Wilshire Australia Private Markets Pooled Superannuation Trust ABN Annual financial report - 30 June 2016

Transcription

1 Wilshire Australia Private Markets Pooled Superannuation Trust ABN Annual financial report -

2 Wilshire Australia Private Markets Pooled Superannuation Trust ABN Annual financial report - Contents Page Statement of comprehensive income 3 Balance sheet 4 Statement of changes in equity 5 Statement of cash flows 6 7 Trustee statement 28 Independent auditor s report to the Trustee and unitholders of Wilshire Australia Private Markets Pooled Superannuation Trust 29 These financial statements cover Wilshire Australia Private Markets Pooled Superannuation Trust as an individual entity. The Trustee of Wilshire Australia Private Markets Pooled Superannuation Trust during the reporting period was The Trust Company (Superannuation) Limited (ABN , RSE No L ). The Trustee's registered office is: Level 20, 357 Little Collins Street, Melbourne, Victoria. On 1 July, the Trustee changed its name to Diversa Trustees Limited. 2

3 Statement of comprehensive income For the year ended Investment income Notes Interest income on financial assets not held at fair value through profit or loss 515, ,037 Distributions from investments 46,750,301 48,027,121 Net gains/(losses) on financial instruments held at fair value through profit or loss 12 (33,302,388) 37,168,907 Net foreign exchange gains/(losses) 322,849 (260,106) Total investment income 14,285,775 85,123,959 Expenses Accounting and audit fees 92,408 79,637 Trustee fees , ,423 Legal fees 10,006 1,800 Other operating expenses 7 17,503 14,911 Total operating expenses 361, ,771 Operating profit before income tax 13,924,052 84,806,188 Finance costs attributable to unitholders from operations Distributions to unitholders 10 60,557,439 26,190,668 Increase/(decrease) in net assets attributable to unitholders 9 (53,643,541) 51,474,245 Operating profit before income tax expense 7,010,154 7,141,275 Income tax expense 8 (7,010,154) (7,141,275) Profit/(loss) for the year - - Other comprehensive income - - Total comprehensive income - - The above statement of comprehensive income should be read in conjunction with the accompanying notes. 3

4 Balance sheet As at Assets Notes Cash and cash equivalents 11 5,850,813 25,700,738 Receivables 14 3,029,560 49,381 Financial assets held at fair value through profit or loss ,848, ,048,753 Deferred tax asset 15 5,176 5,867 Total assets 256,733, ,804,739 Liabilities Payables 16 59, ,712 Current tax liability 733,574 2,387,350 Total liabilities (excluding net assets attributable to unitholders) 793,002 2,520,062 Equity Operational risk reserve 9(b) 797, ,727 Total equity 797, ,727 Net assets attributable to unitholders - liability 9(a) 255,143, ,486,950 The above balance sheet should be read in conjunction with the accompanying notes. 4

5 Statement of changes in equity For the year ended Operational Risk Total Equity Reserve Balance at 1 July 2014 Profit/(loss) for the year - - Other comprehensive income - - Total comprehensive income for the year - - Transfers to the operational risk reserve 797, ,727 Balance at 797, ,727 Balance at 1 July Profit/(loss) for the year - - Other comprehensive income - - Total comprehensive income for the year - - Transfers to the operational risk reserve - - Balance at 797, ,727 The above statement of changes in equity should be read in conjunction with the accompanying notes. 5

6 Statement of cash flows For the year ended Cash flows from operating activities Notes Interest received 515, ,037 Distribution income received 43,770,122 48,027,121 Trustee fees paid (241,806) (221,423) Operating expenses paid (193,201) (80,133) Income tax paid (8,663,240) (6,140,878) Purchase of financial assets held at fair value through profit or loss Return of capital from financial assets held at fair value through profit or loss (3,837,772) (8,113,737) 36,735,874 37,055,469 Net cash inflow from operating activities 18 68,084,991 70,714,455 Cash flows from financing activities Proceeds from applications by unitholders 13,250,601 4,807,293 Return of capital to unitholders (40,950,925) (30,482,338) Distributions paid (60,557,439) (26,190,668) Net cash (outflow) from financing activities (88,257,764) (51,865,713) Net increase/(decrease) in cash and cash equivalents (20,172,773) 18,848,748 Cash and cash equivalents at beginning of the year 25,700,738 7,112,096 Effect of foreign currency exchange rate changes on cash and cash equivalents 322,849 (260,106) Cash and cash equivalents at the end of the year 18, 11 5,850,813 25,700,738 The above statement of cash flows should be read in conjunction with the accompanying notes. 6

7 Contents Page 1 Reporting entity 8 2 Basis of preparation 8 3 Significant accounting policies 9 4 Financial risk management 13 5 Capital risk management 19 6 Auditors remuneration 19 7 Other operating expenses 19 8 Income tax expense 20 9 Net assets attributable to unitholders Distributions to unitholders Cash and cash equivalents Financial assets held at fair value through profit or loss Segment information Receivables Deferred tax asset Payables Related party transactions Notes to the statement of cash flows Events occurring after the reporting period Commitments and contingencies 27 7

8 1 Reporting entity These financial statements cover Wilshire Australia Private Markets Pooled Superannuation Trust (ABN ) (the PST ) as an individual entity. The PST was constituted on 28 February The PST will terminate on 27 February 2081 unless terminated earlier in accordance with the provisions of the Trust Deed. The manager of the PST is Wilshire Global Advisors Limited (ABN ). The Trustee of the PST during the reporting period was The Trust Company (Superannuation) Limited (ABN ) (the Trustee ). The Trustee's registered office is Level 20, 357 Collins Street, Melbourne, Victoria. The Trustee holds RSE Licence No. L issued by the Australian Prudential Regulatory Authority (APRA) authorising it to act as the Trustee of public offer superannuation entities including the PST. The PST provides an opportunity for Australian superannuation funds to invest in a diverse portfolio of private equity funds, primarily in the United States (US) and Europe. The PST aims to produce long term returns that significantly exceed those available through a widely diversified portfolio of public listed securities such as the S&P500 Index and the MSCI Europe Index. 2 Basis of preparation (a) Statement of compliance The financial statements are general purpose financial statements which have been prepared in accordance with Australian Accounting Standards, Interpretations issued by the Australian Accounting Standards Board, the provisions of the Trust Deed and the requirements of the Superannuation Industry (Supervision) Act 1993 and Regulations (SIS). The financial statements of the PST also comply with International Financial Reporting Standards as issued by the International Accounting Standards Board. The PST is a for-profit trust for the purpose of preparing the financial statements. The financial statements are prepared on the basis of fair value measurement of assets and liabilities except where otherwise stated. The balance sheet is presented on a liquidity basis. Assets and liabilities are presented in decreasing order of liquidity and are not distinguished between current and non-current. All balances are expected to be recovered or settled within twelve months, except for investments in financial assets and net assets attributable to unitholders. The amount expected to be recovered or settled within twelve months after each reporting period cannot be reliably determined. The financial statements were authorised for issue by a resolution of the Trustee on 27 September. The directors of the Trustee have the power to amend and reissue the financial statements. (b) Functional and presentation currency The financial statements are presented in Australian dollars, which is the functional currency of the PST. Amounts are reported in whole dollars, except where otherwise noted. (c) Use of estimates and judgements The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of asset and liabilities, income and expenses. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and any future period affected. The PST makes estimates and assumptions that affect the reported amounts of assets and liabilities within the financial year. Estimates are reviewed on an ongoing basis and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Revisions to accounting estimates are recognised in the period in which the estimate is revised and any future period affected. Further details on the use of estimates are disclosed in note 4(d). 8

9 3 Significant accounting policies The accounting policies set out below have been applied consistently to all periods presented in these financial statements. (a) Financial assets (i) Classification The PST s investments are classified as at fair value through profit or loss, which is comprised of investments in limited liability partnerships. (ii) Recognition/derecognition The PST recognises financial assets and financial liabilities on the date it becomes party to the contractual agreement (trade date) and recognises changes in fair value of the financial assets or financial liabilities from this date. Investments are derecognised when the right to receive cash flows from the investments have expired or the PST has transferred substantially all risks and rewards of ownership. (iii) Measurement Details on how the fair values of financial instruments are determined are disclosed in note 4(d). (b) Net assets attributable to unitholders The PST is governed by a Trust Deed which stipulates that it will terminate after a period of 80 years (unless terminated earlier). There are 11 classes of units issued to the unitholders and the terms of issue for each class are different. The unitholder funds are therefore classified as a financial liability. The units are not redeemable at the unitholders' option and cannot be put back to the PST at any time for cash equal to a proportionate share of the PST's net asset value. The units are measured at the fair value of total assets less the fair value of total liabilities (excluding unitholders funds) at reporting date. (c) Operational Risk Reserve Under APRA Prudential Standard SPS 114: Operational Risk Financial Requirement (ORFR), the PST is required to establish and maintain an operational risk reserve, at a minimum, of at least 0.25% of funds under management (FUM). Funds were allowed a three year transition period through to to reach the target amount. The operational risk reserve is operated in accordance with the Trustee s capital risk management policy as disclosed in Note 5 to the financial statements. The operational risk reserve may be used in certain circumstances to address operational risk events or claims against the PST arising from an operational risk event. (d) Cash and cash equivalents Cash comprises cash on hand, cash at bank and short term deposits. Cash equivalents are short term, highly liquid investments that are readily convertible to known cash amounts which are subject to an insignificant risk of changes in value. 9

10 3 Significant accounting policies (e) Revenue recognition Interest income Interest income is recognised in the statement of comprehensive income as it accrues, taking into account the effective yield on the financial asset. Interest revenue not received at reporting date is reflected in the balance sheet as a receivable. Distributions Distributions from limited partnerships are recognised on a present entitlement basis. Movements in fair value of investments Changes in the fair value of investments are recognised as income and are determined as the difference between the fair value at year-end or consideration received (if sold during the year) and the fair value as at the prior year-end or cost (if the investment was acquired during the period). (f) Expenses All expenses, including Trustee fees, are recognised in profit or loss on an accruals basis. (g) Income tax Income tax for the year comprises current and deferred tax. Current tax Current tax is calculated by reference to the amount of income taxes payable or recoverable in respect of the taxable profit or tax loss for the period. It is calculated using tax rates and tax laws that have been enacted or substantively enacted on reporting date. Current tax for current and prior periods is recognised as a liability (or asset) to the extent that it is unpaid (or refundable). Deferred tax Deferred tax is provided using the balance sheet method, providing for temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The amount of deferred tax provided is based on the expected manner of realisation of the asset or settlement of the liability, using tax rates enacted or substantively enacted at reporting date. The measure of deferred tax reflects the tax consequences that would follow the manner in which the PST expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities. A deferred tax asset is recognised only to the extent that is probable that future taxable profits will be available against which the asset can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised. Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously. Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively. The PST currently incurs withholding tax on investment income imposed by certain countries. Such income is recorded net of withholding tax in the statement of comprehensive income. 10

11 3 Significant accounting policies (g) Income tax Current and deferred tax for the period Income tax has been provided in the current year at the rate of 15% (: 15%) as it is the expectation of the Trustee that the PST will be treated as a complying Pooled Superannuation Trust. (h) Distributions The PST does not distribute income to its unitholders on a year-by-year basis, only upon disposal of long term investments. In accordance with the Trust Deed, the PST distributes, as determined by the Trustee and the manager of the PST, its distributable income to unitholders by cash or reinvestment. In accordance with Clause 8.3 of the Trust Constitution, the distributable amount is determined by reference to the income of the PST and the income tax payable thereon. The distributions are recognised in profit or loss as finance costs attributable to unitholders. (i) Increase/decrease in net assets attributable to unitholders Non-distributable income is included in net assets attributable to unitholders and may consist of unrealised changes in the fair value of financial instruments held at fair value through profit or loss, derivative financial instruments, accrued income not yet assessable, expenses provided or accrued for which are not yet deductible, net capital losses and tax free or tax deferred income. Net capital gains on the realisation of any financial instruments (including any adjustments for tax deferred income previously taken directly to net assets attributable to unitholders) and accrued income not yet assessable will be included in the determination of distributable income in the same year in which it becomes assessable for tax. (j) Foreign currency translation Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translations at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss. Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when fair value was determined. Translation differences on assets and liabilities carried at fair value are reported in the statement of comprehensive income on a net basis within net gain on financial instruments held at fair value through profit or loss. (k) Receivables Receivables include such items as reduced input tax credits (RITC) and application monies receivable from unitholders. Amounts are generally received within 30 days of being recorded as receivables. (l) Payables Payables include amounts owed to limited partnerships and accrued expenses owing by the PST which are unpaid as at the end of the reporting period. The amounts are unsecured and are usually paid within 30 days of being recorded as payables. (m) Applications and redemptions Applications received for units in the PST are recorded net of any entry fees payable prior to the issue of units in the PST. 11

12 3 Summary of significant accounting policies (n) Goods and services tax Revenue, expenses and assets are recognised net of amounts of goods and services tax (GST) recoverable from the Australian Taxation Office (ATO) as a RITC. In circumstances where GST is not recoverable, the GST is recognised as part of the cost of acquisition of the asset or as part of the expense. Receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from, or payable to, the ATO is included as a current asset or liability on the balance sheet. Cash flows are included in the statement of cash flows on a gross basis. The GST components of cash flows arising from investing and financing activities, which are recoverable from, or payable to the ATO, are classified as operating cash flows. (o) New accounting standards and interpretations A number of new standards, amendments to standards and interpretations are effective for annual periods beginning after, and have not been applied in preparing these financial statements. Those which may be relevant to the PST are set out below. The PST does not plan to adopt these standards early. AASB 9 Financial Instruments (effective 1 January 2018) AASB 9 addresses classification, measurement and derecognition of financial assets and financial liabilities. This standard applies to annual reporting periods beginning on or after 1 January The adoption of this standard is not expected to have a significant impact on the recognition and measurement of the PST s financial instruments as they are carried at fair value through profit or loss. AASB 15 Revenue from Contracts with Customers (effective 1 January 2018) The AASB has issued a new standard for the recognition of revenue. This standard applies to annual reporting periods beginning on or after 1 January It will replace AASB 118 which covers contracts for goods and services and AASB 111 which covers construction contracts. The new standard is based on the principle that revenue is recognised when control of a good or service transfers to a customer so the notion of control replaces the existing notion of risks and rewards. The PST's main sources of income are interest, distributions and net gains on financial instruments held at fair value. All of these are outside the scope of the new revenue standard. As a consequence, it is not expected that the adoption of the new revenue recognition rules will have a significant impact on the PST's accounting policies or the amounts recognised in the financial statements. There are no other standards that are not yet effective and that are expected to have a material impact on the PST in the current or future reporting periods and on foreseeable future transactions. (p) Segment reporting A geographical segment is identified when products or services are provided within a particular economic environment subject to risks and returns that are different from those of segments operating in other economic environments. 12

13 4 Financial risk management The PST's activities expose it to the following risks from its investments in financial instruments: market risk (including currency risk and interest rate risk and other market price risk); credit risk; and liquidity risk. The PST's overall risk management program, as approved by the Trustee, focuses on ensuring compliance with the Trust Deed and seeks to maximise the returns derived for the level of risk to which the PST is exposed. Financial risk management is carried out by the Investment Manager, Wilshire Global Advisors Limited. However, it is ultimately the responsibility of the Trustee to ensure that there is an effective risk management control framework in place. Consistent with regulatory requirements the Trustee has the function of overseeing the establishment and maintenance of risk based systems and controls for the PST. The Trustee has developed, implemented and maintains a Risk Management Framework (RMF). The RMF identifies the Trustee s policies and procedures, processes and controls that comprise its risk management and control systems. These systems address all material risks, financial and non-financial, likely to be faced by the PST. Annually, the Trustee is required to certify to APRA whether adequate strategies have been put in place to monitor those risks, that the Trustee has systems in place to ensure compliance with legislative and prudential requirements and that the Trustee has satisfied itself as to the compliance with the RMF. All investments present a risk of loss of capital. The maximum risk resulting from these financial instruments is determined by the fair value of the financial instruments. The Investment Manager uses different methods to measure different types of risk to which it is exposed. These methods are explained below. (a) Market risk Market risk is the risk that the value of the PST's investment portfolio and investment income will fluctuate as a result of changes in market prices. Market risk comprises three types of risk: currency risk, interest rate risk and price risk. There has been no change to the PST s exposure to market risks or the manner in which it manages and measures the risk. (i) Currency risk Currency risk is the risk that the net market value of a financial instrument will fluctuate because of changes in foreign exchange rates. As a significant proportion of the PST's investments are denominated in foreign currencies other than the Australian dollar, the PST is exposed to currency risk. The currency risk disclosures have been prepared on the basis of the PST s direct investments and not on a look through basis for investments held indirectly by underlying limited partnerships. Consequently the disclosure of currency risk in the note may not represent the true risk profile of the PST, where the PST has investments which also have exposure to foreign money markets. The PST does not hedge its foreign currency exposure. 13

14 4 Financial risk management (a) Market risk The following tables summarise the PST's exposure to foreign exchange risk: AUD A USD A EURO A Total A Assets Cash and cash equivalents 5,748, ,112 1,073 5,850,813 Receivables 3,029, ,029,560 Financial assets held at fair value through profit or loss - 188,046,333 59,801, ,848,264 Deferred tax asset 5, ,176 Total assets 8,783, ,147,445 59,803, ,733,813 Liabilities Payables 59, ,428 Current tax liability 733, ,574 Total liabilities (excluding net assets attributable to unitholders) 793, ,002 AUD A USD A EURO A Total A Assets Cash and cash equivalents 21,522,531 4,178, ,700,738 Receivables 49, ,381 Financial assets held at fair value through profit or loss - 233,380,431 80,668, ,048,753 Deferred tax asset 5, ,867 Total assets 21,577, ,558,467 80,668, ,804,739 Liabilities Payables 132, ,712 Current tax liability 2,387, ,387,350 Total liabilities (excluding net assets attributable to unitholders) 2,520, ,520,062 14

15 4 Financial risk management (a) Market risk Foreign exchange risk sensitivity In a foreign exchange rate movement of 11% in the US dollar and 12% in the EURO against the Australian dollar is considered prudent in assessing sensitivity to foreign exchange movements. In a foreign exchange rate movement of 25% in the US dollar and 10% in the EURO against the Australian dollar was considered prudent in assessing sensitivity to foreign exchange movements. At, had the Australian dollar weakened by the above currency movements against the US dollar and EURO, with all other variables being constant, the increase in net assets attributable to unitholders would amount to approximately 25 million (: 73 million) respectively. Had the Australian dollar strengthened by the above currency movements against the US dollar and EURO, with all other variables held constant, the decrease in net assets attributable to unitholders would amount to approximately 24 million (: 55 million). (ii) Interest rate risk Interest rate risk is the risk that the value of a financial instrument will fluctuate due to changes in market interest rates. Given the nature of the financial instruments held by the PST, there is no significant direct interest rate risk in the PST. The majority of the PST s financial instruments are non-interest bearing with only cash being subjected to interest rate risk. The interest rate disclosures have been prepared on the basis of the PST s direct investment and not on a look-through basis for investments held indirectly through limited partnerships. Consequently, the disclosure of interest rate risk in this note may not represent the true interest rate risk profile of the PST where the PST has significant investments in unit trusts which also have exposure to the interest rate markets. Interest rate risk sensitivity At, should interest rates have lowered by 100 basis points (: 100 basis points) with all other variables held constant, the decrease in net assets attributable to unitholders (and in net profit after tax) for the period would amount to approximately 265,000 (: 99,000). If interest rates had risen by 100 basis points (: 100 basis points) with all other variables held constant, the increase in net assets attributable to unitholders (and in net profit after tax) would amount to approximately 225,000 (: 84,000). These increases/decreases in net assets attributable to unitholders are calculated on an undiscounted basis. The analysis was performed on the same basis in. (iii) Other market price risk Other market risk is the risk that the fair value of a financial instrument will fluctuate because of changes in market prices (other than those arising from currency risk or interest rate risk), whether those changes are caused by factors specific to the individual financial instrument or its issuer, or factors affecting all similar financial instruments traded in the market. The PST invests in foreign private equity limited partnerships. These limited partnerships are funds of funds that are ultimately exposed to unlisted investments that are not traded in an organised public market. The price risk arises from these investments as their values in the future are uncertain and the funds in which the PST may invest are limited. The investment in foreign private equity funds is presented on the balance sheet as financial assets held at fair value through profit or loss. 15

16 4 Financial risk management (a) Market risk Price risk is managed by ensuring that all activities are transacted in accordance with mandates; overall investment strategy and within approved limits. The funds of funds structure of the investments aims to minimise price risk as it leads to greater diversification of investments across a range of sectors, industries and manager style. The PST does not use derivatives to manage price risk. Other market price risk sensitivity At, if the market price had decreased by 10% (: increased by 15%) with all other variables held constant, this would have decreased net assets attributable to unitholders by approximately 21 million (: increased 40 million). Conversely, if the market price had increased by 10% (: decreased by 15%) with all other variables held constant, this would have increased net assets attributable to unitholders by approximately 25 million (: decreased 47 million). (b) Credit risk Credit risk is the risk that the counterparty to the financial instrument will default on its contractual obligations resulting in a financial loss to the PST. Credit risk to the PST primarily arises from deposits with financial institutions and the failure of a unitholder to meet its commitment to the PST. Concentrations of credit risk are minimised primarily by ensuring that counterparties, together with the respective credit limits are approved and ensuring that all transactions are undertaken in accordance with Investment Management Agreements and the Trust Deed. The risk of a unitholder failing to meet its commitment to the PST is managed in that unitholders must be APRA regulated superannuation funds. The exposure to credit risk for cash and cash equivalents is low as all counterparties have a rating of A2 (as determined by Standard & Poor's) or higher. The Trustee and Investment Manager monitor the PST's credit position on a daily basis. (c) Liquidity risk Liquidity risk is the risk that the PST will experience difficulty in either realising assets or otherwise raising sufficient funds to satisfy commitments associated with financial instruments. The PST invests in overseas private equity limited partnerships. These funds ultimately invest in unlisted investments generally for a period of several years and whose values in the future are uncertain. As a consequence, the financial instruments held by the PST are regarded as highly illiquid investments. Liquidity risk is mitigated to a certain extent by the funds of funds structure of the investments which results in funds being ultimately invested across a range of sectors, industries and manager style. In subscribing to units in the PST, unitholders agree to pay a capital commitment. Capital commitments are payable in instalment to the PST by a date specified in notices issued by the Manager. Unitholders of the PST must be regulated superannuation funds. (d) Estimation of fair value The PST s financial assets and liabilities included in the balance sheet are carried at their approximate fair value. The PST measures its financial instruments at fair value, by valuation using the following fair value hierarchy that reflects the significance of inputs used in making the measurement: Level 1 net market value measures are those instruments valued based on quoted prices (unadjusted) in active markets for identical instruments. 16

17 4 Financial risk management (d) Estimation of fair value Level 2 net market value measurements are those instruments valued based on inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices). This category includes instruments valued using: quoted prices in active markets for similar instruments; quoted prices for identical or similar instruments in markets that are considered less than active; or other valuation techniques for which significant inputs are directly or indirectly observable from market data. Level 3 net market value measurements are those instruments valued based on inputs for the asset or liability that are not based on observable market data (unobserved inputs) and the unobservable inputs have significant effect on the instrument s valuation. This category includes instruments that are value based on quoted prices for similar instruments for which significant unobservable adjustments or assumptions are required to reflect differences between the instruments. The PST s investments are in limited partnerships which are funds of funds. The investments are carried at fair value, representing either cost or a reasonable current value provided by the underlying investment manager where the manager considers such value to be appropriate. A substantial portion of the investments held by the limited partnerships in which the PST invests are valued in good faith by the General Partners of those partnerships in the absence of readily determinable market values. The limited partnerships frequently invest in companies that are closely held, either not publicly traded or traded with certain restrictions and are in various stages of development. For the majority of the PST's investments, the General Partners apply the International Private Equity and Venture Capital Valuation Guidelines in determining the fair values of their portfolios. These Guidelines set out best practice methodologies for determining the fair value of private equity investments such as: price of recent investment; earnings multiple; discounted cash flows or earnings of the underlying business; discounted cash flows from the investment and industry valuation benchmarks. The PST holds investments primarily in closely held private partnerships for which no ready market exists. The PST invests directly in limited partnerships which in turn invest in limited partnerships that fall into the following major categories: Buyouts - private equity partnerships that acquire the equity of a mature private business and are investing in companies with the United Kingdom (U.K.), Western & Eastern Europe and the US. Venture - private equity partnerships that acquire the equity or equity like capital of a new or a relatively new private business and are investing in companies with the U.K., Western & Eastern Europe and the US. Co-investments - direct investments in portfolio companies that are sourced through co-investment opportunities offered by primary funds or secondary funds. The PST's investments are in private equity funds that are structured as closed-end, commitment-based investment funds where the PST commits a specified amount of capital upon inception of the fund (i.e. committed capital) which is then drawn down over a specified period of the fund's life. Such funds generally do not provide redemption options for investors and, subsequent to final closing, do not permit subscriptions by new or existing investors. Rather, the nature of the investments is that the distributions are received through the liquidation of the underlying assets of the investment partnerships. Accordingly all of the PST's investments have been classified as within level 3 as they have unobservable inputs and are infrequently traded or not traded at all. 17

18 4 Financial risk management The following table provides and analysis of financial instruments that are measured subsequent to initial recognition at fair value (net market value), grouped into Levels 1, 2 and 3 based on the degree to which the fair value is observable. Fair value measurement As at Carrying amount Level 1 Level 2 Level 3 Investments in limited partnerships 247,848, ,848,264 Total 247,848, ,848,264 As at Carrying amount Level 1 Level 2 Level 3 Investments in limited partnerships 314,048, ,048,753 Total 314,048, ,048,753 The following table shows a reconciliation from the beginning balances to the ending balances for fair value measurements in Level 3 of the fair value hierarchy: Opening balance at the beginning of the reporting period 314,048, ,821,578 Contributions 3,837,772 8,113,738 Return of capital (36,735,874) (37,055,469) Transfers to Level Gain or (loss) recognised in profit or loss (33,302,388) 37,168,907 Closing balance at the end of the reporting period 247,848, ,048,753 18

19 5 Capital risk management The Trustee has established an operational risk reserve ( ORR ) in response to the operational risk financial requirement introduced into the Superannuation Industry (Supervision) Act 1993 from 1 July The reserve is operated in accordance with the Operational Risk Financial Requirement Strategy. The purpose is to provide funding for incidents where losses may arise from operational risk relating to the Trust. The level of reserve is determined by the Trustee based on an assessment of the risks faced by the Trust. The Trustee was allowed a three year transition period through to to reach the target amount. At all times during the transition period the Trustee maintained an approved guarantee amount of at least 5,000,000. The approved guarantee amount is required by APRA under the conditions of holding an RSE Licence. It was an integral part of the Trustee s capital risk management framework during the year. It will no longer be required by APRA from 1 July where the operational risk financial requirement has been met by the Trustee. The ORR balance at the end of the reporting period was 797,727 (: 797,727). 6 Auditors remuneration PricewaterhouseCoopers, auditor of the PST Audit and review of the financial statements and regulatory audit services 73,249 66,550 Tax compliance services 10,260 10,260 Grant Thornton Audit and review of the risk management framework 4,935 2,451 Total 88,444 79,261 7 Other operating expenses APRA fees 13,800 13,813 Bank charges 3,392 1,098 Other ,503 14,911 19

20 8 Income tax expense Recognised in the statement of comprehensive income: Current tax expense Current year 7,009,463 7,132,783 7,009,463 7,132,783 Deferred tax expense Movement in temporary differences 691 8,492 Total income tax expense 7,010,154 7,141,275 Reconciliation between tax expense to prima facie tax payable: Operating profit before income tax expense 13,924,052 84,806,188 Tax at the complying PST tax rate of 15% 2,088,608 12,720,928 Tax effect of amounts which are not deductible (taxable) in calculating taxable income: Non assessable gains/losses on financial instruments held at fair value through profit or loss 4,921,546 (5,579,653) Income tax expense 7,010,154 7,141,275 A deferred tax asset in relation to the valuation of investments has not been recognised in the accounts as it does not pass the probable test in accordance with AASB 112 Income Taxes. The balance of the deferred tax asset not recognised is 6,129,043 (: 1,133,685). 20

21 9 Net assets attributable to unitholders (a) Movements in the net assets attributable to unitholders during the year were as follows: Liability Liability Opening balance 336,486, ,485,471 Applications 13,250,601 4,807,293 Return of capital (40,950,925) (30,482,332) Increase/(decrease) in net assets attributable to unitholders (53,643,541) 51,474,245 Transfers to the operational risk reserve - (797,727) Closing balance 255,143, ,486,950 Total net assets attributable to unitholders - liability 255,143, ,486,950 (b) Movements in the operational risk reserve: Reserve balance at the beginning of the reporting period 797,727 - Plus: Transfers into reserve - 797,727 Reserve balance at the end of the reporting period 797, , Distributions to unitholders The distributions for the year were as follows: Distributions paid 60,557,439 26,190,668 60,557,439 26,190, Cash and cash equivalents Cash at bank 5,850,813 25,700,738 5,850,813 25,700,738 21

22 12 Financial assets held at fair value through profit or loss Interests in limited partnerships USD 188,046, ,380,431 Interests in limited partnerships EURO 59,801,931 80,668,322 Total designed at fair value through profit or loss 247,848, ,048,753 Wilshire European Private Markets Fund IV, LP Wilshire European Private Markets Fund V, LP Wilshire European Private Markets Fund VI, LP Wilshire European Private Markets Fund VII, LP Wilshire European Private Markets Fund VIII, LP Wilshire Private Markets Fund III, LP Wilshire US Private Markets Fund IV, LP Wilshire US Private Markets Fund V, LP Wilshire US Private Markets Fund VI, LP Wilshire US Private Markets Fund VII, LP Wilshire US Private Markets Fund VIII, LP Fair value at 30/6/15 Additions at cost Return of capital Notional carrying values 30/6/16 At fair value 30/6/16 Unrealised (loss)/gain 743,491 - (41,173) 702, ,223 (142,095) 1,794,726 77,089 (388,951) 1,482,864 1,199,571 (283,294) 4,583,174 - (96,629) 4,486,545 3,915,078 (571,468) 45,700, ,658 (7,913,267) 38,071,991 32,183,908 (5,888,083) 30,384, ,019 (3,348,394) 27,283,172 23,702,944 (3,580,228) - - (4,022,267) (4,022,267) - 4,022,267 12,467,727 1,156,292 (1,506,668) 12,117,350 9,719,203 (2,398,147) 12,308,243 - (1,167,518) 11,140,725 8,747,605 (2,393,120) 42,013,683 - (5,697,779) 36,315,904 30,280,707 (6,035,197) 100,376, ,266 (9,193,646) 91,775,544 78,998,604 (12,776,940) 63,675,639 1,480,449 (3,359,583) 61,796,505 58,540,420 (3,256,085) 314,048,753 3,837,772 (36,735,874) 281,150, ,848,264 (33,302,388) 22

23 12 Financial assets held at fair value through profit or loss Wilshire European Private Markets Fund IV, LP Wilshire European Private Markets Fund V, LP Wilshire European Private Markets Fund VI, LP Wilshire European Private Markets Fund VII, LP Wilshire European Private Markets Fund VIII, LP Wilshire Private Markets Fund III, LP Wilshire US Private Markets Fund IV, LP Wilshire US Private Markets Fund V, LP Wilshire US Private Markets Fund VI, LP Wilshire US Private Markets Fund VII, LP Wilshire US Private Markets Fund VIII, LP Fair value at 30/6/14 Additions at cost Return of capital Notional carrying values 30/6/15 At fair value 30/6/15 Unrealised (loss)/gain 744,084 - (32,362) 711, ,491 31,769 2,303,712 59,751 (536,825) 1,826,638 1,794,726 (31,913) 5,573, ,637 (311,379) 5,434,035 4,583,174 (850,861) 49,774,506 2,842,398 (8,121,238) 44,495,666 45,700,600 1,204,934 29,064, ,525 (5,310,979) 24,320,456 30,384,547 6,064,092 5,101,841 - (662,774) 4,439,067 - (4,439,067) 15,091,678 3,897 (1,379,352) 13,716,223 12,467,727 (1,248,496) 10,754, ,423 (726,952) 10,368,714 12,308,243 1,939,529 39,505, ,119 (4,407,511) 35,429,084 42,013,683 6,584,599 90,236,176 1,898,764 (8,859,520) 83,275, ,376,924 17,101,503 57,671,174 1,898,224 (6,706,577) 52,862,821 63,675,639 10,812, ,821,578 8,113,738 (37,055,469) 276,879, ,048,753 37,168,907 23

24 13 Segment information Business segment: The PST operates solely in the investment management industry. Geographical segments: While the PST operates only in Australia, the investments held by the PST are managed in the US and Europe: - US: 188,046,333 (: 233,380,431) - Europe: 59,801,931 (: 80,668,322) 14 Receivables GST receivable 87,385 49,381 Distribution receivable from partnership 2,942,175-3,029,560 49,381 Due to the short term nature of these receivables, their carrying value is assumed to approximate their net market value. The maximum exposure to credit risk is the net market value of receivables. Information regarding credit risk exposure is set out in Note Deferred tax asset The balance comprises temporary differences attributable to: Accrued expenses 5,176 5,867 Movements: Opening balance at 1 July 5,867 14,358 Credited/(charged) to the statement of comprehensive income (691) (8,491) Closing balance at 5,176 5, Payables Trade payables 29,351 93,600 Accrued expenses 30,077 39,112 59, ,712 Due to the short term nature of these payables, their carrying value is assumed to approximate their net market value. Information regarding interest rate, foreign exchange and liquidity risk exposure is set out in Note 4. 24

25 17 Related parties (a) Trustee and key management personnel The Trustee of the PST during the reporting period was The Trust Company (Superannuation) Limited (RSE No L ). On 1 July, the Trustee changed its name to Diversa Trustees Limited. Key management personnel include persons who were directors of the Trustee at any time during the reporting period. The directors of The Trust Company (Superannuation) Limited are as follows: M. Cerché (Chairperson), appointed 1 September 2014 M. Jones, appointed 1 September 2014 A. de Vries, appointed 1 September 2014 V. Parrott, appointed 1 September 2014 L. Barrett, appointed 23 June None of the directors nor the Trustee are or were unitholders in the PST. Remuneration of directors of the Trustee There have been no transactions between the Trustee and the PST other than trustee fees disclosed in the statement of comprehensive income. The compensation received or due and receivable by the Trustee in connection with the trusteeship of the PST was 241,806 (: 221,423). The directors of the Trustee do not receive remuneration directly from the PST. (b) Other entities with significant influence over the PST Investment Manager The Investment Manager of the Wilshire Australia Private Markets Pooled Superannuation Trust is Wilshire Global Advisors Limited (ABN ). Key management personnel includes persons who were directors of Wilshire Global Advisors Limited at any time during the financial year. The following persons were directors of Wilshire Global Advisors Limited during the whole of the financial year, unless otherwise stated: 25

26 17 Related party transactions - Gary Gabriel, resigned 30 July - William MacAulay, resigned 30 November - Reena Lalji - Richard Stokes, appointed on 7 August - Matt Gaffney 18 Notes to the statement of cash flows For the purpose of the statement of cash flows, cash includes cash on hand and cash at bank. Cash at end of financial year as shown in the statement of cash flows is reconciled to the related items in the balance sheet as follows: Reconciliation of cash and cash equivalents: Cash at bank 5,850,813 25,700,738 Reconciliation of net operating profit to net cash inflow from operating activities: 5,850,813 25,700,738 (Decrease)/Increase in net assets attributable to unitholders (53,643,541) 51,474,245 Purchase of financial assets held at fair value through profit or loss (3,837,772) (8,113,738) Return of capital from financial assets held at fair value through profit or loss 36,735,874 37,055,469 Net losses/(gains) on financial instruments held at fair value through profit or loss 33,302,388 (37,168,907) Realised foreign exchange (gains)/losses (322,849) 260,106 (Increase)/decrease in GST receivable (38,004) (29,836) (Increase)/decrease in Distribution receivable from partnership (2,942,175) - Decrease/(increase) in investor receivable - 46,557 Decrease/(increase) in future tax benefit 691 8,492 (Decrease)/increase in tax liabilities (1,653,776) 991,905 (Decrease)/increase in accrued expenses (73,284) (506) Distributions paid to unitholders 60,557,439 26,190,668 Net cash inflow from operating activities 68,084,991 70,714,455 26

27 19 Events subsequent to reporting date On 1 July, the Trustee changed its name from The Trust Company (Superannuation) Limited to Diversa Trustees Limited. The directors of the Trustee and its management team remain unchanged. There have been no other significant events since the end of the reporting period and the date of this report that would have an impact on the financial position of the PST or on the results of its operations, or the state of affairs of the PST in future years. 20 Commitments and contingencies Funds committed to limited partnerships at the reporting date but not recognised as liabilities are as follows: Committed Capital AUD Committed Capital AUD Wilshire European Private Markets Fund IV, L.P. 755, ,825 Wilshire European Private Markets Fund V, L.P. 441, ,276 Wilshire European Private Markets Fund VI, L.P. 737, ,669 Wilshire European Private Markets Fund VII, L.P. 3,591,712 3,758,880 Wilshire European Private Markets Fund VIII, L.P. 5,491,585 7,681,903 Wilshire Private Markets Fund III, L.P. - - Wilshire U.S. Private Markets Fund IV, L.P. 3,024,017 4,080,452 Wilshire U.S. Private Markets Fund V, L.P. 3,541,809 3,469,779 Wilshire U.S. Private Markets Fund VI, L.P. 3,889,338 3,810,240 Wilshire U.S. Private Markets Fund VII, L.P. 7,463,411 7,887,770 Wilshire U.S. Private Markets Fund VIII, L.P. 5,910,487 9,823,065 27

28 Trustee statement In the opinion of the Trustee of the Wilshire Australia Private Markets Pooled Superannuation Trust: 1. The accompanying financial statements of the Wilshire Australia Private Markets Pooled Superannuation Trust are properly drawn up as to present fairly the financial position of the PST as at, the results of its operations and changes in equity for the year ended and the PST s cash flows for the year ended on that date; and 2. The operation of the Wilshire Australia Private Markets Pooled Superannuation Trust has been carried out in accordance with its Trust Deed as amended and in compliance with: The requirements of the Superannuation Industry (Supervision) Act 1993 and Regulations; Applicable sections of the Corporations Act 2001 and Regulations; The requirements under Section 13 of the Financial Sector (Collection of Data) Act 2001; and 3. The accompanying financial statements have been drawn up in accordance with Australian Accounting Standards and the Trust Deed, as amended. Signed in accordance with a resolution of the directors of the Trustee. Signed in Melbourne this 27 th day of September Director Director 28