ANNUAL FINANCIAL REPORT & SUSTAINABILITY REPORT 2017

Transcription

1 ANNUAL FINANCIAL REPORT & SUSTAINABILITY REPORT ANNUAL FINANCIAL REPORT Select Encompass Credit Union Ltd A.C.N Incorporated in Australia AFSL and Australian Credit License number Registered Office: 59 Buckingham St SURRY HILLS NSW 2010 Telephone Number:

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3 1 CONTENTS SUSTAINABILITY REPORT 2-20 (THE SUSTAINABILITY REPORT DOES NOT FORM PART OF THE ANNUAL FINANCIAL REPORT) ANNUAL FINANCIAL REPORT 21-68

4 2 CONTENTS Sustainability Report Sustainability & Select Encompass Credit Union Ltd 3 Introduction 3 About Select Encompass 4 Financial Year /17 Highlights 5 Financial Year /18 Goals 6 Financial Year /18 Challenges 6 Stakeholders 7 Select Encompass stakeholders 7 Focusing the report content 7 Members 8 Member satisfaction 8 Attracting a younger member base 8 Retaining existing members 8 Improved product transparency 8 Governance 9 Operating principles 9 Responsible lending 9 Compliance and breaches 9 Managing the risk of fraud 10 Remuneration policies 10 People 11 Employee training 11 Flexible working arrangements 11 Employee satisfaction 11 Risk Culture 12 Gender Equality 12 Women in Mutuals 12 Wellbeing of Employees 12 Languages Spoken 12 English dialects spoken 12 Community 13 Australian Mutuals Foundation 13 Employee Volunteering 14 Environment 14 Electronic service delivery 14 Climate risk 14 Suppliers 15 Major suppliers co-operatively owned 15 Australian sourcing 15 GRI Index 16

5 SUSTAINABILITY & SELECT ENCOMPASS CREDIT UNION LTD 3 Introduction Select Encompass Credit Union Ltd is an Approved Deposit-taking Institution that is regulated by the Australian Prudential Regulation Authority (APRA) under the Banking Act. Select Encompass is also a mutual, that is, an autonomous association of persons united voluntarily to meet their common economic needs and aspirations through a jointly-owned and democratically-controlled enterprise. Select Encompass aims to be its members first choice for the provision of financial services. All of Select Encompass activities are designed to enhance the financial well-being of members. Like all credit unions, Select Encompass provides members with a secure place to save and a source of reasonably priced credit. Select Encompass also has a social mission to teach members about the value of regular savings and the wise use of credit. By pooling resources members help themselves and each other to achieve economic and social advancement. Whereas the recent financial fad known as P2P (peer to peer lending) depends on institutional investors, credit unions can be considered as the original peer to peer lenders, with Select Encompass aggregating member to member lending since More generally, Select Encompass remains highly regulated within a sound Australian banking system. The prudential regulator APRA ensures that regulated institutions are safe and sound so that like all banks, Select Encompass provides deposit facilities that are government guaranteed up to $250,000. Select Encompass has continued to provide high levels of customer service as measured by a biennial member survey. The first post-merger survey revealed that 84% of members are satisfied or very satisfied with Select Encompass products and services. It is the view of the Board and management that Select Encompass operates and acts in a responsible and ethical way. This claim may be justified since: Members are customers and equal owners of Select Encompass; Select Encompass provides banking services for human and social needs, as opposed to corporate speculative gain; Select Encompass is 100% Australian owned and operated; Select Encompass does not offshore employees or business activities; Select Encompass does not invest in fossil fuels, gambling, armaments, persistent chemicals, animal testing; Select Encompass supports socially responsible activities (both domestically and internationally). This is Select Encompass first post-merger sustainability report and it shows that Select Encompass business approach and operations aligns products and services with stakeholder expectations to add economic, environmental and social value. Select Encompass is not seeking to be a leader in sustainable business practices nor does Select Encompass seek to be compared to other businesses. We simply want to show that Select Encompass is an organisation with methods of operation and employment practices that are effected responsibly. At this time, Select Encompass has chosen not to strictly align with the Global Reporting Initiative (GRI) G4 reporting framework, but has looked to align with many of its disclosure requirements, so as to capture and communicate important information to our stakeholders. We hope that by explaining Select Encompass sustainable business practices we both inform members as to how we conduct our operations and deliver our services, and also look to attract potential members whose values and interests align with our own. We are proud of the fact that we always strive to do the right thing, by complying with laws and acting honestly and openly in all that we do. Eric Priestley Chair of the Board Mark Worthington Chief Executive Officer

6 4 About Select Encompass Select Encompass is a community-based banking organisation that values its members and puts their interests first. Select Encompass Credit Union has been providing quality banking, loan and investment services to the community since Select Encompass offers all the traditional banking products and services that members have come to expect, whilst keeping up to date with the latest technological advances in banking. These principles have ensured that members continue to benefit from an ever changing banking environment whilst being offered the best possible service. The benefit derived from belonging to a mutual banking organisation is in equally sharing in the success of the organisation through competitive rates, minimal fees and exceptional customer service. Unlike a major bank, Select Encompass is not a publicly listed company and as such does not have a primary financial aim of providing dividends to shareholders. This differentiating factor is another benefit of belonging to a mutual and clearly highlights the objective of increasing the value offered to members and their local communities. From a governance perspective once you re a member you are entitled to an equal say in the running of Select Encompass. You have a right to vote at the Annual General Meeting and to elect the Board of Directors - subject to qualification, you can even be a director. At Select Encompass, we have taken our corporate social responsibility to a new level, something we are very proud of. This includes tailoring products and services to assist in the financial education and growth of the youth and young adult sector, facilitating community initiatives in the local areas surrounding our branches, donating to Barnardos to look after disadvantaged or neglected children, as well as upholding our international social responsibility with the direct support of credit union development projects in Laos, Myanmar, and Bhutan. Select Encompass understands that we all play a part in preserving our environment and we look forward to continually improving our environmental efforts whilst maintaining our position as our members preferred banking institution. Select Encompass was formed as a result of a merger between Select and Encompass credit unions. Encompass Credit Union can trace its origins back to 1953 with the formation of the Motor Transport Employees Savings & Loans Co-op. Select originated in 1963 to provide financial services to employees of the Sydney County Council and members of the Municipal Employees Union. Today, Select Encompass is a result of joint ventures in twenty-one credit unions coming together over the past 64 years. Access NSW Employees CU Brisbane Waters County Council Employees CU Chullora Omnibus Employees CU Coopers Credit Union CSR & Rinker Employees CU Dairy Farmers Credit Union Encompass Credit Union Government Transport Credit Union Kingsgrove Bus Depot Employees CU Memberfirst Credit Union Motor Transport Employees CU Orion Credit Union Railways Staff Credit Union Raleigh Park Employees CU Ryde Omnibus Employees CU Select Credit Union St George County Council Employees CU Sydney County Council Employees CU Tartan Credit Union Waverley Bus Depot Employees CU Waverley Bus Depot Employees CU Willoughby Omnibus Employees CU

7 5 As at June Select Encompass has 30,208 members and $627.5m in assets. Select Encompass employs 77 people, 20 of whom work permanent part-time, and the full-time equivalent number of employees is Select Encompass has an administration office at Surry Hills, and ten branches located at Chippendale (Central Station), Chullora, Gosford, Gymea, Hamilton, Homebush, Merrylands, North Ryde, Parramatta, & Revesby. Select Encompass 77 employees 30,208 members $627.5m assets 20 permanent part-time Financial Year /17 Highlights The launching of mobile contactless payment apps Samsung Pay and Apple Pay to complement Android Pay, as well as the introduction of website Live Chat. Expanding the branch network to ten branches across Sydney, Gosford and Newcastle. This member access improvement was due to the successful merger and integration of 77 employees and 8 directors into one cohesive and member focused mutual financial organisation. Increasing total assets by $14.7m to $627.5m. Achieving industry average return on assets for similar sized mutuals (before merger related expenses of $777k). Profit after income tax was $1.447m. The launch of the Australian Mutuals Foundation (AMF). The AMF is a registered charity with three objectives: To support Australian children and youth who are at risk of abuse or neglect, or who are disadvantaged in terms of housing, medical care or education (these activities will be conducted through a partnership with Barnardos) To assist remote and disadvantaged communities in impoverished South East Asian and South Pacific countries to alleviate poverty through the creation of sustainable financial cooperatives (these activities will be conducted through a partnership with the Asian Confederation of Credit Unions) To provide a mechanism for members of cooperatives and mutuals, and the general public, to make donations to those affected by natural disasters Canstar 5 Star Outstanding Value awards for: Credit Card Low Rate Owner Occupied Fixed Home Loan Line of Credit Investor Variable Home Loan Investor Fixed Home Loan Savings Account Transaction Account

8 6 Financial Year /18 Goals Financial Year /18 Challenges Select Encompass first considered the desirability of mutual bank status in 2012 when consumer surveys showed that non-members do not understand the words credit union, while everyone over the age of six understands the word bank. Since that time achieving mutual bank status has been a strategic objective. In preparation for bank status Select Encompass became the smallest ADI in Australia to set up a Reserve Bank of Australia (RBA) repo-eligible internal securitisation, and Select Encompass is currently in the process of setting up an RBA Exchange Settlement Account. The 1 July merger provided for Select Encompass to meet the minimum capital requirement set by APRA. It is anticipated that, subject to member and regulatory approvals, Select Encompass will convert to mutual bank status on 1 January 2018, or such other date as approved by APRA. The Annual General Meeting is scheduled for 13 December, and will consider the name change special resolution. The member notice and explanatory notes will be sent to members by 20 November. The Capital Adequacy Ratio is considered to be the most important strength/soundness measure for any banking institution. With a capital ratio in excess of 25%, Select Encompass is one of the most well capitalised banking institutions in Australia. An ongoing strategic goal is to be our members first choice for the provision of financial services. The culture of People Helping People, profits remaining with the members, community participation, corporate social responsibility, and support of core industry groups have been and will continue to be strategic goals for Select Encompass. The banking industry regulator the Australian Prudential Regulation Authority (APRA) has noted that the environment of heightened risk that has prevailed for the past few years has not lessened: the environment remains one of high housing prices, high and rising household indebtedness, subdued household income growth, historically low interest rates and strong competitive pressures. APRA has therefore concluded that further steps to address risks that continue to build within the mortgage lending market are appropriate. APRA s measures have included a 10% per annum investment purpose mortgage loan growth benchmark. Whilst maintaining high credit acceptance standards, Select Encompass exceeded the growth benchmark during the year. In order to comply with APRA s measure, Select Encompass decided to cease acceptance of all investment purpose mortgage loan applications from May. It is anticipated that acceptance of such loans may recommence from March The biennial member survey revealed a decreased level of satisfaction particularly from former Encompass members. The merger made changing the BSB (Bank State Branch) number, moving (from S2, S3 type) sub account identifiers to industry standard xref bank account numbers, and changing 922 duplicated member numbers necessary. However these necessary changes were important factors affecting satisfaction. Select Encompass will communicate the benefits of the changes, as well as post merger improvements to products and pricing in order to regain member satisfaction. Select Encompass has a vibrant and interactive membership of 30,208. However the average age of members is over 53. Select Encompass is determined to maintain existing members and be more attractive to younger members by becoming a mutual bank, acting socially responsibly, and providing age-relevant products and services. Select Encompass smaller asset size means that fixed costs (in information technology and transaction access, employees, and regulatory responses, for example), can form a greater proportion of overall operating costs when compared to larger organisations. Select Encompass will pursue economies of scale, including through mergers, in order to defray increasing fixed costs.

9 7 STAKEHOLDERS Government & Regulatory Bodies Select Encompass Members Suppliers Members Stakeholders Banking Industry Employees & Contractors Other Mutuals People and the Environment Family and Friends The majority of Select Encompass interactions with its stakeholders occur on a daily basis through relationships between members and Select Encompass employees and managers, and business service providers. The service providers include Credit Union Services Corporation (Australia) Ltd (CUSCAL), the Customer Owned Banking Association, the Business Council of Cooperatives and Mutuals, Ultradata, and Transaction Solutions (TAS). Focusing the report content Identifying the aspects of operations that are most important to Select Encompass and its stakeholders has enabled us to focus the content this report. The materiality approach was based on AccountAbility s AA1000 principles and informed by its 5-part materiality test as well as the GRI s Reporting Principles for Defining Report Content. To identify the material aspects, we collected and reviewed a range of internal and external information across a range of sources (internal documents, media, peer reports, and recent stakeholder engagement) to identify aspects of relevance to Select Encompass over the past few years. An internal workshop was originally conducted with key personnel to review these aspects, identify additional aspects of interest and finally prioritise these aspects in terms of their interest to stakeholders and their importance to the business. On this basis a concise and focused list of material aspects was developed to respond to in this report. Report section Members Governance People Community Environment Suppliers Material aspect Member satisfaction Attracting a younger member base Retaining existing members Improved product transparency Governance and risk framework Responsible lending Compliance and breaches Managing the risk of fraud Remuneration policies Employee training Flexible working arrangements Employee satisfaction Risk culture Gender equality Women in mutuals Wellbeing of employees Community investment Australian Mutuals Foundation Ltd Employee volunteering Electronic service delivery Climate risk Major suppliers co-operatively owned Australian sourcing

10 8 MEMBERS Member satisfaction Mutually-owned organisations such as Select Encompass are based on their membership, and without satisfied and well-served members we wouldn t exist. Maintaining member satisfaction is of the highest importance. Every two years Select Encompass engages Derham Marketing Research, an independent customer research company to survey members. By analysing the results Select Encompass is able to understand what we do well and what we can improve upon. For the previous three biennial surveys Select Encompass has achieved an overall satisfaction rating of 93%. For however, the satisfaction rating slipped to 84%. This rating was affected by a number of factors affecting former Encompass members. The merger was structured such that Select Credit Union transferred its business to Encompass Credit Union. However, from a software perspective it was assessed as optimal for the Encompass members to be converted to the Select core banking system. This was because the Select system was a later release using industry standard bank account xref numbers (instead of sub account identifiers such as S2, S4, S6 etc.), and Select was already using its own independent BSB number The Encompass BSB is owned by Cuscal. All Encompass members were inconvenienced by the change to xref account numbers, and by the change in BSB number. Further, 922 Encompass members whose member numbers were duplicated, had their member numbers changed by the addition of a 9000 prefix. Select Encompass will communicate the benefits of these changes, as well as post-merger improvements to products and pricing in order to regain member satisfaction. Attracting a younger member base Historically, credit unions were formed by people who had a common bond (for example employees of a particular industry or company, or living in a particular geographic area). For Select Encompass the predominant common bonds were employment in the transport or energy industries. Over the past ten years though, mergers have expanded the member base to include members of the CSR & Rinker Employees Credit Union, MemberFirst Credit Union (including Dairy Farmers Credit Union), and employees of 3M Australia from Tartan Credit Union. As Select Encompass membership ages (the average age is currently 53) it is important to attract younger members in order to maintain long-term business sustainability and growth. First Home Buyer s Loan a special variable rate for the first two years of the loan with mortgage preparation fee and standard valuation costs waived; Mobile contactless payments apps Android Pay, Apple Pay, and Samsung pay; and A smartphone app that includes balance and transaction information, BPAY and third party transfers. Retaining existing members Select Encompass has a focus on keeping up with new technology and attracting a younger member base, however properly servicing and maintaining existing members is a higher priority, as it is the existing members who continue to contribute to the strength of the organisation. Edvest Term Deposits higher interest rate for members aged over 50 Retirement planning the partnership with Bridges enables the provision of financial advice for members approaching retirement The call centre is the main resource so that existing members can best take advantage of our online presence. Whilst we hope to empower existing members to feel confident using online services there is a branch network and call centre for those who prefer to interact with customer service representatives one on one. Improved product transparency Product transparency enables members and potential members to fully understand the benefits and any limitations of the financial products and services offered. To improve product transparency, Select Encompass applies prudential legislation and obligations relevant to each product or service, and describes its products in concise, simple to understand language. Select Encompass also compares its transparency to similar products available in the market. Employees are trained in all products and services and are made aware of any relevant changes as products evolve or are added, ensuring that members are always properly informed. Over the past twelve months Select Encompass has been able to enhance its communication with members via and printed newsletters. We look at ways to better implement e-communication with members, and try to ensure that members are receiving the information that is of interest to them. All marketing material is reviewed and approved before publication so as to comply with relevant legal and product disclosure requirements. Select Encompass has launched several new products that align with the needs of younger members: Kickstart saver account (offering 5% pa on savings up to $5,000 for under 18s); Family Helper Home Loan parents can use the equity in their home to assist their children;

11 9 GOVERNANCE Operating principles Select Encompass Credit Union Ltd (SECUL) is an Authorised Deposittaking Institution (ADI) regulated by the Australian Prudential Regulation Authority (APRA) under the Banking Act, and regulated by the Australian Securities and Investments Commission (ASIC) under the Corporations Act. Select Encompass abides by the World Council of Credit Unions International Operating Principles: Democratic Structure Open and Voluntary Membership Democratic Control Non-Discrimination Service to Members Distribution to Members Building Financial Stability Service to Members Social Goals On-Going Education Co-operation among Co-operatives Social Responsibility Select Encompass governance and risk framework Select Encompass governance and risk framework ensures that Select Encompass is controlled and managed in a sound and responsible manner by a competent board of directors. The directors are elected by the membership at the Annual General Meeting and directors are only eligible for election if they are deemed Fit & Proper ( Fit meaning that directors have the requisite skills and experience, and Proper meaning that they are persons of honesty and integrity). Board nominees must be recommended after being interviewed by Select Encompass Director Nominations Committee. Select Encompass Corporate Code of Conduct contains policies concerning the acceptance of gifts, conflicts of interest, non-work related activities, confidentiality, and workplace behaviour. The board of directors has created three committees in order to more effectively manage corporate and regulatory responsibilities. These committees are: Select Encompass also conducts annual strategic and business planning in order to analyse performance against short and long term goals and to assess relevant risks. Annual financial budgets are prepared that take into account realistic projections of growth and profitability based on assessment of the economic environment. There have been no reported instances of misconduct in relation to governance at Select Encompass during the year. Responsible lending Even before the introduction of responsible lending legislation, Select Encompass considers that it has always been a responsible lender. Select Encompass has always ensured that borrowing members have the capacity to make their loan repayments. As far as we can ascertain, Select Encompass has only made eight property foreclosures since 1953, and there were no foreclosures during the /17 financial year. All frontline employees at Select Encompass must complete 20 hours of continuing professional development through the Australian College of Commerce and Management. At Select Encompass our lending policies follow the guidelines set out by ASIC under The National Consumer Credit Protection Act. This Act formalised responsible lending guidelines and ensures that documents include adequate disclosures, that forms are correctly completed, and that proper serviceability calculations are used to assess loan affordability. Compliance and breaches Select Encompass management, employees and Board are made aware of changes to regulatory or other legislative requirements by subscribing to: The Customer Owned Banking Association (COBA) whose legal department produces compliance bulletins, compliance manuals, and training modules DB Legal for legal advice and guidance Protecht as collators of an industry risk incident database And by: Attending industry forums and conferences Employees attending general job specific training courses While being confident that Select Encompass is aware of all compliance requirements, comprehensive audits have revealed five non-reportable breaches during the /17 year. Governance & Remuneration Committee Audit Committee Risk Committee

12 10 Managing the risk of fraud Select Encompass has comprehensive internal and external fraud policies and procedures to minimise the risk of fraud. Whilst there were no instances of internal fraud during the year, external fraud in the form of internet banking fraud, and Visa card and ATM fraud totalled $27,644. While some fraud events such as card skimming can be beyond Select Encompass control, subscription to Cuscal s 24/7 Vigil card transaction monitoring system has reduced exposure to card and ATM fraud. Select Encompass Internal Audit function is responsible for assessing key areas of operations that could be targets for internal fraud. The Internal Auditor ensures that the relevant policies and procedures are adhered to, including the use of personal accounts, internet banking, electronic funds transfers, expense payments, and the placement of corporate investments. Select Encompass mitigates the risk that the remuneration of executive managers may conflict with the objectives of the policy by: limiting the performance component of an individual s remuneration to 10% of their base salary (maximum of 2.5% was paid during /17); making the payment of any performance based component of remuneration entirely discretionary by Select Encompass; and not considering the payment of any discretionary remuneration until the end of the relevant financial year. No contracts with business partners were terminated due to fraud, and no legal cases of fraud were brought against Select Encompass or its employees. Remuneration policies Select Encompass employees are covered by an Enterprise Bargaining Agreement negotiated with the Finance Sector Union. Select Encompass does not impose any restrictions on employees regarding freedom of association. The objective of management remuneration policies is to ensure that Select Encompass complies with Prudential Standards and that performance based components of remuneration: encourage behaviour that supports Select Encompass long-term financial soundness and its risk management framework. align with prudent risk-taking and incorporate adjustments to reflect: o o o the outcomes of business activities; the risks of business activities including, where relevant, the cost of the associated capital; and the time necessary for the outcomes of business activities to be reliably measured do not compromise the independence of risk and financial control personnel.

13 11 PEOPLE Employees are Select Encompass most important asset. As the foundation of a successful mutual, Select Encompass aims to meet employee needs by providing a safe, friendly and flexible work environment. Select Encompass genuinely cares about its people, and attracts and retains high-quality employees with flexible work arrangements, above award remuneration and attractive employee benefits. With 77 employees (64.75 full time equivalent), opportunities for promotion at Select Encompass can be limited, however during the year, the Loans Manager and IT Manager positions were filled by internal promotion. Select Encompass provides learning opportunities for employees to continue their education, develop their skill sets, adapt to changes within a competitive banking environment and perform their roles with confidence. Employee training Select Encompass provides a wide range of training opportunities from the beginning of employment. During the /17 year, employees participated in 1,163 hours of continuing professional development. Front line employees (as mentioned under Responsible Lending) are required to undertake 20 hours each of Continuing Professional Development through the Australian College of Commerce and Management to ensure they are up to date with the continually changing industry requirements and standards. All new employees participate in an induction and orientation program to assist with familiarisation with company policies and Work Health and Safety practices. This is followed by an ongoing learning environment that focuses on compliance, and products and systems (with one-to-one training), external courses, and online industry specific learning modules. Managers look to enhance their people management skills to ensure they are capable of fulfilling their leadership and mentoring responsibilities, and all employees are provided the opportunity to undertake further industry-related study. Select Encompass Human Resources Policy provides that the cost of any approved course or degree that is completed successfully will be reimbursed by Select Encompass. Business Continuity Plan (BCP) tests are conducted annually. Managers, supervisors, and some branch staff participate in this testing process, which is designed to ensure that Select Encompass can continue to serve its members in the event of a major disaster or disruption to the business. Select Encompass consciously hires younger trainees, in turn paving the way for career opportunities and providing a solid foundation for future careers. Employees are encouraged to attend relevant conferences and other industry specific events to improve engagement and interest in the industry and in turn their roles within Select Encompass. Employees are encouraged to participate and to use their expertise to help deliver on the strategic plan and thus contribute to Select Encompass long term future. Emerging leaders within the company are identified and invited to apply for the COBA (Customer Owned Banking Association) Emerging Leader Program. The Emerging Leader Program each year equips future leaders in the customer owned banking sector with leadership and industry insights to support the continued growth of mutual banks, credit unions and the industry as a whole. Through an arrangement organised by the Australian Mutuals Foundation (AMF), two young employees attended a co-operative development education program run by the Asian Confederation of Credit Unions in Thailand. The attendees were generously sponsored by Allianz Insurance. Participation in this international program provides an invaluable and unique experience for deserving Select Encompass employees. Flexible working arrangements To provide an optimum work environment, Select Encompass can offer alternative working arrangements including flexible hours to assist employees with family or other commitments, commuting during peak time, and part-time employment. Employees with over 30 days of accrued annual leave are encouraged by their manager to take leave in the interests of their health and well-being. Select Encompass also has a record of providing casual work or part-time hours for employees seeking a more gradual transition to retirement. Employee satisfaction All employees participate in an annual performance review regardless of the position they hold. This is considered an opportunity for employees to identify their strengths and their professional development needs, as well as to discuss career aspirations. Employees are regularly informed of any changes in the business and are made aware of key decisions that may affect them. As part of the organisational culture, feedback to management from employees is always encouraged and employees can comfortably communicate with managers or supervisors on any issues. Select Encompass recently conducted an employee survey and 61 of 77 full and part-time employees voluntarily responded. The survey realised the following general observations: 100% of respondents understand how their work directly contributes to the overall success of Select Encompass 98% are motivated to see Select Encompass succeed 97% agree that Select Encompass is focused on the needs of members 97% are satisfied or very satisfied with working at Select Encompass

14 12 97% agree that Select Encompass has very high standards of service 95% are proud to work at Select Encompass 93% respond that they are treated fairly and with respect by their manager However, 23% think that favouritism is sometimes an issue with regard to performance assessments and salaries 15% respond that the CEO and executive managers do not communicate well with the rest of the organisation 15% respond that their job does not allow the flexibility needed to balance work and family/personal life Risk Culture Select Encompass assesses risk culture annually to identify employee attitudes towards the development and effective operation of the risk management framework. The August survey identified the following key themes: Over 94% of respondents felt that Select Encompass and its management set clear standards (in terms of honesty & integrity, confidentiality, conflicts of interest, acceptance of gifts, workplace behaviour and drug and alcohol use) for the behaviour expected of all employees, with 6% unsure; No employees felt that the reporting of issues and incidents would have a direct consequence on them; 100% of employees were aware of the key risks their departments face. There were some opportunities for improvement, as: 36% of employees felt that only sometimes their opinions count (4% said that their opinions don t count); and 15% of employees felt procedures were not detailed enough to assist them in their role. Select Encompass management will work together with employees in an effort to improve the risk culture over time. Gender Equality The Australian Institute of Company Directors has a target of 30% female board representation for ASX200 companies. As at 30 June, three of the eight Select Encompass Board directors are women (37.5%). Excluding the CEO, two of the four Executive Managers are women. Women in Mutuals The organisation Women in Mutuals (WIM) is currently headed voluntarily by Select Encompass Executive Manager - Sales and Lending Louise Aubusson. WIM is a network of employees in the mutual industry with a desire to enhance knowledge, create an environment for worthwhile discussions and advance the standing of women in the industry. WIM aims to facilitate interaction and organise activities that support peer discussion and collaboration. Female employees at Select Encompass are encouraged to attend relevant WIM mutual events to be inspired by, network with, and learn from leading women in the mutual industry. Wellbeing of Employees The wellbeing of Select Encompass employees is a priority. Healthy and happy employees are more efficient, productive and better team players. Employees are encouraged to go home on time, to avoid working overtime, and to manage their stress levels and to take their full allocated breaks throughout the day. Employees are also encouraged to seek counselling and support if they need emotional support or guidance, even if the matter is not related to work. Ergonomic sit/stand desks have been provided to employees at the Surry Hills head office to support wellbeing, back health and correct posture, and filtered water is provided throughout head office. The roof of the Surry Hills head office has a common area tennis court and head office employees are encouraged to voluntarily play a game (in their lunch break) as a weekly team sport exercise. Languages spoken Chinese, Filipino, French, German, Hindi, Italian, Macedonian, Samoan, Spanish, Turkish, Vietnamese. English dialects understood Broken Hill, Country Victoria, Dubbo, Gold Coast, Kiwi, Lake Macquarie, Melbourne, Scouse, South East (UK), Sydney North South East & West, West Wyalong, Yass.

15 13 COMMUNITY During /17 Select Encompass participated in, and/or directly financially contributed to a number of important causes in our communities The Tartan Science Education Program 20 member nominated schools were awarded $500 each to support a science education initiative Fun4kids Day Select Encompass employees attend and assist the Fun4Kids Day held in the Holroyd district Ausgrid Family Day/Christmas Party Silverwater Select Encompass provides a donation to this annual family day Bargoed House each year Select Encompass attends the Bargoed House Christmas Picnic held for the children of Ausgrid members, and sponsors the raffle and lucky door prize Bankstown Netball Association sponsorship of all under 10s teams player of the week award as well as contributing to the purchase of netball equipment Barnardos Special Needs Children s Christmas Party Select Encompass organises bus transport and individual employees volunteer so that neglected/disadvantaged children can attend the Barnardos Special Needs Christmas Party Barnardos Peter-Pan Op Shop Select Encompass employees volunteered to assist Barnardos with op-shop fundraising Some employees make a fortnightly contribution towards Barnardos gift giving Revesby South Fundraisers Select Encompass provided support to the P&C of Revesby South Public School Gymea Village Fair Select Encompass participates each year Barnados Jamberoo Christmas Picnic and Easter Picnic, we donate for lunch and Select Encompass employees have attended the Jamberoo event in the past Select Encompass supported Harmony Day and RU Ok Day Tracksafe Select Encompass donates to TrackSAFE as a registered charity established to reduce injuries and fatalities on the rail network. Australian Mutuals Foundation As part of Select Encompass commitment to social responsibility and in support of the ideals that the mutual industry was built upon, Select Encompass is very proud to have established and launched the Australian Mutuals Foundation (AMF) in. The AMF is a registered charity with the Australian Charities and Notfor-profits Commission, and has immediately become one of the top ten corporate donors to Barnardos. The AMF has three objectives: To support Australian children and youth who are at risk of abuse or neglect, or who are disadvantaged in terms of housing, medical care or education (these activities will be conducted through a partnership with Barnardos) To assist remote and disadvantaged communities in impoverished South East Asian and South Pacific countries to alleviate poverty through the creation of sustainable financial cooperatives (these activities will be conducted through a partnership with the Asian Confederation of Credit Unions) To provide a mechanism for members of cooperatives and mutuals, and the general public, to make donations to those affected by natural disasters. Imperial Centre Gosford annual Christmas event Select Encompass participated in this event providing giveaways and promoted the benefits of banking for children and youth

16 14 ENVIRONMENT Select Encompass Credit Union may donate up to 5% of its annual profit to the AMF. It is anticipated that other mutuals and individuals will also make donations. During /17 Select Encompass donated $105,000 to the Australian Mutuals Foundation. Employee Volunteering Select Encompass employees are encouraged to volunteer their time to support approved causes and/or assist with fundraising for organisations associated with Select Encompass. Through Select Encompass work with Barnardos, employees have opportunities to volunteer (while being paid by Select Encompass) at fundraising events such as the annual Special Needs Children s Christmas event, or the secondhand clothing pop-up shop in the CBD. Employees also represent Select Encompass and the Australian Mutuals Foundation at the Barnardos Mother of the Year awards. Electronic service delivery Select Encompass is conscious of the way in which it uses resources and looks to minimise its carbon footprint. Select Encompass employees consciously try to print only when required, reducing the number of ink cartridges and resources being used by the organisation. Internal documents use double sided printing where possible and there is an electronic storage system for member information. Committee and Board reports are sent electronically, and much correspondence and proof reading of documents is done via rather than hard copies to reduce paper wastage. Almost 7,000 Select Encompass members have opted to receive communications from Select Encompass via rather than post. Climate risk Australian companies have a legal obligation to disclose material risks, including material climate-related risks. At this stage, Select Encompass recognises physical climate change risks in terms of increased risk of flooding, and increased frequency and severity of extreme weather events. Select Encompass is analysing its exposure to loan security properties to ascertain those that may have an increased risk of flooding, or increased exposure to severe weather events. Climate risk is a standing agenda item for management risk committee meetings.

17 15 SUPPLIERS Major suppliers co-operatively owned Some of Select Encompass important industry-based suppliers are owned by credit unions. By co-operating with other mutuals, Select Encompass is able to negotiate competitive pricing for the goods and services that mutuals use in common, as opposed to negotiating individual arrangements. TransAction Solutions hosts Select Encompass core banking and networking functions and is owned by twenty-five credit unions and two mutual banks. CUSCAL (formerly known as Credit Union Services Corporation Australia Ltd) provides transaction switching services and is similarly co-operatively owned (albeit to a maximum of 80% from 2014). Co-operation among mutuals is key to creating economies that reduce costs and improve profitability. Australian and local sourcing Goods and services used by Select Encompass are acquired from Australian suppliers, including the core banking software system which is owned by the Melbourne based Ultradata Australia. Select Encompass does acknowledge however, that certainty around the origin of all the products it procures is difficult. Select Encompass itself is 100% Australian owned and operated and does not outsource its employees or business activities offshore. Select Encompass considers all branches as significant locations of operation and Select Encompass will use local suppliers, most of whom are located within the boundaries of Sydney, the Central Coast and the Hunter region according to the branch location. When fitting out our branch offices, Select Encompass uses local professionals and trades people. The newly renovated head office in Surry Hills was fitted out by Surry Hills based MPA Projects.

18 16 GRI INDEX General Standard Disclosures GRI Content Index for In accordance - Core GENERAL STANDARD DISCLOSURES Select Encompass has not sought external assurance for this report Description STRATEGY AND ANALYSIS G4-1 Statement from the most senior decision-maker of the organization ORGANISATIONAL PROFILE Section / Direct Answer Refer to Introduction G4-3 Name of the organisation Select Encompass Credit Union Ltd G4-4 Primary brands, products and services Refer to Introduction Primary products: Financial products, services and advice G4-5 Location of the organisation s headquarters Surry Hills, NSW Australia G4-6 Number of countries where the organisation operates, and names of countries with either significant operations or that are specifically relevant to the sustainability topics covered in the report Select Encompass Credit Union Ltd operates only in Australia G4-7 Nature of ownership and legal form Ownership: Owned by its members Legal form: An Approved Deposit-taking Institution that is regulated by the Australian Prudential Regulatory Authority (APRA) under the Banking Act G4-8 Markets served Markets served: Australia Sectors: Financial Services Types of Customers: Individuals seeking credit, loan, deposit and related services and advice G4-9 Scale of the organisation Number of operations: Administrative office plus ten branches Total Assets: $627 million (as at June ) G4-10 Total number of employees by employment type, employment contract and region, broken down by gender G4-11 Percentage of total employees covered by collective bargaining agreements G4-12 Description of the organisation s supply chain Refer to Suppliers Full-time employees: 57 Part-time employees: 20 Total employees: 77 (all based in Australia) Full-time equivalent: Employees based in Sydney: 67 Employees based in Gosford: 5 Employees based in Newcastle: 5 Number of female employees: 53 Number of male employees: 24 All of Select Encompass employees are covered by an Enterprise Bargaining Agreement negotiated with the Finance Sector Union. Select Encompass does not impose any restrictions on employees regarding freedom of association.

19 17 G4-13 Significant changes during the reporting period regarding the organisation s size, structure, ownership, or its supply chain G4-14 Explanation of whether and how the precautionary approach or principle is addressed by the organisation G4-15 Externally developed economic, environmental and social charters, principles, or other initiatives to which the organisation subscribes or which it endorses G4-16 Memberships of associations (such as industry associations) and national or international advocacy organisations IDENTIFIED MATERIAL ASPECTS AND BOUNDARIES G4-17 All entities included in the organisation s consolidated financial statements or equivalent documents including indication which of these are not covered by the report G4-18 Process for defining the report content and the Aspect Boundaries G4-19 Material Aspects identified in the process for defining report content G4-20 Aspect Boundary within the organisation for each material Aspect G4-21 Aspect Boundary outside the organisation for each material Aspect G4-22 Effect of any restatements of information provided in previous reports, and the reasons for such restatements G4-23 Significant changes from previous reporting periods in the Scope and Aspect Boundaries STAKEHOLDER ENGAGEMENT G4-24 List of stakeholder groups engaged by the organisation G4-25 Basis for identification and selection of stakeholders with whom to engage Select Credit Union Ltd and Encompass Credit Union Ltd merged on 1 July. Prior to the merger Select s total assets were $323m and Encompass total assets were $290m. As at 30 June Select Encompass total assets were $627m. There were no other significant changes in Select Encompass structure, ownership, or its supply chain during the last 12 months. There is no formalised process at Select Encompass for applying the precautionary principle. However, we remain conscious of our social and environmental impacts. Select Encompass abides by the World Council of Credit Unions International Operating Principles. Signatory to the Customer Owned Banking Code of Practice. Member of the Financial Ombudsman Service. Member of the Customer Owned Banking Association Member of the Business Council of Co-operatives and Mutuals Supporter member of the Asian Confederation of Credit Unions (ACCU) The financial statements cover the breadth of Select Encompass operations. There are no other entities (such as joint ventures, subsidiaries, leased facilities or outsourced operations) included in the financial statements. Refer to Focusing the report content. This report covers the breadth of Select Encompass operations for the reporting period. Select Encompass has identified material GRI Aspects for the reporting period. For an overview of these material GRI Aspects and further information on where in this report they are discussed, please refer to the section Focusing the report content. Aspect Boundaries for each material Aspect were not determined for this report but will be considered in our future reporting as we become more familiar with the boundary setting process. See above comment for G4-20 Restatements of any information provided in the Select Credit Union Ltd 2015 Sustainability Report result from the nature of the business of providing co-operatively owned financial services. See above comments for G4-20 to G4-22 Refer to Select Encompass stakeholders Engaging the stakeholders In 2015, Select held a workshop involving managers across the business (including participants from Encompass) that are responsible for liaising with the different stakeholder groups. The small scale of the business means a relatively small group of key stakeholders; the process for selecting with whom to engage our relatively small group of key stakeholders allows us to maintain direct, personal relationships to each group.

20 18 G4-26 Approaches to stakeholder engagement, including frequency of engagement by type and by stakeholder group G4-27 Key topics and concerns that have been raised through stakeholder engagement, and how the organisation has responded to those key topics and concerns, including through its reporting. REPORT PROFILE G4-28 Reporting period (such as fiscal or calendar year) for information provided This was not determined for the report but will be considered in future reporting as we become more familiar with the reporting requirements Focusing the report content Financial Year /17 Highlights Financial Year /18 Challenges In addition, each report section addresses the relevant material issues identified, including how Select Encompass has responded or how we intend to respond in future. Fiscal Year G4-29 Date of most recent previous report (if any) Select Credit Union Ltd first produced a Sustainability Report as at 30 June 2015 G4-30 Reporting cycle Initially biennial intended to move to annual reporting G4-31 Contact point for questions regarding the report or its contents Mark Worthington, CEO Select Encompass Credit Union Ltd G4-32 In accordance option chosen for the report This table represents Select Encompass GRI Content Index for the report. It should be noted that Select Encompass has slightly altered the GRI Content Index format suggested in the G4 Implementation Manual in a way that we believe increases accessibility, particularly for those readers not familiar with G4, or the GRI Guidelines more broadly. G4-33 Policy and current practice with regard to seeking external assurance for the report GOVERNANCE G4-34 Governance structure of the organisation, including committees of the highest governance body and any committees responsible for decision-making on economic, environmental and social impacts G4-57 Internal and external mechanisms for seeking advice on ethical and lawful behaviour, and matters related to organisational integrity, such as helplines or advice lines Select Encompass has not sought external assurance for this report. Refer to Governance Select Encompass is a member of the Customer Owned Banking Association (COBA) which provides Select Encompass with compliance and legal support. Legal advice through COBA s dedicated in-house legal practice Training computer-based training modules covering key regulatory areas to ensure that employees are well-trained and that mandatory training requirements are met Employee Relations access online Employee Relations support Compliance Forums forums for compliance managers and employees covering regulatory developments Compliance Manuals compliance manuals, guides, legally signed-off loan forms and other resources covering most areas relevant to retail banking and finance. Select Encompass is a member of the Financial Ombudsman Service which independently resolves disputes between consumers and member financial services providers. This independent dispute resolution process covers financial services disputes and is funded by banking institutions and hence free to consumers. Select Encompass also subscribes to a legal advisory service provided by DB Legal.

21 19 G4-58 Internal and external mechanisms for reporting concerns about unethical or unlawful behaviour, and matters related to organisational integrity, such as escalation through line management, whistleblowing mechanisms or hotlines Select Encompass is committed to ensuring compliance with the law and the highest ethical standards in the conduct of its business. The Select Encompass Whistleblowing Policy is designed to discourage improper conduct, to enable whistleblowers to report suspected improper conduct in good faith without risk of personal disadvantage from making the report, and facilitate the investigation of such reports. Training and education is conducted via an ongoing program for all directors, employees and contractors and includes Select Encompass commitment to ensuring compliance with the law and the highest ethical standards in the conduct of its business, the existence of the policy to facilitate good faith reports of suspected improper conduct without risk of personal disadvantage, Select Encompass Corporate & Director Code of Conduct, and information on the sort of improper conduct to be particularly aware of. SPECIFIC STANDARD DISCLOSURES Material Aspects Description Page / Direct Answer MEMBERS G4-PR5 G4-PR7 GOVERNANCE G4-PR4 G4-PR9 G4-SO5 PEOPLE G4-LA2 G4-LA3 G4-LA9 Results of surveys measuring customer satisfaction Total number of incidents of non-compliance with regulations and voluntary codes concerning marketing communications including advertising, promotion and sponsorship, by type of outcomes Total number of incidents of non-compliance with regulations and voluntary codes concerning product and service information and labelling, by type of outcomes Monetary value of significant fines for noncompliance with laws and regulations codes concerning the provision of products and services Confirmed incidents of corruption and actions taken Benefits provided to full time employees that are not provided to part-time employees, by significant locations of operation Return to work and retention rates after parental leave, by gender Average hours of training per employee, by gender and by employee category Refer to Member satisfaction Select Encompass has had no incidents of non-compliance with regulations and voluntary codes concerning marketing communications including advertising, promotion and sponsorship. Refer to Improved product transparency Select Encompass has had no incidents of non-compliance with regulations and voluntary codes concerning product and service information and labelling. Refer to Governance Select Encompass has had no fines for non-compliance with laws and regulations codes concerning the provision of products and services. Refer to Governance Select Encompass has had no confirmed incidents of corruption in the reporting period Refer to Managing the risk of fraud There are no benefits provided to full time employees that are not provided to part-time employees Female employees who took parental leave during the period: 5 Male employees who took parental leave during the period: 0 Resignations (did not return from parental leave): 2 Employees who did or will be returning to work: 3 Average training hours per employee: 15.1 Average training hours per male employee: 13.5 Average training hours per female employee: 15.9

22 20 G4-LA10 G4-LA11 COMMUNITY G4-FS-13 G4-FS-14 SUPPLIERS G4-EC9 Programs for skills management and lifelong learning that support the continued employability of employees and assist them in managing career endings Percentage of employees receiving regular performance and career development reviews, by gender and by employee category Access points in low-populated or economically disadvantaged areas by type Initiatives to improve access to financial services for disadvantaged people Proportion of spending on local suppliers at significant locations of operation Employees are encouraged to participate in related higher level education and this is supported with opportunities for study leave and financial assistance. All frontline employees are required to undertake 20 hours continuing professional development (CPD) training annually. Trainees are provided with on the job workplace training whist undertaking a Certificate III Financial Services and where appropriate continue on to undertake a Certificate IV in a related qualification. Professional development is also supported for the following memberships: 120 hours over a 3 year period for employees who have attained CPA membership; 80 hours over a 2 year period for employees who have attained IPA membership; 75 hours over a 3 year period for employees who have attained GIA membership; and 60 DPD units over a 3 year period for employees who have attained AICD membership. All Select Encompass employees receive regular performance and career development reviews Select Encompass has branches in Chippendale (Central Station), Chullora, Gosford, Gymea, Hamilton, Homebush, Merrylands, North Ryde, Parramatta, & Revesby Refer to International social responsibility This information is not available this year

23 ANNUAL FINANCIAL REPORT SELECT ENCOMPASS CREDIT UNION LTD 21 CONTENTS DIRECTORS REPORT 22 DIRECTORS DECLARATION 28 INDEPENDENT AUDITOR S REPORT 29 STATEMENT OF PROFIT OR LOSS AND OTHER 31 COMPREHENSIVE INCOME STATEMENT OF CHANGES IN MEMBER EQUITY 32 STATEMENT OF FINANCIAL POSITION 33 STATEMENT OF CASH FLOWS 34 NOTES TO THE FINANCIAL STATEMENTS 35-68

24 22 DIRECTORS REPORT Your Directors present their report on the Select Encompass Credit Union Ltd for the financial year ended 30 June. The Credit Union is a company with a mutual structure registered under the Corporations Act INFORMATION ON DIRECTORS The names of the Directors in office at any time during or since the end of the year are: Name Experience and Qualifications ERIC PAUL PRIESTLEY Chair (Independent, non-executive) since 2007 Qualifications Bachelor of Business, Accounting Certificate of Transport Management (Sydney University) CTM Certified Practising Accountant (CPA) Memberships Graduate, Australian Institute of Company Directors Experience Senior Planner Assets and Systems, STA 2014-Present Formerly Finance and Administration Manager and Sales Manager with STA Director Consulting (Government Sector) for APA Management Services FIONA LOUISE BENNETT Director (Independent, non-executive) since Qualifications Bachelor of Business, Accounting, Finance & Economics Certified Practising Accountant (CPA) Memberships Graduate, Australian Institute of Company Directors Member of Instil (formally Australasian Mutuals Institute) Member, Women on Boards Board member, Western NSW Local Health District January -present Experience Various positions with CSR Limited in Accounting & Financial Control roles Director Select Credit Union (2011-) ALISON MARGARET BRUCHHAUSER Director (Independent, non executive) since 2012 Qualifications Diploma in Applied Business Advanced Personnel Management Certificate Memberships Graduate, Australian Institute of Company Directors Member of Australian Human Resources Institute Experience Lead Business Partner, Human Resources, Transport for NSW, 2012 Present Corporate HR Information Systems Manager, Railcorp HR Manager Asset Management, Railcorp

25 23 Name Experience and Qualifications ALEX CLAASSENS Director (Independent, non-executive) since 2009 Memberships Member of the Australian Institute of Company Directors Member of NSW Rail Regulator NSW Branch Operations Forum 2013-Present Executive member of Unions NSW 2010-Present Member of Association of Superannuation Funds Australia (ASFA) Member of NSW ALP Administrative Committee Experience NSW State Secretary and member of the National Executive, Rail Tram and Bus Union 2010-Present Appointed to Sydney Alliance for Community Building as alternate Board member 2013-Present Employee representative Board member of the State Super (SAS Trustee Corporation) 2012-Present Train Driver on the NSW rail network 1977-Present JOHN ANTHONY COTTEE Director (Independent, non executive) since Qualifications Bachelor of Business, Accounting Diploma of Financial Studies Certified Practising Accountant (CPA) CPA Public Practice Certificate Memberships Graduate, Australian Institute of Company Directors Fellow of Instil (formally Australasian Mutuals Institute) Member Australian Institute of Management Member Mutuals Audit & Governance Professional Institute (MAGPI) Experience Principal Consultant - Step Ahead Business Solutions (established May 2004) CEO Prospect Credit Union Ltd ( ) Director Select Credit Union (2012-) Director MemberFirst Credit Union ( ) Chairman ( ) PAUL DUNN Director (Independent, non executive) since 2013 Qualifications Graduate Diploma in Applied Finance, KAPLAN Bachelor of Commerce Master of Business Administration Chartered Accountant Memberships Graduate, Australian Institute of Company Directors Experience Various senior executive positions with the State Transit Authority over a 23 year period.

26 24 Name Experience and Qualifications NEIL SYDNEY PENINTON Director (Independent, non executive) since Memberships Member of the Australian Institute of Company Directors Fellow of Instil (formally Australasian Mutuals Institute) Experience 43 years experience with EnergyAustralia (now Ausgrid) approximately 25 years in supervisory, senior and executive management positions. Director of Select Credit Union KRISTEN JULIE WATTS Director (Independent, non executive) since Qualifications Bachelor of Economics, Accounting Master of Commerce Chartered Accountant Memberships Graduate, Australian Institute of Company Directors Member of Instil (formally Australasian Mutuals Institute) Experience Director of Select Credit Union Over 25 years experience in commercial finance, risk management and investment governance. INFORMATION ON THE CHIEF EXECUTIVE OFFICER MARK JOSEPH WORTHINGTON Chief Executive Qualifications Bachelor of Arts Master of Business Administration Memberships Graduate, Australian Institute of Company Directors Fellow, Australasian Mutuals Institute Experience CEO Select Encompass present CEO Select Credit Union Director, TransAction Solutions Ltd Director, Australian Mutuals Foundation Ltd 17 years Credit Union management experience

27 25 Meetings Attended Board Audit Committee Governance and Remuneration Committee Name Meetings Eligible Meetings Attended Meetings Eligible Meetings Attended Meetings Eligible Meetings Attended Meetings Eligible Risk Committee Meetings Attended Eric Priestley * Fiona Bennett John Cottee Paul Dunn Neil Peninton Kristen Watts Alison Bruchhauser Alex Claassens * The Chairman of the Board Eric Priestley attended 6 Audit Committee meetings in an ex officio capacity. The role of the Audit Committee is to assist the Board in the discharge of its responsibilities by way of monitoring the compliance with prudential and statutory requirements to which the Credit Union is obliged to comply. The role of the Governance and Remuneration Committee is to monitor compliance with governance obligations and assist the Board in discharging its responsibilities. The role of the Risk Committee is to assist the Board in the discharge of its responsibilities in respect of the identification, measurement and mitigation of the risks faced by the Credit Union. Board policy is that the maximum term of the Chair of the Audit and Risk Committees is three (3) years and Directors are encouraged to serve on the Risk and Audit Committees during their term of office. DIRECTORS BENEFITS No Director has received or become entitled to receive during, or since the end of the financial year, a benefit because of a contract made by the Credit Union or a related body corporate with a Director, a firm of which a Director is a member or an entity in which a Director has a substantial financial interest, other than that disclosed in Note 33 of the financial report. COMPANY SECRETARY The following person held the position of Company Secretary during the financial year: Mr Simon Andrew Brasier ACIS, FIPA was appointed Company Secretary on 1 November Mr Brasier has been employed by Select Encompass Credit Union since 1990, most recently as the Executive Manager Governance and Operations. INDEMNIFYING OFFICER OR AUDITOR Insurance premiums have been paid to insure each of the Directors and Officers of the Credit Union, against any costs and expenses incurred by them in defending any legal proceeding arising out of their conduct while acting in their capacity as a Director or Officer of the Credit Union. In accordance with normal commercial practice disclosure of the premium amount and the nature of the insured liabilities is prohibited by a confidentiality clause in the contract. No insurance cover has been provided for the benefit of the auditors of the Credit Union.

28 26 FINANCIAL PERFORMANCE DISCLOSURES PRINCIPAL ACTIVITIES The principal activities of the Credit Union during the year were the provision of retail financial services to members in the form of taking deposits and giving financial accommodation as prescribed by the Constitution. No significant changes in the nature of these activities occurred during the year. OPERATING RESULTS The net profit of the Credit Union for the year after providing for income tax was $1,447,197 (: $116,000). As at 30 June the Capital Adequacy Ratio was 25.13%, well above the statutory minimum of 8.00%. DIVIDENDS No dividends have been paid or declared since the end of the financial year and no dividends have been recommended or provided for by the Directors of the Credit Union. REVIEW OF OPERATIONS The results of the Credit Union s operations from its activities of providing financial services to its members have changed significantly from those of the previous year. The Encompass 2015/16 profit after tax of $0.116m was affected by $1.143m of merger related expenses. This year s post merger operating result was affected by $0.777m of merger related expenses. SIGNIFICANT CHANGES IN STATE OF AFFAIRS On 1 July Select Credit Union Ltd merged with Encompass Credit Union Limited to create Select Encompass Credit Union Ltd. As at 30 June total assets were $627.5m. Immediately prior to the merger Encompass had total assets of $289.6m and Select had total assets of $323.2m. There were no other significant changes in the state of the affairs of the Credit Union during the year. EVENTS OCCURRING AFTER BALANCE DATE Select Encompass has provided My Credit Union Ltd with notice of termination of branch sharing arrangements at the Hamilton and Parramatta branches. The termination is effective on 31 December. When effected, the annual revenue reduction will be approximately $111,000. No other matters or circumstances have arisen since the end of the financial year which significantly affected or may significantly affect in subsequent years the operations, or state of affairs of the Credit Union. LIKELY DEVELOPMENTS AND RESULTS No other matters, circumstances or likely developments have arisen since the end of the financial year which have significantly affected or may significantly affect in subsequent years: (i) the operations of the Credit Union; (ii) the results of those operations; or (iii) the state of affairs of the Credit Union in the financial years subsequent to this financial year. ROUNDING The amounts contained in the financial statements have been rounded to the nearest one thousand dollars in accordance with ASIC Class Order 06/51. The Credit Union is permitted to round to the nearest one thousand () for all amounts except prescribed disclosures which are shown in whole dollars.

29 27 This report is made in accordance with a resolution of the Board and is signed for and on behalf of the Directors by: Eric Priestley, Director Signed and dated this 27th day of September

30 28 DIRECTORS DECLARATION The Directors of Select Encompass Credit Union Ltd declare that: 1. The financial statements, comprising the statement of comprehensive income, statement of financial position, statement of cash flows, statement of changes in member equity, and accompanying notes, are in accordance with the Corporations Act 2001 and: (a) comply with Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001; and (b) give a true and fair view of the company s financial position as at 30 June and of its performance for the year ended on that date. 2. The company has included in the notes to the financial statements an explicit and unreserved statement of compliance with International Financial Reporting Standards. 3. 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. This declaration is made in accordance with a resolution of the Board of Directors and is signed for and on behalf of the Directors by: Eric Priestley, Director Signed and dated this 27th day of September

31 29 Independent Auditor s Report To the members of Select Encompass Credit Union Ltd Report on the audit of the Financial Report Opinion We have audited the Financial Report of Select Encompass Credit Union Ltd (the Credit Union) In our opinion, the accompanying Financial Report of the Credit Union is in accordance with the Corporations Act 2001, including: giving a true and fair view of the Group s financial position as at 30 June and of its financial performance for the year ended on that date; and complying with Australian Accounting Standards and the Corporations Regulations The Financial Report comprises: Consolidated statement of financial position as at 30 June ; Consolidated statement of profit or loss and other comprehensive income, Consolidated statement of changes in member equity, and Consolidated statement of cash flows for the year then ended; Notes including a summary of significant accounting policies; and Directors Declaration. The Group consists of the Credit Union and the entity it controlled at the year-end or from time to time during the financial year. Basis for opinion We conducted our audit in accordance with Australian Auditing Standards. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. 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 Credit Union in accordance with the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the Financial Report in Australia. We have fulfilled our other ethical responsibilities in accordance with the Code. Other Information Other Information is financial and non-financial information in Select Encompass Credit Union Ltd s annual reporting which is provided in addition to the Financial Report and the Auditor's Report. This includes the Directors Report. The Directors are responsible for the Other Information. 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.