Wellington Management Portfolios (Australia) Special Strategies Portfolio ARSN Annual report - 30 June 2010

Transcription

1 Wellington Management Portfolios (Australia) Special Strategies Portfolio ARSN Annual report -

2 Wellington Management Portfolios (Australia) Special Strategies Portfolio ARSN Annual report - Contents Directors' report 2Page Auditor's independence of comprehensive declaration income 65 Statements Statements of of changes financial in position equity 78 Statements of cash flows 9 Notes Directors' the financial declaration statements Independent auditor's report to the unitholders of Wellington Management Portfolios (Australia) Special Strategies Portfolio 32 This financial report covers Wellington Management Portfolios (Australia) Special Strategies Portfolio as an individual entity and the consolidated entity consisting of Wellington Management Portfolios (Australia) Special Strategies Portfolio and its subsidiaries. The Responsible Entity of Wellington Management Portfolios (Australia) Special Strategies Portfolio is Macquarie Investment Management Limited (ABN ). The Responsible Entity's registered office is Mezzanine Level, NO.1 Martin Place, Sydney, NSW

3 Wellngton Management Portfolios (Australia) Special Strategies Portfolio Directors' report Directors' report The directors of Macquarie Investment Management Limited, a wholly owned subsidiary of Macquarie Group Limited, the Responsible Entity of Wellington Management Portfolios (Australia) Special Strategies Portfolio, present their report together with the consolidated financial report of Wellington Management Portfolios (Australia) Special Strategies Portfolio ("the Trust" ) and its controlled entities (collectively, "the consolidated entity") for the year ended Principal activities The Trust invests in international equity securities, unlisted unit trusts, hybrid securities and derivatives in accordance with the provisions of the Trust Constitution. The Trust did not have any employees during the year. There were no significant changes in the nature of the Trust's activities during the year. Directors The following persons held office as directors of Macquarie Investment Management Limited during the year or since the end of the year and up to the date of this report: B N Terry N Roderick (resigned 29/03/2010) R Cartright V Malley C Vignes M Rady (resigned 01/02/2010) C Swanger (appointed 08/02/2010) T Graham (appointed 29/03/2010) Review and results of operations During the year, the Trust continued to invest funds in accordance with target asset allocations as set out in the governing documents of the Trust and in accordance with the provisions of the Trust Constitution. Results The performance of the Trustand the consolidated entity, as represented by the results of its operations, was as follows: Consolidated 30 June June June June 2009 Operating profit/(ioss) before finance costs attributable to unitholders () 13,575 (44,108) 10,866 (41,099) Distributions Distribution paid and payable to unitholders of the parent () Distribution to unitholders of the parent (cents per unit) 8, , Significant changes in state of affairs In the opinion of the directors, there were no significant changes in the state of affairs of the Trust that occurred during the financial year under review. Matters subsequent to the end of the financial year No matter or circumstance has arisen since that has significantly affected, or may significantly affect: (i) the operations of the Trust in future financial years, or (ii) the results of those operations in future financial years, or -2-

4 Wellington Management Portfolios (Australia) Special Strategies Portfolio Directors' report Directors' report (iii) the state of affairs of the Trust in future financial years. Likely developments and expected results of operations The Trust will continue to be managed in accordance with the investment objectives and guidelines as set out in the governing documents of the Trust and in accordance with the provisions of the Trust Constitution. The results of the Trust's operations will be affected by a number of factors, including the performance of investment markets in which the Trust 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 Trust and the expected results of those operations have not been included in this report because the Responsible Entity believes it would be likely to result in unreasonable prejudice to the Trust. Indemnification and insurance of officers and auditors No insurance premiums are paid for out of the assets of the Trust in regards to insurance cover provided to either the officers of Macquarie Investment Management Limited or the auditors of the Trust. So long as the offcers of Macquarie Investment Management Limited act in accordance with the Trust Constitution and the Law, the officers remain indemnified out of the assets of the Trust against losses incurred while acting on behalf of the Trust. The auditors of the Trust are in no way indemnified out of the assets of the Trust. Fees paid to and interests held in the Trust by the Responsible Entity or its associates Fees paid to the Responsible Entity and its associates out of Trust property during the year are disclosed in note 11 of the financial statements. No fees were paid out of Trust property to the directors of the Responsible Entity during the year. The number of interests in the Trust held by the Responsible Entity or its associates as at the end of the financial year are disclosed in note 11 of the financial statements. Interests in the Trust The movement in units on issue in the Trust during the year is disclosed in note 6 of the financial statements. The value of the Trust's assets and liabilities is disclosed on the statements of financial position and derived using the basis set out in note 2 of the financial statements. Environmental regulation The operations of the Trust are not subject to any particular or significant environmental regulations under a Commonwealth, State or Territory law. Rounding of amounts to the nearest thousand dollars The Trust is an entity of the kind referred to in Class Order 98/0100 (as amended) issued by the Australian Securities and Investments Commission relating to the "rounding off' of amounts in the directors' report. Amounts in the directors' report have been rounded to the nearest thousand dollars in accordance with that Class Order, unless otherwise indicated. -3-

5 Wellngton Management Portfolios (Australia) Special Strategies Portfolio Directors' report Directors' report Auditor's independence declaration A copy of the Auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 5. This report is made in accordance with a resolution of the directors. fl ~ (' ~.~ / R Cartwright Director Sydney 27 September

6 t.~ '''''''.. æu ERNST & YOUNG Ernst & Young Centre 680 George street Sydney NSW 2000 Australia GPO Box 2646 Sydney NSW 2001 Tel: Fax: Auditor's Independence Declaration to the Directors of Macquarie Investment Management Limited, as Responsible Entity for Wellngton Management Portfolios (Australia) - Special Strategies Portfolio In relation to our audit of the financial report of Wellington Management Portfolios (Australia) - Special Strategies Portfolio for the financial year ended, to the best of my knowledge and belief, there have been no contraventions of the auditor independence requirements of the Corporations Act 2001 or any applicable code of professional conduct. &sl ~ 1i..,, Ernst & Young It Graeme McKenzie Partner 27 September 2010 Liability limited by a scheme approved under Professional Standards Legislation

7 Wellngton Management Portfolios (Australia) Special Strategies Portfolio Statements of comprehensive income For the year ended Statements of comprehensive income Consolidated 30 June 30 June 30 June 30 June Notes -~ Investment income Interest income Dividend income 4,956 3,482 4,039 1,233 Trust distributions 2,427 Net gains/(iosses) on financial instruments held at fair value through profit or loss 5 12,779 (45,389) 9,168 (43,729) Other operating income 1, , Total net investment income/(ioss) 18,869 (41,475) 14,304 (39,127) Expenses Responsible Entity's fees 11 4,719 2,224 3,206 1,840 Withholding taxes on foreign dividends and interest Other operating expenses Total operating expenses 5,294 2,633 3,438 1,972 Operating profit/(ioss) 13,575 (44,108) 10,866 (41,099) Finance costs attributable to unitholders Distributions to unitholders of the parent entity (7,200) (7,200) Distributions to minority interests (839) (951) (Increase)/decrease in net assets attributable to unitholders of the parent entity 6 (10,866) 48,299 (10,866) 48,299 (Increase)/decrease in net assets attributable to minority interests Profit/(Ioss) for the year (1,870) 3,960 Total comprehensive income for the year The above statements of comprehensive income should be read in conjunction with the accompanying notes. -6-

8 Wellngton Management Portfolios (Australia) Special Strategies Portfolio Statements of financial position As at Cash-and Statements of financial position Consolidated 30 June 30 June 30 June 30 June Notes Assets cash equivalents 7 33,857 30,109 28,654 26,235 Due from brokers - receivable for securities sold 26,448 4,596 24,400 1,773 Receivables Financial assets held at fair value through profit or loss 8 357, , , ,453 Total assets 418, , , ,919 Liabilities Due to brokers - payable for securities purchased 4,603 25,249 2,847 22,861 Responsible Entity's fees payable 2, , Financial liabilities held at fair value through profit or loss 9 40,536 31,403 26,845 27,012 Net assets attributable to minority interests 42,341 38,496 Total liabilities (excluding net assets attributable to unitholders of the parent entity) 89,949 95,881 31,382 50,504 Net assets attributable to unitholders of the parent entity - liability 6 329, , , ,415 The above statements of financial position should be read in conjunction with the accompanying notes. -7-

9 Wellngton Management Portfolios (Australia) Special Strategies Portfolio Statements of changes in equity For the year ended Statements of changes in equity Consolidated Total equity at the beginning of the year Totarcomprenensíve income for the year Transactions with onwers in their capacity as owners Total equity at the end of the year 30 June June June June 2009 Under Australian 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 year. The above statements of changes in equity should be read in conjunction with the accompanying notes. -8-

10 Wellington Management Portfolios (Australia) Special Strategies Portfolio Statements of cash flows For the year ended Statements of cash flows Consolidated 30 June 30 June 30 June 30 June Notes Cashflows from operating activities Proceeds from sale of financial instruments held at fair value through profit or loss 995, , , ,439 Purchase of financial instruments held at fair value through profit or loss Dividends received (1,041,116) 4,475 (972,123) 2,698 (679,780) 1,648 (744,085) 857 Interest received Other income received Responsible Entity's fees paid (3,232) (1,497) (2,165) Payment of other expenses (17) (12) (824) Net cash outflow from operating 12(a) activities /43,289) (330,175) /45,093) (291,270) Cash flows from financing activities Proceeds from applications by unitholders 52, ,175 52, ,514 Payments for redemptions by unitholders Net cash inflow from financing /5,100) /5,100) activities 47, ,175 47, ,514 Net increase in cash and cash equivalents 4,517 23,000 2,673 20,244 Cash and cash equivalents at the beginning of the year 30,109 26,235 Effects of foreign currency exchange rate changes on cash and cash equivalents (769) 7,109 (254) 5,991 Cash and cash equivalents at the end of the year 7 33,857 30,109 28,654 26,235 Non-cash financing activities 12(b) 839 7,200 7,200 The above statements of cash flows should be read in conjunction with the accompanying notes. -9-

11 Wellngton Management Portfolios (Australia) Special Strategies Portfolio 1 General information This financial report includes separate financial statements for Wellington Management Portfolios (Australia) Special Strategies Portfolio ("he Trust" as an individual entity and the consolidated entity consisting of Wellington Management Portfolios (Australia) Special Strategies Portfolio ("he Trust") and its subsidiaries. The Trust was constituted on 11 April The Responsible Entity of the Trust is Macquarie Investment Management Limited (the "Responsible Entity"). The Responsible Entity's registered offce is Mezzanine Level, NO.1 Martin Place, Sydney, NSW The financial --- report is presented in Australian currency. During the year, the Trust invested funds in accordance with target asset allocations as set out in the current offer document and in accordance with the provisions of the Trust Constitution. The financial statements were authorised for issue by the directors on 27 September The directors of the Responsible Entity have the power to amend and reissue the financial report. 2 Summary of significant accounting policies The principal accounting policies applied in the preparation of these financial statements are set out below. (a) Basis of preparation This general purpose financial report has been prepared in accordance with Australian Accounting Standards, other authoritative pronouncements of the Australian Accounting Standards Board 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. Compliance with International Financial Reporting Standards (IFRS) The financial statements have been prepared in accordance with Australian Accounting Standards as issued by the Australian Accounting Standards Board and International Financial Reporting Standards as issued by the International Accounting Standards Board. (b) Principles of consolidation (i) Subsidiaries The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Wellington Management Portfolios (Australia) Special Strategies Portfolio ("the parent entity") as at and the results of all subsidiaries for the year then ended. Wellington Management Portfolios (Australia) Special Strategies Portfolio and its subsidiaries together are referred to in this financial report as the consolidated entity. Subsidiaries are all those entities (including special purpose entities) over which the consolidated entity has the power to govern the financial and operating policies, generally accompanying a shareholding of more than one-half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the consolidated entity controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the consolidated entity. They are de-consolidated from the date that control ceases. The purchase method of accounting is used to account for the acquisition of subsidiaries by the consolidated entity. All transactions (including gains and losses) and balances between entities in the consolidated group are eliminated. Minority interests in the results and net assets of subsidiaries are shown separately in the consolidated statements of comprehensive income and statements of financial position respectively. Investments in subsidiaries are accounted for at fair value in the individual financial statements of Wellington Management Portfolios (Australia) Special Strategies Portfolio. -10-

12 Wellington Management Portfolios (Australia) Special Strategies Portfolio 2 Summary of significant accounting policies (el Financial instruments (i) Classification The consolidated entity and the Trust's investments are categorised as at fair value through profit or loss. They comprise: Financial instruments held for trading These include derivative financial instruments including foreign exchange spot contracts and options. The consolidated entity and the Trust does not designate any derivatives as hedges in a hedging relationship. Financial instruments designated at fair value through profit or loss upon initial recognition These include financial assets that are not held for trading purposes and which may be sold, such as investments in exchange traded international equity instruments, hybrid securities and unlisted unit trusts. Financial assets and financial liabilities designated at fair value through profit or loss at inception are those that are managed and their performance evaluated on a fair value basis in accordance with the Trust's documented inyestment strategy. The Trust's policy is for the Responsible Entity to evaluate the information about these financial assets on a fair value basis together with other related financial information. Loans and receivables/payables comprise amounts due to or from the consolidated entity and the Trust. (ii) Recognition/derecognition The consolidated entity and the Trust 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 cashflows from the investments has expired or the consolidated entity or the Trust has transferred substantially all risks and rewards of ownership. (iii) Measurement (a) Financial assets and liabilities held at fair value through profit or loss 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 loss are measured at fair value with changes in their fair value recognised in the statements of comprehensive income. Fair value in an active market The fair value of financial assets and liabilities traded in active markets is based on their quoted market prices at the statements of financial position date without any deduction for estimated future selling costs. Financial assets are priced at current bid prices, while financial liabilities are priced at current asking prices. Fair value in an inactive or unquoted market The fair value of derivatives that are not exchange-traded is estimated at the amount that the consolidated entity and the Trust would receive or pay to terminate the contract at the statements of financial position date taking into account current market conditions (volatility and appropriate yield curve) and the current creditworthiness of the counterparties. The fair value of a forward contract is determined as a net present value of estimated future cash flows, discounted at appropriate market rates as at the valuation date. Investments in unlisted unit trusts are recorded at the redemption value per unit as reported by the managers of such trusts. -11-

13 Wellington Management Portfolios (Australia) Special Strategies Portfolio 2 Summary of significant accounting policies (c) Financial instruments (b) Loans and receivables. Loan assets_are measured initially at fair value plus transaction costs and subsequently amortised using the effective interest rate method, less impairment losses if any. Such assets are reviewed at each statements of financial position date to determine whether there is objective evidence of impairment for example when there has been a significant or prolonged decline in the fair value below carrying amount. If any such indication of impairment exists, an impairment loss is recognised in the statements of comprehensive income as the difference between the asset's carrying amount and the present value of estimated future cash flows discounted at the original effective interest rate. If in a subsequent period the amount of an impairment loss recognised on a financial asset carried at amortised cost decreases and the decrease can be linked objectively to an event occurring after the write-down, the writedown is reversed through the statements of comprehensive income. (d) Investments in subsidiaries Investments in subsidiaries are measured in accordance with note 2(c). (e) Business combinations Business combinations relate to the acquisition by the Trust of controlling interests in other entities. The purchase method of accounting is used to account for all business combinations, including business combinations involving entities or businesses under common control, regardless of whether equity instruments or other assets are acquired. Cost is measured as the fair value of the consideration given plus costs directly attributable to the acquisition. (f) Net assets attributable to unitholders Units are redeemable at the unitholders' option and are therefore classified as financial liabilities. The units can be put back to the Trust at any time for cash based on the redemption price. The fair value of redeemable units is measured at the redemption amount that is payable (based on the redemption unit price) at the statements of financial position date if unitholders exercised their right to put the units back to the Trust. (g) Cash and cash equivalents For the purpose of presentation in the statements of cash flows, cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short term, highly liquid investments with original maturities of three months or less from the date of acquisition that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts. Bank overdrafts, if any, are shown separately in the statements of financial position. Payments and receipts relating to the purchase and sale of investment securities are classified as cash flows from operating activities, as movements in the fair value of these securities represent the consolidated entity and the Trust's main income generating activity. (h) Investment income Interest income is recognised in the statements of comprehensive income for all financial instruments that are not held at fair value through profi or loss using the effective interest method. Interest income on assets held at fair value through profit or loss is included in the net gains/(losses) on financial instruments. Other changes in fair value for such instruments are recorded in accordance with the policies described in note 2(c). -12-

14 Wellngton Management Portfolios (Australia) Special Strategies Portfolio 2 Summary of significant accounting policies (h) Investment income The effective interest method is a method of calculating the amortised cost of a financial asset or financial liability and of allocating the interest income or interest expense over the relevant period. The effective interest rate is the rate thate~açtly discquntsestimated future cashpayments or receipts throughout the expected life of the financial instrument, or a shorter period where appropriate, to the net carrying amount of the financial asset or liability. When calculating the effective interest rate, the Trust estimates cash flows considering all contractual terms of the financial instrument (for example, prepayment options) but does not consider future credit losses. The calculation includes all fees paid or received between the parties to the contract that are an integral part of the effective interest rate, including transaction costs and all other premiums or discounts. Dividend income is recognised on the ex-dividend date. Trust distributions are recognised on an entitlements basis. (i) Expenses All expenses, including Responsible Entity's fees, are recognised in the statements of comprehensive income on an accruals basis. (j Income tax Under current legislation, the Trust is not subject to income tax provided the taxable income of the Trust is fully distributed either by way of cash or reinvestment (i.e. unitholders are presently entitled to the income of the Trust). Financial instruments held at fair value may include unrealised capital gains. Should such a gain be realised, that portion of the gain that is subject to capital gains tax will be distributed so that the Trust is not subject to capital gains tax. Realised capital losses are not distributed to unitholders but are retained in the Trust to be offset against any realised capital gains. If realised capital gains exceed realised capital losses, the excess is distributed to unitholders. The benefits of imputation credits and foreign tax paid are passed on to unitholders. The Trust currently incurs withholding tax imposed by certain countries on investment income. Such income is recorded gross of withholding tax in the statements of comprehensive income. (k) Distributions In accordance with the Trust Constitution, the Trust distributes its distributable (taxable) income, and any other amounts determined by the Responsible Entity, to unitholders by cash or reinvestment. The distributions are recognised in the statements of comprehensive income as finance costs attributable to unitholders. (I) Increase/decrease in net assets attributable to unitholders Income not distributed is included in net assets attributable to unitholders. Movements in net assets attributable to unitholders are recognised in the statements of comprehensive income as finance costs. (m) Foreign currency translation i) Functiona/ and presentation currency Items included in the consolidated entity and the Trust's financial statements are measured using the currency of the primary economic environment in which it operates (the "functional currency"). This is the Australian dollar, which reflects the currency of the economy in which the consolidated entity and the Trust competes for funds and is regulated. The Australian dollar is also the consolidated entity and the Trust's presentation currency. -13-

15 ~ 'I Wellington Management Portfolios (Australia) Special Strategies Portfolio 2 Summary of significant accounting policies (m)foreign currency translation ii) Transactions and balances Foreign currency Jransactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translations at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the statements of comprehensive income. The consolidated entity and the Trust does not isolate that portion of gains or losses on securities and derivative financial instruments that are measured at fair value through profit or loss and which is due to changes in foreign exchange rates from that which is due to changes in the market price of securities. Such fluctuations are included with the net gains or losses on financial instruments at fair value through profit or loss. (n) Due from/to brokers Amounts due from/to brokers represent payables for securities purchased and receivables for securities sold that have been contracted for but not yet delivered by the end of the year. A provision for impairment of amounts due from brokers is established when there is objective evidence that the consolidated entity and the Trust will not be able to collect all amounts due from the relevant broker. Significant financial diffculties of the broker, probability that the broker will enter bankruptcy or financial reorganisation, and default in payments are considered indicators that the amount due from brokers is impaired. (0) Receivables Receivables may include amounts for dividends, distributions and interest. Dividends and distributions are accrued when the right to receive payment is established. Interest is accrued at the reporting date from the time of last payment in accordance with the policy set out in note 2(h) above. Amounts are generally received within 30 days of being recorded as receivables. Receivables include such items as Reduced Input Tax Credits (RITC) and application monies receivable from unitholders. (p) Payables Payables includes liabilities and accrued expenses owing by the consolidated entity and the Trust which are unpaid as at the reporting date. The distribution amount payable to unitholders as at the reporting date is recognised separately on the statements of financial position when unitholders are presently entitled to the distributable income under the Trust's Constitution. (q) Applications and redemptions Applications received for units in the Trust are recorded net of any entry fees payable prior to the issue of units in the Trust. Redemptions from the Trust are recorded gross of any exit fees payable after the cancellation of units redeemed. (r) Goods and Services Tax (GST) The GST incurred on the costs of various services provided to the Trust by third parties such as investment management fees have been passed onto the Trust. The Trust qualifies for RITC at a rate of 75% hence investment management fees and other expenses have been recognised in the statements of comprehensive income 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 statements of financial position. Cash flows relating to GST are included in the statements of cash flows on a gross basis. -14-

16 Wellington Management Portfolios (Australia) Special Strategies Portfolio 2 Summary of significant accounting policies (s) Use of estimates The consolidated entity and the Trust makes estimates and assumptions that affect the reported amounts of assets and liabilities within the next financial year. Estimates are continually evaluated and based on historical experience ----and-other-factors; including expectations of future events that are believed to be reasonable under the circumstances. For the majority of the consolidated entity and the Trust's financial instruments, quoted market prices are readily available. However, certain financial instruments, for example, over-the-counter derivatives or unquoted securities are fair valued using valuation techniques. Where valuation techniques (for example, pricing models) are used to determine fair values, they are validated and periodically reviewed by experienced personnel of the Responsible Entity, independent of the area that created them. Models are calibrated by back-testing to actual transactions to ensure that outputs are reliable. Models use observable data, to the extent practicable. However, areas such as credit risk (both own and counterparty), volatilities and correlations require management to make estimates. Changes in assumptions about these factors could affect the reported fair value of financial instruments. (t) New accounting standards and interpretations Certain new accounting standards and interpretations have been published that are not mandatory for 30 June 2010 reporting periods. The directors' assessment of the impact of these new standards (to the extent relevant to the Trust) and interpretations is set out below: (i) AASB 9 Financial Instruments and related amendment AASB replacing AASB 139 Financial Instruments: Recognition and Measurement The Australian Accounting Standards Board has now issued AASB 9 Financial Instruments which altered the classification and measurement of financial instruments. Under the new standard only two possible classifications arise, rather than the four existing classifications currently available under AASB 139 Financial Instruments: Recognition and Measurement, and will result in all financial assets being measured at amortised cost or fair value through profit or loss, or through other comprehensive income. Financial liabilities are currently excluded from the scope of this standard. The standard is mandatorily applicable for annual reporting periods beginning on or after 1 January The Trust has not adopted this standard early and is still assessing the full impact of this standard. (u) Rounding of amounts The consolidated entity and the Trust are entity's of the kind referred to in Class Order 98/0100 (as amended), issued by the Australian Securities and Investments Commission, relating to the "rounding off' of amounts in the financial report. Amounts in the financial report have been rounded off to the nearest thousand dollars in accordance with that Class Order, unless otherwise indicated. 3 Financial risk management (a) Strategy in using financial instruments The consolidated entity and the Trust's activities expose it to a variety of financial risks: market risk (including price risk and foreign exchange risk), credit risk and liquidity risk. Consolidated Entity The consolidated entity's financial risk is managed by the Investment Manager of the individual unit trusts within the consolidated entity. No other risk management occurs for the consolidated entity. Entity The Trust's overall risk management programme focuses on ensuring compliance with the Trust's governing documents and the law and seeks to maximise the returns in accordance with the level of risk to which the Trust is exposed. The Trust uses derivative financial instruments to alter certain risk exposures. -15-

17 Wellington Management Portfolios (Australia) Special Strategies Portfolio 3 Financial risk management Financial risk management is carried out by the Responsible Entity's risk management team under policies approved by MIML's senior managers or by the board of directors of the Responsible Entity (the Board). (b) Market risk (i) Price-fisk The consolidated entity and Trust trades in financial instruments by taking positions in traded and over-the-counter instruments, including derivatives, to take advantage of short-term market movements in equity markets. All securities investments present a risk of loss of capital. The Investment Manager moderates this risk through a careful selection of securities and other financial instruments within specified limits. The maximum risk resulting from financial instruments is determined by the fair value of the financial instruments. The Trust's overall market positions are monitored on a daily basis by the Trust's Investment Manager of the individual unit trust within the consolidated entity. In accordance with the Trust's policy, the risk management department of the Trust's Investment Manager monitors the Trust's overall market price sensitivity on a daily basis. This is done by: - not permitting gearing, securities lending and securities borrowing. - seeking to ensure the Trust is fully invested - managing the number of securities to aim for diversification across multiple stocks - managing risk to any single stock to aim for diversification across multiple strategies - seeking to ensure the Trust stays in line with its objective of maintaining weights in defined asset classes within stated ranges - not permittng short positions, with the exception of derivatives, to limit exposure to market risk - managing number of strategies to aim for diversification across multiple stocks - managing strategy approaches to effectively limit exposure to approved trading strategies to aim for diversification The consolidated entity and Trust's equity securities and trading derivative financial instruments are susceptible to market price risk arising from uncertainties about future prices of the instruments. The Trust is benchmarked against the MSCI World Index. The risk is measured using sensitivity analysis as detailed in note 3(c). (ii) Foreign exchange risk The consolidated entity and Trust holds both monetary and non-monetary assets denominated in currencies other than the Australian dollar. The foreign exchange risk relating to non-monetary assets and liabilities is a component of price risk. Foreign exchange risk arises as the value of monetary securities denominated in other currencies will fluctuate due to changes in exchange rates. The risk is measured using sensitivity analysis as detailed in note 3(c). Compliance with the Trust's policy is reported to the Board quarterly on an exceptions basis. -16-

18 Wellngton Management Portfolios (Australia) Special Strategies Portfolio 3 Financial risk management (ii) Foreign exchange risk The tables below summarise the consolidated entity and Trust's assets and liabilities that are denominated in a currency other than the Australian dollar. Consolidated -Japanese British Other US Dollars Euro Yen Pound currencies Total A$'OOO A$'OOO A$'OOO A$'OOO A$'OOO A$'OOO Assets Cash and cash equivalents 30,898 1,198 1, ,857 Due from brokers - receivable for securities sold 24, ,405 26,448 Receivables Financial assets held at fair value through profit or loss 218,181 37,857 31,627 20,378 49, ,821 Total assets 274,158 39,122 31,660 22,168 51, ,997 Liabilties Due to brokers - payable for securities purchased 4, ,603 Responsible Entity's fees payable 2,469 2,469 Financial liabilities held at fair value through profit or loss 33, , ,536 Net assets attributable to minority interests 42,341 42,341 Total liabilties (excluding net assets attributable to unitholders of the parent entity) 37, ,734 45,444 89,949 Net assets attributable to unitholders of the parent entityliability 236,454 39,055 24,926 22,168 6, ,

19 Wellington Management Portfolios (Australia) Special Strategies Portfolio 3 Financial risk management (ii) Foreign exchange risk Japanese British Other US Dollars Euro Yen Pound currencies Total A$'OOO A$'OOO A$'OOO A$'OOO A$'OOO A$'OOO Assets Cash and cash equivalents 28, ,654 Due from brokers - receivable for securities sold 23, ,064 24,400 Receivables Financial assets held at fair value through profit or loss 141,024 24,426 6,031 7, , ,666 Total assets 193,023 24,493 6,031 7, , ,430 Liabilities Due to brokers - payable for securities purchased 2, ,847 Responsible Entity's fees payable 1,690 1,690 Financial liabilities held at fair value through profit or loss 26, ,845 Total liabilities (excluding net assets attributable to unitholders) 29, ,951 31,382 Net assets attributable to unitholders - liabiliy 163,659 24,426 6,031 7, , ,048 Consolidated Japanese British Other 30 June 2009 US Dollars Euro Yen Pounds currencies Total A$'OOO A$'OOO A$'OOO A$'OOO A$'OOO A$'OOO Assets Cash and cash equivalents 4,449 18,387 2,580 4, ,109 Due from brokers - receivable for securities sold 2, ,835 4,596 Receivables Financial assets held at fair value through profit or loss 245,915 9,346 12,072 7,108 54, ,975 Total assets 252,569 28,103 14,979 11,789 56, ,046 Liabilities Due to brokers - payable for securities purchased 19,360 1,908 3,482 24,750 Financial liabilities held at fair value through profit or loss 7,362 17,283 2,881 2,628 1,249 31,403 Total liabilities (excluding net assets attributable to unitholders of the parent entity) 26,722 17,283 4,789 2,628 4,731 56,153 Net assets attributable to unitholders of the parent entity - liabilty 225,847 10,820 10,190 9,161 51, ,

20 Wellington Management Portfolios (Australia) Special Strategies Portfolio 3 Financial risk management (ii) Foreign exchange risk Japanese British Other 30 June 2009 US Dollars Euro Yen Pounds currencies Total A$'OOO A$'OOO A$'OOO A$'OOO A$'OOO A$'OOO Assets Cash and cash equivalents 4,067 16,955 2,580 2,632 26,235 Due from brokers - receivable for securities sold 1,773 1,773 Receivables Financial assets held at fair value through profit or loss 152,091 1,233 5,908 1,514 31, ,004 Total assets 158,022 18,195 8,488 4,146 31, ,250 Liabilities Due to brokers - payable for securities purchased 17,946 1,908 2,508 22,362 Financial liabilities held at fair value through profit or loss 4,905 16,925 2,554 2,628 27,012 Total liabilities (excluding net assets attributable to unitholders) 22,851 16,925 4,462 2,628 2,508 49,374 Net assets attributable to unitholders - liability 135,171 1,270 4,026 1,518 28, ,876 (iii) Interest rate risk The majority of the consolidated entity and Trust's financial assets and liabilities are non-interest bearing. As a result, the consolidated entity and Trust is not subject to significant amounts of risk due to fluctuations in the prevailing levels of market interest rates. Any excess cash and cash equivalents are invested at short-term market interest rates. (c) Summarised sensitivity analysis The following table summarises the sensitivity of the consolidated entity and Trust's operating profit and net assets attributable to unitholders to foreign exchange risk and other price risk. The reasonably possible movements in the risk variables have been determined based on management's best estimate, having regard to a number of factors, including historical levels of changes in foreign exchange rates, historical correlation of the consolidated entity and Trust'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 the economies, markets and securities in which the consolidated entity and Trust invest. As a result, historic variations in risk variables are not a definitive indicator of future variations in the risk variables. Reasonably possible movements in the risk variables for price risk are 15% (2009: 15%) and for foreign exchange risk are 15% (2009: 15%). Price risk Foreign exchange risk rofiunet assets attributable to unitholders Consolidated +15% -15% +15% -15% +15% -15% USD GBP GBP Other Other (47,593) 47,593 7,749 (7,749) 269 (269) 374 (374) 30 June 2009 (44,972) 44,972 (1,906) 1, (702) 2,752 (2,752) -19-

21 Wellington Management Portfolios (Australia) Special Strategies Portfolio 3 Financial risk management (c) Summarised sensitivity analysis 41,973 Price risk I Impact on operatin +15% -15% +15% USD (41,973) 7,412 Foreign exchange risk profiunet assets attributable to unitholders -15% +15% -15% +15% USD GBP GBP Other (7,412) 30 June ,813 (39,813) (1,802) 1, (395) 135 2,290-15% Other (135) (2,290) (d) Credit risk Credit risk arises from the Trust's investments in underlying trusts. Other credit risk arises from derivatives, cash and cash equivalents, deposits with banks and other financial institutions and amounts due from brokers. None of these assets are impaired nor past due but not impaired. The Trust restricts its exposure to credit losses on cash and cash equivalents by managing exposures to single issuers and only investing in banks. In accordance with the Trust's policy, the risk management department of the Responsible Entity monitors the Trust's credit position on a daily basis. The Compliance Committee of the Responsible Entity reviews any identified exceptions to internal risk policies and procedures on a quarterly basis. The risk management area of the Responsible Entity of the subsidiary is responsible for monitoring compliance on an individual basis. Exceptions to compliance with the credit risk policy are not monitored on a consolidated basis. The Trust ensures a minimum credit quality for individual cash issuers, reduces credit risk by limiting the target exposure of high yield fixed income and convertibles and therefore does not have any significant credit risk. (e) Liquidity Risk The Trust is exposed to daily cash redemptions of redeemable units. It therefore invests the majority of its assets in investments that are traded in an active market and can be readily disposed of. The Trust may, from time to time, invest in derivative contracts traded over the counter, which are not traded in an organised market and may be illiquid. As a result, the consolidated entity and Trust may not be able to liquidate quickly its investments in these instruments at an amount close to their fair value to meet its liquidity requirements or to respond to specific events such as a deterioration in the creditworthiness of any particular issuer. In accordance with the Trust's policy, the risk management area of the Responsible Entity monitors the Trust's liquidity position on a daily basis. This risk is managed by: - seeking to ensure the Trust is invested in suffciently liquid stocks - restricting exposure to illiquid assets The Compliance Committee of the Responsible Entity reviews any identified exceptions to internal risk policies and procedures on a quarterly basis. Liquidity risk is not monitored on a consolidated basis. Subject to the Corporations Act 2001 and the Trust's Constitution, redeemable units are redeemed on demand at the unitholder's option. Futures matures within 90 days and all other liabilities are payable within 30 days. (f) Fair value estimation The carrying amounts of the consolidated entity and the Trust's assets and liabilities at the reporting date approximate their fair values. The consolidated entity and the Trust has adopted the amendments to AASB 7, effective 1 July This requires the consolidated entity and the Trust to classify 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). -20-

22 Wellington Management Portfolios (Australia) Special Strategies Portfolio 3 Financial risk management (f) Fair value estimation Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (level 2) Inputs-for the asset or liability that are not based on observable market data (that is, unobservable inputs) (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. If a fair value measurement uses observable inputs that require significant adjustment based on unobservable inputs, that measurement is a level 3 measurement. Assessing the significance of a particular input to the fair value measurement in its entirety requires judgement, considering factors specific to the asset or liability. The table below sets out the consolidated entity and the Trust's financial assets and liabilities (by class) measured at fair value according to the fair value hierarchy at. Comparative information has not been provided as permitted by the transitional provisions of the new rules. Consolidated. as at Level 1 Financial assets Financial assets held for trading: - Derivatives Financial assets designated at fair value through profit or loss at inception: - Equity securities Total 314, ,307 Level 2 Level 3 Total balance 40,576 40,576 2,936 43, , ,819 Financial liabilties Financial liabilities held for trading: - Derivatives Total 40,536 40,536 40,536 40,536. as at Level 1 Financial assets - Derivatives Financial assets designated at fair value through profit or loss at inception: - Equity securities - Unlisted unit trusts Total Level 2 164, , , ,098 Level 3 Total balance 26,830 26, , , ,666 Liabilties Financial liabilities held for trading: - Derivatives Total 26,845 26,845 26,845 26,

23 Wellngton Management Portfolios (Australia) Special Strategies Portfolio 4 Auditor's remuneration During the year the following fees were paid or payable for services provided by the auditor of the Trust: Consolidated 30 June 30 June 30 June 30 June $ $ $ $ Audit services Audit and review of financial reports Other audit work under the Corporations Act 2001 Total remuneration for audit services 10,600 21,346 4,300 10, , ,400 11,180 24,146 4,590 11,458 Audit fees are paid out of the Investment Manager's own resources. 5 Net gains/(iosses) on financial instruments held at fair value through profit or loss Net gains/(iosses) recognised in relation to financial instruments held at fair value through profit or loss: Consolidated 30 June 30 June 30 June 30 June Net gains/(iosses) on financial instruments held for trading , Net gains/(iosses) on financial instruments (946) designated as at fair value through profit or loss 11,951 (55,781 ) 9,156 Interest expense on financial instruments held at (42,783) fair value through profit and loss (31 ) Net gains/(iosses) on financial instruments held at fair value through profit or loss 12,779 (45,389) 9,168 (43,729) -22-