More annual reports from MyState Limited:
2023 Report2019
Annual Report
2
Content
01 Performance Highlights
Annual General Meeting
Highlights
Group Performance
Chairman’s Report
Managing Director’s Report
Banking Operations
Wealth Management
Digital Services
Risk Management
Supporting the Community
02 Directors' Report
Board of Directors
Key Management Personnel
Directors' Report
Remuneration Report
03 Financial Report
6
7
8
12
16
17
18
19
20
26
28
30
36
Results for the Year
50
Notes to the Consolidated Financial Statements 55
Directors’ Declaration
91
Independent Auditor’s Report
92
Information Relating to Shareholders
97
Corporate Directory
99
Best Western Hotel,
156 Bathurst Street, Hobart
on Thursday 17 October 2019
commencing at 10.30 am (Hobart Time).
Corporate Governance
The Board of MyState Limited is committed to
upholding the highest levels of corporate governance
and subscribes to the Corporate Governance Principles
and Recommendations published by the ASX Corporate
Governance Council in order to promote investor
confidence in the company and within the broader
market. In addition, the Australian Prudential Regulation
Authority (APRA) requires MyState Limited, as the
non-operating holding company of a bank, to comply
with the prudential obligations that apply directly to the
bank. To this end, the Board of MyState Limited has a
governance framework whereby the appropriate Board
policies, meeting the APRA prudential requirements,
apply across the Group.
MyState Limited’s Board approved Corporate Governance
Statement is available on the Company’s website and is
current as at 23 August 2019.
MyState Limited
ABN 26 133 623 962
OUR PURPOSE
OUR MISSION
OUR VISION
To help people achieve
their dreams
To make financial services
simple and trustworthy
OUR VALUES
Integrity We do what we say, and
we hold ourselves and each other
accountable for our actions and our
commitments. We ‘do the right thing’.
Innovation We embrace change and
are always looking to improve the
way we do things. If there’s a better,
more efficient way to do something,
we’ll find it and make it happen.
Courage Our actions are bold, our
decision-making brave, and we won’t
be scared to challenge convention.
Relationships We are obsessive
about customer experience and are
committed to building quality customer
and stakeholder relationships. We’re
one team, we’re stronger together and
we celebrate success.
To make a genuine difference
to our customers and
communities every day
Community We live, work and play
locally. We’re passionate about
the communities we serve, and we
understand that everyone has a
valuable contribution to make.
MyState Limited Annual Report 2019
4
01
Performance
Highlights
MyState’s business transformation
is delivering for our shareholders,
customers and community.
MyState Limited Annual Report 2019
6
Performance Highlights
7
Highlights
We are modernising to reflect
how customers want to bank.
Shareholders
$31.0m
net profit after tax
28.75c
full year dividends,
fully franked
Exceptional customer service
2.7
days faster loan-application
turnaround compared to
industry average
+42
customer net promoter
score (NPS) for MyState Group
5
pays services including
Apple Pay, Google PayTM,
Samsung Pay, Garmin PayTM
and Fitbit PayTM
Group
Performance
Underlying NPAT
($ million)
Underlying earnings
per share (cents)
Dividends – fully franked
per share (cents)
1H
2H
0
.
4
1
0
.
4
1
0
.
4
1
5
2
.
4
1
7
.
9
2
1
.
1
3
1
.
0
3
5
.
1
3
0
.
1
3
1
.
4
3
5
.
5
3
0
.
4
3
0
.
5
3
2
.
4
3
5
.
4
1
5
.
4
1
5
.
4
1
5
.
4
1
5
2
.
4
1
5
.
4
1
Customers
$3.7b
customer deposits
Community
58%
of home loan portfolio
based outside Tasmania
$5.0b
loan portfolio
2015 2016 2017 2018 2019
2015 2016 2017 2018 2019
2015 2016 2017 2018 2019
Underlying return on
average equity (%)
Underlying cost to
income ratio (%)
Net interest income
($ million)
$2.2m
100+
1,500
invested through the MyState
Community Foundation since 2001
not-for-profit organisations
assisted since 2001
students participated in the
MyState Student Film Festival
4
.
0
1
6
.
0
1
0
.
0
1
1
.
0
1
7
.
9
3
.
4
6
2
.
3
6
9
.
5
6
7
.
2
6
8
.
4
6
4
.
3
8
9
.
8
8
1
.
8
8
5
.
9
8
4
.
9
8
2015 2016 2017 2018 2019
2015 2016 2017 2018 2019
2015 2016 2017 2018 2019
MyState Limited Annual Report 2019
MyState Limited Annual Report 2019Performance Highlights 8
9
Chairman’s
Report
At MyState conduct risk has always been an important focus and is
embedded in our risk framework. The risk framework has been updated to
ensure that we fully reflect the precepts identified by the Royal Commission.
Operating Performance
Significant Initiatives
The operating result for the year under review was slightly
disappointing. However, in the context of considerable
progress in our transition to a digital bank and the overall
circumstances of the banking sector, it was nonetheless a
solid performance.
Statutory net profit after tax fell 1.5% to $31 million.
The result included a one–off benefit of $1.2 million
arising from the sale of the financial planning business
and, excluding discontinued operations, net profit after
tax fell from $31.3 million to $29.8 million.
The result was significantly impacted by a spike in bank
bill swap rate (BBSW) linked funding costs in the first half.
However, the spike abated in the second half when
net profit after tax was $15.9 million, compared with
$13.9 million in the first half.
Earnings per share including discontinued operations fell
from 34.97 cps to 34.17 cps.
Whilst a strong focus on expense control was maintained,
the group’s cost-to-income ratio increased from 62.7% to
64.8%. The metric was adversely impacted by growth in
technology related costs and reduced income related to
movements in BBSW linked funding costs.
The loan book continued to grow at a rate well above
system, and the overall loan book increased by 10.7%.
At 30 June 2019 the loan book was $5 billion,
an all-time record.
At the same time it is pleasing to note that credit
quality was maintained and this remains one of the key
differentiators of our business.
Capital adequacy ratio decreased in the year from 13.5%
to 12.9%, but remains very strong.
Unlike many of our peers it is pleasing to report that we
have not had to make any provision for remediation costs.
The wealth management business had a strong year with
funds under management increasing to $1.17 billion.
The directors have declared a final dividend of 14.5cps,
unchanged from the previous corresponding period.
• We continue to develop our digital offering and in
FY19 we invested a further $5 million in technology,
taking the total investment over the past five years to
$25 million. Our focus is to make banking easier for our
customers and at the same time, deliver operational
efficiencies, enabling us to do more business without
increasing costs.
• The sale of the financial planning arm in June 2019
followed a review of the growth options available to
us in that business. Further, whilst comfortable that
we were appropriately managing conflicts of interest,
we came to the view that returns did not justify the
attendant risks.
• The Board has approved a revised business plan for the
funds management business that will see an enhanced
technology offering for customers. It is anticipated
that we will reduce the number of funds and target a
range of initiatives to improve scale and the returns to
investors in our funds.
The Royal Commission into Banking
and Financial Services
MyState was not called on to submit any evidence at
the Royal Commission. However, we have critically
examined our business in the light of the following
recommendations that were applicable to us.
Role of mortgage brokers
The Royal Commission recommended a number of
changes to the responsibility of mortgage brokers
and their remuneration arrangements. We support the
changes but hope that they will be implemented in a
manner that does not diminish the important role that
brokers play in facilitating competition in banking.
The Royal Commission upheld the Banking Code of
Practice as a good self-governance tool for the industry.
MyState is a signatory to the Code and is committed to
ensuring that we fully comply with both its key principles
but also its spirit.
Remuneration Practices
The Royal Commission observed that incentive
remuneration arrangements could influence behaviours
and customer outcomes. MyState has undertaken a
comprehensive review of incentive remuneration at all
levels of the organisation. Our incentive plans have risk,
compliance and customer outcome gateways, we have
adopted the applicable Sedgwick recommendations and
are fully compliant with BEAR requirements.
Conduct Risk
The Royal Commission made a particular emphasis on
conduct risk, detailing six fundamental precepts.
At MyState conduct risk has always been an important
focus and is embedded in our risk framework. This has
been updated to ensure that we fully reflect the precepts
identified by the Royal Commission.
Culture & Governance self-assessment
The commission recommended that financial entities
undertake an assessment of culture and governance.
MyState will engage an external party to facilitate this
review and we anticipate that it will be completed in FY20.
Conflicts of Interest
The Royal Commission noted the importance of
appropriate management of conflicts on interest. MyState
has at all times sought to ensure that our governance
processes appropriately manage conflicts of interest.
Banking Executive Accountability Regime
The application of the legislated Banking Executive
Accountability Regime (BEAR) involved strengthening
governance around accountability and providing greater
visibility between accountability and remuneration.
MyState was fully compliant with the BEAR regime on
1 July 2019, with accountability documentation lodged
and approved by APRA.
Changes to remuneration arrangements that form part of
BEAR have also been fully implemented.
Remuneration Matters
In recent times there has been much written about bank
remuneration arrangements and the potential for them to
lead to unacceptable customer outcomes.
We have undertaken a comprehensive review of
remuneration arrangements across the business to ensure
Miles Hampton
Chairman
Statutory net profit
after tax
5 year investment
in technology
$31.0m
$25.0m
The operating result for the year under
review was slightly disappointing. However,
in the context of considerable progress in our
transition to a digital bank and the overall
circumstances of the banking sector, it was
nonetheless a solid performance.
MyState Limited Annual Report 2019
MyState Limited Annual Report 2019Performance Highlights 10
that our remuneration structures do not inadvertently
frame behaviours that work against good customer
outcomes.
At the executive level we maintain risk, compliance and
customer outcomes overlays to variable remuneration
that ensure that even if defined performance metrics are
achieved, the board can cause variable remuneration
payments to be diminished or forfeited.
Below the executive level we have undertaken a
comprehensive review of remuneration structures in light
of the findings of the Sedgwick Review. Where necessary
we have made changes to ensure that our variable pay
structures support good customer outcomes.
Competition in Banking
maximum extent possible, changes to the regulatory
regime do not disproportionately impact smaller players.
Board changes
During the year non-executive director Peter Armstrong
retired from the Board following a distinguished career
that included serving as chairman and director of some of
our formational credit unions.
We acknowledge the contribution that Peter made to our
business and we wish him well in retirement.
We welcomed Vaughn Richtor to the Board in
September 2019. Vaughn is a highly experienced bank
chief executive with significant experience and success
in digital banking both in Australia and overseas.
The competitive landscape continues to be balanced
against smaller players.
Acknowledgement
It is a pity that the Royal Commission failed to explicitly
call out that one of the best ways of ensuring the absence
of complacency that sits behind so many of its egregious
findings was to improve the competitive landscape.
Apart from the obvious scale disadvantage, smaller banks
have to maintain higher capital ratios to fund their loan
books and their funding costs are inevitably higher.
At the same time we are seeing significant growth in
non-bank lending which is placing additional pressure on
all players, but particularly the smaller banks.
I would like to acknowledge the contribution of my
fellow board members in the face of the ever-increasing
demands being placed on bank directors.
I also acknowledge the focus of the executive team on
building a digital bank and the contribution of our people
who are committed to delivering unparalleled service for
our customers.
While new regulations arising from the Royal Commission
recommendations will rightly aim to enforce greater
industry accountability, it is to be hoped that
consideration will be given to ensuring that, to the
Miles Hampton
Chairman
MyState Limited Annual Report 2019Performance Highlights
12
13
Managing
Director’s Report
During the year we continued our strategy of developing our digital banking capability,
which allows our customers to bank where they want, whenever they want.
Anticipating customers’ demands for more convenient,
secure financial services, we have expanded and
enhanced the customer experience to make it easy
for people to manage their money.
Ratings agency Moody’s provides a Baa1 rating for
MyState Bank, recognising the strength of our risk
management systems and the strength of our capital
management strategy.
Our investment in technology continues to focus on
serving human needs, delivering our customers superior
service and greater access to our full suite of banking
and wealth management products.
MyState’s return on average equity at the end of the
year was 9.7%, which remained high compared to
regional bank peers.
Banking overview
The financial services industry is changing faster than
any other time in history. Today we have an increasing
proportion of customers using online and mobile services,
without a need for support through a traditional branch
network. The use of and need for cash are falling rapidly.
We have improved our services by streamlining
processes, reorganising our business structure to
deepen customer relationships and provide a highly
differentiated customer experience.
Most importantly, our customers are telling us they like
these improvements. 2019 saw this demonstrated by
another improvement in MyState’s net promoter score
(NPS). We continue be a leader in the banking industry
with a Group score of +42, a large improvement on +27
last year, which was already a high score.
Financial overview
The Group’s total operating income was $120.4 million,
slightly lower than $120.9 million in the previous year.
The contribution of our banking business to profit was
$25.9 million compared to $26.9 million. The profitability
of our wealth management business increased to
$5.1 million (including profit from the sale of the financial
planning business), up from $4.6 million from the
prior year.
At 30 June 2019, MyState’s capital adequacy ratio
was 12.9%, with Common Equity Tier 1 (CET1) capital
at 11.1%, meaning the Group already meets APRA’s
‘unquestionably strong’ capital targets that come into
effect on 1 January 2020.
Strong lending growth propelled our loan book above
$5 billion for the first time, supported by record
applications and settlements. Having consistently
delivered above-system growth for several years, we are
now a much larger organisation, able to improve our
economies of scale.
Enhanced technology, including new finance and risk
management systems, helps us to manage our business
more efficiently and effectively. Systems and process
improvements have led to much faster loan approval
times with our turnaround times around two days faster
than the industry average. Also, all of our banking
products are able to be originated online, making our
bank a truly national bank.
Our successful channel strategy has helped build scale
across Australia’s eastern seaboard. Our loan book in
New South Wales now represents 21.8% of the portfolio,
Victoria 17.3% and Queensland 15.8%. While our
Tasmanian book is growing, the proportion it represents
reduced to 41.8%, decreasing our concentration risk on
a single state economy.
Customer deposits increased to $3.7 billion. This strong
12.1% growth from $3.3 billion last year was driven
by the success of new online deposit products.
These contemporary services have been well received
and include personal accounts with a range of payment
options. We have a wonderful brand in MyState
Bank and continue to invest heavily in building brand
awareness across new markets through more targeted
marketing campaigns.
During the year, the banks’ funding costs were heavily
impacted by elevated wholesale funding rates. As
a result, the net interest margin declined to 1.80%.
Wholesale funding costs reduced towards the end of
the financial year as expectations of a Reserve Bank
cash rate cut reduced pressure on margins. As we move
forward, we will increase the proportion of customer
deposits that we hold and reduce reliance on wholesale
funding markets, which we consider will allow us to
manage our net interest margin more actively.
Simplified wealth management business
In June 2019, we took the decision to divest our retail
financial planning business, simplifying our operations.
While this decision was difficult, we felt it was in our best
interest as the risk profile of this business was changing,
particularly following the Hayne Royal Commission.
We were pleased to receive what we considered a
premium for the business, reflecting its quality.
We are investing heavily in a multi-year project that
will improve the product and digital experience for our
funds management customers. We are moving to a
new platform for our funds management operations to
increase the scalability and service levels of the business.
This is an incredibly exciting project that will support
the national expansion of our business while allowing
customers and investors to manage portfolios online and
take advantage of the new products and services that we
are developing.
Our income funds performed well, and funds under
management increased to a new decade-high of
$1.17 billion.
Customer deposits
+12.1%
Customer NPS
+42
Loan portfolio
$5.0b
Melos Sulicich
Managing Director and Chief Executive Officer
MyState Limited Annual Report 2019Performance Highlights 15
Our people
We are operating in a fast-changing environment and are
building a competitive advantage through technology
and nimble processes, including continual changes to
our business structure to serve customers. However,
while technology and process improvement are critical
to our business, it is the quality of our people that really
make the difference. During the year we strengthened
our executive team, adding additional banking
distribution, digital and marketing skills.
The change that the banking industry is going through
is exciting and unprecedented. It means that traditional
skills of customer engagement and risk management
are augmented by increased analytical, digital and
automation skill sets that are part of a new world that
did not exist in our business just a few years ago.
It’s exciting but challenging at the same time as we
continually move to change the shape of our business to
a much more contemporary model.
I would like to take this opportunity to congratulate
our team which provides the superior service that
delights our customers. We have a strong customer-
centric culture with high levels of engagement and
responsiveness, and I thank all our people for their
dedication and passion.
Building customer trust
The Hayne Royal Commission has seen significantly
heightened regulatory oversight across the financial
services industry. While there was no specific impact on
MyState, we continued to invest in risk management
processes, systems and people to ensure the highest
standards of compliance are delivered with the customers’
needs firmly at the centre of all of our decision-making.
Through the Australian Banking Association, the banking
industry has launched a revitalised Banking Code of
Practice, with the newest version of the code taking
effect on 1 July 2019. The new Code provides an
ethical, customer-oriented and sustainable framework.
It sets clear standards of conduct for banks, their staff
and representatives, and aims to set a new standard
of customer service for the banking industry. MyState
Bank is proud to be a voluntary signatory to the Code,
and one of the smallest banks to make this large
commitment, ensuring our customers get the very best
of service and peace of mind.
During the year we strengthened our whistleblower
program and we continue to provide a Customer
Advocate service, offering an independent review for
customer feedback and customer complaints.
However, the increased regulatory oversight has had
other consequences that disproportionately impacted
smaller banks. There remains work to be done by the
government to ‘level the playing field’ and reduce some
of the challenges faced by the smaller banks.
Summary
We remain focused on helping our customers achieve
their dreams. We are well positioned both financially and
strategically, with a strong balance sheet. As the shift
to digital services continues, our investments build our
competitive edge and allow us to improve and enhance
the products and services that we offer our customers
as well as reduce average service costs. As regulation
changes and new entrants emerge, we believe we
are well positioned to grow our share of Australians'
everyday banking.
House prices appear to be stable or improving, and we
remain focused on continuing to grow the business.
Our strategy of pursuing low risk, owner-occupied
lending with a loan-to-valuation ratio of less than
80% remains in place, and we have a clear expansion
opportunity across Australia’s eastern seaboard.
We are excited by the potential to extend our funds
management business nationally through development
of a modern, scalable platform, which creates a new
market for our income funds products. We intend to
make some exciting and significant changes to this
business model in the coming period.
We continue to build deep customer relationships and
place customers at the centre of everything we do.
I would like to thank my hardworking team for their
outstanding work, commitment and enthusiasm in
delivering better outcomes for our customers during the
year. I’d also like to thank my hardworking and extremely
dedicated board for their focus and help in enabling the
executive to continue to deliver on an ambitious
growth strategy.
Melos Sulicich
Managing Director and Chief Executive Officer
MyState Limited Annual Report 2019Performance Highlights
16
Banking
Operations
Banking customers
136,500
Wealth
Management
Over the financial year, the number of banking
customers that we serve increased to 136,500.
This achievement reflected having more customers with
mortgages across Australia and rapid acceptance of our
new online transaction and term deposit accounts.
Our strategic investment in technology has delivered a full-
service online and mobile banking platform, extending the
availability of our services. Online origination for home loans
has expedited the experience for home loan applicants.
New, innovative deposit products proved popular, including
the Glide monthly fee-free transaction account, Bonus Saver
deposit account and online term deposits.
We understand that customers would like to do some
things themselves, and MyState’s apps offer greater
convenience, a broader range of features and
simple-to-use, intuitive features so people can check
balances, pay bills and transfer funds at their convenience.
This digital experience is supported by fast processing
of payments across the New Payments Platform,
e-statements, a customer contact centre and regular
personal and digital communication. We provide the
ability to make day-to-day tap and go payments using
any device that offers these services. We are among the
few banks in Australia that offer Apple Pay, Google Pay,
Samsung Pay, Garmin Pay and Fitbit Pay.
Our digital platform has also reduced our cost to serve,
providing low cost, low maintenance offerings that are
secured by a range of security features such as electronic
and manual verification. Customers can securely open
new accounts and process transactions in minutes.
Behind the scenes, we are also investing heavily in cyber
security and fraud detection measures to protect our
customers, their money, their data and information.
This is an increasingly important area that is evolving
quickly, and our aim is to ensure we are at the forefront
of the industry as it evolves.
Home loan growth
Our successful lending strategy continued, with new loans
boosting the home loan book from $4.36 billion to
$4.85 billion during the year. This included significant
growth in the lower than 80% loan-to-valuation ratio loan
category favoured by our prudent lending practices.
Our strategy of engaging with mortgage brokers
ensures this important channel continues to support our
expansion plans, in concert with our online capabilities
and the direct services provided through branches which
remain strong in our traditional heartland areas.
We are focused on sustainable growth, and strong risk
management practices ensure we maintain exceptional
credit quality. Our arrears remain well below those of our
regional peers and the benchmark for major banks.
Our 90 day arrears were 0.26%, close to historical lows.
During the year we consolidated our banking brands,
rebranding The Rock as MyState Bank. This enabled our
Central Queensland customers to benefit immediately
from improved, simplified digital services. We now offer
a consistent suite of banking products and services
nationwide.
Funding
MyState maintains a broad range of funding sources,
and at the end of the year the proportion of funding
provided by customer deposits was 68.6%, wholesale
funding 6.9% and securitisation 24.5%.
We provide the ability to make day-to-day tap and go
payments using any device that offers these services.
Digitisation creates growth opportunity
Digital transformation
MyState’s wealth management business, Tasmanian
Perpetual Trustees (TPT), is one of Australia’s oldest and
most respected providers of wealth solutions.
TPT offers simple, contemporary financial products for
customers that want to ensure their investments and
estates are safe and well managed.
Funds management
Our funds management business offers risk-sensitive
income funds that have an important role supporting
investors desiring consistent and reliable income.
These extend from retirees through to wholesale clients,
such as charities and local councils.
MyState’s funds management business performed very
well in 2019, attracting new customers and investors.
Growth and investment returns have helped to increase
funds substantially over the past ten years, and we
completed the year with $1.17 billion in funds under
management, our highest total since 2009.
Trustee services and financial planning
2019 saw the divestment of our financial planning arm,
simplifying our operations. We continue to provide
‘prudent person’ advice, which manages the affairs of a
person’s estate after they have passed away as well as
advising through our Private Client Services those trustee
clients who are incapacitated.
The value of estates administered in 2019 was less than
the previous year when our business benefited from a
number of high-value estates and probate applications.
We have begun a multi-year digital transformation of
our wealth business which, when complete, will offer
streamlined 24x7 services. This investment will place
greater control in the hands of our investors and increase
transparency on the status of their investments.
The first step in this transition is the move to a new
administration platform. The new platform will allow
customers to manage personal details, transact, top up
investments, access statements and balances, and apply
online for new products.
These additional capabilities will expand our addressable
market, as they enable the nationwide distribution of
products, currently only available in Tasmania, through a
cost-effective technology platform. Our initial focus for
expansion will be the eastern seaboard, where there is
significant opportunity.
We will continue to provide the exceptional customer
service that differentiates our business, supplementing
personal services with fast, accurate digital systems.
Funds under management
$1.17b
We have begun a multi-year digital transformation
of our wealth business which, when complete,
will offer streamlined 24x7 services.
MyState Limited Annual Report 2019
MyState Limited Annual Report 2019Performance Highlights17Performance Highlights Digital
Services
The way we bank and manage wealth are being
transformed by new technologies and devices.
We are responding to our customers’ desire for products
and services that simplify their lives by providing
contemporary services that are intuitive and helpful.
Increasingly, customers prefer the flexibility of mobile
services, with more people using an app to do their
banking than any other channel. In the next four years,
the global use of mobile payments is expected to
increase and surpass the use of credit cards and cash.
The digital assets we have built are increasingly the ones
that are driving our growth. The number of customers
joining MyState online more than doubled in 2019, with
a particular focus on everyday banking. Moving forward,
an increased focus and investment in digital acquisition
will aim to further build and extend our platforms.
Over the next year, we will further enhance our apps,
digital products, internet banking, and contact centre
services as we strive to provide leading services and
tools for our customers.
We are innovating to increase customer self-service
capability within our app and enable customers to
have greater control over their account management.
Investments in personal financial management
capabilities will provide customers with personalised
recommendations to help them better manage their
money. Powered by predictive analytics, helpful
insights will enable our customers to budget and plan
expenditures, set targets, and actively save.
As we continue to become a more data-driven business
with simplified systems and processes, we are serving
customers more cost-effectively. Our use of intelligent
business applications, such as analytics, predictive
modelling and customer relationship management
(CRM), continues to deliver step-change improvements
in effectiveness. Evolving our contact centre technology
will see us transform to become an integrated phone
and digital operation, helping power an even better
customer experience.
In recent years we have delivered important, large-scale
technology changes and we are now benefiting from
these investments in a simple, well-integrated modern
platform. This positions us well to take advantage of
opportunities such us Open Banking.
19
Risk
Management
Managing both financial and non-financial risks are an
integral part of the Group’s strategy. A robust risk and
customer centric culture is at the heart of everything we do.
Risks are identified, managed and mitigated using our
risk management framework. We consider that effective
risk management can provide strategic differentiation
including:
Our risk management framework
We examined the recommendations from the Hayne
Royal Commission very closely and, where appropriate,
made changes to the way we manage our business.
We have a strong culture of accountability and
responsibility across all business lines and have further
strengthened our processes to maintain the highest
standards of culture and conduct.
Our approach to risk management is built on the
fundamentals of the ‘three lines of defence’ governance
model. This is backed by an effective risk control
framework embedded in our business. We have a detailed
and actively managed risk appetite and regularly examine
every aspect of our operations to detect and manage all
forms of financial and non-financial risk that may impact
our strategy.
Strategic differentiation
Our risk appetite and Group strategy are developed
together, supporting a consistent approach to enterprise-
wide risk management and decision-making.
• A prudent approach and a strong risk culture that help
us deliver our strategic intent.
• Robust controls that make sure risks are identified,
managed and mitigated effectively.
• Enhanced risk accountability that ensures business
units in the first line of defence are accountable and
supported by strong oversight and challenge from our
risk professionals in the second line of defence.
• Effective risk reporting and analytics that provide
insight into events that may impact the Group’s risk
appetite and ability to deliver strategic outcomes.
This includes enhanced reporting and accountability
at the first line of defence through the introduction of
divisional risk management committees.
• Supporting sustainable growth through a risk culture
that provides both proactive support and constructive
challenges.
This framework helps ensure we support our mission and
deliver the best outcomes for MyState and our customers.
We are responding to our
customers’ desire for products
and services that simplify
their lives by providing
contemporary services that
are intuitive and helpful.
We were awarded
Mozo selected MyState Bank
as the best choice for Small
Business No Strings Savings
MyState Limited Annual Report 2019
We have a strong culture
of accountability and
responsibility across all
business lines and have
further strengthened our
processes to maintain
the highest standards of
culture and conduct.
MyState Limited Annual Report 2019Performance Highlights18Performance Highlights 20
21
Supporting
the Community
Encouraging diversity
MyState considers workplace diversity to be a
considerable asset, fostering an inclusive culture where
everyone is treated with respect. The diversity plan
includes clear objectives across a range of inclusion
metrics and targeted initiatives to progress the
Company's position on diversity. Initiatives include:
• inclusive recruitment practices;
• flexible work initiatives;
• additional leave options; and
• access to diversity awareness programs.
This year, MyState supported International Women’s Day
breakfast events in Hobart and Rockhampton. The events,
attended by more than 400 people, included keynote
speeches by successful business owner Janine Allis in
Hobart and former professional surfer Layne Beachley
in Rockhampton.
Reducing environmental impact
The environmental outcomes of our decisions are
important and we continue to reduce our use of natural
resources. For example, 32% of banking customers
use electronic statements, up from 20% last year, and
37% of shareholders receive annual reports, notices
and announcements electronically, reducing paper
consumption. We use fully recycled paper stock printed
with vegetable ink for customer brochures, envelopes
and stationery.
During property moves, such as our Kingston branch
relocation, we carefully select fixtures and fittings to
minimise impact.
We are passionate about the communities that we serve
and believe we have a responsibility to make a difference
by using our resources to help future generations.
Some of the ways in which we achieve this outcome
are by supporting not-for-profit, charity and community
groups through the MyState Foundation, which is
focused on empowering youth. Over 19 years, the
Foundation has awarded over $2 million in grants to help
more than 100 not-for-profit organisations. Bridgewater
PCYC, Beacon Foundation, Rural Alive & Well, Camp
Quality, St Vincent de Paul Society, Brave Foundation,
Edmund Rice Camps Tasmania, Story Dogs, Colony 47
and CatholicCare Tasmania were among the
2019 recipients.
The Foundation also supports The Smith Family,
funding 100 students in the Learning for Life program
for disadvantaged school children, supporting two Work
Inspiration programs annually and student graduation
celebrations.
Our support for the Hobart Hurricanes cricket team
over four seasons has helped promote MyState Bank
nationally. In the 2018/2019 season we were the principal
partner of the Women’s Big Bash League (WBBL)
Hurricanes team and a major partner of the Big Bash
League (BBL) team. We provided match day volunteers at
home games and supported Hurricanes players’ visits to
local schools during Community Blitz events.
Another event that attracts national visitors is the
MyState Bank Australian Wooden Boat Festival,
a biennial event which hosted 215,000 people in
Hobart over four days celebrating Tasmania’s rich
maritime history.
The MyState Student Film Festival, which was opened
to national entrants for the first time last year, received
a record 1,500 participants and 306 entries. This event
provides an important forum for students to showcase
their talent and visual arts creativity.
Tasmanian Perpetual Trustees is a proud supporter of the
Hardie Fellowship, which provides Tasmanian teachers
with financial aid to broaden their professional knowledge
through university study and research in the United States.
MyState Foundation
Foundation
grants in 2019
Not-for-profit
organisations helped
Students supported through
The Smith Family
$159,637
10
100
MyState Bank Student Film Festival
Festival years
Festival entries
Participating students
17
306
1,500
MyState Bank Australian Wooden Boat Festival
Tasmanian economy contribution
Festival attendees
Registered boats
$30.0m
215,000
504
MyState Limited Annual Report 2019MyState Limited Annual Report 2019Performance HighlightsPerformance Highlights 22
Performance Highlights
Hobart Hurricanes
Seasons supported
Principal partner
Major partner
4
WBBL Hurricanes
BBL Hurricanes
International Women’s Day
States
Keynote speakers
2 Queensland
Tasmania
2 Layne Beachley
Janine Allis
People attended
400+
Hardie Fellowship
Trust support
Funding over 16 years
Educators supported
16 years
$5.5m
9
MyState Limited Annual Report 2019
24
02
Directors'
Report
As at 30 June 2019
MyState Limited Annual Report 2019
Board of Directors
Miles Hampton
Chairman
BEc(Hons), FCPA, FAICD
Appointed 12 February 2009
Mr Hampton was appointed a
Director of MyState Limited on
12 February 2009 and became Chairman on 29 October
2013. He has been a Director of Tasmanian Perpetual
Trustees Limited since July 2006 and he was appointed a
Director of MyState Bank Limited in September 2009.
Mr Hampton was Managing Director of ASX-listed
agribusiness and real estate public company Roberts
Limited from 1987 until 2006.
Melos A Sulicich
Managing Director and
Chief Executive Officer
BBus, GAICD, SA FIN
Appointed 1 July 2014
Mr Sulicich is Managing Director and
Chief Executive Officer of MyState Limited and also a
Director of the MyState Community Foundation.
Mr Sulicich has extensive experience in a diverse range
of businesses and industry sectors covering petrol
retailing, financial services, industrial services, health
care, transport and logistics.
Mr Hampton has previously been a Director of public
companies Ruralco Holdings Ltd, Australian Pharmaceutical
Industries Ltd, Wentworth Holdings Ltd, Money3
Corporation Ltd, HMA Ltd and Gibsons Ltd. He was also a
Director of Impact Fertilisers Pty Ltd, Deputy Chairman of
the Van Diemen’s Land Company and Chairman of Forestry
Tasmania, Hobart Water and TasWater.
Mr Hampton is a member of the MyState Limited
Board’s Group Audit Committee, Group Remuneration
Committee and Chair of the Group Nominations and
Corporate Governance Committee.
From 2008 to 2013, he held the position of Chief
Executive Officer of RAMS Financial Group, a subsidiary
of Westpac. Prior to this, he spent eight years in general
management positions for companies including Mayne
Group, Adsteam Marine and the Spotless Group.
From 1995 to 2000, Mr Sulicich worked in various
general management positions for Colonial Group
Limited, including General Manager Marketing, Director
Sales and Marketing for Colonial UK Limited and
General Manager, Network Financial Services.
Robert L Gordon
Independent non-executive Director
BSc, MIFA, MAICD, FAMI
Appointed 12 February 2009
Mr Gordon is currently President of
the Institute of Foresters of Australia
(IFA) and President of Football Federation Tasmania,
having previously held the position of Managing
Director, Forestry Tasmania.
He has been a company director for seventeen years
including six years as Chairman of connectfinancial.
Mr Gordon has been a director of companies in the
tourism industry, research & development, construction
and infrastructure.
Mr Gordon was appointed as a Director of MyState Bank
on 1 July 1998. He is Chairman of MyState Community
Foundation Limited and was appointed a Director of
Tasmanian Perpetual Trustees Limited on
22 September 2009.
He is the Chairman of MyState Limited Board’s Group
Risk Committee and a member of the Group Nomination
and Corporate Governance Committee and the
Group Digital Business Committee.
MyState Limited Annual Report 2019
Directors' Report
As at 30 June 2019
27
Sibylle Krieger
Independent non-executive Director
LLB(Hons), LLM, FAICD, MBA
Appointed 1 December 2016
Ms Krieger has over 35 years of
broad commercial experience as a
lawyer, economic regulator, independent consultant and
non-executive director, with particular focus on heavily
regulated industries. She was a partner in two large
commercial law firms for 22 years and has over 12 years’
experience as a non-executive director.
She is currently a non-executive director of the Australian
Energy Market Operator Ltd (AEMO) and was formerly
a non-executive Chair of Xenith IP Group Limited, a
director of Sydney Ports Corporation, Allconnex Water,
TasWater and Vector Limited (NZX:VCT), and a trustee
of the Royal Botanic Gardens and Domain Trust and of
Sydney Grammar School.
In addition to her board roles, Ms Krieger has served
as an independent consultant to private sector and
government clients across diverse areas including risk
management and energy security.
Ms Krieger is the chair of MyState Limited Board’s Group
People and Remuneration Committee and a member of
the Group Risk Committee and the Group Nominations
and Corporate Governance Committee.
Warren Lee
Independent non-executive Director
BCom, CA
Appointed 19 October 2017
Mr Lee has extensive experience
and leadership in the international
financial services industry, including 15 years at AXA
in senior management positions within the company’s
Australian and Asian businesses.
Mr Lee's two most recent executive positions were Chief
Executive Officer of the Victorian Funds Management
Corporation and Chief Executive Officer, Australia and
New Zealand for AXA Asia Pacific Holdings Limited.
He is currently a non-executive director of Tower
Limited, Go Hold Limited and Go Blank Limited. He
has a Bachelor of Commerce from the University of
Melbourne and is a member of Chartered Accountants
Australia and New Zealand.
Mr Lee is a member of MyState Limited Board’s Group
Audit Committee, Group Risk Committee and Group
Digital Business Committee.
Stephen E Lonie
Independent non-executive Director
BCom, MBA, FCA, FFin, FAICD, FIMCA
Appointed 12 December 2011
Currently, he is non-executive Chairman of Central
Queensland mining group Jellinbah Resources Pty Ltd and
is also Chairman of Apollo Tourism & Leisure Ltd and a non-
executive Director of Corporate Travel Management Ltd.
Mr Lonie was a former Partner
of the international accounting
and consulting firm KPMG, and now practices as an
independent management consultant.
Mr Lonie is a member of MyState Limited Board’s Group
Audit Committee, Group People and Remuneration
Committee and Chair of the Group Digital Business
Committee.
Andrea Waters
Independent non-executive Director
BCom, FCA, GAICD
Appointed 19 October 2017
Ms Waters is an experienced auditor,
accountant and non-executive director
with over 30 years' experience in financial services.
She is a Fellow of Chartered Accountants Australia &
New Zealand and a member and accredited facilitator
of the Australian Institute of Company Directors. She
is a former partner with KPMG (until 2012) specialising
in financial services audit. For the past seven years she
has been a professional non-executive director and is
currently a Director of Grant Thornton Australia Ltd,
Bennelong Funds Management Group, Citywide Service
Solutions Pty Ltd and Colonial Foundation.
She was previously a Director of The Lord Mayor's
Charitable Foundation, Chartered Accountants Australia
& New Zealand, Cancer Council Victoria, CareSuper and
Cash Converters International Limited (ASX:CCV).
Ms Waters is the Chair of MyState’s Group Audit
Committee and a member of the Group Risk Committee.
Key Management
Personnel
David Harradine
Chief Financial Officer
BCom, FCA, BIIA, CIA
David is a chartered accountant with over 20 years’ experience working in
the financial services industry. Having worked for over 16 years with Deloitte
as a partner within the chartered accounting and advisory firm, David joined
MyState in 2015 as CFO. David is responsible for managing the finance,
treasury, regulatory reporting, strategy and property functions for MyState.
David contributes to the Tasmanian community through his board
appointments to the not-for-profit community sector organisations
CatholicCare and Centacare Evolve Housing.
Mandakini Khanna
Chief Risk Officer
Post DipBusAdm, Post DipBusFin, BCom
Mandakini (Mandy) is responsible for the management of the financial and
non-financial risks of the MyState Limited Group. Mandy and her team have
worked on strengthening risk culture and risk frameworks within MyState.
This has helped build a culture of accountability across the business and
sharpened the focus on customer outcomes.
Mandy has over 20 years’ experience in banking and retail financial and has
held senior risk management positions in GE Capital across Asia Pacific.
Prior to joining MyState, Mandy was the Chief Credit Officier for GE Capital in
Asia Pacific.
Heather McGovern
General Manager, Digital and Marketing
BA Comms
Heather was appointed General Manager, Digital and Marketing in
March 2019 and has responsibility for the Group’s digital, innovation,
customer experience, brand and marketing divisions.
Heather has over 20 years’ experience in digital and marketing roles within the
financial services sector having worked with American Express, the Royal Bank
of Canada, National Australia Bank, Incitec Pivot and AIA Australia. Prior to
joining MyState, Heather held the role of Chief Product & Marketing Officer
with BankVic where she played a key role in the expansion of their digital
offering. Her rich international career includes roles based in Italy and Canada
as well as in Australia.
Directors' Report
As at 30 June 2019
29
Tony MacRae
General Manager, Banking
BEc
Tony has responsibility for the Group’s banking division which includes retail,
call centres, business and agri-business as well as the mortgage broker
channel. Tony’s extensive career within the financial services sector includes his
previous role of National General Manager, Westpac Retail Home Ownership
Distribution where he was responsible for the strategic sales leadership of
Westpac’s physical and digital salesforce.
Prior, Tony held key positions with the RAMS/Westpac Group including Acting
CEO of RAMS and General Manager, Third Party Distribution for Westpac. He also
held senior roles with PMI and Virgin Money Australia. Tony is a Board member
and Treasurer of the Royal Flying Doctor Service, South Eastern Section.
Paul Moss
General Manager, Technology, Operations and Product
BEng(Hons)
Paul is responsible for the strategic direction and delivery of MyState Limited
Group’s back office processing, technology and products. He joined the company
in May 2015 having previously been a Director of IT Advisory at KPMG.
Prior, Paul spent 11 years at Betfair, in the UK and Australia as Director of
Information Systems and Operations, focusing on strategy development,
global infrastructure deployments and customer experience.
Before that he occupied technical leadership positions in UK-based
investment banks.
Craig Mowll
General Manager, Wealth Management
MBA, MBSc
Craig was appointed General Manager, Wealth Management in July 2018
and is responsible for the strategic, financial and ongoing management of
the MyState Limited Group’s Wealth Management division, which includes
investment management and trustee capabilities.
Craig was previously Managing Director of Aura Group’s funds and wealth
management business, following five years as the Chief Executive Officer of
Certitude Global Investments. His prior roles include Director of Distribution,
Product and Marketing at Credit Suisse and General Manager of Australian
Distribution, Technical and Customer Service at St. George Bank.
Janelle Whittle
General Manager, People and Culture
BCom, MHRM
Janelle has overall responsibility for MyState Limited Group’s human resources,
including remuneration and benefits, health and safety, recruitment and
employee relations. People and Culture leads internal communications and has
a key role in developing and fostering organisational culture and capability to
support MyState’s growth aspirations.
Janelle has over twenty years’ experience in human resource management
across a number of industries including aquaculture, utilities and higher
education. Her previous senior leadership positions in human resources
include General Manager People and Culture at Aurora Energy, and Director
Organisational Design and Change at the University of Tasmania.
30
Directors'
Report
Your Directors present their report on MyState Limited for
the year ended 30 June 2019.
• Sibylle Krieger LLB (Hons), LLM, FAICD, MBA
Independent non-executive Director.
Directors
• Miles Hampton BEc (Hons), FCPA, FAICD
• Warren Lee BCom, CA
Independent non-executive Director.
Chairman and independent non-executive Director.
• Stephen Lonie BCom, MBA, FCA, FFin, FAICD, FIMCA
• Melos Sulicich BBus, GAICD, SA FIN
Managing Director – Executive Director.
• Peter Armstrong BEc (Hons), Dip ED, Dip FP, CPA,
FAICD (retired 22 February 2019)
Independent non-executive Director.
• Robert Gordon BSc, MIFA, MAICD, FAMI
Independent non-executive Director.
Principal Activities
Independent non-executive Director.
• Andrea Waters BCom, FCA, GAICD
Independent non-executive Director.
Company Secretary
• Scott Lukianenko Ad Dip BMgmt, Grad Cert BA,
GIA (Cert).
Banking Services
Trustee Services
Funds Management
• Personal, residential and business
• Estate planning
• Managed fund investments
banking
• Estate and trust administration
• Transactional, internet & mobile
banking
• Power of attorney
• Corporate trustee
• Savings and investments
•
Insurance and other alliances
MyState Limited provides banking, trustee and managed
fund products and services through its wholly-owned
subsidiaries MyState Bank Limited and Tasmanian
Perpetual Trustees Limited.
With the exception of the sale of retail Financial Planning
on 28 June 2019, there have been no significant changes
in the nature of the principal activities of the Group during
the year.
Operating and Financial Review
The Group recorded a statutory profit after income tax for
the year ended 30 June 2019 of $30.987m (30 June
2018: $31.461m).
Dividends
The Directors have declared a fully franked (at 30%)
final dividend of 14.5 cents per share. The dividend will
be payable on 1 October 2019 to shareholders on the
register at the record date of 30 August 2019.
Dividends paid in the full year ended 30 June 2019 were
as follows:
• In respect of the year ended 30 June 2018, a fully franked
final dividend of 14.5 cents per share, amounting to
$13.097m, was paid on 25 September 2018.
• In respect of the half year ended 31 December 2018,
a fully franked dividend of 14.25 cents per share,
amounting to $12.919m, was paid on 29 March 2019.
31
Review and Results of Operations
Financial performance
The Group recorded a net profit after income tax for the
full year ended 30 June 2019 of $30.987m, a decrease of
1.5% on the prior corresponding period ended 30 June
2018 (pcp) of $31.461m.
Earnings per share decreased by 2.31% to 34.17 cents per
share on the pcp and return on equity decreased 38bps
to 9.70%.
Group Net Profi t after Tax ($m)
Operating costs increased $2.220m or 2.9% on prior
year (2.0% excluding depreciation and amortisation).
The Group’s Wealth business, also reported a result in
line with the prior year
High credit quality maintained in a period of
significant growth
The above system loan book growth has been delivered
with a focus on low risk, owner-occupied lending with a
loan-to-valuation ratio of less than 80%.
The banking loan portfolio grew 10.72% reaching a
$5 billion total portfolio.
30.10
31.50
31.00
30 and 90 day arrears continue to be below peers and
industry benchmarks (at 0.46% and 0.26% respectively).
Total book composition ($m)
4,269
4,550
5,038
63
63
66
55
72
64
51
69
65
FY17
FY18
FY19
4,076
4,358
4,852
The full year result for the Group was significantly
impacted by a decrease in the net interest margin (NIM),
which declined 17bps on the prior year. The decline in
NIM reflected competitive pressures and the impact in the
first half of an increase in the Bank Bill Swap Rate (BBSW)
benchmark. However, as BBSW eased in the second
half, NIM improved. The shifting market conditions led
to a strong finish to FY19 with 2H19 delivering a much
improved result on 1H19.
MyState Bank achieved above system loan book growth,
the book increasing $487.835m during FY19, compared
to $282.731m in the prior year.
FY17
FY18
FY19
Housing Loans
Personal Loans
Business / Agri / Commercial
Overdrafts
Directors' ReportAs at 30 June 2019MyState Limited Annual Report 2019MyState Limited Annual Report 2019Directors' ReportAs at 30 June 2019
32
Home Loan Book by LVR ($b)
$0.20
$0.26
$0.39
$0.31
$0.30
$0.42
$3.05
$3.51
$0.20
$0.30
$0.37
>90%
85% - 90% +2.40%
80% - 85%
<80%
$3.98
h
t
w
o
r
g
r
a
e
y
n
o
r
a
e
Y
+13.51%
FY17
FY18
FY19
Exposure to investor and interest only lending remains
very low and within regulatory guidelines.
During the period, MyState Bank continued to grow its
customer base across the eastern seaboard of Australia,
with the proportion of home loans outside of Tasmania
increasing from 54.5% to 58.2% since 30 June 2018.
Margin pressure driven by increased cost of funding
Funding costs in 1H19 were significantly elevated on
the prior year and were driven by BBSW benchmarked
wholesale funding costs which increased substantially over
norms of the last decade.
Despite an increase in funding costs, variable home loan
rates for customers were maintained through the first half
and repricing of mortgages was delayed until 29 January
2019, when variable rate mortgages were increased
by 11 - 16 bps.
The repricing of mortgages helped to contribute to
margin maintenance in 2H19. This outcome was further
assisted by a steady reduction in wholesale funding costs
late in the half, which benefited from an easing in BBSW.
A rate cut was announced by the RBA in June 2019, and
most of this reduction has been passed on to borrowers.
Deposit rates also partly reduced at the end of June 2019
reflecting a downward move in the market following the
RBA cut.
Customer deposits remain important to ensuring a
competitive and stable funding base and customer
deposits increased $394.890m or 12.09% on the
prior period.
Non-interest income from banking activities
Non-interest income from banking activities continued to
trend in line with market and industry trends. Increased
uptake of digital products and preferences for lower cost
self-serve functionality also impacted non-interest income,
which declined by $0.219m (1.41%) on pcp.
Wealth management
MyState’s wealth management business continued to
provide diversity in revenue for the Group, with NPAT
of $5.111m, increasing 11.96% on the pcp (inclusive of
a $1.209m gain on disposal of the financial planning
business). Funds under management revenue increased
1.19% on the pcp in tandem with the highest Funds
Under Management (FUM) recorded for the past decade
at $1.170b.
Funds under management ($m)
1,153
1,170
NIM Trend
1.97%
1.97%
1,089
1.81%
1.79%
1.80%
FY17
FY18
FY19
On 28 June 2019 the retail Financial Planning business
was sold.
FY17
FY18
1H19
2H19
FY19
Strong Capital position
13.47%
1.96%
11.52%
1.51%
0.05%
Tier 1 capital
Tier 2 capital
Increase
Decrease
1.93%
1.51%
2.29%
0.05%
0.20%
33
12.90%
1.82%
11.09%
FY18
Capital
initiatives
Securitised
assets
Profi t
Dividends
paid
Secured
mortgage
lending
Capitalised
intangibles
Other asset
growth
FY19
The Group has maintained its strong balance sheet and
the Group’s capital adequacy ratio at 30 June 2019 was
12.90%. Notwithstanding significant lending growth,
this equates to a 57 bps difference on the pcp. The
Group maintained 11.09% common equity tier 1 capital
adequacy ratio and remains well positioned to meet
APRA’s “unquestionably strong” requirements by 1
January 2020.
Robust risk & regulatory framework and track record
The Group has continued to invest in strengthening its
risk management capability and embedding an even
stronger risk culture.
MyState’s approach to risk management continues to
mature and is overseen by the Board and its Group Risk
Committee, supported by a well-defined risk appetite
statement, contemporary processes and systems and an
industry standard three lines of defence model, which
supports the identification, assessment, evaluation and
management of risk.
Conduct risk is an area of risk that has attracted much
attention within the sector and MyState’s long-standing
commitment to delivering great customer outcomes
continues to be affirmed by our Customer Advocate,
a role independent from the bank’s existing complaints
resolution process and designed to ensure the most
difficult customer complaints are managed appropriately
and with direct access to the CEO if necessary.
In addition, our commitment to our Code of Conduct
has been reaffirmed by strengthening our whistle blower
program. MyState adopted the new Banking Code of
Practice on 1 July 2019. Core to the Banking Code are
the concepts of being diligent and prudent bankers, and
understanding our duty of care for all our customers.
Community
MyState seeks to make a genuine difference to our
customers and communities each and every day.
Since 2001, the MyState Foundation has awarded more
than $2.2 million in grants to help more than 90 not-for-
profit organisations with a focus on empowering youth.
Outlook
MyState Bank expects to continue to be able to achieve
above system growth whilst maintaining a high quality
of loan book.
Margin management will continue to be important
in the context of a low interest rate environment that
is expected to be a feature of the industry for the
foreseeable future.
The business is now realising the benefits from an
extended period of significant investment in digital
technology platforms. The focus in FY2020 will be to
continue to build customer advocacy and grow the
customer base nationally, as well as pursue further
operating efficiencies.
Tasmanian Perpetual Trustees is expected to continue
to provide further revenue diversity as the Group
reinvigorates its funds management platform, introduces
new services for investors and improved returns
for investors.
Superior customer outcomes, unlocking the benefits of
investments made in digitisation of the business and a
focus on disciplined execution of strategy are expected
to deliver improved shareholder returns over the
future period.
Directors' ReportAs at 30 June 2019MyState Limited Annual Report 2019MyState Limited Annual Report 2019Directors' ReportAs at 30 June 2019
34
35
Indemnification and Insurance of Directors and Officers
The Company has paid, or agreed to pay, a premium
in relation to a contract insuring the Directors and
Officers listed in this report against those liabilities for
which insurance is permitted under Section 199B of the
Corporations Act 2001.
The Company has not otherwise, during or since the relevant
period, indemnified or agreed to indemnify an Officer or
Auditor of the Company or of any related body corporate
against a liability incurred as such an Officer or Auditor.
Non-Audit Services
During the year, Wise Lord & Ferguson, the Company’s
auditor has performed certain other services in addition
to their statutory duties. Further details are set out in note
9.2 to the financial statements.
The Board has considered the non-audit services provided
during the year by the auditor and, in accordance with
written advice provided by the Group Audit Committee,
is satisfied that the provision of those non-audit services
during the year by the auditor is compatible with, and did
not compromise, the auditor independence requirements
of the Corporations Act 2001, for the following reasons:
• All non-audit services were subject to the corporate
governance procedures adopted by the Company and
have been reviewed by the Group Audit Committee,
to ensure that they do not impact the integrity and
objectivity of the auditor; and
• The non-audit services provided do not undermine the
general principles relating to the auditor independence
as they related to technical disclosure issues.
Signed in accordance with a resolution of the Directors.
Miles Hampton
Chairman
Hobart, dated 23 August 2019
Melos Sulicich
Managing Director and Chief Executive Officer
Lead auditor’s independence declaration
under section 307C of the Corporations
Act 2001
The Directors received the following declaration from the
auditor of the Company:
In relation to our audit of the financial report for the
consolidated group for the financial year ended 30 June
2019, to the best of my knowledge and belief, there have
been no contraventions of the auditor independence
requirements of the Corporations Act 2001 or any
applicable code of professional conduct.
This declaration is in respect of MyState Limited and the
entities it controlled during the period.
J Doyle
Partner
Wise Lord & Ferguson
Hobart
Dated 23 August 2019
Rounding of amounts
In accordance with applicable financial reporting
regulations and current industry practices, amounts
in this report have been rounded off to the nearest
one thousand dollars, unless otherwise stated. Any
discrepancies between totals and sums of components in
charts contained in this report are due to rounding.
State of Affairs
During the financial year, there was no significant change
in the state of affairs of the Company other than referred
to in the review and results of operations.
Events Subsequent To Balance Date
In the opinion of the Directors, there has not arisen, in
the period between the end of the financial year and
the date of this report, any material item, transactions or
event that is likely to significantly affect the operations of
the consolidated entity.
Likely Developments and Expected Results
Directors do not foresee any material changes in the
likely developments in the operations or the expected
results of those operations in future financial years.
Directors consider that the disclosure of additional
information in respect of likely developments in the
operations or the expected results of those operations
may unreasonably prejudice the Company. Accordingly,
this information has not been disclosed in this report.
Environmental Regulation
The Company is not subject to significant environmental
regulation.
Directors’ Meetings
The number of meetings of Directors (including meetings
of the Committees of Directors) held during the year and
the number of meetings attended by each director are as
indicated in the following table:
Director
Board
Meetings
Group Audit
Committee
Peter Armstrong
(Retired 22/2/19)
Robert Gordon
Miles Hampton
Sibylle Krieger
Warren Lee
Stephen Lonie
Melos Sulicich
Andrea Waters
A
8
13
12
12
12
11
13
13
B
8
13
13
13
13
13
13
13
A
n/a
n/a
5
n/a
5
4
n/a
5
B
n/a
n/a
5
n/a
5
5
n/a
5
Group
People and
Remuneration
Committee
A
2
B
2
n/a
n/a
3
4
n/a
4
n/a
n/a
4
4
n/a
4
n/a
n/a
Group
Nominations
& Corporate
Governance
Committee
Group Digital
Business
Committee
Group Risk
Committee
A
n/a
12
n/a
10
11
n/a
n/a
12
B
n/a
12
n/a
12
12
n/a
n/a
12
A
3
4
4
1
n/a
n/a
n/a
n/a
B
3
4
4
1
n/a
n/a
n/a
n/a
A
n/a
4
n/a
3
3
4
n/a
n/a
B
n/a
4
n/a
3
4
4
n/a
n/a
A – Number of meetings attended | B – Number of meetings eligible to attend
Directors' ReportAs at 30 June 2019MyState Limited Annual Report 2019MyState Limited Annual Report 2019Directors' ReportAs at 30 June 2019
MyState Limited
Remuneration
Report
This Remuneration Report forms part of the
Directors’ Report and outlines the Director and
Executive remuneration arrangements of MyState
Limited (the Company or MYS) for the year ended
30 June 2019, in accordance with the requirements
of the Corporations Act 2001 and its regulations.
For the purposes of this report, Key Management
Personnel (KMP) are defined as those persons having
authority and responsibility for planning, directing
and controlling the major activities of the Company,
directly or indirectly, including any Director (whether
Executive or otherwise) of the Company.
Contents
1. Key Management Personnel
2. Remuneration Strategy
2.1 Remuneration Philosophy
2.2 Consequences of Performance on
Shareholder Wealth
2.3 Remuneration Governance
3. Non-Executive Director Remuneration
1. Key Management Personnel
4. Managing Director and Executive Remuneration
4.1 Total Fixed Reward
4.2 Short Term Incentive
4.3 Executive Long Term Incentive Plan
4.4 Banking Executive Accountability Regime
5. Statutory Tables
6. Shareholdings of Key Management Personnel
7. Loans to Key Management Personnel
8. Executive Employment Agreements
The Key Management Personnel (KMP) of the Company in office during the year and up to the date of this report was as follows:
Name | Title
Non-Executive Directors
Miles Hampton
Chairman
Peter Armstrong
Robert Gordon
Sibylle Krieger
Warren Lee
Stephen Lonie
Andrea Waters
Executive Directors
Melos Sulicich
Managing Director and Chief Executive Officer
Executives
Huw Bough
General Manager Mortgage Broker, Business and Agri Banking
Katherine Dean
General Manager Retail Banking Sales and Service
David Harradine
Chief Financial Officer
Mandakini Khanna
Chief Risk Officer
Paul Moss
General Manager Technology, Operationsand Product
Heather McGovern
General Manager Digital and Marketing
Anthony MacRae
General Manager Banking
Craig Mowll
General Manager Wealth Management
Janelle Whittle
General Manager People and Culture
MyState Limited Annual Report 2019
Movements in the
2019 Financial Year
Ceased 22 February 2019
Ceased 1 February 2019
Ceased 7 December 2018
Appointed 18 March 2019
Appointed 12 February 2019
Appointed 16 July 2018
37
2. Remuneration Strategy
2.1 Remuneration Philosophy
The objective of MyState Limited’s remuneration policy
is to promote personal and collective behaviours that
deliver sustained financial performance appropriate risk
management and the, good reputation of the Group.
The MYS Remuneration Policy is designed to achieve this
objective by having:
• Appropriately balanced measures of employee
performance that inform variable performance based
pay for Executives, including short and long term
incentive plans;
• Recognition and reward for strong performance
linked to favourable customer outcomes and
sustainable shareholder returns;
• A considered balance between the capacity to pay and
the need to attract and retain capable staff at all levels;
• Ensuring that the structure of the remuneration
of risk and financial control personnel, including
performance based components, does not
compromise the independence of these personnel in
carrying out their functions;and
• Short term and long term incentive performance
criteria being structured within the overall risk
management of the Group.
The performance measures for triggering both the Group’s
cash based Short Term Incentive Plan (STI) and Executive
Long Term Incentive Plan (ELTIP) have been tailored to
align “at-risk” remuneration and performance hurdle
thresholds to the delivery of financial and operational
objectives and sustained shareholder value growth.
STI includes financial and non-financial metrics.
ELTIP performance measures for all offers are weighted
equally between relative total shareholder return (TSR)
performance and absolute post tax return on equity
(ROE). The relative TSR is a measure which incorporates
both dividends paid and movements in share prices,
whilst the post-tax underlying ROE are measures of
corporate profitability.
2.3 Remuneration Governance
The Group People and Remuneration Committee assists
the Directors in discharging the Board’s responsibilities
in relation to remuneration governance and to provide
oversight to support the Company in achieving its human
resource goals. The committee makes recommendations
to the Board on:
• Remuneration arrangements for Directors, the
Managing Director and other senior Executives,
having regard to comparative remuneration data in
the financial services industry, independent advice and
compliance with the requirements of APRA Prudential
Standards and the Banking Executive Accountability
Regime (BEAR);
Further, the Board has an overriding discretion to
reduce or clawback variable pay to mitigate unintended
consequences.
• Human Resource policies and practices, ratification of
industrial instruments and oversight of compliance with
legal and regulatory requirements; and
In accordance with best practice corporate governance,
the structure of Non-Executive Director remuneration is
separate and distinct from Executive remuneration.
2.2 Consequences of Performance on
Shareholder Wealth
In considering the Company’s performance and benefits for
Shareholder wealth, the Group People and Remuneration
Committee has regard to the following metrics:
Indicator
2015
2016
2017
2018
2019
29,719
31,062 30,080 31,461
30,987
• Oversight to ensure that the Group builds capability
for strategic execution and to support the Group’s
business operations and culture, including succession
planning and matters such as the Company’s Employee
Share Scheme and other incentive schemes for
Executives and staff.
The Group People and Remuneration Committee aims to
ensure that there is no conflict of interest regarding Executive
Director involvement in Board decisions on remuneration
packages and also in monitoring the involvement of
Management generally in Committee discussions and
deliberations regarding remuneration policy. No Executive is
directly involved in deciding their own remuneration.
Underlying Profit
after income tax
($'000)
Underlying
Earnings per share
(cents)
Dividends paid
($'000)
Share price
(dollars)
Underlying Return
on equity (%)
Underlying Cost to
Income Ratio (%)
34.04
35.52
34.04
34.97
34.17
3. Non-Executive Director Remuneration
24,880 24,886 25,042 25,794 26,016
4.83
4.13
4.85
5.01
4.49
10.4
10.6
10.0
10.1
9.7
The Company’s Non-Executive Directors (NEDs) receive
only fees, including statutory superannuation, for their
services and the reimbursement of reasonable expenses.
They do not receive any retirement benefits other than
statutory superannuation.
64.3
63.2
65.9
64.0
64.77
The Board reviews its fees to ensure the Company’s NEDs
are fairly remunerated for their services, recognising the
MyState Limited Annual Report 2019Directors' ReportAs at 30 June 2019 38
39
level of skill and experience required to conduct the role
and that the fee scale will enable the Company to attract
and retain talented NEDs.
The individual Executive remuneration arrangements
reflect the complexity of the role, individual responsibilities,
individual performance, experience and skills.
The advice of independent remuneration consultants is taken
to ensure that the Directors’ fees are in line with market.
The aggregate remuneration paid to all the NEDs,
inclusive of statutory superannuation, may not exceed the
$950,000 amount fixed by Shareholders at the October
2012 Annual General Meeting of Shareholders.
This “fee pool” is only available to NEDs.
Each NED currently receives $88,400 per annum, inclusive
of statutory superannuation, and the Chairman receives
$221,000 per annum, inclusive of statutory superannuation.
The Chairs of the Group’s Audit Committee and Risk
Committee receive an additional $15,000 per annum,
inclusive of statutory superannuation. The Chairs of the
Group Technology Committee and the Group People and
Remuneration Committee receive an additional $12,500,
per annum, inclusive of statutory superannuation.
Additionally, Members of Board Committees who are
not Chairs are paid $5,000 per annum per Committee,
inclusive of statutory superannuation. The Chairman’s
fee is inclusive of Chairing the Group Nominations and
Corporate Governance Committee, membership of the
Group Audit Committee and membership of Group People
and Remuneration Committee.
4. Managing Director and Executive
Remuneration
The Company links the nature and quantum of the
remuneration of the Executive Management Team (EMT),
comprising the Managing Director and Executives directly
reporting to the Managing Director, to its financial and
operational performance. The remuneration packages for the
EMT are based on a notional Total Target Reward which, from
time to time, may comprise one or more of the following:
• Total fixed reward (inclusive of superannuation and
salary sacrifice) (TFR);
• Cash based short term incentives (STI); and
• Equity based long term incentives (ELTIP).
4.1 Total Fixed Reward
The Total Fixed Reward (TFR) is paid by way of cash salary,
superannuation and salary sacrificed other benefits and is
reviewed annually by the Group People and Remuneration
Committee. External remuneration consultants are
appointed on a regular basis to provide analysis and advice
to the Committee to ensure that Executive remuneration is
competitive and appropriately structured.
4.2 Short Term Incentive
The STI is an annual “at risk” incentive payment. It
rewards EMT members for their contribution towards
the achievement of the Group’s goals. The maximum
potential payment is calculated as a percentage of the
TFR of each EMT member and is payable in cash and/or
superannuation contributions.
Payment is conditional upon the achievement, during the
financial year under review, of financial and non-financial
performance objectives. The measures are chosen and
weighted to best align the individual’s reward to the
Key Performance Indicators (KPI’s) of the Group and its
overall long term performance. There is no fixed minimum
payment amount. The KPI’s are measures relating to
Group and personal performance accountabilities and
include financial, strategic, operational, cultural, risk and
compliance, customer and stakeholder measures.
Each year, the Group People and Remuneration
Committee, in consultation with the Board, sets the KPI’s
for the Managing Director.
The Managing Director recommends KPI’s for Executives
to the Group People and Remuneration Committee who
subsequently make a recommendation to the Board.
At the end of the financial year, the Managing Director
assesses the performance of the Executives against their KPIs
and makes a recommendation for each Executive to the Group
People and Remuneration Committee as to the STI payment.
At the end of the financial year, the Group People and
Remuneration Committee assesses the performance of the
Managing Director against the KPIs for the financial year.
The Group People and Remuneration Committee
recommends the STI payments to be made to the
Managing Director and Executives for approval by the
Board. Approval of a STI to the Managing Director or
Executives is at the complete discretion of the Board. The
Board discretion may result in a reduction or forfeiture
of payment. The Board applies overall gateways to STI
payments that are a combination of financial and non-
financial considerations including, risk and compliance,
conduct and reputation and net profit before tax. The
Board have applied these gates to modify the payment
awarded to Executives. If the results on which any STI
reward was based are subsequently found by the Board
to have been the subject of deliberate management
misstatement, error, misrepresentation or act or omission
which the Group People and Remuneration Committee
or the Board (acting reasonably) considers would have
resulted in the KPIs not being satisfied or there is otherwise
a reward decision incorrectly made, the Board may require
repayment of the whole or any part of the relevant STI,
in addition to taking any other disciplinary actions.
Payment of a STI to the Managing Director or Executive
who are accountable persons, is subject to the Board being
satisfied that the payment may be made under the BEAR.
Current STI Offers
Details of the STI payments for the 2018/2019 financial
year and the 2017/2018 financial year are set out in the
following tables.
Key Management Personnel
Max. %
(of TFR)
Max Payable % Awarded % Forfeited
Amount
Paid $
% Which
is not yet
assessed
for payment
Melos Sulicich
Huw Bough(i)
Katherine Dean (i)
David Harradine
Mandakini Khanna
Heather McGovern (i)
Anthony MacRae (i)
Craig Mowll (i)
Paul Moss
Janelle Whittle
Melos Sulicich
Huw Bough
Katherine Dean
David Harradine
Mandakini Khanna
Paul Moss
Andrew Polson (i)
Chris Thornton (i)
Janelle Whittle (i)
2018/2019 STI
$312,500
20.85%
79.15%
$65,156
$60,362
25.27%
74.73%
$15,256
$42,082
0%
100%
$0
$114,000
18.37%
81.63%
$20,950
$108,000
27.68%
72.32%
$29,890
$28,479
27.20%
72.80%
$7,755
$44,556
25.40%
74.60%
$11,330
$112,192
11.48%
88.52%
$12,874
$102,000
24.23%
75.77%
$24,710
$87,000
19.72%
80.28%
$17,160
2017/2018 STI
$287,500
55.00%
45.00%
$158,125
$99,000
72.22%
27.78%
$71,500
$96,000
42.75%
57.25%
$41,040
$111,000
72.52%
27.48%
$80,500
$103,500
75.07%
24.93%
$77,700
$99,000
72.73%
27.27%
$72,000
$85,483
$46,258
0.00%
0.00%
100.00%
100.00%
$0
$0
$38,137
43.33%
56.67%
$16,525
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
50%
30%
30%
30%
30%
30%
30%
30%
30%
30%
50%
30%
30%
30%
30%
30%
30%
30%
30%
(i) Pro-rata Max Payable based on commencement and cessation dates as applicable.
Directors' ReportAs at 30 June 2019MyState Limited Annual Report 2019MyState Limited Annual Report 2019Directors' ReportAs at 30 June 2019 40
41
4.3 Executive Long Term Incentive Plan
The ELTIP provides a long term “at risk” incentive, assessed
over a three year performance period. It was established
by the Board to encourage the EMT, comprising the
Managing Director and participating Executives, by
allowing them to be rewarded with shares for helping to
create long term value for the Company’s shareholders.
Participating Executives are allocated fully paid ordinary
shares in the Company without payment on their part if
performance criteria specified by the Board are satisfied in
a set performance period.
Each year, an offer may be made to individual members of
the EMT as determined by the Board. The maximum value
of the offer is determined as a percentage of the TFR of
each member of the EMT. As a general guide, noting that
the Board has absolute discretion to vary, the maximum
percentages used are 50% for the Managing Director and
30% for participating Executives. The maximum value of the
offer is converted into a number of fully paid ordinary shares
based upon the Volume Weighted Average Price (VWAP)
of shares calculated over the period of twenty (20) trading
days commencing on the first business day of the financial
year in which the offer is made. The number of shares is then
nominally fixed.
In order for the shares to vest, certain performance criteria
must be satisfied within the predetermined performance
period. Both the performance criteria and the performance
period are set by the Board, at its absolute discretion.
The Board has, for the time being, set the three financial
years, commencing with the year in which an offer is made
under the plan, as the performance period, with relative
TSR, absolute post tax underlying ROE for the “2016” and
“2017” offers and post-tax underlying ROE for the “2018”
offer as the performance criteria.
At the end of the performance period, or as soon as possible
after, the Board will determine, at its complete discretion,
the number of shares in respect of which the Managing
Director and participating Executive may be entitled under
the terms of the relevant offer and ELTIP rules.
For offers made on or after 1 July 2018, the Board has
also set a period of five years from commencement of
the performance period before making an allocation
of shares to an Executive who meets or partially meets
the performance criteria, creating a deferral period
of a further two years between the conclusion of the
performance period and the allocation of shares.
On accepting an ELTIP offer made by the Company,
participating Executive are required to not hedge
their economic exposure to any allocated non-vested
entitlement. Failure to comply with this directive will
constitute a breach of duty and may result in forfeiture of
the offer and/or dismissal.
Any reward that may be payable to the Managing
Director and participating Executive on satisfaction of the
performance criteria under any ELTIP offer is subject to
reassessment and possible forfeiture, during the further
deferral period, if the results on which the ELTIP reward was
based, are subsequently found to have been the subject
of deliberate management misstatement. In addition,
where a participating Executive is also an accountable
person under the BEAR, the payment of shares to the
Executive will be subject to the Board’s positive assessment
that their accountability obligations have been met. The
payment and allocation of shares may be reduced or
cancelled to the extent that the Board determines that the
accountability obligations have not been met.
Vesting of shares to the Managing Director and eligible
Executives is at the complete discretion of the Board.
The ELTIP rules provide for an independent Trustee to
act at the direction of the Company, and the Trustee
may acquire and hold shares on behalf of Executives that
have received an allocation of shares. The participating
Executive cannot transfer or dispose of shares which
have vested to them until the time specified in the ELTIP
rules. A direction to the Trustee to allocate shares to each
eligible Executive will be made in accordance with their
entitlement under the relevant offer and ELTIP rules.
Any shares to be allocated to the Managing Director
under this Plan require shareholder approval in
accordance with ASX Listing Rules.
Commencement of employment during a financial year
Where an Executive commences employment with
the Company post 1 July in a given year, the following
conditions will apply in respect of ELTIP:
• Upon recommendation by the Managing Director, and,
if deemed eligible by the Board, the Executive shall
receive a pro rata offer for that year, unless that person
commences employment between 1 April and 30 June,
in which case, they shall not be entitled to receive an
offer for that financial year; and
• Calculations for ELTIP entitlements in terms of the
20 day VWAP, must be consistent with the offers for
that year, irrespective of the date that an employee
commences or to whom an offer to participate is made.
Cessation of employment
On separation from the Company, ELTIP shares will be
released only if the separation is due to a Qualifying
Reason or is at the initiation of the Company without cause.
A Qualifying Reason, as defined by the ELTIP Plan Rules,
is death, total and permanent disability, retirement at
normal retirement age, redundancy or other such reason
as the Board, in its absolute discretion, may determine.
Where an ELTIP participant ceases employment with MYS
during a performance period, the offer will be assessed
by the Board at the end of the performance period along
with all other participants subject to meeting the 12
month employment hurdle that applies to any ELTIP offer.
The allocation of shares to any ELTIP participant where
the Executive is an accountable person, is subject to the
BEAR. Shares will not be vested for ELTIP participants to
the extent it would cause the Company to contravene its
obligations under the BEAR.
dividend payments on those shares and to have the
Trustee exercise the voting rights on those shares in
accordance with their instructions.
For the avoidance of doubt, for ELTIP offers made after
1 July 2018, the Company will not direct the Trustee
to allocate the shares to the participating Executive’s
account during the specified 2 year deferral period. The
2 year deferral period commences after the end of the
relevant performance period. During this period, such
participants have no entitlement to any dividends or
voting rights in respect of the shares.
Entitlement to dividend income on shares
During the period that allocated shares for a participating
Executive are held by the Trustee, the participating
Executive is entitled to receive the income arising from
Details of offers made under the ELTIP to KMP that affect
the calculation of their remuneration are set out in the
following table.
Offer
2016
2017
2018
Performance Period
1 July 2016 to 30 June 2019
1 July 2017 to 30 June 2020
1 July 2018 to 30 June 2021
The comparator group
Fair value of shares used for
TSR calculation (i)
Offer date
- Managing Director
- Other executives (iii)
Value of offer (ii)
- Managing Director
- Other eligible Executives
Members of the S&P/ASX300
$1.96
Managing Director $2.57
Other Executives $2.44
Managing Director $2.52
Other Executives $2.17
29 November 2016
5 September 2016
8 November 2017
11 September 2017
7 January 2019
7 January 2019
$287,500
$691,455
$287,500
$800,136
$312,500
$651,727
(i) The fair value of offers that are assessed and awarded on market based conditions is determined on the grant date in accordance with
AASB 2. The fair value is used by the Group to recognise an expense over the performance period for the TSR component of offers.
(ii) The value of the offer is the maximum value calculated as at the date of offer to the KMP(s) at that time. As such, it may include the value of
offers made to individuals who are no longer KMP’s of the Company.
(iii) Pro-rata offer made to Katherine Dean in respect of the “2016” Offer on 15 May 2017, in respect of the “2017” Offer to Janelle Whittle on
13 February 2018, in respect of the “2018” Offer to Anthony MacRae and Heather McGovern on the 25th of February 2019 and 29th of May
2019 respectively
Calculation of the Reward
TSR Component
For the 2016, 2017, 2018 and 2019 Offers, the ELTIP TSR component will vest on the following basis:
MYS TSR relative to the ASX 300:
Percentage of the applicable reward that will vest:
Below the mid-point percentage:
At the Median ASX300
0%
50%
Between the median and 75th percentile
Straight line basis between 50% and 100%
Above the 75th percentile
100%
No reward will be payable if performance is negative irrespective of the benchmark group performance.
Directors' ReportAs at 30 June 2019MyState Limited Annual Report 2019MyState Limited Annual Report 2019Directors' ReportAs at 30 June 2019 42
43
ROE Component
The performance period for the ROE component for the ELTIP reward will be based upon on the Company’s post tax
ROE and will be payable on the following basis:
Name
Component
Maximum Offer
Forfeited/
Lapsed
Vested in the 2018/19
Financial Year
Not yet assessed
for Vesting
Number of Shares
For the 2016 and 2017 Offers:
MYS aggregate absolute post tax underlying
ROE for the performance period:
Below 31.80%
31.80%
31.80% to 33.50%
33.50% or above
For the 2018 & 2019 Offer:
MYS aggregate post tax underlying
ROE for the performance period:
Below 30.00%
30.00%
30.00% to 31.50%
31.50% or above
Percentage of the applicable reward that will vest:
0%
25%
Straight line from 25% to 100%
100%
Percentage of the applicable reward that will vest:
0%
50%
Straight line basis from 50% to 100%
100%
Actual and Potential ELTIP Share Allocations
The following tables detail, for current and former KMP, the status of offers made under the ELTIP. The “2015” offer
performance period was completed on 30 June 2018. The “2016” offer performance period was completed on 30 June 2019.
Name
Component
Maximum Offer
Forfeited/
Lapsed
Vested in the 2017/18
Financial Year
Not yet assessed
for Vesting
Number of Shares
"2015" Offer
Melos Sulicich
Huw Bough
David Harradine
Mandakini Khanna (i)
Paul Moss
Andrew Polson (i)
Chris Thornton
TSR
ROE
TSR
ROE
TSR
ROE
TSR
ROE
TSR
ROE
TSR
ROE
TSR
ROE
29,193
29,193
10,191
10,191
11,306
11,305
6,116
6,116
9,235
9,235
3,733
3,733
10,191
10,191
29,193
29,193
10,191
10,191
11,306
11,305
6,116
6,116
9,235
9,235
3,733
3,733
10,191
10,191
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(i) Pro-rata Max Payable based on commencement dates as applicable
-
-
-
-
-
-
-
-
-
-
-
-
-
-
“2016” Offer
Melos Sulicich
Huw Bough
Katherine Dean (i)
David Harradine
Mandakini Khanna
Paul Moss
Andrew Polson
Chris Thornton
TSR
ROE
TSR
ROE
TSR
ROE
TSR
ROE
TSR
ROE
TSR
ROE
TSR
ROE
TSR
ROE
34,976
34,975
12,044
12,044
4,192
4,191
13,504
13,503
12,044
12,044
12,044
12,044
12,044
12,044
11,679
11,679
16,719
34,975
12,044
12,044
4,192
4,191
6,455
13,503
5,757
12,044
5,757
12,044
12,044
12,044
11,679
11,679
18,257
-
-
-
-
-
7,049
-
6,287
-
6,287
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1) Pro-rata Max Payable based on commencement dates as applicable
The “2017”, “2018” and “2019” offers have not been assessed for vesting. The following table shows the maximum
number of shares available under each of these offers:
Name
Melos Sulicich
Huw Bough
Katherine Dean (iv)
David Harradine
Colleen Harris (i)
Mandakini Khanna
Heather McGovern (iii)
Anthony MacRae (iii)
Paul Moss
Craig Mowll (iii)
Andrew Polson
Chris Thornton
Janelle Whittle (ii)
Component
TSR
ROE
TSR
ROE
TSR
ROE
TSR
ROE
TSR
ROE
TSR
ROE
TSR
ROE
TSR
ROE
TSR
ROE
TSR
ROE
TSR
ROE
TSR
ROE
TSR
ROE
"2017" Offer
"2018" Offer
"2019" Offer
29,307
29,307
10,092
10,092
9,786
9,786
11,315
11,315
9,714
9,714
10,551
10,551
-
-
-
-
10,092
10,092
-
-
10,092
10,092
10,245
10,245
3,888
3,887
Number of Shares
32,188
32,187
-
-
-
-
11,742
11,742
-
-
11,124
11,124
2,934
2,933
4,590
4,589
10,506
10,506
11,556
11,555
-
-
-
-
8,961
8,961
34,036
34,035
-
-
-
-
-
-
-
-
12,743
12,743
10,783
10,782
12,743
12,743
11,926
11,926
12,743
12,743
-
-
-
-
9,476
9,475
(i) Offer made in 2017 but not accepted.
(ii) Pro-rata offer made for “2017”.
(iii) Pro-rata offer made for “2018”.
(iv) The “2018” Offer extended to Katherine Dean was forfeited due to less than 12 months of the performance period having been served.
Directors' ReportAs at 30 June 2019MyState Limited Annual Report 2019MyState Limited Annual Report 2019Directors' ReportAs at 30 June 2019
44
45
4.4 Banking Executive Accountability Regime
MyState accountable persons are registered with APRA.
Each accountable person has an agreed accountability
statement that sets out the accountabilities relevant
to their role in relation to BEAR. Each accountability
statement is endorsed by the Board and approved by
APRA. Any entitlement to variable remuneration maybe
subject to deferral, reduction or forfeiture under the BEAR
even if performance criteria have been met.
The BEAR requires authorised deposit-taking institutions
(including the Company) to defer payment of a minimum
amount of variable remuneration for a minimum period
of 4 years. The requirement for variable remuneration to
be deferred does not apply if the amount that would be
deferred is less than $50,000.
The deferral period is subject to extension, as
determined by the Board, or reduction, as determined
by the Board and approved by APRA. At the end of
the applicable deferral period, any entitlement to
deferred variable remuneration will be assessed against
each individual meeting their accountable person
obligations. If an accountable person fails to comply
with his or her accountability obligations, their deferred
variable remuneration will reduced by an amount that
is proportionate to the failure or may be cancelled, as
determined by the Board.
5. Statutory Tables
$
Salary
and Fees
Cash
Bonus (i)
Other
Short Term
Benefits
Non-
Monetary
Benefits (ii)
Post
Employment
Super-
annuation
Termination
Benefits
Share Based
Payment (iii)
Total
Non-Executive Directors
Miles Hampton
2019
201,214
2018
193,532
Peter Armstrong
2019
51,740
2018
75,151
Robert Gordon
2019
87,637
2018
82,305
Colin Hollingsworth 2019
-
2018
8,064
Sibylle Krieger
2019
96,590
2018
91,074
Warren Lee
2019
94,147
2018
63,051
Stephen Lonie
2019
100,977
2018
97,905
Andrea Waters
2019
98,701
2018
66,204
Total NED
2019
731,006
2018
677,286
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
19,115
18,386
5,000
18,099
-
-
-
-
27,068
25,407
24,901
-
5,085
24,558
-
-
-
-
-
-
-
-
9,176
8,652
8,944
5,990
9,593
9,301
9,376
6,289
5,000
5,085
99,710
125,145
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
220,329
211,918
74,839
102,219
113,044
107,206
-
37,707
105,766
99,726
103,091
69,041
110,570
107,206
108,077
72,493
835,716
807,516
5. Statutory Tables (Continued)
Salary
and Fees
Cash
Bonus (i)
Other
Short Term
Benefits
Non-
Monetary
Benefits (ii)
Post
Employment
Super-
annuation
Termination
Benefits
Share Based
Payment (iii)
Total
$
Executives
Melos Sulicich
2019
599,616
65,156
2018
550,385
158,125
-
-
Huw Bough
2019
219,078
15,256
25,000
2018
305,303
71,500
Katherine Dean
2019
146,057
-
David Harradine
2019
354,923
20,950
2018
292,237
41,040
Colleen Harris
2018
345,546
80,500
2019
2018
-
117,099
-
-
Mandakini Khanna
2019
328,662
29,890
Jessica Kingston
2018
314,963
77,700
2019
2018
-
14,990
-
-
Anthony MacRae
2019
136,173
11,330
Heather McGovern
2018
2019
2018
-
-
84,615
7,755
-
-
Paul Moss
2019
310,432
24,710
2018
301,370
72,000
Craig Mowll
2019
333,517
12,874
Andrew Polson
2018
2019
-
-
2018
272,957
Chris Thornton
2019
-
2018
143,449
-
-
-
-
-
Janelle Whittle
2019
248,054
2018
115,104
17,160
16,525
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Total Executive
2019 2,761,127
205,081
25,000
2018 2,773,403
517,390
-
Total KMP
2019 3,492,133
205,081
25,000
2018 3,450,689
517,390
-
-
2,892
-
-
6,916
6,325
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
25,000
24,631
17,808
24,697
16,054
28,342
25,000
24,454
-
10,341
37,964
31,354
-
1,590
9,327
-
8,038
-
29,491
28,630
20,586
-
-
23,032
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
64,527
754,299
55,088
791,121
(4,345)
272,797
19,270
420,770
(4,705)
164,322
17,837
385,781
21,770
422,643
24,214
474,714
-
-
-
127,440
20,505
417,021
26,281
450,298
-
-
-
16,580
3,701
160,531
-
-
2,273
102,681
-
-
19,452
384,085
19,755
421,755
11,578
378,555
-
-
-
-
2,871
298,860
-
-
42,753
15,146
194,670
(6,145)
389,873
-
-
6,916
51,970
11,916
57,055
24,533
10,935
213,801
-
-
-
11,908
301,655
2,806
145,370
146,664 3,358,589
223,152
194,670
161,977
3,922,562
313,511
-
146,664
4,194,305
348,297
194,670
161,977
4,730,078
(i) The cash bonus shown is the actual amount awarded in respect of the 2018/19 financial year STI offers.
(ii) Non-Monetary Benefits consist of car parking expense, travel & accommodation and entertainment.
(iii) Share based payment amounts have been calculated in accordance with the relevant accounting policy and Accounting Standard. The fair
value of the share grant is calculated at the date of grant and is allocated to each reporting period evenly over the period from grant date
to vesting date. This fair value will generally be different to the value of shares at the time they vest. The value disclosed is the portion of the
fair value of the share grant allocated to this reporting period. These amounts represent share grants which will only vest to the KMP when
certain performance and service criteria are met. In some circumstances all, or a portion, of the shares may never vest to the KMP. As these
figures are based on accrual accounting and not a reflection of actual cash paid or shares vested, negative figures can result in the event of
accrual reversals being recorded. Amounts stated are in respect of the period that the individual held a role of a KMP.
Directors' ReportAs at 30 June 2019MyState Limited Annual Report 2019MyState Limited Annual Report 2019Directors' ReportAs at 30 June 2019
46
47
6. Shareholdings of Key Management
Personnel
Non-Executive Director Minimum Shareholding
Requirement
A Minimum Shareholding Requirement (MSR) has been
implemented for all Non-Executive Directors.
Non-Executive Directors, in the absence of approval from
the Board to the contrary, are required to acquire and
maintain, directly or indirectly, Shares in MyState Limited
to the equivalent of one year’s pre-tax base Director’s
fee. The MSR must be achieved within four years of their
appointment or the date of implementation of this policy,
whichever is the latter.
Executive Minimum Shareholding Requirement
In the absence of approval from the Board to the contrary,
a Minimum Shareholding Requirement (MSR) will apply to
Executives whom:
1. Receive a TFR greater or equal to $250,000; and
2. Participate in ELTIP and STI programs.
The MSR will be 50% of Fixed Annual Remuneration (FAR)
for the Managing Director and CEO and 25% of TFR for all
other executives and must be achieved within 4 years of the
date that the policy becomes applicable to the Executive.
Any Shares issued into deferral, from the 2018 ELTIP
Offer onwards, will be recognised for the purposes of
Executive MSR.
The Shares in MyState Limited (ASX code: MYS) may
be held directly or indirectly, and may include Shares
obtained prior to 1 January 2015 and/or Shares acquired
through ELTIP or any other scheme, which includes Shares
vested and allocated but still held in trust, but excludes
any allocated Shares which have not yet vested.
Details regarding the holdings by KMP and their related
parties of ordinary shares in the Company are set out in the
following table. Related parties include close members of
the family of the KMP. It also includes entities under joint or
several control or significant influence of the KMP and their
close family members. No equity transactions with KMP,
other than those arising as payment for compensation,
have been entered into with the Company.
Key Management
Personnel
Balance at
commencement of
financial year
Granted as
compensation (i) Net change other
Balance at end
of financial year
Balance at end of
financial year held
by ELTIP trustee (ii)
Non-Executive Directors
Miles Hampton
Robert Gordon
Sibylle Krieger
Warren Lee
Stephen Lonie
Andrea Waters
Sub Total
Executives
Melos Sulicich
Heather McGovern
Anthony MacRae
David Harradine
Mandakini Khanna
Paul Moss
Janelle Whittle
Craig Mowll
Sub Total
700,000
20,387
5,311
-
56,829
-
782,527
68,070
-
-
3,685
-
-
1,404
-
73,159
-
-
-
-
-
-
-
18,257
-
-
7,049
6,287
6,287
-
-
37,880
21,700
5,000
19,132
11,972
1,761
20,665
80,230
9,908
-
-
-
-
-
-
-
9,908
721,700
25,387
24,443
11,972
58,590
20,665
862,757
96,235
-
-
10,734
6,287
6,287
1,404
-
120,947
-
-
-
-
-
-
-
17,014
-
-
1,685
-
-
-
-
18,699
(i) These amounts are the shares awarded for the “2016 Offer”. The awarding of these shares was approved on the 23 of August 2019 with the
exception of those relating to Melos Sulicich whose shares are subject to shareholder approval. These shares have not yet been issued to the
Trustee to hold on behalf of the Executives.
(ii) The shares that are held in trust are also shown in the balance at the end of the financial year totals.
7. Loans to Key Management Personnel
There are no loans guaranteed or secured by the Company to KMP and their related parties in 2019.
Related parties include close members of the family of the KMP. It also includes entities under joint or several control or
significant influence of the KMP and their close family members.
8. Executive Employment Agreements
The Managing Director and Executives are employed under individual open ended employment contracts that set out
the terms of their employment.
Incumbent
Commenced
in role
Contract
term
TFR
Short Term
Incentive
(maximum)
ELTIP
(maximum)
Termination Provisions In the event
of termination by the Company
Melos Sulicich (i)
1 July 2014 Ongoing $625,000
50% of TFR
50% of TFR Notice:
The contract may be terminated by
the Company with 26 weeks notice or
payment in lieu of notice.
Entitlement:
• Pro-rata STI payment applied as at
the date of termination.
• Payment of STI if the performance
period is complete but not yet paid
• Pro-rata ELTIP allocation, made
following the completion of the
applicable performance periods.
David
Harradine (ii)
Mandakini
Khanna (ii)
Anthony
MacRae (ii)
Heather
McGovern (ii)
16 March 2015 Ongoing $390,000
30% of TFR
1 December
2015
12 February
2019
Ongoing $390,000
Ongoing $390,000
18 March 2019 Ongoing $330,000
Paul Moss (ii)
13 May 2015 Ongoing $365,000
Craig
Mowll (ii)
Janelle
Whittle (ii)
16 July 2018 Ongoing $390,000
22 January
2018
Ongoing $290,000
30% of
TFR upon
invitation to
participate
Notice:
The contract can be terminated by the
Company upon provision of 3 months
notice.
Entitlement:
• Payment of the equivalent of
6 months TFR (inclusive of the
provision of 3 months notice).
• Pro-rata STI payment applied as at
the date of termination.
• Payment of STI if the performance
period is complete but not yet paid
• Pro-rata ELTIP allocation, made
following the completion of the
applicable performance periods.
(i) Required to hold shares to the value of 50% of TFR.
(ii) Required to hold shares to the value of 25% of TFR within 4 years from commencement.
Signed in accordance with a resolution of the Directors.
Miles Hampton
Chairman
Melos Sulicich
Managing Director and Chief Executive Officer
Hobart, dated this 23 August 2019
Directors' ReportAs at 30 June 2019MyState Limited Annual Report 2019MyState Limited Annual Report 2019Directors' ReportAs at 30 June 2019
4848
03
Financial
Report
As at 30 June 2019
MyState Limited Annual Report 2019
50
51
Results for the year
Section 7
Income tax expense, current and deferred
tax balances
7.1
Income tax expense, current and deferred
tax balances
Section 8 Group structure and related parties
8.1
8.2
8.3
Parent entity information
Controlled entities and principles of
consolidation
Related party disclosures
Section 9 Other notes
9.1
9.2
9.3
9.4
Contingent liabilities and expenditure
commitments
Remuneration of auditors
Events subsequent to balance date
Other significant accounting policies and new
accounting standards and disclosures
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
Section 1
Corporate information and basis
of accounting
1.1
1.2
1.3
1.4
Reporting entity
Basis of accounting
Use of estimates and judgements
Provisions (other than for impairment of
financial assets)
Section 2 Financial performance
2.1
2.2
2.3
2.4
2.5
2.6
2.7
Net banking operating income
Income from wealth management activities
Income from other activities
Expenses
Earnings per share
Dividends
Segment financial information
Section 3 Capital and financial risk management
3.1
3.2
3.3
Capital management strategy
Financial risk management
Average balance sheet and sources of net
interest income
Section 4 Financial assets and liabilities
4.1
4.2
4.3
4.4
4.5
4.6
Cash and liquid assets
Financial instruments
Loans and advances
Transfer of financial assets (securitisation
program)
Deposits and other borrowings including
subordinated notes
Fair value of financial instruments
Section 5 Non-financial assets, liabilities and equity
5.1
5.2
5.3
5.4
Property, plant and equipment
Intangible assets and goodwill
Employee benefit provisions
Share capital
Section 6 Discontinued operations
6.1
Discontinued operations
Consolidated Income Statement
for the year ended 30 June 2019
Interest income
Interest expense (i)
Net interest income
Non-interest income from banking activities (ii)
Net banking operating income
Income from wealth management activities (iii)
Income from other activities
Total operating income
Less: Expenses
Personnel costs (iii)
Administration costs (i), (ii) & (iii)
Technology costs
Occupancy costs (iii)
Marketing costs
Governance costs
Total operating expenses
Profit before impairment and tax expense
Impairment (recovery) / expense on loans and advances (iii)
Profit before tax from continuing operations
Income tax expense (iii)
Profit for the year from continuing operations
Discontinued operations
Profit / (loss) after tax for the year from discontinued operations
Profit for the year
Profit attributable to the:
Equity holders of MyState Limited
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
Notes
30 June 2019
$’000
30 June 2018
$’000
2.1
2.1
2.1
2.2
2.3
2.4
2.4
2.4
4.3
7.1
6.1
2.5
2.5
202,103
(112,720)
89,383
15,733
105,116
15,298
-
188,264
(98,753)
89,511
15,514
105,025
15,884
6
120,414
120,915
35,657
15,131
13,614
6,060
4,589
2,944
77,995
42,419
(201)
42,620
12,842
29,778
1,209
30,987
36,147
15,053
12,071
6,190
3,768
2,546
75,775
45,140
441
44,699
13,441
31,258
203
31,461
30,987
31,461
34.17
34.17
34.97
34.97
(i) Comparatives restated to reflect change in accounting policy disclosed in note 9.4 (iv).
(ii) Comparatives restated to reflect change in accounting policy disclosed in note 9.4. (iii) (b).
(iii) Comparatives restated to exclude the discontinued operations disclosed in note 6.1.
The accompanying notes form part of these financial statements.
MyState Limited Annual Report 2019MyState Limited Annual Report 2019Financial ReportAs at 30 June 2019Financial ReportAs at 30 June 2019 52
53
Consolidated Statement of Comprehensive Income
for the year ended 30 June 2019
Profit for the year
Other comprehensive income / (expense)
Items that may be reclassified subsequently to profit or loss
Cash flow hedges - Net gains / (losses) taken to equity
Income tax effect
Total other comprehensive income / (expense) for the year
Total comprehensive income for the year
Total comprehensive income for the year is attributable to:
Equity holders of MyState Limited
Notes
30 June 2019
$’000
30 June 2018
$’000
30,987
31,461
(400)
120
(280)
(14)
4
(10)
30,707
31,451
30,707
31,451
Consolidated Statement of Financial Position
for the year ended 30 June 2019
Notes
30 June 2019
$’000
30 June 2018
$’000
Assets
Cash and liquid assets
Due from other financial institutions
Other assets
Financial instruments
Loans and advances
Property, plant and equipment
Deferred tax assets
Intangible assets and goodwill (i)
Total assets
Liabilities
Due to other financial institutions
Other liabilities
Deposits and other borrowings including subordinated notes (i)
Employee benefit provisions
Tax liabilities
Total liabilities
Net assets
Equity
Share capital
Retained earnings
Reserves
Total equity
(i) Comparatives are restated to reflect change in accounting policy disclosed in note 9.4 (iv).
The accompanying notes form part of these financial statements.
4.1
4.2
4.3
5.1
7.1
5.2
4.5
5.3
7.1
5.4
79,994
27,168
7,405
67,876
25,826
6,950
450,333
406,864
5,053,091
4,565,256
5,779
4,133
84,979
6,360
3,948
85,225
5,712,882
5,168,305
38,180
7,092
33,334
7,666
5,331,516
4,796,378
5,384
3,211
5,341
4,924
5,385,383
4,847,643
327,499
320,662
148,707
175,880
2,912
145,380
170,568
4,714
327,499
320,662
Consolidated Statement
of Changes in Equity
for the year ended 30 June 2019
At 1 July 2017
Profit for the year
Other comprehensive income /
(expense)
Total comprehensive income for
the year
Equity issued under employee
share scheme
Equity issued under executive
long term incentive plan
Equity issued under dividend
reinvestment plan
Share based payment expense
recognised
Transfer to / from retained
earnings
Dividends paid
At 30 June 2018
At 1 July 2018
Impact of adoption of new
accounting standards
Restated opening total equity
Profit for the year
Other comprehensive income /
(expense)
Total comprehensive income
for the year
Equity issued under employee
share scheme
Equity issued under executive
long term incentive plan
Equity issued under dividend
reinvestment plan
Share based payment expense
recognised
Transfer to retained earnings
Dividends paid
At 30 June 2019
Note
Share capital
$’000
Retained
earnings
$’000
General
reserve for
credit losses
$’000
Employee
equity
benefits
reserve
$’000
Hedging
reserve
$’000
Total
$’000
141,349
164,358
4,428
956
(187)
310,904
-
-
-
82
104
3,845
-
-
-
31,461
-
31,461
-
-
-
-
543
(25,794)
-
-
-
-
-
-
-
-
-
145,380
170,568
145,380
170,568
4,428
4,428
-
-
-
-
81
-
3,246
-
-
-
(1,338)
30,987
-
30,987
-
-
-
-
-
-
-
-
-
-
-
-
1,679
(1,679)
(26,016)
-
5.4
5.4
5.4
2.6
9.4
5.4
5.4
5.4
2.6
-
-
-
-
(104)
-
174
(543)
-
483
483
-
-
-
-
-
-
-
157
-
-
-
(10)
(10)
-
-
-
-
-
-
(197)
(197)
-
-
31,461
(10)
31,451
82
-
3,845
174
-
(25,794)
320,662
320,662
(1,338)
30,987
(280)
(280)
(280)
30,707
-
-
-
-
-
81
-
3,246
157
-
(26,016)
327,499
148,707
175,880
2,749
640
(477)
The accompanying notes form part of these financial statements.
MyState Limited Annual Report 2019MyState Limited Annual Report 2019Financial ReportAs at 30 June 2019Financial ReportAs at 30 June 2019 54
55
Notes
30 June 2019
$’000
30 June 2018
$’000
Consolidated Statement of Cash Flows
for the year ended 30 June 2019
Cash flows from operating activities
Interest received
Interest paid
Fees and commissions received (i)
Other non-interest income received
Payments to suppliers and employees
Income tax paid
Net cash flows from / (used in) operating activities
4.1
Cash flows from investing activities
Purchase of intangible assets (ii)
Proceeds from sale of property, plant and equipment
Purchase of property, plant and equipment
Net (increase) / decrease in loans to customers
Net (increase) / decrease in amounts due from other financial institutions
Proceeds from sale of discontinued operations
Proceeds from sale of other investments
Net cash flows from / (used in) investing activities
Cash flows from financing activities
Employee share issue
214,453
(107,476)
32,026
1,224
(76,409)
(14,306)
49,512
198,704
(98,573)
35,335
1,836
(75,697)
(11,924)
49,681
(4,934)
(3,771)
39
(610)
7
(313)
(501,783)
(293,196)
(45,851)
22,507
3,398
-
-
648
(549,741)
(274,118)
81
82
Dividends paid net of dividend reinvestment plan
2.6
(22,845)
(21,953)
Net increase / (decrease) in subordinated notes
Net increase / (decrease) in deposits and other borrowings
Net increase / (decrease) in due to other financial institutions (ii)
Net cash flows from / (used in) financing activities
Net increase / (decrease) in cash held
Cash at beginning of financial year
Closing cash carried forward
118
369,020
165,973
512,347
12,118
67,876
79,994
(50)
70,627
179,381
228,087
3,650
64,226
67,876
4.1
(i) Comparatives restated to reflect change in accounting policy disclosed in note 9.4. (iii)(b).
(ii) Comparatives restated to reflect change in accounting policy disclosed in note 9.4 (iv).
Notes to the Consolidated
Financial Statements
for the year ended 30 June 2019
1.1 Reporting entity
MyState Limited (the Company) is incorporated and domiciled in Australia and is a company limited by shares that are
publicly traded on the Australian Securities Exchange. The consolidated financial statements of MyState Limited and its
subsidiaries (the Group) were authorised for issue by the Directors on 23 August 2019.
1.2 Basis of accounting
These consolidated financial statements are general purpose financial statements which have been prepared in
accordance with the Corporations Act 2001, Accounting Standards and Interpretations, and other requirements of the
law. Compliance with Australian Accounting Standards ensures that the financial statements and notes of the Company
and the Group comply with International Financial Reporting Standards (IFRS).
The financial statements comprise the consolidated financial statements of the Group. For the purpose of preparing the
consolidated financial statements, the Company is a for-profit entity.
Where necessary, comparatives figures have been re-classified and re-positioned for consistency with current period
disclosures.
The consolidated financial statements have been prepared on the basis of historical cost, except for certain properties
and financial instruments that are measured at revalued amounts or fair values at the end of each reporting period,
as explained in the accounting policies.
Rounding of amounts
The Company is a company of the kind referred to in Australian Securities and Investments Commission (ASIC) Class
Order 2016/191, and, in accordance with that Class Order, amounts in the financial report are rounded off to the nearest
thousand dollars, unless otherwise indicated. All amounts are presented in Australian dollars.
1.3 Use of estimates and judgements
The preparation of the financial report in conformity with Australian Accounting Standards requires the use of certain
critical accounting estimates. It also requires management to exercise judgment in the process of applying the
accounting policies. The notes to the financial statements set out areas involving a higher degree of judgment or
complexity, or areas where assumptions are significant to the financial report such as:
• Loan origination cost amortisation, refer note 2.1;
The accompanying notes form part of these financial statements.
• Impairment losses on loans and advances, refer note 4.3;
• Fair value of financial instruments, refer note 4.6;
• Impairment assessment of intangibles and goodwill, refer note 5.2; and
• Recoverability of deferred tax assets, refer note 7.1.
.
1.4 Provisions (other than for impairment of financial assets)
Provisions are recognised when the Group has a legal, equitable or constructive obligation to make a future sacrifice of
economic benefits to other entities as a result of past transactions or other past events and it is probable that a future
sacrifice of economic benefits will be required and a reliable estimate can be made of the amount of the obligation.
MyState Limited Annual Report 2019MyState Limited Annual Report 2019Financial ReportAs at 30 June 2019Financial ReportAs at 30 June 2019
56
57
2.1 Net banking operating Income
2.2 Income from wealth management activities
Interest income
Loans and advances
Investment securities
Total interest income
Interest expense
At call deposits
Fixed term deposits (i)
Total interest expense
Non-interest income from banking activities
Transaction fees (ii)
Loan fee income
Banking commissions
Other banking operations income
30 June 2019
$’000
30 June 2018
$’000
190,352
11,751
177,869
10,395
202,103
188,264
5,814
106,906
112,720
5,164
4,839
4,035
1,695
14,281
84,472
98,753
5,750
4,725
3,665
1,374
Total non-interest income from banking activities
15,733
15,514
(i) Comparatives restated to reflect change in accounting policy disclosed in note 9.4 (iv).
(ii) Comparatives restated to reflect change in accounting policy disclosed in note 9.4. (iii) (b).
Income accounting policy
Income is recognised to the extent that it is probable that the economic benefits will flow to the entity and the income
can be reliably measured. The following specific recognition criteria must also be met before income is recognised.
Interest
Interest income is accrued using the effective interest rate method, which is the rate that exactly discounts estimated
future cash receipts through the expected life of the financial instrument. Loan origination fees are recognised as
components of the calculation of the effective interest rate method in relation to originated loans. They, therefore, affect
the interest recognised in relation to this portfolio of loans. The average life of loans in the relevant loan portfolios is
reviewed annually to ensure the amortisation methodology for loan origination fees is appropriate.
Interest expense is calculated on an accruals basis using the effective interest rate method. The effective interest rate
method is the rate that exactly discounts future payments through the expected life of the financial instrument.
Non-interest income from banking activities
Refer to the “income accounting policy” in note 2.2.
Funds management income
Other fees and commissions
Total Income from wealth management activities
30 June 2019
$’000
30 June 2018
$’000
10,242
5,056
15,298
10,122
5,762
15,884
Funds management income and fiduciary activities
Tasmanian Perpetual Trustees Limited, a controlled entity of the Group, acts as Responsible Entity, Trustee and Funds
Manager for ten managed investment schemes. The investment schemes place monies with external wholesale fund
managers, direct mortgages and mortgage backed securities, term deposits and other investments. The clients include
individuals, superannuation funds and corporate investors.
The assets and liabilities of these funds are not included in the Consolidated Financial Statements. Income earned by
the Group in respect of these activities are included in the Consolidated Income Statement of the Group as “Funds
management income”.
The following table shows the balance of the unconsolidated funds under management and funds under advice that
gives rise to funds management and other fees and commissions income respectively:
Funds under management
Funds under advice (i)
(i) Comparatives restated to exclude the discontinued operations disclosed in note 6.
30 June 2019
$’M
30 June 2018
$’M
1,170
438
1,153
415
Other fees and commissions
Tasmanian Perpetual Trustees Pty Limited provides private client tax accounting services and acts as trustee and
executor of estates. “Other fees and commissions income” is the income earned from these activities.
Income accounting policy
The Group earns three main types of fees and commissions under contracts with customers. The first is single performance
obligation contracts, such as transaction services, where the performance obligation is performed and consideration
received in quick succession. Income from these contracts is recorded as the performance obligations are satisfied. The
second is where contracts with the customer are for the performance of multiple obligations over time and the customer
only benefits from delivery of all those obligations together over time, for example the provision of trustee services and
services to funds under management. For these contracts, income is recognised over the service period. The third type
of income is insurance intermediary income where the performance obligations are satisfied substantially at the time of
referring the customer and economic benefits flow to the Group over time. The Group has estimated that nil income will
be brought forward as a contract asset under these contracts due to the insufficient probability of the timing and amount
of future income that will flow from these contracts. This income is therefore recorded when received.
While this policy has changed in the 2019 financial year, it has not resulted in a change to the timing or amount of
income recognised. Refer also to note 9.4 (iii) (b).
2.3 Income from other activities
Profit on sale of property, plant and equipment assets
30 June 2019
$’000
30 June 2018
$’000
-
6
MyState Limited Annual Report 2019MyState Limited Annual Report 2019Financial ReportAs at 30 June 2019Financial ReportAs at 30 June 2019 58
59
2.4 Expenses
The following items are included within each item of specified expenses:
Occupancy costs include:
Operating lease payments
Depreciation – buildings and leasehold improvements
Technology costs include:
Amortisation – computer software
Administration costs include: (i)
Loss on sale of property, plant and equipment assets
Depreciation - furniture, equipment and computer hardware
30 June 2019
$’000
30 June 2018
$’000
4,153
767
4,060
1,014
4,354
3,236
8
375
-
427
(i) Comparatives restated to reflect change in accounting policy disclosed in note 9.4 (iv)
Expense accounting policy
Operating lease expense
Leases are classified at their inception as either operating or finance leases based on the economic substance of
the agreement, to reflect the risks and benefits incidental to ownership. The minimum lease payments of operating
leases, where the lessor effectively retains substantially all of the risks and benefits of ownership of the leased item, are
recognised as an expense on a straight-line basis in the Consolidated Income Statement over the life of the lease.
Depreciation and amortisation expense
The Group adopts the straight-line method of depreciating property, plant and equipment and amortising intangible
assets over the estimated useful lives commencing from the time the asset is held ready for use. Leasehold improvements
are depreciated over the shorter of either the unexpired expected term of the lease or the estimated useful life of the
improvements. Estimated useful lives are:
Buildings
Office furniture, fittings & equipment
Building fit-out
Computer hardware
Software
2.5 Earnings per share
Basic earnings per share from continuing operations
Basic earnings per share from discontinued operations
Total basic earnings per share
Diluted earnings per share from continuing operations
Diluted earnings per share from discontinued operations
Total diluted earnings per share
40 years.
4-7 years.
4-15 years.
3 years.
3-10 years.
30 June 2019
cents
30 June 2018
cents
32.84
1.33
34.17
32.84
1.33
34.17
34.74
0.23
34.97
34.74
0.23
34.97
Earnings per share accounting policy
Basic earnings per share is calculated by dividing the Group’s profit attributable to ordinary equity holders by the
weighted average number of ordinary shares outstanding during the financial year. Diluted earnings per share is
calculated by dividing the Group’s profit attributable to ordinary equity holders by the weighted average number of
ordinary shares that would be issued on the exchange of all the dilutive potential ordinary shares into ordinary shares.
The following table details the weighted average number of shares used in the calculation of basic and diluted earnings
per share:
Weighted average number of ordinary shares used in calculating basic and
diluted earnings per share
Number
Number
90,676,336
89,959,758
2.6 Dividends
Dividends paid
2017 Final dividend paid - 14.5 cents per share
2018 Interim dividend paid - 14.25 cents per share
2018 Final dividend paid - 14.5 cents per share
2019 Interim dividend paid - 14.25 cents per share
The dividends paid during the year were fully franked at the 30 per cent corporate tax rate.
Date of
payment
30 June 2019
$’000
30 June 2018
$’000
13 Sep 2017
29 Mar 2018
25 Sep 2018
29 Mar 2019
-
-
13,097
12,919
26,016
12,970
12,824
-
-
25,794
30 June 2018
$’000
30 June 2017
$’000
Franking credit balance
The amount of franking credits available for the subsequent financial year are:
Franking account balance as at the end of the period at 30%
65,666
63,933
Franking credits that will arise from the payment of income tax payable at the end
of the period
682
2,561
Dividends not recognised at the end of the financial year
On 23 August 2019, the Directors resolved to pay a final dividend for the 2019 financial year of 14.5 cents per share or
$13.201m total to be paid on the 1 October 2019, fully franked at the 30 per cent corporate tax rate. This dividend has
not been brought to account as the amount had not been determined at the reporting date. This dividend will reduce
the balance of the franking account by $5.657m.
2.7 Segment financial information
Operations of reportable segments
The Group has identified two operating divisions and a corporate division, which are its reportable segments.
These divisions offer different products and services and are managed separately. The Group’s management committee
review internal management reports for each of these divisions at least monthly.
Banking division
The banking division’s product offerings include lending; encompassing home loans, personal, overdraft, line of credit
and commercial products, transactional savings accounts and fixed term deposits and insurance products. It delivers
these products and services through its branch network, digital channels and third party channels. The banking division
is conducted by the MyState Bank Group.
MyState Limited Annual Report 2019MyState Limited Annual Report 2019Financial ReportAs at 30 June 2019Financial ReportAs at 30 June 2019 60
61
Wealth management division
The wealth management division is a provider of funds management and trustee services. It operates predominantly
within Tasmania. It holds $1.17 billion in funds under management on behalf of personal, business and wholesale
investors as the responsible entity for 10 managed investment schemes. The division also provided financial planning
however ceased to do so in June 2019, refer to note 6. The results relating to financial planning have been excluded
from the segment note below for the current and prior financial year. The wealth management division is conducted by
Tasmanian Perpetual Trustees Limited. Tasmanian Perpetual Trustees Limited is a trustee company licensed within the
meaning of Chapter 5D of the Corporations Act 2001 and is the only private trustee company with significant operations
in Tasmania.
Corporate and consolidation division
The corporate cost centre is responsible for the governance of the Group. The corporate cost centre charges the
operating divisions on a cost recovery basis for costs it has incurred. This division is also where eliminations are allocated
between the banking division and the wealth management division.
Year ended 30 June 2019
Interest income
Interest expense
Other income
Transaction fees
Loan fee income
Banking commissions
Other banking operations income
Funds management income
Other wealth management fees and commissions
Income from other activities
Total operating income
Expenses
Personnel costs
Administration costs
Technology costs
Occupancy costs
Marketing costs
Governance costs
Impairment expense / (recovery)
Income tax expense
Segment profit for the year
Segment balance sheet information
Segment assets
Segment liabilities
Banking
$’000
Wealth
Management
$’000
Corporate and
Consolidation
$’000
Total
$’000
201,763
(112,720)
5,164
4,839
4,035
1,814
-
-
-
244
96
-
-
-
-
-
10,242
5,056
-
-
-
-
-
(119)
-
-
-
202,103
(112,720)
5,164
4,839
4,035
1,695
10,242
5,056
-
104,895
15,542
(23)
120,414
25,552
18,655
13,398
5,399
4,338
705
(201)
11,135
25,914
5,744
2,936
442
497
209
132
-
1,679
3,903
4,361
(6,460)
(226)
(164)
42
2,107
-
28
(39)
35,657
15,131
13,614
6,060
4,589
2,944
(201)
12,842
29,778
5,634,791
29,283
5,382,178
4,342
48,808
(1,137)
5,712,882
5,385,383
Year ended 30 June 2018
Interest income
Interest expense (i)
Other income(i)
Transaction fees
Loan fee income
Banking commissions
Other banking operations income
Funds management income
Other Wealth Management fees and commissions
Income from other activities
Total operating income
Expenses (i)
Personnel costs
Administration costs
Technology costs
Occupancy costs
Marketing costs
Governance costs
Impairment expense / (recovery)
Income tax expense
Segment profit for the year
Segment balance sheet information
Segment assets
Segment liabilities
Banking
$’000
Wealth
Management
$’000
Corporate and
Consolidation
$’000
Total
$’000
187,999
(98,753)
5,750
4,725
3,665
1,615
-
-
6
184
81
-
-
-
-
-
10,122
5,762
-
-
-
-
-
(241)
-
-
-
188,264
(98,753)
5,750
4,725
3,665
1,374
10,122
5,762
6
105,007
16,068
(160)
120,915
25,475
19,532
11,599
5,403
3,501
655
441
11,495
26,906
5,427
3,029
410
644
230
68
-
1,899
4,361
5,245
(7,508)
62
143
37
1,823
-
47
(9)
36,147
15,053
12,071
6,190
3,768
2,546
441
13,441
31,258
5,089,105
4,842,607
27,646
3,291
51,554
1,745
5,168,305
4,847,643
(i) Comparatives restated to reflect change in accounting policy disclosed in note 9.4 (iii) and (iv).
3.1 Capital management strategy
The Group’s capital management strategy is to adhere to regulatory requirements and maximise shareholder value
through optimising the level and use of capital resources, whilst also providing the flexibility to take advantage of
opportunities as they may arise.
The Group’s capital management objectives are to:
• Comply with internal and regulatory capital requirements;
• Ensure sufficient capital resource is available to support the Group’s business, operational and investment activities;
• Maintain balance sheet resilience to safeguard the Group’s ability to continue as a going concern; and
• Support MyState Bank Limited’s credit rating.
The Group’s capital management policy considers each of internal, regulatory and rating agency capital requirements.
MyState Limited Annual Report 2019MyState Limited Annual Report 2019Financial ReportAs at 30 June 2019Financial ReportAs at 30 June 2019 62
63
Under APS 110 Capital Adequacy, the ultimate responsibility for the prudent management of capital resides with the
Board of Directors. The Board must ensure that an appropriate level and quality of capital is maintained, commensurate
with the type, amount and concentration of risk exposures.
The Group’s regulatory capital requirements are measured on a Level 1 and Level 2 basis.
Level 1 is comprised of MyState Bank Limited (the ADI).
On the 28th September 2016, the Group issued $10 million of floating rate subordinated notes (“notes”). The issuer was MyState Bank
Limited. The notes have a term of 10 years, maturing 26th September 2026, and pay interest quarterly at a floating rate equal to the three-
month BBSW plus a margin of 4.25% per annum. The issuer has the option to redeem all or some of the notes on 28th September 2021 and
each quarterly interest payment date thereafter, and for certain regulatory events (in each case subject to APRA’s prior written approval).
If APRA notifies the issuer that a non-viability trigger event has occurred, the notes will be converted into ordinary shares of MyState Limited,
or written-off. The amount included in the Group’s Level 2 Tier 2 regulatory capital is a percentage equal to that of external interest in the
Group’s regulatory capital. The amount included in the Group’s Level 1 Tier 2 regulatory capital is 100%.
(ii) The impact of adopting AASB 9 Financial Instruments (2010) impairment requirements on capital, is discussed further in note 9.4 (iii) a.
Level 2 is comprised of the wider MyState Limited prudential Group. This Group includes MyState Limited (the non-operating
holding company), MyState Bank Limited and Connect Asset Management (the Securitisation programme Manager).
3.2 Financial risk management
All entities that are consolidated for accounting purposes are included within the Level 2 regulatory capital calculation
except for certain securitisation vehicles and Tasmanian Perpetual Trustees Limited.
The Group has developed a detailed Internal Capital Adequacy Assessment Plan (ICAAP). This plan covers the capital
requirements of the Group on a Level 1 and Level 2 basis (as previously described) as well as Tasmanian Perpetual
Trustees. The Group’s capital position is monitored on a frequent basis and is reported to the Board monthly. The ICAAP
also includes a three year forecast of capital adequacy which is prepared and submitted to the Board at least annually.
The ICAAP aims to ensure that adequate planning activities take place so that the Group is effectively capitalised and
also includes a three year forecast of capital adequacy which is prepared and submitted to the Board at least annually.
The ICAAP encompasses known financial events, dividend policy, capital raisings, securitisation and stress testing.
The Board has currently set a minimum total capital adequacy ratio of 12.5% for the Group. Capital adequacy of the
Group on a level 2 basis as at 30 June 2019 is detailed in the following table:
Qualifying capital
Common equity tier 1 capital
Paid-up ordinary share capital
Retained earnings (ii)
Reserves excluding general reserve for credit losses
Total common equity tier 1 capital
Regulatory adjustments
Deferred expenditure including deferred tax assets
Goodwill and intangibles
Other deductions
Total regulatory adjustments
Net common equity tier 1 capital
Tier 2 capital
Subordinated notes (i)
General reserve for credit losses
Total capital
Risk weighted assets
Capital adequacy ratio
30 June 2019
$’000
30 June 2018
$’000
148,708
189,669
640
145,400
182,262
483
339,017
328,145
24,804
49,760
58,875
133,439
205,578
25,950
49,800
54,065
129,815
198,330
30,929
2,749
29,323
4,400
239,256
232,053
1,854,273
1,722,248
12.90%
13.47%
(i) On the 14th August 2015, the Group issued $25 million of floating rate subordinated notes (“notes”). The issuer was MyState Bank Limited.
The notes have a term of 10 years, maturing 14th August 2025, and pay interest quarterly at a floating rate equal to the three-month BBSW
plus a margin of 5% per annum. The issuer has the option to redeem all or some of the notes on 14th August 2020 and each quarterly interest
payment date thereafter, and for certain regulatory events (in each case subject to APRA’s prior written approval).
Risk management is an integral part of the Group’s business processes. The Board sets policy to mitigate risks and
ensure the risk management framework is appropriate, to direct the way in which the Group conducts business.
Promulgated Board approved policies ensure compliance throughout the business, which are monitored by way of a
dedicated compliance system. Risk management plans exist for all documented risks within the Group and these plans
are reviewed regularly by the Executive Management Team, the Group Risk Committee and the Board. Business units
are accountable for risks in their area and are responsible for ensuring the appropriate assessment and management of
these risks.
Risk exposure profile
The Group actively monitors a range of risks, which are not limited to, but include the following:
• Credit risk,
• Market risk; and
• Liquidity risk.
3.2.1 Credit risk
Approach to credit risk management
Credit risk arises within the Group’s lending and treasury investment activities and is the risk that a counterparty may fail
to complete its contractual obligations when they fall due.
The Group’s approach to managing this risk is to separate prudential control from operational management by assigning
responsibility for approval of credit exposures to specific individuals and management committees. The Group Risk
Committee has oversight of credit risk exposures and the Enterprise Risk Committee monitors credit related activities
through regular reporting processes, including monitoring large exposure to single groups and counterparties. The roles
of funding and oversight of credit are separate.
Board approved lending policies guide the processes for all loan approvals by subsidiary operations. All loans over a
designated amount, whether within delegated limits or not, are reported to the Group Risk Committee on a regular
basis. Any loan outside of delegated limits must be approved by the Board prior to funding.
Maximum exposure to credit risk
The amounts disclosed in the following table are the maximum exposure to credit risk, before taking account of any
collateral held or other credit enhancements. For financial assets recognised on the Balance Sheet, the exposure to
credit risk equals their carrying amount. For customer commitments, the maximum exposure to credit risk is the full
amount of the committed facility as at the reporting date.
MyState Limited Annual Report 2019MyState Limited Annual Report 2019Financial ReportAs at 30 June 2019Financial ReportAs at 30 June 2019 64
65
Cash and liquid assets
Due from other financial institutions
Other assets
Financial instruments
Loans and advances
Customer commitments(i)
Maximum exposure to credit risk
30 June 2019
$’000
30 June 2018
$’000
79,994
27,168
7,405
450,333
564,900
67,876
25,826
6,950
406,864
507,516
5,053,091
4,565,256
112,999
142,924
5,730,990
5,215,696
(i) For further information regarding these commitments, refer to note 9.1.
The credit quality of financial assets has been determined based on Standard and Poor’s credit ratings for financial
assets other than loans and advances at amortised cost. For loans and advances at amortised cost, the assets identified
as being “closely monitored” are those assets that are greater than 30 days past due.
Credit quality is impacted by concentration risk created by the ensuing vulnerability of assets to similar conditions such
as economic or political factors. The Group monitors the geographical diversification of its loans and advances. An
analysis of this concentration of credit risk at the reporting date is shown in the following table:
Tasmania
Victoria
New South Wales
Queensland
Western Australia
Australian Capital Territory
South Australia
Northern Territory
30 June 2019
$’000
30 June 2018
$’000
2,160,122
2,135,168
856,584
1,084,744
787,477
79,966
40,498
41,009
5,055
698,673
950,419
630,015
76,106
34,551
37,691
3,214
Gross loans and advances at amortised cost
5,055,455
4,565,837
There are no loans that individually represent 10% or more of shareholders’ equity.
Credit quality of financial assets
Financial assets other than loans and advances at amortised cost
Equivalent S&P rating A+ and above
Equivalent S&P rating A- and below
Loans and advances at amortised cost
New Facilities - not closely monitored
New Facilities - closely monitored
Continuing facilities - not closely monitored
Continuing facilities - closely monitored
Total on balance sheet exposure to credit risk
New facilities are loans that have been funded within the financial year.
Neither past due or impaired
Past due but not impaired - loans and advances at amortised cost
31 to 60 days
61 to 90 days
More than 90 days
Total past due but not impaired
Impaired – loans and advances at amortised cost
Maximum exposure to credit risk
Estimate of collateral held against past due but not impaired assets
Estimate of collateral held against impaired assets
30 June 2019
$’000
30 June 2018
$’000
3.2.2 Market risk
310,243
253,963
251,611
256,053
1,370,251
1,153,123
1,116
1,769
3,661,887
3,391,212
19,837
19,152
5,617,297
5,072,920
Managing market risk
Market risk is the exposure to adverse changes in the value of the Group’s portfolio as a result of changes in market
prices or volatility. The Group is exposed primarily to interest rate risk.
Interest rate risk exposure
The operations of the ADI is subject to the risk of interest rate fluctuations as a result of mismatches in the timing of the
repricing of interest rate on their assets and liabilities.
Value at Risk (VaR)
The following table indicates the VaR based on historical data. The Group estimates VaR as the potential loss in earnings
from adverse market movements over a 20 day holding period to a 99% confidence level. VaR takes account of all
material market variables that may cause a change in the value of the loan portfolio. Although an important tool for the
measurement of market risk, the assumptions underlying the model are limited to reliance on historical data.
5,030,032
4,543,568
Value at risk (post-tax) based on historic data
Average
Minimum
Maximum
7,552
4,076
10,879
22,507
552
9,736
3,645
7,420
20,801
887
5,053,091
4,565,256
34,033
-
31,640
420
Derivatives
The Group is exposed to changes in interest rates. The only derivative instruments currently entered into by the
Group are interest rate swaps. The Group protects its portfolio of fixed rate loans, and exposure to variable rate debt
obligations, by paying fixed rates to swap providers and receiving variable rates in return. The variable receipts mitigate
the exposure to interest rate changes that will impact on the Group’s variable rate payment obligations.
Derivatives accounting policy
Derivatives are initially recognised at fair value on the date a derivative contract is entered into and subsequently
remeasured to their fair value. Fair values are obtained from quoted market prices in active markets. Movements in the
carrying amounts of derivatives are recognised in the Consolidated Income Statement, unless the derivative meets the
requirements for hedge accounting.
30 June 2019
$’000
30 June 2018
$’000
952
795
1,249
1,437
818
2,019
Estimate of collateral held
The Group holds collateral against loans and advances to customers in the form of a mortgage charge over property.
To mitigate credit risk, the bank (ADI) can take possession of the security held against the loans and advances as a result
of customer default. The collateral shown above is an estimate of the value of collateral held; it is not practicable to
determine the fair value.
MyState Limited Annual Report 2019MyState Limited Annual Report 2019Financial ReportAs at 30 June 2019Financial ReportAs at 30 June 2019 66
67
The Group documents the relationship between the hedging instruments and hedged items at inception of the
transaction, as well as its risk management objective and strategy for undertaking various hedge transactions.
The Group also documents its assessment of whether the derivatives used in hedging transactions have been or will
continue to be, highly effective in offsetting changes in the fair values or cash flows of hedged items. This assessment is
carried out both at inception and on a monthly basis.
Cash flow hedges
The Group has cash flow hedges that are used to hedge the variability of interest rates in relation to certain liabilities.
These derivative instruments are established with terms that exactly match the terms of the liability designated as the
hedged item and therefore form highly effective relationships. The portion of the liability designated in the hedging
relationship is determined by reference to specific fixed rate assets within the loan portfolio. Sources of ineffectiveness
are limited to credit risk of parties to the relationship. The Group tests for ineffectiveness each month. The variability in
fair values attributable to an item designated as a cash flow hedge is recognised in Other Comprehensive Income to the
extent of the hedges effectiveness. Any ineffective portion of the change in the fair value of a derivative is recognised
immediately in the Consolidated Income Statement.
Derivatives that do not qualify for hedge accounting
If a derivative expires or is sold, terminated, or exercised, or no longer meets the criteria for hedge accounting, or the
designation is revoked, then hedge accounting is discontinued and the amount recognised in Other Comprehensive
Income remains in Other Comprehensive Income until the forecast transaction affects the Consolidated Income
Statement. If the forecast transaction is no longer expected to occur, it is reclassified to the Consolidated Income
Statement as a reclassification adjustment.
When a derivative is not designated in a qualifying relationship, all changes in its fair value are recognised immediately in
the Consolidated Income Statement, as a component of net income from other financial instruments carried at fair value.
3.2.3 Liquidity risk
Managing liquidity risk
Liquidity risk is the risk that the Group is unable to meet its financial and statutory obligations as they fall due,
which could arise due to mismatches in cash flows.
The Group’s objective is to manage its funds in a way that will facilitate growth in core business under a wide range of
market conditions. The Group maintains, and adheres to, an Internal Liquidity Adequacy Assessment Plan (ILAAP). This
process includes acknowledgements of liquidity risks within the Group and justification of the amount of liquidity that is
being held based on the liquidity risk profile of the organisation.
Group Treasury is responsible for implementing liquidity risk management strategies in accordance with the ILAAP. The
Group’s Assets and Liabilities Committee (ALCO) assists the Board with oversight of asset and liability management
including liquidity risk management. The Group’s liquidity policies are approved by the Board after endorsement by the
Group Risk Committee and the Banking Group’s ALCO.
The Group maintains a portfolio of highly marketable assets that can be liquidated in the event of an unforeseen
interruption of cash flows. The Group also has committed lines of credit that it can access to meet its liquidity needs.
Liquidity scenarios are calculated under stressed and normal operating conditions, to assist in anticipating cash
requirements providing adequate reserves.
Liquidity risk exposure
The Group is exposed to liquidity risk primarily through its banking activities.
The Group’s contractual cash flows associated with its financial liabilities and hedging derivatives, within relevant
maturity groupings is as follows. These are presented on an undiscounted basis and, therefore, will not agree to
amounts presented on the Consolidated Statement of Financial Position as they incorporate principal and associated
future interest payments.
-
-
-
-
-
-
-
On demand
$’000
< 3 months
$’000
3 months to
1 year
$’000
1 year to
5 years
$’000
> 5 years
$’000
Total
$’000
2019
At call deposits
Due to other financial institutions
Term deposits
Negotiable certificates of deposit
Subordinated notes
Securitisation liabilities
1,592,811
-
-
-
-
-
-
38,180
863,963
170,440
551
-
-
-
-
1,146,745
24,399
275,821
1,653
-
8,816
51,418
1,592,811
38,180
2,035,107
446,261
62,438
84,831
254,493
1,144,969
-
1,484,293
Contractual amounts payable
1,592,811
1,157,965
1,678,712
1,178,184
51,418
5,659,090
Derivative liability
2018
At call deposits
-
1,564,556
Due to other financial institutions
Term deposits
Negotiable certificates of deposit
Subordinated notes
Securitisation liabilities
-
-
-
-
-
95
-
33,334
688,696
330,950
591
75,314
960
7,722
-
-
-
-
980,795
21,984
72,000
1,773
-
9,456
-
-
-
-
-
42,624
8,777
1,564,556
33,334
1,691,475
402,950
54,444
225,943
1,034,104
-
1,335,361
Contractual amounts payable
1,564,556
1,128,885
1,280,511
1,065,544
42,624
5,082,120
Derivative liability
-
1,573
2,635
4,622
-
8,830
Contractual maturity of assets and liabilities
The contractual maturities of the Group’s financial assets and liabilities as at the reporting date are contained in the
following table. The Group expects that certain assets and liabilities will be recovered or settled at maturities which are
different to their contractual maturities.
30 June 2019
30 June 2018
Financial assets
Cash and liquid assets
Due from other financial institutions
Other assets
Financial instruments
Loans and advances
Total financial assets
Financial liabilities
Less than
12 months
$’000
More than
12 months
$’000
Less than
12 months
$’000
More than
12 months
$’000
79,994
27,168
7,405
-
-
-
Total
$’000
79,994
27,168
7,405
295,956
154,377
450,333
89,100
4,963,991
5,053,091
67,876
25,826
6,950
245,023
92,773
Total
$’000
67,876
25,826
6,950
161,841
406,864
4,472,483
4,565,256
499,623
5,118,368
5,617,991
438,448
4,634,324
5,072,772
Due to other financial institutions
Other liabilities
Deposits
Subordinated notes
(38,180)
(7,092)
-
-
(38,180)
(7,092)
(33,334)
(7,666)
-
-
(33,334)
(7,666)
(3,969,844)
(24,398)
(3,994,242)
(3,604,154)
-
(34,698)
(34,698)
-
(20,751)
(34,745)
(3,624,905)
(34,745)
Securitisation liabilities (i)
(296,987)
(1,005,589)
(1,302,576)
(257,580)
(879,148)
(1,136,728)
Total financial liabilities
(4,312,103)
(1,064,685)
(5,376,788)
(3,902,734)
(934,644)
(4,837,378)
Net contractual amounts
receivable / (payable)
(3,812,480)
4,053,683
241,203
(3,464,286)
3,699,680
235,394
(i) Comparatives are restated to reflect change in accounting policy disclosed in note 9.4 (iv).
MyState Limited Annual Report 2019MyState Limited Annual Report 2019Financial ReportAs at 30 June 2019Financial ReportAs at 30 June 2019 68
69
3.3 Average balance sheet and sources of net interest income
4.1 Cash and liquid assets
Non-interest earning assets
102,811
-
-
107,074
-
-
Bad and doubtful debts expense net of recoveries
The following table shows the major categories of interest-earning assets and interest-bearing liabilities, together with
their respective interest earned or paid by the Group and the average interest rates. Averages are calculated based on
the balance at each month end.
30 June 2019
30 June 2018
Average
balance
$’000
Interest
$’000
Average rate
%
Average
balance
$’000
Interest
$’000
Average rate
%
Average interest earning assets
and interest income
Interest-earning assets
Cash and liquid assets
Financial instruments
67,178
370
425,122
11,381
Loans and advances (i) & (ii)
4,481,845
190,352
0.55%
2.68%
4.25%
61,418
408,321
279
10,116
4,070,257
177,869
0.45%
2.48%
4.37%
Total average interest-earning
assets
4,974,145
202,103
4.06%
4,539,996
188,264
4.15%
Total average assets
5,076,956
202,103
3.98%
4,647,070
188,264
4.05%
Average liabilities and
interest expense
Interest-bearing liabilities
Deposits and derivatives (i)
Notes and bonds on issue
Total average interest-bearing
liabilities
3,550,144
1,193,405
72,419
40,301
2.04%
3.38%
3,270,165
1,058,130
65,424
33,329
2.00%
3.15%
4,743,549
112,720
2.38%
4,328,295
98,753
2.28%
Non-interest bearing liabilities
46,903
-
-
49,657
-
-
Total average liabilities
4,790,452
112,720
2.35%
4,377,952
98,753
2.26%
Reserves
302,877
-
-
295,266
-
-
Total average liabilities and
reserves
5,093,329
112,720
2.21%
4,673,218
98,753
2.11%
(i) Comparatives restated to reflect change in accounting policy disclosed in note 9.4 (iv).
(ii) The offset account average balance included in Loans and advances is $263.897m (Jun 18 : $267.460m).
Notes, coins and cash at bank
Other short term liquid assets
Total cash and liquid assets
30 June 2019
$’000
30 June 2018
$’000
66,972
13,022
79,994
62,452
5,424
67,876
Notes to the statements of cash flows
Reconciliation of profit for the year to net cash provided by operating activities
Profit for the year
30,987
31,461
Add / (less) items classified as investing / financing activities or non-cash items:
Depreciation of property, plant and equipment
Amortisation of intangible assets
Gain on disposal of discontinued operations
Loss on disposal of equipment
Loss / (gain) on sale of equipment
Deferred upfront lending costs
Deferred upfront bond issuance costs
Share based payment
Tax movement within reserves
Changes in assets and liabilities
Decrease / (increase) in due from other financial institutions
Decrease / (increase) in other assets
Decrease / (increase) in deferred tax assets
Increase / (decrease) in due to other financial institutions
Increase / (decrease) in other liabilities
Increase / (decrease) in employee benefit provisions
Increase / (decrease) in tax liabilities
Net cash flows used in operating activities
Cash and liquid assets accounting policies
1,142
4,354
(1,544)
-
(8)
(41)
12,123
1,696
157
769
228
(455)
(185)
3,562
(1,510)
(50)
(1,713)
49,512
1,441
4,554
-
162
(6)
455
9,959
-
174
4
449
(373)
770
(1,038)
865
(29)
833
49,681
Cash and liquid assets
Cash and liquid assets in the Consolidated Statement of Financial Position and for the purposes of the Consolidated
Statement of Cash Flows comprise cash at bank and in hand and short-term deposits with an original maturity of less
than three months, net of outstanding bank overdrafts. Cash flows arising from deposits, share capital, investments,
loans to subsidiaries and investments in associates are presented on a net basis in the Statement of Cash Flows.
Cash flow statement
Cash flows arising from the following activities are presented on a net basis in the Statement of Cash Flows:
• Customer deposits and withdrawals from savings and fixed-term deposit accounts;
• Movements in investments;
• Amounts due to and from other financial institutions;
• Customer loans and advances; and
• Dividends paid.
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70
71
4.2 Financial instruments
Financial instruments at amortised cost
Negotiable certificates of deposits
Term deposits
Floating rate notes
Other deposits
Total financial instruments at amortised cost
Financial instruments at fair value
Derivatives
Other financial instruments at fair value
Total financial assets
30 June 2019
$’000
30 June 2018
$’000
204,115
35,700
208,611
1,699
177,022
35,700
191,542
2,028
450,125
406,292
(792)
1,000
(428)
1,000
450,333
406,864
Financial instruments accounting policies
Financial instruments at amortised cost
Financial instruments at amortised cost are those non-derivative financial assets that the Group has acquired with the
objective of holding in order to collect contractual cash flows. The contractual terms of the financial asset give rise on
specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
Financial instruments at fair value
Financial instruments other than those carried at amortised cost, are carried at their fair value at the reporting date.
Note 4.6 contains information on how the Group determines fair values. Fair value gains and losses are recognised in
comprehensive income until the derecognition date, at which point the net gains and losses are transferred to profit or
loss for that instrument.
Derecognition of financial assets and liabilities
Financial assets are derecognised when the contractual rights to receive cash flows from the assets have expired, or
where the Bank has transferred its contractual rights to receive the cash flows of the financial assets and substantially
all the risks and rewards of ownership. Financial liabilities are derecognised when they are extinguished, i.e. when the
obligation is discharged, cancelled or expired.
4.3 Loans and advances
Classification of loans and advances at amortised cost
Residential loans secured by mortgage
Personal loans and unsecured overdrafts
Overdrafts secured by mortgage
Commercial loans
Total loans and advances at amortised cost
Specific provision for impairment
Collective provision for impairment
Total loans and advances at amortised cost net of provision for
impairment
30 June 2019
$’000
30 June 2018
$’000
4,870,272
4,374,002
74,752
41,068
69,363
74,450
44,915
72,470
5,055,455
4,565,837
266
2,098
222
359
5,053,091
4,565,256
Loans and advances at amortised cost accounting policy
Loans and other receivables that have fixed or determinable payments that are not quoted in an active market are
classified as “loans and advances”. Loans and advances are recognised on trade date and are measured at amortised
cost using the effective interest method, less any impairment. Interest income is recognised by applying the effective
interest rate, except for short-term receivables when the effect of discounting is immaterial.
Provision for impairment
Specific provision for impairment
Opening balance
Net specific provision funding
Write-off of previously provisioned facilities
Closing balance of specific provision for impairment
Collective provision for impairment
Opening balance (i)
Net collective provision funding
Write-off of previously provisioned facilities
Closing balance of collective provision for impairment
Charge to profit for impairment on loans and advances
Increase / (decrease) in specific provision for impairment
Increase / (decrease) in collective provision for impairment
Bad debts recovered
Bad debts written off directly (ii)
Less charge related to discontinued operation
Total impairment (recovery) / expense on loans and advances
30 June 2019
$’000
30 June 2018
$’000
222
514
(470)
266
2,271
(173)
-
2,098
44
(173)
(932)
1,020
(160)
(201)
620
39
(437)
222
337
685
(663)
359
(398)
22
(988)
1,805
-
441
(i) On adoption of the provisioning chapter of AASB 9, the collective provisions opening balance was increased by $1.912M and therefore the
opening balance shown for FY2019 differs to the closing balance in FY2018.
(ii) Comparatives restated to exclude the discontinued operations disclosed in note 6.1.
Impairment of financial assets accounting policy
Financial assets are assessed for indicators of impairment at the end of each reporting period. Financial assets are
considered to be impaired when there is objective evidence that, as a result of one or more events that occurred after
the initial recognition of the financial asset, the estimated future cash flows of the investment have been affected.
The primary source of credit risk for the Group arises on its loan portfolio. In relation to this portfolio, the Group
maintains an individually assessed provision and a collective provision.
Specific provisions for impairment are made against individual risk rated credit facilities where a loss is expected.
The provisions are measured as the difference between a financial asset’s carrying amount and the expected future cash flows.
All other loans and advances that do not have an individually assessed provision are assessed collectively for
impairment. In the 2018 financial year, an evaluation process was undertaken by categorising all loans into a credit risk
hierarchy based on a series of estimates and judgements based on APRA Prudential Standard APS 220 - Credit Quality.
On 1 July 2019 the Group adopted the Provisioning chapter of AASB 9 Financial Instruments. Collective provisions are
calculated using an Expected Credit Loss (ECL) model. This model is forward looking and does not require evidence of
an actual loss event for impairment provisions to be recognised, resulting in an acceleration of impairment recognition.
The Group applies a three-stage approach to measuring the ECL based on credit risk since origination. The Group
estimates ECL through modelling the probability of default, loss given default and exposure at default, as follows:
Stage 1 - Performing - This category includes financial assets that have not experienced a significant increase in credit
risk since their origination. For these financial assets an allowance equivalent to 12 month’s ECL is recognised, which
represents the credit losses expected to arise from defaults occurring over the next 12 months.
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73
Transfer of financial assets accounting policy
Once assets are transferred to a securitisation vehicle, the Group does not have the ability to use the transferred assets during
the term of the arrangement. The Group does not have any loans transferred to unconsolidated securitisation vehicles.
The consolidated securitisation vehicles generally transfer all the risks and rewards of ownership of the assets to the
investors in the notes. However, derecognition of the transferred assets from the Group is prohibited because the cash
flows that the securitisation vehicles collect from the transferred assets on behalf of the investors are not passed to them
without material delay. In these cases, the consideration received from the investors in the notes in the form of cash
is recognised as a financial asset and a corresponding financial liability is recognised. The investors in the notes have
recourse only to the cash flows from the transferred financial assets.
Interest in Joint Operations accounting policy
Securitised positions are held through a number of Special Purpose Entities (SPEs). These entities are classified as joint
operations, as the parties that have joint control of the arrangement, have rights to the assets, and obligations for the
liabilities, relating to the arrangement. Joint control is the contractually agreed sharing of control of an arrangement
which exists only when decisions about the relevant activities requires unanimous consent of the parties sharing control.
The Group recognises its interest in a joint operation:
• Its assets, including its share of any assets held jointly;
• Its liabilities, including its share of any liabilities incurred jointly;
• Its share of the revenue from the sale of the output by the joint operation; and
• Its expenses, including its share of any expenses incurred jointly.
The Group accounts for the assets, liabilities, revenues and expenses relating to its interest in a joint operation in
accordance with the accounting standards applicable to the particular assets, liabilities, revenues and expenses.
When a Group entity transacts with a joint operation in which a Group entity is a joint operator (such as a sale or
contribution of assets), the Group is considered to be conducting the transaction with the other parties to the joint
operation, and gains and losses resulting from the transactions are recognised in the Group’s consolidated financial
statements only to the extent of other parties’ interests in the joint operation. When a Group entity transacts with a joint
operation in which a group entity is a joint operator (such as a purchase of assets), the Group does not recognise its
share of the gains and losses until it re-sells those assets to a third party.
Stage 2 - Under-performing - This category includes financial assets that have experienced a significant increase in credit
risk since their origination and are not credit impaired. For these financial assets an allowance equivalent to lifetime ECL
is recognised. Lifetime ECL is the credit losses expected to arise from defaults occurring over the remaining life of the
financial assets.
Stage 3 - Non-performing (impaired) - This category includes financial assets that are credit impaired. The provision is
also equivalent to the lifetime ECL. The difference to the provision calculated on stage 2 loans is that the stage 3 loan
calculation is not discounted over a future period, but rather the provision is calculated at present value.
Financial assets in stage 1 and stage 2 are assessed for impairment collectively, whilst those assets in stage 3 are subject
to either collective or specific impairment assessment. The Group’s methodology for specific provisions remains
largely unchanged.
Key judgements and estimates made by the Group include the following:
Significant changes in credit risk
Significant increases in credit risk for financial assets are assessed by comparing the risk of a default occurring over the
expected life of a financial asset at the reporting date compared to the corresponding risk of default at origination.
In determining what constitutes a significant increase in credit risk, the Group considers qualitative and quantitative
information. The judgement to determine this is primarily based on changes in internal customer risk grades since
origination of the facility. For all of the Group’s loan portfolios, in addition to the primary indicator, a mathematical model
has been developed to identify where a facility’s recent behaviour has deteriorated significantly from its original behaviour.
Forward looking information
The measurement of expected credit losses needs to reflect an unbiased probability-weighted range of possible future
outcomes. AASB 9 provides limited guidance on how to meet this requirement and consequently, the Group has
developed an approach considered appropriate for its credit portfolio, informed by emerging market practices.
In applying forward looking information in the Group’s AASB 9 credit models, the Group considered three alternate
economic scenarios (base case, strong recovery and moderate recession), to ensure a sufficient unbiased representative
sample is included in estimating ECL.
The inclusion of a forward looking component in the model anticipates changes in the economic outlook, which
will likely increase the volatility of the provision. Where applicable, further adjustments may be made to account for
situations where known or expected risks and information have not been considered in the modelling process.
It is important to note that the increase in impairment provisions on transition to AASB 9 is not reflective of a change in
underlying portfolio credit quality.
4.4 Transfer of financial assets (securitisation program)
Some loans and advances to customers are sold by the Group to securitisation vehicles. The transfer takes the form of the
Group assuming an obligation to pass cash flows from the underlying assets to investors in the notes. The Group utilises its
securitisation program to provide regulatory capital relief and funding diversification.
The following table sets out the values at the transaction date of financial assets transferred during the financial year in this
manner to vehicles that provide regulatory capital relief and the value of the associated liabilities issued from the vehicles.
This table does not include transfer of assets to the securitisation vehicle in which the Group is the bond holder.
Transferred financial assets:
Loans and advances
Associated financial liabilities
Carrying value at
transaction date
30 June 2019
$’000
30 June 2018
$’000
468,506
449,344
Securitisation liabilities to external investors
435,200
440,490
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4.5 Deposits and other borrowings including subordinated notes
The aggregate net fair values of financial assets and financial liabilities which are carried at amortised cost is:
Deposits
At call deposits
Term deposits
Negotiable certificates of deposit
Total deposits
Other borrowings
Subordinated notes (i)
Securitisation liabilities
Total deposits and other borrowings including subordinated notes
Concentration of deposits:
Customer deposits
Wholesale deposits
Subordinated notes (i)
Securitisation liabilities
Total deposits
30 June 2019
$’000
30 June 2018
$’000
1,592,811
1,564,556
2,035,107
1,660,665
366,324
399,684
3,994,242
3,624,905
34,698
34,580
1,302,576
1,136,893
5,331,516
4,796,378
3,661,618
3,266,731
332,624
34,698
358,174
34,580
1,302,576
1,136,893
5,331,516
4,796,378
(i) Refer to note 3.1 (1) for details regarding the Subordinated Note issue.
There are no customers who individually have deposits which represent 10% or more of total liabilities.
Deposits and other borrowings accounting policy
Deposits and other borrowings are initially measured at fair value, net of transaction costs and are subsequently measured
at amortised cost using the effective interest method, with interest expense recognised on an effective yield basis.
The Group does not currently hold any financial liabilities at fair value.
4.6 Fair value of financial instruments
Classification of financial instruments
Cash and liquid assets, amounts due to financial institutions and amounts due from financial institutions are carried at
cost. As these assets are short term assets, their cost is considered to approximate their fair value.
The following financial assets and liabilities are also carried at amortised cost:
• Financial instruments;
• Loans and advances;
• Deposits; and
• Other borrowings.
Financial assets
Financial instruments
Loans and advances
Total financial assets
Financial liabilities
Deposits
Other borrowings including subordinated
notes
30 June 2019
30 June 2018
Carrying value
$’000
Net fair value
$’000
Carrying value
$’000
Net fair value
$’000
450,125
451,903
406,292
404,923
5,053,091
5,043,730
4,565,256
4,558,478
5,503,216
5,495,633
4,971,548
4,963,401
3,994,242
3,992,342
3,624,905
3,623,058
1,337,274
1,337,274
1,176,499
1,176,499
Total financial liabilities
5,331,516
5,329,616
4,801,404
4,799,557
Fair value hierarchy
The level in the fair value hierarchy of the inputs used in determining the fair values is shown below. The fair value of
these assets is:
Level 1 - inputs that are prices quoted for identical instruments in active markets;
Level 2 - inputs based on observable market data other than those in level 1; and
Level 3 - inputs for which there is no observable market data.
Where the expected maturity is in excess of 12 months, the fair value is discounted to its present value. During the year,
there have been no material transfers between levels of the fair value hierarchy.
Level 1 value
$’000
Level 2 value
$’000
Level 3 value
$’000
Total value
$’000
2019
Financial assets
Financial instruments
Loans and advances
Financial liabilities
Deposits
Other borrowings including subordinated
notes
2018
Financial assets
Financial instruments
Loans and advances
Financial liabilities
Deposits
Other borrowings including subordinated
notes
-
-
-
-
-
-
-
-
451,903
-
451,903
-
5,043,730
5,043,730
3,992,342
1,337,274
404,923
-
-
-
3,992,342
1,337,274
404,923
-
4,558,478
4,558,478
3,623,058
1,176,499
-
-
3,623,058
1,176,499
The Group has performed a VaR analysis at note 3.2, Market risk. VaR takes account of all material market variables that
may cause a change in the value of the loan portfolio, being 100% of Level 3 inputs.
MyState Limited Annual Report 2019MyState Limited Annual Report 2019Financial ReportAs at 30 June 2019Financial ReportAs at 30 June 2019 76
77
5.1 Property, plant and equipment
5.2 Intangible assets and goodwill
Land and buildings
At revalued amount
Accumulated depreciation
Plant and equipment
At cost
Accumulated depreciation
Total property, plant and equipment
Property, plant and equipment accounting policy
30 June 2019
$’000
30 June 2018
$’000
12,758
(7,734)
5,024
5,044
(4,289)
755
5,779
12,895
(7,115)
5,780
3,713
(3,133)
580
6,360
Plant and equipment
Plant and equipment, including leasehold improvements, are measured at cost less accumulated depreciation and any
impairment in value.
Land and buildings
Following initial recognition at cost, land and buildings are carried at a revalued amount, being their fair value at the
date of the revaluation less any subsequent accumulated depreciation on buildings and accumulated impairment
losses. Independent valuations are performed with sufficient regularity to ensure the carrying amount does not differ
materially from the asset’s fair value at the Consolidated Statement of Financial Position date. Fair value, is determined
by reference to market-based evidence, which is the amount for which the assets could be exchanged between a
knowledgeable willing buyer and seller in an arm’s length transaction as at valuation date.
Any revaluation surplus is credited to the asset revaluation reserve included in the equity section of the Consolidated
Statement of Financial Position, unless it reverses a revaluation decrease of the same asset previously recognised in the
Consolidated Income Statement. Any revaluation deficit is recognised in the Consolidated Income Statement unless it directly
offsets a previous surplus of the same asset in the asset revaluation reserve. Accumulated depreciation is eliminated against
the gross carrying amount of the asset and the net amount is restated to the revalued amount of the asset.
Impairment of property, plant and equipment
The carrying values of property, plant and equipment are reviewed for impairment when events or changes in
circumstances indicate the carrying value may not be recoverable. For an asset that does not generate largely
independent cash flows, the recoverable amount is determined for the cash-generating unit to which the asset belongs.
Derecognition of property, plant and equipment
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits
are expected to arise from the continued use of the asset. Any gain or loss arising on derecognition of the asset
(calculated as the difference between the net disposal proceeds and the carrying amount of the item) is included in the
Consolidated Income Statement in the year the item is derecognised.
Year ended 30 June 2019
At 1 July 2018, net of accumulated amortisation (i)
Additions
Disposals
Amortisation
At 30 June 2019, net of accumulated amortisation
At 30 June 2019
Cost (gross carrying amount less impairment)
Accumulated amortisation
Net carrying amount
Year ended 30 June 2018
At 1 July 2017, net of accumulated amortisation
Additions
Amortisation
At 30 June 2018, net of accumulated amortisation (i)
At 30 June 2018
Cost (gross carrying amount less impairment)
Accumulated amortisation
Net carrying amount (i)
Goodwill
$’000
Software
$’000
Total
$’000
65,978
-
(826)
-
65,152
19,247
4,934
-
(4,354)
19,827
85,225
4,934
(826)
(4,354)
84,979
65,152
32,550
97,702
-
(12,723)
(12,723)
65,152
19,827
84,979
65,978
-
-
65,978
65,978
-
65,978
18,712
3,771
(3,236)
19,247
32,211
(12,964)
19,247
84,690
3,771
(3,236)
85,225
98,189
(12,964)
85,225
(i) Comparatives are restated to reflect change in accounting policy disclosed in note 9.4 (iv).
Intangibles accounting policy
Intangible assets acquired separately are capitalised at cost and from a business combination are capitalised at fair value
as at the date of acquisition. Following initial recognition, the cost model is applied to the class of intangible assets. The
useful lives of these intangible assets are assessed to be either finite or infinite. Where amortisation is charged on assets
with finite lives, this expense is taken to the Consolidated Income Statement. Certain costs directly incurred in acquiring
and developing software are capitalised and amortised over the estimated useful life.
Intangible assets are tested for impairment where an indicator of impairment exists and, in the case of indefinite life
intangibles (limited to Goodwill), annually, either individually or at the cash-generating unit level. Useful lives are also
examined on an annual basis and adjustments, where applicable, are made on a prospective basis.
Goodwill is treated as an indefinite life intangible, software and other intangibles are finite life intangibles. Refer to note
2.4 Expenses for the useful life of tangible and intangible assets.
Impairment testing of goodwill
For the purpose of impairment testing, goodwill has been allocated to the Group’s two cash-generating units (CGUs)
the Banking Business and the Wealth Management Business. These CGU’s represent the lowest level within the Group
at which the goodwill is monitored for internal management purposes. The aggregate carrying amounts of goodwill
allocated to each CGU for the purpose of impairment testing is as follows:
Banking Business
Wealth Management Business
Total goodwill
30 June 2019
$’000
30 June 2018
$’000
40,189
24,963
65,152
40,189
25,789
65,978
MyState Limited Annual Report 2019MyState Limited Annual Report 2019Financial ReportAs at 30 June 2019Financial ReportAs at 30 June 2019 78
79
The Group’s assessment of goodwill value-in-use exceeds the carrying value allocated to the CGUs and included in the
financial statements.
5.3 Employee benefits provision
The recoverable amounts for each CGUs value-in-use was determined using cash flow projections from Board approved
financial budgets for the year ending 30 June 2019. Growth rates have been applied from year two through to year
twenty. Cash flows are projected by undertaking detailed calculations for each income and expense category over a five
year period and are then extrapolated off the 5th year, which is the lowest point of growth. An exit value is calculated
at the end of 20 years, based on an implied terminal value earnings multiple of 12.1 for both CGUs and a long-term
growth rate not exceeding industry. A post-tax discount rate of 8.3% and a pre-tax discount rate of 11.9% was used.
Certain income categories are modelled by projecting growth in relevant portfolio balances and the resulting income
derived there-from. Other non-portfolio related income streams and expense categories are modelled by projecting real
rates of growth (above inflation) for each category. Terminal value is determined at year twenty using the assumption
that the CGU achieves no real growth above inflation into perpetuity. The growth rates applied do not exceed the
long-term average growth rate for the business which the CGU operates. The discount rate used of 8.3% reflects the
Group’s post-tax nominal weighted average cost of capital, in which has been reviewed by externally engaged advisers
and approved by the Board. Average inflation is projected to be 2.0%. The method for determining value-in-use is
consistent with that adopted in the comparative period.
The key assumptions adopted in assessing Banking’s value-in-use are the rate of growth in the balance of the housing
loan portfolio and the outlook for net interest margin (NIM). Taking into account management’s past experiences
and external evidence, the assumptions that have been adopted for both of these components are considered to
be conservative. NIM is projected to be consistent with the budget outlook, which reflects the current low interest
rate environment. Management expects that, over time, these assumptions will be positively exceeded and that any
reasonably possible change to assumptions used in Management’s assessment will not result in impairment.
The key assumption adopted in assessing Wealth Management’s value-in-use is the rate of growth in income derived
from management fee (MF) income. MF income is derived from its activities as the responsible entity for various
Managed Investment Schemes (MIS). MF income derived is directly related to the portfolio balances of the MIS.
Other sources of income for the Wealth Management Business are its Trustee Services division. Taking into account
Management’s past experiences and external evidence, the assumptions adopted are considered reasonable and
conservative. Management’s assessment of Wealth Management’s value-in-use exceeds its carrying value.
Any reasonably possible change to assumptions used in Management’s assessment will not result in impairment.
Goodwill accounting policy
Goodwill on the acquisition of businesses is carried at cost as established at the date of the acquisition of the business
less accumulated impairment losses, if any.
For the purposes of impairment testing, goodwill is allocated to each of the Group’s cash generating units (or groups of
CGUs) that is expected to benefit from the synergies of the combination.
A CGU to which goodwill has been allocated is tested for impairment annually, or more frequently when there is an
indication that the unit may be impaired. If the recoverable amount of the CGU is less than its carrying amount, the
impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the CGU and then to
the other assets of the unit pro rata based on the carrying amount of each asset in the CGU. Any impairment loss for
goodwill is recognised directly in profit or loss. An impairment loss recognised for goodwill is not reversed in subsequent
periods. On disposal of the relevant CGU, the attributable amount of goodwill is included in the determination of the
profit or loss on disposal.
Impairment of subsidiaries accounting policy
Investments in subsidiaries are tested annually for impairment or more frequently if events or changes in circumstances
indicate that the carrying value may not be recoverable. An impairment loss is recognised for the amount by which the
investment's carrying amount exceeds its recoverable amount (which is the higher of fair value less costs to sell and
value in use). At each balance sheet date, the investments in subsidiaries that have been impaired are reviewed for
possible reversal of the impairment.
Balances
Provision for annual leave
Provision for long service leave
Total employee benefits provisions
Due to be settled within 12 months
Due to be settled more than 12 months
Total employee benefits provisions
30 June 2019
$’000
30 June 2018
$’000
2,105
3,279
5,384
4,187
1,197
5,384
2,130
3,211
5,341
3,319
2,022
5,341
Employee benefits accounting policy
Liabilities for salaries, wages and annual leave are recognised in respect of employees’ service up to the reporting date.
Where settlement is expected to occur within twelve months of the reporting date, the liabilities are measured at their
nominal amounts based on the remuneration rates which are expected to be paid when the liability is settled. Where
settlement is expected to occur later than twelve months from reporting date, the liabilities are measured at the present
value of payments which are expected to be paid when the liability is settled.
A liability for long service leave is recognised and measured at the present value of expected future payments to be
made in respect of services provided up to the reporting date. Consideration is given to expected future wage and
salary levels, experience of employee departures and periods of service.
Contributions are made by the Group to employee superannuation funds and are charged as expenses when incurred.
5.4 Share capital
Issued and paid up ordinary shares
Movements in ordinary share capital
Opening balance
Shares issued pursuant to the
– employee share scheme of the Group
– executive long term incentive plan
– dividend reinvestment plan
Closing balance
30 June 2019
$’000
30 June 2018
$’000
148,707
145,380
30 June 2019
30 June 2018
Number of
shares
Amount
$’000
Number of
shares
Amount
$’000
90,308,117
145,380
89,445,395
141,349
15,983
-
81
-
16,727
21,658
82
104
716,445
3,246
824,337
3,845
91,040,545
148,707
90,308,117
145,380
Terms and conditions
Ordinary shares have the right to receive dividends as declared from time to time and, in the event of a winding up of
the Company, to participate in the proceeds from the sale of all surplus assets in proportion to the number of shares
and amounts paid up on the shares held. Ordinary shares entitle their holder to one vote per share, either in person or
by proxy at meetings of the Company.
The Company does not have authorised capital or par value in respect of its issued shares.
The Group offers share based remuneration, refer to note 8.3 and the Remuneration Report for further information
regarding these arrangements.
MyState Limited Annual Report 2019MyState Limited Annual Report 2019Financial ReportAs at 30 June 2019Financial ReportAs at 30 June 2019 80
6.1 Discontinued operations
The net cash flows of the retail financial planning business are as follows:
On 17 June 2019, the Group publicly announced the decision of its Board of Directors to sell its retail financial planning
business, a division of its wholly-owned subsidiary, Tasmanian Perpetual Trustees Limited. The sale was completed on
28 June 2019.
The post-tax gain on disposal of discontinued operations was determined as follows:
Operating
Investing
Total
81
30 June 2019
$’000
30 June 2018
$’000
(535)
3,398
2,863
117
-
117
Cash consideration received
Transfer of employee entitlements
Total consideration received
Net assets disposed of (other than cash):
Intangibles - Goodwill
Transfer of employee entitlements
Costs associated with the sale:
Cost associated with onerous lease contract
Make good requirements
Consulting and sale costs
Redundancies
Gain on disposal of discontinued operation
Less tax expense
Post-tax gain on disposal of discontinued operation
30 June 2019
$’000
30 June 2018
$’000
3,491
(93)
3,398
825
(93)
140
160
599
223
1,544
(332)
1,212
-
-
-
-
-
-
-
-
-
-
-
The retail financial planning business previously formed part of the “Wealth” segment. As the division is now classified
as a discontinued operation, it is no longer presented in the segment note. The results of the division for the year are
presented in the following table:
Write-down of trade receivables
Following the classification of the retail financial planning business as a discontinued operation, the recoverable amount
was estimated for certain trade receivables. An impairment loss was identified of $0.16M, which was recognised in
the carrying amount of the assets in the disposal group and in the Statement of Profit or Loss within Discontinued
Operations.
7.1 Income tax expense, current and deferred tax balances
30 June 2019
$’000
30 June 2018
$’000
The major components of income tax expense / (benefit) are:
Income tax expense
Current income tax charge
Adjustment in respect of current income tax of previous years
Adjustments in respect of deferred income tax of previous years
Adjustments in respect of equity / goodwill
Relating to origination and reversal of temporary differences
Total Income tax expense
A reconciliation between tax expense and accounting profit before
income tax multiplied by the Group’s applicable income tax rate is as
follows:
30 June 2019
$’000
30 June 2018
$’000
Income tax expense attributable to:
Accounting profit before income tax
Revenue from contracts with customers
Expenses
Gain from selling discontinued operation before tax
Profit / (loss) before impairment
Impairment on write down to fair value of assets
Profit / (loss) before tax from discontinued operations
Tax benefit / (expense):
Tax on disposal of discontinued operations
Tax related to operations of the discontinued operations
Tax on remeasurement to fair value
Profit / (loss) for the year from discontinued operations
2,447
(2,291)
1,544
1,700
(160)
1,540
(332)
(47)
48
1,209
2,632
(2,342)
-
290
-
290
-
(87)
-
203
The income tax expense comprises amounts set aside as:
Provision attributable to the current year at the statutory rate of 30%, being:
- Prima facie tax on accounting profit before tax
- Under / (over) provision in prior year
Expenditure not allowable for income tax purposes
Other
Income tax expense reported in the consolidated income statement
Profit before income tax from discontinued operations
Income tax expense related to discontinued operations:
- Tax on disposal of discontinued operations
- Tax related to operations of discontinued operations
- Tax related to fair values less cost to sell
Income tax expense related to discontinued operations
Total income tax expense
Weighted average effective tax rates
12,705
13,665
(139)
(458)
693
372
13,173
58
(37)
-
(158)
13,528
42,620
44,699
12,786
13,410
(24)
80
-
12,842
1,540
332
47
(48)
331
21
27
(17)
13,441
290
-
87
-
87
13,173
29.8%
13,528
30.1%
MyState Limited Annual Report 2019MyState Limited Annual Report 2019Financial ReportAs at 30 June 2019Financial ReportAs at 30 June 2019 82
83
Deferred income tax relates to the following:
30 June 2019
$’000
30 June 2018
$’000
Deferred income tax assets are recognised for all deductible temporary differences, carry forward of unused tax assets
and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible
temporary differences and the carry forward of unused tax assets and unused tax losses can be utilised except:
Deferred tax assets
Employee entitlements
Provisions
Doubtful debts
Other
Total deferred tax assets
Deferred tax liabilities
Financial assets at fair value
Property, plant and equipment
Other
Total deferred tax liabilities
Current tax payable
Total tax liabilities
Movements in deferred tax balances
Opening balance
(Charged) / credited to income statement
Credited/(charged) to equity
Adjustments for deferred tax of prior years
Closing balance
Taxation accounting policy
1,615
266
629
1,623
4,133
68
1,715
584
2,367
844
3,211
1,602
184
108
2,054
3,948
69
1,263
1,026
2,358
2,566
4,924
Deferred tax assets
Deferred tax liabilities
30 June 2019
$’000
30 June 2018
$’000
30 June 2019
$’000
30 June 2018
$’000
3,948
(482)
68
599
4,133
4,718
(262)
84
(592)
3,948
2,358
(110)
-
119
2,367
3,306
(399)
80
(629)
2,358
Income tax expense is recognised in the Consolidated Income Statement, except to the extent that it relates to items
recognised directly in other comprehensive income, in which case it is recognised in the Consolidated Statement of
Comprehensive Income. Income tax expense on the profit or loss of the period comprises current tax and deferred tax.
Current tax payable
Current tax payable is the expected tax payable on the taxable income for the financial year using tax rates that have
been enacted, and any adjustment to tax payable in respect of previous years.
Deferred tax
Deferred income tax is provided on all temporary differences at the reporting date. Temporary differences are calculated
at each reporting date as the difference between the carrying amount of assets and liabilities for financial reporting
purposes and their tax base.
Deferred income tax liabilities are recognised for all taxable temporary differences except:
• Where the deferred income tax liability arises from the initial recognition of goodwill or of an asset or liability in a
transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit
nor taxable profit or loss; and
• When the taxable temporary differences associated with the investments in subsidiaries and the timing of the reversal
of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in
the foreseeable future.
• When the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition
of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affect
neither the accounting profit nor the taxable profit and loss; and
• When the deductible temporary differences are associated with investments in subsidiaries, in which case a deferred
tax asset is only recognised to the extent that it is probable that the temporary differences will reverse in the
foreseeable future and taxable profit will be available against which the temporary differences can be utilised.
Deferred tax assets and deferred tax liabilities are offset only if a legally enforceable right exists to set off current tax
assets against current tax liabilities and the deferred tax assets and liabilities relate to the same taxable entity and the
same taxable authority.
The Group undertakes transactions in the ordinary course of business where the income tax treatment requires the
exercise of judgement. The Group estimates its tax liability based on its understanding of the tax law.
Tax consolidation
The Group has elected to be taxed as a single entity under the tax consolidation regime. The head company is MyState
Limited. The members of the Group have entered into a tax sharing agreement that provides for the allocation of
income tax liabilities among the entities should the head entity default on its tax payment obligations. No amounts have
been recognised in the financial statements in respect of this agreement on the basis that the possibility of default is
remote.
The Company and the controlled entities in the tax consolidated group continue to account for their own current and
deferred tax amounts. The Company has applied the separate tax payer within group approach in determining the
appropriate amount of current taxes and deferred taxes to allocate to members of the tax consolidated group.
In addition to its own current and deferred tax amounts, the Company also recognises the current tax liabilities (or
assets) and the deferred tax assets arising from unused tax losses and unused tax credits assumed from controlled
entities in the tax consolidated group.
Any difference between the amounts assumed and amounts receivable or payable under the tax funding agreement are
recognised as a contribution to (or distribution from) wholly-owned tax consolidated entities.
8.1 Parent entity information
The accounting policies of the parent entity, which have been applied in determining the financial information shown
below, are the same as those applied in the consolidated financial statements. Refer to note 1 and policy notes within
the financial statements for a summary of the significant accounting policies relating to the Group.
Statement of Financial Position
Assets
Cash and liquid assets
Other receivables
Related party receivables
Investments in subsidiaries
Deferred tax assets
Total assets
30 June 2019
$’000
30 June 2018
$’000
193
297
2,393
2,705
176
1,749
256,867
253,674
920
1,312
260,670
259,616
MyState Limited Annual Report 2019MyState Limited Annual Report 2019Financial ReportAs at 30 June 2019Financial ReportAs at 30 June 2019 84
85
Statement of Financial Position
(continued)
30 June 2019
$’000
30 June 2018
$’000
The Company reassesses whether or not it controls an investee if facts and circumstances indicate that there are
changes to one or more of these three elements of control.
Liabilities
Other liabilities
Related party payables
Tax liabilities
Employee benefit provisions
Total liabilities
Net assets
Equity
Share capital
Retained earnings
Reserves
Total equity
Financial performance
Profit after income tax for the year
Other comprehensive income
Total comprehensive income
564
-
630
353
1,547
1,044
36
2,561
283
3,924
259,123
255,692
254,634
251,308
3,849
640
3,901
483
259,123
255,692
25,965
25,785
–
–
25,965
25,785
The parent entity has not entered in to any guarantees and does not have any contingent liabilities as at 30 June 2019
(30 June 2018: nil).
Transactions between the Company and the consolidated entities principally arise from the provision of management
and governance services. All transactions with subsidiaries are in accordance with regulatory requirements, the
majority of which are on commercial terms. All transactions undertaken during the financial year with the consolidated
entities are eliminated in the Consolidated Financial Statements. Amounts due from and due to entities are presented
separately in the Statement of Financial Position of the Company except where offsetting reflects the substance of the
transaction or event.
8.2 Controlled entities and principles of consolidation
Details of the Group’s material subsidiaries at the end of the reporting period are as follows.
Significant subsidiaries
MyState Bank Limited
Tasmanian Perpetual Trustees Limited
Connect Asset Management Pty Ltd
Principal activities
Banking
Wealth Management
Manager of
Securitisation Vehicles
Country of
Incorporation
Ownership
Interest
Australia
Australia
Australia
100%
100%
100%
Basis of consolidation accounting policy
The consolidated financial statements incorporate the financial statements of the Company and entities (including
structured entities) controlled by the Company and its subsidiaries. Control is achieved when the Company:
• Has power over the investee;
• Is exposed, or has rights, to variable returns from its involvement with the investee; and
• Has the ability to use its power to affect its returns.
When the Company has less than a majority of the voting rights of an investee, it has power over the investee when the
voting rights are sufficient to give it the practical ability to direct the relevant activities of the investee unilaterally. The
Company considers all relevant facts and circumstances in assessing whether or not the Company’s voting rights in an
investee are sufficient to give it power, including:
• The size of the Company’s holding of voting rights relative to the size and dispersion of holdings of the other
vote holders;
• Potential voting rights held by the Company, other vote holders or other parties;
• Rights arising from other contractual arrangements; and
• Any additional facts and circumstances that indicate that the Company has, or does not have, the current ability
to direct the relevant activities at the time that decisions need to be made, including voting patterns at previous
shareholders’ meetings.
Consolidation of a subsidiary begins when the Company obtains control over the subsidiary and ceases when the
Company loses control of the subsidiary. Specifically, income and expenses of a subsidiary acquired or disposed of
during the year are included in the Consolidated Income Statement and Other Comprehensive Income from the date
the Company gains control until the date when the Company ceases to control the subsidiary.
Profit or loss and each component of Other Comprehensive Income are attributed to the owners of the Company and
to the non-controlling interests. Total comprehensive income of subsidiaries is attributed to the owners of the Company
and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.
When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies in
line with the Group’s accounting policies.
All intragroup assets and liabilities, equity, income, expenses and cash flows relating to transactions between members
of the Group are eliminated in full on consolidation.
8.3 Related party disclosures
The ultimate parent entity and controlling entity is MyState Limited. Balances and transactions between the Company
and its subsidiaries, which are related parties of the Company, have been eliminated on consolidation and are not
disclosed in this note. Details of transactions between the Group and other related parties are disclosed in the following
paragraphs.
Managed Investment Schemes
Within the Group, Tasmanian Perpetual Trustees Limited (TPT) is a Responsible Entity for Managed Investment Schemes
(Funds) and, accordingly, has significant influence over their activities. TPT receives management fees from these Funds.
TPT also pays expenses of the Funds for which it is reimbursed. TPT and the Company have also invested in these Funds
and receive distributions on these investments. These investments are made on the same terms and conditions that
apply to all investors in these Funds. Details of these transactions and balances are as follows:
Management fees received
Balance of investment held at year end
Distributions received from managed funds
Consolidated
TPT
30 June 2019
$’000
30 June 2018
$’000
30 June 2019
$’000
30 June 2018
$’000
10,242
10,802
289
10,122
10,242
10,122
9,867
205
8,499
217
5,120
152
MyState Limited Annual Report 2019MyState Limited Annual Report 2019Financial ReportAs at 30 June 2019Financial ReportAs at 30 June 2019 86
87
The Funds have:
• Accepted money on deposit from Directors and Executives or entities associated with Directors and Executives at
prevailing Fund rates and conditions;
• Loaned money to MyState Bank, in the form of term deposits, totalling $17.75 million (2018: $20.25 million); and
Other operating leases have an average term of 3 to 5 years for property and are non-cancellable. Assets that are the
subject of operating leases are computer equipment and property.
MSB has provided guarantees to third-parties in order to secure the obligations of customers. The range of situations in
which guarantees are given include:
• Local Government Authorities, to secure the obligations of property and sub-divisional developers to complete
• Invested in the ConQuest Trusts Residential Mortgage Backed Securities Program in the form of Class A and B notes
infrastructure developments;
totalling $57.77 million (2018: $33.16 million).
These deposits are made on the same terms and conditions that apply to all similar transactions.
to complete building works;
• Local Government Authorities, Schools and other building owners, to secure the obligations of building contractors
Key Management Personnel
• Landlords, to secure the obligations of tenants to pay rent; and
Individual Directors and Executive compensation disclosures
Information regarding individual Directors, Executive compensation, and equity instruments disclosures, as required
by the Corporations Regulation 2M.2.03, is provided in the Remuneration Report section of the Directors’ report.
Disclosure of the compensation and other transactions with key management personnel (KMP) is required pursuant
to the requirements of Australian Accounting Standard AASB 124 Related Party Disclosures. The KMP of the Group is
comprised of the Non Executive Directors, Managing Director and Chief Executive Officer and certain Executives.
Key management personnel compensation
The key management personnel compensation comprised:
Short-term employee benefits
Post employment benefits
Share-Based payment (i)
Termination benefits
30 June 2019
$’000
30 June 2018
$’000
3,734
4,025
314
147
-
342
162
195
(i) These amounts are estimates of compensation and include a portion that will only vest to the Managing Director or Executive when certain
performance criteria are met or a ‘Capital Event’ occurs. The fair value of shares is calculated at the date of grant and is allocated to each
reporting period over the period from grant date to vesting date. The value disclosed is the portion of the fair value of the shares allocated to
this reporting period.
9.1 Contingent liabilities and expenditure commitments
Operating lease expenditure commitments
not later than 1 year
later than 1 and not later than 5 years
later than 5 years
Total lease expenditure contracted for at balance date
30 June 2019
$’000
30 June 2018
$’000
3,767
10,024
4,900
18,691
3,793
10,973
8,423
23,189
The Group occupies a number of properties which house its branch network. The leases for these properties are on
normal commercial terms and conditions. The usual initial term for these leases is five years.
In the 2012 period, MyState Bank Limited (MSB) commenced leasing its Headquarters building located in Hobart. The
term of the lease is fifteen years, with an option for a further ten year term. Rental increases over the term of the lease are
determined by reference to movements in the consumer price index. In the 2015 period, the Group also entered into a
lease of a property situated in Launceston, which is principally used to house elements of the Tasmanian Perpetual Trustees
Limited (TPT) business. The term of the lease is five years, with an option for two further five year terms. Rental increases
over the term of the lease are determined by reference to movements in the consumer price index. If the options for
further terms are exercised, the rental is to be determined by market appraisal at that time.
• CUSCAL, to secure payroll and direct debit payments processed by CUSCAL on behalf of customers.
Customer commitments
Loans approved but not advanced to borrowers
Undrawn continuing lines of credit
Performance guarantees
Total customer commitments
50,529
59,092
3,378
76,319
63,658
2,947
112,999
142,924
Guarantees are issued in accordance with approved Board policy. Those guarantees over $10,000 are required to be
secured. In the event that a payment is made under a guarantee, the customer’s obligation to MSB is crystallised in the
form of an overdraft or loan.
Bank Guarantee
1,000
1,000
The Group is a non-broker participant in the Clearing House Electronic Sub Register System operated by the Australian
Securities Exchange and has provided a guarantee and indemnity for the settlement account from Bendigo and
Adelaide Bank Limited (BABL). The Group maintains a deposit with BABL for $1,000,000 (2018: $1,000,000) as collateral
for the guarantee.
Estate Administration
The Group acts as executor and trustee for a significant number of trusts and estates. In this capacity, the Group has
incurred liabilities for which it has a right of indemnity out of the assets of those trusts and estates. Accordingly, these
liabilities are not reflected in the financial statements.
Other contracted commitments for expenditure on plant and equipment as at the reporting date are for only
minimal amounts.
MyState Limited Annual Report 2019MyState Limited Annual Report 2019Financial ReportAs at 30 June 2019Financial ReportAs at 30 June 2019 88
89
9.2 Remuneration of auditors
• AASB 2018-1 Amendments to Australian Accounting Standards – Annual Improvements 2015-2017 Cycles.
During the financial year, the following fees were paid or payable for services provided by the auditor of the Group,
Wise Lord & Ferguson:
• AASB 2018-2 Amendments to Australian Accounting Standards – Plan Amendment, Curtailment or Settlement.
30 June 2019
$’000
30 June 2018
$’000
• AASB 2018-3 Amendments to Australian Accounting Standards – Reduced Disclosure Requirements.
The adoption of the following new standards has impacted the financial statements this financial year:
Audit services
Audit of the financial statements of the consolidated entities
Total remuneration for audit services
Audit related services
Assurance related services
Audit of loans and other services to the securitisation program
Total remuneration for audit related services
Other non-external audit related services
Other services
Total remuneration for non-audit related services
Total remuneration for services provided
9.3 Events subsequent to balance date
382
382
46
12
58
33
33
473
380
380
45
21
66
51
51
497
There were no matters or circumstances that have arisen since the end of the year which significantly affected or may
significantly affect the operations of the Group, the results of those operations, or the state of affairs of the Group in
future financial periods.
9.4 Other significant accounting policies, new accounting standards and disclosures
The principal accounting policies, which are consistent with those applied in the comparative period unless otherwise
stated, that have been adopted in the preparation of the financial report are set out in this section and the preceding
sections.
(i) Other assets
Other assets comprise accounts receivable, accrued income and prepayments. Accounts receivable are initially recorded
at the fair value of the amounts to be received and are subsequently measured at amortised cost using the effective
interest rate method, less any provision for impairment loss.
(ii) Other liabilities
Other liabilities comprise accounts payable and accrued expenses and represent liabilities for goods and services
received by the Group that remain unpaid at the end of the reporting period. The balance is recognised as a current
liability with the amounts normally paid within 30 days of the recognition of the liability.
(iii) New and revised accounting standards
The Group has adopted the following new standards and amendments to standards, including any consequential
amendments to other standards, with a date of initial application for reporting periods beginning on or after
1 July 2018 that have been issued by the Australian Accounting Standards Board (AASB). The adoption of these
accounting standards has not resulted in any impacts to the financial statements:
• AASB 2014-10 Amendments to Australian Accounting Standards - Sale or Contribution of Assets between an Investor
and its Associate or Joint Venture.
• AASB 2017-6 Amendments to Australian Accounting Standards – Prepayment Features with Negative Compensation.
• AASB 2017-7 Amendments to Australian Accounting Standards – Long-term Interests in Associates and
Joint Ventures.
(a) AASB 9 Financial Instruments
In December 2014, the AASB issued AASB 9 Financial Instruments which replaces AASB 139 Financial Instruments:
Recognition and Measurement. The standard covers four broad topics: Impairment, Classification, Measurement and
Hedging. AASB 9 Financial Instruments was effective for periods beginning on or after 1 January 2018. The standard
introduced changes in the classification and measurement of financial assets and liabilities and simplifications to hedge
accounting, all of which the Group early adopted in 2014. Additionally, AASB 9 included a new Expected Credit Loss
(ECL) model for impairment. The Group implemented the ECL model for impairment on 1 July 2018 as outlined further
within this note.
Impairment
The Group has developed a AASB 9 Expected Credit Loss model, which replaces the previous incurred loss approach
under AASB 139. Refer to note 4.3 for the new accounting policy. The impact upon adoption on 1 July 2018 is as follows.
Transition to ECL Model pre-tax
The impairment requirements have been applied prospectively from 1 July 2018 by adjusting opening retained earnings
at that date. The Group has elected not to restate prior period comparative balances on adoption of the new standard.
Impact
The following table provides a pre-tax breakdown of the transition to AASB 9 ECL model from AASB 139 as at 1 July 2018:
Collective Provisions
Specific Provisions
Total Provisions
AASB 139
$' 000
359
222
581
AASB 9
$' 000
2,271
222
2,493
Movement
$' 000
1,912
-
1,912
The Group’s opening balance sheet adjustment, based on the economic conditions, forecast economic scenarios,
management judgements and assumptions as at 1 July 2018, was an increase in impairment provisions of $1.912m
before tax, with a corresponding decrease in shareholders’ equity of $1.338m after tax.
The increase in the provision for doubtful debts on adoption of the standard has been taken through opening retained
earnings as at 1 July 2018, with no impact on the income statement. The impact on the Group’s Common Equity Tier 1
capital adequacy ratio (CET1 ratio ) on the date of adoption was a reduction of 12bps.
Governance
The Asset and Liability Committee (ALCO) is responsible for reviewing and approving forecast economic scenarios and
the associated probability weights applied to each scenario.
The Risk and Credit Committee (RCC) is responsible for recommending any adjustments required to account for
situations where known or expected risks have not been adequately addressed in the modelling process.
The Group’s provision for impairment, impairment on loans and advances and any areas of judgement are reported to
the Group’s Audit Committee (GAC) and Board at each reporting period.
(b) AASB 15 Revenue from Contracts with Customers
AASB 15 Revenue from Contracts with Customers replaces AASB 118 Revenue and is effective for periods beginning
on 1 July 2018. The core principle of AASB 15 is that an entity recognises revenue based on the transfer of promised
goods or services to customers for an amount that reflects the consideration to which the entity expects to be entitled in
MyState Limited Annual Report 2019MyState Limited Annual Report 2019Financial ReportAs at 30 June 2019Financial ReportAs at 30 June 2019 90
91
exchange for those goods or services. The model in AASB 15 features a contract based five-step analysis of transactions,
to determine whether, how much and when revenue is recognised.
The adoption of the new revenue methodology has resulted in no change to the timing of recognition of income. The
only adjustment to Group reported revenue is where the Group acts as principal in a settlement arrangement. In these
circumstances, the income and expense is required to be shown net. Previously, the Group had certain interchange
income and expense that was reported gross, but now, this interchange income and expense has been netted and the
comparative restated accordingly.
Directors’
Declaration
In accordance with a resolution of the Directors of MyState Limited, we state that:
The Group has not had an opening balance sheet adjustment.
1. In the opinion of the Directors:
The following accounting standards will impact the financial statements in future financial years:
(a) The financial statements and notes of the Group set out on pages 51-90 are in accordance with the Corporations
(c) AASB 16 Leases
AASB 16 Leases replaces AASB 117 Leases and is effective for periods beginning on or after 1 January 2019.
MyState Limited will adopt this standard on 1 July 2019.
AASB 16 requires lessees to recognise most leases on balance sheet as lease liabilities at the present value of future
lease payments with a corresponding right-of-use assets which will be reduced via depreciation over the lease term.
Lessees must apply a single model for all recognised leases, but will have the option not to recognise ‘short-term’ leases
and leases of ‘low-value’ assets. The accounting for Lessors is largely unchanged.
The Group has assessed the impact of this standard on its operating leases (the Group does not have finance leases
currently) and has determined that the impact on the timing of expenses related to leases will not differ materially
as a result of adoption. The classification of that expense will be disclosed as depreciation expense, in relation to
extinguishing the right-of-use-asset, and financing expense, in relation to the implied interest costs used in the valuation
of the lease liability used in the valuation of the lease liability. As a result of this reclassification, the Group's “Lease
expense” will reduce.
The Group will adopt the standard on 1 July 2019 and at this date will raise a right-of-use asset at a value equivalent to the
lease asset. Comparatives will not be restated. On adoption the Group anticipates that the value of the right-of-use asset
and corresponding liability of approximately $12.8M will be recognised on balance sheet in relation to the in-scope leases.
(iv) Changes in accounting policy and disclosure
The Group has adopted two changes to accounting policies in the current reporting period. These changes have been
applied retrospectively in the financial statements. Where comparative information has been amended, references has
been made back to this note.
1. Inclusion of Bond Issuance costs in the effective interest rate
Costs that are integral to the issuance of bonds have been capitalised in accordance with AASB 9 and amortised over
the expected life of the issued bonds. The written down value of these costs had previously been recognised within
“Intangible assets and goodwill”, with the amortisation associated previously disclosed within “Administration costs”
as “Amortisation - other intangibles”. In the current reporting period, this policy has been changed. The costs continue
to be capitalised in accordance with AASB 9 and amortised over the expected life of the issued bonds, however, the
unamortised balance of these costs is now included in “Deposits and other borrowings including subordinated notes”
and the expense is included in “Interest expense”, to reflect the average effective interest rate calculation of the
bonds issued. The value of unamortised bond issuance costs at 30 June 2019 is $3.637m (30 June 2018: $5.026m).
Amortisation expense related to bond issuance costs at 30 June 2019 is $1.697m (30 June 2018: $1.318m).
2. Inclusion of Mortgage Offset Accounts in the calculation of average interest earned on assets
The balance of Mortgage Offset accounts is included within “Deposits and other borrowings including subordinated
notes” on the Consolidated Statement of Financial Position, which is unchanged. In Note 3.3 “Average balance sheet
and source of net interest income”, offset accounts had previously been reported in the liabilities total “Deposits
and derivatives”. As these balances represent a proportion of Loans and advances that are non-interest earning, this
disclosure has changed and offset accounts are now netted off against the balance of “Loans and advances” to reflect
the interest earning balances more accurately. The quantitative impact of this change is disclosed in the Note 3.3.
Act 2001, including:
(i) Giving a true and fair view of the Group’s financial position as at 30 June 2019 and of its performance for the
year ended on that date; and
(ii) Complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional
reporting requirements; and
(b) There are reasonable grounds to believe that MyState Limited will be able to pay its debts as and when they
become due and payable.
2. The Directors have been given the declarations required by Section 295A of the Corporations Act 2001 by the
Chief Executive Officer and Chief Financial Officer for the financial year ended 30 June 2019.
3. The financial statements and notes also comply with International Financial Reporting Standards as disclosed in note 1.2.
This declaration is made in accordance with a resolution of the Directors.
On behalf of the Board
Miles Hampton
Chairman
Hobart, dated 23 August 2019
Melos Sulicich
Managing Director and Chief Executive Officer
MyState Limited Annual Report 2019MyState Limited Annual Report 2019Financial ReportAs at 30 June 2019Financial ReportAs at 30 June 2019
92 Financial Report
As at 30 June 2019
93
Independent
Auditor’s Report
Independent Auditor’s Report
To the Shareholders of MyState Limited
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of MyState Limited (the Company) and its subsidiaries (the Group), which
comprises the consolidated statement of financial position as at 30 June 2019, the consolidated income
statement, the consolidated statement of comprehensive income, the consolidated statement of changes in
equity and the consolidated statement of cash flows for the year then ended, notes comprising a summary of
significant accounting policies and other explanatory information and the Directors’ declaration of the Company.
In our opinion the accompanying financial report of the Group is in accordance with the Corporations Act 2001,
including:
I.
giving a true and fair view of the Group’s financial position as at 30 June 2019 and of its financial
performance for the year then ended; and
II.
complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those
standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our
report. We are independent of the Group in accordance with the auditor independence requirements of the
Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards
Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the
financial report in Australia; and we have fulfilled our other ethical responsibilities in accordance with the Code.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit
of the financial report of the current period. These matters were addressed in the context of our audit of the
financial report and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
For each matter below, our description of how our audit addressed the matter is provided in that context.
We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of the Financial
Report section of our report, including in relation to these matters. Accordingly, our audit included the
performance of procedures designed to respond to our assessment of the risks of material misstatement of the
financial statements. The results of our audit procedures, including the procedures performed to address the
matters below, provide the basis for our audit opinion on the accompanying Financial Report.
Liability limited by a scheme approved under Professional Standards Legislation.
1st Floor 160 Collins Street, Hobart TAS 7000
GPO Box 1083 Hobart TAS 7000
03 6223 6155
Move Forward
email@wlf.com.au
www.wlf.com.au
1. Operation of IT systems and Controls
Key audit matter
How our audit addressed the matter
A significant part of the Group’s financial reporting
process
IT systems with
automated processes and controls for the capture,
processing, storage and extraction of information.
is heavily reliant on
An essential part of IT system is ensuring appropriate
user access and change management protocols exist
and are being observed. These protocols are
important because they ensure that access and
changes to IT systems and related data are made and
authorised in an appropriate manner.
These key controls mitigate potential fraud or error
because of change to an application or underlying
data.
MyState has outsourced arrangements for a number
of key IT processes.
We focus our audit on those IT systems and controls that are
significant to the Group’s financial reporting process.
tested
We assessed and
the design and operating
effectiveness of the Group’s IT controls, including those over
user access and change management as well as data
reliability.
This involved assessing:
•
•
•
•
for software
Technology control environment and governance;
Change management processes
applications;
Access controls designed to enforce segregation of
duties;
System development, reviewing the appropriateness
of managements
implementation
controls;
testing and
• We carried out direct tests of the operation of key
programs to establish the accuracy of calculations,
the correct generation of reports, and to assess the
correct operation of automated controls and
technology-dependent manual controls; and
Third party reports on IT systems and controls.
•
For outsourced providers, we obtain assurance from third
party auditors on the design and operating effectiveness of
controls.
2. Recognition and Measurement – Intangible Assets
Refer to Note 5.2 ‘Intangible assets and goodwill’
Key audit matter
How our audit addressed the matter
The Group is in the process of enhancing its IT
systems. During the financial year, a number of
strategic transformative projects were developed and
implemented. New systems were
researched,
designed, projects commenced and completed.
This increased the amount of costs capitalised as
intangible assets in relation to significant projects.
The recognition and measurement of these costs
requires
internally
generated intangible assets as to when the costs
incurred on projects transition from research to
development.
judgement, particularly
for
To address the risk of material misstatement and obtain
sufficient audit evidence, we performed the
following
procedures over intangible assets:
• We evaluated and tested the Group’s processes for
recognising intangible assets;
• We reviewed amounts capitalised for significant
projects currently being completed by the group.
This included a retrospective assessment of amounts
capitalised in early stages of significant projects;
• We reviewed the Group’s processes for considering
the completion of projects and commencement of
amortisation; and
• We ensured
intangible assets made redundant
through new projects were written off.
MyState Limited Annual Report 2019Financial ReportAs at 30 June 2019 94
95
3. Provision for Doubtful Debts
Refer to Note 4.3 ‘Loans and advances’
Why significant
How our audit addressed the matter
The provision for doubtful debts is determined in
accordance with the requirements of AASB 9 Financial
Instruments. We focus on this area because of the
significant judgement involved in determining the
provision
for
impairment of loans that exceed specific thresholds
are
individually assessed by management with
reference to future cash repayments and proceeds
from the realisation of security.
for doubtful debts. Provision
Other loans that do not have an individually assessed
provision are assessed on a portfolio basis with loans
with similar risk characteristics.
Key areas of judgement included:
•
•
The design of the economic credit loss model
used;
The selection of assumptions adopted such
as the probability of default, loss given
default, exposure at default and forward
looking information.
Other Information
To address the risk of material misstatement and obtain
sufficient audit evidence, we performed the
following
procedures over the provisions for doubtful debts:
•
•
•
•
•
•
Assessed the governance oversight;
Reviewed and tested the calculation of the expected
credit loss model, including the specific provision and
collective provision for impairment;
Ensured the methodology for write off of debt was
consistent with prior periods;
Tested the accuracy of the data used to calculate the
provision;
Reviewed a sample of current arrears balances and
reviewed follow up procedures, including whether
specific
in arrears had been
financial assets
appropriately provided; and
Reviewed management assessments for provision for
loans that exceed specific thresholds.
The Directors are responsible for the other information. The other information comprises the information
included in the Group’s annual report for the year ended 30 June 2019, but does not include the financial report
and our auditor’s report thereon.
Our opinion on the financial report does not cover the other information and accordingly we do not express any
form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information and, in
doing so, consider whether the other information is materially inconsistent with the financial report or our
knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have
performed, we conclude that there is a material misstatement of this other information, we are required to
report that fact. We have nothing to report in this regard.
Responsibilities of the Directors for the Financial Report
The Directors of the Company are responsible for the preparation of the financial report that gives a true and
fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal
control as the Directors determine is necessary to enable the preparation of the financial report that gives a true
and fair view and is free from material misstatement, whether due to fraud or error.
In preparing the financial report, the Directors are responsible for assessing the ability of the Group to continue
as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis
of accounting unless the Directors either intend to liquidate the Group or to cease operations, or has no realistic
alternative but to do so.
Auditor’s Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from
material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance
with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements
can arise from fraud or error and are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on the basis of this financial report.
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgement
and maintain professional scepticism throughout the audit. We also:
•
Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error,
design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient
and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement
resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery,
intentional omissions, misrepresentations, or the override of internal control.
•
•
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness
of the Group’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates
and related disclosures made by the Directors.
Conclude on the appropriateness of the Directors’ use of the going concern basis of accounting and, based
on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that
may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a
material uncertainty exists, we are required to draw attention in our auditor’s report to the related
disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our
conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However,
future events or conditions may cause the Group to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial report, including the disclosures,
and whether the financial report represents the underlying transactions and events in a manner that
achieves fair presentation.
•
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business
activities within the Group to express an opinion on the financial report. We are responsible for the
direction, supervision and performance of the Group audit. We remain solely responsible for our audit
opinion.
We communicate with the Directors regarding, among other matters, the planned scope and timing of the audit
and significant audit findings, including any significant deficiencies in internal control that we identify during our
audit.
We also provide the Directors with a statement that we have complied with relevant ethical requirements
regarding independence, and to communicate with them all relationships and other matters that may
reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with the Directors, we determine those matters that were of most significance
in the audit of the financial report of the current period and are therefore the key audit matters. We describe
these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or
when, in extremely rare circumstances, we determine that a matter should not be communicated in our report
because the adverse consequences of doing so would reasonably be expected to outweigh the public interest
benefits of such communication.
MyState Limited Annual Report 2019MyState Limited Annual Report 2019Financial ReportAs at 30 June 2019Financial ReportAs at 30 June 2019 96
97
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages xx to xx of the Directors’ report for the year
ended 30 June 2019.
36 to 47
In our opinion, the Remuneration Report of MyState Limited, for the year ended 30 June 2019 complies with
section 300A of the Corporations Act 2001.
Responsibilities
The Directors of the Company are responsible for the preparation and presentation of the Remuneration Report
in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on
the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.
JOANNE DOYLE
Partner
Wise Lord & Ferguson
Chartered Accountants
Date: 23 August 2019
Information relating
to shareholders
Range of Units (Snapshot) as at 23 August 2019
Range
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 Over
Rounding
Total
Unmarketable Parcels
Minimum $500.00 parcel at $4.70 per unit
Top Holders (Snapshot) as at 23 August 2019
Rank Name
Total holders
Units
% of Issued
Capital
57,346
23,088,272
3,164
1,145
965
44
8,593,580
8,584,856
21,960,902
28,812,935
25.36
9.44
9.43
24.12
31.65
0.00
62,664
91,040,545
100.00
Minimum
Parcel Size
Holders
107
359
Units
12473
1.
2.
3.
4.
5.
6.
7.
8.
9.
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
CITICORP NOMINEES PTY LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
NATIONAL NOMINEES LIMITED
SELECT MANAGED FUNDS LTD
NEALE EDWARDS PTY LTD
MR BRIAN DAVID FAULKNER
BEECHWORTH HOLDINGS PTY LTD
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