More annual reports from MyState Limited:
2023 ReportAnnual Report
2020
Contents
Highlights of the Year
Group Performance
Chairman’s Report
02
03
04
Managing Director’s Report 06
Our Strategy
Risk Management
MyState Bank
TPT Wealth
Our Culture
Our Community
Board of Directors
10
12
14
16
17
18
20
Key Management Personnel 22
Directors’ Report
Financial Report
24
47
MyState Limited | ABN 26 133 623 962
Annual General Meeting
Virtual (online) AGM – Wednesday 21 October 2020 at 10.30am (AEDST)
Due to the continuing uncertainty created by the COVID-19 pandemic, the Board
has determined to hold an online Annual General Meeting (AGM) this year. This
approach will provide a safe environment for shareholders attending the meeting.
In response to COVID-19 the Australian Government has made temporary
amendments to the Corporations Act 2001. These amendments allow notices of
meeting and other information regarding the AGM to be provided to shareholders
and also released to the ASX where it can be viewed and downloaded.
This year our Notice of AGM will be published online at mystatelimited.com.au
and released to the ASX on Friday 18 September 2020.
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 at mystatelimited.com.au
Our purpose is to help
people achieve their dreams.
Our customer charter
We’re committed to:
• Earning your trust and keeping it
• Being genuinely interested in what you want
• Making things easier for you
• Telling you things straight up; no jargon
• Helping you make the right choices for you and your money
• Putting things right if they go wrong
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.
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 2020 | 01
Highlights
of the Year
+12.9%
Core earnings(1)
+7.6%
customer
deposits
+1.0%
net profit after tax:
$30.1m (continuing
operations basis)(2)
+5.1%
home loan
growth
-1.95%
cost-to-income
ratio
+48
consistent market leading
customer NPS
1) Defined as pre-provision operating profit before tax
2) Including impairment expense of $4.9m
02 | MyState Limited Annual Report 2020
Group
Performance
NPAT
($million)
Earnings per share
(cents)
Dividends – fully franked
per share (cents)
1
.
1
3
1
.
0
3
5
.
1
3
0
.
1
3
1
.
0
3
5
.
5
3
0
.
4
3
0
.
5
3
2
.
4
3
9
.
2
3
0
.
4
1
0
.
4
1
5
2
.
4
1
5
2
.
4
1
2nd half
5
.
4
1
5
.
4
1
5
.
4
1
5
.
4
1
5
.
4
1
1st half
6
1
0
2
7
1
0
2
8
1
0
2
9
1
0
2
0
2
0
2
6
1
0
2
7
1
0
2
8
1
0
2
9
1
0
2
0
2
0
2
6
1
0
2
7
1
0
2
8
1
0
2
9
1
0
2
0
2
0
2
Return on average
equity (%)
Cost-to-income
ratio (%)
Net interest income
($ million)
6
.
0
1
0
.
0
1
1
.
0
1
7
.
9
2
.
9
9
.
5
6
2
.
3
6
7
.
2
6
8
.
4
6
8
.
2
6
5
.
9
9
9
.
8
8
1
.
8
8
5
.
9
8
4
.
9
8
6
1
0
2
7
1
0
2
8
1
0
2
9
1
0
2
0
2
0
2
6
1
0
2
7
1
0
2
8
1
0
2
9
1
0
2
0
2
0
2
6
1
0
2
7
1
0
2
8
1
0
2
9
1
0
2
0
2
0
2
MyState Limited Annual Report 2020 | 03
Chairman’s Report
The operating result for the year to 30 June 2020 was very pleasing under
the circumstances, with COVID-19 presenting significant challenges to our
customers, the MyState team and the banking sector in general.
Operating performance
Statutory net profit after tax fell from
$31 million to $30 million, after taking
into account an increase in impairment
charges of $4.9 million, principally
related to COVID-19. On a like-for-like
basis, however, net profit after tax
was up 1.0%, as last year’s net profit
included a one-off gain of $1.2 million
on the sale of our retail financial
planning business.
Core earnings, as measured by net
operating profit before impairment
charges and tax, increased 12.9% to
$47.9 million, a very pleasing result,
reflecting the significant improvement
in business operations and investment
in technology that have been
undertaken over the past few years.
The Group cost-to-income ratio fell
from 64.8% to 62.8%.
The MyState Bank loan book increased
$237 million, or 4.7%, to $5.3 billion.
Pleasingly the customer deposit book
increased by $280 million with the
customer deposit ratio sitting at 69.1% at
year’s end.
At TPT Wealth, Funds Under
Management fell $101 million to
$1.07 billion, reflecting a combination
of the COVID-19-related market
correction and a decline in investor
sentiment in the last quarter of the
year. Funds Under Advice decreased
$56 million to $402 million.
Impairment charges
Whilst there was a slight uptick in arrears,
the substantially higher impairment
charges principally represent provisions
for our current estimate of possible
losses relating to the impact of
COVID-19 on our customers.
In determining the level of provisioning
required, we have undertaken scenario
modelling with the key assumptions
being the effect of the economic
downturn on house prices and
unemployment. These provisions may
have to be adjusted up or down as new
information becomes available.
COVID-19
The operational pressures placed on
the business as a consequence of
COVID-19 have been very significant.
Our management team has responded
to the challenge with a focus on the
safety of staff and customers whilst
seeking to maintain the momentum in
our business that we have worked so
hard to build over recent years.
We intend to apply the learnings from
this enforced new business model in
how we do business going forward.
The impact of COVID-19 over the
medium term is difficult to predict
with certainty.
But what I can say is that our team
are committed to delivering on our
customer promise of making financial
services simple and trustworthy, whilst
continuing to deliver ongoing growth
and improved shareholder returns.
Dividend and capital
The capital adequacy ratio increased
from 12.9% to 13.0%, well above
both internal benchmarks and
regulatory requirements.
Nonetheless, the Board has
determined that no final dividend will
be paid in respect of the financial year
ended 30 June 2020. This decision was
not taken lightly as we fully understand
that many shareholders rely on
dividends to fund living expenses.
Miles Hampton
Chairman
$280m
increase in customer
deposits
+12.9%
increase in core
earnings
04 | MyState Limited Annual Report 2020
Our focus has been on transitioning to a digital
bank and wealth management group
The Board came to a clear view that we
had to maintain a very strong capital
position given the challenges and
uncertainties we are facing.
and capital strength, but reflect our
recognition of the hardships that many
of our customers and shareholders will
be experiencing.
We could have paid a dividend and
undertaken a capital raise at the same
time, as some other banks have done.
However our judgement was that the
interests of our shareholders were best
served by not paying a final dividend,
noting that the interim dividend paid in
March 2020 meant the overall dividend
payout for FY20 was 43%.
The Board expects that, barring
unforeseen circumstances, we will pay
a dividend for the half year ending
31 December 2020.
In light of the present circumstances,
the Board has resolved to modify our
dividend policy such that for the time
being we will be targeting a payout
ratio in the range 60-80%.
Previously we had been targeting a
payout ratio in the range 70-90% and
our average dividend ratio over the
past four years has been 85%.
Director fees and
Executive incentives
The Board determined that
Non-Executive Directors’ fees be
reduced by 20% for a six-month period
commencing in May 2020.
Further, the Executive team have
elected to forego any short-term
incentives for the FY20 financial
year. Additionally, there will be no
fixed remuneration increases for
management in 2020.
These initiatives of themselves do not
have a material effect on profitability
Strategic focus
Our overall focus has been on
transitioning to a digital bank and
wealth management business.
It is pleasing to see the investment of
prior years delivering improvements in
terms of customer growth, customer
deposits, customer satisfaction
measures and core earnings. Whilst
the transformation of TPT Wealth
commenced later than MyState Bank,
the initial results are encouraging with
early investor feedback being positive.
We have set some very ambitious
targets for customer growth as we
go forward and we are confident that
achievement of these targets will
deliver further improvement across a
range of key performance measures.
Executive leadership
In January 2020, we announced that
Managing Director & Chief Executive
Officer Melos Sulicich would be
stepping down in June 2020 having led
the Group since 2014.
In March 2020, we were well advanced
in the process to appoint a successor
when the impact of COVID-19 on the
economy and in particular the banking
sector became clearer.
The uncertainties we were facing were
significant and the Board came to
the view that continuity and proven
leadership were needed to guide us
through what would undoubtedly be a
very difficult period.
The Board were very pleased that
Melos Sulicich agreed to defer his
resignation. He will continue as
Managing Director & Chief Executive
Officer until at least September 2021.
Board changes
In November 2019, Non-Executive
Director Stephen Lonie passed away
after a brief illness.
Stephen joined the MyState Board
in 2011 following the acquisition
of the Rock Building Society Ltd in
Queensland. His contribution to
MyState was invaluable and he will
be greatly missed. We extend our
sympathy to his wife Jenny and family.
Acknowledgement
I acknowledge the efforts of all in the
MyState team. Their commitment
to delivering outstanding customer
service in what have been very
challenging circumstances has been
particularly pleasing.
I also acknowledge the effort of
our Executive who have dealt with
a whole range of COVID-19-related
impacts whilst continuing to focus on
our strategic intent to be a nimble
digital bank and a revitalised wealth
management business.
Finally I would like to acknowledge the
contribution and support of my fellow
Board members during what has been
an extremely demanding period.
Miles Hampton
Chairman
MyState Limited Annual Report 2020 | 05
Managing Director’s Report
The year in review has been like no other in our history. It has been a challenging
year of slow economic growth, increased competition and regulatory change – not
to mention the difficulty posed by a vicious bushfire season and finally a global
pandemic, the likes of which none of us have seen in our lives.
Melos Sulicich
Melos Sulicich
Managing Director and
Managing Director and
Chief Executive Officer
Chief Executive Officer
With all of these external issues going
on around us, we continued our focus
on improving our capability and
culture, on simplifying, modernising
and digitising the business, and on our
balance sheet strength. In doing this,
we significantly reduced the cost and
risk of operating despite the strong
headwinds facing the sector.
We are continuing to simplify,
automate, digitise and modernise our
operations so we attract customers
looking for a contemporary way to
bank, assist them to buy a house or car
or grow their wealth.
At the core of our strategy is a focus
on our customers’ evolving interests
and needs. The digitisation of our
operations has been designed with the
customer front-and-centre. Our goal
has been to create a banking, lending
and wealth management business that
our customers find relevant, and our
high +48 net promoter score, which
measures customer advocacy, shows
we are succeeding.
The success of our digital
transformation is also reflected in how
our customers are interacting with
our services. Two-thirds of customers
are now transacting online or via our
mobile app and more are choosing to
receive bank statements electronically
rather than in the mail. More customers
are coming to us via digital means,
with an increase of over 170% in online
customer acquisition compared with
the previous year.
With the launch of our artificial
intelligence (AI) powered everyday
banking features that enable
customers to understand and manage
their financial affairs more efficiently,
together with the introduction of
robotic technology, our digital
investments are paving the way for
further growth.
Financial overview
Despite the challenging environment,
we are very pleased with the 12.9%
increase in MyState’s core operating
profit before provisions and tax. This
reflects the success of our strategy
which is helping us to build a strong
national business.
The $4.9 million provision for credit
losses is reflective of the challenges
faced by our customers as a result of
the COVID-19 pandemic. There are
still considerable uncertainties before
us, with a very difficult economic
+170%
online customer
acquisition
$3.9b
deposit portfolio, an
increase of 7.6% from
last year
$5.1b
home loan portfolio, up
5.1% from last year
06 | MyState Limited Annual Report 2020
The latest in personalised
banking offers customers
insights and advice to help them
manage their spending, save
more and reduce debt
environment, and unemployment
expected to rise as we come to terms
with the first recession we have had
in decades.
Our strong result was underpinned
by growth in customer deposits and
our loan book, which enabled us
to increase our Net Interest Margin
to 1.86%. In part, this has led to a
reduction of 195 basis points in our
cost-to-income ratio to 62.8%, despite
increased spending on marketing and
digital transformation.
Total operating income was
$128.9 million, up 7% on the previous
year, with net interest income up
11.3% to $99.5 million, benefiting from
balance sheet growth, disciplined
margin management, a significant
increase in retail deposits and lower
wholesale funding costs.
The return on average equity was
9.2% after provisions. While this was
down on the previous year, it remains
favourable when compared to regional
bank peers.
Lending and deposit
growth
With our streamlined banking services,
mobile app and internet banking fully
operational, we are seeing greater
customer engagement. Our banking
services are more attractive to an
ever-increasing customer base who
are looking for a clear and simple
banking proposition.
In a very low growth environment, our
home loan book increased by 5.1%
to $5.1 billion, 1.7 times the national
system growth rate, with 79% of the
book being owner occupiers. During
the year we were granted a position on
the Federal Government’s First Home
Loan Deposit Scheme panel, where
the Federal Government guarantees a
portion of the loan up to 15%.
We are doing our utmost to support
our customers during the COVID-19
crisis. Approximately 11% of our loan
portfolio has been placed in a loan
repayment pause due to difficulties
faced by customers during this period.
Every three months, we are reviewing
the situation of customers whose
loan repayments have been paused
with a view to helping them re-start
repayments. We’ll continue to work
with our customers individually to
arrive at the best outcome for each of
them through this period.
There was a significant decrease in
funding costs during the year, helped
by falls in interest rates and a 7.6%
increase in customer deposits to
$3.9 billion which represented 69.1%
of the funding mix. Retail customer
deposits rose by 15.5%, reflecting
increased engagement.
MyState Limited Annual Report 2020 | 07
Managing Director’s Report (continued)
Response to COVID-19
The rapid escalation of the COVID-19
pandemic led to a swift response
to ensure our customers in financial
distress were taken care of and our
staff were out of harm’s way.
We were quick to institute work-
from-home protocols for all office-
based staff, while also ensuring that
customer services were unaffected.
Our Customer Care Centre and all our
branches remained open every day
throughout the period. We prioritised
the issuing of debit cards to customers
who were without a card so they could
access money, shop online or use
contactless pay options while shopping,
without coming into a branch.
We also added capacity to our
customer and collection services
team to help support those who
were faced with financial hardship.
We have offered the ability to switch
mortgages to interest-only or to defer
payments for customers who have lost
a significant proportion of their income
due to COVID-19.
We were quick to join the Federal
Government’s Small and Medium
Enterprises (SME) Guarantee Scheme,
which aims to support up to $40 billion
of lending to SMEs, including sole
traders and not-for-profits. Under
the scheme, the Government
guarantees 50% of new loans issued by
eligible lenders.
The pandemic has forced a number of
changes to our day-to-day operations
and we are planning to continue
with those which have been found
to be positive including flexible
working arrangements.
Regulatory changes
Following the Royal Commission into
Banking and Financial Services last year,
there have been significant changes
in the regulatory and compliance
environment and our risk management
team has worked hard to ensure the
Group stays ahead of those changes.
Since the start of the COVID-19
pandemic, regulators have made
decisions to slow or defer many
changes. They also have been open to
dialogue and consultation to ensure
that we have the ability to deal with
issues created by COVID-19 and still
run our business in an effective and
efficient manner.
During the year we conducted a
self-assessment of our Governance,
Culture, Remuneration and
Accountability (GCRA) practices, along
the lines that APRA had previously
required many financial services
companies to undertake. The results
showed that we have significantly
strengthened our position in these
critical areas in recent years, particularly
in the area of non-financial risk. The
self-assessment identified many
strengths that MyState had developed
and embedded in our operations
and culture. Commensurate with the
size and complexity of the Group, it
also identified some opportunities
for strengthening the Group’s risk
management framework. We do not
intend to become complacent here
and will continue to refine and improve
our risk management practices and
frameworks as circumstances change.
Capital position and
liquidity
We remain comfortably capitalised
above regulatory minimums. In
July 2020 MyState Limited issued
$25 million of Tier 2 qualifying
subordinated notes , which replaces
the same amount of similar notes
issued by MyState Bank Limited in
2015. The structure of these new
notes also improves our regulatory
capital efficiency.
In the early stages of the pandemic
we decided to hold higher levels of
liquidity to create a buffer for the
business, and will continue to do so
until we are more comfortable with the
external environment.
Wealth management
Following the rebranding of
Tasmanian Perpetual Trustees to
TPT Wealth and its transition to a
digital funds management business
focused on mortgage funds, our
new wealth management platform is
now beginning to attract mainland
customers. The outsourcing of fund
administration has enabled TPT
Wealth to offer investors access to a
more streamlined online management
portal, where customers can trade and
top-up investments.
After showing a steady increase
throughout the year, Funds Under
Management reduced by $101 million
over the year to $1.07 billion, as
customers withdrew funds from this
type of product to provide themselves
with liquidity and certainty in uncertain
economic times. This outflow was much
smaller than we have seen in similar
situations in the past and funds have
recently started to move back into
these products.
We are continuing our journey of
modernisation at TPT Wealth and
anticipate that most of the capability
and technology changes will be
completed this year.
ABA Banking Code
implementation
The Australian Banking Association
(ABA) released its latest Banking
Code of Practice at the beginning of
July 2019. The new Code, which we
implemented immediately, places
stronger emphasis on protecting
vulnerable communities and loan
guarantors and on increasing inclusivity
and accessibility.
We also signed our Customer Charter
during the year, which leans heavily
on the Code’s themes. The Charter
will give our customers peace of mind,
knowing that we have their interests as
our primary motivator. Our promise to
customers is that we’re committed to
earning their trust and keeping it, being
genuinely interested in what they want
and making things as easy as possible.
08 | MyState Limited Annual Report 2020
We were quick to institute work-
from-home protocols for all
office based staff
Maintaining performance
Our results last year reflected the
actions we’ve been taking to build a
simpler, more modern, better business
– including investing in marketing
and better customer experience.
Importantly, our results also showed
the continued strength and momentum
in our business. Despite the challenges,
we were able to deliver above-system
growth in home lending and strong
transaction account growth.
Early in the new financial year we have
made some decisions to streamline
and strengthen the business
further. We have undertaken some
considerable restructuring in the TPT
Wealth business which will position this
business for the future, enabling us to
focus on growing the business in areas
where we see considerable potential.
We have also announced the closure of
our remaining MyState Bank branches
in Central Queensland. These decisions
were extremely difficult, but we firmly
believe that they are in the long-term
interest of the business.
In recent years we have invested heavily
in technology to provide customers
with the ability to interact with us in
the manner they have demanded.
Traditional face-to-face branch-
based interactions are declining
at an increasingly rapid pace and
our Queensland branches were the
smallest and least attended in our
network. We will continue to service
our customers impacted by branch
closures through online and mobile
banking, our Customer Care Centre
and our Bank@Post arrangement with
Australia Post.
Looking ahead
Our operating results last year were
very strong. We are making very
good progress on our strategy to be
simpler and better, and are very clear
on what we need to do to deliver
continued performance in the current
economic, regulatory and competitive
environment. We are seeing the
benefits from our transformation which
are showing increased penetration
into mainland markets. The strength of
the business, the commitment of the
leadership team, and the continued
dedication of our people to our
purpose and to our customers, give me
great confidence that we can deliver a
company of which you, as our owners,
can be proud.
Lastly, I would like to thank our
hardworking team for their stoic
resilience during these unpredictable
times. They have shown themselves to
be adaptable and committed to our
values, delivering better outcomes
for our customers particularly those
frontline workers who are the physical
face of our organisation. I’d also like
to thank our Board members for their
focus and help in supporting the
executive to deliver on an ambitious
growth strategy.
Melos Sulicich
Managing Director and
Chief Executive Officer
MyState Limited Annual Report 2020 | 09
Our Strategy
Our customers are central to every decision that we make. From risk management
practices, to streamlining our back-office operations and modernising our banking
and wealth products, our customers’ needs and interests are paramount.
We are adapting our business to meet the needs of customers in a world that is changing at an ever increasing pace. We’re
improving our systems, products and services to help make the customer experience more streamlined and user-friendly. We
are also using digital technology to make our products simpler, more relevant and easier to use.
We’re adapting to meet our
customers’ needs in a rapidly
changing world
10 | MyState Limited Annual Report 2020
Our strategic priorities
Our
Strategy
• Grow our balance sheet
• Invest in contemporary,
• Increase digital capabilities and
use of automation in our banking
operations
• Build our brand
• Attract and deepen relationships
with customers
scalable wealth management
and trustee products and
systems
• Growth through mainland
distribution
Supported by investment in marketing and a strong
risk culture
Our purpose
is to help people
achieve their
dreams
Our mission
is making financial
services simple and
trustworthy
MyState Limited Annual Report 2020 | 11
Risk Management
Managing both financial and non-financial risks is integral to
everything we do.
In the past year, we have continued to
strengthen MyState’s risk management
practices to align them with regulatory
changes and the recommendations
from the Royal Commission into
Banking and Financial Services.
In late 2019, with the assistance of
an independent expert, the Board
initiated a self-assessment report
into the effectiveness of MyState’s
Governance, Culture, Remuneration
and Accountability frameworks
and practices. This self-assessment
identified many strengths that MyState
had developed and embedded in our
operations and culture. Commensurate
with the size and complexity of
the Group, it also identified some
opportunities for strengthening the
Group’s risk management framework
and practices.
We have empowered all MyState
employees to have a greater focus
on risk management. We have a
strong culture of accountability and
responsibility across the business and
risk management committees have
now been created in each division.
Each of the divisional risk committees
are chaired by an Executive and
attended by members of the senior
management team. These committees
are integral to embedding a dynamic
and strong risk culture within our
organisation, supporting a consistent
approach to enterprise-wide risk
management and decision-making.
Risks are identified, managed and
mitigated using our risk management
framework. We consider that effective
risk management can provide strategic
differentiation including:
We have empowered
all MyState employees to
have a greater focus on
risk management
12 | MyState Limited Annual Report 2020
We have a strong culture
of accountability and
responsibility
of divisional risk management
committees.
external and internal environments; this
has included:
• A prudent approach and a strong
risk culture to help us deliver our
strategic intent.
• Robust controls to make sure
risks are identified, managed and
mitigated effectively.
• Supporting sustainable growth
through a risk culture that provides
both proactive support and
constructive challenges.
• Enhanced risk accountability to
• Risk frameworks which are
enable accountability in the first line
of defence supported by a strong
oversight and challenge from our risk
professionals in the second line of
defence.
• Effective risk reporting and
analytics to 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
regularly reviewed to support our
regulatory obligations and our
customer commitments.
Our risk framework helps ensure we
support our purpose and mission
and deliver the best outcomes for
our customers.
Response to COVID-19
In responding to the COVID-19
pandemic we have actively
managed the risk in both our
• A focus on employee and
customer safety.
• The resilience of our operations
including enhanced oversight of the
services provided by our third-party
providers as well as the continued
enhancement of our cyber and
information security.
• Monitoring the impact on lending
activities and the portfolio.
• A focus on providing customers
viable alternatives to manage
their debt.
MyState Limited Annual Report 2020 | 13
MyState Bank
In order to become a leading national digital bank, we are adapting, changing
and evolving our systems and products to help make the customer experience
more streamlined and user-friendly.
12,000
new customers
joined in FY20
60.5%
of our home loan book
is outside Tasmania
+48
customer NPS
Digital transformation
driving customer growth
At the heart of our technology
investments is a focus on improving
our customers’ experience and looking
after their interests. Digitisation has
given MyState Bank a national reach
with a platform that is able to expand
along with customer demand, no
longer constrained by the size of our
branch network. There are no longer
physical limits to our growth.
We have introduced artificial
intelligence (AI) driven solutions for our
everyday banking products, equipping
our customers with cutting-edge tools
that put them in greater control of their
finances. Our customers now have
access to one of the most holistic AI-
driven banking solutions in Australia.
It’s features include Customer Insights
that give our customers automated
bill reminders and in-depth analysis
of their spending habits and an opt-in
Auto-Save tool that can help them save
faster to achieve their financial goals.
We are also continuing to develop
and deploy software robotics to
undertake back-office, document-
heavy activities such as data entry
which provides our team more time to
focus on customer service.
The introduction of web chat in
our customer care centre enables
representatives to handle multiple
enquires simultaneously and in a more
time-efficient manner. The take-up of
web chat among our customers has
exceeded expectations.
MyState has launched phase one
of Open Banking, well ahead
of the October 2020 mandated
implementation date. Phase one makes
details about the features, rates and
fees of transaction, savings and term
deposit accounts available through an
Application Programming Interface
(API). This marks MyState’s first step
in the Consumer Data Rights (CDR)
regime with phase two planned to
conclude in 2021.
MyState Bank’s digital strategy is
attracting new customers across
Australia as the bank is transformed
into a retail deposit-led business.
The bank welcomed 12,000 new
customers during the year. The
proportion of new customers acquired
through digital channels doubled
during the year to 61%, showing the
success of transitioning to a digital
bank model.
Home loan growth
Investment in our lending business
technology has further streamlined
processes, making our services easier
for brokers to use, faster for our staff
to process applications and simpler for
customers to access. All this combined
is making our bank more attractive for
brokers and customers alike.
Mortgage customer numbers
continued to grow via broker networks
in Queensland, New South Wales
and Victoria.
Strong participation in the
Government’s First Home Loan
Deposit Scheme (FHLDS) contributed
to above-system loan book growth.
While the economic outlook has
deteriorated as a result of COVID-19,
MyState’s arrears remain well below
those of our regional peers and the
benchmarks for major banks, with
14 | MyState Limited Annual Report 2020
Our investments in new technology
ensure our customers get services that
fit their lifestyle
30-day arrears at 0.61% and 90-day
arrears at 0.35%.
Investment in marketing
We have increased targeted marketing
activity that is building brand
awareness and acquiring customers in
new markets. A mix of traditional and
digital advertising is supplemented by
a range of PR and content activities.
Our investments in digital marketing
have been key in driving our customer
growth from digital channels.
Introducing new capability, boosting
targeted digital performance media,
and ensuring a focus on optimisation,
have been core components of
our success.
Our Net Promotor Score (NPS), which
measures customer loyalty, is among
the best of our peers and finished
the year at +48, up from +42 in the
previous year.
Award winning products
The Bank’s Bonus Saver account
received a five-star rating from Canstar
and an Experts Choice Award from
Mozo, confirming the product as one of
the top in its class. The Bank’s Business
Online Saver was also awarded an
Experts Choice from Mozo for Small
Business No Strings Savings.
T A NDING VA
L
U
E
S
O U T
S
A
UOCCA SGNIV
TN
REGULAR SAVER
MyState Limited Annual Report 2020 | 15
TPT Wealth
In wealth management, we are taking our trusted 133-year-old TPT Wealth
business and bringing it into the modern day, using digitisation to build a
bridge to mainland customers.
TPT Wealth
TPT Wealth is one of Australia’s
oldest providers of wealth solutions
offering contemporary financial
products including asset management
and trustee services which includes
estate planning, administration and
charitable trusts.
TPT Wealth is transforming into a
national digital business and we want
to be acknowledged as an expert,
specialist income fund provider,
delivering regular and reliable yield to
investors.
We are investing in contemporary,
scalable wealth management and
trustee products and systems to enable
growth through mainland distribution.
Transformation of the
wealth business
Throughout the last year, the
transformation of TPT Wealth has
continued, rebranding and moving to
an asset management model. There
was substantial restructuring during
the year, with fund administration
and accounting outsourced to a
leading third party provider and the
creation of a new digital platform
to allow investors to manage their
investments online.
We have just released a new loan
origination platform for the TPT Wealth
business and by the end of the year
we will have upgrated the trustee
platform to modern digital-based
contemporary system.
We have closed two sub-scale funds
and will be making changes to some
of our other income funds during the
course of the year ahead to align our
product suite better with what our
customers are seeking.
With this in place, TPT Wealth is now
looking to the future as it transforms
into a national digital business.
Funds management
While COVID-19 is uncharted territory
in terms of credit and liquidity
challenges, we are extremely well
placed for the future. We are ready to
compete for market share, grow our
mortgage book and secure a greater
number of investors across Australia.
TPT Weatlth is transforming
into a national digital
business
16 | MyState Limited Annual Report 2020
Our Culture
As we step into our future, it has become more important to understand
the culture we wish to cultivate and what is important to our people, our
customers and our communities.
MyState’s Customer Charter places
customers’ interests at the forefront
of everything the company does. The
wellbeing of our staff is equally central
to our future success: an engaged
workforce is a productive one that is
ready to help our customers, improving
their overall experience and helping us
continue to grow.
Because of this, last year with the
contribution of the entire MyState
team, we undertook a workplace
culture assessment. This has given us
an understanding of our current culture
that we have never had before, and has
allowed us to identify our ideal culture
for optimal business performance. We
know where we are headed which has
enabled us to put in place targeted
programs to evolve a workplace culture
to drive our strategic vision. The
importance of this is only increasing in
a post-pandemic world.
An employee experience survey last
year achieved a score in line with
other Australian banks. In response
to feedback, we have increased our
focus on mental health and general
wellbeing, implementing a number
of initiatives that increase the access
to these services for our people. A
specific callout is our wellbeing web
portal for staff which has proven
popular. Staff have also appreciated
the continuation of flexible working
practices, which were expanded in
response to COVID-19 and our cultural
evolution has been reflected in their
responses to our surveys.
Our people have a very clear
understanding of how their role
contributes to achieving our growth
objectives and how we can help
people achieve their dreams. Our
internal peer-nominated program
rewards employees who excel in
their behaviour and attitude, with the
Executive team deciding the winners
on a quarterly basis.
We continue to place a strong focus on
increasing our diversity and inclusivity
with the launch of our Belong Network
and inaugural internal staff event to
celebrate International Women’s Day.
It is pleasing to note that MyState has
49% of all leadership positions filled
by women.
The wellbeing of our customers
and staff are equally central to our
future success
MyState Limited Annual Report 2020 | 17
Our Community
We are passionate about the communities we operate in and believe we
have a responsibility to make a difference by using our resources to help
future generations.
$2.3m
of grants provided by
the MyState Community
Foundation since 2001
2,000
young people helped by
Bridgewater PCYC
291
films entered in the
MyState Student
Film Festival
MyState Community
Foundation
The MyState Community Foundation
is focused on empowering
disadvantaged youth to reach their
full potential. Since 2001, the MyState
Community Foundation has supported
over 130 not-for-profit organisations by
providing over $2.3 million in grants.
In 2020, the MyState Foundation
provided support for 17 organisations,
including Bridgewater PCYC, which was
a recipient of a grant that will directly
benefit the region’s most at-risk
young people.
The Bridgewater PCYC assists
approximately 2,000 young people
each year. The grant provides
funding for its Back to Life Sports
Program which provides equipment
and coaching for small groups and
aims to re-engage with local young
people, giving them personal growth
and development opportunities. The
grant will enable the refurbishment of
the current gym and the purchase of
equipment.
Other organisations to benefit from
a MyState Community Foundation
grant in 2020 include The Smith
Family, CatholicCare Tasmania, The
Shepherd Centre for Deaf Children,
Riding for the Disabled St Helens,
Camp Quality, ParaQuad Association,
Brave Foundation, St Vincent de Paul,
Redkite, Variety, Canteen, Fight Cancer
Foundation, Dooloomai Youth Project,
Young Life Australia, Kingston Beach
SLSC and Cystic Fibrosis.
Football Tasmania
MyState’s partnership with Football
Tasmania has helped reboot the sport
across the state, with thousands of
kids lacing up and getting back on
the pitch, following the COVID-19
The Back to Life Sports
Program provides young
people with personal
growth opportunities
18 | MyState Limited Annual Report 2020
The MyState Student Film Festival
is a premier youth artistic
event which helps young people
develop key life skills.
lockdown that threatened to see the
season shelved.
Football Tasmania restarted the
competition with the safety of parents
and players paramount. This has
allowed junior players to get back to
their sport sooner, helping them reap
the health and social benefits that were
missed during the lockdown.
It is also allowing Tasmania’s children
to get back to a level of normality and
enjoy a healthy and connected life
through football, which has been an
honour to help facilitate. In addition
to our match day good sports awards,
we were proud to sponsor a ball for
each junior player during the season,
allowing them to hone their skills
at home and make 2020 their most
successful season yet.
MyState Student
Film Festival
The MyState Student Film Festival is
a premier youth artistic event which
helps young people develop key
life skills such as creative thinking,
communication, planning, teamwork,
problem solving and management
through the art of film. In 2019, the
festival showcased 291 short films,
representing the work of more than
1,300 students from 105 schools.
Amara Gantz, winner of Best Animation
and Post Year 10 – University categories
at the 2019 MyState Student Film
Festival, used the experience to secure
a six-month training placement in Los
Angeles, working on Guillermo del
Toro’s stop-motion feature Pinocchio.
Amara Gantz, multi-award winning MyState
Student Film Festival participant
Amara said the event had honed
her animation and filmmaking skills
over many years. Her winning 2019
submission, Feel the Music, was a
festival favourite with its fusion of
big band swing music, colour and
movement.
Hardie Fellowship
TPT Wealth is proud to be entrusted to
manage the Hardie Fellowship Trust,
which provides financial support for
a number of teachers each year to
pursue advanced study or research at
a US university. Fellowship recipients
then enrich the local community by
passing on their learning to others.
MyState Limited Annual Report 2020 | 19
Board of Directors
BEc (Hons), FCPA,
FAICD
Miles Hampton – Chairman and Independent Non-Executive Director
MyState Bank Limited (Chair), TPT Wealth Ltd (Chair), MyState Community Foundation Limited
Group Nominations and Corporate Governance Committee (Chair), Group Risk Committee,
Group Digital Business Committee, Group Audit Committee, Group People and
Remuneration Committee
Miles has been a Non-Executive Director since
February 2009 and became Chairman in October
2013, and prior, a Director of Tasmanian Perpetual
Trustees Limited (now TPT Wealth Ltd) from July
2006. He is the former Managing Director of
ASX-listed Roberts Limited, a position he held
from 1987 until 2006. He is the former Chairman
of Forestry Tasmania, Hobart Water and TasWater
and former Deputy Chairman of the Van Diemen’s
Land Company. Miles has served on the Boards of
Ruralco Holdings Ltd, Australian Pharmaceutical
Industries Ltd, Wentworth Holdings Ltd, Money3
Corporation Ltd, HMA Ltd, Gibsons Ltd and
Impact Fertilisers Pty Ltd.
Melos Sulicich – Managing Director and Chief Executive Officer
MyState Bank Limited, TPT Wealth Ltd, MyState Community Foundation Limited, Connect Asset
Management Pty Ltd
Melos was appointed Managing Director and
Chief Executive Officer in July 2014. He has
extensive experience in a diverse range of
businesses and industry sectors covering petrol
retailing, financial services, industrial services,
health care, transport and logistics. From 2008
to 2013, he held the position of Chief Executive
Officer of RAMS Financial Group, a subsidiary
of Westpac. Prior to this, he held general
management positions for companies including
Spotless Group, Adsteam Marine, Mayne Group,
Colonial Group Limited, Colonial UK Limited and
the Shell Company of Australia.
BBus, GAICD, SA FIN
Robert Gordon – Independent Non-Executive Director
MyState Bank Limited, TPT Wealth Ltd, MyState Community Foundation Limited (Chair)
Group Risk Committee (Chair), Group Nomination and Corporate Governance Committee,
Group Digital Business Committee
Robert has been a Non-Executive Director since
February 2009 and prior, a Director of MyState
Bank Limited, (previously connectfinancial),
from July 1998. He is the current President of
the Institute of Foresters of Australia (IFA) and
Football Federation Tasmania and Chair of the
Supported Affordable Accommodation Trust.
He is the former Managing Director of Forestry
Tasmania and has previously served on the
Board of a number of companies in the tourism,
research and development, construction and
infrastructure industries.
BSc, MIFA, MAICD,
FAMI
20 | MyState Limited Annual Report 2020
Sibylle Krieger – Independent Non-Executive Director
MyState Bank Limited, TPT Wealth Ltd
Group People and Remuneration Committee (Chair), Group Risk Committee,
Group Nominations and Corporate Governance Committee
LLB (Hons), LLM,
FAICD, MBA
Sibylle has been a Non-Executive Director since
December 2016 and has over 35 years of broad
commercial experience as a lawyer, economic
regulator, company director and independent
consultant with focus on heavily regulated sectors.
She was a partner in two large commercial law
firms for 22 years and has over 13 years’ experience
as a Non-Executive Director. Sibylle is currently a
Non-Executive director of the Australian Energy
Market Operator Ltd (AEMO) and Openpay Group
Limited (ASX:OPY), and has previously served as
Chair of Xenith IP Group Limited (ASX:XIP) and as
a Director of Sydney Ports Corporation, Allconnex
Water, TasWater, Vector Limited (NZX:VCT), and a
trustee of the Royal Botanic Gardens and Domain
Trust and Sydney Grammar School.
BCom, CA
BA (Hons), MAICD
Warren Lee – Independent Non-Executive Director
MyState Bank Limited, TPT Wealth Ltd
Group Digital Business Committee (Chair), Group Audit Committee, Group Risk Committee
Warren was appointed as a Non-Executive Director
in October 2017. He has extensive experience in the
international financial services industry, including 15
years at AXA in senior management positions within
the company’s Australian and Asian businesses.
Warren was previously the 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 MetLife Limited, and is a member of
Chartered Accountants Australia and New Zealand.
Vaughn Richtor – Independent Non-Executive Director
MyState Bank Limited, TPT Wealth Ltd
Group Audit Committee, Group Risk Committee, Group People and Remuneration Committee,
Group Digital Business Committee
Vaughn was appointed as a Non-Executive Director
in September 2019. He has held CEO roles in Asia
and is the former CEO of ING DIRECT Australia
and CEO Challenger and Growth Countries – Asia,
ING Group after joining ING in London in 1991 as
Deputy General Manager UK and Ireland. Vaughn
is a Non-Executive Director of Rest Super and also
a current adviser to both Rhizome and Spriggy. He
is a prior Board member of TMB Bank in Thailand,
ING Vysya Bank in India, Kookmin Group in Korea,
and a Non-Executive Director, and later Chairman,
of Ratesetter Australia. In addition, he writes and
speaks extensively on leadership, corporate culture,
customer centricity and digital banking.
Andrea Waters – Independent Non-Executive Director
MyState Bank Limited, TPT Wealth Ltd
Group Audit Committee (Chair), Group Risk Committee
BCom, FCA, GAICD
Andrea has been a Non-Executive Director since
October 2017. She is an experienced Non-Executive
Director, auditor and accountant with over 35 years’
experience in financial services. She is a Fellow of
Chartered Accountants Australia & New Zealand,
and both a member and accredited facilitator of
the Australian Institute of Company Directors.
She is a former partner with KPMG, specialising
in financial services audit. Andrea is a Director of
Grant Thornton Australia Ltd, Bennelong Funds
Management Group, Citywide Service Solutions Pty
Ltd, Colonial Foundation and Genworth Mortgage
Insurance Australia Limited (GMA). Prior, she was a
Director of The Lord Mayor’s Charitable Foundation,
Chartered Accountants Australia & New Zealand,
Cancer Council Victoria, CareSuper and Cash
Converters International Limited (CCV).
MyState Limited Annual Report 2020 | 21
Key Management Personnel
Gary Dickson – Chief Financial Officer
Appointed October 2019
As Chief Financial Officer, Gary is responsible
for managing the finance, treasury, regulatory
reporting, strategy and property functions
for MyState. Gary is also a Director of Connect
Asset Management Pty Ltd.
Gary has over 25 years of experience in a variety
of financial roles, with 12 years of CFO experience.
His most recent position was at ME Bank as
CFO, where he drove strong growth in key
financial metrics during his six-year tenure. Prior
to this, Gary held the position of CFO for AXA
Australia for five years. His prior financial services
roles include senior positions with the Colonial
First State Group, the Investments & Insurance
Services division at Commonwealth Bank and
Portfolio Partners Limited.
BCom,
MBA (Executive), FCA
Mandakini (Mandy) Khanna – Chief Risk Officer
Appointed December 2015
Post DipBusAdm, Post
DipBusFin, BCom
Mandy is responsible for the management
of the financial and non-financial risks of the
MyState Limited Group. Mandy and her team are
responsible for strengthening risk culture and risk
frameworks, building a culture of accountability
and sharpening the focus on customer outcomes
at MyState.
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 Officer for GE Capital in Asia Pacific.
Heather McGovern – General Manager, Digital and Marketing
Appointed March 2019
Heather is the General Manager, Digital and
Marketing 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 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.
BA Comms
22 | MyState Limited Annual Report 2020
Anthony (Tony) MacRae – General Manager, Banking
Appointed February 2019
As General Manager, Banking, 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 role as 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 to this,
Tony held key positions with the RAMS/Westpac
Group including Acting CEO of RAMS and
General Manager, Third Party Distribution for
Westpac, as well as 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
Appointed May 2015
As General Manager, Technology, Operations
and Product, Paul is responsible for the strategic
direction and delivery of MyState Limited Group’s
back office processing, technology and products.
Paul was previously a Director of IT Advisory
at KPMG, following 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. Prior, Paul occupied
technical leadership positions in UK-based
investment banks.
Craig Mowll – General Manager, Wealth Management
Appointed July 2018
Craig is responsible for the strategic, financial and
ongoing management of the MyState Limited
Group’s Wealth Management division, TPT Wealth
Limited, which specialises in Asset Management
and Trustee Services.
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
included Director of Distribution, Product and
Marketing at Credit Suisse and General Manager
of Asset Management, Margin Lending and
Stockbroking at St. George Bank.
Janelle Whittle – General Manager, People and Culture
Appointed January 2018
Janelle has overall responsibility for MyState
Limited Group’s human resources function,
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 20 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.
BEc
BEng (Hons)
MBA, MBSc
BCom, MHRM
MyState Limited Annual Report 2020 | 23
Directors’ Report
For the year ended 30 June 2020
Your Directors present their report on MyState Limited for the year ended 30 June 2020.
Directors
• Miles Hampton BEc (Hons), FCPA, FAICD
Chairman and independent Non-Executive Director.
• Melos Sulicich BBus, GAICD, SA FIN
Managing Director and Chief Executive Officer –
Executive Director.
• Robert Gordon BSc, MIFA, MAICD, FAMI
Independent Non-Executive Director.
• Sibylle Krieger LLB (Hons), LLM, FAICD, MBA
Independent Non-Executive Director.
• Warren Lee BCom, CA
Independent Non-Executive Director.
• Stephen Lonie BCom, MBA, FCA, FFin, FAICD, FIMCA
(deceased 20 November 2019)
Independent Non-Executive Director.
• Vaughn Richtor BA (Hons), MAICD
(commenced 1 September 2019)
Independent Non-Executive Director.
• Andrea Waters BCom, FCA, GAICD
Independent Non-Executive Director.
Company Secretary
• Scott Lukianenko Ad Dip BMgmt, Grad Dip BA,
GIA (Cert).
Principal Activities
Banking Services
Trustee Services
Funds Management
• Personal, residential and business
• Estate planning
• Managed fund investments
banking
• Transactional, internet and mobile
banking
• Savings and investments
• Insurance and other alliances
• Estate and trust administration
• Power of attorney
• Corporate trustee
MyState Limited (MyState) provides banking, trustee and managed fund products and services through its wholly-owned
subsidiaries MyState Bank Limited (MyState Bank) and TPT Wealth Limited (TPT Wealth).
TPT Wealth, formerly named “Tasmanian Perpetual Trustees Limited”, rebranded on 2 December 2019 as part of MyState’s
transformation of the wealth business. TPT Wealth now has national distribution capability along with new digital products
and services. Its principal activities, as listed in the table above, are unchanged, following the divestment of the retail financial
planning business on 28 June 2019.
There have been no other significant changes in the nature of the principal activities of the Group during the year.
Dividends
Dividends paid in the full year ended 30 June 2020 were as follows:
• In respect of the year ended 30 June 2019, a fully franked final dividend of 14.5 cents per share, amounting to $13.204m, was
paid on 1 October 2019.
• In respect of the half year ended 31 December 2019, a fully franked dividend of 14.25 cents per share, amounting to
$13.036m, was paid on 2 April 2020.
To maintain the Group’s strong capital position during the current economic uncertainty, the Board resolved not to pay a final
dividend for the year ended 30 June 2020. The dividend of 14.25 cents per share paid in April 2020 represents a payout ratio
of 43.4% for the 2020 financial year. Barring unforeseen circumstances, the Directors expect to resume dividends for the first
half of the year ending 30 June 2021. In light of the ongoing uncertainty, the Board has resolved to change its dividend policy
to a payout ratio of 60-80% of post-tax earnings from the previous range of 70-90%.
24 | MyState Limited Annual Report 2020
Operating and financial review
A strong result by MyState, fuelled by its digital
growth strategy and increased penetration of the
mainland market
The Group recorded a statutory net profit after income tax
(NPAT) for the year ended 30 June 2020 of $30.06m, a fall of
3.0% from $30.99m in the prior corresponding period (pcp)
ended 30 June 2019. While NPAT declined on a statutory
basis, it rose 0.9% on a continuing operations basis when
excluding the profit impact of the sale of the Group’s
financial planning business on 28 June 2019.
Net Profit after Tax ($m)
31.46
30.99
30.06
FY18
FY19
FY20
Earnings per share decreased by 3.9% to 32.86 cents per
share (FY19: 34.17 cents per share) and return on average
equity decreased 52bps to 9.16%, but still compares
favourably to regional bank peers.
Pre-provision operating profit of $47.9m increased 12.9% on
the pcp, driven by improved banking net interest income
(NII), up 11.3% to $99.5m. This reflected balance sheet
growth, a reduction in retail and wholesale funding costs and
disciplined lending and deposit margin management.
The lending environment for owner-occupied home loans
remained competitive during the period, exacerbated by
slow system credit growth. The total lending book grew
$237.4m on the pcp.
Income growth of 7.0% exceeded growth in operating
costs (including depreciation and amortisation) of 3.8%.
The Group continued to increase its investment in
capability, marketing and technology, while the increases in
depreciation and amortisation reflects previous IT systems
and digital investment. The cost-to-income ratio improved
by 195bp to 62.8%.
Statutory net profit after tax included a $4.9m credit
impairment expense, the majority of which was an increase
in the collective credit loss provision. This increase reflects
an uptick in total arrears and the ageing of arrears during
the period and a forward looking economic overlay for
potential credit losses associated with the economic impact
of COVID-19.
TPT Wealth reported a net profit after income tax for the
year ended 30 June 2020 of $3.7m, compared to $3.9m in the
pcp (excluding discontinued operations).
During the year, the business continued to invest in its
digital transformation, with customers now having access
to more streamlined, user-friendly banking products and
service. Customers are more supported by digital channels
with increasing investment in mobile and internet banking
applications, including the recent launch of a new banking
service enabling customers to manage their financial affairs
more efficiently. The implementation of robotics technology
in back-office systems is also increasing efficiency with many
previous manual tasks now undertaken daily by robots.
This investment has set MyState up as a modern, scalable
banking and wealth management company.
The Group is focused on anticipating and meeting the
evolving needs of its customers and it is pleasing that this
investment in improving customer experience has been
recognised in the Group’s net promoter score of +48, an
increase of +8 on the pcp. The bank welcomed 12,000 new
customers during the year which represents an increase of
16% on the pcp.
High credit quality maintained in FY20
Total book composition ($m)
51
69
65
55
72
64
4,852
4,358
42
71
61
5,102
FY18
FY19
FY20
Housing Loans
Personal Loans
Business/Agri/Commercial
Overdrafts
MyState Bank is focused on low risk, owner-occupied lending
with a loan-to-valuation ratio of less than 80%.
MyState Limited Annual Report 2020 | 25
The banking loan portfolio grew 4.7% on pcp, reaching
$5,276 million at 30 June 2020.
income fell by just 6.8%. Rapidly falling BBSW benchmark
rates drove wholesale funding costs lower.
NIM trend
1.97%
1.80%
1.82%
1.88%
1.86%
FY18
FY19
1H20
2H20
FY20
Interest income benefited from a home loan book that was
$250m (5.1%) higher than the pcp (with growth in the second
half of $198m).
Lending applications of $2.27 billion were 11% higher than
the pcp, with settlements of $1.29 billion broadly in line
with pcp.
Customer deposits remain important to ensuring a
competitive and stable funding base and customer deposits
increased $279.9m or 7.6% on the prior period.
The Bank’s Bonus Saver account received a five-star rating
from Canstar and an Experts Choice Award from Mozo,
confirming the product as one of the top in its class. The
Bank’s Business Online Saver was also awarded an Experts
Choice from Mozo for Small Business No Strings Savings.
Non-interest income from banking activities
Non-interest income from banking activities was lower
than the prior period, reflecting increased uptake of
digital products and preferences for lower-cost self-serve
functionality.
TPT Wealth’s digital transformation
In a significant step, which supports plans for national
growth, Tasmanian Perpetual Trustees was re-branded
as TPT Wealth and a new investor portal launched which
enables investors to manage their investments online.
Although there has been a significant increase in credit loss
provisions in the period, a large majority of this is COVID-19
related and the underlying credit quality of the banking
portfolio remains strong: 30+ and 90+ days’ arrears remain
well below industry benchmarks and 79% of the portfolio
remains at 80% LVR or less.
Exposure to investor and interest-only lending remains
low, with owner-occupied loans representing 79% of the
portfolio. Lending momentum in the second half of the
financial year was assisted by early and strong uptake of
applicants for the Federal Government’s First Home Loan
Deposit Scheme, and this accounts for the majoirty of the
increase in loans with >90% LVR. The scheme supports
eligible first home buyers who can purchase a loan with
a deposit of 5%, with The National Housing Finance
Investment Corporation guaranteeing up to 15% of the value
of the property purchased.
During the period, MyState Bank continued to grow
its customer base across Australia’s east coast with the
proportion of home loans outside Tasmania increasing
from 58.2% to 60.5% since 30 June 2019. Over recent years,
MyState has moved from being a predominantly Tasmanian
bank to a national bank, based in Tasmania.
Home loan book – LVR profile ($b)
$0.20
$0.30
$0.37
$0.20
$0.26
$0.39
$3.51
$0.35
$0.37
$0.34
$3.98
$4.04
FY18
FY19
FY20
<80% LVR
>90% LVR
80-85% LVR
85-90% LVR
Focused margin management and favourable
funding costs
Net interest margin benefited from significantly lower
funding costs, particularly across the second half, with total
interest expense falling 21.2% on the pcp, while interest
26 | MyState Limited Annual Report 2020
Directors’ Report (continued)For the year ended 30 June 2020
Funds Under Management ($m)
1,153
1,170
1,069
FY18
FY19
FY20
TPT Wealth’s revenue from continuing operations increased
to $15.6 million, up 2.2% from $15.3 million in the pcp.
Funds under management were up 1.5% on pcp until
February when a COVID-19 led decline in market sentiment,
coupled with a fall in equity markets and subsequent partial
recovery, resulted in a closing position of $1.069 billion at
30 June 2020, down 8.6% on pcp.
Strong capital position
The Group has maintained its strong balance sheet with a
total capital ratio at 30 June 2020 of 13.01%, 11 basis points
higher than at 30 June 2019. The Group’s Common Equity
Tier 1 capital ratio slightly reduced by 2bps to 11.07%,
however remains well positioned to meet the expected
changes to APRA’s capital standards. Securitisation
continues to be used as a key capital management tool to
support the Bank’s strategy of growing its lending book
whilst delivering a stable income return to shareholders.
Capital
12.90%
1.81%
11.09%
1.81%
1.42%
0.23%
1.55%
1.70%
0.09%
0.45%
13.01%
1.94%
11.07%
Jun-19
Capital
initatives
Securitised
assets
Profi t
Dividends
paid
Secured
mortgage
lending
Capitalised
intangibles
Other asset
growth
Jun-20
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
management culture.
In FY20, the Group activated its Crisis Management Plan and its Pandemic Plan in response to the global COVID-19
pandemic. The Board held a number of additional weekly oversight meetings with a focus on customer and staff safety and
well-being, operational resilience, liquidity risk, capital management and credit risk.
In late 2019, with the assistance of an independent expert, the Board initiated a self-assessment report into the effectiveness
of MyState Bank’s Governance, Culture, Remuneration and Accountability frameworks and practices. The report was initiated
in response to APRA’s recommendation, following the findings of the Prudential Inquiry into the Commonwealth Bank
MyState Limited Annual Report 2020 | 27
published in May 2018, that it was good practice for entities
which had not been requested to undertake the assessment
to undertake one.
The self-assessment identified many strengths possessed
by MyState. Commensurate with the size and complexity
of the Group, it also provided some opportunities for
strengthening the Group’s risk management framework and
practices, specifically;
• The three lines of defence (LOD) model continues to
mature, and enhancements to the Risk Frameworks have
been supported by enterprise investment in capability and
management systems. There is an opportunity to continue
to increase the focus on non-financial risks and also to
continue to develop the 1LOD division risk committees;
• MyState continues to develop its risk culture and
management of conduct risk, and staff are pro-actively
encouraged to identify, report and remediate risk
incidents. There is an opportunity to further and more
deeply integrate compliance and risk related matters into
some decision making processes;
• The remuneration framework has been updated and
has adopted the recommendations made by Sedgwick
in the Retail Banking Remuneration Review 2017 and to
comply with the Banking Executive Accountability Regime
(BEAR). There is an opportunity to continue to enhance
the processes around the recommendations regarding
incentive payments and the communication of the risk
adjusted outcomes to remuneration decisions.
Management and the Board are committed to continually
enhancing the Risk, Governance and Remuneration
frameworks so they remain appropriate for the scale and
complexity of the Group. Management consequently
has actions in place to address the opportunities for
improvement that have been highlighted.
Outlook
MyState continues to build its strategic position with
excellent asset quality, modern digital platforms and broader
marketing capabilities.
Lending momentum in the second half of FY20 is expected
to continue into the first half of FY21. The increase in
applications and settlements in the second half was largely
influenced by the Government’s First Home Loan Deposit
Scheme. The roll over into FY21, and top up of scheme
enabled funding, will assist growth. Margin management
remains 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 focus for FY21 will be to build customer advocacy to
further grow the customer base nationally, and to pursue
further operating efficiencies.
A multi-year program of work is continuing to transform TPT
Wealth. There was substantial restructuring during the year,
with fund administration and accounting outsourced and
a new digital platform launched. Transitioning into FY21, a
new lending system is due to be deployed in August 2020
and a new trustee system, well into the planning stage,
is anticipated to be complete by the end of the current
calendar year. Replacement of existing legacy systems will
create a more efficient and scalable business, providing
further revenue diversity and improved returns for investors.
We have a clear organic revenue growth strategy and a
significant opportunity to build our business. Superior
customer outcomes remain the priority, and following
six years of transformation, we are well equipped to grow
and prosper in the COVID-19 world.
Lead auditor’s independence
declaration under section 307C of the
Corporations Act 2001
The lead auditor’s independence declaration is set out on
page 30 and forms part of the Directors’ Report for the year
ended 30 June 2020.
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.
Events subsequent to balance date
The Group restructured its subordinated notes portfolio,
the details of which are disclosed in note 3.1 of the
financial statements.
In August 2020 the Group announced the closure of six
of its Branch locations, four in Queensland and two in
Tasmania. A net financial benefit is anticipated in relation to
these closures in FY22.
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 other material item, transactions or
event that is likely to significantly affect the operations of
the Group.
Environmental Regulation
The Company is not subject to significant
environmental regulation.
28 | MyState Limited Annual Report 2020
Directors’ Report (continued)For the year ended 30 June 2020 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
MYS Board
Meetings
Group Audit
Committee
Group People
and
Remuneration
Committee
Group Risk
Committee
MYS Directors
R Gordon
M Hampton
S Kreiger
W Lee
S Lonie (ceased
17/11/19)
V Richtor (appointed
1/9/19)
M Sulicich
A Waters
A
18
18
18
17
1
15
18
18
B
18
18
18
18
4
15
18
18
A
n/a
5
n/a
4
1
3
B
n/a
5
n/a
5
3
3
n/a
5
n/a
5
A
n/a
5
5
B
n/a
5
5
n/a
n/a
0
3
n/a
n/a
1
4
n/a
n/a
Group
Nominations &
Corporate
Governance
Committee
A
4
4
4
B
4
4
4
n/a
n/a
A
5
1
5
4
B
5
1
5
5
n/a
n/a
n/a
n/a
1
n/a
5
1
n/a
5
n/a
n/a
n/a
n/a
n/a
n/a
Group Digital
Business
Committee
A
4
2
B
4
2
n/a
n/a
4
0
2
4
1
3
n/a
n/a
n/a
n/a
• 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.
A – Number of meetings attended.
B – Number of meetings eligible to attend.
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:
MyState Limited Annual Report 2020 | 29
30 | MyState Limited Annual Report 2020
Directors’ Report (continued)For the year ended 30 June 20201st 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 Liability limited by a scheme approved under Professional Standards Legislation. AAuuddiittoorr’’ss IInnddeeppeennddeennccee DDeeccllaarraattiioonn ttoo tthhee DDiirreeccttoorrss ooff MMyySSttaattee LLiimmiitteedd In relation to our audit of the financial report of MyState Limited for the financial year ended 30 June 2020, 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. DDAANNNNYY MMCCCCAARRTTHHYY Partner Wise Lord & Ferguson Date: 21 August 2020 Remuneration Report
For the year ended 30 June 2020
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 2020, 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
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
31
32
32
32
32
33
33
33
33
37
40
41
43
45
45
1. Key Management Personnel
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
Robert Gordon
Sibylle Krieger
Warren Lee
Stephen Lonie
Vaughn Richtor
Andrea Waters
Executive Director
Melos Sulicich | Managing Director and Chief Executive Officer
Executives
Gary Dickson | Chief Financial Officer
David Harradine | Chief Financial Officer
Mandakini Khanna | Chief Risk Officer
Paul Moss | General Manager Technology, Operations and 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
Movements in the 2020 Financial Year
Deceased 20 November 2019
Appointed 1 September 2019
Appointed 7 October 2019
Commenced role 19 October 2019
Ceased 25 October 2019
MyState Limited Annual Report 2020 | 31
2. Remuneration Strategy
2.1 Remuneration Philosophy
The objective of MyState Limited’s Remuneration Policy is to promote personal and collective behaviours that deliver good
customer outcomes, sustained financial performance, appropriate risk management and maintain the reputation of the Group.
The MyState Limited Remuneration Policy is designed to achieve this objective by having:
• Appropriately balanced measures of employee performance that inform variable performance based pay for Executives
and other eligible employees, 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;
• Structuring of the remuneration of risk and financial control personnel, including performance based components, so as not
to compromise the independence of these personnel in carrying out their functions;
• Board discretion in the assessment and clawback of Executive incentives as an ultimate means to mitigate unintended
consequences of variable pay and to preserve the interests of shareholders and customers; and
• Short term and long term incentive performance criteria being structured within the overall risk management of the Group.
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
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 (%)
2016
31,062
35.52
24,886
4.13
10.6
63.2
2017
30,080
34.04
25,042
4.85
10.0
65.9
2018
31,461
34.97
25,794
5.01
10.1
64.0
2019
30,987
34.17
26,016
4.49
9.7
64.77
2020
30,060
32.86
26,241
3.93
9.2
62.8
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 performance hurdle thresholds to the
delivery of financial and operational objectives and sustained
growth in shareholder value.
STI includes both financial and non-financial metrics.
ELTIP performance measures for all offers are weighted
equally between relative total shareholder return (TSR)
performance and return on equity (ROE). The relative TSR
is a measure which incorporates both dividends paid and
movements in share prices, whilst the ROE is a measure 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 provides oversight
to support the Company in achieving its human resource
goals. The Committee reviews and makes recommendations
to the Board on:
• Remuneration arrangements for Directors, the Managing
Director and other Senior Executives, having regard to
comparative remuneration data, independent advice and
compliance with the requirements of APRA Prudential
Standards and the Banking Executive Accountability
Regime (BEAR);
• Human Resource policies and practices, ratification of
industrial instruments and oversight of compliance with
legal and regulatory requirements; and
• 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 Employees.
The Group People and Remuneration Committee aims
to ensure that there is no conflict of interest regarding
32 | MyState Limited Annual Report 2020
Directors’ Report (continued)For the year ended 30 June 2020 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.
3. Non-Executive Director
Remuneration
Non-Executive Director Remuneration response to
COVID-19
The Board have decided to reduce Non-Executive
Director remuneration by 20% for 6 months commencing
from 1 May 2020.
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.
The Board reviews its fees to ensure the Company’s NEDs
are fairly remunerated for their services, recognising the 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 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 $110,000 per annum, inclusive
of statutory superannuation, and the Chairman receives
$236,500 per annum, inclusive of statutory superannuation.
The Chairs of Committees (other than the Board Chair if he
or she chairs a Committee) receive an additional $10,000, per
annum, inclusive of statutory superannuation.
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
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 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 advice to the Committee to ensure that Executive
remuneration is competitive and appropriately structured.
The individual Executive remuneration arrangements
reflect the complexity of the role, individual responsibilities,
individual performance, experience and skills.
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.
MyState Limited Annual Report 2020 | 33
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 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 2019/2020 financial year and the 2018/2019 financial year are set out in the following tables.
Managing Director and Executive response to COVID-19
Managing Director and Executives have agreed to forfeit any FY20 STI and no salary increases will be awarded to the
Managing Director or Executives in the FY20 year-end review process.
Key Management Personnel
% Max
(of TFR)
Max.
Payable
%
Awarded
%
Forfeited
$ Amount
Paid
% Which is not
yet Assessed
for Payment
2019/2020
Melos Sulicich
Gary Dickson(1)
David Harradine(1)
Mandakini Khanna
Heather McGovern
Anthony MacRae
Craig Mowll
Paul Moss
Janelle Whittle
2018/2019
Melos Sulicich
Huw Bough(1)
Katherine Dean(1)
David Harradine
Mandakini Khanna
Heather McGovern(1)
Anthony MacRae(1)
Craig Mowll(1)
Paul Moss
Janelle Whittle
50%
30%
30%
30%
30%
30%
30%
30%
30%
50%
30%
30%
30%
30%
30%
30%
30%
30%
30%
$312,500
$88,110
$37,504
$117,000
$99,000
$117,000
$117,000
$109,500
$87,000
$312,500
$60,362
$42,082
$114,000
$108,000
$28,479
$44,556
$112,192
$102,000
$87,000
0%
0%
0%
0%
0%
0%
0%
0%
0%
20.85%
25.27%
0%
18.37%
27.68%
27.20%
25.40%
11.48%
24.23%
19.72%
100%
100%
100%
100%
100%
100%
100%
100%
100%
79.15%
74.73%
100%
81.63%
72.32%
72.80%
74.60%
88.52%
75.77%
80.28%
$0
$0
$0
$0
$0
$0
$0
$0
$0
$65,156
$15,256
$0
$20,950
$29,890
$7,755
$11,330
$12,874
$24,710
$17,160
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
1) Pro-rata Max Payable based on commencement and cessation dates as applicable.
34 | MyState Limited Annual Report 2020
Directors’ Report (continued)For the year ended 30 June 2020 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
to 30 June in the 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 “2017” offer and
post-tax underlying ROE for the “2018” and “2019” offers
and statutory ROE which may be adjusted for one off items
at the discretion of the Board for the “2020” 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 Executives 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 Executives 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.
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
MyState Limited during a performance period, the offer
MyState Limited Annual Report 2020 | 35
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.
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 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.
Details of offers made under the ELTIP are set out in the following table.
Offer
“2017”
“2018”
“2019”
Performance period
1 July 2017 to 30 June 2020 1 July 2018 to 30 June 2021 1 July 2019 to 30 June 2022
The comparator group
Fair value of shares on offer
date(1)
Offer date
– Managing Director
– Other Executives(3)
Value of offer(2)
– Managing Director
– Other eligible Executives
Members of the S&P/ASX300
Managing Director $2.57
Managing Director $2.52
Managing Director $2.49
Other Executives $2.44
Other Executives $2.17
Other Executives $2.49
8 November 2017
7 January 2019
28 October 2019
11 September 2017
7 January 2019
28 October 2019
$287,500
$800,136
$312,500
$651,727
$312,500
$787,664
1) 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.
2) 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.
3) Pro-rata offer made in respect of the “2017” Offer to Janelle Whittle on 13 February 2018. In respect of the “2018” Offer, a pro-rata offer made to
Anthony MacRae and Heather McGovern on the 25th of February 2019 and 18th of March 2019 respectively. Pro-rata offer made in respect of the
“2019” Offer to Gary Dickson on the 16th of March 2020.
Calculation of the Reward
TSR Component
The ELTIP Offers TSR components will vest on the following basis:
For the 2017, 2018 and 2019 Offers:
MYS TSR Relative to the ASX 300
Below the mid-point percentage:
At the Median ASX300
Between the median and 75th percentile
Above the 75th percentile
36 | MyState Limited Annual Report 2020
Percentage of the Applicable
Reward that will Vest
0%
50%
Straight line basis between
50% and 100%
100%
Directors’ Report (continued)For the year ended 30 June 2020 For the 2020 Offers:
MYS TSR Relative to the ASX 300
Below the 25th percentile:
At the 25th percentile
Between the 25th and 75th percentile
Above the 75th percentile
Percentage of the Applicable
Reward that will Vest
0%
25%
Straight line basis between
25% and 100%
100%
No reward will be payable if performance is negative irrespective of the benchmark group performance.
ROE Component
The performance period for the ROE component for the ELTIP reward will be based upon on the Company’s post-tax
underlying ROE and will be payable on the following basis:
For the 2017 Offers:
MYS Aggregate Absolute Post Tax Underlying ROE for the
Performance Period:
Percentage of the Applicable
Reward that will Vest:
Below 31.80%
31.80%
31.80% to 33.50%
33.50% or above
For the 2018 and 2019 Offers:
0%
25%
Straight line from 25% to 100%
100%
MYS Aggregate Absolute Post Tax Underlying ROE for the
Performance Period:
Percentage of the Applicable
Reward that will Vest:
Below 30.00%
30.00%
30.00% to 31.50%
31.50% or above
For the 2020 Offers:
0%
50%
Straight line from 50% to 100%
100%
MYS Aggregate Statutory ROE, which may be adjusted for one off items
at the discretion of the board, for the Performance Period:
Percentage of the Applicable
Reward that will Vest:
Below 27.00%
27.00%
27.00% to 30.00%
30.00% or above
0%
25%
Straight line from 25% to 100%
100%
MyState Limited Annual Report 2020 | 37
Actual and Potential ELTIP Share Allocations
The following tables detail, for current and former KMP, the status of offers made under the ELTIP. The “2017” offer
performance period was completed on 30 June 2020. The “2016” offer performance period was completed on 30 June 2019.
Offer
Name
Component
Number of Shares
Maximum
Offer
Forfeited/
Lapsed
Vested in the
2019/20
Financial
Year
Not yet
Assessed for
Vesting
“2017” Offer
Melos Sulicich(1)
Huw Bough
Katherine Dean
David Harradine
Mandakini Khanna
Paul Moss
Andrew Polson
Chris Thornton
Janelle Whittle(2)
TSR
ROE
TSR
ROE
TSR
ROE
TSR
ROE
TSR
ROE
TSR
ROE
TSR
ROE
TSR
ROE
TSR
ROE
29,307
29,307
10,092
10,092
9,786
9,786
11,315
11,315
10,551
10,550
10,092
10,092
10,092
10,092
10,245
10,245
3,888
3,887
12,485
29,307
10,092
10,092
9,786
9,786
11,315
11,315
4,495
10,550
4,299
10,092
10,092
10,092
10,245
10,245
1,656
3,887
16,822
–
–
–
–
–
–
–
6,056
–
5,793
–
–
–
–
–
2,232
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
38 | MyState Limited Annual Report 2020
Directors’ Report (continued)For the year ended 30 June 2020 Offer
Name
Component
Number of Shares
Maximum
Offer
Forfeited/
Lapsed
Vested in the
2018/19
Financial
Year
Not yet
Assessed for
Vesting
“2016” Offer
Melos Sulicich
Huw Bough
Katherine Dean(2)
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) The awarding of the 2020 offer is subject to shareholder approval subsequent to the publishing of this report.
2) Pro-rata Max Payable based on commencement dates as applicable.
MyState Limited Annual Report 2020 | 39
The “2018”, “2019” and “2020” 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
Katherine Dean(1)
Gary Dickson(2)
David Harradine(3)
Mandakini Khanna
Heather McGovern(4)
Anthony MacRae(4)
Paul Moss
Craig Mowll
Janelle Whittle
“2018” Offer “2019” Offer
“2020” Offer
Component
Number of Shares
TSR
ROE
TSR
ROE
TSR
ROE
TSR
ROE
TSR
ROE
TSR
ROE
TSR
ROE
TSR
ROE
TSR
ROE
TSR
ROE
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
–
–
9,570
9,570
–
–
12,743
12,743
10,783
10,782
12,743
12,743
11,926
11,926
12,743
12,743
9,476
9,475
38,676
38,675
–
–
14,852
14,851
–
–
14,480
14,480
12,252
12,252
14,480
14,480
13,552
13,552
14,480
14,480
10,767
10,767
1) The “2018” Offer extended to Katherine Dean was forfeited due to less than 12 months of the performance period having been served.
2) Pro-rata offer made for “2019”.
3) The “2019” Offer extended to David Harradine was forfeited due to less than 12 months of the performance period having been served.
4) Pro-rata offer made for “2018”.
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 may be 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 prescribed 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 be reduced by an amount that is proportionate
to the failure or may be cancelled, as determined by the Board.
40 | MyState Limited Annual Report 2020
Directors’ Report (continued)For the year ended 30 June 2020 5. Statutory Tables
$
Salary &
Fees
Cash
Bonus(1)
Other
Short
Term
Benefits
Non-
Monetary
Benefits(2)
Post
Employ-
ment
Super-
annuation
Term-
ination
Benefits
Share
Based
Payment(3)
Non-Executive Directors
Miles Hampton
2020
201,922
2019
201,214
Peter Armstrong 2020
–
2019
Robert Gordon
2020
2019
51,740
87,449
87,637
Vaughn Richtor
2020
76,042
2019
–
Sibylle Krieger
2020
101,875
Warren Lee
2019
2020
2019
Stephen Lonie
2020
96,590
98,933
94,147
42,731
2019
100,977
Andrea Waters
2020
100,702
2019
98,701
Total NED
2020
709,654
2019
731,006
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
19,183
19,115
–
5,000
18,099
–
–
–
–
–
–
–
–
–
–
–
–
–
25,390
25,407
7,224
–
9,678
9,176
9,399
8,944
4,059
9,593
9,567
9,376
84,500
5,000
99,710
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Total
221,105
220,329
–
74,839
112,839
113,044
83,266
–
111,553
105,766
108,332
103,091
46,790
110,570
110,269
108,077
794,154
835,716
MyState Limited Annual Report 2020 | 41
Other
Short
Term
Benefits
Non-
Monetary
Benefits(2)
Post
Employ-
ment
Super-
annuation
Term-
ination
Benefits
Share
Based
Pay-
ment(3)
Total
Salary &
Fees
Cash
Bonus(1)
$
Executives
Melos Sulicich
Huw Bough
Katherine Dean
David Harradine
Mandakini Khanna
Anthony MacRae
Heather McGovern
Paul Moss
Craig Mowll
Janelle Whittle
Gary Dickson
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
600,000
–
599,616
65,156
–
–
–
–
–
219,078
15,256
25,000
–
146,057
149,678
–
–
–
354,923
20,950
355,954
–
328,662
29,890
365,000
–
136,173
11,330
301,370
–
84,615
7,755
339,806
–
310,432
24,710
369,469
–
333,517
12,874
264,840
–
248,054
17,160
264,219
–
–
–
–
1,788
25,000
–
–
–
–
25,000
–
17,808
–
6,916
16,054
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
8,365
25,000
36,409
37,964
25,000
9,327
28,630
8,038
25,001
29,491
20,531
20,586
25,160
24,533
20,716
–
1,788
214,812
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Total Executive
2020 3,010,336
Total KMP
2020 3,719,990
–
–
1,788
299,312
2019 2,761,127
205,081
25,000
6,916
213,801
2019 3,492,133 205,081
25,000
11,916
313,511
1) The cash bonus shown is the actual amount awarded in respect of each financial year’s STI offers.
2) Non-Monetary Benefits consist of car parking expense, travel & accommodation and entertainment.
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
80,956
707,744
64,527
754,299
3,075
3,075
(4,345)
272,797
2,895
2,895
(4,705)
164,322
(3,225)
154,818
21,770
422,643
28,010
420,373
20,505
417,021
17,469
407,469
3,701
160,531
14,316
344,316
2,273
102,681
26,399
391,206
19,452
384,085
21,743
411,743
11,578
378,555
18,299
308,299
11,908
301,655
10,005
294,940
–
–
219,942 3,446,878
146,664 3,358,589
219,942 4,241,032
146,664 4,194,305
3) 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.
42 | MyState Limited Annual Report 2020
Directors’ Report (continued)For the year ended 30 June 2020 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 (NED MSR).
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 NED MSR must
be achieved within four years of their appointment.
Managing Director Minimum Shareholding Requirement (MD MSR)
In the absence of approval from the Board to the contrary, the MD MSR will apply to the Managing Director. The MD MSR will
be 50% of TFR and must be achieved within 4 years of appointment.
Any MD MSR Shares issued into deferral, from the 2018 ELTIP Offer onwards, will be recognised for the purposes of the
MD MSR.
The Shares in MyState Limited (ASX code: MYS) may be held directly or indirectly, and may include Shares obtained prior to
commencement of employment 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.
Related Parties of KMP Shareholdings
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.
MyState Limited Annual Report 2020 | 43
Executives (other than Managing Director) Minimum Shareholding Requirements
Minimum shareholding requirements for Executives (other than the Managing Director) were lapsed by the Board on
16 July 2020. The relative size of the remuneration packages at MyState, and the legislative controls via the BEAR are
considered sufficient to align the interests of Executives with those of shareholders. Executives continue to be encouraged by
the Board to own MyState shares.
Key Management Personnel
Non-Executive Directors
Miles Hampton
Robert Gordon
Sibylle Krieger
Warren Lee
Vaughn Richtor
Andrea Waters
Sub Total
Executives
Melos Sulicich
Anthony MacRae
Gary Dickson
Heather McGovern
Mandakini Khanna
Paul Moss
Janelle Whittle
Craig Mowll
Sub Total
Number of
Shares at
Commencement
of Financial Year
Granted as
Compen-
sation to be
held by the
ELTIP trustee(1)
Number of
Shares at End
of Financial
Year
Number of
Shares at End of
Financial Year
held by ELTIP
Trustee(2)
Net Change
Other
721,700
25,387
24,443
11,972
–
20,665
804,167
–
–
–
–
–
–
–
28,300
750,000
1,200
1,689
12,032
2,500
1,428
47,149
26,587
26,132
24,004
2,500
22,093
851,316
–
–
–
–
–
–
–
96,235
16,822
6,029
119,086
53,910
–
–
–
6,287
6,287
1,404
–
–
–
–
6,056
5,793
2,232
–
–
–
–
221
221
3,310
–
–
–
–
12,564
12,301
6,946
–
110,213
30,903
9,781
150,897
–
–
–
12,564
12,301
2,232
–
81,007
1) These amounts are the shares awarded for the “2017 Offer”. The awarding of these shares was approved on 21 August 2020 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.
2) The shares that are held in trust are also shown in the balance at the end of the financial year totals and include those shares yet to be issued to
the trustee under the “2017 Offer”.
44 | MyState Limited Annual Report 2020
Directors’ Report (continued)For the year ended 30 June 2020
7. Loans to Key Management Personnel
There are no loans guaranteed or secured by the Company to KMP and their related parties in 2020.
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
Short Term
Incentive
(maximum)
TFR
ELTIP
(maximum)
Termination Provisions in
the Event of Termination
by the Company
Melos Sulicich(1)
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.
MyState Limited Annual Report 2020 | 45
Incumbent
Commenced
in Role
Contract
Term
Short Term
Incentive
(maximum)
TFR
Gary Dickson
19 October 2019
Ongoing
$400,000
30% of TFR
Mandakini Khanna
1 December 2015
Ongoing
$390,000
Anthony MacRae
12 February 2019
Ongoing
$390,000
Heather McGovern
18 March 2019
Ongoing
$330,000
Paul Moss
Craig Mowll
13 May 2015
Ongoing
$365,000
16 July 2018
Ongoing
$390,000
Janelle Whittle
22 January 2018
Ongoing
$290,000
ELTIP
(maximum)
30% of
TFR upon
invitation to
participate
Termination Provisions in
the Event of Termination
by the Company
Notice:
Each 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.
1) Required to hold shares to the value of 50% of TFR.
Signed in accordance with a resolution of the Directors.
Miles Hampton
Chairman
Hobart, dated this 21 August 2020
Melos Sulicich
Managing Director and Chief Executive Officer
46 | MyState Limited Annual Report 2020
Directors’ Report (continued)For the year ended 30 June 2020
Financial Report
For the year ended 30 June 2020
Results for the year
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
1.1
1.2
1.3
1.4
of accounting
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
4.7
Cash and liquid assets
Financial instruments
Loans and advances
Transfer of financial assets (securitisation
program)
Deposits and other borrowings including
subordinated notes
Other liabilities
Fair value of financial instruments
48
49
50
51
52
53
53
53
53
54
55
55
56
57
57
58
60
62
68
69
70
71
73
74
74
75
Section 5 Non-financial assets, liabilities and equity
5.1
5.2
5.3
5.4
Property, plant and equipment and
right-of-use assets
Intangible assets and goodwill
Employee benefit provisions
Share capital
Section 6 Discontinued operations
6.1
Discontinued operations
76
78
80
81
82
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
83
86
87
88
90
91
91
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
91
accounting standards and disclosures
MyState Limited Annual Report 2020 | 47
Consolidated Income Statement
Interest income
Interest expense (i)
Net interest income
Non-interest income from banking activities
Net banking operating income
Income from wealth management activities
Income from other activities
Total operating income
Less: Expenses
Personnel costs
Administration costs
Technology costs
Occupancy costs (i)
Marketing costs
Governance costs
Total operating expenses
Profit before impairment and tax expense
Impairment expense / (recovery) on loans and advances
Profit before tax from continuing operations
Income tax expense
Profit for the year from continuing operations
Discontinued operations
Profit 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)
30 June
2020
$’000
30 June
2019
$’000
188,330
202,103
(88,808)
(112,720)
99,522
13,699
89,383
15,733
113,221
105,116
15,636
15,298
3
–
128,860
120,414
37,417
15,518
14,751
5,461
5,250
2,556
80,953
47,907
4,921
42,986
12,926
30,060
35,657
15,131
13,614
6,060
4,589
2,944
77,995
42,419
(201)
42,620
12,842
29,778
–
30,060
1,209
30,987
30,060
30,987
32.86
32.86
34.17
34.17
Notes
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
(i) The current year balance reflects the application of AASB 16 Leases, comparatives have not been restated as permitted by the standard. Refer to
Note 9.4 (iii).
The accompanying notes form part of these financial statements.
48 | MyState Limited Annual Report 2020
Financial Report (continued)For the year ended 30 June 2020 Consolidated Statement of Comprehensive Income
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
Items that will not be reclassified subsequently to profit or loss
Changes in the fair value of equity investments at fair value through other
comprehensive income
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
The accompanying notes form part of these financial statements.
Notes
30 June
2020
$’000
30 June
2019
$’000
30,060
30,987
(184)
55
(400)
120
(1,000)
(1,129)
28,931
–
(280)
30,707
28,931
30,707
MyState Limited Annual Report 2020 | 49
Consolidated Statement of Financial Position
Assets
Cash and liquid assets
Due from other financial institutions
Other assets
Financial instruments
Loans and advances
Property, plant and equipment and right-of-use assets (i)
Deferred tax assets
Intangible assets and goodwill
Total assets
Liabilities
Due to other financial institutions
Deposits and other borrowings including subordinated notes
Employee benefits provisions
Other liabilities (i)
Tax liabilities
Total liabilities
Net assets
Equity
Share capital
Retained earnings
Reserves
Total equity
30 June
2020
$’000
30 June
2019
$’000
Notes
4.1
116,502
34,615
6,762
79,994
27,168
7,405
4.2
4.3
5.1
7.1
5.2
4.5
5.3
4.6
7.1
542,565
450,333
5,286,114
5,053,091
19,491
5,286
5,779
4,133
84,471
84,979
6,095,806
5,712,882
25,617
38,180
5,704,778
5,331,516
5,674
21,165
4,250
5,384
7,092
3,211
5,761,484
5,385,383
334,322
327,499
5.4
152,775
148,707
182,449
178,629
(902)
163
334,322
327,499
(i) The current year balance reflects the application of AASB 16 Leases, comparatives have not been restated as permitted by the standard. Refer to
Note 9.4 (iii).
The accompanying notes form part of these financial statements.
50 | MyState Limited Annual Report 2020
Financial Report (continued)For the year ended 30 June 2020 Employee
equity
benefits
reserve
$’000
Hedging
reserve
$’000
Other
reserves
$'000
Consolidated Statement of Changes in Equity
At 1 July 2018
Impact of adoption of new
accounting standards
Note
Share
capital
$’000
Retained
earnings
$’000
145,380
174,996
–
(1,338)
Restated opening total equity
145,380
173,658
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 2019
At 1 July 2019
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 2020
5.4
5.4
5.4
2.6
5.4
5.4
5.4
2.6
–
–
–
81
–
3,246
–
–
–
30,987
–
30,987
–
–
–
–
–
(26,016)
148,707
178,629
148,707
178,629
–
–
–
30,060
–
30,060
88
170
3,810
–
–
–
–
–
–
–
–
(26,240)
483
–
483
–
–
–
–
–
–
157
–
–
640
640
–
–
–
–
(170)
–
234
–
–
(197)
–
(197)
–
(280)
(280)
–
–
–
–
–
–
(477)
(477)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Total
$’000
320,662
(1,338)
319,324
30,987
(280)
30,707
81
–
3,246
157
–
(26,016)
327,499
327,499
30,060
(129)
(1,000)
(1,129)
(129)
(1,000)
28,931
–
–
–
–
–
–
–
–
–
–
–
–
88
–
3,810
234
–
(26,240)
152,775
182,449
704
(606)
(1,000)
334,322
The accompanying notes form part of these financial statements.
MyState Limited Annual Report 2020 | 51
Consolidated Statement of Cash Flows
Cash flows from operating activities
Interest received
Interest paid
Fees and commissions received
Other non-interest income received
Payments to suppliers and employees (i)
Income tax paid
(Increase)/decrease in operating assets:
Due from other financial institutions
Financial instruments
Loans and advances
Increase/(decrease) in operating liabilities:
Due to other financial institutions
Deposits and other borrowings including subordinated notes
30 June
2020
$’000
30 June
2019
$’000
Notes
202,671
214,453
(96,054)
(107,476)
26,893
32,026
3,400
1,224
(76,162)
(76,409)
(12,989)
(14,306)
(8,581)
(1,982)
(93,615)
(43,869)
(251,207)
(501,783)
(2,022)
1,679
371,464
533,314
Net cash flows from / (used in) operating activities
4.1
63,798
36,871
Cash flows from investing activities
Purchase of intangible assets
Proceeds from sale of property, plant and equipment
Purchase of property, plant and equipment
Proceeds from sale of discontinued operations
Net cash flows from / (used in) investing activities
Cash flows from financing activities
Employee share issue
Subordinated notes
Dividends paid net of dividend reinvestment plan
Net cash flows from / (used in) financing activities
Net increase / (decrease) in cash held
Cash at beginning of financial year
Closing cash carried forward
(4,425)
(4,934)
11
(637)
–
(5,051)
88
110
39
(610)
3,398
(2,107)
81
118
2.6
(22,437)
(22,845)
(22,239)
(22,646)
36,508
79,994
4.1
116,502
12,118
67,876
79,994
(i) The current year balance reflects the application of AASB 16 Leases, comparatives have not been restated as permitted by the standard. Refer to
Note 9.4 (iii).
The accompanying notes form part of these financial statements.
52 | MyState Limited Annual Report 2020
Financial Report (continued)For the year ended 30 June 2020
Notes to the Consolidated
Financial Statements
For the year ended 30 June 2020
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 address of its registered office and principal
place of business is 137 Harrington Street, Hobart Tasmania
7000. The consolidated financial statements of MyState
Limited and its subsidiaries (the Group) were authorised for
issue by the Directors on 21 August 2020.
1.3 Use of estimates and judgement
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;
• Impairment losses on loans and advances, refer note 4.3;
• Fair value of financial instruments, refer note 4.7;
• Impairment assessment of intangibles and goodwill, refer
note 5.2;
• Recoverability of deferred tax assets, refer note 7.1; and
• Application of newly adopted standard AASB 16 Leases,
refer note 9.4 (iii).
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.
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, Australian
Accounting Standards and Interpretations, and other
requirements of the law. The financial report complies with
Australian equivalents to International Financial Reporting
Standards (“AIFRS”).
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, comparative 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.
MyState Limited Annual Report 2020 | 53
2.1 Net banking operating income
Interest income
Loans and advances
Investment securities
Total interest income
Interest expense
At call deposits
Fixed term deposits
Financing cost – leases (i)
Total interest expense
Non-interest income from banking activities
Transaction fees
Loan fees
Banking commissions
Other banking operations income
Total non-interest income from banking activities
30 June
2020
$’000
30 June
2019
$’000
180,914
190,352
7,416
11,751
188,330
202,103
11,450
76,150
1,208
13,957
98,763
–
88,808
112,720
4,513
4,462
3,018
1,706
5,164
4,839
4,035
1,695
13,699
15,733
(i) The current period balance reflects the application of AASB 16 Leases, comparatives have not been restated as permitted by the standard. Refer
to Note 9.4 (iii).
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, and therefore effect 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.
54 | MyState Limited Annual Report 2020
Notes to the Consolidated Financial Statements(continued)For the year ended 30 June 2020 2.2 Income from wealth management activities
Funds management income
Other fees and commissions
Total income from wealth management activities
30 June
2020
$’000
10,315
5,321
15,636
30 June
2019
$’000
10,242
5,056
15,298
Funds management income and fiduciary activities
TPT Wealth Limited, a controlled entity of the Group, acts as Responsible Entity, Trustee and Funds Manager for nine
managed investment schemes. The investment schemes place monies with external wholesale fund managers, direct
mortgages and mortgaged 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 is 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
30 June
2020
$’M
1,069
402
30 June
2019
$’M
1,170
438
Other fees and commissions
TPT Wealth 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 income type 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 income type 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.
2.3 Income from other activities
Profit on sale of property, plant and equipment assets
30 June
2020
$’000
30 June
2019
$’000
3
–
MyState Limited Annual Report 2020 | 55
2.4 Expenses
The following items are included within each item of specified expenses:
Occupancy costs include:
Operating lease payments (i)
Depreciation – right of use lease assets (i)
Depreciation – buildings and leasehold improvements
Technology costs include:
Amortisation – computer software
Administration costs include:
Loss on disposal of property, plant and equipment assets
Depreciation – furniture, equipment and computer hardware
30 June
2020
$’000
30 June
2019
$’000
379
3,254
482
4,153
–
767
4,874
4,354
146
322
8
375
(i) The current period balance reflects the application of AASB 16 Leases, comparatives have not been restated as permitted by the standard. Refer
to Note 9.4 (iii).
Expense accounting policy
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 and
right-of-use assets 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
Right-of-use assets
40 years
4-7 years
4-15 years
3 years
3-10 years
2-15 years
Each year the useful life of assets are evaluated. The remaining useful life of select core banking systems has been revised
and extended in the current year as the Group has implemented significant increased functionality and, in turn, longevity of
these sytems over their initial capacity. The revised remaining useful life is within the above stated parameters however the
total life since original core system implementation is in excess of the above stated lives in some instances.
56 | MyState Limited Annual Report 2020
Notes to the Consolidated Financial Statements(continued)For the year ended 30 June 2020 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
30 June
2020
cents
32.86
–
32.86
32.86
–
32.86
30 June
2019
cents
32.84
1.33
34.17
32.84
1.33
34.17
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
91,491,358
90,676,336
Number
Number
2.6 Dividends
Dividends paid
2018 Final dividend paid – 14.5 cents per share
2019 Interim dividend paid – 14.25 cents per share
2019 Final dividend paid – 14.5 cents per share
2020 Interim dividend paid – 14.25 cents per share
Total dividends paid
Date of
payment
30 June
2020
$’000
30 June
2019
$’000
25 Sep 2018
29 Mar 2019
1 Oct 2019
2 Apr 2020
–
–
13,097
12,919
13,204
13,036
26,240
–
–
26,016
The dividends paid during the year were fully franked at the 30 per cent corporate tax rate.
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%
Franking credits that will arise from the payment of income tax payable at the end
of the period
There have been no dividends declared since the end of the financial year.
30 June
2020
$’000
30 June
2019
$’000
67,568
65,666
2,314
682
MyState Limited Annual Report 2020 | 57
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.
Wealth Management division
The Wealth Management division is a provider of funds management and trustee services. It operates predominantly
within Tasmania. It holds $1.069 billion (2019: $1.170 billion) in funds under management on behalf of personal, business and
wholesale investors as the responsible entity for nine managed investment schemes. The Wealth Management division is
conducted by TPT Wealth Limited which 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.
58 | MyState Limited Annual Report 2020
Notes to the Consolidated Financial Statements(continued)For the year ended 30 June 2020 Corporate and consolidation division
The corporate division is responsible for the governance of the Group. The corporate division 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 2020
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
188,105
(88,800)
4,513
4,462
3,018
1,914
–
–
515
182
(1)
–
–
–
–
10,315
5,321
–
113,727
15,817
27,267
19,272
14,067
5,070
4,878
604
4,888
11,335
26,346
6,107
2,951
563
359
349
104
33
1,610
3,741
43
(7)
–
–
–
(208)
–
–
(512)
(684)
4,043
(6,705)
121
32
23
1,848
–
(19)
(27)
Total
$’000
188,330
(88,808)
4,513
4,462
3,018
1,706
10,315
5,321
3
128,860
37,417
15,518
14,751
5,461
5,250
2,556
4,921
12,926
30,060
6,056,509
5,795,422
25,195
2,183
14,102
6,095,806
(36,121)
5,761,484
MyState Limited Annual Report 2020 | 59
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
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 Limited and MyState Bank Limited’s
credit rating.
60 | MyState Limited Annual Report 2020
Banking
$’000
Wealth
Management
$’000
Corporate and
Consolidation
$’000
201,763
(112,720)
5,164
4,839
4,035
1,814
–
–
–
244
–
–
–
–
–
10,242
5,056
–
96
–
–
–
–
(119)
–
–
–
Total
$’000
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
5,382,178
29,283
4,342
48,808
5,712,882
(1,137)
5,385,383
The Group’s capital management policy considers each of
internal, regulatory and rating agency capital requirements.
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) and
ConQuest 2010-1R.
Level 2 is comprised of the wider MyState Limited
prudential group. This group includes MyState Limited (the
Notes to the Consolidated Financial Statements(continued)For the year ended 30 June 2020 non-operating holding company), MyState Bank Limited, Connect Asset Management Limited (the Securitisation programme
Manager) and ConQuest 2010-1R.
All entities that are consolidated for accounting purposes are included within the Level 2 regulatory capital calculation except
for certain securitisation vehicles and TPT Wealth 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 TPT Wealth Limited. 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. 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 is detailed in the following table:
Qualifying capital
Common equity tier 1 capital
Paid-up ordinary share capital
Retained earnings
Reserves excluding general reserve for credit losses
Total common equity tier 1 capital
Less: 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
2020
$’000
30 June
2019
$’000
152,775
148,708
197,231
189,669
(310)
640
349,696
339,017
20,728
72,006
42,297
24,804
49,760
58,875
135,031
133,439
214,665
205,578
30,769
30,929
6,826
2,749
252,260
239,256
1,939,372
1,854,273
13.01%
12.90%
(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 had a term of 10 years to 14th August 2025, and paid interest quarterly at a floating rate equal to the three-month BBSW plus a margin of 5%
per annum. The issuer redeemed these notes on 14 August 2020 having obtained APRA’s prior written approval.
On the 10th July 2020, the Group issued $25 million of floating rate subordinated notes (“notes”). The issuer was MyState Limited. The notes have
a term of 10 years, maturing 10 July 2030, and pay interest quarterly at a floating rate equal to the three-month BBSW plus a margin of 4.35% per
annum. The issuer has the option to redeem these notes on 10 July 2025 and each quarterly interest payment date thereafter, and for certain
regulatory events (in each case subject to APRA’s prior written approval). On the same date, and with the same terms, MyState Bank Limited issued
$25 million of floating rate subordinated notes to MyState Limited with terms identical to those issued by MyState Limited.
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 28th 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. For the notes issued on 14th August 2015 and 28th September 2016, 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%.
MyState Limited Annual Report 2020 | 61
3.2 Financial risk management
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 in the Statement of Financial Position, 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.
30 June
2020
$’000
116,502
34,615
6,762
30 June
2019
$’000
79,994
27,168
7,405
542,565
450,333
700,444
564,900
5,286,114
5,053,091
147,881
112,999
6,134,439
5,730,990
Cash and liquid assets
Due from other financial institutions
Other assets
Financial instruments
Loans and advances
Customer commitments (i)
Maximum exposure to credit risk
(i) For further information regarding these commitments, refer to note 9.1.
62 | MyState Limited Annual Report 2020
Notes to the Consolidated Financial Statements(continued)For the year ended 30 June 2020 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. New facilities are loans that have been funded
within the financial year.
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
Loans and advances at amortised cost past due analysis
Not past due (i)
Past due but by:
31 to 60 days
61 to 90 days
More than 90 days
Total loans and advances at amortised cost
Estimate of collateral held against past due assets
30 June
2020
$’000
30 June
2019
$’000
382,699
310,243
317,745
254,657
1,304,934
1,370,251
591
1,116
3,954,565
3,661,887
26,024
19,837
5,986,558
5,617,991
5,254,085
5,030,186
8,889
4,750
7,461
2,658
18,390
12,786
5,286,114
5,053,091
45,027
34,033
(i) There is $536.358 million within this balance of borrowers that have been meeting their repayment obligations and have applied for payment
deferrals as a result of COVID-19. These loans are not considered “past due” by the Group.
MyState Limited Annual Report 2020 | 63
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.
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
Gross loans and advances at amortised cost
There are no loans that individually represent 10% or more of shareholders’ equity.
3.2.2 Market risk
Managing market risk
30 June
2020
$’000
30 June
2019
$’000
2,131,726
2,160,122
918,936
856,584
1,105,970
1,084,744
962,515
787,477
76,999
50,149
41,088
5,668
79,966
40,498
41,009
5,055
5,293,051
5,055,455
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 are subject to the risk of interest rate fluctuations as a result of mismatches in the timing of the
repricing of interest rates 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.
Value at risk (post-tax) based on historic data
Average
Minimum
Maximum
64 | MyState Limited Annual Report 2020
30 June
2020
$’000
30 June
2019
$’000
1,533
1,076
2,111
952
795
1,249
Notes to the Consolidated Financial Statements(continued)For the year ended 30 June 2020 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.
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 hedge’s
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 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.
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.
MyState Limited Annual Report 2020 | 65
On the 19th of March 2020 the RBA established a Term Funding Facility (TFF) that offered ADI’s three-year funding at a rate of
0.25% per annum to support the Australian economy through COVID-19. MyState Bank, the Group’s ADI, has been granted an
allowance of $109.032 million which may be drawn down until 30 September 2020. The drawn amount as at the reporting date
of $29.989 million is reported within “term deposits”. Funding obtained under the TFF has been secured by $35.620 million of
eligible asset backed self-securitisation.
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
2020
At call deposits
Due to other financial institutions
Term deposits
Negotiable certificates of deposit
Subordinated notes
Securitisation liabilities
1,986,905
–
–
–
–
–
–
25,617
–
–
–
–
1,025,116
920,749
38,756
219,096
427
9,965
1,281
–
–
–
–
1,986,905
25,617
1,984,621
229,061
92,130
276,391
1,206,010
–
1,574,531
6,830
35,710
44,248
Contractual amounts payable
1,986,905
1,362,386
1,208,386
1,251,596
35,710
5,844,983
–
122
1,410
8,753
–
10,285
Derivative liability
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
1,146,745
24,399
313,331
551
52,994
1,653
84,831
254,493
1,144,969
–
1,484,293
8,816
38,152
49,172
–
–
–
–
1,592,811
38,180
2,035,107
366,325
–
–
Contractual amounts payable
1,592,811
1,300,856
1,455,885
1,178,184
38,152
5,565,888
Derivative liability
–
95
960
7,722
–
8,777
66 | MyState Limited Annual Report 2020
Notes to the Consolidated Financial Statements(continued)For the year ended 30 June 2020 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.
Financial assets
Cash and liquid assets
Due from other financial institutions
Other assets
Financial instruments
Loans and advances (i)
Total financial assets
Financial liabilities
Due to other financial institutions
Other liabilities
Deposits
Subordinated notes
Securitisation liabilities
Total financial liabilities
Net contractual amounts
receivable / (payable)
30 June 2020
30 June 2019
Less than
12 months
$’000
More than
12 months
$’000
Total
$’000
Less than
12 months
$’000
More than
12 months
$’000
116,502
34,615
6,762
–
–
–
116,502
34,615
6,762
79,994
27,168
7,405
–
–
–
Total
$’000
79,994
27,168
7,405
313,261
229,304
542,565
295,956
154,377
450,334
69,741
5,216,373
5,286,114
89,100
4,963,991
5,053,091
540,881
5,445,677
5,986,558
499,623
5,118,368
5,617,992
(25,617)
(21,165)
–
–
(25,617)
(21,165)
(38,180)
(7,092)
–
–
(38,180)
(7,092)
(3,895,668)
(304,919) (4,200,587)
(3,969,844)
(24,398)
(3,994,242)
–
(34,808)
(34,808)
–
(34,698)
(34,698)
(368,521)
(1,100,862)
(1,469,383)
(296,987)
(1,005,589)
(1,302,576)
(4,310,971)
(1,440,589)
(5,751,560)
(4,312,103)
(1,064,685)
(5,376,788)
(3,770,090)
4,005,088
234,998
(3,812,480)
4,053,683
241,204
(i) Contractual recovery is subject to evolving regulatory and industry support for counterparties requesting such support, as at the reporting date,
the primary support provided to borrowers is repayment deferral periods.
MyState Limited Annual Report 2020 | 67
3.3 Average balance sheet and sources of net interest income
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 2020
30 June 2019
Average
balance
$’000
Interest
$’000
Average
rate
%
Average
balance
$’000
Interest
$’000
Average
rate
%
Average assets and interest income
Interest-earning assets
Cash and liquid assets
Financial instruments
Loans and advances (i)
94,219
494,983
241
7,175
0.26%
1.45%
67,178
370
425,122
11,381
4,873,672
180,914
3.71%
4,481,845
190,352
0.55%
2.68%
4.25%
Total average interest-earning assets
5,462,874
188,330
3.45% 4,974,145
202,103
4.06%
Non-interest earning assets
145,239
–
–
102,811
–
–
Total average assets
5,608,113
188,330
3.36% 5,076,956
202,103
3.98%
Average liabilities and
interest expense
Interest-bearing liabilities
Deposits and derivatives
4,033,629
54,751
1.36%
3,550,144
Notes and bonds on issue
1,457,203
32,849
2.25%
1,193,405
72,419
40,301
2.04%
3.38%
Total average interest-bearing
liabilities
5,490,832
87,600
1.60% 4,743,549
112,720
2.38%
Non-interest bearing liabilities
53,338
–
–
46,903
–
–
Total average liabilities
5,544,170
87,600
1.58% 4,790,452
112,720
2.35%
Reserves
310,388
–
–
302,877
–
–
Total average liabilities and reserves
5,854,559
87,600
1.50% 5,093,329
112,720
2.21%
(i) The offset account average balance included in Loans and advances is $264.109m (Jun 19: $263.897m)
68 | MyState Limited Annual Report 2020
Notes to the Consolidated Financial Statements(continued)For the year ended 30 June 2020
4.1 Cash and liquid assets
Notes, coins and cash at bank
Other short term liquid assets
Total cash and liquid assets
Reconciliation of profit for the year to net cash provided by operating activities
Profit for the year
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 / (gain) on sale of equipment
Bad and doubtful debts expense net of recoveries
Share based payment
Tax movement within reserves
Changes in assets and liabilities
Decrease / (increase) in due from other financial institutions
Decrease / (increase) in loans and advances
Decrease / (increase) in financial instruments
Decrease / (increase) in other assets
Decrease / (increase) in deferred tax assets
Increase / (decrease) in due to other financial institutions
30 June
2020
$’000
110,831
5,671
116,502
30 June
2019
$’000
66,972
13,022
79,994
30,060
30,987
804
4,874
–
143
4,921
234
55
1,142
4,354
(1,544)
(8)
(41)
157
769
(43,070)
44,097
(237,944)
(500,668)
(93,416)
(43,869)
1,331
(1,153)
(13,138)
–
(185)
3,562
Increase / (decrease) in deposits and other borrowings including subordinated notes
408,772
499,881
Increase / (decrease) in employee benefits provisions
Increase / (decrease) in tax liabilities
Net cash flows used in operating activities
Cash and liquid assets accounting policies
Cash and liquid assets
291
1,034
63,798
(50)
(1,713)
36,871
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.
Where operational income and expense accruals and prepayments are included in the above line items, the movements will
differ between the statement of financial position and the disclosure in this note.
MyState Limited Annual Report 2020 | 69
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 instruments
Financial instruments accounting policies
Financial instruments at amortised cost
30 June
2020
$’000
30 June
2019
$’000
298,616
204,115
35,700
35,700
207,178
208,611
2,117
1,699
543,611
450,125
(1,046)
–
(792)
1,000
542,565
450,333
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 4.7 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 Group 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.
70 | MyState Limited Annual Report 2020
Notes to the Consolidated Financial Statements(continued)For the year ended 30 June 2020 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
30 June
2020
$’000
30 June
2019
$’000
5,119,511
4,870,272
67,351
35,398
70,791
74,752
41,068
69,363
5,293,051
5,055,455
305
6,632
266
2,098
Total loans and advances at amortised cost net of provision for impairment
5,286,114
5,053,091
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
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
Less charge related to discontinued operation
Total impairment (recovery) / expense on loans and advances
30 June
2020
$’000
30 June
2019
$’000
266
39
–
305
2,098
4,595
(61)
6,632
39
4,595
(831)
1,118
–
4,921
222
514
(470)
266
2,271
(173)
–
2,098
44
(173)
(932)
1,020
(160)
(201)
The Group has undertaken a review of the expected credit loss of its lending portfolios against relevant specific economic
conditions triggered by COVID-19. The review considered the macroeconomic outlook, customer credit quality, the quality of
collateral held, exposure at default and the effect of payment deferral options as at the reporting date. These model inputs
including forward-looking information have been revised in recognition that COVID-19 is the key driver of forward looking
information. Whilst the inputs have been revised, the underlying methodology for calculating the ECL is consistently applied
MyState Limited Annual Report 2020 | 71
in the current and comparative period as described in the
‘Impairment of financial assets accounting policy’ presented
below.
In arriving at the reported ECL, the following assumptions
have been considered the more probable outcome as at the
reporting date:
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.
• Australian unemployment rates of approximately
9% recovering to pre-COVID-19 levels by the
2022 calendar year.
• House prices decline by 7% in the 2021 financial
year and recovering to pre-COVID-19 levels by the
2022 calendar year.
• The Reserve Bank of Australia maintaining the current cash
rate of 0.25% until 2023.
Future economic conditions that result in outcomes that
differ from the current estimate are possible and will be
accounted for in future periods.
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
nominal 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.
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 a
specific 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.
The 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.
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.
72 | MyState Limited Annual Report 2020
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.
Key judgements and estimates made by the Group include
the following:
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 its 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.
Notes to the Consolidated Financial Statements(continued)For the year ended 30 June 2020 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 carrying 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
30 June
2020
$’000
30 June
2019
$’000
541,940
468,506
Securitisation liabilities to external investors
528,081
435,200
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.
MyState Limited Annual Report 2020 | 73
4.5 Deposits and other borrowings including subordinated notes
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
2020
$’000
30 June
2019
$’000
1,986,905
1,592,811
1,984,621
2,035,107
229,061
366,324
4,200,587
3,994,242
34,808
34,698
1,469,383
1,302,576
5,704,778
5,331,516
3,941,537
3,661,618
259,050
332,624
34,808
34,698
1,469,383
1,302,576
5,704,778
5,331,516
(i) Refer to note 3.1 (i) 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 Other liabilities
Trade payables and related accruals
Lease liabilities (i)
Total other liabilities
30 June
2020
$’000
6,502
14,663
21,165
30 June
2019
$’000
7,092
–
7,092
(i) The current period balance reflects the application of AASB 16 Leases, comparatives have not been restated as permitted by the standard. Refer
to Note 9.4 (iii).
Lease liabilities
Lease liabilities are initially measured at the present value of the future lease payments at the commencement date,
discounted using the interest rate implicit in the lease (or if that rate cannot be readily determined, the lessee’s incremental
borrowing rate).
Lease payments are allocated between principal and interest expense. Interest expense is recognised as a financing cost
within interest expense (refer note 2.1) in the income statement over the lease period. Any variable lease payments not
included in the measurement of the lease liability are also recognised in the income statement in the period in which the
event or condition that triggers those payments occurs. Lease liabilities are remeasured when there is a change in future
lease payments arising from a change in lease term, an assessment of an option to purchase the underlying asset, an index or
74 | MyState Limited Annual Report 2020
Notes to the Consolidated Financial Statements(continued)For the year ended 30 June 2020 rate, or a change in the estimated amount payable under a residual value guarantee. When the lease liability is remeasured, a
corresponding adjustment is made to the carrying value of the Right-of-use (ROU) asset, or, in the income statement, where
the carrying value of the ROU asset has been fully written down. The ROU asset is recorded in property, plant and equipment
and right-of-use assets (refer to note 5.1).
4.7 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.
The aggregate net fair value of financial assets and financial liabilities which are carried at amortised cost is:
Financial assets
Financial instruments
Loans and advances
Total financial assets
Financial liabilities
Deposits
30 June 2020
30 June 2019
Carrying
value
$’000
Net fair
value
$’000
Carrying
value
$’000
Net fair
value
$’000
543,611
543,339
450,125
451,903
5,286,114
5,295,507
5,053,091
5,043,730
5,829,725
5,838,846
5,503,216
5,495,633
4,200,587
4,203,504
3,994,242
3,992,342
Other borrowings including subordinated notes
1,504,191
1,504,191
1,337,274
1,337,274
Total financial liabilities
5,704,778
5,707,695
5,331,516
5,329,616
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.
MyState Limited Annual Report 2020 | 75
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.
2020
Financial assets
Financial instruments
Loans and advances
Financial liabilities
Deposits
Other borrowings including subordinated notes
2019
Financial assets
Financial instruments
Loans and advances
Financial liabilities
Deposits
Other borrowings including subordinated notes
Level 1
value
$’000
Level 2
value
$’000
Level 3
value
$’000
Total value
$’000
–
–
–
–
–
–
–
–
543,339
–
543,339
–
5,295,507
5,295,507
4,203,504
1,504,191
–
–
4,203,504
1,504,191
451,903
–
451,903
–
5,043,730
5,043,730
3,992,342
1,337,274
–
–
3,992,342
1,337,274
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.
5.1 Property, plant and equipment and right-of-use assets
Land and buildings
At revalued amount
Accumulated depreciation
Plant and equipment
At cost
Accumulated depreciation
Right-of-use assets – land and buildings (i)
At cost
Accumulated depreciation
Total property, plant and equipment
30 June
2020
$’000
30 June
2019
$’000
12,890
12,758
(8,202)
4,688
5,395
(4,567)
828
16,429
(2,454)
13,975
19,491
(7,734)
5,024
5,044
(4,289)
755
–
–
–
5,779
(i) The current period balance reflects the application of AASB 16 Leases, comparatives have not been restated as permitted by the standard. Refer
to Note 9.4 (iii).
76 | MyState Limited Annual Report 2020
Notes to the Consolidated Financial Statements(continued)For the year ended 30 June 2020 Impairment of property, plant and equipment and right-of-
use assets
The carrying values of property, plant and equipment and
right-of-use assets 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 and right of
use assets
An item of property, plant and equipment or right-of-use
asset 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.
Property, plant and equipment accounting policy
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.
Plant and equipment and right-of-use (ROU) assets
Plant and equipment and right-of-use assets, including
leasehold improvements, are measured at cost less
accumulated depreciation and any impairment in value. The
cost of ROU assets correspond to the amount recognised
for the lease liability on initial recognition together with any
lease payments made at or before the commencement date
net of any lease incentives received and initial direct costs.
MyState Limited Annual Report 2020 | 77
5.2 Intangible assets and goodwill
Year ended 30 June 2020
At 1 July 2019, net of accumulated amortisation
65,152
19,827
84,979
Goodwill
$’000
Software
$’000
Total
$’000
Additions
Disposals
Amortisation
–
–
–
4,425
4,425
(59)
(59)
(4,874)
(4,874)
At 30 June 2020, net of accumulated amortisation
65,152
19,319
84,471
At 30 June 2020
Cost (gross carrying amount less impairment)
Accumulated amortisation
Net carrying amount
Year ended 30 June 2019
At 1 July 2018, net of accumulated amortisation
Additions
Disposal
Amortisation
65,152
36,784
101,936
–
(17,465)
(17,465)
65,152
19,319
84,471
65,978
–
(826)
–
19,247
4,934
–
(4,354)
85,225
4,934
(826)
(4,354)
At 30 June 2019, net of accumulated amortisation
65,152
19,827
84,979
At 30 June 2019
Cost (gross carrying amount less impairment)
Accumulated amortisation
Net carrying amount
65,152
–
32,550
(12,723)
97,702
(12,723)
65,152
19,827
84,979
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.
78 | MyState Limited Annual Report 2020
Notes to the Consolidated Financial Statements(continued)For the year ended 30 June 2020 Impairment testing of Goodwill
For the purpose of impairment testing, goodwill has been allocated to the Group’s two cash-generating units (CGU’s), 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
2020
$’000
40,189
24,963
65,152
30 June
2019
$’000
40,189
24,963
65,152
The Group’s assessment of goodwill value-in-use exceeds
the carrying value allocated to the CGU’s and included in the
financial statements.
The recoverable amounts for each CGU’s value-in-use
was determined using cash flow projections from Board
approved financial budgets for the year ending 30 June 2021.
Growth rates have been applied from year two through to
year ten. 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 10 years, based on an implied
terminal value earnings multiple of 11.8 and 12.8 for the
Banking Business and the Wealth Management Business
respectively, and a long-term growth rate not exceeding
industry. A post-tax discount rate of 8.5% (12.1% pre-tax)
and 7.8% (11.1% pre tax) was used for the Banking Business
and the Wealth Management Business respectively. 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 ten 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.
Average inflation is projected to be 2.2%. 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 projections reflect
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 divisions. 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
CGU’s) 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
MyState Limited Annual Report 2020 | 79
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.
5.3 Employee benefits provision
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
2020
$’000
30 June
2019
$’000
2,194
3,480
5,674
4,304
1,370
5,674
2,105
3,279
5,384
4,187
1,197
5,384
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.
80 | MyState Limited Annual Report 2020
Notes to the Consolidated Financial Statements(continued)For the year ended 30 June 2020 5.4 Share capital
Issued and paid up ordinary shares
Movements in ordinary share capital
Opening balance
Shares issued pursuant to the
– Group employee share scheme
– Executive long term incentive plan
– Dividend reinvestment plan
Closing balance
30 June
2020
$’000
30 June
2019
$’000
152,775
148,707
30 June 2020
30 June 2019
Number of
shares
Amount
$’000
Number of
shares
Amount
$’000
91,040,545
148,707
90,308,117
145,380
18,885
41,310
88
170
15,983
–
81
–
908,122
3,810
716,445
3,246
92,008,862
152,775
91,040,545
148,707
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 2020 | 81
6.1 Discontinued operations
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, TPT Wealth Limited. The sale was completed on 28 June 2019.
The post-tax gain on disposal of discontinued operations was determined as follows:
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
2020
$’000
–
–
–
–
–
–
–
–
–
–
–
–
30 June
2019
$’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 division. As the retail financial planning business
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:
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
82 | MyState Limited Annual Report 2020
30 June
2020
$’000
30 June
2019
$’000
–
–
–
–
–
–
–
–
–
–
2,447
(2,291)
1,544
1,700
(160)
1,540
(332)
(47)
48
1,209
Notes to the Consolidated Financial Statements(continued)For the year ended 30 June 2020 The net cash flows of the retail financial planning business are as follows:
Operating
Investing
Total
30 June
2020
$’000
–
–
–
30 June
2019
$’000
(535)
3,398
2,863
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
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:
Income tax expense attributable to:
Accounting profit before income tax
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
30 June
2020
$’000
30 June
2019
$’000
14,343
12,705
117
(141)
50
(1,443)
12,926
(139)
(458)
693
372
13,173
42,986
42,620
12,896
12,786
(24)
31
23
12,926
–
–
–
–
–
(24)
80
–
12,842
1,540
332
47
(48)
331
12,926
30.1%
13,173
29.8%
MyState Limited Annual Report 2020 | 83
Deferred income tax relates to the following:
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
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.
84 | MyState Limited Annual Report 2020
30 June
2020
$’000
30 June
2019
$’000
1,702
227
1,990
1,367
5,286
68
1,342
534
1,944
2,306
4,250
1,615
266
629
1,623
4,133
68
1,715
584
2,367
844
3,211
Deferred tax assets
Deferred tax liabilities
30 June
2020
$’000
4,133
1,092
61
–
5,286
30 June
2019
$’000
3,948
(482)
68
599
4,133
30 June
2020
$’000
2,367
(564)
–
141
1,944
30 June
2019
$’000
2,358
(110)
–
119
2,367
Deferred tax
Deferred income tax is provided on all temporary differences
at 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.
Notes to the Consolidated Financial Statements(continued)For the year ended 30 June 2020 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:
• 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.
MyState Limited Annual Report 2020 | 85
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
Liabilities
Other liabilities
Related party payables
Tax liabilities
Employee benefits 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
30 June
2020
$’000
30 June
2019
$’000
1,040
690
3,465
193
297
2,393
262,613
256,867
661
920
268,469
260,670
565
11
2,368
394
3,338
564
–
630
353
1,547
265,131
259,123
258,702
254,634
5,738
691
3,849
640
265,131
259,123
28,130
25,965
–
–
28,130
25,965
The parent entity has not entered into any guarantees and does not have any contingent liabilities as at 30 June 2020
(30 June 2019: 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.
86 | MyState Limited Annual Report 2020
Notes to the Consolidated Financial Statements(continued)For the year ended 30 June 2020 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.
Principal activities
Banking
Wealth Management
Manager of
Securitisation Vehicles
Country of
Incorporation
Ownership
Interest
Australia
Australia
Australia
100%
100%
100%
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.
Significant subsidiaries
MyState Bank Limited
TPT Wealth Limited
Connect Asset Management Pty Ltd
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.
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.
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.
MyState Limited Annual Report 2020 | 87
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, TPT Wealth 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
The Funds have:
Consolidated
TPT
30 June
2020
$’000
30 June
2019
$’000
30 June
2020
$’000
30 June
2019
$’000
10,315
10,242
10,315
10,242
2,297
10,802
190
289
316
161
8,499
217
• 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 and negotiable certificates of deposit, totalling $2.30M
(2019: $17.75M); and
• Invested in the ConQuest Trusts Residential Mortgage Backed Securities Program in the form of Class A and B notes
totalling $35.59M (2019: $57.77M).
These deposits are made on the same terms and conditions that apply to all similar transactions.
88 | MyState Limited Annual Report 2020
Notes to the Consolidated Financial Statements(continued)For the year ended 30 June 2020 Key Management Personnel
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
2020
$’000
30 June
2019
$’000
3,722
3,734
299
220
–
314
147
–
(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.
MyState Limited Annual Report 2020 | 89
9.1 Contingent liabilities and expenditure commitments
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
infrastructure developments;
• Local Government Authorities, Schools and other building owners, to secure the obligations of building contractors to
complete building works;
• Landlords, to secure the obligations of tenants to pay rent; and
• 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
30 June
2020
$’000
30 June
2019
$’000
77,755
63,443
4,672
50,529
59,092
3,378
145,870
112,999
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.
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 (2019: $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.
90 | MyState Limited Annual Report 2020
Notes to the Consolidated Financial Statements(continued)For the year ended 30 June 2020 9.2 Remuneration of auditors
During the financial year, the following fees which are shown exclusive of GST claimed were paid or payable for services
provided by the auditor of the Group, Wise Lord & Ferguson:
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
The Group restructured its subordinated notes portfolio, the
details of which are disclosed in note 3.1. In August 2020, the
Group announced the closure of six of its branch locations,
four in Queensland and two in Tasmania. A net financial
benefit is anticipated in relation to these closures in FY22.
There were no other 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.
30 June
2020
$’000
30 June
2019
$’000
390
390
46
8
54
64
64
508
382
382
46
12
58
33
33
473
(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:
• AASB 16 Leases
• IFRIC 23 Uncertainty over Income Tax Treatments
• Annual Improvements to AASBs 2015-2017 Cycle
(Amendments to AASB 3, AASB 11, AASB 112
and AASB123)
With the exception of AASB16 Leases, adoption of the above
has not resulted in any changes in how the Group currently
applies accounting standards.
The adoption of AASB 16 Leases has impacted the financial
statements this financial year.
AASB 16 Leases
The Group adopted AASB 16 Leases from 1 July 2019,
but has not restated comparatives as permitted under
the modified retrospective transitional provisions in the
MyState Limited Annual Report 2020 | 91
standard. The reclassification and adjustments arising from the new leasing rules are therefore recognised in the opening
consolidated statement of financial position on 1 July 2019.
On adoption of this standard, the Group recognised lease liabilities in relation to leases which had previously been classified
as ‘operating’ leases under the principles of AASB 117 Leases; the Group did not have any ‘finance’ leases. These liabilities
were measured at the present value of the remaining lease payments discounted using the lessee’s incremental borrowing
rate as of 1 July 2019. The lessees incremental borrowing rate applied to the leases range from 5 to 10%.
The costs incurred from operating leases not recognised as right-of-use assets under AASB 16 Leases are reported in
occupancy costs in the consolidated income statement. Depreciation charges relevant to the right-of-use lease assets are
reported in administration costs in the consolidated income statement (refer to note 2.4).
The Group utilised two practical expedients permitted by the standard. The first was to apply a single discount rate to a
portfolio of leases with reasonably similar characteristics. The second was to place reliance on previous assessments of
whether leases are onerous. The value of the right of use asset, before recognising any pre-existing onerous lease provisions,
is equal to that of the lease liability.
The following reconciles the balance in the prior year operating lease commitments note to the lease liability recorded on
1 July 2019.
Operating lease commitments at 30 June 2019 (i)
Recognition exemption for leases of less than 12 months
Increase from reassessment of probable future lease costs
Recognition exemption for leases of low value assets
Discounted using the incremental borrowing rate
Lease liability recognised at 1 July 2019
1 Jul 19
$’000
18,691
–
1,574
(39)
(4,986)
15,240
(i) As disclosed under AASB 117 in the Group’s Consolidated Financial Statements
The right-of-use assets are presented within Property plant and equipment & right-of-use assets. Lease liabilities are
presented within Other liabilities. Cash outflows under leases accounted for under the lease standard are $3.960M in the
current financial year.
92 | MyState Limited Annual Report 2020
Notes to the Consolidated Financial Statements(continued)For the year ended 30 June 2020 Directors’ Declaration
For the year ended 30 June 2020
In accordance with a resolution of the Directors of MyState Limited, we state that:
1. In the opinion of the Directors:
(a) The financial statements and notes of the Group set out on pages 48 to 92 are 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 2020 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 2020.
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 this 21 August 2020
Melos Sulicich
Managing Director and Chief Executive Officer
MyState Limited Annual Report 2020 | 93
Independent Auditor’s Report
For the year ended 30 June 2020
94 | MyState Limited Annual Report 2020
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 Liability limited by a scheme approved under Professional Standards Legislation. IInnddeeppeennddeenntt AAuuddiittoorr’’ss RReeppoorrtt To the Shareholders of MyState Limited RReeppoorrtt oonn tthhee AAuuddiitt ooff tthhee FFiinnaanncciiaall RReeppoorrtt OOppiinniioonn 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 2020, 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 2020 and of its financial performance for the year then ended; and II. complying with Australian Accounting Standards and the Corporations Regulations 2001. BBaassiiss ffoorr OOppiinniioonn 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. KKeeyy AAuuddiitt MMaatttteerrss 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. MyState Limited Annual Report 2020 | 95
11.. OOppeerraattiioonn ooff IITT ssyysstteemmss aanndd CCoonnttrroollss Key audit matter How our audit addressed the matter A significant part of the Group’s financial reporting process is heavily reliant on IT systems with automated processes and controls for the capture, processing, storage and extraction of information. An essential part of IT systems 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. We assessed and tested 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: • Technology control environment and governance; • Change management processes for software applications; • Access controls designed to enforce segregation of duties; • System development, reviewing the appropriateness of management’s testing and implementation controls; • 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. 22.. RReeccooggnniittiioonn aanndd MMeeaassuurreemmeenntt –– IInnttaannggiibbllee AAsssseettss Refer to Note 5.2 ‘Intangible assets and goodwill’ Key audit matter How our audit addressed the matter The Group continues to enhance its IT systems. During the financial year, a number of strategic projects were developed and implemented. New systems were researched, designed, projects commenced and completed. A review of the useful life of IT systems was undertaken. The recognition and measurement of costs capitalised through these projects requires judgement, particularly for internally generated intangible assets as to when the costs incurred on projects transition from research to development. MyState’s annual testing of impairment of goodwill requires a high level of judgement with significant forward looking assumptions used in the valuation models. 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; • We ensured intangible assets made redundant through new projects were written off; • We reviewed the useful lives applied to IT systems to ensure reasonable; and • We reviewed the goodwill valuation model and forward looking assumptions applied to each CGU of the Group. 96 | MyState Limited Annual Report 2020
Independent Auditor’s Report (continued)For the year ended 30 June 2020 33.. PPrroovviissiioonn ffoorr IImmppaaiirrmmeenntt oonn LLooaannss aanndd AAddvvaanncceess Refer to Note 4.3 ‘Loans and advances’ Key audit matters How our audit addressed the matter The provision for impairment on loans and advances 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. Provision for impairment of loans and advances that exceed specific thresholds are individually assessed by management with reference to future cash repayments and proceeds from the realisation of security. 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, and the impact of COVID-19 on these assumptions; • The design of the management overlays applied in response to significant economic events; and • The stress test modelling undertaken to verify provisioning levels. To address the risk of material misstatement and obtain sufficient audit evidence, we performed the following procedures over the provisions for impairment on loans and advances: • Assessed the governance oversight; • Reviewed and tested the calculation of the expected credit loss model, including the specific provision, collective provision for impairment and management overlays; • Considered the assumptions within the management overlays; • 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 financial assets in arrears had been appropriately provided; and • Reviewed management assessments of provision for loans that exceed specific thresholds. OOtthheerr IInnffoorrmmaattiioonn 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 2020, 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. RReessppoonnssiibbiilliittiieess ooff tthhee DDiirreeccttoorrss ffoorr tthhee FFiinnaanncciiaall RReeppoorrtt 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. MyState Limited Annual Report 2020 | 97
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. AAuuddiittoorr’’ss RReessppoonnssiibbiilliittiieess ffoorr tthhee AAuuddiitt ooff tthhee FFiinnaanncciiaall RReeppoorrtt0ur 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 andappropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting fromfraud 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 areappropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of theGroup’s internal control.•Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates andrelated disclosures made by the Directors.•Conclude on the appropriateness of the Directors’ use of the going concern basis of accounting and, based onthe audit evidence obtained, whether a material uncertainty exists related to events or conditions that may castsignificant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertaintyexists, we are required to draw attention in our auditor’s report to the related disclosures in the financial reportor, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidenceobtained up to the date of our auditor’s report. However, future events or conditions may cause the Group tocease to continue as a going concern.•Evaluate the overall presentation, structure and content of the financial report, including the disclosures, andwhether the financial report represents the underlying transactions and events in a manner that achieves fairpresentation.•Obtain sufficient appropriate audit evidence regarding the financial information of the entities or businessactivities 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 31-46
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Independent Auditor’s Report (continued)For the year ended 30 June 2020 adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. RReeppoorrtt oonn tthhee RReemmuunneerraattiioonn RReeppoorrtt OOppiinniioonn oonn tthhee RReemmuunneerraattiioonn RReeppoorrtt We have audited the Remuneration Report included in pages 10-25 of the Directors’ report for the year ended 30 June 2020. In our opinion, the Remuneration Report of MyState Limited, for the year ended 30 June 2020 complies with section 300A of the Corporations Act 2001. RReessppoonnssiibbiilliittiieess 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. DDAANNNNYY MMCCCCAARRTTHHYY Partner Wise Lord & Ferguson Chartered Accountants Date: 21 August 2020 Information relating to shareholders
For the year ended 30 June 2020
Range of Units (Snapshot) as at 21 August 2020
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 21 August 2020
Name
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
CITICORP NOMINEES PTY LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
NATIONAL NOMINEES LIMITED
CS THIRD NOMINEES PTY LIMITED
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