ANNUAL REPORT 2012/2013

President’s Report 2

CEO’s Report 3

MFAA State Councils 4

Partners and Sponsors 6

MFAA Board 8

MFAA Strategic Direction 9

Support and Represent Professional Credit Advisers 10

Lobby for the Interests of Professional Credit Advisers 12

Develop and Deliver Services that Enhance the Professional Skills and Careers of Professional Credit Advisers 16

Facilitate Stakeholder Engagement 22

Promote the MFAA Professional Credit Advisers to Consumers 25

Financials 27

TABLE OF CONTENTS

CEO’s Report

The strength of the MFAA over the years

has been its flexibility and adaptability to

changing circumstances, but more importantly

its consistency of approach. We have

never veered from our focus of increasing

and maintaining professional standards

and promoting those to the public. This

applies not only to our members but also in

the organisation’s approach to regulators,

politicians, the media and other stakeholders.

Whether or not they agree with the MFAA’s

position on particular issues, those institutions

know that whatever comes to them from the

MFAA will be well-reasoned, logical, rational,

practical and professionally delivered.

More often than not, that approach goes a

long way to winning the day.

I’ve heard it said that it’s difficult to promote

the benefits of a member organisation to

consumers amidst all the white noise of

expensive advertising in the market. That

may be so, but I would argue that is easy to

achieve if you have something attractive to

‘sell’. Given all our consumer research which

shows that a large majority of consumers

will look for a member of a professional

organisation with whom to deal, it is clear to

me that the ‘product’ offered by MFAA credit

advisers – credit advice delivered at high

ethical, education and general professional

standards – is in demand.

That the Australian broker mortgage market

share is now 45% (one of the highest in the

world) is testimony to the fact that consumers

seek and appreciate the advice and services

offered by credit advisers (brokers).

During the year, the MFAA team has worked

hard to develop and enhance the MFAA’s

relationship with other professional bodies,

e.g. financial advisers, planners, accountants

and real estate professionals (a) to identify

how we can collaborate in the best interests

of our members and (b) to encourage their

members to recognise the importance and

benefits of building relationships with MFAA

credit advisers.

On the lobbying stage and with a new federal

government in Canberra, we are working with

them behind the scenes as we always do,

whichever party is in power, to ensure they

understand the workings of our profession

and the issues that drive us. I am confident

this approach will result in a benign regulatory

framework in which our members can operate

effectively. The MFAA will most certainly be

participating in the inquiry into the finance

sector as promised by the Coalition.

Our restructured staffing with relationship

managers in each state reaching out to

members with a renewed focus on enhanced

member engagement has proven successful

with favourable comments coming to me

about this valuable role from members but

more so evidenced by greater attendance

at PD days and other functions held by the

MFAA around the nation. Members’ feedback

is welcomed as it enables us to fashion

programs and actions which are best suited to

members’ stated needs and requirements.

More detail about our activities on members’

behalf is contained in the following pages

but in addition to our dedicated team I pay

tribute to the many volunteers who make

this association work. I refer to the members

of the Board, National Committees, State

Councils, State Committees, various member

forums and those many members who take

the time to phone or email me and the rest of

the MFAA staff with suggestions and points

of view. Finally to those members who give

their time and experience in the industry by

serving on the important Disciplinary Tribunal

panels I give my thanks and those of the

MFAA team.

Phil NaylorMFAA CEO

President’s Report

Industry associations form for

the purpose of promoting growth

and progress in their particular

industries by providing a central

information source about the

industry and its issues, establishing

best practice guidelines, lobbying

local, state and federal government

and promoting the image of

the industry through licensing,

membership standards and public

service advertising.

The MFAA can proudly state that it is

the most prominent industry body that is

continuing to promote and shape the future

of our industry.

The MFAA’s key strategic objectives are

to increase and maintain professional

standards, lobby on members’ behalf and

promote the benefits of dealing with an

MFAA member.

In terms of professional standards, MFAA

members have shown tremendous support

for our initiatives with close to 95% of

broker members completing the Diploma

requirement, which is a not only a great

endorsement for the association but is a

validation that true professionals want to

be recognised as such by the public and

other industry participants. Of the 1100

whose membership was cancelled for non-

compliance of the Diploma requirement, 400

have since met the requirements and have

been re-instated so we can now proudly

promote that all MFAA members hold the

highest qualifications relative to the Mortgage

and Finance industry.

Interestingly, the higher education standard

has served as an attraction to new members.

Since the Diploma requirement has been

enforced, new members to the association

are being admitted at a rate of around 100

per month. So I thank all our members for

supporting our initiatives which allow us a

better platform from which to promote our

association and its members to the consumer.

Following on from the implementation of the

higher qualification standards, the MFAA has

introduced its new accreditation MFAA Credit

Adviser to better reflect the role of members

providing credit advice to consumers and

business. In addition to this, to ensure the

professionalism of our members operating

with self-managed super funds, a further

accreditation of MFAA Credit Adviser – SMSF

Lending has also been launched. This

program is being well supported by members

registering for the accreditation.

In promoting the high professional standards

of MFAA Credit Advisers, in September the

MFAA launched the highly innovative Life

Changing Conversations campaign, designed

and utilised primarily for online and social

media promotional activity. Being a much

lower cost vehicle than traditional media,

this allows for better targeted promotions

and a greater message spread to the wider

consumer audience through members

supporting viral activity via their own social

media pages.

The MFAA continues with its relentless

lobbying regime and has worked with the

regulators to ensure that any enhancements

to the NCCP and related legislations are

appropriate. In particular, in the lead up to

the September Federal Election, we urged all

political parties to cease further regulatory

changes to the industry until the full impacts

of the NCCP were allowed sufficient time to

be absorbed by industry participants. This

view appears to be consistent with that of

the new Government which has promised

to commission an inquiry into the finance

sector, supporting another of the MFAA’s

election policy requests.

As this marks the end of my term as

President of the MFAA and hence the end of

my tenure as a board member for the past

six years, I take this opportunity to thank Phil

Naylor and all the team at the MFAA for their

energies in lobbying, member engagement,

professional development, training, functions

and events. I also sincerely thank all

members of the board over those years who

I know have given exceptional service in a

voluntary capacity. We are all committed

to our industry and our members being

the best they can be. In being innovative

and progressive, the decisions we make

and the directions we take are not always

popular and at times not always immediately

understood, but I believe we can all look

back over the years and agree that our

industry would not be as strong or as united

without the strength of an association that is

inclusive for all industry participants and is

focussed on how its members can best serve

the people it is there to serve.

Martin LeedhamMFAA President

MFAA Annual Report 2013 / President’s & CEO’s Report / 3

State Councils

New South Wales & Australian Capital Territory

Michael Adams - Councillor(retired November 2012) Advance Investment Securities Australia

Donna Beazley - CouncillorOxygen Home Loans

Peter Beverley - Councillor(retired November 2012) Beverley Advisory Pty Ltd

Scott Bolton - Vice PresidentAussie Home Loans

Chris Carn - Councillor(appointed November 2012) NAB Broker

Rob Fitzgerald - CouncillorSAM Loans

Stuart Garvey - CouncillorMidstate Financial Services Pty Ltd

Clint Hawthorne - CouncillorAustralian First Mortgage

Deena Janes - Councillor(appointed November 2012) Your Client Matters

Fred Obeido - CouncillorProforma Financial Solutions

Warren Prince - PresidentBig & Little Home Loans

Valentine Tyson - CouncillorPrestige Mortgages Bowral

Sarah Wells - TreasurerRed Concierge

Queensland

Ruan Burger - Councillor(Retired November 2012) Home Loans etc

Ray Dib - Councillor(Appointed November 2012) Club Financial Services

Craig Green - PresidentGadens Lawyers

Ken Groves - CouncillorFinancial Integration

Wayne Marks - CouncillorLadybird Home Loans

Ryan Mau - CouncillorSmartline

Michelle Middlemo - Councillor(Retired November 2012) PLAN

Vicki Mitchell-Taylor - CouncillorAussie Lutwyche

Lisa Sanders - TreasurerYour Future Strategy

Jeana Scott - Vice-PresidentKandu Finance

Andrew White - Councillor(Appointed November 2012) Loan Market

South Australia & Northern Territory

Steve Aspinall - President (July 2012 - June 2013)Vice President(July - July 2012)Treasurer(July-November 2012) Angas Securities

Mitchell Blackburn - Councillor (appointed November 2012) Respond Finance

Leah Busby - Councillor Blackfish Finance

Andrew Harrison - Councillor (retired November 2012) Smart Financial Choices

Gerald Jones - Treasurer(November 2012 - June 2013)Councillor(July - November 2012) Bernie Lewis

Martin Leedham - President (July - July 2012) Australian Finance Group

Fiona McGarry - Vice President(November 2012 - June 2013)Councillor(July - November 2012)ALI Group

Paul McMellon - Councillor (retired November 2012) Choice Aggregation Series

Brenton Rolton - Councillor (appointed November 2012) Smartline

Tony Schelling - Councillor Mortgage Choice Darwin

Marissa Schulze - Councillor Rise High Financial Solutions

Amanda Scott - Councillor(appointed November 2012) ANZ Bank

Stephen Villios - CouncillorRams Home Loans

Tasmania

Phil Borsboom - CouncillorWealthWorx

Geoff Colls - CouncillorHobart Home Loans

Peter Crosswell - Treasurer

Lance Cure - CouncillorFinance Brokers of Tasmania Pty Ltd

Bryce Harding - PresidentMurdock Clarke Mortgage Fund

Brady Henley - CouncillorPace Financial

Troy Spinks - CouncillorTassie Home Loans

Ross Taylor - CouncillorSynergy Home Loans (Aust.) Pty Ltd

Damian Vout - Vice-PresidentCollins SBA Genesys

Victoria

Lee Dittmer - CouncillorHow Property Loans

Laurie Duffus - Councillor(appointed November 2012) Aussie / National Mortgage Brokers

Rob Emmett - Councillor(retired November 2012) Collins Home Loans

Cynthia Grisbrook - Vice-President (July – November 2012)President (November 2012 – June 2013)DLV Finance Solutions

Barrie Henman - President (July – November 2012)Councillor (November 2012 – June 2013)Innovative Financial Concepts (Aust.) Pty Ltd

Voula Kotsiras - CouncillorPort Group

Louis Lucas - CouncillorDestiny Financial Solutions – Melbourne

Andrew Morel - CouncillorClub Financial Services

Greville Pabst - Councillor (July – November 2012)Vice-President (November 2012 – June 2013)WBP Property Group

Leith Wickstein - TreasurerChoice Home Loans

Western Australia

Tom Brazier - CouncillorAdelaide Bank

Janine Carpenter - CouncillorIn Mortgage & Finance Services (IMFS)

Don Crellin - CouncillorResolve Finance

Rose De Rossi - Vice PresidentDiversifi

David Devenish - CouncillorSmartline

Barry Elmslie - President(retired November 2012) About Homeloans.com.au

Karen Hambleton-O’Grady - CouncillorSimply Mentoring

Neville Hamilton - CouncillorSwan Financial Services

Marco Meloni - PresidentChoice Home Loans(appointed November 2012)

Paul Tasker - Councillor(retired November 2012) Sense Financial Services

Tony Versace - Councillor(appointed November 2012) P & N Bank

MFAA Annual Report 2013 / State Councils/ 5

Partners and Sponsors

Australian Capital Territory & New South Wales Sponsors

Gold SponsorCommonwealth Bank

Silver SponsorsCBREGenworthQBEWestpac

Bronze SponsorsALI GroupCitibankConnectiveDeposit PowerFASTING DirectNAB BrokerPepper Home LoansSt GeorgeVow

QueenslandSponsors

Silver SponsorsSuperannuation PropertyGenworthWestpac

Bronze SponsorsALI GroupCitibankCommonwealth BankConnectiveFASTING DirectMacquarieNAB BrokerPepper Home LoansQBESt George

South Australia & Northern TerritorySponsors

Gold SponsorQBE LMI

Silver SponsorsAdelaide BankAngas SecuritiesCBREHomeStart FinanceWestpac

Bronze SponsorsAustralian Life InsuranceCommonwealth Bank CitibankConnectiveConveyancing MattersFASTING DirectNAB BrokerPeople’s Choice Credit UnionPepper Home LoansStatewide SuperSt George (Bank SA)

VictoriaSponsors

Ali GroupBank of MelbourneCBRECherry SolutionsCitibankCommonwealth BankConnectiveDeposit PowerFASTGenworthING DirectNAB BrokerPepper Home LoansPRP Property GroupQBE LMIWestpac

MFAA Annual Report 2013 / Partners & Sponsors/ 76

Western Australia Sponsors

Silver SponsorsCBREKeystartQBEWestpac

Bronze SponsorsALI GroupCitibankCommonwealth BankFASTHerron Todd WhiteING DirectMacquarieNAB Broker Pepper Home Loans

DIAMOND INDUSTRY PARTNERS

CONVENTION SPONSORS

PLATINUM INDUSTRY PARTNER

GOLD INDUSTRY PARTNERS

In 2009 the MFAA conducted a strategic review and redefined its goals. To ensure we are providing members with an update of strategic progress, we have restructured this annual report in line with our five main objectives.

MFAA Strategic Direction

MFAA Annual Report 2013 / Strategic Direction/ 9

Support and Represent Professional Credit Advisers p.10

Lobby for the Interests of Professional Credit Advisers p.12

Develop and Deliver Services that Enhance the Professional Skills and Careers of Professional Credit Advisers p.16

Facilitate Stakeholder Engagement p.22

Promote MFAA Professional Credit Advisers to Consumers p.25

MFAA Board

8

July 2012-June 2013 Steve Aspinall - DirectorSA & NT State President(appointed July 2012)

Tim Brown - DirectorChair, National Brokers CommitteeVice President (appointed November 2012)

Corinna Dieters - DirectorIndependent

Garry Driscoll - TreasurerChair, National Mortgage Management Committee(retired November 2012)

Barry Elmslie - DirectorWA State President(retired November 2012)

Craig Green - DirectorQueensland State President

Cynthia Grisbrook - DirectorVictoria State President(appointed November 2012)

Bryce Harding - DirectorTasmania State President

Barrie Henman - DirectorVictoria State President(retired November 2012)

Steve Kane - President(resigned 19 July 2012)

Martin Leedham - DirectorSA & NT State PresidentPresident (appointed July 2012) Darren McLeod - DirectorChair, National Mortgage Management Committee(appointed November 2012)

Marco Meloni - DirectorWA State President(appointed November 2012)

Damian Percy - Vice President (until November 2012)Chair, National Lenders Committee

Warren Prince - DirectorNSW & ACT State President

Ray Slack - DirectorChair, National Equipment & Commercial Finance CommitteeTreasurer (appointed November 2012)

Brad Wood - DirectorChair, National Brokers Committee(retired November 2012)

Constitution, the MFAA Code of Practice, associated governance documents and the MFAA Disciplinary Rules.

Because probity checks have been waived, non loan writer memberships are not promoted to the general public and non loan writer members are not listed on the MFAA’s member search website resource. The member certificate for these members now includes the wording “non loan writer”.

Continuing the benefitsOnly MFAA membership offers its members:

• ‘member only’ information including comprehensive legal & compliance resources;

• access to free or competitively priced courses via MFAA Pathways;

• free delivery of the Mortgage and Finance Brief magazine every two months;

• listings on the MFAA ‘Find a Member Search’, ‘Mortgage Manager Search’;

‘the essentials of borrowing’ websites;

• use of MFAA logos for stationery, advertising and signage;

• advertising such as the MFAA Approved Broker campaign;

• access to the Member Benefits program, which offers a range of discounts and special offers; and

• weekly e-newsletters keeping members up-to-date on industry developments.

MFAA Disciplinary processThe MFAA Disciplinary process serves to protect the MFAA standards and the reputation of its members by providing a vehicle to sanction members who have transgressed the MFAA’s Code of Practice, Constitution or Disciplinary Rules. It also ensures that details of members who have been expelled or suspended are notified to the community in general thus reinforcing to consumers the standards enforced by the MFAA.

During the year the MFAA published for the benefit of its members an easy to read explanatory guide to its Governance and Disciplinary processes.

Over the period 2012/13 the MFAA Tribunal expelled four members and suspended four (two of whom were ultimately expelled).

The MFAA extends its sincere appreciation to the following members who served pro bono on Tribunal panels during the year to assist the external Chair, Hank Spier and Deputy Chair, Michael Terceiro in their deliberations:

The MFAA devoted 15% of funds to membership administration and compliance. Membership as at 30 June 2013 stood at 9,927 members, with 1,155 new members joining during the 2012-13 financial year.

Membership numbers

98% of MFAA membership is represented by

• Individual brokers; and

• broking businesses & mortgage managers dealing directly with the public

Higher Standards for MFAA membersThe transition from the Cert IV to the diploma was implemented smoothly with the vast majority of loan writer members providing evidence of completion of the diploma or MFAA Fast Track program. In March 2013 approximately 1,100 memberships were cancelled for not providing evidence of completion of the diploma, Since then more than 350 of these members subsequently provided their diploma and have been re-instated.

As of 30 June 2013 88% of all loan writing members are MFAA Credit Advisers. Our membership base is smaller than last year but remaining members have demonstrated higher professional and educational standards.

Promote professional credit advisers This year ground work was laid for the new Essentials of Borrowing site where potential home buyers will be able to find an MFAA credit adviser.

Support MFAA members Membership staff have continued to provide quality service to both existing members and those seeking to become members. Staff not only answer enquiries promptly but are also pro-active in following up members who may have forgotten to renew their membership.

Increased convenience for membersChanges have been implemented to the non loan writer membership category. The non loan writer membership is now available to applicants who are employed in a non loan writer capacity by an existing MFAA member. There is no longer any application fee for this membership category and the membership fee has been reduced from $433.00 to $150.00 so that members can encourage more of their support staff to become members.

To streamline the application process many of the usual requirements for MFAA membership have been waived, however, the non loan writer must provide photo ID and an employer reference.

As has been the case, individual non loan writer members still have full membership rights, including the right to vote and to stand for election. The MFAA will continue to waive the education and continuing professional development requirements for non loan writer members. Individual non loan writer members will continue to be subject to the MFAA

10

MFAA Annual Report 2013 / Support and Represent Professional Credit Advisers / 11

Jason Bridgett, Qld

John Carson, NSW

Peter Catramados, Vic

Milan Chetkovich, WA

Don Crellin, WA

Sam Crowley, NT

Garry Dowd, Vic

Laurie Duffus, Vic

Michael Coyne, NSW (who retired from the panel

during the year after 9 years’ service)

Rob Emmett, Vic

Barrie Gaubert, NSW

Terry Jewson, Vic

Peter Kelly, SA

Mark Lewis, SA

Jim Socrateous, NSW

Anne-Marie Syme, WA

Sof Tsialtas, Vic

Darren Turner, Qld

Support and Represent Professional Credit Advisers

Governance

MFAA BoardThe Board met on six occasions during the year plus occasional electronic communications outside the physical board meeting schedule. The Board’s Finance, Audit and Risk Management Committee, comprising Ray Slack (Chair), Corinna Dieters and Craig Green, met on 10 occasions.

State CouncilsThe six State Councils, whose Presidents sit on the Board, met regularly during the year, implementing Board decisions at a local level, providing input to the Board and considering membership applications, with an oversight of local events.

CommitteesFeeding into the MFAA Board are four national committees, whose chairs sit on the Board:

National Brokers Committee (NBC)NBC, comprising ten elected aggregator/broking group representatives and the chairs of the State Broker Forums, met on five occasions during the year. Issues discussed included:

NBC was chaired initially by Brad Wood, then Tim Brown.

National Equipment & Commercial Finance Committee This Committee, chaired by Ray Slack and supported by Joe Zappia as deputy chair, has been very active this past year, involving itself in many matters affecting the sector including the following:

• the impact of Personal Property Securities (PPS) regulation and sector PPS education;

• member use of technology, especially social media, to increase engagement;

• submission to government on both point of sale and small business lending; and

• training and entry into equipment & commercial broking.

The MFAA devoted 18% of funds to lobbying, stakeholder engagement and governance.

Lobbying

RegulatorsThe MFAA’s ongoing policy is to maintain strong and positive working relationships with all regulators impacting MFAA members. This has continued during the year particularly via involvement with Treasury and ASIC and communication with APRA, ATO and AUSTRAC. Additionally we have held meetings with the relevant Minister and shadow Minister to emphasise the MFAA’s position on various issues impacting our members.

MFAA Lobbying and Submissions – 2012/13While lobbying to protect members’ interests encompasses a range of phone calls, correspondence and meetings with various regulators and politicians it also involves detailed and rigorous written submissions advocating MFAA’s stance on particular issues. During the year the following submissions were made on MFAA members’ behalf:

Submission Date

SUBMISSION DATE

Senate Inquiry into post GFC Banking sector (submission and appearance) August 2012

WA Landgate VOI procedures September 2012

NCCP Small Business Finance proposals March 2013

NCCP Review of licensed credit assistance providers March 2013

Letters to key political parties on MFAA election issues April 2013

NCCP Point of Sale exemption April 2013

NCCP Fine tuning of regulations April 2013

Loan variations under NCCP May 2013

NCCP proposed changes to disclosures in consumer lending June 2013

SA VOI proposals June 2013

Tax deductibility of education expenses July 2013

FBT – proposals re vehicle leasing July 2013

NCCP Hardship regulations August 2013

NCCP broker disclosure regulations August 2013

12

MFAA Annual Report 2013 / Lobby for the Interests of Professional Credit Advisers / 1312

• SMSF lending;

• WA Landgate Identification verification;

• accreditation transfer protocols;

• MFAA Certified Mentor program;

• broker market share statistics;

• lender loan offer letters;

• AML/CTF refresher course;

• loan variations and NCCP;

• valuations; and

• brokers witnessing/certifying documents.

Lobby for the Interests of Professional Credit Advisers

National Lenders Committee (NLC)This committee comprises ten lender members, four of them majors and six from non-ADI lenders which distribute their products through intermedaries.

The committee, under the chairmanship of Damian Percy of Adelaide Bank held six meetings in 2012-13, assisted by Aaron Milburn of Citibank as deputy chair. At those meetings the many matters discussed included:

• lender support for the MFAA’s diploma program;

• introduction of the MFAA’s SMSF LRBA accreditation;

• state-based Verification of Identification (VOI) legislation;

• the AML/CTF ‘Refresher’ course;

• the NCCP Enhancements Act notably relating to revised harship provisions;

• consideration of a simple, industry-wide accreditation application form; and

• the potential impact of changes to privacy legislation.

Mortgage Management Committee Initially chaired by Garry Driscoll, then for most of the year by Darren McLeod, the Mortgage Management Committee heldsix meetings in which the following matters of interest to the mortgage management sector were discussed:

• use of the term ‘non-bank lender’;

• COSL update;

• ASIC auditing of DEF arrangements;

• SMSF lending;

• mortgage managers and the NCCP;

• promotion of mortgage managers;

• new e-conveyancing regulations and mortgage managers; and

• role and operations of Valex.

“Failure is when you lose the courage and passion to try something new”

— Andrew Denton

14

The MFAA devoted 47% of funds to professional standards, including events and professional development.

MFAA members demanded standards in excess of mandatory standards. ACCC case identified seven (7) out of 16 aspects of NCCP requirements in which they believed MFAA standards to be superior.

Positioning our industry, and more specifically our MFAA members, as professionals operating in a profession entailed the establishment of appropriate education standards, access to suitable professional development and events, appropriate structure for new entrants entering our profession, and adherence to a suitable code of practice and disciplinary process.

We define a profession as:‘A disciplined group of individuals who adhere to high ethical standards and uphold themselves to, and are accepted by, the public as possessing special knowledge and skills in a widely recognised, organised body of learning derived from education and training at a high level, and who are prepared to exercise this knowledge and these skills in the interest of others.’ The Australian Council of Professionals (Professions Australia)

Education StandardsMFAA members operate at higher educational standards than mandated by NCCP and demonstrate a dedication to professionalism. The MFAA increased the minimum education standard from Cert IV to diploma, or Fast Track for more experienced members. 2012/2013 realised the completion of this initiative having all MFAA credit advisers completing either the diploma qualification through a registered training organisation (RTO), or ‘Fast Track’ an MFAA built case study and external assessment (

• Former RAF pilot and POW John Peters’

inspirational premise was, “You will always

make mistakes, you are human, but you

realise that your power rests in the speed in

which you learn”.

• Rachel Botsman predicted that within the next

couple of years, an online reputation will be

more important than a credit rating.

These and many other speakers provided delegates with inspiration, business strategy, tips for success and

practical, fresh ideas.

2013 ExpoMart The ExpoMart offered a wide variety of hands-on, interactive opportunities designed to improve business operations and practices. With over 50 exhibitors participating in the ExpoMart it is the premier industry exhibition showcasing key products and services to mortgage and finance professionals. The complimentary ExpoMart theatrette enabled delegates and ExpoMart visitors the opportunity to hear a variety of industry-focused presentations.

Networking functions are always a highlight of the National Convention enabling attendees the opportunity to mingle and meet new people in a relaxed environment. The Welcome Reception at Doltone House kicked off the networking and was followed by the gala dinner and the comedy finale lunch.

The MFAA National Convention is a highlight on the industry calendar providing professional development and significant networking opportunities with like-minded individuals.

2013 MFAA National ConventionThe 2013 MFAA National Convention was held in Sydney at the Sydney Convention & Exhibition Centre. More than 1,200 members gathered from 8-10 May for three days of professional development and networking.

The theme of the convention ‘Challenging Change’ showed us that change is not just inevitable, it’s absolutely necessary for any business to succeed and the key is to understand it and embrace it. With more than 20 impressive international and Australian speakers, attendees learnt the critical skills required to face today’s challenges successfully and prepare their businesses for long-term growth in any climate.

Headline speakers included:

• John Howard, who shared his view on

leadership and said that leaders change with

the shifting landscape in which they find

themselves. “If you don’t believe in anything…

you cannot be an effective leader.”

• Andrew Denton’s observations from Enough

Rope were that change happens to all of us

and “failure is when you lose the courage and

passion to try something new”.

• Tim Lawless from RP Data presented a very

informative session on the housing market

while George Megalogenis discussed the

fundamental shift in the household sector

and Australia’s increasingly cosmopolitan

demography.

18 MFAA Annual Report 2013 /National Committee Report/ 15

“If you don’t believe in anything, you cannot be an effective leader”

— John Howard

This new legislation impacts by amending the NCCP with key reforms which include:

• changed hardship provisions;

• new obligations relating to reverse mortgages

(e.g. requiring provision of equity projections

and disclosure of an information statement);

• restrictions on use of words including

‘independent’ and ‘financial counselling’;

• new obligations and prohibitions on small

amount credit contracts; and

• remedies for unfair conduct.

The NCCP has created a nationally consistent regime which, in time, the public will come to understand and accept. While regulatory implementation may have had some unintended consequences, such as some of the problems with External Dispute Resolution (EDR) complaint management (including resolution time lag and complaint lodgement by arguably inappropriate persons like property developers), the legislation will assist brokers through the implementation of obligations and prohibitions placed on all credit licensees to protect consumers.

Legal and Compliance

Standards The large majority of brokers has accepted that sensible and realistic nation-wide regulation of consumer credit and licensing of credit industry participants, including brokers, would help to ‘professionalise’ the industry. Additionally, most brokers acknowledge the expectation and the significance that the community places on higher education standards, particularly in a sector like mortgage and finance broking. The MFAA board’s decision to ‘raise the bar’ on education through the requirement of the diploma standard, has lifted the whole profession providing a clear public perception of a professional body of people who are there to assist borrowers, to save them time and effort and to provide them with an extremely valuable service. National regulation and a high education standard have combined to create an entry threshold for credit advisers which undesirable elements will tend to avoid.

Regulation Despite continuing changes to the broker’s regulatory environment over the past year, members have finally been able to establish and implement systems to meet their compliance obligations under the National Consumer Credit Protection Act 2009 (NCCP).

The government’s subsequent legislation, the Consumer Credit Legislation Amendment (Enhancements) Act 2012, was passed on 17 September 2012.

Some might view enhanced consumer protection as a negative, but from the public’s point of view, this is an unsustainable argument.

The national regulator, the Australian Securities and Investments Commission (ASIC), has been reasonably patient with the industry and has taken a softly-softly approach in most cases. Its earlier advice was that it would allow time for transition to the new regime but would act on anything it regarded as ‘reckless’.

That said, ASIC has been true to its word and has cancelled a number of credit licences and banned a number of industry participants, including some brokers, who it generally argued had acted in a reckless manner. Some of these actions have reinforced decisions made by the MFAA Tribunal to suspend or cancel membership or to expel members over the past year.

Information The MFAA website’s Member Centre contains a ‘Legal And Compliance Resources’ page which, over the past year, has continued to update its Members with an extensive and far-reaching range of information including technical legal and compliance issues to help them comply with its governance rules and with regulatory requirements for all Australian jurisdictions in which the mortgage and finance community operates.

20 MFAA Annual Report 2013 / Develop and Deliver Services that Enhance the Professional Skills and Careers of Professional Credit Advisers / 21

22

22

Consumer GroupsThe MFAA has continued to hold strong links with the various consumer credit groups to ensure they understand and recognise the high standards which MFAA members uphold and observe.

Other Industry GroupsThe MFAA has fostered collaborative relationships with other industry groups in Australia, eg the Association of Financial Advisers, Commercial Asset Finance Brokers Association, the Financial Planners Association, Certified Practising Accountants, the Australian Property Institute and the Real Estate Institute and internationally, the NZ Professional Advisers Association, Canadian Association of Accredited Mortgage Professionals, Mortgage and Finance Association of Singapore, Mortgage Bankers Association (USA) , National Association of Mortgage Brokers (USA) and the Association of Mortgage Intermediaries (UK).

The MFAA maintains a strong working relationship with the Australian Bankers Association, Customer Owned Banking Association and the Credit Ombudsman Service Ltd (COSL).

Representation on other bodies MFAA members and former directors, Jon Denovan and Vicky Edema are directors of the Credit Ombudsman Service Ltd and MFAA CEO Phil Naylor is a director of LIXI Ltd, the lending industry’s electronic standards body.

MFAA News The MFAA fortnightly member email, MFAA News, changed to a weekly schedule in February 2013 – giving members more of the compliance, industry and professional development news they need. We also introduced a regular ‘MFAA on air’ video series, which includes interviews with industry leaders and insights from MFAA CEO Phil Naylor – this has noticeably increased member engagement.

Prediction: an online reputation will be more important than a credit rating.— Rachel Botsman

Facilitate Stakeholder Engagement

Equipment & Commercial Initiative In August 2012 the MFAA conducted a survey of its equipment and commercial finance members. These results assisted the MFAA in tailoring its messages and media placement specifically for business clients.

MFAA Convention The MFAA continued its Convention blog – providing up-to-the-minute summaries of speaker sessions and networking events. The MFAA also launched a popular range of membership brochures on a range of key topics, such as SMSF lending, the MFAA Certified Mentor Program™, the Essentials of Borrowing website, getting started in the industry and more.

Excellence Awards The MFAA annual Excellence Awards continue to gain attention from both inside and outside the industry – with winners and finalists receiving publicity in mainstream media.

Social Media The MFAA now has over 5,000 members and industry representatives that it engages with on a daily basis via social media channels: Twitter, Facebook and LinkedIn. The MFAA now has a Klout score of 51.

work on professional standards and financial services regulation; and

• communicating and advocating with political stakeholders.

Through its media and PR activities, the MFAA aims to position the association as the industry leader regarding mortgage and finance brokers in Australia, raising professional standards, elevating industry benchmarks, advocating members’ interests and being a thought leader on issues where credit services touch consumers.The MFAA proactively distributed over 50 media releases throughout the year on strategic and tactical topics that promoted the interests of various stakeholders. This generated 290 print/TV/online/radio mentions and appearances.

Careers expos To address the ageing demographic trend within the broking industry and to position mortgage and finance broking as a viable career option, the MFAA exhibited at the National Careers and Employment Expo in both Brisbane and Adelaide in May 2012.

This gave the MFAA a unique opportunity to speak directly to school students, careers advisers and adults looking to reinvent their career – about the benefits of becoming a mortgage or finance broker. Further expo opportunities were identified for the second half of 2013.

Local marketing campaigns The Mandurah (WA) regional marketing campaign continued over from the previous financial year, finishing in August 2012. The campaign, which ran on two local radio stations and featured in two local newspapers, demonstrated the value that an MFAA mortgage broker can give those looking for a home loan.

A similar campaign ran in Canberra in August 2012.

The MFAA devoted 20% of funds to marketing and communications, including consumer awareness.

MFAA advertising campaign Following on from the success of the pilot digital campaign that the MFAA ran in autumn 2012, a second online campaign launched in spring 2012. This campaign reinforced the trusted adviser role that an MFAA Approved Broker plays.

The online display advertising ran in tandem with a Facebook competition, which leveraged off the 8000-strong group of engaged consumers who ‘like’ the page. The $2,500 prize on offer drove thousands of competition entries.

There was also a significant uplift in the number of visitors to the Essentials of Borrowing website; while the campaign was running the website had 1,400 visitors per day – which is a 2058% increase on the amount of daily traffic to the website before the campaign began.

The digital campaign was supported by newspaper advertising in The Australian, using distressed space on the front page, with the headline, ‘What are you missing out on by not using a mortgage broker?’.

Media & PR During 2012/2013 the MFAA focused on:

• building and maintaining a positive image of the MFAA’s strategic direction amongst key stakeholders;

• generating effective communications that resulted in positive media coverage of the MFAA’s activities, policy positions and its

Promote MFAA Professional Credit Advisers to Consumers25

MFAA Annual Report 2013 / Promote MFAA Professional Credit Advisers to Consumers / 25

Treasurer’s ReportFINANCIALS Year ending 30 June 2013

the MFAA team for all their valuable

assistance during the year. I would

also like to thank the members of the

Finance, Audit and Risk Management

Committee, Corrina Dieters and Craig

Green for their contribution.

Ray SlackTREASURER

the 4th quarter of the year as a result of

members coming back to the MFAA.

The Mortgage & Finance Brief had a net loss of $ 197,807 for the year

and it is the Board’s focus to have this

self-funded from advertising revenue.

This was not achieved due to the cost

of production and the position has been

remedied through a shift to digital media

and changes to the print version of the

magazine. The outcome of Advertising &

Public Relations revenue was a decrease

of 13.7% for the year.

Both Events income and Educational

/ Professional Development Income

showed a small improvement to the

2012 year which is encouraging and

shows the support by brokers to the

programmed events and training forums

introduced.

I would like to thank Phil Naylor and

At the commencement of the year

2012/2013, the Board noted that the

key issue for the association in the

next year will be bedding down its

new educational requirements and

promoting awareness of the high

standards of MFAA Approved Brokers to

the community in general.

The financials in this year’s Annual

Report show a loss of $119,334

despite having a budget for a surplus of

$61,000.

Although the overall result was

disappointing, it was not unexpected

given the loss of members due to the

high standards adopted by the MFAA’s

requirement for the diploma standard.

Membership revenue decreased by 5.7%

($257,735) with membership overall

decreasing during the year by 9.9%.

This has now stabilised and there is a

positive growth trend to membership in

“...the key issue for the association in the next year will be bedding down its new educational requirements and promoting awareness of the high standards of MFAA Approved Brokers”

MFAA Annual Report 2013 / Financial Report/ 27

When John of Wellard purchased multiple investment properties stretching from WA to NSW, working with a mortgage broker was critical to the success of the purchases.

John chose to work with a broker he had worked with previously, who is a member of the Mortgage and Finance Association of Australia (MFAA). “The same MFAA member has assisted us with loans for investment houses in WA, NSW and NT. They have been outstanding – knowledgeable, proactive, energetic and thorough”, says John.

John estimates that using a mortgage broker for their investments has saved them a significant amount of time. “On one occasion, they helped us through a very complicated and emotionally draining property purchase. The purchase probably would have fallen over if our broker hadn’t been on hand to progress with the paperwork whilst we were out of town, which was an enormous help.”

John believes that using a mortgage broker not only avoids stressful complications, but saves money by negotiating the most appropriate deal and provides peace of mind by communicating any changes and taking care of complex issues as they arise.

John’s story is not uncommon. Many people find working with a mortgage broker offers many benefits, with time and cost savings being the clear plus points. But, if you look closer, there are many more benefits to using a broker;

Mortgage brokers can help find the right loan for youThe best deal is not necessarily the cheapest rate. A good mortgage broker will examine your circumstance and future plans to recommend a loan that is best suited to you. Having an appropriate loan which works for you can help you build wealth.

Mortgage brokers can help you avoid pitfallsMany products seem to offer a great deal but they could have penalties, fees and charges you may not be aware of. They may also not offer the flexibility you require in the future. A mortgage broker can guide you and help you avoid taking out a loan you might later regret.

Insist on an MFAA Approved BrokerA good mortgage broker can save you time and money and give you peace of mind. The MFAA is the professional body for the mortgage and finance industry and represents over 11,000 mortgage brokers nationally. Only a broker that meets the highest industry standards in education, experience and ethics is approved by the MFAA, so you can be sure that an MFAA Approved Broker will give you the highest standard of service.

Meet your local MFAA approved brokers - in the Mandurah region.

www.essentialsofborrowing.com.au

Mortgage Brokers - saving you time, money and headaches

To find an MFAA member in your local area and get the Top 40 Loan Tips, go to

Ben Franklin Aussie Mandurah T: 08 9583 6333 E: ben.franklin@aussie.com.au

Greg Hancock Choice Home Loans T: 0405 025 510 E: hancockg@westnet.com.au

Steve Sims Elite Loan Services T: 08 9581 9409 E: steve@eliteloanservices.com.au

Michael Maher Fair Go Finance T: 1300 324 746 E: michaelm@fairgofinance.net.au

Terry Boag Peel Finance Brokers T: 08 9535 9151 E: terry@peelfinancebrokers.com.au

Graham Stacey West Australian Loan Centre T: 08 9535 5566 E: graham.stacey@growthpartners.com.au

Only a broker that meets the highest industry standards in education, experience and ethics gets approved by the MFAA. Here in the Mandurah region, there are a number of MFAA members who are experts in the local property market and can help you find the right loan to suit your circumstances.

Key performance indicators used by the entity:

The relevant performance indicator for education standards is

that 94% of relevant members held Diploma or equivalent status

by 30 June 2013.

The effectiveness of the advertising and PR campaigns is

measured against industry benchmarks of broker market share

and consumer surveys of recognition of MFAA logos.

Success of lobbying is measured against the Board’s

assessment of the appropriateness of the legislation for

members’ purposes.

Corporate informationThis financial report covers the Mortgage & Finance Association

of Australia as an individual entity.

The Mortgage & Finance Association of Australia is a company

limited by guarantee, incorporated and domiciled in Australia. Its

registered office and principal place of business is:

Mortgage & Finance Association of Australia

Suite 12, 40 Yeo Street

Neutral Bay NSW 2089

Members’ LiabilityThe liability of the Members is limited.

Members’ ContributionsEvery Member undertakes to contribute to the assets of the

Association if it is wound up while the Member is a Member, or

within one year after the Member ceases to be a Member, for:

(a) the payment of the debts and liabilities of the

Association, contracted before the Member

ceased to be a Member;

(b) the expenses of winding up the Association; and

(c) the adjustment of the rights of the contributories

among themselves.

Principal activitiesThe principal activities of the Association during the year were:

(a) providing lobbying especially on the introduction and implementation of the National Consumer Credit Protection Act, representational services, professional development services, publications,

convention and like events for members’ benefit;

(b) increasing member professional standards and ensuring compliance with MFAA Code of Practice

and MFAA Disciplinary Rules for the benefit of

consumers; and

(c) raising the MFAA profile with stakeholders and consumers.

Ongoing Objectives, strategies and performance indicators

The Strategic Objectives of the association are:

• support and representation of professional credit

advisers (mortgage and finance brokers, mortgage

managers and aggregators/broking groups);

• support of professional credit advisers through higher

education standards and higher levels of professional

standards;

• promotion of consumer awareness of professional

credit advisers;

• lobbying to advance and protect the interests of

professional credit advisers; and

• facilitating stakeholder engagement.

The strategy for achieving those objectives are:

• increasing minimum education standards to Diploma

level, ongoing review of professional standards via

membership criteria, Constitution, Code of Practice

and Disciplinary processes;

• advertising and PR campaigns on an ongoing basis;

• lobbying in respect of NCCP and other legislation or

proposed legislation impacting members; and

• convening appropriate forums to engage

stakeholders.

Director’s Report

DirectorsThe directors of the Association in office during the financial year until the date of this report are as follows. Directors were in office for

the entire period unless otherwise stated. Number of Board Meetings attended of possible meetings is noted against each director.

Steve Aspinall (6 of 6) Appointed 24 July 2012

Tim Brown (4 of 4) Appointed 22 Nov 2012

Corinna Dieters (6 of 6)

Garry Driscoll (2 of 2) Retired 22 Nov 2012

Barry Elmslie (2 of 2) Retired 22 Nov 2012

Craig Green (6 of 6)

Cynthia Grisbrook (4 of 4) Appointed 22 Nov 2012

Bryce Harding (6 of 6)

Barrie Henman (2 of 2 ) Retired 22 Nov 2012

Stephen Kane (1 of 1) Retired 24 July 2012

Martin Leedham (6 of 6)

Darren McLeod (3 of 4) Appointed 22 Nov 2012

Marco Meloni (4 of 4) Appointed 22 Nov 2012

Damian Percy (6 of 6)

Warren Prince (6 of 6)

Ray Slack (6 of 6)

Bradley Wood (2 of 2) Retired 22 Nov 2012

Your directors present their report on the Mortgage & Finance Association of Australia (‘the Association’ or ‘MFAA’) for the year ended 30 June 2013.

MFAA Annual Report 2013 / Financial Report/ 2928

FINANCIALS Year ending 30 June 2013

Amount of Members’ ContributionsThe amount of the contribution under Members’ Contributions

above must not exceed $10.00 per Member in any

circumstance.

Review of operationsThe economic conditions during the year have impacted on

membership in that while we admitted 1,594 to membership

this has been outweighed by resignations or non-renewals as

individuals leave the industry and cancellations as noted below.

Accordingly total national membership of the Association as at

30 June 2013 was 9,927 a 9.91% decrease on the level as at

30 June 2012. Included in this figure are 9,335 members with

CMC/AFC/ACA/CA/CCA status.

This year saw the completion of the Board’s previous decision

that all individual members complete a Diploma qualification or

SEGMENT REVENUES SEGMENT RESULTS

2013 2012 2013 2012

$ $ $ $

Membership 4,287,605 4,545,340 3,537,344 3,764,253

Events income 2,363,175 2,331,247 29,475 (6,250)

Education/Professional Development income

768,341 719,572 412,381 408,758

Marketing/Merchandising income 327 515 (49,122) 515

Advertising & Public Relations 510,365 591,221 69,135 15,087

Head Office / administration 319,889 386,961 (4,118,546) (4,156,563)

Total operations 8,249,702 8,574,856 (119,333) 25,800

equivalent. A deadline of 31st January, 2013 was set. Following

the deadline a total of 1,100 memberships were cancelled.

Up to 30 June, 352 of those cancelled memberships were

reinstated following receipt of evidence of Diploma completion.

In seeking to assist members in obtaining their Diploma

qualification government funding was secured via the National

Workplace Development Fund program. A total amount of

$1,540,000 was approved and made available to approved

vendor RTOs to discount the course fee for our members. The

government agency paid a total of $117,782 in Administration

fees for the association to administer the project.

The total number of employees as at 30 June 2013 was 21

(2012: 25).

A summary of revenues and results by significant segments is

set out below:

Likely developments and expected results of operationsAs new brokers are joining the industry (exceeding the number

of those exiting), MFAA membership is projected to increase

during the next 12 months.

The Board, following its June 2009 external independent Strategic

Review (which was further refined in 2012) of the association, its

structures, operations, services and governance, is continuing to

monitor and review these factors to ensure the MFAA’s relevance

and viability going forward. The key issues for the Association in

the next year will be enhancing its Professional Development offer

and promoting awareness of the high standards of MFAA Credit

Advisers to the community in general.

Further information on likely developments in the operations of the

Association and the expected results of operations have not been

included in this report because the directors believe it would be

likely to result in unreasonable prejudice to the Association.

Environmental regulationThe operations of the Association are not subject to any

particular or significant environmental regulations under a

Commonwealth, State, or Territory law.

Qualifications and Special Responsibilities of Directors

Martin Leedham

(National President)

Mr Leedham is an individual non-loan writing member,

Adelaide SA

Tim Brown

(National Vice-President & Chair of National Brokers Committee)

Mr Brown is CEO of Vow Financial,

Sydney NSW

Ray Slack (National Treasurer & Chair National Equipment & Commercial

Finance Committee)

Mr Slack is Director, Macarthur Finance & Capital Pty Ltd,

Campbelltown NSW

Damien Percy

(Chair, National Lenders Committee)

Mr Percy is General Manager, Third Party Mortgages, Bendigo

and Adelaide Bank Ltd,

Adelaide SA

Warren Prince

(State President MFAA NSW/ACT Division)

Mr Prince is Owner Operator, Big & Little Home Loans,

Weetangera ACT

Bryce Harding

(State President MFAA Tasmania Division)

Mr Harding is Manager,

Murdoch Clarke Mortgage Management Ltd,

Hobart TAS

Craig Green

(State President MFAA Queensland Division)

Mr Green is a Partner of Gadens Lawyers, Brisbane QLD

Corinna Dieters

(Additional Independent Director)

Ms Dieters is Director, Seaview Consulting,

Kew VIC

Stephen Aspinall

(State President MFAA SA/NT Division)

Mr Aspinall is Senior Executive Angus Securities Ltd,

Adelaide SA

Cynthia Grisbrook

(State President MFAA Victoria Division)

Ms Grisbrook is Principal, DLV Finance Solutions,

Melbourne VIC

Marco Meloni

(State President MFAA WA Division)

Mr Meloni is Principal, Choice Home Loans,

Leederville WA

Darren McLeod

(Chair National Mortgage Management Committee)

Mr McLeod is Head of Third Party, Firstmac Home Loans,

Brisbane QLD

MFAA Annual Report 2013 / Financial Report/ 3130

FINANCIALS Year ending 30 June 2013

Non-audit servicesThe Association may decide to employ the auditor on assignments additional to their statutory audit duties where the auditor’s expertise and experience with the Association are important.

Details of the amounts paid or payable to the auditor (Ernst & Young) for audit and non-audit services provided during the year are set out below.

The board of directors has considered the position and is satisfied that the provision of the non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001.

The directors are satisfied that the provision of non-audit services by the auditor, as set out below, did not compromise the auditor independence requirements of the Corporations Act 2001 for the following reasons:

• all non-audit services have been reviewed by the

board of directors to ensure they do not impact the

impartiality and objectivity of the auditor; and

• none of the services undermine the general

principles relating to auditor independence as set

out in Professional Statement F1, including reviewing

or auditing the auditor’s own work, acting in a

management or a decision making capacity for the

Association, acting as advocate for the Association

or jointly sharing economic risk and rewards.

Insurance of officersDuring the year, the Association paid an insurance premium to insure the directors of the Association for professional indemnity and office bearers’ liability, association reimbursement and entity insurance.

The liabilities insured are legal costs that may be incurred in defending civil or criminal proceedings that may be brought against the officers in their capacity as officers of the Association, and any other payments arising from liabilities incurred by the officers in connection with such proceedings, other than where such liabilities arise out of conduct involving a wilful breach of duty by the officers or the improper use by the officers of their position or of information to gain advantage for themselves or someone else or to cause detriment to the Association. It is not possible to apportion the premium between amounts relating to the insurance against legal costs and those relating to other liabilities.

Auditor’s Independence Declaration Copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out on the following page. Signed in accordance with a resolution of the directors.

Sydney 15 October, 2013

Martin LeedhamDIRECTOR

Raymond SlackDIRECTOR

Non-audit services (continued)During the year the following fees were paid or payable for services provided by the auditor of the Association, its related practices and non-related audit firms:

SEGMENT REVENUES

2013 2012

$ $

AUDIT SERVICES

Ernst & Young:

Audit and review of financial reports and other audit work under the Corporations Act 2001

46,000 45,500

Total remuneration for audit services 46,000 45,500

OTHER SERVICES

Ernst & Young:

Tax compliance services 6,500 7,500

Total remuneration for other services 6,500 7,500

Total remuneration paid to audit firms 52,500 53,000

MFAA Annual Report 2013 / Financial Report/ 3332

FINANCIALS Year ending 30 June 2013

STATEMENT OF COMPREHENSIVE INCOME

2013 2012

NOTES $ $

Revenue 5 8,249,702 8,574,856

Depreciation, amortisation & impairment expense 6(a) (138,587) (141,036)

Employee benefits expense 6(b) (2,953,211) (2,988,733)

Other expenses 6(c) (5,277,237) (5,419,287)

Profit/(loss) before income tax (119,333) 25,800

Income tax expense 7 - -

Profit/(loss) attributable to members of Mortgage & Finance Association of Australia

(119,333) 25,800

Other comprehensive income/(loss) - -

Total comprehensive income/(loss) for the year (119,333) 25,800

The above statement of comprehensive income should be read in conjunction with the accompanying notes.

MFAA Annual Report 2013 / Financial Report/ 3534

FINANCIALS Year ending 30 June 2013

STATEMENT OF FINANCIAL POSITION

2013 2012

ASSETS NOTES $ $

Current assets

Cash and cash equivalents 8 4,329,810 4,509,658

Trade and other receivables 9 417,562 535,951

Other current assets 10 192,306 104,301

TOTAL CURRENT ASSETS 4,939,678 5,149,910

Non current assets

Property, plant and equipment 11 71,660 86,679

Intangible assets 12 242,084 260,619

Other non current assets 13 5,482 5,482

TOTAL NON CURRENT ASSETS 319,226 352,780

TOTAL ASSETS 5,258,904 5,502,690

LIABILITIES NOTES $ $

Current liabilities

Trade and other payables 14 2,836,263 2,898,780

Provisions 15 335,263 341,640

TOTAL CURRENT LIABILITIES 3,171,526 3,240,420

Non current liabilities

Provisions 16 61,383 116,942

TOTAL NON CURRENT LIABILITIES 61,383 116,942

Total liabilities 3,232,909 3,357,362

Net assets 2,025,995 2,145,328

MEMBERS’ FUNDS

Members’ funds 2,025,995 2,145,328

Total members’ funds 2,025,995 2,145,328

The above statement of financial position should be read in conjunction with the accompanying notes.

STATEMENT OF CHANGES IN MEMBERS’ FUNDS

2013 2012

$ $

Total members’ funds at the beginning of the financial year 2,145,328 2,119,528

Profit/(loss) for the year (119,333) 25,800

Other comprehensive income - -

Total comprehensive income for the year (119,333) 25,800

Total members’ funds at the end of the financial year 2,025,995 2,145,328

The above statement of changes in members’ funds should be read in conjunction with the accompanying notes.

STATEMENT OF CASH FLOWS

2013 2012

NOTES $ $

CASH FLOWS FROM OPERATING ACTIVITIES

Membership subscriptions received (inclusive of goods and services tax)

4,516,491 4,898,985

Receipts from customers (inclusive of goods and services tax)

4,363,740 3,977,890

Payments to suppliers and employees (inclusive of goods and services tax)

(9,105,554) (9,164,180)

Interest received 150,508 217,480

Net cash flows from operating activities 21 (74,815) (69,825)

CASH FLOWS FROM INVESTING ACTIVITIES

Payments for intangible assets and property, plant and equipment (105,033) (56,664)

Net cash flow used in investing activities (105,033) (56,664)

CASH FLOW FROM FINANCING ACTIVITIES

Net cash flows from financing activities - -

Net increase/(decrease) in cash and cash equivalents (179,848) (126,489)

Cash and cash equivalents at beginning of the year 4,509,658 4,636,147

Cash and cash equivalents at end of the year 8 4,329,810 4,509,658

The above statement of cash flows should be read in conjunction with the accompanying notes.

MFAA Annual Report 2013 / Financial Report/ 3736

FINANCIALS Year ending 30 June 2013

Notes to the financial statements

1. Corporation Information

The financial report of the Mortgage & Finance Association of Australia for the year ended 30 June 2013 was authorised for issue in accordance with a resolution of the directors on 15 October 2013.

Mortgage & Finance Association of Australia is a company limited by guarantee incorporated in Australia. The nature of its operations and principal activities are disclosed in the directors’ report.

2. Summary of significant accounting policies

(a) Basis of preparationThis general purpose financial report has been prepared in accordance with Australian equivalents to International Financial Reporting Standards (AIFRSs), other authoritative pronouncements of the Australian Accounting Standards Board, Urgent Issues Group Interpretations and the Corporations Act 2001

Compliance with IFRSsThe financial report complies with Australian Accounting Standards as issued by the Australian Accounting Standards Board and International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board.

Historical cost conventionThese financial statements have been prepared under the historical cost convention.

Functional and presentation currencyThe functional and presentation currency of the Association is Australian dollars ($).

Critical accounting estimatesThe preparation of financial statements in conformity with AIFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Association’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in note 4.

(b) Revenue recognitionRevenue is recognised and measured at the fair value of the consideration received or receivable to the extent it is probable that the economic benefits will flow to the Association and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised:

i) Subscription and sponsorshipRevenues are recognised as revenue in the year to which the service relates with the unearned portion deferred.

ii) EducationRevenues are recognised when received, which is the point at which the Association has control of the monies.

iii) EventsRevenues are deferred when received, and recognised as revenue when the event occurs.

iv) Interest revenueRevenue is recognised as interest accrues using the effective interest method. This is a method of calculatingthe amortised cost of a financial asset and allocating the interest income over the relevant period using theeffective interest rate, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the net carrying amount of the financial asset.

(c) Income taxMortgage & Finance Association of Australia is a non profit organisation for taxation purposes. Accordingly, the Association’s mutual income is not subject to income tax while non mutual income (such as interest income) in excess of specified levels is subject to tax at prescribed rates.

The income tax expense or revenue for the period is the tax payable on the current period’s taxable income based on the national income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences between the tax bases of assets and liabilities and their carrying amounts in the financial statements, and to unused tax losses.

Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to

apply when the assets are recovered or liabilities are settled, based on those tax rates which are enacted or substantively enacted for each jurisdiction. The relevant tax rates are applied to the cumulative amounts of deductible and taxable temporary differences to measure the deferred tax asset or liability. An exception is made for certain temporary differences arising from the initial recognition of an asset or a liability. No deferred tax asset or liability is recognised in relation to these temporary differences if they arose in a transaction, other than a business combination, that at the time of the transaction did not affect either accounting profit or taxable profit or loss.

Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses.

Current and deferred tax balances attributable to amounts recognised directly in members funds are also recognised directly in members funds.

(d) LeasesLeases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases (note 19). Payments made under operating leases (net of any incentives received from the lessor) are charged to the statement of comprehensive income on a straight line basis over the period of the lease.

(e) Impairment of assetsGoodwill and intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely

independent of the cash inflows from other assets or groups of assets (cash generating units). Non financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at each reporting date.

(f) Acquisition of assets The purchase method of accounting is used to account for all acquisitions of assets (including business combinations) regardless of whether equity instruments or other assets are acquired. Cost is measured as the fair value of the assets given, shares issued or liabilities incurred or assumed at the date of exchange plus costs directly attributable to the acquisition. Where equity instruments are issued in an acquisition, the value of the instruments is their fair value as at the acquisition date based on the best available evidence of the price at which the instruments could be exchanged between knowledgeable, willing parties in an arm’s length transaction. Transaction costs arising on the issue of equity instruments are recognised directly in equity.

Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. The excess of the cost of acquisition over the fair value of the Association’s share of the identifiable net assets acquired is recorded as goodwill (refer to note 2(j)). If the cost of acquisition is less than the fair value of the net assets of the business acquired, the difference is recognised directly in the statement of comprehensive income, but only after a reassessment of the identification and measurement of the net assets acquired.

Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their present value as at the date of exchange. The discount rate used is the entity’s incremental borrowing rate, being the rate at which a similar borrowing could be obtained from an independent financier under comparable terms and conditions.

MFAA Annual Report 2013 / Financial Report/ 3938

FINANCIALS Year ending 30 June 2013

2. Summary of significant accounting policies (continued)

(g) Cash and cash equivalentsCash and cash equivalents in the statement of financial position includes cash on hand, deposits held at call with financial institutions, other short term, highly liquid investments with original maturities that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

For the purpose of the statement of cash flows, cash and cash equivalents consist of cash and cash equivalents as defined above.

(h) Trade receivablesTrade receivables are recognised initially at fair value and subsequently measured at amortised cost, less an allowance for impairment. Trade receivables are due for settlement between 30-60 days from the date of recognition.

Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off. An impairment provision is recognised when there is objective evidence that the Association will not be able to collect all amounts due according to the original terms of receivables. The amount of the impairment loss is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate.

(i) Property, plant and equipmentPlant and equipment is stated at historical cost less accumulated depreciation and any accumulated impairment losses. Historical cost includes expenditure that is directly attributable to the acquisition of the items.

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Association and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the statement of comprehensive income during the financial period in which they are incurred.

Depreciation is calculated using the straight-line method to allocate their cost or re-valued amounts, net of their residual values, over their estimated useful lives, as follows:

Plant and equipment - 2-10 yearsLeasehold improvement - Over term of lease

An item of property, plant and equipment is derecognised upon disposal or when no further future economic benefits are expected from its use or disposal.

Gains and losses on disposal are determined by comparing proceeds with the carrying amount. These are included in the statement of comprehensive income.

(j) Intangible assets

(i) SoftwareSoftware has a finite useful life and is carried at cost less accumulated amortisation and impaired losses. Amortisation is calculated using the straight line method to allocate the cost of software over their estimated useful life of 4 years.

(ii) GoodwillWhere an entity or operation is acquired, the identifiable net assets acquired are measured at fair value. The excess of the fair value of the cost of acquisition over the fair value of the identifiable net assets acquired, net of any restructuring costs, is brought to account as goodwill.

Goodwill is allocated to one cash generating unit for the purpose of impairment testing.

The Association performs its impairment testing as at 30 June each year using a value in use, discounted cash flow methodology for the cash generating unit to which goodwill has been allocated.

Impairment losses recognised for goodwill are not subsequently reversed.

(iii) Web site costsCosts in relation to web sites are charged as expenses in the period in which they are incurred unless they relate to the acquisition of an asset, in which case they are capitalised and amortised over their period of expected benefit. Generally, costs in relation to feasibility studies during the planning phase of a website, and ongoing costs of maintenance during the operating phase of a website are considered to be an expense. Cost incurred in building or enhancing a web site, to the extent that they represent probable future economic benefits that can be reliably measured, are capitalised as an asset and amortised over the period of the expected benefits which may vary from 2 to 5 years.

(iv) TrademarksIntangible assets with indefinite useful lives are tested for impairment annually either individually or at the cash-generating unit level consistent with the methodology outlined for goodwill above. Such intangibles are not amortised. The useful life of an intangible asset with an indefinite life is reviewed each reporting period to determine whether indefinite life assessment continues to be supportable. If not, the change in the useful life assessment from indefinite to finite is accounted for as a change in an accounting estimate and is thus accounted for on a prospective basis.

(k) Trade and other payables Trade and other payables are carried at amortised cost and due to their short term nature are not discounted.

These amounts represent liabilities for goods and services provided to the Association prior to the end of financial year which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition.

(l) Employee benefits

(i) Wages, salaries and annual leaveLiabilities for wages and salaries, including non monetary benefits and annual leave expected to be settled within 12 months of the reporting date are recognised in other payables in respect of employees’ services up to the reporting date and are measured at the amounts expected to be paid when the liabilities are settled.

(ii) Long service leaveThe liability for long service leave is recognised in the provision for employee benefits and measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date using the projected unit credit method. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the reporting date on national government bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows.

(iii) Employee benefit on costsEmployee benefit on costs, including payroll tax, are recognised and included in employee benefit liabilities and costs when the employee benefits to which they relate are recognised as liabilities.

(m) Recoverable amount of non current assetsThe recoverable amount of an asset is the net amount expected to be recovered through the cash inflows and outflows arising from its continued use and subsequent disposal.

Where the carrying amount of a non current asset is greater than its recoverable amount, the asset is written down to its recoverable amount. Where net cash inflows are derived from a group of assets working together, recoverable amount is determined on the basis of the relevant group of assets. The decrement in the carrying amount is recognised as an expense in the net profit or loss in the reporting period in which the recoverable amount write down occurs.

The expected net cash flows included in determining recoverable amounts of non current assets are not discounted.

(n) Goods and Services Tax (GST)Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the taxation authority. In this case it is recognised as part of the cost of acquisition of the asset or as part of the expense.

Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the taxation authority is included with other receivables or payables in the statement of financial position.

Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are recoverable from, or payable to the taxation authority, are presented as operating cash flow. Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority.

MFAA Annual Report 2013 / Financial Report/ 41

FINANCIALS Year ending 30 June 2013

The Association’s policy is to maintain sufficient cash and cash equivalents to fund its operations. The policy is to hold cash and cash equivalents with institutions that have “Approved Deposit Taking Institution” status. Annual budgets are framed to achieve a 5% of turnover surplus to build cash reserves sufficient to cover 6 months operating expenses.

The Board constantly analyses its interest rate exposure. Within this analysis consideration is given to potential renewals of existing positions, alternative financing, and the mix of fixed and variable interest rates, where applicable.

The following sensitivity analysis is based on the interest risk exposures in existence at the reporting date.

Judgements of possible reasonable movements:

Significant assumptions used in the interest rate sensitivity analysis include:

- Reasonably possible movements in interest rates were determined based on the Association’s current mix of investments in Australia, relationships with finance institutions, the level of investment that is expected to be renewed as well as a review of the last two year’s historical movements and economic forecasters’ expectations.

(o) New accounting standards and interpretationsCertain Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet effective have not been adopted by the Association for the annual reporting period ended 30 June 2013. The directors have not early adopted any of these new or amended standards or interpretations. The directors have not yet fully assessed the impact of these new or amended standards (to the extent relevant to the Association) and interpretations.

3. Financial Risk Management Objectives and Policies

The Association’s principal financial instruments comprise receivables, payables, cash and short-term deposits.

The main purpose of these financial instruments is to raise finance for the Association’s operations. The Association has various other financial assets and liabilities such as trade receivables and trade payables, which arise directly from its operations.

The Association manages its exposure to key financial risks, including interest rate and credit risk in accordance with the Association’s financial risk policy. The objective of the policy is to support the delivery of the Association’s financial targets whilst protecting future financial security.

The Board reviews and agrees policies for managing each of these risks as summarised below.

Primary responsibility for identification and control of financial risks rests with the Financial Risk Management Committee under the authority of the Board. The Board reviews and agrees policies for managing each of the risks identified below.

Risk Exposures and Responses

(a) Interest rate riskAt balance date, the Association had the following financial assets exposed to Australian Variable interest rate risk that are not designated in cash flow hedges:

INTEREST RATE RISK2013 2012

$ $

FINANCIAL ASSETS

Cash and Cash equivalents

4,329,810 4,509,658

Net Exposure 4,329,810 4,509,658

INTEREST RATE RISK2013 2012

$ $

POST TAX PROFIT

+1% (100 basis points) 43,298 45,097

-.5% (50 basis points) (21,649) (22,548)

OTHER COMPREHENSIVE INCOME

+1% (100 basis points) - -

-.5% (50 basis points) - -

- The net exposure at the reporting date is representative of what the Association was and is expecting to be exposed to in the next twelve months from the reporting date.

(b) Foreign currency riskAs all transactions are denominated in Australian Dollars, the Association is not exposed to foreign currency risk.

(c) Price riskThe Association has no exposure to commodity and equity securities price risk.

(d) Credit riskCredit risk arises from the financial assets of the Association, which comprise cash and cash equivalents, trade and other receivables. The Association’s exposure to credit risk arises from potential default of the counter party, with a maximum exposure equal to the carrying amount of these instruments. Exposure at balance date is addressed in each applicable note.

The Association trades only with recognised, creditworthy third parties, and as such collateral is not requested nor is it the Association’s policy to securitise its trade and other receivables.

It is the Association’s policy that all customers who wish to trade on credit terms are subject to credit verification procedures including an assessment of their independent credit rating, financial position, past experience and industry reputation. Risk limits are set for each individual customer in accordance with parameters set by the board. These risk limits are regularly monitored.

In addition, receivable balances are monitored on an ongoing basis with the result that the Association’s exposure to bad debts is not significant.

(e) Liquidity riskPrudent liquidity risk management is maintained such that the Association maintains sufficient cash and cash equivalents to fund its operations. As a result, the Association is not subject to liquidity risk at the reporting date. A liquidity maturity analysis has not been prepared as there are sufficient cash and cash equivalents on hand to cover total liabilities.

(f) Fair ValueThe methods for estimating fair value are outlined in the relevant notes to the financial statements.

4. Significant accounting judgements, estimates and assu