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Deutsche Boerse Group 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
44
45
49
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
Year in Summary FY2022
Profit After Tax
$6,148,699 ($5,633,706 in FY21)
Management Expense Ratio 1.14%
(1.11% in FY21)
Earnings Per Share (cents)
2.64 Basic (2.26 in FY21)
Portfolio Return
(Pre-tax)* +1.6%
Benchmark*#
-9.0%
Dividends 4.8 cps
Fully Franked (declared for FY22)
(4.4 cps in FY21)
Portfolio Return
(Post-tax)* +2.4%
ASX 300*
-6.8%
Net Assets** $243,126,059
($263,369,217 in FY21)
Net Tangible Assets (NTA)
$1.04 (pre-tax cum div) $1.06 (post tax cum div)
All data as at 30 June 2022 unless otherwise specified. *Returns are measured for the 2022 financial year. #S&P/ASX300 ex 20 index.
**Whilst the portfolio had a positive return of 2.4% the reduction in Net Assets are mainly due to the share buybacks and dividend payments.
Historical Net Tangible Assets
$1.25
$1.15
$1.05
$0.95
$0.85
$0.75
Aug
14
Apr
15
Dec
15
Aug
16
Apr
15
Dec
17
Aug
18
Apr
19
Dec
19
Aug
20
Historical Dividends
Apr
21
Jun
22
Source: QV Equities; 30 June 2022
Dec
21
6.0
5.0
4.0
3.0
2.0
1.0
0.0
QVE Dividend Payment (Fully Franked)
1.0
2.1
2.0
2.2
2.2
2.0
2.1
2.2
2.2
1.8
1.5
1.1
1.1
1.1
1.1
1.2
1.2
1.2
1.2
FY16
FY17
FY18
FY19
FY20
FY21
FY22
1.5
0.5
FY15
■ Interim ■ Interim ■ Interim ■ Final ■ Special
Source: QVE Annual Reports & QVE ASX Announcements
4
| QV Equities Limited Annual Report 2022
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 61% of the S&P/ASX300 Index by market capitalisation and had a 37% concentration
in the Financial and Resource sectors at 30 June 2022.
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 nearly 25 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 2022 | 5
A letter from the Chairman, Peter McKillop
Dear Shareholders,
After reaching new all-time highs in the first half of the financial year, concerns over high inflation and rising interest
rates, as well as the Russian invasion of Ukraine, led to a reversal in stock markets around the world. Many fell very heavily,
including the US sharemarket, which had its worst performance in the first half of a calendar year since 1970.
The Australian sharemarket, as measured by the S&P/ASX 300 Accumulation Index, finished the financial year down 6.8% –
this was only the second negative return recorded in the last ten years. The falls were broad-based, but worst affected were
many speculative companies, including some previously high-flying technology companies, that reached unprecedented
levels as sharemarkets rose to record highs in 2021.
Despite the volatility and uncertainty over this period, I am pleased to inform you that the Company’s portfolio delivered
a positive return of 1.6% to shareholders for the year ended 30 June 2022 which compares very favourably to the portfolio’s
benchmark (ASX300 ex-20 Accumulation Index) return of negative 9.0%.
It was pleasing to see that the portfolio’s value held up relatively well in what was a challenging environment and we
can attribute this to the sound fundamentals that underpin the stocks held in the QVE portfolio – which, as we have
often repeated, is made up of what QVE’s investment manager, Investors Mutual, considers are well-established and
well-managed, sound companies.
Also, the Board is delighted to be able to recognise the achievement of QVE Portfolio Manager, and Investors Mutual
Founder, Anton Tagliaferro who received the Medal of the Order of Australia (OAM) in the Queen’s Birthday 2022 Honours
List. Anton was recognised for his services to charitable organisations and the investment sector over the last two decades.
Financial Results
The Company earned a net after-tax profit of $6.1 million for the year ended 30 June 2022, up 9.1% from the prior financial
year. On an earnings per share basis, the FY2022 result equates to after-tax earnings of 2.64 cents per share. The increase
in profit was due primarily to an increase in dividends received this year. This is a return to more normal levels, after many
companies reduced or cancelled their dividends last financial year due to Covid.
Dividends
In a volatile investment environment, your Board realises the importance of a regular income stream and is committed
to continuing its policy of paying quarterly dividends, and where prudent, increasing dividend payments. Your Board
recognises the importance of maintaining adequate reserves to allow these regular dividend payments and to this end had
$29 million of capital profits and profits reserves at the end of FY22 prior to the payment of the final dividend.
A final fully-franked dividend for the 2022 financial year of 1.2 cents per share will be paid on 2 September, 2022
(the ex-dividend date for the final dividend will be 15 August, 2022). This is in addition to the fully-franked interim dividends
of 1.2 cents that were paid for the September 2021, December 2021 and March 2022 quarters. This takes total dividends per
share to 4.8 cents for the financial year 2022, 9.1% higher than the previous financial year.
On Market Buyback
Your Board continues to take active steps to reduce the discount between the net tangible assets (NTA) per share and the
Company’s sharemarket price.
An on-market share buyback has been in place since September 2019. 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. On purchase the shares are
cancelled, thereby increasing the NTA per share for remaining shareholders.
Since the buyback commenced, the Company has purchased 47.7 million shares at a cost of 43.6 million to 17 August 2017.
6
| QV Equities Limited Annual Report 2022
Chairman’s Letter (continued)
Annual General Meeting
It is our intention to hold the Annual General Meeting (AGM) in person, subject to government Covid regulations.
You are invited to attend the AGM on Wednesday, 26 October 2022 at 10am (AEDT) at the Radisson Blu Plaza Hotel,
27 O’Connell St, Sydney. Following the AGM, Investors Mutual will provide an update on the Company’s portfolio.
This investment update will also be held the following day via a webinar, for those of you that are unable to attend in
person. You will receive further information about the AGM in September including how to RSVP.
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
Shareholder briefing events
Regular webinars
I encourage you to subscribe to receive these updates and invitations through our 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 profitable, well-established companies, underpinned by reasonable valuations, with growth
potential and sustainable earnings from a diverse range of sectors. We are particularly focused on paying consistent levels
of fully franked dividends in these volatile investment times.
I look forward to discussing the results in this Annual Report further at the Annual General Meeting.
Thank you for your continuing support of QVE.
Yours sincerely
Peter McKillop, Chairman
17 August 2022
QV Equities Limited Annual Report 2022 | 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 2022.
The year to 30 June 2022 was a year of two distinct parts with world sharemarkets continuing to hit record highs in the
first half spurred on by optimism about the economic outlook as interest rates remained at all-time lows in many parts of
the world. However, we saw a reversal of fortunes in the second half as the emergence of inflation caused Central Banks
to tighten monetary policy by increasing interest rates and we also saw the withdrawal of unprecedented government
and central bank stimulus. This prompted significant investor concerns that many economies around the world may fall
into recession later in 2022 or in early 2023. Consequently, we saw a broad-based sell off in sharemarkets, but especially
in economically sensitive sectors such as in the Media and Consumer Discretionary sectors and also in many speculative
companies which, despite very little earnings or cash flow, had risen to unprecedented levels.
The QVE portfolio held up well in what was a challenging environment in the second half of FY 22. IML’s strict adherence to
its investment mantra, which has defined its approach to investing through all market cycles for the past 24 years, held the
portfolio in good stead.
IML has always looked to invest in well-established companies which possess the following clear 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 2022 was made up of 47 listed securities spread across various ASX sectors. The Company’s top
holdings include well-known quality companies such as Amcor, Sonic Healthcare, Aurizon, Ampol and Orica.
Portfolio Allocation at 30 June 2022
I.T.
1%
Utilities
2%
Communication
Services
6%
Materials
17%
Consumer
Staples
7%
Real
Estate
7%
Financials
8%
Energy
8%
Cash
15%
Consumer
Discretionary
10%
Health
Care
9%
Industrials
10%
8
| QV Equities Limited Annual Report 2022
Source: Investors Mutual
Investment Manager’s Report (continued)
Key Equity Investments
Principal activity
Holding weight*
Amcor
Aurizon
Orica
Ampol
Coles
Global packaging company
Australian rail company
Global manufacturer of commercial grade explosives and chemicals
Importer, retailer and refiner of petroleum products
Australian supermarket retailer
Pact Group
Rigid plastics packaging, contract manufacturing and pallet pooling company
The Lottery Corporation
Lotteries company (formerly part of Tabcorp)
Skycity Entertainment
New Zealand/Australian casino operator
Sonic Healthcare
Global pathology company
Brambles
IAG
Metcash
Santos
Global supplier of reusable pallets and containers
General insurance provider
Distributor of food, liquor and hardware
Oil and gas producer
Origin Energy
Australian energy retailer & LNG producer
Charter Hall REIT
Australian REIT focused on Daily Needs retailers
Suncorp
TPG Telecom
Mayne Pharma
Australian insurance, banking and finance operator
Telecommunications company
Pharmaceutical company
Homeco Daily needs REIT
Australian REIT focused on Daily Needs retailers
Southern Cross Media
Radio and television operator
6.1%
5.7%
5.5%
4.7%
3.7%
3.7%
3.4%
3.3%
3.1%
2.7%
2.4%
2.3%
2.2%
2.2%
2.1%
1.8%
1.8%
1.7%
1.5%
1.5%
The complete portfolio is shown on page 49–50 of this financial report.
* Holding weight as at 30 June 2022
Portfolio Performance
The QVE portfolio returned +1.6% before tax and after fees for the 12 months to 30 June 2022, compared to the benchmark
ASX300 ex-20 Index’s return of -9.0%.
This was a good result, with the portfolio benefiting from its avoidance of highly speculative and over-priced technology
stocks and from its low exposure to highly cyclical sectors such as the Resources and Consumer Discretionary sectors.
The portfolio benefited over the year from its exposure to holdings such as AusNet Services, Amcor, Orica, Ampol and
New Hope, which all performed strongly. The share prices of energy-related companies including Origin Energy and
New Hope Coal all improved as oil, gas and coal prices moved higher on the back of sanctions and disrupted supply
stemming from the Russian invasion of Ukraine.
AusNet Services was a strong performer in FY2022, gaining +51% over the year as it accepted a takeover offer from asset
manager Brookfield at $2.65 a share. AusNet is a large, diversified energy network business in Victoria, which owns and
operates over $11 billion of regulated and contracted assets. QVE was attracted to AusNet due to its resilient and recurring
earnings and its ability to grow revenues over time, as well as its hard to replicate asset base.
The bid for AusNet was a continuation of the upsurge in corporate activity that we saw emerging over the second half
of financial year 2021. This was caused by record low interest rates and increased confidence in the outlook for Australia’s
economy, combined with the low valuations of certain ASX-listed companies.
QV Equities Limited Annual Report 2022 | 9
Investment Manager’s Report (continued)
QVE also benefited over the year from takeover bids for Spark Infrastructure Group, Australian Pharmaceutical Industries,
Crown Resorts and Z Energy. 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 value of which were not
reflected in the share prices, which created the opportunity for a suitor to acquire these companies.
We believe there are many other companies in the QVE portfolio that could be recipients of takeover approaches in the
years ahead as we believe they are significantly undervalued, including Mayne Pharma, Integral Diagnostics and Clearview.
Amcor, a global leader in the development and production of rigid and flexible packaging for the Consumer and Health Care
sectors, performed well for QVE, up +23% in FY2022. Its underlying earnings have continued to grow despite the uncertainty
of the last three years, highlighting the resilient end-markets of its portfolio of assets, which are focused on food, medicine
and other daily essentials. The company has also demonstrated its ability to maintain margins in a rising cost environment
by rapidly passing on higher input costs to its customers. Amcor is also a strong generator of free cash which has allowed
the company to reinvest in growth while paying its shareholders an attractive and growing dividend over time.
Another very strong performer for QVE was Ampol, which increased +27% over FY2022. Ampol supplies Australia’s largest
branded petrol and convenience network, as well as refining, importing and marketing fuels and lubricants. The company
is also a significant operator in New Zealand, now accounting for approximately 40% of all fuel volumes in that market after
completing its acquisition of Z Energy late in financial year 2022. The acquisition will result in a trans-Tasman network of
2,350 sites supplying 25 billion litres of fuel per annum, offering synergy savings of NZ$60-80 million per annum largely
through fuel procurement and overhead cost reductions. Ampol enjoyed significantly higher refining margins over the last
financial year in conjunction with recovering fuel volumes following the end of lockdowns and solid fuel retailing margins.
The Fuel Security Services Payment program Ampol signed with the federal government was a major development for the
company, this arrangement will support a base level of refinery earnings and cash flow, while providing the opportunity to
capture the full upside from improving conditions, as has occurred late in the year.
There were a few disappointing performers over the year including Pact, Pro-Pac, Virgin Money UK and Southern Cross Media.
In the case of Pact and Pro Pac, these companies’ earnings were impacted by rapidly increasing raw material costs which
impacted margins. Pact and Pro-Pac remain significant players in the Australian packaging industry with Pact being the no.
1 player in the rigids plastic segment and Pro-Pac being the no2 player in the flexibles packaging segment. As such while
recent results have disappointed , we believe both companies will recover as they pass on price increases to restore margins.
Concerns over the strength of the UK economy weighed on Virgin Money UK while radio operator Southern Cross Media
was sold down heavily towards year end over concerns about the future outlook for advertising spend. We believe both
stocks have been sold down excessively and that their share prices are reflecting very dire outcomes. Both companies are
generating good cashflows, paying dividends and are returning capital to shareholders via share buybacks.
10 | QV Equities Limited Annual Report 2022
Investment Manager’s Report (continued)
Outlook
Global share markets, including Australia’s, have seen greater volatility as central banks wind back on stimulus and look to
tighten monetary conditions in the face of rising inflation. While we believe the Australian share market will remain volatile,
it now trades at more reasonable levels, and good value is emerging across a number of quality companies.
We continue to be 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 and recovering from Covid-19 headwinds such as SkyCity Entertainment and A2B; companies that
are on track for revenue growth, such as Amcor and that can benefit from higher interest rates, such as IAG and Aurizon.
With increased volatility in markets, and investors exhibiting a greater level of caution, fundamentals are coming back into
favour and this should continue to suit our investing style as can be seen by the way QVE has performed over the past year.
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. This approach has enabled us to deliver reliable income and long-term
capital growth to our investors over IML’s 24 years of existence, while achieving returns which are more consistent and less
volatile than the overall share market.
We believe that a portfolio of well-established, profitable companies, with a strong market position and recurring earnings,
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.
Thank you for your continued support.
Anton Tagliaferro
Investment Director
Investors Mutual Limited
17 August 2022
Simon Conn
Senior Portfolio Manager
Investors Mutual Limited
QV Equities Limited Annual Report 2022 | 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 2022.
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
Principal activities
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
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:
2022
Ordinary shares – interim 2022
Ordinary shares – interim 2022
Ordinary shares – interim 2022
Ordinary shares – final 2021
2021
Ordinary shares – interim 2021
Ordinary shares – interim 2021
Ordinary shares – interim 2021
Ordinary shares – final 2020
Dividend
per share
Total
amount
Date of
payment
%
Franked
1.2 cents
1.2 cents
1.2 cents
1.1 cents
1.1 cents
1.1 cents
1.1 cents
2.2 cents
$2,751,554
$2,765,752
$2,798,777
$2,646,839
$2,668,716
$2,697,591
$2,741,593
$5,689,883
03/06/2022
04/03/2022
03/12/2021
03/09/2021
04/06/2021
05/03/2021
04/12/2020
18/09/2020
100%
100%
100%
100%
100%
100%
100%
100%
Since year end, the Directors have declared a final fully franked dividend of 1.2 cents per fully paid ordinary share to be paid
on 2 September 2022.
12 | QV Equities Limited Annual Report 2022
Directors’ Report (continued)
Review of operations
Our Investment Manager (“the Manager”), Investors Mutual Limited (“IML”) has been diligently building 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/(Decrease) in QVE’s NTA
Benchmark return
1 July 2021 to 30 June 2022
+2.4% post-tax | +1.6% pre-tax
1 January 2022 to 30 June 2022
-3.7% post-tax | -6.1% pre-tax
-9.0%
-15.9%
Note: these figures are calculated net of IML’s management fee.
Investment operations for the year ended 30 June 2022 resulted in an operating profit before tax of $6,903,129 (2021:
$6,606,332) and an operating profit after tax of $6,148,699 (2021: $5,633,706).
Net Tangible Assets (NTA) for each ordinary share as at 30 June 2022 (calculated on market value before applicable taxes and
before provision for dividends) amounted to $1.04 (2021: $1.09) per share. NTA after provision for tax and before provision
for dividends was $1.06 (2021: $1.08) per share.
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 2022 was $243,126,059 (2021: $263,369,217).
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 2022.
Matters subsequent to the end of the year
Since the end of the financial year, the Directors declared a fully franked final dividend of 1.2 cents per fully paid ordinary
share payable on 2 September 2022. The Company bought back 70,717 shares for $67,102 since 30 June 2022.
Subsequent to 30 June 2022 to the date of this report there have been no other events specific to the Company of which the
Directors are aware which have 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 rising inflation, the Ukraine war, the ongoing presence of
COVID-19 adding to the economic uncertainty.
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 2022 | 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 2022
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 Chairman of Dexus Asset Management
(includes Dexus Industria REIT (ASX: DXI) and Dexus
Convenience Retail REIT (ASX: DXC) and a Director of Yarra
Funds Management Ltd and A2B Australia Limited.
Former directorships in last 3 years
Jennifer Horrigan was formerly a Director of Generation
Healthcare (ASX: GHC), Redkite (national children’s cancer
charity) 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 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 is a Chartered Accountant and holds a Graduate
Diploma in Applied Finance from Finsia.
Eamonn Roles is Chairman of the Nominations and Corporate
Governance Committee.
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 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 a member of the Institute of Chartered Accountants
and of the Financial Services Institute of Australasia.
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 2022 | 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 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 2022
Directors’ Report (continued)
Meeting of Directors
The numbers of meetings of the Company’s Board of Directors and each Board Committee held during the year ended
30 June 2022, and the numbers of meetings attended by each Director were:
Directors’ meetings
Audit and Risk
Nominations and
Corporate Governance
Meeting of committees
A
7
7
7
5
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
(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 $100,000 per annum. Directors do not receive bonuses nor are they issued
options on securities. Directors’ fees cover all main Board activities and membership of committees. Under the ASX Listing
Rules, the maximum fees payable to Directors may not be increased without the approval from the Company at a general
meeting. Directors seek approval from time to time as appropriate.
The following table reflects the Company’s performance and Directors’ remuneration over five years:
Five Year Financial Summary
Profit after tax ($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 ($)
2022
6.1
2.64
4.8
1.06
0.940
100,000
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
As outlined above, Directors’ fees are not directly linked to the Company’s performance.
QV Equities Limited Annual Report 2022 | 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 2022 and 30 June 2021.
2022
Non-Executive Directors
Peter McKillop
Jennifer Horrigan
Eamonn Roles
Total key management personnel compensation
2021
Non-Executive Directors
Peter McKillop
Jennifer Horrigan
Eamonn Roles
Total key management personnel compensation
Short term
employee benefits
Directors’ fees
$
Post-employment
benefits su
perannuation
$
12,501
27,242
27,242
66,985
27,499
2,758
2,758
33,015
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
Total
$
40,000
30,000
30,000
100,000
Total
$
40,000
30,000
30,000
100,000
Directors receive a superannuation guarantee contribution required by the government, which was 10% of individual
benefits for financial year 2022 and did not receive any other retirement benefits. Directors may also elect to salary
sacrifice their fees into superannuation.
(b) Director related entity remuneration
Anton Tagliaferro and Simon Conn are Directors and hold equity interests in IML, the entity appointed to manage the
investment portfolio of QV Equities Limited.
All transactions with related entities were made on normal commercial terms and conditions.
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 $2,390,503 (2021: $2,297,676) inclusive
of GST. The amount expensed in the Statement of Comprehensive Income after allowing for the reduced input tax
credit was $2,227,514 (2021: $2,141,016). As at 30 June 2022, the balance payable to the Manager was $169,565 (2021:
$185,890).
No other 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.
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.
18 | QV Equities Limited Annual Report 2022
Directors’ Report (continued)
Remuneration report (audited) (continued)
(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.
(d) Equity instrument disclosures relating to Directors
As at 30 June 2022, the Company’s Directors and their related parties held the following interests in the Company:
Ordinary shares held
2022
Directors
Peter McKillop
Jennifer Horrigan
Eamonn Roles
Anton Tagliaferro
Simon Conn
Balance as at
30 June 2021
Acquisitions
Disposals
Balance as at
30 June 2022*
537,060
29,200
155,000
8,050,000
400,000
9,171,260
–
–
–
450,000
–
450,000
–
–
–
–
–
–
537,060
29,200
155,000
8,500,000
400,000
9,621,260
* The Directors’ shareholding balances as at 30 June 2022 were the same at the date of the report.
2021
Directors
Peter McKillop
Jennifer Horrigan
Eamonn Roles
Anton Tagliaferro
Simon Conn
Balance as at
30 June 2020
Acquisitions
Disposals
Balance as at
30 June 2021
504,560
29,200
100,000
6,050,000
230,000
6,913,760
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
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
QV Equities Limited Annual Report 2022 | 19
Directors’ Report (continued)
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.
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 dollars 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
17 August 2022
20 | QV Equities Limited Annual Report 2022
Auditor’s Independence Declaration
QV Equities Limited Annual Report 2022 | 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 which are separate and independent legal entities.pitcher.com.auAuditor’s Independence DeclarationTo the Directors of QV EquitiesLimitedABN64 169 154 858In relation to the independent auditof QV Equities Limited for the year ended 30 June 2022,Ideclare 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 PartnersSydney17 August 2022
Financial Statements for the year ended 30 June 2022
Statement of Comprehensive Income
Notes
30 June 2022
$
30 June 2021
$
Investment income
Dividend/distribution income
Interest income
Realised gains on options and futures
Unrealised gains/(losses) on options
Other income
Total 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 attributable to owners
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 (loss)/income, net of tax
8,089,828
144,482
614,754
994,218
23,591
9,866,873
2,227,514
100,000
70,312
75,113
308,436
182,369
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
2,963,744
2,753,464
6,903,129
754,430
6,148,699
6,606,332
972,626
5,633,706
(1,947,403)
30,154,715
138,454
22,801
(1,808,949)
30,177,516
15
5
Total comprehensive income for the year, net of tax attributable to owners
4,339,750
35,811,222
Earnings per share
Basic and diluted earnings per share (cents per share)
13
2.64
2.26
The Statement of Comprehensive Income should be read in conjunction with the accompanying notes.
22 | QV Equities Limited Annual Report 2022
Financial Statements (continued)
Statement of Financial Position
Notes
30 June 2022
$
30 June 2021
$
Assets
Current assets
Cash and cash equivalents
Receivables
Prepayments
Total current assets
Non-current assets
Financial assets at fair value
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
12
12
32,092,735
19,027,433
2,089,625
143,890
954,841
152,513
34,326,250
20,134,787
206,870,930
246,182,122
10,667,089
217,538,019
251,864,269
4,202,090
250,384,212
270,518,999
1,892,072
5,719,638
1,126,500
8,738,210
8,738,210
1,144,653
4,856,094
1,149,035
7,149,782
7,149,782
243,126,059
263,369,217
239,449,478
253,069,464
(25,545,039)
25,549,403
3,672,217
(9,730,977)
17,094,620
2,936,110
243,126,059
263,369,217
QV Equities Limited Annual Report 2022 | 23
Financial Statements (continued)
Statement of Changes in Equity
Issued
capital
$
Asset
revaluation
reserve
$
Capital
profits
reserve
$
Notes
Profits
reserve
$
Retained
profits
$
Total
$
Balance at 1 July 2021
253,069,464
(9,730,977)
17,094,620
2,936,110
– 263,369,217
–
–
–
–
(13,619,986)
–
(1,808,949)
(1,808,949)
–
–
–
–
–
–
–
–
6,148,699
6,148,699
–
(1,808,949)
6,148,699
4,339,750
(5,550,330)
(5,412,592)
– (10,962,922)
–
– (13,619,986)
Profit for the year
Other comprehensive income:
Net revaluation of investments
Total comprehensive income
gains for the year
Transactions with equity holders
in their capacity as owners:
Dividends provided for or paid
Shares buyback – redemption
Other
Realised gains/(losses) on sale
of investments transferred
to capital profits reserve
14
11
12
– (14,005,113)
14,005,113
–
–
–
Transfer to profits reserve
–
–
–
6,148,699
(6,148,699)
Balance at 30 June 2022
239,449,478 (25,545,039)
25,549,403
3,672,217
– 243,126,059
Issued
capital
$
Asset
revaluation
reserve
$
Capital
profits
reserve
$
Notes
Profits
reserve
$
Retained
profits
$
Total
$
Balance at 1 July 2020
272,103,428
(29,628,264)
13,392,726
4,521,852
–
260,389,742
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:
Dividends provided for or paid
Share buyback – redemption
Other
Realised gains/(losses) on sale
of investments transferred
to capital profits reserve
Transfer to profits reserve
14
11
12
–
–
–
–
(19,033,964)
–
–
–
30,177,516
30,177,516
–
–
–
–
–
–
–
–
5,633,706
5,633,706
–
30,177,516
5,633,706
35,811,222
(6,578,335)
(7,219,448)
–
–
–
–
(13,797,783)
(19,033,964)
–
–
(10,280,229)
10,280,229
–
–
5,633,706
(5,633,706)
Balance at 30 June 2021
253,069,464
(9,730,977)
17,094,620
2,936,110
–
263,369,217
The Statement of Changes in Equity should be read in conjunction with the accompanying note.
24 | QV Equities Limited Annual Report 2022
–
–
–
–
Statement of Cash Flow
Cash flows from operating activities
Dividends/distributions received
Interest received
Net realised gains on exchange traded options
Other income
Payments for other expenses
Income tax paid
Net cash inflow from operating activities
6
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
Notes
30 June 2022
$
30 June 2021
$
7,758,337
60,137
1,571,905
20,056
(2,941,650)
(5,568,789)
899,996
6,506,141
147,729
2,241,290
97,448
(2,848,071)
(1,499,483)
4,645,054
(85,773,519)
(68,126,016)
122,450,935
36,677,416
84,596,052
16,470,036
(10,962,922)
(13,797,783)
(13,549,188)
(19,494,494)
(24,512,110)
(33,292,277)
Net increase/(decrease) in cash and cash equivalents
13,065,302
(12,177,187)
Cash and cash equivalents at beginning of the year
Cash and cash equivalents at the end of the year
6
19,027,433
32,092,735
31,204,620
19,027,433
The above Statement of Cash Flow should be read in conjunction with the accompanying notes.
QV Equities Limited Annual Report 2022 | 25
Financial Statements (continued)
Notes to the Financial Statements for the year ended 30 June 2022
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 17 August 2022.
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 2022 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 interpreations 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
Financial assets are recognised initially at fair value including transaction costs. Financial liabilities are recognised
initially at fair value.
(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 contractual 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 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.
26 | QV Equities Limited Annual Report 2022
Notes to the Financial Statements (continued)
2
Summary of significant accounting policies (continued)
(b) Investments (continued)
(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.
(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 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.
QV Equities Limited Annual Report 2022 | 27
Notes to the Financial Statements (continued)
2
Summary of significant accounting policies (continued)
(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 using the effective
interest method, 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).
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
were 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. Costs directly attributable to the buy back are recognised as a deductible from equity.
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/(loss) attributable to owners of the Company.
by the weighted average number of ordinary shares outstanding during the financial year, adjusted for shares
bought back during the year.
(ii) 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.
28 | QV Equities Limited Annual Report 2022
Notes to the Financial Statements (continued)
2
Summary of significant accounting policies (continued)
(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 and tax losses only if the Company considers it
is probable that future taxable amounts will be available to utilise those temporary differences and losses.
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 financial assets 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.
QV Equities Limited Annual Report 2022 | 29
Notes to the Financial Statements (continued)
3 Financial risk management (continued)
(a) Market risk (continued)
(i) Price risk (continued)
The Company’s industry sector weighting of investments including options as at 30 June 2022 and 30 June 2021 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
2022
%
7.8
16.8
9.2
1.9
9.8
9.6
8.3
7.3
6.0
6.5
1.3
84.5
15.5
100.0
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
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.
Investments represent 82% (2021: 91%) 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% (2021: 30%).
Impact on Total
Comprehensive income
2022
$
7,201,055
(7,201,055)
14,402,110
2021
$
8,576,158
(8,576,158)
17,152,316
(14,402,110)
(17,152,316)
Increase 5%
Decrease 5%
Increase 10%
Decrease 10%
30 | QV Equities Limited Annual Report 2022
3 Financial risk management (continued)
(a) Market risk (continued)
(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 performance, 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.
Floating interest
rate
$
Non-interest
bearing
$
Total
$
30 June 2022
Financial assets
Cash and cash equivalents
32,092,735
–
32,092,735
Receivables
–
2,089,625
2,089,625
Financial assets at fair value
4,179,130
202,691,800
206,870,930
36,271,865
204,781,425
241,053,290
Financial liabilities
Trade creditors and other payables
Financial liabilities at fair value
–
–
–
(1,892,072)
(1,126,500)
(3,018,572)
(1,892,072)
(1,126,500)
(3,018,572)
Net exposure to interest rate risk
36,271,865
201,762,853
238,034,718
30 June 2021
Financial assets
Cash and cash equivalents
Receivables
Financial assets at fair value
Financial liabilities
Trade creditors and other payables
Financial liabilities at fair value
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)
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
The weighted average interest rate of the Company’s interest bearing financial assets at 30 June 2022 is 0.51%
(2021: 0.61%).
Sensitivity analysis
At 30 June 2022, if interest rates had increased/decreased by 75 basis points (2021: 75 basis points) from the year
end rates with all other variables held constant, post-tax profit for the year would have been $150,226 (2021:
$127,822) higher and $150,226 lower (2021: $127,822), mainly as a result of higher/lower interest income from
interest bearing financial assets.
QV Equities Limited Annual Report 2022 | 31
Notes to the Financial Statements (continued)
Notes to the Financial Statements (continued)
3 Financial risk management (continued)
(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 receives 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 for the purchase of securities, expenses 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.
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.
32 | QV Equities Limited Annual Report 2022
4 Fair value measurement (continued)
(i) Recurring fair value measurements
The following table presents the Company’s assets measured and recognised at fair value as at 30 June 2022 and
30 June 2021.
As at 30 June 2022
Financial assets
Financial assets at fair value:
Listed equities
Listed unit trusts
Floating rate notes
Total
Financial liabilities
Financial liabilities held for trading:
Options
Total
As at 30 June 2021
Financial assets
Financial assets at fair value:
Listed equities
Listed unit trusts
Floating rate notes
Total
Financial liabilities
Financial liabilities held for trading:
Futures
Options
Total
Level 1
$
Level 2
$
Level 3
$
Total
$
185,996,300
16,695,500
4,179,130
206,870,930
1,126,500
1,126,500
–
–
–
–
–
–
–
–
–
–
–
–
185,996,300
16,695,500
4,179,130
206,870,930
1,126,500
1,126,500
Level 1
$
Level 2
$
Level 3
$
Total
$
220,407,856
21,797,676
3,976,590
246,182,122
5,000
1,144,035
1,149,035
–
–
–
–
–
–
–
–
–
–
–
–
–
–
220,407,856
21,797,676
3,976,590
246,182,122
5,000
1,144,035
1,149,035
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 closing prices at the end of the reporting year.
During the year $nil (2021: $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.
QV Equities Limited Annual Report 2022 | 33
Notes to the Financial Statements (continued)
Notes to the Financial Statements (continued)
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% (2021: 30%)
2,070,939
1,981,900
Increase/(decrease) in income tax expense due to:
30 June 2022
$
30 June 2021
$
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
Cash flow boost received
Under/(over) provisions 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:
550,927
420,710
(1,836,421)
(1,402,367)
10,162
(33,875)
(10,800)
–
7,988
(4,490)
754,430
208,459
543,437
(964)
7,988
(4,490)
754,430
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
The charge for current income tax expense is based on the profit for the year adjusted for
any non-assessable or non-deductible items. It is calculated using the tax rates that have
been enacted or are substantially enacted by the end of the current financial year.
10.93%
14.72%
34 | QV Equities Limited Annual Report 2022
5 Taxation (continued)
(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
Transfer from deferred tax liabilities
The rate used at 30 June 2022 is 30% (2021: 30%)
(c) Current tax liabilities
Balance at beginning of the year
Current year income tax on operating profit
Current year realised capital gain
Net income tax paid
Under/(over) provision of income tax in previous year
30 June 2022
$
30 June 2021
$
13,398
15,367
10,638,324
10,667,089
10,890
16,261
4,174,939
4,202,090
4,202,090
12,765,887
650
964
6,463,385
10,667,089
14,025
(73,357)
(8,504,465)
4,202,090
30 June 2022
$
30 June 2021
$
4,856,094
203,970
6,215,211
(5,568,789)
13,152
5,719,638
939,610
822,814
4,596,166
(1,499,483)
(3,013)
4,856,094
QV Equities Limited Annual Report 2022 | 35
Notes to the Financial Statements (continued)
Notes to the Financial Statements (continued)
5 Taxation (continued)
(d) Deferred tax liabilities
This balance comprises temporary differences attributable to:
Fair value adjustment on equity investments
(11,113,902)
(3,961,403)
30 June 2022
$
30 June 2021
$
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 provision
Transfer to deferred tax assets*
The rate used at 30 June 2022 is 30% (2021: 30%)
* Debit balance on deferred tax liabilities transferred to deferred tax assets.
213,531
34,320
227,727
10,638,324
–
–
543,437
(7,014,810)
7,988
(84,732)
16,875
(145,679)
4,174,939
–
–
93,480
8,410,972
13
6,463,385
(8,504,465)
–
–
36 | QV Equities Limited Annual Report 2022
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 (gains)/losses on options
Dividend/distribution income reinvested
(Increase) in dividends/distributions receivable
(Increase)/decrease in interest receivable
(Increase) in other income receivable
Decrease/(increase) in prepayments
Increase/(decrease) in sundry creditors and accruals
(Increase)/decrease in deferred tax assets
(Decrease) in current tax liabilities
Increase in deferred tax liabilities
Net cash inflow from operating activities
7 Receivables
Receivables – unsettled trades
Interest receivable
Dividends/distributions receivable
Other receivables
Total receivables
None of the receivables are past the due date or impaired.
30 June 2022
$
32,092,735
32,092,735
30 June 2021
$
19,027,433
19,027,433
30 June 2022
$
30 June 2021
$
6,148,699
5,633,706
(994,218)
(164,296)
(167,195)
(84,346)
(3,535)
8,623
970,623
(1,615)
(5,356,181)
543,437
(5,248,703)
899,996
30 June 2022
$
1,351,967
84,346
604,160
49,152
2,089,625
123,261
–
(42,575)
116
–
(61,945)
(480,651)
59,332
(679,670)
93,480
(988,652)
4,645,054
30 June 2021
$
472,257
–
436,965
45,619
954,841
QV Equities Limited Annual Report 2022 | 37
Notes to the Financial Statements (continued)
Notes to the Financial Statements (continued)
8 Financial assets at fair value
Financial assets held at fair value through other comprehensive income include the following:
Listed securities
30 June 2022
$
30 June 2021
$
206,870,930
246,182,122
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, included in the Statement of Comprehensive Income were:
Dividend income:
Listed securities held at year-end
Listed securities sold during the year
Total dividend
2022
$
6,520,876
1,568,952
8,089,828
2021
$
6,115,184
433,532
6,548,716
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
Gain on disposal after tax
Listed securities
2022
$
2021
$
136,297,618
85,068,309
14,005,113
10,280,229
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
10 Trade creditors and other payables
Payable – unsettled trades
Payable – share buyback
Payable – other expenses
Total trade creditors and other payables
38 | QV Equities Limited Annual Report 2022
30 June 2022
$
30 June 2021
$
1,838,279
(711,779)
1,126,500
866,595
282,440
1,149,035
30 June 2022
$
30 June 2021
$
1,496,875
76,477
318,720
1,892,072
833,725
–
310,928
1,144,653
11
Issued capital
(a) Share capital
30 June 2022
Number of
shares
30 June 2022
Total amount
$
30 June 2021
Number of
shares
30 June 2021
Total amount
$
Fully paid ordinary shares
229,049,493
239,449,478
242,506,634
253,069,464
(b) Movements in ordinary share capital
2022
Date
01/07/2021
Opening balance
Share buyback
30/06/2022
Closing balance
2021
Date
01/07/2020
Opening balance
Share buyback
30/06/2021
Closing balance
* Rounded to two decimal places.
(c) Fully paid ordinary shares
Number
of shares
242,506,634
(13,457,141)
229,049,493
Number
of shares
264,818,778
(22,312,144)
242,506,634
Share price*
$
1.01
–
Total amount
$
253,069,464
(13,619,986)
239,449,478
Share price*
$
Total amount
$
0.85
–
272,103,428
(19,033,964)
253,069,464
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. There are no separate classes of shares and each
share has the same rights attaching to it as all other shares of the Company.
(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.
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 future dividend payments purposes.
(b) Asset revaluation reserve
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.
(c) Profits reserve
Retained earnings are transferred to the profit reserve for future dividend payments.
QV Equities Limited Annual Report 2022 | 39
Notes to the Financial Statements (continued)
Notes to the Financial Statements (continued)
13 Earnings per share
30 June 2022
cents
30 June 2021
cents
(a) Basic and diluted earnings per share
Total earnings per share attributable to the ordinary equity holders of the Company
2.64
2.26
(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 issues during the year.
Diluted earnings per share and basic earnings per share are the same as there are no potential dilutive ordinary shares.
233,106,211
249,046,600
14 Dividends
(a) Dividends paid during the year
Dividends paid fully franked at 30% (2021: 30%) tax rate.
Final dividend FY21: 1.1 cents per share fully franked paid 3 September 2021
(Final dividend FY20: 2.2 cents per share fully franked paid 18 September 2020)
Interim dividend FY22: 1.2 cents per share fully franked paid 3 December 2021
2,798,777
(Interim dividend FY21: 1.1 cents per share fully franked paid 4 December 2020)
Interim dividend FY22: 1.2 cents per share fully franked paid 4 March 2022
2,765,752
(Interim dividend FY21: 1.1 cents per share fully franked paid 5 March 2021)
Interim dividend FY22: 1.2 cents per share fully franked paid 3 June 2022
2,751,554
(Interim dividend FY21: 1.1 cents per share fully franked paid 4 June 2021)
10,962,922
(b) Dividends not recognised at the end of the reporting period
30 June 2022
$
2,646,839
30 June 2021
$
5,689,883
2,741,593
2,697,591
2,668,716
13,797,783
In addition to the above dividends, since year end the Directors have recommended the
payment of a final dividend of 1.2 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 2 September 2022 (2021: 3 September 2021) out of the profits of the Company
at 30 June 2022 and 30 June 2021, but not recognised as a liability at year end is:
2,748,594
2,667,573
30 June 2022
$
30 June 2021
$
40 | QV Equities Limited Annual Report 2022
14 Dividends (continued)
(c) Dividends franking account
The fully franked final dividend to be paid on 2 September 2022 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 2022.
Opening balance of franking account
Franking credits on dividends received
Tax paid during the period
30 June 2022
$
30 June 2021
$
1,311,938
1,836,421
5,568,789
4,323,424
1,402,367
1,499,483
Franking credits on ordinary dividends paid
(4,698,395)
(5,913,336)
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% (2021: 30%)
Adjusted franking account balance
4,018,753
5,719,638
9,738,391
(1,177,969)
8,560,422
1,311,938
4,856,094
6,168,032
(1,143,246)
5,024,786
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 to 19.
Short term employee benefits - Directors fees
Post employment benefits - Superannuation
30 June 2022
$
30 June 2021
$
66,985
33,015
100,000
63,864
36,136
100,000
QV Equities Limited Annual Report 2022 | 41
Notes to the Financial Statements (continued)
Notes to the Financial Statements (continued)
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
2022
Directors
Peter McKillop
Jennifer Horrigan
Eamonn Roles
Anton Tagliaferro
Simon Conn
2021
Directors
Peter McKillop
Jennifer Horrigan
Eamonn Roles
Anton Tagliaferro
Simon Conn
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
100,000
6,050,000
230,000
6,913,760
Acquisitions
Disposals
–
–
–
450,000
–
450,000
–
–
–
–
–
–
Acquisitions
Disposals
32,500
–
55,000
2,000,000
170,000
2,257,500
–
–
–
–
–
–
Balance as at
30 June 2022
537,060
29,200
155,000
8,500,000
400,000
9,621,260
Balance as at
30 June 2021
537,060
29,200
155,000
8,050,000
400,000
9,171,260
16 Related party transactions
Anton Tagliaferro and Simon Conn are Directors and hold equity interests in IML, the entity appointed to manage the
investment portfolio of QV Equities Limited.
All transactions with related entities were made on commercial terms and conditions no more favorable than those available
to other parties unless otherwise stated.
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 $2,390,503 (2021: $2,297,676) inclusive of GST.
The amount expensed in the Statement of Comprehensive Income after allowing for the reduced input tax credit was
$2,227,514 (2021: $2,141,016). As at 30 June 2022, the balance payable to the Manager was $169,565 (2021: $185,890).
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.
42 | QV Equities Limited Annual Report 2022
17 Segment information
The Company has only 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 and options.
18 Contingencies and commitments
The Company had no commitments or contingent liabilities as at 30 June 2022 and 30 June 2021.
19 Events occurring after the reporting period
Since the end of the financial year, the Directors declared a fully franked final dividend of 1.2 cents per fully paid ordinary
share payable on 2 September 2022. The Company bought back 70,717 shares for $67,102 since 30 June 2022.
Subsequent to 30 June 2022 to the date of this report there have been no other events specific to the Company of which the
Directors are aware which have 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 2022
$
30 June 2021
$
47,700
44,600
11,100
58,800
10,400
55,000
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.
QV Equities Limited Annual Report 2022 | 43
Notes to the Financial Statements (continued)
Directors’ Declaration
In the Directors’ opinion,
(1)
the financial statements and notes set out on pages 22 to 43 are in accordance with the Corporations Act 2001 including:
(a) complying with the 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 2022 and of its performance for the
year ended 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
17 August 2022
44 | QV Equities Limited Annual Report 2022
Independent Auditor’s Report to the Shareholders
QV Equities Limited Annual Report 2022 | 45
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 which are separate and independent legal entities.pitcher.com.auIndependent Auditor’s ReportTo the Members of QV Equities LimitedABN 64 169 154 858Report on the Audit of the Financial ReportOpinion We have audited the financial report of QV Equities Limited(“the Company”), which comprises the statement of financial position as at 30 June 2022, the statement of comprehensive income, the statement of changes in equity and the statement of cash flow for the year then ended, and notes to the financial statements, including a summary of significant accounting policies, and the directors’ declaration. In our opinion, the accompanying financial report of QV Equities Limited is in accordance with theCorporations Act 2001, including:i.giving a true and fair view of the Company’s financial position as at 30 June 2022and of its financial performance for the year then ended; andii.complying with Australian Accounting Standards and the CorporationsRegulations 2001.Basis for Opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Reportsection of our report. We are independent of the Company in accordance with the auditor independence requirements of the Corporations Act 2001and the ethical requirements of the Accounting Professional and Ethical Standards Board’s 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 theindependence 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 auditor’s report.We believe that the audit evidence we haveobtained is sufficient and appropriate to provide a basis for our opinion.
Independent Auditor’s Report to the Shareholders (continued)
Independent Auditor’s 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 Company’s financial
assets as they represent the most significant
driver of the Company’s Net Tangible Assets
and Profit.
Our procedures included, amongst others:
▪ Obtaining an understanding of and
evaluating the design of the investment
management processes and controls;
or
other
The Company’s investments are considered
to be non-complex in nature with fair value
based on readily observable data from the
observable markets.
ASX
Consequently,
investments are
classified under Australian Accounting
Standards as “Level 1” (i.e., where the
valuation is based on quoted prices in an
active market).
these
▪ Reviewing
and
evaluating
the
independent auditor’s 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 auditor’s report relate to and
obtaining bridging letters;
▪ Obtaining confirmations of the investment
holdings directly from the Custodians;
and
valuation
the
Assessing
individual
Company’s
investment holdings using independent
pricing sources;
recalculating
of
Evaluating the accounting treatment of
for
revaluations of
current/deferred tax and unrealised gains
or losses; and
financial assets
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.
46 | QV Equities Limited Annual Report 2022
Independent Auditor’s Report to the Shareholders (continued)
Independent Auditor’s 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 Company’s Annual Report for the year ended 30 June 2022 but
does not include the financial report and our auditor’s 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.
Auditor’s 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
auditor’s 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 Company’s 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.
QV Equities Limited Annual Report 2022 | 47
Independent Auditor’s Report to the Shareholders (continued)
Independent Auditor’s Report
To the Members of QV Equities Limited
ABN 64 169 154 858
Auditor’s Responsibilities for the Audit of the Financial Report (Continued)
• Conclude on the appropriateness of the Directors’ 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 Company’s
ability to continue as a going concern. If we conclude that a material uncertainty exists,
we are required to draw attention in our auditor’s 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 auditor’s
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 auditor’s 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 Directors’ Report
for the year ended 30 June 2022.
In our opinion, the Remuneration Report of QV Equities Limited, for the year ended 30 June
2022, 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
17 August 2022
Pitcher Partners
Sydney
Pitcher Partners is an association of independent firms.
ABN 17 795 780 962.
An independent New South Wales Partnership.
48 | QV Equities Limited Annual Report 2022
Shareholder Information
The shareholder information set out below was applicable as at 30 June 2022.
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 2022:
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
Bega Cheese Ltd
Best and Less Group Holdings
Brambles Ltd*
Charter Hall Retail REIT
Cleanaway Waste Management Ltd
Clearview Wealth Limited
Codan Ltd
Coles Group Limited*
Crown Resorts Limited
Event Hospitality and Entertainment Ltd
G.U.D. Holdings Limited
Hipages Group Holdings Ltd
Home Consortium
Homeco Daily Needs REIT
Incitec Pivot Limited*
Informedia Limited
Insurance Australia Group
Integral Diagnostics Limited
Lottery Corporation
2022
Holding
units
Fair value
$
Holding
units
2,100,000
1,000,000
1,200,000
800,000
330,000
2,310,000
2,570,000
1,758,000
14,432,000
11,295,900
3,600,000
13,680,000
–
–
480,000
2,203,200
2,100,000
500,000
1,000,000
900,000
380,000
2,900,000
6,200,000
650,000
–
3,500,000
2,467,900
2,292,000
250,000
–
2021
Fair value
$
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
–
–
370,000
600,000
–
600,000
1,300,000
–
1,600,000
300,000
500,000
–
–
400,000
1,600,000
300,000
2,800,000
500,000
600,000
1,300,000
1,100,000
1,800,000
–
164,609
355,555
6,426,000
4,901,000
–
1,088,000
2,088,000
8,905,000
–
–
3,196,000
1,584,000
1,353,000
3,584,000
1,655,000
1,002,000
5,668,000
3,333,000
8,136,000
–
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
–
–
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
–
Mayne Pharma Group Limited
16,000,000
4,000,000
16,000,000
5,120,000
Medibank Private Ltd
Metcash Limited*
425,000
1,300,000
1,381,250
5,512,000
–
–
1,350,000
5,386,500
QV Equities Limited Annual Report 2022 | 49
Shareholder Information (continued)
A Long term equity investments (continued)
2022
2021
Mirvac Group*
National Storage REIT
New Hope Corporation Limited
Newcrest Mining Limited
Nine Entertainment Co. Holdings Limited
Oceanagold Corp
Oil Search Limited
Ooh Media Limited
Orica Limited*
Origin Energy Limited*
Pact Group Holdings Ltd
Pro-Pac Packaging Limited**
Ramsay Health Care Ltd (preference shares)
Regis Healthcare Limited
Santos Ltd*
Shopping Centres Australasia Property Group
Skycity Entertainment Group Limited
Sonic Healthcare Limited*
Southern Cross Media Group Limited
Spark Infrastructure Group
Suncorp Group Ltd*
Tabcorp Holding Limited
TPG Telecom Ltd*
United Malt Group Ltd
Virgin Money UK PLC (formerly Cybg PLC)*
Z Energy Limited
Floating rate notes
Fair value
$
–
1,117,677
2,854,500
2,528,000
5,529,000
854,000
3,048,000
2,275,000
9,960,0
6,314,000
12,950,000
Holding
units
500,000
–
1,000,000
100,000
1,900,000
–
–
Fair value
$
987,500
–
3,460,000
2,089,000
3,467,500
–
–
Holding
units
–
564,483
1,650,000
100,000
1,900,000
350,000
800,000
1,500,000
1,815,000
1,300,000
830,000
900,000
4,900,000
2,650,000
20,000
900,000
700,000
1,200,000
3,000,000
220,000
3,500,000
–
13,089,100
5,157,000
8,844,500
1,285,250
1,993,000
1,665,000
5,194,000
3,300,000
7,950,000
7,262,200
3,482,500
–
400,000
4,392,000
750,000
1,400,000
3,500,000
26,500,000
5,300,000
–
–
1,200,000
2,340,000
–
1,000,000
1,750,000
–
2,520,000
5,687,500
300,000
11,520,000
3,500,000
2,500,000
–
7,315,000
5,625,000
–
–
700,000
900,000
1,500,000
–
–
2,400,000
12,432,000
4,179,000
2,943,000
3,315,000
–
350,000
550,000
1,500,000
1,100,000
2,191,000
2,464,000
5,520,000
2,783,000
Crown Resorts Limited unsecured sub floating rate note
41,000
4,179,130
41,000
3,976,590
Total equities
Cash
Total portfolio
206,870,930
246,182,122
32,092,735
19,027,433
238,963,665
265,209,555
* Part or all of the security was subject to call options written by the Company as at 30 June 2022.
** Pro-Pack Packaging had a one for 10 share consolidation during the year ended 30 June 2022.
There were 677 (2021: 592) investment transactions during the financial year. The total brokerage paid on these transactions
was $261,919 (2021: $289,564).
50 | QV Equities Limited Annual Report 2022
Shareholder Information (continued)
B Distribution of equity securities
Analysis of numbers of shareholders by size of holding as at 30 June 2022:
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
291
560
682
3,085
308
4,926
93,584
1,846,459
5,565,355
108,223,771
113,320,324
229,049,493
0.04
0.81
2.43
47.25
49.47
100.00
There were 210 holders of less than a marketable parcel of ordinary shares holding a total of 24,600 shares.
C Equity security holders
Twenty largest shareholders – ordinary shares:
Name
HSBC Custody Nominees (Australia) Limited
Citicorp Nominees Pty Limited
AKAT Investments Pty Ltd
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