This is Annexure A of 36 pages referred to in Form 388 ‘Copy of financial statements and reports’ for
Scheme Name: Australian Corporate Bond Trust Director ARSN: 603 010 779 Theta Asset Management Limited ABN: 37 071 807 684 - ASFL: 230920
Date 27/9/2017
AUSTRALIAN COPORATE BOND TRUST AND ITS CONTROLLED ENTITIES ARSN 603 010 779
Consolidated Financial Report for the year ended 30 June 2017
Australian Corporate Bond Trust and its controlled entities For the year ended 30 June 2017
Contents
Page Directors’ Report 1
Auditor’s Independence Declaration 5
Consolidated Statement of Profit or Loss and Other Comprehensive Income 6
Consolidated Statement of Financial Position 7
Consolidated Statement of Changes in Equity 8
Consolidated Statement of Cash Flows 9
Notes to the Consolidated Financial Statements 10
Directors’ Declaration 33
Independent Auditor’s Report 34 Australian Corporate Bond Trust and its controlled entities For the year ended 30 June 2017
Directors’ Report
The directors of Theta Asset Management Ltd (“the Responsible Entity”), the Responsible Entity of the Australian Corporate Bond Trust ("the Trust”), present their report together with the consolidated financial statements of Australian Corporate Bond Trust and its controlled entities (collectively "the Group"), for the year ended 30 June 2017 and the auditor’s report thereon.
The Responsible Entity
The Responsible Entity of the Trust is Theta Asset Management Ltd. The trustee of the controlled entities is Valuestream Investment Management Limited (a related entity to the Responsible Entity).
The principal place of business of the Responsible Entity and the Group is Suite 501, Level 5, 210 Clarence Street, Sydney, NSW 2000.
The directors of the Responsible Entity during the financial year ended 30 June 2017 are:
Name and Experience, qualifications and special responsibilities appointment ROBERT Robert has over 28 years’ experience in financial services having spent six years at MARIE Macquarie Bank as a state manager for Western Australia and South Australia. He was also the product manager for Macquarie’s successful Cash Management Trust in Executive addition to a range of equity based funds. Robert was General Manager Marketing of the Bridges group with responsibility for the in-house platform which had $1.5 billion under administration. Since moving to Western Australian Robert was responsible manager and Director of Wealth Management and Insurance at BankWest. Following the takeover of BankWest by HBOS Robert established a specialist Responsible Entity service provider which includes Theta Asset Management Limited.
KIRSTEN Kirsten has more than 18 years’ experience in financial services as an institutional MARIE stockbroker, institutional bond dealer and has comprehensive foreign currency and futures trading experience. Non-Executive Kirsten holds a Bachelor of Business degree from Curtin University and is also a member of FINSIA.
Kirsten resigned on 1 May 2017. Michael Michael has spent over 31 years in Banking & Finance, 17 of those years in financial Fenech markets in senior roles with Macquarie Bank, National Australia Bank, CUSCAL and HSBC. Non-Executive Following 9 years in CUSCAL, Michael was appointed as the Chief Operating Officer at HSBC Australia, responsible for the banks operations in Australia and New Zealand. In this role, he successfully restructured the business focusing on compliance, risk and cost management.
Since 2007, Michael has been running a consultancy, research and software provider for financial services organisations focusing in Credit Unions, Fund Managers and Financial Planners.
Page 1 Australian Corporate Bond Trust and its controlled entities For the year ended 30 June 2017
Directors’ Report Continued
The Responsible Entity (continued)
Name and Experience, qualifications and special responsibilities appointment Norman Mr. Gibson is a lawyer with 30 years of experience in commercial law practice. Gibson Non-Executive Norman was appointed on 1 May 2017.
Principal activities
The Trust is a registered managed investment scheme domiciled in Australia.
The Trust was established on 20 November 2014 and commenced operations on 13 May 2015 when a unit holder first subscribed to the units of the Trust.
The principal activity of the Trust is to give investors exposure to a range of leading Australian companies corporate bonds via the ASX AQUA platform. These bonds are held in the wholly-owned sub-trusts (controlled entities) of the Trust.
There have been no significant changes in the activities of the Trust and its controlled entities’ principal activity during the year. The Group did not have any employees during the year.
Review of operations
Results The Group made a profit from operations before distributions for the year ended 30 June 2017 of $4,567,865 (2016: $837,513).
Distributions Paid
For the year ended 30 June 2017, distributions paid or payable to unitholders was $6,604,771 (2016: $1,219,289).
Group Assets 30-Jun-17 30 June 2016 $ $ Net Assets 207,803,812 58,071,822
The basis of valuation of the assets is disclosed in Note 2 to the financial statements.
Page 2 Australian Corporate Bond Trust and its controlled entities For the year ended 30 June 2017
Directors’ Report Continued
Units on issue
1,965,860 units of the Trust were on issue at 30 June 2017 (2016: 548,300 units). During the year 1,423,560 (2016: 480,300) units were issued by the Trust and 6,000 units matured during the year (2016: nil).
Significant changes in the state of affairs
There were no significant changes in the state of affairs of the Group that occurred during the financial year under audit other than noted elsewhere in the Directors’ Report.
Likely developments
The Group will continue its current activities in accordance with the Responsible Entity’s guidelines and the objectives of the Trust. At the time of preparing this report, the Responsible Entity is not aware of any other likely developments.
Fees paid to and interests held in the Trust by the Responsible Entity or its associates
Fees paid to the Responsible Entity were paid out from the Australian Corporate Bond Company Limited ("Securities Manager") and not from the Trust.
The Responsible Entity or its associates held no units in the Trust as at 30 June 2017.
Except as disclosed in this report or in the notes to the consolidated financial statements, since the date of commencement, no director of the Responsible Entity has received or become entitled to receive any benefit because of a contract made by the Responsible Entity or a related entity with a director, or with a firm of which a director is a member, or with an entity in which a director of the Responsible Entity has a substantial interest.
Options granted No options were granted: (i) over unissued units in the Trust during or since the end of the financial year; or (ii) to the Responsible Entity.
No unissued units in the Trust were under option or at the date on which the report was made.
No units were issued in the Trust during or since the end of the financial year as a result of the exercise of an option over unissued units in the Trust.
Events subsequent to reporting date No matters or circumstances have arisen since the end of the year which significantly affected or may significantly affect the operations of the Group, the result of those operations in subsequent financial years.
Page 3 Australian Corporate Bond Trust and its controlled entities For the year ended 30 June 2017
Directors' Report Continued
Indemnifications and insurance of officers
Indemnification Under the Trust Constitution, the Responsible Entity, including its officers and employees, is indemnified out of the Group's assets for any loss, damage, expense or other liability incurred by it in properly performing or exercising any of its powers, duties or rights in relation to the Group.
The Group has not indemnified any auditor of the Trust.
Insurance premiums No insurance premiums are paid out of the assets of the Group in regards to insurance cover provided to the Responsible Entity or the auditors of the Group.
Proceeding on behalf of the Trust
No person has applied for leave of Court to bring proceedings on behalf of the Group or intervene in any proceedings to which the Group is a party for the purpose of taking responsibility on behalf of the Trust for all or any part of those proceedings. The Group was not a party to any such proceedings during the year.
Rounding of amounts
In accordance with ASIC Corporations (Pounding in Financial/Directors' Reports) Instrument 2016/191, the amounts in the Directors' Report and in the Financial Report have been rounded to the nearest dollar.
Additional information
Investment policy of the Trust The primary objective of the Trust is to provide classes of ASX traded units that track the performance of particular Underlying Bonds, after fees and expenses.
Tax treatment of the Trust The financial accounting treatment applied to the Trust in the consolidated financial statements differs from the treatment of the Underlying Bonds held by the Trust for income tax purposes. The Trust will hold the Underlying Bonds on revenue account. Any gain made by the Trust on redemption or disposal of the Underlying Bonds should be assessable as ordinary income and any payment for the acquisition of the Underlying Bonds should be a deductible expense.
Lead auditor's independence declaration
The lead auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 5 and forms part of the Directors' Report for the period ended 30 June 2017.
Signed i^ accordance with resolution of the directors of the Responsible Entity:
Mict- Director
Dated at Sydney this 27th day of September 2017
Page 4
Auditor’s Independence Declaration To the Directors of Theta Asset Management Ltd As Responsible Entity of Australian Corporate Bond Trust and its controlled entities ARSN 603 010 779
As lead auditor for the audit of Australian Corporate Bond Trust and its controlled entities for the year ended 30 June 2017, I declare that to the best of my knowledge and belief, there have been:
(i) no contraventions of the auditor independence requirements of the Corporations Act 2001; and
(ii) no contraventions of any applicable code of professional conduct.
C I CHANDRAN Partner
PITCHER PARTNERS Sydney
27 September 2017
5
An independent New South Wales Partnership. ABN 17 795 780 962. Pitcher Partners is an association of independent firms Level 22 MLC Centre, 19 Martin Place, Sydney NSW 2000 Melbourne | Sydney | Perth | Adelaide | Brisbane| Newcastle Liability limited by a scheme approved under Professional Standards Legislation An independent member of Baker Tilly International Australian Corporate Bond Trust and its controlled entities For the year ended 30 June 2017
Consolidated Statement of Profit or Loss and Other Comprehensive Income
30 June 2017 30 June 2016 Notes $ $ Revenue Interest 3 4,567,865 837,513 4,567,865 837,513
Expenses - -
Operating profit 4,567,865 837,513
Finance costs attributable to unitholders Distributions to unitholders 5, 9 (6,604,771) (1,219,289) Decrease in net assets attributable to unitholders 2,036,906 381,776
Profit/loss for the period - -
Other comprehensive income - -
Total comprehensive income for the period - -
The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes.
Page 6 Australian Corporate Bond Trust and its controlled entities As at 30 June 2017
Consolidated Statement of Financial Position
30 June 2017 30 June 2016 Notes $ $ Current assets Interest Receivables 6 1,841,686 584,283 Unsettled Trades 3,274,830 665,170 Financial Assets 7 16,268,632 601,167 Total current assets 21,385,148 1,850,620
Non-current assets Financial Assets 7 189,693,494 56,886,372 Total non-current assets 189,693,494 56,886,372
Total assets 211,078,642 58,736,992
Liabilities Unallotted applications 8 3,274,830 665,170 Total liabilities 3,274,830 665,170
Net assets attributable to unit holders 8 207,803,812 58,071,822
The above consolidated statement of financial position should be read in conjunction with the accompanying notes.
Page 7 Australian Corporate Bond Trust and its controlled entities For the year ended 30 June 2017
Consolidated Statement of Changes in Equity
In accordance with AASB 132 Financial Instruments - Presentation , the Group's net assets attributable to unit holders are classified as liability. As a result, the Group had no equity, and accordingly, no changes in equity have been presented for the year.
Page 8 Australian Corporate Bond Trust and its controlled entities For the year ended 30 June 2017
Consolidated Statement of Cash Flows
Notes 30 June 2017 30 June 2016 $ $ Cash flow from operating activities Receipt of coupon 5 6,604,771 1,219,289 Net cash flows provided by operating activities 6,604,771 1,219,289
Cash flows from investing activities Payments for investment in corporate bonds (152,368,896) (50,909,858) Proceeds from maturity of bonds 600,000 - Net cash flows used in investing activities (151,768,896) (50,909,858)
Cash flows from financing activities Proceeds from issue of units 152,368,896 50,909,858 Payment for maturity of bonds (600,000) - Payment of distributions (6,604,771) (1,219,289) Net cash flows provided by financing activities 145,164,125 49,690,569
Net increase in cash held - -
Cash and cash equivalents at beginning of period - -
Cash and cash equivalents at end of period - -
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
Page 9 Australian Corporate Bond Trust and its controlled entities For the year ended 30 June 2017
Notes to the Consolidated Financial Statements
1. GENERAL INFORMATION
These consolidated financial statements and notes represent those of the Australian Corporate Bond Trust (“Trust”) and its controlled entities (collectively "the Group”). The Trust is a unit trust, incorporated and domiciled in Australia. The Trust is a registered Managed Investment Scheme under the Corporations Act 2001 .
The Trust was established on 20 November 2014 and commenced operations on 13 May 2015 when a unit holder first subscribed to the units of the Trust.
The consolidated financial statements were authorised for issue by the Board of Directors of the Responsible Entity on 27 September 2017.
2. SIGNIFICANT ACCOUNTING POLICIES
Basis of preparation The consolidated financial statements are general purpose financial statements that have been prepared in accordance with Australian Accounting Standards, Australian Accounting Interpretations, other authoritative pronouncements of the Australian Accounting Standards Board (AASB) and the Corporations Act 2001. The Trust is a for-profit entity for financial reporting purposes under Australian Accounting Standards.
Australian Accounting Standards set out accounting policies that the AASB has concluded would result in financial statements containing relevant and reliable information about transactions, events and conditions. Compliance with Australian Accounting Standards ensures that the financial statements and notes also comply with International Financial Reporting Standards as issued by the IASB.
The principal accounting policies adopted in the preparation of the consolidated financial statements are set out below. These policies have been consistently applied to all the periods presented, unless otherwise stated.
(a) Principles of consolidation The consolidated financial statements are those of the Group, comprising the financial statements of the Trust and of all entities which the Trust controls. The Group controls an entity when it is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. See Note 10 for the composition of the Group.
The financial statements of subsidiaries are prepared for the same reporting period as the Trust, using consistent accounting policies. Adjustments are made to bring into line any dissimilar accounting policies, which may exist.
All inter-company balances and transactions, including any unrealised profits or losses have been eliminated on consolidation. Subsidiaries are consolidated from the date on which control is established and are de-recognised from the date that control ceases.
Where the consolidated entity loses control over a subsidiary, it derecognises the assets and liabilities in the subsidiary.
Page 10 Australian Corporate Bond Trust and its controlled entities For the year ended 30 June 2017
Notes to the Consolidated Financial Statements
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(b) Functional currency The consolidated financial statements are presented in Australian Dollars, which is the Group’s functional and presentation currency.
(c) Revenue recognition Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured.
Interest revenue is recognised as interest accrues using the effective interest method. This is a method of calculating the amortised cost of a financial asset and allocating the interest income over the relevant period using the effective interest rate, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the net carrying amount of the financial asset.
(d) Significant accounting judgements, estimates and assumptions The preparation of the consolidated financial statements requires management of the Responsible Entity to make judgements, estimates and assumptions that affect the reported amounts in the consolidated financial statements. Management of the Responsible Entity continually evaluates its judgements and estimates in relation to assets, liabilities, contingent liabilities, revenue and expenses. Management bases its judgements and estimates on historical experience and on other factors considered reasonable under the circumstances.
The Responsible Entity has identified critical accounting policies for which significant judgements, estimates and assumptions are made. Actual results may differ from these estimates under different assumptions and conditions and may materially affect financial results or the financial position reported in future periods.
Further details of the nature of these assumptions and conditions may be found in the relevant notes to the consolidated financial statements.
(e) Financial instruments Financial assets and financial liabilities are recognised when the entity becomes a party to the contractual provisions of the instrument. For financial assets, this is equivalent to the date that the entity commits itself to either the purchase or sale of the asset (i.e., trade date accounting is adopted).
Initial recognition and measurement The Group’s financial instruments are initially measured at fair value adjusted for transaction costs.
(i) Financial assets Held-to-maturity investments Held-to-maturity investments are non-derivative financial assets that have fixed maturities and fixed or determinable payments, and the Group intends to hold the investments to maturity. They are subsequently measured at amortised cost using the effective interest rate method.
Page 11 Australian Corporate Bond Trust and its controlled entities For the year ended 30 June 2017
Notes to the Consolidated Financial Statements
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(e) Financial instruments (continued)
(i) Financial assets (continued)
Held-to-maturity investments (continued) The effective interest rate method is used to allocate interest income or interest expense over the relevant period and is equivalent to the rate that exactly discounts estimated future cash payments or receipts (including fees, transaction costs and other premiums or discounts) through the expected life (or when this cannot be reliably predicted, the contractual term) of the financial instrument to the net carrying amount of the financial asset or liability. Revisions to expected future net cash flows will necessitate an adjustment to the carrying value with a consequential recognition of an income or expense in profit or loss.
Derecognition Financial assets are derecognised where the contractual rights to receipt of cash flows expires or the asset is transferred to another party whereby the entity no longer has any significant continuing involvement in the risks and benefits associated with the asset.
(ii) Financial liabilities Financial liabilities include trade payables and other creditors.
Non-derivative financial liabilities are subsequently measured at amortised cost.
Derecognition Financial liabilities are derecognised where the related obligations are discharged, cancelled or expired. The difference between the carrying value of the financial liability extinguished or transferred to another party and the fair value of consideration paid, including the transfer of non-cash assets or liabilities assumed, is recognised in profit or loss.
(iii) Impairment Financial assets are tested for impairment at each financial year end to establish whether there is any objective evidence for impairment as a result of one or more events (‘loss events’) having occurred and which have an impact on the estimated future cash flows of the financial assets.
For held-to-maturity investments carried at amortised cost, impairment losses are measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate. The amount of the loss reduces the carrying amount of the asset and is recognised in profit or loss. The impairment loss is reversed through profit or loss if the amount of the impairment loss decreases in a subsequent period and the decrease can be related objectively to an event occurring after the impairment was recognised.
Page 12 Australian Corporate Bond Trust and its controlled entities For the year ended 30 June 2017
Notes to the Consolidated Financial Statements
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(e) Financial instruments (continued)
(iii) Impairment
Securities held in the Trust are monitored for qualitative and quantitative factors that might affect credit quality. At each reporting date, the published credit ratings of S&P, Moody’s, or Fitch are compared for all securities, to determine if there has been a significant deterioration in credit quality since initial recognition in the Trust.
The Trust has, from time to time, held debt securities that have a mechanism to automatically adjust to changing credit risk. For example, certain bonds have contractual terms contained in the bond information memorandum for ‘step-up’ and ‘step-down’ provisions, that adjusts the coupon rate for decreases/increases in the credit risk. Adjustment in the coupon rate to adopt to changing credit risk is monitored by management and is not necessarily a trigger for impairment of the bond.
As at reporting date, no securities held by the Trust are impaired.
(f) Unit prices The unit price is based on unit price accounting outlined in the Trust’s Constitution and Product Disclosure Statement (PDS).
(g) Distributions In accordance with the Trust’s Constitution, the Responsible Entity must determine the distributable income of the Trust for each distribution period. Specifically, in the Trust PDS, where the bond issuer makes a coupon payment on the Underlying Bonds, unit holders in that class are entitled to receive income as distribution. Distributions are recognised in the Consolidated Statement of Profit or Loss and Other Comprehensive Income as finance costs.
(h) Cash and cash equivalents Cash and cash equivalents includes cash on hand, deposits held with financial institutions, other short term, highly liquid investments with original maturities of three months or less that are readily convertible to cash and which are subject to an insignificant risk of changes in value.
Page 13 Australian Corporate Bond Trust and its controlled entities For the year ended 30 June 2017
Notes to the Consolidated Financial Statements
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(i) Interest receivables Interest receivables relate to the amounts due from the issuers of the Underlying Bonds.
Interest receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method, less any impairment losses. Refer to Note 2(e) for further discussion on the determination and treatment of impairment losses.
(j) Net assets attributable to unit holders There are 48 separate classes of units on issue as at 30 June 2017 (2016: 37) and each class is referable to a particular pool of assets and liabilities held with the Trust. Unit holders participate in distributions and the proceeds on the winding up the Trust in proportion to the number of units held in each class.
(k) Classification of unit holders funds as liability Units are redeemable at the option of the unit holders if the unit holders apply to redeem at least the minimum redemption amount. The units are classified as liabilities as the Trust is required to distribute the distributable income within a period after the receipt of coupon payments from the issuers of the Corporate Bonds.
(l) Comparative information When required by Accounting Standards, comparative information have been adjusted to conform to changes in presentation for the current financial year.
(m) Taxation Under the current tax legislation, the Trust is not subject to income tax provided that the unitholders are presently entitled to the income fo the Trust and the Trust entirely distributes its taxable income.
There is no taxable income of the Trust to which the unitholders are not currently entitled. Additionally, the Trust Constitution requires the distribution of the full amount of the net taxable income of the Trust to unitholders each year. Refer to Note 2(k) for information relating to distributions.
(n) New Accounting Standards for Application during the Year and in Future Periods The Group has adopted all of the new, revised or amending Accounting Standards and Interpretations issued by the AASB that are mandatory for the current reporting period.
Page 14 Australian Corporate Bond Trust and its controlled entities For the year ended 30 June 2017
Notes to the Consolidated Financial Statements
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(n) New Accounting Standards for Application during the Year and in Future Periods (Continued) New and revised Standards and amendments thereof and Interpretations effective for the current year that are relevant to the Group included:
• AASB 2015-1 ‘Amendments to Australian Accounting Standards – Annual Improvements to Australian Accounting Standards 2012-2014 Cycle’
The adoption of above standards and interpretations did not have a material impact on the Group.
Standards and Interpretations in issue but not yet adopted At the date of authorisation of the financial statements, the Standards and Interpretations listed below were in issue but not yet effective. Standard/Interpretation Effective for annual reporting Expected to be initially periods beginning on or after applied in the financial year ending AASB 9 ‘Financial Instruments’, 1 January 2018 30 June 2019 and the relevant amending standards AASB 15 ‘Revenue from 1 January 2018 30 June 2018 Contracts with Customers’, AASB 2014-5 ‘Amendments to Australian Accounting Standards arising from AASB 15’
AASB 16 ‘Leases’ 1 January 2018 30 June 2019
The Group has not yet assessed the potential impact and applicability of the above new standards and interpretations.
There are no other standards that are not yet effective and that are expected to have a material impact on the Group in the current or future reporting periods and on foreseeable future transactions.
Page 15 Australian Corporate Bond Trust and its controlled entities For the year ended 30 June 2017
Notes to the Consolidated Financial Statements
3. INTEREST REVENUE
30 June 2017 30 June 2016 $ $ Interest revenue 4,567,865 837,513 Total 4,567,865 837,513
4. AUDITOR'S REMUNERATION 30 June 2017 30 June 2016 Pitcher Partners: $ $ Audit and review of the financial reports 32,500 18,500 Audit of the compliance plan 4,000 4,000 36,500 22,500
The auditor's remuneration is paid for by the Securities Manager.
5. RECONCILIATION OF PROFIT/(LOSS) TO NET CASH INFLOW/(OUTFLOW) PROVIDED BY/(USED IN) OPERATING ACTIVITIES 30 June 2017 30 June 2016 $ $ Profit/(loss) for the year - - Decrease in net assets attributable to unitholders (2,036,906) (381,776) Distributions to unitholders 6,604,771 1,219,289 Net change in receivables 2,036,906 381,776 Net cash inflow provided by operating activities 6,604,771 1,219,289
6. INTEREST RECEIVABLES
30 June 2017 30 June 2016 CURRENT $ $ Interest receivable 1,841,686 584,283 1,841,686 584,283
Page 16 Australian Corporate Bond Trust and its controlled entities For the year ended 30 June 2017
Notes to the Consolidated Financial Statements
7. FINANCIAL ASSETS
At amortised cost 30 June 2017 30 June 2016 Current 16,268,632 601,167 Non-current 189,693,494 56,886,372 Total 205,962,126 57,487,539
30-Jun-17 30-Jun-16 ASX Maturity Coupon Rate $ $ $ $ Code of Date Face value Amortised cost Face value Amortised cost Issuer AGL Energy Ltd AGL 05-Nov-21 5.00% 5,830,000 6,133,353 110,000.00 117,042 ANZ Banking Group Ltd ANZ 03-Jun-20 3.25% 500,000 502,630 - - APT Pipelines Ltd APA 22-Jul-20 7.75% 2,490,000 2,798,216 500,000.00 572,133 Ausnet Services Holdings Pty Ltd AST 28-Jun-22 5.75% 2,510,000 2,787,567 230,000.00 253,184 Alumina Ltd AWC 19-Nov-19 5.50% 12,300,000 12,683,919 1,000,000.00 1,008,115 Aurizon Network Pty Ltd AZJ 28-Oct-20 5.75% 19,490,000 20,597,723 5,700,000.00 5,957,622 BHP Billiton Finance Ltd BH1 30-Mar-20 3.00% 1,500,000 1,506,282 - - BHP Billiton Finance Ltd BHP 18-Oct-17 3.75% 3,040,000 3,047,957 1,500,000.00 1,511,958 Bank of Queensland Ltd BOQ 12-Jun-18 4.00% 500,000 504,029 500,000.00 508,150 Coca Cola Amatil Ltd CCA 13-Nov-19 4.25% 1,500,000 1,545,880 500,000.00 515,763 Caltex Australia Ltd CTX 23-Nov-18 7.25% 1,600,000 1,696,592 400,000.00 439,354 Crown Group Finance Ltd CWN 18-Jul-17 5.75% 500,000 500,558 500,000.00 511,737 Downer EDI Ltd DO1 11-Mar-22 4.50% 11,200,000 11,346,950 500,000.00 495,018 Downer EDI Ltd DOW 29-Nov-18 5.75% 2,050,000 2,118,122 580,000.00 604,340 DEXUS Finance Pty Ltd DX1 05-Nov-25 4.75% - - - - DEXUS Finance Pty Ltd DXS 10-Sep-18 5.75% 750,000 776,795 100,000.00 105,087 AMP Bank Limited F01 06-Jun-18 BBSW +0.87% 3,300,000 3,302,288 2,300,000.00 2,303,529 Bank of Queensland Ltd F02 07-Nov-16 BBSW + 1.15% - - 600,000.00 601,167 Bank of Queensland Ltd F03 12-Jun-18 BBSW +1% 8,400,000 8,408,059 4,200,000.00 4,199,353 National Australia Bank Ltd F04 08-Nov-18 BBSW +0.88% 3,000,000 3,004,593 2,000,000.00 2,002,743 National Australia Bank Ltd F05 20-May-19 BBSW +0.85% 1,500,000 1,500,179 1,000,000.00 998,843 Suncorp-Metway Ltd F06 23-Apr-19 BBSW +1.1% 11,350,000 11,398,705 3,400,000.00 3,409,619
17 Australian Corporate Bond Trust and its controlled entities For the year ended 30 June 2017
Notes to the Consolidated Financial Statements
7. FINANCIAL ASSETS (CONTINUED) 30-Jun-17 30-Jun-16 ASX Maturity Coupon Rate $ $ $ $ Code of Date Face value Amortised cost Face value Amortised cost Issuer ANZ Banking Group Ltd F07 17-Apr-20 BBSW +0.82% 500,000 499,271 - - Bank of Queensland Ltd F08 06-Nov-19 BBSW +1.07% 5,350,000 5,363,237 - - Macquarie Bank Ltd F09 03-Mar-20 BBSW +1.1% 7,600,000 7,627,089 - - National Australia Bank Ltd F10 03-Jun-20 BBSW +0.8% 2,100,000 2,104,139 - - Westpac Banking Corporation F11 28-Jul-20 BBSW +0.9% 2,500,000 2,507,735 - - GPT RE Ltd GPT 24-Jan-19 6.75% 500,000 525,669 500,000 541,377 Incitec Pivot Limited IPL 21-Feb-19 5.75% 2,300,000 2,365,197 1,860,000 1,935,119 Lend Lease Finance Ltd LL1 13-May-20 6.00% 13,880,000 14,690,492 4,500,000 4,747,333 Lend Lease Finance Ltd LLC 13-Nov-18 5.50% 5,540,000 5,670,577 3,500,000 3,618,307 Mirvac Group Finance Ltd MG1 18-Dec-17 5.50% 500,000 505,741 500,000 517,792 Mirvac Group Finance Ltd MGR 18-Sep-20 5.75% 5,000,000 5,380,301 500,000 535,405 Macquarie Bank Ltd MQG 03-Mar-20 3.25% 1,000,000 1,005,985 - - National Australia Bank Ltd NA1 16-Dec-21 4.00% 3,500,000 3,629,066 - - National Australia Bank Ltd NAB 20-May-19 4.25% 500,000 512,213 500,000 518,421 Qantas Airways Ltd QF1 27-Apr-20 6.50% 7,220,000 7,739,430 500,000 538,150 Qantas Airways Ltd QF2 11-Jun-21 7.50% 9,040,000 10,204,522 1,000,000 1,116,405 Qantas Airways Ltd QF3 19-May-22 7.75% 9,100,000 10,463,474 2,600,000 2,944,268 RE1 Ltd for Westfield Retail Trust SCG 23-Oct-19 5.00% 2,100,000 2,183,973 1,000,000 1,040,749 Stockland Trust Management Ltd SG1 25-Nov-20 8.25% 3,000,000 3,474,741 500,000 585,359 Stockland Trust Management Ltd SGP 06-Sep-19 5.50% 1,500,000 1,579,381 500,000 528,213 Sydney Airport Finance Company Pty Ltd SYD 06-Jul-18 7.75% 896,000 941,701 300,000 326,736 Telstra Corporation Ltd TLS 15-Jul-20 7.75% 3,950,000 4,489,924 2,450,000 2,865,718 Westpac Banking Corporation WB1 28-Jul-20 3.5% 1,000,000 1,018,083 - - Westpac Banking Corporation WBC 22-Jan-20 3.25% 500,000 504,598 - - Wesfarmers Limited WE1 12-Mar-20 4.75% 4,700,000 4,902,401 1,500,000 1,574,792 Wesfarmers Limited WES 28-Mar-19 6.25% 1,500,000 1,582,161 500,000 538,770 Woolworths Limited WOW 21-Mar-19 6.00% 8,000,000 8,330,628 6,500,000 6,899,868 196,586,000 205,962,126 54,830,000 57,487,539
18 Australian Corporate Bond Trust and its controlled entities For the year ended 30 June 2017
Notes to the Consolidated Financial Statements
8. NET ASSETS ATTRIBUTABLE TO UNIT HOLDERS No. $ Number of fully paid units At the beginning of the reporting period 1 July 2016 548,300 58,071,822 Units issued during the period 1,423,560 152,368,896 Units redeemed during the period (6,000) (600,000) Decrease in net assets attributable to unitholders - (2,036,906) At the end of the reporting period 30 June 2017 1,965,860 207,803,812
Number of fully paid units At the beginning of the reporting period 1 July 2015 68,000 7,543,740 Units issued during the year 480,300 50,909,858 Decrease in net assets attributable to unitholders - (381,776) At the end of the reporting period 30 June 2016 548,300 58,071,822
As at 30 June 2017, the Trust received application for XTBs amounting to $3,274,830, for which settlement was to occur post year end.
In 2016 financial statements, the unallocated units with total amount of $665,170 was presented as part of “Net assets attributable to unitholders”. A reclassification was made to present the unallocated units as a separate line item in the liabilities section of the statement of financial position.
The reclassification has resulted to the decrease in the total Net Asset Value of the Group by $665,170 but did not impact the individual sub-trusts value per unit since no units have been issued to at 30 June 2016 for the $665,170.
Page 19 Australian Corporate Bond Trust and its controlled entities For the year ended 30 June 2017
Notes to the Interim Financial Statements
8. NET ASSETS ATTRIBUTABLE TO UNIT HOLDERS (CONTINUED)
Details of Exchange Traded Bond Units ("XTBs") issued: 30 June 2017 Accumulated Issued Units Application Redemption Distributions Net income Balance at 30 June earnings attributable to 2017 XTB unitholders ASX Code $ $ $ $ $ $ $ YTMAGL 153 117,726 6,108,131 - (138,000) 90,688 6,178,698 YTMANZ - - 504,520 (8,125) 7,499 503,894 YTMAPA 12,004 596,490 2,313,710 - (92,613) 53,855 2,883,446 YTMAST 935 258,934 2,598,678 - (138,575) 68,798 2,788,770 YTMAWC 2,663 1,011,755 11,923,319 - (501,500) 351,720 12,787,957 YTMAZJ 89,407 6,045,515 14,994,732 - (744,050) 408,238 20,793,842 YTMBH1 - - 1,518,210 - (30,000) 29,447 1,517,657 YTMBHP 23,060 1,528,273 1,578,475 - (114,000) 55,266 3,071,074 YTMBOQ 3,706 515,430 - - (20,000) 5,948 505,084 YTMCCA 4,183 525,000 1,055,795 - (53,125) 22,527 1,554,380 YTMCTX 3,391 446,232 1,339,293 - (116,000) 35,920 1,708,836 YTMCWN 20,045 533,360 - - (28,750) (11,080) 513,575 YTMDO1 382 501,425 10,953,819 - (146,250) 191,574 11,500,950 YTMDOW 2,018 605,247 1,556,805 - (66,988) 31,517 2,128,599 YTMDX1 ------YTMDXS 2,931 109,671 687,954 - (14,375) 3,911 790,092 YTMF01 26,434 2,303,631 1,004,220 (84,983) 58,863 3,308,165 YTMF02 7,120 602,800 - (600,000) (9,088) (832) - YTMF03 40,973 4,211,314 4,219,490 - (192,467) 140,016 8,419,326 YTMF04 22,143 2,008,525 1,006,445 - (70,413) 49,500 3,016,200 YTMF05 6,108 999,690 501,170 - (36,508) 33,968 1,504,428 YTMF06 34,338 3,421,745 8,025,023 - (185,268) 163,025 11,458,863 YTMF07 - - 499,735 - (6,480) 8,636 501,891
20 Australian Corporate Bond Trust and its controlled entities For the year ended 30 June 2017
Notes to the Interim Financial Statements
8. NET ASSETS ATTRIBUTABLE TO UNIT HOLDERS (CONTINUED) 30 June 2017 Accumulated Issued Units Application Redemption Distributions Net income Balance at 30 June earnings attributable to 2017 XTB unitholders ASX Code $ $ $ $ $ $ $ YTMF08 - - 5,376,380 - (40,676) 49,734 5,385,438 YTMF09 - - 7,646,154 - (97,097) 93,353 7,642,410 YTMF10 - - 2,109,296 - (13,083) 11,712 2,107,925 YTMF11 - - 2,512,845 - (13,068) 19,553 2,519,330 YTMGPT 10,242 562,620 - - (33,750) 1,276 540,388 YTMIPL 27,088 1,969,151 468,587 - (120,750) 68,878 2,412,954 YTMLL1 84,240 4,803,545 10,213,817 - (568,500) 268,430 14,801,532 YTMLLC 52,452 3,701,170 2,166,832 - (304,700) 95,450 5,711,204 YTMMG1 2,181 530,265 - - (27,500) 1,788 506,734 YTMMGR 23,546 548,800 4,968,380 - (143,750) 65,582 5,462,558 YTMMQG - 1,012,880 - (8,125) 11,883 1,016,638 YTMNA1 - 3,682,310 - (90,000) 42,589 3,634,899 YTMNAB 3,538 527,895 - - (21,250) 4,450 514,633 YTMQF1 7,198 552,900 7,374,485 - (256,750) 145,028 7,822,861 YTMQF2 20,909 1,155,650 9,357,187 - (414,000) 122,443 10,242,189 YTMQF3 65,335 3,022,244 7,737,795 - (414,625) 135,003 10,545,752 YTMSCG 26,137 1,061,428 1,172,725 - (75,000) 18,517 2,203,807 YTMSG1 26,768 603,910 2,983,320 - (144,375) 29,868 3,499,491 YTMSGP 21,405 543,048 1,076,050 - (41,250) 6,483 1,605,736 YTMSYD 2,593 335,361 649,156 - (27,551) 15,898 975,457 YTMTLS 68,839 2,990,350 1,794,416 - (253,038) 30,514 4,631,081 YTMWB1 - - 1,032,295 (8,750) 9,413 1,032,958 YTMWBC - - 507,390 - 4,385 511,775 YTMWE1 23,837 1,596,098 3,423,093 - (161,500) 88,469 4,969,997 YTMWES 20,018 558,050 1,096,165 - (78,125) 10,271 1,606,379 YTMWOW 77,721 7,019,822 1,617,814 - (450,000) 198,602 8,463,959 866,041 58,425,070 152,368,896 (600,000) (6,604,771) 3,348,576 207,803,812
21 Australian Corporate Bond Trust and its controlled entities For the year ended 30 June 2017
Notes to the Interim Financial Statements
8. NET ASSETS ATTRIBUTABLE TO UNIT HOLDERS (CONTINUED)
30 June 2016 Accumulated Issued Units Application Redemption Distributions Net income Balance at 30 June earnings attributable to 2016 XTB unitholders ASX Code $ $ $ $ $ $ $ YTMAGL - - 117,726 - - 153 117,879 YTMAPA - - 596,490 - (19,375) 12,004 589,119 YTMAST - - 258,934 - (6,613) 935 253,256 YTMAWC - - 1,011,755 - - 2,663 1,014,418 YTMAZJ 2,408 542,980 5,502,535 - (120,750) 86,999 6,014,172 YTMBHP 1,656 511,658 1,016,615 - (28,125) 21,404 1,523,208 YTMBOQ - - 515,430 - (10,000) 3,706 509,136 YTMCCA - - 525,000 - (10,625) 4,183 518,558 YTMCTX - - 446,232 - (7,250) 3,391 442,373 YTMCWN 2,040 533,360 - - (28,750) 18,005 524,655 YTMDO1 - - 501,425 - - 382 501,807 YTMDOW - - 605,247 - - 2,018 607,265 YTMDXS - - 109,671 - (5,750) 2,931 106,852 YTMF01 - - 2,303,631 - (22,218) 26,434 2,307,847 YTMF02 - - 602,800 - (5,965) 7,120 603,955 YTMF03 - - 4,211,314 - (46,676) 40,973 4,205,611 YTMF04 - - 2,008,525 - (19,590) 22,143 2,011,078 YTMF05 - - 999,690 - (3,769) 6,108 1,002,029 YTMF06 - - 3,421,745 - (25,396) 34,338 3,430,687 YTMGPT - - 562,620 - (16,875) 10,242 555,987 YTMIPL - - 1,969,151 - (23,000) 27,088 1,973,239 YTMLL1 2,986 538,235 4,265,310 - (105,000) 81,254 4,782,785 YTMLLC 2,835 524,935 3,176,235 - (110,000) 49,617 3,643,622 YTMMG1 - - 530,265 - (13,750) 2,181 518,696
22 Australian Corporate Bond Trust and its controlled entities For the year ended 30 June 2017
Notes to the Interim Financial Statements
8. NET ASSETS ATTRIBUTABLE TO UNIT HOLDERS (CONTINUED)
30 June 2016 Accumulated Issued Units Application Redemption Distributions Net income Balance at 30 June earnings attributable to 2016 XTB unitholders ASX Code $ $ $ $ $ $ $ YTMMGR 2,457 548,800 - - (28,750) 21,089 543,596 YTMNAB - - 527,895 - (10,625) 3,538 520,808 YTMQF1 - - 552,900 - (16,250) 7,198 543,848 YTMQF2 - - 1,155,650 - (56,250) 20,909 1,120,309 YTMQF3 - - 3,022,244 - (120,125) 65,335 2,967,454 YTMSCG - 528,908 532,520 - (37,500) 26,137 1,050,065 YTMSG1 3,211 603,910 - - (41,250) 23,557 589,428 YTMSGP 2,132 543,048 - - (27,500) 19,273 536,953 YTMSYD - - 335,361 - - 2,593 337,954 YTMTLS 2,470 996,844 1,993,506 - (106,562) 66,369 2,952,627 YTMWE1 2,130 531,882 1,064,216 - (23,750) 21,707 1,596,185 YTMWES 2,094 558,050 - - (31,250) 17,924 546,818 YTMWOW 2,109 552,602 6,467,220 - (90,000) 75,612 7,007,543 28,528 7,515,212 50,909,858 - (1,219,289) 837,513 58,071,822
Each unit confers on its holder an equal, undivided beneficial interest subject to liabilities of each class of XTB. Upon liquidation each unit holder is entitled to a pro rata share of the Trust’s net assets of each class.
23 Australian Corporate Bond Trust and its controlled entities For the year ended 30 June 2017
Notes to the Consolidated Financial Statements
9. DISTRIBUTIONS TO UNITHOLDERS 30 June 2017 30 June 2016 XTB ASX CODE $ $ YTMAGL 138,000 - YTMANZ 8,125 - YTMAPA 92,613 19,375 YTMAST 138,575 6,613 YTMAWC 501,500 - YTMAZJ 744,050 120,750 YTMBH1 30,000 - YTMBHP 114,000 28,125 YTMBOQ 20,000 10,000 YTMCCA 53,125 10,625 YTMCTX 116,000 7,250 YTMCWN 28,750 28,750 YTMDO1 146,250 - YTMDOW 66,988 - YTMDXS 14,375 5,750 YTMF01 84,983 22,218 YTMF02 9,088 5,965 YTMF03 192,467 46,676 YTMF04 70,413 19,590 YTMF05 36,508 3,769 YTMF06 185,268 25,396 YTMF07 6,480 - YTMF08 40,676 - YTMF09 97,097 - YTMF10 13,083 - YTMF11 13,068 - YTMGPT 33,750 16,875 YTMIPL 120,750 23,000 YTMLL1 568,500 105,000 YTMLLC 304,700 110,000 YTMMG1 27,500 13,750 YTMMGR 143,750 28,750 YTMMQG 8,125 - YTMNA1 90,000 - YTMNAB 21,250 10,625 YTMQF1 256,750 16,250 YTMQF2 414,000 56,250 YTMQF3 414,625 120,125 YTMSCG 75,000 37,500
Page 24 Australian Corporate Bond Trust and its controlled entities For the year ended 30 June 2017
Notes to the Consolidated Financial Statements
9. DISTRIBUTIONS TO UNITHOLDERS 30 June 2017 30 June 2016 XTB ASX CODE $ $ YTMSG1 144,375 41,250 YTMSGP 41,250 27,500 YTMSYD 27,551 - YTMTLS 253,038 106,562 YTMWB1 8,750 - YTMWE1 161,500 23,750 YTMWES 78,125 31,250 YTMWOW 450,000 90,000 Total 6,604,771 1,219,289
10. CONTROLLED ENTITIES 30-Jun-17 30-Jun-16 Subsidiary of Australian Corporate Bond Country of Percentage Percentage Trust ("ACBT") Establishment Owned (%) Owned (%) ACBT AGL 5.00% 5/11/2021 Class Sub-Trust Australia 100 100 ACBT ANZ 3.25% 3/06/2020 Class Sub-Trust Australia 100 - ACBT APA 7.75% 22/07/2020 Class Sub-Trust Australia 100 100 ACBT AST 5.75% 28/06/2022 Class Sub-Trust Australia 100 100 ACBT AWC 5.50% 19/11/2019 Class Sub-Trust Australia 100 100 ACBT AZJ 5.75% 28/10/2020 Class Sub-Trust Australia 100 100 ACBT BHP 3.75% 18/10/2017 Class Sub-Trust Australia 100 100 ACBT BH1 3.00% 30/03/2020 Class Sub-Trust Australia 100 100 ACBT BOQ 4.00% 12/06/2018 Class Sub-Trust Australia 100 100 ACBT CCA 4.25% 13/11/2019 Class Sub-Trust Australia 100 100 ACBT CTX 7.25% 23/11/2018 Class Sub-Trust Australia 100 100 ACBT CWN 5.75% 18/07/2017 Class Sub-Trust Australia 100 100 ACBT DO1 4.50% 11/03/2022 Class Sub-Trust Australia 100 100 ACBT DOW 5.75% 29/11/2018 Class Sub-Trust Australia 100 100 ACBT DX1 4.75% 05/11/2025 Class Sub-Trust Australia 100 - ACBT DXS 5.75% 10/09/2018 Class Sub-Trust Australia 100 100 ACBT F01 BBSW +0.87% 6/06/2018 Class Sub-Trust Australia 100 100 ACBT F02 BBSW +1.15% 11/07/2016 Class Sub-Trust Australia - 100 ACBT F03 BBSW +1.00% 06/12/2018 Class Sub-Trust Australia 100 100 ACBT F04 BBSW +0.88% 08/11/2018 Class Sub-Trust Australia 100 100 ACBT F05 BBSW +0.85% 20/05/2019 Class Sub-Trust Australia 100 100 ACBT F06 BBSW +1.10% 23/04/2019 Class Sub-Trust Australia 100 100 ACBT F07 BBSW +0.82% 17/04/2020 Class Sub-Trust Australia 100 - ACBT F08 BBSW +1.07% 06/11/2019 Class Sub-Trust Australia 100 - ACBT F09 BBSW +1.10% 03/03/2020 Class Sub-Trust Australia 100 - ACBT F10 BBSW +0.80% 03/06/2020 Class Sub-Trust Australia 100 - ACBT F11 BBSW +0.90% 28/07/2020 Class Sub-Trust Australia 100 -
Page 25 Australian Corporate Bond Trust and its controlled entities For the year ended 30 June 2017
Notes to the Consolidated Financial Statements
10. CONTROLLED ENTITIES (CONTINUED)
30-Jun-17 30-Jun-16 Subsidiary of Australian Corporate Bond Country of Percentage Percentage Trust ("ACBT") Establishment Owned (%) Owned (%) ACBT GPT 6.75% 24/01/2019 Class Sub-Trust Australia 100 100 ACBT IPL 5.75% 21/02/2019 Class Sub-Trust Australia 100 100 ACBT LL1 6.00% 13/05/2020 Class Sub-Trust Australia 100 100 ACBT LLC 5.50% 13/11/2018 Class Sub-Trust Australia 100 100 ACBT MG1 5.50% 18/12/2017 Class Sub-Trust Australia 100 100 ACBT MGR 5.75% 18/09/2020 Class Sub-Trust Australia 100 100 ACBT MQG 3.25% 3/03/2020 Class Sub-Trust Australia 100 - ACBT NAB 4.25% 20/05/2019 Class Sub-Trust Australia 100 100 ACBT NA1 4% 16/12/2021 Class Sub-Trust Australia 100 - ACBT NVN 5.00% 19 December 2019 Class Sub-Trust Australia 100 100 ACBT QF1 6.50% 27/04/2020 Class Sub-Trust Australia 100 100 ACBT QF2 7.50% 11/06/2021 Class Sub-Trust Australia 100 100 ACBT QF3 7.75% 19/05/2022 Class Sub-Trust Australia 100 100 ACBT SCG 5.00% 23/10/2019 Class Sub-Trust Australia 100 100 ACBT SG1 8.25% 25/11/2020 Class Sub-Trust Australia 100 100 ACBT SGP 5.50% 6/09/2019 Class Sub-Trust Australia 100 100 ACBT SYD 7.75% 6/07/2018 Class Sub-Trust Australia 100 100 ACBT TCL 4.75% 08/12/2021 Class Sub-Trust Australia 100 - ACBT TLS 7.75% 15/07/2020 Class Sub-Trust Australia 100 100 ACBT TL1 4.00% 16/09/2022 Class Sub-Trust Australia 100 - ACBT WBC 3.25% 22/01/2020 Class Sub-Trust Australia 100 - ACBT WB1 3.5% 28/07/2020 Class Sub-Trust Australia 100 - ACBT WE1 4.75% 12/03/2020 Class Sub-Trust Australia 100 100 ACBT WES 6.25% 28/03/2019 Class Sub-Trust Australia 100 100 ACBT WOW 6.00% 21/03/2019 Class Sub-Trust Australia 100 100
The Group is restricted to transfer any assets within the Group including the distributions of taxable profits.
11. FINANCIAL RISK MANAGEMENT a. Financial Risk Management Policies
The main risks that the Group is exposed to are credit risk, liquidity risk and market risk relating to interest rate risk. There have been no substantive changes in the types of risks the Group is exposed to, how these risks arise, or the Responsible Entity’s objectives, policies and processes for managing or measuring the risks during the year.
(i) Credit risk The maximum exposure to credit risk, excluding the value of any collateral or other security, at reporting date to recognise financial assets, is the carrying amount, net of any provisions for impairment of those assets, as disclosed in the Consolidated Statement of Financial Position and the relevant notes.
Page 26 Australian Corporate Bond Trust and its controlled entities For the year ended 30 June 2017
Notes to the Consolidated Financial Statements
11. FINANCIAL RISK MANAGEMENT (CONTINUED) a. Financial Risk Management Policies
(i) Credit risk (continued)
The Group’s credit exposure is to the creditworthiness of the underlying Bond Issuers. However, the credit risk to the Bond Issuer of the underlying bond is passed through to the XTB Holders. There is no material exposure to a single entity or group under the financial instruments entered into by the Group.
There are no amounts of collateral held as security at 30 June 2017.
30 June 2017 30 June 2016 Ratings $ $ Financial assets Between BB+ and AA- 205,962,126 57,487,539 /Aa3 Interest receivables n/a 1,841,686 584,283 Unsettled trades n/a 3,274,830 665,170 211,078,642 58,736,992
The aging of the Group's receivables at the reporting date was: 30 June 2017 30 June 2016 Gross Impairment Gross Impairment $ $ $ $ Current 5,116,516 - 1,249,453 - Past due 0-30 days - - - - Past due 31-60 days - - - - Past due 61-90 days - - - - Past due over 91 days - - - -
The Responsible Entity believes that no specific impairment allowance is necessary in respect of receivables because they are of good credit quality and no receivables are past due or impaired.
(ii) Market risk Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates.
Fair Value - In the case of the Group, the investments are not carried at fair value but carried at amortised cost therefore any changes in the market interest rates have no impact to the investments.
Future Cash Flows – In the case of the Group, the future cash flows are not affected by the changes in market interest rates for its fixed interest investments. For the Group's floating interest investments (the coupon rate for the next coupon payment is fixed at the previous coupon date), the future cash flows are not affected by the changes in market interest rates if the last coupon date was on or before 30 June 2017.
No sensitivity analysis on the exposure to changes in market interest rates was prepared since the Group are not affected by these changes at year-end.
Page 27 Australian Corporate Bond Trust and its controlled entities For the year ended 30 June 2017
Notes to the Consolidated Financial Statements
11. FINANCIAL RISK MANAGEMENT (CONTINUED) a. Financial Risk Management Policies
(iii) Liquidity risk Liquidity risk arises from the financial liabilities of the Group and the Group’s subsequent ability to meet its obligations to repay its financial liabilities when they fall due.
The Group had no borrowings at 30 June 2017. The distribution obligations of the Group will be met by the cash inflows from coupons from Underlying Bonds which are received at regular intervals and are dependent on a distribution being declared. There were $6,604,771 distributions made during the year (2016: $1,219,289).
Where the market for an Underlying Bond becomes illiquid, it is possible that the value of that bond might be affected. As XTBs are linked to the performance of the Underlying Bonds, it is likely that any illiquidity in the Underlying Bond market will also result to the corresponding Class of XTB to become illiquid. The liquidity risk is essentially passed on to the XTB Holder. Should XTBs be redeemed and Underlying Bonds delivered to the Authorised Participant, the liquidity risk is transferred back to the Underlying Bond being delivered.
Remaining Contractual Maturities The following tables detail the Fund's remaining contractual maturity for its financial instrument liabilities. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the financial liabilities are required to be paid. The tables include both interest and principal cash flows disclosed as remaining contractual maturities and therefore these totals may differ from their carrying amount in the statement of financial position.
Within 1 1 to 5 Over 5 Total Year Years Years 2017 $ $ $ $ Non-Interest Bearing Unalloted applications 3,274,830 - - 3,274,830 Net assets attributable to unitholders 26,385,842 200,395,665 - 226,781,507 Total 29,660,672 200,395,665 - 230,056,337
2016 Non-Interest Bearing Unalloted applications 665,170 - - 665,170 Net assets attributable to unitholders 3,486,845 57,486,362 3,649,053 64,622,260 Total 4,152,015 57,486,362 3,649,053 65,287,430
The cash flows in the maturity analysis above are not expected to occur significantly earlier than contractually disclosed above.
Page 28 Australian Corporate Bond Trust and its controlled entities For the year ended 30 June 2017
Notes to the Consolidated Financial Statements
11. FINANCIAL RISK MANAGEMENT (CONTINUED) b. Financial instruments The Group’s financial instruments consist mainly of interest receivables, investments in corporate bonds, and unsettled trades.
(i) Fair values Fair value of financial assets and financial liabilities that are not measured at fair value on a recurring basis (but fair value disclosures are required).
The Group measures fair value using the following fair value hierarchy that reflects the significance of the inputs used in making the measurements:
(a) Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;
(b) Level 2: inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices); and
(c) Level 3: inputs for the asset or liabilities that are not based on observable market data (unobservable inputs).
Except as detailed in the following table, the directors of the Responsible Entity consider that the carrying amounts of financial assets and liabilities recognised in the financial statements approximate their fair values.
Fair value hierarchy as at 30 June 2017 Level 1 Level 2 Level 3 Total $ $ $ $ Financial assets Corporate bonds 209,234,587 - - 209,234,587 Total 209,234,587 - - 209,234,587
Fair value hierarchy as at 30 June 2016 Level 1 Level 2 Level 3 Total $ $ $ $ Financial assets Corporate bonds 58,480,714 - - 58,480,714 Total 58,480,714 - - 58,480,714
The fair value of the bonds incorporates the interest receivable component.
12. RELATED PARTY TRANSACTIONS
(a) Responsible Entity of the Trust The Responsible Entity of the Trust is Theta Asset Management Ltd, which provides outsourced responsible entity and administrative services to the Trust in accordance with the Trust's Constitution.
Page 29 Australian Corporate Bond Trust and its controlled entities For the year ended 30 June 2017
Notes to the Consolidated Financial Statements
12. RELATED PARTY TRANSACTIONS (CONTINUED)
(b) Trustee of the Sub-Trusts/Controlled Entities The Trustee of the Sub-Trusts is Valuestream Investment Management Ltd (a related entity to Theta Asset Management Ltd), which provides outsourced trustee and administrative services to the Sub-Trusts in accordance with the respective Sub-Trusts' Constitution.
(c) Securities Manager The Securities Manager of the Group is Australian Corporate Bond Company Limited, which provides advice to the Responsible Entity on the selection of the Underlying Bonds that may constitute a new Class of XTB, and provides financial intermediaries with information about the benefits, features, risks and rewards of the different Classes of XTBs.
The securities manager’s margin, which is incorporated into the offer price of XTBs, are received by the Securities Manager and is accounted for outside the Trust.
(d) Keythr Management Personnel The Group does not employ personnel in its own right. However, it is required to have an incorporated Responsible Entity and Trustee to manage the activities of the Group. The directors of the Responsible Entity and Trustee are considered the key management personnel. The names of each person holding position as director of the Responsible Entity during the financial year and up to the date of this report were:
Robert Marie Michael Fenech Kirsten Marie - resigned 1 May 2017 Norman Gibson - appointed 1 May 2017
(e) Other Key Management Personnel There are no other persons with responsibility for planning, directing and controlling the activities of the Group, directly or indirectly during or since the end of the financial year.
(f) Responsible Entity/Trustee Fees and Other Transactions There were no fees incurred by the Group and paid to the Responsible Entity during the year.
In performing its administrative services, the Responsible Entity incurs expenses on behalf of the Trust for which it recovers from Australian Corporate Bond Company Limited, the Securities Manager. These expenses include administration and fund accounting expenses.
(g) Remuneration of Directors The directors of the Responsible Entity did not receive any remuneration, superannuation or retirement benefits from the Group since the beginning or since the end of the financial year.
(h) Interest in the Units of the Trust No directors and director related entities or the Responsible Entity hold any units in the Trust or sub-trusts.
Page 30 Australian Corporate Bond Trust and its controlled entities For the year ended 30 June 2017
Notes to the Consolidated Financial Statements
12. RELATED PARTY TRANSACTIONS (CONTINUED)
(i) Related Party Investment Held by the Group The Group has no investment in the Responsible Entity/Trustee or its associates.
(j) Key Management Personnel Loan Disclosures The Group has not made, guaranteed or secured, directly or indirectly, any loans to the key management personnel of their personally related entities at any time during the reporting year.
(k) Other Transactions within the Group Apart from those details disclosed in this note, no director has entered into a material contract with the Group since the end of the previous year and there were no material contracts involving directors' interest subsisting at year end.
13. CONTINGENCIES
There are no contingent liabilities or contingent assets as at 30 June 2017.
14. CAPITAL COMMITMENTS
There are no capital commitments as at 30 June 2017.
15. EVENTS SUBSEQUENT TO REPORTING DATE
No matters or circumstances have arisen since the end of the year which significantly affected or may significantly affect the operations of the Trust, the result of those operations in subsequent financial years.
16. TRUST DETAILS
The Trust and its controlled entities are registered and domiciled in Australia. The head trust, Australian Corporate Bond Trust is a registered managed investment scheme.
Registered Office of the Responsible Entity The address of the registered office of the Responsible Entity is: Level 13, 210 George Street, Sydney, NSW 2000.
Page 31 Australian Corporate Bond Trust and its controlled entities For the year ended 30 June 2017
Notes to the Consolidated Financial Statements
17. PARENT ENTITY INFORMATION
In accordance with the Corporations Amendment (Corporate Reporting Reform) Act 2010 and the Corporations Act 2001 , the following summarised parent entity information is set out below.
30 June 2017 30 June 2016 $ $ Revenue 4,567,865 837,513 Expenses - - Operating profit 4,567,865 837,513
Finance costs attributable to unitholders Distributions to unitholders (6,604,771) (1,219,289) Increase/decrease in net asset attributable to unitholders 2,036,906 381,776
Profit/loss for the period - -
Other comprehensive gain - - Total comprehensive income for the period - -
Non-current assets 207,803,812 58,071,822 Total assets 207,803,812 58,071,822
Current liabilities - - Total liabilities -
Net assets attributable to unit holders 207,803,812 58,071,822
Guarantees The Trust has not entered into any guarantees during the financial year.
Contingent liabilities At 30 June 2017, the Trust had no contingent liability.
Contractual commitments At 30 June 2017, the Trust had not entered into any contractual commitments.
Page 32 Australian Corporate Bond Trust and its controlled entities For the year ended 30 June 2017
Directors' Declaration
In the opinion of the directors of Theta Asset Management Limited, the Responsible Entity of Australian Corporate Bond Trust ("the Trust"):
a. the consolidated financial statements and notes, as set out on pages 6 to 32, are in accordance with the Corporations Act 2001 including:
i. complying with Australian Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; and
ii. giving a true and fair view of the consolidated financial position as at 30 June 2017 and its performance as represented by the results of its operations and its cash flows for the year ended on that date.
b. there are reasonable grounds to believe that the Trust will be able to pay its debts as and when they become due and payable.
c. Note 2 confirms that the consolidated financial statements comply with International Financial Reporting Standards as issued by the International Accounting Standards Board.
fgned Ip accordance with a r; solution of the Directors of the Responsible Entity:
IVUcWei-Ferrech Director of Theta Asset Management Limited /
Dated at Sydney this 27th day of September 2017
Page 33
Independent Auditor’s Report To the Unitholders of Australian Corporate Bond Trust and its controlled entities ARSN 603 010 779
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of Australian Corporate Bond Trust and its Controlled Entities (“the consolidated entity”), which comprises the consolidated statement of financial position as at 30 June 2017, the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, notes comprising a summary of significant accounting policies and the Directors’ declaration.
In our opinion:
a. the financial report of the consolidated entity has been prepared in accordance with the Corporations Act 2001, including:
i. giving a true and fair view of the consolidated entity’s financial position as at 30 June 2017 and of its financial performance for the year then ended; and
ii. complying with Australian Accounting Standards and Corporations Regulations 2001; and
b. the financial report also complies with International Financial Reporting Standards as disclosed in Note 2.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Those standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement. Our responsibilities under those standards are further described in the Auditor’s Responsibility section of our report. We are independent of the consolidated entity in accordance with the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (“the Code”) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
34 An independent New South Wales Partnership. ABN 17 795 780 962. Pitcher Partners is an association of independent firms Level 22 MLC Centre, 19 Martin Place, Sydney NSW 2000 Melbourne | Sydney | Perth | Adelaide | Brisbane| Newcastle Liability limited by a scheme approved under Professional Standards Legislation0 An independent member of Baker Tilly International
Independent Auditor’s Report To the Unitholders of Australian Corporate Bond Trust and its controlled entities ARSN 603 010 779
Other information
The Directors of Theta Asset Management Limited, the Responsible Entity of the consolidated entity, are responsible for the other information. The other information comprises the information in the consolidated entity’s annual report for the year ended 30 June 2017, but does not include the financial report and the auditor’s report thereon.
Our opinion on the financial report does not cover the other information and we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially consistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
Directors’ of the Responsible Entity’s Responsibility for the Financial Report
The Directors of the Responsible Entity of the consolidated entity, are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001. In Note 2, the Directors of the Responsible Entity also state, in accordance with applicable Australian Accounting Standards and Interpretations that the financial statements comply with International Financial Reporting Standards. The Directors of the Responsible Entity’s responsibility also include such internal control as they determine is necessary to enable the preparation of a financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error.
In preparing the financial report, the Directors of the Responsible Entity are responsible for assessing the consolidated entity’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors of the Responsible Entity either intends to liquidate the consolidated entity or to cease operations, or has no realistic alternative but to do so.
Auditor’s Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial report.
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Independent Auditor’s Report To the Unitholders of Australian Corporate Bond Trust and its controlled entities ARSN 603 010 779
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgement and maintain professional scepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the consolidated entity’s internal control. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Directors. Conclude on the appropriateness of the Directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the consolidated entity’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the consolidated entity to cease to continue as a going concern. Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether the financial report represents the underlying transactions and events in a manner that achieves fair presentation. Obtain sufficient appropriate evidence regarding the financial information of the consolidated entity or business activities within the consolidated entity to express an opinion on the financial report. We are responsible for the direction, supervision and performance of the consolidated entity audit. We remain solely responsible for our audit opinion.
We communicate with the Directors of the Responsible Entity regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
C I CHANDRAN PITCHER PARTNERS Partner Sydney
27 September 2017
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