MYSTATE LIMITED - Annual Report 2021

ABN 26 133 623 962 Level 2, 137 Harrington Street Hobart 7000 Tasmania Australia

==> picture [117 x 66] intentionally omitted <==

20 August 2021

The Manager Company Announcements Australian Securities Exchange 20 Bridge Street Sydney NSW 2000

MyState Limited – Preliminary Final Report (Appendix 4E) for the year ended 30 June 2021

The Directors of MyState Limited (the “Company”) are pleased to announce the audited results of the Company for the year ended 30 June 2021 as follows:

RESULTS FOR ANNOUNCEMENT TO THE MARKET

Extracted from the Financial Statements for the year ended	$’000 30 June 2021	$’000 30 June 2020	% Change
Income from operations	138,520	128,860	+7.5%
Profit after tax attributable to members	36,341	30,060	+20.9%
Net profit after tax attributable to members	36,341	30,060	+20.9%

Dividends for the current year are:	Amount per security	Franked amount per security
Interim Dividend 2021- fully franked at 30% Paid 16 March 2021	12.5 cents	12. 5 cents
Final Dividend 2021- fully franked at 30% Payable 21 September 2021 Record Date for determining entitlements for final dividend – 26 August 2021	13.0 cents	13.0 cents
Dividend for the prior corresponding period:	Amount per security	Franked amount per security
Final dividend 2020	Nil	Nil.
Dividend Reinvestment Plan	Last Date for Receipt of DRP Election
The MyState Limited Dividend Reinvestment Plan is operational for this 2021 Final Dividend	27 August 2021
Net Tangible Assetsper share	2021	2020
	310 cents	268 cents

Details of entities over which control has been gained or lost during the period

During the financial period the holding company MyState Limited gained control of the following entity:

Subsequent events

The remainder of the information requiring disclosure to comply with Listing Rule 4.3A is contained in the attached copy of the Financial Statements and comments on performance of the Company included in the Media and ASX Release dated 20 August 2021.

Further information regarding MyState Limited and its business activities can be obtained by visiting the company’s website at www.mystatelimited.com.au.

Yours faithfully

==> picture [88 x 45] intentionally omitted <==

Scott Lukianenko Company Secretary

==> picture [226 x 91] intentionally omitted <==

==> picture [99 x 11] intentionally omitted <==

Directors’ Report & Financial Statements For the year ended 30 June 2021

Directors’ Report

Your Directors present their report on MyState Limited for the year ended 30 June 2021.

Directors

Miles Hampton BEc (Hons), FCPA, FAICD Chairman and independent non-executive Director.
Melos Sulicich BBus, GAICD, SA FIN Managing Director and Chief Executive Officer – Executive Director.
Stephen Davy BSc (Hons) Independent non-executive Director.

(commenced 1 July 2021)

Robert Gordon BSc, MIFA, MAICD, FAMI Independent non-executive Director.
Sibylle Krieger LLB (Hons), LLM, FAICD, MBA Independent non-executive Director.
Warren Lee BCom, CA Independent non-executive Director.
Vaughn Richtor BA (Hons), MAICD Independent non-executive Director.
Andrea Waters BCom, FCA, GAICD Independent non-executive Director.

Company Secretary

Scott Lukianenko Ad Dip BMgmt, Grad Dip BA, GIA (Cert).

Principal Activities

Banking Services	Trustee Services	Funds Management
 Personal, residential and business banking  Transactional, internet & mobile banking  Savings and investments  Insurance and other alliances	 Estate planning  Estate and trust administration  Power of attorney  Corporate trustee	 Managed fund investments

MyState Limited (MyState) provides banking, trustee and managed fund products and services through its wholly-owned subsidiaries MyState Bank Limited (MyState Bank) and TPT Wealth Limited (TPT Wealth). There have been no significant changes in the nature of the principal activities of the Group during the year .

Dividends

In respect of the half year ended 31 December 2020, a fully franked dividend of 12.50 cents per share, amounting to $11.508m was paid on 16 March 2021.

The Directors have declared a fully franked final dividend of 13.0 cents per share. The dividend will be payable on 21 September 2021 to shareholders on the register at the record date of 26 August 2021, taking the dividend for the full year to 25.5 cents per share.

Operating and Financial Review

Financial Performance

==> picture [174 x 144] intentionally omitted <==

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

Group Net Profit after Tax
($m)
36.34
30.99
30.06
FY19 FY20 FY21
----- End of picture text -----

The Group recorded a net profit after income tax for the year ended 30 June 2021 of $36.34m, an increase of 20.9% on the prior corresponding period (pcp) to 30 June 2020 of $30.06m.

Earnings per share increased by 19.2% to 39.18 cents per share (FY20: 32.86 cents per share) and return on equity increased 116bps to 10.32%, which compares favourably to other banks recently reported results and is well above regional bank peers.

Pre-provision operating profit of $53.6m* increased 11.9% on pcp, driven by improved net interest income, up 12.5% to $112.0m, reflecting growth in lending assets and improved net interest margin (NIM), which increased 10bps on the pcp. The increase in NIM reflected significantly lower funding costs, driven by lower retail deposit and wholesale interest rates.

The loan book grew $320m or 6% during FY21 compared with $237m or 4.7% in FY20. The market for owner-occupied home loans remained very competitive during the period. Despite this, the home loan book grew $349m (6.8% or 1.3 times system) over the year.

With increasing numbers of customers choosing to transition to digital transactions both the Banking and Wealth businesses reduced their physical footprint through the closure of six branches (two in Tasmania and the remaining four in Central Queensland) and a consolidation of some properties across Tasmania. The cost of this restructure was approximately $2.6m with the resulting cost savings reinvested into growth related initiatives.

Operating costs, excluding restructure costs, increased $3.9m or 4.9% driven by increased investment in capability, digitisation and marketing.

Despite a period of significant change and the challenges presented by COVID-19, MyState’s customer net promoter score was +47 at 30 June 2021. MyState’s score remains among the leading financial services providers, and is significantly above most banking peers and reflects the close relationship we have with our existing customers.

TPT Wealth’s earnings were well below the pcp. This in part reflected investment decisions as we reposition the business, but also reflected persistently low interest rates and the decision to reduce the management fee on the At Call Fund in order to support investor returns. Funds under management were marginally ahead of the previous year.

(*Pre-provision operating profit is defined as profit before impairment expense/(recovery), restructure costs and income tax expense.)

High credit quality maintained in FY21

MyState Bank remains focused on low risk, owner occupied lending with a loan to valuation ratio of less than 80%.

The banking loan portfolio grew 6% on pcp, reaching $5,592 million at 30 June 2021.

Impairment expense was $5.9m lower with the prior period expense reflecting in part the increase in 90+ days arrears at 30 June 2020, but principally a significant increase in the forward looking economic overlay in response to the uncertainty created by the COVID-19 pandemic. The current period write-back was a result of reduced arrears and the improved economic outlook, in particular for unemployment and house prices.

Total book composition ($m)

==> picture [237 x 224] intentionally omitted <==

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

5,592
5,276
5,037
4,549
36
42 68
51 5,447
69 71 5,102 41
4,852 61
55 65
4,358
72
64
Jun 18 Jun 19 Jun 20 Jun 21
Housing Loans Personal Loans
Business / Agri / Commercial Overdrafts
1 Excludes capitalised origination costs
----- End of picture text -----

30 and 90 day arrears remain below industry benchmarks at 0.55% and 0.24% respectively (30 June 2020: 0.61% and 0.35%).

Exposure to investor and interest only lending remains low.

The increase in loans with an LVR greater than 90% since FY19 reflects the success of the Bank’s participation in the Federal Government’s First Home Loan Deposit Scheme (FHLDS), which is all owner occupied. The FHLDS is an Australian Government initiative to support eligible customers purchase their first home sooner with as little as a 5% deposit. The National Housing Finance and Investment Corporation provides a guarantee of up to a maximum amount of 15% of the value of a property (as assessed by MyState) purchased under the scheme.

==> picture [236 x 157] intentionally omitted <==

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

Net interest margin expansion
+10bps
NIM Trend
1.94% 1.97% 1.96%
1.86%
1.80%
FY19 FY20 1H21 2H21 FY21
----- End of picture text -----

Customer deposits increased by 13% in the period driven by significant growth in the award winning Bonus Saver Account with the majority of customers acquired via digital and online channels. Importantly, our on-line originated deposit portfolio grew from $274m to $809m (195%) during the year.

MyState Bank’s reliance on securitisation funding reduced during the year as a result of the increase in customer deposits.

Non-interest income from banking activities

Net interest income benefited from significantly lower funding costs, with total interest expense falling 41.4% on the pcp, while interest income fell by just 12.7%. Net Interest Margin (NIM) increased 10bps on the pcp to 1.96%.

==> picture [230 x 176] intentionally omitted <==

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

Customer Deposits ($m)
4,462
3,942
3,662
1,987 2,965
1,593
1,955
2,069 1,497
Jun 19 Jun 20 Jun 21
Customer deposits at call Customer deposits at term
----- End of picture text -----

Non-interest income from banking activities continued to trend lower (by $0.75m or 5.5% on the pcp) reflecting the increased uptake of digital products and preferences for lower cost self-serve functionality.

TPT Wealth

==> picture [224 x 166] intentionally omitted <==

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

Funds under management
($m)
1,153 1,170 1,069 1,103 1,105
Jun 18 Jun 19 Jun 20 Dec20 Jun 21
----- End of picture text -----

From a financial perspective, TPT Wealth had a disappointing year. Income from wealth management activities was $2.21m or 14% lower than the pcp, driven by lower fees from trustee related services and management fees.

Significant restructuring initiatives were undertaken in TPT Wealth over the past 18 months with fund administration and fund accounting outsourced, investment management for TPT Wealth’s growth funds outsourced, and TPT Wealth’s core lending and trustee systems replaced.

In June 2021, the Fixed Term Fund was awarded a

4 Star rating from SQM Research, which is expected to help increase inflows into the fund from retail investors.

Strong capital position

Capital

==> picture [446 x 250] intentionally omitted <==

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

0.59%
1.72%
0.00% 1.80% 0.16% 14.84 %
0.43%
13.01 % 2.77% 1.76%
1.94%
13.08%
11.07%
Jun‐20 Capital Securitised Profit Dividends paid Secured Capitalised Other asset Jun 21
initiatives assets mortgage intangibles growth
lending
----- End of picture text -----

The Group has maintained a strong capital position with all capital ratios comfortably above regulatory minimums. The Group’s total capital ratio increased 183bps in the period to 14.84% at 30 June 2021 and the Group’s Common Equity Tier 1 ratio improved by 201bps.

The strong capital position was bolstered by the raising of $55.5 million in June through the issue of 12,903,075 shares at $4.30 each to existing retail and existing and new institutional shareholders.

COVID-19 assistance to customers

Following the onset of the COVID-19 global pandemic, MyState Bank has supported over 1,900 customers through a range of measures including loan deferrals, moving customers to interest only loans or by reducing minimum monthly repayments. At 30 June 2021, approximately 35 customers remain on some form of assistance representing 0.2% of total home loan balances (down from a peak of 10.9% in June 2020).

==> picture [484 x 149] intentionally omitted <==

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

Total loans with assistance (facilities, no.)
1,739
209
1,530
301
77 76 35
48 20
224
28 15
Jun 20 Dec 20 Apr 21 Jun 21
Defer Repayments Reduce Repayments/ Change to Interest Only
----- End of picture text -----

==> picture [484 x 143] intentionally omitted <==

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

Total loans with assistance (balances, $m)
$575m
71
503 $126m
30 $28m $11m
96 19 6
10 5
Jun 20 Dec 20 Apr 21 Jun 21
Defer Repayments Reduce Repayments/ Change to Interest Only
----- End of picture text -----

==> picture [484 x 158] intentionally omitted <==

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

Home lending assistance
10.9%
7.2%
2.4%
1.3%
0.3% 0.5% 0.1% 0.2%
Jun 20 Dec 20 Apr 21 Jun 21
% of total home loan facilities % of total home loan balances
----- End of picture text -----

While the Australian economy has performed more strongly than expected over the past year, with strong house price growth and declining unemployment levels, the ongoing disruption caused by the pandemic is expected to continue to impact on economic activity. The fiscal support provided by both state and Federal governments is welcomed and MyState Bank will continue to support impacted customers over the coming months. MyState did not receive any direct support such as JobKeeper during the period.

Community

MyState seeks to make a genuine difference to our customers and the communities within which we operate. Since 2001, the MyState Foundation has awarded more than $2.4 million in grants to help more than 90 not-for-profit organisations in Tasmania with a focus on empowering youth.

Retirement of Managing Director

In early August 2021 we announced that Managing Director and CEO Melos Sulicich had advised the Board that he intended to retire on 31 December 2021.

Melos had resigned in January 2020 but subsequently withdrew his resignation at the request of the Board and agreed to stay on until at least September 2021 to guide the company through the impact of COVID-19 on the business.

Melos has done a great job transforming MyState into a highly scalable, modern challenger bank and wealth management business and we acknowledge the leadership that he has provided.

We are sorry to lose him and have greatly appreciated his preparedness to stay on and see us through the impacts of COVID-19.

The Board has commenced the process to find a new Managing Director & CEO.

Outlook

The Board has endorsed a plan to accelerate the growth in lending at MyState Bank and non-bank lending at TPT Wealth.

At MyState Bank we expect to achieve strong growth in lending assets while maintaining a high level of credit quality and cost discipline. The business also expects to realise the benefits from recent restructuring activity and investment in its digital capabilities, distribution and marketing to grow the customer base nationally, while maintaining a strong risk culture to manage the risks associated with an uncertain, but improving economic environment.

The economy and in particular employment is proving resilient and the Board remain comfortable with the level of credit loss provisioning, even with the recent disruption to parts of the economy caused by recent COVID-19 outbreaks and consequent lockdowns in parts of the country.

At TPT Wealth we expect to grow FUM and non-bank lending and to also benefit from the transformation of the business over recent years.

The recent capital raise will likely dilute earnings per share growth in the short term but in the medium term we expect to see gains in both EPS and ROE.

Lead auditor’s independence declaration under section 307C of the Corporations Act 2001

The lead auditor’s independence declaration is set out on page 9 and forms part of the Directors’ Report for the year ended 30 June 2021.

Rounding of amounts

In accordance with applicable financial reporting regulations and current industry practices, amounts in this report have been rounded-off to the nearest one thousand dollars, unless otherwise stated. Any discrepancies between totals and sums of components in charts contained in this report are due to rounding.

Events Subsequent To Balance Date

In the opinion of the Directors, there has not arisen, in the period between the end of the financial year and the date of this report, any other material item, transactions or event that is likely to significantly affect the operations of the Group.

Environmental Regulation

The Company is not subject to significant environmental regulation.

Directors’ Meetings

The number of meetings of Directors (including meetings of the Committees of Directors) held during the year and the number of meetings attended by each director are as indicated in the following table:

MYS Directors	MYS Board Meetings	MYS Board Meetings	Group Audit Committee	Group Audit Committee	Group People and Remuneration Committee	Group People and Remuneration Committee	Group Risk Committee	Group Risk Committee	Group Nominations & Corporate Governance Committee	Group Nominations & Corporate Governance Committee	Group Digital & Marketing Committee	Group Digital & Marketing Committee
	A	B	A	B	A	B	A	B	A	B	A	B
R Gordon	11	11	n/a	n/a	n/a	n/a	6	6	5	5	4	4
M Hampton	11	11	4	4	5	5	6	6	5	5	4	4
S Krieger	11	11	n/a	n/a	5	5	6	6	5	5	n/a	n/a
W Lee	11	11	4	4	n/a	n/a	6	6	n/a	n/a	4	4
V Richtor	11	11	4	4	5	5	6	6	n/a	n/a	4	4
M Sulicich	11	11	n/a	n/a	n/a	n/a	n/a	n/a	n/a	n/a	n/a	n/a
A Waters	11	11	4	4	n/a	n/a	6	6	n/a	n/a	n/a	n/a

A ‐ Number of meetings attended.

B ‐ Number of meetings eligible to attend.

Indemnification and Insurance of Directors and Officers

The Company has paid, or agreed to pay, a premium in relation to a contract insuring the Directors and Officers listed in this report against those liabilities for which insurance is permitted under Section 199B of the Corporations Act 2001.

The Company has not otherwise, during or since the relevant period, indemnified or agreed to indemnify an Officer or Auditor of the Company or of any related body corporate against a liability incurred as such an Officer or Auditor.

Non-Audit Services

During the year, Wise Lord & Ferguson, the Company’s auditor has performed certain other services in addition to their statutory duties. Further details are set out in note 8.2 to the financial statements.

The Board has considered the non-audit services provided during the year by the auditor and, in accordance with written advice provided by the Group Audit Committee, is satisfied that the provision of those non-audit services during the year by the auditor is compatible with, and did not compromise, the auditor independence requirements of the Corporations Act 2001, for the following reasons:

All non-audit services were subject to the corporate governance procedures adopted by the Company and have been reviewed by the Group Audit Committee, to ensure that they do not impact the integrity and objectivity of the auditor; and
The non-audit services provided do not undermine the general principles relating to auditor independence as they related to technical disclosure issues.

==> picture [76 x 59] intentionally omitted <==

Auditor’s Independence Declaration to the Directors of MyState Limited

In relation to our audit of the financial report of MyState Limited for the financial year ended 30 June 2021, to the best of my knowledge and belief, there have been no contraventions of the auditor independence requirements of the Corporations Act 2001 or any applicable code of professional conduct.

==> picture [110 x 75] intentionally omitted <==

DANNY MCCARTHY

Partner Wise Lord & Ferguson Date: 20 August 2021

Liability limited by a scheme approved under Professional Standards Legislation.

[email protected] www.wlf.com.au

1st Floor 160 Collins Street, Hobart TAS 7000 GPO Box 1083 Hobart TAS 7000

03 6223 6155 Move Forward

MyState Limited Remuneration Report

For the year ended 30 June 2021

This Remuneration Report forms part of the Directors’ Report and outlines the Director and Executive remuneration arrangements of MyState Limited (the Company or MYS) for the year ended 30 June 2021, in accordance with the requirements of the Corporations Act 2001 and its regulations.

For the purposes of this report, Key Management Personnel (KMP) are defined as those persons having authority and responsibility for planning, directing and controlling the major activities of the Company, directly or indirectly, including any Director (whether Executive or otherwise) of the Company.

1.	Key Management Personnel .............................................................................................................. 11
2.	Remuneration Strategy ...................................................................................................................... 12
	2.1 Remuneration Philosophy.............................................................................................................. 12
	2.2 Consequences of Performance on Shareholder Wealth................................................................ 12
	2.3 Remuneration Governance............................................................................................................. 13
3.	Non‐Executive Director Remuneration .................................................................................................. 13
4.	Managing Director and Executive Remuneration .................................................................................. 14
	4.1 Total Fixed Reward.......................................................................................................................... 14
	4.2 Short Term Incentive....................................................................................................................... 14
	4.3 Executive Long Term Incentive Plan............................................................................................... 17
	4.4 Banking Executive Accountability Regime..................................................................................... 22
	4.5 Review of Executive Remuneration................................................................................................ 22
5.	Statutory Tables ..................................................................................................................................... 23
6.	Shareholdings of Key Management Personnel ...................................................................................... 25
7.	Loans to Key Management Personnel ................................................................................................... 26
8.	Executive Employment Agreements ...................................................................................................... 27

1. Key Management Personnel

The Key Management Personnel (KMP) of the Company in office during the year and up to the date of this report were as follows:

|Name |Title|Movements in the 2021
Financial Year|
|---|---|
|Non‐Executive Directors||
|Miles Hampton
Chairman||
|Stephen Davy|Appointed 24 June 2021
Commenced role 1 July 2021|
|Robert Gordon||
|Sibylle Krieger||
|Warren Lee||
|Vaughn Richtor||
|Andrea Waters||
|Executive Director||
|Melos Sulicich
Managing Director and Chief Executive Officer||
|Executives||
|Gary Dickson
Chief Financial Officer||
|Mandakini Khanna
Chief Risk Officer||
|Alan Logan
General Manager Wealth Management|Due to commence 30 August
2021|
|Paul Moss
General Manager Technology, Operations and Product||
|Heather McGovern
General Manager Digital and Marketing||
|Anthony MacRae
General Manager Banking|Ceased 30 June 2021|
|Huw Bough
General Manager Banking|Appointed 1 June 2021
Commenced role 30 June 2021|
|Craig Mowll
General Manager Wealth Management|Ceased 18 June 2021|
|Janelle Whittle
General Manager People and Culture||

2. Remuneration Strategy

2.1 Remuneration Philosophy

The objective of MyState Limited’s Remuneration Policy is to promote personal and collective behaviours that deliver good customer outcomes, sustained financial performance, appropriate risk management and maintain the good reputation of the Group.

The MyState Limited Remuneration Policy is designed to achieve this objective by having:

Appropriately balanced measures of employee performance that inform variable performance based pay for Executives and other eligible employees, including short and long term incentive plans;
Recognition and reward for strong performance linked to favourable customer outcomes and sustainable shareholder returns;
A considered balance between the capacity to pay and the need to attract and retain capable staff at all levels;
Structuring of the remuneration of risk and financial control personnel, including performance based components, as not to compromise the independence of these personnel in carrying out their functions;
Board discretion in the assessment and application of malus or clawback of Executive incentives (whether vested or unvested) as an ultimate means to mitigate unintended consequences of variable pay and to preserve the interests of shareholders and customers; and
Short term and long term incentive performance criteria integrated within the overall risk management of the Group.

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

2.2 Consequences of Performance on Shareholder Wealth

In considering the Company's performance and benefits for Shareholder wealth, the Group People and Remuneration Committee has regard to the following metrics:

Indicator	2017	2018	2019	2020	2021
Statutory Profit after income tax ($'000)	30,080	31,461	30,987	30,060	36,341
Statutory Earnings per share (cents)	34.04	34.97	34.17	32.86	39.18
Dividends paid ($'000)	25,042	25,794	26,016	26,241	11,508
Share price (dollars)	4.85	5.01	4.49	3.93	4.68
Statutory Average return on equity (%)	10.0	10.1	9.7	9.2	10.31
Statutory Cost to income ratio (%)	65.9	64.0	64.78	62.8	63.14

The performance measures for triggering both the Group’s Short Term Incentive Plan (STI) and Executive Long Term Incentive Plan (ELTIP) have been tailored to align "at‐risk" remuneration performance hurdle thresholds to the delivery of financial and operational objectives and sustained growth in shareholder value.

STI includes both financial and non‐financial metrics.

ELTIP performance measures for all offers are weighted equally between relative total shareholder return (TSR) performance and return on equity (ROE). The relative TSR is a measure which incorporates both dividends paid and movements in share prices, whilst the ROE is a measure of corporate profitability.

2.3 Remuneration Governance

The Group People and Remuneration Committee assists the Directors in discharging the Board’s responsibilities in relation to remuneration governance and provides oversight to support the Company in achieving its culture and capability ambitions. The Committee reviews and makes recommendations to the Board on:

Remuneration arrangements for Directors, the Managing Director and other Senior Executives, having regard to comparative remuneration data, independent advice and compliance with the requirements of APRA Prudential Standards and the Banking Executive Accountability Regime (BEAR);
Human Resource policies and practices, ratification of industrial instruments and oversight of compliance with legal and regulatory requirements; and
Oversight of Group capability to deliver on strategic objectives and to support the Group’s business operations and culture, including succession planning and other matters such as the Company’s Employee Share Scheme and other incentive schemes for Executives and Employees.

The Group People and Remuneration Committee aims to ensure that there is no conflict of interest regarding Executive Director involvement in Board decisions on remuneration packages and also in monitoring the involvement of Management generally in Committee discussions and deliberations regarding remuneration policy. No Executive is directly involved in deciding their own remuneration.

3. Non‐Executive Director Remuneration

The Company’s Non‐Executive Directors (NEDs) receive only fees, including statutory superannuation, for their services and the reimbursement of reasonable expenses. They do not receive any retirement benefits other than statutory superannuation.

The Board determines the fees paid to NEDs taking into account the level of skill and experience required to conduct the role and that the fee scale will enable the Company to attract and retain talented NEDs.

The Board obtains independent advice from remuneration consultants on a regular basis.

The aggregate remuneration paid to all the NEDs, inclusive of statutory superannuation, may not exceed the amount fixed by Shareholders which is currently $950 000.

Each NED currently receives $110,000 per annum, inclusive of statutory superannuation, and the Chairman receives $236,500 per annum, inclusive of statutory superannuation.

The Chairs of Committees (other than the Board Chair if he or she chairs a Committee) receive an additional $10,000, per annum, inclusive of statutory superannuation.

4. Managing Director and Executive Remuneration

MyState Limited structures its remuneration framework for the Managing Director and each Executive directly reporting to the Managing Director (Executive) to:

Support MyState Limited's purpose and mission
Reflect our company’s values, and
Allow the Executive to drive our strategy

Total remuneration packages offered to the Executive are based on a notional Total Target Reward which can comprise three elements:

Total Fixed Reward (TFR) , which includes cash salary, superannuation contributions and any salary sacrifice.
Cash based short term incentives (STI) which provides appropriate short‐term rewards for our focus on driving strong customer acquisition, increasing investment in digital innovation and managing operating expenses, while maintaining a culture centred on delivery with positive customer experiences; and
Equity based long term incentives (ELTIP) which reinforces the focus on achieving longer term strategic objectives for our multi‐ year transformation journey and embedding the fundamental structures that will allow us to take advantage of evolving market conditions and meet customer needs quickly, and therefore create long‐term value for shareholders.

4.1 Total Fixed Reward

The Group People and Remuneration Committee annually reviews Executive remuneration taking into account responsibilities, performance, qualifications and experience. External remuneration consultants are appointed on a regular basis to provide advice to the Committee on structure and market comparison.

4.2 Short Term Incentive

The STI is an incentive with possible reward for Executive members dependent on their contribution towards the Company’s short and medium term goals.

Each year, the Group People and Remuneration Committee, recommends to the Board, the KPI’s for the Managing Director.

The Managing Director recommends KPI’s for Executives to the Group People and Remuneration Committee who subsequently make a recommendation to the Board.

At the end of the financial year, the Managing Director assesses the performance of the Executives against their KPIs and makes a recommendation for each Executive to the Group People and Remuneration Committee as to the STI payment.

At the end of the financial year, the Group People and Remuneration Committee assesses the performance of the Managing Director against the KPIs for the financial year.

After consultation with the Chair of the Group Audit Committee, and the Chair of the Group Risk Committee, the Group People and Remuneration Committee recommends the STI payments to be made to the Managing Director and Executives for approval by the Board. Approval of a STI to the Managing Director or Executives is at the complete discretion of the Board. The Board discretion may result in a reduction or forfeiture of payment.

In addition, the annual STI component awarded may be reduced or forfeited if the Company and the individual Executive does not meet ‘gateways’ approved by the Board at the start of the financial year.

The following key performance measures for the STI component and the level of achievement were assessed by the Board in respect to the FY21 financial year:

==> picture [452 x 285] intentionally omitted <==

Exceeded or met target Partially met target Below target

The three gateways for FY21 are summarised below:

Gateway	Assessment measures
Group Risk	If MyState Limited does not meet compliance and risk management obligations, its reputation is
	materially damaged, capital adequacy and liquidity fall below Prudential range(s), or if an
	Accountable Person does not meet their personal accountability BEAR obligations, STI may be
	reduced or forfeited at Board discretion.
Profit before Tax exclusive	If PBT before Incentives is below FY21 budget, STI may be reduced or forfeited.
of Executive Management
STI and Company
Performance Bonus (PBT
Before Incentives)
Values and Behaviours	Executives must live the MyState Limited values and meet or exceed expectations as assessed against
(Individual)	the values by their manager. If not, STI may be reduced or forfeited. The Board may also exercise
	discretion.

The Board has determined that all the FY21 gateways had been met. The Board notes that MyState Limited did not receive any Job Keeper benefits. Performance against three joint performance measures, Earnings per Share, Net Interest Margin and Cost to Income Ratio have been wholly met. It was particularly pleasing that the key non‐financial measures customer NPS and net customer growth was higher than the previous year.

If the results on which any STI reward was based are subsequently found by the Board to have been the subject of deliberate management misstatement, error, misrepresentation or act or omission, which the Group People and Remuneration Committee or the Board (acting reasonably) considers would have resulted in the KPIs not being satisfied, or there is otherwise a reward decision incorrectly made, the Board may require repayment of the whole or part of the relevant STI, in addition to taking any other disciplinary actions.

Payment of a STI to the Managing Director or Executive, who are accountable persons, is subject to the Board being satisfied that the payment may be made under the BEAR.

Current STI Offers

Details of the STI payments for the 2020/2021 financial year and the 2019/2020 financial year are set out in the following tables.

						% Which is not
	% Max.
Key Management Personnel		Max. Payable	% Awarded	% Forfeited	$ Amount Paid	yet Assessed
	(of TFR)
						for Payment

2020/2021

Melos Sulicich	50%	$312,500	89.30%	10.70%	$279,063	0%


Gary Dickson	30%	$120,000	90.65%	9.35%	$108,780	0%


Mandakini Khanna	30%	$117,000	94.90%	5.10%	$111,033	0%


Heather McGovern	30%	$99,000	86.40%	13.60%	$85,536	0%


Anthony MacRae	30%	$117,000	0%	100%	$0	0%


Craig Mowll(1)	30%	$113,153	0%	100%	$0	0%


Paul Moss	30%	$109,500	92.45%	7.55%	$101,233	0%


Janelle Whittle	30%	$90,750	88.65%	11.35%	$80,450	0%

2019/2020 *

Melos Sulicich	50%	$312,500	0%	100%	$0	0%


Gary Dickson(1)	30%	$88,110	0%	100%	$0	0%


David Harradine(1)	30%	$37,504	0%	100%	$0	0%


Mandakini Khanna	30%	$117,000	0%	100%	$0	0%


Heather McGovern	30%	$99,000	0%	100%	$0	0%


Anthony MacRae	30%	$117,000	0%	100%	$0	0%


Craig Mowll	30%	$117,000	0%	100%	$0	0%


Paul Moss	30%	$109,500	0%	100%	$0	0%


Janelle Whittle	30%	$87,000	0%	100%	$0	0%

1) Pro‐rata Max Payable based on commencement and cessation dates as applicable.

For the 2019/2020 financial year in response to Covid‐19 the Managing Director and Executives agreed to forfeit any STI

4.3 Executive Long Term Incentive Plan

The ELTIP provides a long term "at risk" incentive, assessed over a three year performance period. It was established by the Board to encourage and motivate the Executive, comprising the Managing Director and participating Executives, by rewarding them with shares for helping to create long term value for the Company's shareholders. Participating Executives are allocated fully paid ordinary shares in the Company without payment on their part if performance criteria specified by the Board are satisfied in a set performance period. Until 30 June 2021 the offers were in the form of shares, however beyond that date offers will be in the form of performance rights that, on vesting would deliver to participants one Share for each vested performance right.

Each year, an offer may be made to individual members of the Executive as determined by the Board. The maximum value of the offer is determined as a percentage of the TFR of each member of the Executive. As a general guide, noting that the Board has absolute discretion to vary, the current percentages used are 70% for the Managing Director and 30% for participating Executives. The maximum value of the offer is converted into a number of fully paid ordinary shares or performance rights based upon the Volume Weighted Average Price (VWAP) of shares calculated over the period of twenty (20) trading days to 30 June immediately prior to the commencement of the performance period for the relevant offer. The number of shares or performance rights that may deliver shares is then nominally fixed.

In order for the shares or performance rights to vest, certain performance criteria must be satisfied within the predetermined performance period. Both the performance criteria and the performance period are set by the Board, at its absolute discretion. The Board has set the three financial years, commencing with the year in which an offer is made under the plan, as the performance period, with relative TSR, and post‐tax underlying ROE for the "2018" and “2019” offers. Relative TSR and statutory ROE have been set as the performance criteria for the "2020" offers and "2021" offers. The Board may adjust the statutory ROE performance criteria for one off items for the 2020 and subsequent offers.

At the end of the performance period, or as soon as possible thereafter, the Board will determine, at its complete discretion, the number of shares or performance rights that have vested and the number of shares in which the Managing Director and participating Executive may become entitled under the terms of the relevant offer and ELTIP rules.

The Board has set a period of five years from commencement of the performance period before an allocation of shares to an Executive can be made, creating a deferral period of a further two years between the conclusion of the performance period and the allocation of shares.

Any ELTIP reward payment to the Managing Director and participating Executives on satisfaction of the performance criteria under any ELTIP offer is subject to reassessment and possible reduction or forfeiture, during the deferral period (or earlier in the performance period), if the Board considers an adjustment event has occurred (as described in the ELTIP). This enables the Board to adjust variable remuneration (potentially to zero) if such adjustments are necessary to, among other things, protect the financial soundness of the Company or respond to significant unexpected or unintended consequences that were not foreseen by the Board. In addition, where a participating Executive is also an accountable person under the BEAR, the delivery of shares to the Executive (and/or any associated payment) will be subject to the Board's positive assessment that their accountability obligations have been met. The number of shares that may be allocated (and/or value of any associated payment) may be reduced or cancelled to the extent that the Board determines that the accountability obligations have not been met.

Allocation of shares to the Managing Director and eligible Executives is ultimately at the complete discretion of the Board. The ELTIP rules provide for an independent Trustee to act at the direction of the Company, and the Trustee may acquire and hold shares on behalf of Executives that have received an allocation of shares. The participating Executive cannot transfer or dispose of shares before they have been allocated to them, which will not occur until the end of the deferral period specified in the ELTIP rules or relevant offer. A direction to the Trustee to allocate shares to each eligible Executive will be made in accordance with their entitlement under the relevant offer and ELTIP rules.

Any shares or performance rights to be allocated to the Managing Director under this Plan require shareholder approval in accordance with ASX Listing Rules.

On accepting an ELTIP offer made by the Company, participating Executives are required to not hedge their economic exposure to any allocated non‐vested entitlement. Failure to comply with this directive will constitute breach of duty and may result in forfeiture of the offer and / or dismissal.

Commencement of employment during a financial year

Where an Executive commences employment with the Company post 1 July in a given year, the following conditions will apply in respect of ELTIP:

Upon recommendation by the Managing Director, and, if deemed eligible by the Board, the Executive shall receive a pro‐ rata offer for that year, unless that person commences employment between 1 April and 30 June, in which case, they shall not be entitled to receive an offer for that financial year; and
Calculations for ELTIP entitlements in terms of the 20 day VWAP, must be consistent with the offers for that year, irrespective of the date that an employee commences or to whom an offer to participate is made.

Cessation of employment

On separation from the Company, participants will be eligible to receive shares only if the separation is due to a Qualifying Reason.

A Qualifying Reason, as defined by the ELTIP Plan Rules, is death, total and permanent disability, retirement at normal retirement age, redundancy or other such reason as the Board, in its absolute discretion, may determine.

Where an ELTIP participant ceases employment with MyState Limited during a performance period, the offer will be assessed by the Board at the end of the performance period along with all other participants subject to meeting the 12 month employment hurdle that applies to any ELTIP offer.

The allocation of shares to any ELTIP participant where the Executive is an accountable person, is subject to the BEAR. Shares will not be delivered to ELTIP participants, or any payment made, to the extent it would cause the Company to contravene its obligations under the BEAR.

Entitlement to dividend income on shares

During the period that allocated shares for a participating Executive are held by the Trustee, the participating Executive is entitled to receive the income arising from dividend payments on those shares and to have the Trustee exercise the voting rights on those shares in accordance with their instructions.

For the avoidance of doubt, for ELTIP offers made after 1 July 2018, the Company will not direct the Trustee to allocate the shares to the participating Executive's account during the specified two year deferral period. The two year deferral period commences after the end of the relevant performance period. During this period, such participants have no entitlement to any dividends or voting rights in respect of the shares.

Details of offers made under the ELTIP are set out in the following table.

Offer	"2018"	"2019"	"2020"
Performance period	1 July 2018 to 30 June 2021	1 July 2019 to 30 June 2022	1 July 2020 to 30 June 2023
The comparator group
		Members of the S&P/ASX300

Fair value of shares on offer date(1)	Managing Director $2.52 Other Executives $2.17	Managing Director $2.49 Other Executives $2.49	Managing Director $3.36 Other Executives $3.36
Offer date ‐ Managing Director ‐ Other Executives(3)	18 October 2018 7 January2019	28 October 2019 28 October 2019	16 November 2020 16 November 2020
Value of offer(2) ‐ Managing Director ‐ Other eligible Executives	$312,500 $651,727	$312,500 $787,664	$312,500 $649,500

1) The fair value of offers that are assessed and awarded on market based conditions is determined on the grant date in accordance with AASB 2. The fair value is used by the Group to recognise an expense over the performance period for the TSR component of offers.
2) The value of the offer is the maximum value calculated as at the date of offer to the KMP(s) at that time. As such, it may include the value of offers made to individuals who are no longer KMP's of the Company.
3) In respect of the “2018” Offer, a pro‐rata offer made to Anthony MacRae and Heather McGovern on the 25[th] of February 2019 and 18[th] of March 2019 respectively. Pro‐rata offer made in respect of the “2019” Offer to Gary Dickson on the 16[th] of March 2020.

Calculation of the Reward

TSR Component

The ELTIP Offers TSR components will vest on the following basis:

For the, 2018 and 2019 offers:

For the 2020 offers:

MYS TSR Relative to the ASX 300:	Percentage of the Applicable Reward that will Vest:	MYS TSR Relative to the ASX 300:	Percentage of the Applicable Reward that will Vest:
Below the mid‐point percentage:	0%	Below the 25thpercentile:	0
At the Median ASX300	50%	At the 25thpercentile	25%
Between the median and 75th percentile	Straight line basis between 50% and 100%	Between the 25th and 75th percentile	Straight line basis between 25% and 100%
Above the 75thpercentile	100%	Above the 75thpercentile	100%

For the 2021 offer:

MYS TSR Relative to the ASX 300	Percentage of the Applicable Reward that will Vest:
Below the 50th percentile	0%
At the 50th percentile	50%
Between the 50th percentile and the 75th percentile	Straight line basis between 50% and 100%
At or Above the 75thpercentile	100%

ROE Component

The performance period for the ROE component for the ELTIP reward will be based upon on the Company's post‐tax ROE and will be payable on the following basis:

For the 2018 and 2019 Offers: For the 2020 Offer:

MYS Aggregate Absolute Post Tax Underlying ROE for the Performance Period:	Percentage of the Applicable Reward that will Vest:
Below 30.00%	0%
30.00%	50%
30.00% to 31.50%	Straight line basis from 50% to 100%
31.50% or above	100%

MYS Aggregate Statutory ROE, which may be adjusted for one off items at the discretion of the board, for the Performance Period:	Percentage of the Applicable Reward that will Vest:
Below 27.00	0%
27.00%	25%
27.00% to 30.00%	Straight line from 25% to 100%
30.00% or above	100%

For the 2021 Offer:

Statutory ROE with Board discretion to adjust for one off items:	Percentage of the Applicable Reward that will Vest:
Below 30%	0%
30%	50%
30% to 31.50%	Straight line basis from 50% to 100%
31.5% or above	100%

Actual and Potential ELTIP Share Allocations

The following tables detail, for current and former KMP, the status of offers made under the ELTIP. The "2017" offer performance period was completed on 30 June 2020. The "2018" offer performance period was completed on 30 June 2021.

Offer	Name	Component	Maximum Offer	Forfeited / Lapsed	Vested in the 2020/21 Financial Year	Not yet Assessed for Vesting
				Number	of Shares
"2018" Offer	Melos Sulicich(1)	TSR	32,188	‐	16,126	‐
		ROE	32,187	32,187	‐	‐
	Anthony MacRae	TSR	4,590	2,300	‐	‐
		ROE	4,589	4,589	‐	‐
	Heather McGovern	TSR	2,934	‐	1,470	‐
		ROE	2,933	2,933	‐	‐
	David Harradine	TSR	11,742	5,833	‐	‐
		ROE	11,742	11,742	‐	‐
	Mandakini Khanna	TSR	11,124	‐	5,573	‐
		ROE	11,124	11,124	‐	‐
	Paul Moss	TSR	10,506	‐	5,264	‐
		ROE	10,506	10,506	‐	‐
	Craig Mowll	TSR	11,556	5,790	‐	‐
		ROE	11,555	11,555	‐	‐
	Janelle Whittle	TSR	8,961	‐	4,489	‐
		ROE	8,961	8,961	‐	‐
Offer	Name	Component	Maximum Offer	Forfeited / Lapsed	Vested in the 2019/20 Financial Year	Not yet Assessed for Vesting
				Number	of Shares
"2017" Offer	Melos Sulicich	TSR	29,307	12,485	16,822	‐
		ROE	29,307	29,307	‐	‐
	Huw Bough	TSR	10,092	10,092	‐	‐
		ROE	10,092	10,092	‐	‐
	Katherine Dean	TSR	9,786	9,786	‐	‐
		ROE	9,786	9,786	‐	‐
	David Harradine	TSR	11,315	11,315	‐	‐
		ROE	11,315	11,315	‐	‐
	Mandakini Khanna	TSR	10,551	4,495	6,056	‐
		ROE	10,550	10,550	‐	‐
	Paul Moss	TSR	10,092	4,299	5,793	‐
		ROE	10,092	10,092	‐	‐
	Andrew Polson	TSR	10,092	10,092	‐	‐
		ROE	10,092	10,092	‐	‐
	Chris Thornton	TSR	10,245	10,245	‐	‐
		ROE	10,245	10,245	‐	‐
	Janelle Whittle(2)	TSR	3,888	1,656	2,232	‐
		ROE	3,887	3,887	‐	‐

1) The awarding of the 2018 offer is subject to shareholder approval subsequent to the publishing of this report.
2) Pro‐rata Max Payable based on commencement dates as applicable

The "2019", “2020” and "2021" offers have not been assessed for vesting. The following table shows the maximum number of shares available under each of these offers:

		"2019" Offer	"2020" Offer	"2021" Offer
Name	Component		Number of Shares
Melos Sulicich	TSR	34,036	38,676	‐
	ROE	34,035	38,675	‐
Gary Dickson(1)	TSR	9,570	14,852	12,500
	ROE	9,570	14,851	12,500
David Harradine(2)	TSR	‐	‐	‐
	ROE	‐	‐	‐
Mandakini Khanna	TSR	12,743	14,480	12,188
	ROE	12,743	14,480	12,187
Heather McGovern	TSR	10,783	12,252	10,313
	ROE	10,782	12,252	10,312
Anthony MacRae	TSR	12,743	14,480	‐
	ROE	12,743	14,480	‐
Paul Moss	TSR	11,926	13,552	11,407
	ROE	11,926	13,552	11,406
Craig Mowll	TSR	12,743	14,480	‐
	ROE	12,743	14,480	‐
Janelle Whittle	TSR	9,476	10,767	9,844
	ROE	9,475	10,767	9,844
Huw Bough	TSR	‐	‐	12,188
	ROE	‐	‐	12,187
Alan Logan(3)	TSR	‐	‐	‐
	ROE	‐	‐	‐

1) Pro‐rata offer made for “2019”.
2) The “2019” Offer extended to David Harradine was forfeited due to less than 12 months of the performance period having been served.
3) Pro‐rata “2021” offer to be determined post commencement.

4.4 Banking Executive Accountability Regime

MyState accountable persons are registered with APRA. Each accountable person has an agreed accountability statement that sets out the accountabilities relevant to their role in relation to the BEAR. Any entitlement to variable remuneration may be subject to deferral, reduction or forfeiture under the BEAR even if performance criteria have been met.

The BEAR requires authorised deposit‐taking institutions (including the Company) to defer payment of a prescribed minimum amount of variable remuneration for a minimum period of four years. The requirement for variable remuneration to be deferred does not apply if the amount that would be deferred is less than $50,000.

The deferral period is subject to extension, as determined by the Board, or reduction, as determined by the Board and approved by APRA. At the end of the applicable deferral period, any entitlement to deferred variable remuneration will be assessed against each individual meeting their accountable person obligations. If an accountable person fails to comply with his or her accountability obligations, their deferred variable remuneration will be reduced by an amount that is proportionate to the failure or may be cancelled, as determined by the Board.

4.5 Review of Executive Remuneration

During FY21 the Group People and Remuneration Committee commissioned independent advice in respect of the structure and performance criteria for Executive variable remuneration. With the benefit of that advice the Board decided to make a number of changes which take effect from 1 July 2021.

5. Statutory Tables

		Salary &	Cash Bonus	Other Short Term	Non‐Monetary	Post‐Employment	Termination		Share Based
$		Fees	(1)	Benefits	Benefits (2)	Superannuation	Benefits		Payment (3)		Total
Non‐Executive Directors
Miles Hampton	2021	209,004	‐	‐	393	19,855		‐		‐	229,252
	2020	201,922	‐	‐	‐	19,183		‐		‐	221,105
Robert Gordon	2021	89,849	‐	‐	‐	26,275		‐		‐	116,124
	2020	87,449	‐	‐	‐	25,390		‐		‐	112,839
Vaughn Richtor	2021	97,211	‐	‐	‐	9,235		‐		‐	106,446
	2020	76,042	‐	‐	‐	7,224		‐		‐	83,266
Sibylle Krieger	2021	106,049	‐	‐	‐	10,075		‐		‐	116,124
	2020	101,875	‐	‐	‐	9,678		‐		‐	111,553
Warren Lee	2021	106,049	‐	‐	‐	10,075		‐		‐	116,124
	2020	98,933	‐	‐	‐	9,399		‐		‐	108,332
Stephen Lonie	2021	‐	‐	‐	‐	‐		‐		‐	‐
	2020	42,731	‐	‐	‐	4,059		‐		‐	46,790
Andrea Waters	2021	116,124	‐	‐	‐	‐		‐		‐	116,124
	2020	100,702	‐	‐	‐	9,567		‐		‐	110,269
Total NED	2021	724,286	‐	‐	393	75,515		‐		‐	800,194
	2020	709,654	‐	‐	‐	84,500		‐		‐	794,154

Statutory tables (continued)

		Salary &		Other Short Term	Non‐Monetary		Post‐Employment	Termination		Share Based
$		Fees	Cash Bonus (1)	Benefits	Benefits (2)		Superannuation	Benefits		Payment (3)	Total
Executives
Melos Sulicich	2021	623,077	279,063	‐	1,095		25,961		‐	156,698	1,085,894
	2020	600,000	‐	‐	1,788		25,000		‐	80,956	707,744
Huw Bough	2021	36,986	‐	‐		‐	3,514		‐	‐	40,500
	2020	‐	‐	‐		‐	‐		‐	3,075	3,075
Katherine Dean	2021	‐	‐	‐		‐	‐		‐	‐	‐
	2020	‐	‐	‐		‐	‐		‐	2,895	2,895
David Harradine	2021	‐	‐	‐		‐	‐		‐	4,046	4,046
	2020	149,678	‐	‐		‐	8,365		‐	(3,225)	154,818
Mandakini Khanna	2021	369,863	111,033	‐		‐	35,137		‐	56,434	572,467
	2020	355,954	‐	‐		‐	36,409		‐	28,010	420,373
Anthony MacRae	2021	372,019	‐	‐		‐	25,481		‐	50,573	448,073
	2020	365,000	‐	‐		‐	25,000		‐	17,469	407,469
Heather McGovern	2021	312,961	85,536	‐		‐	29,731		‐	42,132	470,360
	2020	301,370	‐	‐		‐	28,630		‐	14,316	344,316
Paul Moss	2021	353,077	101,233	‐	1,302		25,961		‐	52,892	534,465
	2020	339,806	‐	‐		‐	25,001		‐	26,399	391,206
Craig Mowll	2021	383,075	‐	‐		‐	20,295		‐	24,390	427,760
	2020	369,469	‐	‐		‐	20,531		‐	21,743	411,743
Janelle Whittle	2021	276,519	80,450	‐	1,302		27,245		‐	42,505	428,021
	2020	264,840	‐	‐		‐	25,160		‐	18,299	308,299
Gary Dickson	2021	389,423	108,780	‐		‐	25,961		‐	43,532	567,696
	2020	264,219	‐	‐		‐	20,716		‐	10,005	294,940
Total Executive	2021	3,117,000	766,095	‐	3,699		219,286		‐	473,202	4,579,282
	2020	3,010,336	‐	‐	1,788		214,812		‐	219,942	3,446,878
Total KMP	2021	3,841,286	766,095	‐	4,092		294,801		‐	473,202	5,379,476
	2020	3,719,990	‐	‐	1,788		299,312		‐	219,942	4,241,032

Statutory tables (continued)

1) The cash bonus shown is the actual amount awarded in respect of each financial year’s STI offers.
2) Non‐Monetary Benefits consist of car parking expense, travel & accommodation and entertainment.
3) Share based payment amounts have been calculated in accordance with the relevant accounting policy and Accounting Standard. The fair value of the share grant is calculated at the date of grant and is allocated to each reporting period evenly over the period from grant date to vesting date. This fair value will generally be different to the value of shares at the time they vest. The value disclosed is the portion of the fair value of the share grant allocated to this reporting period. These amounts represent share grants which will only vest to the KMP when certain performance and service criteria are met. In some circumstances all, or a portion, of the shares may never vest to the KMP. As these figures are based on accrual accounting and not a reflection of actual cash paid or shares vested, negative figures can result in the event of accrual reversals being recorded. Amounts stated are in respect of the period that the individual held a role of a KMP.

6. Shareholdings of Key Management Personnel

Non‐Executive Director Minimum Shareholding Requirement

A Minimum Shareholding Requirement has been implemented for all Non‐Executive Directors (NED MSR).

Non‐Executive Directors, in the absence of approval from the Board to the contrary, are required to acquire and maintain, directly or indirectly, shares in MyState Limited to the equivalent of one year’s pre‐tax base Director’s fee. The NED MSR must be achieved within four years of their appointment.

Managing Director Minimum Shareholding Requirement (MD MSR)

In the absence of approval from the Board to the contrary, the MD MSR will apply to the Managing Director.

The MD MSR will be 50% of TFR and must be achieved within four years of appointment.

Any shares subject to deferral (including shares which may be allocated in respect of vested performance rights), from the 2018 ELTIP offer onwards, will be recognised for the purposes of MD MSR. The Shares in MyState Limited (ASX code: MYS) may be held directly or indirectly, and may include Shares obtained prior to commencement of employment and/or Shares acquired through ELTIP or any other scheme.

Related Parties of KMP Shareholdings

Details regarding the holdings by KMP and their related parties of ordinary shares in the Company are set out in the following table. Related parties include close members of the family of the KMP. It also includes entities under joint or several control or significant influence of the KMP and their close family members. No equity transactions with KMP, other than those arising as payment for compensation, have been entered into with the Company.

Key Management Personnel	Number of Shares at Commence‐ ment of Financial Year	Granted as Compensation to be held by ELTIP trustee (1)	Net Change Other	Number of Shares at End of Financial Year	Number of Shares at End of Financial Year Held by ELTIP Trustee (2)
Non‐Executive Directors
Miles Hampton	750,000	‐	148,362	898,362	‐

Robert Gordon	26,587	‐	7,138	33,725	‐

Sibylle Krieger	26,132	‐	718	26,850	‐

Warren Lee	24,004	‐	3,637	27,641	‐

Vaughn Richtor	2,500	‐	9,331	11,831	‐

Andrea Waters	22,093	‐	9,963	32,056	‐

Sub Total	851,316	‐	179,149	1,030,465	‐

Executives
Melos Sulicich	119,086	16,126	23,804	159,016	79,911
Gary Dickson	‐	‐	‐	‐	‐
Heather McGovern	‐	1,470	‐	1,470	1,470
Mandakini Khanna	12,564	5,573	1,545	19,682	19,682
Paul Moss	12,301	5,264	338	17,903	17,903
Janelle Whittle	6,946	4,489	715	12,150	6,721
Huw Bough	5,000	‐	758	5,758	‐
Sub Total	155,897	32,922	27,160	215,979	125,687
1) These amounts are the shares awarded for the “2018 Offer”. The awarding of these shares was approved on 20 August 2021 with the exception of those relating to Melos Sulicich whose shares are subject to shareholder approval. These shares have not yet been issued to the Trustee to hold on behalf of the Executives. 2) The shares that are held in trust are also shown in the balance at the end of the financial year totals and include those shares yet to be issued to the trustee under the “2018 Offer”.

7. Loans to Key Management Personnel

There are no loans made by MyState subsidiaries to KMP or their related parties in 2021.

Related parties include close members of the family of the KMP. It also includes entities under joint or several control or significant influence of the KMP and their close family members.

8. Executive Employment Agreements

The Managing Director and Executives are employed under individual open ended employment contracts that set out the terms of their employment.

Incumbent	Commenced in Role	Contract Term	TFR	Short Term Incentive (maximum)	ELTIP (maximum)	Termination Provisions in the Event of Termination by the Company
Melos Sulicich(1)	1 July 2014	Ongoing	$625,000	50% of TFR in 2021 financial year 60% of TFR in 2022 financial year	50% of TFR in 2021 financial year 70% of TFR in 2022 financial year	Notice: The contract may be terminated by the Company with 26 weeks’ notice or payment in lieu of notice. Entitlement:  Pro‐rata STI payment applied as at the date of termination.  Payment of STI if the performance period is complete but not yet paid  Pro‐rata ELTIP allocation, made following the completion of the applicable performance periods.
Huw Bough	1 June 2021	Ongoing	$390,000	30% TFR	30% of TFR upon invitation to participate	Notice: Each contract can be terminated by the Company upon provision of three months’ notice. Entitlement:  Pro‐rata STI payment applied as at the date of termination.  Payment of STI if the performance period is complete but not yet paid  Pro‐rata ELTIP allocation, made following the completion of the applicable performance periods.
Alan Logan	30 August 2021	Ongoing	$370 000

Gary Dickson	19 October 2019	Ongoing	$400,000	30% TFR	30% of TFR upon invitation to participate	Notice: Each contract can be terminated by the Company upon provision of three months’ notice. Entitlement:  Payment of the equivalent of six months TFR (inclusive of the provision of three months’ notice).  Pro‐rata STI payment applied as at the date of termination.  Payment of STI if the performance period is complete but not yet paid  Pro‐rata ELTIP allocation, made following the completion of the applicable performance periods.
Mandakini Khanna	1 December 2015	Ongoing	$390,000
Anthony MacRae	12 February 2019	Ongoing	$390,000
Heather McGovern	18 March 2019	Ongoing	$330,000
Paul Moss	13 May 2015	Ongoing	$365 000
Craig Mowll	16 July 2018	Ongoing	$390,000
Janelle Whittle	22 January 2018	Ongoing	$315,000

1) Required to hold shares to the value of 50% of TFR.

Signed in accordance with a resolution of the Directors.

==> picture [155 x 47] intentionally omitted <==

Miles Hampton Chairman

==> picture [119 x 42] intentionally omitted <==

Melos Sulicich Managing Director and Chief Executive Officer

Hobart, dated this 20 August 2021

MyState Limited Consolidated Financial Statements

For the year ended 30 June 2021

Consolidated Income Statement Consolidated Statement of Comprehensive Income Consolidated Statement of Financial Position Consolidated Statement of Changes in Equity Consolidated Statement of Cash Flows

Section	1.	Corporate information and basis of accounting
1.1		Reporting entity
1.2		Basis of accounting
1.3		Use of estimates and judgement
1.4		Provisions (other than for impairment of financial assets)
Section	2.	Financial performance
2.1		Net banking operating income
2.2		Income from wealth management activities
2.3		Income from other activities
2.4		Expenses
2.5		Earnings per share
2.6		Dividends
2.7		Segment financial information
Section	3.	Capital and financial risk management
3.1		Capital management strategy
3.2		Financial risk management
3.3		Average balance sheet and sources of net interest income
Section	4.	Financial assets and liabilities
4.1		Cash and liquid assets
4.2		Financial instruments
4.3		Loans and advances
4.4		Transfer of financial assets (securitisation program)
4.5		Deposits and other borrowings including subordinated notes
4.6		Other liabilities
4.7		Fair value of financial instruments
Section	5.	Non-financial assets, liabilities and equity
5.1		Property, plant and equipment and right-of-use assets
5.2		Investment property
5.3		Intangible assets and goodwill
5.4		Employee benefits provisions
5.5		Share capital
Section	6.	Income tax expense, current and deferred tax balances
6.1		Income tax expense, current and deferred tax balances
Section	7.	Group structure and related parties
7.1		Parent entity information
7.2		Controlled entities and principles of consolidation
7.3		Related party disclosures
Section	8.	Other notes
8.1		Contingent liabilities and expenditure commitments
8.2		Remuneration of auditors
8.3		Events subsequent to balance date
8.4		Other significant accounting policies and new accounting standards and disclosures

MyState Limited Consolidated Income Statement for the year ended 30 June 2021

		30 June 2021	30 June 2020
	Notes	$ '000	$ '000
Interest income	2.1	164,336	188,330
Interest expense	2.1	(52,385)	(88,808)
Net interest income		111,951	99,522
Non-interest income from banking activities	2.1	12,951	13,699
Net banking operating income		124,902	113,221
Income from wealth management activities	2.2	13,618	15,636
Income from other activities	2.3	-	3
Total operating income		138,520	128,860
Less: Expenses
Personnel costs		39,615	37,417
Administration costs	2.4	15,346	15,518
Technology costs	2.4	16,200	14,751
Occupancy costs	2.4	4,763	5,461
Marketing costs		6,394	5,250
Governance costs		2,580	2,556
Restructure costs	2.4	2,559	-
Total operating expenses		87,457	80,953
Profit before impairment and tax expense		51,063	47,907
Impairment expense / (recovery) on loans and advances	4.3	(995)	4,921
Profit before tax		52,058	42,986
Income tax expense	6.1	15,717	12,926
Profit for theyear		36,341	30,060
Profit attributable to the:
Equity holders of MyState Limited		36,341	30,060
Basic earnings per share (cents per share)	2.5	39.18	32.86
Diluted earnings per share(centsper share)	2.5	39.18	32.86

The accompanying notes form part of these financial statements.

MyState Limited Consolidated Statement of Comprehensive Income for the year ended 30 June 2021

	30 June 2021	30 June 2020
Notes	$ '000	$ '000
Profit for the year	36,341	30,060
Other comprehensive income / (expense)
Items that may be reclassified subsequently to profit or loss
Cash flow hedges - Net gains / (losses) taken to equity	434	(184)
Income tax effect	(130)	55
Items that will not be reclassified subsequently to profit or loss
Changes in the fair value of equity investments at fair value through other comprehensive
income	-	(1,000)
Total other comprehensive income/ (expense) for theyear	304	(1,129)
Total comprehensive income for theyear	36,645	28,931
Total comprehensive income for the year is attributable to:
Equity holders of MyState Limited	36,645	28,931

The accompanying notes form part of these financial statements.

MyState Limited Consolidated Statement of Financial Position as at 30 June 2021

	Notes	30 June 2021	30 June 2020
		$ '000	$ '000
Assets
Cash and liquid assets	4.1	80,266	116,502
Due from other financial institutions		31,859	34,615
Other assets		7,032	6,762
Financial instruments	4.2	707,166	542,565
Loans and advances	4.3	5,607,300	5,286,114
Property, plant and equipment and right-of-use assets	5.1	11,678	19,491
Investment property	5.2	3,801	-
Current and deferred tax assets	6.1	9,896	5,286
Intangible assets and goodwill	5.3	83,478	84,471
Total assets		6,542,476	6,095,806
Liabilities
Due to other financial institutions		18,821	25,617
Deposits and other borrowings including subordinated notes	4.5	6,079,794	5,704,778
Employee benefits provisions	5.4	5,240	5,674
Other liabilities	4.6	20,605	21,165
Tax liabilities	6.1	2,802	4,250
Total liabilities		6,127,262	5,761,484
Net assets		415,214	334,322
Equity
Share capital	5.5	208,196	152,775
Retained earnings		207,282	182,449
Reserves		(264)	(902)
Total equity		415,214	334,322

The accompanying notes form part of these financial statements.

MyState Limited Consolidated Statement of Changes in Equity for the financial year ended 30 June 2021

			Retained	Employee equity
		Share capital	earnings	benefits reserve	Hedging reserve	Other reserves	Total
	Note	$ '000	$ '000	$ '000	$ '000	$ '000	$ '000
At 1 July 2019		148,707	178,629	640	(477)	-	327,499
Profit for the year		-	30,060	-	-	-	30,060
Other comprehensive income / (expense)		-	-	-	(129)	(1,000)	(1,129)
Total comprehensive income for theyear		-	30,060	-	(129)	(1,000)	28,931
Equity issued under employee share scheme	5.5	88	-	-	-	-	88
Equity issued under executive long term incentive plan	5.5	170	-	(170)	-	-	-
Equity issued under dividend reinvestment plan	5.5	3,810	-	-	-	-	3,810
Share based payment expense recognised		-	-	234	-	-	234
Dividends paid	2.6	-	(26,240)	-	-	-	(26,240)
At 30 June 2020		152,775	182,449	704	(606)	(1,000)	334,322
At 1 July 2020		152,775	182,449	704	(606)	(1,000)	334,322
Profit for the year		-	36,341	-	-	-	36,341
Other comprehensive income / (expense)		-	-	-	304	-	304
Total comprehensive income for the year		-	36,341	-	304	-	36,645
Equity issued under employee share scheme	5.5	84	-	-	-	-	84
Equity issued under executive long term incentive plan	5.5	167	-	(167)	-	-	-
Equity issued under dividend reinvestment plan	5.5	1,397	-	-	-	-	1,397
Equity issued under institutional placement and entitlement offer	5.5	31,280	-	-	-	-	31,280
Equity issued under retail entitlement offer	5.5	24,203	-	-	-	-	24,203
Share based payment expense recognised		-	-	501	-	-	501
Entitlement offer share issuance costs, net of tax	5.5	(1,710)	-	-	-	-	(1,710)
Dividends paid	2.6	-	(11,508)	-	-	-	(11,508)
At 30 June 2021		208,196	207,282	1,038	(302)	(1,000)	415,214

The accompanying notes form part of these financial statements.

MyState Limited Consolidated Statement of Cash Flows for the financial year ended 30 June 2021

	Notes	30 June 2021	30 June 2020
		$ '000	$ '000
Cash flows from operating activities
Interest received		178,286	202,671
Interest paid		(54,343)	(96,054)
Fees and commissions received		25,777	26,893
Other non-interest income received		2,027	3,400
Payments to suppliers and employees (i)		(76,756)	(73,597)
Income tax paid		(21,905)	(12,989)
(Increase)/decrease in operating assets:
Due from other financial institutions		3,336	(8,581)
Financial instruments		(163,814)	(93,615)
Loans and advances		(334,763)	(251,207)
Increase/(decrease) in operating liabilities:
Due to other financial institutions		(3,868)	(2,022)
Deposits and other borrowings		323,729	371,464
Net cash flows from/ (used in) operating activities	4.1	(122,294)	66,363
Cash flows from investing activities
Purchase of intangible assets		(4,282)	(4,425)
Proceeds from sale of property, plant and equipment		-	11
Purchase of property, plant and equipment		(499)	(637)
Net cash flows from/ (used in) investing activities		(4,781)	(5,051)
Cash flows from financing activities
Employee share issue		84	88
Entitlement and placement offer share issue		55,339	-
(Receipts)/payments for lease liabilities		(2,757)	(2,565)
Subordinated notes		(146)	110
Floating rate notes issue		49,976	-
Dividends paid net of dividend reinvestment plan	2.6	(11,657)	(22,437)
Net cash flows from/ (used in) financing activities		90,839	(24,804)
Net increase / (decrease) in cash held		(36,236)	36,508
Cash at beginning of financial year		116,502	79,994
Closing cash carried forward	4.1	80,266	116,502

(i) Excludes payments of lease liabilities following the application of AASB 16 Leases. Comparatives have been restated to disclose outflows from lease liabilities separately.

The accompanying notes form part of these financial statements.

MyState Limited Notes to the consolidated financial statements for the year ended 30 June 2021

1.1 Reporting entity

MyState Limited (the Company) is incorporated and domiciled in Australia and is a company limited by shares that are publicly traded on the Australian Securities Exchange. The address of its registered office and principal place of business is 137 Harrington Street, Hobart Tasmania 7000. The consolidated financial statements of MyState Limited and its subsidiaries (the Group) were authorised for issue by the Directors on 20 August 2021.

1.2 Basis of accounting

These consolidated financial statements are general purpose financial statements which have been prepared in accordance with the Corporations Act 2001, Australian Accounting Standards and Interpretations, and other requirements of the law. The financial report complies with Australian equivalents to International Financial Reporting Standards (“AIFRS”).

The financial statements comprise the consolidated financial statements of the Group. For the purpose of preparing the consolidated financial statements, the Company is a for-profit entity.

Where necessary, comparative figures have been re-classified and re-positioned for consistency with current period disclosures.

The consolidated financial statements have been prepared on the basis of historical cost, except for certain properties and financial instruments that are measured at revalued amounts or fair values at the end of each reporting period, as explained in the accounting policies.

Rounding of amounts

The Company is a company of the kind referred to in Australian Securities and Investments Commission (ASIC) Class Order 2016/191, and, in accordance with that Class Order, amounts in the financial report are rounded off to the nearest thousand dollars, unless otherwise indicated. All amounts are presented in Australian dollars.

1.3 Use of estimates and judgement

The preparation of the financial report in conformity with Australian Accounting Standards requires the use of certain critical accounting estimates. It also requires management to exercise judgment in the process of applying the accounting policies. The notes to the financial statements set out areas involving a higher degree of judgment or complexity, or areas where assumptions are significant to the financial report such as:

Loan origination cost amortisation, refer note 2.1;
Impairment losses on loans and advances, refer note 4.3;
Fair value of financial instruments, refer note 4.7;
Impairment assessment of intangibles and goodwill, refer note 5.3;
Recoverability of deferred tax assets, refer note 6.1; and
▪ Assessment of right-of-use assets and lease liabilities, refer notes 4.6 and 5.1.

1.4 Provisions (other than for impairment of financial assets)

Provisions are recognised when the Group has a legal, equitable or constructive obligation to make a future sacrifice of economic benefits to other entities as a result of past transactions or other past events and it is probable that a future sacrifice of economic benefits will be required and a reliable estimate can be made of the amount of the obligation.

SECTION 1: Corporate information and basis of accounting

MyState Limited Notes to the consolidated financial statements for the year ended 30 June 2021

2.1	30 June 2021 30 June 2020 $ '000 $ '000
	Net banking operating income Interest income Loans and advances 160,912 180,914 Investment securities 3,424 7,416
	Total interest income 164,336 188,330
	Interest expense At call deposits 12,851 11,450 Fixed term deposits 38,217 76,150 Financingcost - leases 1,317 1,208
	Total interest expense 52,385 88,808
	Non-interest income from banking activities Transaction fees 3,918 4,513 Loan fees 4,674 4,462 Banking commissions 2,984 3,018 Other bankingoperations income 1,375 1,706
	Total non-interest income from banking activities 12,951 13,699

Income accounting policy

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

Interest

Interest income is accrued using the effective interest rate method, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial instrument. Loan origination fees are recognised as components of the calculation of the effective interest rate method in relation to originated loans, and therefore effect the interest recognised in relation to this portfolio of loans. The average life of loans in the relevant loan portfolios is reviewed annually to ensure the amortisation methodology for loan origination fees is appropriate.

Interest expense is calculated on an accruals basis using the effective interest rate method. The effective interest rate method is the rate that exactly discounts future payments through the expected life of the financial instrument.

Non-interest income from banking activities

Refer to the "income accounting policy" in note 2.2.

SECTION 2: Financial performance

MyState Limited Notes to the consolidated financial statements for the year ended 30 June 2021

2.2	30 June 2021 30 June 2020 $ '000 $ '000
	Income from wealth management activities Funds management income 9,412 10,315 Other fees and commissions 4,206 5,321
	Total income from wealth management activities 13,618 15,636

Funds management income and fiduciary activities

TPT Wealth Limited, a controlled entity of the Group, acts as Responsible Entity, Trustee and Funds Manager for eight managed investment schemes. The investment schemes place monies with external wholesale fund managers, direct mortgages and mortgaged backed securities, term deposits and other investments. The clients include individuals, superannuation funds and corporate investors.

The assets and liabilities of these funds are not included in the Consolidated Financial Statements. Income earned by the Group in respect of these activities is included in the Consolidated Income Statement of the Group as "Funds management income".

The following table shows the balance of the unconsolidated funds under management and funds under advice that gives rise to funds management and other fees and commissions income respectively:

	June 2021	30 June 2020
	$ 'M	$ 'M
Funds under management	1,105	1,069
Funds under advice	487	402

Other fees and commissions

TPT Wealth Limited provides private client tax accounting services and acts as trustee and executor of estates. "Other fees and commissions income" is the income earned from these activities.

Income accounting policy

The Group earns three main types of fees and commissions under contracts with customers. The first income type is single performance obligation contracts, such as transaction services, where the performance obligation is performed and consideration received in quick succession. Income from these contracts is recorded as the performance obligations are satisfied. The second income type is where contracts with the customer are for the performance of multiple obligations over time and the customer only benefits from delivery of all those obligations together over time, for example the provision of trustee services and services to funds under management. For these contracts, income is recognised over the service period. The third type of income is insurance intermediary income where the performance obligations are satisfied substantially at the time of referring the customer and economic benefits flow to the Group over time. The Group has estimated that nil income will be brought forward as a contract asset under these contracts due to the insufficient probability of the timing and amount of future income that will flow from these contracts. This income is therefore recorded when received.

SECTION 2: Financial performance

MyState Limited Notes to the consolidated financial statements for the year ended 30 June 2021

2.3 2.4	30 June 2021 30 June 2020 $ '000 $ '000
	Income from other activities Profit on sale ofproperty,plant and equipment assets - 3
	Expenses The following items are included within each item of specified expenses: Occupancy costs include: Operating lease payments (114) 379 Depreciation - right of use lease assets 2,934 3,254 Depreciation - buildings and leasehold improvements 362 482 Technology costs include: Amortisation - computer software 5,275 4,874 Administration costs include: Depreciation - furniture, equipment and computer hardware 276 322 Restructure costs include (i): Depreciation - early termination of right-of-use lease assets 1,215 - Termination payments 952 - Loss on disposal of fit out costs 248 - Other 144 -
	Total restructure costs 2,559 -

(i) During the period, branches in Queensland were closed and properties in Northern Tasmania were consolidated. The restructure costs include the cost to early terminate leases and redundancy costs related to impacted staff.

Expense accounting policy

Depreciation and amortisation expense

The Group adopts the straight line method of depreciating property, plant and equipment and amortising intangible assets over the estimated useful lives, commencing from the time the asset is held ready for use. Leasehold improvements and right-of-use assets are depreciated over the shorter of either the unexpired expected term of the lease or the estimated useful life of the improvements. Estimated useful lives are:

Buildings	40	years.
Office furniture, fittings & equipment	4-7	years.
Building fit-out	4-15	years.
Computer hardware	3	years.
Software	3-10	years.
Right-of-use assets	2-15	years.

Each year the useful life of assets are evaluated. The remaining useful life of select core banking systems was revised and extended in the prior year as the Group has implemented significant increased functionality and, in turn, longevity of these sytems over their initial capacity. The revised remaining useful life is within the above stated parameters however the total life since original core system implementation is in excess of the above stated lives in some instances.

SECTION 2: Financial performance

MyState Limited Notes to the consolidated financial statements for the year ended 30 June 2021

2.5	30 June 2021 30 June 2020 cents cents
	Earnings per share Basic earnings per share from continuing operations 39.18 32.86 Diluted earningsper share from continuingoperations 39.18 32.86

Earnings per share accounting policy

Basic earnings per share is calculated by dividing the Group's profit attributable to ordinary equity holders by the weighted average number of ordinary shares outstanding during the financial year. Diluted earnings per share is calculated by dividing the Group's profit attributable to ordinary equity holders by the weighted average number of ordinary shares that would be issued on the exchange of all the dilutive potential ordinary shares into ordinary shares.

The following table details the weighted average number of shares used in the calculation of basic and diluted earnings per share:

	Number Number
Weighted average number of ordinary shares used in calculating basic and diluted earnings per share	92,761,685 91,491,358

2.6 Dividends

	Date of	30 June 2021	30 June 2020
	payment	$ '000	$ '000
Dividends paid
2019 Final dividend paid - 14.5 cents per share	1 Oct 2019	-	13,204
2020 Interim dividend paid - 14.25 cents per share	2 Apr 2020	-	13,036
2020 Final dividend paid - 0 cents per share	N/A	-	-
2021 Interim dividendpaid - 12.5 centsper share	16 Mar 2021	11,508	-
Total dividendspaid		11,508	26,240

The dividends paid during the year were fully franked at the 30 per cent corporate tax rate.

SECTION 2: Financial performance

MyState Limited Notes to the consolidated financial statements for the year ended 30 June 2021

2.6 Dividends (continued)

	30 June 2021	30 June 2020
	$ '000	$ '000
Franking credit balance
The amount of franking credits available for the subsequent financial year are:
Franking account balance as at the end of the period at 30%	82,890	67,568
Franking credits that will arise from the payment of income tax payable at
the end of the period	4,049	2,314

Dividends not recognised at the end of the financial year

On 20 August 2021, the Directors resolved to pay a final dividend for the 2021 financial year of 13.0 cents per share or $13.686m total to be paid on 21 September of 2021, fully franked at the 30 per cent corporate tax rate. This dividend has not been brought to account as the amount had not been determined at the reporting date. This dividend will reduce the balance of the franking account by $5.865m.

2.7 Segment financial information

Operations of reportable segments

The Group has identified two operating divisions and a corporate division, which are its reportable segments. These divisions offer different products and services and are managed separately. The Group's management committee review internal management reports for each of these divisions at least monthly.

Banking division

The Banking division's product offerings include lending; encompassing home loans, personal, overdraft, line of credit and commercial products, transactional savings accounts and fixed term deposits and insurance products. It delivers these products and services through its branch network, digital channels and third party channels. The Banking division comprises the MyState Bank Limited Group.

Wealth Management division

The Wealth Management division is a provider of funds management and trustee services. It operates predominantly within Tasmania. It holds $1.105 billion (2020: $1.069 billion) in funds under management on behalf of personal, business and wholesale investors as the responsible entity for eight managed investment schemes. The Wealth Management division comprises TPT Wealth Limited which is a trustee company licensed within the meaning of Chapter 5D of the Corporations Act 2001 and is the only private trustee company with significant operations in Tasmania.

Corporate and consolidation division

The corporate division is responsible for the governance of the Group. The corporate division charges the operating divisions on a cost recovery basis for costs it has incurred. This division is also where eliminations are allocated between the Banking division and the Wealth Management division.

SECTION 2: Financial performance

MyState Limited Notes to the consolidated financial statements for the year ended 30 June 2021

2.7 Segment financial information (continued)

Segment financial information (continued)
		Wealth	Corporate
	Banking	Management	and Consolidation	Total
	$' 000	$' 000	$' 000	$' 000
Year ended 30 June 2021
Interest income	164,358	(12)	(10)	164,336
Interest expense	(52,370)	(2)	(13)	(52,385)
Other income
Transaction fees	3,918	-	-	3,918
Loan fee income	4,674	-	-	4,674
Banking commissions	2,984	-	-	2,984
Other banking operations income	1,695	-	(320)	1,375
Funds management income	-	9,412	-	9,412
Other wealth management fees and commissions	-	4,206	-	4,206
Income from other activities	-	-	-	-
Total operating income	125,259	13,604	(343)	138,520
Expenses
Personnel costs	27,241	6,338	6,036	39,615
Administration costs	20,999	2,964	(8,617)	15,346
Technology costs	14,893	1,017	290	16,200
Occupancy costs	4,532	144	87	4,763
Marketing costs	6,042	344	8	6,394
Governance costs	549	181	1,850	2,580
Impairment expense / (recovery)	(1,180)	185	-	(995)
Restructure costs (i)	2,277	282	-	2,559
Income tax expense	15,002	646	69	15,717
Segment profit for the year	34,904	1,503	(66)	36,341
Segment balance sheet information
Segment assets	6,467,120	24,307	51,049	6,542,476
Segment liabilities	6,123,366	1,426	2,470	6,127,262

(i) Costs related to the restructure for the Banking Division are $2.277M and for the Wealth Management division are $0.282M. Refer to note 2.4 for further information.

SECTION 2: Financial performance

MyState Limited Notes to the consolidated financial statements for the year ended 30 June 2021

2.7 Segment financial information (continued)

		Wealth	Corporate
	Banking	Management	and Consolidation	Total
	$' 000	$' 000	$' 000	$' 000
Year ended 30 June 2020
Interest income	188,105	182	43	188,330
Interest expense	(88,800)	(1)	(7)	(88,808)
Other income
Transaction fees	4,513	-	-	4,513
Loan fee income	4,462	-	-	4,462
Banking commissions	3,018	-	-	3,018
Other banking operations income	1,914	-	(208)	1,706
Funds management income	-	10,315	-	10,315
Other Wealth Management fees and commissions	-	5,321	-	5,321
Income from other activities	515	-	(512)	3
Total operating income	113,727	15,817	(684)	128,860
Expenses
Personnel costs	27,267	6,107	4,043	37,417
Administration costs	19,272	2,951	(6,705)	15,518
Technology costs	14,067	563	121	14,751
Occupancy costs	5,070	359	32	5,461
Marketing costs	4,878	349	23	5,250
Governance costs	604	104	1,848	2,556
Impairment expense / (recovery)	4,888	33	-	4,921
Income tax expense	11,335	1,610	(19)	12,926
Segment profit for the year	26,346	3,741	(27)	30,060
Segment balance sheet information
Segment assets	6,056,509	25,195	14,102	6,095,806
Segment liabilities	5,795,422	2,183	(36,121)	5,761,484

SECTION 2: Financial performance

MyState Limited Notes to the consolidated financial statements for the year ended 30 June 2021

3.1 Capital management strategy

The Group's capital management strategy is to adhere to regulatory requirements and maximise shareholder value through optimising the level and use of capital resources, whilst also providing the flexibility to take advantage of opportunities as they may arise.

The Group's capital management objectives are to:

▪Comply with internal and regulatory capital requirements;

▪Ensure sufficient capital resource is available to support the Group's business, operational and investment activities;

▪Maintain balance sheet resilience to safeguard the Group's ability to continue as a going concern; and ▪Support MyState Limited's and MyState Bank Limited’s credit rating.

The Group's capital management policy considers each of internal, regulatory and rating agency capital requirements. Under APS 110 Capital Adequacy, the ultimate responsibility for the prudent management of capital resides with the Board of Directors. The Board must ensure that an appropriate level and quality of capital is maintained, commensurate with the type, amount and concentration of risk exposures.

The Group’s regulatory capital requirements are measured on a Level 1 and Level 2 basis.

Level 1 is comprised of MyState Bank Limited (the ADI) and ConQuest 2010-1R.

Level 2 is comprised of the wider MyState Limited prudential group. This group includes MyState Limited (the nonoperating holding company), MyState Bank Limited, Connect Asset Management Limited (the Securitisation programme Manager) and ConQuest 2010-1R.

All entities that are consolidated for accounting purposes are included within the Level 2 regulatory capital calculation except for certain securitisation vehicles and TPT Wealth Limited.

The Group has developed a detailed Internal Capital Adequacy Assessment Plan (ICAAP). This plan covers the capital requirements of the Group on a Level 1 and Level 2 basis (as previously described) as well as TPT Wealth Limited. The Group's capital position is monitored on a frequent basis and is reported to the Board monthly. The ICAAP also includes a three year forecast of capital adequacy which is prepared and submitted to the Board at least annually.

The ICAAP aims to ensure that adequate planning activities take place so that the Group is effectively capitalised. The ICAAP encompasses known financial events, dividend policy, capital raisings, securitisation and stress testing.

SECTION 3: Capital and financial risk management

MyState Limited Notes to the consolidated financial statements for the year ended 30 June 2021

3.1 Capital management strategy (continued)

The Board has currently set a minimum total capital adequacy ratio of 12.5% for the Group. Capital adequacy of the Group on a level 2 basis is detailed in the following table:

on a level 2 basis is detailed in the following table:
	30 June 2021	30 June 2020
	$'000	$'000
Qualifying capital
Common equity tier 1 capital
Paid-up ordinary share capital (i)	208,197	152,775
Retained earnings	219,127	197,231
Reserves excluding general reserve for credit losses	44	(310)
Total common equity tier 1 capital	427,368	349,696
Less: Regulatory adjustments
Deferred expenditure including deferred tax assets	24,818	20,728
Goodwill and intangibles	68,913	72,006
Other deductions	41,733	42,297
Total regulatory adjustments	135,464	135,031
Net common equity tier 1 capital	291,904	214,665
Tier 2 capital
Subordinated notes (ii)	32,706	30,769
General reserve for credit losses	6,380	6,826
Total capital	330,990	252,260
Risk weighted assets	2,231,100	1,939,372
Capital adequacyratio	14.84%	13.01%

(i) On the 24th June 2021, the Group raised $24.2 million (5,628,573 shares at $4.30 each) under a retail entitlement offer. This followed an institutional entitlement offer and fully underwritten institutional placement (Placement) which raised $11.3 million and $20 million respectively (7,274,502 ordinary shares at $4.30 each) from existing and new institutional investors, on the 2nd June 2021.

(ii) On the 14th August 2015, the Group issued $25 million of floating rate subordinated notes (“notes”). The issuer was MyState Bank Limited. The notes had a term of 10 years to 14th August 2025, and paid interest quarterly at a floating rate equal to the three-month BBSW plus a margin of 5% per annum. The issuer redeemed these notes on 14 August 2020 having obtained APRA’s prior written approval.

On the 10th July 2020, the Group issued $25 million of floating rate subordinated notes (“notes”). The issuer was MyState Limited. The notes have a term of 10 years, maturing 10 July 2030, and pay interest quarterly at a floating rate equal to the three-month BBSW plus a margin of 4.35% per annum. The issuer has the option to redeem these notes on 10 July 2025 and each quarterly interest payment date thereafter, and for certain regulatory events (in each case subject to APRA’s prior written approval). On the same date, and with the same terms, MyState Bank Limited issued $25 million of floating rate subordinated notes to MyState Limited with terms identical to those issued by MyState Limited.

On the 28th September 2016, the Group issued $10 million of floating rate subordinated notes (“notes”). The issuer was MyState Bank Limited. The notes have a term of 10 years, maturing 28th September 2026, and pay interest quarterly at a floating rate equal to the three-month BBSW plus a margin of 4.25% per annum. The issuer has the option to redeem all or some of the notes on 28th September 2021 and each quarterly interest payment date thereafter, and for certain regulatory events (in each case subject to APRA’s prior written approval).

If APRA notifies the issuer that a non-viability trigger event has occurred, the notes will be converted into ordinary shares of MyState Limited, or written-off. For the notes issued on the 28th September 2016, the amount included in the Group’s Level 2 Tier 2 regulatory capital is a percentage equal to that of the external interest in the Group's regulatory capital. The amount included in the Group's Level 1 Tier 2 regulatory capital is 100%. For the notes issued on the 10th July 2020, the amount included in the Group's Level 1 and Level 2 Tier 2 regulatory capital is 100%.

SECTION 3: Capital and financial risk management

MyState Limited Notes to the consolidated financial statements for the year ended 30 June 2021

3.2 Financial risk management

Risk management is an integral part of the Group's business processes. The Board sets policy to mitigate risks and ensure the risk management framework is appropriate, to direct the way in which the Group conducts business. Promulgated Board approved policies ensure compliance throughout the business, which are monitored by way of a dedicated compliance system. Risk management plans exist for all documented risks within the Group and these plans are reviewed regularly by the Executive Management Team, the Group Risk Committee and the Board. Business units are accountable for risks in their area and are responsible for ensuring the appropriate assessment and management of these risks.

Risk exposure profile

The Group actively monitors a range of risks, which are not limited to, but include the following:

▪Credit risk, ▪Market risk; and ▪Liquidity risk.

3.2.1 Credit risk

Approach to credit risk management

Credit risk arises within the Group's lending and treasury investment activities and is the risk that a counterparty may fail to complete its contractual obligations when they fall due.

The Group's approach to managing this risk is to separate prudential control from operational management by assigning responsibility for approval of credit exposures to specific individuals and management committees. The Group Risk Committee has oversight of credit risk exposures and the Enterprise Risk Committee monitors credit related activities through regular reporting processes, including monitoring large exposure to single groups and counterparties. The roles of funding and oversight of credit are separate.

Board approved lending policies guide the processes for all loan approvals by subsidiary operations. All loans over a designated amount, whether within delegated limits or not, are reported to the Group Risk Committee on a regular basis. Any loan outside of delegated limits must be approved by the Board prior to funding.

Maximum exposure to credit risk

The amounts disclosed in the following table are the maximum exposure to credit risk, before taking account of any collateral held or other credit enhancements. For financial assets recognised in the Statement of Financial Position, the exposure to credit risk equals their carrying amount. For customer commitments, the maximum exposure to credit risk is the full amount of the committed facility as at the reporting date.

	30 June 2021	30 June 2020
	$'000	$'000
Cash and liquid assets	80,266	116,502
Due from other financial institutions	31,859	34,615
Other assets	7,032	6,762
Financial instruments	707,166	542,565
	826,323	700,444
Loans and advances	5,607,300	5,286,114
Customer commitments (i)	200,392	145,870
Maximum exposure to credit risk	6,634,015	6,132,428

(i) For further information regarding these commitments, refer to note 8.1.

SECTION 3: Capital and financial risk management

MyState Limited Notes to the consolidated financial statements for the year ended 30 June 2021

3.2 Financial risk management (continued)

The credit quality of financial assets has been determined based on Standard and Poor's credit ratings for financial assets other than loans and advances at amortised cost. For loans and advances at amortised cost, the assets identified as being "closely monitored" are those assets that are greater than 30 days past due. New facilities are loans that have been funded within the financial year.

within the financial year.
	30 June 2021	30 June 2020
	$'000	$'000
Credit quality of financial assets
Financial assets other than loans and advances at amortised cost
Equivalent S&P rating A+ and above	476,364	382,699
Equivalent S&P rating A and below	349,959	317,745
Loans and advances at amortised cost
New Facilities - not closely monitored	1,544,649	1,304,934
New Facilities - closely monitored	364	591
Continuing facilities - not closely monitored	4,036,862	3,954,565
Continuing facilities - closely monitored	25,425	26,024
Total on balance sheet exposure to credit risk	6,433,623	5,986,558
Loans and advances at amortised cost past due analysis
Not past due	5,576,675	5,254,085
Past due days:
31 to 60 days	11,492	8,889
61 to 90 days	5,760	4,750
More than 90 days	13,373	18,390
Total loans and advances at amortised cost	5,607,300	5,286,114
Estimate of collateral held against past due assets	45,588	45,027

Estimate of collateral held

To mitigate credit risk, the bank (ADI) holds collateral against select loans and advances in the form of a mortgage charge over property. The bank can take possession of the security held against the loans and advances as a result of customer default. The collateral shown above is an estimate of the value of collateral held, it is not practicable to determine the fair value.

SECTION 3: Capital and financial risk management

MyState Limited Notes to the consolidated financial statements for the year ended 30 June 2021

3.2 Financial risk management (continued)

Credit quality is impacted by concentration risk created by the ensuing vulnerability of assets to similar conditions such as economic or political factors. The Group monitors the geographical diversification of its loans and advances. An analysis of this concentration of credit risk at the reporting date is shown in the following table:

	30 June 2021	30 June 2020
	$'000	$'000
Tasmania	2,223,256	2,131,726
Victoria	981,390	918,936
New South Wales	1,122,964	1,105,970
Queensland	1,106,049	962,515
Western Australia	77,467	76,999
Australian Capital Territory	50,601	50,149
South Australia	43,897	41,088
Northern Territory	7,094	5,668
Gross loans and advances at amortised cost	5,612,718	5,293,051

There are no loans that individually represent 10% or more of shareholders' equity.

3.2.2 Market risk

Managing market risk

Market risk is the exposure to adverse changes in the value of the Group's portfolio as a result of changes in market prices or volatility. The Group is exposed primarily to interest rate risk.

Interest rate risk exposure

The operations of the ADI are subject to the risk of interest rate fluctuations as a result of mismatches in the timing of the repricing of interest rates on their assets and liabilities.

Value at Risk (VaR)

The following table indicates the VaR based on historical data. The Group estimates VaR as the potential loss in earnings from adverse market movements over a 20 day holding period to a 99% confidence level. VaR takes account of all material market variables that may cause a change in the value of the loan portfolio. Although an important tool for the measurement of market risk, the assumptions underlying the model are limited to reliance on historical data.

	30 June 2021	30 June 2020
	$'000	$'000
Value at risk (post-tax) based on historic data
Average	1,531	1,533
Minimum	980	1,076
Maximum	2,999	2,111

Derivatives

The Group is exposed to changes in interest rates. The only derivative instruments currently entered into by the Group are interest rate swaps. The Group protects its portfolio of fixed rate loans, and exposure to variable rate debt obligations, by paying fixed rates to swap providers and receiving variable rates in return. The variable receipts mitigate the exposure to interest rate changes that will impact on the Group's variable rate payment obligations.

SECTION 3: Capital and financial risk management

MyState Limited Notes to the consolidated financial statements for the year ended 30 June 2021

3.2 Financial risk management (continued)

Derivatives accounting policy

Derivatives are initially recognised at fair value on the date a derivative contract is entered into and subsequently remeasured to their fair value. Fair values are obtained from quoted market prices in active markets. Movements in the carrying amounts of derivatives are recognised in the Consolidated Income Statement, unless the derivative meets the requirements for hedge accounting.

The Group documents the relationship between the hedging instruments and hedged items at inception of the transaction, as well as its risk management objective and strategy for undertaking various hedge transactions. The Group also documents its assessment of whether the derivatives used in hedging transactions have been or will continue to be, highly effective in offsetting changes in the fair values or cash flows of hedged items. This assessment is carried out both at inception and on a monthly basis.

Cash flow hedges

The Group has cash flow hedges that are used to hedge the variability of interest rates in relation to certain liabilities. These derivative instruments are established with terms that exactly match the terms of the liability designated as the hedged item and therefore form highly effective relationships. The portion of the liability designated in the hedging relationship is determined by reference to specific fixed rate assets within the loan portfolio. Sources of ineffectiveness are limited to credit risk of parties to the relationship. The Group tests for ineffectiveness each month. The variability in fair values attributable to an item designated as a cash flow hedge is recognised in Other Comprehensive Income to the extent of the hedge's effectiveness. Any ineffective portion of the change in the fair value of a derivative is recognised immediately in the Consolidated Income Statement.

Derivatives that do not qualify for hedge accounting

If a derivative expires or is sold, terminated, or exercised, or no longer meets the criteria for hedge accounting, or the designation is revoked, then hedge accounting is discontinued and the amount recognised in Other Comprehensive Income remains in Other Comprehensive Income until the forecast transaction affects the Consolidated Income Statement. If the forecast transaction is no longer expected to occur, it is reclassified to the Consolidated Income Statement as a reclassification adjustment.

When a derivative is not designated in a qualifying relationship, all changes in its fair value are recognised immediately in the Consolidated Income Statement, as a component of net income from other financial instruments carried at fair value.

SECTION 3: Capital and financial risk management

MyState Limited Notes to the consolidated financial statements for the year ended 30 June 2021

3.2 Financial risk management (continued)

3.2.3 Liquidity risk

Managing liquidity risk

Liquidity risk is the risk that the Group is unable to meet its financial and statutory obligations as they fall due, which could arise due to mismatches in cash flows.

The Group maintains a portfolio of highly marketable assets that can be liquidated in the event of an unforeseen interruption of cash flows. The Group also has committed lines of credit that it can access to meet its liquidity needs. Liquidity scenarios are calculated under stressed and normal operating conditions, to assist in anticipating cash requirements providing adequate reserves.

The Group's objective is to manage its funds in a way that will facilitate growth in core business under a wide range of market conditions. The Group maintains, and adheres to, a Liquidity Risk Management framework (LRMF). This process includes acknowledgements of liquidity risks within the Group and justification of the amount of liquidity that is being held based on the liquidity risk profile of the organisation.

Group Treasury is responsible for implementing liquidity risk management strategies in accordance with the LRMF. The Group's Assets and Liabilities Committee (ALCO) assists the Board with oversight of asset and liability management including liquidity risk management. The Group's liquidity policies are approved by the Board after endorsement by the Group Risk Committee and the Banking Group's ALCO.

On the 19th of March 2020 the RBA established a Term Funding Facility (TFF) that offered ADI's three-year funding at a rate of 0.25% per annum to support the Australian economy through COVID-19. MyState Bank, the Group's ADI, was granted an allowance of $109.032 million which was fully drawn ahead of the 30 September 2020 deadline.

On the 1st September 2020, the RBA announced changes to the TFF, including a Supplementary Allowance that provided ADI’s additional three year funding at a rate of 0.10%. MyState Bank was granted an allowance of $75.650 million which was fully drawn ahead of the 30 June 2021 deadline.

The combined drawn amount as at the reporting date of $184.682 million is reported within "term deposits". Funding obtained under the TFF has been secured by $219.350 million of eligible asset backed self-securitisation. The funding was drawn down progressively and will therefore be able to be repaid progressively at the end of each respective three year term.

SECTION 3: Capital and financial risk management

MyState Limited Notes to the consolidated financial statements for the year ended 30 June 2021

3.2 Financial risk management (continued)

3.2.3 Liquidity risk (continued)

Liquidity risk exposure

The Group is exposed to liquidity risk primarily through its banking activities. The Group's contractual cash flows associated with its financial liabilities and hedging derivatives, within relevant maturity groupings is as follows. These are presented on an undiscounted basis and, therefore, will not agree to amounts presented on the Consolidated Statement of Financial Position as they incorporate principal and associated future interest payments.

			3 months	1 year
	On demand	< 3 months	to 1 year	to 5 years	> 5 years	Total
	$'000	$'000	$'000	$'000	$'000	$'000
2021
At call deposits	2,965,447	-	-	-	-	2,965,447
Due to other financial institutions	-	18,821	-	-	-	18,821
Term deposits	-	632,137	807,082	242,796	-	1,682,015
Negotiable certificates of deposit	-	281,279	-	-	-	281,279
Subordinated notes	-	380	1,141	6,087	50,335	57,943
Floating rate notes	-	253	1,013	55,065	-	56,331
Securitisation liabilities	-	82,541	247,622	808,855	-	1,139,018
Contractual amounts payable	2,965,447	1,015,411	1,056,858	1,112,803	50,335	6,200,854
Derivative liability	-	163	1,922	13,775	-	15,860
2020
At call deposits	1,986,905	-	-	-	-	1,986,905
Due to other financial institutions	-	25,617	-	-	-	25,617
Term deposits	-	1,025,116	920,749	38,756	-	1,984,621
Negotiable certificates of deposit	-	219,096	9,965	-	-	229,061
Subordinated notes	-	427	1,281	6,830	35,710	44,248
Securitisation liabilities	-	92,130	276,391	1,206,010	-	1,574,531
Contractual amounts payable	1,986,905	1,362,386	1,208,386	1,251,596	35,710	5,844,983
Derivative liability	-	122	1,410	8,753	-	10,285

SECTION 3: Capital and financial risk management

MyState Limited Notes to the consolidated financial statements for the year ended 30 June 2021

3.2 Financial risk management (continued)

3.2.3 Liquidity risk (continued)

Contractual maturity of assets and liabilities

The contractual maturities of the Group's financial assets and liabilities as at the reporting date are contained in the following table. The Group expects that certain assets and liabilities will be recovered or settled at maturities which are different to their contractual maturities.

		30 June 2021			30 June 2020
	< 12 months	> 12 months	Total	< 12 months	> 12 months	Total
	$'000	$'000	$'000	$'000	$'000	$'000
Financial assets
Cash and liquid assets	80,266	-	80,266	116,502	-	116,502
Due from other financial institutions	31,859	-	31,859	34,615	-	34,615
Other assets	7,032	-	7,032	6,762	-	6,762
Financial instruments	351,018	356,148	707,166	313,261	229,304	542,565
Loans and advances (i)	66,042	5,541,258	5,607,300	69,741	5,216,373	5,286,114
Total financial assets	536,217	5,897,406	6,433,623	540,881	5,445,677	5,986,558
Financial liabilities
Due to other financial institutions	(18,821)	-	(18,821)	(25,617)	-	(25,617)
Other liabilities	(20,605)	-	(20,605)	(21,165)	-	(21,165)
Deposits	(4,685,945)	(242,796)	(4,928,741)	(3,895,668)	(304,919)	(4,200,587)
Subordinated notes	-	(34,662)	(34,662)	-	(34,808)	(34,808)
Floating rate notes	-	(49,976)	(49,976)	-	-	-
Securitisation liabilities	(267,457)	(798,958)	(1,066,415)	(368,521)	(1,100,862)	(1,469,383)
Total financial liabilities	(4,992,828)	(1,126,392)	(6,119,220)	(4,310,971)	(1,440,589)	(5,751,560)
Net contractual amounts receivable / (payable)	(4,456,611)	4,771,014	314,403	(3,770,090)	4,005,088	234,998

(i) Contractual recovery is subject to evolving regulatory and industry support for counterparties requesting such support, as at the reporting date, the primary support provided to borrowers is repayment deferral periods.

SECTION 3: Capital and financial risk management

MyState Limited Notes to the consolidated financial statements for the year ended 30 June 2021

3.3 Average balance sheet and sources of net interest income

The following table shows the major categories of interest-earning assets and interest-bearing liabilities, together with their respective interest earned or paid by the Group and the average interest rates. Averages are calculated based on the balance at each month end.

		30 June 2021			30 June 2020
	Average		Average	Average		Average
	balance	Interest	rate	balance	Interest	rate
	$ '000	$ '000	%	$ '000	$ '000	%
Average assets and interest income
Interest-earning assets
Cash and liquid assets	102,751	21	0.02%	94,219	241	0.26%
Financial instruments	608,672	3,403	0.56%	494,983	7,175	1.45%
Loans and advances (i)	5,173,127	160,912	3.11%	4,873,672	180,914	3.71%
Total average interest-earning assets	5,884,550	164,336	2.79%	5,462,874	188,330	3.45%
Non-interest earning assets	141,968	-	-	145,239	-	-
Total average assets	6,026,518	164,336	2.73%	5,608,113	188,330	3.36%
Average liabilities and interest expense
Interest-bearing liabilities
Deposits and derivatives	4,563,415	30,861	0.68%	4,033,629	54,751	1.36%
Notes and bonds on issue	1,300,339	20,206	1.55%	1,457,203	32,849	2.25%
Total average interest-bearing liabilities	5,863,754	51,067	0.87%	5,490,832	87,600	1.60%
Non-interest bearing liabilities	42,846	-	-	53,338	-	-
Total average liabilities	5,906,600	51,067	0.86%	5,544,170	87,600	1.58%
Reserves	332,453	-	-	310,388	-	-
Total average liabilities and reserves	6,239,053	51,067	0.82%	5,854,559	87,600	1.50%

(i) The offset account average balance included in Loans and advances is $232.382 million (2020: $264.109 million).

SECTION 3: Capital and financial risk management

MyState Limited Notes to the consolidated financial statements for the year ended 30 June 2021

4.1	30 June 2021 30 June 2020 $ '000 $ '000
	Cash and liquid assets Notes, coins and cash at bank 75,469 110,831 Other short term liquid assets 4,797 5,671
	Total cash and liquid assets 80,266 116,502
	Profit for the year 36,341 30,060 Depreciation of property, plant and equipment 638 804 Depreciation of right of use assets 3,626 3,254 Amortisation of intangible assets 5,275 4,874 Loss / (gain) on sale of equipment 248 143 Bad and doubtful debts expense net of recoveries (995) 4,921 Share based payment 501 234 Tax movement within reserves (130) 55 Changes in assets and liabilities: Decrease / (increase) in due from other financial institutions 2,756 (43,070) Decrease / (increase) in loans and advances (320,192) (237,944) Decrease / (increase) in financial instruments (164,167) (93,416) Decrease / (increase) in other assets (270) 642 Decrease / (increase) in deferred tax assets (614) (1,153) Increase / (decrease) in due to other financial institutions (4,619) (13,138) Increase / (decrease) in deposits and other borrowings 325,186 408,772 Increase / (decrease) in employee benefits provisions (434) 291 Increase/ (decrease)in tax liabilities (5,444) 1,034 Reconciliation of profit for the year to net cash provided by operating activities Add / (less) items classified as investing / financing activities or non-cash items:
	Net cash flows used in operating activities (122,294) 66,363

Cash and liquid assets accounting policies

Cash and liquid assets

Cash and liquid assets in the Consolidated Statement of Financial Position and for the purposes of the Consolidated Statement of Cash Flows comprise cash at bank and in hand and short-term deposits with an original maturity of less than three months, net of outstanding bank overdrafts. Cash flows arising from deposits, share capital, investments, loans to subsidiaries and investments in associates are presented on a net basis in the Statement of Cash Flows.

Cash Flow statement

Cash flows arising from the following activities are presented on a net basis in the Statement of Cash Flows:

▪ Customer deposits and withdrawals from savings and fixed-term deposit accounts;

▪ Movements in investments;

▪ Amounts due to and from other financial institutions;

▪ Customer loans and advances; and ▪ Dividends paid.

Where operational income and expense accruals and prepayments are included in the above line items, the movements will differ between the statement of financial position and the disclosure in this note.

SECTION 4: Financial assets and liabilities

MyState Limited Notes to the consolidated financial statements for the year ended 30 June 2021

4.2	30 June 2021 30 June 2020 $ '000 $ '000
	Financial instruments Financial instruments at amortised cost Negotiable certificates of deposits 317,703 298,616 Term deposits 35,700 35,700 Floating rate notes 353,258 207,178 Other deposits 1,068 2,117
	Total financial instruments at amortised cost 707,729 543,611
	Financial instruments at fair value Derivatives (563) (1,046) Other financial instruments at fair value - -
	Total financial instruments 707,166 542,565

Financial instruments accounting policies

Financial instruments at amortised cost

Financial instruments at amortised cost are those non-derivative financial assets that the Group has acquired with the objective of holding in order to collect contractual cash flows. The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

Financial instruments at fair value

Financial instruments other than those carried at amortised cost, are carried at their fair value at the reporting date. Note 4.7 contains information on how the Group determines fair values. Fair value gains and losses are recognised in comprehensive income until the derecognition date, at which point the net gains and losses are transferred to profit or loss for that instrument.

Derecognition of financial assets and liabilities

Financial assets are derecognised when the contractual rights to receive cash flows from the assets have expired, or where the Group has transferred its contractual rights to receive the cash flows of the financial assets and substantially all the risks and rewards of ownership. Financial liabilities are derecognised when they are extinguished, i.e. when the obligation is discharged, cancelled or expired.

4.3	Loans and advances Classification of loans and advances at amortised cost Residential loans secured by mortgage Personal loans and unsecured overdrafts Overdrafts secured by mortgage Commercial loans	5,468,427 5,119,511 46,989 67,351 29,200 35,398 68,102 70,791
	Total loans and advances at amortised cost	5,612,718 5,293,051
	Specific provision for impairment Collectiveprovision for impairment	50 305 5,368 6,632
	Total loans and advances at amortised cost net ofprovision for impairment	5,607,300 5,286,114

Loans and advances at amortised cost accounting policy

Loans and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as "loans and advances". Loans and advances are recognised on trade date and are measured at amortised cost using the effective interest method, less any impairment. Interest income is recognised by applying the effective interest rate, except for short-term receivables when the effect of discounting is immaterial.

SECTION 4: Financial assets and liabilities

MyState Limited Notes to the consolidated financial statements for the year ended 30 June 2021

4.3 Loans and advances (continued)

	30 June 2021	30 June 2020
	$ '000	$ '000
Provision for impairment
Specific provision for impairment
Opening balance	305	266
Net specific provision funding	(255)	39
Write-off ofpreviously provisioned facilities	-	-
Closing balance of specificprovision for impairment	50	305
Collective provision for impairment
Opening balance	6,632	2,098
Net collective provision funding	(1,037)	4,595
Write-off ofpreviously provisioned facilities	(227)	(61)
Closing balance of collectiveprovision for impairment	5,368	6,632
Charge to profit for impairment on loans and advances
Increase / (decrease) in specific provision for impairment	(255)	39
Increase / (decrease) in collective provision for impairment	(1,037)	4,595
Bad debts recovered	(675)	(831)
Bad debts written off directly	972	1,118
Less charge related to discontinued operation	-	-
Total impairment(recovery) / expense on loans and advances	(995)	4,921

The Group has undertaken a review of the expected credit loss of its lending portfolios against relevant specific economic conditions under varying scenarios. The review considered the macroeconomic outlook, customer credit quality, the quality of collateral held and exposure at default as at the reporting date. These model inputs including forward-looking information have been revised in recognition that COVID-19 is a key driver of the estimates therein. The modelled expected credit loss (ECL) is sensitive to the speed and resilience of post-COVID-19 economic normalisation, and the longevity of any monetary and fiscal intervention, as these influence both the probability of default, and the value of collateral that may be utilised. Whilst the inputs have been revised, the underlying methodology for calculating the ECL is consistently applied in the current and comparative period as described in the 'Impairment of financial assets accounting policy' presented below.

In arriving at the reported ECL, the following assumptions have been considered the more probable outcome as at the reporting date:

▪Australian unemployment rates to return to pre-COVID-19 levels of approximately 5% in the 2022 financial year and remaining stable as economic activity returns gradually towards normalised levels.

▪Australian house prices increase by approximately 6% in the 2022 financial year and 5% in 2023 calendar year.

▪The Reserve Bank of Australia maintaining the cash rate at historic lows until 2023 to continue to support economic activity in this COVID-19 environment.

Given the more recent COVID-19 outbreaks and resulting lockdowns in mainland Australia, future economic conditions that result in outcomes that differ from the current estimate are possible and will be accounted for in future periods.

SECTION 4: Financial assets and liabilities

MyState Limited Notes to the consolidated financial statements for the year ended 30 June 2021

4.3 Loans and advances (continued)

Impairment of financial assets accounting policy

Financial assets are assessed for indicators of impairment at the end of each reporting period. Financial assets are considered to be impaired when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been affected. The primary source of credit risk for the Group arises on its loan portfolio. In relation to this portfolio, the Group maintains a specific provision and a collective provision.

Specific provisions for impairment are made against individual risk rated credit facilities where a loss is expected. The provisions are measured as the difference between a financial asset's carrying amount and the expected future cash flows.

All other loans and advances that do not have an individually assessed provision are assessed collectively for impairment. The collective provisions are calculated using an Expected Credit Loss (ECL) model. This model is forward looking and does not require evidence of an actual loss event for impairment provisions to be recognised.

The Group applies a three-stage approach to measuring the ECL based on credit risk since origination. The Group estimates ECL through modelling the probability of default, loss given default and exposure at default, as follows:

Stage 1 - Performing - This category includes financial assets that have not experienced a significant increase in credit risk since their origination. For these financial assets an allowance equivalent to 12 month’s ECL is recognised, which represents the credit losses expected to arise from defaults occurring over the next 12 months.

Stage 2 - Under-performing - This category includes financial assets that have experienced a significant increase in credit risk since their origination and are not credit impaired. For these financial assets an allowance equivalent to lifetime ECL is recognised. Lifetime ECL is the credit losses expected to arise from defaults occurring over the remaining life of the financial assets.

Stage 3 - Non-performing (impaired) - This category includes financial assets that are credit impaired. The provision is also equivalent to the lifetime ECL. The difference to the provision calculated on stage 2 loans is that the stage 3 loan calculation is not discounted over a future period, but rather the provision is calculated at nominal value.

Financial assets in stage 1 and stage 2 are assessed for impairment collectively, whilst those assets in stage 3 are subject to either collective or specific impairment assessment.

Significant changes in credit risk

Significant increases in credit risk for financial assets are assessed by comparing the risk of a default occurring over the expected life of a financial asset at the reporting date compared to the corresponding risk of default at origination. In determining what constitutes a significant increase in credit risk, the Group considers qualitative and quantitative information. The judgement to determine this is primarily based on changes in internal customer risk grades since origination of the facility. For all of the Group’s loan portfolios, in addition to the primary indicator, a mathematical model has been developed to identify where a facility’s recent behaviour has deteriorated significantly from its original behaviour.

Key judgements and estimates made by the Group include the following:

Forward looking information

The measurement of expected credit losses needs to reflect an unbiased probability-weighted range of possible future outcomes. AASB 9 provides limited guidance on how to meet this requirement and consequently, the Group has developed an approach considered appropriate for its credit portfolio, informed by emerging market practices.

In applying forward looking information in its AASB 9 credit models, the Group considered three alternate economic scenarios (base case, strong recovery and moderate recession), to ensure a sufficient unbiased representative sample is included in estimating ECL. At 30 June 2021, the forward looking component of the collective provision for doubtful debts is $1.473M (2020: $2.510M).

SECTION 4: Financial assets and liabilities

MyState Limited Notes to the consolidated financial statements for the year ended 30 June 2021

4.4 Transfer of financial assets (securitisation program)

Some loans and advances to customers are sold by the Group to securitisation vehicles. The transfer takes the form of the Group assuming an obligation to pass cash flows from the underlying assets to investors in the notes. The Group utilises its securitisation program to provide regulatory capital relief and funding diversification.

The following table sets out the carrying values at the transaction date of financial assets transferred during the financial year in this manner to vehicles that provide regulatory capital relief and the value of the associated liabilities issued from the vehicles. This table does not include transfer of assets to the securitisation vehicle in which the Group is the bond holder.

	30 June 2021		30 June 2020
	$ '000		$ '000
Transferred financial assets:
Loans and advances		-	541,940
Associated financial liabilities:
Securitisation liabilities to external investors		-	528,081

Transfer of financial assets accounting policy

Once assets are transferred to a securitisation vehicle, the Group does not have the ability to use the transferred assets during the term of the arrangement. The Group does not have any loans transferred to unconsolidated securitisation vehicles.

The consolidated securitisation vehicles generally transfer all the risks and rewards of ownership of the assets to the investors in the notes. However, derecognition of the transferred assets from the Group is prohibited because the cash flows that the securitisation vehicles collect from the transferred assets on behalf of the investors are not passed to them without material delay. In these cases, the consideration received from the investors in the notes in the form of cash is recognised as a financial asset and a corresponding financial liability is recognised. The investors in the notes have recourse only to the cash flows from the transferred financial assets.

SECTION 4: Financial assets and liabilities

MyState Limited Notes to the consolidated financial statements for the year ended 30 June 2021

4.5	30 June 2021 30 June 2020 $ '000 $ '000
	Deposits and other borrowings including subordinated notes Deposits At call deposits 2,965,447 1,986,905 Term deposits 1,682,015 1,984,621 Negotiable certificates of deposit 281,279 229,061
	Total deposits 4,928,741 4,200,587
	Other borrowings Subordinated notes (i) 34,662 34,808 Floating rate notes (ii) 49,976 - Securitisation liabilities 1,066,415 1,469,383
	Total deposits and other borrowings including subordinated notes 6,079,794 5,704,778
	Concentration of deposits: Customer deposits 4,462,773 3,941,537 Wholesale deposits 465,968 259,050 Subordinated notes (i) 34,662 34,808 Floating rate notes (ii) 49,976 - Securitisation liabilities 1,066,415 1,469,383
	Total deposits 6,079,794 5,704,778

(i) Refer to note 3.1 (ii) for details regarding the subordinated notes issue.

(ii) On the 16th June 2021, floating rate notes with a face value of $50m and term of 4 years were issued by MyState Bank Limited.

There are no customers who individually have deposits which represent 10% or more of total liabilities.

Deposits and other borrowings accounting policy

Deposits and other borrowings are initially measured at fair value, net of transaction costs and are subsequently measured at amortised cost using the effective interest method, with interest expense recognised on an effective yield basis.

The Group does not currently hold any financial liabilities at fair value.

SECTION 4: Financial assets and liabilities

MyState Limited Notes to the consolidated financial statements for the year ended 30 June 2021

4.6	30 June 2021 30 June 2020 $ '000 $ '000
	Other liabilities Trade payables and related accruals 8,699 6,502 Lease liabilities 11,906 14,663
	Total other liabilities 20,605 21,165

Lease liabilities

Lease liabilities are initially measured at the present value of the future lease payments at the commencement date, discounted using the interest rate implicit in the lease (or if that rate cannot be readily determined, the lessee’s incremental borrowing rate).

Lease payments are allocated between principal and interest expense. Interest expense is recognised as a financing cost within interest expense (refer note 2.1) in the income statement over the lease period. Any variable lease payments not included in the measurement of the lease liability are also recognised in the income statement in the period in which the event or condition that triggers those payments occurs. Lease liabilities are remeasured when there is a change in future lease payments arising from a change in lease term, an assessment of an option to purchase the underlying asset, an index or rate, or a change in the estimated amount payable under a residual value guarantee. When the lease liability is remeasured, a corresponding adjustment is made to the carrying value of the Right-of-use (ROU) asset, or, in the income statement, where the carrying value of the ROU asset has been fully written down. The ROU asset is recorded in property, plant and equipment and right-of-use assets (refer to note 5.1).

4.7 Fair value of financial instruments

Classification of financial instruments

Cash and liquid assets and amounts due from financial institutions are carried at cost. As these assets are short term assets, their cost is considered to approximate their fair value.

The following financial assets and liabilities are also carried at amortised cost:

▪Financial instruments;
▪Loans and advances;
▪Deposits; and
▪Other borrowings.

The aggregate net fair value of financial assets and financial liabilities which are carried at amortised cost is:

	30 June	2021	30 June	2020
	Carrying	Net fair	Carrying	Net fair
	value	value	value	value
	$ '000	$ '000	$ '000	$ '000
Financial assets
Financial instruments	707,729	725,199	543,611	543,339
Loans and advances	5,607,300	5,613,341	5,286,114	5,295,507
Total financial assets	6,315,029	6,338,540	5,829,725	5,838,846
Financial liabilities
Deposits	4,928,741	4,928,719	4,200,587	4,203,504
Other borrowings including subordinated notes	1,151,053	1,150,973	1,504,191	1,504,191
Total financial liabilities	6,079,794	6,079,692	5,704,778	5,707,695

SECTION 4: Financial assets and liabilities

MyState Limited Notes to the consolidated financial statements for the year ended 30 June 2021

4.7 Fair value of financial instruments (continued)

Fair value hierarchy

The level in the fair value hierarchy of the inputs used in determining the fair values is shown below. The fair value of these assets is:

Level 1 - inputs that are prices quoted for identical instruments in active markets;

Level 2 - inputs based on observable market data other than those in level 1; and

Level 3 - inputs for which there is no observable market data.

Where the expected maturity is in excess of 12 months, the fair value is discounted to its present value. During the year, there have been no material transfers between levels of the fair value hierarchy.

	Level 1		Level 2	Level 3	Total
	value		value	value	value
	$ '000		$ '000	$ '000	$ '000
2021
Financial assets
Financial instruments		-	725,199	-	725,199
Loans and advances		-	-	5,613,341	5,613,341
Financial liabilities
Deposits		-	4,928,719	-	4,928,719
Other borrowings includingsubordinated notes		-	1,150,973	-	1,150,973
2020
Financial assets
Financial instruments		-	543,339	-	543,339
Loans and advances		-	-	5,295,507	5,295,507
Financial liabilities
Deposits		-	4,203,504	-	4,203,504
Other borrowings includingsubordinated notes		-	1,504,191	-	1,504,191

The Group has performed a VaR analysis at note 3.2, Market risk. VaR takes account of all material market variables that may cause a change in the value of the loan portfolio, being 100% of Level 3 inputs.

SECTION 4: Financial assets and liabilities

MyState Limited Notes to the consolidated financial statements for the year ended 30 June 2021

5.1	30 June 2021 30 June 2020 $ '000 $ '000
	Property, plant and equipment and right-of-use assets Land and buildings At revalued amount 7,351 12,890 Accumulated depreciation (6,629) (8,202)
	722 4,688
	Plant and equipment At cost 5,433 5,395 Accumulated depreciation (4,826) (4,567)
	607 828
	Right-of-use assets - land and buildings At cost 14,938 16,429 Accumulated depreciation (4,589) (2,454)
	10,349 13,975
	Totalproperty, plant and equipment 11,678 19,491

Property, plant and equipment accounting policy

Land and buildings

Following initial recognition at cost, land and buildings are carried at a revalued amount, being their fair value at the date of the revaluation less any subsequent accumulated depreciation on buildings and accumulated impairment losses. Independent valuations are performed with sufficient regularity to ensure the carrying amount does not differ materially from the asset's fair value at the Consolidated Statement of Financial Position date. Fair value, is determined by reference to market-based evidence, which is the amount for which the assets could be exchanged between a knowledgeable willing buyer and seller in an arm's length transaction as at valuation date.

Any revaluation surplus is credited to the asset revaluation reserve included in the equity section of the Consolidated Statement of Financial Position, unless it reverses a revaluation decrease of the same asset previously recognised in the Consolidated Income Statement. Any revaluation deficit is recognised in the Consolidated Income Statement unless it directly offsets a previous surplus of the same asset in the asset revaluation reserve.

Plant and equipment and right-of-use (ROU) assets

Plant and equipment and right-of-use assets, including leasehold improvements, are measured at cost less accumulated depreciation and any impairment in value. The cost of ROU assets correspond to the amount recognised for the lease liability on initial recognition together with any lease payments made at or before the commencement date, net of any lease incentives received and initial direct costs.

Impairment of property, plant and equipment and right-of-use assets

The carrying values of property, plant and equipment and right-of-use assets are reviewed for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. For an asset that does not generate largely independent cash flows, the recoverable amount is determined for the cash-generating unit to which the asset belongs.

Derecognition of property, plant and equipment and right of use assets

An item of property, plant and equipment or right-of-use asset is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the item) is included in the Consolidated Income Statement in the year the item is derecognised.

SECTION 5: Non-financial assets, liabilities and equity

MyState Limited Notes to the consolidated financial statements for the year ended 30 June 2021

5.2	30 June 2021 30 June 2020 $ '000 $ '000
	Investment property Land and buildings At revalued amount 5,293 - Accumulated depreciation (1,492) -
	3,801 -
	Total investmentproperty 3,801 -

Investment property accounting policy

Land and buildings

SECTION 5: Non-financial assets, liabilities and equity

MyState Limited Notes to the consolidated financial statements for the year ended 30 June 2021

5.3 Intangible assets and goodwill

	Goodwill	Software	Total
	$ '000	$ '000	$ '000
Year ended 30 June 2021
At 1 July 2020, net of accumulated amortisation	65,152	19,319	84,471
Additions	-	4,282	4,282
Disposals	-	-	-
Amortisation	-	(5,275)	(5,275)
At 30 June 2021, net of accumulated amortisation	65,152	18,326	83,478
At 30 June 2021
Cost (gross carrying amount less impairment)	65,152	19,319	84,471
Accumulated amortisation	-	(993)	(993)
Net carrying amount	65,152	18,326	83,478
Year ended 30 June 2020
At 1 July 2019, net of accumulated amortisation	65,152	19,827	84,979
Additions	-	4,425	4,425
Disposal	-	(59)	(59)
Amortisation	-	(4,874)	(4,874)
At 30 June 2020, net of accumulated amortisation	65,152	19,319	84,471
At 30 June 2020
Cost (gross carrying amount less impairment)	65,152	36,784	101,936
Accumulated amortisation	-	(17,465)	(17,465)
Net carrying amount	65,152	19,319	84,471

Intangibles accounting policy

Intangible assets acquired separately are capitalised at cost and from a business combination are capitalised at fair value as at the date of acquisition. Following initial recognition, the cost model is applied to the class of intangible assets. The useful lives of these intangible assets are assessed to be either finite or infinite. Where amortisation is charged on assets with finite lives, this expense is taken to the Consolidated Income Statement. Certain costs directly incurred in acquiring and developing software are capitalised and amortised over the estimated useful life.

Intangible assets are tested for impairment where an indicator of impairment exists and, in the case of indefinite life intangibles (limited to Goodwill), annually, either individually or at the cash-generating unit level. Useful lives are also examined on an annual basis and adjustments, where applicable, are made on a prospective basis.

Goodwill is treated as an indefinite life intangible, software and other intangibles are finite life intangibles. Refer to note 2.4 Expenses for the useful life of tangible and intangible assets.

SECTION 5: Non-financial assets, liabilities and equity

MyState Limited Notes to the consolidated financial statements for the year ended 30 June 2021

5.3 Intangible assets and goodwill (continued)

Impairment testing of Goodwill

For the purpose of impairment testing, goodwill has been allocated to the Group's two cash-generating units (CGU's) the Banking Business and the Wealth Management Business. These CGU's represent the lowest level within the Group at which the goodwill is monitored for internal management purposes. The aggregate carrying amounts of goodwill allocated to each CGU for the purpose of impairment testing is as follows:

allocated to each CGU for the purpose of impairment testing is as follows:
	30 June 2021	30 June 2020
	$ '000	$ '000
Banking Business	40,189	40,189
Wealth Management Business	24,963	24,963
Totalgoodwill	65,152	65,152

The Group’s assessment of goodwill value-in-use exceeds the carrying value allocated to the CGU's and included in the financial statements.

The recoverable amounts for each CGU's value-in-use was determined using cash flow projections from Board approved financial budgets for the year ending 30 June 2022. Growth rates have been applied from year two through to year ten. Cash flows are projected by undertaking detailed calculations for each income and expense category over a four year period and are then extrapolated off the 4th year, which is the lowest point of growth. An exit value is calculated at the end of 10 years, based on an implied terminal value earnings multiple of 8.9 and 14.9 for the Banking Business and the Wealth Management Business respectively, and a long-term growth rate not exceeding industry. A post-tax discount rate of 9.9% (14.1% pre-tax) and 8.0% (11.4% pre tax) was used for the Banking Business and the Wealth Management Business respectively. Certain income categories are modelled by projecting growth in relevant portfolio balances and the resulting income derived there-from. Other non-portfolio related income streams and expense categories are modelled by projecting real rates of growth (above inflation) for each category. Terminal value is determined at year ten using the assumption that the CGU achieves no real growth above inflation into perpetuity. The growth rates applied do not exceed the long-term average growth rate for the business which the CGU operates. The discount rate used of 9.9% reflects the Group's post-tax nominal weighted average cost of capital, which has been reviewed by externally engaged advisers and approved by the Board. Average inflation is projected to be 2.2%. The method for determining value-in-use is consistent with that adopted in the comparative period.

The key assumptions adopted in assessing Banking's value-in-use are the rate of growth in the balance of the housing loan portfolio and the outlook for net interest margin (NIM). Taking into account management's past experiences and external evidence, the assumptions that have been adopted for both of these components are considered to be conservative. NIM projections reflect the current low interest rate environment. Management expects that, over time, these assumptions will be positively exceeded and that any reasonably possible change to assumptions used in Management’s assessment will not result in impairment.

The key assumption adopted in assessing Wealth Management's value-in-use is the rate of growth in income derived from management fee (MF) income. MF income is derived from its activities as the responsible entity for various Managed Investment Schemes (MIS). MF income derived is directly related to the portfolio balances of the MIS. Other sources of income for the Wealth Management Business are its Trustee Services divisions. Taking into account Management's past experiences and external evidence, the assumptions adopted are considered reasonable and conservative. Management’s assessment of Wealth Management's value-in-use exceeds its carrying value. Any reasonably possible change to assumptions used in Management’s assessment will not result in impairment.

SECTION 5: Non-financial assets, liabilities and equity

MyState Limited Notes to the consolidated financial statements for the year ended 30 June 2021

5.3 Intangible assets and goodwill (continued)

Goodwill accounting policy

Goodwill on the acquisition of businesses is carried at cost as established at the date of the acquisition of the business less accumulated impairment losses, if any.

For the purposes of impairment testing, goodwill is allocated to each of the Group's cash generating units (or groups of CGU's) that is expected to benefit from the synergies of the combination.

A CGU to which goodwill has been allocated is tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the CGU is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the CGU and then to the other assets of the unit pro rata based on the carrying amount of each asset in the CGU. Any impairment loss for goodwill is recognised directly in profit or loss. An impairment loss recognised for goodwill is not reversed in subsequent periods. On disposal of the relevant CGU, the attributable amount of goodwill is included in the determination of the profit or loss on disposal.

I mpairment of subsidiaries accounting policy

Investments in subsidiaries are tested annually for impairment or more frequently if events or changes in circumstances indicate that the carrying value may not be recoverable. An impairment loss is recognised for the amount by which the investment's carrying amount exceeds its recoverable amount (which is the higher of fair value less costs to sell and value in use). At each balance sheet date, the investments in subsidiaries that have been impaired are reviewed for possible reversal of the impairment.

5.4

	30 June 2021	30 June 2020
	$ '000	$ '000
Employee benefits provisions
Balances
Provision for annual leave	2,006	2,194
Provision for longservice leave	3,234	3,480
Total employee benefitsprovisions	5,240	5,674
Due to be settled within 12 months	3,879	4,304
Due to be settled in more than 12 months	1,361	1,370
Total employee benefitsprovisions	5,240	5,674

Employee benefits accounting policy

Liabilities for salaries, wages and annual leave are recognised in respect of employees' service up to the reporting date. Where settlement is expected to occur within twelve months of the reporting date, the liabilities are measured at their nominal amounts based on the remuneration rates which are expected to be paid when the liability is settled. Where settlement is expected to occur later than twelve months from reporting date, the liabilities are measured at the present value of payments which are expected to be paid when the liability is settled.

A liability for long service leave is recognised and measured at the present value of expected future payments to be made in respect of services provided up to the reporting date. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service.

Contributions are made by the Group to employee superannuation funds and are charged as expenses when incurred.

SECTION 5: Non-financial assets, liabilities and equity

MyState Limited Notes to the consolidated financial statements for the year ended 30 June 2021

5.5	30 June 2021 30 June 2020 $ '000 $ '000
	Share capital Issued andpaid upordinaryshares 208,196 152,775

Movements in ordinary share capital

	30 June	2021	30 June	2020
	Number	Amount	Number	Amount
	of shares	$ '000	of shares	$'000
Opening balance	92,008,862	152,775	91,040,545	148,707
Shares issued pursuant to the:
- Group employee share scheme	21,853	84	18,885	88
- Executive long term incentive plan	34,063	167	41,310	170
- Dividend reinvestment plan	307,239	1,397	908,122	3,810
- Institutional placement and entitlement offer	7,274,502	31,280	-	-
- Retail entitlement offer	5,628,573	24,203	-	-
-Less: Share issue transaction costs, net of tax	-	(1,710)	-	-
Closing balance	105,275,092	208,196	92,008,862	152,775

Terms and conditions

Ordinary shares have the right to receive dividends as declared from time to time and, in the event of a winding up of the Company, to participate in the proceeds from the sale of all surplus assets in proportion to the number of shares and amounts paid up on the shares held. Ordinary shares entitle their holder to one vote per share, either in person or by proxy at meetings of the Company.

The Company does not have authorised capital or par value in respect of its issued shares.

The Group offers share based remuneration, refer to note 7.3 and the Remuneration Report for further information regarding these arrangements.

SECTION 5: Non-financial assets, liabilities and equity

MyState Limited Notes to the consolidated financial statements for the year ended 30 June 2021

6.1	30 June 2021 30 June 2020 $'000 $'000
	Income tax expense, current and deferred tax balances The major components of income tax expense /(benefit) are:
	Income tax expense Current income tax charge 14,794 14,343 Adjustment in respect of current income tax of previous years 78 117 Adjustments in respect of deferred income tax of previous years (10) (141) Adjustments in respect of equity / goodwill 611 50 Relating to origination and reversal of temporary differences 244 (1,443)
	Total income tax expense 15,717 12,926
	A reconciliation between tax expense and accounting profit before income tax multiplied by the Group's applicable income tax rate is as follows: Income tax expense attributable to: Accounting profit before income tax 52,058 42,986 The income tax expense comprises amounts set aside as: Provision attributable to the current year at the statutory rate of 30%, being: - Prima facie tax on accounting profit before tax 15,617 12,896 - Under / (over) provision in prior year 63 (24) Expenditure not allowable for income tax purposes 36 31 Other 1 23
	Income tax expense reported in the consolidated income statement 15,717 12,926 Total income tax expense 15,717 12,926
	Weighted average effective tax rates 30.2% 30.1%

SECTION 6: Income tax expense, current and deferred tax balances

MyState Limited Notes to the consolidated financial statements for the year ended 30 June 2021

6.1	30 June 2021 30 June 2020 $'000 $'000
	Income tax expense, current and deferred tax balances (continued) Deferred income tax relates to the following: Deferred tax assets Employee entitlements 1,572 1,702 Provisions 221 227 Doubtful debts 1,662 1,990 Other 2,445 1,367
	Total deferred tax assets 5,900 5,286
	Current tax receivable 3,996 -
	Total tax assets 9,896 5,286
	Deferred tax liabilities Financial assets at fair value 68 68 Property, plant and equipment 2,387 1,342 Other 347 534
	Total deferred tax liabilities 2,802 1,944
	Current taxpayable - 2,306
	Total tax liabilities 2,802 4,250
	Movements in deferred tax balances Deferred tax assets Deferred tax liabilities
	30 June 2021 30 June 2020 30 June 2021 30 June 2020 $' 000 $' 000 $' 000 $' 000
	Opening balance 5,286 4,133 1,944 2,367 13 1,092 858 (564) Credited/(charged) to equity 611 61 - - (10) - - 141 Adjustments for deferred tax ofprioryears (Charged)/credited to income statement
	Closing balance 5,900 5,286 2,802 1,944

SECTION 6: Income tax expense, current and deferred tax balances

MyState Limited Notes to the consolidated financial statements for the year ended 30 June 2021

6.1 Income tax expense, current and deferred tax balances (continued)

Taxation accounting policy

Income tax expense is recognised in the Consolidated Income Statement, except to the extent that it relates to items recognised directly in other comprehensive income, in which case it is recognised in the Consolidated Statement of Comprehensive Income. Income tax expense on the profit or loss of the period comprises current tax and deferred tax.

Current tax payable

Current tax payable is the expected tax payable on the taxable income for the financial year using tax rates that have been enacted, and any adjustment to tax payable in respect of previous years.

Deferred tax

Deferred income tax is provided on all temporary differences at reporting date. Temporary differences are calculated at each reporting date as the difference between the carrying amount of assets and liabilities for financial reporting purposes and their tax base.

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

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

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

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

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

The Group undertakes transactions in the ordinary course of business where the income tax treatment requires the exercise of judgement. The Group estimates its tax liability based on its understanding of the tax law.

SECTION 6: Income tax expense, current and deferred tax balances

MyState Limited Notes to the consolidated financial statements for the year ended 30 June 2021

6.1 Income tax expense, current and deferred tax balances (continued)

Taxation accounting policy (continued)

Tax consolidation

The Group has elected to be taxed as a single entity under the tax consolidation regime. The head company is MyState Limited. The members of the Group have entered into a tax sharing agreement that provides for the allocation of income tax liabilities among the entities should the head entity default on its tax payment obligations. No amounts have been recognised in the financial statements in respect of this agreement on the basis that the possibility of default is remote.

The Company and the controlled entities in the tax consolidated group continue to account for their own current and deferred tax amounts. The Company has applied the separate tax payer within group approach in determining the appropriate amount of current taxes and deferred taxes to allocate to members of the tax consolidated group.

In addition to its own current and deferred tax amounts, the Company also recognises the current tax liabilities (or assets) and the deferred tax assets arising from unused tax losses and unused tax credits assumed from controlled entities in the tax consolidated group.

Any difference between the amounts assumed and amounts receivable or payable under the tax funding agreement are recognised as a contribution to (or distribution from) wholly-owned tax consolidated entities.

SECTION 6: Income tax expense, current and deferred tax balances

MyState Limited Notes to the consolidated financial statements for the year ended 30 June 2021

7.1 Parent entity information

The accounting policies of the parent entity, which have been applied in determining the financial information shown below, are the same as those applied in the consolidated financial statements. Refer to note 1 and policy notes within the financial statements for a summary of the significant accounting policies relating to the Group.

	30 June 2021	30 June 2020
Statement of Financial Position	$ '000	$ '000
Assets
Cash and liquid assets	318	1,040
Other receivables	965	690
Related party receivables	25,000	3,465
Investments in subsidiaries	321,392	262,613
Current and deferred tax assets	5,510	661
Total assets	353,185	268,469
Liabilities
Other liabilities	2,536	565
Other borrowings	25,000	-
Related party payables	2,921	11
Tax liabilities	32	2,368
Employee benefitsprovisions	457	394
Total liabilities	30,946	3,338
Net assets	322,239	265,131
Equity
Share capital	314,124	258,702
Retained earnings	7,071	5,738
Reserves	1,044	691
Total equity	322,239	265,131
Financial performance
Profit after income tax for theyear	12,841	28,130
Other comprehensive income	-	-
Total comprehensive income	12,841	28,130

The parent entity has not entered into any guarantees and does not have any contingent liabilities as at 30 June 2021 (30 June 2020: nil).

Transactions between the Company and the consolidated entities principally arise from the provision of management and governance services. All transactions with subsidiaries are in accordance with regulatory requirements, the majority of which are on commercial terms. All transactions undertaken during the financial year with the consolidated entities are eliminated in the Consolidated Financial Statements. Amounts due from and due to entities are presented separately in the Statement of Financial Position of the Company except where offsetting reflects the substance of the transaction or event.

SECTION 7: Group Structure and related parties

MyState Limited Notes to the consolidated financial statements for the year ended 30 June 2021

7.2 Controlled entities and principles of consolidation

Details of the Group’s material subsidiaries at the end of the reporting period are as follows.

		Country of	Ownership
Significant subsidiaries	Principal activities	Incorporation	Interest
MyState Bank Limited	Banking	Australia	100%
TPT Wealth Limited	Wealth Management	Australia	100%
Connect Asset Management Pty Ltd	Manager of Securitisation	Australia	100%
	Vehicles

Basis of consolidation accounting policy

The consolidated financial statements incorporate the financial statements of the Company and entities (including structured entities) controlled by the Company and its subsidiaries. Control is achieved when the Company:

Has power over the investee;
Is exposed, or has rights, to variable returns from its involvement with the investee; and
Has the ability to use its power to affect its returns.

The Company reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of these three elements of control.

When the Company has less than a majority of the voting rights of an investee, it has power over the investee when the voting rights are sufficient to give it the practical ability to direct the relevant activities of the investee unilaterally. The Company considers all relevant facts and circumstances in assessing whether or not the Company's voting rights in an investee are sufficient to give it power, including:

The size of the Company's holding of voting rights relative to the size and dispersion of holdings of the other vote holders;
Potential voting rights held by the Company, other vote holders or other parties;
Rights arising from other contractual arrangements; and
Any additional facts and circumstances that indicate that the Company has, or does not have, the current ability to direct the relevant activities at the time that decisions need to be made, including voting patterns at previous shareholders' meetings.

Consolidation of a subsidiary begins when the Company obtains control over the subsidiary and ceases when the Company loses control of the subsidiary. Specifically, income and expenses of a subsidiary acquired or disposed of during the year are included in the Consolidated Income Statement and Other Comprehensive Income from the date the Company gains control until the date when the Company ceases to control the subsidiary.

Profit or loss and each component of Other Comprehensive Income are attributed to the owners of the Company and to the non-controlling interests. Total comprehensive income of subsidiaries is attributed to the owners of the Company and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.

When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies in line with the Group's accounting policies.

All intragroup assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation.

SECTION 7: Group Structure and related parties

MyState Limited Notes to the consolidated financial statements for the year ended 30 June 2021

7.3 Related party disclosures

The ultimate parent entity and controlling entity is MyState Limited. Balances and transactions between the Company and its subsidiaries, which are related parties of the Company, have been eliminated on consolidation and are not disclosed in this note. Details of transactions between the Group and other related parties are disclosed in the following paragraphs.

Managed Investment Schemes

Within the Group, TPT Wealth Limited (TPT) is a Responsible Entity for Managed Investment Schemes (Funds) and, accordingly, has significant influence over their activities. TPT receives management fees from these Funds. TPT also pays expenses of the Funds for which it is reimbursed. TPT and the Company have also invested in these Funds and receive distributions on these investments. These investments are made on the same terms and conditions that apply to all investors in these Funds. Details of these transactions and balances are as follows:

	Consolidated	Consolidated	TPT
	30 June 2021	30 June 2020	30 June 2021	30 June 2020
	$ '000	$ '000	$ '000	$ '000
Management fees received	9,412	10,315	9,412	10,315
Balance of investment held at year end	2,553	2,297	2,509	316
Distributions received from managed funds	(35)	190	(23)	161

The Funds have:

Accepted money on deposit from Directors and Executives or entities associated with Directors and Executives at prevailing Fund rates and conditions;
Loaned money to MyState Bank, in the form of term deposits and negotiable certificates of deposit, totalling $2.55M (2020: $2.30M); and
▪ Invested in the ConQuest Trusts Residential Mortgage Backed Securities Program in the form of Class A and B notes totalling $28.94M (2020: $35.59M).

These deposits are made on the same terms and conditions that apply to all similar transactions.

Key Management Personnel

Individual Directors and Executive compensation disclosures

Information regarding individual Directors, Executive compensation, and equity instruments disclosures, as required by the Corporations Regulation 2M.2.03, is provided in the Remuneration Report section of the Directors' report. Disclosure of the compensation and other transactions with key management personnel (KMP) is required pursuant to the requirements of Australian Accounting Standard AASB 124 Related Party Disclosures. The KMP of the Group is comprised of the Non Executive Directors, Managing Director and Chief Executive Officer and certain Executives.

	30 June 2021	30 June 2020
	$ '000	$ '000
Key management personnel compensation
The key management personnel compensation comprised:
Short-term employee benefits	4,611	3,722
Post employment benefits	295	299
Share-Based payment (i)	473	220
Termination benefits	-	-

(i) These amounts are estimates of compensation and include a portion that will only vest to the Managing Director or Executive when certain performance criteria are met or a 'Capital Event' occurs. The fair value of shares is calculated at the date of grant and is allocated to each reporting period over the period from grant date to vesting date. The value disclosed is the portion of the fair value of the shares allocated to this reporting period.

SECTION 7: Group Structure and related parties

MyState Limited Notes to the consolidated financial statements for the year ended 30 June 2021

8.1 Contingent liabilities and expenditure commitments

MSB has provided guarantees to third-parties in order to secure the obligations of customers. The range of situations in which guarantees are given include:

Local Government Authorities, to secure the obligations of property and sub-divisional developers to complete infrastructure developments;
Local Government Authorities, Schools and other building owners, to secure the obligations of building contractors to complete building works;
Landlords, to secure the obligations of tenants to pay rent; and
CUSCAL, to secure payroll and direct debit payments processed by CUSCAL on behalf of customers.

	30 June 2021	30 June 2020
	$'000	$'000
Customer commitments
Loans approved but not advanced to borrowers	134,076	77,755
Undrawn continuing lines of credit	62,458	63,443
Performance guarantees	3,858	4,672
Total customer commitments	200,392	145,870

Guarantees are issued in accordance with approved Board policy. Those guarantees over $10,000 are required to be secured. In the event that a payment is made under a guarantee, the customer's obligation to MSB is crystallised in the form of an overdraft or loan.

TPT Wealth Limited ceased being a non-broker participant in the Clearing House Electronic Sub Register System operated by the Australian Securities Exchange during the 2021 financial year. As such, this company no longer maintains a deposit with Bendigo and Adelaide Bank Limited (2020: $1,000,000) as collateral for the guarantee on the settlement account.

Estate Administration

TPT Wealth Limited acts as executor and trustee for a significant number of trusts and estates. In this capacity, this company has incurred liabilities for which it has a right of indemnity out of the assets of those trusts and estates. Accordingly, these liabilities are not reflected in the financial statements.

Other contracted commitments for expenditure on plant and equipment as at the reporting date are for only minimal amounts.

SECTION 8: Other notes

MyState Limited Notes to the consolidated financial statements for the year ended 30 June 2021

8.2	30 June 2021 30 June 2020 $'000 $'000
	Remuneration of auditors Audit services Audit of the financial statements of the consolidated entities 401 390 During the financial year, the following fees which are shown exclusive of GST claimed were paid or payable for services provided by the auditor of the Group, Wise Lord & Ferguson:
	Total remuneration for audit services 401 390
	Audit related services Assurance related services 50 46 Audit of loans and other services to the securitisation program 6 8
	Total remuneration for audit related services 56 54
	Other non-external audit related services Other services 10 64
	Total remuneration for non-audit related services 10 64
	Total remuneration for servicesprovided 467 508

8.3 Events subsequent to balance date

On 9 August 2021, MyState Limited announced that Managing Director and Chief Executive Officer, Melos Sulicich, will be retiring on 31 December 2021. The company has commenced the process to appoint a successor.

There were no other matters or circumstances that have arisen since the end of the year which significantly affected or may significantly affect the operations of the Group, the results of those operations, or the state of affairs of the Group in future financial periods.

8.4 Other significant accounting policies, new accounting standards and disclosures

The principal accounting policies, which are consistent with those applied in the comparative period unless otherwise stated, that have been adopted in the preparation of the financial report are set out in this section and the preceding sections.

(i) Other assets

Other assets comprise accounts receivable, accrued income and prepayments. Accounts receivable are initially recorded at the fair value of the amounts to be received and are subsequently measured at amortised cost using the effective interest rate method, less any provision for impairment loss.

(ii) Other liabilities

Other liabilities comprise accounts payable and accrued expenses and represent liabilities for goods and services received by the Group that remain unpaid at the end of the reporting period. The balance is recognised as a current liability with the amounts normally paid within 30 days of the recognition of the liability.

SECTION 8: Other notes

MyState Limited Notes to the consolidated financial statements for the year ended 30 June 2021

8.4 Other significant accounting policies, new accounting standards and disclosures (continued)

(iii) New and revised accounting standards

The Group has adopted the following new standards and amendments to standards:

▪ AASB 2018-7 Amendments to Australian Accounting Standards – Definition of Material

▪ AASB 2019-1 Amendments to Australian Accounting Standards – References to the Conceptual Framework

▪AASB 2019-2 Amendments to Australian Accounting Standards

▪AASB 2019-3 Amendments to Australian Accounting Standards – Interest Rate Benchmark Reform

Adoption of these amendments has not resulted in any changes in how the Group currently applies accounting standards.

SECTION 8: Other notes

MyState Limited Directors Declaration for the year ended 30 June 2021

In accordance with a resolution of the Directors of MyState Limited, we state that:

In the opinion of the Directors:
(a) The financial statements and notes of the Group set out on pages 30 to 76 are in accordance with the Corporations Act 2001 , including:
(i) Giving a true and fair view of the Group's financial position as at 30 June 2021 and of its performance for the year ended on that date; and
(ii) Complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; and
(b) There are reasonable grounds to believe that MyState Limited will be able to pay its debts as and when they become due and payable.
The Directors have been given the declarations required by Section 295A of the Corporations Act 2001 by the Chief Executive Officer and Chief Financial Officer for the financial year ended 30 June 2021.
The financial statements and notes also comply with International Financial Reporting Standards as disclosed in note 1.2.

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

On behalf of the Board

==> picture [141 x 42] intentionally omitted <==

Miles Hampton Chairman

==> picture [126 x 45] intentionally omitted <==

Melos Sulicich Managing Director and Chief Executive Officer

Hobart Dated 20 August 2021.

==> picture [76 x 59] intentionally omitted <==

Independent Auditor’s Report

To the Shareholders of MyState Limited

Report on the Audit of the Financial Report

Opinion

We have audited the financial report of MyState Limited (the Company) and its subsidiaries (the Group), which comprises the consolidated statement of financial position as at 30 June 2021, the consolidated income statement, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, notes comprising a summary of significant accounting policies and other explanatory information and the Directors’ declaration of the Company.

In our opinion the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including:

I. giving a true and fair view of the Group’s financial position as at 30 June 2021 and of its financial performance for the year then ended; and
II. complying with Australian Accounting Standards and the Corporations Regulations 2001.

Basis for Opinion

We conducted our audit in accordance with Australian Auditing Standards. 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 Group in accordance with the auditor independence requirements of 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; and we have fulfilled our other ethical responsibilities in accordance with the Code.

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

Key Audit Matters

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 and in forming our opinion thereon, and we do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context.

We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the financial statements. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying Financial Report.

Liability limited by a scheme approved under Professional Standards Legislation.

[email protected] www.wlf.com.au 78

1st Floor 160 Collins Street, Hobart TAS 7000 GPO Box 1083 Hobart TAS 7000

03 6223 6155 Move Forward

1. Operation of IT systems and Controls

Key audit matter

This is a key audit matter because a significant part of the Group’s financial reporting process is heavily reliant on IT systems with automated processes and controls for the capture, processing, storage and extraction of information.

There have been substantial changes to the Group’s IT landscape in the 2021 financial year and it has been essential to ensure appropriate user access and change management protocols exist and are being observed. These protocols are important because they ensure that access and changes to IT systems and related data are made and authorised in an appropriate manner.

These key controls mitigate potential fraud or error because of change to an application or underlying data.

MyState has outsourced arrangements for a number of key IT processes.

How our audit addressed the matter

We focus our audit on those IT systems and controls that are significant to the Group’s financial reporting process.

We assessed and tested the design and operating effectiveness of the Group’s IT controls, including those over user access and change management as well as data reliability and integrity.

This involved assessing:

Technology control environment and governance;
Change management processes for software applications;
Access controls designed to enforce segregation of duties;
System development, reviewing the appropriateness of management’s testing and implementation controls;
We carried out direct tests of the operation of key programs to establish the accuracy of calculations, the correct generation of reports, and to assess the correct operation of automated controls and technologydependent manual controls; and
Third party reports on IT systems and controls.

For outsourced providers, we obtain assurance from third party auditors on the design and operating effectiveness of controls.

2. Recognition and Measurement – Intangible Assets

Refer to Note 5.2 ‘Intangible assets and goodwill’

Key audit matter

The recognition and measurement of intangible assets is a key audit matter because of the Group’s ongoing investment in new systems and the judgement required to:

Recognise when costs incurred transition from research to development; and
Assess the useful life of IT assets.

The Group continues to enhance its IT systems and online servicing capability. During the financial year, a number of strategic projects were developed and implemented. New systems were researched, designed, projects commenced and completed. A review of the useful life of IT systems was undertaken.

There is also a high level of judgement required in the Group’s annual testing of impairment of goodwill with significant forward looking assumptions used in the valuation models.

How our audit addressed the matter

To address the risk of material misstatement and obtain sufficient audit evidence, we performed the following procedures over intangible assets:

We evaluated and tested the Group’s processes for recognising intangible assets;
We reviewed amounts capitalised for significant projects currently being completed by the group. This included a retrospective assessment of amounts capitalised in early stages of significant projects;
We reviewed the Group’s processes for considering the completion of projects and commencement of amortisation;
We ensured intangible assets made redundant through new projects were written off;
We reviewed the useful lives applied to IT systems to ensure they are reasonable; and
We reviewed the goodwill valuation model and forward looking assumptions applied to each CGU of the Group.

3. Provision for Impairment on Loans and Advances Refer to Note 4.3 ‘Loans and advances’ Key audit matters

The provision for impairment on loans and advances is a key audit matter because the loans and advances balance is significant to the Group and the significant judgement inherent in the provisioning model. The provisioning model is determined in accordance with the requirements of AASB 9 Financial Instruments .

Provision for impairment of loans and advances that exceed specific thresholds are individually assessed by management with reference to future cash repayments and proceeds from the realisation of security.

Other loans that do not have an individually assessed provision are assessed on a portfolio basis with loans with similar risk characteristics.

Key areas of judgement included:

The design of the expected credit loss model used;
The selection of assumptions adopted such as the probability of default, loss given default, exposure at default and forward looking information, and the impact of COVID-19 on these assumptions;

How our audit addressed the matter

To address the risk of material misstatement and obtain sufficient audit evidence, we performed the following procedures over the provisions for impairment on loans and advances:

Assessed the governance oversight;
Reviewed and tested the calculation of the expected credit loss model, including the specific provision, collective provision for impairment and management overlays;
Considered the assumptions within the management overlays;
Ensured the methodology for write off of debt was consistent with prior periods;
Tested the accuracy of the data used to calculate the provision;
Reviewed a sample of current arrears balances and reviewed follow up procedures, including whether specific financial assets in arrears had been appropriately provided for; and
Reviewed management assessments of provision for loans that exceed specific thresholds.
The design of the management overlays applied in response to significant economic events; and
The stress test modelling undertaken to verify provisioning levels.

Other Information

The Directors are responsible for the other information. The other information comprises the information included in the Group’s annual report for the year ended 30 June 2021, but does not include the financial report and our auditor’s report thereon.

Our opinion on the financial report does not cover the other information and accordingly we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, 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. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of the Directors for the Financial Report

The Directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the Directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error.

In preparing the financial report, the Directors are responsible for assessing the ability of the Group to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Group or to cease operations, or has no realistic alternative but to do so.

Auditor’s Responsibilities for the Audit of the Financial Report

Our objectives are 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 the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and 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.

As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgement and maintain professional scepticism throughout the audit. We also:

Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Directors.
Conclude on the appropriateness of the Directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether the financial report represents the underlying transactions and events in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the financial report. We are responsible for the direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion.

We communicate with the Directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide the Directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with the Directors, we determine those matters that were of most significance in the audit of the financial report of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the

adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Report on the Remuneration Report

Opinion on the Remuneration Report

We have audited the Remuneration Report included in pages 11 to 27 of the Directors’ report for the year ended 30 June 2021.

In our opinion, the Remuneration Report of MyState Limited, for the year ended 30 June 2021 complies with section 300A of the Corporations Act 2001.

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

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

DANNY MCCARTHY Partner Wise Lord & Ferguson Chartered Accountants

Date: 20 August 2021

AI assistant

MYSTATE LIMITED — Annual Report 2021

65395_rns_2021-08-19_11e526eb-e091-4c57-add8-b74ad729ba97.pdf

MyState Limited – Preliminary Final Report (Appendix 4E) for the year ended 30 June 2021

RESULTS FOR ANNOUNCEMENT TO THE MARKET

Details of entities over which control has been gained or lost during the period

Subsequent events

Directors’ Report

Directors

Company Secretary

Principal Activities

Dividends

Operating and Financial Review

Financial Performance

High credit quality maintained in FY21

Non-interest income from banking activities

TPT Wealth

Strong capital position

Capital

COVID-19 assistance to customers

Community

Retirement of Managing Director

Outlook

Lead auditor’s independence declaration under section 307C of the Corporations Act 2001

Rounding of amounts

Events Subsequent To Balance Date

Environmental Regulation

Directors’ Meetings

Indemnification and Insurance of Directors and Officers

Non-Audit Services

Auditor’s Independence Declaration to the Directors of MyState Limited

DANNY MCCARTHY

MyState Limited Remuneration Report

For the year ended 30 June 2021

Contents

1. Key Management Personnel

2. Remuneration Strategy

2.1 Remuneration Philosophy

2.2 Consequences of Performance on Shareholder Wealth

2.3 Remuneration Governance

3. Non‐Executive Director Remuneration

4. Managing Director and Executive Remuneration

4.1 Total Fixed Reward

4.2 Short Term Incentive

Current STI Offers

4.3 Executive Long Term Incentive Plan

Commencement of employment during a financial year

Cessation of employment

Entitlement to dividend income on shares

Calculation of the Reward

TSR Component

For the 2020 offers:

ROE Component

For the 2021 Offer:

Actual and Potential ELTIP Share Allocations

4.4 Banking Executive Accountability Regime

4.5 Review of Executive Remuneration

5. Statutory Tables

Statutory tables (continued)

Statutory tables (continued)

6. Shareholdings of Key Management Personnel

Non‐Executive Director Minimum Shareholding Requirement

Managing Director Minimum Shareholding Requirement (MD MSR)

Related Parties of KMP Shareholdings

7. Loans to Key Management Personnel

8. Executive Employment Agreements

MyState Limited Consolidated Financial Statements

Contents

1.1 Reporting entity

1.2 Basis of accounting

Rounding of amounts

1.3 Use of estimates and judgement

1.4 Provisions (other than for impairment of financial assets)

Income accounting policy

Interest

Non-interest income from banking activities

Funds management income and fiduciary activities

Other fees and commissions

Income accounting policy

Expense accounting policy

MYSTATE LIMITED Annual Report 2021