2010 ANNUAL REPORT

HFA HOLDINGS LIMITED ABN: 47 101 585 737

Office Level 5151 Macquarie StreetSydney NSW 2000

Telephone+61 (2) 8302 3333

Facsimilie(02) 9252 4580

Emailinfo@hfaholdings.com.au

Websitewww.hfaholdings.com.au

Shareholder information and inquiriesAll inquiries and correspondence regarding shareholdings should be directed to HFA’s share registry provider:

Link Market Services LimitedAddressLevel 12680 George StreetSydney NSW 2000

Mailing AddressLocked Bag A14Sydney South NSW 1235

Telephone1300 554 474 or (overseas) +61 (2) 8280 7111

Facsimilie(02) 9287 0303

Websitewww.linkmarketservices.com.au

Chairman’s review 2

Directors’ report 5

Lead auditor’s independence declaration 26

Consolidated statement of financial position 27

Consolidated income statement 28

Consolidated statement of comprehensive income 29

Consolidated statement of changes in equity 30

Consolidated statement of cash flows 31

Notes to the consolidated financial statements 32

1 Reporting entity 32

2 Basis of preparation 32

3 Significant accounting policies 32

4 Determination of fair values 38

5 Risk management 39

6 Operating segments 40

7 Revenue and expenses 43

8 Finance and income costs 44

9 Income tax expense 45

10 Cash and cash equivalents 46

11 Trade and other receivables 46

12 Investments 47

13 Tax assets and liabilities 47

14 Plant and equipment 48

15 Intangible assets 49

16 Trade and other payables 51

17 Employee benefits 51

18 Derivatives 51

19 Share-based payments 52

20 Loans and borrowings 54

21 Capital and reserves 55

22 Earnings per share 57

23 Parent entity disclosures 58

24 Reconciliation of cash flows from operating activites

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25 Financial instruments 60

26 Commitments 64

27 Contingent liabilities 65

28 Auditor’s remuneration 65

29 Related parties 65

30 Group entities 70

31 Events after balance sheet date 70

Directors’ declaration 71

Independent auditor’s report to the members of HFA Holdings Limited 72

ASX additional information 74

Notes 76

Corporate directory Back Cover

CONTENTS

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CHAIRMAN’S REVIEW

Highlights

• Netincomeof$60.62million(2009:$95.54m)

• Operatingcashflowsof$29.40million(2009:$42.54m)

• OperatingEBITDAof$24.09million(2009:$40.25m)

• Pre-taxprofitof$6.30million(2009:lossof$580.46m)

• Netprofitaftertaxof$4.70million(2009:lossof$573.18m)

Assets under management and fund flows

• AssetsUnderManagement(AUM)of$5.54billion (2009:$6.16billion)

• FundsUnderManagement(FUM)of$5.51billion (2009:$5.62billion)

•LighthousePartnersAUMup11%withpositivenetinflows

WelcometotheHFAHoldingsLimited(“HFA”)annualreportforthe2010financialyear.ItiswithgreatsatisfactionthatIcanreportanumberofstrongpositivesfromtheperformanceofyourcompanyoverthelast12months.Inmytwopreviousreportstoshareholdersin2008and2009IdetailedhowHFAwasimpactedbyandwasrespondingtothefalloutfromtheglobalfinancialcrisis(GFC).TheseweredifficultandextremelychallengingtimesfortheBoard,managementandstaffofHFA,astheywereforthefundsmanagementindustryglobally.Iampleasedtoreportthatwhilesomechallengesremain,wehaveseenoverthelast12monthsastabilisingofourbusinessandimportantlyamaterialreductionintheadverseexternalpressureswhichaffectourabilitytocreatevalueforshareholders.

REVIEW OF RESULTS

Inthe12monthsto30June2010,HFAdeliveredasolidfinancialperformance,withpositivenetearningsforthefinancialyear.HighlightsfortheyearincludeEBITDAof$24.09millionandoperatingcashflowof$29.40million.HFA’spre-taxearningswere$6.3millionfortheyearto30June2010,withanetprofitaftertaxof$4.70millioncomparedtoanetlossin2009of$573.18million.The2009financialresultswereseverelyimpactedbynoncashimpairmentsandwrite-downsof$599.53millionprimarilyrelatedtotheacquisitionofLighthousein2008.

TotalFundsUnderManagement(FUM)felllessthan2%to$5.51billionfortheyeardemonstratingastabilisationofthegroup’sFUMcomingoutoftheGFC.Reflectingageneraldeleveragingofinvestmentproductsglobally,HFA’sAustralianbusinessreduceditsownproductleverage,resultinginAssetsUnderManagement(AUM)of$5.54billion.

TheLighthousebusinesscontinuedthestrongrecoveryfromthefirsthalfintothesecondhalfwithan11%increaseinAUMfortheyearandpositivefundflowsfor10ofthe12months.Lighthousecontributed78%oftheGroup’stotalnetincomeof$60.62millionand89%ofOperatingEBITDAof$24.09millionforthefullyear.

TheseresultsareindicativeoftheconfidencetheBoardandmanagementhaveinthebusinessandthatwehavedealtwiththeworstramificationsoftheGFCandemergedasaleaderintheglobalalternateinvestmentindustrythroughLighthouse’smanaged accountsprogram.

Spencer YoungChairman

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LIGHTHOUSE PARTNERS

HFA’sstrongfinancialresultswereunderpinnedbyanexcellentcontributionandperformancebyourwholly-ownedUS-basedLighthousePartnersbusiness.Underthefirst-rateguidanceofPresidentSeanMcGouldandhisteam,theLighthousebusinesshasemergedfromtheGFCasastrong,stablebusinesswithtremendouspotentialtogrowwellintothefuture.

Lighthouse’scurrentsuccessisbuiltnotjustonitsindustryleadinginvestmentperformancebutalsoontheprecipitousdecisionin2005tomigratefundportfoliopositionsawayfrominvestmentsinunderlyinghedgefundstodirectinvestmentsviaaproprietarymanagedaccountsprogram.WhentheGFCstruckin2007hedgefundinvestorsimmediatelybegandemandinggreatertransparency,securityofinvestmentassetsandenhancedliquidityfromtheirmanagersandtheprogressLighthousehadalreadymadeinmigratingtomanagedaccounts,albeitstillworkinprogress,positionedthemwelltobeagloballeaderinmeetinginvestors’expectations.

Asoneofthelargestfundofmanagedaccountsprovidersinhedgefundproductsglobally,Lighthouse’smanagedaccountsprogramhasbeenwellreceivedbyitsexistingandnewclients,with70%ofallinflowsreceivedduringFY10goingtoLighthouseproductswhichhave100%oftheirassetsinvestedviathemanagedaccountsprogram.

TheLighthousebusinesswillcontinuetofocusonthedevelopmentanddistributionofitsmanagedaccountsprogram,inparticularfocussingonbroadeningdistributionnotonlygeographically,butalsodeeperintothelargerinstitutionalinvestorspace.

CERTITUDE GLOBAL INVESTMENTS

OurAustralianbusinesscontinuedtofeelthepressurefromthestructuralupheavaloftheAustralianretailfundmanagementmarketduringFY10.However,wearebeginningtoseeevidenceofastabilisationinthelocalmarketandhaverecentlyre-positionedthebusinesstomaximiseopportunitiesastheinvestmentenvironmentreturnstomorehistoricallynormallevels.

FromAugust1,2010,ourAustralianbusiness,previouslycalledHFAAssetManagement,becameknownasCertitudeGlobalInvestments.Changingthenameofthebusinessisjustoneelementofourstrategytore-positionthebusinesstoensureitslongtermsustainabilityandmaximiseopportunitiesforgrowth.

Underpinningthenamechangeisanewstrategicdirectionfocussingonmovingtoanopenarchitecturemodelofinvestmentmanagementservices.Previouslythebusinesshadbeenfocussedonasinglemulti-managerstrategywithdistributionprimarilytoretailinvestorsthroughIndependentFinancialAdvisers(IFAs).

Underitsrevisedstrategythebusinesswillnowfocusonofferingabroaderrangeofproducts,toamorediverserangeofinvestors,withafocusonprovidingsimpleandtransparentaccesstosomeoftheworld’sleadingactiveinvestmentmanagers.IntheprocessCertitudewillretainitsmarketleadingexpertiseinabsolutereturnsandmulti-managerproductsandenvisagesapivotalongoingroleforproductssourcedfromLighthousewiththeirmanagedaccountsprogramcapabilitiesandbenefits.ThesuccessfulimplementationofthenewbusinessstrategyundertheCertitudebrand,includingtheintroduction

HFA HOLDINGS IS A DIVERSIFIED GLOBAL FUND MANAGER

Global Partnerships

Multi-Manager Products

Structured Products

Managed Account Program

Marshall Wace GavKal

Other TBA

HFA Branded

Investment Funds

HFA Octane Branded

Customised Client Solutions

CHAIRMAN’S REVIEW

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Certitude Global

• Multi-capabilityPlatformincludingFundofManagedAccountsand singlestrategies

• Diversifiedclientbase

• Positionas‘Alpha’solutionsprovider

• Growthbusinessmodelwithsustainablemarginsforthelong-term

• Adifferentiationstrategyimplementedbymatchinghighqualityproductwithsustainablemargintoadiversified clientbase

HFA Asset Management

• MultiManagerFundofHedgeFund (FoHF)providerbuiltonstrong distributionnetwork

• Largelyretailclientbase

• Positionedasthe‘LeaderinAbsoluteReturns’

• Businessmodelnotsuitedtopost-GFC financialandproductclimate

• Longtermsuccessrequiresincreased diversificationandimprovedinvestor engagement&productunderstanding

IwouldliketotakethisopportunitytothankmyfellowBoardmembers,theseniormanagementandstaffofHFA,LighthouseandCertitude,fortheircontinuedeffortsnotjustinsustainingHFAthroughouttheGFCbutmoreimportantlytoentrenchitasacompanythatiswellpositionedtodeliverlongtermvalueforbothourshareholdersandourproductinvestors.

KindRegards

Spencer Young Chairman

ofhighqualitysinglemanagerproductsthatareliquid,transparentandsimple,willlaythefoundationsforrenewedAUMgrowthandprofitabilityoverthemedium-term.

ThechangesatCertitudearebeingdrivenbyexperiencedfinancialservicesexecutiveCraigMowllasthenewlyappointedChief ExecutiveOfficeroftheAustralianbusiness.

OUTLOOK

TheoperatingandfinancialperformanceofHFAoverthelast12monthsallowsustonowlookforwardandplanwithmoreclaritythanatanytimesincetheonsetoftheGFC.OurUSbusinessispushingaheadstronglyandourAustralianbusinessisbuildingthenecessaryfoundationstoprovidelastingreturns.TheGFChaschangedtheglobalfundsmanagementlandscape,withallinvestorsrequiringenhancedtransparency,liquidityandsecurityofassetsintheirinvestments.BoththeLighthouseandtheCertitudebusinesseshavefacedthesechallengesandre-focussedtheirstrategiesonmeetingthesedemandsthroughtheirproductofferingsandservices.Inaddition,bothbusinessesareactivelypursuingadiversificationoftheirtraditionaldistributionchannels.

NEW OPEN ARCHITECTURE FOR AUSTRALIAN BUSINESS

Migration To Open

Architecture Model

CHAIRMAN’S REVIEW

asset management

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DIRECTORS’ REPORT

The directors present their report together with the financial report of HFA Holdings Limited and its subsidiaries (the “Group”)

for the financial year ended 30 June 2010 and the auditor’s report thereon.

1. DIRECTORS The directors of HFA Holdings Limited (the “Company”/ “HFA”) at any time during or since the end of the financial year are:

Mr Spencer Young B.Eng. MBA

Chairman, Executive Director and Chief Executive Officer

Spencer founded HFA in 1998. He has over 19 years of alternate asset class investment experience and close relationships with a network of international hedge funds and domestic research and rating agencies.

Spencer holds a B.Eng (U.Qld) and an MBA from Harvard. He has held several senior investment positions including executive director of Rothschild Australia Private Equity and Lend Lease Corporation’s senior executive in the USA for venture capital and private equity investments. An experienced company director, his recent directorships have included Tremblant Capital, a significant New York based hedge fund.

Appointed Executive Director 15 May 2003.

Appointed Non-Executive Director 13 April 2007 to 18 September 2007.

Appointed Chief Executive Officer and Executive Director 18 September 2007.

Name, qualifications and independence status

Mr Sean McGouldBSc. Accounting

Executive Director

Sean is the co-founder of Lighthouse Investment Partners, LLC (Lighthouse) and serves as President and Co-Chief Investment Officer. He supports the investment team in the manager search, selection and review process and is the Chairperson of the Investment Committee. Sean has been overseeing all aspects of the portfolios since August 1996.

Sean joined Asset Management Advisors (“AMA”), a multi-family office as Chief Investment Officer in August 1996. Lighthouse was formally spun out of AMA in 1999. For the past 16 years, Sean has been investing in various alternative investment strategies. Prior to founding Lighthouse, Sean was the director of the Outside Trader Investment Program at Trout Trading Management Company and was responsible for the allocation of the fund's assets to external alternative asset strategies.

Prior to Trout, Sean worked for PriceWaterhouse.

Appointed 3 January 2008.

Experience, special responsibilities and other directorships

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Mr John LarumB. Com MEc GAICD

Independent Non-Executive Director

John has extensive experience in the financial services industry having held a range of senior positions including, President of China Business for UBS Global Asset Management, Chief Executive Officer of UBS Global Asset Management (Australia), and Chief Economist for UBS Warburg (Australia). Prior to joining UBS, he spent more than a decade with the Federal Treasury in Canberra, where he rose to the position of Assistant Secretary, Domestic Economy Branch, Economic Division. John holds a Bachelor of Commerce (Econometrics) from the University of New South Wales and a Master of Economics from the Australian National University.

Chairperson of the Remuneration Committee and Member of the Audit Committee.

Appointed 12 December 2008.

Mr Michael Shepherd

Independent Non-Executive Director

Michael has extensive experience in financial markets and the financial services industry having held a range of senior positions including Vice Chairman of ASX Limited, and directorships of several of ASX’s subsidiaries including Australian Clearing House Pty Ltd. He was also National President of the Financial Services Institute of Australasia.

Currently Michael is a director of ASX Market Supervision Pty Ltd, Chairman of the Shepherd Centre and is an independent Compliance Committee Member for UBS Global Asset Management (Australia) Limited.

Member of the Remuneration Committee and Member of the Audit Committee.

Appointed 16 December 2009.

Mr F P (Andy) EstebanB.Bus ASA MAICD METI

Independent Non-Executive Director

Andy holds a Bachelor of Business majoring in Accounting. He is an Associate of the Australian Society of CPA’s and a member of the Australian Institute of Company Directors. He has 31 years experience in the financial services industry, of which 21 years were with Perpetual Trustees Australia Limited.

In 1999 he established FP Esteban and Associates, a private business specialising in implementing and monitoring risk management and compliance frameworks in the financial services industry. He has provided compliance consulting services to a number of organisations including UBS Global Asset Management for their funds management operations in Australia, and South East Asia operations located in Hong Kong, Singapore, Taiwan and China. From July 2005 until June 2008 he was an independent director of Credit Suisse Asset Management (Australia) Ltd. He is currently the Chairman of Certitude Global Investments Limited, a wholly-owned subsidiary of the Company.

Chairperson of the Audit Committee and Member of the Remuneration Committee.

Appointed 18 June 2008.

DIRECTORS’ REPORT

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2. COMPANY SECRETARIESMsJoanneHillBALLBwasappointedtothepositionofjointcompanysecretaryon20November2008.Joanneisaqualifiedsolicitor.JoannehasovertenyearsexperienceinthefinancialservicessectorandpriortojoiningHFAin2007heldseniorlegaladvisorypositionsinbothAustralianSecuritiesExchange(ASX)andNewZealandExchange(NZX)listedfinancialservicescompanies.Joannehasbeensolecompanysecretarysince1June2010.

MrRobertWhiteBBuswasappointedtothepositionofjointcompanysecretaryon15February2007.Roberthasover15yearsexperienceinthefinancialservicesindustryworkingwithinboththeinstitutionalandretailmarketsegmentsintheUK,EuropeandAustralia.Robertresignedascompanysecretaryon1June2010.

3. DIRECTORS’ INTERESTSTherelevantinterestofeachdirectorintheordinarysharecapitaloftheCompanyatthedateofthisreportisasfollows:

Number of ordinary shares

Mr Spencer Young1 22,516,951

Mr Sean McGould2 77,752,335

Mr F P (Andy) Esteban 8,354

Mr John Larum 36,400

Mr Michael Shepherd3 100,000

1.SharesareheldindirectlybySpencerYoungasTrusteefortheSpencerYoungFamilyTrust. 2.77,744,335sharesheldindirectlybySGMHoldings,LLC.

3.SharesareheldindirectlybyTidalaPtyLtdasTrusteefortheShepherdProvidentFund.

4. DIRECTORS’ MEETINGSThenumberofdirectors’meetings(includingmeetingsofcommitteesofdirectors)andnumberofmeetingsattendedbyeachofthedirectorsoftheCompanyduringthefinancialyearare:

Director A B A B A B

Mr Spencer Young 11 11 - - - -

Mr Sean McGould 10 11 - - - -

Mr F P (Andy) Esteban 11 11 1 1 3 3

Mr John Larum 10 11 1 1 2 3

Mr Michael Shepherd 8 8 - - 2 2

A–Numberofmeetingsattended. B–Numberofmeetingsheldduringthetimethedirectorheldofficeandwaseligibletoattend

duringtheyear.

Audit committee meetings

Remuneration committee meetings

Board meetings

Duringthefinancialyearending30June2010,theboardhadresponsibilityfortheperformanceofthefunctionsofthe nominationcommitteeandnoseparatenominationcommitteemeetingswereheld.

5. CORPORATE GOVERNANCE STATEMENTThisstatementoutlinesthemaincorporategovernancepracticesinplacethroughoutthefinancialyear,whichcomplywiththeASXGovernanceCouncilrecommendations,unlessotherwisestated.

TheCompany’spolicies,chartersandcodesinrelationtocorporategovernanceareavailableontheCompany’swebsite.

5.1 BOARD OF DIRECTORS

ROLE OF THE BOARD

Theboard’sprimaryroleistheprotectionandenhancementoflong-termshareholdervalue.

Tofulfilthisrole,theboardisresponsiblefortheoverallcorporategovernanceoftheGroup,including:

• ensuringtheintegrityofriskmanagement,internalcontrol,legalcomplianceandmanagementcontrolsystems;

• reviewingandapprovingcorporatestrategies,budgets,plansandpoliciesdevelopedbymanagementandevaluatingperformanceoftheGroupagainstthosestrategiesandbusinessplansin orderto: - monitortheperformanceoffunctionsdelegatedtosenior managementincludingtheprogressofmajorcapital expenditure,capitalmanagement,acquisitions,divestitures andstrategiccommitments;and

- assessthesuitabilityoftheGroup’soverallstrategies, businessplansandresourceallocation;

• ensuringthateffectiveaudit,riskmanagementandregulatorycomplianceprogramsareimplementedtoprotecttheGroup’sassetsandshareholdervalue;

• reviewingandapprovinggovernancepolicies;

• oversightofcorporategovernancematterspertainingtoboardmanagement;

• appointingandremovingthechiefexecutiveofficer(”CEO”);

• ratifyingtheappointmentofthechieffinancialofficer(“CFO”) andthecompanysecretary;

• evaluatingtheperformanceoftheCEOandseniormanagement;

• reviewingboardandexecutivesuccessionplanning;

• monitoringfinancialperformanceandbusinessresults(includingtheauditprocess)tounderstandatalltimesthefinancialpositionoftheGroup;

• oversightoftheCompany’scontinuousdisclosureobligationsincludingapprovingtheGroup’sstatutoryaccountsanddirectors’reportsandthedeclarationofanydividends;

• reportingtoshareholdersandotherstakeholders;

DIRECTORS’ REPORT

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Name Position Independent First appointed

Mr Spencer Young Chairman,CEOandExecutiveDirector No May2003

Mr Sean McGould ExecutiveDirector No January2008

Mr F P (Andy) Esteban Non-ExecutiveDirector Yes June2008

Mr John Larum Non-ExecutiveDirector Yes December2008

Mr Michael Shepherd Non-ExecutiveDirector Yes December2009

• capitalmanagement,includingissues,callson,forfeitureofshares,declarationofdividendsandsharebuybacks;

• membershipandroleofboardsub-committees;

• reviewingtheperformanceoftheboardandboardcommittees;and

• implementingacultureofcompliancewiththehighestlegalandethicalstandardsandbusinesspractices.

TheboardhasdelegatedtotheCEOand,undertheCEO’sleadership,executivemanagement,thepowersandauthoritynecessarytoimplementthestrategiesapprovedbytheboardandtomanagethedaytodaybusinessaffairsoftheCompany.TheCEOisrequiredtoconsulttheboardonmattersthataresensitive,extraordinary,ofastrategicnatureorareotherwiseoutsidetheCEO’sdelegatedauthoritylimitsasspecifiedbytheboardfromtimetotime.

Atthetimeoftheirappointment,non-executivedirectorsreceiveaformalletterofappointmentwhichsetsoutthekeytermsandconditionsoftheirappointment,includingexpectationsofattendanceandpreparationforallboardmeetings,appointmentstootherboards,theproceduresfordealingwithconflictsofinterest,andtheavailabilityofindependentprofessionaladvice.TherolesandresponsibilitiesoftheCEOandCFOareformallyoutlined.

Detailsoftheboard’scharterarelocatedontheCompany’swebsite(www.hfaholdings.com.au).

COMPOSITION OF THE BOARD

Thecompositionoftheboardisdeterminedusingthefollowingprinciples:

• aminimumoffourdirectors,withabroadrangeofexpertise;

• amaximumofninedirectors;and

• amajorityofnon-executivedirectors.

RefertoTable1(below)forasummaryofthecompositionoftheboardasat19August2010.

Theboardcomprisedofonlyfourmembersuntiltheappointmentofnon-executivedirectorMrMichaelShepherdinDecember2009,atwhichpointthemajorityoftheboardwereindependent.FollowingtheresignationofthepreviousChairmanon31March2009,therolesofChairmanandCEOhavebeenexercisedbythesameperson.

Atthattime,theboarddeterminedthatgiventheglobaleconomiccircumstancesandtheirpotentialimpactontheCompany,MrYounghadtheappropriateknowledgeandexperiencetobestundertaketheChairmanrole.Thisarrangementwillremainunderreviewbytheboard.Accordingly,theCompanywasnotincompliancewithASXCorporateGovernancePrinciple2.1,2.2and2.3throughoutthe entirefinancialyear.

DIRECTOR INDEPENDENCE

Anindependentdirectorisadirectorwhoisnotamemberofmanagement(anon-executivedirector),isfreeofanybusinessorotherrelationshipsthatcouldmateriallyinterferewith,orcouldreasonablybeperceivedtomateriallyinterferewith,theexerciseoftheirunfetteredandindependentjudgement,andwho:

• isnotasubstantialshareholderoftheCompany,holdslessthan5%ofthevotingsecuritiesoftheCompanyandisnotanofficerof,orotherwiseassociated,directlyorindirectly,withaholderofmorethan10%oftheCompany’svotingsecurities;

• hasnot,withinthelastthreeyears,beenemployedinanexecutivecapacitybytheCompanyoranothergroupmember,orbeenadirectorafterceasingtoholdanysuchemployment;

• withinthelastthreeyearshasnotbeenaprincipaloremployeeofamaterialprofessionaladviseroramaterialconsultanttotheCompanyoranothergroupmember;

• isnotamaterialsupplierorcustomeroftheCompanyoranothergroupmember,oranofficeroforotherwiseassociated,directlyorindirectly,withamaterialsupplierorcustomer;

• hasnomaterialcontractualrelationshipwiththeCompanyoranothergroupmemberotherthanasadirectoroftheCompany;and

• isfreefromanyinterestandanybusinessorotherrelationshipwhichcould,orcouldreasonablybeperceivedto,materiallyinterferewiththedirector’sabilitytoactinthebestinterestoftheCompany.

TABLE1.Compositionoftheboard

DIRECTORS’ REPORT

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DIRECTORS’ REPORT

INDEPENDENT PROFESSIONAL ADVICE AND ACCESS TO COMPANY INFORMATION

EachdirectorhastherightofaccesstoallrelevantCompanyinformationandtotheCompany’sexecutivesand,subjecttopriorconsultationwiththeChairman,mayseekindependentprofessionaladvicefromasuitablyqualifiedadviserattheGroup’sexpense.Thedirectormustconsultwithanadvisorsuitablyqualifiedintherelevantfield,andobtaintheChairman’sapprovalofthefeepayablefortheadvicebeforeproceedingwiththeconsultation.Acopyoftheadvicereceivedbythedirectoristobemadeavailabletoallothermembersoftheboard.

DIRECTOR AND EXECUTIVE EDUCATION

TheGroupeducatesnewdirectorsaboutthenatureofthebusiness,currentissues,thecorporatestrategyandtheexpectationsoftheGroupconcerningperformanceofdirectors.Directorsareencouragedtointeractwithmanagementtogainabetterunderstandingofbusinessoperations,andareencouragedtoundertakecontinuingeducationinrelationtotheGroupandtheindustryinwhichitoperatestoupdateandenhancetheirskillsandknowledge.

BOARD PROCESSES

Toassistintheexecutionofitsresponsibilities,theboardhasprovidedfortheestablishmentofanumberofboardcommitteesincludinganominationcommittee,aremunerationcommittee,andanauditcommittee.Thesecommitteeshavewrittenchartersoutliningthedutiesandresponsibilitiesofthecommittee,whicharereviewedonaregularbasis.TheboardhasalsoestablishedaframeworkformanagementoftheGroupincludingasystemofinternalcontrol,abusinessriskmanagementprocessandtheestablishmentofappropriateethicalstandardsandcodesofconduct.

Theframeworkincludes:

• internalcontrols(forexample:dualsignatories,reconciliations,andsegregationofduties);

• businessriskmanagementprocess(riskregister,complianceplansfortheoperationofmanagedinvestmentschemes,stafftradingpolicies,andemployeemanual);and

• ethicalstandardsandcodesofconduct(directorcodeofconduct,employeecodeofconduct,andemployeemanual).

Theboardmeetsapproximatelyeverytwomonths,withadditionalmeetingsheldasrequiredtoaddressspecificissues.TheagendaformeetingsispreparedinconjunctionwiththeCEO,CFOandcompanysecretarytoensureadequatecoverageofstrategic,financial,governanceandcompliancematters.Submissionsarecirculatedinadvanceofthemeetings.Seniorexecutivesareinvitedtoattendboardmeetingsandareavailableforcontactbynon-executivedirectorsbetweenmeetings.Thedirectorsmayhaveclosedsessionswithoutanyexecutiveinvolvementduringmeetingsattheirdiscretion.

5.2 NOMINATION COMMITTEE

Thenominationcommitteecharterrequiresthatthenominationcommitteebecomprisedofthreenon-executivedirectors,themajorityofwhichmustbeindependent.

Thenominationcommitteeistoadvisetheboardonmattersrelatingtothecompositionandperformanceoftheboard.Boardcandidatesmuststandforelectionatthenextgeneralmeetingofshareholders.Thenominationcommitteeisalsoresponsibleformakingrecommendationsregardingtheappointmentandremovalofdirectors,havingregardtoanappropriatemixofskillsetsandexpertise.Thenominationcommitteealsoreviewsperformanceoftheboard,committeesandkeyexecutives,reviewsboardsuccessionplans,aswellasoverseeingtheinductionprocessfornewdirectorsandcommitteemembers.

Thenominationcommittee’snominationofexistingdirectorsforre-appointmentisnotautomaticandiscontingentontheirpastperformance,contributiontotheCompanyandthecurrentandfuturerequirementsoftheboard.Thenominationcommitteesubmitsrecommendationstotheboard,whichthenvotesonthem.

TheCompanydoesnotcurrentlycomplywithASXCorporateGovernancePrinciple2.4andthefunctionsofthenominationcommitteearebeingundertakenbytheboardwhichtheCompanyconsidersappropriateatthistimegiventhesmallsizeoftheboard.Theboardundertakeson-goingself-assessmentandiscurrentlyreassessingitsprocessforaformalperformanceevaluation.

Underitscharter,thenominationcommitteemeetsbi-annuallyunlessotherwiserequired.Asthefunctionsofthenominationcommitteewereundertakenbytheboardfortheyearended30June2010,separatemeetingsofthecommitteewerenotheld.

Furtherdetailsofthenominationcommittee’scharterandpolicies,includingthoseforappointingdirectorsandseniorexecutives,areavailableontheCompany’swebsite.

5.3 REMUNERATION COMMITTEE

Theremunerationcommittee’sdutiesandresponsibilitiesareoutlinedintheremunerationcommitteecharter.Theremunerationcommitteecharterrequiresthattheremunerationcommitteebecomprisedofthreenon-executivedirectors,themajorityofwhichmustbeindependent.

TheremunerationcommitteereviewsandmakesrecommendationstotheboardonremunerationpackagesandpoliciesapplicabletotheexecutiveofficersanddirectorsoftheCompany.

Itisalsoresponsibleforreviewingandmakingrecommendationsinrelationtoshareschemes,incentiveperformancepackages,superannuationentitlements,retirementandterminationentitlements,fringebenefitspoliciesandprofessionalindemnityandliabilityinsurancepolicies.

Themembersoftheremunerationcommitteeduringtheyearwere:

• MrFP(Andy)Esteban-Independentnon-executivedirector

• MrJohnLarum-Independentnon-executivedirector

• MrMichaelShepherd-Independentnon-executivedirector(appointed16December2009).

Theremunerationcommitteecomprisedofonlytwomembersuntiltheappointmentofnon-executivedirectorMrMichaelShepherdinDecember2009.Accordingly,theCompanywasnotincompliance

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DIRECTORS’ REPORT

withASXCorporateGovernancePrinciple8.1throughouttheentirefinancialyear.

TheCEOisinvitedtoremunerationcommitteemeetingsasrequired,todiscussseniorexecutives’performanceandremunerationpackagesbutdoesnotattendmeetingsinvolvingmatterspertainingtohimselfasCEO.

Theremunerationcommitteemeetsbi-annuallyorasoftenasnecessarytoenableittoeffectivelydischargeitsresponsibilities.Thefrequencyofmeetingsandtheattendancerecordofcommitteemembersaredisclosedinthedirectors’report.

Asummaryoftheremunerationcommittee’scharterisavailableontheCompany’swebsite.

REMUNERATION POLICIES

CompensationlevelsforkeymanagementpersonnelandsecretariesoftheCompanyandrelevantkeymanagementpersonneloftheGrouparecompetitivelysettoattractandretainappropriatelyqualifiedandexperiencedindividuals.Externalremunerationbenchmarksandsurveysareconsideredwhensettingcompensationlevels.

Compensationstructuresaredesignedtorewardtheachievementofstrategicobjectivesandachievethebroaderoutcomeofcreationofvalueforshareholders.Thecompensationstructurestakeintoaccount:

• thecapabilityandexperienceofkeymanagementpersonnel;

• keymanagementpersonnel’sabilitytocontrolrelevantperformance;

• theGroup’sperformance;and

• theamountofincentiveswithineachkeymanagementperson’s

compensation.

Compensationpackagesincludeamixoffixedcompensationplusperformancelinkedcompensationwhichincludesashorttermincentive(STI)andmayincludealongtermincentive(LTI).Detailsoffixedcompensation,STIandLTIarrangementsarediscussedintheremunerationreportinthedirectors’report.

NON-EXECUTIVE DIRECTOR REMUNERATION

Non-executivedirectorsreceivedirectorfees.Theaggregateofnon-executivedirectorfeesiscappedatamaximumof$750,000perannum,asapprovedbyshareholdersattheannualgeneralmeetingheldon14December2007.Non-executivedirectorsarenotentitledtoparticipateinexecutiveremunerationschemes,maynotreceiveoptionsorbonuspayments,andarenotprovidedwithretirementbenefitsotherthanstatutorysuperannuationentitlements.

Executiveandnon-executivedirectorsmaybereimbursedfortheirreasonableexpensesproperlyincurredasdirectors.

Detailsoftheremunerationofnon-executivedirectorsandkeypersonnelareincludedintheremunerationreportinthedirectors’report.

5.4 AUDIT COMMITTEE

Theauditcommitteehasadocumentedcharterapprovedbytheboard.

Thecommitteememberscompriseaminimumofthreenon-executivedirectors,withamajoritybeingindependent.TheChairmanmaynotbetheChairmanoftheboard.

Themembersoftheauditcommitteeduringtheyearwere:

• MrFP(Andy)Esteban-Independentnon-executivedirector

• MrJohnLarum-Independentnon-executivedirector

• MrMichaelShepherd-Independentnon-executivedirector (appointed16December2009).

Theauditcommitteecomprisedofonlytwomembersuntiltheappointmentofnon-executivedirectorMrMichaelShepherdinDecember2009.Accordingly,theCompanywasnotincompliancewithASXCorporateGovernancePrinciple4.2throughouttheentirefinancialyear.

Atthediscretionoftheauditcommittee,theexternalauditorand othermembersoftheboardandmanagementwillbeinvitedto auditcommitteemeetings.

TheCEOandtheCFOdeclareinwritingtotheboardonanannualbasisthatthefinancialrecordsoftheCompanyforthefinancialyearhavebeenproperlymaintainedandthattheCompany’sfinancialreportsforthefinancialyearcomplywithaccountingstandardsandpresentatrueandfairviewoftheGroup’sfinancialconditionandoperationalresults.

Thefrequencyofmeetingsandtheattendancerecordofcommitteemembers,alongwithasummaryofdirectorqualificationsaredisclosedinthedirectors’report.

Asummaryoftheauditcommittee’scharterisavailableontheCompany’swebsitealongwithinformationonproceduresfortheselectionandappointmentoftheexternalauditor,andfortherotationofexternalauditengagementpartners.

Theroleoftheauditcommitteeistoassisttheboardindischargingitsoversightresponsibilitiesinrelationtoauditandfinancialreportingmatters.Responsibilitiesinclude:

• overseeingthefinancialreportingprocesstoensurethebalance,transparencyandintegrityofpublishedfinancialreports,including; - reviewingthehalfyearandannualfinancialreportsand otherfinancialinformationdistributedexternally.This includesapprovingnewaccountingpoliciestoensure compliancewithAustralianAccountingStandards(AASBs), andassessingwhetherthefinancialinformationis consistentwithcommitteemembers’informationand adequateforshareholders’needs; - assessingmanagement’sproceduressurroundingthe financialreportingprocess; - consideringtheresultsoftheaudit,including recommendationssubmittedbytheexternalauditorand management’sresponses;and - makingrecommendationstotheboardregardingsame;

• reviewingtheeffectivenessofinternalcontrolsrelevanttothefinancialreportingfunction;

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• reviewingtheindependenceoftheexternalauditorsandauditprocess,including: - makingrecommendationsregardingtheappointment/ removaloftheexternalauditorandrotationoftheexternal auditpartner; - assessingtheperformanceoftheexternalauditor;and - reviewingnon-auditservicesprovidedbytheexternal auditorandcompliancewiththeCompany’sExternal AuditorPolicy;

• reviewingtheCompany’sprocessformonitoringcompliancewithlawsandregulationsaffectingfinancialreporting;and

• consideringandreportingtotheboardonanysuchothermattersastheboardmayrefertothecommitteefromtimetotime.

Theauditcommitteereviewstheperformanceoftheexternalauditorsonanannualbasisandnormallymeetswiththemduringtheyearto:

• discusstheauditplans,identifyanysignificantchangesinstructure,operations,internalcontrolsoraccountingpolicieslikelytoimpactthefinancialstatementsandtoreviewthefeesproposedfortheauditworktobeperformed;

• reviewthehalf-yearandpreliminaryfinalreportpriortolodgementwiththeASX,andanysignificantadjustmentsrequiredasaresultoftheauditor’sfindings,andtorecommendboardapprovalofthesedocumentspriortoannouncementofresults;

• reviewthedraftannualandhalf-yearfinancialreports,andrecommendboardapprovalofthefinancialreport;and

• reviewtheresultsandfindingsoftheauditor,theadequacyofaccountingandfinancialcontrols,andtomonitortheimplementationofanyrecommendations.

EXTERNAL AUDITORS

TheCompanyhasengagedKPMGasitsexternalauditors.TheexternalauditormustremainindependentoftheGroupatalltimesandcomplywithAPES110CodeofEthicsforProfessionalAccountantspertainingtofinancialindependenceandbusinessrelationships.Inaddition,theexternalauditormustnotprovidenon-auditservicesthatcouldbeconsideredtoimpairtheauditor’sindependencewhetherinfactoronaperceptionbasis.

Theleadauditengagementpartnershouldberotatedafteraperiodofnolongerthanfiveyearsandcannotresumetheroleuntilatleasttwoyearshaveelapsed.MrRobertJones,thecurrentleadauditengagementpartner,willrotateofftheCompany’sauditfollowingcompletionofthecurrentfinancialyearendaudit.

Ananalysisoffeespaidtotheexternalauditors,includingabreak-downoffeesfornon-auditservices,isprovidedinnote28ofthefinancialstatements.

5.5 RISK MANAGEMENT

OVERSIGHT OF THE RISK MANAGEMENT SYSTEM

Theboardoverseestheestablishment,implementation,andannualreviewoftheCompany’sriskmanagementsystem.Managementhas

establishedandimplementedariskmanagementsystemforassessing,monitoringandmanagingallrisks,includingmaterialbusinessrisks,fortheGroup.AsummaryoftheseproceduresiscontainedontheCompany’swebsite.TheCEOandtheCFOhaveprovidedassurance,inwritingtotheboard,thatthefinancialreportingriskmanagementandassociatedcomplianceandcontrolshavebeenassessedandfoundtobeoperatingefficientlyandeffectively.Theoperationalandotherriskmanagementcomplianceandcontrolshavealsobeenassessed,foundtobeoperatingeffectivelyandthesamereportedbymanagementtotheboard.AllriskassessmentscovertheentirefinancialyearandtheperioduptothesigningoftheannualfinancialreportforallmaterialoperationsintheGroup.

RISK PROFILE

TheGroup’sriskmanagementpoliciesandproceduresareaimedatensuringrisksareidentified,assessedandappropriatelymanaged.TheboardreviewsthestatusoftheGroup’sriskprofileatleastannually.Riskreportingincludesthestatusofrisksthroughintegratedriskmanagementprogramsaimedatensuringrisksareidentified, assessedandappropriatelymanaged.

Eachbusinessunitisresponsibleandaccountableforimplementingandmanagingthestandardsrequired.

MaterialbusinessrisksfortheCompanymayarisefromsuchmattersasproductinvestmentperformance,interestrateandexchangeratemovements,actionsbycompetitors,counterpartyrisk,systemsrisk,governmentpolicychanges,financialreporting,andthepurchase,developmentandapplicationofinformationtechnologysystems.

RISK MANAGEMENT AND COMPLIANCE AND CONTROLS

TheGroupstrivestoensurethatitsinvestmentproductsareofthehigheststandard.Theboardisresponsiblefortheoverallinternalcontrolframework,butrecognisesthatnocost-effectiveinternalcontrolsystemwillprecludeallerrorsandirregularities.Theboard’spolicyoninternalcontrolcomprisestheCompany’sinternalcomplianceandcontrolsystems,including:

• Operatingunitcontrols–Operatingunitsconfirmcompliancewithfinancialcontrolsandproceduresincludinginformation systemscontrols.

• Functionalspecialityreporting–Keyareassubjecttoregularreportingtotheboardincludefinance,operations,regulatoryandcompliance.

• Investmentappraisal–Guidelinesforcapitalexpenditureincludeannualbudgets,detailedappraisalandreviewprocedures,levelsofauthority,andduediligencerequirementswherebusinessesarebeingacquiredordivested.

Comprehensivepracticeshavebeenestablishedtoensure:

• compliancewithfinancialservicesregulation;

• financialexposuresarecontrolled,includingtheuseofderivatives.FurtherdetailsoftheCompany’spoliciesrelatingtointerestratemanagement,foreignexchangeratemanagementandcreditriskmanagementareincludedinnotes5and25ofthefinancialstatements;

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• businesstransactionsareproperlyauthorisedandexecuted;

• thequalityandintegrityofpersonnel(seebelow);

• financialreportingaccuracyandcompliancewiththefinancialreportingregulatoryframework(seebelow);and

• environmentalregulationcompliance(seebelow).

GiventhesizeandnatureoftheGroup,theboarddoesnotconsideritnecessarytoestablishaninternalauditfunction.TheGrouphasanumberofalternativepoliciesinplaceinrelationtoindependentoversightofcompliancewithfinancialserviceslegislation,suchasdedicatedcomplianceresourcesineachbusinessunitandtheestablishmentofanexternalcompliancecommitteeforeachregisteredschemeoperatedunderanAustralianFinancialServicesLicence.

QUALITY AND INTEGRITY OF PERSONNEL

Writtenconfirmationofcompliancewithpoliciesisobtainedfromallbusinessunits.Performanceappraisalsareconductedatleastannuallyforallemployees.Traininganddevelopmentandappropriateremunerationandincentiveswithregularperformancereviewscreateanenvironmentofcooperationandconstructivedialoguewithemployeesandseniormanagement.

FINANCIAL REPORTING

TheCEOandtheCFOhaveprovidedassuranceinwritingtotheboardthattheCompany’sfinancialreportsarefoundedonasoundsystemofriskmanagementandinternalcomplianceandcontrolwhichimplementsthepoliciesadoptedbytheboard.

Monthlyactualresultsarereportedagainstbudgetsapprovedbythedirectors,andrevisedforecastsfortheyeararepreparedregularly.

ENVIRONMENTAL REGULATION

TheGroup’soperationsarenotsubjecttoanysignificantenvironmentalregulationundereitherAustralianorUnitedStateslegislation.However,theboardbelievesthattheGrouphasadequatesystemsinplaceforthemanagementofitsenvironmentalrequirementsandisnotawareofanybreachofthoseenvironmentalrequirementsastheyapplytotheGroup.

5.6 ETHICAL STANDARDS

Alldirectors,managersandemployeesareexpectedtoactwiththeutmostintegrityandobjectivity,strivingatalltimestoenhancethereputationandperformanceoftheGroup.Everyemployeehasanominatedsupervisortowhomtheymayreferanyissuesarisingfromtheiremployment.Processesareinplacetopromoteandcommunicatethesestandardsofethicalbehaviour.

CONFLICT OF INTEREST

Directorsmustkeeptheboardadvised,onanongoingbasis,ofanyinterestthatcouldpotentiallyconflictwiththoseoftheCompany.Theboardhasdevelopedprocedurestoassistdirectorstodisclosepotentialconflictsofinterest.

Wheretheboardbelievesthatasignificantconflictexistsforadirectoronaboardmatter,thedirectorconcernedmayonlybepresentwhentheitemisbeingconsideredattheboard’sdiscretion.Detailsof

directorrelatedentitytransactionswiththeGrouparesetoutinnote29tothefinancialstatements.

CODE OF CONDUCT

TheGrouphasadvisedeachdirector,managerandemployeethattheymustcomplywiththeCodeofConductandEmployeeManual.TheCodeofConductandEmployeeManualcoversthefollowing:

• aligningthebehaviouroftheboardandmanagementwiththeCodeofConductbymaintainingappropriatecoreCompanyvaluesandobjectives;

• fulfillingresponsibilitiestoshareholdersbydelivering shareholdervalue;

• usefulnessoffinancialinformationbymaintainingappropriateaccountingpolicies,practicesanddisclosure;

• fulfillingresponsibilitiestoclients,customersandconsumersbymaintaininghighstandardsofservice,andsafety;

• employmentpracticessuchasoccupationalhealthandsafety,equalemploymentopportunity,trainingandeducationalsupport,communityactivities,sponsorshipsanddonations;

• responsibilitiestotheindividual,suchasprivacy,useofprivilegedorconfidentialinformation,andconflictresolution;

• compliancewithlegislation;

• managingactualorpotentialconflictsofinterest;

• corporateopportunitiessuchaspreventingdirectorsandkeyexecutivesfromtakingadvantageofproperty,informationorpositionforpersonalgain;

• confidentialityofcorporateinformation;

• fairdealing;

• protectionandproperuseoftheCompany’sassets;and

• reportingofunlawfulorunethicalbehaviourandbreachesoftheCodeofConduct.

AsummaryoftheCodeofConductisincludedontheCompany’swebsite.

TRADING IN GENERAL COMPANY SECURITIES BY DIRECTORS AND EMPLOYEES

ThekeyelementsoftheTradingPolicyare:

• identificationofthedesignatedofficerstowhomthepolicyapplies,whichincludesalldirectorsandallstaff;

• prohibitionofdesignatedofficersfromtradinginCompanysecurities: – exceptduringthefourweekperiodcommencingthefirst businessdayaftertheannouncementofhalf-yearlyand annualresultstotheASX,ortheAnnualGeneralMeeting; – exceptduringperiodsoutsidetheabovementionedtrading window,whereapprovalhasbeengrantedbytheboardor theboard’sdelegate;and – whilstinpossessionofpricesensitiveinformationnotyet releasedtothemarket.

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• raisingtheawarenessoflegalprohibitionsincludingtransactionswithcolleaguesandexternaladvisers;

• requiringdetailstobeprovidedofintendedtradingintheCompany’sshares;

• requiringdetailstobeprovidedofthesubsequentconfirmationofthetrade;

• identificationofprocessesforunusualcircumstanceswherediscretionsmaybeexercisedincasessuchasfinancialhardship;

• aprohibitiononentryintotransactionsorarrangementsdesignedtolimittheeconomicriskofsecurityholdingsintheCompanyoverunvestedentitlements.

ThepolicyalsodetailstheinsidertradingprovisionsoftheCorporationsAct2001andissummarisedontheCompany’swebsite.

5.7 COMMUNICATION WITH SHAREHOLDERS

TheboardprovidesshareholdersandthebroaderpublicwithinformationinaccordancewithitsContinuousDisclosurePolicyanditsShareholderCommunicationPolicy.AsummaryofeachpolicyiscontainedontheCompany’swebsite.

CONTINUOUS DISCLOSURE

TheContinuousDisclosurePolicyoutlineshowtheCompanyidentifiesmattersthatmayhaveamaterialeffectonthepriceoftheCompany’ssecurities,notifyingthemtotheASX,postingthemontheCompany’swebsiteandissuingmediareleases.

TheCEOisresponsibleforensuringHFAcomplieswithcontinuousdisclosurerequirements,whilstthecompanysecretaryoverseesandmonitorsdisclosureofinformationtotheASX,analysts,brokers,shareholders,investors,themediaandthepublic.

AnymattersrequiringdisclosureareadvisedtotheASXonthedaytheyarediscovered,andallstaffmustfollowtheContinuousDisclosureProcess,whichinvolvesmonitoringallareasoftheGroup’sinternalandexternalenvironment.

SHAREHOLDER COMMUNICATION

TheCompanyshareholdercommunicationplatformconsistsof:

• theCompany’sContinuousDisclosurePolicywhichisdesignedtofacilitatecompliancewithcontinuousdisclosureobligationsimposedundertheCorporationsAct2001andASXListingRules;

• theCompany’swebsitewhichcontainsrelevantinformationabouttheCompany’sactivitiesandcorporategovernanceframework;

• participationbyshareholdersattheCompany’sgeneralmeetings,toensureahighlevelofaccountabilityandidentificationwiththeGroup’sstrategyandgoals;

• attendancebytheCompany’sauditorattheCompany’sAnnualGeneralMeetingtoanswershareholderqueriesregardingtheconductoftheauditandthepreparationandcontentoftheauditor’sreport;and

• theuseofelectronictechnologywhereappropriatetofacilitategreatereffectivenessofcorporatecommunication.

InformationismadeavailableontheCompany’swebsitewithinonedayofpublicrelease.Importantissuesarepresentedtoshareholdersatgeneralmeetingsassingleresolutions.Inparticular,shareholdersarerequestedtovoteontheelectionandre-electionofdirectors,theaggregateremunerationofnon-executivedirectors,thegrantingofoptionsandsharestodirectors,theremunerationreportandchangestotheConstitution.

AcopyoftheConstitutionisavailabletoanyshareholderuponrequest.

5.8 REMUNERATION REPORT - AUDITED

ThedirectorsoftheCompanypresenttheremunerationreportpreparedinaccordancewithsection300AoftheCorporationsAct2001fortheGroupfortheyearended30June2010.

TheCompany’sremunerationstrategyisdesignedtoattract,retainandmotivateappropriatelyqualifiedandexperienceddirectorsandseniorexecutives.DetailsoftheCompany’sremunerationstrategyforthe2010financialyeararesetoutinthisremunerationreport.Theremunerationreportformspartofthedirectors’report.

5.8.1 PRINCIPLES OF COMPENSATION

Remunerationisreferredtoascompensationthroughoutthisreport.

Keymanagementpersonnelhaveauthorityandresponsibilityforplanning,directingandcontrollingtheactivitiesoftheCompanyandtheGroup,includingdirectorsoftheCompanyandotherexecutives.KeymanagementpersonnelcomprisethedirectorsoftheCompanyandexecutivesfortheCompanyandtheGroupincludingthefivemosthighlyremuneratedCompanyandGroupexecutives.

CompensationlevelsforkeymanagementpersonnelandsecretariesoftheCompanyandrelevantkeymanagementpersonneloftheGrouparecompetitivelysettoattractandretainappropriatelyqualifiedandexperiencedindividuals.Externalremunerationbenchmarksandsurveysareconsideredwhensettingcompensationlevels.

Compensationstructuresaredesignedtorewardtheachievementofstrategicobjectivesandachievethebroaderoutcomeofcreationofvalueforshareholders.Thecompensationstructurestakeintoaccount:

• thecapabilityandexperienceofthekeymanagementpersonnel;

• thekeymanagementpersonnel’sabilitytocontrolrelevantperformance;

• theGroup’sperformance;and

• theamountofincentiveswithineachkeymanagementperson’scompensation.

Compensationpackagesincludeamixoffixedcompensationplusperformancelinkedcompensationwhichincludesashorttermincentive(STI)andmayincludealongtermincentive(LTI).TheoverallobjectiveofthisremunerationstrategyistosupportthebusinessstrategyoftheGroupbyattracting,retainingandrewardingqualityexecutiveemployeesandstaff,withaviewtoaligningemployeeandshareholdergoals.

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FIXED COMPENSATION

Fixedcompensationconsistsofbasecompensation(whichiscalculatedonatotalcostbasisandincludesanyFBTchargesrelatedtoemployeebenefitsincludingmotorvehicles),aswellasemployercontributionstosuperannuationfundsandretirementplans.KeyexecutivecompensationlevelsarereviewedannuallybytheremunerationcommitteethroughaprocessthatconsidersindividualandoverallperformanceoftheGroup.Aseniorexecutive’scompensationisalsoreviewedonpromotion.

SHORT TERM INCENTIVES (STI)

STIsarepaidtoseniorexecutivesandemployeesintheformofanannualbonus,whichisusuallypaidincash,butmaybesatisfiedbytheissueofshares.TheaimofthearrangementsinplaceacrosstheGroupistorecognisethecontributionsandachievementsofindividuals.PerformancemeasuresgenerallyincludemeasuresrelatingtotheGroupandtheindividual,andincludefinancial,people,clientservice,strategyandriskmeasuresasappropriate.Themeasuresarechosenastheydirectlyaligntheindividual’srewardtothesuccessoftheGroupandtoitsstrategyandperformance.

AustraliandistributionstaffareeligibleforanSTIbasedona“SalesIncentiveScheme”,whichdeterminesthecashbonusasafunctionofnetfundsraisedbyeachindividualoverapre-determinedminimumthreshold.OtherAustralianstaffandexecutivesareentitledtoadiscretionarySTIbonus,determinedaftertakingintoaccounttheirachievementofperformancemeasuresandtheoverallperformanceofthebusinessunit.

EmployeesofLighthouseInvestmentPartners,LLCareentitledtoparticipateinaSTIbonuspoolwhichisdeterminedasupto20%ofearningsbeforeinterest,tax,depreciationandamortisation(EBITDA)ofLighthouseInvestmentPartners,LLC.AllocationoftheSTIbonuspoolisrecommendedbyseniormanagementofLighthousebasedonachievementofperformancemeasures.InDecember2009,Lighthousemanagementrecommended,andtheboardapproved,thegrantof8,547,009sharestoseniorLighthouseexecutivesinadditiontothecashbonuspool.ThesharesweregrantedforthepurposeofrecognitionofstaffcontributiontothegrowthoftheLighthousebusinessduringtheyeardespitechallengingexternalfactors,andtoprovideadditionalmotivationtoretainkeystaffwithinthebusiness.Thenon-cashexpenserecognisedinrelationthisgrantofsharesfortheyearended30June2010totalled$2,008,547.

STIbonusesallocatedtoseniorexecutivesarereviewedandapprovedbytheremunerationcommittee.TheremunerationcommitteeexercisesdiscretionwhenapprovingSTIbonusestoseniorexecutives,bytakingintoaccountqualitativeassessmentsofanindividual’sperformanceduringthepreviousyearaswellasachievementoftangibleperformanceindicators.

LONG TERM INCENTIVES (LTI)

TheCompanyhasestablishedLTIplanstoassistintheattraction,retentionandmotivationofemployeesandkeymanagementpersonnel.TheplansprovidelongtermincentivesforemployeesandmanagementtocontributetothelongtermprofitabilityandsharepricegrowthoftheGroupthroughadirectgrowthinthevalueoftheirshareholdingsandfuturedividendstreams.

2008 Employee Performance Rights Plan

AnofferofrightstoissuedsharesintheCompanywasmadetoemployeesoftheHFAAustralianbusinesson12March2008atwhichtimetheboardapprovedtheallocationof3,955,000performancerightstoemployees.

Noconsiderationispayablebyemployeesupontheissueofperformancerightsorinrespectofthesharestobeissuedupontheexerciseoftheperformancerights.Vestingconditionsmustbesatisfiedfortheperformancerightstobeexercised.

Vestingoftheperformancerightsisintranchesof25%,35%and40%withrespectivevestingdatesof31December2008,31December2009and31December2010.VestingconditionsincludebeingemployedbytheGroupatrelevantvestingdatesandmeetingperformancehurdlesrelatingtoassetsundermanagement,baserevenue(excludingperformancefees)andEBITDA.

TheHFAHoldingsLimitedboardretainstheabilitytopermitvestingincircumstanceswherehurdlethresholdsarenotmetbutcommercialcircumstanceswarrantlimitedorfullvesting.

AllocationsundertheperformancerightsplanwereapprovedbytheboardbasedonrecommendationsfromtheCEO,withseniorityintheorganisationandpotentialtocontributetothefuturesuccessoftheGroupformingthebasisoftheserecommendations.

Tranche1oftheperformancerightsplanvestedat31December2008,with100%oftheshares(901,250shares)availableunderthetrancheforeligibleemployeesbeingissuedatthediscretionoftheboard.Thenon-cashexpenserecognisedinrelationtoTranche1fortheyearended30June2009totalled$218,977.

Tranche2oftheperformancerightsplanvestedat31December2009,with30%oftheshares(299,250shares)availableunderthetrancheforeligibleemployeesbeingissuedduetothesatisfactionofthebaserevenueperformancehurdle.TheboarddidnotexerciseitsdiscretiontovestanyadditionalsharesunderTranche2.Thenon-cashexpenserecognisedinrelationtoTranche2fortheyearended30June2010totalled$241,395.

Lighthouse Investment Partners Incentive Compensation Plan

AnincentiveplanforemployeesofLighthouseInvestmentPartners,LLCwasestablishedbySGMHoldings,LLCon1July2008.SGMHoldings,LLCisarelatedentityofexecutivedirectorSeanMcGouldandisnotpartoftheHFAHoldingsLimitedGroup.GrantsmadeundertheplanarefundedbySGMHoldings,LLCnottheHFAHoldingsLimitedGroup.However,asSGMHoldings,LLCisashareholderofHFAHoldingsLimited,accountingstandardsrequirethattheCompanyrecogniseanexpenseassociatedwiththesharesgrantedundertheplanwithacorrespondingincreaseintheCompany’sequitytorecognisethecontributionbySGMHoldings,LLCasashareholder.

TheincentiveplangrantsparticipantsanopportunitytoearnapaymentofcashorparticipateinanofferingofordinarysharesofHFAHoldingsLimited.Thevestingoftheincentiveplanisinthreeequaltrancheswithvestingdatesof1January2009,1January2010and1January2011,providedtheemployeeremainsemployedatvestingdate.Therearenoothervestingconditionsorperformancehurdles.Noconsiderationispayablebyemployeesinrelationtothe

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In Thousands of AUD 2010 2009 2008 2007

Net profit / (loss) attributable to equity holders of the parent 4,701 (573,184) 35,170 20,279

Dividends paid - 16,085 14,895 8,274

Dividends per share (cents) - 3.5 6.1 4.1

Change in share price (dollars) (0.01) (0.98) (1.39) 0.86

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grantofthesharesofHFAHoldingsLimited.SGMHoldings,LLChasfulldiscretioninrelationtotheallocationofentitlementsandvestingconditionsundertheplan.

100%ofthesharesavailableundertheplanweretransferredtoeligibleemployeesduringtheyearended30June2009(9,904,925shares).Thetotalnon-cashexpenserecognisedbytheGroupinrelationtothisplanfortheyearended30June2009totalled$12,177,025.NoexpenseinrelationtotheplanwasrecognisedbytheGroupfortheyearended30June2010.

CONSEQUENCES OF PERFORMANCE ON SHAREHOLDERS’ WEALTH

Theoveralllevelofkeymanagementpersonnel’scompensationtakesintoaccounttheperformanceoftheGroupoveranumberofyears. InconsideringtheGroup’sperformanceandbenefitsforshareholders’wealth,theremunerationcommitteehaveregardtotheseindicatorsasseeninTable2(below).

OTHER BENEFITS

TheGroupdoesnotcurrentlypayanyotherbenefits,eithercashornon-cashtodirectorsoftheCompanyorkeymanagementpersonneloftheGroup.

SERVICE CONTRACTS

TheGrouphasenteredintoemploymentcontractswitheachexecutivedirectorandmemberofkeymanagementpersonnel.Theemploymentcontractoutlinesthecomponentsofcompensationpaidbutdoesnotprescribehowcompensationlevelsaremodifiedyeartoyear.Compensationlevelsarereviewedeachyeartotakeintoaccountcost-of-livingchanges,anychangeinthescopeoftheroleperformedandanychangesrequiredtomeettheprinciplesofthecompensationpolicy.IndividualperformanceevaluationswereundertakenfortheCompany’sseniorexecutivesinaccordancewiththeCompany’semploymentpoliciesandindividuals’contractualarrangements.

Spencer Young, Chief Executive Officer, HFA Holdings Limited. TheCompanyiscurrentlyfinalisingaserviceagreementwithSpencerYoung.Aspectsofthisserviceagreementmayrequireshareholderapproval.

Sean McGould, President, Chief Investment Officer Lighthouse Investment Partnersenteredintoaserviceagreementon1January2006,andwhichwasamendedon1November2009.Theagreement

specifiesthedutiesandobligationstobefulfilled.Theamendedserviceagreementisforatermoftwoyearscommencingfrom1January2010andthereaftershallautomaticallybeextendedforoneyeartermsunlesseithertheGrouportheemployeegivesnotlessthansixtydaysnoticeofitsintentionnottoextendtheagreement.

TheGroupmayterminatetheserviceagreementatanytimeforgrossnegligenceorwilfulmisconduct.Theemployeemayterminatetheserviceagreementatanytimebygivingsixtydaysnotice.

TheemployeemayterminatetheagreementatanytimeiftheGroupfailstocomplyinanymaterialrespectwiththetermsoftheagreement,thereisamaterialreductioninthecompensationopportunities,thereisamaterialandunconsentedchangetoresponsibilities,ortheemployeeinvoluntarilyceasestobeamemberoftheboardofdirectorsofHFAHoldingsLimitedforanyreasonotherthancause.InthesecircumstancesapaymentofUSDollars(“USD”)1,000,000multipliedbythenumberofdayssincethefiscalyearendingbeforeterminationdividedby365willbemadeinlieuofanyunpaidbonus.

TheGroupmayterminatetheagreementforanyreasonotherthangrossnegligenceorwilfulmisconductatanytimebygivingnotlessthansixtydaysnotice.Inthesecircumstancealso,apaymentofUSD1,000,000multipliedbythenumberofdayssincethefiscalyearendingbeforeterminationdividedby365willbemadeinlieuofanyunpaidbonus.

Scott Perkins, Director of Investor Relations, Lighthouse Investment Partners enteredintoaserviceagreementon1January2006,andwhichwasamendedon1November2009.Theagreementspecifiesthedutiesandobligationstobefulfilled.Theserviceagreementisforatermoftwoyearscommencingfrom1January2010andthereaftershallautomaticallybeextendedforoneyeartermsunlesseithertheGrouportheemployeegivesnotlessthansixtydaysnoticeofitsintentionnottoextendtheagreement.

TheGroupmayterminatetheserviceagreementatanytimeforgrossnegligenceorwilfulmisconduct.Inthesecircumstancesthereisnoentitlementtoaterminationpayment.

TheemployeemayterminatetheagreementatanytimeiftheGroupfailstocomplyinanymaterialrespectwiththetermsoftheagreement,thereisamaterialreductioninthecompensation

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opportunitiesorthereisamaterialandunconsentedchangetoresponsibilities.Theemployeemustgivesixtydatesnoticeoftermination.InthesecircumstancesapaymentofUSD1,000,000multipliedbythenumberofdayssincethefiscalyearendingbeforeterminationdividedby365willbemadeinlieuofanyunpaidbonus.

TheGroupmayterminatetheagreementforanyreasonotherthangrossnegligenceorwilfulmisconductatanytimebygivingnotlessthansixtydaysnotice.Inthesecircumstancealso,apaymentofUSD1,000,000multipliedbythenumberofdayssincethefiscalyearendingbeforeterminationdividedby365willbemadeinlieuofanyunpaidbonus.

Kelly Perkins Co-Chief Investment Officer, Lighthouse Investment Partnersenteredintoaserviceagreementon1January2008.Theagreementspecifiesthedutiesandobligationstobefulfilled.Theserviceagreementisforanon-fixedterm.

TheemployeeortheGroupmayterminatetheserviceagreementatanytimeandforanyreasonornoreason,withorwithoutcause.Theemployeemustgivesixtydaysnoticeoftermination.Uponterminationtheemployeeisentitledtoapro-rataportionofthesemi-annualcompensation.Thesemi-annualcompensationiscalculatedas1.25%ofthegrossrevenueofLighthouseInvestmentPartners,LLC.

Robert Swan, Chief Operating Officer, Lighthouse Investment Partners enteredintoaserviceagreementon1January2008.Theagreementspecifiesthedutiesandobligationstobefulfilled.Theserviceagreementisforanon-fixedterm.

TheemployeeortheGroupmayterminatetheserviceagreementatanytimeandforanyreasonornoreason,withorwithoutcause.Theemployeemustgivesixtydaysnoticeoftermination. Uponterminationtheemployeeisentitledtoapro-rataportionofthesemi-annualcompensation.Thesemi-annualcompensationiscalculatedas1.0%ofthegrossrevenueofLighthouseInvestmentPartners,LLC.

Thefollowingkeymanagementpersonnelareengagedpursuantto anexecutiveservicesagreement:

• AmberStoney,ChiefFinancialOfficer,HFAHoldingsLimited

• CraigMowll,ChiefExecutiveOffice,CertitudeGlobalInvestmentsLimited(“Certitude”)(formerlyHFAAssetManagementLimited)

• OscarMartinis,JointManagingDirectorofCertitude(Resigned 1June2010)

• RobertWhite,CompanySecretaryofHFAHoldingsLimitedandJointManagingDirectorofCertitude(Resigned1June2010)

Theagreementsspecifythedutiesandobligationstobefulfilled.

TheGroupmayterminatetheagreementatanytime,withoutnoticeforanumberofreasonsincludingbankruptcy,grossnegligenceorwilfulandseriousmisconduct.Inthesecircumstancesthereisnoentitlementtoterminationpayment.Theemployeemayterminate theagreementatanytimebygiving6monthsnoticeandtheGroupmayterminatetheagreementatanytimebythegivingof6monthsnoticeorpaymentinlieu.

NON-EXECUTIVE DIRECTORS

Theaggregatecompensationforallnon-executivedirectors,lastvoteduponbyshareholders,isnottoexceed$750,000perannumandisdeterminedwithreferencetoexternalbenchmarks,surveysandfeespaidtoothernon-executivedirectorsofcomparablecompanies.Actualcompensationfornon-executivedirectorsforthefinancialyearended30June2010was$226,831(2009:$260,893).

Non-executivedirector’scompensationis$80,000plussuperannuationperannum.

Directors’feescoverallmainboardactivitiesandmembershipofanycommittee.Non-executivedirectorsdonotreceiveanyperformancerelatedremuneration.

DirectorsareentitledtobepaidalltravellingandotherexpensestheyincurinattendingtotheCompany’saffairs,includinggeneralmeetings.

Non-executivedirectorsarenotentitledtoanybenefitsorpaymentsonretirementfromoffice.

DIRECTOR’S AND EXECUTIVE OFFICER’S REMUNERATION (COMPANY AND CONSOLIDATED)

Table3onpages17and18detailsthenatureandamountofeachmajorelementofremunerationofeachdirectoroftheCompanyandeachoftheeightnamedCompanyandGroupexecutiveswhoreceivethehighestremuneration.

Insurancepremiumsinrelationtodirectorsandofficeholdershavenotbeenincludedinthesedisclosuresasthereisnoappropriatebasisforallocationofpremiumspaid.

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DIRECTORS

Non-Executive

Mr F P (Andy) Esteban1 84,410 - 84,410 7,597 - - 92,007 - -

(appointed 18 June 2008) 80,000 - 80,000 7,200 - - 87,200 - -

Mr John Larum 80,000 - 80,000 7,200 - - 87,200 - -

(appointed 12 December 2008) 42,769 - 42,769 3,849 - - 46,618 - -

Mr Michael Shepherd 43,692 - 43,692 3,932 - - 47,624 - -

(appointed 16 December 2009) - - - - - - - - -

Mr Brett Howard - - - - - - - - -

Chairperson 80,250 - 80,250 7,222 - - 87,472 - - (resigned 31 March 2009)

Mr Robert Fraser - - - - - - - - -

(appointed 14 December 2007, 36,333 - 36,333 3,270 - - 39,603 - - resigned 24 November 2008)

Executive

Mr Spencer Young 286,871 - 286,871 14,461 - - 301,332 - -

Chief Executive Officer 286,871 - 286,871 13,745 - - 300,616 - -

Mr Sean McGould 283,134 - 283,134 16,988 - - 300,122 - -

(Chief Investment Officer, Lighthouse) 335,300 - 335,300 20,118 - - 355,418 - -

TABLE3.Director’sandexecutiveofficer’sremuneration(companyandconsolidated)

1.Inadditiontothe$80,000receivedbyMrFP(Andy)Estebanforhisroleasnon-executivedirectorofHFAHoldingsLimited,hereceived$4,410forhisroleasnon-executivedirectorofCertitudeGlobal

InvestmentsLimited(appointed21May2010).

S300A (1)(e)(vi) Value of

shares as a percent of

remuneration

SHORT TERM POST EMPLOYMENT

SHARE-BASED PAYMENTS

Termination benefits

Salary and fees

$

STI cash

bonus

$

Total

$

Super & retirement

plan contributions

$ $

Shares and performance

rights

$

Total

$ %

S300A (1)(e)(i)

Proportion of remuneration performance

based

%

$ $ $ $ $ $ $ % %

2010 2009

DIRECTORS’ REPORT

18

Executives

Mr Craig Mowll 50,059 - 50,059 3,615 - - 53,674 - -

Chief Executive Officer, - - - - - - - - - Certitude (appointed 14 May 2010)

Ms Amber Stoney 112,822 20,000 132,822 9,673 - 19,312 161,807 24% 12%

Chief Financial Officer 250,000 90,000 340,000 13,745 - 22,112 375,857 30% 6% (appointed 26 Sept 20081)

Mr Scott Perkins 283,134 348,620 631,754 11,487 - 237,821 881,062 67% 27%

Director of Investor 335,300 843,555 1,178,855 32,859 - - 1,211,714 70% - Relations, Lighthouse

Mr Kelly Perkins 283,134 421,618 704,752 9,488 - 311,432 1,025,672 71% 30%

Co-Chief Investment 335,300 1,054,445 1,389,745 34,536 - 1,424,281 74% - Officer, Lighthouse

Mr Robert Swan 283,134 348,620 631,754 11,487 - 237,821 881,062 67% 27%

Chief Operating 335,300 843,555 1,178,855 32,859 - - 1,211,714 70% - Officer, Lighthouse

Former

Mr Oscar Martinis 399,253 - 399,253 14,461 162,500 43,451 619,665 7% 7%

Joint Managing Director, 325,000 165,000 490,000 13,745 - 49,751 553,496 39% 9% Certitude (resigned 1 June 2010)

Mr Robert White 360,752 - 360,752 14,461 162,500 43,451 581,164 7% 7%

Joint Managing Director, 325,181 165,000 490,181 13,745 - 49,751 553,677 39% 9% Certitude (resigned 1 June 2010)

Mr Jonathan Pain2 157,197 - 157,197 5,317 - - 162,514 - -

Chief Investment Strategist, 395,833 280,000 675,833 13,745 - 27,640 717,218 43% 4% Certitude (resigned 18

September 20092)

Mr Rodney Hughes - - - - - - - - -

Chief Financial Officer, 62,455 - 62,455 3,436 113,771 22,112 201,774 11% 11% (appointed 14 January 2007,

resigned 26 September 2008)

TABLE3.Director’sandexecutiveofficer’sremuneration(companyandconsolidated)(continued)

1.MsAmberStoneytookaleaveofabsenceduringtheperiod15May2009to12October2009.Herdutiesandresponsibilitiesduringthatperiodweresharedamongstotheremployeesandmembers

ofKeyManagementPersonnel.

2.MrJonathanPainresignedasanexecutiveofficeron18September2009.On6April2010heresignedhispositionasanon-executivedirectorofCertitude,awholly-ownedsubsidiaryoftheCompany.

S300A (1)(e)(vi) Value of

shares as a percent of

remuneration

SHORT TERM POST EMPLOYMENT

SHARE-BASED PAYMENTS

Termination Benefits

Salary and fees

$

STI cash

bonus

$

Total

$

Super & retirement

plan contribution

$ $

Shares and performance

rights

$

Total

$ %

S300A (1)(e)(i)

Proportion of remuneration performance

based

%

$ $ $ $ $ $ $ % %

2010 2009

DIRECTORS’ REPORT

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Mr Oscar Martinis1 112,500

157,500

180,000

12/03/08

12/03/08

12/03/08

0.9950

0.9196

0.8499

31/12/09

31/12/10

31/12/11

2009

2010

2011

112,500

47,250

-

6,750

11,017

-

Nil

110,250

-

Nil

25,707

-

Mr Robert White1 112,500

157,500

180,000

12/03/08

12/03/08

12/03/08

0.9950

0.9196

0.8499

31/12/09

31/12/10

31/12/11

2009

2010

2011

112,500

47,250

-

6,750

11,017

-

Nil

110,250

-

Nil

25,707

-

Mr Jonathan Pain1 62,500

87,500

100,000

12/03/08

12/03/08

12/03/08

0.9950

0.9196

0.8499

31/12/09

31/12/10

31/12/11

2009

2010

2011

62,500

Nil

-

3,750

Nil

-

Nil

87,500

-

Nil

20,402

-

Mr Rodney Hughes1 50,000

70,000

80,000

12/03/08

12/03/08

12/03/08

0.9950

0.9196

0.8499

31/12/09

31/12/10

31/12/11

2009

2010

2011

50,000

Nil

-

3,000

Nil

-

Nil

70,000

-

Nil

16,322

-

Ms Amber Stoney 50,000

70,000

80,000

12/03/08

12/03/08

12/03/08

0.9950

0.9196

0.8499

31/12/09

31/12/10

31/12/11

2009

2010

2011

50,000

21,000

-

3,000

4,897

-

Nil

49,000

-

Nil

11,425

-

1.Inaccordancewiththeplanrules,MrJonathanPainandMrRodneyHughesforfeitedtheirrightstoTranche2and3oftheperformanceplanupontheirresignation.MrOscarMartinisandMrRobert

WhiteforfeitedtheirrightstoTranche3oftheperformanceplanupontheirresignation.

NOTES IN RELATION TO THE TABLE OF DIRECTORS’ AND EXECUTIVE OFFICERS’ REMUNERATION

Theshort-termincentivebonusisforperformanceduringtherespectivefinancialyearusingthecriteriasetoutonpage14.

Short-termincentivesfortheLighthouseexecutives,excludingexecutivedirectors,arecalculatedonasemi-annualbasisinaccordancewiththeirservicecontracts.Thissemi-annualbonusformspartoftheLighthouseSTIbonuspool.

ThefairvalueoftheperformancerightshasbeencalculatedusingtheBlack-Scholesoptionpricingmodeladjustedfordividendsandisexpensedevenlyovertheperiodfromgrantdatetovestingdate.Thevaluedisclosedistheportionoffairvalueoftheperformancerightsissuedascompensationinthecurrentreportingperiod.

Thefairvalueoftheordinarysharesgrantedwasbasedonthemarketvalueofthesharesongrantdate.

DETAILS OF PERFORMANCE RELATED REMUNERATION

DetailsoftheGroup’spolicyinrelationtotheproportionofremunerationthatisperformancerelatedisdiscussedonpage14.

5.8.3 ANALYSIS OF PERFORMANCE RIGHTS GRANTED OVER EQUITY INSTRUMENTS GRANTED AS COMPENSATION

DetailsoftheperformancerightsgrantedasremunerationtoeachkeymanagementpersonoftheGroupandeachofthenamedCompanyandGroupexecutivesaredetailedinthetablebelow.

Therighttoreceivesharesisconditionaloncontinuingservice,andtheachievementofcertainperformancehurdles.Detailsofperformancecriteriaaresetoutonpage14.

Inaccordancewiththetermsoftheperformanceplan,theboardexerciseditsdiscretiontovest100%ofthesharesavailableunderTranche1.

Inaccordancewiththetermsoftheperformanceplananduponthesatisfactionofthebaserevenueperformancehurdle,30%ofthesharesavailableunderTranche2vested.TheboarddidnotexerciseitsdiscretiontovestanyfurthersharesunderTranche2.

Notermsofperformancerightsgrantedhavebeenalteredormodifiedbytheissuingentityduringthereportingperiodorpriorperiod.Therightswereprovidedatnocosttotheparticipants.

Total number of rights granted

DIRECTORS’ REPORT

Executives

Grant date

Fair value at grant

date

Expiry date

Financial year in

which grant vests

Number of options

vested during the financial

year

Value of vested

options at exercise

date

Number of options

lapsed during the financial

year

Value of lapsed

options at exercise

date

$ $ $

20

DIRECTORS’ REPORT

6. PRINCIPAL ACTIVITIES TheprincipalactivitiesoftheGroupduringthecourseofthefinancialyearweretheprovisionofabsolutereturnfundproductstoinvestorsgloballyviaLighthouseInvestmentPartners,LLCandCertitudeGlobalInvestmentsLimited(“Certitude”).

HFAHoldingsLimitedisacompanylimitedbysharesthatisincorporatedinAustralia.Awhollyownedsubsidiary,HFALighthouseHoldingsCorpistheparententityoftheUSbasedLighthouseGroup(“Lighthouse”),whichthroughLighthouseInvestmentPartners,LLCactsasaglobalabsolutereturnfundsmanager.Anotherwhollyownedsubsidiary,Certitude,actsastheResponsibleEntityandManagerofschemesandotherproductsinAustralia.

DetailsoftheConsolidatedGroupareincludedatnote30tothefinancialstatements.

7. OPERATING AND FINANCIAL REVIEW

CONSOLIDATED RESULTS

In thousands of AUD 2010 2009

Revenue 72,576 112,855

Investmentmanagementcosts (11,956) (17,312)

Operating income 60,620 95,543

Foreignexchangegain/(loss)onoperatingactivities 119 1,214

Operatingexpenses,netofotherincome (34,399) (44,109)

Operating EBITDA (before equity settled transactions) 26,340 52,648

Equitysettledtransactionexpense (2,250) (12,396)

Operating EBITDA (after equity settled transactions) 24,090 40,252

Depreciationandamortisation (11,977) (14,949)

Impairmentlosses - (599,537)

Netinterestincome/(expenses) (5,808) (6,230)

Profit/(loss) before income tax 6,305 (580,464)

Incometaxbenefit/(expense) (1,604) 7,280

Net profit/(loss) after income tax 4,701 (573,184)

Basic EPS (cents) 1.013 (124.641)

TheGrouprecordedaconsolidatedprofitaftertaxof$4.701millionforthefinancialyearended30June2010(2009:consolidatedlossaftertaxof$573.184million).TheGroupgeneratedanoperatingEBITDAof$24.090million.Thisisdown40%ontheprioryear,andreflectsbothloweraverageAssetsUnderManagement(“AUM”)for2010comparedtotheprioryear,aswellasthenegativeimpactoftheincreaseintheaverageAustralianDollarexchangeratefortheyearto88.30cents(2009:74.56cents).

NET INCOME FROM OPERATING ACTIVITIES

Netincomefromoperatingactivitiesdecreasedto$60.620millionforthefinancialyearended30June2010.Thisrepresentsadecreaseof37%fromthe2009financialyear.

NetoperatingincomefromtheUSLighthouseoperationswas$47.522million,down20%inUSdollarcurrencytermsfromthe prioryear.ThisreflectsthefactthatwhilstLighthousehadpositiveAUMgrowththroughoutthe2010financialyear,theaverageAUMfor2010was10%lowerthantheprioryear.Theaveragenetmanagementfee(afterinvestmentmanagementcosts)earnedonAUMremainedunchangedcomparedtotheprioryear.

TheAustralianCertitudeoperationsexperienceda48%decreaseinnetoperatingincometo$13.098million,mirroringthedecreaseintheaverageAUMfor2010comparedtotheprioryear.Theaveragenetmanagementfee(afterinvestmentcosts)forCertituderemainedsteadywhencomparedtotheprioryear.

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OPERATING EXPENSES

Operatingexpenses(excludingdepreciation,amortisationandimpairmentlosses)decreasedto$34.399millionforthefinancialyearended30June2010.Thisrepresentsadecreaseof$9.710millionor22%whencomparedtothepriorfinancialyear.ThisdecreaseisduetoahigheraverageAustraliandollarexchangerateforthe2010financialyearandactivecostmanagementacrosstheGroup.

DEBT AND NET INTEREST EXPENSE

Since30June2009,theGrouphasreduceditsUSDollar(“USD”)denominateddebtfromUSD113.074milliontoUSD102.375million,anditsAustralianDollar(“AUD”)denominateddebtfromAUD6.899milliontoAUD1.087million.

ThisreductionindebthasresultedinadecreaseinnetinterestexpensefortheGroupforthe2010financialyear.

IMPAIRMENT LOSSES

Animpairmentlossof$585.621millioninrelationtothegoodwillrecognisedontheacquisitionoftheUSoperationswasrecognisedinthe2009financialyear.ThislossreflectedthesignificantlylowerexpectedfuturenetcashflowsfromtheUSoperationsatthattime,ascomparedtothebusinessatthetimeofacquisition.TheexpectationsoftheUSoperation’sfuturecashflowshavemateriallyimprovedsince2009,andhencenofurtherimpairmentlosseswererecognisedduringthe2010financialyear.

Inaddition,animpairmentlossof$13.916millionwasrecognisedinthe2009financialyearinrelationtogoodwill,otherintangibleassets,non-currentproductreceivablesandinvestmentsheldbytheAustralianbusiness.NofurtherimpairmentlosseswererecognisedbytheAustralianbusinessduringthe2010financialyear.

REVIEW OF OPERATIONS

HFAoperatesaspecialistglobalfundsmanagementbusinessprovidingabsolutereturnfundproductstoinvestorswiththeaimofachievingconsistentriskadjustedreturns.

OneoftheGroup’smostimportantassetsisitsqualitypeople.TheGrouphas98staffinlocationsaroundtheworld.

BrisbaneSydney

Melbourne

Florida

Chicago New York

London

Hong Kong

11

11 3

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22

BoththeLighthouseandCertitudeoperationsarestructuredbyfunction:

INVESTOR BASE

TheGroup’soverallinvestorbasehasremainedsolidandcontinuestobewelldiversifiedacrossbothclienttypeandgeographicalregion.

TheLighthousebusinesshasaninvestorbasethatspanstheUnitedStates,Europe,CanadaandAsiaandincludeshighnetworthindividuals,familyoffices,endowments,foundations,trusts,investmentbanks,benefitplans,pensionfunds,healthcareandinsurancecompanies.

InAustralia,Certitudeprovidesabsolutereturnproductstoretail,wholesaleandinstitutionalinvestorsviatheoperationanddistributionofmanagedinvestmentschemes.

AttheGrouplevel,allocationsoftheinvestorbaseasat30June2010byinvestortypeandgeographicalregionareasfollows:

ASSETS UNDER MANAGEMENT

Globaleconomicfactorseasedthroughoutthe2010financialyearascomparedtotheGlobalFinancialCrisis(“GFC”)intheprioryear.TheGroup’sfundsundermanagement(“FUM”)inAUDterms(excludingleveragewithintheproducts)remainedrelativelysteady.

Asat30June2010,HFAhadtotalFUMof$5.51billion(2009:$5.62billion)andtotalAUMof$5.54billion(2009:$6.16billion).Thisrepresentsadecreaseof2%inFUMand10%inAUMsincetheendofthepreviousfinancialyear.Thefollowingchartshowshowperformance,netflows,reductioninleveragewithintheproductsandforeignexchangetranslationimpactedtheFUM(representedasproductequityinthechart)andAUMoverthefinancialyear:

AUMbyInvestorType

Certitude Lighthouse Head Office

Corporate/Institutional (26%) Americas (55%)

Retail (21%) Asia Pacific (26%)

Employee (3%) Europe (19%)

HNW & Family Offices (17%)

Endowment & Foundation (10%)

Benefit Plans (23%)

AUMbyRegion

DIRECTORS’ REPORT

3

21

1113

11

29

2

3

5

InvestmentDistribution/

Investor Services Operations/Corporate Compliance

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AUMbyInvestorType

LIGHTHOUSE - US OPERATIONS

TheLighthouseoperationsintheUShavedemonstratedasteadyrecoveryfromtheworstimpactsoftheGFCin2008and2009.AUMforLighthousehasincreasedfromUSD3.27billiontoUSD3.63billion,anincreaseof11%forthefinancialyearended30June2010.ThisincreaseisdrivenbybothpositivenetinflowsfortheyearofUSD195million,andpositiveinvestmentperformanceacrossthecoreLighthouseproducts.

OneofLighthouse’skeyfocusesduringthe2010financialyearhasbeenthedistributionofitsmanagedaccountprogram.Lighthousefirstestablisheditsmanagedaccountprogramin2005,andhasbeenrefiningandexpandingtheprogramsincethattime,withtheprogrambeingcompletedduringthisfinancialyear.

AmajorthemeamongstinvestorscomingoutoftheGFChasbeenademandforincreasedtransparency,directsecurityoverunderlyingassets,greatercertaintyofassetvaluationsandaccesstotheliquidityoftheunderlyingassets.Benefitsofmanagedaccountstoinvestorsincludeabetterunderstandingoftheoverallriskswithinaportfolio,andenhancedmanagementandmonitoringofrisk.TheLighthousemanagedaccountprogram,whichmeetsthedemandsofInvestorsposttheGFCanddeliverstherelatedbenefits,hasbeenwellreceivedbyexistingandpotentialLighthouseinvestors.TheprogramhasbeenrolledoutasmuchaspossibleacrosstheexistingLighthousefunds,andnewLighthousefundsarebeingestablishedtocapitaliseonthebenefitsthatthemanagedaccountprogramoffers.During2010,70%ofsubscriptionsintoLighthouseproductswerereceivedintoLighthousefundswhichutilisethemanagedaccountprogram.

Lighthousehascontinuedtomaintainastrong,diversifiedglobalinvestorbase,withallocationstodifferentinvestortypesasat30June2010asfollows:

WiththegrowthofAUMthroughoutthe2010financialyear,LighthousehasbeenthemajorcontributortotheGroup’sresult,withtheUSoperationsaccountingforapproximately78%ofnetoperatingincome,and89%ofEBITDA(excludingtheforeignexchangelossesontheintercompanyloan).

CERTITUDE - AUSTRALIAN OPERATIONS

TheAustralianoperationshaveexperiencedamorechallengingyear,withtherecoveryoftheAustralianretailfundsmanagementsectoroccurringmoreslowlythanthebroaderglobalhedgefundmarket.The2010financialyearwasaperiodofresolutionofresidualissuesfromtheGFC,andprovidedtheopportunitytore-evaluatethestrategicdirectionoftheAustralianbusiness.

AustralianAUMfell39%,whilstoverallFUM(whichexcludesleverage)fell21%.Thekeydriversforthisdecreasewere:

• ThecompletionofdeleveragingbytheAustralianfundportfolios;

• $235millionofwithdrawaloffersbytheHFADiversified InvestmentsFund;and

• thediscontinuationofthe$78millioninvestmentmanagement agreementwithSignatureCapitalInvestmentsLimited(formerly HFAAcceleratorPlusLimited)inFebruary2010.

Tocountertheresultantfallinrevenue,theAustralianbusinesshasplacedakeyfocusoncontrollingoperatingcosts,witha28%reductioninoperatingcostsfor2010comparedtotheprioryear.

Throughouttheyear,theAustralianbusinesshasworkedtoretainthestrengthofitsIndependentFinancialAdviser(“IFA”)network,andcontinuestobesupportedby1,532independentfinancialadvisers,withproductslistedon28mastertrustplatforms.

AUM

$M

4000

5540(197)

(19) Leverage(178) Equity

(494)312(244)6163

5263ProductEquity

5513ProductEquity

27 Leverage540 Leverage

2000

0

6000

AUM

JUNE

2009

AUM

JUNE

2010

FX TR

ANSL

ATIO

N

NET

ROW

S

NET

PERF

ORMA

NCE

CHAN

GE IN

LEVE

RAGE

AUM(AUD)MovementsfortheyearendedJune2010

DIRECTORS’ REPORT

FLOW

S

Corporate/Institutional (26%)

Americas (71%)

Employee (3%)

Asia Pacific (4%)

HNW & Family Offices (23%)

Europe (25%)

Endowment & Foundation (14%)

Benifit Plans (35%)

AUMbyRegion

24

ThecloseofthefinancialyearhasseenpositivedevelopmentsfortheAustralianbusiness,includingtheliftingoftheredemptionsuspensionfromitslargestAustralianfund,theHFADiversifiedInvestmentsFund.

OfkeyimportanceisthelaunchofanewbusinessfocusandstrategyunderthenewbrandnameofCertitude,ledbythenewAustralianbusinessChiefExecutiveOfficer,MrCraigMowll.

Underthisnewapproach,Certitudewillbroadenitsbusinessstrategyontwokeyfronts:

• abroaderinvestmentoffering,fromanexclusivemulti-strategyabsolutereturnproductbasetobeingamorecomprehensiveproviderof activefundsmanagementsolutions;and

• anexpansionofitsinvestmentbasebeyonditstraditionalIFAsourcedretailinvestorbasetowardtheneedsofinstitutionalandhighnet worthinvestorsaswell.

WhilsttheexistingAustralianfundswillretaintheHFAbrand,newproductswhichfitwithinabroaderactivemanagerproductsuitewillcarrytheCertitudebrandname.

ResultsoftheAustralianoperationswillcontinuetobeimpactedintheshort-termbythedeclineinAUMwhichhasoccurredoverthe2009and2010financialyears.However,thesuccessfulimplementationofthenewbusinessstrategyundertheCertitudebrand,includingtheintroductionofhighqualitysinglemanagerproductsthatareliquid,transparentandsimple,willlaythefoundationsforrenewedAUMgrowthandprofitabilityoverthemedium-term.

SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS

IntheopinionofthedirectorstherewerenosignificantchangesinthestateofaffairsoftheGroupthatoccurredduringthefinancialyearunderreview.

8. DIVIDENDS DividendspaidordeclaredbytheCompanytomemberssincetheendofthepreviousfinancialyearare:

Final2009ordinary - - - N/A

Interim2010ordinary - - - N/A

Total amount -

Final2008ordinary 3.5 16,085 Franked 26September2008

Interim2009ordinary - - - N/A

Total amount 16,085

Frankeddividendsdeclaredandpaidduringthe2009yearwerefrankedatthetaxrateof30%.

DECLARED AFTER END OF YEAR

Thedirectorshaveatthedateofthisreportdeclaredthatnofinaldividendwillbepaidforthefinancialyearended30June2010.

9. EVENTS SUBSEQUENT TO REPORTING DATE IntheopinionofthedirectorsoftheCompany,therehasnotarisenintheintervalbetweentheendofthefinancialyearandthedateofthisreportanyitem,transactionoreventofamaterialandunusualnaturelikelytoaffectsignificantlytheoperationsoftheGroup,theresultsofthoseoperations,orthestateofaffairsoftheGroup,infuturefinancialyears.

DIRECTORS’ REPORT

Declared and paid during the 2010 financial year

Declared and paid during the 2010 financial year

Cents per share

Cents per share

Total amount $000’s

Total amount $000’s

Franked / unfranked

Franked / unfranked

Date of payment

Date of payment

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12. AUDITOR KPMGcontinuesinofficeasauditorinaccordancewithsection327 oftheCorporationsAct2001.

NON-AUDIT SERVICES

DuringtheyearKPMG,theCompany’sauditor,hasperformedcertainotherservicesinadditiontotheirstatutoryduties.

Theboardhasconsideredthenon-auditservicesprovidedduringtheyearbytheauditoranditissatisfiedthattheprovisionofthosenon-auditservicesduringtheyearbytheauditoriscompatiblewith,anddidnotcompromise,theauditorindependencerequirementsoftheCorporationsAct2001forthefollowingreasons:

• allnon-auditservicesweresubjecttothecorporategovernance proceduresadoptedbytheCompanyandhavebeenreviewedby theauditcommitteetoensuretheydonotimpacttheintegrity andobjectivityoftheauditor;and

• thenon-auditservicesprovideddonotunderminethegeneral principlesrelatingtoauditorindependenceassetoutinAPES110 CodeofEthicsforProfessionalAccountants,astheydidnot involvereviewingorauditingtheauditor’sownwork,actingina managementordecisionmakingcapacityfortheCompany,acting asanadvocatefortheCompanyorjointlysharingrisksand rewards.

DetailsoftheamountspaidorpayabletoKPMGforauditandnonauditservicesareprovidedinnote28ofthefinancialstatements.

LEAD AUDITOR’S INDEPENDENCE DECLARATION UNDER SECTION 307C OF THE CORPORATIONS ACT 2001

Theleadauditor’sindependencedeclarationrequiredundersection307CoftheCorporationsAct2001issetoutonpage26andformspartofthedirectors’reportforthefinancialyearended30June2010.

13. ROUNDING OFF TheCompanyisakindreferredtoinASICClassOrder98/100dated10July1998andinaccordancewiththatClassOrder,amountsinthefinancialreportanddirectors’reporthavebeenroundedofftothenearestthousanddollars,unlessotherwisestated.

Signedinaccordancewitharesolutionofthedirectors:

Spencer Young F P (Andy) EstebanChairman/ExecutiveDirector/ Non-ExecutiveDirectorChiefExecutiveOfficer

DatedatSydneythis19thdayofAugust2010

10. LIKELY DEVELOPMENTS TheUSLighthousebusinesswillcontinuetofocusonthedevelopmentanddistributionofitsmanagedaccountprogram,inparticularfocusingonbroadeningdistributionnotonlygeographically,butalsointothelargerinstitutionalinvestorspace.

TheAustralianbusinesswillpursueitsnewbusinessstrategy,rollingoutnewproductswhichfitwithitsbroader“activefundsmanagementsolution”philosophy,andfocusingdistributioneffortsnotonlyontheindependentfinancialadvisernetwork,butalsohighnetworthandinstitutionalinvestors.

FurtherinformationaboutlikelydevelopmentsintheoperationsoftheGroupandtheexpectedresultsofthoseoperationsinfuturefinancialyearshasnotbeenincludedinthisreportbecausedisclosureoftheinformationwouldbelikelytoresultinunreasonableprejudiceto theGroup.

11. INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERSINDEMNIFICATION

TheCompanyhasagreedtoindemnifycurrentdirectorsandformerdirectorsagainstallliabilitiestoanotherperson(otherthantheCompanyorarelatedbodycorporate)thatmayarisefromtheirpositionasdirectorsoftheCompanyanditscontrolledentities,exceptwheretheliabilityarisesoutofconductinvolvingalackofgoodfaith.TheagreementstipulatesthattheCompanywillmeetthefullamountofanysuchliabilities,includingcostsandexpenses.

TheCompanyhasalsoagreedtoindemnifythecurrentdirectorsofitscontrolledentitiesforallliabilitiestoanotherperson(otherthantheCompanyorarelatedbodycorporate)thatmayarisefromtheirposition,exceptwheretheliabilityarisesoutofconductinvolvingalackofgoodfaith.TheagreementstipulatesthattheCompanywillmeetthefullamountofanysuchliabilities,includingcostsandexpenses.

INSURANCE PREMIUMS

Thedirectorshavenotincludeddetailsoftheamountofthepremiumpaidinrespectofthedirectors’andofficers’liabilityinsurancecontracts,assuchdisclosureisprohibitedunderthetermsofthecontract.Theinsurancepremiumspaidrelatetocostsandexpensesincurredbytherelevantofficersindefendingproceedings,whethercivilorcriminalandwhatevertheiroutcome;andotherliabilitiesthatmayarisefromtheirposition,withtheexceptionofconductinvolvingawillfulbreachofdutyorimproperuseofinformationorpositiontogainapersonaladvantage.

DIRECTORS’ REPORT

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LEAD AUDITOR’S INDEPENDENCE DECLARATION

LEAD AUDITOR’S INDEPENDENCE DECLARATION UNDER SECTION 307C OF THE CORPORATIONS ACT 2001

TO THE DIRECTORS OF HFA HOLDINGS LIMITED:

Ideclarethat,tothebestofmyknowledgeandbelief,inrelationtothe auditforthefinancialyearended30June2010therehavebeen:

• nocontraventionsoftheauditorindependencerequirementsasset outintheCorporationsAct2001inrelationtotheaudit;and

• nocontraventionsofanyapplicablecodeofprofessionalconductin relationtotheaudit.

KPMG

Robert S JonesPartner

DatedatBrisbanethis19thdayofAugust2010

KPMG,anAustralianpartnershipandamemberfirmoftheKPMGnetworkofindependantmemberfirmsaffiliatedwithKPMGInternational,aSwisscooperative.

LiabilitylimitedbyaschemeapprovedunderProfessionalStandardsLegislation.

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Thenotesonpages32to70areanintegralpartoftheseconsolidatedfinancialstatements.

As at 30 June 2010

in thousands of AUD Note 2010 2009 Assets

Cashandcashequivalents 10 32,977 29,290

Tradeandotherreceivables 11 12,817 19,391

Currenttaxassets 13 500 307

Total current assets 46,294 48,988

Investments 12 2,373 2,319

Plantandequipment 14 1,615 1,893

Deferredtaxassets 13 293 496

Intangibleassets 15 171,683 191,959

Total non-current assets 175,964 196,667

Total assets 222,258 245,655

Liabilities

Tradeandotherpayables 16 7,252 9,294

Employeebenefits 17 4,399 5,303

Derivatives 18 1,359 -

Loansandborrowings 20 10,322 7,879

Total current liabilities 23,332 22,476

Employeebenefits 17 172 217

Derivatives 18 - 3,455

Loansandborrowings 20 110,351 137,039

Total non-current liabilities 110,523 140,711

Total liabilities 133,855 163,187

Net assets 88,403 82,468

Equity

Sharecapital 504,730 504,730

Reserves 21 112,971 113,987

Retainedearnings/(accumulatedlosses) (529,298) (536,249)

Total equity attributable to equity holders of the Company 88,403 82,468

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

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CONSOLIDATED INCOME STATEMENT

For the year ended 30 June 2010

in thousands of AUD Note 2010 2009 Revenue

7

72,576

112,855

Investmentmanagementcosts (11,956) (17,312)

Net income from operating activities 60,620 95,543

Otherincome 7 4 208

Expenses 7 (45,391) (57,635)

Results from operating activities before impairment losses and equity settled transactions 15,233 38,116

Impairmentlosses 7 - (599,537)

Equitysettledtransactions 7 (2,250) (12,396)

Results from operating activities 12,983 (573,817)

Financeincome 8 660 2,018

Financecosts 8 (7,338) (8,665)

Net finance costs (6,678) (6,647)

Profit / (loss) before income tax 6,305 (580,464)

Incometax(expense)/benefit 9 (1,604) 7,280

Net profit / (loss) for the period 4,701 (573,184)

Attributable to:

OwnersoftheCompany 4,701 (573,184)

Profit / (loss) for the period 4,701 (573,184)

Earnings per share

Basicearnings/(loss)pershare(centspershare) 22 1.013 (124.641)

Dilutedearnings/(loss)pershare(centspershare) 22 1.013 (124.474)

Thenotesonpages32to70areanintegralpartoftheseconsolidatedfinancialstatements.

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CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the year ended 30 June 2010

in thousands of AUD Note 2010 2009

Profit for the period 4,701 (573,184)

Other comprehensive income

Foreigncurrencytranslationdifferencesforforeignoperations 8 (3,187) 178,436

Effectiveportionofchangesinfairvalueofcashflowhedges 8 2,096 (6,207)

Netchangeinfairvalueofavailable-for-salefinancialassets 8 107 7

Incometaxonothercomprehensiveincome 9 (32) (24,094)

Other comprehensive income / (expense) for the period, net of income tax (1,016) 148,142

Total comprehensive income / (expense) for the period 3,685 (425,042)

Attributable to:

OwnersoftheCompany 3,685 (425,042)

Total comprehensive income / (expense) for the period 3,685 (425,042)

Thenotesonpages32to70areanintegralpartoftheseconsolidatedfinancialstatements.

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CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 30 June 2010

ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY

in thousands of AUD

Balanceat1July2008 504,730 (4) 1,613 (35,764) 40,624 511,199

Total comprehensive income for the period

Profit/(loss)fortheperiod - - - - (573,184) (573,184)

Other comprehensive income

Foreigncurrencytranslationdifferences,netoftax 8(b) - - - 153,206 - 153,206

Effectiveportionofchangesinfairvalueofcashflowhedges,netoftax 8(b) - - (5,068) - - (5,068)

Netchangeinfairvalueofavailable-for-salefinancialassets,netoftax 8(b) - 4 - - - 4

Totalothercomprehensiveincome - 4 (5,068) 153,206 - 148,142

Totalcomprehensiveincomefortheperiod - 4 (5,068) 153,206 (573,184) (425,042)

Transactions with owners, recorded directly in equity

Dividendstoequityholders 21 - - - - (16,085) (16,085)

Equitysettledtransactions 19 - - - - 12,396 12,396

Totaltransactionswithowners - - - - (3,689) (3,689)

Balanceat30June2009 504,730 - (3,455) 117,442 (536,249) 82,468

Balanceat1July2009 504,730 - (3,455) 117,442 (536,249) 82,468

Total comprehensive income for the period

Profit/(loss)fortheperiod - - - - 4,701 4,701

Other comprehensive income

Foreigncurrencytranslationdifferences,netoftax 8(b) - - - (3,187) - (3,187)

Effectiveportionofchangesinfairvalueofcashflowhedges,netoftax 8(b) - - 2,096 - - 2,096

Netchangeinfairvalueofavailable-for-salefinancialassets,netoftax 8(b) - 75 - - - 75

Totalothercomprehensiveincome - 75 2,096 (3,187) - 1,016

Totalcomprehensiveincomefortheperiod - 75 2,096 (3,187) 4,701 3,685

Transactions with owners, recorded directly in equity

Dividendstoequityholders 21 - - - - - -

Equitysettledtransactions 19 - - - - 2,250 2,250

Totaltransactionswithowners - - - - 2,250 2,250

Balanceat30June2010 504,730 75 (1,359) 114,255 (529,298) 88,403

Equitysettledtransactionsrelatetotherecognitionofsharesissuedtoemployeesunderthe2008HFAEmployeePerformanceRightsPlanandtheLighthouseInvestmentPartnersShortTermIncentivePlan(2009:2008EmployeePerformanceRightPlanandtheLighthouseInvestmentPartnersIncentiveCompensationPlan).Thisisanon-cashexpense.Theseamountsarerecognisedinretainedearnings.

Thenotesonpages32to70areanintegralpartoftheseconsolidatedfinancialstatements.

NoteShare

CapitalFair Value Reserve

Hedging Reserve

Translation Reserve

Retained Earnings

Total Equity

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CONSOLIDATED STATEMENT OF CASH FLOWS

For the year ended 30 June 2010

in thousands of AUD

Note 2010 2009

Cash flows from operating activities

Cashreceiptsfromcustomers 79,995 123,918

Cashpaidtosuppliersandemployees (49,610) (72,250)

Cashgeneratedfromoperations 30,385 51,668

Interestreceived 541 796

Dividendsanddistributionsreceived - 8

Incometaxespaid (1,528) (9,931)

Net cash from operating activities 24 29,398 42,541

Cash flows from investing activities

Acquisitionofplantandequipment (525) (162)

Acquisitionofinvestments (167) (67)

Proceedsfromdisposalofinvestment 310 -

Net cash used in investing activities (382) (229)

Cash flows from financing activities

Proceedsfromborrowings - 9,999

Repaymentofborrowings (17,660) (34,803)

Borrowingcosts (135) (1,659)

Dividendspaid - (16,085)

Interestpaid (6,930) (6,562)

Net cash used in financing activities (24,725) (49,110)

Net increase/(decrease) in cash and cash equivalents 4,291 (6,798)

Cashandcashequivalentsat1July 29,290 38,828

Effectofexchangeratefluctuationsoncashheld (604) (2,740)

Cash and cash equivalents at 30 June 10 32,977 29,290

Thenotesonpages32to70areanintegralpartoftheseconsolidatedfinancialstatements.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. REPORTING ENTITY HFAHoldingsLimited(the“Company”/“HFA”)isdomiciledinAustralia.HFAisacompanylimitedbyshares,incorporatedinAustraliawhosesharesarepubliclylistedontheAustralianSecuritiesExchange.TheconsolidatedfinancialstatementsoftheCompanyasatandfortheyearended30June2010comprisetheCompanyanditssubsidiaries(the“Group”).

HFAhasfourAustraliandomiciledwhollyownedsubsidiaries,CertitudeGlobalInvestmentsLimited(formerlyHFAAssetManagementLimited)(“Certitude”),AdminPtyLtd(formerlyHFAAdminPtyLtd)(“Admin”),A.C.N.122776550PtyLtdandA.C.N.143806651Limited.CertitudeistheresponsibleentityfortheAustralianbasedinvestmentschemes.AdminisaserviceentitytoCertitudeandprovidesadministrativeservicesincludingstaff,premisesandotherresourcestoCertitudeandtheCompany.A.C.N122776550PtyLtdandA.C.N.143806651aredormantentities.

HFAalsohastwoforeignsubsidiaries,HFALighthouseHoldingsCorp.andHFALighthouseCorp.BothforeignsubsidiariesareincorporatedintheUnitedStatesandwereestablishedtofacilitatetheacquisitionofUSbasedLighthouseGroup.TheLighthouseGroupcomprisesfiveforeignentitiesbeingLHPInvestmentsLLC,LighthouseInvestmentPartnersLLC,LighthousePartnersNYLLC,LighthousePartnersUKLLC(allincorporatedintheUnitedStates)andLighthousePartnersLimited(HK)(incorporatedinHongKong).LighthouseInvestmentPartnersLLCistheinvestmentmanagerfortheLighthouseinvestmentschemes.

TheregisteredofficeofHFAisLevel5,151MacquarieStreet, SydneyNSW2000.

2. BASIS OF PREPARATION (A) STATEMENT OF COMPLIANCE

TheconsolidatedfinancialreportisageneralpurposefinancialreportwhichhasbeenpreparedinaccordancewithAustralianAccountingStandards(AASBs)(includingAustralianInterpretations)adoptedbytheAustralianAccountingStandardsBoard(AASB)andtheCorporationsAct2001.TheconsolidatedfinancialreportoftheGroupalsocomplieswiththeInternationalFinancialReportingStandards(IFRSs)andinterpretationsadoptedbytheInternationalAccountingStandardsBoard(IASB).

Thefinancialstatementswereapprovedbytheboardofdirectorson19August2010.

(B) BASIS OF MEASUREMENT

Theconsolidatedfinancialstatementshavebeenpreparedonagoingconcernbasis.Assuch,theconsolidatedfinancialstatementshavebeenpreparedonahistoricalcostbasisexceptforthefollowingitemsinthestatementoffinancialposition:

• derivativefinancialinstrumentsaremeasuredatfairvalue

• financialinstrumentsatfairvaluethroughtheprofitorlossare measuredatfairvalue

• available-for-salefinancialassetsthataremeasuredatfairvalue

Methodsusedtomeasurefairvaluearediscussedfurtherinnote4.

(C) FUNCTIONAL AND PRESENTATION CURRENCY

TheseconsolidatedfinancialstatementsarepresentedinAustraliandollars,whichistheCompany’sfunctionalcurrency.TheCompanyisofakindreferredtoinASICClassOrder98/100dated10July1998andinaccordancewiththeClassOrder,amountsinthefinancialreporthavebeenroundedtothenearestthousanddollars,unlessotherwisestated.

(D) USE OF ESTIMATES AND JUDGEMENTS

ThepreparationofconsolidatedfinancialstatementsinconformitywithAASBsrequiresmanagementtomakejudgements,estimatesandassumptionsthataffecttheapplicationofaccountingpoliciesandthereportedamountsofassets,liabilities,incomeandexpenses.Actualresultsmaydifferfromtheseestimates.

Estimatesandunderlyingassumptionsarereviewedonanongoingbasis.Revisionstoaccountingestimatesarerecognisedintheperiod inwhichtheestimateisrevisedandinanyfutureperiodsaffected.

Informationaboutcriticaljudgementsinapplyingaccountingpoliciesthathavethemostsignificanteffectontheamountrecognisedinthefinancialstatementsaredescribedbelow:

• note12-measurementofinvestments

• note13-utilisationoftaxlosses

• note15-measurementoftherecoverableamountsof cash-generatingunitscontaininggoodwill

• note19-measurementofsharebasedpayments

• note25-valuationoffinancialinstruments

(E) CHANGES IN ACCOUNTING POLICIES

Startingasof1July2009,theGrouphaschangeditsaccountingpoliciesinthefollowingareas:

• Accountingforbusinesscombinations

• Determinationandpresentationofoperatingsegments

• Presentationoffinancialstatements

3. SIGNIFICANT ACCOUNTING POLICIES Theaccountingpoliciessetoutbelowhavebeenappliedconsistentlytoallperiodspresentedintheseconsolidatedfinancialstatements,andhavebeenappliedconsistentlybyGroupentities,exceptasexplainedinnotes2(e),3(a)(i),3(q)and3(r)whichaddresschanges inaccountingpolicies.

(A) BASIS OF CONSOLIDATION

TheconsolidatedfinancialstatementsarethoseoftheGroup,comprisingHFAHoldingsLimited(theparentcompany)andallentitiesthatHFAHoldingsLimitedcontrolledfromtimetotimeduringtheperiodandatthereportingdate.

For the year ended 30 June 2010

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(B) FOREIGN CURRENCY

(i) Foreign currency transactions

TransactionsinforeigncurrenciesaretranslatedtotherespectivefunctionalcurrenciesoftheGroupentitiesattheexchangeratesatthedatesofthetransactions.Monetaryassetsandliabilitiesdenominatedinforeigncurrenciesatthereportingdateareretranslatedtothefunctionalcurrencyattheforeignexchangerateatthatdate.Theforeigncurrencygainorlossonmonetaryitemsisthedifferencebetweenamortisedcostinthefunctionalcurrencyatthebeginningoftheperiod,adjustedforeffectiveinterestandpaymentsduringtheperiod,andtheamortisedcostinforeigncurrencytranslatedattheexchangerateattheendoftheperiod.Non-monetaryassetsandliabilitiesdenominatedinforeigncurrenciesthataremeasuredatfairvalueareretranslatedtothefunctionalcurrencyattheexchangerateatthedatethatthefairvaluewasdetermined.Foreigncurrencydifferencesarisingonretranslationarerecognisedinprofitorloss,exceptfordifferencesarisingonretranslationofavailable-for-saleequityinstrumentsandafinancialliabilitydesignatedasaqualifyingcashflowhedge,whicharerecogniseddirectlyinequity(see(c)(ii)below).

(ii) Foreign operations

Theassetsandliabilitiesofforeignoperations,includinggoodwillandfairvalueadjustmentsarisingonacquisition,aretranslatedtoAustraliandollarsatexchangeratesatthereportingdate.TheincomeandexpensesofforeignoperationsaretranslatedtoAustraliandollarsusingexchangeratesapproximatingthedateoftherelevanttransaction.

Foreigncurrencydifferencesarerecogniseddirectlyintheforeigncurrencytranslationreserve(FCTR)inequity.Whenaforeignoperationisdisposedof,inpartorinfull,therelevantamountintheFCTRistransferredtotheprofitorloss.

Foreignexchangegainsorlossesarisingfromamonetaryitemreceivablefrom,orpayableto,aforeignoperation,thesettlementofwhichisneitherplannednorlikelyintheforeseeablefuture,areconsideredtoformpartofanetinvestmentinaforeignoperationandarerecogniseddirectlyinequityintheFCTR.

(C) FINANCIAL INSTRUMENTS

(i) Non-derivative financial instruments

TheGroupinitiallyrecognisesfinancialinstrumentsonthedatethattheyareoriginated.Allotherfinancialinstruments(includinginstrumentsdesignatedatfairvaluethroughprofitorloss)arerecognisedinitiallyonthetradedateatwhichtheGroupbecomesapartytothecontractualprovisionsoftheinstrument.TheGroupderecognisesafinancialassetwhenthecontractualrightstothecashflowsfromtheassetexpireandderecognisesafinancialliabilitywhenitscontractualobligationsaredischargedorcancelledorexpire.

Financialassetsandliabilitiesareoffsetandthenetamountpresentedinthestatementoffinancialpositionwhen,andonlywhen,theGrouphasalegalrighttooffsettheamountsandintendseithertosettleonanetbasisortorealisetheassetandsettletheliabilitysimultaneously.

TheGrouphasthefollowingnon-derivativefinancialinstruments:

(i) Business combinations

Change in accounting policy

TheGrouphasadoptedrevisedAASB3BusinessCombinations(2008)andamendedAASB127ConsolidatedandSeparateFinancialStatements(2008)whichwouldberelevanttotheGroup’soperationsintheeventofanyfuturechangestoitsbusinesscombinations.Thechangeinaccountingpolicyisappliedprospectivelyandhadnomaterialimpactonearningspershare.

Foreverybusinesscombination,theGroupidentifiestheacquirer,whichisthecombiningentitythatobtainscontroloftheothercombiningentitiesorbusinesses.Controlisthepowertogovernthefinancialandoperatingpoliciesofanentitysoastoobtainbenefitsfromitsactivities.Inassessingcontrol,theGrouptakesintoconsiderationpotentialvotingrightsthatcurrentlyareexercisable.Theacquisitiondateisthedateonwhichcontrolistransferredtotheacquirer.Judgementisappliedindeterminingtheacquisitiondateanddeterminingwhethercontrolistransferredfromonepartytoanother.

Measuring goodwill

TheGroupmeasuresgoodwillasthefairvalueoftheconsiderationtransferredincludingtherecognisedamountofanynon-controllinginterestintheacquiree,lessthenetrecognisedamount(generallyfairvalue)oftheidentifiableassetsacquiredandliabilitiesassumed,allmeasuredasoftheacquisitiondate.

Considerationtransferredincludesthefairvaluesoftheassetstransferred,liabilitiesincurredbytheGrouptothepreviousownersoftheacquiree,andequityinterestsissuedbytheGroup.Considerationtransferredalsoincludesthefairvalueofanycontingentconsiderationandshare-basedpaymentawardsoftheacquireethatarereplacedmandatorilyinthebusinesscombination(seebelow).Ifabusinesscombinationresultsintheterminationofpre-existingrelationshipsbetweentheGroupandtheacquiree,thentheloweroftheterminationamount,ascontainedintheagreement,andthevalueoftheoff-marketelementisdeductedfromtheconsiderationtransferredandrecognisedinotherexpenses.

Transaction costs

TransactioncoststhattheGroupincursinconnectionwithabusinesscombination,suchasfinder’sfees,legalfees,duediligencefees,andotherprofessionalandconsultingfees,areexpensedasincurred.

(ii) Subsidiaries

SubsidiariesareentitiescontrolledbytheGroup.Thefinancialstatementsofsubsidiariesareincludedintheconsolidatedfinancialstatementsfromthedatethatcontrolcommencesuntilthedatethatcontrolceases.

TheaccountingpoliciesofsubsidiarieshavebeenchangedwherenecessarytoalignthemwiththepoliciesadoptedbytheGroup.Thefinancialstatementsofsubsidiariesarepreparedforthesamereportingperiodastheparentcompany.

(iii) Transactions eliminated on consolidation

Intra-groupbalances,andanyunrealisedincome&expensesarisingfromintra-grouptransactions,areeliminatedinpreparingtheconsolidatedfinancialstatements.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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accountingisdiscontinuedprospectively.Thecumulativegainorlosspreviouslyrecognisedinequityremainsthereuntiltheforecasttransactionoccurs.Whenthehedgeditemisanon-financialasset,theamountrecognisedinequityistransferredtothecarryingamountoftheassetwhenitisrecognised.Inothercasestheamountrecognisedinequityistransferredtoprofitorlossinthesameperiodthatthehedgeditemaffectsprofitorloss.

(iii) Share capital

Ordinary shares

Ordinarysharesareclassifiedasequity.Incrementalcostsdirectlyattributabletotheissueofordinarysharesandshareoptionsarerecognisedasadeductionfromequity,netofanytaxeffects.

(D) PLANT AND EQUIPMENT

(i) Recognition and measurement

Itemsofplantandequipmentaremeasuredatcostlessaccumulateddepreciationandaccumulatedimpairmentlosses.

Costincludesexpendituresthataredirectlyattributabletotheacquisitionoftheasset.Purchasedsoftwarethatisintegraltothefunctionalityoftherelatedequipmentiscapitalisedaspartofthatequipment.

Gainsandlossesondisposalofanitemofplantandequipmentaredeterminedbycomparingtheproceedsfromdisposalwiththecarryingamountofplantandequipmentandarerecognisednetwithin“expenses”inprofitorloss.

(ii) Depreciation

Depreciationisrecognisedintheprofitorlossonastraight-linebasisovertheestimatedusefullifeoftheassetasfollows:

Furnititureandequipment 7years

Leaseholdimprovements LeaseTerm

Computerequipment 3-5years

Theresidualvalue,theusefullifeandthedepreciationmethodappliedtoanassetarereassessedatleastannually.Thecarryingvalueofplantandequipmentisreviewedforimpairment(seeaccountingpolicy(g))wheneventsorchangesincircumstancesindicatethecarryingvaluemaynotberecoverable.

(E) LEASED ASSETS

LeasesunderthetermsofwhichtheGroupassumessubstantiallyalltherisksandrewardsofownershipareclassifiedasfinanceleases.Uponinitialrecognitiontheleasedassetismeasuredatanamountequaltothelowerofitsfairvalueandthepresentvalueoftheminimumleasepayments.Subsequenttoinitialrecognition,theassetisaccountedforinaccordancewiththeaccountingpolicyapplicabletothatasset.

OtherleasesareoperatingleasesandtheleasedassetsarenotrecognisedontheGroup’sbalancesheet.

Cash and cash equivalents

Cashandcashequivalentscomprisecashbalancesandcalldeposits.

Trade and other receivables

Tradeandotherreceivablesarefinancialassetswithfixedordeterminablepaymentsthatarenotquotedinanactivemarket.Suchassetsarerecognisedinitiallyatfairvalue,andthensubsequentlyaremeasuredatamortisedcostlessimpairmentlosses(seeaccountingpolicy(g)).

Available-for-sale financial assets

TheGroup’sinvestmentsinequitysecuritiesareclassifiedasavailable-for-salefinancialassets.Subsequenttoinitialrecognition,theyaremeasuredatfairvalueandchangestherein,otherthanimpairmentlosses(seeaccountingpolicy(g)),arerecognisedasaseparatecomponentofequity.Whenaninvestmentisderecognised,thecumulativegainorlossinequityistransferredtoprofitorloss.

Financial assets at fair value through profit or loss

Afinancialassetisclassifiedasatfairvaluethroughprofitorlossifitisheldfortradingorisdesignatedassuchuponinitialrecognition.FinancialassetsaredesignatedatfairvaluethroughprofitorlossiftheGroupmanagessuchinvestmentsandmakespurchaseandsaledecisionsbasedonthefairvalueinaccordancewiththeGroup’sinvestmentstrategyorriskmanagementstrategy.Uponinitialrecognition,attributabletransactioncostsarerecognisedinprofitorlosswhenincurred.Financialinstrumentsatfairvaluethroughprofitorlossaremeasuredatfairvalue,andchangesthereinarerecognisedinprofitorloss.

Trade and other payables

Tradeandotherpayablesarestatedattheiramortisedcost.Tradepayablesarenon-interestbearingandarenormallysettledon 30-dayterms.

Loans and borrowings

Loansandborrowingsarerecognisedinitiallyatfairvalueplusanydirectlyattributabletransactioncosts.Subsequenttoinitialrecognitionthesefinancialliabilitiesaremeasuredatamortisedcostusingtheeffectiveinterestratemethod.

(ii) Derivative financial instruments

TheGroupholds/hasheldderivativefinancialinstrumentstohedgecertainforeigncurrencyandinterestrateriskexposures.Derivativesarerecognisedinitiallyatfairvalueandattributabletransactioncostsarerecognisedinprofitorlosswhenincurred.Subsequenttoinitialrecognition,derivativesaremeasuredatfairvalueandchangesthereinaccountedforasdescribedbelow.

Cash flow hedges

Changesinfairvalueofderivativehedginginstrumentsdesignatedascashflowhedgesarerecogniseddirectlyinequitytotheextentthatthehedgeiseffective.Totheextentthatthehedgeisineffective,changesinfairvaluearerecognisedinprofitorloss.

Ifthehedginginstrumentnolongermeetsthecriteriaforhedgeaccounting,expiresorissold,terminatedorexercised,thenhedge

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(F) INTANGIBLE ASSETS

(i) Goodwill

Goodwillonacquisitionofsubsidiariesisinitiallymeasuredatcost,beingtheexcessofthecostoftheacquisitionovertheGroup’sinterestinthenetfairvalueoftheidentifiableassets,liabilitiesandcontingentliabilitiesoftheacquiree.Followinginitialrecognition,goodwillismeasuredatcostlessanyaccumulatedimpairmentlosses(seeaccountingpolicy(g)).

Asatacquisitiondate,anygoodwillisallocatedtotheacquiredcash-generatedunitsthatgaverisetotherecognitionofthegoodwill.Goodwillisnotamortisedbutreviewedforimpairmentannuallyormorefrequentlyifeventsorchangesincircumstancesindicatethatthecarryingvaluemaybeimpaired.

Impairmentisdeterminedbyassessingtherecoverableamountofthecash-generatingunittowhichthegoodwillrelates.Whentherecoverableamountofthecashgeneratingunitislessthanthecarryingamount,animpairmentlossisrecognised.

(ii) Management rights and customer relationships

Whereacquiredseparately,managementrightsandcustomerrelationshipassetsarecapitalisedatcost.Subsequenttoacquisition,theassetsaremeasuredatcostlessaccumulatedamortisationandaccumulatedimpairmentlosses(seeaccountingpolicy(g)).

(iii) Other intangible assets

OtherintangibleassetsacquiredbytheGroup,whichhavefinitelives,aremeasuredatcostlessaccumulatedamortisationandaccumulatedimpairmentlosses.

Intangibleassetscreatedwithinthebusinessarenotcapitalisedandexpenditureischargedagainstprofitsintheyearinwhichtheexpenditureisincurred.

(iv) Amortisation

Amortisationisrecognisedinprofitorlossonastraight-linebasisovertheestimatedusefullivesofintangibleassets,otherthangoodwill,fromthedatethattheyareavailableforuse.Theestimatedusefullivesforthecurrentandcomparativeperiodsareasfollows:

Managementrightsandcustomerrelationships 5-10years

Trademarks 20years

Capitalisedsoftwaredevelopmentcosts 5years

(G) IMPAIRMENT

(i) Financial assets

Afinancialassetisassessedateachreportingdatetodeterminewhetherthereisanyobjectiveevidencethatitisimpaired.Afinancialassetisconsideredtobeimpairedifobjectiveevidenceindicatesthatoneormoreeventshavehadanegativeeffectontheestimatedfuturecashflowsofthatasset.

Animpairmentlossinrespectofafinancialassetmeasuredatamortisedcostiscalculatedasthedifferencebetweenitscarrying

amount,andthepresentvalueoftheestimatedfuturecashflowsdiscountedattheoriginaleffectiveinterestrate.Animpairmentlossinrespectofanavailable-for-salefinancialassetiscalculatedbyreferencetoitsfairvalue.

Significantfinancialassetsaretestedforimpairmentonanindividualbasis.Theremainingfinancialassetsareassessedcollectivelyingroupsthatsharesimilarcreditriskcharacteristics.

Allimpairmentlossesarerecognisedinprofitorloss.Anycumulativelossinrespectofanavailable-for-salefinancialassetrecognisedpreviouslyinequityistransferredtoprofitorloss.

Animpairmentlossisreversedifthereversalcanberelatedobjectivelytoaneventoccurringaftertheimpairmentlosswasrecognised.Forfinancialassetsmeasuredatamortisedcostthereversalisrecognisedinprofitorloss.Foravailable-for-salefinancialassetsthatareequitysecurities,thereversalisrecogniseddirectlyinequity.

(ii) Non-financial assets

ThecarryingamountsoftheGroup’snon-financialassets,otherthandeferredtaxassets(seeaccountingpolicy(n)),arereviewedateachreportingdatetodeterminewhetherthereisanyindicationofimpairment.Ifanysuchindicationexists,theasset’srecoverableamountisestimated.Forgoodwillandintangibleassetsthathaveindefinitelives,therecoverableamountisestimatedateachreportingdate.

Therecoverableamountofanassetorcash-generatingunitisthegreaterofitsvalueinuseanditsfairvaluelesscoststosell.Inassessingvalueinuse,theestimatedfuturecashflowsarediscountedtotheirpresentvalueusingapre-taxdiscountratethatreflectscurrentmarketassessmentsofthetimevalueofmoneyandtherisksspecifictotheasset.Forthepurposeofimpairmenttesting,assetsaregroupedtogetherintothesmallestgroupofassetsthatgeneratescashinflowsfromcontinuingusethatarelargelyindependentofthecashinflowsofotherassetsorgroupsofassets(the“cash-generatingunit”).

Animpairmentlossisrecognisedwheneverthecarryingamountofanassetoritscash-generatingunitexceedsitsrecoverableamount.Impairmentlossesarerecognisedinprofitorloss.Impairmentlossesrecognisedinrespectofcash-generatingunitsareallocatedfirsttoreducethecarryingamountofanygoodwillallocatedtotheunitsandthentoreducethecarryingamountoftheotherassetsintheunit(groupofunits)onapro-ratabasis.

Animpairmentlossinrespectofgoodwillisnotreversed.Inrespectofotherassets,impairmentlossesrecognisedinpriorperiodsareassessedateachreportingdateforanyindicationsthatthelosshasdecreasedornolongerexists.Animpairmentlossisreversediftherehasbeenachangeintheestimatesusedtodeterminetherecoverableamount.Animpairmentlossisreversedonlytotheextentthattheasset’scarryingamountdoesnotexceedthecarryingamountthatwouldhavebeendetermined,netofdepreciationandamortisation,ifnoimpairmentlosshadbeenrecognised.

(H) PROVISIONS

Aprovisionisrecognisedif,asaresultofapasteventtheGrouphasapresentobligation(legalorconstructive)thatcanbeestimatedreliably,anditisprobablethatanoutflowofeconomicbenefitswillberequiredtosettletheobligation.

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Iftheeffectofthetimevalueofmoneyismaterial,provisionsaredeterminedbydiscountingtheexpectedfuturecashflowsatapre-taxratethatreflectscurrentmarketassessmentsofthetimevalueofmoneyand,whereappropriate,therisksspecifictotheliability.

(I) EMPLOYEE BENEFITS

(i) Wages and salaries, annual leave and long service leave

Liabilitiesarisinginrespectofwagesandsalaries,annualleaveandanyotheremployeebenefitsexpectedtobesettledwithin12monthsofthereportingdatearemeasuredattheirnominalamountsbasedonremunerationrateswhichareexpectedtobepaidwhentheliabilityissettled,includingrelatedon-costs.Allotheremployeebenefitliabilitiesaremeasuredatthepresentvalueoftheestimatedfuturecashoutflowtobemadeinrespectofservicesprovidedbyemployeesuptothereportingdate.Indeterminingthepresentvalueoffuturecashoutflows,themarketyieldasatthereportingdateonnationalgovernmentbonds,whichhavetermstomaturityapproximatingthetermsoftherelatedliability,areused.

Employeebenefitsexpensesarisinginrespectofthefollowingcategories:

• wagesandsalaries,non-monetarybenefits,annualleave,long serviceleave,sickleaveandotherleavebenefits;

• terminationbenefits;and

• othertypesofemployeebenefits,

arerecognisedagainstprofitsonanetbasisintheirrespectivecategories.

(ii) Defined contribution plans

Adefinedcontributionplanisapost-employmentbenefitplanunderwhichanentitypaysfixedcontributionsintoaseparateentityandwillhavenolegalorconstructiveobligationtopayfurtheramounts.Obligationsforcontributionstodefinedcontributionplansarerecognisedasanemployeebenefitexpenseinprofitorlossintheperiodsduringwhichservicesarerenderedbyemployees.

(iii) Short-term benefits

Short-termemployeebenefitobligationsaremeasuredonanundiscountedbasisandareexpensedastherelatedserviceisprovided.

Aliabilityisrecognisedfortheamountexpectedtobepaidundershort-termcashbonusorprofit-sharingplansiftheGrouphasapresentlegalorconstructiveobligationtopaythisamountasaresultofpastserviceprovidedbytheemployee,andtheobligationcanbemeasuredreliably.

(iv) Share-based payments

TheGroupprovidesbenefitstoitsemployeesintheformofshare-basedpaymenttransactions,wherebyemployeesrenderservicesinexchangeforsharesorrightsovershares(“equity-settledtransactions”).

Thegrantdatefairvalueofshare-basedpaymentawardsgrantedtoemployeesisrecognisedasanequitysettledtransactionexpensein

theprofitorloss,withacorrespondingincreaseinequity,overtheperiodthattheemployeesunconditionallybecomeentitledtotheawards.Theamountrecognisedasanexpenseisadjustedtoreflectthenumberofawardsforwhichtherelatedserviceandnon-marketvestingconditionsareexpectedtobemet,suchthattheamountultimatelyrecognisedasanexpenseisbasedonthenumberofawardsthatmeettherelatedserviceandnon-marketperformanceconditionsatthevestingdate.

Thecumulativeexpenserecognisedforequity-settledtransactionsateachreportingdateuntilvestingdatereflects:(i)theextenttowhichthevestingperiodhasexpired;and(ii)thenumberofawardsthat,intheopinionofthedirectorsoftheGroup,willultimatelyvest.Thisopinionisformedbasedonthebestavailableinformationatbalancedate.

SharebasedpaymentarrangementsinwhichtheGroupreceivesgoodsorservicesasconsiderationforitsownequityinstrumentsareaccountedforasequity-settledshare-basedpaymenttransactions,regardlessofhowtheequityinstrumentsareobtainedbytheGroup.

(J) REVENUE

Revenueisrecognisedtotheextentthatitisprobablethattheeconomicbenefitswillflowtotheentityandtherevenuecanbereliablymeasured.Thefollowingspecificrecognitioncriteriamustalsobemetbeforerevenueisrecognised.Whereamountsdonotmeettheserecognitioncriteria,theyaredeferredandrecognisedintheperiodinwhichtherecognitioncriteriaaremet.

Management fees and performance fees

PeriodicmanagementfeesarereceivedformanagementservicesprovidedbyGroupentitiesthatactasinvestmentmanagerinrelationtovariousinvestmentproducts.Thesefeesarerecognisedasrevenuesasthemanagementservicesareprovided.

Periodicperformancefeesarereceivedbygroupentitiesthatactasinvestmentmanagerofvariousinvestmentproductswhentheperformanceoftheproductexceedsapredeterminedlevel.Thesefeesarerecognisedasrevenueswhenitisestablishedthatperformanceoftheinvestmentproducthasexceededtherequiredlevel.

(K) INVESTMENT MANAGEMENT COSTS

Investmentmanagementcostsconsistoffeesforinvestmentmanagementservicesfrominvestmentadvisors,distributionrebatesandtrailcommissionspaidtofinancialadvisorsandotherthirdpartydistributors.Thesecostsarerecognisedonanaccrualbasis.

(L) LEASE PAYMENTS

Paymentsmadeunderoperatingleasesarerecognisedinprofitorlossonastraight-linebasisoverthetermofthelease.Leaseincentivesreceivedarerecognisedasanintegralpartofthetotalleaseexpense,overthetermofthelease.

(M) FINANCE INCOME AND FINANCE COSTS

Financeincomecomprisesinterestincomeonfundsinvested,dividendanddistributionincome,gainsonthedisposalofavailable-for-salefinancialassetsandchangesinthefairvalueoffinancialassetsheldatfairvaluethroughtheprofitorloss.Interestincomeisrecognisedasit

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accruesinprofitorloss,usingtheeffectiveinterestmethod.DividendanddistributionincomeisrecognisedinprofitorlossonthedatethattheGroup’srighttoreceivepaymentisestablished,whichinthecaseofquotedsecuritiesistheex-dividenddate.

Financecostscompriseinterestexpenseonborrowings,changesinthefairvalueoffinancialassetsatfairvaluethroughprofitorloss,andlossesonhedginginstrumentsthatarerecognisedinprofitorloss.

Foreigncurrencygainsandlossesarerecognisedonanetbasis.

(N) INCOME TAX

Incometaxexpensecomprisescurrentanddeferredtax.Incometaxexpenseisrecognisedintheprofitorlossexcepttotheextentthatitrelatestoitemsrecogniseddirectlyinequity,inwhichcaseitisrecognisedinequity.

Currenttaxistheexpectedtaxpayableonthetaxableincomefortheyear,usingtaxratesenactedorsubstantivelyenactedatthereportingdate,andanyadjustmenttotaxpayableinrespectofpreviousyears.

Deferredtaxisrecognisedusingthebalancesheetmethod,providingfortemporarydifferencesbetweenthecarryingamountsofassetsandliabilitiesforfinancialreportingpurposesandtheamountsusedfortaxationpurposes.Theamountofdeferredtaxprovidedisbasedontheexpectedmannerofrealisationorsettlementofthecarryingamountofassetsandliabilities,usingtaxratesenactedorsubstantivelyenactedatthereportingdate.Deferredtaxassetsandliabilitiesareoffsetifthereisalegallyenforceablerighttooffsetcurrenttaxliabilitiesandassets,andtheyrelatetoincometaxesleviedbythesametaxauthorityonthesametaxableentity,orondifferenttaxentities,buttheyintendtosettlecurrenttaxliabilitiesandassetsonanetbasisortheirtaxassetsandliabilitieswillberealisedsimultaneously.

Adeferredtaxassetisrecognisedonlytotheextentthatitisprobablethatfuturetaxableprofitswillbeavailableagainstwhichtheassetcanbeutilised.Deferredtaxassetsarereducedtotheextentthatitisnolongerprobablethattherelatedtaxbenefitwillberealised.

Additionalincometaxesthatarisefromthedistributionofdividendsarerecognisedatthesametimeastheliabilitytopaytherelateddividendisrecognised.

Tax consolidation

TheCompanyanditswholly-ownedAustralianresidententitiesformedatax-consolidatedgroupwitheffectfrom1May2006andarethereforetaxedasasingleentityfromthatdate.Theheadentitywithinthetax-consolidatedgroupisHFAHoldingsLimited.

Currenttaxexpense/income,deferredtaxliabilitiesanddeferredtaxassetsarisingfromtemporarydifferencesofthemembersofthetax-consolidatedgrouparerecognisedintheseparatefinancialstatementsofthemembersofthetax-consolidatedgroupusingthe‘separatetaxpayerwithingroup’approachbyreferencetothecarryingamountsofassetsandliabilitiesintheseparatefinancialstatementsofeachentityandthetaxvaluesapplyingundertaxconsolidation.

Anycurrenttaxliabilities(orassets)anddeferredtaxassetsarisingfromunusedtaxlossesofthesubsidiariesisassumedbytheheadentityinthetax-consolidatedgroupandarerecognisedasamountspayable(receivable)to(from)otherentitiesinthetax-consolidatedgroup.

TheCompanyrecognisesdeferredtaxassetsarisingfromunusedtaxlossesofthetax-consolidatedgrouptotheextentthatitisprobablethatfuturetaxableprofitsofthetax-consolidatedgroupwillbeavailableagainstwhichtheassetcanbeutilised.

Anysubsequentperiodadjustmentstodeferredtaxassetsarisingfromunusedtaxlossesasaresultofrevisedassessmentsoftheprobabilityofrecoverabilityisrecognisedbytheheadentityonly.

(O) GOODS AND SERVICES TAX

Revenue,expensesandassetsarerecognisednetoftheamountofgoodsandservicestax(GST)exceptwheretheGSTincurredonapurchaseofgoodsandservicesisnotrecoverablefromthetaxationauthority.Inthesecircumstances,theGSTisrecognisedaspartofthecostofacquisitionoftheassetoraspartoftheexpense.

ReceivablesandpayablesarestatedwiththeamountofGSTincluded.ThenetamountofGSTrecoverablefrom,orpayableto,thetaxationauthorityisincludedaspartofreceivablesorpayablesintheconsolidatedstatementoffinancialposition.

CashflowsareincludedintheStatementofCashFlowsonagrossbasis.TheGSTcomponentsofcashflowsarisingfrominvestingandfinancingactivities,whicharerecoverablefrom,orpayableto,thetaxationauthority,areclassifiedasoperatingcashflows.

(P) EARNINGS PER SHARE

TheGrouppresentsbasicanddilutedearningspershare(EPS)dataforitsordinaryshares.BasicEPSiscalculatedbydividingtheprofitorlossattributabletoordinaryshareholdersoftheCompanybytheweightedaveragenumberofordinarysharesoutstandingduringtheperiod.DilutedEPSisdeterminedbyadjustingtheprofitorlossattributabletoordinaryshareholdersandtheweightedaveragenumberofordinarysharesoutstandingfortheeffectsofalldilutivepotentialordinaryshares,whichincludesshareoptionsgrantedtoemployees.

(Q) SEGMENT REPORTING

Asof1July2009theGroupdeterminesandpresentsoperatingsegmentsbasedontheinformationthatinternallyisprovidedtotheGroup’sCEOandboardofdirectors,whoaretheGroup’schiefoperatingdecisionmakers.ThischangeinaccountingpolicyisduetotheadoptionofAASB8OperatingSegments.PreviouslyoperatingsegmentsweredeterminedandpresentedinaccordancewithAASB114SegmentReporting.Thenewaccountingpolicyinrespectofsegmentoperatingdisclosuresispresentedasfollows.

Comparativesegmentinformationhasbeenre-presentedinconformitywiththetransitionalrequirementsofthestandard.Sincethechangeinaccountingpolicyonlyimpactspresentationanddisclosureaspects,thereisnoimpactonearningspershare.

AnoperatingsegmentisacomponentoftheGroupthatengagesinbusinessactivitiesfromwhichitmayearnrevenuesandincurexpenses,includingrevenuesandexpensesthatrelatetotransactionswithanyoftheGroup’sothersegments.Alloperatingsegments’operatingresultsareregularlyreviewedbytheGroup’sCEOandboardofdirectorstomakedecisionsaboutresourcestobeallocatedtothesegmentandassessitsperformance,andforwhichdiscretefinancialinformationisavailable.

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SegmentresultsthatarereportedtotheCEOandboardofdirectorsincludeitemsdirectlyattributabletoasegment.

UnallocateditemscompriseassetsandliabilitiesrelatingtoHFAHoldingsLimitedandAdminPtyLtd(theAustralianparentandserviceentities),corporateexpensesandamountsthatareeliminatedonconsolidationoftheGroup.

(R) PRESENTATION OF FINANCIAL STATEMENTS

TheGroupappliesrevisedAASB101PresentationofFinancialStatements(2007),whichbecameeffectiveasof1January2009.Asaresult,theGrouppresentsintheconsolidatedstatementofchangesinequityallownerchangesinequity,whereasallnon-ownerchangesinequityarepresentedintheconsolidatedstatementofcomprehensiveincome.

Comparativeinformationhasbeenre-presentedsothatitalsoisinconformitywiththerevisedstandard.Sincethechangeinaccountingpolicyonlyimpactspresentationaspects,thereisnoimpactonearningspershare.

(S) NEW STANDARDS AND INTERPRETATIONS NOT YET ADOPTED

Thefollowingstandards,amendmentstostandardsandinterpretationshavebeenidentifiedasthosewhichmayimpacttheentityintheperiodofinitialapplication.Theyareavailableforearlyadoptionat30June2010,buthavenotbeenappliedinpreparingthisfinancialreport:

• AASB9Financial Instruments includesrequirementsforthe classificationandmeasurementoffinancialassetsresulting fromthefirstpartofPhase1oftheprojecttoreplaceAASB139 Financial Instruments: Recognition and Measurement.AASB9will becomemandatoryfortheGroup’s30June2014financial statements.Retrospectiveapplicationisgenerallyrequired, althoughthereareexceptions,particularlyiftheentityadoptsthe standardfortheyearended30June2012orearlier.TheGroup hasnotyetdeterminedthepotentialeffectofthestandard.

• AASB124Related Party Disclosures(revisedDecember2009) simplifiesandclarifiestheintendedmeaningofthedefinitionof arelatedpartyandprovidesapartialexemptionfromthe disclosurerequirementsforgovernment-relatedentities.The amendments,whichwillbecomemandatoryfortheGroup’s30 June2012financialstatements,arenotexpectedtohaveany impactonthefinancialstatements.

• AASB2009-5Further amendments to Australian Accounting Standards arising from the Annual Improvements Process affect variousAASBsresultinginminorchangesforpresentation, disclosure,recognitionandmeasurementpurposes.The amendments,whichbecomemandatoryfortheGroup’s30June 2011financialstatements,arenotexpectedtohaveasignificant impactonthefinancialstatements.

• AASB2009-8Amendments to Australian Accounting Standards - Group Cash-settled Share-based Payment Transactionsresolves diversityinpracticeregardingtheattributionofcash-settledshare- basedpaymentsbetweendifferententitieswithinagroup.Asa resultoftheamendmentsAI8Scope of AASB 2andAI11AASB

2 - Group and Treasury Share Transactions willbewithdrawnfrom theapplicationdate.Theamendments,whichbecomemandatory fortheGroup’s30June2011financialstatements,arenot expectedtohaveasignificantimpactonthefinancialstatements.

• IFRIC19Extinguishing Financial Liabilities with Equity Instruments addressestheaccountingbyanentitywhenthetermsofa financialliabilityarerenegotiatedandresultintheentityissuing equityinstrumentstoacreditoroftheentitytoextinguishall orpartofthefinancialliability.IFRIC19willbecomemandatory fortheGroup’s30June2011financialstatements,with retrospectiveapplicationrequired.TheGrouphasnotyet determinedthepotentialeffectoftheinterpretation.

4. DETERMINATION OF FAIR VALUES AnumberoftheGroup’saccountingpoliciesanddisclosuresrequirethedeterminationofthefairvalue,forbothfinancialandnon-financialassetsandliabilities.Fairvalueshavebeendeterminedformeasurementand/ordisclosurepurposesbasedonthefollowingmethods.Whereapplicable,furtherinformationabouttheassumptionsmadeindeterminingfairvaluesisdisclosedinthenotesspecifictothatassetorliability.

PLANT AND EQUIPMENT

Thefairvalueofplantandequipmentrecognisedasaresultofabusinesscombinationisbasedonmarketvalues.Themarketvalueofitemsofplant,equipment,fixturesandfittingsisbasedonthequotedmarketpricesforsimilaritems.

INTANGIBLE ASSETS

Thefairvalueofintangiblesacquiredinabusinesscombinationisbasedonthediscountedcashflowsexpectedtobederivedfromtheuseandeventualsaleoftheassets.

INVESTMENTS IN EQUITY SECURITIES AND INVESTMENT VEHICLES

Thefairvalueoffinancialassetsatfairvaluethroughprofitorlossandavailable-for-salefinancialassetsisdeterminedbyreferencetotheirquotedclosingbidpriceatthereportingdate.

TRADE AND OTHER RECEIVABLES

Thefairvalueoftradeandotherreceivablesisestimatedasthepresentvalueoffuturecashflows,discountedatthemarketrateofinterestatthereportingdate.Thefairvalueisdeterminedfordisclosurepurposes.

DERIVATIVES

Thefairvalueofinterestrateswapsisbasedonvaluationsreceivedfromtheinterestswapprovider.Thesevaluationsaretestedforreasonablenessbydiscountingestimatedfuturecashflowsbasedonthetermsandmaturityofeachcontractandusingmarketinterest ratesforasimilarinstrumentatmeasurementdate.

NON-DERIVATIVE FINANCIAL ASSETS

Fairvalueiscalculatedbasedonthepresentvalueoffutureprincipalandinterestcashflowsdiscountedatthemarketrateofinterestatthereportingdate.

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NON-DERIVATIVE FINANCIAL LIABILITIES

Fairvalue,whichisdeterminedfordisclosurepurposes,iscalculatedbasedonthepresentvalueoffutureprincipalandinterestcashflows,discountedatthemarketrateofinterestatthereportingdate.

SHARE-BASED PAYMENT TRANSACTIONS

Thefairvalueofequitysettledshare-basedpaymenttransactionsrightsismeasuredusingtheBlack-Scholesmodel.Measurementinputsincludesharepriceongrantdate,exercisepriceoftheinstrument,expectedvolatility(basedonhistoricalsharepricevolatility),lifeoftheinstrument,expecteddividends,andtheriskfreeinterestrate(basedongovernmentbonds).Serviceandnon-marketconditionsarenottakenintoaccountindeterminingfairvalue.

Thefairvalueofcashsettledshare-basedpaymenttransactionsisbasedonthemarketvalueofthesharesonsettlementdate.

5. RISK MANAGEMENT OVERVIEW

TheGrouphasexposuretothefollowingrisksfromitsuseoffinancialinstruments:

• creditrisk

• liquidityrisk

• marketrisk

• operationalrisk

ThisnotepresentsinformationabouttheGroup’sexposuretoeachoftheaboverisks,itsobjectives,policiesandprocessesformeasuringandmanagingrisk,andtheGroup’smanagementofcapital.Furtherquantitativedisclosuresareincludedthroughouttheseconsolidatedfinancialstatements.

RiskmanagementpoliciesareestablishedtoidentifyandanalysetherisksfacedbytheGroup,tosetappropriaterisklimitsandcontrols,andtomonitorrisksandadherencetolimits.RiskmanagementpoliciesandsystemsarereviewedregularlytoreflectchangesinmarketconditionsandtheGroup’sactivities.TheGroup,throughitstraining,employeemanualsandprocedures,aimstodevelopadisciplinedandconstructivecontrolenvironmentinwhichallemployeesunderstandtheirrolesandobligations.

TheboardofdirectorshasoverallresponsibilityfortheestablishmentandoversightoftheriskmanagementframeworkandoverseeshowmanagementmonitorscompliancewiththeGroup’sriskmanagementpoliciesandproceduresandreviewstheadequacyoftheriskmanagementframework.

(A) FINANCIAL RISK MANAGEMENT

Credit risk

CreditriskistheriskoffinanciallosstotheGroupifacustomerorcounterpartytoafinancialinstrumentfailstomeetitscontractualobligations,andarisesprincipallyfromtheGroup’sreceivablesandinvestmentsecurities.

Trade and other receivables

TheGroup’sexposuretocreditriskispredominantlyrelatedtomanagementfees,performancefeesandotherrelatedfeesfromproductsmanagedbytheGroup(approximately68%oftheGroup’sAUMisinvestedintheLighthouseDiversifiedFundandLighthouseGlobalLongShortFund).ReceivablesareactivelymonitoredtominimisetheGroup’sexposuretobaddebts.

Investments

TheGrouplimitsitsexposuretocreditriskfrominvestmentsbyonlyinvestingineitherquotedsecuritiesorunquotedsecuritieswheretheinvestmententityismanagedbytheGroup.Basedonhistoricalperformance,managementdoesnotexpectanycounterpartytofailtomeetitsobligations.

Liquidity risk

LiquidityriskistheriskthattheGroupwillnotbeabletomeetitsfinancialobligationsastheyfalldue.TheGroup’sapproachtomanagingliquidityistoensure,asfaraspossible,thatithassufficientliquiditytomeetitsliabilitieswhendue,underbothnormalandstressedconditions,withoutincurringunacceptablelossesorriskingdamagetotheGroup’sreputation.

Asdetailedinnote20tothefinancialstatements,theGrouphasvariousbankfacilitiesinplace.Undercurrentarrangements,thesefacilitiesareduetomatureinNovember2011.TheGrouphasprocessesinplacetoensurethetermsandconditionsofborrowingarrangementscontinuetobemet.Inthenormalcourse,thefacilitieswillberenegotiatedorrefinancedpriortomaturity.

TheGroupactivelymonitorscashflowandfunding.TheGroupensuresthatithassufficientcashondemandtomeetoperationalrequirements,includingtheservicingoffinancialobligations.Thisapproachexcludesthepotentialimpactofextremecircumstanceswhichcannotbepredicted.

Market risk

Marketriskistheriskthatchangesinmarketprices,suchasforeignexchangerates,interestratesandequitypriceswillaffecttheGroup’sincomeorthevalueofitsholdingsoffinancialinstruments.Theobjectiveofmarketriskmanagementistomanageandcontrolmarketriskexposureswithinacceptableparameters,whileoptimisingthereturn.

Currency risk

TheGroupisexposedtocurrencyriskonfeerevenue,receivablesandborrowingsthataredenominatedinacurrencyotherthantherespectivefunctionalcurrenciesoftheGroupentities.ThisrelatesprimarilytoAustraliandollar(AUD)denominatedbalancesheldbytheUSLighthouseGroup,whichhasafunctionalcurrencyofUSdollars(USD).

Inaddition,theGroupisexposedtocurrencyriskinrespectoffinancialassetsandliabilitiesdenominatedinforeigncurrenciesandtheforeigncurrencyriskofnetassetsrelatingtotheGroup’sforeignoperations.HFAisalsoexposedtocurrencyriskinrespectofthetranslationofitsUSDearnings.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

TheGroupisalsoindirectlyexposedtoforeigncurrencyriskonrevenueearnedfromAUDdenominatedmanagedinvestmentproductsinvestedinmarketsdenominatedinacurrencyotherthanAUD.ThecurrencygivingrisetothisriskisprimarilyUSD.Thisriskisprimarilyhedgedbythemanagedinvestmentproductdirectly,therebyreducingtheforeigncurrencyriskonrevenuesearnedbytheGroup.

Whereverappropriate,theGroupseekstoensureborrowingsandrelatedpaymentsarestructuredtoprovideaneconomichedge,therebyminimisingcurrencyriskarising.

Interest rate risk

TheGroup’sexposuretointerestrateriskrelatesprimarilytotheGroup’ssecuredbankloans.Interestratesonborrowingsareonavariableratebasis.TheGroupmanagesinterestrateriskbyenteringintointerestrateswapstoconvertaportionofitsexposuretochangesininterestrateborrowingstoafixedratebasis.

Equity risk

Equitypriceriskarisesfromavailable-for-saleassetsandfinancialassetsdesignatedatfairvaluethroughprofitorloss.Available-for-salefinancialassetsconsistofinvestmentsinordinaryshares.Financialassetsdesignatedatfairvaluethroughprofitorlossareunitsininvestmentvehiclesthatwouldotherwisebeclassifiedasavailable-for-sale.ThevalueoftheseinvestmentsheldbytheGroupisnotconsideredtoresultinanysignificantrisktotheGroup’sincome.

Furtherinformationoncreditrisk,liquidityriskandmarketriskisincludedatnote25.

Capital management

TheGroupaimstomaintainastrongcapitalbasesoastomaintaininvestor,creditorandmarketconfidenceandtosustainfuturedevelopmentofthebusiness.Theboardofdirectorsmonitorsthereturnoncapital,thelevelofdividendspaidandrelateddividendpolicy.TheGroup’scapitalmanagementpoliciesarealsomonitoredtoensurethattheyarewithintherequirementsoftheGroup’sexternaldebtfacility.

InaccordancewiththerequirementsoftheAustralianSecuritiesandInvestmentsCommissionAustralianFinancialServicesLicence,Certitudemustensurethatatalltimesthevalueofitsnettangibleassetsaremaintainedatanamountequaltonotlessthan0.5%ofschemeproperty,uptoamaximumof$5million.Certitude’spositionisactivelymonitoredtoensurecompliancewiththisrequirement.Therequirementwascompliedwiththroughouttheyear.

(B) OPERATIONAL RISK MANAGEMENT

OperationalriskistheriskofdirectorindirectlossarisingfromawidevarietyofcausesassociatedwiththeGroup’sprocesses,personnel,technologyandinfrastructure,andfromexternalfactorsotherthancredit,marketandliquidityriskssuchasthosearisingfromlegalandregulatoryrequirementsandgenerallyacceptedstandardsofcorporatebehaviour.

TheGroup’sobjectiveistomanageoperationalrisksoastobalancetheavoidanceoffinanciallossesanddamagetotheGroup’sreputationwithoverallcosteffectivenessandtoavoidcontrolproceduresthatrestrictinitiative.

ThisobjectiveissupportedbythedevelopmentofoverallGroupstandardsforthemanagementofoperationalriskinthefollowingareas:

• requirementsforappropriatesegregationofduties,includingthe independentauthorisationoftransactions

• requirementsforthereconciliationandmonitoringoftransactions

• compliancewithregulatoryandotherlegalrequirements

• documentationofcontrolsandprocedures

• developmentofcontingencyplans

• trainingandprofessionaldevelopment

• ethicalandbusinessstandards

• riskmitigation,includinginsurancewherethisiseffective.

6. OPERATING SEGMENTS TheGrouphastworeportablesegments,asdescribedbelow,whicharetheGroup’sstrategicbusinessunits.ThestrategicbusinessunitsarebasedontheGroup’stwoprincipalgeographiclocations,beingAustraliaandtheUnitedStates.Foreachofthestrategicbusinessunits,theGroup’sCEOandboardofdirectorsreviewinternalmanagementreportsonamonthlybasis.ThefollowingsummarydescribestheoperationsineachoftheGroup’sreportablesegments:

• Australia.IncludestheAustralianCertitudebusiness,whichacts astheResponsibleEntityofschemesandotherproductswhich areprovidedtoretail,wholesaleandinstitutionalinvestors throughoutAustralia.

• UnitedStates.IncludestheUSbasedLighthouseGroup,whichacts asaglobalabsolutereturnfundsmanagerforUSandCayman Islandbasedfunds.

$485million(2009:$629million)oftheAssetsunderManagementwhicharemanagedbyCertitudeareinvestedinfundsmanagedbytheLighthouseGroup.ThiscrossinvestmentresultsinmanagementfeerebatesbetweentheAustralianandUSoperatingsegments.

Informationregardingtheresultsofeachreportablesegmentisincludedbelow.Performanceismeasuredonsegmentresultsbeforeforeignexchangelossesontheintercompanyloan(whicheliminateonconsolidationoftheGroup)asincludedintheinternalmanagementreportsthatarereviewedbytheGroup’sCEOandboardofdirectors.

ComparativesegmentinformationhasbeenrepresentedinconformitywiththerequirementofAASB8Operating Segments.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Information about reportable segments 2010 Reportable segments Reconciliation to consolidated totals

in thousands of AUD Australia

United States

Total reportable segments

Corporate / service entities

Elimination entries

Consolidated totals

Externalrevenue 17,038 55,538 72,576 - - 72,576

Inter-segmentrevenue - 2,945 2,945 - (2,945) -

Investmentmanagementcosts (3,940) (10,961) (14,901) - 2,945 (11,956)

Net income from operating activities 13,098 47,522 60,620 - - 60,620

OtherIncome - 2 2 2 - 4

Expenses

Depreciationandamortisationexpense - (11,046) (11,047) (189) - (11,235)

Otherexpenses (9,021) (23,761) (32,781) (1,374) - (34,156)

Results from operating activities before impairment expense and equity settled transactions 4,077 12,717 16,794 (1,561) - 15,233

Impairment(expense)/reversal - - - 24,812 (24,812) -

Equitysettledtransactions - (2,009) (2,009) (241) - (2,250)

Results from operating activities 4,077 10,708 14,785 23,010 (24,812) 12,983

Finance income / (costs)

Interestincomeonbankdeposits 459 8 467 74 - 541

Netforeignexchangegain/(loss) - (26,824) (26,824) - 26,943 119

Interestexpense(external) - (7,427) (7,427) (248) 585 (7,090)

Interestexpense(internal) - (3,545) (3,545) 1,195 2,350 -

Otherfinancecosts (2) (300) (302) 639 (585) (248)

Profit / (loss) before tax 4,534 (27,380) (22,846) 24,670 4,481 6,305

Profit/(loss)beforetax(eliminatingforeigncurrency movementsonintercompanyloan) 4,534 (439) 4,095 24,670 (22,460) 6,305

Incometax(expense)/benefit (1,360) (77) (1,437) (167) - (1,604)

Segmentassets 20,939 198,646 219,585 124,174 (121,501) 222,258

Segmentliabilities (3,318) (129,730) (133,048) (2,438) 1,631 (133,855)

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Information about reportable segments2009 Reportable segments Reconciliation to consolidated totals

in thousands of AUD Australia

United States

Total reportable segments

Corporate / service entities

Elimination entries

Consolidated totals

Externalrevenue 36,140 76,715 112,855 - 112,855

Inter-segmentrevenue - 9,512 9,512 - (9,512) -

Investmentmanagementcosts (10,807) (16,017) (26,824) - 9,512 (17,312)

Net income from operating activities 25,333 70,210 95,543 - - 95,543

OtherIncome 88 116 204 4 - 208

Expenses

Depreciationandamortisationexpense (668) (13,393) (14,061) (255) - (14,316)

Otherexpenses (10,353) (29,447) (39,800) (3,519) - (43,319)

Results from operating activities before impairment expense and equity settled transactions 14,400 27,486 41,886 (3,770) - 38,116

Impairment(expense)/reversal (11,446) (585,621) (597,067) (435,156) 432,686 (599,537)

Equitysettledtransactions - (12,177) (12,177) (219) - (12,396)

Results from operating activities 2,954 (570,312) (567,358) (439,145) 432,686 (573,817)

Finance income / (costs)

Interestincomeonbankdeposits 279 201 480 316 - 796

Dividendincomeonavailbale-for-salefinancialassets - - - 8 - 8

Netforeignexchangegain/(loss) - 45,654 45,654 110 (44,550) 1,214

Interestexpense(external) - (7,196) (7,196) (530) 67 (7,659)

Interestexpense(internal) - (19,965) (19,965) 15,161 4,804 -

Otherfinancecosts (2) (1,170) (1,172) 233 (67) (1,006)

Profit / (loss) before tax 3,231 (552,788) (549,557) (423,847) 392,940 (580,464)

Profit/(loss)beforetax(eliminatingforeigncurrency movementsonintercompanyloan) 3,231 (597,338) (594,107) (423,847) 437,490 (580,464)

Incometax(expense)/benefit (969) (3,749) (4,718) (4,598) 16,596 7,280

Segmentassets 17,915 220,610 238,525 103,850 (96,720) 245,655

Segmentliabilities (3,595) (393,662) (397,257) (9,055) 243,125 (163,187)

MAJOR REVENUE SOURCE

9%(2009:12%)and50%(2009:45%)oftheGroup’stotalrevenuerelatestomanagementandperformancefeesearnedontheHFADiversifiedInvestmentsFundandLighthouseDiversifiedFundrespectively.

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in thousands of AUD 2010 2009

(A) REVENUE

Managementfeeincome 71,149 110,369

Performancefeeincome 1,252 844

Originationfees 175 1,642

Total revenue 72,576 112,855

(B) OTHER INCOME

Sundryincome 4 208

Total other income 4 208

(C) EXPENSES

Personnelexpenses1 (24,648) (31,584)

Professionalfees (1,894) (2,920)

Depreciation (536) (804)

Amortisationintangibleassets (10,699) (13,512)

Occupancyexpenses (2,378) (2,987)

Marketingandpromotioncosts (81) (263)

Travelcosts (1,198) (1,384)

Otherexpenses (3,957) (4,181)

Total expenses (45,391) (57,635)

(D) IMPAIRMENT LOSSES

Impairmentlosses-intangibleassets - (596,119)

Impairmentlosses-financialassets - (3,418)

Total impairment losses - (599,537)

(E) EQUITY SETTLED TRANSACTIONS

Equitysettledtransactions (2,250) (12,396)

Total equity settled transactions (2,250) (12,396)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

7. REVENUE AND EXPENSES Profit/(loss)beforeincometaxexpenseincludesthefollowingspecificrevenuesandexpenseswhosedisclosureisrelevantinexplainingtheperformanceoftheGroup:

1.includesconsolidatedcontributionstodefinedcontributionplansof$717thousand(2009:$1,019thousand).

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in thousands of AUD 2010 2009

(A) RECOGNISED DIRECTLY IN PROFIT OR LOSS

Finance income

Interestincomeonbankdeposits 541 796

Dividendanddistributionincomeonavailable-for-salefinancialassets - 8

Netforeignexchangegain 119 1,214

Total finance income 660 2,018

Finance costs

Interestexpenseonfinancialliabilitiesmeasuredatamortisedcost (7,090) (7,659)

Financecosts (135) (726)

Netchangeinfairvalueoffinancialassetsatfairvaluethroughprofitorloss (113) (280)

Total finance costs (7,338) (8,665)

Net finance costs recognised in profit or loss (6,678) (6,647)

(B) RECOGNISED DIRECTLY IN OTHER COMPREHENSIVE INCOME

Foreigncurrencytranslationdifferenceforforeignoperations (3,187) 178,436

Effectiveportionofchangesinfairvalueofcashflowhedges 2,096 (6,207)

Changeinfairvalueofavailable-for-salefinancialassetstransferredtoprofitorloss 107 7

Incometaxonincomeandexpenserecogniseddirectlyinequity (32) (24,094)

Finance income attributable to equity holders recognised directly in equity, net of tax (1,016) 148,142

Recognised in:

Translationreserve (3,187) 153,206

Hedgingreserve 2,096 (5,068)

Fairvaluereserve 75 4

1,016 148,142

8. FINANCE AND INCOME COSTS

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(A) RECOGNISED IN THE INCOME STATEMENT

in thousands of AUD 2010 2009

Current tax expense

Currentyear (1,422) (7,471)

Deferred tax expense

Originationandreversaloftemporarydifferences 12,744 217,486

Taxlossesforwhichnodeferredtaxwasrecognised (15,133) (15,295)

Changeinunrecognisedtemporarydifferences 2,207 (187,440)

Income tax (expense) / benefit reported in income statement (1,604) 7,280

(B) INCOME TAX RECOGNISED IN OTHER COMPREHENSIVE INCOME

2010 2009

in thousands of AUD

Before tax

Tax benefit (expense)

Net of tax

Before tax

Tax benefit (expense)

Net of tax

Foreigncurrencytranslationdifferenceforforeignoperations (3,187) - (3,187) 178,436 (25,230) 153,206

Effectiveportionofchangesinfairvalueofcashflowhedges 2,096 - 2,096 (6,207) 1,139 (5,068)

Changeinfairvalueofavailable-for-salefinancialassets 107 (32) 75 7 (3) 4

Income tax benefit / (expense) recognised in equity (984) (32) (1,016) 172,236 (24,094) 148,142

(C) RECONCILIATION OF EFFECTIVE TAX RATE

in thousands of AUD 2010 2009

Accountingprofit/(loss)beforetax 6,305 (580,464)

Incometaxusingthedomesticcorporationtaxrateof30%(2009:30%) (1,891) 174,139

Effectoftaxratesinforeignjurisdictions* 3,383 42,771

Non-deductibleexpenses 1,176 (7,069)

Taxbenefitsnotincludedinaccountingprofit (6,738) 131,853

Taxlossesforwhichnodeferredtaxisrecognised (15,133) (15,295)

Changesinunrecognisedtemporarydifferences 17,733 (319,293)

Under/(over)providedinpriorperiods (134) 174

Income tax (expense) / benefit on pre-tax net profit (1,604) 7,280

9. INCOME TAX EXPENSE

*TheGroup’sUSsubsidiariesoperateinataxjurisdictionwithhighertaxrates.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(C) RECONCILIATION OF EFFECTIVE TAX RATE

TheGroup’sconsolidatedeffectivetaxratefortheyearended30June2010was25.4%(fortheyearended30June2009:1.3%).Theeffectivetaxratefortheyearended30June2010wasimpactedbythefollowing:

• TaxlossesincurredforthefinancialyearbytheUSLighthouseGroup,whichhavenotbeenrecognisedasadeferredtaxasset.Inparticular,thecurrentfinancialyeartaxlossesfortheUSLighthouseGroupincludeaninterestexpenseinrelationtotheintercompanyloanthatexistedbetweentheparententity,HFAHoldingsLimited,anditswholly-ownedsubsidiary,HFALighthouseHoldingsCorp.Nodeferredtaxassethasbeenrecognisedinrelationtothisinterestexpense,andhencenocorrespondingincometaxbenefitisincludedintheincomestatement.However,theequivalentinterestincomeisassessabletotheAustraliantaxconsolidationgroupinthefinancialyearended30June2010,resultinginanincometaxexpenseinrelationtotheinterestwithoutanoff-settingincometaxbenefit.TheGrouphasdeterminedthatduetothecurrentoperatingenvironmentintheglobalfinancialmarketsitisnotprobablethatsufficienttaxableprofitswillbegeneratedinthefuturetoutilisethepotentialbenefitsassociatedwiththecarriedforwardoperatinglosses.Assuch,theGroupdidnotrecognisethevalueofthepotentialbenefitassociatedwiththeselossesinthecurrentperiod.

10. CASH AND CASH EQUIVALENTS

in thousands of AUD 2010 2009

Cashatbank 16,431 27,865

Calldeposits 16,546 1,425

32,977 29,290

CashatbankearnsinterestatfloatingratesbasedondailybankdepositratesfortheAustraliancashdeposits,andtheFederatedGovernmentObligationsFundfortheUScashdeposits.

Calldepositsincludes$577thousandoffundsthatareheldinnominatedaccountsinrelationtosecuritydepositsfortheleaseofofficepremises.

Thefairvalueofcashandcashequivalentsis$32,977thousand(2009:$29,290thousand).

TheGroup’sexposuretointerestrateriskandasensitivityanalysis forfinancialassetsandliabilitiesisdisclosedinnote25.

11. TRADE AND OTHER RECEIVABLES

in thousands of AUD 2010 2009

Current

ReceivablesduefromGroupmanagedproducts 11,389 17,893

Otherreceivablesandprepayments 1,428 1,498

12,817 19,391

Receivablescomprisemanagementfees,performancefees,andrecoverablecostsfromGroupmanagedproductsandarenon-interestbearingandgenerallyon30dayterms.

Impairment of non-current receivables

Duringthe2009year,$2,968thousandofnon-currentreceivablesrelatingtotheperformanceofIndexOutperformanceCallOptionsincludedinthreeoftheGroup’sstructuredproductswereimpairedandwrittendowntozeroduetoadecreaseinthevalueoftheoptions.Thisreductioninthecarryingvalueofnon-currentreceivableswasrecognisedin“impairmentlosses”inthefinancialstatementsoftheGroup.

Therehasbeennofurtherimpairmentofnon-currentreceivablesinthe2010year.

TheGroup’sexposuretocreditandcurrencyriskandimpairmentlossesrelatedtotradeandotherreceivablesisdisclosedinnote25.

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12. INVESTMENTS

in thousands of AUD 2010 2009

Non-current

Available-for-salefinancialassets 191 84

Financialassetsdesignatedatfairvaluethroughprofitorloss 2,182 2,235

2,373 2,319

Available-for-salefinancialassetsconsistofinvestmentsinordinaryshares(refertonote29fortransactionswithrelatedparties).

Thefinancialassetsdesignatedatfairvaluethoughprofitorlossareunitsininvestmentvehiclesthatotherwisewouldhavebeenclassifiedasavailable-for-sale.

Impairment of available-for-sale financial assets

HFAHoldingsLimitedholds562thousandsharesinSignatureCapitalInvestmentsLimited(formerlyHFAAcceleratorPlusLimited)withacostbaseof$534thousand(95centspershare).Asat30June2009,thefairvalueoftheseshareswas$84thousand(15centspershare).Asaresult,thecarryingvalueofthisassetwasassessedundertheimpairmentprovisionsofAASB139FinancialInstruments:RecognitionandMeasurement.Duetothesignificantdeclineinthefairvalueofthisinvestment,animpairmentlossof$450thousandwasrecognisedandisincludedin“impairmentlosses”intheprofitorlossoftheGroupfortheyearended30June2009.

Asat30June2010,thefairvalueoftheseshareswas$191thousand(34centspershare),thereforenofurtherimpairmentlosshasbeenrecognisedfortheyearended30June2010.Theincreaseinthefairvaluehasbeenrecognisedinaseparatecomponentofequity(refernote3(c)(i)).

TheGroup’sexposuretocredit,liquidityandmarketraterisksrelatedtootherinvestmentsisdisclosedinnote25.

13. TAX ASSETS AND LIABILITIES (A) CURRENT TAX ASSETS AND LIABILITIES

ThecurrenttaxassetfortheGroupof$500thousand(2009:$307thousand)representstheamountofincometaxesrecoverableinrespectofpriorperiodsandthatarisefromthepaymentoftaxinexcessoftheamountsduetotherelevanttaxauthority.

(B) RECOGNISED DEFERRED TAX ASSETS

Deferredtaxassetsareattributabletothefollowing:

in thousands of AUD 2010 2009

Consolidated

Amortisation/depreciation 51 -

Available-for-salefinancialassets (30) 2

Otherreceivables (5) -

Tradecreditors 67 168

Employeebenefits 149 235

Deferredrevenue - -

Otherprovisions 61 91

Net tax assets / (liabilities) 293 496

(C) UNRECOGNISED DEFERRED TAX ASSETS

Deferredtaxassetshavenotbeenrecognisedinrespectofthefollowingitems:

in thousands of AUD 2010 2009

Deductibletemporarydifferences 275,758 293,202

Taxlosses 29,746 15,295

305,504 308,497

Thesedeferredtaxassetsariseasaresultofimpairmentlossesrecognisedintheprioryear,andcarriedforwardoperatingtaxlosses.

Thesedeferredtaxassetshavenotbeenrecognisedonthebasisthatduetothecurrentoperatingenvironmentintheglobalfinancialmarkets,itisnotprobablethatfuturetaxableprofitorcapitalgainswillbeavailableagainstwhichtheGroupcanutilisethesebenefits. Assuch,theGroupdidnotrecognisethevalueofthepotentialbenefitassociatedwiththeselossesinthecurrentperiod.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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in thousands of AUDFurniture and

equipmentComputer

equipment Leasehold

improvements Total

COST

Balanceat1July2008 1,096 1,185 962 3,243

Additions 8 123 31 162

Disposals (33) (83) (118) (234)

Effectofmovementinexchangerates 175 127 83 385

Balance at 30 June 2009 1,246 1,352 958 3,556

Balanceat1July2009 1,246 1,352 958 3,556

Additions 201 283 41 525

Disposals (261) (38) (180) (479)

Effectofmovementinexchangerates (56) (35) (33) (124)

Balance at 30 June 2010 1,130 1,562 786 3,478

DEPRECIATION

Balanceat1July2008 (141) (574) (170) (885)

Depreciationchargefortheyear (235) (407) (162) (804)

Disposals 13 70 24 107

Effectofmovementinexchangerate (1) (46) (34) (81)

Balance at 30 June 2009 (364) (957) (342) (1,663)

Balanceat1July2009 (364) (957) (342) (1,663)

Depreciationchargefortheyear (152) (268) (116) (536)

Disposals 177 34 70 281

Effectofmovementinexchangerate 18 29 8 55

Balance at 30 June 2010 (321) (1,162) (380) (1,863)

CARRYING AMOUNTS

At1July2008 955 611 792 2,358

At 30 June 2009 882 395 616 1,893

At1July2009 882 395 616 1,893

At 30 June 2010 809 400 406 1,615

14. PLANT AND EQUIPMENT

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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in thousands of AUD Goodwill

Managment rights / customer

relationships Trademarks Software Total

COST

Balanceat1July2008 520,946 88,203 1,974 831 611,954

Additions - - - - -

Writtenoff - (34) - - (34)

Effectofmovementinexchangerates 96,699 14,209 368 155 111,431

Balance at 30 June 2009 617,645 102,378 2,342 986 723,351

Balanceat1July2009 617,645 102,378 2,342 986 723,351

Additions - - - - -

Writtenoff - - - - -

Effectofmovementinexchangerates (29,542) (4,341) (113) (47) (34,043)

Balance at 30 June 2010 588,103 98,037 2,229 939 689,308

AMORTISATION AND IMPAIRMENT LOSSES

Balanceat1July2008 - (7,535) (49) (84) (7,668)

Amortisationfortheyear - (13,165) (129) (218) (13,512)

Impairmentlosses (587,640) (8,479) - - (596,119)

Effectofmovementinexchangerate 85,598 301 2 6 85,907

Balance at 30 June 2009 (502,042) (28,878) (176) (296) (531,392)

Balanceat1July2009 (502,042) (28,878) (176) (296) (531,392)

Amortisationfortheyear - (10,410) (107) (182) (10,699)

Impairmentlosses - - - - -

Effectofmovementinexchangerate 23,995 459 4 8 24,466

Balance at 30 June 2010 (478,047) (38,829) (279) (470) (517,625)

CARRYING AMOUNTS

At1July2008 520,946 80,668 1,925 747 604,286

At 30 June 2009 115,603 73,500 2,166 690 191,959

At1July2009 115,603 73,500 2,166 690 191,959

At 30 June 2010 110,056 59,208 1,950 469 171,683

15. INTANGIBLE ASSETS

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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IMPAIRMENT TESTING OF INTANGIBLE ASSETS

Therecoverableamountofgoodwillandintangibleassetsiscalculatedasthepresentvalueoftheestimatedfuturecashflows,discountedusingapre-taxdiscountratethatreflectscurrentmarketassessmentsofthetimevalueofmoneyandtherisksspecifictothoseassets.

Forgoodwill,intangibleassetswithanindefinitelifeandintangibleassetsthatarenotyetavailableforuseanimpairmenttestiscarriedoutannually.Otherintangibleassetsaretestedforimpairmentwhenanimpairmentindicatorexists(seenote3(g)).

Forthepurposeofimpairmenttesting,intangibleassetsareallocatedtothefollowingcashgeneratingunits:

in thousands of AUD

2010Carryingamount

2009Carryingamount

Australian based funds management

Goodwill - -

Managementrights - -

US based funds management

Goodwill 110,056 115,603

Managementrights/customerrelationships 59,208 73,500

Trademarks 1,950 2,166

Software 469 690

171,683 191,959

A) 30 JUNE 2010 IMPAIRMENT TESTING

Australian based funds management cash generating unit (AUS CGU)

Asnotedinthetableabove,the30June2010carryingvalueforintangibleassetsallocatedtotheAUSCGUwas$Nil.ThereforenofurtherimpairmenttestingfortheAUSCGUwascarriedoutasat30June2010.

US based funds management cash generating unit (US CGU)

ImpairmenttestingcarriedoutontheUSCGUasat30June2010didnotresultintherecognitionofanyadditionalimpairmentlosses.

TherecoverableamountoftheUSCGUwasdeterminedbasedonavalueinusecalculation.

Tocalculatethis,cashflowprojectionswerebasedonthefinancialbudgetfortheUSbusinessagreedbytheexecutivedirectorsforthe2011

to2013financialyears.Forecastsfor2014and2015werebasedonrevenuegrowththatwasbroadlyconsistentwiththeapprovedgrowthratesforthe2011to2013periodandnormalisedcostpercentages.

Alongtermgrowthrateof4.4%wasusedintheterminalvaluecomponentofthecalculation.Thisratewasbasedona2.4%CPIlongtermforecastplus2.0%forrealGDPassourcedfromtheEconomistIntelligenceUnit,andisconsistentwiththegrowthassumptionappliedbymanyUScompanieswhenperformingimpairmenttests.

Thesecashflowprojectionswerethendiscountedusingthepre-taxdiscountrateof15.3%.

B) IMPAIRMENT TESTING FOR THE YEAR ENDED 30 JUNE 2009

TheGFC,particularlyfollowingthecollapseofLehmanBrothersinvestmentbankinSeptember2008,createdoneofthemostdifficultoperatingenvironmentsforfundmanagersinhistory.Theseverityandswiftnessofthecrisis,andtheresultantdistressincreditandcapitalmarketsaroundtheworldmeantthattheabsolutefundssectorexperiencedinvestmentlossesandsignificantnetfundoutflows.

TheGroupassessedthecarryingvalueofgoodwillandintangibleassetsasat31December2008duetothereductionintheGroup’sAUMandtheexpectationthattheseconditionswouldcontinueintheshorttermbeforefundflowsandperformancereturnedtonormallevels.

Australian based funds management cash generating unit (AUS CGU)

AsaresultofthetestingcarriedoutontheAUSCGUduringtheyearended30June2009,thecarryingamountofmanagementrightsandgoodwillallocatedtothisCGUwasdeterminedtobehigherthanitsrecoverableamount,andanimpairmentlossof$10,498thousandwasrecognisedandisincludedin“impairmentlosses”forthatperiod.

TherecoverableamountoftheAUSCGUwasdeterminedbasedonavalueinusecalculation.

Tocalculatethis,cashflowprojectionswerebasedonthefinancialbudgetfortheAustralianbusinessapprovedbytheboardofdirectorsforthe2009to2012financialyears.Forecastsfor2013werebasedonlevelsconsistentwith2012.Aterminalvaluewascalculatedusingagrowthrateof0%.

Thesecashflowprojectionswerethendiscountedusingthepre-taxdiscountrateof20.2%.

US based funds management cash generating unit (US CGU).

AsaresultofthetestingcarriedoutontheUSCGUduringtheyearended30June2009,theaggregatecarryingamountofassetsallocatedtothisCGUwasdeterminedtobehigherthanitsrecoverableamount,

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

andanimpairmentlossof$585,621thousandwasrecognisedandisincludedin“impairmentlosses”forthatperiod.Theimpairmentlosswasallocatedfullyagainstgoodwill.

ThislossreflectssignificantlylowerthanexpectedfuturecashflowsfromtheUSoperationscomparedtothebusinessatthetimeofacquisition.

TherecoverableamountoftheUSCGUwasdeterminedbasedonavalueinusecalculation.

Tocalculatethis,cashflowprojectionsarebasedonthefinancialbudgetfortheUSbusinessapprovedbytheboardofdirectorsforthe2009to2012financialyears.Forecastsfor2013werebasedonrevenuegrowththatwasbroadlyconsistentwiththeapprovedgrowthratesfor2011and2012andnormalisedcostpercentages.

Alongtermgrowthrateof3.5%wasusedintheterminalvaluecomponentofthecalculation.Thisratewasbasedona2.1%CPIlongtermforecastplus1.4%forrealGDPassourcedfromtheEconomistIntelligenceUnit,andisconsistentwiththegrowthassumptionappliedbymanyUScompanieswhenperformingimpairmenttests.

Thesecashflowprojectionswerethendiscountedusingthepre-taxdiscountrateof16.6%.

16. TRADE AND OTHER PAYABLES

in thousands of AUD 2010 2009

Current

Tradecreditors 1,716 1,859

Othercreditorsandaccruals 5,536 7,435

Total trade and other payables 7,252 9,294

Tradecreditorsarenon-interestbearingandnormallysettledon30dayterms.TheGroup’sexposuretocurrencyandliquidityriskrelatedtotradeandotherpayablesisdisclosedinnote25.

17. EMPLOYEE BENEFITS

in thousands of AUD 2010 2009

Current

Salariesandwagesaccrued 4,037 4,704

Liabilityforannualleave 362 599

Total employee benefits – current 4,399 5,303

Non-current

Liabilityforlongserviceleave 172 217

Total employee benefits – non-current 172 217

18. DERIVATIVES

in thousands of AUD 2010 2009

Current

Derivativesusedforhedging 1,359 -

Non-current

Derivativesusedforhedging - 3,455

Total derivatives 1,359 3,455

DerivativesusedforhedgingrelatetointerestrateswapsusedtohedgetheGroup’sexposuretointerestraterisk.Thefairvalueofthesederivativesisbasedonvaluationsreceivedfromtheinterestrateswapprovider.

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19. SHARE-BASED PAYMENTS

2008 HFA EMPLOYEE PERFORMANCE RIGHTS PLAN

AnofferofrightstoissuedsharesintheCompanywasmadetoemployeesofHFA’sAustralianbusinesson12March2008.Theboardapprovedtheallocationof3,955,000performancerightstoemployees.

Noconsiderationispayablebyemployeesupontheissueofperformancerightsorinrespectofthesharestobeissuedupontheexerciseoftheperformancerights.Vestingconditionsmustbesatisfiedfortheexerciseoftheperformancerights.

Vestingoftheperformancerightsisintranchesof25%,35%and40%withrespectivevestingdatesof31December2008,31December2009and31December2010.VestingconditionsincludebeingemployedbytheGroupattherelevantvestingdateandmeetingofperformancehurdlesfortheGrouprelatingtoassetsundermanagement,baserevenue(excludingperformancefees)andEBITDA.

TheHFAHoldingsLimitedboardretainstheabilitytopermitvestingincircumstanceswherehurdlethresholdsarenotmetbutcommercialcircumstanceswarrantlimitedorfullvesting.

Detailsoftheperformancerightsgrantedareasfollows:

in thousands of AUD

Total number of rights granted

Grant date Fair value at grant date

$

Expiry date Financial year in which grant vests

Tranche1 988,750 12/03/2008 0.9950 31/12/2009 2009

Tranche2 1,384,250 12/03/2008 0.9196 31/12/2010 2010

Tranche3 1,582,000 12/03/2008 0.8499 31/12/2011 2011

Thefollowingisareconciliationofperformancerightsoutstandingunderthe2008HFAEmployeePerformanceRightsPlan:

Number of shares

Outstandingat1July2008 3,955,000

Forfeitedduringtheperiod (953,750)

IssuedduringtheperiodinrelationtoTranche1 (901,250)

Outstanding at 30 June 2009 2,100,000

Outstandingat1July2009 2,100,000

Forfeitedduringtheperiod (1,330,750)

IssuedduringtheperiodinrelationtoTranche2 (299,250)

Outstanding at 30 June 2010 470,000

Tranche1oftheperformancerightsplanvestedat31December2008,with100%oftheshares(901,250shares)availableunderthetrancheforeligibleemployeesbeingissuedatthediscretionoftheboard.Thenon-cashexpenserecognisedinrelationtoTranche1fortheyearended30June2009totalled$219thousand.

Tranche2oftheperformancerightsplanvestedat31December2009,with30%oftheshares(299,250)availableunderthetrancheforeligibleemployeesbeingissuedduetothesatisfactionofthebaserevenueperformancehurdle.TheboarddidnotexerciseitsdiscretiontovestanyadditionalsharesunderTranche2.Thenon-cashexpenserecognisedinrelationtoTranche2fortheyearended30June2010totalled$241thousand.

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ThefairvalueofperformancerightsiscalculatedusingtheBlack-Scholesoptionpricingmodeladjustedfordividendsandisallocatedtoreportingperiodsevenlyovertheperiodfromgrantdatetovestingdateafterestimatingprobabilitiesofvesting.

Thefollowingfactorsandassumptionswereusedindeterminingthefairvalueoftherightsatgrantdate:

in thousands of AUD

Grant date Life of right granted

Exerciseprice

$

Share price at grant date

$

Risk free interest rate

Dividend yield

Fair value per right at grant

date$

Tranche1 12/03/08 1.8years - 1.06 6.630% 8.2% 0.9950

Tranche2 12/03/08 2.8years - 1.06 6.323% 8.2% 0.9196

Tranche3 12/03/08 3.8years - 1.06 6.190% 8.2% 0.8499

LIGHTHOUSE INVESTMENT PARTNERS INCENTIVE COMPENSATION PLAN

AnincentiveplanforemployeesofLighthouseInvestmentPartners,LLCwasestablishedbySGMHoldings,LLCon1July2008.SGMHoldings,LLCisarelatedentityofexecutivedirectorSeanMcGouldandisnotpartoftheHFAHoldingsLimitedGroup.GrantsmadeundertheplanwillbefundedbySGMHoldings,LLCnottheHFAHoldingsLimitedGroup.However,asSGMHoldings,LLCisshareholdersofHFAHoldingsLimited,accountingstandardsrequirethattheCompanyrecogniseanexpenseassociatedwiththesharesgrantedundertheplanwithacorrespondingincreaseintheCompany’sequitytorecognisethecontributionbySGMHoldings,LLCasashareholder.

TheincentiveplangrantsparticipantsanopportunitytoearnapaymentofcashorreceiveordinarysharesofHFAHoldingsLimited.100%ofthesharesavailableundertheplanweretransferredtoeligibleemployeesduringtheyearended30June2009(9,904,925shares),withthenon-cashexpenserecognisedbytheGroupforthatyeartotalling$12,177thousand.

ThefairvalueofordinarysharesavailableundertheplaniscalculatedusingtheBlack-Scholesoptionpricingmodeladjustedfordividendsandisallocatedtoreportingperiodsevenlyovertheperiodfromgrantdatetovestingdateafterestimatingprobabilitiesofvesting.

Thefollowingfactorsandassumptionswereusedindeterminingthefairvalueoftherightsatgrantdate:

in thousands of AUD

Grant date Life of right granted

Exerciseprice

$

Share price at grant date

$

Risk free interest rate

Dividend yield

Fair value per right at grant

date$

Tranche1 01/07/2008 0.5years - 1.09 6.947% 8.0% 1.0489

Tranche2 01/07/2008 1.5years - 1.09 6.849% 8.0% 0.9712

Tranche3 01/07/2008 2.5years - 1.09 6.748% 8.0% 0.8992

LIGHTHOUSE INVESTMENT PARTNERS SHORT TERM INCENTIVE PLAN

EmployeesofLighthouseInvestmentPartners,LLCareentitledtoparticipateinashorttermincentive(STI)planwhichisbasedontheperformanceoftheLighthouseGroup.

Fortheyearended31December2009,LighthouseemployeesweregrantedsharesinHFAHoldingsLimitedinpartialsettlementoftheirbonusentitlements.Noconsiderationwaspayablebyemployeesuponissueoftheshares.ThetotalnumberofHFAHoldingsLimitedsharesissuedtoLighthouseemployeesunderthisincentiveplanwas8,547,009.

Thefairvalueoftheordinarysharesgrantedundertheplanwasbasedonthemarketvalueofthesharesonthe31December2010grantdate.Thenon-cashexpenserecognisedbytheGroupinrelationtothisplanfortheyearended30June2010was$2,009thousand(2009:$Nil).

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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20. LOANS AND BORROWINGS

in thousands of AUD 2010 2009

Current

Bankloan–secured

FacilityA–USD 10,322 5,885

FacilityB–AUD - 1,994

Total current loans and borrowings 10,322 7,879

Non-current

Bankloan–secured

FacilityA–USD 109,293 132,247

FacilityB–AUD 1,058 4,792

Total non-current loans and borrowings 110,351 137,039

Total loans and borrowings 120,673 144,918

Currentloansandborrowingsaretheportionofbankloansexpectedtobepaidwithinoneyear.

TERMS AND DEBT REPAYMENT SCHEDULE

Thetermsandconditionsoftheoutstandingloansasat30June2010wereasfollows:

in thousands of AUDNominal

interest rateDate of

maturityFace value Carrying

amountFace value Carrying

amount

2010 2009

FacilityA LIBOR+2.25% 1/11/2011 120,116 119,615 139,357 138,132

FacilityB BBSY+2.25% 1/11/2011 1,087 1,058 6,899 6,786

Total loans and borrowings 121,203 120,673 146,256 144,918

FINANCING ARRANGEMENTS

BankloanscompriseofthefollowingfacilitiesavailableunderaCashAdvanceFacilitiesAgreement(“CAFA”)withWestpacBankingCorporation:

• FacilityA(USDLighthouseGroupAcquisitionFacility)

• FacilityB(AUDWorkingCapitalFacility).

BothfacilitiesaresecuredbyfirstrankingfixedandfloatingchargesandmortgagesoveralltheassetsandundertakingsofHFAHoldingsLimitedandAdminPtyLtdinfavourofWestpac,withUSChargesgrantedbyHFALighthouseHoldingsCorp,HFALighthouseCorp,LHPInvestments,LLCandLighthouseInvestmentPartners,LLCinfavourofWestpacandDepositAccountControlAgreementsgrantedbyLHPInvestmentsLLCandLighthouseInvestmentPartnersLLCinfavourofWestpac.ThefacilitiesmatureinNovember2011.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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HFAHoldingsLimited,AdminPtyLtd,CertitudeGlobalInvestmentsLimited,HFALighthouseHoldingsCorpandHFALighthouseCorpguaranteetheobligationsofHFAHoldingsLimitedandHFALighthouseHoldingsCorp(“theBorrowers”).TheBorrowersandguarantorsalsoprovideacrossguaranteeinrelationtotheseobligationsandanyneworacquiredHFAsubsidiarymustalsoprovideaguaranteeandfirstrankingsecurityoveritsassets.TheCAFAcontainsrepresentations,warranties,undertakingsandeventsofdefaultofatypeusualforadebtfacilityofthiskindandhavingregardtothenatureofHFA’sbusiness.Undertakingsincludeobligationstocomplywithapplicablelaws,carryonbusinessinaproperandefficientmanner,ensurethatnoeventofdefaultoccursandinsureallsecuredproperty.

FinancialundertakingsincludethatHFAanditsrelatedentitieswillensurethat:

• EBITDAforeachperiodisalwaysatleast1.5timesgreaterthantheinterestexpenseforthesameperiod;and

• AssetsundermanagementoftheConsolidatedGrouparenotlessthanUSD2.6billion.

Thefinancialundertakingsaretestedquarterly,basedonthepreceding12months.

TheGroup’sexposuretocurrencyandinterestrateriskrelatedtoloansandborrowingsisdisclosedinnote25.

BankloansaredenominatedinbothAustraliandollarsandUSdollars.ThebankloanamountsincurrentliabilitiescomprisestheportionoftheGroup’sbankloanspayableandtheexpectedamounttobepaidwithinoneyear(2010:$10,322thousand)(2009:$7,879thousand).

21. CAPITAL AND RESERVES

MOVEMENT IN ORDINARY SHARES ON ISSUE

in thousands of shares 2010 2009

Balanceatbeginningoffinancialyear 460,484 459,583

Exerciseofperformancerights-6March2009 - 901

SharesissuedundertheLighthouseInvestmentPartnersShortTermIncentivePlan-9February2010 8,547 -

Exerciseofperformancerights-11February2010 299 -

Balance at end of financial year 469,330 460,484

TheCompanydoesnothaveauthorisedcapitalorparvalueinrespectofissuedshares.

Ordinaryshareshavetherighttoreceivedividendsasdeclaredand,intheeventofwindingupHFA,toparticipateintheproceedsfromthesaleofallsurplusassetsinproportiontothenumberofandamountspaiduponsharesheld.Ordinarysharesentitletheirholdertoonevote,eitherinpersonorbyproxy,atameetingofHFA.

Tranche1oftheperformancerightsplanvestedat31December2008,with100%oftheshares(901,250shares)availableunderthetrancheforeligibleemployeesbeingissuedatthediscretionoftheboard.

Tranche2oftheperformancerightsplanvestedat31December2009,with30%oftheshares(299,250shares)availableunderthetrancheforeligibleemployeesbeingissuedduetothesatisfactionofthebaserevenueperformancehurdle.TheboarddidnotexerciseitsdiscretiontovestanyadditionalsharesunderTranche2.

Fortheyearended31December2009,LighthouseemployeesweregrantedsharesinHFAHoldingsLimitedinpartialsettlementoftheirbonusentitlementsundertheLighthouseInvestmentPartnersShortTermIncentivePlan.ThetotalnumberofHFAHoldingsLimitedsharesissuedtoLighthouseemployeesunderthisincentiveplanwas8,547,009.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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NATURE AND PURPOSE OF RESERVES

in thousands of AUD 2010 2009

Fairvaluereserve 75 -

Translationreserve 114,255 117,442

Hedgingreserve (1,359) (3,455)

112,971 113,987

Fair value reserve

Thefairvaluereservecomprisesthecumulativenetchangeinthefairvalueofavailable-for-salefinancialassetsuntiltheinvestmentisderecognisedorimpaired. Translation reserve

Thetranslationreservecomprisesallforeigncurrencydifferencesarisingfromthetranslationofthefinancialstatementsofforeignoperations.

Hedging reserve

Thehedgingreservecomprisestheeffectiveportionofthecumulativenetchangeinthefairvalueofcashflowhedginginstrumentsrelatedtohedgedtransactionsthathavenotyetoccurred. Dividends

DividendsrecognisedinthecurrentyearbytheGroupare:

Declared and paid during the 2010 financial yearCents per

shareTotal amount

$000'sFranked /

unfrankedDate of

payment

Final2009ordinary - - - N/A

Interim2010ordinary - - - N/A

Total amount -

Declared and paid during the 2009 financial year

Final2008ordinary 3.5 16,085 Franked 26September2008

Interim2009ordinary - - - N/A

Total amount 16,085

Frankeddividendsdeclaredandpaidduringthe2009yearwerefullyfrankedatthetaxrateof30%.

Thedirectorshaveatthedateofthisreportdeclaredthatnofinaldividendwillbepaidforthefinancialyearended30June2010.

DIVIDEND FRANKING ACCOUNT

Company

in thousands of AUD 2010 2009

30%frankingcreditsavailabletoshareholdersofHFAHoldingsLimitedforsubsequentfinancialyears. 11,213 10,140

Theaboveavailableamountsarenowbasedonthebalanceofthedividendfrankingaccountatyear-endadjustedforfrankingcreditsthatwillarisefromthepaymentofcurrenttaxliabilities.Inaccordancewiththetaxconsolidationlegislation,theCompanyastheheadentityinthetax-consolidatedgrouphasalsoassumedthebenefitof$11,213thousand(2009:$10,140thousand)frankingcredits.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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22. EARNINGS PER SHARE

Thecalculationofbasicearningspershareanddilutedearningspershareat30June2010wasbasedonprofitattributabletoordinaryshareholdersof$4,701thousand(2009:lossof$573,184thousand)andaweightedaveragenumberofordinarysharesoutstandingduringthefinancialyearended30June2010of463,900thousandand464,085thousandrespectively(2009:459,869thousandand460,484respectively),calculatedasfollows:

in thousands of AUD Note 2010 2009

Earningsfromoperationsusedincalculatingbasicearningspershare 4,701 (573,184)

Earningsfromoperationsusedincalculatingdilutedearningspershare 4,701 (573,184)

Weighted average number of shares issued

Issuedordinarysharesat1July 21 460,484 459,583

Effectofsharesissued6March2009 286

Effectofsharesissued9February2010 3,302 -

Effectofsharesissued11February2010 114 -

Weighted average number of ordinary shares used in calculating basic earnings per share 463,900 459,869

Effectofperformancerightsissued12March2008 185 615

Weighted average number of ordinary shares used in calculating diluted earnings per share 464,085 460,484

Cents Per Share 2010 2009

Basicearningspershare 1.013 (124.641)

Dilutedearningspershare 1.013 (124.474)

On11February2010and6March2009theCompanyissued299,250and901,250sharesrespectivelyfornoconsiderationinrelationtothe2008EmployeePerformanceRightsPlanofferedtoemployeeson12March2008.

On9February2010theCompanyissued8,547,009sharesfornoconsiderationinrelationtotheLighthouseInvestmentPartnersShortTermIncentivePlanforthetwelvemonthsended31December2009.

Therehavebeennoothertransactionsinvolvingordinarysharesorpotentialordinarysharessincethereportingdateandbeforethecompletionofthesefinancialstatements.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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23. PARENT ENTITY DISCLOSURES

Asat,andthroughoutthefinancialyearended30June2010,theparentcompanyoftheGroupwasHFAHoldingsLimited.

Company

in thousands of AUD 2010 2009

Result of the parent entity

Profit/(loss)fortheperiod 24,577 (422,877)

Othercomprehensiveincome 75 4

Total comprehensive income for the period 24,652 (422,873)

Financial position of the parent at year end

Currentassets 2,496 6,747

Totalassets 122,618 102,032

Currentliabilities (411) (2,454)

Totalliabilities (1,514) (7,831)

Total equity of the parent comprising of:

Sharecapital 504,730 504,730

Fairvaluereserve 75 -

Retainedearnings (383,701) (410,529)

Total equity 121,104 94,201

PARENT ENTITY CONTINGENT LIABILITIES

GSTandcurrenttaxliabilitiesofotherentitieswithintheAustralianGSTgrouparetransferredtotheparententityandareincludedinthecurrentliabilitiesdisclosedabove.

Pleaserefertonote27forcommentsregardingcontingentliabilities.

PARENT ENTITY GUARANTEES IN RESPECT OF DEBTS OF ITS SUBSIDIARIES

TheparententityhasenteredintoadeedofcrossguaranteewiththeeffectthattheCompanyguaranteesthebankloanfacilityheldbysubsidiaryHFALighthouseHoldingsCorpundertheCashAdvanceFacilitiesAgreementwithWestpacBankingCorporation.

Furtherdetailsofthedeedofcrossguaranteeandthesubsidiariessubjecttothedeed,aredisclosedatnote20.

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24. RECONCILIATION OF CASH FLOWS FROM OPERATING ACTIVITIES

in thousands of AUD Note 2010 2009

Cash flows from operating activities

Netprofit/(loss)fortheperiod(aftertax) 4,701 (573,184)

Adjustments for:

Depreciationexpense 7(c) 536 804

Impairmentlosses 7(d) - 599,537

Amortisationofintangibleassets 7(c) 10,699 13,512

Interestexpenseonfinancialliabilitiesmeasuredatamortisedcost 8(a) 7,090 7,659

Netlossondisposalofplant&equipment 199 127

Financecosts 8(a) 135 726

Equity-settledtransactions 7(e) 2,250 12,396

Incometaxexpense/(benefit) 76 (17,211)

Profitondisposalofwrittenoffinvestment (310) -

Fairvaluegain/(loss)onfinancialassetsatfairvaluethroughprofitorloss 8(a) 113 280

Foreigncurrency(gain)/loss (471) 113

Operating cash flow before changes in working capital and provisions 25, 018 44,759

(Increase)/decreaseinreceivables 6,223 5,235

(Increase)/decreaseinotherassets 22 (174)

Increase/(decrease)inpayables (1,129) (2,116)

Increase/(decrease)inprovisionsandemployeebenefits (736) (3,696)

Increase/(decrease)indeferredincome - (1,467)

Net cash from operating activities 29,398 42,541

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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25. FINANCIAL INSTRUMENTS

Exposuretocredit,liquidity,currency,equitypriceandinterestrateriskarisesinthenormalcourseoftheGroup’sbusiness.

CREDIT RISK

Exposure to credit risk

ThecarryingamountoftheGroup’sfinancialassetsatreportingdaterepresentsthemaximumcreditexposure:

in thousands of AUD Note

Carrying amount

2010

Carrying amount

2009

Cashandcashequivalents 10 32,977 29,290

Tradeandotherreceivables 11 12,817 19,391

Available-for-salefinancialassets 12 191 84

Financialassetsatfairvaluethroughprofitorloss 12 2,182 2,235

Total financial assets 48,167 51,000

TheGroup’sexposuretocreditriskfortradeandotherreceivablespredominantlyrelatestomanagementfees,performancefeesandotherrelatedfeesfromproductsmanagedbytheGroup.Atreportingdate,89%oftheGroup’sloansandreceivablesrelatedtomanagementfees,performancefeesandotherrelatedfeesowingfromproductsmanagedbytheGroup(2009:92%);47%ofreceivablesrelatetotheLighthouseDiversifiedFundandLighthouseGlobalLongShortFund(2009:43%).

WithrespecttocreditriskarisingfromtheotherfinancialassetsoftheGroup,whichcomprisecashandcashequivalents,available-for-salefinancialassets,financialassetsatfairvaluethroughprofitorlossandinterestrateswapsusedforhedging,theGroup’sexposuretocreditriskarisesfromdefaultofthecounterparty,withamaximumexposureequaltothecarryingamountoftheseinstruments.

Impairment losses

Basedonhistoricdefaultrates,theGroupbelievesthatnoimpairmentallowanceisnecessaryinrespectoftradereceivables.96%ofthetradereceivablesbalanceisnotpastdue(2009:94%).Paymentforthe4%oftradereceivablespastduewasreceivedon9July2010.

Impairment of non-current receivables

Themovementintheallowanceforimpairmentinrespectofnon-currentloansandreceivablesduringtheyearwasasfollows:

in thousands of AUD 2010 2009

Balanceat1July 2,968 -

Impairmentlossrecognised - 2,968

Balance as at 30 June 2,968 2,968

Duringthe2009year,$2,968thousandofnon-currentreceivablesrelatingtotheperformanceofIndexOutperformanceCallOptionsincludedinthreeoftheGroup’sstructuredproductswereimpairedandwrittendowntozeroduetoadecreaseinthevalueoftheoptions.Thisreductioninthecarryingvalueofnon-currentreceivableswasrecognisedin“impairmentlosses”inthefinancialstatementsoftheGroup.

Therehasbeennofurtherimpairmentofnon-currentreceivablesinthe2010year.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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Impairment of available-for-sale financial assets

Themovementintheallowanceforimpairmentinrespectofavailable-for-saleinvestmentsduringtheyearwasasfollows:

in thousands of AUD 2010 2009

Balanceat1July 450 -

Impairmentlossrecognised - 450

Balance at 30 June 450 450

HFAHoldingsLimitedholds562thousandsharesinSignatureCapitalInvestmentsLimited(formerlyHFAAcceleratorPlusLimited)withacostbaseof$534thousand(approximately95centspershare).Asat30June2009,thefairvalueoftheseshareswas$84thousand(15centspershare).Asaresult,thecarryingvalueofthisassetwasassessedundertheimpairmentprovisionsofAASB139FinancialInstruments:RecognitionandMeasurement.Duetothesignificantdeclineinthefairvalueofthisinvestment,animpairmentlossof$450thousandwasrecognisedandisincludedin“impairmentlosses”intheprofitorlossoftheGroupfortheyearended30June2009.

Asat30June2010,thefairvalueoftheseshareswas$191thousand(0.34centspershare),thereforenofurtherimpairmentlosshasbeenrecognisedfortheyearended30June2010.Theincreaseinthefairvaluehasbeenrecognisedinaseparatecomponentofequity(refernote3(c)(i)).

LIQUIDITY RISK

TheGroup’sdebtfacilitieswillmatureinNovember2011.

Thefollowingarethecontractualmaturitiesofnon-derivativefinancialliabilities,includingestimatedinterestpaymentsandexcludingtheimpactofnettingagreements:

2010

in thousands of AUD NoteFair

Value6 months

or less6-12

months1-2

years2-5

yearsMore than

5 years

Non derivative financial liabilities:

Loansandborrowings 20 121,203 (8,923) (4,495) (113,862) - -

Tradeandotherpayables 16 7,252 (7,252) - - - -

128,455 (16,175) (4,495) (113,862) - -

2009

in thousands of AUD NoteFair

Value6 months

or less6-12

months1-2

years2-5

yearsMore than

5 years

Non derivative financial liabilities:

Loansandborrowings 20 146,256 (4,340) (10,320) (11,384) (130,935) -

Tradeandotherpayables 16 9,294 (9,294) - - - -

155,550 (13,634) (10,320) (11,384) (130,935) -

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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Thefollowingtableindicatestheperiodinwhichthecashflowsassociatedwithderivativesthatarecashflowhedgesareexpectedtooccurandwhentheyareexpectedtoimpactprofitorloss:

2010

in thousands of AUD NoteFair

Value6 months

or less6-12

months1-2

years2-5

yearsMore than

5 years

Interest rate swaps:

Liabilities 18 1,359 (1,459) - - - -

1,359 (1,459) - - - -

2009

in thousands of AUD NoteFair

Value6 months

or less6-12

months1-2

years2-5

yearsMore than

5 years

Interest rate swaps:

Liabilities 18 3,455 (1,240) (1,428) (1,640) - -

3,455 (1,240) (1,428) (1,640) - -

CURRENCY RISK

TheGroupisexposedtocurrencyriskasatreportingdateinrespectofAUDreceivablesheldbytheLighthouseGroup,whichhasafunctionalcurrencyofUSD.Thevalueofreceivablesheldatbalancedatewas$695thousand(2009:$617thousand).

Thefollowingsignificantexchangeratesappliedduringtheyear:

2010 2009

Average Rate Reporting date spot rate Average Rate Reporting date spot rate

AUD:USD 0.8830 0.8523 0.7456 0.8114

Sensitivity analysis

A10%appreciation(depreciation)intheAustraliandollaragainsttheUSdollarat30June2010wouldhaveincreased(decreased)theGroup’sprofitorlossby$45thousand(2009:$40thousand).Thisanalysisassumesthatallothervariablesremainconstant.

EQUITY PRICE RISK

Ananalysisoffinancialassetswhichareexposedtoequitypriceriskfluctuationsinfairvalueincludesthefollowing:

in thousands of AUD Note

Carrying amount

2010

Carrying amount

2009

Available-for-salefinancialassets 12 191 84

Financialassetsdesignatedasfairvaluethroughprofitorloss 12 2,182 2,235

2,373 2,319

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Sensitivity analysis

Available-for-sale financial assets

A10%increase(decrease)inequitypriceswouldhaveincreased(decreased)thefairvalueofavailable-for-salefinancialassetsby$13thousand(2009:$6thousand).TheequityvalueoftheGroupwouldhavebeenaffectedbyacorrespondingamount.

Financial assets designated as fair value through profit or loss

A10%increaseinthefairvalueofinvestmentsatreportingdatewouldhaveincreasedtheGroup’sprofitby$129thousand(2009:$121thousand).A10%decreasewouldhavedecreasedtheGroup’sprofitby$129thousand(2009:$138thousand).

INTEREST RATE RISK

TheGroup’sexposuretomarketriskforchangesininterestratesrelatesprimarilytotheGroup’ssecuredbankloans,cashdepositsandinterestrateswaps.

Theinterestrateprofileoffinancialliabilitiesisdetailedinnote20.Allinterestratesonborrowingsareonavariableratebasis.TheGroupmanagesinterestrateriskonitsUSDdenominatedborrowingbyenteringintofixedrateinterestrateswaps.

AtreportingdatetheGroup’sinterestbearingfinancialinstrumentswere:

in thousands of AUD Note

Carrying amount

2010

Carrying amount

2009

Fixed rate instruments

Interestrateswapliabilities 18 (1,359) (3,455)

Variable rate instruments

Cashandcashequivalents 10 32,977 29,290

Loansandborrowings 20 (120,673) (144,918)

Fair value sensitivity analysis for fixed rate instruments

TheGroupdoesnotaccountforanyfixedratefinancialassetsorliabilitiesatfairvaluethroughprofitorloss.Interestrateswapsaredesignatedaseffectivecashflowhedges,withmovementsinfairvaluebeingaccountedforthroughequity.Thereforeachangeininterestratesatthereportingdatewouldnotaffectprofitorloss.

Achangeof100basispointsininterestrateswouldhaveincreased(decreased)theGroup’sequityby$186thousand(2009:$1,087thousand).

Cash flow sensitivity analysis for variable rate instruments

AchangeininterestratesatreportingdatewouldnothaveimpactedthecarryingvalueoftheGroup’svariablerateinstruments,andwouldthereforenothavehadanimpactontheGroup’sequityorprofitorloss.

FAIR VALUES

Thecarryingvaluesoffinancialassetsandliabilitiesapproximatetheirfairvalues.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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FAIR VALUE HIERARCHY

Thetablebelowanalysesfinancialinstrumentscarriedatfairvalue,byvaluationmethod.Thedifferentlevelshavebeendefinedasfollows:

Level1:quotesprices(unadjusted)inactivemarketsforidenticalassetsorliabilities

Level2:inputsotherthanquotedpricesincludedwithinLevel1thatareobservablefortheassetorliability,eitherdirectly(i.e.,asprices) orindirectly(i.e.,derivedfromprices)

Level3:inputsfortheassetorliabilitythatarenotbasedonobservablemarketdata(unobservableinputs)

in thousands of AUD Note Level 1 Level 2 Level 3 Total

2010

Available-for-salefinancialassets 12 191 - - 191

Financialassetsatfairvaluethroughprofitorloss 12 - 2,182 - 2,182

Derivativefinancialliabilities 18 - (1,359) - (1,359)

191 823 - 1,014

2009

Available-for-salefinancialassets 12 84 - - 84

Financialassetsatfairvaluethroughprofitorloss 12 - 2,235 - 2,235

Derivativefinancialliabilities 18 - (3,445) - (3,445)

84 (1,210) - (1,126)

26. COMMITMENTS

OPERATING LEASE COMMITMENTS

TheGrouphasenteredintocommercialleasesonofficeequipmentandpremiseswhereitisnotinthebestinterestoftheGroupto purchasetheseassets.

Theseleaseshaveanaveragelifeofbetween1and8yearswithrenewaltermsincludedinthecontracts.Renewalsareattheoption ofthespecificentitythatholdsthelease.

Futureminimumrentalspayableundernon-cancellableoperatingleasesasat30Juneareasfollows:

in thousands of AUD 2010 2009

Withinoneyear 1,574 1,603

Afteroneyearbutnotmorethanfiveyears 4,177 3,526

Morethanfiveyears 2,395 263

8,146 5,392

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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29. RELATED PARTIES

REMUNERATION OF KEY MANAGEMENT PERSONNEL

Thekeymanagementpersonnelcompensationincludedin“personnelexpenses”and“equitysettledtransactions”(seenote7)isasfollows:

in AUD 2010 2009

Short-termemployeebenefits 3,846,450 6,667,447

Postemploymentbenefits 130,167 214,074

Terminationbenefits 325,000 113,771

Share-basedpayments 893,288 171,366

5,194,905 7,166,658

INDIVIDUAL DIRECTORS AND EXECUTIVES COMPENSATION DISCLOSURES

Informationregardingindividualdirectorsandexecutives’compensationandsomeequityinstrumentsdisclosuresasrequiredbyCorporationsRegulation2M.3.03isprovidedintheremunerationreportsectionofthedirectors’report.

Apartfromthedetailsdisclosedinthisnote,nodirectorhasenteredintoamaterialcontractwiththeGroupsincetheendofthepreviousfinancialyearandtherewerenomaterialcontractsinvolvingdirectors’interestsexistingatyear-end.

27. CONTINGENT LIABILITIES

LITIGATION

TheGroupisdefendinganactionboughtagainstitbyaformeremployeeasaresultofanemployeeshareofferatthetimeoftheinitialpublicoffering.

TheGroupstronglydeniesanyliabilityorwrongdoing.ThedirectorsdonotexpecttheoutcomeoftheactiontohaveamaterialeffectontheGroup’sfinancialposition.

Inthedirectors’opinion,disclosureofanyfurtherinformationwouldbeprejudicialtotheinterestoftheGroup.

28. AUDITOR’S REMUNERATION

in AUD 2010 2009

Audit services: Auditorsofthecompnany

KPMG Australia:

Auditandreviewoffinancialreports 123,200 183,750

Overseas KPMG Firm:

Auditandreviewoffinancialreports 135,900 189,780

259,100 373,530

Services other than statutory audit: Auditorsofthecompany

KPMG Australia:

Otherassuranceservices 12,900 24,480

Taxationservices 137,912 123,902

Otheradvisoryservices 9,000 10,000

159,812 158,382

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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OPTIONS AND RIGHTS OVER EQUITY INSTRUMENTS

ThemovementduringthereportingperiodinthenumberofperformancerightsoverordinarysharesintheCompanyhelddirectly,indirectlyorbeneficially,byeachkeymanagementperson,includingtheirrelatedparties,isasfollows:

2010

Balance 1 July 2009

Granted as compensation

Vested during the year

Other changes*

Balance 30 June 2010

Directors

MrSpencerYoung - - - - -

MrSeanMcGould - - - - -

MrFP(Andy)Esteban - - - - -

MrJohnLarum - - - - -

MrMichaelShepherd - - - - -

Executives

MrCraigMowll - - - - -

MsAmberStoney 150,000 - (21,000) (49,000) 80,000

MrOscarMartinis 337,500 - (47,250) (290,250) -

MrRobertWhite 337,500 - (47,250) (290,250) -

MrJonathanPain 187,500 - - (187,500) -

MrScottPerkins - - - - -

MrKellyPerkins - - - - -

MrRobertSwan - - - - -

2009

Balance 1 July 2008

Granted as compensation

Vested during the year

Other changes*

Balance 30 June 2009

Directors

MrSpencerYoung - - - - -

MrSeanMcGould - - - - -

MrFP(Andy)Esteban - - - - -

MrJohnLarum - - - - -

MrBrettHoward - - - - -

MrRobertFraser - - - - -

Executives - - - - -

MsAmberStoney 200,000 - (50,000) - 150,000

MrOscarMartinis 450,000 - (112,500) - 337,500

MrRobertWhite 450,000 - (112,500) - 337,500

MrJonathanPain 250,000 - (62,500) - 187,500

MrRodneyHughes 200,000 - (50,000) (150,000) -

MrScottPerkins - - - - -

MrKellyPerkins - - - - -

MrRobertSwan - - - - -

*Otherchangesrepresentperformancerightsthatwereforfeitedduringtheyear.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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Noperformancerightsheldbykeymanagementpersonnelarevestedandexercisable,orvestedbutnotexercisableat30June2010or2009.Noadditionalperformancerightsweregrantedtokeymanagementpersonnelduringthereportingperiodascompensation.Refertobelowreconciliationofmovementsinsharesforsharesthatweregrantedtokeymanagementpersonnelduringthereportingperiodascompensation.

FurtherdetailsofperformancerightsandsharesprovidedasremunerationtoeachkeymanagementpersonoftheGroup,togetherwiththetermsandconditionsoftherights,canbefoundintheremunerationreportonpages14to19.

MOVEMENTS IN SHARES

ThemovementduringthereportingperiodinthenumberofsharesintheCompanyheld,directly,indirectlyorbeneficially,byeachkeymanagementperson,includingtheirrelatedparties,isasfollows:

2010

Balance 1 July 2009 Purchases Sales

Net Change Other

Balance 30 June 2010

Directors

MrSpencerYoung1 25,516,951 - (3,000,000) - 22,516,951

MrSeanMcGould2 77,752,335 - - - 77,752,335

MrFP(Andy)Esteban 8,354 - - - 8,354

MrJohnLarum - 36,400 - - 36,400

MrMichaelShepherd3 - 100,000 - - 100,000

Executives

MrCraigMowll - - - - -

MsAmberStoney4 700,491 - - 21,0006 721,491

MrOscarMartinis 909 - - 47,2506 N/A5

MrRobertWhite 117,807 - - 47,2506 N/A5

MrJonathanPain 204,281 - - - N/A5

MrScottPerkins 10,848,612 - - 897,4367 11,746,048

MrKellyPerkins 17,931,675 - - 1,175,2147 19,106,889

MrRobertSwan 10,848,612 - - 897,4367 11,746,048

1.SharesareheldindirectlybySpencerYoungasTrusteefortheSpencerYoungFamilyTrust.

2.77,744,335sharesareheldindirectlybySGMHoldings,LLC.

3.SharesareheldindirectlybyTidalaPtyLtdasTrusteefortheShepherdProvidentFund.

4.649,582sharesareheldindirectlybyAJStoneyFamilyTrust.

5.NolongerKeyManagementPersonnelasat30June2010.

6.Beingsharesissuedunderthe2008HFAPerformanceRightsPlan.

7.BeingsharesissuedundertheLighthouseInvestmentPartnersShortTermIncentivePlanforthecalendaryearended31December2009.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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2009

Balance 1 July 2008 Purchases Sales

Net Change Other

Balance 30 June 2009

Directors

MrSpencerYoung1 25,516,951 - - - 25,516,951

MrSeanMcGould2 91,476,460 - - (13,724,125)3 77,752,335

MrFP(Andy)Esteban 8,354 - - - 8,354

MrJohnLarum - - - - -

MrBrettHoward 450,000 - - - N/A5

MrRobertFraser 23,600 - - - N/A5

Executives

MsAmberStoney4 650,491 - - 50,0006 700,491

MrOscarMartinis 5,501,909 - (5,613,500) 112,5006 909

MrRobertWhite 1,110,000 - (1,104,693) 112,5006 117,807

MrJonathanPain 1,014,324 - (872,543) 62,5006 204,281

MrRodneyHughes 93,000 - - 50,0006 N/A5

MrScottPerkins 10,848,612 - - - 10,848,612

MrKellyPerkins 17,931,675 - - - 17,931,675

MrRobertSwan 10,848,612 - - - 10,848,612

KEY MANAGEMENT PERSONNEL AND DIRECTOR TRANSACTIONS

AnumberofkeymanagementpersonsoftheGroupholdpositionsinotherentitiesthatresultinthemhavingcontrolorsignificantinfluenceoverthefinancialoroperatingpoliciesoftheseentities.

AnumberoftheseentitiestransactedwiththeGroupinthereportingperiod.Thetermsandconditionsofthetransactionswithkeymanagementpersonnelwerenomorefavourablethanthoseavailable,orwhichmightreasonablybeexpectedtobeavailable,onsimilartransactionstonon-keymanagementpersonnelrelatedentitiesonanarm’slengthbasis.

Theaggregateamountsrecognisedduringtheyearrelatingtokeymanagementpersonnelandotherrelatedpartieswereasfollows:

Signature Capital Investment Limited (“Signature”) (Formerly HFA Accelerator Plus Limited)

SignatureCapitalInvestmentsLimitedisalistedinvestmentcompanythatwasmanagedbyCertitude,awhollyownedsubsidiaryofHFAHoldingsLimited,until19February2010pursuanttoamanagementagreement.

Duringthefinancialyear:

(i) TheCompanypurchasednoadditionalsharesinSignature.Thefairvalueoftheholdingof561,692sharesasat30June2010is$190,975 (2009:$84,254)

(ii) TheCompanyreceiveddividendsof$Nil(2009:$8,425fullyfranked)fromitsshareholdinginSignature.

(iii) Certituderecognisedmanagementandperformancefeespaidorpayableof$759,644(2009:$6,083,506)fromSignature.Amountsreceivable fromSignatureat30June2010were$460,286forwhichpaymentwasreceivedon9July2010(2009:$1,610,977).

1.SharesareheldindirectlybySpencerYoungasTrusteefortheSpencerYoungFamilyTrust.

2.77,744,335sharesareheldindirectlybySGMHoldings,LLC.

3.3,819,200sharesweretransferredfromSGMHoldings,LLCtoaminorityshareholderofSGMHoldings,LLCinaccordancewithanagreementbetweenthepartiesandasforeshadowedintheHFA

RightsIssueProspectusdated1November2007.9,904,925sharesfromSGMHoldings,LLCweretransferredtoHFALighthouseEmployeesinaccordancewiththeEmployeeIncentivePlan

establishedinJuly2008.Thisresultedintherecognitionof$12,177,025ofequitysettledtransactionexpenseintheconsolidatedincomestatement.

4.649,582sharesareheldindirectlybyAJStoneyFamilyTrust.

5.NolongerKeyManagementPersonnelasat30June2009.

6.Beingsharesissuedunderthe2008HFAPerformanceRightsPlan.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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Certitude Global Investments Limited

CertitudeisawhollyownedsubsidiaryoftheGroupandresponsibleentityofanumberofmanagedinvestmentschemes.

DuringthefinancialyearCertituderecognisedmanagementandperformancefeespaidorpayableof$16,102,818(2009:$28,413,896)frommanagedinvestmentschemesforwhichitactsastheResponsibleEntity.

AmountsreceivablefromschemesforwhichCertitudeactsastheResponsibleEntityasat30June2010were$3,018,887(2009:$4,913,433).

Lighthouse Investment Partners, LLC

LighthouseInvestmentPartners,LLC(LIP)isawhollyownedsubsidiaryoftheGroupandisaregisteredinvestmentadvisorundertheInvestmentAdvisorsActof1940andoperatesasgeneralpartnerandinvestmentmanagerfortheLighthouseinvestmentproducts.

Duringthefinancialyearthefollowingrelatedpartytransactionsoccurred:

(i) LIPrecognisedmanagementandperformancefeespaidorpayableof$55,537,514(2009:$76,715,320)frominvestmentproductsfor whichLIPactsasgeneralpartnerandinvestmentmanager.Amountsreceivablefromtheseproductsat30June2010were$7,893,217 (2009:$11,109,344).

(ii) LIPholdsthefollowinginvestmentsinproductsinwhichtheyactasgeneralpartnerandinvestmentmanager:

in AUDProduct

Fair Value30 June 2010

Fair Value30 June 2009

LighthouseCompositeSeries 218,127 230,303

LighthouseGlobalSeries 206,724 223,810

LighthouseTrendSeries 212,644 224,188

LighthouseHealthcareSeries 185,723 171,741

LighthouseLowVolatilityFundQPII,LP 11,436 205,568

LighthouseAggressiveGrowthFund 151,456 138,945

LighthouseEnhancedGlobalSeries 49,341 62,545

LighthouseCreditOpportunitiesFund,LP 591,376 520,131

LHStrategiesMasterFundSPCLHEnhancedGlobalMasterSegregatedPortfolio 98,918 109,774

LighthouseEnhancedYieldFundLP - 283,642

LighthouseNavigatorFundLP 269,824 63,949

LLVFSLVLLC 10,301 -

LighthouseCreditCompassSeries 59,743 -

LighthousePrimeSeries 57,609 -

LighthouseGlobalLongShortFundLPSeriesB 58,665 -

2,181,887 2,234,596

Theaboveinvestmentsareclassifiedasfinancialassetsdesignatedatfairvaluethroughprofitorloss(refernote12).

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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TERMS AND CONDITIONS OF TRANSACTIONS WITH RELATED PARTIES

Salestoandpurchasesfromrelatedpartiesaremadeinarmslengthtransactionsatbothnormalmarketpricesandnormalcommercialterms.

Outstandingbalancesatyear-endareunsecuredandsettlementoccursincash.

Therehavebeennoguaranteesprovidedorreceivedforanyrelatedpartyreceivables.

Fortheyearended30June2010,theGrouphasnotraisedaprovisionfordoubtfuldebtsrelatingtoamountsowedbyrelatedparties.Anassessmentisundertakeneachfinancialyearofthefinancialpositionoftherelatedpartyandthemarketinwhichtherelatedpartyoperatesin,andwhenrequired,theGroupraisessuchaprovision.

30. GROUP ENTITIESTheGroup’sfinancialstatementsincludethefinancialstatementsofHFAHoldingsLimitedandthesubsidiarieslistedinthefollowingtable:

Name

Country of incorporation

% Equity interest

2010 2009

CertitudeGlobalInvestmentsLimited1 Australia 100 100

AdminPtyLtd2 Australia 100 100

A.C.N122776550PtyLtd Australia 100 100

A.C.N143806651Limited3 Australia 100 -

HFALighthouseHoldingsCorp UnitedStates 100 100

HFALighthouseCorp UnitedStates 100 100

LHPInvestments,LLC UnitedStates 100 100

LighthouseInvestmentPartners,LLC UnitedStates 100 100

LighthousePartnersNY,LLC UnitedStates 100 100

LighthousePartnersUK,LLC UnitedStates 100 100

LighthousePartnersLimited(HK) HongKong 100 100

31. EVENTS AFTER BALANCE SHEET DATETherehasnotarisenintheintervalbetweentheendofthefinancialyearandthedateofthisreport,anyotheritem,transactionoreventofamaterialnature,likelytoaffectsignificantlytheoperationsoftheGroup,theresultsofthoseoperations,orthestateofaffairsoftheGroup,infuturefinancialyears.

1.FormerlyHFAAssetManagementLimited

2.FormerlyHFAAdminPtyLimited

3.Incorporated21May2010

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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For the year ended 30 June 2010

1. IntheopinionofthedirectorsofHFAHoldingsLimited(the“Company”):

(a) theconsolidatedfinancialstatementsandnotes,andtheremunerationreportinthedirectors’report,set outonpages13to19,areinaccordancewiththeCorporationsAct2001,including:

(i) givingatrueandfairviewoftheGroup’sfinancialpositionasat30June2010andofits performanceforthefinancialyearendedonthatdate;and

(ii) complyingwithAustralianAccountingStandards(includingtheAustralianAccounting Interpretations)andtheCorporationsRegulations2001;and

(b) therearereasonablegroundstobelievethattheCompanywillbeabletopayitsdebtsasandwhenthey becomedueandpayable.

2. ThedirectorshavebeengiventhedeclarationsrequiredbySection295AoftheCorporationsAct2001from thechiefexecutiveofficerandchieffinancialofficerforthefinancialyearended30June2010.

3. ThedirectorsdrawattentiontoNote2(a)totheconsolidatedfinancialstatements,whichincludesa statementofcompliancewithInternationalFinancialReportingStandards.

Signedinaccordancewitharesolutionofthedirectors.

Spencer Young F P (Andy) EstebanChairman/ExecutiveDirector/ Non-ExecutiveDirector ChiefExecutiveOfficer

DatedatSydneythis19thdayofAugust2010

DIRECTORS’ DECLARATION

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KPMG,anAustralianpartnershipandamemberfirmoftheKPMGnetworkofindependantmemberfirmsaffiliatedwithKPMGInternational,aSwisscooperative.

LiabilitylimitedbyaschemeapprovedunderProfessionalStandardsLegislation.

INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF HFA HOLDINGS LIMITED REPORT ON THE FINANCIAL REPORT

WehaveauditedtheaccompanyingfinancialreportoftheGroupcomprisingHFAHoldingsLimited(theCompany)andtheentitiesitcontrolledattheyear’sendorfromtimetotimeduringthefinancialyear.Thefinancialreportcomprisestheconsolidatedstatementoffinancialpositionasat30June2010,andconsolidatedincomestatement,consolidatedstatementofcomprehensiveincome,consolidatedstatementofchangesinequityandconsolidatedstatementofcashflowsfortheyearendedonthatdate,adescriptionofsignificantaccountingpoliciesandotherexplanatorynotes 1to31andthedirectors’declaration.

Directors’ responsibility for the financial report

ThedirectorsoftheCompanyareresponsibleforthepreparationandfairpresentationofthefinancialreportinaccordancewithAustralianAccountingStandards(includingtheAustralianAccountingInterpretations)andtheCorporationsAct2001.Thisresponsibilityincludesestablishingandmaintaininginternalcontrolrelevanttothepreparationandfairpresentationofthefinancialreportthatisfreefrommaterialmisstatement,whetherduetofraudorerror;selectingandapplyingappropriateaccountingpolicies;andmakingaccountingestimatesthatarereasonableinthecircumstances.Innote2(a),thedirectorsalsostate,inaccordancewithAustralianAccountingStandardAASB101Presentation of Financial Statements,thatthefinancialreportoftheGroup,comprisingthefinancialstatementsandnotes,complieswithInternationalFinancialReportingStandards.

Auditor’s responsibility

Ourresponsibilityistoexpressanopiniononthefinancialreportbasedonouraudit.WeconductedourauditinaccordancewithAustralianAuditingStandards.TheseAuditingStandardsrequirethatwecomplywithrelevantethicalrequirementsrelatingtoauditengagementsandplanandperformtheaudittoobtainreasonableassurancewhetherthefinancialreportisfreefrommaterialmisstatement.

Anauditinvolvesperformingprocedurestoobtainauditevidenceabouttheamountsanddisclosuresinthefinancialreport.Theproceduresselecteddependontheauditor’sjudgement,includingtheassessmentoftherisksofmaterialmisstatementofthefinancialreport,whetherduetofraudorerror.Inmakingthoseriskassessments,theauditorconsidersinternalcontrolrelevanttotheentity’spreparationandfairpresentationofthefinancialreportinordertodesignauditproceduresthatareappropriateinthecircumstances,butnotforthepurposeofexpressinganopinionontheeffectivenessoftheentity’sinternalcontrol.Anauditalsoincludesevaluatingtheappropriatenessofaccountingpoliciesusedandthereasonablenessofaccountingestimatesmadebythedirectors,aswellasevaluatingtheoverallpresentationofthefinancialreport.

Weperformedtheprocedurestoassesswhetherinallmaterialrespectsthefinancialreportpresentsfairly,inaccordancewiththeCorporationsAct2001andAustralianAccountingStandards(includingtheAustralianAccountingInterpretations),aviewwhichisconsistentwithourunderstandingoftheCompany’sandtheGroup’sfinancialpositionandofitsperformance.

Webelievethattheauditevidencewehaveobtainedissufficientandappropriatetoprovideabasisforourauditopinion.

INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF HFA HOLDINGS LIMITEDFor the year ended 30 June 2010

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Independence

Inconductingouraudit,wehavecompliedwiththeindependencerequirementsoftheCorporationsAct2001.

Auditor’s opinion

Inouropinion:

(a) thefinancialreportoftheGroupisinaccordancewiththeCorporationsAct2001,including:

(i) givingatrueandfairviewoftheGroup’sfinancialpositionasat30June2010andofitsperformancefortheyearendedonthatdate;and

(ii) complyingwithAustralianAccountingStandards(includingtheAustralianAccountingInterpretations)andtheCorporationsRegulations2001.

(b)thefinancialreportalsocomplieswithInternationalFinancialReportingStandardsasdisclosedinnote2(a).

REPORT ON THE REMUNERATION REPORT

WehaveauditedtheremunerationreportincludedinSection5.8ofthedirectors’reportfortheyearended30June2010.ThedirectorsoftheCompanyareresponsibleforthepreparationandpresentationoftheremunerationreportinaccordancewithSection300AoftheCorporationsAct2001.Ourresponsibilityistoexpressanopinionontheremunerationreport,basedonourauditconductedinaccordancewithauditingstandards.

Auditor’s opinion

Inouropinion,theremunerationreportofHFAHoldingsLimitedfortheyearended30June2010,complieswithSection300AoftheCorporationsAct2001.

KPMG

Robert S JonesPartner

DatedatBrisbanethis19thdayofAugust2010

INDEPENDENT AUDITOR’S REPORT TO THEMEMBERS OF HFA HOLDINGS LIMITED

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ASX ADDITIONAL INFORMATION

Additional information required by the Australian Securities Exchange Limited Listing Rules is set out below.

SHAREHOLDINGS (AS AT 20 AUGUST 2010)SUBSTANTIAL SHAREHOLDERS

SeanMcGould,hiscontrolledentitiesandassociateshadarelevantinterestin77,752,335sharesasat20August2010whichrepresented16.56%ofHFA’stotalissuedcapital.

SpencerYoungastrusteeforSpencerYoungFamilyTrustanditsassociateshadarelevantinterestin22,516,951sharesasat20August2010,whichrepresented4.79%ofHFA’stotalissuedcapital.

UBSAGanditsrelatedbodiescorporateadvisedthat,asat5July2010,itanditsassociateshadarelevantinterestin38,069,776shares,whichrepresented8.11%ofHFA’stotalissuedcapital.

BankofAmericaCorporationadvisedthat,asat9November2009,itanditsassociateshadarelevantinterestin46,992,974shares,whichrepresented10.21%ofHFA’stotalissuedcapital.

DelawareStreetCapitalMasterFund,LPadvisedthat,asat9February2010,itanditsassociateshadarelevantinterestin79,476,588shares,whichrepresented17.26%ofHFA’stotalissuedcapital.

SECURITIES SUBJECT TO VOLUNTARY ESCROWTherearenosecuritiessubjecttoescrowasat20August2010.

DISTRIBUTION OF EQUITY SECURITY HOLDERS

Category

Number of equity security holders ordinary shares

1 – 1,000 164

1,001 – 5,000 704

5,001 – 10,000 605

10,001 – 100,000 1,522

100,001 and over 266

3,261

Thenumberofshareholdersholdinglessthanamarketableparcelofordinarysharesis452.

ON-MARKET BUY-BACK

Thereisnocurrenton-marketbuy-back.

ASX INFORMATION

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TWENTY LARGEST SHAREHOLDERS

NameNumber of Ordinary

Shares heldPercentage of

capital held

HSBCCustodyNominees(Australia)Limited 134,096,170 28.58%

CiticorpNomineesPtyLimited 61,181,202 13.04%

NationalNomineesLimited 45,701,866 9.74%

ANZNomineesLimited-CashIncomeA/C 26,469,475 5.64%

SpencerYoung-SpencerYoungFamilyA/C 22,516,951 4.80%

ButtonwoodNomineesPtyLtd 9,900,000 2.11%

MerrillLynch(Australia)NomineesLimited 7,922,106 1.69%

JPMorganNomineesAustraliaLimited 5,973,221 1.27%

CarringtonLandPtyLtd 5,971,396 1.27%

MrShayShimonHazan 5,500,000 1.17%

MrHeZhao 4,785,000 1.02%

UBSNomineesPtyLtd 4,463,643 0.95%

WoodmontTrustCompanyLtd-LeuchturmFoundationA/C 2,970,874 0.63%

UBSWealthManagementAustraliaNomineesPtyLtd 1,892,155 0.40%

QueenslandInvestmentCorporation 1,350,770 0.29%

PanAustralianNomineesPtyLtd 1,343,085 0.29%

MrRichardJamesWilliamsandMsJaneClareDunlop-BSDSuperFundA/C 1,300,000 0.28%

KewagInvestmentsPtyLtd 1,232,000 0.26%

MrDavidMichaelDwan 1,161,647 0.25%

MsGuozhenLu 1,062,000 0.23%

UNQUOTED EQUITY SECURITIES

Therearenounquotedequitysecurities.

VOTING RIGHTS

Ordinary shares

RefertoNote21ofthefinancialstatements.

ADDITIONAL ASX INFORMATION CONT.

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NOTES

Designed and produced by Villain Designs www.villaindesigns.com.au

2010

HFA HOLDINGS LIMITED ABN: 47 101 585 737

Registered OfficeLevel 5, 151 Macquarie Street Sydney NSW 2000 +61 (2) 8302 3333

Principal Administrative OfficeLevel 3, 46 Edward StreetBrisbane Qld 4000+61 (7) 3218 6200

Company Secretary Ms Joanne Hill

Auditors Of The CompanyKPMG

Share RegistryLink Market Services Limited Level 12, 680 George Street Sydney NSW 2000

ASX ListingThe Company is listed on the Australian Stock Exchange ASX Code Listing: HFAHome Exchange: Melbourne

Other InformationHFA Holdings Limited, incorporated and domiciled in Australia, is a publicly listed company limited by shares