what do i do€¦ · mr e a desousa – retired november 2013 mr b t nevin – director...

Campbelltown Shop U012, Macarthur Square Shopping Centre, Gilchrist Drive, Ambarvale NSW 2560

Fairfield Shop G50, Neeta City Shopping Centre, Smart Street, Fairfield NSW 2165

Greenacre 138 Waterloo Rd, Greenacre NSW 2190

Katoomba 63 Pioneer Place, Katoomba NSW 2780

Kogarah St.George Hospital Cafeteria, Belgrave Street, Kogarah NSW 2217

Leichhardt 7–15 Wetherill Street, Leichhardt NSW 2040

Lidcombe 27–29 Church Street, Lidcombe NSW 2141

Marrickville 296 Marrickville Road, Marrickville NSW 2204

Mascot 1197 Botany Road, Mascot NSW 2020

Parkes 189 Clarinda Street, Parkes NSW 2870

Parramatta 207 Church Street, Parramatta NSW 2150

Penrith 16–20 Riley Street, Penrith NSW 2750

Rockdale Shop 5, Rockdale Plaza, Rockdale NSW 2216

Rouse Hill Shop GR092A, Civic Way, Rouse Hill Town Centre, Rouse Hill NSW 2155

Springwood 268 Macquarie Road, Springwood NSW 2777

Sutherland 20 Eton Street, Sutherland NSW 2232

Sydney City 210 Clarence Street, Sydney NSW 2000

Windsor Shop 7–8, 251 George Street, Windsor NSW 2756

Registered Office: 19 Second Ave, Blacktown NSW 2148

Branches

scu.net.auCall 13 61 91

Sydney Credit Union Ltd

ABN 93 087 650 726 AFSL 236476 Australian Credit Licence No 236476. Please address all mail to PO Box 444 Blacktown NSW [email protected]

2014 ANNUAL REPORT

Sydney Credit Union Ltd | ABN 93 087 650 726 1

scu.net.au 2014 Annual Report

Directors’ Report

Your Directors present their report on SCU for the financial year ended 30 June 2014.

SCU is a company registered under the Corporations Act 2001.

Information on Directors

The names of the Directors in office at any time during or since the end of the year are:-

Mr B T Nevin (Chairman)Mr H R Kludass (Deputy Chair)Mr J W Bourke Mr G J HayesMr S KasanczukMr M E SawyerMr P StewartMr R W ThornMr G M Varcoe Mr E A DeSousa – retired November 2013

Mr B T Nevin – Director

Qualifications – Certified Practising AccountantFellow of the Australasian Mutuals Institute

Experience – Chair, 1997–2008, 2010–CurrentDeputy Chair, 1986–1997, 2008–2010Director, 1972–CurrentExecutive Committee, 1986–CurrentCorporate Governance Committee, 2010–CurrentRemunerations Committee, 2010–Current

Interest in Shares – 1 Member Share in SCU

Mr H R Kludass – Director

Qualifications – Bachelor of Commerce (Accounting)Associate Diploma in Business (Accounting)Member of the Australasian Mutuals Institute

Experience – Director, June 2009–CurrentDeputy Chair, 2010–CurrentAudit & Compliance Committee, Nov 2009–CurrentRemunerations Committee, 2010–CurrentExecutive Committee, 2010–CurrentCorporate Governance Committee, 2010–CurrentExecutive Officer, Sutherland Shire Council Employees Credit Union

(SSCECU) 2000–2009Chairman, SSCECU 1999–2000Director, SSCECU 1997–1999Business Consultant, 1997–2008


SCU 2014 AR inners Final_A4 17/10/14 4:57 PM Page 1

Mr J W Bourke – Director

Qualifications – Associate, Local Government Administration Member of the Australasian Mutuals Institute

Experience – Director, 2008–CurrentAudit & Compliance Committee, 2008–CurrentGeneral Manager, South Sydney Council, 1989–2001


Mr G Hayes – Director

Qualifications – Bachelor of CommerceLocal Government Managers AssociationMember of the Australasian Mutuals Institute

Experience – Director, 2010–CurrentChair, Risk Management Committee – Dec 2013–CurrentExecutive Committee, Dec 2013–CurrentCorporate Governance Committee, Dec 2013–CurrentMember, Risk Management Committee, 2010–CurrentRemuneration Committee, Nov 2013–CurrentSenior Accountant, Sutherland Shire Council C.F.O. SSCECU, 1992–2009Director, SSCECU, 1985–1991Chairman, SSCECU, 1989–1991Deputy Chair, SSCECU, 1987–1989


Mr S Kasanczuk – Director

Qualifications – Bachelor of Business (Accounting)Graduate Diploma in Applied Finance & InvestmentCertified Information Systems Auditor (CISA)Diploma of Surveying Fellow of the Australasian Mutuals InstituteFellow, CPA AustraliaFellow, Financial Services Institute of AustraliaAssociate, Australasian Compliance InstituteMember, Australian Institute of Risk Management (MAIRM)Qualified Trainer & Project Manager

Experience – Director, SCU, Nov 2011–CurrentChair, Risk Management Committee, Dec 2011–Nov 2013Executive Committee, Dec 2011–Nov 2013Corporate Governance Committee, Dec 2011–Nov 2013Member, Risk Management Committee, 2011–currentRemuneration Committee, Dec 2011–Nov 2013Director, Karpaty Foundation, Feb 2010–Jan 2012Director/Principal, WolfThink Consulting, Jan 2004–currentDirector, Karpaty Credit Union Ltd (Karpaty), Nov 2002–Feb 2010Finance Committee, Karpaty, Jan 2002–Jan 2005Risk & Compliance Committee, Karpaty, Jan 2003–Jan 2005Personnel Committee, Karpaty, Jan 2006–Jan 2007

Interest in Shares – 2 Member Shares in SCU

2014 Annual Report scu.net.au

2 Sydney Credit Union Ltd | ABN 93 087 650 726


Mr M E Sawyer – Director

Qualifications – Member of the Australian Institute of ManagementFellow of the Australasian Mutuals InstituteElectrical Trades Certificate (TAFE)Supervision Certificate (TAFE) majoring in Industrial SupervisionTrain the Trainer CertificateDiploma of Financial Services

Experience – Director, Oct 2005–CurrentChair, Corporate Governance Committee, Dec 2011–CurrentExecutive Committee, Dec 2011–CurrentRemuneration Committee, Dec 2011–CurrentAudit & Compliance Committee, Dec 2005–Nov 2008Risk Management Committee, Nov 2008–Nov 2011Director, Pinnacle Credit Union, 2003–2005Travel Agent and Tour OperatorDirector of Licensed/Registered Club, 1993–1994Total Quality Management (Energy Australia 1992–1994)


Mr P Stewart – Director

Qualifications – Diploma of Corporate ManagementAssociate Member of the Institute of Chartered SecretariesAssociate Member of the Institute of Banking & FinanceMember of the Australasian Mutuals Institute

Experience – Director, 2010–CurrentMember, Risk Management Committee, 2010–Current43 years’ experience in banking and finance including:

• Senior Management• Finance• Lending• Risk Management• Project Management and• Operational Risk Management roles


Mr R W Thorn – Director

Qualifications – Bachelor of BusinessCertificate in Electrical EngineeringMember of the Australasian Mutuals Institute

Experience – Director, 2005–CurrentExecutive Committee, 2008–CurrentRemuneration Committee, 2010–CurrentCorporate Governance Committee, 2010–CurrentChair, Audit & Compliance Committee, Nov 2008–CurrentAudit & Compliance Committee, Dec 2005–CurrentDirector, Prospect Credit Union, 2001–2006





Mr G M Varcoe – Director

Qualifications – Bachelor of Engineering (Civil)Graduate Diploma of Management (Technology Management)Master of Business Administration (Technology Management)Builders Licence Member of the Australasian Mutuals Institute

Experience – Director, Apr 2008–CurrentAudit & Compliance Committee, May 2008–CurrentDirector, BM&RCCU, 1997–Mar 2008 Chair, Corporate Governance Committee BM&RCCU, 2006–Mar 2008Licensed Builder and Consultant Engineer

Interest in Shares – 3 Member Shares in SCU

Retired at the 2013 AGM

Mr E A DeSousa – Director

Qualifications – Bachelor of LawMaster of Dispute ResolutionNSW Psychiatric Nursing CertificateAssociate Fellow – Australasian Mutuals Institute

Experience – Director, April 2008–Nov 2013 (Retired)Chair, Corporate Governance Committee, May 2008–Dec 2011Remuneration Committee, 2010–Dec 2011Director, Blue Mountains & Riverlands Community Credit Union

(BM&RCCU), Nov 1998–Mar 2008Chair, BM&RCCU, Nov 2004–Mar 2008Finance & Executive Committees, BM&RCCU, Nov 1998–Nov 2002Governance & Executive Committees, BM&RCCU, Nov 2002–Mar 2008Presiding Lawyer Member, NSW Mental Health Review Tribunal,

Oct 1991–Oct 2005Past President, Blue Mountains Hydrotherapy CommitteePast President, Rotary Club of Central Blue MountainsPast President, Blue Mountains Business Network





Mr A J Jennings – Chief Executive Officer and Company Secretary

Qualifications – Advanced Diploma in AccountingCertificate III in Investment and Personal Financial Planning Diploma of ManagementMember of the Australasian Mutuals InstituteJustice of the Peace

Experience – 34 years in the Financial Services IndustrySydney Credit Union CEO and Company Secretary since 1998

Other Directorships – TransAction Solutions Pty LtdAustralasian Mutuals Institute (AMI)BACS LtdShared Services Pty Ltd

Interest – 1 Member Share in SCU



Executive & Audit & Risk CorporateDirector Board Remuneration Compliance Management Governance Period of appointment

H A H A H A H A H A

Brian Nevin 11 8 3 3 - - - - 3 3 1/7/2013 to 30/6/2014

Hans Kludass 11 11 3 3 4 2 - - 3 3 1/7/2013 to 30/6/2014

John Bourke 11 11 - - 4 3 - - - - 1/7/2013 to 30/6/2014

Greg Hayes 11 10 2 1 - - 4 4 2 1 1/7/2013 to 30/6/2014

Stephan Kasanczuk 11 11 1 1 - - 4 4 1 1 1/7/2013 to 30/6/2014

Mark Sawyer 11 10 3 3 - - - - 3 3 1/7/2013 to 30/6/2014

Peter Stewart 11 9 - - - - 4 4 - - 1/7/2013 to 30/6/2014

Ray Thorn 11 11 3 3 4 4 - - 3 3 1/7/2013 to 30/6/2014

Gary Varcoe 11 9 - - 4 4 - - - - 1/7/2013 to 30/6/2014

Eddie DeSousa 4 4 - - - - 2 2 - - 1/7/2013 to 13/11/2013




Directors’ Benefits

No Director has received, or become entitled toreceive, during or since the financial year, a benefitbecause of a contract made by SCU, controlledentity, or a related body corporate with a Director, afirm of which a Director is a Member or an entity inwhich a Director has a substantial financial interest,other than that disclosed in Note 32 of the financialreport.

Indemnifying Officer Or Auditor

Insurance premiums have been paid to insure eachof the Directors and officers of SCU against anycosts and expenses incurred by them in defendingany legal proceeding arising out of their conductwhile acting in their capacity as an officer of SCU.In accordance with normal commercial practice,disclosure of the premium amount and the natureof the insured liabilities is prohibited by aconfidentiality clause in the contract.

No insurance cover has been provided for thebenefit of the auditors of SCU.

Financial Performance Disclosures

Principal Activities

The principal activities of SCU during the year werethe provision of retail financial services to Membersin the form of taking deposits and giving financialaccommodation as prescribed by the Constitution.

No significant changes in the nature of theseactivities occurred during the year.

Operating Results

The net profit of SCU for the year, after providing forincome tax and extraordinary items, was $1,865,127[2013 $2,114,418]. There were no significant eventsduring the year that impacted upon the currentyear’s result.

Dividends

Since the end of the financial year, dividends of$20,096 have been paid or declared by theDirectors of SCU from the profits earned during theyear ended 30 June 2014 or prior.

Review Of Operations

The results of SCU’s operations from its activities ofproviding financial services to its Members did notchange significantly from those of the previous year.

Significant Changes In State Of Affairs

SCU had the following significant changes to itsstate of affairs during the year:

– Closure of the branch at Bondi Junction NSW– Refurbishment of the branch at Leichhardt NSW

Other than the events stated above, there were noother significant changes to the State of Affairs ofSCU during the year.

Events Occurring After Balance Date

No matters or circumstances have arisen since theend of the financial year which significantly affectedor may significantly affect the operations, or state ofaffairs, of SCU in subsequent financial years, otherthan:

– SCU has committed to a new contract withUltradata Australia to provide and maintain theirUltracs system for use by SCU as its core bankingsystem over the next 7 years.

Likely Developments And Results

No other matter, circumstance or likely developmentin the operations has arisen since the end of thefinancial year that has significantly affected or maysignificantly affect:

(i) The operations of SCU;(ii) The results of those operations; or(iii) The state of affairs of SCU

in the financial years subsequent to this financialyear.


Auditors’ Independence

The auditors have provided the declaration ofindependence to the Board as prescribed by theCorporations Act 2001 as set on page 8 of thisreport.

This report is made in accordance with a resolutionof the Board of Directors and is signed for and onbehalf of the Directors by:

B Nevin R ThornChair Chair, Audit &

Compliance Committee

Signed and dated this 25 September 2014

Auditor’s independence declaration to the D irectors of Sydney Credit Union Limited

In accordance with the requirements of section307C of the Corporations Act 2001, as lead auditorof Sydney Credit Union Limited for the year ended30 June 2014, I declare that to the best of myknowledge and belief, that there have been nocontraventions of:

(i) the auditor independence requirements of theCorporations Act 2001 in relation to the audit;and

(ii) any applicable code of professional conduct inrelation to the audit.

Signed: Neville SinclairPartner Grant Thornton Audit Pty Ltd

Dated: 25 September 2014






We have audited the accompanying financial reportof Sydney Credit Union Limited (the “Company”),which comprises the statement of financial positionas at 30 June 2014, the statement of comprehensiveincome, statement of changes in equity and state -ment of cash flows for the year then ended, notescomprising a summary of significant accountingpolicies and other explanatory information and thedirectors’ declaration of the company.

Directors’ responsibility for thefinancial report The Directors of the Company are responsible forthe preparation of the financial report that gives atrue and fair view of the financial report inaccordance with Australian Accounting Standardsand the Corporations Act 2001. This responsibilityincludes such internal controls as the Directorsdetermine are necessary to enable the preparationof the financial report to be free from materialmisstatement, whether due to fraud or error. TheDirectors also state, in the notes to the financialreport, in accordance with Accounting StandardAASB 101 Presentation of Financial Statements, thatthe financial report, comprising the FinancialStatements and Notes, complies with InternationalFinancial Reporting Standards.

Auditor’s responsibility Our responsibility is to express an opinion on thefinancial report based on our audit. We conductedour audit in accordance with Australian AuditingStandards which require us to comply with relevantethical requirements relating to audit engagementsand plan and perform the audit to obtainreasonable assurance whether the financial reportis free from material misstatement.

An audit involves performing procedures to obtainaudit evidence about the amounts and disclosuresin the financial report. The procedures selecteddepend on the auditor’s judgement, including theassessment of the risks of material misstatement ofthe financial report, whether due to fraud or error.

In making those risk assessments, the Auditorconsiders internal control relevant to the Company’spreparation and fair presentation of the financialreport in order to design audit procedures that areappropriate in the circumstances, but not for thepurpose of expressing an opinion on the effective -ness of the Company’s internal control. An auditalso includes evaluating the appropriate ness ofAccounting Policies used and the reasonableness ofaccounting estimates made by the Directors, as wellas evaluating the overall presentation of thefinancial report.

We believe that the audit evidence we haveobtained is sufficient and appropriate to providea basis for our audit opinion.

Electronic presentation of auditedfinancial report This Auditor’s Report relates to the financial report ofSydney Credit Union Limited for the year ended 30June 2014 included on Sydney Credit Union Limited’sweb site. The Company’s Directors are responsiblefor the integrity of Sydney Credit Union Limited’sweb site. We have not been engaged to report onthe integrity of Sydney Credit Union Limited’s website. The Auditor’s Report refers only to the state -ments named above. It does not provide an opinionon any other information which may have beenhyperlinked to/from these statements. If users ofthis report are concerned with the inherent risksarising from electronic data communications theyare advised to refer to the hard copy of the auditedfinancial report to confirm the information includedin the audited financial report presented on thisweb site.

IndependenceIn conducting our audit, we have complied with theindependence requirements of the CorporationsAct 2001. We confirm that the independencedeclaration required by the Corporations Act 2001,which has been given to the Directors of SydneyCredit Union Limited, would be in the same termsif given to the Directors as at the time of thisauditor’s report.

Independent Auditor’s reportto the Members of Sydney Credit Union Limited




Auditor’s Opinion In our opinion:a. the financial report of Sydney Credit Union

Limited is in accordance with theCorporations Act 2001, including:i giving a true and fair view of the

Company’s financial position as at30 June 2014 and of its performancefor the year ended on that date; and

ii complying with Australian AccountingStandards and the CorporationsRegulations 2001; and

b the financial report also complies withInternational Financial Reporting Standardsas disclosed in the Note 1.

Grant Thornton Audit Pty LtdChartered Accountants

Neville SinclairDirector – Audit & Assurance

Sydney, 25 September 2014




Directors’ Declaration1. In the opinion of the Directors of the Sydney

Credit Union Limited:(a) the financial statements and notes of

Sydney Credit Union Limited are inaccordance with the Corporations Act2001, including (i) complying with Australian

Accounting Standards (includingthe Australian AccountingInterpretations) and theCorporations Regulations 2001;and

(ii) giving a true and fair view of theCompany’s financial position as at30 June 2014 and of its perform -ance for the year ended on thatdate.

(b) there are reasonable grounds tobelieve that Sydney Credit UnionLimited will be able to pay its debts asand when they become due andpayable.

2. The financial statements comply withInternational Financial Reporting Standards.

This declaration is made in accordance with aresolution of the Board of Directors and is signed forand on behalf of the Directors by:

B NevinChair

Dated this 25 September 2014




Statement of Comprehensive Incomefor the financial year ended 30 June 2014

Note 2014 2013$ $

Interest revenue 2.a 32,286,963 34,982,347Less: Interest expense 2.c 14,415,792 16,896,067Net Interest income 17,871,171 18,086,280

Add: Fees, commission and other income 2.b 3,917,849 4,852,017Sub Total 21,789,020 22,938,297

Less:Non-Interest ExpensesImpairment Losses on loans receivable from Members 2.d 218,147 433,887Fee and Commission expenses 3,432,409 3,453,688

3,650,556 3,887,575General Administration— Employees compensation and benefits 10,096,402 10,145,841— Depreciation and Amortisation 2.e 1,064,709 1,157,781— Information Technology 450,307 143,211— Office Occupancy 1,691,820 1,775,238— Other Administration 1,420,664 1,930,840Total General Administration 14,723,902 15,152,911

Other Operating Expenses 2.f 1,093,160 1,086,247

Total Non-Interest Expenses 19,467,618 20,126,733

Profit before Income Tax 2,321,402 2,811,564

Income Tax Expense 3 456,275 697,146

Profit after Income Tax 1,865,127 2,114,418

Add: Other Comprehensive IncomeOther Increases in Members equity - -

Total comprehensive income 1,865,127 2,114,418




Statement of Changes in Member Equityfor the year ended 30 June 2014

Opening Profit Gain on Transfers ClosingBalance for the Business to/(from) Dividends Balance1/7/2013 Year Transfer Reserves Paid 30/6/2014

Preference Share Capital 1,753,240 - - - - 1,753,240

Capital Reserve Account 606,357 - - 15,833 - 622,190

Asset Revaluation Reserve 2,457,683 - - - - 2,457,683

General Reserve 7,146,773 - - - - 7,146,773

General Reserve for Credit Losses 1,869,783 - - - - 1,869,783

Retained Earnings 50,567,056 1,865,127 - (15,833) (79,494) 52,336,856

TOTAL 64,400,892 1,865,127 - - (79,494) 66,186,525

Statement of Changes in Member Equityfor the year ended 30 June 2013

Opening Profit Gain on Transfers ClosingBalance for the Business to/(from) Dividends Balance1/7/2012 Year Transfer Reserves Paid 30/6/2013

Preference Share Capital 1,753,240 - - - - 1,753,240

Capital Reserve Account 592,854 - - 13,503 - 606,357

Asset Revaluation Reserve 2,457,683 - - - - 2,457,683

General Reserve 7,146,773 - - - - 7,146,773

General Reserve for Credit Losses 1,869,783 - - - - 1,869,783

Retained Earnings 48,553,633 2,114,418 - (13,503) (87,492) 50,567,056

TOTAL 62,373,966 2,114,418 - - (87,492) 64,400,892




Note 2014 2013$ $

ASSETSCash 4 12,544,095 13,029,005Liquid Investments 5 117,570,615 101,146,193Receivables 6 2,000,344 640,932Prepayments 351,276 283,145Loans to Members 7 & 8 525,631,255 518,309,675Available for Sale Equity Investments 9 1,697,608 1,697,608Property, Plant and Equipment 10 7,364,537 7,922,084Taxation Assets 11 & 16 1,849,664 1,747,916Intangible Assets 12 267,046 358,067TOTAL ASSETS 669,276,440 645,134,625

LIABILITIESShort Term Borrowings 13 - 3,000,000Deposits from Other Institutions - 5,000,000Deposits from Members 14 589,623,432 559,037,085Creditor Accruals and Settlement Accounts 15 7,917,518 8,231,762Borrowings – Subordinated Deposit 18 1,972,375 1,964,087Taxation Liabilities 16 68,744 -Provisions 17 3,507,846 3,500,799TOTAL LIABILITIES 603,089,915 580,733,733

NET ASSETS 66,186,525 64,400,892

MEMBERS EQUITYPreference Share Capital 19 1,753,240 1,753,240Capital Reserve Account 20 622,190 606,357Asset Revaluation Reserve 21 (i) 2,457,683 2,457,683General Reserves 21 (ii) 7,146,773 7,146,773General Reserve for Credit Losses 22 1,869,783 1,869,783Retained Earnings 52,336,856 50,567,056TOTAL MEMBERS EQUITY 66,186,525 64,400,892

Note Description Note Description23 Financial Risk Management Objectives and Policies 31 Contingent liabilities24 Categories of financial instruments 32 Disclosures on Directors and other Key 25 Maturity profile of Financial Assets and Liabilities Management Personnel26 Non-Current Profile of Financial Assets and Liabilities 33 Economic dependency27 Interest rate change profile of Financial Assets and 34 Superannuation liabilities

Liabilities 35 Securitisation28 Net fair value of Financial Assets and Liabilities 36 Notes to statement of cash flows29 Financial commitments 37 Corporate information30 Standby borrowing facilities

Statement of Financial Positionas at 30 June 2014




Note 2014 2013$ $

REVENUE ACTIVITIES

Revenue InflowsInterest received 32,064,452 35,089,283Fees and commissions 3,200,137 3,424,704Dividends 541,791 393,994Other income 140,285 129,675

35,946,665 39,037,656Revenue OutflowsInterest paid (14,641,283) (18,319,890)Suppliers and employees (18,299,001) (18,723,342)Income taxes paid (512,088) (420,906)Dividends Paid (79,494) ( 87,492)

(33,531,866) (37,551,630)Net Cash from Revenue Activities 36(c) 2,414,799 1,486,026

INFLOWS FROM OTHER OPERATING ACTIVITIESDecrease in Member loans (net movement) (7,525,193) (33,836,178)Increase in Member deposits and shares (net movement) 29,442,787 35,400,509Increase in deposits from other institutions (net movement) (16,424,422) (2,407,000)Decrease in Other Receivables - 200,000Decrease in receivables from other financial institutions (net movement) (5,000,000) 555,066

Net Cash from Operating Activities 493,172 (87,603)

INVESTING ACTIVITIES

InflowsProceeds on sale of investment in shares - 372,752Proceeds on sale of property, plant and equipment 90,031 1,448,656Less: Outflows Purchase of intangible assets (42,577) (55,817)Purchase of property plant and equipment (440,335) (413,388)Net Cash from Investing Activities (392,881) 1,352,203

FINANCING ACTIVITIES

Inflows (Outflows)Decrease in borrowings (12,000,000) (24,000,000)Increase in borrowings 9,000,000 21,958,562Net Cash from Financing Activities (3,000,000) (2,041,438)

Total Net Cash increase/(decrease) (484,910) 709,188Cash at Beginning of Year 13,029,005 12,319,817Cash at End of Year 36(a) 12,544,095 13,029,005

Statement of Cash Flowsfor the year ended 30 June 2014




1. Statement of Significant Accounting PoliciesThis financial report is prepared for Sydney Credit Union Limited as a single entity, for the year ended the30 June 2014. The report was authorised for issue on 25 September 2014 in accordance with a resolution ofthe Board of Directors. The financial report is presented in Australian dollars.

The financial report is a general purpose financial report which has been prepared in accordance with therequirements of the Corporations Act 2001, Australian Accounting Standards and other authoritativepronouncements of the Australian Accounting Standards Board. Compliance with Australian AccountingStandards ensures compliance with the International Financial Reporting Standards (IFRSs) as issued by theInternational Accounting Standards Board (IASB). Sydney Credit Union Limited is a for-profit entity for thepurpose of preparing the financial statements.

a. Basis of Measurement

The financial statements have been prepared on an accruals basis, and are based on historicalcosts, which do not take into account changing money values or current values of non-currentassets. The accounting policies are consistent with the prior year unless otherwise stated.

b. Classification and subsequent measurement of financial assets

Financial assets and financial liabilities are recognised when SCU becomes a party to the contractualprovisions of the financial instrument, and are measured initially at fair value adjusted bytransactions costs, except for those carried at fair value through profit or loss, which are measuredinitially at fair value. Subsequent measurement of financial assets and financial liabilities aredescribed below.

Financial assets are derecognised when the contractual rights to the cash flows from the financialasset expire, or when the financial asset and all substantial risks and rewards are transferred.A financial liability is derecognised when it is extinguished, discharged, cancelled or expires.

(i) Classification and subsequent measurement of financial assets

For the purpose of subsequent measurement, financial assets other than those designatedand effective as hedging instruments are classified into the following categories upon initialrecognition: • loans and receivables• financial assets at fair value through profit or loss (FVTPL) • held-to-maturity (HTM) investments • available-for-sale (AFS) financial assets.

The category determines subsequent measurement and whether any resulting income andexpense is recognised in profit or loss or in other comprehensive income.

All financial assets except for those at FVTPL are subject to review for impairment at least ateach reporting date to identify whether there is any objective evidence that a financial asset ora group of financial assets is impaired. Different criteria to determine impairment are appliedfor each category of financial assets, which are described below.

All income and expenses relating to financial assets that are recognised in profit or loss, arepresented within finance costs, finance income or other financial items, except for impairmentof loans and receivables which is presented within other expenses.

(ii) Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable paymentsthat are not quoted in an active market. After initial recognition, these are measured atamortised cost using the effective interest method, less provision for impairment. SCU's cashand cash equivalents, trade and most other receivables fall into this category of financialinstruments.




Individually significant receivables are considered for impairment when they are past due orwhen other objective evidence is received that a specific counterparty will default. Receivablesthat are not considered to be individually impaired are reviewed for impairment in CreditUnions, which are determined by reference to the industry and region of a counterparty andother shared credit risk characteristics. The impairment loss estimate is then based on recenthistorical counterparty default rates for each identified Credit Union.

(iii) Financial Assets at FVTPL

Financial assets at FVTPL include financial assets that are either classified as held for trading orthat meet certain conditions and are designated at FVTPL upon initial recognition. All derivativefinancial instruments fall into this category, except for those designated and effective ashedging instruments, for which the hedge accounting requirements apply (see below).

Assets in this category are measured at fair value with gains or losses recognised in profit orloss. The fair values of financial assets in this category are determined by reference to activemarket transactions or using a valuation technique where no active market exists.

(iv) HTM investments

HTM investments are non-derivative financial assets with fixed or determinable payments andfixed maturity other than loans and receivables. Investments are classified as HTM if SCU hasthe intention and ability to hold them until maturity. SCU currently holds Term deposits,Negotiable Certificates of Deposit (NCD), Floating Rate Notes, and Bank accepted Bills OfExchange in this category. If more than an insignificant portion of these assets are sold orredeemed early then the asset class will be reclassified as Available For Sale financial assets.

HTM investments are measured subsequently at amortised cost using the effective interestmethod. If there is objective evidence that the investment is impaired, determined by referenceto external credit ratings, the financial asset is measured at the present value of estimatedfuture cash flows. Any changes to the carrying amount of the investment, includingimpairment losses, are recognised in profit or loss.

(v) Available For Sale (AFS) financial assets

AFS financial assets are non-derivative financial assets that are either designated to thiscategory or do not qualify for inclusion in any of the other categories of financial assets. SCU'sAFS financial assets, include the equity investment in Cuscal Limited, and TransAction SolutionsPty Limited.

The equity investment in Cuscal Limited, and TransAction Solutions Pty Limited are measuredat cost less any impairment charges, as its fair value cannot currently be estimated reliably.Impairment charges are recognised in profit or loss.

All other AFS financial assets are measured at fair value. Gains and losses on these assets arerecognised in other comprehensive income and reported within the AFS reserve within equity,except for impairment losses, which are recognised in profit or loss. When the asset isdisposed of or is determined to be impaired, the cumulative gain or loss recognised in othercomprehensive income is reclassified from the equity reserve to profit or loss, and presentedeffective interest method and dividends are recognised in profit or loss within 'finance income'.

Reversals of impairment losses are recognised in other comprehensive income, except forfinancial assets that are debt securities which are recognised in profit or loss only if thereversal can be objectively related to an event occurring after the impairment loss wasrecognised.

(vi) Classification and subsequent measurement of financial liabilities

SCU’s financial liabilities include borrowings, trade and other payables and derivative financialinstruments.




Financial liabilities are measured subsequently at amortised cost using the effective interestmethod, except for financial liabilities held for trading or designated at FVTPL, that are carriedsubsequently at fair value with gains or losses recognised in profit or loss.

All interest-related charges and, if applicable, changes in an instrument's fair value arereported.

c. Loans to Members

(i) Basis of recognition

All loans are initially recognised at fair value, net of loan origination fees and inclusive oftransaction costs incurred. Loans are subsequently measured at amortised cost. Anydifference between the proceeds and the redemption amount is recognised in the incomestatement over the period of the loans using the effective interest method.

Loans to Members are reported at their recoverable amount representing the aggregateamount of principal and unpaid interest owing to SCU at balance date, less any allowance orprovision against impairment for debts considered doubtful. A loan is classified as impairedwhere recovery of the debt is considered unlikely as determined by the Board of Directors.

(ii) Interest earned

Term loans – the loan interest is calculated on the basis of daily balance outstanding and ischarged in arrears to a Members account on the last day of each month.

Overdraft – the loan interest is calculated initially on the basis of the daily balance outstandingand is charged in arrears to a Members account on the last day of each month.

Credit cards – the interest is calculated initially on the basis of the daily balance outstandingand is charged in arrears to a Members account on the 28th day of each month, on cashadvances and purchases in excess of the payment due date. Purchases are granted up to 55days interest free until the due date for payment.

Non-accrual loan interest – while still legally recoverable, interest is not brought to account asincome where SCU is informed that the Member has deceased, or, where a loan is impaired.

(iii) Loan origination fees and discounts

Loan establishment fees and discounts are initially deferred as part of the loan balance, andare brought to account as income over the expected life of the loan as interest revenue.

(iv) Transaction costs

Transaction Costs are expenses which are direct and incremental to the establishment of theloan. These costs are initially deferred as part of the loan balance, and are brought to accountas a reduction to income over the expected life of the loan. The amounts brought to accountare included as part of Interest revenue.

(v) Fees on loans

The fees charged on loans after origination of the loan are recognised as income when theservice is provided or costs are incurred.

(vi) Net gains and losses

Net gains and losses on loans to Members to the extent that they arise from the partialtransfer of business or on securitisation, do not include impairment write downs or reversals ofimpairment write downs.




d. Loan Impairment

(i) Specific and Collective Provision for Impairment

A provision for losses on impaired loans is recognised when there is objective evidence thatthe impairment of a loan has occurred. Estimated impairment losses are calculated on eithera portfolio basis for loans of similar characteristics, or on an individual basis. The amountprovided is determined by management and the board to recognise the probability of loanamounts not being collected in accordance with terms of the loan agreement. The criticalassumptions used in the calculation are as set out in Note 8. Note 23 details the credit riskmanagement approach for loans.

The APRA Prudential Standards require a minimum provision to be maintained, based onspecific percentages on the loan balance which are contingent upon the length of time therepayments are in arrears. This approach is used to assess the collective provisions forimpairment.

An assessment is made at each statement of financial position date to determine whetherthere is objective evidence that a specific financial asset or a group of financial assets isimpaired. Evidence of impairment may include indications that the borrower has defaulted, isexperiencing significant financial difficulty, or where the debt has been restructured to reducethe burden to the borrower.

(ii) Reserve for Credit Losses

In addition to the above specific provision, the Board has recognised the need to make anallocation from retained earnings to ensure there is adequate protection for Members againstthe prospect that some Members will experience loan repayment difficulties in the future. Thereserve is based on estimation of potential risk in the loan portfolio based upon:

– the level of security taken as collateral; and

– the concentration of loans taken by employment type.

(iii) Renegotiated loans

Loans which are subject to renegotiated terms which would have otherwise been impaired donot have the repayment arrears diminished and interest continues to accrue to income. Eachrenegotiated loan is retained at the full arrears position until the normal repayments arereinstated and brought up to date and maintained for a period of 6 months.

e. Bad debts written off (direct reduction in loan balance)

Bad debts are written off from time to time as determined by management and the Board ofDirectors when it is reasonable to expect that the recovery of the debt is unlikely. Bad debts arewritten off against the provisions for impairment, if a provision for impairment had previously beenrecognised. If no provision had been recognised, the write offs are recognised as expenses in theincome statement.

f. Property, Plant and Equipment

Land and buildings are measured at acquisition cost less accumulated depreciation. Currentvaluations to within 3 years of the reporting date are used to determine the need to recognise in theaccounts any impairment to the acquisition cost. Any revaluation increments are credited to the assetrevaluation reserve, unless it reverses a previous decrease in value in the same asset previouslydebited to the income statement. Revaluation decreases are debited to the income statement unlessit directly offsets a previous revaluation increase in the same asset in the asset revaluation reserve.




Property, plant and equipment with the exception of freehold land, are depreciated on a straight linebasis so as to write off the net cost of each asset over its expected useful life to SCU. The useful livesare adjusted as appropriate at each reporting date. Estimated useful lives at the balance date are asfollows:

– Buildings – 40 years.– Leasehold Improvements – lesser of the lease term or 10 years.– Plant and Equipment – 3 to 7 years.– Assets less than $300 are not capitalised.

g. Receivables from Other Financial Institutions

Term deposits and Negotiable Certificates of Deposit with other financial institutions are unsecuredand have a carrying amount equal to their principal amount. Interest is paid on the daily balance atmaturity. All deposits are in Australian currency.

The accrual for interest receivable is calculated on a proportional basis of the expired period of theterm of the investment. Interest receivable is included in the amount of receivables in the statementof financial position.

h. Equity Investments and Other Securities

Investments in shares are classified as available for sale financial assets where they do not qualifyfor classification as loans and receivables, or investments held for trading.

Investments in shares listed on the stock exchanges are re-valued to fair value based on the marketbid price at the close of business on statement of financial position date. The gains and losses in fairvalue are reflected in equity through the asset revaluation reserve.

Investments in shares which do not have a ready market and are not capable of being reliablyvalued are recorded at the lower of cost or recoverable amount.

Realised net gains and losses on available for sale financial assets taken to the profit and lossaccount comprises only gains and losses on disposal.

All investments are in Australian currency.

i. Member Deposits

(i) Basis for Measurement

Member savings and term investments are quoted at the aggregate amount of money owingto depositors.

(ii) Interest Payable

Interest on savings is calculated on the daily balance and posted to the accounts periodically,or on maturity of the term deposit. Interest on savings is brought to account on amount ofmoney owing to depositors on an accrual basis in accordance with the interest rate terms andconditions of each savings and term deposit account as varied from time to time. The amountof the accrual is shown as part of amounts payable.

j. Borrowings

All loans and borrowings are initially recognised at fair value, net of transaction costs incurred.Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (netof transaction costs) and the redemption amount is recognised in the income statement over theperiod of the loans and borrowings using the effective interest method.




k. Provision for Employee Benefits

Provision is made for SCU’s liability for employee benefits arising from services rendered byemployees to balance date. Employee benefits expected to be settled within one year, have beenmeasured at their nominal amount.

Other employee benefits payable later than one year have been measured at the present value ofthe estimated future cash outflows to be made for those benefits discounted using nationalgovernment bond rates.

Provision for long service leave is on a pro-rata basis from commencement of employment with SCUbased on the present value of its estimated future cash flows.

Annual leave is accrued in respect of all employees on pro-rata entitlement for part years of serviceand leave entitlement due but not taken at balance date. Annual leave is reflected as part of thesundry creditors and accruals.

Contributions are made by SCU to an employee’s superannuation fund and are charged to theincome statement as incurred.

l. Leasehold on Premises

Leases where the lessor retains substantially all the risks and rewards of ownership of the net assetare classified as operating leases. Payments made under operating leases (net of incentives receivedfrom the lessor) are charged to the income statement on a straight-line basis over the period of thelease.

A provision is recognised for the estimated make good costs on the operating leases, based on theNet Present Value of the future expenditure at the conclusion of the lease term discounted at 5%.

Increases in the provision in future years due to the unwinding of the interest charge, is recognisedas part of the interest expense.

m. Income Tax

The income tax expense shown in the Income Statement is based on the operating profit beforeincome tax adjusted for any non tax deductible, or non-assessable items between accounting profitand taxable income. Deferred Tax Assets and Liabilities are recognised using the statement offinancial position liability method in respect of temporary differences arising between the tax basesof assets or liabilities and their carrying amounts in the financial statements. Current and deferredtax balances relating to amounts recognised directly in equity are also recognised directly in equity.

Deferred tax assets and liabilities are recognised for all temporary differences between carryingamounts of assets and liabilities for financial reporting purposes and their respective tax bases at therate of income tax applicable to the period in which the benefit will be received or the liability willbecome payable. These differences are presently assessed at 30%.

Deferred tax assets are only brought to account if it is probable that future taxable amounts will beavailable to utilise those temporary differences. The recognition of these benefits is based on theassumption that no adverse change will occur in income tax legislation; and the anticipation thatSCU will derive sufficient future assessable income and comply with the conditions of deductibilityimposed by the law to permit a future income tax benefit to be obtained.

n. Intangible Assets

Items of computer software which are not integral to the computer hardware owned by SCU areclassified as intangible assets.

Computer software held as intangible assets is amortised over the expected useful life of thesoftware. These lives range from 2 to 5 years.




o. Goods and Services Tax

As a financial institution SCU is input taxed on all income except other income from commissions andsome fees. An input taxed supply is not subject to GST collection, and similarly the GST paid onrelated or apportioned purchases cannot be recovered. As some income is charged GST, the GST onpurchases are generally recovered on a proportionate basis. In addition certain prescribedpurchases are subject to reduced input tax credits (RITC), of which 75% of the GST paid isrecoverable.

Revenue, expenses and assets are recognised net of the amount of goods and services tax (GST). Tothe extent that the full amount of GST incurred is not recoverable from the Australian Tax Office (ATO),the GST is recognised as part of the cost of acquisition of the asset or as part of an item of theexpense.

Receivables and payables are stated with the amount of GST included where applicable GST iscollected. The net amount of GST recoverable from, or payable to, the ATO is included as a currentasset or current liability in the statement of financial position. Cash flows are included in the cashflow statement on a gross basis. The GST components of cash flows arising from investing andfinancing activities which are recoverable from, or payable to, the Australian Taxation Office areclassified as operating cash flows.

p. Business Combinations

The Group applies the acquisition method in accounting for business combinations.

Under Financial Sector (Transfers of Business) Act 1999 all the assets and liabilities of the transferringbody, wherever those assets and liabilities are located, become (respectively) assets and liabilities ofthe receiving body without any transfer, conveyance or assignment.

The consideration transferred by SCU to obtain control of the net assets is calculated as the sum ofthe acquisition-date fair values of assets transferred, liabilities incurred and the equity interestsissued by SCU, which includes the fair value of any asset or liability arising from a contingentconsideration arrangement. Acquisition costs are expensed as incurred.

SCU recognises identifiable assets acquired and liabilities assumed in a business combinationregardless of whether they have been previously recognised in the acquired entity's financialstatements prior to the acquisition. Assets acquired and liabilities assumed are generally measuredat their acquisition-date fair values.

Goodwill (if applicable) is stated after separate recognition of any identifiable intangible assets. It iscalculated as the excess of the sum of (a) fair value of consideration transferred, (b) the recognisedamount of any non-controlling interest in the acquired entity and (c) acquisition-date fair value of anyexisting equity interest in the acquired entity, over the acquisition-date fair values of identifiable netassets.

Where the fair values of identifiable net assets exceed the sum calculated above, the excess amountis recognised directly in equity for a mutual organisation [as prescribed by AASB 3 Guidance B47].

q. Impairment of Assets

At each reporting date SCU assesses whether there is any indication that individual assets areimpaired. Where impairment indicators exist, recoverable amount is determined and impairmentlosses are recognised in the income statement where the asset's carrying value exceeds itsrecoverable amount. Recoverable amount is the higher of an asset's fair value less costs to sell andvalue in use. For the purpose of assessing value in use, the estimated future cash flows arediscounted to their present value using a pre-tax discount rate that reflects current marketassessments of the time value of money and the risks specific to the asset. Where it is not possible toestimate recoverable amount for an individual asset, recoverable amount is determined for the cash-generating unit to which the asset belongs.


r. Accounting Estimates and Judgements

Management have made judgements when applying SCU’s accounting policies with respect to

i. De-Recognition of loans assigned to a special purpose vehicle used for securitisation purposes– refer Note 7.

ii. The classification of preference shares as equity instruments – refer Note 19.

Management have made critical accounting estimates when applying SCU’s accounting policies withrespect to the impairment provisions for loans - refer Note 8.

s. New standards applicable for the current year

SCU applies the current revised accounting standards applicable for financial years commencing1 July 2013. SCU has adopted the following amended standards in the presentation of the financialreport.

AASBreference

Nature of Change Application date: Impact on InitialApplication

AASB 10

(Issued August2012)ConsolidatedFinancialStatements

Introduces a single ‘control model’ for all entities,including Special Purpose Entities (SPEs), wherebyall of the following conditions must be present:Power of investee (whether or not power used inpractice). Exposure, or rights, to variable returnsfrom investee. Ability to use power over investee to affect theentity’s returns from the investee.

Annual reportingperiodscommencing on orafter 1 July 2013

When this standard isfirst adopted for the yearended 30 June 2014,there will be no impacton transactions andbalances recognised inthe financial statementsbecause SCU does nothave any specialpurpose entities.

AASB 13

(IssuedSeptember2012)Fair ValueMeasurement

Currently, the fair value measurementrequirements are included in several AccountingStandards. AASB 13 establishes a single frameworkfor measuring fair value of financial and non-financial items recognised at fair value in thestatement of financial position or disclosed in thenotes in the financial statements.Additional disclosures required for items measuredat fair value in the statement of financial position,as well as items merely disclosed at fair value inthe notes to the financial statements. Extensiveadditional disclosure requirements for itemsmeasured at fair value that are ‘level 3’ valuationsin the fair value hierarchy that are not financialinstruments, e.g. land and buildings, investmentproperties etc.

An nual reportingperiodscommencing on orafter 1 January2013

This standard is firstadopted for the yearended 30 June 2014,There is no impact onthe financial statementsbecause the revised fairvalue measurementrequirements applyprospectively from 1January 2013 and assetsimpacted are Shares inCuscal and IDPC whichare not material to thefinancial statements.






AASBreference

Nature of Change Applicationdate:

Impact on Initial Application

AASB 119

(ReissuedSeptember2012)EmployeeBenefits

Main changes include:Elimination of the ‘corridor’ approach ofdeferring gains/losses for definedbenefit plans.Actuarial gains/losses on remeasuringthe defined benefit planobligation/asset to be recognised inother comprehensive income ratherthan in profit or loss, and cannot bereclassified in subsequent periods.Subtle amendments to timing forrecognition of liabilities for terminationbenefits.Employee benefits expected to besettled (as opposed to due to be settledunder current standard) within 12months after the end of the reportingperiod are short term benefits , andtherefore not discounted whencalculating leave liabilities. Annual leavenot expected to be used within 12months of end of reporting period will infuture be discounted when calculatingleave liability.

Annualreportingperiodscommencingon or after 1January 2013.

SCU currently calculates its liability forannual leave employee benefits on thebasis that it is due to be settled within 12months of the end of the reportingperiod because employees are entitledto use this leave at any time. Theamendments to AASB 119 require thatsuch liabilities be calculated on the basisof when the leave is expected to betaken, i.e. expected settlement.When this standard is first adopted for30 June 2014 year end, annual leaveliabilities will be recalculated on 1 July2013.Leave liabilities for any employees withsignificant balances of leave outstandingwho are not expected to take their leavewithin 12 months will be discounted,which may result in a reduction of theannual leave liabilities recognised on1 July 2013 and a correspondingincrease in retained earnings as at thatdate.

t. New or emerging standards not yet mandatory

Certain Accounting standards and interpretations have been published that are not mandatory for30 June 2014 reporting periods. SCU’s assessment of the impact of these new standards andinterpretations is set out below.

AASBreference

Nature of Change Applicationdate:

Impact on Initial Application

AASB 9

FinancialInstruments(IssuedDecember2009 andamendedDecember2010)

Amends the requirements forclassification and measurement offinancial assets.The following requirements havegenerally been carried forwardunchanged from AASB 139 FinancialInstruments: Recognition andMeasurement into AASB 9. Theseinclude the requirements relating to:Classification and measurement offinancial liabilities; and Derecognitionrequirements for financial assets andliabilities.However, AASB 9 requires that gains orlosses on financial liabilities measuredat fair value are recognised in profit orloss, except that the effects of changesin the liability’s credit risk arerecognised in other comprehensiveincome.

Periodsbeginning onor after 1January 2015.

Due to the recent release of theseamendments and that adoption is onlymandatory for the 30 June 2016 yearend, SCU has not yet made anassessment of the impact of theseamendments.At 30 June 2013, SCU does not haveany financial liabilities measured at fairvalue through profit or loss.There will therefore be no impact on thefinancial statements when theseamendments to AASB 9 are adopted.




2. Income StatementNote 2014 2013

$ $a. Analysis of interest revenue

Interest revenue on assets carried at amortised costCash – deposits at call 386,362 349,268Receivables from financial institutions 3,589,598 4,044,480Loans to Members 28,305,377 30,578,968Loans to capital investors 5,626 9,631TOTAL INCOME FROM RECEIVABLES 32,286,963 34,982,347

b. Fee, commission and other income

Fee and commission revenueFee income on loans – other than loan origination fees 442,614 458,906Fee Income from Member deposits 1,302,759 1,424,913Other fee income 110,283 145,853Insurance commissions 598,635 666,778Other commissions 755,186 737,208TOTAL FEE AND COMMISSION REVENUE 3,209,477 3,433,658

Other income Available for sale assetsGain on sale of available for sale investments– not previously re-valued in equity - -Dividends received on available for sale assets 541,791 393,994Bad debts recovered 93,780 81,635Income from property (rental income) 48,400 48,000Gain on disposal of assets– Property, plant and equipment 24,401 894,690Miscellaneous revenue - 40TOTAL FEE COMMISSION AND OTHER INCOME 3,917,849 4,852,017

c. Interest expenses

Interest expense on liabilities carried at amortised cost Short Term Borrowings 29,979 152,441Deposits from other financial institutions 159,585 162,465Deposits from Members 14,024,353 16,396,007Overdraft 21,224 24,787Interest – Subordinated Debt 180,651 160,367TOTAL INTEREST EXPENSE 14,415,792 16,896,067




Note 2014 2013$ $

d. Impairment losses Available for Sale Assets - -

Loans and advances Increase in provision for impairment 218,147 433,887

TOTAL IMPAIRMENT LOSSES 218,147 433,887

e. Other prescribed disclosures

General administration – employees costs include:– net movement in provisions for employee

annual leave (2,319) (3,645)– net movement in provisions for employee

long service leave 130,233 90,716

General Administration – Depreciation & Amortisation expense comprisesBuildings 174,599 172,506Plant and equipment 295,961 376,676Leasehold improvements (includes lease make-good prov.) 460,550 424,936Intangibles 133,598 183,663

1,064,708 1,157,781General Administration – Office Occupancy costs include –Property operating lease payments– minimum lease payments 1,691,820 1,341,754

f. Other Operating expenses include

Audit and review of financial statements (GST Exclusive)– Audit fees – current year – Grant Thornton 102,550 109,615– Audit fees – current year – Other Auditors - -

Other Services (GST Exclusive)

– Taxation Services – Grant Thornton 6,000 6,000– Taxation Services – Other Auditors - - – Compliance Services – Grant Thornton 2,500 2,750– Compliance Services – Other Auditors - - – Other Services – Other Auditors - -

111,050 118,365

Defined contribution superannuation expenses 29,017 36,406

Loss on disposal of assets– Property, plant, equipment - -




Note 2014 2013$ $

3. Income Tax Expensea. The income tax expense comprises amounts

set aside as:-

Current tax expense – current year profits 3(b) 545,783 612,879Adjustments for previous years 16,300 (81,816)Deferred tax expense (105,808) 166,083Total current income tax expense 456,275 697,146

b. The prima facie tax payable on profit is reconciled to the income tax expense in the accounts as follows:

Profit 2,321,402 2,811,564Prima facie tax payable on profit before income tax at 30% 696,421 843,469

Add tax effect of expenses not deductible– Other non-deductible expenses 54,867 67,535– Dividend Imputation adjustment 69,653 65,143Subtotal 820,941 976,147

Less– Non Assessable Income - (111,806)– Deductions Allowed not in Accounting Expenses (42,981) (34,316)– Franking rebate (232,177) (217,146)Income tax expense attributableto current year profit 545,783 612,879

c. Franking CreditsFranking credits held by SCU after adjusting for franking credits that will arise from thepayment of income tax payable as at theend of the financial year is: 11,072,094 10,279,438

4. CashCash on hand 1,518,063 1,330,621Deposits at call 11,026,032 11,698,384

12,544,095 13,029,005

5. Liquid Investmentsa. Hold to Maturity

Negotiable Certificates of Deposits 90,810,615 81,486,193ReceivablesTerm Deposits 26,760,000 19,660,000

117,570,615 101,146,193b. Dissection of Receivables

Deposits with Industry Bodies – Cuscal 34,757,834 37,717,538Deposits with other Societies 21,952,781 1,968,655Deposits with banks 60,860,000 61,460,000

117,570,615 101,146,193




Note 2014 2013$ $

6. ReceivablesInterest receivable on deposits with other financial institutions 740,454 523,138

Sundry debtors and settlement accounts 1,259,890 117,7942,000,344 640,932

7. Loans To Membersa. Amount due comprises:

Overdrafts and revolving credit 15,191,840 16,048,881Term loans 511,401,142 503,281,138Subtotal 526,592,982 519,330,019Less:Unamortised loan origination fees (75,849) (85,188)Unearned Income (144,350) (149,545)Subtotal 526,372,783 519,095,286Less:Provision for impaired loans (8) (741,528) (785,611)

525,631,255 518,309,675

b. Credit Quality – Security held against loans

Secured by mortgage over business assets 10,590,668 11,317,104Secured by mortgage over real estate 476,662,596 464,761,244Partly secured by goods mortgage 14,329,521 16,842,323Wholly unsecured 25,010,197 26,409,348 Total 526,592,982 519,330,019

It is not practicable to value all collateral as at thebalance date due to the variety of assets andcondition. A breakdown of the quality of theresidential mortgage security on a portfolio basisis as follows: 2014 2013

$ $Security held as mortgage against real estate is on the basis of

– loan to valuation ratio of less than 80% 370,491,840 359,500,432

– loan to valuation ratio of more than 80% but mortgage insured 84,911,328 81,897,231

– loan to valuation ratio of more than 80% and not mortgage insured 21,259,428 23,363,581

Total 476,662,596 464,761,244

The Board decided not to require disclosure of the fair value of collateral held, but to requiredisclosure of only a description of collateral held as security and other credit enhancements. TheBoard noted that such disclosure does not require an entity to establish fair values for all its collateral(in particular when the entity has determined that the fair value of some collateral exceeds thecarrying amount of the loan) and, thus, would be less onerous for entities to provide than fair values.




Note 2014 2013$ $

c. Concentration of Loans

The values discussed below include on statement of financial position values and off statement of financial position undrawn facilities as described in Note 29. (29)

(i) Loans to individual or related groups of Members which exceed 10% of Member’s equity in aggregate 7,322,279 7,329,453

(ii) There are no loans to Members concentrated to individuals employed in any individual industry

(iii) Loans to Members are concentrated in the following Geographical locations:

New South Wales 500,795,182 493,335,492ACT 1,132,248 1,347,238Victoria 2,616,696 3,090,877Queensland 16,616,064 15,342,058South Australia 2,257,390 2,601,368Western Australia 1,643,189 1,756,853Northern Territory 280,408 320,020Tasmania 1,251,805 1,536,113TOTAL 526,592,982 519,330,019

(iv) Loans by Customer type were

Loans to Natural persons– Residential loans and facilities 458,320,206 440,372,893– Personal loans and facilities 57,682,108 67,334,686– Business loans and facilities - -

516,002,314 507,707,579 Loans to corporations 10,590,668 11,622,440TOTAL 526,592,982 519,330,019

8. Provision on Impaired Loans

a. Total provision comprises

Individual Specific provisions 741,528 785,611Total Provision 741,528 785,611

b. Movement in the provision for impairment

Balance at the beginning of year 785,611 934,957Add (deduct):– Transfers from (to) Income Statement 218,147 433,887– Bad debts written off provision (262,230) (583,233)Specific Provision Balance at end of year 741,528 785,611

Details of credit risk management is set out (23)in Note 23.




2014 2013$ $

c. Impaired loans written off

Amounts written off against the provision for impaired loans 262,230 583,233Amounts written off directly to expense 655 -Total bad debts 262,885 583,233Bad debts recovered in the period 93,780 81,635

93,780 81,635

d. Analysis of loans that are impaired or potentially impaired by class

In the Note below – Carrying Value is the amount of the statement of financial position– Impaired loans value is the ‘on statement of financial position’ loan balances which are past due

by 91 Days or more – Provision for impairment is the amount of the impairment provision allocated to the class of

impaired loans

2014 2014 2014 2013 2013 2013Carrying Value of Provision for Carrying Value of Provision for

value Impaired impairment value Impaired impairmentLoans Loans

$ $ $ $ $ $Loans to Members Mortgages 472,999,687 - - 460,380,927 - -Personal & Commercial 38,401,455 1,033,513 559,260 42,900,211 1,322,904 656,535Revolving Credit Facilities& Credit cards 15,191,840 272,111 182,268 16,048,881 187,527 129,076

Total 526,592,982 1,305,624 741,528 519,330,019 1,510,431 785,611

Past due value is the ‘on statement of financial position’s loan balances which are past due by 91 days ormore. It is not practicable to determine the fair value of all collateral as at the balance date due to thevariety of assets and condition.

e. Analysis of loans that are impaired or potentially impaired based on age of repayments outstanding

2014 2014 2013 2013Carrying Provision Carrying Provision

Value Value$ $ $ $

Non impaired up to 30 days 525,287,358 - 517,819,588 -31 to 90 days in arrears 283,921 56,784 401,727 80,34591 to 182 days in arrears 291,136 114,791 430,172 172,069183 to 272 days in arrears 66,700 39,768 104,615 62,769273 to 365 days in arrears 103,611 79,615 75,605 60,484Over 365 days in arrears 288,145 268,302 310,785 280,868

Over-limit facilities over 14 days 272,111 182,268 187,527 129,076Total 526,592,982 741,528 519,330,019 785,611

The impaired loans are generally not secured against residential property. Some impaired loans aresecured by bill of sale over motor vehicles or other assets of varying value. It is not practicable to determinethe fair value of all collateral as at the balance date due to the variety of assets and condition.




2014 2013$ $

f. Assets acquired via enforcement of security - -

g. Loans with repayments past due but not regarded as impaired

There are loans with a value of $1,719,570 past due which not considered to be impaired as the valueof related security over residential property is in excess of the loan due. It is not practicable todetermine the fair value of all collateral as at the balance date due to the variety of assets andcondition.

Loans with repayments past due but not impaired are in arrears as follows:

Loans Members 1-3 Mths 3-6 Mths 6-12 Mths > 1 Year Total

2014Mortgage secured 1,221,651 410,232 87,687 - 1,719,570Personal loans - - - -Revolving Credit

and Credit Card Facilities - - - -Total 1,221,651 410,232 87,687 - 1,719,570

2013Mortgage secured 2,199,059 615,650 330,736 - 3,145,445Personal loans - - - - -Revolving Credit

and Credit Card Facilities - - - - -Total 2,199,059 615,650 330,736 - 3,145,445

Key assumptions in determining the provision for impairment

In the course of the preparation of the annual report SCU has determined the likely impairment losson loans which have not maintained the loan repayments in accordance with the loan contract, orwhere there is other evidence of potential impairment such as industrial restructuring, job losses oreconomic circumstances. In identifying the impairment likely from these events SCU is required toestimate the potential impairment using the length of time the loan is in arrears and the historicallosses arising in past years. Given the relatively small number of impaired loans, the circumstancesmay vary for each loan over time resulting in higher or lower impairment losses. An estimate isbased on the period of impairment

Period of impairment % of

Up to 30 days 031 days to 90 days 2091 days to 182 days 40183 days to 272 days 60273 days to 365 days 80Over 365 days 100




2014 2013$ $

9. Available for Sale InvestmentsShares in Listed companies – –

Shares in Unlisted companies – at cost– Cuscal Limited (a) 1,697,597 1,697,597– TransAction Solutions Pty Limited (b) 254,318 254,318– Shared Services Pty Ltd 1 1– Maritime Mining & Power Credit Union 10 10Total Value of investments 1,951,926 1,951,926

Less Provisions for impairment– TransAction Solutions Pty Limited (b) (254,318) (254,318)TOTAL INVESTMENTS net of provision 1,697,608 1,697,608

Disclosures on Shares held at cost

a. Cuscal Limited

The shareholding in Cuscal is measured at cost as its fair value could not be measured reliably. Thiscompany supplies services to SCU organisations. These shares are held to enable SCU to receiveessential banking services – refer to Note 33. The shares are able to be traded.

The financial reports of Cuscal record net tangible asset backing of these shares exceeding their costvalue. Based on the net assets of Cuscal, any fair value determination on these shares is likely to begreater than their cost value, but due to the absence of a ready market, a market value is not able tobe determined readily.

SCU is not intending to dispose of these shares.

b. TransAction Solutions Pty Limited (TAS)

The shareholding in TAS is measured at cost as its fair value could not be measured reliably.

These shares are held to enable SCU to receive essential computer support staff and services to meetthe day to day needs of SCU, and compliance with the relevant Prudential Standards. The shares arenot able to be traded and are not redeemable.

The financial reports of TAS record net tangible asset backing of these shares exceeding their costvalue. Based on the net assets of TAS, any fair value determination on these shares is likely to begreater than their cost value, but due to the absence of a ready market and restrictions on the abilityto transfer the shares, a market value is not able to be determined readily.

SCU is not intending to dispose of these shares.




Note 2014 2013$ $

10. Property, Plant and Equipment

a. Fixed Assets

Land – at deemed cost 1,171,400 1,171,4001,171,400 1,171,400

Buildings – at deemed cost 6,585,907 6,376,991Less: Provision for depreciation (1,594,759) (1,420,157)

4,991,148 4,956,834Total Land & Buildings 6,162,548 6,128,234

Plant and equipment – at deemed cost 2,696,951 2,884,936Less: Provision for depreciation (2,338,711) (2,367,477)

358,240 517,459

Capitalised Leasehold Improvements at deemed cost 2,659,990 2,673,745Less: Provision for amortisation (1,855,731) (1,463,993)

804,259 1,209,752

Lease Makegood Asset 295,050 303,050Less: Provision for amortisation (255,560) (236,411)

39,490 66,639843,749 1,276,391

Total Property, Plant and Equipment 7,364,537 7,922,084

b. Land and Buildings – Valuation

The following properties have been valued on the basis stated. The properties continue to be recognised inthe Financial Statements at their deemed cost, with any increase in the value not being brought to account.

Location Date Basis Cost Value Amt Valuer

Car Park251-255a ClarenceStreet, Sydney NSW

23/08/12 Fair Market Value $23,159 $60,000Stephen J McLarenAAPIReg. Val. No. 2130

Land & Buildings60 Cooper Street, Surry Hills NSW

07/07/11 Sale Price $590,000 $1,596,100Property sold 3 July 2012

Land & Buildings138 Waterloo Road,Greenacre NSW

14/08/12 Fair Market Value $686,931 $1,250,000Stephen J McLarenAAPIReg. Val. No. 2130

Land & Buildings19 Second Avenue,Blacktown NSW

30/06/11 Fair Market Value $4,368,998 $4,600,000

V.J. Lupton FAPI (Val &Econ) Registration No.1221 and for AlcornLupton & AssociatesPty Ltd




Movement in the assets balances during the year were:

2014 2013Plant & Plant &

Property equipment Leasehold Property equipment Leasehold$ $ $ $ $ $

Opening balance 6,128,234 517,459 1,276,391 6,849,566 795,838 1,369,382Purchases in the year 208,917 200,928 30,942 - 101,442 331,946Transfer - - - - - -

6,337,151 718,387 1,307,333 6,849,566 897,280 1,701,328

LessAssets Disposed - (64,186) (3,034) (548,826) (3,145) -Depreciation charge (174,603) (295,961) (460,550) (172,506) (376,676) (424,937)Balance at the end of the year 6,162,548 358,240 843,749 6,128,234 517,459 1,276,391

Note 2014 2013$ $

11. Taxation AssetsDeferred Tax Asset 1,749,879 1,613,045Income Tax Refund Due (17) - 12,277GST Recoverable 99,785 122,594

1,849,664 1,747,916

Deferred tax asset comprise:Accrued expenses not deductible until incurred 268,527 330,826Provisions for impairment on loans 222,458 235,683Provisions for employee benefits 1,048,786 1,019,572Depreciation on fixed assets 218,582 35,456Unearned Income (8,474) (8,492)

1,749,879 1,613,045

Location Date Basis Cost Value Amt Valuer

Land & Buildings189 Clarinda Street,Parkes NSW

31/08/10 Fair Market Value $343,690 $360,000

James S Patterson AAPIRegional & Rural ValuersPty Limited. Reg. Val. No. 2546

Land & Buildings268 Macquarie Road,Springwood NSW

06/09/10 Fair Market Value $1,200,000 $1,586,000Lloyd’s Property ValuationsReg Val. No. 1640

Land & Buildings29 Church Street,Lidcombe NSW

21/08/12 Fair Market Value $900,002 $1,330,000Stephen J McLaren AAPICertified Practicing ValuerReg. Val. No. 2130




Note 2014 2013$ $

12. Intangible AssetsComputer software 1,247,237 1,204,660Less provision for amortisation (980,191) (846,593)

267,046 358,067

Movement in the assets balances during the year were :

Opening balance 358,067 485,914Purchases 42,577 55,817LessAmortisation charge (133,598) (183,664)Impairment loss - -Balance at the end of the year 267,046 358,067

13. Short Term BorrowingsLoans - 3,000,000TOTAL SHORT TERM BORROWINGS - 3,000,000

14. Deposits From MembersMember Deposits– at call 290,965,367 263,122,212– term 298,392,899 295,635,980Member Withdrawable Shares 265,166 278,893TOTAL DEPOSITS & SHARES 589,623,432 559,037,085

Concentration of Member Deposits

There were no significant individual Memberdeposits which in aggregate represent morethan 10% of the total liabilities:

(i) Geographical concentrations

New South Wales 576,420,745 547,469,671ACT 703,744 719,923Victoria 1,741,113 1,283,052Queensland 8,935,449 8,355,993South Australia 411,522 458,557Western Australia 1,036,850 529,982Northern Territory 124,046 31,084Tasmania 249,963 188,823Total per Balance Sheet 589,623,432 559,037,085




Note 2014 2013$ $

15. Creditor Accruals and Settlement AccountsAnnual Leave 1,105,841 1,105,883Creditors and accruals 3,012,392 644,048Interest payable on borrowings - 5,622Interest payable on deposits 3,106,560 3,334,717Accrual for GST payable 56,649 60,158Sundry creditors 636,076 3,081,334TOTAL AMOUNTS PAYABLE 7,917,518 8,231,762

16. Taxation LiabilitiesCurrent income tax liability 68,744 -TOTAL TAXATION LIABILITIES 68,744 -

Current income tax liability comprises:

Balance – previous year (12,277) (245,738)Less: Payments in current year (4,023) 327,554Over / under statement in prior year (16,300) 81,816

Liability for income tax in current year 576.810 739,152Less: Instalments paid in current year (508,066) (751,429)Balance/(refund due) – current year 68,744

(12,277)

17. ProvisionsLong service leave 2,251,150 2,156,987Lease make good of premises 295,050 303,050Provisions – other 961,646 1,040,762TOTAL PROVISIONS 3,507,846 3,500,799

18. Long Term Borrowings –Subordinated Debt

SUBORDINATED DEBT ACCOUNTBalance at the beginning of the year 2,000,000 2,000,000Increase due to debt issued– Subordinated Debt - -Less: Debt Raising Discount (41,438) (41,438)Add: Debt Raising Discount amortised 13,813 5,525Balance at the end of year 1,972,375 1,964,087




Note 2014 2013$ $

19. Preference Shares Balance at the beginning of the year 1,753,240 1,753,240Increase due to shares issued - -Balance at the end of year 1,753,240 1,753,240

SCU entered into an agreement to issueredeemable preference shares.

SCU issued 20,000 redeemable preference 2,000,000 2,000,000shares with a face value of $100 each toAustralian Mutual T1 Capital Funding Trust. Theshares may be redeemable after June 2016.

Less capital raising costs associated with the issue (46,760) (46,760)

As part of the capital raising scheme, SCU (200,000) (200,000)was required to provide a limited recourseunsecured subordinated loan to the Trustee for10% of the face value of shares issued. The loan isrepayable upon the redemption of the shares.

Net amount received for the issue of shares 1,753,240 1,753,240

Key Assumptions

The structure of the share issue agreement and theT1 Loss Reserve are considered to be effectively onetransaction to raise capital. This view is consistentwith the way the capital is treated for prudentialcapital adequacy requirements.

20. Capital Reserve AccountBalance at the beginning of the year 606,357 592,854Transfer from retained earnings on share redemptions 15,833 13,503Balance at the end of year 622,190 606,357

a. Share Redemption

The accounts represent the amount of redeemablepreference shares redeemed by SCU since 1 July1999. The Law requires that the redemption of theshares be made out of profits. Since the value ofthe shares has been paid to Members inaccordance with the terms and conditions of theshare issue, the account represents the amount ofprofits appropriated to the account.




Note 2014 2013$ $

21. Other ReservesAsset revaluation reserve – land & buildings 2,457,683 2,457,683General Reserve 7,146,773 7,146,773TOTAL OTHER RESERVES 9,604,456 9,604,456

Movements in Reserves

(i) Asset Revaluation Reserve – Land & BuildingsThe asset revaluation reserve accounts for the unrealised gains on assets due to revaluation to fair value

Balance at the beginning of the year 2,457,683 2,457,683Less: Asset Revaluations Realised - -Balance at the end of year 2,457,683 2,457,683

(ii) General ReserveBalance at the beginning of the year 7,146,773 7,146,773Add: Transfer from Asset Revaluation Reserve - -Balance at the end of year 7,146,773 7,146,773

22. General Reserve For Credit LossesGeneral reserve for credit losses 1,869,783 1,869,783Other reserve for credit losses - -TOTAL CREDIT LOSS GENERAL RESERVES 1,869,783 1,869,783

23. Financial Risk Management Objectives And Policies Introduction

The Board of Directors has endorsed a policy of Compliance and Risk Management to suit the risk profile of SCU.

SCU’s risk management focuses on the major areas of market risk, credit risk, capital management, liquidity riskand operational risk. Authority flows from the board of Directors to the risk committee and the audit committeewhich are integral to the management of risk. The following diagram gives an overview of the structure.

The diagram shows the risk management structure. The main elements of risk governance are as follows:

Board of Directors: This is the primary governing body. It approves the level of risk which SCU is exposed toand the framework for reporting and mitigating those risks.

The Board will create a Governance Committee, Risk Management Committee, Audit & ComplianceCommittee and other Committees as appropriate, to oversee critical functions; the Board retainsresponsibility for decision making at all times and for ensuring the performance of the duties delegated tothe Committees, including Audit & Compliance and Risk Management.

The Board should ensure that its decisions and actions do not pose an unacceptable prudential risk to theinstitution by way of monitoring the compliance with prudential and statutory requirements to which SCU isobliged to comply.




Risk Management Committee: This is a key body in the control of risk. It comprises a minimum of 3Directors. Senior Management and the Risk Manager attend by invitation.

The purpose of the Risk Management Committee is to assist the Board of Directors in the discharge of itsresponsibilities ensuring that risks facing SCU are identified, assessed and properly managed in line withthe prudential standard regime and other risk related regulation. The Committee will categorise risks. TheCommittee will use prevailing best practice and adopt the methodologies of Australian Standards in relationto risk management e.g. AS4360.

The Risk Management Committee carries out a regular review of all operational areas to ensure thatoperational risks are being properly controlled and reported. It also ensures that contingency plans are inplace to achieve business continuity in the event of serious disruptions to business operations. Regularmonitoring is carried out by the Risk Committee of operational reports and control assignments arereviewed by the Risk Committee to confirm whether risks are within the parameters outlined by the Board.

treports in turn to the Board, where actual exposures to risks are measured against prescribed limits.

Audit Committee: Its key role in risk management is the assessment of the controls that are in place tomitigate risks. The Audit Committee considers and confirms that the significant risks and controls are to beassessed within the internal audit plan. The Audit Committee receives the internal audit reports onassessment and compliance with the controls, and provides feedback to the risk committee for theirconsideration.

Asset & Liability Committee (ALCO): This committee of senior management meets monthly and hasresponsibility for managing and reporting risk exposure in the areas of:

• Credit Risk,• Liquidity Risk,• Capital Risk,• Market Risk (including Interest Rate Risk), and• Financial and Accounting Risk.

CorporateGovernanceCommittee

Board of Directors

ChiefExecutive

Officer

DeputyCEO

ExternalAuditor

Internal AuditManager

RiskManagement

Committee

Asset & LiabilityManagement

Committee

Risk &Compliance

Manager

ExecutiveCommittee

Audit &ComplianceCommittee




It scrutinises operational reports and monitors exposures against limits determined by the Board. The ALCOCommittee has responsibility for implementing policies to ensure that all risk exposures are properlymeasured and controlled.

This committee also has responsibility for managing interest rate risk exposures, and ensuring that thetreasury and finance functions adhere to exposure limits as outlined in the policies for interest rate GAP.

Risk Manager: This person has responsibility for liaising with the operational functions to ensure timelyproduction of information for the Risk Management Committee and ensuring that instructions passed downfrom the Board via its Risk Management Committee are implemented. This person also ensures that all keyrisk controls are being maintained ongoing, through affirmative reporting from those responsible for theperformance of those controls.

Internal Audit: Internal audit has responsibility for implementing the controls testing and assessment asrequired by the Audit Committee.

Key risk management policies encompassed in the overall risk management framework include:

• Market Risk (primarily Interest Rate Risk) • Liquidity Management• Capital Management• Credit Risk Management• Operations Risk Management including data and fraud risk management.

SCU has undertaken the following strategies to minimise the risks arising from financial instruments.

A. Market Risk and Hedging Policy

The objective of SCU’s market risk management is to manage and control market risk exposures inorder to optimise risk and return.

Market risk is the risk that changes in interest rates and volatilities will have an adverse effect onSCU's financial condition or results. SCU is not exposed to currency risk, and other significant pricerisk. SCU does not trade in the financial instruments and has not undertaken any hedging at thistime. SCU is exposed only to interest rate risk arising from changes in market interest rates.

The management of market risk is the responsibility of the ALCO Committee, which reports directly tothe Risk Committee.

(i) Interest rate risk

Interest rate risk is the risk of variability of the fair value or future cash flows arising fromfinancial instruments due to the changes in interest rates. Most banks are exposed to interestrate risk within its Treasury operations. SCU does not have a treasury operation and does nottrade in financial instruments.

Interest rate risk in the banking book

SCU is exposed to interest rate risk in its banking book due to mismatches between therepricing dates of assets and liabilities. The interest rate risk on the banking book is measuredand reported to the ALCO, the Risk Committee and the Board, on a monthly basis. In thebanking book the most common risk SCU faces arises from fixed rate assets and liabilities.This exposes SCU to the risk of sensitivity should interest rates change.

The level of mismatch on the banking book is set out in Note 27 below. The table set out atNote 27 displays the period that each asset and liability will reprice as at the balance date.This risk is not considered significant to warrant the use of derivatives to mitigate this risk.




Method of managing risk

The policy of SCU to manage the risk is to maintain a balanced ‘on book’ strategy by ensuringthe net interest rate gaps between assets and liabilities are not excessive.

SCU’s exposure to market risk is measured and monitored using the Value-at-Risk (VaR)methodology of estimating potential losses. VaR is a technique which estimates the potentialchange in the value of the financial assets and liabilities that could occur on risk positionstaken due to movements in markets rates and prices over a specified time period to a givenlevel of confidence. VaR, as set out in the table below, has been calculated using historicalsimulations, using movements in market rates and prices, a 99.5 per cent confidence leveland taking into account historical correlations between different markets and rates.

Any potential exposures in excess of the exposure limits stated above are rectified throughtargeted fixed rate interest products available through investment assets, and term depositsliabilities to rectify the imbalance to within acceptable levels. The policy of SCU permits theundertaking of derivatives to reduce interest rate risks, but no such derivatives have beenundertaken to date. SCU’s exposure to interest rate risk is set out in Note 27 which details thecontractual interest change profile.

Based on the calculations as at 30 June, the impact on the net economic value as apercentage of the Capital Base, for a 2% movement in interest rates would be as follows:

2014 2013Value-at-Risk Methodology 0.27% 1.10%

SCU is therefore confident within a 99.5 per cent confidence level that, given the risks as at 30June 2014, it will not incur a one day loss on its non-trading book of more than the amountcalculated above, based on the VaR model used. Although the use of VaR models calculatesthe interest rate sensitivity on the banking book, this is not reflected in the Pillar 1 capitalrequirement.

SCU’s exposure to banking book interest rate risk is not expected to change materially in thenext year so existing capital requirements are considered to be an accurate measurement ofcapital needed to mitigate interest rate risk.

B. Liquidity Risk

Liquidity risk is the risk that SCU may encounter difficulties raising funds to meet commitmentsassociated with financial instruments, e.g. borrowing repayments or Member withdrawal demands.It is the policy of the board of Directors that treasury maintains adequate cash reserves andcommitted credit facilities so as to meet the Member withdrawal demands when requested.

SCU manages liquidity risk by:

– Continuously monitoring actual daily cash flows and longer term forecasted cash flows; – Monitoring the maturity profiles of financial assets and liabilities;– Maintaining adequate reserves, liquidity support facilities and reserve borrowing facilities; and– Monitoring the prudential liquidity ratio daily.

SCU has a longstanding arrangement with the industry liquidity support organisation, Credit UnionFinancial Support Services (CUFSS), which can access industry funds to provide support to SCU shouldit be necessary at short notice. SCU has not had any need to access funds from this source.

Under the APRA Prudential Standards, SCU is required to maintain a minimum of 9% of total adjustedliabilities as liquid assets capable of being converted to cash within 48 hours. SCU policy is tomaintain 15% of funds as liquid assets, to ensure that SCU maintains at all times adequate funds formeeting Member withdrawal requests. The ratio is checked daily. Should the liquidity ratio fall belowthis level the Management and Board are to address the matter and ensure that the liquid funds are




obtained from new deposits, borrowing facilities or other liquidity support facilities available. Note 30details the borrowing facilities as at balance date. These facilities are in addition to the support fromCUFSS.

The maturity profile of the financial assets and financial liabilities, based on the contractualrepayment terms are set out in Note 25.

The ratio of liquid funds over the past year is set out below:

Total adjusted liabilities 2014 2013

Liquid investments $128,596,647 $112,844,577As at 30 June 19.52% 17.78%Average for the year 19.83% 18.30%Minimum during the year 17.18% 16.38%Maximum during the year 21.24% 21.26%

C. Credit Risk

Credit risk is the risk that Members, financial institutions and other counterparties will be unable tomeet their obligations to SCU which may result in financial losses. Credit risk arises principally fromSCU’s loan book, and investment assets.

(i) Credit Risk – Loans

The analysis of SCU’s loans by class, is as follows:

2014 2014 2014 2013 2013 2013Carrying Off balance Max Carrying Off balance Max

Loans to value sheet exposure value sheet exposure$ $ $ $ $ $

Mortgage 458,320,206 43,598,434 501,918,640 460,437,463 44,717,174 505,154,637Personal 42,345,918 823,475 43,169,393 31,221,236 56,413 31,277,649Revolving Credit 15,191,840 - 15,191,840 16,048,880 21,257,138 37,306,018Commercial - - - - - -

Total to natural persons 515,857,964 44,421,909 560,279,873 507,707,579 66,030,725 573,738,304

Corporate borrowers 10,590,668 - 10,590,668 11,622,440 - 11,622,440

Total 526,448,632 44,421,909 570,870,541 519,330,019 66,030,725 585,360,744

Carrying value is the value on the Statement of Financial Position. Maximum exposure is thevalue on the Statement of Financial Position plus the undrawn facilities (loans approved notadvanced, redraw facilities, and undrawn approved revolving credit line facilities). The detailsare shown in Note 29.

All loans and facilities are within Australia. The geographic distribution is not analysed intosignificant areas within Australia as the exposure classes are not considered material.Concentrations are described in Note 7(c).

The method of managing credit risk is by way of strict adherence to the credit assessmentpolicies before the loan is approved and close monitoring on a weekly basis of defaults in therepayment of loans thereafter. The credit policy has been endorsed by the Board of Directors,to ensure that loans are only made to Members that are creditworthy (capable of meetingloan repayments).




SCU has established policies over the:

– Credit assessment and approval of loans and facilities covering acceptable riskassessment, security requirements;

– Limits of acceptable exposure over the value to individual borrowers, non-mortgagesecured loans, commercial lending and concentrations to geographic and industrygroups considered at high risk of default;

– Reassessing and review of the credit exposures on loans and facilities; – Establishing appropriate provisions to recognise the impairment of loans and facilities;– Management and recovery procedures for loans in repayment default; and– Review of compliance with the above policies;

A regular review of compliance is conducted as part of the internal audit scope.

Past due and impaired

A financial asset is past due when the counterparty has failed to make a payment whencontractually due. Past due does not mean that a counterparty will never pay, but it cantrigger various actions such as renegotiation, enforcement of covenants, or legal proceedings.Once the past due exceeds 90 days the loans is regarded as impaired, unless other factorsindicate the impairment should be recognised sooner.

Loan repayments are monitored daily to detect delays in repayments, and recovery action isundertaken. For loans where repayments are doubtful, external consultants are engaged toconduct recovery action. The exposures to losses arise predominantly in the personal loansand revolving credit facilities not secured by registered mortgages over real estate.

If such evidence exists, the estimated recoverable amount of that asset is determined and anyimpairment loss, based on the net present value of future anticipated cash flows, isrecognised in the income statement. In estimating these cash flows, management makesjudgements about a counterparty’s financial situation and the net realisable value of anyunderlying collateral.

In addition to specific provisions against individually significant financial assets, SCU makescollective provision assessments for each financial asset portfolio segmented by similar riskcharacteristics.

The Statement of Financial Position provisions are maintained at a level that managementdeems sufficient to absorb probable incurred losses in SCU’s loan portfolio from homogenousportfolios of assets and individually identified loans.

A provision for incurred losses is established on all past due loans after a specified period ofrepayment default where, based on past experience, it is probable that some of the capitalwill not be repaid or recovered. Specific loans and portfolios of assets are provided againstdepending on a number of factors including deterioration in counterparty's risk, changes in acounterparty's industry conditions and technological developments, as well as identifiedstructural weaknesses or deterioration in cash flows.

The provisions for impaired and past due exposures relate to the loans to Members. Past duevalue is the ‘on balance sheet’ loan balances which are past due by 90 days or more. (Detailsare as set out in Note 8.)

Bad debts

Amounts are written off when collection of the loan or advance is considered to be remote. All write offs are on a case by case basis, taking account of the exposure at the date of thewrite off.




On secured loans, the write off takes place on ultimate realisation of collateral value, or fromclaims on any lenders mortgage insurance.

A reconciliation in the movement of both past due and impaired exposure provisions isprovided in Note 8.

Collateral securing loans

A sizeable portfolio of the loan book is secured on residential property in Australia. Therefore,SCU is exposed to risks in the reduction the Loan to Value (LVR) cover should the propertymarket be subject to a decline.

The risk of losses from the loans undertaken is primarily reduced by the nature and quality ofthe security taken.

The Board policy is to maintain at least 50% of the loans in well secured residential mortgageswhich carry an 80% loan to valuation ratio or less. Note 7(b) describes the nature and extentof the security held against the loans held as at the balance date.

Concentration risk – Individuals

Concentration risk is a measurement of SCU’s exposure to an individual counterparty (or groupof related parties). If prudential limits are exceeded as a proportion of SCU’s regulatory capital(10%) a large exposure is considered to exist. No capital is required to be held against thesebut the APRA must be informed. APRA may impose additional capital requirements if itconsiders the aggregate exposure to all loans over the 10% capital benchmark, to be higherthan acceptable.

The aggregate value of large exposure loans is set out in note 7(c) (i). [SCU holds no significantconcentrations of exposures to Members]

Concentration risk – Industry

There is no concentration of credit risk with respect to loans and receivables as SCU has alarge number of customers dispersed in areas of employment.

(ii) Credit Risk – Liquid Investments

Credit risk is the risk that the other party to a financial instrument will fail to discharge theirobligation resulting in SCU incurring a financial loss. This usually occurs when debtors fail tosettle their obligations owing to SCU.

There is a concentration of credit risk with respect to investment receivables with theplacement of investments in Cuscal. The credit policy is that investments are only made toinstitutions that are credit worthy. Directors have established policies that a maximum of 50%of SCU’s capital base can be invested with any one financial institution at a time. With respectto Cuscal, this limit is increased to 150%

The risk of losses from the liquid investments undertaken is reduced by the nature and qualityof the independent rating of the investment body and the limits to concentration on one CreditUnion. Also the relative size of SCU as compared to the industry is relatively low such that therisk of loss is reduced.

Under SCU Industry’s liquidity support scheme, at least 3.2% of the total assets must beinvested in Cuscal, to allow the scheme to have adequate resources to meet its obligations ifneeded. The Board policy is to maintain a significant proportion of the investments in CuscalLimited, a company set up to support its Member Credit Unions. Cuscal has a long-term creditrating of A+ and a short-term credit rating of A-1.




The Board has approved that the majority of its investments will generally be with financialinstitutions with a rating not lower than BBB-. The Board permits investments with counter -parties with ratings below this rating, or otherwise unrated to a limit of 10% of SCU’s capitalbase for any single counterparty, or 30% of the capital base in total for all such counterpartyinvestments.

External Credit Assessment for Institution Investments

SCU uses the ratings of Standard & Poors ratings agency to assess the credit quality ofinvestment exposures, where applicable, using the credit quality assessment scale in APRAprudential guidance AGN 112. The credit quality assessment scale within this standard hasbeen complied with.

The exposure values associated with each credit quality step are as follows:

30 June 2014 30 June 2013Carrying Past due Carrying Past due

Investments with value value Provision value value Provision

Cuscal – rated A+ 45,783,866 - - 49,572,438 - -Banks – rated

AA and above - - - 1,015,010 - -Banks – rated below AA 60,860,000 - - 55,747,051 - -Non-Banks rated

AA and above - - - - - -Non-Banks rated

below AA 8,452,781 - - 5,055,959 - -Unrated institutions –

Credit Unions 13,500,000 - - 1,976,176 - -Total 128,596,647 - - 113,366,634 - -

(iii) Credit Risk – Guarantees

SCU provides financial guarantees on behalf of Members. All guarantees provided are fullysecured against either an existing registered mortgage facility already held by SCU, or byfunds lodged as a term deposit with SCU. The total value of guarantees issued at 30 June2014 amounted to $1,147,997 (30 June 2013 $1,216,651).

D. Operational Risk

Operational risk is the risk of loss to SCU resulting from deficiencies in processes, personnel,technology and infrastructure, and from external factors other than credit, market and liquidity risks.Operational risks in SCU relate mainly to those risks arising from a number of sources including legalcompliance; business continuity; data infrastructure; outsourced services failures; fraud; andemployee errors.

SCU’s objective is to manage operational risk so as to balance the avoidance of financial lossesthrough the implementation of controls, whilst avoiding procedures which inhibit innovation andcreativity. These risks are managed through the implementation of polices and systems to monitorthe likelihood of the events and minimise the impact. Systems of internal control are enhancedthrough

– the segregation of duties between employee duties and functions, including approval andprocessing duties;

– documentation of the policies and procedures, employee job descriptions and responsibilities, toreduce the incidence of errors and inappropriate behaviour;




– implementation of the whistle blowing policies to promote a compliant culture and awareness ofthe duty to report exceptions by staff;

– education of members to review their account statements and report exceptions to SCU promptly; – effective dispute resolution procedures to respond to member complaints; – effective insurance arrangements to reduce the impact of losses; and – contingency plans for dealing with the loss of functionality of systems or premises or staff.

(i) Fraud

Fraud can arise from member card PINS and internet passwords being compromised wherenot protected adequately by the member. It can also arise from other systems failures. SCUhas systems in place which are considered to be robust enough to prevent any material fraud.However, in common with all retail a bank, fraud is potentially a real cost. Fraud losses havearisen from card skimming, internet password theft and false loan applications.

(ii) IT systems

The worst case scenario would be the failure of SCU’s core banking and IT network suppliers,to meet customer obligations and service requirements. SCU has outsourced the IT systemsmanagement to an Independent Data Processing Centre (IDPC) which is owned by a collectionof credit unions. This organisation has the experience in-house to manage any short-termproblems and has a contingency plan to manage any related power or systems failures.Other network suppliers are engaged on behalf of SCU by the industry body CUSCAL toservice the settlements with other financial institutions for direct entry, ATM & Visa cards, andBPay etc.

A full disaster recovery plan is in place to cover medium to long-term problems which isconsidered to mitigate the risk to an extent such that there is no need for any further capital tobe allocated.

E. Capital Management

The minimum capital levels required to be maintained by all Financial Institutions are prescribed bythe Australian Prudential Regulation Authority (APRA). Under the APRA prudential standards capital isdetermined in three components

• Credit risk • Market risk (trading Book) • Operations risk.

The market risk component is not required as SCU is not engaged in a trading book for financialinstruments.

Capital resources

Tier 1 Capital

The vast majority of Tier 1 Capital comprises

– Preference share capital – Retained profits – Realised reserves.

From 1 January 2013 the Tier 1 capital also includes Asset Revaluation Reserves on Property.

Additional Tier 1 capital.

This is a new classification of capital and includes Preference share capital approved by APRA andqualifies as Tier 1 capital.




Tier 2 Capital

Tier 2 Capital consists of capital instruments that combine the features of debt and equity in that theyare structured as debt instruments, but exhibit some of the loss absorption and funding flexibilityfeatures of equity. There are a number of criteria that capital instruments must meet for inclusion inTier 2 Capital resources as set down by APRA.

Tier 2 Capital generally comprises:

– Tier 2 capital instruments - subordinated loan.

– General Reserve for Credit Losses.

Capital in SCU is made up as follows:2014 2013

Tier 1 Common Equity $’000 $’000

Capital reserve account 606 578Asset revaluation reserves on property (2013) 2,458 2,458General reserves 7,147 7,162Retained earnings 52,191 50,538

62,402 60,736Less prescribed deductions (3,617) (3,778)Net tier 1 Common Equity 58,785 56,958

Tier 1 Additional EquityAdditional Tier 1 Capital Instruments 1,953 1,953Less prescribed deductions (1,400) (1,000)Net Tier 1 Additional Equity 553 953Total Net Tier 1 Capital 59,338 57,911

Tier 2Subordinated debt 1,972 1,964Reserve for credit losses 1,870 1,870

3,842 3,834Less prescribed deductions (400) (400)Net tier 2 capital 3,442 3,434

TOTAL CAPITAL 62,780 61,345

SCU is required to maintain a minimum capital level as compared to the risk weighted assets at anygiven time. The above capital is in excess of the minimum required.

The risk weights attached to each asset are based on the weights prescribed by APRA in itsGuidance AGN 112-1. The general rules apply the risk weights according to the level of underlyingsecurity.




2014 Carrying Value Risk On-Balance Off-Balance Risk Weighted

Sheet Sheet Total Weighting Value$’000 $’000 $’000 $’000

Cash 1,518 - 1,518 0% -Highly rated Deposits

in ADI’s 96,148 - 96,148 20% 19,230Less highly rated Deposits

in ADI’s 33,189 - 33,189 50% 16,595Standard Loans secured

against eligible residential mortgages up to 80% LVR 421,588 - 421,588 35% 147,556

Standard Loans secured against eligible residential mortgages over 80% LVR 45,803 33,444 79,247 50% 39,623

Standard Loans secured against eligible residential mortgages over 80% LVR 2,579 - 2,579 75% 1,934

Other assets 65,835 11,140 76,975 100% 76,975Total 666,660 44,584 711,244 301,913

2013 Carrying Value Risk On-Balance Off-Balance Risk Weighted

Sheet Sheet Total Weighting Value$’000 $’000 $’000 $’000

Cash 1,331 - 1,331 0% -Highly rated Deposits

in ADI’s 84,297 - 84,297 20% 16,859Less highly rated Deposits

in ADI’s 29,069 44,717 73,786 50% 36,893Standard Loans secured

against eligible residential mortgages up to 80% LVR 402,470 - 402,470 35% 140,865



Other assets 71,040 1,239 72,279 100% 72,279Total 643,484 45,956 689,440 294,890




The capital ratio as at the end of the financial year over the past 5 years is as follows

2014 2013 2012 2011 201018.45% 18.47% 18.27% 17.35% 17.20%

The level of capital ratio can be affected by growth in asset relative to growth in reserves and bychanges in the mix of assets between different risk weighting categories.

To manage SCU’s capital SCU reviews the ratio monthly and monitors major movements in the assetlevels. Policies have been implemented to require reporting to the Board and the regulator if thecapital ratio falls below 15%. Further a 3 year capital budget projection of the capital levels ismaintained annually to address how strategic decisions or trends may impact on the capital level.

Pillar 2 Capital on Operational Risk

This capital component was introduced as from the 1 January 2008 and coincided with changes inthe asset risk weightings for specified loans and liquid investments. Previously no operational chargewas prescribed.

SCU uses the Standardised approach which is considered to be most suitable for its business giventhe small number of distinct transaction streams. The Operational Risk Capital Requirement iscalculated by mapping SCU’s three year average net interest income and net non-interest income toSCU’s various business lines.

Based on this approach, SCU’s operational risk requirement is as follows:

– operational risk capital $3,072,034 (2013: $ 3,007,927)

It is considered that the Standardised approach accurately reflects SCU’s operational risk other thanfor the specific items set out below.

Internal capital adequacy management

SCU manages its internal capital levels for both current and future activities through a combination ofthe various Committees. The outputs of the individual Committees are reviewed by the Board ofDirectors in its capacity as the primary governing body. The capital required for any change in SCU’sforecasts for asset growth, or unforeseen circumstances, are assessed by the Board. The financedepartment then update the forecast capital resources models produced and the impact upon theoverall capital position of SCU is reassessed.

In relation to the operational risks, the major measurements for additional capital as a percentage ofrisk weighted assets are:

– Credit Concentration risk 4.83%– Interest Rate Risk 1.60%– Liquidity Risk 1.58%– Strategic Risk 0.11%– Regulatory Risk 0.02%– Contagion Risk 0.50%

The optional additional capital charge recognised by the Board equates to $29,403,049 (2013: $25,875,868).




24. Categories Of Financial Instrumentsa. The following information classifies the financial Note 2014 2013

instruments into measurement classes $ $

Financial assets – carried at amortised costCash 4 12,544,095 13,029,007Receivables 6 2,000,344 640,932Receivables from financial institutions 5 117,570,615 101,146,192Total Receivables from financial institutions 132,115,054 114,816,131

Loans to Members 7&8 525,631,255 518,309,675Loans to capital investors 12 - -Total loans 525,631,255 518,309,675

Available for sale investments – carried at cost 9 1,697,609 1,697,609Total Available for sale investments 1,697,609 1,697,609

TOTAL FINANCIAL ASSETS 659,443,928 634,823,415

Financial liabilitiesShort term borrowings 14 - 3,000,000Creditors 16 7,917,521 8,231,762Deposits from other institutions - 5,000,000Deposits from Members 15 589,623,432 559,037,085Long term borrowings 20 1,972,375 1,964,087Preference shares 21 1,753,240 1,753,240Total carried at amortised cost 601,266,568 578,986,174

TOTAL FINANCIAL LIABILITIES 601,266,568 578,986,174

b. Assets measured Fair value measurement at end of the reporting period using:at fair value Balance Level 1 Level 2 Level 3Financial assets at fair value through

profit or loss – hedge derivatives - - - -Cash flow Hedge derivatives - - - - Available-for-sale financial assets - - - -Equity investments 1,697,675 - - 1,697,675

Total 1,697,675 - - 1,697,675

The fair value hierarchy has the following levels:

(a) quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1);

(b) inputs other than quoted prices included within Level 1 that are observable for the asset orliability, either directly (i.e. as prices) or indirectly (i.e. derived from prices) (Level 2); and

(c) inputs for the asset or liability that are not based on observable market data (unobservableinputs) (Level 3).

The above equity investments are measured at cost less provision for impairment, as their fair valuecould not be reliably measured. These equities were acquired for the purpose of gaining access tothe use of the services provided by these companies rather than for speculative investmentpurposes. The equities are not able to be traded and are not redeemable.

The financial reports of these companies record the net tangible asset backing of these equitiesexceeding their cost. Based upon the net assets, any fair value determination on these shares islikely to be greater than their cost value, but due to the absence of a ready market and restrictionson the ability to transfer the shares, a market value is not able to be determined readily.




25. Maturity Profile Of Financial Assets And LiabilitiesMonetary assets and liabilities have differing maturity profiles depending on the contractual term and in thecase of loans the repayment amount and frequency. The table below shows the period in which differentmonetary assets and liabilities held will mature and be eligible for renegotiation or withdrawal. In the caseof loans, the table shows the period over which the principal outstanding will be repaid based on theremaining period to the repayment date assuming contractual repayments are maintained, and is subjectto change in the event that current repayment conditions are varied. Financial assets and liabilities are atthe undiscounted values (including future interest expected to be earned or paid). Accordingly these valueswill not agree to the statement of financial position.

Within 1 1–3 3–12 1–5 After 5 No2014 month months months years years Maturity Total

$ $ $ $ $ $ $ASSETSCash 12,544,095 - - - - - 12,544,095Receivables 1,237,693 - - - - - 1,237,693Receivables From

financial institutions 41,258,888 63,923,194 12,893,986 11,427 - - 118,087,495Loans to Members 4,242,921 8,682,741 37,497,158 171,711,660 642,419,188 - 864,553,668Loans to Capital Investors - - - - - - -Available for sale

Investments - - - - - 1,697,609 1,697,609On statement offinancial position 59,283,597 72,605,935 50,391,144 171,723,087 642,419,188 1,697,609 998,120,560Undrawn commitments

Note 29 - - - - - - -

Total financial Assets 59,283,597 72,605,935 50,391,144 171,723,087 642,419,188 1,697,609 998,120,560


$ $ $ $ $ $ $

LIABILITIESBorrowings - - - - - - -Creditors 6,219,213 - - - - - 6,219,213Deposits from other

financial institutions - - - - - - -Deposits from

Members – at call 298,658,065 - - - - - 298,658,065Deposits from

Members – term 45,927,049 130,866,255 117,229,015 6,764,084 - - 300,786,403Preference Shares - - - - 1,753,240 - 1,753,240Subordinated debt - - - 2,000,000 - - 2,000,000On statement offinancial position 350,804,327 130,866,255 117,229,015 8,764,084 1,753,240 - 609,416,921

Undrawn commitments - - - - - 66,262,518 66,262,518

Total financial Liabilities 350,804,327 130,866,255 117,229,015 8,764,084 1,753,240 66,262,518 675,679,439





$ $ $ $ $ $ $ASSETSCash 13,029,005 - - - - - 13,029,005Receivables 640,932 - - - - - 640,932Receivables From

financial institutions 37,048,022 40,103,722 24,682,189 12,017 - - 101,845,950Loans to Members 4,390,622 9,010,128 38,672,001 174,287,646 662,812,250 - 889,172,647Loans to Capital Investors - - - - - - -Available for sale

Investments - - - - - 1,697,609 1,697,609On statement offinancial position 55,108,581 49,113,850 63,354,190 174,299,663 662,812,250 1,697,609 1,006,386,143Undrawn commitments

Note 29 - - - - - - -

Total Financial Assets 55,108,581 49,113,850 63,354,190 174,299,663 662,812,250 1,697,609 1,006,386,143


$ $ $ $ $ $ $

LIABILITIESBorrowings 3,003,551 - - - - - 3,003,551Creditors 8,231,764 - - - - - 8,231,764Deposits from other

financial institutions - - 5,163,637 - - - 5,163,637Deposits from

Members – at call 263,401,105 - - - - - 263,401,105Deposits from

Members – term 45,372,804 108,861,286 135,297,521 9,991,925 - - 299,523,536Preference Shares - - - - 1,753,240 - 1,753,240Subordinated debt - - - 2,000,000 - - 2,000,000On statement offinancial position 320,009,224 108,861,286 140,461,158 11,991,925 1,753,240 - 583,076,833

Undrawn commitments - - - - - 67,212,961 67,212,961

Total Financial Liabilities 320,009,224 108,861,286 140,461,158 11,991,925 1,753,240 67,212,961 650,289,794




26. Non-Current Profile ofFinancial Assets And Liabilities

The table below represents the above maturity profile summarised at discounted values. The contractualarrangements best represents the estimated minimum amount of repayment on the loans, liquidinvestments and on the member deposits. While the liquid investments and member deposits arepresented in the table below on a contractual basis, as part of our normal banking operations we wouldexpect a large proportion of these balances to roll over. Loan repayments are generally accelerated bymembers choosing to repay loans earlier. These advance repayments are at the discretion of the membersand not able to be reliably estimated.

2014 2013Within 12 After 12 Within 12 After 12

Item Months Months Total Months Months Total$’000 $’000 $’000 $’000 $’000 $000

FINANCIAL ASSETSCash 12,544 - 12,544 13,029 - 13,029Liquid Investments 117,571 - 117,571 101,146 - 101,146Loans and advances 31,617 494,746 526,363 22,559 496,771 519,330Receivables 1,238 - 1,238 641 - 641Available For Sale Equity

Investments - 1,698 1,698 - 1,698 1,698Loans to Capital Investors - - - - - -

Total financial Assets 162,970 496,444 659,414 137,375 498,469 635,844

FINANCIAL LIABILITIESBorrowings - - - 3,000 - 3,000Creditors 6,219 - 6,219 8,256 - 8,256Deposits from other financial

institutions - - - 5,000 - 5,000Deposits from Members – Call 290,965 265 291,230 263,122 279 263,401Deposits from Members – Term 292,024 6,369 298,393 286,938 9,238 296,176Preference Shares - 1,753 1,753 - 1,753 1,753Subordinated debt - 1,972 1,972 - 1,964 1,964

Total financial Liabilities 589,208 10,359 599,567 566,316 13,234 579,550




27 . Interest Rate Change Profile of Financial Assets And Liabilities

Financial assets and liabilities have conditions which allow interest rates to be amended either on maturity(term deposits and term investments) or after adequate notice is given (loans and savings). The table belowshows the respective value of funds where interest rates are capable of being altered within the prescribedtime bands, being the earlier of the contractual repricing date, or maturity date.

Within 1 1-3 3-12 1-5 Non interest Total2014 month months months years bearing

$ $ $ $ $ $ASSETSCash 11,026,032 - - - 1,518,063 12,544,095Advances to other financial institutions 41,214,244 63,596,371 12,750,000 10,000 - 117,570,615Receivables - - - - - -Loans & Advances – mortgage 375,638,542 3,448,928 25,936,967 67,975,250 - 472,999,687Loans & Advances – personal 37,844,681 2,271 23,458 5,132,216 - 43,002,626Loans & Advances – other 9,809,421 - 696,514 84,733 - 10,590,668Investments - - - - 1,697,609 1,697,609Loans to Capital Investors - - - - - -On statement offinancial position 475,532,920 67,047,570 39,406,939 73,202,199 3,215,672 658,405,300Undrawn commitments Note 29 - - - - - -

Total Financial Assets 475,532,920 67,047,570 39,406,939 73,202,199 3,215,672 658,405,300

Within 1 1-3 3-12 1-5 Non interest Total2014 month months months years bearing

$ $ $ $ $ $LIABILITIESDeposits from Members 336,715,112 124,439,113 121,835,158 6,368,883 265,166 589,623,432Deposits from other

financial institutions - - - - - -Borrowings - - - - - -Creditors - - - - 6,219,213 6,219,213Preference Shares - 1,753,240 - - - 1,753,240Subordinated Debt - 1,972,375 - - - 1,972,375On statement offinancial position 336,715,112 128,164,728 121,835,158 6,368,883 6,484,379 599,568,260Undrawn commitments Note 29 - - - - 66,262,518 66,262,518

Total Liabilities 336,715,112 128,164,728 121,835,158 6,368,883 72,746,897 665,830,778




Within 1 1-3 3-12 1-5 Non interest Total

2013 month months months years bearing

$ $ $ $ $ $

ASSETS

Cash 11,698,384 - - - 1,330,621 13,029,005

Advances to other financial institutions - - - - - -

Receivables 36,996,286 39,889,907 24,250,000 10,000 - 101,146,193

Loans & Advances – mortgage 394,951,812 1,548,473 11,478,122 52,459,055 - 460,437,462

Loans & Advances – personal 44,724,959 2,478 24,719 2,517,961 - 47,270,117

Loans & Advances – other 9,970,490 - 824,700 827,250 - 11,622,440

Investments - - - - 1,697,609 1,697,609

Loans to Capital Investors - - - - - -

On statement of

financial position 498,341,931 41,440,858 36,577,541 55,814,266 3,028,230 635,202,826

Undrawn commitments Note 29 - - - - - -

Total Financial Assets 498,341,931 41,440,858 36,577,541 55,814,266 3,028,230 635,202,826

Within 1 1-3 3-12 1-5 Non interest Total

2013 month months months years bearing

$ $ $ $ $ $

LIABILITIES

Deposits from Members 308,698,401 108,073,992 133,026,414 9,238,278 - 559,037,085

Deposits from other

financial institutions - - 5,000,000 - - 5,000,000

Borrowings 3,000,000 - - - - 3,000,000

Creditors - - - - 8,231,762 8,231,762

Preference Shares - 1,753,240 - - - 1,753,240

Subordinated Debt - 1,964,087 - - - 1,964,087

On statement of

financial position 311,698,401 111,791,319 138,026,414 9,238,278 8,231,762 578,986,174

Undrawn commitments Note 29 - - - - 67,212,861 67,212,861

Total Liabilities 311,698,401 111,791,319 138,026,414 9,238,278 75,444,623 646,199,035




28. Net Fair Value of Financial Assets and LiabilitiesNet fair value has been determined on the basis of the present value of expected future cash flows underthe terms and conditions of each financial asset and financial liability.

Significant assumptions used in the determining the cash flows are that the cash flows will be consistentwith the contracted cash flows under the respective contracts.

The information is only relevant to circumstances at balance date and will vary depending on thecontractual rates applied to each asset and liability, relative to market rates and conditions at the time. Noassets are held regularly traded by SCU, and there is no active market to assess the value of the financialassets and liabilities. The values reported have not been adjusted for the changes in credit ratings of theassets. The calculation reflects the interest rate applicable for the remaining term to maturity not the rateapplicable to the original term.

2014 2013Fair Value Book Value Variance Fair Value Book Value Variance

$ $ $ $ $ $FINANCIAL ASSETSCash 12,544,095 12,544,095 - 10,930,621 10,930,621 -Advances to other

financial institutions 117,638,800 117,570,615 68,185 103,395,512 103,244,577 150,935Receivables (1) 1,237,693 1,237,693 - 640,932 640,932 -Loans – mortgage 458,308,360 458,320,206 (11,846) 460,525,026 460,437,463 87,563Loans – personal 57,568,540 57,537,758 30,782 47,252,289 47,270,117 (17,828)Loans – other 10,571,691 10,590,669 (18,978) 11,633,098 11,622,440 10,658Investments 1,697,608 1,697,608 - 1,697,608 1,697,608 -Loans to Capital Investors - - - - - -

Total financial Assets 659,566,787 659,498,644 68,143 636,075,086 635,843,758 231,328

2014 2013Fair Value Book Value Variance Fair Value Book Value Variance

$ $ $ $ $ $FINANCIAL LIABILITIESBorrowings - - - 3,000,000 3,000,000 -Deposits from

Members – call 290,965,367 290,965,367 - 263,122,212 263,122,212 -Deposits from

Members – term 298,501,709 298,392,899 108,810 298,466,194 295,635,980 2,830,214Deposits from

other institutions - - - 5,000,000 5,000,000 -Creditors (1) 6,219,213 6,219,213 - 7,125,878 7,125,878 -Preference Shares 1,753,240 1,753,240 - 1,753,240 1,753,240 -Subordinated debt 2,000,000 2,000,000 - 2,000,000 2,000,000 -

Total financial Liabilities 599,439,529 599,330,719 108,810 580,467,524 577,637,310 2,830,214

(1) For these assets and liabilities the carrying value approximates fair value.

Assets where the fair value is lower than the book value have not been written down in the accounts of SCUon the basis that they are to be held to maturity, or in the case of loans, all amounts due are expected to berecovered in full.




The net fair value estimates were determined by the following methodologies and assumptions:

(i) Liquid Assets and Receivables from other Financial Institutions

The carrying values of cash and liquid assets and receivables due from other financial institutionsredeemable within 12 months approximate their fair value as they are short term in nature or arereceivable on demand.

(ii) Loans and Advances

The carrying value of loans and advances is net of unearned income and both general and specificprovisions for doubtful debts.

For variable rate loans, (excluding impaired loans) the amount shown in the statement of financialposition is considered to be a reasonable estimate of fair value subject to the assessment of thecredit spread on personal loans considered to be less marketable. The fair value for fixed rate loansis calculated by utilising discounted cash flow models (i.e. the net present value of the portfolio futureprincipal and interest cash flows), based on the repricing maturity of the loans. The discount ratesapplied were based on the current applicable rate offered for the average remaining term of theportfolio.

The average rates applied to give effect to the discount of cash flows were 5.47% (2013 5.69%).

The fair value of impaired loans was calculated by discounting expected cash flows using a ratewhich includes a premium for the uncertainty of the flows.

(iii) Deposits From Members

The fair value of call and variable rate deposits, and fixed rate deposits repricing within 12 months, isthe amount shown in the statement of financial position. Discounted cash flows were used tocalculate the fair value of other term deposits, based upon the deposit type and the rate applicableto its related period maturity.

The average rates applied to give effect to the discount of cash flows were 4.59% (2013 5.93%).

(iv) Short Term Borrowings

The carrying value of payables due to other financial institutions approximate their fair value as theyare short term in nature and reprice frequently.

2014 2013$ $

29. Financial Commitmentsa. Outstanding Loan commitments

The loans approved but not funded 10,978,105 16,839,289

b. Loan Redraw facilitiesThe loan redraw facilities available 33,443,804 29,116,434

c. Undrawn Loan FacilitiesLoan facilities available to Members for overdraftsand line of credit loans are as follows:– Total value of facilities approved 37,032,449 37,306,019– Less: Amount advanced (15,191,840) (16,048,881)

Net undrawn value 21,840,609 21,257,138

Total financial commitments 66,262,518 67,212,861

These commitments are contingent on Members maintaining credit standards and ongoingrepayment terms on amounts drawn.




2014 2013$ $

d. Lease expense commitments for operating leases on property occupied by SCUNot later than one year 906,245 1,262,522Later than one year but not later than five years 1,098,504 2,274,667Over five years - -

2,004,749 3,537,189

The operating leases are in respect of property used for providing branch services to Members.There are no contingent rentals applicable to leases taken out. The terms of the leases are forbetween 1 to 5 years and options for renewal are usually obtained for a further period up to 6 years.

There are no restrictions imposed on SCU so as to limit the ability to undertake further leases, borrowfunds or issue dividends.

e. Computer Bureau Expense CommitmentsAs referred to in Note 33, SCU has a managementcontract with TransAction Solutions Pty Limited (TAS)to supply computer support staff and services tomeet the day to day needs of SCU and compliancewith the relevant Prudential Standards.

2014 2013The costs committed under contracts with TAS are as follows: $ $

Not later than one year 511,500 453,447Later than 1 year but not 2 years - 453,447Later than 2 years but not 5 years - -Later than 5 years - -

511,500 906,894

f. Other expense commitmentsNot later than one year 511,707 488,231Later than 1 year but not 2 years 511,707 325,487Later than 2 years but not 5 years 1,535,120 -Later than 5 years 1,364,552 -

3,923,086 813,718

30. Standby Borrowing FacilitiesSCU has a borrowing facility with Cuscal of:

Current Net2014 Gross Borrowing Available

$ $ $Overdraft Facility 2,000,000 - 2,000,000

TOTAL STANDBY BORROWING FACILITIES 2,000,000 - 2,000,000

Current Net2013 Gross Borrowing Available

$ $ $Overdraft Facility 2,000,000 - 2,000,000

TOTAL STANDBY BORROWING FACILITIES 2,000,000 - 2,000,000

Withdrawal of the loan facility is subject to the availability of funds at Cuscal. Cuscal holds an equitablemortgage charge over all of the assets of SCU as security against loan and overdraft amounts drawn underthe facility arrangement.




31. Contingent Liabilities

Liquidity Support Scheme

SCU is a Member of Credit Union Financial Support Scheme Limited (CUFSS) a Company limited byguarantee, established to provide financial support to Member Credit Unions in the event of a liquidity orcapital problem. As a Member, SCU is committed to maintaining 3.2% of the total assets as deposits withCuscal Limited.

Under the terms of the Industry Support Contract (ISC), the maximum call for each participating CU wouldbe 3.2% of SCU's Total Assets (3% under loans and facilities and 0.2% under the cap on contributions topermanent loans). This amount represents the participating credit union's irrevocable commitment underthe ISC. At the balance date there were no loans issued under this arrangement.

Guarantees

SCU has issued guarantees on behalf of Members for the purpose of lease and trade credit facilities. Theamounts of the guarantees are in total $1,147,997. The guarantee is payable only on the Member defaultingon the contractual repayments to the Lessor/supplier. The guarantees are generally fully secured againstregistered first mortgages or Term Deposit funds lodged.

32. Disclosures on Directors and other Key Management Personnel

a. Remuneration of Key Management Personnel [KMP]

Key Management Persons (KMP) has been taken to comprise the Directors and the Members of theexecutive management responsible for the day to day financial and operational management of SCU.

The aggregate Compensation of Key Management Persons during the year comprising amountspaid or payable or provided for was as follows:

2014 2013

Directors & Directors &Other KMP Other KMP

$ $

(a) short-term employee benefits; 714,158 684,426

(b) post-employment benefits - Superannuation contributions 118,799 116,905

(c) other long-term benefits – net increases in Long Service leave provision 36,272 34,453

(d) termination benefits; - -

(e) share-based payment. - -

Total 869,229 835,784

In the above table, remuneration shown as Short Term benefits means (where applicable) wages,salaries and social security contributions, paid annual leave and paid sick leave, profit-sharingand bonuses, value of Fringe Benefits received, but excludes out of pocket expense reimbursements.

All remuneration to Directors was approved by the Members at the previous Annual General Meetingof SCU.




2014 2013$ $

b. Loans to Directors and other Key Management Persons

(i) The aggregate value of loans to Directors and other KeyManagement Personnel as at Balance date amounted to 156,167 139,248

(ii) The total value of revolving credit facilities to Directors and other Key Management Personnel, as at Balance date amounted to 73,500 73,500Less amounts drawn down and included in (i) (13,614) (10,998)Net balance available 59,886 62,502

(iii) During the year the aggregate value of loans disbursed to Directors and other Key Management Personnel amounted to:Revolving credit facilities 139,366 150,737Term Loans 30,000 44,205

169,366 194,942(iv) During the year the aggregate value of Revolving

Credit Facility limits granted or increased to Directors and other Key Management Personnel amounted to: - 500

(v) Interest and other revenue earned on Loans and revolving credit facilities to KMP 8,128 8,938

SCU’s policy for lending to Directors and Management is that all loans are approved and depositsaccepted on the same terms and conditions which applied to Members for each class of loan ordeposit with the exception of loans to KMP who are not Directors. There are no loans which areimpaired in relation to the loan balances with Director’s or other KMP’s.

KMP who are not Directors receive a concessional rate of interest on their loans and facilities. Thesebenefits, where subject to Fringe Benefits tax, are included in the remuneration in Note 32(a) above.

There are no benefits or concessional terms and conditions applicable to the close family Membersof the Key Management Persons. There are no loans which are impaired in relation to the loanbalances with close family relatives of Directors and KMP.

c. Transactions with Other Related Parties

Other transactions between related parties include deposits from Director related entities or closefamily Members of Directors, and other KMP.

SCU’s policy for receiving deposits from related parties is that all transactions are approved anddeposits accepted on the same terms and conditions which applied to Members for each type ofdeposit.

There are no benefits paid or payable to the close family Members of the key management persons.

There are no service contracts to which key management persons or their close family Members arean interested party.

2014 2013$ $

Total value Term and Savings Deposits from KMP 1,288,249 959,767

Total Interest paid on deposits to KMP 34,764 38,778


Campbelltown Shop U012, Macarthur Square Shopping Centre, Gilchrist Drive, Ambarvale NSW 2560

Fairfield Shop G50, Neeta City Shopping Centre, Smart Street, Fairfield NSW 2165

Greenacre 138 Waterloo Rd, Greenacre NSW 2190

Katoomba 63 Pioneer Place, Katoomba NSW 2780

Kogarah St.George Hospital Cafeteria, Belgrave Street, Kogarah NSW 2217

Leichhardt 7–15 Wetherill Street, Leichhardt NSW 2040

Lidcombe 27–29 Church Street, Lidcombe NSW 2141

Marrickville 296 Marrickville Road, Marrickville NSW 2204

Mascot 1197 Botany Road, Mascot NSW 2020

Parkes 189 Clarinda Street, Parkes NSW 2870

Parramatta 207 Church Street, Parramatta NSW 2150

Penrith 16–20 Riley Street, Penrith NSW 2750

Rockdale Shop 5, Rockdale Plaza, Rockdale NSW 2216

Rouse Hill Shop GR092A, Civic Way, Rouse Hill Town Centre, Rouse Hill NSW 2155

Springwood 268 Macquarie Road, Springwood NSW 2777

Sutherland 20 Eton Street, Sutherland NSW 2232

Sydney City 210 Clarence Street, Sydney NSW 2000

Windsor Shop 7–8, 251 George Street, Windsor NSW 2756

Registered Office: 19 Second Ave, Blacktown NSW 2148

Branches

scu.net.auCall 13 61 91

Sydney Credit Union Ltd

ABN 93 087 650 726 AFSL 236476 Australian Credit Licence No 236476. Please address all mail to PO Box 444 Blacktown NSW [email protected]

2014 ANNUAL REPORT

what do i do€¦ · mr e a desousa – retired november 2013 mr b t nevin – director...

Documents