SCHOOLBLAZER LIMITED — AGM Information 2010

Feb 1, 2010

Level 5, 34 Hunter Street Phone: +612 9221 7155 Sydney NSW 2000 Fax: +612 9233 2713 GPO Box 4406 Email: hgl@hgl.com.au Sydney NSW 2001 Web: www.hgl.com.au

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AGM 2010 Chairman’s Address

Introduction

Thank you for attending today. In my address this morning I will briefly reflect on the 2009 results and update you on our strategy and on current trading conditions.

At last year’s AGM I commented that HGL faced an uncertain and volatile economic environment however these conditions could provide opportunities to strengthen our businesses.

2009 Results

As there is extensive commentary and analysis on the 2009 results in both the accounts and the 8 page review sent to all shareholders before Christmas my comments on the 2009 results will be brief.

Last year can be summarised as follows:

• A $15m turnaround in reported profit from a loss of $7.5 million in 2008 to a reported profit of $8.0 million in 2009.

• A reduction in net debt of $18 million from $31.4 million in 2008 to $13.4 million in 2009. This is the result of strong operational cash flow and the sale of listed shares including MMC Contrarian.

• A drop of only 3% in sales to $164.7 million compared with $169.9 million achieved in 2008. This is a positive indication of the resilience and strength of the products we sell.

• A decline in business EBIT to $11.1 million compared with $15.2 million in 2008. The fall was because of the lower gross margins achieved in the immediate aftermath of the decline in the value of the Australian dollar; I will expand on this later.

• An EBIT to net business asset return of 15.4% compared with 21.4% last year. Pleasingly in a very difficult year capital employed only increased $1.2 million and the return although below our 20% target was still very respectable.

• A fall in core profit to $5.0 million compared with $8.5 million in 2008.

• A non core profit after tax of $3.0 million compared with a loss of $15.9 million in 2008. This arose mainly on the sale of listed shares and MMC Contrarian.

• Fully franked dividends of 8 cents per share compared with 12.1 cents in 2008.

These results were achieved in a tough and challenging environment.

HGL Limited ABN 25 009 657 961

investing in businesses

Level 5, 34 Hunter Street Sydney NSW 2000 GPO Box 4406 Sydney NSW 2001

Phone: +612 9221 7155 Fax: +612 9233 2713 Email: hgl@hgl.com.au Web: www.hgl.com.au

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The reduced business EBIT was caused by the rapid fall in the value of Australian dollar and the decline in consumer confidence experienced early in the financial year. The majority of products sold by HGL are purchased in US dollars. The US exchange rate averaged 74 cents in 2009 compared with 91 cents in 2008. The rapid 30% decline in the Australian dollar to near 60 cents, which occurred between July and November 2009 produced significant additional product costs.

To combat increased product costs management negotiated price reductions from suppliers and price increases to customers and controlled expenses. These actions were not effective immediately but produced a stronger second half performance and have also laid the foundations for improved core profit in 2010.

Given the uncertain economic conditions no new acquisitions were made. Focus was instead on the existing businesses where several new product agencies were acquired during the year to supplement the existing portfolio.

Corporate Strategy

Let me now turn to our corporate strategy.

Historically HGL was a hybrid between an investment and an operating company involved in sourcing and selling niche branded products, funds management and listed equities.

Over the past year the board has narrowed the HGL business model by concentrating activities on sourcing and selling branded products into niche markets. HGL operates through individually run businesses each focussed on their customers, the brands they represent and on product innovation and sourcing. Whilst some of the businesses are owned in conjunction with management HGL now typically owns 100% of the larger businesses. A description of each business is to be found on page 6 of the annual report. We see the 100% owned business model as more common in our future acquisitions. Some of the brands we represent are set out in the inside cover of the annual report.

The investments in funds management and listed equities are being sold with the proceeds being used to reduce debt. Our present capital management policy is to retain these funds and together with prudent borrowings invest the capital by acquiring additional businesses and agencies when they become available.

Performance for the first quarter

I said earlier the outcome of the actions we took during 2009 to combat the increase in product costs were not immediate but have laid the foundations for an improved 2010. I will now update you on the unaudited financial results for the first three months to 31 December compared to the same three months last year.

HGL Limited ABN 25 009 657 961

investing in businesses

Level 5, 34 Hunter Street Sydney NSW 2000 GPO Box 4406 Sydney NSW 2001

Phone: +612 9221 7155 Fax: +612 9233 2713 Email: hgl@hgl.com.au Web: www.hgl.com.au

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• Sales have increased by 1.2% to $44.6 million.

• Gross margin has increased by $2.8 million to $20.5 million with gross margin % increasing to 46% from 40%. The margin improvement is as a result of the actions taken during 2009 and a stronger Australian dollar.

• Expenses have fallen by 4.2% to $14.9 million.

• Business EBIT has increased by 154% to $5.6 million from $2.2 million last year. All of our businesses have increased their EBIT compared to the same period last year.

• Core profit after interest, tax and minorities has increased to $2.4 million from $0.6 million last year.

• The business capital employed has increased by $3 million to $75 million and the EBIT to capital employed ratio has improved to 30% compared to 15% in the year to September 2009 and 21% achieved in 2008.

• In addition, in the first quarter, a non core profit after tax of $2.7 million has been recognised on the sale of listed shares. At 31 December the unrealised after tax profit on the remaining $9.2 million of listed shares is $4.5 million.

• After the payment of the final dividend net debt has fallen by $3.7 million due to continued strong operational cash flow and $4.8 million from the sale of listed shares. At 31 December 2009 net debt is $9.7 million.

The positive first quarter may have benefitted from the government’s stimulus measures. The extent to which sales, if any, have been brought forward into the December quarter will become clearer over the next few months.

Conclusion

In conclusion I am confident in saying that HGL is well placed with a sound strategy, minimal debt and strong underlying cash flow with management focussed on improving earnings. HGL has a balance sheet which is able to fund organic growth, new product lines and acquisitions.

2009 was an extremely challenging year for the entire HGL group and on behalf of the board and shareholders I thank all the employees for their continued effort, focus and commitment.

On behalf of the board I also would like to thank our shareholders for their support during a difficult period.

P G Miller

Chairman

HGL Limited ABN 25 009 657 961

investing in businesses