10 October 2007

Hunter Hall'ss strategy notes

Hunter Hall Global Value Limited's pre-tax NTA increased 0.2% over the month, after adjusting for the final 3.0 cent fully franked dividend. The benchmark MSCI Index in Australian dollars declined by 3.7%. The rise was despite the strength of the Australian dollar, up 7% against the US dollar, British pound and Japanese yen, over the month which reduced the value of the Company's foreign holdings.
Equity markets appear to have shrugged off the sub-prime induced credit crisis to rally for the time being although the ability of banks and companies to borrow money remains constrained. Despite the US Federal Reserve's half a percentage point interest rate cut we expect many more mortgagee foreclosures over the next year, and the weak US housing sector looks set to dent US economic growth. In light of these concerns we are raising cash to preserve capital and be better prepared for bargain hunting.
We have trimmed our Korean positions, but also took profits from Singaporean global logistics company Noble Group (+30%) and Singapore Petroleum (+15%). We put more of the Company's assets into prospective iron ore miner Atlas Iron (+34%), which had an especially strong month as iron ore contract negotiations continue between
major miners, BHP, Rio Tinto, CVRD and Chinese steelmakers.
Australian cancer treatment provider Sirtex (+10%) released its 2007 full year results showing sales rising to $33m from $23m in 2006. The underlying business is steadily improving with sales growing in Europe (up 142%), the US
and Asia and new distribution arrangements providing an entry into previously untapped markets. Profits were negatively affected by non-recurring items such as legal fees and foreign exchange losses.
At month-end unaudited net assets were $499 million pre-tax and $472 million post-tax, ex the 3.0 cent per share final fully franked dividend. The asset breakdown was 5% net liquids, 22% Australian and New Zealand equities,
19% European equities, 46% Asian equities and 8% U.S equities. Hedging was in place for 42% of the Company's foreign currency exposure.

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