Centuria Capital Group
Annual Report 2022

Plain-text annual report

Centuria Capital Group Annual Report 2022 Centuria Capital Group – Annual Report 2022 | A Contents About Centuria 01 02 05 08 12 19 20 24 26 28 31 32 34 35 36 37 38 39 40 46 50 55 57 About Centuria Centuria's values and capabilities Australasian real estate platform Chairman’s report Joint CEOs' letter Key financial metrics Expanding our funds management platform Diversifying fund models across Centuria’s platform Leveraging strong capital transaction capabilities Strong active asset management capabilities coupled with major tenant partners $2.1 billion development pipeline to seed funds Unlisted property: AUM growth to $13.0 billion Healthcare: Growing in an attractive sector Agriculture: Diversification into a compelling sector Centuria Bass Credit: A new unlisted growth opportunity Institutional AUM growth to $1.9 billion Listed property: AUM growth to $6.8 billion Centuria LifeGoals Sustainability at Centuria Board of directors Senior executives Centuria’s people Directors’ report 101 Financial statements 110 Notes to the financial statements 174 181 Directors’ declaration Corporate Governance Statement 182 Additional ASX information 183 Corporate directory ACKNOWLEDGEMENT OF COUNTRY Our group manages property throughout Australia and New Zealand. Accordingly, Centuria pays its respects to the traditional owners of the land in each country, to their unique cultures and to their elders past, present and emerging. Centuria Capital Group (ASX:CNI) is a leading Australasian fund manager included in the S&P/ASX 200 Index, established 24 years ago. We manage a range of investment products including listed and unlisted real estate funds, investment bonds and real estate credit funds and whilst we hold co-investments in many of our funds we operate an external or discrete management model. Centuria is the manager of Australia’s largest listed pure-play industrial and office REITs, Centuria Industrial REIT (ASX:CIP) and Centuria Office REIT (ASX:COF), and the New Zealand diversified listed REIT, Asset Plus Limited (NZX:APL). By FY22 close, CNI grew to $20.6 billion of assets under management, of which, 96% comprises real estate funds across industrial, healthcare, decentralised office, agriculture, real estate finance, large format retail and daily needs retail sectors within Australia and New Zealand. Centuria’s $13 billion unlisted real estate funds platform includes a series of unlisted single and multi asset closed- ended funds and multi asset open-ended funds. These unlisted or direct property funds constitute over 65% of Centuria’s total real estate and differentiate Centuria from many of its peers. During FY22 funds under management grew from entities being integrated into the Centuria fold following corporate transactions announced in previous periods. These new operations broadened Centuria’s diversity across asset sectors, geographies, capital sources and have added additional discrete investor bases in both West Australia and New Zealand. CENTURIA FUNDS MANAGEMENT PLATFORM CIP and COF are included in the S&P/ASX 200 and 300 Indices, respectively. Both A-REITs are also included in the FTSE EPRA Nareit Global Development Index, enabling them to be readily compared with international peers. Collectively, the listed REITs comprise $6.8 billion1 of assets under management (AUM). FY22 corporate acquisitions, organic real estate fund generation and real estate credit activities during FY22 resulted in $3.1 billion of gross real estate activity, a record for Centuria. This was complemented by a $2.1 billion development pipeline and a $1.0 billion valuation uplift across the platform. Centuria’s operations are supported by 400 staff across eight offices in three countries with a significant proportion of our workforce focused on the full spectrum of management – from inhouse facility managers and asset managers, to fund managers and corporate personnel – all dedicated to the lifecycle of real estate funds and trusts. This results in specifically curated funds and assets, designed to optimise securityholder returns. $20.6bn GROUP AUM1 $19.8bn REAL ESTATE AUM $6.8bn LISTED REAL ESTATE $13.0bn UNLISTED REAL ESTATE $4.1bn $2.4bn $0.3bn $8.3bn $2.4bn CENTURIA INDUSTRIAL REIT ASX:CIP CENTURIA OFFICE REIT ASX:COF ASSET PLUS LIMITED NZX:APL SINGLE ASSET FUNDS MULTI ASSET FUNDS $2.3bn MULTI ASSET OPEN END FUNDS $0.8bn INVESTMENT BONDS CENTURIA LIFE CENTURIA INVESTMENT BONDS GUARDIAN FRIENDLY SOCIETY 1. Assets under management (AUM) as at 30 June 2022. All figures are in Australian dollars (currency exchange ratio of AU$1.000:NZ$1.1088 as at 30 June 2022). Numbers presented may not add up precisely to the totals provided due to rounding. AUM includes assets exchanged to be settled, cash and other assets. Based on the respective close prices for COF, CIP and APL at Wednesday, 30 June 2022. Includes ownership by associates of Centuria Capital Group. B | Centuria Capital Group – Annual Report 2022 Centuria Capital Group – Annual Report 2022 Centuria Capital Group – Annual Report 2022 | 01 Centuria's values and capabilities Our core values are the essence of our identity – the principles, beliefs and philosophy of our brand. Our values and capabilities support our vision and shape our culture to create a sense of belonging. We prioritise strong and lasting relationships within our business and with our investors, tenants and partners. Centuria mobilises to seize opportunities, we make well-informed decisions and we are transparently accountable. Values We are honest, transparent and respectful We take pride in how we develop strong and lasting relationships within our business and with our investors, tenants and partners. We do this in how we communicate with, support and respect one another. We work and thrive as an integrated and agile team We are bigger than the individual parts. We embrace diversity and collaborate with colleagues and partners to achieve success. Capabilities We support each other to grow Transparent cooperation Thorough process We seek opportunities to encourage personal development and support collective growth. We reward and celebrate success and like to promote from within. We do what it takes We love challenges and finding unique ways to solve problems. We have a focus on growth and a commitment to always act ethically and in the best interests of our stakeholders. Transparent cooperation means our teams are accountable and responsible, creating autonomy without politics. We are honest in our communication, we build trust and we value one-another’s opinions, leading to stronger collaboration with our stakeholders. Transactional velocity Transactional velocity means the speed that we do business. We mobilise our people to seize opportunities and make quick decisions. What takes others months to transact, takes us only days. Our processes result in thorough analysis. Our experienced team knows where the risks and opportunities lie, which leads to well informed decision making. Personal interaction At Centuria, it’s personal. As a Centurian you will be well cared for. As a client, we look after your interests as if they were our own. We create a sense of belonging and build relationships through the way we treat and work with one another. 02 | Centuria Capital Group – Annual Report 2022 Centuria Capital Group – Annual Report 2022 | 03 VISION A leading Australasian property funds manager Our people are leaders in their field throughout Australia and New Zealand. We leverage our geographic diversity, our in-depth market knowledge in favoured sectors and our access to capital to grow funds under management, with a strong focus on earnings growth. INTEGRATED PLATFORM Geography Sectors Fund types Capital sources Australia New Zealand Office Industrial Healthcare Daily needs retail Large format retail Real estate finance Agriculture Investment bonds Listed REITS Unlisted single asset closed-ended funds Unlisted multi asset closed-ended funds Unlisted multi asset open-ended funds Listed Unlisted institutional Unlisted retail Unlisted wholesale ACTIVE MANAGEMENT GENERATING INVESTMENT OPPORTUNITIES Integrated in-house capability Balance sheet Platform support Funds management Real estate transactions Development Distribution Asset management Property and facilities management Leasing Cash on hand Capital recycling Diverse capital sources Undrawn debt capacity Underwriting Co-investments Fund establishment Cornerstones Australasian real estate platform Real estate platform expansion to $19.8 billion¹ +20% over FY22 GEOGRAPHY1 SECTORS $19.8 billion $19.8 billion $ BILLION $ BILLION 2.5 0.4 0.2 0.8 1.6 Australia New Zealand 1.7 1.8 17.2 6.0 7.3 Office Industrial Healthcare Daily needs retail Large format retail Real estate finance Agriculture Other2 FUNDS CAPITAL $19.8 billion $19.8 billion $ BILLION $ BILLION 2.3 2.4 6.8 Unlisted single asset closed-ended funds 8.3 Listed REITs Multi asset closed-ended funds Multi asset open-ended funds 6.8 1.9 5.7 5.4 Unlisted wholesale Unlisted retail Listed REITS Unlisted institutional MOORA ALMOND ORCHARD, HILLSTON NSW 04 | Centuria Capital Group – Annual Report 2022 04 | Centuria Capital Group – Annual Report 2022 All figures above are in Australian dollars (currency exchange ratio of AU$1.000:NZ$1.1088 as at 30 June 2022). Numbers presented may not add up precisely to the totals provided due to rounding. AUM includes assets exchanged to be settled, cash and other assets. 1. Excludes $0.1bn of US syndicates from Primewest merger. 2. Other AUM across tourism, shopping centres and land syndicates in the US, NZ and WA. Centuria Capital Group – Annual Report 2022 | 05 Healthcare, agriculture and real estate finance create new, alternative growth corridors A $19.8 billion leading Australasian real estate platform1 FLAVORITE GLASSHOUSE, WARRAGUL VIC $19.8bn Real estate platform1,2 Office Industrial $7.3bn AUM $6.0bn AUM Daily needs retail (DNR) $1.8bn AUM 9% Healthcare $1.7bn AUM 9% 31% FY21 $4.8bn FY21 $1.3bn FY21 $1.1bn Real estate finance Agriculture 37% FY21 $7.1bn Large format retail (LFR) $1.6bn AUM $0.8bn AUM 8% FY21 $1.3bn 4% FY21 $0.3bn $0.4bn AUM 2% FY21 $0.1bn WA NT SA QLD NSW ACT VIC TAS NORTH ISLAND SOUTH ISLAND AUSTRALIA NEW ZEALAND New South Wales Australian Capital Territory Auckland $1,668m across 37 properties Other New Zealand $808m across 58 properties $401m across 5 properties South Australia $811m across 28 properties Tasmania $23m across 3 properties $4,184m across 107 properties Queensland $3,490m across 105 properties Victoria $3,598m across 82 properties Western Australia $4,207m across 95 properties Note: All figures above are in Australian dollars (currency exchange ratio of AU$1.000:NZ$1.1088 as at 30 June 2022). Numbers presented may not add up precisely to the totals provided due to rounding. 1. AUM includes assets exchanged to be settled, cash and other assets. 2. Platform total of $19.8bn includes other AUM of $0.2bn across tourism, shopping centres and land syndicates in the US, NZ and WA. Note: All figures above are in Australian dollars (currency exchange ratio of AU$1.000:NZ$1.1088 as at 30 June 2022). Numbers presented may not add up precisely to the totals provided due to rounding. 1. Includes assets exchanged to be settled and real estate finance loans by property. Sub totals exclude cash and other assets. 06 | Centuria Capital Group – Annual Report 2022 06 | Centuria Capital Group – Annual Report 2022 Centuria Capital Group – Annual Report 2022 | 07 Centuria Capital Group – Annual Report 2022 | 07 Chairman’s report Garry Charny CHAIRMAN On behalf of the Centuria Capital Group Board, it is my pleasure to introduce the Group’s 2022 Annual Report. Thomas Edison once said that genius was one percent inspiration and ninety nine percent perspiration. Whilst we do not claim to be geniuses, there was plenty of perspiration in FY22 by the entire Centuria team to ensure the delivery of excellent results for the financial year, details of which can be found below and throughout this report. After a somewhat bleak beginning, as FY22 progressed, we were able to throw off the shackles of COVID lockdowns and our teams were finally able to travel across Australia and New Zealand to once again meet with their colleagues in person. This allowed us to complete and cement the integration of our recently merged businesses and to solidify the substantial talent pool in the organisation. One that will be fully tested in the year ahead. Rising interest rates coupled with steepening inflation will present a challenge, however we remain cautiously optimistic as we continue to seek out suitable assets to provide value-add opportunities for new and existing funds and build up growing verticals in healthcare and agriculture. PERFORMANCE The recent mergers with Primewest (now Centuria), Bass Capital (now Centuria Bass), Augusta Capital (now Centuria NZ), and Heathley (now Centuria Healthcare) provided us with a runway into a more diversified real estate platform by asset class and geographical reach as well as providing a broader suite of fund types and investor profiles. These corporate acquisitions enabled the Group to access both higher revenue from management fees and transaction fees. The broadened platform provides investment options across industrial, healthcare, decentralised office, agriculture, real estate finance, large format retail and daily needs retail. It is my pleasure to report that the Group grew its real estate assets under management (AUM) across each of these seven real estate pillars. Total Group AUM increased 18% year on year to $20.6 billion1. Our unlisted funds, which account for two-thirds of our real estate platform, as well as our listed funds, collectively expanded our real estate AUM to $19.8 billion. A weighting towards unlisted real estate and our longstanding relationships with a now-enlarged unlisted distribution network, coupled with our institutional investment partner relationships, is noteworthy with direct property being a solid defensive proposition in times of equity capital market volatility. Diversification is a key theme throughout the Group’s FY22 results and our healthcare, agriculture and credit funds are all good examples of our expansion into new and relevant asset classes. We broadened our healthcare investment into New Zealand through a strategic aged care portfolio acquisition and this, coupled with organic transactions across Australia, increased our healthcare AUM to $1.7 billion. We also focused on high-quality agricultural investments with this sector growing to $0.4 billion. In addition, our Centuria Bass real estate credit funds took advantage of compelling opportunities to provide non- bank finance, primarily across the residential sector, with its AUM jumping to $0.8 billion. Centuria Bass focuses on high quality credit often overlooked by the major lenders. Each of Centuria’s listed entities also continued to grow. The S&P/ASX 300-listed COF is Australia’s largest listed pure- play office REIT and CIP is Australia’s largest listed domestic pure-play industrial REIT. Both A-REITs delivered strong rent collection and tenant retention outcomes. This performance is reflected in their solid FY22 funds from operation results noting also that these A-REITs were amongst the first to provide FY23 distribution guidance to the market. During FY22, we have meaningfully expanded our investor base across retail investors, high net worth and ultra-high net worth individuals, advisers, family offices, wholesale and institutional capital sources, providing them with a broad suite of listed and unlisted investment opportunities that cater to various risk/reward appetites. Importantly, Centuria also established significant new joint venture partnerships with international institutions including Morgan Stanley Real Estate Investing, creating a healthcare-focused fund and a joint venture with BlackRock to acquire 140 St Georges Terrace, Perth. These partnerships expand on Centuria’s existing office and daily needs retail international institutional mandates, respectively providing $634 million AUM and $600 million AUM to the Group platform. The result of this expansion was the Group delivering a record FY22 period of operating earnings and distributions, which was a significant achievement against the backdrop of rising inflation, domestic and global economic volatility and COVID. MANAGEMENT AND INTEGRATION As mentioned, our business diversification was enabled through the integration of several entities into the Centuria Group. These businesses, in the main, are still run by their extremely talented founders who continue to lead their respective teams within the Centuria tent. The Western Australia-based Primewest team, led by John Bond, Jim Litis and David Schwartz, have been integrated within Centuria with personnel operating throughout both our Perth and Sydney offices. A significant proportion of the Primewest portfolio is now managed using Centuria’s centralised software systems, creating better efficiencies across the Group. The Board and I would like to thank the Primewest founders and their team for a successful first year with the Group. We also extend our congratulations to Giles Borten, Nicholas Goh and the Centuria Bass Credit team who, during their inaugural year with the Group, have significantly increased their AUM by $0.5 billion. Our New Zealand platform continues to grow under the leadership of Mark Francis and Bryce Barnett. As mentioned, during FY22, the NZ team expanded its healthcare AUM, with the acquisition of the Heritage healthcare portfolio. Andrew Hemming and his healthcare team have continued to drive growth and value in this sector, with transactions ranging from existing properties to fund-through opportunities. Healthcare is now a prominent, fast growing business vertical within the Group. 1. Assets under management (AUM) as at 30 June 2022. All figures above are in Australian dollars (currency exchange ratio of AU$1.000:NZ$1.1088 as at 30 June 2022). Numbers presented may not add up precisely to the totals provided due to rounding. AUM includes assets exchanged to be settled, cash and other assets. 08 | Centuria Capital Group – Annual Report 2022 08 | Centuria Capital Group – Annual Report 2022 Centuria Capital Group – Annual Report 2022 | 09 Chairman’s report CULTURE AND ESG Centuria takes its commitment to our securityholders, stakeholders and the broader community seriously. As part of that commitment, we continue to focus on our environmental, social and governance initiatives and produced our first Sustainability Report in October 2021. Our second report is expected to be published prior to the Annual General Meeting (AGM). Centuria defines its commitment to sustainability within a framework that encompasses three broad areas: Conscious of Climate Change (environmental considerations), Valued Stakeholders (social responsibilities) and Responsible Business Principles (governance directives). During the period, Centuria became a member of the Green Building Council in both Australia and New Zealand. We have implemented climate adaptation plans to reduce the physical impacts of climate change and continue to introduce solar panel installations across our office and industrial assets in partnership with tenants. Highlights of environmental initiatives specific to our REITs include: • Centuria Industrial REIT becoming an industry participant in the NABERS Accelerate Program for Warehouses and Cold Stores; and • Centuria Office REIT achieving an increased NABERS Sustainable Portfolio Index (SPI) energy rating of 4.8 stars and NABERS water rating of 3.9 stars. Furthermore, we have adopted the Task Force on Climate Related Financial Disclosure recommendations. This means climate change is now a standard investment consideration, with plans being developed across the Centuria platform. The Group also provided disclosures aligned to the Global Reporting Initiative (GRI) Sustainability Reporting Standards and delivered its second Modern Slavery Statement, with more than 350 suppliers assessed and further engagement underway. It is trite but critical to say our staff are the backbone of our company. Ensuring employee satisfaction is paramount, which is why we undertake an annual “pulse check”. The 2022 independent staff engagement survey revealed encouraging results, including that 94% of personnel are proud to work at Centuria and would recommend Centuria as a great place to work and 92% believe their manager genuinely cares about their wellbeing. It is also pleasing for the Board to note the continued success of the Future Leaders Program outlined in the Joint CEO report. At the board level, it is my pleasure to report CNI Independent Non-Executive Director (NED), Susan Wheeldon, was appointed Independent Chair of the Group Nomination and Remuneration Committee, in addition to being Chair of our Culture and ESG Committee. 10 | Centuria Capital Group – Annual Report 2022 We have also restructured our Responsible Entity boards with Jennifer Cook being appointed an Independent NED of Centuria Property Funds No. 2 Limited (CPF2L) and Elizabeth McDonald, an Independent NED of Centuria Property Funds Limited (CPFL) and Member of the CPFL Audit, Risk and Compliance Committee. Their biographies are readily available on our website. Our boards are now a broad church and our focus on diversity coupled with meritocracy means that there is remarkable strength and depth to all the operating boards within the Group. Our commitment to diversity in our workplace, be it at board, senior management or general staff level is undiminished and it remains a tentpole for Centuria, now and in the future. CONCLUSION Centuria’s strong growth has been achieved in the past few years against the backdrop of a global pandemic, geopolitical volatility and an uncertain economic outlook. Notwithstanding that tableaux and conscious of some choppy waters ahead, the Group has successfully executed on its diversification strategy within real estate funds management which underpins our future growth across the business. On behalf of the Board, I thank you, our securityholders, for your ongoing support throughout FY22. I would also like to take this opportunity to thank my fellow Board members, Responsible Entity Board Members, Senior Management and staff for your commitment to the business and ultimately, our securityholders. You continue to deliver exceptional value and set new benchmarks. In particular, I thank our Joint CEOs, John McBain and Jason Huljich, who have not only led the entire Centuria team to an exceptional performance but continued to create a culture we are all proud of. Looking ahead, as workers return to the office, healthcare resumes pre-pandemic service levels and consumers continue to support daily needs retail, large format retail and eCommerce, we are encouraged by a return to the new normal. We have seen the worst of the pandemic, we will get through the current financial maelstrom and we will prudently seize on the opportunities that these uncertain times present. In the meantime, I look forward to welcoming you all to our Annual General Meeting, both physical and virtual, in late November. Garry Charny CHAIRMAN Key metrics: Delivering strong growth and creating value across the platform $20.6bn Group AUM¹ +18% above FY21 14.5cps FY22 OEPS1 delivered +20.8% above FY21 11.0cps FY22 DPS delivered +10.0% above FY21 DPS $3.1bn FY22 gross real estate activity2 +24% above FY21 89% Recurring revenues of FY22 total Group revenues $2.1bn Development pipeline3 14.5cps FY23 OEPS guidance 11.6cps FY23 DPS guidance5 +5.4% above FY22 DPS 1. Operating EPS (OEPS) is calculated based on the Operating NPAT of the Group divided by the weighted average number of securities. 2. Includes $2,175m of acquisitions exchanged and settled in FY22, $403m of acquisitions exchanged in FY22 yet to be settled and $516m of real estate finance transactions. 3. Development projects and development capex pipeline, including fund throughs. Committed development pipeline $1.3bn, future pipeline $0.8bn. 4. Net valuation movement from managed funds. 5. FY23 guidance announced on 10 August 2022. UNLISTED: 38-44 GAP RD, SUNBURY VIC Centuria Capital Group – Annual Report 2022 | 11 Joint CEOs' letter John McBain JOINT CEO Jason Huljich JOINT CEO It is our pleasure to present Centuria Capital Group’s 2022 Annual Report. During FY22, Centuria recorded a record $3.1 billion of real estate activity expanding assets under management (AUM) by 18% to $20.6 billion1. This heightened activity was complemented by the completion of two previous term corporate acquisitions and their successful integration. Importantly, this combination of organic and inorganic growth has broadened our diversity of asset sectors, geographies and capital sources as we now have additional, significant discrete investor bases in both Western Australia and New Zealand as well as new, major institutional fund mandates. Centuria manages investment funds spanning industrial, decentralised office, healthcare, agriculture, real estate finance, daily needs retail and large format retail. Each of these seven real estate verticals contributed to total FY22 real estate activity. This was complimented by a $2.1 billion development pipeline and an FY22 valuation uplift of $1.0 billion across the platform. Centuria’s increased platform scale continues to deliver high recurring revenues, accounting for 89% of total revenues, as well as continued access to embedded performance fees. Since FY17, CNI has generated a 40% compound annual growth rate (CAGR) in AUM. This result has been achieved by a combination of organic growth from real estate acquisitions, active real estate management and corporate acquisitions. FINANCIAL RESULTS During FY22, the Group delivered a 63% increase in operating profit after tax of $114.5 million, which translated to operating earnings per security (OEPS) of 14.5 cents. FY22 OPES was in line with our upgraded guidance, representing an increase of 20.8% from FY21. The Group’s FY22 distributions per security (DPS) of 11.0 cents also met guidance and delivered a 10% increase from FY21. Total FY22 operating revenue increased 38% to $292.6 million while management fee revenue grew 77% to $146.8 million, bolstered by activities across the Primewest platform as well as transactional activity across our industrial and healthcare sectors. More specifically, transaction fee revenue increased 162% to $39.3 million and $33 million of performance fees were recognised. The Group has seen a significant increase in its latent unrecognised performance fees, which at current valuations across the managed portfolio is $179 million, reflecting the embedded fees inherent within the managed portfolio. Transactional income, comprising acquisition, financing, underwriting and sales fees, was up 162% during FY22. This result was underpinned by $4.3 billion of property transactions and real estate finance activity, including $2.2 billion of property transactions, $516 million in additional real estate finance loans and $893 million in strategic divestments. Centuria continues to co-invest in funds it operates, including ASX-listed REITs CIP and COF as well as NZX-listed APL, and our institutional mandates. These co-investments provide a continuous source of recurring revenue. During FY22, the Group’s co-investments delivered an operating profit of $48.4 million, up 33% from the prior period. Centuria’s investment bonds division contributed a healthy $4.6 million operating profit with c.$1.6 million attributable to recoupment of prior period fee rebates. Through the Group’s 50% interest in Centuria Bass Credit (CBC), property and development finance contributed $4.1 million to our operating earnings. CBC continues to focus on new growth opportunities arising from market volatility, and bank lending restrictions. During FY22, development operating profit increased 44% to $6.5 million and development activities continue to be predominantly directed towards the creation of new, quality investment assets for existing or proposed Centuria managed funds. Accordingly, our development management fee revenues are expected to continue to grow as we undertake further projects, for example in the healthcare space. Centuria retained a strong focus on capital management during FY22 with net operating cash inflows of $182 million and a net operating interest cover ratio of 6.8 times (2.0 times covenant). During the period, the Group finalised two revolving loan facilities totalling $150 million. These undrawn facilities together with the Group cash balance of $185 million made a total of $339 million available at FY22 year end. The Group has built this balance sheet strength to ensure maximum flexibility, together with the capacity to take opportunities that are likely to become available in the near term, while maintaining strong financial covenant ratios. PLATFORM GROWTH Throughout FY22, Centuria’s real estate platform expanded by more than 20% to $19.8 billion, with unlisted real estate funds increasing 18% to $13.0 billion and listed funds growing 24% to $6.8 billion. Growth was generated by $2.6 billion of real estate acquisitions together with $0.5 billion of real estate lending. Centuria has one of the largest transactional teams within Australia, with specialists in each real estate sector who achieved considerable success via off-market transactions and select sales campaigns, demonstrating the level of growth opportunities available for a diversified platform. In FY22 organic transactions took centre stage, totalling 90 properties, 67 real estate loans, a record breaking level of activity. Examples of these transactions include trophy assets in the $100-$300 million range such as: • A super-prime last mile distribution centre in the core Sydney industrial market of Fairfield; • An A-grade, recently completed metropolitan office building in South Melbourne; 1. Assets under management (AUM) as at 30 June 2022. All figures above are in Australian dollars (currency exchange ratio of AU$1.000:NZ$1.1088 as at 30 June 2022). Numbers presented may not add up precisely to the totals provided due to rounding. AUM includes assets exchanged to be settled, cash and other assets. 12 | Centuria Capital Group – Annual Report 2022 12 | Centuria Capital Group – Annual Report 2022 Centuria Capital Group – Annual Report 2022 | 13 Joint CEOs' letter BLOOMFIELD MEDICAL CENTRE, ORANGE NSW • A New Zealand aged care portfolio incorporating 38 assets; and • A greenhouse agricultural investment, leased to Australia’s largest glasshouse operator, Flavorite Hydroponic Tomatoes, in Warragul, Victoria The Group manages 419 assets leased to approximately 2,500 customer tenants. Average rent collections totalled a healthy 98% during the period. This impressive result was complemented by more than 500,000 sqm of leasing terms agreed, across an impressive 469 individual deals. This represents 12.6% of the Group’s total NLA. Our annual tenant engagement surveys held across our office and industrial assets continued to show strong results, with 96% of tenants reporting satisfaction with Centuria as their asset manager1. Collectively, our Australasian platform provides a high average occupancy exceeding 97% and an average WALE of 6.7 years. The Group’s high occupancy and staggered expiry profiles provide opportunities to deliver income predictability as well as capturing rental uplift upon expiry. In addition to our property acquisitions, our development pipeline also assisted with organic growth – providing fit for purpose, modern, sustainable assets for our listed and unlisted funds. In particular, approximately $988 million of our committed pipeline is focused on new healthcare properties while around 15% is dedicated to new industrial real estate. Within Australia, the latter sector has less than 1% vacancy resulting in significant rental growth and an opportunity to take advantage on these very tight supply/ demand fundamentals. Our development division continued to generate strong recurring development management fees and in some instances, development profits on completion. Across the unlisted platform, we service more than 12,000 retail, wholesale and institutional investors and during FY22 our distribution team raised $620 million of equity across new and open-ended opportunities. More than 32% of our unlisted AUM has no fund expiry review date and 56% has expiry review dates at or beyond five years. During the period, we launched a number of unlisted single asset fixed term funds. These include office funds, predominantly leased to Government tenants; bespoke investment opportunities sourced with new JV partners; and a wholesale retail trust. Our multi asset unlisted fund suite further broadened during the period, including: • the Centuria Healthcare Property Fund (CHPF), which grew to $568 million; • the Centuria NZ Industrial Fund, which increased to $588 million; • the Centuria Diversified Property Fund (CDPF), which merged with Primewest Property Investment Fund, expanding its portfolio to $260 million; • the Centuria NZ Healthcare Property Fund, which is underpinned by the $181 million Heritage-operated aged care portfolio; and • the recently launched Centuria Agriculture Fund, which is seeded with a $177 million glasshouse estate operated by the Flavorite Group. During FY22, institutional capital investment in Centuria’s unlisted platform increased 12% to $1.9 billion. This included a healthcare joint venture with Morgan Stanley Real Estate Investing, called Centuria Prime Partnership (CPP), a joint venture with Blackrock for a Perth prime office building ($280 million) and another two prime office mandates worth $634 million. Our existing daily needs retail investment mandate expanded during the period to more than $600 million. The institutional mandates referred to above and the recently launched Centuria Agriculture Fund are both excellent examples of investment products previously built by the Primewest team or launched post the merger. Each of Centuria’s listed entities continued to grow. The S&P/ASX 300-listed COF is Australia’s largest listed pure- play office REIT, with 23 high quality office assets worth $2.4 billion. During the period, it acquired $314 million of assets and achieved significant leasing success across more than 41,000 sqm. The S&P/ASX 200-listed CIP is Australia’s largest listed pure-play industrial REIT with 88 industrial properties worth $4.1 billion. During the period, it acquired 23 high quality industrial assets and three developments sites, worth $765 million. It also leased more than 185,000 sqm. MANAGEMENT TEAM With an enlarged platform, our team also grew to 400 personnel across eight offices in three countries with a significant proportion of our workforce focused on the full spectrum of fund and asset management. Throughout FY22, we bolstered our Treasury team, with key personnel now secured in Sydney, Perth and Auckland to ensure prudent capital management across the business. As we have grown in scale and diversification, so have our relationships with investors and finance providers. We have developed solid relationships with more than 21 quality lenders. The Group Treasury team’s role is to source optimal debt capital and maintain sound capital management. This expanded team allows Centuria to develop robust, on the ground relationships with key finance providers. Importantly, in FY22 we introduced what is to be a regular independent staff engagement survey which showed levels of engagement and satisfaction are high, with 94%1 of employees reporting they enjoy working at Centuria. Further details are contained in the Chairman’s introduction. Our leadership program ensures the further development of future leaders, nurturing the management skills of recognised personnel across departments and throughout Australasia. Fostering the next generation of leaders ensures continuity across the business and flexibility as our workforce grows. It has been particularly rewarding to see future leaders from different countries and states come together during the program. ENVIRONMENTAL, SOCIAL AND GOVERNANCE CONSIDERATIONS Centuria has accelerated our focus on environmental, social and governance (ESG) initiatives over FY22, and will published our second Sustainability Report prior to the 2022 Annual General Meeting (AGM). Our Chairman’s introduction covers some of the detail surrounding our efforts in this field, but we would like to focus further on two topics. Firstly, we believe we have an important responsibility to explain our ESG position and the actions we are taking to our team. We prioritise sharing information and actively encourage employee feedback in regular workshops held on a variety of topics surrounding our social and environmental endeavours. Second, an example of our practical approach to community responsibility is our support for St Lucy’s School in Sydney, which provides primary and secondary education for students with disabilities. Centuria has supported the school for the past 10 years. Our commitment to the school involves volunteer days as well as annual trivia night fundraising events. This year we raised a record breaking $175,000, an increase of 25% from last year’s event. We intend to continue our support for the school as our main benevolent endeavour. Diversity also continues to be a focus and the Group is pleased to report its gender diversity has improved with a 41:59 split between females to males2. 1. Centuria Capital Group undertake regular tenant surveys. The figure reported is from the Group’s FY22 survey. 1. Centuria Capital Group undertake regular employee engagement surveys. The reported figure is from the Group’s FY22 survey. 2. Centuria’s 2021 female to male workforce ratio was 37:63. 14 | Centuria Capital Group – Annual Report 2022 Centuria Capital Group – Annual Report 2022 | 15 Joint CEOs' letter OUTLOOK We remain focused on sourcing quality real estate investment opportunities, utilising our deep real estate expertise and leveraging our platform to create value for our investors. The Centuria platform offers unique characteristics as an external funds manager. These include its bias towards high margin unlisted real estate business, its geographic reach and Australasian focus, its extremely defensive asset sector composition with sufficient channels to weather volatility and last of course our very extensive and mature internal investor base. These attributes, coupled with our REIT management revenues, joint venture interests, institutional partnerships, and real estate credit business, combine to create a strong recurring revenue base. This, diversity of revenue in conjunction with our nimble and highly reactive business model, differentiates us from our peers. Our business has operated for over 26 years in a variety of market conditions and cycles during which it has been supervised by Joint CEOs who initially formed the business. Additionally, many of our executives have been with us for more than 15 years and we are confident that as a group we have the experience to maintain a disciplined approach to market disruptions and, just as importantly, the ability to seize on well priced assets for new funds so we look forward to FY23 with some anticipation. No corporate is immune from financial market fluctuations and we have spent considerable time internally assessing our view on how conditions may alter, by how much, and over what period. Interest rates, for example, are expected to rise and then abate and it is important to take a through- cycle approach to real estate investment which, by its nature, is long term. Centuria will retain its strong focus on the Australasian real estate sector and intends to grow its platform in the alternative healthcare, agriculture and non-bank lending sectors which are receiving strong, continued investor demand. In addition, we will continue to leverage our strong distribution network and our institutional relationships to take advantage of both core and value add real estate opportunities across our traditional asset classes. Looking ahead, we provide FY23 operating EPS guidance of 14.5 cents per security and DPS guidance of 11.6 cents per security, reflecting a 5.4% increase on FY22. The increase in our distribution guidance demonstrates our continued confidence in the cash generating capability of the business. We would like to thank our team across Australia, New Zealand and the Philippines for their unwavering loyalty and dedication. Similarly, we thank the Chairman and Board of Directors across the Group and Responsible Entity boards as well as our external committees whose guidance and support are invaluable to the company’s success. Their hard work and dedication is often not appreciated and we wish to ensure it is acknowledged publicly. Most of all we thank you, our securityholders, for your ongoing confidence and support. We look forward to updating you throughout FY23. John McBain Jason Huljich JOINT CEO JOINT CEO 16 | Centuria Capital Group – Annual Report 2022 56-88 LISBON STREET, FAIRFIELD NSW Centuria Capital Group – Annual Report 2022 | 17 Key financial metrics OPERATING NET PROFIT AFTER TAX ($M)1 OPERATING EARNINGS PER SECURITY2 (CENTS) 114.5 16.3 12.7 12.0 12.0 14.5 45.1 45.7 53.3 70.2 FY18 FY19 FY20 FY21 FY22 FY18 FY19 FY20 FY21 FY22 DISTRIBUTIONS PER SECURITY (CENTS) NET ASSETS PER SECURITY ($)3 9.25 9.70 10.00 11.00 8.20 1.29 1.32 1.44 1.92 1.73 FY18 FY19 FY20 FY21 FY22 FY18 FY19 FY20 FY21 FY224 STATUTORY NET PROFIT AFTER TAX ($M)5 143.5 54.8 50.9 21.1 FY18 FY19 FY20 FY21 FY22 (37.9) UNLISTED: EXCHANGE TOWER, 2 THE ESPLANADE, PERTH WA 18 | Centuria Capital Group – Annual Report 2022 18 | Centuria Capital Group – Annual Report 2022 1. Operating NPAT of the Group comprises the results of all operating segments and excludes non-operating items such as  transaction costs, mark to market movements on property and derivative financial instruments, the results of Benefit Funds, controlled property funds and share of equity accounted net profit in excess of distributions received. 2. Operating EPS is calculated based on the operating NPAT of the Group divided by the weighted average number of securities. 3. Number of securities on issue 30 June 2022: 792,787,120 (at 30 June 2021: 787,802,693). 4. Decline in net asset value per security is primarily attributable to the unrealised fair valuation of the Group’s listed co-investment stakes. 5. Attributable to securityholders. Centuria Capital Group – Annual Report 2022 | 19 Centuria Capital Group – Annual Report 2022 | 19 FY22 was a record period of operating earnings and distribution delivered by the Group, despite the backdrop of rising inflation, domestic and global economic volatility, COVID-19 disruptions and ongoing geopolitical events. FY23 guidance announced 10 August 202214.5cps operating EPS11.6cpsdistribution per security+5.4% above FY22 DPSUNLISTED: VARSITY LAKES DAY HOSPITAL, VARSITY LAKES QLD Expanding our funds management platform ASSETS UNDER MANAGEMENT (AU$ billion) FY22 GROUP AUM MOVEMENT1 (AU$ billion) 20.6 13.0 17.4 11.0 1.0 0.5 0.1 -0.1 -0.9 20.6 2.6 17.4 40% CAGR1 Unlisted real estate 3.8 1.5 1.5 0.8 4.9 1.9 2.1 0.9 6.2 2.6 2.7 0.9 8.8 4.0 4.0 0.8 6.8 5.5 Listed real estate 0.9 0.8 Investment bonds FY17 FY18 FY19 FY20 FY21 FY22 1. CAGR calculated from 30 June 2017 to 30 June 2022. 20 | Centuria Capital Group – Annual Report 2022 20 | Centuria Capital Group – Annual Report 2022 FY212 Property acquisitions Valuations Centuria Bass Credit Development completions Investment bonds Property divestments FY22 Note: Assets under management (AUM) as at 30 June 2022. All figures above are in Australian dollars (currency exchange ratio of AU$1.000:NZ$1.1088 as at 30 June 2022). Numbers presented may not add up precisely to the totals provided due to rounding. 1. AUM includes assets exchanged to be settled, cash and other assets. 2. Includes $735m of acquisitions exchanged at FY21 results that have since settled. Centuria Capital Group – Annual Report 2022 | 21 Centuria Capital Group – Annual Report 2022 | 21 Centuria is a leading Australasian real estate funds manager with Group assets under management exceeding $20 billion1 with the experience and potential to increase this pool of assets meaningfully over time.Major direct corporate acquisitions Major direct real estate acquisitions FY22 $5.2bn AUM $3.1bn AUM 90 properties and 37 real estate finance loans FY22 gross real estate activity $1.1bn AUM FY21 $1.7bn AUM $0.5bn AUM FY20 $0.6bn AUM $0.6bn AUM FY19 $1.4bn AUM FY17 UNLISTED: VISY FACILITY, PENROSE AUCKLAND NZ 22 | Centuria Capital Group – Annual Report 2022 22 | Centuria Capital Group – Annual Report 2022 Centuria Capital Group – Annual Report 2022 | 23 NISHIOrganic growth has been aided by strategic corporate mergers that provided access to new markets, broader distribution lists, new real estate asset classes and expertise, allowing us to confidently diversify the property funds offering.UNLISTED: CAMERON PARK PLAZA, CAMERON PARK NSW Diversifying fund models across Centuria’s platform 24 | Centuria Capital Group – Annual Report 2022 Centuria Capital Group – Annual Report 2022 | 25 1. Platform total real estate AUM of $19.8bn includes other AUM of $0.2bn across tourism, shopping centres and land syndicates in the US, NZ and WA. SECTOROfficeIndustrialDaily needs retailHealthcareLarge format retailReal estate financeAgricultureFUND TYPE/CAPITAL SOURCEAUM ($bn)1$7.3$6.0$1.8$1.7$1.6$0.8$0.4Unlisted closed-ended single and multi asset1$8.73.41.21.00.81.30.60.2Listed REITs1$6.82.64.10.1Unlisted open-ended$2.30.20.70.20.70.20.20.2Unlisted institutional$1.91.10.60.2We have broadened our range of assets by sector, asset size, geographic markets and strategies for investment. Our range of investment options provide varying risk/return alternatives to match individual investor appetite.Leveraging strong capital transaction capabilities Leveraging our transactions expertise and deep market relationships, Centuria has a proven track record of securing high quality assets, predominantly in off-market or select campaign situations. $3.1bn FY22 gross real estate activity 90 properties 37 real estate finance loans $0.9bn $3.1bn $2.5bn Real estate finance FY22 exchanged yet to be settled $1.2bn FY22 exchanged and settled FY19 FY20 FY211 FY222 1. 2. Includes $735m of acquisitions exchanged at FY21 that have since settled. Includes $2,175m of acquisitions exchanged and settled in FY22, $403m of acquisitions exchanged in FY22 yet to be settled and $516m of real estate finance transactions. 26 | Centuria Capital Group – Annual Report 2022 26 | Centuria Capital Group – Annual Report 2022 UNLISTED: FLAVORITE GLASSHOUSE, WARRAGUL VIC Centuria Capital Group – Annual Report 2022 | 27 8 LEXINGTON DRIVE, BELLA VISTA NSW | ARTIST IMPRESSION Strong active asset management capabilities coupled with major tenant partners CENTURIA PLATFORM’S TOP 10 TENANTS BY INCOME (%)1 Government Woolworths Limited ASX/NZX listed Telstra Corporation ASX/NZX listed Coles Group ASX/NZX listed Wesfarmers ASX/NZX listed Arnott’s Multinational Visy Multinational Healius ASX/NZX listed General Distributors National Heritage Lifecare Ltd National 2.5% 1.7% 1.6% 1.5% 1.4% 1.3% 1.1% 1.0% 0.9% 11.8% Office Industrial Healthcare Daily needs retail Large format retail Centuria’s ability to effectively manage assets across our platform benefits from integrated commercial property services and an active management approach. 6.1 year Platform’s weighted average lease expiry (WALE) by income1,2 97.2% Platform’s total occupancy by area1,2 98.2% Average rent collected over entire platform1 ~419 assets1,2 ~2,480 tenants1,2 1. Tenancy profile is shown aggregated across all funds managed by Centuria and is not representative of any single fund. 2. Excludes land, development, US syndicates, Centuria BASS Credit, assets exchanged yet to be settled. 28 | Centuria Capital Group – Annual Report 2022 28 | Centuria Capital Group – Annual Report 2022 Centuria Capital Group – Annual Report 2022 | 29 Centuria Capital Group – Annual Report 2022 | 29 $2.1 billion development pipeline to seed funds The Group has a $2.1 billion development pipeline. These projects include opportunities to upgrade, refurbish and redevelop properties to create high quality investment assets for our listed and unlisted funds. Development fees and profits provide growing income. Centuria strategically uses its balance sheet to seed development projects destined for Centuria funds. $45.1m Carrying value of Centuria balance sheet development assets. FY22 COMPLETIONS COMMITTED PIPELINE2 FUTURE PIPELINE2, 3, 4 TOTAL PIPELINE ASSET CLASS $M GLA $M GLA $M GLA $M GLA Office Industrial - 3 -   202 25,600 260 308 138,600 - - - - 202 25,600 308 138,600 Healthcare 37 5,081 613 51,940 375 25,948 988 77,888 Large format retail Other/social infrastructure3 7 486 33 8,628 - - 33 8,628 36 10,000 163 12,090 371 93,804 594 105,894 Total¹ 83 15,827 1,319 236,858 746 119,752 2,065 356,610 Note: All figures above are in Australian dollars (currency exchange ratio of AU$1.000:NZ$1.1088 as at 30 June 2022). Numbers presented may not add up precisely to the totals provided due to rounding. 1. Development projects and development capex pipeline, including fund throughs. 2. Committed pipeline includes planning commencements and projects under construction. 3. Lakeview Queenstown JV reflected at a 25% interest. 4. Includes opportunities undergoing development assessments or pre-planning approvals. Centuria Capital Group – Annual Report 2022 | 31 Centuria Capital Group – Annual Report 2022 | 31 LISTED: 6-8 MUNROE LANE, ALBANY, AUCKLAND NZ 30 | Centuria Capital Group – Annual Report 2022 30 | Centuria Capital Group – Annual Report 2022 Unlisted property: AUM growth to $13.0 billion (+18% for FY22) Centuria has a strong weighting to unlisted property funds (63%). Centuria's unlisted funds receive firm support from our 12,000 strong investor base and are a resilient, defensive linchpin of our success. SECTORS $13.0 billion $ BILLION 0.3 0.4 0.8 4.7 FY22 1.7 1.8 Office Industrial Healthcare Daily needs retail Large format retail Real estate finance Agriculture Other2 1.6 0.7 FUNDS $13.0 billion $ BILLION 2.3 2.4 FY22 Single asset closed- ended funds Multi asset closed- ended funds Multi asset open- ended funds 8.3 63% AUM weighting to unlisted real estate $620m FY22 gross equity raised $21m FY22 performance fee cash collected 56% Unlisted AUM with expiry review dates at, or beyond, five years >12,000 Australian investors $33m FY22 recognised performance fees $179m FY22 latent underlying performance fees1 32% Unlisted AUM with no fund expiry review date 1. The total amount of latent (unrecognised) future performance fees available to the Group are estimated at $179m. Unrecognised performance fees are estimated based on current property valuations adopted within each fund and due to inherent uncertainties in relation to the future performance of each property do not qualify for recognition in the current period under Centuria's revenue recognition policy and may not entirely eventuate. 32 | Centuria Capital Group – Annual Report 2022 32 | Centuria Capital Group – Annual Report 2022 Centuria Capital Group – Annual Report 2022 | 33 Centuria Capital Group – Annual Report 2022 | 33 UNLISTED: WEST VILLAGE SHOPPING CENTRE PRECINCT, WEST END QLD Agriculture: Diversification into a compelling sector Targeting $0.8bn of agriculture AUM by FY23 end. Triple net-leases provide secure income streams. Strong transaction pipeline provides further growth opportunities. EXPANDING AGRICULTURE $0.4bn AUM 7 assets 3 funds $0.2bn AUM Centuria Agriculture Fund launched, with seed asset Warragul Glasshouse. Healthcare: Growing in an attractive sector Targeting $2.0bn of healthcare AUM by FY23 end. Centuria is an established healthcare real estate manager. $1.7bn (+55%) real estate AUM (81% AU/19% NZ) c.$1bn total healthcare development pipeline UNLISTED FUNDS AND INSTITUTIONAL DEMAND Morgan Stanley REI partnership growth to CHPF open-ended fund growth to $215m AUM1 ASSET MANAGEMENT Over 200 healthcare tenants 107 properties $568m1 AUM (+200%) $0.9bn AUM across six other unlisted healthcare funds Institutional grade short stay and day hospitals, mental health facilities, medical and specialist centres and aged care facilities in NZ. Includes development projects on an accounting carrying value basis. 1. 2. Source: JLL. 3. Source: Australian Institute of Health and Welfare – Health Expenditure Australia 2017- 18. Figures exclude aged care, 41250DS0007 Gender Indicators, Australia, November 2019, ACFA – Sixth Report on the Funding and Financing of the Aged Care Sector – July 2019, Australian Bureau of Statistics, Department of Treasury – Treasury projections from 2015 Intergenerational Report: Australia in 2055. MURDOCH CANCER TREATMENT CENTRE, MURDOCH WA 34 | Centuria Capital Group – Annual Report 2022 PINEGATTA FARM, DENILIQUIN NSW Centuria Capital Group – Annual Report 2022 | 35 HEALTHCARE THEMES AND MEGATRENDS Emerging Australian real estate sector2 • Australian private hospital sector worth ~$41bn by 2041.• Currently ~30,000 beds,155 general overnight private hospitals, 35 rehabilitation clinics and 45 specialist mental health facilities.• Just 280 beds currently under construction (~2,200 private hospital beds required in the next eight years to meet demand).Co-location models• PropCo partners and private real estate funding/PPP increasing.• Multi-use healthcare precincts. • Long leases can support income predictability. Ageing population and chronic disease occurrence3• 65+ population forecast to more than double to 7.9 million in 2050.• Population with comorbidities increased to 78% (females), 76% (males).AGRICULTURE THEMES AND MEGATRENDS Export potential• Premium food product growth of 55% to 2030.1Supply chain • Disruptions highlight access to local agriculture products.High quality domestic agriculture • Australian products are highly valued by global markets.Technology and farming advancements • Supporting higher revenues, yields, productivity and reduced waste.Protected cropping • Predictable outputs can mitigate key farming risks..Environment• Modern agriculture techniques harness world-leading technology to reduce water consumption. Energy efficient assets have a lower operational running cost, with initiatives such as on site solar reducing greenhouse emissions.1. Source: CSIRO. Growth opportunities for Australian food and agribusiness.2. Source: Protected Cropping Australia. Centuria Bass Credit: A new unlisted growth opportunity Institutional AUM growth to $1.9 billion (+12% over FY22) INTEGRATION DEBT MARKET TRENDS • Utilising Centuria’s multi-sector real estate expertise and distribution. • Centuria Bass JV continues to offer attractive margins. • Margin compression, increasing construction costs causing developers to consider alternative debt solutions. NON-BANKING FINANCE ALTERNATIVE NON-BANK LENDERS • Predominantly focused on first ranking mortgages. • Traditional bank lenders continue to reduce development real estate debt exposure. Changing market conditions generate new growth opportunities. $0.8bn real estate finance AUM (FY21: $0.3bn) 91% of loan volumes secured by first mortgage security, gross average LVR of 64% 37 loans funded worth $516m Unlisted mandates and partnerships support new investment opportunities. $1.7bn $1.9bn • Morgan Stanley (MSREI) healthcare partnership grows to $215m AUM.1 • Opportunities to expand healthcare institutional capital. • Prime office sovereign wealth mandate filled (2 assets, $634m AUM). • $930m daily needs retail sovereign wealth mandate (11 assets, $600m AUM). Family office and select single asset JVs broaden capital pools e.g. Blackrock 140 St Georges Terrace Fund. $0.3bn FY20 FY21 FY22 1. Includes development projects on an accounting carrying value basis. WESTSIDE PRIVATE HOSPITAL, TARINGA QLD ADENEY PRIVATE HOSPITAL, KEW VIC | ARTIST IMPRESSION EXCHANGE PLAZA, PERTH WA 111 ST GEORGES TERRACE, PERTH WA RICHARDSON STREET, SOUTH PERTH WA | ARTIST IMPRESSION OMNIA WOOLWORTHS, DARLINGHURST NSW WEST VILLAGE SHOPPING CENTRE, QLD 36 | Centuria Capital Group – Annual Report 2022 Centuria Capital Group – Annual Report 2022 | 37 Listed property: AUM growth to $6.8 billion (+24% for FY22) ASX:COF ASX:CIP CENTURIA OFFICE REIT CENTURIA INDUSTRIAL REIT Australia’s largest ASX-listed pure play office REIT. A quality portfolio of decentralised, strategically located and affordable office space. Australia’s largest domestic ASX-listed pure play industrial REIT. A quality portfolio of fit for purpose industrial assets, situated in infill locations with close key infrastructure. $2.4bn AUM1 23 high quality assets 18.9% CNI co-investment2 $314m FY22 acquisitions $4.1bn AUM 88 high quality assets 16.1% CNI co-investment2 $765m FY22 acquisitions3 Included in the S&P/ASX 300 Index Included in the S&P/ASX 200 Index Included in the Included in the FTSE EPRA NAREIT Global Developed Index FTSE EPRA NAREIT Global Developed Index 79% Portfolio income from government, ASX-listed and multinational tenants. 88% Portfolio income from ASX-listed, national and multinational tenants. NZX:APL ASSET PLUS Targeting long term total returns. Completing major, council anchored office development. $0.3bn AUM1,4 19.9% CNI co-investment2 Munroe Lane development NZ$147m estimated value on completion Mid FY23 Munroe Lane target completion 1. Excludes assets exchanged in FY21 that settled in FY22. 2. 3. 4. Includes ownership associates of Centuria Capital Group. Includes assets exchanged in FY21 but settled in FY22. Includes commenced development projects valued on an as if completed basis. Centuria LifeGoals LifeGoals investment bonds is a simple tax effective solution to achieve long term financial goals. $0.8bn AUM 8.6% total Australian investment bond market share1 Approved by a wide range of dealer groups nationally 31 fund options including 3 ESG fund options ASSETS UNDER MANAGEMENT FY22 $M FY21 $M HY22 CHANGE (%) Prepaid funeral plans (Guardian)2 Capital guaranteed (Centuria Life)3 Unitised bonds (Centuria Life)3 536.6 582.0   -7.8% 0.0 140.9 -100.0% 230.7 141.6 62.9% Centuria LifeGoals 39.6 27.9 41.9% Total 806.9 892.4 -9.6% 1. QDS report 30 March 2022. 2. Centuria Life Limited (CLL) is the key service provider to Over Fifty Guardian Friendly Society. 3. As part of a major restructure the capital guaranteed bonds became unitised bonds following a policyholder vote and APRA approval. 38 | Centuria Capital Group – Annual Report 2022 Centuria Capital Group – Annual Report 2022 | 39 Sustainability at Centuria Centuria is committed to the development and implementation of environmental and social sustainability practices across its portfolio, while adhering to best practice corporate governance. Centuria developed a pragmatic and achievable sustainability framework that guides our investment decisions, asset management and stakeholder relations for the betterment of the communities and markets we operate within. Our Sustainability Framework aligns our approach to sustainability under three areas of focus. OUR SUSTAINABILITY FRAMEWORK The three areas of focus which define Centuria Capital’s Sustainability Framework are aligned to environment, social and governance aspects. These areas are: Conscious of Climate Change, Valued Stakeholders and Responsible Investment Principles. HIGHLIGHTS FOR FY22 VALUED STAKEHOLDERS RESPONSIBLE INVESTMENT PRINCIPLES CONSCIOUS OF CLIMATE CHANGE Responsible investment principles GOVERNANCE Centuria is committed to honest, transparent, and responsible business practices. We do this by investing in our processes and people, equipping the Group to act responsibly and in the best interests of our stakeholders. This includes making sure the right policies, procedures and systems are in place to strengthen our governance. TRANSPARENT AND ACCOUNTABLE To ensure we are transparent and accountable, we provide ongoing training for our people to strengthen our systems and wider governance processes. All employees undergo regular training covering: • code of conduct; • cyber security; • breach reporting; and • ESG for select personnel, including modern slavery. RESPONSIBLE INVESTMENT Responsible investing is about incorporating wider values into our decision making process. When we make investment decisions, we consider the ESG implications and what impact they may have on our valued stakeholders. Over the past year, Centuria has focused on: • a modern slavery assessment of our suppliers; and • climate change assessments of our assets. VALUES AND CAPABILITIES Our values and capabilities define what it means to be an employee at Centuria. We are committed to investing in our people, supporting them to realise their professional and personal goals. 1. Centuria undertakes annual tenant surveys. The reported figures are from the Group’s FY22 combined commercial and industrial surveys. 2. Rating refers to the assets held by the Centuria Office REIT (ASX:COF). 40 | Centuria Capital Group – Annual Report 2022 40 | Centuria Capital Group – Annual Report 2022 Centuria Capital Group – Annual Report 2022 | 41 41%women in the workplaceCenturia is committed to a diverse and inclusive workplace.4.8 NABERS Energy SPI rating2 up from 4.7 the previous year.Energy Sustainability Portfolio Index.10 yearsof continued support at St Lucy's School.Proudly supported by Centuria Industrial REIT96%customer focused96% of surveyed tenants are satisfied with Centuria as an asset owner.1Industry participationNABERS Accelerate Program For Warehouses And Cold Stores.Green Building Council membershipsCenturia’s second Sustainability Report will be published later this year, in time for Centuria Capital Group's 2022 Annual General Meeting.Conscious of climate change ENVIRONMENT Climate change impacts the way we do business and the communities in which we operate. Increasing severity in weather patterns and the movement of capital towards climate resilient and low carbon opportunities requires a proactive and practical response. CLIMATE ACTION Across out listed and unlisted portfolio, we are continuing to improve asset efficiency, reduce our energy consumption and respective generated emissions. Asset upgrades are focused on improving building ratings under NABERS and delivering value for our tenants and investors. Our Office REIT (ASX:COF) and Industrial REIT (ASX:CIP) have also committed to increase the amount of onsite solar, across their respective portfolios. CLIMATE RESILIENCE We have risk assessed our existing portfolio against probable climate impacts under a 2°C and 4°C scenario. New assets are also screened for probable climate risks before being acquired by our funds. Transition plans are being developed for assets to aid in the mitigation of potential severe weather events, driven by climate change. Centuria reports under the Task Force on Climate-related Financial Disclosure (TCFD) recommendations, with our second disclosure to be released later this year as part of our Sustainability Report. How will climate change affect Australia? Hotter and drier conditions will lead to harsher bushfire weather. Heatwaves will become even longer and hotter. Higher sea levels will increase flooding in coastal cities and towns. Potential severe thunderstorm days are expected to increase. Droughts are likely to happen even more often. Cyclones are likely to become more intense, but less frequent. Extreme rainfall events are expected to become more intense. Source: Climate Council ONGOING CLIMATE ACTION ACROSS OUR VALUE CHAIN Installed a 323kW solar panel system. COF has also undertaken a portfolio wide feasability assesment, with plans to install an additional 1.5MW of solar panels across existing assets. In partnership with our tenant, a 1MW system was installed. CIP is also partnering with other valued tenants to install more than 1.5MW of solar panels in FY23, with plans to increase this in years to come. COF: 8 CENTRAL AVENUE, REDFERN NSW CIP: 21 JAY STREET, TOWNSVILLE QLD Valued stakeholders SOCIAL A valued stakeholder is one we seek to assist in the creation of long term shared value. We define our stakeholders as our customers (tenants), investors (individual and institutional), suppliers, industry bodies, communities in which we operate and our employees. CUSTOMER FOCUSED Our tenants are important stakeholders. We undertake annual tenant engagement surveys to better connect and understand how we can better support them, while proactively engaging with our investors to understand where their values lie. COMMUNITY FOCUSED At Centuria, it is important for us to support and contribute to the prosperity of the local communities in which we operate. We aim to create long term partnerships with the local communities where our assets are located and not- for-profit organisations. To this end, Centuria has continued its ten year partnership with St Lucy’s School, a special primary and high school for children with disabilities located in Wahroonga on Sydney’s North Shore. This year we were able to raise a record-breaking $175,000 for the school, which is a 25% increase from last year. DIVERSE, INCLUSIVE AND HEALTHY WORKPLACES We are focused on promoting a diverse and inclusive workplace, prioritising the health and wellbeing of all our employees. An annual employee (including part time and contractors) engagement survey is conducted by our external provider, Culture Amp. This annual survey is an important tool used by management to identify areas of opportunity to create a resilient and thriving work culture. Centuria also provides wider support for our employees, who benefit from: • a generous parental leave program; and • Centuria Rewards – a rewards program which provides financial assistance for employees. 96% of surveyed tenants are satisfied with Centuria as an asset owner.1 94% of employees are proud to work at Centuria.2 41% women in the workplace. Centuria is committed to a diverse and inclusive workplace. 1. Centuria undertakes annual tenant surveys. The figure reported is from the Group’s FY22 survey. 2. Centuria undertakes annual employee engagement surveys. The figure reported is from the Group’s FY22 survey. 42 | Centuria Capital Group – Annual Report 2022 Centuria Capital Group – Annual Report 2022 | 43 Centuria Capital Group – Annual Report 2022 | 43 $175,00 raisedin support of St Lucy's School. John McBain Susan Wheeldon John Slater Jason Huljich EXECUTIVE DIRECTOR AND JOINT CEO INDEPENDENT NON-EXECUTIVE DIRECTOR INDEPENDENT NON-EXECUTIVE DIRECTOR EXECUTIVE DIRECTOR AND JOINT CEO Garry Charny CHAIRMAN Kristie Brown Peter Done INDEPENDENT NON-EXECUTIVE DIRECTOR INDEPENDENT NON-EXECUTIVE DIRECTOR 44 | Centuria Capital Group – Annual Report 2022 Centuria Capital Group – Annual Report 2022 | 45 Board of directors Garry Charny CHAIRMAN John McBain EXECUTIVE DIRECTOR AND JOINT CEO Jason Huljich EXECUTIVE DIRECTOR AND JOINT CEO Susan Wheeldon INDEPENDENT NON-EXECUTIVE DIRECTOR Garry was appointed as Chairman of the Centuria Capital Group Board on 30 March 2016. He has significant board level experience with listed and unlisted companies across a diverse range of sectors including property (Trafalgar Corporate, which became 360 Capital and Manboom); retail (Apparel Group, Sportscraft and Saba); technology (General Electric EcXpress and 1st Available) and media (Boost Media, Macquarie Radio, and April Entertainment). Currently he is Chairman, Managing Director and founder of Wolseley Corporate, an Australian corporate advisory and investment house that consults on local and international transactions in the USA, United Kingdom, Malaysia, India and throughout Southeast Asia. Wolseley specialises in mergers and acquisitions, strategic corporate advice and contentious matters resolution. Garry is also Chairman of Spotted Turquoise Films, an international film and television company based in Sydney and Los Angeles, and Chairman of Shero Investments, a Sydney based investment company. Previously, he was co-founder and Chairman of Boost Media International, an international media advisory business with offices in Sydney, New York, Toronto, Kuala Lumpur and Delhi. He was also President of Boost Media LLC (USA). From 1983 to 1995, Garry practised as a Barrister-at-Law at the Sydney Bar specialising in corporate, commercial, equity and media. He was an Adjunct Lecturer in Law at the University of NSW. Joint CEO John McBain’s 42 year real estate career in both Australasia and the UK spans the commercial and industrial markets and more latterly the healthcare and agriculture real estate sectors. He is an Executive Director of Centuria Capital Limited, Centuria Life Limited, Centuria Healthcare Pty Limited and Primewest Management Limited and a Non- Executive Director of Centuria Bass Credit Limited. John is a director of NZX-listed Asset Plus Limited (NZX:APL) and an alternate director of Centuria Funds Management NZ Limited and Centuria NZ Industrial Fund Limited. He also serves on the Centuria NZ and Centuria Healthcare Management committees and the Centuria Life Investment Committee. John and Jason Huljich founded Centuria Capital together over 25 years ago and the group now oversees more than $20 billion of assets under management including four separate publicly listed vehicles and over 400 staff throughout Australia, New Zealand and the Philippines. John is chiefly responsible for Centuria’s corporate team including corporate acquisitions and mergers. His responsibilities include corporate strategy as well as leadership of the Finance, Governance, Compliance, Corporate Investor Relations, Marketing, Communications and Centuria Life teams who report directly to him. He serves on the Non-Financial Risk Committee and the ESG Management Committee. Since 2007, John has been instrumental in the integration of several businesses into the Centuria group, including the 360 Capital Group (2016), a majority interest in Heathley Asset Management (now Centuria Healthcare) (2019), New Zealand-based Augusta Capital Limited (now Centuria NZ) (2020) and Primewest Group (2021). This corporate acquisition strategy, together with a highly successful asset acquisition and funds management program overseen by fellow CEO Jason Huljich, has seen the pair oversee significant corporate growth culminating in Centuria Capital Limited entering the S&P ASX 200 Index in July 2021. John has a property valuation qualification from the University of Auckland. Joint CEO Jason’s 26 year real estate career spans the commercial and industrial sectors. Jason is an Executive Director of Centuria Capital Group, Centuria Life Limited, Centuria Healthcare Pty Limited, Centuria Healthcare Asset Management Limited and Primewest Management Limited, as well as a director of Centuria Funds Management (NZ) Ltd and Centuria NZ Industrial Fund Limited and a Non-Executive Director of Centuria Bass Credit Limited. Jason is joint CEO alongside John McBain, collectively overseeing more than $20 billion of assets under management and managing over 400 staff throughout Australia, New Zealand and the Philippines. Jason is chiefly responsible for the Group's real estate portfolio and funds management operations including the listed Centuria Industrial REIT (ASX:CIP) and Centuria Office REIT (ASX:COF), as well as Centuria’s extensive range of unlisted funds across Australia and New Zealand. Several unlisted funds regularly feature in the top 10 performing core funds in the Property Council of Australia/MSCI Australia Unlisted Retail Quarterly Property Funds Index. Since Centuria was established, Jason has been pivotal in raising over $5 billion for the listed and unlisted vehicles. He has been central to positioning Centuria as Australia’s fourth largest external property funds manager. CNI and CIP are included in the S&P/ASX 200 Index. COF is included in the S&P/ASX 300 Index. CIP and COF are part of the FTSE EPRA Nareit Global Index. Jason has a hands on approach to the real estate operations across the Group’s platform. The Transactions, Development, Funds Management, Distribution and Asset Management teams all report directly to him. Jason’s career began after graduating with a Bachelor of Commerce (Commercial Law major) from the University of Auckland. He is a Property Funds Association (PFA) of Australia past President. The PFA is the peak industry body representing the $125 billion direct property investment industry. Jason currently sits on the Property Council of Australia’s Global Investment Committee. Susan joined the Centuria Capital Group Board as an Independent Non-Executive Director in August 2016. She brings extensive experience across international commercial markets within ICT, real estate, legal, aviation and online retail sectors. Currently Susan is Country Manager for Australia, New Zealand and Oceania at Airbnb. Previously, she served in a number of roles, including Head of Government and Performance and Head of Agency at Google, working with major national and global companies to develop and deliver growth strategies that future proof and build clients’ businesses and brands in a constantly changing environment. During her career, Susan has held a number of senior roles in Australia and the United Kingdom across a diverse range of industries including global law firms DLA Piper and King & Wood Mallesons, working with the Virgin Australia and Virgin Atlantic airline brands, as Vice President of Groupon, and as Head of Brand and Retail at AMP Capital Shopping Centres. She holds an MBA from the Australian Graduate School of Management (AGSM) and is a member of the Australian Institute of Company Directors. 46 | Centuria Capital Group – Annual Report 2022 Centuria Capital Group – Annual Report 2022 | 47 John Slater INDEPENDENT NON-EXECUTIVE DIRECTOR Kristie Brown INDEPENDENT NON-EXECUTIVE DIRECTOR Peter Done INDEPENDENT NON-EXECUTIVE DIRECTOR John was appointed as a financial adviser to Centuria Life Limited in 2011 and as a member of its Board in 2013. On 22 May 2013, he was appointed as a Director of Centuria Capital Limited. He also serves on the Nomination and Remuneration Committee. John was previously a senior executive at KPMG Financial Services prior to establishing a financial advisory practice. Since the sale of that practice he has focused on consulting activities and his non-executive roles with Centuria. John has deep experience in all financial market sectors gained during his 35 year career. Over this time, he has been directly involved with investments and investment committees and sits on the investment committees of Centuria Life Limited and the Over Fifty Guardian Friendly Society Limited. John continues to be active in investment committee activities in other non-aligned financial groups. Kristie is an experienced real estate investment and legal professional who was appointed to the Centuria Board on 15 February 2021 as an Independent Non- Executive Director as well as a member of the Group’s Audit, Risk and Compliance Committee (ARCC) and the Conflicts Committee. Kristie has a background in corporate law with over 17 years’ experience in funds management and M&A. She has practiced at Clayton Utz and Ashurst (then, Blake Dawson Waldron) and has considerable experience working with large corporations, fund managers, financial institutions, private equity and hedge fund operators, real estate investment trusts, developers and financiers. Subsequent to her legal career, Kristie established a private investment business, Danube View Investments, which primarily operates in the Australian property sector. Kristie is also a founding partner of investment firm, Couloir Capital, which was established in 2020 to invest its own capital in unique investment opportunities and to introduce such opportunities to like-minded family office and high net worth investors. Peter joined the Centuria Capital Group Board as an Independent Non-Executive Director in November 2007. He is also Chair of Centuria Capital Group’s Audit, Risk and Compliance Committee. He has extensive knowledge of accounting, audit and financial management in the property development and financial services industries, corporate governance, regulatory issues and board processes through his many senior roles. Peter hails from a 38 year career at KPMG. From 1979, he held the position of Partner until his retirement in 2006. During his 27 years as Partner, Peter was the lead audit partner for many clients, including those involved in property development, primary production and television and film production and distribution. Peter holds a Bachelor of Commerce (Accounting) from the University of New South Wales and is a Fellow of Chartered Accountants Australia and New Zealand. 48 | Centuria Capital Group – Annual Report 2022 Centuria Capital Group – Annual Report 2022 | 49 Senior executives Anna Kovarik GROUP CHIEF RISK OFFICER AND COMPANY SECRETARY Anna joined Centuria in July 2018 in the role of General Counsel and Company Secretary. In July 2020 Anna was promoted to Group Chief Risk Officer and Company Secretary. Prior to joining Centuria, Anna held the position of Group Risk Manager at Mirvac Group and was previously Head of Group Insurance for AMP and General Counsel and Company Secretary at AMP Capital Brookfield. Anna holds a Masters of Information Technology, a BA (Hons) in Systems Management and was awarded a distinction in the Global Executive MBA program at the University of Sydney. She is qualified as a solicitor in both the UK and NSW and was a senior associate at Allens law firm in Sydney where she specialised in the areas of real estate and funds management. Anna is a member of the Australian Institute of Company Directors. Ross Lees HEAD OF FUNDS MANAGEMENT Ross is the Head of Real Estate Funds Management and a Centuria Senior Executive Committee member. He is responsible for both listed and unlisted property funds in the office, industrial, retail, healthcare and agricultural sectors. This includes Australia’s largest ASX- listed pure-play office and industrial REITs (COF and CIP), and more than 100 open- and closed-ended unlisted property funds with AUM exceeding $19 billion. Ross joined Centuria in 2017 and has more than 17 years of investment management experience, having held senior transactional and portfolio management positions for peers including Dexus, LOGOS Group and Stockland. Ross holds a Master of Applied Finance from Macquarie University and Bachelor of Business (Property Economics) from UWS. Simon Holt CHIEF FINANCIAL OFFICER As Chief Financial Officer, Simon has been responsible for Centuria’s finance, information technology and treasury functions since 2016. Alongside the Joint CEOs, Simon is a key member of the senior team responsible for the Group’s expansion across Australia, New Zealand and the Philippines, and he has been instrumental in debt and equity raisings across all the Centuria listed entities, in particular Centuria Capital Limited. Simon takes immense pride in the key role he has played in Centuria’s evolution, and in reporting year on year growth across distributions per security and operating profits made by the Group. He has been instrumental in structuring expanded capital sources through joint venture partnerships, and he has established a well performing treasury function which has overseen the issuance of Centuria corporate notes and further diversifying the Group lender pool. Simon has more than 25 years experience across local and global financial markets and has held a range of senior financial positions which include Westfield Group and Westfield Trust. Simon is a Chartered Accountant and holds a Bachelor of Business degree (Accounting and Marketing majors) from the University of Technology, Sydney (UTS). He is also a Member of Australian Institute of Company Directors and a licenced Class 1 Agent for Real Estate Sales, Leasing and Auctions. John McBain Jason Huljich EXECUTIVE DIRECTOR AND JOINT CEO EXECUTIVE DIRECTOR AND JOINT CEO 50 | Centuria Capital Group – Annual Report 2022 50 | Centuria Capital Group – Annual Report 2022 Centuria Capital Group – Annual Report 2022 | 51 Andrew Essey HEAD OF TRANSACTIONS Andrew joined Centuria Capital Group in early 2013 and for the past six years, as Group Head of Transactions, has been responsible for originating and managing the Group’s property transactions, across all real estate sectors, totalling more than $8 billion of direct deals on behalf of the Group and its funds. Andrew is also a member of Centuria’s Senior Executive Committee and manages a team of 10 transaction specialists across Australia. He has 15 years’ experience in the Australian property industry. Prior to his current role, Andrew was Centuria’s National Leasing Manager and a Fund Manager and prior to this, he worked in DTZ’s Sydney agency for six years. Andrew holds a Bachelor of Business Administration from Radford University, Virginia, USA with a major in marketing and a minor in economics. Senior executives Mark Francis CEO - CENTURIA NEW ZEALAND CEO of Centuria’s New Zealand division, Mark Francis, has a career spanning more than 25 years across financial and real estate markets. He founded Augusta Capital in 2001 and assumed his current position at the helm of Centuria’s New Zealand entity following the companies’ merger. Mark is a board member of the Centuria Funds Management NZ and the Centuria NZ Industrial Fund as well as a Centuria Capital Senior Executive Committee member. He is also Managing Director of the NZX-listed Asset Plus Limited (NZX:APL). He is responsible for overseeing a NZD$2.9 billion real estate portfolio spanning office, industrial, healthcare, retail and tourism assets across listed and unlisted funds while managing a team of more than 40 staff across three offices. Prior to founding Augusta, Mark was an equity analyst with Hendry Hay MacIntosh (now Merrill Lynch in NZ) before undertaking property development roles with Force Corporation Limited and Village Roadshow Australia Pty Ltd. Mark graduated from the University of Otago with a Bachelor of Commerce (Finance). Andrew Hemming MANAGING DIRECTOR, CENTURIA HEALTHCARE For more than two decades, Andrew has worked across investment markets including Australian and US equity derivatives, fixed term interest markets and commercial real estate sectors, the latter focused on healthcare property. His investment experience spans Australian, British, European and US markets. As managing director of Centuria Healthcare, Andrew is responsible for strategic business growth, deal origination, asset transactions, and leads 17 healthcare property specialists. He has grown the business to 60 assets under management worth c.$1.4 billion (as at 30 June 2022). Andrew guides the Centuria Healthcare investment division with a preference towards assets that provide cost-effective, best models of care. He is instrumental in securing institutional mandates while also overseeing development funds, closed-ended unlisted funds and an open-ended unlisted retail fund – Centuria Healthcare Property Fund (CHPF). In 2019, Centuria Capital Group acquired Heathley Limited to form Centuria Healthcare. Andrew was appointed Managing Director of Heathley in 2013 and continues in this role. His career includes senior positions at investment houses including BNP Paribas, Merrill Lynch and Folkestone. Andrew holds a Bachelor of Arts, majoring in commerce, and a Master of Business Administration majoring in accounting and finance from Macquarie University. André Bali HEAD OF DEVELOPMENT Victor Georos HEAD OF PORTFOLIO AND ASSET MANAGEMENT Since 2007, André has overseen all Centuria’s project and property development functions, including development and debt funds. Victor joined Centuria as Senior Portfolio Manager in April 2013 and was appointed Head of Portfolio and Asset Management in July 2015. In his role he is responsible for overseeing portfolio and asset management of Centuria’s portfolio, including the development and implementation of strategies to enhance value through active asset management and development. Victor works closely with the Funds Management team and the Development team. In addition Victor manages the Centuria Property Fund’s Valuation program and is actively involved with the constant review of best practice policies and procedures. Victor has extensive experience in asset and investment management, development and funds management, across the office, retail and industrial sectors, with a key focus on results and ability to build high performance teams across all sectors. Prior to joining Centuria Victor held senior positions with GPT Group and Lendlease, including Head of Industrial and Business Parks at GPT. Victor holds a Bachelor of Land Economy and a Graduate Diploma of Finance and Investment (FINSIA) and is a graduate member of the Australian Institute of Company Directors (GAICD). He is responsible for both passive and active management of Centuria and Centuria Healthcare’s listed and unlisted portfolio including capital works, planning, strategic repositioning of assets to maximise returns, development and project management, joint ventures and partnerships and working closely with Centuria’s leasing, capital transactions and funds management teams to enhance value for Centuria’s investors. André has more than 30 years experience in development and investment management across numerous sectors including office, health, residential, industrial and retail. Currently he oversees c.$2.1 billion worth of development projects throughout Australasia across industrial, healthcare, office, dementia care residences, social and affordable housing, hotel and residential projects (as at 31 December 2021). Prior to Centuria, André founded and operated a specialised property consulting and advisory company. His experience also includes several senior positions in a number of property development companies. André holds an Honours Degree in Applied Science from UNSW, Masters of Commerce (Land Economics) from UWS, Grad Cert of Finance from AGSM, AAPI, MAICD and held non- executive roles on several not for profit organisations including Habitat for Humanity. Michael Blake HEAD OF CENTURIA LIFE With more than three decades in the wealth management industry across blue chip Australian and multinational corporations, Michael Blake joined Centuria in 2016 and is responsible for investment bond products provided by Centuria Life. He is chiefly responsible for Centuria Life’s P&L, strategic direction, funds under management growth, product development and directly reports to the Centuria Life Limited (CLL) Board. Prior to his current position, Michael was pivotal in launching the unlisted Centuria Diversified Property Fund. Michael joined Centuria after 12 years with a prominent international real estate investor and manager, where he secured several industry awards including Fund Manager of the Year and Direct Property and A-REIT of the Year. Prior to this, he held Senior Management roles for financial institutions across a 21 year period. Michael holds a Bachelor of Financial Administration from the University of New England, a Diploma of Financial Planning from the Royal Melbourne Institute of Technology (RMIT), a Master of Business Administration from Macquarie University and is a graduate of the Australian Institute of Company Directors. Michael has held Board and Investment Committee positions in Australia and New Zealand. 52 | Centuria Capital Group – Annual Report 2022 Centuria Capital Group – Annual Report 2022 | 53 Senior executives Centuria’s people Alexandra Koolman GROUP COMMUNICATIONS MANAGER Alexandra is Group Communications Manager, responsible for internal and external communications across Centuria’s c.$20 billion listed and unlisted equity and debt funds, ESG initiatives, development projects and investment bonds. She joined the Group in April 2020, bringing extensive domestic and international corporate communications and public relations experience across commercial, residential, build to rent and development real estate sectors. Alexandra brings 20 years experience to Centuria, having held senior positions with Australian property developers and British real estate agencies, including Colliers International. She holds a Bachelor of Business (Public Relations) degree from the Queensland University of Technology (QUT). Sara Stacey HEAD OF MARKETING Sara is Head of Marketing, responsible for Centuria’s full end-to-end marketing strategy, planning and execution across the Group’s business entities and channels within Australia and New Zealand, which incorporates brand positioning, real estate capital fundraising campaigns and investment bond promotions. Since joining the Group in 2019, Sara has been instrumental in supporting Centuria’s growth through the introduction of a new Corporate brand while integrating several merged businesses including Heathley Limited (now Centuria Healthcare), Bass Capital (now Centuria Bass Credit), Augusta Capital (now Centuria NZ) and most recently Primewest. Sara brings more than 20 years global marketing experience to Centuria, with a strong financial markets background. Her career spans senior roles within prestigious international institutions including Pictet Asset Management, BlueBay Asset Management (now part of the Royal Bank of Canada) and State Street Global Advisors where she transferred to the Sydney office in 2015 as Head of Marketing – Australia. Her successful career has been recognised with several marketing awards including MAX’s 2022 Agency Campaign of the Year (winner), MAX’s 2022 Video Campaign of the Year (finalist), the Financial Standard’s Marketer of the Year 2016, among others. Sara studied a Chartered Institute of Marketing (CIM) accreditation from the London Metropolitan University and holds a Graphic Design Diploma (Merit) from Colchester Institute, UK. 54 | Centuria Capital Group – Annual Report 2022 ST LUCY'S VOLUNTEERING, MAY 2022 MELBOURNE MASTERCHEF, JULY 2022 CENTURIA BASS CITY2SURF, AUGUST 2022 MANILA TEAM VISIT, MAY 2022 CENTURIA NZ SENIOR TEAM Centuria Capital Group – Annual Report 2022 | 55 Centuria Capital Group – Annual Report 2022 | 55 Directors’ report For the year ended 30 June 2022 The Directors of Centuria Capital Limited (the Company) present their report together with the consolidated financial statements of the Company and its controlled entities (the Group) for the financial year ended 30 June 2022 and the auditor’s report thereon. ASX-listed Centuria Capital Group consists of the Company and its controlled entities including Centuria Capital Fund (CCF). The shares in the Company and the units in CCF are stapled, quoted and traded on the Australian Securities Exchange (ASX) as if they were a single security under the ticker code CNI. DIRECTORS AND DIRECTORS’ INTERESTS NAME APPOINTED DIRECTORSHIP OF OTHER LISTED COMPANIES RESIGNED Mr Garry S. Charny 23 Feb 2016 None Mr Peter J. Done 28 Nov 2007 Centuria Industrial REIT (CIP)1 Centuria Office REIT (COF)2 Mr John R. Slater 22 May 2013 None Ms Susan L. Wheeldon 31 Aug 2016 None Ms Kristie R. Brown 15 Feb 2021 None Mr John E. McBain 10 July 2006 None Mr Jason C. Huljich 28 Nov 2007 None Mr Nicholas R. Collishaw 27 Aug 2013 Centuria Industrial REIT (CIP)1 Centuria Office REIT (COF)2 Redcape Hotel Group (RDC)3 30 Aug 2021 1. Director of Centuria Property Funds No. 2 Limited (CPF2L) as responsible entity for Centuria Industrial REIT. 2. Director of Centuria Property Funds Limited (CPFL) as responsible entity for Centuria Office REIT. 3. Nicholas Collishaw resigned as Director from the Centuria Industrial REIT and Centuria Office REIT on 30 August 2021. UNLISTED: 25 GRENFELL STREET, ADELAIDE SA 56 | Centuria Capital Group – Annual Report 2022 Centuria Capital Group – Annual Report 2022 | 57 Directors’ report For the year ended 30 June 2022 Mr Garry S. Charny, BA. LL.B. INDEPENDENT NON-EXECUTIVE DIRECTOR AND CHAIRMAN Mr Peter J. Done, B.Comm, FCA. INDEPENDENT NON-EXECUTIVE DIRECTOR Mr John R. Slater, Dip.FS (FP), F Fin. INDEPENDENT NON-EXECUTIVE DIRECTOR Ms Susan L. Wheeldon, MBA. INDEPENDENT NON-EXECUTIVE DIRECTOR Experience and expertise Experience and expertise Experience and expertise Experience and expertise Garry was appointed to the Board on 23 February 2016 and appointed Chairman of Centuria Capital Group on 30 March 2016. Garry is also Chair of Centuria Life Limited, Over Fifty Guardian Friendly Society Limited and Centuria Healthcare Pty Ltd. He is Managing Director and founding Principal of Wolseley Corporate, an Australian based corporate advisory and investment house which transacts both domestically and internationally. He has significant, board-level experience in listed and unlisted companies across a diverse range of sectors including property, retail, technology and media. He formerly practised as a barrister in the fields of commercial and equity. Other directorships Wolseley Corporate (Chairman) Spotted Turquoise Films (Chairman) Shero Investments (Chairman) Responsibilities • Chair of the Centuria Capital Limited and Centuria Funds Management Limited Boards, Member of the Conflicts Committee • Member of the Nomination and Remuneration Committee (stepped down as Chair on 22 February 2022) • Member of the Centuria Capital Limited and Centuria Funds Management Limited Audit, Risk and Compliance Committee (resigned 22 February 2022) • Chair of the Centuria Life Limited Board • Member of the Centuria Life Limited Audit Committee • Member of the Centuria Life Limited Risk and Compliance Committee Chair of the Centuria Healthcare Pty Limited Board Peter was appointed to the Board on 28 November 2007. Peter was a Partner at KPMG for 27 years until his retirement in June 2006. He has extensive knowledge in accounting, audit and financial management in the property development and financial services industries, corporate governance, regulatory issues and Board processes through his many senior roles. Other directorships Centuria Industrial REIT Centuria Office REIT Responsibilities • Member of the Centuria Capital Limited and Centuria Funds Management Limited Boards, Member of the Nomination and Remuneration Committee • Chair of the Centuria Capital Limited and Centuria Funds Management Limited Audit, Risk and Compliance Committee • Member of the Centuria Life Limited Board • Chair of the Centuria Life Limited Audit Committee • Chair of the Centuria Life Limited Risk and Compliance Committee Member of the Centuria Life Limited Investment Committee • Member of the Centuria Property Funds Limited Board • Member of the Centuria Property Funds Limited Audit, Risk and Compliance Committee Member of the Centuria Property Funds No. 2 Limited Board • Chair of the Centuria Property Funds No. 2 Limited Audit, Risk and Compliance Committee • Member of the Over Fifty Guardian Friendly Society Limited Board • Chair of the Over Fifty Guardian Friendly Society Limited • Chair of the Over Fifty Guardian Friendly Society Limited Board Audit Committee • Member of the Over Fifty Guardian Friendly Society Limited Audit Committee • Chair of the Over Fifty Guardian Friendly Society Limited Risk and Compliance Committee • Member of the Over Fifty Guardian Friendly Society Limited Risk and Compliance Committee Member of the Culture and ESG Committee Interests in CNI Ordinary stapled securities: 1,506,182 Interests in CNI Ordinary stapled securities: 422,753 John was appointed as a financial adviser to Centuria Life Limited in 2011 and as a member of its Board in 2013. On 22 May 2013, he was appointed as a Director of Centuria Capital Limited. He also serves on the Nomination and Remuneration Committee. John was previously a senior executive at KPMG Financial Services prior to establishing a financial advisory practice. Since the sale of that practice he has focused on consulting activities and his non-executive roles with Centuria. John has deep experience in all financial market sectors, gained during his 35 year career. Over this time, he has been directly involved with investments and investment committees and sits on the Investment Committees of Centuria Life Limited and the Over Fifty Guardian Friendly Society Limited. John continues to be active in investment committee activities in other non-aligned financial groups. Other directorships None Responsibilities • Member of the Centuria Capital Limited and Centuria Funds Management Limited Boards, Member of the Centuria Capital Limited and Centuria Funds Management Limited Nomination and Remuneration Committee • Member of the Centuria Capital Limited and Centuria Funds Management Limited Audit, Risk and Compliance Committee • Member of the Centuria Life Limited Board • Chair of the Centuria Life Limited Investment Committee • Member of the Over Fifty Guardian Friendly Society Limited Investment Committee Interests in CNI Ordinary stapled securities: 3,110,677 Susan was appointed to the Board on 31 August 2016. Currently Susan is Country Manager for Australia, New Zealand and Oceania at Airbnb. Previously, she served in a number of roles, including Head of Government and Performance and Head of Agency at Google, working with major national and global companies to develop and deliver growth strategies that future-proof and build clients’ businesses and brands in a constantly changing environment. She has previous experience in retail property asset management at AMP Capital Shopping Centres, as Head of Brand and Retail, responsible for delivering alternative revenue from 38 retail assets across Australia and New Zealand with combined annual sales in excess of $5 billion. Other directorships None Responsibilities • Member of the Centuria Capital Limited and Centuria Funds Management Limited Boards, Member of the Centuria Capital Limited and Centuria Funds Management Limited Conflicts Committee (resigned 22 February 2022) • Chair of the Centuria Capital Limited and Centuria Funds Management Limited Culture and ESG Committee • Chair of the Centuria Capital Limited and Centuria Funds Management Limited Nomination and Remuneration Committee (appointed 22 February 2022) Interests in CNI Ordinary stapled securities: Nil 58 | Centuria Capital Group – Annual Report 2022 Centuria Capital Group – Annual Report 2022 | 59 Directors’ report For the year ended 30 June 2022 Ms Kristie R. Brown, B. Comm, B. Law (Hons) INDEPENDENT NON-EXECUTIVE DIRECTOR Mr John E. McBain, Dip. Urban Valuation EXECUTIVE DIRECTOR AND JOINT CHIEF EXECUTIVE OFFICER Mr Jason C. Huljich, B. Comm. EXECUTIVE DIRECTOR AND JOINT CHIEF EXECUTIVE OFFICER Experience and expertise Experience and expertise Experience and expertise Kristie is an experienced real estate investment and legal professional who was appointed to the Centuria Board on 15 February 2021 as an Independent Non-Executive Director as well as a member of the Group’s Audit, Risk and Compliance Committee (ARCC) and the Conflicts Committee. Kristie has a background in corporate law with over 17 years’ experience in funds management and M&A. She has practiced at Clayton Utz and Ashurst (then, Blake Dawson Waldron) and has considerable experience working with large corporations, fund managers, financial institutions, private equity and hedge fund operators, real estate investment trusts, developers and financiers. Joint CEO John McBain’s 42 year real estate career in both Australasia and the UK spans the commercial and industrial markets and more latterly the healthcare and agriculture real estate sectors. He is an Executive Director of Centuria Capital Limited, Centuria Life Limited, Centuria Healthcare Pty Limited and Primewest Management Limited and a Non-Executive Director of Centuria Bass Credit Limited. John is a Director of NZX-listed Asset Plus Limited (NZX:APL) and an alternate Director of Centuria Funds Management NZ Limited and Centuria NZ Industrial Fund Limited. He also serves on the Centuria NZ and Centuria Healthcare Management committees and the Centuria Life Investment Committee. Joint CEO Jason’s 26 year real estate career spans the commercial and industrial real estate sectors. Jason is an Executive Director of Centuria Capital Group, Centuria Life Limited, Centuria Healthcare Pty Limited, Centuria Healthcare Asset Management Limited and Primewest Management Limited, as well as a director of Centuria Funds Management (NZ) Ltd and Centuria NZ Industrial Fund Limited and a Non-Executive Director of Centuria Bass Credit Limited. Jason is Joint CEO alongside John McBain, collectively overseeing more than $20 billion of assets under management and managing over 400 staff throughout Australia, New Zealand, and the Philippines. He has been central to positioning Centuria as Australia’s fourth largest external property funds manager. CNI and CIP are included in the S&P/ASX 200 Index. COF is included in the S&P/ASX 300 Index. CIP and COF are part of the FTSE EPRA Nareit Global Index. Jason has a hands-on approach to the real estate operations throughout the Group’s platform. The Transactions, Development, Funds Management, Distribution and Asset Management teams all report directly to him. Jason’s career began after graduating with a Bachelor of Commerce (Commercial Law major) from the University of Auckland. He is a Property Funds Association (PFA) of Australia Past President. The PFA is the peak industry body representing the $125 billion direct property investment industry. Jason currently sits on the Property Council of Australia’s Global Investment Committee. Subsequent to her legal career, Kristie established a private investment business, Danube View Investments, which primarily operates in the Australian property sector. Kristie is also a founding partner of investment firm, Couloir Capital, which was established in 2020 to invest its own capital in unique investment opportunities and to introduce such opportunities to like-minded family office and high net worth investors. Other directorships Colouir Capital Responsibilities • Member of the Centuria Capital Limited and Centuria Funds Management Limited Boards, Member of the Centuria Capital Limited and Centuria Funds Management Limited Audit, Risk and Compliance Committee • Member of the Centuria Capital Limited and Centuria Funds Management Limited Conflicts Committee Interests in CNI Ordinary stapled securities: Nil John and Jason Huljich founded Centuria Capital together over 25 years ago and the group now oversees more than $20 billion of assets under management including four separate publicly listed vehicles and over 400 staff throughout Australia, New Zealand and the Philippines. John is chiefly responsible for Centuria’s corporate team including acquisitions and mergers. His responsibilities include strategy as well as leadership of the Finance, Governance, Compliance, Corporate Investor Relations, Marketing, Communications and Centuria Life teams who report directly to him. He jointly steers the Senior Executive Committee and serves on the Non-Financial Risk Committee and the ESG Management Committee. Since 2007, John has been instrumental in the integration of several businesses into the Centuria group, including the 360 Capital Group (2016), a majority interest in Heathley Asset Management (now Centuria Healthcare) (2019), New Zealand-based Augusta Capital Limited (now Centuria NZ) (2020) and Primewest Group (2021). This strategy, together with a highly successful asset acquisition and funds management program overseen by fellow CEO Jason Huljich, has seen significant growth culminating in Centuria Capital Limited entering the S&P ASX 200 Index in July 2021. John has a property valuation qualification from the University of Auckland. Other directorships Asset Plus Limited Responsibilities Group Joint Chief Executive Officer Interests in CNI Ordinary stapled securities: 7,700,782 Performance rights granted: 2,367,445 Jason is chiefly responsible for the Group's real estate portfolio and funds management operations including the listed Centuria Industrial REIT (ASX:CIP) and Centuria Office REIT (ASX:COF), as well as Centuria’s extensive range of unlisted funds across Australia and New Zealand. Several unlisted funds regularly feature in the Top 10 Performing Core Funds in the Property Council of Australia/MSCI Australia Unlisted Retail Quarterly Property Funds Index. Other directorships None Special responsibilities Group Joint Chief Executive Officer Interests in CNI Since Centuria was established, Jason has been pivotal in raising over $5 billion for the listed and unlisted vehicles. Ordinary stapled securities: 6,258,581 Performance rights granted: 2,367,445 DIRECTORS’ MEETINGS The following table sets out the number of directors’ meetings (including meetings of committees of directors) held during the financial year and the number of meetings attended by each director (while they were a director or committee member). AUDIT, RISK MANAGEMENT AND COMPLIANCE COMMITTEE MEETINGS NOMINATION AND REMUNERATION COMMITTEE MEETINGS BOARD MEETINGS CONFLICTS COMMITTEE MEETINGS CULTURE AND ESG COMMITTEE MEETINGS DIRECTOR Mr Garry S. Charny Mr Peter J. Done Mr John R. Slater Ms Susan L. Wheeldon Ms Kristie R. Brown Mr John E. McBain Mr Jason C. Huljich Mr Nicholas R. Collishaw A 25 25 23 22 25 24 25 5 B 25 25 25 25 25 25 25 5 A 3 6 5 # 2 # # # B 4 6 6 # 2 # # # A 4 4 4 2 # # # # B 4 4 4 2 # # # # A 16 # # 11 4 # # # B 16 # # 12 4 # # # A 4 # # 4 # # 4 # B 4 # # 4 # # 4 # A = Number of meetings attended B = Number of meetings held during the time the Director held office during the year # = Not a member of committee 60 | Centuria Capital Group – Annual Report 2022 Centuria Capital Group – Annual Report 2022 | 61 Directors’ report For the year ended 30 June 2022 COMPANY SECRETARY Anna Kovarik was appointed to the position of Company Secretary on 5 July 2018. Anna holds a Masters of Information Technology, a BA (Hons) in Systems Management and was awarded a distinction in the Global Executive MBA program at the University of Sydney. She is qualified as a solicitor in both the United Kingdom and New South Wales and was a senior associate at Allens law practice in Sydney. Prior to joining Centuria, Anna held the position of Group Risk Manager at Mirvac Group and was previously Head of Group Insurance for AMP and General Counsel and Company Secretary at AMP Capital Brookfield. PRINCIPAL ACTIVITIES The principal activities of the Group during the financial year were the marketing and management of investment products including direct interest in property funds, friendly society investment bonds, property and development finance and other investments across Australasia. SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS Significant changes in the state of affairs of the Group during the financial year were as follows: • Contributed equity attributable to Centuria Capital Group increased to $1,415,301,000 reflecting stapled securities issued at completion of the takeover of Primewest Group Limited (Primewest) during the year, vesting of rights under the Executive Incentive Plan and participation in the Dividend Reinvestment Plan (DRP). Details of changes in contributed equity are disclosed in Note C11 to the consolidated financial statements. • On 1 December 2021, the Group acquired a 50% holding in Centuria Agriculture Fund I (formerly Centuria Agriculture REIT III), which holds the Warragul agriculture asset purchased for $177.0m. The Fund is consolidated as at 30 June 2022. • On 16 December 2021, the Group entered into a three year $100,000,000 secured loan note facility. The facility is a floating rate revolving facility with a margin of 2.25% which is due to mature on 16 December 2024. • On 31 March 2022, the Group acquired 13 Healthcare properties from Heritage Lifecare for NZ$98,700,000. The properties were funded in combination from free cash and a secured asset facility. On 19 April 2022, the Group acquired 25 Healthcare properties from Heritage Lifecare which was onsold to Centuria New Zealand Healthcare Property Fund (CNZHPF) on 20 April 2022. As at 30 June 2022, the Group has a loan receivable of $70,044,755 with CNZHPF. • In March 2022, the Fund issued a $70,000,000 three year senior secured medium term note (MTN) with a fixed coupon of 5.46% which is due to mature on 25 March 2025. • In April 2022, the Group issued a $30,000,000 three year senior secured medium term note (MTN) with a floating coupon of 3.70% which is due to mature on 25 March 2025. • On 30 June 2022, the Group entered into a five year $50,000,000 secured loan note facility. The facility is a floating rate revolving facility with a margin of 2.45% which is due to mature on 30 June 2027. OPERATING AND FINANCIAL REVIEW The Group recorded a consolidated statutory net loss for the year of $37,361,000 (2021: profit of $149,639,000). Statutory net (loss)/profit after tax has been prepared in accordance with the Corporations Act 2001 and Australian Accounting Standards, which comply with International Financial Reporting Standards. The Group recorded an operating profit after tax of $114,509,000 (2021: $70,211,000). Operating profit after tax excludes non-operating items such as transaction costs, fair value movements and share of net profit of equity accounted investments in excess of distributions received. The statutory NPAT includes a number of items that are not considered operating in nature, the table below provides a reconciliation from statutory profit to operating profit. RECONCILIATION OF STATUTORY PROFIT TO OPERATING PROFIT Statutory (loss)/profit after tax Statutory (loss)/earnings per security (EPS) (cents) LESS NON-OPERATING ITEMS: 2022 $’000 (37,361) (4.8) 2021 $’000 149,639 24.6 Unrealised loss/(gain) on fair value of investments and derivatives 167,087 (79,843) Transaction and other costs Seed capital write back Profit attributable to controlled property funds Eliminations between the operating and non-operating segment Share of equity accounted net loss/(profit) in excess of distributions received Write-off of capitalised borrowing costs in relation to repayment of secured notes Tax impact of above non-operating adjustments Operating profit after tax Operating EPS (cents) 4,395 (750) 4,503 - (13,861) (12,456) 4,710 3,083 - (12,793) 114,510 14.5 6,681 175 2,349 (837) 70,211 12.0 A summary of the Group’s operating segments is provided in Note A5 of the Financial Report. The Operating NPAT for the Group comprises the result of the divisions which report to the Joint CEOs and Board of Directors for the purpose of resource allocation and assessment of performance. SEGMENT OPERATING PROFIT AFTER TAX $’000 2022 2021 INCREASE/ (DECREASE) $’000 INCREASE/ (DECREASE) % HIGHLIGHTS Property funds management 78,785 44,558 34,227 Co-investments Developments Property and development finance Investment bonds management Corporate Operating profit after tax 28,863 26,066 4,526 2,912 3,412 3,419 286 547 (3,988) (4,665) 114,510 70,211 2,797 1,107 2,626 2,865 77 11 32 918 524 (a) (b) (c) (d) (e) A detailed Segment Profit and Loss as well as a detailed Segment Balance Sheet are outlined in Notes B1 and C1, respectively. Operational highlights for the key segments were as follows: (A) Property funds management For the year ended 30 June 2022, property funds management operating NPAT of $78,785,000 was higher than the prior year ending 30 June 2021 by $34,227,000 primarily due to the impact of acquisitions in the first half of the financial year and full year impact of the acquisition of Primewest Group Limited. The increase in AUM was primarily attributable to approximately $3.1 billion in organic acquisitions including $2.1 billion in unlisted real estate across healthcare and agriculture and $1.0 billion in listed real estate primarily in the industrial sector in CIP. For the year ended 30 June 2022, excluding the after tax impact of performance fees, the Property Funds Management segment NPAT increased by $23,698,000 or 74% reflecting the growth in AUM from the acquisition of Primewest at the end of FY21. 62 | Centuria Capital Group – Annual Report 2022 Centuria Capital Group – Annual Report 2022 | 63 Directors’ report For the year ended 30 June 2022 (B) Co-investments EVENTS SUBSEQUENT TO THE REPORTING DATE For the year ended 30 June 2022, the co-investments segment operating NPAT increased by $2,787,000. This was primarily due to additional units acquired during the year in COF and CIP, as well as $1,272,000 of rental income from Heritage Lifecare Centres. The operating profit after tax for the co-investments segment represents the distributions and returns generated from investment stakes held less applicable financing costs. (C) Developments For the year ended 30 June 2022, the developments segment operating net profit after tax was $4,526,000, an increase of $1,107,000 from the year ended 30 June 2021. The increase is primarily due to development management fees from growth in development pipeline. (D) Property and development finance For the year ended 30 June 2022, the property and development finance segment's operating NPAT was $2,912,000. This increase from last year represents the full year impact of the Group's acquisition of 50% interest in Centuria Bass, a real estate debt fund provider. The Centuria Bass operating NPAT has increased by 66% compared to FY21 due to significant expansion in funds under management. Centuria Bass is considered a joint venture and treated as an equity accounted investment commencing from 22 April 2021. The operating results of Centuria Bass are shown in Note B1 as the Group's proportionate share. (E) Investment bonds management For the year ended 30 June 2022, the investment bonds management segment's operating NPAT increased by $2,865,000 primarily due to an increase in investment management services, one-off recovery of prior year fee and cost savings associated with the unitisation of legacy capital guaranteed products. EARNINGS PER SECURITY (EPS) Basic EPS (cents/security) Diluted EPS (cents/security) 14.5 14.3 (4.8) (4.8) 12.0 11.9 24.6 24.2 2022 OPERATING 2022 STATUTORY(i) 2021 OPERATING 2021 STATUTORY (i) As the Group is in a statutory loss, the Diluted EPS is equal to Basic EPS. DIVIDENDS AND DISTRIBUTIONS ividends and distributions paid or declared by the Group during the current financial year were: CENTS PER SECURITY TOTAL AMOUNT $’000 DATE PAID DIVIDENDS/DISTRIBUTIONS PAID DURING THE YEAR Final 2021 dividend (100% franked) Final 2021 trust distribution Interim 2022 dividend (100% franked) Interim 2022 trust distribution DIVIDENDS/DISTRIBUTIONS DECLARED DURING THE YEAR Final 2022 dividend (100% franked) Final 2022 trust distribution 2.10 3.40 1.20 4.30 0.90 4.60 12,605 20,408 9,482 33,977 30 Jul 2021 30 Jul 2021 9 Feb 2022 9 Feb 2022 7,114 11 Aug 2022 36,363 11 Aug 2022 From 30 June 2022 to 9 August 2022, the fair value gain on investments in listed funds is $16,470,000, with the share price in CIP moving from $2.81 to $2.99 and the share price in COF moving from $1.70 to $1.68. In July 2022, $9,468,967 of units were redeemed in Centuria 111 St Georges Terrace Fund bringing the Group's ownership to 30%. As a result, the Group has deconsolidated this fund post year end. In July 2022, a new Centuria Agriculture Fund (CAF) was established and the put/call option in relation to remaining 50% interest in the Warragul asset was exercised with external investor equity from new investors entering into CAF. Subsequently, the Group's existing 50% ownership reduced to 38%. As a result, the Group has deconsolidated this fund post year end. Other than the above, there has not arisen in the interval between 30 June 2022 and the date hereof any item, transaction or event of a material and unusual nature likely, in the opinion of the directors of the Company, to affect significantly the operations of the Group, the results of those operations, or the state of affairs of the Group, in future financial periods. LIKELY DEVELOPMENTS The Group continues to pursue its strategy of focusing on its core operations, utilising a strengthened balance sheet to provide support to grow and develop these operations. Further information about likely developments in the operations of the Group and the expected results of those operations in future financial years has not been included in this report because disclosure of the information would be likely to result in unreasonable prejudice to the Group. ENVIRONMENTAL REGULATION The Group has policies and procedures to identify and appropriately address environmental obligations that might arise in respect of the Group's operations that are subject to significant environmental laws and regulation. The Directors have determined that the Group has complied with those obligations during the financial year and that there has not been any material breach. INDEMNIFICATION OF OFFICERS AND AUDITORS The Company has agreed to indemnify all current and former directors and executive officers of the Company and its controlled entities against all liabilities to persons (other than the Company or a related body corporate) which arise out of the performance of their normal duties as a director or executive officer unless the liability relates to conduct involving a lack of good faith. The Company has agreed to indemnify the directors and executive officers against all costs and expenses incurred in defending an action that falls within the scope of the indemnity and any resulting payments. The directors have not included details of the nature of the liabilities covered or the amount of premium paid in respect of the directors' and officers' liability and legal expenses insurance contracts, as such disclosure is prohibited under the terms of the contracts. The Company has not otherwise, during or since the end of the financial year, except to the extent permitted by law, indemnified or agreed to indemnify an officer or auditor of the Company or any related body corporate against a liability incurred as an officer or auditor. 64 | Centuria Capital Group – Annual Report 2022 Centuria Capital Group – Annual Report 2022 | 65 Directors’ report For the year ended 30 June 2022 NON-AUDIT SERVICES During the financial year, the Group’s auditor KPMG, has performed services in addition to the audit and review of the financial statements. Details of amounts paid or payable to KPMG are outlined in Note F3 to the financial statements. The directors are satisfied that the provision of non-audit services during the year, by the auditor (or by another person or firm on the auditor's behalf) is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The directors are of the opinion that the services as disclosed in the financial statements do not compromise the external auditor's independence, based on advice received from the Audit, Risk and Compliance Committee, for the following reasons: • all non-audit services have been reviewed and approved to ensure that they do not impact the integrity and objectivity of the auditor; and • none of the services undermine the general principles relating to auditor independence as set out in the Code of Conduct APES 110 Code of Ethics for Professional Accountants issued by the Accounting Professional and Ethical Standards Board, including reviewing or auditing the auditor's own work, acting in a management or decision-making capacity for the Company, acting as advocate for the Company or jointly sharing economic risks and rewards. A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 99. ROUNDING OF AMOUNTS The Group is an entity of a kind referred to in ASIC Legislative Instrument 2016/191, related to the ‘rounding off’ of amounts in the Directors’ report and financial statements. Amounts in the Directors’ report and financial statements have been rounded off, in accordance with the instrument to the nearest thousand dollars, unless otherwise indicated. Susan Wheeldon INDEPENDENT NON-EXECUTIVE DIRECTOR NOMINATION AND REMUNERATION COMMITTEE CHAIR'S LETTER Dear investor, As Chair of the Nomination and Remuneration Committee, I am pleased to present the remuneration report for the year ended 30 June 2022. Our remuneration philosophy aims to fairly reward and retain the people who we believe play a crucial role in the achievement of our long term objectives and are a key source of our competitive advantage as a leading Australasian funds manager in the S&P/ASX 200 Index. As we continue to grow and mature as a company, we have sought to substantially improve the disclosure of our remuneration structure and practices to clearly link the performance of Centuria Capital Group to remuneration outcomes. Each year, the Board reviews the Group’s executive remuneration practices to ensure they remain appropriately aligned to our short and longer term strategic objectives, and that we have appropriately considered external factors and the views expressed by our stakeholders and their advisors. Throughout the year we sought feedback from our investors and various stakeholder groups and continued to find opportunities to improve transparency of our remuneration practices, in order to provide greater clarity around how the Board reviews and sets executive remuneration. As further discussed below, the key elements of the FY22 executive remuneration structure remain consistent with the prior year, which the Board believes remains fit for purpose and supports our primary objective to drive long term performance for our securityholders. More details of this can be found on page 71 of the remuneration report. Executive remuneration In FY22, management have been successful in delivering growth in earnings as well as executing the Company's strategy of diversifying its portfolio and delivering accelerated growth in AUM. In spite of these achievements, as part of the FY22 remuneration review and in light of the current market conditions, the Nomination and Remuneration Committee has not proposed an increase in fixed remuneration for the Joint CEOs or the Chief Financial Officer for FY23, with the fixed remuneration rate retained at their FY22 amount. We have also retained the adjustments to the performance hurdles for executives’ variable awards first introduced in FY21, ensuring we remain aligned with our comparator peers, whilst continuing to align with investors’ interests. For the long term incentives (LTI), a combination of relative and absolute total securityholder return (TSR) hurdles assessed against A-REIT peers in the S&P/ASX 200 have been retained as the most appropriate performance hurdles, aligning executives’ interests with securityholder outcomes and providing a direct comparison of Centuria’s performance against our peers. The LTI proposed for the FY22-25 period will also continue to vest over years three and four. The short term incentive (STI) hurdles have been set to ensure the awards are not only demonstrably tied to financial performance, but also ensure an ongoing annual focus on imperative business and operational issues that will drive long term securityholder value and create the type of company we are all striving towards. More details can be found on page 81 of the remuneration report. Non-executive director (NED) remuneration The NED fee structure which was first introduced in FY21 has been retained for FY22. The fee structure covers the Board and Board committee roles across the Group (including CNI and other operating entities) and was adopted to improve the transparency of fees paid to directors across what is a complex group with ever increasing governance standards. Further more, the fee schedule has been benchmarked against A-REIT peers in the S&P/ ASX 200 to align director remuneration with market practice as well as recognising the significant responsibilities each director has in the various Boards and Board committees they sit on across the Group. More details of the fee structure can be found on page 89 of the remuneration report. 66 | Centuria Capital Group – Annual Report 2022 Centuria Capital Group – Annual Report 2022 | 67 Directors’ report For the year ended 30 June 2022 The fees have been designed to be comparable to our peers in order to attract and retain the highest quality talent to the Board. Expanding the breadth and depth of Board membership across the Group continues to be a key priority of the current Board and will underpin our drive towards optimal independence and diversity in all its forms. It has been especially pleasing to note the continuing trend of female representation across all Board memberships, including Non-Executive Directors which increased from 33% to 40% during the course of the financial year. For the current year we have also expanded remuneration disclosures with respect to fees paid to each Centuria Capital Limited NED. As outlined on pages 94 to 97 of the remuneration report, these enhanced disclosures now disaggregate the total fees paid to each NED across the various boards and sub committees which they serve on. The new disclosures further enhance the transparency and link between the benchmarked schedule of fees and the aggregate remuneration paid to each serving NED. FY22 performance and remuneration outcomes Despite volatile market conditions and uncertainty brought about by recent global events, we are pleased to report that FY22 has been another record year for Centuria’s operating performance, with the business delivering growth as well as meeting its operating EPS and distribution guidance. The twin strategy of growing assets under management combined with the continued diversification of our portfolio across multiple sectors, has delivered stability and ensured the continued growth in our recurring revenue base. This has been delivered despite the recent volatility in listed capital markets, threats from rising inflation and interest rates as well as geopolitical tensions impacting supply chains. In that sense, the continued growth and stability in operating performance delivered for FY22, is a culmination of ongoing efforts by Senior Management over recent years to develop a stable operating platform and sustainable earnings for our securityholders. In addition to growth in operating earnings, it is also pleasing to note the continued growth in the Centuria AUM with the platform executing more than $3 billion in acquisitions and divestments in FY22, crystalising acquisition and disposal fees, embedded performance fees and at the same time, further enhancing the future revenue generating potential of the business. It is important to note that the continued diversification of the business into emerging asset sectors including healthcare, agriculture and real estate debt together with its geographic diversification will allow the business to leverage earnings and unlock new sources of capital and investors in the future. Volatility in markets like those currently experienced by our listed platforms are neither unexpected nor surprising. The challenge is the way the business and its management will respond to these events which, for Centuria, translates to remaining agile and taking advantage of its deep management expertise to unlock future opportunities. Centuria remains well placed to take advantage of these opportunities with the business securing funding in excess of $300 million, earmarked to support future acquisitions as well as refocusing its efforts towards developing and accessing new sources of capital. It has been with this background that the Nomination and Remuneration Committee has assessed the annual performance of Senior Management against their FY22 STI objectives. It has been especially pleasing to note the way Senior Management and the business have responded to the various challenges and satisfactorily met or exceeded their financial performance hurdles, resulting in 100% award of the financial component of their FY22 STI. Details of the targets and the overperformance achieved by Senior Management against each target, including the rationale for the adoption of each of the financial performance metrics have been set out on page 82 of the Remuneration Report. Whilst traditional financial measures in assessing the performance of our senior executive team will remain the cornerstone of our assessment criteria, the continuing growth in the size, scale and the geographical dispersion of Centuria’s operations and its people have necessitated an increasing focus on non-financial metrics. The integration of newly acquired platforms, including Augusta in New Zealand, Primewest in Western Australia and the Centuria Bass Capital business in Sydney have elevated the importance of non-financial metrics such as staff engagement, non-financial risk management as well as our sustainability accountabilities. I am proud to observe the Group’s enduring commitment to improving the environmental and social outcomes across our operations, as a key driver of our business and to create a positive impact to the communities and markets in which we operate. The performance of our executive key management personnel against these non-financial metrics have been detailed on pages 83 to 84 of the remuneration report, with the team exceeding targets across all three metrics, resulting in the award of 100% of the non-financial component of the FY22 STI. The superior staff engagement survey score of 84%, measured independently by Culture Amp has been especially pleasing for the Committee and a highlight given the significant increase in size and geographical dispersion of our people across Australia, New Zealand and the Philippines. With the LTI remaining a key remuneration component to align the long term interests of Centuria’s investors with its senior executives, it is important to note the negative impact of declining global equity markets on Tranche 7 of LTIs, covering the 1 July 2019 to 30 June 2022 performance period. For FY22, Centuria’s one year TSR was -32% with the three year TSR being 16.9%. This has resulted in 0% of the absolute TSR component of the Tranche 7 LTI awards vesting in FY22. Whilst it is difficult to imagine a combination of short term strategies within Senior Management’s control which could have avoided or produced a different TSR outcome, it is important to note the continued growth in AUM from $6.2 billion in FY19 to $20.6 billion by the end of FY22. With this increase representing a compound annual growth rate in AUM of 49.0% over the three year performance period, 100% of the AUM component of the Tranche 7 LTI awards vested in FY22. This report has been approved by the Board and is intended to be informative and digestible whilst complying with our statutory reporting obligations. The Board continues to place a high priority on having meaningful dialogue with our securityholders and other stakeholders regarding our remuneration policies, in order to understand their perspectives and concerns, as well as to remain abreast of local and global market best practices. We appreciate your ongoing support and we look forward to engaging with you again in FY23. Yours sincerely, Susan L. Wheeldon CHAIR OF THE NOMINATION AND REMUNERATION COMMITTEE 68 | Centuria Capital Group – Annual Report 2022 LISTED: 1 ASHBURN ROAD, BUNDAMBA QLD Centuria Capital Group – Annual Report 2022 | 69 Centuria Capital Group – Annual Report 2022 | 69 Directors’ report For the year ended 30 June 2022 AUDITED REMUNERATION REPORT The Board are pleased to present the remuneration report for the period ending 30 June 2022. This remuneration report has been prepared in accordance with section 300A of the Corporations Act 2001 (Cth) (Act) and the applicable Corporations Regulations 2001 (Cth). The remuneration report provides information about the remuneration arrangements for key management personnel (KMP), which includes Non-Executive Directors and the Group’s Senior Management for the year ended 30 June 2022. The report is structured as follows: • details of KMP covered in this report; • remuneration oversight and key principles; • remuneration of executive directors and Senior Management; • key terms of employment contracts; • Non-Executive Director remuneration; and • director and Senior Management equity holdings and other transactions. Details of KMP covered in this report The following persons had authority and responsibility for planning, directing and controlling the activities of the Group, directly or indirectly, including any Director (whether executive or otherwise) of the Company during the full financial year. NAME ROLE NON-EXECUTIVE DIRECTORS Mr Garry S. Charny Independent Non-Executive Director and Chairman Mr Peter J. Done Mr John R. Slater Independent Non-Executive Director Independent Non-Executive Director Ms Susan L. Wheeldon Independent Non-Executive Director Ms Kristie Brown Independent Non-Executive Director EXECUTIVE DIRECTORS Mr John E. McBain Executive Director and Joint Chief Executive Officer Mr Jason C. Huljich Executive Director and Joint Chief Executive Officer EXECUTIVES Mr Simon W. Holt Chief Financial Officer TERM Full term Full term Full term Full term Full term Full term Full term Full term The term 'Senior Management' is used in this remuneration report to refer to the Executive Directors and the Chief Financial Officer. Nomination and Remuneration Committee The Board has an established the Nomination and Remuneration Committee which operates under the delegated authority of the Board of Directors. A summary of the Nomination and Remuneration Committee charter is included on the Centuria Capital Group website. The functions of the Committee in respect of remuneration include: • making recommendations to the Board regarding the remuneration of non-executive members of Centuria’s Board, subsidiary boards and committees which shall be reviewed annually; • an annual review of Senior Management's remuneration and the application of incentive programs; and • an annual review of the structure and application of the short term and long term incentive schemes and policies for executives and staff. Additionally, the function of the Committee in respect of Board, Joint CEOs and Senior Executive performance include: • evaluating the performance of the Board, including Committees and individual Directors; • assessing the performance of the Joint CEOs and Senior Executives against their key performance indicators; and • ensuring other human resource management programs, including performance assessment programs are in place. The following Non-Executive Directors of Centuria are members of the Nomination and Remuneration Committee • Ms Susan L. Wheeldon (Non-Executive Director and Committee Chair from 22 February 2022); • Mr Garry S. Charny (Non-Executive Director, Chairman of Centuria Capital Limited and Committee Chair until 22 February 2022); • Mr John R. Slater (Non-Executive Director); and • Mr Peter J. Done (Non-Executive Director). The Committee is tasked by the Board to advise it in relation to remuneration outcomes and it may obtain external professional advice and secure the attendance of advisors with relevant experience if it considers this necessary. There were no remuneration recommendations made by external advisors during the year in relation to FY22 remuneration. Remuneration policy and link to performance Group structure Centuria Capital Group is an ASX-listed specialist investment manager with a 26 year track record of delivering a range of products and services to investors, advisers and securityholders. Our business is centered around property funds management and investment bonds, with the following key areas of focus: • Centuria Property Funds which specialises in listed property funds (A-REITs) and unlisted property funds including; • listed REITs, Centuria Office REIT (COF) and Centuria Industrial REIT (CIP) (Australia); • listed property fund Asset Plus Limited (NZ); • Centuria Diversified Property Fund; • Centuria Agriculture Fund; • Centuria Healthcare Property Fund; • Centuria New Zealand Industrial Fund; • Centuria New Zealand Property Fund; • Centuria New Zealand Healthcare Property Fund; • 120 closed-ended unlisted property funds in Australia and New Zealand; • Centuria Bass (50% interest in real estate credit supplier); and • Centuria LifeGoals Investment Bonds. 70 | Centuria Capital Group – Annual Report 2022 Centuria Capital Group – Annual Report 2022 | 71 Directors’ report For the year ended 30 June 2022 The Group encompasses a portfolio of wholesale and retail funds, a healthcare business with related wholesale and retail funds, and a New Zealand business with listed and unlisted funds. It is noted that the listed REITs are not staffed and responsibility for these are managed by the executive team and employees of CNI. The Group structure is outlined below. The combined market capitalisation of the listed headstock (Centuria Capital Group) and its two listed REITS, CIP and COF, is over approximately $4.3 billion as at 30 June 2022. Given the overall size of the Group, the complexities of the business it operates and its international scope, the Board has adopted a number of remuneration practices that reflect this. These are represented in our Joint CEO structure as well as the new Directors’ Fees Schedule, which are discussed further in pages 73 and 90 of this report, respectively. Abridged Group structure The below structure only outlines the key operating and management entities of the Centuria Capital Group (note: this is not a full list of controlled entities and associates). Centuria Capital Limited AUM $20.46bn CFML AREF Centuria Capital Fund Centuria Life Limited AUM $0.8bn Manager for: • 40 investment funds • Administrator of the Centuria Property Funds Limited AUM $4.0bn Responsible entity for: • Centuria Office REIT (ASX:COF) • Centuria Diversified Guardian Friendly Society Property Fund • Centuria Agriculture Fund • 17 unlisted funds Centuria Property Funds No.2 Limited (CPF2L) AUM $5.5bn Responsible entity for: • Centuria Industrial REIT (ASX:CIP) • Centuria Healthcare Property Fund • 4 unlisted funds Centuria Funds Management Limited (CFML) Responsible entity and trustee for: • Centuria Capital Fund • Centuria Capital No.2 Fund (ASX:C2FHA) • Prime Healthcare Holding Trust Cenuria Property Services Pty Limited Cenuria Platform Investments Pty Limited Cenuria Developments Pty Limited Development pipeline of $2.1bn Cenuria Healthcare Pty Limited Cenuria Capital (NZ) Limited Centuria Bass Credit Pty Limited AUM $0.8bn Real estate credit supplier Primewest Management Limited AUM $6.3bn Responsible entity for: • 102 unlisted funds. Centuria Healthcare Asset Management Limited AUM $0.6bn Responsible entity for: • 4 unlisted funds Co-investment stakes including: • 10% Centuria NZ Industrial Fund • 19.9% Asset Plus Limited • 6.3% Centuria NZ Property Fund • 13.2% Centuria Healthcare Fund (Held directly or indirectly through interposed entities). Centuria Funds Management (NZ) Limited AUM $2.6bn Manager for: • Asset Plus Limited (NZX:APL) • Centuria NZ Industrial Fund • Centuria NZ Property Fund • Centuria NZ Healthcare Fund • 37 unlisted funds Centuria Capital No.2 Fund Co-investment stakes including: • 18.9% Centuria Office REIT (ASX:COF) • 16.1% Centuria Industrial REIT (ASX:CIP) • 50% Centuria Agriculture Fund • 22.4% Centuria Diversified Property Fund • 22.0% Centuria Government Income Property Fund No.2 • 12.0% Centuria Healthcare Direct Medical Fund No.2 (Held directly or indirectly through interposed and related entities). Legend Stapled entities Wholly owned entities Partially owned entities Other interposed entities Joint CEO structure The Joint CEO structure was established in 2019 as an important part of the Group’s long term management succession and retention plan. In support of the Joint CEO structure the Board takes into account the following matters: • the Joint CEOs have a strong background in all aspects of the business but also have unique yet complementary skill sets, which allows them to focus on different areas in the management of the complexities of the business given the Group’s overall structure. Mr Huljich has primary oversight of funds management, distribution and property services and Mr McBain has primary oversight of corporate functions (corporate strategy, M&A, finance, treasury, legal, marketing, communications and investor relations) and the Life business; and • the Board recognises the significant importance that a strong succession plan has on any business. The Joint CEOs have worked seamlessly together for 26 years. By creating the Joint CEO role for Mr Huljich in 2019, the Board believes it has moved to ensure investors can have confidence in the future direction of the Group and that, with Joint CEOs, the business has two strong leaders, collaborating to optimise investor value in a tried and tested way. The Joint CEO structure has been adopted to ensure any future departure is without disruption to the Group’s operations, which will inevitably lead to superior outcomes for securityholders. The remuneration of the Joint CEOs reflects the position they hold in the real estate funds management industry and their experience and achievements gained from working together over a period of 26 years at Centuria. Given the complementary skill sets of the two CEOs and their division of key responsibilities (outlined above), the Board believes the remuneration of the Joint CEOs is a benefit for investors by removing the need for expensive secondary key executive resources which many other A-REIT peers require, such as a Chief Investment Officer and/or Chief Operating Officer. Through the Joint CEO structure, the Group is able to minimise the size of the senior executive group to be leaner, less costly and nimbler than its peers, which the Board believes is a significant competitive advantage and in the long term interests of securityholders. As part of its benchmarking process, the Board believes the reduced senior executive group in association with the Joint CEO structure is a significant cost saving practice for the Group in comparison to its peers. The Nomination and Remuneration Committee, as well as the Board, annually review the appropriateness of the Joint CEO structure to ensure its efficiency and effectiveness by assessing the joint performance of the CEOs in delivering strong securityholder outcomes within the context of the Group’s continued growth compared to A-REIT peers’ performance and total executive team costs. The FY22 fixed remuneration amount for the Joint CEOs was $1,552,500. The Committee considered a number of factors in setting this amount: • recognition of the Joint CEOs’ strong execution of the Group’s growth strategy and continued strong financial performance under their leadership, including a substantial 98% growth in AUM over FY21 and inclusion in the S&P/ASX 200 Index; and • the Joint CEOs’ response to the COVID-19 pandemic, where they voluntarily took a six month 15% reduction to their FY21 fixed remuneration and displayed outstanding performance in positioning the Group to rebound quickly from the initial impact of the pandemic. As part of the FY22 remuneration review, the Nomination and Remuneration Committee has not proposed an increase in fixed remuneration for the Joint CEOs for FY23, which will remain at the FY22 amount above. The unchanged fixed remuneration has been recommended despite management delivering: • another record year for Centuria’s operating performance, with the business delivering growth as well as meeting its Operating EPS and Distribution guidance; • continued growth in the Centuria AUM with the platform executing more than $3 billion in acquisitions and divestments in FY22; • the twin strategy of growing assets under management, combined with the continued diversification of our portfolio across multiple sectors, despite recent market volatilities; • continued diversification of the business into emerging asset sectors including healthcare, agriculture and real estate debt allowing the business to leverage its geographic diversification and unlock new sources of capital and investors in the future; and • increasing focus on non-financial metrics such as staff engagement, non-financial risk management as well as environmental, social and governance outcomes. 72 | Centuria Capital Group – Annual Report 2022 Centuria Capital Group – Annual Report 2022 | 73 Directors’ report For the year ended 30 June 2022 Remuneration of Senior Management Remuneration philosophy The Group recognises the important role people play in the achievement of its business strategy and long term objectives and as a key source of competitive advantage. To grow and be successful across these two areas, the Group must be able to attract, motivate and retain capable individuals with exceptional talent, expertise, experience and relationships. Our Group is able to achieve this goal by following our remuneration principles outlined in the table below. The main objective in rewarding the Group’s Senior Management for their performances is to ensure that shareholders’ wealth is maximised through the Group’s continued growth. Remuneration structure The table below outlines the Group’s remuneration principles, the components of Senior Management’s remuneration and the underpinning rationale for each element of the remuneration structure. The Nomination and Remuneration Committee ensures the criteria used to assess and reward staff includes financial and non-financial measures of performance. The table below summarises the key features of executive remuneration and the objectives of each element. OUR REMUNERATION PRINCIPLES DELIVERING VALUE FOR SECURITYHOLDERS IN THE MOST EFFICIENT MANNER DRIVE AN OWNERSHIP MENTALITY ATTRACT, MOTIVATE AND RETAIN TALENT The Joint CEO structure optimises the size of the senior executive group in relation to its peers to make it leaner and more agile than our peers. Including senior staff in the LTI equity plan to provide a sense of ownership and alignment, as well as distributing securities to all non-LTI staff. Ensuring competitive, at-risk rewards are provided to attract and retain the best executive talent. TOTAL EXECUTIVE REMUNERATION FIXED AT-RISK TYPE OF REMUNERATION What is the objective? REMUNERATION SHORT TERM INCENTIVE LONG TERM INCENTIVE • Attract and retain key talent • Be competitive • Drive annual financial growth targets and securityholder returns • Support delivery of the business strategy and growth objectives • Reward value creation over a one year period whilst supporting the long term strategy • Incentivise desired behaviours in line with the Group’s risk appetite • Incentivise long term value creation • Drive alignment of employee and securityholder interests TOTAL EXECUTIVE REMUNERATION FIXED AT-RISK REMUNERATION SHORT TERM INCENTIVE LONG TERM INCENTIVE TYPE OF REMUNERATION How is it set? Fixed remuneration is set with reference to market competitive rates in comparison to ASX-listed A-REITs for similar positions, adjusted to account for the experience, ability and productivity of the individual employee. Senior executives participate in the Group’s STI plan which is assessed against key areas of financial and non-financial performance that are designed to create an ongoing annual focus on imperative business and operational issues that create the type of company we all strive towards. Refer to the FY22 STI scorecard for further details. Awarded in cash or shares at the Board’s discretion. Senior executives participate in the Group’s LTI plan which is assessed against securityholder returns over a three year performance period. The significant weighting towards relative TSR in the LTI aligns executive’s interests with securityholder outcomes and provides a direct comparison of the Group’s performance against their comparator group of peers. Refer to the LTI structure section for further details. Equity with performance assessed over three years (vesting in years three and four). Joint CEOs • 125% of fixed remuneration at Joint CEOs • 125% of fixed remuneration at maximum maximum CFO • 100% of fixed remuneration at CFO • 100% of fixed remuneration at maximum maximum How is it delivered? • Base salary • Superannuation • Other eligible salary sacrifice benefits Opportunity 74 | Centuria Capital Group – Annual Report 2022 Centuria Capital Group – Annual Report 2022 | 75 Directors’ report For the year ended 30 June 2022 Delivery of FY22 executive remuneration components The diagram below outlines the payment/delivery timing of each element of executive remuneration. When are the key FY22 remuneration components earned and received? Fixed remuneration Cash Paid throughout the year STI Cash One year performance period n o i t a r e m u n e r k s i r - t A Performance rights Performance measured over three years following the grant (75% RTSR, 25% ATSR) LTI 75% of LTI award vesting in year 3 (subject to performance/service requirements and calculation point for total award at end of year 3) 25% of LTI award vesting in year 4 YEAR 1 YEAR 2 YEAR 3 YEAR 4 Remuneration mix Remuneration packages include a mix of fixed and variable remuneration and short and long term performance based incentives. The graphs below detail the approximate fixed and variable components for Senior Management. The proportion of fixed and variable remuneration for the CFO is established by the Joint CEOs and the Nomination and Remuneration Committee and then approved by the Board. POTENTIAL JOINT CEO REMUNERATION MIX (AT TARGET OPPORTUNITIES) POTENTIAL JOINT CEO REMUNERATION MIX (AT MAXIMUM OPPORTUNITIES) POTENTIAL CFO REMUNERATION MIX (AT TARGET OPPORTUNITIES) POTENTIAL CFO REMUNERATION MIX (AT MAXIMUM OPPORTUNITIES) The Committee regularly reviews the composition of the benchmarking of peer groups to ensure they continue to represent appropriate reference points for establishing total remuneration for the Group’s executives. In general, the Committee considers companies with similarities to the Group on one or more of the following characteristics: • industry or comparable lines of business; • operate in multiple geographies; • number of employees; • revenue or FUM; and • market capitalisation on the ASX (using the combined market capitalisation for CNI, CIP and COF of approximately $4.3 billion as at 30 June 2022, for benchmarking purposes). The Committee reviews benchmarking data for a broad set of ASX-listed A-REIT peers that exhibit the above characteristics, however, it considers the following ASX-listed entities to be the most comparable peers for the Group and represent our main source of competition for executive talent: • Charter Hall Group (ASX:CHC); • Goodman Group (ASX:GMG); • Stockland (ASX:SGP); • Mirvac Group (ASX:MGR); • Dexus (ASX:DXS); • GPT Group (ASX:GPT); • Scentre Group (ASX:SCG); and • Vicinity Centres (ASX:VCX). Whilst benchmarking data is used as one input into remuneration decisions, the Committee also considers various fundamental factors including: • the size and complexity of the role, including geographical reach including offshore responsibilities; • the criticality of the role to successful execution of the Group’s business strategy; • skills and experience of the individual; • period of service; • scarcity of talent; • surrounding market conditions and sentiment; and • the Group’s growth trajectory. Historical performance, shareholder wealth and remuneration 41.7 % 33.3 35.7 28.6 % 25.0 35.7 35.8 37.7 32.2 33.9 Financial performance % 26.5 % 33.9 The Group’s overall objective is to reward Executive Directors and Senior Management based on the Group's performance and build on shareholders' wealth but this is subject to market conditions for the year. The graph below sets out the Group's operating net profit after tax for the past five years. FIVE YEAR OPERATING FINANCIAL PERFORMANCE FIXED STI LTI Remuneration benchmarking The Committee believes it is critical to understand the relevant market for key executive talent in order to ensure the Group’s remuneration strategy and frameworks support the guiding principle which is to attract, motivate and retain capable individuals with exceptional talent, expertise, experience and relationships. $45,087 $45,706 $53,253 $114,510 $70,211 76 | Centuria Capital Group – Annual Report 2022 Centuria Capital Group – Annual Report 2022 | 77 FY18 FY19 FY20 FY21 FY22 Directors’ report For the year ended 30 June 2022 The table below sets out summary information about the Group’s earnings for the past five years. 12 MONTH TOTAL SHAREHOLDER RETURN - 30 JUNE 2021 TO 30 JUNE 2022 FIVE YEAR SUMMARY 30 JUNE 2022 30 JUNE 2021 30 JUNE 2020 30 JUNE 2019 30 JUNE 2018 Operating profit after tax ($'000) 114,510 70,211 53,253 45,706 45,087 Statutory profit after tax attributable to Centuria Capital Group securityholders ($'000) (37,852) 143,456 21,105 50,795 54,765 Share price at start of year Share price at end of year Interim dividend Final dividend Special non-cash dividend Statutory basic earnings per Centuria Capital Group security Operating basic earnings per Centuria Capital Group security $2.78 $1.81 5.5cps 5.5cps - $1.79 $2.78 4.5cps 5.5cps - $1.77 $1.79 $1.40 $1.77 4.5cps 4.25cps 5.2cps 5.0cps - 7.8cps $1.23 $1.40 4.1cps 4.1cps - (4.8)cps 24.6cps 4.7cps 14.2cps 19.8cps 14.5cps 12.0cps 12.0cps 12.7cps 16.3cps Joint CEO STI outcome (% of maximum) Joint CEO LTI outcome (% of vesting of grant) CFO STI outcome (% of maximum) CFO LTI outcome (% of vesting of grant) 100% 25% 100% 25% 100% 100% 90% 100% 93% 100% 93% 100% N/A 100% N/A 100% N/A 100% N/A 100% Total securityholder return (TSR) Following the major acquisition of the Primewest business in 2021, on 16 July 2021, Centuria Capital joined the S&P/ASX 200 Index ranked #154 and this ranking is currently circa #155 - #165 taking into account the post-transaction free float market capitalisation. Due to the factors set out on page 77 and subject to the qualification also outlined, the Group considers the following ASX- listed entities as its most comparable peers which forms the basis of its remuneration benchmarking exercises: • Charter Hall Group (ASX:CHC); • Goodman Group (ASX:GMG); • Stockland (ASX:SGP); • Mirvac Group (ASX:MGR); • Dexus (ASX:DXS); • GPT Group (ASX:GPT); • Scentre Group (ASX:SCG); and • Vicinity Centres (ASX:VCX). The graphs and table below highlight Centuria’s performance against the nominated A-REIT peers, the broader S&P/ASX 200 Index and the S&P 200 A-REIT Index. CNI -32.0% Peer -28.3% Peer -14.6% Peer -9.6% Peer -12.3% Peer -0.5% Peer -29.5% Peer 21.8% Peer -17.2% ASX 200 A-REIT -12.3% 40% 20% – (20%) (40%) +21.8% (0.5%) (9.6%) (12.3%) (12.3%) (14.6%) (17.2%) (28.3%) (29.5%) (32.0%) Jun-21 Jul-21 Aug-21 Sep-21 Oct-21 Nov-21 Dec-21 Jan-22 Feb-22 Mar-22 Apr-22 May-22 Jun-22 Source: TSR data from FactSet and IRESS. Note: TSR calculated from closing price 30 June 2021 (as the last trading day in the period) to closing price 30 June 2022. TSR data includes reinvested distributions and represents total return, not an annualised figure. THREE YEAR TOTAL SHAREHOLDER RETURN - 28 JUNE 2019 TO 30 JUNE 2022 CNI 16.9% Peer 9.0% Peer 24.7% Peer -22.2% Peer -20.5% Peer -22.8% Peer -29.6% Peer -15.8% Peer -3.6% ASX 200 A-REIT -8.0% 125% 100% 75% 50% 25% – (25%) (50%) (75%) +24.7% +16.9% +9.0% +3.6% (8.0%) (15.8%) (20.5%) (22.2%) (22.8%) (29.6%) 78 | Centuria Capital Group – Annual Report 2022 Centuria Capital Group – Annual Report 2022 | 79 Jun-19 Sep-19 Dec-19 Mar-20 Jun-20 Sep-20 Dec-20 Mar-21 Jun-21 Sep-21 Dec-21 Mar-22 Jun-22 Source: TSR data from FactSet and IRESS. Note: TSR calculated from closing price 28 June 2019 (as the last trading day in the period) to closing price 30 June 2022. TSR data includes reinvested distributions and represents total return, not an annualised figure. Directors’ report For the year ended 30 June 2022 Total shareholder return NOMINATED PEERS Centuria Capital Group Peer Peer Peer Peer Peer Peer Peer Peer INDICES S&P/ASX 200 S&P/ASX 200/A-REIT 3 YEAR RETURN 1H22 2H22 FY22 28 JUN 19 TO 30 JUN 22 30 JUN 21 TO 31 DEC 21 31 DEC 21 TO 30 JUN 22 30 JUN 21 TO 30 JUN 22 16.9% 24.7% 9.0% 3.6% (15.8%) (20.5%) (22.2%) (22.8%) (29.6%) 27.8% 25.9% 33.9% (6.5%) 9.4% 6.8% 13.7% 18.5% 1.3% (46.8%) (32.1%) (46.4%) (11.5%) 11.3% (17.9%) (20.6%) (16.0%) (30.4%) (32.0%) (14.6%) (28.3%) (17.2%) 21.8% (12.3%) (9.6%) (0.5%) (29.5%) 10.4% (8.0%) 3.8% 14.7% (9.9%) (23.5%) (6.5%) (12.3%) Source: TSR data from FactSet and IRESS. Notes: TSR data includes reinvested distributions and represents total return, not an annualised figure. TSR is calculated from the closing price of the last trading day in the prior period to capture share price return from the first day of the relevant period. A major focus for FY22 was continuing the Group’s dual strategy of growing AUM and ongoing diversification of our portfolio across multiple sectors. During FY22 Group AUM grew 18.4% to $20.6 billion. However, like many of our peers and the broader S&P/ASX 200 Index, our share price has been negatively impacted by the deteriorating global equity markets over the past year, against a backdrop of geopolitical and economic uncertainty on a global scale. For FY22, Centuria’s one year absolute TSR was -32% with the three year absolute TSR being 16.9%. Despite Centuria's relative TSR performance compared to the majority of its peers, Tranche 7 LTI awards were based on annual absolute TSR metrics, unlike the majority of its peers, resulting in nil vesting. However, it should be noted that our three year TSR is measurably higher than seven of our eight nominated peers, as well as the broader S&P/ASX 200 Index and the S&P 200 A-REIT Index. Centuria believes that important factors driving this outcome include: • the selection of a lean Senior Management team and incentivising them appropriately; • the synergy and cohesiveness that exists between management and a diverse Board enabling long term strategies to be set and implemented seamlessly; and • a recognition that the culture that exists within the group is tangible and promotes a productive, diverse and rewarding working atmosphere where employees strive to outperform. Notwithstanding our one year TSR outcome, which has been impacted by external market factors outside executives’ control, it is important to reiterate the substantial compound annual growth rate in AUM of 49.0% achieved over the same three year period. This clearly demonstrates the ability of our high performing management team - led by our highly complementary and experienced Joint CEOs - to execute the Group’s growth strategy over an extended period. Fixed remuneration Fixed remuneration consists of base remuneration (which is calculated on a total cost basis and includes any FBT charges related to employee benefits including motor vehicles), as well as employer contributions to superannuation funds. For the CFO, this is reviewed annually by the Joint CEOs and the Nomination and Remuneration Committee. The process consists of a review of Group, business unit and individual performance as well as relevant comparative remuneration in the market. The same process is used by the Nomination and Remuneration Committee when reviewing the fixed remuneration of the Joint CEOs. Senior Management are given the opportunity to receive their fixed remuneration in a variety of forms including cash and salary sacrifice items such as motor vehicles, motor vehicle allowances and/or additional superannuation contributions. (i) Short term Incentives (STI) The objective of the STI program is to link the achievement of the Group’s non-financial and financial targets with the remuneration received by Senior Management accountable for meeting those targets. The potential STI available is set at a level to provide sufficient incentive for Senior Management to achieve operational targets and such that the cost to the Group is reasonable in the circumstances. STI structure FY22 STI plan structure Performance period 12 months Opportunity Joint CEOs CFO 125% of total fixed remuneration at maximum. 100% of total fixed remuneration at maximum. How the STI is paid STI awards may be settled in either cash and/or shares at the Board’s discretion. Performance measures and conditions Financial measures (60%) Non-financial measures (40%) • Growth in assets under management (AUM) • Operating earnings per share (EPS) growth • Equity flow growth • Staff engagement • Non-financial risk management • Environmental, social and governance (ESG) How are STI targets set? In determining STI hurdle targets, the following factors are considered by the Committee and Board: • Performance of peer fund managers over a range of asset classes; • Direct returns from asset classes in particular property, equities and fixed interest; • Outlook for financial markets including fixed interest returns; • Effect financial market views on asset values e.g. cap rate compression or expansion; • Performance of Centuria compared to other peer managers; and • Quality of Centuria’s financial products compared to market and how contemporary they are in this context. How is the STI assessed? At the Board’s absolute discretion, the Group’s Senior Management may be provided with the opportunity to receive an annual, performance-based incentive. The Nomination and Remuneration Committee assesses annually the individual scorecards of participants against the KPIs in determination of the annual STI outcome. The 'STI Achieved' section outlines the overall scorecard outcomes for FY22. What happens when an executive ceases employment? Joint CEOs CFO Is there any STI deferral? No If employment terminates part way through a financial year (other than for termination for serious misconduct), the Joint CEOs are entitled to the STI for the full financial year. If employment terminates part way through a financial year, the CFO forfeits any applicable STI for the relevant financial year. 80 | Centuria Capital Group – Annual Report 2022 Centuria Capital Group – Annual Report 2022 | 81 Directors’ report For the year ended 30 June 2022 FY22 performance measures and objectives FY22 STI scorecard PERFORMANCE HURDLE WEIGHTING RATIONALE FOR USE TARGET CRITERIA OUTCOMES PERFORMANCE HURDLE WEIGHTING RATIONALE FOR USE TARGET CRITERIA OUTCOMES FINANCIAL METRICS Growth in AUM 30% Operating EPS 15% Increasing AUM is fundamental to the Group’s growth strategy • Target = $19.5 billion, resulting in 100% of the award vesting. • Outperformance target = $20.38 billion, resulting in 125% granting of the award. Ensures continued focus on growing and managing the profitability of the business as a key driver of sustainable securityholder returns • Original target = guidance • Outperformance target = FY21 of 12.0cps +15%, resulting in 125% granting of award For FY22, the Company’s total AUM is $20.6 billion as at 30 June 2022, representing a growth of approximately 18.4% from the prior reporting period (FY21: $17.4 billion). This achievement was above outperformance target. For FY22, the original operating EPS guidance was 13.2cps and upgraded to 14.5 cps. Current forecast FY22 OEPS is 14.5cps. This achievement was above outperformance target. Equity flow growth 15% Provides alignment to the Group’s growth strategy • Target = 17.5% resulting in 100% of award vesting • Outperformance target = 20% resulting in 125% granting of award. Year on year equity flow growth was 35%. Equity flows relate to equity raised from public sources for property funds. This achievement was above outperformance target. NON-FINANCIAL METRICS Staff engagement* 15% A motivated and engaged workforce will drive positive business The company conducts annual company-wide surveys with employees. • Results from these surveys are calculated into a score, with vesting occurring at these achievement points: • Score of 55% = 50% of the award • Score of 65%= 75% of the award • Score of 75% and over = 100% of the award The Non Financial Risk Committee exists to provide a regular conduit for important non-financial information to flow between management and the Board. The main criteria employed to assess performance were: • regular attendance by key management personnel (KMP); • regular and accurate formal Board reporting; and • ensuring that all relevant matters within the ambit of the Committee were brought to the Board’s attention in a timely manner 10% Non- financial risk management It is critical for our Senior Management to establish and foster a culture of risk awareness and mitigation across the organisation There has been significant ongoing work in staff engagement, which has recorded positive results. These include the following: • a new staff engagement survey platform has been instigated allowing for national and global benchmarking; • we have used an external consultant to review and assess the initial survey which indicated overall staff engagement score of 84%, outperforming the real estate industry benchmarks by 8% and overall Australian businesses by 12%; and • the Board assessed the outcomes of the staff engagement surveys in conjunction with the above initiatives as meeting target, resulting in 100% of the award being achieved. The Board noted the work of the Committee as it related to a number of important non- financial risks e.g. unit pricing policies, potential conflict issues, fund restructuring issues, performance reporting issues, group risks, DRP issues and a large number of other relevant issues. The Board monitored the achievements of the Committee in raising each issue and implementing transparent solutions. The Board assessed the outcomes of the Non- Financial Risk Committee as meeting target, resulting in 100% of the award being achieved. 82 | Centuria Capital Group – Annual Report 2022 Centuria Capital Group – Annual Report 2022 | 83 Directors’ report For the year ended 30 June 2022 PERFORMANCE HURDLE WEIGHTING RATIONALE FOR USE TARGET CRITERIA OUTCOMES ESG 15% Provides alignment to the areas of focus under our sustainability framework The ESG metric is assessed against key achievements in the implementation of the Company’s ESG strategy, including: • improving diversity throughout the Group; and • development and roll- out of the Company’s environmental and sustainability initiatives across the Group. Management has executed the following steps in relation to ESG during FY22; • integration of climate risk as part of the assessment of acquisitions and the investment process; • delivery of the Company’s second Sustainability Report to coincide with the holding of the 2022 AGM; and • improved gender diversity across the Group achieving targeted 40% female/60% male. The Board assessed the outcomes of the above actions as meeting target, resulting in 100% of the award being achieved. *Employee engagement is measured as a score through a new annual company-wide survey conducted independently by “Culture Amp” who reported directly to the CNI Board. In addition to the scorecard above, the Board took into consideration the following non-financial achievements made in FY22 in determining the final outcome of the FY22 STI awards: • during FY22 CNI was included in the S&P/ASX 200 for the first time in its history; • the target Group operating performance was achieved despite a backdrop of significant market volatility; • during FY22 having completed the acquisition of Primewest, the Group successfully integrated its operations; • a new comprehensive Employee Engagement Survey was deployed across the Group using Culture Amp, with the results exceeding real estate industry benchmarks by 8% and the rest of Australian business benchmarks by 12%; • further diversified the Group's representation across the various property sectors by establishing its first dedicated Agricultural Fund; • expanded the Group's Healthcare portfolio through the Healthcare Joint Venture with Morgan Stanley; • during FY22 Centuria continued to increase its commitment to Sustainability and ESG outcomes following the appointment of a General Manager - Sustainability and its commitment to provide a second Sustainability Report prior to the 2022 AGM; • the Group achieved further improvements on its weighted NABERS rating to 4.96 stars (4.83 at June 2021); • successfully responded to several environmental catastrophes including floods across the Eastern seaboard protecting the safety and interests of tenants and investors; • increased stakeholder and investor engagement; • strengthened and expanded sources of listed and unlisted capital sources; and • despite headwinds impacting certain asset sectors, non financial property services metrics, including average tenant retention, portfolio occupancy and square metres of leasing deals completed, all exceeded prior year benchmarks. STI achieved The table below outlines the percentage of target STI achieved (and forfeited) in relation to financial and non-financial KPIs, and the total STI awarded, for each executive in 2022. FINANCIAL NON-FINANCIAL STI ON MAXIMUM EXECUTIVE OPPORTUNITY WEIGHTING ACHIEVED FORFEITED WEIGHTING ACHIEVED FORFEITED STI AWARDED John McBain (Joint CEO) Jason Huljich (Joint CEO) Simon Holt (CFO) $1,940,625 60% 100% 0% 40% 100% 0% $1,940,625 $1,940,625 60% 100% 0% 40% 100% 0% $1,940,625 $786,500 60% 100% 0% 40% 100% 0% $786,500 Long term incentives (LTI) The Group has an executive incentive plan (LTI Plan) which forms a key element of the Group’s incentive and retention strategy for Senior Management under which performance rights (Rights) are issued. The primary objectives of the LTI Plan include: • focusing executives on the longer term performance of the Group to drive long term shareholder value creation; • ensure Senior Management remuneration outcomes are aligned with shareholder interests, in particular, the strategic goals and performance of the Group; and • ensure remuneration is competitive and aligned with general market practice by ASX-listed entities. Rights issued under the LTI Plan are issued in accordance with the thresholds approved at the Annual General Meeting (AGM). LTI structure LTI PLAN STRUCTURE Performance period Opportunity Instrument Three years performance with 75% of any LTI award vesting in Year 3 with the remaining 25% vesting in Year 4 • Joint CEOs • CFO • 125% of total fixed remuneration at maximum • 95% of total fixed remuneration at maximum Performance Rights. The allocation of the LTI grants is on a face value basis using the volume weighted average price of the Company’s shares over the five ASX trading days immediately preceding 1 July of the grant year (being the date of the commencement of the performance period). Each Performance Right is a right to acquire one Security in the Group (or an equivalent cash amount), subject to the achievement of the “performance hurdles” set out below. 84 | Centuria Capital Group – Annual Report 2022 Centuria Capital Group – Annual Report 2022 | 85 Directors’ report For the year ended 30 June 2022 LTI PLAN STRUCTURE LTI PLAN STRUCTURE Performance metrics Relative total securityholder return (RTSR) (75%) RTSR (compounded) when ranked to the comparator group of S&P/ASX 200 A-REIT accumulation index stocks over the performance period Performance Rights subject to RTSR Hurdle that vest • Exceeds the comparator group • 100% 75th percentile • More than the comparator group 50th percentile and less than 75th percentile • Equal to the comparator group 50th percentile • Less than the comparator group 50th percentile • Between 50% to 100% progressive pro- rata vesting (i.e. on a straight-line basis) • 50% • 0% Absolute total securityholder return (ATSR) (25%) Annual ATSR achieved over the performance period Performance Rights subject to ATSR Hurdle that vest • 15% or greater • Between 10% and 15% • 10% • Less than 10% • 100% • Between 25% to 100% progressive pro- rata vesting (i.e. on a straight line basis) • 25% • 0% Rationale for the performance metric and conditions Both RTSR and ATSR measure the return securityholders would earn if they held a notional number of securities over a period of time. RTSR provides a relative measure of growth in the Group’s security price in comparison to relative peers (being the S&P/ASX 200 A-REIT accumulation index). ATSR provides an absolute measure of growth in the Group’s security price. The ATSR target is determined with reference to the following factors which can impact future performance: • performance of peer fund managers over a range of asset classes; • direct returns from asset classes in particular property, equities and fixed interest; • outlook for financial markets including fixed interest returns; • effective financial market views on asset values e.g. cap rate compression or expansion; • performance of Centuria compared to other peer managers; and • quality of Centuria’s financial products compared to market and how contemporary they are in this context. By combining RTSR with an ATSR measure, executives can be rewarded for driving positive returns and investors have the confidence that interests are aligned with long term business growth and the creation of shareholder wealth. The inclusion of an ATSR metric has been designed to counterbalance RTSR outcomes which may vest when overall market conditions are down. What happens when an executive ceases employment? If a participant ceases to be employed by the Group before the end of the performance period, whether the Performance Rights lapse will depend on the circumstances of cessation. If a participant ceases employment due to resignation, termination for cause or termination for gross misconduct, all unvested performance rights will lapse at cessation unless the Board determines otherwise. If a participant ceases employment for any other reason prior to Performance Rights vesting, a pro-rata number of unvested performance rights (based on the performance period that has elapsed at the time of cessation) will remain unvested until the end of the original performance period and vest to the extent that the relevant performance hurdles have been satisfied at any time. The balance of performance rights will lapse at cessation. Malus and clawback In the event of fraud, dishonesty or material misstatement of financial statements, the Board may make a determination, including lapsing unvested performance rights or 'clawing back' securities allocated upon vesting, to ensure that no unfair benefit is obtained by a participant. Dividends and voting rights Rights do not carry a right to vote or to dividends or, in general, a right to participate in other corporate actions such as bonus issues. Re-testing Change of control provisions Awards are tested once, at the end of the performance period of three years. There is no further retesting of the performance conditions If a change of control event occurs, the Board has the discretionary power to determine whether any unvested performance rights should ultimately vest, lapse or become subject to different vesting conditions. In making such a determination, the Board may have regard to any factors that the Board considers relevant, including the period elapsed, the extent to which the vesting conditions have been satisfied and the circumstances of the event. LTI grants Currently, the Group operates three tranches of the LTI Plan as below: TRANCHE GRANT DATE (JOINT CEOS) GRANT DATE (OTHER PARTICIPANTS) PERFORMANCE PERIOD 7 8 9 18 October 2019 18 October 2019 1 July 2019 to 30 June 2022 26 November 2020 13 November 2020 1 July 2020 to 30 June 2023 3 December 2021 12 August 2021 1 July 2021 to 30 June 2024 The table below outlines rights which were previously granted to Senior Management and testing against those conditions. TRANCHE KMP 7 Mr John E. McBain NO. OF RIGHTS GRANTED PERFORMANCE PERIOD VESTING CONDITIONS ACHIEVEMENT OF CONDITIONS 187,500 1 July 2019 - 30 June 2022 562,500 FUM growth hurdle AUM growth was 49% resulting in 100% vesting Mr Jason C. Huljich 187,500 562,500 Mr Simon W. Holt 69,514 208,542 Absolute TSR growth hurdle Absolute TSR was 6.25%, resulting in 0% vesting 8 Mr John E. McBain 682,278 1 July 2020 - 30 June 2023 227,426 Relative TSR growth hurdle(i) N/A Mr Jason C. Huljich 682,278 227,426 Mr Simon W. Holt 274,630 91,543 Absolute TSR growth hurdle(ii) N/A NO. OF RIGHTS VESTING VALUE 187,500 $1.87 - - 187,500 $1.87 - - 69,514 $1.87 - - - - - - - - - - - - - - 86 | Centuria Capital Group – Annual Report 2022 Centuria Capital Group – Annual Report 2022 | 87 Directors’ report For the year ended 30 June 2022 TRANCHE KMP NO. OF RIGHTS GRANTED PERFORMANCE PERIOD VESTING CONDITIONS ACHIEVEMENT OF CONDITIONS NO. OF RIGHTS VESTING VALUE 9 Mr John E. McBain 530,086 1 July 2021 - 30 176,935 June 2024 Mr Jason C. Huljich 530,086 176,935 Mr Simon W. Holt 204,370 68,123 Relative TSR growth hurdle(iii) N/A Absolute TSR growth hurdle(iv) N/A - - - - - - - - - - - - (i): The Tranche 8 relative TSR fair value is $1.75 for Joint CEOs and $1.58 for CFO. (ii): The Tranche 8 absolute TSR fair value is $1.29 for Joint CEOs and $1.10 for CFO. (iii): The Tranche 9 relative TSR fair values are $1.92 (three year vesting) and $1.85 (four year vesting) for Joint CEOs and $2.05 (three year vesting) and $1.98 (four year vesting) for CFO. (iv): The Tranche 9 absolute TSR fair value are $1.18 (three year vesting) and $1.16 (four year vesting) for Joint CEOs and $1.23 (three year vesting) and $1.19 (four year vesting) for CFO. Key terms of employment contracts Joint Chief Executive Officers Mr John E. McBain, was appointed as CEO of the Group in April 2008. Mr Jason C. Huljich, was appointed as Joint CEO of the Group in June 2019. Mr John E. McBain and Mr Jason C. Huljich are employed under contract. The summary of the major terms and conditions of their employment contracts are as follows: • fixed compensation plus superannuation contributions; • car parking within close proximity to the Company’s office; Statutory remuneration table to KMP The following table discloses total remuneration of Executive Directors and Senior Management in accordance with the Corporations Act 2001: SALARIES INCLUDING SUPERANNUATION ($)* YEAR SHORT TERM INCENTIVE ($) LONG SERVICE LEAVE ($) SHARE-BASED PAYMENTS ($) $ EXECUTIVE KMP Mr John E. McBain Mr Jason C. Huljich Mr Simon W. Holt Total 2022 2021 2022 2021 2022 2021 2022 2021 1,552,500 1,940,625 1,265,626 1,687,50 90,109 83,748 1,175,247 4,758,481 858,689 3,895,563 1,552,500 1,940,625 29,356 1,175,247 4,697,728 1,261,372 1,940,625 1,403 840,072 4,043,472 786,500 677,760 786,500 643,500 18,702 59,642 445,780 2,037,482 311,886 1,692,788 3,891,500 4,667,750 138,167 2,796,274 11,493,691 3,204,758 4,271,625 144,793 2,010,647 9,631,823 *The amount includes superannuation of $23,568 (FY21: $21,694) for each executive KMP which is the maximum annual employer contribution cap. Non-Executive Director remuneration Objective The Board seeks to set aggregate remuneration at a level that provides the Group with the ability to attract and retain directors of the highest calibre, whilst incurring a cost that is acceptable to shareholders. • eligible to participate in the bonus program determined at the discretion of the Board; • Non-Executive Directors receive adequate remuneration to attract and retain the requisite talent; • the Group may terminate their employment contract by providing six months written notice or provide payment in lieu of the notice period plus an additional six months. Any payment in lieu of notice will be based on the total fixed compensation package; and • the Group may terminate their employment contract at any time without notice if serious misconduct has occurred. When termination with cause occurs, the Joint CEOs are only entitled to remuneration up to the date of termination. The Nomination and Remuneration Committee ensures severance payments due to the Joint Chief Executive Officers on termination are limited to pre-established contractual arrangements which do not commit the Group to making any unjustified payments in the event of non-performance. Other Senior Management (standard contracts) All Senior Management are employed under contract. The Group may terminate their employment agreement by providing three months written notice or providing payment in lieu of the notice period (based on the total fixed compensation package). • reflect the complexity of the Group structure and the time commitment associated with oversight of multi-faceted operating entities within the Group; • reflects the risk and responsibility accepted by the Non-Executive Directors and their commercial expertise; and • the structure should align the Non-Executive Directors with investors, not providing any disincentive to take independent action. Structure The constitution and the ASX listing rules specify that the aggregate remuneration of Non-Executive Directors shall be determined from time to time by a general meeting. An amount not exceeding the aggregate amount determined is then divided between the directors as agreed. An aggregate maximum amount of not more than $2,000,000 per year was approved at the 2017 Annual General Meeting. Each director receives a fee for being a director of group companies and an additional fee is paid to the chairman and to the chair of each board committee. The payment of the additional fees to each chair recognises the additional time commitment and responsibility associated with the position. Non-executive directors do not receive equity as a form of payment. As highlighted on page 72, the Centuria structure, whilst not unique, comprises multiple operating entities, both listed and unlisted. These include CNI, COF, CIP, Centuria Life, Centuria Healthcare, Centuria New Zealand, Centuria Bass Credit and Primewest. Each board has specific requirements and obligations. In recognition of the complexity of the Group and in the interests of good governance and transparency, the Group has adopted a directors’ fee schedule which is disclosed in the table below. The fee schedule covers the board and board committee roles across the headstock and other operating entities which the Centuria directors are appointed to. The fee schedule is designed to improve transparency while recognising that each Board is responsible for actively overseeing the financial position and monitoring the business and affairs of the particular entity on behalf of its stakeholders, to whom directors are accountable. 88 | Centuria Capital Group – Annual Report 2022 Centuria Capital Group – Annual Report 2022 | 89 Directors’ report For the year ended 30 June 2022 In determining the fee schedule, the Non-Executive Director fees were benchmarked against the same peer group of S&P/ ASX 200 A-REIT companies used to determine levels of executive committee pay. Additionally, the complexity of the overall Group and the commitment levels required by Non-Executive Directors was considered in setting the level of fees. The fee schedule, outlined below, became effective from 1 June 2021: DIRECTOR FEES’ SCHEDULE CENTURIA CAPITAL LIMITED Board Audit, Risk and Compliance Committee Conflicts Committee Nominination and Remuneration Committee Culture, People and ESG Committee CENTURIA LIFE LIMITED Board Audit Committee Risk and Compliance Committee Investment Committee CENTURIA PROPERTY FUNDS LIMITED Board Audit, Risk Management and Compliance Committee CENTURIA PROPERTY FUNDS NO. 2 LIMITED Board Audit, Risk Management and Compliance Committee CENTURIA HEALTHCARE PTY LTD Board CENTURIA HEALTHCARE ASSET MANAGEMENT LTD Board Chair Member Chair Member Chair Member Chair Member Chair Member Chair Member Chair(ii) Member Chair(ii) Member(ii) Chair Member(ii) Chair Member(i) Chair Member Chair Member(i) Chair(ii) Member Chair Member Chair Member $335,000 $110,000 $20,000 $10,000 $50,000 $15,000 $20,000 $10,000 $20,000 $10,000 $90,000 $30,000 - $10,000 - - $70,000 - $110,000 $30,000/$55,000 $15,000 $10,000 $115,000 $30,000/$55,000 - $10,000 $70,000 $35,000 $50,000 $30,000 Note (i): Committee members who are also directors on the Centuria Capital Group Board are remunerated $30,000 and all other committee members are remunerated $55,000. Note (ii): The chair/member of the committee is a director on the Centuria Capital Limited Board and does not receive an additional fee. Following a review of the Non-Executive Directors’ fees during FY22, from 1 July 2022, the Non-Executive Directors’ fees for each of the boards and committees increased by 4%. The review of Non-Executive Director remuneration involved market analysis of remuneration practices for comparable ASX-listed A-REIT peers. This increase was approved after considering the market data and the changes in workload and accountabilities of NEDs as the Group has continued to grow its AUM and diversify its portfolio over the past year. Details of boards and board committees Centuria Capital Limited The Board of Centuria Capital Limited sets the strategic direction and objectives of the Centuria Group. Through its regular monthly board meetings, as well as the many transaction specific meetings, it oversees the performance of the executive management team in delivering against the strategic goals across the entire operations of the Group. The Board of Centuria Capital Limited and the Board of Centuria Funds Management Limited, as the responsibility entity of the Centuria Capital Fund, oversee and govern the complex stapled CCG structure (ASX:CNI). Where appropriate, meetings take place concurrently for maximum efficiency. Sub-committees chaired by independent Non-Executive Directors and established by the Centuria Capital Limited Board provide a forum for greater oversight of the governance requirements of the organisation. Centuria Funds Management Limited The Centuria Funds Management Limited Board concurrently with the Centuria Capital Limited Board and as the responsible entity of the stapled Centuria Capital Fund, provides oversight over management decision making, particularly in relation to the various co-investment stakes. This includes associated capital raisings and borrowings through facilities and note issuances in the market. Centuria Funds Management Limited holds an Australian Financial Services Licence that enables it to provide a wide range of financial products and investment advisory services as well as being the trustee of the Centuria Capital No. 2 Fund which is the issuer of listed redeemable debt notes (ASX:C2FHA). Centuria Capital Fund is a fund that has each of its units stapled to Centuria Capital Limited shares, with the two securities traded alongside each other as a single instrument (CNI). The Centuria Capital Fund holds various strategic co-investment stakes primarily in listed and unlisted funds managed by Centuria. CCF through its subsidiaries is also the vehicle through which the group: • undertakes both long term and short term investment decisions; • supports the establishment of new funds through the provision of initial seed capital; • provides underwriting support as and when required; • undertakes equity raisings; and • raises finance through various external facilities and the issuance of both listed and unlisted notes. Centuria Life Limited Centuria Life Limited is an APRA regulated entity and is the vehicle through which the Centuria Capital Group issues and offers its full suite of investment bond products in addition to providing investment management and administration services to Over Fifty Guardian Friendly Society Limited (Guardian). Guardian has in excess of $800 million in assets under management. With the great majority of the products offered by the business having daily unit pricing, it requires the application of strict governance and compliance systems and processes to meet regulatory requirements in addition to the continuous monitoring of Board and APRA mandated capital adequacy requirements. Centuria Healthcare Pty Limited Centuria Capital Group owns 64% of Centuria Healthcare Pty Limited, formerly Heathley Healthcare. Through its various subsidiaries, including Centuria Healthcare Asset Management Limited, the responsible entity for a number of unlisted healthcare registered schemes this company provides extensive property, funds management and development management services across a range of established healthcare assets and development opportunities. The Centuria Capital Group currently has a majority interest in Centuria Healthcare Pty Limited, with a put and call option exercisable in 2024 to acquire the remaining stake in the healthcare business. In the meantime, Centuria Capital Group has day to day control over the operating and financial decisions of the business and the Board meets on a monthly basis to set the strategic direction of Centuria’s healthcare business. 90 | Centuria Capital Group – Annual Report 2022 Centuria Capital Group – Annual Report 2022 | 91 Directors’ report For the year ended 30 June 2022 Centuria Property Funds Limited Non-executive director - statutory remuneration table Centuria Property Funds Limited (CPFL) is the responsible entity of the ASX-listed Centuria Office REIT (ASX:COF) and the responsible entity of the open-ended Centuria Diversified Property Fund and 19 closed-ended registered schemes with over $4.0 billion total assets under management. CPFL is also regulated by ASIC to provide custodian services to various property funds. The Board must ensure that CPFL continually meets its obligations as an Australian Financial Services Licence holder including capital adequacy, minimum net tangible asset, liquidity and cashflow testing requirements. Centuria Property Funds No. 2 Limited Centuria Property Funds No. 2 Limited (CPF2L) is the responsible entity of the ASX-listed Centuria Industrial Fund (ASX:CIP) and the responsible entity of the open-ended Centuria Healthcare Property Fund and four closed-ended registered schemes with over $5.5 billion total assets under management. CPF2L is also regulated by ASIC to provide custodian services to various property funds. The Board must ensure that CPF2L continually meets its obligations as an Australian Financial Services Licence holder including capital adequacy, minimum net tangible asset, liquidity and cashflow testing requirements. Audit, Risk and Compliance Committee The CNI Board has an established Audit, Risk and Compliance Committee to assist in relation to audit, risk management and compliance oversight responsibilities, ensuring the integrity of the Group’s financial reporting and compliance with statutory and regulatory obligations mandated by ASIC and prudential requirements governed by APRA. The Committee meets on a quarterly basis and is also accountable for assessing the effectiveness of the Group’s risk management policy and ensuring there is a continuous process for the management of significant risks throughout the Group. Conflicts Committee Identifying and addressing all matters involving conflicts of interest, whether actual or perceived is the cornerstone of good corporate governance. The Board of Centuria Capital Group has established a Conflicts Committee to review and assess specific arrangements proposed to manage conflicts as and when they arise. The Committee has an independent Chair, Professor Simon Rice AO, and its members are all independent Non-Executive Directors from within the Group. Meetings take place whenever required to provide the Board of the relevant Centuria entity with guidance on whether the measures proposed, if properly implemented, are adequate to manage the conflict. Amongst its A-REIT peers in the S&P/ ASX 200, Centuria is the only company to have such a committee. Nomination and Remuneration Committee The Nomination and Remuneration Committee is tasked with ensuring that the Boards of the various Centuria Group entities comprise of members with the appropriate mix of skills, tenure, experience, training and diversity to provide the right balance of stewardship and oversight on behalf of its stakeholders. The Committee is also tasked with providing appropriate governance and monitoring of the Group’s remuneration policies, adherence to codes of conduct as well as advice with respect to the appropriate quantum and structure of remuneration for Senior Management and staff. The aim of the Nomination and Remuneration Committee is to ensure the appropriate balance of risk and rewards for people whilst ensuring appropriate stewardship of the Group’s resources on behalf of its stakeholders. Culture and ESG Committee The Culture and ESG Committee was established by the Board as a result of the Board’s recognition of the importance of ESG to the long term sustainability of the Company and the increasing relevance to Centuria’s investors as the Company grows. The committee is chaired by Susan L. Wheeldon, Board member of CNI. The Board also recognised the Company’s responsibility to the community in which it operates and as such, established the Committee to assist the Board in fulfilling its oversight responsibilities and to make recommendations on matters pertaining to culture, the environment, social and governance. Investment committees Centuria Capital Group has various investment committees to oversee the relevant entity’s investment and portfolio management practices to ensure they are in line with the risk and return requirements of its investors, as well as ensuring that investment decisions are made in accordance with the appropriate regulatory requirements. The Centuria Life and Over Fifty Guardian Friendly Society Investment Committees in particular monitor fund rules and target achieving the long term strategic objectives of investors. The below table outlines total fees paid to NEDs for 2021 and 2022. All the fees below include superannuation and since 1 June 2021 reflect the rates outlined in the benchmarked director fee schedule on page 90. NON-EXECUTIVE KMP Mr Garry S. Charny Ms Kristie R. Brown Note (ii) Mr Peter J. Done Mr John R. Slater Ms Susan L. Wheeldon Mr Nicholas R. Collishaw Note (iii) Total YEAR 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 TOTAL FEES(I) $ 495,000 337,810 125,312 38,846 230,000 197,348 230,000 159,919 146,771 106,793 52,727 200,888 1,279,810 1,041,604 Note (i): Board and committee fees are paid as cash and are inclusive of superannuation contributions which are paid in accordance with the applicable superannuation legislation. Non-executive directors are not entitled to retirement benefits other than superannuation. Total fees for each Non-executive director disclosed in the table above include superannuation contributions as follows: • Mr Garry S. Charny $29,932 (2021: $28,043) • Ms Kristie R. Brown $11,392 (2021: $3,370) • Mr Peter J. Done $10,455 (2021: $6,997) • Mr John R. Slater $20,909 (2021: $13,874) • Ms Susan L. Wheeldon $13,343 (2021: $9,265) • Mr Nicholas R. Collishaw $4,242 (2021: $17,429) Note (ii): Ms Kristie R. Brown was appointed a member of the Centuria Capital Board on 15 February 2021. Note (iii): Mr Nicholas R. Collishaw resigned from the Board on 30 August 2021. The below presentation shows how fees paid to each NED aligns with their roles in various subsidiary boards and committees as per the fee schedule on page 90. This new fee structure and schedule was effective from 1 June 2021. The 2021 fees in the tables below therefore only represent the fees for one month. The 2021 full year fees paid to NEDs are outlined in the table presented above. 92 | Centuria Capital Group – Annual Report 2022 Centuria Capital Group – Annual Report 2022 | 93 MEETINGS HELD DURING FY22 AUDIT, RISK AND COMPLIANCE COMMITTEE NOMINATION AND REMUNERATION COMMITTEE CULTURE AND ESG COMMITTEE CONFLICTS COMMITTEE BOARD INVESTMENT COMMITTEE TOTAL $ 25 335,000 - 0# 0# 0# - 335,000 MEETINGS HELD DURING FY22 AUDIT, RISK AND COMPLIANCE COMMITTEE NOMINATION AND REMUNERATION COMMITTEE CULTURE AND ESG COMMITTEE CONFLICTS COMMITTEE BOARD Directors’ report For the year ended 30 June 2022 MR GARRY S. CHARNY Centuria Capital Limited YEAR 2022 12 months 2021 1 month (new fee structure)** 27,917 0# 0# 0# Centuria Life Limited 2022 12 months 13 90,000 Centuria Healthcare Pty Ltd(i) Total 2021 1 month (new fee structure)** 2022 12 months 2021 1 month (new fee structure)** 2022 12 months 2021 1 month (new fee structure)** 7,500 14 70,000 5,833 52 495,000 41,250 0# 0# - - - - - - - - - - - - - - - - - - - - - - - - - - 27,917 90,000 7,500 - 70,000 - 5,833 - 495,000 - 41,250 Note (i): The meetings held during the year includes the meetings held by the Centuria Healthcare Pty Ltd Board sub-committee. ** The new fee structure and schedule outlined on page 90 was effective from 1 June 2021. The 2021 fees in this table therefore only represent the fees for one month. The 2021 full year fees paid to NEDs are outlined in the table presented on page 93. # NED is chair/member of this committee, however receives no additional fee for their role on the committee. MS KRISTIE R. BROWN Centuria Capital Limited(i) Total YEAR 2022 12 months 2021 1 month (new fee structure)** 2022 12 months 2021 1 month (new fee structure)** MEETINGS HELD DURING FY22 AUDIT, RISK AND COMPLIANCE COMMITTEE NOMINATION AND REMUNERATION COMMITTEE CULTURE AND ESG COMMITTEE CONFLICTS COMMITTEE BOARD 25 110,000 10,000 5,132 9,167 833 - 52 110,000 10,000 5,132 9,167 833 - - - - - - - - - INVESTMENT COMMITTEE TOTAL $ - 125,132 - 10,000 - 125,132 - 10,000 Note (i): Ms Kristie Brown was appointed a member of the Centuria Capital Board on 15 February 2021. ** The new fee structure and schedule outlined on page 90 was effective from 1 June 2021. The 2021 fees in this table therefore only represent the fees for one month. The 2021 full year fees paid to NEDs are outlined in the table presented on page 93. Centuria Life Limited 2022 12 months 13 30,000 0# 0# 2,500 MR PETER J. DONE Centuria Capital Limited YEAR 2022 12 months 2021 1 month (new fee structure)** Centuria Property Funds Limited Centuria Property Funds No. 2 Limited Total 2021 1 month (new fee structure)** 2022 12 months 2021 1 month (new fee structure)** 2022 12 months 2021 1 month (new fee structure)** 2022 12 months 2021 1 month (new fee structure)** 25 110,000 20,000 9,167 1,667 27 30,000 0# 2,500 0# 28 30,000 0# 200,000 0# 93 495,000 20,000 16,667 1,667 - - - - - - - - - - 10,000 833 - - - - - - 10,000 833 - - - - - - - - - - INVESTMENT COMMITTEE TOTAL $ - 140,000 - 11,667 - - 30,000 2,500 - 30,000 - 2,500 - 30,000 - 2,500 - 230,000 - 19,167 ** The new fee structure and schedule outlined on page 90 was effective from 1 June 2021. The 2021 fees in this table therefore only represent the fees for one month. The 2021 full year fees paid to NEDs are outlined in the table presented on page 93. # NED is chair/member of this committee, however receives no additional fee for their role on the committee. 94 | Centuria Capital Group – Annual Report 2022 Centuria Capital Group – Annual Report 2022 | 95 Directors’ report For the year ended 30 June 2022 MR JOHN R. SLATER Centuria Capital Limited YEAR 2022 12 months 2021 1 month (new fee structure)** Total 2021 1 month (new fee structure)** 2022 12 months 2021 1 month (new fee structure)** MEETINGS HELD DURING FY22 AUDIT, RISK AND COMPLIANCE COMMITTEE NOMINATION AND REMUNERATION COMMITTEE CULTURE AND ESG COMMITTEE CONFLICTS COMMITTEE BOARD 25 110,000 10,000 9,167 833 38 140,000 10,000 11,667 833 - - - - - - 10,000 833 - 10,000 - 833 - - - - - - INVESTMENT COMMITTEE TOTAL $ - 130,000 - 10,833 70,000 100,000 5,833 8,333 70,000 230,000 5,833 19,166 Centuria Life Limited 2022 12 months 13 30,000 - - 2,500 ** The new fee structure and schedule outlined on page 90 was effective from 1 June 2021. The 2021 fees in this table therefore only represent the fees for one month. The 2021 full year fees paid to NEDs are outlined in the table presented on page 93. MS SUSAN L. WHEELDON Centuria Capital Limited(i) Total YEAR 2022 12 months 2021 1 month (new fee structure)** 2022 12 months 2021 1 month (new fee structure)** MEETINGS HELD DURING FY22 AUDIT, RISK AND COMPLIANCE COMMITTEE NOMINATION AND REMUNERATION COMMITTEE CULTURE AND ESG COMMITTEE CONFLICTS COMMITTEE BOARD INVESTMENT COMMITTEE TOTAL $ 25 110,000 - 9,688 7,083 20,000 - 146,771 9,167 833 1,250 - 1,667 - 12,084 25 110,000 9,167 - - 9,688 7,083 20,000 - 146,771 1,250 - 1,667 - 12,084 Note (i): Ms Susan Wheeldon was a member of the Conflicts Committee until 22 February 2022. On 22 February 2022, she was appointed Chair of the Nomination and Remuneration Committee. ** The new fee structure and schedule outlined on page 90 was effective from 1 June 2021. The 2021 fees in this table therefore only represent the fees for one month. The 2021 full year fees paid to NEDs are outlined in the table presented on page 93. MR NICHOLAS R. COLLISHAW Centuria Capital Limited(i) Centuria Property Funds Limited(i) Centuria Property Funds No. 2 Limited(i) Centuria Healthcare Asset Management Limited (ii) Total YEAR 2022 12 months 2021 1 month (new fee structure)* 2022 12 months 2021 1 month (new fee structure)* 2022 12 months 2021 1 month (new fee structure)** 2022 12 months 2021 1 month (new fee structure)* 2022 12 months 2021 1 month (new fee structure)* MEETINGS HELD DURING FY22 AUDIT, RISK AND COMPLIANCE COMMITTEE NOMINATION AND REMUNERATION COMMITTEE CULTURE AND ESG COMMITTEE CONFLICTS COMMITTEE BOARD INVESTMENT COMMITTEE TOTAL $ 25 18,333 9,167 27 5,000 2,500 28 5,000 2,500 6 22,727 5,833 86 51,060 20,000 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 1,667 - 20,000 833 - 10,000 - - - - - - 1,667 833 - 5,000 - - 2,500 5,000 - 2,500 - 22,727 - - - 5,833 52,727 20,833 Note (i): Mr Nicholas Collishaw resigned from the Board of Centuria Capital Limited, Centuria Property Funds Limited and Centuria Property Funds No.2 Limited on 30 August 2021. Note (ii): Mr Nicholas Collishaw resigned from the Board of Centuria Healthcare Asset Management Limited on 17 September 2021. ** The new fee structure and schedule outlined on page 90 was effective from 1 June 2021. The 2021 fees in this table therefore only represent the fees for one month. The 2021 full year fees paid to NEDs are outlined in the table presented on page 93. 96 | Centuria Capital Group – Annual Report 2022 Centuria Capital Group – Annual Report 2022 | 97 Directors’ report For the year ended 30 June 2022 Related party transactions Since 2021 the Board has adopted a policy that, as a matter of general principle, third party consultancy fees should not be paid to entities that are related to independent directors. Any directors who are associated with entities that received consulting fees have had their independence tested and confirmed by reference to ASIC guidelines on independence and through an external review. There were no fees paid in FY22. In FY21, the following transactions occurred between the Group and key management personnel: ENTITY RELATED PARTY Wolseley Corporate Pty Ltd Mr Garry S. Charny Tailwind Consulting Pty Ltd Mr John R. Slater 30 JUNE 2022 $ - - 30 JUNE 2021 $ 328,707 211,977 Director and Senior Management equity holdings and other transactions Director and Senior Management equity holdings Set out below are details of movements in fully paid ordinary shares held by Directors and Senior Management as at the date of this report. Lead Auditor’s Independence Declaration under Section 307C of the Corporations Act 2001 To the Directors of Centuria Capital Limited I declare that, to the best of my knowledge and belief, in relation to the audit of Centuria Capital Group for the financial year ended 30 June 2022 there have been: i. ii. no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit; and no contraventions of any applicable code of professional conduct in relation to the audit. MOVEMENT BALANCE AT 30 JUNE 2022 CHANGES PRIOR TO SIGNING BALANCE AT SIGNING DATE NAME Mr Garry S. Charny Mr Peter J. Done Mr John R. Slater Ms Susan L. Wheeldon Ms Kristie R. Brown BALANCE AT 1 JULY 2021 406,753 1,506,182 3,110,677 - - 16,000 422,753 - - - - 1,506,182 3,110,677 - - Mr John E. McBain 7,062,484 638,298 7,700,782 Mr Jason C. Huljich 5,289,612 968,969 6,258,581 Mr Simon W. Holt 777,889 230,496 1,008,385 This report is made in accordance with a resolution of Directors. Mr Garry S. Charny DIRECTOR Peter Done DIRECTOR Sydney 10 August 2022 - - - - - - - - 422,753 1,506,182 3,110,677 - - 7,700,782 6,258,581 1,008,385 KPMG Paul Thomas Partner Sydney 10 August 2022 KPMG, an Australian partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under Professional Standards Legislation. 48 98 | Centuria Capital Group – Annual Report 2022 Centuria Capital Group – Annual Report 2022 | 99 Financial statements 2 CORNWALLIS STREET CSIRO DATA61 BUILDING, 13 GARDEN ST BIOMEDICAL BUILDING, 3 CENTRAL AVENUE 100 | Centuria Capital Group – Annual Report 2022 Centuria Capital Group – Annual Report 2022 | 101 UNLISTED: AUSTRALIAN TECHNOLOGY PARK, SOUTH EVERLEIGH NSW Financial report contents For the year ended 30 June 2022 Consolidated statement of comprehensive income Consolidated statement of financial position Consolidated statement of changes in equity Consolidated statement of cash flows Notes to the consolidated financial statements A About the report A1 General information A2 Significant accounting policies A3 Other new accounting standards and interpretations A4 Use of judgements and estimates A5 Segment summary B Business performance B1 Segment profit and loss B2 Revenue B3 Fair value movements of financial instruments and property B4 Expenses B5 Finance costs B6 Taxation B7 (Losses)/earnings per security B8 Dividends and distributions C Assets and liabilities C1 Segment balance sheet C2 Receivables C3 Financial assets C4 Investment properties C5 Inventory C6 Intangible assets C7 Payables C8 Borrowings C9 Call/put option liability C10 Right of use asset/lease liability C11 Contributed equity C12 Commitments and contingencies D Cash flows D1 Operating segment cash flows D2 Cash and cash equivalents D3 Reconciliation of profit for the period to net cash flows from operating activities E Group structure E1 Interests in associates and joint ventures E2 Interests in subsidiaries E3 Parent entity disclosure F Other F1 Share-based payment arrangements F2 Financial instruments F3 Remuneration of auditors F4 Events subsequent to the reporting date Directors’ declaration Independent auditor’s report 102 | Centuria Capital Group – Annual Report 2022 Consolidated statement of comprehensive income For the year ended 30 June 2022 NOTES B1, B2 E1 B3 B4 B5 B6 Revenue Share of net profit of equity accounted investments Net movement in policyholder liability Fair value movements of financial instruments and property Expenses Finance costs (Loss)/profit before tax Income tax expense (Loss)/profit after tax (LOSS)/PROFIT AFTER TAX IS ATTRIBUTABLE TO: Centuria Capital Limited Centuria Capital Fund (non-controlling interests) External non-controlling interests (Loss)/profit after tax Foreign currency translation reserve Total comprehensive (loss)/income for the year TOTAL COMPREHENSIVE (LOSS)/INCOME FOR THE YEAR IS ATTRIBUTABLE TO: Centuria Capital Limited Centuria Capital Fund (non-controlling interests) External non-controlling interests Total comprehensive (loss)/income (LOSS)/PROFIT AFTER TAX ATTRIBUTABLE TO: Centuria Capital Limited Centuria Capital Fund (non-controlling interests) (Loss)/profit after tax attributable to Centuria Capital Group securityholders (LOSS)/EARNINGS PER CENTURIA CAPITAL GROUP SECURITY Basic (cents per stapled security) Diluted (cents per stapled security) B7 B7 (LOSS)/EARNINGS PER CENTURIA CAPITAL LIMITED SHARE Basic (cents per share) Diluted (cents per share) 2022 $’000 2021 $’000 299,716 228,932 7,101 16,514 (190,384) (135,313) (31,593) (33,959) (3,402) (37,361) 20,637 (58,489) 491 (37,361) (4,262) (41,623) 16,375 (58,489) 491 (41,623) 20,637 (58,489) (37,852) 3,070 5,788 103,929 (155,864) (20,289) 165,566 (15,927) 149,639 23,431 120,025 6,183 149,639 (757) 148,882 22,674 120,025 6,183 148,882 23,431 120,025 143,456 CENTS CENTS (4.8) (4.8) 2.6 2.6 24.6 24.2 4.0 4.0 The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes. Centuria Capital Group – Annual Report 2022 | 103 103 104 106 108 110 110 110 110 111 112 113 114 114 116 119 120 121 121 126 126 128 128 130 131 134 136 138 140 140 143 144 144 145 146 146 147 147 150 150 154 160 162 162 163 173 173 174 175 EQUITY ATTRIBUTABLE TO CENTURIA CAPITAL FUND (NON-CONTROLLING INTERESTS) Contributed equity Retained earnings NOTES 2022 $’000 2021 $’000 C11 1,025,584 1,018,822 (313,452) (183,970) Total equity attributable to Centuria Capital Fund (non-controlling interests) 712,132 834,852 Total equity attributable to Centuria Capital Group securityholders 1,389,818 1,508,264 EQUITY ATTRIBUTABLE TO EXTERNAL NON-CONTROLLING INTERESTS Contributed equity Retained earnings Total equity attributable to external non-controlling interests Total equity 15,683 27,700 43,383 31,781 30,196 61,977 1,433,201 1,570,241 The above consolidated statement of financial position should be read in conjunction with the accompanying notes. Consolidated statement of financial position As at 30 June 2022 Cash and cash equivalents Receivables Income tax receivable Financial assets Other assets Inventory Deferred tax assets Equity accounted investments Investment properties Right of use asset Intangible assets Total assets Payables Provisions Borrowings Provision for income tax Interest rate swaps at fair value Benefit funds policyholder's liability Call/put option liability Deferred tax liabilities Lease liability Total liabilities Net assets EQUITY NOTES D2 C2 B6(b) C3 C5 B6(c) E1 C4 C10 C6 C7 C8 B6(b) B9 B6(c) C10 2022 $’000 200,565 113,487 6,861 2021 $’000 273,351 127,197 977 961,692 990,524 9,972 134,783 50,006 74,769 8,679 53,744 42,526 55,637 337,500 208,140 17,006 19,947 788,209 790,551 2,694,850 2,571,273 134,619 5,113 88,675 4,077 629,385 426,642 4,165 18,750 1,764 31,205 270,557 303,650 84,095 95,522 19,443 22,690 100,572 21,757 1,261,649 1,001,032 1,433,201 1,570,241 Equity attributable to Centuria Capital Limited Contributed equity Reserves Retained earnings Total equity attributable to Centuria Capital Limited C11 389,717 386,634 3,491 284,478 677,686 3,720 283,058 673,412 104 | Centuria Capital Group – Annual Report 2022 Centuria Capital Group – Annual Report 2022 | 105 Consolidated statement of changes in equity For the year ended 30 June 2022 CENTURIA CAPITAL LIMITED CENTURIA CAPITAL FUND (NON-CONTROLLING INTERESTS) EXTERNAL NON-CONTROLLING INTERESTS CENTURIA CAPITAL LIMITED CENTURIA CAPITAL FUND (NON-CONTROLLING INTERESTS) EXTERNAL NON-CONTROLLING INTERESTS CONTRIBUTED EQUITY $’000 RESERVES $’000 RETAINED EARNINGS $’000 CONTRIBUTED EQUITY $’000 TOTAL $’000 RETAINED EARNINGS $’000 TOTAL ATTRIBUTABLE TO CENTURIA CAPITAL GROUP SECURITY- HOLDERS $’000 TOTAL $’000 CONTRIBUTED EQUITY $’000 RETAINED EARNINGS $’000 TOTAL $’000 TOTAL EQUITY $’000 CONTRIBUTED EQUITY $’000 RESERVES $’000 RETAINED EARNINGS $’000 CONTRIBUTED EQUITY $’000 TOTAL $’000 RETAINED EARNINGS $’000 TOTAL ATTRIBUTABLE TO CENTURIA CAPITAL GROUP SECURITY- HOLDERS $’000 TOTAL $’000 CONTRIBUTED EQUITY $’000 RETAINED EARNINGS $’000 TOTAL $’000 TOTAL EQUITY $’000 Balance at 1 July 2021 386,634 3,720 283,058 673,412 1,018,822 (183,970) 834,852 1,508,264 31,781 30,196 61,977 1,570,241 Profit for the year - - 20,637 20,637 - (58,489) (58,489) (37,852) - (4,262) - (4,262) - - - (4,262) - (4,262) 20,637 16,375 - (58,489) (58,489) (42,114) 981 4,033 - 5,014 - - - 5,014 - - - - 491 491 (37,361) - - (4,262) 491 491 (41,623) - - 5,014 - - (18,965) (18,965) - (70,523) (70,523) (89,488) - (3,895) (3,895) (93,383) - - - - - - 2,039 6,636 (173) (344) 236 470 - - - 6,636 8,675 (344) (517) 470 706 - (252) (252) - (470) (470) (722) - - - - - - - - - - - 8,675 (517) 706 - (722) - - - - - - - - - - - - - - (22,077) 908 (21,169) (21,169) 5,979 - 5,979 5,979 (173) 236 - - - 389,717 3,491 284,478 677,686 1,025,584 (313,452) 712,132 1,389,818 15,683 27,700 43,383 1,433,201 Securities issued 2,039 Foreign currency translation reserve Total comprehensive income for the year Equity settled share based payments expense Dividends and distributions paid/ accrued Cost of equity raising Change in value of securities issued Fair value differential on acquisition (impact of transaction as part of stapled group) Deconsolidation of controlled property funds Issued equity to non-controlling interests Balance at 30 June 2022 Balance at 1 July 2020 Profit for the year Foreign currency translation reserve Total comprehensive income for the year Acquisition of subsidiaries with non-controlling interests Equity settled share based payments expense Dividends and distributions paid/ accrued Transactions with owners in their capacity as owners Fair value differential on acquisition (impact of transaction as part of stapled group) Purchase of external non- controlling interests Deconsolidation of controlled property funds Balance at 30 June 2021 Stapled securities issued 209,208 Cost of equity raising (1,205) - - - - - - - - - 177,149 2,901 17,074 197,124 545,744 (9,771) 535,973 733,097 57,230 40,819 98,049 831,146 - 23,431 23,431 (757) - (757) - - 120,025 120,025 143,456 - - (757) (757) 23,431 22,674 - 120,025 120,025 142,699 - - - 6,183 6,183 149,639 - - (757) 6,183 6,183 148,882 - - - 1,482 1,576 - 3,058 - - - - - - - 18,992 (917) 18,075 18,075 3,058 - - - 3,058 - (19,808) (19,808) - (40,219) (40,219) (60,027) - (3,295) (3,395) (63,322) - - - 2,671 2,671 - 5,685 5,685 8,356 - 209,208 475,185 - (1,205) (2,107) - - 475,185 684,393 (2,107) (3,312) - 259,690 259,690 - (259,690) (259,690) - - - - - - - - - - 8,356 - 684,393 - (3,312) - - - - - - - - - - - - - - - (42,982) (13,387) (56,369) (56,369) - (1,459) 793 (666) (666) 386,634 3,720 283,058 673,412 1,018,822 (183,970) 834,852 1,508,264 31,781 30,196 61,9771,570,241 The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes. 106 | Centuria Capital Group – Annual Report 2022 Centuria Capital Group – Annual Report 2022 | 107 Consolidated statement of cash flows For the year ended 30 June 2022 CASH FLOWS FROM OPERATING ACTIVITIES CASH FLOWS FROM FINANCING ACTIVITIES NOTES 2022 $’000 2021 $’000 NOTES 2022 $’000 2021 $’000 Management fees received Performance fees received Rent received Distributions received Interest received Payments to suppliers and employees Cash received on development projects Interest paid Income taxes paid Applications - benefits funds Redemptions - benefits funds Net cash provided by operating activities D3 CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from sale of related party investments Purchase of investments in related parties Repayment of loans by related parties Loans to related parties Loans repaid by other parties (Purchase)/sale of investment property Purchase of equity accounted investments Disposal of equity accounted investments Payments for property, plant and equipment Cash balance on deconsolidation of property funds Purchase of subsidiaries Collections from reverse mortgage holders Sale/(purchase) of property held for development Benefit Funds net disposals of investments in financial assets Proceeds from sale of investments Return of investment to external non-controlling interests 186,462 110,355 Proceeds from issue of securities to securityholders of Centuria Capital Group 20,829 27,764 53,119 4,531 1,772 15,333 38,832 2,191 Equity raising costs paid Proceeds from borrowings Repayment of borrowings Capitalised borrowing costs paid (106,726) (135,469) Distributions paid to securityholders of Centuria Capital Group 8,300 (328) 248,719 133,073 (2,611) 242,616 (23,395) (98,645) (1,900) (4,877) (90,524) (52,124) 3,658 (3,820) 140,710 (71,711) 273,351 (1,075) 1,376 (3,227) 215,581 99,119 174,458 (226) Proceeds from issues of securities to external non-controlling interests Distributions paid to external non-controlling interests Net cash provided by financing activities Net (decrease)/increase in cash and cash equivalents Cash and cash equivalents at the beginning of the financial year Effects of exchange rate changes on cash and cash equivalents Cash and cash equivalents at end of year 200,565 273,351 The above consolidated statement of cash flows should be read in conjunction with the accompanying notes. 48,511 (26,393) (19,560) 27,801 (44,737) 171,601 42,723 (15,355) (10,280) 15,611 (42,851) 22,862 89,817 33,988 (164,281) (128,519) 82,991 3,750 (149,531) (31,216) - (237,700) 6,702 861 (28,381) (26,089) 8,324 (2,697) 5,000 (3,343) (12,926) 105,308 - (104,996) 2,551 10,149 12,925 4,737 - 888 (22,621) 21,319 - (356) Net cash used in investing activities (384,022) (139,324) 108 | Centuria Capital Group – Annual Report 2022 Centuria Capital Group – Annual Report 2022 | 109 Notes to the financial statements For the year ended 30 June 2022 A About the report A1 GENERAL INFORMATION The shares in Centuria Capital Limited, (the 'Company) and the units in Centuria Capital Fund (CCF) are stapled and trade together as a single stapled security (Stapled Security) on the ASX as ‘Centuria Capital Group’ (the 'Group) under the ASX 'CNI'. The Group is a for-profit entity and its principal activities are the marketing and management of investment products including property investment funds and friendly society investment bonds, as well as co-investments in property investment funds. Statement of compliance The consolidated financial statements are general purpose financial statements which have been prepared in accordance with Australian Accounting Standards adopted by the Australian Accounting Standards Board (AASB) and the Corporations Act 2001. The consolidated financial statements comply with International Financial Reporting Standards (IFRS) adopted by the International Accounting Standards Board (IASB). Foreign currency transactions Transactions in foreign currencies are translated into the respective functional currencies of Group companies at the exchange rate at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the exchange rate at the reporting date. Non-monetary assets and liabilities that are measured at fair value in a foreign currency are translated into the functional currency at the exchange rate when the fair value was determined. Non- monetary items that are measured based on historical cost in a foreign currency are translated at the exchange rate at the date of the transaction. Foreign currency differences are generally recognised in profit or loss. However, foreign currency differences arising from the translation of the following items are recognised in Other Comprehensive Income (OCI): • an investment in equity securities designated as at fair value through OCI (FVOCI) (except on impairment, in which case foreign currency differences that have been recognised in OCI are reclassified to profit or loss); • a financial liability designated as a hedge of the net investment in a foreign operation to the extent that the hedge is The consolidated financial statements of the Group comprising the Company (as ‘Parent) and its controlled entities for the year ended 30 June 2022 were authorised for issue by the Group’s Board of Directors on 10 August 2022. effective; and • qualifying cash flow hedges to the extent that the hedges are effective. Basis of preparation The consolidated financial statements have been prepared on the basis of historical cost, except for financial assets at fair value through profit and loss, other financial assets, investment properties and derivative financial instruments which have been measured at fair value at the end of each reporting period. Cost is based on the fair values of the consideration given in exchange for assets. All amounts are presented in Australian dollars, which is the Company’s functional currency, unless otherwise noted. Assets and liabilities have been presented on the face of the statement of financial position in decreasing order of liquidity and do not distinguish between current and non-current items. Going concern The financial report has been prepared on a going-concern basis, which assumes continuity of normal business activities and the realisation of assets and settlement of liabilities in the ordinary course of business. Rounding of amounts The Group is an entity of a kind referred to in ASIC Legislative Instrument 2016/191, related to the ‘rounding off’ of amounts in the Directors’ Report and financial statements. Amounts in the Directors’ Report and financial statements have been rounded off, in accordance with the instrument to the nearest thousand dollars, unless otherwise indicated. A2 SIGNIFICANT ACCOUNTING POLICIES The accounting policies and methods of computation in the preparation of the consolidated financial statements are consistent with those adopted in the previous financial year ended 30 June 2021 with the exception of the adoption of new accounting standards outlined below or in the relevant notes to the consolidated financial statements. When the presentation or classification of items in the consolidated financial statements has been amended, comparative amounts are also reclassified, unless it is impractical. Accounting policies are selected and applied in a manner that ensures that the resulting financial information satisfies the concepts of relevance and reliability, thereby ensuring that the substance of the underlying transactions or other events are reported. These financial statements contain all significant accounting policies that summarise the recognition and measurement basis used and which are relevant to provide an understanding of the financial statements. Accounting policies that are specific to a note to the financial statements are described in the note to which they relate. Foreign operations The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated into the Australian dollar (AUD) at the exchange rate at the reporting date. The income and expenses of foreign operations are translated into AUD at the exchange rates at the date of the transactions. Foreign currency differences arising from the translation of foreign operations are recognised in OCI and accumulated into the translation reserve, except to the extent that the translation difference is allocated to NCI. A3 OTHER NEW ACCOUNTING STANDARDS AND INTERPRETATIONS The AASB has issued new or amendments to standards that are first effective from 1 July 2021. The following amended standards and interpretations that have been adopted do not have a significant impact on the Group’s consolidated financial statements. Standards now effective: AASB 2020-8 Amendments to Australian Accounting Standards - Interest Rate Benchmark Reform - Phase 2 AASB 2020-8 amends AASB 9 Financial Instruments, AASB 7 Financial Instruments: Disclosures, AASB 4 Insurance Contracts, AASB 16 Leases and AASB 139 Financial Instruments: Recognition and Measurement to introduce practical expedients in relation to accounting for modification of financial contracts and/or leases if a change results directly from IBOR reform. Amendments also allow a series of exemptions from the regular hedge accounting rules and introduce additional disclosures requirements. AASB 2021-3 Amendments to Australian Accounting Standards - COVID-19-Related Rent Concessions beyond 30 June 2021 AASB 2021-3 extends the practical expedient introduced by AASB 2020-4 Amendments to Australian Accounting Standards - COVID-19 - Related Rent Concessions by a further 12 months - permitting lessees to apply the relief to rent concessions for which reductions in lease payments were originally due on or before 30 June 2022. 110 | Centuria Capital Group – Annual Report 2022 Centuria Capital Group – Annual Report 2022 | 111 Notes to the financial statements For the year ended 30 June 2022 A About the report Standards not yet effective: A number of new standards are effective for annual periods beginning after 1 July 2021 and earlier application is permitted; however, the Group has not early adopted the new or amended standards in preparing these consolidated financial statements. The following new and amended standards are not expected to have a significant impact on the Group’s consolidated financial statements. • AASB 2020-3 Amendments to Australian Accounting Standards - Annual Improvements 2018-2020 and Other Amendments • AASB 2020-6 Amendments to Australian Accounting Standards - Classification of Liabilities as Current or Non-current • AASB 17 Insurance Contracts • AASB 2020-5 Amendments to Australian Accounting Standards - Insurance Contracts • AASB 2022-1 Amendments to Australian Accounting Standards - Initial application of AASB 17 and AASB 9 - Comparative Information • AASB 2021-2 Amendments to Australian Accounting Standards - Disclosure of Accounting Policies and Definition of Accounting Estimates • AASB 2021-5 Amendments to Australian Accounting Standards - Deferred Tax related to Assets and Liabilities arising from a Single Transaction • AASB 2021-7(a-c) Amendments to Australian Accounting Standards - Effective Date of Amendments to AASB 10 and AASB 128 and Editorial Corrections A4 USE OF JUDGEMENTS AND ESTIMATES In preparing these consolidated financial statements, management has made judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense that are not readily apparent from other sources. The judgements, estimates and assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates. Information about critical judgements in applying accounting policies that have the most significant effect on the amounts recognised in the consolidated financial statements are included in the following notes: • Note B2 Revenue - performance fees • Note C4 Investment properties • Note C6 Intangible assets • Note F2 Financial instruments A5 SEGMENT SUMMARY As at 30 June 2022 the Group has six reportable operating segments. These reportable operating segments are the divisions which report to the Group's Joint Chief Executive Officers and Board of Directors for the purpose of resource allocation and assessment of performance. The reportable operating segments are: OPERATING SEGMENTS DESCRIPTION Property funds management Management of listed and unlisted property funds. Co-investments Direct interest in property funds, properties held for sale and other liquid investments Development Management of development projects and completion of structured property developments which span sectors ranging from commercial office, industrial, health through to residential mixed use. Property and development finance Provision of real estate secured non-bank finance for land sub-division, bridging finance, development projects and residual stock. Investment bonds management Corporate Management of the Benefit Funds of Centuria Life Limited and management of the Over Fifty Guardian Friendly Society Limited. The Benefit Funds include a range of financial products, including single and multi-premium investments Overheads for supporting the Group's operating segments and management of a reverse mortgage lending portfolio In addition, the Group also provides disclosures in relation to a further four non-operating segments, which are: NON-OPERATING SEGMENTS DESCRIPTION Non-operating items Benefit funds Controlled property funds Eliminations Comprises transaction costs, mark-to-market movements in investment, property and derivative financial instruments, share of equity accounted net profit in excess of distributions received and all other non-operating activities Represents the operating results and financial position of the Benefit Funds of Centuria Life Limited which are required to be consolidated in the Group’s financial statements in accordance with accounting standards. Represents the operating results and financial position of property funds which are managed by the group and consolidated under accounting standards. The Group's principal activities do not include direct ownership of these funds for the purpose of measuring control under accounting standards and deriving rental income. Therefore the results attributable to the controlled property funds are excluded from operating profit. However, the performance management of the controlled property funds is included in operating profit, aligned with how performance of the business is assessed by management of the Group. Elimination of transactions between the operating segments and the other non-operating segments above, including transactions between the operating entities within the Group, the property funds controlled by the Group and the Benefit Funds. The accounting policies of reportable segments are the same as the Group's accounting policies. Refer below for an analysis of the Group’s segment results: • Note B1 Segment profit and loss • Note C1 Segment balance sheet • Note D1 Operating segment cash flows 112 | Centuria Capital Group – Annual Report 2022 Centuria Capital Group – Annual Report 2022 | 113 Notes to the financial statements For the year ended 30 June 2022 B Business performance B1 SEGMENT PROFIT AND LOSS FOR THE YEAR ENDED 30 JUNE 2022 NOTES PROPERTY FUNDS MANAGEMENT $’000 CO- INVESTMENTS $’000 DEVELOPMENT $’000 PROPERTY AND DEVELOPMENT FINANCE $’000 INVESTMENT BONDS MANAGEMENT $’000 OPERATING PROFIT $’000 NON OPERATING ITEMS $’000 BENEFITS FUNDS $’000 CONTROLLED PROPERTY FUNDS $’000 CORPORATE $’000 ELIMINATIONS $’000 STATUTORY PROFIT $’000 FOR THE YEAR ENDED 30 JUNE 2021 NOTES PROPERTY FUNDS MANAGEMENT $’000 CO- INVESTMENTS $’000 DEVELOPMENT $’000 PROPERTY AND DEVELOPMENT FINANCE $’000 INVESTMENT BONDS MANAGEMENT $’000 OPERATING PROFIT $’000 NON OPERATING ITEMS $’000 BENEFITS FUNDS $’000 CONTROLLED PROPERTY FUNDS $’000 CORPORATE $’000 ELIMINATIONS $’000 STATUTORY PROFIT $’000 Management fees Property acquisition fees Property performance fees Financing fees Development revenue Property sales fees Interest revenue Rental income Recoverable outgoings Distribution/ dividend revenue Underwriting fees Other income 124,634 26,850 32,950 1,986 - 2,326 120 - - - 3,473 790 - - - - - - 1,450 1,272 - 45,515 - 564 Total revenue B2 193,129 48,801 27,872 - - - - - - - - - - - (12,653) 11,447 - - - - - 73 4,592 14,246 - 758 450 - - - 898 - - 2,886 - - - - 307 7,785 - - - - 10,723 - - - - - - - - - - - - - - - - 146,804 26,850 32,950 - - - 6,651 (4,592) 14,246 2,326 - - - - - - - - 3,235 8,449 (2,886) 430 - - - - - - 2 62 1,784 - - - - - 18,271 5,402 - - - 45,515 (2,706) 6,541 528 474 3,561 (2,818) 3,473 - - 41 - - 132 (6,439) 140,365 - - - - - 26,850 32,950 2,059 14,246 2,326 (59) 5,936 - - 20,055 5,402 (4,212) 45,138 - - 3,473 916 11,251 3,771 292,609 (13,002) 7,012 23,807 (10,710) 299,716 - - - - - - - - - 7,101 - - 16,514 - - - - 7,101 16,514 - (167,087) (24,848) 32 1,519 (190,384) - (12,653) - - - - (12,653) Management fees Property acquisition fees Property performance fees Financing fees Development revenue Property sales fees Interest revenue Rental income Recoverable outgoings Distribution/ dividend revenue Premiums - discretionary participation features Underwriting fees Other income Total revenue Share of net profit of equity accounted investments Net movement in policyholder liabilities E1 Fair value movements of financial instruments and property B3 73,437 7,881 17,908 420 - 769 170 - 3,977 - - 5,090 - - - - - - - 830 - - 35,753 - - 40 2,528 - - - 50,271 - - 78 - - - - 12 - - - 863 - - - - - - - - - 7,433 - - - - - - - - - - - 83,398 7,881 17,908 - - - 1,283 (863) 50,271 769 20 2,786 3,806 162 240 3,977 - - - - - - - - - - - 768 - - - - - - 35,753 (1,469) 8,813 - 5,090 2,340 - - - 1,441 - 73 552 1,736 - - - - - - - - - - - - 10,212 3,464 - - - 87 (3,879) 79,519 - - - - - 7,881 17,908 420 50,271 769 (60) 4,514 - - 10,452 7,441 (2,371) 40,726 - - - 1,441 5,090 2,500 109,652 36,623 52,889 863 8,005 4,684 212,716 (2,332) 11,095 13,763 (6,310) 228,932 - - - - - - - - - - - - - - - - - - - - - 3,070 - - 5,788 - - - - 3,070 5,788 79,843 20,348 8,048 (4,310) 103,929 (74,839) (374) (8,738) (3,621) (6,693) (22,176) (116,441) 237 (5,429) (7,199) 6,172 (122,660) Expenses B4 (45,811) (234) (3,708) (440) (7,086) (16,382) (73,661) (4,503) (29,741) (7,159) 3,879 (111,185) (5,884) (17,765) (7) (5) (11) (2,385) (26,057) (1,063) (2) (2,779) (1,692) (31,593) 112,406 30,662 6,474 4,159 4,547 (20,790) 137,458 (173,814) (6,753) 13,861 (4,711) (33,959) B6 (33,621) (1,799) (1,948) (1,247) (1,135) 16,802 (22,948) 12,793 6,753 - - (3,402) 78,785 28,863 4,526 2,912 3,412 (3,988) 114,510 (161,021) PROFIT/(LOSS) AFTER TAX ATTRIBUTABLE TO: Centuria Capital Limited Centuria Capital Fund Profit/(loss) after tax attributable to Centuria Capital Group security- holders Non-controlling interests Profit/(loss) after tax 78,785 5,965 4,526 2,912 3,412 (53,393) 42,207 (21,570) - 22,898 - - - 49,405 72,303 (139,451) 78,785 28,863 4,526 2,912 3,412 (3,988) 114,510 (161,021) - - - - - - - - 78,785 28,863 4,526 2,912 3,412 (3,988) 114,510 (161,021) - - - - - - 13,861 (4,711) (37,361) - - 20,637 13,370 (4,711) (58,489) 13,370 (4,711) (37,852) 491 - 491 13,861 (4,711) (37,361) (Loss)/profit before tax Income tax benefit/ (expense) Profit/(loss) after tax Cost of sales - - (44,679) Finance costs B5 (1,133) (11,168) (6) - - - (3) - (44,679) - (2,578) (14,888) (3,262) - (3) - - (44,679) (2,196) 60 (20,289) 62,708 25,221 4,496 423 916 (14,276) 79,488 72,816 7,487 12,456 (6,681) 165,566 B6 (18,150) 845 (1,077) (137) (369) 9,611 (9,277) 837 (7,487) - - (15,927) 44,558 26,066 3,419 286 547 (4,665) 70,211 73,653 PROFIT/(LOSS) AFTER TAX ATTRIBUTABLE TO: Centuria Capital Limited Centuria Capital Fund Profit/(loss) after tax attributable to Centuria Capital Group security- holders Non-controlling interests Profit/(loss) after tax 44,558 4,534 3,419 286 547 (24,026) 29,318 (5,887) - 21,532 - - - 19,361 40,893 79,540 44,558 26,066 3,419 286 547 (4,665) 70,211 73,653 - - - 44,558 26,066 3,419 - 286 - - - - 547 (4,665) 70,211 73,653 - - - - - - 12,456 (6,681) 149,639 - - 23,431 1,824 (2,232) 120,025 1,824 (2,232) 143,456 10,632 (4,449) 6,183 12,456 (6,681) 149,639 E1 B3 B4 B5 Share of net profit of equity accounted investments Net movement in policyholder liabilities Fair value movements of financial instruments and property Cost of sales Expenses Finance costs (Loss)/profit before tax Income tax benefit/ (expense) Profit/(Loss) after tax 114 | Centuria Capital Group – Annual Report 2022 Centuria Capital Group – Annual Report 2022 | 115 Notes to the financial statements For the year ended 30 June 2022 B Business performance B2 REVENUE Revenue has been disaggregated in the segment profit and loss in Note B1 (a) Recognition and measurement TYPE OF REVENUE DESCRIPTION Management fees The Group provides: a) fund management services to property funds in accordance with the fund constitutions. The services are provided on an ongoing basis and revenue is calculated and recognised in accordance with the relevant constitution. The fees are invoiced and paid monthly in arrears. Over-time b) property management services to the owners of property assets in accordance with property services agreements. The services are utilised on an ongoing basis and revenue is calculated and recognised in accordance with the specific agreement. The fees are invoiced monthly with variable payment terms depending on the individual agreements. Over-time c) lease management services to the owners. The revenue is recognised when the specific service is delivered (e.g. on lease execution) and consideration is due 30 days from invoice date. d) development management services to the owners of property assets in accordance with development management agreements. Revenue is calculated in accordance with the specific agreement and invoiced in accordance with the contract terms. Consideration is due from the customer based on the specific terms agreed in the contract and is recognised when the Company has control of the benefit. Point-in-time Over-time Distribution/dividend revenue Distribution/dividend revenue from investments is recognised when the shareholder has a right to receive payment. Point-in-time Interest revenue Interest revenue is accrued on an over-time by reference to the principal outstanding using the effective interest rate. Over-time Rental income Rental income from investment property is recognised in profit or loss on a straight line basis over the term of the lease. Over-time Finance work fees Liquidity management services to property funds in accordance with the fund constitutions. The revenue is recognised when the specific service is delivered (e.g. on facility execution) and consideration is due 30 days from invoice date. Point-in-time TYPE OF REVENUE DESCRIPTION Performance fees REVENUE RECOGNITION POLICY REVENUE RECOGNITION POLICY Over-time The Group receives a performance fee for providing management services where the property fund outperforms a set internal rate of return (IRR) benchmark at the time the property is sold. Consideration is due upon successful sale of the investment property if the performance hurdles are satisfied. In measuring the performance fees to be recognised each period, consideration is given to the facts and circumstances with respect to each investment property including external factors such as its current valuation, passage of time and outlook of the property market. Performance fees are only recognised when they are deemed to be highly probable and the amount of the performance fees will not result in a significant reversal in future periods. The Group’s performance fees are recognised over-time under AASB 15 Revenue from Contracts with Customers. The key assumptions made in estimating the amount of performance fee revenue that is highly probable include: >2 years from forecast fund end date: It is assumed that the highly probable threshold is only met when the forecast end date of the fund is within two years from balance date. The forecast end date is generally based on the relevant fund end date as expressed in the relevant PDS or a revised fund end date in the event that an alternative strategy is undertaken by the Group, in which case the unbooked portion of any forecast performance fees are recognised over the extended term of the fund. In instances where the fund term is extended beyond two years from the reporting date and the Group has already accrued a performance fee in prior periods, the Group will continue to accrue any additional fee over the extended remaining period. Probability thresholds for sensitivity to property valuations: The level of constraint applied to performance fee revenue is adjusted depending on remaining fund tenure. Specifically, a discount in property values between 10.0% to 20.0% is applied, depending on when in the two year window the fund is expected to wind up. In instances where the fund term is extended beyond two years from the reporting date and the Group has already accrued a performance fee in prior periods, a discount in property values between 2.5% to 10.0% is applied depending on the remaining fund term as it is assumed the fund term extension was on the basis that fund performance can be further enhanced, thereby reducing the risk of valuation decrements and increasing the likelihood of achieving the full performance fee. Fair value of investment properties: The fair value of investment properties is based on the latest available valuation of the underlying property from the published financial statements or board approved valuations. 116 | Centuria Capital Group – Annual Report 2022 Centuria Capital Group – Annual Report 2022 | 117 Notes to the financial statements For the year ended 30 June 2022 B Business performance TYPE OF REVENUE DESCRIPTION Recoverable outgoings The Group recovers the costs associated with general building and tenancy operation from lessees in accordance with specific clauses within lease agreements. These are invoiced monthly based on an annual estimate. The consideration is due 30 days from invoice date. Should any adjustment be required based on actual costs incurred, this is recognised in the statement of financial performance within the same reporting period and billed annually. Property acquisition fees The Group provides property acquisition related services to property funds and the revenue is based on a fixed percentage included in the PDS issued at the establishment of the fund. The consideration is due upon successful settlement of the investment property. Property sales fees The Group provides sales services to the owners of property assets in accordance with property management agreements. The consideration is due upon successful sale of the investment property. Development revenue The Group recognises development revenue based on satisfaction of performance obligations on an over-time basis as its customers control the land on which the developments are being delivered. Over-time (b) Transaction price allocated to the remaining performance obligations The following table includes revenue expected to be recognised in the future related to performance obligations that are unsatisfied (or partially unsatisfied) at the reporting date. RECOGNISED IN 2022 $’000 UNRECOGNISED PERFORMANCE OBLIGATIONS 2022 $’000 RECOGNISED IN 2021 $’000 UNRECOGNISED PERFORMANCE OBLIGATIONS 2021 $’000 Property performance fees* Development revenue Management fees** 32,950 14,246 57,822 179,273 25,954 75,999 17,908 49,664 22,308 21,388 2,280 86,544 * The underlying property funds managed by the Group have embedded performance fees of $215,081,000 as at 30 June 2022. Based on the assumptions outlined in B2(a), the total estimated amount of performance fees available to the Group to recognise in the future is $179,273,000. Unrecognised performance fees are based on current valuations with fund expiries ranging up to FY30 and may not be fees that will eventuate nor recognised upon Fund expiry or at the point performance fees recognition will normally be triggered. ** Only relates to unlisted property funds management fees which have defined fund terms. REVENUE RECOGNITION POLICY Over-time (c) Transactions with related parties Management fees are charged to related parties in accordance with the respective trust deeds and management agreements. Point-in-time Performance fees from property funds managed by Centuria Management fees from property funds managed by Centuria Distributions from property funds managed by Centuria Point-in-time Management fees from Over Fifty Guardian Friendly Society Property acquisition fees from property funds managed by Centuria Interest from debt funds managed by Centuria Sales fees from property funds managed by Centuria Underwriting fees in relation to property funds managed by Centuria Interest income on loans to property funds managed by Centuria Fees from debt funds managed by Centuria 2022 $ 134,751,000 38,597,343 32,950,250 26,850,177 2,885,503 3,618,246 2,326,011 3,472,595 1,381,964 307,120 2021 $ 75,021,656 31,620,548 17,908,370 7,881,250 1,194,002 3,725,242 769,175 5,089,589 701,934 582,098 247,140,209 144,493,864 Terms and conditions of transactions with related parties Investments in property funds and Benefit Funds held by certain directors and director-related entities are made on the same terms and conditions as all other investors and policyholders. Directors and director-related entities receive the same returns on these investments as all other investors and policyholders. The Group pays some expenses on behalf of related entities and receives a reimbursement for those payments. B3 FAIR VALUE MOVEMENTS OF FINANCIAL INSTRUMENTS AND PROPERTY Movement in Centuria Industrial REITs listed market price Movement in Centuria Office REITs listed market price Fair value movement in healthcare put/call option Other fair value movements Total fair value movement 2022 $’000 (101,599) (56,719) (26,005) (6,061) (190,384) 2021 $’000 64,786 27,358 (5,523) 17,308 103,929 118 | Centuria Capital Group – Annual Report 2022 Centuria Capital Group – Annual Report 2022 | 119 Notes to the financial statements For the year ended 30 June 2022 B Business performance B4 EXPENSES B5 FINANCE COSTS Employee benefits expense Cost of sales - development Property management fees paid Property outgoings and fund expenses Consulting and professional fees Insurance costs Transaction costs Depreciation expense Administration fees Information technology expenses Acquisition fee rebates expense Claims - discretionary participation features Other expenses 2022 $’000 75,410 12,653 4,594 5,393 5,109 5,000 3,652 4,179 3,278 3,359 1,360 165 11,161 135,313 2021 $’000 49,410 44,679 4,168 5,652 4,077 1,747 5,220 3,731 1,943 1,870 - 26,804 6,563 155,864 (a) Transactions with key management personnel (i) Transactions with directors For transactions with directors, refer to details included in the audited remuneration report on page 70. (ii) Key management personnel compensation The aggregate compensation paid to key management personnel of the Group is set out below: Short term employee benefits Post-employment benefits Other long term employment benefits Share-based payments 2022 $ 9,678,084 160,976 138,167 2,796,274 12,773,501 2021 $ 8,120,098 144,764 144,793 2,010,647 10,420,302 Detailed information on key management personnel is included in the audited remuneration report. Operating interest charges Bank loans in controlled property funds interest charges Reverse mortgage facility interest charges Loss/(gain) on derivatives on fair value hedges (Gain)/loss on financial assets fair value hedges Finance charge - puttable instruments Other finance costs Finance lease interest Recognition and measurement The Group’s finance costs include: • interest expense recognised using the effective interest rate method; and • the net gain or loss on hedging instruments that are recognised in profit or loss. B6 TAXATION Current tax expense in respect of the current year Adjustments to current tax in relation to prior years Deferred tax (benefit)/expense relating to the origination and reversal of temporary differences Adjustments to deferred tax in relation to prior years Income tax expense 2022 $’000 18,112 2,779 1,999 (14,503) 14,503 5,884 1,750 1,069 31,593 2022 $’000 23,877 (1,117) 22,760 (18,468) (890) 3,402 2021 $’000 12,497 2,196 2,334 8,080 (8,080) 1,133 1,006 1,123 20,289 2021 $’000 7,048 61 7,109 8,904 (86) 15,927 120 | Centuria Capital Group – Annual Report 2022 Centuria Capital Group – Annual Report 2022 | 121 Notes to the financial statements For the year ended 30 June 2022 B Business performance (a) Reconciliation of income tax expense The prima facie income tax expense on profit before income tax reconciles to the income tax expense in the consolidated financial statements as follows: (c) Movement of deferred tax balances FINANCIAL YEAR ENDED 30 JUNE 2022 OPENING BALANCE $’000 MOVEMENT $’000 CLOSING BALANCE $’000 (Loss)/profit before tax Less: (loss)/profit not subject to income tax Income tax expense calculated at 30% ADD/(DEDUCT) TAX EFFECT OF AMOUNTS WHICH ARE NOT DEDUCTIBLE/(ASSESSABLE): Tax offset for franked dividends Adjustments due to foreign exchange Non-allowable expenses - other Adjustments to income tax expense in relation to prior years Effects of different tax rates of subsidiaries operating in other jurisdictions Income tax expense 2022 $’000 (33,956) 45,169 11,213 3,364 (301) - 1,415 (1,117) 41 3,402 2021 $’000 165,566 (114,680) 50,886 15,266 (389) (86) 1,007 61 68 15,927 The tax rate used in the above reconciliation is the corporate tax rate of 30% payable for Australian corporate entities on taxable profits under Australian tax law. There has been no change in the corporate tax rate when compared with the previous reporting period. Taxable income derived for New Zealand tax purposes is at the tax rate of 28%. (b) Current tax assets and liabilities CURRENT TAX ASSETS/(LIABILITIES) ATTRIBUTABLE TO: Income tax receivable/(payable) - Australia Income tax receivable - New Zealand Income tax payable to benefit fund policy holders - Australia 2022 $’000 3,721 - (1,025) 2,696 2021 $’000 (996) 977 (768) (787) 122 | Centuria Capital Group – Annual Report 2022 DEFERRED TAX ASSETS Provisions Transaction costs Capital losses Revenue tax losses Financial derivatives Property held for development Right of use asset/lease liability Equity accounted investment Other DEFERRED TAX LIABILITIES Indefinite life management rights Accrued performance fees Accrued income Unrealised gain/(loss) on financial assets Other FINANCIAL YEAR ENDED 30 JUNE 2021 DEFERRED TAX ASSETS Provisions Transaction costs Capital losses Financial derivatives Revenue tax losses Property held for development Right of use asset/lease liability Equity accounted investment Other 3,498 4,387 24,781 2,943 2,319 3,942 48 523 85 42,526 (86,678) (6,345) (352) (6,794) (403) (633) 195 (1,468) (1,402) 9,034 1,772 67 - (85) 7,480 - (5,189) (56) 10,286 9 2,865 4,582 23,313 1,541 11,353 5,714 115 523 - 50,006 (86,678) (11,534) (408) 3,492 (394) (100,572) 5,050 (95,522) OPENING BALANCE $’000 MOVEMENT $’000 CLOSING BALANCE $’000 2,164 3,762 25,128 2,757 1,118 3,964 103 523 - 1,334 625 (347) (438) 1,825 (22) (55) - 85 3,498 4,387 24,781 2,319 2,943 3,942 48 523 85 39,519 3,007 42,526 Centuria Capital Group – Annual Report 2022 | 123 Notes to the financial statements For the year ended 30 June 2022 B Business performance FINANCIAL YEAR ENDED 30 JUNE 2021 DEFERRED TAX LIABILITIES Indefinite life management rights Accrued performance fees Accrued income Unrealised gain/(loss) on financial assets Other (33,253) (53,425) (86,678) (1,498) (290) (381) (403) (4,847) (62) (6,413) - (6,345) (352) (6,794) (403) (35,825) (64,747) (100,572) Recognition and measurement Income tax expense represents the sum of the tax currently payable and payable on a deferred basis. (i) Current tax The tax currently payable is based on taxable income for the year. Taxable income differs from profit as reported in the consolidated profit or loss because of items of income or expense that are assessable or deductible in other years as well as items that are never assessable or deductible. The Group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period. (ii) Deferred tax Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities and the corresponding tax bases. Deferred tax liabilities are generally recognised for all assessable temporary differences. Deferred tax assets are recognised for all deductible temporary differences, unused tax losses and tax offsets, to the extent that it is probable that sufficient future taxable profits will be available to utilise them. However, deferred tax assets and liabilities are not recognised for: • assessable temporary differences that arise from the initial recognition of assets or liabilities in a transaction that is not a business combination which affects neither taxable income nor accounting profit; • assessable temporary differences relating to investments in subsidiaries, associates and joint ventures to the extent that the Group is able to control the timing of the reversal of the temporary differences and it is probable that they will not reverse in the foreseeable future; and • assessable temporary differences arising from goodwill. The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable income will be available to allow all or part of the asset to be recovered. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The applicable rates are 30% for deferred tax assets and liabilities arising to the Australian subsidiaries of the Company and 28% for deferred tax asset and liabilities arising to the New Zealand subsidiaries of the Company. The measurement of deferred tax assets and liabilities reflects the tax consequences that would follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities. OPENING BALANCE $’000 MOVEMENT $’000 CLOSING BALANCE $’000 Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis. (iii) Tax consolidation The company and all its wholly-owned Australian resident subsidiaries are part of a tax consolidated group under Australian taxation law. The company is the head company of the tax consolidated group. Tax expense/benefit, deferred tax assets and deferred tax liabilities arising from temporary differences of the members of the tax consolidated group are recognised in their separate financial statements using a 'standalone taxpayer' approach. Under the tax funding agreement between members of the tax consolidated group, amounts are recognised as payable to or receivable by each member in relation to the tax contribution amounts paid or payable between the Company and the members of the the tax consolidated group. The Benefit Funds are part of the tax consolidated group, and they are allocated a share of the income tax liability attributable to Centuria Life Limited equal to the income tax liability that would have arisen to the Benefit Funds had they been stand-alone entities. Centuria Capital Fund (CCF) and its sub-trusts are not part of the tax consolidated group. Under current Australian income tax legislation, trusts are not liable for income tax, provided their securityholders are presently entitled to the net (taxable) income of the trust including realised capital gains, each financial year. Primewest Group Limited (Primewest Group) was not a wholly-owned subsidiary of the Company for tax purposes at 30 June 2021 and is its own tax consolidated group at 30 June 2021. Primewest Group’s tax rate was 27.5% prior to the Company’s acquisition of Primewest Group Limited. The tax rate was increased to 30% retrospectively on the date of acquisition in accordance with Australian tax legislation. From 1 August 2021, Primewest Group formed part of the Company's consolidated tax group as a result of the Company acquiring the remaining interest post year-end. Centuria Healthcare Pty Ltd (Centuria Healthcare) is not a wholly-owned subsidiary of the Company at 30 June 2022. Centuria Healthcare has its own tax consolidated group with its wholly-owned subsidiaries for the full year. Centuria Healthcare is the head company of the Centuria Healthcare tax consolidated group. Tax expense/benefit, deferred tax assets and deferred tax liabilities arising from temporary differences of the members of the tax consolidated group are recognised in their separate financial statements using a 'standalone taxpayer' approach. As no tax funding agreement existed at 30 June 2022 between the members of the tax consolidated group, any amounts payable or receivable in relation to the tax contribution for each entity is recognised as a contribution of capital with the head company of the tax consolidated group. The New Zealand tax resident subsidiaries of the Company are all stand-alone taxpayers from a New Zealand income tax perspective as they have not elected to form a consolidated group for New Zealand tax purposes. (iv) Current and deferred tax for the period Income taxes relating to items recognised directly in equity are recognised directly in equity and not in the statement of comprehensive income. In the case of a business combination, the tax effect is included in the accounting for the business combination. 124 | Centuria Capital Group – Annual Report 2022 Centuria Capital Group – Annual Report 2022 | 125 Notes to the financial statements For the year ended 30 June 2022 B Business performance B7 (LOSSES)/EARNINGS PER SECURITY Basic (cents per stapled security) Diluted (cents per stapled security)(i) 2022 CENTS (4.8) (4.8) 2021 CENTS 24.6 24.2 The (losses)/earnings used in the calculation of basic and diluted (losses)/earnings per security is the (loss)/ profit for the year attributable to Centuria Capital Group securityholders as reported in the consolidated statement of comprehensive Income. (i) As the Group is in a statutory loss, the diluted EPS is equal to basic EPS. The weighted average number of ordinary securities used in the calculation of basic and diluted earnings per security is as follows: Weighted average number of ordinary securities (basic) Weighted average number of ordinary securities (diluted)(i) 2022 791,188,235 800,319,140 2021 584,215,946 591,683,198 (i) The weighted average number of ordinary securities used in the calculation of diluted earnings per security is determined as if 30 June 2022 was the end of the performance period of the grants of rights under the LTI plan. All rights that would have vested if 30 June 2022 was the end of the performance period are deemed to have been issued at the start of the financial year. B8 DIVIDENDS AND DISTRIBUTIONS DIVIDENDS/DISTRIBUTIONS PAID DURING THE YEAR Final year-end dividend (fully franked) Final year-end distribution Interim dividend (fully franked) Interim distribution DIVIDENDS/DISTRIBUTIONS DECLARED DURING THE YEAR Final dividend (fully franked)(i) Final distribution(i) CENTS PER SECURITY 2022 TOTAL $’000 CENTS PER SECURITY 2021 TOTAL $’000 2.10 3.40 1.20 4.30 0.90 4.60 12,605 20,408 9,482 33,977 7,114 36,363 1.80 3.40 1.20 3.30 2.10 3.40 8,690 16,420 7,203 19,811 12,605 20,408 (i) The Group declared a final dividend/distribution in respect of the year ended 30 June 2022 of 5.5 cents per stapled security which included a fully franked dividend of 0.9 cents per share and a trust distribution of 4.6 cents per unit. The final dividend had a record date of 30 June 2022 and payable on 11 August 2022. The total amount paid of $43,477,000 (2020: $33,013,000) has been provided for as a liability in these financial statements. (a) Franking credits Amount of franking credits available to shareholders of the Company(i) (i) Before taking into account the impact of the final dividend paid on 11 August 2022. 2022 $’000 9,447 2021 $’000 11,297 Of the franking credit balance of $9,447,000 at 30 June 2022, $7,179,000 relates to the Centuria Capital Limited tax consolidated group and $2,268,000 relates to the Centuria Healthcare tax consolidated group. 126 | Centuria Capital Group – Annual Report 2022 UNLISTED: WOOLWORTHS MELBOURNE SQUARE, SOUTHBANK VIC Centuria Capital Group – Annual Report 2022 | 127 PROPERTY FUNDS MANAGEMENT $’000 CO- INVESTMENTS $’000 NOTES DEVELOPMENT $’000 PROPERTY AND DEVELOPMENT FINANCE $’000 INVESTMENT BONDS MANAGEMENT $’000 CORPORATE $’000 OPERATING BALANCE SHEET $’000 BENEFITS FUNDS $’000 CONTROLLED PROPERTY FUNDS $’000 ELIMINATIONS $’000 STATUTORY BALANCE SHEET $’000 PROPERTY FUNDS MANAGEMENT $’000 CO- INVESTMENTS $’000 NOTES DEVELOPMENT $’000 INVESTMENT BONDS MANAGEMENT $’000 PROPERTY AND DEVELOPMENT FINANCE $’000 CORPORATE $’000 OPERATING BALANCE SHEET $’000 BENEFITS FUNDS $’000 CONTROLLED PROPERTY FUNDS $’000 ELIMINATIONS $’000 STATUTORY BALANCE SHEET $’000 Notes to the financial statements For the year ended 30 June 2022 C Assets and liabilities C1 SEGMENT BALANCE SHEET AS AT 30 JUNE 2022 ASSETS Cash and cash equivalents Receivables D2 C2 94,123 11,763 39,313 72,451 14,034 10,250 7,616 32,184 184,999 9,503 6,063 388 8,818 105,941 4,187 3,359 Income tax receivable B6 Financial assets C3 Other assets Inventory C5 - - - - - 726,579 - - - - 88,712 40,690 Deferred tax assets B6(c) 22,883 1,182 4,668 Equity accounted investments E1 Investment properties C4 Right of use asset C10 - - - Intangible assets C6 788,209 49,117 - - - - - - - 25,765 - - - - - 63 - 6,861 6,861 - 38,008 764,587 257,328 9,909 9,972 - 129,402 - - 373 17,512 46,618 3,388 - - - - - - 74,882 - 17,006 17,006 - 788,209 - - - - - 31 - - - 337,500 - - - - - 200,565 113,487 6,861 (60,254) 961,692 - 9,972 (113) 74,769 - - - 337,500 17,006 788,209 Total assets 977,666 891,387 94,921 25,765 8,440 130,298 2,128,477 274,406 352,601 (60,634) 2,694,850 3,002 - - 436,705 2,111 5,113 3,606 440,311 - - - - 5,113 190,239 (1,165) 629,385 Provisions Borrowings Provision for income tax C8 B6 Interest rate swap at fair value Benefit funds policy holders' liability Call/put option liability 2,620 - - - Deferred tax liability B6(c) 93,310 Lease liability C10 - - - - - - - 192 - - - - - - - - - - - - - 395 3,015 1,150 18,750 18,750 - - - 270,557 48,695 48,695 - 275 64 93,841 1,681 - 19,443 19,443 - - - - - - - - - - 4,165 18,750 270,557 35,400 84,095 - - 95,522 19,443 Total liabilities 134,481 498,540 6,545 3,107 112,613 755,286 274,406 197,916 34,041 1,261,649 - - - - - - - - - - - - - - - - - 5,648 (267) 134,783 Other assets - 50,006 Investment properties C4 Financial assets C3 - 695,871 AS AT 30 JUNE 2021 ASSETS Cash and cash equivalents Receivables Contract asset Income tax receivable D2 C2 C2 54,497 158,418 9,526 2,638 47,573 27,910 2,462 269 24,558 249,637 16,835 6,879 - 273,351 8,715 86,929 6,049 1,475 (194) 94,259 - 306 - - 141 - - - - - - 32,938 - - 13 - 53,744 4,152 - - - - - - 84 - - - - - - - 32,938 671 977 - - 54,309 750,180 288,179 8,441 8,679 - - - 53,744 9,821 42,526 - - - - 208,140 - - - - - - - 32,938 977 (47,835) 990,524 - - - - - - - 8,679 208,140 53,744 42,526 55,637 19,947 790,551 - - - - - - - 25,704 - 55,637 - - 19,947 19,947 - 790,551 - - - - - - - - - Property held for development Deferred tax assets 28,553 Equity accounted investments E1 Right of use asset - - Intangible assets C6 790,551 29,933 - - LIABILITIES Payables Provisions Borrowings C7 C8 5,593 29,220 3,308 1,230 2,417 - - - 298,440 15,955 Provision for income tax 5,658 Interest rate swap at fair value Benefit funds policy holders' liability - - Deferred tax liability B6(c) 90,074 Call/put option liability Lease liability - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 44,541 83,892 385 4,592 (194) 88,675 1,660 4,077 7,006 321,401 - - - - 4,077 106,428 (1,187) 426,642 (4,662) 996 768 31,205 31,205 - - - 303,650 4,238 94,312 6,260 22,690 22,690 21,757 21,757 - - - - - - - - - - - - - - 1,764 31,205 303,650 100,572 22,690 21,757 128,435 580,330 311,063 111,020 (1,381) 1,001,032 LIABILITIES Payables C7 35,549 61,835 6,353 2,832 19,549 126,118 1,018 7,677 (194) 134,619 Total assets 921,621 912,132 102,835 2,991 25,704 126,462 2,091,745 311,063 216,494 (48,029) 2,571,273 Net assets 843,185 392,847 88,376 25,765 5,333 17,685 1,373,191 - 154,685 (94,675) 1,433,201 Total liabilities 103,742 327,660 19,263 1,230 Net assets 817,879 584,472 83,572 1,761 25,704 (1,973) 1,511,415 - 105,474 (46,648) 1,570,241 128 | Centuria Capital Group – Annual Report 2022 Centuria Capital Group – Annual Report 2022 | 129 Notes to the financial statements For the year ended 30 June 2022 C Assets and liabilities C2 RECEIVABLES Receivables from related parties Other receivables(i) Contract assets - development NOTES C2(a) 2022 $’000 92,342 21,047 98 113,487 2021 $’000 63,252 31,007 32,938 127,197 (i) Prior year other receivables includes $16,400,000 of receivables from the sale of Vitalharvest shares. All receivables are current except for $11,013,000 of performance fees receivable which are non-current. These are located in Note C2(a). The Group does not hold any collateral or other credit enhancements over these balances nor does it have a legal right of offset against any amounts owed by the Group to the counterparty. (a) Receivables from related parties The following amounts were owed by related parties of the Group at the end of the financial year: 2022 $ 2021 $ Performance fees owing from property funds managed by Centuria 35,863,456 24,296,035 Management fees owing from property funds managed by Centuria 26,216,186 13,772,263 Loan receivable from Centuria Government Income Property Fund - 11,248,798 Recoverable expenses owing from property funds managed by Centuria 16,825,906 5,913,021 Distribution receivable from Centuria Industrial REIT Distribution receivable from Centuria Office REIT Deposits receivable from property funds managed by Centuria Distribution receivable from unlisted property funds managed by Centuria Sales fees owing from property funds managed by Centuria 4,373,677 3,941,846 3,780,375 3,336,852 3,757,900 1,238,847 286,032 - 743,345 - C3 FINANCIAL ASSETS Investments in trusts, shares and other financial instruments at fair value Investment in related party unit trusts at fair value Loans receivable from related parties(i) Reverse mortgage receivables(ii) NOTES C3(a) 2022 $’000 242,834 608,729 70,045 40,084 2021 $’000 271,911 664,304 - 54,309 961,692 990,524 Financial assets are classified as non-current assets. (i) The loan receivable from Centuria NZ Healthcare Property Fund accrues interest at 4.75% per annum and does not have an expiry date. (ii) Whilst some mortgages are likely to be repaid during the next 12 months, the Group does not control the repayment date. (a) Investments in related party unit trusts carried at fair value through profit or loss The following table details related party investments carried at fair value through profit and loss. 2022 2021 FAIR VALUE $ UNITS HELD OWNERSHIP % FAIR VALUE $ UNITS HELD OWNERSHIP % FINANCIAL ASSETS HELD BY THE GROUP Centuria Industrial REIT 284,076,307 101,094,771 15.92% 344,998,908 92,741,642 16.81% Centuria Office REIT 154,858,724 91,093,367 15.25% 189,290,479 80,893,367 15.72% Centuria NZ Industrial Fund 39,932,013 25,015,037 10.00% 48,584,204 39,279,014 16.10% Centuria Healthcare Direct Medical Fund No.2 25,483,689 18,673,473 12.04% 16,386,598 16,991,495 11.08% Prime Healthcare Holding Trust 21,500,000 21,500,000 10.00% - - 0% Asset Plus Limited 17,329,033 72,507,288 19.99% 21,915,324 72,507,288 19.99% Matrix Trust 11,092,900 9,313,938 5.00% 5,892,821 5,106,431 5.00% 92,342,379 63,252,160 Dragon Hold Trust 9,696,223 969,622,257 10.00% 1,500,000 1,500,000 10.00% Recognition and measurement Receivables are initially recognised at fair value and subsequently at amortised cost using the effective interest rate method, less an allowance for impairment. Due to the short term nature of these financial rights, their carrying amounts are estimated to represent their fair values. (i) Contract assets - development The timing of revenue recognition, billings and cash collections results in billed accounts receivable (trade receivables) and unbilled receivables (contract assets) on the consolidated statement of financial position. Primewest Agricultural Trust No. 2 6,775,000 6,775,000 19.81% - - 0% Centuria NZ Property Fund 5,224,905 5,000,000 6.27% 3,645,664 3,850,000 10.00% Pialba Place Trust 4,375,331 5,129,345 23.32% 3,908,561 5,129,345 23.32% Centuria Healthcare Aged Care Property Fund No.1 Primewest Large Format Retail Trust No. 2 Centuria NZ Healthcare Property Fund 2,954,165 5,513,559 9.21% 2,948,651 5,513,559 9.21% 3,407,301 3,097,546 7.29% 2,439,720 2,430,000 6.64% 4,997,192 5,734,989 13.15% - - 0% 130 | Centuria Capital Group – Annual Report 2022 Centuria Capital Group – Annual Report 2022 | 131 Notes to the financial statements For the year ended 30 June 2022 C Assets and liabilities Centuria Government Income Property Fund Primewest 251 St Georges Terrace Trust 2022 2021 FAIR VALUE $ UNITS HELD OWNERSHIP % FAIR VALUE $ UNITS HELD OWNERSHIP % 643,539 643,539 0.64% - - 0% 101,300 100,000 0.26% 104,126 104,126 0.27% Centuria 25 Grenfell Street Fund 40,010 40,010 0.08% - - 0% Centuria Scarborough House Fund Albany Brooks Gardens Trust - - - - 0% 0% 105,921 102,836 0.22% 422,950 275,000 1.60% 592,487,632 642,143,927 FINANCIAL ASSETS HELD BY THE BENEFIT FUNDS Centuria Office REIT 11,502,742 6,766,319 1.32% 15,875,494 6,784,399 1.32% Centuria Industrial REIT 3,597,699 1,280,320 0.25% 5,137,580 1,381,070 0.25% Centuria SOP Fund 1,140,900 1,000,000 3.28% 1,147,200 1,000,000 3.28% 16,241,341 608,728,973 22,160,274 664,304,201 Related party unit trusts carried at fair value through profit and loss 30 JUNE 2022 $’000 30 JUNE 2021 $’000 Opening balance Investment purchases Acquisition of subsidiary Carrying value transferred from controlled property funds Disposal Foreign currency translation Fair value gain/(loss) Carrying value transferred from/(to) equity accounted investments 664,304 160,789 - - (80,478) (2,448) (146,692) 13,254 608,729 440,529 126,584 14,366 9,860 (16,604) (145) 89,714 - 664,304 Recognition and measurement All financial assets are recognised and derecognised on trade date where the purchase or sale of a financial asset is under a contract whose terms require delivery of the financial asset within the timeframe established by the market concerned. Financial assets are initially measured at fair value plus transaction costs, except for those financial assets classified as at fair value through profit or loss (FVTPL), which are initially measured at fair value only. Financial assets are classified as financial assets at FVTPL when the financial asset is either held for trading or it is designated as at fair value through profit or loss. Financial assets at FVTPL are stated at fair value, with any gains or losses arising on remeasurement recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any dividend or interest earned on the financial asset and is included in the statement of comprehensive income. AASB 9 contains three principal classification categories for financial assets: • measured at amortised cost; • measured at fair value through other comprehensive income (FVOCI); and • measured at FVTPL. The classification depends on the entity's business model for managing the financial assets and the contractual terms of the cash flows. (i) Financial assets at amortised cost Loans and receivables are initially recognised at fair value and subsequently at amortised cost using the effective interest rate method less any allowance under the expected credit loss (ECL) model. (ii) Recoverability of loans and receivables At each reporting period, the Group assesses whether financial assets carried at amortised cost are ‘credit-impaired’. A financial asset is ‘credit-impaired’ when one or more events that has a detrimental impact on the estimated future cash flows of the financial asset have occurred. The Group recognises loss allowances at an amount equal to lifetime ECL on trade and other receivables. Loss allowances for financial assets measured at amortised cost are deducted from the gross carrying amount of the assets. Lifetime ECLs result from all possible default events over the expected life of the trade receivables and are a probability-weighted estimate of credit losses. Credit losses are measured as the difference between cash flows due to the Group in accordance with the contract and the cash flows that the Group expects to receive. The Group analyses the age of outstanding receivable balances and applies historical default percentages adjusted for other current observable data as a means to estimate lifetime ECL, including forecasts of interest rates and inflation, as well as the financial stress of counterparties and their ability to operate as a going concern. Debts that are known to be uncollectable are written off when identified. The Group has continued to analyse the age of outstanding receivable balances post balance sheet date and applied estimated percentages of recoverability to estimate ECL, as well as the financial stress of counterparties and their ability to operate as a going concern. Debts that are known to be uncollectible are written off when identified. 132 | Centuria Capital Group – Annual Report 2022 Centuria Capital Group – Annual Report 2022 | 133 Notes to the financial statements For the year ended 30 June 2022 C Assets and liabilities (iii) Financial assets at fair value through profit and loss All financial assets not classified as measured at amortised cost or FVOCI as described above are measured at FVTPL. This includes all derivative financial assets. On initial recognition, the Group may irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortised cost or at FVOCI or at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise. A financial asset (unless it is a trade receivable without a significant financing component that is initially measured at the transaction price) is initially measured at fair value plus, for an item not at FVTPL, transaction costs that are directly attributable to its acquisition. Financial assets at FVTPL are subsequently measured at fair value. Net gains and losses, including any interest or dividend income, are recognised in profit or loss. Financial assets recognised at FVTPL include reverse mortgage loan receivables, reverse mortgage derivatives and investments in trusts. C4 INVESTMENT PROPERTIES PROPERTY 2022 $’000 2021 $’000 ASSET TYPE 2022 CAPITALI- SATION RATE % 2022 DISCOUNT RATE % 2022 VALUER 264 Copelands Rd, Warragul VIC 177,000 - Agriculture 111 St George Terrace, Perth WA 160,500 159,000 Office Foundation Place, QLD 60 Investigator Drive, Robina QLD 26 Westbrook Parade, Ellenbrooke WA 40 John Rice Avenue, Elizabeth Vale SA - - - - 31,500 7,250 5,220 5,170 Total fair value 337,500 208,140 Investment properties are classified as non-current. Opening balance Capital improvements and associated costs Gain/(loss) on fair value Change in deferred rent and lease incentives Deconsolidation of controlled property funds* Acquisition of subsidiary Closing balance^ 5.6 6.5 - - - - 2022 $’000 208,140 385 2,251 (1,136) (49,140) 177,000 337,500 7.5 Knight Frank 6.8 Cushman Wakefield - - - - 2021 $’000 167,110 356 5,712 (2,068) (12,110) 49,140 208,140 * Primewest Property Income Fund (PPIF) was deconsolidated from the Group on 31 October 2021. ^ The carrying amount of investment properties includes components related to deferred rent, capitalised lease incentives and leasing fees amounting to $10,577,700 (30 June 2021: $10,575,100). Key estimate and judgements (a) Recognition and measurement The investment properties recognised by the Group are properties owned by related party funds that are taken to be controlled by the Group under accounting standards. Investment properties are properties held either to earn rental income or for capital appreciation or for both. Investment properties are initially recorded at cost which includes stamp duty and other transaction costs. Subsequently, the investment properties are measured at the fair value with any change in value recognised in profit or loss. The carrying amount of investment properties includes components relating to deferred rent, lease incentives and leasing fees. An investment property is derecognised upon disposal. Any gain or loss arising on derecognition of the property (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in profit or loss in the period in which the property is derecognised. (b) Valuation techniques and significant unobservable inputs The fair value of the investment properties were determined by the directors of the Responsible Entity of the relevant fund or by an external, independent valuation company having an appropriate recognised professional qualification and recent experience in the location and category of the properties being valued. Fair value is based on market values, being the estimated amount for which a property could be exchanged on the date of valuation between a willing buyer and willing seller in an arm's length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion. The valuations were prepared by considering the following valuation methodologies: • Capitalisation approach: the annual net rental income is capitalised at an appropriate market yield to arrive at the property's market value. Appropriate capital adjustments are then made where necessary to reflect the specific cash flow profile and the general characteristics of the property. • Discounted cash flow approach: this approach incorporates the estimation of future annual cash flows over a 10 year period by reference to expected rental growth rates, ongoing capital expenditure, terminal sale value and acquisition and disposal costs. The present value of future cash flows is then determined by the application of an appropriate discount rate to derive a net present value for the property. • Direct comparison approach: this approach identifies comparable sales on a dollar per square metre of lettable area basis and compares the equivalent rates to the property being valued to determine the property's market value. The valuations reflect, when appropriate, the type of tenants actually in occupation or responsible for meeting lease commitments or likely to be in occupation after letting of vacant accommodation and the market’s general perception of their credit-worthiness; the allocation of maintenance and insurance responsibilities between the lessor and lessee; and the remaining economic life of the property. It has been assumed that whenever rent reviews or lease renewals are pending with anticipated reversionary increases, all notices and, where appropriate, counter notices have been served validly and within the appropriate time. The most significant unobservable input used in the above valuation techniques and its relationship with fair value measurement is the capitalisation rate. The higher/lower the rate, the lower/higher the fair value. 134 | Centuria Capital Group – Annual Report 2022 Centuria Capital Group – Annual Report 2022 | 135 Notes to the financial statements For the year ended 30 June 2022 C Assets and liabilities (c) Fair value measurement The fair value measurement of investment properties has been categorised as a level 3 fair value as it is derived from valuation techniques that include inputs that are not based on observable market data (unobservable inputs). SIGNIFICANT UNOBSERVABLE INPUTS FAIR VALUE MEASUREMENT SENSITIVITY TO SIGNIFICANT INCREASE IN INPUT FAIR VALUE MEASUREMENT SENSITIVITY TO SIGNIFICANT DECREASE IN INPUT Market rent Increase Capitalisation rate Decrease Discount rate Decrease Decrease Increase Increase RANGE OF INPUTS FY22 RANGE OF INPUTS FY21 $28 psm to $598 psm $572 psm to $593 psm 5.6% to 6.5% 6.0% to 6.5% 5.6% to 7.5% 6.4% to 6.8% A further sensitivity analysis was taken by the Group to assess the fair value of investment property values. The table below illustrates the valuation of movements in capitalisation rates and discount rate: FAIR VALUE AT 30 JUNE 2022 $’000 CAPITALISATION -0.25% $’000 RATE IMPACT +0.25% $’000 FAIR VALUE AT 30 JUNE 2021 $’000 CAPITALISATION -0.25% $’000 RATE IMPACT +0.25% $’000 Investment properties 337,500 14,620 (13,444) 208,140 8,141 (7,549) C5 INVENTORY Property held for development Properties held for sale NOTE C5(a) C5(b) 30 JUNE 2022 $’000 30 JUNE 2021 $’000 45,679 89,104 134,783 53,744 - 53,744 Property held for sale are classified as current. Other than 54 Cook Street, Auckland, property held for development are classified as non-current. (a) Property held for development PROPERTY 54 Cook St, Auckland New Zealand 17-19 Man St, Queenstown New Zealand 741 Cudgen Rd, Cudgen Australia 27-29 Young St, West Gosford Australia 209 Kotham Rd, Victoria Australia 30 JUNE 2022 $’000 30 JUNE 2021 $’000 24,174 14,447 5,648 1,410 - 45,679 20,905 11,263 - 1,295 20,281 53,744 PROPERTY Opening balance Capital expenditure Foreign currency translation Acquisitions Disposals(i) Impairment 30 JUNE 2022 $’000 30 JUNE 2021 $’000 53,744 16,390 (1,429) 11,025 (30,062) (3,989) 45,679 31,295 2,611 (162) 20,000 - - 53,744 (i) Disposals for the period include 209 Kotham Road, Victoria and 57 Wyatt Street, South Australia. Recognition and measurement Properties held for development relates to land and property developments that are held for sale or development and sale in the normal course of the Group’s business. Properties held for development are carried at the lower of cost or net realisable value. The calculation of net realisable value requires estimates and assumptions which are regularly evaluated and are based on historical experience and expectations of future events that are believed to be reasonable under the circumstances. Properties held for development are classified as non-current assets unless they are contracted to be sold within 12 months of the end of the reporting period, in which case they are classified as current assets. (b) Properties held for sale On 31 March 2022, the Group acquired 13 healthcare properties from Heritage Lifecare for NZ$98,700,000. The properties were funded in combination from free cash and a secured asset facility. On 19 April 2022, the Group acquired 25 healthcare properties from Heritage Lifecare which was onsold to Centuria New Zealand Healthcare Property Fund (CNZHPF) on 20 April 2022. As at 30 June 2022, the Group has a loan receivable of $70,044,755 with CNZHPF. JUNE 2022 $’000 JUNE 2021 $’000 16 Anvers Pl, Christchurch (Hoon Hay Rest Home) 1 Hennessy Pl, Christchurch (George Manning) 10 Danvers St, Hastings (Waiapu Lifecare) 202 - 204 Kamo Rd, Whangarei (Puriri Court Lifecare) 69 Moehau St, Te Puke (Carter House Lifecare) 51 Botanical Rd, Tauranga (Hodgson House Lifecare) 361 Mangorei Rd, New Plymouth (Riverside Lifecare) 50 McLauchlan St, Blenheim (Waterlea Lifecare) 117 Shakespeare St, West Coast (Granger House Lifecare) 1 Cargill St, Invercargill (Cargill Lifecare) 124 Maxwell Rd, Marlborough (Maxwell Lifecare) 15 Karina Trc, Palmerston (Karina Lifecare) 12,794 12,485 11,382 10,707 8,603 7,633 6,397 6,176 6,088 3,045 2,118 1,676 89,104 - - - - - - - - - - - - - 136 | Centuria Capital Group – Annual Report 2022 Centuria Capital Group – Annual Report 2022 | 137 Notes to the financial statements For the year ended 30 June 2022 C Assets and liabilities Opening balance Acquisitions Foreign currency translation JUNE 2022 $’000 - 91,366 (2,262) 89,104 JUNE 2021 $’000 - - - - Recognition and measurement Properties held for sale are carried at the lower of cost or net realisable value. The calculation of net realisable value requires estimates and assumptions which are regularly evaluated and are based on historical experience and expectations of future events that are believed to be reasonable under the circumstances. Properties held for sale are classified as non- current assets unless they are contracted to be sold within 12 months of the end of the reporting period, in which case they are classified as current assets. C6 INTANGIBLE ASSETS Goodwill Indefinite life management rights Opening balance Acquired goodwill Acquired indefinite life management rights Foreign currency translation Purchase price accounting adjustments 2022 $’000 479,957 308,252 788,209 2022 $’000 790,551 - - (2,574) 232 788,209 2021 $’000 481,696 308,855 790,551 2021 $’000 280,120 319,216 196,799 29 (5,613) 790,551 Goodwill and intangible assets are classified as non-current. Goodwill and management rights are solely attributable to the Property Funds Management cash generating unit with recoverability determined by a value in use calculation using profit and loss projections covering a five year period, with a terminal value determined after five years. Recognition and measurement (i) Indefinite life management rights Management rights acquired in a business combination are initially measured at fair value and reflect the right to provide asset and fund management services in accordance with the management agreements. (ii) Goodwill Goodwill acquired in a business combination is measured at cost and subsequently measured at cost less any impairment losses. The cost represents the excess of the cost of a business combination over the fair value of the identifiable assets, liabilities and contingent liabilities acquired. (iii) Impairment Goodwill and intangible assets that have an indefinite useful life are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. For the purpose of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows that are largely independent of the cash inflows from other assets or groups of assets (cash generating units or CGUs). Non-financial assets other than goodwill that were previously impaired are reviewed for possible reversal of the impairment at each reporting date. Key estimates and judgements The key assumptions used in the value in use calculations for the Property Funds Management cash-generating unit are as follows: Revenue Revenues in 2023 are based on the Board approved budget for 2023 and are assumed to increase at a rate of 7.5% (2021: 7.5%) per annum for years 2024-2027. The directors believe this is a prudent and achievable growth rate based on past experience. Expenses Expenses in 2023 are based on the budget for 2023 and are assumed to increase at a rate of 5.0% (2021: 5.0%) per annum for the years 2024-2027. The directors believe this is an appropriate growth rate based on past experience. Discount rate Discount rates are determined to calculate the present value of future cash flows. A pre-tax rate of 11.80% (2021: 9.37%) is applied to cash flow projections. In determining the appropriate discount rate, regard has been given to relevant market data as well as Group specific inputs. Terminal growth rate Beyond 2026, a growth rate of 3.0% (2021: 3.0%), in line with long term economic growth, has been applied to determine the terminal value of the asset. Sensitivity to changes in assumptions As at 30 June 2022, the estimated recoverable amount of intangibles including goodwill relating to the property funds Management cash-generating unit exceeded its carrying amount by $324,500,000 (2021: $585,400,000). The table below shows the key assumptions used in the value in use calculation and the amount by which each key assumption must change in isolation in order for the estimated recoverable amount to be equal to its carrying value. 138 | Centuria Capital Group – Annual Report 2022 Centuria Capital Group – Annual Report 2022 | 139 Notes to the financial statements For the year ended 30 June 2022 C Assets and liabilities Assumptions used in value in use calculation Rate required for recoverable amount to equal carrying value 7.50% 1.82% 11.80% 15.42% 5.00% 12.26% REVENUE GROWTH RATE (AVERAGE) PRE-TAX DISCOUNT RATE EXPENSES GROWTH RATE C7 PAYABLES Sundry creditors(i) (ii) Dividend/distribution payable(iii) Accrued expenses 2022 $’000 63,825 43,477 27,317 134,619 2021 $’000 22,550 44,513 21,612 88,675 (i) Sundry creditors are non-interest bearing liabilities and are payable on commercial terms of seven to 60 days. (ii) Sundry creditors includes $11,020,000 of deposits in transit in relation to the redemptions of Centuria 111 St Georges Terrace Fund that were allotted in July 2022, $8,867,000 of cash held on behalf of PW (HICT) Pty Ltd in relation to tax payable on wind-up of fund and $5,900,000 of cash in relation to applications for the Primewest Agricultural Trust No. 2. (iii) Prior year includes the Primewest final distribution of $11,500,000. All trade and other payables are considered to be current as at 30 June 2022, due to their short term nature. Recognition and measurement Payables are recognised when the Group becomes obliged to make future payments resulting from the purchase of goods and services. Due to the short term nature of these financial obligations, their carrying amounts are estimated to represent their fair values. C8 BORROWINGS Secured listed redeemable notes Fixed rate secured notes Floating rate secured notes Secured bank loans - New Zealand Reverse mortgage bill facilities and notes Secured bank loans in controlled property funds Development facility Borrowing costs capitalised The terms and conditions relating to the above facilities are set out below. NOTES C8(a) C8(b) C8(b) C8(d) C8(c) C8(e) C8(f) 2022 $’000 2021 $’000 198,693 198,693 99,388 96,650 44,417 4,600 29,366 66,650 7,440 7,006 190,239 106,505 - (4,602) 629,385 15,955 (4,973) 426,642 (a) Secured listed redeemable notes On 21 April 2021, the Fund issued $198,693,000 of listed redeemable notes with a variable interest rate of 4.25% plus the bank bill rate which is due to mature on 21 April 2026. These notes are secured against assets within certain subsidiaries of the Group. (b) Secured notes FIXED CLASSIFICATION COUPON RATE DUE DATE TOTAL LIMIT $'000 FACILITY AVAILABLE $'000 Tranche 5 Non-current 5.00% 21 Apr 2024 Tranche 7 Non-current 5.46% 25 Mar 2025 29,388 70,000 99,388 - - - FLOATING CLASSIFICATION COUPON RATE DUE DATE TOTAL LIMIT $'000 FACILITY AVAILABLE $'000 Tranche 4 Current BBSW +4.25% 21 Apr 2023 Tranche 6 Non-current BBSW +4.50% 21 Apr 2024 35,000 31,650 Tranche 8 Non-current BBSW +3.35% 25 Mar 2025 30,000 - - - Revolver A Non-current BBSY +2.25% 16 Dec 2024 100,000 100,000 Revolver B Non-current BBSY +2.45% 30 Jun 2027 50,000 50,000 2022 $’000 2021 $’000 29,388 29,366 70,000 - 99,388 29,366 2022 $’000 2021 $’000 35,000 35,000 31,650 31,650 30,000 - - - - - 246,650 150,000 96,650 66,650 The following facilities were entered into during the period. On 16 December 2021, the Group entered into a three year $100,000,000 secured loan note facility. The facility is a floating rate revolving facility with a margin of 2.25% which is due to mature on 16 December 2024. In March 2022, the Group issued a $70,000,000 three year senior secured medium term note (MTN) with a fixed coupon of 5.46% which is due to mature on 25 March 2025. In April 2022, the Group issued a $30,000,000 three year (MTN) with a floating coupon of 3.35% which is due to mature on 25 March 2025. On 30 June 2022, the Group entered into a five year $50,000,000 secured loan note facility. The facility is a floating rate revolving facility with a margin of 2.45% which is due to mature on 30 June 2027. The loan is a multi-currency facility allowing both AUD and NZD currencies. (c) Reverse mortgage bill facilities and notes (secured) As at 30 June 2022, the Group had $4,600,000 (2021: $7,006,000) non-recourse notes on issue to ANZ Bank, secured over the remaining reverse mortgages held in Senex Warehouse Trust No.1 (a subsidiary of the Group) due to mature on 30 November 2023 and is classified as non-current as at 30 June 2022. The facility limit as at 30 June 2022 is $5,500,000 (2021: $8,200,000) and is reassessed every six months with a view to reducing the facility in line with the reduction in the reverse mortgage book. Under the facility agreement, surplus funds (being mortgages repaid (including interest) less taxes, administration expenses and any hedge payments) are required to be applied against the facility each month. 140 | Centuria Capital Group – Annual Report 2022 Centuria Capital Group – Annual Report 2022 | 141 Notes to the financial statements For the year ended 30 June 2022 C Assets and liabilities FACILITY Amount used at reporting date Amount unused at reporting date 2022 $’000 5,500 (4,600) 900 2021 $’000 8,200 (7,006) 1,194 (f) Development facility In 2021, the Group had drawn down amounts to fund its social affordable housing developments which were subsequently repaid in 2022. Recognition and measurement Borrowings are initially recognised at fair value, net of transaction costs. They are subsequently measured at amortised cost using the effective interest rate method. (d) Secured bank loans - New Zealand The borrowings facilities for New Zealand are outlined as follows. These facilities are secured against assets within certain subsidiaries of the Group. On 30 March 2022, the Group entered into a 18-month NZ$50,000,000 secured loan revolving facility. The facility is a floating rate revolving facility with a margin of 2.00% which is due to mature on 30 September 2023. CLASSIFICATION MATURITY DATE FACILITY LIMIT $’000 FUNDS AVAILABLE $’000 DRAW DOWN $’000 BORROWING COSTS $’000 TOTAL $’000 C9 CALL/PUT OPTION LIABILITY Healthcare call/put option Flavorite call/put option 30 June 2022 New Zealand investment facility Non-current 30 Nov 2023 10,823 10,823 - New Zealand asset facility Non-current 30 Sep 2023 45,094 677 44,417 - - - 44,417 44,417 Opening balance Movement in fair value New call/put option entered 2022 $’000 48,695 35,400 84,095 2022 $’000 22,690 26,005 35,400 84,095 2021 $’000 22,690 - 22,690 2021 $’000 17,167 5,523 - 22,690 30 June 2021 New Zealand investment facility Non-current 30 Nov 2022 11,160 3,720 7,440 - 7,440 7,440 (e) Bank loans - controlled property funds (secured) Each controlled property fund has debt facilities secured by first mortgage over each of the fund’s investment property and a first ranking fixed and floating charge over all assets of each of the funds. Details of the amounts drawn and the maturity of each facility are as follows: FUND 30 June 2022 CLASSIFICATION MATURITY DATE FACILITY LIMIT $’000 FUNDS AVAILABLE $’000 DRAW DOWN $’000 BORROWING COSTS $’000 TOTAL $’000 Centuria 111 St Georges Terrace Fund Non-current 30 Jun 2025* 90,000 5,957 84,044 - 84,044 264 Copelands Road (Warragul) Non-current 13 Jan 2025 106,200 - (5) 106,195 22,533 190,239 30 June 2021 Centuria 111 St Georges Terrace Fund Current 30 Jun 2022 90,000 5,957 84,043 (148) 83,895 Primewest Property Income Fund** Non-current 19 Feb 2024 22,600 - 22,600 (77) 22,533 106,428 *The maturity date was extended to 30 June 2025 on 25 July 2022. **Primewest Property Income Fund (PPIF) was deconsolidated from the Group on 31 October 2021. The Warragul call/put option liability is considered current and the healthcare call/put option is considered non-current as at 30 June 2022. The healthcare call/put option liability relates to a simultaneous call option and put option over the remaining shares in Centuria Healthcare which are held by existing management shareholders of Centuria Healthcare. The call option is in favour of the Group, whilst the put option is in favour of the management shareholders. The options are exercisable five years from the date of completion of the initial acquisition of the 63% economic interest in Centuria Healthcare, with an exercise price equal to ten times EBIT for the last financial year prior to exercise of the option plus net tangible assets. As at year end, the Group is party to a put and call option over the remainder 50% equity interest in Centuria Agriculture Fund (CAF) with the vendor being Flavorite HoldCo Pty Limited for $35,400,000. This option was exercised subsequent to year end. Recognition and measurement (i) Financial liabilities at fair value through profit or loss The option liabilities are measured at fair value at recognition (including transaction costs, for assets and liabilities not measured at fair value through profit or loss). Subsequently at each reporting period, the Group measures the option liabilities at fair value with value changes recognised in profit or loss. 142 | Centuria Capital Group – Annual Report 2022 Centuria Capital Group – Annual Report 2022 | 143 Notes to the financial statements For the year ended 30 June 2022 C Assets and liabilities C10 RIGHT OF USE ASSET/LEASE LIABILITY The Group has seven operating lease commitments outlined below: LEASE Level 41 Chifley Sq, Sydney NSW Level 32, 120 Collins St, Melbourne VIC Level 2, 348 Edward St, Brisbane QLD 307 Murray St, Perth WA 38-35 Gaunt St, Auckland NZ 331-335 Devon St East, New Plymouth NZ ORIGINAL TERM 10 years 5 years 5 years 5 years 8 years 3 years EXTENSION OPTION FIXED ANNUAL RENT INCREASE 5 years - - 5 years - 3 years The current right of use asset is $2,686,000 (2021: $2,941,000) and the current lease liability is $2,298,000 (2021: $2,314,000). The remaining right of use asset and lease liability is classified as non-current. RIGHT OF USE ASSET Opening balance Depreciation on right of use asset Acquisition of subsidiary balance LEASE LIABILITY Opening balance Cash lease payments Finance lease interest Acquisition of subsidiary balance C11 CONTRIBUTED EQUITY CENTURIA CAPITAL LIMITED 2022 $’000 19,947 (2,941) - 17,006 2022 $’000 21,757 (3,350) 1,036 - 19,443 2022 2021 NO. OF SECURITIES $’000 NO. OF SECURITIES Balance at beginning of the period 787,802,693 386,634 509,998,482 Equity settled share based payments expense 2,367,418 Change in value of units issued - 981 236 1,921,149 - 4.0% 3.75% 3.5% 4.0% 2.5% CPI 2021 $’000 21,393 (2,404) 958 19,947 2021 $’000 22,564 (2,962) 1,123 1,032 21,757 $’000 177,149 1,482 - 2022 2021 CENTURIA CAPITAL FUND (NON-CONTROLLING INTERESTS) NO. OF SECURITIES $’000 NO. OF SECURITIES $’000 Balance at beginning of the period 787,802,693 1,018,822 509,998,482 545,744 Equity settled share based payments expense Stapled securities issued Cost of equity raising Change in value of units issued 2,367,418 2,617,009 - 1,921,149 6,636 275,883,062 - - (344) 470 - - - 475,185 (2,107) - Balance at end of the period 792,787,120 1,025,584 787,802,693 1,018,822 Fully paid ordinary securities carry one vote per security and carry the right to distributions. The Fund issued 2,617,009 stapled securities on 9 February 2022 in relation to the distribution reinvestment plan undertaken for the 2022 interim distribution. Recognition and measurement Incremental costs directly attributed to the issue of ordinary shares are accounted for as a deduction from equity, net of any tax effects. C12 COMMITMENTS AND CONTINGENCIES Australian guarantees The Group has provided bank guarantees of $3,334,153 for commercial leases with respect to its Sydney and Melbourne office premises. These bank guarantees are cash collateralised. The above guarantees are issued in respect of the Group and do not constitute an additional liability to those already existing in interest bearing liabilities on the statement of financial position. Capital commitments At 30 June 2022, the Company has committed up to a further NZ$11,250,000 of capital over approximately the next 9 years in its joint venture partnership with Ninety Four Feet. As part of the Man St, Queenstown property held for development in New Zealand, commitments of approximately NZD$720,000 have been made to the project managers of the development. As part of the Cook St, Auckland, property held for development in New Zealand, commitments of approximately NZD$2,600,000 have been made to the project managers of the development. Contingent liabilities The directors of the Group are not aware of any contingent liabilities in relation to the Group, other than those disclosed in the financial statements, which should be brought to the attention of securityholders as at the date of completion of this report. Stapled securities issued Cost of equity raising Balance at end of period 2,617,009 2,039 275,883,062 209,208 - (173) - (1,205) 792,787,120 389,717 787,802,693 386,634 144 | Centuria Capital Group – Annual Report 2022 Centuria Capital Group – Annual Report 2022 | 145 Notes to the financial statements For the year ended 30 June 2022 D Cash flows D1 OPERATING SEGMENT CASH FLOWS(I) FOR THE YEAR ENDED 30 JUNE 2022 CASH FLOWS FROM OPERATING ACTIVITIES Management fees received Performance fees received Distributions received Interest received Cash received on development projects Rent received Payments to suppliers and employees Income tax paid Interest paid Net cash provided by operating activities CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from sale of related party investments Purchase of investments in related parties Repayment of loans by related parties Loans to related parties Purchase of equity accounted investments Payments for plant and equipment Cash balance on acquisition of subsidiaries Purchase of subsidiaries Receipts/purchase of property held for development Collections from reverse mortgage holders Proceeds from sale of investments Proceeds from sale of equity accounted investments Cash paid on acquisition of Primewest Group Net cash used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issue of securities Equity raising costs paid Proceeds from borrowings 146 | Centuria Capital Group – Annual Report 2022 2022 $’000 2021 $’000 204,593 100,765 20,829 48,791 4,862 48,511 1,951 1,772 35,021 1,483 43,866 240 (109,016) (129,500) (18,727) (19,727) 182,067 (7,438) (11,626) 34,583 77,299 13,908 (198,790) (128,662) 20,216 (94,255) 6,702 3,750 (20,537) (26,089) (2,697) - (89,070) 12,086 2,551 4,737 8,324 (343) 97,841 (26,977) (22,621) 888 1,047 5,000 - (78,019) (280,136) (153,575) 8,300 (328) 142,353 133,073 (2,611) 241,900 FOR THE YEAR ENDED 30 JUNE 2022 Repayment of borrowings Costs paid to issue debt Distributions paid Net cash provided by financing activities Net increase in operating cash and cash equivalents Cash and cash equivalents at the beginning of the period Effects of exchange rate changes on cash and cash equivalents 2022 $’000 2021 $’000 (23,395) (98,620) (1,900) (90,524) 34,506 (63,563) 249,637 (1,075) (2,187) (52,124) 219,431 100,439 149,461 (263) Cash and cash equivalents at the end of the period 184,999 249,637 (i) The operating segment cash flows support the segment note disclosures of the Group and provide details in relation to the operating segment cash flows performance of the Group. The operating segment cash flows exclude the impact of cash flows attributable to Benefit Funds and controlled property funds. Refer to pages 108-109 for the full statutory cash flow statement of the Group. D2 CASH AND CASH EQUIVALENTS Included in total cash and cash equivalents of $200,565,000 (2021: $273,351,000) is $10,513,039 (2021: $1,828,994) relating to amounts held by Senex Warehouse Trust No.1 and the Benefit Funds which is not readily available for use by the Group. D3 RECONCILIATION OF PROFIT FOR THE PERIOD TO NET CASH FLOWS FROM OPERATING ACTIVITIES Profit for the year ADJUSTMENTS FOR: Depreciation and amortisation Non-cash development income Share-based payment expense Amortisation of borrowing costs Non-cash performance and sales fees Fair value movement of financial assets Interest revenue from reverse mortgages Interest expense reverse mortgage facility Equity accounted profit in excess of distribution paid Unrealised foreign exchange loss Unrealised (gain)/loss on investment properties Amortisation of lease incentives 2022 $’000 2021 $’000 (37,361) 149,639 4,179 (1,498) 5,010 2,195 (14,015) 186,643 (2,746) 1,966 612 3,558 3,741 1,789 3,731 (11,417) 3,058 2,628 (16,297) (96,443) (2,744) 1,522 (1,601) 112 (7,554) 1,881 Centuria Capital Group – Annual Report 2022 | 147 Notes to the financial statements For the year ended 30 June 2022 D Cash flows Costs paid for debt issuance Provision for doubtful debts Finance lease interest CHANGES IN NET ASSETS AND LIABILITIES: (Increase)/decrease in assets: Receivables Deferred tax assets Increase/(decrease) in liabilities: Other payables Tax provision Deferred tax liability Provisions Policyholder liability Net cash flows provided by operating activities 2022 $’000 1,901 28 1,036 2021 $’000 4,877 - 1,210 25,095 (2,205) 1,912 (1,212) 38,653 3,240 (18,179) 1,051 (33,092) 171,601 (5,939) (5,399) 12,484 (3,701) (7,885) 22,862 Recognition and measurement For the purposes of the statement of cash flows, cash and cash equivalents includes cash on hand and in banks. Cash equivalents are short term, highly liquid investments that are readily convertible to known amounts of cash, which are subject to an insignificant risk of changes in value and have a maturity of three months or less at the date of acquisition. Bank overdrafts are shown within borrowings in the statement of financial position. 148 | Centuria Capital Group – Annual Report 2022 Centuria Capital Group – Annual Report 2022 | 149 UNLISTED: VERMONT SOUTH MEDICAL CENTRE, VERMONT SOUTH VIC Notes to the financial statements For the year ended 30 June 2022 E Group structure CENTURIA DIVERSIFIED PROPERTY FUND - STAPLED $’000 CENTURIA DIVERSIFIED PROPERTY FUND - PRE $’000 PRIMEWEST PROPERTY INCOME $’000 CENTURIA BASS CREDIT $’000 CENTURIA GOVERN- MENT INCOME PROPERTY FUND NO. 2 $’000 QT LAKEVIEW DEVELOP- MENTS LIMITED $’000 PRIMEWEST AGRI- CULTURAL TRUST NO. 2 $’000 CENTURIA NEW ZEALAND PROPERTY FUND $’000 CENTURIA NEW ZEALAND HEALTH-CARE PROPERTY FUND $’000 TOTAL $’000 E1 INTERESTS IN ASSOCIATES AND JOINT VENTURES CARRYING AMOUNTS OF EQUITY ACCOUNTED INVESTMENTS % OF OWNERSHIP INTEREST PRINCIPAL ACTIVITY CARRYING AMOUNT 30 JUNE 2022 % 30 JUNE 2021 % 30 JUNE 2022 $’000 30 JUNE 2021 $’000 NAME OF ENTITY Centuria Diversified Property Fund 22.38 20.40 Centuria Bass Credit 50.00 50.00 QT Lakeview Developments Limited 25.00 25.00 Property investment Non-bank finance Property investment Centuria Government Income Property Fund No.2 22.03 0.00 Property investment Total equity accounted investments Equity accounted investments are classified as non-current. 39,021 28,144 25,765 25,704 2,240 1,789 7,743 - 74,769 55,637 The Group’s subsidiary, Augusta Lakeview Holdings Limited (Lakeview Holdings) has signed a partnership agreement with NFF QT Development Unit Trust (NFF) to establish QT Lakeview Partnership (the Joint Venture) to develop the Lakeview site in Queenstown, New Zealand. Lakeview Holdings has a 25% interest in the Joint Venture which represents a maximum capital commitment to Lakeview Holdings of NZ$14,000,000. The Joint Venture has entered into a development agreement with the Queenstown Lakes District Council to develop a range of residential, hotels, co- working, co-living, hospitality and retail options on the three-hectare site on a staged basis, with construction estimated to take more than 10 years and phased over seven stages. On 22 April 2021, the Group acquired 50% of Bass Capital Partners Pty Ltd (Centuria Bass) for $25,417,876 with the option to fully acquire the remaining 50% interest in five years. From that date, the Group has equity accounted its interest in Centuria Bass which offers non-banking finance for real estate secured transactions including land sub-division, development projects, bridging finance and residual stock. In November 2021, the Group acquired 32.17% ownership stake in the Centuria Government Income Property Fund No. 2. From that date, the Group has equity accounted its interest in that fund. The ownership stake decreased to 22.03% at 30 June 2022. On 27 May 2022, Centuria Diversified Property Fund (CDPF) and Primewest Property Income Fund (PPIF) were stapled together. After the stapling, the Group's residual combined ownership stake is 22.38% as at 30 June 2022. PPIF was previously consolidated by the Group and was subsequently deconsolidated from the Group on 31 October 2021. Opening balance as at 1 July 2021 Acquisition of investments Carrying value transferred from controlled property funds Share of net profit/(loss) after tax Distributions received/ receivable Carrying value transferred from/(to) financial assets Disposals Fair value gain/(loss) Stapling of CDPF and PPIF Closing balance as at 30 June 2022 - - - 28,144 - - - - 12,827 25,704 - 1,789 - 12,424 405 10,325 - - - - - - 55,637 5,227 28,381 (565) 1,539 1,007 2,911 429 (175) (3,421) (403) (2,850) (336) - - - - 15,080 - 27,907 1,780 (528) - - - - 7,101 (7,713) - - - - - - - (94) 162 39,761 (26,168) (13,593) - - - - - - (8,027) (15,080) (5,227) (28,334) (4,774) - (3,550) - - 46 - - - - - - - - - (8,324) 114 - 74,769 - - - 39,021 - - 25,765 7,743 2,240 The below table shows the movement in carrying amounts of equity accounted investments from 1 July 2020 to 30 June 2021. CARRYING AMOUNTS OF EQUITY ACCOUNTED INVESTMENTS Opening balance as at 1 July 2020 Acquisition of investments Share of net profit/(loss) after tax Distributions received/receivable Disposal Foreign exchange translation CENTURIA DIVERSIFIED PROPERTY FUND - PRE STAPLED $'000 31,830 - 2,784 (1,470) (5,000) - CENTURIA BASS CREDIT $’000 QT LAKEVIEW DEVELOPMENTS LIMITED $’000 - 25,418 286 - - - 1,125 671 - - - (7) 1,789 TOTAL $’000 32,955 26,089 3,070 (1,470) (5,000) (7) 55,637 Closing balance as at 30 June 2021 28,144 25,704 150 | Centuria Capital Group – Annual Report 2022 Centuria Capital Group – Annual Report 2022 | 151 Notes to the financial statements For the year ended 30 June 2022 E Group structure (a) Summarised financial information for associates and joint ventures The tables below provide summarised financial information for those associates. The information disclosed reflects the amounts presented in the consolidated financial statements of the relevant associates and not the Group's share of those amounts. SUMMARISED STATEMENT OF COMPREHENSIVE INCOME CENTURIA DIVERSIFIED PROPERTY FUND(I) CENTURIA BASS CREDIT CENTURIA GOVERNMENT INCOME PROPERTY FUND NO. 2 QT LAKEVIEW DEVELOPMENTS PTY LTD TOTAL 30 JUNE 2022 $’000 30 JUNE 2021 $’000 30 JUNE 2022 $’000 30 JUNE 2021 $’000 30 JUNE 2022 $’000 30 JUNE 2021 $’000 30 JUNE 2022 $’000 30 JUNE 2021 $’000 30 JUNE 2022 $’000 30 JUNE 2021 $’000 8,190 7,156 572,807 283,979 Other expenses (4,603) (5,409) (9,475) (11,222) (821) Finance costs (1,209) (1,388) (272) (13) (385) Revenue 6,977 13,912 15,569 16,126 2,394 Net (loss)/gain on fair value of investment properties and other investments Gain/(loss) on fair value of investments (390) (1,125) 1,311 9,920 - - - (1,871) - 2,106 Profit/(loss) for the period Other comprehensive income Total comprehensive income/loss) 2,086 15,910 5,822 4,891 1,423 - - - - - 2,086 15,910 5,822 4,891 1,423 - - - - - - - - - - - - - - - - - 24,940 30,038 - (2,261) (1,125) - - - - - - 3,417 9,920 (1,866) (1,401) (14,899) (16,631) 9,331 20,801 - - 9,331 20,801 (i) The 30 June 2022 profit and loss represents the stapled CDPF fund and the prior year profit and loss represents the pre-stapled CDPF fund. CENTURIA DIVERSIFIED PROPERTY FUND(I) CENTURIA BASS CREDIT CENTURIA GOVERNMENT INCOME PROPERTY FUND NO. 2 QT LAKEVIEW DEVELOPMENTS PTY LTD TOTAL 30 JUNE 2022 $’000 30 JUNE 2021 $’000 30 JUNE 2022 $’000 30 JUNE 2021 $’000 30 JUNE 2022 $’000 30 JUNE 2021 $’000 30 JUNE 2022 $’000 30 JUNE 2021 $’000 30 JUNE 2022 $’000 30 JUNE 2021 $’000 10,121 11,868 17,046 19,079 1,557 12,086 2,099 9,012 598 1,958 22,207 13,967 26,058 19,677 3,515 244,914 180,742 256,889 96,081 62,814 244,914 180,742 256,889 96,081 62,814 8,196 5,767 10,439 1,788 973 8,196 5,767 10,439 1,788 973 - - 266,923 110,532 - 99,237 65,150 266,923 110,538 30,585 159,688 123,792 5,585 3,432 34,771 - - - - - - - - - - - - - - - - - 28,724 30,947 23,056 2,697 51,780 33,644 8,190 7,156 572,807 283,979 - - - - - - - - 19,608 7,555 19,608 7,555 129,822 65,156 - 266,923 110,532 - 396,745 175,688 8,190 7,156 208,234 134,380 22.38% 20.44% 50.00% 50.00% 22.03% - 25.00% 25.00% SUMMARISED BALANCE SHEET Cash and cash equivalents Other current assets Total current assets Other non- current assets Total non- current assets Other current liabilities Total current liabilities Other non- current liabilities Total non- current liabilities Net tangible assets Fund's share in % Borrowings 99,237 65,150 - 6 30,585 Fund's share 35,738 25,303 2,797 1,716 7,658 Goodwill 3,283 2,841 22,968 23,988 85 Carrying amount 39,021 28,144 25,765 25,704 7,743 - - - 2,047 1,789 193 - 2,240 1,789 (i) The 30 June 2022 profit and loss represents the stapled CDPF fund and the prior year profit and loss represents the pre-stapled CDPF fund. 152 | Centuria Capital Group – Annual Report 2022 Centuria Capital Group – Annual Report 2022 | 153 Notes to the financial statements For the year ended 30 June 2022 E Group structure E2 INTERESTS IN SUBSIDIARIES The Group's principal subsidiaries at 30 June 2022 are set out below. Unless otherwise stated, they have issued capital consisting solely of ordinary shares or units that are held directly by the Group, and the proportion of ownership interests held equals the voting rights held by the Group. The subsidiaries of the Group were incorporated in the following jurisdictions, Australia, New Zealand and Singapore with principal places of business corresponding with the respective geographic jurisdictions. The parent entity of the Group is Centuria Capital Limited. AUSTRALIAN SUBSIDIARIES Centuria Capital Fund Centuria Capital Health Fund Centuria Capital No. 2 Fund Centuria Capital No. 2 Industrial Fund Centuria Capital No. 2 Office Fund Centuria Capital No. 3 Fund Centuria Capital No. 4 Fund Centuria Capital No. 5 Fund Centuria Capital No. 6 Fund Centuria Capital No. 7 Fund Centuria Capital No. 8 Fund Centuria Lane Cove Debt Fund Centuria 111 St Georges Terrace Fund Centuria Agriculture Fund I Centuria Agriculture Fund II Centuria Agri Logistics I REIT Centuria ALRI (A) Trust Centuria ALRI (B) Trust Centuria ALRI (C) Trust Centuria ALRIII (A) Trust Cudgen Health Precinct SPV Trust Primewest Property Fund Primewest USA Trust Primewest 140 St Georges Terrace Fund Primewest Property Income Fund OWNERSHIP INTEREST % 30 JUNE 2022 30 JUNE 2021 0% (100% NCI) 0% (100% NCI) 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 42% 50% 100% 100% 100% 100% 100% 50% 50.1% 100% 100% 100% - 100% 100% 100% 100% 100% 100% 100% 100% 100% - 100% 42% - - - - - - - - 100% 100% 100% 48% AUSTRALIAN SUBSIDIARIES Senex Warehouse Trust No. 1 80 Grenfell Street Pty Ltd A.C.N. 062 671 872 Pty Limited Ahnco Pty Ltd* Amberlee Nominees Pty Ltd Belmont Road Development Pty Limited Belmont Road Management Pty Limited Centuria 57 Wyatt Street Pty Ltd Centuria 61-67 Wyatt St Pty Limited Centuria 80 Flinders Street Pty Limited Centuria Agri Logistics Pty Limited Centuria Business Services Pty Limited Centuria Canberra No. 3 Pty Limited Centuria Developments (Cardiff) Pty Limited Centuria Developments (Mann Street) Pty Limited Centuria Developments (Mayfield) Pty Limited Centuria Developments (Young Street) Pty Limited Centuria Developments Pty Limited Centuria Tweed Valley Developments Pty Limited Centuria Employee Share Fund Pty Ltd Centuria Finance Pty Ltd Centuria Funds Management Limited Cudgen Health Precinct Pty Limited Centuria Healthcare Asset Management Limited* Centuria Healthcare Asset Management Nominee 1 Pty Ltd* Centuria Healthcare Energy Company Pty Ltd* Centuria Healthcare Funds Distributions Limited* Centuria Healthcare Investments Pty Ltd* Centuria Healthcare Property Services Pty Limited* OWNERSHIP INTEREST % 30 JUNE 2022 30 JUNE 2021 100% 100% 100% 64% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 50.1% 64% 64% 64% 64% 64% 64% 100% 100% 100% 63% 100% 100% 100% 100% 100% 100% - 100% 100% 100% 100% 100% 100% 100% - 100% 100% 100% - 63% 63% 63% 63% 63% 63% 154 | Centuria Capital Group – Annual Report 2022 Centuria Capital Group – Annual Report 2022 | 155 Notes to the financial statements For the year ended 30 June 2022 E Group structure AUSTRALIAN SUBSIDIARIES Centuria Healthcare Pty Ltd Centuria Healthcare Developments Pty Ltd* Centuria IM Agri No. 1 Pty Limited Centuria IM Agri No. 2 Pty Limited Centuria Industrial Property Services Pty Ltd Centuria Institutional Investments No. 3 Pty Limited Centuria Investment Holdings No. 4 Pty Limited Centuria Investment Holdings Pty Limited Centuria Investment Management (CDPF) Pty Ltd Centuria Investment Management (CIP) Pty Ltd Centuria Investment Management (CMA) No. 2 Pty Limited Centuria Investment Management (CMA) Pty Limited Centuria Investment Management (Property) No. 1 Pty Ltd Centuria Investment Management (Property) No. 2 Pty Ltd Centuria Investment Management (Property) No. 3 Pty Ltd Centuria Investment Services Pty Limited Centuria Life Limited Centuria Nominees No. 3 Pty Limited Centuria Platform Investments Pty Limited Centuria Properties No. 3 Limited Centuria Property Funds Limited Centuria Property Funds No. 2 Limited Centuria Property Services Pty Limited Centuria Richlands Pty Ltd Centuria SubCo Pty Limited CHPF 1 Pty Ltd CHPF 2 Pty Ltd CHPF 3 Pty Ltd CHPF Cairns Pty Ltd CHPF Kallangur Pty Ltd OWNERSHIP INTEREST % 30 JUNE 2022 30 JUNE 2021 AUSTRALIAN SUBSIDIARIES OWNERSHIP INTEREST % 30 JUNE 2022 30 JUNE 2021 64% 64% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 63% 63% - - 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% CHPF South Bunbury Pty Ltd Crestway Nominees Pty Ltd Forrestdale Home Pty Ltd Fromnex Pty Limited Heathley Finance Company Pty Ltd* Heathley Funds Management Pty Ltd* Heathley Investor Services Pty Limited* Heathley Nominees Pty Ltd* Just across the river Pty Ltd Mainriver Holdings Pty Ltd More than meets the eye Pty Ltd Over Fifty Capital Pty Ltd Over Fifty Funds Management Pty Ltd Over Fifty Investments Pty Ltd Over Fifty Seniors Equity Release Pty Ltd Primewest (1 Forrest Place) Pty Ltd Primewest (1060 Hay Street) Pty Ltd Primewest (15 Ogilvie Road) Pty Ltd Primewest (307 Murray Street) Pty Ltd Primewest (359 Scarb Beach Road) Pty Ltd Primewest (380 Scarborough Beach Road) Pty Ltd Primewest (380A Scarborough Beach Road) Pty Ltd Primewest (382 Scarborough Beach Road) Pty Ltd Primewest (384 Scarborough Beach Road) Pty Ltd Primewest (511 Abernethy Road) Pty Ltd Primewest (607 Bourke Street) Pty Ltd Primewest (616 St Kilda Road) Pty Ltd Primewest (Australia Place) Pty Ltd Primewest (Busselton) Pty Ltd 100% 100% 100% 31.5% 64% 64% 64% 64% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 31.5% 63% 63% 63% 63% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 156 | Centuria Capital Group – Annual Report 2022 Centuria Capital Group – Annual Report 2022 | 157 Notes to the financial statements For the year ended 30 June 2022 E Group structure AUSTRALIAN SUBSIDIARIES Primewest (Cannington) Pty Ltd Primewest (Cottesloe Central) Pty Ltd Primewest (Erskine) Pty Ltd Primewest (Gauge Circuit) Pty Ltd Primewest (Hillbert Rd) Pty Ltd Primewest (Joondalup House) Pty Ltd Primewest (Lot 4 Davidson Street Kalgoorlie) Pty Ltd Primewest (Melville) Pty Ltd Primewest (Neerabup) Pty Ltd Primewest (Northlands) Pty Ltd Primewest (Osborne Park) Pty Ltd Primewest (Wattleup) Pty Ltd Primewest Agrichain Management Pty Ltd Primewest Corporate Holdings Pty Limited Primewest Enterprises Pty Ltd Primewest Funds Ltd Primewest Group Limited Primewest Management Ltd Primewest P/Q Pty Ltd Primewest Real Estate Pty Ltd Primewest USA Holdings Pty Ltd Primwest (135 Clayton Street) Pty Limited PWG Property Pty Ltd Riodell Holdings Pty Ltd Stead Road Pty Ltd Teewana Farm Pty Ltd 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% OWNERSHIP INTEREST % 30 JUNE 2022 30 JUNE 2021 NEW ZEALAND SUBSIDIARIES Centuria Capital (NZ) Limited (formerly Centuria New Zealand Holdings Limited) Centuria Capital (NZ) No. 1 Limited (formerly Augusta Capital Limited) Centuria Capital (NZ) No. 2 Limited (formerly Augusta Capital No. 1 Limited) Centuria Funds Management (NZ) Limited (formerly Augusta Funds Management Limited) Centuria Lakeview Holdings Limited (formlerly Augusta Lakeview Holdings Limited) Centuria Property Holdco Limited (formerly Augusta Property Holdco Limited) OWNERSHIP INTEREST % 30 JUNE 2022 30 JUNE 2021 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% SINGAPORE SUBSIDIARIES Centuria Capital Private Limited (Singapore) 100% 100% * The ownership percentage outlined above for these subsidiaries reflects the Group’s economic ownership. The Group holds a 50% voting right in each of these subsidiaries. Recognition and measurement (i) Basis of consolidation The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company. The Group controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The financial statements of subsidiaries are included in the consolidated financial statements from the date on which control commences until the date on which control ceases. Intra-group balances and transactions and any unrealised income and expenses arising from intra-group transactions are eliminated in preparing the consolidated financial statements. The company is required by AASB 10 Consolidated Financial Statements to recognise the assets, liabilities, income, expenses and equity of the Benefit Funds of its subsidiary, Centuria Life Limited (the Benefit Funds). The assets and liabilities of the Benefit Funds do not impact the net profit after tax or the equity attributable to the securityholders of the Company and the securityholders of the Company have no rights over the assets and liabilities held in the Benefit Funds. In order to reflect the assets and liabilities pertaining to the Benefit Funds being attributable to policyholders (as approved by securityholders) an equal and offsetting policyholder liability is recognised on consolidation. In addition, on consolidation of the various income and expenses attributable to the Benefit Funds an equal and opposite net change in policyholder liabilities is recorded in the statement of comprehensive income. The company has majority representation on the Board of the Over Fifty Guardian Friendly Society Limited (Guardian). However, as Guardian is a mutual organisation, the Company has no legal rights to Guardian's net assets, nor does it derive any benefit from exercising its power and therefore does not control Guardian. 158 | Centuria Capital Group – Annual Report 2022 Centuria Capital Group – Annual Report 2022 | 159 Notes to the financial statements For the year ended 30 June 2022 E Group structure E3 PARENT ENTITY DISCLOSURE As at, and throughout, the current and previous financial year, the parent entity of the Group was Centuria Capital Limited RESULT OF PARENT ENTITY Profit or loss for the year Total comprehensive income for the year FINANCIAL POSITION OF PARENT ENTITY AT YEAR END Total assets Total liabilities Net assets 2022 $’000 2021 $’000 23,561 23,561 28,258 28,258 1,147,511 (465,339) 682,172 847,907 (179,578) 668,329 The parent entity classifies its assets and liabilities as current, except for the parent entity's investments in subsidiaries. The assets of the parent entity mainly consist of cash, short term receivables, investments in subsidiaries and deferred tax assets. The parent entity's investment in subsidiaries are measured at cost. The liabilities of the parent entity mainly consist of short term payables. TOTAL EQUITY OF THE PARENT ENTITY COMPRISING OF: Share capital Share-based incentive reserve Retained earnings/(loss) Total equity 2022 $’000 2021 $’000 389,716 8,931 283,526 682,173 386,633 4,898 276,798 668,329 (a) Guarantees entered into by the parent entity The parent entity has, in the normal course of business, entered into guarantees in relation to the debts of its subsidiaries during the financial year. (b) Commitments and contingent liabilities of the parent entity The parent entity has bank guarantees of $3,349,911 for commercial leases with respect to its Sydney and Melbourne office premises. These bank guarantees are cash collateralised. The above guarantees are issued in respect of the parent entity and do not constitute an additional liability to those already existing in liabilities on the statement of financial position. The directors of the Company are not aware of any other contingent liabilities in relation to the parent entity, other than those disclosed in the financial statements. 160 | Centuria Capital Group – Annual Report 2022 243 BRADMAN STREET, ACACIA RIDGE QLD Centuria Capital Group – Annual Report 2022 | 161 Notes to the financial statements For the year ended 30 June 2022 F Other F1 SHARE-BASED PAYMENT ARRANGEMENTS (a) LTI plan details The company has an executive incentive plan (LTI Plan) which forms a key element of the Company’s incentive and retention strategy for senior executives under which performance rights (Rights) are issued. Each employee receives ordinary securities of the Group on vesting of the performance rights. No amounts are paid or payable by the recipient on receipt of the performance rights or on vesting. The performance rights carry neither rights to dividends nor voting rights prior to vesting. It is expected that future annual grants of performance rights will be made, subject to the Board’s determination of the overall performance of the Group and market conditions. The vesting of any performance rights awarded will be subject to attainment of appropriate performance hurdles and on the basis of continuing employment with the Group. Further details of the LTI Plan are included in the audited remuneration report from page 70 to 98. Performance rights outstanding at the beginning of the year Performance rights granted during the year Performance rights vested during the year Performance rights outstanding at the end of the year 2022 8,960,099 3,196,360 (2,297,578) 9,858,881 2021 7,090,373 3,861,014 (1,991,288) 8,960,099 The following table sets out the fair value of the rights at the respective grant date: PERFORMANCE CONDITION TRANCHE 7 TRANCHE 8 TRANCHE 9 Growth in FUM Absolute TSR Relative TSR $1.87 $0.79 - - - $1.29 and $1.10 (i) $1.85 to $2.15(iii) $1.75 and $1.58 (ii) $1.16 to $1.32(iv) (i) $1.29 for Chief Executive Officers and $1.10 for other employees. (ii) $1.75 for Chief Executive Officers and $1.58 for other employees. (iii) $1.85 and $1.92 for Chief Executive Officers, $1.98 and $2.05 for senior executive committee members and $2.15 for other employees. (iv) $1.16 and $1.18 for Chief Executive Officers, $1.19 and $1.23 for senior executive committee members and $1.32 for other employees. During the year, share based payment expenses were recognised of $5,010,000 (2021: $3,058,000). Recognition and measurement Equity-settled share-based payments to employees and others providing similar services are measured at the fair value of the equity instruments at the grant date. The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Group’s estimate of equity instruments that will eventually vest. At the end of each reporting period, the Group revises its estimate of the number of equity instruments expected to vest. The impact of the revision of the original estimates with respect to non-market vesting conditions, if any, is recognised in profit for the year such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to the equity-settled employee benefits reserve. The performance objectives for 2,801,507 of the performance rights issued under Tranche 7 were partially met as at 30 June 2022. As a result, 700,377 of these rights will vest on 31 August 2022. F2 FINANCIAL INSTRUMENTS (b) Measurement of fair values The fair value of the rights was calculated using a binomial tree valuation methodology for the Rights with non-market vesting conditions and a monte-carlo simulation for the Rights with market vesting conditions. The inputs used in the measurement of the fair values at grant date of the rights were as follows: TRANCHE 7 TRANCHE 8 TRANCHE 9 Expected vesting date 31 Aug 2022 31 Aug 2023 31 Aug 2024 and 2 Aug 2025 Share price at the grant date Expected life Volatility Risk free interest rate Dividend yield $2.13 2.9 years 18% 0.76% 4.5% $2.51 and $2.37 $3.13 - $3.25 2.8 years 26% 2.8 - 4.1 years 26% 0.11% and 0.12% 0.11% and 0.86% 4.2% 3.8% (a) Management of financial instruments The Board is ultimately responsible for the Risk Management Framework of the Group. The Group employs a cascading approach to managing risk, facilitated through delegation to specialist committees and individuals within the Group. The Group is exposed to a variety of financial risks as a result of its activities. These risks include market risk (including interest rate risk and price risk), credit risk and liquidity risk. The Group's risk management and investment policies, approved by the Board, seek to minimise the potential adverse effects of these risks on the Group's financial performance. These policies may include the use of certain financial derivative instruments. Centuria Group has various investment committees to oversee the relevant entity’s investment and portfolio management practices to ensure they are in line with the risk and return requirements of its investors, as well as ensuring that investment decisions are made in accordance with the appropriate regulatory requirements. The Centuria Life investment committee in particular monitor fund rules and target achieving the long term strategic objectives of investors. From time to time, the Group outsources certain parts of the investment management of the Benefit Funds to specialist investment managers including co-ordinating access to domestic and international financial markets, and managing the financial risks relating to the operations of the Group in accordance with an investment mandate set out in the Group's constitution and the Benefit Funds' product disclosure statements. The Benefit Funds' investment mandates are to invest in equities and fixed interest securities via unit trusts, discount securities and may also invest in derivative instruments such as futures and options. The Group uses interest rate swaps to manage interest rate risk and not for speculative purposes in any situation. Hedging is put in place where the Group is either seeking to minimise or eliminate cash-flow variability, i.e. converting variable rates to fixed rates, or changes in the fair values of underlying assets or liabilities, i.e. to convert fixed rates to variable rates. 162 | Centuria Capital Group – Annual Report 2022 Centuria Capital Group – Annual Report 2022 | 163 Notes to the financial statements For the year ended 30 June 2022 F Other Derivative financial instruments of the Benefit Funds, consolidated into the financial statements of the Group under AASB 10 Consolidated Financial Statements, are used only for hedging factual or anticipated exposures relating to investments. The use of financial derivatives in respect of Benefit Funds is governed by the Benefit Funds' investment policies, which provide written principles on the use of financial derivatives. From time to time, the Group outsources certain parts of the investment management of the Benefit Funds to specialist investment managers including coordinating access to domestic and international financial markets, and managing the financial risks relating to the operations of the Group in accordance with an investment mandate set out in the Group’s constitution and the Benefit Funds’ product disclosure statements. The Benefit Funds’ investment mandates are to invest in equities and fixed interest securities via unit trusts, discount securities and may also invest in derivative instruments such as futures and options. The Group uses interest rate swaps to manage interest rate risk and not for speculative purposes in any situation. Hedging is put in place where the Group is either seeking to minimise or eliminate cash-flow variability, i.e. converting variable rates to fixed rates, or changes in the fair values of underlying assets or liabilities, i.e. to convert fixed rates to variable rates. Derivative financial instruments of the Benefit Funds, consolidated into the financial statements of the Group under AASB 10 Consolidated Financial Statements, are used only for hedging factual or anticipated exposures relating to investments. The use of financial derivatives in respect of Benefit Funds is governed by the Benefit Funds’ investment policies, which provide written principles on the use of financial derivatives. (b) Capital risk management The Group manages its capital to ensure that entities in the Group will be able to continue as going concerns while maximising the return to stakeholders through the optimisation of debt and equity capital. This overall strategy remains unchanged from the prior year. The Group's capital structure consists of net debt (borrowings, offset by cash and cash equivalents) and equity of the Group (comprising issued capital, reserves and retained earnings). The Group carries on business throughout Australia and New Zealand, primarily through subsidiary companies that are established in the markets in which the Group operates. The operations of CLL are regulated by APRA and the management fund of CLL has a minimum prescribed capital amount (PCA) that must be maintained at all times. It is calculated monthly and these results are reported to the Board each month. The current level of share capital of CLL meets the PCA requirements. In addition, Centuria Property Funds Limited, Centuria Funds Management Limited, Centuria Property Fund No.2 Limited, Centuria Healthcare Asset Management Limited and Heathley Funds Distribution Limited have AFS licences so as to operate registered property trusts. Regulations require these entities to hold a minimum net asset amount which is maintained by way of cash term deposits and listed liquid investments. Operating cash flows are used to maintain and, where appropriate, expand the Group's funds under management as well as to make the routine outflows of tax, dividends and repayment of maturing debt. The Group regularly reviews its anticipated funding requirements and the most appropriate form of funding (capital raising or borrowings) depending on what the funding will be used for. The capital structure of the Benefit Funds (and management fund) consists of cash and cash equivalents, bill facilities and mortgage assets. The Benefit Funds also hold a range of financial assets for investment purposes including investments in unit trusts, equity and floating rate notes. The Investment Committee aims to ensure that there is sufficient capital for possible redemptions by policyholders of the Benefit Funds by regularly monitoring the level of liquidity in each fund. The Benefit Funds have no restrictions or specific capital requirements on the application and redemption of units. The Benefit Funds' overall investment strategy remains unchanged from the prior year. (c) Fair value of financial instruments (i) Valuation techniques and assumptions applied in determining fair value The fair values of financial assets and financial liabilities with standard terms and conditions and traded on active liquid markets are determined with reference to quoted market prices (includes listed redeemable notes, bills of exchange, debentures and perpetual notes). The fair values of other financial assets and financial liabilities (excluding derivative instruments) are determined in accordance with generally accepted pricing models based on discounted cash flow analysis using prices from observable current market transactions and dealer quotes for similar instruments. Discount rates are determined based on market rates applicable to the financial asset or liability. The valuation technique used to determine the fair value of the Group's reverse mortgage loan book is as follows: • the weighted average reverse mortgage holders’ age is 83 years; • the future cash flows calculation is related to borrowers' mortality rates and mortality improvements. The data is sourced from mortality tables sourced from externally published data. • fixed or variable interest rates charged to borrowers are used to project future cash flows; • a redemption rate, which is based on historical loan redemption experience, applies to future cash flow forecast; and • year-end yield curve plus a credit margin is used to discount future cash flows back to 30 June 2022 to determine the fair value. (ii) Valuation techniques and assumptions applied in determining fair value of derivatives The fair values of derivative instruments are calculated using quoted prices. Where such prices are not available, discounted cash flow analysis is performed using the applicable yield curve for the duration of the instruments for non- optional derivatives, and option pricing models for optional derivatives. The valuation technique used to determine the fair value of the Fixed for Life interest rate swaps is as follows: • the weighted average reverse mortgage holders’ age is 83 years; • the expected future cash flows in relation to the swaps are based on reverse mortgage borrowers' expected life expectancy sourced from mortality tables provided by the actuary; and the difference between the fixed swap pay rates and forward rates as of 30 June 2022 is used to calculate the future cash flows in relation to the swaps; and year-end yield curve plus a credit margin is used to discount future cash flows back to 30 June 2022 to determine the fair value. (iii) Fair value measurements recognised in the statement of financial position The following table shows the carrying amounts and fair values of financial assets and financial liabilities, including their levels in the fair value hierarchy for financial instruments measured at fair value. The table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value is observable. • Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities. • Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices). • Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs). There were no transfers between Level 1, 2 and 3 in the period. 164 | Centuria Capital Group – Annual Report 2022 Centuria Capital Group – Annual Report 2022 | 165 Notes to the financial statements For the year ended 30 June 2022 F Other 30 JUNE 2022 FINANCIAL ASSETS MEASUREMENT BASIS FAIR VALUE HIERARCHY CARRYING AMOUNT $’000 FAIR VALUE $’000 Cash and cash equivalents Amortised cost Not applicable 200,565 200,565 Receivables Financial assets Financial assets Financial assets - mortgage backed assets Reverse mortgages receivables FINANCIAL LIABILITIES Payables Amortised cost Not applicable 113,487 113,487 Fair value Fair value Fair value Fair value Level 1 Level 2 Level 3 Level 3 685,211 685,211 235,216 235,216 1,181 1,181 40,084 40,084 1,275,744 1,275,744 Amortised cost Not applicable 134,619 134,619 Benefit funds policy holders' liability Amortised cost Not applicable 270,558 270,558 Borrowings (net of borrowing costs) Amortised cost Not applicable 629,385 624,941 Interest rate swaps - reverse mortgage fixed-for-life Fair value Call/put option liability Fair value Level 3 Level 3 18,750 18,750 84,095 84,095 1,137,407 1,132,963 Cash and cash equivalents Amortised cost Not applicable 273,351 273,351 Amortised cost Not applicable 127,197 127,197 Fair value Fair value Fair value Fair value Level 1 Level 2 Level 3 Level 3 811,661 811,661 123,373 123,373 1,181 1,181 54,309 54,309 1,391,072 1,391,072 30 JUNE 2021 FINANCIAL ASSETS Receivables Financial assets Financial assets Financial assets - mortgage backed assets Reverse mortgages receivables FINANCIAL LIABILITIES Payables The Group determines Level 2 fair values for financial assets and liabilities without an active market based on broker quotes. Level 2 fair values for simple over-the-counter derivatives are also based on broker quotes. Those quotes are tested for reasonableness by discounting expected future cash flows using market interest rates for a similar instrument at the measurement date. Fair values reflect the credit risk of the instrument and include adjustments to take account of the credit risk of the entity and counterparty where appropriate. The Level 3 financial asset held by the Group is the fair value of the residential mortgage receivables attributable to interest rate risk. The Level 3 financial liability held by the Group is the fixed-for-life interest rate swaps. These items are designated in a fair value hedging relationship, with the fair value movements on the swaps offset by the fair value movements in the mortgage receivables. However, as the Group has only designated the fair value movements attributable to interest rate risk in the hedging relationship, any other fair value movements impact the profit and loss directly, such as credit risk movements. (iv) Reconciliation of Level 3 fair value measurements of financial assets and liabilities YEAR ENDED 30 JUNE 2022 Balance at 1 July 2021 Loan repaid New call/put option entered Fair value adjustment Accrued interest Attributable to credit risk Balance at 30 June 2022 YEAR ENDED 30 JUNE 2021 Balance at 1 July 2020 Loan repaid Fair value adjustment Accrued interest OTHER MORTGAGE BACKED ASSETS AT FAIR VALUE $’000 REVERSE MORTGAGES FAIR VALUE $’000 FIXED-FOR- LIFE INTEREST RATE SWAPS $’000 CALL/PUT OPTION LIABILITY $’000 1,181 54,309 (31,205) (22,690) TOTAL $’000 1,595 - - - - - - (3,824) 1,206 - (2,618) - - 3,413 (17,749) 3,935 - - (35,400) (35,400) (26,005) (26,005) (1,907) 14,503 (1,347) - - - 1,506 (3,246) 2,588 1,181 40,084 (18,750) (84,095) (61,580) OTHER MORTGAGE BACKED ASSETS AT FAIR VALUE $’000 REVERSE MORTGAGES FAIR VALUE $’000 FIXED-FOR-LIFE INTEREST RATE SWAPS $’000 CALL/PUT OPTION LIABILITY $’000 TOTAL $’000 1,195 (14) - - - - 58,904 (32,752) (17,167) 10,180 (2,126) - 720 - - (1,420) (5,523) (5,523) 2,965 (1,925) (5,152) 8,080 (282) (5,328) - - - 1,040 2,928 (5,610) 1,181 54,309 (31,205) (22,690) 1,595 Amortised cost Not applicable 88,675 88,675 Attributable to interest rate and other risk Benefit funds policy holders' liability Amortised cost Not applicable 303,650 303,650 Borrowings (net of borrowing costs) Amortised cost Not applicable 426,642 430,576 Attributable to credit risk Balance at 30 June 2021 Interest rate swaps - reverse mortgage fixed-for-life Fair value Call/put option liability Fair value Level 3 Level 3 31,205 31,205 22,690 22,690 872,862 876,796 166 | Centuria Capital Group – Annual Report 2022 Centuria Capital Group – Annual Report 2022 | 167 MEASUREMENT BASIS FAIR VALUE HIERARCHY CARRYING AMOUNT $’000 FAIR VALUE $’000 Attributable to interest rate and other risk Notes to the financial statements For the year ended 30 June 2022 F Other Key estimates and judgements The fair value of the 50 year residential mortgage loans and 50 year swaps are calculated using a valuation technique based on assumptions that are not supported by prices from observable current market transactions in the same instrument and not based on available observable market data due to the illiquid nature of the instruments. A discounted cash flow model is used for analysis using the applicable yield curve out to 20 years, with the yield curve at 20 years employed as the best proxy for subsequent rates due to non-observable market data and to reflect the average remaining life expectancy of the borrowers. Assumptions and inputs used for valuation of reverse mortgage loan receivables: • The loan interest compounding period is the expected remaining life of the borrower; • Mortality rates for males and females are based on portfolio-adjusted 2013-2015 life tables; • The compounding interest rate is the fixed rate of loan for the period from day 1 up to the point of time when loan carrying amount equals the property value. After that point of time, the loan compounding rate will be reduced to the same as long term residential property growth rate determined by Management, on the grounds that any fixed rate exceeding the property growth rate will not be recovered after that point of time; • For 30 June 2022 valuation, the property growth rates are 0% for FY23, then reverted to a 3.5% flat rate from FY24 onwards; • Discount factors are calculated based on the market quoted long term rates on 30 June 2022; • The 1% flat credit risk premium, reflecting the portfolio default profile on 30 June 2022, is added to the monthly cash flow discount factors to discount future cash flows generated by the reverse mortgage loans. Assumptions and inputs used for valuation of the 50 year interest rate swaps: • Mortality rates for males and females based on portfolio-adjusted 2013-2015 life tables. The improvement factor tapers down to 1% p.a. at age 90 and then zero at age 100; • Joint life mortality is calculated based on last death for loans with joint borrowers; • 46% of the residential mortgage loan portfolio consists of joint lives; • Discount factors are calculated based on the market quoted long term rates on 30 June 2022; • The 1.716% flat credit risk premium, reflecting the business default profile on 30 June 2022, is added to the monthly cash flow discount factors to discount future cash flows generated by the reverse mortgage loans. Recognition and measurement The Group enters into derivative financial instruments such as interest rate swaps to manage its exposure to interest rate risk. Derivatives are initially recognised at fair value at the date a derivative contract is entered into and are subsequently remeasured to their fair value at each reporting period. The resulting gain or loss is recognised in profit or loss immediately unless the derivative is designated and effective as a hedging instrument, in which event, the timing of the recognition in profit or loss depends on the nature of the hedge relationship. (d) Credit risk Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. The Group has adopted a policy of only dealing with creditworthy counterparties and obtaining sufficient collateral or other security, where appropriate, as a means of mitigating risk of financial loss from default. The credit risk on financial assets of the Group and the parent recognised in the statement of financial position is generally the carrying amount, net of allowance for impairment loss. Concentration of risk may exist when the volume of transactions limits the number of counterparties. (i) Credit risk of reverse mortgages Concentration of credit risk in relation to reverse mortgage loans is minimal, as each individual reverse mortgage loan is secured by an individual residential property. The loan is required to be settled off from the proceeds of disposal of the secured property after the borrower's death. Individual property valuations are conducted at least every 3 years in accordance with financier's requirements. At 30 June 2022, the highest loan to value ratio (LVR) of a loan in the reverse mortgage loan book is 129% (2021: 117%), and there are 72 out of 166 (2021: 77 out of 182) reverse mortgage loans where the LVR is higher than 50%. (ii) Credit risk on other financial assets Credit risk on other financial assets such as investments in floating rate notes, standard discount securities and unit trusts is managed through strategic asset allocations with creditworthy counterparties and the on-going monitoring of the credit quality of investments, including the use of credit ratings issued by well-known rating agencies. The exposure of credit risk in respect of financial assets is minimal. The Group does not have any significant credit risk exposure to any single entity in other financial assets or any group of counterparties having similar characteristics. (e) Liquidity risk The Group's approach to managing liquidity is to ensure that it will always have sufficient liquidity to meet its liabilities. The liquidity risk is managed for the Group at a corporate level. Bank account balances across all entities, current and future commitments, and expected cash inflows are reviewed in detail when the monthly cash flow projection is prepared for management purposes and presented to the Board at its regular monthly meetings. By comparing the projected cash flows with the assets and liabilities shown in the individual and consolidated statements of financial position, which are also prepared on a monthly basis for management purposes and presented to the Board, liquidity requirements for the Group can be determined. Based on this review, if it is considered that the expected cash inflows plus liquidity on hand, may not be sufficient in the near term to meet cash outflow requirements, including repayment of borrowings, a decision can be made to carry out one or more of the following: • renegotiate the repayment terms of the borrowings; • sell assets that are held on the statement of financial position; and/or • undertake an equity raising. This, combined with a profitable business going forward, should ensure that the Group continues to meet its commitments, including repayments of borrowings, as and when required. The Group's overall strategy to liquidity risk management remains unchanged from the prior year. The policyholders in the Benefit Funds are able to redeem their policies at any time and the Benefit Funds are therefore exposed to the liquidity risk of meeting policyholders' withdrawals at any time. The Investment Committee aims to ensure that there is sufficient capital for possible redemptions by policyholders of the Benefit Funds by regularly monitoring the level of liquidity in each fund. The following table summarises the Group's remaining contractual maturity for its non-derivative financial liabilities with agreed repayment periods. The tables have been prepared based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group and the parent can be required to pay. The tables include both interest and principal cash flows. To the extent that interest flows are at floating rate, the undiscounted amount is derived from interest rate curves at the end of the reporting period. 168 | Centuria Capital Group – Annual Report 2022 Centuria Capital Group – Annual Report 2022 | 169 Notes to the financial statements For the year ended 30 June 2022 F Other NON-DERIVATIVE FINANCIAL LIABILITIES ON DEMAND $’000 LESS THAN 3 MONTHS $’000 3 MONTHS TO 1 YEAR $’000 1-5 YEARS $’000 5+ YEARS $’000 TOTAL $’000 2022 Borrowings Payables Call/put option liability - - - Benefit funds policyholder's liability 270,557 Finance lease liabilities - 134,619 35,400 - 805 8,242 28,531 697,617 - - - - 58,929 - - - - - 734,390 134,619 94,329 270,557 270,557 179,066 30,978 769,721 6,820 1,257,142 2,447 13,175 6,820 23,247 Total 2021 Borrowings Payables Call/put option liability - - - 782 12,658 477,917 88,675 - - - - - - 28,141 - - - - - 491,357 88,675 28,141 303,650 Benefit funds policyholder's liability 303,650 Finance lease liabilities - 822 2,403 13,285 10,050 26,560 Total 303,650 90,279 15,061 519,343 10,050 938,383 The following table summarises the maturing profile of derivative financial liabilities. The table has been drawn up based on the undiscounted net cash flows on the derivative instruments that settle on a net basis. DERIVATIVE FINANCIAL LIABILITIES ON DEMAND $’000 LESS THAN 3 MONTHS $’000 3 MONTHS TO 1 YEAR $’000 1-5 YEARS $’000 5+ YEARS $’000 TOTAL $’000 2022 Interest rate swaps Total 2021 Interest rate swaps Total - - - - 92 92 66 66 287 287 212 212 2,924 33,775 2,924 33,775 37,078 37,078 2,342 2,342 45,171 45,171 47,791 47,791 (f) Market risk Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises interest rate risk and price risk. Due to the nature of assets held by the Group (excluding the Benefit Funds), there is an asset and liability management process which determines the interest rate sensitivity of the statement of financial position and the implementation of risk management practices to hedge the potential effects of interest rate changes. The Group manages the market risk associated with its Benefit Funds by outsourcing its investment management. The Investment Manager manages the financial risks relating to the operations of the Benefit Funds in accordance with an investment mandate set out in the Benefit Funds’ constitution and PDS. There has been no change to the Group's exposure to market risks or the manner in which it manages and measures the risk. (i) Interest rate risk management The Group is exposed to interest rate risk because entities in the Group borrow funds at floating interest rates. Management of this risk is evaluated regularly and interest rate swaps are used accordingly. The tables below detail the Group's interest bearing financial assets and liabilities. WEIGHTED AVERAGE EFFECTIVE INTEREST RATE % VARIABLE RATE $’000 FIXED RATE $’000 TOTAL $’000 2021 FINANCIAL ASSETS Cash and cash equivalents Other financial assets held by Benefit Funds Other interest bearing loans Reverse mortgage receivables Total financial assets FINANCIAL LIABILITIES Borrowings Total financial liabilities 0.87% 2.56% 4.82% 8.71% 169,706 30,859 200,565 3,269 - 743 7,432 71,039 39,341 10,701 71,039 40,084 173,718 148,671 322,389 4.56% (529,997) (99,388) (629,385) (529,997) (99,388) (629,385) Net interest bearing financial assets/(liabilities) (356,279) 49,283 (306,996) WEIGHTED AVERAGE EFFECTIVE INTEREST RATE % VARIABLE RATE $’000 FIXED RATE $’000 TOTAL $’000 2021 FINANCIAL ASSETS Cash and cash equivalents Other financial assets held by Benefit Funds Reverse mortgage receivables Total financial assets FINANCIAL LIABILITIES Borrowings Total financial liabilities 0.13% 0.88% 8.71% 247,100 122,219 710 370,029 26,251 3,825 53,509 83,585 273,351 126,044 54,219 453,614 3.54% (397,276) (29,366) (426,642) (397,276) (29,366) (426,642) Net interest bearing financial assets/(liabilities) (27,247) 54,219 26,972 170 | Centuria Capital Group – Annual Report 2022 Centuria Capital Group – Annual Report 2022 | 171 Notes to the financial statements For the year ended 30 June 2022 F Other (ii) Interest rate swap contracts Under interest rate swap contracts, the Group agrees to exchange the difference between fixed and floating rate interest amounts calculated on agreed notional principal amounts. Such contracts enable the Group to mitigate the risk of changing interest rates on the fair value of fixed rate financial assets held and the cash flow exposures on the issued variable rate debt. The following table details the notional principal amounts and remaining expiry of the Group's outstanding interest rate swap contracts as at reporting date. These swaps are at fair value through profit and loss. INTEREST RATE SWAPS 30 June 2022 30 June 2021 NOMINAL AMOUNT $’000 8,447 9,301 ASSETS $’000 - - LIABILITIES $’000 (18,750) (31,205) HEDGE INEFFECTIVENESS RECOGNISED IN PROFIT OR LOSS $’000 115 84 AVERAGE CONTRACTED RATE NOTIONAL PRINCIPAL AMOUNT FAIR VALUE Interest rate swaps are recognised as interest rate swaps at fair value line item in the statement of financial position. The line item in the profit or loss statement that includes hedge effectiveness is within finance costs. PAY FIXED FOR FLOATING CONTRACTS DESIGNATED AS EFFECTIVE IN FAIR VALUE HEDGE 2022 % 2021 % 2022 $'000 2021 $'000 2022 $'000 2021 $'000 50 years swaps contracts 7.48% 7.48% 8,447 9,301 (18,750) (31,205) 8,447 9,301 (18,750) (31,205) (iii) Interest rate sensitivity The sensitivity analysis below has been determined based on the parent and the Group's exposure to interest rates at the balance date and the stipulated change taking place at the beginning of the financial year and held constant throughout the reporting period, in the case of financial assets and financial liabilities that have variable interest rates. A 100 basis points (1.00%) increase or decrease represents management's assessment of the reasonably possible change in interest rate. At reporting date, if variable interest rates had been 100 (2021: 25) basis points higher or lower and all other variables were held constant, the impact to the Group would have been as follows: F3 REMUNERATION OF AUDITORS Amounts received or due and receivable by KPMG: Audit and review of the financial report Other services including AFSL and compliance plan audits Non-audit services 2022 $ 858,353 115,401 426,800 1,400,554 2021 $ 711,048 141,611 162,500 1,015,159 EFFECT ON PROFIT AFTER TAX F4 EVENTS SUBSEQUENT TO THE REPORTING DATE CONSOLIDATED Interest rate risk Interest rate risk CHANGE IN VARIABLE 2022 CHANGE IN VARIABLE 2021 +1.00% -1.00% +0.25% -0.25% 2021 $’000 (4,004) 4,132 2020 $’000 (496) 500 The methods and assumptions used to prepare the sensitivity analysis have changed in the year. The sensitivity analysis takes into account interest-earning assets and interest-bearing liabilities attributable to the securityholders only, and does not take into account the bank bill facility margin changes. (iv) Fair value hedges The Group held the following instruments to hedge exposures to changes in interest rates. Interest rate swaps - as at 30 June 2021 Net exposure ($'000) Average fixed interest rate Interest rate swaps - as at 30 June 2020 Net exposure ($'000) Average fixed interest rate MATURITY 1-6 MONTHS 6-12 MONTHS MORE THAN ONE YEAR - - - - - - - - 8,447 7.48% 9,301 7.48% The amounts relating to items designated as hedging instruments and hedge ineffectiveness were as follows. From 30 June 2022 to 9 August 2022, the fair value gain on investments in listed funds is $16,470,000, with the share price in CIP moving from $2.81 to $2.99 and the share price in COF moving from $1.70 to $1.68. In July 2022, $9,468,967 of units were redeemed in Centuria 111 St Georges Terrace Fund bringing the Group's ownership to 30%. As a result, the Group has deconsolidated this fund post year end. In July 2022, a new Centuria Agriculture Fund (CAF) was established and the put/call option in relation to the remaining 50% interest in the Warragul asset was exercised with external investor equity from new investors entering into CAF. Subsequently, the Group's existing 50% ownership reduced to 38%. As a result, the Group has deconsolidated this fund post year end. Other than the above, there has not arisen in the interval between 30 June 2022 and the date hereof any item, transaction or event of a material and unusual nature likely, in the opinion of the directors of the Company, to affect significantly the operations of the Group, the results of those operations, or the state of affairs of the Group, in future financial periods. 172 | Centuria Capital Group – Annual Report 2022 Centuria Capital Group – Annual Report 2022 | 173 Directors’ declaration For the year ended 30 June 2022 In the opinion of the Directors’ of Centuria Capital Limited: (a) the consolidated financial statements and notes set out on pages 102 to 173 and the Remuneration Report set out on pages 70 to 98 in the Directors' Report, are in accordance with the Corporations Act 2001 including: (i) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements, and (ii) giving a true and fair view of the Group’s financial position as at 30 June 2021 and of its performance for the financial year ended on that date, and (b) there are reasonable grounds to believe that the Group will be able to pay its debts as and when they become due and payable. Note A1 confirms that the consolidated financial statements also comply with International Financial Reporting Standards as issued by the International Accounting Standards Board. Independent Auditor’s Report To the stapled security holders of Centuria Capital Group Report on the audit of the Financial Report The Directors have been given the declarations by the Joint Chief Executive Officers and Chief Financial Officer required by section 295A of the Corporations Act 2001. Opinion This declaration is made in accordance with a resolution of Directors. Mr Garry S. Charny Mr Peter J. Done DIRECTOR DIRECTOR Sydney 10 August 2022 We have audited the Financial Report of Centuria Capital Limited (the Company) as the deemed parent presenting the stapled security arrangement of the Centuria Capital Group (the Stapled Group Financial Report). In our opinion, the accompanying Financial Report is in accordance with the Corporations Act 2001, including: • giving a true and fair view of the Stapled Group’s financial position as at 30 June 2022 and of its financial performance for the year ended on that date; and • complying with Australian Accounting Standards and the Corporations Regulations 2001. The Financial Report of the Stapled Group comprises: • Consolidated statement of financial position as at 30 June 2022; • Consolidated statement of comprehensive income, Consolidated statement of changes in equity, and Consolidated statement of cash flows for the year then ended; • Notes including a summary of significant accounting policies; (collectively referred to as Financial Statements); and • Directors’ Declaration. Centuria Capital Group (the Stapled Group) consists of the Company and the entities it controlled at the year-end or from time to time during the financial year and Centuria Capital Fund and the entities it controlled at the year-end or from time to time during the financial year. Basis for opinion We conducted our audit in accordance with Australian Auditing Standards. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the Financial Report section of our report. We are independent of the Stapled Group and the Company in accordance with the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the Code) that are relevant to our audit of the Financial Report in Australia. We have fulfilled our other ethical responsibilities in accordance with these requirements. KPMG, an Australian partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under Professional Standards Legislation. 112 174 | Centuria Capital Group – Annual Report 2022 Centuria Capital Group – Annual Report 2022 | 175 Key Audit Matters The Key Audit Matters we identified are: • Recognition of performance fee income; • Recoverable amount of goodwill and indefinite life intangible assets; and • Valuation of investments in related party unit trusts and investment properties. Key Audit Matters are those matters that, in our professional judgement, were of most significance in our audit of the Financial Report of the current year. These matters were addressed in the context of our audit of the Financial Report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Recognition of performance fee income ($32.9m) Refer to Note B2 to the Financial Report • • Forecast fund end date - The fund end date impacts the level of returns that can be achieved over the course of the funds life and may change depending on management’s view of when maximum value can be obtained for unitholders of the fund. • • Constraint - This is impacted by the Stapled Group’s expectations of how much of the performance fee is highly probable of being received in accordance with the requirements of the accounting standards. Recalculated the Stapled Group’s performance fee recognised against hurdles in the underlying performance fee agreements with managed property funds; and Challenged the constraints applied in determining the amount of performance fees that are highly probable of bring received by the Stapled Group, based on the Stapled Group’s estimate of current and forecast property fund performance. We used our knowledge of the Stapled Group, their past performance, business, and our industry experience. Recoverable amount of goodwill and indefinite life intangible assets ($788.2m) The key audit matter How the matter was addressed in our audit Refer to Note C6 to the Financial Report The Stapled Group, in its capacity as a property fund manager, earns performance fees based on agreements with some of its managed property funds. Performance fees are triggered when underlying funds internal rate of return exceeds the agreed hurdle rate. Recognition of performance fee income is considered a key audit matter due to the: • Quantum of performance fee income, representing 11% of the Stapled Group’s total revenue; and • Significant judgement exercised by us in assessing the amount of performance fees recognised by the Stapled Group. The key assumptions impacting the amount of performance fees, are subject to estimation uncertainty, bias and inconsistent application. This increases the risk of inaccurate forecasts or a wider range of possible outcomes for us to consider. Increased time and effort is spent by the audit team in assessing these key assumptions. The amount of performance fees recognised are impacted by key assumptions including: Fair value of underlying investment • properties held by the funds - The valuation of investment properties contains assumptions with estimation uncertainty such as expected capitalisation rates and market rental yields. This leads to additional audit effort due to the differing assumptions based on asset classes, geographies and characteristics of individual investment properties. In performing our procedures, we: The key audit matter How the matter was addressed in our audit • • • • • Reviewed the Stapled Group’s agreements with managed property funds to understand the key terms related to performance fees, including hurdle rates; Evaluated the Stapled Group’s accounting policies regarding the recognition of performance fee income against accounting standard requirements. This included assessing the Stapled Group’s policies for constraining performance fee income and valuing investment properties against accounting standard requirements; Assessed the scope, competence and objectivity of the fund’s external experts and their internal valuers to fair value the underlying investment properties held by the funds; Challenged specific property fair value assumptions such as capitalisation rates and market rental yields by comparing to market analysis published by industry experts, recent market transactions, inquiries with the Stapled Group, historical performance of the underlying investment properties and using our industry experience; Assessed the Stapled Group’s determination of the forecast fund end date based on the underlying managed property fund agreements, the fair value of underlying investment properties, the Stapled Group’s fund strategy and history of extending fund term end dates; 113 A key audit matter is the Group’s annual testing of goodwill and indefinite life intangible assets for impairment, given the size of the balance (being 29.3% of total assets) and sensitivity of the forward-looking assumptions to changes. We focused on the significant forward-looking assumptions the Stapled Group applied in their value in use model, including: • Forecast operating cash flows, growth rates and terminal growth rates (taking into consideration future growth in funds under management and transactional fees). The Group’s model is sensitive to changes in these assumptions, which may reduce available headroom. This drives additional audit effort specific to their feasibility and consistency of application to the Group’s strategy. • Discount rate - this is complicated in nature and varies according to the conditions and environment the specific Cash Generating Unit (CGU) is subject to from time to time. The Group’s modelling is highly sensitive to changes in the discount rate. We involved valuation specialists to supplement our senior audit team members in assessing this key audit matter. In performing our procedures, we: • • • Considered the appropriateness of the value in use method applied by the Stapled Group, to perform the annual impairment test of goodwill and indefinite life intangible assets, against the requirements of the accounting standards; Compared the cash flows contained in the value in use model to the Board approved forecast; Challenged the Stapled Group’s significant forecast cash flows and growth assumptions by: - - - Comparing baseline cash flows to actual historic cash flows and comparing key events to the Board approved plan and strategy; Comparing terminal growth rates to published studies of industry trends and expectations, and considering differences to the Stapled Group’s assumptions. We used our knowledge of the Stapled Group, their past performance, business and customers, and our industry experience; and Checking the consistency of the forecast growth rates to the Stapled Group’s stated plan and strategy and our experience regarding the feasibility of these in the economic environment in which they operate. 114 176 | Centuria Capital Group – Annual Report 2022 Centuria Capital Group – Annual Report 2022 | 177 • Worked with our valuation specialists to independently develop a discount rate range considered comparable using publicly available market data for comparable entities, adjusted by risk factors specific to the Stapled Group and the industry it operates in; • • Considered the sensitivity of the model by varying key assumptions, such as forecast growth rates, terminal growth rates and discount rates, within a reasonably possible range. We did this to identify those assumptions at higher risk of bias or inconsistency in application and to focus on our further procedures; and Assessed the disclosures in the financial report against the requirements of the accounting standards. Valuation of investments in related party unit trusts ($608.7m) and investment properties ($337.5m) Refer to Note C3 and C4 to the Financial Report The key audit matter How the matter was addressed in our audit The Stapled Group’s investments consist primarily of investments in related party unit trusts and investment property. We considered these investments to be a key audit matter as they are significant in value (being 35.2% of total assets), the importance of the performance of these investments in driving the Stapled Group’s investment income and investment property valuations contain assumptions with estimation uncertainty for us to consider. We focused on the important features of the Stapled Group’s investment property valuation process. In order of application, these included key assumptions and methodologies adopted in the external valuation, being capitalisation rates, discount rates, and future rental income inputs to the capitalisation rate and discounted cash flow methodologies. For investments in related party unit trusts, our procedures included: • Assessing the appropriateness of the accounting policies applied by the Stapled Group, including those relevant to the fair value hierarchy of investments against the requirements of the accounting standards; and • Checking the valuation of investments as at 30 June 2022, as recorded in the general ledger, to external data (listed and quoted unit prices, and underlying net asset values). For investment property, our procedures included: • Assessing the Stapled Group’s methodologies used in the valuation of investment property for consistency with accounting standards and Stapled Group policies; • Assessing the scope, competence and objectivity of external valuation experts engaged by the Stapled Group; and • Challenging the Stapled Group’s investment property key valuation assumptions, being capitalisation rates, discount rates, and future rental income inputs, by comparing against market analysis published by industry experts, recent market transactions, and the property specific attributes including location, asset condition, land area and actual passing income. Assessing the disclosures in the financial report, against accounting standard requirements. Other Information Other Information is financial and non-financial information in the Stapled Group’s (Centuria Capital Group) annual reporting which is provided in addition to the Financial Report and the Auditor's Report. The Directors are responsible for the Other Information. The Other Information we obtained prior to the date of this Auditor’s Report was the Directors’ Report, Remuneration Report, the Stock Exchange Appendix 4E and Additional stock exchange information. The Centuria Capital Group Annual Report is expected to be made available to us after the date of the Auditor's Report. Our opinion on the Financial Report does not cover the Other Information and, accordingly, we do not and will not express an audit opinion or any form of assurance conclusion thereon, with the exception of the Remuneration Report and our related assurance opinion. In connection with our audit of the Financial Report, our responsibility is to read the Other Information. In doing so, we consider whether the Other Information is materially inconsistent with the Financial Report or our knowledge obtained in the audit, or otherwise appears to be materially misstated. We are required to report if we conclude that there is a material misstatement of this Other Information, and based on the work we have performed on the Other Information that we obtained prior to the date of this Auditor’s Report we have nothing to report. Responsibilities of the Directors for the Financial Report The Directors are responsible for: • preparing the Financial Report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 • • implementing necessary internal control to enable the preparation of a Financial Report that gives a true and fair view and is free from material misstatement, whether due to fraud or error assessing the Stapled Group and Company’s ability to continue as a going concern and whether the use of the going concern basis of accounting is appropriate. This includes disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless they either intend to liquidate the Stapled Group and Company or to cease operations, or have no realistic alternative but to do so. 178 | Centuria Capital Group – Annual Report 2022 Centuria Capital Group – Annual Report 2022 | 179 115 116 Auditor’s responsibilities for the audit of the Financial Report Our objective is: • • to obtain reasonable assurance about whether the Financial Report as a whole is free from material misstatement, whether due to fraud or error; and to issue an Auditor’s Report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error. They are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the Financial Report. A further description of our responsibilities for the audit of the Financial Report is located at the Auditing and Assurance Standards Board website at: https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf. This description forms part of our Auditor’s Report. Report on the Remuneration Report Opinion Directors’ responsibilities In our opinion, the Remuneration Report of Centuria Capital Limited for the year ended 30 June 2022, complies with Section 300A of the Corporations Act 2001. The Directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with Section 300A of the Corporations Act 2001. Our responsibilities We have audited the Remuneration Report included in 70 to 98 pages 15 to 47 of the Directors’ report for the year ended 30 June 2022. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. KPMG Paul Thomas Partner Sydney 10 August 2022 117 180 | Centuria Capital Group – Annual Report 2022 Corporate Governance Statement The corporate governance statement for CNI was last updated on 28 September 2022 and is available on the Centuria website at https://centuria.com.au/centuria-capital/corporate/sustainability/governance/. LISTED: 29 PENELOPE CRESECENT, ARNDELL PARK NSW Centuria Capital Group – Annual Report 2022 | 181 Additional ASX information Corporate directory The securityholder information set out below was applicable as at 24 July 2022. DISTRIBUTION OF SECURITIES Analysis of numbers of securityholders by size of holding: HOLDING 1 - 1000 1,001 - 5,000 5,001 - 10,000 10,001 - 100,000 100,001 and over NUMBER OF HOLDERS NUMBER OF SECURITIES 1,965 4,805 951,692 12,212,862 1,451 10,430,487 1,685 45,396,924 210 723,913,125 10,116 792,905,090 There were 256 holders of less than a marketable parcel of securities holding 8,149 securities. TOP 20 SECURITYHOLDERS The names of the twenty largest holders of securities are listed below: HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED J P MORGAN NOMINEES AUSTRALIA PTY LIMITED CITICORP NOMINEES PTY LIMITED NATIONAL NOMINEES LIMITED PENTEK HOLDINGS PTY LTD BNP PARIBAS NOMINEES PTY LTD CIRCLESTAR PTY LTD NUMBER HELD 169,786,689 165,855,748 71,329,099 32,904,921 32,862,905 28,669,789 28,377,402 MR PETER KARL CHRISTOPHER HULJICH & MR JOHN HAMISH BONSHAW IRVING 16,566,486 TOPSFIELD PTY LTD MR C P HULJICH & MRS C M F HULJICH & P K C HULJICH GH 2016 PTY LTD BNP PARIBAS NOMS (NZ) LTD HWM (NZ) HOLDINGS LIMITED CITICORP NOMINEES PTY LIMITED PARITAI PTY LIMITED BNP PARIBAS NOMINEES PTY LTD MR JASON TIMOTHY KILGOUR & MR VAUGHAN CHARLES ATKIN MARK EDWARD FRANCIS & ROCKRIDGE TRUSTEE COMPANY LIMITED RESOLUTE FUNDS MANAGEMENT HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED > 15,826,336 14,890,525 9,701,022 8,144,132 6,948,589 6,122,204 6,005,311 5,753,112 4,563,792 4,557,969 4,344,364 3,672,008 PERCENTAGE OF ISSUED SECURITIES 21.41 20.92 9.00 4.20 4.15 3.62 3.58 2.09 2.00 1.88 1.22 1.03 0.88 0.77 0.76 0.73 0.58 0.58 0.55 0.46 SUBSTANTIAL HOLDERS Substantial holders in the Group are set out below as at 24 July 2022. The Vanguard Group, Inc. BlackRock Inc. VOTING RIGHTS All ordinary securities carry one vote per security without restriction. 636,882,403 80.41 NUMBER HELD PERCENTAGE 64,340,821 43,584,931 8.17% 5.51% 107,925,752 13.68% Contact us Unitholder Inquiries Centuria Investor Services GPO Box 3993 Sydney NSW 2000 Mail to Centuria Capital Limited Level 41, Chifley Tower, 2 Chifley Square SYDNEY NSW 2000 T. 1800 182 257 Centuria Head Office Level 41, Chifley Tower, 2 Chifley Square SYDNEY NSW 2000 T. (02) 8923 8923 F. (02) 9460 2960 contactus@centuria.com.au Group Chief Risk Officer and Company Secretary Anna Kovarik Level 41, Chifley Tower, 2 Chifley Square SYDNEY NSW 2000 T. (02) 8923 8923 F. (02) 9460 2960 Disclaimer This annual report is provided for general information purposes only. It is not a prospectus, product disclosure statement, pathfinder document or any other disclosure document for the purposes of the Corporations Act and has not been, and is not required to be, lodged with the Australian Securities and Investments Commission. It should not be relied upon by the recipient in considering the merits of CNI or the acquisition of securities in CNI. Nothing in this annual report constitutes investment, legal, tax, accounting or other advice and it is not to be relied upon in substitution for the recipient’s own exercise of independent judgment with regard to the operations, financial condition and prospects of CNI. The information contained in this annual report does not constitute financial product advice. Before making an investment decision, the recipient should consider its own financial situation, objectives and needs, and conduct its own independent investigation and assessment of the contents of this annual report, including obtaining investment, legal, tax, accounting and such other advice as it considers necessary or appropriate. This annual report has been prepared without taking account of any person’s individual investment objectives, financial situation or particular needs. It is not an invitation or offer to buy or sell, or a solicitation to invest in or refrain from investing in, securities in CNI or any other investment product. The information in this annual report has been obtained from and based on sources believed by CNI to be reliable. To the maximum extent permitted by law, CNI and the members of the Centuria Capital Group make no representation or warranty, express or implied, as to the accuracy, completeness, timeliness or reliability of the contents of this annual report. To the maximum extent permitted by law, CNI does not accept any liability (including, without limitation, any liability arising from fault or negligence) for any loss whatsoever arising from the use of this annual report or its contents or otherwise arising in connection with it. This annual report may contain forward-looking statements, guidance, forecasts, estimates, prospects, projections or statements in relation to future matters (Forward Statements). Forward Statements can generally be identified by the use of forward looking words such as “anticipate”, “estimates”, “will”, “should”, “could”, “may”, “expects”, “plans”, “forecast”, “target” or similar expressions. Forward Statements including indications, guidance or outlook on future revenues, distributions or financial position and performance or return or growth in underlying investments are provided as a general guide only and should not be relied upon as an indication or guarantee of future performance. No independent third party has reviewed the reasonableness of any such statements or assumptions. Neither CNI nor any member of Centuria Capital Group represents or warrants that such Forward Statements will be achieved or will prove to be correct or gives any warranty, express or implied, as to the accuracy, completeness, likelihood of achievement or reasonableness of any Forward Statement contained in this annual report. Except as required by law or regulation, CNI assumes no obligation to release updates or revisions to Forward Statements to reflect any changes. The reader should note that this annual report may also contain pro-forma financial information. Distributable earnings is a financial measure which is not prescribed by Australian Accounting Standards (AAS) and represents the profit under AAS adjusted for specific non-cash and significant items. The Directors of CFML consider that distributable earnings reflect the core earnings of the Centuria Capital Fund. All dollar values are in Australian dollars ($ or A$) unless stated otherwise. 182 | Centuria Capital Group – Annual Report 2022 Centuria Capital Group – Annual Report 2022 | 183 Centuria Capital Group – Annual Report 2022 | 183 184 | Centuria Capital Group – Annual Report 2022 centuria.com.au 

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