PERPETUAL WEALTHFOCUS INVESTMENT FUNDS Annual Financial Report 30 June Perpetual Investment Management Limited ABN AFSL

Transcription

1 PERPETUAL WEALTHFOCUS INVESTMENT FUNDS Annual Financial Report Perpetual Investment Management Limited ABN AFSL

2 Annual Financial Report Contents Page Directors' report 2 Lead auditor's independence declaration 6 Statements of comprehensive income 7 Balance sheets 8 Statements of changes in equity 9 Cash flow statements Directors' declaration 44 Independent auditor's report to the unitholders 45-1-

3 Directors' report For the year ended Directors' report The directors of Perpetual Investment Management Limited (a wholly owned subsidiary of Perpetual Limited), the Responsible Entity of Perpetual WealthFocus Investment Funds, present their report together with the annual financial report of Perpetual WealthFocus Investment Funds (''the Schemes'') for the year ended and the auditor's report thereon. Statutory name Referred to in this document as ARSN Perpetual International Perpetual Global Perpetual Industrial Perpetual Industrial Perpetual's Fund 4 APN Unlisted Property Fund Perpetual Fund 57 Australian Unity Mortgage Income Fund Responsible Entity The Responsible Entity of Perpetual WealthFocus Investment Funds is Perpetual Investment Management Limited (ABN ). The Responsible Entity's registered office and principal place of business is Level 18, 123 Pitt Street, Sydney, NSW Directors The following persons held office as directors of Perpetual Investment Management Limited during the year or since the end of the year and up to the date of this report: G Foster (appointed 25 January 2013, Alternate for G Larkins) M Gordon (appointed 28 March 2013, resigned 24 February ) J Hawkins (appointed 6 July 2012) D Kiddie (appointed 24 February ) G Larkins (appointed 7 January 2013) P Lynch (appointed 6 July 2012, Alternate for J Hawkins) P Statham (appointed 24 February, Alternate for D Kiddie) P Statham (appointed 9 September 2013, resigned 24 February, Alternate for M Gordon) D Winterton (appointed 24 February, Alternate for D Kiddie) D Winterton (appointed 20 April, resigned 24 February, Alternate for M Gordon) Principal activities The Schemes invest and trade in equities, unlisted unit trusts, derivatives and a range of diversified income generating assets in accordance with the provisions of the Constitutions of the Schemes. The objectives and investment strategies of the Schemes are disclosed in the Perpetual WealthFocus Investment Funds Product Disclosure Statement. -2-

4 Directors' report For the year ended Directors' report Principal activities The Responsible Entity approved the wind-up of the APN Unlisted Property Fund on 7 August The Scheme initially invested exclusively in the APN Property for Income Fund which was suspended in 2008 and later introduced a withdrawal offer whereby quarterly redemption requests were satisfied by a combination of cash (approximately 75% based on the portfolio) and units in a new underlying fund, the APN Unlisted Property Fund. The new underlying fund holds the illiquid component of the underlying investment in the APN Property for Income Fund. The Scheme is now fully invested in the APN Unlisted Property Fund and will return the remaining capital as it becomes available. The Responsible Entity will continue to administer the Scheme until the wind-up is completed and unitholders receive their entitlements. The Schemes did not have any employees during the year. There were no significant changes in the nature of the Schemes' activities during the year. Review and results of operations During the year, the Schemes continued to invest in accordance with target asset allocations as set out in the governing documents of the Schemes and in accordance with the provisions of the Schemes' Constitutions. The APN Unlisted Property Fund continued the process of winding up and returning capital. The performance of the Schemes, as represented by the results of their operation, was as follows: Perpetual Global Perpetual Industrial APN Unlisted Australian Unity 2 Property Fund Mortgage Income Fund Operating profit/(loss) before finance costs attributable to unitholders Distribution paid and payable Distribution (cents per unit) (8,609) 47,602 (48,785) 288, , ,107 (16,723) (214) 234 2, , , , , , , Stated to the nearest whole dollar as the Scheme does not meet the criteria set out in ASIC Corporations (Rounding in Financial/Directors' Reports) Instrument / The distribution paid & payable, and distribution (cents per unit) values are the total of both classes of units. The split between the two classes is provided in note

5 Directors' report For the year ended Directors' report Interests in the Schemes The movement in units on issue in the Schemes during the year is disclosed in note 6 to the financial statements. The value of the Schemes' assets and liabilities is disclosed on the balance sheets and derived using the basis set out in note 2 to the financial statements. Significant changes in state of affairs Effective 16 May, the Perpetual Industrial investment guidelines were updated. The Scheme will continue to invest in listed shares on or proposed to be listed on any recognised Australian exchange but may have up to 10% exposure to shares listed on or proposed to be listed on any recognised global exchange. Currency hedges may be used from time to time. In the opinion of the directors, there were no other significant changes in the state of affairs of the Schemes that occurred during the financial year under review. Likely developments and expected results of operations The Schemes will continue to be managed in accordance with the investment objectives and guidelines as set out in the governing documents of the Schemes and in accordance with the provisions of the Schemes' Constitutions. Matters subsequent to the end of the financial year No matter or circumstance has arisen since that has significantly affected, or may significantly affect: (i) the operations of the Schemes in future financial years; or (ii) the results of those operations in future financial years; or (iii) the state of affairs of the Schemes in future financial years. Environmental regulation The operations of the Schemes are not subject to any particular or significant environmental regulations under a Commonwealth, State or Territory law. Fees paid to and interests held in the Schemes by the Responsible Entity or its associates Fees paid to the Responsible Entity and its related parties out of Schemes property during the year are disclosed in note 10 to the financial statements. No fees were paid out of Schemes property to the directors of the Responsible Entity during the year. The number of interests in the Schemes held by the Responsible Entity or its associates as at the end of the financial year is disclosed in note 10 to the financial statements. -4-

6 Directors' report For the year ended Directors' report Indemnification and insurance of officers and auditors No insurance premiums are paid for out of the assets of the Schemes in regards to insurance cover provided to either the officers of Perpetual Investment Management Limited or the auditor of the Schemes. So long as the officers of Perpetual Investment Management Limited act in accordance with the Schemes' Constitutions and the law, the officers remain indemnified out of the assets of the Schemes against losses incurred while acting on behalf of the Schemes. The auditor of the Schemes is in no way indemnified out of the assets of the Schemes. Rounding of amounts to the nearest thousand dollars The Schemes are entities of the kind referred to in ASIC Corporations (Rounding in Financial/Directors' Reports) Instrument /191. Amounts in the directors report and financial report have been rounded to the nearest thousand dollars in accordance with the legislative instrument, unless otherwise indicated. Lead auditor's independence declaration A copy of the Lead auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 6. This report is made in accordance with a resolution of the directors. Director Sydney 20 September -5-

7 ABCD Lead Auditor s Independence Declaration under Section 307C of the Corporations Act 2001 To: the directors of Perpetual Investment Management Limited I declare that, to the best of my knowledge and belief, in relation to the audit for the financial year ended there have been: (i) no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit; and (ii) no contraventions of any applicable code of professional conduct in relation to the audit. KPMG Michael O Connell Partner Sydney 20 September -6- KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. Liability limited by a scheme approved under Professional Standards Legislation.

8 Statements of comprehensive income For the year ended Statements of comprehensive income Notes Perpetual Global Perpetual Industrial APN Unlisted Property Fund Australian Unity Mortgage Income Fund Investment income Dividend/distribution income Interest income Net gains/(losses) on financial instruments held at fair value through profit or loss Net foreign exchange gains/(losses) Other operating income Total net investment income/(loss) Expenses Responsible Entity's fees Other expenses Total operating expenses Operating profit/(loss) Finance costs attributable to unitholders Distributions to unitholders Changes in net assets attributable to unitholders (total comprehensive income) 1,702 10, , , , , , ,673 6, ,690 3 (8,852) 41,341 (171,824) 166,537 (203,901) (575,412) (16,334) (35) - - (61) (25) (7,150) 51,736 (18,448) 322, , ,340 (15,145) 2, ,459 4,134 22,236 26,013 18,541 24,233 1,577 3, ,101 7, ,459 4,134 30,337 33,826 18,541 24,233 1,578 3,063 (8,609) 47,602 (48,785) 288, , ,107 (16,723) (214) , , , , , , ,400 6 (8,843) 45,437 (418,711) (297,615) (259,293) (658,893) (139,723) (181,614) The above statements of comprehensive income should be read in conjunction with the accompanying notes. 1 Stated to the nearest whole dollar as the Scheme does not meet the criteria set out in ASIC Corporations (Rounding in Financial/Directors' Reports) Instrument /

9 Balance sheets As at Balance sheets Notes Perpetual Global Perpetual Industrial APN Unlisted Property Fund Australian Unity Mortgage Income Fund Assets Cash and cash equivalents Financial assets held at fair value through profit or loss Due from brokers - receivable for securities sold Receivables Total assets Liabilities Distributions payable to unitholders of the Scheme Due to brokers - payable for securities purchased Payables Total liabilities (excluding net assets attributable to unitholders) Net assets attributable to unitholders - liability 13(b) - - 4, ,607 53,325 65,060 8,367 45, , ,411 3,143,841 3,684,520 1,344,330 1,548,231 86, , ,384 15, ,397 6,258 26,544 29, ,109 41, , ,758 3,214,510 3,835,238 1,498,764 1,655,230 94, , , , , , ,145 36, ,901 3,055 4,674 1, , , , ,674 1, , ,209 2,911,148 3,318,848 1,394,090 1,653,383 94, ,580 The above balance sheets should be read in conjunction with the accompanying notes. 1 Stated to the nearest whole dollar as the Scheme does not meet the criteria set out in ASIC Corporations (Rounding in Financial/Directors' Reports) Instrument /

10 Statements of changes in equity For the year ended Statements of changes in equity The Schemes' net assets attributable to unitholders are classified as a liability under AASB 132 Financial Instruments: Presentation. As such the Schemes have no equity and no items of changes in equity have been presented for the current or comparative period. -9-

11 Cash flow statements For the year ended Cash flow statements Notes Perpetual Global Perpetual Industrial APN Unlisted Property Fund Australian Unity Mortgage Income Fund Cash flows from operating activities Dividends/distributions received Interest received Other income received Responsible Entity's fees paid Other expenses paid Net cash inflow/(outflow) from operating activities Cash flows from investing activities Proceeds from sale of investments Payments for purchase of investments Net cash inflow/(outflow) from investing activities Cash flows from financing activities Proceeds from applications by unitholders Payments for redemptions by unitholders Distributions paid Net cash inflow/(outflow) from financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the year Cash and cash equivalents at the end of the year 6,453 8, , , , , , ,747 6, , ,012 2,571 1,438 1, (1,588) (4,926) (24,323) (27,354) (16,985) (33,194) (1,810) (3,417) - - (8,674) (8,384) (86) (118) (1) (1) 13(a) 4,990 4, , , , ,237 (565) , ,885 3,777,618 4,370, , ,407 (19,411) (181,724) (3,452,229) (3,483,098) , , , , , ,407 12,975 12, ,064 1,261, (20,188) (209,569) (1,101,426) (1,986,458) (366) (20) (87,198) (197,549) (355,000) (1,055,000) (123,000) (182,930) (7,579) (197,226) (551,560) (922,584) (355,000) (1,054,997) (123,000) (182,930) - (39) (100,866) 100,454 (11,735) (286,760) (37,140) 22, ,607 5,153 65, ,820 45,507 23,330 13(b) - - 4, ,607 53,325 65,060 8,367 45,507 The above cash flow statements should be read in conjunction with the accompanying notes. 1 Stated to the nearest whole dollar as the Scheme does not meet the criteria set out in ASIC Corporations (Rounding in Financial/Directors' Reports) Instrument /

12 For the year ended 1 General information This annual financial report covers Perpetual WealthFocus Investment Funds ("the Schemes"). The Schemes are registered managed investment schemes under the Corporations Act The Schemes are domiciled in Australia. The Responsible Entity of the Schemes is Perpetual Investment Management Limited. The Responsible Entity's registered office is Level 18, 123 Pitt Street, Sydney, NSW The Responsible Entity approved the wind-up of the APN Unlisted Property Fund on 7 August The Scheme initially invested exclusively in the APN Property for Income Fund which was suspended in 2008 and later introduced a withdrawal offer whereby quarterly redemption requests were satisfied by a combination of cash (approximately 75% based on the portfolio) and units in a new underlying fund, the APN Unlisted Property Fund. The new underlying fund holds the illiquid component of the underlying investment in the APN Property for Income Fund. The Scheme is now fully invested in the APN Unlisted Property Fund and will return the remaining capital as it becomes available. The Responsible Entity will continue to administer the Scheme until the wind-up is completed and unitholders receive their entitlements. The annual financial report was authorised for issue by the directors of the Responsible Entity on 20 September. The directors of the Responsible Entity have the power to amend and reissue the annual financial report. 2 Summary of significant accounting policies The principal accounting policies applied in the preparation of this annual financial report are set out below. These policies have been consistently applied to all years presented, unless otherwise stated in the following text. (a) Basis of preparation This general purpose annual financial report has been prepared in accordance with Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards Board (''AASB'') and the Corporations Act 2001 in Australia. The annual financial report is prepared on the basis of fair value measurement of assets and liabilities except where otherwise stated. As a result of the Responsible Entity's decision to wind-up the APN Unlisted Property Fund, the financial statements for this Scheme are prepared on a non-going concern basis. The financial statements are being prepared on the basis set out in the accounting policy notes. There is no difference between this basis and preparing the financial statements on a going concern basis. No additional provision or liabilities have been recognised as a result of a possible orderly realisation as the Scheme does not incur any additional legal or contractual obligations. Compliance with International Financial Reporting Standards The annual financial report of the Schemes also complies with International Financial Reporting Standards ("IFRS") and Interpretations as issued by the International Accounting Standards Board ("IASB"). -11-

13 For the year ended 2 Summary of significant accounting policies (a) Basis of preparation Functional and presentation currency The annual financial report is presented in Australian dollars, which is the Schemes' functional currency. Use of estimates and judgement The preparation of the annual financial report requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expenses. These estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to the accounting estimates are recognised prospectively. (b) New accounting standards and interpretations Certain new accounting standards and interpretations have been published that are not mandatory for the reporting period and have not been early adopted by the Schemes. The assessment of the impact of these new standards (to the extent relevant to the Schemes) and interpretations is set out below: (i) AASB 9 Financial Instruments (and applicable amendments) (effective from 1 January 2018) AASB 9 addresses the classification, measurement and derecognition of financial assets and financial liabilities. It has also introduced revised rules around hedge accounting and impairment. The standard is available for early adoption. Management does not expect the adoption of AASB 9 to have a significant impact on the recognition and measurement of the Schemes' financial instruments because they are carried at fair value through profit or loss. The derecognition rules have not been changed from the previous requirements, and the Schemes do not apply hedge accounting. AASB 9 introduces a new impairment model. However, as the Schemes' investments are all held at fair value through profit or loss, the change in impairment rules will not impact the Schemes. (ii) AASB 15 Revenue from Contracts with Customers (effective from 1 January 2018) The AASB has issued a new standard for the recognition of revenue. This will replace AASB 118 which covers contracts for goods and services and AASB 111 which covers construction contracts. The new standard is based on the principle that revenue is recognised when control of a good or service transfers to a customer - so the notion of control replaces the existing notion of risks and rewards. The Schemes' main sources of income are interest, dividends/distributions and gains on financial instruments held at fair value. All of these are outside the scope of the new revenue standard. As a consequence, management does not expect the adoption of the new revenue recognition rules to have a significant impact on the Schemes' accounting policies or the amounts recognised in the financial statements. -12-

14 For the year ended 2 Summary of significant accounting policies (c) Financial instruments (i) Classification The Schemes' investments are classified at fair value through profit or loss. They comprise: Financial instruments held for trading Derivative financial instruments such as futures, forward contracts, options and swaps are included under this classification. The Schemes do not designate any derivatives as hedges in a hedging relationship. Financial instruments designated at fair value through profit or loss upon initial recognition These include financial assets that are not held for trading purposes and which may be sold. These are investments in equity instruments and unlisted unit trusts. Financial assets designated at fair value through profit or loss at inception are those that are managed and their performance evaluated on a fair value basis in accordance with the Schemes' documented investment strategies. The Schemes' policy is for the Responsible Entity to evaluate the information about these financial instruments on a fair value basis together with other related financial information. (ii) Recognition/derecognition The Schemes recognise financial assets and financial liabilities on the date they become party to the purchase contractual agreement (trade date) and recognise changes in fair value of the financial assets or financial liabilities from this date. Investments are derecognised on the date the Schemes become party to the sale contractual agreement (trade date). (iii) Measurement Financial assets and liabilities held at fair value through profit or loss At initial recognition, the Schemes measure financial assets and financial liabilities at fair value. Transaction costs are expensed in profit or loss as incurred. Subsequently, all financial assets and financial liabilities are measured at fair value without any deduction for estimated future selling cost. Gains and losses arising from changes in the fair value measurement are included in profit or loss. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Further details of fair value measurement are disclosed in note 14(d) to the financial statements. -13-

15 For the year ended 2 Summary of significant accounting policies (c) Financial instruments (iv) Offsetting financial instruments Financial assets and liabilities are offset and the net amount reported in the balance sheets when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis, or realise the asset and settle the liability simultaneously. (d) Net assets attributable to unitholders For Perpetual Global and Perpetual Industrial, units are redeemable at the unitholders' option, however applications and redemptions may be suspended by the Responsible Entity if it is in the best interests of the unitholders. The units are classified as financial liabilities as the Schemes are required to distribute their distributable income, in accordance with the Schemes' Constitutions. The units can be put back to the Schemes at any time for cash based on the redemption price. The units are measured at the redemption amount that is payable at the balance sheet date if unitholders exercise their right to redeem units in the Schemes. For the remaining Schemes, units are redeemable subject to return of capital and are classified as financial liabilities. (e) Cash and cash equivalents For the purpose of presentation in the cash flow statements, cash and cash equivalents include cash on hand, deposits held at call with financial institutions, other short term and highly liquid financial assets with a maturity period of three months or less from the date of acquisition that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts. Bank overdrafts are shown as a liability on the balance sheets. (f) Receivables Receivables include accrued income, application monies receivable and Reduced Input Tax Credits ("RITC") refund. Receivables are measured at their nominal amounts. Amounts are generally received within 30 days of being accrued for. Given the short term nature of most receivables, the nominal amount approximates fair value. (g) Payables Payables include accrued expenses and redemption monies owing by the Schemes which are unpaid at the end of the reporting date. Amounts are generally paid within 30 days of being accrued for. Given the short term nature of most payables, the nominal amount approximates fair value. -14-

16 For the year ended 2 Summary of significant accounting policies (h) Investment income Interest income is recognised in profit or loss as it accrues using the nominated interest rates available on the bank accounts held. Dividend income is recognised on the ex-dividend date. Trust distributions (including distributions from cash management trusts) are recognised on a present entitlements basis. Other income is brought to account on an accruals basis. (i) Expenses All expenses, including Responsible Entity's fees, are recognised in profit or loss on an accruals basis. (j) Income tax Under current legislation, the Schemes are not subject to income tax as unitholders are presently entitled to the income of the Schemes, provided the taxable income of the Schemes is fully distributed either by way of cash or reinvestment. The benefit of franking credits and foreign tax credits are passed on to unitholders, providing certain conditions are met. (k) Distributions In accordance with the Schemes' Constitutions, the Schemes distribute their distributable income to unitholders by cash or reinvestment. The distributions are recognised in profit or loss as finance costs attributable to unitholders. (l) Changes in net assets attributable to unitholders Income not distributed is included in net assets attributable to unitholders. Movements in net assets attributable to unitholders are recognised in profit or loss as finance costs attributable to unitholders. (m) Goods and Services Tax ("GST") The GST incurred on the cost of various services provided to the Schemes by third parties such as Responsible Entity's fees, has been passed onto the Schemes. The Schemes qualify for RITC; hence Responsible Entity's fees and other expenses have been recognised in profit or loss net of the amount of GST recoverable from the Australian Taxation Office ("ATO"). Accounts payable are inclusive of GST. The net amount of GST recoverable from the ATO is included in receivables in the balance sheets. Cash flows relating to GST are included in the cash flow statements on a gross basis. -15-

17 For the year ended 2 Summary of significant accounting policies (n) Foreign currency translation Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the date of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translations at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss. Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when fair value was determined. Translation differences on assets and liabilities carried at fair value are reported in profit or loss on a net basis within net gains/(losses) on financial instruments held at fair value through profit or loss. 3 Net gains/(losses) on financial instruments held at fair value through profit or loss Net gains/(losses) arising from changes in the fair value measurement comprise: Perpetual Global Perpetual Industrial APN Unlisted Property Fund Australian Unity Mortgage Income Fund Net unrealised gains/(losses) on financial instruments held for trading Net unrealised gains/(losses) on financial instruments designated at fair value through profit or loss Net realised gains/(losses) on financial instruments held for trading Net realised gains/(losses) on financial instruments designated at fair value through profit or loss Net gains/(losses) on financial instruments held at fair value through profit or loss (7,661) (90,583) (417,577) (289,905) (203,901) (575,412) (7,941) (1,069) 9, (1,191) 131, , , (8,393) (232) (8,852) 41,341 (171,824) 166,537 (203,901) (575,412) (16,334) (35) 1 Stated to the nearest whole dollar as the Scheme does not meet the criteria set out in ASIC Corporations (Rounding in Financial/Directors' Reports) Instrument /

18 For the year ended 4 Other expenses Perpetual Global Perpetual Industrial APN Unlisted Property Fund Australian Unity Mortgage Income Fund Transaction costs - - 6,832 7, Sundry expenses - - 1, Total - - 8,101 7, Distributions to unitholders The distributions for the year were as follows: Perpetual Industrial - Class A CPU CPU Perpetual Industrial - Class B CPU CPU Distributions paid - September Distributions paid - December Distributions paid - March Distributions payable - June Total distributions 3, , , , , , , , , , , , , , , , , , , ,069 1 Stated to the nearest whole dollar as the Scheme does not meet the criteria set out in ASIC Corporations (Rounding in Financial/Directors' Reports) Instrument /

19 For the year ended 5 Distributions to unitholders The distributions for the year were as follows: Perpetual Global CPU CPU APN Unlisted Property Fund CPU CPU Australian Unity Mortgage Income Fund CPU CPU Distributions paid - July Distributions paid - August Distributions paid - October Distributions paid - December Distributions paid - March Distributions paid - May Distributions payable - June Total distributions , , , , , , , , , , , , , , , , , , ,400 1 Stated to the nearest whole dollar as the Scheme does not meet the criteria set out in ASIC Corporations (Rounding in Financial/Directors' Reports) Instrument /

20 For the year ended 6 Net assets attributable to unitholders Movements in the number of units and net assets attributable to unitholders during the year were as follows: Net assets attributable to unitholders Opening balance Applications Redemptions Units issued upon reinvestment of distributions Changes in net assets attributable to unitholders Closing balance Net assets attributable to unitholders Opening balance Applications Changes in net assets attributable to unitholders Closing balance Perpetual Global Units '000 Units '000 Perpetual Industrial Units '000 Units ' , , , ,676 2,936,090 2,782,025 3,318,848 3,425,256 10,372 10,816 12,883 12, ,919 2,832, ,962 1,260,798 (16,594) (193,853) (20,153) (209,497) (1,015,141) (3,476,098) (1,101,732) (1,983,911) 1, , , , , , (8,843) 45, (418,711) (297,615) 121, , , ,209 2,946,736 2,936,090 2,911,148 3,318,848 Units 1 APN Unlisted Property Fund Units 1 Australian Unity Mortgage Income Fund Units 1 Units 1 7,001,752 7,001,741 1,653,383 2,312, , , , , (259,293) (658,893) - - (139,723) (181,614) 7,001,752 7,001,752 1,394,090 1,653, , ,350 94, ,580 As stipulated within the Schemes' Constitutions, each unit represents a right to an individual share in the Schemes and does not extend to a right to the underlying assets of the Schemes. With the exception of Perpetual Industrial, there are no separate classes of units and each unit has the same right attaching to it as all other units of the Schemes. For Perpetual Industrial Share Fund, there are two classes of units in the Scheme - Class A for retail investors and Class B for wholesale investors. 1 Stated to the nearest whole unit/dollar as the Scheme does not meet the criteria set out in ASIC Corporations (Rounding in Financial/Directors' Reports) Instrument /

21 For the year ended 6 Net assets attributable to unitholders Capital risk management The Schemes consider their net assets attributable to unitholders as capital, notwithstanding net assets attributable to unitholders are classified as a liability. The amount of net assets attributable to unitholders can change significantly on a daily basis as the Schemes are subject to daily applications and daily redemptions at the discretion of unitholders with the exception of APN Unlisted Property Fund and Australian Unity Mortgage Income Fund which may return capital to unitholders during the year. Applications and redemptions are reviewed relative to the liquidity of the Schemes' underlying assets on a daily basis by the Responsible Entity. Under the terms of the Schemes' Constitutions, the Responsible Entity has the discretion to reject an application and to defer or adjust a redemption if the exercise of such discretion is in the best interests of unitholders. 7 Financial assets held at fair value through profit or loss Perpetual Global Fair value Perpetual Industrial Fair value APN Unlisted Property Fund 3 Fair value Australian Unity Mortgage Income Fund 3 Fair value Held for trading Options Foreign exchange forward contracts Designated at fair value through profit or loss Equities Unlisted unit trusts Total financial assets held at fair value through profit or loss - - 2,936,209 3,500, , , , ,970 1,344,330 1,548,231 86, , , ,411 3,143,838 3,684,438 1,344,330 1,548,231 86, , , ,411 3,143,841 3,684,520 1,344,330 1,548,231 86, ,175 1 Stated to the nearest whole dollar as the Scheme does not meet the criteria set out in ASIC Corporations (Rounding in Financial/Directors' Reports) Instrument / The Schemes invest in the unlisted unit trusts that were suspended. The responsible entity of the suspended unlisted unit trusts continued to provide daily unit prices, however no trades have been executed at these unit prices outside the redemption windows. The unit prices of the suspended unlisted unit trusts as at are considered to represent the best estimate of fair value. -20-

22 For the year ended 8 Receivables Perpetual Global Perpetual Industrial APN Unlisted Property Fund Australian Unity Mortgage Income Fund Dividends/distributions receivable 1,320 6,071 23,774 26, ,721 41, Interest receivable Applications receivable ,555 2, Other receivables Total receivables 1,397 6,258 26,544 29, ,109 41, Payables Perpetual Global Perpetual Industrial APN Unlisted Property Fund Australian Unity Mortgage Income Fund Responsible Entity's fees payable ,610 1, Redemptions payable ,540 2, Other payables Total payables ,901 3,055 4,674 1, Stated to the nearest whole dollar as the Scheme does not meet the criteria set out in ASIC Corporations (Rounding in Financial/Directors' Reports) Instrument /

23 For the year ended 10 Related party transactions Responsible Entity The Responsible Entity of Perpetual WealthFocus Investment Funds is Perpetual Investment Management Limited (ABN ), a wholly owned subsidiary of Perpetual Limited (ACN ). The Schemes do not employ personnel in their own right. However, they are required to have an incorporated Responsible Entity to manage the activities of the Schemes and this is considered the key management personnel. Key management personnel (a) Directors The directors of Perpetual Investment Management Limited during the financial year or since the end of the year and up to the date of this report are as follows: G Foster (appointed 25 January 2013, Alternate for G Larkins) M Gordon (appointed 28 March 2013, resigned 24 February ) J Hawkins (appointed 6 July 2012) D Kiddie (appointed 24 February ) G Larkins (appointed 7 January 2013) P Lynch (appointed 6 July 2012, Alternate for J Hawkins) P Statham (appointed 24 February, Alternate for D Kiddie) P Statham (appointed 9 September 2013, resigned 24 February, Alternate for M Gordon) D Winterton (appointed 24 February, Alternate for D Kiddie) D Winterton (appointed 20 April, resigned 24 February, Alternate for M Gordon) (b) Other key management personnel There were no other persons with responsibility for planning, directing and controlling the activities of the Schemes, directly or indirectly, during or since the end of the financial year. Key management personnel unitholdings From time to time directors of the Responsible Entity, or their related entities, may invest in or withdraw from the Schemes. These investments or withdrawals are on the same terms and conditions as those entered into by other unitholders of the Schemes. No key management personnel of the Responsible Entity held material interest in the Schemes at the reporting date. -22-

24 For the year ended 10 Related party transactions Transactions with key management personnel Key management personnel services are provided by Perpetual Investment Management Limited and included in the Responsible Entity's fees. There is no separate charge for these services. There was no compensation paid directly by the Schemes to any of the key management personnel during the year. The Schemes have not made, guaranteed or secured, directly or indirectly, any loans to the key management personnel or their related entities at any time during the reporting period. Responsible Entity's fees and other transactions The Responsible Entity s fees are calculated in accordance with the Schemes' Constitutions (as amended). The Responsible Entity s fees comprising of a management fee and expense recoveries are expressed as a percentage of the net asset value of the Schemes. The Responsible Entity's fees rate for each of the Schemes is as follows: Schemes Responsible Entity s fees Management Fee Expenses Recoveries Perpetual Global 2.02% 0.03% Perpetual Industrial - Class A 1.95% 0.03% Perpetual Industrial - Class B nil nil APN Unlisted Property Fund 2.10% 0.00% Australian Unity Mortgage Income 1.60% 0.00% All related party transactions are conducted on normal commercial terms and conditions. The transactions during the year and amounts payable at year end between the Schemes and the Responsible Entity were as follows: Responsible Entity's fees paid and payable directly by the Scheme Fees payable to the Responsible Entity as at reporting date (included in payables) Perpetual Global Perpetual Industrial APN Unlisted Property Fund Australian Unity Mortgage Income Fund 1,458,667 4,134,068 22,236,119 26,012,994 18,541 24,233 1,577 3, , , , ,702 4,610 1,

25 For the year ended 10 Related party transactions Related party unitholdings Parties related to the Schemes (including the Responsible Entity, its related parties and other schemes managed by the Responsible Entity) held units in the Schemes as follows: Number of Number of Distributions paid/payable Number of Number of Distributions paid/payable Perpetual Global Number of Interest units units by the Number of Interest units units by the units held held acquired disposed Scheme units held held acquired disposed Scheme '000 % '000 '000 '000 % '000 '000 Managed Investment Schemes Perpetual Balanced Growth Fund No ,931 - Perpetual WealthFocus Investment Advantage Fund - Perpetual Global Share Option 40, ,398 3, , ,190 5, Perpetual Wholesale Conservative Growth Fund ,042 - Perpetual Wholesale Diversified Growth Fund ,021 - Perpetual Wholesale Split Growth Fund ,058 30,830 - Superannuation Funds Perpetual WealthFocus Superannuation Fund - Perpetual Global Share Pension Option - Perpetual Global Share Super Option Perpetual's Pooled Superannuation Trust - Global Share Option 2, ,417 1, , , , ,181 4, , ,805 5, , , , ,

26 For the year ended 10 Related party transactions Related party unitholdings Parties related to the Schemes (including the Responsible Entity, its related parties and other schemes managed by the Responsible Entity) held units in the Schemes as follows: Perpetual Industrial - Class B Managed Investment Schemes Perpetual Wholesale Industrial Fund Perpetual Wholesale Split Growth Fund Number of units held Interest held Number of units acquired Number of units disposed Distributions paid/payable by the Scheme Number of units held Interest held Number of units acquired Number of units disposed Distributions paid/payable by the Scheme '000 % '000 '000 '000 % '000 '000 2,270, , , ,323 2,254, ,772,969 1,655, ,663 20, ,772 5,614 2,364 19, ,897 3,873 3,406 Perpetual Industrial - Class A Superannuation Fund Perpetual's Pooled Superannuation Trust - Perpetual Industrial Share Option 54, ,750 12,322 8,946 55, ,129 13,234 14,885 APN Unlisted Property Fund Number of units held 1 Distributions Distributions Number of Number of paid/payable Number of Number of paid/payable Interest units units by the Number of Interest units units by the held acquired disposed Scheme units held held acquired disposed Scheme % % Company Perpetual Limited Superannuation Funds Perpetual WealthFocus Superannuation Fund - APN Unlisted Property Pension Option 1,939, ,063 1,939, ,505 - APN Unlisted Property Super Option 2,364, ,666 2,364, ,072 1 Stated to the nearest whole unit/dollar as the Scheme does not meet the criteria set out in ASIC Corporations (Rounding in Financial/Directors' Reports) Instrument /

27 For the year ended 10 Related party transactions Related party unitholdings Parties related to the Schemes (including the Responsible Entity, its related parties and other schemes managed by the Responsible Entity) held units in the Schemes as follows: Australian Unity Mortgage Income Fund Number of units held 1 Interest held Number of units acquired 1 Number of units disposed 1 Distributions paid/payable by the Scheme Number of units held 1 Interest held Number of units acquired 1 Number of units disposed 1 Distributions paid/payable by the Scheme % % Company Perpetual Limited 47, ,676 47, ,321 Superannuation Funds Perpetual WealthFocus Superannuation Fund - Australian Unity Mortgage Income Pension Option 323, , , ,905 - Australian Unity Mortgage Income Super Option 303, , , ,119 1 Stated to the nearest whole unit/dollar as the Scheme does not meet the criteria set out in ASIC Corporations (Rounding in Financial/Directors' Reports) Instrument /

28 For the year ended 10 Related party transactions Investments The Schemes held investments in the following schemes which are also managed by the Responsible Entity or its related parties: Perpetual Global Share Fund Managed Investment Schemes Perpetual Global Share Fund - Class A Perpetual's International Share Pool Fund Perpetual Industrial - Class B Managed Investment Scheme Perpetual Institutional Cash Management Trust Number of Number of Distributions received/ Number of Number of Distributions received/ Number of Fair value of Interest units units receivable by Number of Fair value of Interest units units receivable by units held investment held acquired disposed the Scheme units held investment held acquired disposed the Scheme '000 % '000 '000 '000 % '000 ' , , ,086 18,579 1, , , ,904 4,218 6, , ,209 4,324 Number of Number of Distributions received/ Number of Number of Distributions received/ Number of Fair value of Interest units units receivable by Number of Fair value of Interest units units receivable by units held investment held acquired disposed the Scheme units held investment held acquired disposed the Scheme '000 % '000 '000 '000 % '000 ' , , ,341,959 1,318,300 4, , , ,316,643 1,308,548 6,

29 For the year ended 11 Structured entities A structured entity is an entity that has been designed so that voting or similar rights are not the dominant factor in deciding control, and the relevant activities are directed by means of contractual arrangements. The Schemes consider all investments in unlisted unit trusts to be structured entities. The Schemes invest in unlisted unit trusts for the purpose of capital appreciation and earning investment income. The unlisted unit trusts are managed in accordance with the investment strategy by the respective investment managers. The investment decisions are based on the analysis conducted by the managers. The return of the unlisted unit trusts is exposed to the variability of the performance of the investment strategies. The unlisted unit trusts finance their operations by issuing redeemable units which are puttable at the holder's option and entitle the holder to a proportional stake in the respective trusts' net assets and distributions. The Schemes' interest in unconsolidated structured entities from investing in unlisted unit trusts at the reporting date is disclosed in note 7. The fair value of these entities is included in financial assets held at fair value through profit or loss in the balance sheet. The Schemes' maximum exposure to loss is equal to the total fair value of their investments in these entities as there are no off balance sheet exposures relating to them. The Schemes' exposure to any risk from the structured entities will cease when these investments are disposed of. Unconsolidated subsidiaries The Schemes have determined that they are investment entities under the definition in AASB 10 as they meet the following criteria: (a) The Schemes have obtained funds for the purpose of providing unitholders with investment management services; (b) The Schemes' business purpose, which is communicated directly to unitholders, is investing solely for returns from capital appreciation and investment income; and (c) The performance of investments made through the Schemes are measured and evaluated on a fair value basis. The Schemes also meet all of the typical characteristic of an investment entity. Consequently the Schemes applied the investment entity exception to consolidation and measured their subsidiaries at fair value through profit or loss. -28-

30 For the year ended 11 Structured entities Unconsolidated subsidiaries With the exception of Perpetual Global, no other Schemes are considered to have control in structured entities. Perpetual Global The following table provides information in relation to unconsolidated subsidiaries of the Scheme at the reporting date: Fair value Ownership interest % % Unconsolidated subsidiaries Perpetual Global - Class A 140, , Perpetual's International Share Pool Fund Each of the above subsidiaries is domiciled in Australia. The Schemes do not have current commitments or intentions and contractual obligations to provide financial or other support to the unconsolidated structured entities. There are no loans or advances currently made to these entities. There are no significant restrictions on the ability of an unconsolidated structured entity to transfer funds to the Schemes in the form of cash distributions. 12 Auditor's remuneration During the year the following fees were paid or payable by the Responsible Entity for services provided by the auditor of the Schemes: Audit and audit related services KPMG Total remuneration for audit and audit related services Perpetual Global Perpetual Industrial APN Unlisted Property Fund Australian Unity Mortgage Income Fund 10,582 10,185 21,619 20,855 10,582 10,185 7,906 7,

31 For the year ended 13 Reconciliation of operating profit/(loss) to net cash inflow/(outflow) from operating activities Perpetual Global Perpetual Industrial APN Unlisted Property Fund Australian Unity Mortgage Income Fund (a) Reconciliation of operating profit/(loss) to net cash inflow/(outflow) from operating activities Operating profit/(loss) (Increase)/decrease in dividends/distributions receivable (Increase)/decrease in interest receivable (Increase)/decrease in other receivables Increase/(decrease) in payables Net (gains)/losses on financial instruments held at fair value through profit or loss Net foreign exchange (gains)/losses Net cash inflow/(outflow) from operating activities (b) Components of cash and cash equivalents Cash at the end of the year as shown in the cash flow statements is reconciled to the balance sheets as follows: Cash on hand Future deposits Total cash and cash equivalents (8,609) 47,602 (48,785) 288, , ,107 (16,723) (214) 4,751 (1,792) 2,258 13,488 (59,324) 8,279 (101) (46) (275) (22) (490) (460) 562 2,827 (7,305) (118) (131) 8,852 (41,341) 171,824 (166,537) 203, ,412 16, ,990 4, , , , ,237 (565) , ,607 53,325 65,060 8,367 45, , ,607 53,325 65,060 8,367 45,507 1 Stated to the nearest whole dollar as the Scheme does not meet the criteria set out in ASIC Corporations (Rounding in Financial/Directors' Reports) Instrument /

32 For the year ended 14 Financial risk management The Schemes' investing activities are exposed to a variety of financial risks. These risks include market risk (including currency risk, interest rate risk and price risk), credit risk and liquidity risk. A risk management framework has been established by the Responsible Entity of the Schemes to monitor the Schemes' compliance with their governing documents and to minimise risks in their investment activities. This framework incorporates a regular assessment process to ensure procedures and controls adequately manage investment activities. The investment activities of the Schemes are carried out by the asset managers in accordance with the investment strategy specifically tailored for the Schemes' objectives. The strategy is approved by the Board of Directors of the Responsible Entity, and must comply with any authorised investments and management restrictions specified in the Schemes' Constitutions. The Schemes are permitted to use derivative products. The use of derivatives is considered to be part of the investment management process and is not managed in isolation. This note presents information about the Schemes' exposure to each of the above risks. The Schemes use different methods to measure different types of risks to which they are exposed. These methods include sensitivity analysis in the case of interest rate risk, currency risk and price risk; and credit ratings analysis for credit risk. (a) Market risk Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate due to changes in market prices such as foreign exchange rates, interest rates, equity prices and credit spreads. The Schemes may use derivative instruments to manage their exposure to market risks. However, the use of derivatives is limited to the investment strategy and restrictions specified in the Schemes' governing documents. Perpetual Industrial held foreign exchange forward contracts as at ( : the Scheme held options). (i) Currency risk Schemes that invest in financial instruments denominated in currencies other than the Australian dollar are exposed to currency risk. Currency risk arises as fair value or future cash flows of monetary securities denominated in foreign currency will fluctuate due to changes in exchange rates. The currency risk relating to non-monetary assets and liabilities is a component of price risk not currency risk. However, management monitors the exposures on all foreign currency denominated assets and liabilities. The Schemes may enter into derivative contracts to protect the valuation of financial assets and liabilities against variations in the exchange rates. The Schemes do not designate any derivatives as hedges, and hence these derivative financial instruments are classified at fair value through profit or loss. The Schemes did not have significant exposure to currency risk at the reporting date. -31-

33 For the year ended 14 Financial risk management (a) Market risk (ii) Interest rate risk Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Schemes are exposed to cash flow interest rate risk on financial instruments with floating interest rates. Financial instruments with fixed interest rates expose the Schemes to fair value interest rate risk. The Schemes' exposure to interest rate risk is limited to their cash and cash equivalents, which earn/charge a floating rate of interest. With the exception of the Scheme presented in the table below, interest rate risk is not considered to be significant to the Schemes. The Scheme in the table below is exposed to interest rate risk on its cash holdings. Interest income from cash holdings is received and interest expense from bank overdraft is incurred at variable interest rates. Investments in cash holdings are at call. The weighted average interest rate on cash holdings and bank overdraft as at are as per the table below: Australian Unity Mortgage Income Fund % % Weighted average interest rate Sensitivity analysis The sensitivity analysis estimates the sensitivity of the Schemes' operating profit and net assets attributable to unitholders to interest rate risk. The sensitivity rate is based on management s best estimate of a reasonably possible movement in the interest rates, having regard to historical levels of changes in interest rates. The following table shows the impact of 1% increase in interest rates applicable at reporting date would have on the Schemes' operating profit and net assets attributable to unitholders. This analysis assumes that all variables, in particular foreign currency rates, remain constant. A decrease of 1% would have an equal, but opposite effect to the amounts shown below on the basis that all other variables remain constant. Australian Unity Mortgage Income Fund Impact on operating profit and net assets attributable to unitholders Stated to the nearest whole dollar as the Scheme does not meet the criteria set out in ASIC Corporations (Rounding in Financial/Directors' Reports) Instrument /

34 For the year ended 14 Financial risk management (a) Market risk (iii) Price risk The Schemes are exposed to market price risk predominantly through their investment in equities, unlisted unit trusts and derivatives for which prices in the future are uncertain (other than arising from currency risk or interest rate risk). The Schemes' asset managers aim to manage the impact of market price risk through the use of consistent and carefully considered investment guidelines. Risk management techniques are used in the selection of investments. Investments (including derivatives) are only purchased that meet investment criteria. Risk can be reduced by diversifying investments across several asset managers, markets, regions and different asset classes. At the reporting date, the fair value of the Schemes' investments exposed to price risk was as follows: Perpetual Global Perpetual Industrial APN Unlisted Property Fund Australian Unity Mortgage Income Fund Fair value of investments exposed to price risk 140,913, ,411,317 3,143,838,544 3,684,519,845 1,344,330 1,548,231 86, ,175 Sensitivity analysis The sensitivity analysis estimates the sensitivity of the Schemes' operating profit and net assets attributable to unitholders to market price risk. The sensitivity rate is based on management s best estimate of a reasonably possible movement in the market price, having regard to historical correlation of the Schemes' investment with the relevant benchmark and market volatility. An increase of 15% at the reporting date of the market prices would have increased the Schemes' operating profit and net assets attributable to unitholders by the amounts disclosed in the following tables. A decrease of 15% would have an equal, but opposite effect to the amounts shown below, on the basis that all other variables remain constant. Impact on operating profit and net assets attributable to unitholders Perpetual Global Perpetual Industrial APN Unlisted Property Fund Australian Unity Mortgage Income Fund 21,136,993 22,861, ,575, ,677, , ,235 12,962 28,

35 For the year ended 14 Financial risk management (b) Credit risk Credit risk is the risk that a counterparty will be unable to pay amounts when they fall due. The Schemes are exposed to credit risk on derivative financial instruments, cash and cash equivalents, amounts due from broker and other receivables. (i) Derivative financial instruments The use of derivatives is limited to the investment strategy specifically tailored for the Schemes. Asset managers are only permitted to use derivative financial instruments that meet certain investment criteria. The counterparty risk arising from entering into derivative contracts is minimised by predominantly using exchange traded derivatives (except for currency hedging, contracts for differences, and occasionally, other approved over the counter instruments). The exchange traded derivatives are only executed and cleared through approved members of the exchanges. For over the counter derivatives, minimum credit ratings apply for counterparties at the time of entering into a contract and ISDA agreements. (ii) Cash and cash equivalents The exposure to credit risk for cash and cash equivalents is low as all counterparties have a rating of A or higher (as determined by Standard & Poor's). (iii) Amounts due from brokers All transactions in listed securities are settled/paid for upon delivery using approved brokers. The risk of default is considered low, as delivery of securities sold is only made once the broker has received payment from the counterparty. Payments on securities acquired are only made after the broker has received the securities. The trade will fail if either party fails to meet its obligations. All transactions in unlisted unit trusts are settled/unitised when unit prices are issued. The risk of default is considered low except when the unlisted unit trusts are suspended. (c) Liquidity risk Liquidity risk is the risk that the Schemes will not be able to meet their financial obligations as they fall due. The Perpetual Global and Perpetual Industrial are exposed to daily cash redemptions of redeemable units. The Schemes' investments are considered to be readily realisable. The Schemes primarily hold investments in an active market and can be readily disposed. Only a limited proportion of its assets are held in investments not actively traded on a stock exchange. The APN Unlisted Property Fund and the Australian Unity Mortgage Income Fund are no longer offering redemptions. The Responsible Entity will return capital to unitholders when the Schemes have available cash. -34-

36 For the year ended 14 Financial risk management (c) Liquidity risk In order to manage the Schemes' overall liquidity, asset managers will only purchase securities (including derivatives) which meet the Schemes' investment criteria, including the assessment of saleability in different market conditions. The Schemes' investment strategies generally define a minimum liquidity level for the Schemes which are monitored regularly. The following tables summarise the contractual maturities of financial liabilities, including interest payments where applicable: Perpetual Global Carrying amount Contractual cash flows At call Less than 6 months More than 12 months Carrying amount At call Contractual cash flows Less than 6 months More than 12 months Non-derivative financial liabilities Distributions payable to unitholders of the Scheme ,165-2,165 - Due to brokers - payable for securities purchased Payables Net assets attributable to unitholders 141, , , , Total 142, , , ,209 2,549 - Perpetual Industrial Carrying amount Contractual cash flows At call Less than 6 months More than 12 months Carrying amount At call Contractual cash flows Less than 6 months More than 12 months Non-derivative financial liabilities Distributions payable to unitholders of the Scheme 283, , , ,369 - Due to brokers - payable for securities purchased 17,145-17,145-36,966-36,966 - Payables 2,901-2,901-3,055-3,055 - Net assets attributable to unitholders 2,911,148 2,911, ,318,848 3,318, Total 3,214,510 2,911, ,362-3,835,238 3,318, ,

37 For the year ended 14 Financial risk management (c) Liquidity risk The following tables summarise the contractual maturities of financial liabilities, including interest payments where applicable: APN Unlisted Property Fund Contractual cash flows Carrying amount At call Less than 6 months More than 12 months 31 June Carrying amount At call Contractual cash flows Less than 6 months More than 12 months Non-derivative financial liabilities Distributions payable to unitholders of the Scheme 100, , Payables 4,674-4,674-1,847-1,847 - Net assets attributable to unitholders 1,394, ,394,090 1,653, ,653,383 Total 1,498, ,674 1,394,090 1,655,230-1,847 1,653,383 Australian Unity Mortgage Income Fund Carrying amount At call Contractual cash flows Less than 6 months More than 12 months Contractual cash flows Carrying amount At call Less than 6 months More than 12 months Non-derivative financial liabilities Payables Net assets attributable to unitholders 94,857-94, , ,580 Total 94, , , ,580 (d) Fair value measurement The Schemes classify fair value measurement of their financial assets and liabilities using a fair value hierarchy model that reflects the subjectivity of the inputs used in making the measurements. The fair value hierarchy has the following levels: Inputs that are quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1); Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (level 2); and Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (level 3). 1 Stated to the nearest whole dollar as the Scheme does not meet the criteria set out in ASIC Corporations (Rounding in Financial/Directors' Reports) Instrument /

38 For the year ended 14 Financial risk management (d) Fair value measurement (i) Fair value in an active market (level 1) The fair value of financial assets and liabilities traded in active markets (such as publicly traded derivatives and listed securities) is based on quoted market prices at the end of the reporting period without any deduction for estimated future selling costs. For the majority of financial assets and liabilities, information provided by the quoted market independent pricing services is relied upon for valuation. A financial instrument is regarded as quoted in an active market if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service, or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm's length basis. An active market is a market in which transactions for the financial asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis. Listed securities and exchange traded derivatives are valued at the last traded price. Investments in unlisted unit trusts are recorded at the redemption value per unit as reported by the investment managers of such trusts. (ii) Fair value in an inactive or unquoted market (level 2 and level 3) The fair value of financial assets and liabilities that are not traded in an active market is determined by using valuation techniques. These include the use of recent arm's length transactions, reference to current fair value of a substantially similar other instrument, discounted cash flow techniques, option pricing models or any other valuation technique that provides a reliable estimate of prices obtained in actual market transactions. Where discounted cash flow techniques are used, estimated future cash flows are based on management's best estimates and the discount rate used is a market rate at the end of the reporting period applicable for an instrument with similar terms and conditions. For other pricing models, inputs are based on market data at the end of the reporting period. Some of the inputs to these models may not be market observable and are therefore estimated based on assumptions. The output of a model is always an estimate of approximation of a value that cannot be determined with certainty, and valuation techniques employed may not fully reflect all factors relevant to the positions held. The fair value of derivatives that are not exchange traded is estimated at the amount that would be received or paid to terminate the contract at the end of the reporting period taking into account current market conditions (volatility and appropriate yield curve) and the current creditworthiness of the counterparties. Options are valued with the reference to the quoted prices of the underlying index or share. If there is no liquid market available, the options are valued based on option prices provided by an arm's length broker. These valuations are based on Black-Scholes option pricing models. The fair value of a forward contract is determined as a net present value of estimated future cash flows, discounted at appropriate market rates as at the reporting date. Investments in unlisted unit trusts are recorded at the redemption value per unit as reported by the investment managers of such trusts. APN Unlisted Property Fund and Australian Unity Mortgage Income Fund held investments in unlisted unit trusts that are classified as level 3. The unlisted unit trusts were suspended due to lack of liquidity in the underlying investment portfolio. The valuation technique may use significant unobservable inputs at the underlying asset level. The Schemes obtained fair value prices from the investment manager without significant adjustments and did not calculate any unobservable inputs itself. -37-

39 For the year ended 14 Financial risk management (d) Fair value measurement (ii) Fair value in an inactive or unquoted market (level 2 and level 3) The output of a model is always an estimate or approximation of a value that cannot be determined with certainty, and valuation techniques employed may not fully reflect all factors relevant to the positions held. Valuations are therefore adjusted, where appropriate, to allow for additional factors including liquidity risk and counterparty risk. With the exception of APN Unlisted Property Fund and Australian Unity Mortgage Income Fund, the Schemes did not hold any financial instruments with fair value measurements using significant unobservable (level 3) inputs as at and. The following tables present the Schemes' financial assets and liabilities (by class) measured at fair value according to the fair value hierarchy at the reporting date: Perpetual Global Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total Financial assets Financial assets designated at fair value through profit or loss: Unlisted unit trusts 140, , , ,411 Total 140, , , ,411 Perpetual Industrial Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total Financial assets Financial assets held for trading: Options Foreign exchange forward contracts Financial assets designated at fair value through profit or loss: Equities 2,936, ,936,209 3,500, ,500,468 Unlisted unit trusts 207, , , ,970 Total 3,143, ,143,841 3,684, ,684,

40 For the year ended 14 Financial risk management (d) Fair value measurement The following tables present the Schemes' financial assets and liabilities (by class) measured at fair value according to the fair value hierarchy at the reporting date: APN Unlisted Property Fund Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total Financial assets Financial assets designated at fair value through profit or loss: Unlisted unit trusts - - 1,344,330 1,344, ,548,231 1,548,231 Total - - 1,344,330 1,344, ,548,231 1,548,231 Australian Unity Mortgage Income Fund Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total Financial assets Financial assets designated at fair value through profit or loss: Unlisted unit trusts ,416 86, , ,175 Total ,416 86, , ,175 1 Stated to the nearest whole dollar as the Scheme does not meet the criteria set out in ASIC Corporations (Rounding in Financial/Directors' Reports) Instrument /

41 For the year ended 14 Financial risk management (d) Fair value measurement Transfers between levels The Schemes' policy is to recognise transfers into and transfers out of fair value hierarchy levels at the end of the reporting period. The following table presents the transfers between levels for the years ended and : Perpetual Global Transfers between levels 1 and 2: Unlisted unit trusts Level 1 Level 2 Level 3 Level 1 Level 2 Level (233) On 29 April, the Responsible Entity approved to deregister Perpetual International Share Pool Fund, the underlying unlisted unit trust of Perpetual Global, which was subsequently deregistered on 12 July. As a result, the underlying unlisted unit trust in no longer traded in an active market and therefore transferred to level 2. Apart from the above transfers between levels, there were no other transfers for the years ended and. Fair value measurements using significant unobservable inputs (level 3) The following table presents the movement in level 3 instruments for the years ended and by class of financial instrument: APN Unlisted Australian Unity Property Fund Mortgage Income Fund Unlisted unit trusts Opening balance 1,548,231 2,123, , ,596 Sales - - (86,425) (82,386) Gains/(losses) recognised in profit and loss (203,901) (575,412) (16,334) (35) Closing balance 1,344,330 1,548,231 86, ,175 Total unrealised gains/(losses) for the year included in the statements of comprehensive income for financial assets and liabilities held at the end of the year (203,901) (575,412) (7,941) Stated to the nearest whole dollar as the Scheme does not meet the criteria set out in ASIC Corporations (Rounding in Financial/Directors' Reports) Instrument /

42 For the year ended 15 Offsetting financial assets and financial liabilities Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously. The gross and net positions of financial assets and liabilities that have been offset in the balance sheet are disclosed in the first three columns of the tables below. Apart from the Scheme mentioned in this note, no other Schemes held financial assets or liabilities subject to offsetting arrangements at the reporting date. Effects of offsetting on the balance sheet Related amounts not offset Effects of offsetting on the balance sheet Related amounts not offset Perpetual Industrial Gross amounts Gross amounts set off in the balance sheet Net amounts presented in the balance sheet Amounts subject to master netting arrangements Gross amounts set off in the balance sheet Net amounts presented in the balance sheet Net amounts Gross amounts Net amounts Financial assets Margin accounts Derivative financial instruments Total Master netting arrangement Agreements with derivative counterparties are based on the ISDA Master Agreements. Under the terms of these arrangements, only where certain credit events occur (such as default), the net position owing/receivable to a single counterparty in the same currency will be taken as owing and all the relevant arrangements terminated. As the Schemes do not presently have a legally enforceable right of set-off, these amounts have not been offset in the balance sheet, but have been presented separately in the above table. Amounts subject to master netting arrangements -41-

43 For the year ended 16 Derivative financial instruments A derivative is a financial instrument or other contract which is settled at a future date and whose value changes in response to the change in a specified interest rate, financial instrument price, commodity price, foreign exchange rate, index of prices or rates, credit rating or credit index or other variable. Derivative financial instruments require no initial net investment or an initial net investment that is smaller than would be required for other types of contracts that would be expected to have a similar response to changes in market factors. Derivative transactions include many different instruments such as foreign exchange forward contracts, futures and options. Derivatives are considered to be part of the investment process and the use of derivatives is an essential part of the Schemes' portfolio management. Derivatives are not managed in isolation. Consequently, the use of derivatives is multifaceted and includes: hedging to protect an asset or liability of the Schemes against a fluctuation in market values or to reduce volatility; a substitution for trading of physical securities; and adjusting asset exposures within the parameters set in the investment strategy, and adjusting the duration of fixed interest portfolios or the weighted average maturity of cash portfolios. While derivatives are used for trading purposes, they are not used to gear (leverage) a portfolio. Gearing a portfolio would occur if the level of exposure to the markets exceeds the underlying value of the Schemes. The Schemes held the following derivative instruments during the year: (a) Futures Futures are contractual obligations to buy or sell financial instruments on a future date at a specified price established in an organised market. The futures contracts are collateralised by cash or marketable securities. Changes in futures contracts' values are usually settled net daily with exchange. (b) Options An option is a contractual arrangement under which the seller (writer) grants the purchaser (holder) the right, but not the obligation, either to buy (a call option) or sell (a put option) at or by a set date or during a set period, a specific amount of securities or a financial instrument at a predetermined price. The seller receives a premium from the purchaser in consideration for the assumption of future securities price risk. (c) Foreign exchange forward contracts Foreign exchange forward contracts are primarily used by the Schemes to hedge against currency risks on their non-australian dollar denominated trading securities. The Schemes agree to receive or deliver a fixed quantity of foreign currency for an agreed upon price on an agreed future date. Foreign exchange forward contracts are valued at the prevailing bid price at the end of each reporting period. The Schemes recognise a gain or loss equal to the change in fair value at the end of each reporting period. Risk exposure and fair value measurements Information about the Schemes' exposure to financial risks and the methods and assumptions used in determining fair values is provided in note 14 to the financial statements. The maximum exposure to credit risk at the end of the reporting period is the carrying amount of the derivative financial instruments. -42-

44 For the year ended 17 Events occurring after the reporting period No significant events have occurred since the reporting date which would impact on the financial position of the Schemes disclosed in the balance sheets as at or on the results and cash flows of the Schemes for the year ended on that date. 18 Contingent assets, liabilities and commitments There were no outstanding contingent assets, liabilities or commitments as at and. -43-

45 Directors' declaration For the year ended Directors' declaration In the opinion of the directors of Perpetual Investment Management Limited, the Responsible Entity of Perpetual WealthFocus Investment Funds: (a) the annual financial statements and notes, set out on pages 7 to 43, are in accordance with the Corporations Act 2001, including: (i) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001; and (ii) giving a true and fair view of the Schemes' financial position as at and of their performance for the financial year ended on that date; (b) there are reasonable grounds to believe that the Schemes will be able to pay their debts as and when they become due and payable; and (c) the financial report also complies with International Financial Reporting Standards as discussed in note 2(a). This declaration is made in accordance with a resolution of the directors. Director Sydney 20 September -44-

46 ABCD Independent auditor s report to the unitholders of Perpetual WealthFocus Investment Funds Report on the financial report We have audited the accompanying financial report of Perpetual WealthFocus Investment Funds (the Schemes), which comprises the balance sheets as at, and the statements of comprehensive income, statements of changes in equity and cash flow statements for the year ended on that date, notes 1 to 18 comprising a summary of significant accounting policies and other explanatory information and the directors declaration. Directors responsibility for the financial report The directors of Perpetual Investment Management Limited (the Responsible Entity) are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that is free from material misstatement, whether due to fraud or error. In note 2(a), the directors also state, in accordance with Australian Accounting Standard AASB 101 Presentation of Financial Statements, that the financial statements comply with International Financial Reporting Standards. Auditor s responsibility Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. These Auditing Standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor s judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation of the financial report that gives a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report. We performed the procedures to assess whether in all material respects the financial report presents fairly, in accordance with the Corporations Act 2001 and Australian Accounting Standards, a true and fair view which is consistent with our understanding of the Schemes financial positions and of their performance. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. Liability limited by a scheme approved under Professional Standards Legislation.

47 ABCD Independence In conducting our audit, we have complied with the independence requirements of the Corporations Act Auditor s opinion In our opinion: (a) the financial report of Perpetual WealthFocus Investment Funds is in accordance with the Corporations Act 2001, including: (i) giving a true and fair view of the Schemes financial positions as at and of their performance for the year ended on that date; and (ii) complying with Australian Accounting Standards and the Corporations Regulations (b) the financial report also complies with International Financial Reporting Standards as disclosed in note 2(a). Basis of preparation Without modifying our opinion, we draw attention to note 2(a) of the financial report which describes the basis of preparation. The financial report of Perpetual s Fund 4 (referred to in the annual financial report as APN Unlisted Property Fund) has been prepared on a non-going concern basis. Following a resolution to terminate the Scheme made by the Board of Directors of the Responsible Entity, Perpetual s Fund 4 is no longer considered a going concern. KPMG Michael O Connell Partner Sydney 20 September -46-

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