Macquarie Global Equities Fund ARSN Annual report 30 June 2008

Transcription

1 ARSN Annual report

2 ARSN Annual report Contents Directors' report Auditor's independence declaration Income statements Balance sheets Statements of changes in equity Cash flow statements Directors' declaration Independent auditor's report to the unitholders of Macquarie Global Equities Fund Page This financial report covers Macquarie Global Equities Fund as an individual entity and the consolidated entity consisting of Macquarie Global Equities Fund (formerly Macquarie Lazard Global Equities Fund) and its subsidiaries. The Responsible Entity of Macquarie Global Equities Fund is Macquarie Investment Management Limited (ABN ). The Responsible Entity's registered offce is Level 7, 1 Martin Place, Sydney, NSW

3 Directors' report Directors' report The directors of Macquarie Investment Management Limited (a wholly owned subsidiary of Macquarie Group Limited), the Responsible Entity of Macquarie Global Equities Fund present their report together with the consolidated financial report of Macquarie Global Equities Fund ("the Trust" ) and its controlled entities (collectively, "the consolidated entity") for the year ended. Principal activities The consolidated entity invests in equities instruments, unlisted unit trusts and derivatives in accordance with the provisions of the Trust Constitution. The consolidated entity did not have any employees during the year. There were no significant changes in the nature of the consolidated entity's activities during the year. Directors The following persons held offce as directors of Macquarie Investment Management Limited during the year or since the end of the year and up to the date of this report: B N Terry B Bruck (resigned 18/08/2008) N Roderick P Maher R Cartright V Malley C Vignes (appointed 18/08/2008) Review and results of operations During the year, the Trust continued to invest funds in accordance with target asset allocations as set out in the governing documents of the Trust and in accordance with the provisions of the Trust Constitution. Results The penormance of the Trust, as represented by the results of its operations, was as follows: Operating profitl(loss) before finance costs attributable to unitholders ($'000) Distributions Distribution paid and payable ($'000) Distribution (cents per unit) (37,798) (35,774) 34,317 2, , , , Significant changes in state of affairs In the opinion of the directors, there were no significant changes in the state of affairs of the Trust that occurred during the financial year under review. 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 Trust in future financial years, or (ii) the results of those operations in future financial years, or (iii) the state of affairs of the Trust in future financial years. -2-

4 Directors' report Directors' report Likely developments and expected results of operations The Trust wil continue to be managed in accordance with the investment objectives and guidelines as set out in the governing documents of the Trust and in accordance with the provisions of the Trust Constitution. The results of the Trust's operations will be affected by a number of factors, including the penormance of investment markets in which the Trust invests. Investment penormance is not guaranteed and future returns may differ from past returns. As investment conditions change over time, past returns should not be used to predict future returns. Further information on likely developments in the operations of the Trust and the expected results of those operations have not been included in this report because the Responsible Entity believes it would be likely to result in unreasonable prejudice to the Trust. Indemnification and insurance of officers and auditors No insurance premiums are paid for out of the assets of the Trust in regards to insurance cover provided to either the offcers of Macquarie Investment Management Limited or the auditors of the Trust. So long as the offcers of Macquarie Investment Management Limited act in accordance with the Trust Constitution and the Law, the offcers remain indemnified out of the assets of the Trust against losses incurred while acting on behalf of the Trust. The auditors of the Trust are in no way indemnified out of the assets of the Trust. Fees paid to and interests held in the Trust by the Responsible Entity or its associates Fees paid to the Responsible Entity and its associates out of Trust property during the year are disclosed in note 12 on page 27 of the financial statements. No fees were paid out of Trust property to the directors of the Responsible Entity during the year. The number of interests in the Trust held by the Responsible Entity or its associates as at the end of the financial year are disclosed in note 12 on page 27 of the financial statements. Interests in the Trust The movement in units on issue in the Trust during the year is disclosed in note 7 of the financial statements. The value of the Trust's assets and liabilities is disclosed on the balance sheets and derived using the basis set out in note 2 of the financial statements. Environmental regulation The operations of the Trust are not subject to any particular or significant environmental regulations under a Commonwealth, State or Territory law. Rounding of amounts to the nearest thousand dollars The Trust is an entity of the kind referred to in Class Order 98/0100 (as amended) issued by the Australian Securities and Investments Commission relating to the "rounding off' of amounts in the directors' report. Amounts in the directors' report have been rounded to the nearest thousand dollars in accordance with that Class Order, unless otherwise indicated. Auditor's independence declaration A copy of the Auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 5. This report is made in accordance with a resolution of the directors. -3-

5 Directors' report ~ C.". R Cartright Director Sydney 29 September

6 pmcfw1erhousfßpers I PricewaterhouseCoopers ABN Darling Park Tower Sussex Street GPO BOX 2650 SYDNEY NSW 1171 DX 77 Sydney Australia Telephone Facsimile ww.pwc.com/au Auditor's Independence Declaration As lead auditor for the audit of Macquarie Global Equities Fund for the year ended, I declare that to the best of my knowledge and belief, there have been: a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and b) no contraventions of any applicable code of professional conduct in relation to the audit. This declaration is in respect of Macquarie Global Equities Fund and the entities it controlled during the year. ~Craig Stafford Partner PricewaterhouseCoopers Sydney 29 September 2008 Liabilty limited by a scheme approved under Professional Standards Legislation

7 Income statements For the year ended Income statements Notes Investment income Interest income from financial assets not held at fair value through profi or loss Dividend income 4,512 3,642 1,147 Distribution income 3 1,026 5,017 Other operating income , Net gains/(iosses) on financial instruments held at fair value through profi or loss 5 (39,878) (38,693) 27,319 Total net investment income/(ioss) (35,301) (35,773) 34,324 Expenses Responsible entity's fees 12 1,930 1,158 Withholding taxes on foreign dividends and interest 555 Other operating expenses Total operating expenses 2,497 1, Operating profit/(ioss) (37,798) 33,915 (35,774) 34,317 Finance costs attributable to unitholders Distributions to unitholders of the parent entity (2,070) (14,110) (2,070) (14,109) Distributions to minority interests (28) (79) (Increase)/decrease in net assets attributable to unitholders of the parent entity 7 37,844 (19,623) 37,844 (20,208) (Increase)/decrease in net assets attributable to minority interests 2,052 (103) Profit/(Ioss) for the year The above income statements should be read in conjunction with the accompanying notes. -6-

8 Balance sheets As at Balance sheets Notes Assets Cash and cash equivalents 8 1,985 15,496 2,802 Due from brokers - receivable for securities sold 8,879 2,359 Receivables Financial assets held at fair value through profit or loss 9 286, , , ,053 Total assets 297, , , ,988 Liabilties Distributions payable Due to brokers - payable for securities purchased 3,364 5,322 Payables Bank overdrafts 8 2,639 2,639 Responsible entity fees payable Financial liabilities held at fair value through profit or loss ,819 62,127 52,625 47,120 Net assets attributable to minority interests (redemption price of units) 3,325 1,966 Total liabilities (excluding net assets attributable to unitholders of the parent entity) 179,386 70,080 55,337 47,131 Net assets attributable to unitholders of the parent entity - liabilty 7 118, , , ,857 The above balance sheets should be read in conjunction with the accompanying notes. -7-

9 Statements of changes in equity For the year ended Statements of changes in equity Total equity at the beginning of the financial year Profitl(loss) for the year Total recognised income and expense for the financial year Transactions with equity holders in their capacity as equity holders. Distributions to equity holders Total equity at the end of the financial year Under AI FRS, net assets attributable to unitholders are classified as a liability rather than equity. As a result there was no equity at the start or end of the year. The above statements of changes in equity should be read in conjunction with the accompanying notes -8-

10 Cash flow statements For the year ended Cash flow statements Notes Cash flows from operating activities Proceeds from sale of financial 1,316, ,445 11, ,988 instruments held at fair value through profi or loss Purchase of financial instruments held at fair value through profi or loss (1,328,848) (415,031) (15,771) (198,367) Dividends received 4,117 3,606 1,026 1,549 Interest received Fee rebates received 624 2, Other income received Responsible entity's fees (1,918) (624) received/(paid) Payment of other expenses (337) (8) (3) Net cash inflow/(outflow) from 13(a) (10,870) 42,161 (958) 26,931 operating activities Cash flows from financing activities Proceeds from applications by unitholders 23, ,459 23, ,033 Payments for redemptions by unitholders (28,594) (168,193) (28,145) (168,198) Distributions paid (11 ) (11 ) Net cash inflow/(outflow) from financing activities (5,271) (29,734) (4.483) (27,165) Net increase/(decrease) in cash and cash equivalents (16,141) 12,427 (5,441) (234) Cash and cash equivalents at the beginning of the year 15,496 3,067 2,802 3,067 Effects of foreign currency exchange rate changes on cash and cash equivalents (9) 2 (31) Cash and cash equivalents at the end of the year 8(a) (654) 15,496 (2,639) 2,802 Non-cash financing activities 13(b) 2,069 14,098 2,069 14,098 The above cash flow statements should be read in conjunction with the accompanying notes. -9-

11 1 General information This financial report includes separate financial statements for Macquarie Global Equities Fund ("the Trust") as an individual entity and the consolidated entity consisting of Macquarie Global Equities Fund (formerly Macquarie Lazard Global Equities Fund) and its subsidiaries. The Trust was constituted on 2 March The Responsible Entity of the Trust is Macquarie Investment Management Limited (the "Responsible Entity"). The Responsible Entity's registered offce is Level 7, 1 Martin Place, Sydney, NSW The financial report is presented in Australian currency. During the year, the Trust continued to invest funds in accordance with target asset allocations as set out in the current offer document and in accordance with the provisions of the Trust Constitution. The financial statements were authorised for issue by the directors on 29 September The directors of the Responsible Entity have the power to amend and reissue the financial report. 2 Summary of significant accounting policies The principal accounting policies applied in the preparation of these financial statements 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 financial report has been prepared in accordance with Australian Accounting Standards, other authoritative pronouncements of the Australian Accounting Standards Board, Urgent Issues Group Interpretations and the Corporations Act 2001 in Australia. The financial report is prepared on the basis of fair value measurement of assets and liabilties except where otherwise stated. Compliance with International Financial Reporting Standards (ffrs) Australian Accounting Standards include Australian equivalents to International Financial Reporting Standards (AIFRS). Compliance with AIFRS ensures that the financial report of the Trust, comprising the financial statements and notes thereto, complies with International Financial Reporting Standards. (b) Principles of consolidation (i) Subsidiaries The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Macquarie Global Equities Fund ("the parent entity") as at and the results of all subsidiaries for the year then ended. Macquarie Global Equities Fund and its subsidiaries together are referred to in this financial report as the consolidated entity. Subsidiaries are all those entities (including special purpose entities) over which the Trust has the power to govern the financial and operating policies, generally accompanying a shareholding of more than one-half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Trust controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Trust. They are deconsolidated from the date that control ceases. The purchase method of accounting is used to account for the acquisition of subsidiaries by the Trust. All transactions (including gains and losses) and balances between entities in the consolidated group are eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Trust. Minority interests in the results and net assets of subsidiaries are shown separately in the consolidated income statements and balance sheets respectively. -10-

12 2 Summary of significant accounting policies (c) Financial instruments (i) Classifcation The Trust's investments are categorised as at fair value through profi or loss. They comprise:. Financial instruments held for trading These include derivative financial instruments including forward contracts. The Trust does not designate any derivatives as hedges in a hedging relationship.. Financial instruments designated at fair value through profi 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 exchange traded equity instruments and unlisted trusts. Financial assets and financial liabilities designated at fair value through profi or loss at inception are those that are managed and their penormance evaluated on a fair value basis in accordance with the Trust's documented investment strategy. The Trust's policy is for the Responsible Entity to evaluate the information about these financial assets on a fair value basis together with other related financial information. Loans and receivables/payables comprise amounts due to or from the Trust. (ii) Recognition/derecognition The Trust recognises financial assets and financial agreement (trade date) and recognises changes in fair value of the financial assets or financial date. liabilities on the date it becomes part to the contractual liabilties from this Investments are derecognised when the right to receive cashflows from the investments has expired or the Trust has transferred substantially all risks and rewards of ownership. (ii) Measurement (a) Financial assets and liabilities held at fair value through profit or loss Financial assets and liabilities held at fair value through profi or loss are measured initially at fair value excluding any transaction costs that are directly attributable to the acquisition or issue of the financial asset or financial liability. Transaction costs on financial assets and financial liabilties at fair value through profit or loss are expensed immediately. Subsequent to initial recognition, all instruments held at fair value through profi or loss are measured at fair value with changes in their fair value recognised in the income statements.. Fair value in an active market The fair value of financial assets and liabilities traded in active markets is based on their quoted market prices at the balance sheets date without any deduction for estimated future sellng costs. Financial assets are priced at current bid prices, while financial liabilties are priced at current asking prices.. Fair value in an inactive or unquoted market The fair value of derivatives that are not exchange-traded is estimated at the amount that the Trust would receive or pay to terminate the contract at the balance sheets date taking into account current market conditions (volatility and appropriate yield curve) and the current creditworthiness of the counterparties. 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 valuation date. The fair value of an option contract is determined by applying the Black- Scholes option valuation model. (b) Loans and receivables Loan assets are measured initially at fair value plus transaction costs and subsequently amortised using the effective interest rate method, less impairment losses if any. Such assets are reviewed at each balance sheets date to determine whether there is objective evidence of impairment for example when there has been a significant or prolonged decline in the fair value below carrying amount. -11-

13 2 Summary of significant accounting policies (c) Financial instruments If any such indication of impairment exists, an impairment loss is recognised in the income statements as the difference between the asset's carrying amount and the present value of the revised estimated future cash flows discounted at the original effective interest rate. If in a subsequent period the amount of an impairment loss recognised on a financial asset carried at amortised cost decreases and the decrease can be linked objectively to an event occurring after the write-down, the writedown is reversed through the income statements. (d) Investments in subsidiaries Investments in subsidiaries are measured in accordance with note 2(c). (e) Business combinations Business combinations relate to the acquisition by the Trust of controllng interests in other entities. The purchase method of accounting is used to account for all business combinations, including business combinations involving entities or businesses under common control, regardless of whether equity instruments or other assets are acquired. Cost is measured as the fair value of the consideration given plus costs directly attributable to the acquisition. (f) Net assets attributable to unitholders Units are redeemable at the unitholders' option and are therefore classified as financial liabilities. The units can be put back to the Trust at any time for cash based on the redemption price. The fair value of redeemable units is measured at the redemption amount that is payable (based on the redemption unit price) at the balance sheets date if unitholders exercised their right to put the units back to the Trust. (g) Cash and cash equivalents For cash flow statements presentation purposes, cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short term, highly liquid investments with original maturities of three months or less 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 separately on the balance sheets. Payments and receipts relating to the purchase and sale of investment securities are classified as cash flows from operating activities, as movements in the fair value of these securities represent the Trust's main income generating activity. (h) Investment income Dividend income is recognised on the ex-dividend date with any related foreign withholding tax recorded as an expense. Trust distributions are recognised on an entitlements basis. (i) Expenses All expenses, including Responsible Entity's fees and custodian fees, are recognised in the income statements on an accruals basis. -12-

14 2 Summary of significant accounting policies m Incometax Under current legislation, the Trust is not subject to income tax provided the taxable income of the Trust is fully distributed either by way of cash or reinvestment (ie unitholders are presently entitled to the income of the Trust). Financial instruments held at fair value may include unrealised capital gains. Should such a gain be realised, that portion of the gain that is subject to capital gains tax wil be distributed so that the Trust is not subject to capital gains tax. Realised capital losses are not distributed to unitholders but are retained in the Trust to be offset against any realised capital gains. If realised capital gains exceed realised capital losses, the excess is distributed to unitholders. The benefis of imputation credits and foreign tax paid are passed on to unitholders. (k) Distributions In accordance with the Trust Constitution, the Trust distributes its distributable (taxable) income, and any óther amounts determined by the Responsible Entity, to unitholders by cash or reinvestment. The distributions are recognised in the income statements as finance costs attributable to unitholders. (I) Increase/decrease 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 the income statements as finance costs. (m)foreign currency translation i) Functional and presentation currency Items included in the Trust's financial statements are measured using the currency of the primary economic environment in which it operates (the "functional currency"). This is the Australian dollar, which reflects the currency of the economy in which the Trust competes for funds and is regulated. The Australian dollar is also the Trust's presentation currency. ii) Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates 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 liabilties denominated in foreign currencies are recognised in the income statements. The Trust does not isolate that portion of gains or losses on securities and derivative financial instruments that are measured at fair value through profi or loss and which is due to changes in foreign exchange rates from that which is due to changes in the market price of securities. Such fluctuations are included with the net gains or losses on financial instruments at fair value through profit or loss. (n) Due from/to brokers Amounts due from/to brokers represent payables for securities purchased and receivables for securities sold that have been contracted for but not yet delivered by the end of the year. A provision for impairment of amounts due from brokers is established when there is objective evidence that the Trust wil not be able to collect all amounts due from the relevant broker. Significant financial diffculties of the broker, probability that the broker will enter bankruptcy or financial reorganisation, and default in payments are considered indicators that the amount due from brokers is impaired. -13-

15 2 Summary of significant accounting policies (0) Accrued income Accrued income may include amounts for dividends, trust distributions and interest. Dividends and trust distributions are accrued when the right to receive payment is established. Interest is accrued at the reporting date from the time of last payment. Amounts are generally received within 30 days of being recorded as receivables. (p) Receivables Receivables may include amounts for dividends, interest and trust distributions. Dividends and trust distributions are accrued when the right to receive payment is established. Interest is accrued at the reporting date from the time of last payment in accordance with the policy set out in note 2(h) above. Amounts are generally received within 30 days of being recorded as receivables. Receivables include such items as RITC and application monies receivable from unitholders. (q) Payables Payables includes liabilities and accrued expenses owing by the Trust which are unpaid as at balance date. The distribution amount payable to unitholders as at the reporting date is recognised separately on the balance sheets when unitholders are presently entitled to the distributable income under the Trust's Constitution. (r) Applications and redemptions Applications received for units in the Trust are recorded net of any entry fees payable prior to the issue of units in the Trust. Redemptions from the Trust are recorded gross of any exit fees payable after the cancellation of units redeemed. (s) Goods and Services Tax (GST) The GST incurred on the costs of various services provided to the Trust by third parties such investment management fees have been passed onto the Trust. The Trust qualifies for Reduced Input Tax Credits (RITC) at a rate of 75% hence investment management fees, custodial fees and other expenses have been recognised in the TO). Accounts income statements net of the amount of GST recoverable from the Australian Taxation Offce (A 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. (t) Use of estimates The Trust makes estimates and assumptions that affect the reported amounts of assets and liabilities within the next financial year. Estimates are continually evaluated and based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. For the majority of the Trust's financial instruments, quoted market prices are readily available. However, certain financial instruments, for example, over-the-counter derivatives or unquoted securities are fair valued using valuation techniques. Where valuation techniques (for example, pricing models) are used to determine fair values, they are validated and periodically reviewed by experienced personnel of the Responsible Entity, independent of the area that created them. Models are calibrated by back-testing to actual transactions to ensure that outputs are reliable. Models use observable data, to the extent practicable. However, areas such as credit risk (both own and counterparty), volatilities and correlations require management to make estimates. Changes in assumptions about these factors could affect the reported fair value of financial instruments. -14-

16 2 Summary of significant accounting policies (u) New accounting standards and interpretations Certain new accounting standards and interpretations have been published that are not mandatory for 30 June 2008 reporting periods. The directors' assessment of the impact of these new standards (to the extent relevant to the Trust) and interpretations is set below: (i) AASB 8 Operating Segments and AASB Amendments to Australian Accounting Standards arising from AASBB AASB 8 and AASB are effective for annual reporting periods beginning on or after 1 January The Trust has not adopted these standards early. Application of these standards wil not affect any of the amounts recognised in the financial statements, but may affect the segment disclosures provided in note 14. (ii) Revised AASB 101 Presentation of Financial Statements and AASB Amendments to Australian Accounting Standards arising from AASB 101. AASB 101 (Revised) is applicable to annual reporting period beginning on or after 1 January The Trust has not adopted this standard early. It requires the presentation of a statement of comprehensive income and makes changes to the statement of changes in equity wil not affect any of the amounts recognised in the financial statements. If the Trust makes a prior period adjustment or re-classifies items in the financial statement, it will need to disclose a third balance sheet (statement of financial position), this one being at the beginning of the comparative period. (iii) AASB 132 Financial Instruments: Presentation and AASB Amendments to Australian Accounting Standards - Puttable Financial Instruments and Obligations Arising on Liquidation (Revised AASB 132). Revised AASB 132 is applicable for reporting periods beginning on or after 1 January The Trust has not adopted this standard early. Application of this standard wil not affect any of the amounts recognised in the financial statements as the Trust is obligated to distribute all of its taxable income in accordance with the Trust's Constitution. Accordingly, there wil be no change to classification of unitholders' funds as a liability and therefore no impact on profi or loss and equity. (v) Rounding of amounts The Trust is an entity of the kind referred to in Class Order 98/0100 (as amended), issued by the Australian Securities and Investments Commission, relating to the "rounding off' of amounts in the financial report. Amounts in the financial report have been rounded off to the nearest thousand dollars in accordance with that Class Order, unless otherwise indicated. (w) Segment reporting A business segment is identified for a group of assets and operations engaged in providing products or services that are subject to risks and returns that are different to those of other business segments. A geographical segment is identified when products or services are provided within a particular economic environment subject to risks and returns that are different from those of segments operating in other economic environments. 3 Financial risk management (a) Strategy in using financial instruments The consolidated entity and Trust's activities expose it to a variety of financial risks: market risk (including price risk), credit risk and liquidity risk. Entity The consolidated entity's financial risk is managed by the Investment Manager of the individual unit trusts within the consolidated entity. No other risk management occurs for the consolidated entity. Entity -15-

17 3 Financial risk management 3 Financial risk management The Trust's overall risk management programme focuses on ensuring compliance with the Trust's Product Disclosure Statement and seeks to maximise the returns derived for the level of risk to which the Trust is exposed. (b) Market risk (i) Price risk All securities investments present a risk of loss of capital. The Investment Manager moderates this risk through a careful selection of securities and other financial instruments within specified limits. The maximum risk resulting from financial instruments is determined by the fair value of the financial instruments. The Trust's overall market positions are monitored on a daily basis by the Trust's Investment Manager.Summarised below is the impact of an increase/decrease of the MSCI All Country World Index ex Australia on the Trust's net assets attributable to unitholders at. The analysis is based on the assumptions that the index increased/decreased by 15% ( %) with all other variables held constant and that the fair value of the Trust's portolio of equity securities and derivatives moved according to the historical correlation with the index. The impact mainly arises from the possible change in the fair value of listed equities, unlisted unit trusts and equity derivatives. In accordance with the underlying Trust's policy, the risk management department of the Trust's Investment Manager monitors the Trust's overall market price sensitivity on a daily basis. This is done by: - Not permitted to limit exposure to market risk - Ensure the portolio is fully invested to minimise cash drag - Manage exposure to any single country and ensure diversification across multiple countries - Manage exposure to non index stocks to ensure fund is tracking its benchmark within permitted limits - Manage number of securities to ensure diversification across multiple stocks - Manage exposure to any single sector and any single stock to ensure diversificationi across all sectors The consolidated entity and underlying Trust's investments are susceptible to market price risk arising from uncertainties about future prices of securities. At, the underlying Trust's market risk is affected by changes in market prices. If the MSCI World Ex Australia Hedged at had increased by 15% with all other variables held constant, this would have increased net assets attributable to unitholders by approximately AUD 17,765, (2007: AUD 23,828,400). Conversely, if the MSCI World Ex Australia Hedged at had decreased by 15% with all other variable held constant, this would have decreased net assets attributable to unitholders by approximately AUD 17,765, (2007: AUD 23,828,400). At, the consolidated entity's market risk is affected by changes in market prices. If the MSCI World Ex Australia Hedged at had increased by 15% with all other variables held constant, this would have increased net assets attributable to unitholders by approximately AUD 17,765, (2007: AUD 23,828,400). Conversely, if the MSCI World Ex Australia Hedged at had decreased by 15% with all other variable held constant, this would have decreased net assets attributable to unitholders by approximately AUD 17,765, (2007: AUD 23,828,400). (ii) Foreign exchange risk The Trust has exposure to both monetary and non-monetary assets denominated in currencies other than the Australian dollar. The foreign exchange risk relating to non-monetary assets and liabilities is a component of price risk. Foreign exchange risk arises as the value of monetary securities denominated in other currencies wil fluctuate due to changes in exchange rates. The risk is measured using sensitivity analysis. To reduce risk due to movements in foreign currency prices for investors who do not wish to be exposed to this risk, the fund hedge foreign exchange risks back to AUD. The table below summarises the Trust's assets and liabilities -16-

18 -17-

19 3 Financial risk management (b) Market risk Australian Japanese British Other 30 June 2007 Dollars US Dollars Euro Yen Pounds currencies Total A$'OOO A$'OOO A$'OOO A$'OOO A$'OOO A$'OOO A$'OOO Cash and cash equivalents 11,135 3, ,496 Due from brokers - receivable for securities sold 473 1, ,359 Financial assets held at fair value through profi or loss 46,689 65,987 33,250 4,406 15,910 44, ,468 Fee rebates receivable Dividend Receivable Other assets ,995 70,652 35,060 4,510 16,065 44, ,936 Due to brokers - payable for securities purchased (3,925) (283) (353) (205) (556) (5,322) Financial liabilities held at fair value through profi or loss (26,706) (11,603) (5,287) (4,985) (13,546) (62,127) Distribution payable (89) (89) Responsible Entity Fee payable (571) (571) Interest payable (5) (5) Net asset attributable to Minority Interest (1,966) (1,966) 55,364 40,021 23,174 (U30) 10,875 30, ,856 Australian Japanese British Other 30 June 2007 Dollars US Dollars Euro Yen Pounds currencies Total A$'OOO A$'OOO A$'OOO A$'OOO A$'OOO A$'OOO A$'OOO Cash and cash equivalents 2,802 2,802 Financial assets held at fair value through profi or loss 203, ,053 Fee rebates receivable , ,988 Financial liabilties held at fair value through profi or loss (26,706) (10,146) (5,283) (4,985) (47,120) Distribution payable (10) (10) Payables (1 ) (1 ) 205,977 (26,706) (10,146) (5,283) (4,985) 158,

20 3 Financial risk management (b) Market risk (ii) Interest rate risk The majority of the Trust's financial assets and liabilities are non-interest bearing. As a result, the Trust is not subject to significant amounts of risk due to fluctuations in the prevailing levels of market interest rates. Any excess cash and cash equivalents are invested at short-term market interest rates. (c) Foreign Exchange sensitivity analysis The following table summarises the sensitivity of the Trust's operating profit and net assets attributable to unitholders to foreign exchange risk. The reasonably possible movements in the risk variables have been determined based on management's best estimate, having regard to a number of factors, including historical levels of changes in foreign exchange rates and market volatilty. However, actual movements in the risk variables may be greater or less than anticipated due to a number of factors, including unusually large market shocks resulting from changes in the penormance of the economies, markets and securities in which the fund invests. As a result, historic variations in risk variables are not a definitive indicator of future variations in the risk variables. -15% USD $' June 2007 Foreign exchange risk Impact on operating profit/net assets (19,223) (10,598) -15% USD $' June 2007 (d) Credit risk Credit risk arises from the Trust's investment in underlying trusts. attributable to unitholders +15% - 15% USD Euro 19,223 (4,851) 10,598 (5,259) Foreign exchange risk. Impact on operating profit/net assets (345) attributable to unitholders +15% - 15% USD Euro 345 (199) Other credit risk arises from cash and cash equivalents, deposits with banks and other financial institutions and amounts due from brokers. None of these assets are impaired nor past due but not impaired. The Trust restricts its exposure to credit losses on cash and cash equivalents by ensuring the find only deals with highly rated counterparies and managing exposure with FX counterparties. In accordance with the Trust's policy, the risk management area of the Investment Manager monitors the Trust's credit position on a daily basis. The Compliance Committee of the Responsible Entity reviews any identified exceptions to internal risk policies and procedures on a quarterly basis. (e) Liquidity risk +15% Euro $'000 (4,851) (5,259) +15% Euro $'000 The Trust is exposed to daily cash redemptions of redeemable shares. It therefore invests the majority of its assets in investments that are traded in an active market and can be readily disposed of; it invests only a limited proportion of its assets in investments not actively traded on a stock exchange

21 3 Financial risk management (e) Liquidity risk In accordance with the Trust's policy, the risk management area of the Investment Manager monitors the Trust's liquidity position on a daily basis. This is managed by ensuring provisions are in place to manage liquidity obligations for all unitholders. The Compliance Committee of the Responsible Entity reviews any identified exceptions to internal risk policies and procedures on a quarterly basis. Redeemable units are redeemed on demand at the holder's option. All other liabilties are payable within 30 days. At Financial liabilities at fair value through profi or loss Net settled derivatives Total financial liabilities Less than 1 month 1-6 months 6-12 months $' , ,194 52,625 52,625 At 30 June 2007 Financial liabilities at fair value through profi or loss Net settled derivatives Total financial liabilities 15,007 15,007 47,120 47,120 (f) Fair value estimation The carrying amounts of the Trust's assets and liabilities at the balance sheet date approximate their fair values. Financial assets and liabilities held at fair value through profit or loss are measured initially at fair value excluding any transaction costs that are directly attributable to the acquisition or issue of the financial asset or financial liabilty. Transaction costs on financial assets and financial liabilities at fair value through profi or loss are expensed immediately. Subsequent to initial recognition, all instruments held at fair value through profi or loss are measured at fair value with changes in their fair value recognised in the income statement.. Fair value in an active market The fair value of financial assets and liabilities traded in active markets is based on their quoted market prices at the balance sheets date without any deduction for estimated future sellng costs. Financial assets are priced at liabilities are priced at current asking prices. current bid prices, while financial. Fair value in an inactive or unquoted market The fair value of derivatives that are not exchange traded is estimated at the amount that the Trust would receive or pay to terminate the contract at the balance sheets date taking into account current market conditions (volatility and appropriate yield curve) and the current creditworthiness of the counterparties. 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 valuation date. The fair value of an option contract is determined by applying the Black Scholes option valuation model. Investments in other unlisted unit trusts are recorded at the redemption value per unit as reported by the managers of such funds. 4 Auditor's remuneration During the year the following fees were paid or payable for services provided by the auditor of the Trust: -20-

22 4 Auditor's remuneration $ $ $ $ Audit services PricewaterhouseCoopers Australian firm Audit and review of financial reports Other audit work under the Corporations Act 15,763 14,906 6,959 4, , ,715 Other 1A54 Total remuneration for audit services 19,193 15,836 8,674 6,174 Audit fees are paid out of the Responsible Entity's own resources. All other expenses are paid by the Trust. 5 Net gains/(iosses) on financial instruments held at fair value through profit or loss Net gains/(iosses) recognised in relation to financial assets and financial loss: liabilities held at fair value through profi or Net unrealised gain/(ioss) on financial instruments designated as at fair value through profit or loss Net realised gainlloss on Financial Instruments held for trading Net realised gain/(ioss) on financial instruments designated as at fair value through profi or loss Net gains/(iosses) on financial assets held at fair value through profi or loss (24,585) (13,623) (1,670) (39,878) (2,509) 33,095 30,586 (33,323) (3,601 ) (1,769) (38,693) (2,932) 30,251 27,319 Realised and unrealised gains and losses are recognised on a weighted average cost basis. 6 Other operating expenses Sundry Net assets attributable to unitholders of the parent Movements in number of units and net assets attributable to unitholders of the parent during the year were as follows: As stipulated within the Trust Constitution, each unit represents a right to an individual share in the Trust and does not extend to a right to the underlying assets of the Trust. There are no separate classes of units and each unit has the same rights attaching to it as all other units of the Trust. -21-

23 7 Net assets attributable to unitholders of the parent Opening balance Applications Redemptions Units issued upon reinvestment of distributions Increase/(decrease) in net assets attributable to unitholders Closing balance 30 June 2008 No. '000 Liability 132,955 20,166 (24,460) 2, , No. '000 $'000 Liability Liabilty 143, , ,494 23,672 (141,343) (28,145) 11,828 2, ,955 (37,844) 118, June 2007 $'000 Liability 151, ,033 (168,198) 14,098 20, ,857 The Trust manages its 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 Trust is subject to daily applications and redemptions at the discretion of unitholders. The Trust monitors the level of daily applications and redemptions relative to the liquid assets (assets that can be liquidated within one day) in the Trust. 8 Cash and cash equivalents Cash at bank Money market instruments 1,985 1,985 8,000 7, ,802 2,802 (a) Reconcilation to cash at the end of the year The above figures are reconciled to cash at the end of the financial year as shown in the cash flow statement as follows: Balances as above Bank overdrafts Balances per cash flow statement 1,985 (2,639) (654) 15, (2,639) (2,639) 2,802 2,802 9 Financial assets held at fair value through profit or loss Notes Fair value Fair value Fair value Fair value Held for trading Derivatives (note 11) Total held for trading , ,967 61,677 61,677 53,597 53,597 46,690 46,

24 9 Financial assets held at fair value through profit or loss Designated at fair value through profit or loss Equity securities Unlisted unit trusts Total designated at fair value through profit or loss Total financial assets held at fair value through profit or loss Notes Fair value Fair value Fair value Fair value Equity securities International equity securities listed on a prescribed stock exchange Total equity securities 115, , , ,791 Notes Fair value Fair value Fair value Fair value Derivatives Foreign currency forward contracts Total derivatives 170, ,967 61,677 61,677 53,597 53,597 46,690 46,690 Notes Fair value Fair value Fair value Fair value Unlisted unit trusts Units in International equity trusts Total unlisted unit trusts 120, , , ,363 Total financial assets held at fair value through profit or loss 286, , , ,053 An overview of the risk exposures relating to financial assets at fair value through profi or loss is included in note

25 10 Financial liabilties held at fair value through profit or loss Fair value Fair value Fair value Fair value Held for trading Derivatives (note 11) Total held for trading 169, ,819 62, , Total financial liabilities held at fair value through profit or loss 169,819 62,127 52,625 47,120 Fair value Fair value Fair value Fair value Derivatives Foreign currency forward contracts 169, Total derivatives 169, ,120 Total financial liabilities held at fair value through profit or loss 169,819 62,127 52,625 47,120 An overview of the risk exposures relating to financial 3. liabilties at fair value through profi or loss is included in note 11 Derivative financial instruments In the normal course of business the Trust enters into transactions in various derivative financial instruments with certain risks. 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 a wide assortment of instruments, such as forwards, futures and options. Derivatives are considered to be part of the investment process. The use of derivatives is an essential part of the Trust's portolio 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 Trust against a fluctuation in market values or to reduce volatility. a substitution for trading of physical securities. 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 portolios. The Trust holds the following derivative instruments: (a) Forward currency contracts -24-

26 11 Derivative financial instruments Forward currency contracts are primarily used by the Trust to hedge against foreign currency exchange rate risks on its non-australian dollar denominated trading securities. The Trust agrees to receive or deliver a fixed quantity of foreign currency for an agreed upon price on an agreed future date. Forward currency contracts are valued at the prevailing bid price at the reporting date. The Trust recognises a gain or loss equal to the change in fair value at the reporting date. The Trust's derivative financial instruments at year-end are detailed below: Contract/ notional '000 Fair Assets $'000 Values Liabilties $'000 Buy Foreign currency forward contracts - AUD Foreign currency forward contracts - CAD Foreign currency forward contracts - CHF Foreign currency forward contracts - CZK Foreign currency forward contracts - DKK Foreign currency forward contracts - EUR Foreign currency forward contracts - GBP Foreign currency forward contracts - HKD Foreign currency forward contracts - JPY Foreign currency forward contracts - NOK Foreign currency forward contracts - NZD Foreign currency forward contracts - SEK Foreign currency forward contracts - SGD Foreign currency forward contracts - USD 57,133 3,356 8,121 3,248 10,330 10,264 3,228 28,199 1,037,339 3, ,282 6,713 56,994 53,090 3,423 8, ,248 16,619 6,585 3,750 10, ,420 5,132 58, ,967 Sell Foreign currency forward contracts - AUD Foreign currency forward contracts - CAD Foreign currency forward contracts - CHF Foreign currency forward contracts - DKK Foreign currency forward contracts - EUR Foreign currency forward contracts - GBP Foreign currency forward contracts - HKD Foreign currency forward contracts - JPY Foreign currency forward contracts - NOK Foreign currency forward contracts - NZD Foreign currency forward contracts - SEK Foreign currency forward contracts - SGD Foreign currency forward contracts - USD (5,098) (3,220) (4,633) (7,874) (14,678) (7,834) (61,061 ) (1,178,976) (3,421) (630) (7,945) (8,249) (85,344) (4,717) (3,283) (4,712) (1,714) (23,406) (15,825) (8,122) (11,521 ) (692) (490) (1,362) (6,310) (87,665) (169,819) (169,819) 30 June 2007 Contract/ notional '000 Fair Assets $'000 Values Liabilities $'000 Buy Foreign currency forward contracts - Australian Dollars (AUD) Foreign currency forward contracts - British Pound (GBP) Foreign currency forward contracts - Hong Kong Dollar (HKD) Foreign currency forward contracts - Canadian Dollar (CAD) Foreign currency forward contracts - Danish Krone (DKK) ,690 2, ,822 2,291 46,690 6, ,