For personal use only

Transcription

1 HUNTER HALL GLOBAL VALUE LIMITED ACN Level 2, 60 Castlereagh Street, Sydney NSW 2000, Australia Telephone: Fax: August 2012 Company Announcements Office Australian Stock Exchange Limited Level 5, 20 Bridge Street Sydney NSW 2000 HUNTER HALL GLOBAL VALUE LIMITED 30 June 2012 Preliminary Final Report Please find attached copies of the following documents in relation to the 30 June 2012 preliminary final report: - Appendix 4E Preliminary Final report; - Directors Report; and - Audited Financial Statements for the year ended 30 June 2012 Yours sincerely, Jeremy Freeman Company Secretary GPO Box 4006, Sydney NSW 2001, Australia Website: invest@hunterhall.com.au

2 Appendix 4E Preliminary final report Period ended 30 June 2012 ENTITY: HUNTER HALL GLOBAL VALUE LIMITED ABN: The following information is given to the ASX under listing rule 4.3A. Item 1: Reporting period This preliminary final report is for the reporting period to 30 June 2012 and the previous corresponding period to 30 June Item 2: Results for announcement to the market $A 000 Up/(down) % Up/(down) to $A : Revenue from ordinary activities (799) (16) 4, : Profit from ordinary activities after tax attributable to members (prior to one-off de-recognition of deferred tax assets) 2.2: Profit from ordinary activities after tax attributable to members 2.3: Net profit for the period attributable to members (28,332) (248) (16,920) (55,007) (482) (43,595) (55,007) (482) (43,595) 2.4: No fully franked dividend was paid during the year. No final dividend is to be paid. Amount per share Franked amount per share Final dividend - n/a At 30 June 2012 the franking balance of the Company was $1,246,000 (2011: $644,000). 2.5: Salient features of the result included: The loss of the Company after providing for income tax amounted to $43,595,000 (loss of $16,920,000 prior to a one-off de-recognition of deferred tax assets) (2011: profit of $11,412,000). Net assets at 30 June 2012 totalled $196,756,000 (2011: $256,067,000). At 30 June 2012 the Company s net asset backing after provision for tax on unrealised capital gains was $ per share compared to a net asset backing of $ at 30 June Cash holdings at 30 June 2012 were $42,112,000 (2011: $34,823,000). There were no performance fees accrued as payable to the Investment Manager as at 30 June As at 31st July 2012 the performance fee accrual was negative $6.421m. Item 3: Net Tangible Assets Per Security Reporting period $A Previous corresponding period $A Net Tangible Asset backing per ordinary share after tax Appendix 4E Page 1

3 Item 4: Commentary Financial Performance In the 12 months to 30 June 2012 the Company reported a net loss after tax of $16.9m before a oneoff derecognition item of deferred tax assets of $26.7m for a total net loss of $43.6m. This compares to a net gain after tax of $11.4m in the year to 30 June The results include investment losses before tax of $24.9m, while in the year to 30 June 2011 gains before tax were $15.2m. Net assets after provision for tax was $196.8m at 30 June 2012 compared to $256.1m a year earlier. The net assets per share was $ calculated on 237.0m ordinary shares on issue. Net assets are calculated using bid price to value investments. The Australian Securities Exchange requires investment companies to report their Net Asset Backing each month using net market value. This calculation differs from the net assets used for Financial Reporting, as referred to above, in that it uses last sale price less realisation costs to value investments. The Company considers that the Net Asset Backing figure using last sale price less realisation costs is the more appropriate measure of its performance. Change to Net Tangible Asset Backing Following a review of the recoverability of the company s deferred tax asset the Board has considered it prudent to write-off the deferred tax assets from the balance sheet effective 30 June The decision to write-off the deferred tax asset at 30 June 2012 does not impact the ability of the company to carry forward the full amount of the tax losses for tax purposes. The series of net assets used to calculate the performance reported in the Monthly Performance Reports has been adjusted since inception to remove deferred tax assets. This results in a reported return of approximately 1.6% since inception less than if the deferred tax asset had been retained. The following table details the investment performance of the Company, including share buybacks and assuming reinvestment of dividends: To 30 June 2012 (%) HHV (1) MSCI (2) Relative Performance (1-2) 6 Months Year Years Years Years Years Compound Annual Return since inception ( ) Source: Hunter Hall. MSCI refers to the MSCI World Total Return Index, Net Dividend Reinvested, in A$. Performance figures refer to the movement in net assets per share, including share buybacks and the reinvestment of dividends, but excluding the effect of option exercises. Past performance is no guarantee of future performance and no guarantee of future return is implied. Dividend No final dividend is to be paid. As no interim dividend was paid, the total for the year is nil dividends (2011: nil). Buy-back In the 12 months to 30 June 2012, the Company bought back and cancelled 21.9m shares. The average price for the buy-back was $0.72 for a total consideration of $15.7m. Between listing and 30 June 2012, the Company has bought back and cancelled 181.4m shares at an average price of $0.77 per share.

4 Portfolio Structure At 30 June 2012, the Company held 70 stocks which accounted for 74% of the portfolio. The balance was net liquids, predominantly cash, held in Australian dollars, US dollars, Japanese Yen, Canadian dollars, Swiss Francs and Norwegian Kroner. This accounted for 21% of the portfolio, while Gold accounted for 5% of the portfolio. At 30 June 2012 hedging was in place for 42% of the Company s foreign currency exposure. 30 June June 2012 Net Liquids 14% 21% Gold Bullion 3% 5% Deferred Tax Asset 8% Equities 75% 74% Equities Breakdown: - Australia/New Zealand 27% 28% - UK 4% 7% - Europe (ex UK) 10% 10% - Japan 6% 5% - Korea 4% 4% - Asia (ex Japan, ex Korea) 8% 1% - North America 16% 19% - South America % of international equities hedged 38% 42% Number of Stocks Stocks as at 30 June 2012 Company Country Main Business Cost ($m) Market ($m) Pre-tax Portfolio Weight % Sirtex Medical Australia liver cancer treatments Gold Bullion gold gold M2 Australia telecommunications Danieli Italy machinery manufacturer Comcast USA communication services Decmil Australia engineering services BTG UK medical devices Lexmark USA printing and imaging solutions Oracle USA software Afren UK oil and gas exploration and production Samchully Korea energy distributor PMP Australia printing and distribution Interdigital USA wireless technologies JDS USA optical components Bank of New York USA financial services American Greetings USA greeting cards Biota Australia pharmaceuticals Daiichikosho Japan karaoke machinery Fuji Media Japan broadcaster Redflex Australia technology Other Total Investments Net Liquids Net Assets Pre-Tax Australian Equities International % foreign currency exposure hedged 42% * These figures differ from those shown in the financial statements as they are based on last traded price not bid price. Appendix 4E Page 3

5 Outlook Hunter Hall is in the business of cautious deployment of capital to companies that we are confident align to our value style, which has offered good returns in the long run and will do so again. We believe the difficult economic conditions are producing exciting opportunities for the Hunter Hall investment team to purchase undervalued equities. The precision required to execute this strategy does involve the exercise of patience and resilience. More recently we have been encouraged by positive signals in operating results posted by many of our holdings in this reporting season. As we see more evidence of a resolution of the structural problems facing the world economy we plan to deploy more cash into equity investments. Our belief is that 2012/13 will lay the foundations for this investment strategy to be rewarded with better returns - in both a relative and absolute sense. Annual General Meeting The Annual General Meeting of Hunter Hall Global Value Limited will be held on Thursday 22 November 2012 at 4.00pm at the The Mint, 10 Macquarie Street Sydney NSW This will be preceded by the Hunter Hall Investment Management Annual Investors and Advisors meeting, commencing at 1.30pm, to which Company shareholders are also invited. Item 5: Audit Review/Status This report is based on accounts that are audited and a copy of the Independent Auditor s Report has been included in the attached Financial Report. Item 6: Attachments forming part of Appendix 4E Hunter Hall Global Value Limited 2012 Financial Report. Adam Blackman Non-executive director 31 August 2012

6 HUNTER HALL GLOBAL VALUE LIMITED ACN Financial Report 30 June 2012

7 CONTENTS Directors' Report 2 Statement of Comprehensive Income 7 Statement of Financial Position 8 Statement of Changes in Equity 9 Statement of Cash Flows 10 Notes to the Financial Statements 11 Directors' Declaration 31 Auditor's Independence Declaration 32 Independent Auditor's Report 33 Shareholder information 36 Corporate directory 39 HUNTER HALL GLOBAL VALUE LIMITED FINANCIAL REPORT

8 DIRECTORS' REPORT Your Directors present their report on Hunter Hall Global Value Limited for the financial year ended 30 June Directors The name of Directors in office at any time during or since the end of the year are: Peter James MacDonald Hall Executive Chairman, Executive Director Adam Paul Blackman Non-executive Director Alex Koroknay Non-executive Director Julian David Constable Non-executive Director Jack Theseus Lowenstein Executive Director (resigned 23 November 2011) Directors have been in office since the start of the financial year to the date of this report, unless stated otherwise. Information on Directors During the period, the following persons held office as Director: Peter James MacDonald Hall, B.A. Executive Chairman, Executive Director Mr Hall is Executive Director and Chairman of the Company. He is also Executive Director and Chairman of Hunter Hall International Limited and a Director of Hunter Hall International Ethical Fund plc (since 2002), all of which are publicly listed entities. He is Chief Investment Officer of Hunter Hall Investment Management Limited and Executive Director and Chairman of Hunter Hall International (UK) Limited. With regards to Hunter Hall International Limited, he is a Trustee of the Charitable Trust, a member of the Charities Committee and of the Remuneration and Nomination Committee. Mr Hall is also a Patron of the Asian Rhino Project and Sea Shepherd UK, a Director of the International Rhino Foundation and a member of the Sydney Film Festival Council. Mr Hall has 29 years experience in investment markets. Previously he was Investment Manager of Hancock & Gore Limited, Portfolio Manager and Analyst with Mercantile Mutual Holdings Limited, Industrial Analyst with Pembroke Securities Limited, Investment Analyst with New Zealand South British Insurance Limited and a journalist with John Fairfax & Sons Limited. Mr Hall completed the Harvard Business School Owner/President Management Program in Mr Hall was awarded Member (AM) of the Order of Australia in 2010 for his philanthropic contributions to society and his service to the finance management industry. Adam Paul Blackman B.Econ., FCA., JP. Non-executive Director Mr Blackman is a Non-executive Director of Hunter Hall Global Value Limited, a publicly listed entity. He is Chairman of the Hunter Hall Global Value Limited Audit Committee. Mr Blackman is a chartered accountant with 23 years experience in public practice and is a partner in the firm, Quantum Partners Accountants & Business Advisers where he is primarily involved in business and taxation planning services. He has had several years experience in reviewing and advising on compliance issues in the financial services industry. Mr Blackman is a Fellow of the Institute of Chartered Accountants in Australia. Alex Koroknay B.A., LLM. (Hons) Non-executive Director Mr Koroknay is a Non-executive Director of the Company. He is a Trustee of the Hunter Hall Charitable Trust and a member of the Hunter Hall Global Value Limited Audit Committee. Mr Koroknay is a practising solicitor specialising in managed investments, superannuation and venture capital financing, and is experienced in the requirements of the Corporations Act and Superannuation Industry (Supervision) Act. For five years Mr Koroknay worked as a consultant with HWL Ebsworth and acted for a number of fund managers before establishing his own practice. Previously he was a Partner with Nash O Neill Tomko; Dibbs Crowther and Osborne; Manager - Corporate Securities at Allen Allen Hemsley and a consultant to Toomey, Pegg and Drevikovsky. Mr Koroknay was also a Director of Fiducian Portfolio Services Limited between January 2002 and February HUNTER HALL GLOBAL VALUE LIMITED FINANCIAL REPORT

9 DIRECTORS' REPORT Julian David Constable Non-executive Director Mr Constable is a Non-executive Director of the Company. He is a member of the Hunter Hall Global Value Limited Audit Committee. Mr Constable is a senior investment advisor at Bell Potter Securities Ltd, having worked in this capacity since In this role his key attributes are developing new business and building relationships with clients. He has worked in the stockbroking industry since 1984, in both trading and advisory areas, at firms including Pembroke Securities Ltd, Pring Dean McNall, Hambros Equities and Potter Warburg Dillon Read. Mr Constable has been a Non-executive Director of the ASX-listed HGL Ltd since August 2003 and is a member of its Remuneration Committee. HGL Ltd operates as an import and distribution company. Jack Theseus Lowenstein M.A. (Oxon) Deputy Chairman, Executive Director (resigned 23 November 2011) Mr Lowenstein resigned on 23 November 2011 and was Deputy Chairman and Executive Director of Hunter Hall Global Value Limited and was Executive Director of Hunter Hall International Limited, both of which are publicly listed entities. He was Deputy Chief Investment Officer of Hunter Hall Investment Management Limited and was a member of the Hunter Hall Risk Management Committee. Mr Lowenstein is also Chairman of Kontiki Capital Limited, a Fiji based investment bank, and has been a Director of Calliden Group Limited since April Company Secretary Jeremy Graham Freeman B.Eng. (Hons), M.App.Fin Company Secretary and Compliance Manager Mr Freeman has been Company Secretary and Compliance Manager since Mr Freeman has 12 years of industry experience and was previously Currency Dealer and Analyst at Hunter Hall. Jeremy s previous experience includes four years in the administrative and accounting aspects of the financial services industry as well as three years in investor communications, performance analysis and attribution and business analysis. Ouafaa Karim B.A., M.Com.Law Grad Dip (Corp Management), SIA (Aff). Group Company Secretary and Compliance and Risk Manager; Director, Responsible Investment Strategies and Chief Executive, Europe and Asia Ms Karim has been Chief Executive Officer of Hunter Hall International (UK) Limited since 2011 and the Group Company Secretary, and Compliance and Risk Manager since She is also Executive Director of Bennelong Administration Services Pty Limited, a Trustee of the Hunter Hall Charitable Trust and a member of the Hunter Hall Charity Committee. Ms Karim is also a Director of the Responsible Investment Association Australasia and is a member of the IFSA Regulatory Affairs Board Committee and the AFSA NSW Executive Committee. Ms Karim has over 26 years experience in the finance industry including corporate management, company secretarial, unit trust administration, compliance, operations and custody. Previously Ms Karim was employed by Aetna Funds Management (Australia) Limited, Permanent Trustee Company Limited and State Street Australia Limited. HUNTER HALL GLOBAL VALUE LIMITED FINANCIAL REPORT

10 DIRECTORS' REPORT Directors' interests held As at the date of this report, the relevant interests of Directors and their related parties in the shares of the Company are: Shares Mr P Hall 200,000 Mr A Blackman 14,000 Mr A Koroknay 10,000 Mr J Constable 50,000 Mr J Lowenstein - Principal activities Hunter Hall Global Value Limited was incorporated on 22 December 2003 to invest in a portfolio of permitted investments. The Company provides investors with the opportunity to invest in a medium to long term concentrated portfolio, and gain access to a defined investment process and the experience of the investment management team of the Manager, Hunter Hall Investment Management Limited. The Company predominantly invests in international and some ASX listed securities. Some late-stage private equity companies may also be part of the Company s investment universe. Operating results The net operating loss of the Company after providing for income tax amounted to $16.920m before a one-off derecognition item of deferred tax assets of $26.675m for a total net loss of $43.595m (2011: gain of $11.412m). Financial Position Net assets at 30 June 2012 totalled $ m (2011: $ m). At 30 June 2012 the Company s net asset backing was $ per share (after derecognition of net deferred tax assets of $ per share) compared to a net asset backing of $ (including recognition of net deferred tax assets of $ per share) at 30 June Cash holdings at 30 June 2012 were $42.112m (2011: $34.823m) before payment of income tax. Earnings per share Basic and fully diluted loss per share for the year to 30 June 2012 was 17.5 cents per share (2011: earnings of 4.3 cents). Dividends Paid or Recommended No dividends id d have been paid or recommended d during the 2012 financial i year. Likely Developments The Company will continue to seek to meet its financial objective to increase intrinsic value per share. Future results will be dependent on fluctuations in financial markets. The Company intends to continue to buy back shares on market in accordance with the share buy back plan approved by shareholders. Events Subsequent to Reporting Date There were no other matters or circumstances which have arisen since the end of the financial year which significantly affected or may significantly affect the operations of the Company, the results of those operations, or the state of affairs of the Company in future financial years. Significant Changes to the State of Affairs There were no significant changes in the state of affairs of the Company during the financial year other than as noted in the Chairman's Report. Environmental Issues The Company s operations are not subject to any environmental regulation under the law of the Commonwealth and State. Proceedings on Behalf of the Company No person has applied for leave of Court to bring proceedings on behalf of the Company or intervene in any proceedings to which the Company is a party for the purpose of taking responsibility on behalf of the Company for all or any part of those proceedings. The Company was not a party to any such proceedings during the year. Indemnifying and Insurance of Directors and Officers The Company insures each of the Directors and officers in office against liabilities for costs and expenses incurred by them in defending any legal proceedings arising out of their conduct while acting in the capacity of Directors and officers of the Company, other than conduct involving a wilful breach of duty in relation to the Company. HUNTER HALL GLOBAL VALUE LIMITED FINANCIAL REPORT

11 DIRECTORS' REPORT Remuneration Report The information which follows through to the end of the section titled Executive Directors and other Key Management Personnel is subject to audit by the external auditor. Remuneration Policy The Board s policy is to remunerate Non-executive Directors at market rates for time, commitment and responsibilities. The Board determines payments to the Non-executive Directors and reviews their remuneration annually, based on market practice, duties and accountability. Independent external advice is sought when required. The Company does not remunerate its Executive Directors and other Key Management Personnel. Remuneration is paid by the parent of the Company's manager, Hunter Hall International Limited (HHL). For remuneration of Executive Directors and executives refer to the HHL Annual Report for the year to 30 June The employment terms and conditions of Key Management Personnel and Executive Directors are formalised in contracts of employment with HHL. Employment Details of Members of Key Management Personnel and Other Executives Names and positions held of Directors and other Key Management Personnel of the Company in office at any time during the financial year are: Peter James MacDonald Hall Executive Chairman, Executive Director Adam Paul Blackman Non-executive Director Alex Koroknay Non-executive Director Julian David Constable Non-executive Director David Barclay Buckland Chief Executive Officer of Hunter Hall Investment Management Limited (resigned from the Manager on 24 April 2012) Michael Walsh Paula Ferrao Interim Chief Executive Officer of Hunter Hall International Limited Chief Operating and Financial Officer Group Company Secretary and Compliance and Risk Manager; Director, Ouafaa Karim Jack Theseus Lowenstein Responsible Investment Strategies and Chief Executive, Europe and Asia Executive Director (resigned 23 November 2011) There were no other employees meeting the definition of Key Management Personnel. Non-executive Directors The Non-executive Directors received the following remuneration from the Company during the financial year: 2012 Non-executive Directors Mr A Blackman Mr A Koroknay Mr J Constable Short Term Benefits Post Employment Benefits Total remuneration Directors' Fees Superannuation Contributions Total $ $ $ 32,109 2,890 34,999 27,522 2,477 29,999 27,522 2,477 29,999 87,153 7,844 94, Non-executive Directors Mr A Blackman Mr A Koroknay Mr J Constable Short Term Benefits Post Employment Benefits Total remuneration Directors' Fees Superannuation Contributions Total $ $ $ 33,555 3,020 36,575 29,816 2,683 32,499 27,140 2,443 29,583 90,511 8,146 98,657 The remuneration amounts for the 2011 year were inclusive of directors' fees relating to Hunter Hall Superannuation Company Limited, which is now in liquidation. HUNTER HALL GLOBAL VALUE LIMITED FINANCIAL REPORT

12 DIRECTORS' REPORT Proportions of elements of remuneration related to performance Position held as at 30 June 2012 and any change during the year Non salary cashed based incentives Shares Options Fixed salary/ fees Total Non-executive Directors % % % % % Mr A Blackman Non-executive Director Mr A Koroknay Non-executive Director Mr J Constable Non-executive Director There were no options granted or performance bonuses paid to Non-executive Directors during the financial year. Meetings of Directors During the financial year, 8 meetings of Directors (including committees) were held. Attendances were: Proportions of elements of remuneration not related to performance Executive Directors and other Key Management Personnel The Executive Directors of the Company were, for part or all of the year, also Directors of HHL and other Key Management Personnel were employees of HHL.Their services to the Company form part of the services provided by Hunter Hall Investment Management Limited under its investment management agreement with the Company. As such only Non-executive Directors are paid directly by the Company. It is not possible to make a reasonable estimate of the fees paid to key management personnel that is attributable to the Company. DIRECTORS MEETINGS AUDIT COMMITTEE MEETINGS Peter James MacDonald Hall Adam Paul Blackman Alex Koroknay Julian David Constable Jack Theseus Lowenstein* Number eligible to attend Number attended Number eligible to attend Number attended * Jack Theseus Lowenstein resigned effective 23 November Auditor's Independence Declaration A copy of the Auditor s Independence Declaration as required under s307c of the Corporations Act 2001 in relation to the Audit of the Financial Report for the year ended 30 June 2012 is set out on page 32 and forms part of this report. Non-Audit Services No non-audit services were provided by the Company s auditors, Grant Thornton Audit Pty Ltd, or its related entities to the Company for the year to 30 June 2012 (2011: nil). Rounding of amounts The Company is of a kind referred to in Class Order 98/100, issued by the Australian Securities and Investments Commission, relating to the rounding off of amounts in the Directors' Report. Amounts in the Directors' Report have been rounded off in accordance with that Class Order to the nearest thousand dollars, or in certain cases, to the nearest dollar. Signed in accordance with a resolution of the Board of Directors. Adam Blackman Director Sydney Dated this 31st day of August 2012 HUNTER HALL GLOBAL VALUE LIMITED FINANCIAL REPORT

13 STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE June 30 June Note $'000 $'000 Revenue Interest received Dividends received 3,600 4,098 Other revenue Total revenue 4,085 4,884 Fair value changes (Losses)/gains from investments 2 (24,848) 15,210 Total (losses)/gains from investments (24,848) 15,210 Expenses Administration fees (82) (83) Management fees 3 (3,254) (3,736) Directors fees (95) (86) Professional fees (117) (102) Registry fees (65) (146) Other expenses (288) (464) Total expenses (3,901) (4,617) (Loss)/profit before income tax (24,664) 15,477 Income tax attributable to the Company 4 7,744 (4,065) Derecognition of net deferred tax assets 9 (26,675) - Income tax expense (18,931) (4,065) Net (loss)/profit after income tax expense (43,595) 11,412 Other comprehensive income for the year - - Total comprehensive income for the year (43,595) 11,412 Basic & diluted earnings per share (cents per share) 5 (17.5) 4.3 The Statement of Comprehensive Income should be read in conjunction with the accompanying Notes. HUNTER HALL GLOBAL VALUE LIMITED FINANCIAL REPORT

14 STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE June 30 June Note $'000 $'000 Assets Cash and cash equivalents 6 42,112 34,823 Investments 8 155, ,988 Trade and other receivables 7 1,539 2,475 Deferred tax assets 9-19,014 Total assets 199, ,300 Liabilities Trade and other payables 10 2,364 2,151 Financial liabilities Deferred tax liabilities 9-82 Total liabilities 2,727 2,233 Net assets 196, ,067 Equity Contributed equity , ,929 Accumulated losses (78,457) (34,862) Total equity 196, ,067 The Statement of Financial Position is presented on a liquidity basis and should be read in conjunction with the accompanying Notes. HUNTER HALL GLOBAL VALUE LIMITED FINANCIAL REPORT

15 STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2012 Contributed Accumulated Equity Losses Total Note $ 000 $ 000 $ 000 Balance as at 1 July ,967 (30,342) 268,625 Profit for the year - 11,412 11,412 Other comprehensive income for the year Total comprehensive income for the year - 11,412 11,412 Transactions with owners in their capacity as owners: Shares bought back 12 (8,038) - (8,038) Dividends paid 13 - (15,932) (15,932) Balance as at 30 June ,929 (34,862) 256,067 Balance as at 1 July ,929 (34,862) 256,067 Loss for the year - (43,595) (43,595) Other comprehensive income for the year Total comprehensive income for the year - (43,595) (43,595) Transactions with owners in their capacity as owners: Shares bought back 12 (15,716) - (15,716) Balance as at 30 June ,213 (78,457) 196,756 The Statement of Changes in Equity should be read in conjunction with the accompanying Notes. HUNTER HALL GLOBAL VALUE LIMITED FINANCIAL REPORT

16 STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE June 30 June Note $ 000 $ 000 Cash flows from operating activities Interest received Dividends received 3,694 4,527 Sundry receipts Management and performance fees paid (3,331) (4,076) Payment to suppliers (711) (746) Income tax received - 1,005 Net cash inflow from operating activities ,468 Cash flows from investing activities Investments purchased (101,378) (106,278) Proceeds from investments sold 124, ,030 Net cash inflow from investing activities 22,922 32,752 Cash flows from financing activities Payments for share buybacks (15,716) (8,038) Dividends paid - (15,932) Net cash outflow from financing activities (15,716) (23,970) Net increase in cash and cash equivalents held 7,352 10,250 Cash and cash equivalents at beginning of year 34,823 25,497 Effect of foreign currency translations (63) (924) Cash and cash equivalents at end of year 6 42,112 34,823 The Statement of Cash Flows should be read in conjunction with the accompanying Notes. HUNTER HALL GLOBAL VALUE LIMITED FINANCIAL REPORT

17 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES The general purpose financial statements of the Company have been prepared in accordance with the requirements of the Corporations Act 2001, Australian Accounting Standards and other authoritative pronouncements of the Australian Accounting Standards Board. Compliance with Australian Accounting Standards results in full compliance with the International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). The Company is a for-profit entity for the purpose of preparing the financial report. The Company is a listed public company, incorporated and domiciled in Australia. The financial report has been prepared on an accruals basis and is based on historical costs and does not take into account changing money values or, except where stated, current valuations of non-current assets. Cost is based on the fair values of the consideration given in exchange for assets. Summary of Significant Accounting Policies The following is a summary of the material accounting policies adopted by the Company in the preparation of the financial report. They have been consistently applied unless otherwise stated. a. Revenue and other income Dividend income is recognised on a receivable basis on the date shares are quoted ex-dividend. Distribution income is recognised on a receivable basis as of the date the unit value is quoted ex-distribution. Interest from fixed interest and discount securities is recognised as income on the basis of the accumulated entitlement that would be received on the disposal of the security according to the trading practices accepted by the market for the relevant security. Interest on cash on deposit is recognised in accordance with the terms and conditions which apply to the deposit. All revenue is stated net of the amount of Goods and Services Tax (GST). b. Cash and cash equivalents Cash and cash equivalents include cash on hand and in banks, and money market investments readily convertible to cash within two working days, net of outstanding overdrafts. For the purpose of the Statement of Cash Flows, cash includes cash on hand and at call deposits with banks or financial institutions, net of bank overdrafts. HUNTER HALL GLOBAL VALUE LIMITED FINANCIAL REPORT

18 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued) c. Fair values of financial assets and liabilities Recognition and initial measurement Financial assets and liabilities are recognised when the Company becomes a party to the contractual provisions to the instrument. For financial assets this is equivalent to the date that the Company commits itself to either the purchase or sale of the asset (i.e. trade date accounting is adopted). Financial assets and liabilities are valued at fair value. Financial instruments are classified into the following categories and fair values of financial instruments are determined on the following basis: i. Investments All investments are initially recognised at cost, being the fair value of the consideration given including acquisition charges associated with the investment. After initial recognition, investments have been classified as designated fair value through profit or loss. Gains and losses on investments are recognised in the Statement of Comprehensive Income. Investment performance is measured and evaluated by Key Management Personnel on the basis of fair value movement and managed in accordance with the documented investment strategy. Investments traded in an organised financial market (traded securities) are valued at current quoted market bid price for an asset. Quoted market prices are available for listed shares, options, debentures and other equity and debt securities. ii. Monetary financial assets and liabilities not traded in an organised financial market Financial assets and liabilities related to trade debtors, trade accounts payable, accruals and dividends payable are valued on a cost basis carrying amount (which approximates fair value). iii. Gold Bullion Gold bullion is valued at fair value current quoted market price. iv. Receivables Receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and are subsequently measured at amortised cost. Receivables are included in current assets, except for those which are not expected to mature within 12 months following the end of the reporting period. v. Financial liabilities Non-derivative financial liabilities are subsequently measured at amortised cost and can include trade accounts payable and accrued expense provisions. d. Foreign currency translation Transactions denominated in foreign currencies are translated into Australian Dollars at the rates of exchange ruling on the date of the transaction. All realised exchange gains and losses are taken to account in the period in which they arise. Foreign currency monetary assets and liabilities existing at reporting date are revalued at the rates of foreign exchange at reporting date. The resulting unrealised exchange differences are brought to account in determining the profit or loss for the year. e. Derivative financial instruments The Company uses derivative financial instruments such as foreign currency contracts to hedge its risks associated with foreign currency fluctuations. Such derivative financial instruments are stated at fair value. The fair value of forward contracts is calculated by reference to current forward exchange rates for contracts with similar maturity profiles. Gains and losses arising from changes in fair value are taken directly to the Statement of Comprehensive Income. HUNTER HALL GLOBAL VALUE LIMITED FINANCIAL REPORT

19 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued) f. Income Tax The income tax expense/(revenue) for the year comprises current income tax expense/(revenue) and deferred tax expense/(revenue). The Company adopts the liability method of tax-effect accounting whereby the income tax expense is based on the profit from ordinary activities adjusted for any non-assessable or disallowed items. Deferred tax is accounted for using the balance sheet liability method in respect of temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. No deferred income tax will be recognised from the initial recognition of an asset or liability, excluding a business combination, where there is no effect on accounting or taxable profit or loss. Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or liability is settled. Deferred tax is credited in the Statement of Comprehensive Income except where it relates to items that may be credited directly to equity, in which case the deferred tax is adjusted directly against equity. Deferred income tax assets are recognised to the extent that it is probable that future tax profits will be available against which deductible temporary differences can be utilised. The amount of benefits brought to account or which may be realised in the future is based on the assumption that no adverse change will occur in income taxation legislation and the anticipation that the economic entity will derive sufficient future assessable income to enable the benefit to be realised and comply with the conditions of deductibility imposed by the law. g. Goods and Services Tax Revenue, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the Australian Tax Office. In these circumstances the GST is recognised as part of the cost of acquisition of the asset or is expensed. Receivables and payables in the Statement of Financial Position are shown inclusive of GST. Cash flows are presented in the Statement of Cash Flows on a gross basis, except for the GST component of investing and financing activities, which are disclosed as operating cash flows. h. Trade and Other Payables Trade and other payables represent the liability outstanding at the end of the reporting period for goods and services received by the Company during the reporting period which remains unpaid. The balance is recognised as a current liability with the amount being normally paid within 30 days of recognition of the liability. HUNTER HALL GLOBAL VALUE LIMITED FINANCIAL REPORT

20 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued) i. Critical accounting estimates and judgements The Directors evaluate estimates and judgements incorporated into the financial report based on historical knowledge and best available current information. Estimates assume a reasonable expectation of future events and are based on current trends and economic data, obtained both externally and within the Company. Key estimates - recognition of Deferred Tax Asset Deferred tax assets are recognised for all unused tax losses to the extent that it is probable that taxable profit will be available against which the losses can be utilised. Significant management judgement is required to determine the amount of deferred tax assets that can be recognised based upon the likely timing and the level of future taxable profits. The Company has tax losses carried forward amounting to $88.917m (2011: $66.614m). These relate mainly to realised losses on the investment portfolio of the Company and subject to satisfying the specific income tax rules regarding the carry forward and utilisation of tax losses, do not expire regardless of their recognition in the financial statements. The Company expects to be able to meet the income tax rules for utilisation of carried forward losses in future. As at 30 June 2012 the Company has made the decision to derecognise the deferred tax asset of $26.7m to nil in the current reporting period based on uncertainties over the recoverability arising from the trading performance for the year as well as deterioration in the economic outlook which will moderate expected returns from equity investments. It should be noted that the decision to derecognise the deferred tax asset was necessary to comply with AASB 112: Income Taxes in respect of which the Company has taken a conservative approach in considering the probability of recoupment over a short-term lookout period. The Board of Directors of the Company are of the belief that the Company will be profitable in future and that the deferred tax asset will eventually be recoverable. Key estimates - impairment The Company assesses impairment at each reporting date by evaluating conditions specific to the Company that may lead to impairment of assets. When an impairment trigger exists, the recoverable amount of the asset is determined. Value-in-use calculations performed in assessing recoverable amounts incorporate a number of key estimates. No impairment has been recognised in respect of any assets for the year ended 30 June As noted above, however, the deferred tax asset was derecognised for the 2012 year. Key estimates - carbon tax On 9 December 2011, the Commonwealth Government's "Clean Energy Future Legislative Package" received Royal Assent. The package introduces a range of measures, the major element of which is the enactment of a carbon price effective from 1 July As the Company does not fall within the "Top 500 Australian Polluters", the impact of the Carbon Scheme will be through indirect effects of increased prices on general business expenses as suppliers subject to the carbon pricing mechanism are likely to pass on their carbon pricing burden to their customers in the form of increased prices. The Company expects that this will not have a significant impact upon the operating costs of the business and therefore will not have an impact upon the valuation of assets and/or going concern of the business. j. Rounding of amounts Unless otherwise shown in the financial statements, amounts have been rounded to the nearest thousand dollars and are shown in A$ 000. Hunter Hall Global Value Limited is a company of the kind referred to in the Australian Securities and Investments Commission Class Order 98/100 issued 10 July HUNTER HALL GLOBAL VALUE LIMITED FINANCIAL REPORT

21 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued) k. Changes in accounting policies Adoption of AASBs and improvements to AASBs AASB 1054 and AASB The AASB has issued AASB 1054 Australian Additional Disclosures and Amendments to Australian Accounting Standards arising from the Trans-Tasman Convergence Project, and made several minor amendments to a number of AASBs. These standards eliminate a large portion of the differences between the Australian and New Zealand accounting standards and IFRS and retain only additional disclosures considered necessary. These changes also simplify some current disclosures for Australian entities and remove others. Standards, amendments and interpretations to existing standards that are not yet effective and have not been adopted early by the Company The AASB has issued new and amended accounting standards and interpretations that have mandatory application dates for future reporting periods. The Company has decided against early adoption of these standards. A discussion of those future requirements and their impact on the Company follows: AASB 9 Financial Instruments (effective from 1 January 2013) The AASB aims to replace AASB 139 Financial Instruments: Recognition and Measurement in its entirety. The replacement standard (AASB 9) is being issued in phases. To date, the chapters dealing with recognition, classification, measurement and derecognition of financial assets and liabilities have been issued. These chapters are effective for annual periods beginning 1 January Further chapters dealing with impairment methodology and hedge accounting are still being developed. The Company has yet to assess the impact that this amendment is likely to have on its financial statements. However, the Company does not expect to implement the amendments until all chapters of AASB 9 have been published and a comprehensive impact of all changes can be assessed. AASB 13 Fair Value Measurement AASB 13 does not affect which items are required to be fair-valued, but clarifies the definition of fair value and provides related guidance and enhanced disclosures about fair value measurements. It is applicable for annual periods beginning on or after 1 January The Company has yet to assess the impact of this new standard. AASB Amendments to Australian Accounting Standards Presentation of Items in Other Comprehensive Income (AASB 101 Amendments) The AASB 101 Amendments require an entity to group items presented in other comprehensive income into those that, in accordance with other IFRSs: (a) will not be reclassified subsequently to profit or loss and (b) will be reclassified subsequently to profit and loss when specific conditions are met. It is applicable for annual periods beginning on or after 1 July The Company does not expect this will change the current presentation of items in other comprehensive income. AASB Amendments to Australian Accounting Standards - Disclosures - Offsetting Financial Assets and Liabilities AASB principally amends AASB 7 to require disclosure of information that will enable users of an entity's financial statements to evaluate the effect or potential effect of netting arrangements, including rights of set-off associated with the entity's recognised financial assets and recognised financial liabilities, on the entity's financial position. The Company has yet to assess the impact of these amendments. AASB Amendments to Australian Accounting Standards - Offsetting Financial Assets and Liabilities AASB adds application guidance to AASB 132 to address inconsistencies identified in applying some of the offsetting criteria of AASB 132, including clarifying the meaning of "currently has a legally enforceable right to set-off" and that some gross settlement systems may be considered equivalent to net settlement. The Company has yet to assess the impact of these amendments. HUNTER HALL GLOBAL VALUE LIMITED FINANCIAL REPORT

22 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 NOTE 2 : CHANGES IN FAIR VALUE OF INVESTMENTS $'000 $'000 Designated at fair value through profit & loss - security investments, gold bullion and units in unlisted schemes Realised changes in fair value of investments (6,994) 20,422 Unrealised changes in fair value of investments (18,372) (11,215) Held for trading - derivative financial instruments: Realised changes in fair value of investments 2,158 5,114 Unrealised changes in fair value of investments (2,746) 4,206 Foreign exchange Realised changes in fair value of investments 1,160 (2,392) Unrealised changes in fair value of investments (54) (925) (24,848) 15,210 NOTE 3 : EXPENSES a. Management Fees In accordance with the Investment Management Agreement (outlined in the Shareholder Information section of this Annual Report), the Investment Manager is entitled to a management fee of 1.5% per annum of the gross value of the Company, payable on a monthly basis. The Investment Manager is also entitled to a performance fee when the Company outperforms the MSCI Total Return Index, Net Dividends Reinvested in Australian dollars. The method of calculating the fee is detailed in the Investment Management Agreement. The amounts paid and payable to the Investment Manager in accordance with the Investment Management Agreement were: Management fees Performance fees $'000 $'000 3,254 3, ,254 3,736 b. Indirect Cost Ratio (ICR) The ICR is a measure of the additional expense incurred by shareholders as a result of investing in the Company. The majority of these expenses comprise fees paid to the Investment Manager and the custodian. Expenses that would otherwise be incurred by a direct investor, such as transaction costs, brokerage, government taxes and charges on purchases and sales, are excluded. The ICR of each of the Company is calculated in accordance with the Government's Enhanced Fee Disclosure measures (Corporations Amendment Regulations 2005), as shown in the following table. The table combines the expenses incurred directly by the Company and those incurred indirectly through investments in other managed investments. ICR related expenses incurred by the Company Excluding performance fees $'000 $'000 3,901 4,616 ICR related expenses incurred by the Company as a % of average net assets Including performance fees Excluding performance fees % % HUNTER HALL GLOBAL VALUE LIMITED FINANCIAL REPORT

23 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 NOTE 3 : EXPENSES (continued) c. Auditor s Remuneration Remuneration of the Auditor of the Company for: $'000 $'000 Audit of year end Financial Report Review of half year Financial Report Non-assurance services NOTE 4 : INCOME TAX EXPENSE Note: $'000 $'000 The components of tax expense comprise: Current tax - - Deferred tax 9c 7,744 (4,065) 7,744 (4,065) $'000 $'000 The prima facie tax on profit before tax is reconciled to the income tax benefit provided in the financial report as follows: Prima facie tax payable on profit before income tax of 30% 7,399 (4,643) Less tax effect of: Foreign withholding tax (77) (36) Franking credits (181) (215) Under provision for income tax in prior year - (7) Add tax effect of: Tax credits Income tax attributable to entity 7,744 (4,065) The applicable weighted average effective tax rates are as follows: 31% 26% NOTE 5 : EARNINGS PER SHARE (EPS) $'000 $'000 (Loss)/profit used in the calculation of both basic and dilutive EPS (43,595) 11,412 Weighted average number of ordinary shares outstanding during the year used in calculation of basic EPS Weighted average number of ordinary shares and potential ordinary shares outstanding during the year used in calculation of dilutive EPS No. No. 249,725, ,717, ,725, ,717,663 HUNTER HALL GLOBAL VALUE LIMITED FINANCIAL REPORT

24 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 NOTE 6 : CASH AND CASH EQUIVALENTS $'000 $'000 Cash at bank 42,112 34,823 42,112 34,823 NOTE 7 : TRADE AND OTHER RECEIVABLES $'000 $'000 Dividends accrued Interest accrued GST receivable Prepayments - - Amounts receivable on investments sold 1,259 2,074 1,539 2,475 There are no past due or impaired receivables at reporting date. NOTE 8 : INVESTMENTS $'000 $'000 Equity securities at fair value 145, ,224 Options at fair value 6 - Derivative financial instruments at fair value - 2,382 Gold bullion at fair value 10,692 8, , ,988 Details of the Company s largest 10 investments as at 30 June 2012 are as follows: Name of investment Sirtex Medical Ltd Gold Bullion M2 Telecommunications Group Comcast Corporation BTG plc Decmil Group Ltd Lexmark International, Inc. Oracle Corporation Afren plc Samchully Co Ltd Principal activities liver cancer treatments gold telecommunications communication services medical devices engineering services printing and imaging solutions software oil and gas exploration and production energy distributor Carrying value $ ,191 10,692 7,866 5,433 5,078 4,983 4,929 4,660 3,948 3,820 Details of the Company s largest 10 investments as at 30 June 2011 are as follows: Name of investment Sirtex Medical Ltd Interdigital Inc Gold Bullion PMP Ltd St Barbara Ltd Decmil Group Ltd M2 Telecommunications Group Proto Corp Alcatel Lucent Woongjin Thinkbig Co Ltd Principal activities liver cancer treatments wireless technologies gold printing and distribution gold explorer and producer engineering services telecommunications publishing telecommunications equipment and services education services Carrying value $ ,666 8,696 8,382 6,456 6,290 6,142 5,796 5,480 5,463 4,895 HUNTER HALL GLOBAL VALUE LIMITED FINANCIAL REPORT

25 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 NOTE 9 : TAX a. Assets $'000 $'000 Income tax receivable Deferred tax asset comprises: Attributable to realised tax loss - - Attributable to carried forward tax loss 21,374 19,988 Fair value adjustments 5,218 (1,132) Other Derecognition of net deferred tax asset (26,729) ,014 Total Tax Assets - 19, b. Liabilities $'000 $'000 Income tax payable Deferred tax liability comprises: Other Derecognition of net deferred tax asset (54) Total Tax Liabilities c. Reconciliations $'000 $'000 (i) Gross Movements Opening balance (18,932) (22,997) Charged to the Statement of Comprehensive Income (7,744) 4,065 Derecognition of net deferred tax asset 26,676 - Closing balance - (18,932) Movements (ii) Deferred Tax Assets At 1 July 2010 Deductible in financial year Attributable to realised tax loss Credited to the Statement of Comprehensive Income At 30 June 2011 Fair value gain adjustments Other Total $ 000 $ 000 $ , , (6,612) - (6,612) 2, ,418 18, ,014 Deductible in financial year Attributable to realised tax loss Credited to the Statement of Comprehensive Income Derecognition of net deferred tax asset At 30 June ,386-1,386 6,351 (21) 6,330 (26,593) (137) (26,730) Fair value gain adjustments Other Total (iii) Deferred Tax Liabilities $ 000 $ 000 $ 000 At 1 July Charged to the Statement of Comprehensive Income (18) (111) (129) At 30 June Charged to the Statement of Comprehensive Income - (28) (28) Derecognition of net deferred tax asset - (54) (54) At 30 June HUNTER HALL GLOBAL VALUE LIMITED FINANCIAL REPORT

26 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 NOTE 10 : TRADE AND OTHER PAYABLES $'000 $'000 Amounts owing on investments purchased 1,635 1,262 Sundry accruals Payable to related parties: Manager s account Payable to other Director related parties ,364 2,151 NOTE 11 : FINANCIAL LIABILITIES $'000 $'000 Financial Liabilities (foreign currency forward contracts) NOTE 12 : CONTRIBUTED EQUITY No. shares No. shares Issued ordinary shares at the beginning of the reporting period 258,859, ,826,093 Share buy backs (21,891,745) (9,966,412) Issued ordinary shares at reporting date 236,967, ,859,681 $'000 $'000 Issued ordinary shares at cost at the beginning of the period 290, ,967 Share buy backs (15,716) (8,038) Issued ordinary shares at cost at reporting date 275, ,929 Share Rights Ordinary shares participate in dividends and the proceeds on winding up the Company in proportion to the number of shares held. At shareholder meetings each ordinary share is entitled to one vote when a poll is called, otherwise each shareholder has one vote on a show of hands. The share capital of the Company consists only of fully paid ordinary shares, the shares do not have a par value. Share Buy Backs During the year the Company bought back 21,891,745 (2011: 9,966,412) ordinary shares on issue at an average of $0.718 each (2011: $0.806 each). The total purchase consideration of the buy-back was $15,716,386 (2011: $8,037,593). The buy backs occurred on market at the same terms available to other shareholders. Shares were bought back if trading at a 10% or greater discount to NTA. The shares bought back have been cancelled and the full amount of the buy-back debited to issued capital. Capital Management The Company manages its capital to ensure that it is able to continue as a going concern while maximising the return to shareholders and benefits for other stakeholders. The Board also aims to maintain a capital structure that ensures the lowest cost of capital available to the entity. For the year ended 30 June 2012, the Company paid no dividends (2011: 6.0 cents). The Company's overall strategy remains unchanged from The capital structure of the Company consists of cash and cash equivalents and equity attributable to equity holders of the parent, comprising issued capital, reserves and retained earnings as disclosed in the Statement of Changes of Equity. The Company is not subject to externally imposed capital requirements. Operating cash flows are used to maintain and expand the Company's investment portfolio, as well as to make the routine outflows of tax and dividends. The Board has no current plans to issue further shares on the market but intends to continue to buy-back shares on market in accordance with the share buy-back plan approved by shareholders. HUNTER HALL GLOBAL VALUE LIMITED FINANCIAL REPORT

27 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 NOTE 13 : DIVIDENDS $'000 $'000 Fully franked final ordinary dividend of nil cents per share (2011: 6.0 cents) - 15,932 Fully franked interim ordinary dividend of nil cents per share (2011: nil) ,932 The amount of franking credits available for subsequent reporting periods are: Balance at the end of the reporting period Franking credits that will arise from the payment of the amount of provision for income tax Franking debits that will arise from the payment of dividends recognised as a liability at the end of the reporting period Franking credits that will arise from the receipt of dividends recognised as receivables at the end of the reporting period The amount of franking credits available for future reporting periods due to the dividends declared after the end of the reporting period 1, , NOTE 14 : CASH FLOW INFORMATION Reconciliation of net cash provided by operating activities to net $'000 $'000 profit after income tax: Net (loss)/profit after income tax (43,595) 11,412 Changes in fair value of investments 24,847 (15,210) Net change in working capital: Change in trade and other receivable Change in trade and other payables (159) (207) Change in deferred tax 18,773 5,111 Net cash inflow from operating activities 146 1,468 HUNTER HALL GLOBAL VALUE LIMITED FINANCIAL REPORT

28 NOTE 15 : NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 FINANCIAL RISK MANAGEMENT The Company s financial instruments consist mainly of deposits with banks, investments, accounts receivable and payable, and derivatives. Derivatives are used by the Company for economic hedging purposes. Such instruments include forward exchange contracts. The Company does not speculate in the trading of derivative instruments. The sensitivity analysis shown in Note 15 is based on changes that are considered to be reasonably possible based on current market conditions. The Company holds the following financial instruments: Financial Assets $'000 $'000 Cash and cash equivalents 42,112 34,823 Trade and other receivables 1,539 2,475 Investments at fair value 155, ,606 Foreign currency forward contracts - 2, , ,286 Financial Liabilities Trade and other payables 2,364 2,151 Foreign currency forward contracts 363-2,727 2,151 Financial Risk Exposures and Management The main risks the Company is exposed to through its financial instruments are foreign exchange risk, price risk, interest rate risk, credit risk and liquidity risk. a. Market Risk (i) Foreign exchange risk With approximately 46.0% (2011: 52.2%) of the Company s investment portfolio (including cash), held in foreign stocks there is a risk associated with movements in foreign exchange rates. In addition 13.4% (2011: 10.3%) of the Company's investment portfolio is held in foreign currency cash. The Australian Dollar weighting of the Company's portfolio is mainly comprised of Australian Dollar cash, Australian equities, and forward contracts hedging foreign currency exposures back into Australian Dollars. The Company maintains an objective of being 40-80% exposed to the Australian Dollar. This is primarily managed through the sale of Foreign Exchange Forward contracts. The use of forward contracts resulted in a realised gain of $2,157,585 in the year to 30 June 2012 (2011: gain of $5,114,372). The extent of cash diversification may also be adjusted over time. Where cash is held in foreign currencies it is held in currencies reflecting the currency weights in the performance benchmark, the MSCI World Total Return Index, Net Dividends Reinvested in Australian Dollar. The currency composition of this index reflects the relative size of global equity markets. It is generally dominated by exposure to the three broad regions of Asia, Europe and North America. Australian Dollar assets comprised 3% of the index at 30 June In absolute terms the Company is a net investor in foreign currency assets including cash and to a varying degree benefits from any weakening in the Australian Dollar against those currencies to which it is exposed. The accounting policy in regard to forward exchange contracts is detailed in Note 1e. HUNTER HALL GLOBAL VALUE LIMITED FINANCIAL REPORT

29 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 NOTE 15 : FINANCIAL RISK MANAGEMENT (continued) The Company's total net exposure to fluctuations in foreign currency exchange rates at the reporting date was as follows: 2012 Cash Investments Forwards Unsettled Trades Other Total Assets $'000 $'000 $'000 $'000 $'000 $'000 Australian Dollar 15,663 64, ,980 Canadian Dollar 2,331 3, ,497 Euro 1 12, ,791 British Pound - 10, ,426 Hong Kong Dollar Indian Rupee Japanese Yen 4,589 9, ,865 New Zealand Dollar Norwegian Kroner 1,936 3, ,286 Singapore Dollar ,274 Korean Won - 8, ,251 Swedish Kroner 824 2, ,254 Swiss Francs 852 1, ,441 Thailand Baht United States Dollar 15,175 37, ,214 42, , , ,729 Forwards Unsettled Trades Other Total Liabilities $'000 $'000 $'000 $'000 Australian Dollar ,596 Canadian Dollar British Pound Japanese Yen Norwegian Kroner Swedish Kroner United States Dollar , ,973 HUNTER HALL GLOBAL VALUE LIMITED FINANCIAL REPORT

30 NOTE 15 : NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 FINANCIAL RISK MANAGEMENT (continued) The Company's total net exposure to fluctuations in foreign currency exchange rates at the comparative reporting date was as follows: 2011 Cash Investments Forwards Unsettled Trades Other Total Assets $'000 $'000 $'000 $'000 $'000 $'000 Australian Dollar 10,470 75, ,312 Brazilian Real ,032-1,840 Canadian Dollar 1,366 5, ,657 Euro 5 15, ,289 British Pound - 7, ,564 Japanese Yen 3,162 14, ,295 New Zealand Dollar Norwegian Kroner 1,769 4, ,540 Singapore Dollar 1 1, ,601 Korean Won - 10, ,597 Swedish Kroner - 4, ,588 Swiss Francs 2,216 1, ,563 Taiwanese Dollar ,017 Thailand Baht United States Dollar 15,834 55,868 1, ,667 34, ,606 2,425 2, ,329 Liabilities Forwards Unsettled Trades Other Total $'000 $'000 $'000 $'000 Australian Dollar ,798 Canadian Dollar Euro Thailand Baht Swiss Francs United States Dollar , ,194 At reporting date, the details of outstanding forward exchange contracts are: Buy Australian Dollars Average Exchange Rate $ 000 $ 000 Canadian Dollar 1,830 3, Euro 7,090 9, British Pound 3,852 6, Indian Rupee Japanese Yen 2,972 1, South Korean Won 3,429 5,306 1, , Norwegian Kroner 657 2, Swedish Kroner 992 1, Thailand Baht United States Dollar 15,829 15, Swiss Francs 1,139 1, Sensitivity analysis At reporting date a 10% strengthening/weakening of the Australian Dollar at 30 June 2012 would have (decreased)/increased profit or loss before income tax by ($7,956,186)/ $7,956,186 (2011: ($10,304,709)/ $10,304,709). The analysis assumes that all other variables, in particular interest rates, remain constant. The analysis is performed on the same basis as for HUNTER HALL GLOBAL VALUE LIMITED FINANCIAL REPORT

31 NOTE 15 : NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 FINANCIAL RISK MANAGEMENT (continued) (ii) Price risk The Company is exposed to equity securities price risk. This arises from investments held by the Company and classified on the Statement of Financial Position as fair value through profit or loss. To manage its price risk arising from investments in equity securities, the Company diversifies its portfolio. The majority of the Company s equity investments are publicly traded. Sensitivity analysis At reporting date, if the equity prices had been 10% lower or higher profit or loss before income tax of the Company would have (decreased)/increased by ($15,583,240)/$15,583,240 (2011: ($19,960,671)/$19,960,671). The analysis assumes that all other variables remain constant. The analysis is performed on the same basis as for The sensitivity to equity prices has not changed significantly from the prior year. (iii) Interest rate risk The majority of the Company's financial assets are non-interest bearing. The main interest rate risk for the Company arises from its cash holdings. The Company's exposure to interest rate risk, which is the risk that a financial instrument's value will fluctuate as a result of change in market interest rates and the effective weighted average interest rates on classes of financial assets and financial liabilities are as follows: Cash and cash equivalents Cash Balance subject to Floating Interest Rate $' Weighted Average Effective Cash Balance Interest Rate subject to Floating Interest Rate % $'000 42, ,823 Weighted Average Effective Interest Rate % 1.33 Sensitivity analysis At reporting date, if the interest rates had been 10% lower or higher profit or loss before income taxes of the Company would have (decreased)/increased by ($3,730)/$3,730 (2011: ($4,570)/$4,570). b. Credit risk Credit risk arises from cash and cash equivalents, derivative financial instruments and deposits with banks and financial institutions, as well as outstanding receivables. The Company minimises concentrations of credit risk by undertaking transactions with a number of customers and counter parties on recognised and reputable exchanges. The Company is not materially exposed to any individual counterparty. The maximum exposure to credit risk, excluding the value of any collateral or other security, at reporting date in respect of recognised financial assets is the carrying amount, net of any provisions for doubtful debts of those assets, as disclosed in the Statement of Financial Position and Notes to the Financial Statements. The Company's management considers that all the above financial assets that are not impaired or past due for each of the reporting dates under review are of good credit quality. As disclosed in Note 7 there were no past due or impaired receivables at reporting date. HUNTER HALL GLOBAL VALUE LIMITED FINANCIAL REPORT

32 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 NOTE 15 : FINANCIAL RISK MANAGEMENT (continued) c. Liquidity risk The Company manages liquidity risk by monitoring forecast cash flows and ensuring that adequate uninvested cash levels are maintained. Maturities of financial liabilities Financial liabilities held by the Company include management fees payable to the Investment Manager, unsettled trades and other sundry accruals. The below table shows the maturities of financial liabilities held by the Company. The Company holds short term forward contracts which are also included below where any liability existed at reporting date. Further information on these instruments is in Note 15e. below Financial Liabilities Due to brokers Foreign currency forward contracts Other payables & accrued expenses Total 2011 Financial Liabilities Due to brokers Foreign currency forward contracts Other payables & accrued expenses Total Less than 1 month 1 to 3 months 3 to 6 months 6 to 12 months Total $000 $000 $000 $000 $000 1, , , ,973 Less than 1 month 1 to 3 months 3 to 6 months 6 to 12 months Total $000 $000 $000 $000 $000 1, , , ,194 d. Net fair values The net fair values of listed investments have been valued at the quoted market bid price at reporting date. For unlisted investments where there is no organised financial market, the net fair value has been based on either cost or the redemption price published by the issuer at reporting date. The net fair value of loans and amounts due approximates their carrying value. For other assets and other liabilities the net fair value approximates their carrying value. No financial assets and financial liabilities are readily traded on organised markets in standardised form other than listed investments. Financial assets where the carrying amount exceeds net fair values have not been written down as the Company believes the diminution to be temporary. The following table provides an analysis of financial instruments as at reporting date that are measured subsequent to initial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which fair value is observable. Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets and liabilities. Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices). Level 3 fair value measurement are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs). Fair value of financial assets that are traded in active markets are based on quoted prices or dealer price quotations. For all other financial instruments the Company determines fair values using broker quoted bid prices & unlisted unit trust prices. There has been no transfer between levels from the previous reporting period Level 1 Level 2 Level 3 Total Financial assets at fair value through profit or loss $'000 $'000 $'000 $'000 Foreign currency forward contracts Listed investments at fair value 155, ,232 Unlisted investments at fair value Total 155, ,078 Financial liabilities at fair value through profit or loss $'000 $'000 $'000 $'000 Foreign currency forward contracts Total HUNTER HALL GLOBAL VALUE LIMITED FINANCIAL REPORT

33 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 NOTE 15 : FINANCIAL RISK MANAGEMENT (continued) 2011 Level 1 Level 2 Level 3 Total Financial assets at fair value through profit or loss $'000 $'000 $'000 $'000 Foreign currency forward contracts - 2,425-2,425 Listed investments at fair value 190, ,636 Unlisted investments at fair value 8, ,970 Total 199,018 3, ,031 Financial liabilities at fair value through profit or loss $'000 $'000 $'000 $'000 Foreign currency forward contracts Total e. Specific instruments Derivative financial instruments A derivative is a financial contract the value of which depends on or is derived from the value of underlying assets, liabilities or indices. Derivative transactions include a wide assortment of instruments, such as forwards, futures, options and swaps. Derivatives are considered to be part of the investment process. The use of derivatives is an essential part of the Company s portfolio management. In particular the Company utilises short term forward contracts to manage its risk associated with movements in foreign exchange rates. For details of forward exchange contracts outstanding at the reporting date refer to Note 15(a)(i). HUNTER HALL GLOBAL VALUE LIMITED FINANCIAL REPORT

34 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 NOTE 16 : RELATED PARTY TRANSACTIONS $ $ Transactions between related parties are on normal commercial terms and conditions no more favourable than those available to other parties unless otherwise stated. a. Hunter Hall International Ltd Expense reimbursements paid in relation to cost incurred on behalf of the Company (504,537) (504,350) b. Hunter Hall Investment Management Ltd Pursuant to the Investment Management Agreement: Performance fees paid and payable c. d. e. Management fees paid and payable Bennelong Administration Services Pty Ltd Administration fees paid and payable pursuant to administration services provided by Bennelong Administration Services Pty Ltd to the Company Alex Koroknay (Non-executive Director) Legal fees paid (inclusive of GST) Share and option transaction of Directors: - - (3,253,664) (3,736,364) (98,793) (84,745) (2,063) - Directors and Director-related entities hold, directly, indirectly or beneficially as at the reporting date equity interest in the Company, in the form of ordinary shares in the Company. There were no Company options on issue as at 30 June Movements in equity interests during the period were as follows: Held at 1 Jul 11 Purchases Sales Held at 30 Jun 12 Mr A Blackman Mr P Hall Mr A Koroknay Mr J Constable 14, ,000 10,000 50, , ,000 10,000 50,000 Mr J Lowenstein 80,000 - (80,000) - Held at 1 Jul 10 Purchases Sales Held at 30 Jun 11 Mr A Blackman Mr P Hall 20, , (6,000) (300,000) 14, ,000 Mr A Koroknay 10, ,000 Mr J Constable 50, ,000 Mr J Lowenstein 80, ,000 HUNTER HALL GLOBAL VALUE LIMITED FINANCIAL REPORT

35 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 NOTE 17 : STATEMENT OF OPERATIONS BY SEGMENT The Company has identified its operating segments based on the internal reports that are reviewed and used by the Chief Investment Officer of the Investment Management Company in assessing and determining the allocation of resources. The Company operates in one business segment, being investment in securities. The Company operates from Australia only and therefore has only one geographical segment. The Company invests in securities listed or to be listed on foreign and domestic stock exchanges, unlisted securities and fixed interest securities. As at 30 June 2012, 46.0% (2011: 52.2%) of the Company's investment portfolio was held in foreign securities. The Company has investment exposures in different countries which are shown below: 2012 Investments listed in: Australia & New Zealand United Kingdom Other Europe Japan Korea India Other Asia USA Canada Other Americas Options Foreign Exchange Hedge Contracts Sub Cash Total Realised Unrealised Fair Value of Portfolio Revenue Gains/(Losses) Gains/(Losses) Portfolio Share $ 000 $ 000 $ 000 $ 000 % 1,525 2,482 (6,442) 65, ,179 10, (2,262) (10,087) 19, ,387 9, (407) (2,571) 8, (4,471) (2,644) 1, (1,924) 484 1, (1,491) (94) 35, (217) (3,472) 3, (263) (840) ,158 (2,746) (363) (0.2) 3,674 (4,837) (21,109) 155, ,161 (63) 42, ,085 (3,676) (21,172) 197, Investments listed in: Australia & New Zealand United Kingdom Other Europe Japan Korea India Other Asia USA Canada Other Americas Foreign Exchange Hedge Contracts Sub Cash Total Realised Unrealised Fair Value of Portfolio Revenue Gains/(Losses) Gains/(Losses) Portfolio Share $ 000 $ 000 $ 000 $ 000 % 2,147 6,974 (5,104) 76, (1,746) 3,086 8, ,227 10,137 25, (1,328) (2,295) 14, (24) (5,461) 10, ,716 (6,093) 15, (739) 38 2, ,030 (3,825) 39, (66) (2,488) 5, ,114 4,206 2, ,485 25,536 (7,009) 201, (2,392) (925) 34, ,884 23,144 (7,934) 236, HUNTER HALL GLOBAL VALUE LIMITED FINANCIAL REPORT

36 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 NOTE 18 : SUBSEQUENT EVENTS There were no other events subsequent to year end that require disclosure other than those matters referred to elsewhere in this report. The financial report was authorised for issue on 31 August 2012 by the Board of Directors. NOTE 19 : CONTINGENT LIABILITIES There were no contingent liabilities at year end that require disclosure (2011: nil). HUNTER HALL GLOBAL VALUE LIMITED FINANCIAL REPORT

37 DIRECTORS' DECLARATION 1) In the opinion of the directors of the Company: a) b) the financial statements and notes of the Company are in accordance with the Corporations Act 2001, including i) giving a true and fair view of its financial position as at 30 June 2012 and of its performance for the financial year ended on that date; and ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001; and there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable. 2) 3) The directors have been given the declarations required by Section 295A of the Corporations Act 2001 from the Chief Executive Officer and Chief Financial Officer for the financial year ended 30 June The financial statements comply with International Financial Reporting Standards as stated in Note 1. Signed in accordance with a resolution of the directors of the Company. Adam Blackman Director Sydney Dated this 31st day of August 2012 HUNTER HALL GLOBAL VALUE LIMITED FINANCIAL REPORT

38 Grant Thornton Audit Pty Ltd ACN Level 17, 383 Kent Street Sydney NSW 2000 Locked Bag Q800 QVB Post Office Sydney NSW 1230 Auditor s Independence Declaration To the Directors of Hunter Hall Global Value Limited T F E info.nsw@au.gt.com W In accordance with the requirements of section 307C of the Corporations Act 2001, as lead auditor for the audit of Hunter Hall Global Value Limited for the year ended 30 June 2012, I declare that, to the best of my knowledge and belief, there have been: a b no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and no contraventions of any applicable code of professional conduct in relation to the audit. GRANT THORNTON AUDIT PTY LTD Chartered Accountants M A Adam-Smith Partner Audit & Assurance Sydney, 31 August 2012 Grant Thornton Australia Limited is a member firm within Grant Thornton International Ltd. Grant Thornton International Ltd and the member firms are not a worldwide partnership. Grant Thornton Australia Limited, together with its subsidiaries and related entities, delivers its services independently in Australia. Liability limited by a scheme approved under Professional Standards Legislation 32

39 Grant Thornton Audit Pty Ltd ACN Level 17, 383 Kent Street Sydney NSW 2000 PO Locked Bag Q800 QVB Post Office Sydney NSW 1230 T F E info.nsw@au.gt.com W Independent Auditor s Report To the Members of Hunter Hall Global Value Limited Report on the financial report We have audited the accompanying financial report of Hunter Hall Global Value Limited (the Company ), which comprises the statement of financial position as at 30 June 2012, the statement of comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, notes comprising a summary of significant accounting policies and other explanatory information and the directors declaration of the company. Directors responsibility for the financial report The Directors of the Company are responsible for the preparation of the financial report that gives a true and fair view of the financial report in accordance with Australian Accounting Standards and the Corporations Act This responsibility includes such internal controls as the Directors determine are necessary to enable the preparation of the financial report to be free from material misstatement, whether due to fraud or error. The Directors also state, in the notes to the financial report, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that compliance with the Australian equivalents to International Financial Reporting Standards ensures that the financial report, comprising the financial statements and notes, complies with International Financial Reporting Standards. Auditor s responsibility Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards which require us to comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor s Grant Thornton Australia Limited is a member firm within Grant Thornton International Ltd. Grant Thornton International Ltd and the member firms are not a worldwide partnership. Grant Thornton Australia Limited, together with its subsidiaries and related entities, delivers its services independently in Australia. Liability limited by a scheme approved under Professional Standards Legislation 33

40 judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company s preparation and fair presentation of the financial report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Directors, as well as evaluating the overall presentation of the financial report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Independence In conducting our audit, we have complied with the independence requirements of the Corporations Act Auditor s opinion In our opinion: a the financial report of Hunter Hall Global Value Limited is in accordance with the Corporations Act 2001, including: i ii giving a true and fair view of the Company s financial position as at 30 June 2012 and of its performance for the year ended on that date; and complying with Australian Accounting Standards and the Corporations Regulations 2001; and b the financial report also complies with International Financial Reporting Standards as disclosed in the notes to the financial statements. Report on the remuneration report We have audited the remuneration report included in pages 5 to 6 of the directors report for the year ended 30 June The Directors of the Company are responsible for the preparation and presentation of the remuneration report in accordance with section 300A of the Corporations Act Our responsibility is to express an opinion on the remuneration report, based on our audit conducted in accordance with Australian Auditing Standards. 34

41 Auditor s opinion on the remuneration report In our opinion, the remuneration report of Hunter Hall Global Value Limited for the year ended 30 June 2012 complies with section 300A of the Corporations Act GRANT THORNTON AUDIT PTY LTD Chartered Accountants M A Adam-Smith Partner Audit and Assurance Sydney, 31 August