Hansard Regulatory News (HSD)

21 September 2012

Hansard Global plc

Results for the year ended 30 June 2012

Hansard Global plc ("Hansard" or "the Group"), the specialist long-term savings provider, today announces its results for the year ended 30 June 2012.

Summary

The performance of the Group during the financial yeardemonstrates success from the Group's investment in distribution infrastructure and its focus on regular premium business sourced from the growth economies of the Far East and Latin America. Regular premium new business flows are at a record level of £124.4m (2011: £112.0m) and have contributed to industry-leading margins of 9.6%. Almost 60% of this regular premium business has been introduced electronically through Hansard OnLine.

Continued instability in the Eurozone has hampered the progress of single premium new business flows. We do not anticipate the position to be improved within the next few years.

Despite turmoil in all major stock markets throughout the year, total new business flows are marginally higher than those of the previous financial year based on Compensation Credit, the Group's internal measure. Based on PVNBP, new business is 20.5% below last year due to lower single premiums. The initial costs of acquiring this new business have been funded by positive operating cash flows of £37.2m (2011: £35.7m) generated from the existing policy book.

However we are not immune from market forces that have combined to erode value for almost all market participants. Results under both IFRS and EEV reflect the impact of market falls during the year; reactions to the continuing uncertainties in the Eurozone; continuing investment in our business and the increased burden of legal fees, regulatory, compliance and related costs.

Trading Results

Results for the year under IFRS and EEV are in line with previous guidance.

Dividends

The Board has proposed a final dividend of 8.0p per share which, if approved by the shareholders, represents a total dividend of 13.9p per share in respect of the financial year (2011: 13.75p), an increase of 1.1%.

The proposed final dividend is at the same level as the previous year. Over the last two years the Company has paid dividends that have been £16m in excess of cash generated by the business. The Board believes that now is an appropriate time to adjust the dividend to a level commensurate with the surplus cash generated by the business.

Dividend payments for the year ended 30 June 2013 therefore are expected to total 8.0p per share and it is the Board's intention to pursue a progressive policy thereafter.

Current Trading

New business levels in the first two months of the financial year reflect the cautious stance of policyholders and are significantly below the level of the corresponding period in the prior year. However the Board expects new business to gather momentum in the second quarter on the back of new product launches and also more positive investment market conditions.

Interim Management Statement

The first Interim Management Statement in respect of the year ending 30 June 2013 is expected to be published on 8 November 2012.

Leonard Polonsky, Chief Executive of Hansard Global plc, commented:

"The performance of the Group throughout the financial year was encouraging. In line with our new business strategy we continued to invest in regular premium flows and to focus on growth markets. 

Single premium business remains constrained by market volatility and the instability in the Eurozone that shows few signs of abating. While the economic environment remains challenging, we have a robust strategy in place and are successfully developing the business in the growth markets of the Far East and Latin America.

For further information

Hansard Global plc +44 (0) 1624 688000

Leonard Polonsky, Chief Executive

Gordon Marr, Managing Director

Vince Watkins, Chief Financial Officer

Pelham Bell Pottinger +44 (0) 20 7861 3232

Daniel de Belder

Notes to editors:

·; Hansard Global plc is the holding company of the Hansard Group of companies. The Company was listed on the London Stock Exchange in December 2006. The Group is a specialist long-term savings provider, based in the Isle of Man.

·; The Group offers a range of flexible and tax-efficient investment products within a life assurance policy wrapper, designed to appeal to affluent, international investors.

·; The Group utilises a low-cost distribution model by selling policies exclusively through a network of independent financial advisors, and the retail operations of certain financial institutions who provide access to their clients in more than 170 countries. The Group's distribution model is supported by Hansard OnLine, a multi-language internet platform, and is scaleable.

·; The principal geographic markets in which the Group currently services financial advisors and policyholders are the Far East, Latin America and the Middle East, in the case of Hansard International Limited, and Western Europe in the case of Hansard Europe Limited, the Group's two life assurance companies.

·; The Group's objective is to grow its business by attracting new business and positioning itself to adapt rapidly to market trends and conditions. The scaleability and flexibility of the Group's operations allow it to enter or develop new geographic markets and exploit growth opportunities within existing markets without the need for significant further investment.

Forward-looking statements:

This announcement may contain certain forward-looking statements with respect to certain of Hansard Global plc's plans and its current goals and expectations relating to future financial condition, performance and results. By their nature forward-looking statements involve risk and uncertainties because they relate to future events and circumstances which are beyond Hansard Global plc's control. As a result, Hansard Global plc's actual future condition, performance and results may differ materially from the plans, goals and expectations set out in Hansard Global plc's forward-looking statements. Hansard Global plc does not undertake to update forward-looking statements contained in this announcement or any other forward-looking statement it may make. No statement in this announcement is intended to be a profit forecast or be relied upon as a guide for future performance.

Chairman's Statement

I am pleased to present the Annual Report of Hansard Global plc for the financial year ended 30 June 2012.  

The performance of the Group during the financial year demonstrates success from the Group's investment in distribution infrastructure and its focus on regular premium business sourced from the growth economies of the Far East and Latin America. Almost 60% of this regular premium business has been introduced electronically through Hansard OnLine.

Despite turmoil in all major stock markets throughout the year, new business flows are marginally higher than those of the previous financial year on the Group's internal measure. The initial costs of acquiring this new business have been funded by positive cash flows generated internally.

However we are not immune from market forces that have combined to erode value for almost all market participants. Results under both IFRS and EEV reflect the impact of market falls during the year and reactions to the continuing uncertainties in the Eurozone.

International Financial Reporting Standards ("IFRS")

Reflecting continued investment in our business, reduced asset values and the continuing weakness of the Euro, IFRS profit after tax for the year is £11.2 million (US$17.6m), compared with the profit of £16.5m (US$25.9m) earned in the previous financial year. Earnings per share for the year are 8.2p (US 12.9 cents), compared with 12.0p (US 18.8c).

We remain confident that we will be successful following our appeal against the initial ruling in the Norwegian litigation and we anticipate continuing additional expenditure to address this and other cases of which we have been made aware.

European Embedded Value ("EEV")

Following the payment of dividends totalling £19.1m (US$30m) during the year, the Group's embedded value at 30 June 2012 is £224m (US$352m), (2011: £257m, US$403m). Falls in market levels and changes in policyholder behaviour have been incorporated in our expectations of value. EEV operating profit after tax of £4.8m (US$7.5m) has reduced from £14.9m (US$23.4m) in the previous year.

New business

Against the backdrop of volatile market conditions and global economic concerns affecting investor confidence, new business for the year is marginally above the level of the previous financial year. Increased new business levels have been driven, in large part, by the Group's continued focus on the growth markets of the Far East and Latin America, and continued investment in Hansard OnLine. Calculated on the Group's internal metric, Compensation Credit, new business has increased by 3.6% to £17.1m (US$26.9m) from £16.5m (US$25.9m).

During the year we achieved a record level of regular premium new business flows that has contributed to industry-leading margins.

Single premium business remains constrained by market volatility and the instability in the Eurozone that shows few signs of abating. While the economic environment remains challenging, we have a robust strategy in place and are successfully developing the business in the growth markets of the Far East and Latin America.

Dividends

Dividends totalling 13.9p per share have been paid to shareholders during the year. This represents an increase of 3.3% over the dividends of 13.45p per share paid during the previous financial year.

The Board has resolved to pay a final dividend of 8.0p (2011: 8.0p) per share on 19 November 2012 which is subject to approval at the Annual General Meeting. If approved, this will represent total dividends for the financial year of 13.9p, an increase of 1.1% over the dividends of 13.75p per share paid in respect of the previous financial year.

The proposed final dividend is at the same level as the previous year. Over the last two years the Company has paid dividends that have been £16m in excess of cash generated by the business. The Board believes that now is an appropriate time to adjust the dividend to a level commensurate with the surplus cash generated by the business.

Dividend payments for the year ended 30 June 2013 therefore are expected to total 8.0p per share and it is the Board's intention to pursue a progressive policy thereafter.

Hansard OnLine

Hansard OnLine is an important component of the Group's relationship with financial advisors and their clients and continues to be developed to meet their needs.

Assets under Administration

The value of policyholders' assets under administration reflects the economic environment and was £1.03 billion (US$1.6bn) at the balance sheet date, (2011; £1.23bn, US$1.9bn).

Employees

The progress that we have made in these turbulent times is a reflection of the skill and enthusiasm of our employees throughout the world. On behalf of the Board and Shareholders, I thank them all for their continued commitment to Hansard's success.

L S Polonsky

Chairman

20 September 2012

Report of the Managing Director

Throughout the year we have continued to invest in our business; to focus distribution resources; to improve support to Independent Financial Advisors (IFAs) in our target markets and to reduce our exposure to operational risk. I believe that the success of our strategy is reflected in a record level of regular premium new business and in increasing utilisation of Hansard OnLine amongst IFAs in our target markets.

Against those successes however, we need to balance: the uncertain economic conditions; increased regulatory complexity; instability in the Eurozone; and the costs of defending ourselves against asset performance-related litigation. The combined effect of these factors has depressed our results under IFRS and EEV.

Investing in new business

The Group invested £27.3m (2011: £25.7m) in new business during the year, funded by positive operating cash flows from the policies on hand at the beginning of this financial year.

We have seen a continuation of the growth in new business levels over those of the last few years, driven by our strategic focus on growth markets and supported by targeted expenditure. Using the Group's internal metric, Compensation Credit, new business is 3.6% up on the previous financial year. This statistic, however, does not fully convey that we have achieved growth of 11% in regular premium new business over the previous year. This represents a record level of regular premium new business. This growth, despite volatile markets and uncertain economic outlook, reflects a continuation of profitable relationships with IFAs in our target markets.

The design of our systems, aided by the Hansard OnLine new business functionality, allows us to capture and administer regular premium business efficiently and to deliver new business margins on the PVNBP basis of 9.6% (2011: 8.3%). These margins remain well above the industry average.

Investing for growth

The Group's investments in distribution and other infrastructure, in order to improve relationships with IFAs and policyholders, and further automate processes, have continued throughout the financial year, and have underpinned increasing regular premium flows from the growth markets of the Far East and Latin America.

In particular, Hansard OnLine new business functionality is continuing to develop in response to feedback from a wide range of intermediaries throughout the world. At time of writing, more than 4,200 new business applications have been processed through this facility.

We believe that all aspects of the lifecycle of a Hansard policy should be capable of being transacted online and we continue to develop our systems to meet that target. In partnership with a local financial services organisation we have developed systems to support online processing of policyholder investment transactions. These systems have been implemented on a targeted basis with selected intermediaries. Approximately 60% of fund switches and asset dealing instructions are now received online.

Risk management

Our business model involves the controlled acceptance and management of risk exposures. Understanding the risks we face and managing them appropriately enables effective decision making, contributes to our competitive advantage and helps us to achieve our business objectives. The mechanisms for identifying, assessing, managing and monitoring risks are an integral part of our day to day management process.

Our risk management framework is continually being refreshed to better support our objectives and to recognise regulatory and legislative change.

While the Group has designed its products, distribution methods and cost base with a view to reducing operational and financial risks, the regulatory, corporate and legislative responses to the extreme financial and market circumstances encountered over the last four years will have a significant impact on the business environment in which we operate. Like other financial services groups, we continue to adapt to these challenges.

Our business model is such that the assets linked to policies, and which determine the policy values, are selected by policyholders or their advisors yet, as has been reported in the past, a majority of the complaints we receive relate to the selection and performance of assets. This is particularly true of more complex structured products distributed throughout Europe that have been selected by policyholders and / or their advisors for inclusion in policies.

Hansard Europe has been served with writs totalling approximately £11m arising from such complaints and other asset performance-related issues. The Group does not provide investment advice and, accordingly, the Board is of the view that these complaints have no merit. The negative initial judgement in Norway was not unanticipated as our defence is very much based on technical arguments and we have appealed. The Group intends to defend itself against all claims strenuously.

Corporate Governance

Hansard is committed to achieving high standards of corporate governance. This was demonstrated by the Board implementing the provisions of the UK Corporate Governance Code with effect from 1 July 2010 and adhering to its principles throughout this financial year, as is reported elsewhere in this Report & Accounts.

Throughout the year we have refreshed Board and Committee structures and composition throughout the Group, and have also taken steps to increase the objectivity of Actuarial oversight.

The burden of increasing regulatory and governance requirements has increased costs for all financial services institutions and this trend shows no sign of abating. I expect the implementation of Solvency II, FATCA and other legislation proposed throughout the EU will occupy a significant amount of the Group's resources over the next few years.

Financial performance

Throughout the financial year we continued to generate positive operating cash flows that enable us to fund new business strain and support dividend payments. We believe that the pursuit of profitable contracts is the best use of our resources at this time.

The success of our endeavours is not immediately apparent under IFRS reporting. New business flows will contribute to income streams over many years, but our continued investment in systems and other resources currently outweighs the initial growth in income. Our business is long term in nature, and for this reason we present the results on an EEV basis, which better reflects the true profitability of new business, in addition to the IFRS basis, which are set out in the Financial Review.

Investing in our people

The Group has a dedicated dynamic workforce in the Isle of Man, the Republic of Ireland and other locations. We have a commitment to service and quality at the highest level in relation to the development of successful products, administration, distribution mechanisms and Hansard OnLine.

The progress that we have made this year is a reflection of the skill and enthusiasm of our employees. I thank them all for their continued commitment to Hansard's success.

G S Marr

Managing Director

20 September 2012

Report of the Chief Distribution Officer

I feel that our decision to better position the Group to benefit from the growth that we envisaged in the economies of the Far East and Latin America is being rewarded. Despite challenging economic conditions throughout this financial year we continued to generate strong levels of new business flows, reflecting continuing levels of interest in Hansard's products in many parts of the world, aided by the development of Hansard OnLine. Importantly, stronger flows of regular premium new business have contributed to a record level of regular premium new business at £124.4m (PVNBP) in the year (2011: £112.0m).

I believe that this is recognition, in uncertain market conditions, of our ability to develop a proposition that meets the needs of policyholders and intermediaries, and of the efforts of those intermediaries. I would like to record my thanks to all members of the Group's distribution force and to all those IFAs and intermediaries who have introduced new business to us this year.

Strategy

It is generally accepted that a regular premium-based investment approach is appropriate in uncertain economic conditions. We believe that extending the Group's proposition will allow a continued flow of regular premium business from growth markets, together with limited flows of single premium new business.

Our objective is to grow by attracting profitable new business and positioning ourselves to adapt rapidly to market trends and conditions. The continued growth in new business reflects our efforts to:

·; develop and enhance relationships with IFAs, intermediaries and their clients and;

·; increase the functionality of Hansard OnLine to continue to meet the needs of IFAs and policyholders.

New business volumes

New business volumes for the year on the Group's internal metric, Compensation Credit, and on two metrics widely used by the market are set out below.

The increase in Compensation Credit over last year illustrates that the Group continues to grow new business levels profitably. This is a measure of the quality of our proposition and of increased levels of interest among IFAs and their clients throughout the world. New business levels measured under the CC basis have grown by an average of 14% annually since 30 June 2009.

At first glance, the indicated fall in total new business levels under PVNBP and APE would appear problematic, however we are well aware that one impact of the uncertain market conditions that we continue to experience is to cause deferrals in certain financial planning and, therefore, in single premium business. Reporting under PVNBP and APE highlights the reduction in single premiums from the level of the previous year.

To allow better comparison with results published by other companies the following commentary relates to new business flows calculated on the basis of PVNBP.

New business flows on the PVNBP basis

We continue to generate the majority of our new business from the growth economies of the Far East and Latin America. Despite a reduction in the level of new business from Latin America, a combined 61% of the Group's new business was sourced from those areas (2011: 51%). This is predominantly regular premium business introduced by Independent Financial Advisors, many of whom use the Hansard OnLine new business functionality. An increase in the proportion of more profitable regular premium flows has led to the increased new business margin. 

Those regular premium flows from those growth economies, together with steady flows from other parts of the world, totalled £124.4m PVNBP for the year, or 11.1% above the previous year. Consistent with our strategy of attracting a greater mix of regular premium flows, regular premium products accounted for almost 71% of the Group's PVNBP in the year (2011: 51%).

Single premium flows that are typically sourced from the EU and the Rest of the World have been reduced from previous levels as policyholder investment decisions are deferred in the face of instability in the Eurozone and a continuing difficult market environment. We do not accept new business from certain parts of Scandinavia pending the finalization of the Norwegian litigation, and that will probably not be finalized for a further year.

Single premiums in the year are £51.3m compared with £109.1m in 2011. As reported previously, large single premium cases issued in Q1 2011 totalling £20.0m have distorted the comparison to last year.

PVNBP for the year ended 30 June

PVNBP new business flows by region

Developing and enhancing relationships

The Group's proposition is to develop and enhance relationships with intermediaries and their clients through the use of our people, products and technology in a way that meets shared objectives.

We continue to look to better position market development resourcesto provide local language and other support to IFAs in the Group's target markets. During the financial year we increased our exposure to the growth markets of South-East Asia and to North Africa.While we continue to develop new business opportunities in Western Europe and for intermediaries focussed on an expatriate market, we do not intend to increase distribution resource in those markets at this time.

Selective recruitment of distribution resourcescontinues, in line with our policy of expanding our reach amongst suitable financial advisors in the Group's target markets, and we look to extend the management pool. Throughout the next financial year we intend to continue to develop relationships through targeted expansion of resources in the Far East; in more countries in Latin America, Middle East, Africa and, assuming that confidence in the Eurozone returns, a better focussed activity in Europe.

Through our network of Account Executives we continue toreceive business from a strong and well-diversified range of financial advisors around the world. The growth in regular premium new business flows from target markets is reflected in the proportions of contractual premiums denominated in US Dollars and Japanese Yen. Some 60% of this year's PVNBP is denominated in those currencies (2011: 53%).

We are monitoring the discussions concerning the implementation of the Retail Distribution Review by the Financial Services Authority in the UK. While we support transparency in fee and other disclosures, the breadth of our distribution and the limited proportion of new business sourced from the UK means that we do not expect significant disruption when the Review is implemented.

New business profits

Despite market conditions, we have retained our focus on profitability. Increased regular premium flows, which earn higher margins than single premium business, have contributed to the growth in the new business margin to 9.6% on the PVNBP basis (2011: 8.3%).

These margins are well above the industry average, and are now at a higher level than the margin reported prior to the global credit crisis.

Hansard OnLine

We continue to invest in order to enhance existing relationships with IFAs and other intermediaries in the Group's target markets. In particular over 1,900 policies were introduced electronically this year by those financial advisors in international markets using the online new business facility through Hansard OnLine. This incorporates over 60% of the relevant regular premium policies issued in the year. We intend to increase the number of intermediaries using the system.

Functionality to support online submission of a range of products for European-based advisors has been rolled out to a number of those advisors over the period since the balance sheet date.

The cost savings to intermediaries of these applications is significant, and can be expected to increase as the demand for paper copies reduces.

J Kanarek

20 September 2012

BUSINESS REVIEW

Business

Hansard is a specialist long-term savings provider that began trading internationally from the Isle of Man in 1987 and has operated in the Republic of Ireland since 1995. The Group offers a range of flexible, tax-efficient investment products within life assurance policy wrappers, developed to appeal to affluent international investors and distributed byIndependent Financial Advisors ("IFAs") and other intermediaries acting for the clients they introduce.

The Company's head office is in Douglas, Isle of Man, and its principal subsidiaries operate from the Isle of Man, and Dublin, Republic of Ireland. Hansard International Limited has established a branch in Malaysia to support business flows from the Asian growth economies.

We intend to grow our business in our preferred markets and at an acceptable return on capital.

Strategy

In support of our growth targets, our strategy is to develop long term profitable relationships with IFAs and other intermediaries who introduce insurance policies to affluent international investors.

The results for the year that are summarised in this Report & Accounts reflect the successful implementation of the decisions taken by the Group to:

·; invest in Hansard OnLine and the Group's systems and;

·; increase the proportion of regular premium new business;

·; develop profitable relationships with intermediaries in growth markets and;

·; maintain levels of solvency cover that meet the requirements of regulators, policyholders, intermediaries and other stakeholders.

Hansard OnLine

Hansard OnLine is the Group's multi-language internet platform. It is a secure extranet platform hosting all information about the policies administered by the Group. We provide access to relevant portions of this information to Intermediaries and their clients to allow them to better manage their objectives.

Hansard OnLine joins together IFAs and other intermediaries around the world with Hansard's offices, and with their clients, who may also have intermediary-controlled access through their OnLine accounts. IFAs and their clients get fast, easy and secure access to current data and analytical information around the world, around the clock.

Content may be presented in any of 11 different languages - helping IFAs communicate more effectively with their clients and reinforcing their brand.

Widely and independently regarded as best in class, Hansard OnLine is a valuable sales and administration tool that continues to be developed to meet the needs of intermediaries and policyholders. Functionality introduced during the financial year aims to improve access; increase security; scalability and speed of processing and reduce operational risks.

A summary of more recent innovations include:

Meeting policyholders' requirements

Local needs in local languages

Policy information (policy valuations, premium collection, unit fund and investment performance information) is available OnLine to policyholders and intermediaries with content presented in 11 different languages.

Secure communications 

Through an OnLine account policyholders can view all the documentation relating to their policy. Over 10,000 OnLine accounts are used regularly.

Approx. 40% of policyholder correspondence is no longer posted. Clients access electronic copies via their OnLine Account. The number of clients choosing not to receive hard copy post has shown a steady increase since launch in February.

Supporting intermediaries' business models

OnLine processing

  OnLine processing of new business applications

Over 4,200 new business applications have been received OnLine since launch. 60% of all new business applications are now received OnLine.

  OnLine processing of policy investment transactions

The majority of Fund Advisors now transact policy-related investment dealing Online. Over 60% of all available transactions are now processed OnLine. Development of a facility to allow Fund Advisors to transact in aggregate throughout their client range is expected to be ready to pilot in the next few months.

Up to date analytical information

·; Policy Timeline

With the Policy Timeline functionality released last month the IFA is able to have a single-screen view of the entire policy history that allows them to zoom in on the correspondence and transactions at interesting points of the policy's life, and thus improve at a glance their understanding of the policyholder's relationship with Hansard.

·; Unit Fund Centre

The Unit Fund Centre is an interactive research application that allows the IFA to filter the entire range of Hansard unit funds available, based on a range of specific criteria, and create bespoke, personalised reports for their clients.

·; SMS Alerts

A new SMS alerting system is being piloted. The system allows the IFA to set OnLine alerts (fund and policy movement, new correspondence etc) then receive a SMS message when an event is triggered.

Reducing Operational risk

The straight-through processing of policyholder instructions (whether received directly or through their appointed agents) reduces the Group's operational risk exposures, as does the ability of the Group to communicate electronically with intermediaries and policyholders, irrespective of geographical boundaries. In certain circumstances this allows the Group to reduce its operational expense base.

Products

The Group's products are unit-linked regular or single premium life assurance contracts, issued by Hansard International and Hansard Europe, which offer access to a wide range of investment assets. The contract benefits are directly linked to the value of those assets that are selected by, or on behalf of, the policyholder. The Group does not offer investment advice. Policyholders bear the investment risk.

These contracts are distributed exclusively through IFAs and other intermediaries, supported by our multi-language internet platform, Hansard OnLine. As a result of high levels of service, the nature of the Group's products, the functionality of Hansard OnLine, and the ability of the policyholder to reposition assets within a policy, we expect to retain the policyholder relationship over the long term.

The Group's products do not include any policies with financial options and/or guarantees regarding investment performance and, hence, unlike the situation faced by many other life assurers, the Group carries no guarantee risk that can cause capital strain. Capital invested in new business is typically returned within three years.

Revenues

The main source of income for the Group is the fees earned from the administration of the insurance contracts. The new business generated in a particular year is expected to earn income for an average period of 14 years and so, with careful expense management, provides a good return on the investment. In the year under review we have seen growth of over 11% in regular premium new business flows, which will provide an income stream for the future. Our business is therefore long term in nature both from a policyholder perspective and with regards to the income that is generated.

From this income we meet the overheads of the business, invest in our business and invest to acquire new insurance contracts. Capital invested in new business earns a return in excess of 15% p.a. and is typically returned within three years. A large proportion of the annual cash generated each year from the policies under administration is re-invested in growing the business, with the aim of increasing future returns for shareholders.

Capitalisation and solvency

The Group is well capitalized to meet the requirements of regulators, policyholders and intermediaries. The required solvency margins are covered 13.6 times (2011: 13.4 times) by our capital resources, which are typically held in a wide range of deposit institutions and in highly-rated money market liquidity funds. Therefore the solvency position is well insulated against the difficult investment markets. Additionally, the in-force portfolio has no material investment options or guarantees that could cause capital strain.

The introduction of Solvency II in January 2014 will see a fundamental change in the way EU based insurers assess their capital requirements and risk management standards. The Group's EU based insurer, Hansard Europe, has participated throughout the design process. Based on current guidance the Group does not expect additional capital requirements as a result of these legislative changes.

Key performance indicators

We intend to grow our business in our preferred markets and at an acceptable return on capital. To support this the Group's senior management team monitors a range of Key Performance Indicators, both financial and non-financial, that are designed to ensure that performance against targets and expectations across significant areas of activity is monitored and variances explained.

The following is a summary of the key indicators:

FINANCIAL REVIEW

Presentation of financial results

As noted above, our business is long term in nature, and for this reason we present the results on an EEV basis in addition to the statutory IFRS basis. We believe that EEV is a valid measure of profitability as our products are designed to minimise capital strain.

The profit that the Group expects to earn from the issue of an insurance contract is the same, irrespective of the basis of measurement, however:

·; The EEV result is a discounted cash flow valuation of the future profits expected to emerge from the current book of insurance contracts and provides a more complete recognition of management's activity throughout the financial year. It demonstrates the expected emergence of shareholder cash over the long term, by reflecting the net present value of the expected future cash flows. The embedded value profit reported in one year will emerge as cash in future years.

·; The IFRS methodology smoothes recognition of profit from new business by spreading the initial costs (and revenues) evenly over the life of the business. The result therefore reflects neither the future shareholder value added, nor the cash impact of the new business in a particular year.

Results for the year

Despite the volatile markets throughout the financial year and uncertain economic outlook, the Group has invested £27.3m in new business during the year, an increase of 6.2% over the previous year. As can be seen in the report of the Chief Distribution Officer, the level of regular premium new business received in the year rose to £124m, an increase of 11% over the previous year.

The increased proportion of regular premium new business has driven a growth in the new business margin, as calculated under EEV, to 9.6% (2011: 8.3%) and a growth in the level of deferred origination costs held on the IFRS balance sheet to £121.2m (2011: £113.1m).

While we enjoy significant positive operating cash flows, falling markets, instability in the Eurozone, and foreign currency rates that have tested new lows have all impacted on the Group's profitability. IFRS profit, before taking into account FX losses on the euro holdings in Hansard Europe Limited to meet regulatory capital requirements was £12.1m (2011: £15.2m). Profit after tax is £11.2m (2011: £16.5m).

Policyholders' assets under administration decreased over the year to £1.03bn (2011: £1.23bn), reflecting the continued impact of the global financial crisis on the valuation of assets selected by policyholders, which has in turn restrained the level of our asset-based income streams.

The following is a summary of key items to allow readers to better understand the results of strategy implementation, as represented under accounting disclosures.

Abridged consolidated income statement

The consolidated income statement presented under IFRS reflects the financial results of the Group's activities during the year. This income statement however, as a result of its method of presentation, incorporates a number of features that might affect an understanding of the results of the Group's underlying transactions. This relates principally to:

·; investment income, gains and losses relating to the assets administered by the Group to back its liability to policyholders. These assets are generally selected by the policyholder or an authorised intermediary and the policyholder bears the investment risk. Investment losses during the year attributable to policyholder assets were £146.5m (2011: £109.2m gains).

·; fund management fees paid by the Group to third parties having a relationship with the underlying contract. While fund management fees paid are properly recorded in the consolidated income statement under IFRS, it distorts results compared with an understanding of the Group's own entitlement to fund management fees and any requirement to pay such fees for services rendered in respect of the Group's own assets. In the current year third party fund management fees attributable to policyholder assets were £4.3m (2011: £4.8m). These are reflected in both income and expenses under the IFRS presentation.

An abridged consolidated income statement is presented below, excluding the items of income and expenditure indicated above.

Fees and commissions

Elements of contract fee income are largely fixed in nature, representing both the smoothing of up-front income required under IFRS, and policy-servicing charges applied to the policy book annually or as required by the policy terms and conditions. Consistent levels of contract fee income reflects the strength of the existing book of business, as the increased levels of new business in this financial year will be reflected in fee income in future financial years.

Approximately 30% of the Group's fees and commissions, being fund management fees and commissions receivable from third parties, are related directly to the value of assets under administration ("AuA") and exposed to market movements and valuation judgements.

Reduced asset values, policyholder caution, and weaknesses in foreign currencies against sterling have contributed to a decrease over the prior year fees and commissions of £50.8m. Fees and commissions for the year attributable to Group activities are £50.2m

A summary of fees and commissions is set out below:

Included in Contract fee income is £19.8m (2011: £20.2m) representing the amounts prepaid in previous years, as can be seen below in the reconciliation of Deferred income.

Origination costs

Our target is to grow new business through profitable relationships with intermediaries. Under IFRS, new business commissions paid, together with the directly attributable incremental costs incurred on the issue of a policy contract, are deferred and amortised over the life of that policy. This accounting policy reflects that the Group will continue to earn income over the long-term from policies issued in a given financial year. The impact on current year income of contracts issued this year is minimal.

The growth in new business volumes over last year is reflected in an increase of 7% in these direct costs of new business to £25.0m. This is deferred to match the longer-term income streams expected to accrue from the policies issued this year.

Amounts totalling £16.9m (2011: £15.9m) have been expensed to match contract fee income earned this year from policies issued in previous financial years.

Origination costs in the year are:

Other elements of the Group's new business costs, for example recruitment costs and initial payments to new Account Executives, are expensed as incurred.

The life of a typical single premium contract is 15 years. The life of a regular premium contract is deemed to be the term of the individual policy. Typical terms range between 10 years and 25 years.

Administrative and other expenses

We continue to robustly manage administrative and other expenses. However we recognise that expenses for the year reflect higher new business levels, increased legal fees, continued investment in the Group's proposition and distribution capabilities as well as the costs of strengthening the governance and controls to meet the needs of a growing, complex business. Expenses have increased by 6.6% over the previous year.

Growth investment spend has increased by 4% to £2.5m as we have continued to invest for future growth in the business, with a number of Hansard OnLine and other initiatives launched during the year or in course of development.

A summary of administrative and other expenses attributable to the Group is set out below:

Professional fees in the year include increased legal fees of £0.9m relating to policyholder complaints and other issues (2011: £0.5m); amounts totalling £0.5m for audit related services (2011: £0.5m); and £0.5m (2011: £0.6m) for administration, custody, dealing and other charges paid under the terms of the investment processing outsourcing arrangements.

Foreign exchange losses / gains

Foreign exchange losses of £1.0m (2011: gains of £1.5m) have been recognised as a result of the strengthening of Sterling against the Euro during the financial year. The Group's own assets are held predominantly in Sterling but Hansard Europe is required to hold Euro currency balances to support its regulatory capital requirements.

You can find further information about the Group's foreign currency exposures in note 22 to the IFRS section of this Report & Accounts.

Cash Flows

Operating cash flows continue to be strongly positive. The operational surplus (fees deducted from contracts and commissions received, less operational expenses) of £37.2m has grown by £1.5m despite the increased expenses referred to above. This surplus has funded investment in new business in the year, which has increased to £27.3m, in line with the new business levels reported elsewhere in this Report & Accounts.

This demonstrates that the in-force policy book continues to generate the cash required to support the Group's main business objectives of investing in new business, and enhancing distribution and other infrastructure.

The following summarises the Group's own cash flows in the year:

Dividends of £19.1m paid during the year have been funded by the Group's own resources.

Abridged consolidated balance sheet

The consolidated balance sheet presented under IFRS reflects the financial position of the Group at 30 June 2012. As a result of its method of presentation, the consolidated balance sheet incorporates the financial assets held to back the Group's liability to policyholders, and also incorporates the equivalent liability to policyholders of £1.03bn (2011: £1.23bn). Additionally, the Group's cash and bank deposits are disclosed based on maturity dates.

The abridged consolidated balance sheet presented below, excluding those assets and liabilities, allows a better understanding of the Group's own capital position and reflects continued investment in profitable new business. The successful implementation of the Group's strategy to invest in a higher proportion of regular premium new business results in an increase of deferred origination costs ("DOC"). The volume and nature of single premium new business in the financial year means that there is a more limited increase in the deferred income reserve ("DIR").

Deferred origination costs

As mentioned above, deferral of origination costsreflects that the Group will continue to earn income over the long-term from policies issued in a given financial year. The increase of £25.0m in value since 30 June 2011 (net of amounts amortised against contract fee income in the current financial year) reflects the continued acquisition of profitable contracts.

The movement in value of DOC over the financial year is summarized below.

Cash and bank deposits

The Group feels that the best use of its capital is to ensure continued investment in profitable regular premium contracts. These investments earn a return of at least 15% pa. As can be seen above, the Group invested £27.3m in new business during the year which was funded by cash flows from the existing policy book. While the construction of the Group's products means that this investment will be recouped within 3 years, continued investment in profitable regular premium contracts produces a short-term cash strain as a result of the commission and other costs incurred at inception of a contract.

Following this investment and coupled with a continuation of the Group's dividend record, cash at 30 June 2012 stood at £65.3m, a reduction of £7.8m from the value reported at 30 June 2011. Despite this reduction, the Group is well capitalized to meet the requirements of regulators, intermediaries, policyholders and other stakeholders.

The Group's liquid assets at the balance sheet date are held with a wide range of deposit institutions and in highly-rated money market liquidity funds.

Deferred income reserve

Consistent with the treatment of deferred origination costs, the treatment of deferred income ensures that up-front fees are taken to the consolidated income statement in equal installments over the longer-term, reflecting the services provided over the period of the contract. The deferred income reserve represents the unamortised balance of accumulated initial amounts received on new business. The proportion of income deferred in any one year is dependent upon the mix and volume of business flows in previous years; the Group's focus on more profitable regular premium business means that the future value of DIR will not necessarily move in line with the value of DOC.

The movement in value of DIR over the financial year is summarized below.

Assets under administration

In the following paragraphs, assets under administration ("AuA"), refers to net assets held to cover financial liabilities as analysed in note 16 to the consolidated financial statements presented under IFRS.

Despite market conditions, the Group has retained positive cash flows from the large number of regular premium contracts that the Group administers on behalf of policyholders around the world. Policyholder deposits to regular premium contracts in the year increased by 13% to £87.3m.

While the change in the mix of new business towards more regular premiums is reflected in positive cash flows, these flows are offset by withdrawals of larger single premium contracts, by premium holidays affecting regular premium policies and by market valuation reductions. Accordingly, the value of AuA at 30 June 2012 is £1.03bn, a decrease of 15.9% since 30 June 2011.

AuA currency composition

The investment choices of policyholders and their agents generally reflect the currency of the territories in which they are resident. The currency composition of AuA at 30 June 2012 is similar to that of the previous year, with 53% designated in US dollar (2011: 50%) and 26% in Euro (2011: 28%). The Group's AuA is therefore subject to currency rate fluctuations when reported in sterling, as reflected above.

AuA Valuation

Certain assets selected by policyholders remain impacted by the global financial crisis. During this financial year we saw an increase in efforts to resolve uncertainty over some policyholder asset values. However, a further small number of funds held within policy contractsbecame affected by liquidity or other issues that hinder their sales or redemptions on normal terms with a consequent adverse impact on policy transactions. This caused us to apply a prudent valuation by writing down those assets by £41m, in accordance with our normal practice.

The write-downs in this financial year, as well as prudent valuations on other assets similarly affected, have reduced asset-based fees in the current financial year and impacted EEV profits. Any continued reductions in AuA will cause declines in the Group's future asset-based income streams but will not affect the Group's capital position.

The net effect of these particular valuation issues under IFRS is a write-down of £26m that is incorporated in "Effect of market movements" shown in the table above.

Complaints over AUA performance and related issues

In valuation issues such as those referred to above, financial services institutions are increasingly drawn into disputes in cases where the performance of assets selected directly by or on behalf of policyholders through their advisors fails to meet their expectations. This is particularly relevant in the case of more complex structured products distributed throughout Europe that have been selected for inclusion in policies.

Even though the Group does not give any investment advice, as this is left to the policyholder directly or through an agent, advisor or an entity appointed at the policyholder's request or preference, the Group has been subject to a number of policyholder complaints in relation to the selection and performance of assets linked to policies. At time of writing, writs totalling approximately £11m have been served on Hansard Europe Limited as a result of these and related complaints. An initial Court hearing into the majority of these complaints was held in Norway in April, at which the Judge concluded that the Group has a case to answer. This negative initial judgement was not unanticipated as our defence is very much based on technical arguments and we have appealed. The Group intends to defend itself against these and any other claims strenuously.

Based on the pleadings and advice received to date from legal counsel the Group has not made any provision in respect of any complaints.

Results for the year under European Embedded Value

As anticipated in the design of the Group's products, last year's value of in force business of £197.2m has, in the year, generated £38.9m of cash, of which £25.0m has been used directly in acquiring new business and the Group paid dividends of £19.1m in the year from its cash resources.

Notwithstanding increased new business, the Group's EEV has reduced over the year to £224.3m, a change of £32.7m since 30 June 2011. Beyond dividend payments totaling £19.1m (2011: £18.5m), the change largely reflects a reduction in asset values and changes in policyholder behaviour in the light of sustained uncertainly around the economic environment for medium- to long-term savings.

Within the results, trends can be observed that are consequences of the Group's strategy to:

·; increase the proportion of regular premium new business,

·; develop profitable relationships with intermediaries in growth markets, and

·; invest in Hansard OnLine and the Group's systems.

The profitability of new business has increased, as shown by the new business margin of 9.6% (2011: 8.3%) which is well above the level of our competitors. The increase reflects the change in business mix towards more profitable products. Less business was sold in PVNBP terms (a consequence of the move from high PVNBP, low margin single premium business).

EEV return

The Group's EEV return is lower than the comparable period last year at £(13.7m) (2011: £28.5m). The main contributors were Investment Return Variances of £(17.1m) (2011: £12.0m) and Operating Profit of £4.8m (2011: £14.9m) compared to the prior year.

The three most significant components of EEV profit after tax are the New Business Contribution, Operating Assumption Changes and Investment Return Variances.

·; New Business Contribution is lower by some £1.7m (2012: £16.8m, 2011: £18.5m): this masks the changing mix of new business; a greater proportion of regular premium business has been sold this year, which is inherently more profitable (hence the increased new business margin of 9.6%).

·; The Operating assumption changes (2012: £(13.0m), 2011: £(11.3m)) reflect the emergence of evidence that the Group's policyholders are more inclined to reduce future premiums or surrender their contracts which is putting pressure on unit costs.

·; This year, the Investment return variance, largely dictated by the assets selected by policyholders, has had a net negative impact on EEV arising primarily from the fall in assets under administration and consequentially a lower level of future fee income than previously anticipated.

The components of EEV profit after tax are set out in the table below:

Operating performance - New business

Under EEV reporting, it is a convention to measure sales using the Present Value of New Business Premiums ('PVNBP'). This is the capitalised value of expected premiums using the assumptions that underpin the EEV calculation. Sales using this measure have fallen in the year to £175.7m (2011: £221.1m). The Group's strategy is to increase the proportion of regular premium sales. The success of this approach is demonstrated by the increase in proportion of regular premium business from 49% to 70% of PVNBP primarily through activity in the growth markets of the Far East and Latin America, as can be seen in the report of the Chief Distribution Officer, and the increase in new business margin to 9.6% (2011: 8.3%).

The underlying profitability of the Group's new business remains consistently above those levels enjoyed by competitors, reflecting the efficiency of the Group's product design. The Internal Rate of Return of new business written in the year remains in excess of 15% p.a., reflecting the product design which sees initial capital invested in new business being returned, on average, within three years.

Operating performance - In-force business

Experience Variances

In the year, policyholders switched between unit funds less and reduced or ceased premiums to a greater extent than expected, resulting in a £6.0m fall in EEV (2011: £(3.0m)). This was driven in part by more policyholders choosing to continue their policies but opting to pay no further premiums (£1.8m reduction) and greater than expected lapses (£1.2m reduction). Costs were higher than expected (a £1.6m EEV reduction). Smaller variances arose due to actual charge inflation being lower than expected, from lower than expected FX margins and from fewer partial surrenders. 

Summary details of sources of experience variance are shown in the tables below:

Operating Assumption Changes

The 'Other' assumption changes relate to the future changes in the level of fees from policyholder activity.

Investment performance

Investment performance is a key driver of the EEV profit. It principally reflects the investment choices made by policyholders.

The components of investment performance impact are shown in the table below.

The exchange rate movements are a consequence of the proportion of premiums, policyholder investments and policies denominated in currencies other than Pounds Sterling and the relative exchange rate movements of those currencies.

EEV balance sheet

Following the payment of dividends totalling £19.1m, the Group's EEV has decreased by £32.7m to £224.3m (2011: £257.0m).

The table below provides a summarised breakdown of the EEV at the valuation dates:

Net worth is the market value of shareholders' funds on an IFRS basis with adjustments to exclude certain accounting assets and liabilities (such as deferred origination costs and deferred income reserves). At the balance sheet date, the net worth of the Group is represented by liquid cash balances.

The Value of future profits is the capitalised value of future profit with due allowance for policyholder behaviour based on the policyholder funds under administration at 30 June 2012. Given the Group's product design, the cash generation from the Value of future profits is rapid: some 50% is expected to be converted into cash within 4 years.

Net asset value per share

On an EEV basis, the net asset value per share at 30 June 2012 is 163.3p (2011: 187.2p), a decrease of 12.8%, based on the EEV at the balance sheet date divided by the number of shares in issue at that date, being 137,372,255 ordinary shares.

The Net asset value per share at 30 June 2012 on an IFRS basis, is 32.7p, a decrease of 14.6% from the value of 38.3p at 30 June 2011.

Risk management and internal control

The Board has overall responsibility for:

·; determining the nature and extent of the significant risks it is willing to take in achieving its strategic objectives; and

·; maintaining the Group's risk management and internal control systems and for reviewing their effectiveness.

During the year the Group has continued to invest in risk management resources to promptly identify, measure, manage, report and monitor risks that affect the achievement of strategic, operational and financial objectives.

Effectiveness of risk management and internal control

The identification and evaluation of risks to key business objectives is conducted on an ongoing and consistent basis as indicated below. These processes are managed and monitored by executive management.

The Hansard Global plc Board has sought positive assurance, and is satisfied that risk management and internal controls are functioning effectively and are operating as intended within the Group.

Risk Management Resources

The Board has established a Management Risk Committee ("MRC") covering the Group's subsidiaries and operations, to supplement the activities of the Audit and Risk Committees operated by the regulated entities within the Group. Mr R G Taylor, the Group Chief Risk Officer, is the Chairman of the MRC.

The objective and role of the Management Risk Committee is to:

·; report to the Board on all risk matters across the Group;

·; assist the Board in ensuring an effective system of internal control and compliance, including its obligations under applicable laws and regulations;

·; assist the Board in ensuring the embedding of the Enterprise-wide Risk Management framework across the Group.

The key responsibilities of the Committee are:

·; to review the Group's Risk Appetite and risk strategy and make recommendations on risk appetite to the Board;

·; to review the Group's risk profile against its risk appetite and strategy and review any drivers of change in the profile;

·; review the design, effectiveness and completeness of the Group's risk management framework; and

·; assess the adequacy and quality of the risk management function and the effectiveness of risk reporting within the Group.

The Group operates a Three Lines of Defence model of risk management, with clearly defined roles and responsibilities for committees and individuals:

First line: Day-to-day risk management is delegated from the Board to the Managing Director and, through a system of delegated authorities and limits, to business managers.

Second Line: Risk oversight is provided by the Chief Risk Officer and established risk management committees. These committees are supported by compliance functions across the Group.

Third Line: Independent verification of the adequacy and effectiveness of the internal risk and control management system is provided by the Group Audit Committee which is supported by the Group Internal Audit function.

In support of its accountabilities to operate a sound system of internal control the Board has implemented and maintains an enterprise-wide risk management ("ERM") programme. The ERM programme has been in place throughout the year and is up to the date of this report. To support the governance process the Group relies on documented policies and guidelines. The programme has been subject to review during the year and policies have been strengthened for various areas to reflect new insights and changes in the Group's environment.

The ERM programme recognises the value to be achieved from ensuring that risk management and internal control are embedded as continuous and developing processes within strategy setting, programme level functions and day-to-day operating activities and are not treated as discrete activities, performed at certain points in time.

The systems of internal control which make up the ERM programme are designed to recognise the Board's responsibilities under the UK Corporate Governance Code to:

·; safeguard assets;

·; maintain proper accounting records;

·; provide reliable financial information;

·; identify and manage business risks;

·; maintain compliance with appropriate legislation and regulation and;

·; identify and adopt best practice.

The key features of the ERM system of internal control include:

·; Terms of Reference for the Board and each of its committees;

·; A clear organisational structure, with documented delegation of authority from the Board to executive management;

·; Committees of senior managers responsible for reviewing the Group's financial and non-financial risks and;

·; Risk management and internal control frameworks for the Group's operations. Each subsidiary company Board is required to attest to its adherence to these control frameworks on a quarterly basis.

The overarching objectives of the ERM programme combine five interrelated elements, which enable the management of risk at strategic, programme and operational levels to be integrated, so that the levels of activity support each other.

These five elements are defined as:

·; Management oversight and the control culture;

·; Risk recognition and assessment;

·; Control activities and segregation of duties;

·; Information and communication and;

·; Monitoring activities and correcting deficiencies.

The result is a risk management strategy, which is led from the top whilst being embedded in the Group's business systems, strategy and policy setting processes and the normal working routines and activities of the organisation. In this way risk management becomes an intrinsic part of the way business is conducted within the Group.

Risk appetite

The Board has established a formal Risk Appetite Framework which specifies the level of risk that may be assumed by the Group's operating subsidiary companies in order to achieve the Group's strategic objectives.

Risks to objectives are continuously assessed by management according to their potential impact and likelihood. A Risk Profile Score, independently generated using these assessments, is reviewed by subsidiary company Boards to indicate if objectives are likely to be achieved, and whether the risks entailed are appropriate. These profiles are aggregated and considered by the Company Board at each meeting.

Risk identification and assessment

The ERM programme requires all subsidiary companies to identify and record risks to business objectives. The content of the Risk Register is addressed by the agenda of each subsidiary company Board meeting, and confirmation that it is conducted on an ongoing and consistent basis is reported to the Company Board.

All Risk Register content is rated according to the impact and likelihood of risk events, and these ratings are continuously re-assessed in response to the business environment. This aspect of the configuration and integration of the ERM programme ensures that all staff are made aware of the relevance of risk management to the achievement of their individual objectives and accountabilities.

The Group has defined a clear and simple process for identifying and managing emerging risks. The process provides for:

·; the identification of emerging financial and non-financial risks;

·; the creation of action plans and identification of early warning indicators;

·; the effective management of emerging risks by the appropriate risk owner and;

·; the passage of any risks identified into "business as usual" processes where appropriate.

Risk monitoring and management

As well as regular management monitoring activities, the MRC meet on a monthly basis to discuss emergent strategic and operational risks.

Risk reporting

A quarterly Risk Report is considered before the Boards are asked to attest to the effective functioning of the internal control framework and the ongoing identification and evaluation of risk within each subsidiary. These attestations are then presented to the Board of the Company in order to obtain the same comfort at Group level.

Financial reporting process

The Group maintains a process to assist the Board in understanding the risks to the Group failing to meet its objectives. This incorporates a system of planning and sensitivity analysis incorporating Board approval of forecast financial and other information. Operational management reports monthly to the Executive Committee on a wide range of key performance indicators and other significant matters. The Board receives regular representations from the senior executives.

Performance against targets is reported to the Board quarterly through a review of the Company's results based on accounting policies that are applied consistently throughout the Group. Draft financial statements are prepared quarterly by the Chief Financial Officer ("CFO"). The members of the Audit Committee review the draft financial statements for the half year ended 31 December annually and for the full financial year, and meet with the CFO to discuss and challenge the presentation and disclosures therein. Once the draft document is approved by the Audit Committee, it is reviewed by the Board before final approval at a Board meeting.

Risks relating to the Group's financial and other exposures

Hansard's business model involves the controlled acceptance and management of risk exposures. The steps taken to minimise those exposures include the operation of unit-linked insurance business. Under the terms of the unit-linked investment contracts issued by the Group, the policyholder bears the investment risk on the assets in the unit-linked funds, as the policy benefits are directly linked to the value of the assets in the funds. These assets are administered in a manner consistent with the expectations of the policyholders. By definition, there is a precise match between the investment assets and the policyholder liabilities, and so the market risk and credit risk lie with policyholders.

The Group's exposure on this unit-linked business is limited to the extent that income arising from asset management charges and commissions is generally based on the value of assets in the funds, and any sustained falls in value will reduce earnings. The Group's exposure to financial risks is addressed within note 22 to the consolidated financial statements.

The Board believes that the principal risks facing the Group's earnings and financial position are those relating to the operation of the Group's business model and to the environment within which the Group operates. While the Group's business model has served to minimise the principal risks facing the Group, the responses to the extreme financial and market circumstances that continue to be encountered may impact on the Group's strategic objectives, profitability or capital requirements.

The following table provides examples of the principal risks that may impact on the Group's strategic objectives, profitability or capital. Where necessary, the Group will develop alternative strategies to minimise the impact of any changes to its risk profile.

By order of the Board

Dr Leonard Polonsky

Executive Chairman

20 September 2012

The Group has no other items of Comprehensive Income and as such has not presented a separate Consolidated  Statement of Comprehensive Income.

Consolidated Statement of Changes in Equity

L S Polonsky G S Marr

Director Director

Notes to the financial statements

1 Principal accounting policies

These consolidated financial statements incorporate the assets, liabilities and the results of Hansard Global plc ("the Company") and of its subsidiary undertakings ("the Group").

The principal accounting policies adopted in the preparation of these consolidated financial statements are now set out below or, in the case of policies that relate to separately disclosed values in the primary statements, within the relevant note to these consolidated financial statements. These policies have been consistently applied, unless otherwise stated.

1.1 Basis of presentation

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union ("IFRS"), International Financial Reporting Standards Interpretations Committee ("IFRSIC") interpretations, and with the Isle of Man Companies Acts 1931 to 2004. The financial statements have been prepared under the historical cost convention as modified by the revaluation of financial investments and financial liabilities at fair value through profit or loss. The comparative classification of financial investments has been restated to better reflect the underlying assets.

The Group has applied all IFRS standards adopted by the European Union and effective at 30 June 2012.

The following new standards and interpretations are in issue but not yet effective and have not been early adopted by the Group:

·; IAS 1, 'Financial statement presentation'

·; IAS 12, 'Income taxes'.

·; IFRS 9, 'Financial Instruments'

·; IFRS 10, 'Consolidated financial statements'

·; IFRS 12, 'Disclosures of interest in other entities'

·; IFRS 13, 'Fair value measurement'

The adoption of the above standards is not expected to have any material impact on the Group's results.

There are no other standards, amendments or interpretations to existing standards that are not yet effective, that would have a material impact on the Group's financial statements.

The financial statements are presented in millions of pounds sterling rounded to the nearest one hundred thousand pounds.

The preparation of financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting year. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the year in which the estimate is revised if the revision affects only that year or in the year of the revision and future years if the revision affects both current and future years.

The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements, are disclosed in note 2.

1.2 Basis of consolidation

The consolidated financial statements incorporate the assets, liabilities and the results of the Company and of its subsidiary undertakings. Subsidiaries are those entities in which the Company directly or indirectly has the power to govern the financial and operating policies generally accompanying a shareholding of more than one half of the voting rights. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. Where necessary, accounting policies applied by subsidiary companies have been adjusted to present consistent disclosures on a consolidated basis.

Intra-group transactions, balances and unrealised gains and losses arising from intra-group transactions, are eliminated in preparing these consolidated financial statements.

1.3 Product classification

The Directors have determined that the products issued by the Company's subsidiaries are classified for accounting purposes as investment contracts, as they do not transfer significant insurance risk. 

2 Critical accounting estimates and judgements in applying accounting policies

Estimates, assumptions and judgements are used in the application of accounting policies in these financial statements. Critical accounting estimates are those which involve the most complex or subjective judgements or assessments. Estimates, assumptions and judgements are evaluated continually and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Actual outcomes may differ from assumptions and estimates made by management.

2.1 Accounting estimates and assumptions

The principal areas in which the Group applies accounting estimates and assumptions are in deciding the amount of management expenses that are treated as origination costs and the period of amortisation of deferred origination costs ("DOC") and deferred income ("DIR"). Estimates are also applied in determining the recoverability of deferred origination costs.

2.1.1 Origination costs

Management expenses have been reviewed to determine the relationship of such expense to the issue of an investment contract. Certain expenses vary with the level of new business production and have been treated as origination costs. Other expenses are written off as incurred.

2.1.2 Amortisation of DOC and DIR

Deferred origination costs and deferred income are amortised on a straight-line basis over the life of the underlying investment contract. The life of a contract is either the contractual term thereof or the expected life of a single premium contract which is currently estimated at 15 years. This is calculated in a manner consistent with the assumptions used in the calculation of European Embedded Value.

2.1.3 Recoverability of DOC

Deferred origination costs are tested annually, at product group level, for recoverability by reference to expected future income levels.

2.2 Judgements

The primary areas in which the Group has applied judgement in applying accounting policies are:

·; to determine whether a provision is required in respect of pending or threatened litigation and;

·; the fair value of certain financial investments. Where the directors determine that there is no active market for a particular financial instrument, fair value is assessed using valuation techniques based on available, relevant, information and an appraisal of all associated risks. This process requires the exercise of significant judgement on the part of Directors. Where significant inputs to the valuation technique are observable, the instrument is categorised as Level 2. Otherwise, it is categorised as Level 3. This is discussed further in note 22 to these consolidated financial statements.

3 Segmental information

Disclosure of operating segments in these financial statements is consistent with reports provided to the Chief Operating Decision Maker ("CODM") which, in the case of the Group, has been identified as the Executive Committee of Hansard Global plc.

In the opinion of the CODM, the Group operates in a single reportable segment, that of the distribution and servicing of long-term investment products through the Group's subsidiaries.

The Group's Executive Committee uses two principal measures when appraising the performance of the business: Net Issued Compensation Credit ("NICC") and expenses. NICC is a measure of the value of new in-force business and top-ups on existing single premium contracts.  NICC is the total amount of basic initial commission payable to intermediaries for business sold in a period and is calculated on each piece of new business. It excludes override commission paid to intermediaries over and above the basic level of commission. The Group maintains a close control over the margins realised on new business which are consistent across the Group's products and, hence, NICC is a reliable indicator of value.

The following table analyses NICC geographically and reconciles NICC to origination costs incurred during the year (note 13):

Revenues and expenses allocated to geographical locations contained in sections 3.1 to 3.4 below, reflect the revenues and expenses generated in or incurred by the legal entities in those locations.

3.1 Geographical analysis of fees and commissions by origin

3.2 Geographical analysis of profit before taxation

3.3 Geographical analysis of gross assets

3.4 Geographical analysis of gross liabilities

4 Fees and commissions

Fees are charged to investment contracts for policy administration services, investment management services, payment of benefits and other services related to the administration of investment contracts. Fees are recognised as revenue as the services are provided. Initial fees that exceed the level of recurring fees and relate to the future provision of services are deferred in the balance sheet and amortised on a straight-line basis over the life of the relevant contract. These fees are accounted for on the issue of a contract and on receipt of incremental premiums on existing single premium contracts.

Regular fees charged to contracts are recognised on a straight-line basis over the period in which the service is provided. Transactional fees are recorded when the required action is complete.

Commissions receivable arise principally from fund houses with which investments are held. Commissions are recognised on an accruals basis in accordance with the relevant agreement.

5 Investment income

Investment income comprises dividends, interest and other income receivable, realised gains and losses on investments and unrealised gains and losses. Dividends are accrued on the date notified. Interest is accounted for on a time proportion basis using the effective interest method.

6 Origination costs

Origination costs include commissions, intermediary incentives and other distribution-related expenditure. Origination costs which vary with, and are directly related to, securing new contracts and incremental premiums on existing single premium contracts are deferred to the extent that they are recoverable out of future net income from the relevant contract. Deferred origination costs are amortised on a straight-line basis over the life of the relevant contracts. Origination costs that do not meet the criteria for deferral are expensed as incurred.

7 Administrative and other expenses

Included in administrative and other expenses is the following:

8 Employee costs

8.1 The aggregate remuneration in respect of employees (including sales staff and executive

 Directors) was as follows:

The Group operates a defined contribution group personal pension scheme that is open to all Group employees based on the Isle of Man aged between 25 and 65 years of age, with two years of service with the Group. Employees based in the Republic of Ireland with one year of service are eligible to be members of a personal retirement savings account scheme.

Group companies contribute to employees' individual defined contribution pension plans. Contributions are charged to the income statement as they become payable under the terms of the relevant employment contract. The Group has no further payment obligations once pension contribution requirements have been met.

8.2 The average number of employees during the year, including executive directors, was as follows:

8.3 Share-based payments

Details of the costs attributed to the share-based payments programme implemented by the Company can be found in note 19.

9 Taxation

Taxation is based on profits and income for the period as determined with reference to the relevant tax legislation in the countries in which the Company and its subsidiaries operate. Tax payable is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date. Tax is recognised in the income statement except to the extent that it relates to items recognised in equity. Tax on items relating to equity is recognised in equity. 

The Group's profits arising from its Isle of Man-based operations are taxable at zero percent. Profits in the Republic of Ireland are taxed at 12.5%.

There is no material difference between the current tax charge in the income statement and the current tax charge that would result from applying standard rates of tax to the profit before tax.

10 Earnings per share

The calculation for earnings per share is based on the profit for the year after taxation divided by the average number of shares in issue throughout the year.

The Directors believe that there is no material difference between the weighted average number of shares in issue for the purposes of calculating either basic or diluted earnings per share. The figure under both measures is 8.2 pence per share.

11 Dividends

Interim dividends payable to shareholders are recognised in the year in which the dividends are paid. Final dividends payable are recognised as liabilities when approved by the shareholders at the annual general meeting.

The following dividends have been paid by the Group during the year:

The Board has resolved to pay a final dividend of 8.0p per share on 19 November 2012, subject to approval at the Annual General Meeting, based on shareholders on the register on 28 September 2012. If approved, this would bring the total dividends in respect of the year ended 30 June 2012 to 13.9p per share and will represent an increase of 1.1% over the dividends in respect of the financial year ended 30 June 2011 (13.75p per share).

12 Plant and equipment

Plant and equipment is stated at historical cost less depreciation and any impairment. The historical cost of plant and equipment is the purchase cost, together with any incremental costs directly attributable to the acquisition. Depreciation is calculated so as to write off the cost of the assets, less their estimated residual values, on a straight-line basis over the expected useful economic lives of the assets concerned, as follows:

Depreciation is included in administration and other expenses in the income statement.

The carrying amount, residual value and useful life of the Group's plant and equipment is reviewed annually to determine whether there is any indication of impairment, or a change in residual value or expected useful life. If there is any indication of impairment, the asset's carrying value is revised.

The cost of plant and equipment at 30 June 2012 is £7.5m (2011: £6.8m). Accumulated depreciation at 30 June 2012 is £6.4m (2011: £5.9m).

13 Deferred origination costs

Formal reviews to assess the recoverability of deferred origination costs on investment contracts are carried out at each balance sheet date to determine whether there is any indication of impairment. If there is any indication of irrecoverability or impairment, the asset's recoverable amount is estimated.

Impairment losses are reversed through the income statement if there is a change in the estimates used to determine the recoverable amount. Such losses are reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of amortisation where applicable, if no impairment loss had been recognised.

14 Other receivables

Other receivables are initially recognised at fair value and subsequently measured at amortised cost.

At the balance sheet date there are no receivables overdue but not impaired (2011: £nil) or impaired (2011: £nil). Due to the short-term nature of these assets the carrying value is considered to reflect fair value.

15 Cash and cash equivalents and deposits

Cash and cash equivalents include cash in hand, deposits held at call with banks, and other short-term highly liquid investments with original maturities of three months or less, net of short-term overdraft positions where a right of set-off exists.

16 Financial liabilities under investment contracts

16.1.1 Investment contract liabilities

Investment contracts consist of unit-linked contracts written through subsidiary companies in the Group. Unit-linked liabilities are measured at fair value by reference to the value of the underlying net asset value of the Group's unitised investment funds, determined on a bid basis, at the balance sheet date.

The decision by the Group to designate its unit-linked liabilities at fair value through profit or loss reflects the fact that the liabilities are calculated with reference to the value of the underlying assets.

16.1.2 Investment contract premiums

Investment contract premiums are not included in the income statement but are reported as deposits to investment contracts and are included in financial liabilities in the balance sheet. On existing business, a liability is recognized at the point the premium falls due. The liability for premiums received on new business is deemed to commence at the acceptance of risk.

16.1.3 Benefits paid

Withdrawals from policy contracts and other benefits paid are not included in the income statement but are deducted from financial liabilities under investment contracts in the balance sheet. Benefits are deducted from financial liabilities and transferred to amounts due to investment contract holders on the basis of notifications received, when the benefit falls due for payment or, on the earlier of the date when paid or when the contract ceases to be included within those liabilities.

16.2 Movement in financial liabilities under investment contracts

The following table summarises the movement in liabilities under investment contracts during the year:

Investment contract benefits comprise of dividend and interest income and net realised and unrealised gains and losses on financial investments held to cover financial liabilities.

16.3 Investments held to cover liabilities under investment contracts

The Group classifies its financial assets into the following categories: financial investments and loans and receivables. Financial investments consist of units in collective investment schemes, equity securities, fixed income securities and deposits with credit institutions. All financial investments are designated at fair value through profit or loss.

The decision by the Group to designate its financial investments at fair value through profit or loss reflects the fact that the investment portfolio is managed, and its performance evaluated, on a fair value basis.

The Group recognises purchases and sales of investments on trade date. Investment transaction costs are written off in administration expenses as incurred.

All gains and losses derived from financial investments, realised or unrealised, are recognised within investment income in the income statement, in the period in which they arise.

The value of financial assets at fair value through profit or loss that are traded in active markets (such as trading securities) is based on quoted market prices at the balance sheet date. The quoted market price for financial assets held by the Group is the current bid price. Investments in funds and certain other unquoted securities are valued at the latest available net asset valuation provided by the administrators or managers of the funds and companies, unless the directors are aware of good reasons why such valuations would not be the most appropriate or indicative of fair value. Where necessary, the Group uses other valuation methods to arrive at the stated fair value of its financial assets, such as recent arms' length transactions or reference to similar listed investments.

Loans and receivables are financial assets with fixed or determinable payments that are not quoted on an active market. Loans and receivables consist, primarily, of contract fees receivable, long-term cash deposits (i.e. with a maturity duration in excess of three months) and cash and cash equivalents.

The following investments, cash and cash equivalents, other assets and liabilities are held to cover financial liabilities under investment contracts. They are included within the relevant headings on the consolidated balance sheet.

17 Other payables

Other payables are initially recognised at fair value and subsequently measured at amortised cost. They are recognised at the point where service is received but payment is due after the balance sheet date.