CLUB PLUS SUPERANNUATION SCHEME FINANCIAL STATEMENTS FOR THE PERIOD ENDED 30 JUNE 2017

Transcription

1 FINANCIAL STATEMENTS FOR THE PERIOD ENDED 30 JUNE 2017

2 TABLE OF CONTENTS Page Statement of Financial Position Income Statement Statement of Changes In Member Benefits Statement of Changes in Reserves Statement of Cash Flows 1. Operation of the Scheme 2. Summary of significant accounting policies 3. Member liabilities 4. Fair value of financial instruments 5. Investment property 6. Receivables 7. Payables 8. Changes in fair value of Investments 9. Funding arrangements 10. Reserves 11. Income tax 12. Operating expenses 13. Auditor's remuneration 14. Cash flow statement reconciliation 15. Segment information 16. Related party disclosures 17. Financial risk management objectives and policies 18. Insurance 19. Commitments and contingent liabilities 20. Significant events after balance date Trustee Declaration Independent Report by the Approved Auditor to the Trustee

3 The above statement of financial position should be read in conjunction with the accompanying notes.

4 Income Statement For the period ended 30 June 2017 Note Superannuation activities Interest 5,618,314 5,157,330 Dividend revenue 21,657,324 18,849,655 Distributions from unit trusts 68,857,868 47,039,597 Changes in assets measured at fair value 8 183,508,997 (3,556,532) Other investment income 2,594,284 3,381,929 Other income 358, ,624 Total superannuation activities income 282,595,443 71,390,603 Investment expenses (6,566,360) (3,764,550) Administration expenses (4,332,324) (4,781,338) Operating expenses 12 (8,742,043) (8,075,512) Total expenses (19,640,727! (16,621,400! Net result from superannuation activities 262,954,716 54,769,203 Profit from operating activities 262,954,716 54,769,203 Less: Net benefits allocated to members' accounts (231,946,384) (60,920,943) Profit/(loss) before income tax 31,008,332 (6,151,740! Income tax expense/(beneflt) 11 13,552,474 (8, 708,389) Profit after income tax 17,455,858 2,556,649 The above income statement should be read in conjunction with the accompanying notes. 2

5 Statement of Changes in Member Benefits For the period ended 30 June 2017 Note Opening balance of member benefits Contributions: Employer Member Transfer from other superannuation plans Government co-contributions Income tax on contributions Net after tax contributions Benefits to members/beneficiaries Insurance premiums charged to members' accounts Death and disability insurance benefits credited to members' accounts Benefits allocated to members' accounts, comprising: Net investment income Administration fees Closing balance of member benefits 2,206,824,280 2,121,437, ,067, ,510,411 30,244,360 24,182,968 50,925,730 44,677, , ,222 (23,209,085) (20,282,605) 214,524, ,624,248 (166,083,701) (142,465,597) (22,899,493) (22,209,840) 5,111,928 4,517, ,437,779 71,279,140 (11,491,395) (10,358,197) 2,469,424,198 2,206,824,280 The above statement of changes in member benefits should be read in conjunction with the accompanying notes. 3

6 Statement of Changes In Reserves For the period ended 30 June 2017 General reserve Operational risk reserve Total equity Opening balance as at 1 July 2016 Net transfers to/from reserves Profit 4,716,376 (895,778) 17,366,094 5,392, ,778 89,764 10,108,645 17,455,858 Closing balance as at30 June ,186, ,811 27,564,503 General reserve Operational risk reserve Total equity Opening balance as at 1 July 2015 Profit 2,168,732 2,547,644 5,383,264 9,005 7,551,996 2,556,649 Closing balance as at 30 June ,376 5,392,269 10,108,645 The above statement of changes in reserves should be read in conjunction with the accompanying notes. 4

7 Statement of Cash Flows For the period ended 30 June 2017 Note Cash flows from operating activities Interest from cash and cash equivalents 118, ,762 Insurance proceeds 5,470,583 5,027,729 Administration expenses (4,257,043) (4,831,738) Other general administration expenses (8,698,666) (7,916,940) Other income (1,675,736) 3,626,939 Insurance premiums (22,475,314) (22, 162,206) Income lax paid (2,956,2671 (2,980,3111 Net cash inflows from operating activities 14 (34,474,0351 (29,069,7651 Cash flows from Investing activities Purchase of investments (79, 142,333) (65,547,039) Proceeds from sate of investments 67,557,678 43,649,693 Net cash outflows from investing activities (11,584,6551 (21,897,3461 Cash flows from financing activities Employer contributions 156,067, ,378,867 Member contributions 30,244,360 24,433,137 Transfers from other superannuation plans received 50,925,730 44,677,252 Government co-contributions received 496, ,222 Benefits paid to members (166,083,707) (145,810,199) Income tax paid on contributions received (23,209,0851 (20,282,6051 Net cash inflows from financing activities 48,441,098 51,932,674 Net increase in cash 2,382, ,563 Cash at the beginning of the financial period 11,234,554 10,268,991 Cash at the end of the financial period 14 13,616,962 11,234,554 The above statement of cash flows should be read in conjunction with the accompanying notes. 5

8 1. Operation of the Scheme The Club Plus Superannuation Scheme (the 'Scheme') was established in 1987 to provide benefits to employees of the club industry. While retaining its club heritage, subsequent to obtaining public offer status on 6 September 2010, the Scheme accepts contributions from a range of employers. The Scheme is domiciled in Australia and its Trustee's registered office is Level 11, 66 Hunter Street, Sydney, NSW The Scheme is a defined contribution fund whereby contributions of the employer and the employees are made in accordance with the terms of the Trust Deed. The members' accounts are credited or debited each year with their proportionate share of the net investment income, expenses and income tax expense of the Scheme. The Trustee of the Scheme is Club Plus Superannuation Ply Ltd and it is the holder of a public offer class Registrable Superannuation Entity Licence (licence no. L ). In accordance with amendments to the Superannuation Industry (Supervision) Act1993 the Scheme registered with the Australian Prudential Regulation Authority on 16 December 2005 (registration no. R ). 2. Summary of significant accounting policies (a) Basis of preparation The financial statements are a general purpose financial report which has been prepared in accordance with Australian Accounting Standards, and other authoritative pronouncements of the Australian Accounting Standards Board, the Superannuation Industry (Supervision) Act1993 and regulations and the provisions of the Trust Deed. The financial statements are presented in Australian dollars. The Scheme is a not-for-profit entity for the purpose of preparing financial statements. The financial statements were approved by the Board of Directors of the trustee, Club Plus Superannuation Pty Ltd on 28 September (b) (i) Adoption of AASB 1056 AASB 1056 Superannuation Entities (AASB 1 056) is applicable for annual reporting periods beginning on or after 1 July The adophon of AASB 1056 has resulted in: -Changes to the presentation format of the financial statements; -Changes to the measurement of assets and liabilities from 'net market value' to 'fair value', excluding member liabilities, tax assets and liabilities and insurance assets and liabilities; -Additional disclosure requirements for assets and liabilities held at fair value as required by AASB 13 Fair Value Measurement; -Member benefits recognised as liabilities rather than equity; and - Contributions, roflovers and other inward transfers and benefits paid to members are not in the nature of income or expenses, and are presented in the statement of changes in member benefits. In accordance with the transitional provisions of AASB 1056, The Scheme has applied the new accounting Standard retrospectively from the start of the comparative period. (b) (ii) Other changes a) Units in unlisted unit trust investments are stated at the value of the cum distribution redemption price and recognise distributions when announced and allocated by the fund managers. This is a policy change where units in unlisted unit trust investments were stated at the value of the ex-distribution redemption price in the previous year. This change meets the requirements of both AASB 118 Revenue and AASB 139 Financial instruments: Recognition and measurement. The above change has resulted in: - an increase to the investment value of unit trusts reported and decrease in the distribution receivable this change has not result in a change to net assets available for member benefits -distribution income would be reduced and unrealised gains would increase in the income statement by the same amount b) Contributions receivable no longer includes contributions received after 1 July 2017 relating to June This is a policy change where these contributions were included in the previous year. As any post 30 June 17 receipts are treated as FY18 transactions in member's accounts and annual statements, it is considered not appropriate to accrue them as contributions receivable. The change meets the requirements of both AASB1056 Superannuation Entities and AASB1 01 Framework for the Preparation and Presentation of Financial Statements. The above change has resulted in: - an increase to the investment value of unit trusts reported and decrease in the distribution receivable - this change has not result in a change to net assets available for member benefits -distribution income would be reduced and unrealised gains would increase in the income statement by the same amount The table below shows the impact of the changes outlined above on the statement of financial position at the transition date of 1 July 2016 for the year ended 30 June 2016: 6

9 2. Summary of significant accounting policies (continued) Description Financial Instruments Change in measurement from net market value to fair value: Interest bearing securities Australian equities International equities Unit Trust Private equity Pooled superannuation trusts Investment properties Sub total As previously reported as at 30 June ,428, ,050, ,719, ,571, ,818,513 1,975,587,943 Transition Adjustment 101,907,718 2,044,773 20,122,535 36,699,726 43,211,703 68,642, ,843,513) 29,785,231 Restated total as at 30 June ,336, ,094, ,842, ,271,028 43,211,703 68,642,289 6,975,000 2,005,373,174 Receivables Derecognition of contributions receivable Derecognition of investment income receivable 13,183,127 26,375,124 (13,183,127) (26,375,124) Payables Reclassification of benefits payable to member liabilities. 3,015,904 (3,015,904) Member benefits Member benefits recognised as liabilities rather than equity: Member liabilities 2,206,824,280 2,206,824,280 Equity Member benefits recognised as liabilities rather than equity: Member liabilities Reserves 2,215,045,985 6,697,549 (2,215,045,985) 3,411,096 10,108,645 The table below shows the impact of the changes outlined above on the income statement at the transition date of 1 July 2016 for the year ended 30 June 2016: Description Profit before income tax previously reported Change in measurement from net market value to fair value: Changes in assets measured at fair value As previously at 30 June ,920,864 Transition Adjustment 3,410,105 Restated total as at 30 June ,920,864 3,410,105 Contributions, rollovers and other inward transfers and benefits paid to members are transferred to the statement of changes in member benefits: Employee contributions Members contributions Transfers from other superannuation funds Government co-contributions No TFN tax income and surcharge tax income Insurance premiums Death and disability benefits Profit from operating activities 251,920,864 (148,487,140) (24,389,365) (44,677,252) (536,222) (164,427) 22,209,840 (4,517,200) (197,151,661) (148,487,140) (24,389,365) (44,677,252) (536,222) (164,427) 22,209,840 (4,517,200) 54,769,203 Benefits allocated to members accounts Profit/(loss) before income tax 251,920,864 (60,920,943) (258,072,604) (60,920,943) (6,151,740) Income tax expense/(benefit) Income tax expense on unallocated contributions receivable Surcharge tax and No TFN tax Anti-detriment payments Income tax on contributions transferred to the statement of changes in member benefits Sub-total 13,352,076 13,352,076 (1.946,508) (164,427) 333,075 13,352,076 (1,946,508) (164,427) 333,075 Profit after income tax 238,568,788 (236,012, 139) 2,

10 2. Summary of significant accounting policies (continued) (c) New accounting standards and interpretations The Scheme applied for the first time certain standards and amendments which are effective for annual periods beginning on or after 1 July Apart from AASB 1056, the adoption of these standards and amendments has not had any significant financial impact on the financial statements. Accounting Standards and Interpretations issued but not yet effective Certain Australian Accounting Standards and Interpretations have recently been issued or amended but are not yet effective and have not been adopted by the Fund for the annual reporting period ended 30 June The impact of these standards and interpretations has been assessed and to extent applicable to the Fund are outlined in the below table. Standards and interpretations that are not expected to have a material impact on the Fund have not been included. Accounting Standard and Nature AASB 9/IFRS 9 Financial Instruments AASB 9 brings together the classification and measurement, impairment and hedge accounting phases of the IASB's project to replace las 39 Financial Instruments: Recognition and Measurement and is expected to be effective for annual periods beginning on or after 1 January Also, the IASB has addressed the key concern that arose as a result of the financial crisis that the incurred loss model in las 39 contributed to the delayed recognition of credit losses, by issuing the new impairment requirements that are based on a more forward-looking expected credit loss model. Application Date of Standard 01-Jan-18 Application Date for Fund 01-Jul-18 Impact on financial report The Fund expects that this standard will have minimal impact on the financial statements of the Fund and the Trustee. The AASB is yet to issue the final version of AASB 9. A revised version of AASB 9 (AASB ) was issued in December 2013 which included the new hedge accounting requirements, including changes to hedge effectiveness testing, treatment of hedging costs, risk components that can be hedged and disclosures. AASB 9 includes requirements for a simplified approach for classification and measurement of financial assets compared with the requirements of AASB 139. AASB 15 Revenue Recognition AASB 15 replaces the existing revenue recognition standards AASB 111 Construction Contracts, AASB 118 Revenue and related Interpretations. AASB 15 incorporates the requirements of I FRS 15 Revenue from Contracts with Customers issued by the International Accounting Standards Board (IASB) and developed jointly with the US Financial Accounting Standards Board (FASB). AASB 15 specifies the accounting treatment for revenue arising from contracts with customers {except for contracts within the scope of other accounting standards such as leases or financial instruments).the core principle of AASB 15 is that an entity recognises revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. An entity recognises revenue in accordance with that core principle by applying the following steps: (a) Step 1: Identify the contract{s) with a customer (b) Step 2: Identify the performance obligations in the contract (c) Step 3: Determine the transaction price (d) Step 4: Allocate the transaction price to the performance obligations in the contract (e) Step 5: Recognise revenue when (or as) the entity satisfies a performance obligation Impact on financial report The Trustee and the Fund are assessing all revenue streams to ensure that revenue is recognised in accordance with the requirements of AASB 15. AASB 15 provides two methods for applying the standard upon transition: 1. Retrospective under AASB Retrospective with cumulative effect of initially applying the standard recognised at date of initial application in accordance with requirements as set out in paragraphs C7 C8 of the standard. This is expected to have a minimal impact on the financial statements of the Fund. 01-Jan Jul-18 8

11 2. Summary of significant accounting policies (continued) Other Significant Accounting Policies (d) Consolidation The Scheme is an investment entity and, as such, does not consolidate the entities it controls. Instead, interest in subsidiaries are classified as fair value through profit or loss and measured at fair value. (e) Financial assets and liabilities (a) Classification The Scheme classifies its financial assets and financial liabilities into the categories below in accordance with AASB 139. Financial assets and liabilities held tor trading These assets are acquired principally for the purpose of generating a profit from short-term fluctuation in price. All derivatives are classified as held for trading. Derivative financial instruments entered into by the Scheme do not meet the hedge accounting criteria as defined by AASB 139. Consequently hedge accounting is not applied by the Scheme. Financial instruments designated at fair value through profit or loss upon initial recognition These financial assets are designated on the basis that they are part of a group of financial assets which are managed and have their performance evaluated on a fair value basis in accordance with risk management and investment strategies of the Scheme. Receivables Receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. The Scheme includes in this category short term receivables. Other financial liabilities This category includes all financial liabilities, other than those classified at fair value through profit or loss. Other financial liabilities are measured at their nominal amounts. Amounts are generally settled within 30 days of being recognised as other financial liabilities. Given the short-term nature of other financial liabilities, the nominal amount approximates fair value. (b) Recognition The Scheme recognises a financial asset or financial liability when, and only when, it becomes a party to the contractual provisions of the instrument. Purchases or sales of financial assets that require delivery of assets within the time frame generally established by regulation or convention in the marketplace are recognised on the trade date, ie., the date that the Scheme commits to purchase or sell the asset. (c) Derecognition A financial asset (or, where applicable a part of a financial asset or part of a group of similar financial assets) is derecognised where: i. The rights to receive cash flows from the asset have expired; or ii. The Scheme has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows full without material delay to a third party under a 'pass-through' arrangement; and iii. Either (a) the Scheme has transferred substantially all the risks and rewards of the asset, or {b) the Fund has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset. The Scheme derecognises a financial liability when the obligation under the liability is discharged, cancelled or expires. (d) Initial measurement Financial assets and financial liabilities at fair value through profit or loss are recorded in the statement of financial position at fair value. All transaction costs for such instruments are recognised directly in income statement. Loans and receivables and financial liabilities (other than those classified at fair value through profit or loss) are measured initially at their fair value plus any directly attributable incremental costs of acquisition or issue. For financial assets and liabilities where the fair value at initial recognition does not equal the transaction price, the Scheme recognises the difference in the income statement, unless specified otherwise. 9

12 2. Summary of significant accounting policies (continued) (e) Financial assets and liabilities (continued) (e) Subsequent measurement After initial measurement, the Scheme measures investments and derivatives at fair value through profit or loss. Subsequent changes in the fair value of those investments are recorded as 'changes in assets measured at fair value' through the income statement. Interest earned is recorded in 'Interest revenue' according to the terms of the contract. Dividend revenue is recorded in 'dividend revenue'. (f) Fair value measurement Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either: - In the principal market for the asset or liability, or - In the absence of a principal market, in the most advantageous market for the asset or liability The principal or the most advantageous market must be accessible to by the Scheme. The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest. The Scheme uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs. All assets and liabilities for which fair value is measure or disclosed in the financial statements are categorised within the fair value hierarchy. Refer to Note 4 and Note 5. (g) Investment properties Investment properties are measured initially at cost, including transaction costs. Subsequent to initial recognition, investment properties are stated at fair value, which reflects market conditions, at the reporting date. Fair value is determined based on annual evaluation performed by an accredited external independent valuer, applying a valuation model recommended by the International Valuation Standards Committee. Gains or losses arising from changes in the fair value of investment properties are recognised in the income statement in the period which they arise. Investment properties are derecognised when they have been disposed of or when they are permanently withdrawn from use and no further economic benefit is expected from their disposal. The difference between the net disposal proceeds and the carrying amount of the asset is recognised in the income statement in the period of derecognition. (h) Cash and cash equivalents Cash and short-term deposits in the statement of financial position comprise cash at bank and in hand and short-term deposits with an original maturity of three months or less held by our administrator, which are subject to an insignificant risk of changes in value. For the purposes of the statement of cash flows, cash and cash equivalents consist of cash and short-term deposits as defined above. (i) Receivables and payables Receivables are carried at nominal amounts due which approximate fair value. Receivables are normally settled within 30 days. Payables are carried at nominal amounts which are approximate fair value. They represent liabilities for goods and services provided to the Scheme prior to the end of the financial year that are unpaid when the Scheme becomes obliged to make future payments in respect of the purchase of these goods or services. Payables are normally settled on 30 day terms. 10

13 2. Summary of significant accounting policies (continued) (j) Revenue recognition Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Scheme and the revenue can be reliably measured, regardless of when the payment is received. Revenue is measured at the fair value of the consideration received or receivable, taking into account contractually defined terms of payment and excluding taxes or duty. The specific recognition criteria described below must also be met before revenue is recognised: Changes in fair value Changes in the fair value of investments and derivatives are calculated as the difference between the fair value at sale, or at balance date, and the fair value at the previous valuation point. All changes are recognised in the income statement. Interest Interest revenue on cash and other financial assets carried at fair value is recorded according to the terms of the contract and is recognised in the income statement. Dividends and distributions Dividend and distribution revenue is recognised when the Scheme's right to receive payment is established. Revenue is presented gross of any non-recoverable withholding taxes, which are disclosed separately as tax expense in the income statement. Group Life Insurance Proceeds Insurance claim amounts are recognised where the insurer has agreed to pay the claim lodged and has transferred the claim amount to the Scheme. (k) Income tax The Scheme is a complying superannuation fund for the purposes of the provisions of the Income Tax Assessment Act Accordingly, the concessionaltax rate of 15% has been applied to the Scheme's taxable income. Income tax in the income statement for the year comprises current and deferred tax. Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the balance date. Deferred tax is provided on all temporary differences at the balance date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred tax liabilities are recognised for all taxable temporary differences except: -Where the deferred tax liability arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss. - When the taxable temporary difference is associated with investments in subsidiaries, associates or interests in joint ventures, and the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets are recognised for all deductible temporary differences, carry-forward of unused tax assets and unused tax losses. Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry-forward of unused tax assets and unused tax losses can be utilised, except: 11

14 2. Summary of significant accounting policies (continued) {k) Income tax (continued) -Where the deferred tax asset relating to the deductible temporary differences arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor the taxable profit or loss. - In respect of deductible temporary differences associated with investments in subsidiaries, associates or interests in joint ventures, in which case a deferred tax asset is only recognised to the extent that it is probable that the temporary difference will reverse in the foreseeable future and taxable profit will be available against which the temporary difference can be utilised. The carrying amount of deferred tax assets is reviewed at each balance date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are reassessed at each balance date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance date. Deferred tax assets and deferred tax liabilities are offset only if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred tax assets and liabilities relate to the same taxable entity and the same taxation authority. {I} Goods and services tax (GST) Revenues, expenses and assets are recognised net of the amount of GST, except: -When the GST incurred on a sale or purchase of assets or services is not payable to or recoverable from the taxation authority, in which case the GST is recognised as part of the revenue or the expense item or as part of the cost of acquisition of the asset, as applicable; or - When receivables and payables are stated with the amount of GST included. The net amounts of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the statement of financial position. Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority. Cash flows are included in the statement of cash flows on a gross basis. The GST component of cash flows arising from investing activities, which is recoverable from, or payable to the taxation authority are classified as operating cash flows. {m) Superannuation contribution surcharge The Superannuation Laws Amendment (Abolition of Surcharge) Act 2005 abolishes both the superannuation contributions surcharge and the termination payments surcharge in respect of superannuation contributions and certain termination payments made or received on or after 1 July Assessments for surcharge in respect of contributions and payments for the year ended 30 June 2005 and prior years will continue to be issued and remain payable. Superannuation Contribution Surcharge is levied on surchargeab!e contributions for a relevant year on the basis of the individual member's adjusted taxable income for that year. The liability for the Superannuation Contribution Surcharge is recognised when the assessment is received, as the Trustee considers this is when it can be reliably measured. The superannuation surcharge liability recognised by the Fund has been charged to the relevant members' accounts. 12

15 2. Summary of significant accounting policies (continued) (n) Foreign currency The functional and presentation currency of the Fund is Australian Dollars, which is the currency of the primary economic environment in which it operates. The Fund's performance is evaluated and its liquidity managed in Australian Dollars. Therefore, the Australian Dollar is considered as the currency that most faithfully represents the economic effects of the underlying transactions, events and conditions Transactions in foreign currencies are initially recorded at the functional currency spot rate at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency spot rates of exchange at the reporting date. Exchange differences arising on the settlement of monetary items or on translating monetary items at rates different from those at which they were translated on initial recognition during the period or in a previous financial report, are recognised in the income statement in the period in which they arise. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate as at the date of the initial transaction. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. (o) Member liabilities Member liabilities are measured at the amount of accrued benefits. Defined contribution member liabilities are measured as the amount of member account balances as at the reporting date. {p) Reserves The Scheme maintains an Operational Risk Reserve, in accordance with the requirements established by the Australian Prudential Regulatory Authority under Prudential Standard SPS 114 Operational Risk Financial Requirement and also holds a General reserve. The purpose of these additional reserves is set out in Note to. The purpose of the Operational Risk Reserve is to provide protection to the Scheme in the event that a loss is incurred from an operational risk event occurring. The use of the Operational Risk Reserve is governed by the requirements of SPS 114, which is applicable to all APRA-regulated funds. The current Operational Risk Reserve represents approximately 0.26% (2016: 0.24%) of the net assets available for member benefits of the Scheme. The Trustee intends to maintain this reserve between 0.20% and 0.30% of net assets available for member benefits. The Scheme maintains a General Reserve that provides funding to cover strategic initiatives approved by the Trustee for the benefit of members. Transfers in and out of the reserves are made only at the authorisation of the Trustee and in accordance with the Fund's Reserve Policy. (q) Significant accounting judgements and estimates and assumptions The preparation of the Scheme's financial statements requires management to make judgements, estimates and assumptions that affect the amounts recognised in the financial statements. However, uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of the asset or liability affected in the future. The significant accounting policies have been consistently applied in the current financial year and the comparative period, unless otherwise stated. Where necessary, comparative information has been re-presented to be consistent with current period disclosures. Fair Value of Investments When the fair values of the investments recorded in the statement of financial position cannot be measured based on quoted prices in active markets, their fair value is measured using valuation techniques. The inputs in these models are taken from observable markets where possible, but where this is not feasible, a degree of judgement is required to establish fair values. Judgements include considerations of inputs such as liquidity risk, credit risk and volatility. Changes in assumptions about these factors could affect the reported fair value of these investments. 13

16 2. Summary of significant accounting policies (continued) {q) Significant accounting judgements and estimates and assumptions (continued) Assessment as investment entity Entities that meet the definition of an investment entity within AASB 10 are required to measure their subsidiaries at fair value through profit or loss rather than consolidate them. The criteria which define an investment entity are, as follows: -An entity that obtains funds from one or more investors for the purpose of providing those investors with investment services; -An entity that commits to its investors that its business purpose is to invest funds solely for returns from capital appreciation, investment income or both; and -An entity that measures and evaluates the performance of substantially all of its investments on a fair value basis. The Scheme's product disclosure statement details its objective of providing services to members which includes investing in equities, fixed income securities and unit trusts for the purpose of returns in the form of investment income and capital appreciation. The Scheme reports to its members via an annual report, and to its management, via internal management reports, on a fair value basis. All investments are reported at fair value to the extent allowed by AASB t056 in the Scheme's annual report. The Scheme has a clearly documented exit strategy for all of its investments. The Trustee has also concluded that the Scheme meets the additional characteristics of an investment entity, in that it has more than one investment; the investments are predominantly in the form of equities and similar securities; it has more than one investor and its investors are not related parties. The Trustee has therefore concluded that the Scheme meets the definition of an investment entity. These conclusions will be reassessed on an annual basis, if any of these criteria or characteristics changes. 3. Member liabilities Member account balances are determined by crediting rates that are determined based on the underlying investment movements. Members bear the investment risk relating to the underlying assets and crediting rates used to measure the member liabilities. Crediting rates are updated weekly. At30 June ,556 (2016: 219,329) has not been allocated to members' at balance date. The amount not yet allocated to members' accounts consists of contributions received by the Scheme that have not been able to be allocated to members' as at balance date less contribution tax on these unallocated contributions. Refer to Note 18 for the Fund's management of the investment risks. Member liabilities vest 100% to members Members liability at end of the financial year 2,469,424,198 2,206,824,280 As compared to net assets available to pay benefits 2,496,988,701 2,216,932,925 14

17 4. Fair value of financial instruments (a) Classification of financial instruments under the fair value hierarchy AASB 13 requires disclosures relating to fair value measurements using a three-level fair value hierarchy. The level 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. Assessing the significance of a particular input requires judgement, considering factors specific to the asset or liability. The following table shows financial instruments recognised at fair value, categorised between those whose fair value is based on: - Level1 :Quoted {unadjusted) market prices in active markets for identical assets or liabilities - Level2: Valuation techniques lor which the lowest level input that is significant to the fair value measurement is directly or indirectly observable - Level3: Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable The level in which instruments are classified in the hierarchy is based on the lowest level input that is significant to the fair value measurement in its entirety. Assessment of the significance of an input requires judgement after considering factors specific to the instrument. Interest bearing securities Term deposits Government bonds Corporate bonds Level 1 30 June 2017 Level2 25,063, ,728, ,791,999 level3 Total 25,063, ,728, ,791,999 Australian equities Listed 595,969, ,969, ,969, ,969,519 International equities Unlisted 586,589, ,589,839 Unit trusts BCA MEZZAN DEBT TST ICG Diversified Infrastructure Fund Kapstream ARIF PR CL QIC Private EQT 4 LP Industry Super Property Trust Australian Prime Property Trust (Commercial) Australian Prime Property Trust {Retail) LaSalle Australian Club Trust 178,908 45,234, ,462,208 62,551,766 67,974,052 43,408, ,490,500 74,037, ,908 45,234, ,462,208 62,551,766 67,974,052 43,408, ,490,500 74,037,651 Other (development, infrastructure) 495,338, , Pooled superannuation trusts IFM Australian Infrastructure Fund 46, ,483,929 Private equity Unlisted private equity 64,635,532 64, Derivative assets Forward foreign exchange contracts 240,808, ,808, ,808, ,808,029 Derivative liabilities Forward foreign exchange contracts (48,337) (239,426,012) (239,474,349) 15

18 4. Fair value of financial instruments (continued) (a) Classification of financial instruments under the fair value hierarchy (continued) 30 June 2016 Level1 Level2 Interest bearing securities Term deposits 47,294,339 Corporate bonds 203,411,430 Asset-backed securities 249,630, ,336,020 Level3 Total 47,294, ,411, ,630, ,336,020 Australian equities Listed 549,085,584 Unlisted 9,393 Directly managed portfolio 549,094, ,085,584 9, ,094,977 International equities Unlisted 493,842,157 Unit trusts Energy Infrastructure Trust 59,796,047 ICG Diversified Infrastructure Fund 40,631,467 Industry Super Property Trust 59,687,216 Australian Prime Property Trust {Commercia 38,661,442 Australian Prime Property Trust {Retail) 98,648,901 LaSalle Australian Club Trust 45,554,052 Colonial First State Private Property Syndica 291, ,271,028 Pooled superannuation trusts IFM Australian Infrastructure Fund 43211,703 Private equity Unlisted private equity 68,642,289 Derivative assets Australian Share Price Index futures 18,988 Forward foreign exchange contracts 208,685,762 18, ,685,762 Derivative liabilities (209,925, ,842,157 59,796,047 40,631,467 59,687,216 38,661,442 98,648,901 45,554, , ,271, ,642,289 18, ,685, ,704, ,925,7501 Valuation technique Interest bearing securities The Scheme invests in term deposits, corporate bonds and asset-backed securities. Term deposits are valued at face value plus accrued interest at balance date and are classified as Level 2 investments. Corporate bonds are valued using observable inputs such as recent transaction prices, the Scheme classifies these investments as level 2. Asset-backed securities are valued using observable inputs including current rates of interest and industry accepted valuation processes, as such these investments are classified as Level 2. 16

19 4. Fair value of financial Instruments (continued) (a) Classification of financial instruments under the fair value hierarchy (continued) Valuation technique (continued) Listed equities When fair values of publicly traded equity securities are based on quoted market prices, or binding dealer price quotations, in an active market for identical assets without any adjustments, the instruments are included within Level1 of the hierarchy. Unlisted equities and private equity Investments For equities not listed on a recognised stock exchange and for private equity investments, that are valued based on the net asset value of the underlying investments and are classified as Level 2. Unlisted unit trusts and pooled superannuation trusts The Scheme invests in these trusts which are not quoted in an active market and which may be subject to restrictions on redemptions such as lock up periods, redemption gates and side pockets. The Scheme considers the valuation techniques and inputs used in valuing these funds as part of its due diligence prior to investing, to ensure they are reasonable and appropriate and therefore the NAV of these funds may be used as an input into measuring their fair value. In measuring this fair value, the NAV of the funds is adjusted, as necessary, to reflect restrictions on redemptions, future commitments, and other specific factors of the fund and fund manager. In measuring fair value, consideration is also paid to any transactions in the shares of the fund. The Scheme classifies these investments as Level 2. Derivative assets and liabilities The Scheme uses widely recognised valuation models for determining fair values of over-the-counter interest rate swaps, currency swaps, forward foreign exchange contracts and listed derivatives (futures). Futures are classified as level 1. For other derivative assets and liabilities, the most frequently applied valuation techniques include forward pricing and swap models, using present value calculations. The models incorporate various inputs including both credit and debit valuation adjustments for counterparty and own credit risk, foreign exchange spot and forward rates and interest rate curves. For these financial instruments, significant inputs into models are market observable and are included within Level 2. (b) Level3 reconciliation The following table shows a reconciliation of the movement in the fair value of financial instruments categorised within Level 3 between the beginning and the end of the reporting period. 30 June 2017 Opening balance Sales/Redemptions Closing Balance Equities listed TOTAL 30 June 2016 Opening balance Sales/Redemptions Closing Balance Equitieslisted 10,197 (10,197) TOTAL 10,197 (10,197) (c) Transfers Between Hierarchy Levels There have been no significant transfers between Level 1 and Level 2, nor between Level 2 and Level 3 of the fair value hierarchy during the financial year. 17

20 5. lnveslment property Investment property 8,800,000 6,975,000 (a) Valuation technique 8,800,000 6,975,000 Directly managed investment property comprises investment in directly held retail buildings primarily for the purpose of occupancy for the Trustee office. In addition the purpose of holding this particular investment is appreciation in investment valuation for the benefit of members. As at 30 June 2017 the fair value of the property is based on a valuation pertormed by Landsburys Valuation & Advisory Pty Ltd, an accredited independent valuer. The valuation method applied is direct comparison. The direct comparison method has regard to the location, building services, provision of car parking, proximity to transport routes and employment bases, access, configuration, specification, potential rental expectation, levels of natural light and likely buyer profile, however disregards temporary items of fit out. Direct comparison is a subjective comparison with the available sales evidence on a rate per square meter basis. Due to the subjectivity of the valuation the Scheme has classified the investment property as Level 3. For the investment property classified in Level 3 some of the inputs to the valuation model are unobservable and therefore. subjective in nature. The use of reasonably possible alternative assumptions could produce a different fair value measurement. If the impact of using those alternative assumptions would cause the fair value of Level 3 assets to be higher or lower by 5% of the net assets available for member benefits of the Scheme then the result for the year would have been higher or lower by 440,000 {2016: 348,750). (b) Level 3 reconciliation The following table shows a reconciliation of the movement in the fair value of the investment property categorised within Level 3 between the beginning and the end of the reporting period. 30 June 2017 Property TOTAL Opening balance 6,975,000 6,975,000 Total realised/unrealised gains and losses through income statement 1,825,000 1,825,000 Closing Balance 8,800,000 8,800, June 2016 Property TOTAL Opening balance 6,750,000 6,750,000 Total realised/unrealised gains and losses through income statement 225, ,000 Closing Balance 6,975,000 6,975,000 18

21 6. Receivables Recoverable within 12 months GST receivable Prepayments Sundry receivables Receivable from related entity ,833 4,301, ,183 4,825, ,683 9,037 21,988 52, ,558 Due to the short term nature of these receivables, their carrying value is assumed to approximate their fair value. The maximum exposure to credit risk is the fair value of receivables. Information regarding credit risk exposure is set out in Note Payables 2017 Due within 12 months Trade and other creditors 2,961,298 Accrued expenses 292,913 3,254, ,347, ,023 2,572,892 Due to the short term nature of these payables, their carrying value is assumed to approximate their fair value. Information regarding interest rate, foreign exchange and liquidity risk exposure is set out in Note Changes in lair value of investments 2017 Investments held at balance date Interest bearing securities (3,374,630) Australian equities 47,982,378 International equities 66,704,324 Unit trusts 6,196,922 Pooled superannuation trusts Private equity Derivative assets and derivative liabilities 1,382,018 Investment property 41,813,412 Total unreallsed galns/(losses} 160,704,424 Investments realised during the year Interest bearing securities 125,260 Australian equities 10,324,784 International equities 4,477,606 Unit trusts 11,830 Private equity Derivative assets and derivative liabilities 7,865,093 Investment property Total realised galns/{losses} 22,804,573 Change in fair value of Investments 183,508, ,965,542 6,653,609 (17,397,254) 19,102,574 (1,274,951) 11,922,493 (1,239,988) ,955,171 3,599,023 (14,709,854) (10,324,905) (628,407) (151,841) (3,295,719) (25,511,703) (3,556,532) The amounts recorded as 'realised gains/{losses)' above is the difference between the fair value at sale and the carrying amount at the beginning of the reporting period or when acquired, if acquired during the year. 19

22 9. Funding arrangements During the year ended 30 June 2017, the employers contributed to the Scheme on behalf of members as part of the Trust Deed, Award and Superannuation Guarantee Charge of 9.50%, (2016: 9.50%). Member and additional employer contributions are paid to the Scheme at a rate determined by the member and/or employer. 10. Reserves General reserve 21,186,692 4,716,376 Operational risk reserve 6,377,811 5,392,269 27,564,503 10,108,645 The purpose of the Operational Risk Reserve is to provide protection to the Scheme in the event that a loss is incurred from an operational risk event occurring. The use of the Operational Risk Reserve is governed by the requirements of SPS 114, which is applicable to all APRA-regulated funds. The current Operational Risk Reserve represents approximately 0.26% (2016: 0.24%) of the net assets available for member benefits of the Scheme. The Trustee intends to maintain this reserve between 0.20% and 0.30% of net assets available for member benefits. The Scheme maintains a General Reserve that provides funding to cover strategic initiatives approved by the Trustee for the benefit of members. Transfers in and out of the reserves are made only at the authorisation of the Trustee and in accordance with the Fund's Reserve Policy. 11, Income 1ax (a) Major components of income tax expenses for the years ended 30 June 2017 and 2016: Income statement Current tax expense Current tax charge Adjustments in respect of current income tax of previous years Deferred tax Relating to origination and reversal of temporary differences Total tax expense as reported in the income statement ,521,204 (144,851) 5,176,121 13,552, (88,259) (569,771) (8,050,359) (8, 708,389) (b) Reconciliation between income tax expenses and the accounting profit before income tax Profitl(loss) from operating activities Income tax at 15% Non-deductible administration expenses Surcharge tax liability Oerecognition of temporary differences Net benefit allocated to member accounts Anti-detriment deduction Capital gains/(losses) not assessable/( deductible) Exempt pension income Net imputation and foreign tax credits Under/(over) provision in the previous year 31,008,332 4,651,250 67,367 34,791,958 (326,091) (12,492,275) (3,739,975) (9,254,909) (144,851) 13,552,474 (6,151,740) (922,761) 67,367 (3,698) (10,160) 5,806,665 (36,326) (4,409,001) (421,212) (8,209,492) (569,771) (B, 708,389) 20