Fusion Fund - Vanguard Property Securities . Index Fund · This financial report covers Fusion Fund...

Fusion Fund - Vanguard Property Securities .Index FundARSN 129792347

Annual report - 30 June 2009

Fusion Fund - Vanguard Property SecuritiesIndex FundARSN129 792 347

Annual report - 30 June 2009Contents

PageDirectors' report 2Auditor's independence declaration 5Income statement . 6Balance sheet 7Statement of changes in equity 8Cash flow statement 9Notes to the financial statements 10Directors' declaration 21Independent auditor's report to the unitholders of Fusion Fund" Vanguard Property Securities Index Fund 22

This annual financial réport covers Fusion Fund - Vanguard Property Securities Index Fund as an individual entity.

The responsible entity of Fusion Fund - Vanguard Property Securities Index Fund is Macquarie Financial ProductsManagement Limited (ABN 38095135694). The responsible entity's registered office is NO.1 Martin Place,Sydney, NSW 2000.

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Fusion Fund - Vanguard Property Securities Index FundDirectors' report

30 June 2009

Directors' report

The directors of Macquarie Financial Products Management Limited (a wholly owned subsidiarY of Macquarie GroupLimited), the responsible entity of Fusion Fund - Vanguard Property Securities Index Fund, present their reporttogether with the financial report of Fusion Fund - Vanguard Property Securities Index Fund (the "Fund") for the yearended 30 June 2009.

Principal activities

The Fund delivers investment returns from investments in managed funds, whilst also protecting against losses byemploying a capital management technique referred to as Threshold Management.

The Fund did not have any employees during the year.

There were no significant changes in the nature of the Fund's activities during the year.

Directors

The following persons held offce as directors of Macquarie Financial Products Management Limited during the yearor since the end of the year and up to the date of this report:

Peter LucasAnthony Abraham (resigned 20 February 2009)Wiliam Fox

Simone MosseJason King (appointed 20 February 2009)

Review and results of operations

During the year, the Fund maintains its investment strategy in managed funds whilst employing ThresholdManagement techniques in accordance with provisions of the governing documents of the Fund.

ResultsThe performance of the Fund, as represented by the results of its operations, was as follows:

Year ended30 June

2009$

Period ended30 June

2008$

Net operating profiU(loss) before firìance costs attributable to unitholders

Final DistributionsDistribution paid and payableDistribution (cents per unit)

Distributions - to redeemingunitholders 'Distribution paid

(491,789)

27,50219.66

858

Unit redemption prices

It is the opinion of the directors that adopting Australian Accounting Standards ("AAS") does not have unit pricingconsequences, as the basis of unit price accounting is as outlined in the Fund Constitution and the governingdocuments of the Fund. There is no difference between net assets for unit pricing purposes and net assets asreported in the financial statements.

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Fusion Fund - Vanguard Propert Securities Index FundDirectors' report

30 June 2009(continued)

Directors' report (continued)

Significant changes in state of affairs

In the opinion of the directors, there were no significant changes in the state of affairs of the Fund that occurredduring the financial year under review.

Matters subsequent to the end of the financial year

No matter or circumstance has arisen since 30 June 2009 that has significantly affected, or may significantly affect:

(i) the operations of the Fund in future financial years, or

(ii) the results of those operations in future financial years, or

(iii) the state of affairs of the Fund in future financial years.

Likely developments and expected results of operations

The Fund will continue to be managed in accordance with the investment objectives and guidelines as set out in thegoverning documents of the Fund and in accordance with the provisions of the Fund Constitution.

The results of the Fund's operations will be affected by a number of faCtors, including the performance of investmentmarkets in which the Fund invests. Investment performance is not guaranteed and future returns may differ frompast returns. As investment conditions change over time, past returns should not be used to predict future returns.

Further information on likely developments in the operations of the Fund and the expected results of thoseoperations have not been included in this report because the responsible entity believes it would be likely to result inunreasonable prejudice to the Fund.

Indemnification and insurance of offcers and auditors

No insurance premiums are paid for out of the assets of the Fund in regards to insurance cover provided to eitherthe offcers of Macquarie Financial Products Management Limited or the auditors of the Fund. So long as theofficers of Macquarie Financial Products Management Limited actin accordance with the Fund Constitution and theLaw, the offcers remain indemnified out of the assets of the Fund against losses incurred while acting on behalf ofthe Fund. The auditors of the Fund are in no way indemnified out of the assets of the Fund.

Fees paid to and intèrests held in the Fund by the responsible entity or its associates

Fees paid to the responsible entity and its associates out of Fund property during the year are disclosed in note 10on page 18 of the financial statements.

No fees were paid out of Fund property to the directors of the responsible entity during the year.

The number of interests in the Fund held by the responsible entity or its associates as at the end of the financialyear are disclosed in note 10 on page 18 of the financial statements.

Interests in the Fund

The movement in units on issue in the Fund during the year is disclosed in note 6 of the financial statements.

The value of the Fund assets and liabilities is disclosed on the balance sheet and derived using the basis set out innote 2 of the financial statements.

Environmental regulation\

The operations of the Fund are not subject to any particular or significant environmental regulations under aCommonwealth, State or Teri'tory law.

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Fusion Fund - Vanguard Propert Securities Index FundDirectors' report


Directors' report (continued)

Auditor's Independence Declaration

A copy of the Auditor's Independence Declaration as requireo under section 307C of the Corporations Act 2001 isset out on page 5.

This report is made in accordance with a resolution of the directors.

Jl.Sydney21 September 2009

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PRICEWA1fRHOUSE(aJPERS I-

P ricewaterhouseCoopersABN 52 780 433 757

Darling Park Tower 2201 Sussex StreetGPO BOX 2650SYDNEY NSW 1171DX 77 SydneyAustraliaww.pwc.com/auTelephone +61 282660000Facsimile +61 2 8266 9999

Auditor's independence declaration

As lead auditor for the audit of Fusion Fund - Vanguard Property Securities Index Fund for the year ended 30 June2009, I declare th'1t to the best of my knowledge and belief, there have been:

(a) no contraventions of the auditor independence requirements of the Corporations Act2001 in relation to the audit;and

(b) no contraventions of any applicable code of professional conduct in relation to the audit.

This declaration is in respect of Fusion Fund - Vanguard Property SElcurities Index Fund during the year.

.~S J SmithPartnerPricewaterhouseCoopers

Sydney21 September 2009

Liability limited by a scheme approved under Professional Standards Legislation

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Fusion Fund - Vanguard Propert Securities Index FundIncome statement

For the year ended 30 June 2009

Income statementYear ended

30 June2009

Notes $

Period ended30 June

2008$

Investment incomeInterest incomeDistribution incomeNet gains/(losses) on financial instruments held at fair value through profitor loss .Total nèt investment income/(loss)

3,37534,685

(520,647)(482,587)

5

ExpensesResponsible entity's feesReimbursement of responsible entity out of pocket expensesOther operating expensesTotal operating expenses

1010

7,8061,171

2259,202

Operating profiU(loss) (491,789)

Finance costs attributable to unitholdersDistributions to unitholders(Increase)/decrease in net assets attributable to unitholdersProfit/(Ioss) for the year

76

(28,360)520,149

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

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Fusion Fund - Vanguard Propert Securities Index FundBalance sheet

As at 30 June 2009

Balance sheet

Notes

AssetsCash and cash equivalents 8ReceivablesFinancial assets. held at fair value through profit or loss 9Total assets

LiabilitiesResponsible entity fees payable 10Redemptions payableTotal liabilities (excluding net assets attributable to unitholders)

Net assets attributable to unitholders - liability 6

Represented by:

Fair value of outstanding units based on redemption valueUnits issued upon reinvestment of distribution at year end

The above balance sheet should be read in conjunction with the accompanying notes.

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As at30 June

2009$

30 June2008

$

174,3091,382 2,131,160

83,394259,085 2,131,160

9,875165,057174,932

84,153 2,131,160

56,65127,50284,153

2,131,160

2,131,160

Fusion Fund - Vanguard Prope'rt Securities Index FundStatement of changes in equity

For the year ended 30 June 2009

Statement of changes in equity

Year ended30 June

2009$

Period ended30 June

2008$

Total equity at th~ beginning of the financial yearProfit/(loss) for the yearNet income/(expense) recognised directly in equityTotal recognised income and expense for the financial year

Transactions with equity holders in their capacity as equity holdersTotal equity at the end of the financial,year

Under Australian Accounting Standards ("AAS") net assets attributable to unitholders are classified as a liabilityrather than equity. As a result there was no equity atthe start or end of the year.

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

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Fusion Fund - Vanguard Propert Securities Index Fund, Cash flow statementFor the year ended 30 June 2009

Cash flow statement

Year ended30 June'

2009Notes $

Period ended30 June

2008$

Cash flows from operating activitiesProceeds from sale of financial instruments held at fair value through profior lossPurchase of financial instruments held at fair value through profit or lossDividends received

Interest receivedResponsible entity's fees paidNet cash inflow/(outflow) from operating activities

2,004,600(2,574,663)

3,375

11 (a) (566,688)

2,571,837(1,830,840)

740,997

174,309

11(b),8 174,309

Cash flows from financing activitiesProceeds from applications by unitholdersPayments for redemptions by unitholdersDistributions paidNet cash inflow/(outfow) from financing activities

Net increase/(decrease) in cash and cash equivalents

Cash and cash equivalents at the beginning of the year

Ca'sh and cash equivalents at the end of the year

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

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Fusion Fund - Vanguard Propert Securities Index FundNotes to the financial statements

30 June 2009

1 General information

This financial report covers Fusion Fund - Vanguard Property Securities Index Fund ("the Fund") as an individualentity. The Fund was constituted on 4 March 2008. The Fund will terminate on 3 March 2088 unless terminatedearlier in accordance with the provisions of the Fund Constitution.

The.financial statements were authorised for issue by the directors on 21 September 2009. The directors of theresponsible entity have the power to amend and reissue the financial report.

2 Summary of significant accounting policies

The principal accounting policies applied in the preparation of these financial statements are set out below. Thesepolicies have been consistently applied to all years presented, unless otherwise stated in the following text.

(a) Basis of preparation

This general purpose financial report has been prepared in accordance with Australian Accounting Standards, otherauthoritative pronouncements of the Australian Accounting Standards Board, Urgent Issues Group Interpretationsand the Corporations Act 2001. .

The financial report is prepared on the basis of fair value measurement of assets and liabilities except whereotherwise stated.

Prior year comparatives are for four months period from 4 March 2008 to 30 June 2008 therefore they are not fullycomparable with the current period. .

Compliance with International Financial Reporting Standards (IFRS)

The financial report of the Fund also complies with International Financial Reporting Standards as issued by theInternational Accounting Standards board.

(b) Financial instruments

(i) Classification

The Fund's investments are classified as at fair value through profit or loss. They comprise:

. Financial Instruments designated at fair value through profit or loss upon initial recognition.

These include financial assets that are not held for trading purposes and which may be sold. These areinvestments in unlisted trusts. . .

Financial assets and financial liabilities designated at fair value through profit or loss at inception are those thatare managed and their performance evaluated on a fair value basis in accordance with the Fund's documentedinvestment strategy. The Fund's policy is for the responsible entity to evaluate the information about thesefinancial assets on a fair value basis together with other related financial information.

(ii) Recognition/Derecognition

The Fund recognises financial assets and financial liabilities on the date it becomes party to the contractualagreement (trade date) and recognises changes in fair value of the financial assets or financial liabilities designatedin the fair value through profit or loss category from this date. .

Investments are derecognised when the right to receive cash flows from the investments have expired or the Fundhas transferred substantially all risks and rewards of ownership.

(iii) Measurement'

Financial assets and liabilities held at fair value through profit or loss

Investments in unit trusts are initially recorded at fair value and revalued at the recording date. Gains and losses(realised and unrealised) are included within total investment income in the income statement, with realised gainsbeing calculated on a specific identified costs basis. Investments in unlisted unit trusts are valued by reference tothe prevailing redemption value as reported by the managers of such Funds at the reporting date.

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Fusion ,Fund - Vanguard Propert Securities Index FundNotes to the financial statements

, 30 June 2009(continued)

2 Summary of significant accounting policies (continued)

(c) Net assets attributable to unitholders

Units are redeemable at the unitholders option and are therefore classified as financial liabilities. The units can beput back to the Fund at any time (subject to Manager apprOval) for cash equal to a proportionate share of the bookvalue of the Fund's net assets. The fair value of redeemable units is measured at the redemption amount that ispayable (based on the redemption unit price) at the balance sheet date if unitholders exercised their right to put theunits back to the Fund.

(d) Cash and cash equivalents

For the purposes of the cash flow statement, cash includes deposits at call which are readily convertible to knownamounts of cash and are subject to an insignificant risk of changes in value.

Payments and receipts relating to the' purchase and sale of financial assets are classified as cash flows fromoperating activities, as movements in the fair value of these securities represent the Fund's main income generatingactivity.

(e) Investment income

Distribution income is recognised when the Fund's right to receive payment is established.

Changes in the fair value of financial assets and liabilities designated in the fair value through profit or loss categoryare recognised as income or expenses in the income statement in the year in which the changes occur.

Interest income is recognised in the income statement using the effective interest rate method.

(f) Expenses

All expenses, including responsible entity's feesHnd custodian fees, are recognised in the income statement on anaccruals basis.

(g) Income tax

Under current legislation, the Fund is not subject to income tax as unitholders àre presently entitled to the income ofthe Fund.

i

Realised capital losses are not distributed to unitholder.s but are retained in the Fund to be offset against anyrealised capital gains. If re,àlised capital gains exceed realised capital losses, the excess is distributed to unitholders.

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

The Fund currently incurs withholding tax imposed by certain countries on investment income. Such income isrecorded gross of withholding tax in the income statement. ,

(h) Distributions

In accordance with the Fund Constitution, the Fund fully distributes its distributable (taxable) income to unitholdersby cash or reinvestment. The dii5tributions are payable at the end of June each year and are recognised in theincome statement as finance costs attributable to unitholders.

(i) Increaseldecrease in net assets attributable to unitholders

Income not distributed is included in net assets attributable to unitholders. Movements in net assets attributable tounitholders are recognised in the income statement as finance costs.

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ü) Redemptions distributions

In accordance with the Fund constitution, the Fund distributes a "redemption distribution" when a unit is redeemedand the redemption price of that unit is greater than the application price of that uhit. The redemption distribution isincluded in the redemption price of unit andis accounted for as a distribution paid in the financial statements.

(k) Receivables

Receivables may include amounts for dividends, interest and trust distributions. Dividends and trust distributions areaccrued when the right to receive paym~nt is established. Interest is accrued at the reporting date from the time oflast payment in accordance with the policy set out in note 2(e) above. Amounts are generally received within 30days ,of being recorded as receivables.

(I) Payables

Payables include liabilities and accrued expenses owing by the Fund which are unpaid as at balance sheet date.

The distribution amount payable to unitholders as at the reporting date is recognised separately on the balancesheet when unitholders are presently entitled to the distributable income under the Fund's Constitution.

(m) Applications and redemptions

Applications received forunits in the Fund are recorded net of any entry fees payable prior to the issue of units inthe Fund. Redemptions from the Fund are recorded gross of any exit fees payable after the cancellation of unitsredeemed. 'Unit redemption prices are determined by reference to the net assets of the Fund divided by the number of units onissue less any redemption costs.

(n) Goods and Services Tax (GST)

The GST incurred on the costs of various services provided to the Fund by third parties such as audit fees andresponsible entity fees have been passed onto the Fund. The Fund qualifies for Reduced Input Tax Credits (RITC)at a rate of 75% hence responsible entity fees and other expenses have been recognised in the income statementnet of the amount of GST recoverable from the Australian Taxation Office (A TO). Accounts payable are inclusive ofGST. The net amount of GST recoverable from the ATO is included in receivables in the balance sheet. Cashflows relating to GST are included in the cash flow statement on a gross basis.

(0) Use of estimates

In preparing the financial statements no estimates were made which included a high degree of judgement.

(p) New accounting standards and interpretations

Certain neW accounting standards and interpretations have been published that are not mandatory for 30 june 2009reporting periods. The directors' assessment of the impact of these new standards (to the extent relevant to theFund) and interpretations i~ set below:

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(p) New accounting standards and interpretations (continued)

(i) AASB 8 Operating Segments and AASB 2007-3 Amendments to Australian Accounting Standards arising fromAASB 8 (effective from 1 January 2009)

AASB 8 will result in a significant change in the approach to segment reporting, as it requires adoption of a'management approach' to reporting on financial performance. The information being reported will be based on whatthe key decision makers use internally for evaluating segment performance and deciding how to allocate resourcesto operating segments. The Fund will adopt AASB 8 from 1 July 2009:The Fund is organised into one mainsegment which operates solely in the business of investments management within Australia. Consequently, nodetailed segment reporting is provided in the Fund's financial Statements.

(ii) Revised AASB 101 Presentation of Financial Statements and AASB 2007-8 Amendments to AustralianAccounting Standards arising from AASB 101 (effective from 1 January 2009)

The revised AASB 101 requires the presentation of a statement of comprebensive income arid makes changes tothe statement of changes in equity, but will not affect any of the amounts recognised in the financial statements. Ifthe Fund makes a prior periòd adjustment or re-c1assifies items in the financial statement, it will need to disclose athird balance sheet (statement of financial position), this one being at the beginning of the comparative period. TheFund will apply the revised standard from 1 July 2009.

(iii) AÄSB 132 Financial Instruments: Presentation and AASB 2008-2 Amendments to Australian AccountingStandards - Puttable Financial Instruments and Obligations Arising on Liquidation (Revised AASB 132)

Revised AASB 132 is applicable for reporting periods beginning on or after 1 January 2009. The Fund hçis notadopted this standard early. Application of this standard will notaffect any of the amounts recognised in the financialstatements as the Fund is obligated to distribute all of its taxable income in accordance with the Fund's Constitution.Accordingly, there will be no change to classification of unitholders' funds as a liability and therefore no impact onprofit or loss and equity.

(q) Segment reporting

A business segment is identified for a group of assets and operations engaged in providing products or services thatare subject to risks and returns that are different to those of other business segments. A geographical segment isidentified when products or services are provided within a particular economic environment subjectto risks andreturns that are different from those of segments operating in other economic environments.

3 Financial risk management

The Fund's activities expose it to a variety of financíal risks: market risk (including price risk; foreign exchange riskand interestrate risk), credit risk and liquidity risk.

The Fund's overall risk management programme focuses onenswing compliance with the Fund's ProductDisclosure Statement and seeks to maximise the returns derived for the level of risk to which the Fund is exposed.Financial risk management is carried out by the responsible entity under policies approved by the Board of Directorsof the responsible entity.

The Fund uses different methods to measure different types of risk to which it is exposed. These methods includesensitivity analysis in the case of interest rate, foreign exchange and other price risks and ratings analysis for creditrisk.

(ay Market risk

(i) Price Risk

The underlying fund managers provide redemption prices for the funds on a monthly basis and the prices as at 30June 2009 have been used to determine those investments carrying value as at 30 June 2009. These areinvestments in unlisted trusts. This risk is managed by ensuring that all activities are transacted in accordance withthe fund constitution, product disclosure statement, compliance plan and overall investment strategy.

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3 Financial risk management (continued)

(a) Market risk (continued)

The table on page 15 summarises the impact of an increase/decrease of the underlying investment funds unit priceson the Fund's net assets attributable to unitholders at 30 June 2009. The analysis is bàsed on the assumptions thatthe underlying investment funds unit price increased/decreased by 15% (2008: 7:5%) with all other variables heldconstant. The impact mainly arises from the possible change in the fair value of investments in unlisted unit trusts.

(ii) Foreign exchange risk

There isno direct foreign exchange risk in this Fund. Indirectforeign exchange risk cannot be managed as the Funddoes not receive sufficient information to assess on a look-through basis.

(iii) Interest rate risk

The Fund's interest bearing financial assets expose it to risks associated with the effects of fluctuations in theprevailing levels of market interest rates on its financial position and cash flows. The risk is measured usingsensitivity analysis.

The fund does not have direct exposure to debt instruments, guarantees, collateral and derivatives.

The interest rate r.isk disclosures have been prepared on the basis of the Fund's direct investment and not on alook-through basis for investments held indirectly through unit trusts. Consequently, the disclosure of.interest raterisk below may not represent the true interest rate risk profile of the Fund where the Fund has significantinvestments in unit trusts which also have exposure to the interest rate markets.

The fund may have an indirect exposure to bonds through its investment in the cash trust. Movements in interestrates will also affect amount of interest earned on cash deposits.

The table below summarises the Fund's exposure to interest rate risks. It includes the Fund's assets and liabilities atfair values.

30 June 2009

Financial assetsCash and cash equivalentsReceivablesFinancial assets held at FVTPLFinancial liabilitiesPayablesNet exposure

Floating Non-interest Totalinterest rate bearing

$ $ $

174,309 174,3091,382 1,382

83,394 83,394

(174,932) (174,932)174,309 (90,156) 84,153

Floating Non-interest Totalinterest rate bearing

$ $ $

2,131,160 2,131,160

30 June 2008Financial assets'

Cash and cash equivalentsReceivablesFinancial assets held at FVTPLFinancial liabiliiesPayables

2,131,160 2,131,160

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3 Financial risk management (continued)

(a) Market risk (continued)

The table below summarises the impact of an increaseldecrease of interest rates on the Fund's operating profit andnet assets attributable to unitholders through changes in fair value or changes in future cash flows. The analysis isbased on the assumption that interest rates changed by +1- 50 basis points (2008- +1- 75 basis points) from the yearend rates with all other variables held constant. The impact mainly arises from changes in the fair value of fixedinterest securities. .(0) Summarised sensitivity analysis

The following table summarises the sensitivity of the Fund's operating profi and net assets attributable tounitholders to interest rate risk and price risk: The reasonably possible movements in the risk variables have beendetermined based on Managementsbest estimate, having regard toa number of factors, including historical levelsof changes in underlying funds investment unit price. However, actual mqvementsin the risk variables may begreater or less than anticipated due to a number of factors, including unusually large market shocks resulting fromchanges in the performance of the economies, markets and securities in which the underlying fund invests. As aresult, historic variations iri risk variables are not a definitive indicator of future variations in the risk variables.

The variables for price risk represent the impact of one day's movement in the price of the underlying equityinvestment before taking into account the effect of Threshold Management. The Fund uses Threshold Managementas an investment technique to manage price risk. Threshold Management seeks to ensure that the value of theFund's units is at least equal to the original investment at the Threshold Management expiry date as specified in theProduct Disclosure Statement.

Price'risk I Interest rate riskImpact on operating profit/Net assets attributable to unitholders$$ $ $

30 June 2009

30 June 2008

(12,509) 12,509 (872) 872

(c) Credit risk

The Fund is exposed to credit risk, which is the risk that a counterparty will be unable to pay amounts in full whenthey fall due.

The exposure to credit risk for cash and cash equivalents is low as all counterparties have a rating of A- asdetermined by the Standards and Poor's rating agency.

Other than the cash and cash equivalents and investment in the underlying fund, the Fund does not have aconcentration of a credit risk that arises from an exposure to a single counterparty. Furthermore, the Fund does nothave a material exposure to a group of counterparties which are expected to be affected similarly by changes ineconomic or other conditions.

There are no non-performing assets in the fund.'

The carrying amount of the financial assets best represents the Fund's maximum credit risk exposure at balancedate.

(d) Liquidity Risk

Liquidity risk i¡: the risk that the Fund will experience difficulty in either realising assets or otherwise raising sufficientfunds to satisfy commitments. There is no significant direct liquidity risk in this Fund as the responsible entity hasdiscretion whether to accept or reject a redemption request as stipulated in the product disclosure statement.Indirect risk cannot be managed as the Fund does not have suffcient informàtion to assess on a look through basis.

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4 Auditor's remuneration

Auditors remuneration of $7,910 (2008: $3,050) in relation to the audit and review of the financial statements arepaid for by Macquarie Financial Products Management Limited, the responsible entity,

In the current year, the responsible entity has recharged an amount to cover expenses paidJor on behalf of theFund, including the 2009 audit fees. The re-charge is disclosed in Note 10.

" '

5 Netgains/(Iosses) on financial instruments held at fair value through profit or loss

Net gains/(Iosses) have been calculated on a specific identified costs basis in line with the Fund's tax calculations.

Year ended30 June

2009$

Period ended30 June

2008$

Net gains/(losses) on financial instruments held at fair value through profit orloss 'Net unrealised gain/(loss) on financial assets at fair value through profit or lossNet realised gain/(loss) on financial assets at fair value through profit or lossNet gains/(losses) on financial assets held at fair value through profit or loss

(11,929)(508,718)(520,647)

6 Netassets attributable to unitholdersAs stipulated within the Fund's Constitution, each unit represents an equal undivided interest in the Fund's assets.

There are 2 classes of unitholders in the Fund. The units are held in separate classes, by release, for the purpose OfThreshold Management.

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

As at30 June

2009No.

30 June2008No.

30 June2009

$

30 June2008

$

Net assets attributable to unitholders - June2008 releaseOpening balanceApplicationsRedemptionsUnits issued upon reinvestment of distributionsIncrease/(decrease) in net assets attributable tounitholdersClosing balance

2,131,373155,241

(2,214,259)72,360

2,131,3732,131,160

117,387(1,752,463) ,

14,223

2,131,160

144,715 2,131,373(466,788)

43,519 2,131,160

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Fusion Fund - Vanguard Propert Securities Index Fund

Notes tothe financial statements30 June 2009

(continued)

6 Net assets attributable to unitholders(continued)

Net assets attributable to unitholders -November 2008 releaseOpening balanceApplicationsRedemptionsUnits issued upon reinvestment of distributionsIncrease/(decrease) in net assets attributable tounitholdersClosing balance

Total net assets attributable to unitholders

7 Distributions to unitholders

Distributions paidlpayable were as follows:

Final distributions payableDistributions paid to redeeming unitholders

8 .Cash and cash equivalents

Cash at bank

30 June2009No.

493,514(425,953)

67,557

135,118

Year ended30 June

2009$

27,502858

28,360

30 June2008No.

Year ended30 June

2009CPU

As at30 June

2009$

323,292(242,576)

13,279

(53,361)40,634

84,153

Period ended30 June

2008$

19.66

30 June2009

$

174,309

30 June2008

$

2,131,160

Period ended30 June

2008CPU

As at30 June

2008$

Cash at the end of the finanqial year, as shown in the statement of cashflows, is reconciled to the related items in. the balance sheet as detailed above. These accounts are interest bearing.

The average interest rate for the year was 1.71 % (2008: 5.17%).

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9 Financial assets held at fair value through profit or loss,As at

30 June2009

Fair value$

30 June2008

Fair value$

Unlisted unit trustsTotal financial assets held at fair value through profit or loss

83,39483,394

10 Related party transactions

Responsible entity

The responsible entity of Fusion Fund - Vanguard Property Securities Index Fund is Macquarie Financial ProductsManagement Limited.

Key management personnel

(a) Directors

Key management personnel includes persons who were directors of Macquarie Financial Products ManagementLimited at any time during the financial year as follows: '.

Peter LucasWilliam FoxSimone MosseJason King (appointed 20 February 2009)Anthony Abraham (resigned 20 February 2009)

(b) / Other key management personnel

There were no other persons with responsibility for planning, directing and controlling the activities of the Fund,directly or indirectly during the financial year.

Responsible Entity's fees and other transactions

Under the terms of the Fund constitution, the responsible entity is entitled to be paid from the assets of the Fund afee of up to 3% per annum (GST exclusive) of the value of the assets calculated daily, based on the value of theassets on each day and payable from the assets on 30 June in each year. The current fee charged by the,Responsible Entity is 1% per annum(GST exclusive).

All related party transactions are conducted on normal commercial terms and conditions. The transactions duringthe yearand amounts payable at the year end between the Fund and the Responsible Entity are as follows:

Year ended30 June

2009$

Period ended30 June

2008$

Management fees for the year paid by the Fund to the Responsible EntityResponsible entity's fees incurred and other transactions 'Administration expenses incurred by the responsible entity which are reimbursed inaccordance with the Fund Constitution .Aggregate amounts payable to the responsible entity at the reporting date

7,806

1,1719,875

- i 8-

Fusion Fund - Vanguard Propert Securities Index FundNotés to the financial statements

30 June 2009(continued) ,

10 Related party transactions (continued)

Related party schemes' unitholdings

There were no interests held in the Fund by the responsible entity or a related party of the responsible entity duringthe period.

Key management personnel remuneration

Key management personnel are paid by Macquarie Financial Products Management Limited. Payments made fromthe Fund to Macquarie Financial Products Management Limited do not include any amounts attributable to thecompensation of key management personneL.

Key management personnel loan disclosures

The Fund has not made, guaranteed or secured, directly or indirectly, any loans to the key management personnelor their personally related entities at any time during the year.

Other transactions within the Fund

From time to time the directors of the responsible entity, or their director related entities, may inVest in or withdrawfrom the Fund. These investments or withdrawals are on the same terms and conditions as those entered into byother Fund investors and are trivial in nature.

Apart from those details disclosed in this note, no director has entered into a material contract with the Fund sincethe end of the previous financial year and there were no material contracts involving director's interests existing atyear end.

The Fund holds cash balances with Macquarie Bank Limited, the parent entity of the responsible entity. Thesebalances are held on normal commercial terms.

The Fund may purchase bonds from Macquarie Bank Limited, or Macquarie Bank Limited may facilitate such apurchase. The purchase of such bonds is on normal commercial terms at market price.

-19-



11 Reconciliation of profit/(Ioss) to net cash inflow/(outflow) from operating activities

Year ended30 June

2009$

Period ended30 June

2008$

(a) Reconcilation of profiU(loss) to net cash inflow/(outfow) from operatingactivitiesNet profiU(loss) before finance costsNet (gains)/Ioss on financial assets at fair valueProceeds from sale of financial instruments held at fair value through profit or loss'(including net realised gains/(losses))

Purc~ase of financial instruments held at fair value through profit or loss andderivative financial instrumentsDistribution income reinvestedNet change in amounts payable and other liabilitiesNet change in amounts receivable and other assetsNet cash inflow/(outflow) from operating activities

(491,789)520,647

2,004,600

(2,574,663)(33;978)

9,875(1,380)

(566,688)

(b) Components of cash and cash equivalentsCash as at the end of the financial year as shown in the cash flow statement isreconciled to the balance sheet as follows:Cash and cash. equivalents 174,309

174,309

í

(c) Non-cash financing and investing activitiesDuring the year, the following distributiòn income were satisfied by the issue of unitsin unlisted unit trust investmentsDuring the year, the following distribution payments were satisfied by the issue of,units in the Fund

33,978

27,502

12 Segment information

The Fund is organised into one main segment which operates solely in the business of investment managementwithin Australia. Consequently, no segment reporting is provided inthe Fund's financial statements. '

While the Fund operates from Australia only (the geographical segment), the Fund may have investment exposuresin different countries and across different. industries.

The Fund assesses geographical exposure on a direct investment basis as it does not receive sufficient informationfrom the underlying fund managers to provide exposures on a look-through basis.

13 Events occurring after the balance sheet dateNo significant events have occurred since balance date which would impact on the financial position of the Funddisclosed in the balance sheet as at 30 June 2009 or on the results and cash flows of the Fund for the year endedon that date.

14 Contingent assets and liabilities and commitments

There are no outstanding contingent assets and liabilities or commitments as at 30 June 2009 and 30 June 2008.

-20-

Fusion Fund - Vanguard Propert Securities Index Fund/Directors' declaration

30 June 2009

Directors' declaration

In the opinion of the directors of the Responsible Entity:

(a) the financial statements and notes set out on pages 6 to 20 are in accordance with the Corporations Act2001, including:

(i) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatoryprofessional reporting requirements; and

(ii) giving a true and fair view of the Fund's financial position as at 30 June 2009 and of its performance,for the financial year ended on that date; and

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

This declaration is made in accordance with a resolution of the directors.

Sydney21 September 2009

-21-

fJcEW1fRHOUS@PERS I

PricewaterhouseCoopersABN 52 780 433 757

Independent auditor's report to the unitholders of FusionFund. Vanguard Property Securities Index Fund

Darling Park Tower 2201 Sussex StreetGPO BOX 2650SYDNEY NSW 1171DX 77 SydneyAustraliaTelephone +61 282660000Facsimile +61 2 8266 9999ww.pwc.com/au

Report on the financial report

We have audited the accompanying financial report of Fusion Fund - Vanguard Property SecuritiesIndex Fund (the Trust), which comprises the balance sheet as at 30 June 2009, and the incomestatement, statement of changes in equity and cash flow statement for the year ended on that date,a summary of significant accounting policies, other explanatory notes and the directors' declarationfor the Trust.

Directors' responsibility for the financial report

The directors of Macquarie Financial Products Management Limited (the Responsible Entity) areresponsible for the preparation and fair presentation of the financial report in accordance withAustralian Accounting Standards (including the Australian Accounting Interpretations) and theCorporations Act 2001. This responsibility includes establishing and maintaining internal controlsrelevant to the preparation and fair presentation of the financial report that is free from materialmisstatement, whether due to fraud or error; selecting and applying appropriate accountingpolicies; and making accounting estimates that are reasonable in the circumstances. In Note 1 (a),the directors also state, in accordance with Accounting Standard AASB 101 Presentation ofFinancial Statements, that compliance with the Australian equivalents to International FinancialReporting Standards ensures that the financial report, comprising the financial statements andnotes, complies with International Financial Reporting Standards.

Auditor's responsibilty

Our responsibility is to express an opinion on the financial report based on our audit. We conductedour audit in accordance with Australian Auditing Standards. These Auditing Standards require thatwe comply with relevant ethical requirements relating to audit engagements and plan and performthe audit to obtain reasonable assurance whether the financial report is free from materialmisstatement.

An audit involves performing procedures to obtain audit evidence about the amounts anddisclosures in the financial report. The procedures selected depend on the auditor's judgement,including the assessment of the risks of material misstatement of the financial report, whether dueto fraud or error. In making those risk assessments, the auditor considers internal control relevantto the entity's preparation and fair presentation of the financial report in order to design auditprocedures that are appropriate in the circumstances, but not for the purpose of expressing anopinion on the effectiveness of the entity's internal control. An audit also includes evaluating theappropriateness of accounting policies used and the reasonableness of accounting estimatesmade by the directors, as well as evaluating the overall presentation of the financial report.

Our procedures include reading the other information in the Annual Report to determine whether itcontains any material inconsistencies with the financial report.

Liability limited by a scheme approved under Professional Standards Legislation

fJcEW1fRHOUsE(PERS IOur audit did not involve an analysis of the prudence of business decisions made by directors ormanagement.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide abasis for our audit opinions.

Independence

In conducting our audit, we have complied with the independence requirements of the CorporationsAct 2001.

Auditor's opinion

In our opinion:

(a) the financial report of Fusion Fund - Vanguard Property Securities Index Fund is in accordancewith the Corporations Act 2001, including:

(i) giving a true and fair view of the Trust's financial position as at 30 June 2009 and of theirperformance for the year ended on that date; and

(ii) complying with Australian Accounting Standards (including the Australian AccountingInterpretations) and the Corporations Regulations 2001; and

(b) the financial report and notes also comply with International Financial Reporting Standards asdisclosed in Note 1 (a).

Ir'aw~~PricewaterhouseCoopers

øS J SmithPartnerSydney21 September 2009

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