wallace absolute return limited abn 58 100 854 788 for … · 2008-09-30 · wallace absolute...

Wallace Absolute Return Limited

ABN 58 100 854 788

Annual Financial Report

For The Year Ended 30 June 2008

Suite 3204 Level 32

Australia Square 264-278 George Street

Sydney NSW 2000

Tel (02) 9247 4361 Fax (02) 9247 9271

For

per

sona

l use

onl

y

Table of Contents Performance Summary 1 Chairman’s Letter 3 Corporate Governance Statement 4 Company Profile 10 Directors’ Report 11 Lead Auditor’s Independence Declaration 17 Financial Report Income Statement 18 Balance Sheet 19 Statement of Changes in Equity 20 Cash flow Statement 21 Notes to the Financial Statements 22 Directors’ Declaration 41 Independent Audit Report to the Members 42 Shareholder Information 44 Directory 45

For

per

sona

l use

onl

y

WALLACE ABSOLUTE RETURN LIMITED ABN 58 100 854 788

1

PERFORMANCE SUMMARY

� Loss after tax of $23.790 million for the financial year 30 June 2008 compared to a profit after tax of $3.446 million for the financial year 30 June 2007.

� Net assets decreased by 29.20% to $64.505 million which included deferred tax assets of

$10.672 million and deferred tax liabilities of $0.348 million.

� Posted a loss per share of 27.62 cents for the financial year 30 June 2008 compared to earnings per share of 7.27 cents for the financial year 30 June 2007.

� No dividends were declared or paid during the year. � Net Tangible Asset (NTA) backing per share as at 30 June 2008 fell to $0.76 (including

deferred tax asset of $0.13) and to $0.63 (excluding deferred tax asset) as at 30 June 2008 compared to $1.04 (including deferred tax asset of $0.03) as at 30 June 2007.

PERFORMANCE Wallace Absolute Return Limited (“the Company”) reports a loss after tax for the financial year ended 30 June 2008 of $23,790,279. The loss reflected the poor performance of equity investments in the Company’s investment portfolio. The major contributors to the negative performance and their returns for the financial year 30 June 2008 were stocks in the S&P ASX 300 Finance and Utilities Indices. These indices fell 35.4% and 31.7%, respectively for the financial year 30 June 2008 due to significant dislocation in global credit markets. During the reporting period the size of the Company’s investment portfolio was progressively reduced in response to the extreme volatility in investment markets. It is anticipated that continued elevated levels of volatility may present some attractive investment opportunities for the Company in the current financial year. The NTA backing per Share as at 30 June 2008 was $0.76 including deferred tax asset of $0.13 and to $0.63 excluding deferred tax asset. The deferred tax assets are included on the assumption that the Company will derive sufficient future assessable income to enable the amount of this benefit to be realised (refer Note 1A of the Financial Statements). The Company reports its NTA weekly to the Australian Securities Exchange (“ASX”) and on the website www.wallacefunds.com.au The Company paid no dividends during the year.

For

per

sona

l use

onl

y


2

Listed Portfolio Composition As at 30 June 2008

Health, 12%

Energy, 3%

Telecom, 2%

Property, 25%

Industrials, 3%

Utilities, 11%

Materials, 1%

IT, 0%

Consumer Discretionary, 0%

Consumer Staples, 2%

Financials ex Property, 41%

Largest 20 Australian Stock Exchange Listed Positions at 30 June 2008* Name Total Value $ Allco Equity Partners Limited 5,754,544 Babcock & Brown Communities Group 4,946,832 Primary Health Care Limited 2,939,674 Rio Tinto Limited 2,439,000 Prime Retirement and Aged Care Property Trust 2,268,747 Babcock & Brown Infrastructure Group 1,836,000 Babcock & Brown Power 960,000 St. George Bank Limited 920,059 Commonwealth Bank of Australia 818,142 Westpac Banking Corporation 719,960 Funtastic Limited 425,850 Mesoblast Limited 409,500 BHP Billiton Limited 262,000 Resmed, Inc. 246,840 Boart Longyear Limited 245,300 Woolworths Limited 244,500 Macquarie Bank Limited 243,200 Stockland 242,550 Macquarie Communications Infrastructure Group 240,950 General Property Trust 239,760 TOTAL $26,403,408 * Note that derivative positions may be held against some or all of these positions. Unlisted Investments and Fixed Interest Securities held at 30 June 2008 Name Total Value $ Lease Investments Pty Limited - Redeemable Preference Shares 10,000,000 Lease Company of Australia Limited – Secured Notes 7,930,865 Secured Finance Limited - Debentures 2,932,323 Technology Leasing Partnership - Residual Rights 5,245,000 HAL Data Services Pty Limited - Residual Rights 10,014,678 HAL Data Services Pty Limited - Shares 4,601,135 TOTAL $40,724,001 Note 20 of the Financial Report discloses what has occurred subsequent to 30 June 2008 regarding some of the unlisted investments and securities.

For

per

sona

l use

onl

y

WALLACE ABSOLUTE RETURN LIMITED ABN 58 100 854 788 CHAIRMAN’S LETTER

3

29 September 2008 Dear Shareholder I present you with the Annual Report for the year to 30 June 2008 of Wallace Absolute Return Limited (the “Company”). For the year to 30 June 2008, the Company recorded a loss after expenses and tax of $23.790m (2007: $3.446m profit). Earnings per share after tax were a loss of 27.62 cents for the year to 30 June 2008 (2007: profit of 7.27 cents). This was an extremely disappointing result for shareholders and as a consequence the Company has not been able to declare a dividend for the 2008 financial year. Wallace Funds Management Limited (Manager) has informed your board that the decrease in net assets was primarily due to the sharp fall in the utility and financial sector stocks in the Company’s investment portfolio. These sectors fell 35.4% and 31.7% respectively over the year to 30 June 2008 due to the credit crisis that impacted investment markets globally during that year. As a consequence of the substantial increase in investment market volatility the Company’s investment portfolio was substantially reduced by the Manager during the six months to 30 June 2008 with investments reducing from $131.596m as at 31 December 2007 to $66.406m as at 30 June 2008. Borrowings were also reduced substantially from $82.496m as at 31 December 2007 to $13.316m as at 30 June 2008. This reduction in the size of the investment portfolio has been achieved through the sale of listed investments in the Company’s investment portfolio. Consequently unlisted securities and fixed interest investments in the Company’s investment portfolio have increased in percentage terms. The Manager has agreed with your Board to endeavour to reduce the portfolio exposure to unlisted investments and securities over time while maximising shareholders returns. The Company’s board is very concerned about the poor share price performance of the Company’s shares and in particular the difference between the market price and the net tangible asset backing of its shares. In light of the current extraordinary investment market conditions the independent directors and the Manager will be reviewing the investment guidelines of the Company for the purpose of endeavouring to reduce future investment risk, achieve a return to profitability and resume the payment of dividends to shareholders. Yours sincerely

KENNETH BARRY Chairman F

or p

erso

nal u

se o

nly

WALLACE ABSOLUTE RETURN LIMITED ABN 58 100 854 788 CORPORATE GOVERNANCE STATEMENT

4

BOARD FUNCTIONS The functions of the Board include:

1. Charting the direction, strategies and financial objectives of Wallace Absolute Return Limited (“the Company”);

2. Overseeing and monitoring organisational performance against these strategies and

objectives;

3. Ensuring any significant risks facing the Company and its investments have been identified and appropriate control, monitoring and reporting mechanisms are in place;

4. Monitoring financial performance including approval of the annual and half-year financial

reports and liaising with the Company's auditors;

5. Enhancing the reputation of the Company;

6. Appointing and assessing the performance of the Managing Director and Wallace Funds Management Ltd’s (“the Manager”) investment portfolio; and

7. Communicating with and protecting the rights and interests of all shareholders and other

stakeholders. BOARD COMPOSITION The composition of the Board is subject to shareholder approval. All nominations for appointment to the Board are considered by the current Board. The Board comprises 2 independent directors: Kenneth Barry (Chairman) and Alan Liddle, and one executive director: Richard Wallace. The Chairman is responsible for leadership of the Board and for the efficient organisation and conduct of the Board’s function. The executive director’s role is to manage the affairs of the Company including its relationship with the Manager. The details of the directors’ experience, qualifications, special responsibilities and attendance at meetings are set out in the Directors’ Report. At each annual general meeting, one third of the Board (other than the Managing Director) must retire and, if those directors so choose, may offer themselves for re-election. The Board has in place formal processes for performance evaluation of the directors and key executives. POLICIES Board policies relevant to the composition and functions of Directors include:

� The Board must consist of a majority of independent Directors and the membership of the Audit Committee must consist solely of independent Directors.

� The Audit Committee must be chaired by an independent Director other than the Board

Chairman.

� The Board will generally meet monthly with an agenda designed to provide adequate information about the affairs of the Company, allow the Board to guide and monitor management and assist involvement in discussions and decisions on strategy.

� The Board has an agreed policy on the circumstances in which Directors are entitled to obtain

access to company documents and information.

For

per

sona

l use

onl

y


5

THE MANAGER The Board generally meets monthly and receives a summary financial report from the Manager incorporating the results from the investment activities. The Manager reports to the Board at Board meetings on the largest positions, largest gains and largest losses of the Company’s investment portfolio. The Manager keeps the Board informed of any enhancements of its process, and reports back to the Board with any information the directors may require from time to time. The Board has established a number of internal control procedures and an extensive risk management framework within which the Manager operates to protect the interests of the Company and its shareholders. These are monitored by the Board at its meetings through information provided by both the Manager and independent external consultants employed directly by the Company. INDEPENDENCE The Board assesses the independence of each Director. For this purpose an independent Director is: 1. A non-executive Director whom the Board considers to be independent of management and

free of any business or other relationship that could materially interfere with the exercise of unfettered and independent judgment;

2. Is not a substantial shareholder of the Company (as defined in section 9 of the Corporations Act 2001);

3. Within the last two years has not been employed in an executive capacity by the Company; 4. Within the last two years has not been a principal of a material professional advisor or a

material consultant to the Company;

5. Is not a material supplier or customer of the Company; and, 6. Has no material contractual relationship with the Company. In addition to being required to conduct themselves in accordance with the ethical policies of the Company, Directors are required to be meticulous in their disclosure of any material contract or relationship in accordance with the Corporations Act 2001 and this disclosure extends to the interests of family companies and spouses. Directors are required to strictly adhere to the constraints on their participation and voting in relation to matters in which they may have an interest in accordance with the Corporations Act 2001 and the Company's policies. Each of the current non-executive Directors of the Company has been assessed as independent. In reaching that determination, the Board has taken into account (in addition to the matters set out above): 1. The specific disclosures made by each Director as referred to above; 2. Where applicable, the related party dealings referable to each Director, noting that those

dealings are not material under accounting standards; 3. That no independent Director has ever been employed by the Company or any of its

subsidiaries; 4. That no Director is, or has been associated with a supplier, professional adviser, consultant to

or customer of the Company which is material under accounting standards; and 5. That no independent Director personally carries on any role for the Company otherwise than as

a Director of the Company.

For

per

sona

l use

onl

y


6

INDEPENDENCE (CONTINUED) The Company does not consider that term of service on the Board is a factor affecting a Director's ability to act in the best interests of the Company. Independence is judged against the ability, integrity and willingness of the Director to act. Due to the size of the Company and the Board no nomination committee has been established. RESOURCES AVAILABLE TO DIRECTORS Independent Directors have the right to seek independent professional advice in the furtherance of their duties as Directors of the Company at the Company’s expense. The Chairman’s prior approval of such expenditure is required. BUSINESS CONDUCT Conflicts of Interest In accordance with the Constitution of the Company and the Corporations Act 2001, Directors must disclose to the Board any material contract in which they may have an interest in compliance with section 195 of the Corporations Act 2001 and any Director with a material personal interest in a matter being considered by the Board must not be present when the matter is being considered and must not vote on the matter. Confidentiality Directors must not use or publish non-public information of the Company except where disclosure is authorised or legally mandated. Fair Dealing The Company actively promotes a set of values designed to assist all personnel in their dealings with each other, competitors, customers and the community. Company Assets All employees of the Company are required to protect and ensure efficient use of the Company’s assets for legitimate business purposes. Legal Compliance The Company actively promotes compliance with laws and regulations, the reporting of unlawful/unethical behaviour, and protection for those who report violations in good faith. DIRECTOR DEALINGS IN COMPANY SECURITIES The Board has a policy in place for Directors of the Company which prohibits them from dealing in the Company’s shares without the consent of at least one other Director. Directors must not deal if they are in possession of information which is price sensitive. The Board is aware of its obligation to keep the market fully informed. AUDIT ARRANGEMENTS Committees The Board has established an Audit Committee to assist in the execution of its duties and to allow detailed consideration of complex financial and other issues. Due to the size of the Board other committees have not been established.

For

per

sona

l use

onl

y


7

AUDIT ARRANGEMENTS (CONTINUED) Audit Committee The Board’s Audit Committee comprises Alan Liddle (Chairman) and Kenneth Barry who are independent directors. The main responsibilities of the Audit Committee include reviewing the effectiveness of the internal control environment, prudent management of financial risks, fulfilling the Company’s accounting and financial reporting obligations, reviewing the effectiveness and efficiency of operations, and maintaining an effective and efficient audit. In performing these functions, the Committee: 1. Reviews the financial statements and reports of the Company; 2. Reviews accounting policies to ensure compliance with current laws, relevant regulations and

accounting standards; 3. Conducts any investigations relating to financial matters, records, accounts and reports which it

considers appropriate; and 4. Reviews all material matters requiring exercise of judgment by management and reports those

matters to the Board. The Board makes use of external independent specialists to ensure that appropriate risk management practices are in place. UBS Nominees Pty Limited as the custodian independently reconciles the Company’s trades on a daily basis. INDEPENDENCE OF AUDITORS The Board: 1. Monitors the independence of its auditors; 2. Reviews the independent safeguards put in place by its auditors; 3. Requires the rotation of the audit partner every 5 years; 4. Reviews and may restrict the type of non-audit services which can be provided by its auditors; 5. Undertakes a review of non-audit fees paid to its auditors. Auditor: Moore Stephens Sydney is the Auditor of the Company appointed by the Board and continues in that office.

For

per

sona

l use

onl

y


8

CONTINUOUS DISCLOSURE The Corporations Act 2001 and the ASX Listing Rules (Listing Rules) require that a company discloses to the market matters which could be expected to have a material effect on the price or value of the Company’s securities. Management processes are in place to ensure that all material matters which may potentially require disclosure are promptly reported to the Managing Director. Matters reported are assessed and, where required by the Listing Rules, reported to the Australian Securities Exchange (ASX). The Managing Director is responsible for communications with the ASX and for ensuring that such information is not released to any person until the ASX has confirmed its release to the market. SHAREHOLDER COMMUNICATIONS The Board aims to keep shareholders informed of all major developments affecting the Company's activities and its state of affairs through announcements to the ASX, releases to the media and dispatch of financial reports. All such announcements are also placed on the website at www.wallacefunds.com.au BUSINESS RISKS The Board is the vehicle to facilitate the identification of significant areas of business risk and to implement procedures to manage those risks. The Company’s procedures manual contains detailed procedures in relation to the identification, analysis, evaluation, treatment and communication of risks associated with the Company’s business. INTERNAL CONTROL FRAMEWORK The Company has developed a set of policies and procedures (set out in the Company’s procedures manual) in relation to the Company’s compliance and risk programs. This provides the Board and management with an ongoing program to identify, monitor and manage compliance issues and significant risks with a view to protecting the value of the shareholder's investment and safeguarding the Company’s investments. REMUNERATION Due to the size of the Board no remuneration committee has been established. The Board is responsible for the following: 1. Considering changes in remuneration policy likely to have a material impact on the Company; 2. Considering senior executive appointments; 3. Determining remuneration for senior management; and 4. Leadership performance of employees, legislative compliance in relation to employment issues,

and any incentive plans operating within the Company. The Company’s policies regarding the terms and conditions of remuneration relating to the appointment and retirement of Board members are approved by the Board following receipt and consideration of professional advice where this is considered appropriate. A Director of the Company who is an employee or principal of the Manager is not entitled to any remuneration as a Director of the Company. Any increase in the maximum total remuneration of the Directors of the Company, which was set at $250,000 in 2002, is subject to the approval of shareholders. Directors’ remuneration, totalled $119,900 for the financial year ended 30 June 2008.

For

per

sona

l use

onl

y


9

ETHICAL STANDARDS The Company sets standards of behavior required of all employees including: 1. To act properly and efficiently in pursuing the objectives of the Company; 2. To avoid situations which may give rise to a conflict of interest; 3. To know and adhere to the Company’s Equal Employment Opportunity policy and programs; 4. To maintain confidentiality in relation to the affairs of the Company and its suppliers of services;

and 5. To be absolutely honest in all professional activities. These standards are communicated to staff. In addition, the Company has established insider trading guidelines for staff to ensure that unpublished price sensitive information about the Company or any other company is not used in an illegal manner. BEHAVIOUR ISSUES The Company is committed to providing fair, safe, challenging and rewarding work, recognising the importance of attracting and retaining the best staff and consequently, being in a position to provide good service to its investors. There are various policies and systems in place to enable achievement of these goals, including: 1. Discrimination Guidelines; 2. Health and Safety Guidelines;

3. Recruitment and Selection Guidelines; 4. Performance feedback and review processes; 5. Development and Progress Assessment Timetable; and 6. Internal and External Industry Related Training Programs. The Company is strongly committed to maintaining an ethical workplace and complying with legal and ethical responsibilities. Staff are required to report fraud, corrupt conduct, mal-administration and serious and substantial waste by other working staff. A system has been established which allows staff to remain anonymous, if they wish, for reporting of these matters. GOVERNANCE PHILOSOPHY The Board places significant importance on the governance of the Company, which it believes is vital to its well-being. The Company has adopted a comprehensive framework of Corporate Governance Guidelines which are designed to properly balance performance and conformance and thereby allow the Company to undertake, in an effective and prudent manner, the investment activities which are the basis of its business.

For

per

sona

l use

onl

y

WALLACE ABSOLUTE RETURN LIMITED ABN 58 100 854 788 COMPANY PROFILE

10

COMPANY PROFILE The Company was listed on the Australian Securities Exchange (“ASX”) on 28 January 2003. The Company offers investors the opportunity to participate in an absolute return product. The Company publishes its NTA weekly through the ASX and on its website (www.wallacefunds.com.au) providing investors with timely performance updates. The Company’s investment strategy involves the use of the Manager’s fundamental and quantitative research to identify assets that are, in the Manager’s opinion, mispriced relative to each other. The Company then allocates its capital according to the risk adjusted return expectations of each security in order to optimise the Company’s total return for a given level of risk. Broadly, the level of risk is measured by the expected range of outcomes for each security. A greater expected range of outcomes indicates higher risk and results in less capital being allocated to that investment. FEATURES OF THE COMPANY INCLUDE: Incentivised Fee Payment Structure: The Manager is paid a base management fee of 1.2% p.a, and a performance fee only if fund returns are above a pre-determined positive hurdle rate. The hurdle rate is the Reserve Bank of Australia cash rate (7.25% on 30 June 2008). If the Manager does not attain a positive return, no performance fee is payable - this aligns the goals of shareholders and the Manager. Underperformance relative to the positive hurdle rate must be fully recouped before the Manager is entitled to a performance fee.

For

per

sona

l use

onl

y

WALLACE ABSOLUTE RETURN LIMITED ABN 58 100 854 788 DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2008

11

Your Directors present their report on the results of Wallace Absolute Return Limited (“the Company”) for the financial year ended 30 June 2008. DIRECTORS The names and particulars of the Directors of the company in office at any time during or since the end of the financial year are: Kenneth Barry - LL.B. (Chairman and Non-executive Director) Kenneth Barry is a corporate and commercial lawyer. He is currently chairman of Deacons, an Australian law firm, and the Australian board of management of Coolmore Australia. He is also a director of DWS Advanced Business Solutions Limited, Next Generation Clubs Australia Pty Limited, Thoroughbred Breeders Australia Limited and MAP Venture Capital Pty Ltd. Mr. Barry is a member of the Audit Committee. Alan Liddle - BA (Hons), MBA, FAICD (Non-executive Director) Alan Liddle is a professional director and investor. He was the co-founder of the ASX listed Ventracor Limited (formerly Micromedical Industries Limited) and it’s Chief Executive Officer from 1986 to 1998. He held senior management roles with fund manager Edward Lumley Limited and was a lecturer in advanced financial management for the Institute of Chartered Secretaries and Administrators. He has advised numerous public and private companies on issues relating to organisational structure, valuation and raising capital. He is currently a non-executive director of Immune System Therapeutics Limited (formerly PacMab Limited). Mr. Liddle is the Chairman of the Audit Committee. Richard Wallace - B Ec (Executive Director) Richard Wallace is an accredited Derivatives Adviser (Levels 1 & 2) with the ASX and has worked in the financial services industry for the last 20 years. He has held proprietary investment roles with Bankers Trust Australia Limited, Macquarie Bank Limited and UBS Warburg Australia Equities Limited. He is currently the Managing Director of Wallace Funds Management Ltd and a director of Lease Company of Australia Limited. COMPANY SECRETARY Richard Wallace is also the company secretary of Wallace Absolute Return Limited. MEETINGS OF DIRECTORS Directors' meetings

Director

Number of Meetings

Held

Number of meetings Attended

Kenneth Barry – Chairman 11 11 Alan Liddle 11 11 Richard Wallace 11 11 PRINCIPAL ACTIVITIES The Company is engaged in investment activities, conducted primarily in Australia. No significant change in these activities took place during the year.

For

per

sona

l use

onl

y


12

OPERATING AND FINANCIAL REVIEW The net loss after income tax of the Company for the year amounted to $23,790,279 (2007 profit: $3,446,219) and the loss before income tax was $35,227,734 (2007 profit: $4,238,120). The Performance Summary on pages 1 and 2 highlights the operating and financial results of the Company. FINANCIAL POSITION The net assets of the Company have decreased by $26,544,267 from 30 June 2007 to $64,504,966 as at 30 June 2008. REMUNERATION REPORT i) Principles used to determine the nature and amount of remuneration The Company’s policy for determining the nature and amount of remuneration of board members and senior executives of the Company is as follows:

a. The maximum total remuneration of the Directors of the Company has been set at A$250,000 per annum to be divided among them in such proportions as they think fit;

b. Directors, including the Managing Director, will not be entitled to Directors’ fees if they

are employees or principals of the Manager (Wallace Funds Management Limited). The remuneration of the Directors is not linked to the performance of the Company. The Board ensures that director reward satisfies the following key criteria for good reward governance practices: a. competitiveness and reasonableness; b. acceptability to members; c. transparency Directors’ remuneration excludes insurance premiums paid by the Company or related parties in respect of directors’ and officers’ liabilities and legal expenses insurance contracts, in accordance with common commercial practice. ii) Directors’ fees The current base remuneration was last reviewed with effect from 1 July 2004. iii) Benefits Directors received no additional benefits other than base remuneration. iv) Retirement Benefits No retirement benefits are provided to Directors. F

or p

erso

nal u

se o

nly


13

REMUNERATION REPORT - Continued v) Directors’ remuneration disclosures The remuneration of each Director of Wallace Absolute Return Limited during the year is set out in the following table:

Short term

benefits

Post employment

benefits

Total

Names Cash salary

and fees Superannuation Contributions

$ $ $ Directors Mr. K Barry (Chairman) – 76,300 76,300 Mr. A Liddle (Non- executive Director) 40,000 3,600 43,600 Mr. R Wallace (Executive Director) – – – Total Remuneration: 40,000 79,900 119,900 The Executive Director, Mr. Richard Wallace, is not remunerated by the Company. Mr. Wallace is an employee of the Manager, Wallace Funds Management Limited. Remuneration of the Manager is detailed below. Except for management fees and performance fees the Company paid in relation to its investment portfolio to Wallace Funds Management Limited, a company controlled by Mr. Richard Wallace, no cash benefits, post employment superannuation or equity compensation were paid to any of the Directors in the financial years ended 30 June 2007 or 30 June 2008. vi) Company performance, shareholder wealth and Directors’ remuneration The following table compares the Company performance and Directors’ remuneration since 1 July 2003:

Directors 2008 2007 2006 2005 2004 Net (loss) / profit ($) (23,790,279) 3,446,219 3,193,068 3,042,817 2,138,508 Dividends paid (cents per share) – 10.0 10.0 10.0 6.5 Share Price ($) 0.36 1.02 1.00 1.01 0.96 Directors’ remuneration 119,900 119,900 119,900 119,900 76,300 vii) Specified Executives There were no specified executives (other than Directors) for the Company during the financial year. F

or p

erso

nal u

se o

nly


14

REMUNERATION REPORT- Continued viii) Service Agreements The Non Executive Directors were initially appointed on 1 June 2002. The Executive Director does not have a service agreement with the Company. Subject to Rule 6.16(c) of the Company’s Constitution, at every annual general meeting 1/3 of the Directors or, if their number is not a multiple of 3, then, subject to the Listing Rules, the number nearest to 1/3, must retire from office and are eligible for re-election. The Company paid a fee for management services in relation to its investment portfolio to Wallace Funds Management Limited, a company controlled by Mr. Richard Wallace, a director of the Company. The Management Agreement commenced on 22 October 2002 and remains in force for an initial period of 25 years, unless terminated earlier in accordance with the terms of the Agreement. During the financial year the Company paid to Wallace Funds Management, in accordance with the Management Agreement, management fees of $982,148 (2007: $686,773) inclusive of GST and a performance fee of $nil (2007: $1,446,886). ix) Loans to Directors Other than the related party transactions referred to in Note 18b of the Financial Statements there were no loans provided to Directors during the financial year. x) Remuneration Options There were no options granted as remuneration during the financial year. xi) Shares Issued on Exercise of Remuneration Options There were no shares issued on the exercise of options granted as remuneration during the financial year. xii) Directors shareholdings The shareholding of each director of Wallace Absolute Return Limited during the year is set out in the following table:

Directors Balance 1 July 2007

Net Change

Balance 30 June 2008

Mr. Kenneth Barry 54,724 – 54,724 Mr. Alan Liddle 23,467 – 23,467 Mr. Richard Wallace 1,986,144 1,940,000 46,144 2,064,335 1,940,000 124,335 AUDIT COMMITTEE The Company has an Audit Committee comprising Alan Liddle (Chair) and Kenneth Barry. MEETINGS OF AUDIT COMMITEE

Audit Committee meetings

Director

Number of Meetings

Held

Number of Meetings Attended

Alan Liddle – Chairman 4 4 Kenneth Barry 4 4

For

per

sona

l use

onl

y


15

NON AUDIT SERVICES PROVIDED BY THE AUDITOR The Directors, in accordance with advice received from the Audit Committee, are satisfied that the provision of non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The Directors are of the view that the nature and scope of each type of non-audit service provided did not compromise the auditor’s independence. For the year ended 30 June 2008, fees paid or payable for non-audit work performed by the auditor included the following: Other services provided by related practice of auditor $20,400 Other assurance services $3,600 LEAD AUDITOR’S INDEPENDENCE DECLARATION The Lead Auditor’s Independence Declaration for the year ended 30 June 2008 has been received and can be found on page 17 of the Annual Report. DIVIDENDS No dividends were paid or declared during the year. EVENTS SUBSEQUENT TO REPORTING DATE On 25 September 2008 the Company released the following statement to the ASX on the effect of short-selling on its portfolio. “Since 19 September 2008 the Australian Securities and Investments Commission (ASIC) has prohibited naked and covered short selling of all securities quoted on licensed markets in Australia, subject to certain exceptions. WAB has on occasions used covered short selling to hedge its market exposures and to reduce risk. Among the current permitted exceptions to the ban on short selling are covered short positions in existence prior to 22 September 2008 and covered short selling in arbitrage transactions. In addition WAB is able to manage market exposures through the use of listed derivatives such as stock options and share price futures. Consequently the effect on WAB’s investment portfolio has been negligible.” Other than stated elsewhere in this report and in Note 20 of the Financial Statements, no matters or circumstances have arisen since the end of the financial year which significantly affected or may significantly affect the operations of the Company, the results of those operations, or the state of affairs of the Company in future financial years. SIGNIFICANT CHANGES IN STATE OF AFFAIRS Other than stated elsewhere in this report no significant changes in the Company’s state of affairs occurred during the financial year. FUTURE DEVELOPMENTS Continuing elevated volatility levels in financial markets have resulted in the withdrawal of risk capital and consequently liquidity. This withdrawal has resulted in sharp declines in global equity values and a reduction in the company’s net assets but it will endeavour to benefit from future corporate activity and pricing anomalies. ENVIRONMENTAL ISSUES The Company’s operations are not subject to significant environmental regulation under the law of the Commonwealth or any State or Territory.

For

per

sona

l use

onl

y


16

OPTIONS At 30 June 2008 there were no options outstanding. No options have been granted over unissued shares during or since the end of the financial year. INDEMNIFICATION AND INSURANCE OF OFFICERS AND AUDITORS The Company has executed a deed of indemnity for each of the directors which indemnify them to the extent permitted by Sections 199A, 199B and 199C of the Corporations Act 2001. The Company has paid premiums to insure each of the Directors against liabilities for costs and expenses incurred by them in defending any legal proceedings arising out of their conduct while acting in the capacity of director of the Company, other than conduct involving a wilful breach of duty in relation to the Company. The total amount of the premium paid in relation to the above was $42,069 (2007: $30,265). No indemnities have been given or insurance premiums paid during or since the end of the financial year for any person who is or has been an auditor of the Company. PROCEEDINGS ON BEHALF OF THE COMPANY No person has applied for leave of the Court to bring proceedings on behalf of the Company or intervened in any proceedings to which the Company is a party for the purpose of taking responsibility on behalf of the Company for all or any part of those proceedings. The Company was not a party to any such proceedings during the year. Signed in accordance with a resolution of the Board of Directors:

RICHARD WALLACE Managing Director In Sydney, this 29th day of September 2008

For

per

sona

l use

onl

y

17

AUDITOR’S INDEPENDENCE DECLARATION TO THE DIRECTORS OF WALLACE ABSOLUTE RETURN LIMITED In accordance with the requirements of section 307C of the Corporations Act 2001, as lead auditor for the audit of Wallace Absolute Return Limited for the year ended 30 June 2008, I declare that, to the best of my knowledge and belief, there have been:

a) no contraventions of the auditor independence requirements of 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.

MOORE STEPHENS SYDNEY Chartered Accountants

C. CHANDRAN Partner Dated in Sydney this 29th day of September 2008.

For

per

sona

l use

onl

y


The Income Statement is to be read in conjunction with the notes to the financial statements.

18

INCOME STATEMENT FOR THE YEAR ENDED 30 JUNE 2008

2008 2007 Note $ $

Proceeds from the sale of investments 400,454,058 402,439,347

Unrealised (loss) / profit on investments (15,411,679) 10,056,087

Other revenue from ordinary activities 2 10,551,055 5,033,516

Cost of investments sold (424,886,090) (408,770,734)

Brokerage and other investment costs (409,449) (758,208)

Depreciation and amortisation expenses (7,907) (3,953)

Administration expenses 3 (913,626) (1,984,799)

Borrowing costs (3,924,944) (1,140,633)

Other expenses from ordinary activities (679,152) (632,503) (Loss) / Profit from ordinary activities before income tax benefit/(expense)

(35,227,734) 4,238,120

Income tax benefit / (expense) relating to ordinary activities

4

11,437,455

(791,901)

(Loss) / Profit from ordinary activities after income tax benefit/(expense)

(23,790,279)

3,446,219 (Loss) / Basic earnings per share (cents per share)

5

(27.62)

7.27 Diluted (loss) / earnings per share (cents per share) 5

(27.62) 7.27

For

per

sona

l use

onl

y


The Balance Sheet is to be read in conjunction with the notes to the financial statements.

19

BALANCE SHEET AS AT 30 JUNE 2008

2008 2007 Note $ $

ASSETS

Cash and cash equivalents 6 471,363 2,071,010

Trade and other receivables 7 2,555,199 5,306,763

Financial assets - held for trading 8a 25,681,817 138,060,943

Financial assets - available for sale 8b 14,601,135 10,000,000

Financial assets - loans and receivables 8c 26,122,866 34,742,190

Other assets 9 789,118 2,044,751

Deferred tax assets 4 10,672,226 2,441,889

Plant and equipment 10 7,736 15,643

TOTAL ASSETS 80,901,460 194,683,189

LIABILITIES

Cash and cash equivalents 6 13,316,241 53,573,088

Trade and other payables 11 1,534,574 13,211,280

Financial liabilities 8 1,198,020 33,294,811

Deferred tax liabilities 12 347,659 3,554,777

TOTAL LIABILITIES 16,396,494 103,633,956

NET ASSETS 64,504,966 91,049,233

EQUITY

Issued capital 13 89,491,831 92,245,819

Accumulated losses 14 (24,986,865) (1,196,586)

TOTAL EQUITY 64,504,966 91,049,233

For

per

sona

l use

onl

y


The Statement of Changes in Equity is to be read in conjunction with the notes to the financial statements.

20

STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2008

Note

Issued Capital

Retained Earnings / (Accumulated

Losses)

Total Equity $ $ $

At 1 July 2006 33,899,226 1,339,144 35,238,370 Profit for the period – 3,446,219 3,446,219 Dividend paid 15 – (5,981,949) (5,981,949) Issued shares 58,346,593 – 58,346,593 At 30 June 2007 92,245,819 (1,196,586) 91,049,233

At 1 July 2007 92,245,819 (1,196,586) 91,049,233

Loss for the period – (23,790,279) (23,790,279) On market share buy-back 13 (2,753,988) – (2,753,988) At 30 June 2008 89,491,831 (24,986,865) 64,504,966

For

per

sona

l use

onl

y


The Cash Flow Statement is to be read in conjunction with the notes to the financial statements.

21

CASH FLOW STATEMENT FOR THE YEAR ENDED 30 JUNE 2008

2008 2007

Note $ $ CASH FLOWS FROM OPERATING ACTIVITIES

Proceeds from the sale of investments 472,187,143 401,105,148

Dividends received 4,330,175 1,146,455

Interest received 4,455,453 2,640,821

Other receipts from customers 1,493,896 862,724

Payments for investments purchased (435,514,943) (507,461,793)

Payments to suppliers and others (1,615,592) (4,067,394)

Borrowing costs (3,924,944) (826,679)

Income tax refund / (paid) – (791,901)

Net cash used in operating activities 16b 41,411,188 (107,392,619)

CASH FLOWS FROM FINANCE ACTIVITIES

Share buy-back (2,753,988) –

Proceeds from share issue – 57,732,805

Cash Dividends paid – (5,024,782) Net cash (used in)/provided by financing activities (2,753,988) 52,708,023

Net increase/(decrease) in cash held 38,657,200 (54,684,596)

Cash at the beginning of the financial year (51,502,078) 3,182,518

Cash at the end of the financial year 16a (12,844,878) (51,502,078)

For

per

sona

l use

onl

y

WALLACE ABSOLUTE RETURN LIMITED ABN 58 100 854 788 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2008

22

NOTE 1 - STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES The financial report covers Wallace Absolute Return Limited ("the Company") as an individual entity. The Company is a listed public company, incorporated and domiciled in Australia. The financial report was approved for release by the Board of Directors on 29 September 2008. Basis of Preparation The financial report is a general purpose financial report that has been prepared in accordance with Australian Accounting Standards including Australian Accounting Interpretations, other authoritative pronouncements of the Australian Accounting Standards Board and the Corporations Act 2001. The financial report of the Company complies with all Australian equivalents to International Financial Reporting Standards (AIFRS) in their entirety. The financial report has been prepared on an accrual basis and is based on historical costs modified by the revaluation of selected non current assets, financial assets and financial liabilities for which the fair value basis of accounting has been applied. It is considered the information needs of shareholders of a Company of this type are better met by presentation of the Balance Sheet on a liquidity basis. The following is a summary of the material accounting policies adopted by the Company in the preparation of the financial report. The accounting policies have been consistently applied, unless otherwise stated.

A. Income Tax The charge for current income tax expense/benefit is based on the profit/loss for the year adjusted for any non assessable or disallowed items. It is calculated using tax rates that have been enacted or are substantively enacted by the balance sheet date. Deferred tax is accounted for using the balance sheet liability method in respect of temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. No deferred income tax will be recognised from the initial recognition of an asset or liability, excluding a business combination, where there is no effect on accounting or taxable profit or loss. Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or liability is settled. Deferred tax is credited in the Income Statement except where it relates to items that may be credited directly to equity, in which case the deferred tax is adjusted directly against equity. Deferred income tax assets are recognised to the extent that it is probable that future tax profits will be available against which deductible temporary differences can be utilised. The amount of benefits brought to account or which may be realised in the future is based on the assumption that no adverse change will occur in income taxation legislation and in anticipation that the Company will derive sufficient future assessable income to enable the benefit to be realised and comply with the conditions of deductibility imposed by the law. B. Revenue Recognition Revenues are recognised at fair value of the consideration received net of the amount of goods and services tax (GST) payable to the Australian Taxation Office ("ATO"). i. Trading Income Profits and losses realised from the sale of investments and unrealised gains and losses are included in the Income Statement in the year they are incurred. Realised and unrealised profits and losses on trading derivative instruments are reflected in the Income Statement (refer to Note 1D).

For

per

sona

l use

onl

y


23

NOTE 1 - STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) B. Revenue Recognition (Continued) ii. Dividend Income Dividends and distributions are brought to account on the date that the shares or units are traded ex-dividend. iii. Interest Income Interest income is recognised as it accrues, taking into account the effective yield on the associated financial asset. iv. Other Income Other income is recognised when the right to receive the revenue has been established. C. Cash and Cash Equivalents For the purpose of the Cash Flow Statement, cash includes cash on hand and at call deposits with banks or financial institutions net of bank overdrafts, and investments in money market instruments maturing within less than three months. D. Financial Instruments Recognition and Initial Measurement Financial instruments, incorporating financial assets and financial liabilities, are recognised when the entity becomes a party to the contractual provisions of the instrument. Trade date accounting is adopted for financial assets that are delivered within timeframes established by marketplace convention. Financial instruments are initially measured at fair value plus transactions costs where the instrument is not classified as at fair value through profit or loss. Transaction costs related to instruments classified as at fair value through profit or loss are expensed to profit or loss immediately. Financial instruments are classified and measured as set out below. Derecognition Financial assets are derecognised where the contractual rights to receipt of cash flows expires or the asset is transferred to another party whereby the entity no longer has any significant continuing involvement in the risks and benefits associated with the asset. Financial liabilities are derecognised where the related obligations are either discharged, cancelled or expire. The difference between the carrying value of the financial liability extinguished or transferred to another party and the fair value of consideration paid, including the transfer of non-cash assets or liabilities assumed, is recognised in profit or loss. Classification and Subsequent Measurement i. Financial assets at fair value through profit or loss Financial assets are classified at fair value through profit or loss when they are held for trading for the purpose of short term profit taking, where they are derivatives not held for hedging purposes, or designated as such to avoid an accounting mismatch or to enable performance evaluation where a group of financial assets is managed by key management personnel on a fair value basis in accordance with a documented risk management or investment strategy. Realised and unrealised gains and losses arising from changes in fair value are included in profit or loss in the period in which they arise. ii. Loans and Receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and are subsequently measured at amortised cost using the effective interest rate method.

For

per

sona

l use

onl

y


24

NOTE 1 - STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) D. Financial Instruments (Continued) Classification and Subsequent Measurement (Continued) iii. Held-to-maturity investments Held-to-maturity investments are non-derivative financial assets that have fixed maturities and fixed or determinable payments, and it is the Company’s intention to hold these investments to maturity. They are subsequently measured at amortised cost using the effective interest rate method. iv. Available-for-sale financial assets Available-for-sale financial assets are non-derivative financial assets that are either designated as such or that are not classified in any of the other categories. They comprise investments in the equity of other entities where there is neither a fixed maturity nor fixed or determinable payments. v. Financial Liabilities Non-derivative financial liabilities (excluding financial guarantees) are subsequently measured at amortised cost using the effective interest rate method. Derivative Instruments Derivative financial instruments held by the Company are traded in a less active market. The use of settlement price provided by recognised exchanges is a valuation technique commonly used by market participants to price derivative instruments and it has been demonstrated to provide reliable estimates of prices obtained in actual market transactions. An appropriate measure of fair value is the use of a valuation technique which includes using recent arm's length market transactions between knowledgeable and willing parties, discounted cash flow analysis and option pricing models. Fair Value Fair value is determined based on current bid prices for all quoted investments. Valuation techniques are applied to determine the fair value for all unlisted securities, including recent arm’s length transactions, reference to similar instruments and option pricing models. Financial Guarantees Where material, financial guarantees issued, which require the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due, are recognised as a financial liability at fair value on initial recognition. The guarantee is subsequently measured at the higher of the best estimate of the obligation and the amount initially recognised less, when appropriate, cumulative amortisation in accordance with AASB 118: Revenue. Where the entity gives guarantees in exchange for a fee, revenue is recognised under AASB 118. The fair value of financial guarantee contracts has been assessed using a probability weighted discounted cash flow approach. The probability has been based on:

� the likelihood of the guaranteed party defaulting in a year period; � the proportion of the exposure that is not expected to be recovered due to the guaranteed

party defaulting; and � the maximum loss exposed if the guaranteed party were to default.

For

per

sona

l use

onl

y


25

NOTE 1 - STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

E. Plant and Equipment Each class of plant and equipment is carried at cost less, where applicable, any accumulated depreciation and impairment of value. Depreciation is calculated on a straight line basis over the useful life of the asset commencing from the time the asset is held ready for use. The useful lives used for each class of depreciable assets are: Computer equipment 4 years Furniture 5 years F. Impairment of Financial Assets A financial asset is assessed at each reporting date to determine whether there is any objective evidence that the asset may be impaired. A financial asset is considered impaired if the evidence indicates one or more events have had a negative effect on the estimated future cash inflows of that asset. Individually significant financial assets are tested for impairment separately. The remaining financial assets are assessed on a group basis based on credit risk. An impairment loss on a held-to-maturity investment is calculated as the difference between its carrying amount and the present value of the estimated future cash flows discounted at the original effective interest rate. An impairment loss on an available-for-sale financial asset is calculated by reference to its fair value. Impairment losses are recognised in the Income Statement. G. Impairment of Non-Financial Assets At each reporting date, the Company assesses whether there is any indication that an asset may be impaired. Where an indicator of impairment exists, the Company makes a formal estimate of recoverable amount. Where the carrying amount of an asset exceeds its recoverable amount the asset is considered impaired and is written down to its recoverable amount. Recoverable amount is the greater of fair value less costs to sell and value in use. It is determined for an individual asset, unless the asset’s value in use cannot be estimated to be close to its fair value less costs to sell and it does not generate cash inflows that are largely independent of those from other assets or groups of assets, in which case, the recoverable amount is determined for the cash-generating unit to which the asset belongs. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. H. Foreign Currency Transactions and Balances Foreign currency transactions during the year are converted to Australian currency at the rates of exchange applicable at the dates of the transactions. Amounts receivable and payable in foreign currencies at balance date are converted at the rates of exchange ruling at that date. The gains and losses from conversion of assets and liabilities, whether realised or unrealised, are included in the Income Statement from ordinary activities as they arise.

For

per

sona

l use

onl

y


26

NOTE 1 - STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) I. Critical Accounting Estimates and Judgements The Directors evaluate estimates and judgements incorporated into the financial report based on historical knowledge and best available current information. Estimates assume a reasonable expectation of future events and are based on current trends and economic data. There are no estimates or judgements that have a material impact on the financial results of the Company for the year ended 30 June 2008. There are no impending new accounting standards that will result in any material change in relation to the financial instruments. J. Goods and Services Tax (GST) Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the Australian Taxation Office (ATO). In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of an item of expense. Receivables and payables in the Balance Sheet are shown inclusive of GST. The net amount of tax recoverable from, or payable to the ATO is included within other assets or other liabilities.

Cash flows are included in the Cash Flow Statement on a gross basis. The GST component of cash flows arising from investing and financing activities which is recoverable from, or payable to, the ATO is classified as operating cash flows. K. Segment reporting The Company is a publicly listed company limited by shares, incorporated and domiciled in Australia. The Company is engaged in investment activities, conducted primarily in Australia. L. New Standards The following Australian Accounting Standards have been issued or amended and are applicable to the Company but are not yet effective. They have not been adopted in preparation of the financial statements at reporting date.

AASB Amendment Standards Affected Outline of Amendment

Application Date of

Standard

Application Date for

Company AASB 8 Operating Segments

AASB 114

Segment Reporting

Requires segment information disclosure on basis of internal reports. No effect has yet been determined.

1 January 2009 1 July 2009

AASB 123 Borrowing Costs

AASB 123

Borrowing Costs Requires borrowing cost on qualifying assets to be capitalised. No effect has yet been determined.

1 January 2009 1 July 2009

AASB 101 Presentation of Financial Statements

AASB 101

Presentation of Financial Statements

The revised AASB 101: Presentation of Financial Statements issued in September 2007 requires the presentation of a statement of comprehensive income.

1 January 2009 1 July 2009 For

per

sona

l use

onl

y


27

Notes 2008 2007 $ $ NOTE 2 - REVENUE

Other revenue from ordinary activities consists of the following:

Dividend income 4,641,644 1,382,864

Interest income 4,415,515 2,824,409

Other income 1,493,896 826,243

10,551,055 5,033,516 NOTE 3 - (LOSS) / PROFIT FROM ORDINARY ACTIVITIES

(Loss) / Profit from ordinary activities before income tax expense has been determined after:

a. Administration expenses

Management fee 18 913,626 638,859

Performance fee 18 – 1,345,940

913,626 1,984,799

b. Auditor’s remuneration

Auditing or reviewing the financial report 38,000 38,000

Other assurance services 3,600 3,300 Other services provided by related practice of auditor

20,400 16,410

62,000 57,710 NOTE 4 - TAXATION

a. Income tax (benefit) / expense

The components of tax expense comprise:

- Current tax – –

- Deferred tax (11,443,777) 783,532 Benefit from previously recognised temporary difference/tax loss used to reduce current tax expense

- Under/over provision from previous years 6,322 8,369

(11,437,455) 791,901

For

per

sona

l use

onl

y


28

Notes 2008 2007 $ $ NOTE 4 - TAXATION (CONTINUED)

b. Current and deferred tax balances

Assets

- Deferred tax assets 10,672,226 2,441,889

- Income tax 9 778,519 2,028,662

11,450,745 4,470,551

Liabilities

- Deferred tax liability 12 347,659 3,554,777

c. Numerical reconciliation of current income tax (benefit)/expense prima facie tax payable

Prima facie tax on profit / (loss) from ordinary activities

(35,227,734) 4,238,120

Tax at the Australian tax rate of 30% (10,568,320) 1,271,436 Tax effect of amounts which are not deductible (taxable) in calculating taxable income:

- Imputation credits 307,014 209,102

- Under/(over) provision for income tax, prior year (152,768) 8,369 - Gross-up for franking credits/Conversion to tax losses (1,023,381) (697,006)

Current income tax (benefit) / expense (11,437,455) 791,901

d. Dividend franking account

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

– 1,783,411

The above available amounts are based on the balance of the dividend franking account at year-end adjusted for: i. franking credits that will arise from the payment of the current tax liability; ii. franking debits that will arise from the payment of dividends recognised as a liability at the

year-end; iii. franking credits that will arise from the receipt of dividends recognised as receivables at the

year-end; and iv. franking credits that the entity may be prevented from distributing in subsequent years. The ability to utilise the franking credits is dependent upon there being sufficient available profits to declare dividends. F

or p

erso

nal u

se o

nly


29

2008 2007 $ $ NOTE 5 - (LOSS) / EARNINGS PER SHARE

a. Reconciliation of (loss) / earnings to net (loss) / profit

Net (loss) / profit (23,790,279) 3,446,219

(Loss) / Earnings used in calculation of basic (loss)/earnings per share

(23,790,279) 3,446,219

b. Weighted average number of shares No. No.

Weighted average number of ordinary shares outstanding during the year used in the calculation of basic earning per share

86,126,332

47,400,865 NOTE 6 - CASH AND CASH EQUIVALENTS

Cash at bank 471,363 2,071,010

Prime broker finance facility (13,316,241) (53,573,088)

(12,844,878) (51,502,078) Cash balances not available for use: A cash balance of $20,000 (2007: $20,000) held in a term deposit is not available for use by the Company at the reporting date due to the amount being a performance bond, lodged to satisfy the requirements of the Company's Australian Financial Services License. Terms and conditions: The weighted average interest rate for cash and cash equivalents as at 30 June 2008 was 6.84% (2007: 6.15%). The weighted average interest rate for prime broker finance facility as at 30 June 2008 was 7.85% (2007: 6.75%). NOTE 7 - TRADE AND OTHER RECEIVABLES

Trade debtors 1,217,482 4,417,334

Sundry debtors 1,337,717 889,429

2,555,199 5,306,763 Terms and conditions Trade debtors relate to unsettled trades. They are non-interest bearing and are secured by the Australian Stock Exchange - National Guarantee Fund. They are settled within 3 days of the sale being executed. Sundry debtors consist of the following:- i. Accrued income - non-interest bearing and unsecured. ii. GST receivable - relates to goods and services tax that can be recovered from the ATO. iii. Dividend income - non-interest bearing and unsecured.

For

per

sona

l use

onl

y


30

Note 2008 2007 $ $ NOTE 8 - FINANCIAL ASSETS

INVESTMENTS

Total market value of investments held long 8a/8b 66,405,818 182,803,133

Total market value of investments held short 8a (1,198,020) (33,294,811)

65,207,798 149,508,322 a. Market value of listed investments held for trading: Long positions

Shares 25,665,842 136,056,820

Options – 479,398

Other derivatives 15,975 1,524,725

25,681,817 138,060,943

Short positions

Shares (1,198,020) (33,277,586)

Options – (17,225

(1,198,020) (33,294,811)

24,483,797 104,766,132 b. Market value of investments in unlisted corporations available for sale :

Shares 4,601,135 –

Redeemable Preference shares 10,000,000 10,000,000

14,601,135 10,000,000

c. Market value of investments in loans and securities :

Debentures and secured notes 26,122,866 34,742,190

26,122,866 34,742,190

Terms and conditions: Debentures and secured notes had maturity dates ranging from 18 April 2009 to 18 October 2011 (2007: from 8 April 2009 to 10 October 2011) and an average interest rate of 10.73% p.a. (2007: 10.21%). Major investments: The 20 largest listed investments of the Company as at 30 June 2008 are disclosed on page 2 of this report. NOTE 9 - OTHER ASSETS

Prepayments and other assets 10,599 16,089

Income Tax refundable 778,519 2,028,662

789,118 2,044,751

For

per

sona

l use

onl

y


31

Note 2008 2007 $ $ NOTE 10 - PLANT AND EQUIPMENT

Computer equipment and furniture - at cost 53,392 53,392

Less accumulated depreciation (45,656) (37,749)

7,736 15,643

Movements in carrying amounts Movement in carrying amounts for each class of plant and equipment between the beginning and the end of the current financial year

Balance at the beginning of the year 15,643 19,596

Depreciation expense (7,907) (3,953)

Carrying amount at the end of the year 7,736 15,643 NOTE 11 - TRADE AND OTHER PAYABLES

Trade creditors 1,274,983 12,396,583

Accrued expenses 45,966 186,810

Amounts payable to director-related parties 18a 213,625 627,887

1,534,574 13,211,280 Terms and conditions: Trade creditors relate to unsettled trades. They are non-interest bearing and unsecured. They are settled within 3 days of the purchase being executed. Amounts payable to director-related parties relate to management and performance fees payable to the Manager, Wallace Funds Management Limited, pursuant to the Management Agreement made with the Company. Accrued expenses are settled within the terms of payment offered, which is usually within 30 days. No interest is applicable to the above account balances. NOTE 12 - DEFERRED TAX LIABILITIES

Deferred tax liabilities comprise the tax estimated on:

Revaluation of investments – 3,458,797

Other temporary differences 347,659 95,980

347,659 3,554,777 F

or p

erso

nal u

se o

nly


32

2008 2007 $ $ NOTE 13 - ISSUED CAPITAL

Issued and paid-up capital

84,455,052 (2007: 88,044,787) fully-paid ordinary shares issued 89,491,831 92,245,819

Fully-paid ordinary shares

Balance at the beginning of the reporting period 92,245,819 33,899,226

Nil (2007: 15,052,810) shares issued for cash pursuant to the continuing offer prospectus

– 16,698,200

Nil (2007: 32,905,541) shares issued for cash pursuant to the rights issue prospectus –

36,196,095

Nil (2007: 5,749,040) shares issued pursuant to the dividend reinvestment plan

– 5,980,330

3,589,735 (2007: Nil) shares bought back from on market share buy-back

(2,726,053) –

Share issue costs net of tax (27,935) (528,032)

Balance at the end of the reporting period 89,491,831 92,245,819 a. Options No options have been issued by the Company during the financial year. At balance date the number of options over ordinary shares in the Company was nil. b. Ordinary Shares Ordinary shares participate in the dividends and the proceeds on winding up of the Company in proportion to the number of shares held. In the event of winding up of the Company, ordinary shareholders rank after unsecured creditors. At shareholder meetings a shareholder is entitled to vote on a show of hands and when a poll is called is entitled to one vote for each ordinary share held. c. Capital Management Management controls the capital of the Company in order to maintain a good debt to equity ratio, provide the shareholders with adequate returns and ensure that the Company can fund its operations and continue as a going concern. The Company’s debt and capital includes ordinary share capital and financial liabilities supported by financial assets. There are no externally imposed capital requirements. Management effectively manages the Company’s capital by assessing the Company’s financial risks and adjusting its capital structure in response to changes in these risks and in the market. These responses include the management of debt levels, distributions to shareholders and share issues.

For

per

sona

l use

onl

y


33

Note 2008 2007 $ $ NOTE 14 - (ACCUMULATED LOSSES) / RETAINED EARNINGS

(Accumulated losses)/Retained earnings at the beginning of the financial year

(1,196,586) 1,339,144

Net (loss)/profit attributable to members of the entity

(23,790,279) 3,446,219

Distributed to shareholders 15 – (5,981,949) Accumulated losses at the end of the financial year

(24,986,865) (1,196,586)

NOTE 15 - DIVIDENDS

A fully franked dividend of 5 cents per share paid on 31 October 2006

– 1,780,922

A fully franked dividend of 5 cents per share paid on 31 May 2007

– 4,201,027

14 – 5,981,949 NOTE 16 - CASH FLOW INFORMATION

a. Reconciliation of cash

Cash at the end of the financial year as shown in the Cash flow Statement is reconciled to the related items in the Balance Sheet as follows:

Cash at bank 6 471,363 2,071,010

Prime broking finance facility - secured 6,16c (13,316,241) (53,573,088)

(12,844,878) (51,502,078) b. Reconciliation of cash flow from operations with (loss)/profit from ordinary activities after income tax

(Loss)/Profit from ordinary activities after income tax (23,790,279) 3,446,219

Non-cash flows in (loss)/profit from ordinary activities

Depreciation 7,907 3,953

Unrealised loss/(profit) on investments 15,411,679 (10,056,087)

Changes in assets and liabilities:

Decrease/(Increase) in trade debtors 3,199,852 (1,334,199)

Decrease/(Increase) in sundry debtors (448,288) (419,997)

Decrease/(Increase) in investments 68,888,845 (107,143,628)

Decrease/(Increase) in other assets 1,255,633 36,674

(Decrease)/Increase in trade creditors (1,047,853) 9,145,630 (Decrease)/Increase in other payables and

accruals (10,628,853)

165,577 (Decrease)/Increase in income tax payable (11,437,455) (1,236,761)

Cash flows from/(used in) operating activities 41,411,188 (107,392,619)

For

per

sona

l use

onl

y


34

2008 2007 $ $ NOTE 16 - CASH FLOW INFORMATION (CONTINUED)

c. Credit stand-by arrangements and loan facilities

Prime broking finance facility 4,027,580 17,725,608

Amount utilised – –

Unutilised prime broking finance facility 4,027,580 17,725,608

The prime broking finance facility with UBS Australia Limited is secured by a fixed and floating charge over the Company’s assets, in accordance with the Prime Brokerage Agreement dated 20 January 2003. The Board limits and monitors the amount of leverage the Manager may use. Currently, that limit has been set at up to 3 times the value of the Company's net assets. The secured finance facility had a weighted average interest rate as at the 30 June 2008 of 7.85% (2007: 6.75%). d. Non-cash transactions On 21 April 2008, the Company purchased 11.503% equity interest in HAL Data Services Pty. Limited (an unlisted entity) for a consideration of $4,601,135. Part of the consideration amounting $2,601,135 was paid through transfer of the Company’s secured notes holdings with Lease Company of Australia Limited to the vendors. NOTE 17 - FINANCIAL RISK MANAGEMENT

This note presents information about the Company’s exposure to interest rate risk, credit risk, liquidity risk and market risk, the Board’s objectives, policies and processes for measuring and managing risk, and the management of capital. Further quantitative disclosures are included throughout this financial report.

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

The Board of Directors oversees how management monitors 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 Company manages and monitors its interest rate risk, credit risk, liquidity risk and market risk though the use of an investment mandate set up by the Board of Directors, which provides limits and targets on investment activities. Regular reports are provided to the Board of Directors and Audit Committee of the Company on investment/liquidity activities including where threshold triggers have been activated and remedial actions have been undertaken. a. Interest Rate Risk The Company’s exposure to interest rate risk, is the risk that a financial instrument’s value will fluctuate as a result of changes in market interest rates and the effective weighted average interest rate for each class of financial assets and liabilities. The terms and conditions including interest rate risk for each class of financial asset, financial liability and equity instrument, both recognised and unrecognised at balance date, are included under the appropriate notes for that instrument.

For

per

sona

l use

onl

y


35

2008 2007 $ $

NOTE 17 - FINANCIAL RISK MANAGEMENT (CONTINUED)

b. Credit Risk The carrying amount of the Company’s financial instruments represents the maximum credit exposure. The Company’s maximum exposure to credit risk at reporting date was:

Note

Cash and cash equivalents 471,363 2,071,009

Trade and other receivables 2,555,199 5,306,763

Financial assets – held for trading 8(a) 25,681,817 138,060,943

Financial assets – available for sale 8(b) 14,601,135 10,000,000

Financial assets – loans and receivables 8(c) 26,122,866 34,742,190

Other financial assets 10,599 16,089

Total 69,442,979 190,196,994 None of the Company’s receivables and other financial assets are past due. No impairment losses were recognised during the year. Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Company’s trade and other receivables. The Company’s exposure to Trade and Other Receivables credit risk is influenced mainly by the individual characteristics of each party. The Company has no provision to cover potential losses that may arise from impairment of the Trade and Other Receivable balances. Credit Risk on unlisted investments and securities is managed by monitoring of asset backing, management reports, projections and statutory financial reports. Credit Risk for derivative financial instruments arises from the potential failure by counterparties to the contract to meet their obligations. As all derivative contracts are transacted through recognised exchanges, credit risk associated with these contracts is considered minimal.

For

per

sona

l use

onl

y


36

NOTE 17 - FINANCIAL RISK MANAGEMENT (CONTINUED) c. Liquidity Risk The following are the contractual maturities of financial instruments, including estimated interest payments and excluding the impact of netting agreements: 30 June 2008

Balance

Sheet $

Contractual cash flows

$

6 months

or less $

6-12

months $

1-2

years $

2-5

years $

More than 5 years

$ Non-derivative

financial liabilities

Short-sale investments

1,198,020

(1,198,020)

(1,198,020)

–

–

–

–

Trade and other payables

1,534,474

(1,534,474)

(1,534,474)

–

–

–

–

Prime broker finance facility

13,316,241

(13,316,241)

(13,316,241)

–

–

–

–

Derivative


–

–

–

–

–

–

–

16,048,735 (16,048,735) (16,048,735) – – – –

30 June 2007

Non-derivative financial liabilities

Short-sale investments

33,294,811

(33,294,811)

(33,294,811)

–

–

–

–

Trade and other payables

13,311,280

(13,311,280)

(13,311,280)

–

–

–

–

Prime broker finance facility

53,573,088

(53,573,088)

(53,573,088)

–

–

–

–

Derivative


–

–

–

–

–

–

–

100,179,179 (100,179,179) (100,179,179) – – – –

Liquidity 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 liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company’s reputation. Liquidity risk represents the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities. The Company's major cash outflows are the purchase of securities and dividends paid to shareholders, the levels of which are managed by the management company and the Board, respectively. The Company's inward cash flows depend upon the level of sales of securities, dividends, interest received and any exercise of options that may be on issue.

For

per

sona

l use

onl

y


37

2008 2007 $ $ NOTE 17 - FINANCIAL RISK MANAGEMENT (CONTINUED) c. Liquidity Risk (Continued) The Company monitors its cash flow requirements daily by reference to known transactions to be paid or received. The Company holds a portion of its portfolio in cash and fixed interest securities sufficient to ensure that it has cash available to meet all payments. Alternatively, the Company can increase its level of sales of the readily tradeable securities it holds to increase cash inflows. d. Market Risk Market risk represents the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in the market place. By its nature, as an investment company that invests in tradeable securities, the Company will always be subject to market risk as it invests its capital in securities which are not risk free as the market price of these securities can fluctuate. The Company has investment guidelines which place limits on the composition of the investment portfolio. e. Equity swaps The valuation of financial instruments not shown in the Balance Sheet reflects the estimated amounts expected to be paid or received to terminate the contracts or replace the contracts at their market values as at the reporting date. They involve monthly payments or receipts of the net market differential. Swap contracts are subject to credit risk in relation to the relevant counterparty, which is UBS Nominees Pty Limited. At balance date there are no holdings in swaps contracts. f. Net Fair Values The carrying amounts of financial instruments on the Balance Sheet approximate their net fair values. g. Sensitivity Analysis The Company has performed sensitivity analysis relating to its exposure to interest rate risk and price risk at balance date. This sensitivity analysis demonstrates the effect on the current year results and equity which could result from a change in these risks. Interest Rate Sensitivity Analysis At 30 June 2008, the effect on profit and equity as a result of changes in the interest rate, with all other variables remaining constant would be as follows:

Change in loss after tax - Increase in interest rate by 100 basis points (335,796) (111,841) - Decrease in interest rate by 100 basis points 335,796 111,841 Change in equity - Increase in interest rate by 100 basis points (335,796) (111,841) - Decrease in interest rate by 100 basis points 335,796 111,841

For

per

sona

l use

onl

y


38

Note 2008 2007 $ $ NOTE 17 - FINANCIAL RISK MANAGEMENT (CONTINUED) g. Sensitivity Analysis (Continued) Share Price of Securities Risk Sensitivity Analysis At 30 June 2008, the effect on profit and equity as a result of changes in share price of securities, with all other variables remaining constant would be as follows:

Change in loss after tax - Increase in share price of securities by 100 basis points (171,275) (721,340) - Decrease in share price of securities by 100 basis points 171,275 721,340 Change in equity - Increase in share price of securities by 100 basis points 171,275 721,340 - Decrease in share price of securities by 100 basis points (171,275) (721,340)

NOTE 18 – RELATED PARTY TRANSACTIONS

a. Director’s transactions with the Company i) The Company paid a fee for management services in relation to its investment portfolio to Wallace Funds Management Limited, a company controlled by Mr. Richard Wallace, a director of the Company. During the year, the following amounts were paid to Wallace Funds Management Limited in accordance with the Management Agreement disclosed in Note 11:

Management fees 3a 700,001 356,379

Performance fees 3a – 1,000,533

700,001 1,356,912 ii) The amounts due and payable at balance date to Wallace Funds Management Limited in accordance with the Management Agreement disclosed in Note 11 were:

Management fees 3a 213,625 282,480

Performance fees 3a – 345,407

11 213,625 627,887

b. Related party transactions

The Company has invested in entities controlled by and of which Richard Wallace is a director. Such investments were made on an arm's length basis and no financial benefits accrued to any Director of the Company as a result of such investments.

For

per

sona

l use

onl

y


39

2008 2007 $ $ NOTE 18 – RELATED PARTY TRANSACTIONS (CONTINUED)

i.) The carrying value of such investments, which are included in investments on the Balance Sheet (refer note 8c) are summarised as follows:

Redeemable preference shares in Lease Investments Pty Ltd 10,000,000 10,000,000

Lease Company of Australia Limited secured notes 7,930,865 10,532,000

17,930,865 20,532,000

ii.) Interest received from such investments are as follows:

Redeemable preference shares in Lease Investments Pty Ltd 1,000,000 1,000,000

Lease Company of Australia Limited secured notes 1,009,848 916,104

2,009,848 1,916,104

iii.) Interest receivables from such investments are as follows:

Redeemable preference shares in Lease Investments Pty Ltd 250,000 250,000

Lease Company of Australia Limited secured notes 219,948 263,300

469,948 513,300

c. Key management personnel Information regarding individual Directors’ and executives’ compensation and equity ownership disclosures are provided in the Remuneration Report of the Directors’ Report on pages 12 to 14, as permitted by Corporations regulations 2M.3.03 and 2M.6.04.

NOTE 19 - COMMITMENTS

a. Lease rental contract

Payable

- not later than 1 year – 20,481

- later than 1 year but not later than 5 years – –

- later than 5 years – –

Total lease rental – 20,481 For

per

sona

l use

onl

y


40

NOTE 20 - EVENTS SUBSEQUENT TO BALANCE DATE Sale of Unlisted Investments On 3 September 2008, the Company announced its agreement to sell its entire investments in Lease Company of Australia Limited (LCA) and Lease Investments Pty Limited (LIP) (as disclosed in Note 18) based on a proposal made by HAL Data Services Pty Limited (HAL) on 29 August 2008. The transaction is expected to be completed within 60 days from the date of the announcement whereby loan notes with 11% interest rate per annum will be issued by HAL equivalent to the carrying value of the company’s investment in LCA and LIP.

In addition HAL will provide to the Company interests in residual value of leased assets and other asset backed securities issued or owned by HAL equivalent to the carrying values of the company’s investments in LCA and LIP.

The reason for disposing of these related party investments is to rectify the noncompliance with ASX Listing Rule 10.1 when the Manager inadvertently without shareholders’ approval acquired these investments.

The Company consulted with ASX and obtained confirmation that the corrective action was satisfactory to the ASX in accordance with ASX Listing Rule 10.9.

ASX/ASIC Prohibition on Short-selling On 25 September 2008 the Company released the following statement to the ASX on the effect of short-selling on its portfolio. “Since 19 September 2008 the Australian Securities and Investments Commission (ASIC) has prohibited naked and covered short selling of all securities quoted on licensed markets in Australia, subject to certain exceptions. WAB has on occasions used covered short selling to hedge its market exposures and to reduce risk. Among the current permitted exceptions to the ban on short selling are covered short positions in existence prior to 22 September 2008 and covered short selling in arbitrage transactions. In addition WAB is able to manage market exposures through the use of listed derivatives such as stock options and share price futures. Consequently the effect on WAB’s investment portfolio has been negligible.” NOTE 21 - COMPANY DETAILS The registered office and principal place of business of the Company is: Wallace Absolute Return Limited Suite 3204 Level 32 Australia Square 264-278 George Street Sydney NSW 2000

For

per

sona

l use

onl

y


41

DIRECTORS’ DECLARATION The Directors of Wallace Absolute Return Limited (“the Company”) declare that: 1. The financial statements, notes and additional disclosures set out in the Directors’ Report

designed as “Remuneration Report” as set out on the pages 18 to 40, are in accordance with the Corporations Act 2001, including:

a) complying with Accounting Standards in Australia and the Corporations Regulations

2001; and b) giving a true and fair view of the financial position as at 30 June 2008 and of the

performance for the year ended on that date of the Company;

2. The Directors of the Manager, Wallace Fund Management Limited have declared that:

a) the financial records of the company for the financial year have been properly maintained in accordance with section 286 of the Corporation Act 2001;

b) the financial statements and notes for the financial year comply with the Accounting

Standards; and

c) the financial statements and notes for the financial year give a true and fair view.

3. At the date of this declaration, in the Directors’ opinion there are reasonable grounds to believe

that the Company will be able to pay its debts as and when they become due and payable. Signed in accordance with a resolution of the Board of Directors.

Richard Wallace Managing Director Dated this 29th day of September 2008

For

per

sona

l use

onl

y

42

INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF WALLACE ABSOLUTE RETURN LIMITED

We have audited the accompanying financial report of Wallace Absolute Return Limited (“”the Company”) which comprises the balance sheet as at 30 June 2008, and the income statement, statement of changes in equity and cash flow statement for the year ended on that date, a summary of significant accounting policies and other explanatory notes 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 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.

For

per

sona

l use

onl

y

43

Auditor’s Opinion

In our opinion the financial reports of Wallace Absolute Return 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 2008 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.

Report on the Remuneration Report We have audited the Remuneration Report included in pages 12 to 14 of the Directors’ Report for the year ended 30 June 2008. 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 Australian Auditing Standards. Auditor’s Opinion In our opinion the Remuneration Report of Wallace Absolute Return Limited for the year ended 30 June 2008, complies with section 300A of the Corporations Act 2001.

MOORE STEPHENS SYDNEY Chartered Accountants

C. CHANDRAN Partner Dated in Sydney this 29th day of September 2008

For

per

sona

l use

onl

y

WALLACE ABSOLUTE RETURN LIMITED ABN 58 100 854 788 SHAREHOLDER INFORMATION

44

TWENTY LARGEST SHAREHOLDERS AT 31 AUGUST 2008 Number of ordinary % of capital Name shares held held

1. National Nominees Limited 20,901,566 24.75%

2. UBS Nominees Pty Limited 3,318,287 3.93%

3. Palicave Pty Limited 2,175,000 2.58%

4. Cogent Nominees Pty Limited 2,118,887 2.51%

5. Stuttgart Pty Limited 1,529,383 1.81%

6. Clough Superannuation Pty Limited 1,450,000 1.72%

7. Minefield Investments Pty Limited 1,430,000 1.69%

8. Mr. David Dominic Walsh 1,425,000 1.69%

9. Gatt Holdings Pty Limited 1,040,000 1.23%

10. Kingstead Pty Limited 845,964 1.00%

11. Australian EnterprIse Holdings Pty Limited 710,190 0.84%

12. Crestland Pty Limited 550,000 0.65%

13.Bollin Holdings Pty Limited 525,000 0.62%

14. Jetan Pty Limited 523,948 0.62%

15. The Thomas Foundation 500,000 0.59%

16. PTG Superannuation Pty Limited 463,636 0.55%

17. French Enterprises Pty Limited 446,150 0.53%

18. Masepi Supperannuation Pty Limited 440,000 0.52%

19. Shellco Enterprises Pty Limited 420,000 0.50%

20. Clamain Pty Limited 400,000 0.47%

41,213,011 48.80% On 31 August 2008, there were 1,478 holders of ordinary shares in the capital of the Company. Holders of ordinary shares are entitled to one vote per share. Number of shares held Number of shareholders 1 - 1,000 52 1,001 - 5,000 258 5,001 - 10,000 286 10,001 - 100,000 766 100,001 - and over 96 The number of security investors holding less than a marketable parcel of 1,563 securities ($0.32) on 31/08/2008) is 84 and they hold 72,596 securities. SUBSTANTIAL SHAREHOLDINGS As at 31 August 2008, the names and holdings of substantial shareholders as disclosed in notices received by the Company are as follows: Substantial Shareholders No. of shares % of Total National Nominees Limited 20,901,566 24.75%

For

per

sona

l use

onl

y

WALLACE ABSOLUTE RETURN LIMITED ABN 58 100 854 788 DIRECTORY

45

DIRECTORS SECRETARY Kenneth Barry - Chairman Richard Wallace Alan Liddle - Non- Executive Director Richard Wallace - Managing Director MANAGEMENT REGISTERED OFFICE Wallace Funds Management Limited Suite 3204 Level 32 Level 32 Australia Square 264-278 George Street 264-278 George Street Sydney NSW 2000 Sydney NSW 2000 Phone: (02) 9247 4361 Phone: (02) 9247 4361 Fax: (02) 9247 9271 Fax: (02) 9247 9271 Email: [email protected] Internet: www.wallacefunds.com.au SHARE REGISTRY AUDITORS Link Market Services Limited Moore Stephens Sydney Locked Bag A14 Chartered Accountants Sydney South NSW 1235 Level 7 Phone: (02) 8280 7111 20 Hunter Street Fax: (02) 9287 0303 Sydney NSW 2000 Email: [email protected] Email: [email protected] Internet: www.linkmarketservices.com.au Internet: www.moorestephens.com.au

CUSTODIAN UBS Nominees Pty Limited Level 25, Governor Phillip Tower 1 Farrer Place Sydney NSW 2000 Phone: (02) 9324 2000 Fax: (02) 9324 2558 KEY DATES Annual General Meeting Date: Thursday 27 November 2008

For

per

sona

l use

onl

y

wallace absolute return limited abn 58 100 854 788 for … · 2008-09-30 · wallace absolute...

Documents