RESIMAC GROUP LTD - Annual Report 2012

HOMELOANS LIMITED

ABN 55 095 034 003 FINANCIAL STATEMENTS

30 JUNE 2012

Homeloans Limited-Annual Report

CONTENTS TO FINANCIAL REPORT

Corporate Information	3
Directors' Report	5
Auditor's Independence Declaration to the Directors of Homeloans Limited	22
Corporate Governance Statement	23
Statement of Financial Position as at 30 June 2012	31
Statement of Comprehensive Income for the year ended 30 June 2012	32
Statement of Changes in Equity for the year ended 30 June 2012	33
Statement of Cash Flows for the year ended 30 June 2012	34
Notes to the Financial Statements for the year ended 30 June 2012	35
Directors' Declaration	86
Independent Audit Report	87
Investor Information	89

Homeloans Limited-Annual Report

CORPORATE INFORMATION

This annual report covers both Homeloans Limited as an individual entity and the Group’s financial report incorporating Homeloans Limited and the entities that it controlled during the financial year. The Group's functional and presentation currency is AUD ($).

A description of the consolidated operations and of its principal activities is included in the review of operations and activities in the directors' report on pages 5 to 21.

Directors

Timothy Holmes (Executive Chairman/Managing Director) Robert Salmon (Non-Executive Director) Robert Scott (Non-Executive Director) – Brian Benari (Non-Executive Director) resigned 17 February 2012 Andrew Hall (Non-Executive Director) – Gavin Buchanan (Non-Executive Director) appointed 17 February 2012

Company Secretary

Jennifer Murray

Registered Office

Level 9,The Quadrant 1 William Street Perth WA 6000 Phone: (08) 9327 1777 Facsimile: (08) 9327 1778

Corporate Office

Level 16, 68 Pitt Street Sydney NSW 2000 Phone: (02) 8267 2000 Facsimile: (02) 8267 2045

National Office

Level 2, The Atrium 168 St George’s Terrace Perth WA 6000 Phone: (08) 9261 7000 Facsimile: (08) 9261 7079 Web site: www.homeloans.com.au Customer enquiries: 13 38 39

Postal Address

PO Box 7216 Cloisters Square Perth WA 6850

Homeloans Limited-Annual Report

CORPORATE INFORMATION (CONTINUED)

Share Registry

Computershare Investor Services Pty Ltd Level 2, Reserve Bank Building 45 St George’s Terrace Perth WA 6000 Telephone: (08) 9323 2000 Facsimile: (08) 9323 2033

Bankers

Westpac Banking Corporation Westpac Place 275 Kent Street Sydney NSW 2000

Auditors

Ernst & Young The Ernst & Young Building 11 Mounts Bay Road Perth WA 6000

Homeloans Limited-Annual Report

DIRECTORS' REPORT

Your directors submit their report for the year ended 30 June 2012.

DIRECTORS

The names and details of the company's directors in office during the financial year and until the date of this report are as follows. Directors were in office for this entire period unless otherwise stated.

Names, qualifications, experience and special responsibilities

Timothy Alastair Holmes (Executive Chairman/Managing Director)

Tim was appointed Managing Director on 1 October 2008. Tim is also Chairman of the Board (appointed 1 July 2003) and was previously appointed as a director on 9 November 2000. He has 44 years experience in the finance and banking industry, is a Fellow of the Australian Institute of Company Directors, and Honorary Consul of Austria in WA. He is also the former International President of the Young President’s Organisation and a former Vice President of the WA Chamber of Commerce and Industry. Tim has not held any other Directorships of listed companies over the past three years.

Robert Peter Salmon (Non-Executive Director)

Appointed 9 November 2000. Rob has 42 years experience in the finance and banking industry. In 1985, Rob joined with Tim Holmes to establish International Financing and Investment Pty Ltd, the predecessor to Homeloans Limited. He has a Bachelor of Economics from the University of Western Australia. Rob has not held any other Directorships of listed companies over the past three years.

Robert Norman Scott (Non-Executive Director)

Appointed 9 November 2000, Rob is a Chartered Accountant with over 37 years experience. Rob was an International Partner with Arthur Andersen, retiring from that firm in 1995 and now consults to Perth based Gooding Partners Chartered Accountants. Rob is chairman of the company’s audit committee and is a member of the company’s remuneration and nomination committee.

Rob serves as a non-executive director of the following listed companies:

Sandfire Resources NL (Appointed 30 July 2010)
CGA Mining Limited (Appointed 8 January 2009)
Amadeus Energy Ltd (Appointed 30 October 1996)

Rob ceased to be a director of the following listed companies during the year:

Neptune Marine Services Limited (30 March 2012)

Rob was formerly a director of the following listed companies:

Allied Healthcare Group Ltd formerly BioMD Ltd (Resigned 14 June 2011)
Australian Renewable Fuels Limited (Resigned 30 June 2011)

– Brian Roland Benari (Non-Executive Director) resigned on 17 February 2012

Appointed 3 May 2007. Brian is the Chief Executive Officer and Managing Director of Challenger Limited. Prior to his appointment to this role in February 2012, Brian was the Chief Financial Officer / Chief Operating Officer of Challenger Limited. Prior to his appointment to this role in November 2008, Brian was Chief Executive of Challenger Mortgage Management. He led the acquisition by Challenger of Interstar Securities, Australia’s largest non-bank lender from Zurich Capital Markets. Brian was formerly Chief Operating Officer/Chief Financial Officer with Zurich Capital Markets, and also held senior executive roles with Macquarie Bank and Bankers Trust. Brian is a Chartered Accountant and has a Bachelor of Business from Curtin University (WA). Brian was a member of the company’s audit committee and was also a member of the company’s nomination and remuneration committee. Brian has not held any other Directorships of listed companies over the past three years.

Homeloans Limited-Annual Report

DIRECTORS’ REPORT (CONTINUED)

Andrew Loddington Hall (Non-Executive Director)

Appointed 28 October 2008. Drew is the former Chief Executive Officer of Advantedge Financial Services with mortgages under management and administration of over $135 billion. Prior to this Drew was the Chief Executive of Challenger Mortgage Management and Chief Financial Officer / Chief Operating Officer from 2003 – 2008. Before joining Challenger Drew held senior executive roles at Zurich Capital Markets, Macquarie Bank and Bankers Trust. Drew is a Chartered Accountant and has a Bachelor of Business from the University of Technology, Sydney. He is also a Fellow of FINSIA. Drew is a member of the company’s audit committee and is chairman of the company’s nomination and remuneration committee. Drew has not held any other Directorships of listed companies over the past three years.

– Gavin James Buchanan (Non-Executive Director) appointed on 17 February 2012

Gavin is the Group Treasurer of Challenger Limited (“Challenger”) and has been with Challenger since 2007. Before joining Challenger, Gavin was the Director and Head of Financial Institutions for Barclays Capital in Australia and prior to this was the Chief Executive Officer of Australian Mortgage Securities Limited (a member of the Wizard Home Loans group), which was at the time, Australia’s largest issuer of residential mortgage backed securities. Gavin has also previously held senior roles at both UBS and Citigroup in the area of securitisation. Gavin is a solicitor of the Supreme Court of NSW and has a Bachelor of Commerce and Bachelor of Laws from the University of NSW. Gavin was appointed to both the audit and nomination and remuneration committees on 24 April 2012.

COMPANY SECRETARY

Jennifer Murray

Jennifer Murray was appointed company secretary to Homeloans Limited on 9 November 2000. She is a Chartered Secretary and has over 29 years experience in providing corporate secretarial services for both public and proprietary companies. She is presently the Senior Manager, Corporate Secretarial Services for Perth based Gooding Partners Chartered Accountants.

Interests in the shares and options of the company and related bodies corporate.

As at the date of this report, the interests of the directors in the shares and options of Homeloans Limited were:

	Number of Ordinary	Number of
	Shares	Options
		Over Ordinary
		Shares
T A Holmes	12,847,024	-
R P Salmon	12,477,449	-
R N Scott	2,156,116	-
A L Hall	-	-
G J Buchanan	-	-

Homeloans Limited-Annual Report

DIRECTORS’ REPORT (CONTINUED)

DIVIDENDS

	Cents	$'000
Final dividends recommended:
Final dividend for 2012
- on ordinary shares	3.5	3,733
Dividends paid in the year:
Interim for the year
- on ordinary shares (fully franked)	2.5	2,660
Final dividend for 2011
- on ordinary shares (fully franked)	3.5	3,628

When making payment of the final dividend for 2011 and the interim dividend for 2011 from current year profits, the Company had announced that these dividends were fully franked for Australian Income Tax purposes. The Company had sufficient franking credits available to fully frank these dividends.

Management obtained a private ruling from the Australian Tax Office (“ATO”) dated 25 January 2012 which covers the period from 1 July 2010 to 31 December 2012. The ruling concludes that past dividends paid by the Group and the interim and final dividends proposed to be paid out of current period profits constitute frankable distributions under section 202-40 of the ITAA 1997. Management is confident that if necessary this private ruling can be extended beyond 31 December 2012.

Notwithstanding the favourable private ruling obtained, it is also noted that on 27 June 2012, the ATO released a public ruling on this matter, Taxation Ruling TR 2012/5. This ruling provided confirmation that a dividend paid out of current trading profits will be frankable even if the company has un-recouped prior year accounting losses or has lost part of its share capital. The ruling was consistent with the private ruling obtained by Homeloans Limited.

PRINCIPAL ACTIVITIES

The principal activities during the year of entities within the Group were:

mortgage origination and management of home loans; and
securitisation of mortgages through the Residential Mortgage Trust (RMT), a special purpose vehicle (“SPV”) used to issue residential mortgage backed securities.

The principal activities were conducted under the brand names Homeloans Limited, Access Home Loans, Independent Mortgage Corporation Pty Ltd, Auspak Financial Services Pty Limited and FAI First Mortgage Pty Ltd. As of the balance date, the Company has mortgage origination and management agreements with Bendigo and Adelaide Bank Limited, Advantedge Financial Services, Origin Mortgage Management Services, ING Bank (Australia) Limited, Pepper Homeloans Pty Ltd, Residential Mortgage Trust and other institutions.

Homeloans Limited-Annual Report

DIRECTORS’ REPORT (CONTINUED)

OPERATING AND FINANCIAL REVIEW

Group Overview

Homeloans Limited is a company limited by shares that is incorporated and domiciled in Australia. The Company was incorporated on 9 November 2000 acquiring the assets and liabilities of IF & I Securities Pty Ltd (as trustee for the IF & I Securities Unit Trust) and Anedo Pty Ltd. On 19 March 2001, Homeloans Limited shares commenced trading on the Australian Stock Exchange.

Homeloans Limited has prepared a consolidated financial report incorporating the entities that it controlled during the financial year.

Review of operations

A review of operations of the Group during the financial year, the results of those operations, the changes in the state of affairs and the likely developments in the operations of the Group are set out in this report.

Performance Indicators

Management and the Board monitor the Group’s overall performance, from its implementation of the strategic plan through to the performance of the company against operating plans and financial budgets. The Board, together with management, have identified key performance indicators (KPI’s) that are used to monitor performance. Management monitor KPI’s on a regular basis. Directors receive the KPI’s for review prior to each monthly board meeting allowing all directors to actively monitor the Group’s performance.

Operating Results for the Year

On a statutory basis, net profit after tax for the year was $8,110,000, down from the previous financial year result of $9,162,000. On a normalised basis, net profit after tax was $8,023,000, down marginally on the comparable prior year result of $8,076,000 (See Table 1 on page 9).

The Group has delivered a resilient result amidst what continues to be a challenging mortgage market. Despite a subdued economic environment and a highly competitive market, the Group focused on growing its business with the acquisition in June 2012 of the business of Refund Home Loans Pty Ltd (“Refund”).

The acquisition of Refund has provided an excellent platform for taking Homeloans to the next level. As part of the acquisition, the Group acquired trail income and expense rights to Refund’s $1.9 billion loan book. In addition, 54 Refund brokers entered into agreements to become Homeloans-branded brokers which now enhances the Group’s branded retail network substantially around Australia.

With housing credit growth at historically low levels, loan balances under administration by the Group (excluding the securitised loan portfolio and the Refund loan portfolio) increased 5.8% on the previous financial year. The Group has continued to grow its branded loan book, achieving growth of 6.3% on June 2011, reflecting ongoing focus on providing a competitive offering and on retention activities. Lending volumes were down by 4% on the previous financial year. No new loans were written in the RMT during the year. As the current securitised loan portfolio reduces, the net fee commission income generated from this segment has declined accordingly. These factors combined have resulted in a decrease of 6% in net fee and commission income to $15,053,000, down from the previous corresponding period result of $16,083,000.

Total operating expenses of $15,544,000 were down 13.6% from the corresponding period of $17,982,000. After allowing for one off costs associated with the Refund acquisition of $292,000, operating expenses were $15,252,000, down 15.2% on the prior year. This reduction reflects concerted efforts across the Group to improve operating efficiencies in a lower growth environment. Achieving further efficiency improvements and ensuring we continue to be agile and customer orientated will remain key areas of focus for the Group over the year ahead.

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DIRECTORS’ REPORT (CONTINUED)

Table 1:

e 1:
Statutory Profit after tax Add: Costs of acquisition (pre - tax) Less: RMT cashflow re-estimation benefit (pre - tax) Tax effect of the above Tax consolidation benefit Normalised profit after tax (non-IFRS information)	Consolidated 2012 2011 $'000 $'000*
	8,110 9,162 292 - (416) (594) 37 178 - (670)
	8,023 8,076

The normalised profit after tax disclosed is unaudited. Management believe the disclosure of the normalised profit after tax provides additional insight into the underlying performance for the period.

The Group’s warehouse facility has been extended for a further 12 months to 30 June 2013 and there continues to be regular discussions with the warehouse provider as to the future utilisation and maturity of the facility given ongoing uncertainty in the global economy and within credit markets. It should be noted that the warehouse facility is structured so that in the highly unlikely event it is not renewed or otherwise defaults, there is only limited recourse to the Group. If the warehouse facility is not renewed or otherwise defaults and the related assets are liquidated, the primary impact for the Group would be the loss of future income streams from excess spread, being the difference between the Group’s mortgage rate and the cost of funds and fee income. The directors are satisfied that in the event of either of these scenarios occurring, the Group’s ability to continue as a going concern will not be affected.

The Group expects general market conditions to remain subdued at least into the first half of the new financial year. The Board is confident the environment, combined with the increase in distribution networks, will present opportunities for the Group to continue to grow and differentiate itself in the market. The Group remains focused on expanding our business via acquisitions and organic growth, increasing lending volumes through strategic relationships with our wholesale funders and enhancing our product offering.

The Company has maintained good levels of residual cash reserves which continue to be supported by strong operating cashflows emanating from underlying earnings. The Company also remains free of any recourse debt facilities having repaid these in full in the 2010 financial year. The Board believes the ongoing cash reserves will be more than sufficient to meet the Group’s ongoing funding requirements including future business development and investment.

Summarised operating results are as follows:

ised operating results are as follows:
	2012 Revenues $’000 Results $’000
Operating segments Origination and Management 36,732 5,858 Securitisation of Mortgages 27,977 5,682 Group revenue and profit from operating activities before income tax expense 64,709 11,540	36,732 5,858 27,977 5,682

Homeloans Limited-Annual Report

DIRECTORS’ REPORT (CONTINUED)

Shareholder Returns

Basic earnings per share on a statutory basis was 7.67 cents.

	2012	2011	2010	2009	20081
Basic earnings per share (cents)	7.67	8.96	12.21	7.20	(12.42)
Return on assets (%)(3) Return on equity (%)(4)	2.0% 20.2%	1.8% 20.9%	1.8% 18.6%	0.9% 11.0%	(1.2%) (20.8%)
Dividend payout ratio (%)(5)	78.9%	67.5%	57.7%	96.4%	(16.1%)2

Debt to equity measures have not been disclosed due to the impact of the consolidation of RMT. Consolidation of RMT adds significant debt to the Group’s Statement of Financial Position without any commensurate impact on equity. RMT, under its trust structure, has assets and liabilities that offset and no equity interests.

Results for 2008 have been further adjusted based upon the Group’s change in accounting policy on the computation of the effective interest rate method on loan assets.
An interim dividend was paid based on a result prior to impairment losses toward the end of 2008 financial year. No final dividend was paid as a result of the statutory loss recorded of $12,511,000 in 2008.
Return on assets is calculated by taking the net profit after tax for the year and dividing by the average total assets. As a result of the requirement under AASB 127 – Consolidated and Separate Financial Statements to consolidate the special purpose entity, Residential Mortgage Trust (RMT), significant assets have been added to the consolidated Statement of Financial Position without any appreciable increase in net profit.
Return on equity is calculated by taking the net profit after tax for the year and dividing by the average total equity.
Dividend Payout Ratio is calculated by dividing dividends declared from net profit after tax for the year by the net profit after tax.

Liquidity and Capital Resources

The Group’s Statement of Cash Flows illustrates that there was a decrease in cash and cash equivalents in the year ended 30 June 2012 of $876,000 (2011: Decrease of $36,632,000).

Operating cash flow of $6,548,000 (2011: $4,152,000) includes cash available to the investors in the special purpose vehicles (SPV) of RMT, which is maintained in the trust cash collections accounts. The balance of cash in these cash collections accounts is not available to the Group. The movement in these cash balances during the financial year was negative $1,720,000 (2011: negative movement of $2,627,000). Therefore, if the RMT SPV’s had not been consolidated, total Group operating cashflow would have been $8,268,000 (2011: $6,779,000).

The Group maintains sufficient capital reserves to meet ongoing funding requirements. In addition to solid cash reserves, the Group also has an overdraft facility of $900,000 which was unutilised at 30 June 2012. The Residential Mortgage Trust has a warehouse facility of $250,000,000 as at 30 June 2012 (2011: $350,000,000) drawn to $244,040,000 at 30 June 2012 (2011: $309,373,000).

Asset and capital structure

Profile of Debts	2012 2011 $'000 $'000
The profile of the Group's debt finance is as follows: Bank loans–secured Due to bondholders Loans from funders	244,040 309,373 54,180 70,381 3,622 3,254
	301,842 383,008

The amount of the Group’s debts has decreased over the financial year due to a reduction in loan balances within the RMT trusts.

Homeloans Limited-Annual Report

DIRECTORS’ REPORT (CONTINUED)

Capital Expenditure

There has been a decrease in cash due to the purchase of equipment during the year ended 30 June 2012 of $182,000 compared to $299,000 in the year ended 30 June 2011.

Risk Management

The Board is responsible for overseeing the establishment and implementation by management of risk management systems and reviewing the effectiveness of these systems. The Board is assisted in this process by the Audit Committee, which has in its charter, responsibility for overseeing the effective operation of the Company’s risk management framework.

The fundamental aim of the Company’s risk management strategy is to balance risk against reward, and to optimise returns to all stakeholders. The Company recognises three main types of risk:

Market risk – the risk of change in earnings from changes in market factors such as interest rates, housing market and economic conditions;
Operational risk – the risk of loss resulting from inadequate or failed internal processes, people and systems, or from external events; and
Liquidity risk – the risk of failure to adequately fund cash demand in the short term.

The Managing Director and Chief Financial Officer periodically provide formal statements to the Board that in all material aspects:

the Company’s financial statements present a true and fair view of the Group’s financial condition and operational results; and
the risk management and internal compliance and control systems are sound, appropriate and operating efficiently and effectively.

The Board has a number of mechanisms in place to ensure that management's objectives and activities are aligned with the risks identified by the Board. These include the following:

Board approval of a strategic plan, which encompasses the Group's vision, mission and strategy statements, designed to meet stakeholders' needs and manage business risk.
Implementation of Board approved operating plans and budgets and Board monitoring of progress against these budgets, including the establishment and monitoring of KPI’s of both a financial and non-financial nature.

SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS

There were no significant changes in the state of affairs of the Group during the financial year.

SIGNIFICANT EVENTS AFTER THE BALANCE DATE

On 27[th] August 2012, the Directors of the Company declared a final dividend in respect of the year ended 30 June 2012 of 3.5 cents per share, fully franked. The dividend has not been provided for in the 30 June 2012 financial statements. The final dividend is payable on 2[nd] October 2012.

On 18[th] July 2012, the Group disposed of its 26.5% holding in National Mortgage Brokers Pty Limited for $1,550,000.

Other than the matters reported above, there has been no other matter or circumstance that has arisen since the balance date that has affected or may significantly affect the operations of the Group, the results of those operations or the state of affairs of the Group in subsequent periods.

LIKELY DEVELOPMENTS AND EXPECTED RESULTS

Other than as referred to in this report, further information as to likely developments in the operations of the Group would, in the opinion of the directors, be likely to result in unreasonable prejudice to the Group.

Homeloans Limited-Annual Report

DIRECTORS’ REPORT (CONTINUED)

ENVIRONMENTAL REGULATION AND PERFORMANCE

The Group is not subject to any specific license or agreement to comply with the requirements of environmental protection authorities in Australia.

SHARE OPTIONS

Unissued shares

As at 30 June 2012, there were no unissued ordinary shares under options (2011:125,000).

Option holders do not have any right, by virtue of the option, to participate in any share issue of the company or any related body corporate or in the interest issue of any other registered scheme.

100,000 ordinary shares were issued as a result of the exercise of options during the year under review. 25,000 options expired during the year.

INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS

During or since the financial year, the company has paid premiums in respect of a contract insuring all the directors of Homeloans Limited against a liability incurred in their role as directors of the company, except where:

(a) The liability arises out of conduct involving a willful breach of duty; or

(b) There has been a contravention of Sections 182 or 183 of the Corporations Act 2001,

as permitted by section 199B of the Corporations Act 2001.

Terms, conditions and rates are commensurate with the market. The policy prohibits disclosure of the nature of the indemnification and insurance cover, and the amount of the premium.

Homeloans Limited-Annual Report

DIRECTORS’ REPORT (CONTINUED)

REMUNERATION REPORT (Audited)

This remuneration report outlines the director and executive remuneration arrangements of the Company and the Group in accordance with the requirements of the Corporations Act 2001 and its Regulations. For the purposes of this report, Key Management Personnel (KMP) of the Group are defined as those persons having authority and responsibility for planning, directing and controlling the major activities of the Company and the Group, directly or indirectly, including any director (whether executive or otherwise) of the parent company.

For the purposes of this report, the term ‘executive’ encompasses the Managing Director, the executive management team and other senior managers of the Company and the Group.

Details of Key Management Personnel

Directors
T.A.Holmes	Executive Chairman
B.R.Benari	Director (Non-Executive) - resigned 17 February 2012
R.P.Salmon	Director (Non-Executive)
R.N.Scott	Director (Non-Executive)
A.L.Hall	Director (Non-Executive)
G.J.Buchanan	Director (Non-Executive) - appointed 17 February 2012
Key Management	Personnel
L.McDonald	Head of Credit/Underwriting
A.Carn	General Manager–Third Party Distribution - resigned 11 November 2011
C.Matthews	Chief Financial Officer–resigned 29 February 2012
I.Parkes	Chief Financial Officer–appointed 14 May 2012
S.McWilliam	Chief Operating Officer
G.Mitchell	General Manager–Sales (formerly General Manager - Retail Sales)

Remuneration philosophy

The performance of the Company depends upon the quality of its directors and executives. To prosper, the Company must attract, motivate and retain highly skilled directors and executives. To this end, the Company embodies the following principles in its remuneration framework:

Provide competitive rewards to attract high calibre executives;
Link executive rewards to shareholder value;
Significant portion of executive remuneration ‘at risk’, dependent upon meeting pre-determined performance benchmarks; and,
Establish appropriate, demanding performance hurdles in relation to variable executive remuneration.

Compensation policy

The Board of Directors of Homeloans Limited is responsible for determining and reviewing compensation arrangements for the directors and the executive team. The Board assesses the appropriateness of the nature and amount of emoluments of such officers on a periodic basis by reference to relevant employment market conditions with the overall objective of ensuring maximum stakeholder benefit from the retention of a high quality board and executive team. Such officers are given the opportunity to receive their base emolument in a variety of forms including cash and fringe benefits such as motor vehicles and expense payment plans. It is intended that the manner of payment chosen will be optimal for the recipient without creating undue cost for the Company.

To assist in achieving these objectives, the Board links the nature and amount of executive directors’ and officers emoluments to the Company’s and Group’s financial and operational performance.

In addition, all executives are entitled to annual bonuses payable upon the achievement of KPI’s and annual corporate profitability measures, the most important being return on shareholder’s equity. Details of company performance and shareholder returns are discussed on page 19 of this report.

Homeloans Limited-Annual Report

DIRECTORS’ REPORT (CONTINUED)

Nomination and Remuneration Committee

The Nomination and Remuneration Committee is responsible for determining and reviewing compensation arrangements for the directors, the Managing Director and the executives.

The Nomination and Remuneration Committee assesses the appropriateness of the nature and amount of remuneration of directors and executives on a periodic basis by reference to relevant employment market conditions with the overall objective of ensuring maximum stakeholder benefit from the retention of a high quality board and executive team.

Remuneration structure

In accordance with best practice corporate governance, the structure of non-executive director and executive remuneration is separate and distinct.

Non-executive director remuneration

Objective

The Board seeks to set aggregate remuneration at a level which provides the Company with the ability to attract and retain directors of the highest calibre, whilst incurring a cost which is acceptable to shareholders.

Structure

The Constitution and the ASX Listing Rules specify that the aggregate remuneration of non-executive directors shall be determined from time to time by a general meeting. An amount not exceeding the amount determined is then divided between the directors as agreed. At the November 2005 annual general meeting the aggregate maximum sum available for the remuneration of non-executive directors was increased to $250,000 per annum with effect from and including 1 January 2006.

The amount of aggregate remuneration sought to be approved by shareholders and the manner in which it is apportioned amongst directors is reviewed annually. The board may consider advice from external consultants as well as the fees paid to non-executive directors of comparable companies when undertaking the annual review process.

Non-executive directors have long been encouraged by the board to hold shares in the company (purchased by the director on market). It is considered good governance for directors to have a stake in the company whose board he or she sits on. The remuneration of non-executive directors for the period ended 30 June 2012 and 30 June 2011 is detailed in Table 1 on page 17.

Executive remuneration

Objective

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

reward executives for Group, business unit and individual performance against targets set by reference to appropriate benchmarks;
align the interests of executives with those of shareholders; and
link reward with the strategic goals and performance of the Company.

Structure

In determining the level and make-up of executive remuneration, the Nomination and Remuneration Committee may, from time to time, engage an external consultant to provide independent advice detailing market levels of remuneration for comparable executive roles. No external consultant was engaged in the year ended 30 June 2012.

Remuneration consists of the following key elements:

Fixed Remuneration

Variable Remuneration

־ Short Term Incentive (‘STI’); and
־ Long Term Incentive (‘LTI’).

Homeloans Limited-Annual Report

DIRECTORS’ REPORT (CONTINUED)

The proportion of fixed remuneration and variable remuneration (potential short-term and long-term incentives) is established for each executive by the Nomination and Remuneration Committee. Table 1 on page 17 details the variable component of the Key Management Personnel, of the Company and the Group.

Fixed remuneration

Objective

The level of fixed remuneration is set so as to provide a base level of remuneration which is both appropriate to the position and is competitive in the market.

Structure

The fixed remuneration component is usually paid in cash.

The fixed remuneration component of the Key Management Personnel of the Company and the Group are detailed in Table 1 on page 17.

Variable remuneration — Short term incentive (STI)

Objective

The objective of the STI program is to link the achievement of the Company’s operational targets with the remuneration received by the executives charged with meeting those targets. The total potential STI available is set at a level so as to provide sufficient incentive to the executive to achieve the operational targets and such that the cost to the Company is reasonable in the circumstances .

Structure

Actual STI payments granted to each executive depend on the extent to which specific operating targets set at the beginning of the financial year are met. The operational targets consist of a number of Key Performance Indicators (KPI’s) covering both financial and non-financial, corporate and individual measures of performance.

Typically included are measures such as contribution to net profit after tax, loan originations, customer service, risk management, product management, and leadership/team contribution. The company has predetermined benchmarks which must be met in order to trigger payments under the short term incentive scheme. These measures were chosen and designed to align executive behaviour with long term shareholder wealth creation.

On an annual basis, after consideration of performance against KPI’s, an overall performance rating for the company and each individual business unit is approved by the Nomination and Remuneration Committee. The individual performance of each executive is also rated and all three ratings are taken into account when determining the amount, if any, of the short term incentive pool that is allocated to each executive. This process usually occurs within three months after the reporting date.

The aggregate of annual STI payments available for executives across the Company is subject to the approval of the Nomination and Remuneration Committee. Payments are made in the following reporting period and are usually delivered as a cash bonus.

There have been no alterations to the STI bonus plans since their grant date.

STI Bonus for 2012 financial year

The remuneration committee determined the STI payments for the 2012 financial year in August 2012. The STI cash bonus for the 2012 financial year is $280,500, which includes $102,000 for the Key Management Personnel, and will vest and be paid in the 2013 financial year.

Variable remuneration — Long term incentive (LTI)

Objective

The objective of the LTI plan is to reward executives in a manner which aligns this element of remuneration with the creation of shareholder wealth.

As such LTI grants are only made to executives who are able to influence the generation of shareholder wealth and thus have a direct impact on the Company's performance.

Homeloans Limited-Annual Report

DIRECTORS’ REPORT (CONTINUED)

Structure

LTI grants to executives are most commonly delivered in the form of options, but may take other forms, including cash payments.

In the case of options being issued, the options vest with the executive over varying periods and are not usually subject to a performance hurdle, as these options are issued to executives as a form of retention bonus and incentive to contribute to the creation of shareholder wealth. They usually have a life from date of grant of five years, and are exercisable at specific dates and proportions set at the time of granting the options.

Table 2 on page 18 provide details of options granted, the value of options, vesting periods and exercised and lapsed options under the LTI plan.

LTI Cash Bonus for the 2010 financial year

In July 2010, the remuneration committee determined a “special cash bonus” for the 2010 financial year. Part of this “special cash bonus”, which was also subject to a loyalty period, had been treated as an LTI amount given the payment was to be made in December 2011. This component of the “special cash bonus” was granted to executives based on the measurement of performance against the same set of KPI’s as outlined for the STI Bonus which covered financial and non-financial, corporate and individual targets.

The amount vested and paid in December 2011 was $157,500, which included $117,500 for the Key Management Personnel.

LTI Share Bonus for the 2013 financial year

In August 2012, the Board awarded a “share based bonus” subject to shareholder approval of a new share award plan. This share based payment will be reflected in the 2013 Remuneration report. This LTI share based payment will be subject to continuing employment and amounts to $56,500, which includes $25,000 for the Key Management Personnel.

Employment contracts

Managing Director

The role of Managing Director is currently occupied by the Chairman, Timothy Holmes, as Executive Chairman.

During the financial year, in his role as Executive Chairman, Mr. Holmes was paid $281,728. This includes a base annual salary of $200,000 and back pay of $81,728 in relation to additional compensation for his executive duties for the period from November 2010 to June 2011. While acting in this role, Mr. Holmes is not entitled to any STI or LTI, nor will he be entitled to any termination benefits.

Other executives

Under their conditions of employment the employment of the executives may be terminated by either party, by giving 1 month notice. The Company may make a payment in lieu of requiring the service of the notice period.

Upon termination of employment, executives are entitled to their statutory entitlements to accrued annual and long service leave.

Upon termination of employment the Board has discretion to direct the forfeiture, or to pay the benefit of, any award made under either the STI or LTI plan that remain subject to the satisfaction of any performance or other criteria.

Upon termination all vested options remain in place.

No executives are employed under a fixed term contract.

Short term Post employment Termination benefits Long Term Share– based Payment Total % performance related % option related Salary & Fees Cash Bonus Non-monetary benefits Superannuation Incentive Plans3 Options Executive directors T.A.Holmes 2012 281,728 - 8,853 25,356 - - - 315,937 0.00% 0.00% 2011 191,339 - 6,220 17,220 - - - 214,779 0.00% 0.00% Non- executive directors R.P.Salmon 2012 50,000 - - - - - - 50,000 0.00% 0.00% 2011 50,000 - - - - - - 50,000 0.00% 0.00% R.N.Scott 2012 57,500 - - - - - - 57,500 0.00% 0.00% 2011 57,500 - - - - - - 57,500 0.00% 0.00% B.R.Benari 1 2012 - - - - - - - - 0.00% 0.00% 2011 - - - - - - - - 0.00% 0.00% A.L. Hall2 2012 - - - - - - - - 0.00% 0.00% 2011 - - - - - - - - 0.00% 0.00% G.J. Buchanan1 2012 - - - - - - - - 0.00% 0.00% 2011 - - - - - - - - 0.00% 0.00% Other Key Management Personnel L. McDonald 2012 208,500 25,500 7,584 20,205 - 4,000 - 265,789 11.10% 0.00% 2011 185,000 40,000 9,915 20,970 - 8,000 - 263,885 18.19% 0.00% A.Carn4 2012 112,797 - 2,049 14,988 80,000 - - 209,834 0.00% 0.00% 2011 235,000 40,000 9,915 26,235 - 31,500 - 342,650 20.87% 0.00% C.Matthews 5 2012 170,657 - - 15,708 - 10,500 - 196,865 5.33% 0.00% 2011 220,000 40,000 - 25,290 - 21,000 - 306,290 19.92% 0.00% I.Parkes 6 2012 24,230 - - 2,181 - - - 26,411 0.00% 0.00% 2011 - - - - - - - - 0.00% 0.00% S.McWilliam 2012 214,425 51,000 - 23,888 - - - 289,313 17.63% 0.00% 2011 190,000 40,000 - 21,600 - 10,000 - 261,600 19.11% 0.00% G.Mitchell 2012 236,283 25,500 6,957 22,455 - 14,000 - 305,195 12.94% 0.00% 2011 205,000 40,000 6,220 21,420 - 8,000 - 280,640 17.10% 0.00% Totals 2012 1,356,120 102,000 25,443 124,781 80,000 28,500 - 1,716,844 2011 1,333,839 200,000 32,270 132,735 - 78,500 - 1,777,344	Cash Bonus Non-monetary benefits Superannuation Incentive Plans3 Options		- 8,853 25,356 - - - 315,937 0.00% 0.00% - 6,220 17,220 - - - 214,779 0.00% 0.00% - - - - - - 50,000 0.00% 0.00% - - - - - - 50,000 0.00% 0.00% - - - - - - 57,500 0.00% 0.00% - - - - - - 57,500 0.00% 0.00% - - - - - - - 0.00% 0.00% - - - - - - - 0.00% 0.00% - - - - - - - 0.00% 0.00% - - - - - - - 0.00% 0.00% - - - - - - - 0.00% 0.00% - - - - - - - 0.00% 0.00% 25,500 7,584 20,205 - 4,000 - 265,789 11.10% 0.00% 40,000 9,915 20,970 - 8,000 - 263,885 18.19% 0.00% - 2,049 14,988 80,000 - - 209,834 0.00% 0.00% 40,000 9,915 26,235 - 31,500 - 342,650 20.87% 0.00% - - 15,708 - 10,500 - 196,865 5.33% 0.00% 40,000 - 25,290 - 21,000 - 306,290 19.92% 0.00% - - 2,181 - - - 26,411 0.00% 0.00% - - - - - - - 0.00% 0.00% 51,000 - 23,888 - - - 289,313 17.63% 0.00% 40,000 - 21,600 - 10,000 - 261,600 19.11% 0.00% 25,500 6,957 22,455 - 14,000 - 305,195 12.94% 0.00% 40,000 6,220 21,420 - 8,000 - 280,640 17.10% 0.00%	102,000 25,443 124,781 80,000 28,500 - 1,716,844 200,000 32,270 132,735 - 78,500 - 1,777,344
	Salary & Fees		281,728 191,339 50,000 50,000 57,500 57,500 - - - - - - rsonnel 208,500 185,000 112,797 235,000 170,657 220,000 24,230 - 214,425 190,000 236,283 205,000	1,356,120 1,333,839

Homeloans Limited-Annual Report

DIRECTORS' REPORT (CONTINUED)

1 Acting as a director in connection with discharging his duties as an executive of Challenger Limited (“Challenger”) and consequently does not currently take fees for his service.
2 Acting as a director in connection with discharging his duties as an executive of Advantedge Financial Services (“Advantedge”) and consequently does not currently take fees for his service.
3 Amounts shown represent “special cash bonus” accrual determined in respect of performance in 2010 which was paid in December 2011.
4 A. Carn resigned as General Manager – Third Party Distribution on 11th November 2011.
5 C. Matthews resigned as Chief Financial Officer on 29th February 2012
6 I. Parkes was appointed Chief Financial Officer on 14th May 2012

Compensation options: granted and vested during the year (Consolidated)

There were no options granted in the current year that affect remuneration for the year ended 30 June 2012 (2011: no options granted).

No options vested during the year ended 30 June 2012 or 30 June 2011.

For details on the valuation of the options, including models and assumptions used, please refer to note 18.

Table 2:

Value of options exercised and lapsed during the year (Consolidated)

The following table summarises options exercised and lapsed during the year.

30 June 2012	Value of options at date of exercise1 Value of options lapsed during the year
G Mitchell 30 June 2011	9,500 -
	9,500 -
	Value of options at date of exercise1 Value of options lapsed during the year
L. McDonald S. McWilliam	22,050 - 625 -
	22,675 -

1 This represents the intrinsic value of the options at the date of exercise

There were no alterations to the terms and conditions of options granted as remuneration since their grant date.

Table 3:

Shares issued on exercise of options

30 June 2012	Number of shares issued Paid per share $ Unpaid per share $
G.Mitchell	25,000 0.21 -
	25,000 -

Homeloans Limited-Annual Report

DIRECTORS' REPORT (CONTINUED)

30 June 2011	Number of shares issued Paid per share $ Unpaid per share $
L. McDonald S. McWilliam	45,000 0.46 - 12,500 0.56 -
	57,500 -

Company performance and shareholder returns

Basic earnings per share on a statutory basis was 7.67 cents.

	2012	2011	2010	2009	20081
Basic earnings (loss) per share (cents)	7.67	8.96	12.21	7.20	(12.42)
Return on assets (%) 2	2.0%	1.8%	1.8%	0.9%	(1.2%)
Return on equity (%)	20.2%	20.9%	18.6%	11.0%	(20.8%)
Dividend payout ratio (%)	78.9%	67.5%	57.7%	96.4%	(16.1%)
Share price (cents)	58.0	62.0	70.0	55.0	48.0
Dividends (cents)	6.0	6.0	7.0	7.0	2.0

Results for 2008 have been further adjusted based upon the Group’s change in accounting policy.
As a result of the requirement under AASB 127 – Consolidated and Separate Financial Statements to consolidate the special purpose entity, Residential Mortgage Trust (RMT), significant assets have been added to the consolidated Statement of Financial Position without any appreciable increase in net profit.

End of Remuneration Report

Homeloans Limited-Annual Report

DIRECTORS' REPORT (CONTINUED)

DIRECTORS' MEETINGS

The number of meetings of directors (including meetings of committees of directors) held during the year and the number of meetings attended by each director was as follows:

	Directors’ Meetings	Audit Committee	Nomination and
			Remuneration
			Committee
Number of meetings held:	13	2	2
Number of meetings attended:
T. A. Holmes	13	-	-
R. P. Salmon	12	2	-
R. N. Scott	12	2	2
B. R. Benari (resigned 17 February 2012)	6	-	1
G. J. Buchanan (appointed 17 February 2012)	4	-	-
A. L. Hall	11	2	2

Committee Membership

As at the date of this report, the company had an Audit Committee and a Nomination and Remuneration Committee.

Members acting on the committees of the Board during the year were:

Audit

R.N. Scott (Chairman) R.P. Salmon A.L. Hall B.R. Benari – resigned 17 February 2012 G.J. Buchanan – appointed 24 April 2012

Nomination and Remuneration Committee

A.L. Hall (Chairman) R.N. Scott R.P. Salmon - resigned 1 July 2011 B.R. Benari – resigned 17 February 2012 G.J. Buchanan – appointed 24 April 2012

ROUNDING

The amounts contained in this report and in the financial report have been rounded to the nearest $1,000 (where rounding is applicable) under the option available to the company under ASIC Class Order 98/0100. The company is an entity to which the Class order applies.

Homeloans Limited-Annual Report

DIRECTORS' REPORT (CONTINUED)

AUDITOR INDEPENDENCE AND NON-AUDIT SERVICES

The directors received the required declaration from the auditor of Homeloans Limited as to their compliance with auditor independence requirements of the Corporations Act. This declaration is shown on the next page and forms part of this report.

Non-Audit Services

The following non-audit services were provided by the entity's auditor, Ernst & Young. The directors are satisfied that the provision of non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001 . The nature and scope of each type of non-audit service provided means that auditor independence was not compromised.

Ernst & Young received or are due to receive the following amounts for the provision of non-audit services:

Consultancy fees

178,910

Signed in accordance with a resolution of the directors

==> picture [105 x 45] intentionally omitted <==

Timothy A. Holmes Executive Chairman

Perth, 25 September 2012

==> picture [102 x 62] intentionally omitted <==

Auditor's Independence Declaration to the Directors of Homeloans Limited

In relation to our audit of the financial report of Homeloans Limited for the year ended 30 June 2012, 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.

Ernst & Young

==> picture [147 x 40] intentionally omitted <==

T G Dachs Partner Perth 25 September 2012

Liability limited by a scheme approved under Professional Standards Legislation.

Homeloans Limited-Annual Report

CORPORATE GOVERNANCE STATEMENT

The Board of Homeloans Limited is committed to maintaining the highest standards of corporate governance. Corporate governance establishes the framework for how the Board oversees the Company and performs its functions on behalf of shareholders. The Board believes that good governance should be fully embedded in the Company’s framework and culture. This statement reflects the Company’s corporate governance system as at the date of this report.

This statement reports against the ASX Corporate Governance Council’s “Corporate Governance Principles and Recommendations” released in August 2007 and including 2010 amendments. As required by the ASX Listing Rules, this statement sets out the extent to which Homeloans Limited has followed the Principles or, where appropriate, indicates a departure from them with an explanation.

Due to the size of the Company’s operations, the Board is of the belief that a number of the ASX’s recommendations are not appropriate or in the best interest of shareholders. In these cases, the Board has elected not to follow the recommendations.

For further information on the corporate governance policies adopted by Homeloans Limited refer to our website: http://www.homeloans.com.au/.

– Principle 1 Lay solid foundations for management and oversight

The role of the Board and delegations

The Board has the responsibility and is accountable to shareholders for the management and control of the Company’s business and affairs. The Board has identified the key functions which it has reserved for itself. These duties are outlined below and set out in the Board Charter, a copy of which is available on the Company’s website:

oversee the conduct of the Company’s business to evaluate whether the business is being properly managed and to ensure that it is conducted in an honest and ethical manner;
ensure that adequate procedures are in place to identify the principal risks of the Company’s business and delegate the implementation of appropriate systems to manage these risks to Board Committees and management;
select, appoint, evaluate the performance of, determine the remuneration of, plan for the successor of, and removal of the Managing Director;
ensure that adequate plans and procedures are in place for succession planning, including appointing, training and monitoring the performance of senior management;
adopt a strategic planning process and review the Company’s financial objectives and major corporate plans and actions; and
perform other functions as prescribed by law, or assigned to the Board to maximise shareholder value.

The Board may establish Committees to assist in carrying out its responsibilities and to oversee the management of the Company. The Board Committees are discussed in Principle 2. The Board will also consider management recommendations with respect to various financial and operational matters.

Management responsibility

The Board may delegate the above responsibilities to its committees, a director or any other person of authority to perform any of its functions and exercise any of its powers. Ultimate responsibility for the management and control of the Company is vested in the directors, who may then delegate their power to management. The Board has a Delegation of Authority schedule in place, which is reviewed regularly.

The Board has delegated to the Managing Director the authority and powers necessary to implement the strategies approved by the Board and to manage the business affairs of the Company within the policies and delegation limits specified by the Board from time to time. The Managing Director may further delegate to senior management but remains accountable for all such delegated authority.

Executive performance assessment

Senior executives participate in an annual performance review process which involves the establishment of performance objectives and measures, and the review of achievement. The process also involves assessment of remuneration tied to the company achieving its goals. For a full overview of the performance evaluation process for executives, please refer to the remuneration report which is contained within the Directors’ Report. A review of executive performance was undertaken during the year in line with this process.

The Managing Director’s performance is reviewed annually by the Board and is assessed on achievement of the targets and applicable budgets.

Homeloans Limited-Annual Report

Principle 2 – Structure the Board to add value

Membership of the Board

The Board consists of directors with an appropriate mix of skill and experience, from different backgrounds, whom together provide the necessary breadth and depth of experience to meet the Board’s roles and responsibilities.

The size of the Board is determined by the Company’s constitution which specifies a minimum of 3 and a maximum of 7 directors. The table below summarises the current composition of the Board and the term in office held by each director at the date of this report. Background details of each director are set out in the Director’s Report.

Name	Position	Term in Office
T.A Holmes	Executive Chairman	11yrs 11 months
R.P Salmon	Non–Executive Director	11yrs 11 months
R.N Scott	Non–Executive Director	11yrs 11 months
G.J Buchanan	Non–Executive Director	4 months
A.L Hall	Non–Executive Director	3yrs 11 months

The Executive Chairman is currently exercising the role of Managing Director and has done so since the previous Managing Director resigned on 30 September 2008. This appointment was made to ensure the Company maintained leadership and direction during what was then a very challenging period.

Nomination and Appointment of New Directors

The Board’s Nomination and Remuneration Committee has the responsibility for reviewing the membership of the Board on an annual basis to ensure the appropriate skill mix of the Board as a whole.

Procedure for the selection and appointment of new directors:

The Nomination and Remuneration Committee identifies the required skills, experience, and other qualities required of new directors;
Potential candidates are then interviewed by members of the Nomination and Remuneration Committee and a short list prepared;
The Board meets to consider the potential candidates, which is followed by Board members having the opportunity to interview any prospective candidate; and
An appointment is then made by the Board.

The Board is committed to ensuring that new directors are familiar with the Company’s businesses. New directors are provided with an orientation and education program. Directors may undertake continuing education courses at the Company’s expense, with the prior approval of the Chairman or the Board.

Retirement and re-election of Directors

The Company’s constitution specifies that one third of the Board, excluding the Managing Director, must retire from the office and stand for re-election at each Annual General Meeting. Further, each director, excluding the Managing Director, must stand for re-election every 3 years.

During the year, Mr R.N Scott and Mr A.L Hall retired from the Board and were re-elected at the 2011 annual general meeting.

Succession Planning

The Board plans succession of its own members in conjunction with the Board Nomination and Remuneration Committee, taking into account the skill and experience of current board members and the company’s future direction and needs.

The Board retains overall responsibility for succession planning of the Managing Director, via the Nomination and Remuneration Committee. The Nomination and Remuneration Committee and the Managing Director are responsible for the succession planning of other senior executives.

Review of Board performance

The Board reviews its overall performance, the performance of Board Committees and the performance of each individual director annually. The performance of directors is subject to annual peer review.

Homeloans Limited-Annual Report

Director independence

An independent director is a non-executive director (i.e. is not a member of management) and:

is not a substantial shareholder of the company or an officer of, or otherwise associated directly with,
within the last three years has not been employed in an executive capacity by the Company or another consolidated member;
within the last three years has not been a principal of a material professional adviser or a material consultant to the Company or another Group member, or an employee materially associated with the service provided;
is not a material supplier or customer of the Company or other consolidated member, or an officer of or otherwise associated directly or indirectly with a material supplier or customer;
has no material contractual relationship with the Company or another consolidated member other than as a director of the Company; and
is free from any interest and any business or other relationship, which could, or could reasonably be perceived to, materially interfere with the director’s ability to act in the best interests of the Company.

It is the Board’s view that Mr R.N. Scott is an independent non-executive director. In forming this view, the Board had regard to whether Mr Scott had any of the relationships noted above.

The Board does not consist of a majority of independent directors. The Board of Directors is of the opinion that the company is actually benefiting from having both the Company’s founders give of their experience in the industry and have a financial interest as well as leveraging the broad experience in the mortgage lending industry of other directors on the board.

Conflict of Interest

Directors are required to disclose private or other business interests and any other matters which may lead to potential or actual conflict of interest to the Board.

Director’s dealings with the Company will always be at arm’s length to avoid the possibility of actual and perceived conflict of interest.

Any director who has a material personal interest in a matter being considered by the Board must not be present when the matter is being considered and may not vote on the matter. A ‘material’ interest would depend on the individual matter being considered, and whether it would be deemed to be material

Board Access to Information and Advice

All directors have access to any employees, company advisers, records and information they may require to carry out their duties. The Board also receives regular financial and operational reports from executive management.

Directors have the right to seek independent professional advice in connection with their duties and responsibilities at the company’s expense, to help them carry out their responsibilities. Prior notification to the Chairman, or the Board’s approval is required.

Board Committees

There are currently two Board Committees whose powers and procedures are governed by the company’s Constitution and the relevant Committee’s charter – the Audit Committee and the Nomination and Remuneration Committee. Other Committees may be established from time to time to consider matters of special importance.

The Board uses its committees to support it in matters which require more intensive review. Each committee has a written charter, approved by the Board defining its duties, reporting procedures and authority. Minutes from all Committee meetings are tabled at Board meetings.

Copies of the Board Committee charters are available on the Company’s website.

Details of Directors’ membership of each Committee and their attendance at meetings throughout the period are set out in the Director’s Report.

Homeloans Limited-Annual Report

– Principle 3 Promote ethical and responsible decision-making

Code of Conduct

The Company has a Code of Conduct which applies to all directors, employees, contractors and consultants working within Homeloans Limited. The Code articulates the standards of honest, ethical and law-abiding behaviour expected by the Company. Employees are actively encouraged to bring any problems to the attention of management. A copy of the Code can be found at the Company’s website.

Diversity Policy

The Group is committed to having an appropriate blend of diversity on the Board and in the Group’s senior executive positions. The Board has established a policy regarding gender, age, ethnic and cultural diversity. The details of the policy are available on the Company’s website.

The key elements of the diversity policy are as follows:

Increased gender diversity on the Board and senior executive positions and throughout the Group, aiming for equal gender representation on a full-time equivalent basis on the Board by 30 June 2014 and in senior executive positions and the entire Group by 30 June 2015.
Annual assessment of Board gender diversity objectives and performance against objectives by the Board and Nomination committee.

The Group’s performance against the diversity policy objectives are as follows:

	30 June 2012	30 June 2012	30 June 2011	30 June 2011
Gender representation	Female (%)	Male (%)	Female (%)	Male (%)
Board representation	0%	100%	0%	100%
Key management personnel and other executive representation	29%	71%	14%	86%
Group representation	51%	49%	57%	43%

Gender diversity objectives	Progress Update as at 30 June 2012
1.Target the proportion of female employees within a range of 40- 60% of total Group employees	The proportion of female employees stands at 51%, within the targeted range.
2.Target the percentage of women in management positions at a level of at least 25%	The percentage of women in management positions stands at 38%, above the target level
3.Target total female representation at executive level of two by June2015	Female representation at executive level already stands at2.
4.Aim to have one female director on the Board by June 2015	There were no female directors on the board as at 30 June 2012

The Board will report its progress in achieving its objectives on an annual basis.

– Principle 4 Safeguard integrity in financial reporting

Integrity of Homeloans financial reporting

The Board has the responsibility to ensure truthful and factual presentation of the Company’s financial position. The Board has established an Audit Committee to assist the Board to focus on issues relevant to the integrity of the Company’s financial reporting.

In accordance with its Charter, the Audit Committee must have at least three members and is chaired by an independent Director who is not Chair of the Board. Owing to the size of the Board and the fact that there is only one independent director, it is not possible for the majority of the Audit Committee to comprise of independent directors.

Details of the background of the Audit Committee members together with details of the number of meetings of the Audit Committee held during the year and the attendees at those meetings are set out in the Director’s Report.

Homeloans Limited-Annual Report

The primary functions of the Audit Committee are to:

evaluate the adequacy and effectiveness of the internal control system and implement a risk management framework;
appoint, monitor and review the activities of the Company’s external auditors;
monitor the effectiveness and independence of the auditors;
review and report to the board on the Company’s annual and half-year financial statements, and its accounting policies and principles adopted;
ensure adequate compliance controls; and
review and recommend any appropriate amendments to corporate governance policies and framework.

A copy of the Audit Committee Charter is available on the Company’s website.

Declaration by the Chief Executive Officer and the Chief Financial Officer (or equivalent)

The CEO and CFO periodically provide formal assurance statements to the Board that:

the Company’s financial statements present a true and fair view of the Company’s financial condition and operational results; and
the risk management and internal compliance and control systems are sound, appropriate and operating efficiently and effectively.

Independent external audit

The Company requires its independent external audit to:

provide stakeholders with assurance over the true and fair view of the financial reports; and
ensure accounting practices comply with applicable accounting rules and policies.

The Company’s independent external auditor is Ernst & Young (EY). External auditors are required to rotate the engagement partner assigned to the Company on a five year basis. Under this policy, the lead audit engagement partner assigned to the Company rotated at the conclusion of the 2007 financial reporting period. The Board has requested that EY attend the Company’s annual general meeting, and that they be available to answer questions arising in relation to the conduct of their audit.

– Principle 5 Make timely and balanced disclosure

Continuous disclosure policy

The Company is committed to ensuring all investors have equal and timely access to material information concerning the Company and that Company announcements are factual and presented in a clear and objective manner.

The Company’s “Communication Policy”, which is available on the Company’s website, is designed to ensure compliance with the Corporations Act and ASX Listing Rules continuous disclosure requirements. The Board has designated “Disclosure Officers” who comprise both directors and senior management. Disclosure Officers are responsible for: making decisions on what should be disclosed publicly; maintaining a watching brief on information; and ensuring disclosure is made in a timely and efficient manner.

– Principle 6 Respect the rights of shareholders

The Company recognises the importance of enhancing its relationship with investors by: communicating effectively; providing ready access to clear and balanced information about the Company; and encouraging participation at Annual General Meetings. The Company publishes annual and half yearly reports, announcements, media releases and other relevant information on its website at www.homeloans.com.au. When distributing notices of Annual General Meetings to shareholders, the Company encourages shareholders to send in any questions they may wish to have answered prior to the meeting and are also encouraged to ask questions and make comments at the meeting.

– Principle 7 Recognise and manage risk

Risk management and compliance

Homeloans Limited-Annual Report

The fundamental aim of the Company’s risk management strategy is to balance risk against reward, and to optimise returns to all stakeholders. The company recognises three main types of risk:

Market risk – the risk of change in earnings from changes in market factors such as interest rates, housing market and economic conditions;
Operational risk – the risk of loss resulting from inadequate or failed internal processes, people and systems, or from external events; and
Liquidity risk – the risk of failure to adequately fund cash demand in the short term.

The business executives have accountability for the risks within their divisions with oversight, analysis, monitoring and reporting of these risks by an independent senior manager. The risk framework and policies are developed and approved by management and reviewed and approved by the Audit Committee. Senior management provide reporting to the Audit Committee on the effectiveness of management controls for material business risks.

The Board has a number of mechanisms in place to ensure that management's objectives and activities are aligned with the risks identified by the Board. These include the following:

Board approval of a strategic plan, which encompasses the Group's vision, mission and strategy statements, designed to meet stakeholders' needs and manage business risk.
Implementation of Board approved operating plans and budgets and Board monitoring of progress against these budgets, including the establishment and monitoring of KPI’s of both a financial and non-financial nature.

Assurance

The CEO and CFO (or equivalent) periodically provide formal statements to the Board that in all material aspects:

the Company’s financial statements present a true and fair view of the Company’s financial condition and operational results; and
the risk management and internal compliance and control systems are sound, appropriate and operating efficiently and effectively.

This assurance forms part of the process by which the Board determines the effectiveness of its risk management and internal control systems in relation to financial reporting risks.

The Company’s “Risk Management Policy” is available on the Company’s website.

– Principle 8 Remunerate fairly and responsibly

The Board Remuneration Committee

The Board has established a Nomination and Remuneration Committee. This Committee’s Charter, which is available on the Company’s website, includes reviewing and recommending to the Board on:

the remuneration and incentives of senior management in light of company goals and objectives;
superannuation arrangements;
the remuneration framework for directors; and
remuneration by gender

In accordance with its Charter, the Nomination and Remuneration Committee must have at least three members. Owing to the size of the Board and the fact that there is only one independent director, it is not possible for the majority of the Audit Committee to comprise of independent directors.

For a full discussion of the Company's remuneration philosophy and framework and the remuneration received by directors and executives in the current period please refer to the remuneration report, which is contained within the Directors' Report.

Homeloans Limited-Annual Report

ASX Corporate Governance Council Best Practice Recommendations

Homeloans Limited complies with the second edition of the ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations released on 2 August 2007 and including 2010 amendments (except where noted). Homeloans Limited corporate governance practices for the year ended 30 June 2012 and at the date of this report are outlined in the Corporate Governance Statement.

The following summary table lists each of the ASX Principles and the Homeloans Limited assessment of compliance with the principles.

	ASX Principle	Compliance
Principle 1:	Lay solid foundations for management and oversight Companies should establish and disclose the respective roles and responsibilities of board and management.
1.1	Companies should establish the functions reserved to the board and those delegated to seniorexecutives and disclose thosefunctions.	Comply
1.2	Companies should disclose the process for evaluating the performance of senior executives.	Comply
1.3	Companies should provide the information indicated in the Guide to reporting on Principle 1.	Comply

Principle 2:	Structure the board to add value Companies should have a board of an effective composition, size and commitment to adequately discharge its responsibilities and duties.
2.1	A majorityof the board should be independent directors.	Not comply
2.2	The chairshould be an independent director.	Not comply
2.3	The roles of chair and chief executive officer should not be exercised by the same individual.	Not comply
2.4	The board should establish a nomination committee.	Comply
2.5	Companies should disclose the process for evaluating the performance of the board, its committees andindividualdirectors.	Comply
2.6	Companies should provide the information indicated in the Guide to reporting on Principle 2.	Comply

Principle 3:	Promote ethical and responsible decision-making Companies should actively promote ethical and responsible decision-making.
3.1	Companies should establish a code of conduct and disclose the code or a summary of the code as to: �the practices necessary to maintain confidence in the Company’s integrity �the practices necessary to take into account their legal obligations and the reasonable expectations of their stakeholders �the responsibility and accountability of individuals for reporting and investigating reports of unethicalpractices.	Comply Comply Comply
3.2	Companies should establish a policy concerning diversity and disclose the policy or a summary of that policy. The policy should include requirements for the board to establish measurable objectives for achieving gender diversity for the board to assess annually both the objectives andprogress in achievingthem.	Comply
3.3	Companies should disclose in each annual report the measurable objectives for achieving gender diversity set by the board in accordance with the diversity policy and progress towards achievingthem.	Comply
3.4	Companies should disclose in each annual report the proportion of women employees in thewhole organisation,women inseniorexecutive positions andwomenonthe board.	Comply
3.5	Companies should provide the information indicated in the Guide to reporting on Principle 3.	Comply

Principle 4:	Safeguard integrity in financial reporting Companies should have a structure to independently verify and safeguard the integrity of their financial reporting.
4.1	The board should establishanaudit committee.	Comply
4.2	The audit committee should be structured so that it: � consists only of non-executive directors � consist of a majority of independent directors � is chaired by an independent chair, who is not chair of the board � has atleast threemembers	Comply Not comply Comply Comply
4.3	The audit committee should have a formal charter.	Comply
4.4	Companies should provide the information indicated in the Guide to reporting on Principle 4.	Comply

Homeloans Limited-Annual Report


Principle 5:	Make timely and balanced disclosure Companies should promote timely and balanced disclosure of all material matters concerning the company.
5.1	Companies should establish written policies designed to ensure compliance with ASX Listing Rule disclosure requirements and to ensure accountability at a senior executive level for that compliance and disclose thosepolicies or a summaryof thosepolicies.	Comply
5.2	Companies should provide the information indicated in the Guide to reporting on Principle 5.	Comply

Principle 6:	Respect the rights of shareholders Companies should respect the rights of shareholders and facilitate the effective exercise of those rights.
6.1	Companies should design a communications policy for promoting effective communication with shareholders and encouraging their participation at general meetings and disclose theirpolicyor a summaryof thatpolicy.	Comply
6.2	Companies should provide the information indicated in the Guide to reporting on Principle 6.	Comply

Principle 7:	Recognise and manage risk Companies should establish a sound system of risk oversight and management and internal control.
7.1	Companies should establish policies for the oversight and management of material businessrisks and disclose a summary ofthose policies.	Comply
7.2	The board should require management to design and implement the risk management and internal control system to manage the company’s material business risks and report to it on whether those risks are being managed effectively. The board should disclose that management has reported to it as to the effectiveness of the Company’s management of its material business risks.	Comply
7.3	The board should disclose whether it has received assurance from the chief executive officer (or equivalent) and the chief financial officer (or equivalent) that the declaration provided in accordance with section 295A of the Corporations Act is founded on a sound system of risk management and internal control and that the system is operating effectivelyinall material respectsin relationtofinancial reportingrisks.	Comply
7.4	Companies should provide the information indicated in the Guide to reporting on Principle 7.	Comply

Principle 8:	Remunerate fairly and responsibly Companies should ensure that the level and composition of remuneration is sufficient and responsible and that its relationship to performance is clear.
8.1	The board should establish a remuneration committee.	Comply
8.2	The remuneration committee should be structured so that it: � consists of a majority of independent directors � is chaired by an independent chair � has atleast threemembers.	Not comply Not comply Comply
8.3	Companies should clearly distinguish the structure of non-executive directors’ remuneration fromthat ofexecutive directors and seniorexecutives.	Comply
8.4	Companies should provide the information indicated in the Guide to reporting on Principle 8.	Comply

Homeloans Limited-Annual Report

STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2012

		CONSOLIDATED	CONSOLIDATED	HOMELOANS	HOMELOANS
					LIMITED
	Note	2012 $’000	2011 $’000	2012 $’000	2011 $’000
ASSETS
Cash and cash equivalents	8	20,084	20,960	8,537	7,650
Receivables	9	4,331	5,501	16,397	16,537
Loans and advances to customers	13	288,800	370,579	-	-
Other financial assets	14	46,345	37,212	34,168	26,044
Non-current asset held for sale	10	383	-	329	-
Investment in an associate	11	-	351	-	297
Plant and equipment	15	726	887	726	887
Investment in controlled entities	16	-	-	8,335	8,335
Goodwill	17	13,554	12,565	-	-
TOTAL ASSETS		374,223	448,055	68,492	59,750
LIABILITIES
Payables	19	3,897	6,437	14,517	14,980
Interest-bearing liabilities	20	301,842	383,008	3,620	3,249
Other financial liabilities	21	18,966	14,588	9,851	6,825
Derivative financial liability	24	201	206	-	-
Lease incentives	22	95	176	95	176
Deferred income tax liabilities	5	6,793	4,764	4,946	2,796
Provisions	23	507	409	507	409
TOTAL LIABILITIES		332,301	409,588	33,536	28,435
NET ASSETS		41,922	38,467	34,956	31,315
EQUITY
Issued capital	25	66,114	64,481	66,114	64,481
Reserves	25	816	816	816	816
Accumulated losses	25	(25,008)	(26,830)	(31,974)	(33,982)
TOTAL EQUITY		41,922	38,467	34,956	31,315

The Statement of Financial Position is to be read in conjunction with the accompanying notes.

Homeloans Limited-Annual Report

STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2012

		CONSOLIDATED	CONSOLIDATED	HOMELOANS	HOMELOANS
					LIMITED
	Note	2012 $’000	2011 $’000	2012 $'000	2011 $'000
Interest income	4(a)	31,904	40,157	3,574	3,439
Interest expense	4(d)	(21,446)	(28,171)	(1,042)	(975)
Net interest income		10,458	11,986	2,532	2,464
Fees and commission income	4(b)	31,791	32,940	22,330	23,603
Fees and commission expense	4(e)	(16,738)	(16,857)	(9,516)	(11,174)
Other operating income	4(c)	1,014	981	9,369	11,232
Operating expenses	4(f)	(15,544)	(17,982)	(15,401)	(17,892)
Share of profit of associate		310	182	310	182
Impairment (loss)/gain	4(g)	(167)	533	-	-
Gain on loans and advances recognised at amortised cost	4(i)	416	594	-	-
Profit before income tax		11,540	12,377	9,624	8,415
Income tax expense	5	(3,430)	(3,215)	(1,328)	(362)
Net profit after tax for the year		8,110	9,162	8,296	8,053
Total comprehensive income for the
year attributable to members of		8,110	9,162	8,296	8,053
Homeloans Limited
Basic earnings per share (cents per	6	7.67	8.96
share)
Diluted earnings per share (cents per share)	6	7.67	8.95

The Statement of Comprehensive Income is to be read in conjunction with the accompanying notes.

Homeloans Limited-Annual Report

STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2012

	Issued Capital $’000 Accumulated Losses $’000 Employee Option Reserve $’000 Total $’000
	98,283 (29,876) 816 69,223
	- 9,162 - 9,162
	- 9,162 - 9,162 485 - - 485 1,383 - - 1,383 (35,670) - - (35,670) - (6,116) - (6,116)
	64,481 (26,830) 816 38,467
	- 8,110 - 8,110
	- 8,110 - 8,110 21 - - 21 (139) - - (139) 1,751 - - 1,751 - (6,288) - (6,288)

	Issued Capital $’000 Accumulated Losses $’000 Employee Option Reserve $’000 Total $’000 98,283 (35,919) 816 63,180 - 8,053 - 8,053
	- 8,053 - 8,053 485 - - 485 1,383 - - 1,383 (35,670) - - (35,670) - (6,116) - (6,116)
	64,481 (33,982) 816 31,315
	- 8,296 - 8,296
	- 8,296 - 8,296 21 - - 21 (139) - - (139) 1,751 - - 1,751 - (6,288) - (6,288)

(1) A return of capital of 35 cents per share was made to shareholders during the year ended 30 June 2011.

The Statement of Changes in Equity is to be read in conjunction with the accompanying notes.

Homeloans Limited-Annual Report

STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2012

CONSOLIDATED HOMELOANS LIMITED Note 2012 $’000 2011 $’000 2012 $’000 2011 $’000	CONSOLIDATED HOMELOANS LIMITED Note 2012 $’000 2011 $’000 2012 $’000 2011 $’000
Cash flows from operating activities Interest received Interest paid Loan fees and other income Salaries and other expenses (Repayments of)/proceeds from warehouse facility(1) (Repayments to)/proceeds from bondholders(1) Repayments from/Net loans (advanced) from borrowers(1) Income taxes paid Net cash flows from operating activities 8 Cash flows from investing activities Purchase of plant and equipment Acquisition of Refund 12 Net cash flows used in investing activities Cash flows from financing activities Proceeds from issue of shares Share buyback program Proceeds from borrowings Repayment of borrowings Return of capital Payment of dividends Net cash flows used in financing activities Net (decrease)/increase in cash and cash equivalents Add: Opening cash and cash equivalents Closing cash and cash equivalents 8	32,530 40,888 3,599 3,439 (23,774) (27,022) (1,040) (970) 29,882 31,082 27,173 37,265 (30,302) (34,042) (19,469) (29,051) (65,333) (81,380) - - (16,201) (41,210) - - 81,704 119,429 - - (1,958) (3,593) (1,958) (3,593)
	6,548 4,152 8,305 7,090
	(182) (299) (182) (299) (2,950) - (2,950) -
	(3,132) (299) (3,132) (299)
	21 485 21 485 (139) - (139) - 1,925 967 1,925 967 (1,562) (1,534) (1,556) (1,530) - (35,670) - (35,670) (4,537) (4,733) (4,537) (4,733)
	(4,292) (40,485) (4,286) (40,481)
	(876) (36,632) 887 (33,690) 20,960 57,592 7,650 41,340
	20,084 20,960 8,537 7,650

(1) The cash flows of the Group include those arising within the RMT special purpose vehicles (SPVs) and have a significant effect on the interpretation of the Group’s operating cash flows. These cash flows are not available for the use of shareholders. The RMT SPV’s generated negative operating cashflows of $1,720,000 (2011: negative $2,627,000) during the financial year. Therefore, if RMT had not been consolidated, total Group operating cashflow would have been $8,268,000 (2011: $6,779,000.)

Homeloans Limited-Annual Report

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012

Note 1: CORPORATE INFORMATION

The financial report of Homeloans Limited (“the Company) and its controlled entities (“the Group”) for the year ended 30 June 2012 was authorised for issue in accordance with a resolution of directors on 25 September 2012.

Homeloans Limited is a company limited by shares incorporated and domiciled in Australia. On 19 March 2001, Homeloans Limited shares commenced trading on the Australian Stock Exchange.

The nature of the operations and principal activities of the Group are described in the directors’ report.

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of preparation

The financial report is a general-purpose financial report, which has been prepared in accordance with the requirements of the Corporations Act 2001 and Australian Accounting Standards and other authoritative pronouncements of the Australian Accounting Standards Board. The financial report has also been prepared on a historical cost basis, except for derivative financial instruments, which have been measured at fair value.

The financial report is presented in Australian dollars and all values are rounded to the nearest thousand dollars ($’000) unless otherwise stated under the option available to the Company under ASIC Class Order 98/0100. The Company is an entity to which the class order applies.

The Company has adopted the ASIC Class Order 10/654, which allows companies presenting consolidated financial statements to also present parent entity financial statements.

For the purposes of preparing the consolidated financial statements, the Company is a for-profit entity.

(b) Statement of compliance

The financial report complies with Australian Accounting Standards and International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board.

The accounting policies adopted are consistent with those of the previous financial year. From 1 July 2011, the Group has adopted all the Standards and Interpretations mandatory for annual periods beginning on or before 1 July 2011. Adoption of these standards and interpretations did not have any effect on the financial position or performance of the Group. The Group has not elected to early adopt any new or amended Standards or Interpretations issued but not yet effective.

Homeloans Limited-Annual Report

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 (CONTINUED)

(b) Statement of compliance (Continued)

The following new and amended Standards and Interpretations, issued but not yet effective, have been identified as those which may impact the entity in the period of initial application.

Reference	Title	Summary	Application date of standard	Application date for Group

AASB 9	Financial Instruments	AASB 9 includes requirements for the classification and measurement of financial assets resulting from the first part of Phase 1 of the IASB’s project to replace IAS 39 Financial Instruments: Recognition and Measurement (AASB 139 Financial Instruments: Recognition and Measurement).	1 January 2013*	1 July 2013
AASB 2010- 7	Amendments to Australian Accounting Standards arising from AASB 9 (December 2010) [AASB 1, 3, 4, 5, 7, 101, 102, 108, 112, 118, 120, 121, 127, 128, 131, 132, 136, 137, 139, 1023, & 1038 and interpretations 2, 5, 10, 12, 19 & 127]	The requirements for classifying and measuring financial liabilities were added to AASB 9. The existing requirements for the classification of financial liabilities and the ability to use the fair value option have been retained. However, where the fair value option is used for financial liabilities the change in fair value is accounted for as follows: ► The change attributable to changes in credit risk are presented in other comprehensive income (OCI) ► The remaining change is presented in profit or loss If this approach creates or enlarges an accounting mismatch in the profit or loss, the effect of the changes in credit risk are also presented in profit or loss.	1 January 2013*	1 July 2013
AASB 2011- 2	Amendments to Australian Accounting Standards arising from the Trans- Tasman Convergence project –Reduced disclosure regime [AASB 101, AASB 1054]	This Standard makes amendments to the application of the revised disclosures to Tier 2 entities,that are applying AASB 1053.	1 July 2013	1 July 2013
AASB 10	Consolidated Financial Statements	AASB 10 introduces a revised definition of control and establishes a single control model that applies to all entities. This Standard replaces AASB 127 Consolidated and Separate Financial Statements and Interpretation 112 Consolidation–Special Purpose Entities and is required to be applied retrospectively.	1 January 2013	1 July 2013
AASB 2011- 7	Amendments to Australian Accounting Standards arising from the Consolidation and Joint Arrangement Standards	Consequential amendments to AASB 127_Separate_ Financial Statements_and AASB 128_Investments in Associates_as a result of the adoption of AASB 10 Consolidated Financial Statements, AASB 11_Joint Arrangements_and AASB 12_Disclosure of Interests in Other Entities.	1 January 2013	1 July 2013

Homeloans Limited-Annual Report

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 (CONTINUED)

Reference	Title	Summary	Application date of standard	Application date for Group


AASB 12	Disclosure of Interests in Other Entities	AASB 12 includes all disclosures relating to an entity’s interests in subsidiaries, joint arrangements, associates and structures entities. New disclosures have been introduced about the judgements made by management to determine whether control exists, and to require summarised information about joint arrangements, associates and structured entities and subsidiaries with non-controlling interests.	1 January 2013	1 July 2013
AASB 13	Fair Value Measurement	AASB 13 establishes a single source of guidance under Australian Accounting Standards for determining the fair value of assets and liabilities. AASB 13 does not change when an entity is required to use fair value, but rather, provides guidance on how to determine fair value under Australian Accounting Standards when fair value is required or permitted by Australian Accounting Standards. Application of this definition may result in different fair values being determined for the relevant assets. AASB 13 also expands the disclosure requirements for all assets or liabilities carried at fair value. This includes information about the assumptions made and the qualitative impact of those assumptions on the fair value determined.	1 January 2013	1 July 2013
AASB 2011- 8	Amendments to Australian Accounting Standards arising from the Fair Value Measurement Standard	Consequential amendments to existing Australian Accounting Standards as a result of the adoption of AASB 13_Fair Value Measurement_.	1 January 2013	1 July 2013
AASB 2011- 9	Amendments to Australian Accounting Standards - Presentation of Items of Other Comprehensive Income [AASB 1, 5, 7, 101, 112, 120, 121, 132, 133, 134, 1039 & 1049]	The main change resulting from the amendments relates to the Statement of Comprehensive Income and the requirement for entities to group items presented in other comprehensive income on the basis of whether they are potentially reclassifiable to profit or loss subsequently (reclassification adjustments). The amendments do not remove the option to present profit or loss and other comprehensive income in two statements.	1 July 2012	1 July 2012
AASB 119	Employee Benefits	The main amendments to the standard relating to defined benefit plans are as follows :- � Elimination of the option to defer the recognition of actuarial gains and losses (the ‘corridor method’); � Remeasurements (essentially actuarial gains and losses) to be presented in other comprehensive income; � Past service cost will be expensed when the plan amendments occur regardless of whether or not they are vested; and � Enhanced disclosures for Tier 1 entities. The distinction between short-term and other long- term employee benefits under the revised standard is now based on expected timing of settlement rather than employee entitlement. The revised standard also requires termination benefits (outside of a wider restructuring) to be recognised only when the offer becomes legally bindingand cannot be withdrawn.	1 January 2013	1 July 2013

Homeloans Limited-Annual Report

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 (CONTINUED)

Reference	Title	Summary	Application date of standard	Application date for Group


AASB 2012- 5	Amendments to Australian Accounting Standards arising from Annual Improvements 2009–2011 Cycle; and	AASB 2012-5 makes amendments resulting from the 2009-2011 Annual Improvements Cycle. The Standard addresses a range of improvements, including the following: • repeat application of AASB 1 is permitted (AASB 1); and • clarification of the comparative information requirements when an entity provides a third balance sheet (AASB 101 Presentation of Financial Statements).	1 January 2013	1 July 2013

The directors are in the process of determining the impact of the above new and amended accounting standards and interpretations.

AASB ED 215 Mandatory effective date of IFRS 9 proposes to defer the mandatory effective date of AASB 9 from annual periods beginning 1 January 2013 to annual periods beginning on or after 1 January 2015, with early application permitted. At the time of preparation, finalisation of ED 215 is still pending by the AASB. However, the IASB has deferred the mandatory effective date of IFRS 9 to annual periods beginning on or after 1 January 2015, with early application permitted.

(c) Basis of consolidation

The consolidated financial statements comprise the financial statements of Homeloans Limited and its subsidiaries as at 30 June each year (the Group).

Subsidiaries are all those entities (including special purpose entities) over which the Group has the power to govern the financial and operating policies so as to obtain benefits from their activities. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether a group controls another entity.

The financial statements of the subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies.

In preparing the consolidated financial statements, all inter-company balances and transactions, income and expenses and profit and losses resulting from intra-consolidated transactions have been eliminated in full.

Subsidiaries are fully consolidated from the date on which control is obtained by the Group and cease to be consolidated from the date on which control is transferred out of the Group.

(d) Business combinations

Business combinations (pre 1 July 2009)

The purchase method of accounting was used to account for all business combinations regardless of whether equity instruments or other assets are acquired.

Business combinations (post 1 July 2009)

Business combinations are accounted for using the acquisition method. The consideration transferred in a business combination shall be measured at fair value, which shall be calculated as the sum of the acquisition date fair values of the assets transferred by the acquirer, the liabilities incurred by the acquirer to former owners of the acquiree and the equity issued by the acquirer, and the amount of any non-controlling interest in the acquiree. For each business combination, the acquirer measures the non-controlling interest in the acquiree either at fair value or at the proportionate share of the acquiree's identifiable net assets.

Acquisition-related costs are expensed as incurred.

When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic conditions, the Group’s operating or accounting policies and other pertinent conditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts by the acquiree.

If the business combination is achieved in stages, the acquisition date fair value of the acquirer's previously held equity interest in the acquiree is remeasured at fair value as at the acquisition date through profit or loss.

Homeloans Limited-Annual Report

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 (CONTINUED)

Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration which is deemed to be an asset or liability will be recognised in accordance with AASB 139 either in profit or loss or in other comprehensive income. If the contingent consideration is classified as equity, it shall not be remeasured.

(e) Investment in associate

Investments in associates are accounted for using the equity method of accounting in the consolidated financial statements. An associate is an entity in which the Group has significant influence and which is neither a subsidiary nor a joint venture.

Under the equity method, the investment in the associate is carried in the consolidated Statement of Financial Position at cost plus post-acquisition changes in the Group’s share of net assets of the associate. Goodwill relating to an associate is included in the carrying amount of the investment and is not amortised. After application of the equity method, the Group determines whether it is necessary to recognise any additional impairment loss with respect to the Group’s net investment in the associate. The consolidated Statement of Comprehensive Income reflects the Group’s share of the results of operations of the associate.

Where there has been a change recognised directly in the associate’s equity, the Group recognises its share of any changes and discloses this in other comprehensive income. The cumulative movements are adjusted against the carrying amount of the investment.

Any disposal of an investment in the associate is recognised through the Statement of Comprehensive Income, after taking the carrying value of the investment on disposal date and any expenses directly attributable into account.

(f) Leases

Leases are classified at their inception as either operating or finance leases based on the economic substance of the agreement so as to reflect the risks and benefits incidental to ownership.

Operating leases

The minimum lease payments of operating leases, where the lessor effectively retains substantially all of the risks and benefits of ownership of the leased item, are recognised as an expense on a straight-line basis.

Contingent rentals are recognised as an expense in the financial year in which they are incurred.

Operating lease incentives are recognised as a liability when received and subsequently reduced by allocating lease payments between rental expenses and reduction of liability.

Finance leases

Leases which effectively transfer substantially all of the risks and benefits incidental to ownership of the leased item to the Group are capitalised at the inception of the lease at the fair value of the leased property or, if lower, at the present value of the minimum lease payments and disclosed as property, plant and equipment under lease. A lease liability of equal value is also recognised.

Capitalised lease assets are depreciated over the shorter of the estimated useful life of the assets and the lease term. Minimum lease payments are allocated between interest expense and reduction of the lease liability with the interest expense calculated using the interest rate implicit in the lease and charged directly to profit and loss.

The cost of improvements to or on leasehold property is capitalised, disclosed as leasehold improvements, and amortised over the unexpired period of the lease or estimated useful lives of the improvements, whichever is the shorter.

(g) Goodwill

Goodwill on acquisition is initially measured at cost being the excess of the cost of the business combination over the acquirer’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities.

Following initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is not amortised.

Goodwill is reviewed for impairment annually, or more frequently if events or changes in circumstances indicate that the carrying value may be impaired.

As at the acquisition date, any goodwill acquired is allocated to each of the cash-generating units expected to benefit from the combination’s synergies.

Homeloans Limited-Annual Report

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 (CONTINUED)

Impairment is determined by assessing the recoverable amount of the cash-generating unit to which the goodwill relates.

Where the recoverable amount of the cash-generating unit is less than the carrying amount, an impairment loss is recognised.

Where goodwill forms part of a cash-generating unit and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation.

Goodwill disposed of in this circumstance is measured on the basis of the relative values of the operation disposed of and the portion of the cash-generating unit retained.

(h) Intangibles

Intangible assets acquired separately or in a business combination are initially measured at cost. The cost of an intangible asset acquired in a business combination is its fair value as at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses. Internally generated intangible assets, excluding capitalised development costs, are not capitalised and expenditure is recognised in profit or loss in the year in which the expenditure is incurred.

The useful lives of intangible assets are assessed to be either finite or indefinite. Intangible assets with finite lives are amortised over the useful life and tested for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at each financial year-end. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are accounted for prospectively by changing the amortisation period or method, as appropriate, which is a change in accounting estimate. The amortisation expense on intangible assets with finite lives is recognised in profit or loss in the expense category consistent with the function of the intangible asset.

Intangible assets with indefinite useful lives are tested for impairment annually either individually or at the cash generating unit level. Such intangibles are not amortised. The useful life of an intangible asset with an indefinite life is reviewed each reporting period to determine whether indefinite life assessment continues to be supportable. If not, the change in the useful life assessment from indefinite to finite is accounted for as a change in an accounting estimate and is thus accounted for on a prospective basis. A summary of the policies applied to the Group’s intangible assets is as follows:

Gains or losses arising from de-recognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in profit or loss when the asset is derecognised.

(i) Share-based payment transactions

The Group provides benefits to employees (including directors) and to business partners of the Group in the form of share-based payment transactions, whereby the recipients render services in exchange for shares or rights over - shares (‘equity settled transactions’).

There is currently an Employee Share Scheme in place which provides benefits to employees.

The cost of these equity-settled transactions with employees and business partners is measured by reference to the fair value at the date at which they are granted. The fair value is determined by the use of a binomial model.

In valuing equity-settled transactions, no account is taken of any performance conditions, other than conditions linked to the price of the share of Homeloans Limited (‘market conditions’).

The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the performance conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award (‘vesting date’).

The cumulative expense recognised for equity-settled transactions at each reporting date until vesting date reflects:

(i) the extent to which the vesting period has expired; and

(ii) the number of awards that, in the opinion of the directors of the consolidated entity, will ultimately vest.

This opinion is formed based on the best available information at balance date. No adjustment is made for the likelihood of market performance conditions being met as the effect of these conditions is included in the determination of fair value at grant date.

Homeloans Limited-Annual Report

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 (CONTINUED)

No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition.

Where the terms of an equity-settled award are modified, as a minimum an expense is recognised as if the terms had not been modified. In addition, an expense is recognised for any increase in the value of the transaction as a result of the modification, as measured at the date of modification.

Where an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognised for the award is recognised immediately. However, if a new award is substituted for the cancelled award, and designated as a replacement award on the date that it is granted, the cancelled and new award are treated as if they were a modification of the original award, as described in the previous paragraph.

The dilutive effect, if any, of outstanding options is reflected as additional share dilution in the computation of earnings per share.

At balance date the Group did not have on issue any options attaching market based performance conditions.

(j) Revenue recognition

Revenue is recognised and measured at the amount received or receivable to the extent that it is probable that the economic benefits will flow to the entity and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised:

Origination and loan management business Managed Loans
Application fee revenue received in respect of loans is recognised when the service has been provided.
Origination commissions are recognised as revenue once the origination of the loan has been completed.
The group also receives trailing commissions from lenders on loans originated by Homeloans on behalf of those lenders. The trailing commissions are received over the life of the loans based on the loan book balance outstanding. The group also makes trailing commission payments to brokers and commissioned staff based on the loan book balance outstanding.

Upon settling loans, the fair value of the future trailing commission receivable is recognised as revenue for the services provided.This represents the expected future trailing commissions receivable under the origination and management agreement, less ongoing servicing costs not covered by transaction fees, discounted to their net present value. The trailing commission revenue is recognised upon settlement as the services to earn that revenue are principally performed upfront by Homeloans. In addition, the fair value of the trailing commission expense is also recognised. This represents the expected future trailing commissions payable to brokers and commissioned staff discounted to their net present value.

Homeloans receives additional and separate fees for transactional services performed over the life of the loan. This fee revenue is recognised as the services are being provided.

- Origination of Non managed Loans

The group receives trailing commissions from lenders on settled loans over the life of the loan based on the loan book balance outstanding to which the Group is entitled to without having to perform further services. The group makes trailing commission payments to brokers and commission staff based on the loan book balance outstanding.

Upon settling loans (for the reasons noted above), the fair value of the future trailing commission receivable is recognised as revenue for the services provided.This represents the expected future trailing commissions receivable discounted to their net present value. The fair value of the trailing commission expense to brokers and commissioned staff is also recognised, being the future trailing commissions payable discounted to their net present value.

Securitisation of mortgages

Interest income from loans and advances operated by the Residential Mortgage Trusts is recognised as it accrues using the effective interest method.

Homeloans Limited-Annual Report

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 (CONTINUED)

(k) Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset (i.e. an asset that necessarily takes a substantial period of time to get ready for its intended use or sale) are capitalised as part of the cost of that asset. All other borrowing costs are expensed in the period they occur.

(l) Cash and cash equivalents

Cash on hand and in banks and short-term deposits in the Statement of Financial Position comprise cash at bank and in hand and short-term deposits with an original maturity of three months or less. For the purposes of the Statement of Cash Flows, cash and cash equivalents consist of cash and cash equivalents as defined above, net of outstanding bank overdrafts.

(m) Receivables

Trade receivables, which generally have 30-60 day terms, are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less an allowance for impairment.

Collectibility of trade receivables is reviewed on an ongoing basis at an operating unit level. Individual debts that are known to be uncollectible are written off when identified. An impairment allowance is recognised when there is objective evidence that the Group will not be able to collect the receivable.

Future trailing commissions receivable represents the net present value of the expected future trailing income receivable under the origination and management agreement, less ongoing servicing costs not covered by transaction fees.

Subsequent to initial recognition and measurement, the trailing commissions receivable are measured at amortised cost. The carrying amount of the trailing commissions receivable is adjusted to reflect actual and revised estimated cash flows by recalculating the carrying amount through computing the present value of estimated future cash flows at the effective interest rates. The resulting adjustment is recognised as income or expense in the Statement of Comprehensive Income.

(n) De-recognition of financial instruments

The de-recognition of a financial instrument takes place when the Group no longer controls the contractual rights that comprise the financial instrument, which is normally the case when the instrument is sold, or all the cash flows attributable to the instrument are passed through to an independent third party.

The Group utilise special purpose vehicles (SPV), which issues securities to investors. These SPV meet the criteria – of being controlled entities under AASB 127 Consolidated and Separate Financial Statements. These transactions do not meet the criteria under AASB 139 - Financial Instruments: Recognition and Measurement with respect to the de-recognition of financial instruments. Accordingly, the value of the securitised loans has been recorded in the Statement of Financial Position with the related interest earned and interest paid recognised through the consolidated Statement of Comprehensive Income.

(o) Recoverable amount of non-financial assets

At each reporting date, the Group assesses whether there is any indication that an asset may be impaired. Where an indicator of impairment exists, the Group makes a formal estimate of recoverable amount. Where the carrying amount of an asset exceeds its recoverable amount the asset is considered impaired and is written down to its recoverable amount.

Recoverable amount is the greater of fair value less costs to sell and value in use. It is determined for an individual asset, unless the asset’s value in use cannot be estimated to be close to its fair value less costs to sell and it does not generate cash inflows that are largely independent of those from other assets or groups of assets, in which case, the recoverable amount is determined for the cash-generating unit to which the asset belongs.

In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

(p) Non-current assets held for sale

Non-current assets and disposal groups classified as held for sale are measured at the lower of their carrying amount and fair value less costs to sell. Non-current assets and disposal groups are classified as held for sale if their carrying amounts will be recovered principally through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset or disposal group is available for immediate sale in its present condition. Management must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year from the date of classification.

Homeloans Limited-Annual Report

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 (CONTINUED)

(q) Recoverable amount of financial assets

The Group assesses at each balance date whether a financial asset or group of financial assets is impaired.

Financial assets carried at amortised cost

If there is objective evidence that an impairment loss on loans and receivables carried at amortised cost has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the original effective rate determined under the contract. The carrying amount of the asset is reduced either directly or through use of an allowance account. The amount of the loss is recognised in profit or loss.

The Group first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant, and individually or collectively for financial assets that are not individually significant. If it is determined that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, the asset is included in a group of financial assets with similar credit risk characteristics and that group of financial assets is collectively assessed for impairment. Assets that are individually assessed for impairment and for which an impairment loss is or continues to be recognised are not included in a collective assessment of impairment.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed. Any subsequent reversal of an impairment loss is recognised in profit or loss, to the extent that the carrying value of the asset does not exceed its amortised cost at the reversal date.

(r) Loans and advances

All loans and advances are initially recognised at fair value plus directly attributable transaction costs.

Loans and advances are subsequently measured at amortised cost using the effective interest method.

Amortised cost is calculated by taking into account any fees and points paid or received between parties to the contract that are an integral part of the effective interest rate, transactions costs, and all other premiums or discounts on acquisition, over the period to maturity.

Gains and losses are recognised in income when the loans and advances are derecognised or impaired, as well as through the amortisation process.

The Group assesses at each balance date whether there is any objective evidence of impairment. This assessment is undertaken on each loan that is greater than 90 days past due and considers the level of expected future cashflows compared to the carrying amount of each loan.

If there is objective evidence that an impairment loss on loans and other receivables has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of the expected future cash flows (excluding future credit losses that have not been incurred), discounted at the asset’s original effective interest rate.

The Group has individually assessed provisions and collectively assessed provisions. Individually assessed provisions are made against loans and advances.

Individually significant provisions are assessed as the difference between an asset’s carrying amount and the present value of estimated future cash flows discounted at the asset’s original effective interest rate.

All other loans and receivables that do not have an individually assessed provision are assessed collectively for impairment.

Collective provisions are maintained to reduce the carrying amount of the portfolios of similar loans and receivables to their estimated recoverable amounts at the balance date.

The expected future cash flows for portfolios of assets with similar risk characteristics are estimated on the basis of current observable data to reflect the effects of current conditions that did not affect the period on which the loss experience is based and to remove the effects of conditions in the period that do not currently exist. Increases or decreases in the provision amount are recognised in the Statement of Comprehensive Income.

All RMT loans are covered by Lenders Mortgage Insurance.

Homeloans Limited-Annual Report

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 (CONTINUED)

(s) Plant and equipment

Cost and valuation

Items of plant and equipment are measured at cost less accumulated depreciation and any impairment in value.

Depreciation

Depreciation is provided on a straight-line basis on all plant and equipment over the estimated useful life of the asset as follows:

– Plant and equipment over 3 to 15 years.

Impairment

The carrying values of plant and equipment 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 inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs.

If any such indication exists and where the carrying value exceeds the estimated recoverable amount, the assets or cash generating units are written down to their recoverable amount.

The recoverable amount of plant and equipment is the greater of a fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

An item of property, plant and equipment 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 derecognising of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the item) is included in the Statement of Comprehensive Income in the period the item is derecognised.

(t) Trade and other payables

Trade and other payables are carried at amortised cost due their short term nature and are not discounted.

Payables to related parties are carried at the principal amount. Interest, when charged by the lender, is recognised as an expense on an accrual basis.

Future trailing commission payable represents the net present value of the expected future trailing commission payable.

The trailing commission payable is measured at amortised cost. The carrying amount of the commission payable is adjusted to reflect actual and revised estimated cash flows by recalculating the carrying amount through computing the present value of estimated future cash flows at the original effective interest rates. The resulting adjustment is recognised as income or expense in the Statement of Comprehensive Income.

(u) Interest-bearing loans and borrowings

All loans and borrowings are initially recognised at fair value less transaction costs.

After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest method other than those which are measured at fair value through the profit and loss. Amortised cost is calculated by taking into account any fees paid or received between parties to the contract that are an integral part of the effective interest rate, transactions costs, and all other premiums or discounts on acquisition, over the period to maturity.

Gains or losses are recognised in the statement of comprehensive income when the liabilities are derecognised and also as well as through the amortisation process.

(v) Provisions

Provisions are recognised when the economic entity 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 reliable estimate can be made of the amount of the obligation.

Homeloans Limited-Annual Report

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 (CONTINUED)

The expense relating to any provision is presented in the statement of comprehensive income net of any reimbursement.

If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability.

Where discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.

A provision for dividends is not recognised as a liability unless the dividends are declared, determined or publicly recommended on or before the reporting date.

(w) Taxes

Income tax

Income tax on the statement of comprehensive income for the year comprises current and deferred tax. Income tax is recognised in the Statement of Comprehensive Income except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.

Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities based on the current period’s taxable income. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the balance date.

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 assets and unused tax losses can be utilised:

Except where 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 taxable profit or loss; and

In respect of deductible temporary differences associated with investments in subsidiaries, and associates, deferred tax assets are 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.

The carrying amount of deferred income tax assets is reviewed at each balance date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised.

Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance date.

Income taxes relating to items recognised directly in equity are recognised in equity and not in the Statement of Comprehensive Income.

Tax consolidation legislation

Homeloans Limited and its wholly-owned Australian controlled entities have implemented the tax consolidation legislation as of 1 July 2003.

The head entity, Homeloans Limited and the controlled entities in the tax consolidated group continue to account for their own current and deferred tax amounts. The Group has applied the group allocation 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, Homeloans Limited 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.

Asset or liabilities arising under tax funding agreements with the tax consolidated entities are recognised as amounts receivable from or payable to other entities in the group. Details of the tax funding agreement are disclosed in Note 5.

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.

Homeloans Limited-Annual Report

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 (CONTINUED)

(x) Goods and services tax (GST)

Revenues, expenses and assets are recognised net of the amount of GST except:

where the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST is recognised as part of the costs of acquisition of the asset or as part of the expense item as applicable; and

Receivables and payables are stated with the amount of GST included.

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

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

Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority.

(y) Investments and other financial assets

Financial assets in the scope of AASB 139 Financial Instruments: Recognition and Measurement are classified as either financial assets held for trading, loans and receivables, held-to-maturity investments, or available-for-sale investments, as appropriate. When financial assets are recognised initially, they are measured at fair value, plus, in the case of investments not held for trading, directly attributable transactions costs. The Group determines the classification of its financial assets on initial recognition.

All regular way purchases and sales of financial assets are recognised on the trade date i.e. the date that the Group commits to purchase the asset. Regular way purchases or sales are purchases or sales of financial assets under contracts that require delivery of the assets within the period established generally by regulation or convention in the marketplace.

Financial assets held for trading

Financial assets are classified as held for trading if they are acquired for the purpose of selling in the near term. Derivatives are also classified as held for trading unless they are designated as effective hedging instruments. Gains or losses on investments held for trading are recognised in profit or loss.

Held-to-maturity investments

Non-derivative financial assets with fixed or determinable payments and fixed maturity are classified as held-tomaturity when the Group has the positive intention and ability to hold to maturity. Investments intended to be held for an undefined period are not included in this classification. Investments that are intended to be held-to-maturity, such as bonds, are subsequently measured at amortised cost. This cost is computed as the amount initially recognised minus principal repayments, plus or minus the cumulative amortisation using the effective interest method of any difference between the initially recognised amount and the maturity amount. This calculation includes all fees and points paid or received between parties to the contract that are an integral part of the effective interest rate, transaction costs and all other premiums and discounts. For investments carried at amortised cost, gains and losses are recognised in profit or loss when the investments are de-recognised or impaired, as well as through the amortisation process.

Available-for-sale investments

Available-for-sale investments are those non-derivative financial assets that are designated as available-for-sale or are not classified as any of the three preceding categories. After initial recognition available-for sale investments are measured at fair value with gains or losses being recognised as a separate component of equity until the investment is derecognised or until the investment is determined to be impaired, at which time the cumulative gain or loss previously reported in equity is recognised in profit or loss.

The fair value of investments that are actively traded in organised financial markets is determined by reference to quoted market bid prices at the close of business on the balance date. For investments with no active market, fair value is determined using valuation techniques. Such techniques include using recent arm’s length market transactions; reference to the current market value of another instrument that is substantially the same; discounted cash flow analysis and option pricing models.

Homeloans Limited-Annual Report

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 (CONTINUED)

(z) Derivative financial instruments

The Group uses derivative financial instruments such as interest rate swaps to manage its risks associated with interest rate fluctuations. Such derivative financial instruments are stated at fair value. These derivatives are classified as held for trading. Any gains or losses arising from changes in fair value are taken directly to the Statement of Comprehensive Income.

The fair value of interest rate swap contracts is determined by reference to market values for similar instruments.

(aa) Employee benefits

Provision is made for employee benefits accumulated as a result of employees rendering services up to the reporting date. These benefits include wages and salaries, annual leave, sick leave and long service leave.

Liabilities arising in respect of wages and salaries, annual leave, sick leave and any other employee benefits due to be settled within twelve months of the reporting date are measured at their nominal amounts based on remuneration rates which are expected to be paid when the liability is settled. All other employee benefit liabilities are measured at the present value of the estimated future cash outflow to be made in respect of services provided by employees up to the reporting date. In determining the present value of future cash outflows, the market yield as at the reporting date on national government bonds, which have terms to maturity approximating the terms of the related liability, are used.

Employee benefits expenses arise in respect of the following categories:

Wages and salaries, non-monetary benefits, annual leave, long service leave, sick leave and other leave benefits; and other types of employee benefits are recognised against profits on a net basis in their respective categories.

Employee incentive payments are paid and/or recognised as follows:

Executive staff – Incentive payments are recognised when there is a legal or constructive obligation at the balance sheet date and determined based on individual performance in relation to specific KPI’s as well as performance of the company in relation to company wide targets and/or the budget. The Group recognises an expense when the incentive payment can be quantified with some certainty.

(bb) Earnings per share

Basic EPS is calculated as net profit attributable to members, adjusted to exclude costs of servicing equity (other than dividends), divided by the weighted average number of ordinary shares, outstanding during the period, adjusted for any bonus element.

Diluted EPS is calculated as net profit attributable to members, adjusted for the after tax effect of:

Costs of servicing equity (other than dividends);
Dividends and interest associated with dilutive potential ordinary shares that have been recognised as expenses; and
Other non discretionary changes in revenues and expenses during the period that would result from the dilution of potential ordinary shares, divided by the weighted average number of ordinary shares and dilutive potential ordinary shares, adjusted for any bonus element.

(cc) Issued Capital

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.

(dd) Significant accounting judgments, estimates and assumptions

Significant accounting judgments

In the process of applying the group’s accounting policies, management has made judgments involving estimations, which have had an impact on the amounts recognised in the financial statements.

Recovery of deferred tax assets

Deferred tax assets are recognised for deductible temporary differences as management considers that it is probable that future taxable profits will be available to utilise those temporary differences.

Homeloans Limited-Annual Report

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 (CONTINUED)

Consolidation of SPVs

– The Group has decided that the RMT SPVs meet the criteria of being controlled entities under AASB 127 Consolidated and separate financial statements. The SPVs do not meet the criteria for de-recognition of financial instruments. Accordingly it has been judged that the value of the securitised loans and corresponding liabilities be recorded in the Statement of Financial Position using the effective interest method with the related interest earned and interest paid recognised through the consolidated Statement of Comprehensive Income.

Recognition of future trailing commission receivable

The recognition of the future trailing commission receivable on the Statement of Financial Position is an area of judgment due to the different recognition criteria existing within the accounting standards. This position will continue to be monitored in future accounting periods having regard to developments in the relevant accounting standards.In this respect, the Directors believe the accounting treatment adopted by the Group is consistent with the applicable accounting standards and is consistent with the treatment adopted in the prior year and by similar industry participants. The unrealised profit before tax resulting from the movement in future trailing commission assets and liabilities for the financial year ended 30 June 2012 was $1,954,000 (2011: $1,469,000)

Significant accounting estimates and assumptions

The carrying amounts of certain assets and liabilities are often determined based on estimates and assumptions of future events.

The key estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of certain assets and liabilities within the next reporting period are:

Impairment of goodwill

The Group determines whether goodwill is impaired at least on an annual basis. This requires an estimation of the value in use of the cash-generating units to which the goodwill is allocated. The assumptions used in this estimation of recoverable amount and the carrying amount of goodwill are discussed in note 17.

Impairment losses on loans and advances

The Group reviews its loans and advances at each reporting date to assess whether an allowance should be recorded in the Statement of Comprehensive Income. In particular, judgment by management is required in the estimation of the amount and timing of future cash flows when determining the level of allowance required. Such estimates are based on assumptions about a number of factors and actual results may differ, resulting in future changes to the allowance.

Future trailing commissions receivable and future trailing commissions payable.

The Group receives trailing commissions from lenders on settled loans over the life of the loan based on the loan book balance outstanding to which the Group is entitled. The Group also makes trailing commission payments to introducers based on the loan book balance outstanding.

The fair value of trailing commissions receivable and the corresponding payable to introducers is determined by using the discounted cash flow valuation technique. These calculations require the use of assumptions. The key assumptions underlying the fair value calculation of trailing commissions receivable and the corresponding payable to introducers during the year include the prepayment rate and the discount rate. These assumptions are determined by management as follows:

	Year ended 30 June 2012 Year ended 30 June 2011
Weighted average loan life Discount rate	4 years and 3 months 3 years and 9 months 12.0% 12.0%

Some changes were made to the prepayment rates during the period. If these changes had not been made, the net profit before tax result would have been lower by $1,095,000.

A remeasurement of all assets and liabilities using the discounted cash flow valuation technique occurs periodically, usually quarterly but must be completed at each reporting date.

There are a number of parameters that affect these calculations

Loan balance
Prepayment rate

Each of these parameters can change over time and therefore regular revaluations are required, incorporating up to date assumptions for these parameters, to reflect the true value of the discounted assets and liabilities.

Homeloans Limited-Annual Report

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 (CONTINUED)

(ee) Comparatives

Certain comparative figures have been reclassified to conform with current year presentation and disclosure requirements.

Note 3: OPERATING SEGMENTS

Identification of reportable segments

The Group has identified its operating segments based on the internal management reports that are reviewed and used by the Board of Directors (the chief operating decision makers) in assessing performance and in determining the allocation of resources.

The operating segments are identified by the Board of Directors, in conjunction with management, based on the nature of the products and services provided, the nature in which they are organised and managed and the markets to which they serve.

Types of products and services

Origination and management

The origination and management segment originates residential mortgages through external mortgage brokers, satellite offices and internal consultants. The funding for these mortgages is supplied by a pool of funders, with the origination and management segment continuing the ongoing management of the loans after they are processed and settled.

Securitisation of mortgages

The securitisation of mortgages segment is the Group’s own funding source. Using a series of mortgage trusts, this segment packages groups of mortgages and sells the income stream via a securitised mortgage trust.

Accounting policies and inter-segment transactions

The accounting policies used by the Group in reporting segments internally, and in accounting for transactions between reportable segments, are the same as those contained in note 2 to the accounts and in the prior period except as detailed below:

Corporate charges

Corporate charges comprise those operating expenses which are managed and charged centrally. Corporate charges are allocated to each business segment on a proportionate basis linked to origination activity and loan portfolio balances so as to determine a segmental result.

The following item is not allocated to operating segments as it is not considered part of the core operations of any segment:

Income tax

Homeloans Limited-Annual Report

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 (CONTINUED)

Year ended 30 June 2012 Revenue Interest Income Fee and commission income Other operating income Total segment revenue from external Inter-segment revenue Total segment revenue Inter-segment elimination Total consolidated revenue Result Segment results before impairment and finance costs Impairment loss Gain on loans and advances recognised at amortised cost Finance costs Segment results Income tax expense Net profit for the year Assets and liabilities Segment assets(1) Total assets Segment liabilities(1) Unallocated liabilities (tax balances) Total liabilities Other segment information Capital expenditure Depreciation Interest expense	*Origination and* *Management* *Securitisation* *of Mortgages* *Total* $’000 $’000 $’000	*Origination and* *Management* *Securitisation* *of Mortgages* *Total* $’000 $’000 $’000
Revenue Interest Income Fee and commission income Other operating income Total segment revenue from external Inter-segment revenue Total segment revenue Inter-segment elimination Total consolidated revenue Result Segment results before impairment and finance costs Impairment loss Gain on loans and advances recognised at amortised cost Finance costs Segment results Income tax expense Net profit for the year Assets and liabilities Segment assets(1) Total assets Segment liabilities(1) Unallocated liabilities (tax balances) Total liabilities Other segment information Capital expenditure Depreciation Interest expense	4,883 27,021 31,904 30,835 956 31,791 1,014 - 1,014
	36,732 27,977 64,709 2,461 - 2,461
	39,193 27,977 67,170
	(2,461) 64,709 6,080 5,433 11,513 - (167) (167) - 416 416 (222) - (222)	(2,461)
		64,709
	5,858 5,682 11,540 (3,430) 8,110
		8,110


	77,650 296,573 374,223

		374,223

	25,404 299,616 325,020

		7,281
		332,301


	182	- 182

	343	- 343
	1,963 19,483 21,446

(1) The net assets for the Securitisation of Mortgages segment do not reflect the inherent value of the residential loan balances within the SPV’s represented by future income streams, being net interest margin and fee income.

Homeloans Limited-Annual Report

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 (CONTINUED)

Year ended 30 June 2011 *Origination and* *Management* *Securitisation* *of Mortgages Total* $’000 $’000 $’000 Revenue Interest Income 4,724 35,433 40,157 Fee and commission income 31,095 1,845 32,940 Other operating income 981 - 981 Total segment revenue from external 36,800 37,278 74,078 Inter-segment revenue 3,228 - 3,228 Total segment revenue 40,028 37,278 77,306 Inter-segment elimination (3,228) Total consolidated revenue 74,078 Result Segment results before impairment and finance costs 4,462 7,004 11,466 Impairment gain - 533 533 Gain on loans and advances recognised at amortised cost - 594 594 Finance costs (216) - (216) Segment results 4,246 8,131 12,377 Income tax expense (3,215) Net profit for the year 9,162 Assets and liabilities Segment assets(1) 69,724 378,331 448,055 Total assets 448,055 Segment liabilities(1) 21,286 383,242 404,528 Unallocated liabilities (tax balances) 5,060 Total liabilities 409,588 Other segment information Capital expenditure 299 - 299 Depreciation 423 - 423 Interest expense 1,793 26,378 28,171	*Origination and* *Management* *Securitisation* *of Mortgages Total* $’000 $’000 $’000	*Origination and* *Management* *Securitisation* *of Mortgages Total* $’000 $’000 $’000
Revenue Interest Income 4,724 35,433 40,157 Fee and commission income 31,095 1,845 32,940 Other operating income 981 - 981 Total segment revenue from external 36,800 37,278 74,078 Inter-segment revenue 3,228 - 3,228 Total segment revenue 40,028 37,278 77,306 Inter-segment elimination (3,228) Total consolidated revenue 74,078 Result Segment results before impairment and finance costs 4,462 7,004 11,466 Impairment gain - 533 533 Gain on loans and advances recognised at amortised cost - 594 594 Finance costs (216) - (216) Segment results 4,246 8,131 12,377 Income tax expense (3,215) Net profit for the year 9,162 Assets and liabilities Segment assets(1) 69,724 378,331 448,055 Total assets 448,055 Segment liabilities(1) 21,286 383,242 404,528 Unallocated liabilities (tax balances) 5,060 Total liabilities 409,588 Other segment information Capital expenditure 299 - 299 Depreciation 423 - 423 Interest expense 1,793 26,378 28,171	4,724 35,433 40,157 31,095 1,845 32,940 981 - 981
	36,800 37,278 74,078 3,228 - 3,228
	40,028 37,278 77,306
		(3,228)
		74,078
	4,246 8,131 12,377 (3,215) 9,162
		9,162


	69,724 378,331 448,055

		448,055

	21,286 383,242 404,528

		5,060
		409,588


	299	- 299

	423	- 423
	1,793 26,378 28,171

Geographical Information

The Group operates in Australia. All revenue is derived in and attributed to Australia and all non-current assets are located in Australia (the Group’s country of domicile).

Homeloans Limited-Annual Report

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 (CONTINUED)

Note 4: REVENUES AND EXPENSES

	CONSOLIDATED HOMELOANS LIMITED 2012 $’000 2011 $’000 2012 $’000 2011 $’000
REVENUE (a)Interest income Interest received–other person/corporations (b)Fees and commission income Mortgage origination income Loan management fees (c)Other operating income Rental income Management Fees–Wholly owned controlled entities Dividend received from subsidiary Other Total Revenue EXPENSES (d)Interest expense Interest on other loans Interest recognised on trailer commission payable Interest payable to bondholders Interest payable to warehouse facility provider (e)Fees and commission expense Mortgage origination expense Loan management expense	31,904 40,157 3,574 3,439 9,734 11,094 6,298 8,223 22,057 21,846 16,032 15,380
	31,791 32,940 22,330 23,603
	794 725 794 725 - - 3,357 4,748 - - 5,000 5,500 220 256 218 259
	1,014 981 9,369 11,232
	64,709 74,078 35,273 38,274
	222 216 222 216 1,741 1,576 820 759 3,005 4,147 - - 16,478 22,232 - -
	21,446 28,171 1,042 975
	7,787 8,138 4,610 5,509 8,951 8,719 4,906 5,665
	16,738 16,857 9,516 11,174

Homeloans Limited-Annual Report

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 (CONTINUED)

	CONSOLIDATED HOMELOANS LIMITED 2012 $’000 2011 $’000 2012 $’000 2011 $’000
(f) Operating expenses (i) General administrative expenses (ii)Employee benefits Wages & salaries Workers’ compensation costs Annual leave provision Long service leave provision Employee incentive payments Payroll tax Other employee costs (iii)Depreciation consists of: Depreciation and amortisation of: Plant and equipment (iv)Occupancy costs Total Operating expenses (g)Impairment (loss)/gain–loans and advances(1) (h)Gain on derivative financial liability classified as held for trading(2) (i) Gain on loans and advances recognised at amortised cost(3)	4,018 5,367 3,875 5,277 7,531 8,263 7,531 8,263 12 26 12 26 (90) (27) (90) (27) 18 3 18 3 426 518 426 518 501 680 501 680 838 761 838 761
	9,236 10,224 9,236 10,224
	343 423 343 423
	343 423 343 423
	1,947 1,968 1,947 1,968
	15,544 17,982 15,401 17,892
	(167) 533 - -
	5 221 - -
	416 594 - -

(1) Impairment – loans and advances

An allowance for impairment is maintained against the mortgage loan receivables within the RMT Special Purpose Vehicles. In the current financial year, an impairment loss of $167,000 has been recognised which represents amounts written off during the year. In the 2011 financial year, an impairment gain of $533,000 was recognised and was measured as the difference between the carrying amount of the loan and the value of expected future cash flows, adjusted for insurance recoveries. Refer to Note 13 for further disclosure on allowance for impairment (loss)/gain.

(2) Gain on derivative financial liability classified as held for trading is included under Note (d) ‘Interest expense’.

(3) Gain on loans and advances recognised at amortised cost

The gain of $416,000 (2011: $594,000) in loans and advances recognised at amortised cost reflects a re-estimation of cash flows to be generated from the loans within the RMT SPV’s using the original effective interest rate.

Homeloans Limited-Annual Report

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 (CONTINUED)

Note 5: INCOME TAX

	CONSOLIDATED HOMELOANS LIMITED 2012 $’000 2011 $’000 2012 $’000 2011 $’000	CONSOLIDATED HOMELOANS LIMITED 2012 $’000 2011 $’000 2012 $’000 2011 $’000
The major components of income tax expense are: Statement of Comprehensive Income Current income tax Current income tax charge Adjustments in respect of current income tax of previous years Benefits received from changes to the tax consolidation regime Benefits received from previous unrecognised capital loss Deferred income tax Relating to origination and reversal of temporary differences Income tax expenses reported in the Statement of Comprehensive Income A reconciliation between tax expense and the product of accounting profit before income tax multiplied by the Group’s applicable income tax rate is as follows: Accounting profit before income tax At the Group’s statutory income tax rate of 30% (2011: 30%) Entertainment expenses Difference in prior year tax (paid during the year) Benefits received from capital loss Other Fully franked dividend received from subsidiary Benefit received from changes to the tax consolidation regime Income tax expense reported in the consolidated Statement of Comprehensive Income
	2,304 2,881 80 163

	19 24 20 34


	- (670) - (670)


	(82) - (82) -


	1,189 980 1,310 835

	3,430 3,215 1,328 362



	11,540 12,377 9,624 8,415


	3,462 3,713 2,887 2,524

	9 11 9 11
	19 24 20 34
	(82) - (82) -
	22 137 (6) 113
	- - (1,500) (1,650)

	- (670) - (670)


	3,430 3,215 1,328 362

Homeloans Limited-Annual Report

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 (CONTINUED)

	Statement of Financial Position Statement of Comprehensive Income 2012 $’000 2011 $’000 2012 $’000 2011 $’000	Statement of Financial Position Statement of Comprehensive Income 2012 $’000 2011 $’000 2012 $’000 2011 $’000
Deferred tax income Deferred income tax at 30 June related to the following: CONSOLIDATED Deferred tax liabilities Effective interest adjustments on loans and advances (120) (170) (50) (70) Lease incentives - - - (13) Leased assets - - - (13) Accrued income (65) (40) 25 (28) Trailing commissions receivable (13,904) (11,169) 1,123 865 Deferred income tax liabilities (14,089) (11,379) Deferred tax assets Losses available for offset against future taxable income 263 517 254 225 Capital loss benefit recognised 82 - (82) - Accrued expenses 190 238 48 362 Effective interest adjustments on loans and advances 32 40 8 12 Allowance for impairment losses–loans and advances to customers 614 633 19 318 Derivative instrument 60 62 2 66 Lease incentives 29 53 25 24 Provisions 292 290 (2) 7 Capital items 45 72 27 (37) Trailing commissions payable 5,689 4,381 (537) (409) Benefit received from changes to the tax consolidation regime - 329 329 (329) Deferred income tax assets 7,296 6,615 Net deferred income tax liabilities (6,793) (4,764) Deferred tax expense 1,189 980 Reconciliation of net deferred tax liabilities: 2012 $’000 2011 $’000 Opening balance as of 1 July (4,764) (3,784) Tax income during the year recognised in profit or loss (1,189) (980) Deferred taxes acquired in business combinations (840) - Closing balance as at 30 June (6,793) (4,764)
	1,189 980 2012 $’000 2011 $’000 (4,764) (3,784) (1,189) (980) (840) - (6,793) (4,764)	1,189 980

Homeloans Limited-Annual Report

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 (CONTINUED)

	Statement of Financial Position Statement of Comprehensive Income 2012 $’000 2011 $’000 2012 $’000 2011 $’000	Statement of Financial Position Statement of Comprehensive Income 2012 $’000 2011 $’000 2012 $’000 2011 $’000
PARENT Deferred tax liabilities NPV future trailing commissions receivable Lease incentives Leased assets Accrued income Deferred income tax liabilities Deferred tax assets Losses available for offset against future profits Capital loss benefit recognised NPV future trailing commissions payable Accrued expenses Lease incentives Provisions Capital items Benefit received from changes to the tax consolidation regime Deferred income tax assets Net deferred income tax liabilities Deferred tax expense Reconciliation of net deferred tax liabilities: Opening balance as of 1 July Tax income during the year recognised in profit or loss Deferred taxes acquired in business combinations Closing balance as at 30 June	(10,251) (7,818) 821 797 - - - (13) - - - (13) (65) (40) 25 (28) (10,316) (7,858) 263 517 254 225 82 - (82) - 2,959 2,052 (136) (154) 190 237 47 357 29 53 25 24 1,802 1,802 - 7 45 72 27 (38) - 329 329 (329) 5,370 5,062 (4,946) (2,796)




	1,310 835 2012 $’000 2011 $’000 (2,796) (1,961) (1,310) (835) (840) - (4,946) (2,796)	1,310 835

Tax consolidation

Effective 1 July 2003, for the purposes of income taxation, Homeloans Limited and its 100% owned subsidiaries formed a tax consolidated group. The members of the Group have entered into a tax sharing arrangement in order to allocate income tax expense to the wholly-owned subsidiaries on a pro-rata basis. The agreement provides for the allocation of income tax liabilities between the entities should the head entity default on its tax payment obligations. The head entity of the tax consolidated group is Homeloans Limited. No amounts have been recognised in the financial statements in respect of this agreement on the basis that the possibility of default is remote.

Tax effect accounting by members of the tax consolidated group

The head entity and the controlled entities in the tax consolidated group continue to account for their own current and deferred tax amounts. The Group has applied the group allocation approach in determining the appropriate amount of current taxes and deferred taxes to allocate to members of the tax consolidated group. The current and deferred tax amounts are measured in a systematic manner that is consistent with the broad principles in AASB 112 Income Taxes. The nature of the tax funding agreement is set out below.

Homeloans Limited-Annual Report

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 (CONTINUED)

In addition to its own current and deferred tax amounts, the head entity also recognises 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.

Nature of the tax funding agreement

Members of the Group have entered into a tax funding agreement. Under the funding agreement the allocation of tax within the Group is based on a group allocation. The tax funding agreement requires payments to/from the head entity to be recognised via an inter-entity receivable (payable) which is at call.

The allocation of taxes under the tax funding agreement is recognised as an increase or decrease in the subsidiaries’ intercompany accounts with the tax consolidated group head company, Homeloans Limited. The amounts receivable or payable under the tax funding agreement are due upon receipt of the funding advice from the head entity, which is issued as soon as practical after the end of each financial year.

Tax consolidation contributions/distribution

Homeloans has recognised the following amounts as tax consolidation adjustments:

	CONSOLIDATED 2012 2011 $’000 $’000 2,223 2,718 2,223 2,718
Total increase to tax payable to Homeloans Limited from subsidiaries Total increase to intercompany assets of Homeloans Limited

Note 6: EARNINGS PER SHARE

Basic earnings per share amounts are calculated by dividing net profit for the year attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year.

Diluted earnings per share amounts are calculated by dividing the net profit attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on the conversion of all the dilutive potential ordinary options into ordinary shares.

The following reflects the income and share data used in the basic and diluted earnings per share computations:

	CONSOLIDATED Year ended Year ended 30 June 2012 30 June 2011 $’000 $’000
Net profit attributable to ordinary equity holders of the parent Net profit attributable to ordinary equity holders used in the calculation of basic and diluted EPS	8,110 9,162
	8,110 9,162

Weighted average number of ordinary shares (excluding reserved shares) for basic and diluted earnings per share Effect of dilution: Share options Weighted average number of ordinary shares adjusted for the effect of dilution used in calculation of diluted EPS	No. of shares 30 June 2012 No. of shares 30 June 2011 105,778,058 102,244,033 - 90,774
	105,778,058 102,334,807

There were no options outstanding at 30 June 2012.

During the period between the reporting date and the date of completion of the financial statements, no shares have been issued as a result of options being exercised. There have been no other transactions involving ordinary shares or potential ordinary shares that would significantly change the number of ordinary shares or potential ordinary shares outstanding between the reporting date and the date of completion of these financial statements.

Homeloans Limited-Annual Report

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 (CONTINUED)

Note 7: DIVIDENDS PAID AND PROPOSED

CONSOLIDATED HOMELOANS LIMITED 2012 $’000 2011 $’000 2012 $’000 2011 $’000	CONSOLIDATED HOMELOANS LIMITED 2012 $’000 2011 $’000 2012 $’000 2011 $’000
Declared and paid during the year: Franked dividends: Fully franked final dividend on ordinary shares for 2011 - 3.5 cents per share (2010: 3.5 cents) 3,628 3,566 3,628 3,566 Fully franked interim dividend on ordinary shares for 2012 - 2.5 cents per share (2011: 2.5 cents) 2,660 2,550 2,660 2,550 6,288 6,116 6,288 6,116 Proposed and not recognised Dividends on ordinary shares: Final franked dividend for 2012–3.5 cents (2011: 3.5 cents) 3,733 3,629 3,733 3,629
	6,288 6,116 6,288 6,116
	3,733 3,629 3,733 3,629
Final franked dividend for 2012–3.5 cents (2011: 3.5
cents)

Franking credit balance

	HOMELOANS LIMITED 2012 $’000 2011 $’000
The amount of the franking credits available for the subsequent financial year are: Franking account balance as at the end of the financial year at 30% (2011: 30%) Franking credits that will arise from the payment of income tax payable as at the end of the financial year The amount of franking credits available for future reporting periods: Impact on the franking account of dividends proposed or declared before the financial report was authorised for issue but not recognised as a distribution to equity holders during the period The tax rate at which dividends have been franked is 30% (2011: 30%)	2,631 3,369 487 296
	3,118 3,665 (1,600) (1,557)
	1,518 2,108

Homeloans Limited-Annual Report

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 (CONTINUED)

Note 8: CASH AND CASH EQUIVALENTS

	CONSOLIDATED	CONSOLIDATED	HOMELOANS	HOMELOANS
			LIMITED
	2012	2011	2012	2011
	$’000	$’000	$’000	$’000
Reconciliation to Statement of Cash Flows
For the purposes of the Statement of Cash Flows, cash
and cash equivalents comprise the following at 30
June:
Cash at bank and in hand	8,620	7,776	8,537	7,650
RMT Cash Collections Account(1)	9,751	11,010	-	-
Restricted Cash(2)	1,713	2,174	-	-
	20,084	20,960	8,537	7,650

Cash at bank earns interest at floating rates based on daily bank deposit rates and has a term less than 3 months. The carrying amount of cash and cash equivalents represents fair value.

(1) RMT cash collections account includes monies held in the RMT Special Purpose Vehicles (SPV’s) on behalf of investors in those trusts and is not available to Homeloans Limited.

(2) Cash held in trust as collateral for the borrowing facilities with Westpac Banking Corporation (“WBC”).

	CONSOLIDATED HOMELOANS LIMITED 2012 $’000 2011 $’000 2012 $’000 2011 $’000
Reconciliation of net profit after tax to net cash flows from operating activities Net profit after tax Adjustments for: Impairment loss/(gain) Depreciation Dividends received from associate Share of profit in associate–net of tax Changes in assets and liabilities: Decrease/(increase) in receivables Decrease in derivative financial liabilities/assets Movement in impairment provision Decrease in due to borrowers Decrease in due to bondholders Decrease in due to warehouse facility Increase in deferred tax liabilities (Increase)/decrease in current tax liability Increase in trade and other payables (Decrease) /increase in provisions Net cash from operating activities
	8,110 9,162 8,296 8,053

	167 (533) - -
	343 423 343 423
	186 65 186 65
	(217) (127) (217) (127)

	(2,583) 1,147 (2,605) 3,034
	(5) (220) - -

	(398) 17 - -
	82,010 119,675 - -

	(16,201) (41,210) - -

	(65,333) (81,380) - -

	1,189 980 1,310 835

	191 (1,412) 191 (1,412)
	(1,009) (2,204) (286) (3,550)

	98 (231) 98 (231)

	6,548 4,152 7,316 7,090

Disclosure of financing facilities

Refer to note 20.

Disclosure of non-cash financing and investing activities There were no non-cash financing activities.

Homeloans Limited-Annual Report

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 (CONTINUED)

Note 9: RECEIVABLES

	CONSOLIDATED HOMELOANS LIMITED 2012 $’000 2011 $’000 2012 $’000 2011 $’000
Fees receivables Non-related parties(1) Related parties(2) - wholly owned controlled entity Accrued interest(3) Prepayments(4) Last days collections receivable(5) Other	2,648 2,399 1,905 1,679 - - 14,110 14,484
	2,648 2,399 16,015 16,163
	810 1,144 - - 470 514 350 334 375 1,399 - - 28 45 32 40
	4,331 5,501 16,397 16,537

Terms and conditions relating to the above financial instruments

(1) Fees receivable are non-interest-bearing and on settlement terms of between 4 to 60 days

(2) Details of the terms and conditions of related party receivables are set out in note 28. No impairment was recognised in the current or prior financial year. The balance is considered fully collectible.

(3) Accrued interest is due within 30 days.

(4) Prepayments are non-interest-bearing and due in the ordinary course of business between 30 days and 12 months.

(5) Last days collections receivable represents amounts received within the RMT SPV’s on the last day of the reporting period and not cleared in the bank until the first day of the next financial period.

Except for the related party receivables, other balances are neither past due nor impaired. The amount is considered fully collectible. Refer to note 26 for fair value.

Note 10: NON-CURRENT ASSET HELD FOR SALE

Non-Current Asset Held for Sale

Non-Current Asset Held for Sale
Non-Current Asset held for sale(1)	CONSOLIDATED HOMELOANS LIMITED 2012 $’000 2011 $’000 2012 $’000 2011 $’000 383 - 329 -
	383 - 329 -

(1) The Group’s 26.5% (2011: 26.5%) interest in National Mortgage Brokers Pty Ltd (“nMB”) was reclassified as a non-current asset held for sale at 30 June 2012. A sale agreement was executed on 18th July 2012.

Homeloans Limited-Annual Report

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 (CONTINUED)

Note 11: INVESTMENT IN AN ASSOCIATE

Investment in National Mortgage Brokers Pty Limited(1) Carrying amount at the beginning of the year Share of associates net profit after tax Dividends received by the Group Carrying amount of the investment Investment reclassed as non-current asset held for sale(1)	CONSOLIDATED HOMELOANS LIMITED 2012 $’000 2011 $’000 2012 $’000 2011 $’000 - 351 - 297
	- 351 - 297
	351 289 297 235 218 127 218 127 (186) (65) (186) (65)
	383 351 329 297 (383) - (329) -
	- 351 - 297

(1) The Group’s 26.5% (2011: 26.5%) interest in National Mortgage Brokers Pty Limited (“nMB”) was disposed of on 18th July 2012.See Note 10.

Note 12: BUSINESS COMBINATION

On 8[th] June 2012, the Group acquired the rights to the loan book and copies of all records of the business of Refund Home Loans Pty Ltd (Administrator Appointed) (“Refund”) for a total cash consideration of $2,950,000. The acquisition presents a strong opportunity for the Group to expand its distribution footprint and brand presence through the network of Refund’s loan writers who have entered into agreements to become Homeloans-branded brokers.

As the acquisition was made close to year end, the Group has left the acquisition accounting open pending further adjustment to the fair values of net assets acquired. The initial accounting for the combination will be finalised within the next financial year. The provisional fair value of the identifiable assets and liabilities of Refund as at the date of acquisition were detailed as follows:

Other financial assets - trailing commissions receivable Other financial liabilities - trailing commissions payable Deferred tax liability Fair value of identifiable net assets acquired Goodwill	Recognised on acquisition $000 5,373 (2,572) (840) 1,961
Provisional Goodwill was recognised as a result of the acquisition as follows: Purchase consideration transferred Fair value of identifiable net assets acquired Provisional Goodwill arising on acquisition	$’000 2,950 (1,961) 989

Homeloans Limited-Annual Report

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 (CONTINUED)

From the date of acquisition the contribution of Refund to the revenue and net profit before tax of the group was not material given the timing of the acquisition was so near to year end. It is not possible to quantify the impact that the acquisition of the business from Refund would have had on the consolidated statement of comprehensive income had it occurred at the beginning of the reporting period as Refund was under administration during this period and separate books and records were not available.

The goodwill arising on consolidation is attributable to various factors including the value of synergies and the assembled sales force.

In a separate transaction, certain Refund loan writers entered into broker agreements with Homeloans. Under the terms of these agreements, brokers are entitled to contingent payments due and payable by 31 January 2013 and 31 January 2014, upon the achievement of specified volume targets. These contingent payments have not been included in the cost of the business combination as management has assessed that the payments are of the nature of a future volume bonus and therefore do not form part of the acquisition costs.

Acquisition-related costs

Acquisition costs of $292,000 related to external success fees and legal and other administration fees included under Operating expenses in the Statement of Comprehensive Income.

Note 13: LOANS AND ADVANCES TO CUSTOMERS

	CONSOLIDATED HOMELOANS LIMITED 2012 $’000 2011 $’000 2012 $’000 2011 $’000
Gross loans and advances to customers Less: Allowance for impairment loss	290,847 372,690 - - (2,047) (2,111) - -
	288,800 370,579 - -

Loans and advances to customers represent lending for residential mortgages at either fixed or floating rates. In the table below, calculations of expected principal receipts on mortgage loans have been derived using prepayment assumptions based on actual experience.

Expected maturity analysis Less than 1 year 1–2 years 2–3 years 3–4 years 4 - 5 years > 5 years Total	Consolidated Parent 2012 2011 2012 2011 $’000 $’000 $’000 $’000 78,589 110,767 - - 57,261 77,266 - - 41,742 54,101 - - 30,443 38,013 - - 22,213 26,793 - - 60,599 65,750 - -
	290,847 372,690 - -

Homeloans Limited-Annual Report

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 (CONTINUED)

Impairment allowance for loans and advances to customers

A reconciliation of the allowance account for impairment losses on loans and advances is as follows;

	CONSOLIDATED HOMELOANS LIMITED 2012 $’000 2011 $’000 2012 $’000 2011 $’000
Allowance for impairment loss - opening Increased/(decreased) impairment charges Amounts written off Allowance for impairment loss - closing Collective allowance Specific allowance	2,111 3,170 - - 167 (533) - - (231) (526) - -
	2,047 2,111 - -
	685 1,095 - - 1,362 1,016 - -
	2,047 2,111 - -

An allowance for impairment is maintained against the mortgage loan receivables within the RMT Special Purpose Vehicles. The allowance for impairment loss is measured as the difference between the carrying amount of the loan and the value of expected future cash flows, adjusted for insurance recoveries.

The following table provides analysis of the balance of loans that are past due but not considered impaired:

Loans past due but not impaired 1 - 3 months 3 - 6 months > 6 months Total	Consolidated Parent 2012 2011 2012 2011 $’000 $’000 $’000 $’000 3,842 3,544 - - 1,265 2,505 - - 957 2,829 - -
	6,064 8,878 - -

Payment terms of these loans have not been re-negotiated however credit has been stopped until payment is made. The Company has been in direct contact with relevant borrowers. It should be noted that all RMT loans are secured by a first ranking mortgage over the residential property and are covered 100% by Lenders Mortgage Insurance (LMI). Expected recoverable amounts are adjusted to reflect lower than 100% LMI recovery due to operational risks and are also reduced by the amount of higher rate (penalty) interest and fees related to loans in arrears which are not covered by LMI.

Loans with payments outstanding less than one month are more likely to be of a one off nature and are generally – rectified by the borrower within a short period of time i.e. within the same month. Loans in this category are less likely to be representative of loans with underlying repayment problems.

The following table summarises loans past due and impaired. The impairment loss, which has been determined based on an individual assessment of impaired loans, represents the carrying amount of the loans net of the value of future cash flows, adjusted for insurance recoveries (referred to in the table as “Expected recoverable amount”). The assessment of expected future cash flows includes such considerations as the specific circumstances of the borrower, the realisable value of security and expected insurance recoveries.

Loans past due and impaired Carrying amount of impaired loans Less: Expected recoverable amount Impairment loss	Consolidated Parent 2012 2011 2012 2011 $’000 $’000 $’000 $’000 2,421 1,616 - - (1,059) (600) - -
	1,362 1,016 - -

Refer to note 26 for fair value disclosure for loans and advances to customers.

Homeloans Limited-Annual Report

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 (CONTINUED)

Collateral repossessed

As at 30 June 2012 the Group had 2 repossessed residential properties in possession being the security for RMT loans. The Group intends to sell these properties with the proceeds to go towards clearing the outstanding balance of the underlying RMT loans.The combined loan balance of the properties is $412,901 and the estimated value of the properties is between $500,000 and $600,000.

Note 14: OTHER FINANCIAL ASSETS

Future trailing commissions receivable(1) - Current - Non-current	CONSOLIDATED 2012 2011 $’000 $’000 HOMELOANS LIMITED 2012 2011 $’000$’000 18,713 15,298 14,677 11,293 27,632 21,914 19,491 14,751 46,345 37,212 34,168 26,044

Terms and conditions relating to the above financial instruments:

(1) Fair value of future trailing commission receivable is recognised on the origination of managed and non-managed mortgage loans at inception. This represents the net present value of the expected future trailing income receivable under the origination and management agreement, less ongoing servicing costs not covered by transaction fees. Subsequent to initial recognition and measurement, the future trailing commission receivable is measured at amortised cost. Assumptions used in the assessment of the fair value are disclosed under note 2 (dd).

Note 15: PLANT AND EQUIPMENT

	CONSOLIDATED	HOMELOANS
		LIMITED
	Plant and equipment	Plant and equipment
	$’000	$’000
Year ended 30 June 2012
At 1 July 2011, net of accumulated depreciation and
impairment	887	887
Additions	182	182
Depreciation charge for the year	(343)	(343)
At 30 June 2012, net of accumulated depreciation and
impairment	726	726
At 30 June 2012
Cost	6,520	6,520
Accumulated depreciation and impairment	(5,794)	(5,794)
Net carrying amount	726	726
Year ended 30 June 2011
At 1 July 2010, net of accumulated depreciation and
impairment	1,011	1,011
Additions	299	299
Depreciation charge for the year	(423)	(423)
At 30 June 2011, net of accumulated depreciation and
impairment	887	887
At 30 June 2011
Cost	6,338	6,338
Accumulated depreciation and impairment	(5,451)	(5,451)
Net carrying amount	887	887

Homeloans Limited-Annual Report

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 (CONTINUED)

Note 16: INVESTMENT IN CONTROLLED ENTITIES

	CONSOLIDATED HOMELOANS LIMITED 2012 $’000 2011 $’000 2012 $’000 2011 $’000
Investment at cost in controlled entities (Note 28) Impairment allowance	- - 21,331 21,331 - - (12,996) (12,996
	- - 8,335 8,335

Note 17: GOODWILL

Note 17: GOODWILL
	CONSOLIDATED HOMELOANS LIMITED $’000 $’000
Year ended 30 June 2012 At 1 July 2011, net of impairment Add: Goodwill arising on the acquisition of Refund (Refer to Note 12) At 30 June 2012, net of impairment At 30 June 2012 Cost (gross carrying amount) Less: Impairment loss Net carrying amount Year ended 30 June 2011 At 1 July 2010, net of impairment At 30 June 2011, net of impairment At 30 June 2011 Cost (gross carrying amount) Less: Impairment loss Net carrying amount	12,565 - 989 -
	13,554 -
	29,931 - (16,377) -
	13,554 -
	12,565 -
	12,565 -
	28,942 - (16,377) -
	12,565 -

Goodwill acquired through business combinations has been allocated to two individual cash generating units, which are reportable segments, for impairment testing as follows:

Origination and Management
Securitisation of Mortgages

Origination and Management

The recoverable amount of the Origination and Management Cash Generating Unit has been determined based on a value in use calculation. To calculate this, cash flow projections are based on financial budgets, approved by senior management covering a period of ten years. The ten year period has been used as it provides a better indication of business performance given the market in which the segment operates and is supported by historical mortgage market growth. The business’ financial budgets and forecasts are also modeled from 10 year forecasts.

Homeloans Limited-Annual Report

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 (CONTINUED)

The assumed growth rate in settled loans over the period covered by the forecast is on average 10% (2011: 8%). The projected growth rate used reflects long term market averages as well as the business’ projections of its own expected performance. Loan repayment rates range from 12% to 32% depending on types of loans and lenders (2011: 14% to 30%) and are based on actual experience. A terminal value of 8 times (2011: 8 times) was used for cash flows beyond 10 years reflecting industry averages.

The discount rate applied to cash flow projections is 12.5% (2011:12.5%) and is based on average discount rates for comparable businesses in the industry.

Securitisation of Mortgages

The total amount of goodwill allocated to the Securitisation of Mortgages Cash Generating Unit was written down to zero as at 30 June 2012.

Carrying amount of goodwill allocated to each of the cash generating units

CONSOLIDATED Carrying amount of goodwill	Origination and Management Securitisation of Mortgages Total 2012 2011 2012 2011 2012 2011 $’000 $’000 $’000 $’000 $’000 $’000
	13,554 12,565 - - 13,554 12,565

Key assumptions used in the value in use calculation for the Origination and Management Cash Generating Unit (“CGU”) for 30 June 2012 and 30 June 2011

The following describes each key assumption other than those described above on which management has based its cash flow projections when determining the value in use of the Origination and Management CGU:

Inflation – constant 3% per annum (2011: 3%) based on long-term expectations on inflation and is reviewed annually for changes in the market environment.
Securitisation of Mortgages CGU pays to the Origination and Management CGU a management fee representing services provided by the latter to the Securitisation of Mortgages CGU. The management fee represents a portion of the total costs incurred by the Origination and Management CGU in undertaking certain relevant tasks and is calculated on a proportionate basis linked to origination activity and loan portfolio balances.
A degree of reduction in the level of commission rates earned and paid as a result of market and competition driven influences.

Sensitivity to changes in assumptions

Origination and Management

With regard to the assessment of the value in use of the Origination and Management CGU, the most sensitive assumption used in the cash flow projections is the assumed growth rate in settled loans over the forecast period. Given the recoverable amount of this unit at reporting date is considerably greater than its written down carrying value, management believes that reasonably possible changes in the key assumptions, such as a reduction in the average growth rate from 10% to 8% would not cause the recoverable amount of the unit to fall short of its carrying value.

Note 18: SHARE-BASED PAYMENT PLANS

Employee Share Option Plan

An employee option plan exists where eligible employees of the Group, as determined by the directors, are issued with options over the ordinary shares of Homeloans Limited. The options, issued for nil consideration, are issued in accordance with the guidelines established by the directors of Homeloans Limited. The options issued carry various terms and exercising conditions. There are currently no members of this plan as all options have been fully exercised as at 30 June 2012.

Homeloans Limited-Annual Report

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 (CONTINUED)

Information with respect to the number of options granted under the employee option scheme and options issued to directors, employees, and business partners are as follows:

	2012 2011 Number of options Weighted average exercise price $ Number of options Weighted average exercise price $
Outstanding at the beginning of the year Expired during the year Exercised during the year Outstanding at the end of the year Exercisable at the end of the year	125,000 0.21 1,177,500 0.50 (25,000) 0.21 - - (100,000) 0.21 (1,052,500) 0.46
	- - 125,000 0.21 - - 125,000 0.21

Options held at the beginning of the reporting period:

The following table summarises information about options held by employees and other related parties as at 30 June 2011:

2011:
Number of options	Grant date	Vesting date	Expiry date	Weighted	Weighted
				average	average
				exercise price	share price (1)
				$	$
62,500	15 February 2007	29 December 2008	29 December 2011	0.21	0.64
62,500	15 February 2007	29 December 2009	29 December 2011	0.21	0.64
125,000				0.21	0.64

(1) Average share price on the date of grant.

Options granted:

No options were granted by Homeloans Limited during the year ended 30 June 2012 (2011: nil).

Options exercised:

The following table summarises information about options exercised by option holders during the year:

Date 30 June 2012 30 June 2011	Number of options 100,000 1,052,500	Range of exercise price $ 0.21 0.21 - 0.56	Weighted average share price at grant $ 0.64 0.51	Weighted average share price at exercise $
				0.59 0.89

Options held as at the end of the year:

There were no options held by employees or any other related parties as at 30 June 2012.

Homeloans Limited-Annual Report

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 (CONTINUED)

Note 19: PAYABLES

	CONSOLIDATED HOMELOANS LIMITED 2012 $’000 2011 $’000 2012 $’000 2011 $’000
Trade payables(1) Payable to related parties: - controlled entity(2) Accrued commissions(3) Sundry creditors and accruals(4) Current income tax payable Interest payable(5)	434 542 438 546 - - 11,916 11,916 523 478 523 478 1,697 2,258 1,153 1,744 487 296 487 296 756 2,863 - -
	3,897 6,437 14,517 14,980

Terms and conditions relating to the above financial instruments:

(1) Trade payables are non-interest bearing and are normally settled on 30 day terms.

(2) Details of the terms and conditions of related party payables are set out in note 28.

(3) Accrued commissions are non-interest bearing and are payable between 30 and 90 days.

(4) Sundry creditors and accruals are non-interest bearing are normally settled on 30 day terms.

(5) Interest payable is non-interest bearing and is payable within 30 days.

Refer to note 26 for fair value disclosure.

Note 20: INTEREST-BEARING LIABILITIES

		CONSOLIDATED	CONSOLIDATED	HOMELOANS	HOMELOANS
				LIMITED
		2012	2011	2012	2011
	Maturity	$’000	$’000	$’000	$’000
Bank loans
Bank Overdraft(1)		-	-	-	-
Warehouse facility(2)	30/06/2013	244,040	309,373	-	-
Non-bank loans
Bonds(3)	2037	54,180	70,381	-	-
Loans from funders(4)	2012 - 2017	3,622	3,254	3,620	3,249
		301,842	383,008	3,620	3,249

Terms and conditions relating to the above financial instruments:

(1) The Company has a bank overdraft of $900,000 which is not utilised at year end. The bank overdraft is repayable on demand. Interest is charged at the bank’s floating rate. The overdraft is secured by way of registered first mortgages over all assets and undertakings of the Company and its controlled entities

(2) The warehouse facility incurs interest at the bank bill rate plus a margin. The facility is secured by the assets of the warehouse trust. Interest is recognised at an effective rate 5.88% (2011: 6.21%). All loans funded by the RMT program are secured by a first ranking mortgage over a residential property and are 100% mortgage insured. The mortgage insurers must be rated at least A+ by Standard & Poor’s and A1 by Moody’s. The RMT Warehouse facility is a rolling 12 month facility provided by Westpac Banking Corporation (“WBC”). WBC also act as the Liquidity, Redraw and Interest Rate Swap Provider to all RMT trusts. FAI First Mortgage Pty Ltd (“FAIFM”) is the Trust Manager and Servicer to all RMT trusts. FAIFM outsource these services to Bendigo and Adelaide Bank Limited who, in their capacity as Trust Manager and Servicer, are rated “Strong” by Standard and Poor’s. Perpetual Trustees Limited is the Trustee to all RMT trusts.

Homeloans Limited-Annual Report

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 (CONTINUED)

The RMT warehouse has been extended for a further 12 months to 30 June 2013. The terms of the extension, which is effective from July 2012, includes an increase in the funding margin payable to the warehouse provider. The warehouse limit was reduced to $250,000,000 in April 2012 (the limit as at 30 June 2011 was $350,000,000). The RMT warehouse facility is supported by cash collateral reserves. The amount required to be held in cash collateral reserves is determined as the greater of: 50% of the balance of loans greater than 30 days past due over and above a threshold of 3.00%; and a floor of 0.70% of the total balance of loans in the Warehouse.

The warehouse terms continue to require the long term rating of the mortgage insurers in respect of the loans in the warehouse to be at least A+ by Standard & Poor’s and A1 by Moody’s. In the event the ratings are downgraded below these levels, the Company has a reasonable period of time to agree a satisfactory arrangement with the warehouse provider.

(3) Residential Mortgage Backed Securities with a legal final maturity of 32 years from issue, and an expected maturity of at least 5 years. Interest is recognised at an effective rate 4.65% (2011: 4.98%).
(4) Some of the funders used by the company and its controlled entities provide payment of an upfront commission at the point of origination of a mortgage loan. A portion of this upfront commission is then paid back via reduced ongoing management fees over a period of 5 years. Interest is also charged on this facility. The company recognises the upfront commission from these funders as a loan. The principal and interest will be paid back over the 5 year period. Interest is recognised at an effective rate of 6.47% (2011: 6.13%)

Fair value disclosures

Details of the fair value of the Group’s interest bearing liabilities are set out in note 26.

Financing facilities available

At reporting date, the following financing facilities had been negotiated and were available:

	CONSOLIDATED HOMELOANS LIMITED 2012 2011 2012 2011 $’000 $’000 $’000 $’000
Total Facilities - bank overdraft - RMT warehouse facility (refer note 20(2))	900 900 900 900 250,000 350,000 - -
	250,900 350,900 900 900

Facilities used at reporting date - bank overdraft - RMT warehouse facility (refer note 20(2)) Facilities unused at reporting date - bank overdraft - RMT warehouse facility (refer note 20(2))	- - - - 244,040 309,373 - -
	244,040 309,373 - -
	900 900 900 900 5,960 40,627 - -
	6,860 41,527 900 900

Homeloans Limited-Annual Report

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 (CONTINUED)

Assets pledged as security

The carrying amounts of assets pledged as security for interest bearing liabilities are:

	CONSOLIDATED HOMELOANS LIMITED 2012 2011 2012 2011 $’000 $’000 $’000 $’000
ASSETS First mortgage Loans and advances to customers Floating charge Cash assets Receivables Total assets pledged as security	290,552 372,256 - - 11,464 13,184 - - 1,185 2,543 - -
	303,201 387,983 - -

Note 21: OTHER FINANCIAL LIABILITIES

Note 21: OTHER FINANCIAL LIABILITIES
	CONSOLIDATED HOMELOANS LIMITED 2012 $’000 2011 $’000 2012 $’000 2011 $’000
Future trailing commissions payable(1) - Current - Non-current	7,313 6,124 4,261 2,990 11,653 8,464 5,590 3,835
	18,966 14,588 9,851 6,825

[Terms and conditions relating to the above financial instruments: ]

(1) The fair value of future trailing commission payable is recognised on the origination of managed and non-managed mortgage loans. This represents the net present value of the expected future trailing commissions payable to introducers associated with the origination of the loan. Subsequent to initial recognition and measurement, the trailing commission payable is measured at amortised cost. Assumptions used in the assessment of the fair value are disclosed under note 2 (dd). Refer to note 26 for fair value disclosure.

Note 22: LEASE INCENTIVES

	CONSOLIDATED	CONSOLIDATED	HOMELOANS	HOMELOANS
			LIMITED
	2012	2011	2012	2011
	$’000	$’000	$’000	$’000
Lease incentives(1)	95	176	95	176

Terms and conditions relating to the lease incentive:

(1) Net rental incentives were received in the form of an upfront cash incentive and rent-free periods by the Group for entering into a non-cancellable operating lease for premises occupied by the parent entity. This was entered into in September 2003 in respect of the Head Office of the parent entity.

The lease term for the Head Office premises is 10 years. The value of these incentives has been deferred and amortised against occupancy costs over the lease term.

Homeloans Limited-Annual Report

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 (CONTINUED)

Note 23: PROVISIONS

Note 23: PROVISIONS
	CONSOLIDATED HOMELOANS LIMITED 2012 $’000 2011 $’000 2012 $’000 2011 $’000
Long service leave	507 409 507 409
	507 409 507 409

Note 24: DERIVATIVE FINANCIAL LIABILITY

	CONSOLIDATED	CONSOLIDATED	HOMELOANS	HOMELOANS
			LIMITED
	2012	2011	2012	2011
	$’000	$’000	$’000	$’000
Derivative financial liability classified as held for trading(1)	201	206	-	-

(1) The Group uses interest rate swaps for interest risk management purposes. Some of the loans and advances within the RMT SPV’s have fixed interest rates. In order to protect against rising interest rates, the Group has entered into fixed interest swap contracts under which it has right to receive interest at a variable rate and to pay interest at fixed rates. The swaps are used as an effective alternative to physical assets in order to achieve a desired level of total exposure and as a means to manage interest rate risk.

The Group uses various methods in estimating the fair value of a financial instrument. The methods comprise:

Level 1 — the fair value is calculated using quoted prices in active markets.

Level 2 — the fair value is estimated using inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices).

Level 3 — the fair value is estimated using inputs for the asset or liability that are not based on observable market data.

The derivative financial liabilities are the only financial instruments carried at fair value and are classified as Level 2 in the fair value hierarchy. There were no transfers between Level 1 and Level 2 during the year.

The table below sets out the effective exposure values of the derivatives underlying assets, which provides an indication of the Group’s exposure to derivatives. The fair value of ($201,000) (2011: ($206,000)) gives no indication of the ultimate gain or loss that will occur upon settlement of the derivatives as that is dependent upon the applicable market interest rate at the time of settlement.

Notional principal Amount Less than 1 year 1–2 years 2–3 years 3–4 years 4–5 years Total	Consolidated Parent 2012 2011 2012 2011 $’000 $’000 $’000 $’000 8,572 4,602 - - 2,194 5,694 - - 916 457 - - 98 355 - - 60 98 - -
	11,840 11,206 - -

The Group does not apply hedge accounting. All derivatives are designated as financial instruments – held for trading. Total income recognised from the movement in fair value for the financial year is $5,000 (2011: income of $221,000).

Refer to note 26 for fair value disclosure.

Homeloans Limited-Annual Report

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 (CONTINUED)

Note 25: ISSUED CAPITAL AND RESERVES

Note 25: ISSUED CAPITAL AND RESERVES
	CONSOLIDATED HOMELOANS LIMITED 2012 2011 2012 2011 $’000 $’000 $’000 $’000
Ordinary shares issued and fully paid	66,114 64,481 66,114 64,481
	66,114 64,481 66,114 64,481

Effective 1 July 1998, the Corporations legislation in place abolished the concepts of authorised capital and par value shares. Accordingly, the Parent does not have authorised capital or par value in respect of its issued shares. Fully paid ordinary shares carry one vote per share and carry the right to dividends.

Terms and conditions of issued capital

Ordinary shares

Ordinary shares have the right to receive dividends as declared and, in the event of the winding up of the company, to participate in the proceeds from the sale of all surplus assets in proportion to the number of and amounts paid up on shares held.

Ordinary shares entitle their holder to one vote, either in person or by proxy, at a meeting of the company.

	CONSOLIDATED HOMELOANS LIMITED
	No of shares (’000’s) $’000 No of shares (’000’s) $’000

	103,788 64,481 103,788 64,481 2,989 1,751 2,989 1,751 100 21 100 21 (234) (139) (234) (139)

Share options

There were no options over ordinary shares granted during the financial year (2011: Nil). At the end of the year there were no unissued ordinary shares in respect of which options were outstanding (2011:125,000 options). For more information refer to Note 18.

100,000 shares were issued on options exercised during the year (See Note 18).

Dividend Reinvestment Plan

2,989,168 ordinary shares were issued on dividends reinvested as part of the Company’s Dividend Reinvestment Plan.

Share buybacks

234,175 shares were bought back during the year under the existing share buyback program.

Capital Management Plan

The Group’s capital comprises share capital, reserves less accumulated losses amounting to $41,922,000 at 30 June 2012 (2011: $38,467,000). The primary objectives of the Group’s capital management is to ensure that the Group continues as a going concern as well as to maintain optimal returns to shareholders and benefits for other stakeholders. Management also aims to maintain a capital structure that ensures the lowest costs of capital available to the Group.

Homeloans Limited-Annual Report

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 (CONTINUED)

The Group manages its capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of its activities. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue capital securities or perform share buybacks.

The Company is also subject to an externally imposed capital requirement by the Australian Securities & Investments Commission (ASIC). In accordance with Condition 4 of the Company’s Australian Financial Services Licence, it must (a) be able to pay all its debts as and when they become due and payable; (b) have total assets that exceed total liabilities; (c) have no reason to suspect that its total assets would not exceed its total liabilities; and (d) demonstrate, based on cashflow projections, that it will have access to sufficient financial resources to meet its short term liabilities. The Company complied with this requirement for both the year ended 30 June 2012 and the year ended 30 June 2011.

Accumulated losses

Movements in accumulated losses were as follows:

	CONSOLIDATED HOMELOANS LIMITED 2012 2011 2012 2011 $’000 $’000 $’000 $’000
Balance 1 July Net profit for the year Dividends Balance 30 June	(26,830) (29,876) (33,982) (35,919) 8,110 9,162 8,296 8,053 (6,288) (6,116) (6,288) (6,116)
	(25,008) (26,830) (31,974) (33,982)

Employee Option Reserve

Movements in the employee option reserve were as follows:

	CONSOLIDATED HOMELOANS LIMITED 2012 2011 2012 2011 $’000 $’000 $’000 $’000
Balance 1 July Charge for the period Balance 30 June	816 816 816 816 - - - -
	816 816 816 816

The employee option reserve recognises the fair value of options issued to employees and other related parties as remuneration. It applies to all share-based payments issued after 7 November 2002, which had not vested as at 1 January 2005. The option value is calculated using a Binomial model and expensed over the period in which the options vest. The value allocated to each option issue is determined, among other things, by reference to, the share price at the date of grant, the volatility of the share price, and current risk free interest rates.

Note 26: FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

The Group is exposed to financial risks through its financial assets and liabilities comprising cash and cash equivalents, loans and advances, receivables, payables, interest bearing liabilities and fixed to floating interest rate swaps, which arise directly from its operations. The main risks arising from the Group’s financial instruments are credit risk, liquidity risk, interest rate risk and prepayment risk. The Group manages these risks in accordance with its risk management policies. The objective of the policies is to support the delivery of the Group’s financial targets whilst protecting future financial security.

The Group uses different methods to measure and manage different types of risk to which it is exposed. These include monitoring levels of exposure to interest rate risk, prepayment risk and assessment of market forecasts for interest rates. Ageing analysis and monitoring of specific credit exposures are undertaken to manage credit risk. Liquidity is monitored through the development of future rolling cash flow forecasts.

The Board reviews the different types of risk the entity is exposed to including those related to commercial and legal, economic circumstance, natural events, regulations, technological and technical issues and risk related to

Homeloans Limited-Annual Report

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 (CONTINUED)

management activities. A number of possible treatment options are proposed by management and reviewed by the Board and an option is chosen to proceed with. A member of the senior management team is then made responsible for its implementation and a process is put in place to monitor and control the risk.

Credit risk exposures

Credit risk is the risk that the group will incur a loss because its customers, clients or counterparties failed to discharge their contractual obligations. The group has established lending policies and procedures to manage the credit risk inherent in lending. The dominant lending focus has been in the housing market where standard lending practice is that the borrowing facilities for each client is mortgaged secured against residential property and via lenders mortgage insurance. In addition, loan balances are monitored with the result that the Group’s exposure to bad debts is monitored and managed. Refer to note 13 for an ageing analysis of the loans.

The Group’s broker division trades with recognised, credit-worthy lending institutions in Australia. The Group’s approach to credit management utilises a credit risk framework to ensure that the following principals are adhered to:

Independence from risk originators;
Recognition of the different risks in the various Group businesses;
Credit exposures are systematically controlled and monitored;
Credit exposures are regularly reviewed in accordance with existing credit procedures; and
Credit exposures include such exposures arising from derivative transactions.

Each of the divisions is responsible for managing credit risks that arise in their own areas with oversight from a centralised credit risk management team. It is the policy of the Group to monitor the policies of all divisions to ensure that the risk of the Group is monitored.

The Group’s maximum exposure to credit risk at balance date in relation to each class of recognised financial asset is the carrying amount, net of any allowance for doubtful debts, of those assets as indicated in the Statement of Financial Position.

ASSETS Cash assets Receivables Loans and advances to customers(1) Other financial assets Total	CONSOLIDATED HOMELOANS LIMITED 2012 2011 2012 2011 $’000 $’000 $’000 $’000 20,084 20,960 8,537 7,650 4,331 5,501 16,397 16,537 288,800 370,579 - - 46,345 37,212 34,168 26,044
	359,560 434,252 59,102 50,231

(1) Please refer to Note 20 (2) for information relating to the RMT Warehouse.

Credit exposure by credit rating

The majority of the group cash assets, broking related receivable, future trailing commissions receivable and derivative financial assets are held with Australian banks with a S&P rating of at least “A” and above.

Loans and advances are for residential borrowers, who are not rated. All loans are individually mortgage insured by “AA- / A1” equivalent rated insurers.

Concentration of credit risk

The Group minimises concentrations of credit risk in relation to cash, broking related accounts receivable, future trailing commission payable and derivative financial assets by undertaking transactions with a number of investment grade lending institutions. Some agreements with lenders also contain provisions requiring the Group to pay installments due from borrowers until securities are enforced or an insurance claim has been paid and to purchase the mortgage from the lender if Homeloans Limited is in default. The Group’s risk in this area is mitigated by insurance policies and a rigorous credit assessment process.

The Group operates in the residential mortgage industry segment and is not materially exposed to any individual borrower.

Homeloans Limited-Annual Report

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 (CONTINUED)

Liquidity risk

Liquidity risk is the risk that the Group will be able to meet its payment obligations when they fall due under normal and stress circumstances. The Group manages its liquidity risk by maintaining sufficient cash and cash equivalents and credit facilities to meet its obligations as they fall due. Surplus funds are generally invested in at call bank accounts or instruments with maturities of less than 90 days. Within the RMT SPV’s, the Group also maintains sufficient cash reserves to fund redraws and additional advances on existing loans. As stated in note 20, the Group has unused warehouse facilities at the reporting date. However, given no new loans are being originated via this business segment, the unused facility is not required.

The Group’s Finance department monitors actual and forecast cash flows on a daily basis to ensure that sufficient cash resources and/or financing facilities are in place for the Group to meet its corporate debts and other payment obligations as and when they fall due. The Board receives a summary of actual monthly cashflow movements, together with rolling three month cashflow forecasts, each month. In addition, the Board receives periodic cashflow forecasts over medium and longer term horizons. This information is a key aspect of the Boards strategic planning process to ensure the Group maintains a desirable liquidity position going forward.

The Group’s mortgage loan balances are typically repayable over 25-30 years. In contrast, the Group borrows funds with differing maturity profiles:

Term Bonds payable

Term bonds payable are residential mortgage backed securities (RMBS) issued by the Group’s SPV’s. They are 32 year pass through securities that may be repaid early (i.e. at the call date) by the issuer in certain circumstances.

RMT warehouse facility

The RMT warehouse facility is a short term pass through funding facility (typically 12 months) that is renewable annually at the funder’s option.

Going forward, the group is reliant on the renewal/negotiation of the existing warehouse facility or the issuance of new residential mortgage backed securities in order to fund the existing mortgage loans in the RMT SPV. The Group’s warehouse facility has been extended for a further 12 months to 30 June 2013 and there continues to be regular discussions with the warehouse provider as to the future utilisation and maturity of the facility. Developments across the global economy in recent months have again created volatility and a degree of uncertainty within credit markets. It should be noted that the warehouse facility is structured so that in the highly unlikely event it is not renewed or otherwise defaults, there is only limited recourse to the Group. If the warehouse facility is not renewed or otherwise defaults and the related assets are liquidated, the primary impact for the Group would be the loss of future income streams from excess spread, being the difference between the Group’s mortgage rate and the cost of funds and fee income.

The directors are satisfied that in the event of either of these scenarios occurring, the Group’s ability to continue as a going concern will not be affected.

Homeloans Limited-Annual Report

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 (CONTINUED)

The table below summarises the maturity profile of the Group’s contractual undiscounted financial liabilities including derivative financial instruments.

CONSOLIDATED 30 June 2012 Financial Liabilities Trade payables Interest bearing liabilities - RMT Warehouse facility - Bonds - Loans from funders Trailing commissions payable Derivative financial liability Total CONSOLIDATED 30 June 2011 Financial Liabilities Trade payables Interest bearing liabilities - RMT Warehouse facility - Bonds - Loans from funders Trailing commissions payable Derivative financial liability Total Parent		Maturity analysis Balance $’000 0– 6 months $’000 6– 12 months $’000 1– 3 years $’000 3– 5 years $’000 > 5 years $’000 Total $’000



		3,897 3,897 - - - - 3,897

		244,040 39,561 215,352 - - - 254,913
		54,180 9,687 8,090 21,062 10,290 12,324 61,453
		3,622 483 475 1,724 1,537 - 4,219
		18,966 4,376 3,677 9,625 4,736 4,351 26,765
		201 40 76 78 11 - 205
		324,906 58,044 227,670 32,489 16,574 16,675 351,452
		Maturity analysis Balance $’000 0– 6 months $’000 6– 12 months $’000 1– 3 years $’000 3– 5 years $’000 > 5 years $’000 Total $’000



		6,437 6,437 - - - - 6,437

		309,373 54,436 271,282 - - - 325,718
		70,381 16,347 12,883 29,452 11,413 9,072 79,167
		3,254 449 424 1,544 1,358 - 3,775
		14,588 3,405 3,128 7,352 3,306 2,684 19,875
		206 8 10 194 4 - 216
		404,239 81,082 287,727 38,542 16,081 11,756 435,188
		Maturity analysis Balance $’000 0– 6 months $’000 6– 12 months $’000 1– 3 years $’000 3– 5 years $’000 > 5 years $’000 Total $’000
30 June 2012 Financial Liabilities Trade and other payables Interest bearing liabilities - Loans from funders Trailing commissions payable Total Parent		14,517 14,517 - - - - 14,517 3,620 482 473 1,724 1,537 - 4,216 9,851 2,487 2,024 4,863 1,992 1,325 12,691
		27,988 17,486 2,497 6,587 3,529 1,325 31,424
		Maturity analysis Balance $’000 0– 6 months $’000 6– 12 months $’000 1– 3 years $’000 3– 5 years $’000 > 5 years $’000 Total $’000
30 June 2011 Financial Liabilities Trade and other payables Interest bearing liabilities - Loans from funders Trailing commissions payable Total		14,980 14,980 - - - - 14,980 3,249 448 423 1,541 1,358 - 3,770 6,825 1,754 1,411 3,285 1,268 785 8,503
		25,054 17,182 1,834 4,826 2,626 785 27,253

Homeloans Limited-Annual Report

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 (CONTINUED)

The above liquidity profile is based on the period from reporting date to contractual maturity date based on expected principal receipts from mortgage loans. The amounts disclosed in the tables are undiscounted cash flows based on the earliest date at which repayment is required. It should be noted that in the case of the RMT warehouse facility and term bonds, funding is arranged on a pass through basis and therefore there is an element of principal amortisation in each of these funding facilities prior to repayment. The expected principal pass through to the funders shown above is based on the expected principal receipts from mortgage loans. Calculations of expected principal receipts on mortgage loans have been derived using prepayment assumptions based on actual experience.

In the case of the warehouse facility, the above maturity profile reflects the contractual maturity date effective at reporting date. In the case of bonds, the maturity profile assumes that the issuer (i.e. the group’s SPV) will not opt to repay the securities at the call date, but rather, that they will be repaid at their respective maturity dates.

Interest rate risk

Interest rate risk is the risk to the Group’s earnings and equity arising from movements in interest rates, including changes in the absolute levels of interest rates, the shape of the yield curve, the margin between the yield curve and the volatility of the interest rates.

It is the group’s policy to minimise the impact of interest rate movements on our debt servicing capacity, Group profitability, business requirements and company valuation.

The Group’s main interest rate risk arises from mortgage loans, cash deposits and interest bearing liabilities. The vast majority of the Group’s borrowings are issued at variable rates and expose the Group to interest rate risk. Mortgage loans that are written at variable rates and cash deposits also expose the Group to interest rate risk, however the risk is naturally hedged by the variable rate borrowings.

The impact of a rising/falling BBSW benchmark over the Reserve Bank of Australia’s target cash rate can have a significant increase/decrease in the cost of funding and therefore on the net spread earned on the mortgages funded in the RMT Trusts. In the event of a sustained differential to the benchmark, the Group actively manages this exposure by adjusting the interest rate charged to borrowers.

Mortgages written at fixed interest rates are managed with interest rate swaps to match the borrowings used to fund the mortgages. It is a policy of the Group to utilise swaps to manage interest rate risk for 100% of the outstanding balance of fixed rate loans.

The Group’s objective is to minimise exposure to adverse risk and therefore continuously analyses its interest rate exposure. The Group’s Finance department also monitors actual and forecast interest rate information and incorporates this data into the Group’s financial forecasts that are prepared on an ongoing basis throughout the year.

At balance date, the Group had the following mix of financial assets and liabilities exposed to Australian variable interest rate risk that are not designated in cash flow hedges:

	CONSOLIDATED HOMELOANS LIMITED 2012 $’000 2011 $’000 2012 $’000 2011 $’000
Financial Assets Cash and cash equivalents Loans and advances to customers Derivative financial instrument (notional value) Financial liabilities Interest-bearing liabilities - floating Net Exposures	20,084 20,960 8,537 7,650 276,960 359,373 - - 11,840 11,206 - -
	308,884 391,539 8,537 7,650
	(301,842) (383,008) (3,620) (3,249)
	(301,842) (383,008) (3,620) (3,249)
	7,042 8,531 4,917 4,401

Homeloans Limited-Annual Report

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 (CONTINUED)

The sensitivity to movements in interest rates in relation to the value of the interest bearing financial assets and liabilities is shown in the table below with all other variables held constant and assuming that interest rate changes are passed on. The change in basis points is derived from a review of historical movements.

2012	2012	2011	2011
Net Profit / (Loss) after tax	Total Equity	Net Profit / (Loss) after tax	Total Equity
$’000	$’000	$’000	$’000

49	49	60	60
(49)	(49)	(60)	(60)


34	34	31	31
(34)	(34)	(31)	(31)

The risks faced and methods used in the sensitivity analysis did not change from the previous period. As shown above, a 100bps movement in interest rate risk would have minimal impact on the consolidated Group’s financial position.

Prepayment risk

Prepayment risk is the risk that the Group will incur a financial loss because its customers repay earlier than expected, which results in adverse movements in the future trailing commissions receivable and future trailing commissions payable. Refer to note 14 and note 21 for exposure at the balance date. The group monitors the prepayment rates on a monthly basis and modifies its valuation model input when the trends are established.

The consolidated Group’s sensitivity to movements in prepayment rates in relation to the value of the financial assets and liabilities is shown in the table below with all other variables held constant. The change is derived from a review of historical movements.

	2012	2012	2011	2011
Movement in variable	Net Profit / (Loss) after tax	Total Equity	Net Profit / (Loss) after tax	Total Equity
	$’000	$’000	$’000	$’000
Consolidated
+ 10%	(1,605)	(1,605)	(1,242)	(1,242)
-10%	1,825	1,825	1,438	1,438
Parent
+ 10%	(1,451)	(1,451)	(1,075)	(1,075)
-10%	1,678	1,678	1,249	1,249

The risks faced and methods used in the sensitivity analysis did not change from the previous period.

Fair values

Set out below is a comparison by category of carrying amounts and fair values of all of the Group’s financial instruments recognised in the financial statements.

The following methods and assumptions are used to determine the net fair values of financial assets and liabilities:

Recognised Financial Instruments

Cash and cash equivalent: The carrying amount approximates fair value because of their short-term maturity.

Receivables, loans and advances, other financial assets, payables, non-interest bearing liabilities and variable rate interest bearing liabilities: The carrying amount approximates fair value. In the case of Non-interest bearing liabilities, this is because they are short term in nature.

Homeloans Limited-Annual Report

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 (CONTINUED)

The fair value of interest rate swap contracts and fixed rate interest bearing liabilities is determined by reference to market value for similar instruments. The future trailing commissions receivable and future trailing commissions payable have a carrying amount that approximates fair value.

	Carrying	amount		Fair value
	2012	2011	2012		2011
	$’000	$’000	$’000		$’000
Consolidated
Financial assets
Cash	20,084	20,960	20,084		20,960
Receivables	4,331	5,501	4,331		5,501
Loans and advances to customers	288,800	370,579	288,800		370,579
Other financial assets	46,345	37,212	46,345		37,212
Financial liabilities
Payables	3,897	6,437	3,897		6,437
Interest bearing liabilities	301,842	383,008	301,842		383,008
Other financial liabilities	19,167	14,794	19,167		14,794
	Carrying	amount		Fair value
	2012	2011	2012		2011
	$’000	$’000	$’000		$’000
Parent
Financial assets
Cash	8,537	7,650	8,537		7,650
Receivables	16,397	16,537	16,397		16,537
Other financial assets	34,168	26,044	34,168		26,044
Financial liabilities
Payables	14,517	14,980	14,517		14,980
Interest bearing liabilities	3,620	3,249	3,620		3,249
Other financial liabilities	9,851	6,825	9,851		6,825

Note 27: COMMITMENTS AND CONTINGENCIES

– Operating lease commitments Group as lessee

The Group has entered into commercial property leases on its office space requirements. Operating leases have an average remaining lease term of 1.6 years (2011: 2.3 years). Assets, which are the subject of operating leases, include office space and items of office machinery.

Future minimum rentals payable under non-cancellable operating leases as at 30 June are as follows:

	CONSOLIDATED HOMELOANS LIMITED 2012 2011 2012 2011 $’000 $’000 $’000 $’000
Within one year After one year but not more than five years More than five years	1,792 1,741 1,792 1,741 1,266 2,700 1,266 2,700 - - - -
	3,058 4,441 3,058 4,441

Homeloans Limited-Annual Report

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 (CONTINUED)

– Operating lease commitments Group as lessor

The Group has entered into commercial property leases on its surplus office space requirements. Operating leases have an average remaining lease term of 1.2 years (2011: 2.2 years)

Future minimum rentals receivable under non-cancellable operating leases as at 30 June are as follows:

	CONSOLIDATED HOMELOANS LIMITED 2012 2011 2012 2011 $’000 $’000 $’000 $’000
Within one year After one year but not more than five years More than five years	812 783 812 783 138 950 138 950 - - - -
	950 1,733 950 1,733

Superannuation Commitments

Employees and the employer contribute to a number of complying accumulation funds at varying percentages of salaries and wages. The Group’s contributions of up to 9% of employees’ wages and salaries are not legally enforceable other than those payable in terms of ratified award obligations required by the Occupational Superannuation Act.

Contingent liabilities and capital commitments

The directors were not aware of any contingent liabilities or capital commitments as at the end of the financial year or arising since balance date.

Homeloans Limited-Annual Report

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 (CONTINUED)

Note 28: RELATED PARTY DISCLOSURES

The consolidated financial statements include the financial statements of Homeloans Limited and the subsidiaries listed in the following table:

Name
Country of
incorporation
% Equity interest
2012
$’000
2011
$’000

Investment
2012
$’000
2011
$’000

Parent entity
Homeloans Limited
Australia
Controlled entities of Homeloans
Limited:
NSW Home Loans Pty Ltd
Australia
100%
100%
VIC Home Loans Pty Ltd
Australia
100%
100%
QLD Home Loans Pty Ltd
Australia
100%
100%
SA Home Loans Australia Pty Ltd
Australia
100%
100%
WA Home Loans Australia Pty Ltd
Australia
100%
100%
IF & I Securities Pty Ltd
Australia
100%
100%
FAI First Mortgage Pty Ltd
Australia
100%
100%
Access Home Loans
Consolidated incorporating:
- Access Network Management
Pty Ltd
Australia
100%
100%
- Access Home Loans Pty Ltd
Australia
100%
100%
- HLL Pty Ltd
Australia
100%
100%
Independent Mortgage Corporation Pty Ltd
Australia
100%
100%
Residential Mortgage Trust Warehouse
Trust No.1(1)
Australia
100%
100%
RMT Securitisation Trust No.5(1)
Australia
100%
100%
RMT Securitisation Trust No.6(1)
Australia
100%
100%
RMT Securitisation Trust No.7(1)
Australia
100%
100%
Auspak Financial Services Pty Ltd
Australia
100%
100%

-
-
-
-
-
-
-
-
-
-
-
-
-
6,869
6,869
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,466
1,466

8,335
8,335

(1) – Capital unit is held by a third party.

Homeloans Limited-Annual Report

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 (CONTINUED)

The following table provides the total amount of transactions that were entered into with related parties for the relevant financial year (for information regarding outstanding balances at year-end, refer to Note 9 and Note 19).

		Sales to	Purchases		Amounts	Amounts	Amounts
		related	from		owed	by	owed to
		parties	related		related		related
			parties		parties		parties
Related party		$	$		$		$
PARENT
Subsidiaries:
FAI First Mortgage Pty Ltd	2012	2,460,572		-	4,480,161		-
	2011	3,227,874		-	3,718,371		-
Access Network Management Pty Ltd	2012	896,831		-		614,382	8,209,726
	2011	1,519,455		-	1,490,305		8,209,726
Independent Mortgage Corporation Pty Ltd	2012	-		-	9,937,104		-
	2011	-		-	10,004,376		-
Residential Mortgage Trusts	2012	-		-		-	3,705,795
	2011	-		-		-	3,705,795
Auspak Financial Services Pty	2012	-		-		-	921,820
Limited
	2011	-		-		-	729,132
Other related parties:
National Mortgage Brokers Pty Ltd
(formerly Mosaic Financial Services Pty Ltd)(1)	2012	-		-		328,506	-
	2011	-		-		297,105	-
Advantedge Financial Services
(formerly Challenger Mortgage Management)	2012	5,904,588		-		-	-
	2011	6,225,613		-		-	-

The loans to and from subsidiaries are interest free and are repayable on demand.

Other related parties

(1) The Group’s 26.5% interest in National Mortgage Brokers Pty Limited (“nMB”) was disposed of on 18th July 2012 and has been disclosed as a Non-Current Asset held for sale under Note 10.

Note 29: EVENTS AFTER BALANCE DATE

On 27[th] August, the Directors of the Company declared a final dividend in respect of the year ended 30 June 2012 of 3.5 cents per share, fully franked. The dividend has not been provided for in the 30 June 2012 financial statements. The final dividend is payable on 2[nd] October 2012

On 18[th] July 2012, the Group disposed of its 26.5% holding in National Mortgage Brokers Pty Limited for $1,550,000.

Homeloans Limited-Annual Report

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 (CONTINUED)

Note 30: AUDITORS’ REMUNERATION

The auditor of Homeloans Limited is Ernst & Young.

		CONSOLIDATED	CONSOLIDATED	HOMELOANS LIMITED	HOMELOANS LIMITED	HOMELOANS LIMITED
		2012	2011	2012		2011
		$	$	$		$
Amounts received or due and receivable by Ernst &
Young (Australia) for:
�	an audit or review of the financial report of the entity and any other entity in the consolidated group	252,556	242,256	216,300	206,000
�	a compliance audit or review of the financial report of the entity and any other entity in the consolidated	7,725	7,725	7,725		7,725
	group
		260,281	249,981	224,025	213,725
Amounts received or due and receivable by Ernst & Young
(Australia) for non-audit services:
�	a review of the operations of the entity and fees associated with the acquisition of the Refund business	178,910 439,191	- 249,981	178,910 - 402,935 213,725

Note 31: DIRECTORS AND EXECUTIVE DISCLOSURES

Compensation by Category: Key Management Personnel of the Company and the Group

	CONSOLIDATED HOMELOANS LIMITED 2012 2011 2012 2011 $ $ $ $
Short-Term Post Employment Other Long-Term Termination Benefits Share-based Payment	1,483,563 1,566,109 1,483,563 1,566,109 124,781 132,735 124,781 132,735 28,500 78,500 28,500 78,500 80,000 - 80,000 - - - - -
	1,716,844 1,777,344 1,716,844 1,777,344

Homeloans Limited-Annual Report

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 (CONTINUED)

Option holdings of Key Management Personnel of the Company and the Group (Consolidated)

	Vested at 30 June 2012 Balance at beginning of period 1 July 11 Granted as remuneration Options exercised Net Change Other Balance at end of period 30 June 12 Total Exercisable Not Exercisable
30 June 2012
Executives L.McDonald A.Carn(1) C.Matthews(2) I.Parkes(3) S.McWilliam G. Mitchell Total	- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 25,000 - (25,000) - - - - -
	25,000 - (25,000) - - - - -

	Vested at 30 June 2011 Balance at beginning of period 1July 10 Granted as remuneration Options exercised Net Change Other Balance at end of period 30 June 11 Total Exercisable Not Exercisable
30 June 2011
Executives L.McDonald A.Carn(1) C.Matthews(2) I.Parkes(3) S.McWilliam G. Mitchell Total	45,000 - (45,000) - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 12,500 - (12,500) - - - - - 25,000 - - - 25,000 25,000 25,000 -
	82,500 - (57,500) - 25,000 25,000 25,000 -

(1) A. Carn resigned as General Manager – Third Party Distribution on 11th November 2011

(2) C. Matthews resigned as Chief Financial Officer on 29th February 2012

(3) I. Parkes was appointed Chief Financial Officer on 14th May 2012

Shareholdings of Key Management Personnel of the Company and the Group

Shares held in Homeloans Limited (number)

	Balance 01 July 2011 Granted as remuneration Ord. Ord.	On exercise of Options Ord.	Net Change Other Balance 30 June 2012 Ord. Ord.
30 June 2012
Directors T.A.Holmes R.P.Salmon R.N.Scott B.R.Benari(1) A.L. Hall G.J.Buchanan(2) Executives L.McDonald S.McWilliam G. Mitchell I. Parkes(3) Total	12,635,082 - 12,269,494 - 2,104,622 - - - - - - - 50,000 - 50,000 - 455 - - -	- - - - - - - - 25,000 -
			211,942 12,847,024

			207,955 12,477,449

			51,494 2,156,116

			- -

			- -
			- -



			(50,000) -

			- 50,000

			(24,952) 503

			- -

	27,109,653 -	25,000	396,439 27,531,092

Homeloans Limited-Annual Report

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 (CONTINUED)

Shares held in Homeloans Limited (number)

	Balance 01 July 2010 Granted as remuneration On exercise of Options Net Change Other Balance 30 June 2011 Ord. Ord. Ord. Ord. Ord.
30 June 2011
Directors T.A.Holmes R.P.Salmon R.N.Scott B.R.Benari (1) A.L. Hall G.J.Buchanan(2) Executives L.McDonald S.McWilliam G. Mitchell I. Parkes(3) Total	12,476,795 - - 158,287 12,635,082 12,114,186 - - 155,308 12,269,494 2,078,954 - - 25,668 2,104,622 - - - - - - - - - - - - - - - 50,000 - 45,000 (45,000) 50,000 37,500 - 12,500 - 50,000 455 - - - 455 - - - - -
	26,757,890 - 57,500 294,263 27,109,653

(1) B. Benari resigned as a non-executive director on 17th February 2012

(2) G. Buchanan was appointed as a non-executive director on 17th February 2012

(3) I. Parkes was appointed Chief Financial Officer on 14th May 2012

Loans to Key Management Personnel of the Company and the Group

(i) Details of aggregates of loans to key management personnel are as follows:

	Balance at			Interest	Balance at
	beginning of	New	Interest	not	end of	Number in
	period	Loans	Charged	Charged	period	group
	$'000	$'000	$'000	$'000	$'000	#
2012	1,167	-	89	-	1,152	1
2011	3,182	-	113	-	1,167	2

(ii) Details of key management personnel with loans above $100,000 in the reporting period are as follows:

	Balance at			Interest	Balance at	Highest
	beginning of	New	Interest	not	end of	Balance in
	period	Loans	Charged	Charged	period	Period
	$'000	$'000	$'000	$'000	$'000	$'000
Directors
T.A. Holmes	1,167	-	89	-	1,152	1,175

The above loans represent residential mortgages and have been advanced under the same terms and conditions as other borrowers. There were no other transactions with directors or key management personnel during the year.

Homeloans Limited-Annual Report

DIRECTORS' DECLARATION

In accordance with a resolution of the directors of Homeloans Limited, I state that:

In the opinion of the directors:
(a) the financial statements and notes of the Company and the Group are in accordance with the Corporations Act 2001 , including:
(i) giving a true and fair view of the Company and Group’s financial position as at 30 June 2012 and of their performance for the year ended on that date; and
(ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001 ;
(b) the financial statements and notes also comply with International Financial Reporting Standards as disclosed in note 2; and
(c) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.
(d) this declaration has been made after receiving the declarations required to be made to the Directors in accordance with section 295A of the Corporations Act 2001 for the financial year ending 30 June 2012.

On behalf of the Board

==> picture [105 x 44] intentionally omitted <==

Timothy A. Holmes Executive Chairman

Perth, 25 September 2012

==> picture [102 x 62] intentionally omitted <==

Independent auditor's report to the members of Homeloans Limited

Report on the financial report

We have audited the accompanying financial report of Homeloans Limited, which comprises the statements of financial position as at 30 June 2012, the statements of comprehensive income, the statements of changes in equity and the statements 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 and the consolidated entity comprising the company and the entities it controlled at the year's end or from time to time during the financial year.

Directors' responsibility for the financial report

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

Auditor's responsibility

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

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

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

Independence

In conducting our audit we have complied with the independence requirements of the Corporations Act 2001. We have given to the directors of the company a written Auditor’s Independence Declaration.

Liability limited by a scheme approved under Professional Standards Legislation.

Opinion

In our opinion:

a. the financial report of Homeloans Limited is in accordance with the Corporations Act 2001, including:
i giving a true and fair view of the company's and consolidated entity's financial positions as at 30 June 2012 and of their performance for the year ended on that date; and
ii complying with Australian Accounting Standards and the Corporations Regulations 2001; and
b. the financial report also complies with International Financial Reporting Standards as disclosed in Note 2(b).

Report on the remuneration report

We have audited the Remuneration Report included in the directors' report for the year ended 30 June 2012. 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.

Opinion

In our opinion, the Remuneration Report of Homeloans Limited for the year ended 30 June 2012, complies with section 300A of the Corporations Act 2001.

Ernst & Young

==> picture [135 x 36] intentionally omitted <==

T G Dachs Partner Perth 25 September 2012

Homeloans Limited-Annual Report

INVESTOR INFORMATION

The following information is furnished under the requirements of Chapter 4 of the Listing Rules of the Australian Securities Exchange, to the extent that the information required does not appear elsewhere in the Annual Report.

The information has been prepared as at 17 September 2012

(a) Substantial Shareholder details:

Set out below are the names of substantial shareholders of the Company and the number of equity securities in which they have a relevant interest as disclosed in substantial holding notices given to the Company.

Substantial Holder	Number of ordinary shares
	in which interest held
Challenger Group Holdings Ltd	23,730,769
National Australia Bank Ltd	18,983,030
Redbrook Nominees Pty Ltd	15,206,384
Acres Holdings Pty Ltd
Timothy Alastair Holmes	12,847,024
Bond Street Custodians Ltd (TA Holmes A/c)
Tico Pty Ltd (TA Holmes Family A/c)
Bond Street Custodian Ltd (TA Holmes Superfund A/c)
Bond Street Custodian Ltd (Carol Mary Holmes A/c)
Joanna Mary Holmes
Tiffany Eliza Farrar Holmes
Lucy Caroline Holmes
Robert Peter Cockburn Salmon	12,477,449
Peterlyn Pty Ltd (Salmon Family Fund A/c)
Peterly Pty Ltd (Salmon Superfund A/c)

(b) The number of holders of each class of security

There are 665 holders of Ordinary Shares

(c) Voting Rights

The Company has only ordinary shares on issue. All of the Ordinary Shares are fully paid. The holders of the fully paid Ordinary Shares are entitled to attend and vote at all general meetings of the Company and are entitled to be represented at the meeting.

On a show of hands each member present is entitled to one vote and on a poll each member present is entitled to one vote for every ordinary share held.

Homeloans Limited-Annual Report

(d) Distribution Schedule of the number of holders of equity securities in the following categories:

Size of holdings	Ordinary Shares
	Number of holders
1–1,000	83
1,001–5,000	280
5,001–10,000	97
10,001–100,000	166
100,001 and over	39
TOTAL	665

There are 40 shareholders with less than a marketable parcel of shares. A marketable parcel of shares is defined by the ASX as a parcel of shares worth more than $ 500.00

(e) Top 20 holders of Ordinary Shares:

	Ordinary	Shares
Name	Number of Shares held	% holding
Challenger GroupHoldings Ltd	23,730,769	22.29
National Australia Bank Ltd	18,983,030	17.83
Redbrook Nominees PtyLtd	13,709,503	12.88
Peterlyn PtyLtd	12,112,856	11.38
Tico PtyLtd	8,123,944	7.63
HartleyPhillips Securities PtyLtd	4,612,318	4.33
Bond Street Custodians Ltd(V73544A/c)	4,157,016	3.91
AJA Investments PtyLtd	3,446,312	3.24
Gemtrick PtyLtd	2,168,803	2.03
Ferber Holdings PtyLtd	1,661,497	1.56
Acres Holdings PtyLtd	1,496,881	1.41
RBC Investor Services Australia Nominees Pty Ltd	971,740	0.91
Daisson Holdings Pty Ltd (Lonie Super A/c)	507,712	0.48
Carpenter Nominees PtyLtd	494,619	0.46
Bond Street, Custodians Ltd (V12870 A/c)	435,900	0.41
JAMAC Holdings PtyLtd	429,955	0.40
Mr Robert Salmon	364,593	0.34
NSR Investments Pty Ltd (NSR Super Fund A/c)	350,000	0.33
Beneficial Home Loans PtyLtd	300,626	0.28
Ms Kym Carter	226,048	0.21

TOTAL	98,284,122	92.31

(f)

Share Trading

The Company’s shares are listed on the Australian Securities Exchange and the Home Exchange is Perth. Ordinary shares are traded under the code HOM.

(g) Share Buyback

The Company engages in the on-market share buyback of the Company’s ordinary shares from time to time as part of the long term capital management strategy aimed at maximising shareholder value.

AI assistant

RESIMAC GROUP LTD — Annual Report 2012

65714_rns_2012-09-25_6c2f44c9-8682-4f14-8d50-aed53d45f6bc.pdf

HOMELOANS LIMITED

CONTENTS TO FINANCIAL REPORT

CORPORATE INFORMATION

Directors

Company Secretary

Registered Office

Corporate Office

National Office

Postal Address

CORPORATE INFORMATION (CONTINUED)

DIRECTORS' REPORT

DIRECTORS

Timothy Alastair Holmes (Executive Chairman/Managing Director)

Robert Peter Salmon (Non-Executive Director)

Robert Norman Scott (Non-Executive Director)

– Brian Roland Benari (Non-Executive Director) resigned on 17 February 2012

DIRECTORS’ REPORT (CONTINUED)

Andrew Loddington Hall (Non-Executive Director)

– Gavin James Buchanan (Non-Executive Director) appointed on 17 February 2012

COMPANY SECRETARY

Jennifer Murray

DIRECTORS’ REPORT (CONTINUED)

DIVIDENDS

PRINCIPAL ACTIVITIES

DIRECTORS’ REPORT (CONTINUED)

OPERATING AND FINANCIAL REVIEW

Group Overview

Review of operations

Performance Indicators

Operating Results for the Year

DIRECTORS’ REPORT (CONTINUED)

Table 1:

DIRECTORS’ REPORT (CONTINUED)

Shareholder Returns

Liquidity and Capital Resources

DIRECTORS’ REPORT (CONTINUED)

Capital Expenditure

Risk Management

SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS

SIGNIFICANT EVENTS AFTER THE BALANCE DATE

LIKELY DEVELOPMENTS AND EXPECTED RESULTS

DIRECTORS’ REPORT (CONTINUED)

ENVIRONMENTAL REGULATION AND PERFORMANCE

SHARE OPTIONS

Unissued shares

INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS

DIRECTORS’ REPORT (CONTINUED)

REMUNERATION REPORT (Audited)

Details of Key Management Personnel

Remuneration philosophy

Compensation policy

DIRECTORS’ REPORT (CONTINUED)

Nomination and Remuneration Committee

Remuneration structure

Non-executive director remuneration

Objective

Structure

Executive remuneration

Objective

Structure

DIRECTORS’ REPORT (CONTINUED)

Fixed remuneration

Objective

Structure

Variable remuneration — Short term incentive (STI)

Objective

Structure

Variable remuneration — Long term incentive (LTI)

Objective

DIRECTORS’ REPORT (CONTINUED)

Structure

LTI Cash Bonus for the 2010 financial year

Employment contracts

Managing Director

Other executives

DIRECTORS' REPORT (CONTINUED)

Compensation options: granted and vested during the year (Consolidated)

RESIMAC GROUP LTD Annual Report 2012