Financial report 30 June 2015

Financial report 30 June 2015(and interim financial report for the half-year ended 31 December 2015)An illustration of an Australian registered managed investment scheme’s financial report

Endeavour Managed Investment Scheme

Foreword

The annual financial report is an important element in the communication of an entity’s current financial position, financial performance and risks to its stakeholders. For managed investment schemes, continued uncertain economic conditions mean clear, concise and timely information is critical in allowing investors and other stakeholders to make well informed investment decisions. You may be pleased to hear that the disclosure changes for the June 2015 and December 2015 reporting periods are relatively minor compared with those of the previous year. Having said this, the effectiveness and usefulness of financial statement disclosures has become one of the areas of focus for many board and audit committees. The International Accounting Standards Board (IASB) has commenced a project entitled “The disclosure initiative”, to improve disclosure effectiveness by providing guidance on how to enhance the structure of financial statements, make disclosures entity-specific, and apply the materiality concept. Considering the purpose of the Endeavour financial report, the ordering of the notes largely follows the structure suggested by AASB 101 Presentation of Financial Statements. An alternate structure involving reorganisation of the notes according to their nature and perceived importance may more effectively permit users of the financial statements to obtain the information they need. Further discussion on this and an example of such a structure is provided in the following pages. During the year, the new revenue standard, AASB 15 Revenue from Contracts with Customers was issued, as was the final version of AASB 9 Financial Instruments. These are mandatory for financial years commencing 1 January 2017 and 2018, respectively. While these dates may seem like a long time away, schemes should not be complacent. The implications of these new standards will extend beyond the financial statements and will likely effect processes, systems, controls, remuneration structures, stakeholder communications and more. Many schemes are in the process of understanding and assessing the requirements and potential impacts, while others have commissioned full scale projects. We hope this publication will be a useful tool when preparing your financial statement disclosures for this reporting season. If you require any further assistance or direction, please contact me at [email protected] or your EY representative. Brett Kallio Partner, Financial Services Ernst & Young June 2015

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Contents Foreword ........................................................................................................................................................................... i

Introduction ...................................................................................................................................................................... iii

Abbreviations and key ..................................................................................................................................................... xiii

Endeavour Managed Investment Scheme Annual Financial Report .................................................................................... xiv

Contents to the financial report ......................................................................................................................................... 1

Directors' report ............................................................................................................................................................... 2

Auditor’s Independence Declaration ................................................................................................................................... 5

Statement of Comprehensive Income ................................................................................................................................. 6

Statement of Financial Position ......................................................................................................................................... 7

Statement of Changes in Net Assets Attributable to Unitholders ........................................................................................ 8

Statement of Cash Flows ................................................................................................................................................... 9

Notes to the financial statements .................................................................................................................................... 11

Directors' declaration ...................................................................................................................................................... 50

Independent auditor's report ........................................................................................................................................... 51

Appendix A – Half-year financial report ............................................................................................................................ 53

Appendix B – Disclosures for listed schemes .................................................................................................................... 74

Appendix C – Consolidated disclosures ............................................................................................................................. 82

Appendix D — Reduced Disclosure Requirements (‘RDR’) adoption and transition .............................................................. 83

Appendix E — Australian reporting requirements .............................................................................................................. 87

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Introduction This publication contains the financial report of a fictitious registered managed investment scheme, Endeavour Managed Investment Scheme (the ‘Scheme’). The Scheme is registered in Australia, with a reporting date of 30 June 2015. The enclosed financial report has been prepared in accordance with the requirements of the Corporations Act 2001 and Australian Accounting Standards. The report is intended to illustrate the disclosure requirements of the Accounting Standards, including, providing interpretive commentary where necessary. Objective This financial report is illustrative only and does not attempt to show all possible accounting and disclosure requirements. Although the illustrative financial report attempts to show the most likely disclosure requirements for Australian registered managed investment schemes, it should not be regarded as a comprehensive checklist. For a more comprehensive list of disclosure requirements, please refer to EY's financial reporting standards disclosure checklist. If you are unclear as to the requirements, please refer to the relevant authoritative source and, where necessary, seek appropriate professional advice from your EY representatives. How to use these illustrative financial statements to prepare entity-specific disclosures

Notations shown on the right-hand margin of each page are references to accounting standards or other pronouncements that describe the specific disclosure requirements. Commentaries are provided to explain the basis for the disclosure or to address alternative disclosures not included in the illustrative financial statements. In case of doubt as to the requirements, it is essential to refer to the relevant source material and, where necessary, seek appropriate professional advice. Improving disclosure effectiveness The terms ’disclosure overload’ and ‘cutting the clutter’ describe an acute problem in financial reporting that has become a priority issue for the International Accounting Standards Board (‘IASB’), local standard setters including the Australian Accounting Standards Board (‘AASB’), and regulatory bodies. The growth and complexity of financial disclosure is also drawing significant attention from financial statement preparers, and most importantly, the users of financial statements. Even though there is no formal definition of the ‘disclosure overload’ issue, from the different discussions and debates among stakeholders, three common themes have appeared, namely financial statements format or structure; tailoring and materiality. The common practice for the ordering of the notes follow, to a great extent, the structure suggested in paragraph 114 of AASB 101 Presentation of Financial Statements. An alternative structure that some may find more effective in permitting the users to more easily obtain the relevant information involves reorganising the notes according to their nature and perceived importance. In view of the discussion around the disclosure initiatives project, an illustrative ordering based on the seven different note sections is summarised in the table below:

Users of this publication are encouraged to prepare entity-specific disclosures, for which these illustrative financial statements may serve as a useful reference. Transactions and arrangements other than those addressed by the Scheme may require additional disclosures. It should be noted that the illustrative financial statements of the Scheme are not designed to reflect disclosure requirements that apply specifically to satisfy any stock market nor is this publication intended to reflect disclosure requirements that apply mainly to regulated or specialised industries.

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Introduction (continued) Improving disclosure effectiveness (continued) Sections For example, comprising: Corporate information ► Corporate information Basis of preparation and other significant accounting policies

► Basis of preparation ► Other significant accounting policies not

covered in other sections (below) ► Changes in accounting policies and

disclosures ► Significant accounting judgements,

estimates and assumptions ► Fair value measurement and related fair

value disclosures ► Impact of standards issued but not yet

effective Business, operations, and management ► Information on material partly-owned

subsidiaries, interest in joint ventures and investment in associates

► Capital management ► Financial risk management objectives and

policies ► Distributions to unitholders

Significant transactions and events ► Discontinued operations ► Hedging activities and derivatives ► Correction of an error ► Related party transactions ► Events after reporting period

Detailed information on statement of comprehensive income items

► Investment Income ► Other income/expenses and adjustments ► Other operating income and expenses ► Finance income and costs ► Foreign exchange differences ► Management and performance fees ► Components of other comprehensive

income ► Earnings per unit

Detailed information on statement of financial position items

► Investment properties ► Financial assets and liabilities ► Trade and other receivables and payables ► Cash and short-term deposits ► Offsetting financial assets and financial

liabilities ► Net assets attributable to unitholders

Other information ► Commitments and contingencies ► Auditor’s remuneration

By structuring the notes according to their nature and perceived importance, users may find it easier to extract the relevant information. In addition, the significant accounting policies could be placed within the same note as the related qualitative and quantitative disclosures to provide a more holistic discussion to users of the financial statements. Applying the concept of materiality requires judgement, in particular in relation to matters of presentation and disclosure, and may be another cause of the perceived disclosure overload problem. Materiality is an entity specific aspect of relevance based on the nature or magnitude, or both, of the items to which the information relates in the context of an individual entity's financial report.

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Introduction (continued) Improving disclosure effectiveness (continued)

For more guidance on how to improve disclosure effectiveness, please refer to the publication Applying IFRS: Improving Disclosure Effectiveness (July 2014). Australian Accounting landscape When complying with Australian Accounting Standards, preparers also need to comply with all applicable amending standards and interpretations. Australian Accounting Standards as at 31 March 2015 As a general approach, these illustrative financial statements do not early adopt standards or amendments before their effective date. The standards applied in these illustrative financial statements are those that were on issue as at 31 March 2015 and that apply to annual reporting periods beginning on or after 1 July 2014. Standards issued, but not yet effective, as at 31 March 2015 have not been early adopted. It is important to note that the illustrative financial report in this document will require continual updating as new and amended Standards and Interpretations are issued and/or revised. Users of this publication are cautioned to check that there has been no change in requirements of standards between 31 March 2015 and the date on which their financial statements are authorised for issue. Specific disclosure requirements apply for standards and interpretations issued but not yet effective (see Note 2.2 of these illustrative financial statements). We encourage you to confirm with your EY representative that there has been no change in the requirements of AASB Standards and Interpretations between 31 March 2015 and your reporting date. Accounting policy choices Accounting policies are broadly defined in AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors (‘AASB 108’) and include not just the explicit elections provided for in some standards, but also other conventions and practices that are adopted in applying principle-based standards. In some cases, Australian Accounting Standards permit more than one accounting treatment for a transaction or event. Preparers of financial statements should select the treatment that is most relevant to their business and the circumstances of the transaction or event as their accounting policy.

As explained above, the primary purpose of these financial statements is to act as an illustration of how the most commonly applicable disclosure requirements can be met, and therefore includes disclosures that may in practice be deemed not material for the Scheme. It is therefore essential that entities consider their entity-specific circumstances when determining what disclosures to include. Schemes should not consider these financial statements as guidance in making the materiality assessment, and they must always be applied together with tailoring efforts to ensure that an scheme’s financial statements reflect and portray the scheme’s specific circumstances and the scheme’s own materiality considerations. Only then will the financial statements provide decision-useful financial information.

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Introduction (continued) Accounting policy choices (continued) AASB 108 requires a scheme to select and apply its accounting policies consistently for similar transactions, events and/or conditions, unless an Australian Accounting Standard specifically requires or permits categorisation of items for which different policies may be appropriate. Where an Australian Accounting Standard requires or permits such categorisation, an appropriate accounting policy is selected and applied consistently to each category. Therefore, once a choice of one of the alternative treatments has been made, it becomes an accounting policy and must be applied consistently. Changes in accounting policy should only be made if required by a standard or interpretation, or if the change results in the financial statements providing reliable and more relevant information. In these illustrative financial statements, when a choice is permitted by Australian Accounting Standards, the Scheme has adopted one of the treatments as appropriate to the circumstances of the Scheme. In these cases, the commentary provides details of which policy has been selected, the reasons for this policy selection, and summarises the difference in the disclosure requirements. Financial review by management and schedule of investments Many schemes present a financial review by management that is outside the financial statements. Australian Accounting Standards do not require the presentation of such information, although paragraph 13 of AASB 101 gives a brief outline of what may be included in an annual report. The IASB issued an IASB Practice Statement, Management Commentary, in December 2010, which provides a broad, non-binding framework for the presentation of management commentary that relates to financial statements prepared in accordance with IFRS. If a scheme decides to follow the guidance in the Practice Statement, management is encouraged to explain the extent to which the Practice Statement has been followed. A statement of compliance with the Practice Statement is only permitted if it is followed in its entirety. Schemes often also disclose a schedule of investments either inside (as part of the audited information, including comparatives) or outside the financial statements. Preparers of financial statements that comply with Australian Accounting Standards should note that other guidance on management commentary already exists in Australia which may take precedence over the IFRS Practice Statement. Further, the content of a financial review by management in relation to the financial statement and the format of a schedule of investments are often determined by requirements of the Corporations Act 2001. No financial review by management or schedule of investments has been included for the Scheme. Changes to AASB The following new standards and amendments are applicable for the financial year commencing 1 July 2014: ► AASB 1031 Materiality ► AASB 1055 Budgetary Reporting ► AASB 2012-3 Amendments to Australian Accounting Standards - Offsetting Financial Assets and

Financial Liabilities ► AASB 2013-3 Amendments to AASB 136 – Recoverable Amount Disclosures for Non-Financial

Assets ► AASB 2013-4 Amendments to Australian Accounting Standards – Novation of Derivatives and

Continuation of Hedge Accounting [AASB 139] ► AASB 2013-7 Amendments to AASB 1038 arising from AASB 10 in relation to Consolidation and

Interests of Policyholders ► AASB 2013-9 Amendments to Australian Accounting Standards – Conceptual Framework,

Materiality and Financial Instruments

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Introduction (continued) Changes to AASB (continued)

► AASB 2014-1 Amendments to Australian Accounting Standards - Part A: Annual Improvements

2010-2012 Cycle: ► AASB 2 Share-based Payment ► AASB 3 Business Combinations ► AASB 8 Operating Segments ► AASB 116 Property, Plant and Equipment ► AASB 124 Related Party Disclosures ► AASB 138 Intangible Assets

► AASB 2014-1 Amendments to Australian Accounting Standards - Part A: Annual Improvements 2011-2013 Cycle: ► AASB 13 Fair Value Measurement ► AASB 140 Investment Property

► AASB 2014-1 Part B - Amendments to AASB 119 Employee Benefits ► AASB 2014-2 Amendments to AASB 1053 – Transition to and between Tiers, and related Tier 2

Disclosure Requirements ► Interpretation 21 Levies

Not all of these standards and amendments impact the Scheme’s financial statements. If a standard or amendment affects the Scheme, it is described, together with the impact, in Note 2.2 of these financial statements. Our regulatory update provides a summary of announcements and the activities of Australian regulators in the last quarter ended 31 December 2014 that are of relevance to the asset management industry. We have also provided a high level overview of the extensive range of global regulations that are applicable to asset managers in varying degrees. Managing the volume and complexity of overlapping global and local regulatory measures continues to be a key area of focus for asset managers. Detailed below are the key changes impacting the asset management industry:

Regulatory updates Superannuation dual regulated entities (‘SDRE’s) no longer exempt from Australian Financial Services Licence (‘AFSL’) financial conditions Where a responsible entity (‘RE’) of a managed investment scheme (‘scheme’) is also regulated by APRA as an RSE licensee, the following requirements do not currently apply: ► To have in place adequate resources including financial, technological and human resources -

ss912A(1)(d) of the Corporations Act; and ► Adequate risk management systems - s912A(1)(h) of the Corporations Act. Subsection 912A(1) of the Corporations Act was amended on 26 June 2013 by the Superannuation Legislation Amendment (Service Providers and Other Governance Measures) Act to improve the governance arrangements for responsible entities of registered schemes. As a result, from 1 July 2015, the current exemptions cease to have effect on SDREs. SDREs therefore will need to ensure that their business as responsible entity of a scheme complies with the adequate resources and adequate risk management systems requirements. Adequate financial resources In 2013, Australian Securities and Investments Commission (‘ASIC’) released [CO 13/760] Financial requirements for responsible entities and operators of investor directed portfolio services (Class Order 13/760), following an earlier modification in 2011 in CO 11/1140.

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Introduction (continued) Regulatory updates (continued) Under Class Order 13/760 a responsible entity holding scheme property or other assets of a registered scheme or IDPS property must hold net tangible assets (‘NTA’) of the greater of $10 million or 10 per cent of ‘average RE and investor directed portfolio services (‘IDPS’) revenue’, subject to limited exceptions relating to ‘special custody assets’ or ‘Tier $500,000 class assets’. Where a custodian is appointed, the RE must hold minimum NTA of the greater of $150,000 or 0.5% of scheme property up to a maximum of $5m or 10% of ‘average RE and IDPS revenue’. In assessing the requirement to hold NTA for a responsible entity, the revenue from its business as an RSE licensee will need to be taken into account. The NTA requirement must be met by the SDRE’s assets and not assets it holds in trust such as in a superannuation fund or registered scheme. Risk management systems ASIC's policy on risk management for AFS licensees, including responsible entities of the scheme, is set out in Regulatory Guide 104 Licensing: Meeting the general obligations (‘RG 104’). Under RG 104, a responsible entity must have measures in place to ensure they comply with the obligation to have in place adequate risk management systems on an ongoing basis. In particular, in RG 104.62, ASIC states that it expects that risk management systems will: ► Be based on a structured and systematic process that takes into account obligations under the

Corporations Act; ► Identify and evaluate risks faced by the business, focusing on risks that adversely affect consumers

or market integrity (this includes risks of non-compliance with the financial services laws); ► Establish and maintain controls designed to manage or mitigate those risks; and ► Fully implement and monitor those controls to ensure they are effective. ASIC also provided feedback on the risk management practices of responsible entities in ASIC's Report 298 Adequacy of risk management systems of responsible entities, released in 2012. Final guidance is still pending. ASIC focus on breach reporting by AFS licensees ASIC released 14-233MR on 16 September 2014. where Peter Kell, the Deputy Chairman of Australian Securities and Investments Commission, expressed concern about inconsistencies and delays in significant breach reporting. A particular focus of ASIC is to ensure that reporting is made strictly within the timeframe specified in the Corporations Act (ie. 10 business days after becoming aware of the breach). ASIC has confirmed that licensees become aware of a breach when a person responsible for compliance becomes aware of the breach or likely breach. However licensees should not wait until after they have completed a full investigation to satisfy themselves that the breach or likely breach is significant. In particular licensees should not delay reporting until: ► The breach (or likely breach) has been fully investigated and considered by the licensee’s board of

directors or legal advisors; ► The licensee has taken steps to rectify the breach; and ► In the case of a likely breach, the breach has in fact occurred. ASIC will conduct a review of breach reports it has received to consider the following: ► Who they are from; ► What is reported; and ► The timeliness of the reports.

Based on the results of this review, ASIC will then conduct pro-active reviews of those licensees it identifies as having a high risk of non-compliance.

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Introduction (continued) Regulatory updates (continued) ASIC releases a class order on fee disclosures and draft guidance Following a review of fee disclosure practices, ASIC released Class Order [CO 14/1252] Technical modifications to Schedule 10 of the Corporations Regulations in December 2014. The class order clarifies key fee and cost disclosure requirements for Product Disclosure Statements (PDS) and periodic statements for superannuation and managed investment products and addresses: ► Disclosure of costs of investing in interposed vehicles; ► Disclosure of indirect costs; ► Removal of doubt that double counting of some costs for superannuation products is not required;

and ► The appropriate application of the consumer advisory warning. The class order will apply to all PDSs for superannuation and managed investment products from 1 January 2016. It will also apply to periodic statements that must be given for these products by 1 January 2017 or later. ASIC has also commenced a review of RG 97 Disclosing fees and costs in PDSs and periodic statements (‘RG 97’). A draft of RG 97 was circulated to a number of industry associations and other industry participants for comment in December 2014. Final guidance is still pending. Self-managed superannuation funds (“SMSF”) – a retail or wholesale client? In a recent and welcome development, ASIC has clarified how it will apply the wholesale investor test to self-managed superannuation funds (‘SMSF’). This has been an area of ongoing legal uncertainty for a number of years and has affected many fund managers who wish to offer investment products to SMSFs. ASIC has now clarified that in certain circumstances a SMSF may be classed as a wholesale client based on the general test (e.g. if the trustee has net assets of at least $2.5 million or the value of the investment is at least $500,000) rather than applying the higher $10 million asset test to the SMSF itself. ASIC reports on industry implementation of platforms guidance ASIC released a report in September 2014 on their review of the implementation of updated RG148 Platforms that are managed investment schemes by platform operators. The report reminds platform operators about some important obligations, including: ► Management of conflicts of interest to ensure there is appropriate avoidance of, and management

and disclosure in relation to the conflicts inherent in platform structures; ► Timely breach reporting in accordance with s912D and Regulatory Guide 78 Breach reporting by

AFS licensees; ► Having a clear policy and disclosure addressing the implications for unadvised clients on platforms; ► Managing investment governance risk, particularly by superannuation trustees and responsible

entities that are platform operators; and ► Compliance with corporate structure requirements. Updated ASIC policy for externally administered companies and registered managed investment schemes being wound up In light of ASIC’s experiences in administering Class Order 03/392 (‘CO 03/392’) and RG 174 Externally administered companies: Financial reporting and Annual general meetings (‘RG 174’) policy, the legislative changes and the fact that relief will expire, ASIC undertook a project to review RG 174 and CO 03/392.

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Introduction (continued) Regulatory updates (continued) ASIC’s key points from Consultation Paper 223 Relief for externally administered companies and registered schemes being wound up: RG 174 update (‘CP 223’): ► ASIC proposes to update its approach to financial reporting relief for externally administered

companies and registered schemes being wound up; ► ASIC will establish policy settings that appropriately balance the information needs of members

and other users of financial reports with the financial burden imposed on distressed schemes by financial reporting costs; and

► ASIC is consulting on some possible practical improvements they can make to their policy to test whether they will achieve that appropriate balance.

In particular, ASIC are consulting on proposals regarding whether they should: ► Expand their policy to exempt insolvent registered schemes being wound up from financial

reporting; ► Expand their policy to exempt public companies from the obligation to hold an annual general

meetings (‘AGM’) if the company has a liquidator appointed; and ► Update their guidance on the circumstances in which they will provide individual relief, including

narrowing the circumstances in which they give exemptive relief and expanding the circumstances in which they give deferral relief.

ASIC releases updated record keeping obligations for advisors The updated obligations released in September 2014 require AFS licensees to keep records to prove that the AFS licensee and its representatives have complied with the Future of Financial Advice (FOFA) best interests duty and related obligations when they give personal advice to retail clients. ASIC has been actively monitoring record keeping by AFS licensees and, where AFS licensees have failed, has taken action. Refer to: ► Class Order [CO 14/923] Record-keeping obligations for Australian financial services licensees

when giving personal advice; ► Report 409 Response to submissions on CP 214 Updated record keeping obligations for AFS

licensees (REP 409); ► Consultation Paper 214 Updated record-keeping obligations for AFS licensees (CP 214); and ► Industry submissions to CP 214 Key reminders of prior period regulatory changes We have also included some reminders on key matters for your consideration: Unilateral amendments to constitutions of registered scheme Following a recent court decision, even greater care needs to be taken if a RE wishes to unilaterally amend the constitution of a registered scheme (i.e. amendments made without member approval). This court decision could potentially greatly limit the types of constitution modifications that can be made unilaterally. As a consequence it is essential that the board of a RE very carefully considers the effect of proposed changes to a scheme’s constitution on members’ rights, seeks professional advice where necessary and properly records its deliberations in the board minutes. Amendments made in breach of the law are invalid. Considerations for withdrawals from a registered scheme A recent court case highlights the need for a RE to carefully analyse the rights of various members in respect of withdrawal/redemption facilities, before dealing with or suspending those facilities. An incorrect analysis could result in returns to members being made in breach of the scheme constitution and in breach of the Corporations Act.

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Introduction (continued) Regulatory updates (continued) Key ways an RE can limit personal exposure to third parties REs should periodically review their operations, procedures and documents in order to ensure that their personal exposure to third parties is understood and limited. Group exposure can be limited by using special purpose companies with limited personal assets, ensuring that the constitution for each scheme contains adequate indemnity provisions, and obtaining relevant insurances. Further, it is critically important to ensure that all contracts entered into by the RE with third parties include detailed clauses excluding the personal liability of the RE. These limitation clauses are often inadequately drafted or omitted, leading to potential personal exposure of the RE. In specie distribution of the scheme assets to members An RE of a registered scheme must always ensure that it has specific power under a scheme constitution to make an in specie distribution of assets to members, otherwise that distribution may be invalid (in a recent court case which considered this issue the assets in question were units held by the scheme in a company). It should also consider whether member approval is required or desirable, and whether there are any other factors relevant to such a distribution which should be taken into account.

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Introduction (continued) Regulatory updates (continued)

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Abbreviations and key

Abbreviations The following styles of abbreviation are used in the commentary of the Endeavour Managed Investment Scheme illustrative financial report: AASB 7 Australian Accounting Standard No. 7 AASB 8 Australian Accounting Standard No. 8 AASB 9 Australian Accounting Standard No. 9 AASB 10 Australian Accounting Standard No. 10 AASB 12 Australian Accounting Standard No. 12 AASB 13 Australian Accounting Standard No. 13 AASB 101 Australian Accounting Standard No. 101 AASB 107 Australian Accounting Standard No. 107 AASB 112 Australian Accounting Standard No. 112 AASB 124 Australian Accounting Standard No. 124 AASB 128 Australian Accounting Standard No. 128 AASB 133 Australian Accounting Standard No. 133 AASB 134 Australian Accounting Standard No. 134 AASB 139 Australian Accounting Standard No. 139 AASB 140 Australian Accounting Standard No. 140 CA 295 Corporations Act 2001, section 295 CA 299 Corporations Act 2001, section 299 CA 300 Corporations Act 2001, section 300 ASIC CO Australian Securities & Investments Commission Class Order ASIC RG Australian Securities & Investments Commission Regulatory Guidance ASX 4.10 Australian Stock Exchange Listing Rules Chapter 4, Rule 10 Interpretations Interpretations of the AASB Commentary Commentary is aimed at explaining how the requirements of AASB have been

interpreted in arriving at the illustrative disclosure Caveat

The names of people and schemes included in this illustrative financial report are fictitious and have been created for the purpose of illustration only. Any resemblance to any person or business is purely coincidental. This financial report is illustrative only and does not attempt to show all possible accounting and disclosure requirements. Although the illustrative financial report attempts to show the most likely disclosure requirements for registered managed investment schemes, it should not be regarded as a comprehensive checklist of disclosure requirements. In the case of any doubt as to the requirements, it is essential to refer to the relevant source and, where necessary, to seek appropriate professional advice from your EY representative.

Endeavour Managed Investment Scheme ARSN 00 000 000 000Annual financial report for the year ended 30 June 2015

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Contents to the financial report Directors' report ............................................................................................................................................................... 2

Auditor’s Independence Declaration ................................................................................................................................... 5

Statement of Comprehensive Income ................................................................................................................................. 6

Statement of Financial Position ......................................................................................................................................... 7

Statement of Changes in Net Assets Attributable to Unitholders ........................................................................................ 8

Statement of Cash Flows ................................................................................................................................................... 9

Notes to the financial statements .................................................................................................................................... 11

Directors' declaration ...................................................................................................................................................... 50

Independent auditor's report ........................................................................................................................................... 51

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Directors' report The Directors of Endeavour Responsible Entity Limited (ABN 00 000 000 000), the Responsible Entity of Endeavour Managed Investment Scheme (the “Scheme”), submit their report for the Scheme for the year ended 30 June 2015.

CA 298(1)

DIRECTORS CA 300(1)(c)

The names of the Directors of the Responsible Entity in office during the financial year and until the date of this report are:

M.P. Byrne (Chairman)

R. Scanlon

G. Haggar Appointed 14 March 2015

A. Morgan

J. dela Peña

M. Nosewall Resigned 14 March 2015

J. Chuang

The Directors were in office from the beginning of the financial year until the date of this report, unless otherwise stated.

CA 300(1)(c)

Commentary

The names of the directors in office during or since the end of the year and the period for which they were a director (including alternates who have acted in the capacity of director) must be disclosed.

PRINCIPAL ACTIVITIES CA 299(1)(c)

The principal activity of the Scheme during the year was to invest funds in accordance with the provisions of the Scheme’s Constitution.

AASB 101.138(b)

A diversified investment portfolio is maintained to balance the return and risk objectives of the Scheme. In accordance with these investment objectives, the Scheme principally invests in equities, interest bearing securities, derivatives and other securities in several currencies in both domestic and international markets.

There has been no significant change in the nature of this activity during the year.

SCHEME INFORMATION

Endeavour Managed Investment Scheme is an Australian registered Scheme, and was constituted on 1 January 1998. Endeavour Responsible Entity Limited, the Responsible Entity of the Scheme, is incorporated and domiciled in Australia.

AASB 101.138(a)

The registered office and principal place of business of the Responsible Entity is located at Currency House, 30 Hedge Street, Sydney, NSW, 2000.

AASB 101.138(a)

Commentary

The entity shall disclose the following, if not disclosed elsewhere in information published with the financial statements: AASB 101.138(a): the domicile and legal form of the entity, its country of incorporation and the address of its registered office (or principal place of business, if different from the registered office); AASB 101.138(b): a description of the nature of the entity’s operations and its principal activities; and AASB 101.138(c): the name of the parent and the ultimate parent of the group.

REVIEW OF RESULTS AND OPERATIONS CA 299(1)(a)

Results and distributions

Net profit attributable to unitholders for the year ended 30 June 2015 was $11,441,286 (2014: loss $47,890,437).

Distributions to unitholders during the year totalled $2,675,088 (2014: $4,732,112). Distributions to unitholders during the year included a half-yearly distribution in respect of the period ended 31 December 2014 of 0.99 cents per unit (2013: 3.05 cents) paid on 4 January 2014 to unitholders.

CA 300(1)(a)

A final distribution was declared for the year ended 30 June 2015 of 2.38 cents per unit (2014: 2.24 cents) paid on 6 July 2015. The total amount unpaid at the reporting date is disclosed in the Statement of Financial Position.

CA 300(1)(b)

Commentary The Scheme has not illustrated the full disclosures required in the operating and financial review of Endeavour Managed Investment Scheme. The appropriate information to disclose in the operating and financial review will depend upon the Scheme’s business operations and the sector in which it operates. For listed entities, ASIC has issued RG 247 Effective disclosures in an operating and financial review (RG 247) to assist directors and entities to apply the existing requirements of s299A(1) Corporations Act 2001. However, it may be useful guidance for non-listed entities given the similar requirements in s299(1) that apply to all entities required to prepare a directors’ report.”

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Director’s report (continued)

The following fees were paid to the Responsible Entity and its associates out of Scheme property during the financial year:

CA 300(13)(a)

Management fees for the financial year paid to the Responsible Entity $742,364 (2014: $962,106)

Performance fees for the financial year paid to the Responsible Entity $589,441 (2014: nil)

Expenses incurred by the Responsible Entity and reimbursed by the Scheme in accordance with the Scheme’s Constitution.

$184,224 (2014: $166,781)

The interests in the Scheme held by the Responsible Entity and its associates at the end of the year are disclosed in Note 17 to the financial statements.

CA 300(13)(b)

UNITS ON ISSUE

77,983,532 units of the Scheme were on issue at 30 June 2015 (2014: 86,938,296). During the year, 10,657,541 (2014: 11,666,049) units were issued by the Scheme and 19,612,305 (2014: 20,084,507) units were withdrawn.

CA300(13)(c) CA 300(13)(d) CA300(13)(f)

SCHEME ASSETS

At 30 June 2015 the Scheme held assets to a total value of $95,379,233 (2014: $94,005,045). The basis for valuation of the assets is disclosed in Note 2 to the financial statements.

CA 300(13)(e)

Commentary

The following must be disclosed for a registered scheme: CA 300(13)(a): Fees paid to the responsible entity and its associates out of scheme property during the financial year CA 300(13)(b): Number of interests in the scheme held by the responsible entity or its associates as at the end of the financial year. CA 300(13)(c): Interests in the scheme issued during the financial year. CA 300(13)(d): Withdrawals from the scheme during the financial year. CA 300(13)(e): Value of the scheme’s assets as at the end of the financial year, and the basis for valuation. CA 300(13)(f): Number of interests in the scheme as at the end of the financial year. These disclosures can be made in the directors’ report, or a reference can be made to where this information is disclosed in the financial report in accordance with Class Order 98/2395.

SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS CA 299(1)(b)

The investment strategy of the Scheme was revised during the financial year. The Directors of the Responsible Entity foresee constant performance opportunities in the 2016 financial year due to the revision of the Scheme’s investment strategy that occurred in May 2015. This change consisted of increasing the Scheme’s risk management thresholds to allow greater exposure to direct property, infrastructure and private equity assets. Future results will depend on the performance of the markets in the areas in which the Scheme chooses to invest. Other than that detailed above, there were no significant changes to the state of affairs of the Scheme during the year.

SIGNIFICANT EVENTS AFTER THE BALANCE DATE CA 299(1)(d)

There has been no matter or circumstance that has arisen since the end of the financial year that has significantly affected, or may significantly affect, the Scheme’s operations in future financial years, the results of those operations or the Scheme’s state of affairs in future financial years.

LIKELY DEVELOPMENTS AND EXPECTED RESULTS CA 299(1)(e)

The investment strategy of the Scheme will be maintained in accordance with the Scheme Constitution and investment objectives as detailed in the most recent Product Disclosure Statement.

Commentary

CA 299(3): Where information on likely developments is not disclosed because in the directors’ opinion it is likely to result in unreasonable prejudice to the entity, the report state this information has been excluded.

ENVIRONMENTAL REGULATION AND PERFORMANCE CA 299(1)(f)

The operations of the Scheme are not subject to any particular or significant environmental regulation under a law of the Commonwealth or of a State or Territory. There have been no known significant breaches of any other environmental requirements applicable to the Scheme.

INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS

CA 300(8),(9)

The Constitution of the Responsible Entity requires it to indemnify all current and former officers of the Responsible Entity (but not including auditors) out of the property of the Responsible Entity against: a. any liability for costs and expenses which may be incurred by that person in defending civil or criminal

proceedings in which judgement is given in that person’s favour, or in which the person is acquitted, or in connection with an application in relation to any such proceedings in which the court grants relief to the person under the Corporations Act 2001; and

CA 300(1)(g)

EY 4

Director’s report (continued)

b. a liability incurred by the person, as an officer of the Responsible Entity or of a related body corporate, to another person (other than the Responsible Entity or a related body corporate) unless the liability arises out of conduct involving a lack of good faith.

During the financial year, the Responsible Entity paid an insurance premium in respect of a contract insuring each of the officers of the Responsible Entity. The amount of the premium is, under the terms of the insurance contract, confidential. The liabilities insured include costs and expenses that may be incurred in defending civil or criminal proceedings that may be brought against the officers in their capacity as officers of the Responsible Entity or related body corporates. This insurance premium does not cover auditors. The Scheme has not indemnified or insured directors or officers.

INDEMNIFICATION OF AUDITORS

To the extent permitted by law, the Scheme has agreed to indemnify its auditors, Ernst & Young, as part of the terms of its audit engagement agreement against claims by third parties arising from the audit (for an unspecified amount). No payment has been made to indemnify Ernst & Young during or since the financial year.

CA 300(8)(a),

CA 300(9)(b),(c) (e)

CA 300(9)(d)

AUDITOR’S INDEPENDENCE DECLARATION

An independence declaration has been provided to the Directors by the auditor of Endeavour Managed Investment Scheme, EY, and is attached to the Directors’ report.

ASIC CO 05/641

CA 298(1AA)

ROUNDING

The amounts contained in this report and in the financial report have been rounded under the option available to the Scheme under ASIC Class Order 98/100. The Scheme is an entity to which the Class Order applies, and in accordance with that Class Order, amounts in the Directors’ report and the financial report have been rounded to the nearest thousand dollars (where rounding is appropriate).

ASIC CO 98/100 AASB 101.51(e)

Commentary

Where a registered Scheme is of a certain size, amounts and comparatives can be rounded. Rounding, however, is not permitted where it would result in the loss of material information. The financial report or Directors’ Report should state that the Scheme is an entity to which the class order applies and that amounts have been rounded, and the extent of that rounding. Generally, the following rounding levels apply, with some restrictions for related party/remuneration disclosures and auditor remuneration. Refer to the class order for full details: Assets greater than: Rounding: $10m (less than $1,000m) $1,000 $1,000m (less than $10,000m) $100,000 $10,000m $1,000,000 Earnings per unit disclosures must not be rounded further than the nearest one-tenth of a cent. The level of rounding used in presenting amounts in the financial statements shall be displayed prominently and repeated where necessary for the information presented to be understandable.

Signed in accordance with a resolution of the Directors. CA 298(2)

M.P. Byrne CA 298(2)

Chairman

Sydney

26 August 2015

EY 5

Ernst & Young 680 George Street Sydney NSW 2000 Australia GPO Box 2646 Sydney NSW 2001

Tel: +61 2 9248 5555 Fax: +61 2 9248 5959 ey.com/au

A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation

Auditor’s Independence Declaration To the Directors of Endeavour Responsible Entity Limited, as Responsible Entity for Endeavour Managed Investment Scheme

In relation to our audit of the financial report of Endeavour Managed Investment Scheme for the financial year ended 30 June 2015, to the best of my knowledge and belief, there have been no contraventions of the auditor independence requirements of the Corporations Act 2001 or any applicable code of professional conduct.

CA 298(1)(c)

Ernst & Young

D.G. Brown Partner Sydney 26 August 2015

EY 6

Statement of Comprehensive Income AASB 101.10(b) AASB101.81(a) AASB 101.102

for the year ended 30 June 2015 AASB 101.51(c)

Note

30 June 2015 30 June 2014 AASB 101.38

$’000 $’000 AASB 101.51(d),(e)

Income

Interest revenue

9 1,167

1,461

AASB 7.20(b), AASB 118.35(b)(ii)

Dividend revenue 10 1,293 1,875 AASB 118.35(b)(v)

Change in fair value of financial assets and liabilities at fair value through profit or loss 11 13,882 (44,250)

AASB 7.20(a)(i) AASB 101.35

Net foreign exchange gains 101 23 AASB 121.52(a)

AASB 101.35

Total income 16,443 (40,891)

Expense

Interest expense 9 (146) (98) AASB 7.20(b)

Management fees 17 (742) (962)

Performance fees 17 (589) -

Custodian and administration fees (162) (240)

Brokerage fees and other transaction costs (285) (460)

Other general expenses (209) (276)

Total expenses (2,133) (2,036)

Net profit/(loss) before finance costs and income tax 14,310 (42,927) AASB 101.85

Withholding tax expense (194) (231) AASB 101.82(d)

Finance costs AASB 101.82(b)

Distributions to unitholders 13 (2,675) (4,732) AASB 132.40

Net profit/(loss) for the year 11,441 (47,890)

Other comprehensive income - - AASB 101.81A(b)

Change in net assets attributable to unitholders 11,441 (47,890)

Commentary

AASB 101.10A allows the Scheme to present a single statement of profit or loss and other comprehensive income, or two linked statements with profit or loss and other comprehensive income presented separately. This illustration is based on a single statement. AASB 101.99 requires expenses to be analysed by their nature or by their function within the entity, whichever provides information that is reliable and more relevant. The Scheme has presented the analysis of expenses by nature (AASB 101.102). AASB 101 requires entities to present a statement of comprehensive income that combines all items of income and expense recognised in profit or loss together with ‘other comprehensive income’. The other comprehensive income comprises items of income and expenses (including reclassification adjustments) that are not recognised in profit or loss as required or permitted by other Australian Accounting Standards. AASB 101.82A requires the other comprehensive income section to classify line items by nature into those that: ► Will not be reclassified subsequently to profit or loss; and ► Will be reclassified subsequently to profit or loss when specific conditions are met. AASB 101.85 allows an entity to present additional line items, headings and subtotals when such presentation is relevant to an understanding of the entity’s financial performance. In accordance with this paragraph, we have continued to adopt the overall presentation provided in AASB 132 Example 7 for entityies with no equity. Where a scheme with no equity does not elect to follow this alternative presentation, they should be aware that their total comprehensive income must be nil, even where they have items of other comprehensive income. The Scheme does not pay income tax in relation to its operations. The unitholders bear the tax cost on any distributions received from the Scheme. Where the Scheme does not make full distribution to its unitholders, then it is necessary to assess for tax implications.

EY 7

Statement of Financial Position

AASB 101.10(a) AASB 101.63

at 30 June 2015 AASB 101.51(c)

Note 30 June 2015 30 June 2014 AASB 101.38

$’000 $’000 AASB 101.51(d),(e)

ASSETS AASB 101.54(i) AASB 101.54(d),

AASB 7.8(c) Cash and cash equivalents 3 109 463 Due from brokers 4 649 1,273 Dividends receivable 79 142

Interest receivable 107 130

Receivable from redeemable units 105 397

Other receivables and prepayments 9 15 AASB 101.54(h)

Financial assets at fair value through profit or loss 5 94,321 91,585 AASB 7.8(a)

TOTAL ASSETS 95,379 94,005

LIABILITIES

Due to brokers 4 69 73 AASB 101.54(m),

AASB 7.8(f)

Management and performance fees payable 17 72 111

Custodian and administration fees payable 31 52

Distributions payable 13 210 550

Redemption payable 300 917

Other payables and accrued expenses 24 28 AASB 101.54(k)

Financial liabilities at fair value through profit or loss 5 3,684 3,569 AASB 7.8(e)

TOTAL LIABILITIES (EXCLUDING NET ASSETS ATTRIBUTABLE TO UNITHOLDERS) 4,390 5,300

NET ASSETS ATTRIBUTABLE TO UNITHOLDERS 90,989 88,705 AASB 132 Example 7

TOTAL LIABILITIES 95,379 94,005

Commentary

AASB 101.60 requires entities to present assets and liabilities in order of their liquidity (rather than split between current and non-current) when this presentation is reliable and more relevant, as will often be the case for registered managed investment schemes. AASB 101.10(f) requires a Statement of Financial Position as at the beginning of the earliest comparative period when the entity applies an accounting policy retrospectively. AASB 101.55 allows an entity to present additional line items, headings and subtotals when such presentation is relevant to an understanding of the entity’s financial position. In accordance with this paragraph, we have continued to adopt the overall presentation provided in AASB 132 Example 7 for entities with no equity. The Scheme has no instruments classified as equity and presents the net assets attributable to unitholders in accordance with the special format illustrated by AASB 132.IE32.

EY 8

Statement of Changes in Net Assets Attributable to Unitholders

for the year ended 30 June 2015

Units on issue Net assets attributable to

unitholders (calculated in

accordance with

redemption requirements)

Adjustment from mid-

market prices to bid/offer-

market prices

Net assets attributable to


accordance with AASB)

No. ‘000 $’000 $’000 $’000

Balance at 30 June 2013 95,357 148,842 (55) 148,787

Change in accounting policy (40) (40)

Balance at 30 June 2013 95,357 148,802 (55) 148,747

Issue of redeemable units 11,666 16,368 - 16,368

Redemption of redeemable units (20,085) (28,520) - (28,520)

Decrease in net assets attributable to unitholders from transactions in units (8,419) (12,152) - (12,152)

Change in net assets attributable to unitholders - (47,886) (4) (47,890)

Balance at 30 June 2014 86,938 88,764 (59) 88,705 Issue of redeemable units 10,658 11,270 - 11,270 Redemption of redeemable units (19,612) (20,427) - (20,427)

Decrease in net assets attributable to unitholders from transactions in units (8,954) (9,157) - (9,157)

Change in net assets attributable to unitholders - 11,450 (9) 11,441

Balance at 30 June 2015 77,984 91,057 (68) 90,989

Commentary Our view is that if there is a difference between the NAV per AASB and the NAV per the Scheme’s valuation, it is not an equity component. Under AASB 139, asset positions were generally marked at bid prices and liability positions at ask prices. AASB 13 permits an entity to use the price within the bid-ask spread that is most representative of fair value in the circumstances to measure fair value. As a practical expedient, AASB 13 allows for the use of mid-market pricing, or other pricing conventions that are used by market participants, when measuring fair value within the bid-ask spread. AASB 101.80 requires entities without share capital to disclose equivalent information about changes during the period. Consistent with that requirement and the approach adopted for the Statement of Comprehensive Income and the Statement of Financial Position under the alternative presentation in AASB 132 Example 7, we believe that presenting a Statement of Changes in Net Assets Attributable to Unitholders with equivalent information to a Statement of Changes in Equity is best practice and more appropriate to the needs of users than a Statement of Changes in Equity with zero balances. Schemes may however choose to present a Statement of Changes in Equity with nil balances and present the above information in the notes to the financial statements.

EY 9

Statement of Cash Flows AASB 101.10(d) AASB 107.10

for the year ended 30 June 2015 AASB 101.51(c)

Note 30 June 2015 30 June 2014 AASB 101.38

$’000 $’000 AASB 101.51(d)(e)

CASH FLOWS FROM OPERATING ACTIVITIES AASB 107.14

Proceeds from sale of financial investments classified as held for trading

63,913 81,076

Payments for purchase of financial investments and settlement of financial liabilities held for trading

(50,359) (77,486)

Proceeds received from brokers 3,313 3,544

Payments to brokers (910) (1,219)

Interest received 1,190 1,449 AASB 107.31

Dividends and distributions received 1,101 1,418 AASB 107.31

Interest paid (141) (101) AASB 107.31

Management and performance fees paid (1,370) (997)

Custodian and administration fees paid (183) (236)

Other operating expenses paid (500) (751)

Net cash provided by operating activities 14 16,054 6,697

CASH FLOWS FROM INVESTING ACTIVITIES AASB 107.21

Proceeds from sale of financial assets designated as at fair value through profit or loss 9,527 20,189 Purchase of financial assets designated as at fair value through profit or loss (15,345) (11,717) Net cash flows (used in) / provided by investing activities (5,818) 8,472 CASH FLOWS FROM FINANCING ACTIVITIES AASB 107.21

Proceeds from issue of redeemable units 11,562 16,114 AASB 107.17(a)

Payments on redemption of redeemable units (21,044) (27,865) AASB 107.17(b)

Distributions paid to unitholders (1,150) (3,119) AASB 107.34

Net cash flows used in financing activities (10,632) (14,870)

Net (decrease) / increase in cash and cash equivalents (396) 299

Cash and cash equivalents at 1 July 463 109

Effect of exchange rate changes 42 55

Cash and cash equivalents at 30 June 3 109 463

Statement of Cash Flows (continued)

EY 10

Commentary

AASB 107.18 allows entities to report cash flows from operating activities using either the direct method or the indirect method, but encourages use of the direct method. The Scheme presents its cash flows using the direct method. Our view is that a scheme should classify its held-for trading investment movements as operating activities since the investment activities of a scheme are the principal revenue-producing activities of the scheme and the turnover of such investments is high. For investments designated at fair value through profit or loss, the scheme should assess whether the investments are held for the primary purpose of generating future income and cash flows over the long term. If not, and the Responsible Entity believes that the transactions in investments designated at fair value through profit or loss are the principal revenue-producing activities of the scheme, then these cash flows should be classified as operating activities (AASB 107.15), otherwise, they should be classified as cash flows from investing activities (AASB 107.16). The classification adopted should be consistently applied. AASB 107.31 requires cash flows from interest and dividends received and paid to be disclosed separately. AASB 107.33 permits interest paid to be shown as operating, financing or investing activities and interest received to be shown as operating or investing activities, as deemed relevant for the Scheme. The classification adopted should be consistently applied. The Scheme has elected to classify interest received and interest paid as cash flows from operating activities. Our view is that a managed investment scheme may choose whether to present its purchases and sales of investments held for trading gross or net. Once a presentation policy is selected, it must be applied consistently. If a Scheme elects to present the net cash flows from purchases and sales of investments, consideration needs to be given to the adequacy of disclosures in the notes to the financial statements regarding the risks associated with the financial instruments of the scheme in accordance with AASB 7.

EY 11

Notes to the financial statements

For the year ended 30 June 2015 1 Corporate information The registered office of the Responsible Entity is located at 30 Hedge Street, Sydney, New South Wales, 2000.

AASB 101.10(e)

The investment objective of the Scheme is to achieve consistent medium-term returns while safeguarding capital by investing in a diversified portfolio of equity securities, interest bearing securities and related derivatives in several currencies in both domestic and international markets. Most of the Scheme’s investments are listed and traded on stock exchange markets in Australia, Taiwan, the European Union and Japan. The Scheme’s investment activities are managed by Endeavour Asset Management Limited (the ‘Investment Manager’). The Scheme’s custodian and administrator is Endeavour Administration Fund Services Limited. The Scheme’s units are redeemable at the holder’s option.

AASB 101.112 AASB 101.113

AASB 101.138(a) AASB 101.138(b)

The financial statements of Endeavour Managed Investment Scheme for the year ended 30 June 2015 were authorised for issue in accordance with a resolution of the Board of Directors on 26 August 2015.

AASB 110.17

2 Accounting Policies

Commentary

The accounting policies presented below for the Scheme are for illustrative purposes. Therefore, these accounting policies should only be used as guidance. In practice the disclosure may need to be more detailed, and should be tailored to a Scheme’s specific policies.

2.1 Basis of preparation

The financial report is a general purpose financial report, which has been prepared in accordance with the requirements of the Corporations Act 2001, Australian Accounting Standards and other authoritative pronouncements of the Australian Accounting Standards Board. The financial report has also been prepared on a historical cost basis, except for financial assets and financial liabilities held at fair value through profit or loss, that have been measured at fair value.

AASB 101.117 AASB 1054.8 AASB 1054.9

The Statement of Financial Position is presented on a liquidity basis. Assets and liabilities are presented in decreasing order of liquidity and are not distinguished between current and non-current. All balances are expected to be recovered or settled within 12 months, except for financial assets and liabilities at fair value through profit or loss and net assets attributable to unitholders. The amount expected to be recovered or settled within 12 months in relation to these balances cannot be reliably determined.

AASB 101.61

The financial statements are presented in Australian Dollars and all values are rounded to the nearest $’000 except where otherwise indicated.

AASB 101.51(d),(e)

The Scheme is a for-profit entity for the purpose of preparing financial statements.

AASB 1054.8

Basis of consolidation

The Scheme is an investment entity and, as such, does not consolidate the entities it controls. Instead, interests in subsidiaries are classified as at fair value through profit or loss, and measured at fair value.

Statement of Compliance AASB 101.16 AASB 1054.7

The financial statements have been prepared in accordance with the Australian Accounting Standards as issued by the Australian Accounting Standards Board and International Financial Reporting Standards as issued by the International Accounting Standards Board.

Commentary

A scheme shall not describe financial statements as complying with Australian Accounting Standards or International Financial Reporting Standards unless they comply with all the requirements of Australian Accounting Standards or International Financial Reporting Standards (AASB 101.16). If the scheme has included in the notes to the financial statements, in compliance with the accounting standards, an explicit and unreserved statement of compliance with international financial reporting standards, this this should be repeated in the directors’ declaration (CA 295(4)(ca)).

Notes to the financial statements (continued) For the year ended 30 June 2015

EY 12

2 Accounting Policies (continued) 2.2 Changes in accounting policies and disclosure New and amended accounting standards and interpretations

The Scheme has adopted the following new and amended Australian Accounting Standards and AASB Interpretations as of 1 July 2014. The nature and the impact of each new standard and/or amendment is described below: AASB 2012-3 Amendments to Australian Accounting Standards - Offsetting Financial Assets and Financial Liabilities Adds application guidance to AASB 132 Financial Instruments: Presentation to address inconsistencies identified in applying some of the offsetting criteria of AASB 132. This amendment does not have a material impact on the Scheme.

Interpretation 21 Levies Confirms that a liability to pay a levy is only recognised when the activity that triggers the payment occurs. AASB 2013-3 Amendments to AASB 136 – Recoverable Amount Disclosures for Non-Financial Assets Requirement to disclose additional information about the fair value measurement when the recoverable amount of impaired assets is based on fair value less costs of disposal. This amendment does not have a material impact on the Scheme. AASB 2013-4 Amendments to Australian Accounting Standards – Novation of Derivatives and Continuation of Hedge Accounting [AASB 139] Amends AASB 139 to permit the continuation of hedge accounting in specified circumstances where a derivative, which has been designated as a hedging instrument. This amendment does not have a material impact on the Scheme. AASB 1031 Materiality The revised AASB 1031 is an interim standard that cross-references to other Standards and the Framework (issued December 2013) that contain guidance on materiality. This amendment does not have a material impact on the Scheme. AASB 2014-1 Part A- Amendments to Australian Accounting Standards - Annual Improvements 2010-2012

and 2011-2013 Cycle This standard sets out amendments to Australian Accounting Standards arising from the issuance by the International Accounting Standards Board (IASB) of International Financial Reporting Standards (IFRSs) Annual Improvements to IFRSs 2010–2012 Cycle and Annual Improvements to IFRSs 2011–2013 Cycle.

Annual Improvements to IFRSs 2010–2012 Cycle addresses the following item: AASB 124 Related Party Disclosures Defines a management entity providing Key Management Personnel (‘KMP’) services as a related party of the reporting entity. The amendments added an exemption from the detailed disclosure requirements in paragraph 17 of AASB 124 for KMP services provided by a management entity. Payments made to a management entity in respect of KMP services should be separately disclosed. While this amendment will result in the Investment Manager being considered a related party under AASB, this amendment does not have a material impact on the Scheme as the relevant disclosure are already made in the Scheme’s financial statements.

Annual Improvements to IFRSs 2011–2013 Cycle addresses the following item: AASB13 Fair Value Measurement Clarifies that the portfolio exception in paragraph 52 of AASB 13 applies to all contracts within the scope of AASB 139 Financial Instruments: Recognition and Measurement or AASB 9 Financial Instruments - Classification and Measurement, regardless of whether they meet the definitions of financial assets or financial liabilities as defined in AASB 132. This amendment does not have a material impact on the Scheme. AASB 2014-2 Amendments to AASB 1053 – Transition to and between Tiers, and related Tier 2 Disclosure Requirements

The Standard makes amendments to AASB 1053 Application of Tiers of Australian Accounting Standards to: ► Clarify that AASB 1053 relates only to general purpose financial statements; ► Make AASB 1053 consistent with the availability of the AASB 108 Accounting Policies, Changes in

Accounting Estimates and Errors option in AASB 1 First-time Adoption of Australian Accounting Standards; ► Clarify certain circumstances in which an entity applying Tier 2 reporting requirements can apply the AASB

108 option in AASB 1; permits an entity applying Tier 2 reporting requirements for the first time to do so directly using the requirements in AASB 108 (rather that applying AASB 1) when, and only when, the entity had not applied, or only selectively applied, applicable recognition and measurement requirements in its most recent previous annual special purpose financial statements; and


EY 13

2 Accounting Policies (continued) 2.2 Changes in accounting policies and disclosure (continued)

► Specify certain disclosure requirements when an entity resumes the application of Tier 2 reporting requirements.

This amendment does not have a material impact on the Scheme. AASB 2013-9 Part C - Amendments to Australian Accounting Standards – Conceptual Framework, Materiality and Financial Instruments This makes amendments to a number of Australian Accounting Standards, including the following: ► Amendments arising from the issuance of AASB CF 2013-1 ► Amendments to particular Australian Accounting Standards to delete references to AASB 1031 ► Makes amendments to a number of Australian Accounting Standards, including incorporating Chapter 6

Hedge Accounting into AASB 9 Financial Instruments. This amendment does not have a material impact on the Scheme.

Commentary

For illustrative purposes, the Scheme has listed all the disclosures of new and amended standards and interpretations that are effective from 1 July 2014, regardless of whether these have any impact on the Scheme’s financial statements. However, an alternative that schemes should consider would be to only list and address those that have an impact on the Scheme’s financial position, performance and/or disclosures. Financial statements of subsequent periods need not repeat these disclosures. Please refer to your local EY representative or the AASB Insights section of www.ey.com/au for the most up to date information about standards issued but not yet effective when producing your financial report. In our view, standards and amendments that will not have a material impact need not be disclosed.

Standards issued but not yet effective Australian Accounting Standards and Interpretations that have been issued or amended but are not yet effective and have not been adopted by the Scheme for the financial reporting period ended 30 June 2015 are outlines in the table below:

Reference Title Summary Application date of

standard*

Impact on the Scheme

financial report

Application date for

* Designates the beginning of the applicable annual reporting period Please refer to your local EY contact or look out for the latest version of the table in our In balance newsletter (www.ey.com/AU/en/Issues/IFRS/In-balance) which is updated quarterly for information necessary to complete this section.


EY 14

2 Accounting Policies (continued) 2.3 Significant accounting judgements and estimates

AASB 101.122 AASB 101.125

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 and disclosure of contingent liabilities. However, uncertainty about these assumptions and estimates could result in outcomes that could require a material adjustment to the carrying amount of the asset or liability affected in the future periods.

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.

AASB 101.45

Judgements In the process of applying the Scheme’s accounting policies, management has made the following judgements, which have the most significant effect on the amounts recognised in the financial statements:

Assessment as investment entity

Schemes 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:

AASB 10.27

► 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

AASB 10.B85B AASB 10.B85K

► An entity that measures and evaluates the performance of substantially all of its investments on a fair value basis.

The Scheme’s prospectus details its objective of providing investment management services to investors which includes investing in equities, fixed income securities and private equity for the purpose of returns in the form of investment income and capital appreciation. The Scheme reports to its investors via quarterly investor information, 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 in the Scheme’s annual reports. The Scheme has a clearly documented exit strategy for all of its investments.

AASB 10.B85F AASB 10.28

The Board 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 Board has 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.

AASB 10.29

Subsidiaries in which the Fund holds less than a majority of voting rights (de facto control)

The Scheme owns 45% of the units in Endeavour Private Equity Fund and the remaining units are widely dispersed so that no other investor holds greater than 3%. Decisions require the approval of a majority of votes at the unitholders meeting. Ordinarily, 100% of unitholders would not be expected to attend or vote at the meetings and the other unitholders are passive in nature (as demonstrated at previous meetings) and do not have arrangements to consult other unitholders or make collective decisions. Therefore, the 45% holding of the Fund is enough to influence the voting at these meetings. As such, the Board has concluded that the Fund has de facto control of Endeavour Private Equity Fund, and accordingly, it has been included as a subsidiary at fair value.

AASB 10.B38-46

Commentary

AASB 10 recognises that an investor may have power over an investee without a majority of voting rights. AASB 10.B38 considers arrangements which may allow for an investor to have power in these circumstances. In the above situation power has been assessed based on the voting rights held and the dispersal of other voting rights. It should be stressed that holding 45% of the units in an entity does not by itself give rise to control in all instances. The factors provided in AASB 10 need to be considered to determine whether an investor has power over its investees or not.


EY 15

2 Accounting Policies (continued)

2.3 Significant accounting judgements and estimates (continued) AASB 101.122 AASB 101.125

Assessment of fund investments as structured entities The Scheme has assessed whether the funds in which it invests should be classified as structured entities. The Scheme has considered the voting rights and other similar rights afforded to investors in these funds, including the rights to remove the fund manager or redeem holdings. The Scheme has concluded on whether these rights are the dominant factor in controlling the funds, or whether the contractual agreement with the fund manager is the dominant factor in controlling these funds. The Scheme has concluded that the Endeavour Private Equity Fund is not a structured entity.

Estimates and assumptions The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are discussed below. The Scheme based its assumptions and estimates on parameters available when the financial statements were prepared. However, existing circumstances and assumptions about future developments may change due to market changes or circumstances arising beyond the control of the Scheme. Such changes are reflected in the assumptions when they occur.

AASB 101.125 AASB 101.10(e)

Fair value of financial instruments When the fair values of financial assets and financial liabilities 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 including the discounted cash flow (‘DCF’) model. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgement is required in establishing fair values. The estimates include considerations of liquidity and model inputs related to items such as credit risk (both own and counterparty’s), correlation and volatility. Changes in assumptions about these factors could affect the reported fair value of financial instruments in the statement of financial position and the level where the instruments are disclosed in the fair value hierarchy. The models are tested for validity by calibrating to prices from any observable current market transactions in the same instrument (without modification or repackaging) when available. To assess the significance of a particular input to the entire measurement, the fund performs sensitivity analysis or stress testing techniques (see Note 7).

AASB 101.117 to AASB 101.121

AASB 13.93

Contingent consideration, resulting from business combinations, is valued at fair value at the acquisition date as part of the business combination. When the contingent consideration meets the definition of a financial liability, it is subsequently re-measured to fair value at each reporting date. The determination of the fair value is based on discounted cash flows. The key assumptions take into consideration the probability of meeting each performance target and the discount factor. Fair value of investment in private equity investment funds The Scheme invests in private equity funds that 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’s investment manager 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 net asset value (‘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 given to any transactions in the shares/units of the fund (see Note 7).

2.4 Summary of significant accounting policies The principal accounting policies applied in the preparation of these financial statements are set out below.

(A) FINANCIAL INSTRUMENTS

AASB 7.21

(i) Classification AASB 7.B5(a)

The Scheme classifies its financial assets and financial liabilities into the categories below in accordance with AASB 139 Financial Instruments: Recognition and Measurement.

Financial assets and liabilities at fair value through profit or loss

The category of financial assets and liabilities at fair value through the profit or loss is sub-divided into:

Financial assets and liabilities held for trading: Financial assets are classified as held for trading if they are acquired for the purpose of selling and/or repurchasing in the near term. This category includes equity securities, investments in managed funds, investment in subsidiary and debt instruments. 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.

AASB 139.AG14 AASB 139.9(b)(ii)


EY 16


2.4 Summary of significant accounting policies (continued) Financial instruments designated as at fair value through profit or loss upon initial recognition:

AASB 10.31

These include investments in subsidiaries, equity securities and debt instruments that are not held for trading. 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 as set out in the Scheme’s offering document. The financial information about these financial assets is provided internally on that basis to the Investment Manager and to the Board of Directors or delegated authority. ► Investment in subsidiary: In accordance with the exception under AASB 10 Consolidated financial

statements, the Scheme does not consolidate subsidiaries in the financial statements. Investments in subsidiaries are accounted for as financial instruments at fair value through profit or loss.

Commentary

In accordance with AASB 10 paragraph 27, an investment entity is an entity that: ► Obtains funds from one or more investors for the purpose of providing those investor(s) with investment

management services; ► Commits to its investor(s) that its business purpose is to invest funds solely for returns from capital

appreciation, investment income, or both; and ► Measures and evaluates the performance of substantially all of its investments on a fair value basis. An investment entity must demonstrate that fair value is the primary measurement attribute used. The fair value information must be used internally by key management personnel and must be provided to the entity’s investors. In order to meet this requirement, an investment entity would: ► �Elect to account for investment property using the fair value model in AASB 140 Investment Property; ► �Elect the exemption from applying the equity method in AASB 128 for investments in associates and joint

ventures; and ► �Measure financial assets at fair value in accordance with AASB 139. In addition an investment entity should consider whether it has the following typical characteristics: ► �It has more than one investment, to diversify the risk portfolio and maximise returns; ► �It has multiple investors, who pool their funds to maximise investment opportunities; ► �It has investors that are not related parties of the entity; and ► �It has ownership interests in the form of equity or similar interests. The absence of one or more of these typical characteristics does not necessarily disqualify an entity from being an investment entity. If the entity does not have all of the typical characteristics, it should provide additional disclosure according to a consequential amendment to AASB 12. Based on the above, Endeavour Managed Investment Scheme is considered to meet all three conditions of the definition and, hence, qualifies as an investment entity. In accordance with AASB 10.31, investment entities must not consolidate investment in subsidiaries, and these subsidiaries must be measured at fair value through profit or loss. If an investment entity has a subsidiary that provides services that relate to the investment entity’s investment activities, then the exemption under AASB 10.31 does not apply and it must consolidate that subsidiary in accordance with paragraphs 19–26 of AASB 10. The investment entity exception within AASB 10 is applicable for annual periods beginning on or after 1 January 2014. However, early adoption is permitted.

Loans and receivables

Loans and 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.

AASB 139.9

Other financial liabilities

This category includes all financial liabilities, other than those classified as 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.

AASB 139.9

(ii) Recognition

The Scheme recognises a financial asset or a financial liability when, and only when, it becomes a party to the contractual provisions of the instrument.

AASB 139.14

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, i.e., the date that the Scheme commits to purchase or sell the asset.

AASB 139.9 AASB 139.38 AASB 7.B5(c)


EY 17

2 Accounting Policies (continued) 2.4 Summary of significant accounting policies (continued)

AASB 139.17(a) AASB 139.18

(iii) De-recognition

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 in 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 Scheme has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

AASB 139.20(a) AASB 139.20(c)(i)

AASB 139.20(c)(ii)

When the Scheme has transferred its right to receive cash flows from an asset (or has entered into a pass-through arrangement), and has neither transferred nor retained substantially all of the risks and rewards of the asset nor transferred control of the asset, the asset is recognised to the extent of the Scheme’s continuing involvement in the asset. In that case, the scheme also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the scheme has retained. The Scheme derecognises a financial liability when the obligation under the liability is discharged, cancelled or expires.

AASB 139.30(a)

AASB 139.39

(iv) 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 profit or loss.

AASB 139.43

Loans and receivables and financial liabilities (other than those classified as 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 statement of comprehensive income, unless specified otherwise.

AASB 13.59 AASB 13.60 AASB 13.64

Commentary

Paragraph 59 of AASB 13 requires that, when determining whether fair value at initial recognition equals the transaction price, an entity shall take into account factors specific to the transaction and to the asset or liability. Paragraph B4 of AASB 13 describes situations in which the transaction price might not represent the fair value of an asset or a liability at initial recognition. Also paragraph 60 of AASB 13 specifies that, if another AASB requires or permits an entity to measure an asset or a liability initially at fair value and the transaction price differs from fair value, the entity shall recognise the resulting gain or loss in profit or loss unless that AASB specifies otherwise. Paragraph 64 of AASB 13 states that if the transaction price is fair value at initial recognition and a valuation technique that uses unobservable inputs will be used to measure fair value in subsequent periods, the valuation technique shall be calibrated so that at initial recognition, the result of the valuation technique equals the transaction price.


EY 18


2.4 Summary of significant accounting policies (continued)

(v) Subsequent measurement

After initial measurement, the Scheme measures financial instruments which are classified as at fair value through profit or loss at fair value (see Note 2.4(B) below). Subsequent changes in the fair value of those financial instruments are recorded in ‘Change in fair value of financial assets and liabilities at fair value through profit or loss’. Interest earned is recorded in ‘Interest revenue’ according to the terms of the contract. Dividend revenue is recorded in ‘Dividend revenue’.

AASB 139.46 AASB 139.9

AASB 139.55(a)

Loans and receivables are carried at amortised cost using the effective interest method less any allowance for impairment. Gains and losses are recognised in profit or loss when the loans and receivables are derecognised or impaired, as well as through the amortisation process. Financial liabilities, other than those classified as at fair value through profit or loss, are measured at amortised cost using the effective interest method. Gains and losses are recognised in profit or loss when the liabilities are derecognised as well as through the amortisation process.

AASB 7.B5(e) AASB 139.56

The effective interest method is a method of calculating the amortised cost of a financial asset or a financial liability and of allocating the interest income or interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument or, when appropriate, a shorter period to the net carrying amount of the financial asset or financial liability. When calculating the effective interest rate, the Scheme estimates cash flows considering all contractual terms of the financial instruments but does not consider future credit losses. The calculation includes all fees paid or received between parties to the contract that are an integral part of the effective interest rate, transaction costs and all other premiums or discounts.

AASB 139.9 AASB 139.AG6

AASB 118.30(a)

(B) FAIR VALUE MEASUREMENT

The Scheme measures financial assets and liabilities at fair value through profit or loss, such as equity securities, investments in managed funds, investment in subsidiary, debt instruments and equity securities, at fair value at each balance sheet date. 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: ► I�n 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 measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole: ► Level 1 — Quoted (unadjusted) market prices in active markets for identical assets or liabilities; ► �Level 2 — Valuation techniques for which the lowest level input that is significant to the fair value ► measurement is directly or indirectly observable; or ► �Level 3 — Valuation techniques for which the lowest level input that is significant to the fair value ► Measurement is unobservable.

AASB 13.9

AASB 13.16

AASB 13.22

AASB 13.27

AASB 13.61

AASB 13 Appendix A

This item includes changes in the fair value of financial assets and liabilities held for trading or designated upon initial recognition as ‘held at fair value through profit or loss’ and excludes interest and dividend income and expenses. Amounts are calculated as the difference between the fair value at sale or at year end, and the fair value at the previous valuation point. This includes both realised and unrealised gains and losses.

AASB 7.B5(e) AASB 139.55(a)


EY 19


Commentary

AASB 13.77 specifies that the existence of published price quotations in an active market is the best evidence of fair value and, when they are available, they are used to measure fair value. AASB 13 defines an active market as a market in which transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis. The quoted price from an active market cannot be adjusted for transaction costs or the size of the holding according to paragraph 25 and 69 (respectively) of AASB 13. Paragraph 70 of AASB 13 specifies that, if an asset or a liability measured at fair value has a bid price and an ask price (e.g., an input from a dealer market), the price within the bid-ask spread that is most representative of fair value in the circumstances shall be used to measure fair value regardless of where the input is categorised within the fair value hierarchy. The use of bid prices for asset positions and ask prices for liability positions is permitted, but not required. AASB 13.71 does not preclude the use of mid-market pricing or other pricing conventions that are used by market participants as a practical expedient for fair value measurements within a bid-ask spread. The Scheme does not hold assets and liabilities with offsetting positions. Where a fund does have financial assets and financial liabilities with offsetting positions in market risks or counterparty credit risk, it may elect to use the measurement exception provided in AASB 13 to measure the fair value of its net risk exposure by applying the bid or ask price to the net open position as appropriate.

(C) IMPAIRMENT OF FINANCIAL ASSETS

The Scheme assesses at each reporting date whether a financial asset or group of financial assets classified as loans and receivables is impaired. An impairment exists if one or more events that has occurred since the initial recognition of the asset (an incurred ‘loss event’) has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated.

AASB 139.63 AASB 7.B5(f)

AASB 139.58-59

Evidence of impairment may include indications that the debtor or a group of debtors is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganisation and where observable data indicate that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults. If there is objective evidence that an impairment loss has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future expected credit losses that have not yet been incurred) discounted using the asset’s original effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is recognised in profit or loss as ‘impairment expense’.

AASB 139.AG84

Impaired debts together with the associated allowance are written off when there is no realistic prospect of future recovery and all collateral has been realised or has been transferred to the Scheme. If, in a subsequent period, the amount of the estimated impairment loss increases or decreases because of an event occurring after the impairment was recognised, the previously recognised impairment loss is increased or reduced. If a previous write-off is later recovered, the recovery is credited to the ‘impairment expense’.

AASB 7.B5.(d)(i)

AASB 7.B5(d)(ii)

AASB 139.65

Interest revenue on an impaired financial asset is recognised using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss.

AASB 139.AG93

Commentary

The impairment accounting policy has been included above as an example disclosure for schemes which have a significant amount of instruments subject to impairment testing, such as held-to-maturity or available for sale financial instruments. In practice, entities without such instruments are unlikely to require a policy for the small amount of short term trade receivables held.


EY 20


(D) OFFSETTING FINANCIAL INSTRUMENTS

Financial assets and financial liabilities are offset and the net amount reported in the Statement of Financial Position if, and only if, there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise the asset and settle the liability simultaneously. This is generally not the case with master netting agreements unless one party to the agreement defaults and the related assets and liabilities are presented gross in the Statement of Financial Position.

AASB 132.42

(E) FUNCTIONAL AND PRESENTATION CURRENCY AASB 121.9

The Scheme’s functional and presentation currency is the Australian Dollar, which is the currency of the primary economic environment in which it operates. The Scheme’s performance is evaluated and its liquidity is 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.

AASB 101.51(d)

(F) FOREIGN CURRENCY TRANSLATIONS

Transactions during the period, including purchases and sales of securities, income and expenses, are translated at the rate of exchange prevailing on the date of the transaction.

AASB 121.21

Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency spot rates of exchange at the reporting date.

AASB 121.23(a)

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions. 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.

AASB 121.23(b)

AASB 121.23(c)

Foreign currency transaction gains and losses on financial instruments classified as at fair value through profit or loss are included in the Statement of Comprehensive Income as part of the ‘Changes in net fair value of financial assets and liabilities at fair value through profit or loss’. Exchange differences on other financial instruments are included in the Statement of Comprehensive Income as ‘Net foreign exchange gains (losses)’.

AASB 121.30

(G) INTEREST REVENUE AND EXPENSE

Interest revenue and expense are recognised in the Statement of Comprehensive Income for all financial instruments not at fair value through profit or loss using the effective interest method. Interest earned on financial assets classified as ‘at fair value through the profit or loss’ is recorded in ‘Interest revenue’ according to the terms of the contract.

AASB 118.30(a) AASB 139.9

(H) DIVIDEND REVENUE

Dividend revenue is recognised when the Scheme’s right to receive the payment is established. Dividend revenue is presented gross of any non-recoverable withholding taxes, which are disclosed separately as tax expense in the Statement of Comprehensive Income.

AASB 7.B5(e) AASB 118.30(c)

Commentary

There is no specific requirement in AASB 7 as to where in profit or loss the interest and dividends on financial instruments classified as at fair value through profit or loss should be recorded. The policy applied should be consistent from one period to the next. AASB 7 requires the location to be disclosed. For example, interest or dividend earned on financial instruments carried at fair value through profit or loss may be included in net gains or losses for the category, or in interest or dividend income, and the policy should make it clear where they are reported. In these financial statements interest and dividends on financial instruments at fair value through profit or loss are disclosed in interest revenue and dividend income respectively. Dividend revenues on listed securities are generally recorded on the ex-dividend date. The ex-dividend date is the date that the market price of the security is reduced to reflect the amount of the dividend (that is, securities traded on that date do not include rights to the upcoming dividend payment).


EY 21


(I) FEES, COMMISSIONS AND OTHER EXPENSES

Except where included in the effective interest calculation (for financial instruments carried at amortised cost), fees and commissions are recognised on an accrual basis. Legal and audit fees are included within ‘other general expenses’, and are recorded on an accrual basis.

(J) INCOME TAXES

Under current Australian legislation, the Scheme is not subject to income tax provided the unitholders are presently entitled to the income of the Scheme and the Scheme fully distributes its net taxable income.

Commentary

AASB 112 does not directly address the treatment of incoming dividends on which tax has been suffered (i.e., whether they should be shown at the amount received, or gross of withholding tax together with a corresponding tax charge). However, in discussing the treatment prescribed for the paying company, AASB 112.65A describes withholding tax as an amount ‘paid to the tax authorities on behalf of unitholders’. It would therefore be consistent with this treatment for the recipient to show dividends (and other income subject to withholding taxes) gross of withholding taxes, with the withholding tax shown separately.

(K) DISTRIBUTIONS TO UNITHOLDERS

In accordance with the Scheme’s Constitution, the Scheme fully distributes its distributable income to unitholders. Distributions are payable at the end of each half year. Such distributions are determined by reference to the net taxable income of the Scheme. Distributable income includes capital gains arising from the disposal of investments. Unrealised gains and losses are transferred to net assets attributable to unitholders and are not assessable or distributable until realised. Capital losses are not distributed to unitholders but are retained to be offset against any future realised capital gains. Distributions to unitholders are recognised in the Statement of Comprehensive Income as finance costs.

AASB 132.35-36

(L) CASH AND CASH EQUIVALENTS AASB 107.46

Cash and cash equivalents in the Statement of Financial Position comprise cash on hand, demand deposits, short term deposits in banks with original maturities of three months or less and short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

AASB 107.6

Short term investments which are not held for the purpose of meeting short-term cash commitments as well as restricted margin accounts are not considered as ‘cash and cash equivalents’. For the purpose of the Statement of Cash Flows, cash and cash equivalents consist of cash and cash equivalents as defined above, net of outstanding bank overdrafts.

AASB 107.7

AASB 107.8

(M) DUE TO AND DUE FROM BROKERS

Amounts due to brokers are payables for securities purchased (in a regular way transaction) that have been contracted for but not yet delivered on the reporting date. Refer to the accounting policy for ‘other financial liabilities’ for recognition and measurement of these amounts. Amounts due from brokers include margin accounts and receivables for securities sold (in a regular way transaction) that have been contracted for but not yet delivered on the reporting date. Refer to accounting policy for ‘loans and receivables’ for recognition and measurement of these amounts. Margin accounts represent cash deposits held with brokers as collateral against open futures contracts.

AASB 139.38

Commentary

Many derivative instruments require margin payments. The margin payment is not part of the initial net investment in a derivative, but is a form of collateral for the counterparty or clearing-house and may take the form of cash, securities, or other specified assets, typically liquid assets. These assets must be accounted for separately.


EY 22


(N) REDEEMABLE PARTICIPATING UNITS

Redeemable participating units are redeemable at the unitholders’ option and are classified as financial liabilities.

AASB 132.18(b)

The liabilities arising from the redeemable units are carried at the redemption amount being the net asset value calculated in accordance with redemption requirements. For the purpose of calculating the net assets attributable to unitholders in accordance with the Scheme’s redemption requirements, the Scheme’s assets and liabilities are valued on the basis of mid-market prices. For accounting purposes, the Scheme valued its asset positions at bid prices and liability positions at ask prices. The difference between the two valuations is presented on the face of the Statement of Changes in Net Assets Attributable to Unitholders. The Scheme issues units at the unit price of the existing units. The holder of participating units can redeem them at anytime for cash equal to a proportionate share of the Scheme’s net asset value (calculated in accordance with redemption requirements). The Scheme’s net asset value per unit is calculated by dividing the net assets attributable to unitholders (calculated in accordance with redemption requirements) by the number of units on issue.

AASB 139.AG32

(O) UNIT PRICES

Unit prices are determined in accordance with the Scheme’s Constitution and are calculated as the net assets attributable to unitholders of the Scheme, less estimated costs, divided by the number of units on issue, on a forward pricing basis, as determined by the Responsible Entity.

(P) CAPITAL MANAGEMENT

The Responsible Entity manages its net assets attributable to unitholders as capital; not withstanding net assets attributable to unitholders is classified as a liability. The amount of net assets attributable to unitholders can change significantly on a daily basis as the Scheme is subject to daily applications and redemptions at the discretion of unitholders. The Responsible Entity monitors the level of daily applications and redemptions relative to the liquid assets in the Scheme. In order to maintain or adjust the capital structure, the Responsible Entity may return capital to unitholders. The Scheme is not subject to any externally imposed capital requirements.

(Q) GOODS AND SERVICES TAX (GST)

Revenue, expenses and assets are recognised net of the amount of GST except: i. When the GST incurred on a purchase of goods and services is not recoverable from the taxation authority,

in which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and

ii. Receivables and payables are stated with the amount of GST included.

Interpretation

1031.6 & .7

Interpretation 1031.8

Reduced input tax credits (RITC) recoverable by the Scheme from the ATO are recognised as a receivable in the Statement of Financial Position.

Interpretation 1031.9

Cash flows are included in the Statement of Cash Flows on a gross basis and the GST component of cash flows arising from investing and financing activities, which is recoverable from, or payable to, the taxation authority is classified as part of operating cash flows.

Interpretation 1031.10 & .11


EY 23

3 Cash and cash equivalents 30 June 2015 30 June 2014 $ ‘000 $ ‘000

Cash at banks 54 251

Short-term deposits 55 212

109 463 AASB 107.45

Commentary

AASB 107.50(a) requires the entity to disclose the amount of undrawn borrowing facilities that may be available in the future for the operating activities and settling capital commitments, and indicate any restrictions on the use of these entities.

4 Due from/to brokers 30 June 2015 30 June 2014

$ ‘000 $ ‘000

Balances due from brokers

Margin accounts 527 1,042

Receivables for securities sold but not yet settled 122 231 AASB 139.38

649 1,273

Balances due to brokers

Payables for securities purchased but not yet settled 69 73 AASB 139.38

69 73


EY 24

5 Financial assets and financial liabilities at fair value through profit or loss AASB 7.25

30 June 2015 30 June 2014

$’000 $’000

Financial assets at fair value through profit or loss

Financial assets held for trading AASB 7.8(a)(ii)

(i) Listed equities and managed investment schemes

Listed equity securities 34,659 31,157

Listed managed investment schemes 1,142 2,839

Unlisted managed investment schemes 362 -

Investment in subsidiary 363 1,729

36,526 35,725

(ii) Interest bearing securities

Listed debt securities 8,038 12,730

Bank accepted bills 154 487

Promissory notes 659 696

8,851 13,913

(iii) Derivatives

Share price index futures 132 123

Exchange traded share price options 276 328

Currency swaps 1,258 1,592

Forward currency contracts 354 657

2,020 2,700

Total financial assets held for trading 47,397 52,338

Financial assets designated as at fair value through profit or loss AASB 7.8(a)(i)

Listed equity securities 31,824 29,752

Corporate bonds 8,646 6,737

Asset-backed securities 388 552

Government bonds 6,066 2,206

Total financial assets designated as at fair value through profit or loss 46,924 39,247

Financial assets at fair value through profit or loss 94,321 91,585

Financial liabilities at fair value through profit or loss

Financial liabilities held for trading

(i) Derivatives

Interest rate swaps 2,082 2,797

Share price index futures 1,539 721

Written call share price options 63 51

Total financial liabilities held for trading 3,684 3,569 AASB 7.8(e)(ii)

Financial liabilities at fair value through profit or loss 3,684 3,569

Commentary

For Endeavour Managed Investment Scheme, the note presented above arguably duplicates information that is already shown in the fair value hierarchy disclosures in Note 7. This note has however been retained in these illustrative financial statements as: ► There are alternate presentations of the fair value hierarchy disclosures that would not disclose all of the

required information above (in particular, the sub-totals of different AASB 139 categories); ► Where a scheme holds investments that are not measured at fair value, those assets and liabilities will not

be included in the fair value hierarchy and a note showing all of the investments would therefore be required; and

► Even where the information is present, we believe that it is easier to read and comprehend the break-down of the investments of the scheme in a stand-alone note rather than the hierarchy, and therefore consider it to be best practice.


EY 25

6 Categories of financial assets and financial liabilities

Commentary

AASB 7.8 requires the disclosure of the carrying amounts of each of the categories defined in AASB 139. Disclosure in a separate note is not necessarily required. A scheme may also provide that information in various locations through the financial statements (e.g., statement of financial position, accounting policy note and other notes).

The following table analyses the carrying amounts of the financial assets and liabilities by category as defined in AASB 139:

AASB 7.8

30 June 2015 30 June 2014

$ ‘000 $ ‘000

Financial assets

Financial assets at fair value through profit or loss AASB 7.8(a)

Held for trading 47,397 52,338 AASB 7.8(a)(ii)

Designated at fair value through profit or loss 46,924 39,247 AASB 7.8(a)(i)

94,321 91,585

Loans and receivables (1) 1,058 2,420 AASB 7.8(c)

95,379 94,005

Financial liabilities

Financial liabilities at fair value through profit or loss AASB 7.8(e)

Held for trading 3,684 3,569 AASB 7.8(e)(ii)

Financial liabilities measured at amortised cost (2) 706 1,731 AASB 7.8(f)

4,390 5,300

(1) Loans and receivables include: due from brokers, interest and other receivables and prepayments. (2) Financial liabilities measured at amortised cost include: due to brokers, fees and other payables and

accrued expenses.

7 Fair value of financial instruments

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:

AASB 13 Appendix A

► Level 1 — Quoted (unadjusted) market prices in active markets for identical assets or liabilities ► �Level 2 — Valuation techniques for which the lowest level input that is significant to the fair value

measurement is directly or indirectly observable ► Level 3 — 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.

AASB 13.73

Commentary

The Scheme has not elected to apply the portfolio exemption under AASB 13.48. If an entity makes an accounting policy decision to use the exception, this fact is required to be disclosed per AASB 13.96.


EY 26

7 Fair value of financial instruments (continued)

30 June 2015 30 June 2014 AASB 13.91(a) AASB 13.93(a) AASB 13.93(b) AASB 13.97

Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total

$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000


Financial assets held for trading


Listed equity securities 34,659 - - 34,659 31,157 - - 31,157

Listed managed investment schemes 1,142 - - 1,142 2,839 - - 2,839

Unlisted managed investment schemes - - 362 362 - - - -

Investment in subsidiary - 363 - 363 - 1,729 - 1,729


Listed debt securities 8,038 - - 8,038 12,730 - - 12,730 Bank accepted bills - 154 - 154 - 487 - 487 Promissory notes - 659 - 659 - 696 - 696 (iii) Derivatives

Share price index futures 132 - - 132 123 - - 123 Exchange traded share price options 276 - - 276 328 - - 328

Currency swaps - 1,258 - 1,258 - 1,592 - 1,592 Forward currency contracts - 354 - 354 - 657 - 657 Financial assets designated at fair value through profit or loss

Listed equity securities 31,824 - - 31,824 29,752 - - 29,752 Corporate bonds 8,646 - - 8,646 6,737 - - 6,737 Asset-backed securities - - 388 388 - - 552 552 Government bonds 6,066 - - 6,066 2,206 - - 2,206 90,783 2,788 750 94,321 85,872 5,161 552 91,585 Financial liabilities at fair value through profit or loss


(i) Derivatives Interest rate swaps - 2,082 - 2,082 - 2,797 - 2,797 Share price index futures 1,539 - - 1,539 721 - - 721 Written call share price options - 63 - 63 - 51 - 51 1,539 2,145 - 3,684 721 2,848 - 3,569 Commentary AASB 13.99 requires the Scheme to present the quantitative disclosures of AASB 13 to be included in a tabular format, unless another format is more appropriate. The Scheme included the quantitative disclosures in tabular format above.


EY 27


Commentary

Determining the appropriate level of classification may require an assessment to be made at the individual instrument level. While some types of investment may be straightforward, such as stock exchange listed equities, others, such as units in unlisted schemes, are likely to require further judgement. If you have any questions, please contact your local EY representative for further information.

Due to the short-term nature of financial assets and financial liabilities recorded at amortised cost, the carrying amount of those instruments approximates their fair value.

AASB 7.29(a)

Transfers between Level 1 and Level 3 During the financial year, following the delisting of three managed funds and their management’s decision to suspend redemptions for periods ranging between 6 and 12 months, the Scheme’s investments in those funds totalling $40,000 were reclassified from Level 1 to Level 3. Transfers between levels of the fair value hierarchy, are deemed to have occurred at the beginning of the reporting period.

AASB 13.93I(iv)

AASB 13.95

AASB 13.93(c)

Commentary

Paragraph 95 of AASB 13 requires an entity to disclose and consistently follow its policy for determining when transfers between levels of the fair value hierarchy are deemed to have occurred in accordance with paragraph AASB 13.93(c) and AASB 13.93(e)(iv). The policy about the timing of recognising transfers shall be the same for transfers into the levels as for transfers out of the levels. Examples of policies for determining the timing of transfers include the following: ► The date of the event or change in circumstances that caused the transfer; ► �The beginning of the reporting period; or ► �The end of the reporting period.

Valuation technique Listed investment in subsidiaries and associates, equity securities, managed funds and derivatives When fair values of publicly traded equity securities, managed funds and derivatives 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 Level 1 of the hierarchy. The Scheme values these investments at bid price for long positions and ask price for short positions. Unlisted debt securities and treasury bills The Scheme invests in debt securities, corporate and government bonds and treasury securities. In the absence of a quoted price in an active market, they are valued using observable inputs such as recently executed transaction prices in securities of the issuer or comparable issuers and yield curves. Adjustments are made to the valuations when necessary to recognise differences in the instrument’s terms. To the extent that the significant inputs are observable, the Scheme categorises these investments as Level 2. Over-the-counter derivatives The Scheme uses widely recognised valuation models for determining fair values of over-the-counter interest rate swaps, currency swaps and forward foreign exchange contracts. 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. Investment in subsidiary The Scheme carries its investment in subsidiary at fair value through profit and loss based on the net asset value of the subsidiary as reported by the subsidiary or its representative. While these amounts represent the amounts the Scheme would expect to receive if it chose to liquidate its investments, the actual amounts received upon liquidation could be less due to liquidity or redemption restrictions, such as early redemption penalties. The net asset value is adjusted, as necessary, to reflect redemption restriction. The Scheme categorises the investments in subsidiary into Level 2.

Commentary

For Level 2 instruments, paragraph 93 (d) of AASB 13 requires an entity to disclose the description of the valuation technique(s) and the inputs used in the fair value measurement. If there has been a change in valuation technique (e.g., changing from a market approach to an income approach or the use of an additional valuation technique), the entity must disclose that change and the reason(s) for making it.


EY 28


AASB 13.93(d)

Unlisted managed funds The Scheme invests in managed funds, including private equity funds, 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’s investment manager 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 units of the fund. Depending on the nature and level of adjustments needed to the NAV and the level of trading in the fund, the Scheme classifies these funds as either Level 2 or Level 3.

Unlisted asset-backed securities The fair values of investments in asset-backed securities, for which there is currently no active market, are calculated using a valuation model which is accepted in the industry. The model uses discounted cash flow analysis which incorporates both observable and non-observable data. Observable inputs include assumptions regarding current rates of interest and real estate prices. Unobservable inputs include assumptions regarding expected future default rates and market liquidity discounts. The model is calibrated to the ABX index, where relevant. However, significant adjustments may be required in order to reflect differences between the characteristics of the index and the instrument to be valued. Such instruments are included within Level 3.

AASB 13.93(d)

Commentary

According to paragraph 91 of AASB 13, an entity must disclose information that helps users of its financial statements assess both of the following: ► �For assets and liabilities that are measured at fair value on a recurring or non-recurring basis in the

statement of financial position after initial recognition, the valuation techniques and inputs used to develop those measurements; and

► For recurring fair value measurements using significant unobservable inputs (Level 3), the effect of the measurements on profit or loss or other comprehensive income for the period.

Recurring fair value measurements of assets or liabilities are those that other standards require or permit in the statement of financial position at the end of each reporting period. Non-recurring fair value measurements of assets or liabilities are those that other standards require or permit in the statement of financial position in particular circumstances. In the vast majority of cases, it can be expected that a fund would only have recurring fair value measurements on its statement of financial position. For financial instruments, valuation hierarchy disclosures must be given by class of financial instrument will often require greater disaggregation than the line items presented in the statement of financial position. The Scheme presents the information based on the type of asset and liabilities, i.e., listed equity securities, listed managed funds, etc. Paragraph 94 of AASB 13 requires that an entity determines appropriate classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability; and the level of the fair value hierarchy within which the fair value measurement is categorised. The number of classes may need to be greater for fair value measurements categorised within Level 3 of the fair value hierarchy because those measurements have a greater degree of uncertainty and subjectivity. An entity should provide information sufficient to permit reconciliation to the line items presented in the statement of financial position. While AASB 13 requires prospective application; the requirement to disclose by class is not new. AASB 13 has provided further guidance on this matter, including an illustrative table in paragraph IE60. For this reason, comparative information has been provided following the same level of class disaggregation used in the year of adoption. The level of the hierarchy, within which the fair value measurement is classified, must be based on the lowest level input that is significant to the fair value measurement in its entirety (e.g., if the credit valuation adjustment made to a derivative value is based on non-observable inputs and the effect of this is significant to the instrument’s value, then the whole instrument must be presented in Level 3).

Valuation process for Level 3 valuations Valuations are the responsibility of the board of directors of the responsible entity. The valuation of unlisted managed investment schemes and asset-backed securities is performed on a quarterly basis by the valuation department of the investment manager and reviewed by the investment committee of the investment manager.

AASB 13.93(g)


EY 29


The valuations are also subject to quality assurance procedures performed within the valuation department. The valuation department verifies the major inputs applied in the latest valuation by agreeing the information in the valuation computation to relevant documents and market information. In addition, the accuracy of the computation is tested. The latest valuation is also compared with the valuations in the four preceding quarters as well as with the valuations of the two preceding annual periods. If fair value changes (positive or negative) are more than certain thresholds set, the changes are further considered by the investment committee. On a quarterly basis, after the procedures above have been performed the investment committee presents the valuation results to the board of directors of the responsible entity. This includes a discussion of the major assumptions used in the valuations, with an emphasis on the more significant investments and investments with fair value changes outside of the relevant thresholds set out above. The investment committee considers the appropriateness of the valuation methods and inputs, and may request that alternative valuation methods are applied to support the valuation arising from the method chosen. Any changes in valuation methods are discussed and agreed with the responsible entity’s board of directors. There were no other changes in valuation techniques during the year.

Commentary

For Level 3 instruments, AASB 13.93(g) requires an entity to provide description of the valuation processes. For fair value measurements categorised within Level 3 of the fair value hierarchy, AASB 13.93(d) requires an entity to disclose quantitative information about the significant unobservable inputs used in the measurement and any changes in valuation techniques.

Quantitative information of significant unobservable inputs – Level 3:

AASB 13.93(d) AASB 13.93(h)

Description 2015

$’000 Valuation technique

Significant unobservable inputs Range (weighted average)

Asset-backed securities

388 DCF method Discount rate Discount for lack of liquidity Expected future default rates

8% - 10% (9%) 8% - 12% (10.3%) 3% - 7% (4.1%)

Unlisted managed investment schemes

362 EBITDA multiple

Average EBITDA multiple of peers 9x

Investment in subsidiary

363 Credit margin spreads of the underlying investments of the unlisted equity investment

Sensitivity analysis to significant changes in unobservable inputs within Level 3 hierarchy – Level 3: AASB 13.93(h)

Description Input Sensitivity used* Effect on fair value $’000


Discount for lack of liquidity Expected future default rates

5% 5%

50 1


Average EBITDA multiple of peers 1x 130

*The sensitivity analysis refers to a percentage amount added or deducted from the input and the effect this has on the fair value.

Description 2014 $’000

Valuation technique



552 DCF method Discount rate Discount for lack of liquidity Expected future default rates

8% - 10% (9%) 8% - 12% (10.3%) 3% - 7% (4.1%)


Description Input Sensitivity used* Effect on fair value $’000


Discount for lack of liquidity Expected future default rates

5% 5%

50 1



EY 30


Asset-backed securities Significant increases/(decreases) in the discount in isolation would result in a significantly (lower)/higher fair value measurement. Significant increases/(decreases) in default rates in isolation would result in a significantly (lower)/higher fair value measurement. Unlisted managed investment schemes

Significant increases/(decreases) in the discount in isolation would result in a significantly (lower)/higher fair value measurement.

Level 3 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.

Financial assets held for trading:

Financial assets designated at fair

value through profit or loss:

AASB 13.93(e)

Unlisted managed

investment schemes Asset-backed

securities Total

$’000 $’000 $’000

30 June 2015

Opening balance – 1 July 2014 — 552 552

Total gains and losses

- profit or loss (54) 92 38

- other comprehensive income — — —

Purchases — 150 150

Sales — (406) (406)

Issues — — —

Settlements — — —

Transfers into or (out of) level 3 416 — 416 AASB 13.93(e)(iv))

Closing balance – 30 June 2015 362 388 750

30 June 2014

Opening balance – 1 July 2013 — 2,088 2,088


- profit or loss — (92) (92)


Purchases — — —

Sales — (1,444) (1,444)

Issues — — —


Transfers into or (out of) level 3 — — —

Closing balance – 30 June 2014 — 552 552

Commentary

For Level 3 fair value measurements, a reconciliation is required between the opening and closing balances, including: ► Total gains or losses for the period split between those recognised in profit or loss and those recognised in

other comprehensive income, plus the amount of the gains or losses relating to instruments still held at the period end. Disclosure of where they are presented in the statement of comprehensive income is also required;

► Purchases, sales, issues and settlements (by each type of movement rather than net); and ► Transfers into and out of Level 3, with significant transfers into the category disclosed separately from

transfers out, along with the reasons for those transfers. Significant for this purpose is not defined and management will need to use judgement to determine which transfers to disclose separately

Examples of situations which may result in transfers into or out of Level 3 may include: ► �Level 1 to/from Level 3: investments delisting from or listing on a public exchange which is considered to

be an active market; and ► Level 2 to/from Level 3: inputs to valuation models ceasing to be/becoming observable Most funds, including the Scheme, do not have available-for-sale investments or cash flow hedges. If a fund does have such instruments, it would include a separate line item to disclose the total gain or losses recognised in other comprehensive income.


EY 31

7 Fair value of financial instruments (continued) Gains or losses included in profit or loss are presented in change in fair value of financial assets and liabilities at fair value through profit or loss as follows:

AASB 13.91(b) AASB 13.93(e)(i)

AASB 13.93(f)

2015 2014

$’000 $’000

Total gains included in profit and loss for the period 38 (92)

Total gains included in profit or loss for the period for assets held at the end of the reporting period 18 (23)

8 Net assets attributable to unitholders

Quantitative information about the Scheme’s net assets attributable to unitholders is provided in the Statement of Changes in Net Assets Attributable to Unitholders. Each unit issued confers upon the unitholder an equal interest in the Scheme, and is of equal value. A unit does not confer any interest in any particular asset or investment of the Scheme. Unitholders have various rights under the Scheme’s constitution, including the right to: ► Have their units redeemed at a proportionate share based on the Scheme’s net asset value per unit on the

redemption date; ► Receive income distributions; ► Attend and vote at meetings of unitholders; and ► Participate in the termination and winding up of the Scheme The rights, obligations and restrictions attached to each unit are identical in all respects. For the purpose of calculating the net assets attributable to unitholders in accordance with Scheme’s Constitution, the Scheme’s assets and liabilities are valued on the basis of mid-market prices. This valuation of net asset value is different from the AASB valuation requirements. Reconciliation between the Scheme’s Net Asset Value (NAV) under AASB and the NAV calculated per the Scheme’s Constitution is provided in the Statement of Changes in Net Assets Attributable to Unitholders.

AASB 101.79(a) (i),(iii),(v)

AASB 101.80 AASB 101.135.(a)(i)

Commentary

The NAV as per the offer document issued by a scheme often differs from the NAV of the scheme measured in accordance with the requirements of AASB. Common differences are measurement of NAV on the basis of mid-market prices as opposed to AASB measurement basis (i.e., long assets measured at ‘bid’ and short positions measured at ‘offer’) and capitalisation and amortisation of start-up costs (whereas for AASB purposes they are expensed as incurred). Our view is that the liability of a Scheme to its unitholders should be measured as equivalent to the NAV of the scheme (i.e., the value of the scheme's assets less the value of its liabilities) measured in accordance with the requirements of AASB. For disclosure purposes, the Statement of Financial Position should disclose the NAV as per the offer document issued by the scheme and reconcile this figure to the NAV as per AASB with additional disclosures in the notes to the financial statements to assist in understanding the differences between the two amounts, if material.

Net asset value per unit 30 June 2015 30 June 2014

$ $

Net asset value per unit (calculated in accordance with AASB) 1.165 1.020

Net asset value per unit (calculated in accordance with the Scheme’s Constitution) 1.166 1.021


EY 32

9 Interest revenue and expense

2015 2014

$ ‘000 $ ‘000

(a) Interest revenue AASB 118.35(b)(iii)

Cash and cash equivalents 80 40

80 40 AASB 7.20(b)

Debt securities held for trading 487 536 AASB 7.20(a)(i)

Debt securities designated at fair value through profit or loss 600 885 AASB 7.20(a)(i)

1,167 1,461

Commentary

The subtotal has been included to show the interest received from financial assets that are not recorded at fair value through profit or loss, as required by AASB 7.20(b). If applicable, the scheme should also separately disclose interest income on impaired financial assets accrued in accordance with AASB 139.AG93 if any instruments held at amortised cost are determined to be impaired.

(b) Interest expense

Bank overdraft 146 98

146 98 AASB 7.20(b)

10 Dividend revenue AASB 118.35(b)(v)

2015 2014 $ ‘000 $ ‘000

Equity securities held for trading 202 401 AASB 7.20(a)(i)

Equity securities designated at fair value through profit or loss 1,091 1,474 AASB 7.20(a)(i)

1,293 1,875

11 Change in fair value of financial assets and liabilities at fair value through profit

or loss

2015 2014

$’000 $’000

Net changes in fair value on financial assets through profit or loss:

Held for trading 7,888 (23,874) AASB 7.20(a)(i)

Designated at fair value through profit or loss 4,573 (19,313) AASB 7.20(a)(i)

12,461 (43,187)

The Scheme has not designated any loan or receivable as at fair value through profit or loss.

Commentary

A scheme which has designated a loan or receivable (or a group of loans or receivables) as at fair value through profit or loss must provide the disclosure required by AASB 7.9, which includes the following: the maximum credit exposure, the impact of credit derivatives on the credit exposure, and the change in the fair value of the loan or receivable (or group of loans or receivables) and any related credit derivatives due to changes in credit risk, both during the period and cumulatively.


EY 33

11 Change in fair value of financial assets and liabilities at fair value through profit or loss (continued)

2015 2014 $000 $000

Net changes in fair value of financial liabilities through profit or loss: AASB 7.20(a)(i)

Held for trading 1,421 (1,063)

1,421 (1,063)

Net change on financial assets and financial liabilities at fair value through profit or loss:

Held for trading 9,309 (24,937) AASB 7.20(a)(i)

Designated at fair value through profit or loss 4,573 (19,313) AASB 7.20(a)(i)

13,882 (44,250)

Commentary Gains and losses arising on financial instruments at fair value through profit or loss are presented net in accordance with AASB 101.35 which permits net presentation of gains and losses arising from a group of similar transactions. However, AASB 101.35 requires such gains and losses to be reported separately if material. Disclosure of gains and losses arising from financial assets at fair value through profit or loss separate from gains and losses from financial liabilities classified the same are not required, but may provide relevant information for some schemes.

12 Auditor’s Remuneration

2015 2014

ASIC 98/100 AASB 1054.10

$ $

Amounts received or due and receivable by EY for:

- an audit and review of the financial report of the Scheme 41,250 37,500

- other services in relation to the Scheme: audit of compliance plan 20,000 19,000 AASB 1054.11

61,250 56,500 13 Distributions to unitholders

AASB 101.137

2015 2014

Distributions

Number of units

Distributions cents per unit Distributions

Number of units

Distribution cents per unit

$ ‘000 ‘000 $ ‘000 ‘000

Interim Distribution 30 June 820 82,667 0.992 2,782 91,231 3.049

Final Distribution 30 June 1,855 77,984 2.379 1,950 86,938 2.243

2,675 4,732

The portion of the final distribution for the year which was unpaid at the reporting date is disclosed in the Statement of Financial Position.


EY 34

14 Statement of Cash Flows Reconciliation

(a) Reconciliation of change in net assets attributable to unitholders to net cash flows from operating activities

AASB 1054.16

2015 2014 $ ‘000 $ ‘000


Adjustments to reconcile change in net assets attributable to unitholders to net cash from operating activities:

AASB 107.20(b),(c)

Distributions to unitholders 2,675 4,732

Net foreign exchange gains (101) (43)

Payments for purchase of held for trading investments (50,359) (77,486)

Proceeds from sale of held for trading investments 63,913 81,076

Dividend received 292 360

Unrealised component of change in fair value of investments (12,455) 46,601

Net changes in operating assets and liabilities: AASB 107.20(a)

Decrease / (increase) in due from brokers 624 (610)

Decrease / (increase) in dividend receivable 63 (62)

Decrease / (increase) in interest receivable 23 (30)

Decrease / (increase) in other receivables 6 (15)

(Decrease) / increase in due to brokers (4) 3

(Decrease) / increase in management and performance fees payable (39) 41

(Decrease) / increase in custodian and administration fees payable (21) 12

(Decrease) / increase other payables (4) 8

Net cash provided by operating activities 16,054 6,697

(b) Non cash financing and investing activities AASB 107.43

Reinvestment of unitholder distributions 2,075 1,428

Participation in dividend reinvestment plans 255 360

Commentary

AASB 107 does not specify which profit or loss figure should be used in the reconciliation of cash flows. Endeavour Managed Investment Scheme has reconciled change in net assets attributable to unitholders for the year to net cash flows from operating activities.


EY 35

15 Financial Risk Management Objectives and Policies

AASB 7.31, AASB 7.32

Introduction The Scheme’s objective in managing risk is the creation and protection of unitholder value. Risk is inherent in the Scheme’s activities but it is managed through a process of ongoing identification, measurement and monitoring, subject to risk limits and other controls. The process of risk management is critical to the Scheme’s continuing profitability. The Scheme is exposed to market risk (which includes interest rate risk, currency risk and equity price risk), liquidity risk and credit risk arising from the financial instruments it holds or issues.

AASB 7.33

Risk Management Structure The Scheme’s Responsible Entity is responsible for identifying and controlling risks. The Board of Directors supervises the Responsible Entity and are ultimately responsible for the overall risk management approach within the Scheme.

Risk Measurement and Reporting System The Scheme’s risks are measured using a method that reflects both the expected loss likely to arise in normal circumstances and unexpected losses that are an estimate of the ultimate actual loss based on statistical models. The models make use of the probabilities derived from historical experience, adjusted to reflect the economic environment. Risk Monitoring Monitoring and controlling risks is primarily performed based on limits established by the Responsible Entity. These limits reflect the business strategy and market environment of the Scheme as well as the level of the risk that the Scheme is willing to accept. In addition, the Scheme monitors and measures the overall risk bearing capacity in relation to the aggregate risk exposure across all risk types and activities.

Risk Mitigation The Scheme has investment guidelines that set out its overall business strategies, its tolerance for risk and its general risk management philosophy. The Scheme uses derivatives and other instruments for trading purposes and in connection with its risk management activities.

The Investment Manager assesses the risk profile before entering into economic hedge transactions. The effectiveness of hedges is assessed by the Responsible Entity (based on economic considerations rather than AASB hedge accounting conditions). The effectiveness of all hedge relationships is monitored by the Responsible Entity on a quarterly basis. In situations of ineffectiveness, the Investment Manager is instructed to enter into a new hedge relationship to mitigate risk on a continuous basis thereby restructuring or closing out the already existing hedge cover.

Excessive risk concentration Concentration indicates the relative sensitivity of the Scheme’s performance to developments affecting a particular industry or geographical location. Concentrations of risk arise when a number of financial instruments or contracts are entered into with the same counterparty, or where a number of counterparties are engaged in similar business activities, or activities in the same geographic region, or have similar economic features that would cause their ability to meet contractual obligations to be similarly affected by changes in economic, political or other conditions. In order to avoid excessive concentration of risk, the Scheme’s policies and procedures include specific guidelines to focus on maintaining a diversified portfolio. The Investment Manager is instructed to reduce exposure or to use derivative instruments to manage excessive risk concentrations when they arise.

AASB 7.34(c) AASB 7.B8

Commentary

Per AASB7. B8, concentrations of risk arise from financial instruments that have similar characteristics and are affected similarly by changes in economic or other conditions. Concentrations of risk should be disclosed if not otherwise apparent. This should include: ► A description of how management determines concentrations; ► A description of the shared characteristic that identifies each concentration (for example, counterparty,

geographical area, currency or market); and ► The amount of the risk exposure associated with all financial instruments sharing that characteristic. For example, the shared characteristic may refer to geographical distribution of counterparties by groups of countries, individual countries or regions within countries.


EY 36

15 Financial Risk Management Objectives and Policies (continued)

Market risk Market risk is the risk that the fair value or future cash flows of financial instruments will fluctuate due to changes in market variables such as interest rates, foreign exchange rates, and equity prices. Short selling involves borrowing securities and selling them to a broker-dealer. The Scheme has an obligation to replace the borrowed securities at a later date. Short selling allows the Scheme to profit from a decline in market price to the extent that such decline exceeds the transaction costs and the costs of borrowing the securities, while the gain is limited to the price at which the Scheme sold the security short. Possible losses from short sales may be unlimited as the Scheme has a liability to repurchase the security in the market at prevailing prices at the date of acquisition. With written options, the Scheme bears the market risk of an unfavourable change in the price of the security underlying the option. Exercise of an option written by the Scheme could result in the Scheme selling or buying a security at a price significantly different from its fair value.

AASB 7.31

AASB 7.32

AASB 7.33

Commentary

AASB 7.40 requires entities to prepare a sensitivity analysis for each type of market risk to which the entity is exposed. However, under AASB 7.41, if an entity prepares a sensitivity analysis, such as Value at Risk (VaR), that reflects interdependencies between risk variables (e.g., interest rates and exchange rates) and uses it to manage financial risks, it may use that sensitivity analysis in place of the analysis required by AASB 7.40.

Interest rate risk Interest rate risk arises from the possibility that changes in interest rates will affect future cash flows or the fair values of financial instruments. The Scheme enters into interest rate derivatives, mainly interest rate swaps in which the Scheme agrees to exchange, at specified intervals, the difference between fixed and variable interest amounts calculated by reference to an agreed-upon notional principal amount in an effort to manage these risks. The majority of interest rate exposure arises on investment in debt securities in the Australian, Taiwanese, European Union and Japanese markets. Most of the Scheme’s investments in debt securities carry fixed interest rates and mature within 5 years. The following table demonstrates the sensitivity of the Scheme’s profit / (loss) for the year to a reasonably possible change in interest rates, with all other variables held constant.

AASB 7.B22 AASB 7.33(a)

The sensitivity of the profit / (loss) for the year is the effect of the assumed changes in interest rates on: ► The net interest income for one year, based on the floating rate financial assets held at the reporting date;

and ► Changes in fair value of investments for the year, based on revaluing fixed rate financial assets at the

reporting date

AASB 7.40(b)

There is no sensitivity effect on 'other comprehensive income' as the Scheme has no assets classified as ‘available for sale’ or designated hedging instruments. In practice, the actual results may differ from the below sensitivity analysis and the difference could be significant. The basis points sensitivity is based on the volatility of change in the global interest rates over the last 10 years.

Change in basis points Sensitivity of interest

income Sensitivity of changes in fair

value of investments AASB 7.40(a)

AASB 7.B18(b)

Increase / (decrease) Increase / (decrease) Increase / (decrease) AASB 7.B19

$ ‘000 $ ‘000

30 June 2015

AUD 150/(150) 31 / (31) (157) / 316

TWD 100/(100) 6 / (6) (42) / 70

EUR 120/(120) 3 / (3) (27) / 40

JPY 100/(100) 4 / (4) (22) / 44

Other 160/(160) 1 / (1) (12) / 12


EY 37

15 Financial Risk Management Objectives and Policies (continued) Interest rate risk (continued) Change in basis points Sensitivity of interest

income Sensitivity of changes in fair

value of investments AASB 7.40(a)

AASB 7.B18(b)

Increase / (decrease) Increase / (decrease) Increase / (decrease) AASB 7.B19

$ ‘000 $ ‘000

30 June 2014

AUD 150/(150) 46 / (46) (130) / 260

TWD 100/(100) 9 / (9) (44) / 74

EUR 120/(120) 5 / (5) (31) / 44

JPY 100/(100) 6 / (6) (23) / 47

Other 160/(160) 1 / (1) (5) / 5

Commentary

In addition to the sensitivity disclosed above, schemes are required to provide additional disclosures specific to the scheme based on the AASB 7.34(a) requirement to disclose summary quantitative data about its exposure to risk at balance date based on the information provided internally to key management personnel of the entity. The disclosures made should be specific to how each scheme monitors its risks (if the risk is not monitored using the sensitivity analysis disclosed above). These disclosures may include exposure analysis, interest sensitivity gaps, stress testing or other internal modelling.

Currency risk Currency risk is the risk that the value of a financial instrument will fluctuate due to changes in foreign exchange rates. The Scheme invests in securities and other investments that are denominated in currencies other than the Australian Dollar. Accordingly, the value of the Scheme’s assets may be affected favourably or unfavourably by fluctuations in currency rates and therefore the Scheme will necessarily be subject to currency risks. The primary purpose of the Scheme’s foreign currency economic hedging activities is to protect against the volatility associated with investments denominated in foreign currencies and other assets and liabilities denominated in foreign currencies recorded in the normal course of business. The Scheme primarily utilises currency swaps and forward exchange contracts to hedge foreign currency denominated financial instruments. Increases or decreases in the fair values of the Scheme’s foreign currency denominated financial assets and liabilities are partially offset by gains and losses on the economic hedging instruments. The Scheme’s policy is to limit its currency exposure on both monetary and non-monetary financial instruments to the mandates as established in its offering document.

AASB 7.B23 AASB 7.33

The table below indicates the currencies to which the Scheme had significant exposure at 30 June 2015 on its monetary assets and liabilities. The analysis calculates the effect of a reasonably possible movement of the currency rate against the Australian dollar on the profit / (loss) for the year, with all other variables held constant.

AASB 7.34(c) AASB 7.40(b)

There is no sensitivity effect on 'other comprehensive income' as the Scheme has no assets classified as ‘available for sale’ or designated hedging instruments. The reasonably possible movement in each currency is based on the volatility of change in global currency over the last 10 years.

Currency Change in currency rate Effect on net profit / (loss) before finance costs and income tax

AASB 7.40(a) AASB 7.B18(b),

AASB 7.B24 2015 2014 % $ ‘000 $ ‘000 TWD 9/(9) 10 / (12) 28 / (34) JPY 8/(8) 4 / (5) 12 / (14) EUR 11/(11) 7 / (9) 21 / (26) Commentary

In accordance with AASB 7.35, where the quantitative data disclosed as at the reporting date are unrepresentative of the scheme’s exposure to risk during the period, further information that is representative should be provided. For example, if a scheme typically has a large exposure to CHF, but at year-end unwinds the position, the scheme might disclose a graph that shows the exposure at various times during the period, or it might disclose the highest, lowest and average exposures.


EY 38


Currency risk (continued)

Concentration and monitoring of currency risk Notwithstanding that investments in non-monetary items do not give rise to currency risk under the accounting standards, the Scheme monitors its exposure to each currency on both monetary and non-monetary financial instruments as a percentage of net assets attributable to unitholders in order to ensure that its risk to adverse currency movements remains within its mandate limits. The table below sets out the Scheme’s exposure to foreign currency exchange rates at the reporting date and its current limits on exposure:

AASB 7.34(a) AASB 7.B8(c)

% of net assets attributable to unitholders

2015 2014 Limits Currency AASB 7.34(c)

TWD 18% 19% 25%

JPY 8% 9% 15%

EUR 11% 12% 15%

Other 1% 0% 5%

Total 38% 40% 60%

Commentary

The concentration disclosure above represents the currency risk information specific to the Scheme based on the AASB 7.34(a) requirement to disclose summary quantitative data about its exposure to risk at balance date based on the information provided internally to key management personnel of the entity. The disclosures made should be specific to how each scheme monitors its risks (if the risk is not monitored using the sensitivity analysis). In the case of Endeavour Managed Investment Scheme, the Scheme monitors ‘currency risk’ on the basis of investments exposed to movements in currency, including equities on overseas exchanges. While under the definitions in AASB 7 this represents a component of equity price risk rather than currency risk (and therefore should not be included in the sensitivity analysis) if this is the information monitored and given to key management personnel, it should be presented here.

Equity price risk Equity price risk is the risk that the fair values of equities or equity-linked derivatives decrease as a result of changes in the levels of equity indices and the value of individual shares. The equity price risk exposure arises from the Scheme’s investments in equity securities. The Scheme manages this risk by investing in a variety of stock exchanges and by limiting exposure to a single industry sector to 25% of net assets attributable to unitholders. The Scheme’s Constitution limits equity investments to a maximum of 5% (and subject to a special approval of the Board of Directors to a maximum of 10%) of the share capital of a single entity.

AASB 7.33

Management’s best estimate of the effect on profit / (loss) for the year due to a reasonably possible change in equity indices, with all other variables held constant is indicated in the table below. There is no effect on 'other comprehensive income' as the Scheme has no assets classified as available-for-sale or designated hedging instruments. In practice the actual trading results may differ from the sensitivity analysis below and the difference could be material. The reasonably possible changes in equity prices are based on the volatility of change in the individual composite indexes over the last 10 years.

AASB 7.40(b)

Market indices Change in equity price Effect on net profit / (loss) before

finance costs and income tax for the year AASB 7.40(a)

Increase / (decrease) Increase / (decrease)

2015 2014

% $ ‘000 $ ‘000

ASX 200 10/(8) 4,534 / (3,627) 4,330 / (3,464)

S&P 500 10/(9) 1,275 / (1,147) 1,237 / (1,113)

FTSE 100 9/(6) 510 / (339) 495 / (330)

Euronext 100 11/(10) 779 / (708) 832 / (756)


EY 39


Equity price risk (continued)

Commentary

Where derivatives such as options are held, the sensitivity to increases and decreases in the risk variable may not be symmetrical. For a Scheme which invests in unlisted entities (e.g., fund of funds), the equity indices sensitivity table may be replaced with a more relevant sensitivity table, such as sensitivity based on investment or hedge strategies grouped in accordance with AASB 7.B8 (e.g., long/short equity, relative value, event driven etc.).

Concentrations and monitoring of equity price risk The Scheme monitors its exposure to each equity price risk as a percentage of its total equity securities and units in managed funds on both a geographical and industry basis to ensure that its exposure to risk remains within tolerance. The table below analyses the Scheme’s concentration of equity price risk by geographical distribution:

AASB 7.34(c) AASB 7.B8(c)

% of equity securities and units in

managed funds

2015 2014

Australia 64% 63%

Taiwan 18% 18%

Japan 8% 8%

European Union 10% 11%

Total 100% 100%

The table below analyses the Scheme’s concentration of equity price risk by industry distribution:

% of equity securities and units in managed funds

2015 2014

Financial 23% 21%

Insurance 18% 19%

Telecommunication 12% 17%

Energy 10% 12%

Retail 15% 10%

Food and Beverages 11% 9%

Software 8% 5%

Auto Parts & Equipment 3% 5%

Other 0% 2%

Total 100% 100%

Commentary

The concentration disclosures above represents equity price risk information specific to the Scheme based on the AASB 7.34(a) requirement to disclose summary quantitative data about its exposure to risk at balance date based on the information provided internally to key management personnel of the entity. The disclosures made should be specific to how each scheme monitors its risks (if the risk is not monitored using the sensitivity analysis).

Commentary

Under AASB 7.42, when the sensitivity analyses disclosed are unrepresentative of a risk inherent in a financial instrument, the scheme should disclose that fact and the reason it believes the sensitivity analyses are unrepresentative. This may be the case, for example, when: (a) A financial instrument contains terms and conditions whose effects are not apparent from the sensitivity

analysis, e.g., options that remain out of (or in) the money for the chosen change in the risk variable; (b) Financial assets are illiquid, e.g., when there is a low volume of transactions in similar assets and the

scheme finds it difficult to find a counterparty; or (c) The scheme has a large holding of a financial asset that, if sold in its entirety, would be sold at a discount

or premium to the quoted market price for a smaller holding.


EY 40


Liquidity risk Liquidity risk is defined as the risk that the Scheme will encounter difficulty in meeting obligations associated with financial liabilities. Liquidity risk arises because of the possibility that the Scheme could be required to pay its liabilities earlier than expected. The Scheme is exposed to cash redemptions of its redeemable units on a regular basis. Units are redeemable at the holder’s option based on the Scheme’s net asset value per unit at the time of redemption calculated in accordance with the Scheme’s constitution.

AASB 7.33(a)

The Scheme manages its obligation to repurchase the units when required to do so and its overall liquidity risk by: ► Monitoring the daily application and redemption requests to ensure sufficient liquidity is available ► Holding sufficient short term listed assets to meet unexpected large redemption requests if they arise ► Having the ability to freeze or delay redemption requests without unitholder approval, as permitted under

the Scheme constitution

AASB 7.33(b) AASB 7.39(c)

The Scheme invests primarily in marketable securities and other financial instruments, which under normal market conditions are readily convertible to cash. In addition, the Scheme’s policy is to maintain sufficient cash and cash equivalents to meet normal operating requirements and expected redemption requests. Investments in unlisted managed investment schemes expose the Scheme to the risk that the responsible entity of those trusts may be unwilling or unable to fulfil redemption requests within the timeframe required by the Scheme. As at 30 June 2015, the Scheme holds an investment in a unlisted managed investment Scheme of $361,553 (2014: none) representing 0.38% of its total financial assets at fair value through profit or loss, where the responsible entity has suspended all daily redemptions due to a lack of liquidity in its underlying portfolio. Net assets attributable to unitholders are repayable on demand, subject to redemption freeze provisions mentioned above.

Commentary

A scheme with material illiquid investments should disclose that fact, the risk associated with the lack of active market for those investments and how it manages this risk (AASB 7.B11F(e)). Refer to the note 7 for additional commentary in relation to determining fair value for these investments. For example, a fund of funds may be subject to ‘exit penalties’ and ’redemption gates’ which prohibit or significantly limit redemptions of units in underlying investment funds during certain periods. As a result, the Scheme may not be able to meet short term liquidity needs or promptly respond to adverse changes (either in the market or in the investee). In order to manage its liquidity, the Scheme will usually tend to employ restrictions on redemption and sale, transfer, or encumbrance of its own units. A hedge Scheme’s investor agreement may provide the investment manager with the ability to halt redemptions in the Scheme (for example, until they can be honoured in an orderly fashion). Such halts may be imposed to help avoid the Scheme from having to be liquidated. Alternatively, halts may be imposed if the scheme’s investments become so difficult to value that there would be serious concern that redeeming members would be advantaged to the disadvantage of remaining investors. Restrictions on redemptions through the use of pro-rata reductions to investors’ redemption amounts due to a high level of overall investor redemption requests are commonly referred to as gates. While the above illiquid investment is not material to Endeavour Managed Investment Scheme, which invests primarily in directly held investments, it has been included above to provide an example of such disclosure.

The Scheme also has committed lines of credit of $10 million (2014: $10 million) that may be available for future operating activities and to meet short term liquidity needs. There are no significant restrictions on the use of those facilities.

AASB 7.B11D(e)

It is the Scheme’s policy that the Investment Manager monitors the Scheme’s liquidity position on a daily basis and that the Board of Directors of the Responsible Entity review it on a quarterly basis.

AASB 7.B11F(e)


EY 41


Liquidity risk (continued)

The table below summarises the maturity profile of the Scheme’s financial liabilities, gross-settled derivatives and redeemable units based on contractual undiscounted cash flows.

AASB 7.39(a) AASB 7.34

As disclosed above, the Scheme manages the liquidity risk associated with these cash outflows by holding primarily marketable securities which under normal market conditions could be converted to cash within the first maturity grouping below. The total amount meeting this classification as at 30 June 2015 is $92,231,000 (2014: $88,784,000).

AASB 7.B11E

The analysis into relevant maturity groupings is based on the remaining period at the end of the reporting period to the contractual maturity date.

Less than 1 month

1 to 3 months

3 to 6 months

6 to 12 months

1 to 5 years

More than 5 years Total

AASB 7.B11 AASB 7.B11D

$ ‘000 $ ‘000 $ ‘000 $ ‘000 $ ‘000 $ ‘000 $ ‘000

Financial Liabilities

Due to brokers 69 - - - - - 69

Management and performance fees payable 72 - - - - - 72

Custodian and administration fees payable 31 - - - - - 31

Distributions payable 210 - - - - - 210

Redemption payable - 300 - - - - 300

Other payables and accrued expenses 15 6 - 3 - - 24

Financial liabilities at fair value through profit or loss (excluding gross settled derivatives) 660 239 655 742 1,348 40 3,684

Net assets attributable to unitholders 90,989 - - - - - 90,989

Total undiscounted financial liabilities (excluding gross settled derivatives) 92,046 545 655 745 1,348 40 95,379

Gross settled derivatives : AASB 7.39(b)

Currency swap

Gross cash inflow - 7,932 4,271 - - - 12,203

Gross cash outflow - (7,114) (3,831) - - - (10,945)

Forward currency contracts:

Gross cash inflow 2,932 643 - - - - 3,575

Gross cash outflow (2,642) (579) - - - - (3,221)

Total undiscounted gross settled derivatives inflow (outflow) 290 882 440 - - - 1,612

Commentary

AASB 7.39 (a) requires the maturity analysis of liabilities to be based on undiscounted contractual cash flows. AASB 7.B11D (d) requires cash flows from derivatives to be shown gross where settlement will be gross. This is the case even if the derivative is classified as a financial asset. Although AASB 7 does not require disclosure of the receive leg of gross-settled derivatives, it would be logical to also provide this information in order to present the full picture. In practice, the treatment of derivatives in the analysis can be particularly troublesome. When the amount payable is not fixed, the amount disclosed should be determined by reference to the conditions existing at the reporting date. For example, if the amount payable varies with changes in an index, the amount disclosed may be based on the level of the index at the reporting date (AASB 7.B11D). AASB 7 does not explain whether the amount should be based on the spot or forward price of the index and, in practice, both approaches are acceptable. AASB 7.39(c) requires an entity to describe how it manages its liquidity risk. AASB 7.B11E requires the disclosure of a maturity analysis for financial assets an entity holds for managing liquidity risk; if that information is necessary to enable users to evaluate the nature and extent of liquidity risk. Schemes are permitted to disclose a further maturity analysis based on expected maturity if liquidity risk is so managed. Puttable financial instruments classified as equity are scoped out of AASB 7 (AASB 7.3(f)). However, the disclosure of the cash outflow on redemption or repurchase of the redeemable shares allows liquidity risk associated with the put obligation and future cash flows to be evaluated.


EY 42


Liquidity risk (continued)

As at 30 June 2014 Less than

1 month 1 to 3

months 3 to 6

months 6 to 12 months

1 to 5 years Total

AASB 7.B11 AASB 7.B11D

$ ‘000 $ ‘000 $ ‘000 $ ‘000 $ ‘000 $ ‘000

Financial Liabilities

Due to brokers 73 - - - - 73

Management and performance fees payable 111 - - - - 111

Custodian and administration fees payable 52 - - - - 52

Distributions payable 550 - - - - 550

Redemption payable 917 - - - 917

Other payables and accrued expenses 19 9 - - - 28

Financial liabilities at fair value through profit or loss (excluding gross settled derivatives) 537 448 597 806 1,181 3,569

Net assets attributable to unitholders 88,705 - - - - 88,705

Total undiscounted financial liabilities (excluding gross settled derivatives) 90,047 1,374 597 806 1,181 94,005

Gross settled derivatives : AASB 7.39(b)

Currency swap

Gross cash inflow - 11,155 3,332 - - 14,487

Gross cash outflow - (9,929) (2,966) - - (12,895)

Forward currency contracts:

Gross cash inflow 6,373 - - - - 6,373

Gross cash outflow (5,716) - - - - (5,716)

Total undiscounted gross settled derivatives inflow (outflow) 657 1,226 366 - - 2,249

Credit Risk Credit risk is the risk that the counterparty to a financial instrument will cause a financial loss for the Scheme by failing to discharge an obligation. The Scheme is exposed to the risk of credit-related losses that can occur as a result of a counterparty or issuer being unable or unwilling to honour its contractual obligations. These credit exposures exist within financing relationships, derivatives and other transactions.

AASB 7.33(a)

It is the Scheme’s policy to enter into financial instruments with reputable counterparties. The Investment Manager closely monitors the creditworthiness of the Scheme’s counterparties (e.g., brokers, custodian, banks etc.) by reviewing their credit ratings, financial statements and press releases on a regular basis.

The Scheme restricts the exposure to credit losses on derivative instruments it holds by entering into master netting arrangements with major counterparties with whom a significant volume of transactions are undertaken. Such an arrangement provides for a single net settlement of all financial instruments covered by the agreement in the event of default on any one contract. Master-netting arrangements do not result in an offset of balance-sheet assets and liabilities unless certain conditions for offsetting under AASB 132 apply.

AASB 132.50

Although master-netting arrangements may significantly reduce credit risk, it should be noted that: ► Credit risk is eliminated only to the extent that amounts due to the same counterparty will be settled after the

assets are realised; and ► The extent to which overall credit risk is reduced may change substantially within a short period because the

exposure is affected by each transaction subject to the arrangement.

At 30 June 2015, master netting arrangements reduced the credit risk on favourable contracts that have a fair value of $151,000 (2014: $147,000).

AASB 7.36(b)


EY 43


Credit risk (continued)

Credit risk relating to unsettled transactions in listed securities is considered to be minimal as the Scheme only uses brokers with high creditworthiness and the transactions are settled or paid for only upon delivery. Payments on securities acquired are only made after the broker has received the securities. Securities sold are only delivered after the broker has received the payment. The Scheme reduces the settlement risk on gross settled foreign exchange derivatives by using a foreign exchange clearing house which allows transactions to be settled on a delivery versus payment basis. During the year, 73% (2014: 77%) of the transaction volume was settled in this way.

The table below analyses the Scheme’s maximum exposure to credit risk. The maximum exposure is shown gross, before the effect of mitigation through the use of master netting and collateral agreements at reporting date.

AASB 7.36

2015 2014

$ ‘000 $ ‘000

Cash and cash equivalents 109 463

Due from brokers 754 1,670

Dividends receivable 79 142


Other receivables and prepayments 9 15

Interest bearing securities held for trading 8,851 13,913

Debt securities designated at fair value through profit or loss 14,622 8,943

Derivative financial assets 2,020 2,700

Total credit risk exposure 26,551 27,976 AASB 7.36(a)

Credit quality of financial assets The Scheme invests only in financial assets with at least investment grade credit rating as rated by S&P, Moody‘s or Fitch.

The table below analyses the credit quality of debt instruments by rating agency category and class of financial instrument. The Scheme exposure to each grade is monitored on a daily basis to ensure credit risk remains within specified limits:

AASB 7.36(c)

As at 30 June 2015 AAA/Aaa AA/aa A/A BBB/Baa Total

$ ‘000 $ ‘000 $ ‘000 $ ‘000 $ ‘000


Bank accepted bills - 154 - - 154

Promissory notes - - 659 - 659

Corporate bonds 1,650 10,054 3,440 1,540 16,684

Government bonds 6,066 - - - 6,066

7,626 10,208 4,099 1,540 23,563

As at 30 June 2014 AAA/Aaa AA/aa A/A BBB/Baa Total

$ ‘000 $ ‘000 $ ‘000 $ ‘000 $ ‘000


Bank accepted bills - 487 - - 487

Promissory notes - - 696 - 696

Corporate bonds 2,220 11,862 4,072 1,313 19,467

Government bonds 2,206 - - - 2,206

4,426 12,349 4,768 1,313 22,856

Commentary

The Scheme monitors its main credit risk in a similar fashion to the minimum disclosures required by the standard, being by ratings category. Accordingly, in disclosing the summary quantitative information provided internally to key management personnel, they have also met the minimum disclosure requirements of the standard. The credit quality disclosures should only be made for instruments where significant credit risk exists. For the most part, this will only be debt instruments held by the Scheme. Regardless of whether external credit ratings exist, credit quality disclosures should not be made for equity securities held by a Scheme as these only relate to debt instruments issued by the company.


EY 44


Credit risk (continued)

Risk concentrations of the maximum exposure to credit risk Concentration of risk is managed by counterparty, by geographical region and by industry sector.

AASB 7.B8

The Scheme has one significant counterparty, which has a AA rating (2014: one). A significant counterparty is defined as any counterparty that holds portfolio positions and cash that in aggregate, are greater than 10% of the total exposure to credit risk.

The table below analyses the Scheme’s concentration of credit risk by geographical distribution (based on counterparties’ country of domicile):

% of debt instruments

2015 2014

Australia 58% 52%

Taiwan 19% 22%

Japan 9% 11%

European Union 12% 14%

Others 2% 1%

100% 100%

The table below analyses the Scheme’s concentration of credit risk by industry distribution:

% of debt instruments

2015 2014

Government 26% 10%

Financial 33% 39%

Insurance 9% 13%

Telecommunication 12% 14%

Energy 7% 8%

Retail 5% 6%

Software 8% 10%

100% 100%

None of the Scheme’s financial assets were considered to be past due or impaired in either 2015 or 2014. AASB 7.37

Commentary

A scheme with financial assets that are either past due or impaired should disclose the following by class of financial asset (AASB 7.37): (a) An analysis of the age of financial assets that are past due as at the reporting date but not impaired; (b) An analysis of financial assets that are individually determined to be impaired as at the reporting date,

including the factors the scheme considered in determining that they are impaired; and (c) For the amounts disclosed in (a) and (b), a description of collateral held by the fund as security and other

credit enhancements and, unless impracticable, an estimate of their fair value.


EY 45

16 Commitments and Contingencies

In accordance with the Scheme’s constitution and subject to the adequate performance of its duties, the Responsible Entity would be entitled to compensation of $2 million (30 June 2014: $2 million) if it is removed as the Responsible Entity of the Scheme. There are no other commitments or contingencies at the reporting date (2014: none).

AASB 137.86, 89

Commentary

If applicable, the Scheme should disclose investment expenditure commitments and the possible consequences of not meeting those commitments. If known, these commitments should be allocated to the following time bands: ► Within 12 months; ► 12 months or longer and not longer than five years; and ► Five years

17 Related party disclosures

(a) Responsible Entity The Responsible Entity of Endeavour Managed Investment Scheme is Endeavour Responsible Entity Limited, whose immediate and ultimate holding company is Endeavour Asset Management Limited.

AASB 124.12

(b) Details of Key Management Personnel (i) Directors The directors of Endeavour Responsible Entity Limited are considered to be Key Management Personnel of the Scheme. The Directors of the Responsible Entity in office during the year and up to the date of the report are: M.P. Byrne Chairman (non executive) of Endeavour Responsible Entity Limited

R. Scanlon Director and Chief Executive Officer of Endeavour Responsible Entity Limited

G. Haggar Director of Endeavour Responsible Entity Limited, appointed 14 March 2015

A. Morgan Director (non executive) of Endeavour Responsible Entity Limited

J. dela Peña Director (non executive) of Endeavour Responsible Entity Limited

M. Nosewall Director (non executive) of Endeavour Responsible Entity Limited, resigned 14 March 2015

J. Chuang Director (non executive) of Endeavour Responsible Entity Limited

(ii) Other Key Management Personnel In addition to the Directors noted above, Endeavour Responsible Entity Limited, the Responsible Entity of the Scheme, is considered to be Key Management Personnel with the authority for the strategic direction and management of the Scheme.

AASB 124.9

(iii) Compensation of Key Management Personnel No amount is paid by the Scheme directly to the Directors of the Responsible Entity. Consequently, no compensation as defined in AASB 124 “Related Party Disclosures” is paid by the Scheme to the Directors as Key Management Personnel. Compensation is paid to the Responsible Entity in the form of fees and is disclosed in note 17(c).

AASB 124.16

(c) Fees Endeavour Responsible Entity Limited provides management services to Endeavour Managed Investment Scheme, and outsources custodial and administrative functions to associated entities that are wholly owned by Endeavour Asset Management Limited. Endeavour Investment Administration Pty Limited provides custodial and investment accounting services to Endeavour Managed Investment Scheme. All costs associated with the provision of custodial and investment accounting services are paid for by the Responsible Entity, and are conducted on normal commercial terms and conditions.

Transactions between Endeavour Managed Investment Scheme and Endeavour Responsible Entity Limited result from normal dealings with that company as the Scheme’s Responsible Entity. Endeavour Responsible Entity Limited is an Australian Financial Services License holder.

AASB 124.21

Endeavour Responsible Entity Limited receives all management fees that have been paid by the Scheme during the year. The Responsible Entity is entitled to receive a monthly management fee of 0.80% (2014: 0.80%) of the total assets of the Scheme under the terms of the Constitution. The fees are paid on a monthly basis. Total fees paid to the Responsible Entity during the year for management of the Scheme were $742,364 (2014: $962,106). At balance date there is an amount of $55,214 (2014: $110,781) outstanding.

AASB 124.17 AASB 124.18

ASIC CO 98/100


EY 46

17 Related party disclosures (continued)

(c) Fees (continued)

The Responsible Entity is entitled to receive performance fees when the Scheme’s performance meets predetermined requirements. The Scheme’s constitution details the calculation of the performance fee. During the year, the Scheme paid performance fees to the Responsible Entity of $589,441 (2014: nil). At balance date there is an amount of $16,819 (2014: nil) outstanding.

The Scheme invests in other schemes operated by the Responsible Entity, and the Responsible Entity has rebated its fee to the Scheme to ensure that there is no duplication of fees recovered from the other schemes.

AASB 124.17 AASB 124 21

During the period the Responsibly Entity incurred certain expenses on behalf of the Scheme of $184,224 (2014: $166,781). These costs were reimbursed by the Scheme.

(d) Related Party transactions Related Parties Transactions between the Scheme and the Responsible Entity during the year are outlined in note 17(c) above. Transactions between the Scheme and other managed investment schemes also managed by the Responsible Entity consisted of the sale and redemption of units in the Scheme to related managed investment schemes, purchases and sales of units in related managed investment schemes, and receipt and payment of distributions on normal commercial terms and conditions.

AASB 124.17

The amounts outstanding payable or receivable at 30 June 2015 represent the value of the units (financial liability of the Schemes) issued or held and any amount of distribution payable or receivable.

AASB 124.17(b)

Terms and conditions of transactions with related parties All related party transactions are made in arm’s length transactions on normal commercial terms and conditions. Outstanding balances at year end are unsecured and settlement occurs in cash. There have been no guarantees provided or received for any related party receivables.

AASB 124.21

(e) Investments

Commentary

The following note (e) was suggested by IFSA GN 3.25.8 before it was repealed in 2007. We have continued to disclose this information as we believe that other schemes managed by the Responsible Entity are in substance related parties of the Scheme, notwithstanding the fact that AASB 124 does not specifically address the relationship.

(i) Related party investments of the Scheme Details of the Scheme’s investment in other managed investment schemes for which Endeavour Responsible Entity Limited is also the Responsible Entity are set out below:

Fair value of unit holdings % Interest held

Distributions received or receivable from

related parties

Number of units

acquired during the

year

Number of units

disposed during the

year

2015 2014 2015 2014 2015 2014 2015 2015

$ $ % % $ $ No. No.

Endeavour Private Equity Fund 20,868 19,353 50.1 50.1 8,060 7,077 - -

Endeavour International Share Fund 50,728 49,218 6.32 7.56 2,536 2,461 80,000 -

Endeavour Property Securities Fund 173,184 164,449 2.02 1.68 8,659 8,222 350,000 55,000

Endeavour Fixed Interest Fund 182,237 159,023 1.43 1.82 9,112 7,951 30,000 -

Endeavour Small Companies Fund 61,183 60,142 1.55 1.51 3,059 3,007 150,000 75,000


EY 47

17 Related party disclosures (continued)

(e) Investments (continued)

The principal activities of the schemes are as follows: ► Endeavour International Share Fund primarily invests in international listed equities ► Endeavour Property Securities Fund primarily invests in domestic listed property trusts ► Endeavour Fixed Interest Fund primarily invests in domestic semi-government fixed interest securities ► Endeavour Small Companies Fund primarily invests in the domestic listed small companies sector (ii) Related party investments in the Scheme Details of the investments in the Scheme by the Responsible Entity, or other schemes also managed by the Responsible Entity are set out below:

30 June 2015

Number of units held at balance date

% Interest held

Number of units

acquired during year

Number of units

disposed during the

year

Distribution paid or

payable by Scheme

$

Endeavour Balanced Fund 3,365,000 4.31 200,000 35,000 113,302

Endeavour Growth Fund 3,260,000 4.17 - 200,000 109,767

Endeavour High Yield Fund 2,982,925 3.82 45,000 1,562,075 100,438

30 June 2014

Number of units held at balance date

% Interest held

Number of units

acquired during year

Number of units disposed

during the year

Distribution paid or

payable by Scheme

$

Endeavour Balanced Fund 3,200,000 3.68 1,885,000 1,970,000 169,355

Endeavour Growth Fund 3,460,000 3.98 1,660,000 2,050,000 183,116

Endeavour High Yield Fund 4,500,000 5.18 3,160,000 3,210,000 238,156

(f) Unitholdings of Key Management Personnel A director of the Responsible Entity, A. Morgan, holds 22,000 units in the Scheme (2014: 22,000). There were no transactions between the Scheme and Key Management Personnel during the year, other than those described in note 17(c) and payments of distributions on the units held totaling $742 (2014: $1,164). All transactions with Key Management Personnel have been entered into under terms and conditions no more favourable than those the Scheme would have adopted if dealing at arm's length.

AASB 124.17

Commentary

While the Scheme is not required to make the disclosures outlined in the Other Key Management Personnel Disclosures by Disclosing Entities section of the standard as the units in the Scheme are not equity, disclosure of the units held by directors or the Responsible Entity is required under the general obligation outlined in AASB 124.17.


EY 48

18 Investment in subsidiary AASB 12.19B

2015 $’000

2014 $’000

Endeavour Private Equity Fund 363 1,729

Investment in subsidiary at fair value 363 1,729

The Scheme meets the definition of an investment entity. Therefore, it does not consolidate its subsidiaries but rather, it recognises Endeavour Private Equity Fund as investment at fair value through profit or loss.

Ownership interest (%)

Name of unconsolidated subsidiary Principal Place of Business 2015 2014

Endeavour Private Equity Fund Australia 50.1% 50.1%

The above subsidiary does not control any further subsidiaries.

AASB 12.19C

Restrictions The Scheme receives income in the form of dividends and interest from its investments in unconsolidated subsidiaries, and there are no significant restrictions on the transfer of funds from these entities to the Scheme.

AASB 12.19D

Support During the current year, the Scheme provided support in the form of a loan of $100,000 (2014: $nil) to Endeavour Private Equity Fund. This loan bears interest at a rate of 5% and is repayable in 2018. This loan was granted to finance the acquisition of equipment for this entity to commence manufacturing. The Scheme has no contractual commitments or current intentions to provide any other financial or other support to its unconsolidated subsidiaries.

AASB 12.19D-F

19 Offsetting financial assets and financial liabilities

AASB 2012-2

The Scheme presents the fair value of its derivative assets and liabilities on a gross basis. Certain derivative financial instruments are subject to enforceable master netting arrangements, such as an International Swaps and Derivatives Association (‘ISDA’) master netting agreements. In certain circumstances, for example, when a credit event such as a default occurs, all outstanding transactions under an ISDA agreement are terminated, the termination value is assessed and only a single net amount is payable in settlement of all transactions.

AASB 7.13E

As at 30 June 2015 and 30 June 2014, the following tables provide information on the financial impact of the netting agreements if they were applied to the recognised financial assets and liabilities:

AASB 7.13D


EY 49

19 Offsetting financial assets and financial liabilities (continued) AASB 2012-2

30 June 2015

Gross amount of recognised

assets / (liabilities)

Amounts offset in the

statement of financial position

Amounts related to

financial collaterals

Related amount not set

off in the statement of

financial position

Net amount presented on statement of

financial position

($’000) ($’000) ($’000) ($’000) ($’000)

Derivative financial assets

Example counterparty 2,020 - - - 2,020

Total derivative financial assets 2,020 - - - 2,020

Derivative financial liabilities

Example counterparty (3,684) - - - (3,684)

Total derivative financial liabilities (1,664) - - - (1,664)

30 June 2014

Gross amount of recognised

assets / (liabilities)

Amounts offset in the

statement of financial position

Amounts related to

financial collaterals

Related amount not set

off in the statement of

financial position

Net amount presented on statement of

financial position

($’000) ($’000) ($’000) ($’000) ($’000)

Derivative financial assets

Example counterparty 2,700 - - - 2,700

Total derivative financial assets 2,700 - - - 2,700

Derivative financial liabilities

Example counterparty (3,569) - - - (3,569)

Total derivative financial liabilities (869) - - - (869)

Commentary

A scheme shall disclose information to enable users of its financial statements to evaluate the effect or potential effect of netting arrangements on the scheme’s financial position. This includes the effect or potential effect of rights of set-off associated with the scheme’s recognised financial assets and liabilities.

20 Events after balance date AASB 110.21

Since 30 June 2015 there have been no other matters or circumstances not otherwise dealt with in the financial report that have significantly affected or may significantly affect the Scheme (2014: none).

EY 50

Directors' declaration CA 295(1),(4)

In accordance with a resolution of the Directors of Endeavour Responsible Entity Limited, I state that: CA 295(5)(a)

In the opinion of the directors:

(a) The financial statements and notes of the Scheme for the financial year ended 30 June 2015 are in accordance with the Corporations Act 2001, including:

CA 295(4)(d)(i),(ii)

(i) Giving a true and fair view of the Scheme’s financial position as at 30 June 2015 and of its performance for the year ended on that date; and

(ii) Complying with Accounting Standards and the Corporations Regulations 2001

(b) The financial statements and notes also comply with International Financial Reporting Standards as disclosed in Note 2.1

CA 295(4)(ca)

(c) There are reasonable grounds to believe that the Scheme will be able to pay its debts as and when they become due and payable

CA 295(4)(c), ASIC RG 22

On behalf of the board

M.P. Byrne Chairman

CA 295(5)(c)

Sydney, 26 August 2015 CA 295(5)(b)


Ernst & Young Centre 680 George Street Sydney NSW 200 Australia GPO Box 2646 NSW 2001

Tel: +61 2 9248 5555 Fax: +61 2 9248 5959 www.ey.com/au

EY 51

Independent auditor's report To the unitholders of Endeavour Managed Investment Scheme

Report on the financial report We have audited the accompanying financial report of Endeavour Managed Investment Scheme (the ‘Scheme’), which comprises the statement of financial position as at 30 June 2015, and the statement of comprehensive income, statement of changes in net assets attributable to unitholders, and statement of cash flows for the year then ended, notes comprising a summary of significant accounting policies and other explanatory information, and the directors' declaration.

Directors' responsibility for the financial report The directors of the Responsible 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 and for such internal controls as the directors determine are necessary to enable the preparation of the financial report that is free from material misstatement, whether due to fraud or error. In Note 2.1, the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that the financial statements comply with International Financial Reporting Standards.

Auditor's responsibility Our responsibility is to express an opinion on the financial report based on our audit. 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 about whether the financial report is free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal controls relevant to the entity's preparation of the financial report that gives a true and fair view 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 entity's internal controls. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Independence In conducting our audit we have complied with the independence requirements of the Corporations Act 2001. We have given to the directors of the Responsible Entity a written Auditor’s Independence Declaration, a copy of which is attached to the directors’ report.


EY 52

Opinion In our opinion:

a. the financial report of Endeavour Managed Investment Scheme is in accordance with the Corporations Act 2001, including: i giving a true and fair view of the Scheme's financial position as at 30 June 2015 and of its

performance for the year ended on that date; and

ii complying with Australian Accounting Standards and the Corporations Regulations 2001; and

b. the financial report also complies with International Financial Reporting Standards as disclosed in Note 2.1

Ernst & Young

D.G. Brown Partner Sydney 26 August 2015

Appendix A — Half-year financial report

EY 53

Appendix A – Half-year financial report Preparation of an interim financial report Disclosing entities Disclosing entities are required to prepare and lodge a financial report and directors’ report for each half-year under Section 302 of the Corporations Act 2001. Disclosing entities are those where interests in or securities issued by an entity are Enhanced Disclosure securities (‘ED securities’). The most common circumstances where a managed investment scheme becomes a disclosing entity, is where interests in the scheme are included in the official list of a prescribed financial market. This entity becomes subject to the financial market’s listing rules (e.g., ASX listed), or where interests in the scheme are issued to 100 or more unitholders as a result of offers under a product disclosure statement. AASB 134 “Interim Financial Reporting” General purpose half-year financial statements prepared by disclosing entities must comply with the requirements of AASB 134 Interim Financial Reporting. Where the entity prepares an annual special purpose financial report, the entity is not expected to be subject to interim financial reporting. The standard defines the minimum content of an interim financial report as including condensed financial statements and selected explanatory notes, and is intended to provide an update on the latest annual financial report. The standard does not however prohibit an entity from publishing a complete financial report as its interim financial report, or from providing more than the minimum line items or selected explanatory notes. Where an entity publishes a condensed financial report, it must include at a minimum all of the headings and subtotals that were included in its most recent annual financial report and the selected explanatory notes required by the standard. Additional line items or notes must be included if their omission would make the condensed interim financial report misleading. Disclosures presented in this edition of Endeavour Managed Investment Scheme This edition of Endeavour Managed Investment Scheme has been prepared with full financial statements consistent with those required in the current annual financial report, plus selected explanatory notes. The term ‘condensed’ has been excluded from the heading of each financial statement as the line items in those statements are the same as those in the annual financial statements (EY considers that a condensed statement is any presentation of the applicable statement that has fewer line items than those required under AASB 101 and in such cases the statements should be titled accordingly). The selected explanatory notes have been presented after considering the operation and nature of the Scheme and the overall disclosure principle outlined in the standard, as well as the minimum disclosures required by AASB 134.16A and the examples provided in the standard. The full list of minimum disclosures and examples has not been reproduced here to the extent that they are not relevant to the Scheme. If you are unsure as to the selected explanatory notes required to be presented for your entity, we recommend that you thoroughly read the requirements of the standard and seek guidance from your EY representative.

Endeavour Managed Investment Scheme ARSN 00 000 000 000Financial report for the half-year ended 31 December 2015

Appendix A – Half-year financial report (continued)

EY 55

Contents to the interim financial report Directors' report .............................................................................................................................................................. 56

Directors' report (continued) ............................................................................................................................................ 57

Auditor’s Independence Declaration ................................................................................................................................. 58

Statement of Comprehensive Income ............................................................................................................................... 59

Statement of Financial Position ........................................................................................................................................ 60

Statement of Changes in Net Assets Attributable to Unitholders ....................................................................................... 61

Statement of Cash Flows ................................................................................................................................................. 62

Notes to the financial statements ..................................................................................................................................... 63

Independent auditor's report ............................................................................................................................................ 72


EY 56

Directors' report The Directors of Endeavour Responsible Entity Limited (ABN 00 000 000 000), the Responsible Entity of Endeavour Managed Investment Scheme (the “Scheme”), submit their report for the Scheme for the half-year ended 31 December 2015.

CA 302(a)

DIRECTORS CA 306(1)(b)

The names of the Directors of the Responsible Entity in office during the half-year and until the date of this report are:

M.P. Byrne (Chairman)

R. Scanlon

A. Morgan

G. Haggar

J. dela Peña

J. Chuang

The Directors were in office from the beginning of the half-year until the date of this report, unless otherwise stated.

CA 306(1)(b)

Commentary

The names of the directors in office during or since the end of the half-year and the period for which they were a director (including alternates who have acted in the capacity of director) must be disclosed.

REVIEW OF RESULTS AND OPERATIONS

CA 306(1)(a)

Results and distributions

Net profit attributable to unitholders for the half-year ended 31 December 2015 was $11,441,286 (2014: loss $47,890,437).

Distributions to unitholders during the half-year totalled $2,675,088 (2014: $4,732,112). Distributions to unitholders during the period included a distribution of $820,000 on 30 September 2015, with an amount of $1,855,000 declared at 31 December 2015.

AUDITOR’S INDEPENDENCE DECLARATION

An independence declaration has been provided to the Directors by the auditor of Endeavour Managed Investment Scheme, Ernst & Young, and is attached to the Directors’ report.

ASIC CO 05/641

ROUNDING

The amounts contained in this report and in the interim financial report have been rounded under the option available to the Scheme under ASIC Class Order 98/100. The Scheme is an entity to which the Class Order applies, and in accordance with that Class Order, amounts in the Directors’ report and the interim financial report have been rounded to the nearest thousand dollars (where rounding is appropriate).

ASIC CO 98/100

Commentary

Where a registered Scheme is of a certain size, amounts and comparatives can be rounded. Rounding, however, is not permitted where it would result in the loss of material information. The financial report or Directors’ Report should state that the Scheme is an entity to which the class order applies and that amounts have been rounded, and the extent of that rounding. Generally, the following rounding levels apply, with some restrictions for related party/remuneration disclosures and auditor remuneration. Refer to the class order for full details: Assets greater than: Rounding: $10m (less than $1,000m) $1,000 $1,000m (less than $10,000m) $100,000 $10,000m $1,000,000 The level of rounding used in presenting amounts in the financial statements shall be displayed prominently and repeated where necessary for the information presented to be understandable.


EY 57

Directors' report (continued)

Signed in accordance with a resolution of the Directors.

CA 306(3)(a)

M.P. Byrne CA 306(3)(c)

Chairman

Sydney

8 February 2016 CA 306(3)(b)


EY 58 A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation

Ernst & Young Centre 680 George Street Sydney NSW 200 Australia GPO Box 2646 NSW 2001

Tel: +61 2 9248 5555 Fax: +61 2 9248 5959 www.ey.com/au

Auditor’s Independence Declaration To the Directors of Endeavour Responsible Entity Limited, as Responsible Entity for Endeavour Managed Investment Scheme

In relation to our review of the financial report of Endeavour Managed Investment Scheme for the half-year ended 31 December 2015, to the best of my knowledge and belief, there have been no contraventions of the auditor independence requirements of the Corporations Act 2001 or any applicable code of professional conduct.

CA 298(1)(c)

Ernst & Young

D.G. Brown

Partner

Sydney 8 February 2016


EY 59

Statement of Comprehensive Income AASB 134.5(b) AASB 134.8(b)

Note

31 December 2015 31 December 2014 AASB 134.20(b)

$’000 $’000 AASB 101.51(d),(e)

Income

Interest revenue

1,167 1461 AASB 7.20(b), AASB

118.35(b)(ii)

Dividend revenue 1,293 1,875 AASB 118.35(b)(v)

Change in fair value of financial assets and liabilities at fair value through profit or loss 13,882 (44,250)

AASB 7.20(a)(i) AASB 101.35

Net foreign exchange gains 101 23 AASB 121.52(a)

AASB 101.35

Total income 16,443 (40,891)

Expense

Interest expense (146) (98) AASB 7.20(b)

Management fees (742) (962)

Performance fees (589) -

Custodian and administration fees (162) (240)

Brokerage fees and other transaction costs (285) (460)

Other general expenses (209) (276)

Total expenses (2,133) (2,036)

Net profit/(loss) before finance costs and income tax 14,310 (42,927) AASB 101.85

Withholding tax expense (194) (231) AASB 101.82(d)

Finance costs AASB 101.82(b)

Distributions to unitholders 5 (2,675) (4,732) AASB 132.40

Net profit/(loss) for the year 11,441 (47,890)

Other comprehensive income - -


Commentary

Refer to the Annual Financial Report for detailed commentary.


EY 60

Statement of Financial Position AASB 134.5(a) AASB 134.8(a)

at 31 December 2015

Note 31 December 2015 30 June 2015 AASB 134.20(a)

$’000 $’000 AASB 101.51(d),(e)

ASSETS

Cash and cash equivalents 109 463 AASB 101.54(i)

Due from brokers 649 1,273

AASB 101.54(d),

AASB 7.8(c)

Dividends receivable 79 142


Receivable from redeemable units 105 397

Other receivables and prepayments 9 15 AASB 101.54(h)

Financial assets at fair value through profit or loss 4 94,321 91,585 AASB 7.8(a)

TOTAL ASSETS 95,379 94,005

LIABILITIES

Due to brokers 69 73

AASB 101.54(m),

AASB 7.8(f)

Management and performance fees payable 72 111

Custodian and administration fees payable 31 52

Distributions payable 210 550

Redemption payable 300 917

Other payables and accrued expenses 24 28 AASB 101.54(k)

Financial liabilities at fair value through profit or loss 4 3,684 3,569 AASB 7.8(e)

TOTAL LIABILITIES (EXCLUDING NET ASSETS ATTRIBUTABLE TO UNITHOLDERS) 4,390 5,300

NET ASSETS ATTRIBUTABLE TO UNITHOLDERS 90,989 88,705 AASB 132 Example 7

TOTAL LIABILITIES 95,379 94,005 AASB 132 Example 7

Commentary



EY 61

Statement of Changes in Net Assets Attributable to Unitholders

for the half-year ended 31 December 2015 AASB 134.20(c)

Units on issue

Net assets attributable to


accordance with redemption

requirements)

Adjustment from mid-

market prices to bid/offer-

market prices

Net assets attributable

to unitholders (calculated in

accordance with AASB)

No. ‘000 $’000 $’000 $’000

Balance at 1 July 2014 94,863 143,156 (61) 143,095

Issue of redeemable units 11,666 16,368 - 16,368

Redemption of redeemable units (20,085) (28,520) - (28,520)

Decrease in net assets attributable to unitholders from transactions in units

(8,419) (12,152) - (12,152)

Change in net assets attributable to unitholders

- (47,886) (4) (47,890)

Balance at 31 December 2014 86,444 83,118 (65) 83,053 Balance at 1 July 2015 86,938 88,764 (59) 88,705 Issue of redeemable units 10,658 11,270 - 11,270 Redemption of redeemable units (19,612) (20,427) - (20,427) Decrease in net assets attributable to unitholders from transactions in units

(8,954) (9,157) - (9,157)

Change in net assets attributable to unitholders

- 11,450 (9) 11,441

Balance at 31 December 2015 77,984 91,057 (68) 90,989

Commentary Refer to the Annual Financial Report for detailed commentary.


EY 62

Statement of Cash Flows AASB 134.5(d) AASB 134.8(d)

For the half-year ended 31 December 2015

31 December 2015 31 December 2014 AASB 134.20(d)

$’000 $’000 AASB 101.51(d)(e)

CASH FLOWS FROM OPERATING ACTIVITIES AASB 107.14

Proceeds from sale of financial investments classified as held for trading 63,913 81,076

Payments for purchase of financial investments and settlement of financial liabilities held for trading (50,359) (77,486)

Proceeds received from brokers 3,313 3,544

Payments to brokers (910) (1,219)

Interest received 1,190 1,449 AASB 107.31

Dividends and distributions received 1,101 1,418 AASB 107.31

Interest paid (141) (101) AASB 107.31

Management and performance fees paid (1,370) (997)

Custodian and administration fees paid (183) (236)

Other operating expenses paid (500) (751)

Net cash provided by operating activities 16,054 6,697

CASH FLOWS FROM INVESTING ACTIVITIES AASB 107.21

Proceeds from sale of financial assets designated as at fair value through profit or loss 9,527 20,189 Purchase of financial assets designated as at fair value through profit or loss (15,345) (11,717) Net cash flows (used in) / provided by investing activities (5,818) 8,472 CASH FLOWS FROM FINANCING ACTIVITIES AASB 107.21

Proceeds from issue of redeemable units 11,562 16,114 AASB 107.17(a)

Payments on redemption of redeemable units (21,044) (27,865) AASB 107.17(b)

Distributions paid to unitholders (1,150) (3,119) AASB 107.34

Net cash flows used in financing activities (10,632) (14,870)

Net (decrease) / increase in cash and cash equivalents (396) 299

Cash and cash equivalents at 1 July 463 281

Effect of exchange rate changes 42 55

Cash and cash equivalents at 31 December 109 635

Commentary



EY 63

Notes to the financial statements For the half-year ended 31 December 2015

AASB 134.5(e) AASB 134.8(e)

1 Approval of financial statements The financial statements of Endeavour Managed Investment Scheme for the half-year ended 31 December 2015 were authorised for issue in accordance with a resolution of the Board of Directors on 8 February 2016.

Commentary

While not specifically required by AASB 134, we believe that given the requirement to disclose events subsequent to the end of the reporting period, disclosure of the date the report was authorised for issue (and therefore the date to which subsequent events are considered) represents information that should be provided to users of the financial report.

2 Basis of preparation and accounting policies AASB 134.16A (a) Basis of preparation

This general purpose interim financial report for the half-year ended 31 December 2015 has been prepared in accordance with AASB 134 Interim Financial Reporting and the Corporations Act 2001. The interim financial report has also been prepared on a historical cost basis, except for financial assets and financial liabilities held at fair value through profit or loss, that have been measured at fair value.

The financial statements are presented in Australian Dollars and all values are rounded to the nearest $’000 except where otherwise indicated.

(b) Statement of compliance AASB 134.19

The financial report complies with Australian Accounting Standards applicable to interim reporting as issued by the Australian Accounting Standards Board (‘AASB’) and International Financial Reporting Standards (‘IFRS’) applicable to interim reporting as issued by the International Accounting Standards Board. The half year financial report does not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with the most recent annual financial report of the Scheme.

Commentary

AASB 134.19 clarifies that an interim financial report must not be described as complying with Australian Accounting Standards unless it complies with all the requirements of Australian Accounting Standards. In this half-year financial report, the Scheme is not claiming compliance with Australian Accounting Standards in their entirety, but rather with the requirements of AASB 134. If a complete set of interim financial statements was provided complying with all requirements of Australian Accounting Standards, entities may be able to include in their compliance statement, reference to IFRS as issued by the IASB, or their Australian equivalents, in addition to AASB 134.

(c) Changes in accounting standards

The significant accounting policies adopted in the preparation of the half-year financial report are consistent with those followed in the preparation of the Scheme financial report for the year ended 30 June 2015, except for the adoption of new standards and interpretations noted below:

AASB 134.16A(a)

AASB 2015-3 Amendments to Australian Accounting Standards arising from the Withdrawal of AASB 1031 Materiality (effective from 1 July 2015) The Standard completes the AASB’s project to remove Australian guidance on materiality from Australian Accounting Standards. The adoption of the amendments had no material impact on the financial statements of the Scheme. AASB 2015-4 Amendments to Australian Accounting Standards – Financial Reporting Requirements for Australian Groups with a Foreign Parent (effective 1 July 2015) The amendment aligns the relief available in AASB 10 Consolidated Financial Statements and AASB 128 Investments in Associates and Joint Ventures in respect of the financial reporting requirements for Australian groups with a foreign parent.

AASB 134.28


Notes to the financial statements (continued)


AASB 134.5(e) AASB 134.8(e)

EY 64

2 Basis of preparation and accounting policies (continued) (c) Changes in accounting standards (continued) The adoption of the amendments had no material impact on the financial statements of the Scheme. AASB 2015-3 Amendments to Australian Accounting Standards – Investment Entities: Applying the Consolidation Exception (effective from 1 July 2015) This makes amendments to AASB 10, AASB 12 Disclosure of Interests in Other Entities and AASB 128 arising from the IASB’s narrow scope amendments associated with Investment Entities. The adoption of the amendments had no material impact on the financial statements of the Scheme. Accounting standards and interpretations that are applicable to the next annual financial statements of the Scheme have not been applied in this interim financial report.

Commentary

AASB 134.16A(a) requires a ’description of the nature and effect’ of changes in accounting policies, but beyond this, no prescriptive requirements apply. For the current interim period, newly adopted standards and amendments did not have any such effects.

3 Significant accounting judgements and estimates

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 could require a material adjustment to the carrying amount of the asset or liability affected in the future periods. The significant accounting policies have been consistently applied in the current financial period and the comparative period, unless otherwise stated. Where necessary, comparative information has been re-presented to be consistent with current period disclosures.

Commentary

The Scheme has prepared and presented interim financial statements. AASB 134.16A(a) requires a ’description of the nature and effect’ of changes in accounting policies, but beyond this, no prescriptive requirements apply. Where a newly adopted standard or amendment has an impact on the financial statements, the Scheme complies with the requirements under AASB 108.28(f) and makes qualitative and quantitative disclosures of the effect on the different line items in the statement of profit or loss and statement of financial position. For the current interim period, newly adopted standards and amendments did not have any such effects.

4 Fair value of financial instruments 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: ► �Level 1 — Quoted (unadjusted) market prices in active markets for identical assets or liabilities; ► �Level 2 — Valuation techniques for which the lowest level input that is significant to the fair value

measurement is directly or indirectly observable; or ► Level 3 — Valuation techniques for which the lowest level input that is significant to the fair value

measurement is unobservable.

AASB 13 Appendix A

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.

AASB 13.73

Commentary

The Scheme has not elected to apply the portfolio exemption under AASB 13.48. If a scheme makes an accounting policy decision to use the exception, this fact is required to be disclosed per AASB 13.96




AASB 134.5(e) AASB 134.8(e)

EY 65


31 December 2015 30 June 2015

AASB 13.91(a) AASB 13.93(a) AASB 13.93(b)

AASB 13.97 Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total

$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000


Financial assets held for trading


Listed equity securities 34,659 - - 34,659 31,157 - - 31,157

Listed managed investment schemes 1,142 - - 1,142 2,839 - - 2,839

Unlisted managed investment schemes - - 362 362 - - - -

Investment in subsidiary - 363 - 363 - 1,729 - 1,729


Listed debt securities 8,038 - - 8,038 12,730 - - 12,730 Bank accepted bills - 154 - 154 - 487 - 487 Promissory notes - 659 - 659 - 696 - 696 (iii) Derivatives

Share price index futures 132 - - 132 123 - - 123 Exchange traded share price options 276 - - 276 328 - - 328

Currency swaps - 1,258 - 1,258 - 1,592 - 1,592 Forward currency contracts - 354 - 354 - 657 - 657 Financial assets designated at fair value through profit or loss

Listed equity securities 31,824 - - 31,824 29,752 - - 29,752 Corporate bonds 8,646 - - 8,646 6,737 - - 6,737 Asset-backed securities - - 388 388 - - 552 552 Government bonds 6,066 - - 6,066 2,206 - - 2,206 90,783 2,788 750 94,321 85,872 5,161 552 91,585 Financial liabilities at fair value through profit or loss


(i) Derivatives Interest rate swaps - 2,082 - 2,082 - 2,797 - 2,797 Share price index futures 1,539 - - 1,539 721 - - 721 Written call share price options - 63 - 63 - 51 - 51

1,539 2,145 - 3,684 721 2,848 - 3,569

Commentary AASB 13.99 requires the Scheme to present the quantitative disclosures of AASB 13 to be included in a tabular format, unless another format is more appropriate. The Scheme included the quantitative disclosures in tabular format above.




AASB 134.5(e) AASB 134.8(e)

EY 66


Commentary Determining the appropriate level of classification may require an assessment to be made at the individual instrument level. While some types of investment may be straightforward, such as stock exchange listed equities, others, such as units in unlisted schemes, are likely to require further judgement. If you have any questions, please contact your local EY representative for further information.

Due to the short-term nature of financial assets and financial liabilities recorded at amortised cost, the carrying amount of those instruments approximates their fair value.

AASB 7.29(a)

Transfers between Level 1 and Level 3 During the financial year, following the delisting of three managed funds and their management’s decision to suspend redemptions for periods ranging between 6 and 12 months, the Scheme’s investments in those funds totalling $40,000 were reclassified from Level 1 to Level 3. Transfers between levels of the fair value hierarchy, are deemed to have occurred at the beginning of the reporting period.

AASB 13.93(e)(iv)

AASB 13.95 AASB 13.93(c)

Commentary Paragraph 95 of AASB 13 requires an entity to disclose and consistently follow its policy for determining when transfers between levels of the fair value hierarchy are deemed to have occurred in accordance with paragraph AASB 13.93(c) and AASB 13.93(e)(iv). The policy about the timing of recognising transfers shall be the same for transfers into the levels as for transfers out of the levels. Examples of policies for determining the timing of transfers include the following: ► the date of the event or change in circumstances that caused the transfer; ► �the beginning of the reporting period; or ► �the end of the reporting period.

Valuation technique Listed investment in subsidiaries and associates, equity securities, managed funds and derivatives When fair values of publicly traded equity securities, managed funds and derivatives 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 Level 1 of the hierarchy. The Scheme values these investments at bid price for long positions and ask price for short positions. Unlisted debt securities and treasury bills The Scheme invests in debt securities, corporate and government bonds and treasury securities. In the absence of a quoted price in an active market, they are valued using observable inputs such as recently executed transaction prices in securities of the issuer or comparable issuers and yield curves. Adjustments are made to the valuations when necessary to recognise differences in the instrument’s terms. To the extent that the significant inputs are observable, the Scheme categorises these investments as Level 2. Over-the-counter derivatives The Scheme uses widely recognised valuation models for determining fair values of over-the-counter interest rate swaps, currency swaps and forward foreign exchange contracts. 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. Investment in subsidiary The Scheme carries its investment in subsidiary at fair value through profit and loss based on the net asset value of the subsidiary as reported by the subsidiary or its representative. While these amounts represent the amounts the Scheme would expect to receive if it chose to liquidate its investments, the actual amounts received upon liquidation could be less due to liquidity or redemption restrictions, such as early redemption penalties. The net asset value is adjusted, as necessary, to reflect redemption restriction. The Scheme categorises the investments in subsidiary into Level 2.

Commentary For Level 2 instruments, paragraph 93 (d) of AASB 13 requires an entity to disclose the description of the valuation technique(s) and the inputs used in the fair value measurement. If there has been a change in valuation technique (e.g., changing from a market approach to an income approach or the use of an additional valuation technique), the entity must disclose that change and the reason(s) for making it.




AASB 134.5(e) AASB 134.8(e)

EY 67


Unlisted managed funds The Scheme invests in managed funds, including private equity funds, 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’s investment manager 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 units of the fund. Depending on the nature and level of adjustments needed to the NAV and the level of trading in the fund, the Scheme classifies these funds as either Level 2 or Level 3.

AASB 13.93(d)

Unlisted asset-backed securities The fair values of investments in asset-backed securities, for which there is currently no active market, are calculated using a valuation model which is accepted in the industry. The model uses discounted cash flow analysis which incorporates both observable and non-observable data. Observable inputs include assumptions regarding current rates of interest and real estate prices. Unobservable inputs include assumptions regarding expected future default rates and market liquidity discounts. The model is calibrated to the ABX index, where relevant. However, significant adjustments may be required in order to reflect differences between the characteristics of the index and the instrument to be valued. Such instruments are included within Level 3.

AASB 13.93(d)

Commentary Refer to the Annual Financial Report for detailed commentary.

Valuation process for Level 3 valuations Valuations are the responsibility of the board of directors of the responsible entity. The valuation of unlisted managed investment schemes and asset-backed securities is performed on a quarterly basis by the valuation department of the investment manager and reviewed by the investment committee of the investment manager. The valuations are also subject to quality assurance procedures performed within the valuation department. The valuation department verifies the major inputs applied in the latest valuation by agreeing the information in the valuation computation to relevant documents and market information. In addition, the accuracy of the computation is tested. The latest valuation is also compared with the valuations in the four preceding quarters as well as with the valuations of the two preceding annual periods. If fair value changes (positive or negative) are more than certain thresholds set, the changes are further considered by the investment committee. On a quarterly basis, after the checks above have been performed the investment committee presents the valuation results to the board of directors of the responsible entity. This includes a discussion of the major assumptions used in the valuations, with an emphasis on the more significant investments and investments with fair value changes outside of the relevant thresholds set out above. The investment committee considers the appropriateness of the valuation methods and inputs, and may request that alternative valuation methods are applied to support the valuation arising from the method chosen. Any changes in valuation methods are discussed and agreed with the responsible entity’s board of directors. There were no other changes in valuation techniques during the year.

AASB 13.93(g)

Commentary For Level 3 instruments, AASB 13.93(g) requires an entity to provide description of the valuation processes. For fair value measurements categorised within Level 3 of the fair value hierarchy, AASB 13.93(d) requires an entity to disclose quantitative information about the significant unobservable inputs used in the measurement and any changes in valuation techniques.




AASB 134.5(e) AASB 134.8(e)

EY 68


AASB 13.93(d) AASB 13.93(h)

Quantitative information of significant unobservable inputs – Level 3:

31 December 2015 Description $’000 Valuation

technique Significant unobservable inputs Range (weighted

average)

Asset-backed securities 388 DCF method

Discount rate 8% - 10% (9%)

Discount for lack of liquidity 8% - 12% (10.3%)

Expected future default rates 3% - 7% (4.1%)


362 EBITDA multiple

Average EBITDA multiple of peers 9x


Description Input

Sensitivity used* Effect on fair value

$’000

Asset-backed securities Discount for lack of liquidity Expected future default rates

5% 5%

50 1

Unlisted managed investment schemes Average EBITDA multiple of peers 1x 130


30 June 2015

Description $’000 Valuation technique


Asset-backed securities 552 DCF method

Discount rate Discount for lack of liquidity Expected future default rates

8% - 10% (9%) 8% - 12% (10.3%) 3% - 7% (4.1%)


Description Input Sensitivity used* Effect on fair value

$’000

Asset-backed securities Discount for lack of liquidity Expected future default rates

5% 5%

50 1



Significant increases/(decreases) in the discount in isolation would result in a significantly (lower)/higher fair value measurement. Significant increases/(decreases) in default rates in isolation would result in a significantly (lower)/higher fair value measurement.


Significant increases/(decreases) in the discount in isolation would result in a significantly (lower)/higher fair value measurement.




AASB 134.5(e) AASB 134.8(e)

EY 69


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.

Financial assets held for trading:

Financial assets designated at fair

value through profit or loss:

AASB 13.93(e)

Unlisted managed investment

schemes Asset-backed

securities Total

$’000 $’000 $’000

31 December 2015

Opening balance – 1 July 2015 — 552 552


- profit or loss (54) 92 38


Purchases — 150 150

Sales — (406) (406)

Issues — — —


Transfers into or (out of) level 3 416 — 416 AASB 13.93(e)(iv))

Closing balance – 31 December 2015 362 388 750

30 June 2015

Opening balance – 1 July 2014 — 2,088 2,088


- profit or loss — (92) (92)


Purchases — — —

Sales — (1,444) (1,444)

Issues — — —


Transfers into or (out of) level 3 — — —

Closing balance – 30 June 2015 — 552 552

Commentary

For Level 3 fair value measurements, a reconciliation is required between the opening and closing balances, including: ► Total gains or losses for the period split between those recognised in profit or loss and those recognised

in other comprehensive income, plus the amount of the gains or losses relating to instruments still held at the period end. Disclosure of where they are presented in the statement of comprehensive income is also required;

► Purchases, sales, issues and settlements (by each type of movement rather than net); and ► Transfers into and out of Level 3, with significant transfers into the category disclosed separately from

transfers out, along with the reasons for those transfers. Significant for this purpose is not defined and management will need to use judgement to determine which transfers to disclose separately

Examples of situations which may result in transfers into or out of Level 3 may include: ► �Level 1 to/from Level 3: investments delisting from or listing on a public exchange which is considered to

be an active market; and ► Level 2 to/from Level 3: inputs to valuation models ceasing to be/becoming observable Most funds, including the Scheme, do not have available-for-sale investments or cash flow hedges. If a fund does have such instruments, it would include a separate line item to disclose the total gain or losses recognised in other comprehensive income.




AASB 134.5(e) AASB 134.8(e)

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Gains or losses included in profit or loss are presented in change in fair value of financial assets and liabilities at fair value through profit or loss as follows:

AASB 13.91(b) AASB 13.93(e)(i)

AASB 13.93(f)

2015 2014

$’000 $’000

Total gains included in profit and loss for the period 38 (92)

Total gains included in profit or loss for the period for assets held at the end of the reporting period 18 (23)

5 Distributions to unitholders AASB 134.16A(f)

31 December 2015 31 December 2014

Distributions Number of units

Distributions cents per

unit

Distributions Number of units

Distributions cents per

unit

$ ‘000 ‘000 $ ‘000 ‘000

Distribution 30 September 820 82,667 0.992 2,782 91,231 3.049

Distribution 31 December 1,855 77,984 2.379 1,950 86,444 2.256

2,675 4,732

The portion of the final distribution for the half-year which was unpaid at the reporting date is disclosed in the Statement of Financial Position.

Commentary

At a minimum, AASB 134.16A(f) requires disclosure of the amount of distributions paid during the interim period. The expanded disclosure above, which is equivalent to the annual financial report disclosures relating to distributions, is not required but may be useful to users of the financial statements and has been included as a matter of best practice.

6 Commitments and Contingencies

AASB 134.15B(m)

Since the most recent annual financial report, the Scheme has entered into a commitment for an additional investment of $200,000 in Unlisted Fund, an unlisted managed investment Scheme. This commitment may be called at any time up to 31 May 2015. Should the Scheme fail to meet this commitment, the existing holding of $361,553 would be forfeited.

Commentary

AASB 134.15 requires a Scheme to include an explanation of events and transactions that are significant to an understanding of the changes in financial position and performance of the Scheme since the end of the last annual reporting period. Information disclosed in relation to those events and transactions shall update the relevant information presented in the most recent annual financial report. We recommend that you thoroughly read the events and transactions listed on AASB 134.15B, which provides guidance on disclosures that would be required if they are significant. EY considers commitments and contingencies to be significant and it is good practice to disclose such information to provide users insights into the commitments and contingencies of the Scheme.




AASB 134.5(e) AASB 134.8(e)

EY 71

7 Investment in subsidiary AASB 12.19B

31 December 2015 $’000

30 June 2015 $’000

Endeavour Private Equity Fund 363 1,729

Investment in subsidiary at fair value 363 1,729

The Scheme meets the definition of an investment entity. Therefore, it does not consolidate its subsidiaries but rather, it recognises Endeavour Private Equity Fund as investment at fair value through profit or loss.

Ownership interest (%)

Name of unconsolidated subsidiary Principal Place of

Business 31 December 2015 30 June 2015

Endeavour Private Equity Fund Australia 50.1% 50.1%

The above subsidiary does not control any further subsidiaries.

AASB 12.19C

Restrictions The Scheme receives income in the form of dividends and interest from its investments in unconsolidated subsidiaries, and there are no significant restrictions on the transfer of funds from these entities to the Scheme.

AASB 12.19D

Support During the current year, the Scheme provided support in the form of a loan of $100,000 (2014: $nil) to Endeavour Private Equity Fund. This loan bears interest at a rate of 5% and is repayable in 2018. This loan was granted to finance the acquisition of equipment for this entity to commence manufacturing. The Scheme has no contractual commitments or current intentions to provide any other financial or other support to its unconsolidated subsidiaries.

AASB 12.19D-F

8 Events after balance date AASB 134.16A(h)

Since 31 December 2015 there have been no other matters or circumstances not otherwise dealt with in the interim financial report that have significantly affected or may significantly affect the Scheme (2014: none).


EY 72

Independent auditor's report To the unitholders of Endeavour Managed Investment Scheme Report on the Half-year financial report We have reviewed the accompanying half-year financial report of Endeavour Managed Investment Scheme (the ‘Scheme’), which comprises the statement of financial position as at 31 December 2015, and the statement of comprehensive income, statement of changes in net assets attributable to unitholders, and statement of cash flows for the half-year ended on that date, notes comprising a summary of significant accounting policies and other selected explanatory notes, and the directors’ declaration.

Directors' responsibility for the financial report The directors of the Responsible Entity are responsible for the preparation of the half-year financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors of the Responsible Entity determine is necessary to enable the preparation of the half-year financial report that is free from material misstatement, whether due to fraud or error.

Auditor's responsibility Our responsibility is to express a conclusion on the half-year financial report based on our review. We conducted our review in accordance with Auditing Standard on Review Engagements ASRE 2410 Review of Interim and other Financial Reports Performed by the Independent Auditor of the Entity, in order to state whether, on the basis of the procedures described, we have become aware of any matter that makes us believe that the financial report is not in accordance with the Corporations Act 2001 including giving a true and fair view of Endeavour Managed Investment Scheme’s financial position as at 31 December 2015 and its performance for the half-year ended on that date; and complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001. As the auditor of Endeavour Managed Investment Scheme, ASRE 2410 requires that we comply with the ethical requirements relevant to the audit of the annual financial report. A review of a half-year financial report consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Australian Auditing Standards and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Independence In conducting our review we have complied with the independence requirements of the Corporations Act 2001. We have given to the directors of the Responsible Entity a written Auditor's Independence Declaration, a copy of which is included in the Directors' Report.

Ernst & Young 680 George Street Sydney NSW 2000 Australia GPO Box 2646 Sydney NSW 2001

Tel: +61 2 9248 5555 Fax: +61 2 9248 5959 ey.com/au


EY 73

Conclusion Based on our review, which is not an audit, we have not become aware of any matter that makes us believe that the half-year financial report of Endeavour Managed Investment Scheme is not in accordance with the Corporations Act 2001, including: i. giving a true and fair view of Scheme’s financial position as at 31 December 2015 and of its

performance for the half-year ended on that date; and ii. complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations

Regulations 2001.

Ernst & Young

D.G. Brown Partner Sydney 8 February 2016

Appendix B — Disclosures for listed schemes

EY 74

Appendix B – Disclosures for listed schemes

A significant number of Australian managed investment schemes are listed on the Australian Stock Exchange and are therefore required to comply with ASX listing rules. This includes reporting results to the ASX within two months of the year end. Both the Corporations Act 2001 and Australian Accounting Standards impose additional disclosure requirements on listed managed investment schemes. This appendix provides you with example disclosures that are applicable to listed managed investment schemes and are in addition to the disclosure requirements presented in the main set of financial statements for Endeavour Managed Investment Scheme. Directors' report

CORPORATE GOVERNANCE

ASX 4.10.3

In recognising the need for the highest standards of corporate behaviour and accountability, the Directors of Endeavour Responsible Entity Limited support and have adhered to the ASX Corporate Governance Council’s principles and recommendations. The corporate governance statement will be attached to this Annual Report when provided to unitholders.

ASX GN 9

BOARD COMMITTEES

As at the date of this report, the Responsible Entity had an Audit Committee and a Compliance Committee.

The members of the Audit Committee are A. Morgan, J. dela Peña and J. Chuang. The Responsible Entity members of the Compliance Committee are J. Chuang and J. dela Peña. The independent members of the Compliance Committee are A. Duggan, A. Mills and T. Stephens.

Commentary

The ASX listing rules require a statement disclosing the extent to which the scheme has followed the best practice recommendations set by the ASX Corporate Governance Council during the year. If the scheme has not followed all of the recommendations, it must identify those recommendations that have not been followed and give reasons for not following them. If a recommendation was followed for only part of the year, the scheme must state the period for which it was followed. The corporate governance statement may be given to the ASX as a separate report but must be given to the ASX at the same time as the annual report and be clearly identified as the corporate governance report. We have not included a copy of the corporate governance statement in these illustrative financial statements. For further guidance on the disclosure requirements in relation to corporate governance please refer to Endeavour (International) Limited’s Financial Report. The sample disclosure included therein should not be seen as exhaustive, and information on areas of corporate conduct and practice specific to the Scheme/Responsible Entity should be included as appropriate. The requirement to include a Remuneration Report is for listed public companies only and is not applicable for listed investment schemes. Therefore it is not included here. Details of non-audit services provided by the auditor are also only required by listed companies and they are therefore also not provided here. In addition to the Directors’ Report, the Directors’ Declaration for a listed scheme must only be made after the CEO/CFO have provided directors with a declaration that, in that person’s opinion, the financial records of the scheme have been properly maintained in accordance with section 286 and the financial statements and notes for the financial year comply with accounting standards and give a true and fair view. We have not included an example of this declaration in these example financial statements. The directors declaration should include the following additional line: ► �This declaration has been made after receiving the declarations required to be made to the Directors in

accordance with section 295A of the Corporations Act 2001 for the year ending 30 June 2015.

Appendix B – Disclosures for listed schemes (continued)

EY 75

Directors' report (continued) OPERATING AND FINANCIAL REVIEW

CA 299(1)(a)

CA 299A(1) ASX 4.10.17

Commentary

The Scheme has not illustrated the disclosures required in the operating and financial review of Endeavour Managed Investment Scheme. The appropriate information to disclose in the operating and financial review will depend upon the Scheme’s business operations and the sector in which it operates. The requirements of the Corporations Act 2001 are: For all entities ► A review of operations and the results of those operations. For listed entities Information that members of the listed entity would reasonably require to make an informed assessment of: ► The operations; ► Financial position; ► The business strategies; and ► Prospects for future financial years. For listed entities, ASIC has issued RG 247 Effective disclosures in an operating and financial review (RG 247) to assist directors of listed entities in preparing useful and meaningful operating and financial reviews. As it is based on legislation and regulations currently in force, RG 247 is immediately applicable. RG 247 provides the following guidance.

► �Review of operations and financial position:

► Provide analysis and discussion of the impact of transactions and events and explain significant changes during the reporting period;

► Identify underlying drivers impacting performance and financial position of the entity; ► Include discussion of key operating segments and major components; and ► Provide discussion on value and exposures not recognised.

► Business strategies and prospects:

► Discussion on strategies and significant plans; ► Information of prospects not limited to the next financial year; and ► Identify material business risks that potentially impact on future prospects and discuss how each risk

can be managed. ► Unreasonable prejudice:

► It is insufficient to merely state that information has been withheld because disclosure may lead to unreasonable prejudice.


EY 76

Supplementary Notes to the financial statements

21 Earnings per unit AASB 133.70

Commentary

A Scheme applies AASB 133 Earnings per Share (AASB 133) if: ► The ordinary shares or potential ordinary shares of the Scheme are traded in a public market (a domestic

or foreign stock exchange or an over-the-counter market); or ► The Scheme files, or is in the process of filing, its financial statements with a securities commission or

other regulatory organisation for issuing ordinary shares in a public market.

Basic earnings per unit amounts are calculated by dividing total comprehensive income by the weighted average number of units outstanding during the year.

AASB 133.10

Diluted earnings per unit are the same as basic earnings per unit.

AASB 133.31

The following reflects the income and unit data used in the basic and diluted earnings per unit computations.

AASB 133.70

2015 2014

Comprehensive income for the year ($’000) 14,116 (43,158)

Weighted average number of units for basic and diluted earnings per unit (No.)

83,606,848 98,282,886

Basic earnings per unit ($ per unit) 0.169 (0.439)

Diluted earnings per unit ($ per unit) 0.169 (0.439)

There have been no other transactions involving unitholders since the reporting date and before the completion of these financial statements.

Commentary

If the Scheme voluntarily discloses earnings per unit, the earnings per unit disclosures must be in accordance with AASB 133. For a managed investment scheme, basic and diluted earnings per unit are likely to be the same, and reconciliations and information about potential units are unlikely to be required, limiting the disclosures to that provided above. A separate example Statement of Comprehensive Income for a listed scheme has not been presented here, but it should include basic EPS and diluted EPS disclosures (generally at the base of the statement) if its units on issue are classified as equity. Both basic and diluted EPS must be presented with equal prominence for all periods reported, and must be presented even if negative.

22 Segment information

Commentary

AASB 8 ‘Operating Segments’ is only mandatory for a scheme whose debt or equity instruments are traded in a public market or that files, or who is in the process of filing, its financial statements with a securities commission or other regulatory organisation for the purpose of issuing any class of instruments in a public market. A scheme outside the scope of AASB 8 is allowed to disclose segment information without triggering the need to comply fully with the standard, provided that such disclosure is not referred to as ‘segment information’ (AASB 8.3).

For management purposes, the Scheme is organised into two operating segments based on their investment strategies. Both the active trading portfolio and the strategic investment portfolio invest into equity securities, debt instruments and related derivatives, however the active trading portfolio segment aims to identify and profit from short term fluctuations in the values of assets and liabilities traded, while the strategic investment portfolio aims to identify and invest in companies that will deliver superior returns over the long term based on underlying fundamental growth, or by gaining exposure to those companies through the use of derivatives. Each segment is managed by a separate team of the investment manager.

AASB 8.22(a) AASB 8.22(b)


EY 77

22 Segment information (continued)

The investment objective of each segment is to achieve consistent medium-term returns from the investments in each segment while safeguarding capital by investing in diversified portfolios. There have been no changes in reportable segments during the course of the year. Management monitors the operating results of the segments separately for the purposes of making decisions about resources to be allocated and of assessing performance. Segment performance is evaluated based on net profit or loss before tax, which in certain respects, as explained in the table below, is measured differently from net profit before tax in the financial statements. Interest revenue from cash and cash equivalents, net foreign exchange gains on settlement, and all expenses of the Scheme other than brokerage fees and transaction costs are managed at the overall Scheme level.

AASB 8.29

Commentary

For a managed investment scheme, the determination as to whether it has more than one operating segment is made through the eyes of management and will largely depend on the information the Chief Operating Decision Maker (CODM) reviews in order to make decisions about resources allocated to different segments (if applicable) of the Scheme. We would expect that generally, schemes would have multiple operating segments where the investments of the scheme have been allocated to separate sub-portfolios or class of assets, each of which may have different investment or fund managers and investment strategies, and the results of those sub-portfolios are assessed separately by the CODM. For example, some schemes may split their investments into separate portfolios, such as a split between debt and equity, or equity sub-portfolios with an actively managed equity portfolio (held for trading) and an indexed based equity portfolio, each potentially with its own manager. Where the results of these sub-portfolios are evaluated separately, and the performance of the manager(s) is assessed on this basis by the CODM, the scheme would have multiple operating segments, even where the overall performance of the scheme is only compared to a single benchmark in external communications to unitholders. However, the existence of multiple asset classes (and potentially different managers for each), such as in a balanced fund, does not necessarily result in more than one operating segment where the allocation to those classes is based on an integrated investment strategy and the performance of that scheme is only evaluated and assessed on an overall basis by the CODM.

Operating Segments Active trading

portfolioInvestment

portfolio Total

segments Reconciliation Total AASB 8.28

30 June 2015 $ ‘000 $‘000 $‘000 $‘000

Revenue 9,396 6,876 16,272 171 (1) 16,443 AASB 8.23(a)

Net profit before tax 9,184 6,803 15,987 (1,677)(2) 14,310

30 June 2014

Revenue (23,387) (17,572) (40,959) 68 (1) (40,891)

Net profit before tax (23,745) (17,674) (41,419) (1,508)(2) (42,927)

1. Segment revenues do not include interest from cash and cash equivalents of $79,844 (2014: $40,412),

or net foreign exchange gains of $101,299 (2014: $23,119). In addition, investments of the Scheme are measured on a last sales price basis for segment reporting, and on a bid/ask price basis in the financial statements, which reduces the revenue recognised by $9,711 (2014: increase of $5,054) and reduces the value of total assets by $72,004 (2014: reduced by $62,319).

2. In addition to the items at (1) above, segment profit before tax does not include any expenses of the

Scheme other than brokerage fees and transaction costs. The amount of these costs is disclosed in the Statement of Comprehensive Income.


EY 78

22 Segment information (continued)

The total assets of the segments at 30 June 2015 are shown in the table below. Changes in the value of assets are inherent in the Scheme’s activities.

Operating Segments Active trading

portfolio Investment

portfolio Total

segments Reconciliation) Total AASB 8.28

$ ‘000 $‘000 $‘000 $‘000

Total assets – 2015 45,819 48,484 94,303 1,076 95,379 AASB 8.24

Total liabilities - 2015 2,000 1,390 3,390 1,000 4,390

Total assets – 2014 50,123 41,524 91,647 2,358 94,005

Total liabilities – 2014 2,300 2,000 4,300 1,000 5,300

1. Investments of the Scheme are measured on a last sales price basis for segment reporting, and on a

bid/ask price basis in the financial statements, which reduces the revenue recognised by $9,711 (2014: increase of $5,054) and reduces the value of total assets by $72,004 (2014: reduced by $62,319). The remaining difference arises as only financial assets at fair value through profit or loss are considered segment assets.

The table below analyses the Scheme’s operating income per geographical location. The basis for attributing the operating income is the counterparty’s place of incorporation.

AASB 8.33(a)

2015 2014

$’000 $’000

Australia 11,142 (23,386) AASB 8.33(a)(i)

Taiwan 2,688 (8,612) AASB 8.33(a)(ii)

Japan 1,254 (3,880)

European Union 1,303 (4,917)

Rest of the world 56 (96)

Total 16,443 (40,891)

Commentary

AASB 8.33(a)(i) requires the disclosure of revenues from external customers attributed to the entity's country of domicile. This is also applicable when the revenues from the country of domicile are relatively small, as may be the case for many schemes whose country of domicile is tax-driven. AASB 8.33(b) requires a similar disclosure to AASB 8.33(a) regarding the location of certain non-current assets. The Scheme has no non-current assets and therefore a disclosure under AASB 8.33(b) is not provided.

The table below analyses the Scheme’s operating income per investment type AASB 8.32

2015 2014 $’000 $’000

Equity securities 11,965 (37,782) Debt instruments 2,021 720 Derivative financial instruments 2,356 (3,852) Foreign exchange gains on financial instruments not at fair value through profit or loss

101 23

16,443 (40,891) Operating income from one counterparty (including its group entities) amounted to $815,000 (2014: expense $1,750,000), and arose from derivative financial instruments.

AASB 8.34


EY 79

ASX additional information

Commentary The ASX additional information is required for listed entities only and must be current as at a date no more than 6 weeks before the report is sent to unitholders. These requirements apply to annual reporting periods only. Listed below are examples of standard requirements. The disclosures below are not exhaustive and users should review their ASX Listing Rules for further information. There is no requirement to disclose comparative information for ASX additional information. We have not included comparative information in the illustrative disclosures below. Note that these disclosures are for information to be sent to the ASX with the financial report and do not form part of the financial report.

Additional information required by the Australian Stock Exchange Ltd and not shown elsewhere in this report is as follows. The information is current as at 5 March 2015.

ASX 4.10

(a) Distribution of units ASX 4.10.7

There were 78,130,524 ordinary units on issue held by 3,580 unitholders. The number of unitholders, by size of holding are:

ASB 4.10.5

Number of holders

Number of units

1 – 1,000 1,294 970,057

1,001 – 5,000 744 1,972,520

5,001 – 10,000 887 5,728,647

10,001 – 100,000 612 20,697,791

100,001 and over 43 48,761,509

3,580 78,130,524

(b) 20 largest unitholders ASX 4.10.9

The names of the 20 largest holders of quoted units are: Number of

units Percentage of

units

1 C.K. Inc 7,969,314 10.2 2 B.N.K Banking Corporation 5,156,615 6.6 3 B.D.R. Holdings Pty Ltd 3,437,743 4.4 4 Endeavour Balanced Fund 3,365,000 4.3 5 Endeavour Growth Fund 3,260,000 4.2 6 Endeavour High Yield Fund 2,982,925 3.8 7 Castle Holdings Pty Ltd 2,656,438 3.4 8 Firefly Nominees Ltd 2,500,177 3.2 9 K.L. No. 48 Nominees Pty Ltd 2,500,177 3.2 10 Capital Equity Investments Ltd 2,187,655 2.8 11 G. Shore 1,640,741 2.1 12 Trust Company Super Fund 1,406,349 1.8 13 C.H. Manningham 1,328,219 1.7 14 A.P.T. Nominees 1,250,088 1.6 15 Morecambe Finance Ltd 1,171,958 1.5 16 Asset Management Trust No. 3 937,566 1.2 17 A.R. Morgan 859,436 1.1 18 M. Kinsley & Co 625,044 0.8 19 T.H. Ardie 390,653 0.5 20 D. Fawcett 234,392 0.3

45,860,490 58.7


EY 80

ASX additional information (continued)

(c) Substantial unitholders ASX 4.10.4

The names of substantial unitholders who have notified the Scheme in accordance with section 671B of the Corporations Act 2001 are:

Number of units

C.K. Inc 7,969,314

B.N.K Banking Corporation 5,156,615

(d) Voting rights ASX 4.10.6

All units carry one vote per unit without restriction.

(e) Buy-back ASX 4.10.18

There is no current on-market buy-back of units in the Scheme.

(f) Investments Held ASX 4.10.20

Security Code Security Name Number Held Fair Value $’000

XPL Example Security Ltd 51,240 78

… … … …

90,247

Management fees have been reported in the related parties note to the financial statements.

Commentary

This example report has not included a full list of all investments held, only an example for disclosure purposes. If not disclosed elsewhere, the ASX additional information must disclose total management fees paid or accrued during the reporting period, along with a summary of any management agreement (ASX 4.10.20(c)).

(g) Transactions in Securities ASX 4.10.20

There were a total of 3,024 transactions in securities during the year ended 30 June 2015. Total brokerage paid by the Scheme on those transactions was $227,355 (excluding GST).


EY 81

ASX additional information (continued)

(h) Directory

Directors

M. P. Byrne, Chairman

R. Scanlon

A. Morgan

J. dela Peña

G. Haggar

J. Chuang

Company Secretary ASX 4.10.10

G.K. Dellas

Registered office

30 Hedge Street ASX 4.10.11

Sydney NSW 2000 AASB 101.126(a)

Australia

Principal place of business AASB 101.126(a)

30 Hedge Street

Sydney NSW 2000

Australia

Phone: 61 2 9876 5432

Share Register ASX 4.10.12

Administration Registry Services

23rd Floor

560 Smith Street, Sydney

Australia

Phone: 61 2 9876 5431

Solicitors

Solicitors & Co

7 Scott Street

Australia

Bankers

Bank Limited

George Street

Australia

Auditors

Ernst & Young

Australia

Commentary

The following disclosures are also required if applicable to each listed scheme (and not disclosed elsewhere in the annual report). They have not been included here as they do not apply to this Scheme:

► The number of unitholders holding less than a marketable parcel of units (ASX 4.10.8); ► Schemes listed overseas must state the names of the relevant stock exchanges (ASX 4.10.13); ► Disclosure is also required of the number and class of restricted units or securities subject to voluntary

escrow on issue and the date they cease to be restricted (ASX 4.10.14); ► For each class of unquoted units, disclose the number of units on issue, and the number of holders. In

addition, if one person holds more than 20% of the class, disclose the name of the holder and units held, unless the units were issued under an employee incentive a scheme (ASX 4.10.16).

Appendix C — Consolidated disclosures

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Appendix C – Consolidated disclosures

AASB 2013-5 Amendments to Australian Accounting Standards – Investment Entities (“AASB 2013-5”) details an exception to the consolidation requirement of AASB 10 Consolidated Financial Statements (“AASB 10”) for entities that meet the definition of an investment entity. Entities that qualify as investment entities must not consolidate their subsidiaries. Subsidiaries of the managed investment schemes, where they exist, are accounted for as investments at fair value through profit or loss. Following the issuance of AASB 2013-5, we expect that the consolidation exception would apply to most managed investment schemes and the focus will be on stand-alone financial statements. As a result, an illustrative consolidated financial report has not been presented. If you require assistance with the preparation of a consolidated financial report, please contact your EY representative.

Appendix D — RDR adoption and transition

EY 83

Appendix D — Reduced Disclosure Requirements (‘RDR’) adoption and transition

The determination whether or not an entity is a reporting entity depends on the particular facts and circumstances of each case. Those charged with governance of an entity have the responsibility for determining whether or not an entity is a reporting entity. Entities that are reporting entities are required to prepare General Purpose Financial Statements (GPFS), which must comply with all applicable Australian Accounting Standards (AAS). SAC 1 Definition of the Reporting Entity describes reporting entities as entities in respect of which it is reasonable to expect the existence if users dependent on general purpose financial information. Over the years, the Australian Accounting Standards Board (AASB) has received feedback indicating that the subjective nature of the reporting entity concept has resulted in application difficulties such that some entities may be inappropriately classified as non-reporting entities. The concern is that some entities preparing Special Purpose Financial Statements (SPFS) should actually be preparing GPFS. These concerns are sometimes reinforced by ASIC in its financial statements review findings. In relation to this issue, the AASB aims ultimately to have AAS only apply to GPFS. Indeed the AASB has tentatively decided to amend AAS application paragraphs such, the Standards no longer apply to non-reporting entities. If this tentative decision is implemented after planned consultations and research, it will mean that SPFS will no longer be required to comply with AAS and it would be up to the users of SPFSs and regulators of entities preparing SPFSs to identify the relevant reporting requirements1. This is an area of increasing regulator scrutiny and presents a heightened regulatory risk. We expect that ASIC may include some large non-reporting entities in its surveillance program. Management should reassess the reporting entity status of the entities at each reporting period and explore the opportunities to prepare GPFS under Tier 2 of AASB 1053 Application of Tiers of Australian Accounting Standards. 1 AASB 28-29 May 2014 , Agenda paper 9.2 (M138)

EY 84

Appendix D — RDR adoption and transition (continued) Decision tree 1: Eligibility for application of the Reduced Disclosure Requirements and interaction with the reporting entity concept. Under stage one of the reduced disclosure regime, non-reporting entities that prepare special purpose financial statements (‘SPFS’) may continue to do so, although adoption of the regime is permitted upon transition to general purpose financial statements (‘GPFS’). Issues arising from such a transition, including the application of AASB 1 First time adoption of Australian Accounting Standards, are considered in decision tree 2 overleaf. Decision tree 1 indicates the application of the two tiers to various classes of entities within different sectors:

Yes

No No

No No

No

Yes

Yes

Currently a reporting entity?

Non-reporting entities may elect to comply with either tier upon transition to general purpose financial statements. Refer to decision tree 2.

May elect to apply either tier

Apply tier 1: full Australian Accounting Standards

Not-for-profit entity in the private sector

Publicly accountable (as defined in appendix A of AASB

1053?)

For profit entity in the

private sector?

Public sector entity?

Federal, state, territory or

local government

entity?

Yes

Yes

EY 85

Appendix D — RDR adoption and transition (continued) Decision tree 2: Transition from special purpose to general purpose financial statements As noted above, non-reporting entities may continue to prepare special purpose financial statements. In addition, there are no transition issues for those entities currently preparing GPFSs which comply with full IFRS as adopted in Australia, that are required to apply tier 1 of the new regime, since the same reporting requirements will continue to apply. Decision tree 2 considers the requirements for non-reporting entities wishing to adopt the reduced disclosure regime, having already established which tier would be applicable as described in AASB 1053.

No

Tier 2

Tier 2

Tier 1

Applied all recognition and measurement principles of

AASB standards in most recent

SPFSs?

Non-reporting entity transitioning to general purpose financial statements for the first time

Moving to tier 1 or tier 2?

Required to apply AASB 1 – Reduced

Disclosure Requirements

Not required to apply AASB 1

decision tree 2.

Required to apply AASB 1

Required to apply AASB 1

Moving to tier 1 or tier 2?

Tier 1

Yes

EY 86

Appendix D — RDR adoption and transition (continued) Decision tree 3: Transitioning between tiers AASB 1053 contains provisions for those entities transitioning between tiers and whether the application of AASB 1 is required. Decision tree 3 shows that the entities transitioning from tier 1 to tier 2 will not be required to apply AASB 1 on transition. In such cases the transition will simply involve removing those disclosures not required under the RDR but which were previously provided under full IFRS as adopted in Australia. This requirement also applies to those entities preparing GPFSs under the existing regime which transition to tier 2 upon adoption of the new arrangements. However, for-profit private sector entities transitioning in the opposite direction (i.e., from tier 2 to tier 1) will be required to apply AASB 1. This will ensure that after transition these entities will be able to claim IFRS compliance. Not-for-profit entities undertaking the same transition will have the option, but will not be required to apply AASB 1, and would only do so if they wished to claim full compliance with IFRS.

Yes

Yes

Required to apply AASB 1 Required to apply AASB 1

No No For profit, private sector entity?

Does the entity wish to claim full

IFRS compliance?

Not required to apply AASB 1

Transitioning from tier 2 to

tier 1? Not required to apply AASB 1

Transitioning from tier 1 to

tier 2

Yes

No

Appendix E — Australian reporting requirements

EY 87

Appendix E — Australian reporting requirements

The table below provides a summary of reporting requirements for different types of entities.

Type of entity

Financial reporting Complying with reporting requirements

General purpose report

Special purpose report

Not required

Chapter 2M of

Corporations Act 2001 s292(1)

ASX listing rules

Other

Listed Company Listed registered scheme

Investment and

Financial Services

Association (‘IFSA’)

standards may be applicable

Disclosing entity* Unlisted registered scheme

�If a

reporting entity

If a non-reporting

entity

IFSA standards

may be applicable

* For unlisted disclosing entities, be aware of continuous reporting requirements under the Corporations Act 2001. Please note that Part 2M.3 only applies to disclosing entities incorporated or formed in Australia (footnote to CA 292(1)).

EY 88

Appendix E — Australian reporting requirements (continued)

Entity type/ reference

Notice of AGM *# CA 249H, 249HA

Date of AGM CA 250N

Issue annual report to Members

CA 315

Lodge reports with ASX

ASX 4.2A, 4.2B, 4.2C, 4.3A, 4.3B,

4.3C, 4.5

Lodge reports with ASIC

CA 319, 320

Listed company At least 28 days before the AGM 30 Jun 15: 2 Nov 15 31 Dec 15: 3 May 16

Within 5 months after the end of the financial year 30 Jun 15: 30 Nov 15 31 Dec 15: 31 May 16

Earlier of 21 days before the AGM, or 4 months after the end of the financial year

If AGM is held

30 Nov 15 30 Jun 15: 30 Oct 15

If AGM is held

31 May 16 31 Dec 15: 29 Apr 16

Lodge Annual report when it is lodged with ASIC. In any event within 3 months after the end of the financial year 30 Jun 15: 30 Sep 15 31 Dec 15: 31 Mar 16 Lodge Appendix 4E immediately when it becomes available and no later than when the annual report is lodged with ASIC. In any event within 2 months after the end of the financial year 30 Jun 15: 31 Aug 15 31 Dec 15: 29 Feb 16 Lodge Half-year report and Appendix 4D immediately when they become available and no later than when the half-year report is lodged with ASIC. In any event within 2 months after the end of the half-year 30 Jun 15: 31 Aug 15 31 Dec 15: 29 Feb 16

ASX is agent for ASIC, therefore lodgement with ASX represents lodgement with ASIC Annual report within 3 months after the end of the financial year 30 Jun 15: 30 Sep 15 31 Dec 15: 31 Mar 16 Half-year report within 75 days after the end of the half-year 30 Jun 15: 11 Sep 15 31 Dec 15: 16 Mar 16

Listed registered scheme

Within 3 months after the end of the financial year 30 Jun 15: 30 Sep 15 31 Dec 15: 31 Mar 16

Same requirements as listed company

Same requirements as listed company

Unlisted public company

At least 21 days before the AGM 30 Jun 15: 9 Nov 15 31 Dec 15: 10 May 16

Within 5 months after the end of the financial year 30 Jun 15: 30 Nov 15 31 Dec 15: 31 May 16

Earlier of 21 days before the AGM, or 4 months after the end of the financial year

If AGM is held

30 Nov 15 30 Jun 15: 30 Oct 15

If AGM is held

31 May 16 31 Dec 15: 29 Apr 16

Annual report within 3 months after the end of the financial year 30 Jun 15: 30 Sep 15 31 Dec 15: 31 Mar 16 Half-year report within 75 days after the end of the half-year 30 Jun 15: 11 Sep 15 31 Dec 15: 16 Mar 16

Unlisted registered scheme

Within 3 months after the end of the financial year 30 Jun 15: 30 Sep 15 31 Dec 15: 31 Mar 16

Annual report within 3 months after the end of the financial year 30 Jun 15: 30 Sep 15 31 Dec 15: 31 Mar 16 Half-year report within 75 days after the end of the half-year 30 Jun 15: 11 Sep 15 31 Dec 15: 16 Mar 16

* If a company has a constitution, it may specify a longer minimum period of notice. An unlisted company may also call an AGM upon shorter notice, provided all members entitled to attend agree in advance, and no resolution will be moved to remove a director under CA 203D, appoint a director as a replacement of another under that same section, or remove an auditor under CA 329. For a listed company 28 days notice is required for all members’ meetings unless a longer period is specified in the Company’s constitution.

# A public company that has only one member is not required to hold an AGM (CA 250N(4)).

Please note that we have adjusted the dates if it falls on a weekend or holiday for your convenience.

Key Contacts Melbourne Brett Kallio Tel: +61 3 9288 8597 [email protected] Luke Slater Partner Tel: +61 3 9288 8444 [email protected] Maree Pallisco Partner Tel: +61 3 9655 2508 [email protected] Sydney Graeme McKenzie Tel: +61 2 9248 4689 [email protected] Darren Handley-Greaves Partner Tel: +61 2 9248 5118 [email protected] Rita Da Silva Partner Tel: +61 2 8295 6142 [email protected] Jon Pye Partner Tel: +61 2 8295 6972 [email protected] Rohit Khanna Partner Tel: +61 2 9248 5560 [email protected] Brisbane Paula McLuskie Partner Tel: +61 7 3011 3363 [email protected]

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© 2015 Ernst & Young, Australia. All Rights Reserved.

APAC No. AU00002259 M1527742 ED None

This communication provides general information which is current at the time of production. The information contained in this communication does not constitute advice and should not be relied on as such. Professional advice should be sought prior to any action being taken in reliance on any of the information. Ernst & Young disclaims all responsibility and liability (including, without limitation, for any direct or indirect or consequential costs, loss or damage or loss of profits) arising from anything done or omitted to be done by any party in reliance, whether wholly or partially, on any of the information. Any party that relies on the information does so at its own risk. Liability limited by a scheme approved under Professional Standards Legislation.

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Financial report 30 June 2015

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