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A n n u a l R e p or t 2 0 0 5
Newcastle Permanent
Building Society Limited
Annual Report
2005
ABN 96 087 651 992
Contents
I Chairman’s Report 1-4
I CEO’s Review 5 - 10
I Performance Summary 11 - 12
I Sharing with our Community 13 - 16
I Going Forward 17 - 18
I Directors’ Report 19 - 22
I Corporate Governance Statement 23 - 28
I Concise Financial Report 29 - 35
I Directors’ Declaration and Auditor’s Report 36 - 37
I Management Directory 38
I Products and Services 39 - 40
I Branch Locations 41
Here for good
Newcastle Permanent is a regionally based packages is extremely high, a fact that has
independent, mutual retail financial been independently recognised by Cannex,
services provider. Australia’s leading independent banking and finance
With total assets of over $4 billion, Newcastle industry specialist.
Permanent is the financially strongest building In over 100 years of operation, Newcastle
society in Australia and a major economic entity in Permanent’s central operating philosophy has
the Hunter and Central Coast Regions. always been to put the needs of our members first
Electronic banking services, mobile Community and provide value to those members through
Lending Managers and Mortgage Brokers help to excellence in products and service, and support for
extend this footprint south to the Sydney market their community.
and north to the rapidly developing urban centres
We have a long and distinguished history of
of Taree, Port Macquarie and Coffs Harbour.
returning benefits to our community, which is
As a complete retail financial services provider, demonstrated in the competitiveness of our
Newcastle Permanent provides a genuine products, excellence in customer service, an
alternative to traditional banks for a range of extensive and regularly expanding branch network
financial services including the day to day needs of and a significant level of support for a wide range
retail and business banking customers. of community based initiatives.
In terms of lending, whether for home buying, Whichever meaning of the word ‘good’ you choose
investment or business purposes, the quality and to measure our performance by, Newcastle
competitiveness of Newcastle Permanent’s lending Permanent truly is, Here for good.
Business Highlights
% Variance
Total Assets: $4.325 billion + 19.2
Total Deposits: $3.120 billion +4.6
Total Loans: $3.478 billion +18.9
Total Members Funds: $438.1 million +9.3
C h a i r m a n’s
Report
The banking and financial services On behalf of the Board of Newcastle
industry continues to be one of the most Permanent it is my pleasure to report
fiercely competitive in Australia.Within
this environment Newcastle Permanent that the 2004/2005 financial year
is prospering. was another extremely good one for
Our results for this financial year show an
the Society.
encouraging increase in after tax profit
performance, with asset growth of 19.2%.
Total assets now stand at $4.325 billion,
underlining the significant financial strength significant value that they now represent,
of the Society. is a factor in the demand growth that we
I
witnessed during 2004/2005. February and
Lending
March 2005 saw Newcastle Permanent set all
Lending growth during the year has been very
time records for lending.
strong, notwithstanding a gradual softening of
the demand for borrowing for houses and In a first for the Society, we also initiated an
property. This softening of the Australian advertising campaign that directly compared
market was accelerated when the Reserve the cost of a Newcastle Permanent loan to
Bank increased official rates by 0.25% in those of our major competitors. Our
March 2005; the first increase for 15 months. Customer Service Centre noted a major
Consistent with our policy of delivering increase in loan related enquiries as a
value for our members, Newcastle Permanent consequence, demonstrating that the market
delayed the application of this increase is sensitive to direct costs associated with
for one month and also absorbed some of borrowing for housing.
the increase, rather than pass it on in full This demand has continued into the new
to borrowers. financial year with the quality of our products
A return to a policy of aggressive pricing of being officially recognised by Cannex, the
1 our lending products, coupled with the independent mortgage ratings agency.
Playing
a role
in the
growth and
prosperity
of the
regions we
serve.
Efficient friendly customer
service is a hallmark of
Newcastle Permanent.
Newcastle Permanent now has a record
13 five-star lending products as rated by
Cannex. Each five-star rated loan is in the top
2% of those available nationally.
I Deposits
of Newcastle Permanent’s great financial strength,
While Newcastle Permanent has always maintained
a fact underlined by our position as one of the
a very sound deposit base, the Board decided to
strongest financial institutions in Australia.
continue its policy of diversifying the Society’s
I Future Growth
funding base with the commencement of a $1
billion commercial paper program. This program This financial strength is also the platform for
enabled Newcastle Permanent to tap new funding future growth. The Board has taken a conscious
markets both domestically and potentially offshore. decision to reduce the Society’s capital adequacy
The program took advantage of the ‘BBB’ long term slightly in order to fund our growth plans.
and ‘A2’ short term credit rating that Standard & Two new branches have opened on the Central
Poor’s assigned Newcastle Permanent in 2004. Coast, at Wyoming and Bay Village Shopping
The commercial paper program capitalises on Centre at Bateau Bay. In both instances the branch
Newcastle Permanent’s strong performances. staff are reporting an excellent response from retail
It allows us to confidently and actively pursue and business customers who appreciate both the
long term growth strategies and to deliver even quality of Newcastle Permanent products, and the
higher standards of service and distribution for convenience of our longer opening hours.
our members. During the second half of 2005 Newcastle
The Society’s capital adequacy and liquidity ratios Permanent will also open full branches in Taree
remain very sound at 18.1% and 20.44% and Port Macquarie. This expansion follows the
respectively. While conservative by comparison successful deployment of Community Lending
with other operators in the industry, these are signs Managers into those areas. 2
C h a i r m a n’s
Report (continued)
As with the Central Coast, the news of a full As an organisation with a long tradition of
branch service is being welcomed and keenly prudent financial management, formalising
anticipated by those communities. risk management strategies and policies has
The North Coast of NSW has been identified been a straightforward process.
as one of this state’s major growth areas over All other organisational matters pertaining
the next two decades. We are confident that to compliance are well advanced.
the provision of high quality financial services
I Community Support
will be successful with the current and future
population, many of whom are relocating Newcastle Permanent has a long and proud
from major urban areas and expect the ready tradition of community involvement. Over
availability of financial products and services. the years we have supported countless
Opportunities for growth in these areas will worthwhile causes, community initiatives,
be closely monitored. events and projects. We see this facet of our
operation as integral to our mutual status,
We will also become involved in supporting
and a means of returning value to the many
the community in these new areas of
people and communities in the region which
operation, just as we have long done in the
have supported the Society for so many years.
Hunter and Central Coast.
That support has been an essential component
The Society has also undertaken a policy of
of Newcastle Permanent’s success.
expanding our ATM network in non-branch
Our Charitable Foundation marked
locations. Recognising that the ATM is now
12 months of operation in August 2005.
regarded as an essential service component in
In that time more than $1 million has been
the day-to-day needs of our members,
distributed. A total of 29 organisations
providing ATMs in places of high patronage or
representing a diverse field of interests are
usage represents a sound business decision.
now undertaking important community
I Legislative & Statutory Matters projects thanks to the Charitable Foundation.
The 2007 implementation date for the As news of the Foundation’s work spreads,
BASEL 2 Accord has necessitated the the level of community support that it
development of an appropriate timetable to provides will continue to grow, reinforcing
ensure full compliance. Newcastle Permanent the strong association that the Newcastle
has its preparations well in hand and we are Permanent has with the community and
confident of meeting all obligations. actively demonstrating the true nature of
One of the key elements of the Accord is the responsible corporate citizenship.
need to demonstrate an appropriate level of Our commitment to good citizenship was
3 risk management is in place. demonstrated in Newcastle Permanent’s rapid
response to the Tsunami Relief Appeal in early sound understanding of the financial services
January 2005. Within two days of the disaster industry is integral to the ongoing successful
we had launched a public appeal. The response performance of Newcastle Permanent.
was overwhelming. Most important of all, my sincere appreciation
In just a few weeks more than $1million had been goes to all our members whose continuing support
raised for Australian Red Cross to enable them to for Newcastle Permanent is the key ingredient in
deliver assistance to the areas worst affected by the our ongoing success.You can be sure that your
Tsunami. This was the largest group donation Board, management and staff are fully committed
received by the Red Cross in NSW. to serving your best interests.
I thank the local media, particularly The Herald I look forward to the future with confidence.
and NBN Television, and Newcastle and Lake The move to expand the footprint of our area
Macquarie Councils for their generous support in of operation into the northern regions of NSW
helping to make this appeal such a success. The provides us with significant scope for growth,
people of the Hunter and Central Coast can be while continuing to expand our service range
proud of their role in this appeal, demonstrating within the Hunter and Central Coast regions.
the true meaning of community at a time of the Along with this growth we must also be mindful
year when our thoughts are usually associated of the need to ensure that Newcastle Permanent
with relaxation. retains its competitive edge in the market.
I Board and Management Excellence in products and services must be
supported by an organic development in our
I must make special mention of the contribution
systems and organisational culture. This will be
made by my fellow Directors over the past 12
a focus for the Board in the coming year.
months. The responsibilities now applying to
We have an important role to play in the
Directors of any company, coupled with the
growth and prosperity of the Hunter, the Central
increasing complexities of corporate governance,
Coast, and now, the Mid North Coast. It is a
have seen a significant increase in their workload.
role we welcome and will continue to perform
The time devoted to Newcastle Permanent Board
with the diligence, rigour and integrity which
related matters has more than doubled. I thank my
are the hallmark characteristics of the Newcastle
Directors for their unswerving commitment and
Permanent brand.
application to their duties, and for their excellent
counsel in all matters related to the governance
of Newcastle Permanent.
I also wish to congratulate our Chief Executive
Officer, Mr Fraser Read-Smith on his first 12
Michael McDonald
months with Newcastle Permanent. In that time
Chairman
he has provided sound leadership, including the
development and implementation of a range of
initiatives that have positioned the organisation
for sustained growth and future long term success.
In concert with his management team and
tremendous branch staff, Fraser’s diligence and 4
C E O ’s Review
The Society achieved
a buoyant
business performance
outcome.
I Solid Financial Performance Operating expenses of $71.7 million (2004:
$63.9 million) include a $1.1 million increase
In the face of an increasingly competitive
in new project related expenditure.
retail banking environment, the Society
Good progress was made in terms of the cost
achieved a solid 10.3% increase in profit
to asset ratio which fell to 1.80%, down from
before tax after deducting outside equity
1.95% in the previous corresponding period.
interests and excluding non-recurring items,
The Society remains committed to achieving
rising from $43.8 million to $48.3 million.
continuing improvement in cost efficiency so
After adding back non-recurring items and
that its competitive position as an authorised
allowing for income tax expense and a $3.0
deposit-taking institution (ADI) is optimised.
million donation to the Newcastle Permanent
Charitable Foundation, final net profit after I Enhanced Member Value
tax was $34.1 million (2004: $33.8 million).
As a mutual organisation, Newcastle
The donation made to the Newcastle Permanent is primarily focused on
Permanent Charitable Foundation is part of maximising the value it provides directly to
a five year commitment by the Society to members in the form of above-the-line
inject $20.0 million into the Charitable benefits such as better interest rates on loans
Foundation, in order to facilitate its extensive and deposits, lower fees and charges, no
programme of community projects and account keeping fees, no internet or
initiatives in the region. telephone banking fees on retail transaction
Excluding non-recurrent items, total revenue accounts etc. We call this the “mutuality
rose by 9.5% to $123.8 million (2004: dividend”. This is in addition to the
$113.0 million) reflecting the intense accounting profits recorded by the Society,
5
competition for both loans and deposits. which are accumulated as member’s funds and
used to finance the growth and development of the increasing the “above-the-line” benefits that are
Society’s activities for the benefit of current and provided to members, on whose behalf the Society
future members. exists and functions.
Fiscal 2005 saw the Society achieve a 10.5% I Sound Financial Position
increase in the estimated “mutuality dividend”
As noted in the Chairman’s Report, the period
to $45.2 million (2004: $40.9 million).
under review saw the Society maintain a
As shown below, the “mutuality dividend” accounts
conservative financial position. Capital adequacy
for more than half of the overall member value that
was recorded at 18.1% as at 30 June 2005,
was generated by Newcastle Permanent in
reflecting the increased growth of the Society’s
2004/05. In other words, nearly 60% of the total
lending portfolio and a higher level of liquid assets
economic value produced by the Society during
at year’s end. The Society is committed to
this period was provided directly to members in
maintaining a superior capital adequacy ratio to
the form of benefits accruing from the products
most major ADI’s and its current capital position
and services used by each member.
remains well above industry benchmarks and
2004/05 2003/04 prudential requirements. It is also important that
$million $million the Society optimises its capital position for the
After-tax Profit 34.1 33.8 benefit of the Society and its members.
“Mutuality Dividend” 45.2 40.9 Likewise, the Society’s liquidity position remains
very sound with a liquidity ratio of 20.44% as at
Overall Member Value 79.3 74.7 year’s end.
% “Mutuality Dividend” 57.0% 54.8% These ratios leave the Society well placed to pursue
its growth strategies and give it a competitive
This is based on the work of independent banking advantage at a time when system growth is slowing
and finance industry consultants CANNEX Pty and economic conditions have moderated.
Ltd, which calculates the difference in the price of
I Superior Credit Quality
products and services provided by the Society to
members compared with the pricing of the major Industry benchmarking indicates that the Society’s
banks for comparable products and services. arrears position compares very favourably with
ADI’s generally. At year’s end, mortgage loans
The Society provides these benefits to members
because of its mutual structure. In contrast to the with arrears in excess of four months’ duration
major banks and regional banks, the Society has no comprised just 0.05% of total loans, or nearly
shareholders, only members who are also the half the industry average. This partly reflects the
Society’s customers. Consequently, the Society rather benign credit risk conditions which
does not operate to maximise bottom-line have been apparent in recent years - due to
profitability and dividends on behalf of Australia’s sustained economic growth together
shareholders. Instead, as a mutual, Newcastle with associated low inflation, interest rates
Permanent is able to focus its resources on and unemployment. 6
C E O ’s Review (continued)
However, it is also due to the prudent
approach that the Society takes to credit
The "mutuality
risk - as with other risk areas. The Society
has been mindful that such standards can dividend" accounts
easily be diluted in periods of extended for nearly 60% of the
prosperity and has been careful to maintain
overall member value.
a consistent approach to credit policy and
its administration.
I Buoyant Business Performance provides to members on an ongoing basis.
In a period of slowing economic growth, Many other financial institutions offer special
the Society achieved a buoyant business rates for limited periods of time or other
performance outcome. Lending approvals short term gimmicks to attract the unwary
increased by 13.7% overall for the year, borrower. In contrast, the Society provides
with good increases in each of our year-round good value. A comparison of
lending portfolios. headline rates shows the Society at the cutting
Significantly, total loans on balance sheet edge in nearly all the loan categories in which
increased by 18.9% to $3.5 billion. This is an it competes, whether it be for home, personal
excellent outcome - particularly given the or business lending.
competitive environment - and reflects the Several years ago, State Governments around
7 strong value proposition that the Society the country introduced a uniform system of
The
Society's
capital
position
remains well
Senior Executives, left to right:
Fraser Read-Smith, Glenn Walker,
above
Bruce White, Nadine Leighton and industry
Jeff Thornton.
benchmarks.
average annual percentage rates (AAPR) to assist This has further enhanced the ability of this service
mortgage loan borrowers in comparing home and has proven to be something of a hit with
lending products on an “apples with apples” basis. internet registered members.
AAPR takes all the costs of borrowing into account It has also enabled the Society to add new features
and a comparison on this basis clearly shows the to its internet banking offering, such as the
outstanding value proposition provided by the introduction of BPAY View™ and the
Society’s mortgage loan products. implementation of Pay Anyone limits.
This was reinforced when the Society was awarded The Society took the opportunity to significantly
second place in Money Magazine’s national Home upgrade the bandwidth for its branch data
Lender of the Year 2005 awards, in competition communication network. This has led to a major
increase in data transmission speeds through the
with all the major home lending institutions from
network and has greatly improved system
around the country.
functionality in all of our branches. This has
I Meeting Member Needs enabled the Society to further lift service levels
Fiscal 2005 saw a number of new initiatives for the benefit of members – something which has
implemented which are enabling the Society long been the hallmark of Newcastle Permanent.
to better meet member needs. As part of an upgrade of the Society’s security
Nineteen new ATMs were installed during the systems, the latest CCTV surveillance technology
was installed throughout the Society’s branch
period which has significantly increased
network. This adds a further security feature
members’ access to the Society’s ATM network.
which is very much in the interests of all
A further increase in the number of ATMs is
members and staff.
planned for 2005/06.
Each year the Society makes a considerable
As well as augmenting the branch network with
investment in staff training and 2004/05
two additional branches and the establishment of
was no exception.
our first minibranch, a major upgrade of the
Society’s internet banking system was completed. TM Registered to BPAY Pty Ltd ABN 69 079 137 518 8
C E O ’s Review (continued)
Of particular note, was the implementation of already extensive range of business related
a newly developed advanced service training products and services provided by the Society.
programme which involved all of the Society’s Call traffic to our Customer Support Centre
branch based staff and entailed a significant (CSC) increased by 30% during the year.
investment in time and resources. Additional systems were introduced to
This training further augments the capacity the CSC which gives it all the non-cash
of our frontline staff to meet the needs of functionality of the physical branch.
members on a member-by-member basis. The CSC is also now equipped to provide
hands-on assistance to members with
In a significant financial planning initiative the
internet banking queries.
Society launched the Newcastle Permanent
It is also pleasing to note that during the
Investment Portfolio during the year.
course of this year the CSC attained the
This gives members low cost access to a
member service standards targeted by
comprehensive portfolio of strongly
the Society, even with the sizeable increase
performing investment products together
in call volumes.
with full-service reporting capabilities.
A new corporate advertising campaign was
It adds a new dimension to the Society’s
initiated during the year which has proven
ability to assist members with their longer
to be popular with members and non-
term investment planning and wealth
members alike. The “Here for good”
generation activities.
campaign, which reaches back to the ethos
of “Our Town” campaigns of past years,
carries forward the values which have
Newcastle Permanent underpinned the Society’s appeal to members
will continue to and its success for so many years.
We will continue to broaden our distribution
progress and develop.
network and product range to further
enhance and strengthen our relationship
with members.
In a new business banking initiative, the
I A Confident Future
Society launched competitively priced leasing
and equipment finance products to meet the Conditions in the financial services industry
needs of the growing ranks of Society are more challenging than ever. The old
members with small and medium size barriers to competition no longer apply. The
9 business requirements. These complement the application of new technology and the
Senior Executives: left to right:
Tony Carr, Michael Kelly,
Margaret Ellis,
below,
AndrewYost, Terry Millett.
Newcastle
Permanent
is focussed
on maximising
member
value.
emergence of new competitive forces are and develop in this changing environment, as it
transforming the provision of retail banking has successfully done now for so many decades.
and financial services. The Society has clear values and operates in a
For more than a century now, Newcastle region which it knows and understands. It has a
Permanent has successfully catered to the needs of first-rate infrastructure and is highly efficient, with
its members. While it has adapted and made the well trained staff who are committed to doing the
change from being a simple home lender and very best for members. The Society is uniquely
gatherer of deposits, to being a sophisticated multi- positioned to continue to serve the needs of
product, multi-channel distributor of high quality members long into the future.
and well priced financial products and services,
Newcastle Permanent has remained true to its
mutual foundations which focus the Society on
putting the interests of members first.
By remaining relevant to the needs of its members, Fraser Read-Smith
Newcastle Permanent will continue to progress Chief Executive Officer 10
Pe r f o r m a n c e
Summary
Total Assets
4500.00
Total Assets
4000.00 During 2005 total assets
Millions
increased to over $4 billion,
3500.00
underlining the significant
3000.00
financial strength of
2500.00 Newcastle Permanent, and
highlighting the value of a
2000.00
long term strategy of sound
1500.00 prudential management. This
is an ideal platform from
1000.00
which to pursue our
500.00 growth strategies.
0.00
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Member Funds
500.00
Member Funds
Millions
Member funds are used to
finance the growth and
400.00
development of the Society’s
activities for the benefit of
current and future members.
300.00
200.00
100.00
0.00
11
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
After Tax Profit
40.00 After Tax Profit
Millions
35.00 Newcastle Permanent’s 2004/2005 final
net after tax profit was $34.1 million.
30.00
After deducting outside equity interests
25.00 and non-recurring items, the increase in
before tax profit was 10.3%, reflecting
20.00 a solid result.
15.00
10.00
5.00
0.00
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Total Loans
3600.00
Total Loans
3400.00
Total loans increased by 18.9%, an 3200.00
Millions
excellent outcome in a highly competitive 3000.00
2800.00
environment and reflects the strong value
2600.00
proposition that Newcastle Permanent
2400.00
offers to members on an ongoing basis. 2200.00
2000.00
1800.00
1600.00
1400.00
1200.00
1000.00
800.00
600.00
400.00
200.00
0.00
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
12
Sharing with our
The Society takes
great pride in its
corporate citizenship.
Winners of the inaugural Newcastle
Permanent Challenge at Surfest
A wide range of events and initiatives that 2005, Catherine Hill Bay No. 2
benefit the population of the Hunter and team, Brianna Hodgson, Reece
Central Coast in areas including health, Menzies and Tyler Williams.
education, sport and family entertainment
are closely associated with Newcastle
Permanent’s name.
The popularity of the Primary Schools
The Newcastle Permanent Challenge provides
Mathematics Competition and Schools’
a vehicle for the region’s young surfers to
Newspaper Competition continues to
participate in this landmark surfing festival.
increase, providing opportunities for young
people to apply and display for a wider The popularity of water based recreation in
audience, the skills learnt at school. the regions in which we operate prompted
our partnership with Newcastle City Council
Young people are also the direct beneficiaries
to develop and implement a water safety
of our support for the Hunter and Central
program throughout local schools. Utilising
Coast Junior Surf Lifesaving, the Wacky
Wombat Literacy Program, and the Newcastle the off-season resources of the Council’s
Permanent Knights Junior Development beach inspectors and life guards, the program
Program, which reaches over 50,000 children is designed to raise awareness and skills to
across the Hunter and Central Coast every enable people to safely enjoy the time they
year. Indirectly, the entire community benefits spend in and around water.
through the enhancement of the fitness, skills Major participation events such as the Hunter
and understanding that participation in these Bike Run, the Race for Research and Carols
activities provides. by Candlelight events at Speers Point, Port
An expansion of our involvement in Surfest in Stephens and on the Central Coast provide
2005 saw the creation of the Newcastle families with entertainment, exercise, fun and
Permanent Challenge. The event is open to a chance to join with other community
team entries from affiliated board clubs in the members to enjoy the best of the things that
Hunter and Central Coast with each team our region has to offer.
13 comprising one junior, one female and We have also added a new event to our
one cadet. sponsorship portfolio with the Newcastle
Community
Permanent Lake Macquarie Half Marathon.
Widespread participation from local fitness
enthusiasts of all ages, and a large contingent of
competitors from outside the area mean that this
event benefits the entire region from both a health
and economic perspective.
The Society takes great pride in its corporate
citizenship and we believe that our contributions
actively enhance the quality of life for the people
of our region. We will continue to participate
actively in these areas and respond to requests for
assistance where benefits are available to significant
portions of our community.
Sponsorship rights were secured for the new
Superscreen at EnergyAustralia Stadium, reinforcing
our support for the Region’s leading sports facility
14
Sharing with our
I The Newcastle Permanent
Charitable Foundation The Charitable Foundation
The Newcastle Permanent Charitable is an effective
Foundation has now been in full operation
for just over 12 months. Its first year of
means to deliver
operation saw over $1 million distributed to support to
29 community based organisations.
our community.
The groups that we have assisted to date
represent a diverse cross section of interests
for the mentally ill and the disadvantaged,
that are using their grants to deliver
palliative care, homeless youth services
programs and initiatives that directly
and early intervention programs conducted
benefit our community.
by the PCYC.
To date areas of activity that have benefited
from the Foundation’s support include the Newcastle Permanent CEO, Fraser Read-Smith, left and
arts, education, cancer research, autistic University of Newcastle Vice Chancellor, Prof. Nick
Saunders jointly opened the new playground equipment
children and children with disabilities, at the Special Education Centre.The installation was
Alzheimer’s and Diabetes sufferers, support funded with a Foundation grant.
15
Community (continued)
Irrespective of the amount of funding sought, Office on qualifying for and attaining Deductible
each application is assessed by the Foundation’s Gift Recipient (DGR) status was provided to
Trustee against set criteria, all of which ensure that representatives from thirty different organisations
if realised, the proposal will have the potential to during the half day session.
improve the quality of life for a section of Feedback from participants was extremely positive,
our community. and we plan to make these workshops a regular
event in order to assist as many groups as possible
to have an equal chance of securing Charitable
Foundation assistance.
The expansion of Newcastle Permanent to the
Mid North Coast provides a further opportunity
to extend the reach of the Charitable Foundation.
Already applications are being received from
organisations in the Mid North Coast area.
2004-2005 Charitable Foundation
Total 29
Projects Health
The Delta Society’s Pet Partners program arranges therapy pet visits to
16 projects
hospitals, nursing homes and rehabilitation units.The dogs have proven Breakdown (55%)
to be of assistance in speeding recovery.The Delta Society’s Pet Partners of areas
program is supported by the Foundation. supported
Education
4 projects
(14%)
The work of the Charitable Foundation is helping Community
7 projects
to reinforce the already strong association of Arts (24%)
2 projects
Newcastle Permanent’s name with community (7%)
support throughout the Hunter and Central
Coast regions. Through the organisations
that we have assisted, our name is becoming In terms of its scale of funding and operation,
recognised even more widely in the context of the Charitable Foundation is a first in the areas in
genuine community support. which Newcastle Permanent operates. As a
In order to ensure an equality of opportunity for mutual, Newcastle Permanent sees the Foundation
groups seeking funding, the inaugural Charitable as an appropriate and effective way to ensure that
Foundation workshop was held in early July. we are able to deliver maximum value to the
Practical help on completing funding submissions, communities that we serve, and who have
16
plus specialist advice from the Australian Taxation supported us for over one hundred years.
Going forward
I Strategy
A modern, mutual The Society’s strategy for achieving its
business goals and objectives is to:
organisation, owned by
I focus on providing retail financial services
and run for the benefit and avoiding other business areas where the
of its members. Society is unable to apply its expertise or
extract sufficient value for members;
I enhance overall member value generated
through a combination of targeted
growth, improved efficiency and sensible
I Overview
product pricing;
Newcastle Permanent is a modern, mutual
I maintain the Society’s superior financial
building society, owned by and run for the
strength by generating adequate profits
benefit of its members.
in the long term to meet regulatory
I Objective requirements, support future growth
and retain the confidence of members
The Society’s objective is to deliver
and markets;
benefits and long term value for members,
I distribute the Society’s “mutuality dividend”
while dealing with people fairly and
honestly and making a useful contribution fairly across all categories of members
to the communities in which throughout its product range, reinforcing
Newcastle Permanent operates. loyalty and increasing product cross
holdings; and
I Business Goals
I use the Society’s resources to distribute and
The Society’s business goals are: administer its products and services in
I to maximise value, made up of the effective ways, increasing efficiency and
“mutuality dividend” and retained expanding its base of operations.
profits, over the long term for the benefit
I Our Commitment to Members
of our current and future members; and
The Society will put members first by:
I to distribute a wide range of high quality,
I dealing with members on a fair
competitively priced, financial products and
and honest basis;
services to our members that are readily
available and delivered with speed, courtesy I protecting the privacy of members
17 and reliability. (unless the law demands otherwise);
I making every reasonable effort to meet the
relevant needs of members by offering a wide
range of high quality and well priced products
and services;
I ensuring that all products and services are
promoted in a straightforward manner;
I making our products and services readily
accessible; and
I making the Society’s premises a safe,
convenient and user friendly environment.
I Our Commitment
to Employees
In working with its employees, the
Society will:
I act with honesty, integrity and respect;
I deliver challenging development and
career opportunities;
I engage our people and listen to their ideas;
I encourage teamwork, collaboration
and innovation;
I provide competitive remuneration and reward
high performance; and
I provide a healthy, comfortable and friendly
working environment.
I Our Commitment to the Community
During
Through its active involvement in the community,
2004/2005
the Society will:
the value of
I support and contribute to the well being and Newcastle
betterment of the communities in which Permanent’s
products was
Newcastle Permanent operates;
recognised
I support initiatives that are relevant and effective nationally
in addressing community and welfare issues; and with a number
of awards.
I contribute financial and other support to
worthwhile causes and events. 18
D i r e c t o r s’
The names and details of the Directors in
office at any time during or since the end of Your Directors submit herewith the
the year are set out below. Directors have financial report of Newcastle
been in office since the start of the financial
Permanent Building Society Limited
year to the date of this report unless
and its controlled entities for the
otherwise stated.
financial year ended 30 June 2005.
Names, qualifications, experiences and
special responsibilities
and has financial and management experience
with expertise in financial and management
M.P.McDonald
analysis, commercial and organisational
(Chairman)
reviews and audits, due diligence and
corporate governance. He is currently the
Michael McDonald joined the Board of the principal and Managing Director of business
Society in 1999. He is a solicitor and consulting firm M.D. Slater Consulting Pty
Managing Director of the Incorporated Legal Ltd. He is also a director of NIB Health Funds
Practice McDonald Legal. He has practised Limited, the Hunter Westpac Rescue
extensively in the areas of property, Helicopter Service Limited, the University of
commercial and banking law for 30 years. Newcastle Foundation, Corporate Internet
Mr McDonald is Chairman of Newcastle Business Information Systems Pty Ltd and
Friendly Society Ltd and Chairman of the Denis Veitch & Associates Pty Ltd. Mr Slater
commercial agency Denis Veitch & Associates also serves on the Board of the Newcastle
Pty Ltd and is actively involved in the Friendly Society Ltd and is a member of the
operation of this company. He also serves as Society's Corporate Governance and
Chairman of the Board Newcastle Permanent Nominations, Remuneration, Asset &
Community Foundation Company Ltd which is Liability, and Audit, Compliance & Risk
the Trustee of the Newcastle Permanent Management Committees.
Charitable Foundation. Mr McDonald is the
Chairman of the Society's Corporate
Governance and Nominations, Due Diligence W.J.Elliott
and Remuneration Committees. CPA, MAICD
M.D.Slater Warren Elliott joined the Board of the Society
BCom, MBA, FCPA, FCIS,
in 1991. Mr Elliott is a qualified accountant
FAICD, FTIA, FAIM, FCIM
(Deputy Chairman) with over 40 years' experience in accounting,
public administration, electronic data
Michael Slater joined the Board of the Society processing and management, having retired as
19 in 2002. Mr Slater is a qualified accountant General Manager of Shortland Electricity in
Report
1994. Mr Elliott is a former Chairman/Director of
Advance Energy. Mr Elliott is a member of the
Australian Society of Certified Practising D.E.Shanley
BCom, CFP, GAICD
Accountants and the Australian Institute of
Company Directors. Mr Elliott is presently
Chairman of NPBS Securities Pty Ltd and
David Shanley joined the Board of the Society in
also serves on the Boards of Hunter Water
2003. His experience in the finance sector spans
Corporation and Newcastle Friendly Society Ltd.
24 years, with a background in the building society
Mr Elliott is also a member of the Society's Audit,
and credit union industry. For 17 years Mr Shanley
Compliance & Risk Management, and Due
has been an adviser to personal and corporate
Diligence Committees.
clients on technical financial planning issues.
Mr Shanley is a Certified Financial Planner (CFP),
a member of the Financial Planning Association
W.B.Lewis and a graduate of the Australian Institute of
AM, FLGMA (RET.) Company Directors. Mr Shanley is a member of
the Society's Remuneration, and Audit,
Compliance & Risk Management Committees.
Barrie Lewis joined the Board of the Society in
1995. Mr Lewis is a qualified accountant with over
40 years' experience in commercial and public
administration, property development, P.J.Neat
accountancy and management, having retired as MAICD, AMAMI CPM
Town Clerk of the City of Newcastle in 1992.
Mr Lewis also serves on the Boards of Newcastle
Friendly Society Ltd and Newcastle Permanent Phil Neat joined the Board in 2003. He is a
Community Foundation Company Ltd which is the marketing and public affairs consultant and
Trustee of the Newcastle Permanent Charitable Managing Director of a marketing communications
Foundation. Mr Lewis is also Chairman of the consultancy group, which provides counsel and
Society's Audit, Compliance & Risk Management professional services throughout Australia to a
Committee and is a member of the Asset & number of corporations, governments and their
Liability and Due Diligence Committees. He is agencies, and national organisations. He is a former
presently the Chairman of the Newcastle Lake journalist with the ABC and Fairfax. Mr Neat also
Macquarie Ex-services Memorial Centre, Director serves on the Board of the Newcastle Permanent
of HGT Australia Ltd, HGT Aust Pty Ltd and a Community Foundation Company Ltd, which is
Trustee of the Newcastle Regional Disaster Relief the Trustee of the Newcastle Permanent Charitable
Fund. Mr Lewis is a fellow of the Local Foundation. Mr Neat is also a member of the
Government Managers Australia and a member of Corporate Governance and Nominations and
the Australian Institute of Company Directors. Due Diligence Committees. 20
General Board and Board Committee
I General Board
Attendance
Notes:
Board 1) In addition to formal Board meetings, the Directors were also involved in:
- workshops on matters including management, marketing and brand issues,
No. of No. Leave of and business planning;
Meetings 1 Attended Absence 2 - strategy planning sessions; and
- consideration of resolutions via electronic processes, including
M.P. McDonald 19 18 - "circulating" resolutions,
which are not included in the attendance records.
M. Slater 19 19 -
2) Leave of absence may be granted by the Board in advance to excuse a
W.B. Lewis 19 19 - Director from attending a particular meeting. That meeting is then not included
W.J. Elliott 19 17 - as a required attendance.
P. Neat 19 18 - 3) Committee attendances are irregular due to changes in Committee
D. Shanley 18 17 1 composition on 19 November 2004 as explained in the Corporate
Governance Statement.
The Corporate Governance and Nominations Committee conducted a
corporate governance workshop with Competitive Dynamics Pty Ltd during
the year, and other functions of the Committee were discharged by the full
I Committee Attendance 3 Board at formal meetings or in other workshops.
Audit, Compliance
Remuneration Due Diligence Asset and Liability
& Risk Management
Committee Committee Committee
Committee
No. of No. No. of No. No. of No. No. of No.
Meetings Attended Meetings Attended Meetings Attended Meetings Attended
M.P. McDonald - - 5 5 M.P. McDonald 1 1 1 1
M. Slater 7 6 3 3 M. Slater 1 1 10 9
W.B. Lewis 7 7 2 2 W.B. Lewis - - 10 10
W.J. Elliott 5 4 2 2 W.J. Elliott - - - -
P. Neat - - - - P. Neat 1 1 - -
D. Shanley 7 6 3 2 D. Shanley 1 1 - -
I Principal Activities I Operating Results
The principal activity of the entities within the The consolidated profit of the entity after
consolidated entity is the provision of a range providing for income tax has increased by 0.9%
of financial products and services to members. to $34.1 million, (2004: 5.2% increase to
$33.8 million).
The Society has controlled entities whose
principal activity includes a trustee company of I Significant Changes in the State
a regulated superannuation fund, a charitable of Affairs
trust and a special purpose securitisation trust. There were no significant changes in the state
The Society acts as an agent for the Newcastle of affairs of the consolidated entity during the
financial year.
Friendly Society Ltd.
I After Balance Date Events
There has been no other significant change in
the nature of these activities during the year Since the end of the financial year and to the
ended 30 June 2005. date of this report, in the opinion of the
Newcastle Permanent Building Society Limited
21
Directors, no item, transaction or event of a I Indemnifying Officers
material and unusual nature, which would effect
During or since the end of the financial year the
substantially the result of the consolidated
company has paid premiums to insure each of the
entity’s operation for the next succeeding year,
Directors against liability for costs and expenses
has occurred.
incurred by them in defending any legal
I Review of Operations proceedings arising out of their conduct while
acting in the capacity of director of the company,
The consolidated entity has shown sustained
other than conduct involving a wilful breach of
growth and satisfactory performance from all
duty in relation to the company.
operating entities. Total assets increased by 19.2%
to $4.3 billion (2004: 23.3% to $3.6 billion). I Auditor
I Future Developments PricewaterhouseCoopers continues in office
in accordance with section 327 of the
There are no likely developments that are expected
Corporations Act 2001.
to be prejudicial to the interests of members.
A copy of the auditor’s independence declaration
I Environmental Issues as required under Section 307C of the
The entity’s operations are not regulated by any Corporations Act 2001 is set out below.
significant environmental regulation under a law of I Company Secretary
the Commonwealth or of a State or Territory.
See page 28.
I Rounding of Amounts Signed in accordance with a resolution of
The amounts in the financial accounts have the Directors:
been rounded to the nearest thousand dollars
in accordance with ASIC Class Order 98/100.
M.P. McDonald W.B. Lewis
The Society is an entity to which the Class
Chairman Director
Order applies. Newcastle, 16 September 2005
Auditor’s Independence Declaration
As auditor for the audit of Newcastle Permanent Building Society Ltd for the year ended 30 June 2005,
I declare that to the best of my knowledge and belief, there have been:
a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation
to the audit; and
b) no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Newcastle Permanent Building Society Ltd and the entities it controlled
during the period.
W M Russell Newcastle
Partner 16 September 2005
PricewaterhouseCoopers
Liability is limited by the Accountant’s Scheme under the Professional Standards Act 1994 (NSW)
Newcastle Permanent Building Society Limited
22
Corporate Governance
I approving and monitoring financial,
I The Board of Directors regulatory and other reporting.
This Statement outlines the main I Composition of the Board
corporate governance practices in The names of the Directors of the Society
place throughout 2004/2005. are set out in the Directors’ report on
pages 19 & 20 of this report.
The composition of the Board is determined
I Role of the Board using the following principles:
The Board’s primary role is to govern the I a minimum of five and not more than
Society so that long-term member value is seven Directors, with a broad range of
enhanced and protected. The Board is relevant expertise;
responsible for the overall corporate
I a majority of independent non-executive
governance of Newcastle Permanent.
Directors;
Responsibilities include:
I a relevant blend of personal experience
I providing leadership to the organisation by
in accounting and financial management,
establishing rules and procedures, corporate
legal skills, local contacts and networks,
values and governance responsibilities;
and Chief Executive Officer level
I overseeing the performance and activities of business experience;
Newcastle Permanent through agreed
I a non-executive independent Director
strategies and goals;
appointed as Chairman; and
I approving and monitoring capital
I enough Directors to serve on various
expenditure;
committees without overburdening the
I overseeing the management of Newcastle Directors or making it difficult for them to
Permanent’s business; fully discharge their responsibilities.
I ensuring that appropriate controls are in
Directors are required to have relevant
place to manage risk;
experience in a field which is complementary
I ensuring that an effective legal and to the Society’s activities, or to have
regulatory compliance system is in place appropriate qualifications and experience
23
and monitored; and sufficient to provide meaningful contributions
Statement
to the operation of the Board, and to its role in to address any specific significant matters that
overseeing the proper functioning of management. may arise.
To assist in the execution of its responsibilities,
I Remuneration of Directors and
Senior Executives the Board has established a number of
Board Committees.
The Remuneration Committee considers
The Committees have written Charters, which
and makes recommendations to the Board
contain the mandates and operating procedures
regarding the remuneration of Directors and
of the Committee. The Committee Charters
Senior Management. It is also responsible
for making recommendations to the Board are reviewed on a regular basis. The Board has
about incentive performance packages, also established a framework for the
superannuation entitlements, retirement management of the Society including a system
and termination entitlements. of internal control, a business risk management
process and the establishment of appropriate
I Independent Professional Advice ethical and behavioural standards.
Each Director has the right of access to all
I Committees
relevant Society information and to the
Society’s executives and, subject to prior The composition of the Board Committees is
consultation with the Chairman, may seek regularly reviewed to match skills of Directors
independent professional advice from a suitably with the work of the relevant Committee, and
qualified advisor at the Society’s expense. to balance the level of time that each of the
The Director must consult with an advisor Directors must dedicate to the governance of
suitably qualified in the relevant field, and Newcastle Permanent. The Board’s Committees
obtain the Chairman’s approval of the fee were amended on 19 November 2004.
payable for the advice before proceeding with
I Corporate Governance &
the consultation. A copy of the advice received
Nomination Committee
by the Director is made available to all other
members of the Board. The Corporate Governance & Nomination
Committee oversees the appointment and
I Board Processes
induction process for Directors and Committee
The full Board currently holds a minimum of members, and makes recommendations to the
11 scheduled meetings each year, plus strategy Board on the selection, appointment and
meetings, workshops and any extraordinary succession planning process of the company’s
24
meetings at such other times as may be necessary Chief Executive Officer.
Corporate Governance
The Corporate Governance & Nomination activities the Society may decide to pursue or
Committee also uses an external facilitator to undertake. It is also authorised to review and
annually review the effectiveness of the make recommendations about marketing
Board, its committees, individual Directors, plans and member communications.
and Chief Executive Officer.
Committee Members
Committee Members Mr M.P. McDonald (Chairman)
Mr M.P. McDonald (Chairman) Mr P.J. Neat
Mr M.D. Slater Mr W.J. Elliott (appointed 19/11/04)
Mr P.J. Neat Mr W.B. Lewis (appointed 19/11/04)
Mr D.E. Shanley Mr M.D. Slater (retired 19/11/04)
Mr D.E. Shanley (retired 19/11/04)
I Audit, Compliance & Risk
Management Committee I Remuneration Committee
The Audit, Compliance & Risk Management The Remuneration Committee reviews and
Committee has a documented charter, makes recommendations to the Board on
approved by the Board. All members must remuneration packages and policies applicable
be non-executive Directors. The Chairman to the Chief Executive Officer, Senior
of this Committee shall not be the Chairman Executives and Directors. It is also
of the Board. The committee advises on the responsible for making recommendations to
establishment and maintenance of a the Board about incentive performance
framework of internal control and packages, superannuation entitlements,
appropriate ethical standards for the retirement and termination entitlements.
management of the consolidated entity.
Remuneration levels are competitively set to
Committee Members attract and retain appropriately qualified and
Mr W.B. Lewis (Chairman) experienced directors and senior executives.
Mr M.D. Slater The Remuneration Committee obtains
independent advice on the appropriateness
Mr D.E. Shanley
of remuneration packages and trends in
Mr W.J. Elliott (appointed 19/11/04)
comparable organisations.
I Due Diligence Committee Committee Members
The Due Diligence Committee is authorised Mr M.P. McDonald (Chairman)
to investigate and make recommendations to Mr M.D. Slater (appointed 19/11/04)
25
the Board regarding the conduct of any new Mr D.E. Shanley (appointed 19/11/04)
Statement (continued)
Mr W.B. Lewis (retired 19/11/04) compliance risks for the Society. The Chief
Mr W.J. Elliott (retired 19/11/04) Executive Officer has declared in writing to
the Board, that the financial reporting risk
I Asset and Liability Committee management and associated compliance and
The Asset and Liability Committee is not a Board controls have been assessed and found to be
Committee, but rather a management committee operating efficiently and effectively. The
that is chaired by the Chief Financial Officer. Its operational and other compliance risk management
role is to establish and monitor a strategy for controls and procedures have also been assessed
Newcastle Permanent’s composition of assets and and found to be operating efficiently and
liabilities having regard to its broad strategic goals, effectively. All risk assessments covered the whole
and factors including interest rate movements, financial year and the period up to the signing
liquidity and capital adequacy. It is required to have of the annual financial report for all material
two Directors on the committee. Presently, those operations of the Society.
Directors are: The Board also monitors risk management
Mr W.B. Lewis strategies developed to protect against and or
Mr M.D. Slater mitigate identified risks to the Society.
I Associated Companies I Quality and Integrity of Personnel
Newcastle Permanent Building Society has several Employment of appropriately qualified personnel,
associated companies which are consolidated into together with training and development and
the group for reporting purposes. These associated appropriate remuneration and incentives with
companies include: regular performance reviews, creates an
- Newcastle Friendly Society Limited environment of co-operation and constructive
- Newcastle Permanent Community Foundation dialogue with employees and senior management.
Company Limited
I Financial Reporting
- Permanent Financial Services Pty Ltd
The Chief Executive Officer and the Chief
I Risk Management Financial Officer have declared, in writing to the
The Board oversees the establishment, Board that the Society’s financial reports are
implementation, and annual review of the founded on a sound system of risk management
company’s Risk Management System. Management and internal compliance and control which
has established and implemented the Risk implements the policies adopted by the Board.
Management System for assessing, monitoring and Monthly actual results are reported against budgets
26
managing operational, financial reporting, and approved by the Directors. Furthermore, revised
Corporate Governance
forecasts for the year are prepared regularly maintaining appropriate, core Society values
when required. Convergence with and objectives;
International Financial Reporting Standards
I fulfilling responsibilities to members and
(IFRS) is a key current financial reporting
customers by maintaining high standards of
project, and a steering committee has been
product quality, service standards and
established to ensure a smooth transition to
commitments to fair value;
IFRS reporting.
I ensuring compliance with responsibilities to
I Conflict of interest
the individual, such as privacy, use of
Directors must keep the Board advised, on an privileged or confidential information and
ongoing basis of any interest that could conflict resolution;
potentially conflict with those of the
I dealing with and managing conflicts
company. The Board has developed
of interest in accordance with
procedures to assist Directors to disclose
approved policies;
potential conflicts of interest.
I controlling and monitoring corporate
Where the Board believes that a significant
conflict exists for a Director on a Board opportunities by preventing Directors and
matter, the Director concerned does not employees from taking advantage of
receive the relevant Board papers and is not property, information or position for
present at the meeting whilst the item is personal gain;
considered and does not vote on the matter.
I ensuring confidentiality of corporate
Details of Directors’ related-entity
information;
transactions with the Society and consolidated
I dealing fairly with each other, members and
entity are set out in Note [29] “Related Party
Disclosures” in the Society’s full financial third parties;
report.
I protecting and properly using the
I Code of Conduct company’s assets;
The consolidated entity has advised each I compliance with all laws; and
director, manager and employee that they
I reporting of unethical behaviour.
must comply with the Society’s Code of
Conduct by: I Communication with Members
I aligning the behaviour of the Board and The Board communicates with members by
27 management with the code of conduct by providing information as follows:
Statement (continued)
I the concise report is available on request to all practise in the Supreme Court of NSW and the
members and includes relevant information High Court of Australia in 1993 and to the
about the operations of the Society during the Supreme Court of South Australia in 2001.
year, changes in the state of affairs and details He has practised law extensively in the areas of
of future developments; corporate and commercial law, both in private
practice and in company legal roles. Mr Yost has
I newsletters are distributed to members half-
worked at partnership level in private practice and
yearly providing a regular basis to provide
has held Head Legal Counsel roles in a subsidiary
information to members on developments and
of an Australian blue-chip company and in an
issues that may be of interest;
Australian subsidiary of a large multi-national
I general information is available on the company’s company. He is a member of the Australian
internet site; and Corporate Lawyers Association, the Law Society
I the external auditor is requested to attend the of NSW and an Affiliate Member of Chartered
Annual General Meeting to answer any questions Secretaries Australia.
concerning the audit and the content of the
auditor’s report.
The Board encourages full participation of
members at the Annual General Meeting,
to ensure a high level of accountability
and identification with the Society’s strategy
and goals. Important issues are presented to
the members as single resolutions.
The members are requested to vote on the
appointment and aggregate remuneration of
Directors, and changes to the Constitution.
Copies of the Constitution are available to any
member who requests it.
I Company Secretary
Mr Andrew Yost is the Company Secretary of the
Society, having been appointed to that position on
19 August 2004. He is a qualified lawyer holding a
masters degree in Law (LLM). He was admitted to 28
Statements of financial performance
For the year ended 30 June 2005
Parent Consolidated
Entity Entity
2005 2004 2005 2004
Note $’000 $’000 $’000 $’000
Interest revenue 1,2 237,336 202,058 252,467 203,711
Interest expense 1 (133,564) (104,760) (145,800) (105,618)
Net interest revenue 103,772 97,298 106,667 98,093
Other revenue from ordinary activities 1 19,308 21,525 17,723 20,359
Total operating revenue 123,080 118,823 124,390 118,452
Bad and doubtful debts expense 2 (346) (479) (346) (479)
Depreciation and amortisation expenses (3,783) (3,105) (3,783) (3,105)
Donation to Newcastle Permanent Charitable Foundation (3,000) (5,007) - -
Other expenses from ordinary activities (66,718) (62,069) (67,878) (60,799)
Profit from ordinary activities before income tax 49,233 48,163 52,383 54,069
Income tax expense relating to ordinary activities (14,824) (14,629) (15,235) (14,967)
Net profit 34,409 33,534 37,148 39,102
Net profit attributable to outside equity interest - - (3,043) (5,291)
Net profit after income tax attributable to
members of Newcastle Permanent Building Society Ltd 34,409 33,534 34,105 33,811
Net increase in asset revaluation reserve - 12,808 - 12,808
Total revenues, expenses or valuation adjustments
attributable to members of Newcastle Permanent
Building Society Ltd and recognised directly in equity - 12,808 - 12,808
Total changes in equity other than those resulting
from transactions with owners as owners 34,409 46,342 34,105 46,619
The accompanying notes form part of these financial statements
29
Newcastle Permanent Building Society Limited
Statements of financial position
For the year ended 30 June 2005
Parent Consolidated
Entity Entity
2005 2004 2005 2004
$’000 $’000 $’000 $’000
Assets
Cash and liquid assets 106,244 121,289 125,654 125,183
Accrued receivables 10,590 7,099 7,113 6,786
Investment securities 666,105 523,168 666,105 523,168
Loans and advances 3,248,541 2,732,517 3,478,461 2,926,738
Other investments 494 494 294 294
Property, plant and equipment 42,346 41,577 42,346 41,577
Deferred tax assets 2,502 1,989 2,502 1,989
Other assets 2,397 1,818 2,397 1,818
Total Assets 4,079,219 3,429,951 4,324,872 3,627,553
Liabilities
Deposits 3,129,804 2,988,066 3,119,523 2,982,713
Borrowings 478,738 - 724,951 196,649
Payables and other liabilities 35,147 38,811 34,671 37,709
Tax liabilities 1,562 3,907 1,785 4,071
Provisions 5,804 5,412 5,842 5,442
Total Liabilities 3,651,055 3,036,196 3,886,772 3,226,584
Net Assets 428,164 393,755 438,100 400,969
Members' Funds
Reserves 41,133 41,133 41,133 41,133
Retained profits 387,031 352,622 387,065 352,960
Equity attributable to members of
the parent entity 428,164 393,755 428,198 394,093
Outside equity interest in controlled entity - - 9,902 6,876
Total Members’ Funds 428,164 393,755 438,100 400,969
30
Newcastle Permanent Building Society Limited
Statements of cash flows
For the year ended 30 June 2005
Parent Consolidated
Entity Entity
2005 2004 2005 2004
$’000 $’000 $’000 $’000
Inflows Inflows Inflows Inflows
(Outflows) (Outflows) (Outflows) (Outflows)
Cash flows from operating activities
Interest received from loans and advances 200,650 176,997 215,017 178,637
Interest from investment securities 38,432 24,469 40,149 23,853
Dividends received 10 61 10 35
Other income 212 - - -
Fees and other commissions received 14,094 15,308 37,049 15,338
Interest paid on deposits (130,824) (100,953) (143,060) (102,437)
Cash paid to suppliers and employees (67,223) (53,045) (87,049) (46,743)
Income tax paid (17,690) (16,847) (18,047) (17,221)
Net cash flows from operating activities 37,661 45,990 44,069 51,462
Cash flows from investing activities
Net movement in investments (143,091) (109,369) (143,091) (109,369)
Net movement in loans, advances (552,085) (463,885) (551,897) (463,885)
Payments for property, plant and equipment (4,799) (6,564) (4,799) (6,564)
Proceeds from sale of property, plant and equipment 221 283 221 283
Proceeds from sale of investments 760 5,430 760 5,430
Proceeds from liquidation of controlled entity - 1,550 - -
Net cash flows from investing activities (698,994) (572,555) (698,806) (574,105)
Cash flows from financing activities
Net movement in deposits 131,851 424,138 126,923 422,463
Net movement in loans securitised 35,699 194,221 - -
Proceeds from borrowings 448,977 - 448,977 195,711
Proceeds from commercial paper 29,761 - 79,325 166
Net movement in outside equity interest reserves - - (17) (9)
Net cash flows from financing activities 646,288 618,359 655,208 618,331
Net increase/(decrease) in cash held (15,045) 91,794 471 95,688
Cash at the beginning of financial year 121,289 29,495 125,183 29,495
Cash at the end of financial year 106,244 121,289 125,654 125,183
31 The accompanying notes form part of these financial statements Newcastle Permanent Building Society Limited
Discussion and analysis of financial statements
For the year ended 30 June 2005
a. Information on the Concise Financial Report
The financial statements and other specific disclosures have been derived from the Newcastle Permanent Building Society Ltd
(the Society) and its Controlled Entities (the consolidated entity) full financial report for the financial year. Other information
included in the concise financial report is consistent with the consolidated entity's full financial report.
The concise financial report does not, and cannot be expected to, provide as full an understanding of the financial performance,
financial position and financing and investing activities of the consolidated entity as the full financial report.
A copy of the consolidated entity's 2005 Annual Financial Report, including the independent audit report, is available to all
members and will be sent to members without charge upon request.The 2005 Annual Financial Report can be requested by
telephone on 13 19 87.
b. Consolidated Statements of Financial Performance
Total interest revenue increased by $48.8 million or 23.9% from the prior year.The main reason for this is the increase in
interest earning assets of $695.1 million or 19.4%. Interest revenue was also positively impacted by the increase in the Reserve
Bank cash rate by 0.25% in March 2005.The Society delayed passing on this rise to variable rate borrowers until April 2005.
Interest expense increased by $40.2 million or 38.0% from the prior year.The percentage increase is larger than the increase
in interest revenue because the Society passed on higher interest rates to fixed term investors earlier than the rise in the
Reserve Bank cash rate.This is because fixed term interest rates rose prior to the official rate rise in anticipation of the rise.
The increase in interest expense has also been impacted by the diversification of the Society's funding base.This diversification
has been achieved through the introduction of non member funding sources (wholesale funding) in addition to traditional
member funding (retail deposits). The Society previously established a securitisation funding program and more recently has
established a commercial paper program.This enabled the Society to readily tap the wholesale funding market and this funding
has a higher cost than traditional member deposits.The Society commenced this funding diversification in April 2004 and
consequently interest expense in the current financial year reflects a full year charge on these liabilities compared to less than
three months in 2003/04.
Non-interest revenue fell by $2.6 million or 12.9% from the prior year. Prior year’s revenue was significantly impacted from
the sale of Cashcard shares. Removing the impact of the sale of Cashcard shares, non-interest income increased by $2.2 million
or 14.5%.The rise in non-interest revenue was largely due to the increase in commission revenue achieved from higher
insurance product sales, and increased fee revenue from higher volumes for ATM, EFTPOS and Visa transactions.The Society
does not charge any fees on Internet Banking or BPay ® transactions.
Consolidated non-interest expenses excluding bad and doubtful debts increased by $7.8 million or 12.1%.The significant
increases were mainly attributable to increased personnel costs, depreciation and amortisation charges and electronic
32
Newcastle Permanent Building Society Limited ® Registered to BPAY Pty Ltd ABN 69 079 137 518
Discussion and analysis of financial statements
For the year ended 30 June 2005
transaction processing costs.The increase in personnel costs incurred was in relation to the Society's continued growth and
expansion, in particular, the branch network. Higher depreciation and amortisation charges related to new branches and
capitalisation of branch refurbishments and expansion of the Society’s ATM network over the past two years. Higher electronic
processing costs are consistent with the growth in the annual volume of total electronic transactions.
c. Consolidated Statements of Financial Position
Total assets of the consolidated entity increased by $697.3 million or 19.2%, whilst total liabilities increased by $660.2 million
or 20.5%.The increase in total assets reflects the growth in both loans and advances of $551.7 million or 18.9%, and
investment securities of $142.9 million or 27.3%.The increased level of investment securities reflects the Society’s policy of
maintaining a liquidity position well in excess of regulatory requirements.This policy is to ensure that the Society will have the
ability to fund loan asset growth in the short term without having undue impact on both the operational and/or regulatory
liquidity requirements.The total of investment securities and cash as a percentage of total liabilities was 20.4% at the end of
the financial year compared to 20.1% at the end of the previous financial year.
The growth in total liabilities is attributable to the increase in non member funding of $528.3 million and increased member
deposits of $136.8 million.
Equity attributable to members of the parent entity increased by the current year after tax profit of $34.1 million or 8.7% to
$428.2 million.Total equity of the consolidated group, including outside equity interest increased by $37.1 million or 9.3% to
$438.1 million.
d. Consolidated Statements of Cash Flows
The consolidated statement of cash flows shows net cash flows from operating activities decreased by $7.4 million to $44.1
million.This was mainly due to the increase in operational and funding costs noted in Section b. (set out on page 32) and
timing of cash receipts and payments.
Cash outflows from investing activities increased by $124.7 million or 21.7% to $698.8 million (2004: $574.1 million).The
two largest increases were the net movement of loans and advances of $551.9 million (2004: $463.9 million), and the net
movement in investment securities of $143.1 million (2004: $109.4 million).
Cash inflows from financing activities increased by $36.9 million or 6.0% to $655.2 million (2004: $618.3 million).The major
components of this inflow were a result of the net increase in member deposits of $126.9 million (2004: $422.5 million) and
proceeds from borrowings comprising the issue of commercial paper and certificates of deposit issued by the Society of $528.3
million (2004: $195.9 million).
33
Newcastle Permanent Building Society Limited
Notes to the financial statements
For the year ended 30 June 2005
1. INTEREST REVENUE AND INTEREST EXPENSE
The following table shows the average balance for each of the major categories of interest-bearing assets and
liabilities, the amount of interest revenue or expense and the average interest rate.
CONSOLIDATED
Average Average
$’000 $’000 %
Interest revenue 2005
Cash and liquid assets 91,553 4,611 5.04%
Investment securities 571,259 32,802 5.74%
Loans and advances 3,145,156 215,054 6.84%
3,807,968 252,467 6.63%
Interest expense 2005
Member deposits 3,053,378 126,510 4.14%
Certificates of deposits 116,344 6,305 5.80%
Commercial paper 233,680 12,985 5.56%
3,403,402 145,800 4.28%
Net interest revenue 2005 106,667
Interest revenue 2004
Cash and liquid assets 52,512 2,467 4.70%
Investment securities 426,896 22,607 5.30%
Loans and advances 2,705,825 178,637 6.60%
3,185,233 203,711 6.40%
Interest expense 2004
Member deposits 2,798,290 104,327 3.73%
Commercial paper 23,645 1,291 5.46%
2,821,935 105,618 3.74%
Net interest revenue 2004 98,093
34
Newcastle Permanent Building Society Limited
Notes to the financial statements
For the year ended 30 June 2005
Parent Consolidated
Entity Entity
2005 2004 2005 2004
$’000 $’000 $’000 $’000
2. PROFIT FROM ORDINARY ACTIVITIES
Included in the profit from ordinary activities before
income tax are the following items of operating revenue:
Interest revenue (Note 1) 237,336 202,058 252,467 203,711
Non-interest revenue
Dividends 10 61 10 35
Fees 10,448 10,094 10,580 10,099
Commissions 5,258 4,052 5,262 4,062
Proceeds on sale of plant and equipment 221 283 221 283
Proceeds on sale of investments 760 5,430 760 5,430
Proceeds from liquidation of controlled entity - 1,550 - -
Other 2,611 55 890 450
Total 19,308 21,525 17,723 20,359
Revenue from ordinary activities 256,644 223,583 270,190 224,070
Net gain/(loss) on disposal of plant & equipment (26) (73) (26) (73)
Net gain/(loss) on disposal of investments 760 5,007 760 5,007
4. SEGMENT INFORMATION
The Society's group operations are operated wholly within New South Wales and within the following segments:
Financial products
Provision of financial services and products in the form of taking deposits and providing financial accommodation
as prescribed by the Society's and Friendly Society's Constitution.
Community Support
Supporting a dedicated fund for the benefit of the community in the regions in which it operates.
5. COMPANY DETAILS
The registered office and principal place of business of the company is:
307 King Street Newcastle West, NSW 2302.
6. FULL FINANCIAL REPORT
Further financial information can be obtained from the full financial report which is available to members, free of
charge, on request. A copy may be requested by calling 13 19 87.
35
Newcastle Permanent Building Society Limited
Directors’ Declaration
For the year ended 30 June 2005
In the opinion of the Directors of Newcastle Permanent Building Society Ltd, the accompanying concise financial report of
the consolidated entity, comprising Newcastle Permanent Building Society Ltd and its controlled entities for the year ended
30 June 2005, set out on pages 29 to 35 complies with the Accounting Standard AASB 1039 : Concise Financial Reports.
The financial statements and specific disclosures included in the concise financial report have been derived from the full
financial report for the year ended 30 June 2005.
The concise financial report cannot be expected to provide as full an understanding of the financial performance, financial
position and financing and investing activities of the consolidated entity as the full financial report, which as indicated in Note
(a) is available on request.
This declaration is made in accordance with a resolution of the Directors.
Dated at Newcastle this 16th day of September 2005
M.P. McDonald Chairman
W.B. Lewis Director
36
Newcastle Permanent Building Society Limited
Auditor’s Report
For the year ended 30 June 2005
Independent audit report to the members of Newcastle Permanent Building Society Ltd
Matters relating to the electronic presentation of the audited financial report
This audit report relates to the concise financial report of Newcastle Permanent Building Society Ltd (the Society) for the financial year
ended 30 June 2005 included on Newcastle Permanent Building Society Ltd’s web site. The Society’s directors are responsible for the
integrity of the Newcastle Permanent Building Society Ltd’s web site. We have not been engaged to report on the integrity of this web site.
The audit report refers only to the concise financial report identified below. It does not provide an opinion on any other information which
may have been hyperlinked to/from the concise financial report. If users of this report are concerned with the inherent risks arising from
electronic data communications they are advised to refer to the hard copy of the audited concise financial report to confirm the information
included in the audited concise financial report presented on this web site.
AUDIT OPINION
In our opinion, the concise financial report of Newcastle Permanent Building Society Ltd for the year ended 30 June 2005 complies with
Australian Accounting Standard AASB 1039: Concise Financial Reports.
This opinion must be read in conjunction with the rest of our audit report.
SCOPE
The concise financial report and directors’ responsibility
The concise financial report comprises the consolidated statement of financial position, consolidated statement of financial performance,
consolidated statement of cash flows, discussion and analysis of and notes to the financial statements, and the directors’ declaration for
Newcastle Permanent Building Society Ltd (the Society) for the year ended 30 June 2005.
The directors of the Society are responsible for the preparation and presentation of the financial report in accordance with Australian
Accounting Standard AASB 1039: Concise Financial Reports.
AUDIT APPROACH
We conducted an independent audit of the concise financial report in order to express an opinion on it to the members of the Society. Our
audit was conducted in accordance with Australian Auditing Standards, in order to provide reasonable assurance as to whether the concise
financial report is free of material misstatement.The nature of an audit is influenced by factors such as the use of professional judgement,
selective testing, the inherent limitations of internal control, and the availability of persuasive rather than conclusive evidence. Therefore, an
audit cannot guarantee that all material misstatements have been detected. For further explanation of an audit, visit our website
http://www.pwc.com/au/financialstatementaudit.
We also performed an independent audit of the full financial report of the Society for the financial year ended 30 June 2005. Our audit
report on the full financial report was signed on 16 September 2005, and was not subject to any qualification.
In conducting our audit of the concise financial report, we performed procedures to assess whether in all material respects the concise
financial report is presented fairly in accordance with Australian Accounting Standard AASB 1039: Concise Financial Reports.
We formed our audit opinion on the basis of these procedures, which included:
G testing that the information included in the concise financial report is consistent with the information in the full financial report, and
G examining, on a test basis, information to provide evidence supporting the amounts, discussion and analysis, and other disclosures in the
concise financial report which were not directly derived from the full financial report.
Our procedures include reading the other information in the Annual Report to determine whether it contains any material inconsistencies
with the concise financial report.
INDEPENDENCE
In conducting our audit, we followed applicable independence requirements of Australian professional ethical pronouncements and the
Corporations Act 2001.
PricewaterhouseCoopers
W M Russell Newcastle 16 September 2005
Partner
37 Liability is limited by the Accountant's Scheme under the Professional Standards Act 1994 (NSW) Newcastle Permanent Building Society Limited
Management Directory
I Executive Managers
I I
Tony Carr – Treasurer Terry Millett – General Manager Customer Service
I Jeff Thornton – Head of Compliance
I Margaret Ellis – Head of Marketing
I
I
Glenn Walker – General Manager Operations
Michael Kelly – Chief Financial Officer
I Bruce White – Chief Information Officer
I Nadine Leighton – Acting Head of
I
Human Resources Andrew Yost – Company Secretary
I Senior Managers
I I
John Arentz – Treasury Manager Don Jordan – Administration Services Manager
I
I Diana Arnott – Systems Development Manager David Kett – Executive Manager
Branch Banking
I Sue Badman – Manager Southern Region
I Chris Latimer – Financial Planning Manager
I Jon Beckwith – Learning &
I
Development Manager Graham Moore – Manager Branch Support
I
I
Elise Blunt – Treasury Risk Manager Steven Murray – Financial Controller
I
I
Greg Nolan – Head of Business Banking
Jason Bourke – Charitable Foundation &
Sponsorship Manager I Mike Phillips – Head of Product Management
I Bob Burns – Manager Central Region I Dennis Pitt – Investigations Manager -
Fraud Prevention & Detection
I John Connolly – Customer Support
Centre Manager I Chris Quinn – Loans Acquisition Manager
I Lynette Crosdale – Manager Suburban Region I
Stuart Trench – Senior Manager Mortgage
Operations and Broker Channel
I
Noel Ellenor – Manager Banking &
Payment Systems I
Geoff Walker – Manager Northern Region
I Melanie James – Marketing
Communications Manager
38
Products and Services
During 2005, the value of Newcastle
Permanent’s products to members was
recognised nationally through industry awards
Newcastle Permanent
and CANNEX 5 star ratings. The products
that we offer include:
offers a wide range
of competitive
I Everyday Transaction Accounts products and
Statement Savings Account – services.
a convenient and cost effective way to help
manage day-to-day banking.
Mortgage Offset Account – a mortgage
Money Management Account – a high
offset facility with convenient 24 hour access
performance passbook account with very
to your money.
competitive interest rates.
Achiever Account – a way to help save, Money Minder Account – fee free
while still allowing access to savings with banking with passbook access specifically
a passbook. designed for children’s savings.
Term Deposit – the security of a fixed rate
I Savings and Investments of interest and a range of investment terms.
Rapid Saver Account – a passbook account
Gold Term Deposit – a premium fixed
designed to reward efforts to save by paying term interest rate for investments of
a high rate of interest. $200,000 and over.
Special Monthly Interest Account – Managed funds – a range of funds with
an award-winning passbook or statement varying levels of risk and return.
account with higher interest rates (based on
Superannuation and retirement funds –
the Federal Government’s deeming rates) a range of options including superannuation
designed for people over 60 years working, and allocated pensions with varying levels of
retired or on a pension. risk and return.
39
I Home Loans I Personal Loans
Real Deal Home Loan – a low ongoing interest Personal and Car Loans – competitive fixed
rate, no application fee, no valuation fee and no rates with no ongoing account keeping fees and
ongoing account keeping fees. no early repayment fees.
Intro-Rate Home Loan – a discounted rate I Other Products and Services
for the first year. Insurances – house, contents, travel, car and loan
repayment insurance, many with flexible pay-by-
Fixed Rate Home Loans – competitive fixed
the-month options at no extra cost.
interest rates that offer peace of mind and
certainty for those who like to plan ahead. Business Solutions – a comprehensive suite of
products that meet small and medium business
Real Equity Home Loan – a competitively
banking, financing and insurance needs.
priced transactional line of credit secured against
the home. Financial Planning – a dedicated service that
provides financial planning advice on a range of
Real Options Home Loan – a flexible subjects including investments, superannuation
traditional loan with a competitive interest rate and retirement planning, life insurance and
that can be combined with other loans. estate planning.
40
Contact and location Directory
www.newcastlepermanent.com.au
ICustomer Service Centre
I Branch Locations ph: 13 19 87
ADAMSTOWN Brunker & Glebe Rds I Telephone Banking
BATEAU BAY Stockland Bay Village ph: 13 19 12
BELMONT* 587 Pacific Hwy
BELMONT CITI Belmont Citi Centre I Internet Banking: Log on at
CARDIFF 284 Main Rd www.newcastlepermanent.com.au
CESSNOCK Cnr Vincent & Cooper Sts
I Contact number for
CHARLESTOWN MALL Ridley St
CHARLESTOWN SQUARE Charlestown Square all Newcastle Permanent
CLARENCE TOWN* (MINI BRANCH) 118 Prince St branches: 13 19 87
ERINA Erina Fair Shopping Centre
GLENDALE Glendale Supercentre
GOSFORD 163 Mann St I ATM Locations
GREENHILLS Greenhills Shopping Centre
HAMILTON 122 Beaumont St CHARLESTOWN SQUARE
JESMOND Jesmond Stockland Mall Shop 41, Charlestown Square Food Court
JEWELLSTOWN* Jewellstown Plaza
DARBY STREET
KING STREET Cnr King & Union Sts
134 Darby Street, Cooks Hill
KOTARA Westfield Shopping Centre
(cnr Council & Darby Streets)
KURRI KURRI 187 Lang St
LAKE HAVEN Lake Haven Shopping Centre ERINA
LAMBTON 103 Elder St New Retail Mall, Erina Fair
MAITLAND Maitland Heritage Mall
KINCUMBER
MAYFIELD 165 Maitland Rd
Kincumber Village Shopping Centre,
MORISSET 95 Dora St
Avoca Drive, Kincumber
MOUNT HUTTON Lake Macquarie Fair
MUSWELLBROOK Campbell's Corner PHOENIX SPORTS CLUB
NELSON BAY 95 Magnus St Industrial Drive, Mayfield
NEW LAMBTON Cnr Victoria & Regent Sts
NEWCASTLE MALL Cnr Wolfe St POKOLBIN
PARRAMATTA Shop 8, 197-205 Church St Mall Tourist Information Centre,
RAYMOND TERRACE 36 William St 111 Main Road Pokolbin
SALAMANDER BAY Shop 5b, Salamander Shopping Centre
TERRIGAL
SINGLETON 113 John St
1 Campbell Crescent, Terrigal
STOCKTON 53 Mitchell St
SWANSEA 158 Pacific Hwy TOUKLEY
THE JUNCTION Cnr Union & Kenrick Sts Shop 2, 30 Canton Beach Road, Toukley
TORONTO 45 The Boulevard
WARATAH VILLAGE
TUGGERAH Westfield Shopping Centre
Shop 8, Waratah Village, Turton Road, Waratah
WALLSEND PLAZA Cowper St
WARNERS BAY 466 The Esplanade WARABROOK
WESTEND Marketown Shopping Centre Warabrook Shopping Centre
WYOMING Shop 21, Wyoming Shopping Village
41 WESTS LEAGUES CLUB
*Branches without ATMs 88 Hobart Road, New Lambton
Newcastle Permanent Building Society Limited.
ABN 96 087 651 992
Head Office
307 King Street, Newcastle West
PO Box 5001, Hunter Region Mail Centre, NSW 2310
Phone: 13 19 87
Fax: 02 4929 4637
www.newcastlepermanent.com.au
