Centuria Capital Group Interim Financial Report for the half year ended 31 December 2017

Transcription

1 Centuria Capital Group Interim Financial Report for the half year ended Centuria Capital Group comprises of Centuria Capital Limited ABN (the 'Company') and its subsidiaries and Centuria Capital Fund ARSN ('CCF') and its subsidiaries. The Responsible entity of CCF is Centuria Funds Management Limited ACN , AFSL , a wholly owned subsidiary of the Company.

2 Centuria Capital Group Interim Financial Report - Contents Page Directors' report 1 Auditor's Independence Declaration 4 Consolidated interim financial statements 5 Independent auditor's review report to the members 35 These consolidated interim financial statements are the interim financial statements of the consolidated entity consisting of Centuria Capital Limited and its subsidiaries. The interim financial statements are presented in the Australian currency. Centuria Capital Limited is a company limited by shares, incorporated and domiciled in Australia. Its registered office and principal place of business is: Centuria Capital Limited Level 39, 100 Miller Street North Sydney NSW 2060 The consolidated interim financial statements were authorised for issue by the Directors on 15 February The Directors have the power to amend and reissue the consolidated interim financial statements.

3 Directors' report The directors of Centuria Capital Limited (the 'Company') present their interim report together with the interim financial statements of the Company and its controlled entities (the 'Group') for the half year ended and the auditor s review report thereon. ASX listed Centuria Capital Group consists of the Company and its controlled entities including Centuria Capital Fund ('CCF'). The shares in the Company and the units in CCF are stapled, quoted and traded on the Australian Securities Exchange ('ASX') as if they are a single security under the ticker code 'CNI'. Directors The following persons were directors of the Company during the whole of the half year and up to the date of this report: Director Role Appointment Date Mr Garry S. Charny Independent Non-Executive Director and Chairman 23 February 2016 Mr Peter J. Done Independent Non-Executive Director 28 November 2007 Mr John R. Slater Independent Non-Executive Director 22 May 2013 Ms Susan Wheeldon-Steele Independent Non-Executive Director 31 August 2016 Mr Nicholas R. Collishaw Non-Executive Director 27 August 2013 Mr John E. McBain Executive Director and Chief Executive Officer 10 July 2006 Mr Jason C. Huljich Executive Director and Head of Real Estate and Funds Management 28 November 2007 Operating and financial review The Group recorded a consolidated statutory net profit after tax for the half year of $36,342,000 (half year ended 2016: $1,375,000). Statutory net profit after tax has been prepared in accordance with the Corporations Act 2001 and Australian Accounting Standards. The Group recorded an operating profit after tax for the half year of $30,212,000 (half year ended 2016: $2,922,000). Operating profit after tax excludes non-operating items such as transaction costs and fair value movements. The statutory net profit after tax includes a number of items that are not operating in nature, the table below provides a reconciliation from Statutory Profit to Operating Profit. Reconciliation of statutory profit to operating profit 2016 Statutory profit after tax 36,342 (1,375) Less non-operating items: Unrealised loss/(gain) on fair value movements in derivatives, property and investments (1,728) 2,291 Impairment charges in relation to seed capital valuations Corporate restructure & transaction costs 110 2,708 Profit attributable to controlled property funds (2,886) - Eliminations between the operating and non-operating segment (1,176) 305 Tax impact of above non-operating adjustments (450) (1,197) Operating profit after tax 30,212 2,922 Operating profit after tax provides an assessment of performance of the Group aligned with the reporting to the Group s CEO for resource allocation purposes. Centuria Capital Group 1

4 Directors' report Operating and financial review (continued) Operational highlights for the key divisions were as follows: Operating profit after tax for the half year 2016 Increase/ Decrease % Highlights Segment Property Funds Management 24,711 2,986 21, (a) Investment Bonds Division 1,705 1, (b) Co-Investments 5, , (c) (a) Property Funds Management For the half year ended, Property Funds Management operating profit after tax of $24,711,000 was higher than the prior half year ending 2016 by $21,725,000 primarily due to the impact of performance fees of $25,830,000 earned in the current half year. Excluding the after tax impact of performance fees the Property Funds Management segment profit increased by $6,630,000, reflecting the growth in assets under management (AUM) in addition to the contribution arising from the 360 Capital transaction that occurred at the end of the half year ended Operational highlights for the half year included: Increase in recurring Property Funds Management fees of $7,729,000 or 110%% from $7,006,000 for the half year ended 2016 to $14,735,000 for the half year ended 31 December Increase in Unlisted AUM by 30% from $1.3 billion (excluding 10 Spring Street) as at 30 June to $1.7 billion as at Increase in Listed AUM by 31% from $1.6 billion as at 30 June to $2.0 billion as at 31 December Performance fees of $25,830,000 earnt on the sale of 10 Spring St property. (b) Investment Bonds Management For the half year ended, the Investment Bonds Management segment increased its operating profit after tax by $519,000 or 44% to $1,705,000. The Investment Bonds Management business delivered net overall AUM growth of $54 million across its product range representing a 7% increase in AUM from 30 June. (c) Co-Investments For the half year ended, the Co-Investments segment operating profit after tax increased by $4,508,000. This was primarily due to a $147.6 million increase in co-investment holdings across various listed and unlisted investments compared to the prior half year. With an increase in recurring investment revenue from $645,000 for the half year ended 2016 to $9,480,000 for the half year ended the Co-investments segment has contributed to the noted improvement in the Group s overall recurring revenue base which increased from $13,193,000 to $35,114,000 for the corresponding periods. The Co-investments of $277 million as at included a $123 million or a 19.5% stake in Centuria Industrial REIT as well as a $66 million or 11.4% stake in the Centuria Metropolitan REIT. The operating profit after tax for the Co-investments segment represents the distributions and returns generated from those investments after the applicable financing costs. Centuria Capital Group 2

5 Directors' report Operating and financial review (continued) Earnings per security (EPS) 2016 Operating Statutory Operating Statutory Basic EPS (cents/security) (1.6) Diluted EPS (cents/security) (1.6) Dividends and Distributions Dividends and distributions paid or declared by the Group during the current half year were: Cents. Total amount Date Dividends/distributions paid during the half year per security. paid/payable Final dividend (100% franked) , August Final Trust distribution (66% tax deferred) , August Dividends/distributions declared during the half year Interim 2018 dividend (100% franked) , January 2018 Interim 2018 Trust distribution (estimated 50% tax deferred) , January 2018 Total amount ,312 Auditor's independence declaration A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 4. Rounding of amounts The Group is an entity of a kind referred to in ASIC Legislative Instrument 2016/191, related to the rounding off of amounts in the Directors Report and interim financial statements. Amounts in the Directors Report and interim financial statements have been rounded off, in accordance with the instrument to the nearest thousand dollars, unless otherwise indicated. This report is made in accordance with a resolution of Directors. Mr Garry S. Charny Director Sydney Mr Peter J. Done Director Sydney 15 February 2018 Centuria Capital Group 3

6 Lead Auditor s Independence Declaration under Section 307C of the Corporations Act 2001 To the Directors of Centuria Capital Group I declare that, to the best of my knowledge and belief, in relation to the review for the half-year ended there have been: i. no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the review; and ii. no contraventions of any applicable code of professional conduct in relation to the review. KPM_INI_01 KPMG Nigel Virgo Partner Sydney 15 February 2018 PAR_SIG_01 PAR_NAM_01 PAR_POS_01 PAR_DAT_01 PAR_CIT_01 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. Liability limited by a scheme approved under Professional Standards Legislation. 4

7 Centuria Capital Group Interim financial report - Contents Page Consolidated interim statement of comprehensive income 6 Consolidated interim statement of financial position 7 Consolidated interim statement of changes in equity 8 Consolidated interim statement of cash flows 10 Notes to the consolidated interim financial statements 11 A About the report 11 A1 General information 11 A2 Significant accounting policies 11 A3 Use of judgements and estimates 11 A4 Segment summary 12 B Business performance 13 B1 Segment profit and loss 13 B2 Revenue 15 B3 Expenses 15 B4 Finance costs 16 B5 Dividends and distributions 16 C Assets and liabilities 17 C1 Segment balance sheet 17 C2 Receivables 19 C3 Financial assets 19 C4 Investment properties 21 C5 Intangible assets 23 C6 Payables 23 C7 Borrowings 23 C8 Contributed equity 25 C9 Commitments and contingencies 26 D Cash flows 27 D1 Operating segment cash flows 27 E Group Structure 28 E1 Business combination 28 F Other 29 F1 Fair value of financial instruments 29 F2 New Accounting Standards and Interpretations 31 F3 Events subsequent to the reporting date 33 Directors' declaration Independent auditor's review report to the members Centuria Capital Group 5

8 Consolidated interim statement of comprehensive income For the half year ended Notes 2016 Revenue B2 76,624 22,749 Expenses B3 (33,001) (33,556) Fair value movements of financials instruments and property 9,494 (303) Finance costs B4 (7,826) (1,448) Net movement in policyholder liability 2,509 11,542 Profit/(loss) before tax 47,800 (1,016) Income tax expense (11,458) (359) Profit/(Loss) after tax 36,342 (1,375) Profit/(loss) after tax is attributable to: Centuria Capital Limited 20,960 (384) Centuria Capital Fund (non-controlling interests) 12,655 (849) External non-controlling interests 2,727 (142) Profit/(loss) after tax 36,342 (1,375) Other comprehensive income - - Total comprehensive income/(loss) for the period 36,342 (1,375) Total comprehensive income/(loss) for the year is attributable to: Centuria Capital Limited 20,960 (384) Centuria Capital Fund (non-controlling interests) 12,655 (849) External non-controlling interests 2,727 (142) Total comprehensive income/(loss) 36,342 (1,375) Total comprehensive income/(loss) for the year is attributable to: Centuria Capital Limited 20,960 (384) Centuria Capital Fund (non-controlling interests) 12,655 (849) Total comprehensive income/(loss) for the year is attributable to Centuria Capital Group securityholders 33,615 (1,233) Cents Cents Earnings/(loss) per Centuria Capital Group security Basic (cents per stapled security) 13.4 (1.6) Diluted (cents per stapled security) 12.3 (1.6) Earnings/(loss) per Centuria Capital Limited share Basic (cents per share) 8.4 (0.5) Diluted (cents per share) 7.6 (0.5) The above consolidated interim statement of comprehensive income should be read in conjunction with the accompanying notes. Centuria Capital Group 6

9 Consolidated interim statement of financial position As at Notes 30 June Assets Cash and cash equivalents 75,089 74,382 Receivables C2 13,955 16,380 Financial assets C3 681, ,459 Other assets 1,459 1,551 Investment properties C4 232, ,100 Intangible assets C5 157, ,663 Total assets 1,162,207 1,042,535 Liabilities Payables C6 30,246 33,895 Liability to 360 Capital Group 52,197 56,456 Provisions 1,479 1,301 Borrowings C7 253, ,103 Interest rate swaps at fair value 21,183 19,324 Benefit Funds policyholder's liability 352, ,014 Provision for income tax 3,394 3,171 Deferred tax liabilities 5,746 2,320 Total liabilities 720, ,584 Net assets 441, ,951 Equity Equity attributable to Centuria Capital Limited Contributed equity C8 98,534 77,323 Reserves 1,389 1,551 Retained earnings 27,470 11,694 Total equity attributable to Centuria Capital Limited 127,393 90,568 Equity attributable to Centuria Capital Fund (non-controlling interests) Contributed equity C8 244, ,672 Retained earnings 10,033 4,844 Total equity attributable to Centuria Capital Fund (non-controlling interests) 254, ,516 Total equity attributable to Centuria Capital Group securityholders 382, ,084 Equity attributable to external non-controlling interests Contributed equity 34,782 45,367 Retained earnings 24,564 30,500 Total equity attributable to external non-controlling interests 59,346 75,867 Total equity 441, ,951 The above consolidated interim statement of financial position should be read in conjunction with the accompanying notes. Centuria Capital Group 7

10 Consolidated interim statement of changes in equity For the half year ended Centuria Capital Limited Contributed equity Reserves Retained earnings Total Centuria Capital Fund (non-controlling interests) Contributed equity Retained earnings Total Total attributable to Centuria Capital Group Securityholders External non-controlling interests Contributed equity Retained earnings Total Total equity Balance at 1 July 77,323 1,551 11,694 90, ,672 4, , ,084 45,367 30,500 75, ,951 Profit/(loss) for the period ,960 20,960-12,655 12,655 33,615-2,727 2,727 36,342 Total comprehensive income for the period ,960 20,960-12,655 12,655 33,615-2,727 2,727 36,342 Equity based payment 535 (162) Dividends and distributions paid/accrued - - (5,184) (5,184) - (7,314) (7,314) (12,498) - (3,601) (3,601) (16,099) Stapled securities issued 21, ,494 77,146-77,146 98, ,640 Cost of equity raising (818) - - (818) (2,875) - (2,875) (3,693) (3,693) Deconsolidation of controlled property funds (152) (152) (152) (10,585) (5,062) (15,647) (15,799) Balance at 98,534 1,389 27, , ,943 10, , ,369 34,782 24,564 59, ,715 The above consolidated interim statement of changes in equity should be read in conjunction with the accompanying notes. Centuria Capital Group 8

11 Consolidated interim statement of changes in equity For the half year ended 2016 Centuria Capital Limited Contributed equity Reserves Retained earnings Total Centuria Capital Fund (non-controlling interests) Contributed equity Retained earnings Total Total attributable to Centuria Capital Group securityholders External non-controlling interests Contributed equity Retained earnings Total Total equity Balance at 1 July ,058 1,459 28, , ,969 9,883 (185) 9, ,667 Profit/(loss) for the period - - (384) (384) - (849) (849) (1,233) - (142) (142) (1,375) Total comprehensive income for the period - - (384) (384) - (849) (849) (1,233) - (142) (142) (1,375) Acquisition of subsidiaries with Non-controlling interests ,372 28,568 67,940 67,940 Equity based payment 356 (364) - (8) (8) (8) Dividends and distributions paid/accrued - - (3,474) (3,474) - (618) (618) (4,092) (4,092) Stapling dividend and return of capital reinvested (39,205) - (13,331) (52,536) 52,536-52, Stapled securities issued 28, , , , , ,000 Cost of equity raising (999) - - (999) (5,884) - (5,884) (6,883) (6,883) Balance at ,010 1,095 11,263 89, ,852 (1,467) 166, ,753 49,255 28,241 77, ,249 The above consolidated interim statement of changes in equity should be read in conjunction with the accompanying notes. Centuria Capital Group 9

12 Consolidated interim statement of cash flows For the half year ended 2016 Cash flows from operating activities Management fees received 51,840 20,741 Rent received 12,271 - Distributions received 9,335 3,958 Interest received 5,693 6,238 Other income Interest paid (6,155) (835) Income taxes paid (8,173) (2,841) Payments to suppliers and employees (27,242) (14,759) Payments for property held for development - (11,823) Applications - Benefits Funds 13,314 10,559 Redemptions - Benefits Funds (15,964) (21,586) Net cash provided by/(used in) operating activities 35,461 (10,348) Cash flows from investing activities Proceeds from sale of related party investments 47,167 - Proceeds from sale of investments - 40,387 Cash balance on acquisition of subsidiaries - 10,671 Cash balance on consolidation of property funds - 6,937 Repayment of loans by related parties 2,000 7,072 Collections from reverse mortgage holders Payments for property, plant and equipment (213) - Purchase of investments in related parties (97,732) - Deconsolidation of controlled property funds cash balance (766) - Loans to related parties for purchase of properties - (3,616) Payments in relation to investment properties (4,898) - Purchase of other investments (52,723) - Benefit Funds (acquisitions)/disposals of investments in financial assets (10,656) (38,790) Acquisition of investments in unlisted funds - (6,227) Loans provided to other parties (25,980) - Net cash (used in)/provided by investing activities (143,089) 16,758 Cash flows from financing activities Proceeds from borrowings 29,447 11,520 Repayment of borrowings (203) (26,961) Proceeds from issues of securities to securityholders of Centuria Capital Group 98,639 - Equity raising costs paid (3,692) (1,470) Capitalised borrowing costs paid (441) - Distributions paid to securityholders of Centuria Capital Group (11,814) (2,315) Distributions paid to external non-controlling interests (3,601) - Net cash provided by/(used in) financing activities 108,335 (19,226) Net increase/(decrease) in cash and cash equivalents 707 (12,816) Cash and cash equivalents at the beginning of the period 74,382 84,323 Cash and cash equivalents at end of period 75,089 71,507 The above consolidated interim statement of cash flows should be read in conjunction with the accompanying notes. Centuria Capital Group 10

13 A About the report A1 General information The shares in Centuria Capital Limited and the units in Centuria Capital Fund ('CCF') are stapled to trade together as a single stapled security ('Stapled Security') on the ASX as 'Centuria Capital Group' (the 'Group') under the ticker code, 'CNI'. The Group is a for-profit entity and its principal activities are the marketing and management of investment products, including property investment funds and friendly society investment bonds, and co-investment in property investment funds. Statement of compliance The consolidated interim financial statements for the half year ended have been prepared in accordance with Australian Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Act The consolidated interim financial statements do not include all the notes of the type normally included in the annual financial report. Accordingly, this report should be read in conjunction with the annual consolidated financial statements for the year ended 30 June and any public announcements made by the Group during the half year reporting period in accordance with continuous disclosure requirements of the Corporations Act Basis of preparation The consolidated interim financial statements have been prepared on the basis of historical cost, except for derivative financial instruments, financial assets at fair value through profit and loss and other financial assets, which have been measured at fair value at the end of each reporting period. Cost is based on the fair values of the consideration given in exchange for assets. All amounts are presented in Australian dollars, which is the company s functional currency, unless otherwise noted. Assets and liabilities have been presented on the face of the statement of financial position in decreasing order of liquidity and do not distinguish between current and non-current items. Rounding of amounts The Group is an entity of a kind referred to in ASIC Legislative Instrument 2016/191, related to the rounding off of amounts in the Directors Report and consolidated interim financial statements. Amounts in the Directors Report and consolidated interim financial statements have been rounded off, in accordance with the instrument to the nearest thousand dollars, unless otherwise indicated. A2 Significant accounting policies The accounting policies and methods of computation in the preparation of the consolidated interim financial statements are consistent with those adopted in the previous financial year ended 30 June unless specifically outlined below or in the relevant notes to the consolidated interim financial statements. When the presentation or classification of items in the consolidated interim financial statements has been amended, comparative amounts are also reclassified, unless it is impractical. Accounting policies are selected and applied in a manner that ensures that the resulting financial information satisfies the concepts of relevance and reliability, thereby ensuring that the substance of the underlying transactions or other events are reported. A3 Use of judgements and estimates In preparing these consolidated interim financial statements, management has made judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense that are not readily apparent from other sources. The judgements, estimates and assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates. The significant judgements made by management in applying the Group's accounting policies and the key sources of estimation were the same as those applied in the consolidated financial statements as at and for the year ended 30 June. Centuria Capital Group 11

14 A4 Segment summary About the report As at the Group has five reportable operating segments. These reportable operating segments are the divisions which report to the Group's Chief Executive Officer and Board of Directors for the purpose of resource allocation and assessment of performance. The reportable operating segments are: Operating segments Property Funds Management Investment Bonds Management Co-Investments Reverse Mortgages Corporate Description Management of listed and unlisted property funds Management of the Benefit Funds of Centuria Life Limited and management of the Over Fifty Guardian Friendly Society Limited. The Benefit Funds include a range of financial products, including single and multi-premium investments. Direct interest in property funds and other liquid investments Management of a reverse mortgage lending portfolio Overheads for supporting the Group's operating segments In addition, the Group provides disclosures in relation to a further four non-operating segments, which are: Non-operating segments Non-operating items Benefit Funds Controlled Property Funds Eliminations Description Comprises transaction costs, mark-to-market movements on property and derivative financial instruments, and all other non-operating activities Represents the operating results and financial position of the Benefit Funds which are required to be consolidated in the Group s financial statements in accordance with accounting standards Represents the operating results and financial position of property funds which are controlled by the Group and consolidated under accounting standards Elimination of transactions between the operating segments and the other three non-operating segments above The accounting policies of reportable segments are the same as the Group's accounting policies. Refer below for an analysis of the Group's segment results: Note B1 Segment profit and loss Note C1 Segment balance sheet Note D1 Operating segment cash flows Centuria Capital Group 12

15 B Business performance B1 Segment profit and loss For the half year Property Funds Management Investment Bonds Management Co- Investments Reverse Mortgages Corporate Operating profit Non operating items Benefits Funds Controlled Property Funds Eliminations Statutory profit Notes Revenue B2 44,765 5,344 9,480 1, ,944-8,752 11,390 (4,462) 76,624 Expenses B3 (8,054) (2,899) (61) (307) (4,465) (15,786) (110) (15,988) (5,300) 4,183 (33,001) Fair value movements of financial instruments and property ,728 6,885 (361) 1,242 9,494 Finance costs B4 (6) - (4,213) (845) (132) (5,196) - - (2,843) 213 (7,826) Net movement in policyholder liabilities , ,509 Profit/(Loss) before tax 36,705 2,445 5, (4,492) 39,962 1,618 2,158 2,886 1,176 47,800 Income tax expense (11,994) (740) (100) (30) 3,114 (9,750) 450 (2,158) - - (11,458) Profit/(Loss) after tax 24,711 1,705 5, (1,378) 30,212 2,068-2,886 1,176 36,342 Profit/(loss) after tax attributable to: Centuria Capital Limited 24,711 1, (4,801) 21,917 (1,049) ,960 Centuria Capital Fund - - 4,872-3,423 8,295 3, ,176 12,655 Profit/(loss) after tax attributable to Centuria Capital Group securityholders 24,711 1,705 5, (1,378) 30,212 2, ,176 33,615 Non-controlling interests ,727-2,727 Profit/(loss) after tax 24,711 1,705 5, (1,378) 30,212 2,068-2,886 1,176 36,342 TE Centuria Capital Group 13

16 B1 Segment profit and loss (continued) Business performance For the half year 2016 Property Funds Management Investment Bonds Management Co- Investments Reverse Mortgages Corporate Operating profit Non operating items Benefits Funds Controlled Property Funds Eliminations Statutory profit Notes Revenue B2 10,428 4, , ,134-9,315 1 (3,701) 22,749 Expenses B3 (6,162) (2,707) 4 (282) (3,303) (12,450) (2,898) (21,603) (14) 3,409 (33,556) Fair value movements of financial instruments and property (2,291) 1, (303) Finance costs B (919) (529) (1,448) (1,448) Net movement in policyholder liabilities , ,542 Profit/(Loss) before tax 4,266 2, (10) (3,714) 3,236 (5,189) 1,242 (13) (292) (1,016) Income tax expense (1,280) (859) (51) 3 1,873 (314) 1,109 (1,242) - 88 (359) Profit/(Loss) after tax 2,986 1, (7) (1,841) 2,922 (4,080) - (13) (204) (1,375) Profit/(loss) after tax attributable to: Centuria Capital Limited 2,986 1, (7) (1,841) 2,443 (2,752) - (13) (62) (384) Centuria Capital Fund (1,328) (849) Profit/(loss) after tax attributable to Centuria Capital Group securityholders 2,986 1, (7) (1,841) 2,922 (4,080) - (13) (62) (1,233) Non-controlling interests (142) (142) Profit/(loss) after tax 2,986 1, (7) (1,841) 2,922 (4,080) - (13) (204) (1,375) TE Centuria Capital Group 14

17 Business performance B2 Revenue 2016 Management fees from property funds 14,735 7,006 Property acquisition fees - 2,891 Property performance fees 25, Property sales fees 2,971 - Management fees from Benefit Funds 1,725 1,283 Interest revenue 5,166 5,226 Rent and recoverable outgoings 11,243 - Distribution/dividend revenue 12,671 3,338 Premiums - discretionary participation features only 1,474 2,658 Other income ,624 22,749 (a) Transactions with related parties Management fees are charged to related parties in accordance with the respective trust deeds and management agreements. $ 2016 $ Management fees from Property Funds managed by Centuria 14,734,859 7,005,898 Distributions from Property Funds managed by Centuria 6,400, ,320 Property transaction fees from Property Funds managed by Centuria - 2,890,930 Sales fees from Property Funds managed by Centuria 2,970,550 - Management fees from Over Fifty Guardian Friendly Society 1,668,434 1,283,164 Performance fees from Property Funds managed by Centuria 25,829, ,128 51,603,749 11,838,440 B3 Expenses 2016 Employee benefits expense 10,423 7,779 Consulting and professional fees 1,669 1,109 Property outgoings and fund expenses 2,787 - Corporate restructure and transaction costs 109 2,708 Administration fees 1,320 1,299 Claims - discretionary participation features only 12,632 18,194 Other expenses 4,061 2,467 33,001 33,556 Centuria Capital Group 15

18 B3 Expenses (continued) Business performance (a) Transactions with key management personnel As a matter of Board policy, all transactions with directors and director-related entities are conducted on arms-length commercial or employment terms. During the financial year, the following transactions occurred between the Group and key management personnel: Wolseley Corporate Pty Ltd, a related party of Mr Garry S. Charny, was paid $198,000 (inclusive of GST) ( 2016: $280,500) for corporate advisory fees. Tailwind Consulting Pty Ltd, a related party of Mr John R. Slater, was paid $99,000 (inclusive of GST) ( 2016: $83,484) for consultancy services. In addition, Tailwind Consulting paid the Group $4,840 (inclusive of GST) for rental of office space. B4 Finance costs 2016 Operating interest charges 4, Bank loans in Controlled Property Funds interest charges 2,673 - Reverse mortgage facility interest charges (Gain)/loss on derivatives on fair value hedges (50) (6,702) Loss/(gain) on financial assets fair value hedges 50 6,702 Other finance costs ,826 1,448 B5 Dividends and distributions 2016 Cents per Total Cents per Total security security Dividends/distributions paid during the half year Stapling dividend (fully franked) ,331 Final year-end dividend (fully franked) , ,316 Final year-end distribution , Dividends/distributions declared during the half year Interim dividend (fully franked) (i) , ,158 Interim distribution (i) , Dividends and distributions paid/declared to Centuria Capital Group securityholders (ii) , ,423 (i) The Group declared a dividend/distribution in respect of the half year ended of 4.1 cents per stapled security which included a dividend of 1.7 cents per share and a distribution of 2.4 cents per security. The final dividend/distribution had a record date of 29 December and was paid on 31 January The total amount payable of $12,497,520 has been provided as a liability in these financial statements. (ii) In addition to the dividends and distributions paid to Centuria Capital Group securityholders, the Group paid distributions of $2,726,574 to external non-controlling Interests. Centuria Capital Group 16

19 C Assets and liabilities C1 Segment balance sheet Half year ended Property Funds Management Investment Bonds Management Co- Investments Reverse Mortgages Corporate Operating balance sheet Benefits Funds Controlled Property Funds Eliminations Statutory balance sheet Notes Assets Cash and cash equivalents 13,976 5,607 16, ,843 67,025 1,466 6,598-75,089 Receivables C2 3,934 1,996 5,830 (25) ,187 1, (306) 13,955 Financial assets C ,091 46,745 8, , ,292 (52) (7,365) 681,291 Property investments C , ,750 Other assets , ,459 Intangible assets C5 157, , ,663 Total assets 175,675 7, ,702 47,671 39, , , ,069 (7,671) 1,162,207 Liabilities Payables C6 1, , ,245 21, ,826 (306) 30,246 Liability to 360 Capital Group - - 7, ,998-44,199-52,197 Provisions , ,479 Borrowings C ,310 8, , ,644 (4,650) 253,248 Interest rate swap at fair value ,262-20, ,183 Benefit Funds policy holders' liability , ,999 Provision for income tax 14,511 1,050 (123) 1,960 (13,345) 4,053 (659) - - 3,394 Deferred tax liability 1,523 (130) - (679) (1,665) (951) 6, ,746 Total liabilities 18,676 1, ,913 31,289 (5,989) 188, , ,590 (4,956) 720,492 Net assets 156,999 5, ,789 16,382 45, ,951-62,479 (2,715) 441,715 te Centuria Capital Group 17

20 C1 Segment balance sheet (continued) Financial year ended 30 June Assets and liabilities Property Funds Management Investment Bonds Management Co- Investments Reverse Mortgages Corporate Operating balance sheet Benefits Funds Controlled Property Funds Eliminations Statutory balance sheet Notes Assets Cash and cash equivalents 11,403 4,451 29,211 1,252 9,417 55,734 9,869 8,779-74,382 Receivables C2 8,809 1,117 2,766 (25) ,342 2, (775) 16,380 Financial assets C ,354 46, , ,271 10,460 (12,812) 535,459 Property investments C , ,100 Other assets ,389 1, ,551 Intangible assets C5 157, , ,663 Total assets 177,999 5, ,331 47,413 11, , , ,228 (13,587) 1,042,535 Liabilities Payables C ,167 1,235 12,542 23, ,825 (775) 33,895 Liability to 360 Capital Group - - 7, ,938-48,518-56,456 Provisions , ,301 Borrowings C7 (6) - 98,125 9, , ,487 (2,650) 236,103 Interest rate swap at fair value ,190-18,190-1,134-19,324 Benefit Funds policy holders' liability , ,014 Provision for income tax 3, (123) 1,720 (2,497) 2, ,171 Deferred tax liability 422 (18) - (1) (2,724) (2,321) 4, ,320 Total liabilities 5,447 1, ,107 30,291 7, , , ,964 (3,425) 700,584 Net assets 172,552 4,468 69,224 17,122 3, ,849-85,264 (10,162) 341,951 te Centuria Capital Group 18

21 Assets and liabilities C2 Receivables 30 June Receivables from related parties (refer to note C2(a)) 7,655 8,896 Other receivables 6,300 7,484 13,955 16,380 The Group does not hold any collateral or other credit enhancements over these balances nor does it have a legal right of offset against any amounts owed by the Group to the counterparty. (a) Receivables from related parties The following amounts were owed by related parties of the Group at the end of the financial period: $ 30 June $ Monthly management fees owing from property funds 2,674,475 2,627,836 Recoverable expenses owing from property funds 407,153 1,016,155 Interest receivable from Centuria Sandgate Road Fund - 305,933 Acquisition fee receivable from Centuria Sandgate Road Fund - 2,125,000 Distribution receivable from Centuria Metropolitan REIT 1,250, ,672 Distribution receivable from Centuria Industrial REIT 2,346,075 1,607,724 Distribution receivable from Centuria Sandgate Road Fund 20,912 - Distribution receivable from Centuria Scarborough House Fund - 26,455 Receivable from Over Fifty Guardian Friendly Society Limited 927, ,360 Distribution receivable from Centuria Diversified Property Fund 29,074-7,655,628 8,896,135 C3 Financial assets 30 June Investments in trusts, shares and other financial instruments at fair value 389, ,497 Investment in related party unit trusts at fair value (refer to Note C3(a)) 218, ,807 Loans receivable from other parties 25,980 - Loans receivable from related parties (refer to Note C3(b)) ,969 Reverse mortgage receivables (i) 28,194 27,675 Reverse mortgages - hedged item fair value adjustment 18,551 18, , ,459 (i) Whilst some mortgages are likely to be repaid during the next 12 months, the Group does not control the repayment date. Centuria Capital Group 19

22 C3 Financial assets (continued) (a) Investments in related party unit trusts carried at fair value through profit or loss The following table details related party investments carried at fair value through profit and loss. Assets and liabilities 30 June Fair value $ Units held Ownership % Fair value $ Units held Ownership % Financial assets held by the Group Centuria Industrial REIT 122,866,577 48,372, ,877,894 33,148, Centuria Metropolitan REIT 66,067,270 27,643, ,858,876 15,481, Centuria Diversified Property Fund 7,581,298 5,574, Centuria Zenith Fund ,050,000 5,000, Centuria Scarborough House Fund 102, ,826-4,365,826 4,622, Centuria SOP Fund ,198,461 3,204, Centuria Woden Green Estate Development Fund 1,252,500 1,252,500-1,252,500 1,252, Centuria ATP Fund , , Centuria 203 Pacific Highway Fund , , Centuria 19 Corporate Drive Fund ,213 76, Centuria 2 Wentworth Street Fund ,000 50, Centuria 8 Central Avenue Fund ,500 25, Centuria Australian Shares Bond 26,350 10, ,260 10, Centuria Balanced Bond 19,451 9, ,254 9, Centuria Growth Bond 20,784 3, Centuria High Growth Bond ,785 10, ,937,056 82,968, ,606,569 63,491, Financial assets held by the Benefit Funds Centuria SOP Fund 935,600 1,000, Centuria 8 Australia Avenue Fund 14,856 1,458, ,562,198 1,458, Centuria Metropolitan REIT 16,821,537 70,383, ,168,321 5,246, Centuria Industrial REIT 2,540,000 1,000,000-2,470,000 1,000, ,311,993 73,841, ,200,519 7,704, ,249, ,810, ,807,088 71,196, Centuria Capital Group 20

23 C3 Financial assets (continued) Assets and liabilities (b) Loans receivable from related parties The following short-term loans were receivable from related parties of the Group at the end of the financial period: $ 30 June $ Centuria Sandgate Road Fund 521,752 10,968,500 C4 Investment properties 30 June Opening balance 257,100 - Acquisition of investment properties - 249,700 Capital improvements and associated costs 4,574 2,232 Make good contributions - (675) Gain/(loss) on fair value (608) 3,630 Change in deferred rent and lease incentives (316) 2,213 Deconsolidation of Havelock House Fund (28,000) - Closing balance^ 232, ,100 ^ The carrying amount of investment properties includes components related to deferred rent, capitalised lease incentives and leasing fees amounting to $9,824,000 (30 June : $10,140,000). Fair value Capitalisation rate Property 31 December June December % 30 June % Most recent independent valuer cap rate Last independent valuation date 31 December valuer 111 St George Terrace, Perth WA 144, , % 7.25% 7.00% 30/11/ Director City Centre Plaza, Rockhampton Qld 46,500 46, % 7.00% 7.00% 30/11/ Director Havelock House, West Perth WA - 28,000 -% 7.00% -% Windsor Marketplace, Windsor NSW 22,250 22, % 6.50% 6.50% 30/11/ Director 441 Murray Street, Perth WA 20,000 18, % 8.00% 8.00% 30/11/ Director Total fair value 232, , % 35.75% 28.50% Centuria Capital Group 21

24 C4 Investment properties (continued) Key estimate and judgements Assets and liabilities (a) Valuation techniques and significant unobservable inputs The fair value of the investment properties were determined by the Directors of the Responsible Entity of the relevant funds or by an external, independent valuation company having an appropriate recognised professional qualification and recent experience in the location and category of the properties being valued. Fair value is based on market values, being the estimated amount for which a property could be exchanged on the date of valuation between a willing buyer and willing seller in an arm s length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion. The valuations were prepared by considering the following valuation methodologies: Capitalisation Approach: the annual net rental income is capitalised at an appropriate market yield to arrive at the property's market value. Appropriate capital adjustments are then made where necessary to reflect the specific cash flow profile and the general characteristics of the property. Discounted Cash Flow Approach: this approach incorporates the estimation of future annual cash flows over a 10 year period by reference to expected rental growth rates, ongoing capital expenditure, terminal sale value and acquisition and disposal costs. The present value of future cash flows is then determined by the application of an appropriate discount rate to derive a net present value for the property. Direct Comparison Approach: this approach identifies comparable sales on a dollar per square metre of lettable area basis and compares the equivalent rates to the property being valued to determine the property's market value. The valuations reflect, when appropriate, the type of tenants actually in occupation or responsible for meeting lease commitments or likely to be in occupation after letting of vacant accommodation and the market s general perception of their credit-worthiness; the allocation of maintenance and insurance responsibilities between the lessor and lessee; and the remaining economic life of the property. It has been assumed that whenever rent reviews or lease renewals are pending with anticipated reversionary increases, all notices and, where appropriate, counter notices have been served validly and within the appropriate time. The most significant unobservable input used in the above valuation techniques and its relationship with fair value measurement is the capitalisation rate. The higher/lower the rate, the lower/higher fair value. (b) Fair value measurement The fair value measurement of investment properties has been categorised as a Level 3 fair value as it is derived from valuation techniques that include inputs that are not based on observable market data (unobservable inputs). Centuria Capital Group 22

25 C5 Intangible assets Assets and liabilities 30 June Goodwill 65,535 65,535 Indefinite life management rights 92,128 92, , , June Balance at the beginning of the period 157,663 53,025 Acquired goodwill - 12,510 Acquired management rights - 92, , ,663 Goodwill and management rights are solely attributable to the Property Funds Management cash generating unit with recoverability determined by a value in use calculation using profit and loss projections covering a five year period, with a terminal value determined after five years. C6 Payables 30 June Sundry creditors (i) 12,287 15,322 Dividend/distribution payable 13,008 12,351 Accrued expenses 4,951 6,222 30,246 33,895 (i) Sundry creditors are non-interest bearing liabilities and are payable on commercial terms of 7 to 60 days. C7 Borrowings 30 June Fixed rate secured notes (refer to Note C7(a)) 83,000 60,000 Floating rate secured notes (refer to Note C7(a)) 40,000 40,000 Reverse mortgage bill facilities and notes (refer to Note C7(c)) 8,944 9,147 Bank loans in Controlled Property Funds (refer to Note C7(d)) 120, ,837 Borrowing costs capitalised (1,690) (1,881) Other loans 2, , ,103 The terms and conditions relating to the above facilities are set out below. Centuria Capital Group 23

26 Assets and liabilities C7 Borrowings (continued) (a) Secured notes The Group issued Tranche 1 of secured corporate notes to the value of $100,000,000 on 21 April. This consisted of an issue of $40,000,000 floating rate secured notes and $60,000,000 7% fixed rate secured notes. The Group issued Tranche 2 to the value of $23,000,000 7% fixed rate secured notes on 11 September. These notes mature on 21 April 2021 and are secured against assets within certain subsidiaries of the Group. (b) Corporate facility (secured) The Group has a multi option facility with National Australia Bank. The facility limit is $30,500,000, maturing 28 February June Total facility available 30,500 30,500 Bank guarantee utilised 1 (532) (8,032) Unused facility available at the end of the period 29,968 22,468 1 Bank guarantee is not included in the borrowings note above (c) Reverse mortgage bill facilities and notes (secured) As at, the Group had $8,943,624 (30 June : $9,146,855) non-recourse notes on issue to ANZ Bank, secured over the remaining reverse mortgages held in Senex Warehouse Trust No.1 (a subsidiary of the Group) currently due to mature on 30 September The facility limit is $10,000,000 (30 June : $15,000,000) and is reassessed every 6 to 12 months with a view to reducing the facility in line with the reduction in the reverse mortgage book. Under the facility agreement, surplus funds (being mortgages repaid (including interest) less taxes, administration expenses and any hedge payments) are required to be applied against the facility each month. 30 June Facility Limit 10,000 15,000 Amount used at reporting date (8,944) (9,147) Amount unused at reporting date 1,056 5,853 Centuria Capital Group 24

27 C7 Borrowings (continued) Assets and liabilities (d) Bank Loans - Controlled Property Funds (secured) Each controlled property fund has debt facilities secured by first mortgage over each of the fund s investment property and a first ranking fixed and floating charge over all assets of each of the funds. Details of the amounts drawn and the maturity of each facility are as follows: Fund Current/ non-current classification Maturity date Facility limit Funds available Draw Borrowing down costs Draw down Centuria 111 St Georges Terrace Fund Non-current 30 June ,500 7,420 74,080 (129) 73,951 Centuria Retail Fund Current 30 June ,400 1,823 35,577 (38) 35,539 Centuria 441 Murray Street Fund Current 30 June , ,561 (57) 11, ,900 9, ,218 (224) 120, June Centuria 111 St Georges Terrace Fund Non-current 30 June ,500 10,839 70,661 (128) 70,533 Centuria Retail Fund Current 30 June ,400 1,823 35,577 (76) 35,501 Centuria Havelock House Fund Current 31 May ,000 1,000 12,000 (14) 11,986 Centuria 441 Murray Street Fund Current 30 June ,000 1,159 10,841 (24) 10, ,900 14, ,079 (242) 128,837 C8 Contributed equity Centuria Capital Limited 30 June No. of No. of securities securities Balance at beginning of the period 229,815,736 77,323 76,631,699 88,058 Equity based payment 875, , Return of capital reinvested in CCF (39,205) Stapled securities issued 74,102,037 21, ,621,003 28,826 Cost of equity raising - (818) - (712) Balance at end of period 304,793,174 98, ,815,736 77,323 Centuria Capital Fund (non-controlling interests) 30 June No. of No. of securities securities Balance at beginning of the period 229,815, , Equity based payment 875, Stapling dividend and return of capital reinvested ,194,733 52,536 Stapled securities issued 74,102,037 77, ,621, ,174 Cost of equity raising - (2,875) - (6,038) Balance at end of the period 304,793, , ,815, ,672 Fully paid ordinary securities carry one vote per security and carry the right to distributions. On 29 June, the Group issued 20,098,470 options to subscribe for stapled securities. The options have an exercise price of $1.30 per stapled security and expire on 29 June Centuria Capital Group 25

28 C9 Commitments and contingencies Assets and liabilities (a) Commitments As at the, Group had a capital commitment of $77,220,000. This related to an unconditional put and call option agreement regarding a 50% interest in 201 Pacific Highway, St Leonards. The put option has a settlement date of 10 June (b) Contingencies The Group has bank guarantees of $532,304 for commercial leases with respect to its Sydney and Melbourne office premises. The above guarantees are issued in respect of the Group and do not constitute an additional liability to those already existing in interest bearing liabilities on the statement of financial position. Centuria Capital Group 26

29 D Cash flows D1 Operating segment cash flows (i) For the half year ended 2016 Cash flows from operating activities Management fees received 56,840 23,819 Distributions received 5,631 1,101 Interest received Other income received Payments to suppliers and employees (24,659) (13,732) Income tax paid (6,670) (2,276) Interest paid (4,116) (835) Net cash provided by operating activities 28,196 8,348 Cash flows from investing activities Proceeds from sale of related party investments 47,167 - Proceeds from sale of investments - 40,387 Cash balance on acquisition of subsidiaries - 10,671 Repayment of loans by related parties 2,000 7,072 Collections from reverse mortgage holders Purchase of investments in related parties (97,732) - Purchase of other investments (52,723) (6,721) Payments for plant and equipment (213) - Loans provided to other parties (25,980) - Loans to related parties for purchase of properties - (3,616) Net cash (used in)/provided by investing activities (126,769) 48,117 Cash flows from financing activities Proceeds from issue of securities 98,639 - Proceeds from borrowings 27,375 - Repayment of borrowings (203) (26,961) Equity raising costs paid (3,692) (1,470) Distributions paid (11,814) (2,315) Capitalised borrowing costs paid (441) - Net cash provided by/(used in) financing activities 109,864 (30,746) Net increase in operating cash and cash equivalents 11,291 25,719 Cash and cash equivalents at the beginning of the period 55,734 12,948 Cash and cash equivalents at the end of the period 67,025 38,667 (i) The operating segment cash flows support the segment note disclosures of the Centuria Capital Limited and provide details in relation to the Operating Segment cash flows performance of the Group. The Operating Segment cash flows exclude the impact of cash flows attributable to Benefit Funds and Controlled Property Funds. Refer to page 10 of the consolidated interim financial statements for the full statutory cash flow statement of the Group. Centuria Capital Group 27