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Contents
Financial Highlights
Chairman’s Letter
Investment Manager’s Report
Directors’ Report
Auditor’s Independence Declaration
Financial Statements
Statement of Comprehensive Income
Statement of Financial Position
Statement of Changes in Equity
Statement of Cash Flow
Notes to the Financial Statements
Directors’ Declaration
Independent Auditor’s Report to the Shareholders
Shareholder Information
4
6
8
12
21
22
22
23
24
25
26
41
42
46
Corporate Governance Statement
The Board of Directors of QV Equities Limited (“the Company”) is responsible for corporate governance. The Board has
chosen to prepare the Corporate Governance Statement (‘CGS’) in accordance with the fourth edition of the ASX Corporate
Governance Council’s Principles and Recommendations under which the CGS may be made available on a company’s
website. Accordingly, a copy of the Company’s CGS is available on the Company’s website: www.qvequities.com.
Financial Highlights
Profit After Tax
$5,633,706 ($10,478,231 in FY20)
Management Expense Ratio 1.11%
(1.05% in FY20)
Earnings Per Share (cents)
2.26 Basic (3.85 in FY20)
Portfolio Return
(Pre-tax)* +23.4%
Benchmark*#
+24.9%%
Dividends 4.4 cps
Fully Franked (declared for FY21)
(4.4 cps in FY20)
Portfolio Return
(Post-tax)* +16.4%
ASX 300*
+28.5%
Net Assets $263,369,217
($260,389,742 in FY20)
Net Tangible Assets (NTA)
$1.09 (pre-tax cum div) $1.08 (post tax cum div)
All data as at 30 June 2021 unless otherwise specified. *Returns are measured for the 2021 financial year # S&P/ASX300 ex20 index
Historical NTA Growth
$1.25
$1.15
$1.05
$0.95
$0.85
$0.75
Aug
14
Jan
15
Jun
15
Nov
15
Apr
16
Sep
16
Feb
17
Jul
17
Dec
17
May
18
Oct
18
Mar
19
Aug
19
Historical Dividend Growth
Jan
20
Jun
21
Source: Investors Mutual; 30 June 2021
Nov
20
Jun
20
6.0
5.0
4.0
3.0
2.0
1.0
0.0
QVE Dividend Payment (Fully Franked)
1.0
2.1
2.1
2.0
2.0
1.8
1.5
2.2
2.2
2.2
2.2
1.1
1.1
1.1
1.1
FY16
FY17
FY18
FY19
FY20
FY21
1.5
0.5
FY15
■ Interim ■ Interim ■ Interim ■ Final ■ Special
4
| QV Equities Limited Annual Report 2021
Source: Investors Mutual; 30 June 2021
NTA PER SHARE QVE Pre-tax NTACLIENTS PER SHARE QV Equities Overview
QV Equities Limited (“the Company”) is a Listed Investment Company, established to invest in a diversified portfolio of ASX-listed
entities outside the S&P/ASX20 Index. The Company’s investment portfolio is managed by Investors Mutual Limited (IML).
Investment Objective
The Company’s primary objective is to deliver long-term value to shareholders through a combination of capital
growth and income by investing in a diversified portfolio of quality ASX-listed entities outside the S&P/ASX20 Index.
The Company aims to achieve after-fee returns over a five-year-plus investment period higher than the S&P/ASX300
Accumulation Index, excluding that part of the return generated by S&P/ASX20 Accumulation Index securities.
Foundation of the Company’s Investment Strategy
The Australian sharemarket is heavily concentrated in larger entities both in terms of market capitalisation and industry
sector weighting in the broader market’s main index. The S&P/ASX20 Index – representing the 20 largest entities by market
capitalisation on the ASX – accounts for 54% of the S&P/ASX300 Index by market capitalisation and had a 34% concentration
in the Financial and Resource sectors at 30 June 2021.
Investment Strategy
The Company’s investment strategy is to create a diversified and balanced portfolio of ASX-listed securities outside
the S&P/ASX20 Index, aiming to capitalise on IML’s disciplined investment approach and intensive research process.
When assessing investment opportunities, IML’s team of highly-experienced analysts undertakes a comprehensive
‘bottom-up’ approach to identifying, researching and valuing companies. IML’s approach to identifying opportunities
for the portfolio is systematic and disciplined, and focuses on finding those entities that meet IML’s investment criteria,
and then determining an appropriate valuation for those entities. This is the same approach that IML has applied
successfully for over 23 years.
In addition to long-term capital growth, IML is focused on long-term income growth for the portfolio, seeking investment
opportunities that pay sustainable and growing dividends with attractive franking credits, with the portfolio being
diversified across both industries and individual securities.
QV Equities Limited Annual Report 2021 | 5
A letter from the Chairman, Peter McKillop
Dear Shareholders,
Financial year 2021 was a strong one for investors, with many sharemarkets around the world reaching record highs.
Investor confidence was supported by the reopening of many economies as COVID-19 vaccines were made widely available
in most developed economies.
The Australian sharemarket, as measured by the S&P/ASX300 Index, was no exception, delivering its best financial year
return in over three decades. In Australia, the emergency fiscal stimulus introduced by the Federal Government in response
to the first COVID-19 lockdowns was extended through to March 2021 and the Reserve Bank of Australia cut the cash rate
to 0.1% and introduced its own asset purchasing program.
The Company’s portfolio return to shareholders for the year ended 30 June 2021 was 23.4% compared to the portfolio’s
benchmark (ASX300 ex-20 Accumulation Index) return of 24.9%. This was a strong result for the portfolio, although relative
performance was affected by the Manager’s caution towards highly-valued and cyclical sectors such as Technology and
Resources. The Manager considers many companies in these sectors to have higher risks in the current environment.
Financial Results
The Company earned a net after-tax profit of $5.6 million for the year ended 30 June 2021, down 46.2% from the prior
financial year. On an earnings per share basis, the FY2021 result equates to after-tax earnings of 2.26 cents per share.
This reduction in profit was due primarily to the impact COVID-19 and the associated lockdowns had on a number of the
companies in the portfolio, as many of these companies reduced their dividends.
Dividends
In an environment where interest rates are at record lows and where many investors are in need of regular income the
Board adopted a policy, in October 2020, of paying dividends on a quarterly basis.
A final fully-franked dividend for the 2021 financial year of 1.1 cents per share will be paid on 3 September 2021
(the ex-dividend date for the final dividend will be 16 August 2021). In addition, fully-franked interim dividends of 1.1 cents
per share were paid for the September 2020, December 2020 and March 2021 quarters. This takes total dividends per share
to 4.4 cents for financial year 2021, in line with the prior year.
On Market Buyback
The Board and IML are focused on building long-term value and income for shareholders and addressing the issue of the
Company’s shares trading at a discount to net tangible assets (NTA). An on-market share buyback has been in place since
September 2019 and during the year was extended to September 2022. Apart from supporting the Company’s share price,
the main advantage of the buyback is that the shares are being purchased at a discount to NTA and cancelled, thereby
increasing the NTA per share for remaining shareholders.
Since the buyback commenced, the Company has purchased 36.3 million shares at a cost of $31.9 million to 17 August 2021.
Annual General Meeting
Shareholders are invited to attend the Annual General Meeting (AGM) on Wednesday 27 October 2021 at 4.00pm (AEDT).
Following the AGM, Investors Mutual will provide an update for shareholders on the Company’s portfolio. It is intended that
the AGM will be conducted in-person in Sydney, subject to government advice regarding corporate events.
Shareholders will receive further information about the AGM in September.
6
| QV Equities Limited Annual Report 2021
Chairman’s Letter (continued)
Shareholder Communication
I trust you continue to find our regular communication informative and engaging. This information is delivered through
a variety of formats:
y Weekly Net Tangible Assets (NTA) reports
y Monthly investment commentary
y
y
y
y
Regular investment videos
Portfolio Updates and Investment Insights from the Manager
Annual shareholder briefings in major cities
Regular webinars
I encourage you to subscribe to receive these updates and invitations through the Company’s website www.qvequities.com.
Your Board continues to believe that a carefully selected holding of ex-20 stocks, managed by Investors Mutual Limited,
will provide you with reliable income and long-term capital growth.
The Manager remains disciplined and true to label, and as always seeks to invest in good quality companies, underpinned
by reasonable valuations, with upside potential, sustainable earnings from a diverse range of sectors, and paying consistent
levels of franked dividends.
I look forward to discussing the results presented in this Annual Report further at the Annual General Meeting on 27 October.
Thank you for your continuing support of QVE.
Yours sincerely
Peter McKillop, Chairman
18 August 2021
QV Equities Limited Annual Report 2021 | 7
Investment Manager’s Report
Investors Mutual Limited (‘IML’) is pleased to deliver its investment report for QV Equities Limited (‘QVE’) for the financial year
ended 30 June 2021.
Over the course of financial year 2021, global sharemarkets experienced one of the best 12-month periods on record to
close at or near record highs. From COVID-19-induced lows in March 2020, unprecedented government and central bank
stimulus together with ongoing record low interest rates and investor exuberance served to support economic growth and
sharemarkets, with many companies’ share prices recovering strongly over FY2021.
In such a setting, we remained disciplined and prudent in managing the QVE portfolio of stocks outside the ASX top
20. IML maintains strict adherence to the investment mantra which has defined its approach to investing through all
market cycles for the past 23 years. IML looks to invest in well-established companies which possess the following clear
quality characteristics:
y
y
y
y
y
a competitive advantage over their peers;
a recurring earnings stream;
a capable management team;
the ability to grow earnings and dividends over time; and
an attractive entry price.
The Company’s portfolio at 30 June 2021 was made up of 49 listed securities spread across various ASX sectors.
The Company’s top holdings included well-known companies such as Amcor and Tabcorp as well as other good quality
companies such as Sonic Healthcare, Pact Group and AusNet.
Portfolio Allocation at 30 June 2021
Consumer
Staples
4%
Financials
5%
Materials
19%
Industrials
6%
Energy
7%
Real Estate
7%
Utilities
9%
Consumer
Discretionary
13%
Communication
Services
9%
Health Care
10%
Cash
11%
Source: Investors Mutual
8
| QV Equities Limited Annual Report 2021
Investment Manager’s Report (continued)
Key Equity Investments
Principal activity
Holding weight*
Crown Resorts
Pact Group
Amcor
Tabcorp
Aurizon
AusNet
Orica
Australian-based casino owner and operator
Rigid plastics packaging, contract manufacturing and pallet pooling company
Global packaging company
Wagering and lotteries company
Australian rail company
Owner of electricity distribution and transmission assets
Global manufacturer of commercial grade explosives and chemicals
Sonic Healthcare
Global pathology company
Ampol
Importer, retailer and refiner of petroleum products
Southern Cross Media
Radio and television operator
Origin Energy
Australian energy retailer
Coles
HomeCo
Australian supermarket retailer
Australian-owned property group
SkyCity Entertainment
New Zealand/Australian casino operator
Spark Infrastructure
Owner of electricity and transmission assets
Nine Entertainment
Media company with holdings in radio, TV broadcasting, newspaper
publications and digital media
Pro-Pac Packaging
Packaging and distribution company
Incitec Pivot
Virgin Money UK
Mayne Pharma
Manufacturer and distributor of industrial chemicals, fertilisers and explosives
UK retail bank
Pharmaceutical company
4.96%
4.90%
4.86%
4.71%
4.17%
4.11%
3.77%
3.65%
3.60%
2.77%
2.39%
2.35%
2.28%
2.15%
2.13%
2.09%
2.01%
1.98%
1.98%
1.94%
The complete portfolio is shown on page 46–47 of this financial report.
*Holding weight as at 30 June 2021
Portfolio Performance
The QVE portfolio returned 23.4% before tax and after fees for the 12 months to 30 June 2021, compared to the benchmark
ASX300 ex-20 Index’s return of 24.9%.
This was a strong result for the QVE portfolio, particularly given that the benchmark’s return was driven primarily by rallies
in the more speculative or cyclical sectors such as Technology and Resources. Many companies in these sectors have highly
volatile earnings and business models which are unproven and we remain comfortable with the portfolio’s lower weighting
to these sectors.
The portfolio benefited over the year from its exposure to holdings such as Virgin UK, Pact Group, Tabcorp, Hipages
and Home Consortium, which all performed strongly. The share prices of media companies Nine Entertainment
and oOh!media also improved as advertising spend recovered from the falls seen around the COVID-19 lockdowns.
There were a few disappointing performers over the year including Ampol, Orica and Aurizon. These companies’ earnings
were affected by the impact of COVID-19 on underlying volumes and demand. However, we believe the potential remains
for each of these companies to generate good cashflows and returns as conditions continue to normalise in future.
Tabcorp was a good performer in FY2021, gaining +58% over the year. Tabcorp is the leading wagering and lotteries
operator in the country, with a well-established ‘brick and mortar’ offering complemented by a strongly growing digital
offering. In the early stages of COVID-19 lockdowns, Tabcorp’s shares were sold off as the company faced forced closure
of its retail betting shops and gaming services operations. As a result, concerns around the risk of a breach of debt covenants
saw Tabcorp improve its balance sheet with a capital raising. At the same time, trading in the digital parts of the business,
particularly lotteries, remained very strong. In the second half of FY2021, several strategic bidders expressed interest in
acquiring the company’s wagering business, which drove a strong share price recovery. The company has subsequently
announced a demerger of its lotteries and Keno business which should unlock significant value for shareholders.
QV Equities Limited Annual Report 2021 | 9
Investment Manager’s Report (continued)
Home Consortium, a developer and manager of hyper-convenience retail and service centres, performed strongly for
QVE, up +130% in FY2021. Underlying earnings remained resilient through the peak of COVID-19, highlighting the asset and
tenant quality of the company’s portfolio of assets, which are focused on daily needs, leisure and lifestyle and healthcare.
Future earnings and asset valuations were also augmented by multiple, accretive acquisitions over the period. Highlighting
management strength and the deep relationships they have in the market, many of these transactions were executed
off-market and for lower prices than comparable on- market transactions. During FY2021, the company commenced its path
toward an asset-light management model with the successful listing of the HomeCo Daily Needs REIT in November 2020.
Another very strong performer for QVE was Virgin Money UK, which moved +120% higher over FY2021. Virgin Money UK
is a UK-based bank providing services under the Clydesdale Bank, Yorkshire Bank and Virgin Money brands. In line with
the UK banking sector, Virgin Money UK shares fell on fears of the potentially negative effects COVID-19 was estimated to
have on the UK economy. Since then, government support measures, a relatively successful vaccination program and an
improvement in UK macro conditions have led to a broad re- rating of the UK banking sector. Virgin Money UK has benefited
from this, with the valuation gap to domestic UK peers also closing to better reflect Virgin Money UK’s relatively high-quality
lending book, higher provisioning relative to other UK banks, greater scope for self-help initiatives and excess capital
position.
Regarding Ampol, Orica and Aurizon, we continue to follow these companies closely. While their share price performances
and contributions to the QVE portfolio to date have been below expectations, we continue to hold these companies.
We are of the view that their share prices will recover over the medium term as the impact of factors such as COVID-19
on volume demand and prices abate and these companies’ earnings recover. We believe that these companies’ share prices
currently significantly underestimate the improvement that we will see in the medium to longer term.
An increasing theme over the second half of the financial year was an upsurge in corporate activity, with a number
of ASX-listed companies receiving takeover approaches. This has occurred because record low interest rates has made
borrowing costs for companies very attractive, as well as increased confidence in the outlook for Australia’s economy,
combined with the low valuations of certain ASX-listed companies.
Accordingly, it was not surprising to IML that QVE’s holdings in Australian Pharmaceutical Industries, Crown Resorts and
Spark Infrastructure all received takeover approaches in recent months. Over IML’s history we have often held companies
which have received takeover bids and we see it as an important part of our role to extract full value in these situations.
This occurs when we identify an opportunity or see value where the market does not. All of these companies own strategic
assets, the full values of which were not reflected in the share prices, creating the opportunity for a corporate to seek to
acquire these companies.
Many other companies in the QVE portfolio could similarly be recipients of takeover approaches as many of these
companies are significantly undervalued. Mayne Pharma, Z Energy, Southern Cross Media and A2B have been long-
term holdings of QVE which have been affected by COVID-19 and whose long-term potential is not being reflected in
these companies’ current share prices. We believe the market is not reflecting the improved outlook for these companies
and the changes that have occurred in the nature of their operations. For example, Mayne Pharma has recently launched
its ground-breaking oral contraceptive product Nextstellis in the USA, the first entirely new such product in this segment
in over 20 years. The substantial earnings potential for this product is not reflected in the current share price, with
Metrics, the company’s Contract Drug Development and Manufacturing division, continuing to do well, and the company
transitioning away from its traditional generics operation.
A2B is a business which saw its operations heavily affected by the lockdowns, with the company’s taxi operations operating
at significantly reduced levels. However, the current market valuation of A2B is mostly
supported by the property held on its balance sheet, meaning there is very limited value attributed in the current share
price for the company’s substantial taxi operations (which generated $36 million EBITDA in FY19) and A2B’s suite of
technology products, which have been very successful in allowing the taxi industry locally to compete effectively with
ride-share providers.
10 | QV Equities Limited Annual Report 2021
Investment Manager’s Report (continued)
Outlook
Sharemarkets around the world, including Australia’s, remain well-supported as economic growth continues to rebound
from COVID lows and central banks continue to hold interest rates at record low levels. The Australian sharemarket is now
trading at record levels and as such we continue to steer away from some of the riskier parts of the sharemarket and remain
focused on good quality companies which are well-managed, where valuations remain reasonable and which we firmly
believe can do well over the next 3–5 years.
We remain focused on investing in reasonably valued companies which can grow their long-term earnings through their
own initiatives rather than relying on strong economic growth. These initiatives include companies capable of making
accretive bolt-on acquisitions, such as Sonic Healthcare; companies growing market share, such as Integral Diagnostics;
companies restructuring their businesses, such as Ampol; companies that are on track for revenue growth, such as AusNet;
or companies that are actively taking substantial costs out of their operations, such as Pro-Pac Packaging.
Although market conditions in recent years have not favoured IML’s rational, value style, our focus on the fundamental
value and quality of companies in this way has enabled us to deliver reliable income and long- term capital growth to our
investors over IML’s 23 years of existence, while achieving returns which are more consistent and less volatile than the
overall sharemarket.
It remains a privilege, that we do not take for granted, to apply IML’s quality and value investment philosophy and approach
to investing to the QVE portfolio for another year. We believe that a good quality portfolio of well-established companies
in the ex-20 sector of the market will yield regular income and solid returns in the future as well as offering investors the
opportunity to diversify their exposure away from the ASX top 20 stocks.
We hope to meet as many of you as possible at our Annual General Meeting in October, health conditions and government
regulations permitting.
Thank you for your continued support.
Anton Tagliaferro
Investment Director
Investors Mutual Limited
18 August 2021
Simon Conn
Senior Portfolio Manager
Investors Mutual Limited
QV Equities Limited Annual Report 2021 | 11
Directors’ Report
The Directors present their report together with the financial report of QV Equities Limited (“the Company”) for the year
ended 30 June 2021.
Directors
The following persons were Directors of the Company from their appointment date and up to the date of this report:
Name
Peter McKillop
Jennifer Horrigan
Eamonn Roles
Anton Tagliaferro
Simon Conn
Position
Appointment date
Independent Director (Chairman)
Independent Director
Independent Director
Non-independent Director
Non-independent Director
17 April 2014
26 April 2016
30 August 2019
30 April 2014
14 June 2016
Principal activities
The principal activity of the Company is making investments in a diversified portfolio of entities listed on the Australian
Securities Exchange which are not included in the S&P/ASX 20 Index. The primary objective is to provide both long term
capital growth and income. No change in this activity took place during the year or is likely in the future.
Dividends
Dividends paid to shareholders were as follows:
2021
Ordinary shares – interim 2021
Ordinary shares – interim 2021
Ordinary shares – interim 2021
Ordinary shares – final 2020
2020
Ordinary shares – interim 2020
Ordinary shares – final 2019
Dividend
per share
1.1 cents
1.1 cents
1.1 cents
2.2 cents
2.2 cents
2.2 cents
Total
amount
$2,668,716
$2,697,591
$2,741,593
$5,689,883
$5,956,380
$6,079,577
Date of
payment
4/06/2021
5/03/2021
4/12/2020
18/9/2020
17/03/2020
20/09/2019
%
Franked
100%
100%
100%
100%
100%
100%
Since year end, the Directors have declared a final fully franked dividend of 1.1 cents per fully paid ordinary share to be paid
on 3 September 2021.
Review of operations
Our Investment Manager (“the Manager”), Investors Mutual Limited (“IML”) has patiently built a portfolio of quality ex 20 shares
which IML believe are well placed to deliver the Company’s objectives of long term capital growth and consistent income.
Listed below is the Company’s performance for the past 6 and 12 months:
Performance
Increase in QVE’s NTA
Benchmark return
1 July 2020 to 30 June 2021
+16.4% post-tax | +23.4% pre-tax
1 January 2021 to 30 June 2021
+7.0% post-tax | +9.8% pre-tax
+24.9%
+8.9%
Note: these figures are calculated net of IML’s management fee.
Investment operations for the year ended 30 June 2021 resulted in an operating profit before tax of $6,606,332 (2020:
$11,899,749) and an operating profit after tax of $5,633,706 (2020: $10,478,231).
12 | QV Equities Limited Annual Report 2021
Directors’ Report (continued)
Review of operations (continued)
Net Tangible Assets (NTA) for each ordinary share as at 30 June 2021 (calculated on market value before applicable taxes and
before provision for dividends) amounted to $1.09 (2020: $0.94) per share. NTA after provision for tax and before provision
for dividends was $1.08 (2020: $0.98) per share.
The increase in the NTA during the financial year was primarily driven by an increase in the portfolio valuations with markets
recovering from the COVID-19 induced lows.
Further information on the operating and financial review of the Company is contained in the Chairman’s letter on pages 6
to 7 of the Annual Report.
Financial position
The net asset value of the Company at 30 June 2021 was $263,369,217 (2020: $260,389,742).
Significant changes in the state of affairs
There were no significant changes in the state of affairs of the Company during the year ended 30 June 2021.
Matters subsequent to the end of the year
Since the end of the financial year, the Directors declared a fully franked final dividend of 1.1 cents per fully paid ordinary
share payable on 3 September 2021.The Company bought back 2,033,355 shares for $1,990,953 since 30 June 2021.
Subsequent to 30 June 2021 to the date of this report there has been no other events specific to the Company of which the
Directors are aware which has had a material effect on the Company or its financial position.
Likely developments and expected results of operations
The Company will continue to pursue its primary objective of providing long term capital growth and income through
a diversified portfolio of the ASX listed entities outside of the S&P/ASX 20 index.
The outlook for corporate earnings remains uncertain with the ongoing presence of COVID-19 and the continued
government policy and regulation changes to manage the pandemic.
Further information on the Company’s business strategies and results is contained in the Investment Manager’s Report on
pages 8 to 11 of the Annual Report.
Environmental regulation
The Company is not affected by any significant environmental regulation in respect of its operations.
To the extent that any environmental regulation may have an incidental impact on the Company’s operations, the Directors
of the Company are not aware of any breach by the Company of those regulations.
QV Equities Limited Annual Report 2021 | 13
Directors’ Report (continued)
Information on Directors
Peter McKillop
Independent Director, Chairman
Experience and expertise
Peter McKillop has over 30 years’ experience in the funds
management, financial planning and superannuation
industry. Peter was Managing Director of State Super
Financial Services from 1990 until his retirement in 2011.
During his time with State Super Financial Services,
Peter was responsible for the overall management of
the Company’s activities, including compliance with all
legislative requirements and ensuring that the product
range remained appropriate to clients needs.
Prior to joining State Super Financial Services, Peter was
the Group Manager Investment Services at Perpetual
Funds Management Limited (Perpetual) where he
engineered the launch of Perpetual’s in-house funds
into the retail area in 1987, including Perpetual’s highly
successful Industrial Share Fund.
Peter is a Fellow of the Chartered Accountants Australia
& New Zealand and holds a Bachelor of Economics from
the University of Sydney.
Peter was appointed as the Chairman of the Board
on 14 June 2016.
Jennifer Horrigan
Independent Director
Experience and expertise
Jennifer Horrigan has more than 25 years’ experience
across investment banking, financial communications,
investor relations and strategic communications.
She was most recently the Chief Operating Officer
in Australia of the independent investment bank
Greenhill & Co.
Jennifer holds a Bachelor of Business from the Queensland
University of Technology, a Graduate Diploma in
Applied Finance from Finsia and a Graduate Diploma
in Management from the Australian Graduate School
of Management (AGSM).
14 | QV Equities Limited Annual Report 2021
Other current directorships
Peter McKillop does not hold other directorships of listed
companies.
Former directorships in last 3 years
Peter McKillop has not held any other directorships of listed
companies within the last three years.
Special responsibilities
Chairman of the Board.
Interests in shares of the Company
Details of Peter McKillop’s interest in shares of the Company
are included later in this report.
Interests in contracts
Peter McKillop has no interests in contracts of the Company.
Other current directorships
Jennifer Horrigan is a Director of APN Funds Management,
Yarra Funds Management Ltd, Nikko Asset Management
Australia, APN Industria REIT (ASX: ADI), APN Convenience
Retail REIT (ASX:AQR), A2B Australia Limited (ASX:A2B) and
Redkite (national children’s cancer charity).
Former directorships in last 3 years
Jennifer Horrigan was formerly a Director of Generation
Healthcare (ASX: GHC) and Breast Cancer Trials.
Special responsibilities
Chair of the Audit and Risk Committee.
Interests in shares of the Company
Details of Jennifer Horrigan’s interest in shares of the
Company are included later in this report.
Interests in contracts
Jennifer Horrigan has no interests in contracts of the Company.
Directors’ Report (continued)
Information on Directors (continued)
Eamonn Roles
Independent Director
Experience and expertise
Other current directorships
Eamonn Roles has over 25 years’ experience in the
funds management and financial advisory industries
incorporating Product Development & Management,
Marketing, Strategy and Business Planning, and Operations.
He commenced his career at PricewaterhouseCoopers in
Ireland before joining the Australian firm.
Eamonn is a Chartered Accountant and holds a Graduate
Diploma in Applied Finance from Finsia.
Anton Tagliaferro
Non-independent Director
Experience and expertise
Anton Tagliaferro has over 30 years’ experience in the
financial services industry. Anton founded IML in June
1998 and holds the position of Investment Director.
Anton commenced his professional year with Deloitte
Haskins and Sells in London, where he gained the status
of Chartered Accountant. Anton emigrated to Sydney
in 1984 and joined the funds management industry in
1986 when he joined Prudential Assurance. Anton went
on to successfully manage Australian equity portfolios
for Perpetual, County Natwest Investment Management
and BNP Investment Management before he established
Investors Mutual as a specialist Australian Equities
Manager in 1998 where he has been the Investment
Director for the last 23 years.
Anton holds a Bachelor of Arts (Honours) in Accountancy
and is a member of the Institute of Chartered Accountants
and of the Financial Services Institute of Australasia.
Eamonn Roles does not hold other directorships of listed
companies.
Former directorships in last 3 years
Eamonn Roles has not held any other directorships
of listed companies.
Special Responsibilities
Eamonn Roles is Chairman of the Nominations and Corporate
Governance Committee.
Interests in shares of the Company
Details of Eamonn Roles’ interest in shares of the Company
are included later in this report.
Interests in contracts
Eamonn Roles has no interests in contracts of the Company.
Other current directorships
Anton Tagliaferro is a Director and holds equity interests
in IML.
Former directorships in last 3 years
Anton Tagliaferro has not held any other directorships
of listed companies.
Interests in shares of the Company
Details of Anton Tagliaferro’s interest in shares of the
Company are included later in this report.
Interests in contracts
Details of Anton Tagliaferro’s interest in contracts with the
Company are included later in this report.
QV Equities Limited Annual Report 2021 | 15
Other current directorships
Simon Conn has not held any other directorships
of listed companies.
Former directorships in last 3 years
Simon Conn has not held any other directorships of listed
companies within the last three years.
Interests in shares of the Company
Details of Simon Conn’s interest in shares of the Company
are included later in this report.
Interests in contracts
Details of Simon Conn’s interest in contracts with the
Company are included later in this report.
Directors’ Report (continued)
Information on Directors (continued)
Simon Conn
Non-independent Director
Experience and expertise
Simon Conn has served as part of the Manager’s
investment team since June 1998 and has over 15 years’
experience as a Senior Portfolio Manager in the small
cap sector. While employed with the Manager, Simon
is responsible for analysing stocks from a wide range
of industry sectors which have given him the broad
grounding to manage the Manager’s small cap portfolios.
In 1992 Simon commenced his career at KPMG as a tax
and investment consultant. In 1995 Simon joined the
investment division of QBE Insurance Group where he
was employed as an analyst across a range of asset classes
including equities.
Simon holds a Bachelor of Economics and Bachelor
of Laws from the University of Sydney. Simon is a qualified
solicitor and is a Fellow of the Financial Services Institute
of Australasia.
Simon was appointed to the Board on 14 June 2016.
Zac Azzi
Company Secretary
Zac Azzi has over 25 years’ financial services experience
covering asset management, custody, platform and advice.
Zac started his career in corporate accounting at AMP
and then St George Bank. In 2003 Zac joined Old Mutual
Australia Limited (Skandia) in the role of Head of Finance
and Operations, and subsequently Chief Operating
Officer (COO), helping establish and manage their
Australian operations.
Zac subsequently joined SFG Australia Limited where
he helped established their funds management and
platform businesses before joining IML in August 2015
where he was appointed as COO and Company Secretary.
Zac holds a Bachelor of Commerce from Macquarie
University, a Masters of Business Administration from the
Australian Graduate School of Management and is also
a Certified Practising Accountant.
16 | QV Equities Limited Annual Report 2021
Directors’ Report (continued)
Meeting of Directors
The number of meetings of the Company’s Board of Directors and each Board Committee held during the year ended
30 June 2021, and the number of meetings attended by each Director were:
Directors’ meetings
Audit and Risk
Nominations and
Corporate Governance
Meeting of committees
A
7
7
7
7
7
B
7
7
7
7
7
A
5
5
5
–
–
B
5
5
5
–
–
A
3
3
3
–
–
B
3
3
3
–
–
Directors
Peter McKillop
Jennifer Horrigan
Eamonn Roles
Anton Tagliaferro
Simon Conn
A = Number of meetings attended B = Number of meetings held during the time the Director held office or was a member of the committee during the year
The Company has not established a Remuneration Committee as it has no paid employees. The services of Zac Azzi
(COO and Company Secretary), Anton Tagliaferro (Executive Director) and Simon Conn (Executive Director) are provided
to the Company without additional charge as part of the arrangements with IML.
Remuneration report (audited)
This report details the nature and amount of remuneration for each Director of QV Equities Limited in accordance with the
Corporations Act 2001.
Fees and payments to Directors reflect the demands that are made on and the responsibilities of the Directors and are
reviewed annually by the Board. The Company determines the remuneration levels and ensures they are competitively set
to attract and retain qualified and experienced Directors.
Directors’ base fees are set at a maximum of $100,000 per annum. Directors do not receive bonuses nor are they issued
options on securities. Directors’ fees cover all main Board activities and membership of committees. Under the ASX Listing
Rules, the maximum fees paid to Directors may not be increased without the approval from the Company at a general
meeting. Directors seek approval from time to time as appropriate.
The following table reflects the Company’s performance and Directors’ remuneration over five years:
Five Year Financial Summary
Profit after tax ($m)
Basic EPS (cents)
Total dividends (cents per share)
NTA per share post-tax at 30 June ($)
Share price at 30 June ($)
Total Directors remuneration ($)
2021
5.6
2.26
4.4
1.08
0.995
100,000
2020
10.5
3.85
4.4
0.98
0.795
100,000
2019
9.4
3.40
4.4
1.13
1.030
100,000
2018
11.1
4.05
5.2
1.18
1.140
100,000
2017
8.5
3.61
4.0
1.16
1.329
100,000
As outlined above, Directors’ fees are not directly linked to the Company’s performance.
QV Equities Limited Annual Report 2021 | 17
Directors’ Report (continued)
Remuneration report (audited) (continued)
(a) Details of remuneration
The following table shows details of the remuneration paid and payable by the Company to the Directors for the year
ended 30 June 2021 and 30 June 2020.
2021
Non-Executive Directors
Peter McKillop
Jennifer Horrigan
Eamonn Roles
Total key management personnel compensation
2020
Non-Executive Directors
Peter McKillop
Jennifer Horrigan
John McBain
Eamonn Roles
Total key management personnel compensation
Short term
employee benefits
Directors’ fees
$
Post-employment
benefits
superannuation
$
9,132
27,366
27,366
63,864
30,868
2,634
2,634
36,136
Short term
employee benefits
Directors’ fees
$
Post-employment
benefits
superannuation
$
27,397
27,397
4,566
22,831
82,191
12,603
2,603
434
2,169
17,809
Total
$
40,000
30,000
30,000
100,000
Total
$
40,000
30,000
5,000
25,000
100,000
Directors receive a superannuation guarantee contribution required by the government, which was 9.5% of individual
benefits for financial year 2021 and did not receive any other retirement benefits. Directors may also elect to salary
sacrifice their fees into superannuation.
(b) Director related entity remuneration
All transactions with related entities were made on normal commercial terms and conditions.
Anton Tagliaferro is a Director and holds an equity interests in IML, the entity appointed to manage the investment
portfolio of QV Equities Limited. In its capacity as the Manager, IML was paid a management fee of 0.90% p.a.
(plus GST) of the portfolio net asset value on the first $150 million and then 0.75% p.a. (plus GST) thereafter, amounting
to $2,297,676 (2020: $2,611,265) inclusive of GST. The amount expensed in the Statement of Comprehensive Income
after allowing for the reduced input tax credit was $2,141,016 (2020: $2,433,224). As at 30 June 2021, the balance payable
to the Manager was $185,890 (2020: $188,491).
Simon Conn is a Portfolio Manager of the Manager, and he holds equity interests in the Manager.
No other Directors have received or become entitled to receive a benefit (other than those detailed above) by reason
of a contract made by the Company or a related Company with the Director or with a firm of which he is a member
or with a Company in which he has substantial financial interest.
Directors’ fees are not directly linked to the Company’s performance. Further details of the Company’s performance are
detailed in the Chairman’s Letter and Investment Manager’s Report.
(c) Remuneration of Executives
There are no payments made to the Executives by the Company. IML remunerated Anton Tagliaferro, Simon Conn and
Zac Azzi as employees of the Manager during the financial year. The Manager is appointed to provide the day to day
management of the Company and is remunerated as outlined above.
18 | QV Equities Limited Annual Report 2021
Directors’ Report (continued)
Remuneration report (audited) (continued)
(d) Equity instrument disclosures relating to Directors
As at 30 June 2021, the Company’s Directors and their related parties held the following interests in the Company:
Ordinary shares held
2021
Directors
Peter McKillop
Jennifer Horrigan
Eamonn Roles
Anton Tagliaferro
Simon Conn
2020
Directors
Peter McKillop
Jennifer Horrigan
John McBain*
Eamonn Roles
Anton Tagliaferro
Simon Conn
Balance as at
30 June 2020
504,560
29,200
100,000
6,050,000
230,000
6,913,760
Balance as at
30 June 2019
435,895
–
224,142
–
5,050,000
150,000
5,860,037
Acquisitions
Disposals
Balance as at
30 June 2021**
32,500
–
55,000
2,000,000
170,000
2,257,500
–
–
–
–
–
–
537,060
29,200
155,000
8,050,000
400,000
9,171,260
Acquisitions
Disposals
Balance as at 30
June 2020
68,665
29,200
–
100,000
1,000,000
80,000
1,277,865
–
–
–
–
–
–
–
504,560
29,200
n/a
100,000
6,050,000
230,000
6,913,760
* John McBain resigned from the Company effective 30 August 2019 and his shareholding balance as at 30 June 2020 is not included.
** The Directors’ shareholding balances as at 30 June 2021 were the same at the date of the report except for Anton Tagliaferro who held 8,100,000
shares at the date of this report.
Directors and Director-related entities acquired ordinary shares in the Company on the same terms and conditions
available to other shareholders.
End of Remuneration Report
Insurance and indemnification of Officers and Auditors
During the financial year, the Company paid a premium in respect of a contract to insure the Directors of the Company, the
Company Secretary and any related body corporate against liability incurred as such by a Director or Secretary to the extent
permitted by the Corporations Act 2001. The contract of insurance prohibits disclosure of the nature of the liability and the
amount of the premium.
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 to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf
of the Company, or to intervene in any proceedings to which the Company is a party, for the purpose of taking responsibility
on behalf of the Company for all or part of those proceedings.
QV Equities Limited Annual Report 2021 | 19
Directors’ Report (continued)
Non-audit services
The Board of Directors, in accordance with the advice from the Audit Committee, is satisfied that the provision of
non-audit services during the year is compatible with the general standard of independence for auditors imposed by the
Corporations Act 2001. The Directors are satisfied that the services disclosed in Note 20 did not compromise the external
auditor’s independence for the following reasons:
y
y
all non-audit services have been reviewed by the Audit Committee to ensure they do not impact the impartiality and
objectivity of the auditor; and
none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code
of Ethics for Professional Accountants (including Independence Standards).
Rounding of amounts
The Company is of a kind referred to in ASIC Corporations (Rounding in Financial/ Directors’ Report) Instrument 2016/191,
issued by the Australian Securities and Investment Commission, relating to ‘rounding off’. Amounts in this report have been
rounded off in accordance with that Corporation Instrument to the nearest dollar unless otherwise stated.
Auditor’s independence declaration
A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out
on page 21.
This report is made in accordance with a resolution of the Board of Directors.
Peter McKillop, Chairman
18 August 2021
20 | QV Equities Limited Annual Report 2021
Auditor’s Independence Declaration
QV Equities Limited Annual Report 2021 | 21
Level 16, Tower 2 Darling Park201 Sussex StreetSydney NSW 2000Postal AddressGPO Box 1615Sydney NSW 2001p.+612 9221 2099e.sydneypartners@pitcher.com.auAdelaide Brisbane Melbourne Newcastle Perth SydneyPitcher Partners is an association of independent firms.An independent New South Wales Partnership. ABN 17 795 780 962.Liability limited by a scheme approved under Professional Standards Legislation. Pitcher Partners is a member of the global network of Baker Tilly International Limited, the membersof whichare separate and independent legal entities.pitcher.com.auAuditor’s Independence DeclarationTo the Directors of QV EquitiesLimitedABN 64 169 154 858In relation to the independent auditof QV Equities Limited for the year ended 30 June 2021,I declare that to the best of my knowledge and belief there have been:(i)no contraventions of the auditor’s independence requirements of the Corporations Act2001; and(ii)no contraventions of APES 110 Code of Ethics for Professional Accountants (includingIndependence Standards).C IChandranPartnerPitcher PartnersSydney18 August 2021
Financial Statements for the year ended 30 June 2021
Statement of Comprehensive Income
Investment income
Dividend/distribution income
Interest income
Realised gains on options and futures
Unrealised (losses)/gains on options
Other income
Net investment income
Expenses
Management fees
Directors’ fees
ASX fees
Registry fees
Insurance fees
Other expenses
Total expenses
Profit before income tax
Income tax expense
Profit after income tax
Other comprehensive income
Items that will not be recycled to profit and loss
Movement in fair value of long term equity investments, net of tax
Items that will be recycled to profit and loss
Movement in fair value of floating rate notes, net of tax
Other comprehensive income, net of tax
Notes
30 June 2021
$
30 June 2020
$
6,548,716
147,613
2,702,658
(123,261)
84,070
9,359,796
2,141,016
100,000
72,370
75,889
261,701
102,488
11,185,636
500,649
3,086,218
121,523
41,375
14,935,401
2,433,224
100,000
78,496
70,097
178,001
175,834
2,753,464
3,035,652
5
6,606,332
972,626
5,633,706
11,899,749
1,421,518
10,478,231
30,154,715
(39,203,368)
22,801
30,177,516
(172,735)
(39,376,103)
Total comprehensive income/(loss) for the year, net of tax
35,811,222
(28,897,872)
Earnings per share
Basic and diluted earnings per share (cents per share)
13
2.26
3.85
The Statement of Comprehensive Income should be read in conjunction with the accompanying notes.
22 | QV Equities Limited Annual Report 2021
Financial Statements (continued)
Statement of Financial Position
Notes
30 June 2021
$
30 June 2020
$
Assets
Current assets
Cash and cash equivalents
Receivables
Prepayments
Total current assets
Non-current assets
Long term investments
Deferred tax assets
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade creditors and other payables
Current tax liabilities
Financial liabilities at fair value
Total current liabilities
Total liabilities
Net assets
Equity
Issued capital
Asset revaluation reserve
Capital profits reserve
Profits reserve
Total equity
The Statement of Financial Position should be read in conjunction with the accompanying notes.
6
7
8
5
10
5
9
11
12
19,027,433
31,204,620
954,841
152,513
453,501
90,568
20,134,787
31,748,689
246,182,122
4,202,090
250,384,212
270,518,999
220,112,578
12,765,887
232,878,465
264,627,154
1,144,653
4,856,094
1,149,035
7,149,782
7,149,782
1,805,457
939,610
1,492,345
4,237,412
4,237,412
263,369,217
260,389,742
253,069,464
(9,730,977)
17,094,620
2,936,110
263,369,217
272,103,428
(29,628,264)
13,392,726
4,521,852
260,389,742
QV Equities Limited Annual Report 2021 | 23
Financial Statements (continued)
Statement of Changes in Equity
Issued
capital
$
Asset
revaluation
reserve
$
Capital
profits
reserve
$
Notes
Profits
reserve
$
Retained
profits
$
Total
$
272,103,428 (29,628,264)
13,392,726
4,521,852
– 260,389,742
–
–
–
30,177,516
–
30,177,516
–
–
–
5,633,706
5,633,706
30,177,516
–
5,633,706
35,811,222
Balance at 1 July 2020
Profit for the year
Other comprehensive Income:
Net revaluation of investments
Total comprehensive Income
for the year
Transactions with equity holders in their capacity as owners:
–
(19,033,964)
–
–
–
(6,578,335)
(7,219,448)
– (13,797,783)
– (19,033,964)
Dividends provided for or paid
Share buyback – redemption
Other
Realised profits/(losses) on
sale of investments transferred
to capital profits reserve
Transfer to profits reserve
Balance at 30 June 2021
14
11
12
Balance at 1 July 2019
Profit for the year
Other comprehensive income:
Net revaluation of investments
Total comprehensive income
for the year
Shares issued from dividend
reinvestment plan
Dividends provided for or paid
Share buyback – redemption
Other
Realised profits/(losses) on
sale of investments transferred
to capital profits reserve
Transfer to profits reserve
Balance at 30 June 2020
11
14
11
12
–
–
–
–
– (10,280,229)
10,280,229
–
–
–
–
5,633,706
(5,633,706)
–
–
253,069,464
(9,730,977)
17,094,620
2,936,110
– 263,369,217
Issued
capital
$
Asset
revaluation
reserve
$
Capital
profits
reserve
$
Notes
Profits
reserve
$
Retained
profits
$
Total
$
282,529,624
9,189,720
15,019,704
5,010,719
–
311,749,767
–
–
–
(39,376,103)
–
(39,376,103)
365,149
–
(10,791,345)
–
–
–
–
–
–
–
–
–
–
–
(1,068,859)
(10,967,098)
–
10,478,231
10,478,231
–
(39,376,103)
10,478,231
(28,897,872)
–
–
–
–
365,149
(12,035,957)
(10,791,345)
–
–
558,119
(558,119)
–
–
–
–
10,478,231
(10,478,231)
272,103,428
(29,628,264)
13,392,726
4,521,852
–
260,389,742
Transactions with equity holders in their capacity as owners:
The Statement of Changes in Equity should be read in conjunction with the accompanying notes.
24 | QV Equities Limited Annual Report 2021
Statement of Cash Flow
Cash flows from operating activities
Dividends/distributions received
Interest received
Net realised gains on exchange traded options
Payments for other expenses
Other income
Income tax paid
Net cash inflow from operating activities
Cash flows from investing activities
Payments for investments
Proceeds from sale of investments
Net cash inflow from investing activities
Cash flows from financing activities
Dividends paid
Payments for share buyback
Net cash outflow from financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents held at beginning of the year
Cash and cash equivalents at the end of the year
Non-cash transactions:
Shares issued via dividend reinvestment plan
The above Statement of Cash Flow should be read in conjunction with the accompanying notes.
Notes
30 June 2021
$
30 June 2020
$
6,506,141
147,729
2,241,290
(2,848,071)
97,448
(1,499,483)
4,645,054
(68,126,016)
84,596,052
16,470,036
(13,797,783)
(19,494,494)
(33,292,277)
(12,177,187)
31,204,620
19,027,433
11,425,521
520,474
2,864,451
(3,101,464)
41,375
(2,174,792)
9,575,565
(80,360,574)
83,920,962
3,560,388
(11,670,808)
(10,330,815)
(22,001,623)
(8,865,670)
40,070,290
31,204,620
–
365,149
6
6
QV Equities Limited Annual Report 2021 | 25
Financial Statements (continued)
Notes to the Financial Statements for the year ended 30 June 2021
1. General information
QV Equities Limited (“the Company”) is a listed investment company domiciled in Australia. The Company was established
with the primary objective of providing long term capital growth and income, through a diversified portfolio of the
ASX listed entities outside of the S&P/ASX 20 Index. The portfolio is managed by Investors Mutual Limited.
The Company was registered with the Australian Securities Commission (ASIC) on 17 April 2014 and commenced operations
on 22 August 2014.
The financial statements were authorised for issue by the Board on 18 August 2021.
2. Summary of significant accounting policies
The principal accounting policies adopted in the preparation of these financial statements are set out below. The annual
financial statements are for the entity QV Equities Limited.
(a) Basis of preparation
These general purpose annual financial statements for the year ended 30 June 2021 have been prepared in accordance
with the Australian Accounting Standards and interpretations issued by the Australian Accounting Standards Board
and the Corporations Act 2001. The Company is a for-profit entity for financial reporting purposes under the Australian
Accounting Standards.
(i) Compliance with IFRS
The financial statements of the Company also comply with International Financial Reporting Standards (IFRS)
as issued by the International Accounting Standards Board (IASB).
(ii) New accounting standards and Interpretations
There are no new standards or interpretations applicable that would have a material impact for the Company.
(iii) Standards issued but not yet effective
There are no other standards that have been issued but not yet effective and that would be expected to have
a material impact on the entity in the current or future reporting periods and on foreseeable future transactions.
(b) Investments
(i) Recognition and initial measurement
Long term equity investments and investments held for sale are recognised initially at cost. Financial liabilities are
recognised initially at cost.
(ii) Classification and subsequent measurement
The Company classifies its investments based on its business model for managing those financial assets and the
contractual cash flow characteristics of the investments.
For long term equity securities, the cash flows do not represent solely payments of principal and interest and
they are not held for trading. Therefore, the Company has made an irrevocable election to present fair value
movements on these securities in other comprehensive income which accumulates in the asset revaluation reserve.
On derecognition the cumulative gain /loss on these securities are transferred to the capital profits reserve.
For floating rate securities, the contractual cash flows are solely payments of principal and interest and the business
model objective is achieved by both collecting contractual cash flows and selling these financial assets. Therefore, the
Company mandatorily presents these securities in other comprehensive income which accumulates in the asset
revaluation reserve. On derecognition the cumulative gain/loss on these securities are recycled to the profit or loss.
The Company holds call options which are derivative financial instruments classified as financial liabilities at fair
value through profit and loss, changes in the fair value of options are recognised in profit or loss for the year.
(iii) 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 Company no longer has any significant continuing involvement
in the risks and benefits associated with the asset. Realised gains or losses on long term equity investments are
transferred from the asset revaluation reserve to the capital profits reserve.
26 | QV Equities Limited Annual Report 2021
Notes to the Financial Statements (continued)
2. Summary of significant accounting policies (continued)
(b) Investments (continued)
(iv) Valuation
All investments are classified and measured as being at fair value, please refer to note 4 for more information
on the Company’s policy for measuring fair value.
(c) Revenue
(i)
Interest income
Interest income is recognised as it accrues, taking into account the effective yield on the financial asset.
(ii) Dividend income
Dividend income is recognised in the profit or loss on the day on which the relevant investment is first quoted
on an “ex-dividend” basis.
(d) Expenses
All expenses, including management fees, are recognised in the profit and loss on an accruals basis.
(e)
Income tax
The income tax expense or benefit for the year is the tax payable on the current year’s taxable income based on the
applicable income tax rate, adjusted by changes in the deferred tax assets and liabilities attributable to temporary
differences, unused tax losses and the adjustment recognised for prior periods, where applicable.
Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply when the
assets are recovered or liabilities are settled, based on those tax rates that are enacted or substantively enacted.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that
future taxable amounts will be available to utilise those temporary differences and losses.
The carrying amount of recognised and unrecognised deferred tax assets are reviewed each reporting date.
Deferred tax assets recognised are reduced to the extent that it is no longer probable that future taxable profits will
be available for the carrying amount to be recovered.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and
liabilities. Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and
intends to either to settle on a net basis, or to realise the asset and settle the liability simultaneously.
(f) Goods and Services Tax (GST)
Revenues, expenses and assets are recognised net of the amount of goods and services tax (GST), unless GST incurred
is not recoverable from the Australian Taxation Office (ATO). In this case it is recognised as part of the cost of acquisition
of the asset or as part of the expense.
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST
recoverable from, or payable to, the tax authority is included in other receivables or other payables in the Statement
of Financial Position.
Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing
activities which are recoverable from, or payable to the ATO, are presented as operating cash flows.
(g) Cash and cash equivalents
Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term,
highly liquid investments with original maturities of three months or less that are readily convertible to known amounts
of cash which are subject to an insignificant risk to changes in value.
(h) Receivables
Receivables are initially recognised at fair value and subsequently measured at amortised cost, less expected credit losses.
Receivables may include interest, dividends and trust distributions. Interest, dividends and trust distributions are
accrued in accordance with the policy note set out in note 2(c).
QV Equities Limited Annual Report 2021 | 27
Notes to the Financial Statements (continued)
2. Summary of significant accounting policies (continued)
All receivables, unless otherwise stated are non interest bearing, unsecured and generally received in 30 days of being
recorded as a receivable.
(i) Trade creditors and other payables
These amounts represent liabilities for goods and services provided to the Company prior to the reporting date which
was unpaid. These amounts are unsecured and are usually paid within 30 days of recognition. Purchases of securities
and investments that are unsettled at the reporting date are included in payables and are normally settled within
2 business days of trade dates.
(j) Share capital
Ordinary shares will be classified as equity. Costs directly attributable to the issue of ordinary shares will be recognised
as a deduction from equity, net of tax. Shares bought back will be recognised as a reduction to ordinary shares.
(k) Dividends
Provision is made for the amount of any dividend declared, being appropriately authorised and no longer at the
discretion of the Company, on or before the end of the reporting period but not distributed at the end of the reporting
period.
It is the Boards’ policy that all dividends paid will be franked to the maximum extent possible.
(l) Earnings per share
(i) Basic earnings per share
Basic earnings per share is calculated by dividing:
y
y
the profit attributable to owners 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, adjusted for bonus
elements in ordinary shares issued during the year and shares bought back during the year.
(i) Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take
into account:
y
y
the after income tax effect of interest and other financing costs associated with dilutive potential ordinary
shares; and
the weighted average number of ordinary shares that would have been outstanding assuming the conversion
of options.
(m) Rounding of amounts
In accordance with ASIC Corporations (Rounding in Financial/Director’s Reports) Instrument 2016/191, the amounts in the
Directors’ report and in the financial report have been rounded to the nearest dollar unless otherwise stated.
(n) Functional and presentation currency
The functional and presentation currency of the Company is Australian dollars.
(o) Critical accounting judgements, estimates and assumptions
The preparation of the financial statements requires management to make judgements, estimates and assumptions
that affect the reported amounts in the financial statements.
Apart from the items mentioned below, there are no key judgements, estimates and assumptions that have a risk
of causing material adjustment to the carrying amount of assets and liabilities within the next financial year.
Recovery of deferred tax assets
Deferred tax assets are recognised for deductible temporary differences only if the Company considers it is probable
that future taxable amounts will be available to utilise those temporary differences and losses.
28 | QV Equities Limited Annual Report 2021
Notes to the Financial Statements (continued)
3. Financial risk management
The Company’s financial instruments consist of deposits with banks, listed and unlisted investments, trade and other
receivables and trade and other payables. The main risks the Company is exposed to through its financial instruments are
market risk – consisting of interest rate risk and other price risk, credit risk and liquidity risk.
Under delegation from the Board, the Manager is responsible for the daily monitoring and risk assessment of the Company’s
financial market risk.
(a) Market risk
Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes
in market prices. By its nature, as a listed investment company that invests in tradable 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 Manager seeks to reduce market risk for the Company by diversification of the investment portfolio across
numerous stocks and multiple industry sectors. The Manager reviews the relative weightings of the individual securities
and market sectors daily.
(i) Price risk
The Company is exposed to equities securities price risk. This arises from investments held by the Company and
classified in the Statement of Financial Position as long term investments and financial liabilities at fair value.
The Company seeks to manage and constrain other price risk by diversification of the investment portfolio across
multiple stocks and industry sectors. The portfolio is maintained by the Manager within a range of parameters
governing the levels of acceptable exposure to stocks and industry sectors. The relative weightings of the
individual securities and relevant market sectors are reviewed on a daily basis such that risk can be managed by
reducing exposure where necessary.
The Company’s industry sector weighting of investments including options as at 30 June 2021 and 30 June 2020
is listed below:
Industry sector
Financials
Materials
Health Care
Utilities
Consumer Discretionary
Industrials
Energy
Listed Property Trusts
Communication Services
Consumer Staple
Information Technology
Cash
Sensitivity analysis
2021
%
4.7
19.2
9.7
8.6
13.4
6.4
6.8
7.0
9.1
4.4
0.0
89.3
10.7
100.0
2020
%
2.3
19.7
9.3
8.8
12.2
4.9
10.3
4.5
6.2
2.8
1.0
82.0
18.0
100.0
A sensitivity analysis relating to price risk was performed on investments held by the Company at the end of the
reporting year. The sensitivity assumes all other variables remain constant.
QV Equities Limited Annual Report 2021 | 29
Notes to the Financial Statements (continued)
3. Financial risk management (continued)
(a) Market risk (continued)
(i) Price risk (continued)
Investments represent 91% (2020: 82%) of gross assets at year end. The following table illustrates the effect on the
Company’s equity from possible changes in price risk that were reasonably possible based on the risk the Company
was exposed to at reporting date, assuming a flat tax rate of 30% (2020: 30%).
Increase 5%
Decrease 5%
Increase 10%
Decrease 10%
Impact on Total
Comprehensive income
2021
$
8,576,158
(8,576,158)
17,152,316
(17,152,316)
2020
$
7,651,708
(7,651,708)
15,303,416
(15,303,416)
(ii) Cash flow and fair value interest rate risk
The Company’s interest bearing financial assets expose it to risks associated with the effects of fluctuations
in the prevailing levels of market interest rates on its financial position and cash flows. The risk is measured using
sensitivity analysis.
The table below summarises the Company’s exposure to interest rate risk. It includes the Company’s assets and
liabilities at fair value, categorised by the earlier of contractual repricing or maturity dates.
30 June 2021
Financial assets
Cash and cash equivalents
Receivables
Long term investments
Financial liabilities
Trade creditors and other payables
Financial liabilities at fair value
Floating interest
rate
$
Non-interest
bearing
$
19,027,433
–
3,976,590
23,004,023
–
–
–
–
954,841
242,205,532
243,160,373
(1,144,653)
(1,149,035)
(2,293,688)
Total
$
19,027,433
954,841
246,182,122
266,164,396
(1,144,653)
(1,149,035)
(2,293,688)
Net exposure to interest rate risk
23,004,023
240,866,685
263,870,708
30 June 2020
Financial assets
Cash and cash equivalents
Receivables
Long term investments
Financial liabilities
Trade creditors and other payables
Financial liabilities at fair value
31,204,620
–
3,944,200
35,148,820
–
–
–
Net exposure to interest rate risk
35,148,820
–
453,501
216,168,378
216,621,879
(1,805,457)
(1,492,345)
(3,297,802)
213,324,077
31,204,620
453,501
220,112,578
251,770,699
(1,805,457)
(1,492,345)
(3,297,802)
248,472,897
The weighted average interest rate of the Company’s interest bearing financial assets at 30 June 2021 is 0.61%
(2020:1.06%).
30 | QV Equities Limited Annual Report 2021
3. Financial risk management (continued)
(a) Market risk (continued)
(ii) Cash flow and fair value interest rate risk (continued)
Sensitivity analysis
At 30 June 2021, if interest rates had increased/decreased by 75 basis points (2020: 75 basis points) from the
year end rates with all other variables held constant, post-tax profit for the year would have been $127,822
(2020:$237,150) higher/$127,822 (2020: $237,150) lower, mainly as a result of higher/lower interest income from
interest bearing financial assets.
(b) Credit risk
Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing
to discharge an obligation.
Market prices generally incorporate credit risk assessments into valuations and risk of loss is implicitly provided for
in the carrying value of assets and liabilities as they are marked to market at balance date.
The total credit risk for assets is therefore limited to the amount carried in the Statement of Financial Position.
The Manager is responsible for ensuring there is appropriate diversification across counterparties and that they are
of a sufficient quality rating. The Manager minimises the Company’s concentration of credit risk by undertaking
transactions in ASX listed securities with a large number of approved brokers. Payment is only made once a broker has
received securities and delivery of securities only occurs once the broker received payment.
Cash
The majority of the Company’s short term deposits are invested with financial institutions that have a Standard and
Poor’s AA or A1 credit rating. The majority of maturities are within three months.
Receivables
The majority of the Company’s receivables arise from dividends and distributions yet to be received. None of these
assets exposed to credit risk are overdue or considered to be impaired.
(c) Liquidity risk
Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities.
The Company’s cash receipts depend on the level of dividends and interest received and the exercise of options that
may be on issue. The Company’s cash payments are the purchase of securities, expenses paid and dividends that are
paid to shareholders. Payables are due within less than 6 months. In the case of call options, there are no contractual
cash flows as if the option is exercised the contract will be settled in the securities over which the option is written.
The Manager monitors the Company’s cash flow requirements daily by reference to known purchase and sale of
securities, dividends and interest received. Should these decrease by a material amount the Company can alter its cash
outflows as appropriate. The Company also holds a portion of its portfolio in cash and term deposits sufficient to ensure
that it has cash readily available to meet all payments. Finally, the assets of the Company are largely in the form of
tradable securities which can be sold on market if necessary.
The Company is not exposed to material liquidity risk.
QV Equities Limited Annual Report 2021 | 31
Notes to the Financial Statements (continued)
Notes to the Financial Statements (continued)
4. Fair value measurement
The Company measures and recognises the following assets and liabilities at fair value on a recurring basis:
y
y
Long term investments
Financial liabilities held for trading
Fair value hierarchy
AASB 13: Fair value measurement requires disclosure of fair value measurements by level of the fair value hierarchy:
Level 1 – measurements based on quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2 – measurements based on inputs other than quoted prices included in level 1 that are observable for the asset
or liability; and
Level 3 – measurements based on unobservable inputs from the asset or liability.
(i) Recurring fair value measurements
The following table presents the Company’s assets measured and recognised at fair value as at 30 June 2021 and
30 June 2020.
As at 30 June 2021
Financial assets
Long term investments:
Listed equities
Listed unit trusts
Floating rate notes
Total
Financial liabilities
Financial liabilities held for trading:
Options
Futures
Total
As at 30 June 2020
Financial assets
Long term investments:
Listed equities
Listed unit trusts
Floating rate notes
Total
Financial liabilities
Financial liabilities held for trading:
Options
Total
Level 1
$
Level 2
$
Level 3
$
Total
$
220,407,856
21,797,676
3,976,590
246,182,122
1,144,035
5,000
1,149,035
Level 1
$
198,249,379
17,918,999
3,944,200
220,112,578
1,492,345
1,492,345
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Level 2
$
Level 3
$
–
–
–
–
–
–
–
–
–
–
–
–
220,407,856
21,797,676
3,976,590
246,182,122
1,144,035
5,000
1,149,035
Total
$
198,249,379
17,918,999
3,944,200
220,112,578
1,492,345
1,492,345
Included within Level 1 of the hierarchy are listed investments. The fair value of these financial assets and liabilities have
been based on the last close prices at the end of the reporting year.
During the year $nil (2020: $nil) has been transferred from Level 2 to Level 1. There were no transfers in and out of Level
2 and Level 3.
The Company’s policy is to recognise transfers into and transfers out of fair value hierarchy levels as at the end of the
reporting period.
(ii) Disclosed fair values
The carrying amounts of receivables and payables other than tax items are reasonable approximations of their fair
values due to their short-term nature.
32 | QV Equities Limited Annual Report 2021
5. Taxation
(a)
Income tax expense
The prima facie tax on profit from ordinary activities before income tax is reconciled to the income tax expense as follows:
Prima Facie tax on profit from ordinary activities before income tax of 30% (2020: 30%)
1,981,900
3,569,925
30 June 2021
$
30 June 2020
$
Increase/(decrease) in income tax expense due to:
Gross up of imputation credits received
Imputation credits on dividends received
Gross up of foreign income tax offsets
Foreign income tax offsets
Franked dividend income receivable
Tax deferred and income from trust distributions
Cash flow boost received
Under/(over) provision in previous year
Share buyback costs raised directly in equity
Tax expense composition:
Current tax expense
Movement in deferred tax liabilities
Movement in deferred tax assets
Under provision in previous year
Share buyback costs raised directly in equity
Effective tax rate is:
420,710
(1,402,367)
3,779
(12,598)
1,227
–
(3,000)
(3,000)
(14,025)
972,626
819,801
93,480
73,357
13
(14,025)
972,626
798,392
(2,661,307)
62,694
(208,979)
(5,427)
(167,708)
–
42,328
(8,400)
1,421,518
1,463,524
(141,276)
65,342
42,328
(8,400)
1,421,518
The charge for current income tax expense is based on the profit for the year adjusted for
any non-assessable or disallowed items. It is calculated using the tax rates that have been
enacted or are substantially enacted by the end of the current financial year.
14.72%
11.95%
(b) Deferred tax assets
This balance comprises temporary differences attributable to:
Accruals
Share issue costs capitalised
Transfer from deferred tax liabilities
Movements
Opening balance
Share issue costs capitalised
Charged to statement of comprehensive income
Impact of retrospective tax change
Transfer from deferred tax liabilities
The rate used at 30 June 2021 is 30% (2020: 30%)
30 June 2021
$
30 June 2020
$
10,890
16,261
4,174,939
4,202,090
12,765,887
14,025
(73,357)
–
(8,504,465)
4,202,090
18,061
68,422
12,679,404
12,765,887
134,635
8,400
(65,342)
8,790
12,679,404
12,765,887
QV Equities Limited Annual Report 2021 | 33
Notes to the Financial Statements (continued)
Notes to the Financial Statements (continued)
5. Taxation (continued)
(c) Current tax liabilities
Balance at beginning of year
Current year income tax on operating profit
Current year realised capital gain
Net income tax paid
Under provision of income tax in previous year
(d) Deferred tax liabilities
This balance comprises temporary differences attributable to:
Fair value adjustment on equity investments
Revaluation of options
Income receivable not assessable for tax until receipt
Tax deferred distributable income
Transfer to deferred tax assets*
Movements
Opening balance
Charged to statement of comprehensive income
Impact to other comprehensive income
Under/(over) provision
Transfer to deferred tax assets*
The rate used at 30 June 2021 is 30% (2020: 30%)
*Debit balance on deferred tax liabilities transferred to deferred tax assets.
6. Cash and cash equivalents
Cash at bank
Total cash and cash equivalents
Reconciliation of operating profit after tax to cash inflows from operating activities
Net profit after income tax
Changes in operating assets and liabilities
Unrealised losses/(gains) on options
(Increase)/decrease in dividends/distributions receivable
Decrease in interest receivable
(Increase) in prepayments
(Decrease) in sundry creditors and accruals
Decrease in deferred tax assets
(Decrease) in current tax provision
Increase/(decrease) in deferred tax liabilities
Net cash inflow from operating activities
34 | QV Equities Limited Annual Report 2021
30 June 2021
$
30 June 2020
$
939,610
822,814
4,596,166
(1,499,483)
(3,013)
4,856,094
1,631,044
1,463,524
–
(2,174,792)
19,834
939,610
30 June 2021
$
30 June 2020
$
(3,961,403)
(12,500,525)
(84,732)
16,875
(145,679)
4,174,939
–
–
93,480
8,410,972
13
(8,504,465)
–
(49,315)
33,642
(163,206)
12,679,404
–
4,588,095
(141,276)
(16,931,180)
(195,043)
12,679,404
–
30 June 2021
$
19,027,433
19,027,433
30 June 2020
$
31,204,620
31,204,620
30 June 2021
$
5,633,706
30 June 2020
$
10,478,231
123,261
(42,575)
116
(61,945)
(480,651)
59,332
(679,670)
93 ,480
(988,652)
4,645,054
(121,523)
239,885
19,825
(5,026)
(282,553)
48,152
(465,107)
(336,319)
(902,666)
9,575,565
7. Receivables
Receivable – investment debtors
Interest receivable
Dividends/distributions receivable
Other receivables
Total receivables
30 June 2021
$
30 June 2020
$
472,257
–
436,965
45,619
954,841
–
116
394,390
58,995
453,501
None of the receivables are past the due date or impaired.
8. Long term investments
Financial assets held at fair value through other comprehensive income are all held as long term investments and include
the following:
Listed securities
30 June 2021
$
30 June 2020
$
246,182,122
220,112,578
The fair value of investments is based on the fair value measurement hierarchy disclosed in note 4(i).
The total dividends received on these investments sold, included in the Statement of Comprehensive Income were:
Dividend income:
Listed securities held at year-end
Listed securities sold during the year
Total dividend
2021
$
6,115,184
433,532
6,548,716
2020
$
7,005,622
4,180,014
11,185,636
During the year, the total fair value of investments sold in the normal course of the business and to preserve capital were:
Fair value at disposal date
Listed securities
Loss/(gain) on disposal after tax
Listed securities
2021
$
2020
$
85,068,309
83,694,166
(10,280,229)
558,119
9. Financial liabilities held at fair value
Financial liabilities held at fair value through profit or loss are held for trading and include the following:
Exchange traded options
Exchange traded options revaluation
Total financial liabilities at fair value
30 June 2021
$
30 June 2020
$
866,595
282,440
1,149,035
1,327,962
164,383
1,492,345
QV Equities Limited Annual Report 2021 | 35
Notes to the Financial Statements (continued)
Notes to the Financial Statements (continued)
10. Trade creditors and other payables
Payable – investment creditors
Payable – share buyback
Payable – other expenses
Total trade creditors and other payables
11. Issued capital
(a) Share capital
30 June 2021
$
30 June 2020
$
833,725
–
310,928
1,144,653
995,096
460,530
349,831
1,805,457
30 June 2021
Number of
Shares
30 June 2021
Total amount
$
30 June 2020
Number of
shares
30 June 2020
Total amount
$
Fully paid ordinary shares
242,506,634
253,069,464
264,818,778
272,103,428
(b) Movements in ordinary share capital
2021
Date
01/07/2020
Opening balance
Ordinary shares issued under dividend
reinvestment plan
Share buyback – redemption
30/06/2021
Closing balance
2020
Date
01/07/2019
Opening balance
Ordinary shares issued under dividend
reinvestment plan – final 2019
Share buyback – redemption
30/06/2020
Closing balance
* Rounded to two decimal places.
(c) Fully paid ordinary shares
Number of
shares
264,818,778
–
(22,312,144)
242,506,634
Number of
shares
276,344,417
380,059
(11,905,698)
264,818,778
Share price*
$
–
0.85
–
Share price*
$
282,529,624
0.96
0.91
Total amount
$
272,103,428
–
(19,033,964)
253,069,464
Total amount
$
365,149
(10,791,345)
272,103,428
Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the Company in
proportion to the number of and amounts paid on the shares held.
(d) Capital management
The Company’s objectives in managing capital is to continue to provide shareholders with dividends and capital
appreciation over the longer term.
In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to
shareholders, return capital to shareholders, issue new shares, buyback shares or sell assets to reduce debt.
The Company is not subject to any externally imposed capital requirements.
36 | QV Equities Limited Annual Report 2021
12. Reserves
(a) Capital profits reserve
Realised gains or losses on long term equity investments are transferred from the asset revaluation reserve to the
capital profits reserve for dividend payments.
Realised (loss)/profit on sale of investments transferred to reserves
10,280,229
(558,119)
30 June 2021
$
30 June 2020
$
Movements:
Opening balance
Transfer from asset revaluation reserve – gains/(losses) on sale of equities
Dividends provided for or paid
Closing balance
(b) Asset revaluation reserve
13,392,726
10,280,229
(6,578,335)
17,094,620
15,019,704
(558,119)
(1,068,859)
13,392,726
Changes in the fair value of long term investments are presented in other comprehensive income through the assets
revaluation reserve. Upon disposal of long term investment the realised gain or loss is transferred from the asset
revaluation reserve to the capital profits reserve.
13. Earnings per share
30 June 2021
cents
30 June 2020
cents
(a) Basic and diluted earnings per share
Total earnings per share attributable to the ordinary equity holders of the Company
2.26
3.85
(b) Weighted average number of shares used as denominator
Weighted average number of shares used as the denominator in calculating basic and diluted
earnings per share is based on the weighted average number of shares on issue during the year.
Diluted earnings per share and basic earnings per share are the same as there are no potential dilutive ordinary shares.
249,046,600
272,040,430
14. Dividends
(a) Dividends paid during the year
Dividends paid fully franked at 30% (2020: 30%) tax rate.
Final dividend FY20: 2.2 cents per share fully franked paid 18 September 2020
(Final dividend FY19: 2.2 cents per share fully franked paid 20 September 2019)
Interim dividend FY21: 1.1 cents per share fully franked paid 4 December 2020
lnterim dividend FY21: 1.1 cents per share fully franked paid 5 March 2021
(Interim dividend FY20: 2.2 cents per share fully franked paid 17 March 2020)
lnterim dividend FY21: 1.1 cents per share fully franked paid 4 June 2021
30 June 2021
$
30 June 2020
$
5,689,883
2,741,593
2,697,591
2,668,716
13,797,783
6,079,577
–
5,956,380
–
12,035,957
QV Equities Limited Annual Report 2021 | 37
Notes to the Financial Statements (continued)
Notes to the Financial Statements (continued)
14. Dividends (continued)
(b) Dividends not recognised at the end of the reporting period
30 June 2021
$
30 June 2020
$
In addition to the above dividends, since year end the Directors have recommended the
payment of a final dividend of 1.1 cents per fully paid ordinary share, fully franked based
on tax paid at 30%. The aggregate amount of the proposed dividend expected to be
paid on 3 September 2021 (2020: 18 September 2020) out of the profits of the Company
at 30 June 2021 and 30 June 2020, but not recognised as a liability at year end is:
2,667,573
5,826,013
(c) Dividends franking account
The fully franked final dividend to be paid on 3 September 2021 will be franked out of existing franking credits or out
of franking credits arising from the payment of income tax in relation to the year ended 30 June 2021.
Opening balance of franking account
Franking credits on dividends received
Tax paid during the period
Franking credits on ordinary dividends paid
Closing balance of franking account
Adjustment for tax payable on the current period profits
Franking credits available for use in subsequent reporting periods
Adjusted for dividends declared subsequent to reporting period 30% (2020: 30%)
Adjusted franking account balance
30 June 2021
$
30 June 2020
$
4,323,424
1,402,367
1,499,483
(5,913,336)
1,311,938
4,856,094
6,168,032
(1,143,246)
5,024,786
4,645,592
2,661,307
2,174,792
(5,158,267)
4,323,424
939,610
5,263,034
(2,496,863)
2,766,171
The Company’s ability to continue to pay franked dividends is dependent upon the receipt of franked dividends from
investments and the payment of tax.
15. Key management personnel
The names and position held of the Company’s key management personnel (including Directors) in office at any time during
the financial year are:
Peter McKillop
Jennifer Horrigan
Eamonn Roles
Anton Tagliaferro
Simon Conn
(a) Remuneration
Independent Director (Chairman)
Independent Director
Independent Director
Non-Independent Director
Non-Independent Director
Detailed remuneration disclosures are provided in the Remuneration Report of the Directors’ Report on page 17 and 19.
Short term employee benefits – Directors fees
Post employment benefits – Superannuation
30 June 2021
$
30 June 2020
$
63,865
36,135
100,000
82,191
17,809
100,000
38 | QV Equities Limited Annual Report 2021
15. Key management personnel (continued)
(b)
Share holdings of Directors
The number of ordinary shares in the Company that were held during the financial year by each Director of the
Company including their related parties, are set out below:
Ordinary shares held
2021
Directors
Peter McKillop
Jennifer Horrigan
Eamonn Roles
Anton Tagliaferro
Simon Conn
2020
Directors
Peter McKillop
Jennifer Horrigan
John McBain*
Eamonn Roles
Anton Tagliaferro
Simon Conn
Balance as at 30
June 2020
Acquisitions
Disposals
504,560
29,200
100,000
6,050,000
230,000
6,913,760
Balance as at
30 June 2019
435,895
–
224,142
–
5,050,000
150,000
5,860,037
32,500
–
55,000
2,000,000
170,000
2,257,500
–
–
–
–
–
–
Acquisitions
Disposals
68,665
29,200
–
100,000
1,000,000
80,000
1,277,865
–
–
–
–
–
–
–
Balance as at
30 June 2021
537,060
29,200
155,000
8,050,000
400,000
9,171,260
Balance as at
30 June 2020
504,560
29,200
n/a
100,000
6,050,000
230,000
6,913,760
*John McBain resigned from the Company effective 30 August 2019 and his shareholding balance as at 30 June 2020 is not included.
16. Related party transactions
All transactions with related entities were made on commercial terms and conditions no more favorable than those available
to other parties unless otherwise stated.
Anton Tagliaferro is a Director and holds equity interest in Investors Mutual Limited, the entity appointed to manage the
investment portfolio of QV Equities Limited. In its capacity as the Manager, IML was paid a management fee of 0.90% p.a.
(plus GST) on the portfolio net asset value for the first $150 million and then 0.75% (plus GST) thereafter, amounting to
$2,297,676 (2020: $2,611,265) inclusive of GST. The amount expensed in the Statement of Comprehensive Income after
allowing for the reduced input tax credit was $2,141,016 (2020: $2,433,224). As at 30 June 2021, the balance payable to the
Manager was $185,890 (2020: $188,491).
No Director has received or become entitled to receive a benefit (other than those detailed above) by reason of a contract
made by the Company or a related Company with the Director or with a firm of which he is a member or with a company in
which he has substantial financial interest.
Simon Conn is a Portfolio Manager of the Manager, and he holds equity interests in the Manager.
17. Segment information
The Company has one reportable segment. The Company is engaged solely in investment activities conducted in Australia,
deriving revenue from dividend income, interest income, and from the sale of its investments.
QV Equities Limited Annual Report 2021 | 39
Notes to the Financial Statements (continued)
Notes to the Financial Statements (continued)
18. Contingencies and commitments
The Company had no commitments or contingent liabilities as at 30 June 2021 and 30 June 2020.
19. Events occurring after the reporting period
Since the end of the financial year, the Directors declared a fully franked final dividend of 1.1 cents per fully paid ordinary
share payable on 3 September 2021. The Company bought back 2,033,355 shares for $1,990,953 since 30 June 2021.
Subsequent to 30 June 2021 to the date of this report there has been no other events specific to the Company of which the
Directors are aware which has had a material effect on the Company or its financial position.
20. Remuneration of auditors
Audit and other assurance services:
Audit and review of financial report
Non-assurance services:
Tax services
30 June 2021
$
30 June 2020
$
44,600
43,300
10,400
55,000
10,200
53,500
The Company’s Audit Committee oversees the relationship with the Company’s external auditors. The Audit Committee
reviews the scope of the audit and the proposed fee. It also reviews the cost and the scope of the other tax compliance
services of the related entity of the audit firm, to ensure that they do not compromise independence.
40 | QV Equities Limited Annual Report 2021
Directors’ Declaration
In the Directors’ opinion,
(1)
the financial statements and notes set out on pages 22 to 40 are in accordance with the Corporations Act 2001
including:
(a) complying with the Australian Accounting Standards, the Corporations Regulations 2001 and any other mandatory
professional reporting requirements;
(b) complying with International Financial Reporting Standards as issued by the International Accounting Standards
Board as described in note 2 to the financial statements; and
(c) giving a true and fair view of the Company’s financial position as at 30 June 2021 and of its performance for the
year end on that date.
(2) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due
and payable.
The Directors have been given the declarations required by S295A of the Corporations Act 2001.
This declaration is made in accordance with a resolution of the Directors.
Peter McKillop, Chairman
18 August 2021
QV Equities Limited Annual Report 2021 | 41
Independent Auditor’s Report to the Shareholders
Level 16, Tower 2 Darling Park
201 Sussex Street
Sydney NSW 2000
Postal Address
GPO Box 1615
Sydney NSW 2001
p. +61 2 9221 2099
e. sydneypartners@pitcher.com.au
Independent Auditorʼs Report
To the Members of QV Equities Limited
ABN 64 169 154 858
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of QV Equities Limited (“the Company”), which
comprises the statement of financial position as at 30 June 2021, the statement of
comprehensive income, the statement of changes in equity and the statement of cash flows
for the year then ended, and notes to the financial statements, including a summary of
significant accounting policies, and the directorsʼ declaration.
In our opinion, the accompanying financial report of QV Equities Limited is in accordance with
the Corporations Act 2001, including:
i.
ii.
giving a true and fair view of the Companyʼs financial position as at 30 June 2021
and of its financial performance for the year then ended; and
complying with Australian Accounting Standards and the Corporations
Regulations 2001.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our
responsibilities under those standards are further described in the Auditorʼs Responsibilities
for the Audit of the Financial Report section of our report. We are independent of the
Company in accordance with the auditor independence requirements of the Corporations Act
2001 and the ethical requirements of the Accounting Professional and Ethical Standards
Boardʼs APES 110 Code of Ethics for Professional Accountants (including Independence
Standards) (“the Code”) that are relevant to our audit of the financial report in Australia. We
have also fulfilled our other ethical responsibilities in accordance with the Code.
We confirm that the independence declaration required by the Corporations Act 2001, which
has been given to the Directors of the Company, would be on the same terms if given to the
Directors as at the time of this auditorʼs report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our opinion.
Adelaide Brisbane Melbourne Newcastle Perth Sydney
Pitcher Partners is an association of independent firms.
An independent New South Wales Partnership. ABN 17 795 780 962. Liability limited by a scheme approved under Professional
Standards Legislation. Pitcher Partners is a member of the global network of Baker Tilly International Limited, the members of which
are separate and independent legal entities.
pitcher.com.au
42 | QV Equities Limited Annual Report 2021
Independent Auditor’s Report to the Shareholders (continued)
Independent Auditorʼs Report
To the Members of QV Equities Limited
ABN 64 169 154 858
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most
significance in our audit of the financial report of the current year. These matters were
addressed in the context of our audit of the financial report as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion on these matters.
Key audit matter
How our audit addressed the matter
Existence and Valuation of Financial Assets
Refer to Note 8: Financial Assets
We focused our audit effort on the existence and
valuation of the Companyʼs financial assets as
they represent the most significant driver of the
Companyʼs Net Tangible Assets and Profit.
The majority of the Companyʼs investments are
considered to be non-complex in nature with fair
value based on readily observable data from the
ASX or other observable markets.
Consequently, these investments are classified
under Australian Accounting Standards as
“Level 1” (i.e. where the valuation is based on
quoted prices in an active market).
Our procedures included, amongst others:
Obtaining an understanding of and
evaluating the investment management
processes and controls;
Reviewing and evaluating the independent
auditorʼs reports on the design and
operating effectiveness of internal controls
(ASAE 3402 Assurance Reports on
Controls at a Service Organisation) for the
Custodians;
Making enquiries as to whether there have
been any changes to these controls or their
effectiveness for the period to which the
auditorʼs report relate to and obtaining
bridging letters;
Obtaining confirmations of the investment
holdings directly from the Custodians;
Assessing and recalculating the Companyʼs
valuation of individual investment holdings
using independent pricing sources;
Evaluating the accounting treatment of
revaluations of financial assets for
current/deferred tax and unrealised gains or
losses; and
Assessing the adequacy of disclosures in
the financial statements.
Pitcher Partners is an association of independent firms.
ABN 17 795 780 962.
An independent New South Wales Partnership.
QV Equities Limited Annual Report 2021 | 43
Independent Auditor’s Report to the Shareholders (continued)
Independent Auditorʼs Report
To the Members of QV Equities Limited
ABN 64 169 154 858
Other Information
The Directors are responsible for the other information. The other information comprises the
information included in the Companyʼs Annual Report for the year ended 30 June 2021 but
does not include the financial report and our auditorʼs report thereon.
Our opinion on the financial report does not cover the other information and accordingly we
do not express any form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other
information and, in doing so, consider whether the other information is materially inconsistent
with the financial report or our knowledge obtained in the audit or otherwise appears to be
materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement
of this other information, we are required to report that fact. We have nothing to report in this
regard.
Responsibilities of the Directors for the Financial Report
The Directors of the Company are responsible for the preparation of the financial report that
gives a true and fair view in accordance with Australian Accounting Standards and the
Corporations Act 2001 and for such internal controls as the Directors determine is necessary
to enable the preparation of the financial report that gives a true and fair view and is free from
material misstatement, whether due to fraud or error.
In preparing the financial report, the Directors are responsible for assessing the ability of the
Company to continue as a going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the Directors either intend to
liquidate the Company or to cease operations, or have no realistic alternative but to do so.
Auditorʼs Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a
whole is free from material misstatement, whether due to fraud or error, and to issue an
auditorʼs report that includes our opinion. Reasonable assurance is a high level of assurance
but is not a guarantee that an audit conducted in accordance with the Australian Auditing
Standards will always detect a material misstatement when it exists. Misstatements can arise
from fraud or error and are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on the basis of
this financial report.
As part of an audit in accordance with the Australian Auditing Standards, we exercise
professional judgement and maintain professional scepticism throughout the audit. We also:
•
Identify and assess the risks of material misstatement of the financial report, whether due
to fraud or error, design and perform audit procedures responsive to those risks, and
obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion.
The risk of not detecting a material misstatement resulting from fraud is higher than for
one resulting from error, as fraud may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit 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 Companyʼs internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of
accounting estimates and related disclosures made by the Directors.
Pitcher Partners is an association of independent firms.
ABN 17 795 780 962.
An independent New South Wales Partnership.
44 | QV Equities Limited Annual Report 2021
Independent Auditor’s Report to the Shareholders (continued)
Independent Auditorʼs Report
To the Members of QV Equities Limited
ABN 64 169 154 858
Auditorʼs Responsibilities for the Audit of the Financial Report (Continued)
• Conclude on the appropriateness of the Directorsʼ use of the going concern basis of
accounting and, based on the audit evidence obtained, whether a material uncertainty
exists related to events or conditions that may cast significant doubt on the Companyʼs
ability to continue as a going concern. If we conclude that a material uncertainty exists,
we are required to draw attention in our auditorʼs report to the related disclosures in the
financial report or, if such disclosures are inadequate, to modify our opinion. Our
conclusions are based on the audit evidence obtained up to the date of our auditorʼs
report. However, future events or conditions may cause the Company to cease to
continue as a going concern.
• Evaluate the overall presentation, structure and content of the financial report, including
the disclosures, and whether the financial report represents the underlying transactions
and events in a manner that achieves fair presentation.
We communicate with the Directors regarding, among other matters, the planned scope and
timing of the audit and significant audit findings, including any significant deficiencies in
internal control that we identify during our audit.
We also provide the Directors with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and
other matters that may reasonably be thought to bear on our independence, and where
applicable, actions taken to eliminate threats or safeguards applied.
From the matters communicated with the Directors, we determine those matters that were of
most significance in the audit of the financial report of the current period and are therefore the
key audit matters. We describe these matters in our auditorʼs report unless law or regulation
precludes public disclosure about the matter or when, in extremely rare circumstances, we
determine that a matter should not be communicated in our report because the adverse
consequences of doing so would reasonably be expected to outweigh the public interest
benefits of such communication.
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 17 to 19 of the Directorsʼ Report
for the year ended 30 June 2021.
In our opinion, the Remuneration Report of QV Equities Limited, for the year ended 30 June
2021, complies with section 300A of the Corporations Act 2001.
Responsibilities
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.
C I Chandran
Partner
18 August 2021
Pitcher Partners is an association of independent firms.
ABN 17 795 780 962.
An independent New South Wales Partnership.
Pitcher Partners
Sydney
QV Equities Limited Annual Report 2021 | 45
Shareholder Information
The shareholder information set out below was applicable as at 30 June 2021.
Additional information required by the Australian Securities Exchange Limited Listing Rules and not disclosed elsewhere in
this report, is listed below:
A. Long term equity investments
QV Equities Limited portfolio as at 30 June 2021:
Ordinary shares, trust units or stapled securities
A2B Australia Limited
Abacus Property Group
Alumina Ltd*
Amcor Limited*
Ampol Limited (formerly Caltex Australia)*
Aurizon Holdings Limited*
AusNet Services Limited
Australian Clinical Labs Ltd
Australian Pharmaceutical Industries Limited
Bank of Queensland Limited
Best and Less Groups Holdings
BWP Trust
Charter Hall Retail REIT
Cleanaway Waste Management Ltd
Clearview Wealth Limited
Coles Group Limited*
Crown Resorts Limited
Event Hospitality and Entertainment Ltd
Fletcher Building Limited
Genesis Energy Limited
Hipages Group Holdings Ltd
Home Consortium
Homeco Daily Needs REIT
Iluka Resources Limited
Incitec Pivot Limited
Insurance Australia Group SHS*
Integral Diagnostics Limited
Link Administration Holdings Limited
Mayne Pharma Group Limited
Metcash Limited*
Mirvac Group
National Storage REIT
New Hope Corporation Limited
Newcrest Mining Limited*
Nine Entertainment Co. Holdings Limited
Oceanagold Corp
Oil Search Limited*
46 | QV Equities Limited Annual Report 2021
2021
Holding
units
Fair value
$
Holding
units
2020
Fair value
$
2,100,000
500,000
1,000,000
900,000
380,000
2,900,000
6,200,000
650,000
3,500,000
250,000
164,609
–
1,300,000
1,000,000
1,600,000
500,000
1,100,000
350,000
–
–
900,000
450,000
4,300,000
–
2,200,000
900,000
480,000
–
16,000,000
1,350,000
–
564,483
1,650,000
100,000
1,900,000
350,000
800,000
2,646,000
1,575,000
1,645,000
13,617,000
10,719,800
10,788,000
10,850,000
2,210,000
3,902,500
2,277,500
355,555
–
4,940,000
2,640,000
800,000
8,545,000
13,101,000
4,424,000
–
–
2,691,000
2,448,000
6,020,000
–
5,236,000
4,644,000
2,496,000
–
5,120,000
5,386,500
–
1,117,677
2,854,500
2,528,000
5,529,000
854,000
3,048,000
1,800,000
1,458,000
–
1,000,000
1,000,000
430,000
2,500,000
6,000,000
–
–
1,625,000
14,480,000
12,607,600
12,300,000
10,020,000
–
1,700,000
1,946,500
–
–
800,000
1,200,000
–
1,600,000
600,000
1,220,000
390,000
750,000
2,000,000
–
–
–
150,000
3,500,000
–
1,200,000
600,000
15,000,000
500,000
500,000
–
1,500,000
101,172
2,500,000
–
–
–
3,064,000
4,020,000
–
432,000
10,302,000
11,797,400
3,279,900
2,587,500
5,320,000
–
–
–
1,281,000
6,562,500
–
4,680,000
2,460,000
5,775,000
1,360,000
1,085,000
–
2,047,500
3,189,953
3,450,000
–
1,460,000
4,628,200
Shareholder Information (continued)
A. Long term equity investments (continued)
Ordinary shares, trust units or stapled securities (continued)
2021
Holding
units
Fair value
$
Holding
units
Ooh Media Limited
Orica Limited
Origin Energy Limited
Orora Limited
Pact Group Holdings Ltd
Pro-Pac Packaging Limited
Sonic Healthcare Limited*
Southern Cross Media Group Limited**
Spark Infrastructure Group
Spark New Zealand Limited
Tabcorp Holding Limited
TPG Telecom Ltd*
United Malt Group Ltd
Virgin Money UK PLC (formerly Cybg PLC)*
Z Energy Limited
Floating rate notes
1,300,000
750,000
1,400,000
–
3,500,000
26,500,000
300,000
3,500,000
2,500,000
–
2,275,000
9,960,000
6,314,000
–
12,950,000
5,300,000
11,520,000
7,315,000
5,625,000
–
2,400,000
12,432,000
350,000
550,000
1,500,000
1,100,000
2,191,000
2,464,000
5,520,000
2,783,000
1,800,000
600,000
700,000
800,000
4,000,000
22,000,000
390,000
33,035,000
3,000,000
300,000
2,700,000
–
–
3,200,000
1,300,000
2020
Fair value
$
1,638,000
9,984,000
4,088,000
2,032,000
8,760,000
3,960,000
11,867,700
5,781,125
6,480,000
1,272,000
9,126,000
–
–
5,296,000
3,289,000
Crown Resorts Limited unsecured sub floating rate note
41,000
3,976,590
41,000
3,944,200
Total equities
Cash
Total portfolio
246,182,122
220,112,578
19,027,433
265,209,555
31,204,620
251,317,198
* Part or all of the security was subject to call options written by the Company as at 30 June 2021.
** Southern Cross Media had a one for 10 share consolidation during the year.
There were 592 (2020: 561) investment transactions during the financial year. The total brokerage paid on these transactions
was $289,564 (2020: $305,661).
B. Distribution of equity securities
Analysis of numbers of shareholders by size of holding as at 30 June 2021:
Holding
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
Number of shareholders
Ordinary shares
Percentage
249
614
821
3,647
321
5,652
78,389
2,049,397
6,668,179
122,837,179
110,873,490
242,506,634
0.03
0.85
2.75
50.65
45.72
100.00
There were 175 holders of less than a marketable parcel of ordinary shares holding a total of 17,809 shares.
QV Equities Limited Annual Report 2021 | 47
Shareholder Information (continued)
C. Equity security holders
Twenty largest shareholders – ordinary shares:
Name
HSBC Custody Nominees (Australia) Limited
AKAT Investments Pty Ltd
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