Directors' Report

for the year ended 30 june 2008

The Directors present their report, together with the financial report of Savings & Loans Credit Union (S.A.) Limited (‘the Credit Union’) and the consolidated financial report of the consolidated entity, being the edit Union and its controlled entity, for the year ended 30 June 2008 and the auditor’s report thereon.

PRINCIPAL ACTIVITIES

The principal activities of the consolidated entity during the course of the financial year were the provision of retail financial services and financial planning advice to our members and acting as an insurance agent. There were no significant changes in the nature of these activities during the year.

RESULTS OF OPERATIONS

REVIEW OF OPERATIONS

The consolidated entity experienced a growth rate of 19% in assets under management during the 2007/2008 year taking total assets at 30 June 2008 to $3,047 million. The consolidated entity achieved a profit of $10.89 million after tax compared to last year’s result of $15.81 million, a decrease of 31%. The decrease was due to the cost of implementing the new brand, the Melbourne expansion (which were both planned and budgeted) and the higher cost of funds due to the flow on impacts of the global financial market issues. The 2007/2008 profit was transferred to reserves, resulting in a capital adequacy ratio of 11.95%, which is in excess of the 8% minimum required by Australian Prudential Regulation Authority (APRA) regulations.

DIVIDENDS OF SHARE CAPITAL

The consolidated entity has not paid or declared a dividend on Share Capital during the year ended 30 June 2008 and the Directors do not recommend that a dividend be paid out of the surplus for the year ended 30 June 2008. This is in accordance with the rules of the Credit Union, which do not permit the Credit Union to pay dividends.

STATE OF AFFAIRS

The Credit Union achieved a growth rate of 19% in assets under management which was high compared to Finance Industry benchmarks and given the challenging financial conditions that developed as a result of financial market issues globally. Growth is expected be lower in the 2008/09 financial year due to the Credit Union no longer accepting new business from loan brokers.

The Directors resolved to discontinue the operations of its controlled entity during the financial year resulting in the sale of its business name “Loan SA” and partial sale of the rights to the trail commission on a loan portfolio to a third party entity. The remaining rights to trail commissions were sold to the Credit Union at 30 June 2008.

In the opinion of the Directors there were no other significant changes in the state of affairs of the consolidated entity that occurred during the financial year under review.

EVENTS SUBSEQUENT TO REPORTING DATE

During the 2008/09 financial year, the Credit Union announced that it had entered into merger discussions with Austral Credit Union to expand its presence in the Melbourne market. The merger has received regulatory approval and is dependent upon Austral Credit Union members approving the transfer of business to Savings & Loans. The merged entity is expected to be operational from 1 November 2008.

There has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a material and unusual nature likely, in the opinion of the Directors of the Credit Union, to affect significantly the operations of the consolidated entity, the results of those operations, or the state of affairs of the consolidated entity in future financial years.

LIKELY DEVELOPMENTS

The Credit Union will be consolidating its strategy as it enters the third year of its five-year strategic plan. The Melbourne expansion will continue with the likelihood of additional branches being opened. New branches may also be opened in South Australia if appropriate locations are identified. Growth targets have been reduced due to a decrease in the availability and increase in the price of wholesale funding. The Credit Union will concentrate on increasing the level of deposits from members by continuing to offer competitive market rates.

BOARD OF DIRECTORS

The Credit Union maintains a register of Directors in accordance with the Corporations Act 2001 requirements. The register includes details of each Director’s interest in securities issued by the Credit Union. The register is available for inspection without a fee. All Directors of the Credit Union are non-executive Directors.

The Directors of the Credit Union at any time during or since the end of the financial year are listed on pages 10 & 11 of this report.

COMPANY SECRETARIES

Mr Greg Connor, (Dip. Teaching, BEd., Grad. Dip. Bus. Admin., JP, SF Fin), Chief Executive Officer, has held the position of company secretary for the past eight years and previously held the position of Chief Manager of Operations of a major financial institution for four years. Mr Connor currently sits on a number of boards, including the Australasian Mutuals Institute; Australasian Institute of Management SA; and Abacus Australian Mutuals.

Mr Neal Matotek (BEc, CA) (appointed 1 February 2008) has been the Chief Financial Officer for two years and been employed by the Credit Union for the past 12 years in Finance related roles. Previous to being employed at the Credit Union, Mr Neal Matotek was an Audit Manager with KPMG.

Mr Sam Molloy (BEc, BCom) (resigned as company secretary 1 February 2008) has held the position of Senior Manager Strategy and Project Services for six months, was Corporate Governance Manager for eight years and has been employed at the Credit Union for the past 11 years.

DIRECTORS' MEETINGS

The number of Directors’ meetings (including meetings of committees of Directors) and number of meetings attended by each of the Directors of the Credit Union during the financial year are:

DIRECTORS' INTERESTS

During the financial year, no Director of the consolidated entity has received or become entitled to receive any benefit (other than a benefit included in the aggregate amount of remuneration received or due and receivable by Directors shown in the consolidated financial statements) by reason of a contract made by the Credit Union or its controlled entity or with any Director or with a firm of which a Director is a member, or with an entity in which a Director has a substantial interest.

INDEMNIFICATION AND INSURANCE OF OFFICERS

The Credit Union holds a Directors’ and Officers’ insurance policy on behalf of the Directors of each entity in the consolidated entity. The total policy premium in relation to the consolidated entity for the year ended 30 June 2008, which was paid for by the Credit Union, amounted to $40,903 (2007:$43,178).

The policy indemnifies Directors against damages, legal costs and expenses arising from any claim made against them jointly or separately in relation to their duties as Directors of the Credit Union or the controlled entity.

The Credit Union is of a kind referred to in ASIC Class Order 98/100 dated 10 July 1998 and in accordance with that Class Order, amounts in the financial report and directors’ report have been rounded off to the nearest thousand dollars, unless otherwise stated.

LEAD AUDITOR'S INDEPENDENCE DECLARATION UNDER SECTION 307C OF THE CORPORATIONS ACT 2001

The Lead Auditor’s Independence Declaration is set out on page 62 and forms part of the Directors’ Report for the year ended 30 June 2008.

Signed in accordance with a resolution of the Board of Directors of Savings & Loans Credit Union (S.A.) Limited.

W. R. Cossey, Chairperson
Dated at Adelaide this 27th of August 2008.

LEAD AUDITOR'S INDEPENDENCE DECLARATION UNDER SECTION 307C OF THE CORPORATIONS ACT 2001

To: The Directors of Savings & Loans Credit Union (S.A.) Limited

I declare that, to the best of my knowledge and belief, in relation to the audit for the financial year ended 30 June 2008 there have been:

• no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit; and

• no contraventions of any applicable code of professional conduct in relation to the audit

KPMG

M Hinchliffe, Partner
Dated at Adelaide this 27th of August 2008.