Elements Trust. ARSN Annual report - 31 March 2015

Transcription

1 ARSN Annual report - 31 March

2 ARSN Annual report - 31 March Contents Page Directors' Report 1 Auditor's Independence Declaration 5 Statement of Comprehensive Income 6 Statement of Financial Position 7 Statement of Changes in Equity 8 Statement of Cash Flows 9 10 Directors' Declaration 28 Independent Auditor's Report 29 This financial report covers Elements Trust as an individual entity. The Responsible Entity of Elements Trust is Macquarie Financial Products Management Limited (ABN ). The Responsible Entity's registered office is No. 50 Martin Place, Sydney, NSW 2000.

3 For the Year Ended 31 March The directors of Macquarie Financial Products Management Limited, a wholly owned subsidiary of Macquarie Group Limited, the Responsible Entity of Elements Trust, present their report together with the financial report of Elements Trust (the "Trust") for the year ended 31 March. Principal activities The principal activity of the Trust is to gain exposure to either positive or negative performance of the S&P/ASX 200 Index or exposure to positive performance of the PIMCO Total Return Bond Fund. The Trust gains exposure to these indexes via Investment Linked Swaps in accordance with the Trust Constitution. The Trust did not have any employees during the year. There were no significant changes in the nature of the Trust s activities during the year. Directors The following persons held office as directors of Macquarie Financial Products Management Limited during the year or since the end of the year and up to the date of this report: Antony Clubb Anthony John Abraham Jason King Peter Bruce Lucas (resigned 05/05/) Gary Shneier (appointed 05/05/) William Dudley Fox (resigned 09/06/) Review and results of operations Results The performance of the Trust, as represented by the results of its operations, was as follows: Operating profit before finance costs attributable to unitholders () Distributions - Series G 33,261 41,131 Distribution paid and payable ($ 000) - 13,220 Distribution (cents per unit) Distributions - Series H Distribution paid and payable ($ 000) - 5,274 Distribution (cents per unit) Distributions - Series AC Distribution paid and payable ($ 000) 7,165 12,329 Distribution (cents per unit) Distributions - Series AD Distribution paid and payable ($ 000) 3,172 7,478 Distribution (cents per unit)

4 Directors' Report 31 March Review and results of operations (continued) Distributions - Series AE Distribution paid and payable ($ 000) 3,163 6,620 Distribution (cents per unit) Distributions - Series AO Distribution paid and payable ($ 000) 13,096 - Distribution (cents per unit) Distributions - Series AP Distribution paid and payable ($ 000) 4,553 - Distribution (cents per unit) Distributions - Series AQ Distribution paid and payable ($ 000) 3,560 - Distribution (cents per unit) Significant changes in state of affairs The Trust's series AC, series AD and series AE matured on 20 June while series AO, series AP and series AQ were issued on 20 June. In the opinion of the directors, there were no other significant changes in the state of affairs of the Trust that occurred during the financial year under review. Matters subsequent to the end of the financial year No matter or circumstance has arisen since 31 March that has significantly affected, or may significantly affect: (i) the operations of the Trust in future financial years, or (ii) the results of those operations in future financial years, or (iii) the state of affairs of the Trust in future financial years. Likely developments and expected results of operations The Trust will continue to be managed in accordance with the investment objective and strategy set out in the Trust s offer document and in accordance with the Trust Constitution. The results of the Trust's operations will be affected by a number of factors, including the performance of investment markets in which the Trust invests. Investment performance is not guaranteed and future returns may differ from past returns. As investment conditions change over time, past returns should not be used to predict future returns. Further information on likely developments in the operations of the Trust and the expected results of those operations have not been included in this report because the Responsible Entity believes it would be likely to result in unreasonable prejudice to the Trust.

5 Directors' Report 31 March Indemnification and insurance of officers and auditors No insurance premiums are paid for out of the assets of the Trust in regards to insurance cover provided to either the officers of Macquarie Financial Products Management Limited or the auditors of the Trust. Under the Trust Constitution, Macquarie Financial Products Management Limited as Responsible Entity of the Trust is entitled to be indemnified out of the assets of the Trust for any liability incurred by it in properly performing or exercising any of its powers or duties in relation to the Trust. Fees paid to and interests held in the Trust by the Responsible Entity or its associates Fees paid to the Responsible Entity and its associates out of Trust property during the year are disclosed in note 9 of the financial statements. No fees were paid out of Trust property to the directors of the Responsible Entity during the year (: Nil). The number of interests in the Trust held by the Responsible Entity, its directors or its associates as at the end of the financial year are disclosed in note 9 of the financial statements. Interests in the Trust The movement in units on issue in the Trust during the year is disclosed in note 6 of the financial statements. The value of the Trust s assets and liabilities is disclosed on the statement of financial position and derived using the basis set out in note 2 of the financial statements. Environmental regulation The operations of the Trust are not subject to any particular or significant environmental regulations under a Commonwealth, State or Territory law. Rounding of amounts to the nearest thousand dollars Pursuant to Class Order 98/100 issued by the Australian Securities & Investments Commission, relating to the "rounding off" of amounts in the directors' report and financial report, amounts in the directors' report and financial report have been rounded off to the nearest thousand dollars in accordance with that Class Order, unless otherwise indicated.

6 Directors' Report 31 March Auditor's independence declaration A copy of the Auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 5. This report is made in accordance with a resolution of the directors. Director:... Jason King Sydney 25 June

7 Ernst & Young 680 George Street Sydney NSW 2000 Australia GPO Box 2646 Sydney NSW 2001 Tel: Fax: ey.com/au Auditor s Independence Declaration to the Directors of Macquarie Financial Products Management Limited In relation to our audit of the financial report of Elements Trust for the financialyear ended 31 March, to the best of my knowledge and belief, there have been no contraventions of the auditor independence requirements of the Corporations Act 2001 or any applicable code of professional conduct. Ernst & Young Darren Handley-Greaves Partner 25 June A member firm of Ernst &Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation

8 Statement of Comprehensive Income For the Year Ended 31 March Notes Investment income Interest income 9 13,234 15,130 Investment linked swap income 9 34,710 44,921 Net losses on financial instruments held at fair value through profit or loss 5 (1,449) (3,790) Total net investment income 46,495 56,261 Expenses Responsible Entity fees Investment linked swap fees 9 13,130 15,014 Total operating expenses 13,234 15,130 Operating profit 33,261 41,131 Finance costs attributable to unitholders Distributions to unitholders (34,710) (44,921) Decrease in net assets attributable to unitholders 6 1,449 3,790 Profit/(loss) for the year - - Other comprehensive income for the year - - Total comprehensive income for the year - - The above statement of comprehensive income should be read in conjunction with the accompanying notes.

9 Statement of Financial Position As at 31 March Notes Assets Collateral deposit 7 483, ,007 Interest receivable Other receivables 4 5 Financial assets held at fair value through profit or loss 8 8,333 9,782 Total assets 491, ,887 Liabilities Responsible Entity fees payable Total liabilities (excluding net assets attributable to unitholders) Net assets attributable to unitholders - liability 6 491, ,789 The above statement of financial position should be read in conjunction with the accompanying notes.

10 Statement of Changes in Equity For the Year Ended 31 March Total equity at the beginning of the year - - Total comprehensive income for the year - - Transactions with owners in their capacity as owners - - Total equity at the end of the year - - Under Australian Accounting Standards, net assets attributable to unitholders are classified as a liability rather than equity. As a result there was no equity at the start or end of the year. The above statement of changes in equity should be read in conjunction with the accompanying notes.

11 For the Year Ended 31 March Notes Cash flows from operating activities: Collateral withdrawn 600, ,863 Collateral deposited (511,321) (572,007) Investment linked swap income received 34,710 44,921 Interest received 13,248 15,142 Other income received 1 1 Responsible Entity fees paid (119) (129) Investment linked swap fee paid (13,130) (15,014) Net cash inflow from operating activities 10(a) 123, ,777 Cash flows from financing activities: Proceeds from applications by unitholders 483, ,007 Payments for redemptions by unitholders (572,007) (660,863) Distributions paid (34,710) (44,921) Net cash outflow from financing activities (123,591) (133,777) Net increase/(decrease) in cash and cash equivalents - - Cash and cash equivalents at the beginning of the year - - Cash and cash equivalents at the end of the year - - Non-cash financing activities 10(b) - - The above statement of cash flows should be read in conjunction with the accompanying notes.

12 For the Year Ended 31 March 1 General Information This financial report covers Elements Trust (the "Trust") as an individual entity. The Trust was constituted on 29 March The Trust is a registered managed investment scheme domiciled in Australia. The Responsible Entity of the Trust is Macquarie Financial Products Management Limited (the "Responsible Entity''). The Responsible Entity s registered office is No. 1 Martin Place, Sydney, NSW The financial report is presented in Australian dollars. The Investment Manager of the Trust is Macquarie Financial Products Management Limited (the "Investment Manager"). The Trust will continue to be managed in accordance with the investment objective and strategy set out in the Trust s offer document and in accordance with the Trust Constitution. The financial statements were authorised for issue by the directors on 25 June. The directors of the Responsible Entity have the power to amend and reissue the financial report. 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 in the following text. (a) Basis of Preparation This general purpose financial report has been prepared in accordance with Australian Accounting Standards, other authoritative pronouncements of the Australian Accounting Standards Board and the Corporations Act 2001 in Australia. The financial report is prepared on the basis of fair value measurement of assets and liabilities except where otherwise stated. The statement of financial position is presented on a liquidity basis. Assets and liabilities are presented in decreasing order of liquidity and do not distinguish between current and non-current. All balances are expected to be recovered or settled within twelve months, except for investments in financial assets and net assets attributable to unitholders. The amount expected to be recovered or settled within twelve months after the end of each reporting period cannot be reliably determined. Where necessary, comparative information has been reclassified to be consistent with current period disclosures. Changes in Australian Accounting Standards The Trust has adopted all mandatory Australian Accounting Standards and Interpretations for the financial year beginning on or after 1 April. The following key Accounting Standards and amendments to Accounting Standards became applicable in the current financial year:

13 For the Year Ended 31 March 2 Summary of Significant Accounting Policies (continued) (a) Basis of Preparation (continued) (i) AASB Amendments to Australian Accounting Standards - Offsetting Financial Assets and Financial Liabilities AASB amends AASB 132 Financial Instruments: Presentation to clarify that to set off an asset with a liability: The right of set-off must be available and legally enforceable for all counterparties in the normal course of business, as well as in the event of default, insolvency or bankruptcy; Certain gross settlement mechanisms (such as through a clearing house) may be equivalent to net settlement; Master netting arrangements where the legal right of offset is only enforceable on the occurrence of a future event (such as default of the counterparty) continue to not meet the requirements for netting. AASB is required to be retrospectively applied. Application in the current period has not had a material impact on the financial position nor performance of the Trust. (ii) AASB Amendments to Australian Accounting Standards Investment Entities AASB defines an investment entity and provides an exception to the consolidation requirements in AASB 10. Investment entities are required to measure particular subsidiaries at fair value through profit or loss, rather than consolidate them. However, where a non-investment entity parent ultimately controls an investment entity, the parent must still consolidate the investment entity and all the underlying subsidiaries, reversing fair value used by the investment entity. The amendments also set out new disclosure requirements for investment entities. AASB is required to be retrospectively applied, however, adjustments are not required for subsidiary investments that are disposed of or for which control is lost before the due date of initial application, 1 July. Application in the current period has not had a material impact on the financial position nor performance of the Trust. Compliance with International Financial Reporting Standards The financial statements also comply with International Financial Reporting Standards as issued by the International Accounting Standards Board.

14 For the Year Ended 31 March 2 Summary of Significant Accounting Policies (continued) (b) Financial instruments (i) Classification The Trust's investments are categorised as at fair value through profit or loss. They comprise: Financial instruments held for trading These include derivative financial instruments such as investment linked swaps. The Trust does not designate any derivatives as hedges in a hedging relationship. Financial assets and financial liabilities designated at fair value through profit or loss at inception are those that are managed and their performance evaluated on a fair value basis in accordance with the Trust s documented investment strategy. The Trust s policy is for the Responsible Entity to evaluate the information about these financial assets on a fair value basis together with other related financial information. Loans and receivables comprise amounts due to the Trust. (ii) Recognition/derecognition The Trust 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. Investments are derecognised when the right to receive cashflows from the investments has expired or the Trust has transferred substantially all risks and rewards of ownership. (iii) Measurement (a) Financial assets and financial liabilities held at fair value through profit or loss Financial assets and financial liabilities held at fair value through profit or loss are measured initially at fair value excluding any transaction costs that are directly attributable to the acquisition or issue of the financial asset or financial liability. Transaction costs on financial assets and financial liabilities at fair value through profit or loss are expensed immediately. Subsequent to initial recognition, all instruments held at fair value through profit or loss are measured at fair value with changes in their fair value recognised in the statement of comprehensive income. Fair value in an active market The fair value of financial assets and financial liabilities traded in active markets is based on their quoted market prices at the statement of financial position date without any deduction for estimated future selling costs. Financial assets are priced at current bid prices, while financial liabilities are priced at current asking prices.

15 For the Year Ended 31 March 2 Summary of Significant Accounting Policies (continued) (b) Financial instruments (continued) (iii) Measurement (continued) (a) Financial assets and financial liabilities held at fair value through profit or loss (continued) Fair value in an inactive or unquoted market The fair value of financial assets and financial liabilities that are not traded in an active market is determined using valuation techniques. These include the use of recent arm s length market transactions, reference to the current fair value of a substantially similar other instrument, discounted cash flow techniques, option pricing models or any other valuation technique that provides a reliable estimate of prices obtained in actual market transactions. Where discounted cash flow techniques are used, estimated future cash flows are based on management s best estimates and the discount rate used in a market rate at the statement of financial position date applicable for an instrument with similar terms and conditions. For other pricing models, inputs are based on market data at the statement of financial position date. Fair values for unquoted equity investments are estimated, if possible, using applicable pricing/earnings ratios for similar listed companies adjusted to reflect the specific circumstances of the issuer. The fair value of derivatives that are not exchange traded is estimated at the amount that the Trust would receive or pay to terminate the contract at the statement of financial position date taking into account current market conditions (volatility and appropriate yield curve) and the current creditworthiness of the counterparties. Details on how the fair value of financial instruments is determined are disclosed in note 3(e). (b) Investment linked swap The net fair value of the investment linked swaps is principally driven by the value of an option over the S&P/ASX 200 index or performance of the PIMCO Total Return Bond Fund as provided by the swap counterparty less any break costs and/or break gains that would be payable/receivable if the investment linked swaps were able to be redeemed before maturity. (iv) Offsetting financial instruments Financial assets and financial liabilities are offset and the net amount reported in the statement of financial position if, and only if, there is a legally enforceable right to offset the recognised amounts at all times and there is an intention to settle on a net basis, or realise the asset and settle the liability simultaneously. (c) Net assets attributable to unitholders Units are redeemable at maturity and are classified as financial liabilities as the Trust is required to distribute its income. The fair value of redeemable units is measured at the redemption amount that is payable (based on the redemption unit price) at maturity.

16 For the Year Ended 31 March 2 Summary of Significant Accounting Policies (continued) (d) Cash and cash equivalents For the purpose of presentation in the statement of cash flows, cash includes cash on hand and deposits held at call with financial institutions. Cash equivalents include other short-term, highly liquid investments with original maturities of three months or less from the date of acquisition that are readily convertible to known amounts of cash, which are subject to an insignificant risk of changes in value and are held for the purpose of meeting short-term cash commitments rather than for investment or other purposes. Bank overdrafts, if any, are shown separately on the statement of financial position. Payments and receipts relating to the purchase and sale of investment securities are classified as cash flows from operating activities, as movements in the fair value of these securities represent the Trust's main income generating activity. (e) Collateral deposit The collateral deposit is held with MBL and represents the credit support for the investment linked swaps entered into between the Trust and MBL. (f) Investment income Interest income is recognised in the statement of comprehensive income for all financial instruments that are not held at fair value through profit or loss using the effective interest method. 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 year. 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 Trust 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 paid or received between the parties to the contract that are an integral part of the effective interest rate, including transaction costs and all other premiums or discounts. Investment linked swap income is recognised on an entitlements basis. (g) Expenses All expenses, including Responsible Entity fees, are recognised in the statement of comprehensive income on an accruals basis. (h) Income tax Under current legislation, the Trust is not subject to income tax as unitholders are presently entitled to the income of the Trust. Financial instruments held at fair value may include unrealised capital gains. Should such a gain be realised, that portion of the gain that is subject to capital gains tax will be distributed so that the Trust is not subject to capital gains tax. The benefits of imputation credits are passed on to unitholders.

17 For the Year Ended 31 March 2 Summary of Significant Accounting Policies (continued) (i) Distributions In accordance with the Trust Constitution, the Trust distributes its distributable income, and any other amounts determined by the Responsible Entity, to unitholders by cash or reinvestment. The distributions are recognised in the statement of comprehensive income as finance costs attributable to unitholders. (j) Increase/decrease in net assets attributable to unitholders Income not distributed is included in net assets attributable to unitholders. Movements in net assets attributable to unitholders are recognised in the statement of comprehensive income as finance costs. (k) Receivables Receivables may include amounts for interest and investment linked swap income. Interest is accrued at the reporting date from the time of last payment in accordance with the policy set out in note 2(f) above. Investment linked swap income is accrued when the right to receive payment is established. Amounts are generally received within 30 days of being recorded as receivables. Receivables may include such items as Reduced Input Tax Credits (RITC). (l) Payables Payables include liabilities and accrued expenses owing by the Trust which are unpaid as at year end. (m) Applications and redemptions Applications received for units in the Trust are recorded net of any entry fees payable prior to the issue of units in the Trust. Redemptions from the Trust are recorded gross of any exit fees payable after the cancellation of units redeemed. (n) Goods and Services Tax (GST) The GST incurred on the costs of various services provided to the Trust by third parties such as Responsible Entity fees have been passed onto the Trust. The Trust qualifies for RITC hence Responsible Entity 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. Cash flows relating to GST are included as cash flows from operating activities in the statement of cash flows on a gross basis. (o) Use of estimates The Responsible Entity makes estimates and assumptions that affect the reported amounts of assets and liabilities within the next 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. Certain financial instruments, for example, over-the-counter derivatives are fair valued using valuation techniques. Where valuation techniques (for example, pricing models) are used to determine fair values, they are validated and periodically reviewed by experienced personnel of the Responsible Entity, independent of the area that created them. Models are calibrated by back-testing to actual transactions to ensure that outputs are reliable.

18 For the Year Ended 31 March 2 Summary of Significant Accounting Policies (continued) (o) Use of estimates (continued) Models use observable data to the extent practicable. However, inputs such as credit risk (both own and counterparty), volatilities and correlations require management to make estimates. Changes in assumptions about these inputs could affect the reported fair value of financial instruments. For certain other financial instruments, including accounts payable, the carrying amounts approximate fair value due to the immediate or short-term nature of these financial instruments. (p) New accounting standards and interpretations Certain new accounting standards and interpretations have been published that are not mandatory for the 31 March reporting periods. The Responsible Entity s assessment of the impact of these new standards (to the extent relevant to the Trust) and interpretations is set out below: (i) AASB 9 Financial Instruments, AASB Amendments to Australian Accounting Standards arising from AASB 9, AASB Amendments to Australian Accounting Standards - Conceptual Framework, Materiality and Financial Instruments - Part C and related amendment AASB and AASB -1 Amendments to Accounting Standards AASB 9 Financial Instruments applies to annual reporting periods beginning on or after 1 January 2018 and will therefore apply to the Trust from 1 April AASB 9 Financial Instruments requires all financial instruments to be measured at fair value unless the criteria for amortised cost are met. The application of the standard is not expected to change the measurement basis of any of the Trust's current financial instruments, however, AASB 9 Financial Instruments allows the Trust to elect to present gains and losses on equity securities through other comprehensive income, which may impact the presentation of these gains and losses. The impact of the standard may also change if the nature of the Trust's activities or investments changes prior to initial application. The Trust does not intend to early adopt AASB 9 Financial Instruments as permitted by the standard, and the actual impact on initial application will depend on certain elections as disclosed above. The Trust is continuing to assess the full impact of adopting AASB 9 Financial Instruments. Standards and interpretations that are not expected to have material impact on the Trust have not been included. (q) Rounding of amounts Pursuant to Class Order 98/100 issued by the Australian Securities & Investments Commission, relating to the "rounding off" of amounts in the directors' report and financial report, amounts in the directors' report and financial report have been rounded off to the nearest thousand dollars in accordance with that Class Order, unless otherwise indicated.

19 For the Year Ended 31 March 3 Financial risk management (a) Strategy in using financial instruments The Trust invests in investment linked swaps which provide exposure to S&P/ASX 200 index and PIMCO Total Return Bond Fund ("Reference Asset"), and are capital protected at maturity. The Trust has entered into the following agreements: Investment Linked Swap Agreements ("Swap Agreements"); and Cash Collateral Agreements ("Collateral Agreements"). The Swap Agreements and the Collateral Agreements together form the "Investment Linked Swap Arrangements". The Investment Linked Swap Arrangements are the contractual arrangements by which the Trust obtains exposure to the Reference Asset. The Investment Linked Swap Arrangements comprise of two components: Swap Agreements - provide the Trust with exposure to the Reference Asset. These agreements are made between the Trust and Macquarie Bank Limited (the "Swap Counterparty"); and Collateral Agreements - this forms the basis of capital protection at maturity. These agreements are made between the Trust and Macquarie Bank Limited (the "Collateral Counterparty"). Swap Agreements The Swap Agreements are contracts under which the Trust: may receive payment from the Swap Counterparty at maturity, the amount of which will depend upon the performance of the Reference Asset for the relevant series during the term; is required to pay to the Swap Counterparty an amount periodically, equal to the amount of interest it receives from the cash collateral after deduction of Responsible Entity fees; and will receive fixed distributions from the Swap Counterparty throughout the Term. Collateral Agreements The Trust deposits the offer proceeds with the Collateral Counterparty as collateral for its obligation under the Swap Agreement. The interest earned on the collateral deposit is applied to make payments to the Swap Counterparty under the Swap Agreement and the Responsible Entity as management fees. The collateral deposit will be returned to the Trust at the maturity date. Risk Management The Trust s activities expose it to a variety of financial risks: market risk (which may include price risk, foreign exchange risk and interest rate risk), credit risk and liquidity risk.

20 For the Year Ended 31 March 3 Financial risk management (continued) (a) Strategy in using financial instruments (continued) The Responsible Entity s overall risk management programme focuses on ensuring compliance with the Trust s investment guidelines and seeks to maximise the returns derived for the level of risk to which the Trust is exposed. The Trust uses derivatives financial instruments to gain exposure to the performance of S&P/ASX 200 index and PIMCO Total Return Bond Fund. Series AC and series AO uses derivative financial instruments to gain exposure to the positive performance of S&P/ASX 200 index, series AD and series AP use derivative financial instruments to gain exposure to the negative performance of S&P/ASX 200 index, series AE and series AQ uses derivative financial instruments to gain exposure to the positive performance of PIMCO Total Return Bond Fund. Financial risk management is monitored by the Investment Manager's risk management department under policies approved by the Responsible Entity's senior managers or by the board of directors of the Responsible Entity (the "Board"). (b) Market risk (i) Price risk The Trust invests in investment linked swaps which are exposed to S&P/ASX 200 index and PIMCO Total Return Bond Fund. The value of the Trust's investment in the investment linked swaps is linked to the Reference Asset. This index is impacted by the changes in prices of underlying securities. The table summarises the impact of an increase/(decrease) of the Reference Asset on the Trust's net assets attributable to unitholders at 31 March and 31 March. As a separate investment linked swap agreement has been entered into for each series of units, and each investment linked swap agreement has different level of exposure to the Reference Asset, the table below discloses the impact for each agreement. The analysis is based on the assumption that the Reference Asset is increased/(decreased) by 10% (: 10%) with all other variables held constant and that the fair value of the investment linked swap moves in direct correlation with this increase/(decrease). The impact arises from reasonably possible change in the fair value of the investment linked swap. However, actual price movements may be greater or less than those presented below. Series - Reference Asset +10% 31 March 31 March -10% +10% Series AC - S&P / ASX 200 index (887) Series AD - S&P / ASX 200 index - - (17) 168 Series AE - PIMCO Total Return Bond Fund - - 1,028 (228) Series AO - S&P / ASX 200 index 284 (814) % Series AP - S&P / ASX 200 index (36) Series AQ - PIMCO Total Return Bond Fund 360 (94) - - (ii) Foreign exchange risk The Trust is not exposed to foreign exchange risk as all assets and liabilities are denominated in Australian dollars.

21 For the Year Ended 31 March 3 Financial risk management (continued) (b) Market risk (continued) (iii) Interest rate risk All assets and liabilities are non interest bearing with the exception of the collateral deposit, which attracts a floating interest rate of Australian 3 month bank bill swap rate ("BBSW") % for series AO, AP and AQ (: Nil), 3 month BBSW % for series AC, AD and AE (: 3 month BBSW %) and Nil for series G and H (: 3 month BBSW %). Interest income may fluctuate in amount due to changes in interest rates. No interest rate risk analysis is presented as the amount of interest income is offset by the Responsible Entity fees and investment linked swap fees. (c) Credit risk Credit risk arises from investment linked swaps and collateral deposits with MBL. None of these assets are impaired nor past due but not impaired. The exposure to credit risk for collateral deposits with banks and other financial institutions and counterparties to derivatives is low as MBL, the counterparty, has a credit rating of A- (: A-) as determined by Standard and Poor's rating agency. The maximum exposure to credit risk at the reporting date is the carrying amount of the collateral deposit and other financial assets. The Compliance Committee of the Responsible Entity reviews any identified exceptions to internal risk policies and procedures on a quarterly basis. In accordance with the Trust's policy, the Investment Manager s risk management department monitors the Trust's credit exposure on a daily basis. (d) Liquidity risk The investments of the Trust may become illiquid. As a result, the Trust may not be able to liquidate quickly its investments in these instruments at an amount close to their fair value, or at all, to meet its liquidity requirements. No such investments were held at the statement of financial position date. Liquidity risk is managed by monitoring the creditworthiness of MBL on a regular basis. The Compliance Committee of the Responsible Entity reviews any identified exceptions to internal risk policies and procedures on a quarterly basis. Units are not redeemable until maturity subject to the Trust's offer document and Trust Constitution (as applicable). All other liabilities are payable within 30 days. (e) Fair value estimation The carrying amounts of all the Trust's financial assets and financial liabilities at the end of each reporting period approximated their fair values as all financial assets and financial liabilities not fair valued are short-term in nature. The Responsible Entity classifies fair value measurements using a fair value hierarchy that reflects the subjectivity of the inputs used in making the measurements. The fair value hierarchy has the following levels:

22 For the Year Ended 31 March 3 Financial risk management (continued) (e) Fair value estimation (continued) Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1). Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (level 2). Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (level 3). The level in the fair value hierarchy within which the fair value measurement is categorised in its entirety is determined on the basis of the lowest level input that is significant to the fair value measurement in its entirety. For this purpose, the significance of an input is assessed against the fair value measurement in its entirety. If a fair value measurement uses observable inputs that require significant adjustment based on unobservable inputs, that measurement is a level 3 measurement. Assessing the significance of a particular input to the fair value measurement in its entirety requires judgement, considering factors specific to the asset or liability. The determination of what constitutes 'observable' requires significant judgement by the Responsible Entity. The Responsible Entity considers observable data to be market data that is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market. The following table analyses within the fair value hierarchy the Trust's financial assets and financial liabilities (by class) measured at fair value at 31 March and 31 March. Level 1 Level 2 Level 3 Total 31 March Financial assets Financial assets held for trading: - Derivatives - 8,333-8,333 Total financial assets - 8,333-8, March Level 1 Level 2 Level 3 Total Financial assets Financial assets held for trading: - Derivatives - 9,782-9,782 Total financial assets - 9,782-9,782 During the year, there were no transfers between level 1 and 2 or into/out of level 3 (: Nil). For over-the-counter derivatives, fair value is determined using valuation techniques. Valuation techniques include net present value techniques, comparison to similar instruments for which market observable prices exist, options pricing models and other relevant valuation models. These financial instruments have therefore been classified as level 2 in the fair value hierarchy.

23 For the Year Ended 31 March 4 Auditor's remuneration During the year the following fees were paid or payable for services provided by the auditor of the Trust: $ $ Audit Services Ernst & Young Australian firm Audit of financial reports 9,978 9,489 Other audit work under the Corporations Act Total remuneration for audit services 10,341 9,825 Audit fees are paid out of the Responsible Entity's own resources. 5 Net losses on financial instruments held at fair value through profit or loss Net losses recognised in relation to financial instruments held at fair value through profit or loss: Net losses on financial instruments held for trading (1,449) (3,790) Net losses on financial instruments held at fair value through profit or loss (1,449) (3,790) 6 Net assets attributable to unitholders As stipulated within the Trust Constitution, each unit represents an individual share in the beneficial interest in the Trust. There are separate classes of units and each unit has the same rights attaching to it as all other units of that class of units of the Trust. Movements in number of units and net assets attributable to unitholders during the period were as follows: Series G Opening balance - 426, ,400 Applications Redemptions - (426,443) - (426,443) Decrease in net assets attributable to unitholders (9,957) Closing balance

24 For the Year Ended 31 March 6 Net assets attributable to unitholders (continued) Series H Opening balance - 234, ,035 Applications Redemptions - (234,420) - (234,420) Decrease in net assets attributable to unitholders (3,615) Closing balance Series AC Opening balance 266, ,219 - Applications - 266, ,863 Redemptions (266,863) - (266,863) - (Decrease)/increase in net assets attributable to unitholders - - (5,356) 5,356 Closing balance - 266, ,219 Series AD Opening balance 161, ,081 - Applications - 161, ,859 Redemptions (161,859) - (161,859) - (Decrease)/increase in net assets attributable to unitholders - - (2,222) 2,222 Closing balance - 161, ,081 Series AE Opening balance 143, ,489 - Applications - 143, ,285 Redemptions (143,285) - (143,285) - (Decrease)/increase in net assets attributable to unitholders - - (2,204) 2,204 Closing balance - 143, ,489

25 For the Year Ended 31 March 6 Net assets attributable to unitholders (continued) Series AO Opening balance Applications 298, ,307 - Increase in net assets attributable to unitholders - - 5,526 - Closing balance 298, ,833 - Series AP Opening balance Applications 131, ,911 - Increase in net assets attributable to unitholders - - 1,943 - Closing balance 131, ,854 - Series AQ Opening balance Applications 52,908-52,908 - Increase in net assets attributable to unitholders Closing balance 52,908-53,772 - Total Opening balance 572, , , ,435 Applications 483, , , ,007 Redemptions (572,007) (660,863) (572,007) (660,863) (Decrease)/increase in net assets attributable to unitholders - - (1,449) (3,790) Closing balance 483, , , ,789 Capital risk management The Investment Manager manages its net assets attributable to unitholders as capital, notwithstanding net assets attributable to unitholders are classified as a liability.

26 For the Year Ended 31 March 6 Net assets attributable to unitholders (continued) The Trust's objective is to protect the investment of unitholders (as defined within the governing documents of the Trust) when the investment is held to maturity. The Investment Manager seeks to achieve this objective by placing cash inflows from investor contributions on deposit with MBL as counterparty to the Swap Agreements (the "Collateral Deposit"). Under Swap Agreements, MBL will return the Collateral Deposit to the Trust at maturity plus any positive performance in the Reference Asset (if any) for series AC, series AE, series AO and series AQ and negative performance in the Reference Asset (if any) for series AD and series AP. The ability of the Trust to meet its objectives is dependent on the performance of MBL as the counterparty to the Swap Agreements. 7 Collateral deposit Collateral deposit 483, ,007 Total collateral deposit 483, ,007 This deposit attracts a floating interest rate of 3 month BBSW % for series AO, series AP and series AQ (: Nil), 3 month BBSW % for series AC, series AD and series AE (: 3 month BBSW %) and Nil for series G and series H (: 3 month BBSW %). 8 Financial assets held at fair value through profit or loss Fair value Fair value Held for trading Derivatives 8,333 9,782 Total held for trading 8,333 9,782 Total financial assets held at fair value through profit or loss 8,333 9,782 Comprising: Derivatives Investment linked swaps 8,333 9,782 Total derivatives 8,333 9,782 Total financial assets held at fair value through profit or loss 8,333 9,782 An overview of the risk exposures relating to financial assets at fair value through profit or loss is included in note 3. 9 Related party disclosures (a) Responsible Entity The Responsible Entity of Elements Trust is Macquarie Financial Products Management Limited (MFPML), a wholly owned subsidiary of Macquarie Group Limited.

27 For the Year Ended 31 March 9 Related party disclosures (continued) (b) Key management personnel The following persons held office as directors of MFPML during the year or since the end of the year and up to the date of this report: Antony Clubb Anthony John Abraham Jason King Peter Bruce Lucas (resigned 05/05/) Gary Shneier (appointed 05/05/) William Dudley Fox (resigned 09/06/) No amount is paid by the Trust directly to the directors of the Responsible Entity. Consequently, no compensation as defined in AASB 124 Related Party Disclosures is paid by the Trust to the directors as key management personnel. (c) Key management personnel unitholdings Key management personnel of MFPML held units in the Trust as follows: 31 March Unitholders Number of units held opening (Units) Number of units held closing (Units) Interest held % Number of units acquired (Units) Number of units disposed (Units) Distribution declared by the Trust Antony Clubb 2,414,284 2,932, ,932,331 2,414, ,049 Jason King 2,099, ,099,999 41,160 Peter Bruce Lucas 6,428,570 4,511, ,511,278 6,428, ,045 $ 31 March Unitholders Number of units held opening (Units) Number of units held closing (Units) Interest held % Number of units acquired (Units) Number of units disposed (Units) Distribution declared by the Trust Antony Clubb 2,062,500 2,414, ,414,284 2,062, ,477 Jason King 5,812,500 2,099, ,099,999 5,812, ,676 Peter Bruce Lucas 17,000,000 6,428, ,428,570 17,000, ,750 $ (d) Key management personnel loan disclosures The Trust has not made, guaranteed or secured, directly or indirectly, any loans to the key management personnel or their personally related entities at any time during the reporting period (: Nil). The Trust has entered into a deed of charge with Macquarie Specialist Investments Lending Limited "MSIL", an affiliate of Macquarie Group to grant a charge over deposits placed with MBL, as a recourse for loan given to investors.

28 For the Year Ended 31 March 9 Related party disclosures (continued) (e) Responsible Entity fees and other transactions For the year ended 31 March, in accordance with the Trust Constitution, the Responsible Entity received a total fee of % for series AO, series AP and series AQ (: Nil), % and % for series AC, series AD and series AE (: %) and % for series G and series H (: %) of the aggregate investment amount (inclusive of GST, net of RITC available to the Trust) per annum. The Trust has entered into investment linked swap agreements and holds collateral deposits with MBL. All expenses in connection with the preparation of accounting records and the maintenance of the unit register have been fully borne by the Responsible Entity. All related party transactions are conducted on normal commercial terms and conditions. The transactions during the year and amounts payable at year end between the Trust, the Responsible Entity and MBL were as follows: Investment linked swap income received under the investment linked swap agreements 34,709,855 44,920,901 Investment linked swap fees paid to MBL by the Trust 13,130,174 15,014,311 Net loss on investment linked swap held with MBL (1,448,822) (3,789,938) Management fees paid by the Trust to the Responsible Entity 104, ,429 Interest income on collateral deposit received from MBL by the Trust 13,234,278 15,129,946 Fair value of investment linked swap agreements 8,332,658 9,782,480 Aggregate amount payable to the Responsible Entity at the reporting date 82,992 97,915 Collateral deposit held with MBL 483,126, ,006,669 $ $ (f) Related party schemes' unitholdings Parties related to the Trust (including MFPML, its affiliates and other schemes managed by MFPML) held no units in the Trust (: Nil). (g) Investments The Trust held no investments in any schemes which are also managed by MFPML or its related parties (: Nil). (h) Other transaction within the Trust Apart from those details disclosed in this note, no directors of the Responsible Entity have entered into a material contract with the Trust since the end of the previous financial year and there were no material contracts involving directors' interests subsisting at year end. The Trust may hold bank accounts with Macquarie Bank Limited. The Trust may use Macquarie Securities (Australia) Limited, Macquarie Bank Limited or Macquarie entities for broking and clearing services respectively. Fees and expenses are negotiated on an arm's length basis for all transactions with related parties. Bond Street Custodians Limited, a wholly owned subsidiary of Macquarie Group Limited, is a custodian of the Trust.

29 For the Year Ended 31 March 10 Reconciliation of profit/(loss) to net cash inflow from operating activities (a) Reconciliation of profit/(loss) to net cash inflow from operating activities Profit/(loss) for the year - - Decrease in net assets attributable to unitholders (1,449) (3,790) Net losses on financial instruments held at fair value through profit or loss 1,449 3,790 Collateral withdrawn 600, ,863 Collateral deposited (511,321) (572,007) Distributions to unitholders 34,710 44,921 Net change in receivables and other assets Net change in payables and other liabilities (15) (13) Net cash inflow from operating activities 123, ,777 (b) Non-cash financing activities During the year, the following distribution payments were satisfied by the issue of units under the distribution reinvestment plan - - As described in note 2(j), income not distributed is included in net assets attributable to unitholders. The change in this amount each year (as reported in (a) above) represents a non-cash financing cost as it is not settled in cash until such time as it becomes distributable. 11 Events occurring after the reporting date No significant events have occurred since the reporting date which would impact on the financial position of the Trust disclosed in the statement of financial position as at 31 March or on the results and cash flows of the Trust for the year ended on that date. 12 Contingent assets, contingent liabilities and commitments There are no outstanding contingent assets, contingent liabilities or commitments as at 31 March and 31 March.