Financial report
30 June 2015
(and interim financial report
for the half-year ended
31 December 2015)
An illustration of an Australian
registered managed investment
scheme’s financial report
Endeavour Managed Investment Scheme
Foreword
The annual financial report is an important element in the communication of an entity’s current
financial position, financial performance and risks to its stakeholders. For managed investment
schemes, continued uncertain economic conditions mean clear, concise and timely information is
critical in allowing investors and other stakeholders to make well informed investment decisions.
You may be pleased to hear that the disclosure changes for the June 2015 and December 2015
reporting periods are relatively minor compared with those of the previous year. Having said this,
the effectiveness and usefulness of financial statement disclosures has become one of the areas of
focus for many board and audit committees. The International Accounting Standards Board (IASB)
has commenced a project entitled “The disclosure initiative”, to improve disclosure effectiveness by
providing guidance on how to enhance the structure of financial statements, make disclosures
entity-specific, and apply the materiality concept.
Considering the purpose of the Endeavour financial report, the ordering of the notes largely follows
the structure suggested by AASB 101 Presentation of Financial Statements. An alternate structure
involving reorganisation of the notes according to their nature and perceived importance may more
effectively permit users of the financial statements to obtain the information they need. Further
discussion on this and an example of such a structure is provided in the following pages.
During the year, the new revenue standard, AASB 15 Revenue from Contracts with Customers was
issued, as was the final version of AASB 9 Financial Instruments. These are mandatory for financial
years commencing 1 January 2017 and 2018, respectively. While these dates may seem like a long
time away, schemes should not be complacent. The implications of these new standards will extend
beyond the financial statements and will likely effect processes, systems, controls, remuneration
structures, stakeholder communications and more. Many schemes are in the process of
understanding and assessing the requirements and potential impacts, while others have
commissioned full scale projects.
We hope this publication will be a useful tool when preparing your financial statement disclosures
for this reporting season. If you require any further assistance or direction, please contact me at
[email protected] or your EY representative.
Brett Kallio
Partner, Financial Services
Ernst & Young
June 2015
Contents
Foreword ........................................................................................................................................................................... i Introduction ...................................................................................................................................................................... iii Abbreviations and key ..................................................................................................................................................... xiii Endeavour Managed Investment Scheme Annual Financial Report .................................................................................... xiv Contents to the financial report ......................................................................................................................................... 1 Directors' report ............................................................................................................................................................... 2 Auditor’s Independence Declaration................................................................................................................................... 5 Statement of Comprehensive Income ................................................................................................................................. 6 Statement of Financial Position ......................................................................................................................................... 7 Statement of Changes in Net Assets Attributable to Unitholders ........................................................................................ 8 Statement of Cash Flows ................................................................................................................................................... 9 Notes to the financial statements .................................................................................................................................... 11 Directors' declaration ...................................................................................................................................................... 50 Independent auditor's report ........................................................................................................................................... 51 Appendix A – Half-year financial report ............................................................................................................................ 53 Appendix B – Disclosures for listed schemes .................................................................................................................... 74 Appendix C – Consolidated disclosures ............................................................................................................................. 82 Appendix D — Reduced Disclosure Requirements (‘RDR’) adoption and transition .............................................................. 83 Appendix E — Australian reporting requirements .............................................................................................................. 87 EY  ii
Introduction
This publication contains the financial report of a fictitious registered managed investment scheme,
Endeavour Managed Investment Scheme (the ‘Scheme’). The Scheme is registered in Australia, with a
reporting date of 30 June 2015.
The enclosed financial report has been prepared in accordance with the requirements of the
Corporations Act 2001 and Australian Accounting Standards. The report is intended to illustrate the
disclosure requirements of the Accounting Standards, including, providing interpretive commentary
where necessary.
Objective
This financial report is illustrative only and does not attempt to show all possible accounting and
disclosure requirements. Although the illustrative financial report attempts to show the most likely
disclosure requirements for Australian registered managed investment schemes, it should not be
regarded as a comprehensive checklist. For a more comprehensive list of disclosure requirements,
please refer to EY's financial reporting standards disclosure checklist. If you are unclear as to the
requirements, please refer to the relevant authoritative source and, where necessary, seek appropriate
professional advice from your EY representatives.
How to use these illustrative financial statements to prepare entity-specific
disclosures
Users of this publication are encouraged to prepare entity-specific disclosures, for which these illustrative financial
statements may serve as a useful reference. Transactions and arrangements other than those addressed by the Scheme
may require additional disclosures. It should be noted that the illustrative financial statements of the Scheme are not
designed to reflect disclosure requirements that apply specifically to satisfy any stock market nor is this publication
intended to reflect disclosure requirements that apply mainly to regulated or specialised industries.
Notations shown on the right-hand margin of each page are references to accounting standards or other
pronouncements that describe the specific disclosure requirements. Commentaries are provided to
explain the basis for the disclosure or to address alternative disclosures not included in the illustrative
financial statements. In case of doubt as to the requirements, it is essential to refer to the relevant
source material and, where necessary, seek appropriate professional advice.
Improving disclosure effectiveness
The terms ’disclosure overload’ and ‘cutting the clutter’ describe an acute problem in financial reporting
that has become a priority issue for the International Accounting Standards Board (‘IASB’), local
standard setters including the Australian Accounting Standards Board (‘AASB’), and regulatory bodies.
The growth and complexity of financial disclosure is also drawing significant attention from financial
statement preparers, and most importantly, the users of financial statements.
Even though there is no formal definition of the ‘disclosure overload’ issue, from the different
discussions and debates among stakeholders, three common themes have appeared, namely financial
statements format or structure; tailoring and materiality.
The common practice for the ordering of the notes follow, to a great extent, the structure suggested in
paragraph 114 of AASB 101 Presentation of Financial Statements. An alternative structure that some
may find more effective in permitting the users to more easily obtain the relevant information involves
reorganising the notes according to their nature and perceived importance. In view of the discussion
around the disclosure initiatives project, an illustrative ordering based on the seven different note
sections is summarised in the table below:
EY  iii
Introduction (continued)
Improving disclosure effectiveness (continued)
Sections
Corporate information
Basis of preparation and other significant
accounting policies
Business, operations, and management
Significant transactions and events
Detailed information on statement of
comprehensive income items
Detailed information on statement of financial
position items
Other information
For example, comprising:
►
Corporate information
►
Basis of preparation
►
Other significant accounting policies not
covered in other sections (below)
►
Changes in accounting policies and
disclosures
►
Significant accounting judgements,
estimates and assumptions
►
Fair value measurement and related fair
value disclosures
►
Impact of standards issued but not yet
effective
►
Information on material partly-owned
subsidiaries, interest in joint ventures and
investment in associates
►
Capital management
►
Financial risk management objectives and
policies
►
Distributions to unitholders
►
Discontinued operations
►
Hedging activities and derivatives
►
Correction of an error
►
Related party transactions
►
Events after reporting period
►
Investment Income
►
Other income/expenses and adjustments
►
Other operating income and expenses
►
Finance income and costs
►
Foreign exchange differences
►
Management and performance fees
►
Components of other comprehensive
income
►
Earnings per unit
►
Investment properties
►
Financial assets and liabilities
►
Trade and other receivables and payables
►
Cash and short-term deposits
►
Offsetting financial assets and financial
liabilities
►
Net assets attributable to unitholders
►
Commitments and contingencies
►
Auditor’s remuneration
By structuring the notes according to their nature and perceived importance, users may find it easier to
extract the relevant information. In addition, the significant accounting policies could be placed within
the same note as the related qualitative and quantitative disclosures to provide a more holistic
discussion to users of the financial statements.
Applying the concept of materiality requires judgement, in particular in relation to matters of
presentation and disclosure, and may be another cause of the perceived disclosure overload problem.
Materiality is an entity specific aspect of relevance based on the nature or magnitude, or both, of the
items to which the information relates in the context of an individual entity's financial report.
EY  iv
Introduction (continued)
Improving disclosure effectiveness (continued)
As explained above, the primary purpose of these financial statements is to act as an illustration
of how the most commonly applicable disclosure requirements can be met, and therefore
includes disclosures that may in practice be deemed not material for the Scheme. It is therefore
essential that entities consider their entity-specific circumstances when determining what
disclosures to include. Schemes should not consider these financial statements as guidance in
making the materiality assessment, and they must always be applied together with tailoring
efforts to ensure that an scheme’s financial statements reflect and portray the scheme’s specific
circumstances and the scheme’s own materiality considerations. Only then will the financial
statements provide decision-useful financial information.
For more guidance on how to improve disclosure effectiveness, please refer to the publication Applying
IFRS: Improving Disclosure Effectiveness (July 2014).
Australian Accounting landscape
When complying with Australian Accounting Standards, preparers also need to comply with all applicable
amending standards and interpretations.
Australian Accounting Standards as at 31 March 2015
As a general approach, these illustrative financial statements do not early adopt standards or
amendments before their effective date. The standards applied in these illustrative financial statements
are those that were on issue as at 31 March 2015 and that apply to annual reporting periods beginning
on or after 1 July 2014. Standards issued, but not yet effective, as at 31 March 2015 have not been
early adopted.
It is important to note that the illustrative financial report in this document will require continual
updating as new and amended Standards and Interpretations are issued and/or revised.
Users of this publication are cautioned to check that there has been no change in requirements of
standards between 31 March 2015 and the date on which their financial statements are authorised for
issue. Specific disclosure requirements apply for standards and interpretations issued but not yet
effective (see Note 2.2 of these illustrative financial statements).
We encourage you to confirm with your EY representative that there has been no change in the
requirements of AASB Standards and Interpretations between 31 March 2015 and your reporting date.
Accounting policy choices
Accounting policies are broadly defined in AASB 108 Accounting Policies, Changes in Accounting
Estimates and Errors (‘AASB 108’) and include not just the explicit elections provided for in some
standards, but also other conventions and practices that are adopted in applying principle-based
standards.
In some cases, Australian Accounting Standards permit more than one accounting treatment for a
transaction or event. Preparers of financial statements should select the treatment that is most relevant
to their business and the circumstances of the transaction or event as their accounting policy.
EY  v
Introduction (continued)
Accounting policy choices (continued)
AASB 108 requires a scheme to select and apply its accounting policies consistently for similar
transactions, events and/or conditions, unless an Australian Accounting Standard specifically requires
or permits categorisation of items for which different policies may be appropriate. Where an Australian
Accounting Standard requires or permits such categorisation, an appropriate accounting policy is
selected and applied consistently to each category. Therefore, once a choice of one of the alternative
treatments has been made, it becomes an accounting policy and must be applied consistently. Changes
in accounting policy should only be made if required by a standard or interpretation, or if the change
results in the financial statements providing reliable and more relevant information.
In these illustrative financial statements, when a choice is permitted by Australian Accounting
Standards, the Scheme has adopted one of the treatments as appropriate to the circumstances of the
Scheme. In these cases, the commentary provides details of which policy has been selected, the reasons
for this policy selection, and summarises the difference in the disclosure requirements.
Financial review by management and schedule of investments
Many schemes present a financial review by management that is outside the financial statements.
Australian Accounting Standards do not require the presentation of such information, although
paragraph 13 of AASB 101 gives a brief outline of what may be included in an annual report. The IASB
issued an IASB Practice Statement, Management Commentary, in December 2010, which provides a
broad, non-binding framework for the presentation of management commentary that relates to
financial statements prepared in accordance with IFRS. If a scheme decides to follow the guidance in the
Practice Statement, management is encouraged to explain the extent to which the Practice Statement
has been followed. A statement of compliance with the Practice Statement is only permitted if it is
followed in its entirety.
Schemes often also disclose a schedule of investments either inside (as part of the audited information,
including comparatives) or outside the financial statements.
Preparers of financial statements that comply with Australian Accounting Standards should note that
other guidance on management commentary already exists in Australia which may take precedence
over the IFRS Practice Statement. Further, the content of a financial review by management in relation
to the financial statement and the format of a schedule of investments are often determined by
requirements of the Corporations Act 2001.
No financial review by management or schedule of investments has been included for the Scheme.
Changes to AASB
The following new standards and amendments are applicable for the financial year commencing 1 July
2014:
►
►
►
►
►
►
►
AASB 1031 Materiality
AASB 1055 Budgetary Reporting
AASB 2012-3 Amendments to Australian Accounting Standards - Offsetting Financial Assets and
Financial Liabilities
AASB 2013-3 Amendments to AASB 136 – Recoverable Amount Disclosures for Non-Financial
Assets
AASB 2013-4 Amendments to Australian Accounting Standards – Novation of Derivatives and
Continuation of Hedge Accounting [AASB 139]
AASB 2013-7 Amendments to AASB 1038 arising from AASB 10 in relation to Consolidation and
Interests of Policyholders
AASB 2013-9 Amendments to Australian Accounting Standards – Conceptual Framework,
Materiality and Financial Instruments
EY  vi
Introduction (continued)
Changes to AASB (continued)
►
►
►
►
►
AASB 2014-1 Amendments to Australian Accounting Standards - Part A: Annual Improvements
2010-2012 Cycle:
►
AASB 2 Share-based Payment
►
AASB 3 Business Combinations
►
AASB 8 Operating Segments
►
AASB 116 Property, Plant and Equipment
►
AASB 124 Related Party Disclosures
►
AASB 138 Intangible Assets
AASB 2014-1 Amendments to Australian Accounting Standards - Part A: Annual Improvements
2011-2013 Cycle:
►
AASB 13 Fair Value Measurement
►
AASB 140 Investment Property
AASB 2014-1 Part B - Amendments to AASB 119 Employee Benefits
AASB 2014-2 Amendments to AASB 1053 – Transition to and between Tiers, and related Tier 2
Disclosure Requirements
Interpretation 21 Levies
Not all of these standards and amendments impact the Scheme’s financial statements. If a standard or
amendment affects the Scheme, it is described, together with the impact, in Note 2.2 of these financial
statements.
Our regulatory update provides a summary of announcements and the activities of Australian
regulators in the last quarter ended 31 December 2014 that are of relevance to the asset management
industry. We have also provided a high level overview of the extensive range of global regulations that
are applicable to asset managers in varying degrees.
Managing the volume and complexity of overlapping global and local regulatory measures continues to
be a key area of focus for asset managers.
Detailed below are the key changes impacting the asset management industry:
Regulatory updates
Superannuation dual regulated entities (‘SDRE’s) no longer exempt from Australian
Financial Services Licence (‘AFSL’) financial conditions
Where a responsible entity (‘RE’) of a managed investment scheme (‘scheme’) is also regulated by APRA
as an RSE licensee, the following requirements do not currently apply:
►
To have in place adequate resources including financial, technological and human resources ss912A(1)(d) of the Corporations Act; and
►
Adequate risk management systems - s912A(1)(h) of the Corporations Act.
Subsection 912A(1) of the Corporations Act was amended on 26 June 2013 by the Superannuation
Legislation Amendment (Service Providers and Other Governance Measures) Act to improve the
governance arrangements for responsible entities of registered schemes. As a result, from 1 July 2015,
the current exemptions cease to have effect on SDREs. SDREs therefore will need to ensure that their
business as responsible entity of a scheme complies with the adequate resources and adequate risk
management systems requirements.
Adequate financial resources
In 2013, Australian Securities and Investments Commission (‘ASIC’) released [CO 13/760] Financial
requirements for responsible entities and operators of investor directed portfolio services (Class Order
13/760), following an earlier modification in 2011 in CO 11/1140.
EY  vii
Introduction (continued)
Regulatory updates (continued)
Under Class Order 13/760 a responsible entity holding scheme property or other assets of a registered
scheme or IDPS property must hold net tangible assets (‘NTA’) of the greater of $10 million or 10 per
cent of ‘average RE and investor directed portfolio services (‘IDPS’) revenue’, subject to limited
exceptions relating to ‘special custody assets’ or ‘Tier $500,000 class assets’. Where a custodian is
appointed, the RE must hold minimum NTA of the greater of $150,000 or 0.5% of scheme property up
to a maximum of $5m or 10% of ‘average RE and IDPS revenue’.
In assessing the requirement to hold NTA for a responsible entity, the revenue from its business as an
RSE licensee will need to be taken into account. The NTA requirement must be met by the SDRE’s assets
and not assets it holds in trust such as in a superannuation fund or registered scheme.
Risk management systems
ASIC's policy on risk management for AFS licensees, including responsible entities of the scheme, is set
out in Regulatory Guide 104 Licensing: Meeting the general obligations (‘RG 104’). Under RG 104, a
responsible entity must have measures in place to ensure they comply with the obligation to have in
place adequate risk management systems on an ongoing basis. In particular, in RG 104.62, ASIC states
that it expects that risk management systems will:
►
Be based on a structured and systematic process that takes into account obligations under the
Corporations Act;
►
Identify and evaluate risks faced by the business, focusing on risks that adversely affect consumers
or market integrity (this includes risks of non-compliance with the financial services laws);
►
Establish and maintain controls designed to manage or mitigate those risks; and
►
Fully implement and monitor those controls to ensure they are effective.
ASIC also provided feedback on the risk management practices of responsible entities in ASIC's Report
298 Adequacy of risk management systems of responsible entities, released in 2012. Final guidance is
still pending.
ASIC focus on breach reporting by AFS licensees
ASIC released 14-233MR on 16 September 2014. where Peter Kell, the Deputy Chairman of Australian
Securities and Investments Commission, expressed concern about inconsistencies and delays in
significant breach reporting. A particular focus of ASIC is to ensure that reporting is made strictly
within the timeframe specified in the Corporations Act (ie. 10 business days after becoming aware of
the breach).
ASIC has confirmed that licensees become aware of a breach when a person responsible for compliance
becomes aware of the breach or likely breach. However licensees should not wait until after they have
completed a full investigation to satisfy themselves that the breach or likely breach is significant. In
particular licensees should not delay reporting until:
►
The breach (or likely breach) has been fully investigated and considered by the licensee’s board of
directors or legal advisors;
►
The licensee has taken steps to rectify the breach; and
►
In the case of a likely breach, the breach has in fact occurred.
ASIC will conduct a review of breach reports it has received to consider the following:
►
Who they are from;
►
What is reported; and
►
The timeliness of the reports.
Based on the results of this review, ASIC will then conduct pro-active reviews of those licensees it
identifies as having a high risk of non-compliance.
EY  viii
Introduction (continued)
Regulatory updates (continued)
ASIC releases a class order on fee disclosures and draft guidance
Following a review of fee disclosure practices, ASIC released Class Order [CO 14/1252] Technical
modifications to Schedule 10 of the Corporations Regulations in December 2014. The class order
clarifies key fee and cost disclosure requirements for Product Disclosure Statements (PDS) and periodic
statements for superannuation and managed investment products and addresses:
►
Disclosure of costs of investing in interposed vehicles;
►
Disclosure of indirect costs;
►
Removal of doubt that double counting of some costs for superannuation products is not required;
and
►
The appropriate application of the consumer advisory warning.
The class order will apply to all PDSs for superannuation and managed investment products from 1
January 2016. It will also apply to periodic statements that must be given for these products by 1
January 2017 or later.
ASIC has also commenced a review of RG 97 Disclosing fees and costs in PDSs and periodic statements
(‘RG 97’). A draft of RG 97 was circulated to a number of industry associations and other industry
participants for comment in December 2014. Final guidance is still pending.
Self-managed superannuation funds (“SMSF”) – a retail or wholesale client?
In a recent and welcome development, ASIC has clarified how it will apply the wholesale investor test to
self-managed superannuation funds (‘SMSF’). This has been an area of ongoing legal uncertainty for a
number of years and has affected many fund managers who wish to offer investment products to
SMSFs.
ASIC has now clarified that in certain circumstances a SMSF may be classed as a wholesale client based
on the general test (e.g. if the trustee has net assets of at least $2.5 million or the value of the
investment is at least $500,000) rather than applying the higher $10 million asset test to the SMSF
itself.
ASIC reports on industry implementation of platforms guidance
ASIC released a report in September 2014 on their review of the implementation of updated RG148
Platforms that are managed investment schemes by platform operators.
The report reminds platform operators about some important obligations, including:
►
Management of conflicts of interest to ensure there is appropriate avoidance of, and management
and disclosure in relation to the conflicts inherent in platform structures;
►
Timely breach reporting in accordance with s912D and Regulatory Guide 78 Breach reporting by
AFS licensees;
►
Having a clear policy and disclosure addressing the implications for unadvised clients on platforms;
►
Managing investment governance risk, particularly by superannuation trustees and responsible
entities that are platform operators; and
►
Compliance with corporate structure requirements.
Updated ASIC policy for externally administered companies and registered
managed investment schemes being wound up
In light of ASIC’s experiences in administering Class Order 03/392 (‘CO 03/392’) and RG 174 Externally
administered companies: Financial reporting and Annual general meetings (‘RG 174’) policy, the
legislative changes and the fact that relief will expire, ASIC undertook a project to review RG 174 and
CO 03/392.
EY  ix
Introduction (continued)
Regulatory updates (continued)
ASIC’s key points from Consultation Paper 223 Relief for externally administered companies and
registered schemes being wound up: RG 174 update (‘CP 223’):
►
ASIC proposes to update its approach to financial reporting relief for externally administered
companies and registered schemes being wound up;
►
ASIC will establish policy settings that appropriately balance the information needs of members
and other users of financial reports with the financial burden imposed on distressed schemes by
financial reporting costs; and
►
ASIC is consulting on some possible practical improvements they can make to their policy to test
whether they will achieve that appropriate balance.
In particular, ASIC are consulting on proposals regarding whether they should:
►
Expand their policy to exempt insolvent registered schemes being wound up from financial
reporting;
►
Expand their policy to exempt public companies from the obligation to hold an annual general
meetings (‘AGM’) if the company has a liquidator appointed; and
►
Update their guidance on the circumstances in which they will provide individual relief, including
narrowing the circumstances in which they give exemptive relief and expanding the circumstances
in which they give deferral relief.
ASIC releases updated record keeping obligations for advisors
The updated obligations released in September 2014 require AFS licensees to keep records to prove
that the AFS licensee and its representatives have complied with the Future of Financial Advice (FOFA)
best interests duty and related obligations when they give personal advice to retail clients.
ASIC has been actively monitoring record keeping by AFS licensees and, where AFS licensees have
failed, has taken action. Refer to:
►
Class Order [CO 14/923] Record-keeping obligations for Australian financial services licensees
when giving personal advice;
►
Report 409 Response to submissions on CP 214 Updated record keeping obligations for AFS
licensees (REP 409);
►
Consultation Paper 214 Updated record-keeping obligations for AFS licensees (CP 214); and
►
Industry submissions to CP 214
Key reminders of prior period regulatory changes
We have also included some reminders on key matters for your consideration:
Unilateral amendments to constitutions of registered scheme
Following a recent court decision, even greater care needs to be taken if a RE wishes to unilaterally
amend the constitution of a registered scheme (i.e. amendments made without member approval). This
court decision could potentially greatly limit the types of constitution modifications that can be made
unilaterally. As a consequence it is essential that the board of a RE very carefully considers the effect of
proposed changes to a scheme’s constitution on members’ rights, seeks professional advice where
necessary and properly records its deliberations in the board minutes. Amendments made in breach of
the law are invalid.
Considerations for withdrawals from a registered scheme
A recent court case highlights the need for a RE to carefully analyse the rights of various members in
respect of withdrawal/redemption facilities, before dealing with or suspending those facilities. An
incorrect analysis could result in returns to members being made in breach of the scheme constitution
and in breach of the Corporations Act.
EY  x
Introduction (continued)
Regulatory updates (continued)
Key ways an RE can limit personal exposure to third parties
REs should periodically review their operations, procedures and documents in order to ensure that their
personal exposure to third parties is understood and limited. Group exposure can be limited by using
special purpose companies with limited personal assets, ensuring that the constitution for each scheme
contains adequate indemnity provisions, and obtaining relevant insurances.
Further, it is critically important to ensure that all contracts entered into by the RE with third parties
include detailed clauses excluding the personal liability of the RE. These limitation clauses are often
inadequately drafted or omitted, leading to potential personal exposure of the RE.
In specie distribution of the scheme assets to members
An RE of a registered scheme must always ensure that it has specific power under a scheme
constitution to make an in specie distribution of assets to members, otherwise that distribution may be
invalid (in a recent court case which considered this issue the assets in question were units held by the
scheme in a company). It should also consider whether member approval is required or desirable, and
whether there are any other factors relevant to such a distribution which should be taken into account.
EY  xi
Introduction (continued)
Regulatory updates (continued)
EY  xii
Abbreviations and key
Abbreviations
The following styles of abbreviation are used in the commentary of the Endeavour Managed Investment
Scheme illustrative financial report:
AASB 7
AASB 8
AASB 9
AASB 10
AASB 12
AASB 13
AASB 101
AASB 107
AASB 112
AASB 124
AASB 128
AASB 133
AASB 134
AASB 139
AASB 140
CA 295
CA 299
CA 300
ASIC CO
ASIC RG
ASX 4.10
Interpretations
Commentary
Australian Accounting Standard No. 7
Australian Accounting Standard No. 8
Australian Accounting Standard No. 9
Australian Accounting Standard No. 10
Australian Accounting Standard No. 12
Australian Accounting Standard No. 13
Australian Accounting Standard No. 101
Australian Accounting Standard No. 107
Australian Accounting Standard No. 112
Australian Accounting Standard No. 124
Australian Accounting Standard No. 128
Australian Accounting Standard No. 133
Australian Accounting Standard No. 134
Australian Accounting Standard No. 139
Australian Accounting Standard No. 140
Corporations Act 2001, section 295
Corporations Act 2001, section 299
Corporations Act 2001, section 300
Australian Securities & Investments Commission Class Order
Australian Securities & Investments Commission Regulatory Guidance
Australian Stock Exchange Listing Rules Chapter 4, Rule 10
Interpretations of the AASB
Commentary is aimed at explaining how the requirements of AASB have been
interpreted in arriving at the illustrative disclosure
Caveat
The names of people and schemes included in this illustrative financial report are fictitious and have
been created for the purpose of illustration only. Any resemblance to any person or business is
purely coincidental.
This financial report is illustrative only and does not attempt to show all possible accounting and
disclosure requirements. Although the illustrative financial report attempts to show the most likely
disclosure requirements for registered managed investment schemes, it should not be regarded as a
comprehensive checklist of disclosure requirements. In the case of any doubt as to the
requirements, it is essential to refer to the relevant source and, where necessary, to seek
appropriate professional advice from your EY representative.
EY  xiii
Endeavour Managed
Investment Scheme
ARSN 00 000 000 000
Annual financial report
for the year ended 30 June 2015
Contents to the financial report
Directors' report ............................................................................................................................................................... 2 Auditor’s Independence Declaration................................................................................................................................... 5 Statement of Comprehensive Income ................................................................................................................................. 6 Statement of Financial Position ......................................................................................................................................... 7 Statement of Changes in Net Assets Attributable to Unitholders ........................................................................................ 8 Statement of Cash Flows ................................................................................................................................................... 9 Notes to the financial statements .................................................................................................................................... 11 Directors' declaration ...................................................................................................................................................... 50 Independent auditor's report ........................................................................................................................................... 51 EY  1
Directors' report
The Directors of Endeavour Responsible Entity Limited (ABN 00 000 000 000), the Responsible Entity of
Endeavour Managed Investment Scheme (the “Scheme”), submit their report for the Scheme for the year
ended 30 June 2015.
CA 298(1)
CA 300(1)(c)
DIRECTORS
The names of the Directors of the Responsible Entity in office during the financial year and until the date of
this report are:
M.P. Byrne (Chairman)
R. Scanlon
G. Haggar
A. Morgan
J. dela Peña
M. Nosewall
J. Chuang
Appointed 14 March 2015
Resigned 14 March 2015
The Directors were in office from the beginning of the financial year until the date of this report, unless
otherwise stated.
CA 300(1)(c)
Commentary
The names of the directors in office during or since the end of the year and the period for which they were a
director (including alternates who have acted in the capacity of director) must be disclosed.
PRINCIPAL ACTIVITIES
The principal activity of the Scheme during the year was to invest funds in accordance with the provisions of
the Scheme’s Constitution.
CA 299(1)(c)
AASB 101.138(b)
A diversified investment portfolio is maintained to balance the return and risk objectives of the Scheme. In
accordance with these investment objectives, the Scheme principally invests in equities, interest bearing
securities, derivatives and other securities in several currencies in both domestic and international markets.
There has been no significant change in the nature of this activity during the year.
SCHEME INFORMATION
Endeavour Managed Investment Scheme is an Australian registered Scheme, and was constituted on 1
January 1998. Endeavour Responsible Entity Limited, the Responsible Entity of the Scheme, is incorporated
and domiciled in Australia.
The registered office and principal place of business of the Responsible Entity is located at Currency House, 30
Hedge Street, Sydney, NSW, 2000.
AASB 101.138(a)
AASB 101.138(a)
Commentary
The entity shall disclose the following, if not disclosed elsewhere in information published with the financial
statements:
AASB 101.138(a): the domicile and legal form of the entity, its country of incorporation and the address of its
registered office (or principal place of business, if different from the registered office);
AASB 101.138(b): a description of the nature of the entity’s operations and its principal activities; and
AASB 101.138(c): the name of the parent and the ultimate parent of the group.
REVIEW OF RESULTS AND OPERATIONS
CA 299(1)(a)
Results and distributions
Net profit attributable to unitholders for the year ended 30 June 2015 was $11,441,286 (2014: loss
$47,890,437).
Distributions to unitholders during the year totalled $2,675,088 (2014: $4,732,112).
CA 300(1)(a)
Distributions to unitholders during the year included a half-yearly distribution in respect of the period ended
31 December 2014 of 0.99 cents per unit (2013: 3.05 cents) paid on 4 January 2014 to unitholders.
A final distribution was declared for the year ended 30 June 2015 of 2.38 cents per unit (2014: 2.24 cents)
paid on 6 July 2015. The total amount unpaid at the reporting date is disclosed in the Statement of Financial
Position.
CA 300(1)(b)
Commentary
The Scheme has not illustrated the full disclosures required in the operating and financial review of Endeavour Managed
Investment Scheme. The appropriate information to disclose in the operating and financial review will depend upon the Scheme’s
business operations and the sector in which it operates.
For listed entities, ASIC has issued RG 247 Effective disclosures in an operating and financial review (RG 247) to assist directors
and entities to apply the existing requirements of s299A(1) Corporations Act 2001. However, it may be useful guidance for nonlisted entities given the similar requirements in s299(1) that apply to all entities required to prepare a directors’ report.”
EY  2
Director’s report (continued)
The following fees were paid to the Responsible Entity and its associates out of Scheme property during the
financial year:
Management fees for the financial year paid to the Responsible Entity
Performance fees for the financial year paid to the Responsible Entity
Expenses incurred by the Responsible Entity and reimbursed by the
Scheme in accordance with the Scheme’s Constitution.
CA 300(13)(a)
$742,364 (2014: $962,106)
$589,441 (2014: nil)
$184,224 (2014: $166,781)
The interests in the Scheme held by the Responsible Entity and its associates at the end of the year are
disclosed in Note 17 to the financial statements.
CA 300(13)(b)
UNITS ON ISSUE
77,983,532 units of the Scheme were on issue at 30 June 2015 (2014: 86,938,296). During the year,
10,657,541 (2014: 11,666,049) units were issued by the Scheme and 19,612,305 (2014: 20,084,507)
units were withdrawn.
CA300(13)(c)
CA 300(13)(d)
CA300(13)(f)
SCHEME ASSETS
At 30 June 2015 the Scheme held assets to a total value of $95,379,233 (2014: $94,005,045). The basis
for valuation of the assets is disclosed in Note 2 to the financial statements.
CA 300(13)(e)
Commentary
The following must be disclosed for a registered scheme:
CA 300(13)(a): Fees paid to the responsible entity and its associates out of scheme property during the
financial year
CA 300(13)(b): Number of interests in the scheme held by the responsible entity or its associates as at the
end of the financial year.
CA 300(13)(c): Interests in the scheme issued during the financial year.
CA 300(13)(d): Withdrawals from the scheme during the financial year.
CA 300(13)(e): Value of the scheme’s assets as at the end of the financial year, and the basis for valuation.
CA 300(13)(f): Number of interests in the scheme as at the end of the financial year.
These disclosures can be made in the directors’ report, or a reference can be made to where this information
is disclosed in the financial report in accordance with Class Order 98/2395.
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
The investment strategy of the Scheme was revised during the financial year. The Directors of the
Responsible Entity foresee constant performance opportunities in the 2016 financial year due to the
revision of the Scheme’s investment strategy that occurred in May 2015. This change consisted of
increasing the Scheme’s risk management thresholds to allow greater exposure to direct property,
infrastructure and private equity assets. Future results will depend on the performance of the markets in the
areas in which the Scheme chooses to invest.
CA 299(1)(b)
Other than that detailed above, there were no significant changes to the state of affairs of the Scheme
during the year.
SIGNIFICANT EVENTS AFTER THE BALANCE DATE
There has been no matter or circumstance that has arisen since the end of the financial year that has
significantly affected, or may significantly affect, the Scheme’s operations in future financial years, the
results of those operations or the Scheme’s state of affairs in future financial years.
CA 299(1)(d)
LIKELY DEVELOPMENTS AND EXPECTED RESULTS
The investment strategy of the Scheme will be maintained in accordance with the Scheme Constitution and
investment objectives as detailed in the most recent Product Disclosure Statement.
CA 299(1)(e)
Commentary
CA 299(3): Where information on likely developments is not disclosed because in the directors’ opinion it is
likely to result in unreasonable prejudice to the entity, the report state this information has been excluded.
ENVIRONMENTAL REGULATION AND PERFORMANCE
The operations of the Scheme are not subject to any particular or significant environmental regulation under
a law of the Commonwealth or of a State or Territory. There have been no known significant breaches of any
other environmental requirements applicable to the Scheme.
CA 299(1)(f)
CA 300(8),(9)
INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS
The Constitution of the Responsible Entity requires it to indemnify all current and former officers of the
Responsible Entity (but not including auditors) out of the property of the Responsible Entity against:
CA 300(1)(g)
a. any liability for costs and expenses which may be incurred by that person in defending civil or criminal
proceedings in which judgement is given in that person’s favour, or in which the person is acquitted, or in
connection with an application in relation to any such proceedings in which the court grants relief to the
person under the Corporations Act 2001; and
EY  3
Director’s report (continued)
b.
a liability incurred by the person, as an officer of the Responsible Entity or of a related body corporate,
to another person (other than the Responsible Entity or a related body corporate) unless the liability
arises out of conduct involving a lack of good faith.
During the financial year, the Responsible Entity paid an insurance premium in respect of a contract insuring
each of the officers of the Responsible Entity. The amount of the premium is, under the terms of the
insurance contract, confidential. The liabilities insured include costs and expenses that may be incurred in
defending civil or criminal proceedings that may be brought against the officers in their capacity as officers
of the Responsible Entity or related body corporates. This insurance premium does not cover auditors.
The Scheme has not indemnified or insured directors or officers.
INDEMNIFICATION OF AUDITORS
To the extent permitted by law, the Scheme has agreed to indemnify its auditors, Ernst & Young, as part of
the terms of its audit engagement agreement against claims by third parties arising from the audit (for an
unspecified amount). No payment has been made to indemnify Ernst & Young during or since the financial
year.
AUDITOR’S INDEPENDENCE DECLARATION
An independence declaration has been provided to the Directors by the auditor of Endeavour Managed
Investment Scheme, EY, and is attached to the Directors’ report.
ROUNDING
The amounts contained in this report and in the financial report have been rounded under the option
available to the Scheme under ASIC Class Order 98/100. The Scheme is an entity to which the Class Order
applies, and in accordance with that Class Order, amounts in the Directors’ report and the financial report
have been rounded to the nearest thousand dollars (where rounding is appropriate).
CA 300(8)(a),
CA 300(9)(b),(c) (e)
CA 300(9)(d)
ASIC CO 05/641
CA 298(1AA)
ASIC CO 98/100
AASB 101.51(e)
Commentary
Where a registered Scheme is of a certain size, amounts and comparatives can be rounded. Rounding,
however, is not permitted where it would result in the loss of material information.
The financial report or Directors’ Report should state that the Scheme is an entity to which the class order
applies and that amounts have been rounded, and the extent of that rounding.
Generally, the following rounding levels apply, with some restrictions for related party/remuneration
disclosures and auditor remuneration. Refer to the class order for full details:
Assets greater than:
$10m (less than $1,000m)
$1,000m (less than $10,000m)
$10,000m
Rounding:
$1,000
$100,000
$1,000,000
Earnings per unit disclosures must not be rounded further than the nearest one-tenth of a cent.
The level of rounding used in presenting amounts in the financial statements shall be displayed prominently
and repeated where necessary for the information presented to be understandable.
Signed in accordance with a resolution of the Directors.
CA 298(2)
M.P. Byrne
Chairman
Sydney
26 August 2015
CA 298(2)
EY  4
Ernst & Young
680 George Street
Sydney NSW 2000 Australia
GPO Box 2646 Sydney NSW 2001
Tel: +61 2 9248 5555
Fax: +61 2 9248 5959
ey.com/au
Auditor’s Independence Declaration
To the Directors of Endeavour Responsible Entity Limited, as Responsible Entity
for Endeavour Managed Investment Scheme
In relation to our audit of the financial report of Endeavour Managed Investment Scheme for
the financial year ended 30 June 2015, to the best of my knowledge and belief, there have
been no contraventions of the auditor independence requirements of the Corporations Act
2001 or any applicable code of professional conduct.
CA 298(1)(c)
Ernst & Young
D.G. Brown
Partner
Sydney
26 August 2015
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
EY  5
Statement of Comprehensive Income
AASB 101.10(b)
AASB101.81(a)
AASB 101.102
for the year ended 30 June 2015
AASB 101.51(c)
Note
AASB 101.38
30 June 2015
$’000
30 June 2014
$’000
9
10
1,167
1,293
1,461
1,875
11
13,882
(44,250)
101
16,443
23
(40,891)
(146)
(742)
(589)
(162)
(285)
(209)
(2,133)
(98)
(962)
(240)
(460)
(276)
(2,036)
AASB 7.20(b)
14,310
(42,927)
AASB 101.85
(194)
(231)
AASB 101.82(d)
(2,675)
(4,732)
AASB 132.40
11,441
11,441
(47,890)
(47,890)
AASB 101.81A(b)
AASB 101.51(d),(e)
Income
Interest revenue
Dividend revenue
Change in fair value of financial assets and liabilities at fair
value through profit or loss
Net foreign exchange gains
Total income
Expense
Interest expense
Management fees
Performance fees
Custodian and administration fees
Brokerage fees and other transaction costs
Other general expenses
Total expenses
9
17
17
Net profit/(loss) before finance costs and income tax
Withholding tax expense
Finance costs
Distributions to unitholders
Net profit/(loss) for the year
Other comprehensive income
Change in net assets attributable to unitholders
AASB 7.20(b), AASB
118.35(b)(ii)
AASB 118.35(b)(v)
AASB 7.20(a)(i)
AASB 101.35
AASB 121.52(a)
AASB 101.35
AASB 101.82(b)
13
Commentary
AASB 101.10A allows the Scheme to present a single statement of profit or loss and other comprehensive
income, or two linked statements with profit or loss and other comprehensive income presented separately.
This illustration is based on a single statement.
AASB 101.99 requires expenses to be analysed by their nature or by their function within the entity,
whichever provides information that is reliable and more relevant. The Scheme has presented the analysis of
expenses by nature (AASB 101.102).
AASB 101 requires entities to present a statement of comprehensive income that combines all items of
income and expense recognised in profit or loss together with ‘other comprehensive income’. The other
comprehensive income comprises items of income and expenses (including reclassification adjustments) that
are not recognised in profit or loss as required or permitted by other Australian Accounting Standards.
AASB 101.82A requires the other comprehensive income section to classify line items by nature into those
that:
►
Will not be reclassified subsequently to profit or loss; and
►
Will be reclassified subsequently to profit or loss when specific conditions are met.
AASB 101.85 allows an entity to present additional line items, headings and subtotals when such
presentation is relevant to an understanding of the entity’s financial performance. In accordance with this
paragraph, we have continued to adopt the overall presentation provided in AASB 132 Example 7 for
entityies with no equity.
Where a scheme with no equity does not elect to follow this alternative presentation, they should be aware
that their total comprehensive income must be nil, even where they have items of other comprehensive
income.
The Scheme does not pay income tax in relation to its operations. The unitholders bear the tax cost on any
distributions received from the Scheme. Where the Scheme does not make full distribution to its unitholders,
then it is necessary to assess for tax implications.
EY  6
Statement of Financial Position
AASB 101.10(a)
AASB 101.63
AASB 101.51(c)
at 30 June 2015
Note
ASSETS
Cash and cash equivalents
Due from brokers
Dividends receivable
Interest receivable
Receivable from redeemable units
Other receivables and prepayments
Financial assets at fair value through profit or loss
TOTAL ASSETS
3
4
5
30 June 2015
$’000
30 June 2014
$’000
109
649
79
107
105
9
94,321
95,379
463
1,273
142
130
397
15
91,585
94,005
69
72
31
210
300
24
3,684
73
111
52
550
917
28
3,569
4,390
5,300
90,989
95,379
88,705
94,005
AASB 101.38
AASB 101.51(d),(e)
AASB 101.54(i)
AASB 101.54(d),
AASB 7.8(c)
AASB 101.54(h)
AASB 7.8(a)
LIABILITIES
Due to brokers
Management and performance fees payable
Custodian and administration fees payable
Distributions payable
Redemption payable
Other payables and accrued expenses
Financial liabilities at fair value through profit or loss
TOTAL LIABILITIES (EXCLUDING NET ASSETS
ATTRIBUTABLE TO UNITHOLDERS)
NET ASSETS ATTRIBUTABLE TO UNITHOLDERS
TOTAL LIABILITIES
4
17
13
5
AASB 101.54(m),
AASB 7.8(f)
AASB 101.54(k)
AASB 7.8(e)
AASB 132 Example 7
Commentary
AASB 101.60 requires entities to present assets and liabilities in order of their liquidity (rather than split
between current and non-current) when this presentation is reliable and more relevant, as will often be the
case for registered managed investment schemes.
AASB 101.10(f) requires a Statement of Financial Position as at the beginning of the earliest comparative
period when the entity applies an accounting policy retrospectively.
AASB 101.55 allows an entity to present additional line items, headings and subtotals when such presentation
is relevant to an understanding of the entity’s financial position. In accordance with this paragraph, we have
continued to adopt the overall presentation provided in AASB 132 Example 7 for entities with no equity.
The Scheme has no instruments classified as equity and presents the net assets attributable to unitholders in
accordance with the special format illustrated by AASB 132.IE32.
EY  7
Statement of Changes in Net Assets Attributable to Unitholders
for the year ended 30 June 2015
Units on issue
No. ‘000
Balance at 30 June 2013
Change in accounting policy
Balance at 30 June 2013
Issue of redeemable units
Redemption of redeemable units
Decrease in net assets attributable to
unitholders from transactions in units
Change in net assets attributable to
unitholders
Balance at 30 June 2014
Issue of redeemable units
Redemption of redeemable units
Decrease in net assets attributable to
unitholders from transactions in units
Change in net assets attributable to
unitholders
Balance at 30 June 2015
95,357
Net assets
attributable to
unitholders
(calculated in
accordance
with
redemption
requirements)
$’000
Adjustment
from midmarket prices
to bid/offermarket prices
Net assets
attributable to
unitholders
(calculated in
accordance
with AASB)
$’000
$’000
(55)
148,787
(40)
148,747
95,357
148,842
(40)
148,802
11,666
(20,085)
16,368
(28,520)
-
16,368
(28,520)
(12,152)
-
(12,152)
86,938
(47,886)
88,764
(4)
(59)
(47,890)
88,705
10,658
(19,612)
11,270
(20,427)
-
11,270
(20,427)
(9,157)
-
(9,157)
11,450
91,057
(9)
(68)
(8,419)
(8,954)
77,984
(55)
11,441
90,989
Commentary
Our view is that if there is a difference between the NAV per AASB and the NAV per the Scheme’s valuation, it
is not an equity component. Under AASB 139, asset positions were generally marked at bid prices and liability
positions at ask prices. AASB 13 permits an entity to use the price within the bid-ask spread that is most
representative of fair value in the circumstances to measure fair value. As a practical expedient, AASB 13
allows for the use of mid-market pricing, or other pricing conventions that are used by market participants,
when measuring fair value within the bid-ask spread.
AASB 101.80 requires entities without share capital to disclose equivalent information about changes during
the period. Consistent with that requirement and the approach adopted for the Statement of Comprehensive
Income and the Statement of Financial Position under the alternative presentation in AASB 132 Example 7,
we believe that presenting a Statement of Changes in Net Assets Attributable to Unitholders with equivalent
information to a Statement of Changes in Equity is best practice and more appropriate to the needs of users
than a Statement of Changes in Equity with zero balances.
Schemes may however choose to present a Statement of Changes in Equity with nil balances and present the
above information in the notes to the financial statements.
EY  8
Statement of Cash Flows
AASB 101.10(d)
AASB 107.10
for the year ended 30 June 2015
AASB 101.51(c)
Note
30 June 2014
$’000
14
63,913
81,076
(50,359)
3,313
(910)
1,190
1,101
(141)
(1,370)
(183)
(500)
(77,486)
3,544
(1,219)
1,449
1,418
(101)
(997)
(236)
(751)
16,054
6,697
AASB 107.31
AASB 107.31
AASB 107.31
AASB 107.21
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of financial assets designated as at fair
value through profit or loss
Purchase of financial assets designated as at fair value
through profit or loss
9,527
20,189
(15,345)
(11,717)
(5,818)
8,472
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of redeemable units
Payments on redemption of redeemable units
Distributions paid to unitholders
11,562
(21,044)
(1,150)
16,114
(27,865)
(3,119)
Net cash flows used in financing activities
(10,632)
(14,870)
(396)
463
42
109
299
109
55
463
Net cash flows (used in) / provided by investing activities
Net (decrease) / increase in cash and cash equivalents
Cash and cash equivalents at 1 July
Effect of exchange rate changes
Cash and cash equivalents at 30 June
AASB 101.38
AASB 101.51(d)(e)
AASB 107.14
CASH FLOWS FROM OPERATING ACTIVITIES
Proceeds from sale of financial investments classified as
held for trading
Payments for purchase of financial investments and
settlement of financial liabilities held for trading
Proceeds received from brokers
Payments to brokers
Interest received
Dividends and distributions received
Interest paid
Management and performance fees paid
Custodian and administration fees paid
Other operating expenses paid
Net cash provided by operating activities
30 June 2015
$’000
AASB 107.21
3
AASB 107.17(a)
AASB 107.17(b)
AASB 107.34
EY  9
Statement of Cash Flows (continued)
Commentary
AASB 107.18 allows entities to report cash flows from operating activities using either the direct method or
the indirect method, but encourages use of the direct method. The Scheme presents its cash flows using the
direct method.
Our view is that a scheme should classify its held-for trading investment movements as operating activities
since the investment activities of a scheme are the principal revenue-producing activities of the scheme and
the turnover of such investments is high.
For investments designated at fair value through profit or loss, the scheme should assess whether the
investments are held for the primary purpose of generating future income and cash flows over the long term.
If not, and the Responsible Entity believes that the transactions in investments designated at fair value
through profit or loss are the principal revenue-producing activities of the scheme, then these cash flows
should be classified as operating activities (AASB 107.15), otherwise, they should be classified as cash flows
from investing activities (AASB 107.16). The classification adopted should be consistently applied.
AASB 107.31 requires cash flows from interest and dividends received and paid to be disclosed separately.
AASB 107.33 permits interest paid to be shown as operating, financing or investing activities and interest
received to be shown as operating or investing activities, as deemed relevant for the Scheme. The
classification adopted should be consistently applied. The Scheme has elected to classify interest received and
interest paid as cash flows from operating activities.
Our view is that a managed investment scheme may choose whether to present its purchases and sales of
investments held for trading gross or net. Once a presentation policy is selected, it must be applied
consistently. If a Scheme elects to present the net cash flows from purchases and sales of investments,
consideration needs to be given to the adequacy of disclosures in the notes to the financial statements
regarding the risks associated with the financial instruments of the scheme in accordance with AASB 7.
EY  10
Notes to the financial statements
For the year ended 30 June 2015
1
Corporate information
AASB 101.10(e)
The registered office of the Responsible Entity is located at 30 Hedge Street, Sydney, New South Wales, 2000.
The investment objective of the Scheme is to achieve consistent medium-term returns while safeguarding
capital by investing in a diversified portfolio of equity securities, interest bearing securities and related
derivatives in several currencies in both domestic and international markets.
AASB 101.112
AASB 101.113
AASB 101.138(a)
AASB 101.138(b)
Most of the Scheme’s investments are listed and traded on stock exchange markets in Australia, Taiwan, the
European Union and Japan.
The Scheme’s investment activities are managed by Endeavour Asset Management Limited (the ‘Investment
Manager’). The Scheme’s custodian and administrator is Endeavour Administration Fund Services Limited.
The Scheme’s units are redeemable at the holder’s option.
The financial statements of Endeavour Managed Investment Scheme for the year ended 30 June 2015 were
authorised for issue in accordance with a resolution of the Board of Directors on 26 August 2015.
2
AASB 110.17
Accounting Policies
Commentary
The accounting policies presented below for the Scheme are for illustrative purposes. Therefore, these
accounting policies should only be used as guidance. In practice the disclosure may need to be more detailed,
and should be tailored to a Scheme’s specific policies.
2.1
Basis of preparation
The financial report is a general purpose financial report, which has been prepared in accordance with the
requirements of the Corporations Act 2001, Australian Accounting Standards and other authoritative
pronouncements of the Australian Accounting Standards Board. The financial report has also been prepared
on a historical cost basis, except for financial assets and financial liabilities held at fair value through profit or
loss, that have been measured at fair value.
The Statement of Financial Position is presented on a liquidity basis. Assets and liabilities are presented in
decreasing order of liquidity and are not distinguished between current and non-current. All balances are
expected to be recovered or settled within 12 months, except for financial assets and liabilities at fair value
through profit or loss and net assets attributable to unitholders. The amount expected to be recovered or
settled within 12 months in relation to these balances cannot be reliably determined.
The financial statements are presented in Australian Dollars and all values are rounded to the nearest $’000
except where otherwise indicated.
The Scheme is a for-profit entity for the purpose of preparing financial statements.
AASB 101.117
AASB 1054.8
AASB 1054.9
AASB 101.61
AASB 101.51(d),(e)
AASB 1054.8
Basis of consolidation
The Scheme is an investment entity and, as such, does not consolidate the entities it controls. Instead,
interests in subsidiaries are classified as at fair value through profit or loss, and measured at fair value.
Statement of Compliance
AASB 101.16
AASB 1054.7
The financial statements have been prepared in accordance with the Australian Accounting Standards as
issued by the Australian Accounting Standards Board and International Financial Reporting Standards as
issued by the International Accounting Standards Board.
Commentary
A scheme shall not describe financial statements as complying with Australian Accounting Standards or
International Financial Reporting Standards unless they comply with all the requirements of Australian
Accounting Standards or International Financial Reporting Standards (AASB 101.16).
If the scheme has included in the notes to the financial statements, in compliance with the accounting
standards, an explicit and unreserved statement of compliance with international financial reporting
standards, this this should be repeated in the directors’ declaration (CA 295(4)(ca)).
EY  11
Notes to the financial statements (continued)
For the year ended 30 June 2015
2
Accounting Policies (continued)
2.2
Changes in accounting policies and disclosure
New and amended accounting standards and interpretations
The Scheme has adopted the following new and amended Australian Accounting Standards and AASB
Interpretations as of 1 July 2014. The nature and the impact of each new standard and/or amendment is
described below:
AASB 2012-3 Amendments to Australian Accounting Standards - Offsetting Financial Assets and Financial
Liabilities
Adds application guidance to AASB 132 Financial Instruments: Presentation to address inconsistencies
identified in applying some of the offsetting criteria of AASB 132. This amendment does not have a material
impact on the Scheme.
Interpretation 21 Levies
Confirms that a liability to pay a levy is only recognised when the activity that triggers the payment occurs.
AASB 2013-3 Amendments to AASB 136 – Recoverable Amount Disclosures for Non-Financial Assets
Requirement to disclose additional information about the fair value measurement when the recoverable amount
of impaired assets is based on fair value less costs of disposal. This amendment does not have a material
impact on the Scheme.
AASB 2013-4 Amendments to Australian Accounting Standards – Novation of Derivatives and Continuation
of Hedge Accounting [AASB 139]
Amends AASB 139 to permit the continuation of hedge accounting in specified circumstances where a
derivative, which has been designated as a hedging instrument. This amendment does not have a material
impact on the Scheme.
AASB 1031 Materiality
The revised AASB 1031 is an interim standard that cross-references to other Standards and the Framework
(issued December 2013) that contain guidance on materiality. This amendment does not have a material
impact on the Scheme.
AASB 2014-1 Part A- Amendments to Australian Accounting Standards - Annual Improvements 2010-2012
and 2011-2013 Cycle
This standard sets out amendments to Australian Accounting Standards arising from the issuance by the
International Accounting Standards Board (IASB) of International Financial Reporting Standards (IFRSs)
Annual Improvements to IFRSs 2010–2012 Cycle and Annual Improvements to IFRSs 2011–2013 Cycle.
Annual Improvements to IFRSs 2010–2012 Cycle addresses the following item:
AASB 124 Related Party Disclosures
Defines a management entity providing Key Management Personnel (‘KMP’) services as a related party of the
reporting entity. The amendments added an exemption from the detailed disclosure requirements in paragraph
17 of AASB 124 for KMP services provided by a management entity. Payments made to a management entity
in respect of KMP services should be separately disclosed. While this amendment will result in the Investment
Manager being considered a related party under AASB, this amendment does not have a material impact on the
Scheme as the relevant disclosure are already made in the Scheme’s financial statements.
Annual Improvements to IFRSs 2011–2013 Cycle addresses the following item:
AASB13 Fair Value Measurement
Clarifies that the portfolio exception in paragraph 52 of AASB 13 applies to all contracts within the scope of
AASB 139 Financial Instruments: Recognition and Measurement or AASB 9 Financial Instruments Classification and Measurement, regardless of whether they meet the definitions of financial assets or financial
liabilities as defined in AASB 132. This amendment does not have a material impact on the Scheme.
AASB 2014-2 Amendments to AASB 1053 – Transition to and between Tiers, and related Tier 2 Disclosure
Requirements
The Standard makes amendments to AASB 1053 Application of Tiers of Australian Accounting Standards to:
► Clarify that AASB 1053 relates only to general purpose financial statements;
► Make AASB 1053 consistent with the availability of the AASB 108 Accounting Policies, Changes in
Accounting Estimates and Errors option in AASB 1 First-time Adoption of Australian Accounting Standards;
► Clarify certain circumstances in which an entity applying Tier 2 reporting requirements can apply the AASB
108 option in AASB 1; permits an entity applying Tier 2 reporting requirements for the first time to do so
directly using the requirements in AASB 108 (rather that applying AASB 1) when, and only when, the
entity had not applied, or only selectively applied, applicable recognition and measurement requirements in
its most recent previous annual special purpose financial statements; and
EY  12
Notes to the financial statements (continued)
For the year ended 30 June 2015
2
Accounting Policies (continued)
2.2
Changes in accounting policies and disclosure (continued)
►
Specify certain disclosure requirements when an entity resumes the application of Tier 2 reporting
requirements.
This amendment does not have a material impact on the Scheme.
AASB 2013-9 Part C - Amendments to Australian Accounting Standards – Conceptual Framework,
Materiality and Financial Instruments
This makes amendments to a number of Australian Accounting Standards, including the following:
► Amendments arising from the issuance of AASB CF 2013-1
► Amendments to particular Australian Accounting Standards to delete references to AASB 1031
► Makes amendments to a number of Australian Accounting Standards, including incorporating Chapter 6
Hedge Accounting into AASB 9 Financial Instruments.
This amendment does not have a material impact on the Scheme.
Commentary
For illustrative purposes, the Scheme has listed all the disclosures of new and amended standards and
interpretations that are effective from 1 July 2014, regardless of whether these have any impact on the
Scheme’s financial statements. However, an alternative that schemes should consider would be to only list and
address those that have an impact on the Scheme’s financial position, performance and/or disclosures.
Financial statements of subsequent periods need not repeat these disclosures.
Please refer to your local EY representative or the AASB Insights section of www.ey.com/au for the most up to
date information about standards issued but not yet effective when producing your financial report.
In our view, standards and amendments that will not have a material impact need not be disclosed.
Standards issued but not yet effective
Australian Accounting Standards and Interpretations that have been issued or amended but are not yet
effective and have not been adopted by the Scheme for the financial reporting period ended 30 June 2015 are
outlines in the table below:
Reference
Title
Summary
Application
date of
standard*
Impact on the
Scheme
financial report
Application
date for
* Designates the beginning of the applicable annual reporting period
Please refer to your local EY contact or look out for the latest version of the table in our In balance
newsletter (www.ey.com/AU/en/Issues/IFRS/In-balance) which is updated quarterly for information
necessary to complete this section.
EY  13
Notes to the financial statements (continued)
For the year ended 30 June 2015
2
Accounting Policies (continued)
2.3
Significant accounting judgements and estimates
AASB 101.122
AASB 101.125
The preparation of the Scheme’s financial statements requires management to make judgements, estimates
and assumptions that affect the amounts recognised in the financial statements and disclosure of contingent
liabilities. However, uncertainty about these assumptions and estimates could result in outcomes that could
require a material adjustment to the carrying amount of the asset or liability affected in the future periods.
The significant accounting policies have been consistently applied in the current financial year and the
comparative period, unless otherwise stated. Where necessary, comparative information has been
re-presented to be consistent with current period disclosures.
AASB 101.45
Judgements
In the process of applying the Scheme’s accounting policies, management has made the following judgements,
which have the most significant effect on the amounts recognised in the financial statements:
Assessment as investment entity
Schemes that meet the definition of an investment entity within AASB 10 are required to measure their
subsidiaries at fair value through profit or loss rather than consolidate them. The criteria which define an
investment entity are, as follows:
► An entity that obtains funds from one or more investors for the purpose of providing those investors with
investment services;
► An entity that commits to its investors that its business purpose is to invest funds solely for returns from
capital appreciation, investment income or both; and
► An entity that measures and evaluates the performance of substantially all of its investments on a fair
value basis.
AASB 10.27
AASB 10.B85B
AASB 10.B85K
AASB 10.B85F
AASB 10.28
The Scheme’s prospectus details its objective of providing investment management services to investors
which includes investing in equities, fixed income securities and private equity for the purpose of returns in the
form of investment income and capital appreciation.
The Scheme reports to its investors via quarterly investor information, and to its management, via internal
management reports, on a fair value basis. All investments are reported at fair value to the extent allowed by
AASB in the Scheme’s annual reports. The Scheme has a clearly documented exit strategy for all of its
investments.
The Board has also concluded that the Scheme meets the additional characteristics of an investment entity, in
that it has more than one investment; the investments are predominantly in the form of equities and similar
securities; it has more than one investor and its investors are not related parties.
AASB 10.29
The Board has concluded that the Scheme meets the definition of an investment entity. These conclusions will
be reassessed on an annual basis, if any of these criteria or characteristics changes.
Subsidiaries in which the Fund holds less than a majority of voting rights (de facto control)
The Scheme owns 45% of the units in Endeavour Private Equity Fund and the remaining units are widely
dispersed so that no other investor holds greater than 3%. Decisions require the approval of a majority of
votes at the unitholders meeting. Ordinarily, 100% of unitholders would not be expected to attend or vote at
the meetings and the other unitholders are passive in nature (as demonstrated at previous meetings) and do
not have arrangements to consult other unitholders or make collective decisions. Therefore, the 45% holding
of the Fund is enough to influence the voting at these meetings. As such, the Board has concluded that the
Fund has de facto control of Endeavour Private Equity Fund, and accordingly, it has been included as a
subsidiary at fair value.
AASB 10.B38-46
Commentary
AASB 10 recognises that an investor may have power over an investee without a majority of voting rights.
AASB 10.B38 considers arrangements which may allow for an investor to have power in these circumstances.
In the above situation power has been assessed based on the voting rights held and the dispersal of other
voting rights. It should be stressed that holding 45% of the units in an entity does not by itself give rise to
control in all instances. The factors provided in AASB 10 need to be considered to determine whether an
investor has power over its investees or not.
EY  14
Notes to the financial statements (continued)
For the year ended 30 June 2015
2
Accounting Policies (continued)
2.3
Significant accounting judgements and estimates (continued)
AASB 101.122
AASB 101.125
Assessment of fund investments as structured entities
The Scheme has assessed whether the funds in which it invests should be classified as structured entities. The
Scheme has considered the voting rights and other similar rights afforded to investors in these funds, including
the rights to remove the fund manager or redeem holdings. The Scheme has concluded on whether these
rights are the dominant factor in controlling the funds, or whether the contractual agreement with the fund
manager is the dominant factor in controlling these funds.
The Scheme has concluded that the Endeavour Private Equity Fund is not a structured entity.
Estimates and assumptions
The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting
date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and
liabilities within the next financial year, are discussed below. The Scheme based its assumptions and estimates
on parameters available when the financial statements were prepared. However, existing circumstances and
assumptions about future developments may change due to market changes or circumstances arising beyond
the control of the Scheme. Such changes are reflected in the assumptions when they occur.
Fair value of financial instruments
When the fair values of financial assets and financial liabilities recorded in the statement of financial position
cannot be measured based on quoted prices in active markets, their fair value is measured using valuation
techniques including the discounted cash flow (‘DCF’) model. The inputs to these models are taken from
observable markets where possible, but where this is not feasible, a degree of judgement is required in
establishing fair values. The estimates include considerations of liquidity and model inputs related to items
such as credit risk (both own and counterparty’s), correlation and volatility. Changes in assumptions about
these factors could affect the reported fair value of financial instruments in the statement of financial position
and the level where the instruments are disclosed in the fair value hierarchy. The models are tested for validity
by calibrating to prices from any observable current market transactions in the same instrument (without
modification or repackaging) when available. To assess the significance of a particular input to the entire
measurement, the fund performs sensitivity analysis or stress testing techniques (see Note 7).
AASB 101.125
AASB 101.10(e)
AASB 101.117 to
AASB 101.121
AASB 13.93
Contingent consideration, resulting from business combinations, is valued at fair value at the acquisition date
as part of the business combination. When the contingent consideration meets the definition of a financial
liability, it is subsequently re-measured to fair value at each reporting date. The determination of the fair value
is based on discounted cash flows. The key assumptions take into consideration the probability of meeting
each performance target and the discount factor.
Fair value of investment in private equity investment funds
The Scheme invests in private equity funds that are not quoted in an active market and which may be subject
to restrictions on redemptions such as lock-up periods, redemption gates and side pockets.
The Scheme’s investment manager considers the valuation techniques and inputs used in valuing these funds
as part of its due diligence prior to investing, to ensure they are reasonable and appropriate and therefore the
net asset value (‘NAV’) of these funds may be used as an input into measuring their fair value. In measuring
this fair value the NAV of the funds is adjusted, as necessary, to reflect restrictions on redemptions, future
commitments, and other specific factors of the fund and fund manager. In measuring fair value, consideration
is also given to any transactions in the shares/units of the fund (see Note 7).
2.4
Summary of significant accounting policies
The principal accounting policies applied in the preparation of these financial statements are set out below.
(A) FINANCIAL INSTRUMENTS
(i) Classification
The Scheme classifies its financial assets and financial liabilities into the categories below in accordance with
AASB 139 Financial Instruments: Recognition and Measurement.
AASB 7.21
AASB 7.B5(a)
Financial assets and liabilities at fair value through profit or loss
The category of financial assets and liabilities at fair value through the profit or loss is sub-divided into:
Financial assets and liabilities held for trading:
Financial assets are classified as held for trading if they are acquired for the purpose of selling and/or
repurchasing in the near term. This category includes equity securities, investments in managed funds,
investment in subsidiary and debt instruments. These assets are acquired principally for the purpose of
generating a profit from short-term fluctuation in price. All derivatives are classified as held for trading.
Derivative financial instruments entered into by the Scheme do not meet the hedge accounting criteria as
defined by AASB 139. Consequently hedge accounting is not applied by the Scheme.
AASB 139.AG14
AASB 139.9(b)(ii)
EY  15
Notes to the financial statements (continued)
For the year ended 30 June 2015
2
Accounting Policies (continued)
2.4
Summary of significant accounting policies (continued)
Financial instruments designated as at fair value through profit or loss upon initial recognition:
These include investments in subsidiaries, equity securities and debt instruments that are not held for trading.
These financial assets are designated on the basis that they are part of a group of financial assets which are
managed and have their performance evaluated on a fair value basis in accordance with risk management and
investment strategies of the Scheme as set out in the Scheme’s offering document. The financial information
about these financial assets is provided internally on that basis to the Investment Manager and to the Board of
Directors or delegated authority.
►
AASB 10.31
Investment in subsidiary: In accordance with the exception under AASB 10 Consolidated financial
statements, the Scheme does not consolidate subsidiaries in the financial statements. Investments in
subsidiaries are accounted for as financial instruments at fair value through profit or loss.
Commentary
In accordance with AASB 10 paragraph 27, an investment entity is an entity that:
► Obtains funds from one or more investors for the purpose of providing those investor(s) with investment
management services;
► Commits to its investor(s) that its business purpose is to invest funds solely for returns from capital
appreciation, investment income, or both; and
► Measures and evaluates the performance of substantially all of its investments on a fair value basis.
An investment entity must demonstrate that fair value is the primary measurement attribute used. The fair
value information must be used internally by key management personnel and must be provided to the entity’s
investors. In order to meet this requirement, an investment entity would:
► Elect to account for investment property using the fair value model in AASB 140 Investment Property;
► Elect the exemption from applying the equity method in AASB 128 for investments in associates and joint
ventures; and
► Measure financial assets at fair value in accordance with AASB 139.
In addition an investment entity should consider whether it has the following typical characteristics:
► It has more than one investment, to diversify the risk portfolio and maximise returns;
► It has multiple investors, who pool their funds to maximise investment opportunities;
► It has investors that are not related parties of the entity; and
► It has ownership interests in the form of equity or similar interests.
The absence of one or more of these typical characteristics does not necessarily disqualify an entity from
being an investment entity. If the entity does not have all of the typical characteristics, it should provide
additional disclosure according to a consequential amendment to AASB 12.
Based on the above, Endeavour Managed Investment Scheme is considered to meet all three conditions of the
definition and, hence, qualifies as an investment entity.
In accordance with AASB 10.31, investment entities must not consolidate investment in subsidiaries, and
these subsidiaries must be measured at fair value through profit or loss. If an investment entity has a
subsidiary that provides services that relate to the investment entity’s investment activities, then the
exemption under AASB 10.31 does not apply and it must consolidate that subsidiary in accordance with
paragraphs 19–26 of AASB 10. The investment entity exception within AASB 10 is applicable for annual
periods beginning on or after 1 January 2014. However, early adoption is permitted.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not
quoted in an active market. The Scheme includes in this category short term receivables.
Other financial liabilities
This category includes all financial liabilities, other than those classified as at fair value through profit or loss.
Other financial liabilities are measured at their nominal amounts. Amounts are generally settled within 30 days
of being recognised as other financial liabilities. Given the short-term nature of other financial liabilities, the
nominal amount approximates fair value.
(ii) Recognition
The Scheme recognises a financial asset or a financial liability when, and only when, it becomes a party to the
contractual provisions of the instrument.
Purchases or sales of financial assets that require delivery of assets within the time frame generally
established by regulation or convention in the marketplace are recognised on the trade date, i.e., the date that
the Scheme commits to purchase or sell the asset.
AASB 139.9
AASB 139.9
AASB 139.14
AASB 139.9
AASB 139.38
AASB 7.B5(c)
EY  16
Notes to the financial statements (continued)
For the year ended 30 June 2015
2
Accounting Policies (continued)
2.4
Summary of significant accounting policies (continued)
(iii) De-recognition
A financial asset (or, where applicable a part of a financial asset or part of a group of similar financial assets) is
derecognised where:
i. The rights to receive cash flows from the asset have expired; or
ii. The Scheme has transferred its rights to receive cash flows from the asset or has assumed an obligation to
pay the received cash flows in full without material delay to a third party under a ‘pass-through’
arrangement; and
iii. Either (a) the Scheme has transferred substantially all the risks and rewards of the asset, or (b) the
Scheme has neither transferred nor retained substantially all the risks and rewards of the asset, but has
transferred control of the asset.
When the Scheme has transferred its right to receive cash flows from an asset (or has entered into a passthrough arrangement), and has neither transferred nor retained substantially all of the risks and rewards of
the asset nor transferred control of the asset, the asset is recognised to the extent of the Scheme’s continuing
involvement in the asset. In that case, the scheme also recognises an associated liability. The transferred asset
and the associated liability are measured on a basis that reflects the rights and obligations that the scheme has
retained. The Scheme derecognises a financial liability when the obligation under the liability is discharged,
cancelled or expires.
(iv) Initial measurement
Financial assets and financial liabilities at fair value through profit or loss are recorded in the Statement of
Financial Position at fair value. All transaction costs for such instruments are recognised directly in profit or
loss.
AASB 139.17(a)
AASB 139.18
AASB 139.20(a)
AASB 139.20(c)(i)
AASB 139.20(c)(ii)
AASB 139.30(a)
AASB 139.39
AASB 139.43
Loans and receivables and financial liabilities (other than those classified as at fair value through profit or loss)
are measured initially at their fair value plus any directly attributable incremental costs of acquisition or issue.
For financial assets and liabilities where the fair value at initial recognition does not equal the transaction
price, the Scheme recognises the difference in the statement of comprehensive income, unless specified
otherwise.
AASB 13.59
AASB 13.60
AASB 13.64
Commentary
Paragraph 59 of AASB 13 requires that, when determining whether fair value at initial recognition
equals the transaction price, an entity shall take into account factors specific to the transaction and to
the asset or liability. Paragraph B4 of AASB 13 describes situations in which the transaction price might
not represent the fair value of an asset or a liability at initial recognition. Also paragraph 60 of AASB 13
specifies that, if another AASB requires or permits an entity to measure an asset or a liability initially at
fair value and the transaction price differs from fair value, the entity shall recognise the resulting gain or
loss in profit or loss unless that AASB specifies otherwise.
Paragraph 64 of AASB 13 states that if the transaction price is fair value at initial recognition and a valuation
technique that uses unobservable inputs will be used to measure fair value in subsequent periods, the
valuation technique shall be calibrated so that at initial recognition, the result of the valuation technique
equals the transaction price.
EY  17
Notes to the financial statements (continued)
For the year ended 30 June 2015
2
Accounting Policies (continued)
2.4
Summary of significant accounting policies (continued)
(v) Subsequent measurement
After initial measurement, the Scheme measures financial instruments which are classified as at fair value
through profit or loss at fair value (see Note 2.4(B) below). Subsequent changes in the fair value of those
financial instruments are recorded in ‘Change in fair value of financial assets and liabilities at fair value through
profit or loss’. Interest earned is recorded in ‘Interest revenue’ according to the terms of the contract. Dividend
revenue is recorded in ‘Dividend revenue’.
Loans and receivables are carried at amortised cost using the effective interest method less any allowance for
impairment. Gains and losses are recognised in profit or loss when the loans and receivables are derecognised
or impaired, as well as through the amortisation process.
AASB 139.46
AASB 139.9
AASB 139.55(a)
AASB 7.B5(e)
AASB 139.56
Financial liabilities, other than those classified as at fair value through profit or loss, are measured at amortised
cost using the effective interest method. Gains and losses are recognised in profit or loss when the liabilities are
derecognised as well as through the amortisation process.
The effective interest method is a method of calculating the amortised cost of a financial asset or a financial
liability and of allocating the interest income or interest expense over the relevant period. The effective interest
rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life of
the financial instrument or, when appropriate, a shorter period to the net carrying amount of the financial asset
or financial liability. When calculating the effective interest rate, the Scheme estimates cash flows considering
all contractual terms of the financial instruments but does not consider future credit losses. The calculation
includes all fees paid or received between parties to the contract that are an integral part of the effective
interest rate, transaction costs and all other premiums or discounts.
(B) FAIR VALUE MEASUREMENT
The Scheme measures financial assets and liabilities at fair value through profit or loss, such as equity
securities, investments in managed funds, investment in subsidiary, debt instruments and equity securities, at
fair value at each balance sheet date.
AASB 139.9
AASB 139.AG6
AASB 118.30(a)
AASB 13.9
AASB 13.16
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date.
The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the
liability takes place either:
► In the principal market for the asset or liability; or
► In the absence of a principal market, in the most advantageous market for the asset or liability
AASB 13.22
The principal or the most advantageous market must be accessible to by the Scheme.
The fair value of an asset or a liability is measured using the assumptions that market participants would use
when pricing the asset or liability, assuming that market participants act in their economic best interest.
AASB 13.27
The Scheme uses valuation techniques that are appropriate in the circumstances and for which sufficient data
are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of
unobservable inputs.
AASB 13.61
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised
within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair
value measurement as a whole:
► Level 1 — Quoted (unadjusted) market prices in active markets for identical assets or liabilities;
► Level 2 — Valuation techniques for which the lowest level input that is significant to the fair value
► measurement is directly or indirectly observable; or
► Level 3 — Valuation techniques for which the lowest level input that is significant to the fair value
► Measurement is unobservable.
This item includes changes in the fair value of financial assets and liabilities held for trading or designated upon
initial recognition as ‘held at fair value through profit or loss’ and excludes interest and dividend income and
expenses. Amounts are calculated as the difference between the fair value at sale or at year end, and the fair
value at the previous valuation point. This includes both realised and unrealised gains and losses.
AASB 13 Appendix A
AASB 7.B5(e)
AASB 139.55(a)
EY  18
Notes to the financial statements (continued)
For the year ended 30 June 2015
2
Accounting Policies (continued)
2.4
Summary of significant accounting policies (continued)
Commentary
AASB 13.77 specifies that the existence of published price quotations in an active market is the best evidence
of fair value and, when they are available, they are used to measure fair value. AASB 13 defines an active
market as a market in which transactions for the asset or liability take place with sufficient frequency and
volume to provide pricing information on an ongoing basis. The quoted price from an active market cannot be
adjusted for transaction costs or the size of the holding according to paragraph 25 and 69 (respectively) of
AASB 13.
Paragraph 70 of AASB 13 specifies that, if an asset or a liability measured at fair value has a bid price and an
ask price (e.g., an input from a dealer market), the price within the bid-ask spread that is most representative of
fair value in the circumstances shall be used to measure fair value regardless of where the input is categorised
within the fair value hierarchy. The use of bid prices for asset positions and ask prices for liability positions is
permitted, but not required.
AASB 13.71 does not preclude the use of mid-market pricing or other pricing conventions that are used by
market participants as a practical expedient for fair value measurements within a bid-ask spread.
The Scheme does not hold assets and liabilities with offsetting positions. Where a fund does have financial
assets and financial liabilities with offsetting positions in market risks or counterparty credit risk, it may elect to
use the measurement exception provided in AASB 13 to measure the fair value of its net risk exposure by
applying the bid or ask price to the net open position as appropriate.
(C) IMPAIRMENT OF FINANCIAL ASSETS
The Scheme assesses at each reporting date whether a financial asset or group of financial assets classified as
loans and receivables is impaired. An impairment exists if one or more events that has occurred since the initial
recognition of the asset (an incurred ‘loss event’) has an impact on the estimated future cash flows of the
financial asset or the group of financial assets that can be reliably estimated.
AASB 139.63
AASB 7.B5(f)
AASB 139.58-59
Evidence of impairment may include indications that the debtor or a group of debtors is experiencing significant
financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter
bankruptcy or other financial reorganisation and where observable data indicate that there is a measurable
decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate
with defaults. If there is objective evidence that an impairment loss has been incurred, the amount of the loss is
measured as the difference between the asset’s carrying amount and the present value of estimated future
cash flows (excluding future expected credit losses that have not yet been incurred) discounted using the
asset’s original effective interest rate. The carrying amount of the asset is reduced through the use of an
allowance account and the amount of the loss is recognised in profit or loss as ‘impairment expense’.
AASB 139.AG84
Impaired debts together with the associated allowance are written off when there is no realistic prospect of
future recovery and all collateral has been realised or has been transferred to the Scheme. If, in a subsequent
period, the amount of the estimated impairment loss increases or decreases because of an event occurring
after the impairment was recognised, the previously recognised impairment loss is increased or reduced. If a
previous write-off is later recovered, the recovery is credited to the ‘impairment expense’.
AASB 7.B5.(d)(i)
Interest revenue on an impaired financial asset is recognised using the rate of interest used to discount the
future cash flows for the purpose of measuring the impairment loss.
AASB 7.B5(d)(ii)
AASB 139.65
AASB 139.AG93
Commentary
The impairment accounting policy has been included above as an example disclosure for schemes which have a
significant amount of instruments subject to impairment testing, such as held-to-maturity or available for sale
financial instruments.
In practice, entities without such instruments are unlikely to require a policy for the small amount of short term
trade receivables held.
EY  19
Notes to the financial statements (continued)
For the year ended 30 June 2015
2
Accounting Policies (continued)
2.4
Summary of significant accounting policies (continued)
(D) OFFSETTING FINANCIAL INSTRUMENTS
Financial assets and financial liabilities are offset and the net amount reported in the Statement of Financial
Position if, and only if, there is a currently enforceable legal right to offset the recognised amounts and there
is an intention to settle on a net basis, to realise the asset and settle the liability simultaneously. This is
generally not the case with master netting agreements unless one party to the agreement defaults and the
related assets and liabilities are presented gross in the Statement of Financial Position.
(E) FUNCTIONAL AND PRESENTATION CURRENCY
The Scheme’s functional and presentation currency is the Australian Dollar, which is the currency of the
primary economic environment in which it operates. The Scheme’s performance is evaluated and its liquidity is
managed in Australian Dollars. Therefore, the Australian Dollar is considered as the currency that most
faithfully represents the economic effects of the underlying transactions, events and conditions.
(F) FOREIGN CURRENCY TRANSLATIONS
Transactions during the period, including purchases and sales of securities, income and expenses, are
translated at the rate of exchange prevailing on the date of the transaction.
AASB 132.42
AASB 121.9
AASB 101.51(d)
AASB 121.21
Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency
spot rates of exchange at the reporting date.
AASB 121.23(a)
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using
the exchange rates as at the dates of the initial transactions. Non-monetary items measured at fair value in a
foreign currency are translated using the exchange rates at the date when the fair value was determined.
AASB 121.23(b)
Foreign currency transaction gains and losses on financial instruments classified as at fair value through profit
or loss are included in the Statement of Comprehensive Income as part of the ‘Changes in net fair value of
financial assets and liabilities at fair value through profit or loss’. Exchange differences on other financial
instruments are included in the Statement of Comprehensive Income as ‘Net foreign exchange gains (losses)’.
(G) INTEREST REVENUE AND EXPENSE
Interest revenue and expense are recognised in the Statement of Comprehensive Income for all financial
instruments not at fair value through profit or loss using the effective interest method. Interest earned on
financial assets classified as ‘at fair value through the profit or loss’ is recorded in ‘Interest revenue’ according
to the terms of the contract.
(H) DIVIDEND REVENUE
Dividend revenue is recognised when the Scheme’s right to receive the payment is established. Dividend
revenue is presented gross of any non-recoverable withholding taxes, which are disclosed separately as tax
expense in the Statement of Comprehensive Income.
AASB 121.23(c)
AASB 121.30
AASB 118.30(a)
AASB 139.9
AASB 7.B5(e)
AASB 118.30(c)
Commentary
There is no specific requirement in AASB 7 as to where in profit or loss the interest and dividends on financial
instruments classified as at fair value through profit or loss should be recorded. The policy applied should be
consistent from one period to the next. AASB 7 requires the location to be disclosed. For example, interest or
dividend earned on financial instruments carried at fair value through profit or loss may be included in net
gains or losses for the category, or in interest or dividend income, and the policy should make it clear where
they are reported. In these financial statements interest and dividends on financial instruments at fair value
through profit or loss are disclosed in interest revenue and dividend income respectively.
Dividend revenues on listed securities are generally recorded on the ex-dividend date. The ex-dividend date is
the date that the market price of the security is reduced to reflect the amount of the dividend (that is,
securities traded on that date do not include rights to the upcoming dividend payment).
EY  20
Notes to the financial statements (continued)
For the year ended 30 June 2015
2
Accounting Policies (continued)
2.4
Summary of significant accounting policies (continued)
(I) FEES, COMMISSIONS AND OTHER EXPENSES
Except where included in the effective interest calculation (for financial instruments carried at amortised cost),
fees and commissions are recognised on an accrual basis. Legal and audit fees are included within ‘other
general expenses’, and are recorded on an accrual basis.
(J) INCOME TAXES
Under current Australian legislation, the Scheme is not subject to income tax provided the unitholders are
presently entitled to the income of the Scheme and the Scheme fully distributes its net taxable income.
Commentary
AASB 112 does not directly address the treatment of incoming dividends on which tax has been suffered (i.e.,
whether they should be shown at the amount received, or gross of withholding tax together with a
corresponding tax charge).
However, in discussing the treatment prescribed for the paying company, AASB 112.65A describes
withholding tax as an amount ‘paid to the tax authorities on behalf of unitholders’. It would therefore be
consistent with this treatment for the recipient to show dividends (and other income subject to withholding
taxes) gross of withholding taxes, with the withholding tax shown separately.
(K) DISTRIBUTIONS TO UNITHOLDERS
In accordance with the Scheme’s Constitution, the Scheme fully distributes its distributable income to
unitholders.
AASB 132.35-36
Distributions are payable at the end of each half year. Such distributions are determined by reference to the
net taxable income of the Scheme.
Distributable income includes capital gains arising from the disposal of investments. Unrealised gains and
losses are transferred to net assets attributable to unitholders and are not assessable or distributable until
realised. Capital losses are not distributed to unitholders but are retained to be offset against any future
realised capital gains. Distributions to unitholders are recognised in the Statement of Comprehensive Income
as finance costs.
(L) CASH AND CASH EQUIVALENTS
Cash and cash equivalents in the Statement of Financial Position comprise cash on hand, demand deposits,
short term deposits in banks with original maturities of three months or less and short-term, highly liquid
investments that are readily convertible to known amounts of cash and which are subject to an insignificant
risk of changes in value.
Short term investments which are not held for the purpose of meeting short-term cash commitments as well as
restricted margin accounts are not considered as ‘cash and cash equivalents’.
AASB 107.46
AASB 107.6
AASB 107.7
AASB 107.8
For the purpose of the Statement of Cash Flows, cash and cash equivalents consist of cash and cash
equivalents as defined above, net of outstanding bank overdrafts.
(M) DUE TO AND DUE FROM BROKERS
Amounts due to brokers are payables for securities purchased (in a regular way transaction) that have been
contracted for but not yet delivered on the reporting date. Refer to the accounting policy for ‘other financial
liabilities’ for recognition and measurement of these amounts.
AASB 139.38
Amounts due from brokers include margin accounts and receivables for securities sold (in a regular way
transaction) that have been contracted for but not yet delivered on the reporting date. Refer to accounting
policy for ‘loans and receivables’ for recognition and measurement of these amounts.
Margin accounts represent cash deposits held with brokers as collateral against open futures contracts.
Commentary
Many derivative instruments require margin payments. The margin payment is not part of the initial net
investment in a derivative, but is a form of collateral for the counterparty or clearing-house and may take the
form of cash, securities, or other specified assets, typically liquid assets. These assets must be accounted for
separately.
EY  21
Notes to the financial statements (continued)
For the year ended 30 June 2015
2
Accounting Policies (continued)
2.4
Summary of significant accounting policies (continued)
(N) REDEEMABLE PARTICIPATING UNITS
Redeemable participating units are redeemable at the unitholders’ option and are classified as financial
liabilities.
The liabilities arising from the redeemable units are carried at the redemption amount being the net asset
value calculated in accordance with redemption requirements.
AASB 132.18(b)
AASB 139.AG32
For the purpose of calculating the net assets attributable to unitholders in accordance with the Scheme’s
redemption requirements, the Scheme’s assets and liabilities are valued on the basis of mid-market prices. For
accounting purposes, the Scheme valued its asset positions at bid prices and liability positions at ask prices.
The difference between the two valuations is presented on the face of the Statement of Changes in Net Assets
Attributable to Unitholders.
The Scheme issues units at the unit price of the existing units. The holder of participating units can redeem
them at anytime for cash equal to a proportionate share of the Scheme’s net asset value (calculated in
accordance with redemption requirements).
The Scheme’s net asset value per unit is calculated by dividing the net assets attributable to unitholders
(calculated in accordance with redemption requirements) by the number of units on issue.
(O) UNIT PRICES
Unit prices are determined in accordance with the Scheme’s Constitution and are calculated as the net assets
attributable to unitholders of the Scheme, less estimated costs, divided by the number of units on issue, on a
forward pricing basis, as determined by the Responsible Entity.
(P) CAPITAL MANAGEMENT
The Responsible Entity manages its net assets attributable to unitholders as capital; not withstanding net
assets attributable to unitholders is classified as a liability. The amount of net assets attributable to
unitholders can change significantly on a daily basis as the Scheme is subject to daily applications and
redemptions at the discretion of unitholders.
The Responsible Entity monitors the level of daily applications and redemptions relative to the liquid assets in
the Scheme.
In order to maintain or adjust the capital structure, the Responsible Entity may return capital to unitholders.
The Scheme is not subject to any externally imposed capital requirements.
(Q) GOODS AND SERVICES TAX (GST)
Revenue, expenses and assets are recognised net of the amount of GST except:
i. When the GST incurred on a purchase of goods and services is not recoverable from the taxation authority,
in which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense
item as applicable; and
ii. Receivables and payables are stated with the amount of GST included.
Reduced input tax credits (RITC) recoverable by the Scheme from the ATO are recognised as a receivable in
the Statement of Financial Position.
Cash flows are included in the Statement of Cash Flows on a gross basis and the GST component of cash flows
arising from investing and financing activities, which is recoverable from, or payable to, the taxation authority
is classified as part of operating cash flows.
Interpretation
1031.6 & .7
Interpretation 1031.8
Interpretation 1031.9
Interpretation
1031.10 & .11
EY  22
Notes to the financial statements (continued)
For the year ended 30 June 2015
3
Cash and cash equivalents
30 June 2015
$ ‘000
30 June 2014
$ ‘000
Cash at banks
54
251
Short-term deposits
55
212
109
463
AASB 107.45
Commentary
AASB 107.50(a) requires the entity to disclose the amount of undrawn borrowing facilities that may be
available in the future for the operating activities and settling capital commitments, and indicate any
restrictions on the use of these entities.
4
Due from/to brokers
30 June 2015
$ ‘000
30 June 2014
$ ‘000
Margin accounts
527
1,042
Receivables for securities sold but not yet settled
122
231
649
1,273
69
73
69
73
Balances due from brokers
AASB 139.38
Balances due to brokers
Payables for securities purchased but not yet settled
AASB 139.38
EY  23
Notes to the financial statements (continued)
For the year ended 30 June 2015
5
Financial assets and financial liabilities at fair value through profit or loss
30 June 2015
$’000
AASB 7.25
30 June 2014
$’000
Financial assets at fair value through profit or loss
Financial assets held for trading
(i) Listed equities and managed investment schemes
Listed equity securities
Listed managed investment schemes
Unlisted managed investment schemes
Investment in subsidiary
(ii) Interest bearing securities
Listed debt securities
Bank accepted bills
Promissory notes
(iii) Derivatives
Share price index futures
Exchange traded share price options
Currency swaps
Forward currency contracts
Total financial assets held for trading
Financial assets designated as at fair value through
profit or loss
Listed equity securities
Corporate bonds
Asset-backed securities
Government bonds
Total financial assets designated as at fair value
through profit or loss
Financial assets at fair value through profit or loss
AASB 7.8(a)(ii)
34,659
1,142
362
363
36,526
31,157
2,839
1,729
35,725
8,038
154
659
8,851
12,730
487
696
13,913
132
276
1,258
354
2,020
123
328
1,592
657
2,700
47,397
52,338
31,824
8,646
388
6,066
29,752
6,737
552
2,206
46,924
94,321
39,247
91,585
2,082
1,539
63
3,684
3,684
2,797
721
51
3,569
3,569
AASB 7.8(a)(i)
Financial liabilities at fair value through profit or loss
Financial liabilities held for trading
(i) Derivatives
Interest rate swaps
Share price index futures
Written call share price options
Total financial liabilities held for trading
Financial liabilities at fair value through profit or loss
AASB 7.8(e)(ii)
Commentary
For Endeavour Managed Investment Scheme, the note presented above arguably duplicates information that
is already shown in the fair value hierarchy disclosures in Note 7.
This note has however been retained in these illustrative financial statements as:
► There are alternate presentations of the fair value hierarchy disclosures that would not disclose all of the
required information above (in particular, the sub-totals of different AASB 139 categories);
► Where a scheme holds investments that are not measured at fair value, those assets and liabilities will not
be included in the fair value hierarchy and a note showing all of the investments would therefore be
required; and
► Even where the information is present, we believe that it is easier to read and comprehend the breakdown of the investments of the scheme in a stand-alone note rather than the hierarchy, and therefore
consider it to be best practice.
EY  24
Notes to the financial statements (continued)
For the year ended 30 June 2015
6
Categories of financial assets and financial liabilities
Commentary
AASB 7.8 requires the disclosure of the carrying amounts of each of the categories defined in AASB 139.
Disclosure in a separate note is not necessarily required. A scheme may also provide that information in
various locations through the financial statements (e.g., statement of financial position, accounting policy note
and other notes).
The following table analyses the carrying amounts of the financial assets and liabilities by category as defined
in AASB 139:
30 June 2015
30 June 2014
$ ‘000
AASB 7.8
$ ‘000
Financial assets
AASB 7.8(a)
Financial assets at fair value through profit or loss
Held for trading
47,397
52,338
Designated at fair value through profit or loss
46,924
39,247
94,321
91,585
1,058
2,420
95,379
94,005
Loans and receivables (1)
AASB 7.8(a)(ii)
AASB 7.8(a)(i)
AASB 7.8(c)
Financial liabilities
AASB 7.8(e)
Financial liabilities at fair value through profit or loss
Held for trading
Financial liabilities measured at amortised cost (2)
(1)
(2)
7
3,684
3,569
706
1,731
4,390
5,300
AASB 7.8(e)(ii)
AASB 7.8(f)
Loans and receivables include: due from brokers, interest and other receivables and prepayments.
Financial liabilities measured at amortised cost include: due to brokers, fees and other payables and
accrued expenses.
Fair value of financial instruments
AASB 13 requires disclosures relating to fair value measurements using a three-level fair value hierarchy. The
level within which the fair value measurement is categorised in its entirety is determined on the basis of the
lowest level input that is significant to the fair value measurement. Assessing the significance of a particular
input requires judgement, considering factors specific to the asset or liability. The following table shows
financial instruments recognised at fair value, categorised between those whose fair value is based on:
► Level 1 — Quoted (unadjusted) market prices in active markets for identical assets or liabilities
► Level 2 — Valuation techniques for which the lowest level input that is significant to the fair value
measurement is directly or indirectly observable
► Level 3 — Valuation techniques for which the lowest level input that is significant to the fair value
measurement is unobservable
The level in which instruments are classified in the hierarchy is based on the lowest level input that is
significant to the fair value measurement in its entirety. Assessment of the significance of an input requires
judgement after considering factors specific to the instrument.
AASB 13 Appendix A
AASB 13.73
Commentary
The Scheme has not elected to apply the portfolio exemption under AASB 13.48. If an entity makes an
accounting policy decision to use the exception, this fact is required to be disclosed per AASB 13.96.
EY  25
Notes to the financial statements (continued)
For the year ended 30 June 2015
7
Fair value of financial instruments (continued)
Level 1
$’000
30 June 2015
Level 2
Level 3
$’000
$’000
Total
$’000
Level 1
$’000
30 June 2014
Level 2
Level 3
$’000
$’000
Total
$’000
AASB 13.91(a)
AASB 13.93(a)
AASB 13.93(b)
AASB 13.97
Financial assets at fair value
through profit or loss
Financial assets held for trading
(i) Listed equities and managed
investment schemes
Listed equity securities
Listed managed investment
schemes
Unlisted managed investment
schemes
Investment in subsidiary
(ii) Interest bearing securities
Listed debt securities
Bank accepted bills
Promissory notes
(iii) Derivatives
Share price index futures
Exchange traded share price
options
Currency swaps
Forward currency contracts
Financial assets designated at
fair value through profit or loss
Listed equity securities
Corporate bonds
Asset-backed securities
Government bonds
Financial liabilities at fair value
through profit or loss
Financial liabilities held for
trading
(i) Derivatives
Interest rate swaps
Share price index futures
Written call share price options
34,659
-
-
34,659
31,157
-
-
31,157
1,142
-
-
1,142
2,839
-
-
2,839
-
-
362
362
-
-
-
-
-
363
-
363
-
1,729
-
1,729
8,038
-
154
659
-
8,038
154
659
12,730
-
487
696
-
12,730
487
696
132
-
-
132
123
-
-
123
276
-
1,258
354
-
276
1,258
354
328
-
1,592
657
-
328
1,592
657
31,824
8,646
6,066
-
388
-
31,824
8,646
388
6,066
29,752
6,737
2,206
-
552
-
29,752
6,737
552
2,206
90,783
2,788
750
94,321
85,872
5,161
552
91,585
1,539
-
2,082
63
-
2,082
1,539
63
721
-
2,797
51
-
2,797
721
51
1,539
2,145
-
3,684
721
2,848
-
3,569
Commentary
AASB 13.99 requires the Scheme to present the quantitative disclosures of AASB 13 to be included in a tabular
format, unless another format is more appropriate. The Scheme included the quantitative disclosures in tabular
format above.
EY  26
Notes to the financial statements (continued)
For the year ended 30 June 2015
7
Fair value of financial instruments (continued)
Commentary
Determining the appropriate level of classification may require an assessment to be made at the individual
instrument level. While some types of investment may be straightforward, such as stock exchange listed
equities, others, such as units in unlisted schemes, are likely to require further judgement. If you have any
questions, please contact your local EY representative for further information.
Due to the short-term nature of financial assets and financial liabilities recorded at amortised cost, the
carrying amount of those instruments approximates their fair value.
Transfers between Level 1 and Level 3
During the financial year, following the delisting of three managed funds and their management’s decision to
suspend redemptions for periods ranging between 6 and 12 months, the Scheme’s investments in those funds
totalling $40,000 were reclassified from Level 1 to Level 3. Transfers between levels of the fair value
hierarchy, are deemed to have occurred at the beginning of the reporting period.
AASB 7.29(a)
AASB 13.93I(iv)
AASB 13.95
AASB 13.93(c)
Commentary
Paragraph 95 of AASB 13 requires an entity to disclose and consistently follow its policy for determining when
transfers between levels of the fair value hierarchy are deemed to have occurred in accordance with
paragraph AASB 13.93(c) and AASB 13.93(e)(iv). The policy about the timing of recognising transfers shall be
the same for transfers into the levels as for transfers out of the levels. Examples of policies for determining
the timing of transfers include the following:
►
The date of the event or change in circumstances that caused the transfer;
►
The beginning of the reporting period; or
►
The end of the reporting period.
Valuation technique
Listed investment in subsidiaries and associates, equity securities, managed funds and derivatives
When fair values of publicly traded equity securities, managed funds and derivatives are based on quoted
market prices, or binding dealer price quotations, in an active market for identical assets without any
adjustments, the instruments are included within Level 1 of the hierarchy. The Scheme values these
investments at bid price for long positions and ask price for short positions.
Unlisted debt securities and treasury bills
The Scheme invests in debt securities, corporate and government bonds and treasury securities. In the
absence of a quoted price in an active market, they are valued using observable inputs such as recently
executed transaction prices in securities of the issuer or comparable issuers and yield curves. Adjustments are
made to the valuations when necessary to recognise differences in the instrument’s terms. To the extent that
the significant inputs are observable, the Scheme categorises these investments as Level 2.
Over-the-counter derivatives
The Scheme uses widely recognised valuation models for determining fair values of over-the-counter interest
rate swaps, currency swaps and forward foreign exchange contracts. The most frequently applied valuation
techniques include forward pricing and swap models, using present value calculations. The models incorporate
various inputs including both credit and debit valuation adjustments for counterparty and own credit risk,
foreign exchange spot and forward rates and interest rate curves. For these financial instruments, significant
inputs into models are market observable and are included within Level 2.
Investment in subsidiary
The Scheme carries its investment in subsidiary at fair value through profit and loss based on the net asset
value of the subsidiary as reported by the subsidiary or its representative. While these amounts represent the
amounts the Scheme would expect to receive if it chose to liquidate its investments, the actual amounts
received upon liquidation could be less due to liquidity or redemption restrictions, such as early redemption
penalties. The net asset value is adjusted, as necessary, to reflect redemption restriction. The Scheme
categorises the investments in subsidiary into Level 2.
Commentary
For Level 2 instruments, paragraph 93 (d) of AASB 13 requires an entity to disclose the description of the
valuation technique(s) and the inputs used in the fair value measurement. If there has been a change in
valuation technique (e.g., changing from a market approach to an income approach or the use of an additional
valuation technique), the entity must disclose that change and the reason(s) for making it.
EY  27
Notes to the financial statements (continued)
For the year ended 30 June 2015
7
Fair value of financial instruments (continued)
AASB 13.93(d)
Unlisted managed funds
The Scheme invests in managed funds, including private equity funds, which are not quoted in an active
market and which may be subject to restrictions on redemptions such as lock up periods, redemption gates and
side pockets. The Scheme’s investment manager considers the valuation techniques and inputs used in valuing
these funds as part of its due diligence prior to investing, to ensure they are reasonable and appropriate and
therefore the NAV of these funds may be used as an input into measuring their fair value. In measuring this
fair value, the NAV of the funds is adjusted, as necessary, to reflect restrictions on redemptions, future
commitments, and other specific factors of the fund and fund manager. In measuring fair value, consideration
is also paid to any transactions in the units of the fund. Depending on the nature and level of adjustments
needed to the NAV and the level of trading in the fund, the Scheme classifies these funds as either Level 2 or
Level 3.
Unlisted asset-backed securities
The fair values of investments in asset-backed securities, for which there is currently no active market, are
calculated using a valuation model which is accepted in the industry. The model uses discounted cash flow
analysis which incorporates both observable and non-observable data. Observable inputs include assumptions
regarding current rates of interest and real estate prices. Unobservable inputs include assumptions regarding
expected future default rates and market liquidity discounts. The model is calibrated to the ABX index, where
relevant. However, significant adjustments may be required in order to reflect differences between the
characteristics of the index and the instrument to be valued. Such instruments are included within Level 3.
AASB 13.93(d)
Commentary
According to paragraph 91 of AASB 13, an entity must disclose information that helps users of its financial
statements assess both of the following:
►
For assets and liabilities that are measured at fair value on a recurring or non-recurring basis in the
statement of financial position after initial recognition, the valuation techniques and inputs used to
develop those measurements; and
►
For recurring fair value measurements using significant unobservable inputs (Level 3), the effect of the
measurements on profit or loss or other comprehensive income for the period.
Recurring fair value measurements of assets or liabilities are those that other standards require or permit in
the statement of financial position at the end of each reporting period. Non-recurring fair value measurements
of assets or liabilities are those that other standards require or permit in the statement of financial position in
particular circumstances. In the vast majority of cases, it can be expected that a fund would only have
recurring fair value measurements on its statement of financial position.
For financial instruments, valuation hierarchy disclosures must be given by class of financial instrument will
often require greater disaggregation than the line items presented in the statement of financial position. The
Scheme presents the information based on the type of asset and liabilities, i.e., listed equity securities, listed
managed funds, etc.
Paragraph 94 of AASB 13 requires that an entity determines appropriate classes of assets and liabilities on the
basis of the nature, characteristics and risks of the asset or liability; and the level of the fair value hierarchy
within which the fair value measurement is categorised. The number of classes may need to be greater for fair
value measurements categorised within Level 3 of the fair value hierarchy because those measurements have
a greater degree of uncertainty and subjectivity. An entity should provide information sufficient to permit
reconciliation to the line items presented in the statement of financial position.
While AASB 13 requires prospective application; the requirement to disclose by class is not new. AASB 13 has
provided further guidance on this matter, including an illustrative table in paragraph IE60. For this reason,
comparative information has been provided following the same level of class disaggregation used in the year
of adoption.
The level of the hierarchy, within which the fair value measurement is classified, must be based on the lowest
level input that is significant to the fair value measurement in its entirety (e.g., if the credit valuation
adjustment made to a derivative value is based on non-observable inputs and the effect of this is significant to
the instrument’s value, then the whole instrument must be presented in Level 3).
Valuation process for Level 3 valuations
AASB 13.93(g)
Valuations are the responsibility of the board of directors of the responsible entity.
The valuation of unlisted managed investment schemes and asset-backed securities is performed on a
quarterly basis by the valuation department of the investment manager and reviewed by the investment
committee of the investment manager.
EY  28
Notes to the financial statements (continued)
For the year ended 30 June 2015
7
Fair value of financial instruments (continued)
The valuations are also subject to quality assurance procedures performed within the valuation department.
The valuation department verifies the major inputs applied in the latest valuation by agreeing the information
in the valuation computation to relevant documents and market information. In addition, the accuracy of the
computation is tested. The latest valuation is also compared with the valuations in the four preceding quarters
as well as with the valuations of the two preceding annual periods. If fair value changes (positive or negative)
are more than certain thresholds set, the changes are further considered by the investment committee.
On a quarterly basis, after the procedures above have been performed the investment committee presents the
valuation results to the board of directors of the responsible entity. This includes a discussion of the major
assumptions used in the valuations, with an emphasis on the more significant investments and investments
with fair value changes outside of the relevant thresholds set out above.
The investment committee considers the appropriateness of the valuation methods and inputs, and may
request that alternative valuation methods are applied to support the valuation arising from the method
chosen. Any changes in valuation methods are discussed and agreed with the responsible entity’s board of
directors.
There were no other changes in valuation techniques during the year.
Commentary
For Level 3 instruments, AASB 13.93(g) requires an entity to provide description of the valuation processes.
For fair value measurements categorised within Level 3 of the fair value hierarchy, AASB 13.93(d) requires an
entity to disclose quantitative information about the significant unobservable inputs used in the measurement
and any changes in valuation techniques.
AASB 13.93(d)
AASB 13.93(h)
Quantitative information of significant unobservable inputs – Level 3:
Description
Asset-backed
securities
Unlisted managed
investment
schemes
Investment in
subsidiary
2015
$’000
388
Valuation
technique
DCF method
362
EBITDA
multiple
Significant unobservable inputs
Discount rate
Discount for lack of liquidity
Expected future default rates
Average EBITDA multiple of peers
Range (weighted
average)
8% - 10% (9%)
8% - 12% (10.3%)
3% - 7% (4.1%)
9x
Credit margin spreads of the
underlying investments of the
unlisted equity investment
Sensitivity analysis to significant changes in unobservable inputs within Level 3 hierarchy – Level 3:
Description
363
Input
Sensitivity used*
AASB 13.93(h)
Effect on fair value
$’000
50
1
130
Asset-backed
Discount for lack of liquidity
5%
securities
Expected future default rates
5%
Unlisted managed Average EBITDA multiple of peers
1x
investment
schemes
*The sensitivity analysis refers to a percentage amount added or deducted from the input and the effect this
has on the fair value.
Description
2014
$’000
552
Valuation
technique
DCF method
Significant unobservable inputs
Range (weighted
average)
Asset-backed
Discount rate
8% - 10% (9%)
8% - 12% (10.3%)
securities
Discount for lack of liquidity
3% - 7% (4.1%)
Expected future default rates
Sensitivity analysis to significant changes in unobservable inputs within Level 3 hierarchy – Level 3:
Description
Input
Sensitivity used*
Asset-backed
securities
Discount for lack of liquidity
Expected future default rates
5%
5%
AASB 13.93(h)
Effect on fair value
$’000
50
1
*The sensitivity analysis refers to a percentage amount added or deducted from the input and the effect this
has on the fair value.
EY  29
Notes to the financial statements (continued)
For the year ended 30 June 2015
7
Fair value of financial instruments (continued)
Asset-backed securities
Significant increases/(decreases) in the discount in isolation would result in a significantly (lower)/higher fair
value measurement. Significant increases/(decreases) in default rates in isolation would result in a significantly
(lower)/higher fair value measurement.
Unlisted managed investment schemes
Significant increases/(decreases) in the discount in isolation would result in a significantly (lower)/higher fair
value measurement.
Level 3 reconciliation
The following table shows a reconciliation of the movement in the fair value of financial instruments categorised
within Level 3 between the beginning and the end of the reporting period.
Financial assets held
for trading:
Unlisted managed
investment schemes
$’000
30 June 2015
Opening balance – 1 July 2014
Total gains and losses
- profit or loss
- other comprehensive income
Purchases
Sales
Issues
Settlements
Transfers into or (out of) level 3
Closing balance – 30 June 2015
Financial assets
designated at fair
value through profit
or loss:
Asset-backed
securities
$’000
AASB 13.93(e)
Total
$’000
—
552
552
(54)
—
—
—
—
—
416
362
92
—
150
(406)
—
—
—
388
38
—
150
(406)
—
—
416
750
—
2,088
2,088
—
—
—
—
—
—
—
—
(92)
—
—
(1,444)
—
—
—
552
(92)
—
—
(1,444)
—
—
—
552
AASB 13.93(e)(iv))
30 June 2014
Opening balance – 1 July 2013
Total gains and losses
- profit or loss
- other comprehensive income
Purchases
Sales
Issues
Settlements
Transfers into or (out of) level 3
Closing balance – 30 June 2014
Commentary
For Level 3 fair value measurements, a reconciliation is required between the opening and closing balances,
including:
► Total gains or losses for the period split between those recognised in profit or loss and those recognised in
other comprehensive income, plus the amount of the gains or losses relating to instruments still held at the
period end. Disclosure of where they are presented in the statement of comprehensive income is also
required;
► Purchases, sales, issues and settlements (by each type of movement rather than net); and
► Transfers into and out of Level 3, with significant transfers into the category disclosed separately from
transfers out, along with the reasons for those transfers. Significant for this purpose is not defined and
management will need to use judgement to determine which transfers to disclose separately
Examples of situations which may result in transfers into or out of Level 3 may include:
► Level 1 to/from Level 3: investments delisting from or listing on a public exchange which is considered to
be an active market; and
► Level 2 to/from Level 3: inputs to valuation models ceasing to be/becoming observable
Most funds, including the Scheme, do not have available-for-sale investments or cash flow hedges. If a fund
does have such instruments, it would include a separate line item to disclose the total gain or losses recognised
in other comprehensive income.
EY  30
Notes to the financial statements (continued)
For the year ended 30 June 2015
7
Fair value of financial instruments (continued)
Gains or losses included in profit or loss are presented in change in fair value of financial assets and liabilities at
fair value through profit or loss as follows:
2015
$’000
2014
$’000
Total gains included in profit and loss for the period
38
(92)
Total gains included in profit or loss for the period for assets held at the
end of the reporting period
18
(23)
8
AASB 13.91(b)
AASB 13.93(e)(i)
AASB 13.93(f)
Net assets attributable to unitholders
Quantitative information about the Scheme’s net assets attributable to unitholders is provided in the Statement
of Changes in Net Assets Attributable to Unitholders.
AASB 101.79(a)
(i),(iii),(v)
AASB 101.80
AASB 101.135.(a)(i)
Each unit issued confers upon the unitholder an equal interest in the Scheme, and is of equal value. A unit does
not confer any interest in any particular asset or investment of the Scheme. Unitholders have various rights
under the Scheme’s constitution, including the right to:
►
►
►
►
Have their units redeemed at a proportionate share based on the Scheme’s net asset value per unit on the
redemption date;
Receive income distributions;
Attend and vote at meetings of unitholders; and
Participate in the termination and winding up of the Scheme
The rights, obligations and restrictions attached to each unit are identical in all respects. For the purpose of
calculating the net assets attributable to unitholders in accordance with Scheme’s Constitution, the Scheme’s
assets and liabilities are valued on the basis of mid-market prices. This valuation of net asset value is different
from the AASB valuation requirements. Reconciliation between the Scheme’s Net Asset Value (NAV) under
AASB and the NAV calculated per the Scheme’s Constitution is provided in the Statement of Changes in Net
Assets Attributable to Unitholders.
Commentary
The NAV as per the offer document issued by a scheme often differs from the NAV of the scheme measured in
accordance with the requirements of AASB. Common differences are measurement of NAV on the basis of midmarket prices as opposed to AASB measurement basis (i.e., long assets measured at ‘bid’ and short positions
measured at ‘offer’) and capitalisation and amortisation of start-up costs (whereas for AASB purposes they are
expensed as incurred). Our view is that the liability of a Scheme to its unitholders should be measured as
equivalent to the NAV of the scheme (i.e., the value of the scheme's assets less the value of its liabilities)
measured in accordance with the requirements of AASB. For disclosure purposes, the Statement of Financial
Position should disclose the NAV as per the offer document issued by the scheme and reconcile this figure to the
NAV as per AASB with additional disclosures in the notes to the financial statements to assist in understanding
the differences between the two amounts, if material.
Net asset value per unit
30 June 2015
$
30 June 2014
$
Net asset value per unit (calculated in accordance with AASB)
1.165
1.020
Net asset value per unit (calculated in accordance with the Scheme’s
Constitution)
1.166
1.021
EY  31
Notes to the financial statements (continued)
For the year ended 30 June 2015
9
Interest revenue and expense
2015
$ ‘000
2014
$ ‘000
AASB 118.35(b)(iii)
(a) Interest revenue
Cash and cash equivalents
80
40
80
40
AASB 7.20(b)
Debt securities held for trading
487
536
AASB 7.20(a)(i)
Debt securities designated at fair value through profit or loss
600
885
AASB 7.20(a)(i)
1,167
1,461
Commentary
The subtotal has been included to show the interest received from financial assets that are not recorded at fair
value through profit or loss, as required by AASB 7.20(b).
If applicable, the scheme should also separately disclose interest income on impaired financial assets accrued
in accordance with AASB 139.AG93 if any instruments held at amortised cost are determined to be impaired.
(b) Interest expense
Bank overdraft
10
98
146
98
Dividend revenue
Equity securities held for trading
Equity securities designated at fair value through profit or loss
11
146
AASB 7.20(b)
AASB 118.35(b)(v)
2015
$ ‘000
2014
$ ‘000
202
401
1,091
1,474
1,293
1,875
AASB 7.20(a)(i)
AASB 7.20(a)(i)
Change in fair value of financial assets and liabilities at fair value through profit
or loss
Net changes in fair value on financial assets through profit or loss:
Held for trading
Designated at fair value through profit or loss
2015
$’000
2014
$’000
7,888
4,573
(23,874)
(19,313)
12,461
(43,187)
AASB 7.20(a)(i)
AASB 7.20(a)(i)
The Scheme has not designated any loan or receivable as at fair value through profit or loss.
Commentary
A scheme which has designated a loan or receivable (or a group of loans or receivables) as at fair value
through profit or loss must provide the disclosure required by AASB 7.9, which includes the following: the
maximum credit exposure, the impact of credit derivatives on the credit exposure, and the change in the fair
value of the loan or receivable (or group of loans or receivables) and any related credit derivatives due to
changes in credit risk, both during the period and cumulatively.
EY  32
Notes to the financial statements (continued)
For the year ended 30 June 2015
11
Change in fair value of financial assets and liabilities at fair value through profit
or loss (continued)
Net changes in fair value of financial liabilities through profit or loss:
Held for trading
2015
$000
2014
$000
1,421
(1,063)
1,421
(1,063)
9,309
4,573
(24,937)
(19,313)
13,882
(44,250)
AASB 7.20(a)(i)
Net change on financial assets and financial liabilities at fair value
through profit or loss:
Held for trading
Designated at fair value through profit or loss
AASB 7.20(a)(i)
AASB 7.20(a)(i)
Commentary
Gains and losses arising on financial instruments at fair value through profit or loss are presented net in
accordance with AASB 101.35 which permits net presentation of gains and losses arising from a group of
similar transactions. However, AASB 101.35 requires such gains and losses to be reported separately if
material.
Disclosure of gains and losses arising from financial assets at fair value through profit or loss separate from
gains and losses from financial liabilities classified the same are not required, but may provide relevant
information for some schemes.
12
Auditor’s Remuneration
2015
$
2014
$
41,250
20,000
37,500
19,000
61,250
56,500
ASIC 98/100
AASB 1054.10
Amounts received or due and receivable by EY for:
- an audit and review of the financial report of the Scheme
- other services in relation to the Scheme: audit of compliance plan
13
Distributions to unitholders
Distributions
Interim Distribution
30 June
Final Distribution
30 June
AASB 101.137
2015
2014
Number of Distributions
units cents per unit Distributions
Number of Distribution
units cents per unit
$ ‘000
‘000
820
82,667
1,855
77,984
2,675
AASB 1054.11
$ ‘000
‘000
0.992
2,782
91,231
3.049
2.379
1,950
86,938
2.243
4,732
The portion of the final distribution for the year which was unpaid at the reporting date is disclosed in the
Statement of Financial Position.
EY  33
Notes to the financial statements (continued)
For the year ended 30 June 2015
14
Statement of Cash Flows Reconciliation
(a) Reconciliation of change in net assets attributable to unitholders to net cash flows from operating
activities
2015
2014
$ ‘000
$ ‘000
Change in net assets attributable to unitholders
11,441
(47,890)
AASB 107.20(b),(c)
Adjustments to reconcile change in net assets attributable to
unitholders to net cash from operating activities:
Distributions to unitholders
Net foreign exchange gains
Payments for purchase of held for trading investments
Proceeds from sale of held for trading investments
Dividend received
2,675
4,732
(101)
(43)
(50,359)
(77,486)
63,913
81,076
292
360
(12,455)
46,601
624
(610)
Decrease / (increase) in dividend receivable
63
(62)
Decrease / (increase) in interest receivable
23
(30)
6
(15)
Unrealised component of change in fair value of investments
AASB 107.20(a)
Net changes in operating assets and liabilities:
Decrease / (increase) in due from brokers
Decrease / (increase) in other receivables
(Decrease) / increase in due to brokers
(4)
3
(Decrease) / increase in management and performance fees payable
(39)
41
(Decrease) / increase in custodian and administration fees payable
(21)
12
(4)
8
16,054
6,697
(Decrease) / increase other payables
Net cash provided by operating activities
AASB 107.43
(b) Non cash financing and investing activities
Reinvestment of unitholder distributions
Participation in dividend reinvestment plans
AASB 1054.16
2,075
1,428
255
360
Commentary
AASB 107 does not specify which profit or loss figure should be used in the reconciliation of cash flows.
Endeavour Managed Investment Scheme has reconciled change in net assets attributable to unitholders for the
year to net cash flows from operating activities.
EY  34
Notes to the financial statements (continued)
For the year ended 30 June 2015
15
Financial Risk Management Objectives and Policies
Introduction
The Scheme’s objective in managing risk is the creation and protection of unitholder value. Risk is inherent in the
Scheme’s activities but it is managed through a process of ongoing identification, measurement and monitoring,
subject to risk limits and other controls. The process of risk management is critical to the Scheme’s continuing
profitability. The Scheme is exposed to market risk (which includes interest rate risk, currency risk and equity
price risk), liquidity risk and credit risk arising from the financial instruments it holds or issues.
AASB 7.31, AASB 7.32
AASB 7.33
Risk Management Structure
The Scheme’s Responsible Entity is responsible for identifying and controlling risks. The Board of Directors
supervises the Responsible Entity and are ultimately responsible for the overall risk management approach
within the Scheme.
Risk Measurement and Reporting System
The Scheme’s risks are measured using a method that reflects both the expected loss likely to arise in normal
circumstances and unexpected losses that are an estimate of the ultimate actual loss based on statistical
models. The models make use of the probabilities derived from historical experience, adjusted to reflect the
economic environment.
Risk Monitoring
Monitoring and controlling risks is primarily performed based on limits established by the Responsible Entity.
These limits reflect the business strategy and market environment of the Scheme as well as the level of the risk
that the Scheme is willing to accept. In addition, the Scheme monitors and measures the overall risk bearing
capacity in relation to the aggregate risk exposure across all risk types and activities.
Risk Mitigation
The Scheme has investment guidelines that set out its overall business strategies, its tolerance for risk and its
general risk management philosophy.
The Scheme uses derivatives and other instruments for trading purposes and in connection with its risk
management activities.
The Investment Manager assesses the risk profile before entering into economic hedge transactions. The
effectiveness of hedges is assessed by the Responsible Entity (based on economic considerations rather than
AASB hedge accounting conditions). The effectiveness of all hedge relationships is monitored by the Responsible
Entity on a quarterly basis. In situations of ineffectiveness, the Investment Manager is instructed to enter into a
new hedge relationship to mitigate risk on a continuous basis thereby restructuring or closing out the already
existing hedge cover.
Excessive risk concentration
Concentration indicates the relative sensitivity of the Scheme’s performance to developments affecting a
particular industry or geographical location. Concentrations of risk arise when a number of financial instruments
or contracts are entered into with the same counterparty, or where a number of counterparties are engaged in
similar business activities, or activities in the same geographic region, or have similar economic features that
would cause their ability to meet contractual obligations to be similarly affected by changes in economic,
political or other conditions.
AASB 7.34(c)
AASB 7.B8
In order to avoid excessive concentration of risk, the Scheme’s policies and procedures include specific
guidelines to focus on maintaining a diversified portfolio. The Investment Manager is instructed to reduce
exposure or to use derivative instruments to manage excessive risk concentrations when they arise.
Commentary
Per AASB7. B8, concentrations of risk arise from financial instruments that have similar characteristics and are
affected similarly by changes in economic or other conditions.
Concentrations of risk should be disclosed if not otherwise apparent. This should include:
► A description of how management determines concentrations;
► A description of the shared characteristic that identifies each concentration (for example, counterparty,
geographical area, currency or market); and
► The amount of the risk exposure associated with all financial instruments sharing that characteristic.
For example, the shared characteristic may refer to geographical distribution of counterparties by groups of
countries, individual countries or regions within countries.
EY  35
Notes to the financial statements (continued)
For the year ended 30 June 2015
15
Financial Risk Management Objectives and Policies (continued)
Market risk
Market risk is the risk that the fair value or future cash flows of financial instruments will fluctuate due to
changes in market variables such as interest rates, foreign exchange rates, and equity prices.
AASB 7.31
AASB 7.32
AASB 7.33
Short selling involves borrowing securities and selling them to a broker-dealer. The Scheme has an obligation to
replace the borrowed securities at a later date. Short selling allows the Scheme to profit from a decline in market
price to the extent that such decline exceeds the transaction costs and the costs of borrowing the securities,
while the gain is limited to the price at which the Scheme sold the security short. Possible losses from short sales
may be unlimited as the Scheme has a liability to repurchase the security in the market at prevailing prices at the
date of acquisition. With written options, the Scheme bears the market risk of an unfavourable change in the
price of the security underlying the option. Exercise of an option written by the Scheme could result in the
Scheme selling or buying a security at a price significantly different from its fair value.
Commentary
AASB 7.40 requires entities to prepare a sensitivity analysis for each type of market risk to which the entity is
exposed. However, under AASB 7.41, if an entity prepares a sensitivity analysis, such as Value at Risk (VaR),
that reflects interdependencies between risk variables (e.g., interest rates and exchange rates) and uses it to
manage financial risks, it may use that sensitivity analysis in place of the analysis required by AASB 7.40.
Interest rate risk
Interest rate risk arises from the possibility that changes in interest rates will affect future cash flows or the fair
values of financial instruments. The Scheme enters into interest rate derivatives, mainly interest rate swaps in
which the Scheme agrees to exchange, at specified intervals, the difference between fixed and variable interest
amounts calculated by reference to an agreed-upon notional principal amount in an effort to manage these risks.
AASB 7.B22
AASB 7.33(a)
The majority of interest rate exposure arises on investment in debt securities in the Australian, Taiwanese,
European Union and Japanese markets. Most of the Scheme’s investments in debt securities carry fixed interest
rates and mature within 5 years.
The following table demonstrates the sensitivity of the Scheme’s profit / (loss) for the year to a reasonably
possible change in interest rates, with all other variables held constant.
The sensitivity of the profit / (loss) for the year is the effect of the assumed changes in interest rates on:
► The net interest income for one year, based on the floating rate financial assets held at the reporting date;
and
► Changes in fair value of investments for the year, based on revaluing fixed rate financial assets at the
reporting date
AASB 7.40(b)
There is no sensitivity effect on 'other comprehensive income' as the Scheme has no assets classified as
‘available for sale’ or designated hedging instruments.
In practice, the actual results may differ from the below sensitivity analysis and the difference could be
significant.
The basis points sensitivity is based on the volatility of change in the global interest rates over the last
10 years.
Change in basis points
Sensitivity of interest
income
Sensitivity of changes in fair
value of investments
AASB 7.40(a)
AASB 7.B18(b)
Increase / (decrease)
Increase / (decrease)
Increase / (decrease)
AASB 7.B19
$ ‘000
$ ‘000
30 June 2015
AUD
150/(150)
31 / (31)
(157) / 316
TWD
100/(100)
6 / (6)
(42) / 70
EUR
120/(120)
3 / (3)
(27) / 40
JPY
100/(100)
4 / (4)
(22) / 44
Other
160/(160)
1 / (1)
(12) / 12
EY  36
Notes to the financial statements (continued)
For the year ended 30 June 2015
15
Financial Risk Management Objectives and Policies (continued)
Interest rate risk (continued)
Change in basis points
Increase / (decrease)
30 June 2014
AUD
TWD
EUR
JPY
Other
Sensitivity of interest
income
Increase / (decrease)
$ ‘000
Sensitivity of changes in fair
value of investments
Increase / (decrease)
$ ‘000
46 / (46)
9 / (9)
5 / (5)
6 / (6)
1 / (1)
(130) / 260
(44) / 74
(31) / 44
(23) / 47
(5) / 5
150/(150)
100/(100)
120/(120)
100/(100)
160/(160)
AASB 7.40(a)
AASB 7.B18(b)
AASB 7.B19
Commentary
In addition to the sensitivity disclosed above, schemes are required to provide additional disclosures specific to
the scheme based on the AASB 7.34(a) requirement to disclose summary quantitative data about its exposure
to risk at balance date based on the information provided internally to key management personnel of the
entity. The disclosures made should be specific to how each scheme monitors its risks (if the risk is not
monitored using the sensitivity analysis disclosed above). These disclosures may include exposure analysis,
interest sensitivity gaps, stress testing or other internal modelling.
Currency risk
Currency risk is the risk that the value of a financial instrument will fluctuate due to changes in foreign exchange
rates. The Scheme invests in securities and other investments that are denominated in currencies other than the
Australian Dollar. Accordingly, the value of the Scheme’s assets may be affected favourably or unfavourably by
fluctuations in currency rates and therefore the Scheme will necessarily be subject to currency risks.
AASB 7.B23
AASB 7.33
The primary purpose of the Scheme’s foreign currency economic hedging activities is to protect against the
volatility associated with investments denominated in foreign currencies and other assets and liabilities
denominated in foreign currencies recorded in the normal course of business. The Scheme primarily utilises
currency swaps and forward exchange contracts to hedge foreign currency denominated financial instruments.
Increases or decreases in the fair values of the Scheme’s foreign currency denominated financial assets and
liabilities are partially offset by gains and losses on the economic hedging instruments.
The Scheme’s policy is to limit its currency exposure on both monetary and non-monetary financial instruments
to the mandates as established in its offering document.
The table below indicates the currencies to which the Scheme had significant exposure at 30 June 2015 on its
monetary assets and liabilities. The analysis calculates the effect of a reasonably possible movement of the
currency rate against the Australian dollar on the profit / (loss) for the year, with all other variables held
constant.
AASB 7.34(c)
AASB 7.40(b)
There is no sensitivity effect on 'other comprehensive income' as the Scheme has no assets classified as
‘available for sale’ or designated hedging instruments.
The reasonably possible movement in each currency is based on the volatility of change in global currency over
the last 10 years.
Currency
TWD
JPY
EUR
Change in currency rate
%
9/(9)
8/(8)
11/(11)
Effect on net profit / (loss) before
finance costs and income tax
2015
$ ‘000
10 / (12)
4 / (5)
7 / (9)
AASB 7.40(a)
AASB 7.B18(b),
AASB 7.B24
2014
$ ‘000
28 / (34)
12 / (14)
21 / (26)
Commentary
In accordance with AASB 7.35, where the quantitative data disclosed as at the reporting date are
unrepresentative of the scheme’s exposure to risk during the period, further information that is representative
should be provided. For example, if a scheme typically has a large exposure to CHF, but at year-end unwinds
the position, the scheme might disclose a graph that shows the exposure at various times during the period, or
it might disclose the highest, lowest and average exposures.
EY  37
Notes to the financial statements (continued)
For the year ended 30 June 2015
15
Financial Risk Management Objectives and Policies (continued)
Currency risk (continued)
Concentration and monitoring of currency risk
Notwithstanding that investments in non-monetary items do not give rise to currency risk under the accounting
standards, the Scheme monitors its exposure to each currency on both monetary and non-monetary financial
instruments as a percentage of net assets attributable to unitholders in order to ensure that its risk to adverse
currency movements remains within its mandate limits.
AASB 7.34(a)
AASB 7.B8(c)
The table below sets out the Scheme’s exposure to foreign currency exchange rates at the reporting date and its
current limits on exposure:
2015
Currency
TWD
JPY
EUR
Other
Total
% of net assets attributable to unitholders
2014
Limits
AASB 7.34(c)
18%
8%
11%
1%
38%
19%
9%
12%
0%
40%
25%
15%
15%
5%
60%
Commentary
The concentration disclosure above represents the currency risk information specific to the Scheme based on
the AASB 7.34(a) requirement to disclose summary quantitative data about its exposure to risk at balance date
based on the information provided internally to key management personnel of the entity.
The disclosures made should be specific to how each scheme monitors its risks (if the risk is not monitored
using the sensitivity analysis).
In the case of Endeavour Managed Investment Scheme, the Scheme monitors ‘currency risk’ on the basis of
investments exposed to movements in currency, including equities on overseas exchanges. While under the
definitions in AASB 7 this represents a component of equity price risk rather than currency risk (and therefore
should not be included in the sensitivity analysis) if this is the information monitored and given to key
management personnel, it should be presented here.
Equity price risk
Equity price risk is the risk that the fair values of equities or equity-linked derivatives decrease as a result of
changes in the levels of equity indices and the value of individual shares. The equity price risk exposure arises
from the Scheme’s investments in equity securities. The Scheme manages this risk by investing in a variety of
stock exchanges and by limiting exposure to a single industry sector to 25% of net assets attributable to
unitholders. The Scheme’s Constitution limits equity investments to a maximum of 5% (and subject to a special
approval of the Board of Directors to a maximum of 10%) of the share capital of a single entity.
AASB 7.33
Management’s best estimate of the effect on profit / (loss) for the year due to a reasonably possible change in
equity indices, with all other variables held constant is indicated in the table below. There is no effect on 'other
comprehensive income' as the Scheme has no assets classified as available-for-sale or designated hedging
instruments. In practice the actual trading results may differ from the sensitivity analysis below and the
difference could be material.
AASB 7.40(b)
The reasonably possible changes in equity prices are based on the volatility of change in the individual
composite indexes over the last 10 years.
Market indices
Change in equity price
Effect on net profit / (loss) before
finance costs and income tax for the year
Increase / (decrease)
2015
Increase / (decrease)
2014
%
$ ‘000
$ ‘000
ASX 200
10/(8)
4,534 / (3,627)
4,330 / (3,464)
S&P 500
10/(9)
1,275 / (1,147)
1,237 / (1,113)
9/(6)
510 / (339)
495 / (330)
11/(10)
779 / (708)
832 / (756)
FTSE 100
Euronext 100
AASB 7.40(a)
EY  38
Notes to the financial statements (continued)
For the year ended 30 June 2015
15
Financial Risk Management Objectives and Policies (continued)
Equity price risk (continued)
Commentary
Where derivatives such as options are held, the sensitivity to increases and decreases in the risk variable may
not be symmetrical.
For a Scheme which invests in unlisted entities (e.g., fund of funds), the equity indices sensitivity table may be
replaced with a more relevant sensitivity table, such as sensitivity based on investment or hedge strategies
grouped in accordance with AASB 7.B8 (e.g., long/short equity, relative value, event driven etc.).
Concentrations and monitoring of equity price risk
The Scheme monitors its exposure to each equity price risk as a percentage of its total equity securities and
units in managed funds on both a geographical and industry basis to ensure that its exposure to risk remains
within tolerance.
AASB 7.34(c)
AASB 7.B8(c)
The table below analyses the Scheme’s concentration of equity price risk by geographical distribution:
% of equity securities and units in
managed funds
Australia
Taiwan
Japan
European Union
Total
2015
2014
64%
18%
8%
10%
100%
63%
18%
8%
11%
100%
The table below analyses the Scheme’s concentration of equity price risk by industry distribution:
% of equity securities and units in
managed funds
Financial
Insurance
Telecommunication
Energy
Retail
Food and Beverages
Software
Auto Parts & Equipment
Other
Total
2015
23%
18%
12%
10%
15%
11%
8%
3%
0%
100%
2014
21%
19%
17%
12%
10%
9%
5%
5%
2%
100%
Commentary
The concentration disclosures above represents equity price risk information specific to the Scheme based on
the AASB 7.34(a) requirement to disclose summary quantitative data about its exposure to risk at balance
date based on the information provided internally to key management personnel of the entity.
The disclosures made should be specific to how each scheme monitors its risks (if the risk is not monitored
using the sensitivity analysis).
Commentary
Under AASB 7.42, when the sensitivity analyses disclosed are unrepresentative of a risk inherent in a financial
instrument, the scheme should disclose that fact and the reason it believes the sensitivity analyses are
unrepresentative. This may be the case, for example, when:
(a) A financial instrument contains terms and conditions whose effects are not apparent from the sensitivity
analysis, e.g., options that remain out of (or in) the money for the chosen change in the risk variable;
(b) Financial assets are illiquid, e.g., when there is a low volume of transactions in similar assets and the
scheme finds it difficult to find a counterparty; or
(c) The scheme has a large holding of a financial asset that, if sold in its entirety, would be sold at a discount
or premium to the quoted market price for a smaller holding.
EY  39
Notes to the financial statements (continued)
For the year ended 30 June 2015
15
Financial Risk Management Objectives and Policies (continued)
AASB 7.33(a)
Liquidity risk
Liquidity risk is defined as the risk that the Scheme will encounter difficulty in meeting obligations associated
with financial liabilities. Liquidity risk arises because of the possibility that the Scheme could be required to pay
its liabilities earlier than expected. The Scheme is exposed to cash redemptions of its redeemable units on a
regular basis. Units are redeemable at the holder’s option based on the Scheme’s net asset value per unit at the
time of redemption calculated in accordance with the Scheme’s constitution.
The Scheme manages its obligation to repurchase the units when required to do so and its overall liquidity risk
by:
►
►
►
AASB 7.33(b)
AASB 7.39(c)
Monitoring the daily application and redemption requests to ensure sufficient liquidity is available
Holding sufficient short term listed assets to meet unexpected large redemption requests if they arise
Having the ability to freeze or delay redemption requests without unitholder approval, as permitted under
the Scheme constitution
The Scheme invests primarily in marketable securities and other financial instruments, which under normal
market conditions are readily convertible to cash. In addition, the Scheme’s policy is to maintain sufficient cash
and cash equivalents to meet normal operating requirements and expected redemption requests.
Investments in unlisted managed investment schemes expose the Scheme to the risk that the responsible entity
of those trusts may be unwilling or unable to fulfil redemption requests within the timeframe required by the
Scheme. As at 30 June 2015, the Scheme holds an investment in a unlisted managed investment Scheme of
$361,553 (2014: none) representing 0.38% of its total financial assets at fair value through profit or loss,
where the responsible entity has suspended all daily redemptions due to a lack of liquidity in its underlying
portfolio.
Net assets attributable to unitholders are repayable on demand, subject to redemption freeze provisions
mentioned above.
Commentary
A scheme with material illiquid investments should disclose that fact, the risk associated with the lack of active
market for those investments and how it manages this risk (AASB 7.B11F(e)). Refer to the note 7 for additional
commentary in relation to determining fair value for these investments.
For example, a fund of funds may be subject to ‘exit penalties’ and ’redemption gates’ which prohibit or
significantly limit redemptions of units in underlying investment funds during certain periods. As a result, the
Scheme may not be able to meet short term liquidity needs or promptly respond to adverse changes (either in
the market or in the investee). In order to manage its liquidity, the Scheme will usually tend to employ
restrictions on redemption and sale, transfer, or encumbrance of its own units. A hedge Scheme’s investor
agreement may provide the investment manager with the ability to halt redemptions in the Scheme (for
example, until they can be honoured in an orderly fashion). Such halts may be imposed to help avoid the
Scheme from having to be liquidated. Alternatively, halts may be imposed if the scheme’s investments become
so difficult to value that there would be serious concern that redeeming members would be advantaged to the
disadvantage of remaining investors. Restrictions on redemptions through the use of pro-rata reductions to
investors’ redemption amounts due to a high level of overall investor redemption requests are commonly
referred to as gates.
While the above illiquid investment is not material to Endeavour Managed Investment Scheme, which invests
primarily in directly held investments, it has been included above to provide an example of such disclosure.
The Scheme also has committed lines of credit of $10 million (2014: $10 million) that may be available for
future operating activities and to meet short term liquidity needs. There are no significant restrictions on the
use of those facilities.
AASB 7.B11D(e)
It is the Scheme’s policy that the Investment Manager monitors the Scheme’s liquidity position on a daily basis
and that the Board of Directors of the Responsible Entity review it on a quarterly basis.
AASB 7.B11F(e)
EY  40
Notes to the financial statements (continued)
For the year ended 30 June 2015
15
Financial Risk Management Objectives and Policies (continued)
Liquidity risk (continued)
The table below summarises the maturity profile of the Scheme’s financial liabilities, gross-settled derivatives
and redeemable units based on contractual undiscounted cash flows.
AASB 7.39(a)
AASB 7.34
As disclosed above, the Scheme manages the liquidity risk associated with these cash outflows by holding
primarily marketable securities which under normal market conditions could be converted to cash within the
first maturity grouping below. The total amount meeting this classification as at 30 June 2015 is $92,231,000
(2014: $88,784,000).
AASB 7.B11E
The analysis into relevant maturity groupings is based on the remaining period at the end of the reporting
period to the contractual maturity date.
Financial Liabilities
Due to brokers
Management and performance fees
payable
Custodian and administration fees
payable
Distributions payable
Redemption payable
Other payables and accrued
expenses
Financial liabilities at fair value
through profit or loss (excluding
gross settled derivatives)
Net assets attributable to unitholders
Total undiscounted financial
liabilities (excluding gross settled
derivatives)
Gross settled derivatives :
Currency swap
Gross cash inflow
Gross cash outflow
Forward currency contracts:
Gross cash inflow
Gross cash outflow
Total undiscounted gross settled
derivatives inflow (outflow)
AASB 7.B11
AASB 7.B11D
Less
than 1
month
$ ‘000
1 to 3
months
$ ‘000
3 to 6
months
$ ‘000
6 to 12
months
$ ‘000
1 to 5
years
$ ‘000
More
than 5
years
$ ‘000
Total
$ ‘000
69
-
-
-
-
-
69
72
-
-
-
-
-
72
31
210
-
300
-
-
-
-
31
210
300
15
6
-
3
-
-
24
660
90,989
239
-
655
-
742
-
1,348
-
40
-
3,684
90,989
92,046
545
655
745
1,348
40
95,379
AASB 7.39(b)
-
7,932
(7,114)
4,271
(3,831)
-
-
-
12,203
(10,945)
2,932
(2,642)
643
(579)
-
-
-
-
3,575
(3,221)
290
882
440
-
-
-
1,612
Commentary
AASB 7.39 (a) requires the maturity analysis of liabilities to be based on undiscounted contractual cash flows.
AASB 7.B11D (d) requires cash flows from derivatives to be shown gross where settlement will be gross. This is
the case even if the derivative is classified as a financial asset. Although AASB 7 does not require disclosure of
the receive leg of gross-settled derivatives, it would be logical to also provide this information in order to
present the full picture. In practice, the treatment of derivatives in the analysis can be particularly troublesome.
When the amount payable is not fixed, the amount disclosed should be determined by reference to the
conditions existing at the reporting date. For example, if the amount payable varies with changes in an index,
the amount disclosed may be based on the level of the index at the reporting date (AASB 7.B11D). AASB 7 does
not explain whether the amount should be based on the spot or forward price of the index and, in practice, both
approaches are acceptable.
AASB 7.39(c) requires an entity to describe how it manages its liquidity risk. AASB 7.B11E requires the
disclosure of a maturity analysis for financial assets an entity holds for managing liquidity risk; if that
information is necessary to enable users to evaluate the nature and extent of liquidity risk.
Schemes are permitted to disclose a further maturity analysis based on expected maturity if liquidity risk is so
managed.
Puttable financial instruments classified as equity are scoped out of AASB 7 (AASB 7.3(f)). However, the
disclosure of the cash outflow on redemption or repurchase of the redeemable shares allows liquidity risk
associated with the put obligation and future cash flows to be evaluated.
EY  41
Notes to the financial statements (continued)
For the year ended 30 June 2015
15
Financial Risk Management Objectives and Policies (continued)
Liquidity risk (continued)
As at 30 June 2014
Financial Liabilities
Due to brokers
Management and performance fees
payable
Custodian and administration fees
payable
Distributions payable
Redemption payable
Other payables and accrued
expenses
Financial liabilities at fair value
through profit or loss (excluding
gross settled derivatives)
Net assets attributable to unitholders
Total undiscounted financial
liabilities (excluding gross settled
derivatives)
Gross settled derivatives :
Currency swap
Gross cash inflow
Gross cash outflow
Forward currency contracts:
Gross cash inflow
Gross cash outflow
Total undiscounted gross settled
derivatives inflow (outflow)
Less than
1 month
$ ‘000
1 to 3
months
$ ‘000
3 to 6
months
$ ‘000
6 to 12
months
$ ‘000
1 to 5
years
$ ‘000
Total
$ ‘000
73
-
-
-
-
73
111
-
-
-
-
111
52
550
917
-
-
-
52
550
917
19
9
-
-
-
28
537
88,705
448
-
597
-
806
-
1,181
-
3,569
88,705
90,047
1,374
597
806
1,181
94,005
AASB 7.B11
AASB 7.B11D
AASB 7.39(b)
-
11,155
(9,929)
3,332
(2,966)
-
-
14,487
(12,895)
6,373
(5,716)
-
-
-
-
6,373
(5,716)
657
1,226
366
-
-
2,249
Credit Risk
Credit risk is the risk that the counterparty to a financial instrument will cause a financial loss for the Scheme by
failing to discharge an obligation.
AASB 7.33(a)
The Scheme is exposed to the risk of credit-related losses that can occur as a result of a counterparty or issuer
being unable or unwilling to honour its contractual obligations. These credit exposures exist within financing
relationships, derivatives and other transactions.
It is the Scheme’s policy to enter into financial instruments with reputable counterparties.
The Investment Manager closely monitors the creditworthiness of the Scheme’s counterparties (e.g., brokers,
custodian, banks etc.) by reviewing their credit ratings, financial statements and press releases on a regular
basis.
The Scheme restricts the exposure to credit losses on derivative instruments it holds by entering into master
netting arrangements with major counterparties with whom a significant volume of transactions are undertaken.
Such an arrangement provides for a single net settlement of all financial instruments covered by the agreement
in the event of default on any one contract. Master-netting arrangements do not result in an offset of balancesheet assets and liabilities unless certain conditions for offsetting under AASB 132 apply.
AASB 132.50
Although master-netting arrangements may significantly reduce credit risk, it should be noted that:
AASB 7.36(b)
►
►
Credit risk is eliminated only to the extent that amounts due to the same counterparty will be settled after the
assets are realised; and
The extent to which overall credit risk is reduced may change substantially within a short period because the
exposure is affected by each transaction subject to the arrangement.
At 30 June 2015, master netting arrangements reduced the credit risk on favourable contracts that have a fair
value of $151,000 (2014: $147,000).
EY  42
Notes to the financial statements (continued)
For the year ended 30 June 2015
15
Financial Risk Management Objectives and Policies (continued)
Credit risk (continued)
Credit risk relating to unsettled transactions in listed securities is considered to be minimal as the Scheme only
uses brokers with high creditworthiness and the transactions are settled or paid for only upon delivery.
Payments on securities acquired are only made after the broker has received the securities. Securities sold are
only delivered after the broker has received the payment.
The Scheme reduces the settlement risk on gross settled foreign exchange derivatives by using a foreign
exchange clearing house which allows transactions to be settled on a delivery versus payment basis. During the
year, 73% (2014: 77%) of the transaction volume was settled in this way.
The table below analyses the Scheme’s maximum exposure to credit risk. The maximum exposure is shown
gross, before the effect of mitigation through the use of master netting and collateral agreements at reporting
date.
2015
$ ‘000
109
754
79
107
9
8,851
14,622
2,020
26,551
Cash and cash equivalents
Due from brokers
Dividends receivable
Interest receivable
Other receivables and prepayments
Interest bearing securities held for trading
Debt securities designated at fair value through profit or loss
Derivative financial assets
Total credit risk exposure
2014
$ ‘000
463
1,670
142
130
15
13,913
8,943
2,700
27,976
AASB 7.36
AASB 7.36(a)
Credit quality of financial assets
The Scheme invests only in financial assets with at least investment grade credit rating as rated by S&P, Moody‘s
or Fitch.
The table below analyses the credit quality of debt instruments by rating agency category and class of financial
instrument. The Scheme exposure to each grade is monitored on a daily basis to ensure credit risk remains
within specified limits:
As at 30 June 2015
Financial assets at fair value through profit or
loss
Bank accepted bills
Promissory notes
Corporate bonds
Government bonds
As at 30 June 2014
Financial assets at fair value through profit or
loss
Bank accepted bills
Promissory notes
Corporate bonds
Government bonds
AAA/Aaa
$ ‘000
AA/aa
$ ‘000
A/A
$ ‘000
BBB/Baa
$ ‘000
Total
$ ‘000
1,650
6,066
7,626
154
10,054
10,208
659
3,440
4,099
1,540
1,540
154
659
16,684
6,066
23,563
AAA/Aaa
$ ‘000
AA/aa
$ ‘000
A/A
$ ‘000
BBB/Baa
$ ‘000
Total
$ ‘000
2,220
2,206
4,426
487
11,862
12,349
696
4,072
4,768
1,313
1,313
487
696
19,467
2,206
22,856
AASB 7.36(c)
Commentary
The Scheme monitors its main credit risk in a similar fashion to the minimum disclosures required by the
standard, being by ratings category. Accordingly, in disclosing the summary quantitative information provided
internally to key management personnel, they have also met the minimum disclosure requirements of the
standard.
The credit quality disclosures should only be made for instruments where significant credit risk exists. For the
most part, this will only be debt instruments held by the Scheme. Regardless of whether external credit ratings
exist, credit quality disclosures should not be made for equity securities held by a Scheme as these only relate
to debt instruments issued by the company.
EY  43
Notes to the financial statements (continued)
For the year ended 30 June 2015
15
Financial Risk Management Objectives and Policies (continued)
Credit risk (continued)
Risk concentrations of the maximum exposure to credit risk
Concentration of risk is managed by counterparty, by geographical region and by industry sector.
AASB 7.B8
The Scheme has one significant counterparty, which has a AA rating (2014: one). A significant counterparty is
defined as any counterparty that holds portfolio positions and cash that in aggregate, are greater than 10% of
the total exposure to credit risk.
The table below analyses the Scheme’s concentration of credit risk by geographical distribution (based on
counterparties’ country of domicile):
% of debt instruments
2015
2014
Australia
Taiwan
Japan
European Union
Others
58%
19%
9%
12%
2%
100%
52%
22%
11%
14%
1%
100%
The table below analyses the Scheme’s concentration of credit risk by industry distribution:
% of debt instruments
2015
2014
Government
Financial
Insurance
Telecommunication
Energy
Retail
Software
26%
33%
9%
12%
7%
5%
8%
100%
10%
39%
13%
14%
8%
6%
10%
100%
None of the Scheme’s financial assets were considered to be past due or impaired in either 2015 or 2014.
AASB 7.37
Commentary
A scheme with financial assets that are either past due or impaired should disclose the following by class of
financial asset (AASB 7.37):
(a) An analysis of the age of financial assets that are past due as at the reporting date but not impaired;
(b) An analysis of financial assets that are individually determined to be impaired as at the reporting date,
including the factors the scheme considered in determining that they are impaired; and
(c) For the amounts disclosed in (a) and (b), a description of collateral held by the fund as security and other
credit enhancements and, unless impracticable, an estimate of their fair value.
EY  44
Notes to the financial statements (continued)
For the year ended 30 June 2015
16
Commitments and Contingencies
AASB 137.86, 89
In accordance with the Scheme’s constitution and subject to the adequate performance of its duties, the
Responsible Entity would be entitled to compensation of $2 million (30 June 2014: $2 million) if it is removed
as the Responsible Entity of the Scheme.
There are no other commitments or contingencies at the reporting date (2014: none).
Commentary
If applicable, the Scheme should disclose investment expenditure commitments and the possible consequences
of not meeting those commitments. If known, these commitments should be allocated to the following time
bands:
► Within 12 months;
► 12 months or longer and not longer than five years; and
► Five years
17
Related party disclosures
(a) Responsible Entity
The Responsible Entity of Endeavour Managed Investment Scheme is Endeavour Responsible Entity Limited,
whose immediate and ultimate holding company is Endeavour Asset Management Limited.
AASB 124.12
(b) Details of Key Management Personnel
(i) Directors
The directors of Endeavour Responsible Entity Limited are considered to be Key Management Personnel of the
Scheme. The Directors of the Responsible Entity in office during the year and up to the date of the report are:
M.P. Byrne
Chairman (non executive) of Endeavour Responsible Entity Limited
R. Scanlon
Director and Chief Executive Officer of Endeavour Responsible Entity Limited
G. Haggar
Director of Endeavour Responsible Entity Limited, appointed 14 March 2015
A. Morgan
Director (non executive) of Endeavour Responsible Entity Limited
J. dela Peña
Director (non executive) of Endeavour Responsible Entity Limited
M. Nosewall
Director (non executive) of Endeavour Responsible Entity Limited, resigned 14 March 2015
J. Chuang
Director (non executive) of Endeavour Responsible Entity Limited
(ii) Other Key Management Personnel
In addition to the Directors noted above, Endeavour Responsible Entity Limited, the Responsible Entity of the
Scheme, is considered to be Key Management Personnel with the authority for the strategic direction and
management of the Scheme.
(iii) Compensation of Key Management Personnel
No amount is paid by the Scheme directly to the Directors of the Responsible Entity. Consequently, no
compensation as defined in AASB 124 “Related Party Disclosures” is paid by the Scheme to the Directors as Key
Management Personnel.
AASB 124.9
AASB 124.16
Compensation is paid to the Responsible Entity in the form of fees and is disclosed in note 17(c).
(c) Fees
Endeavour Responsible Entity Limited provides management services to Endeavour Managed Investment
Scheme, and outsources custodial and administrative functions to associated entities that are wholly owned by
Endeavour Asset Management Limited. Endeavour Investment Administration Pty Limited provides custodial and
investment accounting services to Endeavour Managed Investment Scheme. All costs associated with the
provision of custodial and investment accounting services are paid for by the Responsible Entity, and are
conducted on normal commercial terms and conditions.
Transactions between Endeavour Managed Investment Scheme and Endeavour Responsible Entity Limited result
from normal dealings with that company as the Scheme’s Responsible Entity. Endeavour Responsible Entity
Limited is an Australian Financial Services License holder.
AASB 124.21
Endeavour Responsible Entity Limited receives all management fees that have been paid by the Scheme during
the year. The Responsible Entity is entitled to receive a monthly management fee of 0.80% (2014: 0.80%) of the
total assets of the Scheme under the terms of the Constitution. The fees are paid on a monthly basis. Total fees
paid to the Responsible Entity during the year for management of the Scheme were $742,364 (2014:
$962,106). At balance date there is an amount of $55,214 (2014: $110,781) outstanding.
AASB 124.17
AASB 124.18
ASIC CO 98/100
EY  45
Notes to the financial statements (continued)
For the year ended 30 June 2015
17
Related party disclosures (continued)
(c) Fees (continued)
The Responsible Entity is entitled to receive performance fees when the Scheme’s performance meets
predetermined requirements. The Scheme’s constitution details the calculation of the performance fee. During
the year, the Scheme paid performance fees to the Responsible Entity of $589,441 (2014: nil). At balance date
there is an amount of $16,819 (2014: nil) outstanding.
The Scheme invests in other schemes operated by the Responsible Entity, and the Responsible Entity has rebated
its fee to the Scheme to ensure that there is no duplication of fees recovered from the other schemes.
AASB 124.17
AASB 124 21
During the period the Responsibly Entity incurred certain expenses on behalf of the Scheme of $184,224 (2014:
$166,781). These costs were reimbursed by the Scheme.
AASB 124.17
(d) Related Party transactions
Related Parties
Transactions between the Scheme and the Responsible Entity during the year are outlined in note 17(c) above.
Transactions between the Scheme and other managed investment schemes also managed by the Responsible
Entity consisted of the sale and redemption of units in the Scheme to related managed investment schemes,
purchases and sales of units in related managed investment schemes, and receipt and payment of distributions
on normal commercial terms and conditions.
AASB 124.17(b)
The amounts outstanding payable or receivable at 30 June 2015 represent the value of the units (financial
liability of the Schemes) issued or held and any amount of distribution payable or receivable.
Terms and conditions of transactions with related parties
All related party transactions are made in arm’s length transactions on normal commercial terms and conditions.
Outstanding balances at year end are unsecured and settlement occurs in cash. There have been no guarantees
provided or received for any related party receivables.
AASB 124.21
(e) Investments
Commentary
The following note (e) was suggested by IFSA GN 3.25.8 before it was repealed in 2007. We have continued to
disclose this information as we believe that other schemes managed by the Responsible Entity are in substance
related parties of the Scheme, notwithstanding the fact that AASB 124 does not specifically address the
relationship.
(i) Related party investments of the Scheme
Details of the Scheme’s investment in other managed investment schemes for which Endeavour Responsible
Entity Limited is also the Responsible Entity are set out below:
Fair value of unit
holdings
2015
2014
$
$
Endeavour Private
Equity Fund
Endeavour
International Share
Fund
Endeavour Property
Securities Fund
Endeavour Fixed
Interest Fund
Endeavour Small
Companies Fund
% Interest held
2015
2014
%
%
Distributions received
or receivable from
related parties
2015
2014
$
$
Number of
units
acquired
during the
year
2015
No.
Number of
units
disposed
during the
year
2015
No.
20,868
19,353
50.1
50.1
8,060
7,077
-
-
50,728
49,218
6.32
7.56
2,536
2,461
80,000
-
173,184 164,449
2.02
1.68
8,659
8,222
350,000
55,000
182,237 159,023
1.43
1.82
9,112
7,951
30,000
-
1.55
1.51
3,059
3,007
150,000
75,000
61,183
60,142
EY  46
Notes to the financial statements (continued)
For the year ended 30 June 2015
17
Related party disclosures (continued)
(e) Investments (continued)
The principal activities of the schemes are as follows:
► Endeavour International Share Fund primarily invests in international listed equities
► Endeavour Property Securities Fund primarily invests in domestic listed property trusts
► Endeavour Fixed Interest Fund primarily invests in domestic semi-government fixed interest securities
► Endeavour Small Companies Fund primarily invests in the domestic listed small companies sector
(ii) Related party investments in the Scheme
Details of the investments in the Scheme by the Responsible Entity, or other schemes also managed by the
Responsible Entity are set out below:
30 June 2015
Endeavour Balanced Fund
Endeavour Growth Fund
Endeavour High Yield
Fund
Number of
units
disposed
during the
year
35,000
200,000
Distribution
paid or
payable by
Scheme
$
113,302
109,767
Number of
units held at
balance date
3,365,000
3,260,000
% Interest
held
4.31
4.17
Number of
units
acquired
during year
200,000
-
2,982,925
3.82
45,000
1,562,075
100,438
Number of
units held at
balance date
3,200,000
3,460,000
% Interest
held
3.68
3.98
Number of
units
acquired
during year
1,885,000
1,660,000
Number of
units disposed
during the
year
1,970,000
2,050,000
Distribution
paid or
payable by
Scheme
$
169,355
183,116
4,500,000
5.18
3,160,000
3,210,000
238,156
30 June 2014
Endeavour Balanced Fund
Endeavour Growth Fund
Endeavour High Yield
Fund
(f) Unitholdings of Key Management Personnel
A director of the Responsible Entity, A. Morgan, holds 22,000 units in the Scheme (2014: 22,000). There were
no transactions between the Scheme and Key Management Personnel during the year, other than those
described in note 17(c) and payments of distributions on the units held totaling $742 (2014: $1,164).
AASB 124.17
All transactions with Key Management Personnel have been entered into under terms and conditions no more
favourable than those the Scheme would have adopted if dealing at arm's length.
Commentary
While the Scheme is not required to make the disclosures outlined in the Other Key Management Personnel
Disclosures by Disclosing Entities section of the standard as the units in the Scheme are not equity, disclosure
of the units held by directors or the Responsible Entity is required under the general obligation outlined in
AASB 124.17.
EY  47
Notes to the financial statements (continued)
For the year ended 30 June 2015
18
Investment in subsidiary
AASB 12.19B
Endeavour Private Equity Fund
Investment in subsidiary at fair value
2015
$’000
2014
$’000
363
363
1,729
1,729
The Scheme meets the definition of an investment entity. Therefore, it does not consolidate its subsidiaries but
rather, it recognises Endeavour Private Equity Fund as investment at fair value through profit or loss.
Ownership interest (%)
Name of unconsolidated subsidiary
Principal Place of Business
2015
2014
Australia
50.1%
50.1%
Endeavour Private Equity Fund
The above subsidiary does not control any further subsidiaries.
AASB 12.19C
Restrictions
The Scheme receives income in the form of dividends and interest from its investments in unconsolidated
subsidiaries, and there are no significant restrictions on the transfer of funds from these entities to the Scheme.
AASB 12.19D
Support
During the current year, the Scheme provided support in the form of a loan of $100,000 (2014: $nil) to
Endeavour Private Equity Fund. This loan bears interest at a rate of 5% and is repayable in 2018. This loan was
granted to finance the acquisition of equipment for this entity to commence manufacturing.
AASB 12.19D-F
The Scheme has no contractual commitments or current intentions to provide any other financial or other support
to its unconsolidated subsidiaries.
19
Offsetting financial assets and financial liabilities
AASB 2012-2
The Scheme presents the fair value of its derivative assets and liabilities on a gross basis. Certain derivative
financial instruments are subject to enforceable master netting arrangements, such as an International Swaps and
Derivatives Association (‘ISDA’) master netting agreements. In certain circumstances, for example, when a credit
event such as a default occurs, all outstanding transactions under an ISDA agreement are terminated, the
termination value is assessed and only a single net amount is payable in settlement of all transactions.
AASB 7.13E
As at 30 June 2015 and 30 June 2014, the following tables provide information on the financial impact of the
netting agreements if they were applied to the recognised financial assets and liabilities:
AASB 7.13D
EY  48
Notes to the financial statements (continued)
For the year ended 30 June 2015
19
Offsetting financial assets and financial liabilities (continued)
Amounts
related to
financial
collaterals
($’000)
Related
amount not set
off in the
statement of
financial
position
($’000)
Net amount
presented on
statement of
financial position
($’000)
-
-
-
2,020
2,020
-
-
-
2,020
(3,684)
-
-
-
(3,684)
(1,664)
-
-
-
(1,664)
Gross amount
of recognised
assets /
(liabilities)
($’000)
Amounts
offset in the
statement of
financial
position
($’000)
Amounts
related to
financial
collaterals
($’000)
Related
amount not set
off in the
statement of
financial
position
($’000)
Net amount
presented on
statement of
financial position
($’000)
2,700
-
-
-
2,700
2,700
-
-
-
2,700
(3,569)
-
-
-
(3,569)
(869)
-
-
-
(869)
30 June 2015
Derivative
financial assets
Example
counterparty
Total derivative
financial assets
Derivative
financial
liabilities
Example
counterparty
Total derivative
financial
liabilities
Gross amount
of recognised
assets /
(liabilities)
($’000)
Amounts
offset in the
statement of
financial
position
($’000)
2,020
30 June 2014
Derivative
financial assets
Example
counterparty
Total derivative
financial assets
Derivative
financial
liabilities
Example
counterparty
Total derivative
financial
liabilities
AASB 2012-2
Commentary
A scheme shall disclose information to enable users of its financial statements to evaluate the effect or potential
effect of netting arrangements on the scheme’s financial position. This includes the effect or potential effect of
rights of set-off associated with the scheme’s recognised financial assets and liabilities.
20
Events after balance date
AASB 110.21
Since 30 June 2015 there have been no other matters or circumstances not otherwise dealt with in the financial
report that have significantly affected or may significantly affect the Scheme (2014: none).
EY  49
Directors' declaration
In accordance with a resolution of the Directors of Endeavour Responsible Entity Limited, I state that:
CA 295(1),(4)
CA 295(5)(a)
In the opinion of the directors:
(a)
The financial statements and notes of the Scheme for the financial year ended 30 June 2015 are in
accordance with the Corporations Act 2001, including:
(i)
Giving a true and fair view of the Scheme’s financial position as at 30 June 2015 and of its
performance for the year ended on that date; and
(ii)
Complying with Accounting Standards and the Corporations Regulations 2001
(b)
The financial statements and notes also comply with International Financial Reporting Standards as
disclosed in Note 2.1
(c)
There are reasonable grounds to believe that the Scheme will be able to pay its debts as and when
they become due and payable
CA 295(4)(d)(i),(ii)
CA 295(4)(ca)
CA 295(4)(c), ASIC RG
22
On behalf of the board
M.P. Byrne
Chairman
CA 295(5)(c)
Sydney, 26 August 2015
CA 295(5)(b)
EY  50
Ernst & Young Centre
680 George Street
Sydney NSW 200 Australia
GPO Box 2646 NSW 2001
Tel: +61 2 9248 5555
Fax: +61 2 9248 5959
www.ey.com/au
Independent auditor's report
To the unitholders of Endeavour Managed Investment Scheme
Report on the financial report
We have audited the accompanying financial report of Endeavour Managed Investment Scheme (the
‘Scheme’), which comprises the statement of financial position as at 30 June 2015, and the statement of
comprehensive income, statement of changes in net assets attributable to unitholders, and statement of
cash flows for the year then ended, notes comprising a summary of significant accounting policies and
other explanatory information, and the directors' declaration.
Directors' responsibility for the financial report
The directors of the Responsible Entity are responsible for the preparation of the financial report that
gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act
2001 and for such internal controls as the directors determine are necessary to enable the preparation of
the financial report that is free from material misstatement, whether due to fraud or error. In Note 2.1,
the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial
Statements, that the financial statements comply with International Financial Reporting Standards.
Auditor's responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our
audit in accordance with Australian Auditing Standards. Those standards require that we comply with
relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain
reasonable assurance about whether the financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
the financial report. The procedures selected depend on the auditor's judgment, including the assessment
of the risks of material misstatement of the financial report, whether due to fraud or error. In making
those risk assessments, the auditor considers internal controls relevant to the entity's preparation of the
financial report that gives a true and fair view in order to design audit procedures that are appropriate in
the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's
internal controls. An audit also includes evaluating the appropriateness of accounting policies used and
the reasonableness of accounting estimates made by the directors, as well as evaluating the overall
presentation of the financial report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinion.
Independence
In conducting our audit we have complied with the independence requirements of the Corporations Act
2001. We have given to the directors of the Responsible Entity a written Auditor’s Independence
Declaration, a copy of which is attached to the directors’ report.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
EY  51
Opinion
In our opinion:
a.
b.
the financial report of Endeavour Managed Investment Scheme is in accordance with the
Corporations Act 2001, including:
i
giving a true and fair view of the Scheme's financial position as at 30 June 2015 and of its
performance for the year ended on that date; and
ii
complying with Australian Accounting Standards and the Corporations Regulations 2001;
and
the financial report also complies with International Financial Reporting Standards as disclosed
in Note 2.1
Ernst & Young
D.G. Brown
Partner
Sydney
26 August 2015
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
EY  52
Appendix A — Half-year
financial report
Appendix A – Half-year financial report
Preparation of an interim financial report
Disclosing entities
Disclosing entities are required to prepare and lodge a financial report and directors’ report for each halfyear under Section 302 of the Corporations Act 2001. Disclosing entities are those where interests in or
securities issued by an entity are Enhanced Disclosure securities (‘ED securities’).
The most common circumstances where a managed investment scheme becomes a disclosing entity, is
where interests in the scheme are included in the official list of a prescribed financial market. This entity
becomes subject to the financial market’s listing rules (e.g., ASX listed), or where interests in the scheme
are issued to 100 or more unitholders as a result of offers under a product disclosure statement.
AASB 134 “Interim Financial Reporting”
General purpose half-year financial statements prepared by disclosing entities must comply with the
requirements of AASB 134 Interim Financial Reporting. Where the entity prepares an annual special
purpose financial report, the entity is not expected to be subject to interim financial reporting.
The standard defines the minimum content of an interim financial report as including condensed financial
statements and selected explanatory notes, and is intended to provide an update on the latest annual
financial report. The standard does not however prohibit an entity from publishing a complete financial
report as its interim financial report, or from providing more than the minimum line items or selected
explanatory notes.
Where an entity publishes a condensed financial report, it must include at a minimum all of the headings
and subtotals that were included in its most recent annual financial report and the selected explanatory
notes required by the standard. Additional line items or notes must be included if their omission would
make the condensed interim financial report misleading.
Disclosures presented in this edition of Endeavour Managed Investment Scheme
This edition of Endeavour Managed Investment Scheme has been prepared with full financial statements
consistent with those required in the current annual financial report, plus selected explanatory notes. The
term ‘condensed’ has been excluded from the heading of each financial statement as the line items in
those statements are the same as those in the annual financial statements (EY considers that a
condensed statement is any presentation of the applicable statement that has fewer line items than those
required under AASB 101 and in such cases the statements should be titled accordingly).
The selected explanatory notes have been presented after considering the operation and nature of the
Scheme and the overall disclosure principle outlined in the standard, as well as the minimum disclosures
required by AASB 134.16A and the examples provided in the standard. The full list of minimum
disclosures and examples has not been reproduced here to the extent that they are not relevant to the
Scheme.
If you are unsure as to the selected explanatory notes required to be presented for your entity, we
recommend that you thoroughly read the requirements of the standard and seek guidance from your EY
representative.
EY  53
Endeavour Managed
Investment Scheme
ARSN 00 000 000 000
Financial report for the half-year
ended 31 December 2015
Appendix A – Half-year financial report (continued)
Contents to the interim financial report
Directors' report ..............................................................................................................................................................56 Directors' report (continued) ............................................................................................................................................57 Auditor’s Independence Declaration .................................................................................................................................58 Statement of Comprehensive Income ...............................................................................................................................59 Statement of Financial Position ........................................................................................................................................60 Statement of Changes in Net Assets Attributable to Unitholders.......................................................................................61 Statement of Cash Flows .................................................................................................................................................62 Notes to the financial statements .....................................................................................................................................63 Independent auditor's report ............................................................................................................................................72 EY  55
Appendix A – Half-year financial report (continued)
Directors' report
CA 302(a)
The Directors of Endeavour Responsible Entity Limited (ABN 00 000 000 000), the Responsible Entity of
Endeavour Managed Investment Scheme (the “Scheme”), submit their report for the Scheme for the halfyear ended 31 December 2015.
CA 306(1)(b)
DIRECTORS
The names of the Directors of the Responsible Entity in office during the half-year and until the date of this
report are:
M.P. Byrne (Chairman)
R. Scanlon
A. Morgan
G. Haggar
J. dela Peña
J. Chuang
The Directors were in office from the beginning of the half-year until the date of this report, unless
otherwise stated.
CA 306(1)(b)
Commentary
The names of the directors in office during or since the end of the half-year and the period for which they
were a director (including alternates who have acted in the capacity of director) must be disclosed.
REVIEW OF RESULTS AND OPERATIONS
CA 306(1)(a)
Results and distributions
Net profit attributable to unitholders for the half-year ended 31 December 2015 was $11,441,286 (2014:
loss $47,890,437).
Distributions to unitholders during the half-year totalled $2,675,088 (2014: $4,732,112).
Distributions to unitholders during the period included a distribution of $820,000 on 30 September 2015,
with an amount of $1,855,000 declared at 31 December 2015.
AUDITOR’S INDEPENDENCE DECLARATION
An independence declaration has been provided to the Directors by the auditor of Endeavour Managed
Investment Scheme, Ernst & Young, and is attached to the Directors’ report.
ROUNDING
The amounts contained in this report and in the interim financial report have been rounded under the
option available to the Scheme under ASIC Class Order 98/100. The Scheme is an entity to which the
Class Order applies, and in accordance with that Class Order, amounts in the Directors’ report and the
interim financial report have been rounded to the nearest thousand dollars (where rounding is
appropriate).
ASIC CO 05/641
ASIC CO 98/100
Commentary
Where a registered Scheme is of a certain size, amounts and comparatives can be rounded. Rounding,
however, is not permitted where it would result in the loss of material information.
The financial report or Directors’ Report should state that the Scheme is an entity to which the class order
applies and that amounts have been rounded, and the extent of that rounding.
Generally, the following rounding levels apply, with some restrictions for related party/remuneration
disclosures and auditor remuneration. Refer to the class order for full details:
Assets greater than:
$10m (less than $1,000m)
$1,000m (less than $10,000m)
$10,000m
Rounding:
$1,000
$100,000
$1,000,000
The level of rounding used in presenting amounts in the financial statements shall be displayed
prominently and repeated where necessary for the information presented to be understandable.
EY  56
Appendix A – Half-year financial report (continued)
Directors' report (continued)
CA 306(3)(a)
Signed in accordance with a resolution of the Directors.
M.P. Byrne
Chairman
Sydney
8 February 2016
CA 306(3)(c)
CA 306(3)(b)
EY  57
Appendix A – Half-year financial report (continued)
Ernst & Young Centre
680 George Street
Sydney NSW 200 Australia
GPO Box 2646 NSW 2001
Tel: +61 2 9248 5555
Fax: +61 2 9248 5959
www.ey.com/au
Auditor’s Independence Declaration
To the Directors of Endeavour Responsible Entity Limited, as Responsible Entity for
Endeavour Managed Investment Scheme
In relation to our review of the financial report of Endeavour Managed Investment Scheme
for the half-year ended 31 December 2015, to the best of my knowledge and belief, there
have been no contraventions of the auditor independence requirements of the Corporations
Act 2001 or any applicable code of professional conduct.
CA 298(1)(c)
Ernst & Young
D.G. Brown
Partner
Sydney
8 February 2016
EY  58
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
Appendix A – Half-year financial report (continued)
Statement of Comprehensive Income
AASB 134.5(b)
AASB 134.8(b)
Note
31 December 2015
$’000
31 December 2014
$’000
AASB 134.20(b)
AASB 101.51(d),(e)
Income
AASB 7.20(b), AASB
118.35(b)(ii)
Interest revenue
Dividend revenue
Change in fair value of financial assets and liabilities at
fair value through profit or loss
1,167
1,293
1461
1,875
13,882
(44,250)
Net foreign exchange gains
Total income
101
16,443
23
(40,891)
Expense
Interest expense
Management fees
Performance fees
Custodian and administration fees
Brokerage fees and other transaction costs
Other general expenses
Total expenses
(146)
(742)
(589)
(162)
(285)
(209)
(2,133)
(98)
(962)
(240)
(460)
(276)
(2,036)
AASB 7.20(b)
Net profit/(loss) before finance costs and income tax
14,310
(42,927)
AASB 101.85
(194)
(231)
AASB 101.82(d)
(2,675)
(4,732)
11,441
11,441
(47,890)
(47,890)
Withholding tax expense
Finance costs
Distributions to unitholders
AASB 118.35(b)(v)
AASB 7.20(a)(i)
AASB 101.35
AASB 121.52(a)
AASB 101.35
AASB 101.82(b)
5
Net profit/(loss) for the year
Other comprehensive income
Change in net assets attributable to unitholders
AASB 132.40
Commentary
Refer to the Annual Financial Report for detailed commentary.
EY  59
Appendix A – Half-year financial report (continued)
Statement of Financial Position
AASB 134.5(a)
AASB 134.8(a)
at 31 December 2015
Note
ASSETS
Cash and cash equivalents
Due from brokers
Dividends receivable
Interest receivable
Receivable from redeemable units
Other receivables and prepayments
Financial assets at fair value through profit or loss
TOTAL ASSETS
31 December 2015
$’000
30 June 2015
$’000
109
463
AASB 101.54(i)
AASB 101.54(d),
4
649
79
107
105
9
94,321
95,379
1,273
142
130
397
15
91,585
94,005
69
72
31
210
300
24
3,684
73
111
52
550
917
28
3,569
4,390
5,300
90,989
95,379
88,705
94,005
LIABILITIES
Due to brokers
Management and performance fees payable
Custodian and administration fees payable
Distributions payable
Redemption payable
Other payables and accrued expenses
Financial liabilities at fair value through profit or loss
TOTAL LIABILITIES (EXCLUDING NET ASSETS
ATTRIBUTABLE TO UNITHOLDERS)
AASB 134.20(a)
AASB 101.51(d),(e)
AASB 7.8(c)
AASB 101.54(h)
AASB 7.8(a)
AASB 101.54(m),
4
NET ASSETS ATTRIBUTABLE TO UNITHOLDERS
TOTAL LIABILITIES
AASB 7.8(f)
AASB 101.54(k)
AASB 7.8(e)
AASB 132 Example 7
AASB 132 Example 7
Commentary
Refer to the Annual Financial Report for detailed commentary.
EY  60
Appendix A – Half-year financial report (continued)
Statement of Changes in Net Assets Attributable to
Unitholders
for the half-year ended 31 December 2015
AASB 134.20(c)
Net assets
attributable to
unitholders
(calculated in
accordance with
redemption
Units on
requirements)
issue
No. ‘000
$’000
94,863
Issue of redeemable units
Redemption of redeemable units
Adjustment
from midmarket prices
to bid/offermarket prices
Net assets
attributable
to unitholders
(calculated in
accordance
with AASB)
$’000
$’000
143,156
(61)
143,095
11,666
(20,085)
16,368
(28,520)
-
16,368
(28,520)
Decrease in net assets attributable to
unitholders from transactions in units
Change in net assets attributable to
unitholders
Balance at 31 December 2014
(8,419)
(12,152)
-
(12,152)
-
(47,886)
(4)
(47,890)
86,444
83,118
(65)
Balance at 1 July 2015
86,938
88,764
(59)
10,658
(19,612)
11,270
(20,427)
-
11,270
(20,427)
(8,954)
(9,157)
-
(9,157)
-
11,450
(9)
11,441
77,984
91,057
(68)
90,989
Balance at 1 July 2014
Issue of redeemable units
Redemption of redeemable units
Decrease in net assets attributable to
unitholders from transactions in units
Change in net assets attributable to
unitholders
Balance at 31 December 2015
83,053
88,705
Commentary
Refer to the Annual Financial Report for detailed commentary.
EY  61
Appendix A – Half-year financial report (continued)
Statement of Cash Flows
AASB 134.5(d)
AASB 134.8(d)
For the half-year ended 31 December 2015
31 December 2015
$’000
CASH FLOWS FROM OPERATING ACTIVITIES
Proceeds from sale of financial investments classified as held for
trading
Payments for purchase of financial investments and settlement
of financial liabilities held for trading
Proceeds received from brokers
Payments to brokers
Interest received
Dividends and distributions received
Interest paid
Management and performance fees paid
Custodian and administration fees paid
Other operating expenses paid
Net cash provided by operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of financial assets designated as at fair value
through profit or loss
Purchase of financial assets designated as at fair value through
profit or loss
31 December 2014
AASB 134.20(d)
$’000
AASB 101.51(d)(e)
AASB 107.14
63,913
81,076
(50,359)
3,313
(910)
1,190
1,101
(141)
(1,370)
(183)
(500)
(77,486)
3,544
(1,219)
1,449
1,418
(101)
(997)
(236)
(751)
16,054
6,697
20,189
(15,345)
(11,717)
(5,818)
8,472
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of redeemable units
Payments on redemption of redeemable units
Distributions paid to unitholders
11,562
(21,044)
(1,150)
16,114
(27,865)
(3,119)
Net cash flows used in financing activities
(10,632)
(14,870)
(396)
463
42
299
281
55
109
635
Net (decrease) / increase in cash and cash equivalents
Cash and cash equivalents at 1 July
Effect of exchange rate changes
Cash and cash equivalents at 31 December
AASB 107.31
AASB 107.31
AASB 107.21
9,527
Net cash flows (used in) / provided by investing activities
AASB 107.31
AASB 107.21
AASB 107.17(a)
AASB 107.17(b)
AASB 107.34
Commentary
Refer to the Annual Financial Report for detailed commentary.
EY  62
Appendix A – Half-year financial report (continued)
Notes to the financial statements
AASB 134.5(e)
AASB 134.8(e)
For the half-year ended 31 December 2015
1
Approval of financial statements
The financial statements of Endeavour Managed Investment Scheme for the half-year ended 31 December 2015
were authorised for issue in accordance with a resolution of the Board of Directors on 8 February 2016.
Commentary
While not specifically required by AASB 134, we believe that given the requirement to disclose events
subsequent to the end of the reporting period, disclosure of the date the report was authorised for issue (and
therefore the date to which subsequent events are considered) represents information that should be provided
to users of the financial report.
2
Basis of preparation and accounting policies
AASB 134.16A
(a) Basis of preparation
This general purpose interim financial report for the half-year ended 31 December 2015 has been prepared in
accordance with AASB 134 Interim Financial Reporting and the Corporations Act 2001. The interim financial
report has also been prepared on a historical cost basis, except for financial assets and financial liabilities held at
fair value through profit or loss, that have been measured at fair value.
The financial statements are presented in Australian Dollars and all values are rounded to the nearest $’000
except where otherwise indicated.
(b) Statement of compliance
The financial report complies with Australian Accounting Standards applicable to interim reporting as issued by
the Australian Accounting Standards Board (‘AASB’) and International Financial Reporting Standards (‘IFRS’)
applicable to interim reporting as issued by the International Accounting Standards Board.
AASB 134.19
The half year financial report does not include all the information and disclosures required in the annual financial
statements, and should be read in conjunction with the most recent annual financial report of the Scheme.
Commentary
AASB 134.19 clarifies that an interim financial report must not be described as complying with Australian
Accounting Standards unless it complies with all the requirements of Australian Accounting Standards. In this
half-year financial report, the Scheme is not claiming compliance with Australian Accounting Standards in their
entirety, but rather with the requirements of AASB 134. If a complete set of interim financial statements was
provided complying with all requirements of Australian Accounting Standards, entities may be able to include in
their compliance statement, reference to IFRS as issued by the IASB, or their Australian equivalents, in addition
to AASB 134.
(c) Changes in accounting standards
The significant accounting policies adopted in the preparation of the half-year financial report are consistent
with those followed in the preparation of the Scheme financial report for the year ended 30 June 2015, except
for the adoption of new standards and interpretations noted below:
AASB 2015-3 Amendments to Australian Accounting Standards arising from the Withdrawal of AASB 1031
Materiality (effective from 1 July 2015)
The Standard completes the AASB’s project to remove Australian guidance on materiality from Australian
Accounting Standards.
AASB 134.16A(a)
AASB 134.28
The adoption of the amendments had no material impact on the financial statements of the Scheme.
AASB 2015-4 Amendments to Australian Accounting Standards – Financial Reporting Requirements for
Australian Groups with a Foreign Parent (effective 1 July 2015)
The amendment aligns the relief available in AASB 10 Consolidated Financial Statements and AASB 128
Investments in Associates and Joint Ventures in respect of the financial reporting requirements for Australian
groups with a foreign parent.
EY  63
Appendix A – Half-year financial report (continued)
Notes to the financial statements (continued)
AASB 134.5(e)
AASB 134.8(e)
For the half-year ended 31 December 2015
2
Basis of preparation and accounting policies (continued)
(c) Changes in accounting standards (continued)
The adoption of the amendments had no material impact on the financial statements of the Scheme.
AASB 2015-3 Amendments to Australian Accounting Standards – Investment Entities: Applying the
Consolidation Exception (effective from 1 July 2015)
This makes amendments to AASB 10, AASB 12 Disclosure of Interests in Other Entities and AASB 128 arising
from the IASB’s narrow scope amendments associated with Investment Entities.
The adoption of the amendments had no material impact on the financial statements of the Scheme.
Accounting standards and interpretations that are applicable to the next annual financial statements of the
Scheme have not been applied in this interim financial report.
Commentary
AASB 134.16A(a) requires a ’description of the nature and effect’ of changes in accounting policies, but beyond
this, no prescriptive requirements apply. For the current interim period, newly adopted standards and
amendments did not have any such effects.
3
Significant accounting judgements and estimates
The preparation of the Scheme’s financial statements requires management to make judgements, estimates and
assumptions that affect the amounts recognised in the financial statements. However, uncertainty about these
assumptions and estimates could result in outcomes that could require a material adjustment to the carrying
amount of the asset or liability affected in the future periods.
The significant accounting policies have been consistently applied in the current financial period and the
comparative period, unless otherwise stated. Where necessary, comparative information has been re-presented
to be consistent with current period disclosures.
Commentary
The Scheme has prepared and presented interim financial statements. AASB 134.16A(a) requires a ’description
of the nature and effect’ of changes in accounting policies, but beyond this, no prescriptive requirements apply.
Where a newly adopted standard or amendment has an impact on the financial statements, the Scheme complies
with the requirements under AASB 108.28(f) and makes qualitative and quantitative disclosures of the effect on
the different line items in the statement of profit or loss and statement of financial position. For the current
interim period, newly adopted standards and amendments did not have any such effects.
4
Fair value of financial instruments
AASB 13 requires disclosures relating to fair value measurements using a three-level fair value hierarchy. The
level within which the fair value measurement is categorised in its entirety is determined on the basis of the
lowest level input that is significant to the fair value measurement. Assessing the significance of a particular
input requires judgement, considering factors specific to the asset or liability. The following table shows financial
instruments recognised at fair value, categorised between those whose fair value is based on:
► Level 1 — Quoted (unadjusted) market prices in active markets for identical assets or liabilities;
► Level 2 — Valuation techniques for which the lowest level input that is significant to the fair value
measurement is directly or indirectly observable; or
► Level 3 — Valuation techniques for which the lowest level input that is significant to the fair value
measurement is unobservable.
The level in which instruments are classified in the hierarchy is based on the lowest level input that is significant
to the fair value measurement in its entirety. Assessment of the significance of an input requires judgement
after considering factors specific to the instrument.
AASB 13 Appendix A
AASB 13.73
Commentary
The Scheme has not elected to apply the portfolio exemption under AASB 13.48. If a scheme makes an
accounting policy decision to use the exception, this fact is required to be disclosed per AASB 13.96
EY  64
Appendix A – Half-year financial report (continued)
Notes to the financial statements (continued)
AASB 134.5(e)
AASB 134.8(e)
For the half-year ended 31 December 2015
4
Fair value of financial instruments (continued)
Level 1
31 December 2015
Level 2
Level 3
$’000
$’000
$’000
34,659
-
-
1,142
-
8,038
-
Total
$’000
30 June 2015
Level 2 Level 3
Level 1
AASB 13.91(a)
AASB 13.93(a)
AASB 13.93(b)
AASB 13.97
Total
$’000
$’000
$’000
$’000
34,659
31,157
-
-
31,157
-
1,142
2,839
-
-
2,839
-
362
362
-
-
-
-
363
-
363
-
1,729
-
1,729
154
659
-
8,038
154
659
12,730
-
487
696
-
12,730
487
696
132
-
-
132
123
-
-
123
276
-
1,258
354
-
276
1,258
354
328
-
1,592
657
-
328
1,592
657
31,824
8,646
6,066
-
388
-
31,824
8,646
388
6,066
29,752
6,737
2,206
-
552
-
29,752
6,737
552
2,206
90,783
2,788
750
94,321
85,872
5,161
552
91,585
1,539
2,082
-
-
2,082
1,539
721
2,797
-
-
2,797
721
-
63
-
63
-
51
-
51
1,539
2,145
-
3,684
721
2,848
-
3,569
Financial assets at fair value
through profit or loss
Financial assets held for
trading
(i) Listed equities and
managed investment
schemes
Listed equity securities
Listed managed investment
schemes
Unlisted managed
investment schemes
Investment in subsidiary
(ii) Interest bearing securities
Listed debt securities
Bank accepted bills
Promissory notes
(iii) Derivatives
Share price index futures
Exchange traded share price
options
Currency swaps
Forward currency contracts
Financial assets designated
at fair value through profit
or loss
Listed equity securities
Corporate bonds
Asset-backed securities
Government bonds
Financial liabilities at fair
value through profit or loss
Financial liabilities held for
trading
(i) Derivatives
Interest rate swaps
Share price index futures
Written call share price
options
Commentary
AASB 13.99 requires the Scheme to present the quantitative disclosures of AASB 13 to be included in a tabular
format, unless another format is more appropriate. The Scheme included the quantitative disclosures in tabular
format above.
EY  65
Appendix A – Half-year financial report (continued)
Notes to the financial statements (continued)
AASB 134.5(e)
AASB 134.8(e)
For the half-year ended 31 December 2015
4
Fair value of financial instruments (continued)
Commentary
Determining the appropriate level of classification may require an assessment to be made at the individual
instrument level. While some types of investment may be straightforward, such as stock exchange listed
equities, others, such as units in unlisted schemes, are likely to require further judgement. If you have any
questions, please contact your local EY representative for further information.
Due to the short-term nature of financial assets and financial liabilities recorded at amortised cost, the
carrying amount of those instruments approximates their fair value.
Transfers between Level 1 and Level 3
During the financial year, following the delisting of three managed funds and their management’s decision to
suspend redemptions for periods ranging between 6 and 12 months, the Scheme’s investments in those funds
totalling $40,000 were reclassified from Level 1 to Level 3. Transfers between levels of the fair value
hierarchy, are deemed to have occurred at the beginning of the reporting period.
AASB 7.29(a)
AASB 13.93(e)(iv)
AASB 13.95
AASB 13.93(c)
Commentary
Paragraph 95 of AASB 13 requires an entity to disclose and consistently follow its policy for determining
when transfers between levels of the fair value hierarchy are deemed to have occurred in accordance with
paragraph AASB 13.93(c) and AASB 13.93(e)(iv). The policy about the timing of recognising transfers shall
be the same for transfers into the levels as for transfers out of the levels. Examples of policies for determining
the timing of transfers include the following:
► the date of the event or change in circumstances that caused the transfer;
► the beginning of the reporting period; or
► the end of the reporting period.
Valuation technique
Listed investment in subsidiaries and associates, equity securities, managed funds and derivatives
When fair values of publicly traded equity securities, managed funds and derivatives are based on quoted
market prices, or binding dealer price quotations, in an active market for identical assets without any
adjustments, the instruments are included within Level 1 of the hierarchy. The Scheme values these
investments at bid price for long positions and ask price for short positions.
Unlisted debt securities and treasury bills
The Scheme invests in debt securities, corporate and government bonds and treasury securities. In the
absence of a quoted price in an active market, they are valued using observable inputs such as recently
executed transaction prices in securities of the issuer or comparable issuers and yield curves. Adjustments
are made to the valuations when necessary to recognise differences in the instrument’s terms. To the extent
that the significant inputs are observable, the Scheme categorises these investments as Level 2.
Over-the-counter derivatives
The Scheme uses widely recognised valuation models for determining fair values of over-the-counter interest
rate swaps, currency swaps and forward foreign exchange contracts. The most frequently applied valuation
techniques include forward pricing and swap models, using present value calculations. The models
incorporate various inputs including both credit and debit valuation adjustments for counterparty and own
credit risk, foreign exchange spot and forward rates and interest rate curves. For these financial instruments,
significant inputs into models are market observable and are included within Level 2.
Investment in subsidiary
The Scheme carries its investment in subsidiary at fair value through profit and loss based on the net asset
value of the subsidiary as reported by the subsidiary or its representative. While these amounts represent the
amounts the Scheme would expect to receive if it chose to liquidate its investments, the actual amounts
received upon liquidation could be less due to liquidity or redemption restrictions, such as early redemption
penalties. The net asset value is adjusted, as necessary, to reflect redemption restriction. The Scheme
categorises the investments in subsidiary into Level 2.
Commentary
For Level 2 instruments, paragraph 93 (d) of AASB 13 requires an entity to disclose the description of the
valuation technique(s) and the inputs used in the fair value measurement. If there has been a change in
valuation technique (e.g., changing from a market approach to an income approach or the use of an additional
valuation technique), the entity must disclose that change and the reason(s) for making it.
EY  66
Appendix A – Half-year financial report (continued)
Notes to the financial statements (continued)
AASB 134.5(e)
AASB 134.8(e)
For the half-year ended 31 December 2015
4
Fair value of financial instruments (continued)
Unlisted managed funds
The Scheme invests in managed funds, including private equity funds, which are not quoted in an active
market and which may be subject to restrictions on redemptions such as lock up periods, redemption gates
and side pockets. The Scheme’s investment manager considers the valuation techniques and inputs used in
valuing these funds as part of its due diligence prior to investing, to ensure they are reasonable and
appropriate and therefore the NAV of these funds may be used as an input into measuring their fair value. In
measuring this fair value, the NAV of the funds is adjusted, as necessary, to reflect restrictions on
redemptions, future commitments, and other specific factors of the fund and fund manager. In measuring fair
value, consideration is also paid to any transactions in the units of the fund. Depending on the nature and
level of adjustments needed to the NAV and the level of trading in the fund, the Scheme classifies these funds
as either Level 2 or Level 3.
AASB 13.93(d)
Unlisted asset-backed securities
The fair values of investments in asset-backed securities, for which there is currently no active market, are
calculated using a valuation model which is accepted in the industry. The model uses discounted cash flow
analysis which incorporates both observable and non-observable data. Observable inputs include assumptions
regarding current rates of interest and real estate prices. Unobservable inputs include assumptions regarding
expected future default rates and market liquidity discounts. The model is calibrated to the ABX index, where
relevant. However, significant adjustments may be required in order to reflect differences between the
characteristics of the index and the instrument to be valued. Such instruments are included within Level 3.
AASB 13.93(d)
Commentary
Refer to the Annual Financial Report for detailed commentary.
Valuation process for Level 3 valuations
AASB 13.93(g)
Valuations are the responsibility of the board of directors of the responsible entity.
The valuation of unlisted managed investment schemes and asset-backed securities is performed on a
quarterly basis by the valuation department of the investment manager and reviewed by the investment
committee of the investment manager.
The valuations are also subject to quality assurance procedures performed within the valuation department.
The valuation department verifies the major inputs applied in the latest valuation by agreeing the information
in the valuation computation to relevant documents and market information. In addition, the accuracy of the
computation is tested. The latest valuation is also compared with the valuations in the four preceding quarters
as well as with the valuations of the two preceding annual periods. If fair value changes (positive or negative)
are more than certain thresholds set, the changes are further considered by the investment committee.
On a quarterly basis, after the checks above have been performed the investment committee presents the
valuation results to the board of directors of the responsible entity. This includes a discussion of the major
assumptions used in the valuations, with an emphasis on the more significant investments and investments
with fair value changes outside of the relevant thresholds set out above.
The investment committee considers the appropriateness of the valuation methods and inputs, and may
request that alternative valuation methods are applied to support the valuation arising from the method
chosen. Any changes in valuation methods are discussed and agreed with the responsible entity’s board of
directors.
There were no other changes in valuation techniques during the year.
Commentary
For Level 3 instruments, AASB 13.93(g) requires an entity to provide description of the valuation processes.
For fair value measurements categorised within Level 3 of the fair value hierarchy, AASB 13.93(d) requires
an entity to disclose quantitative information about the significant unobservable inputs used in the
measurement and any changes in valuation techniques.
EY  67
Appendix A – Half-year financial report (continued)
Notes to the financial statements (continued)
AASB 134.5(e)
AASB 134.8(e)
For the half-year ended 31 December 2015
4
Fair value of financial instruments (continued)
AASB 13.93(d)
AASB 13.93(h)
Quantitative information of significant unobservable inputs – Level 3:
31 December 2015
Description
$’000
Asset-backed securities
388
Unlisted managed
investment schemes
362
Valuation
technique
DCF
method
EBITDA
multiple
Significant unobservable inputs
Discount rate
Range (weighted
average)
8% - 10% (9%)
Discount for lack of liquidity
Expected future default rates
Average EBITDA multiple of peers
8% - 12% (10.3%)
3% - 7% (4.1%)
9x
AASB 13.93(h)
Sensitivity analysis to significant changes in unobservable inputs within Level 3 hierarchy – Level 3:
Description
Asset-backed securities
Unlisted managed
investment schemes
Input
Discount for lack of liquidity
Expected future default rates
Sensitivity used*
5%
5%
Effect on fair value
$’000
50
1
1x
130
Average EBITDA multiple of peers
*The sensitivity analysis refers to a percentage amount added or deducted from the input and the effect this
has on the fair value.
30 June 2015
Description
$’000
Asset-backed securities
552
Valuation
technique
DCF
method
Significant unobservable inputs
Discount rate
Discount for lack of liquidity
Expected future default rates
Range (weighted
average)
8% - 10% (9%)
8% - 12% (10.3%)
3% - 7% (4.1%)
Sensitivity analysis to significant changes in unobservable inputs within Level 3 hierarchy – Level 3:
Description
Input
Asset-backed securities
Discount for lack of liquidity
Expected future default rates
Sensitivity used*
5%
5%
AASB 13.93(h)
Effect on fair value
$’000
50
1
*The sensitivity analysis refers to a percentage amount added or deducted from the input and the effect this
has on the fair value.
Asset-backed securities
Significant increases/(decreases) in the discount in isolation would result in a significantly (lower)/higher fair
value measurement. Significant increases/(decreases) in default rates in isolation would result in a
significantly (lower)/higher fair value measurement.
Unlisted managed investment schemes
Significant increases/(decreases) in the discount in isolation would result in a significantly (lower)/higher fair
value measurement.
EY  68
Appendix A – Half-year financial report (continued)
Notes to the financial statements (continued)
AASB 134.5(e)
AASB 134.8(e)
For the half-year ended 31 December 2015
4
Fair value of financial instruments (continued)
The following table shows a reconciliation of the movement in the fair value of financial instruments
categorised within Level 3 between the beginning and the end of the reporting period.
Financial assets
held for trading:
Unlisted managed
investment
schemes
31 December 2015
Opening balance – 1 July 2015
Total gains and losses
- profit or loss
- other comprehensive income
Purchases
Sales
Issues
Settlements
Transfers into or (out of) level 3
Closing balance – 31 December 2015
AASB 13.93(e)
Financial assets
designated at fair
value through
profit or loss:
Asset-backed
securities
Total
$’000
$’000
$’000
—
552
552
(54)
—
—
—
—
—
416
362
92
—
150
(406)
—
—
—
388
38
—
150
(406)
—
—
416
750
—
2,088
2,088
—
—
—
—
—
—
—
—
(92)
—
—
(1,444)
—
—
—
552
(92)
—
—
(1,444)
—
—
—
552
AASB 13.93(e)(iv))
30 June 2015
Opening balance – 1 July 2014
Total gains and losses
- profit or loss
- other comprehensive income
Purchases
Sales
Issues
Settlements
Transfers into or (out of) level 3
Closing balance – 30 June 2015
Commentary
For Level 3 fair value measurements, a reconciliation is required between the opening and closing balances,
including:
► Total gains or losses for the period split between those recognised in profit or loss and those recognised
in other comprehensive income, plus the amount of the gains or losses relating to instruments still held at
the period end. Disclosure of where they are presented in the statement of comprehensive income is also
required;
► Purchases, sales, issues and settlements (by each type of movement rather than net); and
► Transfers into and out of Level 3, with significant transfers into the category disclosed separately from
transfers out, along with the reasons for those transfers. Significant for this purpose is not defined and
management will need to use judgement to determine which transfers to disclose separately
Examples of situations which may result in transfers into or out of Level 3 may include:
► Level 1 to/from Level 3: investments delisting from or listing on a public exchange which is considered to
be an active market; and
► Level 2 to/from Level 3: inputs to valuation models ceasing to be/becoming observable
Most funds, including the Scheme, do not have available-for-sale investments or cash flow hedges. If a fund
does have such instruments, it would include a separate line item to disclose the total gain or losses
recognised in other comprehensive income.
EY  69
Appendix A – Half-year financial report (continued)
Notes to the financial statements (continued)
AASB 134.5(e)
AASB 134.8(e)
For the half-year ended 31 December 2015
4
Fair value of financial instruments (continued)
Gains or losses included in profit or loss are presented in change in fair value of financial assets and liabilities
at fair value through profit or loss as follows:
2015
$’000
2014
$’000
Total gains included in profit and loss for the period
38
(92)
Total gains included in profit or loss for the period for assets held
at the end of the reporting period
18
(23)
5
Distributions to unitholders
AASB 134.16A(f)
31 December 2015
Distributions
Distribution
30 September
Distribution
31 December
AASB 13.91(b)
AASB 13.93(e)(i)
AASB 13.93(f)
Number of
units
$ ‘000
‘000
820
82,667
1,855
77,984
2,675
31 December 2014
Distributions
cents per
unit
Distributions
Number of
units
Distributions
cents per
unit
$ ‘000
‘000
0.992
2,782
91,231
3.049
2.379
1,950
86,444
2.256
4,732
The portion of the final distribution for the half-year which was unpaid at the reporting date is disclosed in the
Statement of Financial Position.
Commentary
At a minimum, AASB 134.16A(f) requires disclosure of the amount of distributions paid during the interim
period. The expanded disclosure above, which is equivalent to the annual financial report disclosures relating
to distributions, is not required but may be useful to users of the financial statements and has been included
as a matter of best practice.
6
Commitments and Contingencies
AASB 134.15B(m)
Since the most recent annual financial report, the Scheme has entered into a commitment for an additional
investment of $200,000 in Unlisted Fund, an unlisted managed investment Scheme. This commitment may be
called at any time up to 31 May 2015. Should the Scheme fail to meet this commitment, the existing holding of
$361,553 would be forfeited.
Commentary
AASB 134.15 requires a Scheme to include an explanation of events and transactions that are significant to
an understanding of the changes in financial position and performance of the Scheme since the end of the
last annual reporting period. Information disclosed in relation to those events and transactions shall update
the relevant information presented in the most recent annual financial report. We recommend that you
thoroughly read the events and transactions listed on AASB 134.15B, which provides guidance on
disclosures that would be required if they are significant.
EY considers commitments and contingencies to be significant and it is good practice to disclose such
information to provide users insights into the commitments and contingencies of the Scheme.
EY  70
Appendix A – Half-year financial report (continued)
Notes to the financial statements (continued)
AASB 134.5(e)
AASB 134.8(e)
For the half-year ended 31 December 2015
7
Investment in subsidiary
AASB 12.19B
Endeavour Private Equity Fund
Investment in subsidiary at fair value
31 December 2015
$’000
30 June 2015
$’000
363
363
1,729
1,729
The Scheme meets the definition of an investment entity. Therefore, it does not consolidate its subsidiaries but
rather, it recognises Endeavour Private Equity Fund as investment at fair value through profit or loss.
Ownership interest (%)
Name of unconsolidated subsidiary
Endeavour Private Equity Fund
Principal Place of
Business
Australia
31 December 2015
50.1%
30 June 2015
50.1%
The above subsidiary does not control any further subsidiaries.
AASB 12.19C
Restrictions
The Scheme receives income in the form of dividends and interest from its investments in unconsolidated
subsidiaries, and there are no significant restrictions on the transfer of funds from these entities to the
Scheme.
AASB 12.19D
Support
During the current year, the Scheme provided support in the form of a loan of $100,000 (2014: $nil) to
Endeavour Private Equity Fund. This loan bears interest at a rate of 5% and is repayable in 2018. This loan was
granted to finance the acquisition of equipment for this entity to commence manufacturing.
AASB 12.19D-F
The Scheme has no contractual commitments or current intentions to provide any other financial or other
support to its unconsolidated subsidiaries.
8
Events after balance date
AASB 134.16A(h)
Since 31 December 2015 there have been no other matters or circumstances not otherwise dealt with in the
interim financial report that have significantly affected or may significantly affect the Scheme (2014: none).
EY  71
Appendix A – Half-year financial report (continued)
Ernst & Young
680 George Street
Sydney NSW 2000 Australia
GPO Box 2646 Sydney NSW 2001
Tel: +61 2 9248 5555
Fax: +61 2 9248 5959
ey.com/au
Independent auditor's report
To the unitholders of Endeavour Managed Investment Scheme
Report on the Half-year financial report
We have reviewed the accompanying half-year financial report of Endeavour Managed Investment Scheme
(the ‘Scheme’), which comprises the statement of financial position as at 31 December 2015, and the
statement of comprehensive income, statement of changes in net assets attributable to unitholders, and
statement of cash flows for the half-year ended on that date, notes comprising a summary of significant
accounting policies and other selected explanatory notes, and the directors’ declaration.
Directors' responsibility for the financial report
The directors of the Responsible Entity are responsible for the preparation of the half-year financial
report that gives a true and fair view in accordance with Australian Accounting Standards and the
Corporations Act 2001 and for such internal control as the directors of the Responsible Entity determine
is necessary to enable the preparation of the half-year financial report that is free from material
misstatement, whether due to fraud or error.
Auditor's responsibility
Our responsibility is to express a conclusion on the half-year financial report based on our review. We
conducted our review in accordance with Auditing Standard on Review Engagements ASRE 2410 Review of
Interim and other Financial Reports Performed by the Independent Auditor of the Entity, in order to state
whether, on the basis of the procedures described, we have become aware of any matter that makes us believe
that the financial report is not in accordance with the Corporations Act 2001 including giving a true and fair
view of Endeavour Managed Investment Scheme’s financial position as at 31 December 2015 and its
performance for the half-year ended on that date; and complying with Accounting Standard AASB 134 Interim
Financial Reporting and the Corporations Regulations 2001. As the auditor of Endeavour Managed
Investment Scheme, ASRE 2410 requires that we comply with the ethical requirements relevant to the audit of
the annual financial report.
A review of a half-year financial report consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other review procedures. A review is substantially
less in scope than an audit conducted in accordance with Australian Auditing Standards and consequently does
not enable us to obtain assurance that we would become aware of all significant matters that might be
identified in an audit. Accordingly, we do not express an audit opinion.
Independence
In conducting our review we have complied with the independence requirements of the Corporations Act
2001. We have given to the directors of the Responsible Entity a written Auditor's Independence
Declaration, a copy of which is included in the Directors' Report.
EY  72
Appendix A – Half-year financial report (continued)
Conclusion
Based on our review, which is not an audit, we have not become aware of any matter that makes us believe that
the half-year financial report of Endeavour Managed Investment Scheme is not in accordance with the
Corporations Act 2001, including:
i.
giving a true and fair view of Scheme’s financial position as at 31 December 2015 and of its
performance for the half-year ended on that date; and
ii.
complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations
Regulations 2001.
Ernst & Young
D.G. Brown
Partner
Sydney
8 February 2016
EY  73
Appendix B —
Disclosures for
listed schemes
Appendix B – Disclosures for listed schemes
A significant number of Australian managed investment schemes are listed on the Australian Stock
Exchange and are therefore required to comply with ASX listing rules. This includes reporting results to
the ASX within two months of the year end.
Both the Corporations Act 2001 and Australian Accounting Standards impose additional disclosure
requirements on listed managed investment schemes. This appendix provides you with example
disclosures that are applicable to listed managed investment schemes and are in addition to the disclosure
requirements presented in the main set of financial statements for Endeavour Managed Investment
Scheme.
Directors' report
ASX 4.10.3
CORPORATE GOVERNANCE
In recognising the need for the highest standards of corporate behaviour and accountability, the Directors of
Endeavour Responsible Entity Limited support and have adhered to the ASX Corporate Governance Council’s
principles and recommendations. The corporate governance statement will be attached to this Annual Report
when provided to unitholders.
ASX GN 9
BOARD COMMITTEES
As at the date of this report, the Responsible Entity had an Audit Committee and a Compliance Committee.
The members of the Audit Committee are A. Morgan, J. dela Peña and J. Chuang. The Responsible Entity
members of the Compliance Committee are J. Chuang and J. dela Peña. The independent members of the
Compliance Committee are A. Duggan, A. Mills and T. Stephens.
Commentary
The ASX listing rules require a statement disclosing the extent to which the scheme has followed the best
practice recommendations set by the ASX Corporate Governance Council during the year. If the scheme has
not followed all of the recommendations, it must identify those recommendations that have not been followed
and give reasons for not following them. If a recommendation was followed for only part of the year, the
scheme must state the period for which it was followed. The corporate governance statement may be given to
the ASX as a separate report but must be given to the ASX at the same time as the annual report and be
clearly identified as the corporate governance report.
We have not included a copy of the corporate governance statement in these illustrative financial statements.
For further guidance on the disclosure requirements in relation to corporate governance please refer to
Endeavour (International) Limited’s Financial Report. The sample disclosure included therein should not be
seen as exhaustive, and information on areas of corporate conduct and practice specific to the
Scheme/Responsible Entity should be included as appropriate.
The requirement to include a Remuneration Report is for listed public companies only and is not applicable for
listed investment schemes. Therefore it is not included here. Details of non-audit services provided by the
auditor are also only required by listed companies and they are therefore also not provided here.
In addition to the Directors’ Report, the Directors’ Declaration for a listed scheme must only be made after the
CEO/CFO have provided directors with a declaration that, in that person’s opinion, the financial records of the
scheme have been properly maintained in accordance with section 286 and the financial statements and
notes for the financial year comply with accounting standards and give a true and fair view.
We have not included an example of this declaration in these example financial statements. The directors
declaration should include the following additional line:
►
This declaration has been made after receiving the declarations required to be made to the Directors in
accordance with section 295A of the Corporations Act 2001 for the year ending 30 June 2015.
EY  74
Appendix B – Disclosures for listed schemes (continued)
Directors' report (continued)
OPERATING AND FINANCIAL REVIEW
CA 299(1)(a)
CA 299A(1)
ASX 4.10.17
Commentary
The Scheme has not illustrated the disclosures required in the operating and financial review of Endeavour
Managed Investment Scheme. The appropriate information to disclose in the operating and financial review
will depend upon the Scheme’s business operations and the sector in which it operates.
The requirements of the Corporations Act 2001 are:
For all entities
► A review of operations and the results of those operations.
For listed entities
Information that members of the listed entity would reasonably require to make an informed assessment of:
► The operations;
► Financial position;
► The business strategies; and
► Prospects for future financial years.
For listed entities, ASIC has issued RG 247 Effective disclosures in an operating and financial review (RG 247)
to assist directors of listed entities in preparing useful and meaningful operating and financial reviews. As it is
based on legislation and regulations currently in force, RG 247 is immediately applicable.
RG 247 provides the following guidance.
►
Review of operations and financial position:
► Provide analysis and discussion of the impact of transactions and events and explain significant
changes during the reporting period;
► Identify underlying drivers impacting performance and financial position of the entity;
► Include discussion of key operating segments and major components; and
► Provide discussion on value and exposures not recognised.
►
Business strategies and prospects:
► Discussion on strategies and significant plans;
► Information of prospects not limited to the next financial year; and
► Identify material business risks that potentially impact on future prospects and discuss how each risk
can be managed.
►
Unreasonable prejudice:
► It is insufficient to merely state that information has been withheld because disclosure may lead to
unreasonable prejudice.
EY  75
Appendix B – Disclosures for listed schemes (continued)
Supplementary Notes to the financial statements
21
Earnings per unit
AASB 133.70
Commentary
A Scheme applies AASB 133 Earnings per Share (AASB 133) if:
► The ordinary shares or potential ordinary shares of the Scheme are traded in a public market (a domestic
or foreign stock exchange or an over-the-counter market); or
► The Scheme files, or is in the process of filing, its financial statements with a securities commission or
other regulatory organisation for issuing ordinary shares in a public market.
Basic earnings per unit amounts are calculated by dividing total comprehensive income by the weighted
average number of units outstanding during the year.
AASB 133.10
Diluted earnings per unit are the same as basic earnings per unit.
AASB 133.31
The following reflects the income and unit data used in the basic and diluted earnings per unit computations.
AASB 133.70
Comprehensive income for the year ($’000)
Weighted average number of units for basic and diluted earnings per
unit (No.)
Basic earnings per unit ($ per unit)
Diluted earnings per unit ($ per unit)
2015
14,116
2014
(43,158)
83,606,848
98,282,886
0.169
0.169
(0.439)
(0.439)
There have been no other transactions involving unitholders since the reporting date and before the
completion of these financial statements.
Commentary
If the Scheme voluntarily discloses earnings per unit, the earnings per unit disclosures must be in accordance
with AASB 133.
For a managed investment scheme, basic and diluted earnings per unit are likely to be the same, and
reconciliations and information about potential units are unlikely to be required, limiting the disclosures to
that provided above.
A separate example Statement of Comprehensive Income for a listed scheme has not been presented here,
but it should include basic EPS and diluted EPS disclosures (generally at the base of the statement) if its units
on issue are classified as equity. Both basic and diluted EPS must be presented with equal prominence for all
periods reported, and must be presented even if negative.
22
Segment information
Commentary
AASB 8 ‘Operating Segments’ is only mandatory for a scheme whose debt or equity instruments are traded in
a public market or that files, or who is in the process of filing, its financial statements with a securities
commission or other regulatory organisation for the purpose of issuing any class of instruments in a public
market.
A scheme outside the scope of AASB 8 is allowed to disclose segment information without triggering the
need to comply fully with the standard, provided that such disclosure is not referred to as ‘segment
information’ (AASB 8.3).
For management purposes, the Scheme is organised into two operating segments based on their investment
strategies. Both the active trading portfolio and the strategic investment portfolio invest into equity
securities, debt instruments and related derivatives, however the active trading portfolio segment aims to
identify and profit from short term fluctuations in the values of assets and liabilities traded, while the
strategic investment portfolio aims to identify and invest in companies that will deliver superior returns over
the long term based on underlying fundamental growth, or by gaining exposure to those companies through
the use of derivatives.
AASB 8.22(a)
AASB 8.22(b)
Each segment is managed by a separate team of the investment manager.
EY  76
Appendix B – Disclosures for listed schemes (continued)
22
Segment information (continued)
The investment objective of each segment is to achieve consistent medium-term returns from the investments
in each segment while safeguarding capital by investing in diversified portfolios.
AASB 8.29
There have been no changes in reportable segments during the course of the year.
Management monitors the operating results of the segments separately for the purposes of making decisions
about resources to be allocated and of assessing performance. Segment performance is evaluated based on
net profit or loss before tax, which in certain respects, as explained in the table below, is measured differently
from net profit before tax in the financial statements. Interest revenue from cash and cash equivalents, net
foreign exchange gains on settlement, and all expenses of the Scheme other than brokerage fees and
transaction costs are managed at the overall Scheme level.
Commentary
For a managed investment scheme, the determination as to whether it has more than one operating segment
is made through the eyes of management and will largely depend on the information the Chief Operating
Decision Maker (CODM) reviews in order to make decisions about resources allocated to different segments
(if applicable) of the Scheme.
We would expect that generally, schemes would have multiple operating segments where the investments of
the scheme have been allocated to separate sub-portfolios or class of assets, each of which may have
different investment or fund managers and investment strategies, and the results of those sub-portfolios are
assessed separately by the CODM.
For example, some schemes may split their investments into separate portfolios, such as a split between
debt and equity, or equity sub-portfolios with an actively managed equity portfolio (held for trading) and an
indexed based equity portfolio, each potentially with its own manager. Where the results of these subportfolios are evaluated separately, and the performance of the manager(s) is assessed on this basis by the
CODM, the scheme would have multiple operating segments, even where the overall performance of the
scheme is only compared to a single benchmark in external communications to unitholders.
However, the existence of multiple asset classes (and potentially different managers for each), such as in a
balanced fund, does not necessarily result in more than one operating segment where the allocation to those
classes is based on an integrated investment strategy and the performance of that scheme is only evaluated
and assessed on an overall basis by the CODM.
Operating Segments
30 June 2015
Active trading
portfolio
$ ‘000
Investment
portfolio
Total
segments
AASB 8.28
Reconciliation
Total
$‘000
$‘000
$‘000
(1)
16,443
Revenue
9,396
6,876
16,272
171
Net profit before tax
9,184
6,803
15,987
(1,677)(2)
14,310
Revenue
(23,387)
(17,572)
(40,959)
68 (1)
(40,891)
Net profit before tax
(23,745)
(17,674)
(41,419)
(1,508)(2)
(42,927)
AASB 8.23(a)
30 June 2014
1. Segment revenues do not include interest from cash and cash equivalents of $79,844 (2014: $40,412),
or net foreign exchange gains of $101,299 (2014: $23,119). In addition, investments of the Scheme are
measured on a last sales price basis for segment reporting, and on a bid/ask price basis in the financial
statements, which reduces the revenue recognised by $9,711 (2014: increase of $5,054) and reduces
the value of total assets by $72,004 (2014: reduced by $62,319).
2. In addition to the items at (1) above, segment profit before tax does not include any expenses of the
Scheme other than brokerage fees and transaction costs. The amount of these costs is disclosed in the
Statement of Comprehensive Income.
EY  77
Appendix B – Disclosures for listed schemes (continued)
22
Segment information (continued)
The total assets of the segments at 30 June 2015 are shown in the table below. Changes in the value of
assets are inherent in the Scheme’s activities.
Operating Segments
Total assets – 2015
Total liabilities - 2015
Total assets – 2014
Total liabilities – 2014
Active trading
portfolio
Investment
portfolio
$ ‘000
$‘000
45,819
48,484
2,000
1,390
50,123
2,300
Total
segments
Reconciliation)
Total
$‘000
$‘000
94,303
1,076
95,379
3,390
1,000
4,390
41,524
91,647
2,358
94,005
2,000
4,300
1,000
5,300
AASB 8.28
AASB 8.24
1. Investments of the Scheme are measured on a last sales price basis for segment reporting, and on a
bid/ask price basis in the financial statements, which reduces the revenue recognised by $9,711 (2014:
increase of $5,054) and reduces the value of total assets by $72,004 (2014: reduced by $62,319). The
remaining difference arises as only financial assets at fair value through profit or loss are considered
segment assets.
The table below analyses the Scheme’s operating income per geographical location. The basis for attributing
the operating income is the counterparty’s place of incorporation.
Australia
Taiwan
Japan
European Union
Rest of the world
Total
2015
$’000
11,142
2,688
1,254
1,303
56
16,443
2014
$’000
(23,386)
(8,612)
(3,880)
(4,917)
(96)
(40,891)
AASB 8.33(a)
AASB 8.33(a)(i)
AASB 8.33(a)(ii)
Commentary
AASB 8.33(a)(i) requires the disclosure of revenues from external customers attributed to the entity's
country of domicile. This is also applicable when the revenues from the country of domicile are relatively
small, as may be the case for many schemes whose country of domicile is tax-driven.
AASB 8.33(b) requires a similar disclosure to AASB 8.33(a) regarding the location of certain non-current
assets. The Scheme has no non-current assets and therefore a disclosure under AASB 8.33(b) is not
provided.
AASB 8.32
The table below analyses the Scheme’s operating income per investment type
Equity securities
Debt instruments
Derivative financial instruments
Foreign exchange gains on financial instruments not at fair value
through profit or loss
2015
$’000
2014
$’000
11,965
2,021
2,356
101
(37,782)
720
(3,852)
23
16,443
(40,891)
Operating income from one counterparty (including its group entities) amounted to $815,000 (2014:
expense $1,750,000), and arose from derivative financial instruments.
AASB 8.34
EY  78
Appendix B – Disclosures for listed schemes (continued)
ASX additional information
Commentary
The ASX additional information is required for listed entities only and must be current as at a date no more
than 6 weeks before the report is sent to unitholders. These requirements apply to annual reporting periods
only.
Listed below are examples of standard requirements. The disclosures below are not exhaustive and users
should review their ASX Listing Rules for further information. There is no requirement to disclose
comparative information for ASX additional information. We have not included comparative information in
the illustrative disclosures below.
Note that these disclosures are for information to be sent to the ASX with the financial report and do not
form part of the financial report.
Additional information required by the Australian Stock Exchange Ltd and not shown elsewhere in this report
is as follows. The information is current as at 5 March 2015.
ASX 4.10
ASX 4.10.7
(a) Distribution of units
There were 78,130,524 ordinary units on issue held by 3,580 unitholders.
ASB 4.10.5
The number of unitholders, by size of holding are:
1
–
1,000
1,001
–
5,000
5,001
–
10,000
10,001
–
100,000
100,001 and over
Number of
holders
Number of
units
1,294
744
887
612
43
970,057
1,972,520
5,728,647
20,697,791
48,761,509
3,580
78,130,524
ASX 4.10.9
(b) 20 largest unitholders
The names of the 20 largest holders of quoted units are:
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
C.K. Inc
B.N.K Banking Corporation
B.D.R. Holdings Pty Ltd
Endeavour Balanced Fund
Endeavour Growth Fund
Endeavour High Yield Fund
Castle Holdings Pty Ltd
Firefly Nominees Ltd
K.L. No. 48 Nominees Pty Ltd
Capital Equity Investments Ltd
G. Shore
Trust Company Super Fund
C.H. Manningham
A.P.T. Nominees
Morecambe Finance Ltd
Asset Management Trust No. 3
A.R. Morgan
M. Kinsley & Co
T.H. Ardie
D. Fawcett
Number of
units
Percentage of
units
7,969,314
5,156,615
3,437,743
3,365,000
3,260,000
2,982,925
2,656,438
2,500,177
2,500,177
2,187,655
1,640,741
1,406,349
1,328,219
1,250,088
1,171,958
937,566
859,436
625,044
390,653
234,392
10.2
6.6
4.4
4.3
4.2
3.8
3.4
3.2
3.2
2.8
2.1
1.8
1.7
1.6
1.5
1.2
1.1
0.8
0.5
0.3
45,860,490
58.7
EY  79
Appendix B – Disclosures for listed schemes (continued)
ASX additional information (continued)
ASX 4.10.4
(c) Substantial unitholders
The names of substantial unitholders who have notified the Scheme in accordance with section 671B of the
Corporations Act 2001 are:
Number of units
7,969,314
5,156,615
C.K. Inc
B.N.K Banking Corporation
ASX 4.10.6
(d) Voting rights
All units carry one vote per unit without restriction.
ASX 4.10.18
(e) Buy-back
There is no current on-market buy-back of units in the Scheme.
(f) Investments Held
Security Code
ASX 4.10.20
Security Name
XPL
Example Security Ltd
…
…
Number Held
Fair Value $’000
51,240
78
…
…
90,247
Management fees have been reported in the related parties note to the financial statements.
Commentary
This example report has not included a full list of all investments held, only an example for disclosure
purposes.
If not disclosed elsewhere, the ASX additional information must disclose total management fees paid or
accrued during the reporting period, along with a summary of any management agreement (ASX 4.10.20(c)).
(g) Transactions in Securities
ASX 4.10.20
There were a total of 3,024 transactions in securities during the year ended 30 June 2015. Total brokerage
paid by the Scheme on those transactions was $227,355 (excluding GST).
EY  80
Appendix B – Disclosures for listed schemes (continued)
ASX additional information (continued)
(h) Directory
Directors
M. P. Byrne, Chairman
R. Scanlon
A. Morgan
J. dela Peña
G. Haggar
J. Chuang
Company Secretary
G.K. Dellas
Registered office
30 Hedge Street
Sydney NSW 2000
Australia
Principal place of business
30 Hedge Street
Sydney NSW 2000
Australia
Phone: 61 2 9876 5432
Share Register
Administration Registry Services
23rd Floor
560 Smith Street, Sydney
Australia
Phone: 61 2 9876 5431
ASX 4.10.10
ASX 4.10.11
AASB 101.126(a)
AASB 101.126(a)
ASX 4.10.12
Solicitors
Solicitors & Co
7 Scott Street
Australia
Bankers
Bank Limited
George Street
Australia
Auditors
Ernst & Young
Australia
Commentary
The following disclosures are also required if applicable to each listed scheme (and not disclosed elsewhere in
the annual report). They have not been included here as they do not apply to this Scheme:
►
►
►
►
The number of unitholders holding less than a marketable parcel of units (ASX 4.10.8);
Schemes listed overseas must state the names of the relevant stock exchanges (ASX 4.10.13);
Disclosure is also required of the number and class of restricted units or securities subject to voluntary
escrow on issue and the date they cease to be restricted (ASX 4.10.14);
For each class of unquoted units, disclose the number of units on issue, and the number of holders. In
addition, if one person holds more than 20% of the class, disclose the name of the holder and units held,
unless the units were issued under an employee incentive a scheme (ASX 4.10.16).
EY  81
Appendix C —
Consolidated
disclosures
Appendix C – Consolidated disclosures
AASB 2013-5 Amendments to Australian Accounting Standards – Investment Entities (“AASB 2013-5”)
details an exception to the consolidation requirement of AASB 10 Consolidated Financial Statements
(“AASB 10”) for entities that meet the definition of an investment entity. Entities that qualify as
investment entities must not consolidate their subsidiaries. Subsidiaries of the managed investment
schemes, where they exist, are accounted for as investments at fair value through profit or loss.
Following the issuance of AASB 2013-5, we expect that the consolidation exception would apply to
most managed investment schemes and the focus will be on stand-alone financial statements. As a
result, an illustrative consolidated financial report has not been presented.
If you require assistance with the preparation of a consolidated financial report, please contact your EY
representative.
EY  82
Appendix D — RDR
adoption and transition
Appendix D — Reduced Disclosure Requirements (‘RDR’)
adoption and transition
The determination whether or not an entity is a reporting entity depends on the particular facts and
circumstances of each case. Those charged with governance of an entity have the responsibility for
determining whether or not an entity is a reporting entity. Entities that are reporting entities are
required to prepare General Purpose Financial Statements (GPFS), which must comply with all
applicable Australian Accounting Standards (AAS). SAC 1 Definition of the Reporting Entity describes
reporting entities as entities in respect of which it is reasonable to expect the existence if users
dependent on general purpose financial information.
Over the years, the Australian Accounting Standards Board (AASB) has received feedback indicating
that the subjective nature of the reporting entity concept has resulted in application difficulties such
that some entities may be inappropriately classified as non-reporting entities. The concern is that some
entities preparing Special Purpose Financial Statements (SPFS) should actually be preparing GPFS.
These concerns are sometimes reinforced by ASIC in its financial statements review findings.
In relation to this issue, the AASB aims ultimately to have AAS only apply to GPFS. Indeed the AASB
has tentatively decided to amend AAS application paragraphs such, the Standards no longer apply to
non-reporting entities.
If this tentative decision is implemented after planned consultations and research, it will mean that
SPFS will no longer be required to comply with AAS and it would be up to the users of SPFSs and
regulators of entities preparing SPFSs to identify the relevant reporting requirements1.
This is an area of increasing regulator scrutiny and presents a heightened regulatory risk. We expect
that ASIC may include some large non-reporting entities in its surveillance program.
Management should reassess the reporting entity status of the entities at each reporting period and
explore the opportunities to prepare GPFS under Tier 2 of AASB 1053 Application of Tiers of Australian
Accounting Standards.
1
AASB 28-29 May 2014 , Agenda paper 9.2 (M138)
EY  83
Appendix D — RDR adoption and transition (continued)
Decision tree 1: Eligibility for application of the Reduced Disclosure Requirements and interaction with
the reporting entity concept.
Under stage one of the reduced disclosure regime, non-reporting entities that prepare special purpose
financial statements (‘SPFS’) may continue to do so, although adoption of the regime is permitted upon
transition to general purpose financial statements (‘GPFS’). Issues arising from such a transition,
including the application of AASB 1 First time adoption of Australian Accounting Standards, are
considered in decision tree 2 overleaf.
Decision tree 1 indicates the application of the two tiers to various classes of entities within different
sectors:
Currently a
reporting
entity?
No
Non-reporting entities may elect to comply with
either tier upon transition to general purpose
financial statements. Refer to decision tree 2.
Yes
Yes
Public
sector
entity?
No
For profit
entity in the
private
sector?
No
Not-for-profit entity
in the private sector
Yes
Publicly
accountable
(as defined
in appendix
A of AASB
1053?)
No
No
Federal, state,
territory or
local
government
entity?
May elect to apply either tier
Yes
Yes
Apply tier 1: full Australian
Accounting Standards
EY  84
Appendix D — RDR adoption and transition (continued)
Decision tree 2: Transition from special purpose to general purpose financial statements
As noted above, non-reporting entities may continue to prepare special purpose financial statements. In
addition, there are no transition issues for those entities currently preparing GPFSs which comply with
full IFRS as adopted in Australia, that are required to apply tier 1 of the new regime, since the same
reporting requirements will continue to apply.
Decision tree 2 considers the requirements for non-reporting entities wishing to adopt the reduced
disclosure regime, having already established which tier would be applicable as described in AASB
1053.
Non-reporting entity transitioning to general
purpose financial statements for the first time
No
Applied all
recognition and
measurement
principles of
AASB standards
in most recent
SPFSs?
Yes
Tier 2
Moving to
tier 1 or
tier 2?
Required to apply
AASB 1 – Reduced
Disclosure
Requirements
Tier 2
Moving to tier
1 or tier 2?
Tier 1
Not required to
apply AASB 1
decision tree 2.
Tier 1
Required to apply AASB 1
Required to apply AASB 1
EY  85
Appendix D — RDR adoption and transition (continued)
Decision tree 3: Transitioning between tiers
AASB 1053 contains provisions for those entities transitioning between tiers and whether the
application of AASB 1 is required. Decision tree 3 shows that the entities transitioning from tier 1 to tier
2 will not be required to apply AASB 1 on transition. In such cases the transition will simply involve
removing those disclosures not required under the RDR but which were previously provided under full
IFRS as adopted in Australia. This requirement also applies to those entities preparing GPFSs under the
existing regime which transition to tier 2 upon adoption of the new arrangements. However, for-profit
private sector entities transitioning in the opposite direction (i.e., from tier 2 to tier 1) will be required
to apply AASB 1.
This will ensure that after transition these entities will be able to claim IFRS compliance. Not-for-profit
entities undertaking the same transition will have the option, but will not be required to apply AASB 1,
and would only do so if they wished to claim full compliance with IFRS.
Transitioning
from tier 2 to
tier 1?
No
Transitioning
from tier 1 to
tier 2
Not required to apply AASB 1
Yes
For profit,
private
sector
entity?
Yes
Required to apply AASB 1
No
Does the
entity wish
to claim full
IFRS
compliance?
No
Not required to apply AASB 1
Yes
Required to apply AASB 1
EY  86
Appendix E —
Australian reporting
requirements
Appendix E — Australian reporting requirements
The table below provides a summary of reporting requirements for different types of entities.
Financial reporting
Type of entity
Listed Company
Listed registered
scheme
General
purpose
report
Special
purpose
report


Disclosing entity*
Unlisted registered
scheme


If a
reporting
entity

If a nonreporting
entity
Not
required
Complying with reporting requirements
Chapter 2M
of
ASX
Corporations
listing
Other
Act 2001
rules
s292(1)



Investment and
Financial
Services


Association
(‘IFSA’)
standards may
be applicable


IFSA standards

may be
applicable
* For unlisted disclosing entities, be aware of continuous reporting requirements under the Corporations Act 2001. Please note
that Part 2M.3 only applies to disclosing entities incorporated or formed in Australia (footnote to CA 292(1)).
EY  87
Appendix E — Australian reporting requirements (continued)
Entity type/
reference
Listed company
Notice of AGM *#
CA 249H, 249HA
Date of AGM
CA 250N
At least 28 days before
the AGM
Within 5 months after
the end of the financial
year
30 Jun 15: 2 Nov 15
31 Dec 15: 3 May 16
30 Jun 15: 30 Nov 15
31 Dec 15: 31 May 16
Issue annual report
to Members
CA 315
Earlier of 21 days
before the AGM, or 4
months after the end
of the financial year
If AGM is held
30 Nov 15
30 Jun 15: 30 Oct 15
If AGM is held
31 May 16
31 Dec 15: 29 Apr 16
Lodge reports with
ASX
ASX 4.2A, 4.2B,
4.2C, 4.3A, 4.3B,
4.3C, 4.5
Lodge Annual report
when it is lodged with
ASIC. In any event
within 3 months after
the end of the financial
year
30 Jun 15: 30 Sep 15
31 Dec 15: 31 Mar 16
Lodge Appendix 4E
immediately when it
becomes available and
no later than when the
annual report is lodged
with ASIC.
In any event within 2
months after the end of
the financial year
30 Jun 15: 31 Aug 15
31 Dec 15: 29 Feb 16
Lodge reports with
ASIC
CA 319, 320
ASX is agent for ASIC,
therefore lodgement
with ASX represents
lodgement with ASIC
Annual report within 3
months after the end
of the financial year
30 Jun 15: 30 Sep 15
31 Dec 15: 31 Mar 16
Half-year report within
75 days after the end
of the half-year
30 Jun 15: 11 Sep 15
31 Dec 15: 16 Mar 16
Lodge Half-year report
and Appendix 4D
immediately when they
become available and no
later than when the halfyear report is lodged
with ASIC. In any event
within 2 months after
the end of the half-year
30 Jun 15: 31 Aug 15
31 Dec 15: 29 Feb 16
Within 3 months after
the end of the
financial year
30 Jun 15: 30 Sep 15
31 Dec 15: 31 Mar 16
Listed registered
scheme
Unlisted public
company
Unlisted
registered
scheme
At least 21 days before
the AGM
30 Jun 15: 9 Nov 15
31 Dec 15: 10 May 16
Within 5 months after
the end of the financial
year
30 Jun 15: 30 Nov 15
31 Dec 15: 31 May 16
Same requirements as
listed company
Earlier of 21 days
before the AGM, or 4
months after the end
of the financial year
If AGM is held
30 Nov 15
30 Jun 15: 30 Oct 15
Same requirements as
listed company
Annual report within 3
months after the end
of the financial year
30 Jun 15: 30 Sep 15
31 Dec 15: 31 Mar 16
If AGM is held
31 May 16
31 Dec 15: 29 Apr 16
Half-year report within
75 days after the end
of the half-year
30 Jun 15: 11 Sep 15
31 Dec 15: 16 Mar 16
Within 3 months after
the end of the financial
year
30 Jun 15: 30 Sep 15
31 Dec 15: 31 Mar 16
Annual report within
3 months after the end
of the financial year
30 Jun 15: 30 Sep 15
31 Dec 15: 31 Mar 16
Half-year report within
75 days after the end
of the half-year
30 Jun 15: 11 Sep 15
31 Dec 15: 16 Mar 16
* If a company has a constitution, it may specify a longer minimum period of notice. An unlisted company may also call an AGM
upon shorter notice, provided all members entitled to attend agree in advance, and no resolution will be moved to remove a
director under CA 203D, appoint a director as a replacement of another under that same section, or remove an auditor under CA
329. For a listed company 28 days notice is required for all members’ meetings unless a longer period is specified in the
Company’s constitution.
# A public company that has only one member is not required to hold an AGM (CA 250N(4)).
Please note that we have adjusted the dates if it falls on a weekend or holiday for your convenience.
EY  88
Key Contacts
Melbourne
Brett Kallio
Tel: +61 3 9288 8597
[email protected]
Luke Slater
Partner
Tel: +61 3 9288 8444
[email protected]
Maree Pallisco
Partner
Tel: +61 3 9655 2508
[email protected]
Sydney
Graeme McKenzie
Tel: +61 2 9248 4689
[email protected]
Darren Handley-Greaves
Partner
Tel: +61 2 9248 5118
[email protected]
Rita Da Silva
Partner
Tel: +61 2 8295 6142
[email protected]
Jon Pye
Partner
Tel: +61 2 8295 6972
[email protected]
Rohit Khanna
Partner
Tel: +61 2 9248 5560
[email protected]
Brisbane
Paula McLuskie
Partner
Tel: +61 7 3011 3363
[email protected]
EY | Assurance | Tax | Transactions | Advisory
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