MYSTATE LIMITED — Audit Report / Information 2013

Feb 27, 2014

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DECEMBER 2013

Incorporating the requirements of Australian Prudential Standard 330

1 MyState Limited APS330

EXECUTIVE SUMMARY MYSTATE LIMITED

This document has been prepared by MyState Limited to meet the disclosure obligations set down under the Australian Prudential Regulation Authority (APRA) Australian Prudential Standard (APS) 330 Capital Adequacy: Public Disclosure of Prudential Information.

MyState Limited (‘MyState’) is a Tasmanian-based ASX listed diversified financial services company which operates three subsidiaries; MyState Financial, Tasmanian Perpetual Trustees, and The Rock Building Society – each are long established and highly respected brands.

MyState seeks to ensure that it is adequately capitalised at all times, both on a stand-alone (ADI) basis and group basis. APRA monitors MyState’s capital adequacy by assessing the financial strength on two levels:

• �� Level 1, both MyState Financial and The Rock Building Society report separately on a level 1 basis.

• �� Level 2, the wider MyState Limited prudential group which comprises MyState Limited (NOHC), MyState Financial (ADI), The Rock Building Society (ADI), and Connect Asset Management (Securitisation program manager).

MYSTATE LIMITED GROUP STRUCTURE

The following diagram shows the Level 1 and Level 2 conglomerate group and illustrates the different tiers of regulatory consolidation.

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LEVEL 1 LEVEL 2
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MYSTATE MYSTATE
LIMITED LIMITED
MYSTATE THE ROCK MYSTATE THE ROCK
CONNECT CONNECT
ASSET ASSET
MANAGEMENT MANAGEMENT
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Accounting/Regulatory Consolidation

The consolidated financial statements incorporate the assets and liabilities of all subsidiaries, including all special purpose vehicles as well as Tasmanian Perpetual Trustees. Furthermore, MyState’s investment in Tasmanian Perpetual Trustees is deducted from the level 2 regulatory consolidation.

2 MyState Limited APS330

UNCONSOLIDATED ENTITIES

The following legal entities are included in the accounting scope of consolidation but are excluded from the regulatory scope of consolidation:

SECURITISATION SPECIAL PURPOSE VEHICLES

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Total Assets Total Liabilities
$ 000 $ 000
Conquest Mortgage Trust 160,761 160,761
Conquest 2007-1 Trust 80,609 80,609
Conquest 2010-1R Trust 107,903 107,903
Conquest 2010-2 Trust 113,662 113,662
Conquest 2013-1 Trust 305,609 305,609
Conquest Securities Pty Ltd 160,413 160,413
RBS Trust 2007-1 - -
RBS Trust 2009R 31,685 31,685
RBS Warehouse Trust No. 2 222 40
- -
Rockhampton Custodian & Management
Company Pty Ltd
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PRINCIPAL ACTIVITY

The trusts were established for the purpose of regulatory capital relief, via the issue of residential mortgage backed securities or asset backed commercial paper. Conquest 2010-1R and RBS 2009R Trusts were established as emergency liquidity reserves.

Conquest Securities Pty Ltd acts as the Issuer of asset backed commercial paper for the ConQuest Mortgage Trust.

WEALTH MANGEMENT AND TRUSTEE SERVICES

	Total Assets $ 000	Total Liabilities $ 000
Tasmanian Perpetual Trustees Pty Ltd	29,229	3,138

PRINCIPAL ACTIVITY

The Company acts as a Trustee Company in the State of Tasmania, with its activities encompassing those of trustee, executor, agent, fund manager and investment adviser.

MEMBER REWARDS PROGRAM

	Total Assets $ 000	Total Liabilities $ 000
The Gourmet Club Pty Ltd	303	-

PRINCIPAL ACTIVITY

The Company was established to develop a comprehensive member reward program. The rewards program has now ceased and plans to deregister the company are underway.

3 MyState Limited APS330

REGULATORY CAPITAL RECONCILIATION

The following table discloses the consolidated balance sheet of MyState Limited and its subsidiaries, as published in its audited financial statements, and the Balance Sheet under the Level 2 regulatory scope of consolidation pursuant to APS 111. The reference letters included in this table enable the reconciliation to the Common Disclosures – components of capital table.

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Balance Sheet per Balance
published Audited Sheet Under
Financial Adjustments Regulatory Scope of Reference
Statements Consolidation
$ 000 $ 000 $ 000
Assets
Cash and Liquid Assets 74,009 (9,390) 64,619
Investment Securities 384,983 (32,200) 352,783
Other Deposits 21,000 - 21,000
Loans and Advances 2,998,728 (611,994) 2,386,734
of which: General Reserve for Credit Losses - 4,218 4,218 (j)
of which: Capitalised loan and lease origination fees and commissions 1,433 (1,433) - (g)
Other Investments 5,020 38,188 43,208
of which: Equity investments in financial institutions 3,347 233 3,580 (f)
of which: investments in commercial (non-financial) entities that are - 39,629 39,629 (h)
deducted under APRA prudential requirements
Property Plant & Equipment 17,277 (1,443) 15,834
Intangible Assets and Goodwill 77,838 (46,933) 30,905
of which: Goodwill 65,978 (46,157) 19,821 (d)
of which: Information technology software costs 11,046 39 11,085 (g)
of which: Capitalised costs other than loan and lease origination fees 674 (674) - (g)
Other Assets 29,016 (2,735) 26,281
of which: Capitalised costs other than loan and lease origination fees - 674 674
of which: Capitalised loan and lease origination fees and commissions - 2,548 2,548
of which: Derivates - 2,434 2,434
of which: Deferred tax assets 6,858 (547) 6,311 (e)
of which: Securitisation accrued income and liquidity reserves - 823 823 (i)
Total Assets 3,607,871 (666,507) 2,941,364
Liabilities
Amounts due to financial institutions - 2,796 2,796
Deposits and Other Borrowings 3,279,068 (642,008) 2,637,060
Income Tax Liabilities 6,262 (437) 5,825
of which: Deferred Tax Liabilities 4,336 (432) 3,904 (e)
Provisions 5,690 (1,238) 4,452
Creditors & Other Liabilities 32,877 (5,611) 27,266
of which: Amounts due to financial institutions 2,796 - -
Derivates 1,362 - 1,362
Total Liabilities 3,325,259 (646,497) 2,678,762
Net Assets
Share Capital 132,355 (39,272) 93,083 (a)
Reserves 2,439 1,518 3,957
of which: Property Revaluation Reserve 2,340 1,668 4,008 (c)
of which: unrealised gains/(losses) on AFS Items - (55) (55) (c)
of which: Gains/(losses) on effective cash flow hedges (401) (96) (497)
of which: Reserves for equity-settled share-based payments 500 - 500 (c)
Retained Profits 147,818 17,745 165,563
of which: General Reserve for Credit losses - (4,218) (4,218) (j)
Total Equity 282,612 (20,010) 262,602
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4 MyState Limited APS330

CAPITAL ADEQUACY

CAPITAL ADEQUACY AS AT 31 DECEMBER 2013

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Reference Item Description Value
$ 000
(a) Capital Requirements (in terms of risk-weighted assets) for credit risk (excluding securitisation)
by portfolio:
Claims secured by residential mortgage 885,027
Other retail 96,732
All other 165,473
Capital Requirements (in terms of Risk Weighted Assets) for securitisation 502
(b) Capital Requirements (in terms of risk weighted assets) for equity exposures in the IRB approach N/A
(b) Capital Requirements (in terms of risk weighted assets) for market risk N/A
(c) Capital Requirements (in terms of risk weighted assets) for operational risk 148,694
(e) Capital Requirements (in terms of risk weighted assets) for interest rate risk in the banking book
N/A
(IRRBB) (IRB/AMA-approved Australian-owned ADI's only)
(f) Common Equity Tier 1, Tier 1 and total Capital Ratio for the consolidated regulatory group:
Common Equity Tier 1 for the regulatory group 14.01%
Tier 1 capital ratio for the regulatory group 14.01%
Total Capital Ratio for the regulatory group 14.42%
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5 MyState Limited APS330

CREDIT RISK BY PORTFOLIO

CREDIT RISK AS AT 31 DECEMBER 2013

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December 2013 September 2013
Reference Item Description Quarter Quarter Average
$ 000
$ 000 $ 000
(a) (i) Total gross credit risk exposures (excluding equity
investments and securitisation exposures), plus aver-
age gross exposure over the period, broken down by
major types of credit exposure:
Loans 2,393,850 2,404,872 2,393,203
Debt Securities 400,107 398,436 396,342
Commitments and off-balance sheet exposures 47,068 46,057 47,469
(ii) Total gross credit risk exposures (excluding equity
investments and securitisation exposures),
plus average gross exposure over the period,
broker down by portfolio:
Claims secured by residential mortgage 2,295,863 2,337,046 2,342,417
Other retail 97,987 67,826 50,786
(b) (i) Amount of impaired facilities, by portfolio:
Claims secured by residential mortgage 1,652
Other retail 1,255
Amount of past due facilities, by portfolio:
Claims secured by residential mortgage 4,406
Other retail -
(ii) Specific provisions, by portfolio:
Claims secured by residential mortgage 258
Other retail 322
(iii) Charges for specific provisions and write-offs during
the period, by portfolio:
Claims secured by residential mortgage 631
Other retail 712
(c) The general reserve for credit losses 4,218
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6 MyState Limited APS330

SECURITISATION EXPOSURES

SECURITISATION EXPOSURES AS AT 31 DECEMBER 2013

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December 2013 December 2013
Reference Item Description Quarter Quarter
$ 000 $ 000
Total exposures Recognised gain or
securitised loss on sale
(a) Summary of current period’s securitisation activity, including the total
amount of exposures securitsed (by exposure type) and recognised gain or
loss on sale by exposure type:
Residential Mortgage 319,784 -
- -
Credit Car and other personal loans
Commercial Loans - -
Other - -
On Balance Sheet Off Balance Sheet
Aggregate amount of total securitisation exposures retained or
(b)
purchased:
Liquidity support facilities 650 1,193
Derivative facilities 2,631 108,884
- -
Holdings of securites
Other - -
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7 MyState Limited APS330

MAIN FEATURES OF CAPITAL INSTRUMENTS

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Ordinary share capital
1 Issuer MyState Limited
2 Unique identifier (eg CUSIP, ISIN or Bloomberg identifier for private placement) N/A
3 Governing law(s) of the instrument Commonwealth of Australia
Regulator treatment
4 Transitional Basel III rules Common Equity Tier 1
5 Post-transitional Basel III rules Common Equity Tier 1
6 Eligible at solo/group/group & solo Solo and Group
7 Instrument type (ordinary shares/preference shares/subordinated notes/other) Ordinary Shares
8 Amount recognised in Regulatory Capital 93.08M
(currency in mil, as of most recent reporting date)
9 Par value of instrument
10 Accounting classification Shareholders’ Equity
11 Original date of issuance Various
12 Perpetual or dated Perpetual
13 Original maturity date No Maturity
14 Issuer call subject to prior supervisory approval No
15 Optional call date, contingent call dates and redemption amount N/A
16 Subsequent call dates, if applicable N/A
Coupons/dividends Dividends
17 Fixed or floating dividend/coupon N/A
18 Coupon rate and any related index N/A
19 Existence of a dividend stopper N/A
20 Fully discretionary, partially discretionary or mandatory Fully Discretionary
21 Existence of step up or other incentive to redeem N/A
22 Noncumulative or cumulative Noncumulative
23 Convertible or non-convertible Nonconvertible
24 If convertible, coversion trigger(s) N/A
25 If convertible, fully or partially N/A
26 If convertible, conversion rate N/A
27 If convertible, mandatory or optional conversion N/A
28 If convertible, specify insturment type convertible into N/A
29 If convertible, specify issuer of instrument it converts into N/A
30 Write-down feature N/A
31 If write-down, write-down trigger(s) N/A
32 If write-down, fully or partial N/A
33 If write-down, permanent or temporary N/A
34 If temporary write-down, description of write-up mechanism N/A
35 Position in subordination hierarchy in liquidation N/A
(specify instrument type immediately senior to instrument)
36 Non-compliant transitioned features N/A
37 If yes, specify non-compliant features N/A
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8 MyState Limited APS330

COMMON DISCLOSURES COMPOSITION OF CAPITAL

The Group is applying the Basel III regulatory adjustments in full as implemented by APRA. The capital disclosures detailed in the Common Disclosure template below represent the post 1 January 2018 Basel III common disclosure requirements.

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31 December Source in
2013 regulatory Capital
$ 000 Reconciliation
1 Directly issued qualifying ordinary shares
93,083 (a)
(and equivalent for mutually-owned entities) capital
2 Retained earnings 165,226 (b)
3 Accumulated other comprehensive income (and other reserves) 4,454 (c)
4 Directly issued capital subject to phase out from CET1
N/A
(only applicable to mutually-owned companies)
5 Ordinary share capital issued by subsidiaries and held by third parties
N/A
(amount allowed in group CET1)
6 Common Equity Tier 1 capital before regulatory adjustments
Subtotal 262,762
Common Equity Tier 1 capital : regulatory adjustments
7 Prudential valuation adjustments N/A
8 Goodwill (net of related tax liability) 19,821 (d)
9 Other intangibles other than mortgage servicing rights (net of related tax liability) N/A
10 Deferred tax assets that rely on future profitability excluding those arising from temporary
2,537 (e)
differences (net of related tax liability)
11 Cash-flow hedge reserve -
12 Shortfall of provisions to expected losses N/A
13 Securitisation gain on sale (as set out in paragraph 562 of Basel II framework) N/A
14 Gains and losses due to changes in own credit risk on fair valued liabilities N/A
15 Defined benefit superannuation fund net assets N/A
16 Investments in own shares (if not already netted off paid-in capital on reported balance sheet) N/A
17 Reciprocal cross-holdings in common equity N/A
18 Investments in the capital of banking, financial and insurance entities that are outside the
scope of regulatory consolidation, net of eligible short positions, where the ADI does not N/A
own more than 10% of the issued share capital (amount above 10% threshold)
19 Significant investments in the ordinary shares of banking, financial and insurance entit-
ies that are outside the scope of regulatory consolidation, net of eligible short positions N/A
(amount above 10% threshold)
20 Mortgage service rights (amount above 10% threshold) N/A
21 Deferred tax assets arising from temporary differences (amount above 10% threshold, net of
N/A
related tax liability)
22 Amount exceeding the 15% threshold N/A
23 of which: significant investments in the ordinary shares of financial entities N/A
24 of which: mortgage servicing rights N/A
25 of which: deferred tax assets arising from temporary differences N/A
26 National specific regulatory adjustments
(sum of rows 26a, 26b, 26c, 26d, 26e, 26f, 26g, 26h, 26i and 26j)
26a of which: treasury shares N/A
26b of which: offset to dividends declared under a dividend reinvestment plan (DRP), to the
N/A
extent that the dividends are used to purchase new ordinary shares issued by the ADI
26c of which: deferred fee income N/A
26d of which: equity investments in financial institutions not reported in rows 18, 19 and 23 3,580 (f)
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9 MyState Limited APS330

COMMON DISCLOSURES COMPOSITION OF CAPITAL CONT

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31 December Source in
2013 regulatory Capital
$ 000 Reconciliation
26e of which: deferred tax assets not reported in rows 10, 21 and 25 N/A
26f of which: capitalised expenses 14,307 (g)
26g of which: investments in commercial (non-financial) entities that are deducted under
38,955 (h)
APRA prudential requirements
26h of which: covered bonds in excess of asset cover in pools N/A
26i of which: undercapitalisation of a non-consolidated subsidiary N/A
26j of which: other national specific regulatory adjustments not reported in rows 26a to 26i 823 (i)
27 Regulatory adjustments applied to Common Equity Tier 1 due
N/A
to insufficient Additional Tier 1 and Tier 2 to cover deductions
28 Total regulatory adjustments to Common Equity Tier 1
Subtotal 80,023
29 Common Equity Tier 1 Capital (CET1)
Subtotal 182,740
Additional Tier 1 Capital: instruments
30 Directly issued qualifying Additional Tier 1 instruments N/A
31 of which: classified as equity under applicable accounting standards N/A
32 of which: classified as liabilities under applicable accounting standards N/A
33 Directly issued capital instruments subject to phase out from Additional Tier 1 N/A
34 Additional Tier 1 instruments (and CET1 instruments not included in row 5) issued by subsi-
N/A
diaries and held by third parties (amount allowed in group AT1)
35 of which: instruments issued by subsidiaries subject to phase out N/A
36 Additional Tier 1 Capital before regulatory adjustments N/A
Additional Tier 1 Capital: regulatory adjustments N/A
37 Investments in own Additional Tier 1 instruments N/A
38 Reciprocal cross-holdings in Additional Tier 1 instruments N/A
39 Investments in the capital of banking, financial and insurance entities that are outside the
scope of regulatory consolidation, net of eligible short positions, where the ADI does not N/A
own more than 10% of the issued share capital (amount above 10% threshold)
40 Significant investments in the capital of banking, financial and insurance entities that are
N/A
outside the scope of regulatory consolidation (net of eligible short positions)
41 National specific regulatory adjustments (sum of rows 41a, 41b and 41c) N/A
41a of which: holdings of capital instruments in group members by other group members on
N/A
behalf of third parties
41b of which: investments in the capital of financial institutions that are outside the scope of
N/A
regulatory consolidations not reported in rows 39 and 40
41c of which: other national specific regulatory adjustments not reported in rows 41a and 41b N/A
42 Regulatory adjustments applied to Additional Tier 1 due to insufficient Tier 2 to cover
N/A
deductions
43 Total regulatory adjustments to Additional Tier 1 capital N/A
44 Additional Tier 1 capital (AT1) N/A
45 Tier 1 Capital (T1=CET1+AT1) N/A
Subtotal N/A
Tier 2 Capital: instruments and provisions
46 Directly issued qualifying Tier 2 instruments N/A
47 Directly issued capital instruments subject to phase out from Tier 2 N/A
48 Tier 2 instruments (and CET1 and AT1 instruments not included in rows 5 or 34) issued by
N/A
subsidiaries and held by third parties (amount allowed in group T2)
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10 MyState Limited APS330

COMMON DISCLOSURES COMPOSITION OF CAPITAL CONT

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31 December Source in
2013 regulatory Capital
$ 000 Reconciliation
49 of which: instruments issued by subsidiaries subject to phase out N/A
50 Provisions 4,218 (j)
51 Tier 2 Capital before regulatory adjustments
Subtotal 4,218
Tier 2 Capital: regulatory adjustments
52 Investments in own Tier 2 instruments N/A
53 Reciprocal cross-holdings in Tier 2 instruments N/A
54 Investments in the Tier 2 capital of banking, financial and insurance entities that are outside N/A
the scope of regulatory consolidation, net of eligible short positions, where the ADI does
not own more than 10% of the issued share capital (amount above 10% threshold) N/A
55 Significant investments in the Tier 2 capital of banking, financial and insurance entities that
N/A
are outside the scope of regulatory consolidation, net of eligible short positions
56 National specific regulatory adjustments (sum of rows 56a, 56b and 56c) N/A
56a of which: holdings of capital instruments in group members by other group members on
N/A
behalf of third parties
56b of which: investments in the capital of financial institutions that are outside the scope
N/A
of regulatory consolidation not reported in rows 54 and 55
56c of which: other national specific regulatory adjustments not reported in rows 56a and 56b N/A
57 Total regulatory adjustments to Tier 2 capital
Subtotal -
58 Tier 2 capital (T2)
Subtotal 4,218
59 Total capital (TC=T1+T2)
Subtotal 186,957
60 Total risk-weighted assets based on APRA standards
Subtotal 1,270,100
Capital ratios and buffers
61 Common Equity Tier 1 (as a percentage of risk-weighted assets) 14.10%
62 Tier 1 (as a percentage of risk-weighted assets) 14.10%
63 Total capital (as a percentage of risk-weighted assets) 14.42%
64 Buffer requirement (minimum CET1 requirement of 4.5% plus capital conservation
buffer of 2.5% plus any countercyclical buffer requirements expressed as a percentage 11.50%
of risk-weighted assets)
65 of which: capital conservation buffer requirement 2.50%
66 of which: ADI-specific countercyclical buffer requirements
67 of which: G-SIB buffer requirement (not applicable)
68 Common Equity Tier 1 available to meet buffers (as a percentage of risk-weighted assets) 2.60%
National minima (if different from Basel III)
69 National Common Equity Tier 1 minimum ratio (if different from Basel III minimum) N/A
70 National Tier 1 minimum ratio (if different from Basel III minimum) N/A
71 National total capital minimum ratio (if different from Basel III minimum)
N/A
Amount below thresholds for deductions (not risk-weighted)
72 Non-significant investments in the capital of other financial entities N/A
73 Significant investments in the ordinary shares of financial entities N/A
74 Mortgage servicing rights (net of related tax liability) N/A
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11 MyState Limited APS330

COMMON DISCLOSURES COMPOSITION OF CAPITAL CONT

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31 December Source in
2013 regulatory Capital
$ 000 Reconciliation
75 Deferred tax assets arising from temporary differences (net of related tax liability) N/A
Applicable caps on the inclusion of provisions in Tier 2
76 Provisions eligible for inclusion in Tier 2 in respect of exposures subject to standardised
4,218 (j)
approach (prior to application of cap)
77 Cap on inclusion of provisions in Tier 2 under standardised approach 15,876
78 Provisions eligible for inclusion in Tier 2 in respect of exposures subject
N/A
to internal ratings-based approach (prior to application of cap)
79 Cap for inclusion of provisions in Tier 2 under internal ratings-based approach N/A
Capital instruments subject to phase-out arrangements
N/A
(only applicable between 1 Jan 2018 and 1 Jan 2022)
80 Current cap on CET1 instruments subject to phase out arrangements N/A
81 Amount excluded from CET1 due to cap (excess over cap after redemptions and maturities N/A
82 Current cap on AT1 instruments subject to phase out arrangements N/A
83 Amount excluded from AT1 instruments due to cap
N/A
(excess over cap after redemptions and maturities)
84 Current cap on T2 instruments subject to phase out arrangements N/A
85 Amount excluded from T2 due to cap
N/A
(excess over cap after redemptions and maturities)
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12 MyState Limited APS330

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Level 2 137 Harrington Street Hobart 7000 Tasmania Australia (03) 6215 9452 ABN 23 133 623 962

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