to 30 June 20.7 For the initial reporting period from I ... · The financial statements are...

Uniting Financial Services Ethical DiversifiedFund

Special purpose financial statementsFor the initial reporting period from I February 20,7to 30 June 20.7

ABN 30 182829298

Unitin Financial Services Ethical D'vers'fiedFund

Special purpose financial statementsFor the initial reporting period from I February 2017to 30 June 20.7

ABN 30 182829298

Contents

Statement of comprehensive incomeStatement of financial positionStatement of changes in equityStatement of cash flowsNotes to the financial statementsTrustee's declaration

Independent auditor report to the Trustee of Uniting Financial Services Ethical Diversified Fund

These financial statements cover Uniting Financial Services Ethical Diversified Fund as an individual entity.

The Trustee of Uniting Financial Services Ethical Diversified Fund is The Uniting Church (NSW) TrustAssociation Limited (ABN 89725654978). The Trustee's registered office is Level9,222 Pitt Street. Sydney,NSW, 2000.

234

56

2122

Statement of comprehensive incomeFor the initial reporting period from I February 2017 to 30 June 20.7

Revenue

Distribution incomeInterest income

Net gains/(losses) on financial instruments held at fair value through profit or lossNet foreign eXchange gains/(losses)Total revenue

Uniting Financial Services Ethical Diversified FundStatement of comprehensive income

For the initial reportin onod from I Februa 2017 to 30 June 2017

ExpensesManagement feesTransaction costs

Total expenses

Profitl(loss) before finance costs atIributable to unitholders

Finance costs attributable to unitholders

Distributions to unitholders

Interest expenseIncrease/(decrease) in net assets atIributable to unitholders

Profit for the reporting period atIn butsble to unitholders

Other comprehensive income for the reporting periodTotal comprehensive income for the reporting period atIributable to unitholders

The above statement of comprehensive income should be read in conjunction with the accompanying notes

2017$'000

4

35

1,992,, 5682,434

860

13

6854

^49_

444

5

8

6405

7

2,0863

43.6

Statement of financial positionAs at 30 June 20.7

Assets

Cash and cash equivalentsLoans and receivables

Financial assets held at fair value through profit or lossTotal assets

Liabilities

Distributions payablePayablesFinancial liabilities held at fair value through profit or lossTotal liabilities (excluding net assets atIn butsble to unitholders)

Uniting Financial Services Ethical Diversified FundStatement of financial position

As at 30 June 20.7

Net assets atIributable to unitholders - liability

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

Notes

14(b)109

2017

$'000

3,77126,801

230 315

^6^z_

811

12

,, 55596

^5.3_2104

7 258 783

Statement of changes in equityFor the initial reporting period from I February 20.7 to 30 June 20.7

The Fund's net assets attributable to Unitholders are classified as a liability under MBSB132 FinancialInstruments. ' Presentatibn. As such the Fund has no equity therefore no changes in equity have been presentedfor the initial reporting period.

Changes in net assets attributable to unitholders are disclosed in note 7.

The above statement of changes in equity should be read in conjunction with the accompanying notes

Uniting Financial Services Ethical Diversified FundStatement of changes in equity

Fortheinitialre ortin eriod from I February 2017 to 30 June 2017

Statement of cash flows

For the initial reporting period from I February 2017 to 30 June 20.7

Cash flows from operating activitiesProceeds from sale of financial instruments held at fair value through profit or lossPurchase of financial instruments held at fair value through profit or lossTrust distributions receivedInterest received

Management fees paidTransaction costs on financial instruments held at fair value through profit or lossNet cash inflowl(outflow) from operating activities

Cash flows from f, hancing activitiesProceeds from applications by unitholdersDistributions paidInterest expense paidNet cash inflow/(out, low) from financing activities

Uniting Financial Services Ethical Diversified FundStatement of cash flows

For the initial reportin eriod from , February 2017 to 30 June 20.7

Net increasel(decrease) in cash and cash equivalents

Cash and cash equivalents at the beginning of the reporting period

Effects of foreign currency eXchange rate changes on cash and cash equivalents

Cash and cash equivalents at the end of the reporting period

The above statement of cash flows should be read in conjunction with the accompanying notes.

Notes20.7

$'000

3,542(255,080)

259

1,532(380)

^5L14(a) JââL

254,467(53, )

,_!a^)_253933

3.80,

14(b)

^QL

377,

Contents

2

3

General Information

Summary of significant accounting policies

Interest income

Distribution income

Net gains/(losses) on financial instruments held at fair value through profit or loss

Auditors remuneration

Net assets atIn butable to unitholders

Distributions to unitholders

Financial assets held at fair value through profit or loss

Loans and receivables

Payables

Financial liabilities held at fair value through profit or loss

Related party transactions

Reconciliation of profiV(loss) to net cash inflow/(outflow) from operating activities

Events occurring after the reporting period

Contingent assets, liabilities and commitments

4

Uniting Financial Services Ethical Diversified FundNotes to the financial statements

For the initial reportin period from , Februa 20.7 to 30 June 20.7

5

6

7

8

9

10

11

12

13

14

15

16

Page

7

7

15

15

16

16

16

17

17

17

18

18

19

19

20

20

I General Information

These special purpose financial statements cover Uniting Financial Services Ethical Diversified Fund ("the Trust")as an individual entity. The Trust was created by execution of the Ninth Supplemental and Amending Deed dated18 January 20.7 ("Amending Deed', under the Trust Deed and Constitution for The Uniting Church NSW TrustAssociation Fund dated 18 July 2000 ("Trust Deed").

The Trustee of the Trust is The Uniting Church (NSW) Trust Association Limited ("the Trustee") (ABN 89725654978). The Trustee's registered office is Level9.222 Pitt Street, Sydney. NSW 2000.

The Trust invests in a portfolio of assets diversified across asset classes with exposure through direct investmentor through managed investment schemes. Asset classes may include Australian and international equities.Australian property & infrastructure. alternatives, Australian and international fixed interest, high yield credit,commercial mortgages and cash and short dated securities. Derivative instruments may also be used to gainasset class exposure as for hedging purposes.

The Trustee is incorporated and domiciled in Australia.

The financial statements are presented in Australian dollars. which is the Trusts functional currency.

The financial statements are fortheinitialreporting period from I February 2017 to 30 June 20.7 ("the reportingperiod").

The Trust commenced operations on I February 2017, with an initial investment of $248,967,120. in accordancewith the Trust Deed. Ninth Supplemental Deed and Information Document dated 13 January 2017 ("InformationDocument").

The financial statements were authorised for issue by the Trustee on the date the Trustee's declaration wassigned. The Trustee has the power to amend and reissue the financial statements.


For the initial reporting period from I February 2017 to 30 June 2017(continued)

2 Summary of significant accounting policies

The principal accounting policies applied in the preparation of these financial statements are set out belowThese policies have been consistently applied to all reporting periods presented, unless otherwise stated in thefollowing text

(a) Basis of preparation

In the opinion of the directors of the Trustee, the Trust is not publicly accountable nor a reporting entityAccordingly, these special purpose financial statements have been prepared to satisfy the Trustee's reportingrequirements under the Trust Deed

The Trustis a forprofit entity, however the majority of the unitholders are Australian resident organisationsaffiliated or connected with the Uniting Church and have a tax exempt status.

2 Summary of significant accounting policies (continued)

(a) Basis of preparation (continued)

The special purpose financial statements have been prepared in accordance with the applicable requirementsspecified by all Australian Accounting Standards except the selected disclosure provisions of the followingAustralian Accounting Standards (to the extent relevant to the Trust)

. AASB 7 Financial Instruments. ' Disclosures;


For the initial reporting period from I February 20.7 to 30 June 2017continued)

, AAS B 13 Fair Value Measurement,

. AASB 124 Related Party Disclosures;

. AASB 12 Disclosure of Interestsih Other Entities; and

. AASB 127 Separate Financial Statements.

The financial statements are prepared on the basis of fair value measurement of assets and liabilities exceptwhere otheMise stated.

The statement of financial position is presented on a liquidity basis. Assets and liabilities are presented indecreasing order of liquidity and are riot distinguished between current and non-current

The financial statements of the Trust comply with Australian Accounting Standards as issued by the AustralianAccounting Standards Boards, with the exception of the above stated Accounting Standards.

New/Amended standards adopted by the Trust

The Trust has applied the following major accounting standard amendment (to the extent relevant to the Trustand subject to the above exclusions of the accounting standards) for the first time for the reporting period:

AASB 2015-3 Amendments to AUStraftan Accounting Standards arising from the Withdrawal of AASB 1031Material11y. ' AASB 2015-3 completed the withdrawal of references to AASB 1031 Material11y in all AustralianAccounting Standards and Interpretations, allowing AASB 1031 to be effectiveIy withdrawn. The adoption ofAASB 2015-3 did riot have any impact on the Trust for the initial reporting period and will riot impact any futureperiods.

There were no other new or amended standards and interpretations that became effective for the first time for thereporting period that were relevant to the Trust.

(b) Financial instruments

^ Classification

. F1hancia! assets andli^biffies held at fair value Ihrough profit orloss

The Trusts investments are caregorised as held at fair value through profit orloss. They comprise:

. F1hancialinstruments held for trading

These may include derivative financial instruments including futures, forward contracts. options and interestrate swaps. All derivatives in a net receivable or payable position are shown gross and reported as eitherderivative financial assets or derivative financial liabilities. The Trust does not designate any derivatives ashedges in a hedging relationship.


(b) Financial instruments (continued)

in Classification (continued)

. F1hancialins!fuments designated at fair value through profit o110ss upon lintialrecognition

These include financial assets and financial liabilities that are not held for trading purposes and which maybe sold. These may include investments in eXchange traded equity instruments.

Financial assets and financial liabilities designated at fair value through profit or loss at inception are thosethat are managed and their performance evaluated on a fair value basis in accordance with the Trust'sdocumented investment strategy. The Trust's policy is for the Trustee to evaluate the information aboutthese financial instruments on a fair value basis together with other related financial information

The information on the fair value basis is provided internally to the Trusts key management personnel. Inaddition, the designation of financial assets and financial liabilities at fair value through profit or loss willreduce any measurement or recognition inconsistencies and any accounting mismatch that would otherwise


Fortheinitialreporting period from I February 20.7 to 30 June 20.7(continued)

, Loans and receivable SIPayables

Loans and receivable SIPayables are non-derivative financial assets/liabilities with fixed or determinablepayments that are riot quoted in an active market. This category includes short-term receivable SIPayables

(141 Recognition/derecognition

The Trust recognises financial assets and financial liabilities on the date it becomes party to the contractualagreement (trade date) and recognises changes in fair value of the financial assets or financial liabilities from thisdate

A financial asset (or, where applicable a part of a financial asset or part of a group of similar financial assets) isderecognised where:

. the rights to receive cash flows from the asset have expired;

. the Trust retains the right to receive cash flows from the asset. but has assumed an obligation to pay them in fullwithout material delay to a third party under a 'pass through' agreement; or

. the Trust has transferred its rights to receive cash flows from the asset and either

(a) has transferred substantially all the risks and rewards of the asset: or(b) has neither transferred nor retained substantially all the risks and rewards of the asset but has transferredcontrol of the asset

A financial liability is derecognised when the obligation under the liability is discharged, cancelled or expires.

Any gains or losses arising on derecognition of the asset (calculated as the difference between the disposalproceeds and the carrying amount of the asset) are in duded in the statement of comprehensive income in thereporting period the asset is derecognised as realised gains or losses on financial instruments

("41 Measurement

. F1hancia! assets and 11^biffti^s held at fair value through profit or loss

Financial assets and liabilities held at fair value through profit or loss are measured initially at fair valueexcluding any transaction costs that are directly attributable to the acquisition or issue of the financial asset orfinancial liability. Transaction costs on financial assets and financial liabilities at fair value through profit orlossare expensed immediately. Subsequent to initial recognition. all instruments held at fair value through profit orloss are measured at fair value with changes in their fair value recognised in the statement of comprehensiveIncome.

arise.


(b) Financial instruments Icontinued)

(114) Measurement toont, hued)

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderlytransaction between market participants at the measurement date.

. Fair value in an active market

The fair value of financial assets and liabilities traded in active markets is based on their quoted marketprices at the end of the reporting period without any deduction for estimated future selling costs. Financialassets are priced at current bid prices, while financial liabilities are priced at current asking prices

A financial instrument is regarded as quoted in active market if quoted prices are readily and regularlyavailable from an eXchange, dealer, broker. industry group, pricing service, or regulatory agency. and thoseprices represent actual and regularly occurring market transactions on an arm's length basis.

The Trust's financial instruments that are valued based on active markets generally include listedinstruments, ranging from listed equity and/or debt securities to listed derivatives.

. Fair value In an inactive or unquoted market

The fair value of financial assets and liabilities riot traded in an active market is determined using valuationtechniques. These include the use of recent arm's length market transactions, discounted cash flowtechniques. option pricing models or any other valuation technique that provides a reliable estimate of pricesobtained in actual market transactions.

Where discounted cash flow techniques are used, estimated future cash flows are based on management'sbest estimates and the discount rate used is the market rate at the end of the reporting period applicable foran instrument with similar terms and conditions.

For other pricing models, inputs are based on market data at the end of the reporting period.

There may be a difference between the fair value at initial recognition and amounts determined using avaluation technique. If such a difference exists. the Trust recognises the difference in the statement ofcomprehensive income to reflect a change in factors, including time, that market participants would considerin setting a price.

The fair value of derivatives that are not eXchange-traded is estimated at the amount that the Trust wouldreceive or pay to terminate the contract at the end of the reporting period taking into account current marketconditions (volatility and appropriate yield curve) and the current creditworthiness of the counterparties. Thefair value of a forward contract is determined as a net present value of estimated future cash flows,discounted at appropriate market rates as at the valuation date. The fair value of an option contract isdetermined by applying the most appropriate option valuation model.

Investments in unlisted unit trusts are measured at fair value, which is generally determined to beredemption value per unit as reported by the managers of such trusts

The Trust's financial instruments that are valued based on inactive or unquoted markets generally includeunlisted instruments ranging from investments in unlisted unit trusts. unlisted equity and/or debt securities toover the counter derivatives.


For the initial reporting period from I February 2017 to 30 June 20,7continued


(b) Financial instruments (continued)

(1141 Measurement (continuedI

. Loans andreceiVables4:jayables

Loans and receivable SIPayables are measured Initially at fair value plus transaction costs.

Subsequently, loans are carried at amortised cost using the effective interest method, less impairment losses, ifany. Short term receivable SIPayables are carried at their initial fair values. Such assets are rev'ewed at eachbalance sheet date to determine whether there is objective evidence of impairment

If evidence of impairment exists, an impairment loss is recognized in profit or loss as the difference between theassets' carrying amount and the present value of estimated future cash flows discounted at the original effectiveinterest rate. If in the subsequent period the amount of an impairment loss recognized on a financial assetcarried at am onised cost decreases and the decrease can be linked objectiveIy to an event occurring after thewrite-down. the write-down is reversed through profit or loss.


For the initial reporting period from I February 20.7 to 30 June 20,7(continued)

(c) Net assets attributable to unitholders

Units are redeemable at the unitholders' option and are classified as financial liabilities due to mandatorydistributions. The units can be put back to the Trust at any time for cash based on the redemption price. The fairvalue of redeemable units is measured at the redemption amount that is payable (based on the redemption unitprice) at the reporting date if unitholders exercised their right to put the units back to the Trust. Changes in thevalue of this financial liability are recognised in the statement of comprehensive income as they arise.

(d) Cash and cash equivalents

For the purpose of presentation in the statement of cash flows, cash and cash equivalents includes cash onhand, deposits held at call with financial institutions. other short term, highly liquid investments with originalmarurities of three months or less from the date of acquisition that are readily convertible to known amounts ofcash and which are subject to an insignificant risk of changes in value, and bank overdrafts. Bank overdrafts, ifany, are shown within borrowings in the statement of financial position.

Payments and receipts relating to the purchase and sale of investment securities are classified as cash flowsfrom operating activities, as movements in the fair value of these securities represent the Trusts main incomegenerating activity.

(e) Investment income

Interest income and interest expenses are recognised in the statement of comprehensive income for all financialinstruments on an accrual basis. Other changes in fair value for such instruments are recorded in accordancewith the policies described in note 2(b).

Interest income is recognised in profit or loss as it accrues using the nominated interest rates available on thebank accounts held

The effective interest method is a method of calculating the am onised cost of a financial asset or financial liabilityand of allocating the interest income or interest expense over the relevant period. The effective interest rate is therate that discounts estimated future cash payments or receipts throughout the expected life of the financialinstrument. or a shorter period where appropriate, to the net carrying amount of the financial instrument. Whencalculating the effective interest rate. the Trust estimates cash flows considering all contractual terms of thefinancial instrument (for example, prepayment options) but does not consider future credit losses. The calculationincludes all fees paid or received between the parties to the contract that are an integral part of the effectiveinterest rate. including transaction costs and all other premiums or discounts.


(e) Investment income (continued)

Trust distributions are recognised on an entitlements basis.

Net gains/(losses) on financial assets and financial liabilities held at fair value through profit or loss arising on achange in fair value are calculated as the difference between the fair value at the end of the reporting period andthe fair value at the previous valuation point. Net gains/(losses) do riot include interest or dividend/distributionIncome.


For the initial reporting period from I February 2017 to 30 June 20.7(continued)

(f) Expenses

All expenses, including Trustee's fees and custodian fees. are recognised in the statement of comprehensiveincome on an accruals basis. The Trustee will, on a best endeavours basis, manage the management expenseratio of the Trust to approximately I% plus GST per annum. Expenses are recognised net of the amount ofassociated GST where it is recoverable from the taxation authority.

(g) Income tax

Under current legislation, the Trust is not subject to income tax provided the taxable income of the Trust isdistributed either by way of cash or reinvestmerit (i. e. unitholders are presently entitled to the income of theTrust)

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

(h) Distributions

In accordance with the Trust Deed. the Trust distributes its distributable (taxable) income, and any other amountsdetermined by the Trustee, to unitholders by cash or reinvestmerit. The distributions are recognised in thestatement of other comprehensive income as finance costs atIributable to unitholders.

in Changes in net assets atIributable to unitholders

Income riot distributed is included in net assets attributab!e to unitholders. Movements in net assets attributableto unitholders are recognised in the statement of comprehensive income as finance costs.

in Receivables

Receivables may include amounts for dividends, interest and securities sold where settlement has riot yetoccurred. Dividends and trust distributions are accrued when the right 10 receive payment is established. Interestis accrued at the end of each reporting period from the time of last payment in accordance with the policy set outin note 2(e) above. Amounts are generally received within 30 days of being recorded as receivables

Receivables include such items as Reduced Input Tax Credits (RITC) and application monies receivable fromunitholders.


(k) Payables

Payables include liabilities and accrued expenses owing by the Trust which are unpaid as at the end of thereporting period.

Trades are recorded on trade date, and nonnally settled within three business days. Purchases of financialinstruments that are unsettled at the end of each reporting period are included in payables.

The distribution amount payable to unitholders as at the end of each reporting period is recognised separately inthe statement of financial position when unitholders are presently entitled to the distributable income under theTrust Deed.


For the initial reporting period from I February 2017 to 30 June 2017(continued)

(1) Applications and redemptions

Applications received for units in the Trust are recorded net of any entry fees payable prior to the issue of units inthe Trust. Redemptions from the Trust are recorded gross of any exit fees payable after the cancellation of unitsredeemed.

Unit redemption prices are determined by reference to the net assets of the Trust divided by the number of unitson Issue.

(in) Goods and Services Tax (GST)

Expenses of various services provided to the Trust by third parties such as Trustee fees, custodial services andinvestment management fees are recognised net of the amount of associated GST. unless the GST incurred isnot recoverable from the taxation authority. In this case. it is recognised as part of the related expense or costitem.

Accounts payable and receivable are stated Indusive of the GST receivable and payable. The net amount ofGST recoverable from, or payable to, the taxation authority is in duded in receivables or payables in thestatement of financial position.

Cash flows relating to GST are included in the statement of cash flows on a gross basis.

(n) Use of judgments and estimates

The preparation of the Trust's financial statements requires it to make judgments. estimates and assumptionsthat affect the reported amounts of assets and liabilities. Uncertainty about these assumptions and estimatescould result in outcomes that could require a material adjustment to the carrying amount of the asset or liabilityaffected in the future. However, estimates are continually evaluated and based on historical experience and otherfactors, including expectations of future events that are believed to be reasonable under the circumstances.

The Trust's financial instruments are valued primarily based on the prices provided by independent pricingservices.

When the fair values of the reported financial instruments cannot be derived from active markets, they aredetermined using prices obtained from inactive or unquoted markets and/or other valuation techniques. Theinputs to these valuation techniques (if applicable) are taken from observable markets to the extent practicableWhere observable inputs are riot available, the inputs may be estimated based on a degree of judgments andassumptions in establishing fair values.

Where appropriate, the outcomes of the valuation techniques that are used in establishing fair values areval dated using prices from observable current market transactions for similar instruments (without modification orrepackaging) or based on relevant available observabte market data


(n) Use of judgments and estimates (continued)

The determination of what constitutes 'observable' requires significantjudgment by the Trust. The Trust considersobservable data to be market data that is readily available. regularly distributed or updated, reliable andvennable. riot proprietary. and provided by independent sources that are actively involved in the relevant market

In addition, areas such as credit risk (both own and counterparty). volatilities and correlations requiremanagement to make estimates andjudgments. Changes in assumptions about these factors could affect thereported fair value of financial instruments.

The carrying amounts of all the Trusts financial assets and financial liabilities at the end of the reporting periodapproximated their fair values

The Trusts accounting policy on fair value measurement is set out in note 2b(Iii). The methods and assumptionsused in the determination of the fair value of each class of financial instruments are also set out in note 2b(Iii).

For certain other financial instruments, including amounts due from/to brokers. accounts payable and accountsreceivable the carrying amounts approximate fair value due to the immediate or short-term nature of thesefinancial instruments.


For the initial reporting period from I February 20.7 to 30 June 2017(continued

(0) New accounting standards and interpretations

Certain new accounting standards and interpretations have been published that are not mandatory for the 30June 2017 reporting period and have riot yet been applied in the financial statements. The directors' assessmentof the impact of these new standards (to the extent relevant to the Trust) and interpretations is set out below

(1) AASB 9 F1hancial/nstniments (and applicable amendments) (effective from I January 2018)

AASB 9 Financial Instruments addresses the classification, measurement, recognition and derecognition offinancial assets and financial liabilities. it has now also introduced revised rules for hedge accounting andimpairment. The Standard is riot applicable until I January 2018 but is available for early adoption. The Trustdoes riot expect this to have a significant impact on the recognition and measurement of the Trust's financialinstruments as they are carried at fair value through profit or loss. The derecognition rules have riot beenchanged from the previous requirements. and the Trust does not apply hedge accounting. AASB 9 introduces anew impairment model. The Trust does not intend to early adopt AASB 9. The Trust will apply AASB 9 in itsfinancial statements for the reporting period commencing from I July 2018.

(ii)AASB15 Revenue from Contracts with Customers (effective from I January 2018)

The AASB has issued a new standard for the recognition of revenue. Once applied or effective. AASB 15 willreplace AASB 118 Revenue which covers contracts for goods and services and AASB 1/1 ConstructionContracts which covers construction contracts. AASB 15 is based on the notion that revenue is recognised whencontrol of a good or service transfers to a customer. This notion of control replaces the existing notion of risksand rewards.

The Trust's main source of incomeincludes interest, distributions and gains on financial instruments held at fairvalue through profit or loss. All of these are outside the scope of the Revenue standard. Consequently, the Trustdoes not expect AASB 15 to have a significant impact on the Trust's financial statements. The Trust does notintend to early adopt AASB 15. The Trust will apply MSB I5 in its financial statements for the reporting periodcommencing from I July 2018.

(11i) AASB 2016-2 Amendments to Australian Accounting Standards - Disclosure Initiative: Amendments to AASB107 (effective from I January 2017)


(0) New accounting standards and interpretations (continued)

AASB 2016-2 amends AASB 107 Statements of Cash Flows to require entities to provide disclosure that enableusers of financial statements to evaluate cash and non-cash changes in their financing activities. No significantimpact is expected upon adoption of the amendments. The Trust does not intend to early adopt AASB 2016-2.The Trust applies AASB 2016-2 in its financial statements for the reporting period commencing from I July 2017

There are no other standards that are not yet effective and that are expected to have a material impact on theTrust in the current or future reporting periods and on foreseeable future transactions.


For the initial reporting period from I February 20.7 to 30 June 2017(continued

(p) Rounding of amounts

Amounts stated in the financial statements are rounded to the nearest thousand dollars as per ASIC Coinorations(Rounding in F1hanci'afr'Directors' Reports) Instrument 2016/19, unless otheiwise indicated.

(q) Deposits held with brokers for margin

Deposits held with brokers for margin comprise cash held as collateral for derivative transactions.

3 Interest income

Cash and cash equivalentsDebt securities

Mortgage loansTotal

4 Distribution income

Related managed investment schemesNon-related managed Investment schemesTotal distribution income

20.7$'000

3

1,111454

, 568

2017

$'000

394, 598, 992

5 Net gainsl(losses) on financial instruments held at fair value through profit or loss

Net gains/(losses) arising from changes in the fair value measurement comprise:

Net unrealised gains/(losses) on financial instruments held for tradingNet unrealised gains/(losses) on financial instruments designated at fair value through profit orloss

Net realised gains/(losses) on financial instruments held for tradingNet realised gains/(losses) on financial instruments designated at fair value through profit orloss

Net gains/(losses) on financial instruments held at fair value through profit orloss


For the initial reporting period from I February 2017 to 30 June 20.7(continued)

6 Auditor's remuneration

During the reporting period the following fees were paid or payable directly by the Trustee for services providedby the auditor of the Trust

KPMG

Audit of financial statementsOther services

Total remuneration for audit services

7 Net assets attributable to unitholders

As stipulated within the Trust Deed, each unit represents a right to an individual share in the Trust and does notextend to a right to the underlying assets of the Trust. There are no separate classes of units and each unit hasthe same rights attaching to it as all other units of the Trust.

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

20.7No. '000

20.7$'000

ApplicationsIncrease in net assets attributable to unitholders

Closing balance

3,639(,, 640)

^1.91~2434

454

20.7

20,000a0 000

,a^9,009_

254,331

^L â_

20.7

$'000

254,4674316

8 Distributions to unitholders

The distributions for the reporting period were as follows:

Distributions

31 March

30 June (payable)Total distributions


For the initial reporting period from I February 2017 to 30 June 20.7(continued

9 Financial assets held at fair value through profit or loss

Held for tradingFutures

Foreign eXchange foiward contractsTotal held for trading

Designated at fair value through profit or lossDebt securitiesUnlisted unit trusts

Total designed at fair value through profit or loss

Total financial assets held at fair value through profit orloss

, O Loans and receivables

20.7

$'000

Accrued incomeOther receivables

Mortgage loansTotal loans and receivables

531I 555

2017CPU

2086

0.21O 61

2017

$'000

^Q^_

106802

90,739,1.3. â__22^L

âÎ^

20.7

$'000

,, 76932

25 0002680,

10 Loans and receivables (continued)

Mortgage loansGross mortgage loansLess:

Specific impairment provisionTotal mortgages loans (net)

The fair value as at 30 June 2017 for the mortgage loans to third parties amounted to $25,000,000.


For the initial reporting period from I February 20.7 to 30 June 20.7continued)

Provision for impairment

The Trustee assesses the provision for impairment on a specific basis only. Specific loan provisions arerecognised in a situation when, following an assessment of the individual loan facility. there is an objectiveevidence that a loan is impaired.

As at 30 June 2017, there was no specific provision for impairment on the mortgage loans held by the Trust.

During the year, there were no interest earned and losses incurred from impaired assets.

,, Payables

Accrued expensesTotal payables

12 Financial liabilities held at fair value through profit or loss

Held for tradingFutures

Foreign eXchange forward contractsTotal financial liabilities held at fair value through profit or loss

2017$'000

25 000

25000

20.7$'000

96

96

20.7$'000

7

446453

I3 Related party transactions

Trustee's fees and other transactions

The Trustee's fees are calculated in accordance with the Trust Deed (as amended). The Trustee's fee is 1.0%p. a. of the net asset value of the Trust.

All related party transactions are conducted on normal commercial terms and conditions. The transactions duringthe period and amounts payable at period end between the Trust and the Trustee were as follows:


For the initial reporting period from I February 2017 to 30 June 20.7(continued

Trustee's fees paid and payable directly by the Trust

14 Reconciliation of profit/(loss) to net cash inflow/(outflow) from operating activities

(a) Reconciliation of profiU(loss) to net cash inflow/(outflow) from operatingactivities

Increase/(decrease) in net assets atIributable to unitholdersProceeds from sale of financial instruments held at fair value through profit or lossPurchase of financial instruments held at fair value through profit or lossNet (gainsylosses on financial instruments held at fair value through profit or lossNet foreign eXchange (gains)/lossesNet change in receivablesNet change in payablesNet change in distributions payableDistrlbutions paid to unitholdersInterest expense paidNet cash inflow/(outflow) from operating activities

(b) Components of cash and cash equivalentsCash at the end of the reporting period as shown in the statement of cash flows is reconciled to thestatement of financial position as follows:Cash and cash equivalentsFutures margin accountTotal cash and cash equivalents

20.7$

443,809

20.7S'000

4,3163,542

(255,080)(2,434)

(860)(,, 801)

96

,, 555531

3

425âL

3,436335

3,774

15 Events occurring after the reporting period

No significant events have occurred since the end of the reporting period which would impact on the financialposition of the Trust disclosed in the statement of financial position as at 30 June 2017 or on the results and cashflows of the Trust for the reporting period ended on that date.

16 Contingent assets, liabilities and commitments

There were no outstanding contingent assets. liabilities or commitments as at 30 June 2017.


For the initial reporting period from I February 20,7 to 30 June 2017continued)

Trustee's declaration

As stated in note 2(a) to the financial statements. the Trust is riot a reporting entity because in the opinion of theTrustee there are unlikely to exist users of the financial statements who are unable to command the preparationof reports tailored so as to satisfy specifically all of their information needs. Accordingly, these special purposefinancial statements have been prepared to satisfy the Trustee's reporting requirements under the Trust Deed

In the opinion of the Directors of the Trustee:

(a) the financial statements and notes set out on pages 2 to 20

comply with Australian Accounting Standards as stated in note 2(a), and other mandatory(1)professional reporting requirements; and

present fairly the Trusts financial position as at 30 June 2017 and of its performance for the initialreporting period ended on that date; and

(b) there are reasonable grounds to believe that the Trust will be able to pay its debts as and when theybecome due and payable.

This declaration is made in accordance with a resolution of the Directors of the Trustee

Uniting Financial Services Ethical Diversified FundTrustee's declaration

For the initial reportin period from , February 20,7 to 30 June 2017

(ii)

M AndersonDirector

The Uniting Church (NSW) Trust Association Limited

Sydney24 November 2017

^/Q',7'Q'

Uniting Financial Services Ethical Diversified FundIndependent auditor report to the Trustee of Uniting Financial Services Ethical Diversified Fund

30 June 20.7

{The Independent auditor report to the Trustee of Uniting Financial Services Ethical Diversified Fund willbe provided by your auditor}

^

The Chainnan

Board of Directors

The Uniting Church (NSW) trust Association LiLevel9,222 Pitt StreetSydney NSW 2000

Audit & AssuranceLeve 38 Tower Three

300 Barengaroo AvenueSydney NSW 2000

P O Box H67 AUStra a SquareSydney NSW1213Australia

24November 2017

Dear Directors

Audit of the IJFS Ethical Diversified Fund ('the Scheme') financial statements forthe financial period ended 30 June 2017

The purpose of this letter is to fillfil our obligations as auditors in accordance with AustralianAuditing Standards to communicate certain aspects of our audit with you.

This letter is provided to enable you and the Board to clarify outstanding issues with us, discusskey audit findings and consider matters relevant to our independence.

This letter includes only those audit matters of governance interest that have come to our attentionas a result of the performance of our audit. All audit is not designed to identify all matters thatmay be relevant to those charged with governance. Accordingly, the audit does not usuallyidentify all such matters. The scope, tenms and conditions of our audit are set out in ourengagement letter dated 13 June 2017.

This report is provided solely forthe benefit of the parties identified in our engagement letter andis riot to be copied, quoted or referred 10 in whole orin part without KPMG's prior written consent.1<PMG accepts no responsibility to anyone other than the parties identified in the engagementletter for the infonnaiion contained in this report

Status of the audit

We have substantially completed our audit of the financial report of the Scheme for the periodended 30 June 2017 except for:

. receipt of the signed management representation letter;

. completion of subsequent events procedures; and

. receipt of the signed Trustee's Declaration

Nothing has come 10 our attention to indicate that we will not be in a position to issue urnnodifiedaudit report on the Scheme

ABN: 51 194660183

TB ephone +61293357000Facs in e +61 293357001

DX 1056 SydneyWWW kpmg coin au

KPMG, an AUStid an partnersh p and a meITbei I'mof the KPMG network of ridependent member firmsaffiliated with KPMG ritemat ona Cooperat veI"KPMG Internet on a "), a Sw ss ent tv

Liability limited by a schemeapproved under ProfessionalStandards Legislation

^

Scope of our work

Fin""cmlSt"te, ,, e, ,t findit

Our audit was conducted in accordance with Australian Auditing Standards. These AuditingStandards requireihai we comply with relevant ethical requirements relating to audit engagementsand plan and perlbnn the audit to obtain reasonable assurance whether the financial report is freefrom material misstatement, The nature of an audit is influenced by factors such as the use ofprofessional judgement, selective testing* the inherent limitations of internal control, and theavailability of persuasive rather than conclusive evidence. Therefore, an audit c ino1 guaranteethat all material misstatements have been detected. We perfonmed procedures 10 assess whetherthe financial report presents fairly, in all material respects, the financial position of the Schemeas of 30 June 2017 and of its financial perfonnance and its cash flows forthe year then ended inaccordance with the accounting policies described in Notes 2 to the financial statements.

We formed our audit opinion on the basis of these procedures, which included:

. examining, on a test basis, inforrnation to provide evidence supporting the amounts anddisclosures in the financial report; and

. evaluating the appropriateness of accounting policies used, the reasonableness of accountingestimates made by the Directors and evaluating the overall presentation of the financial report.

Our audit included consideration of internal controls relevant to the preparaiion of the financialreport in order to design audit procedures that are appropriate in the circumstances, but not forthe purposes of expressing an opinion on the effectiveness of the internal controls.

Independence

We confimi that* at the date of this report, we remainindependent in accordance with KPMG'spolicies, professional rules and relevant statutory requirements, including the Coiporations Act2001.

To safeguard audit independence, appropriate systems and processes are in place to comply withrelevant KPMG, industry and legislative independence requirements.

Materiality and uriadjusted audit differences

We delennined our financial statement audit material ity during our planning stage to be$2,600,000 which was calculated as 1'. of Total Assets

There were no individual errors identified during our audit testing which are greater than the auditmisstatement posting threshold of S 130,000. individual audit differences below the threshold arenot reported but are considered for their overall impact on the audit.

Tile Own"g CIMrcl, (NS, Firr, ,s, 4350ci@rin, , LimairedAjidir oldie UFS Ejhjcnl DJ\. ers4/led Hind ('!he

Sdie, ,:e?/in a, lei"Ism!eme"ISIbrIhe/inn, rein/periodended 30/11, re 20/7

^

Please do not hesitate contacting me should you have any question.

Yours sincerely

-^.^~,^,^Tim Aman

Pq, .t"e, ,

711e Dinti, ,g Cl, ,, rel, (NS, !? Ir, ,SI4ssoci", toll Li, ,linedAnd, 'I 4'111e UFS EIJIicn! Dii. errored PIMd ('Ihe

Sc/IC"re?film, ,cmlsiaie"Ie, IISjbrihe/inn"cm/perl'odended 30 IIJ"e 201 ?

In^BOBnOentAu^10's^BOOT

To the Un'tholders of Uniting Financial Services Ethical

We have audited the Financ, 81

Statements of Uniting Financial ServicesEthical Diversified Fund (the Trust)

In our opinion, the accompanyingFinancial Statements present fairly, in allmaterial respects, the financial position ofthe Trust as at 30 June 2017, and of itsfinancial performance and its cash flowsfor the initial period from I February 2017to 30 June 2017 in accordance with

Australian Accounting Standards to theextent described in Note I to 2 to the

financial statements and the Trust Deed.

The Financ, at Statements comprise:

. Statement of financial POSitibn as at 30 June 2017

Statement of comprehensive income, Statement ofchanges in equity, and Statement of cash flows for theinitial period from I February 2017 to 30 June 2017

Notes including a summary of significant accountingpolicies

Basis for opinion

We conducted our audit in accordance with AUStral^^n Audrtihg Standards. We believe that the auditevidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Our responsibilities under those standards are further described in the Auditor's responsibilities for theaudrt of the Financial Statements section of our report

We are independent of the Trust in accordance with the ethical requirements of the AccountingProfessional and Ethibal Standards Board's APES 110 Code of Ethics for Professional Accountants (theCode) that are relevant to our audit of the Financial Statements in Australia. We have fulfilled our other

ethical responsibilities in accordance with the Code

I ersified Fund

Emphasis of matter - basis of preparation and restriction on use and distribution

We draw at tent'on to Note I to the Financial Statements, which describes the basis of preparation

The Financ al Statements have been prepared to assist the Trustee of Uniting Financial Services EthicalDiversified Fund h meeting the financial reporting requirements of the Trust Deed.

As a result, the Financ al Statements and this Auditot's Report may not be suitable for another purpose.Our opinion Is not modified in respect of this matter

reMG, an fuguelian partnership am a member, In @1the reMGnetwork of 111,000r^Gin member firms arithaled with reMGInternational Cooperative I reMG Internalrel I a Swiss entity

Liab:lily limited by a scheme approved underProfessional Standards Legislation

Our report is intended solely for the unitholders of Uniting Financial Services Ethical Diversified Fund andshould not be used by or distributed to parties other than the unitholders of Uniting Financial ServicesEthical Diversified Fund. We disclaim any assumption of responsibility for any reliance on this report, or onthe Financial Statements to which it relates, to any person other than the trustee or the unitho!ders ofUniting Financial Services Ethical Diversified Fund or for any other purpose than that for which it wasprepared.

Other Information

Other Information is financial and non-financial information in Uniting Financial Services Ethical DiversifiedFund's annual reporting which is provided in addition to the Financial Statements and the Auditor's ReportThe Trustee is responsible for the Other Information.

Our opinion on the Financial Statements does not cover the Other Information and. accordingly. we do notexpress an audit opinion or any form of assurance conclusion thereon

in connection with our audit of the Financial Statements, our responsibility is to read the OtherInformation. In doing so, we consider whether the Other Information is materialy inconsistent with theFinancial Statements or our knowledge obtained in the audit. or otherwise appears to be material IYmisstated.

We are required to report if we conclude that there is a material misstatement of this Other Information,and based on the work we have performed on the Other Information that we obtained prior to the date ofthis Auditor's Report we have nothing to report

Responsibilities of the Trustee for the Financial Statements

The Trustee is responsible for:

the preparation and fair presentation of the Financial Statements in accordance with the financialreporting requirements of the Trust Deed and have determined that the basis of preparation described inNote I is appropriate to meet the needs of the unitholders

implementing necessary internal control to enable the preparation of Financial Statements that are freefrom material misstatement. whether due to fraud or error

assessing the Trust's ability to continue as a going concern. This includes disclosing. as applicable,matters related to going concern and using the going concern basis of accounting unless they either intendto liquidate the Trust or to cease operations, or have no realistic alternative but to do so

Auditor's responsibilities for the audit of the Financial Statements

Our objective is:

to obtain reasonable assurance about whether the Financial Statements as a whole are free from

material misstatement, whether due to fraud or error; and

to issue an Auditor"s Report that includes our opinion

!,,.̂

Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted Inaccordance with AUStralân Auchtihg Standards will always detect a material misstatement when it exists

Misstatements can arise from fraud or error. They ale considered material if, individually or in theaggregate. they could reasonably be expected to influence the economic decisions of users taken on thebasis of these Financial Statements

A further description of our responsibilities for the audit of the Financial Statements is located at theAudrtihg and Assurance Standards Board website at http://WWW. auasb. gov. au/auditors_files/ar3. pdf. Thisdescription forms part of our Auditor's Report.

ICP 14 ,,

KPMG

-^;^.^Tim Am an

Palmer

Sydney

24 November 2017

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