Bank of Queensland Limited ABN 32 009 656 740 100 Skyring Terrace, Newstead 4006 GPO Box 898, Brisbane 4001 Telephone (07) 3212 3333 Facsimile (07) 3212 3409 www.boq.com.au ASX RELEASE 11 November 2016 AMENDMENTS TO 2016 ANNUAL REPORT Bank of Queensland Limited (BOQ) has today lodged an updated 2016 Annual Report with the Australian Securities Exchange. A summary of the amendments made to the Annual Report lodged with the ASX on 6 October 2016 are set out below: Directors’ Details for Mr Roger Davis, Mr Richard Haire, Ms Karen Penrose & Ms Michelle Tredenick on pages 8 & 9 have been amended to include details of all directorships of other listed companies held by these directors at any time in the 3 years immediately before the end of the financial year. Page 9 has been amended to include Directors’ Details for Mr Warwick Negus. Mr Negus was appointed to the BOQ Board on 22 September 2016. In addition, BOQ notes the following matters of clarification: The reference to “non-functional” on page 52 should read “non-financial”. The last sentence under “Fee Pool” in Section 6. Non-Executive Director Remuneration on page 55 reads “The Board engaged Egan & Associates to provide a view of the current fee levels and based on this advice, will seek shareholder approval at the AGM for a 5% increase to Board and Committee fees for the 2017 year”. BOQ wishes to clarify that, as per the Notice of Meeting dated 27 October 2016 for the 2016 Annual General Meeting (AGM), the specific approval being sought at the 2016 AGM is for an increase in the aggregate maximum amount of non-executive directors’ fees from $2,600,000 per annum (inclusive of superannuation guarantee charge (SGC) contributions) to $2,800,000 per annum (inclusive of SGC contributions). BOQ ANNUAL REPORT 2016 YEAR ENDED 31 AUGUST 2016 CONTENTS CHAIRMAN AND MANAGING DIRECTOR & CEO’S LETTER 5 DIRECTORS’ REPORT 7 Directors’ details 8 Operating and financial review 11 REMUNERATION REPORT Introductory message 44 Remuneration report 45 LEAD AUDITOR’S INDEPENDENCE DECLARATION 67 FINANCIAL REPORT Income statements 70 Statements of comprehensive income 71 Balance sheets 72 Statements of changes in equity 73 Statements of cash flows 77 Notes to the financial statements 78 OTHER INFORMATION Directors’ declaration 135 Independent auditor’s report to the members 136 Shareholding details 138 Shareholder information 141 5 Year Financial Summary 142 Glossary 143 FIND OUT MORE ABOUT HOW WE’RE DELIVERING OUR STRATEGY AT BOQ.COM.AU/ANNUAL_REPORTS/2016 2 ANNUAL REPORT 2016 BOQ FY16 RESULTS A GOOD RESULT IN A CHANGING OPERATING ENVIRONMENT PROFIT RESULTS ($) MILLIONS 360 357 338 301 318 CASH EARNINGS 261 248 M $360 186 UP 1% SINCE FY15 STATUTORY NET PROFIT $338M 2013 2013 2013 2014 2015 2016 UP 6% SINCE FY15 EARNINGS & DIVIDENDS LOAN IMPAIRMENT EXPENSE (CENTS PER SHARE) ($) MILLIONS 2014 90 66 $67M 2015 97 115 DOWN 9% 74 SINCE FY15 2016 96 76 86 74 BASIC CASH EARNINGS PER SHARE DIVIDENDS PER SHARE 67 $96C $76C 2013 2014 2015 2016 DOWN 2% SINCE FY15 UP 3% SINCE FY15 CASH COST TO NET INTEREST MARGIN INCOME RATIO RETURN ON EQUITY % % 46.8 % 1.94 3BPS 10.3 40BPS 80BPS Bank of Queensland Limited and its Controlled Entities ABN 32 009 656 740 AFSL No. 244616 3 DELIVERING OUR STRATEGY CUSTOMER IN CHARGE THERE’S ALWAYS A BETTER WAY VIRGIN MONEY AUSTRALIA REWARD ME HOME LOAN LAUNCHED % 30 OF MORTGAGE APPLICATIONS COVERED BY OUR NEW DIGITAL LENDING SYSTEM GROW THE RIGHT WAY LOVED LIKE NO OTHER $500M GROWTH ( 16 % ) IN LENDING TO LAUNCHED OUR 144 CULTURE NICHE BUSINESS UNITING OUR FOCUS ON SEGMENTS IN FY16 1 MISSION 4 STRATEGIC PILLARS 4 VALUES 4 ANNUAL REPORT 2016 4 ANNUAL REPORT 2016 SEE WHAT OUR CHAIRMAN & CEO HAVE TO SAY AT BOQ.COM.AU/ANNUAL_REPORTS/2016 CHAIRMAN AND MANAGING DIRECTOR & CEO’S LETTER Dear Shareholder, BOQ has delivered an increased profit for a fourth successive nearly a decade of service on the Board. We also farewelled year. This is a particularly good result in a challenging market, director Neil Berkett whose extensive experience across with net profit after tax increasing to $360 million and the finance, digital media and telecommunications sectors statutory profit after tax growing to $338 million. Given these provided the Board with important insight following the results, the Board has declared a final dividend of 38 cents acquisition of Virgin Money Australia. We thank Carmel and per share, taking the full year dividend to a record 76 cents Neil for their invaluable service and wish them all the best per share. for the future. 2016 has been a difficult year for the banking sector. We were also delighted to welcome some new faces to the Global economic uncertainty has driven market volatility, Board. Karen Penrose joined in November, John Lorimer and domestically the economy continues to shift from its in January and more recently Warwick Negus, joined in traditional reliance on mining investment. The low interest rate September. Karen has 30 years’ business experience environment and competition for both lending and deposit growth in the finance and corporate sectors, offering specialist has created margin pressure on both the asset and liability sides knowledge in finance and capital markets, risk management of the balance sheet. Additionally, uncertainty remains around the and compliance. John has more than 20 years in financial next phase of banking industry regulation. services and brings significant expertise in retail financial These market conditions reinforce the need for BOQ to continue services, governance, regulation and risk management. to deliver its strategy. 2016 was a positive year for the bank Warwick’s extensive financial services industries background as we broadened our distribution channels, focussed on niche adds more than 20 years’ experience in investment banking customer segments, improved our process capabilities and and domestic and international funds management. continued to create a culture that is a source of competitive We believe, these additions give the Board the right skills advantage. and experience to meet the needs of a rapidly changing market, and so we warmly welcome Karen, John and Most importantly, we’ve continued to implement our strategy Warwick to the Board. without compromising credit quality and we’ve stayed ahead of the regulatory curve with conservative lending policies and Finally, we’d also like to thank all of our shareholders for your capital ratios. strong ongoing support during 2016. This has enabled us to build a strong and profitable business that is delivering record earnings We believe we’ve achieved the right balance between growth, whilst maintaining a high quality loan portfolio and is positioning asset quality and profitability to build a portfolio that performs BOQ well for the future. throughout the business cycle. We would like to thank the collective efforts of everyone across the BOQ Group that has made this result possible. 2016 has also seen some major governance changes at Roger Davis Jon Sutton Board level. During the year we farewelled long-standing Chairman Managing Director & CEO director Carmel Gray who has provided wise counsel over Bank of Queensland Limited and its Controlled Entities ABN 32 009 656 740 AFSL No. 244616 5 2016 DIRECTORS’ REPORT DIRECTORS’ REPORT FOR THE YEAR ENDED 31 AUGUST 2016 The Directors present their report together with the financial report of Bank of Queensland Limited (‘the Bank’) and of the Consolidated Entity, being the Bank and its controlled entities for the year ended 31 August 2016 and the independent auditor’s report thereon. DIRECTORS’ DETAILS The Directors of the Bank at any time during or since the end of the financial year are: Name, qualifications and independence Experience, special responsibilities and other Directorships status Roger Davis Mr Davis was appointed Chairman on 28 May 2013 and has been a Director since August 2008. He is a Rhodes Scholar B.Econ. (Hons), and has a Bachelor of Economics (Hons) degree from the University of Sydney and a Master of Philosophy degree from Master of Philosophy Oxford. Mr Davis has over 32 years’ experience in banking and investment banking in Australia, the US and Japan. He Chairman is currently a consulting Director at Rothschild Australia Limited. He was previously a Managing Director at Citigroup Non-Executive where he worked for over 20 years and more recently was a Group Managing Director at ANZ Bank. He is currently a Independent Director Director of Argo Investments Limited, Ardent Leisure Management Ltd and Ardent Leisure Ltd and Aristocrat Leisure Ltd. He was formerly Chair of Charter Hall Office REIT (prior to its takeover) and Esanda, and a non-executive director of The Trust Company Limited (prior to its takeover). He is the Chairman of the unlisted entity, AIG Australia Limited. Mr Davis is Chair of the Nomination & Governance, a member of each of the Audit and Risk Committees, and an attendee at all other Board Committees. Jon Sutton Mr Sutton was appointed Managing Director and Chief Executive Officer in January 2015 following four months as the Managing Director and Chief Executive Acting Chief Executive Officer. Mr Sutton originally joined BOQ in July 2012 as our Chief Operating Officer. Mr Sutton Officer has more than 20 years’ experience in banking and prior to BOQ was the Managing Director of Bankwest. Before that, Executive Director as Executive General Manager of Commonwealth Bank Agribusiness, Mr Sutton was central to the establishment of the bank’s agribusiness segment which grew strongly under his guidance and leadership. Prior to this, Mr Sutton was General Manager of Client Risk Solutions at CBA, responsible for marketing derivative products including interest rates, commodities and foreign exchange. He was also Head of Resources and Agribusiness and Head of Corporate Risk Management Commodities, charged with marketing and commodity hedging products to Australian institutions within the base metals, precious metals and energy sectors.