Public Trustee Common Funds Annual Report 2013–14 · 2016-05-25 · Independent Audit Report ......

Public Trustee Common Funds Annual Report

2013–14

Public Trustee Annual Report 2013-14

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Table of contents The Year in Review ............................................................................................................... 3 Our Commitment to South Australia ...................................................................................... 4 Relationship to the AGD Strategic Directions ........................................................................ 5 Our Corporate Governance ................................................................................................... 7

Governance ....................................................................................................................... 7 Boards and Committees .................................................................................................... 9

Our People ...........................................................................................................................11 Organisational Structure ...............................................................................................11 Executive Team ............................................................................................................12

Financial Performance..........................................................................................................13 Customer Investment Performance ..................................................................................13

Investment Overview ....................................................................................................13 2013–14 Asset Allocation .............................................................................................15 Manager of Funds ........................................................................................................16 Peer Group Comparisons .............................................................................................16

Corporate and Client Financial Information...........................................................................17 Officers’ Certification of the Financial Statements .............................................................17 Independent Audit Report .................................................................................................18

Common Funds Financial Statements 2013–14 ...................................................................21 Appendix 1 Common Funds Statutory Information ...............................................................61

The nature and amount of Common Fund fees. ............................................................61 Indirect Cost Ratios ......................................................................................................61 Classes of investment in which Common Funds may invest .........................................64

Public Trustee 211 Victoria Square Adelaide SA 5000 www.publictrustee.sa.gov.au Tel: 08-8226 9200 Fax: 08-8226 9350 ABN: 72-906-921-697 ISSN: 1441-2799 (Print) ISSN: 1836-263X (Online)

http://www.publictrustee.sa.gov.au/

Public Trustee Common Funds Annual Report 2013–14

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The Year in Review In 2013–14 our focus in Public Trustee was again one of service improvement. During the year, we implemented a new investment planning tool which makes it easier for Public Trustee staff to budget and plan investments for customers. The new tool provides a number of significant enhancements and takes into account each customer’s personal and financial circumstances to develop the best possible budget and investment plan for them. In the past financial year, Public Trustee also improved arrangements for customers with superannuation. In line with a new national approach to the market, we entered into a contract with AustralianSuper which is one of Australia’s largest industry superannuation funds. The new arrangements have delivered lower costs and more streamlined services for customers. In 2013–14, Public Trustee’s profit, before income tax equivalent payments, was $2.749 million. This was an excellent result in a constrained economic environment. There were strong returns for Public Trustee’s investment strategies for the financial year. Four out of five of Public Trustee’s investment strategies outperformed their benchmarks, and all continue to exceed benchmark over the long term. This financial year returns ranged from 3.11% for cash to 18.31% for equities, net of fees. In Australia and around the world interest rates remain low, which has been good for global share markets and helped Public Trustee’s more growth-orientated strategies. Over the last 12 months, Public Trustee has worked closely with our investment adviser on a Strategic Asset Allocation (SAA) review, with the aim of improving Public Trustee’s investment portfolio structure. In order to improve expected returns and reduce risk, the two key recommendations of this review were to increase weighting to overseas shares in each of the standard investment strategies, and to introduce unlisted assets (property and infrastructure) to the portfolio. As a result, in October 2013 we implemented a new SAA which increased the weighting to overseas shares within each of the strategies. With excellent returns on overseas shares, this benefited customers in 2013–14. As we enter 2014–15, I am proud of the work we have done in the past year and I would like to take the opportunity to thank all the staff of Public Trustee for their continued hard work and support.

Debra Contala Public Trustee 30 September 2014


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Our Commitment to South Australia ‘The Public Trustee’ is a statutory officer pursuant to the Public Trustee Act 1995. ‘Public Trustee’ is a body corporate and has the powers of a natural person. Public Trustee is also a separate agency within the broader departmental organisation of the Attorney-General’s Department (AGD) and reports in the context of the Strategic Plan of the AGD. Our Vision To be seen as the people’s trustee of choice by customers, stakeholders and the public. Our Mission To provide South Australians with expert trustee services that offer security and peace of mind about financial and investment services, and their assets and affairs. Our Services Our services include a range of estate planning, administration and trustee services, Will making, estate administration, Enduring Power of Attorney, personal estate administration, taxation and funds management services. Our Customers and Stakeholders Customers and beneficiaries whose financial affairs we manage; Family members, carers, liaison persons and health professionals involved with

customers under our management; Guardians of customers; Private financial administrators and managers; Courts, tribunals and regulatory agencies; Peak disability, mental health and aged care advocacy groups; The Attorney-General and the Treasurer on behalf of the South Australian

Government; and Staff of Public Trustee.

Our Principles and Values for 2013–14 Public Trustee is committed to these values: We treat all our customers with dignity and respect; We care about our customers and administer their financial and legal affairs

courteously, promptly and professionally; We encourage feedback and act on it promptly, be it complaint or compliment; and We always act in the best interests of our customers.

Our Strategic Objectives for 2013–14 Achieve recognition for the provision of respectful, timely and expert services to all

customers; Encourage South Australians to have a valid Will; Grow our business through an increase in the number of South Australians who

choose to use our services; Manage our business well; and Invest in our people and create a rewarding place to work.


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Relationship to the AGD Strategic Directions Public Trustee aligns its business objectives and customer-focused services with the AGD Strategic Directions and with South Australia’s Strategic Plan. A particular focus is protecting and supporting vulnerable people by providing financial administration for those who are unable, through age or disability, to manage their own affairs. Public Trustee supports the AGD in achieving the following strategies: Strategic Goal 2 – To champion fair and transparent access to justice Strategy 2.1: Eliminate unnecessary delays in the justice system Strategy 2.4: Provide for the quick and efficient resolution of civil and administrative

disputes Strategic Goal 3 – To protect people’s rights and promote public confidence in our

institutions and services Strategy 3.2: Advocate for and protect the rights of people experiencing vulnerability Strategy 3.3: Educate and inform people about their rights and responsibilities Strategy 3.4: Support cultural diversity and promote equal opportunity Strategic Goal 4 - To be a high-performing organisation Strategy 4.1: Use technology to make it easier for people to do business with the

department Strategy 4.3: Live our core behaviours Strategy 4.4: Value staff diversity and invest in development and leadership opportunities Strategy 4.5: Set the scene for a productive and rewarding workplace


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Our Corporate Governance Governance Basis of Authority In performing its duties, the following legislation forms the basis on which Public Trustee services are delivered to customers, and how: Public Trustee Act 1995; Administration and Probate Act 1919; Aged and Infirm Persons’ Property Act 1940; Family Relationships Act 1975; Guardianship and Administration Act 1993; Inheritance (Family Provision) Act 1972; Legal Practitioners Act 1981; Powers of Attorney and Agency Act 1984; Trustee Act 1936; and Wills Act 1936.

Public Trustee’s Function Under the provisions of Section 5(2) of the Public Trustee Act 1995, Public Trustee may act as a trustee, executor of a Will, administrator of an estate (whether or not of a deceased person), manager, receiver, committee, curator, guardian, next friend, agent, attorney or stakeholder. Under the Legal Practitioners Act 1981, Public Trustee is also able to prepare Wills. Public Trustee is a Public Non-Financial Corporation under the Public Corporations Act 1993. It generates its own income, makes tax-equivalent payments annually, and pays a dividend to the South Australian Government out of its after-tax profits, as agreed by the South Australian Attorney-General and the Treasurer. Public Trustee Charter Under the Public Corporations Act 1993, a Charter must be prepared for a public corporation by its Minister and the Treasurer. The Charter, agreed by the Attorney-General, the Treasurer and the Public Trustee, describes the reporting and accountability requirements and sets out the responsibilities and expectations of both Public Trustee and the government. The Charter is reviewed annually. The Charter also requires an agreed Annual Performance Statement that outlines Public Trustee’s objectives for invested customer funds, and financial and other performance targets. Responsibility ‘The Public Trustee’ is a statutory officer pursuant to the Public Trustee Act 1995. ‘Public Trustee’ is a body corporate and has the powers of a natural person. Public Trustee is also a separate agency within the broader departmental organisation of the AGD and reports in the context of the Strategic Plan of the AGD.


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The Public Trustee has the full responsibilities of a trustee, in accordance with the Public Trustee Act 1995, in carrying out the roles and functions of the office. The Public Trustee is responsible for the strategic direction of the office and the management of service delivery. Risk Management Public Trustee has a risk management framework that assists with the management of strategic and business risk. This occurs through stringent risk assessment by senior management and the adoption of controls to manage identified risk. The framework covers reviews of all of Public Trustee’s investment, financial, operational and administrative responsibilities, at both customer and corporate level. Supporting this framework is an extensive system of control self-assessment. The system requires managers to report six-monthly to Public Trustee's Audit and Risk Management Committee on individual branch compliance with internal controls, instances of failure to comply and proposed corrective action. The process is comprehensive, ensuring each control is assessed in terms of its design and its effectiveness in managing that particular risk. The cycle of ongoing risk assessment helps in the development of Public Trustee’s annual internal audit plan. Public Trustee is a member of the Financial Services Council (FSC). The Council represents organisations undertaking funds management, superannuation, life insurance, financial advice, trustee and public trustee services, and has more than 130 members. External Audit The Auditor-General audits the operations and finances of Public Trustee annually. The Audit and Risk Management Committee receives and reviews all the Auditor-General’s findings, plus management’s response and the corrective actions taken. Internal Audit The Audit and Risk Management Committee oversees the preparation of an annual internal audit work plan. Public Trustee has engaged an external firm to undertake internal audits, consistent with an approved work plan. All internal audit reports and management responses are presented to this committee for consideration. Indemnity of Staff Pursuant to Section 49 of the Public Trustee Act 1995, any liability incurred by Public Trustee may be enforced against the Crown. Notwithstanding this, Public Trustee has comprehensive professional indemnity insurance through the South Australian Government Captive Insurance Corporation (SAICORP), covering all Public Trustee staff in the performance of their required duties.


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Boards and Committees Investment Advisory Committee The Investment Advisory Committee (IAC) ensures we maintain a sound and efficient system of customer investment. Chaired by the Public Trustee, the committee meets quarterly to provide appropriate advice, review the performance of Public Trustee’s investments, and make recommendations on investment matters. Public Trustee’s Investment Guidelines and Procedures clearly define the approved investment processes for internally managed portfolios, sub-portfolio allocation, asset allocation for Standard Investment Strategies (SIS) and the process for engaging external fund managers. The guidelines are regularly reviewed by the committee. Public Trustee engages an expert investment adviser to help the organisation to: Review the appropriateness of strategic asset allocation for all Public Trustee Standard

Investment Strategies; Provide portfolio structuring advice; Select fund managers and monitor their performance, and provide ongoing research into

new managers; Provide quarterly reporting, ad hoc special reports, and dynamic asset allocation advice; Attend meetings of the committee and provide advice associated with Public Trustee

investment activity to that committee and senior management; and Provide other specialist advice.

Members of the committee during 2013–14 were: Debra Contala, the Public Trustee (Chair); Frankie Anderson, General Manager, Customer Services, Public Trustee; Tony Brumfield, General Manager, Business and Client Financial Services, Public

Trustee; Nick Wiseman, Manager, Investment Services, Public Trustee; and Steven Gregor, Manager, Client Financial Services, Public Trustee.

Public Trustee’s expert investment adviser and a representative of the Department of Treasury and Finance attend meetings of the committee. Funds Management Forum A subset of members of the Investment Advisory Committee, and staff of the Funds Administration team, meet monthly in the Funds Management Forum to: Monitor investment performance of funds under management; Ensure compliance of the funds against Public Trustee’s Investment Guidelines and

procedures; Provide advice to the Public Trustee on systems, accounting, taxation, Customer

Investment Tool and investment issues; and Monitor implementation of actions arising from IAC meetings.


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Audit and Risk Management Committee The Audit and Risk Management Committee is responsible for providing independent scrutiny of Public Trustee’s risk, control and compliance framework, and its internal and external accountability responsibilities. The committee has a broad skill base, with an independent Chair, four independent members and one senior member of Public Trustee’s staff. All members are appointed by the Public Trustee following consultation with the Chief Executive, AGD. The committee had a turnover of membership from 1 February 2014. New members are: Virginia Hickey (Chair) - Ms Hickey has legal qualifications and is a fellow of the Institute

of Company Directors. Ms Hickey has extensive experience as a commercial litigation partner of a leading law firm, providing corporate governance advice to boards, and as a board member in a range of industries;

Steve Woolhouse - Mr Woolhouse is a fellow of CPA Australia and has extensive experience in finance roles. Earlier in his career, Mr Woolhouse worked in a financial institution (National Australia Bank) and in the Auditor-General’s Office; and

Tanya Brooks - Ms Brooks has excellent experience in financial accounting, has also had five years’ experience in the Auditor-General’s Department and gives the committee an important link to the Attorney-General’s Department.

Christine Locher and Frankie Anderson were reappointed to the Committee. Peter Whelan, Pamela Martin and Andrew Swanson retired from the Committee on 31 January 2014. The Public Trustee, the General Manager, Business and Client Financial Services, representatives of the Auditor-General, and a representative from the Department of Treasury and Finance also attend committee meetings. As at 30 June 2014, the committee comprised: Virginia Hickey, Director, @ the Board Table (Chair); Tanya Brooks, Principal Accountant, Treasury and Parliamentary Reporting, AGD; Christine Locher, Principal, Solutions@Locher Pty Ltd; Steven Woolhouse, Director, Finance, Corporate Services, Department of the Premier

and Cabinet; and Frankie Anderson, General Manager Customer Services, Public Trustee.

The committee meets at least five times per year and reports annually to the Public Trustee and the Chief Executive, AGD, on its operations and activities. The report includes: A summary of Public Trustee’s progress in addressing the findings and recommendations

made in internal and external audit reports; An overall assessment of Public Trustee’s risk, control and compliance framework,

including details of any significant emerging risks or legislative changes that may have an impact on Public Trustee; and

The number of meetings held during the relevant period and the number of meetings attended by each member.

During 2013–14 the committee considered a comprehensive review of the organisation’s risk assessments, resulting in the approval of a revised internal audit program. The committee also conducts an annual self-assessment and uses that collective feedback to identify areas where it might improve.


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Our People Organisational Structure


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Executive Team Debra Contala BA (Acc) FCPA Public Trustee The Public Trustee is a Statutory Officer within the Attorney-General’s Department (AGD). Debra Contala began as the Public Trustee in November 2010. Ms Contala had previously worked in the AGD for 10 years in a variety of finance and corporate roles, and was most recently the Executive Director of the Finance and Business Services Division. Ms Contala has extensive experience in State Government, including in the Department of Treasury and Finance and Arts SA. She has strong business credentials and expertise in a wide range of areas within government, including finance, project management, procurement and human resources. Ms Contala has also been a member of a range of government boards including the Superannuation Board and the Board of the SA Fire and Emergency Services Commission. She is a member of the State Procurement Board. Frankie Anderson BSocSc General Manager, Customer Services Frankie Anderson joined Public Trustee in August 2011 as General Manager, Customer Services. Ms Anderson had previously held the role of Director, Human Resources in the AGD. Ms Anderson has brought experience in customer service to Public Trustee. Her varied professional background has given her the opportunity to work closely with many areas of the community, including vulnerable people. Since December 2012, she has been a member of the Supported Residential Facilities Advisory Committee, pursuant to the provisions of the Supported Residential Facilities Act 1992. Tony Brumfield BEc (Acc) General Manager, Business and Client Financial Services Tony Brumfield began with Public Trustee in March 2012. He is an accountant with a Bachelor of Economics (Accounting) from Flinders University and a Graduate Certificate of Management from the University of South Australia. Mr Brumfield has experience in a range of executive positions within the South Australian Government and has a strong background in managing corporate and finance functions. He has held the roles of Director, Financial Services at the Department of Treasury and Finance, Director, Finance and Asset Management in the Department of Primary Industries and Resources, and General Manager, Corporate Services at Defence SA. Nick Wiseman, BEc, MPA, CIMA Manager, Investment Services (non-Executive) Nick Wiseman joined Public Trustee in 2006. As Manager, Investment Services, he is responsible for overseeing the development, implementation and monitoring of investment strategies for the funds Public Trustee manages. Before joining Public Trustee, Mr Wiseman worked at Elders and JP Morgan. He has more than 16 years’ experience in financial markets, ranging from money market dealing to institutional funds management.


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Financial Performance Customer Investment Performance Investment Overview For the year ended 30 June 2014, Public Trustee’s investment strategies achieved solid returns. Strong equity markets were the biggest contributor, while returns from fixed interest were more subdued. Equity markets across most regions delivered strong gains, with overseas shares generating 20.1% (unhedged). Australian shares also performed well, returning 17.3%. Global listed property and infrastructure assets benefited from growing confidence in investment markets, adding 15.4% and 24.6% respectively. Over the course of the financial year, global interest rates fell, providing a stimulus for equity markets and boosting returns for bond markets. Global government bonds returned 7.2% (in hedged terms). In Australia, the Reserve Bank of Australia cut interest rates in August 2013 to 2.5%, and rates have remained on hold since that time. The Australian dollar appreciated against the US dollar, finishing the financial year at $0.94 US. Public Trustee’s cash, capital stable, balanced and growth investment strategies outperformed their respective benchmarks, with returns ranging from between 3.11% for cash to 18.31% for the equities strategy (net of fees). The investment returns for five years demonstrate that our long-term performance is strong, stable and continues to exceed benchmarks. Table 22: 2013–14 Standard Investment Strategies’ 5-year performance

2013–14 Performance

Last 12 months annualised

3 years annualised

5 years annualised

Cash 3.11% 4.03% 4.39% benchmark 1.66% 2.55% 2.90%

variance 1.45% 1.48% 1.49%

Capital Stable 7.68% 6.65% 6.86% benchmark 6.94% 6.22% 6.53%

variance 0.74% 0.43% 0.33%

Balanced 11.62% 9.11% 9.14% benchmark 11.04% 8.82% 9.09%

variance 0.58% 0.29% 0.05%

Growth 14.21% 10.63% 10.54% benchmark 13.72% 10.06% 10.23%

variance 0.49% 0.57% 0.31%

Equities 18.31% 12.39% 12.09% benchmark 18.60% 11.64% 11.25%

variance -0.29% 0.75% 0.84%

Public Trustee continues to explore opportunities for customers to benefit from economic conditions. One such opportunity is unlisted infrastructure, which has the potential to provide


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steady long-term returns for our customers and reduce risk in the portfolio. After successfully completing due diligence on an Australian Infrastructure Fund this financial year, we will enter into new investment arrangements in July 2014. Overall the performance of the funds has been extremely successful this financial year. Our bias towards quality investments and long-term focus continues to add value for our customers. Public Trustee takes a highly active role in managing customer funds. We regularly engage with our fund managers, consultants and industry professionals to ensure customer portfolios are managed prudently. We continue to monitor developments in Australia and global trends to ensure adequate protection is in place for our investors. Public Trustee investment funds provide income, growth and security for customers through diversification across asset sectors, and in accordance with Public Trustee’s obligations under the Public Trustee Act 1995 and the Trustee Act 1936. In 2013–14, beneficiaries in estates administered by Public Trustee and other investors chose to invest $279 million ($260 million in 2012–13) of their funds with Public Trustee. Details of the 2013–14 Asset Allocation, Manager of Funds Statement, the Peer Group Comparisons, the Common Funds Statutory Information of Indirect Cost Ratios, Fees and the Classes of Investment in which the Common Funds may invest are contained in the Corporate and Financial Information section of this report. The Public Trustee certification of the Financial Statements, the independent Auditor-General’s report of the financial statements, the Statement of Trusts being administered as at 30 June 2014 and the Common Funds Financial Report are contained in the Corporate and Financial Information section of this report.


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2013–14 Asset Allocation Table 23: 2013–14 Asset Allocation Capital Stable Standard Investment Strategy Common Fund Allocation (%) 2014 Allocation (%) 2013

Neutral Period End $m Neutral Period End $m

Australian Shares 12.0% 11.6% $7.98 15.0% 14.4% $9.17 Overseas Shares 8.0% 8.1% $5.61 5.0% 6.1% $3.88 Listed Property Securities 5.0% 5.3% $3.62 5.0% 5.9% $3.78 Long-term Fixed Interest 15.0% 14.9% $10.29 15.0% 15.0% $9.58 Short-term Fixed Interest 30.0% 30.0% $20.70 30.0% 29.7% $18.99 Overseas Fixed Interest 10.0% 10.1% $7.00 10.0% 9.3% $5.97 Cash 20.0% 20.0% $13.81 20.0% 19.6% $12.55

TOTAL 100.0% 100.0% $69.01 100% 100% $63.92 Balanced Standard Investment Strategy Common Fund Allocation (%) 2014 Allocation (%) 2013 Neutral Period End $m Neutral Period End $m

Australian Shares 24.0% 23.1% $47.57 25.0% 23.3% $48.80 Overseas Shares 16.0% 16.2% $33.32 15.0% 17.6% $37.02 Listed Property Securities 10.0% 10.5% $21.57 10.0% 11.5% $24.10 Long-term Fixed Interest 25.0% 25.2% $51.98 25.0% 24.2% $50.80 Short-term Fixed Interest 10.0% 10.0% $20.52 10.0% 9.6% $20.14 Overseas Fixed Interest 10.0% 10.0% $20.82 10.0% 9.1% $19.01 Cash 5.0% 5.0% $10.27 5.0% 4.8% $10.00 TOTAL 100.0% 100.0% $206.05 100.0% 100.0% $209.87

Growth Standard Investment Strategy Common Fund Allocation (%) 2014 Allocation (%) 2013 Neutral Period End $m Neutral Period End $m

Australian Shares 35.0% 33.8% $68.63 35.0% 31.9% $63.56 Overseas Shares 25.0% 25.4% $51.48 25.0% 28.8% $57.51 Listed Property Securities 10.0% 10.5% $21.34 10.0% 11.3% $22.47 Long-term Fixed Interest 15.0% 15.2% $30.85 15.0% 14.2% $28.41 Short-term Fixed Interest 5.0% 5.0% $10.15 5.0% 4.7% $9.39 Overseas Fixed Interest 5.0% 5.1% $10.30 5.0% 4.4% $8.86 Cash 5.0% 5.0% $10.16 5.0% 4.7% $9.31 TOTAL 100.0% 100.0% $202.91 100.0% 100.0% $199.51

Equities Standard Investment Strategy Common Fund Allocation (%) 2014 Allocation (%) 2013

Neutral Period End $m Neutral Period

End $m

Australian Shares 55.0% 53.8% $42.36 60.0% 54.2% $42.20 Overseas Shares 45.0% 46.2% $36.44 40.0% 45.8% $35.63 TOTAL 100.0% 100.0% $78.80 100.0% 100.0% $77.83


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Manager of Funds During 2013–14, Public Trustee continued its policy of engaging external fund managers for all funds except for cash and Australian fixed interest. Investment assessment of external fund managers requires ongoing monitoring and performance review. This process provides Public Trustee with access to expert advice, without sacrificing control over the style and balance of the common funds. Peer Group Comparisons - Comparative returns to 30 June 2014 (after fees) Table 24: 2013–14 Peer group Comparisons

1 YR % 3 YR % 5 YR % Public Trustee Peer Group Public Trustee Peer Group Public Trustee Peer Group

Cash 3.11% 2.70% 4.03% 3.10% 4.39% 3.30% Capital Stable 7.68% 8.05% 6.65% 6.90% 6.86% 7.55% Balanced 11.62% 10.85% 9.11% 8.50% 9.14% 9.05% Growth 14.21% 12.70% 10.63% 9.70% 10.54% 9.75% Equities 18.31% 14.95% 12.39% 10.15% 12.09% 10.45%

* Note: the peer group returns are based on a survey of multi-sector unit trusts that have similar asset allocations to Public Trustee strategies.


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Public Trustee 2013–14 Corporate and Client Financial Information

Certification of the Financial Statements

We certify that the:-

• accompanying Public Trustee Corporate Statements, Common Fund Statements and Statement of Trusts being Administered and the notes thereto:-

o are in accordance with the accounts and records of Public Trustee; and

o comply with relevant Treasurer’s instructions; and

o comply with relevant accounting standards; and

o present a true and fair view of the financial position of Public Trustee at the end of the financial year and the result of its operations and cash flows for the financial year.

• Internal controls employed by Public Trustee over its financial reporting and its preparation of the financial statements have been effective throughout the financial year.

Debra Contala Tony Brumfield

Public Trustee General Manager, Business and Client Financial Services

Date:- 16 September 2014


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PUBLIC TRUSTEE 2012–13 FINANCIAL STATEMENTS Independent Audit Report


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Audit report page 2


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Common Funds Financial Statements 2013–14Cash Common Fund

Statement of Comprehensive Income Notes 2014 2013For the year ended 30 June 2014 $'000 $'000

Investment incomeInterest 2(e) 16 358 19 793 Net (loss) gain on financial assets held at fair value through profit or loss 2(b),3(d) ( 333) 2 369 Other income - 5

Total investment income 16 025 22 167

Expenses Public Trustee management fees 2(f) 4 119 4 180 Legal and advisory expenses 98 112 Other expenses 26 29

Total expenses 4 243 4 321

Net operating profit 11 782 17 846

Financing costs attributable to unitholdersUndistributed income brought forward 1 497 1 966 Distributions to unitholders 2(h),4 (12 369) (15 946) Transfers from (to) net assets to determine distributable income 2(i) 333 (2 369)

Total financing costs attributable to unitholders (10 539) (16 349)

(Increase) in net assets attributable to unitholders (1 243) (1 497)

Total comprehensive income for the year - -

The above Statement of Comprehensive Income should be read in conjunction with the accompanying notes

Cash Common Fund

Statement of Financial Position Notes 2014 2013As at 30 June 2014 $'000 $'000

AssetsCash and cash equivalents 5 5 000 5 110 Advances to estates 4 894 5 364 Financial assets held at fair value through profit or loss 6 403 930 388 172 Other assets 3 742 4 451

Total assets 417 566 403 097

LiabilitiesIncome distribution payable 1 243 1 497 Bank overdraft 5 64 - Funds deposited by other Common Funds 62 655 55 146 Other liabilities 40 49

Total liabilities (excluding net assets attributable to unitholders) 64 002 56 692

Net assets attributable to unitholders - liability 3 353 564 346 405

Represented by:Fair value of outstanding units based on net asset value 353 564 346 405

The above Statement of Financial Position should be read in conjunction with the accompanying notes


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Cash Common Fund

Statement of Cash Flows Notes 2014 2013For the year ended 30 June 2014 Inflows Inflows

(Outflows) (Outflows)$'000 $'000

Cash flows from operating activitiesCash inflowsInterest received 17 087 20 249 Other Income - - Cash generated from operations 17 087 20 249 Cash outflowsPayments for expenses (4 251) (4 331) Cash used in operations (4 251) (4 331)

Net cash provided by operating activities 10(b) 12 836 15 918

Cash flows from investing activitiesCash inflows

161 367 337 385 Net repayments of advances to estates 470 1 037 Cash generated from investing activities 161 837 338 422 Cash outflowsPurchase of financial assets held at fair value through profit or loss (177 499) (339 114) Cash used in investing activities (177 499) (339 114)

Net cash (used in) investing activities (15 662) ( 692)

Cash flows from financing activitiesCash inflows

7 514 12 136

7 507 (9 642) Cash generated from financing activities 15 021 2 494 Cash outflowsDistributions paid (12 369) (15 946) Cash used in financing activities (12 369) (15 946)

Net cash provided by (used in) financing activities 2 652 (13 452)

Net (decrease) / increase in cash and cash equivalents ( 174) 1 774

Cash and cash equivalents at beginning of the period 5 110 3 336

Cash and cash equivalents at the end of the period 5 4 936 5 110

The above Statement of Cash Flows should be read in conjunction with the accompanying notes

Net proceeds/payments from applications/redemptions from/(to) other Common Funds

Proceeds from the sale of financial assets held at fair value through profit or loss

Net proceeds/payments from applications/redemptions from/(to) unitholders


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Short Term Fixed Interest Common Fund


Investment incomeInterest 2(e) 1 879 2 299 Net gain on financial assets held at fair value through profit or loss 2(b),3(d) 57 84 Other Income - 3


Expenses Public Trustee management fees 2(f) 336 367 Legal and advisory expenses 8 10

Total expenses 344 377


Financing costs attributable to unitholdersUndistributed Income brought forward 892 1 185 Distributions to unitholders 2(h),4 (1 679) (2 218) Transfers (to) net assets to determine distributable income 2(i) ( 57) ( 84)

Total financing costs attributable to unitholders ( 844) (1 117)

(Increase) in net assets attributable to unitholders ( 748) ( 892)


The above Statement of Comprehensive Income should be read in conjunction with the accompanying notes Short Term Fixed Interest Common Fund


AssetsCash and cash equivalents 5 18 649 21 478 Financial assets held at fair value through profit or loss 6 33 178 27 602 Other assets 359 409

Total assets 52 186 49 489

LiabilitiesIncome distribution payable 748 892 Other liabilities 1 2

Total liabilities (excluding net assets attributable to unitholders) 749 894





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Cash flows from operating activitiesCash inflowsInterest received 2 020 2 480 Cash generated from operations 2 020 2 480 Cash outflowsPayments for expenses ( 345) ( 376) Cash used in operations ( 345) ( 376)



18 506 21 000 Cash generated from investing activities 18 506 21 000 Cash outflowsPurchase of financial assets held at fair value through profit or loss (24 117) (14 378) Cash used in investing activities (24 117) (14 378)

Net cash (used in) provided by investing activities (5 611) 6 622

Cash flows from financing activitiesCash inflowsProceeds from applications by unitholders 8 795 3 752 Cash generated from financing activities 8 795 3 752 Cash outflowsPayments for redemptions by unitholders (6 010) (4 121) Distributions paid (1 678) (2 218) Cash used in financing activities (7 688) (6 339)


Net (decrease) / increase in cash and cash equivalents (2 829) 6 139






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Long Term Fixed Interest Common Fund


Investment incomeInterest 2(e) 3 896 4 428

2(b),3(d) 1 545 ( 45) Other Income - 3





Financing costs attributable to unitholdersUndistributed Income brought forward 1 739 2 053 Distributions to unitholders 2(h),4 (3 328) (3 953) Transfers (to) from net assets to determine distributable income 2(i) (1 308) 45





Net gain (loss) on financial assets held at fair value through profit or loss





LiabilitiesIncome Distribution Payable 1 722 1 739 Other liabilities - 5






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Cash flows from operating activitiesCash inflowsInterest received 4 092 4 507 Cash generated from operations 4 092 4 507 Cash outflowsPayments for expenses ( 823) ( 792) Cash used in operations ( 823) ( 792)



25 394 13 000 Cash generated from investing activities 25 394 13 000 Cash outflowsPurchase of financial assets held at fair value through profit or loss (21 952) (26 075) Cash used in investing activities (21 952) (26 075)

Net cash provided by (used in) investing activities 3 442 (13 075)


Net cash (used in) financing activities ( 321) (3 919)

Net increase / (decrease) in cash and cash equivalents 6 390 (13 279)






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Overseas Fixed Interest Common Fund


Investment incomeTrust Distributions 644 1 160 Interest 2(e) 300 425

2(b),3(d) 959 ( 236) Other Income 150 149





Financing costs attributable to unitholdersUndistributed Income brought forward 839 1 434 Distributions to unitholders 2(h),4 (1 397) (2 058) Transfers (to) from net assets to determine distributable income 2(i) ( 959) 236

Total Financing costs attributable to unitholders (1 517) ( 388)




Net gain (loss) on financial assets held at fair value through profit or loss





LiabilitiesIncome distribution payable 275 839 Other liabilities 2 3






Page 28 of 68




Cash flows from operating activitiesCash inflowsTrust distributions received 1 222 1 757 Interest received 297 434 Other income - - Cash generated from operations 1 519 2 191 Cash outflowsPayments for expenses ( 262) ( 271) Cash used in operations ( 262) ( 271)



- - Cash generated from investing activities - - Cash outflowsPurchase of financial assets held at fair value through profit or loss - - Cash used in investing activities - -

Net cash (used in) / provided by investing activities - -



Net increase / (decrease) in cash and cash equivalents 3 180 ( 151)






Page 29 of 16

Australian Shares Common Fund


Investment incomeTrust Distributions 8 410 5 812 Interest 2(e) 144 351

2(b),3(d) 21 150 20 746 Other Income 508 1 687


Expenses Public Trustee management fees 2(f) 1 713 1 607 Legal and advisory expenses 41 43

Total expenses 1 754 1 650

Net operating profit (loss) 28 458 26 946

Financing costs attributable to unitholdersUndistributed Income brought forward 3 283 2 952 Distributions to unitholders 2(h),4 (6 124) (5 869) Transfers (to) net assets to determine distributable income 2(i) (19 310) (20 746)





Net gain on financial assets held at fair value through profit or loss



AssetsCash and cash equivalents 5 8 936 6 454 Financial assets held at fair value through profit or loss 6 157 686 157 028 Other assets 5 598 2 864

Total assets 172 220 166 346

LiabilitiesIncome Distribution Payable 6 307 3 283 Other liabilities - 10






Page 30 of 68




Cash flows from operating activitiesCash inflowsTrust distributions received 5 670 5 729 Interest received 142 364 Other income received - - Cash generated from operations 5 812 6 093 Cash outflowsPayments for expenses (1 755) (1 651) Cash used in operations (1 755) (1 651)



21 000 - Cash generated from investing activities 21 000 - Cash outflowsPurchase of financial assets held at fair value through profit or loss - - Cash used in investing activities - -

Net cash provided by investing activities 21 000 -


Net cash (used in) financing activities (22 575) (6 424)

Net increase / (decrease) in cash and cash equivalents 2 482 (1 982)






Page 31 of 16

Overseas Shares Common Fund


Investment incomeTrust Distributions 3 836 2 374 Interest 2(e) 66 228

2(b),3(d) 19 474 31 203 Other Income 381 262


Expenses Public Trustee management fees 2(f) 1 376 1 149 Legal and advisory expenses 33 31

Total Expenses 1 409 1 180


Financing costs attributable to unitholdersUndistributed Income brought forward 662 1 846 Distributions to unitholders 2(h),4 ( 662) (1 962) Transfers (to) net assets to determine distributable income 2(i) (22 143) (32 109)





Net gain on financial assets held at fair value through profit or loss




Total assets 127 289 135 876

LiabilitiesIncome distribution payable 205 662 Other liabilities - 7






Page 32 of 68




Cash flows from operating activitiesCash inflowsTrust distributions received 2 185 2 829 Interest received 72 233 Cash generated from operations 2 257 3 062 Cash outflowsPayments for expenses (1 409) (1 181) Cash used in operations (1 409) (1 181)

Net cash provided by operating activities 10(b) 848 1 881


28 500 - Cash generated from investing activities 28 500 - Cash outflowsPurchase of financial assets held at fair value through profit or loss - - Cash used in investing activities - -

Net cash provided by investing activities 28 500 -

Cash flows from financing activitiesCash inflowsProceeds from applications by unitholders 10 249 6 856 Cash generated from financing activities 10 249 6 856 Cash outflowsPayments for redemptions by unitholders (40 515) (7 411) Distributions paid ( 662) (1 962) Cash used in financing activities (41 177) (9 373)


Net (decrease) in cash and cash equivalents (1 580) ( 636)






Page 33 of 16

Property Common Fund (formerly Listed Property Securities Common Fund)


Investment incomeTrust Distributions 4 360 2 804 Interest 2(e) 33 47 Net gain on financial assets held at fair value through profit or loss 2(b),3(d) 3 382 5 619 Other Income 128 146





Financing costs attributable to unitholdersUndistributed Income brought forward 637 1 214 Distributions to unitholders 2(h),4 ( 956) (1 724) Transfers (to) net assets to determine distributable income 2(i) (5 000) (6 958)

Total Financing costs attributable to unitholders (5 319) (7 468)

(Increase) in net assets attributable to unitholders (2 078) ( 637)







LiabilitiesIncome distribution payable 2 078 637 Other liabilities - 3

Total liabilities (excluding net assets attributable to unitholders) 2 078 640





Page 34 of 68




Cash flows from operating activitiesCash inflowsTrust distributions received 1 589 2 619 Interest received 34 46 Other Income - 8 Cash generated from operations 1 623 2 673 Cash outflowsPayments for expenses ( 506) ( 510) Cash used in operations ( 506) ( 510)



10 000 26 155 Cash generated from investing activities 10 000 26 155 Cash outflowsPurchase of financial assets held at fair value through profit or loss - (26 000) Cash used in investing activities - (26 000)

Net cash provided by investing activities 10 000 155

Cash flows from financing activitiesCash inflowsProceeds from applications by unitholders 3 364 3 292 Cash generated from financing activities 3 364 3 292 Cash outflowsPayments for redemptions by unitholders (13 659) (3 620) Distributions paid ( 956) (1 724) Cash used in financing activities (14 615) (5 344)


Net (decrease) / increase in cash and cash equivalents ( 134) 266





Public Trustee Common Funds


Page 35 of 16

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS 1. General information

The Common Funds have been established pursuant to the Public Trustee Act 1995 or its predecessor legislation. The following Common Funds were active for the whole of the current and comparative reporting periods:

Cash Common Fund; Short Term Fixed Interest Common Fund; Long Term Fixed Interest Common Fund; Australian Shares Common Fund; Overseas Fixed Interest Common Fund; Overseas Shares Common Fund; and Property Common Fund.

The Inflation Linked Investments Common Fund was dormant throughout 2013–14, has nil assets and liabilities and has not been reported. Investment in Common Funds (with the exception of direct investment in the Cash Common Fund) is by way of notional unit holdings in the Common Funds. Unitholders may invest in the Cash Common Fund or alternately invest in a selection of Common Funds in proportions determined by one or more of the following standard investment strategies provided by Public Trustee:

Capital Stable Growth Balanced Equities

Management of Common Fund investments is undertaken by Public Trustee. An Investment Advisory Committee consisting of senior Public Trustee personnel, with attendance by external investment advisors, assists the Public Trustee in ensuring a sound and prudent system for investing client funds. Australian and International Equity investments, Property investments together with Overseas Fixed Interest investments are made using Australian domiciled pooled funds. During the reporting period the Property Common Fund (formerly the Listed Property Securities Common Fund) introduced unlisted property and infrastructure as authorised investments.

2. Summary of significant accounting policies

The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all years presented, unless otherwise stated.

(a) Basis of accounting

Statement of Compliance The Public Trustee Common Funds financial statements are general purpose financial statements and have been prepared in accordance with relevant Australian Accounting Standards and comply with Treasurer’s Instructions issued pursuant to the provisions of the Public Finance and Audit Act 1987.

Basis of Preparation The Public Trustee Common Funds financial statements have been prepared on the basis of fair value measurement of assets and liabilities except where otherwise stated. The statements have also been prepared on the basis that all funds are distributable to unitholders resulting in zero residual equity. On this basis, the Statement of Changes in Equity has not been included for reporting purposes as the changes in equity is zero.

(b) Financial instruments

(i) Classification

The Funds’ investments are classified as at fair value through profit or loss.

These include financial assets that are not held for trading purposes and which may be sold. These are investments in exchange traded debt and equity instruments, unlisted trusts, unlisted equity instruments and commercial paper. Loans and receivables/payables comprise amounts due to or from the Common Funds.



Page 36 of 68

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS 2. Summary of significant accounting policies (continued)

(ii) Recognition

The Fund recognises financial assets and financial liabilities on the date it becomes party to the contractual agreement (trade date) and recognises changes in fair value of the financial assets or financial liabilities from this date.

(iii) Measurement

(a) Financial Assets held at fair value through the profit or loss

Financial assets and liabilities are held at fair value through the profit or loss. Investments in pooled funds are recorded at fair value as reported by the managers of such funds. Public Trustee has determined the fair value of financial assets to be the market value of these investments at balance date. Accounting Standard AASB 7 Financial Instruments: Disclosures requires disclosure of the measurement methodology used to value financial instruments. Public Trustee invests though fund managers and utilises pricing data provided by those managers which is indirectly derived from the pricing of the underlying securities. Consistent with the definitions in AASB 7 this methodology is classified as level 2 of the fair value hierarchy.

(b) Loans and receivables

Loan assets are measured initially at fair value and subsequently amortised using the effective interest rate method, less impairment losses if any. Such assets are reviewed at each Statement of Financial Position date to determine whether there is objective evidence of impairment for example when there has been a significant or prolonged decline in the fair value below cost. If any such indication of impairment exists, an impairment loss is recognised in the Statement of Comprehensive Income as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the original effective interest rate. If in a subsequent period the amount of an impairment loss recognised on a financial asset carried at amortised cost decreases and the decrease can be linked objectively to an event occurring after the write-down, the write-down is reversed through the Statement of Comprehensive Income.

(c) Net assets attributable to unitholders

Units are redeemable at the unitholders' option and are therefore classified as financial liabilities. The units can be returned into the Common Funds at any time for cash equal to a proportionate share of the Common Funds’ net asset values. The fair value of redeemable units is measured at the redemption amount that is payable (based on the redemption unit price) at the Statement of Financial Position date if unitholders exercise their right to return the units back to the Common Funds. For financial reporting purposes and compliance with Australian Accounting Standards assets are recorded at net asset value.

(d) Cash and cash equivalents

For Statement of Cash Flows presentation purposes, cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short term highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts. Bank overdrafts, where applicable, are shown within liabilities on the Statement of Financial Position.

For all Common Funds (other than Cash Common Fund) cash equivalents include the Funds’ investments in and borrowings from the Cash Common Fund.

Payments and receipts relating to the purchase and sale of investment securities are classified as investing cash flows because the core activity of the Public Trustee is the administration of Trustee Services.



Page 37 of 16

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS 2. Summary of significant accounting policies (continued)

(e) Investment income

Interest income and expenses are recognised in the Statement of Comprehensive Income for all debt instruments using the effective interest method. Other changes in fair value for such instruments are recorded in accordance with the policies described in note 2(b).

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

Dividend income is recognised on the ex-dividend date with any related foreign withholding tax recorded as an expense. Dividends declared on securities sold short are recorded as a dividend expense on the ex-dividend date.

Trust distributions are recognised when the right to receive payment is established.

(f) Expenses

All expenses, including management fees, are recognised in the Statement of Comprehensive Income on an accrual basis.

Management fees are charged against each Common Fund at a rate of one-twelfth of one percent of the value of the fund as at the first business day of each month as authorised by the Public Trustee Act 1995.

(g) Income tax

Under current legislation, the Common Funds are not subject to income tax provided the taxable income of the Fund is fully distributed either by way of cash or reinvestment (i.e. unitholders are presently entitled to the income of the Fund).

Financial instruments held at fair value may include unrealised capital gains. Should such a gain be realised, the portion of the gain that is subject to capital gains tax will be distributed so that the Fund is not subject to capital gains tax.

Realised capital losses are not distributed to unitholders but are retained in the Fund to be offset against any realised capital gains. If realised capital gains exceed realised capital losses, the excess is distributed to unitholders.

The benefits of imputation credits and foreign tax paid are passed on to unitholders.

The Fund currently incurs withholding tax imposed by certain countries on investment income. Such income is recorded net of withholding tax in the Statement of Comprehensive Income.

(h) Distributions

Public Trustee distributes Common Fund income and capital based on the financial results at 31 December and 30 June.

Public Trustee recognises Common Fund distributions to client accounts on the date they are paid by Public Trustee. Public Trustee charges clients with income and capital commission on the date the common funds makes a distribution to client accounts and interest earned is credited when received.


Page 38 of 68

Public Trustee Common Funds NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS 2. Summary of significant accounting policies (continued)

The items above are accrued as appropriate in the statutory accounts under Australian Accounting Standards and the distributions are recognised in the Statement of Comprehensive Income as finance costs attributable to unitholders.

(i) Transfers (to)/from net assets to determine distributable income

Non-distributable income is included in net assets attributable to unitholders and may consist of unrealised changes in the net fair value of financial instruments held at fair value through profit or loss, accrued income not yet assessable, expenses provided or accrued for which are not yet deductible, and net capital losses. Net capital gains on the realisation of any financial instruments and accrued income not yet assessable will be included in the determination of distributable income in the same year in which it becomes assessable for tax. Movements in net assets attributable to unitholders are recognised in the Statement of Comprehensive Income as financing costs.

(j) Foreign currency translation

i) Functional and presentation currency

Items included in the Common Funds’ financial statements are measured using the currency of the primary economic environment in which it operates (the “functional currency”). This is the Australian dollar, which reflects the currency of the economy in which the Common Funds compete for funds and is regulated. The Australian dollar is also the Fund’s presentation currency.

ii) Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translations at year-end exchange rates, of monetary assets and liabilities denominated in foreign currencies are recognised in the Statement of Comprehensive Income. The Funds do not isolate that portion of gains or losses on security financial instruments which is due to changes in foreign exchange rates from that which is due to changes in the market price of securities. Such fluctuations are included with the net gains or losses on financial instruments at fair value through profit or loss.

(k) Receivables

Receivables may include amounts for dividends, interest and trust distributions. Dividends and trust distributions are accrued when the right to receive payment is established. Interest is accrued at the end of each reporting period from the time of last payment using the effective interest rate method. Amounts are generally received within 30 days of being recorded as receivables.

(l) Payables

Payables include liabilities and accrued expenses owing by the Funds which are unpaid as at balance date.

The distribution amount payable to unitholders as at the end of each reporting period is recognised separately on the Statement of Financial Position as unitholders are presently entitled to the distributable income as at 30 June 2014 under the Trust Deed.

(m) Applications and redemptions

Applications received for units in the Common Funds are recorded net of any entry fees payable prior to the issue of units in the Fund. Redemptions from the Fund are recorded gross of any exit fees payable after the cancellation of units redeemed.

(n) Goods and services tax (GST)

The Common Funds are registered entities under the Goods and Services Tax (GST) legislation. Investments in Public Trustee Common Funds are classified as input taxed financial supplies and no GST is charged on such supplies. The GST incurred on the costs of various services provided to the Common


Page 39 of 16

Public Trustee Common Funds NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS 2. Summary of significant accounting policies (continued)

Funds by third parties such as management fees have been passed onto the Common Funds. The Common Funds qualify for Reduced Input Tax Credits (RITC) at a rate of 75% hence investment management fees and other expenses have been recognised in the Statement of Comprehensive Income net of the amount of GST recoverable from the Australian Taxation Office (ATO). Accounts payable are inclusive of GST. The net amount of GST recoverable from the ATO is included in receivables in the Statement of Financial Position.

(o) Use of estimates

The Common Funds financial statements include estimates and assumptions that affect the reported amounts of assets and liabilities within the financial year. Estimates are continually evaluated and based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

(p) New accounting standards and interpretations

There are no new accounting standards and interpretations that have been identified that will have a material impact on the Common Funds’ financial statements for the 30 June 2014 reporting period.

(q) Rounding of amounts

All the amounts in the financial statements have been rounded to the nearest thousand dollars (‘000).

3. Net assets attributable to unitholders

Movements in number of units and net assets attributable to unitholders during the year were as follows:

Each unit represents a right to an individual share in the Fund and does not extend to a right to the underlying assets of the Fund. There are no separate classes of units and each unit has the same rights attaching to it as all other units of the Fund.

(a) Common Fund unit prices2014 2013

Common Fund unit prices Purchase Redemption Purchase Redemption at 30 June Price Price Price Price

Short Term Fixed Interest $1.0137 $1.0107 $1.0122 $1.0092Long Term Fixed Interest $1.0614 $1.0582 $1.0458 $1.0426Overseas Fixed Interest $0.8680 $0.8659 $0.8442 $0.8422Australian Shares $1.6871 $1.6777 $1.5035 $1.4951Overseas Shares $1.2537 $1.2470 $1.0620 $1.0563Property (formerly Listed Property Securities) $1.0330 $1.0268 $0.9292 $0.9237


Page 40 of 68

Public Trustee Common Funds NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS 3. Net assets attributable to unitholders (continued)

(b) Movements in units

Common Fund

2014 2013 2014 2013 2014 2013No. of No. of No. of No. of No. of No. ofunits units units units units units000's 000's 000's 000's 000's 000's

Opening balance 48 081 48 456 85 159 85 142 40 181 40 197 Applications 8 690 3 705 15 205 6 585 9 516 3 173 Redemptions (5 955) (4 080) (12 387) (6 568) (5 674) (3 189) Closing balance 50 816 48 081 87 977 85 159 44 023 40 181

Common Fund

2014 2013 2014 2013 2014 2013No. of No. of No. of No. of No. of No. ofunits units units units units units000's 000's 000's 000's 000's 000's

Opening balance 108 764 109 002 127 756 128 144 54 514 54 800 Applications 9 546 6 831 8 552 7 738 3 407 3 792 Redemptions (19 688) (7 069) (34 590) (8 126) (14 021) (4 078) Closing balance 98 622 108 764 101 718 127 756 43 900 54 514

Property (formerly Listed Property Securities)

Overseas Fixed InterestLong Term Fixed InterestShort Term Fixed Interest

Australian Shares Overseas Shares


Page 41 of 16

Public Trustee Common Funds NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS

1 A net movement in net assets attributable to unitholders funds is reported for the Cash Common Fund for

2013. For 2014 and future periods applications and redemptions have been reported separately. This fund is the primary working account for trust administration operations. Movements in net assets attributable to unitholders are typically high volume, low value transactions.

3. Net assets attributable to unitholders (continued)

(c) Movements in funds employed

Common Fund

2014 2013 2014 2013 2014 2013 2014 2013$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000

Opening balance 346 405 332 032 48 595 48 879 88 923 88 933 33 872 34 122 Applications 6 302 12 005 8 795 3 752 15 937 6 935 8 124 2 771 Redemptions 1 (3 915) - (6 010) (4 120) (12 930) (6 900) (4 805) (2 785) Increase/(decrease) in net assets attributable to unitholders 4 772 2 368 57 84 1 308 ( 45) 959 ( 236) Closing balance 353 564 346 405 51 437 48 595 93 238 88 923 38 150 33 872

Common Fund

2014 2013 2014 2013 2014 2013$'000 $'000 $'000 $'000 $'000 $'000

Opening balance 163 053 142 863 135 207 103 653 50 463 43 833 Applications 16 369 9 983 10 249 6 857 3 364 3 292 Redemptions (32 819) (10 539) (40 515) (7 412) (13 659) (3 620) Increase/(decrease) in net assets attributable to unitholders 19 310 20 746 22 143 32 109 5 000 6 958 Closing balance 165 913 163 053 127 084 135 207 45 168 50 463

Overseas Fixed Interest

Australian Shares Overseas Shares Property (formerly

Listed Property Securities)

Cash Short Term Fixed Interest

Long Term Fixed Interest


Page 42 of 68

Public Trustee Common Funds NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (d) Net realised and unrealised gains (losses) on financial assets

Common Fund 2014 2013 2014 2013$'000 $'000 $'000 $'000

Cash ( 285) 2 360 (48) 9 Short Term Fixed Interest 92 129 (35) (45) Long Term Fixed Interest 1 616 ( 29) (71) (16) Overseas Fixed Interest 959 ( 236) - - Australian Shares 18 759 20 746 2,391 - Overseas Shares 16 720 31 203 2,754 - Property (formerly Listed Property Securities) 2 808 4 139 574 1 480

40 669 58 312 5 565 1 428

Net Unrealised Gains (Losses)

Net Realised Gains (Losses)


Page 43 of 16

Public Trustee Common Funds NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS 4. Distributions to unitholders

Timing of distributionsThe distributions, including cents per unit (CPU), were paid/payable as follows:

Cash Common Fund2014 2014 2013 2013$'000 CPU $'000 CPU

Distributions paid 12 369 0.0352 15 946 0.0464 Undistributable income brought forward (1 497) - (1 966) - Distributions payable 1 243 - 1 497 -

12 115 15 477

Short Term Fixed Interest Common Fund2014 2014 2013 2013$'000 CPU $'000 CPU

Distributions paid 1 679 0.0330 2 218 0.0461 Undistributable income brought forward ( 892) - (1 185) - Distributions payable 748 - 892 -

1 535 1 925

Long Term Fixed Interest Common Fund2014 2014 2013 2013$'000 CPU $'000 CPU


3 311 3 639

Overseas Fixed Interest Common Fund2014 2014 2013 2013$'000 CPU $'000 CPU

Distributions paid 1 397 0.0317 2 058 0.0512 Undistributable income brought forward ( 839) - (1 434) - Distributions payable 275 - 839 -

833 1 463

Australian Shares Common Fund2014 2014 2013 2013$'000 CPU $'000 CPU


9 148 6 200


Page 44 of 68

Public Trustee Common Funds NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS 4. Distributions to unitholders (continued)

Overseas Shares Common Fund2014 2014 2013 2013$'000 CPU $'000 CPU

Distributions paid 662 0.0065 1 962 0.0154 Undistributable income brought forward ( 662) - (1 846) - Distributions payable 205 - 662 -

205 778

Property Common Fund (formerly Listed Property Securities Common Fund)2014 2014 2013 2013$'000 CPU $'000 CPU

Distributions paid 956 0.0218 1 724 0.0316 Undistributable income brought forward ( 637) - (1 214) - Distributions payable 2 078 - 637 -

2 397 1 147

In accordance with the Public Trustee Act 1995, investors received a proportionate distribution of net income depending on the number of days units were held. Included in the distributions at 30 June 2014 were the following net realised capital gains which were distributed to unitholders based on the number of units held as at 30 June 2014: Common Fund Capital Distributions Paid 2014 2014 2013 2013

$'000 CPU $'000 CPULong Term Fixed Interest 210 0.0024 - - Australian Shares 5 913 0.0600 1 112 0.0102 Property 1 466 0.0334 - -

7 589 1 112


Page 45 of 16

Public Trustee Common Funds NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS 5. Cash and cash equivalents

Cash Common Fund 2014 2013$'000 $'000

Cash at bank - 110 Money market instruments 5 000 5 000 Bank overdraft ( 64) -

4 936 5 110

Short Term Fixed Interest Common Fund 2014 2013$'000 $'000

Deposits in Cash Common Fund 18 649 21 478 18 649 21 478

Long Term Fixed Interest Common Fund 2014 2013$'000 $'000


Australian Shares Common Fund 2014 2013$'000 $'000


Overseas Fixed Interest Common Fund 2014 2013$'000 $'000


Overseas Shares Common Fund 2014 2013$'000 $'000


Property Common Fund (formerly Listed Property 2014 2013Securities Common Fund) $'000 $'000



Page 46 of 68

Public Trustee Common Funds NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS 5. Cash and Cash Equivalents (continued)

(a) Cash at bank and on hand

The cash deposit is held with a financial institution and is interest bearing at 2.70% (2013: 2.61%) per annum as at 30 June 2014 available at call. During 2013/2014 Public Trustee changed banking institutions from Westpac Banking Corporation (WBC) to Commonwealth Bank of Australia (CBA) as part of the whole of Government banking strategy. The WBC account remains open to finalise a small amount of outstanding cheques. The target closure date is 30 September 2014. The CBA cash rate negotiated is the Reserve Bank target rate plus 20 basis points.

(b) Bank overdraft

The reported bank overdraft held as at 30 June 2014 ($0.064 million) is a total of the bank balance less unpresented cheques and transaction timing differences. The actual balance of the bank accounts as at 30 June 2014 was $4.701 million. Unpresented cheques amounting to $4.634 million and minor unallocated customer transactions account for the reported deficit. There was no bank overdraft held as at 30 June 2013. Public Trustee actively manages the bank accounts to ensure a positive balance is maintained.

(c) Money market instruments

These investments bear floating interest rates between 3.50% and 7.00% (2013: 3.67% and 8.14%). These investments are available at call.

(d) Deposits in Cash Common Fund

Deposits in the Cash Common Fund act as operating cash accounts for the other Common Funds, and are interest bearing. These investments are available at call.

(e) Advances to other Common Funds / borrowings from Cash Common Fund

There were no advances from the Cash Common Fund to other Common Funds for the period to 30 June 2014.


Page 47 of 16

Public Trustee Common Funds NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS 6. Financial assets held at fair value through profit and loss

2014 2013 2014 2013Fair Value Fair Value Fair Value Fair Value

$'000 $'000 $'000 $'000

Designated as at fair value through profit or lossFixed interest securities 1 403 930 388 172 33 178 27 602 Unlisted unit trusts - - - - Total designated as at fair value through profit or loss 403 930 388 172 33 178 27 602


$'000 $'000 $'000 $'000

Designated as at fair value through profit or lossFixed interest securities 76 834 78 880 - - Unlisted unit trusts - - 157 686 157 028 Total designated as at fair value through profit or loss 76 834 78 880 157 686 157 028


$'000 $'000 $'000 $'000

Designated as at fair value through profit or lossFixed interest securities - - - - Unlisted unit trusts 24 726 23 617 121 013 129 658 Total designated as at fair value through profit or loss 24 726 23 617 121 013 129 658

2014 2013Fair Value Fair Value

$'000 $'000

Designated as at fair value through profit or lossFixed interest securities - - Unlisted unit trusts 42 079 48 569 Total designated as at fair value through profit or loss 42 079 48 569

An overview of the risk exposures relating to financial assets at fair value through profit or loss is included in note 9.

Common FundsCash Short Term Fixed Interest

Property (formerly Listed Property Securities)

Long Term Fixed Interest Australian Shares

Overseas Fixed Interest Overseas Shares

1 Includes other common funds deposits in the Cash Common Fund of $62 655 (2013: $55 146).


Page 48 of 68

Public Trustee Common Funds NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS 7. Revenue and assets for entities within the SA Government

2014 2013$'000 $'000

Public Trustee Common Fund Distributions 7 719 7 900 Refunds & Reimbursements 650 599 Gain / (Loss) on Public Trustee Common Funds ( 484) - Total revenue for entities within SA Government 7 885 8 499

Public Trustee Common Funds 241 942 225 951 Total assets for entities within SA Government 241 942 225 951 Public Trustee administers funds on behalf of a number of government entities that invest in the Common Funds. 8. Derivative financial instruments

Public Trustee did not invest in derivative investments for the year ended 30 June 2014.

9. Financial risk management

Public Trustee’s Common Fund activities expose it to a variety of financial risks: market risk (including interest rate risk and price risk), credit risk and liquidity risk. The overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on financial performance. Only Australian domiciled pooled funds are used for overseas asset purchases. In terms of currency exposure, the Overseas Fixed Interest Common Fund is 100% hedged and the Overseas Shares Common Fund is 50% hedged which reduces currency volatility. The Manager, Investment Services is responsible for ensuring that all investments entered into are within the guidelines specified by Public Trustee’s Investment Guidelines and Procedures Manual. The Manager, Investment Services may recommend to the Public Trustee and the Public Trustee may, after consultation with the Investment Advisory Committee, approve investments outside of Public Trustee’s Investment Guidelines.

(a) Credit risk

Credit risk arises from cash and cash equivalents, deposits with banks and financial institutions, as well as credit exposures to outstanding receivables and committed transactions.

Short-term money market instruments must have a short-term Standard and Poors (S&P) rating of A1 or in the case of the issuer being a bank under the Banking Act 1959 a rating of A2 is accepted. Floating rate instruments must have a long-term S&P credit rating of A+ or better or where the counter party is a bank under the Banking Act 1959, a rating of BBB or better is accepted. Long-term investments must have long-term S&P credit ratings of A+ or better or be an investment in a Commonwealth or Semi-government bond. If there is no independent rating, Public Trustee assesses the credit quality of the provider, taking into account its financial position and past experience.

Credit risk arises primarily with the following classes of instruments and counterparties:

Sovereign debt of the Australian Commonwealth and State Governments Sovereign debt of the foreign governments Banking corporations Corporate debt of investment grade Pooled Investment Funds

The maximum exposure to credit risk at the end of each reporting period is the carrying amount of the financial assets.


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Public Trustee Common Funds NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS 9. Financial risk management (continued)

The credit quality of financial assets that are neither past due nor impaired are assessed by reference to external credit ratings (if available) or to historical information about counterparty default rates.

Pooled Fund Investments are not rated, however, Public Trustee makes a thorough assessment of all Pooled Fund Managers in regard to credit and other risks prior to the investment of funds with each manager. The credit risk lies with the Pooled Fund Manager responsible for the management of the underlying investments. Public Trustee continually monitors these assessments.


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9. Financial risk management (continued)

Credit Risk Analysis2014 2013

$'000 $'000Cash Common FundCash and short term investmentsA1+ 126 617 81 500 A1 78 500 128 033 A2 76 567 44 500 Cash at bank 5 000 5 110

286 684 259 143 Long term investmentsAA - 4 524 AA- 105 042 103 845 A- 6 172 10 250 A+ 11 032 15 003 BBB+ - 517

122 246 134 139

Short Term Fixed Interest Common FundCash and short term investmentsAAA - 2 027 A1+ 2 000 - A1 - 2 513 A2 7 000 2 000 Cash at Bank 18 649 21 478

27 649 28 018 Long term investments

AAA - 2 000 AA+ 2 125 2 109 AA 5 429 5 424 AA- 11 538 7 965 A- 5 086 2 013 BBB+ - 1 551

24 178 21 062

Long Term Fixed Interest Common FundCash and short term investmentsAAA - 7 090 A1+ - 3 014 A1+ 6 043 2 000 A2 2 021 2 000 Cash at Bank 17 239 10 849

25 303 24 953 Long term investmentsAAA 9 335 17 763 AA+ 34 598 20 165 AA 13 938 14 408 AA- 10 899 12 440

68 770 64 776


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9. Financial risk management (continued)2014 2013

$'000 $'000Overseas Fixed Interest Common FundCash 13 668 10 488

Australian Shares Common FundCash 8 936 6 454

Overseas Shares Common FundCash 2 770 4 350

Property Common Fund (formerly Listed Property Securities Common Fund)Cash 1 393 1 527

(b) Market risk

(i) Price risk

The Australian Shares Common Fund, Overseas Shares Common Fund and the Property Common Fund are exposed to equity securities price risk. This arises from investments held by Public Trustee and classified in the Statement of Financial Position as financial assets at fair value through the profit or loss. Public Trustee is not exposed to commodity price risk.

To manage its price risk arising from investments in equity securities, Public Trustee diversifies its portfolio. Diversification of the portfolio is in accordance with Public Trustee’s Investment Guidelines. Irrespective of what type of investment vehicle is used, the primary focus is to ensure the risk/reward objectives of Public Trustee’s investment approach are met. The Common Funds comprise a number of sub-portfolios which invest in different sectors of the equity market.

The Australian Shares Common Fund invests primarily in Top 300 ASX Companies. The remaining investments are in companies outside of the Top 100, with the Australian Shares Common Fund portfolio consisting of listed shares, convertible notes, instalment receipts, preference shares and options. No derivative products are permitted under Public Trustee’s Investment Guidelines. Equities in the Overseas Shares Common Fund consist of investments through Australian domiciled-pooled funds that obviate exposure to currency price risk. An “active” approach is used by the fund utilising a variety of fund managers with different investment styles. This provides diversification benefits and reduces the overall level of risk.

The Property Common Fund (formerly Listed Property Securities Common Fund) primarily invests in listed securities including exchange traded options from the Property Trust sector of any Australian or overseas stock exchange or any listed company whose major activity is in real properties.

(ii) Cash flow and interest rate risk

Public Trustee is exposed to interest rate risk arising from cash investments, short term investments and Australian fixed interest investments. Instruments issued at fixed interest rates expose Public Trustee to fair value interest rate risk and variable rate instruments expose Public Trustee to cash flow interest rate risk.

The Cash Common Fund can invest in short term money market instruments with up to one year maturity, floating rate investment instruments with maturity terms up to 10 years if the counterparty is a bank with a credit rating of A- or better or fixed interest instruments with maturity terms up to 3 years. Securities with greater than one year maturity are restricted to make up less than 20% of the overall fund.

The Short Term Fixed Interest Common Fund can invest in fixed interest securities with maturity terms of three years if the credit rating is A+ or better, or a maturity term of up to 6 years for Commonwealth bonds, Semi-government bonds. The Long Term Fixed Interest Common Fund invests in securities with maturities ranging from 5 years to 25 years.


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9. Financial risk management (continued) (iii) Foreign exchange risk

The Overseas Fixed Interest Common Fund and the Overseas Shares Common Fund are indirectly exposed to foreign exchange risk as a result of their investments in other unit trusts which in turn invest in financial instruments that are denominated in foreign currencies. A sensitivity analysis is provided below, outlining the exposure to each type of market risk at the end of each reporting period, showing how profit or loss and equity would have been affected by the changes in the relevant risk variable that was reasonably possible at that date. All instruments are designated as financial assets at fair value through the profit or loss; resulting in no impact on equity.


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9. Financial risk management (continued) - sensitivity analysis

Cash Common Fund

- + - +1% 1% 20% 10%

Carrying Amount

Profit & Loss

Profit & Loss

Profit & Loss

Profit & Loss

$'000 $'000 $'000 $'000 $'000Financial assetsCash & cash equivalents 5 000 ( 50) 50 - - Financial assets held at fair value through profit or loss 403 930 (4 039) 4 039 - -

Financial liabilitiesBank overdraft ( 64) ( 1) 1 - - Total (decrease) increase (4 090) 4 090 - -

- + - +1% 1% 20% 10%

Carrying Amount

Profit & Loss

Profit & Loss

Profit & Loss

Profit & Loss

$'000 $'000 $'000 $'000 $'000Financial assetsCash & cash equivalents 5 110 ( 51) 51 - - Financial assets held at fair value through profit or loss 388 172 (3 882) 3 882 - -

Financial liab ilitiesBank overdraft - - - - - Total (decrease) increase (3 933) 3 933 - -


- + - +1% 1% 20% 10%

Carrying Amount

Profit & Loss

Profit & Loss

Profit & Loss

Profit & Loss

$'000 $'000 $'000 $'000 $'000Financial assetsDeposits with Cash Common Fund 18 649 ( 186) 186 - - Financial assets held at fair value through profit or loss 33 178 ( 332) 332 - - Total (decrease) increase ( 518) 518 - -

- + - +1% 1% 20% 10%

Carrying Amount

Profit & Loss

Profit & Loss

Profit & Loss

Profit & Loss


2014

2013

2014

2013

Interest rate risk Price risk

Interest rate risk


Price risk



Page 54 of 68

Public Trustee Common Funds NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS 9. Financial risk management (continued) - sensitivity analysis


- + - +1% 1% 20% 10%

Carrying Amount

Profit & Loss

Profit & Loss

Profit & Loss

Profit & Loss


- + - +1% 1% 20% 10%

Carrying Amount

Profit & Loss

Profit & Loss

Profit & Loss

Profit & Loss



- + - +1% 1% 20% 10%

Carrying Amount

Profit & Loss

Profit & Loss

Profit & Loss

Profit & Loss

$'000 $'000 $'000 $'000 $'000Financial assetsDeposits with Cash Common Fund 13 668 ( 137) 137 - - Financial assets held at fair value through profit or loss 24 726 - - (4 945) 2 473 Total (decrease) increase ( 137) 137 (4 945) 2 473

- + - +1% 1% 20% 10%

Carrying Amount

Profit & Loss

Profit & Loss

Profit & Loss

Profit & Loss



Interest rate risk Price risk2014

2013


2014Interest rate risk Price risk

2013


Page 55 of 16



- + - +1% 1% 20% 10%

Carrying Amount

Profit & Loss

Profit & Loss

Profit & Loss

Profit & Loss


- + - +1% 1% 20% 10%

Carrying Amount

Profit & Loss

Profit & Loss

Profit & Loss

Profit & Loss



- + - +1% 1% 20% 10%

Carrying Amount

Profit & Loss

Profit & Loss

Profit & Loss

Profit & Loss


- + - +1% 1% 20% 10%

Carrying Amount

Profit & Loss

Profit & Loss

Profit & Loss

Profit & Loss



2014

Interest rate risk Price risk2014



2013


Page 56 of 68



- + - +1% 1% 20% 10%

Carrying Amount

Profit & Loss

Profit & Loss

Profit & Loss

Profit & Loss


- + - +1% 1% 20% 10%

Carrying Amount

Profit & Loss

Profit & Loss

Profit & Loss

Profit & Loss




2013

(c) Liquidity risk

Public Trustee has working capital policies in place in order to maintain liquidity for clients. Short-term investment analysis assists in determining the amount, if any, to be invested or reinvested in order to maintain working capital. Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, and the ability to close out market positions. Public Trustee manages the liquidity risk by continuously monitoring forecast and actual cash flows and matching maturity profiles of financial assets and liabilities.

(d) Fair value estimation

The fair value of financial assets and financial liabilities are estimated for recognition and measurement or for disclosure purposes. The fair value of these assets and liabilities is equal to their carrying amount.

Cash and cash equivalents are valued at nominal amounts. This asset consists of cash at bank, on hand and short-term money market deposits with maturities of three months or less that is readily converted to cash and which are subject to insignificant risk of changes in value.

Financial assets and liabilities are held at fair value through the profit or loss. Investments in pooled funds are recorded at fair value as reported by the managers of such funds. Public Trustee has determined the fair value of financial assets to be market value of these investments at balance date. Accounting Standard AASB 7 Financial Instruments: Disclosures requires disclosure of the measurement methodology used to value financial instruments. Public Trustee invests though fund managers and utilises pricing data provided by those managers which is indirectly derived from the pricing of the underlying securities. Consistent with the definitions in AASB 7 this methodology is classified as level 2 of the fair value hierarchy. Receivables and payables are valued on a historical cost basis and Public Trustee considers that the carrying value approximates market value.


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Public Trustee Common Funds NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS 10. Cash flow reconciliation

Cash Common Fund 2014 2013$'000 $'000

(a) Reconciliation of cash and cash equivalentsStatement of Cash Flows 4 936 5 110 Statement of Financial Position 4 936 5 110

(b) Reconciliation of profit/loss to net cash provided by (used in) operating activities:Net operating profit for the year 11 782 17 846 Non-cash operating activitiesNet losses/(gains) on financial instruments held at fair value through profit or loss 333 (2 369) Amortisation of discounts and premiums ( 40) ( 83) Movement in assets and liabilitiesDecrease in receivables and other assets 709 627 (Decrease)/increase in payables and other liabilities ( 9) 30 Adjustment for balance day transactions 61 ( 132) Net cash provided by operating activities 12 836 15 919

Short Term Fixed Interest Common Fund 2014 2013$'000 $'000


(b) Reconciliation of profit/loss to net cash provided by (used in) operating activities:Net operating profit for the year 1 592 2 009 Non-cash operating activitiesNet (gains) on financial instruments held at fair value through profit or loss ( 57) ( 84) Amortisation of discounts and premiums 91 29 Movement in assets and liabilitiesDecrease in receivables and other assets 50 148 (Decrease)/increase in payables and other liabilities ( 1) 2 Net cash provided by operating activities 1 675 2 104

Long Term Fixed Interest Common Fund 2014 2013$'000 $'000


(b) Reconciliation of profit/loss to net cash provided by (used in) operating activities:Net operating profit for the year 4 619 3 594 Non-cash operating activitiesNet (gains)/losses on financial instruments held at fair value through profit or loss (1 545) 45 Amortisation of discounts and premiums 149 78 Movement in assets and liabilitiesDecrease/(increase) in receivables and other assets 51 ( 7) (Decrease)/increase in payables and other liabilities ( 5) 5 Net cash provided by operating activities 3 269 3 715


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Public Trustee Common Funds NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS 10. Cash flow reconciliation (continued)

Overseas Fixed Interest Common Fund 2014 2013$'000 $'000


(b) Reconciliation of profit/loss to net cash provided by (used in) operating activities:Net operating profit for the year 1 792 1 227 Non-cash operating activitiesNet (gains)/losses on financial instruments held at fair value through profit or loss ( 959) 236 Income reinvested and not received in cash ( 151) ( 150) Movement in assets and liabilitiesDecrease in receivables and other assets 576 606 (Decrease)/increase in payables and other liabilities ( 1) 1 Net cash provided by operating activities 1 257 1 920

Australian Shares Common Fund 2014 2013$'000 $'000


(b) Reconciliation of profit/loss to net cash provided by (used in) operating activities:Net operating profit for the year 28 458 26 946 Non-cash operating activitiesNet (gains) on financial instruments held at fair value through profit or loss (21 150) (20 746) Income reinvested and not received in cash ( 507) (1 688) Movement in assets and liabilities(Increase) in receivables and other assets (2 734) ( 80) (Decrease)/increase in payables and other liabilities ( 10) 10 Net cash provided by operating activities 4 057 4 442

Overseas Shares Common Fund 2014 2013$'000 $'000


(b) Reconciliation of profit/loss to net cash provided by (used in) operating activities:Net operating profit for the year 22 348 32 887 Non-cash operating activitiesNet (gains) on financial instruments held at fair value through profit or loss (19 474) (31 203) Income reinvested and not received in cash ( 381) ( 262) Movement in assets and liabilities(Increase)/decrease in receivables and other assets (1 638) 452 (Decrease)/increase in payables and other liabilities ( 7) 7 Net cash provided by operating activities 848 1 881


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Public Trustee Common Funds NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS 10. Cash flow reconciliation (continued)

Property Common Fund (formerly Listed Property Securities Common Fund) 2014 2013$'000 $'000


(b) Reconciliation of profit/loss to net cash provided by (used in) operating activities:Net operating profit for the year 7 397 8 105 Non-cash operating activitiesNet (gains) on financial instruments held at fair value through profit or loss (3 382) (5 619) Income reinvested and not received in cash ( 128) ( 139) Movement in assets and liabilities(Increase) in receivables and other assets (2 767) ( 187) (Decrease)/increase in payables and other liabilities ( 3) 3 Net cash provided by operating activities 1 117 2 163

11. Events occurring after balance date

The Property Common Fund invested $3.5 million in an unlisted infrastructure fund which comprises a quality portfolio of long life assets on 8 July 2014.


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Appendix 1: Common Funds Statutory Information Section 30(3) of the Public Trustee Act 1995 requires certain information about each Common Fund operated by the Public Trustee to be included within the Annual Report. Below are the locations of the required information (where the information is not included in this Appendix): Audited Statement of Accounts in respect of each Common Fund Refer to the Corporate and Customer Financial Information section of this report. The Auditor-General’s Report upon the Statements of Account Refer to the Corporate and Customer Financial Information section of this report. The nature and amount of any fee that Public Trustee charges in respect of investment in the Common Funds Management fee A management fee is charged against money invested in each Common Fund at the rate of one-twelfth of 1.025% (inc. of GST) of the value of the fund as at the first business day of each month. Management fees attract GST at a reduced rate as there is an entitlement to claim a reduced input tax credit. Goods and Services Tax An investment in Public Trustee’s common funds is classified as an input-taxed financial supply and no GST is charged on such supplies. Simply put, investments made in common funds and investor withdrawals from those funds are not subject to GST; nor are entry fees subject to GST. If a supply is input-taxed, the supplier will not usually receive a tax credit for any GST incurred in connection with the supplier’s expenses. However, for financial supplies, the supplier is able to claim a tax credit for three quarters of the liability incurred in respect of certain expenses (this is called a reduced input tax credit). The majority of expenses incurred by Public Trustee’s common funds, including Public Trustee management fees, brokerage charges and custody fees, are eligible for the reduced input tax credit. The net impact of the GST on expenses incurred by the common funds is therefore approximately 2.5% rather than the full 10% rate. Indirect Cost Ratios (formerly Management Expense Ratio) The total funds management costs for Common Funds and Standard Investment Strategies, as represented by Indirect Cost Ratios, are shown in the following table. These figures on the following page are inclusive of the net impact of GST.


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Table 25: Standard Investment Strategies Indirect Cost Ratios 2013–14 Standard Investment Strategies

Indirect Cost Ratios (ICR)

Standard Investment Strategies ICRs

Strategy ICR 2013–14 ICR 2012–13

Cash 1.08% 1.08%

Capital Stable 1.26% 1.25%

Balanced 1.42% 1.40%

Growth 1.55% 1.52%

Equities 1.73% 1.72%

Common Fund ICR 2013–14 ICR 2012–13

Cash 1.08% 1.08%

Long-term Fixed Interest 1.09% 1.09%

Short-term Fixed Interest 1.08% 1.08%

Overseas Fixed Interest 1.15% 1.16%

Australian Shares 1.68% 1.68%

Property 1.64% 1.62%

Overseas Shares 1.78% 1.77%

Fees In accordance with Section 29 of the Public Trustee Act 1995, investors pay the following fees when investing in Common Funds (NB no fees are charged on entry or exit from the Cash Common Fund): All other standard investment strategies For beneficiaries of estates administered by Public Trustee, where there is a change of

ownership of the assets and when funds would otherwise be distributed: Amounts up to $500 000 0.5% Additional amounts from $500 000 to $2 million 0.375% Additional amounts from $2 million to $5 million 0.25% Additional amounts above $5 million 0%

For beneficiaries of estates administered by Public Trustee where there is no change of ownership of the assets and when funds would otherwise be distributed: No entry fee will apply except to additional funds invested, in which case the above reduced scale for the beneficiary investors will apply.

For all other investors:

Amounts up to $500 000 1.0% Additional amounts from $500 000 to $2 million 0.75% Additional amounts from $2 million to $5 million 0.5% Additional amounts above $5 million 0%


Page 63 of 16

The above fees will also apply to distributed income and realised capital gains when they are reinvested in a strategy other than cash. No exit fees are charged. No switching fees will be charged except when moving monies from the Cash Strategy to another investment strategy. The above fees will then apply. Deposits Public Trustee does not accept cash deposits. Investments in Investment Strategies may be made either by cheque, direct credit or by transfer of funds from an existing estate being administered by Public Trustee. Identification When establishing an investment account with Public Trustee, customers may be required to provide satisfactory proof of identity. A Public Trustee contact officer will explain identification requirements. The extent to which a capital sum invested may be reduced to defray losses from investment of a Common Fund Realised or unrealised losses of a capital nature of an investment of a Common Fund shall be received or borne by investors, in proportion to the capital sums invested in the fund. Rights of an investor in a Common Fund to withdraw all or part of a person’s investment in the fund Investors may withdraw all or part of their investment in a fund at any time. Part withdrawals must be in amounts of $1 000 or greater, or the balance of the funds being managed, if the amount to be withdrawn reduces the remaining balance to less than $5 000. Proceeds of withdrawals from the Cash Common Fund of amounts less than $1 million will be available on the next business day. Proceeds of withdrawals of amounts greater than $1 million may not be available until the thirtieth business day.

Proceeds of withdrawals from Investment Strategies, other than the Cash Investment Strategy Fund, will not be available until 15 business days after the next exit day (currently the first day of each month). Proceeds of withdrawals of amounts greater than $1 million from these Investment Strategies may not be available until the thirtieth business day after the next exit day. Terms governing distribution of income and profit or loss of a capital nature attributable to each investment in a Common Fund The net income and realised capital gains of each fund are calculated to 30 June and 31 December and will be distributed to the investor in July and January of each year, unless the investor has given instructions to reinvest the money.


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Classes of investment in which Common Funds may invest Introduction Section 29 of the Public Trustee Act 1995 (‘the Act') requires the Public Trustee to determine the classes of investments in which a Common Fund may be invested, and provides for these classes to be varied from time to time. The Act does not define classes of investment. Determination of the classes of investment in which Public Trustee Common Funds may invest Cash Common Fund The permitted classes of investment are: a. Cash b. Fixed Interest Qualifications on these investment classes:

i. All investments shall be denominated in Australian dollars. ii. Fixed rate securities shall not exceed three years to maturity. iii. Floating rate securities shall not exceed 10 years to maturity.

The following class of investment is explicitly excluded: Derivatives. The fund may invest in collective investment schemes operated by organisations approved by the relevant government agencies, provided that the rules of the collective investment schemes restrict the schemes’ investments to the permitted classes of investment of the Common Fund. Short-term Fixed Interest Common Fund The permitted classes of investment are: a. Cash b. Fixed Interest Qualifications on these investment classes:

i. All investments shall be denominated in Australian dollars. The fund’s liquidity requirements will be managed by an investment in the Cash Common Fund.

ii. Fixed rate securities shall not exceed five years to maturity. iii. Floating rate securities shall not exceed 10 years to maturity.

Security lending arrangements in relation to authorised investments are permitted. The following class of investment is explicitly excluded: Derivatives. The fund may invest in collective investment schemes operated by organisations approved by the relevant government agencies, provided that the rules of the collective investment schemes restrict the schemes' investments to the permitted classes of investment of the Common Fund. Long-term Fixed Interest Common Fund The permitted classes of investment are: a. Cash b. Fixed Interest c. Inflation-linked Securities


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Qualifications on these investment classes: i. All investments shall be denominated in Australian dollars. ii. The fund's liquidity requirements will be met by investment in the Cash Common Fund. iii. Fixed rate securities and inflation-linked securities shall not exceed 15 years and 25

years to maturity, respectively. iv. Inflation-linked securities shall be restricted to consumer inflation or average weekly

earnings-linked securities issued by the Commonwealth Government, State Governments or the Government of the Northern Territory, and securities issued by other parties where the payments to holders of the securities are guaranteed by these governments.

v. Security lending arrangements in relation to authorised investments are permitted. The following class of investment is explicitly excluded: Derivatives The fund may invest in collective investment schemes operated by organisations approved by the relevant government agencies, provided that the rules or the collective investment schemes restrict the schemes' investments to the permitted classes of investment of the Common Fund. Australian Shares Common Fund The classes of investment are: a. Cash b. Australian equities c. Derivatives Qualifications on these investment classes:

i. Fund liquidity requirements shall be met by investment in the Cash Common Fund. ii. Investments in Australian Equities shall be limited to securities of companies and trusts

listed on the Australian Stock Exchange, and to unlisted securities in companies and trusts where the intention is for these securities to be listed within six months of investment.

iii. Small capitalisation companies, defined as those outside the Top 100 Sector of the Australian Stock Exchange's All Ordinaries Index, shall not exceed 20% of the fund's assets.

iv. Underwriting is permitted only where Public Trustee has made a firm subscription to a new issue and the amount underwritten does not exceed the subscription amount.

v. Underwriting as an investment instrument is prohibited. vi. Security lending arrangements in relation to authorised investments is permitted. vii. Investments in financial derivatives specifically relating to the investments of the fund

are permitted for the purpose of: investment of funds; or hedging or otherwise managing the risk of the fund.

The fund may invest in collective investment schemes operated by organisations approved by the relevant government agencies, provided that the rules of the collective investment schemes restrict the schemes' investments to the permitted classes of investment of the Common Fund. Property Common Fund The classes of investment are: a. Cash b. Property. Qualifications on these investment classes:


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i. Fund liquidity requirements shall be met by investment in the Cash Common Fund. ii. Investments in property comprise securities of companies and trusts that are either

listed or unlisted. iii. Investments in listed and unlisted infrastructure trusts are permitted in the fund. iv. Underwriting is permitted only where Public Trustee has made a firm subscription to a

new issue and the amount underwritten does not exceed the subscription amount. v. Security lending arrangements in relation to authorised investments are permitted.

Investments in financial derivatives specifically relating to the investments of the fund are

permitted for the purpose of: investment of funds; or hedging or otherwise managing the risk of the fund.

The fund may invest in collective investment schemes operated by organisations approved by the relevant government agencies, provided that the rules of the collective investment schemes restrict the schemes' investments to the permitted classes of investment of the Common Fund. Overseas Shares Common Fund The classes of investment are: a. Cash b. International Equities c. Derivatives. Qualifications on these investment classes:

i. Fund liquidity requirements shall be met by investment in the Cash Common Fund. ii. Cash, where held other than by investment in the Cash Common Fund, shall be held

as bank deposits, bank-guaranteed securities or short-term sovereign debt instruments.

iii. Trading in inter-bank or over-the-counter markets shall occur only in those markets which have been approved by the relevant government agencies of the country in which the market is conducted.

iv. Investments in collective investment schemes, the primary mandates of which are the holdings of smaller companies and emerging markets securities, shall not exceed 25% and 15% of the assets of this Common Fund, respectively.

v. Underwriting is permitted only where Public Trustee (either directly or via an appointed custodian) has made a firm subscription to a new issue and the amount underwritten does not exceed the subscription amount.

vi. Security lending arrangements in relation to authorised investments are permitted. The fund may invest in collective investment schemes operated by organisations approved by the relevant government agencies, provided that the rules of the collective investment schemes restrict the schemes' investments to the permitted classes of investment of the Common Fund. Overseas Fixed Interest Common Fund The permitted classes of investment are: a. Cash b. International Fixed Interest c. Derivatives Qualifications on these investment classes:

i. The fund's liquidity requirements shall be met by investment in the Cash Common Fund.


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ii. Cash, where held other than by investment in the Cash Common Fund, shall be held as bank deposits, bank-guaranteed securities or short-term sovereign debt instruments.

iii. All fixed income securities must be rated by recognised rating agencies and at least 90% of the fund shall comprise investment-grade securities.

iv. Investments in financial derivatives specifically relating to the investments of the fund are permitted for the purpose of: investment of funds; or hedging or otherwise managing the risk of the fund.

The fund may invest in collective investment schemes operated by organisations approved by the relevant government agencies, provided that the rules of the collective investment schemes restrict the schemes' investments to the permitted classes of investment of the Common Fund.


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