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Teaminvest Private Group LimitedMCP INCOME
OPPORTUNITIES
TRUST
ANNUAl REPORT
For the period 7 February 2019 to 30 June 2019
ARSN 631 320 628
B
MCP Income Opportunities Trust
Annual Report
CONTENTS
MCP Income Opportunities Trust Appendix 4E
Investment manager’s report
Directors’ report
Corporate governance statement
Auditor’s independence declaration
Statement of comprehensive income
Statement of financial position
Statement of changes in equity
Statement of cash flows
Notes to the financial statements
Directors’ declaration
Audit report
ASX Additional Information
1
3
4
7
10
11
12
13
14
15
32
33
37
MCP Income Opportunities Trust
Annual Report
1
MCP INCOME OPPORTUNITIES TRUST APPENDIX 4E
FOR THE PERIOD 7 FEBRUARY 2019 TO 30 JUNE 2019
DETAIlS OF REPORTING PERIOD
Current:
Period 7 February 2019 to 30 June 2019
Previous corresponding*:
N/A
* This is the first period of operations of the Fund and hence there are no prior period comparatives.
The Directors of The Trust Company (RE Services) Limited, the Responsible Entity of the MCP Income Opportunities Trust
(the “Fund”) announce the audited results of the Fund for the period 7 February 2019 to 30 June 2019 as follows:
RESUlTS FOR ANNOUNCEMENT TO THE MARKET
Extracted from Financial Statements for the period 7 February 2019 to 30 June 2019.
Revenue from ordinary activities
Profit/(loss) from the period
Total comprehensive income/(loss) for the period
DETAIlS OF DISTRIBUTIONS
$’000
4,074
3,286
3,286
The distributions for the period 7 February 2019 to 30 June 2019 is $3,048,648 (2.03 cents per ordinary unit) and was paid
on 05 July 2019.
DETAIlS OF DISTRIBUTION REINVESTMENT PlAN
The Responsible Entity has established a Distribution Reinvestment Plan (“DRP”) on 13 May 2019 in relation to all
future distributions.
The Responsible Entity expects to make distributions on a quarterly basis. For such distributions, it is expected the record
date will be the first ASX trading day of each month and the last day for electing into the DRP will be 5.00pm (Sydney time)
on the first business day after the record date.
Units under the DRP are currently issued at the net asset value of a unit as determined in accordance with the Fund’s
constitution on the record date.
NET TANGIBlE ASSETS
Total Net Tangible Assets attributable to unitholders ($’000)
Units on issue (’000)
Net Tangible Assets attributable to unit holders per unit ($)
AS AT 30 JUNE 2019
300,237
150,000
2.00
2
MCP Income Opportunities Trust
Annual Report
CONTROl GAINED OR l OST OVER ENTITIES DURING THE PERIOD
NAME OF ENTITIES
MCP Wholesale Income Opportunities Trust
MCP Credit Trust
DATE OF GAIN
CONTRIBUTION TO
OF CONTROL
PROFIT ($’000)
23 April 2019
23 April 2019
1,791
1,794
DETAIlS OF ASSOCIATES AND JOINT VENTURE ENTITIES
The Fund did not have any interest in associates and joint venture entities during the current period.
INDEPENDENT AUDIT REPORT
Additional disclosure requirements can be found in the notes to the MCP Income Opportunities Trust financial statements
for the period 7 February 2019 to 30 June 2019.
This report is based on the financial report which has been audited by the Fund’s auditor. All the documents comprise
the information required by Listing Rule 4.3A.
MCP Income Opportunities Trust
Annual Report
3
INVESTMENT MANAGER’S REPORT
It is pleasing that the Fund was able to make its first
distribution for the period from listing to 30 June 2019
(paid 8 July 2019) which included the ramp up of the Fund
as proceeds from the IPO were invested. The Fund has been
deployed across more than 50 individual assets including
Australian mid‑market corporates, commercial real estate,
and structured finance transactions at different levels of the
capital structure. Risks have been appropriately managed
and underlying asset quality is sound.
In a market environment where investors are looking for
investments generating an attractive income and can deliver
lower market volatility, the Fund has sought to provide this
investment choice, particularly for investors seeking to lower
their exposure to public market equity investments.
The financial period ended 30 June 2019 represents the
first financial period report since the initial ASX listing
of the Fund on 29 April 2019. During the period, the Fund
successfully raised investor capital of $300 million (refer
to Note 7) demonstrating the strong demand for a quality
investment product that seeks to deliver quarterly cash
income, preserve investor capital and manage investment
risks while seeking to provide potential for upside gains
through investments in private credit and other assets such
as warrants, options, preference shares and equity.
Metrics seeks to deliver this outcome for investors by
investing in wholesale funds managed by Metrics. The
rationale for listing the Fund on the ASX was to provide
investors with liquidity by being able to trade units on
market while also accessing the attractive risk‑adjusted
returns from this otherwise less liquid asset class.
The Investment Manager continues to seek opportunities to
diversify the portfolio, build scale, lower costs and manage
the investment risks associated with the operations of the
Fund. The Investment Manager believes that access to a
diversified portfolio of private credit assets with exposure
to equity upside gains provides enhanced risk adjusted
returns for investors and is a highly unique investment
option for investors.
4
MCP Income Opportunities Trust
Annual Report
DIRECTORS’ REPORT
The Trust Company (RE Services) Limited
(ABN 45 003 278 831) is the responsible entity (the
“Responsible Entity”) of MCP Income Opportunities Trust
(the “Fund”). The directors of the Responsible Entity (the
“Directors”) present their report together with the financial
statements of the Fund for the period ended 30 June 2019.
DIRECTORS
The Directors of The Trust Company (RE Services) Limited
during the period and up to the date of this report are shown
below. The Directors were in office for this entire period
except where stated otherwise:
PRINCIPAl ACTIVITIES
The Fund is a registered managed investment scheme
domiciled in Australia.
The Fund’s investment strategy is to create a diversified
exposure to private credit investments and other assets such
as warrants, options, preference shares and equity. Through
active portfolio risk management, the Investment Manager
seeks to provide quarterly cash income and preserve
investor capital. Amounts raised by the Fund are invested in
the MCP Wholesale Income Opportunities Trust. The MCP
Wholesale Income Opportunities Trust invests directly in
wholesale funds or directly in investment assets.
Through active portfolio risk management, the Investment
Manager (Metrics Credit Partners Pty Ltd) will seek to
balance the delivery of unitholder returns and preserving
investor capital.
The Fund was constituted on 25 February 2019, commenced
operations on 23 April 2019 and its units commenced trading
on the Australian Securities Exchange (ASX: MOT) on
29 April 2019.
The Fund did not have any employees during the period.
There were no significant changes in the nature of the Fund’s
activities during the period.
NAME
DATE OF APPOINTMENT/RESIGNATION
Glenn Foster
Christopher
Green
Michael
Vainauskas
Resigned as Director on
17 October 2018
Richard McCarthy
Appointed as a Director on
17 October 2018
Andrew McIver
Alternate Director for Michael
Vainauskas
Vicki Riggio
Gillian Larkins
Phillip Blackmore
Resigned as Alternate Director for
Glenn Foster on 12 October 2018
Appointed as Alternate Director for
Christopher Green and Vicki Riggio
on 6 July 2018 Resigned as Alternate
Director for Christopher Green on
17 October 2018
UNITS ON ISSUE
Units on issue in the Fund at the end of the period are
set out below:
AS AT
30 JUNE 2019
UNITS (’000)
Units on issue (Initial public offering)
150,000
REVIEW AND RESUlTS OF OPERATIONS
During the period, the Fund invested in accordance with
the investment objective and guidelines as set out in the
governing documents of the Fund and in accordance with
the provision of the Fund’s Constitution.
MCP Income Opportunities Trust
Annual Report
5
Results
The performance of the Fund, as represented by the results
of its operations, was as follows:
Profit/(loss) for the period ($’000)
Distributions paid and payable ($’000)
Distributions (cents per unit)
FOR THE PERIOD
7 FEBRUARY 2019
TO 30 JUNE
2019
3,286
3,049
2.03
SIGNIFICANT CHANGES IN STATE OF AFFAIRS
In the opinion of the Directors, there were no significant
changes in the state of affairs of the Fund that occurred
during the period.
MATTERS SUBSEQUENT TO THE END OF THE
FINANCIAl PERIOD
No matter or circumstance has arisen since 30 June 2019
that has significantly affected, or may significantly affect:
(i)
the operations of the Fund in future financial years, or
INDEMNIFICATION AND INSURANCE OF OFFICERS
AND AUDITORS
No insurance premiums are paid for out of the assets of
the Fund in regard to the insurance cover provided to either
the officers of the Responsible Entity or the auditors of
the Fund. So long as the officers of the Responsible Entity
act in accordance with the Fund’s Constitution and the
Corporations Act 2001, the officers remain indemnified out
of the assets of the Fund against losses incurred while acting
on behalf of the Fund.
The auditor of the Fund is in no way indemnified out of the
assets of the Fund.
FEES PAID TO AND INTERESTS HElD IN THE FUND
BY THE RESPONSIBlE ENTITY OR ITS ASSOCIATES
Fees paid to the Responsible Entity and its associates out
of the Fund’s property during the period are disclosed in
Note 12 of the financial statements.
No fees were paid out of the Fund’s property to the Directors
of the Responsible Entity during the period.
The number of interests in the Fund held by the Responsible
Entity or its associates as at the end of the financial period
are disclosed in Note 12 of the financial statements.
(ii) the results of those operations in future financial years, or
UNITS IN THE FUND
(iii) the state of affairs of the Fund in future financial years.
lIKElY DEVElOPMENTS AND EXPECTED RESUlTS
OF OPERATIONS
The Fund will continue to be managed in accordance with
the investment objectives and guidelines as set out in the
governing documents of the Fund and in accordance with
the provisions of the Fund’s Constitution.
The results of the Fund’s operations will be affected by a
number of factors, including the performance of investment
markets in which the Fund invests. Investment performance
is not guaranteed and future returns may differ from past
returns. As investment conditions change over time, past
returns should not be used to predict future returns.
The movement in units on issue in the Fund during the
period is disclosed in Note 7 of the financial statements.
The value of the Fund’s assets and liabilities is disclosed
in the statement of financial position and derived using
the basis set out in Note 2 of the financial statements.
ENVIRONMENTAl REGUlATION
The operations of the Fund are not subject to any particular
or significant environmental regulations under Commonwealth,
State or Territory law.
MCP Income Opportunities Trust
Annual Report
7
CORPORATE GOVERNANCE STATEMENT
FOR THE YEAR ENDED 30 JUNE 2019
BACKGROUND
The Trust Company (RE Services) Limited (“Responsible Entity”)
is the responsible entity for the MCP Income Opportunities
Trust (“Fund”), a registered managed investment scheme
that is listed on the Australian Securities Exchange (“ASX”).
The Responsible Entity is a wholly‑owned subsidiary of
Perpetual Limited (ASX: PPT) (“Perpetual”).
The Responsible Entity is reliant on Perpetual for access to
adequate resources including directors, management, staff,
functional support (such as company secretarial, responsible
managers, legal, compliance and risk, finance) and financial
resources. During the year and up to the date of this report,
Perpetual has at all times made such resources available to
the Responsible Entity.
In operating the Fund the Responsible Entity’s overarching
principle is to always act in good faith and in the best
interests of the Fund’s unitholders, in accordance with
our fiduciary duty. The Responsible Entity’s duties and
obligations in relation to the Fund principally arise from: the
Constitution of the Fund; the Compliance Plan for the Fund;
the Corporations Act 2001 (“Act”); the ASX Listing Rules;
the Responsible Entity’s Australian Financial Services
License; relevant regulatory guidance; relevant contractual
arrangements; and other applicable laws and regulations.
CORPORATE GOVERNANCE
At Perpetual, good corporate governance includes a genuine
commitment to the ASX Corporate Governance Council
Principles and Recommendations (ASX Principles).
The Directors of the Responsible Entity are committed
to implementing high standards of corporate governance
in operating the Fund and, to the extent applicable to
registered schemes, are guided by the values and principles
set out in Perpetual’s Corporate Responsibility Statement
and the ASX Corporate Governance Council’s Corporate
Governance Principles and Recommendations (“Principles”).
The Responsible Entity is pleased to advise that, to the
extent the Principles are applicable to registered schemes;
its practices are largely consistent with the Principles.
As a leading independent responsible entity, the Responsible
Entity operates a number of registered managed investment
schemes (“Schemes”). The Schemes include the Fund as well
as other schemes that are listed on the ASX. The
Responsible Entity’s approach in relation to corporate
governance in operating the Fund is consistent with
its approach in relation to the Schemes generally.
The Responsible Entity addresses each of the Principles
that are applicable to externally managed listed entities
in relation to the Schemes, including the Fund, for the year
ended 30 June 2019. This corporate governance statement
is current as at the date of the Fund’s financial report and
has been approved by the Responsible Entity board.
PRINCIPlE 1 – l AY SOlID FOUNDATIONS
FOR MANAGEMENT AND OVERSIGHT
The role of the Responsible Entity’s Board (“RE Board”)
is generally to set objectives and goals for the operation
of the Responsible Entity and the Schemes, to oversee
the Responsible Entity’s management, to regularly review
performance and to monitor the Responsible Entity’s affairs
acting in the best interests of the unitholders of each of the
Schemes. The RE Board is accountable to the unitholders of
each of the Schemes, and is responsible for approving the
Responsible Entity’s overall objectives and overseeing their
implementation in discharging their duties and obligations
and operating the Schemes.
The role of the Responsible Entity’s management is to
manage the business of the Responsible Entity in operating
the Schemes. The RE Board delegates to management
all matters not reserved to the RE Board, including the
day‑to‑day management of the Responsible Entity and
the operation of the Schemes. Directors, management and
staff are guided by Perpetual’s Code of Conduct which is
designed to assist them in making ethical business decisions.
PRINCIPlE 2 – STRUCTURE THE BOARD
TO ADD VAlUE
At present the RE Board consists of 4 executive directors and
2 alternate directors. The names of the current Directors and
year of appointment is provided below:
Glenn Foster
Michael Vainauskas
Andrew McIver (Alternate)
Vicki Riggio
Richard McCarthy
Phillip Blackmore (Alternate)
2015
2015
2017
2018
2018
2018
8
MCP Income Opportunities Trust
Annual Report
As the RE Board consists of only executive directors, a
Compliance Committee is appointed in relation to each of the
Schemes (refer to Principle 7). The Committee has a majority
of independent members and is chaired by an independent
member who is not the chair of the RE Board
the overarching Responsible Entity’s Risk and Compliance
Framework which includes the service provider oversight
framework assist its staff in making the declarations provided
under section 295A of the Act.
PRINCIPlE 3 – PROMOTE ETHICAl AND
RESPONSIBlE DECISION‑MAKING
The Responsible Entity has a Code of Conduct and
espoused Core Values and a further values framework
known as “The Way We Work” within which it carries on its
business and deals with its stakeholders. These apply to all
directors and employees of Perpetual, and the Responsible
Entity. The Code of Conduct and Core Values, and
supporting Risk framework supports all aspects of the
way the Responsible Entity conducts its business and is
embedded into Perpetual’s performance management
process. The Code of Conduct is available on Perpetual’s
website (www.perpetual.com.au).
PRINCIPlE 4 – SAFEGUARD INTEGRITY
IN FINANCIAl REPORTING
The RE Board does not have an audit committee. Under
delegation by the RE Board, the Responsible Entity Services
management and staff operate within a Compliance and
Risk Management framework with specific policies and
procedures designed to ensure that the Trust’s
> financial reports are true and fair and meet high standards
of disclosure and audit integrity; and
> other reports released on ASX are materially accurate
and balanced.
This includes policies relating to the preparation, review
and sign off process required for the Trust’s financial reports
including the operation of an Internal Review Accounts
Committee and RE Board approval process, the engagement
of the Trust independent auditors and the review and release
of certain reports on the ASX.
The declarations under section 295A of the Corporations Act
2001 (the Act) provide formal statements to the RE Board in
relation to the Trust (refer to Principle 7). The declarations
confirm the matters required by the Act in connection
with financial reporting. The Responsible Entity receives
confirmations from the service providers involved in financial
reporting and management of the Trust, including the
Investment Manager. These confirmations together with
PRINCIPlE 5 – MAKE TIMElY AND BAlANCED
DISClOSURE
The Responsible Entity has a continuous disclosure policy
to ensure compliance with the continuous disclosure
requirements of the Act and the ASX Listing Rules in relation
to the Fund. The policy requires timely disclosure of
information to be reported to the Responsible Entity’s
management and/or Directors to ensure that, information that
a reasonable person would expect to have a material effect
on the unit price or would influence an investment decision
in relation to any of the Fund, is disclosed to the market.
The Responsible Entity’s employees assist management
and/or the Directors in making disclosures to the ASX after
appropriate consultation. The Responsible Entity requires
service providers, including the Investment Manager, to
comply with its policy in relation to continuous disclosure
for the Fund.
PRINCIPlE 6 – RESPECT THE RIGHTS
OF UNITHOl DERS
The Responsible Entity is committed to ensuring timely and
accurate information about the Fund is available to security
holders via the Fund’s website. All ASX announcements are
promptly posted on the Fund’s website: metrics.com.au. The
annual and half year results financial statements and other
communication materials are also published on the website.
In addition to the continuous disclosure obligations, the
Responsible Entity receives and responds to formal and
informal communications from unitholders and convenes
formal and informal meetings of unitholders as requested or
required. The Responsible Entity has an active program for
effective communication with the unitholders and other
stakeholders in relation to the Fund.
The Responsible Entity handles any complaints received
from unitholders in accordance with Perpetual’s Complaints
Handling Policy. The Responsible Entity is a member of
the Australian Financial Complaints Authority (AFCA), an
independent dispute resolution body, which is available
to unitholders in the event that any complaints cannot be
satisfactorily resolved by the Responsible Entity.
MCP Income Opportunities Trust
Annual Report
9
PRINCIPlE 7 – RECOGNISE AND MANAGE RISK
The RE values the importance of robust risk management
systems and maintains a current risk register as part of its
formal risk management program. The RE has established
a Compliance Committee, comprised of Michellene Collopy
(Chairperson), Virginia Malley and Michael Vainauskas.
The Compliance Committee meets at least quarterly.
In the 2018/19 financial reporting period all five meetings
held were attended by all Compliance Committee members.
The Compliance Committee Charter sets out its role and
responsibilities, which is available on request. The
Compliance Committee is responsible for compliance
matters regarding the RE’s Compliance Plan and
Constitution and the Corporations Act.
Perpetual’s Audit, Risk and Compliance Committee is
responsible for oversight of Perpetual’s risk management
and internal control systems. The Audit, Risk and Compliance
Committee is comprised of Ian Hammond, Philip Bullock,
Nancy Fox, P Craig Ueland. In the 2018/19 financial reporting
period there were six meetings held, each of which were
attended by all members. The Audit, Risk and Compliance
Committee terms of reference sets out its role and
responsibilities. This can be obtained on the Perpetual
website. The majority of the Compliance Committee and
the Audit, Risk and Compliance Committee members are
independent and are each chaired by independent members.
The RE manages the engagement and monitoring of
independent external auditors for the Fund. The RE board
receives periodic reports in relation to financial reporting
and the compliance plan audit outcomes for the Fund.
Perpetual has a risk management framework in place which
is reviewed annually. The declarations under section 295A
of the Act provide assurance regarding sound system of
risk management and internal control and that the system
is operating effectively in all material respects in relation
to financial reporting risks. The RE also receives appropriate
declarations from the service providers involved in
financial reporting.
Perpetual has an Internal Audit function which reports
functionally to Perpetual Limited Audit Risk & Compliance
Committee (ARCC), and for administrative purposes,
through the General Manager – Risk & Internal Audit, and
is independent from the external auditor. Perpetual Internal
Audit establishes a risk based audit plan each year that is
approved formally by the ARCC, and executes internal audits
of Perpetual Business Units in accordance with the plan.
The plan is re‑assessed quarterly and reviewed to ensure
that it is dynamic and continues to address the key risks
faced by the Group. Progress against the plan, changes
to the plan, and the results of audit activity are reported
quarterly to the ARCC.
The Fund currently has no material exposure to economic,
environmental and sustainability risk.
PRINCIPlE 8 – REMUNERATE FAIRlY
AND RESPONSIBlY
The fees and expenses which the RE is permitted to pay out
of the assets of the Fund are set out in the Fund constitution.
The Fund financial statements provide details of all fees and
expenses paid by the Fund during the financial period.
10
MCP Income Opportunities Trust
Annual Report
AUDITOR’S INDEPENDENCE DEClARATION
Lead Auditor’s Independence Declaration under
Section 307C of the Corporations Act 2001
To the Directors of The Trust Company (RE Services) Limited (the Responsible
Entity) of MCP Income Opportunities Trust
I declare that, to the best of my knowledge and belief, in relation to the audit of MCP Income
Opportunities Trust for the financial period from 7 February 2019 to 30 June 2019 there have been:
no contraventions of the auditor independence requirements as set out in the
Corporations Act 2001 in relation to the audit; and
no contraventions of any applicable code of professional conduct in relation to the audit.
i.
ii.
KPMG
Andrew Reeves
Partner
Sydney
20 August 2019
10
KPMG, an Australian partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity.
Liability limited by a scheme approved under
Professional Standards Legislation.
STATEMENT OF COMPREHENSIVE INCOME
Investment income
Interest income
Net gains/(losses) on financial instruments at fair value through profit or loss
Distribution income
Total investment income/(loss)
Expenses
Responsible Entity’s fees
Management fees
Investor equalisation expense
Administrative expenses
Total expenses
Profit/(loss) for the period
Other comprehensive income
Total comprehensive income/(loss) for the period
Earnings per unit for profit attributable to unitholders of the Fund
MCP Income Opportunities Trust
Annual Report
11
FOR THE
PERIOD
7 FEBRUARY
2019 TO
30 JUNE 2019
NOTES
$’000
12
12
489
243
3,342
4,074
26
576
144
42
788
3,286
–
3,286
Basic and diluted gain/(loss) per unit (cents)
9
2.19
The above statement of comprehensive income should be read in conjunction with the accompanying notes.
12
MCP Income Opportunities Trust
Annual Report
STATEMENT OF FINANCIAl POSITION
Assets
Cash and cash equivalents
Interest receivable
Distributions receivable
GST receivable
Financial assets
Total assets
Liabilities
Distributions payable
Responsible Entity’s fees payable
Management fees payable
Administrative fees payable
Total liabilities
AS AT
30 JUNE 2019
NOTES
$’000
10
28,488
90
3,342
53
271,715
303,688
3,049
26
344
32
3,451
5
8
12
12
Net assets attributable to unitholders – equity
7
300,237
The above statement of financial position should be read in conjunction with the accompanying notes.
STATEMENT OF CHANGES IN EQUITY
Total equity at the beginning of the period
Comprehensive income for the period
Profit/(loss) for the period
Total comprehensive income for the period
Transactions with unitholders
Capital raising – Initial Public Offering (IPO)
Units issued upon reinvestment of distributions
Distributions paid and payable
Total transactions with unitholders
Total equity at the end of the period
MCP Income Opportunities Trust
Annual Report
13
FOR THE
PERIOD
7 FEBRUARY
2019 TO
30 JUNE 2019
NOTES
$’000
–
3,286
3,286
300,000
–
(3,049)
296,951
300,237
7
7
7, 8
The above statement of changes in equity should be read in conjunction with the accompanying notes.
14
MCP Income Opportunities Trust
Annual Report
STATEMENT OF CASH FlOWS
FOR THE
PERIOD
7 FEBRUARY
2019 TO
30 JUNE 2019
NOTES
$’000
Cash flows from operating activities
Interest received
Management fees paid
Administrative expenses paid
Other expenses paid
Net cash inflow/(outflow) from operating activities
10
Cash flows from investing activities
Purchase of financial assets
Investment manager loan drawdown
Net cash inflow/(outflow) from investing activities
Cash flows from financing activities
Proceeds from application by unitholders
Distributions paid to unitholders
Net cash inflow/(outflow) from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the period
325
(232)
(10)
(63)
20
(270,435)
(1,097)
(271,532)
300,000
–
300,000
28,488
–
Cash and cash equivalents at the end of the period
10
28,488
The above statement of cash flows should be read in conjunction with the accompanying notes.
MCP Income Opportunities Trust
Annual Report
15
NOTES TO THE FINANCIAl STATEMENTS
CONTENTS
1 General information
2 Summary of significant accounting policies
3 Financial risk management
4 Fair value measurements
5 Financial assets
6 Structured entities
7 Net assets attributable to unitholders
8 Distributions to unitholders
9 Earnings per unit
10 Reconciliation of profit/(loss) to net cash
inflow/(outflow) from operating activities
11 Auditor’s remuneration
12 Related party transactions
13 Segment information
14 Events occurring after the reporting period
15 Contingent assets and liabilities and commitments
15
15
20
24
26
26
27
28
28
28
29
29
31
31
31
1 GENERAl INFORMATION
These financial statements covers the MCP Income
Opportunities Trust (the “Fund”) as an individual entity. The
Fund was constituted on 25 February 2019, registered with
the Australian Securities and Investments Commission on
7 February 2019, commenced operations on 23 April 2019
and its units commenced trading on the Australian Securities
Exchange (ASX: MOT) on 29 April 2019. The Fund will terminate
in accordance with the provisions of the Fund’s Constitution.
The Trust Company (RE Services) Limited
(ABN 45 003 278 831, AFSL 235 150) is the Responsible
Entity of the Fund (the “Responsible Entity’’). The Responsible
Entity’s registered office is Level 18 Angel Place, 123 Pitt
Street, Sydney, NSW 2000.
The Investment Manager of the Fund is Metrics Credit
Partners Pty Ltd (AFSL 416 146). The Custodian of the Fund
is Perpetual Corporate Trust Limited.
The Fund’s investment strategy is to create a diversified
exposure to private credit investments and other assets such
as warrants, options, preference shares and equity. Through
active portfolio risk management, the Investment Manager
seeks to provide quarterly cash income and preserve
investor capital. Amounts raised by the Fund are invested in
the MCP Wholesale Income Opportunities Trust. The MCP
Wholesale Income Opportunities Trust invests directly in
wholesale funds or directly in investment assets.
The financial statements were authorised for issue by the
directors of the Responsible Entity (the “Directors of the
Responsible Entity”) on 20 August 2019. The Directors of the
Responsible Entity have the power to amend and reissue the
financial statements.
2 SUMMARY OF SIGNIFICANT
ACCOUNTING POlICIES
The principal accounting policies applied in the preparation
of these financial statements are set out below.
(a) Basis of preparation
These general purpose financial statements have been
prepared in accordance with Australian Accounting
Standards and Interpretations issued by the Australian
Accounting Standards Board (“AASB”) and the Corporations
Act 2001 in Australia. The Fund is a for‑profit entity for the
purpose of preparing the financial statements.
16
MCP Income Opportunities Trust
Annual Report
The financial statements are prepared on the basis of fair
value measurement of assets and liabilities except where
otherwise stated.
The statement of financial position is presented on a liquidity
basis. Assets and liabilities are presented in decreasing order
of liquidity and are not distinguished between current and
non‑current. All balances are generally expected to be
recovered or settled within twelve months, except for
investments in financial assets and net assets attributable to
unitholders. The amount to be recovered or settled in twelve
months in relation to these balances remain subject to the
performance of the Fund and its operations in accordance
with the Constitution. Investors in the Fund have no rights
to redeem and can only sell units on the ASX. The Fund
is operated by the Investment Manager to ensure the
investment in MCP Wholesale Income Opportunities
Trust are held at fair value.
Investment Entity
The Fund has been deemed to meet the definition of an
investment entity, as the following conditions exist:
> The Fund has obtained funds for providing investors
with investment management services;
> The Fund’s business purpose, which was communicated
directly to investors, is investing solely for returns from
capital appreciation and investment income; and
> The performance of investments made through the Fund
are measured and evaluated on a fair value basis. Refer to
note 6 for further details.
The MCP Income Opportunities Trust and the MCP Wholesale
Income Opportunities Trust were formed due to legal,
regulatory, tax or similar requirements. When considered
together they display the characteristics of an investment
entity:
(a) the Fund indirectly holds more than one investment
because the wholesale funds holds a portfolio of
investments;
(b) the MCP Wholesale Income Opportunities Trust is largely
wholly capitalised by the Fund, the Fund is funded by
more than one investor who are related to the Fund; and
(c) ownership in the Fund and the MCP Wholesale Income
Opportunities Trust are represented by the Fund interests
to which a proportion of the net assets of the investment
entity are attributed.
(i) Compliance with International Financial Reporting
Standards (IFRS)
The financial statements of the Fund also comply with
International Financial Reporting Standards and
Interpretations as issued by the International Accounting
Standards Board (IASB).
(ii) New and amended standards adopted by the Fund
Except as described below, there are no other new
standards, interpretations or amendments to existing
standards that are effective for the first time for the financial
reporting period beginning 1 July 2018 that have a material
impact on the Fund.
> AASB 9 Financial Instruments
AASB 9 addresses the classification, measurement and
derecognition of financial assets and financial liabilities.
It replaces the multiple classification and measurement
models in AASB 139 with a new model that classifies financial
instruments based on the business model within which the
financial instruments are managed, and whether the
contractual cashflows under the instrument solely represent
the payment of principal and interest. It also introduces
revised rules around hedge accounting and impairment.
Under AASB 9, financial instruments are classified as:
> Amortised cost if the objective of the business model is to
hold the financial instruments to collect contractual cash
flows only and the contractual cash flows under the
instrument represent solely payments of principal and
interest (SPPI);
> Fair value through other comprehensive income if the
objective of the business model is to hold the financial
instruments both to collect contractual cash flows from
SPPI and for the purpose of sale; or
> All other financial instruments must be recognised at
fair value through profit or loss. An entity may however,
at initial recognition, irrevocably designate a financial
instrument as measured at fair value through profit or
loss if doing so eliminates or significantly reduces a
measurement or recognition inconsistency.
Derivative and equity instruments are measured at fair value
through profit or loss unless, for equity instruments not held
for trading, an irrevocable option is taken to measure at fair
value through other comprehensive income. A debt
instrument is measured at amortised cost if the objective
of the business model is to hold the financial asset for the
MCP Income Opportunities Trust
Annual Report
17
collection of the contractual cash flows and the contractual
cash flows under the instrument represent solely payments
of principal and interest (SPPI). A debt instrument is measured
at fair value through other comprehensive income if the
objective of the business model is to hold the financial asset
both to collect contractual cash flows from SPPI and to sell.
All other debt instruments must be recognised at fair value
through profit or loss. An entity may however, at initial
recognition, irrevocably designate a financial asset as
measured at fair value through profit or loss if doing so
eliminates or significantly reduces a measurement or
recognition inconsistency.
The Fund’s investment portfolio continues to be measured
at fair value through profit or loss and other financial assets
which are held for collection continue to be measured at
amortised cost. The derecognition rules have not been
changed from previous requirements and the Fund does not
apply hedge accounting. As the Fund’s investments are all
at fair value through profit or loss, the change in impairment
rules will not have a material impact on the Fund. The Fund’s
cash and cash equivalents and receivables are classified
as amortised cost and measured at amortised cost under
AASB 9. The impact of any expected credit losses (ECL)
is not material.
(b) Financial instruments
(i) Classification
> Assets
The Fund classifies its investments based on its business
model for managing those financial assets and the
contractual cash flow characteristics of the financial assets.
The Fund’s portfolio of financial assets is managed and
performance is evaluated on a fair value basis in accordance
with the Fund’s documented investment strategy. The Fund’s
policy is for the Responsible Entity to evaluate the information
about these financial assets on a fair value basis together
with other related financial information.
The Fund holds financial assets and financial liabilities
comprising of unlisted unit trusts which are measured at fair
value and are mandatorily classified as fair value through
profit or loss.
The Fund holds financial assets including loans which are
classified and measured at amortised cost, as the loans are
held to maturity and to collect contractual cash flows.
> Liabilities:
Derivative contracts that have a negative fair value are
presented as liabilities at fair value through profit or loss.
> AASB 15 Revenue from Contracts with Customers
(ii) Recognition/derecognition
AASB 15 establishes a single revenue recognition framework
using a five‑step model based on the transfer of goods and
services and the consideration expected to be received in
return for that transfer. The Fund’s main source of income is
investment income, in the form of gains on financial
instruments at fair value as well as interest and dividend
income. All these income types are outside the scope of the
standard. Accordingly, the adoption of new revenue
recognition rules did not have a material impact on the Fund’s
accounting policies or the amounts recognised in the
financial statements.
(iii) New accounting standards and interpretations
not yet adopted
A number of new standards, amendments to standards and
interpretations are effective for annual reporting periods
beginning after 1 July 2019. Management has made an
assessment and concluded that none of these are expected
to have a material impact on the financial statements.
The Fund recognises financial assets and financial liabilities
on the date it becomes party to the contractual agreement
(trade date) and recognises changes in fair value of the
financial assets or financial liabilities from this date.
Investments are derecognised when the right to receive cash
flows from the investments have expired or the Fund has
transferred substantially all risks and rewards of ownership.
Any gains or losses arising on derecognition of the asset held
at fair value through profit and loss (calculated as the difference
between the disposal proceeds and the carrying amount of
the asset) are included in the statement of comprehensive
income in the period the asset is derecognised as realised
gains or losses on financial instruments.
(iii) Measurement
> Financial assets and liabilities held at fair value through
profit or loss
At initial recognition, the Fund measures financial assets and
financial liabilities at fair value. Transaction costs of financial
assets and financial liabilities carried at fair value through
18
MCP Income Opportunities Trust
Annual Report
profit or loss are expensed in the statement of
comprehensive income.
dependent on the Responsible Entity’s discretion (see
note 2(m)).
Subsequent to initial recognition, all financial assets and
financial liabilities at fair value through profit or loss are
measured at fair value. 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. Fair value is calculated as the present
value of expected cash flows arising from the asset having
regard to current market prices and returns for assets of
comparable credit quality, terms and contracted remaining
term to maturity. Gains and losses arising from changes in
the fair value of the financial assets or financial liabilities at
fair value through profit or loss category are presented in the
statement of comprehensive income within ‘net gains/(losses)
on financial instruments at fair value through profit or loss’ in
the period in which they arise.
Further details on how the fair value of financial instruments
are determined are disclosed in note 4.
> Other financial assets and liabilities
Management considers that the carrying amount of cash
and cash equivalents, loans and receivables approximate
fair value.
Other financial liabilities are initially measured at fair value
and subsequently at amortised cost. Management considers
the carrying amount of payables approximate fair value.
(iv) Offsetting financial instruments
Financial assets and liabilities are offset and the net amount
reported in the statement of financial position when there is
a legally enforceable right to offset the recognised amounts
and there is an intention to settle on a net basis, or realise
the asset and settle the liability simultaneously.
(c) Net assets attributable to unitholders – equity
Units in the Fund are listed on the ASX and traded by
unitholder’s and are classified as equity. The units can be
traded on the ASX at any time for cash based on listed price.
While the Fund is a listed investment and liquidity is generally
expected to exist in the secondary market (ASX), there are no
guarantees that an active trading market with sufficient
liquidity will be available. In addition to units being traded on
the ASX, under the Constitution, request for redemption to
the Responsible Entity may be made, however redemption is
The units issued by the Fund meet the requirements of
AASB 132 for classification as equity.
(d) Cash and cash equivalents
Cash comprises cash on hand, deposits held at call with
financial institutions. Cash equivalents are short‑term, highly
liquid investments with an original maturity of three months
or less that are readily convertible into known amounts of
cash, are subject to an insignificant risk of changes in value
and are held for the purpose of meeting short‑term cash
commitments rather than for investment or other purposes.
(e) Investment income
(i) Interest income
The Fund generates interest income from its investments in
financial assets, loans, and cash investments. Interest income
from financial assets at amortised cost is recognised using
the effective interest method and includes interest from cash
and cash equivalents. Interest income from financial assets
at amortised cost is recognised using the effective interest
method and includes interest from cash and cash equivalents.
Interest income is recognised daily as it accrues, taking into
account the actual interest rate on the financial asset and is
recognised in profit or loss.
(ii) Distribution income
Distribution income from financial assets at fair value through
profit or loss is recognised in the statement of comprehensive
income within distribution income when the Fund’s right to
receive payments is established.
(f) Expenses
All expenses, including Responsible Entity fees, investor
equalisation expense (refer to Note 5 for further detail) and
administrative expenses, are recognised in the statement
of comprehensive income on an accruals basis.
Interest expense is recognised in the statement of
comprehensive income as it accrues, using the effective
interest method.
(g) Income tax
The Fund is not subject to income tax provided the taxable
income of the Fund is attributed in full to its unitholders
each financial year either by way of cash or reinvestment.
MCP Income Opportunities Trust
Annual Report
19
Unitholders are subject to income tax at their own marginal
tax rates on amounts attributable to them.
(h) Distributions
In accordance with the Fund’s Constitution, the Fund may
attribute its distributable (taxable) income, and any other
amounts determined by the Responsible Entity, to unitholders
by cash or reinvestment. The distributions are recognised in
the statement of changes in equity as equity.
Financial instruments at fair value may include unrealised
capital gains. Should such a gain be realised, that portion of
the gain that is subject to capital gains tax will be distributed
so that the Fund is not subject to capital gains tax.
Realised capital losses are not distributed to unitholders but
are retained in the Fund to be offset against any realised
capital gains. If realised capital gains exceed realised capital
losses, the excess is distributed to unitholders.
(i) Increase/decrease in net assets attributable
to unitholders
Income not distributed is included in net assets attributable
to unitholders. As the Fund’s units are classified as equity,
movements in net assets attributable to unitholders are
recognised in the statement of changes in equity.
(j) Foreign currency translation
(i) Functional and presentation currency
Items included in the Fund’s financial statements are
measured using the currency of the primary economic
environment in which it operates (the “functional currency”).
This is the Australian dollar, which reflects the currency of
the economy in which the Fund competes for funds and
is regulated. The Australian dollar is also the Fund’s
presentation currency.
(k) Receivables
Loans and receivables are measured initially at fair value plus
transaction costs and subsequently at amortised cost if they
meet the SPPI and business model test; using the effective
interest rate method, less impairment losses if any. Such
assets are reviewed at each reporting date to determine
whether there is objective evidence of impairment.
At each reporting date, the Fund shall measure the loss
allowance on receivables at an amount equal to the lifetime
expected credit losses if the credit risk has increased
significantly since initial recognition. If, at the reporting date,
the credit risk has not increased significantly since initial
recognition, the Fund shall measure the loss allowance at
an amount equal to 12‑month expected credit losses.
Receivables may include amounts for interest and trust
distributions. Interest is accrued at each dealing date in
accordance with policy set out in note 2(e) above. Trust
distributions are accrued when the right to receive payment
is established. Amounts are generally received within 30
days of being recorded as receivables. Receivables are
measured at their nominal amounts.
Receivables also include such items as Reduced Input Tax
Credits (RITC).
Collectability of trade receivables is reviewed on an ongoing
basis. Debts which are known to be uncollectible are written
off by reducing the carrying amount directly. An allowance
account (provision for impairment of trade receivables) is
used when there is objective evidence that the Fund will not
be able to collect all amounts due according to the original
terms of the receivables. Significant financial difficulties of
the debtor, probability that the debtor will enter bankruptcy
or financial reorganisation, and default or delinquency in
payments (more than 30 days overdue) are considered
indicators that the trade receivable is impaired. The amount
of the impairment allowance is the difference between the
asset’s carrying amount and the present value of estimated
future cash flows, discounted at the original effective interest
rate. Cash flows relating to short‑ term receivables are not
discounted if the effect of discounting is immaterial.
The amount of the impairment loss, if any, is recognised
in the Statement of comprehensive income within other
expenses. When a trade receivable for which an impairment
allowance had been recognised becomes uncollectible in
a subsequent period, it is written off against the allowance
account. Subsequent recoveries of amounts previously
written off are credited against other expenses in the
statement of comprehensive income.
(l) Payables
Payables include liabilities and accrued expenses owed
by the Fund which are unpaid as at the end of the
reporting period.
Payables may include amounts for redemptions of units
in the Fund where settlement has not yet occurred. These
20
MCP Income Opportunities Trust
Annual Report
amounts are unsecured and are usually paid within 30 days
of recognition.
The distribution amount payable to unitholders as at the
end of each reporting period is recognised separately in
the statement of financial position when unitholders are
determined by the Responsible Entity in accordance to
the Fund’s Constitution.
(m) Applications and redemptions
Applications received for units in the Fund are recorded
net of any transaction costs payable prior to the issuance
of units in the Fund.
In accordance with the Constitution, the Responsible Entity
may determine to reject a redemption request in its absolute
discretion. The Responsible Entity is not obliged under any
circumstances to pay any part of the redemption price out
of its own funds.
The redemption transaction costs are an estimate by the
Responsible Entity of the total transaction cost the Fund
would incur selling the Trust Property/Units. If appropriate,
the Responsible Entity may apply estimate redemption
transaction costs in regard to the actual cost incurred from
the redemption. If the Responsible Entity makes no estimate,
the redemption transaction costs are zero.
(n) Goods and Services Tax (GST)
The GST incurred on the costs of various services provided
to the Fund by third parties such as audit fees, custodian
services and management fees have been passed onto the
Fund. The Fund qualifies for RITC, hence Management fees,
Administration and custody fees and other expenses have
been recognised in the statement of comprehensive income
net of the amount of GST recoverable from the Australian
Taxation Office (“ATO”). Accounts payable are inclusive of
GST. The net amount of GST recoverable from the ATO is
included in receivables in the statement of financial position.
Cash flows relating to GST are included in the statement of
cash flows on a gross basis.
(o) Use of estimates and judgement
The Fund makes estimates and assumptions that affect the
reported amounts of assets and liabilities within the next
financial year. Estimates are continually evaluated and are
based on historical experience and other factors, including
expectations of future events that are believed to be
reasonable under the circumstances.
For the majority of the Fund’s financial instruments, quoted
market prices are readily available. However, certain financial
instruments, including unquoted securities are fair valued
using valuation techniques determined by the Investment
Manager, in accordance with the valuation procedures
approved by the Responsible Entity. Where valuation
techniques (for example, pricing models) are used to
determine fair values, they are validated and periodically
reviewed by experienced personnel of the Investment
Manager, independent of the area that created them.
Models use observable data, to the extent practicable.
However, areas such as credit risk (both own and
counterparty), volatilities and correlations require
management to make estimates. Changes in assumptions
about these factors could affect the reported fair value of
financial instruments.
For certain other balances reported on statement of financial
position, including amounts due from/to brokers, accounts
payable and accrued expenses, the carrying amounts
approximate fair value due to the immediate or short‑term
nature of these financial instruments.
(p) Rounding of amounts
The Fund is an entity of a kind referred to in ASIC
Corporations (Rounding in Financial/Directors’ Reports)
Instrument 2016/191 issued by the Australian Securities and
Investments Commission (ASIC) relating to the “rounding off”
of amounts in the financial statements. Amounts in the
financial statements have been rounded to the nearest
thousand dollars in accordance with the ASIC Corporations
Instrument, unless otherwise indicated.
(q) Comparatives
This is the first period of operations of the Fund and hence
there are no prior period comparatives.
There were no transactions between the date of constitution
and date of registration of the Fund.
3 FINANCIAl RISK MANAGEMENT
(a) Overview
The Fund’s activities expose it to a variety of financial risks.
The management of these risks is undertaken by the Fund’s
Investment Manager who has been appointed by the
Responsible Entity under an Investment Management
MCP Income Opportunities Trust
Annual Report
21
Agreement to manage the Fund’s assets in accordance
with the Investment Objective and Strategy.
As at period end, the overall market exposures were
as follows:
The RE has in place a framework which includes:
> The Investment Manager providing the RE with regular
AS AT 30 JUNE 2019
reports on their compliance with the Investment
Management Agreement;
> Completion of regular reviews on the Service Provider
which may include a review of the investment managers
risk management framework to manage the financial risks
of the Fund; and
> Regular reporting on the liquidity of the Fund in accordance
with the Fund’s Liquidity Risk Management Statement.
The Fund’s Investment Manager has in place a framework
to identify and manage the financial risks in accordance
with the investment objective and strategy. This includes an
investment due diligence process and on‑going monitoring
of the investments in the Fund. Specific controls the
Investment Manager applies to manage the financial risks
are detailed under each risk specified below.
(b) Market risk
Market risk is the risk that the fair value or future cash flows
of a financial instrument will fluctuate due to the changes in
market variables such as interest rates, foreign exchange
rates and equity prices.
(i) Price risk
Market price risk is the risk that the value of a financial
instrument will fluctuate as a result of changes in market
prices, whether those changes are caused by factors specific
to the individual instrument or factors affecting all
instruments in the market.
The Fund invests in corporate loans and debt securities
indirectly through its investment in MCP Wholesale Income
Opportunities Trust. As a result, the Investment Manager
manages this risk through the daily review of the carrying
value of each of the assets held by the Wholesale Funds
having regard to the market prices of similar assets being
transacted in both the primary and secondary market for
assets of similar credit quality, tenor and loan purpose. Any
adjustment to the fair value of the investment is reflected
through profit or loss.
Financial assets
MCP Wholesale Income Opportunities
Trust
Investment manager loan asset
FAIR VALUE
$’000
264,196
7,519
(ii) Interest rate risk
Interest rate risk is the risk that the value of a financial
instrument will fluctuate due to changes in market
interest rates.
The Fund invests (through the MCP Wholesale Income
Opportunities Trust) primarily in floating rate loans meaning
that as the underlying base rate rises and falls, the relative
attractiveness to other instruments may change.
The investment manager believes there is a strong
correlation between the RBA Cash Rate and the base rates
upon which loans are priced. Absolute returns on loans
therefore rise and fall largely in correlation with the RBA
Cash Rate.
Interest rate duration risk is minimised as individual
borrowers under loan contracts generally have the flexibility
to select interest rate reset periods from 30 to 180 days. In
addition to the ongoing short term re‑setting of the market
benchmark interest rate most loan facilities incorporate a
contractual mechanism to re‑price based on migration of
credit quality over the term of the facility. This is known as
a credit margin pricing grid and incorporates changes to
the credit margin based on certain key credit metrics.
The Fund’s interest‑bearing financial assets and liabilities
expose it to risks associated with the effects of fluctuations
in the prevailing levels of market interest rates on its financial
position and cash flows.
22
MCP Income Opportunities Trust
Annual Report
The tables below summarise the Fund’s exposure to interest rate risk.
AT 30 JUNE 2019
Financial assets
WEIGHTED
EFFECTIVE
FLOATING
FIXED
NON-
INTEREST
INTEREST
INTEREST
INTEREST
RATE
%
RATE
$’000
RATE
$’000
BEARING
$’000
TOTAL
$’000
Cash and cash equivalents
1.25%
28,488
Interest receivable
Distributions receivable
GST receivable
Financial assets
Total financial assets
Financial liabilities
Distributions payable
Responsible Entity’s fees payable
Management fees payable
Administrative fees payable
Total financial liabilities
6%*
–
–
–
–
28,488
–
–
–
–
–
–
–
–
–
–
90
3,342
53
28,488
90
3,342
53
7,519
7,519
264,196
271,715
267,681
303,688
–
–
–
–
–
3,049
3,049
26
344
32
26
344
32
3,451
3,451
Net exposure
28,488
7,519
264,230
300,237
* Weighted effective interest rate only applies to loan assets.
At 30 June 2019, should interest rates have increased/
decreased by 75 basis points with all other variables
remaining constant, the increase/decrease in net assets
attributable to unitholders for the period would amount
to approximately $211,000.
(iii) Currency risk
Currency risk is the risk that the value of financial instruments
will fluctuate due to changes in foreign exchange rates.
As at 30 June 2019, the Fund did not hold as assets or
liabilities denominated in currencies other than the Australian
Dollar and therefore was not exposed to any foreign
exchange risk.
(c) Credit risk
Credit risk is the risk that an issuer or counterparty will be
unable or unwilling to pay amounts in full when due.
The Investment Manager manages credit risk by undertaking
a detailed due diligence process prior to entering into
transactions with counterparties and ongoing daily
monitoring of the credit exposures.
The initial due diligence process is detailed in the
Operational and Investment Policies of the Investment
Manager and addresses aspects relevant to an assessment
of the credit risk and includes risk assessments of both a
qualitative and quantitative nature. Pre‑ lending due diligence
may include independent experts reports provided to the
Investment Manager covering matters such as commercial/
industry risks, accounting and tax reports, legal due
diligence, property valuation, technical risk reports and
environmental reports. As part of the initial due diligence
risk assessment process key risks are identified and the key
determinants of future cash flows and servicing capacity of
the counterparty are identified. Scenario planning and
MCP Income Opportunities Trust
Annual Report
23
sensitivity testing is undertaken to model the impact on
counterparty credit risk under a range of adverse events.
Financial analysis and peer group benchmarking is
undertaken to determine the appropriate credit metrics
and a credit rating identified and allocated. The Investment
Manager uses a range of proprietary credit rating data and
analysis in addition to credit research materials from third
party providers including credit rating agencies to analyse
and monitor counterparty credit risk.
The Investment Manager further seeks to mitigate credit
risk by adhering to the investment parameters of the Fund
which have been designed in a manner that seeks to mitigate
credit risk by ensuring the portfolio is diversified by industry,
counterparty, credit quality, maturity and loan market.
The Investment Manager maintains active engagement with
other market participants and meets regularly and receives
regular reporting from banks, borrowers and ratings agencies
and uses this reporting to manage and monitor performance
of financial assets held by the Fund. Such reporting includes
macro‑economic risk and analysis reporting.
The Investment Manager is provided with ongoing compliance
reporting from borrowers which typically includes the
provision of covenant compliance certificates, financial
accounts, operational management reporting and forward
financial projections and ongoing reporting of performance
against budget projections.
The Investment Committee of the Investment Manager aims
to meet daily to monitor reporting and financial obligations
of counterparties, reconciles payment of interest and fees
and reviews credit, market and liquidity risks of each
financial asset held in the portfolio.
The Fund’s exposure to credit risk for cash and cash
equivalents is low as all counterparties have a rating of
A‑1+ (as determined by public ratings agencies such as
Standard & Poor’s, Moody’s or Fitch) or higher. The Fund
is also exposed to credit risk on corporate loans and debt
securities through its investments in MCP Wholesale
Income Opportunities Trust.
rating. The Fund’s exposure to credit risk is monitored and
managed on a daily basis, and credit ratings are reviewed
and confirmed as part of the Investment Manger’s investment
processes. Credit risk is managed through daily investment
analysis (reporting, covenant compliance, management
and market engagement) as well as through portfolio
construction. The Fund has defined targets and limits based
on both individual counterparty credit quality as well as total
aggregated credit exposure levels. By limiting credit risk
exposure to individual investments based on credit quality
and also limiting the total aggregated exposure to
investments of a defined credit quality, the Fund’s acceptable
level of credit risk is defined and controlled. Credit risk
management is ongoing and the Investment Manager adopts
an active approach to monitoring and managing these risks.
The Investment Manager adheres to the portfolio
investment parameters set out in the offer document of
the Fund. Credit risk is managed with regard to individual
counterparty credit quality and single counterparty exposure
limits. The Investment Manager seeks to manage portfolio
risks by diversifying risks with portfolio construction adhering
to diversification by credit quality, individual counterparty,
industry and contracted maturity profile of assets held within
the portfolio. The Investment Manager seeks to manage
risk by investing in shorter dated credit assets with the
expectation that the weighted tenor to contracted maturity
is within the target portfolio parameters. The portfolio
construction and investment management processes
adopted by the Investment Manager are implemented with
the expectation of seeking to reduce Fund exposure to
both credit and market risks.
The Fund provided a working capital loan to the Investment
Manager. The Responsible Entity has a right of recourse
against the Investment Manager for the amounts owned under
the Manager Loan. The Investment Manager may assign its
obligations under the Investment Manager Loan to an entity
that is controlled by the Investment Manager or a person that
is under the common control of the Investment Manager.
(d) Liquidity risk
Corporate loans and debt securities are rated by the
Investment Manager in accordance with its ratings
methodology, and may also be rated by public ratings
agencies such as Standard & Poor’s, Moody’s or Fitch.
Where a corporate loan or debt security is publicly rated,
it is the Investment Manager’s policy to apply the lower of
a public credit rating or the Investment Manager’s own credit
Liquidity risk is the risk that the Fund may not be able to
generate sufficient cash resources to settle its obligations
in full as they fall due and can only do so on terms that are
materially disadvantageous.
The Investment Manager monitors the Fund’s cash flow
requirements and undertakes cash flow forecasts including
24
MCP Income Opportunities Trust
Annual Report
capital budgeting on a daily basis. Cash flow reconciliations
are undertaken daily to ensure all income and expenses are
managed in accordance with contracted obligations.
The table below analyses the Fund’s non‑derivative financial
liabilities into relevant maturity groupings based on the
remaining period to contractual maturity, as of the reporting
period end. The amounts in the table are the contractual
undiscounted cash flows. Balances that are due within 12
months equal their carrying balances as the impact of
discounting is not significant.
AT 30 JUNE 2019
Distributions payable
Responsible Entity’s fees payable
Management fees payable
Administrative fees payable
Total financial liabilities
4 FAIR VAlUE MEASUREMENTS
LESS THAN
1-6
6-12
OVER
NO STATED
1 MONTH
MONTHS
MONTHS
12 MONTHS
MATURITY
$’000
3,049
26
344
32
3,451
$’000
$’000
$’000
$’000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
The Fund measures and recognises the following assets
and liabilities at fair value on a recurring basis.
information provided by independent pricing services is
relied upon for valuation of investments.
> Financial assets/liabilities at fair value through profit or
loss (FVTPL) (see note 5)
The quoted market price used to fair value financial assets and
financial liabilities held by the Fund is the last‑traded prices.
The Fund has no assets or liabilities measured at fair value on
a non‑recurring basis in the current reporting period.
AASB 13 requires disclosure of fair value measurements by
level of the following fair value hierarchy:
(a) quoted prices (unadjusted) in active markets for identical
assets or liabilities (level 1);
(b) inputs other than quoted prices included within level 1
that are observable for the asset or liability, either directly
or indirectly (level 2); and
(c) inputs for the asset or liability that are not based on
observable market data (unobservable inputs) (level 3).
(i) Fair value in an active market (level 1)
The fair value of financial assets and liabilities traded in
active markets is based on their quoted market prices at
the end of the reporting period without any deduction for
estimated future selling costs.
The Fund values its investments and derivatives in
accordance with the accounting policies set out in note 2 to
the financial statements. For the majority of investments,
A financial instrument is regarded as quoted in an active
market if quoted prices are readily and regularly available
from an exchange, dealer, broker, industry group, pricing
service, or regulatory agency, and those prices represent
actual and regularly occurring market transactions on an
arm’s length basis.
An active market is 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.
(ii) Fair value in an inactive or unquoted market
(Level 2 and Level 3)
The fair value of financial assets and liabilities that are not
exchange‑traded in an active market is determined using
valuation techniques. These include the use of recent arm’s
length market transactions, reference to the current fair value
of a substantially similar other instrument, discounted cash
flow techniques, option pricing models or any other valuation
technique that provides a reliable estimate of prices obtained
in actual market transactions. If all significant inputs required
to fair value an instrument are observable, the instrument is
included in level 2. If one or more of the significant inputs is
MCP Income Opportunities Trust
Annual Report
25
not based on observable market data, the instrument is
included in level 3. This may be the case for certain corporate
debt securities and unlisted unit trusts with suspended
applications and withdrawals.
Where discounted cash flow techniques are used, estimated
future cash flows are based on management’s best estimates
and the discount rate used is a market rate at the end of the
reporting period applicable for an instrument with similar
terms and conditions.
For other pricing models, inputs are based on market data
at the end of the reporting period.
Some of the inputs to these models may not be market
observable and are therefore estimated based on
assumptions.
The output of a model is always an estimate or approximation
of a value that cannot be determined with certainty, and
valuation techniques employed may not fully reflect all factors
relevant to the positions the Fund holds. Valuations are
therefore adjusted, where appropriate, to allow for additional
factors including liquidity risk and counterparty risk.
The carrying value less impairment provision of other
receivables and payables are assumed to approximate their
fair values. The fair value of financial liabilities for disclosure
purposes is estimated by discounting the future contractual
cash flows at the current market interest rate that is available
to the Fund for similar financial instruments.
The determination of what constitutes ’observable’ requires
significant judgment by management. Management consider
observable data to be that market data that is readily
available, regularly distributed or updated, reliable and
verifiable, not proprietary and provided by independent
sources that are actively involved in the relevant market.
Recognised fair value measurements
The following table presents the Fund’s financial assets and liabilities measured and recognised at fair value as at
30 June 2019.
Financials assets
MCP Wholesale Income Opportunities Trust
Investment manager loan asset
Total
LEVEL 1
$’000
LEVEL 2
$’000
LEVEL 3
$’000
TOTAL
$’000
–
–
–
264,196
–
264,196
–
264,196
7,519
7,519
7,519
271,715
26
MCP Income Opportunities Trust
Annual Report
(i) Transfers between levels
5 FINANCIAl ASSETS
The Fund’s policy is to recognise transfers into and
transfers out of fair value hierarchy levels as at the end
of the reporting period.
There were no transfers between the levels in the fair value
hierarchy for the period ended 30 June 2019.
(ii) Fair value measurements using significant unobservable
inputs (level 3)
The following table present the movement in level 3
instruments, by class of financial instruments, for the period
ended 30 June 2019.
FOR THE PERIOD
7 FEBRUARY 2019
TO 30 JUNE 2019
Opening balance
Loan provided to
Investment Manger
Drawdown
IEE
Interest accrued
Closing balance
INVESTMENT
MANAGER
LOAN
ASSETS
$’000
–
6,482
1,097
(134)
74
7,519
TOTAL
$’000
–
6,482
1,097
(134)
74
7,519
(iii) Valuation processes
Investment Manager Loan Assets are classified and
measured at amortised cost.
(iv) Fair values of other financial instruments
The Fund did not hold any financial instruments which were
not measured at fair value in the statement of financial
position. Due to their short‑term nature, the carrying amounts
of receivables and payables are assumed to approximate fair
value. Net assets attributable to unitholders’ carrying value
may differ from its par value (deemed to be redemption price
for individual units) due to differences in valuation inputs.
This difference is not material in the current period.
MCP Wholesale Income
Opportunities Trust
Investment manager loan asset
30 JUNE 2019
$’000
264,196
7,519
271,715
> Investment manager loan asset
The Fund provided a working capital loan to the Investment
Manager. Over a period of ten years the Investment Manager
will repay the Investment Manager Loan, including payment of
interest on the loan which will be interest income to the Fund.
> Investor equalisation expense (IEE)
In consideration for the Investment Manager providing
advisory and management services to the Fund under the
Investment Management Agreement, the Investment Manager
is paid an IEE. The IEE is a monthly expense to the Fund
calculated based on NAV and payable to the Investment
Manager for a period of 10 years from 25 February 2019.
An overview of the risk exposure relating to financial assets
at fair value through profit or loss is included in note 3.
6 STRUCTURED ENTITIES
A structured entity is an entity that has been designed so
that voting or similar rights are not the dominant factor in
deciding who controls the entity, and the relevant activities
are directed by means of contractual arrangements.
An interest in a structured entity is any form of contractual
or non‑contractual involvement which creates variability
in returns arising from the performance of the entity for
the Fund. The Fund considers investments in managed
investment schemes (the “Schemes”) to be structured
entities. The Fund invests in Schemes for the purpose of
capital appreciation and/or earning investment income.
The exposure to investments in related Schemes at fair value,
and any related amounts recognised in the statement of
comprehensive income is disclosed at Note 12 to the
financial statements.
MCP Income Opportunities Trust
Annual Report
27
The exposure to investments in related Schemes at fair value
that the Fund does not consolidate but in which it holds an
interest is disclosed in the following table:
Movements in number of units and net assets attributable to
unitholders during the period were as follows:
FAIR VALUE OF
INVESTMENTS
INTEREST
AS AT
HELD AS AT
30 JUNE 2019
30 JUNE 2019
$’000
264,196
%
100
MCP Wholesale Income
Opportunities Trust
The Fund has exposures to structured entities through
its trading activities. The Fund typically has no other
involvement with the structured entity other than the
securities it holds as part of trading activities and its
maximum exposure to loss is restricted to the carrying value
of the asset. The Fund does not have current commitments to
intentions and contractual obligations to provide financial or
other support to the structured entities. Exposure to trading
assets are managed in accordance with financial risk
management practices as set out in note 3(b).
During the period ended 30 June 2019, total gains/(losses)
incurred on investments in the Schemes were $243,078.
The Fund also earned distribution income of $3,341,729
as a result of its interests in the Schemes.
7 NET ASSETS ATTRIBUTABlE TO UNITHOlDERS
Under AASB 132 Financial instruments: Presentation, puttable
financial instruments meet the definition of a financial liability
to be classified as equity where certain strict criteria are
met. The Fund does not have a contractual obligation to
pay distributions to unitholders. Therefore, the net assets
attributable to unitholders of the Fund meet the criteria
set out under AASB 132 and are classified as equity.
FOR THE PERIOD
7 FEBRUARY 2019 TO
30 JUNE 2019
NO. ’000
$’000
Opening balance
–
–
Capital raising – Initial
Public Offering (IPO)
Units issued upon
reinvestment of
distributions
Distributions paid and
payable
Profit/(loss) for the period
150,000
300,000
–
–
–
–
(3,049)
3,286
Closing balance
150,000
300,237
As stipulated within the Fund’s Constitution, each unit
represents a right to an individual share in the Fund and does
not extend to a right to the underlying assets of the Fund.
There are no separate classes of units and each unit has
the same rights attaching to it as all other units of the Fund.
Capital risk management
The Fund classifies its net assets attributable to unitholders
as equity. The amount of net assets attributable to unitholders
can change significantly on a daily basis as the Fund is
subject to daily applications and redemptions at the
discretion of unitholders.
Daily applications and redemptions are reviewed relative to
the liquidity of the Fund’s underlying assets on a daily basis
by the Responsible Entity. Under the terms of the Fund’s
Constitution, the Responsible Entity has the discretion
to reject an application for units and to defer or adjust
redemption of units if the exercise of such discretion is
in the best interests of unitholders.
28
MCP Income Opportunities Trust
Annual Report
8 DISTRIBUTIONS TO UNITHOlDERS
Distributions are payable at the end of each financial period.
Such distributions are determined by reference to the net
taxable income of the Fund.
The distributions for the period were as follows:
10 RECONCIlIATION OF PROFIT/(lOSS) TO NET
CASH INFlOW/(OUTFlOW) FROM OPERATING
ACTIVITIES
(a) Reconciliation of operating profit/(loss) to net cash
inflow/(outflow) from operating activities
FOR THE
PERIOD
7 FEBRUARY
2019 TO
30 JUNE 2019
$’000
3,286
(183)
(3,485)
402
20
FOR THE PERIOD
7 FEBRUARY 2019 TO
30 JUNE 2019
$’000
CPU*
Distributions
30 June (payable)
3,049
3,049
2.03
2.03
Profit/(loss) for the period
Net change in financial assets
* Distribution is expressed as cents per unit amount in Australian Dollar.
9 EARNINGS PER UNIT
Earnings per unit amounts are calculated by dividing net
profit/(loss) attributable to unitholders before distributions
by the weighted average number of units outstanding
during the period.
FOR THE
PERIOD
7 FEBRUARY
2019 TO
30 JUNE 2019
3,286
150,000
2.19
Operating profit/(loss) attributable
to unitholders ($’000)
Weighted average number of units
on issue (’000)
Basic and diluted earnings per unit (cents)
Net change in receivables
Net change in payables
Net cash inflow/(outflow) from operating
activities
(b) Components of cash and cash equivalents
Cash as at the end of the financial period as shown in the
statement of cash flows is reconciled to the statement of
financial position as follows:
Cash and cash equivalents
FOR THE
PERIOD
7 FEBRUARY
2019 TO
30 JUNE 2019
$’000
28,488
28,488
MCP Income Opportunities Trust
Annual Report
29
(c) Non‑cash financing activities
12 RElATED PARTY TRANSACTIONS
FOR THE
PERIOD
7 FEBRUARY
2019 TO
30 JUNE 2019
$’000
For the purpose of these financial statements, parties are
considered to be related to the Fund if they have the ability,
directly or indirectly, to control or exercise significant
influence over the Fund in making financial and operating
disclosures. Related parties may be individuals or other
entities.
Responsible Entity
The Responsible Entity of the MCP Income Opportunities
Trust is The Trust Company (RE Services) Limited. The
Responsible Entity is a wholly owned subsidiary in the
Perpetual Limited Group (ASX: PPT).
–
–
During the period, the following
distribution payments were satisfied
by the issue of units under the
distribution reinvestment plan
As described in note 2(i), income not distributed is included
in net assets attributable to unitholders. The change in this
amount each period (as reported in (a) above) represents a
non‑cash financing cost as it is not settled in cash until such
time as it becomes distributable.
11 AUDITOR’S REMUNERATION
During the period the following fees were paid or payable for
services provided by the auditor of the Fund:
FOR THE
PERIOD
7 FEBRUARY
2019 TO
30 JUNE 2019
$
KPMG
Audit and other assurance services
Audit and review of financial statements
28,000
Total remuneration for audit and other
assurance services
Total remuneration of KPMG
28,000
28,000
The Investment Manager of the Fund is Metrics Credit
Partners Pty Ltd.
(a) Directors
Key management personnel includes persons who were
Directors of the Responsible Entity at any time during the
financial period as follows:
NAME
DATE OF APPOINTMENT/RESIGNATION
Glenn Foster
Christopher
Green
Michael
Vainauskas
Resigned as Director
on 17 October 2018
Richard McCarthy
Appointed as a Director
on 17 October 2018
Andrew McIver
Alternate Director for
Michael Vainauskas
Vicki Riggio
Gillian Larkins
Phillip Blackmore
Resigned as Alternate Director for
Glenn Foster on 12 October 2018
Appointed as Alternate Director for
Christopher Green and Vicki Riggio
on 6 July 2018 Resigned as Alternate
Director for Christopher Green on
17 October 2018
30
MCP Income Opportunities Trust
Annual Report
(b) Other key management personnel
(ii) Management fee
There were no other persons responsible for planning,
directing and controlling the activities of the Fund, directly
or indirectly during the financial period.
Key management personnel unit holdings
During or since the end of the period, none of the Directors
or Director related entities held units in the Fund, either
directly, indirectly or beneficially.
Neither the Responsible Entity nor its affiliates held units
in the Fund at the end of the period.
Key management personnel compensation
Key management personnel do not receive any remuneration
directly from the Fund. They receive remuneration from the
Responsible Entity in their capacity as Directors or employees
of the Responsible Entity or its related parties. Consequently,
the Fund does not pay any compensation to its key
management personnel. Payments made from the Fund to the
Responsible Entity do not include any amounts attributable
to the compensation of key management personnel.
Key management personnel loan disclosures
The Fund has not made, guaranteed or secured, directly or
indirectly, any loans to the key management personnel or
their personally related entities at any time during the
reporting period.
Other transactions within the Fund
Apart from those details disclosed in this note, no key
management personnel have entered into a material contract
with the Fund during the financial period and there were no
material contracts involving Director’s interests existing at
period end.
(i) Responsible Entity fee
This fee is charged by the Responsible Entity for managing
the Fund and making it available to investors. Fees payable
to the Responsible Entity are calculated on the adjusted net
asset value of the Fund and accrued daily and paid monthly
in arrears from the assets of the Fund and reflected in the
daily unit price.
This fee is charged by the Responsible Entity for services
provided under the Investment Management Agreement.
1.03% per annum of the Fund’s net asset value is calculated
and accrued daily and paid monthly in arrears from the
Fund’s assets.
The performance fee for any period is equal to 15.38% of
the amount (if any) by which the Fund’s Total Return exceeds
the Fund’s Hurdle. The performance fee is calculated and
accrued daily and paid monthly in arrears from the Fund’s
assets. Different fees may be negotiated with wholesale
clients. No performance fees will be paid during the first
year of operations of the Fund.
(iii) Indirect costs
Indirect costs are any amounts that the Responsible Entity
knows or where required, reasonably estimates, will reduce
the Fund’s returns that are paid from the Fund’s assets (other
than the Responsible Entity fee, recoverable expenses and
transactional and operational costs) or that are paid from the
assets of any interposed vehicle (such as the MCP Wholesale
Income Opportunities Trust or wholesale funds) in which the
Fund may invest.
All related party transactions are conducted on normal
commercial terms and conditions. The transactions during
the period and amounts payable at period end between the
Fund and the Responsible Entity were as follows:
FOR THE PERIOD
7 FEBRUARY
2019 TO
30 JUNE 2019
$
26,082
575,905
26,082
344,503
Responsible Entity’s fees for the period
paid and payable by the Fund to the
Responsible Entity
Management fees for the period paid
and payable by the Fund to the
Investment Manager
Aggregate amounts payable to the
Responsible Entity at reporting date
Aggregate amounts payable to the
Investment Manager at reporting date
MCP Income Opportunities Trust
Annual Report
31
Investments
The Fund held investments in the following scheme which is managed by The Trust Company (RE Services) Limited or its
related parties:
AT 30 JUNE 2019
MCP Wholesale Income Opportunities
Trust
DISTRIBUTIONS
UNITS
DISPOSED
UNITS
FAIR VALUE OF
INTEREST
RECEIVED/
ACQUIRED
DURING THE
INVESTMENT
$
HELD
(%)
RECEIVABLE
$
DURING YEAR
YEAR
264,195,661
100
3,341,729
261,761,281
–
13 SEGMENT INFORMATION
The Fund is organised into one main operating segment
with only one key function, being the investment of funds
predominantly in Australia.
14 EVENTS OCCURRING AFTER THE
REPORTING PERIOD
The Directors are not aware of any event or circumstance
since the end of the financial period not otherwise addressed
within this report that has affected or may significantly affect
the operations of the Fund, the results of those operations or
the state of affairs of the Fund in subsequent years. The Fund
continues to operate as a going concern.
15 CONTINGENT ASSETS AND lIABIlITIES
AND COMMITMENTS
There are no outstanding contingent assets, liabilities
or commitments as at 30 June 2019.
MCP Income Opportunities Trust
Annual Report
33
AUDIT REPORT
Independent Auditor’s Report
To the unitholders of MCP Income Opportunities Trust
Opinion
We have audited the Financial Report of MCP
Income Opportunities Trust (the Fund).
In our opinion, the accompanying Financial Report
of the Fund is in accordance with the Corporations
Act 2001, including:
•
•
giving a true and fair view of the Fund's
financial position as at 30 June 2019 and of its
financial performance for the period from 7
February 2019 to 30 June 2019; and
complying with Australian Accounting
Standards and the Corporations Regulations
2001.
Basis for opinion
The Financial Report comprises:
•
•
Statement of financial position as at 30 June
2019
Statement of profit or loss and other
comprehensive income, Statement of changes
in equity, and Statement of cash flows for the
period from 7 February 2019 to 30 June 2019
• Notes including a summary of significant
accounting policies
• Directors' Declaration.
We conducted our audit in accordance with Australian Auditing Standards. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Our responsibilities under those standards are further described in the Auditor’s responsibilities for the
audit of the Financial Report section of our report.
We are independent of the Fund in accordance with the Corporations Act 2001 and the ethical
requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for
Professional Accountants (the Code) that are relevant to our audit of the Financial Report in Australia. We
have fulfilled our other ethical responsibilities in accordance with the Code.
Key Audit Matters
The Key Audit Matters we identified
are:
•
•
Valuation of the financial assets held
at fair value through profit or loss;
and
Accounting treatment for the
recognition of the Investment
Manager loan asset.
Key Audit Matters are those matters that, in our professional
judgement, were of most significance in our audit of the
Financial Report of the current period.
These matters were addressed in the context of our audit of
the Financial Report as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these
matters.
33
KPMG, an Australian partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity.
Liability limited by a scheme approved under
Professional Standards Legislation.
34
MCP Income Opportunities Trust
Annual Report
Valuation of the financial assets held at fair through profit or loss ($264m)
Refer to Note 5 to the Financial Report
The key audit matter
How the matter was addressed in our audit
Financial assets held at fair value through profit
or loss comprise of units held in the MCP
Wholesale Income Opportunities Trust (100%
owned by the Fund).
Valuation of the units in the MCP Wholesale
Income Opportunities Trust is a key audit
matter owing to:
•
•
•
The assets representing 86.8% of the
Fund’s total assets;
The degree of audit effort and resources
involved in assessing the underlying
transaction records; and
The importance of the performance of this
asset in driving the Fund’s investment
income and capital performance, as
reported in the Financial Report.
Our procedures included:
•
•
•
•
Reading the Fund’s Investment Administrator,
Mainstream’s GS007 (Guidance Statement 007
Audit Implications of the Use of Service
Organisations for Investment Management
Services) assurance report to assess the
Investment Administrator’s processes to record
and value the Fund’s unit holdings;
Checking the ownership of the unit holdings to the
unit registry to test the existence of unit holdings
being valued;
Checking the valuation of unit holdings, as recorded
in the general ledger, to the latest available audited
financial statements of MCP Wholesale Income
Opportunities Trust; and
Evaluating the procedures by us in relation to the
audit of MCP Wholesale Income Opportunities
Trust as evidence of the underlying existence and
valuation of the assets held by the Fund.
Accounting treatment for the recognition of the Investment Manage loan asset ($7.5m)
Refer to Note 5 to the Financial Report
The key audit matter
How the matter was addressed in our audit
The accounting treatment for the recognition of
the Investment Manager loan asset (‘loan’) as a
financial asset was a key audit matter owing to
the:
•
•
judgement we applied to assess the
recognition criteria of the loan against the
requirements of the Australian Accounting
Standards given the application to the
Fund’s unique circumstances;
complexity of the Fund’s assessment to
determine the recognition of the loan as a
financial asset. The complexity is driven
from diverse views of interpretations of
Our procedures included:
•
•
•
reading the Fund’s Product Disclosure Statement,
Constitution, Investment Management Agreement
and loan documentation to understand the key
terms and conditions of the loan;
obtaining the Independent Investigating
Accountant’s Report issued by the service provider
appointed by the Responsible Entity to evaluate the
appropriateness of the accounting treatment
against the requirements of the Australian
Accounting Standards;
assessing the scope, competence and objectivity of
the service provider appointed by the Responsible
34
MCP Income Opportunities Trust
Annual Report
35
the Australian Accounting Standards in
practice for the particular terms of this
loan, and necessitated the involvement of
our specialists; and
•
high proportion of audit effort we applied
to challenge alternative views of the
recognition criteria in the Australian
Accounting Standards and the evidence
needed to fulfil this.
Entity;
•
•
•
enquiries of the Responsible Entity, Investment
Manager, and the Fund’s external legal team on
their understanding of the key terms of the loan
agreement;
consulting with our specialists to assess the
accounting treatment for the recognition of the loan
against the requirements of the Australian
Accounting Standards; and
assessing the disclosures in the financial report,
using our understanding of the issue obtained from
our testing, against the requirements of the
Australian Accounting Standards.
Other Information
Other Information is financial and non-financial information in MCP Income Opportunities Trust’s annual
reporting which is provided in addition to the Financial Report and the Auditor’s Report. The Directors of
The Trust Company (RE Services) Limited (the Responsible Entity) are responsible for the Other
Information.
Our opinion on the Financial Report does not cover the Other Information and, accordingly, we do not
express an audit opinion or any form of assurance conclusion thereon.
In connection with our audit of the Financial Report, our responsibility is to read the Other Information. In
doing so, we consider whether the Other Information is materially inconsistent with the Financial Report or
our knowledge obtained in the audit, or otherwise appears to be materially misstated.
We are required to report if we conclude that there is a material misstatement of this Other Information,
and based on the work we have performed on the Other Information that we obtained prior to the date of
this Auditor’s Report we have nothing to report.
Responsibilities of the Directors for the Financial Report
The Directors of The Trust Company (RE Services) Limited (the Responsible Entity) are responsible for:
•
•
•
preparing the Financial Report that gives a true and fair view in accordance with Australian Accounting
Standards and the Corporations Act 2001
implementing necessary internal control to enable the preparation of a Financial Report that gives a
true and fair view and is free from material misstatement, whether due to fraud or error
assessing the Fund's ability to continue as a going concern and whether the use of the going concern
basis of accounting is appropriate. This includes disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless they either intend to liquidate the
Fund or to cease operations, or have no realistic alternative but to do so.
35
36
MCP Income Opportunities Trust
Annual Report
Auditor’s responsibilities for the audit of the Financial Report
Our objective is:
•
•
to obtain reasonable assurance about whether the Financial Report as a whole is free from material
misstatement, whether due to fraud or error; and
to issue an Auditor’s Report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in
accordance with Australian Auditing Standards will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error. They are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on the
basis of the Financial Report.
A further description of our responsibilities for the audit of the Financial Report is located at the Auditing
and Assurance Standards Board website at: http://www.auasb.gov.au/auditors_responsibilities/ar2.pdf.
This description forms part of our Auditor’s Report.
KPMG
Andrew Reeves
Partner
Sydney
20 August 2019
36
MCP Income Opportunities Trust
Annual Report
37
ASX ADDITIONAl INFORMATION
Additional information required by the Australian Stock Exchange Limited Listing Rules and not disclosed elsewhere in this
report is as follows. The information is current as at 31 July 2019 unless otherwise indicated.
A. DISTRIBUTION OF UNITS
Analysis of numbers of unitholders by size of holding:
SIZE OF HOLDING
RANGES:
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
NO OF HOLDERS
TOTAL UNITS PERCENTAGE
118
1,355
1,080
2,214
108
75,381
4,335,667
8,809,019
63,752,037
73,129,336
0.05%
2.89%
5.87%
42.47%
48.72%
4,875
150,101,440
100.00%
The number of unitholders holding less than a marketable parcel of $500 worth of units is 6 and they hold a total of 242 units.
B. l ARGEST UNITHOlDER
The names of the twenty largest holders of quoted units are listed below:
UNITHOLDER
NO. OF UNITS PERCENTAGE
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
HSBC Custody Nominees (Australia) Limited
Netwealth Investments Limited
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