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2023 Report20 21ANNUAL REPORT Resimac Group Ltd ABN 55 095 034 003 Australian Credit Licence 247829 ASX: RMC S T N E T N O C 1 2 3 4 5 6 7 8 Who we are Chairman's message CEO's message Board of Directors Directors' report Remuneration report Financial statements Notes to the consolidated financial statements 4 6 8 10 12 20 36 42 Directors' declaration 9 10 Independent auditor's declaration 11 Independent auditor's report 12 Environment, social and governance 13 Shareholder information 14 Managing your shareholding 15 Corporate information 115 116 117 122 126 128 129 Who we are Resimac Group Ltd ('Resimac Group') is a leading non-bank lender and multi-channel distribution business, recognised as Non-Bank of the Year 2020 by the Australian Mortgage Awards. Its fully integrated business model comprises originating, servicing and funding prime, non- conforming residential mortgages and asset finance products in Australia and New Zealand. With a history dating back to 1985, Resimac Group has a proven track record of growth and stability. We are pleased to service over 50,000 customers with a portfolio of home loans on balance sheet of close to $14 billion and assets under management of over $15 billion. As a pioneer of the Residential Mortgage-Backed Securities ('RMBS') industry we have one of Australia’s most respected securitisation programs, having issued in excess of $35 billion in domestic and global markets since 1987. Resimac Group has access to a diversified funding platform with multiple warehouse lines provided by domestic and offshore banks for short-term funding in addition to a global securitisation program to fund its assets longer term. Thanks to our flexible funding programme, we provide solutions to a wide range of customers including the self-employed and contractors, as well as customers with previous credit impairments through our network of over 12,000 broker partners. Customers with a Resimac Group loan are entitled to an exclusive customer benefits program offering discounts on a vast array of products and services in Australia and New Zealand. Resimac Group is a profitable organisation with diverse income streams - net interest margin on principally funded loans, annuity trail income on non-principally funded loans and other fee income. We operate a proprietary servicing platform and have been issued a Standard & Poor's ('S&P') "STRONG" Servicer Ranking, which was reaffirmed in April 2021. OVER $15b ASSETS UNDER MANAGEMENT 2020 AUSTRALIAN MORTGAGE AWARDS N O N-BANK OF T H E Y E R A I I N O T S O P O R P E C V R E S R U O I ORIG INATION Wholesale, 3rd Party, Direct & White Label distribution channels SERVICING Underwriting, loan management, arrears management OPERATIONS Support functions, geographies FUNDING Warehouse and a global capital markets programme OUR BRAND AMBASSADOR Adam Gilchrist is the ambassador for our corporate brand. He is also the face of our direct channel, homeloans.com.au. When partnering with an organisation I look for credibility, the approach that the business takes to supporting its customers and how it conducts itself in the community. - Adam Gilchrist, Resimac brand ambassador ISSUED IN EXCESS OF $35b RMBS IN DOMESTIC & GLOBAL MARKETS A full range of home loans from Prime Lending and Specialist Lending products Strong funding capabilities - long standing warehouse relationships for short-term funding Diversified long-term funding platform with global multi-currency issuance programmes Well established white label arrangement with leading domestic banks Assets Under Management of over $15 billion Diversified distribution platform originating $4 billion+ p.a. 4 RESIMAC GROUP LTD ANNUAL REPORT 2021 5 | MESSAGE FROM OUR CHAIRMAN | MESSAGE FROM OUR CHAIRMAN Message from our Chairman Warren McLeland Dear shareholder, Resimac produced a remarkable financial result for the year to 30 June 2021. A net profit after tax of $103 million, was a record for your company, representing an astonishing growth of 87% over the previous year. 2021, was however, a roller coaster year in respect to operating conditions. Notwithstanding the positive impact of benign low interest rates, rising employment across the nation and high levels of liquidity in the economy (all of which manifested in an unexpectedly high level of demand for home finance), industry competitiveness was increasingly challenging. The six major banks were particularly aggressive in their eagerness to rebuild market share in home lending by squeezing pricing at every available opportunity. This behaviour reduced margins for all participants including the non-bank sector, which is basically reliant on wholesale funding. In the second half of 2021, we were forced to contend with the ongoing impact of COVID-19 and in particular, the new dramatically more infectious and severe Delta variant. Notwithstanding the business having to switch to full time working from home again, we were largely uninterrupted by COVID-19 and produced record business flow. By June, financial stress amongst borrowers had resurfaced, necessitating Resimac to once again provide mortgage repayment relief to support borrowers’ financial stress. Fortuitously, State/ Territories and Federal Governments have also provided much sought-after relief programmes to help lessen the burden on borrowers. The buoyant industry activity, not of all which favoured a trend for achieving low risk growth ambitions, demonstrates how outstanding our annual performance was to exceed our budgeted expectations. A major contributor to our success in 2021 has been stellar performance in our medium-term funding programmes, where once again Resimac’s pre-eminence in securitisation stood out! Our ability to consistently bring an increasingly wider variety of structures and diversified pools of mortgages to the Australian and international bond markets, attracts returning investors as well as encourages new investors into one of the world’s most stable, secure and low risk markets. The following summary demonstrates the diversity of our activities and the scope and size of our funding achievements for 2021. Resimac issued $5.8 billion across four currencies; AUD, JPY, NZD and USD. The bonds were distributed over seven jurisdictions including Australia (55%), USA (20%), Japan (10%), Asia ex Japan (10%), UK (4%), Europe (1%) and New Zealand (1%). Resimac’s global banking capacity exceeds $5 billion from major domestic banks and five international banks spread across Asia, Japan, Europe and the USA. Our dedicated team of professionals incessantly focuses on improving and enlarging our investor relations activities. Shareholders should understand that it is Resimac’s responsibility to satisfy investor needs. This means a necessity to maintain daily activity and be on top of trends in the world’s bond markets and to have the ability to reflect investor requirements when we bring a new securitisation transaction to the market. Resimac’s 30+ years of experience in securitisation is unequivocally a powerful competitive advantage, irrespective of whether the funding markets are liquid or tight. We are renowned for our conservatism and our long-standing partnership relationships with major local and international banks are testament to our stature in the world’s biggest markets. A major contributor to our success in 2021 has been stellar performance in our medium- term funding programmes, where once again Resimac's pre-eminence in securitisation stood out. I wish to draw shareholders’ attention to one business transformation initiative we have been undergoing for the last 2+ years. We are coming to an end of our biggest project capital investment in the company’s history with the digitalisation of our core operating IT systems capability providing end to end processing for our loan application to settlement procedure and processes. Subsequent to year end, the first phase of implementation went live in our New Zealand business in August with the totality of the project expected to be operational by January 2022. The productivity, efficiency and borrower experience benefits are profound, creating a paradigm shift in our ability to manage future growth in new business. Our new digital engine will be driving the power for creating fast workaround solutions to facilitate new product developments, solve existing bottlenecks and problems, and ultimately sustain top tier customer satisfaction benefits to enhance trust and loyalty from our chosen customer segments. Along with our securitisation capability, we expect digitalisation and our renewed focus on the customer will overall be our principal source of competitive positioning especially when combined with our low cost product manufacture, sharp pricing and distribution. On behalf of my colleagues on the Board, I acknowledge the incessant and major contribution of our CEO, Scott McWilliam to your company throughout the year. All successful organisations, especially when operating under conditions of stress and challenge, require effective leadership and superior consistent management. Scott has delivered that to Resimac in spades! To our employee team, we express our gratitude for their professionalism, enduring commitment, loyalty and teamwork. The pleasure has been ours to count them as colleagues and partners, working as one team to successfully fulfil our ambitious objectives. Warren J McLeland Chairman 6 RESIMAC GROUP LTD ANNUAL REPORT 2021 7 | MESSAGE FROM OUR CEO | MESSAGE FROM OUR CEO Message from our CEO Scott McWilliam FY21 was a watershed year for Resimac Group. While the pandemic continued to plague our economy, particularly in the second half due to the highly transmissible Delta strain, the housing market continued to boom, seeing double-digit growth nearly everywhere in Australia. Home Loan AUM Increased 11% New Zealand AUM Increased 35% Direct Channel AUM Increased 10% Resimac Group has been, and continues to be, well-placed to service the market’s momentum, with a strong value proposition across multiple customer segments - some of which are under- serviced by the major banks. initiatives we implemented to ensure staff continued to feel connected and included while working remotely. Importantly, we didn’t draw on JobKeeper or any other government support to subsidise our working capital. Our focus on meeting the needs and wants of customers has contributed in no small part to Resimac Group’s success in FY21. We continued to grow our book above system, leading to another record normalised NPAT of $104 million (up by 87% on FY20). We have achieved many milestones throughout the year, celebrating 35 years in business, winning Non-Bank of the Year at the 2020 Australian Mortgage Awards, launching our new homeloans.com.au direct channel, and acquiring 100% of International Acceptance Group (which we subsequently relaunched as Resimac Asset Finance). An unwavering commitment to our long- term growth will see us continue to invest in our people, our technology, and our operating model, all of which will support a more diversified business in the future. We’re proud of the support we’ve given our staff throughout the year, particularly with the various work/life balance Our investments in technology have been driven by the need to position our business as not just accommodating the needs and wants of customers today, but ensuring that we’re flexible enough to meet and exceed their expectations in the future. This digital transformation has been ongoing throughout FY21, with the initial staged rollout expected to complete in early 2022. But this is really just the start of an ongoing journey of evolving our business to remain relevant to our customers. Diversity of product has always been one of Resimac Group’s core strengths, and the launch of Resimac Asset Finance builds on this by enabling us to offer a full suite of lending products to consumers and commercial borrowers. We’re excited about the opportunities in this under-serviced market as we expand our footprint in asset finance and leverage the digital investments we’ve made in other areas of our business. Our focus on meeting the needs and wants of customers has contributed in no small part to Resimac Group's success in FY21. The value proposition offered by brokers remains as strong as ever, particularly within the current landscape, and their importance to our business cannot be underestimated. We have shown our support to the third party distribution channel in many ways this year, such as continuing to pay trail commissions for customers on payment moratoriums, and restructuring our product suite to support our wholesale distribution partners following the Best Interests Duty. With a growing market of customers who are comfortable transacting online, channel diversity is another key focus for Resimac Group. Increasingly, we’re seeing customers move away from traditional bricks and mortar retail distribution towards the flexibility and convenience of digital retail distribution. Recognising this opportunity, we’ve complemented our third party distribution channel with a new direct-to-consumer homeloans.com.au brand, giving customers choice in the way they interact and engage with us. Pleasingly, investor demand continues to be strong for our global funding program, which provides our business with a platform for future growth. Throughout FY21, we issued close to $6 billion of prime and non-conforming RMBS at the lowest senior margins since before the GFC. Stable funding markets and lower cost of funds provide us with a runway to aggressively target future growth in FY22 and beyond. We’re deeply thankful to the management team and staff for the formative role they have played in our success, notwithstanding the challenges posed this year by the pandemic. We’re also thankful for the continued support of our brokers, aggregators and other third-party distribution partners, all of whom are critical to the ongoing growth of our business. I would also like to extend my sincere thanks to our board for the invaluable service and support they have provided to our business over the last 12 months. Scott McWilliam CEO 8 RESIMAC GROUP LTD ANNUAL REPORT 2021 9 | BOARD OF DIRECTORS | BOARD OF DIRECTORS Board of Directors Resimac Group Ltd Warren McLeland Susan Hansen Wayne Spanner Duncan Saville Caroline Waldron Peter Fitzpatrick Chairman Independent Independent Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director Independent Non-Executive Director Company Secretary Warren is a former stockbroker and investment banker with over 35 years of experience in domestic and international financial services. In addition, Warren acts as an adviser in funds management and business strategy to companies operating in the Asia Pacific region. Warren is the former Executive Chairman of Resimac Limited. Susan is a Chartered Accountant and holds a Bachelor of Commerce degree and an MBA from the University of Cape Town. Susan has 35 years of experience including a Big Four Accounting firm and an investment bank (financial analysis and risk assessment). Susan is a Principal of a financial training organisation based in New Zealand. Wayne is currently the Global Chief Strategic Alignment, Innovation and People Officer of Norton Rose Fulbright. He was previously the Managing Partner of the Australian firm from 2012 to 2020. Wayne has extensive experience in executive management and corporate governance at Board level. Duncan is a Chartered Accountant and an experienced Non-Executive Director. He is chairman of ICM Limited, an international fund manager. Duncan is a fellow of the Institute of Chartered Accountants Australia and New Zealand, the Australian Institute of Company Directors and the Financial Services Institute of Australasia. Caroline is a Non-Executive Director and cross border advisor with over 30+ years’ experience in regulated consumer sectors such as technology, retail and health. Caroline brings to Resimac commercial and governance experience in many areas including technology rollouts and complex transactions. Caroline holds an LLB Hons (London), and has been admitted to the Bars of England and Wales, Malaysia, Australia and New Zealand. Peter is a Chartered Accountant who worked for a chartered accounting firm and oil explorer prior to joining Resimac Limited in 1987. Peter is responsible for the Group’s company secretariat function. He is a member of the Governance Institute of Australia and the Financial Services Institute of Australasia. Australia and New Zealand. 10 RESIMAC GROUP LTD ANNUAL REPORT 2021 11 | DIRECTORS' REPORT | DIRECTORS' REPORT Directors' report Resimac Group Ltd and its controlled entities The Directors of Resimac Group Ltd (“Resimac” or “the Company”) and its controlled entities (“the Group”) submit herewith the financial report for the financial year ended 30 June 2021. In order to comply with the provisions of the Corporations Act 2001, the Directors’ Report as follows: Information about the Directors Names and particulars of the Directors of the Company during or since the end of the financial year are: Mr Warren McLeland Chairman since February 2020 Non-Executive Director Mrs Susan Hansen Independent Non-Executive Director since October 2016 Warren is a former stockbroker and investment banker with over 35 years of experience in domestic and international financial services. In addition, Warren acts as an adviser in funds management and business strategy to companies operating in the Asia Pacific region. Warren is the former Executive Chairman of Resimac Limited. Susan is a Chartered Accountant and holds a Bachelor of Commerce degree and an MBA from the University of Cape Town. Susan has 35 years of experience including a Big Four Accounting firm and an investment bank (financial analysis and risk assessment). Susan is a Principal of a financial training organisation based in New Zealand. Other listed directorships (last three years): Other listed directorships (last three years): Chairman of Thorn Group Limited (since October 2019, Non-Executive Director of Utilico Emerging Markets Director since August 2019) Limited (since September 2013) Former Chairman of Somers Limited incorporated in Bermuda (resigned February 2021) Special responsibilities: Former non-executive Director of UIL Limited (resigned September 2019) Special responsibilities: Chairman of Resimac Group Ltd (since February 2020) Chairman of the Risk and Compliance Committee (since February 2017) Chair of the Audit Committee (since November 2016) Member of the Remuneration and Nomination Committee (since November 2016) Member of the Risk and Compliance Committee (since November 2016) Member of the Technology, Digital and Innovation Committee (appointed April 2021) Member of the Remuneration and Nomination Chair of Resimac NZ Home Loans Limited (since May Committee (since November 2016) 2012) Member of the Audit Committee (since August 2017) Mr Wayne Spanner Independent Non-Executive Director since February 2020 Wayne is currently the Global Chief Strategic Alignment, Innovation and People Officer of Norton Rose Fulbright. He was previously the Managing Partner of the Australian firm from 2012 to 2020. Wayne has extensive experience in executive management and corporate governance at Board level. Other listed directorships (last three years): Nil Special responsibilities: experience in many areas including technology rollouts and complex transactions. Caroline holds an LLB Hons (London), and has been admitted to the Bars of England and Wales, Malaysia, Australia and New Zealand. Other listed directorships (last three years): Nil Special responsibilities: Chair of the Technology, Digital and Innovation Committee (appointed April 2021) Member of the Remuneration and Nomination Committee (appointed January 2021) Chair of the Remuneration and Nomination Committee Company Secretary (since February 2020) Member of the Risk and Compliance Committee (appointed July 2020) Member of the Audit Committee (appointed July 2020) Mr Duncan Saville Non-Executive Director since November 2017 Duncan is a Chartered Accountant and an experienced Non-Executive Director. He is chairman of ICM Limited, an international fund manager. Duncan is a fellow of the Institute of Chartered Accountants Australia and New Zealand, the Australian Institute of Company Directors and the Financial Services Institute of Australasia. Other listed directorships (last three years): Non-Executive Director of West Hamilton Holdings Limited (since 2012); and Former Non-Executive Director of Somers Limited (retired February 2019). Special responsibilities: Member of the Technology Digital and Innovation Committee (appointed April 2021) Mrs Caroline Waldron Independent Non-Executive Director appointed November 2020 Caroline is a Non-Executive Director and cross border advisor with over 30+ years’ experience in regulated consumer sectors such as technology, retail and health. Caroline brings to Resimac commercial and governance Mr Peter Fitzpatrick since November 2016 Peter is a Chartered Accountant who worked for a chartered accounting firm and oil explorer prior to joining Resimac Limited in 1987. Peter is responsible for the Group’s company secretariat function. He is a member of the Governance Institute of Australia and the Financial Services Institute of Australasia. The abovenamed Directors held office during the financial year and since the end of the previous financial year. Directors’ shareholdings The following table sets out each Director’s relevant interest in shares and rights of the company or in a related body corporate as at 30 June 2021: Directors Fully paid ordinary shares Number of rights over ordinary shares Warren McLeland 12,126,338 Susan Hansen 203,730 Wayne Spanner 15,732 Duncan Saville 254,468,487 Caroline Waldron Nil Nil Nil Nil Nil Nil 12 RESIMAC GROUP LTD ANNUAL REPORT 2021 13 | DIRECTORS' REPORT | DIRECTORS' REPORT Remuneration of key management personnel Results and dividends Information about the remuneration of Key Management Personnel (KMP) is set out in the Remuneration Report section of this Directors’ Report. The term ‘KMP’ refers to those persons having authority and responsibility for planning, directing and controlling the activities of the Company and its controlled entities or indirectly, including any Director whether executive or otherwise of the consolidated entity. The information appearing on pages 15 to 18 forms part of the Directors’ Report for the financial year ended 30 June 2021 and is to be read in conjunction with the following information: FY21 $'000 FY20 $'000 Share options or rights granted to Directors and senior management PROFIT An aggregate of 387,478 shares were granted/exercised: 87,478 shares under the Employee Share Plan on 12 April 2021; Profit attributable to ordinary equity holders of the parent 107,557 55,908 300,000 options exercised by Scott McWilliam on 28 April 2021 in relation to the FY18 Long Term Incentive Plan. Further DIVIDENDS details included in the Remuneration report. Directors’ meetings The following dividends have been paid by the Company or declared by the Directors since the commencement of the financial year ended 30 June 2021: The following table sets out the number of Directors’ meetings (including meetings of committees of Directors) held during the financial year and the number of meetings attended by each Director (while they were a Director or committee member). (a) out of the profits for the year ended 30 June 2020 and retained earnings on the fully-paid ordinary shares: 7,334 6,087 Board meetings Audit COMMITTEES Risk and compliance Remuneration and nomination Technology, digital and innovation2 fully-franked final dividend of 1.80 cents (FY19: 1.00 cents) per share paid on 25 September 2020. fully-franked one off special dividend of nil cents (FY19: 0.50 cents) per share. (A) (B) (A) (B) (A) (B) (A) (B) (b) out of the profits for the half-year ended 31 December 2020 and retained earnings on the fully-paid ordinary shares: DIRECTOR Warren McLeland Susan Hansen Wayne Spanner Duncan Saville Caroline Waldron1 (A) 14 14 14 14 8 (A) Number of meetings eligible to attend. (B) Number of meetings attended. (B) 14 14 14 14 8 3 3 3 - - 3 3 3 - - 5 5 5 - - 5 5 5 - - 4 4 4 - 2 4 4 4 - 2 - 2 - 2 2 - 2 - 2 2 1 Appointed Independent Non-Executive Director in November 2020. 2 The Technology, Digital & Innovation committee was formed in April 2021 to provide oversight on the Group’s strategic direction. fully-franked interim dividend of 2.40 cents (HY20: 1.20 cents) per share paid on 31 March 2021. (c) out of the profits for the full year ended 30 June 2021 and retained earnings on the fully- paid ordinary shares: 9,786 4,879 16,336 7,334 fully-franked final dividend of 4.00 cents (FY20: 1.80 cents) per share declared on 30 August 2021 The Company’s Dividend Reinvestment Plan (DRP) was applied to all dividends. Principal activities The Group is a residential mortgage and asset finance lending business, distributing Prime and Specialist products across multiple channels. The Group operates in Australia and New Zealand, originating a high quality loan portfolio, loan servicing capability, and global funding program. The Group’s core capabilities include: Product manufacturing: The Group applies its detailed knowledge of the Australian and New Zealand markets to offer products to address demand, with attractive risk and return profiles Distribution: Distributing loans in Australia and New Zealand through relationships with accredited brokers, wholesale partners and a direct-to-consumer channel; Treasury and funding expertise: Strong long-term relationships with global funding partners, the Group is an experienced issuer in the global and domestic term securitisation markets; and Risk management: Operating a holistic enterprise risk management and governance framework utilising the three lines of defence model. 14 RESIMAC GROUP LTD ANNUAL REPORT 2021 15 | DIRECTORS' REPORT | DIRECTORS' REPORT Debt funding The Group maintains access to a diversified funding platform supported by established funding relationships and a Board approved funding strategy. The following funding channels are used to support the Group’s lending activities: Corporate debt facility: Utilised for investment in business growth; Term securitisations: Loans that are initially funded via a warehouse facility, are pooled and refinanced by being sold to new funding vehicles that issue limited- recourse independently rated asset-backed securities to institutional investors in multiple jurisdictions; Warehouse facilities: Third-party funders provide limited-recourse financing to special purpose vehicles established by the Group. At 30 June 2021, the Group had three onshore and four offshore warehouse funders; and Wholesale funding partners: Provide white-label funding with the Group receiving net interest margin. Principal risks The Group’s key risks include but are not limited to: Funding risk: The funding platform currently comprises a mix of warehouse facilities, term securitisations and corporate debt. The Group depends on these sources to fund mortgage originations; Capital and liquidity requirements: The Group is required to maintain sufficient liquidity levels under Australian Financial Services Licence requirements; A risk exists that the Group could be required to contribute additional ‘first loss’ equity capital to support the credit position of senior ranking note holders in the warehouse facilities and term securitisations which could impact the Group’s profitability, ability to grow and/or could force it to raise additional capital; Regulatory and licence compliance: The Group is subject to extensive regulation in each of the jurisdictions in which it conducts business. The Group holds eight Australian Credit Licences. Changes in laws or regulations in a market in which the Group operates could impact the business. The Group is licensed and/ or registered to operate a number of its services across a range of jurisdictions. Changes to these licensing regimes, the revocation of existing licences, an inability to renew or receive necessary licences or a change in capital requirements could have a material adverse effect on the Group’s business, operating and financial performance; Macroeconomic environment: A material downturn or increase in unemployment, decreases in house prices, higher interest rates, general reduction in demand for credit and/or a reduction in borrowers’ ability to service their debt (credit risk); and COVID-19: The Group will continue to monitor the effects of COVID-19 on business performance and take action as required. COVID-19 enforced lockdowns and border closures continue to provide macroeconomic headwinds to the economy, with pockets of financial stress evident. The Group’s diversified portfolio and conservative credit policies is assisting the Group to manage COVID-19 headwinds. Review of operations The Group generated a net profit after tax (NPAT) of $107,557,000 for the year ended 30 June 2021. To reflect the Group’s normalised earnings the NPAT has been adjusted to separate one-off items. Management believe the disclosure of the normalised NPAT provides additional insight into the underlying performance for the year, by excluding one off, non-recurring revenue items. The following table reconciles the unaudited normalised earnings to the statutory NPAT for the year in accordance with International Financial Reporting Standards (IFRS). FY21 Business strategy UNAUDITED NON-IFRS INFORMATION $'000 Statutory NPAT1 Fair value gain on investment in financial asset (Athena) 107,557 (5,110) Tax effect of normalised items 1,533 Normalised NPAT 103,980 1 Excludes $249k NPAT attributable to Non-Controlling interest. Net interest income increased 29% to $242,744,000 on prior year driven by higher net interest margin and assets under management growth. Operating expenses of $70,677,000 increased 14% on prior year driven by core banking and origination IT project, higher employment and marketing costs. Loan impairment expense decreased 88% to $2,676,000 on prior year due to COVID-19 provision in FY20. Total home loan settlements across the Group’s direct and third party distribution channels were $4.8 billion, up 3% on prior year. The Group is focused on a number of growth strategies to continue to drive revenue and profitability. 1. Organic lending growth The Group is well-positioned to continue strong volume growth driven by: Customers favourably viewing the Group as an alternative to the major lenders; Opportunity to grow volume in the Specialist and Prime segments of the residential mortgages market; Opportunity to grow volume in the asset finance segment under the newly acquired Resimac Asset Finance brand; Launch of the new direct to consumer brand homeloans.com.au; Launch of the new digital customer banking environment in FY22; Further investment in the Group’s brand positioning; and Pursuing diversification opportunities in Australia and New Zealand. 2. Growth through acquisition Management has demonstrated an ability to identify and execute profit accretive acquisitions in targeted markets consistent with the Group’s strategy; On 1 February 2021 Resimac acquired the remaining 40% interest in Resimac Asset Finance (“RAF”, formerly known as “IA Group”), increasing its ownership from 60% to 100%. RAF is a finance company participating in both secured commercial and consumer lending. The investment aligns with Resimac’s diversification strategy and facilitates expansion into new secured asset classes. The Group’s assets under management at 30 June 2021 comprise: On balance sheet home loans and advances to customers of $13.8 billion, up 11% compared to 30 June 2020; On balance sheet asset finance loans of $0.1 billion White label portfolio of $1.9 billion, down 24% compared to 30 June 2020 in line with the Group’s strategy to cease originating White label loans; and Combined these make up the total assets under management of $15.8 billion. COVID-19 The impact of COVID-19 on customer serviceability decreased during the year, however continues to present challenges to a small portion of the Group’s customers. Resimac’s conservative approach to credit risk and strong funding relationships have mostly insulated the impacts of COVID-19. Resimac remains committed to the safety of employees and supporting customers and the broader community through the ongoing challenges COVID-19 poses. Resimac continues to support customers throughout their home loan journey, particularly where impacted by one off events. Resimac provided financial assistance to customers impacted by COVID-19 in the form of hardship payment moratoriums and repayment flexibility during the year and continues to work with individual customers who require ongoing assistance. Whilst the economic rebound in FY21 in Australia was comforting, we expect FY22 to provide further macroeconomic challenges. Australia’s vaccine rollout remains slow in comparison to other countries, whilst State lockdowns and border closures continue to drive economic headwinds. Furthermore, international borders are expected to remain closed for the majority of FY22 stifling the recovery in a number of industries. Political Donations In the year ended 30 June 2021, the Group’s political contributions totalled $10,000 to the Liberal National Party of Australia. 16 RESIMAC GROUP LTD ANNUAL REPORT 2021 17 | DIRECTORS' REPORT Funding programmes During the year ended 30 June 2021, the following new Residential Mortgage Backed Securities (RMBS) and Medium Term Notes (MTNS) were issued to facilitate assets under management growth, optimise term duration and funding costs: The RESIMAC Bastille Series 2020-1NC transaction was settled on 30 July 2020 and is a domestic non- conforming issue with a total issuance size of $1 billion; The RESIMAC Versailles Series 2020-1 transaction was settled on 10 September 2020 and is a New Zealand prime and non-conforming issue with a total issuance size of NZ$300 million; The RESIMAC Premier Series 2020-1 transaction was settled on 1 October 2020 and is a multi-currency prime issue with a total issuance size of $1 billion equivalent; The RESIMAC Premier Series 2020-3 transaction was settled on 10 December 2020 and is a multi-currency prime issue with a total issuance size of $1 billion equivalent; The RESIMAC Premier Series 2021-1 transaction was settled on 11 March 2021 and is a multi-currency prime issue with a total issuance of $1.5 billion equivalent; and The RESIMAC Bastille Series 2021-1NC transaction was settled on 29 April 2021 and is a domestic non- conforming issue with a total issuance size of $1 billion equivalent. Indemnification of officers and auditors During the financial year, the Company paid a premium in respect of a contract insuring the Directors of the Company, the Company Secretary and all executive officers of the Company against a liability incurred as such a Director, Secretary or executive officer to the extent permitted by the Corporations Act 2001. The contract of insurance prohibits disclosure of the nature of the liability and the amount of the premium. The Company has not otherwise, during or since the financial year, except to the extent permitted by law, indemnified or agreed to indemnify an officer or auditor of the Company against a liability incurred. 18 RESIMAC GROUP LTD Subsequent events Final dividend declared The Board of Resimac Group Ltd has declared a fully franked final dividend of $0.04 per share. The Record Date is 3 September 2021. The payment date will be 21 September 2021. The dividend has not been provided for in this financial report. Sale of White Label portfolio On 27 July 2021 Resimac executed the sale of $0.2b of White label loans (off balance sheet) for consideration of $1.6m plus GST. The net present value of this loan tranche future trail commission receivable is $1.4m, and is recognised on the Statement of Financial Position at 30 June 2021. A gain of $0.2m on the sale will be recognised in FY22. Non-audit services Details of amounts paid or payable to the auditor for non- audit services provided during the year by the auditor are outlined in Note 28 to the financial report. The Directors are satisfied that the provision of non-audit services during the year, by the auditor is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The Directors are of the opinion that the services as disclosed in Note 28 to the financial report do not compromise the external auditor’s independence, based on advice received from the Audit Committee, for the following reasons: All non-audit services have been reviewed and approved to ensure that they do not impact the integrity and objectivity of the auditors; and None of the services undermine the general principles as set out in APES Code of Ethics for Professional Accountants issued by the Accounting Professional and Ethical Standards Board, including reviewing or auditing the auditor’s own work, acting in a management or decision making capacity for the Company, acting as advocate for the Company or jointly sharing economic risks and rewards. Auditor’s independence declaration The auditor’s independence declaration is included on page 116 of this financial report. Rounding off amounts Unless otherwise indicated, the Company has rounded off amounts in this Directors’ Report and the accompanying financial statements to the nearest thousand dollars in accordance with ASIC Corporations Instrument 2016/191. Total home loan settlements across the Group's direct and third party distribution channels were $4.8 billion, up 3% on prior year. | REMUNERATION REPORT | REMUNERATION REPORT Remuneration report 2021 (Audited) KMP remuneration policy (excl. Non-Executive Directors) Remuneration objectives, strategy and principles Remuneration and cultural activities Summary Key management personnel S 1 T 2 N E 3 T 4 N O 5 C 6 7 8 9 10 Other remuneration information Statutory remuneration FY21 outcomes Non-Executive Director remuneration Long-term and short-term incentive plans 21 21 21 22 22 24 24 26 28 31 R U O S E U L A V QUALITY PASSION RESPECT AGILITY PROFESSIONALISM & INTEGRITY ACCOUNTABILITY 1. Summary This Remuneration Report provides shareholders with an overview of Resimac Group’s (the Group) remuneration strategy and framework that applies to the Group’s Directors, Key Management Personnel (KMP), Executive Management and employees (referred to collectively as Employees) for the year ended 30 June 2021. Resimac’s mission is to be a customer focused organisation, leveraging technology and data analytics coupled with expansion of our sustainability and Environment, Social and Governance (ESG) footprint. This mission is facilitated by promoting a culture of transparency, innovation and empowerment and establishment of a remuneration framework that provides positive outcomes for our customers, shareholders and employees while providing fair and equitable benefits. 2. Remuneration objectives, strategy and principles The Group’s objective is to rewards its employees with a level of remuneration and benefits that is commensurate with their individual responsibilities and position within the business. The Board’s remuneration strategy is aligned to the following objectives: To attract, motivate and retain high calibre employees to drive outcomes; Total remuneration for KMP is achieved by a balance of fixed and variable components; Key Performance measures for Resimac management (i.e. KMP and executive management) are linked to both financial and non-financial measures, and designed to be in the best interest of all stakeholders including customers and shareholders; Fixed and variable remuneration for KMP are periodically benchmarked to ensure remuneration is in line with the external market; Pay parity is paramount. Fair and equitable remuneration is applied to all employees regardless of gender, sexual identity, age, religion, ethnicity or disability. 3. Remuneration and cultural activities Continuous review and assessment of our remuneration and benefits continued throughout FY21 with a number of initiatives being included as part of the Renumeration and Cultural Activities plan. These activities included: Employee Diversity & Inclusion survey; Pay parity reporting; Establishment of an Employee Share Scheme offered in March 2021 to all permanent employees with more than 6 months tenure; Introduction of Purchased Leave for employees with To provide fair and equitable remuneration to all more than 6 months tenure; employees in line with the Group’s Diversity & Inclusion Policy; To promote and reward behaviours within the business that are in the interest of all stakeholders which includes customers and shareholders; Align effective risk management and demonstration of appropriate behaviours, values and ethics; To reinforce a culture of continual employee growth and skills development; To ensure the Group’s Governance framework operates within and above industry best practice. The following principles provide the basis of the remuneration framework at Resimac: Resimac remunerates its employees in a manner that is market competitive whilst being acceptable to its shareholders; Flexible working arrangements expanded to allow for eligible employees to work from home 2 days per week Active encouragement of ‘Keeping in Touch Days’ for employees on parental leave; Expansion of existing Wellbeing Program including wellness hours, mindfulness program, professional online exercise classes and senior leadership health assessments; Workforce planning by identifying individual career development plans, training and development and shadowing opportunities. The purpose of the activity is to enhance career development through the identification of skills, interests and learning opportunities, and to assist with succession planning. This activity enabled risk mitigation strategies and further employee engagement activities to be implemented after gaining an understanding of modernised workforce motivators. ANNUAL REPORT 2021 21 | REMUNERATION REPORT | REMUNERATION REPORT 4. Key management personnel The KMP are the people who have the authority and responsibility for planning, directing, implementing and controlling the activities of the Resimac business. The KMP are: Position Term as KMP Name CURRENT Scott McWilliam Jason Azzopardi Chief Executive Officer (CEO) Chief Financial Officer (CFO) Andrew Marsden General Manager - Treasury and Securitisation Danielle Corcoran General Manager - Governance, Change and Culture Majid Muhammad General Manager - Technology FORMER Full term Full term Full term Full term Full term Mary Ploughman Joint Chief Executive Officer (Joint CEO) N/A1 1 Referenced due to Remuneration drawn in FY20, did not serve as KMP in FY21. The Directors classified as KMP and required to be disclosed as part of this report are: Name CURRENT Position Term as KMP Warren McLeland Chairman, Non-Executive Director Susan Hansen Duncan Saville Independent Non-Executive Director Non-Executive Director Wayne Spanner Independent Non-Executive Director Full term Full term Full term Full term Remuneration is based on the: 5.3. Long-term incentive (LTI) role in which the person is performing (i.e. accountability, responsibility, qualifications, skills and experience required); market benchmarking; performance against set Key Performance Indicators (KPIs); and The LTI is a combination of an equity arrangement of options over ordinary shares and a cash component (pursuant to the Resimac Group Ltd Employee Share Option and Rights Plan Rules). The grant of options relies on the satisfaction of service and performance conditions over a 3 year period. achievement of performance hurdles which includes The aim of the LTI is: tenure. The KMP remuneration arrangements are as follows: 5.1. Fixed remuneration The fixed component includes base salary and superannuation and is known as Total Fixed Remuneration (TFR). Annually the TFR for the role in which the KMPs and Executive Managers are performing is reviewed to market and considered by the Remuneration and Nomination Committee. 5.2. Short-term incentive (STI) Each KMP and Executive Manager is eligible to receive an annual STI. The Committee approves annual STI, corporate and personal objectives for each KMP and Executive Manager which comprise financial and non- financial targets at the end of each performance period (i.e. 1 July to 30 June). The Committee measures KMP and Executive Managers performance against those objectives. The amount of an STI award will depend on whether and to what extent those objectives are achieved. The STI assessment is undertaken in July of each year and any award is payable in September of the same year. to retain key talent; to link performance measures that align with sustainable long-term growth; to align long-term company performance with shareholders expectations; and to ensure continual regulatory and compliance adherence. The graphs below set out the relative mix of TFR, STI and LTI for: Scott McWilliam, CEO Other KMP 37% 42% CEO 21% OTHER KMP 54% 32% 14% TFR STI LTI TFR STI LTI Caroline Waldron Independent Non-Executive Director Appointed 17 November 2020 KPIs include: FORMER Chum Darvall Chairman, Independent Non-Executive Director Michael Jefferies Independent Non-Executive Director N/A1 N/A1 1 Referenced due to Remuneration drawn in FY20, did not serve as KMP in FY21. 5. KMP remuneration policy (excl. Non-Executive Directors) Resimac’s remuneration strategy for KMP and Executive Management focuses on both financial and non-financial measures and the Board’s Remuneration & Nomination Committee assist with reviewing and recommending remuneration arrangements for KMP and Executive Management that is both consistent and competitive with the market. The total remuneration of the KMP and Executive Management comprise a fixed component and an at-risk variable component. The at-risk variable component is comprised of a short-term and long-term incentive. Strategic (brand awareness and acquisition activity); Financial metrics including NPAT growth, cost to income ratio and demonstrated innovative cost initiatives; Innovation and technology initiatives and enhancements to allow for scale and digitalisation; Operational efficiency and effectiveness to allow scale; People and culture; and Governance through Resimac’s Risk and Compliance frameworks which focuses on adherence to obligations, reduction of customer complaints, incidents and breaches. 22 RESIMAC GROUP LTD ANNUAL REPORT 2021 23 | REMUNERATION REPORT | REMUNERATION REPORT 6. Long-term and short-term incentive plans 6.2. Short-term incentive plan (STIP) 7.1. Overview of company performance The table below summarises details of Resimac’s performance for key financial measures over the past four financial years. FY21 FY20 FY19 FY18 FINANCIAL YEAR ENDED 30 JUNE NPAT ($'000)1 107,557 55,908 47,185 25,332 Total dividends per share (cents) Dividend payout ratio (%) 4.00 24.3 2.70 19.6 1.90 1.65 16.1 25.9 Basic earnings per share (cents) 26.37 13.75 11.75 6.37 Return on equity (ROE) (%)2 Return on assets (%)3 36.9 7.3 25.5 4.3 17.3 4.4 17.2 2.8 6.1. Long-term incentive plan (LTIP) FY18 LTI Plan: CEO The CEO, Scott McWilliam, was offered a LTI in FY18. The details of the offer were: Granted 900,000 Options pursuant to the Resimac Group Employee Share Options and Rights Plan; Grant Date 18 August 2017; Exercise price of $0.55 per option; Options vest in equal tranches of 300,000 on each anniversary of the Grant Date: First tranche of 300,000 vested on 1 July 2018 and was exercised on 26 April 2021, Second tranche of 300,000 vested on 1 July 2019 and is exercisable, Third tranche of 300,000 vested on 1 July 2020 and is exercisable. Exercise period was 3 years for every tranche vesting; and Vesting condition was 100% tenure. FY20 LTI Plan: KMPs and Executives In 2019 the Board established a Long-Term Incentive Plan (LTIP) for the CEO, KMPs and executive management pursuant to the Resimac Group Ltd Employee Share Option & Rights Plan Rules. The CEO, KMPs and eligible executives were offered options over ordinary shares, and a combined total cash component of up to $2.4m. 3,900,000 options were granted on 15 August 2019 (900,000 allocated to the CEO and 375,000 for each eligible Executive). The vesting date for all options is 31 August 2022, subject to the Group achieving: Net Profit After Tax (NPAT) growth hurdles; Digital transformation; Compliance hurdles; and Participant remaining employed with the Group until the vesting date. KMPs and executives participate in the annual STIP whereby they have an opportunity to earn up to a capped percentage of their TFR. CEO, Scott McWilliam is eligible for a STI up to a cap of 75% of his TFR. Mr McWilliam’s performance is assessed against predetermined KPIs by the Remuneration and Nomination Committee at the end of each performance period. Any STI awarded is paid in cash; 66.7% at the end of the performance period with the remaining 33.3% in cash deferred for 12 months subject to a look back being undertaken by the Remuneration and Nominations Committee. The performance of KMPs and Executives are measured against predetermined KPIs assessed by the CEO at the end of each performance period and the Remuneration and Nomination Committee are responsible for reviewing and approving any awarded STI which will be paid 100% in cash at the end of the performance period. KPIs and relevant measurements will be set at the commencement of the performance period and will be assessed by the Remuneration and Nomination Committee at the end of each performance period. 7. FY21 outcomes With consideration of the uncertain economic environment due to the impact of COVID-19 in FY21, the Remuneration and Nominations Committee determined that KMPs (including the CEO) would not receive an increase in fixed remuneration for FY21 however remained eligible to participate in the short-term incentive plan for FY21. The long-term incentive plan granted to eligible executives remains in place. In July 2021, the Remuneration & Nominations Committee resolved to recommend to the Board that the KMPs (including the CEO) be eligible for a remuneration review, resulting in an increased to the fixed remuneration for KMPs for FY22. 24 RESIMAC GROUP LTD ANNUAL REPORT 2021 25 1 NPAT excludes non-controlling interest (FY21: $249k, FY20: $99k) 2 ROE based on normalised NPAT and average shareholders’ equity per consolidated statement of financial position. 3 ROA based on statutory NPAT and total assets. As a result of the requirement under AASB 10 - Consolidated Financial Statements, the parent company exercises control over the Special Purpose Vehicles (SPVs) and securitisation trusts, therefore significant assets have been added to the consolidated statement of financial position without any appreciable increase in net profit. | REMUNERATION REPORT | REMUNERATION REPORT e g a t n e c r e P s t h g i r ) % ( d e t a e r l e g a t n e c r e P ) % ( 7 d e t a e r l e c n a m r o f r e p L A T O T ) $ ( 6 S T N E M Y A P D E S A B - E R A H S I S T F E N E B M R E T - G N O L - T S O P I S T F E N E B T N E M Y O L P M E I S T F E N E B M R E T - T R O H S n o i t a n m r e T i y r a t e n o m - n o N ) $ ( ) $ ( s t h g i r n o i t p O s t fi e n e b ) $ ( 5 e v a e L ) $ ( ) $ ( ) $ ( 4 n o i t a u n n a r e p u S s t fi e n e b d e d r a w a I T S ) $ ( y r a a S l . 1 2 0 2 e n u J 0 3 d e d n e r a e y l l u f e h t f o t c e p s e r n i P M K o t d e d r a w a n o i t a r e n u m e r l i a u t c a e h t f o y r a m m u s a s e d v o r p w o e b t u o t e s e b a t e h T l l n o i t a r e n u m e r y r o t u t a t S . 8 2 . 4 1 . 7 4 1 1 . 1 1 . 7 0 1 1 . 1 1 . 8 0 1 4 . 9 5 9 . 1 . 3 3 . 2 5 3 1 . 6 2 . 6 3 2 0 . 6 2 . 8 5 2 4 . 9 2 . 3 4 2 3 0 1 , 8 0 1 , 1 5 7 3 , 7 5 1 , 8 7 8 4 6 1 1 , 3 2 0 1 7 1 , 6 6 4 , 4 7 5 6 6 9 , 3 6 1 5 7 9 4 5 , 5 3 6 8 5 , 1 4 8 , 6 7 5 6 6 9 , 3 6 1 0 6 2 4 5 , 5 3 6 8 5 , 3 8 3 , 0 8 6 6 6 9 , 3 6 1 4 3 7 1 6 , 5 3 6 8 5 , - - - - - - - - 6 6 1 , 9 7 6 1 9 , 0 0 5 , 5 6 1 1 6 , 5 7 3 , 5 6 9 3 5 , 7 1 4 , 6 6 8 7 6 , 0 0 0 , 5 2 0 0 0 5 2 , 0 0 0 , 5 2 0 0 0 5 2 , - - - - 2 6 5 , 6 6 3 0 0 0 , 0 5 5 , 8 8 6 9 0 4 0 0 0 0 5 5 , 0 0 0 , 0 5 1 0 0 0 , 0 3 3 , 0 0 0 0 3 1 0 0 0 0 3 3 , 0 0 0 , 5 2 0 0 0 , 0 1 0 0 0 , 0 5 1 0 0 5 , 2 2 3 0 0 0 5 2 , 0 0 0 0 1 , , 0 0 0 0 4 1 0 7 5 3 0 3 , 0 0 0 , 5 2 0 0 0 5 2 , - - 0 0 0 , 0 0 2 0 0 0 , 5 8 3 0 0 0 0 5 1 , 0 2 9 6 7 3 , n a r o c r o C e l l i e n a D 1 2 Y F 2 0 2 Y F . y a p t u o h t i w e v a e l f o d o i r e p a s e d u c n l I 1 . y a p t u o h t i w e v a e l f o d o i r e p a s e d u c n l I 2 P M K T N E R R U C m a i l l i W c M t t o c S 1 2 Y F 0 2 Y F i d r a p o z z A n o s a J 1 2 Y F 0 2 Y F n e d s r a M w e r d n A 1 1 2 Y F 1 0 2 Y F 26 RESIMAC GROUP LTD e g a t n e c r e P s t h g i r ) % ( d e t a e r l e g a t n e c r e P ) % ( 7 d e t a e r l e c n a m r o f r e p L A T O T ) $ ( 6 S T N E M Y A P D E S A B - E R A H S I S T F E N E B M R E T - G N O L - T S O P I S T F E N E B T N E M Y O L P M E I S T F E N E B M R E T - T R O H S n o i t a n m r e T i y r a t e n o m - n o N ) $ ( ) $ ( s t h g i r n o i t p O s t fi e n e b ) $ ( 5 e v a e L ) $ ( ) $ ( ) $ ( 4 n o i t a u n n a r e p u S s t fi e n e b d e d r a w a I T S ) $ ( y r a a S l - - - - - - - - 1 8 1 7 0 3 , - - - 4 . 0 1 5 . 8 2 6 1 7 , 4 1 6 6 6 9 , 3 6 9 0 5 , 4 5 5 , 3 9 3 2 , 3 1 4 , 2 5 7 1 8 1 3 , 8 2 9 6 4 3 , - - - - - - 0 5 7 , 5 0 0 0 , 5 2 - - - - 0 3 1 3 8 2 , 7 8 0 2 , - - - - 0 0 0 , 5 7 1 0 0 0 , 5 4 3 - - - - - 4 6 9 1 2 , 8 0 2 , 2 3 0 0 0 , 5 2 1 0 0 0 , 0 1 2 6 5 , 1 4 0 , 1 0 0 5 , 2 3 9 , 1 5 9 5 0 1 3 , 7 8 0 2 0 1 , 0 0 0 0 1 , , 8 8 6 9 2 8 , 4 5 4 2 8 5 1 , l ) 9 1 0 2 y u J 7 1 P M K s a d e s a e c ( n a m h g u o P y r a M l P M K T N E R R U C d a m m a h u M d i j a M . 1 2 Y F n i P M K s a d e d d A 3 3 1 2 Y F 0 2 Y F 1 2 Y F 0 2 Y F 1 2 Y F 0 2 Y F L A T O T . i g n d a o l i e v a e L e c v r e S g n o L d n a e v a e L l a u n n A e d u c n l i l i n a m h g u o P y r a M o t d a p s t fi e n e b m r e t - g n o L 0 2 Y F j , 0 0 0 5 2 $ o t t c e b u s s a w p a c s n o i t u b i r t n o c l i a n o s s e c n o c n o i t a u n n a r e p u S . r a e y e h t g n i r u d d e u r c c a e v a e l i e c v r e s g n o l l o t e t a e r s t fi e n e b m r e t - g n o L . 9 1 0 2 t s u g u A 5 1 d n a 7 1 0 2 t s u g u A 8 1 n o P M K o t d e t n a r g s n o i t p o o t d e t a e r e s n e p x e t n e m y a p d e s a b e r a h S l . r a e y e h t r o f k s i r t a n o i t a r e n u m e r f o e g a t n e c r e p l a u t c a e h t g n i t c e fl e r , n o i t a r e n u m e r l a t o t e h t y b d e d v d i i I T S e h t s i l l n m u o c d e t a e r e c n a m r o f r e p e g a t n e c r e p e h T 4 5 6 7 ANNUAL REPORT 2021 27 | REMUNERATION REPORT | REMUNERATION REPORT 9.1.4. Board skills A key objective for Resimac is to ensure that we have a Board of Directors that is balanced (i.e. independence), diverse, with a complementary mix of skills and experience. The Board undertakes an assessment of the skills that each Director holds biennially which is then summarised in a skills matrix. Although it is not expected that all Directors will have the same skills and experience, the purpose of the matrix is to ensure there is a balance within the board to ensure we have diversity of thought. The matrix skills categories include: Strategy, planning, monitoring and policy development Governance Risk and compliance Relevant technical and industry knowledge Stakeholder relations Finance and audit Commitment and contribution Leadership Ethics and integrity Technology, digital and innovation The assessment of skills ties into board succession and selection of Directors. 9.1.5. Board evaluation reporting The Board is committed to transparency in determining board membership and in assessing the performance of Directors. The Board undertook performance reviews in 2018 and 2020. At the conclusion of the last full evaluation in 2020 the board determined to undertake more frequent assessments which resulted in an assessment at the conclusion of each board meeting. By rotation a Director is responsible for collation of the feedback and change recommendations. In addition, the Board carries out an evaluation on their effectiveness at the conclusion of each Board meeting. The purpose of this is to assess the performance of the Board as a whole with respect to time keeping, relevance, preparation and outcomes. The performance of Directors are assessed against a range of criteria including contribution at meetings, understanding the major risks affecting the Group, contributing to the development of the strategy, committing the time required to fulfill the role and perform their responsibilities effectively, listening and respecting the ideas of fellow Directors and management and consistently taking the perspective of creating shareholder value. The Board with the assistance of the Remuneration and Nominations Committee conducts a review of the performance of each Director seeking re- election at the Annual General Meeting. 9. Non-Executive Director remuneration 9.1. Overview of Non-Executive Directors’ remuneration arrangements 9.1.1. Policy objectives To be market competitive: aim to set Directors’ fees competitive with Non-Executive Directors in comparable businesses with respect to product mix, market capitalisation, geographical market and employee size; To ensure complementary skills: aim to ensure that the mix of Directors at any one time is diverse and adequate to carry out the objectives of the business; and To safeguard independence: to exclude any performance related element in order to preserve the independence of the Non-Executive Directors. 9.1.2. Aggregate fees approved by shareholders At the Annual General Meeting (AGM) of shareholders held on 25 November 2016, the shareholders approved the maximum aggregate fee pool per annum for non- executives of $550,000. The Board will be proposing an increase to the aggregate fees at the 2021 AGM. 9.1.3. Regular reviews of Directors’ fees The Board reviews the level of Directors’ fees annually to ensure the fees are in line with market and are suitable for the level of skill and expertise required to carry out the duties of Directors in a listed environment in conjunction with holding an Australian Financial Services Licence and several Australian Credit Licences. The agreed fee structure is that a fee is paid to reflect the Chairman’s responsibilities. Each Director receives a base fee and if a Director chairs a Board committee, an additional fee is applied. Superannuation is payable in addition to the base fee where a Director is paid via the Resimac employee payroll system. No fee is paid for committee membership. The FY21 fee levels inclusive of superannuation where applicable were as follows: Position Maximum fee ($) NAME Warren McLeland Chairman and Risk & Compliance Chair 131,400 p.a. Susan Hansen Independent Non-Executive Director, Audit Chair and New Zealand Chair 134,955 p.a. Wayne Spanner Independent Non-Executive Director and Remuneration & Nomination Chair 82,125 p.a. Duncan Saville1 Non-Executive Director Caroline Waldron2 Independent Non-Executive Director 70,000 p.a. 82,125 p.a. 1 Duncan Saville’s fee is exclusive of superannuation. 2 Caroline Waldron commenced on 17 November 2020. 28 RESIMAC GROUP LTD | REMUNERATION REPORT | REMUNERATION REPORT 9.1.6. Non-Executive Director remuneration The fees paid or payable to the Non-Executive Directors in relation to the 2021 financial year are set out below: 10. Other remuneration information 10.1. Remuneration governance Committee changes: CURRENT Warren McLelend2 FY21 FY20 Susan Hansen3 FY21 FY20 Wayne Spanner4 FY21 FY20 Duncan Saville FY21 FY20 Caroline Waldron5 FY21 FY20 FORMER Chum Darvall6 FY20 Michael Jefferies7 FY20 TOTAL REMUNERATION FY21 FY20 SHORT-TERM BENEFITS POST-EMPLOYMENT BENEFITS Fees ($) Superannuation1 ($) 120,000 90,000 126,880 127,056 75,000 25,288 70,000 70,000 46,635 - 11,400 8,550 8,075 8,075 7,125 2,283 - - 4,430 - Total ($) 131,400 98,550 134,955 135,131 82,125 27,571 70,000 70,000 51,065 - 10.1.1. Remuneration governance and responsibility The Resimac Board of Directors has responsibility for setting and overseeing the Company’s remuneration policies, practices and structure. The Board considers recommendations made by the Remuneration and Nomination Committee. The remuneration framework and matters considered by the Remuneration and Nomination Committee and the Board include: Review of Board size and composition (mix of skills, qualifications, experience, independence, diversity and other competencies); Identification and recommendation of candidates to the Board for nomination as members of the Board or its Committees; Development and implementation process for induction and orientation of new Directors; Review and approval of Company objectives and appropriate KPIs relevant to the KMP annual short-term incentive arrangement, and evaluate KMP performance in light of those KPIs; Review and approval of the remuneration of KMP, Directors and senior management (including total fixed remuneration, short-term incentives and long-term incentives); Approval of executive recruitment practices; Succession planning and talent management; and Caroline Waldron appointed 17 November 2020. The Remuneration and Nomination Committee reviews and makes recommendations to the Board on remuneration governance, policies, practices and structure which will apply to the KMP, senior management and the Non-Executive Directors. The Committee also makes recommendations to the Board on the Company’s overall remuneration framework. The Remuneration and Nomination Committee receives regular reports from Human Resources and ensures it is abreast of all regulatory change. The Committee meets at least 4 times per year. 10.1.3. Board changes Caroline Waldron was appointed to the Board in November 2020. Caroline’s appointment brings increased independence to the Board and provides further skill with respect to governance and technology. Other changes to the structure of the Board and its committees was the establishment of a Technology, Digital and Innovation committee chaired by Caroline. Further information on board committees is set out in the Directors’ Report. 10.1.4. Services from remuneration consultants The Remuneration and Nomination Committee may request advice from independent external consultants where appropriate. These consultants will be engaged directly by the Remuneration and Nomination Committee. The Company did not engage any remuneration consultants during the year. 80,000 7,600 87,600 Diversity and inclusion in the workplace. 28,359 2,694 31,053 438,515 420,703 31,030 29,202 469,545 449,905 10.1.2. Remuneration and nomination committee The Board has established a Remuneration and Nomination Committee. This Committee has a formal charter and is available on the Company’s website www.resimac.com.au. The Remuneration and Nomination Committee members are: Wayne Spanner - Chair; and Susan Hansen Warren McLeland 1 Australian superannuation is paid where applicable. New Zealand Kiwisaver is not paid. 2 Appointed Chairman on 28 February 2020, fee reflects a prorated increase received from this date. 3 Director remuneration paid in NZD, FY21 variance due to exchange rates, no changes to base fees. 4 Appointed Independent Non-Executive Director on 28 February 2020, FY20 fee is prorated. 5 Appointed Independent Non-Executive Director on 17 November 2020. 6 Resigned as Chairman & Independent Non-Executive Director on 28 February 2020. 7 Resigned as Independent Non-Executive Director on 26 November 2019. 30 RESIMAC GROUP LTD ANNUAL REPORT 2021 31 | REMUNERATION REPORT | REMUNERATION REPORT 10.1.5. KMP share ownership The table below sets out the number of shares held directly, indirectly or beneficially by the current and former KMP (including their related parties): NON-EXECUTIVE DIRECTORS Warren McLeland Susan Hansen Wayne Spanner Duncan Saville Caroline Waldron SENIOR EXECUTIVES Scott McWilliam Jason Azzopardi Andrew Marsden Danielle Corcoran Majid Muhammad TOTAL Held at 1 July 2020 Net change Held at 30 June 2021 12,159,222 (32,884) 12,126,338 199,941 - 254,468,487 - 3,789 15,732 - - 203,730 15,732 254,468,487 - 266,827,650 (13,363) 266,814,287 1,001,600 300,000 1,301,600 190,000 (110,000) - 90,351 - - 2,291 - 80,000 - 92,642 - 1,281,951 192,291 1,474,242 268,109,601 178,928 268,288,529 10.1.6. Share trading restrictions Resimac Securities Trading Policy reflects the Corporations Act 2001 prohibition on KMP and their closely related parties entering into any arrangement that would have the effect of limiting the KMP’s exposure to risk relating to an element of their remuneration that remains subject to restrictions on disposal. Resimac Directors, management team, and certain members of their immediate family and controlled entities are also required to obtain written consent and clearance for security trading during trading windows from the Chairman. All other employees must adhere to the Securities Trading Policy and are restricted from trading within the blackout periods. The policy is available on the Corporate Governance section of the Company’s website at www.resimac.com. au. Breaches of the policy are subject to disciplinary action, which may include termination of employment. 10.1.7. Further information on remuneration 10.1.7.1. Service agreements Each KMP has entered into an employment contract with the Company (Resimac Limited). These contracts have unlimited duration however may be terminated with relevant notice as set out below unless in the case of serious misconduct in which the KMP may be terminated immediately. All KMPs are entitled to receive payment in lieu of notice of any accrued statutory entitlement (i.e. annual and long service leave) on cessation of their employment. Notice period / Termination payment NAME Scott McWilliam Six months' notice (or payment in lieu) May be terminated immediately for serious misconduct Jason Azzopardi Three months' notice (or payment in lieu) May be terminated immediately for serious misconduct Andrew Marsden Three months' notice (or payment in lieu) May be terminated immediately for serious misconduct Danielle Corcoran Three months' notice (or payment in lieu) May be terminated immediately for serious misconduct Majid Muhammad One month notice (or payment in lieu) May be terminated immediately for serious misconduct 10.1.8. Related party transactions Loans to KMP and their related parties are secured residential mortgage loans provided in the ordinary course of the Group’s mortgage lending business. All loans have normal commercial terms. No amounts have been written down or recorded as specific provisions as the balances are considered fully collectable. 32 RESIMAC GROUP LTD ANNUAL REPORT 2021 33 | REMUNERATION REPORT Details regarding loans outstanding at the reporting date to KMP and their related parties, where the aggregate loan balance exceeded $100,000 at any time during the reporting period, are outlined below. Balance 1 July 2020 Balance 30 June 2021 Interest payable for the year1 Highest balance during the year NON-EXECUTIVE DIRECTORS ($) ($) ($) ($) Duncan Saville 9,548,343 9,322,631 334,826 9,571,874 SENIOR EXECUTIVES Scott McWilliam Jason Azzopardi Danielle Corcoran 1 Interest charged on an arm’s-length basis. 1,500,000 1,925,541 1,577,079 1,620,914 379,201 370,080 43,361 45,045 11,837 1,929,059 1,623,693 379,699 13,004,623 13,239,166 435,069 13,504,325 10.1.8.1. Other transactions and balances with KMP From time to time, Directors of the Company or its controlled entities, or their Director-related entities may obtain loans or ad hoc services from the Group, on the same terms and conditions as those entered into by other group employees or customers. This Directors’ report, including the remuneration report, is signed in accordance with a resolution of the Directors made pursuant to s.298 (2) of the Corporations Act 2001. On behalf of the Directors of Resimac Group Ltd. Warren McLeland Chairman Sydney 30 August 2021 34 RESIMAC GROUP LTD Resimac’s mission is to be a customer focused organisation, leveraging technology and data analytics coupled with expansion of our sustainability and Environment, Social and Governance (ESG) footprint. | CONSOLIDATED STATEMENT OF PROFIT OR LOSS FOR THE YEAR ENDED 30 JUNE 2021 | CONSOLIDATED STATEMENT OF PROFIT OR LOSS FOR THE YEAR ENDED 30 JUNE 2021 Financial statements Consolidated statement of profit or loss for the year ended 30 June 2021 Note FY21 $'000 FY20 $'000 PROFIT AFTER TAX 107,806 56,007 Other comprehensive income, net of income tax Items that will not be reclassified subsequently to profit or loss: Fair value movement on investment in BNK Banking Corporation Limited (“BNK”) through OCI, net of tax 126 (657) Interest income Interest expense Net interest income Fee and commission income Fee and commission expense Other income Employee benefits expense Other expenses Loan impairment expense Profit before tax Income tax expense PROFIT AFTER TAX Attributable to: Owners of the parent Non-controlling interest 1 2 1 2 1 2 2 2 3 Note FY21 $'000 FY20 $'000 Items that may be reclassified subsequently to profit or loss: Changes in fair value of cash flow hedges 467,637 459,305 Tax effect (224,893) (270,680) Currency translation differences 242,744 188,625 Other comprehensive income, net of tax (6,294) 1,888 (204) (4,484) 522 (157) (508) (800) 9,856 11,340 TOTAL COMPREHENSIVE INCOME FOR THE YEAR 103,322 55,207 (35,193) (36,088) Attributable to: 8,022 658 (37,489) (35,886) (33,188) (26,358) (2,676) (22,012) 152,076 80,279 (44,270) (24,272) 107,806 56,007 107,557 55,908 249 99 107,806 56,007 Owners of the parent Non-controlling interest Earnings per share Basic Diluted 103,072 55,112 250 95 103,322 55,207 FY21 cents per share FY20 cents per share 21 21 26.37 26.21 13.75 13.72 36 RESIMAC GROUP LTD ANNUAL REPORT 2021 37 Notes to the consolidated financial statements are included on pages 42 to 114. | CONSOLIDATED STATEMENT OF PROFIT OR LOSS FOR THE YEAR ENDED 30 JUNE 2021 | CONSOLIDATED STATEMENT OF PROFIT OR LOSS FOR THE YEAR ENDED 30 JUNE 2021 Note FY21 $'000 FY20 $'000 ASSETS Cash and cash equivalents Trade and other receivables Loans and advances Contract assets Other financial assets Derivative financial assets Other assets Plant and equipment Right-of-use assets Deferred tax assets Goodwill and intangible assets LIABILITIES 4 5 6 1 7 23 10 9 8 3 11 Trade and other payables 12 Current tax payable Provisions Interest-bearing liabilities Lease liabilities Other financial liabilities Derivative financial liabilities Other liabilities Deferred tax liabilities NET ASSETS EQUITY Share capital Reverse acquisition reserve Total issued capital Reserves Retained earnings Equity attributable to owners of the parent Non-controlling interest Notes to the consolidated financial statements are included on pages 42 to 114. 3 17 13 14 15 23 16 3 20 20 20 20 20 619,809 365,987 4,581 5,974 13,925,760 12,506,012 33,299 15,083 2,256 3,773 1,919 41,954 7,181 52,592 3,627 2,192 10,638 12,279 482 - 27,566 28,893 14,645,166 13,026,691 34,537 20,437 5,218 25,891 24,293 4,630 14,170,651 12,685,616 12,482 15,789 60,976 3,545 392 13,622 20,797 3,277 3,339 3,540 14,324,027 12,785,005 321,139 241,686 181,675 181,895 (61,541) (61,541) 120,134 120,354 (18,126) 219,131 321,139 - (7,556) 128,694 241,492 194 321,139 241,686 8 8 1 1 5 9 5 6 1 ) 0 2 1 , 7 1 ( ) 6 3 3 , 1 ( 1 1 7 , 1 9 3 1 , 1 2 3 - - - - - - - ) 8 2 4 , 8 ( ) 4 4 4 ( ) 4 8 9 , 7 ( 8 8 1 1 5 9 5 6 1 - - - - ) 6 3 3 , 1 ( 1 1 7 , 1 - - ) 0 2 1 , 7 1 ( ) 0 2 1 , 7 1 ( - - - - 8 8 1 ) 4 8 9 , 7 ( 1 1 7 , 1 - l a t o T 0 0 0 ’ $ 6 8 6 , 1 4 2 6 0 8 , 7 0 1 t s e r e t n i 0 0 0 ’ $ 4 9 1 9 4 2 ) 4 8 4 , 4 ( 1 ) 5 8 4 , 4 ( - ) 5 8 4 , 4 ( 2 2 3 , 3 0 1 0 5 2 2 7 0 , 3 0 1 7 5 5 , 7 0 1 ) 5 8 4 , 4 ( 7 5 5 , 7 0 1 7 5 5 , 7 0 1 - g n i l l o r t n o c - n o N e h t f o s r e n w o l o t e b a t u b i r t t A t n e r a p 0 0 0 ’ $ 0 0 0 ’ $ 0 0 0 ’ $ 0 0 0 ’ $ 0 0 0 ’ $ 0 0 0 ’ $ i d e n a t e R i s g n n r a e 2 s e v r e s e R l a t i p a c d e u s s i l a t o T e s r e v e R 1 e v r e s e r n o i t i s u q c a i l a t i p a c e r a h S 2 9 4 , 1 4 2 4 9 6 , 8 2 1 ) 6 5 5 , 7 ( 4 5 3 , 0 2 1 ) 1 4 5 , 1 6 ( 5 9 8 , 1 8 1 l 0 2 0 2 y u J 1 t a s a e c n a a B l - - - - - 1 5 9 5 6 1 - ) 6 3 3 , 1 ( - - - - - - - - - - - - - - - 1 5 9 5 6 1 - - ) 6 3 3 , 1 ( x a t e m o c n i f o t e n , e m o c n i i e v s n e h e r p m o c r e h t O r a e y e h t r o f e m o c n i e v i s n e h e r p m o c l a t o T r a e y e h t r o f t fi o r P s r e n w o s a y t i c a p a c r i e h t n i s r e n w o h t i w s n o i t c a s n a r T a t u o h t i w t s e r e t n i g n i l l o r t n o c - n o n f o n o i t i s u q c A i l o r t n o c n i e g n a h c i i y r a d s b u s f o s e r a h s e h t e r i u q c a o t n o i t p O l i i i n a P t n e m t s e v n e R d n e d v D e h t r e d n u s e r a h s f o e u s s I s n o i t p o e r a h s f o e s c r e x E i s t n e m y a p d e s a b - e r a h S s e r a h s y r u s a e r T i i s d n e d v d y t i u q E 9 3 1 , 1 2 3 1 3 1 , 9 1 2 ) 6 2 1 , 8 1 ( 4 3 1 , 0 2 1 ) 1 4 5 , 1 6 ( 5 7 6 , 1 8 1 1 2 0 2 e n u J 0 3 t a e c n a a B l ’ e v r e s e r n o i t i s u q c a e s r e v e R i ‘ d e l l a c t n u o c c a s h T i . y t i u q e f o t n e n o p m o c a s a d e t a e r c s a w t n u o c c a y t i u q e n a , r e g r e m s n a o e m o H / c a m s e R e h t n o g n i t n u o c c a n o i t i s u q c a e s r e v e r f o t l u s e r a s A i i l 1 . n o i t u b i r t s d r o f e b a i l l i a v a t o n s i i e v r e s e r n o i t i s u q c a e s r e v e R e h T . l a t i p a c e r a h s o t e r u t a n n i r a l i i m s s i . l i a t e d e r o m r o f 0 2 e t o N o t r e f e R . e v r e s e r r e h t o d n a e v r e s e r t n e m y a p d e s a b - e r a h s , e v r e s e r e u a v r i a f l , l e v r e s e r n o i t a s n a r t y c n e r r u c n g e r o f i , e v r e s e r e g d e h w o fl h s a c s e s i r p m o C 2 38 RESIMAC GROUP LTD ANNUAL REPORT 2021 39 | CONSOLIDATED STATEMENT OF PROFIT OR LOSS FOR THE YEAR ENDED 30 JUNE 2021 | CONSOLIDATED STATEMENT OF PROFIT OR LOSS FOR THE YEAR ENDED 30 JUNE 2021 l a t o T 0 0 0 ’ $ 4 2 1 , 6 9 1 ) 9 3 3 ( 5 8 7 , 5 9 1 7 0 0 , 6 5 ) 0 0 8 ( 7 0 2 , 5 5 9 9 ) 8 8 1 ( 7 1 0 , 1 0 3 3 - 2 0 4 ) 6 6 9 , 0 1 ( - - - 9 9 ) 4 ( 5 9 - - - - - - t s e r e t n i 0 0 0 ’ $ t n e r a p 0 0 0 ’ $ g n i l l o r t n o c - n o N e h t f o s r e n w o l o t e b a t u b i r t t A 0 0 0 ’ $ 0 0 0 ’ $ 0 0 0 ’ $ 0 0 0 ’ $ 0 0 0 ’ $ i d e n a t e R i s g n n r a e 2 s e v r e s e R l a t i p a c d e u s s i l a t o T e s r e v e R 1 e v r e s e r n o i t i s u q c a i l a t i p a c e r a h S 9 9 - ) 8 8 1 ( 7 1 0 , 1 0 3 3 - - - - - 2 0 4 - ) 3 2 2 ( ) 6 6 9 , 0 1 ( ) 6 6 9 , 0 1 ( ) 6 9 7 ( - 2 1 1 , 5 5 8 0 9 , 5 5 8 0 9 , 5 5 8 0 9 , 5 5 - ) 6 9 7 ( ) 6 9 7 ( - ) 8 8 1 ( - - - 2 0 4 3 2 2 - - - - - - - - 7 1 0 , 1 0 3 3 - - - - - - - - - - - - - - - - - - 7 1 0 , 1 0 3 3 x a t e m o c n i f o t e n , e m o c n i i e v s n e h e r p m o c r e h t O r a e y e h t r o f e m o c n i e v i s n e h e r p m o c l a t o T r a e y e h t r o f t fi o r P s r e n w o s a y t i c a p a c r i e h t n i s r e n w o h t i w s n o i t c a s n a r T t s e r e t n i g n i l l o r t n o c - n o n f o n o i t i s u q c A i i i y r a d s b u s f o s e r a h s e h t e r i u q c a o t n o i t p O l i i i n a P t n e m t s e v n e R d n e d v D e h t r e d n u s e r a h s f o e u s s I s n o i t p o e r a h s f o e s c r e x E i s t n e m y a p d e s a b - e r a h S n o i t a c o l l a e R i i s d n e d v d y t i u q E 4 2 1 , 6 9 1 4 1 3 , 4 8 ) 7 9 1 , 7 ( 7 0 0 , 9 1 1 ) 1 4 5 , 1 6 ( 8 4 5 , 0 8 1 l 9 1 0 2 y u J 1 t a s a e c n a a B l ) 9 3 3 ( ) 9 3 3 ( - - - - x a t e m o c n i f o t e n , 6 1 B S A A f o n o i t p o d A 5 8 7 , 5 9 1 5 7 9 , 3 8 ) 7 9 1 , 7 ( 7 0 0 , 9 1 1 ) 1 4 5 , 1 6 ( 8 4 5 , 0 8 1 l 9 1 0 2 y u J 1 t a s a e c n a a B d e t s u d A j l 6 8 6 , 1 4 2 4 9 1 2 9 4 , 1 4 2 4 9 6 , 8 2 1 ) 6 5 5 , 7 ( 4 5 3 , 0 2 1 ) 1 4 5 , 1 6 ( 5 9 8 , 1 8 1 0 2 0 2 e n u J 0 3 t a e c n a a B l CASH FLOWS FROM OPERATING ACTIVITIES Interest received Interest paid Receipts from loan fees and other income Payments to suppliers and employees Payments of net loans to borrowers Income tax paid Note FY21 $'000 FY20 $'000 478,160 471,027 (211,859) (263,991) 49,781 46,728 (167,742) (154,961) (1,545,974) (3,573,593) (49,827) (9,079) Net cash used in operating activities 4 (1,447,461) (3,483,869) CASH FLOWS FROM INVESTING ACTIVITIES Payment for plant, equipment and intangible assets Repayment of loans to related parties Payments for new investments Acquisition of subsidiary (RAF) Cash acquired on acquisition of subsidiary (RAF) Balance of proceeds on disposal of Paywise Net cash used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from borrowings Repayment of borrowings Proceeds of loans sold to external party (Athena) Proceeds from exercise of options Payment of lease liabilities Swap payments Payment of dividends Payment for acquisition of treasury shares Net cash provided by financing activities (200) (2) (1,403) (8,240) - 1,700 (279) (2,408) (3,000) (6,000) 1,087 250 (8,145) (10,350) 11,793,151 9,560,872 (10,201,002) (7,364,980) 138,849 1,453,212 165 (1,679) (2,502) (16,169) (1,336) 330 (1,671) (2,090) (9,949) - 1,709,477 3,635,724 . l i a t e d e r o m r o f 0 2 e t o N o t r e f e R . e v r e s e r r e h t o d n a e v r e s e r t n e m y a p d e s a b - e r a h s , e v r e s e r e u a v r i a f l , l e v r e s e r n o i t a s n a r t y c n e r r u c n g e r o f i , e v r e s e r e g d e h w o fl h s a c s e s i r p m o C 2 Net increase in cash and cash equivalents 253,871 141,505 Cash and cash equivalents at the beginning of the financial year (1 July) 365,987 224,790 Effects of exchange rate changes on cash balances held in foreign currencies (49) (308) Cash and cash equivalents at end of year 4 619,809 365,987 Notes to the consolidated financial statements are included on pages 42 to 114. ’ e v r e s e r n o i t i s u q c a e s r e v e R i ‘ d e l l a c t n u o c c a s h T i . y t i u q e f o t n e n o p m o c a s a d e t a e r c s a w t n u o c c a y t i u q e n a , r e g r e m s n a o e m o H / c a m s e R e h t n o g n i t n u o c c a n o i t i s u q c a e s r e v e r f o t l u s e r a s A i i l 1 . n o i t u b i r t s d r o f e b a i l l i a v a t o n s i i e v r e s e r n o i t i s u q c a e s r e v e R e h T . l a t i p a c e r a h s o t e r u t a n n i r a l i i m s s i . 4 1 1 o t 2 4 s e g a p n o d e d u c n l i e r a s t n e m e t a t s l i a c n a n fi d e t a d i l o s n o c e h t o t s e t o N 40 RESIMAC GROUP LTD ANNUAL REPORT 2021 41 | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ABOUT THIS REPORT | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ABOUT THIS REPORT Notes to the consolidated financial statements About this report for the year ended 30 June 2021 About this report Resimac Group Ltd (“Resimac” or “the Company”) is a for-profit company limited by shares incorporated and domiciled in Australia whose shares are publicly traded on the Australian Securities Exchange. The nature of the operations and principal activities of Resimac and entities that it controls (referred to as “the Group”) are described in the segment information. The consolidated general purpose financial report of the Group for the year ended 30 June 2021 was authorised for issue in accordance with a resolution of the Directors on 30 August 2021. The Directors have the power to amend and reissue the financial report. The financial report is a general purpose financial report which: has been prepared in accordance with the requirements of the Corporations Act 2001, Australian Accounting Standards (AAS) and other authoritative pronouncements of the Australian Accounting Standards Board (AASB) and International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB); has been prepared on a historical cost basis, and certain financial instruments which have been measured at fair value. The carrying values of recognised assets and liabilities that are the hedged items in fair value hedge relationships, which are otherwise carried at amortised cost, are adjusted to record changes in the fair values attributable to the risks that are being hedged; is presented in Australian dollars with all values rounded to the nearest thousand dollars ($’000) unless otherwise stated, in accordance with ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191; presents reclassified comparative information where required for consistency with the current year’s presentation; adopts all new and amended Accounting Standards and Interpretations issued by the AASB that are relevant to the Group and effective for reporting periods beginning on or before 1 July 2020. Refer to Note 32 for further details. Key judgements and estimates In the application of the Group’s accounting policies, the Directors are required to make judgements, estimates and assumptions about the carrying value of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making judgements. Actual results may differ from these estimates. Judgements and estimates which are material to the financial report are found in the following notes: the ability to use its power over the investee to affect its return. Relates to Recognition of revenue from contracts with customers Net present value (NPV) of future trail commission: recognition of future commissions receivable and payable Recognition of Deferred Tax Assets (DTA) and Deferred Tax Liabilities (DTL) Impairment of other financial assets NOTE 1 1 & 15 3 7 11 Goodwill impairment 22 & 23 Impairment of financial assets Basis of consolidation The consolidated financial statements comprise the financial statements of the Group. A list of controlled entities (subsidiaries) at year end is contained in Note 24. The financial statements of subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies. Adjustments are made to bring into line any dissimilar accounting policies that may exist. Subsidiaries are consolidated from the date on which control is obtained to the date on which control is disposed. The Group controls an investee if and only if the Group has: power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee); exposure, or rights, to variable returns from its involvement with the investee; and In preparing the consolidated financial statements, all inter-company balances and transactions, income and expenses and profits and losses resulting from intra-Group transactions have been eliminated. The acquisition of subsidiaries is accounted for using the acquisition method. Refer to Note 24 for detail on the consolidation of special purpose vehicles. COVID-19 impact COVID-19 has significantly impacted equity, debt, commodity markets and the overall global economy. The Group has considered the impact of COVID-19 and other market volatility in preparing its financial statements. The Group’s process to determine the impact of COVID-19 for these financial statements is consistent with the process disclosed and applied in its 30 June 2020 and 31 December 2020 financial statements. While the specific areas of judgement as noted on the previous page remain unchanged, COVID-19 resulted in the application of further judgement within those identified areas. Expected credit losses (Note 23) and the assessment of the impairment of other financial assets (Note 7) required continued judgement as a result of the impact of COVID-19. Given the uncertainty associated with these assumptions and estimates, actual outcomes may differ to those forecasted which may impact the accounting estimates included in these financial statements. Other than adjusting events that provide evidence of conditions that existed at the end of the reporting period, the impact of events that arise after the reporting period will be accounted for in future reporting periods. The impact of COVID-19 has been discussed further in each of the related notes. 42 RESIMAC GROUP LTD ANNUAL REPORT 2021 43 | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ABOUT THIS REPORT Foreign currency As at the reporting date, assets and liabilities of overseas subsidiaries are translated into Australian dollars at the rate of exchange at the balance sheet date and the income statements are translated at the average exchange rates for the year. The exchange differences arising on the retranslation are taken directly to a separate component of equity. Transactions in foreign currencies are initially recorded in the functional currency at the exchange rates ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated at the rate of exchange ruling at the balance sheet date. Exchange differences arising from the application of these procedures are taken to the income statement, with the exception of differences on foreign currency borrowings that provide a hedge against a net investment in a foreign entity, which are taken directly to equity until the disposal of the net investment, and then recognised in the income statement. Tax charges and credits attributable to exchange differences on those borrowings are also recognised in equity. Other accounting policies Significant and other accounting policies that summarise the measurement basis relevant to an understanding of the financial statements are provided throughout the notes to the financial statements. The notes to the financial statements The notes include information required to understand the financial statements and is material and relevant to the operations, financial position and performance of the Group. Information is considered material and relevant if, for example: the amount in question is significant because of its size or nature; 44 RESIMAC GROUP LTD it is important for understanding the results of the Group; it helps to explain the impact of significant changes in the Group’s business – for example, acquisitions and impairment write-downs; or it relates to an aspect of the Group’s operations that is important to its future performance. The notes are organised into the following sections: Key numbers: provides a breakdown of individual line items in the financial statements that the Directors consider most relevant and summarises the accounting policies, judgements and estimates relevant to understanding these line items; Capital: provides information about the capital management practices of the Group and shareholder returns for the year; Risk: details the Group’s exposure to various financial risks, explains how these affect the Group’s financial position and performance, and what the Group does to manage these risks; Group structure: explains the Group structure and how changes have affected the financial position and performance of the Group; Unrecognised items: provides information regarding items not recognised in the financial statements but could potentially have an impact on the Group’s financial position and performance; and Other: provides information on items which require disclosure to comply with AAS and other regulatory pronouncements, however, are not considered critical in understanding the financial performance or position of the Group. | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS SEGMENT INFORMATION | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS SEGMENT INFORMATION Notes to the consolidated financial statements Segment information for the year ended 30 June 2021 Segment Information The Group has identified two reportable segments based on the nature of the products and services provided, the type of customers for those products and services, the geographies where the business operates and the existence of discrete and separate reporting and management teams. The internal reports of the reportable segments are regularly reviewed by the Board and executive management team in order to allocate resources to the segment and to assess its performance. The Group’s reportable segments under AASB 8 Operating Segments are therefore as follows: 1. Australian Lending business 2. New Zealand Lending business Represents the distribution and lending businesses currently captured under the Resimac, Resimac Asset Finance and homeloans.com.au brands. The segment contains the bulk of the Australian based income and expense. It incorporates the new business settled through the Australian distribution channels, the margin net of funding costs of the On balance sheet home loan portfolios, and the upfront and trail commission on the White label portfolio. The Group’s fully owned subsidiary Resimac Asset Finance (RAF) specialises in both Australian based secured commercial and consumer lending. Management have assessed the impact of the RAF business on its Group results as not material, and therefore does not represent a reportable segment for the year ended 30 June 2021, notwithstanding RAF is considered a separate operating segment by Management. Whilst the nature of the customers and products are similar to the Australian Lending segment, given the different jurisdiction and market conditions, management believe it is appropriate to distinguish the result of New Zealand from Australia. Separating the Australian and New Zealand trading business is supported by the operation of a dedicated NZ board, NZ segment monthly management reporting, separate regulatory requirements/oversight, and staff solely accountable for the NZ business including a locally based Head of NZ. The following is an analysis of the Group’s revenue and results by reportable operating segments: AUSTRALIAN LENDING NEW ZEALAND LENDING CONSOLIDATED FY21 $'000 FY20 $'000 FY21 $'000 FY20 $'000 FY21 $'000 FY20 $'000 Revenue from external customers 456,616 447,982 28,899 23,321 485,515 471,303 Total segment revenue 456,616 447,982 28,899 23,321 485,515 471,303 Segment results before tax, depreciation, amortisation, finance costs and impairment 157,400 106,740 8,247 3,227 165,647 109,967 Depreciation and amortisation (3,009) (1,021) Loan impairment Finance costs (2,750) (21,653) (7,386) (6,283) Segment results before income tax 144,255 77,783 (85) 74 (415) 7,821 (11) (359) (361) (3,094) (1,032) (2,676) (22,012) (7,801) (6,644) 2,496 152,076 80,279 Income tax expense1 PROFIT AFTER TAX (44,270) (24,272) 107,806 56,007 The following is an analysis of the Group’s assets and liabilities by reportable operating segment: AUSTRALIAN LENDING NEW ZEALAND LENDING CONSOLIDATED FY21 $'000 FY20 $'000 FY21 $'000 FY20 $'000 FY21 $'000 FY20 $'000 Segment assets 13,857,991 12,444,285 786,693 582,406 14,644,684 13,026,691 13,857,991 12,444,285 786,693 582,406 14,644,684 13,026,691 Segment liabilities (13,547,634) (12,201,825) (755,564) (555,347) (14,303,198) (12,757,172) Net assets excluding tax 310,357 242,460 31,129 27,059 341,486 269,519 Tax assets2 Tax liabilities2 NET ASSETS 482 - (20,829) (27,833) 321,139 241,686 1 Income tax expense is disclosed on a consolidated basis, not by reportable operating segment. 2 Tax assets and liabilities are disclosed on a consolidated basis, not by reportable operating segment. 46 RESIMAC GROUP LTD ANNUAL REPORT 2021 47 | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS KEY NUMBERS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS KEY NUMBERS Notes to the consolidated financial statements Key numbers for the year ended 30 June 2021 1. Revenue 1.1. Revenue streams The Group generates revenue primarily from net interest margin, annuity trail income on White label loans and other fee income. Net interest income is derived from the difference between interest income on originating residential and asset finance loans, and interest expense incurred on RMBS and warehouse facilities. FY21 $'000 FY20 $'000 RECOGNITION & MEASUREMENT Revenue from contracts with customers Revenue is based on the consideration specified in a contract with a customer. The Group recognises revenue when it transfers control over a good or service to a customer. The following table provides information about the nature and timing of the satisfaction of performance obligations in contracts with customers, including significant payment terms, and the related revenue recognition policies. Interest income - loans and advances Loans and advances are initially recognised at fair value. Subsequent to initial recognition, the loans are measured at amortised cost using the effective interest method over the estimated actual (but not contractual) life of the mortgage loan, taking into account all income and expenditure directly attributable to the loan. Interest income on loans and advances is recognised as it accrues using the effective interest method. The rate at which revenue is recognised is referred to as the effective interest rate and is equivalent to the rate that effectively discounts estimated future cash flows throughout the estimated life of the net carrying value of the loan. Acquisition costs representing mortgage insurance premiums and upfront broker commissions related to originating On balance sheet loans are capitalised on the statement of financial position of the Group. These costs are amortised to the statement of profit or loss across the expected life of the loan in interest income. Loans and advances in arrears or hardship at 30 June 2021 continue to accrue interest income. Consideration for potential future credit losses on loans in arrears or hardship is reflected in Note 23. Interest income - bank deposits This comprises interest income on cash-held with Australian ADIs. Interest income is recognised as it accrues, using the effective interest method. Other income Other income includes various items including but not limited to payment received under operating leases as income on a straight-line basis over the lease (office sub- lease). Revenue from contracts with customers 9,856 11,340 CLASSIFICATION & MEASUREMENT OF REVENUE Interest income Loans and advances Bank deposits Discount unwind on NPV of trail commission Other income Fair value gains on financial assets Fair value gains/(losses) on interest rate swaps Other 464,787 454,962 592 2,258 1,625 2,718 467,637 459,305 5,110 1,721 1,191 8,022 - (1,180) 1,838 658 TOTAL REVENUE 485,515 471,303 Timing Type of service At a point in time Mortgage origination revenue Nature, timing of satisfaction of performance obligations, significant payment terms, significant judgements used Commission from originating White label loans. The performance obligations are satisfied at the point in time the loan is settled. Non-ongoing performance conditions are attached to the upfront fee. At a point in time Loan management revenue Trail commission income on White label loans, based on the individual monthly loan balance outstanding each month. Trail ceases once the loan is discharged. At a point in time Lending fee income The contracts with the funders include performance obligations which must be satisfied in order to be paid trail commission (e.g. the loan not being in arrears). Loan fees paid by the borrower such as application, discharge, settlement fees etc. The performance obligation for these fees is met at a point in time (settlement, discharge etc) when the fee is charged to the borrower. Revenue recognition policy under AASB 15 Once the Group has referred a successful loan application to the lender, its performance obligations have been met. As such, revenue is recognised at the point in time the loan is settled. The expected value is estimated based on historic experience. Provisions for clawback of the upfront fee are recognised within a period of time post-settlement and is a variable consideration. Revenue is recognised at the point in time the loan is being settled and performance obligations are satisfied according to the contracts with the funders. The present value of the trailing commission receivable is recognised as a contract asset and measured using the expected value method with variable consideration at a point in time. Revenue is recognised when the transaction is completed and the performance obligations are met. 48 RESIMAC GROUP LTD ANNUAL REPORT 2021 49 | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS KEY NUMBERS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS KEY NUMBERS 1.2. Disaggregation of revenue from contracts with customers In the following table, revenue from contracts with customers is disaggregated by primary geographical market, major service lines and timing of revenue recognition. The table also includes a reconciliation of the disaggregated revenue with the Group’s reportable segments (See “Segment Information” on page 47). RECOGNITION & MEASUREMENT 1.3. Assets related to contract with customers The Group has recognised the following assets related to contracts with customers. AUSTRALIAN LENDING NEW ZEALAND LENDING CONSOLIDATED FY21 $'000 FY20 $'000 FY21 $'000 FY20 $'000 FY21 $'000 FY20 $'000 Contract assets – present value of future trail commission receivable Current Non-current FY21 $'000 FY20 $'000 9,093 24,206 33,299 11,587 30,367 41,954 Primary geographical markets Australia New Zealand Major service lines Mortgage origination Loan management Lending fee income 8,928 10,934 - - 8,928 10,934 2,375 2,243 4,310 - 7,307 3,627 8,928 10,934 - 928 928 - - 928 928 928 928 - 406 406 - - 406 406 406 406 8,928 10,934 928 406 9,856 11,340 2,375 2,243 5,238 - 7,307 4,033 9,856 11,340 9,856 11,340 9,856 11,340 Timing of revenue recognition Service transferred at a point in time 8,928 10,934 Revenue from contracts with customers 8,928 10,934 Interest income Other income External revenue as reported in segment information 442,483 434,497 25,154 24,808 467,637 459,305 5,205 2,551 2,817 (1,893) 8,022 658 456,616 447,982 28,899 23,321 485,515 471,303 Contract assets - present value of future trail commission receivable The contract assets primarily relate to the Group’s rights to receive trail commissions from lenders on White label settled loans, over the life of the loan based on the monthly loan balance outstanding. The contract assets are transferred to receivables when the rights become unconditional. Initial recognition Expected value of future trail commission receivable is recognised on the origination of White label settlements. This represents the NPV of the expected future trail commission receivable under the origination and management agreement, less ongoing servicing costs not covered by transaction fees. The initial expected value of trail commission receivable is determined by using the discounted cash flow valuation technique. Subsequent measurement Subsequent to initial recognition, the future trail commission receivable is measured at expected value. The carrying amounts of the trail commissions receivable are adjusted to reflect actual and revised estimated cash flows by recalculating the carrying amount through computing the present value of estimated future cash flows at the effective interest rates. The resulting adjustment is recognised as income or expense in the statement of comprehensive income. A remeasurement of the underlying cash flows relating to the trail commission receivable occurs at each reporting date. Key estimates and assumptions The key estimates and assumptions underlying the remeasurement of the estimated future cash flows include the: prepayment rate; and discount rate. FY21 FY20 Weighted average loan life (years) 3.4 3.5 Discount rate 6% 6% Weighted average loan life The methodology in calculating the weighted average loan life continues usage of the commonly accepted Standard and Poor’s definition. Prepayment rate In order to manage both volatility of rates over time and the uncertainty associated with this modelling, a conservative run-off buffer of 25% is included in the valuation by management, and remains unchanged compared with FY20. Discount rate The discount rate remains unchanged for each individual year tranche of loans for the remainder of the loan’s life. The discount rate is currently set at 6%, incorporating risk free rates and estimates of the credit risk associated with the counterparties providing the trail income, and remains unchanged compared with FY20. 50 RESIMAC GROUP LTD ANNUAL REPORT 2021 51 | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS KEY NUMBERS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS KEY NUMBERS 2. Expenses INTEREST Bond and warehouse facilities Amortisation – bond issue costs Discount unwind on NPV of trail commission Corporate facility Interest on lease liabilities FEE & COMMISSION Mortgage origination Loan management Borrowing costs RMBS financing costs EMPLOYEE BENEFITS Remuneration, superannuation and on-costs Share-based payments OTHER Marketing Technology expenses1 2 Audit and other professional fees1 Rent and occupancy costs Insurance Depreciation and amortisation Depreciation charge of right-of-use assets Other Loan impairment expense FY21 $'000 FY20 $'000 213,675 259,467 9,154 1,098 440 526 8,517 1,311 767 618 RECOGNITION & MEASUREMENT Borrowing costs 2.1. Interest Bond and warehouse facilities Recognised in the profit or loss in the period in which they are incurred. Borrowing costs include: 224,893 270,680 interest on deposits; coupon payments on notes issued; and other interest paid on non-securitised funding facilities and are recognised under the effective interest rate method. See further details under Note 1. Amortisation – bond issue costs Transaction costs incurred by the Group in facilitating the issue of debt securities by the special purpose vehicles, are capitalised on the statement of financial position of the parent entity as bond issue costs. These costs are amortised to the statement of profit or loss over the average expected life of the debt securities using the effective interest rate method. 2.2. Fee and commission Mortgage origination Upfront commission payments for White label home loans to mortgage originators, are recognised at settlement as the services performed by the originator are principally performed upfront. Loan management Includes monthly trail commission payments to brokers for originating On balance sheet and While label loans based on individual loan balances outstanding. 279 434 20,495 22,898 7,144 7,275 6,730 6,026 35,193 36,088 36,697 35,305 792 581 37,489 35,886 4,805 15,722 2,399 1,294 1,801 1,199 1,895 4,073 3,277 9,669 2,611 1,395 1,369 1,032 1,920 5,085 33,188 26,358 2,676 22,012 333,439 391,024 Fees directly related to the Group’s global funding program. Other financing costs Other financing costs include trustee and servicer fees, liquidity fees, rating agency fees, and other financing related fees. 2.3. Employee benefits Employee benefits expense includes fixed and variable remuneration, superannuation, and associated on- costs. The policy relating to share-based payments is set out in Note 31. 2.4. Other This mainly comprises bank fees, general administration expenses and unrecoverable GST. These items are expensed when incurred. 2.5. Loan impairment Loan impairment expenses relates to the movement in the: specific provision; collective provision movements for loan impairment; direct loan write-offs recognised during the year; and recoveries of previously impaired loans. See Note 6 for detail on impairment of loans and advances. 1 Reclassified FY20 IT consulting expenses from professional fees to technology expenses. 2 Core banking IT project costs (FY21: $7.8m; FY20: $0.2m). 52 RESIMAC GROUP LTD ANNUAL REPORT 2021 53 | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS KEY NUMBERS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS KEY NUMBERS 3. Income tax 3.1. Income tax recognised in profit or loss CURRENT TAX In respect of the current year In respect of prior years Translation loss on foreign currency assets and liabilities DEFERRED TAX In respect of the current year In respect of prior years FY21 $'000 FY20 $'000 45,156 26,754 822 12 35 22 45,990 26,811 290 (2,494) (2,010) (1,720) (45) (2,539) 3.3. Deferred tax balances The following is the analysis of deferred tax assets (DTA) and deferred tax liabilities (DTL) presented in the consolidated statement of financial position: Deferred tax assets Deferred tax liabilities Net deferred tax assets/(liabilities) FY21 Deferred tax assets / (liabilities) FY21 $'000 FY20 $'000 482 (392) 90 - (3,540) (3,540) Opening balance Current year recognised in profit or loss Previously unrecognised in profit or loss Recognised directly in equity Recoup tax loss against tax liability Acquisition of RAF Closing balance $’000 $’000 $’000 $’000 $’000 Total income tax expense recognised in the current year 44,270 24,272 Doubtful debts The income tax expense for the year can be reconciled to the accounting profit as follows: Profit before tax Income tax expense calculated at 30% (FY20: 30%) Effect of expenses that are not deductible in determining taxable profit Effect of different tax rates of subsidiaries operating in other jurisdictions Employee Share scheme Other items 152,076 45,623 41 (120) (584) 498 80,279 24,084 344 1 (54) (93) Plant, equipment and software Deferred mortgage insurance Employee entitlements Net provision for lease make good Other accrued expenses Blackhole expenditure Discount on loan Tax losses carried forward $’000 9,582 2 252 1,130 60 1,982 234 (1) 416 324 2,543 (89) 85 (1) 235 (178) - (414) Adjustments recognised in the current year in relation to the deferred tax of prior years Adjustments recognised in the current year in relation to the current tax of prior years Income tax expense recognised in profit or loss (2,010) 822 (45) 35 44,270 24,272 Lease liability Shares Share-based payments Lease incentives 319 323 343 30 The tax rate used for FY21 and FY20 reconciliations above is the corporate tax rate of 30% payable by corporate entities in Australia and 28% in New Zealand on taxable profits respectively. Accrued income and other (741) 73 (1,533) 174 - 444 45,458 24,282 Trail commission payable 6,317 (1,418) 3.2. Current tax assets and liabilities CURRENT TAX Current tax payable FY21 $'000 FY20 $'000 (20,437) (24,293) (20,437) (24,293) Capitalised incentive commission (12,441) (1,042) Loans and advances 2,476 (1,270) Deferred bond issue cost (2,617) (1,172) Derivatives Unpaid superannuation Trail commission receivable 1,337 50 (12,593) (3,540) 349 3 2,597 (290) - 806 - - - (52) (47) 1 (2) (1) 124 842 - (30) 367 - - 2 - - - (3) - - - - - (1) - - (1) - (1,259) 1,285 - - - - 1 1,888 - - 2,010 1,910 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - $’000 9,903 3,351 163 1,215 59 2,165 8 - - 4,897 516 (1,627) 1,802 - 70 (13,483) 1,206 (3,786) 3,574 53 (9,996) 90 54 RESIMAC GROUP LTD ANNUAL REPORT 2021 55 | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS KEY NUMBERS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS KEY NUMBERS FY20 Opening balance Current year recognised in profit or loss Previously unrecognised in profit or loss Recognised directly in equity Recoup tax loss against tax liability Acquisition of RAF Closing balance RECOGNITION & MEASUREMENT Income tax expense represents the sum of the tax currently payable and deferred tax. Deferred tax assets / (liabilities) $’000 $’000 $’000 $’000 $’000 $’000 $’000 3.4. Current tax Doubtful debts 4,111 5,330 Plant, equipment and software Deferred mortgage insurance Employee entitlements 82 358 1,069 Net provision for lease make good 60 Other accrued expenses 2,142 Blackhole expenditure Discount on loan Tax losses carried forward 437 (1) 103 (49) (106) 39 - (164) (203) - 77 Trail commission payable 7,091 (799) Lease liability Shares Share-based payments Lease incentives 92 41 - 30 40 - 173 - Capitalised incentive commission (10,513) (1,942) Loans and advances 4,219 (1,743) Deferred bond issue cost (2,736) 116 Derivatives 1,663 (170) Unpaid superannuation 40 7 Trail commission receivable (14,594) 2,001 Accrued income and other 1 (113) - - - (1) - - - - - 25 7 - 13 - 1 - - - - - - (8) - - - - - - - - - 145 282 157 - 13 - 3 (156) - - - - - - - - - - - 149 (31) - 23 - 4 - - (106) 342 - 35 - - - - - - - 3 - - - - - - - - - - - - - 9,582 2 252 1,130 60 1,982 234 (1) 416 6,317 319 323 343 30 (12,441) 2,476 (2,617) 1,337 50 (12,593) (629) (741) Tax payable is based on taxable profit for the year. Taxable profit differs from ‘profit before tax’ as reported in the consolidated statement of profit or loss and other comprehensive income due to a mix of timing and non- assessable items. The Group's current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period. 3.5. Deferred tax Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the consolidated financial statements and the corresponding tax base used in the computation of taxable profit. Deferred tax liabilities (DTLs) are generally recognised for all taxable temporary differences. Deferred tax assets (DTAs) are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised. Such DTAs and DTLs are not recognised if the temporary difference arises from the initial recognition (other than in a business combination) of assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. In addition, DTLs are not recognised if the temporary difference arises from the initial recognition of goodwill. DTLs are recognised for taxable temporary differences associated with investments in subsidiaries and associates, and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. DTAs arising from deductible temporary differences associated with such investments and interests are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future. The carrying amount of DTAs is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. DTLs and DTAs are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of DTLs and DTAs reflects the tax consequences that would follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities. 3.6. Current and deferred tax for the year Current and deferred tax are recognised in the statement of comprehensive income, except when they relate to items that are recognised in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognised in other comprehensive income or directly in equity respectively. Where current tax or deferred tax arises from the initial accounting for a business combination, the tax effect is included in the accounting for the business combination. 3.7. Tax consolidation On 1 February 2021, RAF joined the Resimac tax consolidated group. The assets of RAF were taken to have been acquired by Resimac Group and the tax cost base of these assets were reset under the Allocable Cost Amount tax consolidation rules. (6,305) 2,494 45 436 (106) (104) (3,540) 56 RESIMAC GROUP LTD ANNUAL REPORT 2021 57 | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS KEY NUMBERS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS KEY NUMBERS 3.8. Tax effect accounting by members of the tax consolidated group Resimac Group Ltd and its wholly-owned Australian controlled entities have implemented the tax consolidation legislation. The head entity Resimac Group Ltd, and the controlled entities in the tax consolidated group continue to account for their own current and deferred tax amounts. The Group has applied the group allocation approach in determining the appropriate amount of current taxes and deferred taxes to allocate to members of the tax consolidated group. The current and deferred tax amounts are measured in a systematic manner that is consistent with the broad principles in AASB 112 Income Taxes. In addition to its own current and deferred tax amounts, the head entity also recognised 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 Resimac tax consolidated group. 3.9. Nature of the tax funding agreement Members of the Group have entered into a tax funding agreement. Under the funding agreement the allocation of tax within the Group is based on a group allocation. The tax funding agreement requires payments to/from the head entity to be recognised via an inter-entity receivable (payable) which is at call. The allocation of taxes under the tax funding agreement is recognised as an increase or decrease in the subsidiaries’ intercompany accounts with the tax consolidated group head company, Resimac Group Ltd. The amounts receivable or payable under the tax funding agreement are due upon receipt of the funding advice from the head entity, which is issued as soon as practical after the end of each financial year. KEY JUDGEMENT The Group’s accounting for taxation requires management’s judgement in assessing whether deferred tax assets and certain deferred tax liabilities are recognised on the statement of financial position. Deferred tax assets, including those arising from unrecouped tax losses, capital losses and temporary differences, are recognised only where it is considered more likely than not that they will be recovered, which is dependent on the generation of sufficient future taxable profits. Assumptions about the generation of future taxable profits depend on management’s estimates of future cash flows. These depend on estimates of future income, operating costs, capital expenditure, dividends and other capital management transactions. Judgements and assumptions are also required about the application of income tax legislation. These judgements and assumptions are subject to risk uncertainty, hence there is a possibility that changes in circumstances will alter expectations, which may impact the amount of deferred tax assets and deferred tax liabilities recognised on the statement of financial position and the amount of other tax losses and temporary differences not yet recognised. In such circumstances, some or all of the carrying amounts of recognised deferred tax assets and liabilities may require adjustment, resulting in a corresponding credit or charge to the consolidated statement of profit or loss and other comprehensive income. 4. Cash and cash equivalents Cash at bank and on hand Cash collections account1 Restricted cash2 Reconciliation of profit after tax to the net cash flows from operating activities Profit after tax Non-cash items Depreciation and amortisation Depreciation charge of right-of-use assets Amortisation of bond issue costs Fair value gain on financial assets Fair value movement on interest rate swaps Loan impairment movement Net loss on disposal of non-current assets Present value of future trail commission income Present value of future trail commission expense Share-based payments expense Discount on mortgage (Increase) / decrease in assets Trade and other receivables Loans and advances Other assets Impairment allowance account Increase / (decrease) in liabilities Trade and other payables Current tax payable Interest-bearing liabilities Provisions Deferred tax liabilities Note FY21 $'000 FY20 $'000 50,622 27,757 567,687 336,730 1,500 1,500 22 619,809 365,987 107,806 56,007 2 2 2 1 2 2 1,199 1,895 9,154 (5,110) 780 2,676 944 8,655 (5,008) 792 (550) 1,032 1,920 8,517 - 3,271 22,012 - 6,694 (2,104) 581 (442) (358) 2,147 (1,559,645) (3,583,219) 60 23 (1,809) (2,254) 8,646 (3,615) (380) 19,522 (12,244) (13,007) 212 168 (1,941) (4,357) Net cash flows used in operating activities (1,447,461) (3,483,869) 1 Cash collections account includes monies in the Special Purpose Vehicles and securitisation trusts on behalf of members in those trusts and various clearing accounts. These funds are not available for operational use. 2 Cash held in trust as collateral. 58 RESIMAC GROUP LTD ANNUAL REPORT 2021 59 | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS KEY NUMBERS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS KEY NUMBERS RECOGNITION & MEASUREMENT Cash comprises cash deposits and cash equivalents that are short-term, liquid investments readily convertible to known amounts of cash, not subject to significant risk of changes in value, and have a maturity of three months or less. Cash at bank earns interest at floating rates based on daily bank deposit rates. Short-term deposits are made for varying periods of between one day and three months, depending on the immediate cash requirements of the Group, and earn interest at the respective short-term deposit rates. 5. Trade and other receivables CURRENT Fee and commission receivable Prepayments GST receivable Deferred consideration for sale of Paywise Sundry receivable NON-CURRENT Deferred consideration for sale of Paywise Note FY21 $'000 FY20 $'000 843 2,371 743 - 624 1,050 2,088 641 750 445 22 22 4,581 4,974 - 1,000 RECOGNITION & MEASUREMENT All receivables are derived from the normal course of business. No maturity dates are specified as they are normally settled within twelve months. There are no long term outstanding receivables as at the reporting date. Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less an allowance for impairment. The credit risk of trade receivables is considered limited as they are due from Australian financial institutions with high credit ratings. Fee and commission receivable This balance comprises trail commission receivables that have settlement terms of 30 days. This is initially recognised at the fair value of the consideration receivable. Sundry receivable This relates to amounts received within the SPV’s on the last day of the reporting period. 6. Loans and advances GROSS LOANS & ADVANCES Loans and advances Capitalised upfront commissions Capitalised mortgage insurance costs Deferred mortgage fee Loans from related parties Note FY21 $'000 FY20 $'000 13,934,440 12,518,394 45,125 41,624 - 94 (16,240) (17,400) - (2) 13,963,325 12,542,710 Less: allowance for impairment (37,565) (36,698) Current Non-current IMPAIRMENT ALLOWANCES Collective allowance Specific allowance MOVEMENT IN IMPAIRMENT ALLOWANCES Balance at 1 July Acquisition of RAF Provided for during the year Specific Collective Write-offs BALANCE AT 30 JUNE 22 13,925,760 12,506,012 3,630,465 2,884,823 10,332,860 9,657,887 13,963,325 12,542,710 32,126 30,641 5,439 6,057 37,565 36,698 36,698 16,445 - 495 1,096 1,580 1,891 20,121 (1,809) (2,254) 37,565 36,698 60 RESIMAC GROUP LTD ANNUAL REPORT 2021 61 | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS KEY NUMBERS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS KEY NUMBERS RECOGNITION & MEASUREMENT COVID-19 7. Other financial assets All loans and advances are initially recognised at fair value plus directly attributable transaction costs, and subsequently measured at amortised cost using the effective interest method. Amortised cost is calculated by taking into account any fees paid or received between parties to the contract that are an integral part of the effective interest rate, transactions costs, and all other premiums or discounts on acquisition, over the period to maturity. Gains and losses are recognised in the statement of comprehensive income when the loans and advances are derecognised or impaired, as well as through the amortisation process. Loans past due but not impaired Payment terms of these loans have not been renegotiated, however no further advances are provided until payment is made. The Group is in direct contact with relevant borrowers to enter into payment arrangements which will bring the account fully up to date within an acceptable period. For Prime Insured loans expected recoverable amounts are adjusted to reflect lower than 100% Lenders Mortgage Insurance (LMI) recovery where applicable e.g. due to costs associated with maintaining the security value within the terms of the LMI agreement (i.e. other than fair wear and tear). They are also reduced by the amount of higher rate (penalty) interest and fees related to loans in arrears which are not covered by LMI. Loans with payments outstanding less than one month are generally rectified by the borrower within a short period of time, i.e. within the same month. Loans in this category are less likely to be representative of loans with underlying repayment problems. Impairment and provisioning AASB 9 requires an Expected Credit Loss model (ECL) at each reporting date to reflect changes in credit risk since initial recognition of the loans and advances. Impairment policy of loans and advances are included in Note 22. The impact of COVID-19 on customer serviceability decreased during the year, however continues to present challenges to a small amount of the Group’s customers. Resimac’s conservative approach to credit risk and strong funding relationships have mostly insulated the impacts of COVID-19. Resimac remains committed to supporting customers and the broader community through the ongoing challenges COVID-19 poses. Whilst the economic rebound in FY21 in Australia was comforting, we expect FY22 to provide further macroeconomic challenges. Australia’s vaccine rollout remains slow in comparison to other countries, whilst State lockdowns and border closures continue to drive economic headwinds. Furthermore, international borders are expected to remain closed for the majority of FY22 stifling the recovery in a number of industries. Security properties repossessed As at 30 June 2021, the Group had exercised their right to liquidate 16 residential properties (FY20: 41) being the security for securitised loans. The Group intends to sell these properties with the proceeds to go towards clearing the outstanding balance of the underlying loans. It is expected that the outstanding balance will be recovered in full, unless a Stage 3 specific provision has been raised against the loan. The transition from a COVID-19 overlay to calculating expected future credit loss within the ECL model for all customers is detailed in Note 23. Listed shares – BNK Banking Corporation Limited (ASX: BBC) Unlisted shares – Athena Unlisted shares – Positive Group Short-term investment Current Non-current Note FY21 $'000 FY20 $'000 22 22 22 22 4,713 7,110 3,000 260 15,083 260 14,823 15,083 1,921 2,000 3,000 260 7,181 260 6,921 7,181 Listed shares BNK is an investment the Group intends to hold for long term strategic purposes. As permitted by AASB 9, the Group designated this investment at the date of initial application as measured at fair value through other comprehensive income. The accumulated fair value reserve related to this investment will not be reclassified to profit or loss. Dividends from this investment will be recognised in profit or loss as other income when the Group’s right to receive payment is established. At 30 June 2021, the Group held 6,412,621 shares in BNK at a share price of $0.735 (30 June 2020: 4,468,902 shares). Unlisted shares Investments that are not traded in an active market, however classified as fair value through profit or loss (FVTPL) are disclosed at fair value at the end of each reporting period. The fair value testing conducted on the unlisted shares, included assessing the impact of COVID-19 on the current and future operating models. The fair value assessments included comparisons against forecasted operating performance at time of investment. The valuation methodology for these investments is disclosed in Note 22. Resimac holds shares in Athena Financial Pty Ltd (“Athena”) & Positive Finance Holdings Pty Ltd (“Positive”). Athena recently completed a Series D capital raise at an increased valuation compared to the Series A capital raise Resimac invested in. Management believe it is appropriate to increase the fair value of the 1.8% investment in Athena to $7.1m, representing the mid-range of the pre and post money Series D valuation. The fair value of the 15% investment in Positive Group remains unchanged. Short-term investment Term deposit with fixed or determinable payments and fixed maturity date which the Group has the intent and ability to hold to maturity. ANNUAL REPORT 2021 63 | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS KEY NUMBERS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS KEY NUMBERS 8. Right-of-use assets Lease - buildings Balance at 1 July Additions Acquisition of RAF Depreciation Foreign exchange Balance at 30 June Lease - buildings Right-of-use assets at cost Less: accumulated depreciation TOTAL RIGHT-OF-USE ASSETS FY21 $'000 FY20 $'000 9. Plant and equipment Carrying amounts of: 12,279 - Plant and equipment 256 - 14,015 191 (1,895) (1,920) (2) (7) 10,638 12,279 14,510 14,256 (3,872) (1,977) 10,638 12,279 1,919 1,919 Computer equipment Office furniture Operating lease equipment Leasehold improvement $’000 $’000 $’000 FY21 $'000 FY20 $'000 2,192 2,192 Total $’000 2,192 496 (17) (751) (1) 1,919 $’000 1,245 - - - 981 (217) (264) 283 296 (3) - 359 - 4 403 (124) - 283 1,481 2,110 - 26 (262) - 1,245 211 494 (622) (1) 2,192 Balance at 1 July 2020 Additions Disposals Depreciation expense Foreign exchange BALANCE AT 30 JUNE 2021 Balance at 1 July 2019 Additions Acquisition of RAF Depreciation expense Foreign exchange BALANCE AT 30 JUNE 2020 541 176 (10) (249) (1) 457 590 149 25 (223) - 541 123 24 (4) (21) - 122 39 58 40 (13) (1) 123 Right-of-use assets The Group lease offices with lease terms between 3 to 8 years. Right-of-use assets are initially measured at cost comprise the following: the amount of the initial measurement of lease liability; any lease payments made at or before the commencement date less any lease incentives received; any initial direct costs; and restoration costs. The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the end of the lease term, unless the lease transfers ownership of the underlying asset to the Group by the lease term or the cost of the right-of-use asset reflects that the Group will exercise a purchase option. In that case the right-of-use asset will be depreciated over the useful life of the underlying asset, which is determined on the same basis as those of property and equipment. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability. Depreciation of right-of-use asset is recognised in the consolidated statement of profit or loss. RECOGNITION & MEASUREMENT Plant and equipment stated at cost less accumulated depreciation and impairment losses. Depreciation and amortisation Depreciation is recognised to write off the cost or valuation of assets less their residual values over their useful lives, using the straight-line method. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis. 64 RESIMAC GROUP LTD ANNUAL REPORT 2021 65 | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS KEY NUMBERS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS KEY NUMBERS The following useful lives are used in the calculation of depreciation: 11. Goodwill and intangible assets Computer equipment Office furniture Operating lease equipment Leasehold improvement Years 3-4 10 3-7 Up to 40 years or life of lease, whichever is shorter Derecognition Impairment An item of plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of plant and equipment is determined as the difference between the sale proceeds and the carrying amount of the asset and is recognised in profit or loss. At each reporting date, the Group reviews the carrying amounts of plant and equipment to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated to determine the extent of the impairment loss (if any). 10. Other assets Reinsurance claim receivable Other Current Non-current RECOGNITION & MEASUREMENT Reinsurance claim receivable FY21 $'000 FY20 $'000 3,545 228 3,773 228 3,545 3,773 3,339 288 3,627 288 3,339 3,627 Prime Insurance Group Limited was purchased as part of the RHG Mortgage Corporation Limited (RHG) acquisition in 2014. Its sole purpose is to provide insurance service and re-insurance facilities for the RHG mortgage assets and process any shortfall claims received. The reinsurance claim receivable is available to utilise against the reinsurance claim reserve amount in Note 16. Goodwill Balance at 1 July FY21 $'000 FY20 $'000 27,430 21,766 Additional amounts recognised from business combinations occurring in the current year - 5,664 BALANCE AT 30 JUNE 27,430 27,430 Other intangible assets Balance at 1 July 2020 Amortisation for the year Write-offs BALANCE AT 30 JUNE 2021 Balance at 1 July 2019 Additions Acquisition of RAF Amortisation for the year BALANCE AT 30 JUNE 2020 Software Brand name $'000 1,386 (397) (879) 110 1,691 68 11 (384) 1,386 $'000 77 (51) - 26 - - 103 (26) 77 Total $'000 1,463 (448) (879) 136 1,691 68 114 (410) 1,463 11.1. Goodwill Goodwill arising on an acquisition of a business is carried at cost as established at the date of acquisition of the business (less accumulated impairment losses, if any). Impairment testing At 30 June 2021, the Group has performed the impairment testing, which included consideration of the impact of COVID-19. Goodwill of $21.7m has been allocated for impairment assessment purpose to the Australian Lending Business segment. This segment is considered to be the Group of cash-generating units (CGU) that are expected to benefit from the synergies of the business combination to which that goodwill relates. The RAF goodwill of $5.7m is considered a separate CGU, and the associated goodwill has been assessed for impairment testing. 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 unit and then to the other assets of the unit pro rata based on the carrying amount of each asset in the unit. Any impairment loss for goodwill is recognised directly in profit or loss. An impairment loss recognised for goodwill is not reversed in subsequent periods. 66 RESIMAC GROUP LTD ANNUAL REPORT 2021 67 | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS KEY NUMBERS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS KEY NUMBERS Recoverable amount of the asset Impairment assessment The recoverable amount is equal to the greater of: fair value less costs to sell; and value in use (‘VIU’). It is not always necessary to determine both the fair value less cost to sell and its VIU. If either of these amounts exceed the carrying amount of the CGU, there is no impairment of the goodwill and it is not necessary to estimate the other amount. As a result, the VIU methodology is considered to be most appropriate as there is no readily available market outside specific business sales of an equivalent sized business to the Australian Lending business segment. The VIU calculation requires management to estimate future cash flows expected to arrive from the CGU and a suitable discount rate in order to calculate present value. For RAF, management have determined that the fair value less cost to sell (FV) is considered most appropriate, as the controlling interest was purchased at arms-length in the current financial year. Indicators of impairment The minimum indicators of impairment have been considered by management. These include both internal and external sources of information such as: significant changes (historical and future) in the market, economic, legal or technological environment which would have an adverse impact on the Group; interest rate changes which impact the discount rate used in modelling; evidence of a worsening financial position; plans to discontinue operations; and economic conditions as a result of COVID-19. Management have assessed that there are no such indicators which would impair the goodwill balance as at 30 June 2021. Inputs to impairment calculations Cash flow projections For VIU calculations, cash flow projections are based on corporate plans and business forecasts prepared by management and approved by the Board. Cash flow projections are for four years and a terminal growth rate beyond this has been applied. In assessing VIU, the estimated future cash flows are discounted to their present value using a discount rate that reflects current market assessments of the time value of money and the risks specific to the CGU. Furthermore, each unit or group of units to which the goodwill is allocated shall: represent the lowest level at which the goodwill is monitored for internal management purposes; and not exceed the operating segments. The allocation of goodwill to these CGU’s is considered appropriate. Key judgements and assumptions The key assumptions used for assessing the recoverable amount of the Australian Lending Business CGU are as below: FY21 FY20 Growth rate for 4-year forecast period (p.a.) 2.5% 5.3% Discount rate (post-tax) 11.0% 11.0% Terminal growth rate 2.0% 2.0% The post-tax discount rate of 11% has been determined by estimating the cost of equity that applies to the Australian lending segment. The terminal growth rate of 2% does not reflect the expected growth trajectory of the Group, it is management’s conservative growth assumption for goodwill impairment testing only. Management conducted the following when testing the impairment of goodwill: revised budgets, forecasts and other assumptions from previous impairment testing to reflect the economic conditions at the balance date, especially to address increased risk and uncertainty; considered the macroeconomic impact of COVID-19 and considered outcomes where future cash flows are reduced or operating costs increase. In assessing the VIU for goodwill impairment assessment, the potential impact of COVID-19 on cash flows and profit growth have been considered under different scenarios: 1) Base case: Current management view of macroeconomic environment: Loan volume: Growth trajectory in line with post COVID-19 growth Margins: Conservative view to declining to flat margin scenario Costs: Growth based on CPI assumptions and investments required to support organic growth of the business 2) Stress scenario: Assumes severe macroeconomic downturn resulting in a sustained downturn in Resimac profitability of -5% CAGR over a 4 year period. The stress scenario indicated sufficient headroom remains for goodwill impairment purposes. The volatility in the current financial markets due to COVID-19 introduces challenges to impairment testing. A second layer of stress testing was added with discount rates ranging from 10-20% which were applied to the base case and stress scenarios. Management tested the stress scenario and applied a discount rate of 20%, the recoverable amount of the CGU exceeded the recorded carrying value for the Australian Lending Business. The full sensitivity range is outlined as follows: Headroom ($m) Discount rate Base Case Stress Test Case 10% 694 439 11% 574 352 12% 479 282 20% 105 7 The recoverable amount of the CGU would not be less than its carrying value in any scenario. Resimac management do not believe there are any other assumptions based on internal or external sources whereby the quantum of the change will eliminate the available headroom. For Resimac Asset Finance Group, using the Calibration methodology within the FV concept, management believe there are no indicators of impairment mainly due to the following: Resimac Asset Finance Group have outperformed initial NPAT expectations; and robust portfolio management and cost controls are embedded to protect the business in the current COVID-19 macroeconomic environment. Impairment charge Management believe potential impacts of COVID-19 have been adequately considered for goodwill impairment testing purposes at 30 June 2021. Based upon the impairment testing performed, there is no impairment charge for FY21 (FY20: nil). 11.2. Other intangible assets Intangible assets with finite useful lives that are acquired separately are carried at cost less accumulated amortisation and accumulated impairment losses. Amortisation is recognised on a straight-line basis over their estimated useful lives. The estimated useful life and amortisation method are reviewed at the end of each reporting period, with the effect of any changes in estimate being accounted for on a prospective basis. Intangible assets with indefinite useful lives that are acquired separately are carried at cost less accumulated impairment losses. Intellectual property Software Brand name Useful life 7 years 3-5 years 2 years ANNUAL REPORT 2021 69 | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS KEY NUMBERS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS KEY NUMBERS Recognise as an operating expense as the service is received 13. Interest-bearing liabilities Software-as-a-Service (SaaS) arrangements SaaS arrangements are service contracts providing the Group with the right to access the cloud provider’s application software over the contract period. As such, the Group does not receive a software intangible asset at the contract commencement date. The following outlines the accounting treatment of costs incurred in relation to SaaS arrangements: Recognise as an operating expense over the term of the service contract Fee for use of application software 12. Trade and other payables Revenue collected in advance Collections owed to trusts Other creditors and accruals Commissions Customisation costs Configuration costs Data conversion and migration costs Testing costs Training costs Costs incurred for the development of software code that enhances or modifies, or creates additional capability, to existing on-premise systems and meets the definition of and recognition criteria for an intangible asset are recognised as intangible software assets. Note FY21 $'000 FY20 $'000 436 11,132 326 7,900 17,654 13,371 5,315 4,294 22 34,537 25,891 Current 34,537 25,891 RECOGNITION & MEASUREMENT Trade creditors and other payables are generally settled within 30 day terms and are unsecured. Trade creditors and other payables are carried at amortised cost and represent liabilities for goods and services provided to the Group prior to the end of the financial year, are unpaid, and arise when the Group becomes obliged to make future payments in respect of the purchase of these goods and services. Collections owed to trusts Relates to loan repayments received from borrowers that reside in clearing accounts not yet allocated to a trust at balance date. Commissions Relates to upfront and trail commission payable to aggregators and brokers. Other creditors and accruals Other creditors and accruals are unsecured payables relating to expenses arising in the ordinary course of business. Debt securities on issue Corporate debt facility Issuance facilities Current Non-current Note FY21 $'000 FY20 $'000 13,780,348 12,421,861 - 5,000 390,303 258,755 22 14,170,651 12,685,616 3,684,369 2,917,692 10,486,282 9,767,924 14,170,651 12,685,616 RECOGNITION & MEASUREMENT All borrowings are initially recognised at fair value of the consideration received less direct transaction costs, and subsequently measured at amortised cost using the effective interest method. Amortised cost is calculated by taking into account any fees paid or received between parties to the contract that are an integral part of the effective interest rate, transaction costs, and all other premiums or discounts on acquisition, over the period to maturity. Gains or losses are recognised in the statement of profit or loss when the liabilities are derecognised and also through the amortisation process. For further detail on the amortised cost basis of accounting see Note 1 and 2. Details of the Group’s interest-bearing liabilities are set out in Note 22. 13.1. Debt securities on issue Warehouse facilities The warehouse facilities provide funding for the initial financing of loans and advances to customers within the warehouse Special Purpose Vehicles (SPV). Refer to Note 24 for the consolidation of the SPVs. The security for advances under these facilities is a combination of fixed and floating charges over all assets of the warehouse SPVs. If the warehouse facility is not renewed or should there be a default under the existing terms and conditions, the warehouse facility funder will not have a right of recourse against the remainder of the Group. Warehouse facilities are secured against the underlying mortgages only. During the financial year there were no breaches to the warehouse agreements. All warehouse facilities were renewed, at equal or higher limits, on or before their maturity date. Bonds RMBS provide duration funding for loans and advances (securitised assets) originated by the Group. The RMBS notes generally have a legal final maturity of 31.5 years from issue, and a weighted average life of up to 6 years. The RMBS SPV security is a combination of fixed and floating charges over all assets of the RMBS SPV. Credit losses arising from securitised assets will not result in the bondholders having a right of recourse against the Group (as Originator, Manager or Servicer). During the year ended 30 June 2021, AUD $5.50 billion and NZD $300 million of new Residential Mortgage Backed Securities (RMBS) and Medium Term Notes (MTNS) were issued (FY20: AUD $3.47 billion). These RMBS issuance paid down warehouse facilities creating capacity to underwrite new mortgages. During the financial year, there were no breaches to the terms of the RMBS. Collateral Certain RMBS and warehouse SPV’s are supported by cash collateral reserves. 70 RESIMAC GROUP LTD ANNUAL REPORT 2021 71 | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS KEY NUMBERS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS KEY NUMBERS 13.2. Corporate debt facility 13.3. Issuance facilities 14.1. Leases As at 30 June 2021, the Company had a $30 million corporate facility with National Australia Bank maturing in September 2021. The Group had an undrawn balance of $30 million at 30 June 2021 (FY20: $25 million). In accordance with the terms of the Group’s corporate debt facilities, the Group is required to comply with certain covenants. During the period and as at 30 June 2021, the Group was compliant with these covenants. The corporate debt facility is secured by a first-ranking charge over the trust assets of the Group. See Note 23.7 for further detail. The Group maintains a series of subsidiary SPV’s for the purpose of raising financing for its RMBS-related credit risk retention (“CRR”) obligations. CRR is a mandatory requirement for the Group’s RMBS issuance activities in the U.S., European, Japanese and U.K. jurisdictions where, in general, the Group is required to hold an economic interest of at least 5% in value of an RMBS issuance. The subsidiary SPV’s hold a 5% vertical strip of bonds of an individual RMBS issuance and raises secured financing from banks and credit investors. 14. Lease liabilities Lease liabilities included in the Statement of Financial Position Balance at 1 July Addition Acquisition of RAF Interest incurred Payment of lease liabilities Foreign exchange BALANCE AT 30 JUNE Current Non-current Amounts recognised in Statement of Comprehensive Income Depreciation charge of right-of-use assets Interest expense on lease liabilities Amounts recognised in Statement of Cash Flows FY21 $'000 FY20 $'000 13,622 - 541 - 526 14,803 497 618 (2,205) (2,289) (2) (7) 12,482 13,622 1,520 1,566 10,962 12,056 12,482 13,622 1,895 526 1,920 618 Total cash outflows for leases (2,205) (2,289) The Group assesses whether a contract is or contains a lease, at inception of the contract. The Group recognises a right-of-use asset and a corresponding lease liability with respect to all lease arrangements in which it is the lessee, except for short-term leases (defined as leases with a lease term of 12 months or less) and leases of low value assets. For these leases, the Group recognises the lease payments as an operating expense on a straight-line basis over the term of the lease unless another systematic basis is more representative of the time pattern in which economic benefits from the leased assets are consumed. The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted by using the rate implicit in the lease. If the rate cannot be readily determined, the lessee uses its incremental borrowing rate. Lease payments included in the measurement of the lease liability comprise: Fixed lease payments (including in-substance fixed payments), less any lease incentives receivable; Variable lease payments that depend on an index or rate, initially measured using the index or rate at the commencement date The amount expected to be payable by the lessee under residual value guarantees; The exercise price of purchase options, if the lessee is reasonably certain to exercise the options; and Payments to penalties for terminating the lease, if the lease term reflects the exercise of an option to terminate the lease The lease liability is presented as a separate line in the consolidated statement of financial position. The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability (using the effective interest method) and by reducing the carrying amount to reflect the lease payments made. The Group remeasures the lease liability and makes a corresponding adjustment to the related right-of-use asset whenever: The lease term has changed or there is a significant event or change in circumstances resulting in a change in the assessment of exercise of a purchase option, in which case the lease liability is remeasured by discounting the revised lease payments using a revised discount rate. The lease payments change due to changes in an index or rate or a change in expected payment under a guaranteed residual value, in which cases the lease liability is remeasured by discounting the revised lease payments using an unchanged discount rate A lease contract is modified and the lease modification is not accounted for as a separate lease, in which case the lease liability is remeasured based on the lease term of the modified lease by discounting the revised lease payments using a revised discount rate at the effective date of the modification. The Group did not make any such adjustments during the year presented. Variable rents that do not depend on an index or rate are not included in the measurement of the lease liability and the right-of-use asset. The related payments are recognised as an expense in the period in which the event or condition that triggers those payments occurs and are included in “Other expenses” in profit or loss (see note 2). The Group has applied judgement to determine the lease term for some lease contracts in which it is a lessee that include renewal options. The assessment of whether the Group is reasonably certain to exercise such options impacts the lease term, which significantly affects the amount of lease liabilities and right-of-use assets recognised. 72 RESIMAC GROUP LTD ANNUAL REPORT 2021 73 | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS KEY NUMBERS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS KEY NUMBERS 15. Other financial liabilities 17. Provisions Note FY21 $'000 FY20 $'000 Present value of future trail commission payable 15,789 20,797 Current Non-current 22 15,789 20,797 4,528 5,750 11,261 15,047 15,789 20,797 Employee benefits Make good Current Non-current FY21 $'000 FY20 $'000 4,760 458 5,218 4,401 817 5,218 4,116 514 4,630 3,902 728 4,630 RECOGNITION & MEASUREMENT The Group makes trail commission payments to mortgage originators based on monthly loan balances outstanding. Initial Recognition Fair value of future trail commission payable is recognised on the origination of White label loans. This represents the NPV of the expected future trail commission payable under the origination and management agreement, less ongoing servicing costs not covered by transaction fees. Subsequent payment Subsequent to initial recognition, the future trail commission payable is measured at amortised cost. The carrying amounts of the trail commissions payable are adjusted to reflect actual and revised estimated cash flows by recalculating the carrying amount through computing the present value of estimated future cash flows at the effective interest rates. The resulting adjustment is recognised as income or expense in the statement of comprehensive income. A remeasurement of the underlying cash flows relating to the trail commission payable occurs at each reporting date. Key judgements and assumptions Refer to Note 1 for the key estimates and judgements underlying the remeasurement of the estimated future cash flows. 16. Other liabilities Reinsurance claim reserve Non-current FY21 $'000 FY20 $'000 3,545 3,545 3,339 3,339 3,545 3,339 The reinsurance claim reserve offsets with the reinsurance claim receivable amount in Note 10. Balance at 1 July 2020 Additional provisions recognised Provision utilised BALANCE AT 30 JUNE 2021 Employee benefits Make good $'000 4,116 2,035 (1,391) 4,760 $'000 514 17 (73) 458 Total $'000 4,630 2,145 (1,557) 5,218 RECOGNITION & MEASUREMENT Provisions are recognised when: the Group has a present obligation (legal or constructive) as a result of a past event; it is probable that the Group will be required to settle the obligation; and a reliable estimate can be made of the amount of the obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (when the effect of the time value of money is material). 17.1. Employee benefits A liability is recognised for benefits accruing to employees where the liability can be measured reliably and payment is probable, in respect of: wages and salaries; annual leave; long service leave; and on-costs relating to the above. Liabilities recognised in respect of employee benefits expected to be settled within 12 months, are measured at their nominal values using the remuneration rate expected to apply at the time of settlement. Liabilities recognised in respect of employee benefits which are not expected to settle within 12 months are measured at the present value of the estimated future cash outflows to be made by the Group in respect of services provided by employees up to the reporting date. The liability for long service leave is recognised in the provision for employee benefits. It is measured as the present value of expected future payments for the services provided by employees up to the reporting date. Expected future payments are discounted using market yields at the reporting date on high quality corporate bonds with terms to maturity that match, as closely as possible, the estimated future cash outflows. 17.2. Make good Where a condition of the Group’s lease premises is to return the property in its original condition at the end of a lease term. The Group recognises a provision for the make good as the expected cost of the refurbishment at the end of the lease. 74 RESIMAC GROUP LTD ANNUAL REPORT 2021 75 | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CAPITAL | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CAPITAL Notes to the consolidated financial statements Capital for the year ended 30 June 2021 18. Capital management The Group’s capital management objectives The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising the return to stakeholders through the optimisation of the debt and equity balance. The Group operates a warehouse to securitisation funding model for its lending business and as such makes decisions on the amount of capital invested in the notes or warehouses based on alternate sources of funding and the expected return on amounts invested and with regard to the company's cost of capital. EQUITY Issued capital Reserves Retained earnings The Group manages its capital through various means, including: adjusting the amount of ordinary dividends paid to shareholders; maintaining a dividend reinvestment plan; raising or repaying capital; and reinvesting profits. The capital structure of the Group consists of net debt (borrowings as detailed in Note 13 offset by cash and bank balances) and equity of the Group (comprising issued capital, reserves, retained earnings and non-controlling interests as detailed in Note 20). The Group is not subject to any externally imposed capital requirements. The Board is responsible for monitoring and approving the capital management framework within which management operates. The purpose of the framework is to prudently manage capital whilst optimising the debt and equity structure. Note FY21 $'000 FY20 $'000 20 20 20 120,134 120,354 (18,126) (7,556) 219,131 128,694 321,139 241,492 19. Dividends Declared and paid during the period (fully-franked at 30 percent) Final dividend for FY20: $0.018 (FY19: $0.010) Special dividend for FY20: Nil (FY19: $0.005) FY21 $'000 FY20 $'000 7,334 4,058 - 2,029 Interim dividend for FY21: $0.024 (Interim FY20: $0.012) 9,786 4,879 Proposed and unrecognised as a liability (fully-franked at 30 percent) Final dividend for FY21: $0.04 (FY20: $0.018) Franking credit balance Franking credits available for future years at 30% adjusted for the payment of income tax and dividends receivable or payable Impact on the franking account of dividends proposed before the financial report was issued but not recognised as a distribution to equity holders during the period. 20. Issued capital and reserves Issued capital Treasury shares Share capital Reverse acquisition reserve1 17,120 10,966 16,336 16,336 7,334 7,334 57,198 19,170 (7,001) (3,143) FY21 $'000 FY20 $'000 183,011 181,895 (1,336) - 181,675 181,895 (61,541) (61,541) 120,134 120,354 Issued capital as at 30 June 2021 was $183,011,197 (408,404,461 ordinary shares). During the period, the Company issued: 567,646 shares for $951,191 in respect of the Resimac Dividend Reinvestment Plan (DRP), and 387,478 shares for $165,000 to provide for LTI share options being exercised and Employee Share Plan 1 As a result of reverse acquisition accounting in the Resimac/Homeloans merger, an account was created as a component of equity. This account called ‘Reverse acquisition reserve’ is similar in nature to share capital. The Reverse acquisition reserve is not available for distribution. 76 RESIMAC GROUP LTD ANNUAL REPORT 2021 77 | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CAPITAL | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CAPITAL 20.1. Issued capital 20.3. Reserves (net of income tax) and retained earnings Balance at 30 June 2020 and 1 July 2020 407,449 181,895 Adoption of AASB 16, net of income tax (339) - - - Balance at 1 July 2019 Issue of shares under a dividend reinvestment plan Exercise of options – proceeds received No. of shares - thousands $'000 405,790 180,548 1,059 600 1,017 330 Issue of shares under the DRP: FY20 Dividend on 25 September 2020 HY21 Dividend on 31 March 2021 Exercise of options – proceeds received Employee shares Balance at 30 June 2021 312 256 300 87 398 553 165 - 408,404 183,011 Fully paid ordinary shares, which have no par value, carry one vote per share and carry a right to dividends. 20.2. Treasury shares Treasury shares held in Resimac Group Ltd by Resimac EST Pty Ltd as Trustee for the Resimac Group Limited Employee Share Trust, are for the benefit of eligible employees of the Resimac Group Employee Share Option and Rights Plan. Shares issued to employees are recognised on a first-in-first-out basis. Balance at 1 July 2019 Subscription of shares by the Trust (average price: $0.85 per share) Allocation of shares under LTI#1 Balance at 30 June 2020 Subscription of shares by the Trust (average price: $2.13 per share) Allocation of shares under LTI#1 Acquisition of shares (average price: $2.47 per share) Balance at 30 June 2021 - 600 - 510 (600) (510) - - 300 (300) 540 540 639 (639) 1,336 1,336 RESERVES Cash flow hedge reserve Foreign currency translation reserve Retained earnings Fair value reserve Share- based payment reserve Other reserve Non- controlling interest $'000 $'000 $'000 $'000 $'000 $'000 $'000 Balance at 1 July 2019 84,314 (5,876) 656 (2,065) Adjusted balance as at 1 July 2019 83,975 (5,876) 656 (2,065) Profit after tax 55,908 Acquisition of non-controlling interest Changes in fair value of cash flow hedges, net of tax Currency translation differences Fair value movement on investment through OCI, net of tax - - - - Equity dividends (10,966) Share-based payments Option to acquire shares of subsidiary Reallocation - - (223) - - 365 - - - - - - - - - (504) - - - - - - - - - (657) - - - 223 88 - 88 - - - - - - 402 - - - - - - - - - - - - (188) - - - - 99 99 - (4) - - - - - BALANCE AT 30 JUNE 2020 128,694 (5,511) 152 (2,499) 490 (188) 194 (7,982) (444) Profit after tax 107,557 Acquisition of non-controlling interest without a change in control Option to acquire shares of subsidiary Changes in fair value of cash flow hedges, net of tax Currency translation differences Fair value movement on investment through OCI, net of tax - - - - - Equity dividends Share-based payments (17,120) - - - - (4,406) - - - - - (2) - - (205) - - - - - - - - 126 - - - - - - - - - 1,711 - 188 - - - - - BALANCE AT 30 JUNE 2021 219,131 (9,917) (55) (2,373) 2,201 (7,982) 194 249 - - 1 - - - - No. of shares - thousands $'000 Balance at 1 July 2020 128,694 (5,511) 152 (2,499) 490 (188) 78 RESIMAC GROUP LTD ANNUAL REPORT 2021 79 | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CAPITAL | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CAPITAL 20.3. Nature and purpose of reserves Cash flow hedge reserve The cash flow hedging reserve represents the cumulative effective portion of gains or losses arising on changes in fair value of hedging instruments entered into for cash flow hedges. The cumulative gain or loss arising on changes in fair value of the hedging instruments will be reclassified to profit or loss only when the hedged transaction affects the profit or loss, or included as a basis adjustment to the non-financial hedged item, consistent with the Group’s accounting policy. results and net assets of the Group's New Zealand operations from its functional currency to the Group's presentation currency are recognised directly in other comprehensive income and accumulated in the foreign currency translation reserve. Share-based payment reserve The share-based payments reserve is used to recognise the value of equity-settled share-based payments provided to employees, including KMP, as part of their remuneration. Refer to Note 31 for further details of these plans. Foreign currency translation reserve 20.4. Retained earnings Exchange differences relating to the translation of the See Note 19 in respect of payment of dividends. 21. Earnings per share FY21 $'000 FY20 $'000 Profit attributable to ordinary equity holders of the parent ($'000) 107,557 55,908 WANOS1 used in the calculation of basic EPS (shares, thousands) 407,824 406,536 Dilutive effect of share options 2,592 1,100 WANOS1 used in the calculation of diluted EPS (shares, thousands) 410,416 407,636 EARNINGS PER SHARE Basic (cents per share) Diluted (cents per share) 26.37 26.21 13.75 13.72 1 Weighted average number of shares 80 RESIMAC GROUP LTD Calculation of earnings per share 21.1. Basic earnings per share From 28 April 2021 to 30 June 2021 (71,610,645) Basic earnings per share is calculated as net profit attributable to the ordinary equity holders of the parent, adjusted to exclude any costs of servicing equity (other than dividends), divided by the WANOS adjusted for any bonus element. 21.2. Diluted earnings per share Diluted earnings per share is calculated by: dividing the net profit attributable to ordinary equity holders of the parent; by the WANOS outstanding during the year; plus the WANOS that would be issued on the conversion of all the dilutive potential ordinary options or rights into ordinary shares. 21.3. Calculation of WANOS Twelve months to 30 June 2021 The number of Resimac Group shares issued: From 1 July 2020 to 24 September 2020 (96,001,762) The number of Resimac ordinary shares on issue of 407,449,337 multiplied by the ratio of days outstanding (86/365); plus From 25 September 2020 to 30 March 2021 (208,907,555) The number of Resimac shares on issue (407,449,337) at 24 September 2020; plus Additional shares issued on 25 September 2020 under the DRP (311,398) multiplied by the ratio of days outstanding (187/365). The number of Resimac shares on issue (408,104,461) at 28 April 2021; plus Additional shares issued on 28 April 2021 under the LTI (300,000) multiplied by the ratio of days outstanding (64/365). Twelve months to 30 June 2020 The number of Resimac Group shares issued: From 1 July 2019 to 29 September 2019 (100,893,180) The number of Resimac ordinary shares on issue of 405,790,153 multiplied by the ratio of days outstanding (91/366); plus From 30 September 2019 to 26 March 2020 (198,845,864) The number of Resimac shares on issue (405,790,153) at 29 September 2019; plus Additional shares issued on 30 September 2019 under the DRP (788,540) multiplied by the ratio of days outstanding (179/366). From 27 March 2020 to 11 May 2020 (51,134,070) The number of Resimac shares on issue (406,578,693) at 26 March 2020; plus Additional shares issued on 27 March 2020 under the DRP (270,644) multiplied by the ratio of days outstanding (46/366). From 12 May 2020 to 30 June 2020 (55,662,478) The number of Resimac shares on issue (406,849,337) at 11 May 2020; plus From 31 March 2021 to 11 April 2021 (13,414,257) Additional shares issued on 12 May 2020 under the LTI (600,000) multiplied by the ratio of days outstanding (50/366). The number of Resimac shares on issue (407,760,735) at 30 March 2021; plus Additional shares issued on 31 March 2021 under the DRP (256,248) multiplied by the ratio of days outstanding (12/365). From 12 April 2021 to 27 April 2021 (17,889,511) The number of Resimac shares on issue (408,016,983) at 11 April 2021; plus Additional shares issued on 12 April 2021 under the Employee Share Plan (87,478) multiplied by the ratio of days outstanding (16/365). ANNUAL REPORT 2021 81 | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS RISK | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS RISK Notes to the consolidated financial statements Risk for the year ended 30 June 2021 22. Financial assets and financial liabilities The Group holds the following financial instruments: Basis of measurement Note FY21 $'000 FY20 $'000 Financial assets Cash and cash equivalents Amortised cost Trade and other receivables Loans and advances Short-term investment Investment securities – BNK Investment securities – Athena Investment securities – Positive Group Derivative financial assets Financial liabilities Trade and other payables Interest-bearing liabilities Amortised cost Amortised cost Amortised cost FVOCI-equity instrument FVTPL FVTPL FVTPL Amortised cost Amortised cost Present value of trail commission payable Amortised cost Derivative financial liabilities FVTPL 4 5 6 7 7 7 7 23 12 13 15 23 619,809 365,987 4,581 5,974 13,925,760 12,506,012 260 4,713 7,110 3,000 2,256 260 1,921 2,000 3,000 52,592 14,567,489 12,937,746 34,537 25,891 14,170,651 12,685,616 15,789 20,797 60,976 3,277 14,281,953 12,735,581 22.1. Fair values measurements and valuation processes 22.1.1. Fair value hierarchy The different levels have been defined as follows: Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities; Level 2: inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs). The following assets and liabilities are measured at fair value by the Group for financial reporting purposes: Fair value hierarchy Valuation technique(s) and key input(s) FY21 $'000 FY20 $'000 Financial assets Listed shares – BNK Banking Corporation Limited (ASX: BBC) Unlisted shares - Athena Level 1 Level 3 Unlisted shares – Positive Group Level 3 Most recent traded price and other available market information Acquisition value, financial performance since acquisition. Subsequent capital raise since acquisition adjusted for changes in market and macroeconomic factors Acquisition value and strategic value from synergies Level 2 Level 2 Discounted cash flow. Forward interest rates, contract interest rates Discounted cash flow. Forward interest rates, contract interest rates 4,713 7,110 1,921 2,000 3,000 3,000 2,256 3,330 - 49,262 Level 2 Level 2 Discounted cash flow. Forward interest rates, contract interest rates Discounted cash flow. Forward interest rates, contract interest rates 472 3,277 60,504 - In the year to 30 June 2021 there has been no change in the fair value hierarchy or the valuation techniques applied to any of the balances above. For further information on the use of derivatives refer to Note 23 Financial risk management. 22.1.2. Fair value of financial assets and liabilities that are not measured at fair value (but fair value disclosures are required) With the exception of the future trail commission payable that is initially recognised at fair value and subsequently carried at amortised cost, management consider that the carrying amounts of financial assets and liabilities recognised in the consolidated financial statements approximate their fair values. Interest rate swaps Cross currency swaps Financial liabilities Interest rate swaps Cross currency swaps 82 RESIMAC GROUP LTD ANNUAL REPORT 2021 83 | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS RISK | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS RISK 22.2. Financial assets and liabilities 22.2.1. Recognition and initial measurement Loans and advances and receivables (including trade and other receivables, bank balances and cash) are non- derivative financial assets with fixed or determinable payments that are not quoted in an active market which are initially recognised when they are originated. All other financial assets and financial liabilities are initially recognised when the Group becomes a party to the contractual provisions of the instrument. A financial asset (unless it is a trade receivable without a significant financing component) or finance liability is initially measured at fair value plus, for an item not at FVTPL, transaction costs that are directly attributable to its acquisition or issue. A trade receivable without a significant financing component is initially measured at the transaction price. 22.2.2. Classification and subsequent measurement 22.2.2.1. Financial assets On initial recognition, a financial asset is classified as measured at: amortised cost fair value through other comprehensive income (FVOCI) – debt instrument fair value through other comprehensive income (FVOCI) – equity instrument fair value through profit or loss (FVTPL) Financial assets are not reclassified subsequent to their initial recognition unless the Group changes its business model for managing financial assets, in which case all affected financial assets are reclassified on the first day of the first reporting period following the change in the business model. A financial asset is measured at amortised cost if it meets both of the following conditions and is not designated as at FVTPL: it is held within a business model whose objective is to hold assets to collect contractual cash flows; and its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. A debt investment is measured at FVOCI if it meets both of the following conditions and is not designated as at FVTPL: it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. On initial recognition of an equity investment that is not held for trading, the Group may irrevocably elect to present subsequent changes in the investment’s fair value in OCI. This election is made on an investment-by- investment basis. All financial assets not classified as measured at amortised cost or FVOCI as described above are measured as FVTPL. This includes all derivative financial assets and investment securities. On initial recognition, the Group may irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortised cost or at FVOCI as at FVTPL if doing so eliminates or subsequently reduces an accounting mismatch that would otherwise arise. 22.2.2.2. Financial assets - Business model assessment The Group determines the business model at the level that reflects how groups of financial assets are managed. In determining the business model, all relevant evidence that is available at date of assessment is used including: how the performance of the financial assets held within that business model are evaluated and reported to the Group’s KMP the risks that affect the performance of the business model (and the financial assets held within that business model) and, in particular, the way in which those risks are managed; and how managers of the business are compensated (for example, whether compensation is based on the fair value of the assets managed or on the contractual cash flows collected). Financial assets that are held for trading or are managed and whose performance is evaluated on a fair value basis are measured at FVTPL. 22.2.2.3. Financial assets - Assessment whether contractual cash flows are solely payments of principal and interest For the purpose of this assessment, ‘principal’ is defined as the fair value of the financial asset on initial recognition. ‘Interest’ is defined as consideration for the time value of money and for the credit risk associated with the principal amount outstanding during a particular period of time and for other basic lending risks and costs (e.g. liquidity risk and administrative costs), as well as a profit margin. In assessing whether the contractual cash flows are solely payments of principal and interest, the Group considers the contractual terms of the instrument. This includes assessing whether the financial asset contains a contractual term that could change the timing or amounts of contractual cash flows such that it would not meet this condition. In making this assessment, the Group considers: contingent events that would change the amount or timing of cash flows; terms that may adjust the contractual coupon rate, including variable-rate features; prepayment and extension features; and terms that limit the Group’s claim to cash flows from specified assets (e.g. non-recourse features). A prepayment feature is consistent with the solely payments of principal and interest criterion if the prepayment amount substantially represents unpaid amounts of principal and interest on the principal amount outstanding, which may include reasonable additional compensation for early termination of the contract. Additionally, for a financial asset acquired at a discount or premium to its contractual par amount, a feature that permits or requires prepayment at an amount that substantially represents the contractual par amount plus accrued (but unpaid) contractual interest (which may also include reasonable additional compensation for early termination) is treated as consistent with this criterion if the fair value of the prepayment feature is insignificant at initial recognition. 22.2.2.4. Financial Assets - Subsequent measurement and gains and losses Financial assets at FVTPL Financial assets at amortised cost Debt investments at FVOCI Equity investments at FVOCI These assets are subsequently measured at fair value. Net gains and losses, including any interest or dividend income, are recognised in profit or loss. However, see Note 23.3 for derivatives designated as hedging instruments. These assets are subsequently measured at amortised cost using the effective interest method. The amortised cost is reduced by impairment loss. Interest income, foreign exchange gains and losses and impairment are recognised in profit or loss. Any gain or loss on derecognition is recognised in profit or loss. These assets are subsequently measured at fair value. Interest income is calculated using the effective interest method. Other net gains and losses are recognised in OCI. On derecognition, gains and losses accumulated in OCI are reclassified to profit or loss. These assets are subsequently measured at fair value. Dividends are recognised as income in profit or loss unless the dividend clearly represents a recovery of part of the cost of the investment. Other net gains and losses are recognised in OCI and are never reclassified to profit or loss. 84 RESIMAC GROUP LTD ANNUAL REPORT 2021 85 | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS RISK | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS RISK 22.2.2.5. Financial liabilities – Classification, subsequent measurement and gains and losses Financial liabilities are classified as either financial liabilities at FVPTL or other financial liabilities. Financial liabilities at FVTPL Financial liabilities are classified as at FVTPL where the liability is either held for trading or designated at fair value through profit or loss. A financial liability is held for trading if: it has been incurred principally for the purpose of repurchasing it in the near term; or on initial recognition it is a part of a portfolio of identified financial instruments that the Group manages together and has a recent actual pattern of short-term profit-taking; or it is a derivative that is not designated and effective as a hedging instrument. A financial liability other than a financial liability held for trading may be designated as at FVTPL upon initial recognition if: such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or the financial liability forms part of a group of financial assets or financial liabilities or both, which is managed and its performance evaluated on a fair value basis, in accordance with the Group’s documented risk management or investment strategy, and information about the grouping is provided internally on that basis; or it forms part of a contract containing one or more embedded derivatives, and AASB 9 permits the entire combined contract to be designated as at FVTPL. Financial liabilities at FVTPL are stated at fair value with any gains or losses arising on remeasurement recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any interest paid on the financial liability and is included in the ‘other gains and losses' line item. Other financial liabilities Other financial liabilities (including borrowings and trade and other payables) are subsequently measured at amortised cost using the effective interest method. The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial liability, or (where appropriate) a shorter period, to the net carrying amount on initial recognition. 22.2.3. Derecognition 22.2.3.1. Financial assets The Group derecognises a financial asset when the contractual rights to the cash flows from the financial asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantively all of the risks and rewards of ownership of the financial asset are transferred or in which the Group neither transfers nor retains substantially all of the risks and rewards of ownership and it does not retain control of the financial asset. The Group enters into transactions whereby it transfers assets recognised in its statement of financial position, but retains either all or substantially all of the risks and rewards of the transferred assets. In these cases, the transferred assets are not derecognised. 22.2.3.2. Financial liabilities The Group derecognises a financial liability when its contractual obligations are discharged or cancelled, or expire. The Group also derecognises a financial liability when its terms are modified and the cash flows of the modified liability are substantially different, in which case a new financial liability based on the modified terms is recognised at fair value. On derecognition of a financial liability, the difference between the carrying amount extinguished and the consideration paid (including any non-cash assets transferred or liabilities assumed) is recognised in profit or loss. 22.2.4. Impairment of financial assets The Group recognises loss allowances for expected credit loss (ECL) on: Financial assets measured at amortised cost Contract assets Lease receivable The Group measures loss allowances for a financial instrument at an amount equal to the lifetime ECL for stage 2 or stage 3 assets if the credit risk on that financial instrument has increased significantly since recognition, or if the financial instrument is a purchased or originated credit-impaired financial asset. If the credit risk on a financial instrument has not increased significantly since initial recognition (except for a purchased or originated credit-impaired financial asset), the Group measures the loss allowance for that financial instrument at an amount equal to a 12 month ECL for stage 1 assets. The Group applies a simplified approach for measuring the loss allowance at an amount equal to lifetime ECL for trade receivables, contract assets and lease receivable in certain circumstances. Significant increase in credit risk An asset moves to stage 2 when its credit risk has increased significantly since initial recognition. A significant increase in credit risk is identified before the exposure has defaulted and at the latest when exposure becomes 30 days past due. When determining whether the credit risk of a financial asset has increased significantly since the initial recognition and when estimating ECLs, the Group considers reasonable and supportable information that is relevant and available without undue cost effort. This includes both quantitative and qualitative information and analysis, based on the Group’s historical experience and informed credit assessment and including forward- looking information. As part of the forward-looking assessment, the Group has considered factors including macro-economic forecast and outlook, GDP growth, unemployment rates and interest rates. Credit-impaired financial assets The movement between stage 2 and 3 will be based on whether financial assets are credit-impaired at the reporting date. A financial asset is credit-impaired when one or more events that have a detrimental impact on the estimated future cash flows of the financial assets have occurred. Evidence that a financial asset is credit-impaired includes the following observable data: significant financial difficulty of the borrower; or breach of contract, such us a default or delinquency in interest or principal payments; or becoming apparent that the borrower will enter bankruptcy or financial re-organisation; or past experience of collecting payments; or an increase in the number of delayed payments in the portfolio past the average credit period; or observable changes in national or local economic conditions that correlate with default on receivables. Definition of default shortfalls (i.e. the difference between the cash flows due to the entity in accordance with the contract and the cash flows that the Group expects to receive). The key inputs used in measuring ECL include: (a) probability of default: the PD is the likelihood of default, applied to each underlying exposure (b) loss given default: the LGD is the magnitude of the expected credit loss in the event of default, taking into consideration the mitigating effect of collateral assets and time value of money (c) exposure at default: the EAD represents the estimated exposure in the event of a default The ECL is determined with reference to the following stages: Stage 1: 12 month ECL At initial recognition, for financial assets without a significant increase in credit risk (SICR), or for financial assets where an increase in credit risk is considered to be low, ECL is determined based on PD over the next 12 months, adjusted for forward looking estimates (FLE). Stage 2: Lifetime ECL not credit impaired Where there has been a SICR, the ECL is determined with reference to the financial asset’s lifetime PD and the lifetime losses associated with that PD, adjusted for FLE. The Group assesses whether there has been a SICR since initial recognition based on qualitative, quantitative, and reasonable and supportable FLE that includes management judgement. Use of more alternative criteria could result in significant changes to the timing and amount of ECL to be recognised. Lifetime ECL is generally determined based on the average maturity of the financial asset. Stage 3: Lifetime ECL credit impaired Financial assets are classified as stage 3 where they are determined to be credit impaired, which generally matches the Group’s definition of default which includes exposures that are at least 90 days past due, and where the obligor is unlikely to pay without recourse against available collateral. The ECL for credit impaired financial assets is generally measured as the difference between the discounted contractual and discounted expected cash flows from the individual exposure. For credit impaired exposure that are modelled collectively, ECL is measured as the product of the lifetime PD, LGD, and EAD, adjusted for FLE. Interest income is determined with reference to the financial asset’s amortised cost carrying value, being the financial asset’s net carrying value after the ECL provision. The Group considers that default has occurred at 90 days past due. Stage 3: Impaired Assets Measurement of ECLs ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash Outside of the ECL, where assets are more than 90 days past due and a shortfall between the loan balance and the underlying security has been identified, a specific provision is raised for the shortfall. 86 RESIMAC GROUP LTD ANNUAL REPORT 2021 87 | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS RISK | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS RISK 23. Financial risk management 23.1. Financial risk management objectives 23.2. Derivative financial instruments The Group's Corporate Treasury function: implements and executes treasury and funding strategy; co-ordinates access to domestic and international financial markets; and monitors and manages the financial risks relating to the operations of the Group through internal monitoring tools which analyse exposures by degree and magnitude of risks. The Group seeks to minimise the effects of currency and interest rate risks by using derivative financial instruments to hedge risk exposures. The use of financial derivatives is governed by the Group's Interest Rate Risk Management Policy approved by the Board of Directors, which provide written principles on: foreign exchange risk; interest rate risk; credit risk; These risks include: the use of financial derivatives and non-derivative market risk (including currency risk and interest rate financial instruments; and risk); economic risk; interest rate risk; credit risk; and liquidity risk. the investment of excess liquidity. Compliance with policies and exposure limits is reviewed by the Board on a continuous basis. The Group does not enter into or trade financial instruments, including derivative financial instruments, for speculative or proprietary purposes. Risk Exposure arising from Measurement Management Market risk - currency Recognised financial assets and liabilities not denominated in Australian dollars. Foreign currency denominated profit or losses Cash flow forecasting Sensitivity analysis Cross currency interest rate swaps Cash flow management and matching Market risk - interest rate Mismatch in interest rates between assets and liabilities Sensitivity analysis Interest rate swaps Market risk - equity investment valuation Investments in equity securities Sensitivity analysis Equity investments not held for trading Credit risk Mortgage portfolio and funding SPV-level exposures, counterparty risk Credit risk analysis Rating agency criteria and analyses Diversification, adaptive capital structures, strong collections/ portfolio management, rating agency provisions in transactions documents Liquidity risk Borrowings, derivative financial liabilities Rolling cash flow forecasts Availability of committed credit lines and borrowing facilities, securitisation, capital relief transactions, structuring terms of obligations RECOGNITION & MEASUREMENT Derivatives are initially recognised at fair value at the date the derivative contracts are entered into and are subsequently remeasured to their fair value at each reporting period. The resulting gain or loss is recognised in profit or loss immediately unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in profit or loss depends on the nature of the hedge relationship. 23.3. Hedge accounting The Group designates certain hedging instruments, which includes derivatives in respect of foreign currency risk, as cash flow hedges. At the inception of the hedge relationship the Group documents the relationship between the hedging instrument and hedged item, along with its risk management objectives and its strategy for undertaking various hedge transactions. Furthermore, at the inception of the hedge and on an ongoing basis, the Group documents whether the hedging instrument that is used in a hedging relationship is effective in offsetting changes in fair values or cash flows of the hedged item attributable to the hedged risk, which is when the hedging relationships meet all of the following hedge effectiveness requirements: there is an economic relationship between the hedged item and the hedging instrument; the effect of credit risk does not dominate the value changes that result from that economic relationship; and the hedge value is largely reflective of the hedged item. Note 22.1 sets out the details of the fair values of the derivative instruments used for hedging purposes. 23.3.1. Cash flow hedges The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in other comprehensive income and accumulated under the heading of cash flow hedging reserve. The gain or loss relating to the ineffective portion is recognised immediately in profit or loss and is included in the other expenses or other income line item. Amounts previously recognised in other comprehensive income and accumulated in equity are reclassified to profit or loss, in the same line as the recognised hedged item. Hedge accounting is discontinued when: the Group revokes the hedging relationship; the hedging instrument expires or is sold, terminated, or exercised; or the Group no longer qualifies for hedge accounting. Any cumulative gain or loss recognised in other comprehensive income and accumulated in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in profit or loss. When a forecast transaction is no longer expected to occur, the gain or loss accumulated in equity is recognised immediately in profit or loss. 23.3.2. Derivative financial assets and liabilities The carrying values are as follows: FY21 $'000 FY20 $'000 Derivative financial assets Cross currency swaps - 49,262 Interest rate swaps 2,256 3,330 2,256 52,592 Derivative financial liabilities Cross currency swaps 60,504 - Interest rate swaps 472 3,277 60,976 3,277 The Group seeks to minimise the effects of foreign currency and some interest rate exposures by using derivative instruments to hedge these positions. Derivatives are initially recognised at fair value at the date derivative contracts are entered into, and subsequently measured at their fair value at each reporting period. During the period, currency movements drove changes in valuation of the Groups’ cross currency swaps hedged to our US RMBS bonds. These movements in our derivative balances are matched with our USD bond liabilities, with the profit/(loss) on swaps recognised in Other Comprehensive Income. 23.4. Market risk Market risk is the risk of an adverse impact on the Group’s earnings resulting from changes in market factors, such as interest rates and foreign exchange rates. 88 RESIMAC GROUP LTD ANNUAL REPORT 2021 89 | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS RISK | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS RISK The following table details the notional principal amounts outstanding at the end of the reporting period: FY21 $'000 FY20 $'000 Notional principal value Less than 1 year 6,935 - 1 to 2 years 2 to 5 years 152,722 24,280 694,900 503,503 854,557 527,783 The interest rate swaps settle and reset on a monthly basis. The floating rate on the interest rate swaps is the Bank Bill Swap Rate (BBSW) local interbank rate. The Group will settle the difference between the fixed and floating interest rate on a net basis. 23.4.4. Corporate interest - Sensitivity analysis The remainder of the Group’s loan portfolio and liabilities are held in corporate entities. The impact of a potential +/- 10bps change in interest rates on interest revenue and borrowing costs on balances held by the Group for the year is set out in the table below: FY21 $'000 FY20 $'000 10bps +/- Impact on corporate interest revenue Interest rate + 10bps 620 366 Interest rate - 10bps (620) (366) Impact on corporate funding costs1 Interest rate + 10bps Interest rate - 10bps - - (5) 5 1 As at 30 June 2021, the corporate debt facility balance is nil. 23.4.1. Interest rate risk Interest rate risk is the risk that the Group will experience deterioration in its financial position as interest rates change over time. Interest rate exposure is driven by interest rate mismatches between assets and liabilities (i.e. borrowing at floating interest rates and lending with fixed interest rates). Interest rate risk is managed by entering into interest rate swaps subject to the Group’s hedging and derivatives policies. 23.4.2. Interest rate risk - Sensitivity analysis The majority of the Group’s liabilities are issued through warehouse facilities and term securitisations in special purpose and bankruptcy-remote entities. Under such arrangements, the repayment profile of the bonds is matched to the repayments collected from the loan assets. The Group has calculated the impact of a potential increase or decrease in borrowing costs in limited recourse entities for the year in the event of a +/- 10bps change in interest rates as shown in the table below: FY21 $'000 FY20 $'000 10bps +/- Borrowing costs 14,158 12,669 23.4.3. Interest rate swap contracts Under interest rate swap contracts, the Group agrees to exchange the difference between fixed and floating rate interest amounts calculated on agreed notional principal amounts. Such contracts enable the Group to mitigate the risk of changing interest rates on the cash flow exposures on the issued variable rate debt. The fair value of interest rate swaps at the end of the reporting period is determined by discounting the future cash flows using the curves at the end of the reporting period and the credit risk inherent in the contract and is disclosed below. FY21 $'000 FY20 $'000 Fair value asset Derivative financial assets 2,256 3,330 Fair value liability Derivative financial liabilities 472 3,277 The following table details the notional principal amounts outstanding at the end of the reporting period: FY21 $'000 FY20 $'000 Notional principal value 2 to 5 years 2,021,479 1,462,711 2,021,479 1,462,711 23.6. Credit risk management The Group’s primary credit risk exposures relate to its lending activities in its principally-funded mortgage portfolio. The Group’s primary lending activities are concentrated in the Australian and New Zealand residential mortgage market. The underlying credit risk in the Group’s lending activities is commensurate with a geographically- diverse residential mortgage portfolio. The Board of Directors is responsible for determining the Group’s overall appetite for credit risk and monitoring the quality and performance of the mortgage portfolio. The credit risk management operational framework and policy is governed and managed by the Credit Committee. The Group does not have any direct counterparty credit exposure arising from its asset financing and securitisation activities. Counterparty risk is governed, and mitigated where required, by ratings agency criteria within the bankruptcy-remote funding SPVs and trusts including exposures to banks, lender’s mortgage insurance providers and derivative counterparties. 23.6.1. Credit risk in lending The Group has established lending policies and procedures to manage the credit risk inherent in lending. The extent of credit risk in the Group’s lending activities is managed within its two origination and funding programmes, being ‘Prime’ and ‘Specialist Lending’. The Group maintains separate credit policies for each programme and regularly reviews and amends policies in line with economic, operating and funding conditions. 23.4.5. Equity price risk Equity investments in listed and unlisted shares are held for strategic rather than trading purposes. The Group does not actively trade these investments. 23.4.6. Equity investment valuation risk - sensitivity analysis If equity prices had been 10% higher / lower: Net profit for the year ended 30 June 2021 would increase / decrease by $1,011,000 as a result of the changes in fair value of the investments in unlisted shares (FY20: $500,000); and Other comprehensive income would increase / decrease by $471,000 as a result of the changes in fair value of investments in listed shares (FY20: $192,000). 23.5. Foreign currency risk 23.5.1. Accounting translation As at reporting date the Group held cash assets denominated in New Zealand dollars (NZD). Fluctuations in the NZD are not expected to have material impact on the consolidated statement of profit or loss or the consolidated statement of comprehensive income and equity of the Group. 23.5.2. Market risk - foreign exchange on monetary items The Group obtains funding denominated in foreign currencies, consequently, exposures to exchange rate fluctuations arise. These currencies include USD. The Group manages foreign currency risk through the use of currency derivatives. The carrying amounts of the Group’s foreign currency denominated assets and liabilities are as follows: Assets USD liabilities (disclosed in AUD) Liabilities USD liabilities (disclosed in AUD) JPY liabilities (disclosed in AUD) FY21 $'000 FY20 $'000 - 49,262 45,738 14,766 - - 90 RESIMAC GROUP LTD ANNUAL REPORT 2021 91 | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS RISK | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS RISK 23.6.2. Exposure to credit risk 23.6.5. Credit risk management The Group’s approach to credit management utilises a credit risk framework to ensure that the following principals are adhered to: independence from risk originators; recognition of the different risks in the various Group businesses; credit exposures are systematically controlled and monitored; credit exposures are regularly reviewed in accordance with current up-to-date credit procedures; and credit exposures include such exposures arising from derivative transactions. Each of the divisions are responsible for managing credit risks that arise in their own areas with oversight from a centralised credit risk management team. It is the policy of the Group to monitor the policies of all divisions to ensure that the risk of the Group is monitored. Loans and advances consist of a large number of customers, spread across diverse demographic and geographical areas. Ongoing credit evaluation is performed on the financial condition of loans and advances and accounts receivable. There is no significant concentration of risk to any single counterparty. The credit risk on derivative financial instruments is limited because the counterparties are banks with high credit- ratings assigned by international credit-rating agencies. 23.6.3. Maximum exposure to credit risk The carrying amount of the Group’s financial assets represents the maximum credit exposure. The Group’s exposure to credit risk at the reporting date was: Cash and cash equivalents Trade and other receivables Contract assets Short-term investment Derivative financial assets Loans and advances at amortised cost – balances subject to credit risk Note FY21 $'000 FY20 $'000 4 5 1 7 23 6 619,809 365,987 4,581 5,974 33,299 41,954 260 260 2,256 52,592 660,205 466,767 13,934,440 12,518,394 14,594,645 12,985,161 As at 30 June 2021, 100% of the Group’s cash and cash equivalents are held with banks or financial institutions with a credit rating of AA- or better (FY20: 100%). 23.6.3.1 Residential mortgage borrowers The Group manages credit risk by obtaining security over residential mortgage property for each loan. In monitoring the credit risk, loans are grouped according to their credit characteristics using credit risk classification systems. This includes the use of the Loan to Value Ratio (LVR) to assess its exposure to credit risk from loans originated through the securitisation programme. For White label loans, some agreements with lenders contain provisions requiring the Group to pay instalments due from borrowers until securities are enforced or an insurance claim has been paid and to purchase the mortgage from the lender if the Group is in default. The Group’s risk in this area is mitigated by insurance policies and a rigorous credit assessment process. 23.6.4. Financial guarantees The Group is exposed to credit risk in relation to financial guarantees given to banks. The Group's maximum exposure in this respect is the maximum amount the Group could have to pay if the guarantees are called on. Refer to Note 26 for the guarantees in respect of the leases. The following table summarises the movement in expected credit loss for loans and advances for the reporting period: Maximum exposure to credit risk $'000 $'000 $'000 $'000 Stage 1 Collective Stage 2 Collective Stage 3 Collective Stage 3 Impaired Total $'000 Balance as at 30 June 2021 Loans and advances Mortgage lending 13,453,244 431,457 36,947 12,194 13,933,842 Commercial lending 598 - - - 598 TOTAL 13,453,842 431,457 36,947 12,194 13,934,440 Balance as at 30 June 2020 Loans and advances Mortgage lending 12,433,112 45,248 22,826 16,571 12,517,757 Commercial lending 637 - - - 637 TOTAL 12,433,749 45,248 22,826 16,571 12,518,394 Expected credit loss Balance as at 30 June 2021 Loans and advances Mortgage lending 13,799 14,016 4,310 5,439 37,564 Commercial lending 1 - - - 1 TOTAL 13,800 14,016 4,310 5,439 37,565 Balance as at 30 June 2020 Loans and advances Mortgage lending 25,864 2,441 2,335 6,057 36,697 Commercial lending 1 - - - 1 TOTAL 25,865 2,441 2,335 6,057 36,698 92 RESIMAC GROUP LTD ANNUAL REPORT 2021 93 | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS RISK | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS RISK The majority of the Group’s exposure to loans and advances is limited, as they are legally owned by special purpose vehicles (trusts) with limited recourse to the Group. Losses on mortgage loans in these entities are therefore limited to the Group’s investment in notes in these trusts and the residual income rights of trusts. The trust structures are designed such that losses are covered by the income generated from the assets within the trust before the investment notes are impaired. As part of the structure the investment notes in the trust holds first right over the loans and advances within the vehicles. Collateral held The value of the collateral held as security for loans in stage 2 and stage 3 collective at 30 June 2021 is $689.6 million (30 June 2020: $94.5 million). The value of the collateral held as security for loans in stage 3 specific loans at 30 June 2021 is $8.1 million (30 June 2020: $12.0 million) Loans are secured by the Group by having the property titles registered as a financial interest that provide the Group first priority over any proceeds becoming available from the sale of the property. For Prime insured loan, LMI policies exist to cover 100% of the principal amount at default plus interest. LOANS & ADVANCES AT AMORTISED COST1 0 days and <30 days 30 days and less than 60 days 60 days and less than 90 days 90 days and less than 180 days 180 days and less than 270 days 270 days and less than 365 days 365 and over TOTAL FY21 $'000 FY20 $'000 13,458,212 12,438,670 395,691 36,677 23,188 6,278 2,753 35,313 10,038 14,487 4,746 2,145 11,641 12,995 13,934,440 12,518,394 23.6.6. Credit risk concentrations An analysis of the Group’s credit risk concentrations on loans and advances is provided in the following table. The amounts in the table represent gross carrying amounts: 23.6.8. Movement in credit exposures Stage 1 Collective Stage 2 Collective Stage 3 Collective Stage 3 Impaired LOANS & ADVANCES AT AMORTISED COST Concentration by region New South Wales Victoria Queensland Western Australia South Australia Tasmania Northern Territory New Zealand TOTAL FY21 $'000 FY20 $'000 5,132,426 4,673,307 3,693,253 3,584,565 2,471,432 2,064,167 1,012,975 918,803 752,651 609,674 100,442 90,275 56,811 48,984 714,450 528,619 13,934,440 12,518,394 Total $'000 6,057 36,698 Provision for impairment losses $'000 $'000 $'000 $'000 Balance as at 30 June 2020 Net transfer between stages Net re-measurement of opening balance net of transfers Impact of transfers between stages and re-measurement 25,865 523 2,441 (49) 2,335 (1,025) (14,038) 11,301 3,286 551 967 (13,515) 11,252 2,261 1,518 Net Financial Assets Originated 2,790 365 Movements in existing individually assessed provisions and write-backs Write-offs Discharges/Other Balance as at 30 June 2021 - - (1,340) 13,800 - - (42) 14,016 39 - - (325) 4,310 - (301) (1,809) (26) 5,439 - 1,516 1,516 3,194 (301) (1,809) (1,733) 37,565 23.6.7. Analysis of loans and advances by past due status Under the Group’s monitoring procedures, a significant increase in credit risk is identified before the exposure has defaulted and at the latest when exposure becomes 30 days past due. The table below provides an analysis of the gross carrying amount of loans and advances by past due status that are over 30 days past due. Credit exposure Balance as at 1 July 2020 12,433,749 45,248 22,826 16,571 12,518,394 Net transfers between stages and financial assets originated 1,020,093 386,209 14,121 (2,568) 1,417,855 Write-offs - - - (1,809) (1,809) Balance as at 30 June 2021 13,453,842 431,457 36,947 12,194 13,934,440 94 RESIMAC GROUP LTD ANNUAL REPORT 2021 95 1 Includes loans that are collectively and specifically provided for. | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS RISK | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS RISK Stage 1 Collective Stage 2 Collective Stage 3 Collective Stage 3 Impaired Total 7,016 1,143 (563) 580 2,789 200 - - 15,882 (602) 25,865 1,750 (958) 1,342 384 112 - - - 475 (280) 2,441 2,103 (699) 1,465 766 44 - - - 23 (601) 2,335 5,576 514 1,470 1,984 - 295 384 (2,254) - 72 6,057 16,445 - 3,714 3,714 2,945 495 384 (2,254) 16,380 (1,411) 36,698 Provision for impairment losses Balance as at 30 July 2019 Net transfer between stages Net re-measurement of opening balance net of transfers Impact of transfers between stages and re-measurement Net Financial Assets Originated Acquisition of RAF Movements in existing individually assessed provisions and write-backs Write-offs COVID-19 overlay Discharges/Other Balance as at 30 June 2020 Credit exposure Balance as at 1 July 2019 10,238,294 50,406 24,334 23,986 10,337,020 Net transfers between stages and financial assets originated 2,195,455 (5,158) (1,508) (5,161) 2,183,628 Write-offs - - - (2,254) (2,254) Balance as at 30 June 2020 12,433,749 45,248 22,826 16,571 12,518,394 COVID-19 The Group discloses expected future credit losses using an expected credit loss (ECL) model, in line with AASB 9 requirements. The ECL model includes an overlay to reflect potential impacts on the portfolio from adverse macroeconomic scenarios (i.e. rising unemployment, house price decline, low wage growth). The macroeconomic overlay considers 3 key macroeconomic assumptions: Australian GDP Property prices Unemployment rate Several alternate macroeconomic scenarios were considered and applied at an individual loan, dynamic underlying security value. Where loans (in the stressed scenario) were uninsured and had LVRs of >100%, we calculated the shortfall required for these loans. This was then used to calculate the macro-economic overlay. Hardship accounts were removed for the purpose of calculating the Macroeconomic overlay. The underlying security value bands used in the macroeconomic overlay are in line with the Core Logic Hedonic Index. At 30 June 2020, the ECL model did not include expected delinquencies from customers on COVID-19 hardship payment moratoriums. Regulators provided guidance for lenders that customers in COVID hardship moratoriums were not to be considered in arrears during the moratorium. Consequently at 30 June 2020, the group provisioned a COVID-19 overlay given the ECL model did not fully capture credit risk of loans in hardship payment moratoriums. The overlay at 30 June 2020 was $16.4m and was included as part of the Collective Provision at 30 June 2020. At 30 June 2021, all COVID hardship payment moratorium periods have completed. For the small subset of customers who entered a COVID hardship moratorium and continue to require assistance post completion of the moratorium, these customers are now treated under the standard hardship procedures, and therefore are treated as in arrears where payments are not up to date. The process of customers previously under COVID-19 hardship payment moratoriums transferring to standard hardship arrangements removes the requirement for a COVID-19 overlay. All customers expected future credit loss are included in the ECL model Collective Provision at 30 June 2021. Management remain cautious of ongoing pockets of financial stress in the economy. Lockdowns and border closures continue to provide material headwinds to the economy, with the expectation of this continuing in FY22. Furthermore, whilst the majority of customers have rolled off hardship moratoriums, management believe it appropriate to flag these customers as potential for increased credit risk in the short term. Per the tables below, whilst the trend of customers requiring assistance has decreased during the year, pockets of financial stress remain. At 30 June 2020, Resimac had 3,195 customers in active COVID-19 hardship payment moratoriums, of which 355 customers subsequently fell into arrears. At 30 June 2021, Resimac continue to provide support to 217 customers under standard hardship arrangements. Payment moratoriums at 30 June 2020 in standard hardship arrangements at 30 June 2021 Prime Specialist NZ & Legacy Total % of Portfolio PRODUCT TYPE # 30 June 2020 30 June 2021 PRODUCT TYPE $'000 30 June 2020 30 June 2021 LOAN PURPOSE # 30 June 2020 30 June 2021 LOAN PURPOSE $'000 30 June 2020 30 June 2021 1,300 94 1,395 95 500 28 3,195 217 664,754 812,708 168,685 1,646,147 33,385 38,847 6,419 78,651 10.0 0.59 13.36 0.57 Owner occupier Investor Total % of Portfolio 2,128 156 1,091,867 56,143 1,067 61 554,280 22,508 3,195 217 1,646,147 78,651 10.0 0.59 13.36 0.57 96 RESIMAC GROUP LTD ANNUAL REPORT 2021 97 | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS RISK | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS RISK Customers previously in COVID-19 hardship payment moratoriums in standard hardship at 30 June 2021 Prime LMI Prime No LMI Specialist LMI Specialist No LMI Total LVR BANDING <60% 60% - 70% 70% - 80% 80% - 90% 90% - 95% 95% - 100% 100% + TOTAL 14 2 3 12 2 4 2 39 17 17 10 7 - 2 2 55 19 2 2 2 1 - 3 29 31 16 24 12 4 4 3 94 81 37 39 33 7 10 10 217 23.7. Liquidity risk management Ultimate responsibility for liquidity risk management rests with the Board of Directors, which has established an appropriate liquidity risk management framework for the management of the Group's short, medium and long-term funding and liquidity management requirements. The Group’s funding platform currently comprises a mix of: warehouse facilities; term securitisation; a secured corporate debt facility; and cash. The majority of the Group’s liabilities represent bonds issued by special purpose trusts through warehouse facilities and term securitisation transactions. Under such arrangements, bondholder recourse is limited to the assets of the relevant special purpose trust to which the liability relates and the repayment profile of the bonds is matched to the repayments collected from the loan assets. Given the limited recourse nature of these borrowings, $13.78 billion at 30 June 2021 (FY20: $12.42 billion), they have not all been included in the table below. The Group manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities, by continuously monitoring forecast and actual cash flows, and by matching the maturity profiles of financial assets and liabilities. Note 23.7.2 below sets out details of additional undrawn facilities that the Group has at its disposal to further reduce liquidity risk. 23.7.1. Liquidity risk tables The following table shows the Group's remaining expected maturity for its non-derivative financial liabilities with agreed repayment periods. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group can be required to pay and hence will not necessarily reconcile with the amounts disclosed in the statement of financial position. The tables include both interest and principal cash flows. To the extent that interest flows are floating rate, the undiscounted amount is derived from interest rate curves at the end of the reporting period. The contractual maturity is based on the earliest date on which the Group may be required to pay. FINANCIAL LIABILITIES FY21 Non-derivatives <6 months or on demand 6-12 months $'000 $'000 1-3 years $'000 3-5 years $'000 >5 years $'000 Total cash flows Carrying amount $'000 $'000 Trade and other payables 34,537 - - - - 34,537 34,537 Interest-bearing liabilities Issuance facilities 12,203 20,164 96,734 261,202 - 390,303 390,303 Present value of future trail commissions payable 2,462 2,066 5,462 2,810 2,989 15,789 15,789 Lease liabilities 1,052 1,049 4,247 4,382 3,677 14,407 12,482 50,254 23,279 106,443 268,394 6,666 455,036 453,111 Derivatives 60,976 - - - - 60,976 60,976 111,230 23,279 106,443 268,394 6,666 516,012 514,087 FY20 Non-derivatives Trade and other payables 25,891 Interest-bearing liabilities Corporate debt facility Issuance facilities Present value of future trail commissions payable - - - - 5,000 - - - 258,755 - - - 25,891 25,891 5,028 5,000 258,755 258,755 28 - 3,115 2,635 7,053 3,671 4,323 20,797 20,797 Lease liabilities 1,137 1,087 3,946 4,089 5,975 16,234 13,622 30,171 3,722 15,999 266,515 10,298 326,705 324,065 Derivatives 3,277 - - - - 3,277 3,277 33,448 3,722 15,999 266,515 10,298 329,982 327,342 23.7.2. Financing facilities Note FY21 $'000 FY20 $'000 Secured corporate debt facility which may be extended by mutual agreement Amount used Amount unused - 30,000 30,000 5,000 25,000 30,000 98 RESIMAC GROUP LTD ANNUAL REPORT 2021 99 | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS GROUP STRUCTURE | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS GROUP STRUCTURE Notes to the consolidated financial statements Group structure for the year ended 30 June 2021 24. Subsidiaries Details of the Group’s subsidiaries at the end of the reporting period are as follows. NAME OF SUBSIDIARY Controlled companies PROPORTION OF OWNERSHIP INTEREST HELD AND VOTING POWER HELD BY THE GROUP Principal activity Place of incorporation and operation FY21 % FY20 % Access Network Management Pty Ltd Auspack Financial Services Pty Ltd Mortgage manager Mortgage broker Australia Australia Barnes Mortgage Management Pty Ltd Mortgage originator and manager Australia Clarence Street Finance Pty Ltd Holder of commission agreements Australia Clarence Street Funding No.1 Pty Ltd Special purpose vehicle Clarence Street Funding No.2 Pty Ltd Participation unit holder Clarence Street Funding No.3 Pty Ltd Special purpose vehicle Clarence Street Funding No.4 Pty Ltd Special purpose vehicle Clarence Street Funding No.6 Pty Ltd Special purpose vehicle Clarence Street Funding No.7 Pty Ltd Special purpose vehicle Clarence Street Funding No.8 Pty Ltd Special purpose vehicle Clarence Street Funding No.9 Pty Ltd Special purpose vehicle Clarence Street Funding No.10 Pty Ltd1 Special purpose vehicle Australia Australia Australia Australia Australia Australia Australia Australia Australia FAI First Mortgage Pty Ltd Trust manager and servicer Australia Homeloans.com.au Pty Ltd2 Housing Financial Services Pty Ltd Mortgage lender Mortgage originator Australia Australia 1 Incorporated 28 July 2020. 2 Homeloans Pty Ltd changed its company name to Homeloans.com.au Pty Ltd on 15 August 2020. 100 100 100 100 100 100 100 100 99.9 99.9 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 NAME OF SUBSIDIARY (cont'd) Principal activity Controlled companies PROPORTION OF OWNERSHIP INTEREST HELD AND VOTING POWER HELD BY THE GROUP Place of incorporation and operation FY21 % FY20 % Independent Mortgage Corporation Pty Ltd Mortgage broker Resimac Asset Finance Investments Pty Limited3 Holding company Resimac Asset Finance Holdings Pty Limited4 Holding company Resimac Asset Finance Pty Limited5 Asset finance originator and manager Evergreen Finance Company Pty Limited Lender of record Australia Australia Australia Australia Australia RAF Structured Finance Pty Limited6 Consumer and commercial lending Australia IASF (NZ) Limited7 SF Mortgage Pty Ltd Consumer and commercial lending New Zealand Lender of record Australia Parnell Road Funding No.1 Limited Special purpose vehicle New Zealand Parnell Road Funding No.2 Limited Special purpose vehicle New Zealand Prime Insurance Group Limited RESIMAC Capital Markets Pty Ltd LMI captive insurer Trust manager Bermuda Australia RESIMAC Financial Services Limited NZ Holding company New Zealand RESIMAC Financial Securities Limited NZ Trust manager and servicer New Zealand RESIMAC Home Loans Ltd NZ Lender of record and trustee New Zealand RESIMAC Limited Non-bank lender Australia RESIMAC NZ Home Loans Ltd NZ Holding company New Zealand RESIMAC Premier Warehouse No.1 Pty LTD8 Unit Holder RHG Mortgage Corporation Ltd8 RHG Mortgage Securities Pty Ltd (RMS)8 RHG Home Loan Pty Ltd9 The Servicing Company Pty Ltd RESIMAC EST PTY LTD 0508 Home Loans Ltd 0800 Home Loans Ltd Access Home Loans Pty Ltd Lender of record Mortgage trustee Mortgage Originator Trust servicer Initial Trustee Dormant Dormant Dormant Australia Australia Australia Australia Australia Australia New Zealand New Zealand Australia 100 100 100 100 100 100 - 100 100 100 100 100 100 100 100 100 100 - - - 100 100 100 100 100 100 100 60 60 60 60 60 60 60 100 100 100 100 100 100 100 100 100 - - - - 100 100 100 100 100 3 International Acceptance Investment Pty Limited changed its company name to Resimac Asset Finance Investments Pty Limited on 6 February 2021. 4 International Acceptance Holdings Pty Limited changed its company name to Resimac Asset Finance Holdings Pty Limited on 6 February 2021. 5 International Acceptance Pty Limited changed its company name to Resimac Asset Finance Pty Limited on 5 February 2021. 6 IA Structured Finance Pty Limited changed its company name to RAF Structured Finance Pty Limited on 6 February 2021. 7 Deregistered 31 January 2021 8 Ownership interest is 0% however the Group have Board control. 9 Acquired 30 June 2021. 100 RESIMAC GROUP LTD ANNUAL REPORT 2021 101 | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS GROUP STRUCTURE | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS GROUP STRUCTURE NAME OF SUBSIDIARY (cont'd) Principal activity PROPORTION OF OWNERSHIP INTEREST HELD AND VOTING POWER HELD BY THE GROUP Place of incorporation and operation FY21 % FY20 % Controlled companies Clarence St Funding No.5 Pty Ltd Fiduciary Services Pty Ltd Loan Packaging Australia Pty Ltd10 National Mutual Pty Ltd RESIMAC Financial Securitisation Ltd RESIMAC Financial Services Pty Ltd RESIMAC Leasing Pty Ltd International Acceptance (NZ) Limited11 Homeloans Pty Ltd12 Controlled trusts Avoca Master Trust Dormant Dormant Dormant Dormant Dormant Dormant Dormant Dormant Dormant Australia Australia Australia Australia New Zealand Australia Australia New Zealand Australia Issuer of RMBS Australia NZF Mortgages Warehouse A Trust Warehouse mortgages New Zealand RESIMAC Bastille Master Trust13 RESIMAC Triomphe Master Trust13 Issuer of RMBS Issuer of RMBS Australia Australia RESIMAC Versailles Master Trust Issuer of RMBS New Zealand RESIMAC Victoire Trust Warehouse mortgages New Zealand RESIMAC Premier Series 2021-214 Issuer of RMBS New Zealand RMT Warehouse Trust No.213 Warehouse mortgages RMT Securitisation Trust No.713 Issuer of RMBS Australia Australia International Acceptance Trust Consumer and commercial lending Australia The Trustee for the Resimac Group Limited Employee Share Trust15 Employee share trust Australia 99.9 100 - 100 100 100 100 - 100 100 100 100 100 100 100 100 100 100 100 - 99.9 100 100 100 100 100 100 60 - 100 100 100 100 100 100 - 100 100 60 - 10 Deregistered 19 August 2020. 11 Deregistered 31 January 2021. 12 Incorporated 3 August 2020. 13 This does not represent holding in capital units, percentage ownership represents control of these Trusts. 14 Incorporated 1 June 2021. 15 Ownership interest is 0% however the Group have Board control. 25.2. Details of acquisition On 1 February 2021, Resimac exercised the option to acquire the remaining 40% for cash consideration of $8.24m. The carrying amount of RAF’s net assets on the date of acquisition was $1.1m. $'000 Carrying amount of NCI acquired 444 Consideration paid to NCI Cash consideration – equity value for 40% of issued shares Option to acquire remaining 40% A decrease in equity attributable to owners of the Company (8,240) (188) (7,984) The decrease in equity attributable to owners of the Company comprised: a decrease in other reserve of $7,982,000; and a decrease in the foreign currency translation reserve of $2,000. Special purpose entities – securitised trusts and funding warehouses Special purpose entities are those entities over which the group has no ownership interest but in effect the substance of the relationship is such that the Group controls the entity so as to obtain the majority of the benefits from its operation. The Group has established special purpose entities to support the specific funding needs of the Group’s securitisation programme with the aim to: conduct securitisation activities funded by short term warehouse facilities provided by reputable lenders; and hold securitised assets and issue Residential Mortgage Backed Securities. The special purpose entities meet the criteria of being controlled entities under AASB 10 - Consolidated Financial Statements. 25. Acquisition of Non-Controlling Interest (NCI) 25.1 Accounting policies Subsidiaries Subsidiaries are entities controlled by the Group. The Group ‘controls’ an entity when it is exposed to, or has right to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The financial statements of subsidiaries are included in the consolidated financial statements from the date on which control commences until the date on which control ceases. Non-controlling interests NCI are measured initially at their proportionate share of the acquiree’s identifiable net assets at the date of acquisition. Changes in the Group’s interest in subsidiary that do not result in a loss of control are accounted for as equity transactions. 102 RESIMAC GROUP LTD ANNUAL REPORT 2021 103 | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS UNRECOGNISED ITEMS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OTHER Notes to the consolidated financial statements Unrecognised items for the year ended 30 June 2021 26. Commitments and contingencies 26.1. Capital commitments The Directors were not aware of any capital commitments as at the end of the financial year or arising since balance date. 26.2. Contingent liabilities Lease guarantees The Group has provided guarantees in respect of the leases over its premises of $585,724 (FY20: $1,415,351). The Directors were not aware of any other contingent liabilities as at the end of the financial year or arising since balance date. 27. Subsequent events 27.1. Final dividend declared The Board of Resimac Group Ltd declared a fully-franked final dividend of $0.04 per share. The Record Date is 3 September 2021. The payment date will be 21 September 2021. The dividend has not been provided for in this financial report. 27.2. Sale of White label portfolio On 27 July 2021 Resimac executed the sale of $0.2b of White label loans (off balance sheet) for consideration of $1.6m plus GST. The net present value of this loan tranche future trail commission receivable is $1.4m, and is recognised on the Statement of Financial Position at 30 June 2021. A gain of $0.2m on the sale will be recognised in FY22. Other than the above, there have been no circumstances arising since 30 June 2021 that have significantly affected or may significantly affect: (a) The operations (b) The results of those operations, or (c) The state of affairs of Group in future financial years. Other for the year ended 30 June 2021 28. Auditor’s remuneration Deloitte Touche Tohmatsu Audit or review of financial reports Group Subsidiaries FY21 $ FY20 $ 347,000 357,919 600,899 557,947 947,899 915,864 Statutory assurance services required by legislation to be provided by the auditor 114,000 13,650 Other assurance and agreed-upon procedures under other legislation or contractual arrangements 226,000 275,608 Other services Tax consulting services Other consulting services 38,850 - 9,550 174,704 48,400 174,704 TOTAL REMUNERATION OF DELOITTE TOUCHE TOHMATSU 1,336,299 1,379,826 Non Deloitte Touche Tohmatsu audit firms Audit or review of financial reports Subsidiaries 14,000 10,000 Statutory assurance services required by legislation to be provided by the auditor 6,000 - Other services Tax compliance services Tax consulting services Other consulting services 173,344 177,648 62,531 - 50,500 44,000 TOTAL REMUNERATION OF NON DELOITTE TOUCHE TOHMATSU AUDIT FIRMS 255,875 282,148 104 RESIMAC GROUP LTD ANNUAL REPORT 2021 105 | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OTHER | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OTHER 28.1. Non-audit services The auditor of the Group is Deloitte Touche Tohmatsu (Deloitte). It is the Group’s policy to employ Deloitte on assignments additional to its statutory audit duties, in compliance with the Group’s independence policies, where Deloitte’s expertise and experience with the Group are important. Amounts owed by related parties are secured and will be settled in cash. No guarantees have been given or received. No expense has been recognised in the current or prior years for bad or doubtful debts in respect of the amount owed by related parties. Compensation of KMP The remuneration disclosures of Directors and other members of KMP during the year are provided in sections one to nine of the remuneration report on pages 12 to 28 of this financial report designated as audited and forming part of the Directors’ Report. The remuneration disclosures are for Resimac KMP only as presented in the Remuneration report. KMP Compensation Short-term benefits Post-employment benefits Long-term benefits Share-based payments FY21 $ FY20 $ 2,984,062 2,422,142 125,000 102,087 32,208 310,595 413,239 346,928 3,554,509 3,181,752 The remuneration of Directors and KMP is determined by the Remuneration and Nomination Committee having regard to the performance of individuals and market trends. The total non-audit services fees of $274,400 represents 20.5% of the total fees paid or payable to Deloitte and related practices for the year ended 30 June 2021 (FY20: $450,312). 29. Related party transactions 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 below. Trading transactions During the year, Group entities entered into the following trading transactions with related parties that are not members of the Group: REVENUE RECEIVED EXPENSES PAID FY21 $'000 FY20 $'000 FY21 $'000 FY20 $'000 Amounts incurred to Director’s related entities1 - - - - - - (123) (123) 1 Includes interest paid on debt securities on issue to Bermuda Commercial Bank Limited. This interest rate is charged at market related terms. Sales to related parties occur at arm’s length on commercial terms in the ordinary course of business in accordance with the terms and conditions outlined in the relevant commercial agreements with each party. The following balances were outstanding at the end of the reporting period: AMOUNTS OWED BY RELATED PARTIES AMOUNTS OWED TO RELATED PARTIES FY21 $'000 FY20 $'000 FY21 $'000 FY20 $'000 Other related parties of Resimac Group Ltd1 13,421 13,421 13,176 13,176 - - - - 1 Includes residential mortgages to KMP or related parties lent in ordinary course of business at arm’s lengths. 106 RESIMAC GROUP LTD ANNUAL REPORT 2021 107 | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OTHER | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OTHER 30. Parent disclosures The parent company of the Group, as at and throughout the financial year ended 30 June 2021, was Resimac Group Ltd. Presented below is supplementary information about the parent entity. STATEMENT OF FINANCIAL POSITION Assets Current Non-current Liabilities Current Non-current NET ASSETS Equity Issued capital Reserves Accumulated losses Attributable to members of the parent: Profit after tax Total comprehensive income for the period FY21 $'000 FY20 $'000 37,127 39,745 311,635 201,385 348,762 241,130 27,602 46,047 73,649 34,946 65,876 100,822 275,113 140,308 183,853 182,072 876 485 90,384 (42,249) 275,113 140,308 149,753 149,753 (5,659) (5,659) 30.1. Guarantees, contingent liabilities and contingent assets At 30 June 2021, there are no financial guarantees, contingent assets or contingent liabilities (FY20: nil). 30.2. Accounting policies The accounting policies of the parent entity, which have been applied in determining the financial information shown above, are the same as those applied in the consolidated financial statements except as set out above. The significant accounting policies relating to the Group are used throughout this financial report. 31. Share-based payments 31.1. Employee share option plan of the Company The Company has a share option scheme (pursuant to the Resimac Group Ltd Employee Share Option and Rights Plan) for senior employees of the Company. In accordance with the terms of the Plan, as approved by shareholders at the 2017 Annual General Meeting, senior employees may be granted options to purchase ordinary shares. Each employee share option converts into one ordinary share of the Company on exercise. No amounts are paid or payable by the recipient on receipt of the option. The options carry neither rights to dividends nor voting rights. Options may be exercised at any time from the date of vesting to the date of their expiry. Long-Term Incentive (LTI#1) Share Options - CEOs Resimac offered the joint CEOs Scott McWilliam and Mary Ploughman (ceased employment on 17 July 2019) the opportunity to purchase 1,800,000 share options vesting in three equal tranches on each anniversary of the grant date. The options were granted on 18 August 2017 and all options vest within 12 months, 24 months and 36 months of respective grant date associated with each tranche. The options expire within 36 months of their vesting, or one month after resignation, whichever is the earlier. The sole vesting condition of the options is the employees remain employed with the Company to the respective vesting date associated with each tranche. The tranche 3 shares for Mary Ploughman expired due to her cessation of employment on 17 July 2019. The expiry dates of her tranche 1 and 2 were revised to 17 July 2020 by the Board. Long-Term Incentive (LTI#2) Share Options - CEO and GMs Under the Group’s LTI share options and rights plan, the CEO and GMs receive options over ordinary shares and a potential cash component of $2.4m. The options were granted on 15 August 2019 and the vesting date for all options is 31 August 2022, subject to the Group achieving Net Profit After Tax (NPAT) growth hurdles, digital transformation hurdles, compliance hurdles and remaining employed with the Group until the vesting date. Since the current reporting period, the LTI#1 and LTI#2 are administrated by The Trustee for the Resimac Group Limited Employee Share Trust. The trust is consolidated in accordance with note 24. The trustee subscribes for the shares issued by the Group and allocates to the employees on exercise of options. Shares held by the trust and not yet allocated to employees at the end of the reporting period are shown as treasury shares in the financial statements. During the financial year ended 30 June 2021, 540,000 (FY20: nil) Resimac shares were purchased on-market at an average price of $2.47 per share, for a total consideration of $1,336,233, to satisfy employee entitlements pursuant to the LTI#1. The fair value of share options under LTI#1 and LTI#2 is recognised as an employee benefits expense with a corresponding increase in equity. The total expense is recognised over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied. At the end of each period, the Group revises its estimates of the number of options that are expected to vest based on the non-market vesting and service conditions. It recognises the impact of the revision to original estimates, if any, in the consolidated statement of profit or loss with a corresponding adjustment to equity. The fair value of the amounts payable to CEO and GMs in respect of cash component is recognised as an expense with a corresponding increase in liabilities, over the vesting period. The liabilities are remeasured to fair value at each reporting date and are presented as employee benefit obligations in the consolidated statement of financial position. Employee Share Plan (ESP) The Group commenced the Resimac Group Employee Share Scheme (ESS) in March 2021 whereby each financial year eligible employees are offered up to $1,000 worth of fully paid Resimac ordinary shares for no cash consideration. Shares allocated under the ESS cannot be sold until the earlier of three years after allocation or the time when the participant is no longer employed by the Group. The first offer under the ESS was made during April 2021. A total of 191 staff participated in this offer. On 12 April 2021, the participants were each allocated 458 fully allocated shares based on the offer amount of $1,000 and the 5 day volume weighted average price (VWAP) of $2.18, resulting in a total of 87,478 shares being allocated. The shares were allocated to staff for no cash consideration. For the financial year ended 30 June 2021, share-based payment expense relating to the ESS totalled $187 thousand. 108 RESIMAC GROUP LTD ANNUAL REPORT 2021 109 | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OTHER | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OTHER 1 2 0 2 r e b m u N s n o i t p o f o d e t s e v n u e n u J 0 3 t a - - - 0 0 0 0 0 3 , 0 0 0 0 0 3 , 0 0 0 0 0 3 , 0 0 0 5 7 8 , 0 0 0 5 7 8 , 0 0 0 5 7 8 , - - - - - - - - r e b m u N s n o i t p o f o f o r e b m u N l d e h s n o i t p o 1 2 0 2 e n u J 1 2 0 2 0 3 t a d e t s e v e n u J 0 3 t a s n o i t p O i d e s c r e x e s n o i t p O d e t i e f r o f e t a d y r i p x E e t a d g n i t s e V f o e c i r p i e s c r e x E ) $ ( n o i t p o ) $ ( e t a d t n a r g l t a e u a v r i a F e t a d t n a r G e h c n a r T s n o i t p o f o r e b m u N : d e u s s i s n o i t p o f o s l i i a t e d e h t s e d v o r p w o e b e b a t e h T l l 0 0 0 0 0 3 , 0 0 0 0 0 3 , 0 0 0 0 0 3 , 0 0 0 0 0 3 , - - ) 0 0 0 0 0 3 ( , 0 0 0 0 0 3 , 0 0 0 0 0 3 , 0 0 0 0 0 3 , 0 0 0 5 7 8 , 0 0 0 5 7 8 , 0 0 0 5 7 8 , - - - - - - - - - - - - - - 1 2 0 2 - 6 - 0 3 8 1 0 2 - 7 - 1 5 5 0 . 2 2 0 2 - 6 - 0 3 9 1 0 2 - 7 - 1 5 5 0 . 3 2 0 2 - 6 - 0 3 0 2 0 2 - 7 - 1 5 5 0 . 5 2 0 2 - 6 - 0 3 2 2 0 2 - 8 - 1 3 5 6 0 . 5 2 0 2 - 6 - 0 3 2 2 0 2 - 8 - 1 3 5 6 0 . 5 2 0 2 - 6 - 0 3 2 2 0 2 - 8 - 1 3 5 6 0 . ) 0 0 0 5 2 1 ( , 5 2 0 2 - 6 - 0 3 2 2 0 2 - 8 - 1 3 5 6 0 . ) 0 0 0 5 2 1 ( , 5 2 0 2 - 6 - 0 3 2 2 0 2 - 8 - 1 3 5 6 0 . ) 0 0 0 5 2 1 ( , 5 2 0 2 - 6 - 0 3 2 2 0 2 - 8 - 1 3 5 6 0 . - ) 8 7 4 7 8 ( , - 1 2 0 2 - 4 - 2 1 1 2 0 2 - 4 - 2 1 A N 7 0 0 . 8 0 0 . 9 0 0 . 0 2 0 . 0 2 0 . 0 2 0 . 0 2 0 . 0 2 0 . 0 2 0 . 4 1 2 . 7 1 0 2 - 8 - 8 1 1 e h c n a r T 0 0 0 0 0 3 , t t o c S , m a i l l i W c M 7 1 0 2 - 8 - 8 1 2 e h c n a r T 0 0 0 0 0 3 , t t o c S , m a i l l i W c M 7 1 0 2 - 8 - 8 1 3 e h c n a r T 0 0 0 0 0 3 , t t o c S , m a i l l i W c M 9 1 0 2 - 8 - 5 1 1 e h c n a r T 0 0 0 0 0 3 , t t o c S , m a i l l i W c M 9 1 0 2 - 8 - 5 1 2 e h c n a r T 0 0 0 0 0 3 , t t o c S , m a i l l i W c M 9 1 0 2 - 8 - 5 1 3 e h c n a r T 0 0 0 0 0 3 , t t o c S , m a i l l i W c M Y B D E R U Q C A I 9 1 0 2 - 8 - 5 1 1 e h c n a r T 9 1 0 2 - 8 - 5 1 2 e h c n a r T 9 1 0 2 - 8 - 5 1 3 e h c n a r T , 0 0 0 0 0 0 1 , , 0 0 0 0 0 0 1 , , 0 0 0 0 0 0 1 , 1 2 0 2 - 4 - 2 1 A N 8 7 4 7 8 , l n a P e r a h S e e y o p m E l s M G s M G s M G 0 0 0 , 5 2 5 , 3 0 0 0 , 0 0 6 0 0 0 , 5 2 1 , 4 ) 8 7 4 , 7 8 3 ( ) 0 0 0 , 5 7 3 ( 8 7 4 , 7 8 8 , 4 s n o i t p o f o e u a v r i a F l . 2 . 1 3 d e u s s I s n o i t p o e u a v l n o i t p o l l a C l d e y i d n e d v D i i e e r f - k s R i e t a r t s e r e t n i l a u n n A y t i l i t a o v l m r e T ) s r a e y ( ) $ ( e c i r p i e s c r e x E ) $ ( e t a d t n a r G e c i r p e r a h s e h c n a r T : d e s u l e d o m e h t o t s t u p n i e h t s t s i l l e b a t g n w o i l l o f e h T . i d e r e d s n o c n e e b e v a h s n o i t a u c a c d e s a b y t i l i l l b a b o r p d n a l a c i t s i t a t s f o r e b m u n a , s n o i t p o e r a h s e h t f o l h c a e f o e u a v r i a f e h t g n n m r e t e d n i i I . n o i t a m r o f n l l i i i t n e a v u q e t e k r a m e b a r a p m o c g n s u s n o i t p o e h t f o e u a v e h t f o n o i t a n m r e t e d i l e h t s l i a t n e h c h w i , l d o h t e m s e o h c S - k c a B e h t s l i l i s n o i t a u a v e h t r o f d e r e d s n o c e v a h e w h c a o r p p a n o i t a u a v y r a m l i r p e h T 0 0 0 0 0 6 , 0 0 0 0 0 6 , 0 0 0 0 0 6 , 0 0 0 0 0 3 , 0 0 0 0 0 3 , 0 0 0 0 0 3 , , 0 0 0 0 0 0 1 , , 0 0 0 0 0 0 1 , , 0 0 0 0 0 0 1 , . 8 0 0 $ - 6 0 0 $ . . 9 0 0 $ - 7 0 0 $ . . 0 1 0 $ - 8 0 0 $ . . 1 2 0 $ - 8 1 0 $ . . 1 2 0 $ - 8 1 0 $ . . 1 2 0 $ - 8 1 0 $ . . 1 2 0 $ - 8 1 0 $ . . 1 2 0 $ - 8 1 0 $ . . 1 2 0 $ - 8 1 0 $ . % 3 2 3 . % 0 0 2 . % 5 3 - 0 3 % 3 2 3 . % 5 1 2 . % 5 3 - 0 3 % 3 2 3 . % 6 2 2 . % 5 3 - 0 3 % 2 % 2 % 2 % 2 % 2 % 2 % 5 7 0 . % 0 3 - 5 2 % 5 7 0 . % 0 3 - 5 2 % 5 7 0 . % 0 3 - 5 2 % 5 7 0 . % 0 3 - 5 2 % 5 7 0 . % 0 3 - 5 2 % 5 7 0 . % 0 3 - 5 2 9 3 . 9 4 . 9 5 . 9 5 . 9 5 . 9 5 . 9 5 . 9 5 . 9 5 . 5 5 0 . 5 5 0 . 5 5 0 . 5 6 0 . 5 6 0 . 5 6 0 . 5 6 0 . 5 6 0 . 5 6 0 . 7 4 0 . 7 4 0 . 7 4 0 . 6 7 0 . 6 7 0 . 6 7 0 . 6 7 0 . 6 7 0 . 6 7 0 . 1 e h c n a r T 7 1 0 2 t s u g u A 8 1 2 e h c n a r T 7 1 0 2 t s u g u A 8 1 3 e h c n a r T 7 1 0 2 t s u g u A 8 1 1 e h c n a r T 9 1 0 2 t s u g u A 5 1 2 e h c n a r T 9 1 0 2 t s u g u A 5 1 3 e h c n a r T 9 1 0 2 t s u g u A 5 1 1 e h c n a r T 9 1 0 2 t s u g u A 5 1 2 e h c n a r T 9 1 0 2 t s u g u A 5 1 3 e h c n a r T 9 1 0 2 t s u g u A 5 1 E T A D T N A R G 110 RESIMAC GROUP LTD ANNUAL REPORT 2021 111 | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OTHER | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OTHER 31.3. Movements in share options during the period The following reconciles the share options outstanding at the beginning and the end of the period: Number of LTI options LTI#1 Number of LTI options LTI#2 Number of ESP options Number of options Total Weighted average fair value $ LTI#1 Weighted average fair value $ LTI#2 Weighted average fair value $ ESP Unvested options at 1 July 2020 300,000 3,525,000 Vested options at 1 July 2020 600,000 - OPTIONS HELD AT 1 JULY 2020 900,000 3,525,000 - - - 3,825,000 600,000 4,425,000 0.09 0.08 0.08 Granted during the year - Exercised during the year (300,000) - - 87,478 87,478 - (87,478) (387,478) 0.55 0.20 - 0.20 - - Unvested options at 30 June 2021 - 3,525,000 Vested options at 30 June 2021 600,000 - - - 3,525,000 - 0.20 600,000 0.09 - OPTIONS HELD AT 30 JUNE 2021 600,000 3,525,000 - 4,125,000 0.09 0.20 - - - 2.14 2.14 - - - 31.4. Share options exercised during the period The Trustee for the Resimac Group Limited Employee Share Trust subscribed for 300,000 fully paid ordinary shares issued by the Group at a subscription price of $2.13 per share, being the volume weighted average price of shares at the close of trading over a 5 day trading period up to and including 27 April 2021. Shares held by the trustee were allocated to Scott McWilliam on his exercise of tranche 1 share options on 26 April 2021. 32. Other accounting policies 32.1. Application of new and revised accounting standards The Group has applied the required amendments to Standards and Interpretations that are relevant to its operations and effective for the current reporting period for the first time for the financial year commencing 1 July 2020. Software-as-a-Service (SaaS) arrangements The International Financial Reporting Standards Interpretations Committee (IFRIC) has issued two final agenda decisions which impact SaaS arrangements: 112 RESIMAC GROUP LTD Customer’s right to receive access to the supplier’s software hosted on the cloud (March 2019). This decision considers whether a customer receives a software asset at the contract commencement date or a service over the contract term. Configuration or customisation costs in a cloud computing arrangement (April 2021). This decision discusses whether configuration or customisation expenditure relating to SaaS arrangements can be recognised as an intangible asset and if not, over what time period the expenditure is expensed. The Group’s accounting policy has historically been to capitalise all costs related to SaaS arrangement as intangible assets in the statement of financial position. The adoption of the above agenda decision has result in a reclassification of these intangible assets to recognition as an expense in the statement of profit or loss. The new accounting policy is presented in Note 11. IBOR Benchmark Reform: Transition from inter-bank offered rates (IBOR) to alternative reference rates (ARRs) The UK Financial Conduct Authority announced on 5 March 2021 that all LIBOR settings will either cease to be published by any administrator or will no longer be representative at a specified future date, with a clear message to market participants to complete transition by the end of 2021. Specifically, 1-month USD LIBOR will cease to be published after 30 June 2023, and all USD LIBOR-linked contracts must transition to replacement risk-free rates. In addition, on 2 June 2021, the Financial Stability Board announced that all new use of LIBOR benchmarks should cease as soon as practicable and no later than the timelines set out by home authorities and/or national working groups in the relevant currencies. The Alternative Reference Rates Committee (“ARRC”) of the Federal Reserve Bank of New York has selected SOFR as the replacement for LIBOR. Resimac has adopted the ARRC-recommended LIBOR fallback language in USD transactions completed since 2019. In line with pronouncements from regulators and its recent USD transactions, Resimac proposes to amend all outstanding USD transactions completed prior to 2019 by incorporating the ARRC-recommended LIBOR fallback language in the USD note conditions. ARRC-recommended LIBOR fallback language Under the ARRC fallback language adopted by Resimac: USD LIBOR will be replaced as the benchmark for USD Notes using Term SOFR, which is expected to be a similar forward-looking term rate to USD LIBOR RMBS and Derivative Amendments Based on discussions with US dealers, Resimac understands that incorporating the ARRC - recommended LIBOR fallback language is consistent with the requirements of US RMBS investors. Resimac is therefore of the view that the proposed amendments are desirable and not materially prejudicial to the Class A1 Noteholders and will make required modifications to the benchmark language in its RMBS transactions and any associated derivative contract. Impacts on financial reporting AASB 2019-3 Amendments to Australian Accounting Standards – Interest Rate Benchmark Reform issued in October 2019, amended to AASB 7 Financial Instruments: Disclosures, AASB 9 Financial Instruments to provide certain reliefs in relation to interest rate benchmark reforms. The relief relate to hedge accounting and have the effect that the reforms should not generally cause hedge accounting to terminate. However, any hedge ineffectiveness should continue to be recorded in the income statement. In September 2020, AASB 2020-8 Amendments to Australian Accounting Standards – Interest Rate Benchmark Reform – Phase 2 amended standards including AASB 7, AASB 9 and AASB 16 Leases (AASB 16) to address accounting issues following the transition to ARR. The amendment provides practical expedients to account for changes in the basis for determining contractual cash flows as a result of IBOR reform under AASB 9 and AASB 16. It provides additional temporary reliefs from applying specific hedge accounting requirements to hedging relationships that are directly affected by IBOR reform and require additional quantitative and qualitative disclosures. The amendments are mandatorily effective for annual reporting periods on or after 1 July 2021. Based on management’s assessment as above, the impact is not expected to be materially different to how the Group currently accounts for financial instruments which have qualified for hedge accounting. Other amendments made to existing standards Other amendments made to existing standards that were mandatorily effective for the financial year commencing 1 July 2020 did not have any material impact on the disclosures or on the amounts recognised in the consolidated financial statements. 32.2. New and revised accounting standards and interpretations on issue but not yet effective Certain new accounting standards and interpretations have been published that are not mandatory for 30 June 2021 reporting periods and have not been early adopted by the Group. The Group’s assessment of the impact of these new standards and interpretations is set out below. These standards are not expected to have a material impact on the financial statements of the Group in future periods. | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OTHER | DIRECTORS' DECLARATION Effective for annual reporting periods beginning on or after 1 July 2021 STANDARD / AMENDMENT AASB 2020-8 Amendments to Australian Accounting Standards - Interest Rate Benchmark Reform Phase 2 AASB 2020-3 Amendments to Australian Accounting Standards - Annual Improvements 2018-2020 and Other Amendments AASB 1 July 2022 AASB 2020-1 Amendments to Australian Accounting Standards - Classification of Liabilities as Current or Non-current 1 July 2023 The standards and interpretations listed above are not expected to have a material impact on financial results or financial position on adoption. 32.3. Goods and services tax (GST) Revenues, expenses and assets are recognised net of the amount of GST except: where the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST is recognised as part of the costs of acquisition of the asset or as part of the expense item as applicable; and receivables and payables which are stated with the amount of GST included. The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the statement of financial position. Cash flows are included in the statement of cash flows on a gross basis and the GST component of cash flows arising from investing and financing activities, which is recoverable from, or payable to, the taxation authority is classified as operating cash flows. Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority. Directors' declaration Resimac Group Ltd and its controlled entities The Directors declare that: a. in the Directors’ opinion, there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable b. in the Directors’ opinion, the attached financial statements are in compliance with Australian Accounting Standards as stated in the financial statements; c. in the Directors’ opinion, the attached financial statements and notes thereto are in accordance with the Corporations Act 2001, including compliance with accounting standards and giving a true and fair view of the financial position and performance of the consolidated entity and the company; and d. the Directors have been given the declarations required by s295.A of the Corporations Act 2001. Signed in accordance with a resolution of the Directors pursuant to s295(5) of the Corporations Act 2001. On behalf of the Directors Warren McLeland Chairman Sydney 30 August 2021 114 RESIMAC GROUP LTD ANNUAL REPORT 2021 115 | INDEPENDENT AUDITOR'S DECLARATION RESIMAC GROUP LTD & ITS CONTROLLED ENTITIES | INDEPENDENT AUDITOR'S REPORT RESIMAC GROUP LTD & ITS CONTROLLED ENTITIES Deloitte Touche Tohmatsu ABN 74 490 121 060 Grosvenor Place 225 George Street Sydney NSW 2000 PO Box N250 Grosvenor Place Sydney NSW 1220 Australia Tel: +61 2 9322 7000 Fax: +61 2 9322 7001 www.deloitte.com.au The Board of Directors Delarey Nell Partner Chartered Accountants 30 August 2021 Dear Board Members, Auditor’s Independence Declaration to Resimac Group Limited In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following declaration of independence to the directors of Resimac Group Limited and its controlled entities. As lead audit partner for the audit of the financial report of Resimac for the year ended 30 June 2021, I declare that to the best of my knowledge and belief, there have been no contraventions of: (i) the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and (ii) any applicable code of professional conduct in relation to the audit. Yours faithfully DELOITTE TOUCHE TOHMATSU Delarey Nell Partner Chartered Accountants Deloitte Touche Tohmatsu ABN 74 490 121 060 Grosvenor Place 225 George Street Sydney NSW 2000 PO Box N250 Grosvenor Place Sydney NSW 1220 Australia Tel: +61 2 9322 7000 Fax: +61 2 9322 7001 www.deloitte.com.au Independent Auditor’s Report to the Members of Resimac Group Limited Report on the Audit of the Financial Report Opinion We have audited the financial report of Resimac Group Limited (the “Company”) and its subsidiaries (the “Group”) which comprises the consolidated statement of financial position as at 30 June 2021, the consolidated statement of profit or loss, 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, and notes to the financial statements, including a summary of significant accounting declaration. information, policies explanatory directors’ other and and the 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 2021 and of their financial performance for the year then ended; and (ii) complying with Australian Accounting Standards and the Corporations Regulations 2001. Basis for Opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report. We are independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional & Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of the Company, would be in the same terms if given to the directors as at the time of this auditor’s report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Liability limited by a scheme approved under Professional Standards Legislation. Member of Deloitte Asia Pacific Limited and the Deloitte organisation. Liability Limited by a scheme approved under Professional Standards Legislation. Member of Deloitte Asia Pacific Limited and the Deloitte organisation. 116 RESIMAC GROUP LTD ANNUAL REPORT 2021 117 | INDEPENDENT AUDITOR'S REPORT RESIMAC GROUP LTD & ITS CONTROLLED ENTITIES | INDEPENDENT AUDITOR'S REPORT RESIMAC GROUP LTD & ITS CONTROLLED ENTITIES Key Audit Matters Other Information Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report for the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Key Audit Matter Impairment of loans and advances As at 30 June 2021 the Group has recognised provisions amounting to $37.6m for impairment losses on loans and advances held at amortised cost in accordance with the Expected Credit Loss (ECL) approach required under AASB 9 Financial Instruments as disclosed in Note 6, 22 and 23. Loans and advances subject to provisioning using the ECL model include the residential lending loans portfolio, personal approved but not yet advanced. loan portfolio and Significant management judgement was necessary in determining expected credit losses, including: - - The application of the requirements of AASB 9 as reflected in the Group’s ECL model particularly in light of the current economic environment including the ongoing impact of COVID-19; The identification of exposures with a significant movement in credit quality to determine whether 12-month or lifetime ECL should be recognised; and - Assumptions used in the ECL model such as the financial condition of the counterparty, repayment capacity and forward-looking macroeconomic factors as disclosed in Note 6,22 and 23. How the scope of our audit responded to the Key Audit Matter Our procedures included, but were not limited to: in conjunction with our specialists Testing the design and implementation of relevant controls over the impairment provision including: - Assessing accuracy of data input into the system used for determining past due status and the approval of credit facilities; and Evaluating the ongoing monitoring and identification of loans displaying indicators of impairment and whether they are migrating on a timely basis to appropriate default stages including generation of days past due reports. - Assessing impairment model adequacy Our procedures included, but were not limited to: the the - Assessing whether managements’ model adequately relevant requirements of addresses accounting standard; Evaluating management’s assessment of the impact of COVID-19 on the loan portfolio and hence the estimate of ECL; Testing on a sample basis, individual exposures to determine if they are classified into appropriate default stages and aging buckets for the purpose of determining impairment loss provision; - - - Assessing the reasonableness of assumptions driving probabilities of default (PD), Loss Given Default (LGD) and Exposure at Default (EAD); and - Assessing reasonableness of management overlays to the modelled collective provision, by recalculating the coverage provided taking into account recent history, performance and de-risking of the relevant portfolios. We also assessed the appropriateness of the disclosures in Notes 6, 22 and 23 to the financial statements. 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 2021 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 we do not express any form of assurance conclusion thereon. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information; we are required to report that fact. We have nothing to report in this regard. Responsibilities of the Directors for the Financial Report The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the directors are responsible for assessing the ability of the Group to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or has no realistic alternative but to do so. Auditor’s Responsibilities for the Audit of the Financial Report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: (cid:31) Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. 118 RESIMAC GROUP LTD ANNUAL REPORT 2021 119 | INDEPENDENT AUDITOR'S REPORT RESIMAC GROUP LTD & ITS CONTROLLED ENTITIES | INDEPENDENT AUDITOR'S REPORT RESIMAC GROUP LTD & ITS CONTROLLED ENTITIES (cid:31) Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control. (cid:31) Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors. (cid:31) Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern. (cid:31) Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether the financial report represents the underlying transactions and events in a manner that achieves fair presentation. (cid:31) Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the financial report. We are responsible for the direction, supervision and performance of the Group’s 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, actions taken to eliminate threats or safeguards applied. From the matters communicated with the directors, we determine those matters that were of most significance in the audit of the financial report of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Report on the Remuneration Report Opinion on the Remuneration Report We have audited the Remuneration Report included in pages 12 to 29 of the Directors’ Report for the year ended 30 June 2021. In our opinion, the Remuneration Report of the Resimac Group Limited, for the year ended 30 June 2021, complies with section 300A of the Corporations Act 2001. Responsibilities The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. DELOITTE TOUCHE TOHMATSU Delarey Nell Partner Chartered Accountants Sydney, 30 August 2021 120 RESIMAC GROUP LTD ANNUAL REPORT 2021 121 | ENVIRONMENTAL, SOCIAL & GOVERNANCE | ENVIRONMENTAL, SOCIAL & GOVERNANCE Environment, social and governance Resimac’s approach to its Environmental, Social and Governance ('ESG') responsibilities is a key factor in how many of our customers, investors, shareholders and our employees regard our business. We acknowledge the importance of our contribution to the community and the environment as corporate citizens and the importance to our shareholders and investors for good corporate governance. As such, we continually incorporate ESG into our culture and our strategy by working together to enhance our effectiveness, providing appropriate disclosures and reporting our activities and progress. Further details of our ESG practices can be found in our Corporate Governance Statement and the Environmental, Social and Governance Statement located on our website. Since 2010 Resimac has planted over 40,000 trees, which is calculated to offset nearly five million kilograms of harmful CO2 emissions from the Earth’s atmosphere. Environment As a leading non-bank lender, we understand the importance of supporting the environment. We are committed to this by: Being carbon conscious. For every loan settled, Resimac facilitates the planting of a Mallee Eucalypt tree in the Australian Wheatbelt region of Western Australia. Since 2010 Resimac has planted over 40,000 trees, which is calculated to offset nearly five million kilograms of harmful CO2 emissions from the Earth’s atmosphere, as well as play a role in increasing the available habitat for local fauna. Continually reducing the need for paper and printable matter, both through our end-to-end digital loan origination process for customers and by reducing the number of printers in our offices. Additionally, all printers have a built-in power saving function to turn off after a short interval. Recycling consumables and equipment in the office, complemented by recycling facilities for employees. This annual report has been printed on recycled paper. Installing sensor lights and LED lighting within the office to reduce power consumption. Social Introducing flexible working arrangements / working from home and the closure of three our offices (with staff transferring to home offices), assisting in reducing overall greenhouse gas emissions, fossil fuel consumption and energy usage. Reducing domestic and international flights. The impact of COVID-19 has allowed the business to think differently about the need for as many face-to-face meetings, and we have leveraged our investments in video telephony technology to maintain face time between staff notwithstanding geographical and pandemic-related limitations. In 2021, we launched a new Green Loan product in our direct channel. With an ultra-low interest rate, the loan makes credit more accessible to encourage customers to join the movement towards a cleaner and more sustainable future. The Green Loan can be used to purchase and install energy efficient items for household improvements such as battery packs and storage, electrical energy storage, hot water heat pump or solar hot water system, insulation and/ or double-glazed windows and solar panels. Our social responsibilities extend across a range of groups, including our employees, customers, investors and the community. It is paramount to the future of our business that our employees conduct themselves in a way that enables us to deliver great service to our customers and business partners, while displaying the company’s values of quality, passion, agility, respect, accountability, professionalism and integrity. At Resimac, we recognise that an engaged team supports a successful business. We encourage work/life balance and offer a number of benefits such as: study support, a flexible day, “wellness” hours, an employee assistance program, salary continuance insurance, purchased leave and a paid community day that enables employees to participate in community activities with a charity of their choice. Throughout the extended lockdowns, we also organised complimentary group fitness sessions for staff, a mindfulness program and resilience training provided by our EAP partner. In 2020, flexible working arrangements were implemented, allowing our staff to work from home two days a week. With our customers, we strive to provide superior service and support throughout their journey with Resimac. We have proactively engaged with our customers to remind them of our financial hardship provisions – not just for COVID-19 lockdowns, but also during natural disasters such as the flooding that affected the eastern seaboard. 122 RESIMAC GROUP LTD ANNUAL REPORT 2021 123 As an entity that holds seven credit licences and an Australian financial services licence, we must ensure we comply with the responsible lending conduct obligations, which we do through our credit committee, board risk and compliance committee, our compliance program, and quality assurance. In 2021, the Board released a Modern Slavery Statement and awareness training to our staff. At Resimac, we recognise that modern slavery is a crime and a violation of fundamental human rights. We are committed to acting ethically and with integrity in our business dealings and relationships, and we are committed to preventing modern slavery in our own business and to helping prevent modern slavery in our supply chains. Who we partner with at Resimac is also key to our sustainability performance. Our responsible approach to procurement of suppliers allows us to manage and mitigate risk. Supporting charities that closely align with our values is important to Resimac. We are proud to support multiple charities and community initiatives including: The Station Food Ladder local support within the Philippines FOOD LADDER Resimac is proud to support Food Ladder, a not-for- profit and global pioneer in the use of environmentally sustainable technologies to create food and economic security for remote communities. Food ladder not only addresses food security, but it also creates employment and training opportunities for adults and education outcomes for children. Food ladder systems have benefited 31,500 individuals, with 6,000 getting a consistent, significant part of their diet from food ladder. Furthermore, it has created 600 jobs. Resimac offers both financial support and assistance with promoting awareness for the organisation. Additionally, the charity ambassador program we launched last year, whereby two employees have been working closely with food ladder to raise awareness and engagement internally and throughout the broader community, has been highly successful. In October this year, we are looking to launch our first co-branded Food Ladder greenhouse in a primary school in Brisbane. In 2022, we expect to launch Food Ladder systems within schools in Perth and Sydney also. We are committed to reducing our carbon footprint, which is why we are encouraging shareholders to change their preferred method of correspondence to email. Not only is it the quickest and most secure way to receive communications, it is better for the environment. | ENVIRONMENTAL, SOCIAL & GOVERNANCE STAFF CHARITY INITIATIVES In addition to the charities that Resimac supports at a company level, we have actively supported charity initiatives that have been driven by staff with a company dollar-matched donation. These initiatives include: the World’s Greatest Shave, a fundraising initiative for blood cancer, where we raised more than $20K; Movember, a charity initiative to raise money for men’s health and prostate cancer; The Push-Up Challenge in support of mental health; and STEPtember to raise money for cerebral palsy. These events collectively raised $100,000. THE STATION LTD The station is a not-for-profit drop-in centre established in 1978, located in the heart of the Sydney CBD. Its mission is to provide a range of services to adults having difficulty obtaining and sustaining accommodation as well as providing food. Resimac has a team of volunteers who help with food service regularly, and we have a highly successful annual collection of personal and hygiene products. We have also supplied both dryers and washing machines. Due to restrictions imposed by COVID-19, we have been unable to assist with food service since February 2020, however we have donated books and food, and will continue our support once restrictions allow. PHILIPPINES Each year, we partner with our staff in Manila to choose the organization / charity that they wish to support within the community. Over the past twelve months, we have supported the San Lazaro Hospital in Manila, which is a public hospital which specialises in infectious diseases. We donated masks, face shields, PPE, surgical gloves and sanitiser. Further, we assisted the Gentle Hands Orphanage with medical and cleaning supplies as they managed the impact of COVID-19. Governance THE BOARD, RISK MANAGEMENT & COMPLIANCE FRAMEWORK Resimac has a strong governance framework in place to ensure all regulatory obligations are adhered to in line with our licence requirements and our position as an ASX Listed entity. There are several committees, policies, and procedures in place to complement this framework including: Risk and Compliance Committee Audit Committee Remuneration and Nominations Committee Technology, Digital and Innovation Committee Assets and Liability Committee Pricing Committee Credit Committee Workplace Health & Safety Committee Diversity & Inclusion Committee Anti-Money Laundering Program Compliance Framework Enterprise Risk Framework Quality Assurance Program Continuous Disclosure Policy Anti-Bribery and Corruption Policy Each Committee has a charter that sets out its responsibility and accountability and this charter is reviewed annually. Resimac has both independent internal and external audit functions to ensure the governance framework we are working towards is being followed. The Board has adopted a Risk Appetite Statement and operational risk register with key risk metrics to ensure appropriate controls are in place. In addition, Quality Assurance Reviews are undertaken on lending approvals by a team independent of the creditor assessors, with control testing and quarterly obligation attestations required by each department. TAX OBLIGATIONS We are committed to ensuring we meet our multi tax obligations which include income, fringe benefit, goods and services, payroll, stamp duty, etc, and have established a Board-approved Tax Risk Management Policy. Best tax practice, tax risk appetite metrics have been adopted. ANNUAL REPORT 2021 125 | SHAREHOLDER INFORMATION | SHAREHOLDER INFORMATION Shareholder information d. Substantial shareholders The names of the substantial shareholders of the Company and the number of equity securities in which they have a relevant interest as disclosed in substantial shareholding notices given to the Company are set out below: SHAREHOLDER Somers Limited, ICM Limited, UIL Limited, Permanent Investments Limited, Somers Isles Private Trustee Company Limited, and each other entity controlled by Duncan Saville 246,757,304 61.91 No. of shares % Additional information required by the ASX and not disclosed elsewhere in this report is set out below. The information is current as at 17 September 2021. Opting in for electronic communication: Only 40% of our shareholders have opted in to receive electronic communications. Consistent with our Carbon Conscious initiative and our commitment to reduce paper consumption, we encourage more shareholders to opt-in for electronic communications. e. Twenty largest shareholders The 20 largest shareholders of ordinary shares on the Company's register at 17 September 2021 were: a. Number of holders of equity securities Ordinary Share Capital: 408,404,461 paid ordinary shares are held by 2,952 individual shareholders. b. Voting rights All issued ordinary shares carry one vote for each member present at the meeting on a show of hands and on a poll each member is entitled to one vote for every ordinary share held. c. Distribution of members and their holdings The number of equity securities by size of holding is set out below: SHAREHOLDER JP Morgan Nominees Australia Pty Limited HSBC Custody Nominees (Australia) Limited Redbrook Nominees Pty Ltd Motrose Pty Ltd Warren John McLeland National Nominees Limited Citicorp Nominees Pty Limited RANGE 1 to 1,000 1,001 to 5,000 5,001 to 10,000 10,001 to 100,000 100,001 and over TOTAL Total holders Units % Units Hartley Phillips Securities Pty Ltd (Hartley Phillips Inv Tst A/C) 866 1,100 350 524 112 457,039 2,957,141 2,757,869 15,922,472 386,309,940 2,952 408,404,461 0.11 0.72 0.68 3.90 94.59 100.00 Moat Investments Pty Ltd (Moat Investment A/C) Westpac Banking Corporation Acres Holdings Pty Ltd Mr Scott Bruce Charles McWilliam RSJSDS Pty Ltd (Salmon Super Fund A/C) High Pass Holdings Pty Ltd (High Pass Hldgs P/L Sup A/C) Mast Financial Pty Ltd (A to Z Investment A/C) Esselmont Pty Ltd (The Esselmont A/C) Minimum parcel size Holders Units Gliocas Investments Pty Ltd (Gliocas Growth Fund A/C) UNMARKETABLE PARCEL Minimum $500.00 parcel at $2.1800 per unit 230 181 19,698 Tico Pty Ltd Ralph Lauren 57 Pty Ltd (John James No 2 A/C) Leuie Enterprises Pty Ltd (Matthew Leuenberger Fam A/C) No. of shares % 170,859,361 111,068,412 14,870,515 14,500,000 11,920,138 9,746,952 5,409,873 5,031,373 4,048,624 2,493,130 1,496,881 1,450,000 1,350,000 1,191,687 1,068,558 989,749 969,556 903,960 854,922 844,394 41.84 27.20 3.64 3.55 2.92 2.39 1.32 1.23 0.99 0.61 0.37 0.36 0.33 0.29 0.26 0.24 0.24 0.22 0.21 0.21 126 RESIMAC GROUP LTD ANNUAL REPORT 2021 127 TOTAL 361,068,085 88.41 | MANAGING YOUR SHAREHOLDING | CORPORATE INFORMATION Corporate information Registered office and Corporate office Level 9, 45 Clarence Street, Sydney NSW 2000 p +61 2 9248 0300 e info@resimac.com.au w resimac.com.au Customer enquiries: 13 38 39 Non-Executive Directors Warren McLeland, Chairman Susan Hansen Duncan Saville Wayne Spanner Caroline Waldron Company Secretary Peter Fitzpatrick Share registry Computershare Investor Services Pty Limited Managing your shareholding The Company’s share registry is managed by Computershare Investor Services Pty Limited (Computershare). The Investor Centre website is the fastest, easiest and most convenient way to view and manage your shareholding. Investor Centre enables a shareholder to: view the Company share price; change your banking details; change your address (for non-CHESS sponsored holdings); update your dividend instruction; update your Tax File Number (TFN), Australian Business Number (ABN) or exemption; select your email and communication preferences; and view your transaction history. When communicating with Computershare or accessing your holding online you will need your Securityholder Reference Number (SRN) or Holder Identification Number (HIN) as shown on your Issuer Sponsored / CHESS statements. You can also contact Computershare by: Address Level 3, 60 Carrington Street, Sydney NSW 2000 p 1300 850 505 e web.queries@computershare.com.au w investorcentre.com.au Tax file number While it is not compulsory to provide a Tax File Number (‘TFN’), if shareholders have not provided a TFN and Resimac pays an unfranked or partly franked dividend, the Company will be required to deduct tax from the unfranked portion of the dividend at the top marginal rate plus the Medicare Levy. Information on Resimac Group Resimac Group website Up-to-date information on the Company can be obtained from the Company's website: resimac.com.au Securities exchange listing The Company’s shares are listed on the Australian Securities Exchange (ASX) and the Home Exchange is Sydney. Ordinary shares are traded under the code, ASX: RMC. Share prices can be accessed from major Australian newspapers, the Resimac Group website or at: asx.com.au 128 RESIMAC GROUP LTD ABN 55 095 034 003 Australian Credit Licence 247829 ASX: RMC To view the 2021 Annual Report, Shareholder and Company information, new announcements, background information on Resimac Group businesses and historical information, visit the Resimac website at resimac.com.au Resimac Group Ltd Level 9, 45 Clarence Street Sydney NSW 2000 p e w +61 2 9248 0300 info@resimac.com.au resimac.com.au ABN 55 095 034 003 Australian Credit Licence 247829 ASX: RMC
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