Financial Report For the year ended 30 June 2016

Transcription

1 firstmac ARSN Financial Report For the year ended 30 June 2016 The financial statements cover Firstmac High Livez as an individual entity. The Responsible Entity of Firstmac High Livez is Perpetual Trust Services Limited (ABN ). The Responsible Entity s registered office is Level 12, 123 Pitt Street NSW 2000.

2 ARSN Financial Report for the Year Ended 30 June 2016 Contents Page number Director s report 2 Auditor s independence declaration 5 Statement of comprehensive income 6 Statement of financial position 7 Statement of changes in equity 8 Statement of changes in net assets attributable to unitholders 9 Statement of cash flows Directors declaration 26 Independent audit report 27 1

3 Directors Report The directors of Perpetual Trust Services Limited, the Responsible Entity (the Responsible Entity ) of Firstmac High Livez, present their report together with the financial statements of Firstmac High Livez (the Fund ) for the year ended 30 June 2016 and the Auditor s Report thereon. Principal Activities The Fund is a registered managed investment scheme domiciled in Australia. The Fund seeks to achieve its investment objective by investing in fixed income securities. These fixed income securities are predominantly comprised of investment grade medium term asset-backed securities supplemented by highly rated short term money market securities. There have been no significant changes in the Fund s activities during the period. The Fund did not have any employees during the period. Directors The following persons held office as directors of the Responsible Entity during the period or since the end of the period and up to the date of this report: Green, Christopher Director Appointed 01/10/2008 Vainauskas, Michael Director Appointed 02/03/2015 Foster, Glenn Stephen Director Appointed 27/07/2015 Cannane, Andrew Director Appointed 28/08/2015 Larkins, Gillian Director Appointed 07/01/2013; Resigned 27/07/2015 Ellwood, Rodney Garth O Sullivan, Anna Alternate for Christopher Green and Andrew Cannane; Appointed 07/12/2015 Alternate for Christopher Green; Appointed 24/02/2014; Resigned 7/12/2015 Foster, Glenn Stephen Alternate for Gillian Larkin; Appointed 25/01/2013; Ceased 27/07/2015 Review and results of operations There have been no significant changes to the operations of the Fund since the previous financial period. The Fund continued to invest funds in accordance with target asset allocations as set out in the governing documents of the Fund and in accordance with the provisions of the Product Disclosure Statement ( PDS ) and the Fund Constitution. The performance of the Fund, as represented by the results of its operations, was as follows: Year ended Year ended 30 June June 2015 Operating profit before financing costs attributable to unitholders 1,993,746 1,846,084 Distribution paid and payable 2,366,056 2,071,406 Distribution (cents per unit) The distribution (cents per unit) has been presented as actual distribution for the years 2016 and

4 Significant changes in state of affairs Firstmac High Livez Directors Report (continued) In the opinion of the directors, there were no significant changes in the state of affairs of the Fund that occurred during the period under review Matters subsequent to the end of the financial year No matter or circumstances have arisen since 30 June 2016 that have significantly affected, or may significantly affect: (i) the operations of the Fund in future financial years, (ii) the results of those operations in future financial years, or (iii) the state of affairs of the Fund in future financial years. Likely developments and expected results of operations The Fund will continue to be managed in accordance with the investment objectives and guidelines as set out in the governing documents of the Fund and in accordance with the provisions of the PDS and the Fund Constitution. The results of the Fund's operations will be affected by a number of factors, including the performance of investment markets in which the Fund invests. Investment performance 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 Fund 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 Fund. Indemnity and insurance of officers No insurance premiums are paid for out of the assets of the Fund in regards to the insurance cover provided to either the officers of the Responsible Entity or the auditors of the Fund. So long as the officers of the Responsible Entity act in accordance with the Fund Constitution and the Law, the officers remain indemnified out of the assets of the Fund against losses incurred while acting on behalf of the Fund. Indemnity of the auditors The auditors of the Fund are not indemnified out of the assets of the Fund. Fees paid to and interests held in the Fund by the Responsible Entity or its associates Fees paid to the Responsible Entity and its associates out of Fund property during the period are disclosed in the Statement of Comprehensive Income and are detailed in Note 13 to the Financial Statements. The Responsible Entity and its associates held no interests in the Fund at the end of, or during, the financial year. No fees were paid out of Fund property to the Directors of the Responsible Entity during the period. Interests in the Fund The movements in units on issue in the Fund during the period and number of interests in the Scheme at the end of the period; are disclosed in Note 10 to the financial statements. The value of the Fund s assets and liabilities is disclosed on the balance sheet and derived using the basis set out in Note 2 to the financial statements. 3

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6 The Directors Perpetual Trust Services Limited As Responsible Entity of Firstmac High Livez Level 12, Angel Place 123 Pitt Street SYDNEY NSW 2000 Auditor s Independence Declaration As lead auditor for the audit of Firstmac High Livez for the year ended 30 June 2016, I declare that, to the best of my knowledge and belief, 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. PITCHER PARTNERS NIGEL BATTERS Partner Brisbane, Queensland 21 September 2016

7 Statement of Comprehensive Income Statement of Comprehensive Income Note Year ended 30 June 2016 Year ended 30 June 2015 Investment Income Interest income 17,109 49,989 Interest income from financial instruments held at fair value through profit or loss 2,606,708 2,313,564 Net (loss) / gain on financial instruments held at fair value through profit or loss 4 (382,842) (240,257) Total net investment income 2,240,975 2,123,296 Expenses Realised loss 12,925 74,629 Other operating expenses 5 66,014 55,798 Management fees 168, ,785 Total operating expenses 247, ,212 Operating profit 1,993,746 1,846,084 Finance costs attributable to unitholders Distributions to unitholders 12 2,366,056 2,071,406 (Decrease) / increase in net assets attributable to unitholders (372,310) (225,322) Profit for the period - - Other comprehensive income - - Total comprehensive income - - The above statement of comprehensive income should be read in conjunction with the accompanying notes. 6

8 Statement of Financial Position As at 30 June 2016 Statement of Financial Position Note As at 30 June 2016 As at 30 June 2015 Assets Cash and cash equivalents 6 3,420,353 5,705,000 Receivables 7 131, ,994 Financial assets held at fair value through profit or loss 8 42,126,668 41,549,984 Total Assets 45,678,364 47,373,978 Liabilities Distribution payable , ,578 Other payables 9 19,939 21,038 Total liabilities (excluding net assets attributable to unitholders) 187, ,616 Net assets attributable to unitholders liability 10 45,490,971 47,184,362 The above statement of financial position should be read in conjunction with the accompanying notes. 7

9 Statement of Changes in Equity Statement of Changes in Equity Year ended 30 June 2016 Year ended 30 June 2015 Total equity at the beginning of the financial year - - Profit for the year Other comprehensive income - - Total comprehensive income - - Transactions with owners in their capacity as owners Total equity at the end of the financial year - - Under Australia Accounting Standards, 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 period. The above statement of changes in equity should be read in conjunction with the accompanying notes. 8

10 Statement of Changes in Equity Statement of Changes in Net Assets Attributable to Unitholders Year ended 30 June 2016 Year ended 30 June 2015 Opening Balance 47,184,362 36,062,042 Applications during the year 10,473,204 24,928,940 Redemptions during the year (13,094,682) (14,640,786) Distribution reinvestment during the year 1,300,397 1,059,488 (Decrease) / increase in assets attributable to unitholders (372,310) (225,322) Closing Balance 45,490,971 47,184,362 The above statement of changes in net assets attributable to unitholders should be read in conjunction with the accompanying notes. 9

11 Statement of Cash Flows Statement of Cash Flows Note Year ended 30 June 2016 Year ended 30 June 2015 Cash flows from operating activities Interest received 2,610,082 2,275,258 Operating expenses paid (65,320) (51,518) Manager fees paid (169,164) (144,407) Other expenses paid (2,736) (1,490) Net cash inflow from operating activities 11(a) 2,372,862 2,077,843 Cash flows from investing activities Purchase of financial assets designated at fair value through profit or loss (969,248) (8,636,217) Net cash outflow from financing activities (969,248) (8,636,217) Cash flows from financing activities Proceeds from issue of redeemable units 10,473,204 24,928,940 Payments on redemption of redeemable units (13,094,682) (14,640,786) Distributions paid to unitholders (1,066,783) (1,011,762) Net cash inflow / (outflow) from financing activities (3,688,261) 9,276,392 Net increase / (decrease) in cash and cash equivalents (2,284,647) 2,718,018 Cash and cash equivalents at the beginning of the period 5,705,000 2,986,982 Cash and cash equivalents at the end of the period 6 3,420,353 5,705,000 The above statement of cash flows should be read in conjunction with the accompanying notes. 10

12 Firstmac High Livez 1 General Information These financial statements cover Firstmac High Livez (the Fund") as an individual entity. The Fund is a for-profit entity. The Responsible Entity of the Fund is Perpetual Trust Services Limited (the Responsible Entity''). The Responsible Entity's registered office is Level 18, 123 Pitt Street, Sydney NSW The Responsible Entity is incorporated and domiciled in Australia. The Investment Manager of the Fund is Firstmac Limited. The Custodian and Accountant of the Fund is Perpetual Corporate Trust Limited. The Fund aims to provide stable monthly income returns from a diversified portfolio of asset-backed securities and short term money market securities. The financial statements were authorised for issue by the directors on 21 st September The directors of the Responsible Entity have the power to amend the financial statements after they have been issued. 2 Summary of significant accounting policies The principal accounting policies applied in the preparation of these financial statements are set out below. (a) Basis of preparation This general purpose financial report has been prepared in accordance with the International Financial Reporting Standards ( IFRS ), Australian Accounting Standards as applicable to for-profit Tier 1 reporting entities; 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 liabilities except where otherwise stated. The statement of financial position is presented on a liquidity basis. Assets and liabilities are presented in decreasing order of liquidity and are not distinguished between current and non-current. All balances are expected to be recovered or settled within twelve months, except for investments in financial assets and net assets attributable to unitholders. The amount expected to be recovered or settled within twelve months after the end of each reporting period cannot be reliably determined. Rounding of amounts Amounts in the Report of the Directors and Financial Report have been rounded to the nearest whole dollars in accordance with Australian Accounting Standards. The financial statements are presented in Australian dollars. (b) Financial instruments The financial statements are prepared in accordance with the historical cost convention, except for bond assets which are carried at fair value. (i) Classification The Fund s investments are classified as at fair value through profit or loss. They comprise: 11

13 2. Summary of significant accounting policies (continued) Firstmac High Livez (b) Financial instruments (continued) 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 such as commercial paper. Financial assets designated at fair value through profit or losses at inception are those that are managed and their performance evaluated on a fair value basis in accordance with the Fund s documented strategy. (ii) Recognition/derecognition The Fund recognises financial assets and financial liabilities on the date it becomes party to the contractual agreement (trade date) and recognises changes in fair value of the financial assets or financial liabilities from this date. Investments are derecognised when the right to receive cash flows from the investments have expired or the Fund has transferred substantially all risks and rewards of ownership. (iii) Measurement Financial assets and liabilities are held at fair value through profit or loss. The fair value of financial assets and liabilities traded in active markets is subsequently based on their quoted market prices at the end of the reporting period without any deduction for estimated future selling costs. The quoted market price used for financial assets held by the Fund is the current bid price and the quoted market price for financial liabilities is the current asking price. (iv) Offsetting financial instruments Financial assets and liabilities are offset and the net amount reported in the balance sheet where 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. (c) Net assets attributable to unitholders Units are redeemable at the unitholders option and are classified as financial liabilities as the Fund is required to distribute its taxable income. The units can be put back to the Fund 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 end of reporting period if unitholders exercised their right to redeem units in the Fund. 12

14 2. Summary of significant accounting policies (continued) Firstmac High Livez (d) Cash and cash equivalents For the purpose of presentation in the statement of cash flows, cash and cash equivalents include cash on hand, deposits held at call with financial institutions, other short term, highly liquid investments with original maturities 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. Payments and receipts relating to the purchase and the sale of investment securities are classified as cash flows from operating activities, as movements in the fair value of these securities represent the Fund s main income generating activity. (e) Receivables Receivables include amounts for interest and GST refund. These are accrued when the right to receive payments is established. Interest is accrued at the end of each reporting period from the time of last payment. Amounts are generally received within 30 days of being recorded as receivables. (f) Payables These amounts represent liabilities for amounts owing by the Fund at balance date which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition. The distribution amount payable to unitholders as at the end of each reporting period is recognised separately in the balance sheet when unitholders are presently entitled to distributable income as at 30 June 2016 under the Constitution. (g) Applications and redemptions Applications received for units in the Fund are recorded net of any entry fees payable prior to the issue of units in the Fund. Redemptions from the Fund are recorded gross of any exit fees payable after the cancellation of units redeemed. (h) Goods and Services Tax (GST) The GST incurred on the costs of various services provided to the Fund by third parties such as investment management fees have been passed onto the Fund. There are some changes in GST legislation since 01 July 2012, according to these changes The Fund qualifies for Reduced Input Tax Credits (RITC) at the rate of 55% for managers fees and 75% for rest of all fees; hence investment management 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 sheet. Cash flows relating to GST are included in the statement of cash flows on a gross basis. (i) Investment income Investment income on assets held at fair value through profit or loss is recorded in interest revenue according to the terms of the contract. (j) Expenses All expenses, including management fees and operating expenses, are recognised in profit or loss on an accrual basis. 13

15 2. Summary of significant accounting policies (continued) (k) Income tax Firstmac High Livez Under current legislation, the Fund is not subject to income tax as unitholders are presently entitled to the income of the Fund. (l) (m) Distributions In accordance with the Fund Constitution, the Fund distributes income adjusted for amounts determined by the Responsible Entity, to unitholders by cash or reinvestment. The distribution is recognised in profit or loss as finance costs attributable to unitholders. 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 profit or loss as finance costs. (n) (o) Use of estimates The Fund 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. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected. When the fair values of financial assets and financial liabilities recorded in the statement of financial position cannot be measured based on quoted prices in active markets, their fair value is measured using valuation techniques the discounted cash flow (DCF) model. The inputs to these models are taken from observable markets where possible, but where is not feasible, a degree of judgement is required in establishing fair values. Judgements include considerations of inputs such as liquidity risk, credit risk and volatility. Changes in assumptions in relation to these factors could affect the reported fair value of financial instruments. New standards and interpretations not yet adopted The following standards and interpretations would have been applied for the first time for entities with years ended 30 June The following standards did not result in any significant changes to the accounting policies: Reference Title Nature of change to accounting policy Application date of standard AASB Amendments to Australia Accounting Standards arising from withdrawal of ASSB 1031 Materiality This amendment completes the withdrawal of references to AASB 1031 in all Australian Accounting Standards and interpretations, allowing that Standard to effectively be withdrawn 1 July 2015 AASB Amendments to Australian Accounting Standards Financial Reporting Requirements for Australian Groups with a Foreign Parent The amendments to AASB 128 align the relief available in AASB 10 and AASB 128 in respect of the financial reporting requirements for Australian groups with a foreign parent. 1 July

16 2. Summary of significant accounting policies (continued) (o) New standards and interpretations not yet adopted (continued) Australian Accounting Standards and Interpretations that have recently been issued or amended, but are not yet effective and have not been adopted by the Fund for the annual reporting period ended 30 June 2016 are outlined in the table below. The following standards have been identified as those which may impact the Fund in the period. These new standards (to the extent relevant to the Fund) and interpretation is set out below: Reference Title Nature of change to accounting policy Application date of standard Application date for the Fund AASB 9 Financial Instruments AASB 9 includes requirements for the classification and measurement of financial assets. 1 January July 2018 AASB Clarification of Acceptable Methods of Depreciation and Amortisation (Amendments to AASB 116 and AASB 138) AASB 116 and AASB 138 both establish the principle for the basis of depreciation and amortisation as being the expected pattern of consumption of the future economic benefits of an asset. 1 January July 2016 AASB Amendments to Australian Accounting Standards Annual Improvements to Australian Accounting Standards Cycle AASB 5 Non-current Assets Held for Sale and Discontinued Operations. AASB 7 Financial Instruments AASB 119 Employee Benefits AASB 134 Interim Financial Reporting: 1 January July 2016 AASB Amendments to Australian Accounting Standards Disclosure Initiative: Amendments to AASB 101 The Standard makes amendments to AASB 101 Presentation of Financial Statements arising from the IASB s Disclosure Initiative project. 1 January July 2016 AASB Amendments to Australian Accounting Standards Disclosure initiative: Amendments to AASB 107 The Standard makes amendments to AASB 107 Statement of Cash Flows (August 2015) 1 January June

17 3. Financial Risk Management Firstmac High Livez (a) Objectives, Strategies, policies and processes The Fund s activities expose it to a variety of financial risks. The management of these risks is conducted by the Fund s Investment Manager who manages the Fund s assets in accordance with its investment objectives. A financial risk management framework has been established by the Fund s Investment Manager who conducts regular assessment processes in order to ensure that procedures and controls are adequately managing the risks arising from the Fund s investment activities. This framework includes: Integrated computer systems and processes with checks and balances; Policies and procedures covering operations; Post-trade investment compliance monitoring; Segregation of the dealing and investment management function from the administration and settlement function; An independent service provider for the valuation of securities; A compliance function within the Investment Manager with a separate reporting line from the portfolio management team; and A half-yearly self-assessment process. The Responsible Entity also has in place a framework to identify, control, report and manage compliance and business obligations, and to ensure that the interests of unitholders in the Fund are protected. Compliance is integrated into the day to day operations of the Responsible Entity Services team ( RES ), a Perpetual Corporate Trust ( CT ) business unit within the Responsible Entity. This framework includes: Policies and procedures; Committee and board reporting; Staff training; Formal service provider agreements; Compliance reporting by the Investment Manager, Investment Administrator and Custodian ( the Service Providers ); Regular monitoring visits of Service Providers; and Monitoring of RES compliance in accordance with Control Self Assessment methodology. RES is ultimately responsible for compliance monitoring. The RES business unit includes the roles of General Manager, Manage Fund, Head of RE Services, Risk Manager, Senior Manager and Manager Corporate Clients. The Responsible Entity has established a Compliance Committee which is responsible for developing and monitoring the Fund's compliance monitoring policies, including those related to its activities. Compliance monitoring policies and systems are reviewed periodically to reflect changes in market conditions and the Fund's activities. RES undertakes regular monitoring reviews of the Fund s service providers, focusing on the general control environment and investment management, administration and custodial functions as provided to the Responsible Entity of the Fund. This is conducted to ensure that the service providers continue to satisfy their obligations as detailed within the relevant service agreement entered into with the Responsible Entity. The Fund s investing activities expose it to market risk (including interest rate risk), credit risk and liquidity risk. 16

18 3. Financial Risk Management (continued) (b) Market Risk (i) Price risk The Fund is exposed to fixed income securities. Bond price fluctuations are associated with interest rate risks and default risks for credit securities. Higher interest rates cause bond prices to fall. (ii) Cash flow and fair value interest rate risk The Fund is exposed to cash flow interest rate risk on financial instruments with variable interest rates. Financial instruments with fixed rates expose the Fund to fair value interest rate risk. The Fund has direct exposure to interest rate changes on the valuation and cash flows of its interest bearing assets and liabilities. However, it may also be indirectly affected by the impact on the valuation of certain assets that use interest rate as an input in their valuation model. Therefore, the sensitivity analysis may not fully indicate the total effect on the Fund s net assets attributable to unitholders of future movements in interest rates. (c) Summarised sensitivity analysis The following table summarises the sensitivity of the Fund s operating profit and net assets attributable to unitholders to interest rate risk and other price risk. The reasonably possible movements in the risk variable have been determined based on management s best estimate, having regard to a number of factors, including historical levels of changes in interest rates, historical correlation of the Fund s investments with the relevant benchmark and market volatility. 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 performance of and/or correlation between the performance of the economics, markets and securities in which the Fund invests. As a result, historic variation in risk variables should not be used to predict future variation in the risk variables. 30 June 2016 Price risk Interest rate risk Net assets attributable to unitholders Cash equivalents -2% +2% -75bps +75bps 909,819 (909,819) (25,653) 25, June 2015 Price risk Interest rate risk Net assets attributable to unitholders Cash equivalents -2% +2% -75bps +75bps 943,687 (943,687) (42,788) 42,788 17

19 3. Financial Risk Management (continued) (d) Credit Risk The Fund is exposed to credit risk that counterparty will be unable to pay amounts in full when they fall due. (i) Debt securities The Fund invests in fixed investment securities which have various Category allocations as disclosed in the PDS. The Category allocations are assigned by the Investment Manager / Responsible Entity using an approach that is consistent with the approach used by rating agencies. An analysis of debt by rating is set out in the table below. Rating 30 June 2016 Category 1 4,415,576 Category 2 5,234,548 Category 3 32,120,577 Total 41,770,701 Rating 30 June 2015 Category 1 5,403,782 Category 2 6,371,723 Category 3 28,998,216 Total 40,773,721 (ii) Cash and cash equivalents The exposure to credit risk for cash and cash equivalents is low as all counterparties have a minimum rating of Category 1. (iii) Other The Fund is not materially exposed to credit risk on other financial assets. The maximum exposure to credit risk at the end of each reporting period is the carrying amount of the financial assets. None of these are impaired nor past due but not impaired. The change in credit risk attributable to the fair value of the financial assets held at fair value through profit and loss is not considered significant. (e) Liquidity Risk Liquidity risk is the risk that the Fund may not be able to generate sufficient cash resources to settle its obligations in full as they fall due or can only do so on terms that are materially disadvantageous. The Fund s PDS provides for monthly redemption of units and it is therefore exposed to liquidity risk of meeting unitholders redemptions at those times. The Fund maintains a minimum liquidity equal to 10% 18

20 3. Financial Risk Management (continued) of total assets of the Fund. Compliance with this is reported to the Responsible Entity on a quarterly basis. In order to manage the Fund s overall liquidity, the Responsible Entity has the discretion to reject an application for units and to defer or adjust redemption of units if the exercise of such discretion is in the Best interest of unitholders. As at 30 June 2016 the fund held 26 different RMBS investments managed and serviced by Firstmac Limited. This represents that largest concentration by issuer at 44.98% (30 June 2015: 33.98%) of total fund assets. Each of the individual holdings are bankruptcy remote with stand-alone closed pool of residential mortgage assets. (f) Fair value estimation The carrying amounts of the Fund s assets and liabilities at the end of each reporting period 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 liability. Transaction costs on financial assets and financial liabilities at fair value through profit or loss are expensed immediately. Subsequent to initial recognition, all instruments held at fair value through profit or losses are measured at fair value with changes in their value recognised in profit or loss. (g) Fair value hierarchy Classification of financial assets and financial liabilities The Fund classifies fair value measurements using a fair value hierarchy that reflects the subjectivity of the inputs used in making the measurements. The fair value hierarchy has the following levels: - 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 assets or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (level 2); - Inputs for the assets or liability that are not based on observable market data (level 3). The level in the fair value hierarchy within which the fair value measurement is categorised in its entirety is determined on the basis of the lowest level input that is significant to the fair value measurement in its entirety. For this purpose, the significance of an input is assessed against the fair value measurement in its entirety. Fair value measurement hierarchy for assets as at 30 June 2016: Fair value measurement using Significant observable inputs Date of Valuation (Level 2) Assets measured at fair value 30 June ,126,668 Fair value measurement hierarchy for assets as at 30 June 2015: Fair value measurement using Significant observable inputs Date of Valuation (Level 2) Assets measured at fair value 30 June ,549,984 19

21 3. Financial Risk Management (continued) Valuation technique and observable inputs The fair value of financial assets held at fair value through profit and loss, consisting of fixed interest securities, is valued by an independent market pricing service. The underlying valuation technique used to determine the fair value is based on discounted cash flows, using significant observable inputs including appropriate yield curves and the weighted average life of each respective asset. Year ended 30 June 2016 Year ended 30 June Net gain/(loss) on financial instruments held at fair value through profit or loss Net unrealised gain on financial assets held at fair value through profit or loss (334,857) (194,900) Amortised bond premium (47,985) (45,357) 382,842 (240,257) 5. Other operating expenses As at 30 June 2016 As at 30 June 2015 Operating expenses 65,095 54,045 Bank fees Austraclear fees 410 1,280 66,014 55, Cash and cash equivalents Operating bank account 320, ,629 Distribution bank account - 77 Redemption bank account - 97 Application bank account Term deposit 3,100,000 5,525,000 3,420,353 5,705, Receivables Interest receivable 125, ,119 GST receivable 5,692 3,465 Prepayment , ,994 20

22 8. Financial assets held at fair value through profit or loss Fixed interest securities 42,126,668 41,549,984 42,126,668 41,549,984 Comprising: Fair Value Premium/ 30 June 2016 Face Value Adjustment (discount) Total Asset backed securities 41,770, ,490 (18,523) 42,126,668 Fair Value Premium/ 30 June 2015 Face Value Adjustment (discount) Total Asset backed securities 40,773, ,348 66,915 41,549, Other payables As at 30 June 2016 As at 30 June 2015 Operating fee payable 6,043 6,268 Manager fee payable 13,896 14,770 19,939 21, Net assets attributable to the Unitholders Movement in the number of units and net assets attributable to unitholders during the year were as follows: Retail Wholesale Total 30 June June June 2016 Opening balance 30,622,523 16,561,839 47,184,362 Applications 5,606,060 4,867,144 10,473,204 Redemptions (8,044,330) (5,050,352) (13,094,682) Distribution Reinvestment 847, ,391 1,300,397 Increase in net assets attributable to (227,147) (145,163) (372,310) unitholders Closing balance 28,804,112 16,686,859 45,490,971 21

23 10. Net assets attributable to the unitholders (continued) Retail Wholesale Total 30 June June June 2016 Units Units Units Opening balance 28,836,835 16,114,546 44,951,382 Applications 5,372,411 4,654,603 10,027,014 Redemptions (7,710,100) (4,847,903) (12,558,003) Distribution Reinvestment 812, ,827 1,247,038 Closing balance 27,311,357 16,356,073 43,667,431 Retail Wholesale Total 30 June June June 2015 Opening balance 28,149,002 7,913,040 36,062,042 Applications 13,777,090 11,151,850 24,928,940 Redemptions (11,914,381) (2,726,405) (14,640,786) Distribution Reinvestment 755, ,129 1,059,488 Decrease in net assets attributable to unitholders (144,547) (80,775) (225,322) Closing balance 30,622,523 16,561,839 47,184,362 Retail Wholesale Total 30 June June June 2015 Units Units Units Opening balance 26,678,384 7,499,601 34,177,985 Applications 12,759,374 10,918,463 23,677,838 Redemptions (11,318,715) (2,592,617) (13,911,332) Distribution Reinvestment 717, ,099 1,006,891 Closing balance 28,836,835 16,114,546 44,951,382 As stipulated within the Fund Constitution, each unit represents a right to an individual share in the Fund and does not extend to a right to the underlying assets of the Fund. The Constitution of the Fund allows the Responsible Entity to issue different classes of units with special rights or restrictions. In these instances, the Corporations Act 2001 requires the Responsible Entity to treat all investors within a class of units equally and investors in different classes fairly. Capital risk management The Fund considers 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 monthly basis as the Fund is subject to monthly applications and redemptions at the discretion of unitholders. 22

24 11. Reconciliation of profit/(loss) to net cash inflow/(outflow) from operating activities (a) Reconciliation of profit/(loss) to net cash inflow/(outflow) from operating activities Year ended 30 June 2016 Year ended 30 June 2015 Profit/(loss) for the period - - Change in net assets attributable to unitholders (372,310) (225,322) Distributions to unitholders 2,366,057 2,071,406 Net losses on financial instruments held at fair value through profit or loss 334, ,900 Realised loss on financial instrument 12,925 74,628 Amortisation of bond premium/discount 47,984 45,357 Net change in receivables and other assets (12,349) (13,635) Net change in payables and other liabilities (4,303) (69,491) Net cash inflow from operating activities 2,372,862 2,077,843 Year ended 30 June 2016 Year ended 30 June 2015 (b) Non-cash financing activities During the period, the following distribution payments were satisfied by the issue of units under the distribution reinvestment plan 1,300,397 1,059, Distributions to unitholders The distributions for the period were as follows: 30 June June CPU Distributions paid 2,198, Distributions payable 167, ,366, June June CPU Distributions paid 1,902, Distributions payable 168, ,071, Related party transactions Responsible Entity The Responsible Entity of the Fund is Perpetual Trust Services Limited (ABN ). Key management personnel The Fund does not employ personnel in its own right. However, it is required to have an incorporated Responsible Entity to manage the activities of the Fund and this is considered the key management personnel.

25 13. Related party transactions (continued) a) Directors: The Key management personnel include persons who were directors of Perpetual Trust Services Limited at any time during the financial period as follows: Green, Christopher Director Appointed 01/10/2008 Vainauskas, Michael Director Appointed 02/03/2015 Foster, Glenn Stephen Director Appointed 27/07/2015 Cannane, Andrew Director Appointed 28/08/2015 Larkins, Gillian Director Appointed 07/01/2013; Resigned 27/07/2015 Ellwood, Rodney Garth O Sullivan, Anna Alternate for Christopher Green and Andrew Cannane; Appointed 07/12/2015 Alternate for Christopher Green; Appointed 24/02/2014; Resigned 7/12/2015 Foster, Glenn Stephen Alternate for Gillian Larkin; Appointed 25/01/2013; Ceased 27/07/2015 Other key management personnel There were no other persons with responsibility for planning, directing and controlling the activities of the Fund, directly or indirectly during the financial year. Key management personnel As at 30 June 2016 no key management personnel held units in the Fund (30 June 2015: nil) Key management personnel compensation Payments made from the Fund to Perpetual Trust Services Limited do not include any amounts directly attributable to key management personnel remuneration. Key management personnel loan disclosures The Fund has not made, guaranteed or secured, directly or indirectly, any loans to the key management personnel or their personally related entities at any time during the reporting period. Responsible Entity/Investment Manager s Fees and other transactions Under the terms of the Fund s Constitution, the Responsible Entity is entitled to receive a fee of up to 3% (exclusive of GST) per annum of the gross asset value of the Fund. All related party transactions are conducted on normal commercial terms and conditions. The transactions during the period and amounts payable at period end between the Fund and the Investment Manager were as follows: Year ended Year ended 30 June June 2015 Management fees for the period paid by the Fund to the Investment Manager 168, ,741 Aggregate amount payable to Investment Manager 13,896 14,770 All other expenses of the Fund are paid by the Investment Manager. 24

26 13. Related party transactions (continued) Related party Fund s unitholdings Parties related to the Fund (including Firstmac Limited and its related parties) held 242, units (2015:768, units) in the Fund, which were worth 251,136 (2015:806,755). Firstmac High Livez owns 42,126,668 (2015: 41,549,984) of fixed asset securities. Of this 42,126,668, 18,947,644 (2015: 16,298,216) represents underlying securities issued by Firstmac Limited. 14. Remuneration of auditors Year ended Year ended 30 June June 2015 During the year the following fees were paid or payable for services provided by the auditor of the Fund Audit and review of financial statements Pitcher Partners 20,000 - Audit and review of financial statements Ernst & Young - 29,458 20,000 29,458 Audit fees are currently paid or payable by the Investment Manager, Firstmac Limited. 15. Contingent liabilities and commitments There are no outstanding contingent assets, liabilities or commitments as at 30 June Events occurring after the reporting period No significant events have occurred since the end of the reporting period which would impact on the financial position of the Fund disclosed in the Statement of Financial Position as at 30 June 2016 or on the results and cash flows of the Fund for the period ended on that date. 25

27

28 INDEPENDENT AUDITOR S REPORT To the Unit holders of Firstmac High Livez Report on the financial report We have audited the accompanying financial report of Firstmac High Livez ( the Fund ), which comprises the statement of financial position as at 30 June 2016, the statement of comprehensive income, the statement of changes in equity and the statement of cash flows for the year then ended, notes 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 Trust Services Limited as responsible entity for Firstmac High Livez 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 gives a true and fair view and is free from material misstatement, whether due to fraud or error. In Note 2, the directors also state, in accordance with Accounting Standard AASB101 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. Those 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 company 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 company 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 believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

29 Independence In conducting our audit, we have complied with the independence requirements of the Corporations Act Opinion In our opinion: (a) the financial report of the Fund is in accordance with the Corporations Act 2001, including: (i) giving a true and fair view of the Fund s financial position as at 30 June 2016 and of its performance for the year ended on that date; and (ii) complying with Australian Accounting Standards and the Corporations Regulations 2001; and (b) the financial report also complies with International Financial Reporting Standards as disclosed in Note 2. PITCHER PARTNERS NIGEL BATTERS Partner Brisbane, Queensland 21 September 2016