Macquarie Treasury Fund. ARSN Annual report - 30 June 2014

Transcription

1 ARSN Annual report - 30 June 2014

2 ARSN Annual report - 30 June 2014 Contents Page Directors' Report 1 Auditor's Independence Declaration 4 Statement of Comprehensive Income 5 Statement of Financial Position 6 Statement of Changes in Equity 7 Statement of Cash Flows 8 9 Directors' Declaration 30 Independent Auditor's Report 31 This financial report covers Macquarie Treasury Fund as an individual entity. The Responsible Entity of Macquarie Treasury Fund is Macquarie Investment Management Limited (ABN ). The Responsible Entity's registered office is No.1 Martin Place, Sydney, NSW 2000.

3 Directors' Report 30 June 2014 The directors of Macquarie Investment Management Limited, a wholly owned subsidiary of Macquarie Group Limited, the Responsible Entity of Macquarie Treasury Fund, present their report together with the financial report of Macquarie Treasury Fund (the "Trust") for the year ended 30 June Principal activities The Trust invests in debt securities and derivatives in accordance with 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 Terry J Edstein (appointed 01/07/2013) J Skender (appointed 01/07/2013, resigned 30/06/2014) I Miller (appointed 01/07/2013) H Brown (appointed 01/07/2014) Review and results of operations During the year, the Trust continued to be managed in accordance with the investment objective and strategy set out in the Trust s offer document and in accordance with the Trust Constitution. Results The performance of the Trust, as represented by the results of its operations, was as follows: Operating profit before finance costs attributable to unitholders () 93, ,589 Distributions Distribution paid and payable () 93, ,589 Distribution (cents per unit) 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. 1

4 Directors' Report 30 June 2014 Matters subsequent to the end of the financial year No matter or circumstance has arisen since 30 June 2014 that has significantly affected, or may significantly affect: (i) the operations of the Trust in future financial years, or (ii) the results of those operations in future financial years, or (iii) the state of affairs of the Trust in future financial years. Likely developments and expected results of operations The Trust will continue to be managed in accordance with the investment objective and strategy set out in the Trust s offer document and in accordance with 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. Under the Trust Constitution, Macquarie Investment Management Limited as Responsible Entity of the Trust is entitled to be indemnified out of the assets of the Trust for any liability incurred by it in properly performing or exercising any of its powers or duties in relation to 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 9 of the financial statements. No fees were paid out of Trust property to the directors of the Responsible Entity during the year (2013: Nil). The number of interests in the Trust held by the Responsible Entity, its directors or its associates as at the end of the financial year are disclosed in note 9 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 statement 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. 2

5 Directors' Report 30 June 2014 Rounding of amounts to the nearest thousand dollars Pursuant to Class Order 98/100 issued by the Australian Securities & Investments Commission, relating to the "rounding off" of amounts in the directors' report and financial report, amounts in the directors' report and financial report have been rounded off to the nearest thousand dollars in accordance with that Class Order, unless otherwise indicated. Auditor's independence declaration A copy of the Auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 4. This report is made in accordance with a resolution of the directors. Director:... B Terry Sydney 16 September

6 Ernst & Young 680 George Street Sydney NSW 2000 Australia GPO Box 2646 Sydney NSW 2001 Tel: Fax: ey.com/au Auditor s Independence Declaration to the Directors of Macquarie Investment Management Limited In relation to our audit of the financial report of Macquarie Treasury Fund for the financial year ended 30 June 2014, 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. Ernst & Young Darren Handley-Greaves Partner 16 September 2014 A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation

7 Statement of Comprehensive Income Notes Investment income Interest income 47,073 70,839 Net gains on financial instruments held at fair value through profit or loss 5 46,698 56,752 Other operating income 6 22 Total net investment income 93, ,613 Expenses Other operating expenses Total operating expenses Operating profit 93, ,589 Finance costs attributable to unitholders Distributions to unitholders (93,754) (127,589) Profit/(loss) for the year - - Other comprehensive income for the year - - Total comprehensive income for the year - - The above statement of comprehensive income should be read in conjunction with the accompanying notes. 5

8 Statement of Financial Position As at 30 June 2014 Notes Assets Cash and cash equivalents 7 898,659 1,422,140 Financial assets held at fair value through profit or loss 8 2,056,561 1,749,718 Total assets 2,955,220 3,171,858 Liabilities Distributions payable 1,615 2,675 Responsible Entity fees payable Application received in advance 3,500 - Other payables 1 1 Total liabilities (excluding net assets attributable to unitholders) 5,756 3,462 Net assets attributable to unitholders - liability 6 2,949,464 3,168,396 The above statement of financial position should be read in conjunction with the accompanying notes. 6

9 Statement of Changes in Equity Total equity at the beginning of the year - - Total comprehensive income for the year - - Transactions with owners in their capacity as owners - - Total equity at the end of the year - - 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 statement of changes in equity should be read in conjunction with the accompanying notes. 7

10 Statement of Cash Flows Notes Cash flows from operating activities: Proceeds from sale of financial instruments held at fair value through profit or loss 5,043,740 5,136,466 Purchase of financial instruments held at fair value through profit or loss (5,307,802) (5,523,545) Interest received 50,982 77,618 Other income received 6 22 Payment of other expenses (23) (25) Net cash outflow from operating activities 10(a) (213,097) (309,464) Cash flows from financing activities: Proceeds from applications by unitholders 11,939,498 13,260,335 Payments for redemptions by unitholders (12,239,063) (14,035,324) Distributions paid (8,165) (8,657) Expenses paid on behalf of unitholders (2,654) (3,314) Net cash outflow from financing activities (310,384) (786,960) Net decrease in cash and cash equivalents (523,481) (1,096,424) Cash and cash equivalents at the beginning of the year 1,422,140 2,518,564 Cash and cash equivalents at the end of the year 7 898,659 1,422,140 Non-cash financing activities 10(b) 83, ,108 The above statement of cash flows should be read in conjunction with the accompanying notes. 8

11 1 General Information This financial report covers Macquarie Treasury Fund (the "Trust") as an individual entity. The Trust was constituted on 15 February The Trust is a registered managed investment scheme domiciled in Australia. The Responsible Entity of the Trust is Macquarie Investment Management Limited (the "Responsible Entity''). The Responsible Entity s registered office is No.1 Martin Place, Sydney, NSW The financial report is presented in Australian dollars. The Investment Manager of the Trust is Macquarie Investment Management Limited (the "Investment Manager"). During the year, the Trust continued to be managed in accordance with the investment objective and strategy set out in the Trust s offer document and in accordance with the Trust Constitution. The financial statements were authorised for issue by the directors on 16 September The directors of the Responsible Entity have the power to amend and reissue the financial report. 2 Summary of Significant Accounting Policies The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all years presented, unless otherwise stated in the following text. (a) Basis of Preparation This general purpose financial report has been prepared in accordance with Australian Accounting Standards, other authoritative pronouncements of the Australian Accounting Standards Board and the Corporations Act 2001 in Australia. The financial report is prepared on the basis of fair value measurement of assets and liabilities except where otherwise stated. The statement of financial position is presented on a liquidity basis. Assets and liabilities are presented in decreasing order of liquidity and do not distinguish between current and non-current. All balances are expected to be recovered or settled within twelve months, except for investments in financial assets and net assets attributable to unitholders. The amount expected to be recovered or settled within twelve months after the end of each reporting period cannot be reliably determined. Where necessary, comparative information has been reclassified to be consistent with current period disclosures. Changes in Australian Accounting Standards The Trust has adopted all mandatory Australian Accounting Standards and Interpretations for the financial year beginning on or after 1 July The following key Accounting Standards and amendments to Accounting Standards became applicable in the current financial year: (i) AASB 10 Consolidated Financial Statements and related standards AASB 11 Joint Arrangements, AASB 12 Disclosure of Interest in Other Entities (effective from 1 January 2013) AASB 10 Consolidated Financial Statements establishes a new control model that applies to all entities. It replaces parts of AASB 127 Consolidated and Separate Financial Statements dealing with the accounting for consolidated financial statements and UIG Consolidation - Special Purpose Entities. 9

12 2 Summary of Significant Accounting Policies (continued) (a) Basis of Preparation (continued) (i) AASB 10 Consolidated Financial Statements and related standards AASB 11 Joint Arrangements, AASB 12 Disclosure of Interest in Other Entities (effective from 1 January 2013) (continued) AASB 11 Joint Arrangements and AASB 12 Disclosure of Interest in Other Entities affect the level of disclosures surrounding the Trust s interests in subsidiaries, associates, joint ventures and unconsolidated structured entities. Adoption of these standards has not had any effect on the financial position, performance or financial report disclosures of the Trust. (ii) AASB 13 Fair Value Measurement (effective from 1 January 2013) AASB 13 Fair Value Measurement establishes a single source of guidance under AASB for determining the fair value of assets and liabilities. AASB 13 Fair Value Measurement does not change when an entity is required to use fair value, but rather, provides guidance on how to determine fair value when fair value is required or permitted. Application of this definition may result in different fair values being determined for the relevant assets. AASB 13 Fair Value Measurement also expands the disclosure requirements for all assets or liabilities carried at fair value. This includes information about the assumptions made and the qualitative impact of those assumptions on the fair value determined. Adoption of this standard has not had any effect on the financial position, performance or financial report disclosures of the Trust. (iii) AASB Amendments to Australian Accounting Standards - Disclosures - Offsetting Financial Assets and Financial Liabilities (effective from 1 January 2013) These amendments require an entity to disclose information about rights of set-off and related arrangements (such as collateral agreements). The aim of the amendments is to provide users of financial statements with information about the effect or potential effect of such rights and arrangements on the Trust s financial position. The new disclosures are required for all recognised financial instruments that are set off in accordance with AASB 132 Financial Instruments: Presentation. These disclosures also apply to recognised financial instruments that are subject to an enforceable master netting arrangement or similar agreement, irrespective of whether they are set off in accordance with AASB 132 Financial Instruments: Presentation. The application of these amendments has not had any effect on the financial position or performance of the Trust; however the disclosure requirements are more comprehensive than the previously existing disclosure requirements. AASB Amendments to Australian Accounting Standards - Disclosures - Offsetting - Financial Assets and Financial Liabilities, disclosures are provided in note 3(f). Compliance with International Financial Reporting Standards The financial statements also comply with International Financial Reporting Standards as issued by the International Accounting Standards Board. 10

13 2 Summary of Significant Accounting Policies (continued) (b) Financial instruments (i) Classification 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 such as futures. 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. These include investments in debt securities. 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 investment strategy. The Trust s policy is for the Responsible Entity to evaluate the information about these financial assets on a fair value basis together with other related financial information. Loans and receivables comprise amounts due to the Trust. (ii) Recognition/derecognition 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 Trust has transferred substantially all risks and rewards of ownership. (iii) Measurement (a) Financial assets and financial liabilities held at fair value through profit or loss Financial assets and financial 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 statement of comprehensive income.! Fair value in an active market The fair value of financial assets and financial liabilities traded in active markets is based on their quoted market prices at the statement 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. 11

14 2 Summary of Significant Accounting Policies (continued) (b) Financial instruments (continued) (iii) Measurement (continued) (a) Financial assets and financial liabilities held at fair value through profit or loss (continued)! Fair value in an inactive or unquoted market The fair value of financial assets and financial liabilities that are not traded in an active market is determined using valuation techniques. These include the use of recent arm s length market transactions, reference to the current fair value of a substantially similar other instrument, discounted cash flow techniques, option pricing models or any other valuation technique that provides a reliable estimate of prices obtained in actual market transactions. Where discounted cash flow techniques are used, estimated future cash flows are based on management s best estimates and the discount rate used in a market rate at the statement of financial position date applicable for an instrument with similar terms and conditions. For other pricing models, inputs are based on market data at the statement of financial position date. Fair values for unquoted equity investments are estimated, if possible, using applicable pricing/earnings ratios for similar listed companies adjusted to reflect the specific circumstances of the issuer. The fair value of derivatives that are not exchange traded is estimated at the amount that the Trust would receive or pay to terminate the contract at the statement of financial position date taking into account current market conditions (volatility and appropriate yield curve) and the current creditworthiness of the counterparties. Details on how the fair value of financial instruments is determined are disclosed in note 3(e). (b) Loans and receivables Loans and receivables are measured initially at fair value plus transaction costs and subsequently amortised using the effective interest method, less impairment losses if any. Such assets are reviewed at each statement of financial position date to determine whether there is objective evidence of impairment. If any such indication of impairment exists, an impairment calculation is undertaken and any impairment loss is recognised in the statement 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 write-down is reversed through the statement of comprehensive income. (iv) Offsetting financial instruments Financial assets and financial liabilities are offset and the net amount reported in the statement of financial position if, and only if, there is a legally enforceable right to offset the recognised amounts at all times and there is an intention to settle on a net basis, or realise the asset and settle the liability simultaneously. 12

15 2 Summary of Significant Accounting Policies (continued) (c) 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 statement of financial position date if unitholders exercised their right to put the units back to the Trust. (d) Cash and cash equivalents For the purpose of presentation in the statement of cash flows, cash includes cash on hand and deposits held at call with financial institutions. Cash equivalents include 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, which are subject to an insignificant risk of changes in value and are held for the purpose of meeting short-term cash commitments rather than for investment or other purposes. Bank overdrafts, if any, are shown separately on the statement 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 Trust's main income generating activity. (e) Margin accounts Margin accounts comprise cash held as collateral for derivative transactions. The cash is held by the broker and is only available to meet margin calls. (f) Investment income Interest income is recognised in the statement of comprehensive income for all financial instruments that are not held at fair value through profit 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 on financial instruments. Other changes in fair value for such instruments are recorded in accordance with the policies described in note 2(b). 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 that exactly discounts estimated future cash payments or receipts throughout the expected life of the financial instrument, or a shorter period where applicable, 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. (g) Expenses Responsible Entity Fees are accounted for at unitholder level, all other expenses are recognised in the statement of comprehensive income on an accruals basis. (h) Income tax Under current legislation, the Trust is not subject to income tax as unitholders are presently entitled to the income of the Trust. 13

16 2 Summary of Significant Accounting Policies (continued) (h) Income tax (continued) 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. (i) Distributions In accordance with the Trust Constitution, the Trust distributes its distributable income, and any other amounts determined by the Responsible Entity, to unitholders by cash or reinvestment. The distributions are recognised in the statement of comprehensive income as finance costs attributable to unitholders. (j) 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 statement of comprehensive income as finance costs. (k) Goods and Services Tax (GST) The GST incurred on the costs of various services provided to the Trust by third parties have been passed onto the Trust. The Trust qualifies for RITC hence other expenses have been recognised in the statement 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 statement of financial position. Cash flows relating to GST are included as cash flows from operating activities in the statement of cash flows on a gross basis. (l) Receivables Receivables may include amounts for interest. Interest is accrued at the reporting date from the time of last payment in accordance with the policy set out in note 2(f) above. Amounts are generally received within 30 days of being recorded as receivables. Receivables may include such items as Reduced Input Tax Credits (RITC). (m) Payables Payables include liabilities and accrued expenses owing by the Trust which are unpaid as at year end. The distribution amount payable to unitholders as at year end is recognised separately in the statement of financial position as unitholders are presently entitled to the distributable income under the Trust Constitution. (n) 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. 14

17 2 Summary of Significant Accounting Policies (continued) (o) Use of estimates The Trust makes estimates and assumptions that affect the reported amounts of assets and liabilities within the next financial year. Estimates are continually evaluated and based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Certain financial instruments, for example, 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, inputs such as credit risk (both own and counterparty), volatilities and correlations require management to make estimates. Changes in assumptions about these inputs could affect the reported fair value of financial instruments. For certain other financial instruments, including accounts payable, the carrying amounts approximate fair value due to the immediate or short-term nature of these financial instruments. (p) New accounting standards and interpretations Certain new accounting standards and interpretations have been published that are not mandatory for the 30 June 2014 reporting periods. The Responsible Entity s 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, AASB Amendments to Australian Accounting Standards arising from AASB 9, AASB Amendments to Australian Accounting Standards - Conceptual Framework, Materiality and Financial Instruments - Part C and related amendment AASB and AASB Amendments to Accounting Standards AASB 9 Financial Instruments applies to annual reporting periods beginning on or after 1 January 2018 and will therefore apply to the Trust from 1 July AASB 9 Financial Instruments requires all financial instruments to be measured at fair value unless the criteria for amortised cost are met. The application of the standard is not expected to change the measurement basis of any of the Trust's current financial instruments, however, AASB 9 Financial Instruments allows the Trust to elect to present gains and losses on equity securities through other comprehensive income, which may impact the presentation of these gains and losses. The impact of the standard may also change if the nature of the Trust's activities or investments changes prior to initial application. The Trust does not intend to early adopt AASB 9 Financial Instruments as permitted by the standard, and the actual impact on initial application will depend on certain elections as disclosed above. (ii) AASB Amendments to Australian Accounting Standards - Offsetting Financial Assets and Financial Liabilities These amendments clarify the meaning of a legally enforceable right to set-off. The amendments also clarify the application of AASB 132 Financial Instruments: Presentation offsetting criteria to settlement systems (such as central clearing house systems) which apply gross settlement mechanisms that are not simultaneous. These amendments are not expected to impact the Trust s financial position or performance and become effective for annual periods beginning on or after 1 January 2014 and will therefore apply to the Trust from 1 July

18 2 Summary of Significant Accounting Policies (continued) (p) New accounting standards and interpretations (continued) (ii) AASB Amendments to Australian Accounting Standards - Offsetting Financial Assets and Financial Liabilities (continued) The Trust does not intend to early adopt AASB Amendments to Australian Accounting Standards - Offsetting Financial Assets and Financial Liabilities as permitted by the standard. Management does not expect these amendments will have a significant effect on the financial position, performance or financial report disclosures of the Trust. (iii) AASB Amendments to Australian Accounting Standards - Investment Entities AASB Amendments to Australian Accounting Standards - Investment Entities applies to annual reporting periods beginning on or after 1 January 2014 and will therefore apply to the Trust from 1 July Under AASB Amendments to Australian Accounting Standards - Investment Entities, an investment entity may apply the exemption to consolidation and instead account for its investments in subsidiaries at fair value through profit and loss. Where the Trust qualifies as an investment entity, the change in accounting policy will be applied retrospectively in accordance with the transition provisions of AASB 10 Consolidated Financial Statements. The amendments also introduce new disclosure requirements for investment entities to AASB 12 Disclosure of Interests in Other Entities and AASB 127 Separate Financial Statements. The Trust does not intend to early adopt AASB Amendments to Australian Accounting Standards - Investment Entities as permitted by the standard. Management does not expect these amendments will have a significant effect on the financial position, performance or financial report disclosures of the Trust. Standards and interpretations that are not expected to have a material impact on the Trust have not been included. (q) Rounding of amounts Pursuant to Class Order 98/100 issued by the Australian Securities & Investments Commission, relating to the "rounding off" of amounts in the directors' report and financial report, amounts in the directors' report and 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 Trust s activities expose it to a variety of financial risks: market risk (which may include price risk, foreign exchange risk and interest rate risk), credit risk and liquidity risk. The Trust s overall risk management programme focuses on ensuring compliance with the Trust s investment guidelines and seeks to maximise the returns derived for the level of risk to which the Trust is exposed. The Trust uses derivatives and other instruments for trading purposes and in connection with its risk management activities. The Trust may use derivative financial instruments to gain or reduce market exposure in the portfolio. Derivatives are not used to gear (leverage) the portfolio. Gearing a portfolio would occur if the level of exposure to the markets exceed the underlying value of the Trust. 16

19 3 Financial risk management (continued) (a) Strategy in using financial instruments (continued) Financial risk management is monitored by the Investment Manager's risk management department under policies approved by the Responsible Entity's senior managers or by the board of directors of the Responsible Entity (the "Board"). (b) Market risk (i) Price risk Price risk for the Trust's debt securities and derivatives is a function of foreign exchange risk, interest rate risk, credit risk and liquidity risk. (ii) Foreign exchange risk The Trust is not exposed to foreign exchange risk as all assets and liabilities are denominated in Australian dollars. (iii) Interest rate risk The Trust is subject to 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. Interest rate risk is managed by:! only allowing investments into certain instrument types! limiting the term of interest rate securities! managing the weighted average maturity for the portfolio. The Board Audit Risk and Compliance Committee of the Responsible Entity reviews any identified exceptions to internal risk policies and procedures on a quarterly basis. The Trust's financial assets and financial liabilities expose it to risks associated with the effects of fluctuations in the prevailing levels of market interest rates on its financial position and cash flow. The table below demonstrates the sensitivity of the Trust's profit/(loss) for the year to a reasonably possible change in interest rates, with all other variables held constant. The sensitivity of the profit/(loss) for the year is the effect of the assumed changes in interest rates on net interest income for the year based on the floating rate financial assets at year end and changes in fair value of investments for the year based on revaluing fixed rate financial assets at year end. 17

20 3 Financial risk management (continued) (b) Market risk (continued) (iii) Interest rate risk (continued) In practice, the actual results may differ from the below sensitivity analysis and the difference could be significant. Sensitivity of changes in fair value of investments Change in basis points Sensitivity of interest income relating to a change in interest rates Increase/ (decrease) Increase/ (decrease) Increase/ (decrease) 30 June /(25) 2,520/(2,520) (463)/ June /(25) 3,999/(3,999) (871)/871 (c) Credit risk Credit risk arises from the Trust's investment in debt securities. Other credit risk arises from cash and cash equivalents, deposits with banks and other financial institutions and counterparties to derivatives. None of these assets are impaired nor past due but not impaired. Credit risk is managed by:! managing exposures to issuers, deposit taking institutions, brokers and other counterparties! maintaining an approved broker and counterparty panel. The exposure to credit risk for cash and cash equivalents, deposits with banks and other financial institutions and counterparties to derivatives is low as all counterparties have a rating of at least A- (2013: A-) as determined by Standard and Poor's rating agency. In accordance with the Trust s policy, the Investment Manager's risk management department monitors the Trust s credit exposure on a daily basis. The Board Audit Risk and Compliance Committee of the Responsible Entity reviews any identified exceptions to internal risk policies and procedures on a quarterly basis. 18

21 3 Financial risk management (continued) (c) Credit risk (continued) The maximum exposure to credit risk at the reporting date is the carrying amount of cash and cash equivalents and other financial assets. An analysis of debt securities by credit rating is set out in the table below: S&P long term ratings Debt securities AA- 4,115 - Total S&P long term ratings 4,115 - S&P short term ratings Debt securities A1+ 1,673,396 1,256,461 A1 379, ,257 Total S&P short term ratings 2,052,446 1,749,718 Total debt securities 2,056,561 1,749,718 (d) Liquidity risk The Trust is exposed to daily cash redemptions of redeemable units. It therefore invests the majority of its assets in investments that can be generally liquidated within a short period of time. The investments of the Trust may become illiquid. As a result, the Trust may not be able to liquidate quickly its investments in these instruments at an amount close to their fair value, or at all, to meet its liquidity requirements. No such investments were held at the statement of financial position date. Liquidity risk is managed by managing the exposure to less liquid securities. The Board Audit Risk and Compliance Committee of the Responsible Entity reviews any identified exceptions to internal risk policies and procedures on a quarterly basis. Redeemable units are redeemed at the request of unitholders subject to the Trust's offer document and Trust Constitution (as applicable). All other liabilities are payable within 30 days. (e) Fair value estimation The carrying amounts of all the Trust's financial assets and financial liabilities at the end of each reporting period approximated their fair values as all financial assets and financial liabilities not fair valued are short-term in nature. 19

22 3 Financial risk management (continued) (e) Fair value estimation (continued) The Trust classifies fair value measurements using a fair value hierarchy that reflects the subjectivity of the inputs used in making the measurements. The fair value hierarchy has the following levels:! Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1).! Inputs other than quoted prices included within level 1 that are observable for the 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 determination of what constitutes 'observable' requires significant judgement by the Trust. The Trust considers observable data to be market data that is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market. The following table analyses within the fair value hierarchy the Trust's financial assets and financial liabilities (by class) measured at fair value at 30 June 2014 and 30 June June 2014 Level 1 Level 2 Level 3 Total Financial assets Financial assets designated at fair value through profit or loss at inception: - Debt securities - 2,056,561-2,056,561 Total financial assets - 2,056,561-2,056, June 2013 Level 1 Level 2 Level 3 Total Financial assets Financial assets designated at fair value through profit or loss at inception: - Debt securities - 1,749,718-1,749,718 Total financial assets - 1,749,718-1,749,718 20

23 3 Financial risk management (continued) (e) Fair value estimation (continued) During the year, there were no transfers between level 1 and 2 or into/out of level 3 (2013: Nil). For debt securities, fair value is determined using valuation techniques. Valuation techniques include net present value techniques, comparison to similar instruments for which market observable prices exist, options pricing models and other relevant valuation models. These financial instruments have therefore been classified as level 2 in the fair value hierarchy. (f) Offsetting financial instruments Financial assets and financial liabilities are presented net in the statement of financial position where the Trust currently has a legally enforceable right to set off the recognised amounts and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously. The Trust currently does not have a legally enforceable right to set off the recognised financial assets and financial liabilities amounts and there is no intention to settle on a net basis or realise the asset and settle the liability simultaneously. All financial instruments are currently reported on a gross basis in the statement of financial position. 4 Auditor's remuneration During the year the following fees were paid or payable for services provided by the auditor of the Trust: 2014 $ 2013 $ Audit services Ernst & Young Australian firm Audit of financial reports 5,212 4,972 Other audit work under the Corporations Act Total remuneration for audit services 5,558 5,308 Audit fees are paid out of the Responsible Entity's own resources. 21

24 5 Net gains on financial instruments held at fair value through profit or loss Net gains recognised in relation to financial instruments held at fair value through profit or loss: Net gains on financial instruments held for trading - 64 Net gains on financial instruments designated as at fair value through profit or loss Interest income on financial instruments held at fair value through profit or loss 46,567 56,224 Net gains on financial instruments held at fair value through profit or loss 46,698 56,752 6 Net assets attributable to unitholders Movements in number of units and net assets attributable to unitholders during the year were as follows: As stipulated within the Trust Constitution, each unit represents a right to an individual share in the Trust and does not extend to a right to the underlying assets of the Trust. There are no separate classes of units and each unit has the same rights attaching to it as all other units of the Trust No. ' No. ' Opening balance 3,168,396 3,828,279 3,168,396 3,828,279 Applications 11,939,499 13,260,333 11,939,499 13,260,333 Redemptions (12,239,064) (14,032,010) (12,239,064) (14,032,010) Units issued upon reinvestment of distributions 83, ,108 83, ,108 Expenses paid on behalf of unitholders (2,654) (3,314) (2,654) (3,314) Closing balance 2,949,464 3,168,396 2,949,464 3,168,396 Capital risk management The Trust manages its net assets attributable to unitholders as capital, notwithstanding net assets attributable to unitholders are classified as a liability. The amount of net assets attributable to unitholders can change significantly on a daily basis as the Trust is subject to daily applications and redemptions at the discretion of unitholders. The Responsible Entity monitors the level of daily applications and redemptions relative to the liquid assets in the Trust. 22

25 7 Cash and cash equivalents Cash at bank 3, Deposits at call 894,986 1,421,484 Total cash and cash equivalents 898,659 1,422,140 8 Financial assets held at fair value through profit or loss 2014 Fair value 2013 Fair value Designated at fair value through profit or loss Debt securities 2,056,561 1,749,718 Total designated at fair value through profit or loss 2,056,561 1,749,718 Total financial assets held at fair value through profit or loss 2,056,561 1,749,718 Comprising: Debt securities Negotiable certificates of deposits 1,939,760 1,571,612 Floating rate notes 113, ,106 Corporate bonds 3,610 - Total debt securities 2,056,561 1,749,718 Total financial assets held at fair value through profit or loss 2,056,561 1,749,718 An overview of the risk exposures relating to financial assets at fair value through profit or loss is included in note 3. 9 Related party disclosures (a) Responsible Entity The Responsible Entity of Macquarie Treasury Fund is Macquarie Investment Management Limited (MIML), a wholly owned subsidiary of Macquarie Group Limited. 23

26 9 Related party disclosures (continued) (b) Key management personnel The following persons held office as directors of MIML during the year or since the end of the year and up to the date of this report: B Terry J Edstein (appointed 01/07/2013) J Skender (appointed 01/07/2013, resigned 30/06/2014) I Miller (appointed 01/07/2013) H Brown (appointed 01/07/2014) No amount is paid by the Trust directly to the directors of the Responsible Entity. Consequently, no compensation as defined in AASB 124 Related Party Disclosures is paid by the Trust to the directors as key management personnel. (c) Key management personnel unitholdings No key management personnel held units in the Trust at any time during the year (2013: Nil). (d) Key management personnel loan disclosures The Trust has not made, guaranteed or secured, directly or indirectly, any loans to the key management personnel or their personally related entities at any time during the reporting period (2013: Nil). (e) Responsible Entity fees and other transactions For the year ended 30 June 2014, in accordance with the Trust Constitution, the Responsible Entity received a total fee of up to 0.50% of net asset value (inclusive of GST, net of RITC available to the Trust) per annum (2013: up to 0.50%), charged at the unitholder level. All expenses in connection with the preparation of accounting records and the maintenance of the unit register have been fully borne by the Responsible Entity. All related party transactions are conducted on normal commercial terms and conditions. The transactions during the year and amounts payable at year end between the Trust, and the Responsible Entity were as follows: 2014 $ 2013 $ Management fees (charged at unitholder level) paid by the Trust to the Responsible Entity 2,654,416 3,313,845 Aggregate amounts payable to the Responsible Entity at the reporting date 639, ,356 24

27 9 Related party disclosures (continued) (f) Related party schemes' unitholdings Parties related to the Trust (including MIML, its affiliates and other schemes managed by MIML) held units in the Trust as follows: 30 June 2014 Unitholders Number of units held opening (Units) Number of units held closing (Units) Interest held % Number of units acquired (Units) Number of units disposed (Units) Distributions declared by the Trust $ Macquarie Master Cash Fund 55,022,521 43,492, ,893,109 18,422,795 1,354,438 Macquarie Capital Stable Fund 5,547,467 37,586-5,810,385 11,320,266 40,313 Capital Stable Fund 1,351, , ,863,944 30,257,100 49,498 Macquarie Global Infrastructure Trust II 148, , ,098-4,098 Balanced Fund 1,439,321 1,086, ,793,943 67,146,562 43,273 Macquarie Balanced Growth Fund 22,728,083 17,462, ,362,718 49,628, ,752 High Growth Fund 37, , ,816,914 25,110,647 31,953 Alternatives Fund 11,647,038 1,501, ,798,288 63,944, ,014 Macquarie Diversified Private Equity Fund 1,949,744 2,663, ,705, ,592 52,016 Global Emerging Markets Fund 341, ,658-8,556,481 8,762,690 8,317 Macquarie Life Limited 90,065, ,667, ,317, ,715,024 2,599,145 Australian Shares Fund 734,386 1,091, ,731,312 25,374,341 23,102 International Shares Fund 330, , ,667,717 53,047,844 73,165 Diversified Income Fund 1,127, , ,189,507 63,492,754 68,229 Listed Property and Infrastructure Fund 502, , ,019,737 16,785,579 21,980 Smaller Companies Fund 346, , ,118,092 7,306,085 7,787 Absolute Australian Shares Fund 2,095, , ,116,211 13,507,762 24,315 Absolute International Shares Fund 1,028, , ,954,792 9,291,653 20,388 Macquarie Short Term Currency Alpha Fund 2,616,966 3,666, ,454, ,749 87,596 25