ClearView Wealth Limited
>
annual report
2010
ABN 83 106 248 248
ClearView Wealth Limited and its subsidiaries
ClearView Wealth Limited
ClearView Wealth Limited
Managing Director’s Report
continued
continued
Content
1 ClearView Corporate Identity
2 Chairman’s Report
4 Managing Director’s Report
9 Corporate Governance
15 Directors’ Report
33
35 Financial Report
109 Directors’ Declaration
110
Independent Audit Report
112 Shareholders’ Information
Auditor’s Independence Declaration
Directory
Financial Calender
Annual General Meeting
28 October 2010, at 10am
Half Year End
31 December 2010
Half year result announced
February 2011
Year End
30 June 2011
Annual Report
August 2011
Dates are subject to change.
2
ClearView Wealth Limited
2010 Annual Report
“ClearView’s strategy in the growing life and wealth
management industry, strong capital position
(no debt) and supportive shareholder base ensure
the Company is well placed for the future.”
Chairman’s Report – 2010 Annual Report
Following the successful completion of the acquisition, our company name was
changed to ClearView Wealth Limited (formerly MMC Contrarian Limited) and we
believe this better reflects the new direction of the Group.
To reflect the transformational changes that have occurred, a new corporate identity
for ClearView has been created and the logo is shown above. The pattern of the
logo is about the interweaving, collaboration and support between ClearView, our
partners and our customers. The colours reflect the warmth, vibrancy, reliability and
approachability of what our partners and customers have come to expect from
ClearView.
The identity also heralds the expansion of the ClearView range of products and
services as we will now offer in addition to advice, superannuation, retirement
solutions, investments and life insurance to better meet the needs of our customers.
The new identity will be officially launched on 9 September, 2010.
1
ClearView Wealth Limited and its subsidiaries
Chairman’s Report
Dear Shareholder
In March 2010 ClearView Wealth Limited (ClearView),
formerly known as MMC Contrarian Limited, entered
into agreements to acquire the life insurance business
of MBF Life and the wealth management business of
ClearView Retirement Solutions from Bupa Australia
(the Acquisition), and we successfully completed this
transaction on 9 June 2010.
Transformational Year
This transformational acquisition is a major step for
your company, and has positioned ClearView as a
highly focused life insurance and wealth
management business with excellent distribution
capabilities.
I would like to thank our shareholders for supporting
our capital raising efforts which enabled us to fund
the cash purchase price for the Acquisition. We
successfully raised $135 million in new shares
through an institutional placement of approximately
$62 million (the Placement), and a 1 for 1 non-
renounceable entitlement offer for approximately $73
million (the Rights Issue). Together with ClearView’s
existing cash reserves, the Company was able to
fully fund the $204 million required for the Acquisition
and its associated costs. The new shares were
issued and commenced trading on the Australian
Securities Exchange (ASX) on 5 May 2010.
ClearView operates its newly acquired life operations
through ClearView Life Assurance Limited (formerly
MBF Life Limited). This is a successful niche life
insurance business focused on the attractive
segment of term life products, and has
manufactured and distributed life protection products
since 1976. ClearView Retirement Solutions has
been providing wealth management services and
manufacturing and distributing managed investment
and superannuation products since 1990, and has
historically been focused on the retiree market and
people transitioning into retirement.
These businesses are consistent with ClearView’s
stated strategy and provide ClearView with attractive
entry points into the Australian life insurance and
wealth management industry. ClearView Retirement
Solutions further strengthens ComCorp’s existing
wealth management offering. In addition, we have
secured an exclusive alliance agreement to market
ClearView’s services to Bupa Australia’s private
health insurance member base for a ten year period,
positioning ClearView on a potentially significant
growth path. This platform will allow us to build a
highly competitive business in the Australian life
insurance and wealth management industry.
Financial Summary
The results for the year ended 30 June 2010 reflect a
net profit after tax of $8.0 million compared to a loss
after tax of $4.7 million in the prior year. The results
include a one off profit on acquisition of $15.3 million
due to the accounting for business combinations
under the accounting standards, partially offset by
one off costs associated with the Acquisition,
restructure and integration of the newly acquired
businesses. The results for the year are therefore
not reflective of the future performance of ClearView.
Further detailed analysis on the results for the year
have been provided in the Managing Director’s
Report.
2
ClearView Wealth Limited and its subsidiaries
Chairman’s Report [continued]
The Year Ahead
After a transformational year, ClearView is well
positioned to leverage its alliance partnerships and
distribution capability through the Bupa and credit
union referral networks. ClearView operates in a
high growth industry that provides a valuable
financial protection product in the market that
remains significantly underinsured. The Board looks
forward to integrating the business operations of the
Acquisition and seeking to maximise the
opportunities that exist in the growing life insurance
and wealth management industry.
The regulatory landscape is not without its
challenges for participants in the financial services
industry. ClearView continues to work hard in the
assessment of such challenges and is responding
by positioning the Group’s business activities to
participate in the provision of a broad array of
financial services. ClearView’s strategy in the
growing life and wealth management industry,
strong capital position (no debt) and supportive
shareholder base ensure the Company is well
placed for the future. ClearView looks forward to
executing its growth strategies and thereby growing
shareholder value.
Ray Kellerman
Chairman
Sydney, 25 August 2010
Cornerstone Shareholder
As a result of the Placement, ClearView’s largest
shareholder, Guinness Peat Group (GPG) reduced
its shareholding from 68% to approximately 48%.
GPG continues to support the Board’s initiatives
and subscribed in full for its entitlements under the
Rights Issue. GPG continues to have two
representatives on the ClearView Board and has
historically had a very successful track record in the
life and wealth management industry. We continue
to value their strategic insights and support.
Growth Segments
ClearView operates in the life insurance and wealth
management industry where confidence in future
growth prospects and in market dynamics remains
strong. These dynamics are driven through an
underinsurance gap and government mandated
superannuation. We remain positive that market
growth will continue at healthy levels consistent
with long term industry growth forecasts of above
9% per annum. Further details on these segments
are provided in the Managing Director’s Report.
People Behind Our Success
ClearView has been fortunate to attract a top level
management team.
We welcomed Simon Swanson as the new
Managing Director in March 2010. Simon brings a
considerable depth of industry knowledge and
experience. My thanks go to Simon for his efforts
during the transformation and to his Management
Team and all their staff for the support and effort
during a year of significant change.
I would also like to extend a sincere thank you to my
Board colleagues. David Goodsall and John Murphy
joined the Board on completion of the Acquisition
and we look forward to their expertise and input to
assist in achieving the desired outcomes for the
business. We are in the process of seeking an
additional Independent Director in order to further
strengthen our Board and to comply with regulatory
guidelines. Further information will be provided to
shareholders in due course.
3
ClearView Wealth Limited and its subsidiaries
Managing Director’s Report
Dear Shareholder
Last year was a particularly volatile one for the global
economy as it recovered from the global financial crisis.
For ClearView the year has been transformational.
Strategic Developments
In our 2009 Annual Report we clearly articulated our
wish to further develop our advice business and the
possibility of taking advantage of any opportunities
that may arise in other segments of the financial
services industry. The acquisition of MBF Life and
ClearView Retirement Solutions from Bupa is clearly
consistent with our strategy and now puts us in an
excellent position to take advantage of the growth in
the life insurance and wealth management industry.
Today, ClearView participates in advice through both
ComCorp advisers and ClearView advisers, in life
insurance through ClearView Life and in the broader
wealth management industry through ClearView
Investments and ClearView Superannuation. All
segments have strong long term growth
characteristics driven by complexity in financial
markets and the general population searching for
quality informed advice and protection for their
financial future.
Financial Results
The results for the year ended 30 June 2010 reflect
a net profit after tax of $8.0 million compared to a
loss after tax of $4.7 million in the prior year. The
results include a one off profit on acquisition of
$15.3 million due to the accounting for business
combinations under the accounting standards,
partially offset by one off costs associated with the
Acquisition, restructure and integration of the newly
acquired businesses. The one off costs include
transaction costs of $4.8 million, redundancy costs
of $2.3 million, and restructure and integration costs
of $2.1 million. The results for the year are therefore
not reflective of the future performance of ClearView.
The total costs associated with the Acquisition
including the costs of the capital raising are $9.4
million. The capital raising costs of $4.6 million were
charged directly to equity.
The Direct Investments segment has been reflected
as a discontinued operation to reflect the impact of
the loss of interest income through utilisation of the
$69.4 million of internal cash resources to fund the
Acquisition and the financial impacts of the legacy
listed share portfolio which has now been
substantially realised. We expect the profit from
discontinued operations of $2.1 million to be
replaced by the profitability of the acquired
businesses in future periods.
The balance sheet as at 30 June 2010 shows net
assets of $242.3 million. This reflects a net asset
value per share of 59.1 cents on a fully diluted basis.
Industry Growth
The Australian Life Insurance Industry has grown
strongly over the last decade and, according to Rice
Warner (Risk Projections Report, 2009), the
Australian Life insurance market annual premium
income is expected to reach $27 billion over the 15
years to June 2023 compared with $7 billion as at
June 2008. This represents an annual compound
growth rate of 9.4% over the period.
There are a number of factors driving growth in the
industry:
— Ageing population: Most life insurance products
in Australia are sold on a yearly renewable basis
and premiums increase with age and
consequently risk. Industry growth in premiums
will partly be driven by Australia’s ageing
population looking to secure their dependants’
future.
4
Australian life insurance market annual premium projected growth
($ billion)
30
25
20
15
10
5
0
26.9
24.0
22.5
20.6
18.8
17.2
15.7
14.4
13.2
12.0
7.7
8.4
7.0
10.1
11.0
9.2
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
Source: Rice Warner February 2009.
5
ClearView Wealth Limited and its subsidiaries
Managing Director’s Report
continued
Australian total assets in financial services market projected growth
($ billion)
DEXX&R (Market
Projections Report,
2009) projects
total assets to
grow at an average
compound annual
growth rate of
8.9%, reaching
$3,341 billion by
June 2019.
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
0
. Total wholesale market
. Total retail market
1,351
1,254
1,990
1,813
1,164
1,081
1,652
1,504
1,003
931
1,248
1,370
865
803
1,036
1,137
745
943
642
783
692
859
June
2009
June
2010
June
2011
June
2012
June
2013
June
2014
June
2015
June
2016
June
2017
June
2018
June
2019
Source: DEXX&R November 2009. *Note: excluding consolidation of wholesale investment in retail products.
The wealth management industry in Australia has
grown substantially over the last ten years, with total
assets in the Australian financial services market in
excess of $1,500 billion.
Australian total retirement income assets projected growth
($ billion)
275
247
222
199
179
161
114
129
116
104
94
300
250
200
150
100
50
0
June
2009
June
2010
June
2011
June
2012
June
2013
June
2014
June
2015
June
2016
June
2017
June
2018
June
2019
Source: DEXX&R November 2009.
6
ClearView Wealth Limited and its subsidiaries
Managing Director’s Report [continued]
— Increased focus on wealth protection:
Insurers have experienced increased life insurance
sales as consumers become more aware of their
financial risks.
— Australian underinsurance: Australia has low
life insurance levels compared to other developed
economies, represented by its comparatively low
life insurance penetration ratios (total in force
premiums as a percentage of GDP). Swiss Re
Sigma figures indicate that as at 2007, Australia
had a life insurance penetration ratio of 3.8% as
compared to the United Kingdom with a
penetration ratio of 15.3% and a global average
penetration ratio of 4.6%.
— Superannuation reforms: Reform in the
Australian superannuation industry has also driven
growth in the industry. Recent government
initiatives that have underpinned growth include
mandated minimum insurance requirements for
all superannuation funds and the removal of the
reasonable benefit limit which has allowed
premiums to be paid from pre-tax income.
The wealth management industry is more fragmented
than the life insurance industry, particularly within
the unitised wholesale funds segment. The top
ten participants in the retail managed funds sector
hold approximately 80.8% of total market share by
Funds Under Management (FUM); and the top ten
participants in the unitised wholesale funds segment
only hold approximately 60.8% of total market share
by FUM.
Not only are the industries that ClearView operates in
growing, but they also meet profitability expectations
from a shareholder perspective. While the business
has its own particular risks (e.g. claims rate variation)
and its reported annual profit can be impacted
by other short term factors (e.g. assets that are
marked to market value), the underlying business,
especially the life insurance business, is based on
long-term, ongoing customer relationships and
contracts. If managed properly, these provide for
multi-year recurrent premiums and fee income to the
business that underpins its longer term resilience and
sustainability.
7
ClearView Wealth Limited and its subsidiaries
Managing Director’s Report
continued
continued
In wealth management we will not participate in
capital intensive products which require an excessive
amount of capital for the amount of risk undertaken
relative to other opportunities.
Prospective Regulatory Changes
During the term of the Labor Government there have
been a number of Reports completed concerning
both advice and the life insurance and wealth
management industry. While the Reports are far
reaching in their potential impact, ClearView believes
it is well positioned should the recommendations of
the Reports be implemented following the recent
federal election.
APRA has also announced plans to revisit the capital
standards for life insurers in 2012. It is not yet clear
what impact this will have and we are participating
fully in the industry consultation process.
Strategic Alliances
As part of the Acquisition, we have entered into a
ten year alliance to sell life insurance and wealth
management products to Bupa’s large customer
base of approximately 2.9 million members. This is
an excellent opportunity for ClearView as it allows us
access to one of the most attractive client segments
in the markets in which we operate.
As outlined in last year’s Report, we have a number
of alliances with credit unions which provide us with
access to over 800,000 credit union members. Our
offering to these members has been enhanced by
our ability to manufacture our own life insurance and
wealth management products but, just as
importantly, the ability to offer Bupa’s health
insurance products to our credit union member
base.
Our strategic alliances are a major point of
differentiation for ClearView which, when combined
with a management team that has unrivalled
experience in managing strategic alliances, means
we are well positioned for growth.
In the last three months the management team has
been further strengthened from what was already a
strong base and we now believe we have the
capacity to build a strategically successful and very
profitable life insurance and wealth management
business.
I would particularly like to record my appreciation of
our previous Managing Director, Alex Hutchison for
the way he managed the business and for his
support in the transition. I look forward to working
with Alex, in his role as Chief Executive Officer of
Wealth Management and Advice, in building a larger
- and more profitable - broadly based financial
services group.
Summary
The 2010 financial year has been a transformational
year for our business and we enter the 2011 year
with a business that is profitable, has a strong capital
position (no debt) and is poised for growth.
Simon Swanson
Managing Director
Sydney, 25 August 2010
8
Corporate
Governance
ClearView Wealth Limited > 2010 Annual Report
9
ClearView Wealth Limited and its subsidiaries
Corporate Governance
This report reflects ClearView Wealth Limited
(ClearView or the Company) (formerly MMC
Contrarian Limited) and its controlled entities’ (the
Group) Corporate Governance policies and practices
as at the date of this report.
Further details about ClearView’s corporate
governance policies and procedures are available on
the ClearView website (www.clearview.com.au).
These documents are updated and reviewed
regularly recognising that corporate governance is an
evolving process.
Principle 1 - Lay solid foundations for
management and oversight
The Board of Directors of ClearView is responsible for
the oversight of the Group’s corporate governance.
The Board guides and monitors the business and
affairs of the Group on behalf of shareholders, by
whom they are elected and to whom they are
accountable. In practice this is achieved through
formal delegation to the Managing Director for day to
day management of the Group and to its Board
Committees - Audit, Risk and Compliance
Committee, Investment Committee and the
Nomination and Remuneration Committee - for
detailed consideration of matters and making
recommendations.
The Board responsibilities are outlined in the Board
Charter. Broadly, the primary functions of the Board
include:
— Determining strategic objectives and approving
the annual operating plans, financial targets and
capital expenditure plans;
— Overseeing the Group including its controls and
accounting systems;
— Ensuring that the Group has implemented
adequate systems of internal control and risk
management policies and procedures;
— Monitoring systems of risk management, internal
controls, legal compliance and codes of conduct
within the Group;
— reviewing the effectiveness, composition and
charter of the Board Committees;
— approving all changes to the corporate structure,
including tax and financial, which are of strategic
importance to the Group;
— approval of the half yearly and annual financial
reports;
— declaring the interim and final dividends;
— reviewing the investment performance of the
Group;
— approving all transactions relating to major
business and company acquisitions, mergers and
divestments;
— ensuring effective external disclosure policies so
that the market is fully informed on all matters that
may influence the share price or a reasonable
person would expect to have a material effect on
the price or value of the shares; and
— approving the appointment and remuneration of
the Managing Director and senior executives.
The process for evaluating the performance of senior
executives has been disclosed in the remuneration
report. This process has been amended as a result
of the evolution in business strategy and the
significant changes in the nature of the business.
The new performance structures were not fully
operational in 2010.
The Board is committed to the highest standards of
ethical behaviour and corporate governance.
Principle 2 - Structure the board to add
value
To ensure the Board is well equipped to discharge
its responsibilities, it has established guidelines for
the nomination and selection of Directors and for the
operation of the Board.
As of the date of this report, the Board is comprised
of seven directors as follows:
— 3 Independent Non Executive Directors- Mr
Kellerman, Mr Wade and Mr Goodsall are
considered Independent Directors, as defined by
the ASX Corporate Governance Council (CGC);
— 3 Non Executive Directors– Mr Jefferies, Mr Eisen
and Mr Murphy who are not considered
independent as the they are associated with
substantial shareholders in the Company; and
— 1 Executive Director- Mr Swanson is the
Managing Director .
10
ClearView Wealth Limited and its subsidiaries
Corporate Governance [continued]
Mr Kellerman is the Chairman and the roles of Chair
and Managing Director are not exercised by the
same individual.
The size and composition of the Board has been
reviewed in light of the significant change in affairs
post the acquisition of ClearView Group Holdings Pty
Limited and its subsidiaries (together Acquired
Entities). This process includes a review taking into
account the needs of the business and to ensure
that there is an appropriate blend of commercial
skills and experience to govern and add value to the
ClearView businesses. In appointing Directors, the
Board considers:
— The current size and composition of the Board;
— The strategic needs of ClearView and its
subsidiaries;
— Regulatory requirements; and
— The skills, knowledge and independence of the
potential director.
The Board does not currently have a majority of
Independent Directors at the date of this report.
Prior to the acquisition of the Acquired Entities, the
Board has historically considered its composition
and that the participation of two Independent
Directors was appropriate for the Group. However,
on completion of the acquisition of the Acquired
Entities two further appointments were made and
the Board is in the process of seeking an additional
Independent Director to ensure that there is a
majority of Independent Directors. The Company
intends to apply for registration as a life Non
Operating Holding Company regulated by APRA.
ClearView is in the process of implementing a Group
Fit and Proper policy post the acquisition of the
Acquired Entities. ClearView Life Nominees Pty
Limited (ClearView Nominees) and ClearView Life
Assurance Limited (ClearView Life) both have
appropriate Fit and Proper policies in place at the
date of this report.
ClearView has put in place measures to help ensure
that individuals who are appointed as Directors or to
senior positions within the Group have the
appropriate fitness and propriety to effectively
discharge their responsibilities and duties.
On appointment, new directors receive a Letter of
Appointment which sets out their duties, the terms
and conditions of their appointment and their
remuneration. The Company also enters into a Deed
of Indemnity with each Director and the Company
Secretary at the time of appointment.
Details regarding the experience and tenure of the
Directors are included in the Directors’ Report.
The Company has established a Nomination and
Remuneration Committee. As at the date of this
report the Nomination and Remuneration Committee
consisted of the following Directors:
R Kellerman (Chairman)
P Wade
A Eisen
The functions of the Nomination and Remuneration
Committee include:
— reviewing the composition of the Board and
making recommendations to the Board;
— evaluating the performance of the Board;
— assessing the necessary and desirable
competencies of Board members;
— reviewing Board succession plans; and
— reviewing the remuneration framework for
directors and executives and making
recommendations to the Board.
ClearView Life, in accordance with relevant
prudential requirements, has established appropriate
remuneration arrangements.
The Board meets formally at least 8 times a year.
It also meets whenever it is necessary between
these scheduled meetings to carry out its
responsibilities.
The Board performance review will include
discussions with each Director specifically
addressing performance criteria, the effectiveness of
the Board and other related issues.
11
ClearView Wealth Limited and its subsidiaries
Corporate Governance
continued
continued
The Nomination and Remuneration Committee has
the authority to at any time conduct or direct any
investigation it considers necessary to fulfil its
responsibilities. The Nomination and Remuneration
Committee has the authority to, at any time retain, at
the expense of ClearView, such legal, accounting or
other advisers, consultants or experts, as the
Committee considers appropriate to assist it in
meeting its responsibilities.
All Directors have the right to seek independent legal
and financial advice, at the expense of the Company,
concerning any aspect of the Company. However,
prior approval of the Chairman is required, which is
not to be withheld unreasonably.
Principle 3: Companies should actively
promote ethical and responsible
decision making
ClearView has established a Code of Conduct
that is available on the Company’s website
(www.clearview.com.au). ClearView believes
that its Directors and employees should conduct
themselves in an ethical manner at all times.
Ethical conduct relates to standards of behaviour
characterised not only by complying with the law
but also by acting honestly and fairly. Employees
and Directors are encouraged to make the
Company aware of any unlawful or unethical
behaviour.
All ClearView Directors and employees are
expected to comply with the Code of Conduct.
The ClearView Employee Trading Policy has been
established to govern the trading in shares and
securities by its Directors, officers and employees.
This policy is designed to raise awareness
and minimise any potential for breach of the
prohibitions on insider trading, either in substance
or appearance. All Directors, officers and
employees are required to conduct their personal
investment activity in a manner that is lawful and
avoids conflicts of interest between the individual’s
personal interests and those of the Group and its
clients.
All Directors, officers and employees are prohibited
from trading in the Company’s securities at any
time if they are in possession of non-public price
sensitive information regarding the Group and
its securities or any other listed company and its
securities which are included on an excluded list.
Directors, officers and employees may only trade in
Group securities if all of the following requirements
are met:
(a) The black out period does not apply;
(b) They are not in possession of price sensitive
information;
(c) They have followed the notice procedure set out
in the policy; and
(d) The relevant approving officer has given consent
to trade.
There may be 2 types of black out periods imposed,
either 6 weeks before the release of the half year
and full year results announcement to the ASX or a
Board-imposed black out period.
(i) All Directors, officers and employees must give
written notification, in accordance with the table set
out below:
Employee
Designated Approving Officer
Chairman
MD & CFO/Company Secretary
MD
Chairman
All other Directors MD & CFO/Company Secretary
All other Employees MD & CFO/Company Secretary
Principle 4 - Safeguard integrity in financial
reporting
It is the Board’s ultimate responsibility to ensure that
effective internal controls exist within the Group.
To assist the Board in this regard it has established
an Audit, Risk and Compliance Committee. As at
the date of this report, the Committee consisted of
the following non-executive Directors:
P Wade (Chairman)
R Kellerman
M Jefferies
J Murphy
D Goodsall
12
ClearView Wealth Limited and its subsidiaries
Corporate Governance [continued]
The Chairman of this Committee is an independent
director and the Committee has a majority of
independent directors. The Chairman of this
Committee is not chair of the Board. Audit, Risk and
Compliance Committee meetings are held at least
three times a year in accordance with the Board
approved charter. Details regarding the experience
and tenure of the members and the attendance at
Audit, Risk and Compliance Committee meetings are
included in the Directors’ report.
The functions of the Audit, Risk and Compliance
Committee include:
— considering the half yearly and annual financial
reports before they are approved by the Board;
— ensuring the effectiveness of management
information systems and systems of internal
control;
— reviewing the appointment of the internal and
external auditors, the terms of their engagement,
the scope and quality of the audit and the
auditor’s independence;
— ensuring that the Group has implemented
adequate risk management policies and
procedures;
— establishing and maintaining the framework of
internal control; and
— ensuring compliance with statutory, Australian
Securities Exchange and other reporting
requirements.
The Audit, Risk and Compliance Committee invite
the auditors to attend committee meetings.
The auditors can meet privately with the Audit, Risk
and Compliance Committee. The partner managing
the audit was appointed in 2009 and will be rotated
after a maximum of five years. It is the policy of the
external auditors to provide an annual declaration of
their independence to the Audit, Risk and
Compliance Committee.
Principle 5 - Make timely and balanced
disclosures
ClearView is committed to providing timely and
relevant information about its business operations to
all shareholders and potential investors to enable
them to make informed decisions about their
investments.
ClearView strives to ensure that all disclosures are;
— made in a timely manner;
— are factual;
— do not omit material information; and
— are expressed in a clear and objective manner to
allow an investor to assess the impact of the
information when making investment decisions.
All material information relating to ClearView is
accessible on the ClearView website (www.
clearview.com.au) as soon as it is disclosed to the
ASX.
ClearView’s approach to communicating with
shareholders and the market is set out in its
Continuous Disclosure Obligation Policy which was
updated in May 2010 and is available on the
ClearView website.
Principle 6 - Respect the rights of
shareholders
The Board aims to ensure that shareholders, on
whose behalf they act, are informed of all information
necessary to assess the performance of the Group.
Information is communicated to the shareholders
through:
— compliance with Australian Securities Exchange
reporting and disclosure requirements;
— the Company’s website, on which all Australian
Securities Exchange announcements are posted;
— the annual and interim reports; and
— the Annual General Meeting (AGM) and any other
shareholder meetings called to obtain approval for
Board action as appropriate.
The Company Secretary is responsible for lodging
communications with the Australian Securities
Exchange.
ClearView encourages all shareholders to attend,
participate and vote at its AGM. The Notice of AGM
is accompanied by explanatory notes on the items of
business to assist shareholders to understand the
business that will be considered at the meeting.
The Board also requests that the Company’s
external auditor attends the meeting and is available
to answer shareholder questions about the conduct
of the audit and the preparation and content of the
audit report.
13
ClearView Wealth Limited and its subsidiaries
Corporate Governance
continued
continued
Principle 7 - Recognise and manage risk
The Board is responsible for ensuring the risk
management systems are effective.
As a result of the acquisition of the Acquired Entities
and the significant change in the nature of the
business, the Group is engaged in a process of
reviewing and assessing the Risk Management
Frameworks, for all Group companies to ensure
applicability and consistency across the Group and
ongoing compliance with all regulatory requirements.
The Board has delegated authority to the Audit, Risk
and Compliance Committee of the Company.
The Board has received and considered the annual
certification from the Managing Director and the
Chief Financial Officer that states that the risk
management system is operating effectively in all
material aspects in relation to financial reporting
risks.
The Company has established an Investment
Committee. As at the date of this report, the
Investment Committee consists of the following
Directors:
A Eisen (Chairman)
R Kellerman
P Wade
The objectives of the Investment Committee include:
— the development of investment policies and
procedures;
— the development within the investment policies
of an asset allocation for the investment portfolios
based on the needs of the organisation and its
risk tolerance;
— the review of proposals for investments (and
investment managers/firms), unless such duties
are assigned to other committees by the Board,
so as to determine the type of investments (and
the investment managers/firm) that may best suit
the Company;
— the monitoring of all areas of the investment
program, including the performance of the
investment portfolio (and the investment
managers/firm), and recommend any changes
that may need to be made from time to time.
The Investment Committee did not meet regularly
post the sale of MMC Asset Management Limited in
July 2009, and the sell down of the listed entity’s
legacy investment portfolio.
As a result of the change in nature of the business
and the acquisition of the Acquired Entities, the
Investment Committee will meet at least 4 times per
annum.
Principle 8 - Remunerate fairly and
responsibly
The Company has established a Nomination and
Remuneration Committee. The composition,
functions and responsibilities of the Committee have
been included under Principle 2.
Details regarding the experience and tenure of the
members and attendance at Nomination and
Remuneration Committee meetings are included in
the Directors’ report.
14
Directors’
Report
ClearView Wealth Limited > 2010 Annual Report
15
ClearView Wealth Limited and its subsidiaries
Directors’ Report
for the year ended 30 June 2010
for the year ended 30 June 2010
The Directors of ClearView Wealth Limited (ClearView
or the Company) (formerly MMC Contrarian Limited)
submit herewith the annual financial report of the
consolidated entity (referred to hereafter as the
Group) for the financial year ended 30 June 2010.
In order to comply with the provisions of the
Corporations Act 2001, the Directors report as
follows:
Former Directors
Alexander Hutchison
Peter Constable
Directors Details
Current Directors
Ray Kellerman
Simon Swanson
Anthony Eisen
Michael Jefferies
Peter Wade
John Murphy
David Goodsall
The biographies for both current and former
Directors of ClearView are detailed below.
Current Directors
Ray Kellerman B.EC, LLB, MBA, ACIA
Non-executive Chairman
Ray is an independent director as defined by the
ASX Corporate Councils Principles. Ray has a legal
background and was head of compliance services at
the Corporate Trust division of Perpetual Trustees
Australia where he spent 10 years before
establishing his own compliance consulting and
advisory business in 2001. Ray currently acts as a
director and audit, risk and compliance committee
member for a number of major fund managers and
financial institutions including Goodman Funds
Management Australia, Certitude Global Investments,
Macquarie Bank, Deutsche Asset Management,
Aberdeen Asset Management and Alliance Bernstein
Investment Management Australia. He is an owner
and Director of Quentin Ayers Pty Limited, an
independent asset consultant firm in the alternative
assets sector.
Ray is the Chairman of the Nomination and
Remuneration Committee and a member of the
Audit, Risk and Compliance Committee and
Investment Committee. He was appointed to these
committees on 18 April 2007. He was appointed
Chairman of the Nomination and Remuneration
Committee on 26 November 2008.
Ray was appointed a Director on 10 April 2007 and
Chairman on 4 November 2008. Age 46.
Simon Swanson B.EC, B.Bus, ANZIIF (Fellow)
CIP, CPA
Managing Director
Simon is one of Australia’s most skilled and
experienced insurance executives having worked for
30 years across life, general and health insurance as
well as funds management. He has successfully led
the largest life insurer (CommInsure, Sovereign and
Colonial) in three countries and has spent half of his
career in the Asia Pacific region. Apart from running
large insurance companies, he has also successfully
started a broad range of businesses covering life
insurance, health insurance and funds management.
Simon was appointed as Managing Director on 26
March 2010. Age 52.
Anthony Eisen B.COM, CA
Non-executive Director
Anthony has over 16 years experience in finance and
investment. He is currently an executive of GPG.
Prior to joining GPG, Anthony was an investment
banker in Australia and the United States. Anthony
commenced his professional career as an
accountant with Price Waterhouse. Anthony
currently represents the interests of GPG on the
boards of Capral Limited, eServGlobal Limited and
Tower Limited. Anthony previously represented the
interests of GPG on the board of Tower Australia
Group Limited.
Anthony is a member of the Nomination and
Remuneration Committee and Chairman of the
Investment Committee. He was appointed to the
Investment Committee on 28 November 2007 and to
the Nomination and Remuneration Committee on 26
November 2008. He was appointed Chairman of
the Investment Committee on 26 November 2008.
Anthony was appointed a Director on 12 November
2007. Age 38.
Michael Jefferies B.COM, CA
Non-executive Director
Mike has been an executive of GPG for the past 18
years. He currently represents the interests of GPG
as Chairman of Touch Holdings Limited and a Non-
executive Director of Tower Limited, Capral Limited,
Metals X Limited and an alternate Director of
eServGlobal Limited. He is also a director of
Ozgrowth Limited. Mike was previously a director of
Tower Australia Group Limited and Australian Wealth
Management Limited.
16
ClearView Wealth Limited and its subsidiaries
Directors’ Report [continued]
Mike is a member of the Audit, Risk and Compliance
Committee. He was appointed to this Committee on
26 November 2008.
David is a member of the Audit, Risk and
Compliance Committee. He was appointed to the
committee on 8 July 2010.
Mike was appointed a Director on 4 November
2008. Age 54
David was appointed a Director on 9 June 2010.
Age 55.
Peter Wade B.EC, ASIA, MSDIA
Non-executive Director
Peter is an independent director as defined by the
ASX Corporate Councils Principles. For the past 30
years, Peter has worked in the Australian and
international equity markets. Peter worked for
Goldman Sachs JB Were (GSJBW) (previously
known as JB Were) in Melbourne, London, New
York and Sydney. At the time of his departure from
GSJBW, Peter was the Joint Head of the Equities
Products Group and was on the Board and
Management Committee. In 2005, Peter joined JP
Morgan where he became Managing Director, Head
of Australian Equities and a member of the
management committee before retiring from full time
employment. He is currently working with the
Commonwealth Bank of Australia. Peter has served
on boards and committees of a number of security
industry related organisations.
Peter is Chairman of the Audit, Risk and Compliance
Committee and a member of the Nomination and
Remuneration Committee and the Investment
Committee. He was appointed to these committees
on 28 November 2007. He was appointed
Chairman of the Audit, Risk and Compliance
Committee on 26 November 2008.
Peter was appointed a Director on 31 October 2007.
Age 53.
David Goodsall BA, FIAA, ASA, CERA, MAICD
Non-executive Director
David is an independent director as defined by the
ASX Corporate Councils Principles. David is a
Fellow of the Institute of Actuaries of Australia and a
Chartered Enterprise Risk Analyst. David has
in-depth knowledge and experience in life insurance
and funds management having held a number
Appointed Actuary positions and led the Actuarial
practice of Ernst & Young where he was also a
partner until he retired from the firm in 2009.
In 2009, David established a new consulting firm,
Synge & Noble, where he is a director. He is also
the Vice President of the Institute of Actuaries of
Australia.
John Murphy B.COM, M.COM, CA, FCPA
Non-executive Director
John is the founder and Managing Director of
Investec Wentworth Private Equity. John has over
30 years experience in private equity, turnarounds,
corporate finance and accounting. Prior to entering
private equity in 1998, John spent over 25 years,
including 14 as a senior partner, in the corporate
finance and recovery division of a global accounting
firm. John is a director of Investec Bank (Australia)
Limited and Chairman of the bank’s Investment
Committee.
John sits on the Boards of many of Investec
Wentworth Private Equity’s portfolio companies and
has extensive public company board experience.
John is a member of the Audit, Risk and Compliance
Committee. He was appointed to this Committee on
8 July 2010.
John was appointed to the board on 9 June 2010.
Age 57.
Former Directors
Alexander Hutchison LLB, MSDIA, AACI
Alex is a solicitor with over 17 years experience in
the financial services sector. Prior to joining
ClearView Wealth Limited, Alex was the Chief
Executive Officer of Bridges Financial Services. Alex
began his financial services career at the Australian
Securities Commission and later the State Bank of
NSW, Colonial Limited and Credit Union Services
Corporation Australian Limited.
Alex resigned as a Director on 26 March 2010.
Age 45.
Peter Constable B. EC
Peter has over 17 years experience in funds
management, investment and finance. He is the
Managing Partner of Ryder Capital (Ryder). Prior to
establishing Ryder, Peter was an executive of MMC
Asset Management where he was Chief Investment
Officer until 1 July 2008. Peter began his career in
London working for The United Bank of Kuwait and
later Royal Sun Alliance.
Peter resigned as a Director on 19 August 2009.
Age 40.
17
ClearView Wealth Limited and its subsidiaries
Directors’ Report
for the year ended 30 June 2010
for the year ended 30 June 2010
continued
continued
The directors named in the previous page, held
office during the whole of the financial year and since
the end of the financial year except for:
Simon Swanson - appointed 26 March 2010
David Goodsall – appointed 9 June 2010
John Murphy – appointed 9 June 2010
Alexander Hutchison- resigned 26 March 2010
Peter Constable - resigned 19 August 2009
Company Secretary
Athol Chiert, B Com, B Acc, CA was appointed
Company Secretary on 4 November 2008. Athol
has a life insurance and private equity background.
Athol was previously the CFO of PrefSure Holdings
Limited and PrefSure Life Limited (formerly Lumley
Life Limited). Athol also served as part of the Global
Capital Group both in Australia and South Africa and
has over 13 years experience in the finance industry.
Athol commenced his professional career as an
accountant with Arthur Andersen.
Appointed Actuary of ClearView Life Assurance
Limited
Greg Martin (BA, FIAA, FFin, MAICD) was appointed
as the Appointed Actuary of ClearView Life
Assurance Limited (formerly MBF Life Limited)
(ClearView Life) on 5 July 2010.
Greg is a Fellow of the Institute of Actuaries of
Australia and a partner of KPMG. He has over 25
years’ experience specialising in life insurance and
funds management and has held a number of other
Appointed Actuary roles during his career. Greg was
the 2008 President of the Institute of Actuaries
Australia (IAA), a previous member of the Life
Insurance Actuarial Standards Board and a member
of multiple committees of the IAA. Greg brings a
wealth of experience to ClearView in the areas of risk
and capital management, financial management and
reporting, and insurance product pricing.
Directorships of other Listed Companies
Directorships of other listed companies held by Directors in the 3 years preceding the end of the financial year
are as follows:
Name
Company
Period of Directorship
Anthony Eisen
Michael Jefferies
John Murphy
Tower Limited
Capral Limited (2)
eServeGlobal Limited
Tower Australia Group Limited (1)
Tower Limited
Metals X Limited
Ozgrowth Limited
Capral Limited
eServeGlobal Limited (1)
Tower Australia Group Limited
Australian Wealth Management Limited
12 December 2006 - Ongoing
29 August 2008 - Ongoing
20 March 2009 - Ongoing
19 December 2006 - 8 August 2008
19 December 2006 - Ongoing
14 June 2004 - Ongoing
31 October 2007 - Ongoing
6 November 2008 - Ongoing
13 March 2009 - Ongoing
8 August 2006 - 8 August 2008
29 October 2004 - 24 April 2007
Ariadne Australia Limited
Staging Connections Group Limited
Gale Pacific Limited
Vocus Communications Limited
Australian Pharmaceutical Industries Limited
Speciality Fashion Group Limited
6 December 2006 - Ongoing
7 March 2003 - Ongoing
24 August 2007 - Ongoing
7 March 2003 - Ongoing
7 August 2004 - 8 August 2007
20 February 2005 - Ongoing
(1) Alternate director.
(2) Alternate director from 19 October 2006 to 29 August 2008.
18
ClearView Wealth Limited and its subsidiaries
Directors’ Report [continued]
Principal Activities
The consolidated entity’s principal activities in the
course of the financial year were that of a vertically
integrated financial services company, with a focus
on the life insurance and wealth management
industry.
On 26 March 2010, the Group announced that it
had signed agreements to acquire ClearView Group
Holdings Pty Limited (CVGH) (formerly MBF
Management Pty Limited), Bupa Australia’s life
insurance and wealth management business (the
Acquisition).
Review of operations and activities
Strategy Update
The Acquisition is consistent with ClearView’s stated
strategy and provides ClearView an attractive entry
point into the wealth management and life insurance
industry. The Acquisition further strengthens
ComCorp’s existing wealth management offering.
On Completion of the Acquisition, ClearView signed
an exclusive Distribution Alliance Agreement (DAA)
with Bupa Australia. The exclusive arrangement
granted under the DAA provides for ClearView Life
and ClearView Financial Management Limited
(CFML) to market life insurance and wealth
management products to Bupa Australia’s member
base. The DAA positions ClearView on a potentially
significant growth path.
The Acquisition transforms ClearView into a highly
focused life insurance and wealth management
business with excellent distribution capabilities. This
base will allow ClearView potentially to build a highly
competitive business in the Australian life insurance
and wealth management industry.
On Completion of the Acquisition, the Company
changed its name to ClearView Wealth Limited to
reflect its new focus and applied to the ASX to have
its ASX code changed to CVW. The shares
commenced trading under the ASX code CVW on
17 June 2010.
Discontinued Operation
Following the application of the internal cash
resources to fund the Acquisition and the realisation
of the legacy share portfolio in the current financial
year, the Direct Investment segment as previously
reported as a segment of the consolidated entity is
considered a discontinued operation – see note 9 for
further details.
Capital Raising
Following the announcement of the Acquisition in
March 2010, ClearView announced a $135 million
capital raising by way of a conditional placement of
$62 million, subject to shareholder approval
(Conditional Placement), and a 1 for 1 entitlement
offer for $73 million (Entitlement Offer). The Capital
Raising was fully underwritten by Commonwealth
Securities Limited (Commsec). ClearView
successfully raised $135 million from its Conditional
Placement and Entitlement Offer pursuant to the
Prospectus dated 26 March 2010. The Conditional
Placement was approved by shareholders at the
EGM held on 30 April 2010 and the new shares from
the Conditional Placement and Entitlement Offer
were issued on 5 May 2010 and commenced
trading on the ASX on that date.
GPG Takeover Bid
On 8 September 2009, Ecurb Australia Pty Limited
(GPG), a wholly owned subsidiary of Guinness Peat
Group plc (Guinness Peat), launched an on-market
takeover offer for all ClearView shares, at a bid price
of $0.48 per ClearView share. The offer price was
subsequently increased to $0.50 per ClearView
share on 16 October 2009. The offer closed at the
end of trading on 6 November 2009. On 9
November 2009, GPG announced that its holding
had increased to 68%.
On completion of the $135 million capital raising,
GPG reduced its holding in ClearView to 47.8%.
GPG participated in the Entitlement Offer but was
diluted through the issue of shares in the Conditional
Placement.
ClearView Group Holdings
The purchase consideration for the Acquisition was
$195 million excluding transaction and capital raising
costs (Acquisition Costs) of $9.4 million and
calculation of the adjustment amount. The purchase
consideration and Acquisition Costs were settled in
cash, funded by internal cash resources of $69.4
million and the balance was funded by a Conditional
Placement of $62 million and a 1 for 1 Entitlement
Offer for $73 million. The Acquisition was approved
by shareholders at the Extraordinary General
Meeting (EGM) held on 30 April 2010 and completed
on 9 June 2010.
19
ClearView Wealth Limited and its subsidiaries
Directors’ Report
for the year ended 30 June 2010
for the year ended 30 June 2010
continued
continued
As at the date of this report the process to
determine the adjustment amount in accordance
with the share sale agreement has yet to be
finalised. The estimated adjustment amount is $5.8
million and is represented by the increase in the net
assets acquired between 31 December 2009 and
the completion date.
Other Acquisitions
On 6 November 2009 the Group acquired the
business of MBT Financial Services Pty Limited
(MBT). MBT was previously a franchised planner of
ComCorp.
Subsequent to year end, on 13 July 2010, the Group
acquired the business of a franchised planner,
Suntrip Financial Services Pty Limited for $0.8
million.
The acquisition of these businesses is consistent
with ClearView’s stated strategy of developing its
presence in the wealth management industry and
represents bolt on acquisitions.
The acquired ClearView wealth management
business is in the process of being integrated with the
Group’s existing ComCorp business. However, the
businesses will operate under two separate brands
with ComCorp focused on the credit union and
related segment of the market while the ClearView
brand will focus on the Bupa health member base.
The Group is an established provider of wealth
management services to member based
organisations, particularly credit unions, representing
approximately 800,000 members Australia wide and
through the Bupa network representing
approximately 2.9 million health members.
As at 30 June 2010, the Group has funds under
management and advice of approximately $3.1
billion.
The Group’s systems provide a scalable opportunity
to build an advice focused wealth management
business model around key referral partners. The
Group is now well positioned for growth and is
seeking to expand its geographic presence.
Employee Share Plan
In accordance with the provisions of the ClearView Wealth Employee Share Plan (ESP), during the year
16,150,000 shares were issued in accordance with the ESP rules with the following grant dates:
Series
Series 7 (Senior Management)
Series 8 (CEO Wealth Management and Advice)
Series 9 (Chairman)
Series 10 (Managing Director)
Series 11 (Managing Director)
Series 12 (Managing Director)
Series 13 (Senior Management)
Date
29 September 2009
08 October 2009
28 October 2009
25 June 2010
25 June 2010
25 June 2010
25 June 2010
No of shares
3,500,000
2,000,000
250,000
2,000,000
4,000,000
4,000,000
400,000
16,150,000
The vesting conditions in the ESP stipulate that all
shares issued in terms of the Plan will automatically
vest with a change of control of ClearView. Effective
23 October 2009, GPG obtained control of
ClearView which resulted in accelerating the vesting
of the shares in the ESP at that time, including
Series 7 and 8 which had been issued prior to the
change of control. The shares issued in Series
9,10,11,12 and 13 were issued subsequent to the
change of control and thus the normal vesting
conditions of the ESP still apply.
The Company issued 2,000,000 shares to Alexander
Hutchison, a former director, in accordance with
shareholder approval obtained at the 2009 AGM.
The Company had issued 250,000 shares to RK
Sydney Pty Limited, an associate of the Chairman,
Mr Raymond Kellerman, in accordance with the Plan
Rules. In accordance with shareholder approval
obtained at the 2009 AGM, it was resolved that the
250,000 shares issued to the associate of Mr
Kellerman be bought back in accordance with the
provisions of the ESP Rules, and thereafter, the
same number of shares be issued to the associate
of Mr Kellerman in order for the terms to be
amended to those consistently applied for Series 7
and Series 8. Furthermore, a further 50,000 shares
issued to a former employee were cancelled in terms
of the ESP Rules and therefore 300,000 shares were
cancelled during the year.
20
ClearView Wealth Limited and its subsidiaries
Directors’ Report [continued]
As outlined in the prospectus and approved at the EGM held on the 30 April 2010, 10 million shares were
issued to Simon Swanson (Series 10,11 and 12) in accordance with his employment contract.
Operating Results for the year ended 30 June 2010 from continuing operations
The Directors report a consolidated profit from continuing operations for the year as follows:
Net profit / (loss) for the year
Net profit / (loss) recognised directly in equity
Total recognised income and expense for the year
5,921
–
5,921
(2,269)
–
(2,269)
361%
–
361%
30 June 2010
$’000
30 June 2009
$’000
Change from
previous year %
The net profit for the year includes premium income,
financial planning income, profits and losses from the
sale of listed securities, management fee income
from the external funds, trust distributions, dividends
and interest income. The results from the
Acquisition have been included from the completion
date, being 9 June 2010.
Included in the net profit for the year from continuing
operations is:
(a) transaction costs of $4.8 million relating to the
Acquisition (nil tax effect).
(b) a profit on acquisition of $15.3 million (nil tax
effect) as a result of the purchase of CVGH in
accordance with AASB 3; and
(c) one off expenses of $4.4 million ($3.1 million net
of tax) which relate to the termination, transition
and restructuring costs associated with the
Acquisition.
Capital raising costs of $4.6 million ($3.2 million net
of tax) were debited against the share capital
account in terms of the accounting standards.
Investment Portfolio
ClearView retains one listed investment on its
Balance Sheet from its legacy listed share portfolio.
It is the intention of the Board to dispose of this
investment in the near term.
Dividends
The Directors have declared that there will be no
final dividend (2009: nil). No interim dividend was
paid during the year (2009: nil).
Following completion of the capital raising and the
Acquisition, ClearView has no debt and a strong
capital position.
As outlined in the prospectus, subject to available
profits and financial position, the Board’s expectation
is to pay an annual dividend representing 20% to
40% of underlying profit, subject to regulatory
requirements and available capital. ClearView’s
ability to pay a dividend will depend upon factors
including its profitability, the availability of franking
credits, and its funding requirements which in turn
may be affected by trading, general economic
conditions and regulation. Accordingly, no
assurance can be given as to the timing, extent and
payment of dividends.
The Board will continue to review its dividend policy
in light of the significant change in the state of affairs
of the Company.
Capital Management
ClearView Life holds surplus capital in excess of its
regulatory requirements of $39 million at 30 June
2010. CFML holds surplus capital in excess of its
regulatory requirements of $1.5 million at 30 June
2010.
The parent entity has $10.7 million of available cash
resources at 30 June 2010 before settlement of the
estimated adjustment amount.
ClearView dividend policy and factors which will
impact on the ability to pay a dividend have been
outlined above.
The Dividend Reinvestment Plan has been
suspended since 26 February 2008 and the Board
will continue to evaluate the Group’s capital position
on a regular basis.
21
ClearView Wealth Limited and its subsidiaries
Directors’ Report
for the year ended 30 June 2010
for the year ended 30 June 2010
continued
continued
Events subsequent to balance date
The directors are not aware of any matter or
circumstance not otherwise dealt with in this report
or the financial statements that has significantly, or
may significantly, affect the operations of the
consolidated entity, the results of those operations
or the state of the affairs of the consolidated entity in
future financial years.
Significant changes in the state of affairs
ClearView Acquisition
On the 26 March 2010 ClearView signed an
agreement to acquire Bupa Australia’s Life Insurance
and Wealth Management businesses for $195 million
plus an adjustment amount as noted above. The
Acquisition completed on 9 June 2010.
Disposal of MMC Asset Management
As previously outlined, ClearView entered into a
Share Sale and Purchase Agreement with
Valuestream Investment Management Limited (VIML)
on 17 July 2009 to effect the sale and purchase of
100% of the shares in MMC Asset Management.
Prior to Completion, MMC Asset Management
completed a $6.0 million capital reduction to
ClearView by the settlement of cash. ClearView also
entered into a Share Subscription Deed with Huon
Capital Pty Limited (Huon) on 17 July 2009 such that
ClearView owns a passive 10% interest in a new
boutique fund manager. The 10% equity stake was
issued to ClearView on Completion of the sale of
MMC Asset Management to VIML. Completion
occurred on 31 July 2009.
On exit of MMC Asset Management from the tax
consolidated group on 31 July 2009, a realised
capital loss in the amount of $30 million was made.
The tax effect of the capital loss has not been raised
as a deferred tax asset in the reported results as the
Board is of the view that it is not probable that the
Group will utilise the capital losses in the foreseeable
future.
Included in the following table are the effects of the various transactions highlighted above:
MMC Asset Management Limited
ClearView Administration Services Pty Limited
(formerly MMC Service Co Pty Limited)
ComCorp Financial Advice Pty Limited
ClearView Group Holdings Pty Limited
(formerly MBF Management Pty Limited)
ClearView Financial Management Limited
ClearView Life Assurance Limited
(formerly MBF Life Limited)
ClearView Life Nominees Pty Limited
Affiliate Financial Planning Pty Limited
Huon Capital Pty Limited
2010
%
–
100
100
100
100
100
100
100
10
2009
%
100
100
100
–
–
–
–
100
–
Future developments
Disclosure of information regarding likely developments in the operations of the consolidated entity in future
financial years and the expected results of those operations is likely to result in unreasonable prejudice to the
consolidated entity. Accordingly, this information has not been disclosed in this report.
22
ClearView Wealth Limited and its subsidiaries
Directors’ Report [continued]
Meetings of directors
The numbers of meetings of the Company’s Board of Directors and of each Board Committee held during the
year ended 30 June 2010, and the numbers of meetings attended by each Director were as follows:
Board
Audit, Risk
and Compliance
Committee
Investment
Committee
Nomination and
Remuneration
Committee
Eligible to
Eligible to
Eligible to
Eligible to
attend Attended
attend Attended
attend Attended
attend Attended
Ray Kellerman
Anthony Eisen
Simon Swanson
John Murphy
David Goodsall
Peter Wade
Michael Jefferies
Alexander Hutchison
Peter Constable
Total number of meetings
22
15
4
1
1
21
16
17
2
22
19
4
1
1
22
19
18
2
22
3
–
–
–
–
3
3
–
–
3
–
–
–
–
3
3
–
–
3
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2
2
–
–
–
1
–
–
–
2
2
–
–
–
2
–
–
–
2
Director’s shareholdings
The following table sets out each Director’s relevant interest in shares, debentures, and rights or options in
shares or debentures of the Company or a related body corporate as at the date of this report.
Directors
Ray Kellerman
Simon Swanson
Anthony Eisen (1)
Michael Jefferies (1)
Peter Wade
David Goodsall
John Murphy (2)
Fully paid ordinary shares
including Employee Share Plan
Number
Employee Share Plan
Number
451,600
12,000,000
199,328,980
199,328,980
139,682
100,000
39,088,239
250,000
10,000,000
–
–
–
–
–
(1) Shares held by Guinness Peat Group of which Anthony Eisen and Mike Jefferies are executives.
(2) Shares held by Investec Wentworth Private Equity of which John Murphy is a director.
Indemnification of directors and officers
During the period, the Company purchased Directors’ and Officers’ Liability Insurance to provide cover in
respect of claims made against the Directors and Officers in office during the financial period and as at the
date of this report, as far as is allowable by the Corporations Act 2001.
The total amount of insurance premium paid and the nature of the liability are not disclosed due to a
confidentiality clause within the contract.
As at the date of this report, no amounts have been claimed or paid in respect of this indemnity and
insurance, other than the premium referred to above. Directors’ and Officer’s liability insurance contributed a
proportion of the total insurance premium.
The Company has not during or since the financial period, indemnified or agreed to indemnify the auditor of
the Company against a liability incurred as an auditor.
23
ClearView Wealth Limited and its subsidiaries
Directors’ Report
for the year ended 30 June 2010
for the year ended 30 June 2010
continued
continued
Rounding of amounts
The Company is of a kind referred to in ASIC Class
Order 98/0100 dated 10 July 1998 and in
accordance with that Class Order amounts in this
report, and the financial report, have been rounded
off to the nearest thousand dollars.
Auditor independence and non audit
services
The Directors have received an independence
declaration from the auditors, a copy of which is on
page 33.
Non-audit services
Details of amounts paid or payable to the auditor for
non-audit services provided during the year by the
auditor are outlined in note 12 to the financial
statements.
The Directors are satisfied that the provision of non-
audit services, during the year, by the auditor 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 note 12 to 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 auditors for the Company or
lead to joint sharing of economic risks and
rewards.
Remuneration report
The Remuneration Report provides an overview of
the consolidated entity’s remuneration policies and
practices and explains the links between Company
performance and rewards. The report also provides
details about the remuneration of Directors and Key
Management Personnel.
incentives that work to drive heightened levels of
individual and overall Company performance.
Performance is based on achieving outcomes that
meet or exceed the Company’s business objectives,
demonstrate its core values and increase the
Company’s shareholder returns.
The remuneration philosophy provides remuneration
packages that allow for market conditions and
recognise the qualities and value that an individual
brings to their role. By adopting a robust approach
to remuneration, the Company aims to attract and
retain top talent.
The primary objective is to ensure that rewards paid
for performance are competitive and appropriate for
the results that are delivered. In accordance with
this objective, the Company has structured
remuneration packages to provide an appropriate
mix of fixed and performance based variable pay
components.
The remuneration strategy and structure for
employees was amended as a result of the transition
of the Company to an operating entity through the
acquisition of ComCorp in the June 2009 financial
year.
Components of Key Management Personnel
Total Remuneration
Total remuneration is made up of 3 components:
— Fixed Remuneration;
— Short Term Incentive (STI); and
— Long Term Incentive (LTI)
The Fixed Remuneration is based on each
employee’s experience, capability and responsibility
and not to specific performance conditions. The
Fixed Remuneration is benchmarked against market
data provided by external consultants when
considered necessary. The Company seeks to
position its Fixed Remuneration component
competitively, with the market median used as a
guide. An external consultant has been used to
provide benchmarking of Fixed Remuneration for
Key Management Personnel for the June 2011
financial year.
Principles of Remuneration
The remuneration strategy seeks to align interests of
shareholders and Key Management Personnel of the
Group and the Company. The principles underlying
the proposed remuneration framework are based on
clearly structured and transparent rewards and
STI is set based on achieving agreed performance
targets and measures. Each Key Management
Personnel is set company and individual
performance targets and objectives. The
performance measures reflect the primary business
drivers and measures.
24
ClearView Wealth Limited and its subsidiaries
Directors’ Report [continued]
Performance targets are set at a business and
individual level as follows:
— Business level - the performance measures are
based on the underlying profit performance of the
Company; and
— Individual level - the performance measures are
tailored to each individual and their respective role
in the Company.
The STI is based on a range calculated as a
percentage of Fixed Remuneration.
The Managing Director is responsible for assessing
the performance of Key Management Personnel and
for recommending the total STI to be paid. The
Managing Director may also recommend STI
payments over and above target bonus amounts for
exceptional performance. The Managing Director’s
recommendations are presented to the Nomination
and Remuneration Committee for consideration and
recommendations are made to the Board for
approval. It is only when Board approval has been
obtained that STI bonuses are approved and payable.
The above mentioned STI plan was not formally
implemented during the June 2010 financial year
(including setting the individual level key performance
indicators) given the focus of management on the
investment opportunities culminating in the
Acquisition. Therefore, for the 2010 financial year
the STI bonuses for Key Management Personnel
were based on the recommendation of the
Managing Director and Board discretion for
achieving performance targets as set out by the
Board. An external consultant was appointed to
benchmark bonuses for the year in light of the
performance and restructuring of the business during
the course of the year. These discretionary bonuses
were based on the benchmarks provided by an
external consultant and approved by the Board.
These have been separately disclosed in the relevant
section below.
The Company entered into an Employment
Agreement with its new Managing Director, Mr Simon
Swanson with effect from 26 March 2010 and he
joined the Board in that capacity.
Mr Swanson’s base salary is $600,000 per annum
(inclusive of superannuation) as Managing Director,
with annual reviews. In addition, there is the
possibility of a short term incentive of up to $400,000
per annum based on defined performance criteria to
be designed by ClearView in consultation with Mr
Swanson. These key performance indicators will be
agreed concurrently with the roll out of the individual
performance targets for Key Management Personnel
by the end of the second quarter of the new financial
year.
ClearView has an ownership-based compensation
scheme for directors, executives and senior
employees of the Group. The objective of the LTI is
to assist in the recruitment, rewarding, retention and
motivation of employees of the Company and its
associated bodies corporate. The ESP is designed
to encourage a focus on the long term results of the
Company and forms part of the LTI plan for
employees of the Company.
In accordance with the provisions of the revised ESP
Rules, as approved by shareholders at the general
meeting held on 7 October 2009, directors,
executives and senior employees may be issued
parcels of ordinary shares at an issue price as
defined under the plan, which will generally be at or
around the market price of ClearView Shares at the
time of issue.
Limited recourse loan
The Company may provide financial assistance to an
employee for the purposes of subscribing for Shares
under the ESP. The financial assistance will be a
limited recourse loan equal to the purchase value of
the Shares, repayable within 5 years. The financial
assistance will become immediately repayable in the
event of “disqualifying circumstances” including
failure to meet performance or vesting conditions, or
upon cessation of the employee’s employment in
circumstances defined in the ESP Rules. The
employee will only be entitled to repay the loan and
obtain the benefit of the shares if the applicable
vesting conditions and performance conditions are
met.
For shares issued, it is a term of the loan that
interest accrues at the Reserve Bank of Australia
official cash rate (RBA Rate) plus a margin of 0.25%
(reset each year in December and June). This is
intended to act as an in-built performance hurdle.
For this reason, additional performance hurdles are
not imposed. The interest rate was revised and
approved by shareholders at the EGM on 30 April
2010. Prior to this approval interest was charged on
the loans at 8% per annum (as approved at the
2009 AGM).
25
ClearView Wealth Limited and its subsidiaries
Directors’ Report
for the year ended 30 June 2010
for the year ended 30 June 2010
continued
continued
The Board considers that a market based interest
rate is more appropriate for the new circumstances
of the Company, given the significant change in
nature of the Company going forward.
Any after tax equivalent of dividends paid on the Plan
Shares will be applied to repayment of any
outstanding loan.
The ESP provides for Shares to be bought back by
the Company in full satisfaction of outstanding loans
(including accrued interest) in circumstances where
an employee does not wish to, or is not entitled to,
repay the loan and obtain unencumbered title to the
Shares.
Restrictions and holding lock
The Shares granted under the ESP are subject to a
holding lock restricting the holder from dealing with
the Shares without the consent of the Board until the
earlier of:
— the 5th anniversary of the issue date;
— the date the employee ceases employment; or
— termination of the ESP.
An executive may make a Disposal Request to the
Board that their Shares be sold on their behalf, and
that the excess sale proceeds (if any) over the
amount of the loan be paid to them. However, an
executive can only make a Disposal Request for their
Shares when the performance and vesting
conditions are satisfied for those Shares, and
approval of the Disposal Request is always subject
to the approval of the Board.
Change in Control provisions
The ESP Rules include an accelerated vesting
provision on a change in control. Unless the terms
of a particular grant provide otherwise, all
performance conditions and vesting conditions
in relation to particular ESP Shares will be deemed
to have been satisfied if:
— a person who did not control ClearView at the
date of issue of the Shares gains control of the
Company (but only if the person is not itself
Controlled by another person who Controlled the
Company at the date of issue); or
— other circumstances occur which the Board
determines in its absolute discretion are
analogous to a Control transaction and justify
removal of performance conditions and/or vesting
conditions.
“Control” is defined as where a person and its
related bodies corporate (as defined in the
Corporations Act) together hold more than 50% of
the ClearView Shares then on issue.
Restrictions on Offer
Shares may not be offered under the ESP to an
employee if that employee would hold, after issue of
the shares, an interest in more than 5% of the issued
shares or be able to control the right to vote of more
than 5% of the votes that may be cast at a general
meeting of the Company.
Shares issued under the ESP will only vest provided
the performance and vesting conditions are achieved
(unless there is a change in control provision event
as outlined above).
The following table summarises the performance and vesting conditions for shares issued under the LTI plan
as at the date of this report:
Series
Vesting Conditions
Series 5 - 16 April 2008 Issue
Series 6 - 30 June 2008 Issue
Series 7 - 29 Sept 2009 Issue
Series 8 - 8 Oct 2009 Issue
Series 9 - 28 Oct 2009 Issue
Series 10 - 25 June 2010 Issue
Series 11 - 25 June 2010 Issue
Series 12 - 25 June 2010 Issue
Series 13 - 25 June 2010 Issue
Nil
Nil
Nil*
Nil*
2 years and 345 days from date of issue
1 year from date of commencement of employment
2 years from date of commencement of employment
3 years from date of commencement of employment
2 years and 341 days from date of issue
* Change in control provision triggered by GPG takeover bid.
Performance
Conditions
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
26
ClearView Wealth Limited and its subsidiaries
Directors’ Report [continued]
In accordance with Mr Swanson’s employment
contract, Mr Swanson is entitled to a long term
incentive comprising 10 million Shares in accordance
with the ESP, and vesting progressively over three
years from the commencement date of his contract
as follows:
— Series 10: 2 million shares at an issue price of 50
cents vesting on 26 March 2011;
— Series 11: 4 million shares at an issue price of 58
cents vesting on 26 March 2012; and
— Series 12: 4 million shares at an issue price of 65
cents vesting on 26 March 2013.
Shareholder approval was obtained at the EGM on
30 April 2010 and completion of the Acquisition
occurred on 9 June 2010.
The Board understands that there is limited liquidity
in derivatives for the Company shares. The Directors
believe that there is no risk in Key Management
Personnel limiting his or her exposure in relation to
shares issued under the plan and accordingly there
is no specific policy in relation to Key Management
Personnel hedging his or her exposure to the
Company’s shares.
The Company also has a Deferred Share Plan (DSP)
in place. Under the DSP, employees, including
directors, may choose to receive part of their
remuneration (including bonuses) in the form of
shares. Shares in respect of the DSP are purchased
on the market and are held in the employee’s name,
but are generally subject to a holding lock until he or
she leaves the employment of the Company.
No shares have been acquired under the DSP as at
the date of this report.
Non-executive Directors’ remuneration
Non-executive Directors are remunerated by fees
within the aggregate limit approved by shareholders.
The present limit on aggregate remuneration for non-
executive Directors is $450,000. Directors’ fees can
be paid as superannuation contributions and may
also be directed to the DSP.
Shares issued under the Employee Share
Plan
Shares granted to Directors and Key Management
Personel
During and since the end of the financial year an
aggregate 15,000,000 shares (2009: Nil shares)
were granted by the Company to the Directors and
Key Management Personnel of the Company and
the consolidated entity under the ESP.
Interest-bearing loans have been granted by the
Company to the following Directors and Key
Management Personnel to fund the acquisition of
shares under the ESP. The loans bear interest at
the RBA rate plus a margin of 0.25% other than
Series 5 and 6 that were issued prior to the revised
ESP Rules and these accrue interest at the lower of
the dividends paid on the shares and the statutory
interest rate.
Until vesting and performance conditions are
achieved, the shares are subject to a holding lock.
If the conditions are met, the loans must be repaid
before the holding lock is released.
Series
Series 5
Series 6
Series 7
Series 7
Series 7
Series 8
Series 9
Series 10
Series 11
Series 12
Director, KMP,
to which the series relates
Alexander Hutchison
Justin McLaughlin
Athol Chiert
Justin McLaughlin
Donna McKell
Alexander Hutchison
Ray Kellerman
Simon Swanson
Simon Swanson
Simon Swanson
Fair value at
grant date
$
Exercise
price per
share
$
Aggregate
value at
grant date
$
0.095
0.103
0.065
0.065
0.065
0.067
0.070
0.112
0.081
0.060
0.597
0.589
0.488
0.488
0.488
0.485
0.500
0.500
0.580
0.650
94,764
51,283
98,057
65,371
32,685
133,171
17,422
224,074
323,295
241,927
Expiry date
16/04/2013
30/06/2013
29/09/2014
29/09/2014
29/09/2014
08/10/2014
28/10/2014
26/03/2015
26/03/2015
26/03/2015
27
ClearView Wealth Limited and its subsidiaries
Directors’ Report
for the year ended 30 June 2010
for the year ended 30 June 2010
continued
continued
As a result of the GPG takeover bid and subsequent
increase in GPG’s shareholding to 68%, the vesting
conditions for employees that were issued shares
prior to the date of change of control were
accelerated as the Shares are granted prior to the
date of GPG increasing its holding to above 50% as
a result of the takeover bid. As previously outlined
to shareholders, the change in control only affects
any performance or vesting conditions applicable to
particular ESP Shares. It does not affect the in-built
performance condition in the form of the annual RBA
interest rate plus a margin of 0.25%, nor does it
automatically release ESP Shares from the disposal
restrictions and holding lock.
The Shares issued to Mr Swanson will vest
progressively each year as outlined above.
Unvested Shares will be immediately forfeited in
accordance with the terms of the Plan if Mr
Swanson terminates his employment (other than
because of a breach by the Company of its
obligations, or because of a reduction in
remuneration or status following a change of
control). If Mr Swanson’s employment is terminated
by the Company for any other reason then the
Shares in the next unvested tranche will vest
automatically, and the remaining unvested Shares
will be forfeited.
All unvested Shares will automatically vest in
accordance with the rules of the Plan upon a change
in control, subject to the definition of change in
control for this purpose being that in the
Employment Agreement entered into with Mr
Swanson on 26 March 2010.
The shares previously issued to Mr Hutchison and
Mr McLaughlin (Series 5 and Series 6) can vest at
the discretion of those executives. The Board
considered that to attract executives with such
experience it was necessary to offer flexible share
issues which still align shareholder interests with
executives of the Company.
Accordingly shares issued under Series 5, 6, 7 and 8
have met the vesting conditions up to the date of
this report.
Full details of the ESP are available from the
Company’s website.
Total Shares Issued under the Employee Share Plan
Details of all shares issued by the Company under the ESP as at the date of this report are:
Number of shares
Class of shares
Issue and
exercise price
$
Grant date
Fair value
at grant date
$
First vesting
date
Final vesting
date
Series 5
Series 6
Series 7
Series 8
Series 9
Series 10
Series 11
Series 12
Series 13
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
16/04/2008
30/06/2008
29/09/2009
08/10/2009
28/10/2009
25/06/2010
25/06/2010
25/06/2010
25/06/2010
0.597
0.589
0.488
0.485
0.500
0.500
0.580
0.650
0.533
0.095 16/04/2008 16/04/2013
0.103 30/06/2008 30/06/2013
0.065 23/10/2009 29/09/2014
0.067 23/10/2009 08/10/2014
0.070 28/10/2012 28/10/2014
0.112 26/03/2011 26/03/2015
0.081 26/03/2012 26/03/2015
0.060 26/03/2013 26/03/2015
0.101 01/06/2013 01/06/2015
Details of Directors and Key Management Personnel
The Directors of the Group and Company during the year were:
Ray Kellerman
Simon Swanson
Anthony Eisen
Michael Jefferies
Peter Wade
David Goodsall
John Murphy
Peter Constable
Alex Hutchison
Chairman, Independent Non-executive director
Managing Director
Non-executive director
Non-executive director
Independent Non-executive director
Independent Non-executive director
Non-executive director
Non-executive director
CEO Wealth Management and Advice
Appointed 26 March 2010
Appointed 9 June 2010
Appointed 9 June 2010
Resigned 19 August 2009
Resigned 26 March 2010
28
ClearView Wealth Limited and its subsidiaries
Directors’ Report [continued]
The Key Management Personnel of the Group and the Company during the year were:
Managing Director
Simon Swanson
Alexander Hutchison CEO Wealth Management and Advice
Athol Chiert
Justin McLaughlin
Donna McKell
Chief Financial Officer and Company Secretary
Chief Investment Officer
Head of Advice Support
The following contractual and other arrangements are in place in respect of the Directors and executives in
office at the date of this report.
Ray Kellerman
subject to re-election by shareholders at least each three years.
Anthony Eisen
subject to re-election by shareholders at least each three years.
Michael Jefferies
subject to re-election by shareholders at least each three years.
Peter Wade
subject to re-election by shareholders at least each three years.
David Goodsall
subject to re-election by shareholders at least each three years.
John Murphy
subject to re-election by shareholders at least each three years.
Simon Swanson
Alexander Hutchison
Justin McLaughlin
Athol Chiert
Donna McKell
The contract is not for a fixed term, and may be terminated by either party giving six
months’ notice. If, in the six months following a change in control, Mr Swanson’s
remuneration or his duties and responsibilities are reduced through no fault of his
own, then Mr Swanson will have a right to terminate the contract with immediate
effect. In this case, and in addition to vesting of Mr Swanson’s ESP Shares, the
Company will be obliged to pay Mr Swanson six months’ base salary plus the
maximum short term incentive amount for that calendar year. Contract provides for
an annual review of Fixed Remuneration.
no fixed term, notice generally required until 9 June 2012 of 12 months by either the
employee or the Company. Post the Acquisition this was extended by a further year.
After 9 June 2012, notice generally required 6 months by either the employee or the
Company. In the case of redundancy an additional 52 week payment is payable.
Contract provides for an annual review of Fixed Remuneration.
no fixed term, notice generally required for the first three years of employment of 12
months by either the employee or the Company. After three years, notice generally
required 6 months by either the employee or the Company. In the case of
redundancy an additional 52 week payment is payable. Contract provides for an
annual review of Fixed Remuneration.
no fixed term, notice generally required for the first three years of employment of 6
months by either the employee or the Company. After three years, notice generally
required 3 months by either the employee or the Company. In the case of
redundancy an additional 26 week payment is payable. Contract provides for an
annual review of Fixed Remuneration.
no fixed term, notice generally required for the first three years of employment of 12
months by either the employee or the Company. After three years, notice generally
required 6 months by either the employee or the Company. In the case of
redundancy an additional 52 week payment is payable. Contract provides for an
annual review of Fixed Remuneration.
29
ClearView Wealth Limited and its subsidiaries
Directors’ Report
for the year ended 30 June 2010
for the year ended 30 June 2010
continued
continued
Key management personnel compensation
The compensation of each member of the Key Management Personnel of the Group for the year ended 30
June 2010 is set out below:
SHORT TERM EMPLOYEE BENEFITS
POST
EMPLOYMENT
SHARE BASED
PAYMENTS
TOTAL
2010
Salary &
Fees
$
Bonus
$
Non- Termination
Payment
$
monetary
$
Employee Share
Super- Plan (1) of Total
%
annuation
$
remuneration Performance (6)
based
$
$
Non Executive Directors
R Kellerman (2)
A Eisen (3)
M Jefferies (4)
P Wade
J Murphy (5)
D Goodsall
P Constable
96,743
65,000
65,000
68,807
3,740
3,479
–
Executive Directors
–
–
–
–
–
–
–
–
–
–
–
–
–
–
S Swanson
A Hutchison
146,286
–
395,008 115,596
–
7,532
Key Management Personnel
J McLaughlin
A Chiert
D McKell
275,229 82,569
250,000 125,000
206,422 61,927
–
–
–
TOTAL
1,575,714 385,092
7,532
–
–
–
–
–
–
–
–
–
–
–
–
–
8,257
–
–
6,193
–
313
8,726
3,898
–
–
–
–
–
–
3.6 108,898
65,000
65,000
75,000
3,740
3,792
8,726
–
–
–
–
–
–
13,166
24,992
6,388
133,172
3.9 165,840
676,300
36.8
24,771
22,500
18,578
65,371
98,057
32,685
33.0
45.0
29.6
447,940
495,557
319,612
127,496
339,571
29.8 2,435,405
(1) Benefit calculated under the Binomial model in respect of the future value of the ESP shares issued.
(2) R Kellerman was until the date of sale on 31 July 2009, an independent member of the MMC Asset Management Compliance
Committee for which a fee of $5,000 was paid to Kellerman & Co Consulting Pty Limited of which he is the sole director and
shareholder.
(3) A Eisen has agreed that he will receive no fee for his services as a director although a fee of $65,000 was paid to GPG of
which he is an employee.
(4) M Jefferies has agreed that he will receive no fee for his services as a director although a fee of $65,000 was paid to GPG of
which he is an employee.
(5) J Murphy has agreed that he will receive no fee for his services as a director although a fee of $3,740 was paid to Investec of
which he is a director.
(6) The ratio of performance based component of remuneration to the non-performance based component of remuneration is
29.9%.
The directors who received the highest remuneration for the year listed in descending order are:
1) Alex Hutchison, CEO Wealth Management & Advice, $676,300 (Alex resigned as a director on 26 March
2010)
2) Simon Swanson, Managing Director, $165,840
3) Ray Kellerman, Chairman, $108,898
The fees paid to Directors or their associated entities are included in the table above.
30
ClearView Wealth Limited and its subsidiaries
Directors’ Report [continued]
The STI plan as outlined in the June 2009 Annual Report was not formally implemented during the June 2010
financial year (including setting the individual level key performance indicators) given the focus of management
on the investment opportunities culminating in the Acquisition. Management were focused on the turnaround
of the business, the integration of ComCorp and the execution of the investment opportunity. Therefore, for
the 2010 financial year the STI bonuses for Key Management Personnel were based on the recommendation
of the Managing Director and Board discretion for achieving performance targets as set out by the Board.
An external consultant was appointed to benchmark bonuses for the year in light of the performance and
restructuring of the business during the course of the year. These discretionary bonuses were based on the
benchmarks provided by an external consultant and approved by the Board.
The amount of bonus forfeited by employees cannot be determined because the STI depends on the
performance for the Company. An estimate of the amount the Company may have earned cannot be
determined.
No bonuses were paid in 2009.
The compensation of each member of the key management personnel of the Group for the prior year is set
out below:
SHORT TERM EMPLOYEE BENEFITS
POST
EMPLOYMENT
SHARE BASED
PAYMENTS
TOTAL
2009
Salary &
Fees
$
Bonus
$
Non- Termination
Payment
$
monetary
$
Employee Share
Super- Plan (1) of Total
%
annuation
$
remuneration Performance (6)
based
$
$
Non Executive Directors
R Kellerman (2)
A Eisen (5)
M Jefferies (6)
P Wade
P Constable
K Eley (4)
79,633
65,000
42,829
59,633
59,633
28,333
Executive Directors
–
–
–
–
–
–
–
–
–
–
–
–
A Hutchison
351,290
– 12,877
Key Management Personnel
J McLaughlin
A Chiert
D McKell
B Wright (3)
277,346
168,269
196,895
92,165
–
–
–
–
–
–
–
–
TOTAL
1,421,026
– 12,877
–
–
–
–
–
–
–
–
–
–
–
–
5,367
–
–
5,367
5,367
–
55,833
26,009
15,144
17,721
16,684
147,492
3,125
–
–
–
–
–
–
–
–
–
(7,813)
(4,688)
3.5
–
–
–
–
–
88,125
65,000
42,829
65,000
65,000
28,333
–
420,000
–
–
–
303,355
183,413
214,616
(7.7) 101,036
1,576,707
(1) Benefit calculated under the Binomial model in respect of the future value of the ESP shares issued.
(2) R Kellerman was an independent member of the MMC Asset Management Compliance Committee for which a fee of $20,000
was paid to Kellerman & Co Consulting Pty Limited of which he is the sole director and shareholder.
(3) These shares lapsed on resignation.
(4) K Eley has agreed that he will receive no fee for his services as a director although a fee of $28,333 was paid to HGL Limited of
which he is a director.
(5) A Eisen has agreed that he will receive no fee for his services as a director although a fee of $65,000 was paid to GPG of
which he is an employee.
(6) M Jefferies has agreed that he will receive no fee for his services as a director although a fee of $42,829 was paid to GPG of
which he is an employee.
(7) The ratio of performance based component of remuneration to the non-performance based component of remuneration is
minimal as no shares were issued during the year.
31
ClearView Wealth Limited and its subsidiaries
Directors’ Report
for the year ended 30 June 2010
for the year ended 30 June 2010
continued
continued
Discussion of relationship between remuneration policy and Company performance
The table below sets out the summary information about the consolidated entity’s earnings and movements in
shareholder wealth for five years to June 2010. Short Term Incentives are based on key performance
measures that reflect the primary business drivers and measures. Short term employee benefits are therefore
aimed at achieving growth whereas long term incentives are aimed at creating shareholder wealth thereby not
limiting the group’s long term goals due to short term decision making. The LTI is based on achieving agreed
performance targets. The objective of the LTI is to assist in the recruitment, reward, retention and motivation
of employees of the consolidated entity.
30 June 2010
30 June 2009
30 June 2008 30 June 2007
30 June 2006
Revenue ($’000)
Net profit / (loss) before tax ($’000)
Net profit / (loss) after tax ($’000)
Dividend (Interim) (cents)
Dividend (final) (cents)
Basic EPS (cents)
Diluted EPS (cents)
Share Price at the beginning
of the year
Share Price at the end of the year
45,368 (1)
7,102 (2)
5,921(2)
–
–
4.44
4.39
$0.42
$0.52
3,865 (1)
(3,092) (2)
(2,269) (2)
–
–
(2.70)
(2.68)
$0.58
$0.42
17,662
(48,639)
(42,767)
4.0
–
(17.24)
(17.24)
$0.92
$0.58
34,196
29,422
20,325
4.0
4.0
8.87
8.86
$0.79
$0.92
33,211
29,243
20,977
3.0
3.0
9.47
9.47
$0.83
$0.79
(1) Revenue from continuing operations excludes net fair value losses in financial assets in the current and prior year.
(2) From continuing operations.
For the 2010 financial year the STI bonuses were based on Board discretion for achieving performance
targets as set out by the Board. As a result of the performance of the Company, Key Management Personnel
received 29.8% proportion of their remuneration as performance based in 2010. The LTI performance and
vesting criteria include a service component as well as an in built performance hurdle through an interest rate
that has been set at the RBA rate plus a margin of 0.25%.
Signed in accordance with a resolution of the Board of Directors made pursuant to s298(2) of the Corporations
Act 2001.
On behalf of the Directors
Ray Kellerman
Chairman
Sydney, 25 August 2010
32
Auditor’s Independence Declaration
The Board of Directors
ClearView Wealth Limited
Level 24, 2 Chifley Square
Sydney NSW 2000
25 August 2010
Dear Directors
CLEARVIEW WEALTH LIMITED
In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following
declaration of independence to the directors of ClearView Wealth Limited.
As lead audit partner for the audit of the financial statements of ClearView Wealth Limited for the financial year
ended 30 June 2010, I declare that to the best of my knowledge and belief, there have been no
contraventions of:
(i) the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
(ii) any applicable code of professional conduct in relation to the audit.
Yours sincerely
DELOITTE TOUCHE TOHMATSU
Philip Hardy
Partner
Chartered Accountants
Liability limited by a scheme approved under Professional Standards Legislation.
33
ClearView Wealth Limited and its subsidiaries
2010 Financial Report
Contents
Consolidated income statement
Consolidated statement of comprehensive income
Consolidated statement of financial position
Consolidated statement of changes in equity
Consolidated statement of cash flows
36
37
38
39
40
Notes to the financial statements
41
1 General information
41
2 Adoption of new and revised Accounting Standards
44
3 Significant accounting policies
4 Critical accounting judgments and key sources of estimation uncertainty 57
63
5 Risk management
67
6 Solvency requirements of the statutory funds
68
7 Segment information
71
8 Parent entity disclosure
71
9 Discontinued operations
72
10 Investment income
72
11 Fee and other revenue
73
12 Other expenses
74
13 Income tax
75
14 Movements in reserves
76
15 Sources of profit
76
16 Earnings per share
77
17 Cash and cash equivalents
77
18 Receivables
78
19 Fixed interest deposits
78
20 Securities
78
21 Financial assets
78
22 Goodwill
79
23 Intangible assets
80
24 Property, plant and equipment
81
25 Business acquisitions
84
26 Disposal of subsidiaries
85
27 Payables
86
28 Provisions
87
29 Deferred tax balances
88
30 Policy liabilities
89
31 Issued capital
89
32 Provision for deferred consideration
89
33 Shares granted under the employee share plans
34 Dividends
90
35 Reconciliation of net profit/(loss) for the year to net cash flows from
operating activities
36 Subsidiaries
37 Investment in associate
38 Share-based payments
39 Related party transactions
40 Financial instruments
41 Disaggregated information by fund
42
Investment in controlled unit trusts
43 Finance leases
44 Contingent liabilities and contingent assets
45 Subsequent events
46 Capital commitments
Directors’ Declaration
Independent Audit Report
Shareholder Information
90
91
92
93
96
98
105
106
107
108
108
108
109
110
112
The Financial Report was authorised for issue by the Directors on 25 August 2010.
34
2010
Financial
Report
ClearView Wealth Limited and its subsidiaries
3535
ClearView Wealth Limited and its subsidiaries
Consolidated income statement
for the year ended 30 June 2010
for the year ended 30 June 2010
Note
Consolidated
2010
$’000
2009
$’000
Continuing operations
Revenue from continuing operations
Premium revenue from insurance contracts
Outward reinsurance expense
Net life insurance premium revenue
Fee and other revenue
Investment income
Operating revenue before net fair value gains on financial assets
Net fair value losses on financial assets
Net operating revenue
Claims expense
Reinsurance recoveries revenue
Change in life insurance policy liabilities
Changes in reinsurers’ share of life insurance liabilities
Change in life investment policy liabilities
Commission expense
Other expenses
Profit on acquisition of subsidiary
Share of loss of associate
Realised capital gains
Depreciation and amortisation expense
Reversal of impairments / (impairments)
Movement in liability of non-controlling interest in
controlled unit trust
Profit / (loss) before income tax expense
Income tax expense / (benefit)
Net profit / (loss) for the year from continuing operations
Profit / (loss) from discontinued operations
PROFIT / (LOSS) FOR THE YEAR
Attributable to:
Equity holders of the parent
Non-controlling interest
Earnings per share
From continuing and discontinued operations
Basic (cents per share)
Diluted (cents per share)
From continuing operations
Basic (cents per share)
Diluted (cents per share)
11
10
30
30
30
12
25
37
12e
13
9
16
2,624
(238)
2,386
11,617
31,365
45,368
(49,492)
(4,124)
(912)
115
1,001
29
19,778
(5,309)
(20,634)
15,325
(59)
–
(745)
20
2,617
7,102
1,181
5,921
2,110
–
–
–
2,646
1,219
3,865
–
3,865
–
–
–
–
–
(941)
(6,530)
–
–
778
(176)
(88)
–
(3,092)
(823)
(2,269)
(2,445)
8,031
(4,714)
8,031
–
8,031
(4,776)
62
(4,714)
4.44
4.39
3.28
3.26
(2.70)
(2.68)
(1.30)
(1.30)
36
To be read in conjunction with the accompanying notes.
ClearView Wealth Limited and its subsidiaries
Consolidated statement of
comprehensive income
for the year ended 30 June 2010
for the year ended 30 June 2010
Profit for the year
Other comprehensive income
Available-for-sale financial assets
Net loss arising on revaluation of available-for-sale financial
assets during the year
Income tax relating to components of other comprehensive
income
Consolidated
2010
$’000
2009
$’000
8,031
(4,714)
(569)
(150)
7,462
(4,864)
170
45
Total comprehensive income for the year
7,632
(4,819)
Total comprehensive income attributable to:
Owners of the Company
Non-controlling interests
7,632
–
7,632
(4,881)
62
(4,819)
To be read in conjunction with the accompanying notes.
37
ClearView Wealth Limited and its subsidiaries
Consolidated statement of
financial position
at 30 June 2010
at 30 June 2010
Assets
Cash and cash equivalents
Financial assets
Receivables
Fixed interest deposits
Securities
Reinsurers share of life insurance policy liabilities
Deferred tax asset
Property, plant and equipment
Investment in associate
Goodwill
Intangible assets
Total assets
Liabilities
Payables
Current tax liabilities
Provisions
Provision for deferred consideration
Life insurance policy liabilities
Life investment policy liabilities
Liability to non-controlling interest in controlled unit trust
Finance leases
Deferred tax liabilities
Total liabilities
Net assets
Equity
Issued capital
Retained losses
Reserves
Equity attributable to equity holders of the parent
Non-controlling interest
Total equity
Note
Consolidated
2010
$’000
2009
$’000
17
21
18
19
20
30
29
24
37
22
23
27
28
32
30
30
43
29
31
14
14
14
197,142
1,429,932
46,474
359
353
(3)
28,997
1,282
142
4,187
59,155
27,923
–
1,338
50,989
4,290
–
11,784
75
198
3,976
6,728
1,768,020
107,301
30,072
1,713
6,063
1,392
(71,607)
1,405,415
152,672
–
–
1,525,720
955
84
951
2,581
–
–
–
28
147
4,746
242,300
102,555
276,565
(34,783)
518
242,300
–
144,816
(42,814)
553
102,555
–
242,300
102,555
38
To be read in conjunction with the accompanying notes.
ClearView Wealth Limited and its subsidiaries
Consolidated statement of
changes in equity
for the year ended 30 June 2010
for the year ended 30 June 2010
Equity-settled
employee
benefits
reserve
$’000
Share
capital
$’000
Asset
revaluation
reserve
$’000
Attributable
Retained
to owners
earnings of the parent
$’000
$’000
Balance at 1 July 2008
Loss for the year
Other comprehensive income for the year
Total comprehensive income for the year
–
–
–
220,233
121
Shares cancelled under Share Buy-back
Share Buy-back costs, net of tax
Recognition of share based payments
(75,009)
(408)
–
–
–
–
–
–
33
504
–
(105)
(38,038)
(4,776)
–
182,820
(4,776)
(105)
(105)
(4,776)
(4,881)
–
–
–
–
–
–
(75,009)
(408)
33
Balance at 30 June 2009
144,816
154
399
(42,814)
102,555
Profit for the year
Other comprehensive income for the year
Total comprehensive income for the year
–
–
–
Issue of shares
Recognition of share-based payments
Share issue costs, net of tax
Balance at 30 June 2010
135,000
–
(3,251)
276,565
–
–
–
–
364
–
518
–
(399)
8,031
–
8,031
(399)
(399)
8,031
7,632
–
–
–
– 135,000
–
364
(3,251)
–
–
(34,783)
242,300
To be read in conjunction with the accompanying notes.
39
ClearView Wealth Limited and its subsidiaries
Consolidated statement of
cash flows
for the year ended 30 June 2010
for the year ended 30 June 2010
Note
Consolidated
2010
$’000
2009
$’000
Cash flows from operating activities
Receipts from clients and debtors
Payments to suppliers and other creditors
Withdrawals paid to life investment clients
Dividends and trust distributions received
Interest received
Income taxes paid
Other receipts
Net cash (utilised) / generated by operating activities
Cash flows from investing activities
Net cash movement due to subsidiary acquisition
Cash and cash equivalents acquired as part of business combination
Payments for listed securities
Acquisition of Property, Plant and Equipment
Transaction costs paid
Proceeds from sale of securities
Proceeds from sale of subsidiary
Proceeds from fixed interest deposits redeemed
Acquisition of client book / business
Settlements made against deferred consideration
Payments for acquisition of business
Acquisition of interest in associate
Loans to associate
35
25
25
26
25
68,532
(22,212)
(59,165)
1,696
7,176
(312)
643
(3,642)
(195,000)
182,376
(63,472)
(1,115)
(3,673)
76,304
20
50,631
(408)
(1,081)
(52)
(2)
(120)
2,400
(7,193)
–
1,571
5,391
190
829
3,188
–
–
(147)
(13)
–
54,582
–
30,482
(88)
(23)
(7,945)
(198)
–
Net cash generated by investing activities
44,408
76,650
Cash flows from financing activities
Proceeds from capital raising
Payment for share buy back
Payment to minorities
Capital raising costs paid net of tax
Net movement in liability of non-controlling interest in unit trusts
Net cash generated / (utilised) in financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Cash and cash equivalents at the end of the financial year
135,000
–
–
(3,251)
(3,296)
–
(75,417)
(549)
–
–
128,453
(75,966)
169,219
27,923
3,872
24,051
197,142
27,923
40
To be read in conjunction with the accompanying notes.
ClearView Wealth Limited and its subsidiaries
Notes to the financial statements
for the year ended 30 June 2010
for the year ended 30 June 2010
continued
continued
1 General information
ClearView Wealth Limited (formerly MMC Contrarian Limited) (the Company or Consolidated Entity) is a limited
company incorporated in Australia. The addresses of its registered office is disclosed in the Directory at the
back of the annual report. The principal activities of the Company and its subsidiaries (the Group) are
described in note 7.
Adoption of new and revised Accounting Standards
2
The following new and revised Australian Accounting Standards and Interpretations have been adopted in the
current period and have affected the amounts reported in these financial statements. Details of other
Standards and Interpretations adopted in these financial statements but that have had no effect on the
amounts reported are set out in section below.
Standards affecting presentation and disclosure
AASB 101 Presentation of Financial
Statements (as revised in September 2007),
AASB 2007-8 Amendments to Australian
Accounting Standards arising from AASB 101
and
AASB 2007-10 Further Amendments to
Australian Accounting Standards arising from
AASB 101
AASB 8 Operating Segments
AASB 2009-2 Amendments to Australian
Accounting Standards - Improving
Disclosures about Financial Instruments
Amendments to AASB 5 Non-current Assets
Held for Sale and Discontinued Operations
(adopted in advance of effective date
of 1 January 2010)
AASB 101(September 2007) has introduced terminology
changes (including revised titles for the financial statements)
and changes in the format and content of the financial
statements.
AASB 8 is a disclosure Standard that has resulted in a
redesignation of the Group’s reportable segments (see note 7).
The amendments to AASB 7 Financial Instruments: Disclosure
expand the disclosures required in respect of fair value
measurements and liquidity risk. The Group has elected not to
provide comparative information for these expanded
disclosures in the current year in accordance with the
transitional relief offered in these amendments.
Disclosures in these financial statements have been modified
to reflect the clarification in AASB 2009-5 Further Amendments
to Australian Accounting Standards arising from the Annual
Improvements Project that the disclosure requirements in
Standards other than AASB 5 do not generally apply to non-
current assets classified as held for sale and discontinued
operations.
AASB 3 Business Combinations (as revised in 2008)
AASB 3 Business Combinations has been adopted in the current year. Its adoption has affected the
accounting for business combinations in the current period.
41
ClearView Wealth Limited and its subsidiaries
Notes to the financial statements [continued]
Notes to the financial statements
for the year ended 30 June 2010
for the year ended 30 June 2010
continued
continued
2
Adoption of new and revised Accounting Standard
cont.
In accordance with the relevant transitional provisions, AASB 3(2008) has been applied prospectively to
business combinations for which the acquisition date is on or after 1 July 2009. The impact of the adoption
of AASB 3(2008) Business Combinations has been:
— To change the recognition and subsequent accounting requirements for contingent consideration. Under
the previous version of the Standard, contingent consideration was recognised at the acquisition date only
if payment of the contingent consideration was probable and it could be measured reliably; any subsequent
adjustments to the contingent consideration were recognised against goodwill. Under the revised
Standard, contingent consideration is measured at fair value at the acquisition date; subsequent
adjustments to the consideration are recognised against goodwill only to the extent that they arise from
better information about the fair value at the acquisition date, and they occur within the ‘measurement
period’ (a maximum of 12 months from the acquisition date). All other subsequent adjustments are
recognised in profit or loss;
— where the business combination in effect settles a pre-existing relationship between the Group and the
acquiree, to require the recognition of a settlement gain or loss; and
— to require that acquisition-related costs be accounted for separately from the business combination,
generally leading to those costs being recognised as an expense in profit or loss as incurred, whereas
previously they were accounted for as part of the cost of the acquisition.
In the current period, these changes in policies have affected the accounting for the acquisition of ClearView
Group Holdings Pty Limited (ClearView Group Holdings) (formerly MBF Management Limited) and MBT
Financial Services Pty Limited as follows:
Income statement and statement of financial position
Acquisition-related costs expensed
2010
$’000
4,843
AASB 3(2008) has also required additional disclosures in respect of the business combinations in the period
(see note 25). Results in future periods may be affected by future impairment write-downs relating to the
increased intangibles recognised and the resultant profit on acquisition.
Standards and Interpretations adopted with no effect on financial statements
The following new and revised Standards and Interpretations have also been adopted in these financial
statements. Their adoption has not had any significant impact on the amounts reported in these financial
statements but may affect the accounting for future transactions or arrangements.
AASB 2008-7 Amendments to Australian
Accounting Standards– Cost of an
Investment in a Subsidiary, Jointly
Controlled Entity or Associate
The amendments deal with the measurement of the cost of
investments in subsidiaries, jointly controlled entities and
associates when adopting A-IFRS for the first time and with the
recognition of dividend income from subsidiaries in a parent’s
separate financial statements.
AASB 2008-1 Amendments to Australian
Accounting Standard -Share-based
Payments: Vesting Conditions and
Cancellations
The amendments clarify the definition of vesting conditions for
the purposes of AASB 2, introduce the concept of ‘non-
vesting’ conditions, and clarify the accounting treatment for
cancellations.
AASB 123 Borrowing Costs (as revised
in 2007) and AASB 2007-6 Amendments
to Australian Accounting Standards
arising from AASB 123
The principal change to AASB 123 was to eliminate the option
to expense all borrowing costs when incurred. This change has
had no impact on these financial statements because it has
always been the Group’s accounting policy to capitalise
borrowing costs incurred on qualifying assets.
42
ClearView Wealth Limited and its subsidiaries
Notes to the financial statements [continued]
AASB 2008-2 Amendments to Australian
Accounting Standards – Puttable
Financial Instruments and Obligations
Arising on Liquidation
The revisions to AASB 132 Financial Instruments: Presentation
amend the criteria for debt/equity classification by permitting
certain puttable financial instruments and instruments (or
components of instruments) that impose on an entity an
obligation to deliver to another party a pro-rata share of the net
assets of the entity only on liquidation, to be classified as
equity, subject to specified criteria being met.
AASB 2008-8 Amendments to Australian
Accounting Standards– Eligible Hedged
Items
The amendments provide clarification on two aspects of hedge
accounting: identifying inflation as a hedged risk or portion, and
hedging with options.
Interpretation 16 Hedges of a Net
Investment in a Foreign Operation
Interpretation 17 Distributions of Non-
cash Assets to Owners and AASB 2008-
13 Amendments to Australian
Accounting Standards arising from
AASB Interpretation 17 Distributions of
Non-cash Assets to Owners
Interpretation 18 Transfers of Assets
from Customers
The Interpretation provides guidance on the detailed
requirements for net investment hedging for certain hedge
accounting designations.
The Interpretation provides guidance on the appropriate
accounting treatment when an entity distributes assets other
than cash as dividends to its shareholders.
The Interpretation addresses the accounting by recipients for
transfers of property, plant and equipment from ‘customers’ and
concludes that when the item of property, plant and equipment
transferred meets the definition of an asset from the perspective
of the recipient, the recipient should recognise the asset at its
fair value on the date of the transfer, with the credit recognised
as revenue in accordance with AASB 118 Revenue.
AASB 2008-5 Amendments to Australian
Accounting Standards arising from the
Annual Improvements Project and AASB
2008-6 Further Amendments to
Australian Accounting Standards arising
from the Annual Improvements Project
In addition to the changes affecting amounts reported in the
financial statements, the amendments have led to a number of
changes in the detail of the Group’s accounting policies – some
of which are changes in terminology only, and some of which
are substantive but have had no material effect on amounts
reported.
AASB 2009-4 Amendments to Australian
Accounting Standards arising from the
Annual Improvements Project and
AASB2009-5 Further Amendments to
Australian Accounting Standards arising
from the Annual Improvements Project
AASB 2009-5 Further Amendments to
Australian Accounting Standards arising
from the Annual Improvements Project
In addition to the amendments to AASB 5 and AASB 107
described earlier in this section, and the amendments to AASB
117, the amendments have led to a number of changes in the
detail of the Group’s accounting policies – some of which are
changes in terminology only, and some of which are substantive
but have had no material effect on amounts reported. The
changes in AASB 2009-5 have been adopted in advance of
their effective dates of 1 January 2010.
The effect of this statement is the early adoption of changes to
AASB 1, 7, 101, 134 and Interpretation 13.
43
ClearView Wealth Limited and its subsidiaries
Notes to the financial statements [continued]
Notes to the financial statements
for the year ended 30 June 2010
for the year ended 30 June 2010
continued
continued
2
Adoption of new and revised Accounting Standard
cont.
Standards and Interpretations in issue not yet adopted
Standard/Interpretation
AASB 2009-8 Amendments to Australian Accounting
Standards – Group Cash-Settled Share-based Payment
Transactions
AASB 2009-10 Amendments to Australian Accounting
Standards – Classification of Rights Issues
AASB 124 Related Party Disclosures (revised December
2009), AASB 2009-12 Amendments to Australian
Accounting Standards
AASB 9 Financial Instruments, AASB 2009-11
Amendments to Australian Accounting Standards arising
from AASB 9
AASB 2009-14 Amendments to Australian Interpretation
– Prepayments of a Minimum Funding Requirement
Interpretation 19 Extinguishing Financial Liabilities with
Equity Instruments
Effective for annual
reporting periods
beginning on or after
Expected to be initially
applied in the financial
year ending
1 January 2010
30 June 2011
1 February 2010
30 June 2011
1 January 2011
30 June 2012
1 January 2013
30 June 2014
1 January 2011
30 June 2012
1 July 2010
30 June 2011
3 Significant accounting policies
Statement of compliance
The financial report is a general purpose financial report which has been prepared in accordance with the
Corporations Act 2001, Accounting Standards and Interpretations, and complies with other requirements of
the law.
The financial report includes the consolidated financial statements of the Group.
Accounting Standards include Australian equivalents to International Financial Reporting Standards (‘A-IFRS’).
Compliance with A-IFRS ensures that the financial statements and notes of the Group comply with
International Financial Reporting Standards (‘IFRS’).
The financial statements were authorised for issue by the Directors on 25 August 2010.
Basis of preparation
The financial report has been prepared on the basis of historical cost, except for the revaluation of certain
non-current assets and financial instruments. Cost is based on the fair values of the consideration given in
exchange for assets. All amounts are presented in Australian dollars, unless otherwise noted.
The Company is a company of the kind referred to in ASIC Class Order 98/0100, dated 10 July 1998, and in
accordance with that Class Order amounts in the financial report are rounded off to the nearest thousand
dollars, unless otherwise indicated.
(a) Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities
(including special purpose entities) controlled by the Company (its subsidiaries) (referred to as ‘the Group’ in
these financial statements). Control is achieved where the Company has the power to govern the financial
and operating policies of an entity so as to obtain benefits from its activities.
44
ClearView Wealth Limited and its subsidiaries
Notes to the financial statements [continued]
The results of subsidiaries acquired or disposed of during the year are included in the consolidated profit or
loss from the effective date of acquisition or up to the effective date of disposal, as appropriate. Where
necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies
into line with those used by other members of the Group.
All intra-group transactions, balances, income and expenses are eliminated in full on consolidation. Non-
controlling interests in subsidiaries are identified separately from the Group’s equity therein. The interests of
non-controlling shareholders may be initially measured either at fair value or at the non-controlling interests’
proportionate share of the fair value of the acquiree’s identifiable net assets. The choice of measurement
basis is made on an acquisition-by-acquisition basis. Subsequent to acquisition, the carrying amount of non-
controlling interests is the amount of those interests at initial recognition plus the non-controlling interests’
share of subsequent changes in equity. Total comprehensive income is attributed to non-controlling interests
even if this results in the non controlling interests having a deficit balance.
Changes in the Group’s interests in subsidiaries that do not result in a loss of control are accounted for as
equity transactions. The carrying amounts of the Group’s interests and the non-controlling interests are
adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference between the
amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or
received is recognised directly in equity and attributed to owners of the Company.
(b) Business combinations
Acquisitions of subsidiaries and businesses are accounted for using the acquisition method. The
consideration for each acquisition is measured at the aggregate of the fair values (at the date of exchange) of
assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for
control of the acquiree. Acquisition related costs are recognised in profit or loss as incurred.
Where applicable, the consideration for the acquisition includes any asset or liability resulting from a
contingent consideration arrangement, measured at its acquisition-date fair value. Subsequent changes in
such fair values are adjusted against the cost of acquisition where they qualify as measurement period
adjustments (see below). All other subsequent changes in the fair value of contingent consideration classified
as an asset or liability are accounted for in accordance with relevant Standards. Changes in the fair value of
contingent consideration classified as equity are not recognised.
Where a business combination is achieved in stages, the Group’s previously held interests in the acquired entity
are remeasured to fair value at the acquisition date (i.e. the date the Group attains control) and the resulting gain
or loss, if any, is recognised in profit or loss. Amounts arising from interests in the acquiree prior to the
acquisition date that have previously been recognised in other comprehensive income are reclassified to profit or
loss, where such treatment would be appropriate if that interest were disposed of.
The acquiree’s identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition
under AASB 3(2008) are recognised at their fair value at the acquisition date, except that:
— deferred tax assets or liabilities and liabilities or assets related to employee benefit arrangements are
recognised and measured in accordance with AASB 112 Income Taxes and AASB 119 Employee Benefits
respectively;
— liabilities or equity instruments related to the replacement by the Group of an acquiree’s share based
payment awards are measured in accordance with AASB 2 Share-based Payment; and
— assets (or disposal groups) that are classified as held for sale in accordance with AASB 5 Noncurrent
Assets Held for Sale and Discontinued Operations are measured in accordance with that Standard.
If the initial accounting for a business combination is incomplete by the end of the reporting period in which
the combination occurs, the Group reports provisional amounts for the items for which the accounting is
incomplete. Those provisional amounts are adjusted during the measurement period (see below), or
additional assets or liabilities are recognised, to reflect new information obtained about facts and
circumstances that existed as of the acquisition date that, if known, would have affected the amounts
recognised as of that date.
45
ClearView Wealth Limited and its subsidiaries
Notes to the financial statements [continued]
Notes to the financial statements
for the year ended 30 June 2010
for the year ended 30 June 2010
continued
continued
Significant accounting policies cont.
3
The measurement period is the period from the date of acquisition to the date the Group obtains complete
information about facts and circumstances that existed as of the acquisition date – and is subject to a
maximum of one year.
(c) Investments in associates
An associate is an entity over which the Group has significant influence and that is neither a subsidiary nor an
interest in a joint venture. Significant influence is the power to participate in the financial and operating policy
decisions of the investee but is not control or joint control over those policies.
The results and assets and liabilities of associates are incorporated in these financial statements using the
equity method of accounting, except when the investment is classified as held for sale, in which case it is
accounted for in accordance with AASB 5 Non-current Assets Held for Sale and Discontinued Operations.
Under the equity method, investments in associates are carried in the consolidated statement of financial
position at cost as adjusted for post-acquisition changes in the Group’s share of the net assets of the
associate, less any impairment in the value of individual investments. Losses of an associate in excess of the
Group’s interest in that associate (which includes any long-term interests that, in substance, form part of the
Group’s net investment in the associate) are recognised only to the extent that the Group has incurred legal or
constructive obligations or made payments on behalf of the associate.
Any excess of the cost of acquisition over the Group’s share of the net fair value of the identifiable assets,
liabilities and contingent liabilities of the associate recognised at the date of acquisition is recognised as goodwill.
The goodwill is included within the carrying amount of the investment and is assessed for impairment as part of
that investment. Any excess of the Group’s share of the net fair value of the identifiable assets, liabilities and
contingent liabilities over the cost of acquisition, after reassessment, is recognised immediately in profit or loss.
When a group entity transacts with an associate of the Group, profits and losses are eliminated to the extent
of the Group’s interest in the relevant associate.
(d) Goodwill
Goodwill arising in a business combination is recognised as an asset at the date that control is acquired (the
acquisition date). Goodwill is measured as the excess of the sum of the consideration transferred, the amount
of any non-controlling interests in the acquiree, and the fair value of the acquirer’s previously held equity
interest in the acquiree (if any) over the net of the acquisition-date amounts of the identifiable assets acquired
and the liabilities assumed.
If, after reassessment, the Group’s interest in the fair value of the acquiree’s identifiable net assets exceeds
the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree and the
fair value of the acquirer’s previously held equity interest in the acquiree (if any), the excess is recognised
immediately in profit or loss as a bargain purchase gain.
Goodwill is not amortised but is reviewed for impairment at least annually. For the purpose of impairment
testing, goodwill is allocated to each of the Group’s cash-generating units expected to benefit from the
synergies of the combination. Cash-generating units to which goodwill has been allocated are tested for
impairment annually, or more frequently when there is an indication that the unit may be impaired. If the
recoverable amount of the cash-generating unit is less than its carrying amount, the impairment loss is
allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets
of the unit pro-rata on the basis of the carrying amount of each asset in the unit. An impairment loss
recognised for goodwill is not reversed in a subsequent period.
On disposal of a subsidiary, the attributable amount of goodwill is included in the determination of the profit or
loss on disposal.
The Group’s policy for goodwill arising on the acquisition of an associate is described at (c) above.
46
ClearView Wealth Limited and its subsidiaries
Notes to the financial statements [continued]
(e) Goods and services tax
Revenues, expenses and assets are recognised net of the amount of goods and services tax (GST), except:
i. where the amount of GST incurred is not recoverable from the taxation authority, it is recognised as part of
the cost of acquisition of an asset or as part of an item of expense; or
ii. for receivables and payables which are recognised inclusive of GST.
The net amount of GST recoverable from, or payable to, the taxation authority is included as part of
receivables or payables.
Cash flows are included in the cash flow statement on a gross basis. The GST component of cash flows
arising from investing and financing activities which is recoverable from, or payable to, the taxation authority is
classified within operating cash flows.
(f) Principles underlying the conduct of life insurance business
The life insurance operations of the Group are conducted within separate statutory funds as required by the
Life Insurance Act 1995 and are reported in aggregate with the shareholders’ funds in the statement of
comprehensive income, statement of financial position, statement of changes in equity and statement of cash
flows. The life insurance operations consist of the provision of life insurance and life investment contracts.
Life insurance contracts involve the acceptance of significant insurance risk. Insurance risk is defined as
significant if, and only if, an insured event could cause an insurer to pay significant benefits in any scenario,
excluding scenarios that lack commercial substance. Insurance contracts include those where the insured
benefit is payable on the occurrence of a specified event such as death, injury or disability caused by accident
or illness. The insured benefit is not linked to the market value of the investments held by the Group, and the
financial risks are substantially borne by the Group. Any contracts issued by the Group and regulated under
the Life Act that do not meet the definition of a life Insurance contract are classified as life investment
contracts.
Life investment contracts include investment-linked contracts where the benefit is directly linked to the market
value of the investment held in the particular investment-linked fund. While the underlying assets are
registered in the name of ClearView Life and the investment-linked policy owner has no direct access to the
specific assets, the contractual arrangements are such that the investment-linked policy owner bears the risks
and rewards of the fund’s investments performance. ClearView Life derives fee income from the administration
of investment-linked funds. Life investment contracts do not contain any discretionary participation features
(i.e. those where the amount or timing of allocation of the profit from the underlying investments is at the
discretion of the insurer).
In accordance with AASB 1038 Life Insurance Contracts, financial assets backing policy liabilities are
designated at fair value through profit and loss. ClearView Life has determined that all assets held within the
statutory funds back life policy liabilities. Financial assets backing policy liabilities consist of high quality
investments such as cash, equities, fixed income securities and property trusts.
The management of financial assets and policy liabilities is closely monitored to ensure that investments are
appropriate given the expected pattern of future cash flows arising from policy liabilities.
(g) Revenue
Fee revenue is recognised when:
— the amount can be measured reliably
— it is probable that the future economic benefit associated with transactions will flow to the entity
— the stage of completion can be measured reliably.
Premium revenue
Premium revenue only arises in respect of life insurance contracts. Premiums with a regular due date are
recognised as revenue on a due basis. Premiums with no due date are recognised as revenue on a cash
received or receivable basis.
47
ClearView Wealth Limited and its subsidiaries
Notes to the financial statements [continued]
Notes to the financial statements
for the year ended 30 June 2010
for the year ended 30 June 2010
continued
continued
Significant accounting policies cont.
3
Unpaid premiums are only recognised as revenue during the days of grace and are included as “Premiums
Receivable” (part of “Receivables”) in the statement of financial position. Premiums due after, but received
before, the end of the financial year are shown as “Premium Deposits” (part of “Trade and other payables”) in
the Statement of Financial Position.
Management fee revenue
Fee revenue comprising management fee revenue with respect to life investment contracts is recognised in
the statement of comprehensive income on an accrual basis as the services are provided. A single
management fee is applied for each Investment Option, which is based on the value of the assets held in each
Investment Option. The fee is calculated each time an Investment Option is valued, before the unit price is
declared. The fee is treated as a reduction in the investment contract liabilities.
Financial planning revenue
Financial planning revenue is recognised on an accruals basis to the extent that it is probable that the income
benefit will flow to the Group and the revenue can be reliably measured. Ongoing trail revenue is recorded
over the effective period in which customers’ funds are invested in products.
Dividend and interest revenue
Dividend revenue from investments is recognised when the Group’s right to receive payment has been
established.
Interest revenue is recognised when it is probable that the economic benefits will flow to the Group and the
amount of revenue can be measured reliably. Interest revenue is accrued on a time basis, by reference to the
principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts
estimated future cash receipts through the expected life of the financial asset to that asset’s net carrying
amount on initial recognition.
Investment Income
Income on investment units and shares is deemed to accrue on the date the distributions are declared.
Distribution income
Distribution income from investments in unit trusts is recognised on a receivable basis as of the date the unit
value is quoted ex-distribution.
(h) Claims
Life insurance contracts
Claims incurred relate to life insurance contracts and are treated as expenses. Claims are recognised upon
notification of the insured event. Claims are shown gross of reinsurance recoverable. Any reinsurance
recoveries applicable to the claims are included in receivables.
Life investment contracts
There is no claims expense in respect of life investment contracts. Surrenders and withdrawals which relate
to life investment contracts are treated as a movement in life investment contract liabilities.
Surrenders and withdrawals are recognised when the policyholder provides notification of their intention to
end the policy.
(i) Reinsurance
Amounts paid to reinsurers under life insurance contracts held by the Company are recorded as an outward
reinsurance expense and are recognised in the statement of comprehensive income from the attachment date
over the period of indemnity of the reinsurance contract.
48
ClearView Wealth Limited and its subsidiaries
Notes to the financial statements [continued]
Reinsurance recoveries receivable on claims incurred are recognised as revenue. Recoveries are assessed in
a manner similar to the assessment of life insurance contract liabilities. Recoveries are measured as the
present value of the expected future receipts, calculated on the same basis as the life insurance contract
liabilities.
(j) Policy acquisition costs
The policy acquisition costs incurred are recorded in the statement of comprehensive income and represent
the fixed and variable costs of acquiring new business. The policy acquisition costs include commission,
policy issue and underwriting costs, agency expenses, management service fees and sale costs. The
acquisition costs incurred in relation to life insurance contracts are capitalised in the valuation of policy
liabilities.
(k) Basis of expense apportionment
All expenses of the life insurance business charged to the statement of comprehensive income have been
apportioned in accordance with Part 6, Division 2 of the Life Act.
The basis is as follows:
— Expenses relating specifically to either the shareholder’s fund or the statutory funds are allocated directly to
the respective funds;
— where they can be directly identified, policy acquisition costs and policy maintenance costs are apportioned
with reference to the objective when each expense is incurred and the outcome achieved; and
— Expenses subject to apportionment under section 80 of the Life Act are allocated between the funds in
proportion to the activities to which they relate. They are apportioned between policy acquisition costs and
policy maintenance costs in relation to their nature as either acquisition or maintenance activities. Activities
are based on direct measures such as transactions processed and business volumes.
Life investment contracts and life insurance contracts are held within separate statutory funds therefore the
allocation of expenses to either life investment or life insurance contracts is inherent in the allocation to the
statutory funds, as described above. The apportionment basis is in line with the principles set in the Life
Insurance Prudential Standard valuation standard (Prudential Standard LPS1.04 Valuation of Policy Liability).
All expenses relate to non-participating business as the Company only writes this category of business.
(l) Policy liabilities
Policy liabilities consist of life insurance policy liabilities and life investment policy liabilities.
Life insurance contracts
The value of life insurance policy liabilities is calculated using the Margin on Services methodology. Under this
methodology, planned profit margins and an estimate of future liabilities are calculated separately for each
related product group, with future cash flows determined using best estimate assumptions and discounted to
the reporting date. Profit margins are released over the financial period in line with the services that have
been provided. The balance of the planned profits is deferred by including it in the value of policy liabilities.
Further details of the actuarial assumptions used in these calculations are set out in note 4.
Life investment contracts
Life investment policy liabilities are valued at fair value, which is based on the valuation of the linked assets,
subject to a minimum of the current surrender value.
(m) Cash and cash equivalents
Cash comprises cash on hand and demand deposits. Cash equivalents are short-term, highly liquid
investments that are readily convertible to known amounts of cash, which are subject to an insignificant risk of
changes in value.
49
ClearView Wealth Limited and its subsidiaries
Notes to the financial statements [continued]
Notes to the financial statements
for the year ended 30 June 2010
for the year ended 30 June 2010
continued
continued
Significant accounting policies cont.
3
(n) Employee benefits
A liability is recognised for benefits accruing to employees in respect of wages and salaries, annual leave, long
service leave, and sick leave when it is probable that settlement will be required and they are capable of being
measured reliably.
A liability and expense for bonuses is recognised where contractually obliged or where there is a past practice
that has created a constructive obligation.
Termination benefits are payable when employment is terminated before the normal retirement date, or when
an employee accepts voluntary redundancy in exchange for these benefits. A liability for termination benefits
is recognised when the Group is demonstrably committed to either terminating the employment of current
employees according to a detailed formal plan without possibility of withdrawal or providing termination
benefits as a result of an offer made to encourage voluntary redundancy. Benefits falling due more than 12
months after reporting date are discounted to present value.
Liabilities recognised in respect of short-term employee benefits, are measured at their nominal values using
the remuneration rate expected to apply at the time of settlement.
Liabilities recognised in respect of long-term employee benefits are measured as the present value of the
estimated future cash outflows to be made by the Group in respect of services provided by employees up to
reporting date.
Defined contribution plans
Contributions to defined contribution superannuation plans are expensed when employees have rendered
service entitling them to the contributions.
(o) Financial assets
All financial assets are recognised and derecognised on trade date where the purchase or sale of a financial
asset is under a contract whose terms require delivery of the financial asset within the timeframe established
by the market concerned, and are initially measured at fair value, plus transaction costs, except for those
financial assets classified as at fair value through profit or loss, which are initially measured at fair value.
Financial assets are classified into the following specified categories: financial assets ‘at fair value through
profit or loss’ (FVTPL), ‘held-to-maturity’ investments, ‘available-for-sale’ (AFS) financial assets and ‘loans and
receivables’. The classification depends on the nature and purpose of the financial assets and is determined
at the time of initial recognition.
Effective interest method
The effective interest method is a method of calculating the amortised cost of a debt instrument and of
allocating interest income over the relevant period. The effective interest rate is the rate that exactly
discounts estimated future cash receipts (including all fees on points paid or received that form an integral
part of the effective interest rate, transaction costs and other premiums or discounts) through the expected
life of the debt instrument, or (where appropriate) a shorter period, to the net carrying amount on initial
recognition. Income is recognised on an effective interest basis for debt instruments other than those
financial assets classified as at FVTPL.
Financial assets at FVTPL
Financial assets are classified as at FVTPL when the financial asset is either held for trading or it is
designated as at FVTPL.
A financial asset is classified as held for trading if:
— it has been acquired principally for the purpose of selling it in the near term; or
— on initial recognition it is part of a portfolio of identified financial instruments that the Group manages
together and has a recent actual pattern of short-term profit-taking; or
— it is a derivative that is not designated and effective as a hedging instrument.
50
ClearView Wealth Limited and its subsidiaries
Notes to the financial statements [continued]
A financial asset other than a financial asset held for trading may be designated as at FVTPL upon initial
recognition if:
— such designation eliminates or significantly reduces a measurement or recognition inconsistency that
would otherwise arise; or
— the financial asset forms part of a group of financial assets or financial liabilities or both, which is
managed and its performance is evaluated on a fair value basis, in accordance with the Group’s
documented risk management or investment strategy, and information about the grouping is provided
internally on that basis; or
— it forms part of a contract containing one or more embedded derivatives, and AASB 139 Financial
Instruments: Recognition and Measurement permits the entire combined contract (asset or liability) to be
designated as at FVTPL.
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 ‘net fair value gains and losses’ line item in the
statement of comprehensive income. Fair value is determined in the manner described in note 4.
Held-to-maturity investments
Bills of exchange and debentures with fixed or determinable payments and fixed maturity dates that the Group
has the positive intent and ability to hold to maturity are classified as held-to-maturity investments. Held-to-
maturity investments are measured at amortised cost using the effective interest method less any impairment,
with revenue recognised on an effective yield basis.
Available for sale financial assets
Listed shares and listed redeemable notes held by the Group that are traded in an active market are classified
as Available For Sale (AFS) and are stated at fair value. The Group also has investments in unlisted shares that
are not traded in an active market but that are also classified as AFS financial assets and stated at fair value
(because the directors consider that fair value can be reliably measured). Fair value is determined in the
manner described in note 4. Gains and losses arising from changes in fair value are recognised in other
comprehensive income and accumulated in the investments revaluation reserve, with the exception of
impairment losses, interest calculated using the effective interest method, and foreign exchange gains and
losses on monetary assets, which are recognised in profit or loss. Where the investment is disposed of or is
determined to be impaired, the cumulative gain or loss previously accumulated in the investments revaluation
reserve is reclassified to profit or loss.
Dividends on AFS equity instruments are recognised in profit or loss when the Group’s right to receive the
dividends is established.
The fair value of AFS monetary assets denominated in a foreign currency is determined in that foreign currency
and translated at the spot rate at the end of the reporting period. The foreign exchange gains and losses that
are recognised in profit or loss are determined based on the amortised cost of the monetary asset. Other
foreign exchange gains and losses are recognised in other comprehensive income.
Loans and receivables
Trade receivables, loans, and other receivables that have fixed or determinable payments that are not quoted
in an active market are classified as ‘loans and receivables’. Loans and receivables are measured at
amortised cost using the effective interest method, less any impairment. Interest income is recognised by
applying the effective interest rate, except for short-term receivables when the recognition of interest would be
immaterial.
Impairment of financial assets
Financial assets, other than those at FVTPL, are assessed for indicators of impairment at the end of each
reporting period. Financial assets are considered to be impaired when there is objective evidence that, as a
result of one or more events that occurred after the initial recognition of the financial asset, the estimated
future cash flows of the investment have been affected.
51
ClearView Wealth Limited and its subsidiaries
Notes to the financial statements [continued]
Notes to the financial statements
for the year ended 30 June 2010
for the year ended 30 June 2010
continued
continued
Significant accounting policies cont.
3
For certain categories of financial asset, such as trade receivables, assets that are assessed not to be
impaired individually are, in addition, assessed for impairment on a collective basis. Objective evidence of
impairment for a portfolio of receivables could include the Group’s past experience of collecting payments, an
increase in the number of delayed payments in the portfolio past the average credit period of 60 days, as well
as observable changes in national or local economic conditions that correlate with default on receivables.
For financial assets carried at amortised cost, the amount of the impairment loss recognised is the difference
between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the
financial asset’s original effective interest rate.
The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets
with the exception of trade receivables, where the carrying amount is reduced through the use of an
allowance account. When a trade receivable is considered uncollectible, it is written off against the allowance
account. Subsequent recoveries of amounts previously written off are credited against the allowance
account. Changes in the carrying amount of the allowance account are recognised in profit or loss.
When an AFS financial asset is considered to be impaired, cumulative gains or losses previously recognised in
other comprehensive income are reclassified to profit or loss in the period.
With the exception of AFS equity instruments, if, in a subsequent period, the amount of the impairment loss
decreases and the decrease can be related objectively to an event occurring after the impairment was
recognised, the previously recognised impairment loss is reversed through profit or loss to the extent that the
carrying amount of the investment at the date the impairment is reversed does not exceed what the
amortised cost would have been had the impairment not been recognised.
In respect of AFS equity securities, impairment losses previously recognised in profit or loss are not reversed
through profit or loss. Any increase in fair value subsequent to an impairment loss is recognised in other
comprehensive income.
Reclassification of financial assets
The Group has reclassified certain non-derivative financial assets out of held for trading (part of the FVTPL
category) to AFS financial assets. Reclassification is only permitted in rare circumstances and where the asset
is no longer held for the purpose of selling in the short-term. In all cases, reclassifications of financial assets
are limited to debt instruments. Reclassifications are accounted for at the fair value of the financial asset at
the date of reclassification.
Derecognition of financial assets
The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset
expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the
asset to another entity. If the Group neither transfers nor retains substantially all the risks and rewards of
ownership and continues to control the transferred asset, the Group recognises its retained interest in the
asset and an associated liability for amounts it may have to pay. If the Group retains substantially all the risks
and rewards of ownership of a transferred financial asset, the Group continues to recognise the financial asset
and also recognises a collateralised borrowing for the proceeds received.
(p) Financial liabilities and equity instruments issued by the Group
Classification as debt or equity
Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the
substance of the contractual arrangement.
Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting
all of its liabilities. Equity instruments issued by the Group are recognised at the proceeds received, net of
direct issue costs.
52
ClearView Wealth Limited and its subsidiaries
Notes to the financial statements [continued]
Compound instruments
The component parts of compound instruments (convertible bonds) issued by the Group are classified
separately as financial liabilities and equity in accordance with the substance of the contractual arrangement.
At the date of issue, the fair value of the liability component is estimated using the prevailing market interest
rate for a similar non-convertible instrument. This amount is recorded as a liability on an amortised cost basis
using the effective interest method until extinguished upon conversion or at the instrument’s maturity date.
The equity component is determined by deducting the amount of the liability component from the fair value of
the compound instrument as a whole. This is recognised and included in equity, net of income tax effects,
and is not subsequently remeasured.
Financial guarantee contract liabilities
Financial guarantee contract liabilities are initially measured at their fair values and, if not designated as at
FVTPL, are subsequently measured at the higher of:
— the amount of the obligation under the contract, as determined in accordance with AASB 137 Provisions,
Contingent Liabilities and Contingent Assets; and
— the amount initially recognised less, where appropriate, cumulative amortisation recognised in accordance
with the revenue recognition policies set out at (g) above.
Financial liabilities
Financial liabilities are classified as either financial liabilities ‘at FVTPL’ or ‘other financial liabilities’.
Financial liabilities at FVTPL
Financial liabilities are classified as at FVTPL when the financial liability is either held for trading or it is
designated as at FVTPL.
A financial liability is classified as held for trading if:
— it has been acquired principally for the purpose of repurchasing it in the near term; or
— on initial recognition it is part of a portfolio of identified financial instruments that the Group manages
together and has a recent actual pattern of short-term profit-taking; or
— it is a derivative that is not designated and effective as a hedging instrument.
A financial liability other than a financial liability held for trading may be designated as at FVTPL upon initial
recognition if:
— such designation eliminates or significantly reduces a measurement or recognition inconsistency that would
otherwise arise; or
— the financial liability forms part of a group of financial assets or financial liabilities or both, which is managed
and its performance is evaluated on a fair value basis, in accordance with the Group’s documented risk
management or investment strategy, and information about the grouping is provided internally on that
basis; or
— it forms part of a contract containing one or more embedded derivatives, and AASB 139 Financial
Instruments: Recognition and Measurement permits the entire combined contract (asset or liability) to be
designated as at FVTPL.
Financial liabilities 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 interest paid on
the financial liability and is included in the ‘other gains and losses’ line item in the statement of comprehensive
income. Fair value is determined in the manner described in note 4.
Other financial liabilities
Other financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs.
Other financial liabilities are subsequently measured at amortised cost using the effective interest method, with
interest expense recognised on an effective yield basis.
53
ClearView Wealth Limited and its subsidiaries
Notes to the financial statements [continued]
Notes to the financial statements
for the year ended 30 June 2010
for the year ended 30 June 2010
continued
continued
Significant accounting policies cont.
3
The effective interest method is a method of calculating the amortised cost of a financial liability and of
allocating interest expense over the relevant period. The effective interest rate is the rate that exactly
discounts estimated future cash payments through the expected life of the financial liability, or (where
appropriate) a shorter period, to the net carrying amount on initial recognition.
Derecognition of financial liabilities
The Group derecognises financial liabilities when, and only when, the Group’s obligations are discharged,
cancelled or they expire.
(q) Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past
event, it is probable that the Group will be required to settle the obligation, and a reliable estimate can be
made of the amount of the obligation.
The amount recognised as a provision is the best estimate of the consideration required to settle the present
obligation at reporting date, taking into account the risks and uncertainties surrounding the obligation. Where
a provision is measured using the cashflows estimated to settle the present obligation, its carrying amount is
the present value of those cashflows.
When some or all of the economic benefits required to settle a provision are expected to be recovered from a
third party, the receivable is recognised as an asset if it is virtually certain that reimbursement will be received
and the amount of the receivable can be measured reliably.
Contingent liabilities acquired in a business combination
Contingent liabilities acquired in a business combination are initially measured at fair value at the date of
acquisition. At subsequent reporting dates, such contingent liabilities are measured at the higher of the
amount that would be recognised in accordance with AASB 137 ‘Provisions, Contingent Liabilities and
Contingent Assets’ and the amount initially recognised less cumulative amortisation recognised in accordance
with AASB 118 ‘Revenue’.
(r) Restructurings
A restructuring provision is recognised when the Group has developed a detailed formal plan for the
restructuring and has raised a valid expectation in those affected that it will carry out the restructuring by
starting to implement the plan or announcing its main features to those affected by it. The measurement of a
restructuring provision includes only the direct expenditures arising from the restructuring, which are those
amounts that are both necessarily entailed by the restructuring and not associated with the ongoing activities
of the entity.
(s) Financial instruments issued by the company
Debt and equity instruments
Debt and equity instruments are classified as either liabilities or as equity in accordance with the substance of
the contractual arrangement. An equity instrument is any contract that evidences a residual interest in the
assets of an entity after deducting all of its liabilities. Equity instruments issued by the Group are recorded at
the proceeds received, net of direct issue costs.
(t) Intangible assets acquired in a business combination
Intangible assets acquired in a business combination and recognised separately from goodwill are initially
recognised at their fair value at the acquisition date (which is regarded as their cost).
Subsequent to initial recognition, intangible assets acquired in a business combination are reported at cost
less accumulated amortisation and accumulated impairment losses, on the same basis as intangible assets
that are acquired separately.
54
ClearView Wealth Limited and its subsidiaries
Notes to the financial statements [continued]
(u) Impairment of other tangible and intangible assets
At each reporting date, the Group reviews its tangible and intangible assets to determine whether there is any
indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable
amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where the
asset does not generate cash flows that are independent from other assets, the Group estimates the
recoverable amount of the cash-generating unit to which the asset belongs. Where a reasonable and
consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-
generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a
reasonable and consistent allocation basis can be identified.
Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for
impairment annually and whenever there is an indication that the asset may be impaired. The recoverable
amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated
future cash flows are discounted to their present value using a discount rate that reflects current market
assessments of the time value of money and the risks specific to the asset for which the estimates of future
cash flows have not been adjusted. If the recoverable amount of an asset (or cash-generating unit) is
estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is
reduced to its recoverable amount. An impairment loss is recognised in profit or loss immediately, unless the
relevant asset is carried at fair value, in which case the impairment loss is treated as a revaluation decrease.
Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is
increased to the revised estimate of its recoverable amount, but only to the extent that the increased carrying
amount does not exceed the carrying amount that would have been determined had no impairment loss been
recognised for the asset (cash-generating unit) in prior years. A reversal of an impairment loss is recognised
immediately in profit or loss, unless the relevant asset is carried at fair value, in which case the reversal of the
impairment loss is treated as a revaluation increase.
(v) Property Plant and Equipment
Each class of property, plant and equipment is carried at cost less, where applicable, any accumulated
depreciation and impairment. Property, plant and equipment is amortised over its expected useful life being,
office equipment 33% and furniture & fittings 33%. Depreciation is calculated on a straight-line basis so as to
write off the net cost or other revalued amount of each asset over its expected useful life to its estimated
residual value. The estimated useful lives, residual values and depreciation method are reviewed at the end of
each annual reporting period, with the effect of any changes recognised on a prospective basis.
(w) Share-based payments
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. Fair value is measured by use of a binomial model. The
expected life used in the model has been adjusted, based on management’s best estimate, for the effects of
non-transferability, exercise restrictions, and behavioural considerations. Details regarding the determination
of the fair value of equity-settled share-based transactions are set out in note 38.
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, if any, is recognised in
profit or loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment
to the employee share plan reserve.
The policy described above is applied to all equity-settled share-based payments that were granted after 7
November 2002 and vested after 1 January 2005. No amounts have been recognised in the financial
statements in respect of other equity-settled shared-based payments.
55
ClearView Wealth Limited and its subsidiaries
Notes to the financial statements [continued]
Notes to the financial statements
for the year ended 30 June 2010
for the year ended 30 June 2010
continued
continued
Significant accounting policies cont.
3
(x) Income tax
Current tax
Current tax is calculated by reference to the amount of income taxes payable or recoverable in respect of the
taxable profit or tax loss for the period. It is calculated using tax rates and tax laws that have been enacted or
substantively enacted by reporting date. Current tax for current and prior periods is recognised as a liability
(or asset) to the extent that it is unpaid (or refundable).
Deferred tax
Deferred tax is accounted for using the balance sheet liability method. Temporary differences are differences
between the tax base of an asset or liability and its carrying amount in the Statement of Financial Position.
The tax base of an asset or liability is the amount attributed to that asset or liability for tax purposes.
In principle, deferred tax liabilities are recognised for all taxable temporary differences. Deferred tax assets are
recognised to the extent that it is probable that sufficient taxable amounts will be available against which
deductible temporary differences or unused tax losses and tax offsets can be utilised. However, deferred tax
assets and liabilities are not recognised if the temporary differences giving rise to them arise from the initial
recognition of assets and liabilities (other than as a result of a business combination) which affects neither
taxable income nor accounting profit. Furthermore, a deferred tax liability is not recognised in relation to
taxable temporary differences arising from the initial recognition of goodwill.
Deferred tax liabilities are recognised for taxable temporary differences associated with investments in
subsidiaries and associates and interests in joint ventures except where the Group is able to control the
reversal of the temporary differences and it is probable that the temporary differences will not reverse in the
foreseeable future. Deferred tax assets arising from deductible temporary differences associated with these
investments and interests are only recognised to the extent that it is probable that there will be sufficient
taxable profits against which to utilise the benefits of the temporary differences and they are expected to
reverse in the foreseeable future.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period(s)
when the asset and liability giving rise to them are realised or settled, based on tax rates (and tax laws) that
have been enacted or substantively enacted by reporting date. The measurement of deferred tax liabilities
and assets reflects the tax consequences that would follow from the manner in which the Group expects, at
the reporting date, to recover or settle the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation
authority and the company/Group intends to settle its current tax assets and liabilities on a net basis.
Current and deferred tax for the period
Current and deferred tax is recognised as an expense or income in the income statement, except when it
relates to items credited or debited directly to equity, in which case the deferred tax is also recognised directly
in equity, or where it arises from the initial accounting for a business combination, in which case it is taken into
account in the determination of goodwill or excess.
Leased assets
Leases are classified as finance leases when the terms of the lease transfer substantially all the risks and rewards
incidental to ownership of the leased asset to the lessee. All other leases are classified as operating leases.
56
ClearView Wealth Limited and its subsidiaries
Notes to the financial statements [continued]
Group as lessee
Assets held under finance leases are initially recognised at their fair value or, if lower, at amounts equal to the
present value of the minimum lease payments, each determined at the inception of the lease. The
corresponding liability to the lessor is included in the Statement of Financial Position as a finance lease
obligation.
Lease payments are apportioned between finance charges and reduction of the lease obligation so as to
achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged
directly against income. Contingent rentals are recognised as expenses in the periods in which they are
incurred.
Finance leased assets are amortised on a straight-line basis over the estimated useful life of the asset.
Operating lease payments are recognised as an expense on a straight-line basis over the lease term, except
where another systematic basis is more representative of the time pattern in which economic benefits from
the leased asset are consumed. Contingent rentals arising under operating leases are recognised as an
expense in the period in which they are incurred.
4
Critical accounting judgments and key sources of
estimation uncertainty
In the application of the Group’s accounting policies management is required to make judgments, estimates
and assumptions about carrying values of assets and liabilities that are not readily apparent from other
sources. The estimates and associated assumptions are based on historical experience and various other
factors that are believed to be reasonable under the circumstance, the results of which form the basis of
making the judgments. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting
estimates are recognised in the period in which the estimate is revised if the revision affects only that period or
in the period of the revision and future periods if the revision affects both current and future periods.
Critical judgments in applying the Group’s accounting policies
The critical judgments (apart from those involving estimations, which are dealt with below), that management
has made in the process of applying the Group’s accounting policies and that have the most significant effect
on the amounts that are recognised in the financial statements are discussed in further detail below.
Key sources of estimation uncertainty
The key assumptions concerning the future, and other key sources of estimation uncertainty at the financial
position date, that have a significant risk of causing a material adjustment to the carrying amount of assets
and liabilities within the next financial year are discussed in further detail below. The resulting accounting
estimates will, by definition, seldom equal the actual results.
Judgements made by management in the application of Australian Accounting Standards that have a
significant effect on the financial report and estimates are:
— Life insurance policy liabilities;
— Assets arising from reinsurance contracts;
— Recoverability of intangible assets;
— Deferred tax assets; and
— Available for sale financial assets.
57
ClearView Wealth Limited and its subsidiaries
Notes to the financial statements [continued]
Notes to the financial statements
for the year ended 30 June 2010
for the year ended 30 June 2010
continued
continued
4
Critical accounting judgments and key sources of
estimation uncertainty cont.
Life insurance policy liabilities
Life insurance policy liabilities are, in the majority of cases, determined using an individual policy-by-policy
calculation. Where liabilities are not determined by individual policy valuation, they are computed using
statistical or mathematical methods, which are expected to give approximately the same results as if an
individual liability were calculated for each contract. The calculations are made by suitably qualified personnel
on the basis of recognised actuarial methods, with due regard to relevant actuarial principles. The
methodology takes into account the risks and uncertainties of the particular classes of life insurance business
written.
The key factors that affect the estimation of these liabilities and related assets are:
— The cost of providing benefits and administering these insurance contracts;
— Mortality and morbidity experience on life insurance products; and
— Discontinuance experience, which affects ClearView Life’s ability to recover the cost of acquiring new
business over the lives of the contracts.
In addition, factors such as regulation, competition, interest rates, taxes, securities market conditions and
general economic conditions affect the level of these liabilities. Details of specific actuarial policies and
methods are set out further in this note.
Assets arising from reinsurance contracts
Assets arising from reinsurance contracts are also computed using the above methods. In addition, the
recoverability of these assets is assessed on a periodic basis to ensure that the balance is reflective of the
amounts that will ultimately be received, taking into consideration factors such as counterparty and credit risk.
Impairment is recognised where there is objective evidence that the Company may not receive amounts due
to it and these amounts can be reliably measured.
Recoverability of intangible assets
The carrying amount of intangible assets at the financial position date was $59.2 million (2009: $6.7 million).
Intangible assets acquired in a business combination are identified and recognised separately from goodwill
where they satisfy the definition of an intangible asset. Subsequent to initial recognition, intangible assets
acquired in a business combination are reported at cost less accumulated amortisation and accumulated
impairment losses, on the same basis as intangible assets acquired separately.
ComCorp Client Book - Intangible
The intangible assets arose on the acquisition of ComCorp and represent the Cornerstone Software System
(CWT) and Client Book.
Expected synergies, growth and the ingrained experience of personnel were recognised as part of goodwill as
the fair values of these intangible assets cannot be reliably estimated.
The Client Book is amortised on a straight line basis over a period of 15 years which the Directors assess as
the intangible assets useful life. The CWT system is amortised on a straight line basis over a period of 5 years
which the Directors assess as the intangible asset’s useful life.
There were no impairment indicators identified in the current financial year. The fair value of identifiable
intangible assets acquired in the Group was determined by estimating the future cash flows to be derived by
these assets and discounting the cash flows with a post-tax discount rate.
58
ClearView Wealth Limited and its subsidiaries
Notes to the financial statements [continued]
ClearView Group Holdings Client Book – Intangible
The intangibles arose on the acquisition of ClearView Group Holdings and represent the in force risk and
investment contracts, financial planning and funds management Client Book. The valuation of these assets
were performed by suitably qualified personnel on the basis of recognised actuarial methods or independent
valuation.
The individual intangibles are amortised over their expected useful lives at annual rates reflective of their
expected utilisation.
Further information about the intangible assets are detailed in note 23.
Impairment of goodwill
The carrying amount of goodwill at the balance sheet date was $4.2 million (2009: $4 million).
Determining whether goodwill is impaired requires an estimation of the value-in-use of the cash-generating
units to which goodwill has been allocated. The value-in-use calculation requires the entity to estimate the
future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to
calculate the present value.
Goodwill has been allocated for impairment testing purposes to the financial planning cash-generating units.
ComCorp - Goodwill
ComCorp acquired the business of Community and Corporate Financial Services Pty Limited on 9 April 2009.
Goodwill arose in the business combination because the cost of the business combination included a control
premium paid to acquire the business assets and assume certain liabilities. In addition, the consideration paid
for the combination effectively included amounts in relation to the benefit of: expected synergies; revenue
growth; improved referral source penetration; future market development and the assembled work force and
ingrained experience of personnel. These benefits are not recognised separately from goodwill as the future
economic benefits arising from them are not capable of being measured separately.
The Group tests for impairment at each reporting date whenever there is an indication that the asset may be
impaired. There were no impairment indicators identified in the current period. Management believes that any
reasonable possible change in the key assumptions on which the recoverable amount is based would not
cause the aggregate carrying amount to exceed the aggregate recoverable amount of the cash-generating
unit.
Further information about the goodwill is detailed in note 22.
Available for sale financial assets
The Board has considered whether shares held had a prolonged or significant decrease in value below cost.
This determines whether the unrealised loss recognised in the asset revaluation reserve should be recycled
through the profit and loss in accordance with AASB 139. Consistent with the policy adopted at 30 June
2009, it was decided to take the unrealised loss from these shares through profit and loss account. As at 30
June 2010, the investment held in the listed share portfolio is considered impaired and accordingly any
unrealised loss was recycled through the profit and loss account.
Deferred tax asset
The Board has considered that it is probable that sufficient taxable amounts will be available against which
deductible temporary differences or unused tax losses and tax offsets can be utilised.
59
ClearView Wealth Limited and its subsidiaries
Notes to the financial statements [continued]
Notes to the financial statements
for the year ended 30 June 2010
for the year ended 30 June 2010
continued
continued
4
Critical accounting judgments and key sources of
estimation uncertainty cont.
The unrealised losses (once crystallised) and the realised investment disposal losses are considered by the
Board to be revenue in nature and represent Group consolidated losses that are subject to the continuity of
ownership test. Based on tax advice, the Group continues to pass the continuity of ownership test as at the
date of this report. Therefore losses can be recouped by the tax consolidated Group against all income of the
Group – including income of a newly joining subsidiary (from the date of joining) including the newly acquired
entities. The Board is therefore of the view that it is probable that the tax consolidated group will utilise the
losses against the profits of acquired entities in the foreseeable future. This will continue to be monitored and
assessed by the Board at each reporting date and to the extent there is a change in circumstance or strategy
any impairment will be recognised accordingly.
Actuarial methods and assumptions
The effective date of the actuarial report on life insurance policy liabilities, life investment policy liabilities and
solvency reserves is 30 June 2010. The actuarial report was prepared by the Appointed Actuary, Greg
Martin. The actuarial report indicates that Appointed Actuary is satisfied to the accuracy of the data upon
which policy liabilities have been determined.
(a) Methods used in the valuation of policy liabilities
The policy liabilities have been determined in accordance with applicable accounting standards. Policy
liabilities for life insurance contracts are valued in accordance with AASB 1038 Life Insurance Contracts,
whereas policy liabilities for life investment contracts are valued in accordance with AASB 139 Financial
Instruments: Recognition and Measurement.
Life Insurance and life investment policy liabilities have been calculated in accordance with the relevant
Prudential Standards and the Life Insurance Act 1995. Life insurance policy liabilities have been calculated in
a way which allows for the systematic release of planned margins as services are provided to policyholders
and premiums are received.
The methods used for the major product groups are as follows:
Related product group
Fund 1 Advice lump sum insurance
Fund 1 Non-advice lump sum insurance
Fund 1 Accidental death
Fund 1 Income protection
Fund 1 Integrated products
Fund 2 Super term
Fund 2 Investments
Fund 4 Investments
Method
Projection
Projection
Projection
Accumulation
Accumulation
Projection
Accumulation
Accumulation
Profit carrier
Premiums
Premiums
Premiums
N/A
N/A
Premiums
N/A
N/A
The projection method uses the discounted value of future policy cash flows (premiums, expenses and claims)
with a reserve for expected future profits. The policy liabilities for life investment contracts are determined as
the fair value of the policy holders’ accounts under the accumulation method with no profit carrier.
(b) Actuarial assumptions used in the valuation of life insurance policy liabilities
Key assumptions used in the calculations of life insurance policy liabilities are as follows:
60
ClearView Wealth Limited and its subsidiaries
Notes to the financial statements [continued]
Life insurance policy liabilities
Risk free discount rate: Average effective rate is 5.49% being the annualised yields on government bonds as
at the valuation date adjusted for shallow market and liquidity premium, net of investment management
expenses.
Acquisition expenses: Per policy acquisition expense assumptions were based on the actual expenses for the
6 months to 30 June 2010.
Maintenance expense and inflation: The per policy maintenance expense assumptions were based on the
budgeted level of expenses. Expense inflation of 3.5% p.a. was assumed.
Lapses: Rates used vary by product, duration, age and premium frequency, and have been based on an
analysis of the ClearView Life’s experience over recent years with allowance for expected trends.
Mortality: Rates used vary by product, age, sex, and smoker status and have been based on the ClearView
Life’s mortality experience. The underlying mortality table used was IA95-97 allowing for selection. The
assumptions for this valuation are the same as at December 2009.
Morbidity (TPD and Trauma): Rates varying by age, sex, and smoking status based on the industry experience
observed by the ClearView Life’s reinsurer.
Tax: 30% of expected gross operating result.
(c) Effects of changes in actuarial assumptions (over 1 month June)
Assumption category
Economic
Maintenance expenses
Lapses
Mortality & morbidity
Other assumptions
Total
Effect on profit margins
increase / (decrease)
$’000
Effect on policy liabilities
increase / (decrease)
$’000
–
2,758
–
–
–
–
2,758
–
(1,727)
–
–
–
–
(1,727)
(d) Processes used to select assumptions
Discount rate
Benefits under life insurance contracts are not contractually linked to the performance of the assets held. As
a result, the life insurance policy liabilities are discounted for the time value of money using risk-free discount
rates that are based on current observable, objective rates that relate to the nature, structure and term of the
future obligations. The risk free discount rate is based on government bond rates adjusted for the shallow
market premium of government bonds and adjusted for the liquidity margin between highly liquid government
bonds and an illiquid policy liability asset.
Maintenance expenses and inflation
The budgeted level of maintenance expenses was taken as an appropriate expenses base per policy.
Per policy maintenance expenses are assumed to increase in the future at a rate which is a combination of
wage and consumer price inflation (CPI) assumptions. The future CPI assumption was derived from the
Reserve Bank of Australia expectation of future inflation. The future wage increase assumption is assumed to
be 1% higher than CPI.
Per policy acquisition expenses were derived from the analysis of acquisition expenses in the general ledger
and management accounts.
61
ClearView Wealth Limited and its subsidiaries
Notes to the financial statements [continued]
Notes to the financial statements
for the year ended 30 June 2010
for the year ended 30 June 2010
continued
continued
4
Critical accounting judgments and key sources of
estimation uncertainty cont.
Taxation
It has been assumed that current tax legislation and rates continue unaltered.
Mortality and morbidity
An appropriate base table of mortality and morbidity is chosen for the type of product being written. An
investigation into the actual experience of the Company over recent years is performed and the Company’s
mortality experience is compared against the rates in the base table. Where data is sufficient to be statistically
credible, the statistics generated by the data are used with reference to an industry table. Where data is
insufficient to be statistically credible, the basis chosen is the industry experience as advised by the ClearView
Life’s reinsurers.
Lapse
An investigation into the actual lapse experience of the ClearView Life over the most recent years is performed
and statistical methods are used to determine appropriate lapse rates. An allowance is then made for any
trends in the data to arrive at a best estimate of future lapse rates.
(d) Sensitivity analysis
The Company conducts sensitivity analyses to quantify the exposure to risk of changes in the key underlying
variables such as interest rates, expenses, mortality, morbidity and lapse. The valuations included in the
reported results and ClearView Life’s best estimate of future performance are calculated using certain
assumptions about these variables. The movement in any key variable will impact the reported performance
and net assets of ClearView Life and the consolidated entity, and as such represents a risk.
Variable
Impact of movement in underlying variable
Interest Rate Risk
Expense Risk
Mortality Rates
Morbidity Rates
Lapses
The life insurance policy liabilities are calculated using a risk-free discount rate that is
derived from market interest rates. Changes in market interest rates will affect the
present value of cash flows and profit margins in the policy liabilities, which in turn will
affect the profit and shareholder equity.
An increase in the level (or growth) of expenses over assumed levels will decrease
profit and shareholder equity.
For life insurance contracts providing death benefits, increased rate of mortality would
lead to higher levels of claims, increasing associated claims cost and thereby reducing
profit and shareholder equity.
The cost of claims under TPD and trauma cover depends on the incidence of
policyholders becoming totally and permanently disabled or suffering a “trauma” event
such as a heart attack or stroke. Higher incidence would increase claim costs,
thereby reducing profit and shareholder equity.
Lapse risk represents the extent to which policyholders choose not to renew their
policy, allowing it to lapse. An increase in the lapse rates will have a negative effect
on profit and net assets, because of the loss of future revenue to recover acquisition
costs.
62
ClearView Wealth Limited and its subsidiaries
Notes to the financial statements [continued]
The table below illustrates how outcomes during financial year ended 30 June 2010 (1 month) in respect of
key actuarial variables would have impacted the reported life insurance policy liabilities, profit and equity for
that financial period.
Impact on policy liabilities
Net of
Gross of
Variable
Interest rates
Mortality & morbidity
Lapses
Maintenance expenses
Change in
variable*
+100 bp
- 100 bp
110.0%
90.0%
110.0%
90.0%
110.0%
90.0%
reinsurance
reinsurance
$’000
6,431
(7,571)
–
–
56
(56)
–
–
$’000
6,467
(7,609)
–
–
56
(56)
–
–
Impact on net profit
Gross of
reinsurance
$’000
Net of
reinsurance
$’000
(4,501)
5,300
(4,527)
5,326
(87)
87
(40)
40
(42)
42
(76)
76
(40)
40
(42)
42
* Note: Interest rate sensitivities show the change to policy liabilities and profit from a change in the risk-free discount rate
average of 5.49%, if the discount rate was increased by 1% to an average of 6.49%, or decreased by 1% to 4.49%. The other
sensitivities show how different the policy liabilities and reported profit would have been if the ClearView Life’s experience in the
current year in relation to those variables had been higher or lower by 10% of that experienced in the Company’s actual during
the period.
5 Risk management
ClearView Life’s activities expose it to a variety of risks, both financial and non-financial.
Key financial risks include market risk (interest rate risk and price risk), credit risk and liquidity risk.
Non-financial risks include compliance risk and operational risk.
Risk management roles and responsibilities
Risk management is an integral part of the management process. Management has a structured framework
to assist in identifying and managing key risks in achieving the company’s strategic vision. This is fundamental
in resource allocation decisions and prioritisation of activities to achieve the Company’s business objectives.
The Audit, Risk and Compliance Committee, on behalf of the Board, periodically reviews the risk management
process in place.
Internal audit activities are focused on key risks and on the key risk controls identified as part of the risk
assessment process. As at the date of this report, the Company was in the process of appointing an
appropriate provider to perform an outsourced internal audit function.
Financial risk
Financial risk borne by ClearView Life relates to the Shareholder’s Fund and working capital within the
Statutory Funds only. Financial risk borne by policyholders relates to policyholder funds within the Statutory
Funds. Therefore financial risks associated with fluctuations in investment-linked financial assets are passed
on to policyholders.
(a) Market risk
Market risk is the risk that financial instruments will be affected by changes in interest rates, foreign exchange
rates and equity prices.
63
ClearView Wealth Limited and its subsidiaries
Notes to the financial statements [continued]
Notes to the financial statements
for the year ended 30 June 2010
for the year ended 30 June 2010
continued
continued
5 Risk management cont.
(i) Interest rate risk
Interest rate risk borne by ClearView Life arises on the Shareholder’s Fund and working capital within the
Statutory Funds which are invested in fixed interest funds and cash. Interest rate risk is managed by
ClearView Life pursuant to the Capital Management Plan which governs the investment of capital.
(ii) Price risk
Equity price risk is the risk that the fair value of investments in equities decreases or increases as a result of
changes in market prices, whether those changes are caused by factors specific to the individual share price
or factors affecting all equity instruments in the market. As at 30 June 2010, ClearView Life had no equity
price risk exposure from the Shareholder’s Fund and working capital within the Statutory Funds. All equity
price risk is borne by the policy holder.
Investment activity is undertaken in accordance with the investment philosophy, approved by the Board,
which amongst other things stipulates the investment allocation mix, the portfolio’s risk characteristics,
management response plans and the use of derivatives.
(b) Credit risk
Credit risk exposures arising from investment activities are calculated prior to entering into any significant
financial transaction with another third party. These are compared to authorised credit limits before further
transactions are undertaken with each counterparty. ClearView Life does not expect any of these
counterparties to fail to meet their obligations, and therefore does not require collateral or other security to
support these credit risk exposures.
Specific reserves are held under regulatory capital adequacy and solvency standards against credit risk.
The credit quality of debt financial assets is managed by the appointed managers using rating categories of
major research houses in accordance with the investment mandate of the fund. The fund’s exposure in each
grade is monitored on a daily basis. This review process allows assessment of the potential loss as a result of
risks and corrective action can be taken in a timely manner.
(c) Liquidity risk
Liquidity risk is the risk that ClearView Life will encounter difficulty in meeting obligations associated with
financial liabilities. This risk is controlled through the fund’s investment in assets which are readily convertible
into cash.
ClearView Life is exposed to liquidity risk via daily calls in cash resources from benefit payments for claims,
surrenders and maturity of policies.
The assets backing policy liabilities for Statutory Funds 1 and 2 are invested in unit trusts that invest in cash
securities, thereby minimising liquidity risk. The shareholder’s assets are invested in cash via unit trusts. In
addition, the Shareholder’s Fund has access to a $5 million overdraft facility.
ClearView Life maintains a level of cash in its trading account to manage liquidity. The level of liquidity
required is reviewed daily and forecast twice weekly, taking into account the timing of expected cash flows,
the likelihood of significant benefit outlays over the short term and known significant one off payments.
To control liquidity risk, ClearView Life invests in financial instruments which, under normal market conditions,
are readily convertible to cash. In addition, ClearView Life operates within established limits to ensure that
there is no concentration of risk. This is done via the diversification of underlying Investment Managers and/or
asset classes.
64
ClearView Wealth Limited and its subsidiaries
Notes to the financial statements [continued]
Under the terms of the Product Disclosure Statements and Constitutions for the related registered schemes,
CFML has the ability to manage liquidity risk by delaying redemptions to policyholders if necessary, until funds
are available. To date, CFML has continued to meet redemptions without imposing delays.
Fair Value Hierarchy
The table below outlines financial instruments carried at fair value, by valuation method. The different levels
have been defined as follows:
— Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities
— Level 2: inputs other than quoted prices included within level 2 that are observable for asset or liability,
either directly (i.e., as prices) or indirectly (i.e., derived from prices)
— Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
30 June 2010
Equity securities
Fixed interest securities
Unit trusts
Level 1
Level 2
$’000
$’000
Level 3
$’000
Total
$’000
481,779
–
451,846
–
496,307
–
–
–
–
481,779
496,307
451,846
933,625
496,307
– 1,429,932
Insurance risk
The life insurance risk activities of ClearView Life are concerned with the pricing, acceptance and management
of the mortality and morbidity risks of policy holders.
Insurance risks are controlled through the use of underwriting procedures, appropriate premium rates and
policy charges and appropriate reinsurance arrangements. The Appointed Actuary provides advice to the
Board of Directors on product pricing, premium rates, policy changes, terms and conditions of products and
reinsurance arrangements. Controls are also maintained over claims management practices to help ensure
the correct and timely payment of insurance claims.
(a) Risk management objectives and policies for mitigating insurance risk
Portfolio of risks
ClearView Life issues term life insurance contracts and disability insurance contracts. The performance of the
Company and its continuing ability to write business depends on its ability to pre-empt and control risks.
ClearView Life has a risk strategy that has been approved by the Board. It summarises ClearView Life’s
approach to risk and risk management.
Risk Strategy
In compliance with contractual and regulatory requirements, a strategy is in place to ensure that the risks
underwritten satisfy policyholders’ risk and reward objectives whilst not adversely affecting ClearView Life’s
ability to pay benefits and claims when due. The strategy involves the identification of risks by type, impact
and likelihood, the implementation of processes and controls to mitigate the risks, the continuous monitoring
and improvement of the procedures in place to minimise the chance of an adverse compliance or operational
risk event occurring. Included in this strategy is the process for underwriting and product pricing to ensure
products are appropriately priced. Capital management is also a key aspect of ClearView Life’s risk
management strategy. Capital requirements are managed in accordance with the Board approved Capital
Management Policy and the relevant Prudential Standards.
65
ClearView Wealth Limited and its subsidiaries
Notes to the financial statements [continued]
Notes to the financial statements
for the year ended 30 June 2010
for the year ended 30 June 2010
continued
continued
5 Risk management cont.
Allocation of Capital
Capital is allocated by ClearView Life to the portfolios of contracts or is held in a central reserve based on
management’s assessment of the risks to which each line of business is exposed and its view of the
profitability of the products that are sold.
Solvency margin requirements established by the Prudential Standards are in place to reinforce safeguards for
policyholders’ interests, that are primarily the ability to meet future claims payments to policyholders. The
solvency margins measure the excess of the value of the insurer’s assets over the value of its liabilities, each
element being determined in accordance with the applicable valuation rules. This margin must be maintained
throughout the year, not just at year end.
Management reporting
ClearView Life reports monthly financial and operational results to the Board. The information, the process by
which it is gathered and the controls over the process will be subject to annual review by ClearView Life’s
internal auditors that are in the process of being appointed.
In addition, annual detailed investigations are performed on the mortality, morbidity and persistency
experience of the business.
(a) Methods to limit or transfer insurance risk exposures
Reinsurance
ClearView Life purchases reinsurance to manage the exposure to accepted insurance risk. ClearView Life
cedes to specialist reinsurance companies a proportion of its portfolio for certain types of insurance risk. This
serves primarily to reduce the net liability on large individual risks and provide protection against large losses.
These reinsurance companies are regulated by Australian Prudential Regulatory Authority (“APRA”) and have
strong credit ratings.
ClearView Life periodically reviews reinsurance and retention levels.
Underwriting procedures
Strategic underwriting decisions are put into effect using the underwriting procedures detailed in ClearView
Life’s underwriting manual. Such procedures include limits to delegated authorities and signing powers. The
underwriting process is subject to monitoring by ClearView Life’s internal auditors to ensure adequate controls
are in place over the underwriting process and that the controls are effective in accordance with the current
risk based audit methodologies.
Claims management
Strict claims management procedures help ensure the timely and correct payment of claims in accordance
with policy conditions. This is particularly necessary for disability business where claims are paid as an
income source for policy holders.
Statutory capital adequacy requirements
ClearView Life’s insurance operations are subject to minimum regulatory capital requirements as determined
by the Appointed Actuary, in accordance with the relevant Life Insurance Prudential Standards.
Asset and liability management techniques
Assets are allocated to different classes of business using a risk-based approach. For life insurance products
management of market risk is generally less critical as the amounts and timing of claims do not vary
significantly with interest rates or other market conditions that affect the underlying investments. Premiums
received and returns obtained from investments provide the liquidity to meet claims payments and associated
expenses as they arise.
For investment-linked products, the interest and market risks are passed on to the policyholder. For the
guaranteed cash options, assets are backed by cash securities, and as such risk in effectively matched.
66
ClearView Wealth Limited and its subsidiaries
Notes to the financial statements [continued]
(b) Concentration of insurance risk
The Company writes individual insurance business providing mortality and morbidity benefit payments. The type
of business written would not be expected to provide significant exposure to concentrations of risk.
Any concentrations of risk are managed through the holding of capital (above statutory requirements) in
accordance with ClearView Life’s Capital Management Policy; there is a specific allowance in the Target
Surplus Policy that holds target surplus capital against insurance risk concentration.
Risk on individual lives is limited through the use of surplus reinsurance arrangements whereby ClearView
Life’s maximum exposure to an individual life is capped.
Age exposure is mitigated through a policy of maximum ages of entry for products. Premium rates generally
rise with age to reflect higher claims likelihood.
(c) Terms and conditions of insurance contracts
The nature of the terms of the life insurance contracts written are such that certain external variables can be
identified on which related cash flows for claims payments depend. The table below provides an overview of
the key variables upon which the amount of related cash flows are dependent.
Type of contract
Detail of contract workings
Non-participating life
insurance contracts
with fixed terms (Term
Life and Disability)
Benefits paid on death or
ill health that are fixed and
not at the discretion of
the issuer
Nature of compensation
for claims
Key variables that affect
the timing and uncertainty
Benefits defined by the
insurance contract are
determined by the contract
obligation of the issuer and are
not directly affected by the
performance of the underlying
assets or the performance of
the contracts as a whole
Mortality
Morbidity
Market earning rates
Interest rates
Discontinued rates
Expenses
6 Solvency requirements of the statutory funds
Distribution of the retained profits shown is limited by the prudential capital requirements pursuant to the Life
Insurance Act 1995, the detailed provisions of which are specified by prudential standards. The APRA
Prudential Standard LPS 2.04 Solvency Standard prescribes a minimum capital requirement, the solvency
requirement, for each statutory fund of the Company. The solvency reserves are as follows:
Solvency reserve % (1)
Coverage of reserve (2)
Explanatory Notes
Statutory Fund
No. 1
Statutory Fund
No. 2
Statutory Fund
No. 4
Statutory Fund
Total
2.3
27.7
0.8
5.3
1.4
2.1
1.4
2.8
(1) The solvency reserve is the amount by which the solvency requirement exceeds the sum of the minimum termination value of
life and investment contracts and other non-policy liabilities. The solvency reserve % shown is the amount of the solvency
reserve expressed as a percentage of the sum of the minimum termination value of life insurance and investment contracts
and other non-policy liabilities. A smaller percentage indicates a smaller solvency reserve (relative to the liabilities of the fund).
(2) The coverage of the solvency reserve is the number of times the solvency reserve is covered by the assets in excess of the
solvency requirement. A number greater than 1 indicates that a fund has assets in excess of the solvency requirement. All of
ClearView Life’s statutory funds have assets in excess of the solvency requirements.
67
ClearView Wealth Limited and its subsidiaries
Notes to the financial statements [continued]
Notes to the financial statements
for the year ended 30 June 2010
for the year ended 30 June 2010
continued
continued
6 Solvency requirements of the statutory funds cont.
Capital management
ClearView Life is required to maintain minimum levels of capital to meet both solvency and capital adequacy
requirements.
The Solvency Standard sets out the level of capital required to ensure that under a range of adverse
circumstances ClearView Life can meet its existing obligations to members and creditors. This is essentially
based on ensuring sufficient capital is available to meet accrued liabilities and obligations if there were an
orderly termination of the fund.
The Capital Adequacy Standard sets out the level of capital required, based on a going concern basis where
the requirement is for ClearView Life to demonstrate that it has sufficient capital to accept premiums and
investments from new and existing policyholders, fund its business plans, absorb short term adverse
experience from time to time, and continue to remain solvent.
ClearView Life is required to comply with these standards on a continuous basis and reports results to APRA
on a quarterly basis.
The Board of ClearView Life has established a capital target in excess of the prudential capital adequacy
requirements to cover both investment and non-investment risks. This buffer further protects against adverse
variations in experience that could reduce retained earnings and/or increase the statutory minimum capital
adequacy requirement in order to reduce the likelihood of a breach of the capital adequacy requirements.
7 Segment information
The Group has adopted AASB 8 Operating Segments (and AASB 2008-3 Amendments to Australian
Accounting Standards arising from AASB 8 with effect from 1 July 2009). AASB 8 requires operating
segments to be identified on the basis of internal reports about components of the Group that are regularly
reviewed by the chief operating decision maker in order to allocate resources to the segment and to assess
its performance. In contrast the predecessor Standard (AASB 114 Segment Reporting) required an entity to
identify two sets of segments (business and geographical), using a risks and rewards approach, with the
entity’s system of internal financial reporting to key management personnel serving only as the starting point
for the identification of such segments. The adoption of AASB 8 by the Group has not resulted in any change
of the identification of the Group’s reportable segments.
The information reported to the Group’s Board of Directors, being the chief operating decision maker, for the
purpose of resource allocation and assessment of performance is focused on the products and services of
each reporting segment. The principal activities and the Group’s reportable segments under AASB 8 are as
follows:
— Life Risk
— Life Investment
— Funds Management; and
— Financial Planning
68
ClearView Wealth Limited and its subsidiaries
Notes to the financial statements [continued]
Life Risk - The Group operates in the life risk industry through its recently acquired wholly owned subsidiary,
ClearView Life. The acquisition of ClearView Life was the first key step in developing a presence in the life risk
industry and represented a transformational change for the Company. Clearview Life provides risk based life
insurance cover and the range of protection choices offer flexibility in both the type and amount of cover the
policy holder can apply for. ClearView Life operates as a specialist life protection business that encompasses
the manufacture and distribution of life protection products.
Life Investment - The Group operates in the life investment industry through ClearView Life. The acquisition
of ClearView Life represents an investment product manufacturing capability whose products have historically
been distributed by ClearView Financial Management Limited (CFML).
Financial Planning - The Group operates in the wealth management industry through its wholly owned
subsidiaries, ComCorp and CFML. CFML is an established superannuation and retirement specialist,
principally providing managed investments and superannuation services under the “ClearView” brand name.
The acquisition of CFML complemented the wealth management business of ComCorp. The Group is now
an established provider of wealth management services to member based organisations, individuals and has
an exclusive distribution alliance agreement to distribute life and wealth products to Bupa Australia’s 2.9
million member base.
Funds Management - CFML is the responsible entity (RE) of the ClearView retail trusts and this segment
therefore relates to the management fees earned for managing third party funds that have been invested in
the retail funds. In future periods the results arising out of the RE responsibility will be reported formally to the
chief operating decision maker, however, in the current period it is included in the results of financial planning.
Direct Investments - During the current financial year, the balance of ClearView’s legacy listed share portfolio
(other than one listed investment) was sold and a significant portion of ClearView’s internal cash resources
was utilised to acquire the share in ClearView Group Holdings. As a result of the investment of the cash prior
to year-end, this segment represents a discontinued operation as there will be no earnings and related costs
relative to this segment in future periods. For the purposes of segment reporting interest income on the cash
retained post acquisition has been grouped in “Other”.
Information regarding these segments is provided below. Amounts reported for the prior period have required
restatement to conform to the requirements of AASB 8. The accounting policies of the reportable segments
are the same as the Group’s accounting policies described in note 3.
External sales
Inter-segment
Total
2010
$’000
2009
$’000
2010
$’000
2009
$’000
2010
$’000
2009
$’000
Segment Revenue
Life Risk
Life Investment
Financial Planning
Fund Management
Other
Total of all segments
Eliminations
2,663
32,165
9,737
80
723
45,368
–
–
–
1,617
3,423
424
5,464
–
Consolidated segment revenue
45,368
5,464
–
–
4,184
–
–
4,184
–
4,184
–
–
–
–
–
–
–
–
2,663
32,165
13,921
80
723
49,552
–
–
–
1,617
3,423
424
5,464
–
49,552
5,464
69
ClearView Wealth Limited and its subsidiaries
Notes to the financial statements [continued]
Notes to the financial statements
for the year ended 30 June 2010
for the year ended 30 June 2010
continued
continued
7 Segment information cont.
Segment profit or loss represents the profit or loss earned by each segment including the allocation of directly
attributable costs of each segment and an allocation of central services costs according to an expense
allocation model which allocates costs across each segment on a reasonable basis. The allocation excludes
the allocation of investment revenue and profit from associates. This is the measure reported to the chief
operating decision maker for the purposes of resource allocation and assessment of segment performance.
Segment Profit
Life Risk
Life Investment
Financial Planning
Fund Management
Other
Total for continuing operations
Profit on acquisition of subsidiary
Eliminations
Profit / (loss) before tax from continuing operations
Income tax (expense) / benefit
Profit / (loss) for the year from continuing operations
2010
$’000
2009
$’000
934
2,094
(1,079)
28
(8,513)
(6,536)
15,325
(1,687)
7,102
(1,181)
5,921
–
–
(689)
(1,687)
564
(1,812)
–
(1,832)
(3,644)
1,375
(2,269)
The following is an analysis of the Group’s assets by reportable operating segment:
Life Risk
Life Investment
Financial Planning
Fund Management
Other
Total segment assets
Unallocated
Eliminations
Consolidated
Segment assets
2010
$’000
2009
$’000
Segment liabilities
2009
2010
$’000
$’000
53,628
1,650,259
28,798
100
51,215
1,784,000
–
(15,980)
–
–
12,251
6,169
–
(59,068)
1,569,177
11,485
–
20,120
18,420
1,247
–
1,541,714
–
(15,994)
1,768,020
19,667
1,525,720
–
–
5,215
111
–
5,326
1,252
–
6,578
70
ClearView Wealth Limited and its subsidiaries
Notes to the financial statements [continued]
8 Parent entity disclosure
(a) Financial Position
Assets
Current
Non-current
Total
Liabilities
Current
Total
Net Asset Value
Equity
Issued capital
Retained earnings
Employee share plan reserve
Asset revaluation reserve
Total
(b) Financial Performance from continued operations
Loss for the year
Total comprehensive income
Parent
2010
$’000
2009
$’000
15,513
223,717
78,907
24,590
239,230
103,497
10,051
10,051
786
786
229,179
102,711
276,565
(47,904)
518
–
144,816
(42,656)
154
397
229,179
102,711
(7,358)
(7,358)
(280)
(280)
(c) The parent has guaranteed the deferred consideration obligation of $1.3 million (2009: $ 2.6 million) of its
subsidiary, ComCorp, in respect of the Business Sale Agreement entered into on 9 April 2009 to acquire
the business of ComCorp and guaranteed the obligations for the lease of Bridge Street entered into by its
subsidiary, ClearView Administration Services. The parent has further guaranteed the employment
obligations for employees employed by ClearView Administration Services in accordance with the Share
Sale Agreement entered into with Bupa Australia.
(d) There are no contingent liabilities in the parent entity.
9 Discontinued operations
During the current financial year, the remainder of ClearView’s listed investment portfolio was sold (other than
one listed investment) and a significant portion of ClearView’s internal cash resources was utilised to acquire
the shares in ClearView Group Holdings. As a result of the investment of the cash prior to year-end, this
segment represents a discontinued operation as there will be no earnings and related costs relative to this
segment in future periods.
71
ClearView Wealth Limited and its subsidiaries
Notes to the financial statements [continued]
Notes to the financial statements
for the year ended 30 June 2010
for the year ended 30 June 2010
continued
continued
9 Discontinued operations cont.
The combined results of discontinued operations (that is direct investment) included in the income statement
are set out below. The comparative profit from discontinued operations have been re-presented to include
those operations classified as discontinued in the current period.
Profit for the year from discontinued operations
Revenue
Other losses on disposal / impairment of investments
Expenses
Profit before tax
Attributable income tax (expense) / benefit
Profit for the year from discontinued operations
(attributable to owners of the Company)
10 Investment Income
Investment Income
Interest income
Dividend income
Distribution income
11 Fee and other revenue
Financial planning fees
Management fees
Other
2010
$’000
2009
$’000
3,810
(498)
3,312
(298)
3,014
(904)
2,110
4,300
(7,919)
(3,619)
(647)
(4,266)
1,821
(2,445)
2,110
(2,445)
Consolidated
2010
$’000
2009
$’000
1,370
2,429
27,566
31,365
1,041
178
–
1,219
11,553
68
(4)
11,617
1,617
1,043
(14)
2,646
72
ClearView Wealth Limited and its subsidiaries
Notes to the financial statements [continued]
12 Other expenses
12a Administration Expenses
Administration, marketing and other operational costs
Share registry and mailing costs
Custody and accounting fees
Listed compliance costs
Rent
12b Employee Costs and Directors’ fees
Employee expenses
Share based payments
Employee termination payments
Directors’ fees
12c Other Expenses
Research expenses
Restructuring expenses
Professional fees
Other expenses
Interest expense
Investment fees and other related expenses
Transaction costs
12d Remuneration of Auditors of the parent entity
Audit and review of financial reports
Preparation of the tax return
Other non-audit services - taxation advice
Other non-audit services - compliance
Other non-audit services - remuneration advice
Capitalised due diligence costs
Consolidated
2010
$’000
2009
$’000
1,607
51
488
179
570
2,895
6,218
364
2,288
333
9,203
44
2,140
134
277
113
526
4,843
589
134
318
120
182
1,343
3,341
–
150
337
3,828
303
754
–
1
2
–
–
8,077
1,060
315
42
102
–
–
459
–
459
257
15
8
11
8
299
45
344
Total operating expenses
20,634
6,530
12e Amortisation and Depreciation expenses
Depreciation expense
Amortisation expense
80
665
745
29
147
176
73
ClearView Wealth Limited and its subsidiaries
Notes to the financial statements [continued]
Notes to the financial statements
for the year ended 30 June 2010
for the year ended 30 June 2010
continued
continued
13 Income tax
(a) Income tax recognised in profit or loss
Income tax expense / (benefit) comprises:
Current tax expense
Over provided in prior years - Current tax expense
Under provided in prior years - Deferred tax expense
Deferred tax expense
Income tax expense
Deferred income tax expense / (benefit) included in income tax expense comprises:
(Increase) / Decrease in deferred tax asset
(Decrease) / Increase in deferred tax liability
Consolidated
2010
$’000
2009
$’000
1,324
(299)
231
(75)
1,181
(1,110)
(155)
(1,265)
(209)
(78)
–
(536)
(823)
7,223
35
7,258
The prima facie income tax expense on pre-tax accounting profit from operations reconciles to the income tax
expense in the financial statements as follows:
Profit / (Loss) before income tax expense
Prima facie tax calculated at 30%
Tax effect of non deductible / assessable amounts in calculating taxable income:
Differences in tax rate for the life company policyholders
Franking credits on dividends received
Non-deductible transaction costs
Difference in realised profit/loss
Accrued benefits on acquisition
Non allowable expenses
Other
Profit on acquisition
Under provision in prior years
Income tax expense / (benefit)
7,102
(3,092)
2,130
(928)
(515)
(323)
1,453
4,213
166
135
(1,517)
(4,495)
(66)
1,181
–
–
–
–
–
105
–
–
(823)
The tax rate used in the above reconciliation is the corporate tax rate of 30% payable by Australian corporate
entities on taxable profits under Australian tax law. There has been no change in the corporate tax rate when
compared with the previous reporting period.
74
ClearView Wealth Limited and its subsidiaries
Notes to the financial statements [continued]
(b) Income tax recognised directly in equity
Current Tax
Share Buy Back Expenses
Capital raising costs
Deferred Tax
Arising on income and expenses taken directly to equity
Arising on capital raising costs charged against share capital
Revaluation of available for sale financial assets
Total tax benefit
Franking account
The balance of the franking account after allowing for tax payable in
respect of the current year’s profit, the receipt of franked dividends
recognised as receivables and the payment of any dividends
recognised as a liability at the reporting date.
Consolidated
2010
$’000
2009
$’000
–
(278)
–
(1,115)
(170)
(1,563)
(35)
–
(140)
–
170
(5)
3,772
3,380
The ability of the Company to continue to pay franked dividends is dependent upon the receipt of franked
dividends from the investment portfolio and the Company itself paying tax.
14 Movements in reserves
Retained losses
Balance at the beginning of the financial year
Net profit / (loss) attributable to members of the parent entity
Balance at the end of the financial year
Asset revaluation reserve
Balance at the beginning of the financial year
Revaluation of securities
Deferred tax asset / (liability) arising on revaluation of securities
Balance at the end of the financial year
Employee share plan reserve
Balance at the beginning of the financial year
Arising on share based payments
Balance at end of the financial year
Non-controlling interest
Balance at the beginning of the financial year
Contributions during the year
Recognised profit attributable to non-controlling interest
Balance at end of the financial year
(42,814)
8,031
(38,038)
(4,776)
(34,783)
(42,814)
399
(569)
170
–
154
364
518
–
–
–
–
504
221
(326)
399
121
33
154
462
(524)
62
–
75
ClearView Wealth Limited and its subsidiaries
Notes to the financial statements [continued]
Notes to the financial statements
for the year ended 30 June 2010
for the year ended 30 June 2010
continued
continued
15 Sources of profit
Components of profit related to movements in life insurance liabilities
Planned profit margins released
Profits arising from difference between actual and expected experience
Impact of IFRS change in economic assumptions
One-off expenses
Components of profit related to movements in life investment liabilities
Other policy holder movements
One-off expenses
One-off tax adjustment
Capitalisation of expected future losses
Investment earnings on assets in excess of life insurance and
investment contract liabilities
Profit for the statutory funds
Loss for the shareholders fund
Profit for ClearView Life Assurance Limited
16 Earnings per share
Basic earnings per share
From continuing operations
From discontinued operations
Total basic earnings per share
Diluted earnings per share
From continuing operations
From discontinued operations
Total diluted earnings per share
Consolidated
2010
$’000
2009
$’000
519
10
887
(923)
412
(790)
(220)
(6)
283
172
(140)
32
–
–
–
–
–
–
–
–
–
–
–
–
Company
2010
cents per
share
2009
cents per
share
3.28
1.16
4.44
3.26
1.13
4.39
(1.30)
(1.40)
(2.70)
(1.30)
(1.38)
(2.68)
16.1 Basic earnings per share
The earnings and weighted average number of ordinary shares used in the calculation of basic earnings per
share are as follows:
2010
$’000
2009
$’000
Profit for the year attributable to owners of the Company
Earnings used in the calculation of total basic earnings per share
Profit for the year from discontinued operations used in the calculation
of basic earnings per share from discontinued operations
Earnings used in the calculation of basic earnings per share from
continuing operations
Weighted average number of ordinary shares for the purpose
of basic earnings per share
8,031
8,031
(4,776)
(4,776)
2,110
(2,445)
5,921
(2,331)
180,737
174,384
76
ClearView Wealth Limited and its subsidiaries
Notes to the financial statements [continued]
16.2 Diluted earnings per share
The earnings used in the calculation of diluted earnings per share are as follows:
Earnings used in the calculation of total basic earnings per share
Interest on ESP loans
Earnings used in the calculation of total diluted earnings per share
Profit for the year from discontinued operations used in the calculation
of diluted earnings per share from discontinued operations
Earnings used in the calculation of diluted earnings per share from
continuing operations
Company
2010
cents per
share
2009
cents per
share
8,031
158
8,189
(4,776)
–
(4,776)
2,110
(2,445)
6,079
(2,331)
The weighted average number of ordinary shares for the purposes of diluted earnings per share reconciles to
the weighted average number of ordinary shares used in the calculation of basic earnings per share as
follows:
Weighted average number of ordinary shares used in the calculation of basic
earnings per share
Shares deemed to be dilutive in respect of the executive share plan
180,737
5,988
174,384
2,404
Weighted average number of ordinary shares used in the calculation of diluted
earnings per share (all measures)
186,725
176,788
17 Cash and cash equivalents
Cash at Bank
Deposits at call
18 Receivables
Trade receivables
Outstanding life insurance premiums
Accrued dividends
Investment income and distribution receivable
Outstanding settlements
Reinsurance receivable
Loan to Associate
Prepayments
Provision for doubtful receivables
Consolidated
2010
$’000
2009
$’000
184,008
13,134
2,096
25,827
197,142
27,923
228
704
3,361
39,714
–
2,018
120
673
(344)
206
–
–
59
635
–
–
438
–
46,474
1,338
Receivables are non interest bearing and unsecured. Trade receivables relate to management fees, life
insurance premiums, financial planning receivables and accrued income. Outstanding settlements usually
require payment within three days of the date of the transaction.
77
ClearView Wealth Limited and its subsidiaries
Notes to the financial statements [continued]
Notes to the financial statements
for the year ended 30 June 2010
for the year ended 30 June 2010
continued
continued
19 Fixed interest deposits
Fixed interest bank term deposits
Consolidated
2010
$’000
2009
$’000
359
50,989
Fixed interest term deposits, held at year end, yield a fixed interest rate of 6.4% (2009:4.22%).
20 Securities
Listed shares
353
4,290
The listed shares represent the 4.058 million shares in Nexbis Limited held by the Company at 30 June 2010.
Securities are classified as available-for-sale financial assets. The fair value of securities is their value at last bid
price.
21 Financial assets
Equity securities
Held directly
Held indirectly via unit trust
Debt securities / Fixed interest securities
Held directly
Held indirectly via unit trust
Property
Held directly
Held indirectly via unit trust
Total financial assets
22 Goodwill
Gross carrying amount
Balance at beginning of financial year
Additional amounts recognised during the period
Balance at end of financial year
Accumulated impairment losses
Balance at beginning of financial year
Impairment losses for the year
Balance at end of financial year
Net book value
At the beginning of the financial year
At the end of the financial year
481,779
258,214
739,993
496,307
129,565
625,872
–
64,067
64,067
1,429,932
–
–
–
–
–
–
–
–
–
–
3,976
211
4,187
–
3,976
3,976
–
–
–
3,976
4,187
–
–
–
–
3,976
Additional amounts recognised in the current year relate to the goodwill of ComCorp as the accounting for the
Comcorp business combination was only provisionally determined at the end of last financial year.
In note 25 details of the acquisition are disclosed and further details on the calculation of goodwill is provided.
78
ClearView Wealth Limited and its subsidiaries
Notes to the financial statements [continued]
23 Intangible assets
2010
Gross carrying amount
Balance at beginning of financial year
Acquired directly during the year
Acquired in a business combination
Balance at end of financial year
Accumulated amortisation and impairment losses
Balance at the beginning of the period
Amortisation Expense in the current year
Balance at the end of the financial year
Net Book Value
At the beginning of the financial year
At the end of the financial year
2009
Gross carrying amount
Balance at beginning of financial year
Acquired directly during the year
Acquired in a business combination
Balance at end of financial year
Accumulated amortisation and
impairment losses
Balance at the beginning of the period
Amortisation Expense in the current year
Balance at the end of the financial year
Net Book Value
At the beginning of the financial year
At the end of the financial year
Software
$’000
Consolidated
Client Management
rights
Book
$’000
$’000
Total
$’000
1,500
–
–
5,375
102
52,990
2,711
–
–
9,586
102
52,990
1,500
58,467
2,711
62,678
68
300
368
79
365
444
2,711
–
2,711
2,858
665
3,523
1,432
5,296
1,132
58,023
–
–
6,728
59,155
–
–
1,500
1,500
–
375
5,000
2,711
–
–
5,375
2,711
–
68
68
–
79
79
2,711
–
2,711
–
–
1,432
5,296
–
–
2,711
375
6,500
9,586
2,711
147
2,858
–
6,728
The intangible assets acquired in the current year arose on the acquisition of ClearView Group Holdings Pty Limited
and represent the value of the risk, investment, financial planning and fund management Client Book intangibles.
The intangible assets are amortised over their expected useful lives. As required under accounting standards at each
reporting date ClearView assesses whether there is an indication of impairment. After considering various external
and internal sources of information such as current economic conditions and anticipated future cash flows to be
derived from these assets it has been assessed that there are no indicators of impairment at 30 June 2010.
79
ClearView Wealth Limited and its subsidiaries
Notes to the financial statements [continued]
Notes to the financial statements
for the year ended 30 June 2010
for the year ended 30 June 2010
continued
continued
24 Property, plant and equipment
Consolidated
Office
furniture equipment
$’000
$’000
Office Computer Computer
software
$’000
hardware
$’000
Leasehold
improve-
ments
$’000
Total
$’000
2010
Gross carrying amount
Balance at beginning of financial year
Additions
Acquisitions through business combinations
Balance at end of financial year
Accumulated depreciation/amortisation
and impairment
Balance at beginning of financial year
Depreciation expense
Balance at end of financial year
Net book value
Balance at end of financial year
2009
Gross carrying amount
Balance at beginning of financial year
Additions
Acquisitions through business combinations
Balance at end of financial year
Accumulated depreciation/amortisation
and impairment
Balance at beginning of financial year
Depreciation expense
Balance at end of financial year
Net book value
Balance at end of financial year
30
17
693
740
21
25
46
60
31
12
103
29
20
49
58
21
206
285
31
13
44
–
5
–
5
–
1
1
67
34
268
215
108
1,179
369
1,502
59
21
80
140
80
220
694
54
241
4
289
1,282
18
–
12
30
9
12
21
15
3
42
60
12
17
29
46
12
–
58
31
–
31
–
–
–
–
–
–
–
67
–
–
67
59
–
59
146
15
54
215
111
29
140
9
31
27
–
8
75
80
ClearView Wealth Limited and its subsidiaries
Notes to the financial statements [continued]
25 Business Acquisitions
Name of subsidiary acquired
Principal
activity
Date of
shares
acquisition acquired (%)
ClearView Group Holdings
Pty Limited
Non operating
holding company
9-June-10
100%
Including the following subsidiaries:
ClearView Life Assurance
Limited
Life Insurance and
Investment
9-June-10
100%
ClearView Financial
Management Limited
Financial Planning and
Responsible Entity
9-June-10
MBT Financial Services Pty
Limited
Financial Planning
6-Nov-09
100%
N/A
Proportions of Cost component
Cost of
of business acquisition
$’000
combination
Cash
Payable
195,000
5,809
Total
200,809
Upfront cash
payment
Deferred
consideration
408
106
514
ClearView Group Holdings Pty Limited (formerly MBF Management Pty Limited)
On the 26 March 2010 ClearView signed agreements to acquire ClearView Group Holdings Pty Limited
(ClearView Group Holdings) representing Bupa Australia’s life insurance and wealth management business for
a purchase consideration of $195 million plus the difference between the completion net assets and the net
assets of ClearView Group Holdings as at 31 December 2009 (estimated adjustment amount of $5.8 million).
The deal completed on 9 June 2010 following approval of the acquisition from APRA. Transaction costs
incurred of $4.8 million have been recognised as an expense in the current financial year and capital raising
costs incurred in the amount of $4.6 million were charged against the share capital account net of tax.
81
ClearView Wealth Limited and its subsidiaries
Notes to the financial statements [continued]
Notes to the financial statements
for the year ended 30 June 2010
for the year ended 30 June 2010
continued
continued
25 Business Acquisitions cont.
Assets acquired and liabilities assumed at the date of completion
Consolidated
Consolidated
CVGH
excl unit trusts of unit trusts incl unit trusts
$’000
CVGH Consolidation
$’000
$’000
Fair value
Fair value
adjustments on acquisition
$’000
$’000
Cash and liquid assets
Receivables
Other financial assets
Deferred tax assets
Deferred tax on leave assumed
Policy holder tax receivable
Property, plant and equipment
Intangible assets
4,216
6,102
1,520,546
14,644
693
2,173
1,179
–
178,160
3,812
182,376
9,914
(22,817) 1,497,729
14,644
693
2,173
1,179
–
–
–
–
–
–
–
–
–
–
–
–
–
52,990
182,376
9,914
1,497,729
14,644
693
2,173
1,179
52,990
Total assets
1,549,553
159,155
1,708,708
52,990
1,761,698
Liabilities
Payables
Leave and bonus provisions
Deferred tax liabilities
Life insurance policy liabilities
Liability to non-controlling interest in
controlled unit trust
Life investment policy liabilities
17,181
2,310
10
(70,198)
869
–
–
–
18,050
2,310
10
(70,198)
–
–
–
–
18,050
2,310
10
(70,198)
–
1,437,827
158,286
158,286
– 1,437,827
–
158,286
– 1,437,827
Total liabilities
1,387,130
159,155
1,546,285
–
1,546,285
Net Assets as at 31 May 2010
Pro rata profit to 8 June 2010
Net Assets on Completion
162,423
721
163,144
–
–
–
162,423
52,990
215,413
721
–
721
163,144
52,990
216,134
The initial accounting for the acquisition has only been provisionally determined at the reporting date. For the
purposes of AASB 3 the fair value of identifiable assets acquired and liabilities assumed have to be determined
to account for the business combination. As at the reporting date these calculations had not been finalised
and therefore the adjustments to assets and liabilities have not been completed. The adjustment amount has
yet to be finalised with Bupa and at the date of this report is subject to change. The amounts disclosed in
the financial statements represents the directors best estimate of the likely fair values of the assets acquired
and liabilities assumed.
Had this business combination been affected at 1 July 2009, the revenue of ClearView Group Holdings would
have been $191.2 million and the net profit for the year from continuing operations would have resulted in a
profit of $12.9 million. These proforma numbers do not take into account any cost saving opportunities as
outlined in the Prospectus.
The Directors of the Group consider these pro-forma numbers to present an approximate measure of the
performance of ClearView Group Holdings on an historical annualised basis. The pro-forma amounts were
based on aggregating the results of ClearView Group Holdings for the 6 months ended 31 December 2009 to
the results for the 6 months ended 30 June 2010.
82
ClearView Wealth Limited and its subsidiaries
Notes to the financial statements [continued]
The acquisition of ClearView Group Holdings resulted in a profit on acquisition of $15.3 million as the business
combination in which the consideration transferred is less than the net of the acquisition-date amounts of the
identifiable assets acquired and the liabilities assumed measured in accordance with AASB 3. The profit on
acquisition arose as the purchase consideration represented a discount to the embedded value of the
businesses acquired. The life insurance and wealth management businesses were considered non core by
the vendor and additionally a strategic long term alliance was entered into as part of the acquisition.
ClearView Group Holdings Pty Limited
$’000
Profit on Acquisition
Fair value of identifiable net assets acquired
Less: Purchase consideration
Profit arising on acquisition
Net cash flow on acquisition
Total purchase consideration
Less consideration payable in future periods (estimated adjustment amount)
Consideration Paid in Cash
Net cash acquired on acquisition
Cash and cash equivalents in acquired entities
Cash and cash equivalents from consolidation of unit trusts
Net consolidated cash acquired
216,134
200,809
15,325
200,809
5,809
195,000
4,216
178,160
182,376
MBT Financial Services Pty Limited
On the 6 November 2009 ComCorp Financial Advice Pty Limited (Comcorp) acquired the business of MBT
Financial Services Pty Limited (MBT).
MBT was previously a franchised planner of ComCorp and the acquisition of the MBT business is consistent
with ClearView stated strategy of developing its presence in the wealth management industry.
The liabilities assumed by ComCorp on the acquisition of MBT for the deferred purchase consideration
payments are limited to $105,778 in accordance with the Business Purchase Deed (BPD). There is a
mechanism in the BPD for the deferred consideration to be reduced should the clients or FUA be reduced
from the levels on which the business was acquired. The amounts disclosed in the financial statements
represents the Directors best estimate of the likely fair values of the assets acquired and liabilities assumed.
Acquisition-related transaction costs amounting to $28,843 have been excluded from the consideration paid
and were recognised as an expense in the period in which they were incurred being the 2010 financial year.
The purchase consideration for the business combination is $513,642, to be settled in cash of which
$105,778 has been withheld for a period of 12 months post completion. Settlement of the $105,778 is
subject to MBT meeting certain target which have been agreed upon in the BPD.
Goodwill arose in the business combination because the cost of the business combination included a control
premium paid to acquire the core business assets and assume certain liabilities. In addition, the consideration
paid for the combination effectively included amounts in relation to the benefit of: revenue growth; improved
referral partner penetration; future market development and the assembled work force and ingrained
experience of personnel of MBT. These benefits are not recognised separately from goodwill as the future
economic benefits arising from them cannot be measured reliably.
83
ClearView Wealth Limited and its subsidiaries
Notes to the financial statements [continued]
Notes to the financial statements
for the year ended 30 June 2010
for the year ended 30 June 2010
continued
continued
25 Business Acquisitions cont.
Had this business combination been affected at 1 July 2009, the revenue of ComCorp would not change and
the net profit for the year from continuing operations would have increased by $90,271. The revenue would
not change since MBT was a franchised planner prior to the acquisition and ComCorp recognised the full
amount of their revenue and withheld a dealer service fee on revenue generated. Subsequent to the
acquisition, ComCorp will retain the full margin. The Directors of the group consider these pro-forma numbers
to present an approximate measure of the performance of ComCorp on an annualised basis and to provide a
reference point for comparison in future periods. The pro-forma amounts were determined by including the
net amount paid to MBT for the period from 1 July 2009 to the end of the reporting period.
In determining the pro-forma revenue and profit of the Group had MBT been acquired at the beginning of the
current reporting period, the Directors have:
— calculated the net amount paid to MBT for the period prior to the completion date
— added the amount paid to MBT back to profit from continuing operations
Non-Current Assets
Client book
Current Liabilities
Provisions for long service leave and annual leave
Fair value of identifiable net assets
Goodwill on acquisition
Net cash flow on acquisition
Total purchase consideration
Less consideration payable in future periods (current)
Consideration Paid in Cash
Book value
$’000
–
(15)
Fair value
adjustment
$’000
Fair value
on acquisition
$’000
100
100
–
–
–
(15)
85
429
514
514
106
408
26 Disposal of subsidiaries
ClearView entered into a Share Sale and Purchase Agreement (SPA) with Valuestream Investment
Management Limited (VIML) on 17 July 2009 to effect the sale and purchase of 100% of the shares in MMC
Asset Management. Prior to Completion, MMC Asset Management completed a $6.05 million capital
reduction to ClearView by the settlement of cash. Completion occurred on 31 July 2009. In accordance with
the SPA, a post completion adjustment payment in the amount of $20,000 was received by ClearView in
November 2009.
ClearView also entered into a Share Subscription Deed with Huon on 17 July 2009 such that ClearView owns
a passive 10% interest in a new boutique fund manager. The 10% equity stake was issued to ClearView on
completion of the sale of MMC Asset Management to VIML. Completion occurred on 31 July 2009.
84
ClearView Wealth Limited and its subsidiaries
Notes to the financial statements [continued]
The profit for the period from the MMC Asset Management operation
is analysed as follows:
Profit of MMC Asset Management operations for the period
Gain on disposal of MMC Asset Management
The following were the results of MMC Asset Management for the period:
Total Income
Operating expense
Profit before income tax
Income Tax (1)
Profit after income tax
1 Month ended
31 July 2009
$’000’s
7
5
12
80
(52)
28
(21)
7
(1) Reversal of the deferred tax timing differences on exit of MMC Asset Management from the ClearView tax consolidated
Group.
The net assets of MMC Asset Management Limited at the date of disposal were as follows:
Net Assets disposed of (excluding goodwill)
Attributable goodwill
Gain on disposal
Total consideration received
31 July 2009
$’000’s
15
–
15
5
20
The disposal resulted in a capital loss of approximately $30 million for which future capital gains may be offset.
The deferred tax asset relating to this capital loss has not been recognised.
27 Payables
Trade Payables
Reinsurance creditors
Outstanding life policy settlements
Custody and accounting fees
Other employee entitlements
Life premiums in advance
Vendor liability (adjustment amount)
Other creditors
Consolidated
2010
$’000
7,106
687
8,689
–
2,422
201
5,877
5,090
30,072
2009
$’000
386
–
–
8
195
–
–
366
955
Payables are non interest bearing and unsecured. Trade payables relate to management fees and financial
planning payables and accrued commission payable to financial planners. Outstanding settlements usually
require payment within three days of the date of the transaction.
Other creditors usually require payment within 10 to 30 days. The Group has financial risk management
policies in place to ensure that all payables are paid within the credit time frame.
85
ClearView Wealth Limited and its subsidiaries
Notes to the financial statements [continued]
Notes to the financial statements
for the year ended 30 June 2010
for the year ended 30 June 2010
continued
continued
28 Provisions
Provision for lease make good
Provision for restructuring
Employee benefits provisions
Other provisions
Make Good Provision
Balance at the beginning of the financial year
Provision acquired in a business combination
Additional provisions made
Amounts used in the current year
Balance at the end of the financial year
Provision for restructuring (i)
Balance at the beginning of the financial year
Provision acquired in a business combination
Additional provisions recognised
Payments made
Balance at the end of the financial year
Employee benefits provision
Balance at the beginning of the financial year
Provision acquired in a business combination
Additional provisions made
Amounts utilised during the current year
Unutilised provisions reversed during the current year
Balance at the end of the financial year
Other provisions (ii)
Balance at the beginning of the financial year
Additional provisions made
Amounts utilised during the current year
Unutilised provisions reversed during the current year
Balance at the end of the financial year
Consolidated
2010
$’000
2009
$’000
50
864
2,330
2,819
6,063
80
–
–
(30)
50
509
–
864
(509)
864
276
2,310
209
(419)
(46)
2,330
86
4,265
(1,343)
(189)
2,819
80
509
276
86
951
–
6
74
–
80
–
109
509
(109)
509
–
–
296
(15)
(5)
276
–
542
(456)
–
86
(i) The provision for restructuring arose on the acquisition of ClearView Group Holdings as detailed in note 25. Restructuring
provisions have been raised in accordance with an approved restructuring plan for the ClearView Group Holdings business.
These restructuring costs relate to termination payments and outplacement costs. The restructure is expected to be completed
by 31 December 2010.
(ii) Other provisions relating to the acquisition of ClearView Group Holdings that do not form part of the approved restructuring
plan. These provisions are expected to be settled before 31 December 2010.
86
ClearView Wealth Limited and its subsidiaries
Notes to the financial statements [continued]
29 Deferred tax balances
Deferred tax assets
Non-current
Deferred tax liabilities
Non-current
(i) Deferred tax assets
Amounts recognised in profit or loss:
Tax Losses carried forward
Accruals not currently deductible
Depreciable and amortisable assets
Provisions
Unrealised losses (policyholder)
Other
Arising on share issue costs
Valuation of listed securities
Deferred tax asset
(ii) Deferred tax liabilities
Amounts recognised in profit or loss:
Deferred acquisition costs
Unrealised gains on investments
Other
Deferred tax liability
Consolidated
2010
$’000
2009
$’000
28,997
11,784
28,997
11,784
–
–
(147)
(147)
10,478
495
(42)
1,743
15,092
1,231
–
–
9,728
–
–
–
–
536
140
1,380
28,997
11,784
–
437
(437)
–
–
–
(147)
(147)
Consolidated
Acquisition
Unused
carried
through business
forward combination/transfers
from subsidiaries
$’000
losses
$’000
Charge
(credit) to
income
$’000
Charge
(credit) to
equity
$’000
Closing
balance
$’000
–
–
–
(8)
14,540
155
1,110
–
1,563
–
28,997
14,532
1,265
1,563
28,997
Opening
balance
$’000
(147)
11,784
11,637
(112)
9,274
–
9,728
9,162
9,728
–
–
–
(35)
(7,223)
(7,258)
–
5
(147)
11,784
5
11,637
2010
Gross deferred tax liabilities
Gross deferred tax assets
Total
2009
Gross deferred tax liabilities
Gross deferred tax assets
Total
Deferred income tax assets are recognised for tax losses carried forwards to the extent that the realisation of
the related tax benefit through future taxable profits is probable.
87
ClearView Wealth Limited and its subsidiaries
Notes to the financial statements [continued]
Notes to the financial statements
for the year ended 30 June 2010
for the year ended 30 June 2010
continued
continued
30 Policy liabilities
(a) Reconciliation of movements in policy liabilities
Life investment policy liabilities
Opening gross life investment policy liabilities
Acquisition of business
Net increase / (decrease) in life investment policy liabilities reflected in the
income statement
Net movement relating to acquisition date adjustment
Decrease in life investment policy liabilities due to management fee reflected
in the income statement
Life investment policy contributions recognised in policy liabilities
Life investment policy withdrawals recognised in policy liabilities
Closing gross life investment policy liabilities
Life insurance policy liabilities
Opening gross life insurance policy liabilities
Acquisition of business
Increase / (decrease) in life insurance policy liabilities reflected in the
income statement
Net movement relating to acquisition date adjustment
Closing gross life insurance policy liabilities
Total Gross policy liabilities
Reinsurers’ share of life insurance policy liabilities
Opening balance
Acquisition of business
Decrease in reinsurance assets reflected in the income statement
Net movement relating to acquisition date adjustment
Closing balance
Consolidated
2010
$’000
2009
$’000
–
1,437,827
–
–
(19,778)
(7,191)
(2,559)
56,281
(59,165)
1,405,415
–
(70,242)
(1,001)
(364)
(71,607)
1,333,808
–
43
(29)
(11)
3
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Net policy liabilities at balance date
1,333,805
Included in life investment policy liabilities are contracts for which there is a guarantee that the unit price will
not fall. The amount of the gross policy liabilities for such contracts is $89.3 million.
(b) Components of net life insurance policy liabilities
Future policy benefits
Future expenses and commissions
Less future revenues
Best estimate Liability
Planned margin over future expenses
Net life insurance policy liabilities
181,274
52,515
(434,257)
(200,468)
128,864
(71,604)
–
–
–
–
–
–
(c) Disclosures on asset restrictions, managed assets and trustee activities
Restrictions on assets
Investments held in the life statutory funds (“funds”) can only be used within the restrictions imposed under the
Life Insurance Act 1995. The main restrictions are that the assets in a fund can only be used to meet the
liabilities and expenses of that fund, to acquire investments to further the business of the fund or as a
distribution when solvency and capital adequacy requirements are met. The shareholder can only receive a
distribution from a fund if the capital adequacy requirements continue to be met after the distribution.
88
ClearView Wealth Limited and its subsidiaries
Notes to the financial statements [continued]
31 Issued capital
2010
No. of shares
2010
$’000
2009
No. of shares
2009
$’000
Issued and fully paid ordinary shares
Balance at beginning of financial year
Shares issued pursuant to Private placement*
Shares issued pursuant to 1 for 1 Entitlement Offer*
Shares cancelled under Share Buy-back
Share Buy-back costs, net of tax
139,312,192 144,816
61,719
123,437,808
73,281
146,562,192
–
–
(3,251)
–
245,107,825
–
–
(105,795,633)
–
220,233
–
–
(75,009)
(408)
Balance at end of financial year
409,312,192 276,565
139,312,192 144,816
Employee share scheme balance at the
beginning of the period
Shares granted under employee share
plan (note 38)
Shares cancelled under the employee plan
Employee share scheme balance at the end
of the period
1,800,000
–
3,300,000
16,150,000
(300,000)
–
–
–
(1,500,000)
17,650,000
–
1,800,000
–
–
–
–
In accordance with AASB 2, Share-Based Payments the shares issued under the employee share plan are
treated as options and are accounted for as set out in note 1(w).
Changes to the then Corporations Law abolished the authorised capital and par value concept in relation to
share capital from 1 July 1998. Therefore, the Company does not have a limited amount of authorised capital
and issued shares do not have a par value.
Fully paid ordinary shares carry one vote per share and carry the rights to dividends.
* During the financial year, the Company executed a shareholder approved private placement for $62 million and a 1 for 1
entitlement offer for $73 million in order to raise the $135 million required for the purposes of the acquisition of ClearView Group
Holdings Pty Limited. The private placement was approved by shareholders at the extraordinary meeting held on 30 April 2010.
32 Provision for deferred consideration
Provision for Deferred Consideration - Current
Provision for Deferred Consideration - Non-current
Total
Consolidated
2010
$’000
1,093
299
1,392
2009
$’000
1,354
1,227
2,581
33 Shares granted under the employee share plans
Executive share plan
In accordance with the provisions of the executive share plan, as at 30 June 2010, executives and senior
employees have acquired 17,650,000 (2009 : 1,800,000) ordinary shares that will vest if certain conditions are
met. Shares granted under the executive share plan carry rights to dividends and voting rights. Financial
assistance amounting to $9,838,645 (2009 : $1,184,626) was made available to executives and senior
employees to fund the acquisition of shares under the executive share plan. For details of the executive share
plan refer to note 38.
89
ClearView Wealth Limited and its subsidiaries
Notes to the financial statements [continued]
Notes to the financial statements
for the year ended 30 June 2010
for the year ended 30 June 2010
continued
continued
33 Shares granted under the employee share plans
cont.
Deferred share plan
In accordance with the provisions of the deferred share plan, employees have the right to have part of their
salary directed towards the acquisition of shares in ClearView Wealth Limited. Shares acquired under the
deferred share plan carry rights to dividends and voting rights. As at 30 June 2010 there were no shares
issued under the DSP. In light of the proposed budget changes this scheme is currently under review.
34 Dividends
Fully paid ordinary shares
Interim dividend per share:
$nil cents (2009: $nil cents)
Final dividend per share:
$nil cents (2009: $nil)
Consolidated
2010
$’000
2009
$’000
–
–
–
–
–
–
The Directors declared that there will be no final dividend paid for the year ended 30 June 2010 (2009 : $nil).
35 Reconciliation of net profit / (loss) for the year to
net cash flows from operating activities
Net profit / (loss) for the year
Realised gains on disposal of securities
Increase in current tax liability
Decrease in deferred tax
Increase in payables
Depreciation on property plant and equipment
Amortisation costs
Unrealised loss on investments
Reversal of impairment in subsidiary
Profit on acquisition of subsidiary
Bad debts written off
Employee share plan expense
Fair value losses on financial assets at fair value through profit & loss
Increase in deferred tax asset
(Increase) / decrease in receivables
Reinvested trust distribution income
Movement in liabilities to non-controlling in controlled unit trust
Decrease in policy liabilities
Loss from associate
Consolidated
2010
$’000
2009
$’000
8,031
(134)
3,875
(73)
8,100
80
665
640
(20)
(15,325)
58
364
49,492
(433)
(28,748)
(410)
(3,601)
(26,262)
59
(4,714)
(1,600)
79
(2,476)
262
29
147
10,060
–
–
49
33
–
–
1,319
–
–
–
–
Net cash (utilised) / generated by operating activities
(3,642)
3,188
90
ClearView Wealth Limited and its subsidiaries
Notes to the financial statements [continued]
36 Subsidiaries
Name of entity
Country of incorporation
Parent entity
ClearView Wealth Limited
(formerly MMC Contrarian Limited)
Subsidiaries
MMC Asset Management Limited
ClearView Group Holdings Pty Limited
(formerly MBF Management Pty Limited)
ClearView Life Assurance Limited
(formerly MBF Life Limited)
ClearView Financial Management Limited
ClearView Life Nominees Pty Limited
ClearView Administration Services Pty Limited
(formerly MMC Service Co Pty Limited)
ComCorp Finance Advice Pty Limited
Affiliate Financial Planning Pty Limited
Controlled Unit Trusts
International Fixed Interest Fund
Fund of Funds Australian Equity Fund
Bond Fund
Fund of Funds International Equity Fund
Property Fund
Money Market Fund
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Ownership interest
2010
%
2009
%
–
100
100
100
100
100
100
100
100
95
83
91
93
91
97
–
–
–
–
100
100
100
–
–
–
–
–
–
During the year the Company acquired 100% of the shares in ClearView Group Holdings Pty Limited which in
turn held 100% of the shares in ClearView Life Assurance Limited and ClearView Financial Management
Limited.
ClearView Administration Services Pty Limited was incorporated in the prior financial year to centralise the
administrative responsibilities of the group which include salary disbursements and settling all non directly
attributable overhead expenditure. ClearView Administration Services Pty Limited recoups all expenditure by
virtue of a management fee from the various group companies and operates on a cost recovery basis.
ComCorp Financial Advice Pty Limited was formed in the prior financial year as a wholly owned subsidiary of
the Company to obtain a licence from ASIC to carry on a financial services business to provide financial
product advice under AFS Licence No. 331367. The business commenced trading on 9 April 2009.
Affiliate Financial Planning was formed as a wholly owned subsidiary of ComCorp Financial Advice Pty Limited
to be registered as an authorised representative of ComCorp.
91
ClearView Wealth Limited and its subsidiaries
Notes to the financial statements [continued]
Notes to the financial statements
for the year ended 30 June 2010
for the year ended 30 June 2010
continued
continued
37 Investment in associate
Investment in associate
Reconciliation of Investment in associate:
Balance at the beginning of financial year
Share of profit for the year
Dividends
Additions
Balance at the end of financial year
Consolidated
2010
$’000
142
198
(59)
–
3
142
2009
$’000
198
–
–
198
198
Name of entity
Associates
Berry Financial Services Pty Ltd
Country
of incorporation
Principal
activity
Ownership interest
2010
%
2009
%
Australia
Financial Planning
40
40
Summarised financial information in respect of the Group’s associate is set out below:
Financial position:
Total assets
Total liabilities
Net assets
Group’s share of associate’s net assets
Financial performance:
Total revenue
Total profit for the year
Group’s share of associate’s loss
Dividends received from associates
Nil
Consolidated
2010
$’000
2009
$’000
21
169
(148)
(59)
90
(148)
(59)
17
17
–
–
219
5
–
Contingent liabilities and capital commitments
There are no capital commitments and other expenditure commitments of associates and jointly controlled
entities.
92
ClearView Wealth Limited and its subsidiaries
Notes to the financial statements [continued]
38 Share-based payments
The Group has an ownership-based compensation scheme for Directors, executives and senior employees of
the Group, namely the employee share plan (ESP). In accordance with the provisions of the plan, as
approved by shareholders at the general meeting held on 7 October 2009, Directors, executives and senior
employees may be issued parcels of ordinary shares at an exercise price as defined under the plan per
ordinary share.
Objectives
The objective of the ESP is to assist in the recruitment of highly skilled individuals and to reward, retain and
motivate employees of the Company and its associated body corporate.
Consideration
Each share will be issued at a price to be determined by the Board prior to making an offer to an employee.
If no price is set, the price per share will be the weighted average price at which shares are traded on the ASX
during the week prior to and including the day of offer or if no shares have traded in that time period the last
price at which an offer to buy is made on the ASX.
Eligibility
Under the ESP, the Directors may invite employees to participate in the ESP and receive shares subject to
performance and vesting conditions determined by the Board. Shares may not be offered under the ESP to
an employee if that employee would hold, after issue of the shares, an interest in more than 5% of the issued
shares or be able to control the right to vote of more than 5% of the votes that might be cast at a general
meeting of the Company. The number of shares granted under the ESP when aggregated with the number of
shares issued under any other employee incentive share plan in the last 5 years must not exceed 6% of the
issued shares at the time an offer to acquire shares under the ESP is made.
Financial assistance
The Company may provide financial assistance to an employee for the purposes of subscribing for shares
under the ESP. The financial assistance will be a limited recourse loan equal to the purchase value of the
shares repayable within 5 years. The financial assistance will become immediately repayable in the event of
“disqualifying circumstances” including failure to meet performance or vesting conditions, or upon cessation of
the employee’s employment in circumstances defined in the ESP Rules. The financial assistance are secured
over the shares and rights attached to the shares.
Rights
Shares issued under the ESP will rank equally with all other issued shares even if subject to a holding lock.
Quotation
The Company will apply to the ASX for official quotation of shares issued under the ESP.
Restrictions
The shares granted under the ESP will be subject to a holding lock restricting the holder from dealing with the
shares without the consent of the Board until generally the earlier of:
(a) the 5th anniversary of the issue date;
(b) the date the employee ceases employment; or
(c) termination of the ESP.
If performance and vesting conditions are not met, then the shares will be cancelled.
Administration of the ESP
The ESP is to be administered by the Board. The Board may make rules and regulations for its operation that
are consistent with the rules of the ESP. The Company will pay all costs and expenses of operating the ESP.
Employees will be liable for any brokerage and tax payable associated with their participation in the ESP.
93
ClearView Wealth Limited and its subsidiaries
Notes to the financial statements [continued]
Notes to the financial statements
for the year ended 30 June 2010
for the year ended 30 June 2010
continued
continued
38 Share-based payments cont.
Amendment of the ESP
Subject to the ASX Listing Rules, the Board may at any time amend any provision of the rules of the ESP.
Termination of the ESP
The Board may resolve at any time to terminate, suspend or reinstate the operation of the ESP.
The following share-based payment arrangements were in existence during the current and comparative
reporting periods:
Fair value at Fair value at
grant date
Exercise price
$
$
Share series
Number
Grant date
Expiry date
2 Series - 27 July 2007 Issue
4 Series - 26 October 2007 Issue
5 Series - 16 April 2008 Issue
6 Series - 30 June 2008 Issue
7 Series - 29 September 2009 Issue
8 Series - 8 October 2009 Issue
9 Series - 28 October 2009 Issue
10 Series - 25 June 2010 Issue
11 Series - 25 June 2010 Issue
12 Series - 25 June 2010 Issue
13 Series - 25 June 2010 Issue
4,425,000
250,000
1,000,000
500,000
3,500,000
2,000,000
250,000
2,000,000
4,000,000
4,000,000
400,000
27/07/07
26/10/07
16/04/08
30/06/08
29/09/09
8/10/09
28/10/09
25/06/10
25/06/10
25/06/10
25/06/10
1/06/12
26/10/12
16/04/13
30/06/13
29/09/14
8/10/14
28/10/14
26/03/15
26/03/15
26/03/15
1/06/15
1.04
1.04
0.60
0.59
0.49
0.49
0.50
0.50
0.58
0.65
0.53
0.03
0.03
0.10
0.10
0.07
0.07
0.07
0.11
0.08
0.06
0.10
Share series
Type of arrangement
First vesting date
Final vesting date
Series 2 - 27 July 2007 Issue
Series 4 - 26 October 2007 Issue
Series 5 - 16 April 2008 Issue
Series 6 - 30 June 2008 Issue
Series 7 - 29 September 2009
Issue
Series 8 - 8 October 2009 Issue
Shares cancelled
Shares cancelled
Key Management Personnel
Key Management Personnel
Key Management Personnel
and Senior Management
CEO Wealth Management
and Advice
Series 9 - 28 October 2009 Issue Chairman
Series 10 - 25 June 2010 Issue
Series 11 - 25 June 2010 Issue
Series 12 - 25 June 2010 Issue
Series 13 - 25 June 2010 Issue
Managing Director
Managing Director
Managing Director
Senior Management
Shares cancelled Shares cancelled
Shares cancelled Shares cancelled
16/04/13
30/06/13
16/04/08
30/06/08
23/10/09
29/09/14
23/10/09
28/10/12
26/03/11
26/03/12
26/03/13
1/06/13
8/10/14
28/10/14
26/03/15
26/03/15
26/03/15
1/06/15
Inputs into the model
Grant date share price ($)
Anticipated vesting price ($)
Expected volatility (%)
Anticipated option life (years)
Series 2 Series 4
Series 5
Series 6
1.04
1.38
21.29
2.00
1.04
1.38
21.29
2.00
0.60
0.60
24.12
3.00
0.59
0.59
25.26
3.00
94
ClearView Wealth Limited and its subsidiaries
Notes to the financial statements [continued]
Inputs into the model
Series 7
Series 8
Series 9 Series 10 Series 11 Series 12
Series 13
Grant date share price ($)
Anticipated vesting price ($)
Expected volatility (%)
Anticipated option life (years)
0.49
0.55
30.24
1.75
0.49
0.55
30.43
1.73
0.50
0.62
25.64
2.95
0.50
0.57
28.78
2.75
0.58
0.66
28.78
2.75
0.65
0.74
28.78
2.75
0.53
0.61
28.78
2.94
The shares were priced using a binomial option pricing model with volatility based on the historical volatility of
the share price.
2010
2009
Number of
shares
Weighted
average
exercise price
Number
of shares
Weighted
average
exercise price
Balance at beginning of the financial year
Granted during the financial year
Cancelled during the year
1,800,000
16,150,000
(300,000)
3,300,000
0.67
0.55
–
1.04 (1,500,000)
Balance at end of the financial year
17,650,000
0.56
1,800,000
–
–
1.04
0.67
The above reconciles the outstanding shares granted under the executive share plan at the beginning and end
of the financial year:
Shares that were granted in the current year:
16.1 million shares were issued during the year as follows:
– 5.5 million shares were issued to employees in accordance with their employment contracts executed at
the time of their recruitment on finalisation of setting the performance and vesting criteria in accordance
with the rules of the plan, of which 2 million were approved by shareholders at the AGM in October 2009;
– 10 million shares to the Managing Director in accordance with approvals at the 30 April 2010 AGM;
– 0.25 million shares to an associate of the Chairman as approved at the 2009 AGM; and
– 0.4 million to senior management in June 2010.
Shares that vested in the current period:
The vesting conditions in the ESP stipulate that all shares issued in terms of the Plan will automatically vest
with a change of control of the Company. Effective 23 October 2009, GPG obtained control of ClearView
which resulted in accelerating the vesting of the shares in the ESP at that time, including Series 7 and 8 which
had been issued prior to the change of control. The shares issued subsequent to Series 8, were issued
subsequent to the change of control and thus the normal vesting conditions of the ESP still apply.
No other shares vested in the current financial year.
Shares that were cancelled during the year:
The Company had issued 250,000 shares to RK Sydney Pty Limited, an associate of the Chairman, Mr
Raymond Kellerman, in accordance with the Plan Rules. In accordance with shareholder approval obtained at
the 2009 AGM, it was resolved that the 250,000 shares issued to the associate of Mr Kellerman be bought
back in accordance with the provisions of the ESP Rules, and thereafter, the same number of shares be
issued to the associate of Mr Kellerman in order for the terms to be amended to those consistently applied for
Series 7 and Series 8. Furthermore, a further 50,000 shares issued to a former employee were cancelled in
terms of the ESP Rules and therefore 300,000 shares were cancelled during the year.
95
ClearView Wealth Limited and its subsidiaries
Notes to the financial statements [continued]
Notes to the financial statements
for the year ended 30 June 2010
for the year ended 30 June 2010
continued
continued
39 Related party transactions
(a) Equity interests in related parties
Equity interests in subsidiaries
Details of the percentage of ordinary shares held in subsidiaries are disclosed in note 36 to the financial statements.
(b) Transactions with key management personnel
I. Key management personnel compensation
Details of key management personnel compensation are disclosed in the Directors’ Report on page 30 of the annual
report. The aggregate compensation made to key management personnel of the Company and the Group is set out
below:
Short-term employee benefits
Post-employment benefits
Share based payments
Consolidated
2010
2009
1,968,338 1,433,903
147,492
(4,688)
127,496
339,571
2,435,405
1,576,707
II. Directors and key management personnel equity holdings
Fully paid ordinary shares of ClearView Wealth Limited including those held under the Employee Share Plan.
Shares Shares not Balance at
beginning
vesting of financial
subject to
subject to
vesting
conditions
No.
conditions
No.
Granted as
year compensation
No.
No.
Net other
change
No.
Balance
balance
end of held subject
to Vesting
Conditions
No.
financial
year
No.
Balance Vested but
vested at
year end exercisable
No.
Vested
not yet and exer-
cisable
No.
No.
2010
R Kellerman 250,000 100,800
350,800
–
100,800
451,600
250,000
P Wade
S Swanson
–
–
19,841
19,841
–
119,841
139,682
–
–
– 10,000,000 2,000,000 12,000,000 10,000,000
–
–
–
–
–
–
A Hutchison 1,000,000
– 1,000,000
2,000,000
– 3,000,000 3,000,000 3,000,000 3,000,000
J McLaughlin 500,000
–
500,000 1,000,000
– 1,500,000 1,500,000 1,500,000 1,500,000
A Chiert
D McKell
–
–
–
–
– 1,500,000
–
500,000
– 1,500,000 1,500,000 1,500,000 1,500,000
–
500,000
500,000
500,000
500,000
P Constable
– 1,499,503 1,499,503
– (1,499,503)
–
–
–
–
–
–
–
–
–
–
–
–
96
ClearView Wealth Limited and its subsidiaries
Notes to the financial statements [continued]
Fully paid ordinary shares of ClearView Wealth Limited including those held under the Employee Share Plan (cont.).
Shares
subject to
vesting
conditions
No.
Shares not Balance at
beginning
subject to
vesting of financial
conditions
No.
Granted as
year compensation
No.
No.
2009
R Kellerman
250,000
57,669
307,669
A Hutchison 1,000,000
– 1,000,000
P Wade
–
50,000
50,000
J McLaughlin
500,000
–
500,000
A Chiert
D McKell
–
–
–
–
–
–
–
–
–
–
–
–
Net other
change
No.
Balance
end of
financial
year
No.
balance
held subject
to Vesting
Conditions
No.
Vested
Balance Vested but
vested at
and
not yet
year end exercisable exercisable
No.
No.
No.
43,131
350,800
250,000
–
–
–
– 1,000,000
1,000,000 1,000,000
– 1,000,000
(30,159)
19,841
–
–
500,000
500,000
500,000
–
–
–
–
–
–
–
–
–
–
–
–
–
500,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
P Constable
– 4,240,392 4,240,392
– (2,740,889) 1,499,503
K Eley
–
200,000
200,000
B Wright
500,000
20,000
520,000
–
–
(200,000)
(520,000)
–
–
All shares granted as compensation to directors and key management personnel were made in accordance with the
provisions of the executive share plan.
(c) Transactions between the Group and its related parties
Other related parties include:
– entities with significant influence over the Group
– associates
– subsidiaries
– other
During the financial year ended 30 June 2010, the following transactions occurred between the Company and its other
related parties:
– MMC Asset Management Limited received a management fee of $68,000 (2009: $1,224,802) for providing asset
management services to the Company.
– ClearView Administration Services Limited received a management fee of $10,032,337 (2009: $1,056,190) a
recoupment of expenditure (including salary disbursements) from various group companies.
– The Company recognised tax payable in respect of the tax liabilities of its wholly-owned subsidiaries. Payments to/
from the Company are made in accordance with the terms of the tax funding arrangement.
– ClearView Wealth Limited settled litigation related expenses on behalf of Berry Financial Services Pty Limited of
$286,419.
– Berry Financial Services Pty Limited charged ComCorp Financial Advice Pty Limited a management fee of $80,000
in respect of services provided to ComCorp.
– ComCorp Financial Services Pty Limited loaned Berry Financial Services $120,000 on an interest free basis.
– ClearView Life Assurance Limited paid commission of $4,183,829 to ClearView Financial Management Limited.
– The Company subscribed and paid for an additional 3,089,073 shares in ComCorp for a cash consideration of $
3,089,073.
– During the year GPG followed its rights in terms of the 1 for 1 entitlement offer and acquired a further 99,664,490
shares in the Company for a cash consideration of $49,832,245.
(d) Parent entity
The parent entity in the Group is ClearView Wealth Limited which is incorporated in Australia.
97
ClearView Wealth Limited and its subsidiaries
Notes to the financial statements [continued]
Notes to the financial statements
for the year ended 30 June 2010
for the year ended 30 June 2010
continued
continued
40 Financial Instruments
(a) Management of financial Instruments
The financial assets of the Group are managed by specialist investment managers who are required to invest
the assets allocated in accordance with directions from the Board. BNP Paribas acts as master custodian on
behalf of the Group and, as such, provides services including physical custody and safekeeping of assets,
settlement of trades, collection of dividends and accounting for investment transactions. Daily operating bank
accounts are managed within the Group by the internal management and finance department.
(b) Significant accounting policies
Details of the significant accounting policies and methods adopted, including the criteria for recognition, the
basis of measurement and the basis on which revenues and expenses are recognised, in respect of each
class of financial asset and financial liability are disclosed in notes 3(o) and 3(p) to the financial statements
respectively.
(c) Capital risk management
Following the announcement of the Acquisition in March 2010, the Company also announced a $135 million
capital raising by way of a Conditional Placement of $62 million, subject to shareholder approval (Conditional
Placement) and a 1 for 1 entitlement offer for $73 million (Entitlement Offer). The Capital Raising was fully
underwritten by Commonwealth Securities Limited (Commsec). The Company successfully raised $135
million from its Conditional Placement and Entitlement Offer pursuant to the prospectus dated 26 March 2010.
The Conditional Placement was approved by shareholders at the EGM held on 30 April 2010 and the new
shares from the Conditional Placement and Entitlement Offer were issued on 5 May 2010 and commenced
trading on the ASX on that date.
The Group has executed on its strategy of utilising its strong Balance Sheet and cash reserves to develop a
broader presence in the life insurance and wealth management industry.
The Group maintains capital to protect customers, creditors and shareholders against unexpected losses to a
level that is consistent with the Group’s risk appetite. The Group’s capital structure consists of ordinary equity
comprising issued capital, retained earnings and reserves (as detailed in notes 31 and 14). The capital
structure remains unchanged from the previous financial period.
The Group, through its subsidiary ClearView Life, is subject to external capital solvency requirements
prescribed by the Life Act of 1995 and discharged by the Australian Prudential Regulatory Authority (APRA).
APRA Prudential Standards LPS2.04 Solvency, LPS3.04 Capital Adequacy and LPS6.03 Management Capital
govern the various aspects of capital management.
The Group assesses the adequacy of its capital requirements through regulatory capital review. The Group
targets a level of capital resources to satisfy these capital measures. The Group’s capital management
strategy forms part of the broader strategic planning process.
Regulatory Capital
The shareholder minimum regulatory capital requirement (MRR) is the amount of shareholder capital required
by ClearView Life as set by APRA.
ClearView Life targets a level of capital equal to the capital adequacy as defined in LPS3.04 Capital Adequacy
plus a target surplus. ClearView Life has complied with the externally imposed capital requirements
throughout the period.
98
ClearView Wealth Limited and its subsidiaries
Notes to the financial statements [continued]
ClearView Life held a level of capital above its MRR of $39 million as at 30 June 2010. The MRR coverage
ratio will vary throughout the year due to investment market movements, dividend payments and the retention
of profits.
CFML is required to hold $5 million of regulatory capital in accordance with its Australian Financial Services
Licence (AFSL). At 30 June 2010 CFML held $1.5 million above these regulatory requirements.
ComCorp is required to hold capital based on a percentage of the total cash outflow for the projected 3
months under its AFSL.
(d) Fair value of financial instruments
The fair values of financial assets and financial liabilities are determined as follows:
– the fair value of financial assets and financial liabilities with standard terms and conditions and traded on
active liquid markets and determined with reference to quoted market prices.
– the fair value 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.
(e) Categories of financial instruments
The Company has investments in the following categories of financial assets and liabilities:
Financial Assets
Available for sale assets
Cash and cash equivalents
Life insurance investment assets
Loans and receivables
Total financial assets
Financial Liabilities
Policyholder liabilities
Payables
Current tax liabilities
Provisions
Provision for deferred consideration
Finance leases
Total financial liabilities
Consolidated
2010
$’000
2009
$’000
353
197,501
1,429,932
46,474
4,290
78,912
–
1,338
1,674,260
84,540
1,333,808
30,072
1,713
6,063
1,392
–
–
955
84
951
2,581
28
1,373,048
4,599
These financial assets and liabilities are recognised in accordance with the accounting policies detailed in
note 3(o) and 3(p) to the financial statements respectively.
99
ClearView Wealth Limited and its subsidiaries
Notes to the financial statements [continued]
Notes to the financial statements
for the year ended 30 June 2010
for the year ended 30 June 2010
continued
continued
40 Financial Instruments cont.
(f) Financial risk management objectives
The Group is exposed to a variety of financial risks as a result of its activities. These risks include market risk
(including currency risk, fair value interest rate risk and price risk), credit risk, liquidity risk and cash flow
interest rate risk. The Group’s risk management and investment policies, approved by the Board, seek to
minimise the potential adverse effects of these risks on the Group’s financial performance. These policies
may include the use of certain financial derivative instruments.
The Group employs specialist investment managers, who monitor and invest the investments, co-ordinate
access to domestic and international financial markets, and manage the financial risks relating to the
operations of the Group in accordance with the guidelines set out by the Board.
The Group does not enter into or trade derivative financial instruments for speculative purposes. The use of
financial derivatives is governed by the Group’s investment policies, which provide written principles on the
use of financial derivatives. These principles permit the use of derivatives to change the Group’s exposure to
particular assets. Derivatives are not used to gear the Group and the Group’s effective market exposure
should not exceed its market value. Compliance with policies and exposure limits is reviewed by the Board
on a continuous basis.
(g) 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 the policy of only dealing with credit worthy counterparties and
obtaining sufficient collateral or other security where appropriate, as a means of mitigating the risk of financial
loss from default. The Group measures credit risk on a fair value basis. The Group’s exposure and the credit
ratings of its counterparties are continuously monitored by the Board.
Credit risk arising on investments is mitigated by investing in rated instruments or instruments issued by rated
counterparties of credit ratings of at least ‘BBB’ or better as determined by Standard and Poor’s. The
following table details the aggregate investment grade of the cash instruments in the portfolio, as rated by well
known rated agencies approved by the Board. The Group has not made use of the government guarantee
over bank deposits.
The Group does have significant credit risk exposure to counterparties but these counterparties have a high
credit rating. The table below shows the maximum exposure to credit risk at the reporting date. It is the
opinion of the Board that the carrying amounts of these financial assets represent the maximum credit risk
exposure at the balance sheet date. The table reflects the credit risk exposure facing the Group.
100
ClearView Wealth Limited and its subsidiaries
Notes to the financial statements [continued]
Cash and cash equivalents and Debt securities / Fixed interest securities
Rating
AAA to AA-
A+ to A-
BBB+ to BBB-
Consolidated
2010
$’000
2009
$’000
671,300
126,088
25,985
–
78,911
–
823,373
78,911
Credit risk associated with receivables is considered minimal. The main receivables balance is in relation to
trust distributions, receivables from funds managers in the financial planning business and for premiums
receivable. Other receivables balances relate predominantly to management fees from external unit trusts.
The concentration is spread across the various debtors with no single significant debtor.
(h) Liquidity risk
The Company’s approach to managing liquidity is to ensure that it will have sufficient liquidity to meet its
liabilities. The Company has significant cash assets and the listed securities that are considered to be readily
realisable. Liquidity Risk is monitored on a continuance basis by the Board. In line with the previously
outlined change in the Group’s strategy the significant cash reserves have been reduced through the
utilisation of internal cash resources of $69.4 million. As a result, turning the cash reserves into operating
cash flows will allow the short term liquidity requirements of the Group to be met as they become due.
The following tables summarises the realisation profile of financial assets at the reporting date. There were no
financial assets past due or impaired at the reporting date.
Less than
3 months
$’000
3 to 6
months
$’000
Consolidated
6 Months
to a year
$’000
1 to 5
years
$’000
Total
$’000
2010
Trade receivables
Loans to associate
Outstanding life insurance premiums net of
provision
Accrued dividends
Investment income and distribution receivable
Reinsurance receivable (i)
Prepayments
Total
228
120
360
3,361
39,714
1,084
167
45,034
–
–
–
–
–
–
–
–
–
–
449
167
616
288
339
627
–
–
228
120
360
–
–
3,361
– 39,714
2,018
673
–
197
197
46,474
(i) Reinsurance receivables are reflected in accordance with the likely settlement of the underlying claims to which they relate.
101
ClearView Wealth Limited and its subsidiaries
Notes to the financial statements [continued]
Notes to the financial statements
for the year ended 30 June 2010
for the year ended 30 June 2010
continued
continued
40 Financial Instruments cont.
The following tables summarise the maturity profile of the Company’s financial liabilities. The tables have been
drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the
company can be required to pay. The tables include both interest and principle cash flows.
Weighted average Less than
interest rate 3 months
$’000
$’000
3 to 6
months
$’000
6 Months
to a year
$’000
1 to 5
years
$’000
Over 5
years
$’000
Total
$’000
Consolidated
2010
Payables (i)
Current tax liabilities (i)
Provisions (i)
Provision for deferred
consideration (i)
Total
2009
Payables (i)
Current tax liabilities (i)
Provisions (i)
Provision for deferred
consideration (i)
Finance leases
Total
(i) Non-interest bearing.
0%
0%
0%
25,565
1,713
3,733
1,808
–
–
1,125
–
1,108
1,574
–
1,222
–
–
–
30,072
1,713
6,063
0%
1,093
–
–
299
–
1,392
32,104
1,808
2,233
3,095
–
39,240
0%
0%
0%
0%
7.3%
955
84
890
758
7
2,694
–
–
–
434
7
441
–
–
–
–
–
61
162
14
1,227
–
176
1,288
–
–
–
–
–
–
955
84
951
2,581
28
4,599
Financing facilities
The Group has access to the following facilities:
Bank Guarantees
– amount used
– amount unused
Overdraft and credit
– amount used
– amount unused
Consolidated
2010
$’000
2009
$’000
340
–
16
5,134
340
–
150
134
(i) Market risk
Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of
changes in market prices. Market risk comprises three types of risk: foreign exchange (currency risk), market
interest rates (interest rate risk) and market prices (price risk). The Group manages these risks via employing
its investment professionals. This is consistent with the prior period.
(a) Interest rate risk
Interest rate risk is the risk that the value of a financial instrument will fluctuate as a result of changes in
market interest rates. Exposure to interest rate risk arises in the normal course of ClearView Wealth Limited’s
business. Interest rate risk is managed on a consolidated basis.
102
ClearView Wealth Limited and its subsidiaries
Notes to the financial statements [continued]
Interest rate risk management
The Group’s activities expose it to the financial risk of changes in interest rates. Floating rate instruments
expose the Group to cash flow risk, whereas fixed interest rate instruments expose the Group to fair value
interest rate risk. The Board monitors the Group’s exposures to interest rate risk.
The tables below detail the Group’s exposure to interest rate risk at the balance sheet date by the earlier of
contractual maturities or re-pricing.
Consolidated
Weighted average
interest rate
%
Less than
3 months
$’000
2010
Financial assets
Variable interest rate instruments:
Cash and cash equivalents
Fixed interest securities
Total
2009
Financial assets
Variable interest rate instruments:
Cash and cash equivalents
Fixed interest securities
Total
(i) For the financial year.
4.66%
5.40% (i)
197,142
359
197,501
3.25%
4.22%
27,923
50,989
78,912
Interest rate sensitivity analysis for floating rate financial instruments
The sensitivity analysis below have been determined based on the Group’s exposure to interest rates at the
reporting 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 instruments that have floating interest rates. A 150 basis
point increase or decrease is used when reporting interest risk internally to key management personal and
represents management’s assessment of the reasonably possible change in interest rates.
The following table illustrates the effect for the Group from possible changes in market risk that were
reasonably possible based on the risk the Group was exposed to at reporting date:
Change in Variable
±1.5% (2009: 1%)
Effect on
operating profit
Consolidated
2010
$’000
±1,574
2009
$’000
±778
Effect on cash and cash equivalents
and fixed interest deposits
Consolidated
2010
$’000
2009
$’000
±1,574
±778
The Group’s sensitivity to interest rates has increased during the current period mainly due to the acquisition
of ClearView Life and the increased exposure to financial assets. The methods and assumptions used to
prepare the sensitivity analysis have not changed in the year. Based on the market exposure management
believe that interest rate variation of 1.5% is considered appropriate.
Fair value sensitivity analysis for fixed rate financial instruments
The Group does account for fixed rate financial assets and liabilities at fair value through profit and loss.
Therefore a change in long term interest rates at reporting date would affect profit and loss.
103
ClearView Wealth Limited and its subsidiaries
Notes to the financial statements [continued]
Notes to the financial statements
for the year ended 30 June 2010
for the year ended 30 June 2010
continued
continued
40 Financial Instruments cont.
(b) Foreign currency risk management
Foreign currency risk is the risk that the market value of future cash flows of a financial instrument will fluctuate
because of changes in foreign exchange rates. The Group undertakes certain investments denominated in
foreign currencies, hence is exposed to the effects of exchange rate fluctuations. However, the foreign currency
risk is borne by the policyholder and the shareholder has no exposure to foreign currency.
USD
GBP
EUR
YEN
Change in AUS
relative to
foreign currency
Effect on net
assets
$’000
5%
16%
21%
(3%)
–
–
–
–
Forward foreign exchange contracts
The Group currently does not make use of forward foreign exchange contracts.
(c) Equity price risk
Other market risk is the risk that the total value of investments will fluctuate as a result of changes in market
prices, whether caused by factors specific to an individual investment, its issuer or all factors affecting all
instruments traded in the market. The Group has investments in equity instruments, which exposes it to price
risk. The Board manages other price risk on a continual basis.
The following table illustrates the effect on recognised income and expense and securities from a possible
change in other market risk that were reasonably possible based on the risk the Group was exposed to at
reporting date:
Effect on operating profit
Consolidated
Effect on securities
Consolidated
Equity price risk - ±16% change
Australia
2010
$’000
2009
$’000
2010
$’000
2009
$’000
±56
±303
±56
±303
The methodology used to prepare the sensitivity analysis was to determine the weighted average beta of the
portfolio (0.71) and multiply a 16% movement in the value of the portfolio by the portfolio beta.
Based on the market exposure management believe that the market variation of 16% is considered
appropriate.
104
ClearView Wealth Limited and its subsidiaries
Notes to the financial statements [continued]
41 Disaggregated information by fund
Shareholders
Fund
Statutory
Fund No.1
Statutory
Fund No.2
Statutory ClearView
Life
Fund No.4
Australian non- Australian non- Australian non-
participating
2010
participating
2010
participating
2010
2010
2010
Abbreviated income statement
Life Insurance premium revenue
Outward reinsurance expense
Fee revenue
Investment revenue
Net fair gains (losses) on financial
assets at fair value
Net revenue and income
Claims expense
Reinsurance recoveries
Deferred Acquisition Costs
Change in life insurance policy liabilities
Change in life investment policy liabilities
Change in reinsurers’ share of life
insurance liabilities
Other expenses
Profit for the year before income tax
Income tax benefit / (expense)
Net profit attributable to members of
ClearView Life Assurance Limited
–
–
–
158
(121)
37
–
–
–
–
–
–
(237)
(200)
60
2,602
(224)
–
285
(219)
2,444
(912)
115
–
1,001
–
29
(1,744)
933
(281)
22
(14)
91
1,147
(872)
374
–
–
–
–
(57)
–
(251)
66
(161)
–
–
1,785
43,104
2,624
(238)
1,876
44,694
(59,635)
(60,847)
(14,746)
(11,891)
–
–
–
–
19,835
–
(3,058)
2,031
(2,416)
(912)
115
–
1,001
19,778
29
(5,290)
2,830
(2,798)
(140)
652
(95)
(385)
32
Abbreviated statement of financial position
Unit trusts
12,538
Total Investment Assets
Other assets
Total assets
Life insurance policy liabilities
Life investment policy liabilities
Other liabilities
Total liabilities
Net assets
12,538
1,566
14,104
–
–
748
748
22,543
22,543
14,087
36,630
(71,528)
–
12,464
(59,064)
91,197
1,293,240 1,419,518
91,197
1,293,240 1,419,518
3,941
72,903
92,497
95,138
1,366,143 1,512,015
(76)
89,290
1,872
(71,604)
–
1,316,125 1,405,415
23,049
7,965
91,086
1,324,090 1,356,860
13,356
95,694
4,052
42,053
155,155
105
ClearView Wealth Limited and its subsidiaries
Notes to the financial statements [continued]
Notes to the financial statements
for the year ended 30 June 2010
for the year ended 30 June 2010
continued
continued
41 Disaggregated information by fund cont.
Shareholders
Fund
Statutory
Fund No.1
Statutory
Fund No.2
Statutory ClearView
Life
Fund No.4
Australian non- Australian non- Australian non-
participating
2010
participating
2010
participating
2010
2010
2010
Abbreviated statement of financial position
Shareholder’s retained profits:
Opening retained profits
Operating profit
Capital transfer between funds
Prior year adjustment
Dividend paid
71
(140)
–
–
–
Shareholder’s retained profits
Shareholder’s capital
Total equity
(69)
13,425
13,356
64,342
652
–
–
–
64,994
30,700
95,694
447
(95)
–
–
–
352
3,700
4,052
26,838
(385)
–
–
–
26,453
15,600
91,698
32
–
–
–
91,730
63,425
42,053
155,155
42 Investment in controlled unit trusts
Name
International Fixed Interest Fund
Fund of Funds Australian Equity Fund
Bond Fund
Fund of Funds International Equity Fund
Property Fund
Money Market Fund
Total
Type
Debt
Equities
Debt
Equities
Property
Debt
Consolidated
30 June 2010
$’000
121,559
394,568
255,625
243,069
56,969
347,728
%
9
28
18
17
4
24
1,419,518
100
106
ClearView Wealth Limited and its subsidiaries
Notes to the financial statements [continued]
43 Finance leases
Leasing arrangements
The Group has no finance lease arrangements as a result of all liabilities for finance lease liabilities being
discharges in the current financial year.
Finance lease liabilities
Minimum future lease payments
Consolidated
Present value of
minimum future lease payments
Consolidated
No later than 1 year
Later than 1 year and not later than 5 years
Later than five years
Minimum future lease payments*
Less future finance charges
Present value of minimum lease payments
Included in the financial statements as:
Current borrowings
Non-current borrowings
2010
$’000
–
–
–
–
–
–
2009
$’000
28
–
–
28
–
28
2010
$’000
–
–
–
–
–
–
–
–
2009
$’000
28
–
–
28
–
28
28
–
* Minimum future lease payments includes the aggregate of all lease payments and any guaranteed residual.
Leasing arrangements
Operating leases relate to:
– Premises leases with lease terms that extend to 30 June 2012. The Group does not have an option to
purchase the leased asset at expiry of the lease.
– Tool of trade cars utilised by employees in the performance of their work responsibilities. The Group does
not have an option to purchase the leased asset at expiry of the lease.
Non-cancellable operating lease commitments
Consolidated
Not longer than 1 year
Longer than 1 year and not longer than 5 years
Longer than 5 years
2010
$’000
1,709
1,704
–
3,413
In respect of non-cancellable operating leases the following liabilities have been recognised:
Make good provision (note 28)
Current
Non-current
50
–
50
2009
$’000
261
–
–
261
80
–
80
107
ClearView Wealth Limited and its subsidiaries
Notes to the financial statements [continued]
Notes to the financial statements
for the year ended 30 June 2010
for the year ended 30 June 2010
continued
continued
44 Contingent liabilities and contingent assets
The Group has term deposits that back financial guarantees issued by National Australia Bank in favour of the
landlord of the Sydney premises in relation to rental deposits of $341,000.
ClearView has guaranteed the obligations of ComCorp under the terms of the BSA.
45 Subsequent events
On 13 July 2010, the Group acquired the business of a franchised planner, Suntrip Financial Services Pty
Limited for $0.8 million.
The Group took out a term deposit at Westpac Banking Corporation in the amount of $0.6 million that serves
as security for guarantees issued by Westpac in favour of the landlord of the new Sydney Bridge Street
premises.
The Directors are not aware of any other matter or circumstance not otherwise dealt with in this report or the
financial statements that has significantly, or may significantly, affect the operations of the consolidated entity,
the results of those operations or the state of the affairs of the consolidated entity in future financial years.
46 Capital commitments
The Group has committed to the following capital expenditures subsequent to the year end.
– System upgrade
– Infrastructure expenditure
Consolidated
$’000
500
245
745
108
ClearView Wealth Limited and its subsidiaries
Director’s Declaration
Directors’ Declaration
The Directors declare that:
a) in the Directors’ opinion, there are reasonable grounds to believe that the Company will be able to pay
their debts as and when they become due and payable;
b) in the Directors’ opinion, the attached financial statements and notes thereto are in accordance with
the Corporations Act 2001, including compliance with accounting standards and giving a true and fair
view of the financial position and performance of the Company and the consolidated entity;
c) in the Directors’ opinion, the financial statements and notes thereto are in accordance with International
Financial Reporting Standards issued by the International Accounting Standards Board as disclosed in
note 3; and
d) the Directors have been given the declarations required by s.295A of the Corporations Act 2001.
Signed in accordance with a resolution of the Directors made pursuant to section 295(5) of the
Corporations Act 2001.
On behalf of the Directors
Ray Kellerman
Chairman
Sydney, 25 August 2010
109
Independent Auditor’s Report
to the Members of ClearView Wealth Limited
Report on the Financial Report
We have audited the accompanying financial report of ClearView Wealth Limited which comprises the
statement of financial position as at 30 June 2010, and the income statement, the statement of
comprehensive income, the statement of cash flows and the statement of changes in equity for the year
ended on that date, notes comprising a summary of significant accounting policies and other explanatory
information, and the directors’ declaration of the consolidated entity comprising the company and the
entities it controlled at the year’s end or from time to time during the financial year as set out on pages 36
to 109.
Directors’ Responsibility for the Financial Report
The directors of the company are responsible for the preparation and fair presentation of the financial
report in accordance with Australian Accounting Standards (including the Australian Accounting
Interpretations) and the Corporations Act 2001. This responsibility includes establishing and maintaining
internal control relevant to the preparation and fair presentation of a financial report that is free from
material misstatement, whether due to fraud or error; selecting and applying appropriate accounting
policies; and making accounting estimates that are reasonable in the circumstances. In Note 3, the
directors also state, in accordance with the Accounting Standard AASB 101 Presentation of Financial
Statements, that compliance with the Australian equivalents to International Financial Reporting ensures
that the financial report, comprising financial statements and notes, complies with the International
Financial Reporting Standards.
Auditor’s Responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our
audit in accordance with Australian Auditing Standards. These Auditing Standards require that we comply
with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain
reasonable assurance whether the financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
the financial report. The procedures selected depend on the auditor’s judgement, including the
assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In
making those risk assessments, the auditor considers internal control relevant to the entity’s preparation
and fair presentation of the financial report in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s
internal control. An audit also includes evaluating the appropriateness of accounting policies used and the
reasonableness of accounting estimates made by the directors, as well as evaluating the overall
presentation of the financial report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinion.
Auditor’s Independence Declaration
In conducting our audit, we have complied with the independence requirements of the Corporations
Act 2001.
Liability limited by a scheme approved under Professional Standards Legislation.
110
Independent Auditor’s Report
to the Members of ClearView Wealth Limited cont.
Auditor’s Opinion
In our opinion,
(a) the financial report of ClearView Wealth Limited is in accordance with the Corporations Act 2001,
including:
(i) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2010 and of their
performance for the year ended on that date; and
(ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations)
and the Corporations Regulations 2001; and
(b) the financial report also complies with International Financial Reporting Standards as disclosed in Note 3.
Report on the Remuneration Report
We have audited the Remuneration Report included in pages 24 to 32 of the directors’ report for the year
ended 30 June 2010. The directors of the company are responsible for the preparation and presentation of
the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is
to express an opinion on the Remuneration Report, based on our audit conducted in accordance with
Australian Auditing Standards.
Auditor’s Opinion
In our opinion, the Remuneration Report of ClearView Wealth Limited for the year ended 30 June
2010 complies with section 300A of the Corporations Act 2001.
DELOITTE TOUCHE TOHMATSU
Philip Hardy
Partner
Chartered Accountants
Sydney, 25 August 2010
Liability limited by a scheme approved under Professional Standards Legislation.
111
ClearView Wealth Limited and its subsidiaries
Shareholders’ information
Shareholders’ Information
directory
directory
On 30 July 2010 there were 2,788 shareholders. All the shares in the Company are ordinary and fully paid
carrying one vote.
Substantial shareholders
The following information is extracted from the Company’s register of top shareholders as at 30 July 2010.
Rank Name
No of share as per notice % of issued capital
1 Guinness Peat Group Plc and its Subsidiaries
2
Investec Bank (Australia) Limited and
Investec Wentworth Private Equity
Westpac Banking Corporation
BT Investment Management Limited
3
199,328,980
47.85
39,688,239
23,525,216
9.53
5.65
The following information is extracted from the Company’s register of top shareholders as at 30 July 2010.
Twenty largest shareholders
Rank Name
Units
% of Units
IWPE Nominees Pty Limited
J P Morgan Nominees Australia Limited
1 Ecurb Australia Pty Limited
2 Guinness Peat Group (Australia) Pty Ltd
3 HSBC Custody Nominees (Australia) Limited
4
5
6 Gannet Capital Pty Ltd
7 National Nominees Limited
8 Gibsbourne Pty Ltd
9 Mr Simon Swanson
10 Citicorp Nominees Pty Limited
11 Bell Potter Nominees Ltd
12
Investec Bank (Australia) Ltd
13 GPG Australia Nominees Limited
14
Morgan Stanley Australia Securities (Nominee)
Pty Limited
IWPE Nominees Pty Limited
RBC Dexia Investor Services Australia Nominees
Pty Limited
15
16
17 ANZ Nominees Limited
18 Mr Alexander Paul Hutchison
19 Manyata Holdings Pty Ltd
20 Queensland Investment Corporation
Distribution of shareholders
Range
1 - 1,000
1,001 -
5,000
5,001 - 10,000
10,001 - 100,000
100,001 and over
Total
116,401,964
65,151,458
27,032,377
26,458,826
19,389,044
16,575,647
15,378,247
10,000,000
10,000,000
9,825,173
8,839,120
7,937,647
7,787,150
5,929,804
5,291,766
3,682,186
3,623,487
2,000,000
2,000,000
2,000,000
27.26
15.26
6.33
6.20
4.54
3.88
3.60
2.34
2.34
2.30
2.07
1.86
1.82
1.39
1.24
0.86
0.85
0.47
0.47
0.47
Total holders
Units
% of Issued Capital
303
907
570
918
90
115,965
2,839,241
4,520,352
25,345,573
394,141,061
2,788
426,962,192
0.03
0.66
1.06
5.94
92.31
100.00
Units
146,928
Unmarketable Parcels
Minimum Parcel Size
Minimum $ 500.00 parcel at $ 0.45 per unit
1,112
Shares under voluntary escrow
There are no shares subject to voluntary escrow as at 30 June 2010.
Holders
332
112
ClearView Wealth Limited
ABN 83 106 248 248
2010 Annual Report
Directory
Directors
Ray Kellerman, Chairman
Simon Swanson
Anthony Eisen
Michael Jefferies
Peter Wade
David Goodsall
John Murphy
Managing Director
Simon Swanson
Secretary
Athol Chiert
Registered Office and Contact Details
Level 24, 2 Chifley Square
Sydney NSW 2000
GPO Box 4964, Sydney NSW 2001
Telephone: 02 9224 0700
Facsimile: 02 9233 2275
Email:
Website: www.clearview.com.au
enquiries@clearview .com.au
Share Registry
Computershare Investor Services Pty Limited
Level 3, 60 Carrington Street
Sydney NSW 2000
Telephone: 1300 855 080
03 9415 4000
Facsimile: 03 9473 2500
For all enquiries relating to shareholdings, dividends and
related matters please contact the share registry.
Auditors
Deloitte Touche Tohmatsu
Accounting and Custodial Services
BNP Paribas Services Australasia Pty Limited
Australian Securities Exchange Share Code
CVW
113
ClearView Wealth Limited
ClearView Wealth Limited
Level 24, 2 Chifley Square, Sydney NSW 2000
Level 24, 2 Chifley Square, Sydney NSW 2000
GPO Box 4964, Sydney NSW 2001
GPO Box 4964, Sydney NSW 2001
Telephone: 02 9224 0700
Telephone: 02 9224 0700
Facsimile: 02 9233 2275
Facsimile: 02 9233 2275
enquirie
clearview.com.au
enquiriess@@clearview.com.au
www.clearview.com.au
www.clearview.com.au