for personal use only · 2010-10-25 · lhp portfolio of $31.8 million and the gam portfolio of...

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ANNUAL REPORT 2010 1

Chairman’s Letter 2

Investment Review 4

Five Year Summary 7

Directors Report 8

Lead Auditor’s Independence Declaration 15

Statement of comprehensive income 16

Statement of financial position 17

Statement of changes in equity 18

Statement of cash flows 19

Notes to the financial statements 20

1. General information 20

2. Basis of preparation 20

3. Significant accounting policies 20

4. Financial assets and liabilities 24

5. Interest income 24

6. Net changes in fair value of financial assets through profit and loss 25

7. Income tax expense 25

8. Receivables 26

9. Payables 26

10. Tax assets and liabilities 26

11. Capital and reserves 28

12. Earnings per share 29

13. Cash and cash equivalents 29

14. Reconciliation of cash flows from operating activities 30

15. Segment information 30

16. Financial risk management 30

17. Related party transactions 35

18. Remuneration of auditors 37

19. Events occurring after the reporting period 37

20. Contingent assets and liabilities 37

Directors’ declaration 38

Audit report 39

Corporate Governance 40

Additional information 47

Corporate Directory

Contents

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Chairman’s Letter Year ended 30 June 2010

SIGNATURE CAPITAL INVESTMENTS 2

Dear shareholder,I am pleased to present the 6th annual report for Signature Capital Investments Limited (Company) (formerly HFA Accelerator Plus Limited).

Financial resultsDuring 2009/10, the Company’s net assets increased by 6.4 cents per share to 48.6 cents per share, an increase of 15.2% over the period. This increase can be attributed to net earnings of 6.1 cents per share plus the impact of the on-market share buy-back program of 0.3 cents per share. By comparison to key global and Australian indices, the MSCI AC World (Net) Index increased by 5.9% in AUD terms (11.8% in USD terms) and the ASX All Ordinaries Accumulation Index increased by 13.8%.

At year-end, the Company had net assets of $90.0 million, including cash and deposits of $23.7 million, the LHP portfolio of $31.8 million and the GAM portfolio of $35.5 million. The LHP portfolio represents investments associated with the underlying funds managed by Lighthouse Partners (LHP) which were progressively deleveraged and redeemed during the year. The GAM portfolio represents a new customised and concentrated portfolio of high quality international hedge funds which were introduced at year-end.

Key developmentsThis past financial year saw some significant changes and positive developments for your Company. Key developments included:

• LeverageacrosstheLHPportfoliowasreducedsignificantly and in February 2010 following the removal of leverage from some of the leveraged instruments the Company commenced receiving its first redemption proceeds. It may be some time however before the redemption process is completed.

• TheCompanycommencedanon-marketsharebuy-back program in October 2009 and during the year acquired and cancelled a total of 4.1 million shares at an average price of 30 cents per share.

• ThemanagementagreementwithHFAAssetManagement Limited (HFAAM) was terminated in February 2010. Subsequently, the Myer Family Company was appointed to provide certain financial and administration services to the Company. These

changes provided the Company with additional flexibility to implement a new investment strategy and reposition the Company.

• AnInvestmentCommitteewasestablishedtoassistinthe oversight of the Company’s investment activities. The Board was pleased to appoint an external member to this committee, Ray King, who has substantial expertise and experience in the international hedge fund industry.

• TheCompanyappointedGAMinJune2010toadviseiton managing and administering a customised portfolio of new international hedge fund investments. An initial USD30 million was allocated to the GAM portfolio at year-end. GAM is a specialist global asset manager with substantial expertise and experience in global hedge funds. GAM is based in London and manages or advises approximately USD55 billion of investment assets and over 700 employees located in 9 offices around the world.

• TheCompanychangeditsnametoSignatureCapitalInvestments Limited in June 2010. The change of name was required as a result of the termination of the management agreement with HFAAM but also reflects the repositioning of the Company.

Investment activitiesDuring 2009/10, the Company’s investment portfolio was principally comprised of a series of leveraged instruments indirectly exposed to the underlying LHP funds. During the year the leverage was repaid from the UBS and JP Morgan instruments and the underlying investments were transferred to the Company. The underlying investments represent ‘side-pockets’ associated with the main LHP fund and are relatively illiquid. The Company continues to work with the manager of the LHP funds on the redemption process.

Your Board is pleased with the GAM appointment and the initial GAM portfolio. In the Board’s view, GAM offers numerous benefits to the Company, including a customised approach to portfolio design and construction for international hedge funds, access to a vast database and global investment opportunity set, access to leading international hedge funds some of which are closed to new investors, and access to GAM’s expertise and risk

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at a discount to the stated NTA value per share. We are focused on initiatives to reduce this discount and are hopeful that over time the market price of the Company’s shares will better reflect underlying value.

Annual general meeting On behalf of the Board I thank shareholders for their continued support throughout the year. We look forward to meeting those of you who are able to attend the annual general meeting on 26 November 2010 being held in Melbourne.

Yours faithfully

John Morrison Chairman

management systems. The appointment is non-exclusive and cost competitive.

The GAM portfolio is concentrated around three liquid investment strategies, namely equity hedge, trading and arbitrage strategies. The portfolio comprises one core holding managed by GAM plus seven satellite holdings managed by specialist third party managers with a proven track record. The portfolio is designed to provide returns that exceed global equity market returns but with significantly lower volatility and risk over a market cycle.

The Company’s investment portfolio is largely denominated in USD and remains relatively unhedged against movements in the AUD, our reporting currency. A strong AUD will have a negative impact on the reported AUD value of the portfolio. Conversely, a weak AUD will have a positive impact on the reported AUD value of the portfolio. The AUD:USD rate has moved in a relatively wide range during the year and volatility levels, while lower than in early 2009, are still considered to be relatively high. Your Board believes that it is prudent to remain unhedged given our investment objective and the underlying portfolio. We will advise shareholders of any material change in our currency hedging policy.

Capital managementDuring 2009/10, the Company continued with its on-market share buy-back program. This program is considered to be an effective method of returning capital to shareholders and at the same time provides additional liquidity in the market for the Company’s shares and is accretive to the Company from a financial perspective.

In August 2010, your Board declared a fully franked dividend of 5 cents per share, comprising a final ordinary dividend of 3 cents per share plus a special dividend of 2 cents per share. These dividends were paid on 4 October 2010. The Dividend Reinvestment Plan (DRP) was reactivated and shareholders representing 15.1% of the Company elected to participate in the DRP. The Company determined to satisfy the DRP share issue through a combination of new shares and on-market purchases to minimise dilution.

While the Board is generally pleased with progress made during 2009/10 and the repositioning of the Company, it recognises that the Company’s shares continue to trade

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During 2009/10, the Company’s investment activities were focused on deleveraging and redeeming the LHP portfolio, continuing the on-market share buy-back and capital management program, and developing and implementing a new investment strategy for the future. The Company has made good progress on each of these initiatives.

The LHP portfolio was the Company’s main investment during 2009/10. As shareholders will be aware, the Company has been trying to redeem these investments since late 2008 and as a result of revised agreements with the various counterparties in 2009 these instruments are required to be fully deleveraged before any redemption proceeds are permitted to be distributed to the Company.

During the year, good progress was made in deleveraging the LHP Portfolio, resulting in the UBS and JP Morgan leveraged instruments being fully deleveraged and both these counterparties distributed the underlying investments to the Company. In the case of UBS, the Company received a direct holding in Lighthouse Diversified Fund SLV (a special purpose ‘side-pocket’ associated with the main fund). In the case of JP Morgan, the Company received a 6.9% shareholding in Newco SLV (a special purpose ‘side-pocket’ also associated with the main fund). The remaining leveraged instrument issued by Natixis remains afoot and is yet to be fully deleveraged.

The Company began receiving its first redemption proceeds in February 2010 from the LHP portfolio. However, it is a slow process and shareholders should be aware that it may be some time before the redemption process is completed.

We are satisfied that the manager of the LHP portfolio is working hard to accelerate the redemption process and is not receiving fees in relation to these ‘side-pocket’ investments. However, the underlying investment positions in each of these LHP side-pockets are largely illiquid and are subject to management by third party managers.

During the second half of 2009/10, the Company terminated its management agreement with HFAAM and carried out a strategic review for the purpose of repositioning the Company for the future. Following this review, the Company appointed GAM to advise it on managing and administering a customised portfolio of international hedge fund investments.

The Board made an initial allocation of USD30 million to the GAM portfolio at the end of June 2010 using surplus cash realised from the LHP redemption process. The GAM portfolio has been concentrated around three broad investment strategies that are liquid and offer attractive risk adjusted returns, namely trading, equity hedge and arbitrage strategies.

The investment portfolio is largely denominated in USD, and remained relatively unhedged against movements in the AUD throughout the year, with the net unhedged USD exposure increasing from 79.7% of net assets to 85.3% at year end. The AUD appreciated 5.5% against the USD for the year, which detracted from performance in AUD terms. The Board believes it is prudent to remain unhedged at this time given the investment objective of maintaining investments in USD.

At 30 June 2010, the Company’s investment portfolio is shown in the adjacent table:

Investment ReviewFor the year ended 30 June 2010

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LHP Portfolio- Lighthouse Diversified Fund SLV – this is a special

liquidating vehicle (‘side-pocket’) established in early 2009 by LHP to hold certain less liquid investments for redeeming investors of the Lighthouse Diversified Fund. The vehicle has been progressively liquidating its underlying positions.

- Newco SLV – this is a special liquidating vehicle (‘side-pocket’) which was established in early 2009 by LHP to hold certain less liquid investments, initially on behalf of JP Morgan and now the Company’s interest is held directly. The vehicle has been progressively liquidating its underlying positions.

- Natixis leveraged instrument – this is a leveraged instrument established in November 2005 by Natixis to provide leveraged exposure to the underlying Lighthouse Diversified Fund. The underlying fund is now the Lighthouse Diversified Fund SLV. The instrument is still being deleveraged. Once it is fully deleveraged we expect the underlying investment in Lighthouse Diversified Fund SLV to be distributed to the Company.

- Lighthouse Diversified Fund receivable - this is an audit holdback amount that has been withheld by LHP from the Company’s final redemption of its investment in the Lighthouse Diversified Fund. We expect that this receivable will be released in early 2010.

Investment Review (continued)For the year ended 30 June 2010

Investment Strategy Market Value (AU$M)

Portfolio %

Cash

USD deposits Cash 12.0 13.2%

AUD deposits Cash 11.7 12.9%

23.7 26.0%

Investments via LHP

Lighthouse Diversified Fund SLV Multi-strategy 20.3 22.3%

Newco SLV Multi-strategy 6.6 7.3%

Nataxis leveraged instrument Multi-strategy 2.6 2.9%

Lighthouse diversified fund recievable Multi-strategy 2.3 2.5%

31.8 34.9%

Investments via GAM

GAM Trading II Trading - global 10.7 11.8%

Pacific and General Equity hedge - global 3.6 4.0%

AlphaGen Tucana Equity hedge - Europe 3.6 4.0%

Eureka Fund Equity hedge - Europe 3.6 4.0%

Occam Global Equity hedge - emerging markets 3.5 3.8%

Amiya Global Equity hedge - emerging markets 3.5 3.8%

Gruss Global Arbitrage - event driven 3.5 3.8%

Proxima Capital Arbitrage - event driven 3.5 3.8%

35.5 39.0%

Total Investments 91.0 100.0%

A brief description of each of the investments is set out below.

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Investment Review (continued)For the year ended 30 June 2010

GAM Portfolio- GAM Trading II – has a 12 year track record of

providing access to some of the world’s leading trading and global macro and managed futures managers, and is diversified across 30 to 50 underlying funds. The portfolio is highly liquid and the fund is AAA rated by S&P, having generated an annual return of in excess of 9% per annum since inception, has not had a negative year in that time and consistently produces zero correlation to equity market risk. The fund has never employed gates on redemptions. GAM Trading II was awarded the best performing specialist fund over 10 years by Hedge Funds Review Magazine.

- Pacific & General - a global long/short equity and fixed income fund that focuses on Asia, US and Europe and managed by Gifford Combs. The philosophy behind the manager’s approach is “Buffet like”, maintaining a concentrated portfolio of well run companies, analysed by bottom-up techniques, whilst hedging risk with opportunistic short sales of over valued companies.

- AlphaGen Tucana - a concentrated, European fundamental long/short equity fund, taking high conviction long and short positions on a long term basis in companies incorporated or whose principal operations are in Europe. This fund is managed by Roger Guy and is likely to have a net long bias and well suited to take advantage of inefficiencies in European equity markets by a good mix of taking concentrated longer term core positions and shorter term trading positions.

- Eureka Fund - a European focused fund managed by one of the most established European hedge funds groups, that allocates capital to a number of sub-portfolios based on performance and opportunities in the market. The manager, Ian Wace, seeks to make positive returns across all market conditions. GAM expects that following a repositioning of this fund’s investment strategy in 2009 it has recaptured its position of being one of Europe’s leading long/short funds in performance and reputation.

- Occam Global Emerging Markets Absolute Return Fund - a large cap equity long/short global emerging markets fund. The manager, Eoghan Flanagan, used to be co-manager of one of Europe’s most successful emerging markets funds over the last 10 years. His approach is based on directional EM equity investing in large cap liquid equities while using cash and futures as hedges.

- Amiya Global Emerging Market Opportunities Fund - an equity long/short fund which will trade and invest in emerging market countries, principally Asia (ex Japan), emerging EMEA and Latin America. It also has the ability to invest in commodity stocks that will benefit from improving EM growth. The fund uses a top down approach to set the macro picture and then a bottom up approach to company valuations to find long and short equity positions. The style ensures that the manager, Ian Mukherjee, focuses on large cap emerging market equities thus mitigating liquidity risk.

- Gruss Global Investors (Enhanced) Fund - a diversified event driven fund that will principally invest in global event arbitrage, distressed and event driven (special situations) investment strategies. The manager, Mark Smith, places heavy emphasis on fundamental company research globally with investment teams in New York, London and Hong Kong and implements a disciplined procedure for risk management.

- Proxima Capital Offshore Fund - a special situation focused global event driven fund. The manager, Youlia Miteva, takes a bottom up approach to investing in small and mid-cap US and European special situation equities. Proxima is focused on situations where traditional valuation methods are not necessarily appropriate or feasible and where an identified catalyst is expected to cause the mispricing to disappear over the short to medium term. This fund has demonstrated strong consistent returns.

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Five Year Summary

Signature Capital Investments LimitedSelected financial data for past five years (ending 30 June)

($M, except as otherwise shown)

Notes:

(i) The Company was established as HFA Accelerator Plus Limited in October 2004. The initial investment portfolio comprised various leveraged instruments which were originally designed to provide indirect leveraged exposure to an underlying fund Lighthouse Diversified Fund Limited (Offshore), a fund of funds managed by Lighthouse Partners.

(ii) In late 2008, the manager of the Lighthouse Diversified Fund Limited (Offshore) gave notice concerning a change in redemption practices following a period of negative returns and illiquid positions. These events had a significant impact on both the value and liquidity of the leveraged instruments. The Company sought to redeem its investments however the redemption process may take some years to complete.

(iii) In February 2010, the Company announced that it had terminated the management agreement with HFA Asset Management Limited and that it would seek approval to change its name. Shareholders approved a change of name to Signature Capital Investments Limited on 30 June 2010.

(iv) In June 2010, the Company announced a new investment strategy and that it had selected GAM to advise it on managing a customised portfolio of international hedge funds.

2010 2009 2008 2007 2006

Earnings:

Net change in fair value of investments 18.33 (153.58) (18.57) 98.51 27.68

Foreign exchange gains/losses (4.44) 2.22 (0.43) (0.03) (0.35)

Interest income 0.52 0.97 2.42 1.38 0.93

Total investment income 14.41 (150.39) (16.58) 99.86 28.26

Management fees (0.82) (6.21) (12.39) (17.27) (11.10)

Administration and other expenses (2.17) (1.56) (1.14) (0.50) (0.33)

Finance expense - - (0.05) - (0.05)

Total expenses (2.99) (7.77) (13.58) (17.77) (11.48)

Net earnings before tax 11.42 (158.16) (30.16) 82.08 16.79

Income tax benefit/(expense) - 8.10 9.06 (24.65) (5.04)

Net earnings attributable to Company 11.42 (150.06) (21.10) 57.43 11.75

Weighted average shares on issue (million) 187.61 189.33 188.20 187.01 141.70

Net earnings per share (cents) 6.1 (79.3) (11.2) 30.7 8.3

Dividends:

Ordinary dividends per share (cents) 3.0 - 2.5 - 4.7

Special dividends per share (cents) 2.0 - 5.0 - -

Total dividends per share (cents) 5.0 - 7.5 - 4.7

Year-end data:

Cash and equivalents 23.7 15.8 33.9 22.9 22.1

Investments 67.3 65.6 205.1 266.7 199.2

Total assets 91.1 81.6 249.5 290.3 221.8

Net assets 90.0 79.8 232.7 262.6 214.0

Total shares on issue (million) 185.25 189.33 189.33 187.01 187.01

Net tangible assets per share ($) $0.486 $0.422 $1.229 $1.404 $1.144

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The Directors of Signature Capital Investments Limited (“the Company”) formerly known as HFA Accelerator Plus Limited, present their report together with the financial statements of the Company for the year ended 30 June 2010 (“the reporting period”) and the auditor’s report thereon.

Signature Capital Investments Limited is a company limited by shares and is incorporated and domiciled in Australia.

DirectorsThe Directors of the Company at any time during or since the end of the financial year are:

Name Period of Directorship

John Morrison Appointed 28 July 2004

Bruce McComish Appointed 20 September 2005

Paul Manka Appointed 20 September 2005

Julie Raffe Appointed 24 July 2007

Robert White Appointed 4 October 2007 – resigned 4 September 2009

D. W. (Bill) O’Neill Appointed 16 October 2009

Principal activitiesThe principal activity of the Company is investment in alternative assets. The Company’s investment objective is to achieve consistent and lower risk adjusted outperformance of global equity returns over the long term across all market conditions and with significantly lower volatility and risk over a market cycle via investment in a diversified portfolio. The Company may use leveraged instruments to increase exposure to the return of an underlying investment. Investments may also be made into cash and cash equivalent securities, foreign exchange contracts and options. Review of operations and results During the year, the Company continued to undertake investment activities in accordance with the Company’s stated investment strategy.

Year ended 30 June 2010

Year ended 30 June 2009

Net profit / (loss) after tax $11,420,052 $(150,055,064)

Basic and diluted earnings per share 6.1 cps (79.3) cps

Net tangible assets per share $0.486 $0.422*

*Audited net tangible assets per share. Unaudited $0.419 per share.

The increase in current year profit to $11,420,052 was driven primarily by the net change in the fair value of the Company’s investment portfolio during the year ended 30 June 2010.

DividendsDividends paid or declared by the Company since the end of the previous financial year were:

Paid or declared during the year $No dividends were paid or declared by the Company during the financial year ended 30 June 2010. -

Paid or declared after end of year $Final ordinary dividend for the year ended 30 June 2010 of 3 cents per share fully franked, due to be paid on 4 October 2010; and 5,557,403

Special ordinary dividend for the year ended 30 June 2010 of 2 cents per share fully franked, due to be paid on 4 October 2010. 3,704,935

Directors ReportFor the year ended 30 June 2010

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Investment Activities Strategic asset realisation program – Lighthouse Investment Partners’ managed investmentsDuring the year the Company continued to implement it’s strategic asset realisation program by redeeming its leveraged instruments.As these leveraged instruments have been liquidated, all leverage in the underlying instruments issued by UBS and JP Morgan has been repaid, with only a small amount of leverage remaining on the instrument issued by Natixis. Following the repayment of the leverage, the Company commenced receiving redemption proceeds in April 2010.Lighthouse Investment Partners provide regular updates to the Company in relation to the forecast realisation timetable. Based upon the most recent estimates, the Company expects to receive redemption proceeds relating to approximately 16% of the remaining portfolio by June 2011, with the balance to be received after that.

GAM managed investmentsOn 25 June 2010, the Company announced it had appointed GAM International Management Limited (GAM) to advise it on managing and administering a customised portfolio of new international hedge fund investments.GAM is a specialist global asset manager, which delivers active discretionary and advisory investment management services of long equity, alternative and fixed income investments. It manages or advises approximately US$50 billion of investment assets. GAM is part of GAM Holding Limited (GAMH), a Swiss parent company whose shares are listed on the SIX Swiss Exchange. GAMH has a market capitalisation of approximately US$2.3 billion.The arrangement with GAM is a non-exclusive appointment and will be solely focussed on those funds allocated by the Company to the GAM portfolio. The arrangement is cost effective and can be terminated by either party.

Capital Management On-market share buy-backConsistent with the Board’s ongoing focus on capital management, an on-market share buy-back was initiated on 13 October 2009 (commenced on 29 October 2009) of up to 10% of the Company’s shares on issue. As at 30 June 2010 a total of 4,086,731 shares have been bought back and cancelled, at a total acquisition cost of $1,227,945 and representing 2.16% of the Company shares on issue as at the commencement of the buy-back.

Reinstatement of the Dividend Reinvestment PlanThe Company’s Dividend Reinvestment Plan has been reactivated and shareholders will be able to participate in relation to the dividend due to be paid on 4 October, 2010.

Significant changes in the state of affairsOther than as noted in the 2010 Financial Report and Notes, there were no significant changes in the state of affairs of the Company that occurred during the reporting period under review.

Change of Company NameOn 30 June 2010 shareholders voted to approve the change of the Company’s name from HFA Accelerator Plus Limited to Signature Capital Investments Limited.

Matters subsequent to the end of the financial yearOther than the ongoing strategic asset realisation program and continuation of the on-market buy-back, there has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a material and unusual nature likely, in the opinion of the Directors of the Company, to affect significantly the operations of the Company, the results of those operations, or the state of affairs of the Company, in future financial years.

Likely developments and expected results of operationsThe results of the Company’s operations may be affected by a number of factors, including the performance of investment markets in which the Company invests, the timing of receipts from the strategic asset realisation program and movements in currency valuations. Investment performance is not guaranteed and future returns may differ from past returns. As investment conditions change over time, past returns should not be used to predict future returns.

Environmental regulationThe operations of the Company are not subject to any particular environmental regulations under a Commonwealth, State or Territory law.

Directors Report (continued)For the year ended 30 June 2010

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Information on Directors John A Morrison BE (Hons) MBA MAICD Independent Chairman

Experience and expertise John is currently an Executive Director of Grant Samuel, a leading independent investment bank. He has broad experience in the finance industry and since 1990 has been involved in providing advice to corporations in mergers, acquisitions, valuations, restructuring, financing and capital management. Prior to this he worked in engineering and construction in Australia and the UK. John was appointed a non-executive Director of Minara Resources Limited on 16 December 1999 and was previously a non-executive Director of HFA Holdings Limited from 15 March 2005 until December 2007.

Special responsibilities

• Chairman of the Board from 7 September 2009;

• Chairman of Nomination and Remuneration Committee from 9 December 2009; and

• Chairman of Investment Committee from 25 March 2010.

Appointed 28 July 2004.

Paul J Manka MBA CFP F FIN. Independent Non-Executive Director

Experience and expertise Paul holds a Masters in Business Administration (MGSM), is a Certified Financial Planner and a Fellow of the Financial Services Institute of Australasia. Paul has held a range of positions within the financial services sector, including various Board and management positions, and continues to provide financial advice to a broad range of clients. Paul has held a number of previous Directorships on publicly listed companies, and has been a Director of Octaviar Limited since February 2004.


• Member of Audit and Risk Committee from 30 June 2006;

• Member of Nominations and Remuneration Committee from 30 March 2007; and

• Member of Investment Committee from 25 March 2010.

Appointed 20 September 2005.

Bruce S McComish BCA (Hons) FCA FCPA. Independent Non-Executive Director

Experience and expertise Bruce holds a Bachelor of Commerce and Administration from Victoria University of Wellington and is a qualified accountant. Bruce was previously the Chief Financial Officer of National Australia Bank Ltd and North Limited, and also worked for 18 years for Unilever PLC in Europe, Asia and in Australia. Bruce has been a non-executive Director of Living and Leisure Australia Limited since 15 May 2006.


• Chairman of the Board from 30 May 2007 to 7 September 2009;

• Chairman of Nominations Committee from 30 March 2007 to 9 December 2009, continuing as a member of the Nomination and Remuneration Committee;

• Audit and Risk Committee Member from 30 June 2006 to 9 December 2009; and



Julie Raffe MAICD, F.FIN, FCA, FCAEW. Independent Non-Executive Director

Experience and expertise Julie is currently the CFO for Village Roadshow Limited, a publicly listed entertainment company, where she has over 20 years experience. Apart from traditional CFO responsibilities, Julie retains financial oversight for Village Roadshow and all subsidiary companies, and is also responsible for the group human resources, risk assessment, tax compliance and technology functions. Before joining Village Roadshow Julie was an Audit Manager at Horwath & Horwath in Australia and the United Kingdom. Julie is a fellow of the Institute of Chartered Accountants in England and Wales and is also a member of Financial Services Institute of Australasia (FINSIA). Julie is an Alternate Director for Austereo Group Ltd, a public listed subsidiary of Village Roadshow, having been appointed on 29 August 2001.


• Chairperson of Audit and Risk Committee from 30 June 2008.

Appointed 24 July 2007


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D. W. (Bill) O’Neill BCOM MCOM FCPA Independent Non Executive Director

Experience and expertise Bill has over 40 years corporate finance experience, including previous senior corporate finance positions at HSBC Investment Banking Group and Morgan Grenfell, and as a consultant to KPMG Corporate Finance. Mr O’Neill is a Fellow of CPA Australia and holds a Bachelor of Commerce and Masters of Commerce.


• Member of Audit and Risk Committee from 9 December 2009; and


Appointed 16 October 2009.

Robert White B Bus. Chief Executive Officer, Executive Director and Company Secretary

Experience and expertise Robert was an Executive Director of HFA Asset Management Limited and responsible for the day to day operations within that Company. Robert has over 14 years experience in the financial services industry working within both the institutional and retail market segments in the UK, Europe and Australia.

Appointed 4 October 2007, resigned 4 September 2009.

Company Secretary

Louise Edwards LLB MBA

Experience and expertise Louise was appointed Company Secretary on 7 September 2009. Louise previously worked as a corporate lawyer and has over ten years experience in corporate roles for listed financial services and investment companies in Australia and the UK. Louise holds a Bachelor of Laws, and a Masters in Business Administration.



Meetings of DirectorsThe numbers of meetings of the Company’s Board of Directors and of each Board committee held during the year ended 30 June 2010, and the numbers of meetings attended by each Director were:

Board MeetingsAudit and Risk

Committee Meetings

Nomination and Remuneration

Committee Meetings

Investment Committee

Meetings

A B A B A B A B

B McComish 15 20 1 1 - 1 4 4

J Morrison 19 20 1 1 1 1 4 4

P Manka 20 20 2 3 1 1 4 4

J Raffe 17 20 3 3 - - - -

B O’Neill 12 15 2 2 - - 4 4

R White 2 2 - - - - - -

A = Number of meetings attended B = Number of meetings held during the time the Director held office or was a member of the committee.

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Share optionsNo share options have been granted during or since the end of the reporting period. As at the date of this report there are no unissued shares of the Company under option.

Indemnification and insurance of officers and auditorsIndemnificationRule 10 of the Company’s constitution provides that the Company indemnifies, on a full indemnity basis and to the full extent permitted by law, officers of the Company for all losses and liabilities incurred by the person in their position as an officer of the Company or of a related body corporate. The Directors may also determine that the same indemnity be provided to officers of related bodies corporate of the Company and Company auditors. In accordance with the requirements of section 199A of the Corporations Act, Rule 10 does not indemnify an officer for any liability involving a lack of good faith. No indemnity has been granted to an auditor of the Company in their capacity as auditor of the Company. The Company has not been required to indemnify any officer under Rule 10 since its incorporation.

Rule 10 also permits the Company to purchase and maintain Directors’ and officers’ insurance policies.

In conformity with Rule 10, the Company is party to Deeds of Indemnity in favour of each of the Directors referred to in this report who held office during the year and the Company Secretary. Since the date of the previous Directors’ Report, the Company entered into new Deeds of Indemnity with Bill O’Neill (Director) and Louise Edwards (Company Secretary) . The indemnities operate to the full extent permitted by law and are not subject to a monetary limit. The Company is not aware of any liability having arisen, and no claims have been made, during or since the financial year under the Deeds of Indemnity.

Insurance premiumsDuring the year, the Company paid premiums for contracts insuring Directors and officers of the Company against certain liabilities (subject to certain exclusions

and to the extent permitted by law), for the year ending 30 June 2010. The Directors have not included details of the nature of the liabilities covered or the amount of the premium paid in respect of the Directors’ and officers’ liability insurance contract as (in accordance with normal commercial practice) such disclosure is prohibited under the terms of the contracts.

Remuneration report (Audited)The Directors of the Company present the Remuneration Report prepared in accordance with section 300A of the Corporations Act 2001 for the year ended 30 June 2010.

Remuneration committeeThe Nomination and Remuneration Committee is responsible for reviewing and making recommendations to the Board on remuneration packages and policies applicable to the Directors of the Company, including superannuation entitlements, and professional indemnity and liability insurance policies.

Principles of compensation The Company does not have any employees. The Company outsourced management of operations to HFA Asset Management Limited from 1 July 2009 to 19 February 2010. The Company entered into a financial and administration agreement with The Myer Family Company Limited (“MFC”) in February 2010 and MFC continue to provide services under that agreement.

The Company does not pay any performance based remuneration.

The Company’s constitution provides that Directors (excluding executive Directors) may be paid such remuneration as is determined from time to time in general meeting. The remuneration may be divided among the non-executive Directors in such proportion as they agree. The Board Charter discloses the main corporate governance practices of the Board including a detailed definition of independence, a framework for the identification of candidates for apportionment to the Board, requirements regarding conflicts of interest, the role and responsibility of the Board, and remuneration and nomination policies. Shareholders have approved remuneration of up to $250,000 in aggregate for non-executive Directors in any year.

Directors’ InterestsThe relevant interest of each Director in shares issued by the Company and other related bodies corporate, as notified by the Directors in accordance with S205G(1) of the Corporations Act 2001, at the date of this report is as follows:

2010 No.

2009 No.

B McComish - -

J Morrison 810,001 10,001

P Manka 200,000 -

J Raffe 30,000 -

B O’Neill - -

R White (resigned 4 September 2009) - 20,903,505

For details of the Directors’ share transactions refer to Note 16 ‘Related Parties’.

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Superannuation contributions and insurance premiums are also paid by the Company in accordance with the law and the Company’s Constitution. Each Director has entered into a Deed of Access, Indemnity and Insurance with the Company and is covered by the Company’s Directors and Officers Liability Insurance.

For the year ended 30 June 2010 non-executive Directors were entitled to annual fees of $36,000 per annum (excluding superannuation) and the chairperson of the Audit and Risk Committee was entitled to an additional $4,000 per annum (excluding superannuation). The Chairman was entitled to annual fees of $60,000 per annum (including superannuation).

The Company Secretary is appointed pursuant to a contract for services. The contract is for no fixed term and is terminable on 4 weeks notice. The Company Secretary is entitled to remuneration of $3,000 per month, plus time based remuneration for additional services. The Company Secretary is not an employee and no termination benefits are payable. The Company Secretary was paid $329,650 (excluding GST) for all services provided to the Company during the year.

Directors’ remuneration Details of the nature and amount of each major element of remuneration of each Director of the Company (as defined in section 300A of the Corporations Act 2001) are:

For the reporting period ended 30 June 2010

Short-term Salary & fees

$

Post- employment

Superannuation benefits

$Total

$

Directors

Non-executive Directors

Mr John Morrison (Chair from 7 September 2009) 2010 51,484 4,634 56,118

2009 43,125 3,881 47,006

Mr Bruce McComish (Chair to 7 September 2009) 2010 39,558 3,560 43,118

2009 62,171 5,595 67,766

Mr Paul Manka 2010 36,000 3,240 39,240

2009 43,125 3,881 47,006

Ms Julie Raffe 2010 40,000 3,600 43,600

2009 47,125 4,241 51,366

Mr D.W (Bill) O’Neill 2010 25,516 2,296 27,812

2009 - - -

Total compensation 2010 192,558 17,330 209,888

2009 195,546 17,598 213,144

Non-audit servicesDuring the year, KPMG, the Company’s auditor, has performed certain other services in addition to their statutory duties.

The Board has considered the non-audit services provided during the year by the auditor and in accordance with written advice provided by resolution of the audit committee, is satisfied that the provision of those non-audit services during the year by the auditor is compatible with, and did not compromise, the auditor independence requirements of the Corporations Act 2001 for the following reasons:

- all non-audit services were subject to the corporate governance procedures adopted by the Company and have been reviewed by the audit committee to ensure they do not impact the integrity and objectivity of the auditor; and

- the non-audit services provided do not undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants, as they did not involve reviewing or auditing the auditor’s own work, acting in a management or decision making capacity for the Company, acting as an advocate for the Company or jointly sharing risks and rewards.

Details of the amounts paid to the auditor of the Company, KPMG, and its related practices for audit and non-audit services provided during the year are set out below:

Taxation services (KPMG Australia) excluding GST 30,300

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Lead auditor’s independence declarationA copy of the Lead auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 15 and forms part of the Directors’ report for the financial year ended 30 June 2010.Signed in accordance with a resolution of the Directors.

John MorrisonChairman

Melbourne 20 August 2010

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To: the Directors of Signature Capital Investments Limited

I declare that, to the best of my knowledge and belief, in relation to the audit for the financial year ended 30 June 2010 there have been:

(a) no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit; and

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

KPMG

Michelle SomervillePartner


Lead Auditor’s Independence Declaration under Section 307C of the Corporations Act 2001For the year ended 30 June 2010

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Note2010

$2009

$

Income

Interest income 5 525,786 979,204

Net changes in fair value of financial assets 6 18,327,056 (153,584,089)

Foreign exchange gains/(losses) (4,438,227) 2,217,067

Net investment income/(loss) 14,414,615 (150,387,818)

Expenses

Management fees 17 816,909 6,213,398

Administrative expenses 737,384 633,591

Legal fees 418,343 356,794

Professional and consultancy fees 665,064 233,907

Other operating expenses 356,863 331,862

Total operating expenses before finance expense 2,994,563 7,769,552

Finance expense - -

Profit/(loss) before income tax 11,420,052 (158,157,370)

Income tax expense/(benefit) 7 - (8,102,306)

Profit/(loss) for the year 11,420,052 (150,055,064)

Other comprehensive income

Other comprehensive income - -

Other comprehensive income for the year, net of income tax - -

Total comprehensive income for the year 11,420,052 (150,055,064)

Profit attributable to:

Shareholders of the Company 11,420,052 (150,055,064)

Profit/(loss) for the year 11,420,052 (150,055,064)

Total comprehensive income attributable to:

Shareholders of the Company 11,420,052 (150,055,064)

Total comprehensive income for the year 11,420,052 (150,055,064)

Earnings per share: Cents Cents

Basic and diluted earnings/(loss) per share 12 6.09 (79.25)

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

Statement of Comprehensive IncomeFor the year ended 30 June 2010

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Note2010

$2009

$

Assets

Current assets

Cash and cash equivalents 13 23,738,624 15,754,559

Financial assets held at fair value through profit or loss:

Leverage instruments 4 - 3,352,373

Unlisted investments 4 5,357,873 -

Current tax asset 10 - 1,345

Receivables 8 91,201 270,220

Total current assets 29,187,698 19,378,497

Non-current assets

Financial assets held at fair value through profit or loss

Leverage instruments 4 2,640,999 62,231,450

Unlisted investments 4 57,041,714 -

Receivables 8 2,244,266 -

Total non-current assets 61,926,979 62,231,450

Total assets 91,114,677 81,609,947

Liabilities

Current liabilities

Other payables 9 1,077,103 1,764,481

Total current liabilities 1,077,103 1,764,481

Total liabilities 1,077,103 1,764,481

Net assets 90,037,574 79,845,466

Equity

Contributed equity 197,103,864 198,331,809

Retained earnings/(accumulated losses) (107,066,290) (118,486,343)

Total equity attributable to the shareholders of the Company 90,037,574 79,845,466

The above statement of financial position should be read in conjunction with the accompanying notes.

Statement of Financial PositionFor the year ended 30 June 2010

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Note

Contributed equity

$

Retained earnings/

(accumulated losses)

$

Total equity

$

Balance at 1 July 2008 198,331,809 34,408,727 232,740,536

Total comprehensive income for the year

Profit/(loss) - (150,055,064) (150,055,064)

Other comprehensive income - - -

Total comprehensive income for the year attributable to shareholders of the Company

198,331,809 (115,646,337) 82,685,472

Transactions with shareholders, recorded directly in equity

Dividends to shareholders 11 - (2,840,005) (2,840,005)

Total transactions with shareholders, recorded directly in equity

- (2,840,005) (2,840,005)

Balance at 30 June 2009 198,331,809 (118,486,342) 79,845,467

Contributed equity

$

Retained earnings/

(accumulated losses)

$

Total equity

$

Balance at 1 July 2009 198,331,809 (118,486,342) 79,845,467

Total comprehensive income for the year

Profit/(loss) - 11,420,052 11,420,052

Other comprehensive income - - -

Total comprehensive income for the reporting period attributable to shareholders of the Company

198,331,809 (107,066,290) 91,265,519

Transactions with shareholders, recorded directly in equity

On-market share buy-back (1,227,945) - (1,227,945)

Total transactions with shareholders, recorded directly in equity

(1,227,945) - (1,227,945)

Balance at 30 June 2010 197,103,864 (107,066,290) 90,037,574

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

Statement of Changes in EquityFor the year ended 30 June 2010

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Note2010

$2009

$

Cash flows from operating activities

Interest received 468,482 979,867

Management fees paid (1,869,167) (7,231,608)

Other expenses paid (1,576,450) (810,011)

Tax expenses paid 1,345 (5,679,484)

Net cash outflow from operating activities 14 (2,975,790) (12,741,236)

Cash flows from investing activities

Proceeds from sale of financial assets held at fair value through profit or loss 47,498,362 13,630,036

Payments for financial assets held at fair value through profit or loss (35,076,155) (26,148,578)

Amounts received from /(placed with) brokers as collateral - 9,991,611

Net cash inflow/(outflow) from investing activities 12,422,207 (2,526,931)

Cash flows from financing activities

On-market share buy-back 11 (1,227,945) -

Dividends paid to the Company’s shareholders 11 - (2,840,005)

Net cash inflow/(outflow) from financing activities (1,227,945) (2,840,005)

Net decrease/(increase) in cash and cash equivalents 8,218,472 (18,108,172)

Cash and cash equivalents at the beginning of the year 15,754,559 33,862,731

Effects of exchange rate changes on cash and cash equivalents (234,407) -

Cash and cash equivalents at the end of the year 13 23,738,624 15,754,559

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

Statement of Cash FlowsFor the year ended 30 June 2010

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1. GENERAL INFORMATIONSignature Capital Investments Limited (“the Company”) formerly known as HFA Accelerator Plus Limited, is incorporated and domiciled in Australia. The address of the Company’s registered office is Level 18, 8 Exhibition Street Melbourne, VIC 3000.

2. BASIS OF PREPARATION(a) Statement of complianceThe financial report is a general purpose financial report which has been prepared in accordance with Australian Accounting Standards (AASBs), including Australian interpretations adopted by the Australian Accounting Standards Board (AASB) and the Corporations Act 2001. The Company’s financial report complies with International Financial Reporting Standards (IFRSs) and interpretations adopted by the International Accounting Standards Board (IASB).

The financial statements were approved by the Board of Directors on 20 August 2010.

AASB 101 (revised) Presentation ofFinancial Statements

The Company has applied the revised standard which became effective from 1 January 2009. The revised standard requires the separate presentation of a statement of comprehensive income and a statement of changes in equity. All non owner changes in equity must now be presented in the statement of comprehensive income. As a consequence, the Company had to change the presentation of its financial statements. Comparative information has been re-presented so that it is also in conformity with the revised standard.

AASB 7 Improving Disclosures about Financial Instruments (Amendments to AASB 7 Financial Instruments: Disclosures)

The Company has applied the amendment to the standard from 1 July 2009. The amendment expands the disclosures required in respect of fair value measurements and liquidity risk. The Company has elected not to provide comparative information for these expanded disclosures in the current reporting period.

(b) Basis of measurementThe financial statements have been prepared on the historical cost basis except for the following:

• derivative financial instruments are measured at fair value; and

• financial instruments at fair value through profit or loss are measured at fair value.

The methods used to measure fair values are discussed further in note 3.

(c) Functional and presentation currencyThese financial statements are presented in Australian dollars, which is the Company’s functional currency.

(d) Use of estimates and judgementsThe preparation of financial statements requires the Company to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates are recognised in the period in which the estimate is revised and in any future periods affected.

In particular, information about significant areas of estimation uncertainty and critical judgements in applying accounting policies that have the most significant effect on the amounts recognised in the financial statements are described in note 11 Tax assets and liabilities.

3. SIGNIFICANT ACCOUNTING POLICIESThe accounting policies set out below have been applied consistently to all periods presented in these financial statements.

(a) Foreign currency translationForeign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translations at year end exchange rates, of monetary assets and liabilities denominated in foreign currencies are recognised in the statement of comprehensive income.

The Company does not isolate that portion of gains or losses on securities and derivative financial investments which is due to changes in foreign exchange rates from that which is due to changes in the market price of securities. Such fluctuations are included with the net gains or losses on financial instruments held at fair value through profit or loss.

(b) Financial instruments(i) ClassificationThe Company has designated all its investments (except as stated below) into the fair value through profit or loss category.

The category of financial instruments at fair value through profit and loss comprises:

Notes to the Financial StatementsFor the year ended 30 June 2010

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3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)• Financial instruments designated at fair value through

profit or loss upon initial recognition. These include assets that are not held for trading purposes and which may be sold. These assets include leveraged instruments. The fair value through profit or loss classification is in accordance with AASB 139 Financial Instruments: Recognition and Measurement. The classification is appropriate as the Company’s performance is assessed on a fair value basis.

• Financial instruments held-for-trading. These include forward foreign exchange contracts and options which the Company may use to hedge its exposure to foreign exchange and interest rate risks. All derivatives in a net receivable position (positive fair value) as well as options purchased, are reported as financial assets held-for-trading. All derivatives in a net payable position (negative fair value) are reported as financial liabilities held-for-trading. There were no financial instruments held-for-trading on the balance sheet at 30 June 2010, although some instruments were held during the year.

Financial instruments designated at fair value through the profit or loss are not subsequently reclassified.

Financial assets that are classified as receivables, and carried at amortised cost, include balances due from brokers and other receivables.

Financial liabilities that are not at fair value through profit or loss include other payables.

(ii) RecognitionThe Company recognises financial assets and financial liabilities on the date it becomes party to the contractual provisions of the instrument. Financial assets are recognised using trade date accounting.

(iii) MeasurementFinancial assets and liabilities held at fair value through profit or loss are measured initially at fair value excluding any transaction costs that are directly attributable to the acquisition or issue of the financial asset or financial liability. Transaction costs on financial assets and financial liabilities at fair value through profit or loss are expensed immediately. Subsequent to initial recognition, all instruments held at fair value through profit or loss are measured at fair value with changes in their fair value recognised in the statement of comprehensive income.Financial assets classified as receivables are carried at amortised cost using the effective interest rate method, less impairment losses, if any.

Financial liabilities, other than those at fair value through profit or loss, are measured at amortised cost using the effective interest rate method.

Trade and other receivables are stated at their amortised cost less impairment losses (see accounting policy (b)(vi)).

(iv) Fair value measurement principlesThe fair value of financial instruments is based on their quoted market prices at balance sheet date without any deduction for estimated future selling costs. Financial assets are priced at current bid prices, while financial liabilities are priced at current asking prices.

If a quoted market price is not available on a recognised stock exchange or from a broker / dealer for non-exchange traded financial instruments, the fair value of the instrument is estimated using valuation techniques, including use of recent arm’s length market transactions, reference to the current fair value of another instrument that is substantially the same, discounted cash flow techniques, option pricing models or any other valuation technique that provides a reliable estimate of prices obtained in actual market transactions.

Where discounted cash flow techniques are used, estimated future cash flows are based on management’s best estimates and the discount rate used in a market rate at the balance sheet date applicable for an instrument with similar terms and conditions. Where other pricing models are used, inputs are based on market data at the balance sheet date. The fair value of derivatives that are not exchange-traded is estimated at the amount that the Company would receive or pay to terminate the contract at the balance sheet date taking into account current market conditions (volatility, appropriate yield curve) and the current creditworthiness of the counterparties.

The fair value of leverage instruments are determined in accordance with the contractual terms of the instrument, with reference to the value of the underlying securities to which it is linked and the cost of the leverage provided within the instrument.

Notes to the Financial Statements (continued)For the year ended 30 June 2010

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3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)(v) ImpairmentFinancial assets that are stated at cost or amortised cost are reviewed at each balance sheet date to determine whether there is objective evidence of impairment. If any such indication exists, impairment testing is carried out and an impairment loss is recognised in the statement of comprehensive income as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the financial asset’s original effective interest rate.

If in a subsequent period the amount of an impairment loss recognised in a financial asset carried at amortised cost decreases and the decrease can be linked objectively to an event occurring after the write down, the write down is reversed through the statement of comprehensive income.

(vi) DerecognitionThe Company derecognises a financial asset when the contractual rights to cash flows from the financial asset expire or it transfers the financial assets and the transfer qualifies for derecognition in accordance with AASB 139.

The Company uses the weighted average method to determine realised gains and losses on derecognition of financial assets not at fair value.

A financial liability is derecognised where the obligation specified in the contract is discharged, cancelled or expired.

(vii) Specific instrumentsCash and cash equivalents Cash comprises current deposits with banks.

Leverage instrumentsThe Company has investments in leverage instruments to gain leveraged exposure to the performance of a portfolio of international absolute return funds. Leverage instruments are recognised initially at fair value, with attributable transaction costs recognised in profit or loss when incurred.

Derivative financial instrumentsThe Company may use derivative financial instruments to hedge its exposure to foreign exchange and interest rate risks arising from investment activities. Derivative financial instruments are recognised initially at fair value. Subsequent to initial recognition, derivative financial instruments are stated at fair value. The gain or loss on remeasurement to fair value is recognised immediately in profit or loss.

Unlisted investmentsThe Company has investments in unlisted companies and funds to gain exposure to a diversified portfolio of international absolute return funds. Unlisted investments are recognised initially at fair value, with attributable transaction costs recognised in profit or loss when incurred.

(c) Share capitalOrdinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares and share options are recognised as a deduction from equity, net of any tax effects.

When share capital recognised as equity is repurchased, the amount of the consideration paid, which includes directly attributable costs, net of any tax effects, is recognised as a deduction from equity.

(d) Interest incomeInterest income is recognised in the statement of comprehensive income as it accrues, using the effective interest method of the instrument calculated at the acquisition or origination date. Interest income includes the amortisation of any discount or premium, transaction costs or other differences between the initial carrying amount of an interest-bearing instrument and its amount at maturity calculated on an effective interest rate basis.

(e) ExpensesAll expenses, including management and performance fees, are recognised in the statement of comprehensive income on an accrual basis.

Included in administrative expenses are custody fees, Director’s fees, indemnity insurance fees and audit and advisory fees.

Included in other operating expenses are compliance fees, ASX fees, printing costs and other miscellaneous operating expenses.

(f) Income taxIncome tax expense comprises current and deferred tax. Income tax expense is recognised in profit or loss except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantially enacted at the reporting date, and any adjustments to tax payable in respect of previous years.

Deferred tax is recognised using the balance sheet method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes.


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3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets.

A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which the temporary difference can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

Additional income taxes that arise from the distribution of dividends are recognised at the same time as the liability to pay the related dividend is recognised.

(g) Goods and Services Tax (GST)Revenues, expenses and assets are recognised net of the amount of goods and services tax (GST), except where the amount of GST incurred is not recoverable from the taxation authority. In these circumstances, the GST is recognised as part of the cost of acquisition of the asset or as part of the expense. The Company qualifies for Reduced Input Tax Credit (RITC’s) at a rate of 75%.

Receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from the ATO is included in receivables in the statement of financial position.

Cash flows relating to GST are included in the statement of cash flows on a gross basis. The GST components of cash flows arising from investing and financing activities which are recoverable from, or payable to, the ATO are classified as operating cash flows.

(h) Earnings per share(i) Basic earnings per shareBasic earnings per share is calculated by dividing the profit/loss attributable to shareholders of the Company, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year.

(ii) Diluted earnings per shareDiluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares.

(i) Segment reportingAs of 1 July 2009 the Company determines and present operating segments based on the information that internally is provided to the Board of Directors, who are the Company’s chief operating decision makers. This change in accounting policy is due to the adoption of AASB 8 Operating Segments. Previously operating segments were determined and presented in accordance with AASB 14 Segment Reporting. The change in accounting policy does not impact on presentation and disclosure in the financial statements.

The Company is organised into one main business segment which operates solely in the business of investment management within Australia.

(j) New accounting standards and interpretationsThe following standards, amendments to standards and interpretations have been identified as those which may impact the Company in the period of initial application. They are available for early adoption at 30 June 2010, but have not been applied in preparing this financial report.

(i) AASB 2009-5 Further Amendments to Australian Accounting Standards arising from the Annual Improvements Project (effective from 1 July 2010)In May 2009 the AASB issued a number of improvements to AASB 5 Non current Assets Held for Sale and Discontinued Operations, AASB 8 Operating Segments, AASB 101 Presentation of Financial Statements, AASB 107 Statement of Cash Flows, AASB 117 Leases, AASB 118 Revenue, AASB 136 Impairment of Assets and AASB 139 Financial Instruments: Recognition and Measurement. The Company will apply the revised Standards from 1 July 2010. The amendments are not expected to have a significant impact on the Company’s financial statements.

(ii) AASB 9 Financial Instruments and AASB 2009-11 Amendments to Australian Accounting Standards arising from AASB 9 (effective from 1 January 2013)AASB 9 Financial Instruments addresses the classification and measurement of financial assets. The standard is not applicable until 1 January 2013. The current four categories of financial assets, stipulated in AASB 139 Financial Instruments: Recognition and Measurement, will be replaced with two measurement categories: fair value and amortised cost. AASB 9 only permits the recognition of fair value gains/(losses) in other comprehensive income if they relate to equity investments that are not held for trading. Fair value gains/(losses) on debt investments, for example, will therefore have to be recognised directly in the statement of comprehensive income. The amendment is not expected to have a significant impact on the Company’s financial statements.


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4. FINANCIAL ASSETS AND LIABILITIESThe following table details the categories of financial assets and liabilities held by the Company at the report date:

Note2010

$2009

$

Current financial assets

Cash and cash equivalents 13 23,738,624 15,754,559

Financial assets at fair value through the profit or loss

Designated at fair value through profit and loss upon initial recognition

Leverage instruments - 3,352,373

Unlisted investments 5,357,873 -

Total financial assets at fair value through the profit or loss 5,357,873 3,352,373

Receivables

Other receivables 8 91,201 270,220

Total receivables 91,201 270,220

Total current financial assets 29,187,698 19,377,152

Non-current financial assets

Financial assets at fair value through the profit or loss

Designated at fair value through profit and loss upon initial recognition

Leverage instruments 2,640,999 62,231,450

Unlisted investments 57,041,714 -

Receivables 8 2,244,266 -

Total financial assets at fair value through the profit or loss 61,926,979 62,231,450

Total non-current financial assets 61,926,979 62,231,450

Total financial assets 91,114,677 81,608,602

Financial liabilities

Payables 9 1,077,103 1,764,481

Total financial liabilities 1,077,103 1,764,481

The Company’s exposure to credit, currency and interest rate risks related to investments is disclosed in note 15.

5. INTEREST INCOME

2010 $

2009 $

Interest income for financial assets that are not at fair value through profit or loss

Cash and cash equivalents 525,786 979,204

Total interest income 525,786 979,204


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6. NET CHANGES IN FAIR VALUE OF FINANCIAL ASSETS THROUGH PROFIT AND LOSS

2010 $

2009 $

Designated at fair value through profit or loss upon initial recognition

Leverage instruments 18,352,998 (128,078,462)

Unlisted Investments (53,846) -

Net gain/(loss) from financial assets and liabilities designated at fair value through profit and loss upon initial recognition

18,299,152 (128,078,462)

Held for trading

Derivative financial instruments

Forward foreign exchange contracts 27,904 (19,641,130)

Options - (5,864,497)

Net gain/(loss) from financial assets and liabilities designated as held for trading 27,904 (25,505,627)

Net gain/(loss) from financial assets and liabilities at fair value through profit and loss

18,327,056 (153,584,089)

7. INCOME TAX EXPENSE

2010 $

2009 $

Current tax expense

Current period - -

Adjustment for prior periods - 77,964

- 77,964

Deferred tax expense/(benefit)

Origination and reversal of temporary differences - (8,180,270)

- (8,180,270)

Total income tax benefit - (8,102,306)

Numerical reconciliation between tax expense and pre-tax accounting profit

Profit/(loss) for the period 11,420,052 (150,055,064)

Total income tax benefit - (8,102,306)

Profit/(loss) excluding income tax 11,420,052 (158,157,370)

Income tax using the Company’s domestic tax rate of 30% (2008: 30%) 3,426,016 (47,447,211)

Under/(over) provided in prior periods 120,828 77,964

Change in temporary differences not previously recognised (25,566,900) 29,314,306

Current year losses not recognised 22,020,056 10,129,117

Total income tax expense/(benefit) - (8,102,306)


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8. RECEIVABLES

Current2010

$2009

$

GST receivable 35,638 270,220

Interest receivable 55,563 -

Total current receivables 91,201 270,220

Non-current2010

$2009

$

Investment proceeds receivable 2,244,266 -

Total non-current receivables 2,244,266 -

9. PAYABLES

2010 $

2009 $

Management fee payable 458,231 1,510,489

Other payables 618,872 253,992

Total payables 1,077,103 1,764,481

10. TAX ASSETS AND LIABILITIESUnrecognised deferred tax assetsDeferred tax assets have not been recognised in respect of the following items:

2010 $

2009 $

Deductible temporary differences 3,747,406 29,314,306

Tax losses 32,142,740 10,129,811

Unrecognised deferred tax asset 35,890,146 39,444,117

The deductible temporary differences and tax losses do not expire under current tax legislation. Deferred tax assets have not been recognised in respect of these items due to the current volatility in the global financial markets and the Company’s Strategic Asset Realisation Program, as it is not sufficiently probable that taxable profits will be generated in the future against which the Company could utilise the potential benefits associated with the current realised and unrealised losses.


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10. TAX ASSETS AND LIABILITIES (CONTINUED)Movement in temporary differences during the year

2010

Balance 1 July 2009

$

Recognised in profit and loss

$

Recognised in Equity

$

Balance 30 June 2010

$

Financial assets at fair value through profit and loss - - - -

Equity raising costs - - - -

Other - - - -

- - - -

2009

Balance 1 July 2008

$

Recognised in profit and loss

$

Recognised in Equity

$


$

Financial assets at fair value through profit and loss (8,417,295) 8,417,295 - -

Equity raising costs 224,207 (224,207) - -

Other 12,818 (12,818) - -

(8,180,270) 8,180,270 - -

Movement in unrecognised deferred tax assets and liabilities during the year

2010

Balance 1 July 2009

$Additions

$Recognition

$


$

Deductible temporary differences 29,314,306 - (25,566,900) 3,747,406

Temporary differences arising from current income tax losses 10,129,811 22,012,929 - 32,142,740

39,444,117 22,012,929 (25,566,900) 35,890,146

2009

Balance 1 July 2008

$Additions

$Recognition

$


$

Deductible temporary differences - 29,314,306 - 29,314,306

Temporary differences arising from current income tax losses - 10,129,811 - 10,129,811

- 39,444,117 - 39,444,117


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Board considers the on-market share buy-back is a means by which some capital can be returned to shareholders. Under the on-market share buy-back, shares will be purchased as and when considered appropriate by the Directors over a twelve month period commencing 28 October 2009. The Directors will take into account prevailing share price, available liquidity, trading performance and other considerations to ensure shares are bought back when beneficial to efficient capital management. Any shares purchased under the on-market share buy-back will be cancelled. The share buy-back will be funded from existing cash reserves.

During the twelve months ended 30 June 2010, 4,086,731 shares were bought back and cancelled under the on-market share buy-back program. The total consideration paid by the Company was $1,227,945.

11. CAPITAL AND RESERVESReconciliation of shares on issue

2010 No. of Shares

2009 No. of Shares

On issue at 1 July 189,333,499 189,333,499

Own shares bought back (4,086,731) -

On issue at 30 June – fully paid 185,246,768 189,333,499

Ordinary shares have the right to receive dividends as declared and, in the event of winding up the Company, to participate in the proceeds from the sale of all surplus assets in proportion to the number of and amounts paid up on shares held. Ordinary shares entitle their holder to one vote, either in person or by proxy, at a meeting of the Company.

The Company does not have authorised capital or par value in respect of its issued shares.

On-market share buy-backPer the ASX announcement on 13 October 2009, the Board advised of its intention to conduct an on-market share buy-back of up to a maximum of 18,933,349 shares (10% of the issued capital at the time of the announcement). The


DividendsDividends recognised in the current year by the Company are:

Cents per share

Total amount $

Franked / unfranked

Date of payment

2010

No dividend declared - N/A N/A

2009

Final 2008 ordinary 1.5 2,840,005 Franked 30 September 2008

Total amount 2,840,005

After the balance sheet date the following dividend was declared by the Directors in respect of the year ended 30 June 2010:

Cents per share

Total amount $

Franked / unfranked

Date of payment

2010

Final 2010 ordinary 3.0 5,557,403 Franked 4 October 2010

Special 2010 ordinary 2.0 3,704,935 Franked 4 October 2010

Total amount 5.0 9,262,338

The financial effect of these dividends have not been brought to account in the financial statements for the financial year ended 30 June 2010 and will be recognised in subsequent financial reports. The total amount of the dividends is estimated based on the shares on issue at 30 June 2010.

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11. CAPITAL AND RESERVES (CONTINUED)Dividend franking account

2010 2009

30 percent franking credits available to shareholders of the Company for subsequent financial years

4,563,132 4,569,628

The above available amounts are based on the balance of the dividend franking account at year-end adjusted for:

(a) franking credits that will arise from the payment of the current tax liabilities; and

(b) franking credits that will arise from the payment of dividends recognised as a liability at year-end.

After allowing for the final and special 2010 dividend, which has not been brought to account in the financial state-ments for the financial year ended 30 June 2010, the balance of the franking account would be $593,558.

12. EARNINGS PER SHAREBasic and diluted earnings per shareThe calculation of basic earnings per share for the financial year ended 30 June 2010 was based on the profit attributable to ordinary shareholders of $11,420,052 (2009: ($150,055,064)) and a weighted average number of ordinary shares outstanding of 187,606,561 (2009: 189,333,499), calculated as follows:

Profit attributable to ordinary shareholders 2010

$2009

$

Profit for the year 11,420,052 (150,055,064)

Weighted average number of ordinary shares 2010

$2009

$

Issued ordinary shares at 1 July 2009 189,333,499 189,333,499

Effect of shares cancelled as part of on-market share buy-back (1,726,938) -

Weighted average number of ordinary shares for the year ended 30 June 2010 187,606,561 189,333,499

13. CASH AND CASH EQUIVALENTS

2010 $

2009 $

Bank balances 23,738,624 15,754,559

Total cash and cash equivalents 23,738,624 15,754,559

The Company’s exposure to interest rate risk and a sensitivity analysis for financial assets and liabilities are disclosed in note 16.

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15. SEGMENT INFORMATIONThe company is organised into one main business segment which operates solely in the business of investment management within Australia.

Internal reporting is provided to the Board on a monthly basis, to enable the Board to assess the company’s performance against its stated investment strategy. The internal reporting is provided in a consistent format to the disclosure and presentation in the financial statements.

16. FINANCIAL RISK MANAGEMENTOverviewThe Company’s assets principally consist of financial instruments which comprise unlisted investments, leverage instruments, forward foreign exchange contracts, and options. It holds these investment assets at the discretion of the Board of Directors, in accordance with its stated investment strategy. The Company’s investment objective is to achieve consistent and lower risk adjusted outperformance of global equity returns over the long term via investment in a range of alternative assets.

The allocation of assets between the various types of financial instruments described above is determined by the Board of Directors who manage the Company’s portfolio of assets to achieve the Company’s investment objectives. Divergence from target asset allocations and the composition of the portfolio is monitored by the Board of Directors on at least a monthly basis.

The Company’s investing activities expose it to the following risks from its use of financial instruments:

• market risk

• credit risk

• liquidity risk

The nature and extent of the financial instruments employed by the Company are discussed below. This note presents information about the Company’s exposure to each of the above risks, as well as the Company’s objectives, policies and processes for measuring and managing risk.

The Board of Directors has overall responsibility for the establishment and oversight of the Company’s risk management framework.

The Board has established an Audit and Risk Committee, which is responsible for developing and monitoring the Company’s risk management policies, including those related to its investment activities. The Company’s risk management policies are established to identify and analyse the risks faced by the Company, to set appropriate risk limits and controls, and to monitor risks and adherences to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Company’s activities.

The Audit and Risk Committee also oversees the monitoring of compliance with the Company’s risk management policies and procedures, and reviews the adequacy of the risk management framework in relation to the risks faced by the Company.

The Board has also established an Investment Committee, which is responsible for reviewing the risk management strategies within the investment portfolio and recommending appropriate changes to the Board for resolution. The Committee’s membership is comprised of both Directors and a specialist investment advisor. The Committee also engages third party investment research experts as required.

14. RECONCILIATION OF CASH FLOWS FROM OPERATING ACTIVITIES

2010 $

2009 $

Profit/(loss) for the period 11,420,052 (150,055,064)

Adjustments for:

Net changes in fair value of financial assets (18,327,056) 153,584,089

Foreign exchange (gains)/losses 4,438,226 (2,217,067)

Operating profit before changes in working capital and provisions (2,468,778) 1,311,958

Change in other receivables 179,019 263,920

Change in other payables (687,376) (535,324)

Change in current tax asset/(liability) 1,345 (5,601,520)

Change in deferred income tax liability - (8,180,270)

Net cash outflow from operating activities (2,975,790) (12,741,236)

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16. FINANCIAL RISK MANAGEMENT (CONTINUED)

Market riskMarket risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Company’s income or the value of its holdings of financial instruments. Market risk embodies the potential for both loss and gains. The objective of market risk management is to manage and control market risk exposures within the acceptable parameters, while optimising the return on risk.

The Company’s strategy on the management of the market risk is driven by the Company’s investment objective. The Company buys and sells derivatives in the ordinary course of business, and also incurs financial liabilities, in order to manage market risks. All such transactions are carried out in accordance with the Company’s stated investment strategy. The market risk disclosures are prepared on the basis of the Company’s direct investments and not on a look-through basis for investments held in the Company.

The sensitivity of the Company’s equity and profit or loss to foreign exchange risk, interest rate risk and other market price risk are measured by the reasonably possible movements approach. This approach is determined based on Board of Directors’ best estimate, having regard to a number of factors, including historical levels of change in foreign exchange rates, interest rates and market volatility. However, actual movements in the risk variables may be greater or less than anticipated due to a number of factors, including unusually large market shocks resulting from changes in the performance of the economies, markets and securities in which the Company invests. As a result, historic variations in the risk variables are not a definitive indicator of future variations in the risk variables.

Currency RiskThe Company may invest in financial instruments and enter into transactions denominated in currencies other than its functional currency (Australian dollars). Consequently, the Company is exposed to risks that the exchange rate of its currency relative to other currencies may change in a manner that has an adverse affect on the value of that portion of the Company’s assets or liabilities denominated in currencies other than the Australian dollars.

The Company is exposed to the currency risk on financial instruments, receivables and liabilities that are denominated in a currency other than the respective functional currency of the Company. The currency in which these transactions are denominated is primarily United States Dollars (USD).

The Company’s policy permits the use of forward foreign exchange contracts, currency options and currency futures as hedging instruments. The Board of Directors exercise their discretion to act in the best interest of shareholders as to the extent of hedging carried out to manage the Company’s foreign currency exposure, whilst also taking into consideration the Company’s current and future liquidity requirements.

During the year, the Board exercised their discretion and took some forward exchange positions. However, at the end of the year the USD portion of the portfolio was unhedged based on an assessment of the cost of hedging, liquidity constraints of the portfolio and the exchange rate relative to long term averages. The Board continues to monitor the effects of being unhedged on the portfolio whilst continuing to assess a number of hedging options.

The Company’s total net exposure to the fluctuations in foreign currency exchange rates at the balance sheet date was as follows:

Exposure to currency risk 2010 AUD

Denominated assets/

(liabilities) $

2010 USD Denominated

assets/ (liabilities)

$

2009 AUD Denominated


$

2009 USD Denominated


$

Cash and cash equivalents 11,587,074 12,151,550 15,754,559 -

Financial assets designated at fair value through profit or loss

Leverage instruments 2,640,999 - 1,921,176 63,662,646

Unlisted Investments - 62,399,587 - -

Other receivables 91,201 2,244,266 270,220 -

Other payables (1,077,103) - (1,764,481) -

Gross balance sheet exposure 13,242,171 76,795,403 16,181,474 63,662,646

Forward foreign exchange contracts - - - -

Net exposure 13,242,171 76,795,403 16,181,474 63,662,646

*Amounts above are presented in Australian dollars.

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Sensitivity analysisThe AUD:USD exchange rate as at 30 June 2010 was 0.84465 (2009: 0.80845).A 10 percent strengthening of the Australian Dollar against the United States of America Dollar at 30 June would have decreased the profit by $7,679,540 (2009: $5,787,513). A 10 percent depreciation of the Australian Dollar against the United States of America Dollar would have increased the profit by $6,981,400 (2009: $7,073,627). This analysis assumes that all other variables, in particular interest rates, remain constant.

Interest rate riskThe Company is subject to interest rate risk through its holding in cash and leverage instruments.The cash assets held by the Company are exposed to a variable interest rate equal to the RBA interbank overnight cash rate. The RBA interbank overnight cash rate as at 30 June 2010 was 4.50% per annum (2009: 3.00% per annum).

The leverage instruments held by the Company give enhanced exposure to an underlying investment by providing up to three times leverage on the face value of the leverage instrument. The cost of the leverage embedded in the instruments is determined on the last business day of each month and is calculated at the rate of the market quoted 1 month LIBOR (London Inter-Bank Offer Rate) plus a margin of 1.25%. 1 month LIBOR as at 30 June 2010 was 0.35% per annum (2009: 0.31% per annum).

Interest rate sensitivity – cash holdingsAn increase of 100 basis points in the RBA interbank overnight cash interest rate as at the reporting date would have increased the profit from operating activities for the year by $100,871 (2009: $157,546); an equal change in the opposite direction would have decreased the profit from operating activities by an equal but opposite amount.

Interest rate sensitivity – leverage instrumentsAn increase of 100 basis points in interest rates as at the reporting date would have decreased the profit from operating activities by $14,134 (2009: $137,387). A decrease of 35 basis points taking LIBOR to a rate of 0.0% would have increased the profit from operating activities by $4,947 (2009: decrease of 31 basis points would have decreased the loss from operating activities by $42,590).

Other market price riskOther market price risk is the risk that value of instrument will fluctuate as a result of changes in market prices (other than those arising from interest rate risk or currency risk), whether caused by factors specific to an individual investment, its issuer or all factors affecting all instruments traded in the market.

As the majority of the Company’s financial instruments are carried at fair value with fair value changes recognised in the income statement, all changes in the market conditions will directly affect net investment income.

Price risk is mitigated by the Company investing in instruments that provide exposure to a diversified portfolio of alternative investments. The Company’s overall market position is monitored on a monthly basis by the Board of Directors.

Sensitivity analysis – other market price riskA 10 percent increase in the value of financial instruments at the reporting date would have increased the profit from operating activities by $6,504,059 (2009: 6,558,382); an equal change in the opposite direction would have decreased the profit from operating activities by an equal but opposite amount.

Credit riskCredit risk is the risk that a counterparty to a financial instrument will fail to discharge an obligation or commitment that it has entered into with the Company. The Directors monitor exposure to credit risk on an ongoing basis.

At 30 June 2010, the following financial assets were exposed to credit risk: leverage instruments, unlisted investments, and receivables. Total carrying amount of financial assets exposed to credit risk amounted to $2,640,999 (2009: $81,608,602).

Credit risk arising on leverage instruments is mitigated by investing in instruments issued by rated counterparties who are major investment banks with current credit ratings of À+´ or better as determined by Standard and Poor’s and Fitch, and Àa1´ or better as determined by Moody’s.

Credit risk arising on forward foreign exchange contacts and options are mitigated by dealing with counterparties that are major Australian banks and which are À´ rated by credit rating agency Standard and Poors, À+´ rated by credit rating agency Fitch and À1´ rated by credit rating agency Moody’s.

The carrying amounts of the financial assets best represent the maximum credit risk exposure at the balance sheet date.

Substantially all of the cash held by the Company is held with National Australia Bank Limited. Bankruptcy or insolvency by National Australia Bank may cause the Company’s rights with respect to the cash held by National Australia Bank Limited to be delayed or limited. The Directors monitor the credit rating and financial position of National Australia Bank on an on-going basis. If the credit quality or the financial position of National Australia Bank deteriorates significantly the Company will move the cash holdings to another bank.

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Liquidity riskLiquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient cash reserves to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company’s reputation.

The Company’s financial instruments include an investment in a leverage instrument and unlisted ``side pocket´´ investments. In normal market conditions these investments would have liquidity terms which allow the Company to redeem the instruments with 90 days notice. However deteriorating market conditions and the Company’s ongoing asset realisation program have

impeded the liquidity of these instruments. Although a substantial amount of proceeds have been received from these investments during the year, a significant amount of the proceeds of the remaining investments are unlikely to be received before July 2011.

Where the company has open derivative positions, the Company is required to maintain sufficient cash reserves to meet margin calls on derivatives, where there may be volatility in the market.

The Company’s liquidity risk is managed on a daily basis by monitoring current cash balances and projecting future cash flow requirements on an ongoing basis. Where the Company considers that additional cash reserves may be required, the Company will partially redeem a portion of its holdings in leverage instruments. From time to time, the Company may also establish cash advance facilities, to assist in managing short term liquidity constraints.

The following are the contractual maturities of financial liabilities:

2010Contractual

amountContractual

cash flows6 months

or less


Financial liabilities designated at fair value through profit or loss - - -

Other payables 1,077,103 (1,077,103) (1,077,103)

1,077,103 (1,077,103) (1,077,103)

2009Contractual

amountContractual

cash flows6 months

or less


Financial liabilities designated at fair value through profit or loss - - -

Other payables 1,764,481 (1,764,481) (1,764,481)

1,764,481 (1,764,481) (1,764,481)

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The following table presents the financial instruments by caption and by level within the valuation hierarchy as at 30 June 2010:

2010 Level 1 Level 2 Level 3 Total

Financial assets designated at fair value through profit or loss - 35,517,670 29,522,916 65,040,586

35,517,670 29,522,916 65,040,586



Estimation of fair valuesThe major methods and assumptions used in estimating the fair values of financial instruments are disclosed in note 3(b)(iv) of the significant accounting policies section.

As at 30 June 2010, the carrying amounts of all the leverage instrument and unlisted investments were determined using valuation techniques specific to the contractual terms of the instruments.

Fair value hierarchyThe Company receives monthly net asset values from the underlying investment managers or their administrators and generally relies on such information in recording valuation of its investments and the Net Tangible Asset backing of its shares. The Company is entitled to adopt an alternative method of valuation in relation to any particular asset or liability if the Board of Directors determines that the alternative method of valuation provides a more accurate fair valuation to the Company. There are inherent limitations in any estimation technique and the amounts realised in a subsequent sale may differ from the amounts recorded and such difference may be material.

AASB 7 ``Financial Instruments: Disclosures´´ establishes a fair value hierarchy that prioritises the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).

The three Levels of the fair value hierarchy under AASB 7 are as follows:

(a) Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities

(b) Level 2 - 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)

(c) Level 3 - inputs for the asset or liability that arenot based on observable market data (unobservable inputs).

Inputs are used in applying the various valuation techniques and broadly refer to the assumptions that market participants use to make valuation decisions, including assumptions about risk. Inputs may include price information, volatility statistics, specific and broad credit data, liquidity statistics, counterparty credit risk, and other factors. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. However, the determination of what constitutes ``observable´´ requires significant judgment by the Directors, in consultation with the investment managers. The Directors, in consultation with the investment managers consider observable data to be that market data which is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market. The categorisation of a financial instrument within the hierarchy is based upon the pricing transparency of the instrument and does not necessarily correspond to the investment manager’s perceived risk of that instrument.

The movements in financial instruments classified within Level 3 during the year were as follows:

2010 $

Balance, beginning of period 65,583,823

Purchases 25,900,008

Sales (63,759,849)

Unrealised gains recognised in comprehensive income 1,798,934

Balance, end of period 29,522,916

Realised gains recognised in comprehensive income 11,058,072

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Investment ActivitiesStrategic asset realisation program – Lighthouse Investment Partners’ managed investmentsDuring the year the Company continued to implement it’s strategic asset realisation program by redeeming all of its leveraged instruments.

As these leveraged instruments have been liquidated, all leverage in the underlying instruments issued by UBS and JP Morgan has been repaid, with only a small amount of leverage remaining on the instrument issued by Natixis. Following the repayment of the leverage, the Company commenced receiving redemption proceeds in April 2010.

Lighthouse Investment Partners provide regular updates to the Company in relation to the forecast realisation timetable. Based upon the most recent estimates, the Company expects to receive redemption proceeds relating to approximately 16% of the remaining portfolio by June 2011, with the balance to be received after that.

GAM managed investmentsOn 25 June 2010, the Company announced it had appointed GAM International Management Limited (GAM) to advise it on managing and administering a customised portfolio of new international hedge fund investments.

GAM is a specialist global asset manager, which delivers active discretionary and advisory investment management services of long equity, alternative and fixed income investments. It manages or advises approximately US$50 billion of investment assets. GAM is part of GAM Holding Limited (GAMH), a Swiss parent company whose shares are listed on the SIX Swiss Exchange. GAMH has a market capitalisation of approximately US$2.3 billion.

The arrangement with GAM is a non-exclusive appointment and will be solely focussed on those funds allocated by the Company to the GAM portfolio. The arrangement is cost effective and can be terminated by either party.

Capital ManagementOn-market share buy-backConsistent with the Board’s ongoing focus on capital management, an on-market share buy-back was initiated on 13 October 2009 (commenced on 29 October 2009) of up to 10% of the Company’s shares on issue. As at 30 June 2010 a total of 4,086,731 shares have been bought back and cancelled, at a total acquisition cost of $1,227,945 and representing 2.16% of the Company shares on issue as at the commencement of the buy-back.

Reinstatement of the Dividend Reinvestment PlanThe Company’s Dividend Reinvestment Plan has been reactivated and shareholders will be able to participate in relation to the dividend due to be paid on 4 October, 2010.

17. RELATED PARTY TRANSACTIONS

(a) DirectorsThe names of persons who were Directors of the Company at any time during the financial year are as follows: Bruce McComish, John Morrison, Paul Manka, Julie Raffe, D.W (Bill) O’Neill (appointed 16 October 2009) and Robert White (resigned 4 September 2009).

The Company does not have any employees.

(b) Key management personnel compensationThe key management personnel compensation is as follows:

2010 $

2009 $

Short-term employee benefits 192,558 195,546

Post-employment benefits 17,330 17,598

209,888 213,144

Individual Director’s compensation and disclosuresInformation regarding individual Director’s compensation as permitted by Corporations Regulation 2M.3.03 is provided in the remuneration report section of the Directors’ report.

Apart from the details disclosed in this note, no Director has entered into a material contract with the Company since the end of the previous financial year and there were no material contracts involving Directors’ interests existing at year-end.

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17. RELATED PARTY TRANSACTIONS (CONTINUED)

(c) Directors interest in shares and optionsFrom time to time Directors of the Company, or their Director-related entities, may purchase or sell the Company’s securities through the Australian Stock Exchange in accordance with the Company’s trading policy.

DirectorsShares held at

1 July 2009 Purchases SalesChange in indirect

holdingsShares held at 30 June 2010

B McComish(1) - - - - -

J Morrison(2) 10,001 - - 800,000 810,001

P Manka - - - 200,000 200,000

J Raffe - - - 30,000 30,000

B O’Neill(3) - - - - -

DirectorsShares held at

1 July 2008 Purchases Sales Change in indirect holdings

Shares held at 30 June 2009

B McComish - - - - -

J Morrison 10,001 - - - 10,001

P Manka - - - - -

J Raffe - - - - -

J Pain(4) 20,945,843 - - (20,945,843) -

R White(5) 20,903,505 - - - 20,903,505

(1) Mr Bruce McComish was appointed as Director on 20 September 2005 and resigned as chairperson on 7 September 2009. (2) Mr John Morrison was appointed as Director on 28 July 2004 and appointed chairperson on 7 September 2009. (3) Mr Bill O’Neill was appointed as Director on 16 October 2009. (4) Mr Jonathan Pain resigned as Director on 29 January 2009. (5) Mr Robert White resigned as Director on 4 September 2009.

(d) Loans from key management personnel and their related partiesDuring the year ended 30 June 2010, the company did not enter into loans from key management personnel or their related parties.

(e) Other transactions with key management personnel or entities related to themManager - HFA Asset Management LimitedInvestment management and administration services were provided by HFA Asset Management Limited in accordance with the Management Agreement dated 20 September 2005 until their termination on 19 February 2010. Fees paid to the former Manager for the period are detailed below:

2010 $

2009 $

Management Fees 816,909 6,213,398

Common Directors with the Investment ManagerRobert White was a Director of the Company up until the date of his resignation on 4 September 2009 and was a Director of the former Manager of the Company, HFA Asset Management Limited.

As a Director of the Company, he did not receive any Director’s fees or remuneration from the Company, however he may have received remuneration from HFA Asset Management Limited or its related entities.

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18. REMUNERATION OF AUDITORSDuring the year the following fees were paid or payable for services provided by the auditor, its related practices and non-related audit firms:

2010 $

2009 $

Audit services:

Auditors of the Company:

Audit and review of financial reports (KPMG Australia) excluding GST 52,700 46,800

52,700 46,800

Services other than statutory audit:

Other services

Taxation services (KPMG Australia) excluding GST 30,300 156,257

30,300 156,257

19. EVENTS OCCURRING AFTER THE REPORTING PERIODOther than the ongoing strategic asset realisation program and the cancellation of the proposed off-market buy-back, there has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of material and unusual nature likely, in the opinion of the Directors of the Company, to affect significantly the operations of the Company, the results of those operations, or the state of affairs of the Company, in future financial years.

20. CONTINGENT ASSETS AND LIABILITIESThere are no outstanding contingent assets or liabilities as at 30 June 2010.

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Directors’ Declaration30 June 2010

In the Directors’ opinion: (a) the financial statements and notes set out on pages 16 to 37 are in accordance with the Corporations Act 2001, including:

i. complying with Australian Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; and

ii. giving a true and fair view of the Company’s financial position as at 30 June 2010 and of its performance, as represented by the results of its operations, changes in equity and its cashflows, for the reporting period ended on that date;

(b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable; and

(c) The financial statements comply with International Financial Reporting Standards.

While the Company does not have any employees, the Directors have been given the declarations required by section 295A of the Corporations Act 2001 by the relevant service providers who collectively perform the functions of Chief Executive Officer and Chief Financial Officer as they relate to the Company.

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

John Morrison Chairman


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Report on the financial Report

We have audited the accompanying financial report of Signature Capital Investments Limited (the Company), which comprises the statement of financial position as at 30 June 2010, and the statement of comprehensive income, statement of changes in equity and statement of cash flows for the year ended on that date, a summary of significant accounting policies and other explanatory notes 1 to 20 and the Directors’ declaration.

Directors’ responsibility for the financial report

The Directors of the company are responsible for the preparation and fair presentation of the financial report in accordance with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Act 2001. This responsibility includes establishing and maintaining internal control relevant to the preparation and fair presentation of the financial report that is free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

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. These Auditing Standards require that we 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 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 entity’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 entity’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 performed the procedures to assess whether in all material respects the financial report presents fairly, in accordance with the Corporations Act 2001 and Australian Accounting Standards (including the Australian Accounting Interpretations), a view which is consistent with our understanding of the Company’s financial position and of its performance.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Independence

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

Auditor’s opinion

In our opinion:

(a) the financial report of Signature Capital Investments Limited is in accordance with the Corporations Act 2001, including:(i) giving a true and fair view of the Company’s financial position as at 30 June 2010 and of its performance for the year ended

on that date; and(ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations

Regulations 2001.(b) the financial report also complies with International Financial Reporting Standards as disclosed in note 2(a).Report on the remuneration report

We have audited the Remuneration Report included on page 12 and 13 of the Directors’ report for the year ended 30 June 2010. 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 2001. Our responsibility is to express an opinion on the remuneration report, based on our audit conducted in accordance with auditing standards.

Auditor’s opinion

In our opinion, the remuneration report of Signature Capital Investments Limited for the year ended 30 June 2010, complies with Section 300A of the Corporations Act 2001.

Michelle Somerville KPMG Partner

Melbourne20 August 2010

Audit ReportFor the year ended 30 June 2010

Independent auditor’s report to the Members of Signature Capital Investments Limited

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The Board of the Company is committed to maintaining high standards of ethical behaviour and having an effective system of corporate governance, which is commensurate with the size of the Company and the nature of its business operations and investment activities.

Set out below is a summary of the ASX Corporate Governance Council’s eight principles of corporate governance (ASX Governance Principles) and how the board has applied each principle and the underlying recommendations.

1. LAYING SOLID FOUNDATIONS FOR MANAGEMENT AND OVERSIGHT1.1 Role of the boardThe board’s primary role is the creation and protection of long-term shareholder value.

The roles and responsibilities of the board are formalised in the Board Charter which is available on the company’s website: www.signaturecapitalinvestments.com.au

In summary, the board’s responsibilities include:

• Strategy - formulating the strategic objectives of the company and establishing goals designed to promote the achievement of those strategic objectives;

• Financial performance - monitoring investment performance, and overall financial performance;

• Financial reporting - considering and approving the half-yearly and annual financial statements;

• Investment manager selection - selection and evaluation of investment managers;

• Portfolio management - monitoring the performance of the investment portfolio and investment managers against the goals and objectives established by the board, including regularly assessing operational and financial risks in respect of the investments;

• Risk management - ensuring that the business risks facing the Company are, wherever possible, identified and that appropriate monitoring and reporting controls are in place to manage these risks;

• Audit - determining the remuneration and terms of appointment of the external auditor, and evaluating their performance and ongoing independence;

• Board performance and composition - evaluation on the performance of the Board and determining its size and composition;

• Succession and remuneration planning - planning for board, and manager succession, and setting director remuneration within shareholder approved limits; and

• Continuous disclosure - ensuring that the market and shareholders are continuously informed of material information

1.2 Delegation to Board CommitteesWhile at all times the board retains full responsibility for guiding and monitoring the company, in discharging its responsibilities it has established the following committees to assist the board. These specialist committees are able to focus on a particular area of responsibility, and then report and provide recommendations to the board.

The board has established the following committees:

• Investment Committee;

• Audit and Risk Committee; and

• Nomination and Remuneration Committee.

Investment Committee Membership of the committee is currently comprised of each of the Directors with the exception of Julie Raffe, together with the external member and advisor Ray King.

The directors’ qualifications are detailed in the Directors’ Report. Ray King’s qualifications include over 20 years of industry wide experience. He is the founder and managing director of Sovereign Investment Research, a boutique investment research and advisory firm specialising in alternative assets and hedge funds.

The role of the committee is to oversee the Company’s investment activities in line with the Investment Policy. Policy issues include, but are not limited to, investment objectives, investment risk tolerance and management, liquidity, asset allocation, currency management, investment manager selection, and investment performance benchmarks. Any changes to the Investment Policy are to be recommended by the committee to the board for resolution.

The Committee Charter is determined by the full board and is reviewed at least annually.

Audit and Risk Committee The composition, role and work of the Audit and Risk Committee is outlined in paragraph 4.1.

Corporate Governance Statement

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Nomination and Remuneration Committee Membership of the committee is currently comprised of John Morrison (Chair), Bruce McComish and Paul Manka.

The role of the Nomination and Remuneration Committee is to make recommendations to the Board in relation to:

• the company’s overall remuneration strategy and ensuring that the remuneration policies are consistent with the company’s strategic objectives;

• review Board succession plans;

• the development of a process for evaluation of the performance of the board, its committees and directors;

• any corporate governance issues as requested by the Board from time to time;

• Details of director remuneration are set out in the Remuneration Report.

Minutes of all committee meetings are tabled at the subsequent board meeting. All matters determined by committees are submitted to the full board as recommendations for the decision of the board.

The details of each director’s attendance at board and committee meetings are detailed in the Director’s Report.

1.3 Other delegationsThe board has appointed The Myer Family Company to provide services on a non-exclusive basis in relation to the operation and administration of the Company in accordance with a services agreement. The services agreement outlines the role and responsibilities of The Myer Family Company in relation to a comprehensive range of financial and administration functions on behalf of the company.

The board has also appointed an external custodian who ensures safe-keeping of assets held by the company.

The Company Secretary is appointed pursuant to a services agreement, and is responsible for monitoring the company’s compliance with statutory and internal governance requirements, in addition to supporting the board in fulfilling its overall responsibilities.

The board considers that the company complies with Principle 1 and its recommendations.

2. STRUCTURING THE BOARD TO ADD VALUE2.1 Composition of the boardThe board is comprised of an Independent Chairman (John Morrison), and four other independent directors.

Director Role AppointedRetiring at 2010 AGM

Seeking re-election at 2010 AGM

John Morrison Independent Chairman 28/07/04 Yes Yes

Bruce McComish Independent Non-Executive Director 20/09/05 No -

Paul Manka Independent Non-Executive Director 20/09/05 Yes Yes

Julie Raffe Independent Non-Executive Director 24/07/07 No -

D. W. (Bill) O’Neill Independent Non-Executive Director 16/10/09 No -

Details of the skills, experience and expertise of each director are set out in the Director’s report.

Corporate Governance Statement (continued)

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The composition of the board is determined using the following principles:

• a minimum of four (4) directors, with an appropriate mix of skills to provide the necessary breadth and depth of knowledge and experience to meet the board’s responsibilities;

• a majority of non-executive directors;

• enough directors to serve on various committees without overburdening the directors or making it difficult for them to fully discharge their responsibilities; and

• The company’s constitution provides that each non-executive director must seek re-election by shareholders at least every three (3) years if they wish to remain a director. Any new non-executive director appointed by the board must seek election by shareholders at the next Annual General meeting of the company. This approach is consistent with the ASX Listing Rules.

The board currently determines a schedule of meetings at the beginning of each year. Additional meetings are held as required to address specific issues.

The agenda for meetings is prepared in conjunction with the chairperson and company secretary. Standing items include the financial reports, strategic matters, governance and compliance. Submissions are circulated in advance. Executives of The Myer Family Company and other external members of board committees who regularly report to the board and are involved in board discussions.

2.2 Director IndependenceAn independent director is a director who is a non-executive director, is free of any business or other relationships that could materially interfere with, or could reasonably be perceived to materially interfere with, the exercise of their unfettered and independent judgment, and who:

is not a substantial shareholder of the Company or an officer of, or otherwise associated directly with, a substantial shareholder of the Company (for this purpose a “substantial shareholder” is a person with a substantial holding as defined in section 9 of the Corporations Act);

is not employed, or has not previously been employed in an executive capacity by the Company or another group member, and there has not been a period of at least three years between ceasing such employment and serving on the Board;

has not, within the last three years, been a principal of a material professional adviser or a material consultant to the Company or another group member, or an employee materially associated with the service provided;

is not a material supplier or customer of the Company or other group member, or an officer of or otherwise associated directly or indirectly with a material supplier or customer; and

has no material contractual relationship with the Company or other group member other than as a director of the Company.

Any director who considers he/she has or may have a conflict of interest or a material personal interest in any matter concerning the company is required to give the board immediate notice of such interest.

All of the directors of the board meet the criteria set out above for independence.

To assist directors to fully meet their responsibilities to bring an independent view on matters before then, each director has the right of access to all relevant company information and, subject to prior consultation with the Chairperson, may seek independent professional advice from a suitably qualified adviser at the Company’s expense. A copy of the advice received by the director is made available to all other members of the board.

2.3 Terms of AppointmentNew directors receive, and are required to sign, a formal letter of appointment setting out the responsibilities, rights and key terms and conditions of their employment.

2.4 Company SecretaryThe appointment and removal of a company secretary is a matter for decision by the Board. The company secretary is responsible for ensuring that the Board procedures are complied with and that corporate governance matters are addressed. The company secretary is accountable to the board, through the Chairman, on all governance matters.

The board believes the company is complies with Principle 2 and its recommendations.


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3. PROMOTION OF ETHICAL AND RESPONSIBLE DECISION MAKINGThe directors are expected to act with the utmost integrity and objectivity, striving at all times to enhance the reputation and performance of the company.

The company has approved and published various corporate policies including a Code of Conduct and Dealing in the Company’s Securities which apply to the company’s officers, and those working on the company’s behalf. These policies are reviewed annually and are available via the company’s website: www.signaturecapitalinvestments.com.au.

3.1 Conflict of interestAll Directors are required to disclose to the Company and must keep the board advised, on an ongoing basis, of any interest that could potentially conflict with those of the Company. The board has developed procedures to assist directors to disclose potential conflicts of interest.

Where the board believes that a significant conflict exists for a director on a board matter, the director concerned does not receive the relevant Board papers and is not present at the meeting whilst the item is considered.

3.2 Code of conductThe board has adopted a Code of Conduct, which sets out parameters for ethical behaviour and business practices. The policy applies to each director, officer, employee, consultant and advisor (‘representative’). Compliance by external parties is required by the terms of the appointment or service agreements.

The company recognises the need for representatives to observe the highest standards of behaviour and ethics when engaging in corporate activity, including compliance with all Company policies, procedures and contracts, and to be honest and fair in dealings on behalf of the company. In addition, any party engaged to fulfil operational or management functions on behalf of the company is contractually obliged to also comply with the Code of Conduct and other corporate policies.

The Code of Conduct sets out the duties and standards expected in relation to the following:

• aligning behaviour with the Code of Conduct by maintaining appropriate core values and objectives as they apply to enhancing shareholder value of the company;

• responsibilities to the individual, such as privacy, and use of privileged or confidential information;

• conflicts of interest;

• corporate opportunities such as preventing directors and key executives from taking advantage of property, information or position for personal gain;

• confidentiality of corporate information;

• fair dealing; and

• reporting of unethical behaviour and breaches of the Code of Conduct.

The Code of Conduct is reviewed at least annually and updated where necessary to ensure it reflects the highest standards of behaviour and professionalism, and the practices necessary to maintain confidence in the Company’s integrity.

3.3 Trading in company securitiesThe company’s Policy for Dealing in the Company’s Securities applies to all directors, officers, and those who engage in certain services on behalf of the company. The policy requires any director, officer or other applicable person (‘relevant person’) who trades, or proposes to trade, to act in accordance with strict guidelines which prohibit trading in the company’s securities in fixed blackout periods preceding the release of the half-year and full year results to the ASX. The Dealing in Securities policy is available on the company’s website: www.signaturecapitalinvestments.com.au.

The policy was implemented to:

• ensure that relevant persons adhere to high ethical and legal standards in relation to their personal investment in company securities;

• Ensure that the personal investments of relevant persons do not conflict with the interests of the company and those other holders of company securities; and

• Preserve market confidence in the integrity of dealing in company securities

Notwithstanding this policy, there is no period during which an individual is exempt from the requirements of the Corporations Act in regard to insider trading prohibitions.

The directors confirm that the company has complied with the policy during the 2010 reporting period.

The board believes the company complies with Principle 3 and its recommendations.


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4. SAFEGUARDING INTEGRITY IN FINANCIAL REPORTINGThe company is committed to providing shareholders with clear, transparent, and high-quality financial information in a timely manner. The company’s Continuous Disclosure Policy underpins this approach.

4.1 Audit and Risk CommitteeThe Board, through the Audit and Risk Committee which was established on 15 September 2005 is responsible for ensuring there are adequate policies in relation to risk management, compliance and internal control systems. The Committee have a documented Charter approved by the board which is available via the company’s website: www.signaturecapitalinvestments.com.au.

The committee comprises three members, all of whom are independent directors: Julie Raffe (Chair), Paul Manka and Bill O’Neill. Details of their qualifications and number of meetings attended are set out in the Directors Report.

All members of the committee have the requisite financial experience and understanding to effectively discharge the committee’s responsibilities under its charter.

The Chair is an independent non-executive director, who is not the chair of the board, and is a fellow of the Institute of Chartered Accountants in England and Wales and member of Financial Services Institute of Australasia (FINSIA).

The committee processes are designed to establish a proactive framework and dialogue between committee members, management and external auditors review and assess the financial reporting and risk framework.

The frequency of meetings and the attendance record of committee members is disclosed in the Directors Report.

The role of the Committee is to assist the board in discharging its oversight responsibilities in relation to audit and risk matters. The Committee reports to the board after each committee meeting. Responsibilities include:

Audit and Financial Reporting The Audit and Risk Committee is responsible for:

• overseeing the financial reporting process to ensure the balance, transparency and integrity of published financial reports;

• reviewing the independent audit process (including recommendations regarding the appointment

and assessment of the performance of the external auditor);

• setting the Company policy on the provision of non-audit services and ensuring compliance with that policy;

• providing advice to the board as to whether the committee is satisfied that the provision of non-audit services is compatible with the general standard of independence, and an explanation of why those non-audit services do comply;

• ensuring there is no compromise to audit independence, in order for the board to be in a position to make the statements required by the Corporations Act to be included in the Company’s Annual Report; and

• providing recommendations as to the propriety of related party transactions.

The Audit and Risk Committee reviews the performance of the external auditors on an annual basis and normally meets with them during the year to:

• discuss the audit plans, identifying any significant changes in structure, operations, internal controls or accounting policies likely to impact the financial statements and to review the fees proposed for the audit work to be performed;

• review the half-year and preliminary final report prior to lodgement with the ASX, and any significant adjustments required as a result of the auditor’s findings, and to recommend board approval of these documents, prior to announcement of results;

• review the draft annual and half-year financial reports, and recommend board approval of the financial report; and

• review the results and findings of the auditor, the adequacy of accounting and financial controls, and to monitor the implementation of any recommendations made.

Policies relating to rotating external audit engagement partners are set by the external audit firm in accordance with Corporations Act and international best practice requirements. It is the policy of the external auditors to provide an annual declaration of their independence to the Audit Committee.

The company’s policy is to appoint external auditors who clearly demonstrate quality and independence. The performance of the external auditor is reviewed annually and applications for tender of external audit services are requested as deemed appropriate,


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taking into consideration assessment of performance, existing value and tender costs.

Risk Management and Internal Controls The Audit and Risk Committee’s function in relation to risk management are:

• reviewing the effectiveness of the internal control and risk management framework and assessing its effectiveness at identifying, managing and monitoring key risks and making recommendations to the board regarding the same;

• monitoring the independence of directors; and

• overseeing the process by which those providing signoff to the board, that the financial statements comply with relevant accounting standards and are true and fair; and that the Company’s internal compliance and control systems have been functioning efficiently and effectively throughout the year. Compliance The Audit and Risk Committee’s functions in relation to compliance are:

• reviewing the Company’s process for monitoring compliance with laws and regulations affecting financial reporting; and

• considering and reporting to the board any such other matters as the board may refer to the committee from time to time.


5. TIMELY AND BALANCED DISCLOSUREThe Company has a written Continuous Disclosure Policy and other procedures designed to ensure compliance with ASX Listing Rules and Corporations Act disclosure requirements and to ensure accountability for compliance. The policy focuses on ensuring the market is kept advised of all information which it is believed may or would have a material effect on the price or value of the company’s securities.

The policy is available on the company’s website, and is reviewed annually to ensure it continues to meet best practice developments in the area.


6. RESPECTING THE RIGHTS OFSHAREHOLDERSThe company is committed to keeping shareholders fully informed of significant developments and activities of the company. This commitment is delivered through the company’s website and specifically the “Investor Information” section, which provides comprehensive financial, share price and other shareholder information, together with email alerts to ASX announcements when made.

The board also encourages full participation of shareholders at the Annual General Meeting, to ensure a high level of accountability and enabling shareholders to meet with the board and ask questions in relation to any aspect of the company’s activities. Important issues are presented to the shareholders as single resolutions.

The board requests the external auditor to attend each Annual General Meeting of the company and to be available to answer shareholder questions about the conduct of the audit, the preparation and content of the auditor’s report, the accounting policies adopted by the company and auditor independence.


7. RECOGNISING AND BALANCING RISK7.1 Oversight of the risk management systemThe board oversees the establishment, implementation, and review of the risk management system for the company.

The board is assisted in its risk management activities by the Audit and Risk Committee and the Investment Committee, which each operate within Charters specifying key risk areas for consideration and monitoring by those committees.

7.2 Investment RiskMajor risks arise from such matters as product investment performance, liquidity risk, interest rate and exchange rate movements, counterparty risk, systems risk, and government policy changes. The Investment Committee is primarily responsible for dealing with issues arising from investment risk, with some matters specifically reserved for the full board.

The Investment Committee comprises directors and external investment consultants, and also engages experts to provide advice in relation to risk identification and mitigation with recommendations to the committee and board.


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7.3 Operational Risk

The Audit and Risk Committee are primarily responsible for recognising and managing operational risks, however the company has appointed The Myer Family Company to undertake financial and administration functions. Therefore, risks associated with these activities are managed in accordance with The Myer Family Company’s own policies and procedures.

The board have also appointed an external custodian to ensure assets owned by the Company are held in safe-custody, and such functions are undertaken by the custodian in accordance with their own policies and procedures which are assessed and independently audited at half-year and full year to test compliance with those policies.

7.4 AssuranceThe board has received from those who collectively fulfil the functions of chief executive officer and chief financial officer written affirmations that, to the best of their knowledge and belief, the integrity of the financial statements is founded on a sound system of risk management and internal compliance and control which implements the policies adopted by the board; and to the extent, in which they relate to financial reporting, that the company’s risk management and compliance and internal control systems are operating effectively in all material respects.


8. REMUNERATING FAIRLY AND RESPONSIBLY

The company’s Nomination and Remuneration Committee is comprised of three directors.

Whilst the company does not have any employees, the Nomination and Remunerations Committee oversees the appointment and induction process for directors and committee members, as well as officers and other key service providers to the company. The committee makes recommendations to the board on the appropriate skills mix, personal qualities, expertise and diversity of each position. When a vacancy exists or there is a need for particular skills, the committee in consultation with the board determines the selection criteria based on the skills deemed necessary.

The committee identifies potential candidates with advice from an external consultant. The board then appoints the most suitable candidate. Board candidates must stand for election at the next general meeting of shareholders.

The Company’s Constitution provides that Directors (excluding executive Directors) may be paid such remuneration as is determined from time to time in general meeting. The remuneration may be divided among the non-executive Directors in such proportion as they agree. The Board Charter discloses the main corporate governance practices of the Board including a detailed definition of independence, a framework for the identification of candidates for apportionment to the Board, requirements regarding conflicts of interest, the role and responsibility of the Board, delegation to management and remuneration and nomination policies. Shareholders have approved remuneration of up to $250,000 in aggregate for non-executive Directors in any year. Insurance premiums are also paid by the Company in accordance with the law and the Company’s Constitution.

Full details of director’s remuneration are set out in the Remuneration Report which is contained within the Directors Report.



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Shareholder information (as at 4 October 2010) Distribution of shareholders

1 – 1,000 9,509

1,001 – 5,000 891,509

5,001 – 10,000 5,921,578

10,001 – 100,000 57,745,919

100,001 and over 122,020,609

186,589,124

As at 4 October 2010, the number of security holders holding less than a marketable parcel of 1,725 securities is 33 and they hold 16,425 securities.

Major ShareholdersThe twenty largest registered shareholders of the Company as at 4 October 2010 are noted below:

Securities held No.

Percentage of issued shares %

National Nominees Limited 34,752,302 18.63%

HSBC Custody Nominees (Australia) Limited – GSCO ECA 14,084,010 7.55%

HSBC Custody Nominees (Australia) Limited – A/C 3 10,774,885 5.77%

RBC Dexia Investor Services Australia Nominees Pty Limited <MLCI A/C> 8,441,460 4.52%

RBC Dexia Investor Services Australia Nominees Pty Limited <BKCUST A/C> 7,462,381 4.00%

JP Morgan Nominees Australia Limited 6,469,550 3.47%

Cogent Nominees Pty Limited 2,740,015 1.47%

Bond Street Custodians Limited <Van Eyk Blue Alt A/C> 1,910,855 1.02%

UBS Nominees Pty Ltd 1,900,320 1.02%

HSBC Custody Nominees (Australia) Limited 1,806,677 0.97%

Mr Warwick Sauer 1,606,587 0.86%

RBC Dexia Investor Services Australia Nominees Pty Limited <RBC DRP A/C> 1,484,247 0.80%

Merrill Lynch (Australia) Nominees Pty Limited 1,233,232 0.66%

Tree Pot Pty Ltd <Tree Pot A/C> 1,023,000 0.55%

BT Portfolio Services Limited <Dr Trevor Sauer App A/C> 1,000,000 0.54%

Asset Custodian Nominees (Aust) Pty Ltd 952,124 0.51%

Killin Investments Pty Ltd 944,508 0.51%

Mr Eric George Baker + Mrs Janine Marie Baker <Kameruka Super A/C> 929,333 0.50%

Cadex Petroleum Pty Limited 813,955 0.44%

Mr Eric George Baker + Mrs Janine Marie Baker <Eric and Jan Baker Super A/C> 690,800 0.37%

Top 20 Total 101,020,241 54.14%

Balance of Register 85,568,883 45.86%

Grand Total 186,589,124 100.00%

Additional Information

Substantial ShareholdersThe number of shares held by Substantial Shareholders and their Associates are set out below:

Dalton Investments LLC advised that, as at 27 July 2010, it and its associates has a relevant interest in 33,843,840 shares, representing 18.27% of shares on issue.

Weiss Asset Management LP advised that, as at 22 July 2010, it and its associates has a relevant interest in 11,194,915 shares, representing 6.0% of shares on issue.

HFA Asset Management Ltd advised that, as at 30 June 2010, it and its associates has a relevant interest in 20,903,505 shares, representing 11.04% of shares on issue.

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Voting RightsAll ordinary shares carry equal voting rights.

Security subject to voluntary escrowThere are no securities subject to voluntary escrow.

On-market buy-backThe Company is currently undertaking an on-market buy-back under the ASX 10/12 rule. A total of 5,588,973 shares were purchased up to 4 October 2010 for consideration of $1,775,860.81. The share buy-back expires 27 October 2010.

List of Investments (as at 30 June 2010)As at the Company’s balance date of 30 June 2010, the Company held the following investments:

InvestmentUSD Investments

US$ millionTotal Investments

A$ million 1

Percentage of Total Portfolio %

Investments via Lighthouse Partners

Natixis leveraged instrument2 - 2.64 2.90

Lighthouse Diversified Fund SLV SPC 17.15 20.30 22.31

Newco SLV Limited 5.56 6.58 7.23

Lighthouse Diversified Fund receivable 1.90 2.24 2.46

Investments via GAM

GAM Trading II (USD Open) 9.00 10.66 11.71

Pacific & General Investments Inc.* 3 3.00 3.55 3.90

The AlphaGen Tucana Fund * 3 3.00 3.55 3.90

Occam Global Emerging Markets UCITS III * 3 3.00 3.55 3.90

Amiya Global Emerging Opportunities Fund Ltd * 3 3.00 3.55 3.90

The Eureka (USD) Fund * 3 3.00 3.55 3.90

Gruss Global Investors (Enhanced) * 3 3.00 3.55 3.90

Proxima Capital Offshore Ltd * 3 3.00 3.55 3.90

Cash & Deposits

AUD denominated 11.59 12.74

USD denominated 10.26 12.15 13.35

Total 64.87 91.01 100.00

(1) USD exchange rate as at 30 June 2010 – 0.84465 (2) Provides exposure to Lighthouse Diversified Fund SLV SPC (3) These investments are held indirectly via GAM AmalGAMs SPC segregated portfolios

Brokerage PaidThe Company’s investment portfolio is comprised of unlisted securities. The Company did not pay any brokerage during the financial year ended 30 June 2010 in relation to its investment portfolio.

Additional Information (continued)

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Company ParticularsSignature Capital Investments LimitedACN 110 247 393

The Company is a Listed Investment Company with its securities listed only on the Australian Stock Exchange.

Registered OfficeLevel 18, 8 Exhibition StreetMelbourne VIC 3000Telephone (03) 8678 3025Fax (03) 8678 3000Email info@signaturecapitalinvestments.com.auwww.signaturecapitalinvestments.com.au

DirectorsJohn MorrisonBruce McComishPaul MankaJulie RaffeDouglas W (Bill) O’Neill

Company SecretaryLouise Edwards

AuditorKPMG Australia147 Collins StreetMelbourne VIC 3000

CustodianNational Australia Bank Limited500 Bourke StreetMelbourne Victoria 3000

Share RegistrarLink Market ServicesLevel 12, 680 George StreetSydney NSW 2000Telephone (02) 8280 7475

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for personal use only · 2010-10-25 · lhp portfolio of $31.8 million and the gam portfolio of...

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