PERPETUAL
CREDiT
iNCOME
TRUST
ARSN 626 053 496
ANNUAL FiNANCiAL REPORT
30 JUNE 2020
ANNUAL FINANCIAL REPORT 2020 | i
Perpetual Credit Income Trust
Appendix 4E
For the year ended 30 June 2020
Details of reporting period
This annual financial report is for the year ended 30 June 2020. The previous corresponding period was from 22
May 2018 to 30 June 2019.
The Directors of Perpetual Trust Services Limited, the Responsible Entity of Perpetual Credit Income Trust (the
Trust) announce the audited results of the Trust for the year ended 30 June 2020 as follows:
Results for announcement to the market
Extracted from 30 June 2020 annual financial report.
Revenue from ordinary activities
Profit/(loss)
Total comprehensive income/(loss)
Details of distributions
For the
period from 22 Increase/(decrease)
May 2018 to
Year ended
30 June 2020 30 June 2019
Increase/(decrease)
$'000
$'000
$'000
5,072
643
643
2,200
1,568
1,568
2,872
(925)
(925)
%
130.55
(58.99)
(58.99)
The distributions for the year ended 30 June 2020 was $17,051,403 (4.2605 cents per ordinary unit). The
Responsible Entity aims to make distributions each month. For such distributions, the record date is the last ASX
trading day of each month. Subsequent to year end, on 27 July 2020, the Directors declared a distribution of
0.3157 cents per ordinary unit which amounted to $1,263,935 and was paid on 10 August 2020.
Details of distribution reinvestment plan
The Responsible Entity has established a Distribution Reinvestment Plan (DRP) on 24 June 2019 in relation to
distributions. Units under the DRP are issued at the net asset value of a unit, as determined in accordance with
the Trust's Constitution, on record date. On 25 March 2020, the Responsible Entity announced that the DRP will
be suspended until further notice.
Net Tangible Assets
Total Net Tangible Assets attributable to unitholders ($'000)
Units on issue ('000)
Net Tangible Assets attributable to unitholders per unit ($)
Control gained or lost over entities during the year
As at
30 June
2020
30 June
2019
425,186
400,334
1.062
441,226
400,000
1.103
Name of entity
Perpetual Loan Fund
Date of gain of control
13 May 2019
Contribution to profit ($'000)
635
There was no loss of control of the entity during the year.
Details of associates and joint venture entities
The Trust did not have any interest in associates and joint venture entities during the year.
Independent audit report
This report is based on the annual financial report which has been audited by the Trust's auditor, KPMG.
Additional disclosure requirements can be found in the notes to the Trust's annual financial report for the year
ended 30 June 2020.
PERPETUAL CREDIT INCOME TRUST
CONTENTS
Investment manager’s report
Directors’ report
Corporate governance statement
Lead auditor’s independence declaration
Statement of comprehensive income
Balance sheet
Statement of changes in equity
Statement of cash flows
Notes to the financial statements
Directors’ declaration
Independent auditor’s report to the unitholders
ASX additional information
2
6
10
16
17
18
19
20
21
46
47
51
Perpetual Credit Income Trust
Appendix 4E
For the year ended 30 June 2020
Details of reporting period
May 2018 to 30 June 2019.
This annual financial report is for the year ended 30 June 2020. The previous corresponding period was from 22
The Directors of Perpetual Trust Services Limited, the Responsible Entity of Perpetual Credit Income Trust (the
Trust) announce the audited results of the Trust for the year ended 30 June 2020 as follows:
Results for announcement to the market
Extracted from 30 June 2020 annual financial report.
For the
period from 22 Increase/(decrease)
Year ended
May 2018 to
30 June 2020 30 June 2019
Increase/(decrease)
$'000
$'000
$'000
5,072
643
643
2,200
1,568
1,568
2,872
(925)
(925)
%
130.55
(58.99)
(58.99)
Revenue from ordinary activities
Profit/(loss)
Total comprehensive income/(loss)
Details of distributions
The distributions for the year ended 30 June 2020 was $17,051,403 (4.2605 cents per ordinary unit). The
Responsible Entity aims to make distributions each month. For such distributions, the record date is the last ASX
trading day of each month. Subsequent to year end, on 27 July 2020, the Directors declared a distribution of
0.3157 cents per ordinary unit which amounted to $1,263,935 and was paid on 10 August 2020.
Details of distribution reinvestment plan
The Responsible Entity has established a Distribution Reinvestment Plan (DRP) on 24 June 2019 in relation to
distributions. Units under the DRP are issued at the net asset value of a unit, as determined in accordance with
the Trust's Constitution, on record date. On 25 March 2020, the Responsible Entity announced that the DRP will
be suspended until further notice.
Net Tangible Assets
As at
30 June
2020
30 June
2019
425,186
400,334
1.062
441,226
400,000
1.103
Total Net Tangible Assets attributable to unitholders ($'000)
Units on issue ('000)
Net Tangible Assets attributable to unitholders per unit ($)
Control gained or lost over entities during the year
Name of entity
Perpetual Loan Fund
Date of gain of control
Contribution to profit ($'000)
13 May 2019
635
There was no loss of control of the entity during the year.
Details of associates and joint venture entities
The Trust did not have any interest in associates and joint venture entities during the year.
Independent audit report
This report is based on the annual financial report which has been audited by the Trust's auditor, KPMG.
Additional disclosure requirements can be found in the notes to the Trust's annual financial report for the year
ended 30 June 2020.
ANNUAL FINANCIAL REPORT 2020 | 1
iNVESTMENT
MANAGER’S
REPORT
Dear Investors,
We are pleased to present the Annual
Financial Report for the Perpetual
Credit Income Trust (the “Trust”). With
the Trust commencing trading on the
ASX on 14 May 2019, these are the first
annual accounts which reflect a full
year of activity.
During the financial year to 30 June
2020 (FY20), the Trust has continued
to deliver to its investment objective
of providing investors with monthly
income by investing in a diversified pool
of credit and fixed income assets. The
Trust has paid monthly distributions
since inception which are in line with
the target return of the RBA Cash Rate
plus 3.25% p.a. (net of fees) through the
economic cycle1. For FY20, 4.26 cents
per unit2 has been paid to investors,
which equates to an annual distribution
return of 3.8%3.
iNVESTMENT PHiLOSOPHY
AND PROCESS
At Perpetual, we believe the key to
investing in credit and fixed income
assets is constructing, and actively
managing, a well-diversified portfolio
of quality assets.
The Portfolio Managers for the Trust,
Michael Korber, Managing Director,
Credit and Fixed Income and Anne
Moal, Head of Corporate High
Yield and Portfolio Manager for the
Perpetual Loan Fund together have
over 60 years’ experience. They have
invested through many market cycles
and are supported by the broader
Perpetual Investments Credit and
Fixed Income team.
The team follow a robust, active and
risk-aware approach to investing
in credit and fixed income assets.
This involves top-down market
screening of the credit environment
and extensive bottom up fundamental
research to develop a list of approved
issuers. This research seeks to screen
out issuers with poor credit quality or
susceptibility to downside shock.
The formal credit review process
involves consideration of where the
asset sits in the capital structure and in-
depth financial analysis and modelling.
We look for companies that have a
good balance sheet and predictable
cash flows, who hold a competitive
market position and have a quality
management team. For unrated or sub-
investment grade assets, we undertake
a more extensive due diligence process
which includes a number of meetings
with arrangers and borrowers. We
will not invest unless we have high
conviction.
Our investment process aims to
find the most attractive segments
of the market and ensure adequate
compensation is provided for
investments. We actively manage risk
via our thorough investment process
and by diversifying the portfolio across
industry sectors, maturities and credit
rating bands.
PORTFOLiO COMPOSiTiON
The Trust’s investment strategy is
to hold a diversified and actively
managed portfolio of credit and fixed
income assets. The strategy allows for
a combination of domestic and global
credit, floating and fixed income assets.
1 This is a target only and may not be achieved.
2 Rounded to two decimal places.
3 Distribution return has been calculated based on the PCI investment portfolio return less the
growth of NTA. Past performance is not indicative of future performance.
2 | PERPETUAL CREDIT INCOME TRUST
As at 30 June 2020, PCI’s portfolio
had 102 holdings across 76 issuers4.
Investments include corporate
bonds, floating rate notes, securitised
assets and private debt (for example,
corporate loans).
While the investment universe for
the Trust is relatively broad and
includes the ability to invest in assets
of foreign issuers, the focus is on
Australian issuers. The Trust can hold
a maximum of 30% of the portfolio
in assets denominated in foreign
currencies. As at 30 June 2020, 90.2%
of assets were denominated in AUD
and 82.1% of assets were issued by
entities incorporated in Australia.
This includes Australian corporations,
banks, property trusts, asset backed
securities (ABS) and infrastructure
groups. We believe our local presence
and ability to meet borrowers and
their management team provides an
advantage in assessing opportunities
and managing credit risk for the
portfolio. As the COVID-19 pandemic
impacted investment markets, we were
quick to move to working remotely
and confirm we were fully operational
during FY20, without disruption,
including contacting our borrowers.
As at 30 June 2020, 54.8% of the
portfolio was invested in investment
grade assets which means that the
issuer of those assets are in the rating
bands BBB to AAA as rated by an
independent ratings agency. The Trust
can also invest up to 70% of the
portfolio in unrated or sub–investment
grade assets.
We believe that unrated or sub-
investment grade assets provide a
point of differentiation for the Trust’s
investment strategy as these assets
typically pay higher coupons than
investment grade assets and can be
a valuable source of income. As at
30 June 2020, 42.8% of the portfolio
was invested in sub-investment grade
or unrated assets5. Investments in
sub-investment grade and unrated
corporate bonds and loans will
generally be focused on senior
positions in the capital structure which
means they are given higher priority
in the event an issuer or company is
wound-up or liquidated. Approximately
17% of the portfolio comprised secured
loans (including via the Perpetual Loan
Fund) at the end of FY20.
MARKET OVERViEW
The spread of the COVID-19 pandemic,
the ensuing response and its impact
on financial markets has undoubtedly
dominated FY20. This led to extreme
volatility, particularly in late February
and March with all asset classes –
equities, credit and fixed income,
property and commodities selling off
dramatically and the global economy
heading towards recession. The impact
on the global economy was significant
as governments around the world
responded to the virus by shutting
down their economies and enacting
social distancing measures. Financial
markets were severely impacted with
volatility being elevated as a result
of concerns surrounding the virus,
the monetary policy response and a
concurrent crisis in energy prices.
4 Number of holdings and number of issuers reported on a full look through basis (excluding
derivatives)
5 A sub-investment grade asset has a rating below BBB-/Baa3 and includes unrated assets
ANNUAL FINANCIAL REPORT 2020 | 3
Throughout the first half of FY20,
increasing valuations and slowing
economic growth were supported
by easing monetary policy globally.
The RBA cut the official cash rate by
0.25% in July and October. In the third
quarter, the cash rate was cut twice,
once at the March meeting and a
second emergency cut that brought the
target cash rate to 0.25%.
The first seven months of the year
saw credit spread tightening up until
February. This meant compensation,
or return provided for accepting credit
risk, was lower. However, in March,
credit and fixed income markets
experienced the most significant
widening of credit spreads since the
Global Financial Crisis. A consequence
of the market volatility and widening
spreads was the diminished liquidity in
the secondary market. It also resulted
in a slow-down of domestic corporate
primary market issuance from late
February until mid-May.
The fourth quarter saw a sharp
recovery in asset prices following the
turmoil of late February and March.
The unprecedented monetary and
fiscal response to the COVID-19
pandemic supported credit spreads
and equity prices. The strong financial
performance was in contrast to
worsening economic indicators as a
raft of global Purchasing Managers’
Indices (PMIs) fell below 50, indicating
contraction, and the US reported record
unemployment growth for the month
of April. In a similar pattern to the first
half of FY20, equity valuations and
credit spreads were being supported by
monetary policy in spite of a worsening
economic outlook.
TRUST PERFORMANCE
The market and economic conditions
during the second half of the year
provided the ultimate test of resilience
for the portfolio in its first full year
of operation. The assets in the
portfolio have held up well during the
extremely volatile market conditions
and we believe the focus on quality
and defensive nature of the portfolio
contributed to this result.
We recognise the importance of
income to our investors and have
continuously delivered on our
investment objective of providing
monthly income over FY20. The total
distributions for the year was 4.26 cents
per unit and the 30 June 2020 annual
distribution return was 3.8% which is
in line with the Trust’s target return6
objective of the RBA cash rate + 3.25%
(net of fees) over the economic cycle.
The Trust’s net tangible assets (NTA)
position remains strong and there has
been no permanent impairment of
underlying security values, meaning
the Trust’s ability to generate income
remains intact.
Prior to 28 February 2020, the Trust
had been trading at an average
premium to NTA of 2.8% since the
Trust’s inception. Unfortunately, the
market volatility led by COVID-19
resulted in the Trust trading at a
discount to NTA. We believe the
NTA for the Trust is more reflective
of the Trust’s performance during the
volatility and are comfortable with
the composition of the portfolio, only
seeing a decrease of -3.5% between
28 February and 30 June 2020.
6 This is a target only and may not be achieved.
4 | PERPETUAL CREDIT INCOME TRUST
We encourage unitholders to remain
patient and have a long-term view.
This will generally provide time to
ride out market woes and profit from
market rises. We believe the assets
in the portfolio have proven their
defensive capabilities, as indicated by
the modest decrease in NTA during
the market volatility. The full value of
the portfolio’s assets is also reflected in
the Trust’s NTA released to ASX daily7,
providing investors with transparency
as to the portfolio value. We are
confident that our robust, active and
risk-aware investment process will
translate to attractive opportunities for
the Trust which will be rewarded over
the long-term.
We would like to take this opportunity
to thank you for your continued support
and trust and we look forward to
providing you with further updates on
the progress of the Trust’s investments
over the coming year via our regular
ASX announcements.
Perpetual Investments
The Trust minimised the impact of
credit spread volatility by diversifying
assets across asset type and maintaining
high aggregate credit quality.
Importantly, the Trust maintained
its running yield which was 4.0% at
the end of June 2020. The Trust’s
income was primarily generated by
coupon payments and interest income
from investments in loans. The Trust
predominately collected income
return from non-financial corporates,
prime RMBS, domestic banks and
non-bank financials. This assisted in
offsetting widening credit spreads in
challenging conditions.
We aim to build a portfolio in which
overall interest rate exposure is
floating and duration is relatively
short. The portfolio weighted average
life as at 30 June 2020 was 4.4 years
which is short and less sensitive
to credit spread movements than
longer dated securities. Further, the
securities in the portfolio are typically
bonds and floating rate notes which
are tradeable with daily pricing and
liquidity. The loan assets are valued
at fair value having considered any
impairment. Critical to our investment
process is also having regular access
to information to enable credit risk
to be monitored on an ongoing basis.
Accordingly, we did not experience,
nor did we expect any default from
borrowers in the portfolio.
7 The NTA released to ASX daily is unaudited and approximate.
Past performance is not indicative of future performance.
ANNUAL FINANCIAL REPORT 2020 | 5
DiRECTOR’S
REPORT
Directors' report
Perpetual Credit Income Trust
Directors' report
For the year ended 30 June 2020
Perpetual Trust Services Limited (ACN 000 142 049, AFSL 236 648) is the Responsible Entity of Perpetual Credit
Income Trust (the Trust). The Directors of the Responsible Entity (the Directors) present their report together with
the annual financial report of the Trust for the year ended 30 June 2020 and the auditor's report thereon.
Principal activities
The Trust is a registered managed investment scheme domiciled in Australia.
The Trust was constituted on 9 May 2018, registered with the Australian Securities and Investments Commission
on 22 May 2018, commenced operations on 8 May 2019 and its units commenced trading on the Australian
Securities Exchange (ASX: PCI) on 14 May 2019.
The Trust invests in a diversified pool of credit and fixed income assets in accordance with the Product
Disclosure Statement and the provisions of the Trust's Constitution.
Perpetual Investment Management Limited (AFSL 234 426) has been appointed by the Responsible Entity to be
the Investment Manager of the Trust (Investment Manager).
The Trust did not have any employees during the year.
There were no significant changes in the nature of the Trust’s activities during the year.
Directors
The Directors of Perpetual Trust Services Limited during the year or since the end of the year and up to the date
of this report are shown below. The Directors were in office for this entire year except where stated otherwise.
Name
Glenn Foster
Vicki Riggio
Richard McCarthy
Simone Mosse
Phillip Blackmore
Michael Vainauskas
Andrew Mclver
Units on issue
Date of appointment/resignation
Appointed as Director on 27 September 2019
Alternate Director for Vicki Riggio
Resigned as Director on 27 September 2019
Resigned as Alternate Director for Michael Vainauskas on 2 September 2019
Appointed as Alternate Director for Glenn Foster on 2 September 2019
Resigned as Alternate Director for Glenn Foster on 27 September 2019
Units on issue in the Trust at the end of the year are set out below:
Units on issue
As at
30 June
2020
As at
30 June
2019
Units ('000) Units ('000)
400,334
400,000
-6-
6 | PERPETUAL CREDIT INCOME TRUST
Perpetual Credit Income Trust
Directors' report
For the year ended 30 June 2020
(continued)
Directors' report (continued)
Review and results of operations
During the year, the Trust invested in accordance with the investment objective and guidelines as set out in the
governing documents of the Trust and in accordance with the provisions of the Trust's Constitution.
The performance of the Trust, as represented by the results of its operations, was as follows:
Profit/(loss) ($'000)
Distributions paid and payable ($'000)
Distributions (cents per unit)
For the
period from
22 May
2018 to
30 June
2019
$'000
30 June
2020
$'000
643
1,568
17,051
4.2605
342
0.0854
As at 30 June 2020, the Trust's Net Tangible Assets (NTA) were $1.062 per unit. This represents a decrease of
-3.72% compared to NTA of $1.103 per unit as at 30 June 2019. The decrease in NTA was predominantly
attributable to the widening credit spreads caused by the coronavirus (COVID-19) pandemic in the second half of
the year and distributions paid. The Trust paid distributions of 4.2605 cents per unit during the year which
equated to an annualised distribution return of 3.8%.
The rapid spread of COVID-19 across the globe has led to unprecedented economic times and governments
taking extreme measures to limit the spread of the virus. This has resulted in extreme volatility in global and local
capital markets which has been reflected in the valuation of the Trust's investment portfolio and its financial
results for the year ended 30 June 2020.
The Manager continues to follow a robust, active and risk-aware approach to investing in credit and fixed income
assets. This involves market screening of the credit environment and research which aims to screen out issuers
with poor credit quality or susceptibility to downside shock.
Further information on the operating and financial performance of the Trust is contained in the Investment
Manager's Report.
Units in the Trust
The movement in units on issue in the Trust during the year is disclosed in note 7 to the financial statements.
The value of the Trust's assets and liabilities is disclosed on the balance sheet and derived using the basis set
out in note 2 to the financial statements.
Significant changes in state of affairs
In the opinion of the Directors, there were no significant changes in the state of affairs of the Trust during the year
other than the matters previously disclosed under the review and results of operations.
-7-
ANNUAL FINANCIAL REPORT 2020 | 7
Perpetual Credit Income Trust
Directors' report
For the year ended 30 June 2020
(continued)
Directors' report (continued)
Likely developments and expected results of operations
The Trust will continue to be managed in accordance with its investment objectives and guidelines as set out in
the governing documents of the Trust and in accordance with the provisions of the Trust's Constitution.
The results of the Trust's operations will be affected by a number of factors, including the performance of
investment markets in which the Trust invests. Investment performance is not guaranteed and future returns may
differ from past returns. As investment conditions change over time, past returns should not be used to predict
future returns.
Matters subsequent to the end of the financial year
On 27 July 2020, the Directors declared a distribution of 0.3157 cents per ordinary unit which amounted to
$1,263,935 and was paid on 10 August 2020.
The uncertainty around COVID-19 is expected to continue to present social and economic challenges in the next
financial year and the resulting impact on the capital markets remain uncertain. Since the reporting date, there
have been no significant changes in the valuation of the Trust's investment portfolio arising from the changes in
the estimates and assumptions in relation to COVID-19. The Directors are closely monitoring the liquidity of the
Trust and any impact on the valuation of the Trust's investment portfolio.
No other matter or circumstance has arisen since 30 June 2020 that has significantly affected, or may
significantly affect:
(i)
(ii)
(iii)
the operations of the Trust in future financial years; or
the results of those operations in future financial years; or
the state of affairs of the Trust in future financial years.
Environmental regulation
The operations of the Trust are not subject to any particular or significant environmental regulations under a law
of the Commonwealth, or of a State or Territory.
Fees paid to and interests held in the Trust by the Responsible Entity or its associates
Fees paid to the Responsible Entity and its related parties out of Trust property during the year are disclosed in
note 14 to the financial statements.
No fees were paid out of Trust property to the Directors of the Responsible Entity during the year.
The number of units in the Trust held by the Responsible Entity or its associates as at the end of the financial
year are disclosed in note 14 to the financial statements.
Indemnification and insurance of officers and auditors
No insurance premiums are paid for out of the assets of the Trust in regards to insurance cover provided to either
the officers of Perpetual Trust Services Limited or the auditor of the Trust. So long as the officers of Perpetual
Trust Services Limited act in accordance with the Trust's Constitution and the law, the officers remain indemnified
out of the assets of the Trust against losses incurred while acting on behalf of the Trust. The auditor of the Trust
is in no way indemnified out of the assets of the Trust.
-8-
8 | PERPETUAL CREDIT INCOME TRUST
Perpetual Credit Income Trust
Directors' report
For the year ended 30 June 2020
(continued)
Perpetual Credit Income Trust
Directors' report
For the year ended 30 June 2020
(continued)
Directors' report (continued)
Directors' report (continued)
Likely developments and expected results of operations
Rounding of amounts to the nearest thousand dollars
The Trust 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 Directors' report. Amounts in the Directors' report and financial report have been
rounded to the nearest thousand dollars in accordance with that ASIC Corporations Instrument, unless otherwise
indicated.
Lead auditor's independence declaration
A copy of the lead auditor's independence declaration as required under section 307C of the Corporations Act
2001 is set out on page 16.
This report is made in accordance with a resolution of the Directors of Perpetual Trust Services Limited.
Director
Sydney
21 August 2020
The Trust will continue to be managed in accordance with its investment objectives and guidelines as set out in
the governing documents of the Trust and in accordance with the provisions of the Trust's Constitution.
The results of the Trust's operations will be affected by a number of factors, including the performance of
investment markets in which the Trust invests. Investment performance is not guaranteed and future returns may
differ from past returns. As investment conditions change over time, past returns should not be used to predict
future returns.
Matters subsequent to the end of the financial year
On 27 July 2020, the Directors declared a distribution of 0.3157 cents per ordinary unit which amounted to
$1,263,935 and was paid on 10 August 2020.
The uncertainty around COVID-19 is expected to continue to present social and economic challenges in the next
financial year and the resulting impact on the capital markets remain uncertain. Since the reporting date, there
have been no significant changes in the valuation of the Trust's investment portfolio arising from the changes in
the estimates and assumptions in relation to COVID-19. The Directors are closely monitoring the liquidity of the
Trust and any impact on the valuation of the Trust's investment portfolio.
No other matter or circumstance has arisen since 30 June 2020 that has significantly affected, or may
significantly affect:
(i)
(ii)
(iii)
the operations of the Trust in future financial years; or
the results of those operations in future financial years; or
the state of affairs of the Trust in future financial years.
Environmental regulation
The operations of the Trust are not subject to any particular or significant environmental regulations under a law
of the Commonwealth, or of a State or Territory.
Fees paid to and interests held in the Trust by the Responsible Entity or its associates
Fees paid to the Responsible Entity and its related parties out of Trust property during the year are disclosed in
note 14 to the financial statements.
No fees were paid out of Trust property to the Directors of the Responsible Entity during the year.
The number of units in the Trust held by the Responsible Entity or its associates as at the end of the financial
year are disclosed in note 14 to the financial statements.
Indemnification and insurance of officers and auditors
No insurance premiums are paid for out of the assets of the Trust in regards to insurance cover provided to either
the officers of Perpetual Trust Services Limited or the auditor of the Trust. So long as the officers of Perpetual
Trust Services Limited act in accordance with the Trust's Constitution and the law, the officers remain indemnified
out of the assets of the Trust against losses incurred while acting on behalf of the Trust. The auditor of the Trust
is in no way indemnified out of the assets of the Trust.
-8-
-9-
ANNUAL FINANCIAL REPORT 2020 | 9
CORPORATE
GOVERNANCE
STATEMENT
BACKGROUND
CORPORATE GOVERNANCE
Perpetual Trust Services Limited
ACN 000 142 049, AFS Licence
No. 236648 (“Responsible Entity”) is
the responsible entity for the Perpetual
Credit Income Trust (“Trust”),
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, risk and finance) and
financial resources. As at the date
of this Corporate Governance
Statement, Perpetual has at all times
made such resources available to the
Responsible Entity.
In operating the Trust, the Responsible
Entity’s overarching principle is to
always act in good faith and in the best
interests of the Trust’s unitholders, in
accordance with our fiduciary duty.
The Responsible Entity’s duties and
obligations in relation to the Trust
principally arise from: the Constitution
of the Trust; the Compliance Plan
for the Trust; the Corporations Act
2001 (“Act”); the ASX Listing Rules;
the Responsible Entity’s Australian
Financial Services Licence; relevant
regulatory guidance; relevant
contractual arrangements; and other
applicable laws and regulations.
At Perpetual, good corporate
governance includes a genuine
commitment to the ASX Corporate
Governance Council Corporate
Governance Principles and
Recommendations 3rd Edition
(“Principles”).
The directors of the Responsible Entity
are committed to implementing high
standards of corporate governance in
operating the Trust and, to the extent
applicable to registered managed
investment schemes, are guided by
the values and principles set out in
Perpetual’s Corporate Responsibility
Statement and the Principles .
The Responsible Entity is pleased to
advise that, to the extent the Principles
are applicable to registered managed
investment schemes; its practices are
largely consistent with the Principles.
As a leading responsible entity, the
Responsible Entity operates a number
of registered managed investment
schemes (“Schemes”). The Schemes
include the Trust as well as other
schemes that are listed on the ASX.
The Responsible Entity’s approach
in relation to corporate governance
in operating the Trust 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
Trust, as at the date of this Corporate
Governance Statement.
10 | PERPETUAL CREDIT INCOME TRUST
10 | PERPETUAL CREDIT INCOME TRUST
PRiNCiPLE 1
LAY SOLiD FOUNDATiONS
FOR MANAGEMENT AND
OVERSiGHT
The role of the Responsible Entity’s
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 the Trust. The Responsible Entity’s
Board is accountable to the unitholders
of the Trust, and is responsible for
approving the Responsible Entity’s
overall objectives and overseeing their
implementation in discharging their
duties and obligations and operating
the Trust.
The role of the Responsible Entity’s
management is to manage the
business of the Responsible Entity in
operating the Trust. The Responsible
Entity Board delegates to management
all matters not reserved to the
Responsible Entity’s Board, including
the day-to-day management of the
Responsible Entity and the operation
of the Trust. Directors, management
and staff are guided by Perpetual’s
Code of Conduct and Perpetual Risk
Appetite Statement which is designed
to assist them in making ethical
business decisions.
The Responsible Entity has appointed
agents (“Service Providers”) to
provide investment management,
administration, custody and other
specialist services and functions in
relation to the Trust.
Effective processes for monitoring
Service Providers are integral to the
Responsible Entity’s operations, given
that substantial operational activities
are outsourced to third parties.
The Management of the Responsible
Entity ensure a systematic and
rigorous approach is applied with
respect to monitoring the performance
of outsourced Service Providers to
the Trust.
The Responsible Entity views all
interactions with Service Providers
as a monitoring opportunity, from the
informal discussions that regularly
occur with Service Providers, to
more formalised monitoring reviews.
The outcomes of all interactions
with Service Providers inform the
Responsible Entity’s view as to the
extent to which the Service Provider
is complying with their operational
obligations to the Responsible Entity.
Prior to appointment, all Service
Providers are subject to operational
due diligence, to verify that the
Service Provider can deliver the
outsourced services in an efficient,
effective and compliant manner.
All Service Providers are assigned an
initial operational risk rating.
The Responsible Entity’s approach to
Service Provider monitoring is outlined
in the diagram below. In addition to
the continuous monitoring that occurs
through day to day interactions with
Service Providers in the regular course
of business, all Service Providers are
required to periodically report to the
Responsible Entity as to the extent to
which they have met their obligations.
informal
engagement
Formal
Reviews
Compliance
Reporting
The RE and
Management
Market
intelligence2
Key Scheme
Data1
1
Includes information regarding investment performance, actual versus strategic asset
allocation, liquidity where applicable and complaints, incidents and issues arising with
respect to the operation of the Trust
2 Information from secondary sources, including the media and analysts and rating house
reports.
CORPORATE GOVERNANCE STATEMENT 2020 | 11
ANNUAL FINANCIAL REPORT 2020 | 11
Periodically, the Service Provider’s risk
rating is reviewed by the stakeholders
within the business, based on the
outcomes of all interactions that have
occurred with the Service Provider
during the review period.
The Responsible Entity maintains
policy, procedure and program
documents that determine the nature
and frequency of formal service
provider monitoring reviews. Service
providers are typically subject to
annual review.
The Service Provider risk rating
dictates any additional monitoring
measures required to be put in place
– for example a Service Provider
assessed as ‘low to medium risk’ will
be subject to the standard monitoring
measures the Responsible Entity
utilises under the Service Provider
Monitoring Framework. Service
Providers risk rated ‘high to very
high’ may be subject to additional
oversight measures to deal with
the factors that caused the Service
Providers risk rating to be high or
very high. In addition, management
and stakeholders utilise the risk
assessment rating in determining
if any action is required when
considering information and the
outcomes of all interactions that have
occurred with the Service Provider
during the review period.
PRiNCiPLE 2
PRiNCiPLE 3
STRUCTURE THE BOARD TO BE
EFFECTiVE AND ADD VALUE
ACTiNG ETHiCALLY AND
RESPONSiBLY
At present the Responsible Entity
Board consists of four executive
directors and one alternate directors.
The names of the current directors and
year of appointment is provided below:
Name
of Director
Year of
Appointment
Glenn Foster
Richard McCarthy
Vicki Riggio
Phillip Blackmore
(Alternate for Vicki Riggio)
2015
2018
2018
2018
Simone Mosse
2019
As the Responsible Entity’s Board
consists of only executive directors,
a Compliance Committee is appointed
in relation to the Trust (refer to
Principle 7). None of the executive
directors of the Responsible Entity
are independent and they are not
remunerated by the Responsible Entity.
The Compliance Committee comprises
of a majority of external members and
is chaired by an external member who
is not the chair of the Responsible
Entity Board.
The Responsible Entity relies on a
variety of mechanisms to monitor and
maintain a culture of acting lawfully,
ethically and responsible:
• policies and procedures: a Code
of Conduct which articulates
and discloses Perpetual’s values,
cyclical mandatory training, a
Whistleblowing Policy and a
Gifts, Political Donations, Bribery
and Corrupt Practices Policy
(further details noted below);
• “The Way We Work” behaviour
framework, and risk ratings that
are intertwined into its annual
performance, remuneration and
hiring processes; and
• employee engagement surveys
and action planning conducted
to address any gaps or concerns
in culture.
These apply to all directors and
employees of Perpetual, and the
Responsible Entity. The Code of
Conduct, The Way We Work and core
values 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 draws from and
expands on Perpetual’s Core Values of
integrity, partnership and excellence.
The Code of Conduct underpins
Perpetual’s culture. The Responsible
Entity Board and the Compliance
Committee are informed of material
breaches of the Code of Conduct
which impact the Scheme and the
Responsible Entity.
12 | PERPETUAL CREDIT INCOME TRUST
Additional policies deal with a range
of issues such as the obligation to
maintain client confidentiality and
to protect confidential information,
the need to make full and timely
disclosure of any price sensitive
information and to provide a safe
workplace for employees, which is
free from discrimination. Compliance
with Perpetual’s Code of Conduct is
mandatory for all employees. A breach
is considered to be a serious matter
that may impact an employee’s
performance and reward outcomes
and may result in disciplinary action,
including dismissal.
A full copy of the Code of Conduct
is available on Perpetual’s website
(https://www.perpetual.com.au/
about/corporate-governance/code-of-
conduct).
Perpetual also has a Whistleblowing
Policy to protect directors, executives,
employees, contractors and suppliers
who report misconduct, including:
• conduct that breaches any law,
regulation, regulatory licence or
code that applies to Perpetual;
• fraud, corrupt practices or unethical
behaviour;
• bribery;
• unethical behaviour which breaches
Perpetual’s Code of Conduct or
policies;
• inappropriate accounting, control
or audit activity; including the
irregular use of Perpetual or client
monies; and
• any other conduct which could
cause loss to, or be detrimental
to the interests or reputation of,
Perpetual or its clients.
As part of Perpetual’s Whistleblowing
Policy, a third party has been engaged
to provide an independent and
confidential hotline for Perpetual
employees who prefer to raise their
concern with an external organisation.
A full copy of the Whistleblowing
Policy is available on Perpetual’s
website ((https://www.perpetual.com.
au/about/corporate-governance/code-
of-conduct).
As part of Perpetual’s commitment to
promoting good corporate conduct and
to conducting business in accordance
with the highest ethical and legal
standards, bribery and corrupt practices
will not be tolerated by Perpetual under
any circumstances. Perpetual’s Gifts,
Political Donations, Bribery and
Corrupt Practices Policy supports
Perpetual’s commitment by:
• prohibiting the payment of political
donations;
• instituting proper procedures
regarding the exchange of gifts;
• clearly outlining Perpetual’s
zero tolerance for bribery and
corruption; and
• including avenues where concerns
may be raised.
A full copy of the Gifts, Political
Donations, Bribery and Corrupt
Practices Policy is available on
Perpetual’s website (https://www.
perpetual.com.au/about/corporate-
governance/code-of-conduct).
Mechanisms are in place to ensure
the Responsible Entity Board and
the Compliance Committee are
informed of material breaches which
impact the Trust and the Responsible
Entity which would include material
breaches of the Code of Conduct and
material incidences reported under
the Whistleblowing Policy and the
Gifts, Political Donations, Bribery and
Corrupt Practices Policy.
PRiNCiPLE 4
SAFEGUARD THE iNTEGRiTY
OF CORPORATE REPORTS
The functions of an audit committee
are undertaken by the full Responsible
Entity Board with assistance from
management. The Responsible Entity
has 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, the engagement
of the Trust’s independent auditors
and the review and release of certain
reports on the ASX.
The declarations under section 295A
of the Corporations Act 2001 provide
formal statements to the Responsible
Entity Board in relation to the Trust
(refer to Principle 7). The declarations
confirm the matters required by the
Corporations 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 the 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
Corporations Act. The Responsible
Entity manages the engagement and
monitoring of independent ‘external’
auditors for the Trust. The Responsible
Entity Board receives periodic
reports from the external auditors in
relation to financial reporting and the
compliance plans for the Trust.
CORPORATE GOVERNANCE STATEMENT 2020 | 13
PRiNCiPLE 5
PRiNCiPLE 6
PRiNCiPLE 7
MAKE TiMELY AND BALANCED
DiSCLOSURE
RESPECT THE RiGHTS
OF UNiTHOLDERS
RECOGNiSE AND
MANAGE RiSK
The Responsible Entity has a
continuous disclosure policy to ensure
compliance with the continuous
disclosure requirements of the
Corporations Act and the ASX Listing
Rules in relation to the Trust which
sets out the processes to review and
authorise market announcements
and which is periodically reviewed to
ensure that it is operating effectively.
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 Trust, is disclosed to
the market. The Responsible Entity’s
Company Secretary may assist
management and/or the directors in
making disclosures to the ASX after
appropriate Responsible Entity’s
Board consultation for material market
announcements. The Responsible
Entity requires service providers,
including the Investment Manager,
to comply with its policy in relation to
continuous disclosure for the Trust.
The Responsible Entity’s Company
Secretary is the Continuous Disclosure
Officer for the Trust in accordance
with the ASX Listing Rules.
The Responsible Entity is committed
to ensuring timely and accurate
information about the Trust is
available to security holders
via the Trust’s website. All ASX
announcements are promptly posted
on the Trust’s website: https://
www.perpetual.com.au/income/
pci-investors/asx-announcements.
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 Trust.
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.
The Responsible Entity is also
committed to communicating
with shareholders electronically in
relation to communications from
the share registry. Shareholders
may elect to receive information
from the Company’s share registry
electronically.
The Responsible Entity values
the importance of robust risk and
compliance management systems and
maintains a current risk register as
part of its formal risk management
program. The systems supporting
the business have been designed to
ensure our risks are managed within
the boundaries of the Perpetual Risk
Appetite Statement and consistent
with our core values built on integrity,
partnership and excellence.
The Responsible Entity has established
a Compliance Committee, comprised
of Johanna Turner (Chair), Virginia
Malley and Simone Mosse.
The Compliance Committee meets
at least quarterly. The Compliance
Committee Terms of Reference sets out
its role and responsibilities, which is
available on request. The Compliance
Committee is responsible for
compliance matters regarding the
Responsible Entity’s Compliance Plan,
Constitution and the Corporations Act.
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 Responsible Entity
also receives appropriate declarations
from the service providers involved in
financial reporting.
The Responsible Entity manages
the engagement and monitoring of
independent external auditors for the
Trust. The Responsible Entity’s board
receives periodic reports in relation to
financial reporting and the compliance
plan audit outcomes for the Trust.
14 | PERPETUAL CREDIT INCOME TRUST
PRiNCiPLE 8
REMUNERATE FAiRLY AND
RESPONSiBLY
The RE does not have a Remuneration
Committee. The fees and expenses
which the Responsible Entity is
permitted to pay out of the assets
of the Trust are set out in the Trust
constitution. The Trust financial
statements provide details of all fees
and expenses paid by the Trust during
a financial period.
The Perpetual Board has the
responsibility and commitment to
monitor that the organisation has a
framework in place to manage risk.
The Board’s commitment is reflected
through the establishment of, and
investment in the Perpetual Group
Risk, Group Compliance and Internal
Audit functions, led by the Chief Risk
Officer. The Chief Risk Officer has the
mandate to design and implement this
Risk Management Framework (RMF).
Perpetual’s Audit, Risk and Compliance
Committee (ARCC) is responsible
for oversight and monitoring of the
Perpetual’s risk appetite statement,
compliance and risk management
frameworks and internal control
systems, and risk culture. The ARCC is
also responsible for monitoring overall
legal and regulatory compliance across
Perpetual including the Responsible
Entity. The RMF was reviewed,
updated and approved by the Audit,
Risk and Compliance Committee
during the 2020 financial year.
The RMF consists of programs and
policies which are designed to address
specific risk categories - strategic,
financial, operational, outsourcing,
investment, reputation, people and
compliance, legal and conduct risk.
Programs supporting the RMF are
regularly reviewed to confirm their
appropriateness. The Audit, Risk and
Compliance Committee is comprised
of Ian Hammond (Chair), Nancy Fox,
Craig Ueland and Gregory Cooper. The
Audit, Risk and Compliance Committee
Terms of Reference sets out its role and
responsibilities. This can be obtained
on the Perpetual website. All members
of the Perpetual Audit, Risk and
Compliance Committee members are
independent non-executive directors
of Perpetual Limited. A majority of
the Responsible Entity Compliance
Committee is comprised of external
members, including an external Chair.
All Perpetual Group Executives are
accountable for managing risk within
their area of responsibility, including
the extent to which the Responsible
Entity is effectively applying and
acting in accordance with the RMF.
They are also required to manage risk
as part of their business objectives
with risk management integrated
across business processes.
The RMF is underpinned by the “Three
Lines of Defence” model. This model
sees the first line, being business unit
management, accountable for the day
to day identification and management
of risks. The Risk and Compliance
function represents the second line
and consists of risk management
professionals who provide the
framework, tools, advice and assistance
to enable management to effectively
identify, assess and manage risk and
is responsible for overseeing first line
activities. Internal Audit provides
independent assurance, representing
the third line, and reports to the ARCC.
In respect of economic, environmental
and social sustainability risks, the
Manager is a signatory to the United
Nations-supported Principles for
Responsible Investment (PRI) and has
sought to integrate ESG considerations
within its Investment Process via
a Responsible Investment Policy.
This policy outlines the necessary
considerations for incorporating
environmental, social and corporate
governance factors in the investment
decision. The Manager’s consideration
of ESG factors and labour standards
does not include making ethical
or moral judgements on particular
practices or issues. Instead, when
deciding whether to buy, retain or sell an
investment, the Manager will consider
those ESG factors only to the extent that
they are relevant to the current or future
value of the investment.
CORPORATE GOVERNANCE STATEMENT 2020 | 15
LEAD AUDiTOR’S
iNDEPENDENT
DECLARATiON
Lead Auditor’s Independence Declaration under
Lead Auditor’s Independence Declaration under
Section 307C of the Corporations Act 2001
Section 307C of the Corporations Act 2001
To the Directors of Perpetual Trust Services Limited as the Responsible Entity of
Perpetual Credit Income Trust
To the Directors of Perpetual Trust Services Limited as the Responsible Entity of
Perpetual Credit Income Trust
I declare that, to the best of my knowledge and belief, in relation to the audit of Perpetual Credit Income
Trust for the financial year ended 30 June 2020 there have been:
i.
I declare that, to the best of my knowledge and belief, in relation to the audit of Perpetual Credit Income
Trust for the financial year ended 30 June 2020 there have been:
no contraventions of the auditor independence requirements as set out in the
Corporations Act 2001 in relation to the audit; and
ii.
i.
ii.
no contraventions of any applicable code of professional conduct in relation to the audit.
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.
KPMG
KPMG
Jessica Davis
Partner
Jessica Davis
Sydney
Partner
21 August 2020
Sydney
21 August 2020
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.
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.
16 | PERPETUAL CREDIT INCOME TRUST
Liability limited by a scheme approved under
Professional Standards Legislation.
Liability limited by a scheme approved under
Professional Standards Legislation.
Lead Auditor’s Independence Declaration under
Lead Auditor’s Independence Declaration under
Section 307C of the Corporations Act 2001
Section 307C of the Corporations Act 2001
To the Directors of Perpetual Trust Services Limited as the Responsible Entity of
Perpetual Credit Income Trust
To the Directors of Perpetual Trust Services Limited as the Responsible Entity of
Perpetual Credit Income Trust
I declare that, to the best of my knowledge and belief, in relation to the audit of Perpetual Credit Income
Trust for the financial year ended 30 June 2020 there have been:
I declare that, to the best of my knowledge and belief, in relation to the audit of Perpetual Credit Income
no contraventions of the auditor independence requirements as set out in the
i.
Trust for the financial year ended 30 June 2020 there have been:
Corporations Act 2001 in relation to the audit; and
ii.
i.
ii.
no contraventions of any applicable code of professional conduct in relation to the audit.
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.
KPMG
KPMG
Jessica Davis
Partner
Jessica Davis
Sydney
Partner
Sydney
21 August 2020
21 August 2020
STATEMENT OF
COMPREHENSiVE
iNCOME
Statement of comprehensive income
Investment income
Distribution income
Interest income
Net gains/(losses) on financial instruments at fair value through profit
or loss
Net foreign exchange gains/(losses)
Other income
Total net investment income/(loss)
Expenses
Responsible Entity's fees
Investment Manager's fees
Other operating expenses
Total expenses
Profit/(loss)
Other comprehensive income
Total comprehensive income/(loss) for the year
Earnings per unit
Basic and diluted earnings per unit - cents per unit
Perpetual Credit Income Trust
Statement of comprehensive income
For the year ended 30 June 2020
For the
period from
22 May
2018 to
30 June
2019
$'000
30 June
2020
$'000
Notes
3
4
5(a), 14
5(b)
5(c)
3,598
14,492
(13,091)
33
40
5,072
130
3,144
1,155
4,429
643
-
643
519
1,203
487
(9)
-
2,200
20
469
143
632
1,568
-
1,568
8
0.16
0.39
The above statement of comprehensive income should be read in conjunction with the accompanying notes.
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.
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.
Liability limited by a scheme approved under
Professional Standards Legislation.
-17-
ANNUAL FINANCIAL REPORT 2020 | 17
BALANCE SHEET
Balance sheet
Assets
Cash and cash equivalents
Financial assets at fair value through profit or loss
Receivables for securities sold
Receivables
Total assets
Liabilities
Financial liabilities at fair value through profit or loss
Distributions payable
Payables for securities purchased
Payables
Total liabilities
Net assets attributable to unitholders - equity
Perpetual Credit Income Trust
Balance sheet
As at 30 June 2020
As at
30 June
2020
$'000
30 June
2019
$'000
11,942
415,073
5,824
1,364
434,203
2,968
1,210
4,475
364
9,017
149,358
297,029
-
839
447,226
692
342
4,526
440
6,000
425,186
441,226
Notes
13(b)
9
11
10
6
12
7
The above balance sheet should be read in conjunction with the accompanying notes.
-18-
18 | PERPETUAL CREDIT INCOME TRUST
Balance sheet
Assets
Cash and cash equivalents
Financial assets at fair value through profit or loss
Receivables for securities sold
Receivables
Total assets
Liabilities
Financial liabilities at fair value through profit or loss
Distributions payable
Payables for securities purchased
Payables
Total liabilities
Perpetual Credit Income Trust
Balance sheet
As at 30 June 2020
As at
30 June
2020
$'000
30 June
2019
$'000
11,942
415,073
5,824
1,364
434,203
2,968
1,210
4,475
364
9,017
149,358
297,029
-
839
447,226
692
342
4,526
440
6,000
Notes
13(b)
9
11
10
6
12
7
Net assets attributable to unitholders - equity
425,186
441,226
The above balance sheet should be read in conjunction with the accompanying notes.
STATEMENT OF
CHANGES iN
EQUiTY
Statement of changes in equity
Total equity at the beginning of the year
Comprehensive income for the year
Profit/(loss)
Other comprehensive income
Total comprehensive income for the year
Transactions with unitholders
Capital raising from the Initial Public Offering (IPO)
Units issued upon reinvestment of distributions
Distributions to unitholders
Total transactions with unitholders
Total equity at the end of the year
Perpetual Credit Income Trust
Statement of changes in equity
For the year ended 30 June 2020
For the
period from
22 May
2018 to
30 June
2019
$'000
-
-
-
1,568
-
1,568
-
440,000
-
(342)
439,658
-
-
441,226
30 June
2020
$'000
441,226
-
-
643
-
643
-
-
368
(17,051)
(16,683)
-
-
425,186
Notes
7
7
7
6, 7
7
The above statement of changes in equity should be read in conjunction with the accompanying notes.
-18-
-19-
ANNUAL FINANCIAL REPORT 2020 | 19
STATEMENT OF
CASH FLOWS
Statement of cash flows
Perpetual Credit Income Trust
Statement of cash flows
For the year ended 30 June 2020
For the
period from
22 May
2018 to
30 June
2019
$'000
30 June
2020
$'000
Notes
Cash flows from operating activities
Distributions received
Interest received
Other income received
Investment Manager's fees paid
Other operating expenses paid
Net cash inflow/(outflow) from operating activities
13(a)
Cash flows from investing activities
Proceeds from sale of investments
Payments for purchase of investments
Net cash inflow/(outflow) from investing activities
Cash flows from financing activities
Capital raising from the Initial Public Offering (IPO)
Distributions paid
Net cash inflow/(outflow) from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Effects of exchange rate changes on cash and cash equivalents
2,963
14,654
258
(3,385)
(1,405)
13,085
-
927
-
(224)
(12)
691
452,220
(586,919)
(134,699)
4,269
(295,602)
(291,333)
-
(15,800)
(15,800)
440,000
-
440,000
(137,414)
149,358
149,358
(2)
-
-
Cash and cash equivalents at the end of the year
13(b)
11,942
149,358
The above statement of cash flows should be read in conjunction with the accompanying notes.
-20-
20 | PERPETUAL CREDIT INCOME TRUST
Statement of cash flows
Perpetual Credit Income Trust
Statement of cash flows
For the year ended 30 June 2020
For the
period from
22 May
2018 to
30 June
2019
$'000
30 June
2020
$'000
Notes
2,963
14,654
258
(3,385)
(1,405)
13,085
927
-
-
(224)
(12)
691
452,220
(586,919)
(134,699)
4,269
(295,602)
(291,333)
-
440,000
(15,800)
(15,800)
440,000
(137,414)
149,358
149,358
(2)
-
-
-
Cash flows from operating activities
Distributions received
Interest received
Other income received
Investment Manager's fees paid
Other operating expenses paid
Net cash inflow/(outflow) from operating activities
13(a)
Cash flows from investing activities
Proceeds from sale of investments
Payments for purchase of investments
Net cash inflow/(outflow) from investing activities
Cash flows from financing activities
Capital raising from the Initial Public Offering (IPO)
Distributions paid
Net cash inflow/(outflow) from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Effects of exchange rate changes on cash and cash equivalents
Cash and cash equivalents at the end of the year
13(b)
11,942
149,358
The above statement of cash flows should be read in conjunction with the accompanying notes.
NOTES TO THE
FiNANCiAL
STATEMENTS
1 General Information
Perpetual Credit Income Trust
Notes to the financial statements
For the year ended 30 June 2020
The annual financial report covers the Perpetual Credit Income Trust (the Trust) as an individual entity. The Trust
is a registered managed investment scheme, which was constituted on 9 May 2018, registered with the
Australian Securities and Investments Commission on 22 May 2018, commenced operations on 8 May 2019 and
its units commenced trading on the Australian Securities Exchange (ASX: PCI) on 14 May 2019. The Trust is
domiciled in Australia. For the purpose of the financial statements, the Trust is a for-profit entity.
The Responsible Entity of the Trust is Perpetual Trust Services Limited (ACN 000 142 049, AFSL 236 648) (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 Trust is Perpetual Investment Management Limited (AFSL 234 426) (the
Investment Manager).
The Trust's investment objective is to provide investors with monthly income by investing in a diversified pool of
credit and fixed income assets.
The annual financial report was authorised for issue by the Directors on 21 August 2020. The Directors of the
Responsible Entity have the power to amend and reissue the annual financial report.
2 Summary of significant accounting policies
The principal accounting policies applied in the preparation of this annual financial report are set out below.
These policies have been consistently applied to all years presented, unless otherwise stated.
(a) Basis of preparation
The annual financial report is a general purpose financial report which has been prepared in accordance with the
Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards Board
(AASB) and the Corporations Act 2001 in Australia.
The annual financial report is prepared on the basis of fair value measurement of assets and liabilities except
where otherwise stated.
Compliance with International Financial Reporting Standards
The annual financial report of the Trust also complies with International Financial Reporting Standards and
Interpretations issued by the International Accounting Standards Board.
Functional and presentation currency
The annual financial report is presented in Australian dollars, which is the Trust's functional currency.
Use of estimates
Management has taken into consideration the impacts of COVID-19 to make estimates and assumptions that
affect the reported amounts in the financial statements. These estimates and associated assumptions are
reviewed regularly and are based on historical experience and other factors, including expectations of future
events that are believed to be reasonable under the circumstances. Actual results may differ from these
estimates.
The use of estimates and critical judgements in fair value measurement that can have significant effect on the
amounts recognised in the financial statements is described in note 16(d).
-20-
-21-
ANNUAL FINANCIAL REPORT 2020 | 21
Perpetual Credit Income Trust
Notes to the financial statements
For the year ended 30 June 2020
(continued)
2 Summary of significant accounting policies (continued)
(b) New accounting standards and interpretations
There are no new accounting standards, amendments and interpretations effective for the first time for the
financial year beginning 1 July 2019 that would be expected to have a material impact on the Trust.
(c) Financial instruments
(i) Classification
The Trust classifies its investments based on its business model for managing those financial instruments and
their contractual cash flow characteristics. The Trust’s investment portfolio is managed and its performance is
evaluated on a fair value basis in accordance with the Trust’s documented investment strategy. The Trust
evaluates the information about its investments on a fair value basis together with other related financial
information.
Derivatives and unlisted unit trusts are classified as financial assets at fair value through profit or loss. Derivative
contracts that have negative values are presented as financial liabilities at fair value through profit or loss.
For debt securities, the contractual cash flows are solely payments of principal and interest, however, they are
neither held for collecting contractual cash flows nor held both for collecting contractual cash flows and for sale.
The collection of contractual cash flows is only incidental to achieving the Trust’s business model’s objective.
Consequently, the debt securities are classified as financial assets at fair value through profit or loss.
(ii) Recognition/derecognition
The Trust recognises financial assets and liabilities on the date it becomes party to the purchased contractual
agreement (trade date) and recognises changes in fair value of the financial assets or financial liabilities from this
date.
Investments are derecognised on the date the Trust becomes party to the sale contractual agreement (trade
date).
(iii) Measurement
At initial recognition, a financial asset or liability is measured at fair value. Transaction costs are expensed in
profit or loss as incurred. Subsequently all financial assets and liabilities are measured at fair value without any
deduction for estimated future selling cost. Gains and losses arising from changes in the fair value measurement
are recognised in profit or loss in the period in which they arise.
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. Further details of fair value measurement are disclosed in
note 16(d).
(iv) Offsetting financial instruments
Financial assets and liabilities are offset and the net amount is reported in the balance sheet 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.
-22-
22 | PERPETUAL CREDIT INCOME TRUST
Perpetual Credit Income Trust
Notes to the financial statements
For the year ended 30 June 2020
(continued)
Perpetual Credit Income Trust
Notes to the financial statements
For the year ended 30 June 2020
(continued)
2 Summary of significant accounting policies (continued)
2 Summary of significant accounting policies (continued)
(b) New accounting standards and interpretations
There are no new accounting standards, amendments and interpretations effective for the first time for the
financial year beginning 1 July 2019 that would be expected to have a material impact on the Trust.
(c) Financial instruments
(i) Classification
The Trust classifies its investments based on its business model for managing those financial instruments and
their contractual cash flow characteristics. The Trust’s investment portfolio is managed and its performance is
evaluated on a fair value basis in accordance with the Trust’s documented investment strategy. The Trust
evaluates the information about its investments on a fair value basis together with other related financial
information.
Derivatives and unlisted unit trusts are classified as financial assets at fair value through profit or loss. Derivative
contracts that have negative values are presented as financial liabilities at fair value through profit or loss.
For debt securities, the contractual cash flows are solely payments of principal and interest, however, they are
neither held for collecting contractual cash flows nor held both for collecting contractual cash flows and for sale.
The collection of contractual cash flows is only incidental to achieving the Trust’s business model’s objective.
Consequently, the debt securities are classified as financial assets at fair value through profit or loss.
The Trust recognises financial assets and liabilities on the date it becomes party to the purchased contractual
agreement (trade date) and recognises changes in fair value of the financial assets or financial liabilities from this
Investments are derecognised on the date the Trust becomes party to the sale contractual agreement (trade
(ii) Recognition/derecognition
date.
date).
(iii) Measurement
At initial recognition, a financial asset or liability is measured at fair value. Transaction costs are expensed in
profit or loss as incurred. Subsequently all financial assets and liabilities are measured at fair value without any
deduction for estimated future selling cost. Gains and losses arising from changes in the fair value measurement
are recognised in profit or loss in the period in which they arise.
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. Further details of fair value measurement are disclosed in
note 16(d).
(iv) Offsetting financial instruments
Financial assets and liabilities are offset and the net amount is reported in the balance sheet 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.
(d) Net assets attributable to unitholders
The Trust is a closed-end vehicle and accordingly there are no redemptions by investors. Instead, while the Trust
is listed, unitholders who wish to exit their investment will be able to do so via the ASX.
Units in the Trust are listed on the ASX and traded by unitholders. The units can be traded on the ASX at any
time for cash based on the listed price. While the Trust is listed 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.
The units issued by the Trust have been classified as equity as the Trust satisfies all criteria for the classification
of puttable financial instruments as equity under AASB 132 Financial Instruments: Presentation.
(e) Cash and cash equivalents
For the purpose of presentation in the statement of cash flows, cash and cash equivalents include cash at bank,
margin accounts, other short term and highly liquid financial assets with a maturity period of three months or less
from the date of acquisition that are readily convertible to known amounts of cash and which are subject to an
insignificant risk of changes in value.
Margin accounts comprise cash held as collateral for derivative transactions. The cash is held by the broker and
is only available to meet margin calls.
(f) Receivables
Receivables include accrued income and receivables for securities sold. Amounts are generally received within
30 days of being accrued for.
These amounts are recognised initially at fair value and subsequently measured at amortised cost. At each
reporting date, the Trust 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 Trust shall measure the loss allowance
at an amount equal to 12-month expected credit losses. Significant financial difficulties of the counterparty,
probability that the counterparty will enter bankruptcy or financial reorganisation, and default in payments are all
considered indicators that a loss allowance may be required. If the credit risk increases to the point that it is
considered to be credit impaired, interest income will be calculated based on the gross carrying amount adjusted
for the loss allowance.
The amount of the impairment loss is recognised in profit or loss within other operating 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 operating expenses in profit or loss.
(g) Payables
Payables include accrued expenses and payables for securities purchased which are unpaid at the end of the
reporting date. Amounts are generally paid within 30 days of being accrued for.
-22-
-23-
ANNUAL FINANCIAL REPORT 2020 | 23
Perpetual Credit Income Trust
Notes to the financial statements
For the year ended 30 June 2020
(continued)
2 Summary of significant accounting policies (continued)
(h) Investment income
Interest income from financial assets at amortised cost is recognised using the effective interest method and
includes interest from cash and cash equivalents.
Interest from financial assets at fair value through profit or loss is determined based on the contractual coupon
interest rate and includes interest from debt securities.
Distribution income from financial assets at fair value through profit or loss is recognised in profit or loss when the
Trust's right to receive payment is established.
Other changes in fair value for such instruments are recorded in accordance with the accounting policies
described in note 2(c).
(i) Expenses
All expenses, including Investment Manager's fees and Responsible Entity's fees are recognised in profit or loss
on an accruals basis.
(j)
Income tax
The Trust is not subject to income tax provided the taxable income of the Trust is attributed in full to its
unitholders each financial year either by way of cash or reinvestment. Unitholders are subject to income tax at
their own marginal tax rates on amounts attributable to them.
The benefits of foreign tax paid are passed on to unitholders, providing certain conditions are met.
(k) Distributions
Distributions are payable as set out in the Trust's Constitution. Such distributions are recognised as payable
when they are determined by the Responsible Entity of the Trust.
(l) Goods and Services Tax
The Goods and Services Tax (GST) is incurred on the cost of various services provided to the Trust by third
parties. The Trust qualifies for Reduced Input Tax Credit; hence expenses such as Responsible Entity's fees
have been recognised in profit or loss net of the amount of GST recoverable from the Australian Taxation Office.
Payables are stated with the amount of GST included. The net amount of GST recoverable is included in
receivables in the balance sheet. Cash flows are included in the statement of cash flows on a gross basis.
(m) Foreign currency translation
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at
the date of the transactions. Foreign exchange gains and losses resulting from the settlement of such
transactions and from the translations at year end exchange rates of monetary assets and liabilities denominated
in foreign currencies are recognised in profit or loss.
Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates
at the date when fair value was determined. Translation differences on assets and liabilities carried at fair value
are reported in profit or loss on a net basis within net gains/(losses) on financial instruments at fair value through
profit or loss.
-24-
24 | PERPETUAL CREDIT INCOME TRUST
Perpetual Credit Income Trust
Notes to the financial statements
For the year ended 30 June 2020
(continued)
2 Summary of significant accounting policies (continued)
3 Interest income
(h) Investment income
Interest income from financial assets at amortised cost is recognised using the effective interest method and
includes interest from cash and cash equivalents.
Interest from financial assets at fair value through profit or loss is determined based on the contractual coupon
interest rate and includes interest from debt securities.
Distribution income from financial assets at fair value through profit or loss is recognised in profit or loss when the
Trust's right to receive payment is established.
Other changes in fair value for such instruments are recorded in accordance with the accounting policies
Cash and cash equivalents
Debt securities
Total
Perpetual Credit Income Trust
Notes to the financial statements
For the year ended 30 June 2020
(continued)
For the
period from
22 May
2018 to
30 June
2019
$'000
30 June
2020
$'000
109
14,383
14,492
567
636
1,203
All expenses, including Investment Manager's fees and Responsible Entity's fees are recognised in profit or loss
4 Net gains/(losses) on financial instruments at fair value through profit or loss
Net gains/(losses) arising from changes in the fair value measurement comprise:
For the
period from
22 May
2018 to
30 June
2019
$'000
30 June
2020
$'000
Net unrealised gains/(losses) on financial instruments at fair value through profit or
loss
Net realised gains/(losses) on financial instruments at fair value through profit or
loss
Net gains/(losses) on financial instruments at fair value through profit or
loss
(11,583)
(1,508)
(13,091)
864
(377)
487
described in note 2(c).
(i) Expenses
on an accruals basis.
(j)
Income tax
The Trust is not subject to income tax provided the taxable income of the Trust is attributed in full to its
unitholders each financial year either by way of cash or reinvestment. Unitholders are subject to income tax at
their own marginal tax rates on amounts attributable to them.
The benefits of foreign tax paid are passed on to unitholders, providing certain conditions are met.
Distributions are payable as set out in the Trust's Constitution. Such distributions are recognised as payable
when they are determined by the Responsible Entity of the Trust.
(k) Distributions
(l) Goods and Services Tax
The Goods and Services Tax (GST) is incurred on the cost of various services provided to the Trust by third
parties. The Trust qualifies for Reduced Input Tax Credit; hence expenses such as Responsible Entity's fees
have been recognised in profit or loss net of the amount of GST recoverable from the Australian Taxation Office.
Payables are stated with the amount of GST included. The net amount of GST recoverable is included in
receivables in the balance sheet. Cash flows are included in the statement of cash flows on a gross basis.
(m) Foreign currency translation
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at
the date of the transactions. Foreign exchange gains and losses resulting from the settlement of such
transactions and from the translations at year end exchange rates of monetary assets and liabilities denominated
in foreign currencies are recognised in profit or loss.
Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates
at the date when fair value was determined. Translation differences on assets and liabilities carried at fair value
are reported in profit or loss on a net basis within net gains/(losses) on financial instruments at fair value through
profit or loss.
-24-
-25-
ANNUAL FINANCIAL REPORT 2020 | 25
Perpetual Credit Income Trust
Notes to the financial statements
For the year ended 30 June 2020
(continued)
5 Expenses
All expenses are recognised, net of the amount of Goods and Services Tax (GST) recoverable from the taxation
authority, in profit or loss on an accruals basis.
(a) Responsible Entity's fees
The Responsible Entity, Perpetual Trust Services Limited, is entitled to receive 0.03% - 0.05% per annum (net
RITC) of the Net Asset Value of the Trust and is also entitled to be paid remuneration for Additional Fund
Administration services in the manner and at the time as set out in Investment Management Agreement. The
Responsible Entity’s fees are calculated and accrued daily and paid monthly in arrears. Further details of the
Responsible Entity’s fees are disclosed in note 14.
(b) Investment Manager's fees
The Investment Manager, Perpetual Investment Management Limited, receives management fees of 0.72% per
annum (net of RITC) of the Net Asset Value of the Trust. In accordance with the PDS dated 8 March 2019, the
Net Asset Value of the Trust is calculated daily by deducting all liabilities, which includes declared but unpaid
distributions, calculated in accordance with the Responsible Entity’s Unit pricing and Valuation Policy and
Australian Accounting Standards (AAS) from the total value of assets of the Trust. The management fees are
calculated and accrued daily and paid monthly in arrears.
Investment Manager's fees
For the
period from
22 May
2018 to
30 June
2019
$'000
30 June
2020
$'000
3,144
469
The Manager is appointed for an initial term of ten years unless terminated earlier (Initial Term). The Investment
Management Agreement will be automatically extended for a further five year term on the expiry of the Initial
Term (Extended Term) unless terminated earlier in accordance with its terms.
If the Investment Management Agreement is terminated during the term, then in certain circumstances the
Manager will be entitled to a termination payment equal to the Management fee rate multiplied by the number of
years in the Initial Term or Extended Term and the value of the total Portfolio as at the termination date, reduced
by one one hundred and twentieth (1/120) for Initial Term or one sixtieth (1/60) for Extended Term for each whole
calendar month that has elapsed between the commencement date or the commencement of the Extended Term
and the termination date.
The Manager agreed to pay all of the costs incurred in raising capital under the Offer in accordance with the PDS
dated 8 March 2019. If the Investment Management Agreement is terminated during the Initial Term, then, in
certain circumstances the Manager will be entitled to be reimbursed for these costs, reduced by one one hundred
and twentieth (1/120) for each whole calendar month that has elapsed between the commencement date and the
termination date.
-26-
26 | PERPETUAL CREDIT INCOME TRUST
Perpetual Credit Income Trust
Notes to the financial statements
For the year ended 30 June 2020
(continued)
Perpetual Credit Income Trust
Notes to the financial statements
For the year ended 30 June 2020
(continued)
5 Expenses
All expenses are recognised, net of the amount of Goods and Services Tax (GST) recoverable from the taxation
authority, in profit or loss on an accruals basis.
(a) Responsible Entity's fees
The Responsible Entity, Perpetual Trust Services Limited, is entitled to receive 0.03% - 0.05% per annum (net
RITC) of the Net Asset Value of the Trust and is also entitled to be paid remuneration for Additional Fund
Administration services in the manner and at the time as set out in Investment Management Agreement. The
Responsible Entity’s fees are calculated and accrued daily and paid monthly in arrears. Further details of the
Responsible Entity’s fees are disclosed in note 14.
(b) Investment Manager's fees
The Investment Manager, Perpetual Investment Management Limited, receives management fees of 0.72% per
annum (net of RITC) of the Net Asset Value of the Trust. In accordance with the PDS dated 8 March 2019, the
Net Asset Value of the Trust is calculated daily by deducting all liabilities, which includes declared but unpaid
distributions, calculated in accordance with the Responsible Entity’s Unit pricing and Valuation Policy and
Australian Accounting Standards (AAS) from the total value of assets of the Trust. The management fees are
calculated and accrued daily and paid monthly in arrears.
For the
period from
22 May
2018 to
30 June
2019
$'000
30 June
2020
$'000
3,144
469
Investment Manager's fees
The Manager is appointed for an initial term of ten years unless terminated earlier (Initial Term). The Investment
Management Agreement will be automatically extended for a further five year term on the expiry of the Initial
Term (Extended Term) unless terminated earlier in accordance with its terms.
If the Investment Management Agreement is terminated during the term, then in certain circumstances the
Manager will be entitled to a termination payment equal to the Management fee rate multiplied by the number of
years in the Initial Term or Extended Term and the value of the total Portfolio as at the termination date, reduced
by one one hundred and twentieth (1/120) for Initial Term or one sixtieth (1/60) for Extended Term for each whole
calendar month that has elapsed between the commencement date or the commencement of the Extended Term
and the termination date.
The Manager agreed to pay all of the costs incurred in raising capital under the Offer in accordance with the PDS
dated 8 March 2019. If the Investment Management Agreement is terminated during the Initial Term, then, in
certain circumstances the Manager will be entitled to be reimbursed for these costs, reduced by one one hundred
and twentieth (1/120) for each whole calendar month that has elapsed between the commencement date and the
termination date.
5 Expenses (continued)
(c) Other operating expenses
Auditors’ remuneration
ASX fees
Registry services
Custody administration fees
Other expenses
Total other operating expenses
(d) Auditor's remuneration
Audit and review of financial statements - KPMG
Tax compliance services - KPMG
Audit and review of compliance plan - PwC
Total auditor's remuneration
Audit fees were paid or payable by the Trust.
For the
period from
22 May
2018 to
30 June
2019
$'000
32
51
33
12
15
143
30 June
2020
$'000
59
56
204
59
777
1,155
For the
period from
22 May
2018 to
30 June
2019
$
30 June
2020
$
48,235
8,034
2,836
59,105
22,500
7,500
2,500
32,500
-26-
-27-
ANNUAL FINANCIAL REPORT 2020 | 27
6 Distributions to unitholders
The distributions for the year were as follows:
Distributions paid - July
Distributions paid - August
Distributions paid - September
Distributions paid - October
Distributions paid - November
Distributions paid - December
Distributions paid - January
Distributions paid - February
Distributions paid - March
Distributions paid - April
Distributions paid - May
Distributions payable - June
Perpetual Credit Income Trust
Notes to the financial statements
For the year ended 30 June 2020
(continued)
For the
period from
22 May
2018 to
30 June
2019
$'000
For the
period from
22 May
2018 to
30 June
2019
CPU
-
-
-
-
-
-
-
-
-
-
-
342
342
-
-
-
-
-
-
-
-
-
-
-
0.0854
0.09
30 June
2020
$'000
30 June
2020
CPU
1,599
1,597
1,544
1,499
1,449
1,497
1,498
1,401
1,307
1,209
1,241
1,210
17,051
0.3997
0.3993
0.3860
0.3745
0.3622
0.3741
0.3741
0.3501
0.3264
0.3019
0.3099
0.3023
4.2605
-28-
28 | PERPETUAL CREDIT INCOME TRUST
Perpetual Credit Income Trust
Notes to the financial statements
For the year ended 30 June 2020
(continued)
Perpetual Credit Income Trust
Notes to the financial statements
For the year ended 30 June 2020
(continued)
6 Distributions to unitholders
The distributions for the year were as follows:
7 Net assets attributable to unitholders
Movements in the number of units and net assets attributable to unitholders during the year were as follows:
For the
For the
period from
period from
22 May
2018 to
30 June
2019
$'000
22 May
2018 to
30 June
2019
CPU
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
30 June
30 June
2020
$'000
2020
CPU
1,599
1,597
1,544
1,499
1,449
1,497
1,498
1,401
1,307
1,209
1,241
1,210
0.3997
0.3993
0.3860
0.3745
0.3622
0.3741
0.3741
0.3501
0.3264
0.3019
0.3099
0.3023
Distributions paid - July
Distributions paid - August
Distributions paid - September
Distributions paid - October
Distributions paid - November
Distributions paid - December
Distributions paid - January
Distributions paid - February
Distributions paid - March
Distributions paid - April
Distributions paid - May
Distributions payable - June
For the
period from
22 May
2018 to
30 June
2019
Units '000
30 June
2020
Units '000
30 June
2020
$'000
For the
period from
22 May
2018 to
30 June
2019
$'000
Net assets attributable to unitholders
Opening balance
Capital raising from the Initial Public Offering (IPO)
Units issued upon reinvestment of distributions
Distributions to unitholders
Profit/(loss)
Closing balance
400,000
-
334
-
-
400,334
-
400,000
-
-
-
400,000
441,226
-
368
(17,051)
643
425,186
-
440,000
-
(342)
1,568
441,226
As stipulated within the Trust's Constitution, each unit represents a right to an individual unit in the Trust and
does not extend to a right to the underlying assets of the Trust. There are no separate classes of units and each
unit has the same right attaching to it as all other units of the Trust.
17,051
4.2605
342
342
0.0854
0.09
Capital risk management
The Trust considers its net assets attributable to unitholders as capital.
8 Earnings per unit
blank
blank
blank
Profit/(loss) attributable to unitholders ($'000)
blank
Weighted average number of units on issue ('000)
blank
blank
Basic and diluted earnings per unit (cents per unit)
For the
period from
22 May
2018 to
30 June
2019
30 June
2020
blank
643
1,568
400,210
400,000
0.16
0.39
Basic and diluted earnings per unit is calculated by dividing the profit attributable to unitholders of the Trust by the
weighted average number of units on issue during the year.
-28-
-29-
ANNUAL FINANCIAL REPORT 2020 | 29
9 Financial assets at fair value through profit or loss
Derivatives
Futures
Swaps
Debt securities
Unlisted unit trusts
Total financial assets at fair value through profit or loss
10 Financial liabilities at fair value through profit or loss
Derivatives
Futures
Swaps
Total financial liabilities at fair value through profit or loss
11 Receivables
Distributions receivable
Interest receivable
Other receivables
Total receivables
Perpetual Credit Income Trust
Notes to the financial statements
For the year ended 30 June 2020
(continued)
30 June
2020
$'000
30 June
2019
$'000
24
458
331,992
82,599
415,073
-
-
247,317
49,712
297,029
30 June
2020
$'000
30 June
2019
$'000
447
2,521
2,968
236
456
692
30 June
2020
$'000
30 June
2019
$'000
1,154
114
96
1,364
519
276
44
839
-30-
30 | PERPETUAL CREDIT INCOME TRUST
Perpetual Credit Income Trust
Notes to the financial statements
For the year ended 30 June 2020
(continued)
30 June
2020
$'000
30 June
2019
$'000
24
458
331,992
82,599
415,073
-
-
247,317
49,712
297,029
30 June
2020
$'000
30 June
2019
$'000
447
2,521
2,968
236
456
692
30 June
2020
$'000
30 June
2019
$'000
1,154
114
96
1,364
519
276
44
839
Derivatives
Futures
Swaps
Debt securities
Unlisted unit trusts
Total financial assets at fair value through profit or loss
10 Financial liabilities at fair value through profit or loss
Total financial liabilities at fair value through profit or loss
Derivatives
Futures
Swaps
11 Receivables
Distributions receivable
Interest receivable
Other receivables
Total receivables
9 Financial assets at fair value through profit or loss
12 Payables
Responsible Entity's fees payable
Investment Manager's fees payable
Other operating expenses payable
Other payable
Total payables
Perpetual Credit Income Trust
Notes to the financial statements
For the year ended 30 June 2020
(continued)
30 June
2020
$'000
30 June
2019
$'000
69
269
11
15
364
21
280
139
-
440
13 Reconciliation of profit/(loss) to net cash inflow/(outflow) from operating activities
(a)Reconciliation of operating profit/(loss) to net
(a) Reconciliation of profit/(loss) to net cash inflow/(outflow) from
operating activities
Profit/(loss)
(Increase)/decrease in distributions receivable
(Increase)/decrease in interest receivable
(Increase)/decrease in other receivables
Increase/(decrease) in payables
Net (gains)/losses on financial instruments at fair value through profit or loss
Net foreign exchange (gains)/losses
Net cash inflow/(outflow) from operating activities
(b)Components of cash and cash equivalents
(b) Components of cash and cash equivalents
Cash at the end of the year as shown in the statement of cash flows is reconciled to
the balance sheet as follows:
Cash at bank
Margin accounts
Total cash and cash equivalents
(c)Non-cash financing activities
(c) Non-cash financing activities
During the year, the following distribution payments were satisfied by the issue of
units under the distribution reinvestment plan
For the
period from
22 May
2018 to
30 June
2019
$'000
1,568
(519)
(276)
(44)
440
(487)
9
691
30 June
2020
$'000
643
(635)
162
(52)
(91)
13,091
(33)
13,085
9,400
2,542
11,942
148,263
1,095
149,358
368
-
-30-
-31-
ANNUAL FINANCIAL REPORT 2020 | 31
Perpetual Credit Income Trust
Notes to the financial statements
For the year ended 30 June 2020
(continued)
14 Related party transactions
Responsible Entity
The Responsible Entity of Perpetual Credit Income Trust is Perpetual Trust Services Limited (ACN 000 142 049,
AFSL 236 648), a wholly owned subsidiary of Perpetual Limited (ACN 000 431 827).
The Trust does not employ personnel in its own right. However, it is required to have an incorporated
Responsible Entity to manage the activities of the Trust and this is considered the key management personnel.
Key management personnel
(a) Directors
The following persons held office as Directors of Perpetual Trust Services Limited during the year or since the
end of the year and up to the date of this report.
Name
Glenn Foster
Vicki Riggio
Richard McCarthy
Simone Mosse
Phillip Blackmore
Michael Vainauskas
Andrew Mclver
Date of appointment/resignation
Appointed as Director on 27 September 2019
Alternate Director for Vicki Riggio
Resigned as Director on 27 September 2019
Resigned as Alternate Director for Michael Vainauskas on 2 September 2019
Appointed as Alternate Director for Glenn Foster on 2 September 2019
Resigned as Alternate Director for Glenn Foster on 27 September 2019
Directors were in office for this entire year except where stated otherwise.
(b) Other key management personnel
There were no other persons with responsibility for planning, directing and controlling the activities of the Trust,
directly or indirectly, during or since the end of the financial year.
Key management personnel unitholdings
No key management personnel of the Responsible Entity held units in the Trust as at 30 June 2020.
Transactions with key management personnel
Key management personnel services are provided by Perpetual Trust Services Limited and included in the
Responsible Entity's fees. There is no separate charge for these services. There was no compensation paid
directly by the Trust to any of the key management personnel during the year.
The Trust has not made, guaranteed or secured, directly or indirectly, any loans to the key management
personnel or their personally related entities at any time during the reporting period.
-32-
32 | PERPETUAL CREDIT INCOME TRUST
14 Related party transactions
Responsible Entity
The Responsible Entity of Perpetual Credit Income Trust is Perpetual Trust Services Limited (ACN 000 142 049,
AFSL 236 648), a wholly owned subsidiary of Perpetual Limited (ACN 000 431 827).
The Trust does not employ personnel in its own right. However, it is required to have an incorporated
Responsible Entity to manage the activities of the Trust and this is considered the key management personnel.
Key management personnel
(a) Directors
Name
Glenn Foster
Vicki Riggio
Richard McCarthy
Simone Mosse
Phillip Blackmore
Date of appointment/resignation
Appointed as Director on 27 September 2019
Alternate Director for Vicki Riggio
Michael Vainauskas
Resigned as Director on 27 September 2019
Andrew Mclver
Resigned as Alternate Director for Michael Vainauskas on 2 September 2019
Appointed as Alternate Director for Glenn Foster on 2 September 2019
Resigned as Alternate Director for Glenn Foster on 27 September 2019
Directors were in office for this entire year except where stated otherwise.
(b) Other key management personnel
There were no other persons with responsibility for planning, directing and controlling the activities of the Trust,
directly or indirectly, during or since the end of the financial year.
Key management personnel unitholdings
No key management personnel of the Responsible Entity held units in the Trust as at 30 June 2020.
Transactions with key management personnel
Key management personnel services are provided by Perpetual Trust Services Limited and included in the
Responsible Entity's fees. There is no separate charge for these services. There was no compensation paid
directly by the Trust to any of the key management personnel during the year.
The Trust has not made, guaranteed or secured, directly or indirectly, any loans to the key management
personnel or their personally related entities at any time during the reporting period.
Perpetual Credit Income Trust
Notes to the financial statements
For the year ended 30 June 2020
(continued)
Perpetual Credit Income Trust
Notes to the financial statements
For the year ended 30 June 2020
(continued)
14 Related party transactions (continued)
Investment Manager
The Investment Manager, Perpetual Investment Management Limited, is a related party to the Trust. In
accordance with AASB 124 Related Party Disclosures, a member of the same group as the Responsible Entity
(who provides key management personnel services) is a related party.
Under the terms of the Investment Management Agreement, the Investment Manager is entitled to receive
Investment Manager's fees calculated by reference to the net asset value of the Trust. Further details of the
Investment Manager's fees are disclosed in note 5.
The following persons held office as Directors of Perpetual Trust Services Limited during the year or since the
end of the year and up to the date of this report.
Responsible Entity's fees and other transactions
Under the terms of the Trust's Constitution, the Responsible Entity is entitled to receive Responsible Entity's fees
calculated by reference to the net asset value of the Trust.
The transactions during the year and amounts payable at the reporting date between the Trust and the
Responsible Entity were as follows:
For the
period from
22 May
2018 to
30 June
2019
$
30 June
2020
$
129,729
68,857
19,558
20,989
Responsible Entity's fees
Responsible Entity's fees payable
Related party unitholdings
Parties related to the Trust (including the Responsible Entity, its related parties and other schemes managed by
the Responsible Entity) held units in the Trust as follows:
30 June 2020
Unitholders
Number of
units held
'000
Interest
held
%
Number of
units
acquired
'000
Number of
units
disposed
'000
Distributions
paid/payable
$'000
Perpetual Super Wrap
32
0.0
32
-
1
30 June 2019
There were no units held by parties related to the Trust.
-32-
-33-
ANNUAL FINANCIAL REPORT 2020 | 33
Perpetual Credit Income Trust
Notes to the financial statements
For the year ended 30 June 2020
(continued)
14 Related party transactions (continued)
Investments
The Trust held investments in the following scheme which is also managed by the Responsible Entity or its
related parties:
30 June 2020
Investments
Number of
units held
'000
Fair value
of
investments
$'000
Interest
held
%
Number of
units
acquired
'000
Number of
units
disposed
'000
Distributions
received/
receivable
$'000
Perpetual Loan Fund
82,087
82,599
56.4
34,233
-
3,598
30 June 2019
Investments
Number of
units held
'000
Fair value
of
investments
$'000
Interest
held
%
Number of
units
acquired
'000
Number of
units
disposed
'000
Distributions
received/
receivable
$'000
Perpetual Loan Fund
47,854
49,712
49.8
47,854
-
519
15 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 control and the relevant activities are directed by means of contractual arrangements.
The Trust considers all investments in unlisted unit trusts to be structured entities. The Trust invests in related
unlisted unit trusts for the purpose of capital appreciation and earning investment income.
The unlisted unit trusts are invested in accordance with the investment strategy by their respective investment
managers. The return of the unlisted unit trusts is exposed to the variability of the performance of their
investments. The unlisted unit trusts finance their operations by issuing redeemable units which are puttable at
the holder's option and entitle the holder to a proportional stake in the respective trusts' net assets and
distributions.
The Trust's exposure to structured entities at 30 June 2020 was $82,599,041 (2019: $49,711,697).
The fair value of these entities is included in financial assets at fair value through profit or loss in the balance
sheet.
The Trust's maximum exposure to loss from its interests in the structured entities is equal to the total fair value of
its investments in these entities as there are no off balance sheet exposures relating to them. The Trust's
exposure to any risk from the structured entities will cease when these investments are disposed of.
The Trust does not have current commitments or intentions and contractual obligations to provide financial or
other support to the structured entities. There are no loans or advances currently made to these entities.
-34-
34 | PERPETUAL CREDIT INCOME TRUST
14 Related party transactions (continued)
The Trust held investments in the following scheme which is also managed by the Responsible Entity or its
Fair value
Number of
Number of
Distributions
Number of
units held
'000
of
Interest
units
investments
held
acquired
disposed
$'000
%
'000
units
'000
received/
receivable
$'000
Perpetual Loan Fund
82,087
82,599
56.4
34,233
3,598
Fair value
Number of
Number of
Number of
units held
'000
of
Interest
investments
$'000
held
%
units
acquired
'000
units
disposed
'000
Distributions
received/
receivable
$'000
-
-
15 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 control and the relevant activities are directed by means of contractual arrangements.
The Trust considers all investments in unlisted unit trusts to be structured entities. The Trust invests in related
unlisted unit trusts for the purpose of capital appreciation and earning investment income.
The unlisted unit trusts are invested in accordance with the investment strategy by their respective investment
managers. The return of the unlisted unit trusts is exposed to the variability of the performance of their
investments. The unlisted unit trusts finance their operations by issuing redeemable units which are puttable at
the holder's option and entitle the holder to a proportional stake in the respective trusts' net assets and
Investments
related parties:
30 June 2020
Investments
30 June 2019
Investments
distributions.
sheet.
The Trust's maximum exposure to loss from its interests in the structured entities is equal to the total fair value of
its investments in these entities as there are no off balance sheet exposures relating to them. The Trust's
exposure to any risk from the structured entities will cease when these investments are disposed of.
The Trust does not have current commitments or intentions and contractual obligations to provide financial or
other support to the structured entities. There are no loans or advances currently made to these entities.
Perpetual Credit Income Trust
Notes to the financial statements
For the year ended 30 June 2020
(continued)
Perpetual Credit Income Trust
Notes to the financial statements
For the year ended 30 June 2020
(continued)
15 Structured entities (continued)
Unconsolidated subsidiaries
The Trust applies the investment entity exception to consolidation available under AASB 10 Consolidated
Financial Statements and measures its subsidiaries at fair value through profit or loss.
The following unconsolidated structured entities are considered to be the Trust's subsidiaries at the reporting
date:
Fair value
30 June
2020
$'000
30 June
2019
$'000
Ownership interest
30 June
30 June
2019
2020
%
%
Perpetual Loan Fund
82,599
49,712
56.4
49.8
The principal place of business for the above entity is Sydney, Australia.
16 Financial risk management
The Trust's activities expose it to a variety of financial risks. The management of these risks is undertaken by the
Trust's Investment Manager who has been appointed by the Responsible Entity under an Investment
Management Agreement to manage the Trust's assets in accordance with the Investment Objective and Strategy.
Perpetual Loan Fund
47,854
49,712
49.8
47,854
519
The Responsible Entity has in place a framework which includes:
• The Investment Manager providing the Responsible Entity with regular 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 Trust; and
• Regular reporting on the liquidity of the Trust in accordance with the Trust’s Liquidity Risk Management
Statement.
The Trust’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 Trust. Specific controls the Investment Manager applies to manage
the financial risks are detailed under each risk specified below.
The Trust's exposure to structured entities at 30 June 2020 was $82,599,041 (2019: $49,711,697).
The fair value of these entities is included in financial assets at fair value through profit or loss in the balance
(a) Market risk
(i) Currency risk
Currency risk arises as the fair value or future cash flows of monetary securities denominated in foreign currency
will fluctuate due to changes in exchange rates. The currency risk relating to non-monetary assets and liabilities
is a component of price risk not currency risk. However, Investment Manager monitors the exposures on all
foreign currency denominated assets and liabilities.
The Trust held cross currency swaps to protect the valuation of financial assets and liabilities against variations in
the exchange rates. The Trust does not designate any derivatives as hedges, and hence these derivative
financial instrument are classified at fair value through profit or loss.
The Trust did not have significant net exposure to currency risk at the reporting date.
-34-
-35-
ANNUAL FINANCIAL REPORT 2020 | 35
Perpetual Credit Income Trust
Notes to the financial statements
For the year ended 30 June 2020
(continued)
16 Financial risk management (continued)
(a) Market risk (continued)
(ii)
Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because
of changes in market interest rates. The Trust is exposed to cash flow interest rate risk on financial instruments
with floating interest rates. Financial instruments with fixed interest rates expose the Trust to fair value interest
rate risk.
The Trust's exposure to interest rate risk also arises from cash and cash equivalents, which earn/charge a
floating rate of interest.
The following table summarises the Trust’s exposure to interest rate risk:
30 June 2020
Financial assets
Cash and cash equivalents
Debt securities
Derivatives
Financial liabilities
Derivatives
30 June 2019
Financial assets
Cash and cash equivalents
Debt securities
Financial liabilities
Derivatives
Floating
interest
rate
$'000
Fixed
interest
rate
$'000
Non-interest
bearing
$'000
Total
$'000
11,942
156,544
-
-
175,448
482
-
2,968
-
-
-
-
11,942
331,992
482
2,968
Floating
interest
rate
$'000
Fixed
interest
rate
$'000
Non-interest
bearing
$'000
Total
$'000
149,358
137,963
-
109,354
-
692
-
-
-
149,358
247,317
692
The table presented in note 16(a)(iv) summarises sensitivity analysis to interest rate risk. This analysis assumes
that all other variables, in particular foreign currency exchange rates remain constant.
-36-
36 | PERPETUAL CREDIT INCOME TRUST
Perpetual Credit Income Trust
Notes to the financial statements
For the year ended 30 June 2020
(continued)
Perpetual Credit Income Trust
Notes to the financial statements
For the year ended 30 June 2020
(continued)
16 Financial risk management (continued)
16 Financial risk management (continued)
(a) Market risk (continued)
(ii)
Interest rate risk
rate risk.
floating rate of interest.
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because
of changes in market interest rates. The Trust is exposed to cash flow interest rate risk on financial instruments
with floating interest rates. Financial instruments with fixed interest rates expose the Trust to fair value interest
The Trust's exposure to interest rate risk also arises from cash and cash equivalents, which earn/charge a
The following table summarises the Trust’s exposure to interest rate risk:
(a) Market risk (continued)
(iii) Price risk
Price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of
changes in market prices (other than those arising from interest rate risk or currency risk).
The Trust predominantly invests in debt securities. As a result, the price risk arising from the Trust's investments
is impacted by movements in interest rates and is reflected in note 16(a)(ii).
The fair value of the Trust's investments exposed to price risk was as follows:
Floating
interest
rate
$'000
Fixed
rate
$'000
interest
Non-interest
bearing
$'000
Total
$'000
Blank
Units in fixed income trust
a
30 June
2020
$'000
30 June
2019
$'000
82,599
82,599
49,712
49,712
30 June 2020
Financial assets
Cash and cash equivalents
Debt securities
Derivatives
Financial liabilities
Derivatives
30 June 2019
Financial assets
Cash and cash equivalents
Debt securities
Financial liabilities
Derivatives
-
-
11,942
156,544
-
175,448
482
11,942
331,992
482
2,968
2,968
Floating
interest
rate
$'000
Fixed
rate
$'000
interest
Non-interest
bearing
$'000
Total
$'000
149,358
137,963
-
109,354
149,358
247,317
-
692
692
-
-
-
-
-
-
-
The table presented in note 16(a)(iv) summarises sensitivity analysis to interest rate risk. This analysis assumes
that all other variables, in particular foreign currency exchange rates remain constant.
The table presented in note 16(a)(iv) summarises sensitivity analysis to price risk. This analysis assumes that all
other variables remain constant.
(iv) Sensitivity analysis
The following table summarises the sensitivity of the profit and net assets attributable to unitholders to interest
rate risk and price risk. The reasonably possible movements in the risk variables have been determined based on
Investment Manager's best estimate, having regard to a number of factors, including historical levels of changes
in interest rates and historical correlation of the Trust's investments with the relevant benchmark and market
volatility. However, actual movements in the risk variables may be greater or less than anticipated due to a
number of factors, including unusual large market movements resulting from changes in the performance of
and/or correlation between the performance of the economies, markets and securities in which the Trust invests.
As a result, historic variations in risk variables should not be used to predict future variations in the risk variables.
blank
Interest rate risk
blank
blank
Price risk
Units in fixed income trust
Sensitivity rates
Impact on profit/net
assets attributable to unitholders
30 June
2020
$'000
1,279
(1,279)
-
-
4,130
(4,130)
+0.25%
-0.25%
+0.5%
-0.5%
+5%
-5%
30 June
2019
$'000
-
-
1,436
(1,436)
2,486
(2,486)
-36-
-37-
ANNUAL FINANCIAL REPORT 2020 | 37
Perpetual Credit Income Trust
Notes to the financial statements
For the year ended 30 June 2020
(continued)
16 Financial risk management (continued)
(b) Credit risk
Credit risk is the risk that a counterparty will be unable to pay amounts when they fall due. The main
concentration of counterparty credit risk, to which the Trust is exposed to, arises predominantly from the Trust's
investments in debt securities. The Trust is also exposed to counterparty credit risk on derivative financial
instruments, cash and cash equivalents, and receivables for securities sold. The maximum exposure to credit risk
at the reporting date is the carrying amount of the financial assets. None of these assets are impaired nor past
due but not impaired.
The Trust determines credit risk and measures expected credit losses for financial assets measured at amortised
cost using probability of default, exposure at default and loss given default. Investment Manager considers
relevant, historical analysis and forward looking information in determining any expected credit loss. At the
reporting date, all receivables and cash and cash equivalents are held with approved counterparties and are
either callable on demand or due within 30 days. Investment Manager considers the probability of default to be
low, as a result, no loss allowance has been recognised based on 12-month expected credit losses as any such
impairment would be wholly insignificant to the Trust.
(i) Debt securities
Investment management processes include the consideration of counterparty risk. The Investment Manager may
refer to the credit ratings issued by rating agencies to assess the creditworthiness of counterparties. The
Investment Manager consider (among other things) branding, stability and security marketability of counterparties
and consistently monitor exposure through electronic systems.
The Investment Manager monitors the credit ratings of debt securities on a regular basis.
The table below sets out the analysis of debt securities by credit ratings as issued by Standard & Poor's:
30 June 2020
Debt securities
30 June 2019
Debt securities
AAA to
AA-
$'000
A+ to
A-
$'000
-
-
37,489
37,489
AAA to
AA-
$'000
A+ to
A-
$'000
BBB+ to
BBB-
$'000
149,639
149,639
BBB+ to
BBB-
$'000
BB+ to
B-
$'000
NON-
RATED
$'000
Total
$'000
15,299
15,299
129,565
129,565
331,992
331,992
BB+ to
B-
$'000
NON-
RATED
$'000
Total
$'000
19,962
19,962
31,094
31,094
105,322
105,322
10,054
10,054
80,885
80,885
247,317
247,317
Debt securities that are not rated by Standard & Poor's may be rated by other rating agencies.
(ii) Derivative financial instruments
The risk of counterparty default in a derivative transaction is minimised by predominantly using exchange traded
derivatives (except for currency hedging, contracts for differences, and occasionally other approved over the
counter instruments). The exchange traded derivatives are only executed and cleared through approved
members of the exchanges. For over the counter derivatives, minimum credit ratings apply for counterparties at
the time of entering into a contract and ISDA agreements are put in place with counterparties.
-38-
38 | PERPETUAL CREDIT INCOME TRUST
Perpetual Credit Income Trust
Notes to the financial statements
For the year ended 30 June 2020
(continued)
Perpetual Credit Income Trust
Notes to the financial statements
For the year ended 30 June 2020
(continued)
16 Financial risk management (continued)
16 Financial risk management (continued)
(b) Credit risk (continued)
(iii) Cash and cash equivalents
The exposure to credit risk for cash and cash equivalents is low as all counterparties have a rating of A or higher
(as determined by Standard & Poor's).
(iv) Receivables for securities sold
All transactions in debt securities are settled/paid for upon delivery using approved brokers. The risk of default is
considered low, as delivery of securities sold is only made once the broker has received payment from the
counterparty. Payments on securities acquired are only made after the broker has received the securities. The
trade will fail if either party fails to meet its obligations.
All transactions in unlisted unit trusts are settled/unitised when unit prices are issued. The risk of default is
considered low except when trading in a suspended unlisted unit trust.
(i) Debt securities
(c) Liquidity risk
Liquidity risk is the risk that the Trust will not be able to meet its financial obligations as they fall due.
The Trust is a closed end vehicle and not exposed to any cash redemptions.
The Trust's investment in Perpetual Loan Fund is considered illiquid as the redemption is subject to the
withdrawal offer made by its responsible entity.
The following table summarises the contractual maturities of financial liabilities, including interest payments
where applicable:
30 June 2020
Non-derivative financial liabilities
Distributions payable to unitholders
Payables for securities purchased
Payables
Total
Derivative financial liabilities
Futures
Swaps
Outflow
Inflow
Total
Carrying
amount
$'000
At call
$'000
Contractual cash flows
less
than 6
months
$'000
6 - 12
months
$'000
more
than 12
months
$'000
-
-
-
-
-
-
-
-
-
1,210
4,475
364
6,049
447
-
599
(329)
717
-
-
-
-
-
-
-
-
-
-
599
(329)
270
-
-
27,010
(24,958)
2,052
1,210
4,475
364
6,049
447
2,521
-
-
2,968
-39-
ANNUAL FINANCIAL REPORT 2020 | 39
(b) Credit risk
Credit risk is the risk that a counterparty will be unable to pay amounts when they fall due. The main
concentration of counterparty credit risk, to which the Trust is exposed to, arises predominantly from the Trust's
investments in debt securities. The Trust is also exposed to counterparty credit risk on derivative financial
instruments, cash and cash equivalents, and receivables for securities sold. The maximum exposure to credit risk
at the reporting date is the carrying amount of the financial assets. None of these assets are impaired nor past
due but not impaired.
The Trust determines credit risk and measures expected credit losses for financial assets measured at amortised
cost using probability of default, exposure at default and loss given default. Investment Manager considers
relevant, historical analysis and forward looking information in determining any expected credit loss. At the
reporting date, all receivables and cash and cash equivalents are held with approved counterparties and are
either callable on demand or due within 30 days. Investment Manager considers the probability of default to be
low, as a result, no loss allowance has been recognised based on 12-month expected credit losses as any such
impairment would be wholly insignificant to the Trust.
Investment management processes include the consideration of counterparty risk. The Investment Manager may
refer to the credit ratings issued by rating agencies to assess the creditworthiness of counterparties. The
Investment Manager consider (among other things) branding, stability and security marketability of counterparties
and consistently monitor exposure through electronic systems.
The Investment Manager monitors the credit ratings of debt securities on a regular basis.
The table below sets out the analysis of debt securities by credit ratings as issued by Standard & Poor's:
30 June 2020
Debt securities
30 June 2019
Debt securities
AAA to
AA-
$'000
A+ to
A-
$'000
-
-
37,489
37,489
AAA to
AA-
$'000
A+ to
A-
$'000
BBB+ to
BBB-
$'000
149,639
149,639
BBB+ to
BBB-
$'000
BB+ to
B-
$'000
NON-
RATED
$'000
15,299
15,299
129,565
129,565
331,992
331,992
BB+ to
B-
$'000
NON-
RATED
$'000
Total
$'000
Total
$'000
19,962
19,962
31,094
31,094
105,322
105,322
10,054
10,054
80,885
80,885
247,317
247,317
Debt securities that are not rated by Standard & Poor's may be rated by other rating agencies.
(ii) Derivative financial instruments
The risk of counterparty default in a derivative transaction is minimised by predominantly using exchange traded
derivatives (except for currency hedging, contracts for differences, and occasionally other approved over the
counter instruments). The exchange traded derivatives are only executed and cleared through approved
members of the exchanges. For over the counter derivatives, minimum credit ratings apply for counterparties at
the time of entering into a contract and ISDA agreements are put in place with counterparties.
-38-
Perpetual Credit Income Trust
Notes to the financial statements
For the year ended 30 June 2020
(continued)
16 Financial risk management (continued)
(c) Liquidity risk (continued)
Carrying
amount
$'000
At call
$'000
Contractual cash flows
less
than 6
months
$'000
6 - 12
months
$'000
more
than 12
months
$'000
342
4,526
440
5,308
236
456
-
-
692
-
-
-
-
-
-
-
-
-
342
4,526
440
5,308
-
-
-
-
-
-
-
-
236
-
443
(316)
363
-
-
7,211
(7,557)
(346)
-
-
10,789
(10,974)
(185)
30 June 2019
Non-derivative financial liabilities
Distributions payable to unitholders
Payables for securities purchased
Payables
Total
Derivative financial liabilities
Futures
Swaps
Outflow
Inflow
Total
(d) Fair value measurement
The Trust classifies fair value measurement of its financial assets and liabilities using a fair value hierarchy model
that reflects the subjectivity of the inputs used in making the measurements. The fair value hierarchy has the
following levels:
• Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1);
•
•
Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either
directly (that is, as prices) or indirectly (that is, derived from prices) (level 2); and
Inputs for the asset or liability that are not based on observable market data (that is, 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 quoted market prices at the
end of the reporting period without any deduction for estimated future selling costs.
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.
Listed securities and exchange traded derivatives are valued at the last traded price. For the majority of these
financial instruments, information provided by the independent pricing services is relied upon for valuation.
(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 traded in an active market is determined by using
valuation techniques. These include the use of recent arm's length transactions, reference to current fair value of
a substantially similar other instrument, discounted cash flow techniques, option pricing models or any other
valuation techniques that provide a reliable estimate of prices obtained in actual market transactions.
-40-
40 | PERPETUAL CREDIT INCOME TRUST
Perpetual Credit Income Trust
Notes to the financial statements
For the year ended 30 June 2020
(continued)
Perpetual Credit Income Trust
Notes to the financial statements
For the year ended 30 June 2020
(continued)
16 Financial risk management (continued)
16 Financial risk management (continued)
(c) Liquidity risk (continued)
30 June 2019
Non-derivative financial liabilities
Distributions payable to unitholders
Payables for securities purchased
Derivative financial liabilities
Payables
Total
Futures
Swaps
Outflow
Inflow
Total
Carrying
amount
$'000
At call
$'000
Contractual cash flows
less
than 6
months
$'000
6 - 12
months
$'000
more
than 12
months
$'000
342
4,526
440
5,308
236
456
-
-
692
-
-
-
-
-
-
-
-
-
342
4,526
440
5,308
236
-
443
(316)
363
-
-
-
-
-
-
-
-
-
-
-
-
7,211
(7,557)
(346)
10,789
(10,974)
(185)
(d) Fair value measurement
The Trust classifies fair value measurement of its financial assets and liabilities using a fair value hierarchy model
that reflects the subjectivity of the inputs used in making the measurements. The fair value hierarchy has the
following levels:
•
•
(level 3).
• Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1);
Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either
directly (that is, as prices) or indirectly (that is, derived from prices) (level 2); and
Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs)
(i) Fair value in an active market (level 1)
The fair value of financial assets and liabilities traded in active markets is based on quoted market prices at the
end of the reporting period without any deduction for estimated future selling costs.
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.
Listed securities and exchange traded derivatives are valued at the last traded price. For the majority of these
financial instruments, information provided by the independent pricing services is relied upon for valuation.
(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 traded in an active market is determined by using
valuation techniques. These include the use of recent arm's length transactions, reference to current fair value of
a substantially similar other instrument, discounted cash flow techniques, option pricing models or any other
valuation techniques that provide a reliable estimate of prices obtained in actual market transactions.
(d) Fair value measurement (continued)
(ii) Fair value in an inactive or unquoted market (level 2 and level 3) (continued)
Valuation models use observable data to the extent practicable. However, areas such as credit risk (both own
and counterparty), volatilities and correlations require Investment Manager to make estimates. Changes in the
assumptions about these factors could affect the reported fair value of financial instruments. 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 held.
Debt securities are generally valued using broker quotes. Where discounted cash flow techniques are used,
estimated future cash flows are based on Investment Manager'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.
The fair value of derivatives that are not exchange traded is estimated at the amount that would be received or
paid to terminate the contract at the end of the reporting period taking into account current market conditions
(volatility and appropriate yield curve) and the current creditworthiness of the counterparties.
Investments in unlisted unit trusts are recorded at the redemption value per unit as reported by the Investment
Managers of such trusts.
The Scheme's level 3 asset include Perpetual Loan Fund which is valued using the redemption value per unit as
reported by the Investment Manager without any adjustment.
The following tables present the Trust's financial assets and liabilities (by class) measured at fair value according
to the fair value hierarchy:
30 June 2020
Level 1
$'000
Level 2
$'000
Level 3
$'000
Total
$'000
Financial assets at fair value
through profit or loss
Derivatives
Futures
Swaps
Debt securities
Unlisted unit trusts
Total
Financial liabilities at fair value
through profit or loss
Derivatives
Futures
Swaps
Total
24
-
5,204
-
5,228
-
458
326,788
-
327,246
-
-
-
82,599
82,599
24
458
331,992
82,599
415,073
447
-
447
-
2,521
2,521
-
-
-
447
2,521
2,968
-40-
-41-
ANNUAL FINANCIAL REPORT 2020 | 41
Perpetual Credit Income Trust
Notes to the financial statements
For the year ended 30 June 2020
(continued)
16 Financial risk management (continued)
(d) Fair value measurement (continued)
30 June 2019
Level 1
$'000
Level 2
$'000
Level 3
$'000
Total
$'000
Financial assets at fair value
through profit or loss
Debt securities
Unlisted unit trusts
Total
Financial liabilities at fair value
through profit or loss
Derivatives
Futures
Swaps
Total
Transfers between levels
2,305
-
2,305
245,012
-
245,012
-
49,712
49,712
247,317
49,712
297,029
236
-
236
-
456
456
-
-
-
236
456
692
The Trust's policy is to recognise transfers into and transfers out of fair value hierarchy levels at the end of the
reporting period.
There were no transfers between levels for the years ended 30 June 2020 and 30 June 2019.
Fair value measurements using significant unobservable inputs (level 3)
The following tables present the movement in level 3 instruments, by class of financial instruments, for the years
ended 30 June 2020 and 30 June 2019:
30 June 2020
Opening balance
Purchases
Gains/(losses) recognised in profit or loss
Closing balance
Total unrealised gains/(losses) for the year included in the statement of
comprehensive income for financial assets and liabilities held at the end of the
year
Unlisted
unit trusts
$'000
Total
$'000
49,712
35,850
(2,963)
82,599
49,712
35,850
(2,963)
82,599
(2,963)
(2,963)
-42-
42 | PERPETUAL CREDIT INCOME TRUST
Perpetual Credit Income Trust
Notes to the financial statements
For the year ended 30 June 2020
(continued)
Perpetual Credit Income Trust
Notes to the financial statements
For the year ended 30 June 2020
(continued)
16 Financial risk management (continued)
16 Financial risk management (continued)
(d) Fair value measurement (continued)
(d) Fair value measurement (continued)
Fair value measurements using significant unobservable inputs (level 3) (continued)
30 June 2019
Level 1
$'000
Level 2
$'000
Level 3
$'000
Total
$'000
30 June 2019
Opening balance
Purchases
Gains/(losses) recognised in profit or loss
Closing balance
Total unrealised gains/(losses) for the year included in the statement of
comprehensive income for financial assets and liabilities held at the end of the
period
Unlisted
unit trusts
$'000
Total
$'000
-
49,887
(175)
49,712
-
49,887
(175)
49,712
(175)
(175)
17 Offsetting financial assets and financial liabilities
Financial assets and liabilities are offset and the net amount is reported in the balance sheet 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. The gross and net positions of financial assets and
liabilities that have been offset in the balance sheet are disclosed in the first three columns of the table below:
30 June 2020
Financial assets
Margin accounts
Derivative financial instruments
Total
Financial liabilities
Derivative financial instruments
Total
Effects of offsetting on the
balance sheet
Gross
amounts
set off in
the
balance
sheet
$'000
Net
amounts
presented
in the
balance
sheet
$'000
Gross
amounts
$'000
Related amounts not
offset
Amounts
subject to
master
netting
arrange-
ments
$'000
Net
amounts
$'000
-
-
-
-
-
2,542
482
3,024
(697)
-
(697)
1,845
482
2,327
(2,968)
(2,968)
697
697
(2,271)
(2,271)
2,542
482
3,024
(2,968)
(2,968)
-43-
ANNUAL FINANCIAL REPORT 2020 | 43
Financial assets at fair value
through profit or loss
Debt securities
Unlisted unit trusts
Total
Financial liabilities at fair value
through profit or loss
Derivatives
Futures
Swaps
Total
Transfers between levels
reporting period.
2,305
-
2,305
245,012
-
245,012
49,712
49,712
247,317
49,712
297,029
236
-
236
-
456
456
236
456
692
-
-
-
-
The Trust's policy is to recognise transfers into and transfers out of fair value hierarchy levels at the end of the
There were no transfers between levels for the years ended 30 June 2020 and 30 June 2019.
Fair value measurements using significant unobservable inputs (level 3)
The following tables present the movement in level 3 instruments, by class of financial instruments, for the years
ended 30 June 2020 and 30 June 2019:
30 June 2020
Opening balance
Purchases
Closing balance
year
Gains/(losses) recognised in profit or loss
Total unrealised gains/(losses) for the year included in the statement of
comprehensive income for financial assets and liabilities held at the end of the
Unlisted
unit trusts
$'000
Total
$'000
49,712
35,850
(2,963)
82,599
49,712
35,850
(2,963)
82,599
(2,963)
(2,963)
-42-
Perpetual Credit Income Trust
Notes to the financial statements
For the year ended 30 June 2020
(continued)
17 Offsetting financial assets and financial liabilities (continued)
Effects of offsetting on the
balance sheet
Gross
amounts
set off in
the
balance
sheet
$'000
Net
amounts
presented
in the
balance
sheet
$'000
Gross
amounts
$'000
Related amounts not
offset
Amounts
subject to
master
netting
arrange-
ments
$'000
Net
amounts
$'000
1,095
1,095
(692)
(692)
-
-
-
-
1,095
1,095
(236)
(236)
859
859
(692)
(692)
236
236
(456)
(456)
30 June 2019
Financial assets
Margin accounts
Total
Financial liabilities
Derivative financial instruments
Total
Master netting arrangement - not currently enforceable
Agreements with derivative counterparties are based on the ISDA Master Agreements. Under the terms of these
arrangements, only where certain credit events occur (such as default), the net position owing/receivable to a
single counterparty in the same currency will be taken as owing and all the relevant arrangements terminated. As
the Trust does not presently have a legally enforceable right of set-off, these amounts have not been offset in the
balance sheet, but have been presented separately in this note.
18 Derivative financial instruments
A derivative is a financial instrument or other contract which is settled at a future date and whose value changes
in response to the change in a specified interest rate, financial instrument price, commodity price, foreign
currency exchange rates, index of prices or rates, credit rating or credit index or other variables.
Derivative financial instruments require no initial net investment or an initial net investment that is smaller than
would be required for other types of contracts that would be expected to have a similar response to changes in
market factors.
Derivative transactions include many different instruments such as foreign exchange forward contracts, futures
and options. Derivatives are considered to be part of the investment process and the use of derivatives is an
essential part of the Trust's portfolio management. Derivatives are not managed in isolation. Consequently, the
use of derivatives is multifaceted and includes:
•
•
•
hedging to protect an asset or liability of the Trust against a fluctuation in market values or to reduce
volatility;
a substitution for trading of physical securities; and
adjusting asset exposures within the parameters set in the investment strategy, and adjusting the duration of
fixed interest portfolios or the weighted average maturity of cash portfolios.
While derivatives are used for trading purposes, they are not used to gear (leverage) a portfolio. Gearing a
portfolio would occur if the level of exposure to the markets exceeds the underlying value of the Trust.
-44-
44 | PERPETUAL CREDIT INCOME TRUST
17 Offsetting financial assets and financial liabilities (continued)
Perpetual Credit Income Trust
Notes to the financial statements
For the year ended 30 June 2020
(continued)
Effects of offsetting on the
Related amounts not
balance sheet
offset
Gross
amounts
set off in
the
balance
sheet
$'000
Net
amounts
presented
in the
balance
sheet
$'000
Amounts
subject to
master
netting
arrange-
ments
$'000
Net
amounts
$'000
-
-
-
-
1,095
1,095
(236)
(236)
859
859
(692)
(692)
236
236
(456)
(456)
Gross
amounts
$'000
1,095
1,095
(692)
(692)
30 June 2019
Financial assets
Margin accounts
Total
Financial liabilities
Derivative financial instruments
Total
Master netting arrangement - not currently enforceable
Agreements with derivative counterparties are based on the ISDA Master Agreements. Under the terms of these
arrangements, only where certain credit events occur (such as default), the net position owing/receivable to a
single counterparty in the same currency will be taken as owing and all the relevant arrangements terminated. As
the Trust does not presently have a legally enforceable right of set-off, these amounts have not been offset in the
balance sheet, but have been presented separately in this note.
18 Derivative financial instruments
A derivative is a financial instrument or other contract which is settled at a future date and whose value changes
in response to the change in a specified interest rate, financial instrument price, commodity price, foreign
currency exchange rates, index of prices or rates, credit rating or credit index or other variables.
Derivative financial instruments require no initial net investment or an initial net investment that is smaller than
would be required for other types of contracts that would be expected to have a similar response to changes in
Derivative transactions include many different instruments such as foreign exchange forward contracts, futures
and options. Derivatives are considered to be part of the investment process and the use of derivatives is an
essential part of the Trust's portfolio management. Derivatives are not managed in isolation. Consequently, the
use of derivatives is multifaceted and includes:
hedging to protect an asset or liability of the Trust against a fluctuation in market values or to reduce
a substitution for trading of physical securities; and
adjusting asset exposures within the parameters set in the investment strategy, and adjusting the duration of
fixed interest portfolios or the weighted average maturity of cash portfolios.
While derivatives are used for trading purposes, they are not used to gear (leverage) a portfolio. Gearing a
portfolio would occur if the level of exposure to the markets exceeds the underlying value of the Trust.
market factors.
volatility;
•
•
•
Perpetual Credit Income Trust
Notes to the financial statements
For the year ended 30 June 2020
(continued)
18 Derivative financial instruments (continued)
The Trust held the following derivative instruments during the year:
(a) Futures
Futures are contractual obligations to buy or sell financial instruments on a future date at a specified price
established in an organised market. The futures contracts are collateralised by cash or marketable securities.
Changes in futures contracts' values are usually settled net daily with the exchange.
(b) Swaps
Swaps are derivative instruments in which two counterparties agree to exchange one stream of cash flow against
another stream.
Cross currency swaps are valued at fair value which is based on the estimated amount the Trust would pay or
receive to terminate the currency derivatives at the balance sheet date, taking into account current interest rates,
foreign exchange rates, volatility and the current creditworthiness of the currency derivatives counterparties.
Cross currency swaps are used to hedge the Trust’s interest rate and foreign currency exposure. However,
hedge accounting has not been applied.
Risk exposures and fair value measurements
Information about the Trust's exposure to financial risks and the methods and assumptions used in determining
fair values is provided in note 16. The maximum exposure to credit risk at the end of the reporting period is the
carrying amount of the derivative financial instruments.
19 Segment information
The Trust is organised into one main operating segment with only one key function, being the investment of funds
predominantly in Australia together with opportunistic investments globally in accordance with its investment
objective and guidelines.
20 Events occurring after the reporting period
On 27 July 2020, the Directors declared a distribution of 0.3157 cents per ordinary unit which amounted to
$1,263,935 and was paid on 10 August 2020.
The uncertainty around COVID-19 is expected to continue to present social and economic challenges in the next
financial year and the resulting impact on the capital markets remain uncertain. Since the reporting date, there
have been no significant changes in the valuation of the Trust's investment portfolio arising from the changes in
the estimates and assumptions in relation to COVID-19. The Directors are closely monitoring the liquidity of the
Trust and any impact on the valuation of the Trust's investment portfolio.
No other significant events have occurred since the reporting date which would have impact on the financial
position of the Trust disclosed in the balance sheet as at 30 June 2020 or on the results and cash flows of the
Trust for the year ended on that date.
21 Contingent assets, liabilities and commitments
There were no outstanding contingent assets, liabilities or commitments as at 30 June 2020 and 30 June 2019.
-44-
-45-
ANNUAL FINANCIAL REPORT 2020 | 45
DiRECTORS’
DECLARATiON
Directors' declaration
Perpetual Credit Income Trust
Directors' declaration
For the year ended 30 June 2020
In the opinion of the Directors of Perpetual Trust Services Limited, the Responsible Entity of Perpetual Credit
Income Trust:
(a)
the annual financial report and notes, set out on pages 17 to 45, are in accordance with the Corporations
Act 2001, including:
(i)
(ii)
complying with Australian Accounting Standards and Interpretations issued by the Australian
Accounting Standards Board, the Corporations Regulations 2001 and other mandatory
professional reporting requirements; and
giving a true and fair view of the Trust's financial position as at 30 June 2020 and of its
performance for the financial year ended on that date;
there are reasonable grounds to believe that the Trust will be able to pay its debts as and when they
become due and payable; and
note 2(a) confirms that the annual financial report complies with International Financial Reporting
Standards and Interpretations issued by the International Accounting Standards Board.
(b)
(c)
This declaration is made in accordance with a resolution of the Directors.
Director
Sydney
21 August 2020
-46-
46 | PERPETUAL CREDIT INCOME TRUST
Perpetual Credit Income Trust
Directors' declaration
For the year ended 30 June 2020
Directors' declaration
Income Trust:
Act 2001, including:
In the opinion of the Directors of Perpetual Trust Services Limited, the Responsible Entity of Perpetual Credit
(a)
the annual financial report and notes, set out on pages 17 to 45, are in accordance with the Corporations
(i)
complying with Australian Accounting Standards and Interpretations issued by the Australian
Accounting Standards Board, the Corporations Regulations 2001 and other mandatory
professional reporting requirements; and
(ii)
giving a true and fair view of the Trust's financial position as at 30 June 2020 and of its
performance for the financial year ended on that date;
(b)
there are reasonable grounds to believe that the Trust will be able to pay its debts as and when they
become due and payable; and
(c)
note 2(a) confirms that the annual financial report complies with International Financial Reporting
Standards and Interpretations issued by the International Accounting Standards Board.
This declaration is made in accordance with a resolution of the Directors.
Director
Sydney
21 August 2020
iNDEPENDENT
AUDiTOR’S
REPORT
TO THE UNITHOLDERS
OF PERPETUAL CREDIT
INCOME TRUST
Lead Auditor’s Independence Declaration under
Independent Auditor’s Report
Section 307C of the Corporations Act 2001
To the unitholders of Perpetual Credit Income Trust
To the Directors of Perpetual Trust Services Limited as the Responsible Entity of
Opinion
Perpetual Credit Income Trust
We have audited the Financial Report of
Perpetual Credit Income Trust (the Trust).
I declare that, to the best of my knowledge and belief, in relation to the audit of Perpetual Credit Income
In our opinion, the accompanying Financial
Trust for the financial year ended 30 June 2020 there have been:
Report of the Trust is in accordance with the
Corporations Act 2001, including:
changes in equity, and Statement of cash flows for the
no contraventions of the auditor independence requirements as set out in the
year then ended
Corporations Act 2001 in relation to the audit; and
• Statement of comprehensive income, Statement of
• Balance sheet as at 30 June 2020
The Financial Report comprises:
i.
ii.
no contraventions of any applicable code of professional conduct in relation to the audit.
• Notes including a summary of significant accounting
• giving a true and fair view of the Trust's
financial position as at 30 June 2020 and of
its financial performance for the year ended
on that date; and
policies
• Directors' Declaration.
• complying with Australian Accounting
Standards and the Corporations Regulations
2001.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. We believe that the audit
KPMG
evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Partner
Jessica Davis
Our responsibilities under those standards are further described in the Auditor’s responsibilities for the
audit of the Financial Report section of our report.
Sydney
We are independent of the Trust 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 (including Independence Standards) (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.
21 August 2020
-46-
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.
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.
Liability limited by a scheme approved
under Professional Standards
Legislation.
ANNUAL FINANCIAL REPORT 2020 | 47
Key Audit Matters
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.
Valuation and existence of financial assets ($415m) and financial liabilities ($3m) at fair value
through profit or loss
Refer to Notes 9 and 10 to the Financial Report
The key audit matter
How the matter was addressed in our audit
Financial assets and liabilities at fair value through
profit or loss (FVTPL) are comprised of investments
in:
• Unlisted unit trusts (Perpetual Loan Fund);
• Debt securities, including corporate bonds,
international bonds, mortgage backed securities,
and floating rate notes; and
• Derivative liabilities, including futures and swaps.
Valuation and existence of financial assets and
financial liabilities at FVTPL is a key audit matter
due to the:
• size of the Trust’s investments which are
significant to its financial position. The investment
in Perpetual Loan Fund and the investments in
debt securities comprise 19% and 76%,
respectively, of the Trust’s total assets at year
end;
• Trust outsources certain financial reporting
processes and controls in relation to the valuation
and existence of these assets and liabilities to
external service organisations. These service
organisations include the custodian, the fund
administrator, which provide administrative
support to the Trust, and the investment
manager. This requires us to understand
processes, assess controls and the flow of
information between these service organisations,
relevant to the Trust’s financial reporting; and
• importance of the performance of Perpetual Loan
Fund and debt securities in driving the Trust’s
investment income and capital performance, as
Our procedures included:
• We assessed the appropriateness of the
accounting policies applied by the Trust, including
those relevant to the fair value hierarchy of
investments against the requirements of the
accounting standards.
• We obtained and read the Trust’s custodian’s and
fund administrator’s GS007 (Guidance Statement
007 Audit Implications of the Use of Service
Organisations for Investment Management
Services) assurance reports to understand the
custodian’s and fund administrator’s processes
and controls to record and value the Trust’s
financial assets and liabilities.
• We obtained and read the Trust’s investment
manager’s GS007 assurance report to understand
the investment manager’s processes and controls
to maintain and provide transactional information
to the Trust’s custodian.
• We assessed the reputation, professional
competence and independence of the auditors of
the GS007 assurance reports.
• We checked the valuation of the unit holdings in
Perpetual Loan Fund, as recorded in the Trust’s
Financial Report, to the audited financial report of
Perpetual Loan Fund.
• With the involvement of our valuation specialists,
we performed the valuation of the underlying
assets of Perpetual Loan Fund using
independently sourced market data for
observable inputs, such as, published credit
spreads and margins. We compared these
48 | PERPETUAL CREDIT INCOME TRUST
Key Audit Matters
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.
Valuation and existence of financial assets ($415m) and financial liabilities ($3m) at fair value
through profit or loss
Refer to Notes 9 and 10 to the Financial Report
The key audit matter
How the matter was addressed in our audit
Financial assets and liabilities at fair value through
Our procedures included:
profit or loss (FVTPL) are comprised of investments
in:
• Unlisted unit trusts (Perpetual Loan Fund);
• Debt securities, including corporate bonds,
international bonds, mortgage backed securities,
and floating rate notes; and
• Derivative liabilities, including futures and swaps.
• We assessed the appropriateness of the
accounting policies applied by the Trust, including
those relevant to the fair value hierarchy of
investments against the requirements of the
accounting standards.
• We obtained and read the Trust’s custodian’s and
fund administrator’s GS007 (Guidance Statement
007 Audit Implications of the Use of Service
Valuation and existence of financial assets and
Organisations for Investment Management
financial liabilities at FVTPL is a key audit matter
Services) assurance reports to understand the
due to the:
• size of the Trust’s investments which are
significant to its financial position. The investment
custodian’s and fund administrator’s processes
and controls to record and value the Trust’s
financial assets and liabilities.
in Perpetual Loan Fund and the investments in
• We obtained and read the Trust’s investment
debt securities comprise 19% and 76%,
manager’s GS007 assurance report to understand
respectively, of the Trust’s total assets at year
the investment manager’s processes and controls
end;
• Trust outsources certain financial reporting
to maintain and provide transactional information
to the Trust’s custodian.
processes and controls in relation to the valuation
• We assessed the reputation, professional
and existence of these assets and liabilities to
competence and independence of the auditors of
external service organisations. These service
the GS007 assurance reports.
organisations include the custodian, the fund
administrator, which provide administrative
support to the Trust, and the investment
manager. This requires us to understand
processes, assess controls and the flow of
• We checked the valuation of the unit holdings in
Perpetual Loan Fund, as recorded in the Trust’s
Financial Report, to the audited financial report of
Perpetual Loan Fund.
information between these service organisations,
• With the involvement of our valuation specialists,
relevant to the Trust’s financial reporting; and
we performed the valuation of the underlying
• importance of the performance of Perpetual Loan
Fund and debt securities in driving the Trust’s
investment income and capital performance, as
assets of Perpetual Loan Fund using
independently sourced market data for
observable inputs, such as, published credit
spreads and margins. We compared these
reported in the Financial Report.
As a result, this was the area with greatest effect
on our overall audit strategy and allocation of senior
resources in planning and performing our audit.
In assessing this Key Audit Matter, we involved our
valuation specialists, who understand the Trust’s
investment profile and business and the economic
environment it operates in.
valuations to the fair value of the underlying
assets.
• We assessed the valuation of the unit price of
Perpetual Loan Fund against the net assets per
unit held of the Perpetual Loan Fund.
• With the involvement of our valuation specialists,
we assessed the fair value of debt securities by
re-performing the valuation by comparing
observable inputs, including broker-quoted prices
to independently sourced market data providers.
• With the involvement of our valuation specialists,
we independently recalculated the valuation of
derivative liabilities using independently sourced
market data for observable inputs, such as
interest rates and foreign exchange rates. We
compared this valuation to the fair value of
derivative liabilities recognised by the Trust.
• We checked the ownership and quantity of
investments to external custody reports as at 30
June 2020.
• We assessed quantitative and qualitative
disclosures, including those relevant to the fair
value hierarchy of investments, against the
requirements of the accounting standards.
Other Information
Other Information is financial and non-financial information in Perpetual Credit Income Trust’s annual
reporting which is provided in addition to the Financial Report and the Auditor’s Report. The Directors of
Perpetual Trust 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 and
will 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.
ANNUAL FINANCIAL REPORT 2020 | 49
Responsibilities of the Directors for the Financial Report
The Directors of Perpetual Trust 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 Trust'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 Trust
or to cease operations, or have no realistic alternative but to do so.
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:
https://www.auasb.gov.au/admin/file/content102/c3/ar2_2020.pdf. This description forms part of our
Auditor’s Report.
KPMG
Jessica Davis
Partner
Sydney
21 August 2020
50 | PERPETUAL CREDIT INCOME TRUST
Responsibilities of the Directors for the Financial Report
The Directors of Perpetual Trust 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 Trust'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 Trust
or to cease operations, or have no realistic alternative but to do so.
• to obtain reasonable assurance about whether the Financial Report as a whole is free from material
Our objective is:
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:
https://www.auasb.gov.au/admin/file/content102/c3/ar2_2020.pdf. This description forms part of our
Auditor’s Report.
KPMG
Jessica Davis
Partner
Sydney
21 August 2020
ASX ADDiTiONAL
iNFORMATiON
Perpetual Credit Income Trust
ARSN 626 053 496
ASX additional information
Additional information required by the Australian Securities Exchange Limited Listing Rules and not disclosed
elsewhere in this report is as follows. The information is current as at 31 July 2020 unless otherwise indicated.
A. Corporate Governance Statement
Refer to the annual financial report, page 10.
B. Substantial unitholders
There are no substantial unitholders.
C. Classes of units
Refer to the annual financial report, note 7, page 29.
Auditor’s responsibilities for the audit of the Financial Report
D. Voting rights
Voting rights which may attach to or be imposed on any unit or class of units is as follows:
(a) on a show of hands each unitholder has one vote; and
(b) on a poll, each unitholder has one vote for each dollar of the value of the total units they have in Trust.
E. Distribution of units
Analysis of numbers of unitholders by size of holding:
Size of holding
BLANK
1 - 1000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 and over
Blank
Number of
holders
Total units
Percentage
89
587
914
6,221
614
8,425
23,053
1,964,419
7,699,242
229,322,653
161,324,515
400,333,882
0.01%
0.49%
1.92%
57.28%
40.30%
100.00%
The number of unitholders holding less than a marketable parcel is 71 and they hold 8,757 units.
F. Twenty largest unitholders
The names of the twenty largest unitholders are listed below:
Unitholder
HSBC Custody Nominees (Australia) Limited
Navigator Australia Ltd
BNP Paribas Nominees Pty Ltd
Netwealth Investments Limited (Wrap Services A/C)
Elizikat Investments Pty Ltd (Doughan Investment A/C)
The Corporation Of The Trustees Of The Order Of The Sisters Of
Mercy In QLD
Beluga Blue Pty Ltd (GTF Family A/C)
Geat Incorporated (Geat-Preservation Fund A/C)
B Plus Enterprises Pty Ltd (Alpha Plus Investments A/C)
Netwealth Investments Limited (Super Services A/C)
J P Morgan Nominees Australia Pty Limited
The Art Gallery Board
AK Clough Holdings Pty Ltd
Mrs Gillian Mary Smith
Milpera Pty Ltd (Delaney Executive S/F A/C)
The Law Society Of SA Legal Practitioners Fidelity Fund
Numbers of units
12,485,661
7,351,202
6,871,533
1,675,588
1,651,744
Percentage
3.12%
1.84%
1.72%
0.42%
0.41%
1,363,636
1,363,636
1,359,372
1,300,000
1,109,924
1,108,017
1,090,909
1,021,103
963,000
909,091
909,090
0.34%
0.34%
0.34%
0.32%
0.28%
0.28%
0.27%
0.26%
0.24%
0.23%
0.23%
-51-
ANNUAL FINANCIAL REPORT 2020 | 51
F. Twenty largest unitholders (continued)
Unitholder
Sisters Of The Perpetual Adoration Of The Blessed Sacrament Ltd
Mr John William Downer
Karang Pty Ltd
Lunara Pty Limited
Numbers of units
909,090
900,000
900,000
878,000
Percentage
0.23%
0.22%
0.22%
0.22%
G. Stock exchange listing
The Trust's units are listed on the Australian Securities Exchange (ASX) and are traded under the code PCI.
H. Voluntary escrow
There are no restricted units in the Trust or units subject to voluntary escrow.
I. Unquoted units
There are no unquoted units on issue.
J. Review of operations and activities for the reporting period
Refer to Directors' report at page 6-7 of the annual financial report.
K. On-market buy back
There is no current on-market buy back.
L. Cash and Assets used
During the year, the Trust invested in accordance with the investment objective and guidelines as set out in the
latest Product Disclosure Statement of the Trust dated 8 March 2019 and in accordance with the Trust's
Constitution.
M. List of investments held by the Trust at 30 June 2020
Investments held as at 30 June 2020
XXXXXXXXXXXX
XXX
XXX
Fair Value
$'000
Unlisted unit trust
XXX
Perpetual Loan Fund
Total Unlisted unit trust
Debt securities
XXX
ANZ Banking Group
Apollo Trust SR 2017-2
APT Pipeline Limited
Aroundtown SA
Asciano Financial Limited
Aurizon Network Pty Limited
Australian Prime Property
Banco Santander SA
Bank Of Queensland Limited
Barclays Bank PLC
Barminco Finance Pty Limited
Bendigo And Adelaide Bank
Bluescope Finance
BNP Paribas
Boral Finance Pty Limited
Brisbane Airport
Byrns Smith Unit Trust
Centuria Capital 2 Fund
52 | PERPETUAL CREDIT INCOME TRUST
XXX
-52-
82,599
82,599
996
2,809
1,772
2,134
4,434
4,062
9,227
9,062
4,934
15,594
7,256
9,518
10,916
8,350
1,148
2,757
8,189
259
Numbers of units
Percentage
909,090
900,000
900,000
878,000
0.23%
0.22%
0.22%
0.22%
The Trust's units are listed on the Australian Securities Exchange (ASX) and are traded under the code PCI.
F. Twenty largest unitholders (continued)
Sisters Of The Perpetual Adoration Of The Blessed Sacrament Ltd
Unitholder
Mr John William Downer
Karang Pty Ltd
Lunara Pty Limited
G. Stock exchange listing
H. Voluntary escrow
There are no restricted units in the Trust or units subject to voluntary escrow.
I. Unquoted units
There are no unquoted units on issue.
J. Review of operations and activities for the reporting period
Refer to Directors' report at page 6-7 of the annual financial report.
K. On-market buy back
There is no current on-market buy back.
L. Cash and Assets used
During the year, the Trust invested in accordance with the investment objective and guidelines as set out in the
latest Product Disclosure Statement of the Trust dated 8 March 2019 and in accordance with the Trust's
Constitution.
M. List of investments held by the Trust at 30 June 2020
Investments held as at 30 June 2020
XXXXXXXXXXXX
XXX
XXX
Fair Value
$'000
Unlisted unit trust
XXX
Perpetual Loan Fund
Total Unlisted unit trust
Debt securities
XXX
ANZ Banking Group
Apollo Trust SR 2017-2
APT Pipeline Limited
Aroundtown SA
Asciano Financial Limited
Aurizon Network Pty Limited
Australian Prime Property
Banco Santander SA
Bank Of Queensland Limited
Barclays Bank PLC
Barminco Finance Pty Limited
Bendigo And Adelaide Bank
Bluescope Finance
BNP Paribas
Boral Finance Pty Limited
Brisbane Airport
Byrns Smith Unit Trust
Centuria Capital 2 Fund
XXX
-52-
82,599
82,599
996
2,809
1,772
2,134
4,434
4,062
9,227
9,062
4,934
15,594
7,256
9,518
10,916
8,350
1,148
2,757
8,189
259
M. List of investments held by the Trust at 30 June 2020 (continued)
Civmec Holdings Limited
Conquest Trust Srs2018-1
Credit Agricole S.A
David Jones Finance
DBNGP Finance Co Pty Limited
Downer Grp Finance Pty Limited
FBG Finance Pty Limited
Flexi Trust Srs2019-2
FP Turbo Srs2019-1
Goldman Sachs Group Ins
Heritage Bank Limited
Illawara Trust
Incitec Pivot Limited
Insurance Australia Group Limited
Kingfisher Trust Series 2019-1
Liberty Funding Pty Ltd Srs 2019-1SME
Liberty Funding Pty Srs 2020-1A
Light Trust Srs2019-1
Lloyds Banking Group Plc
Longwall Relocation Syndicated Loan
Lonsdale Finance Pty Limited
Macquarie Bank Limited
Mineral Resources Limited
National Australia Bank
Nextdc Limited
Omni Bridgeway Limited
Optus Finance Pty Limited
Origin Energy Finance
Pacific National Finance
Peet Limited
Qantas Airways Limited
Shinhan Bank
Spark Finance Limited
The Superannuation Member Srs 2019-2
The Superannuation Members Srs 2019-1
The Superannuation Members Srs2016-1
Think Tank Trust Srs 2019-1
Torrens Trust Series 2019-1
Verizon Communications
Vicinity Centres
Vodafone Group PLC
WSO Finance Pty Limited
Zenith Pacific Pty Limited
Total Debt securities
Derivatives
Futures
Swaps
Total Derivatives
Total
N.
Investment transactions
XXX
XXX
XXX
5,482
497
2,721
10,159
4,397
10,030
5,607
4,374
500
1,301
3,322
201
8,496
15,466
9,066
6,026
1,094
3,532
3,407
2,332
9,006
11,384
5,441
12,834
13,041
10,849
4,396
3,027
3,932
4,128
4,830
6,443
2,025
10,836
5,218
1,527
2,262
5,964
503
7,258
557
1,609
3,495
331,992
(423)
(2,063)
(2,486)
412,105
The total number of transactions entered during the year was 594. The total brokerage paid during the year was
$26,585.
O. Total Management Fees paid or accrued during the year
Refer to the annual financial report, note 5, page 26.
-53-
ANNUAL FINANCIAL REPORT 2020 | 53
This page intentionally left blank.
54 | PERPETUAL CREDIT INCOME TRUST
54 | PERPETUAL CREDIT INCOME TRUST
ANNUAL FINANCIAL REPORT 2020 | 55
DiRECTORY
RESPONSiBLE ENTiTY
Perpetual Trust Services Limited
ABN 48 000 142 049
AFSL 236 648
REGiSTERED OFFiCE
Level 18, Angel Place
123 Pitt Street
Sydney NSW 2000
DiRECTORS
Glenn Foster
Vicki Riggio
Richard McCarthy
Simone Mosse
Phillip Blackmore (Alternate)
COMPANY SECRETARiES
Gananatha Nayanajith Minithantri
Sylvie Dimarco
iNVESTMENT MANAGER
Perpetual Investment Management Limited
Level 18, 123 Pitt Street
Sydney NSW 2000
AFSL 234 426
AUDiTOR
KPMG
International Towers Sydney 3
300 Barangaroo Avenue
Sydney NSW 2000
AUSTRALiAN SECURiTiES EXCHANGE CODE
ASX:PCI
UNiT REGiSTRY
Automic Pty Ltd
Level 5, 126 Phillip Street
Sydney NSW 2000
WEBSiTE
www.perpetualincome.com.au
0
2
8
0
_
6
2
5
1
0
L
P
56 | PERPETUAL CREDIT INCOME TRUST