Maple-Brown Abbott. Diversified Investment Trust ARSN

Transcription

1 Maple-Brown Abbott Diversified Investment Trust ARSN Annual Financial Report 30 June 2018

2 Maple-Brown Abbott Diversified Investment Trust Annual Financial Report Contents Directors report 1 Lead Auditor s Independence Declaration 4 Statement of Financial Position 5 Statement of Comprehensive Income 6 Statement of Changes in Equity 7 Statement of Cash Flows 8 Notes to and forming part of the financial statements 9 1 Summary of significant accounting policies 9 2 Net assets attributable to unitholders 14 3 Interest income 14 4 Other expenses 14 5 Auditor s remuneration 15 6 Distributions paid and payable 15 7 Related parties 15 8 Notes to the Statement of Cash Flows 18 9 Financial instruments Investment in unconsolidated subsidiaries Interests in unconsolidated structured entities Events subsequent to balance date 31 Directors declaration 32 Independent auditor s report to the unitholders 33

3 Maple-Brown Abbott Diversified Investment Trust Directors report The directors of Maple-Brown Abbott Limited, the Responsible Entity of the Maple-Brown Abbott Diversified Investment Trust (the Fund), present their report together with the financial report of the Fund, for the year ended 30 June 2018 and the auditor s report thereon. Responsible Entity Maple-Brown Abbott Limited is the Responsible Entity (AFSL No ). The Responsible Entity is the investment manager of the Fund. The names of the persons who were directors of the Responsible Entity during or since the end of the year are as follows: Name Period of directorship J K Kightley Appointed 11/02/1994 G M Rossler Appointed 19/07/1999 R A Grundy Appointed 01/07/2008 G R Bazzan Appointed 01/07/2008 D L Maple-Brown Appointed 01/07/2009 T T Robinson Appointed 07/03/2013 R A R Lee Appointed 22/10/2015 J A Elliott Appointed 04/01/ The registered office and principal place of business of the Responsible Entity and the Fund is Level 31, 259 George Street, Sydney, NSW Principal activities The Fund is a multi-sector Fund that invests in growth assets comprising Australian and international equities and REITs, and defensive assets comprising Australian fixed interest, alternative assets and cash, in accordance with the provisions of the Fund s Constitution. The Fund did not have any employees during the year. There have been no significant changes in the nature of those activities during the year. Results of operations The Responsible Entity s objective for the Fund is to outperform the Morningstar Multisector Growth Peer Group (Benchmark) average over a rolling period of four years. The Fund achieved a rolling four year annualised return of 6.5% p.a. after fees (: 8.5% p.a.) versus the Benchmark return of 6.7% p.a. (: 7.7% p.a.). A summary of the Fund s annual performance after fees to 30 June is set out below: % % % % % Total return* (1.8) Benchmark * Total return is based on the movement in net asset value per unit plus distributions and is before tax and after all fees and charges. Imputation and foreign tax credits are not included in the performance figures. 1

4 Directors report (continued) Unit prices and distributions Unit prices Redemption price per unit (ex-distribution as at 30 June) Distribution Distribution per unit for the year ended 30 June (excluding tax credits) (note 6) State of affairs The Responsible Entity announced that it has elected into the Attribution Managed Investment Trust (AMIT) regime for the Fund from 1 July to 30 June 2018 and subsequent years. Prior to 1 July, net assets attributable to unitholders were classified as a financial liability as payment of the Fund s distributable income was mandatory as prescribed by the Constitution. In the opinion of the Responsible Entity, there were no other significant changes in the state of affairs of the Fund during the financial year under review. Likely developments The Fund will continue with its principal activities as detailed earlier in this report. Events subsequent to balance date As the investments are measured at their 30 June 2018 fair values in the financial report, any change in values subsequent to the end of the reporting period is not reflected in the Statement of Comprehensive Income or the Statement of Financial Position. However the change in the value of investments is reflected in the current unit price. 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 2018 or on the results and cash flows of the Fund for the year ended on that date. Interests of the Responsible Entity The following fees were earned by the Responsible Entity from the Fund during the year: 2018 Responsible Entity fees 2,777,108 2,867,719 Please refer to note 7(b) to the financial statements for details of Fund units held by the Responsible Entity and its associates. 2

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7 Statement of Financial Position As at 30 June 2018 Note 2018 Assets Cash and cash equivalents 8(a) 63,046,626 62,904,697 Financial assets at fair value through profit or loss: 9(a) Fixed interest securities 56,166,393 59,531,045 Overseas equities held via unlisted unit trust 7(b),11 59,829,920 58,327,902 Alternative assets held via unlisted unit trust 7(b),11 21,210,175 20,553,505 Australian-listed equities 111,609, ,135,045 Australian-listed equities held via unlisted unit trust 7(b),11 4,684,425 5,142,650 Australian-listed property trusts 16,068,234 13,262,300 Loans and receivables: Applications receivable 11, ,979 Balances due from brokers - 3,062,764 Interest receivable 174, ,267 Dividends and distributions receivable 7,115,819 10,445,901 Other receivables 56,210 39,034 Reduced input tax credit receivable 51,889 56,740 Total assets 340,025, ,240,829 Liabilities Redemptions payable 4,076, ,000 Balances due to brokers - 709,692 Distribution payable 6 16,597,196 20,087,660 Sundry creditors and accruals 258, ,217 Total liabilities (excluding net assets attributable to unitholders) 20,932,162 21,779,569 Net assets attributable to unitholders liability** 2-327,461,260 Net assets attributable to unitholders equity 319,092,887 - Represented by: - fair value attributable to unitholders at redemption value* 319,175, ,489,883 - adjustment arising from different unit pricing and AASB valuation principles (82,139) (28,623) 319,092, ,461,260 * Redemption value at redemption price, based on 147,978,593 units (30 June : 150,833,586) ** Net assets attributable to unitholders is classified as equity as at 30 June 2018 and as a financial liability as at 30 June, as disclosed in Notes 1 and 2. The above Statement of Financial Position is to be read in conjunction with the accompanying notes. 5

8 Statement of Comprehensive Income Note 2018 Revenue Dividends and distributions 14,987,141 17,049,821 Interest 3 3,517,459 3,755,426 Net change in the fair value of financial instruments 6,032,208 20,054,584 Other income 2,369 13,543 24,539,177 40,873,374 Expenses Responsible Entity fee 7(b) 2,777,108 2,867,719 Transaction costs 97, ,753 Other expenses 4 45,925 47,702 2,920,460 3,070,174 Profit / (loss) from operating activities 21,618,717 37,803,200 Finance costs Distributions paid and payable to unitholders* 6-27,096,215-27,096,215 Change in net assets attributable to unitholders 21,618,717 10,706,985 * Effective from 1 July, distributions paid and payable to unitholders and change in net assets attributable to unitholders have been disclosed in the Statement of Changes in Equity. These were disclosed in the above statement for the comparative year. The above Statement of Comprehensive Income is to be read in conjunction with the accompanying notes. 6

9 Statement of Changes in Equity Note 2018 Total equity opening balance Reclassification due to AMIT tax regime implementation* 2 327,461, ,461,260 - Comprehensive income Profit / (loss) from operating activities 21,618,717 - Total comprehensive income 21,618,717 - Transactions with unitholders Applications 28,078,352 - Redemptions (34,645,145) - Distributions paid and payable to unitholders 6 (23,420,297) - Total transactions with unitholders (29,987,090) - Total equity closing balance* 319,092,887 - * Effective from 1 July, the net assets attributable to unitholders have been reclassified from financial liability to equity as disclosed in notes 1 and 2. As a result, equity transactions, including distributions paid and payable to unitholders have been disclosed in the above statement for the year ended 30 June The above Statement of Changes in Equity is to be read in conjunction with the accompanying notes. 7

10 Statement of Cash Flows Note 2018 Operating activities Interest received 3,582,437 3,735,566 Dividends and distributions received 5,510,155 5,434,178 Other income received 2,369 13,543 Transaction costs paid (95,453) (155,879) Distributions paid (16,399,447) (16,175,720) Responsible Entity fees paid (2,633,115) (2,740,223) Other expenses paid (49,757) (48,069) Cash flows from operating activities 8(b) (10,082,811) (9,936,604) Investing activities Proceeds from sale of investments 53,762,325 71,241,663 Purchase of investments (30,203,416) (36,916,626) Cash flows from investing activities 23,558,909 34,325,037 Financing activities Proceeds from issue of units 16,123,412 14,319,675 Payments on redemption of units (29,457,581) (33,675,628) Cash flows from financing activities 8(d) (13,334,169) (19,355,953) Change in cash and cash equivalents 141,929 5,032,480 Cash and cash equivalents at beginning of year 62,904,697 57,872,217 Cash and cash equivalents at 30 June 8(a) 63,046,626 62,904,697 The above Statement of Cash Flows is to be read in conjunction with the accompanying notes. 8

11 1 Summary of significant accounting policies The Maple-Brown Abbott Diversified Investment Trust (the Fund) is a fund domiciled in Australia and is a for profit entity. The Fund was constituted on 29 April 1988 and will terminate 80 years (less one day) from the date of commencement or at such earlier time as provided by the Fund s Constitution or by the law. Maple-Brown Abbott Limited is the Responsible Entity. The registered office and principal place of business of the Responsible Entity is Level 31, 259 George Street, Sydney, NSW This annual financial report covers the Fund as an individual entity. The Annual Financial Report was authorised for issue by the directors on 13 September The directors of the Responsible Entity have the power to amend and reissue the financial report. Reclassification of units from financial liability to equity On 5 May 2016, a new tax regime applying to Managed Investment Trusts was established under the Tax Law Amendment (New Tax System for Management Investment Trusts) Act The Attribution Management Investment Trust (AMIT) regime allows the funds that meet certain requirements to make an irrevocable election to be an AMIT. The Responsible Entity elected into the AMIT regime for the Fund effective from 1 July and the Fund is no longer obliged to pay distributions due to the amendments in the Fund's Constitution. Consequently the net assets attributable to unitholders have been reclassified from financial liability to equity from 1 July. (a) Statement of compliance The Annual Financial Report is a general purpose financial report which has been prepared in accordance with the Fund s Constitution (as amended), the Corporations Act 2001 and Australian Accounting Standards and other authoritative pronouncements of the Australian Accounting Standards Board (AASB). The Annual Financial Report of the Fund also complies with International Financial Reporting Standards (IFRS) and interpretations adopted by the International Accounting Standards Board. (b) Basis of preparation The financial report is presented in Australian dollars. The financial report is prepared on the basis of fair value measurement of assets and liabilities, except where otherwise stated. There are no new standards, interpretations or amendments to existing standards that are effective for the first time for the financial year beginning 1 July that have a material impact on the Fund. Changes in accounting policies Except for the AMIT changes as disclosed in this report the following standards were available for early adoption but have not been applied in the financial statements for the reporting period ended 30 June The assessment of the impact of these new standards (to the extent relevant to the Fund) and interpretations is set out below: 9

12 1 Summary of significant accounting policies (continued) (b) Basis of preparation (continued) o AASB 9 Financial Instruments (and applicable amendments) (effective from 1 July 2018 for the Fund). AASB 9 replaces AASB 139 Financial Instruments: Recognition and Measurement and addresses the classification, measurement and derecognition of financial assets and financial liabilities. The derecognition rules have not been changed from the previous requirements. Classification and measurement of financial assets and financial liabilities AASB 9 contains a new classification and measurement approach for financial assets that reflects the business model in which assets are managed and their cash flow characteristics. The standard includes three principal classification categories for financial assets: measured at amortised cost; fair value through other comprehensive income (FVOCI); and fair value through profit or loss (FVTPL). It eliminates the existing AASB 139 categories of held to maturity; loans and receivables; and available for sale. Based on the Responsible Entity's assessment, the adoption of the standard is not expected to have a material impact on the classification of financial assets and financial liabilities of the Fund. This is because, financial instruments currently measured at FVTPL or amortised cost, as relevant, under AASB 139 will continue to be presented as FVTPL or amortised cost under AASB 9. Impairment of financial assets The new impairment model will apply to financial assets measured at amortised cost or FVOCI, except for investments in equity instruments. Based on the Responsible Entity's assessment, changes to the impairment model are not expected to have a material impact on the financial assets because they are short-term in nature (i.e. no longer than 12 months). Hedge accounting The Fund does not apply hedge accounting. o AASB 15 Revenue from Contracts with Customers (effective from 1 July 2018 for the Fund) The AASB has issued a new standard for the recognition of revenue. This will replace AASB 118 Revenue and AASB 111 Construction Contracts. The new standard is based on the principle that revenue is recognised when control of a good or service transfers to a customer - so the notion of control replaces the existing notion of risks and rewards. The Fund's main sources of income are interest, dividends/distributions and gains on financial instruments held at fair value. All of these are outside the scope of the new revenue standard. The Responsible Entity has concluded that the new revenue recognition rules do not have a significant impact on the Fund's accounting policies or the amounts recognised in the financial statements. The accounting policies set out below have been consistently applied to all periods presented in the Annual Financial Report. 10

13 1 Summary of significant accounting policies (continued) (c) Financial instruments Specific instruments: Cash and cash equivalents Cash and cash equivalents may include cash at bank, deposits at call with banks, term deposits and bank bills of exchange and are valued at cost. Derivatives Derivative financial instruments are held for trading and accounted for on a fair value basis using the most recent verifiable source of market prices. Fair values are obtained using quoted market prices or determined through the use of valuation techniques. All derivatives are carried as assets when the fair value is positive and as liabilities when fair value is negative. The Fund does not designate any derivatives as hedges in a hedging relationship. Other Financial instruments Financial assets Financial assets of the Fund are classified either as fair value through profit or loss or as loans and receivables. Fair value through profit or loss Financial assets which are classified as fair value through profit or loss are recognised or derecognised by the Responsible Entity as such at trade date. They are initially recognised at fair value, excluding transaction costs, which are expensed as incurred. Thereafter they are re-measured at fair value, with any resultant gain or loss recognised immediately as revenue in the Statement of Comprehensive Income. Financial assets fair values are determined as follows: Fixed interest securities Fixed interest securities are valued at bid price plus any interest accrued at reporting date. Overseas equities held via unlisted unit trusts Overseas-listed equities may be held via units in unlisted unit trusts which are valued at redemption price as reported by the manager at close of business on the day the trusts are being valued. Alternative assets held via unlisted unit trusts Alternative assets may be held via units in unlisted unit trusts which are valued at redemption price as reported by the manager at close of business on the day the trusts are being valued. Australian-listed equities, Australian-listed property trusts (REITs) These securities are valued at their quoted bid price on the Australian Securities Exchange as of the close of business on the day the securities are being valued. Where dual-listed securities are thinly traded on the Australian Securities Exchange, they are valued at the Australian dollar equivalent of the quoted bid price on the relevant foreign stock exchange. Australian-listed equities held via unlisted unit trusts Listed equities may be held via units in unlisted unit trusts which are valued at redemption price as reported by the manager at close of business on the day the trusts are being valued. 11

14 1 Summary of significant accounting policies (continued) (c) Financial instruments (continued) Loans and receivables Financial assets classified as loans and receivables include balances due from brokers, dividends and distributions receivable and other receivables. These financial assets are carried at amortised cost using the effective interest method less impairment losses if any. Loans and receivables are of a short term nature and hence their carrying value approximates fair value. Financial liabilities Financial liabilities of the Fund are either measured at fair value through profit or loss or at amortised cost using the effective interest method. Financial liabilities other than those at fair value through profit or loss include distributions payable, balances due to brokers, redemptions payable and sundry creditors and accruals which are carried at amortised cost using the effective interest method. These financial liabilities are of a short term nature and hence their carrying value approximates fair value. Effective from 1 July, the issue of redeemable units in the Fund were reclassified as equity as the Fund satisfies all criteria for the classification of puttable financial instruments as equity under AASB 132 Financial Instruments: Presentation. Prior to 1 July financial liabilities arising from the issue of redeemable units in the Fund were carried at the redemption amount representing the unitholders rights to a residual interest in the Fund s assets at reporting date which approximates fair value. Offsetting financial instruments Financial assets and liabilities are offset and the net amount reported in the Statement of Financial Position when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis, or realise the asset and settle the liability simultaneously. (d) Revenue and expenses Dividends are recognised as revenue on the date the shares are quoted ex-dividend. Distributions from unlisted unit trusts are recognised as at the date the unit value is quoted ex-distribution. Where a present entitlement to a distribution exists at year end, it is derived for tax purposes. Interest on cash deposits, bank bills of exchange and fixed interest securities is calculated using the effective interest method and is recognised as revenue in the Statement of Comprehensive Income on an accruals basis. Net change in the fair value of financial instruments held at fair value through profit and loss is determined as the difference between the fair value at year end or consideration received (if sold during the year) and the fair value as at the prior year end or acquisition (if the investment was acquired during the year). Other income is recognised in the Statement of Comprehensive Income on an accruals basis. 12

15 1 Summary of significant accounting policies (continued) (d) Revenue and expenses (continued) Transaction costs incurred in the acquisition and disposal of assets are expensed in the Statement of Comprehensive Income on an accruals basis. Expenses, including Responsible Entity fees, are recognised in the Statement of Comprehensive Income on an accruals basis. (e) (f) (g) Finance costs Effective from 1 July, distributions paid and payable have been disclosed as transactions with unitholders in the Statement of Changes in Equity. Prior to 1 July, distributions paid and payable were recognised in the Statement of Comprehensive Income as finance costs. Change in net assets attributable to unitholders Unrealised gains and losses arising from movements in the fair value of assets are held within net assets attributable to unitholders. The taxable and concessionally taxed portions of realised capital gains on the disposal of investments are attributed to unitholders in the period for which they are assessable for tax purposes. Taxation The Fund has elected into the AMIT regime. On the basis that unitholders are attributed all of the taxable income of the Fund (which includes net realised capital gains) for a financial year, the Fund itself should not be liable for tax. Unitholders will be attributed a share of the taxable income of the Fund and will be required to include the amount attributed to them in their assessable income. Prior to 1 July, unitholders were presently entitled to the income of the Fund and were taxed on the distribution income paid and payable by the Fund during the year. The price of a unit is based on the market values of underlying assets and thus may include a share of unrealised taxable capital gains/losses. Should a net gain be realised, that portion of the gain that is subject to capital gains tax will be attributed to unitholders. Any balance of realised capital losses is not attributed to unitholders but is carried forward to be offset against any future realised capital gains. If realised capital gains exceed realised capital losses, the excess is attributed to unitholders. (h) Net assets attributable to unitholders Effective from 1 July, the net assets attributable to unitholders have been reclassified from a financial liability to equity as the units issued by the Fund satisfy all the criteria for puttable financial instruments to be classified as equity under AASB 132 Financial Instruments: Presentation. Prior to 1 July, the units issued by the Fund were classified as a financial liability as payment of the Fund s distributable income was mandatory as prescribed by the Constitution. Units issued by the Fund provide unitholders with the right to redeem their units on request. The fair value of redeemable units is measured at the redemption price. (i) Determination of redemption price for units in the Fund The redemption price is determined in accordance with the Constitution and is calculated as the value of the assets of the Fund less its liabilities, adjusted for estimated transaction costs, divided by the number of units on issue. 13

16 1 Summary of significant accounting policies (continued) (j) Goods and services tax (GST) The Responsible Entity fees and other expenses are recognised net of the amount of GST recoverable as a reduced input tax credit (RITC). Receivables and payables are stated inclusive of GST. Cash flows are included in the Statement of Cash Flows on a gross basis. 2 Net assets attributable to unitholders 2018 Transfer from liability to equity/opening balance* 327,461, ,846,892 Reclassification due to AMIT tax regime implementation** (327,461,260) - Applications Redemptions - 56,846,572 - (66,939,189) Change in net assets attributable to unitholders - 10,706,985 Closing balance - 327,461,260 * Net assets attributable to unitholders are classified as equity at 30 June 2018 and as liabilities at 30 June. ** Effective from 1 July, the net assets attributable to unitholders have been reclassified from financial liability to equity. As a result, equity transactions, including distributions have been disclosed in the above statement for the year ended 30 June. Accordingly, distributions are no longer classified as a finance cost in the Statement of Comprehensive Income but rather as transactions with unitholders in the Statement of Changes in Equity. The Responsible Entity considers net assets attributable to unitholders as capital. This capital is invested in accordance with the provisions of the Fund s Constitution. The Responsible Entity may make additional investments in the case of net applications, or realise investments in the case of net redemptions, depending on the desired level of liquidity in the Fund. Under the Fund's Constitution, the Responsible Entity may suspend applications or redemptions if it is considered to be in the best interests of unitholders. 3 Interest income 2018 Cash and cash equivalents 1,087,487 1,196,457 Fixed interest securities 2,429,972 2,558,969 Total interest income 3,517,459 3,755,426 4 Other expenses 2018 Total audit expense* 45,925 47,702 * Represents the fees accrued or paid during the year 14

17 5 Auditor s remuneration 2018 Audit services KPMG*: Audit of the Annual Financial Report 37,950 39,050 Audit of the Compliance Plan 7,975 8,652 * Represents the agreed fees for the audit of the Annual Financial Report and Compliance plan. 6 Distributions paid and payable 2018 per per unit unit Distribution paid September quarter 2,292, ,353, Distribution paid December quarter 2,270, ,334, Distribution paid March quarter 2,259, ,320, Distribution payable June quarter 16,597, ,087, Total 23,420, ,096, (a) Unrealised capital gains/(losses) 2018 Balances at 30 June Net unrealised capital gains for tax 42,368,685 44,452,399 Unrealised taxable capital gains/(losses) have been calculated in accordance with the relevant tax legislation and have not been reported in the financial statements, refer note 1(g). 7 Related parties (a) Responsible Entity and Key Management Personnel Maple-Brown Abbott Limited (ABN ) is the Responsible Entity of the Fund. Maple-Brown Abbott Limited is also the investment manager of the Fund. As Responsible Entity, Maple-Brown Abbott Limited is regarded as fulfilling the role and obligations of key management personnel of the Fund. The directors of Maple-Brown Abbott Limited are regarded as key management personnel of that company and not of the Fund. 15

18 7 Related parties (continued) (b) Responsible Entity The names of the persons who were directors of the Responsible Entity during or since the end of the year are as follows: Name Period of directorship J K Kightley Appointed 11/02/1994 G M Rossler Appointed 19/07/1999 R A Grundy Appointed 01/07/2008 G R Bazzan Appointed 01/07/2008 D L Maple-Brown Appointed 01/07/2009 T T Robinson Appointed 07/03/2013 R A R Lee Appointed 22/10/2015 J A Elliott Appointed 04/01/ Loans to key management personnel of Maple-Brown Abbott Limited The Fund has not made, guaranteed or secured, directly or indirectly, any loans to the key management personnel of Maple-Brown Abbott Limited or their personally related entities at any time during the reporting period. Other transactions with key management personnel of Maple-Brown Abbott Limited Apart from those details disclosed in this note, no key management personnel of Maple-Brown Abbott Limited have entered into a contract for services with the Fund since the end of the previous financial year. Remuneration The Responsible Entity s fees are calculated in accordance with the Fund s Constitution (as amended). The Responsible Entity s fee is 0.87% (exclusive of GST, refer note 1(j)) per annum, accrued daily and paid monthly based on the net asset value of the Fund. The total fee of 2,777,108 (: 2,867,719) is disclosed as an item of expense in the Statement of Comprehensive Income and the fee paid during the year is disclosed separately in the Statement of Cash Flows. Balances payable The aggregate amounts payable to the Responsible Entity by the Fund at 30 June are as follows: 2018 Responsible Entity fee 243, ,821 These amounts are included in sundry creditors and accruals in the Statement of Financial Position. Related Party Transactions Investing activities (in other Maple-Brown Abbott funds) The Fund may purchase and sell units in other registered managed investment schemes managed by the Responsible Entity in the ordinary course of business at application and redemption prices calculated in accordance with the Constitutions of those funds. Where the Fund invests in such other schemes, no additional investment management or responsible entity fees are charged in respect of these inter-fund investments. 16

19 7 Related parties (continued) (b) Responsible Entity (continued) At 30 June details of the Fund s investments in other funds managed by the Responsible Entity are set out below: Number of Fair Interest Units Units sold Distributions units held value held in the purchased during the received/ Fund during the year receivable year during the year 2018 % Maple-Brown Abbott Small Companies Trust 5,707,145 4,684, ,716 1,002, ,919 Maple-Brown Abbott International Equity Trust 51,550,371 59,829, ,929,546 6,758,402 7,769,464 Maple-Brown Abbott Global Listed Infrastructure Fund 12,663,709 21,210, ,484,392 1,765, ,567 Maple-Brown Abbott Small Companies Trust 6,427,509 5,142, , , ,628 Maple-Brown Abbott International Equity Trust 49,379,227 58,327, ,757,199 12,919,162 10,164,455 Maple-Brown Abbott Global Listed Infrastructure Fund 11,944,750 20,553, , ,445 The transactions with those entities are carried out on the same terms and conditions as for other unitholders in those funds. Transactions with other parties At 30 June details of the transactions by each specified director of Maple-Brown Abbott Limited and their personally related entities are as follows: Unitholder Number of units held Fair value Units purchased during the year Units sold during the year Distributions received/ receivable during the year 2018 J K Kightley 807,896 1,742, ,969 T T Robinson 442, , ,350-59,487 R A R Lee 351, ,992 26,977-55,091 J A Elliott 22,212 47,909 22,212-2,491 J K Kightley 807,896 1,754, ,949 R A R Lee 324, ,451 86,840-56,697 Other entities associated with the Responsible Entity may hold units in the Fund from time to time in various capacities. The transactions with those other entities and any of the above related entities are carried out on the same terms and conditions as for other unitholders in the Fund. 17

20 8 Notes to the Statement of Cash Flows (a) Components of cash and cash equivalents 2018 Cash at bank 5,166,182 1,445 Deposits at call with banks - 2,035,883 Bank bills of exchange 23,880,444 26,867,369 Term deposits 34,000,000 34,000,000 Cash at the end of financial year 63,046,626 62,904,697 (b) Reconciliation of change in net assets attributable to unitholders to cash flows from operating activities 2018 Change in net assets attributable to unitholders (1,801,580) 10,706,985 Adjustment for: Dividend and distribution income reinvestment (12,807,069) (6,270,993) Distribution reinvested 10,511,313 9,302,143 Rebates reinvested 150, ,610 Net change in the fair value of financial instruments held at fair value through profit and loss (6,032,208) (20,054,584) Changes in operating assets and liabilities during the year: Interest, dividends and distribution receivables 3,395,060 (5,364,509) RITC receivable 4,851 (2,020) Sundry creditors and accruals (13,343) 1,412 Distributions payable (3,490,464) 1,618,352 Cash flows from operating activities (10,082,811) (9,936,604) (c) Non-cash operating, financing and investing activities The following amounts are not included in the Statement of Cash Flows: Operating activities Dividend and distribution income reinvestment During the year the Fund received dividends and distributions in the form of shares or units via a dividend or distribution reinvestment plan (DRP). The value of the shares or units received is based on the market value as determined by the DRP rules and is detailed below: 2018 Dividends and distributions received in the form of shares or units 12,807,069 6,270,993 18

21 8 Notes to the Statement of Cash Flows (continued) (c) Non-cash operating, financing and investing activities (continued) Financing activities Unitholder distributions and rebates reinvested The Fund issues new units in consideration for the reinvestment of distributions and rebates payable to unitholders. The value of the units and number of units issued or redeemed during the year is summarised below: 2018 units units Unitholder distribution and rebate reinvested Units issued 10,661,942 4,883,085 9,428,753 4,373,985 Investing activities The above dividend and distribution income reinvestments are not included in the Statement of Cash Flows relating to the purchase of investments. (d) Reconciliation of liabilities from financing activities The net change in financing activities during the year is (13,334,169) which was from application and redemption transactions made by unitholders (: (19,355,953)). 9 Financial instruments Risks and capital management objectives The Fund's activities expose it to a variety of risks: market risk (including price risk, interest rate risk and currency risk), liquidity risk, credit risk and operational risk. The Responsible Entity seeks to minimise the Fund s financial risks through a variety of activities, including diversification of the investment portfolio and the selection of liquid investments in accordance with the specific investment policies and restrictions set out in the Product Disclosure Statement. The key element in the Responsible Entity s investment philosophy is to seek to buy investments that offer relatively good long term value. The investment philosophy can also be described as contrarian and conservative, which helps to minimise the Fund s financial risks. The nature and extent of the financial instruments outstanding at the balance date and the risk management policies employed by the Responsible Entity are discussed below, together with specific investment objectives and policies applicable to the Fund. 19

22 9 Financial instruments (continued) (a) Market risk Market risk is the risk that the value of a financial instrument will change as a result of exposure to market price changes, interest rate changes and currency movements. Price risk The Fund s market price risk is managed on a daily basis in accordance with the following specific investment policies and restrictions: Investment policies The Fund s model asset allocation (the current target) is reviewed at regular asset allocation meetings having regard to the neutral, maximum and minimum asset allocations set out below: Neutral % Maximum % Minimum % Fixed interest Overseas equities Alternative assets Australian equities REITs Liquidity Total 100 There is also a neutral, maximum and minimum range applied for total growth assets (Australian equities, overseas equities and REITs) and defensive assets as follows: Neutral % Maximum % Minimum % Growth assets Defensive assets Total 100 At the asset allocation meetings relevant macro-economic information is reviewed. To assess the relative value of each asset class the Responsible Entity utilises in-house models to generate the Fund s total rate of return forecasts. When assessing the relative merits of the asset classes a four year outlook is undertaken. The Responsible Entity adheres closely to the model weightings (subject to tolerances) determined at the asset allocation meetings, particularly in relation to equities where it tries not to deviate by more than 1% from the model. Hence the model acts as a buy-sell discipline. For example, if the Australian stock market rises, and there are no other changes to the other asset classes, the Australian equity weighting correspondingly rises and it then becomes necessary to sell Australian stocks to bring the asset classes into line with the model. 20

23 9 Financial instruments (continued) (a) Market risk (continued) Investment restrictions The main guideline in relation to portfolio composition is as follows: o Exposure to a single entity should not be greater than 5% above its weighting in the Responsible Entities customised Australian equities ex-a-reits index. Exposure to the Maple-Brown Abbott Small Companies Trust should not be greater than 5% of the Fund s Australian equity portfolio. o o The total market value held in any one REIT should not exceed by more than 10% the weighting of that REIT in the S&P/ASX 300 A-REIT Index (Total Returns). Alternative asset exposure is ordinarily achieved through the Maple-Brown Abbott Global Listed Infrastructure Fund. Up to 10% of the Fund s market value may be invested in alternative assets. Market exposures As at 30 June the market exposures were: Financial assets at fair value through profit or loss: Designated at fair value through profit and loss Overseas equities held via unlisted unit trust 59,829,920 58,327,902 - Alternative assets held via unlisted unit trust 21,210,175 20,553,505 - Australian-listed equities 111,609, ,135,045 - Australian-listed equities held via unlisted unit trust 4,684,425 5,142,650 - Australian-listed REITs 16,068,234 13,262,300 Total 213,402, ,421,402 21

24 9 Financial instruments (continued) (a) Market risk (continued) Carrying amounts versus fair values The fair values of financial assets and financial liabilities approximates their carrying amounts in the Statement of Financial Position. Sensitivity analysis The table below details the approximate change in net assets attributable to unitholders if there is a percentage change in the above asset classes benchmarks (as outlined in the investment restrictions above) assuming all other variables are constant: 2018 % change % change Increase in benchmarks 10 21,117, ,309,723 Decrease in benchmarks 10 (21,117,122) 10 (21,309,723) Fair value measurement recognised in the Statement of Financial Position The fair value measurement disclosures use a three-tier value hierarchy that reflects the significance of the inputs used in measuring fair values. The fair value hierarchy is comprised of the following levels: o o o Level 1 fair values measured using quoted prices (unadjusted) in active markets for identical instruments; Level 2 fair values measured using directly (i.e. as prices) or indirectly (i.e. derived from prices) observable inputs, other than quoted prices included in Level 1; and Level 3 fair values measured using inputs that are not based on observable market data (unobservable inputs). 22

25 9 Financial instruments (continued) (a) Market risk (continued) At 30 June the financial instruments carried at fair value split by valuation method is summarised below: Level 1 Level 2 Level 3 Total 2018 Financial assets at fair value through profit or loss: Fixed interest securities 46,256,686 9,909,707-56,166,393 Overseas equities held via unlisted unit trust - 59,829,920-59,829,920 Alternative assets held via unlisted unit trust 21,210, ,210,175 Australian-listed equities 111,609, ,609,565 Australian-listed equities held via unlisted unit trust 4,684, ,684,425 Australian-listed REITs 16,068, ,068,234 Total 199,829,085 69,739, ,568,712 Financial assets at fair value through profit or loss: Fixed interest securities 43,034,711 16,496,334-59,531,045 Overseas equities held via unlisted unit trust - 58,327,902-58,327,902 Alternative assets held via unlisted unit trust 20,553, ,553,505 Australian-listed equities 115,135, ,135,045 Australian-listed equities held via unlisted unit trust 5,142, ,142,650 Australian-listed REITs 13,262, ,262,300 Total 197,128,211 74,824, ,952,447 Transfers between levels The Fund s policy is to recognise transfers into and transfers out of fair value hierarchy levels as at the end of the reporting period. There have been no transfers between levels in the fair value hierarchy at the end of 30 June 2018 and 30 June. There were also no changes made to any of the valuation techniques applied as of 30 June

26 9 Financial instruments (continued) (a) Market risk (continued) Fair value measurement Fair value in an active market (level 1) The fair value of financial assets and liabilities traded in active markets (such as publicly traded derivatives and equity securities) is based on bid prices at the end of the reporting period without any deduction for estimated future selling costs. For the majority of financial assets and liabilities, information provided by the quoted market independent pricing services is relied upon for valuation. A financial instrument is regarded as quoted in an active market if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service, or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm's length basis. An active market is a market in which transactions for the financial asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis. The investments in unlisted trusts included as level 1 in the above table relate to investments in registered managed investment schemes managed by the Responsible Entity. Further details of these investments are disclosed in note 7(b). These investments are valued at their quoted redemption price at balance date in accordance with note 1(c). As per note 1(c), the Fund s investments in government and semi-government fixed interest securities are priced on appropriate yield curves taking into account factors such as credit rating, security types, and term to maturity. Fair value in an inactive or unquoted market (level 2 and 3) The fair value of financial assets and liabilities that are not traded in an active market is determined by using valuation techniques. Quoted market prices or dealer quotes for similar instruments are used for debt securities held. The Fund may use a variety of valuation methods and makes assumptions that are based on market conditions existing at the end of each reporting period. Valuation techniques used for non-standardised financial instruments, such as over-the-counter derivatives, include the use of comparable arm's length transactions, reference to the current fair value of a substantially similar other instrument or any other valuation technique that is commonly used by market participants which maximises the use of market inputs and relies as little as possible on entity-specific inputs. 24

27 9 Financial instruments (continued) (a) Market risk (continued) For other pricing models, inputs are based on market data at the end of the reporting period. The output of a model is always an estimate or approximation of a value that cannot be determined with certainty, and valuation techniques employed may not fully reflect all factors relevant to the positions held. Valuations are therefore adjusted, where appropriate, to allow for additional factors including liquidity risk and counterparty risk. Investments in unlisted trusts included as level 2 are valued at their quoted redemption price at balance date. As per note 1(c), the Fund s investments in corporate fixed interest securities are priced on appropriate yield curves taking into account factors such as credit rating, security types, and term to maturity. Fair value measurements using significant unobservable inputs (level 3) The Fund did not hold any financial instruments with fair value measurements using significant unobservable inputs during the year ended 30 June 2018 or year ended 30 June. Financial instruments not measured at fair value The carrying value less impairment provision of other receivables and payables are assumed to approximate their fair values due to their short term nature. Interest rate risk The Fund s exposure to interest rate risk largely relates to cash and cash equivalents and fixed interest securities. Interest rate risk is caused by fluctuations in the prevailing levels of market interest rates which directly impacts on the investment values or returns. Investment policies For Australian fixed interest securities the Responsible Entity conducts fundamental analysis of economic criteria including economic growth and inflation, in order to estimate the fair value of short and long term security yields. Relative valuations, in addition to absolute valuations, are monitored and considered for the purpose of portfolio construction. Investment restrictions Fixed interest securities are usually Government or semi-government securities, or highly rated corporate bonds, but the Fund may from time to time buy other paper, including listed floating rate notes and redeemable preference shares. 25

28 9 Financial instruments (continued) (a) Market risk (continued) Market exposures At 30 June the Fund s exposure to interest rate risk for classes of financial assets is set out below: Floating interest Rate Fixed interest rate Total 2018 Cash at bank 5,166,182-5,166,182 Term deposits - 34,000,000 34,000,000 Bank bills of exchange - 23,880,444 23,880,444 Fixed interest securities - 56,166,393 56,166,393 Total 5,166, ,046, ,213,019 Deposits at call with banks 2,037,328-2,037,328 Term deposits - 34,000,000 34,000,000 Bank bills of exchange - 26,867,369 26,867,369 Fixed interest securities - 59,531,045 59,531,045 Total 2,037, ,398, ,435,742 Interest rate sensitivity (fixed interest securities) The table below details the approximate change in net assets attributable to unitholders at reporting date if there is a change in interest rates assuming all other variables are constant: 2018 Basis point change Basis point change Increase in interest rates 100 (1,108,462) 100 (1,590,865) Decrease in interest rates 100 1,151, ,660,216 Currency risk Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate due to changes in foreign exchange rates for financial instruments denominated in currencies other than the functional currency (AUD) of the Fund. 26

29 9 Financial instruments (continued) (a) Market risk (continued) Investment policies Predicting currency fluctuations is difficult but an attempt to minimise currency risk is done by taking currency forecasts into account when making investments. Overseas investment exposure is achieved through the Maple-Brown Abbott Global Listed Infrastructure Fund (GLIF) and the Maple-Brown Abbott International Equity Trust (IET), which in turn invests part of its assets in the Maple-Brown Abbott Asian Investment Trust (AIT). The investment manager may from time to time hedge the Fund s foreign exchange exposure which may be undertaken in any of the GLIF, IET or AIT. Currency fluctuations are included in the redemption price of the unlisted unit trusts and are considered part of the price risk sensitivity analysis. Investment restrictions At the asset allocation level the Responsible Entity adheres closely to the model weightings, subject to tolerances, determined at the asset allocation meetings, hence the model acts as a buy-sell discipline for the asset classes impacted by currency exposure. (b) Liquidity risk The liquidity risk to which the Fund is exposed arises because unitholders may request redemption of their units in the Fund from time to time, which under normal circumstances are payable within periods of up to six business days. Liquidity risk is minimised through the Fund maintaining sufficient cash and selecting liquid investments traded on a recognised reputable stock exchange and holding investments in unlisted unit trusts which hold investments traded on a recognised reputable stock exchange. The table below shows financial liabilities at contractual undiscounted cashflow amounts grouped into relevant maturities based on the remaining period at 30 June to the contractual maturity date: Less than 1 month 1-3 months 3-12 months More than 12 months Redeemable upon request Total * 2018 Redemptions payable 4,076, ,076,092 Distribution payable 16,597, ,597,196 Sundry creditors and accruals 243,309 15, ,874 Total 20,916,597 15, ,932,162 Redemptions payable 710, ,000 Balances due to brokers 709, ,692 Distribution payable 20,087, ,087,660 Sundry creditors and accruals 252,820 19, ,217 Net assets attributable to unitholders** ,461, ,461,260 Total 21,760,172 19, ,461, ,240,829 * The carrying amounts equal the contractual cashflow amounts. ** Net assets attributable to unitholders is classified as equity as at 30 June 2018 and as a financial liability as at 30 June, as disclosed in Notes 1 and 2. The Fund s Constitution permits the Responsible Entity to suspend withdrawals if it s considered to be in the best interests of unitholders. 27

30 9 Financial instruments (continued) (c) Credit risk Credit risk is the risk that the Fund may incur a loss if other parties fail to perform their obligations under the financial instruments which comprise the Fund s investment portfolio. Any non-equity investments generally incorporate credit assessments in investment valuations and the risk of loss is implicitly provided for in the determination of the fair value of such investments. The Fund also has a credit risk exposure in relation to its transactions with counterparties such as brokers, banks and other financial intermediaries. The Fund minimises concentrations of credit risk by transacting through a number of brokers all of whom operate on recognised and reputable exchanges. All bank bill securities held by the Fund are endorsed or accepted by major Australian trading banks. The credit risk exposure to any one counterparty is low. Total credit risk for the Fund arising from recognised financial instruments is limited to the value of the Fund s investments and receivables shown in the Statement of Financial Position. At 30 June the Standard and Poor s credit rating is set out below: AAA AA+ AA- A1+ A A- BBB Total 2018 Cash at bank ,166, ,166,182 Bank accepted bills of ,880, ,880,444 exchange Term deposits ,000, ,000,000 Fixed interest securities (Australian) Government 34,584, ,584,674 Semi-Government 8,390,807 3,281, ,672,012 Corporate - - 4,214,648-1,522,725 3,131,564 1,040,770 9,909,707 Total 42,975,481 3,281,205 4,214,648 63,046,626 1,522,725 3,131,564 1,040, ,213,019 28

31 9 Financial instruments (continued) (c) Credit risk (continued) AAA AA+ AA- A1+ A A- BBB Total Deposits at call with ,037, ,037,328 banks Bank accepted bills of ,867, ,867,369 exchange Term deposits ,000, ,000,000 Fixed interest securities (Australian) Government 32,148, ,148,310 Semi-Government 8,522,578 2,363, ,886,401 Corporate - - 8,685,929-2,534,825 4,202,800 1,072,780 16,496,334 Total 40,670,888 2,363,823 8,685,929 62,904,697 2,534,825 4,202,800 1,072, ,435,742 (d) Operational risk Operational risk is the risk of direct or indirect loss to the Fund associated with the Responsible Entity s processes, personnel, technology and infrastructure, and from external forces (other than credit, market and liquidity risks) such as those arising from changes to legal and regulatory requirements. The objective of the Responsible Entity in managing operational risk is to mitigate as much as possible the risk of financial losses and damage to reputation, commensurate with overall cost effectiveness. The Responsible Entity is responsible for the development and implementation of controls to address operational risk. This responsibility is supported by the development of an overall control framework implemented to manage operational risk, key aspects of which include: o o o o o o o o o o appropriate segregation of duties, including the independent authorisation of transactions; cash and securities positions are completely and accurately recorded and reconciled to third party data; monitoring the performance of external service providers; documentation of controls and procedures; periodic assessment of operational risks faced, and the adequacy of controls and procedures to address the risks identified; reporting of operational losses and proposed remedial action, with appropriate follow-up; assessment and mitigation of cyber risks and development of contingency business continuity, including disaster recovery, plans; training and professional development; ethical and business standards; and risk mitigation, including insurance where this is effective. 29

32 10 Investment in unconsolidated subsidiaries The Fund has applied the AASB 10 investment entity exemption and accordingly has valued these financial assets at fair value (redemption price) through profit or loss. Country of incorporation Ownership interest Ownership interest Subsidiaries 2018 % % Maple-Brown Abbott International Equity Trust Australia Maple-Brown Abbott Asian Investment Trust* Australia * At 30 June 2018, The Maple-Brown Abbott International Equity Trust held 50.4% (: 58.3%) of the units, giving the Fund an indirect interest of 24.5% (: 28.1%). The Fund does not have current commitments or intentions and contractual obligations to provide financial or other support to its unconsolidated subsidiaries. There are no loans or advances currently made to the unconsolidated subsidiaries. There are no significant restrictions on the ability of an unconsolidated subsidiary to transfer funds to the Fund in the form of cash distributions. 11 Interests in unconsolidated structured entities The table below sets out the unconsolidated structured entities held by Fund at 30 June: Asset class Statement of Financial Position reference Fair value 2018 Overseas equities Overseas equities held via unlisted unit trust 59,829,920 Alternative assets Alternative assets held via unlisted unit trust 21,210,175 Australian equities Australian-listed equities held via unlisted unit trust 4,684,425 85,724,520 Overseas equities Overseas equities held via unlisted unit trust 58,327,902 Alternative assets Alternative assets held via unlisted unit trust 20,553,505 Australian equities Australian-listed equities held via unlisted unit trust 5,142,650 84,024,057 The fair value represents the maximum exposure to loss for each unconsolidated structured entity. The fair value of the exposure will change daily and in subsequent periods will cease once the investments are disposed of. The investment manager of each unconsolidated structured entity is responsible for implementing and monitoring the entity s investment objective and strategy. The investment decisions are based on the analysis conducted by the underlying investment manager. The return of the Fund is exposed to the variability of the performance of the underlying structured entity. 30

33 12 Events subsequent to balance date As the investments are measured at their 30 June 2018 fair values in the financial report, any change in values subsequent to the end of the reporting period is not reflected in the Statement of Comprehensive Income or the Statement of Financial Position. However the change in the value of investments is reflected in the current unit price. 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 2018 or on the results and cash flows of the Fund for the year ended on that date. 31

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