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Navigator Global Investments Limited
and its controlled entities
ACN 101 585 737
Navigator Global Investments Limited
and its controlled entities
ACN 101 585 737
Principal Office
Level 3, 9 Sherwood Road
Toowong QLD 4066
+61 7 3218 6200
www.navigatorglobal.com.au
Registered Office
Level 21
10 Eagle Street
Brisbane QLD 4000
Shareholder information and inquiries
All inquiries and correspondence regarding shareholdings should be directed
to the share registry provider:
Link Market Services Limited
Level 12
680 George Street
Sydney NSW 2000
Locked Bag A14
Sydney South NSW 1235
1300 554 474
+61 2 8280 7111
www.linkmarketservices.com.au
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II
Annual Report 2020 | From the Chairman & CEO
The past financial year has been one of both significant challenge and unique opportunity for the Navigator Group. Not since the global
financial crisis has our business felt such global market turmoil. The world continues to feel the impacts of the global COVID-19 pandemic as
we wait to see how and when we can settle into a ’new normal’.
Navigator adapted to the challenges, implementing a work-from-home practice across all our offices, and embracing new forms of technology to
see to our day-to-day business. It was the disruption to and extreme volatility of global markets early in the pandemic which presented the
biggest challenge, and we had mixed investment results in response.
We commenced the 2020 financial year (FY20) with $14.2 billion of assets under management (AUM), and the impacts of COVID-19 on the
markets and the continued reduction of the client relationships acquired from the Mesirow Advanced Strategies (MAS) transaction has led to a
closing AUM as at 30 June 2020 of $11.8 billion.
Acquisition
Whilst grappling with the pandemic impacts on the core business, Navigator continued to explore a unique opportunity for growth through
acquisition of a portfolio of high-quality alternative investment stakes. For the past few years, we have been focused on a strategy for achieving
growth through acquisition as well as organic growth of the Lighthouse business, and we are very pleased to have identified a transaction which
we believe will be in the best interests of our shareholders.
On 13 August 2020, Navigator announced that it had entered into a proposal to acquire a portfolio of six minority equity investments in
established alternative asset managers. The portfolio is being acquired from funds managed by Dyal Capital Partners and its affiliates. Dyal
Capital Partners is a leading provider of capital to alternative investment management companies globally.
Navigator will acquire a portion of the portfolio up front from the Dyal sellers in exchange for issuing 40,524,306 Navigator shares and 10-year
Convertible Notes convertible into 67,574,292 Navigator shares. The shares and Convertible Notes together represent a 40% economic
interest in Navigator on a fully diluted basis, although the Dyal sellers voting interest will be less than 20% on closing. After five years,
Navigator will make an additional single payment to acquire the remaining interests in the Portfolio.
The transaction terms entitle Navigator to a preferential distribution from the portfolio’s combined cash distributions of $17 million (indexed at
3% pa and subject to a catch-up should the preferred distribution amount not be met in a particular year), as well as 20% of earnings in excess
of this preferred distribution amount. After Navigator makes the final payment after five years it will acquire the rights to the remaining 80% of
the portfolio’s combined cash distributions.
This acquisition has a compelling strategic rationale. Each business within the acquired portfolio has a proven track record of generating strong
returns through multiple market cycles, managing expenses and making cash distributions to partners. These high-quality minority stakes are
expected to provide earnings diversification and support Navigator’s future earnings and dividend profile. The transaction also creates an
ongoing partnership with Dyal Capital Partners, and can assist in Navigator’s access to a variety of future accretive, organic and inorganic
growth opportunities.
The transaction is subject to Navigator shareholder approval at the upcoming Annual General Meeting, as well as some other regulatory
approvals. A full explanation of the transaction will be set out in the Explanatory Memorandum which will accompany the Annual General
Meeting Notice of Meeting. The Board considers that this is an important step for Navigator to deliver on a sound growth and diversification
strategy and creates a platform for Navigator to seek and implement other acquisition opportunities.
We encourage all of our Shareholders to vote in favour of the transaction at the upcoming Annual General Meeting.
Operating performance
Investment performance
The 2020 financial year (FY20) was one of the most challenging we have seen in some time in terms of global market conditions, and the
investment results of the Lighthouse investment portfolios were mixed.
Global equity strategies showed resilience over this volatile period in the markets around March 2020, delivering positive returns whilst global
indices saw significant negative returns. Conversely, the multi-strategy products experienced some difficulties in key strategies, which lead to
disappointing performance in the month of March 2020.
This mixed investment performance creates both risk and opportunities to the assets under management of the Lighthouse business.
Lighthouse has worked with its clients to reposition the multi-strategy portfolios to reflect the current opportunity set in this ‘new normal’. This
has been a key initiative in working proactively to not only retain existing assets, but to pursue potential new opportunities, particularly in the
platform services and hedged equity space.
We do expect, however, that reflective of the reduction to assets under management (AUM) experienced since March 2020, the operating result
of the Lighthouse business will be lower in the 2021 financial year (FY21).
Annual Report 2020 | From the Chairman & CEO
III
FY 20 operating performance
The Operating and Financial Review on pages 5 to 16 sets out detailed information on the Group’s activities for FY20. We take this opportunity
to highlight a few key points:
Navigator delivered EBITDA of $30.5m (with adjusted EBITDA of $28.3m after the attribution of cash rent payments which are no longer
recognised in operating expenses under the AASB 16 Leases accounting standard).
Management fee revenue was $87.5 million for the year, a decrease of 17% on the prior year. The main driver of the decrease in
management fees was a 15% reduction in the average total AUM to $13.2 billion for FY20 (2019: $15.6 billion).
Performance fee revenue for the year was $5.6 million, an increase of $4.5 million on the previous financial year. Despite the economic
impacts of the COVID-19 pandemic during the second half of FY20, strong investment performance in the December 2019 quarter
resulted in positive performance achieved for certain calendar year funds and portfolios.
Operating expenses decreased by $5.3 million compared to the prior year. This reduction is due primarily to staff reductions
implemented in November 2019, the completion of MAS transition expenses; and the reduction to occupancy expenses due to the
Group’s transition to AASB 16 on 1 July 2019.
5-year historical performance
The Board considers EBITDA to be the most relevant measure of the Company’s overall financial performance. Given the nature of our
operations, and taking into account timing differences arising from trade receivables and payables, EBTIDA is largely consistent with the cash
flows generated by operating activities. EBITDA for 2020 fell by 19% on the prior year, a reflection in the deterioration of operating conditions in
the second half of the financial year, however the Board was pleased that Navigator was still in a position to pay a final dividend to
shareholders:
2016
2017
2018
2019
2020
EBITDA (USD 000’s)
Cash flows from operating activities (USD 000’s)
Dividends per share for the financial year (US cents)
29,4901
30,125
12.0
29,848
30,088
14.0
34,212
32,921
16.0
37,652
22,565
17.0
30,518
32,562
14.0
Dividend amount for the financial year (USD 000’s)
19,752
22,648
26,058
27,281
22,885
Dividend payout as a % of EBITDA
67%
76%
76%
72%
75%
Closing share price (dollars)
AUD 2.29
AUD 2.40
AUD 5.34
AUD 3.94
AUD 1.19
Change in share price (dollars)
↑ AUD 0.22
↑ AUD 0.11
↑ AUD 2.94
↓ AUD 1.40
↓ AUD 2.75
1 Underlying earnings before interest, tax, depreciation and amortisation from continuing operations.
Dividends
Despite the significant cash flow challenges created
by the COVID-19 pandemic, the Directors are
pleased that the Company was in a position to pay a
final dividend to shareholders.
The Directors determined an unfranked dividend of
5.5 cents per share (with nil conduit foreign income
credits) payable 4 September 2020. Added to the
interim dividend of 8.5 cents per share, this brings the
total for the year to 14.0 US cents per share.
The FY2020 combined interim and final dividends
equates to a payout ratio of 75% of EBITDA.
The Directors are satisfied that the current capital
management policy of paying a dividend of between
70-80% of EBITDA continues to strike the right
balance between rewarding shareholders and
ensuring the Group can retains sufficient resources to
take advantage of any growth opportunities which
may arise.
Dividends in USD cents per share
0
.
9
0
.
7
0
.
9
0
.
8
5
.
5
5
.
8
Final
Interim
0
.
8
0
.
6
0
.
7
0
.
5
FY16
FY17
FY18
FY19
FY20
IV
Annual Report 2020 | From the Chairman & CEO
Corporate governance
Strong governance and a culture which values ethics and integrity are a key priority for the Navigator board.
Our core values
As a business, we are very aware that people are the heart of everything we do.
That’s why our core values are centered around how we want employees to behave with our clients, our managers and with each other.
These values have been the guiding force within our Lighthouse business since the beginning, and the Navigator board formally adopted
these values in May 2019 to ensure that we articulate them externally as well as internally:
Ethics & Integrity
Do the right thing at all times
and in all circumstances,
whether or not anyone is
watching
Teamwork
Work together and use all of the
resources of the firm to make
decisions that will maximise
value
Professionalism
Treat all people (internally and
externally) with respect and
dignity
Client Loyalty
Do more than is expected by the
client
Continuous Improvement
& Excellence
All employees are responsible for
proactively achieving regular,
incremental improvements
Corporate responsibility and sustainability
Going hand-in-hand with our core values and focus on people is how our organisation meets its broader responsibilities as a global corporate
citizen.
A key objective for FY20 was for Navigator to publish a Corporate Sustainability and Responsibility Report to set out how our Group currently
meets our environmental, social and governance responsibilities. Unfortunately, the demands of dealing with the global pandemic, coupled with
the significant acquisition transaction have meant that this goal was not achieved this year.
The Board sees this as an important goal in demonstrating how our Group meets its broader responsibilities, and we are committed to ensuring
that this is completed for FY21.
Board composition
The stability in the membership of our board over the past six years has been important to the efficient functioning of the Group. Whilst our
board has been relatively small with only five directors, given the singular focus of our strategy and operations on alternative investment
management, and the diverse global locations of the various Directors, a board of this size has been the right fit for the Navigator Group until
now.
The proposed transaction prompted the board to review its composition, as the terms include Dyal being able to nominate a director for
appointment to the board. As a result, the Board considers that this is an appropriate time to appoint an additional independent, non-executive
Director. We are very pleased that Ms Nicola Meaden Grenham agreed to join the Navigator board and was appointed as a Director on
8 October 2020.
Ms Grenham brings over 30 years of knowledge and experience in the global alternative asset management sector. Her background and skills
are an excellent complement to the existing Directors, and she will provide valuable insight in expertise to Navigator, particularly as we embark
on the growth path provided by the proposed transaction.
Annual Report 2020 | From the Chairman & CEO
V
Outlook
FY20 proved to be a busy and challenging year. Whilst the worst of the pandemic crisis has not passed, markets have shown signs of
stabilisation over the past few months. However, the significant impacts to the economies of every country around the world are far from over.
Lighthouse will keep an unwavering focus on delivering investment performance which meets the objectives of its clients and maintaining a high
quality of service. Complementing this will be maximizing opportunities which have arisen due to the disruption caused by the pandemic in a
variety of areas:
pursuing new clients in both equity-based strategies and the platform services offerings;
new investment opportunities for the portfolios;
refining our mix of talent globally; including through access to research, data, and analysis; and
reviewing operating costs.
Navigator delivered resilient financial performance for FY20, however the full impact of the challenges created by the COVID-19 pandemic and
underperformance of the multi-strategy funds in March 2020 will not fully impact the financial performance of the Navigator Group until the
financial year ended 30 June 2021.
Navigator currently expects some future redemptions across MAS and Lighthouse portfolios as a consequence of March 2020 performance and
overall market conditions. However, Navigator also expects this to be off-set by increased interest in our equity-based strategies and platform
services offering. In the current market environment, the quantum and timing of changes in AUM is difficult to predict. However, expectations
for the Group’s FY21 performance should take into account:
an expectation of a lower average AUM for FY21, given the lower starting point of AUM of US$11.8 billion compared to the FY20
average AUM of US$13.3 billion.
an expectation of net outflows over the coming year, although the exact quantum is unknown;
a continued shift towards platform service and customised client AUM which generally has lower fee rates; and
uncertainty as to the level of performance fee revenue which may be earned for FY21.
Given the likely challenges in the core business returning to its pre-pandemic size and profitability, we are pleased that we have the opportunity
with the proposed transaction to add significant scale and diversification to the Navigator Group. With a strong alignment of interests through
the issue of Navigator shares and Convertible Notes to the Dyal Sellers, we also look forward to a productive partnership with Dyal where
Navigator may access additional acquisition opportunities.
On behalf of the Directors, we would like to extend our thanks to all of our staff, who have shown resilience and adaptability in responding to the
necessary changes in working conditions arising from the global pandemic. They have remained focused on delivering quality investment and
client service, with the goal of assisting our clients through the continuing global uncertainties. We look forward to the safe and hopefully swift
resolution of the pandemic, and in the meantime extend our hope that you and your family remain safe and well.
Michael Shepherd
Chairman
Sean McGould
Chief Executive Officer
2020 Snapshot
Operating & financial review
Directors’ report
Lead auditor’s independence declaration
Financial statements
Directors’ declaration
Independent auditor’s report
Shareholder information
3
4
17
33
34
77
78
84
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Unless otherwise indicated, the numbers in this
annual report have been presented in
US Dollars (USD)
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1 Adjusted to exclude the impact of the new AASB 16 Leases accounting
standard. Adjusted EBITDA includes an additional $2.2m of cash lease
payments which are no longer included in occupancy expense.
USD 11.8 bn
USD 87.5 m
USD 30.5 m
Adjusted EBITDA1 USD 28.3 m
USD 14.0 cents
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Annual Report 2020 | Operating & financial review
5
We deliver innovative investment solutions centred around
alternative investments to a range of clients around the world
Navigator Global Investments Limited (‘NGI’) is the ultimate parent entity of Lighthouse Investment Partners, LLC (‘Lighthouse’).
Lighthouse is a global investment management firm which offers hedge fund solutions to investors who are looking to diversify their asset
mix and realise growth with a lower correlation to traditional equity and fixed income allocations.
Lighthouse believes the most effective way to achieve diversification from traditional markets is through exposure to intelligently designed
and actively managed portfolios of hedge fund strategies. Lighthouse’s overall objective is to create and deliver innovative investment
solutions that compound investor capital.
As at 30 June 2020, Lighthouse is managing $11.8 billion of assets.
Lighthouse has an investor base that spans North America, Europe, the Asia-Pacific and the Middle East. It includes high net worth
individuals, family offices, endowments, foundations, trusts, investment banks, benefit plans, pension funds, healthcare and insurance
companies.
As a global business with a global client base, Lighthouse has offices in New York, Chicago, Palm Beach Gardens, London, Hong Kong
and Tokyo.
US$11.8 bn
24+
114
37
Total AUM
Year track record
Total employees
Investment professionals
1000+
Investors worldwide
6
Annual Report 2020 | Operating & financial review
The global asset management industry is a highly competitive space. Our focus is on the alternatives sector, and more specifically multi-
manager hedge funds solutions.
Our purpose is to protect and grow our investors’ assets, and we seek to achieve this through diversification from traditional markets with
exposure to intelligently and actively managed portfolios of hedge fund strategies.
Our success depends on three key factors
Assets Under Management
We earn revenue from managing assets on behalf of our clients (which we refer to as "Assets Under
Management" or “AUM”).
We seek to attract and retain AUM by offering quality investment products and services, and
delivering competitive performance and features.
Our ability to do this can also be impacted by external factors such as global markets and investor
sentiment.
Fee Rates
The revenue we earn on our AUM depends on the management and performance fees we are
entitled to charge for our services.
Our commingled investment products pay us management and performance fees based on
disclosed rates, whilst our institutional clients can negotiate fees with us.
We operate in a highly competitive market, and there is pressure from investors to negotiate
lower fee rates across the global investment management industry.
People
Our success relies on attracting and retaining talented employees.
It is our employees who use their skills and knowledge to enable us to provide quality investment
products and services, to innovate to meet changing investor needs and to respond to compliance
requirements in what is a highly regulated industry.
To attract, motivate and retain quality employees NGI needs to offer competitive compensation
and incentive packages.
Annual Report 2020 | Operating & financial review
7
Our solutions
The foundation for all of our services is our proprietary managed accounts program. Entrepreneurial and innovative, Lighthouse has since its
inception employed proprietary managed accounts. We believe this has allowed us to build truly differentiated alternative asset portfolios with
idiosyncratic exposures, and it spurs our continuing evolution.
Lighthouse invests in portfolios of actively managed hedge funds that seek to diversify traditional market exposures. Our objective is to create
and deliver innovative investment solutions that safely compound investor capital.
Each managed account is typically owned by at least one Lighthouse fund and is managed by a Lighthouse entity. Hedge fund managers are
authorised by Lighthouse to trade the assets within each managed account in accordance with defined investment guidelines and parameters.
Lighthouse investors can place their assets in commingled funds or in customised solutions. We typically structure all our hedge fund allocations
within our proprietary managed account framework.
Commingled Funds
Lighthouse manages a number of multi-strategy and strategy-focused funds. The funds utilise
Lighthouse's proprietary managed accounts which own and control the assets and liabilities, and
authorise external fund managers to trade the assets within certain guidelines.
The two largest strategies for the commingled funds are:
Diversified – which is a multi-strategy, absolute return strategy with low correlation and beta to
traditional markets.
Global Long/Short – which is a global long/short equity fund seeking equity-like returns with
lower volatility than traditional global equity investments.
Customised Solutions
Customised solutions offers investors who are able to commit to a significant investment size
the ability to access the benefits of the managed account structure in their own customised
portfolio while still receiving portfolios construction, manager selection and due diligence
services from the Lighthouse investment team.
Lighthouse is able to work closely with large strategic investors to customise their alternative
investment exposure and meet specific needs across middle office, risk monitoring and
investment advisory services.
Platform Services
Platform services provides clients who have significant allocations to hedge fund assets to access
the benefits of a managed account structure while maintaining control of manager selection and
allocation decisions.
We offer our clients a unique skill set and knowledge which allows us to provide clients with efficient
onboarding, specialised legal structuring and compliance services, counterparty management and
robust operational oversight. Our internally built expertise also means we can offer a high level of
customisation, and support purpose-built tools for advanced portfolio analytics, risk management and
treasury functionality.
Lighthouse has built its infrastructure over time to handle the complexity of operating a large account
program in terms of number of managers and assets under management.
8
Annual Report 2020 | Operating & financial review
$11.8 billion
Investor Geography
Asia-Pacific
5%
Europe
17%
Middle
East
11%
Americas
67%
Assets under management
30 June 2020 AUM
Composition of AUM as at 30 June 2020:
Service
Platform
Services
22%
Commingled
Funds
32%
Customised
Solutions
47%
Investor Type
Endowments /
Foundations
8%
Other
22%
Employees
2%
Individuals
10%
Pensions
58%
Annual Report 2020 | Operating & financial review
9
Changes to AUM over the financial year
The Group saw a 17% reduction in AUM over the 2020 financial year, attributable to:
A $0.2 billion reduction to AUM from investment performance impacts
A reduction of $1.8 billion due to net outflows from MAS assets, of which 77% related to Customised Funds
A reduction of $0.5 billion due to net outflows from Lighthouse (ex MAS) products, of which 77% related to Commingled Funds
9
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USD 14.2
AUM at the beginning of the
financial year was $14.2bn:
MAS
Commingled
0.9
Lighthouse
Customised
& Platform
7.1
MAS
Customised
2.3
Lighthouse
Commingled
3.9
USD 13.5
USD 13.4
USD 12.0
USD 11.8
By 30 September 2019, AUM had seen a $0.7 billion reduction, of
which $0.5 billion was attributable to net outflows. MAS
Customised assets represented the majority of these outflows, with
the remaining representing a small reduction to Commingled
Funds.
The December 2019 quarter saw AUM remain steady, with AUM
increasing $0.5 billion due to positive performance. $0.4 billion of
inflows were received over the quarter from our largest Platform
Services client. MAS redemptions continued to impact AUM
however, with an additional $0.7 billion recorded in the quarter.
The $1.4 billion reduction to AUM in the March quarter was almost
solely due to negative performance, as net flows were largely flat.
Whilst the Group’s equity strategies performed well in this period,
the disappointing performance of the multi-strategy portfolios in
what were extreme global market conditions in March was the key
contributor to the AUM reduction.
AUM remained steady over the last quarter of the 2020 financial
year. Investment performance added $0.8 billion in AUM over the
quarter, which was largely off-set by $1.0 billion of net outflows
over the same period. The June quarter redemptions were mainly
attributable to some of our larger clients either reducing their
exposure to hedge funds in order to generate liquidity in their
portfolios or update asset allocations.
.
10
Annual Report 2020 | Operating & financial review
Fee rates
Our revenue from clients is largely generated by management
fees, although we have a number of portfolios across both our
Commingled funds and our Customised solutions clients which
also may generate a performance fee:
Some of our Commingled funds have share classes which
have a management fee and include a performance fee.
Generally, where a performance fee arrangement fee is in
place, the management fee rate for that share class is lower.
The varying fee options for a particular Commingled fund allow
investors to select a fee structure which best suits their
requirements.
Fee arrangements for Customised solutions clients are
negotiated individually. Whilst most arrangements involve only
a management fee, some clients also have a performance fee
component as part of their fee structure.
Performance fees
Performance fee revenue for the year was $5.6 million, an
increase of $4.5 million on the previous financial year. Despite the
economic impacts of COVID-19 pandemic during the second half
of FY20, positive investment performance in the December 2019
quarter resulted in positive performance achieved for certain
calendar year funds and portfolios. Positive performance of the
equity portfolios throughout the second half have also resulted in
performance fees being earned by global long/short portfolios.
Performance fees are variable in nature, and it is difficult to
forecast how much, if any, performance fee revenue will be earned
by the Group in future periods.
Management fees
People
The average management fee for the 2020 financial year was
0.66% per annum (2019: 0.68% per annum).
Employees by department
The Group has 114 employees across the following functional
divisions as at 30 June 2020 (2019: 139):
37
26
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m
E
l
Investment
Distribution
Operations
Legal & Compliance
HR & Administration
Technology
Corporate
3
15
14
9
10
The decrease in employee headcount is primarily a result of
redundancies made in November 2019, which were implemented
as part of the business rationalising its cost structure by identifying
the level of overall resources needed for current and anticipated
future business requirements.
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%
e
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f
0.73%
0.68%
0.66%
FY 2018
FY 2019
FY 2020
This management fee rate represents the blended net
management fee rate across all AUM. While there a number of
factors which impact the average management fee rate across
periods, the main driver is the relative proportion of AUM invested
across Commingled Funds, Customised Solutions funds and
Platform Services clients. The indicative range for management
fee rates for each of these services is as follows:
Indicative management fee range
Commingled Funds
Customised Solutions
Platform Services
0.50%-1.50%pa
0.45%-0.90%pa
0.20%-0.50%pa
Management fee rebate arrangements may also apply to fees
charged to particular clients within Commingled Fund structures.
Fee rebates are directly off-set against management fee revenue.
Annual Report 2020 | Operating & financial review
11
Summary of the Navigator Group FY20 result
Revenue
Expenses
EBITDA
Additional cash lease payments
USD 101.5m
USD 71.9 m
USD 30.5 m
USD 2.2 m
Adjusted EBITDA
USD 28.3 m
Non-recurring items
Expensed transaction costs
Impairment of intangible
Redundancy costs
USD 1.8 m
USD 0.8 m
USD 1.1 m
Adjusted EBITDA excluding non-recurring items:
USD 32.0 m
AASB 16 Leases commenced on 1 July 2019.
Part of the impact of its introduction is to reclassify
the office lease component of occupancy expense
to be a financing activity. The net cash lease
payments made during the year are adjusted
against EBITDA to aid comparability against the
Group’s 2019 EBITDA.
The Group has pursued a significant transaction
during the year in relation to the acquisition of a
portfolio of minority interests in US hedge fund
managers. Legal, tax and other professional
services incurred in relation to the transaction to
30 June 2020 have been expensed.
The impairment loss relates to the full write-down
of the intangible asset related to the acquisition of
client relationships from Mesirow Advanced
Strategies on 1 July 2018. The MAS AUM have
seen a 75% reduction since acquisition date, with
the remaining AUM operationally absorbed into
Lighthouse. As a result, the $0.8 million intangible
balance has been written down to $nil.
$1.1m of termination payments were made to staff
who were made redundant during the year.
12
Annual Report 2020 | Operating & financial review
The below presentation of the Group’s results is a non-IFRS measure and is intended to show the Group’s performance before the impact of
expense items such as depreciation, amortisation, and non-operating items such as net interest income. Net profit before and after income tax
reconciles to the income statement on page 36.
Management fee revenue
Performance fee revenue
Revenue from reimbursement of fund operating expenses
Revenue from provision of office space and services
Other income
Total revenue
Employee expense
Professional and consulting expense
Reimbursable fund operating expenses
Occupancy expense
Information and technology expense
Distribution expense
Impairment loss
Other operating expenses1
Total expenses1
Result from operating activities1
Net finance income, excluding interest
Earnings before interest, tax, depreciation and amortisation (EBITDA)
Net interest (expense) / income
Depreciation and amortisation
Profit before income tax
Income tax expense
Net profit after income tax
Basic EPS (cents per share)
Consolidated US$’000
2020
87,511
5,576
7,068
1,354
-
2019
105,392
1,135
6,319
1,905
116
101,509
114,867
(44,216)
(48,573)
(8,143)
(7,068)
(1,583)
(3,540)
(2,798)
(769)
(3,795)
(6,800)
(6,319)
(3,959)
(3,631)
(3,401)
(4,561)
(71,912)
(77,244)
29,597
921
30,518
(651)
(3,998)
25,869
(7,721)
18,148
11.19
37,623
29
37,652
126
(1,474)
36,304
(9,461)
26,843
16.55
% change
(17%)
391%
12%
(29%)
(100%)
(12%)
9%
(20%)
(12%)
60%
3%
18%
17%
7%
(21%)
3,076%
(19%)
(617%)
(171%)
(29%)
18%
(32%)
(32%)
-
(100%)
AASB 16 Leases commenced on 1 July 2019. Part of the impact of its introduction is to reclassify the office lease component of occupancy
expense to be a financing activity. The Adjusted EBITDA below adds back net cash lease payments made during the financial year in order to
aid comparability against the Group’s 2019 EBITDA, which is still accounted for under the previous accounting standard.
Earnings before interest, tax, depreciation and amortisation (EBITDA)
Additional cash payments made for office leases (net)
Adjusted earnings before interest, tax, depreciation and amortisation
(Adjusted EBITDA)
Consolidated US$’000
2020
30,518
(2,238)
2019
37,652
-
% change
(19%)
28,280
37,652
(25%)
1 Excludes net finance income / (costs) including interest, depreciation and amortisation. These items have been excluded so as to present the expenses
and result arising from the Group’s core operating activities.
Annual Report 2020 | Operating & financial review
13
Revenue
Management fee revenue
Management fee revenue was $87.5 million for the year, a
decrease of 17% on the prior year.
The main driver of the decrease in management fees was a 15%
reduction in the average total AUM to $13.2 billion for the 2020
financial year (2019: $15.6 billion).
The reduction in AUM is primarily due to a $1.9 billion decrease in
MAS assets for the year ended 30 June 2020, which is a
combination of $1.8 billion of net outflows plus a $98 million
decrease in AUM from investment performance for the period.
The average management fee rate has decreased to 0.66% per
annum for this year (FY2019: 0.68% per annum).
Performance fee revenue
The Group earns performance fees on selected Commingled
Funds and Customised Solutions portfolios. The fees represent an
agreed share of investment outperformance of a fund or portfolio
over a defined benchmark and/or high watermark and may be
subject to hurdles.
Performance fee revenue for the year was $5.6 million, an
increase of $4.5 million on the previous financial year. Despite the
economic impacts of the COVID-19 pandemic during the second
half of FY20, strong investment performance in the December
2019 quarter resulted in positive performance achieved for certain
calendar year funds and portfolios. Positive performance of the
equity portfolios throughout the second half have also resulted in
performance fees being earned by global long/short portfolios.
Approximately 59% of the performance fees have been earned
from Commingled Funds. Share classes have been introduced to
some Commingled Funds which have a fee structure that has a
lower management fee, but allows Lighthouse to earn a
performance fee.
Revenue from reimbursement of fund operating expenses
The Group is entitled to reimbursement for fund expenses that it
has paid on behalf of the funds. While the funds generally pay
their own operating expenses directly, there are some expenses,
such as financial data services, software and technology
expenses, where it is more practical for the Group to incur and pay
the expense and then be reimbursed by the relevant fund(s).
The reimbursement is recognised as revenue, and there is a
corresponding off-setting expense. As the revenue and expense
directly off-set, there is no net impact on profit.
Revenue from reimbursement of fund operating expenses and
reimbursable fund operating expenses incurred for the year were
both $7.1 million (2019: $6.3 million).
Revenue from provision of office space and services
The Group provides office space and services to a number of
external parties at its New York and London offices. This revenue
is a direct recharge of occupancy and professional fees incurred
by the Group.
Operating expenses
Operating expenses decreased by $5.3 million compared to the
prior year. This reduction is due primarily to:
staff reductions implemented in November 2019;
the completion of MAS transition expenses; and
the reduction to occupancy expenses due to the Group’s
transition to AASB 16 on 1 July 2019.
Employee expense
There was a $4.4 million (9%) decrease in employee expense for
the Group as compared to the prior year.
This reflects the reduction in Group headcount over the 2020
financial year, particularly staff redundancies implemented in
November 2019. The average headcount for the year ended 30
June 2020 was 123 (30 June 2019: 144).
Total bonus expense decreased by 10% compared to the prior
year.
Employee expense also includes $1.1 million of severances
related to redundancies made during year.
Professional & consulting fees
The Group utilises a number of expert consultants across its
business, in particular to provide specialist assistance and support
in technology, legal, platform operations and investment process.
Professional and consulting fees vary depending on the specific
projects and operating needs in each period.
Professional fees for the year are $8.1 million, a $1.3 million
increase compared to the prior year. Particular areas which
contributed to the increased expense include:
$1.8 million of legal and tax spend in relation to a business
acquisition opportunity;
$0.9 million of additional spend in relation to development and
testing of a new proprietary trading platform. The
development of this platform was highlighted in last year’s
Annual Report. Once the platform is fully operational, we
expect to see a reduction in the on-going costs associated
with the operation of the trading platform; offset by
$0.5m decrease in MAS professional fees as a result of
completion of the MAS transition;
$0.5m decrease in consulting spend on risk management
systems / risk analysis and operational and business
efficiency; and
$0.3m decrease in external administrator support service
charges which are now being charged directly to the funds.
Occupancy expense
Under AASB 16 Leases, occupancy expense in the current year
relates to short-term leases and common area maintenance costs.
Office premises rent expense previously included as occupancy
expense is now reclassified as a financing activity.
Occupancy expense for year ended 30 June 2020 is $1.6 million, a
$2.4 million decrease from the prior year. This reduction relates
primarily to the adoption of AASB 16 on 1 July 2019.
Adjusted EBITDA on page 11 includes an additional $2.2 million of
cash payments made for office leases (net of additional cash rent
received) to provide better comparability of results to the prior year
which is accounted for under the previous accounting standard.
14
Annual Report 2020 | Operating & financial review
Information and technology expenses
There has been a $91 thousand or 3% decrease in information
and technology expenses.
An additional $1.1 million of spend has been incurred in the current
year in relation to the development and testing of a new proprietary
trading platform. As noted above, only a portion of costs will be on-
going once the platform is fully operational.
This has been offset by a $1.3 million decrease in costs for the
MAS business. The prior year included additional technology
expenses for the transition of MAS data, systems and staff, of
which only $142 thousand are on-going and incurred in the current
year.
Distribution expense
Distribution expense relates to third party distribution
arrangements, whereby ongoing payments are made to third
parties in relation to clients they have introduced and who continue
to be invested in Group portfolios. Distribution expense does not
include rebates on management fees paid to clients, as these are
off-set directly against management fee revenue.
The distribution expense for this financial year was $2.8 million
(2019: $3.4 million). This reduction is largely due to the reduction
in Commingled fund AUM over the year, and at present represents
3.2% of revenue (30 June 2019: 3.2%).
Impairment loss
The impairment loss relates to the full write-down of the intangible
asset related to the acquisition of client relationships from Mesirow
Advanced Strategies on 1 July 2018. The MAS AUM have seen a
75% reduction since acquisition date, with the remaining AUM
operationally absorbed into Lighthouse. As a result, the $0.8
million intangible balance has been written down to $nil.
Income tax expense
The Group recognises an accounting tax expense in its income
statement at an effective tax rate of 29.9% (2019: 26.1%). The
effective tax rate reflects a combination of the United States
federal tax rate of 21%, individual United States state-based taxes,
as well as the effect of other permanent and temporary tax
adjustments.
The Group has significant tax losses available to off-set its tax
liabilities, and hence there is no tax payable in relation to this
accounting tax expense other than in relation to some relatively
nominal United States state-based taxes.
Annual Report 2020 | Operating & financial review
15
Financial position remains solid
Major balance sheet items include:
Assets
Cash
Receivables
Investments
Intangible assets
Right-of-use (lease) assets
Recognised deferred tax assets
Liabilities
Lease liabilities
Deferred rent liability
Net tangible assets per share
Consolidated US$’000
2020
2019
27,032
16,047
14,734
94,513
19,280
45,972
23,160
-
25.18
29,029
19,423
17,953
95,656
-
52,584
-
2,745
40.63
Sources and uses of cash
Intangible assets
The Group primarily used cash generated from operating activities
during the year to 30 June 2020 to pay dividends to shareholders:
+ $33.2 million generated from operating activities
- $28.2 million paid to shareholders as dividends
- $4.2 million paid for leasehold improvements and
acquisition of equipment
- $2.2 million paid for office rent not included in operating
activities
Receivables
Receivables relates mainly to management and performance fees
for which payment has not yet been received as at 30 June 2020.
The decrease in this balance compared to the prior year is
consistent with the lower AUM managed by the Group as at 30
June 2020 compared to the prior year balance date.
Investments
The Group holds two key types of investments: investment in
Lighthouse funds and investment in external entities.
The Group holds $13.2 million of investments in Lighthouse
funds. Investments are held for a number of reasons,
including to meet regulatory commitments, contractual
requirement of a customised client mandate, or to seed a new
product which will be offered to external investors in the
future.
The Group also invests in a number of external entities. The
investments are each relatively small and strategic in nature
and may provide interesting synergistic opportunities for
Lighthouse. The combined fair value of these investments as
at 30 June 2020 is $1.5 million (30 June 2019: $5.3 million).
A revaluation to $nil of the largest investment was recorded
as at 30 June 2020 as the entity’s prospects are considered
significantly uncertain.
When the Company acquired Lighthouse in January 2008, it
recognised $499.5 million of goodwill in relation to the transaction.
An impairment loss of $405.7 million was recognised against the
goodwill balance in the 2009 financial year. The Company has
continued to carry a written-down goodwill balance of $93.8 million
since that time.
Right-of-use assets
With the adoption of AASB 16 Leases on 1 July 2019, the Group
recognised right-of-use (ROU) assets of $14.1 million in relation to
certain office leases. The Group recognised an additional $7.2
million of ROU assets during the year in relation to new office
leases entered into during the year.
Deferred tax assets
The Group’s balance sheet includes a deferred tax asset of $46.0
million which is comprised of carried forward tax losses and
deductible temporary differences relating to the US tax
consolidated group.
It is not expected that the Group will be in a tax payable position
for a number of years other than in relation to some relatively
nominal US state-based taxes.
Lease liabilities & deferred rent liability
With the adoption of AASB 16 Leases on 1 July 2019, the Group
recognised lease liabilities of $18.0 million in relation to certain
office leases. The Group recognised an additional $7.0 million of
lease liabilities during the year in relation to new office leases.
Lease payments are allocated between principal and finance cost,
with $823 thousand of lease interest expense recorded for the
year. Lease liabilities total $23.2 million as at 30 June 2020.
The Group’s previous existing deferred rent liability was off-set
against its newly recognised right-of-use asset on 1 July 2019.
16
Annual Report 2020 | Operating & financial review
COVID-19 impact
The COVID-19 pandemic has created unprecedented interruption
to the lives of billions around the globe and created unique risks
and challenges to businesses across every industry. Whilst the
public health effects have of course been immense, the disruptions
to world economies and the resultant detriment to individual
businesses has come with unimaginable swiftness and severity.
The Group is in a more fortunate position than most in that while
our business and operations have certainly been impacted by the
pandemic, and will likely continue to be so for some time, we have
not experienced some of the acute issues that have arisen for
businesses in other industries that have been more directly
affected. The key implications and impacts for the business as a
result of the pandemic are outlined below.
The Group’s response and management plans for the pandemic
have focused on:
Ensuring the well-being of our staff, including the
implementation of work-from-home capability as and when
required across all of our offices globally;
Assisting our clients to understand the impacts on their
investment portfolios and working with them to adapt their
investment allocations in response to changing market
conditions;
Ensuring that we keep stakeholders informed of key impacts
on the business; and
Reviewing the cost base of the business and identifying where
cost reductions may be implemented should the business see
a higher than expected contraction to AUM.
Business and economic factors
As investment management is the Group’s core operations, business and economic factors have
had the largest impact on our business.
The extreme volatility of global markets in March led to some disappointing investment
performance in our multi-strategy funds, which resulted in significant losses to the market value
of assets we manage across our portfolios. Whilst investment returns of the multi-strategy
portfolios have regained ground since March 2020, we consider that there is some risk that
clients will opt to reduce their exposure to these multi-strategy portfolios over the next 12
months.
In contrast, our equity portfolios performed well during this period, and we consider this may in
fact create some opportunities to attract new clients into these strategies in future.
The majority of our revenue is earned from products managed by the Group, and we have
historically had a very low default rate in relation to our trade and other receivables. The
pandemic has not had any impact on the expectation that all of the Group’s trade and other
receivables will be received in accordance with normal trading terms.
Amounts receivable from external
parties
Supply chains
The nature of the Group’s operations means that it is not dependant on supply chains for
obtaining inventory or consumables critical to the Group being able to provide its services.
Exposures to overseas operations,
transactions and currencies
Containment measures
Key service providers have been able to continue to provide services to the Group without
significant interruption despite ‘stay-at-home’ orders applying in various global locations out of
which they may operate.
The Group’s functional currency is USD and the majority of its assets, liabilities, revenues and
expenses are denominated in USD. Whilst there was significant volatility in the AUD:USD
exchange rate at the beginning of the pandemic, it has not resulted in any material losses to the
Group.
The Group has been very fortunate that we have been able to shift to a work-from-home model
with minimal disruptions. The Group has and will continue to adhere to all local health, social
distancing and travel advice/guidelines. Changes have been implemented as necessary,
including:
elimination of non-essential travel;
restriction of access to our office premises in accordance with local guidelines; and
utilisation of digital technologies, particularly for online collaboration and meetings.
Although the duration of the pandemic is still an unknown, it is not expected that these changes
will be permanent in any way that would be detrimental to future operations.
Government support and assistance The Group has not applied for any government or other support or assistance.
Cash flow management
Debt and lease contracts
Whilst we have seen a reduction in AUM and hence revenue, the Group has not experienced
any cash flow issues, and expects to be able to appropriately manage its cash flow in both the
short and long term.
The Group has renewed its existing $15 million Credit Facility for a further two years until 27 July
2022.
There has not been any modifications to our existing leases. Unrelated to the pandemic, the
Group had a significant reduction to headcount in its Chicago office in November 2019 and has
entered into an arrangement to sub-lease this office during the 2021 calendar year.
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18
Annual Report 2020 | Directors’ Report
The Directors present their report together with the financial statements
of the Group comprising Navigator Global Investments Limited
(‘Navigator’ or ‘the Company’) and its subsidiaries for the year ended
30 June 2020 and the auditor’s report thereon.
The Directors of the Company at any time during or since the end of the financial year are:
Michael Shepherd, AO
Fernando (Andy) Esteban
Andrew Bluhm
Chairman and Independent Non-
Executive Director
Independent Non-Executive Director
Non-Executive Director
Appointed 16 December 2009
Appointed 18 June 2008
Chairman of the Remuneration and
Nominations Committee
Chairman of the Audit and Risk
Committee
Appointed 17 October 2012
Member of the Audit and Risk
Committee
Member of the Audit and Risk
Committee
Member of the Remuneration and
Nominations Committee
Michael has extensive experience in
financial markets and the financial
services industry having held a range of
senior positions including Vice Chairman
of ASX Limited, and directorships of
several of ASX’s subsidiaries including
Australian Clearing House Pty Ltd.
Currently, Michael is Chairman of the
Shepherd Foundation, an independent
director of Investsmart Group Limited, and
is an independent Compliance Committee
Member for UBS Global Asset
Management (Australia) Limited. Michael
is also a Senior Fellow (SF Fin), Life
Member and past President of the
Financial Services Institute of Australasia
and a Member of the Australian Institute of
Company Directors.
Andy holds a Bachelor of Business
majoring in Accounting, is a CPA and a
Member of the Australian Institute of
Company Directors.
He has over 35 years’ experience in the
financial services industry, of which 21
years were with Perpetual Trustees
Australia Ltd. In 1999 he established FP
Esteban and Associates, a private
business specialising in implementing and
monitoring risk management and
compliance frameworks in the financial
services industry.
He has provided consulting services to a
number of domestic and global
organisations in Australia and South East
Asia. From July 2005 until June 2008 he
was an independent director of Credit
Suisse Asset Management (Australia) Ltd.
Andrew is the founder and principal of
Chicago-based DSC Advisors, LP (DSC),
which is the investment manager of
Delaware Street Capital Master Fund,
LP. Delaware Street Capital Master Fund,
LP holds a substantial shareholding in
NGI.
DSC invests in a wide array of companies
and industries seeking to identify and
acquire undervalued securities and sell-
short overvalued securities.
Prior to forming DSC, he was a founder
and Principal of Walton Street Capital,
LLC, and prior thereto worked as a Vice
President at JMB Realty Corporation and
as an Associate at Goldman Sachs.
Annual Report 2020 | Directors’ Report
19
Randall Yanker
Sean McGould
Independent Non-Executive Director
Executive Director and
Chief Executive Officer
Appointed 14 October 2014
Appointed 3 January 2008
Member of the Remuneration and
Nominations Committee
Randall has extensive experience in the
investment management industry, and in
particular hedge funds. He co-founded
Alternative Asset Managers, L.P. (‘AAM’)
in 2004, which is a private investment firm
with primary focus on making strategic
investments in the asset management
sector.
Prior to AAM, Randall was responsible for
establishing multi-billion dollar global
alternative investment and hedge fund
platforms as CEO of Lehman Brothers
Alternative Investment Management, and
before that as a Managing Director of
Swiss Bank Corp.
He is a graduate of Harvard College
(1983) with a degree in Economics, and
serves on the board and is a Trustee of
The New School University, a Trustee of
SEI Advisors’ Inner Circle Fund III, and
Advisory Board member of HF2 Financial
Management.
Sean is the co-founder of Lighthouse and
has served as its Chief Executive Officer,
President and Co-Chief Investment Officer
since inception.
He supports the investment team in the
manager search, selection and review
process and is the Chairman of the
Investment Committee. Sean has been
overseeing all aspects of the portfolios
since August 1996.
For more than 20 years, Sean has been
investing in various alternative investment
strategies. Prior to founding Lighthouse,
Sean was the director of the Outside
Trader Investment Program at Trout
Trading Management Company and was
responsible for the allocation of the fund’s
assets to external alternative asset
strategies. Prior to Trout, Sean worked for
Price Waterhouse and passed the
Certified Public Accountant examination.
20
Annual Report 2020 | Directors’ Report
Board and Committee meetings
Corporate governance
The agenda for meetings is prepared by the Company Secretary in
consultation with the Chairman and Chief Executive Officer, and is
set to ensure adequate coverage of strategic, operational, financial
and governance matters.
Board papers are circulated in advance of the meetings. Senior
executives are invited to attend board meetings, however the
directors may have closed sessions without executive involvement
during meetings at their discretion.
Board meetings
The number of meetings of the Company’s board of directors
during the year ended 30 June 2020, and the number of meetings
attended by each director were:
The Group recognises the value of good corporate
governance. The board believes that effective
governance processes and procedures add to the
performance of the Group and engenders the confidence
of the investment community.
The Company has adopted Listing Rule 4.10.3 which allows
companies to publish their corporate governance statement on
their website rather than in their annual report. The directors have
reviewed the statement, and a copy of the statement, along with
any related disclosures, is available at:
http://www.navigatorglobal.com.au/site/about/corporate-
governance
Held
Attended
Principal activities
Michael Shepherd
Fernando Esteban
Andy Bluhm
Randall Yanker
Sean McGould
12
12
12
12
12
11
11
11
12
12
Audit and Risk Committee meetings
The principal activity of the Group during the course of the financial
year was the provision of investment management products and
services to investors globally through wholly-owned subsidiary
Lighthouse Investment Partners, LLC.
Operating and financial review
Information on the operations and financial position of the Group
and its business strategies and prospects is included in this annual
financial report on pages 4 to 16.
The number of meetings the Audit and Risk Committee held during
the year ended 30 June 2020, and the number of meetings
attended by each Committee Member were:
Dividends
Michael Shepherd
Fernando Esteban
Andy Bluhm
Held
Attended
2
2
2
2
2
2
Remuneration and Nominations Committee meetings
The number of meetings the Remuneration and Nomination
Committee held during the year ended 30 June 2020, and the
number of meetings attended by each Committee Member were:
Michael Shepherd
Fernando Esteban
Randall Yanker
Held
Attended
2
2
2
2
2
2
Company secretary
Ms Amber Stoney BCom (Hons) CA holds the position of company
secretary. Amber has held this position for most of her tenure at
NGI, specifically for the periods 15 March 2007 to 20 November
2008, 18 July 2011 to 9 May 2016 and from 27 June 2016. Amber
also holds the position of Chief Financial Officer of NGI. Prior to
joining the Company in 2003, Amber was a senior manager at
KPMG, specialising in the funds management industry.
The directors have determined an unfranked dividend of United
States (US) 5.5 cents per share (with 0% conduit foreign income
credits). The dividend will be paid on 4 September 2020.
Declared and paid
during the year
ended 30 June 2020
Cents
per
share
Total
amount
US$’000
Date of payment
Final 2019 ordinary
Interim 2020 ordinary
9.0
8.5
14,540
30 August 2019
13,668
6 March 2020
Total amount
28,208
Together with the unfranked interim dividend of USD 8.5 cents per
share paid to shareholders on 6 March 2020, the total dividend to
be paid in relation to the financial year ended 30 June 2020 will be
USD 14.0 cents per share.
Significant changes in state of affairs
In the opinion of the directors there were no significant changes in
the state of affairs of the Group that occurred during the financial
year not otherwise disclosed in this financial report.
Annual Report 2020 | Directors’ Report
21
Likely developments and expected results
Directors’ interests
Further information on likely developments in the operations of the
Group and the expected results of operations have been included
in this annual financial report on pages 4 to 16.
The relevant interest of each director in the shares
issued by the Company at the date of this report is
as follows:
Events subsequent to end of financial year
Line of credit facility
The Group has renewed its existing $15 million Credit Facility for a
further two years until 27 July 2022. This Line of Credit has not
been drawn during the year ended 30 June 2020 and remains
undrawn at the date of this report
Proposed acquisition of portfolio of strategic investments
On the 13th of August, NGI announced that it has entered into a
definitive agreement to acquire six minority ownership interests in
leading established alternative asset managers from investment
funds managed by Dyal Capital Partners, a division of Neuberger
Berman.
The transaction is expected to complete between December 2020
and January 2021 and remains subject to shareholder and certain
regulatory approvals (including FIRB) and the satisfaction of other
customary closing conditions.
There has not arisen in the interval between the end of the
reporting period and the date of this report, any other item,
transaction or event of a material nature, likely to affect
significantly the operations of the Group, the results of those
operations, or the state of affairs of the Group, in future financial
years.
Director
Michael
Shepherd
Fernando
Esteban
Andy
Bluhm
Ordinary
shares
125,000
Notes
125,000 shares are held
indirectly by Tidala Pty Ltd
as Trustee for the Shepherd
Provident Fund
27,000
27,000 shares are held
indirectly by FJE
Superannuation Fund
13,101,982
13,101,982 shares are held
indirectly by Delaware
Street Capital Master Fund,
LP (DSC). Mr Bluhm is the
founder and principal of
DSC Advisors, LP, which is
the investment manager of
DSC
19,436,083 shares are held
indirectly by SGM Holdings,
LLC
Sean
McGould
19,438,083
22
Annual Report 2020 | Directors’ Report
Remuneration report (audited)
This Remuneration
Report for the
Company and its
controlled entities for
the year ended
30 June 2020 forms
part of the Directors’
Report and is audited
in accordance with
section 300A of the
Corporations Act 2001.
Contents
Overview of remuneration policy and structure
Relationship between remuneration policy and company performance
Variable compensation for the 2020 financial year
Non-executive director remuneration
Key management personnel remuneration disclosures
23
26
27
28
29
Reporting in United States dollars
In this report the remuneration and benefits reported have been presented in US dollars
(‘USD’). This is consistent with the functional and presentation currency of the Group.
Where compensation for Australian-based employees is paid in Australian dollars, it is
converted to USD for reporting purposes based on either specific transaction exchange
rates, or the average exchange rate for the payment period as appropriate. The Australian
dollar based compensation paid during the year ended 30 June 2020 was converted to
USD at an average exchange rate of AUD/USD 0.6741 (2019: AUD/USD 0.7131).
The Remuneration Report outlines the remuneration arrangements for the Group’s key management personnel. Key management personnel
are those persons who, directly or indirectly, have authority and responsibility for planning, directing and controlling the activities of the Group.
The key management personnel during the year ended 30 June 2020 were:
Name
Non-Executive Directors
Michael Shepherd
Chairman and Non-Executive Director
Fernando Esteban
Non-Executive Director
Andy Bluhm
Non-Executive Director
Randall Yanker
Non-Executive Director
Executive Director
Sean McGould
Executives
Group Chief Executive Officer and
President & Co-Chief Investment Officer, Lighthouse Investment Partners, LLC
Kelly Perkins
Co-Chief Investment Officer, Lighthouse Investment Partners, LLC
Scott Perkins
Executive Managing Director, Lighthouse Investment Partners, LLC
Rob Swan
Chief Operating Officer, Lighthouse Investment Partners, LLC
Amber Stoney
Chief Financial Officer and Company Secretary, Navigator Global Investments Limited
Term
Full year
Full year
Full year
Full year
Full year
Full year
Full year
Full year
Full year
Annual Report 2020 | Directors’ Report
23
Remuneration report (audited)
Overview of remuneration policy and approach
The overall objectives of the Group’s remuneration policies are to:
embed a culture that promotes the Group’s core values
support the business strategy of the Group by attracting, retaining and rewarding quality staff
encourage appropriate performance and results to uphold client and shareholder interests
properly reflect each individual’s duties and responsibilities
When setting the Group’s approach to remuneration, the Board keeps three key factors front-of-mind:
Operations are based in the US
Navigator is an Australian company listed on the Australian Securities Exchange, however the Group’s operations are
predominantly based in the United States. To be effective in attracting and retaining high quality staff, remuneration
arrangements must therefore be aligned to the expectations of people who are employed in the United States
alternative asset management industry.
These remuneration arrangements may diverge from arrangements which would be considered industry practice within
Australia. The quantum and proportion of variable remuneration to total remuneration packages is one such area.
Variable remuneration is a major component
The remuneration arrangements in place for Lighthouse are structured around setting a relatively low fixed
remuneration amount, and having the opportunity to earn variable remuneration as a major component of overall
remuneration. This is particularly true for our United States based senior management. The Board believes this
provides a dynamic basis to be able to adjust the Group’s total remuneration expense, and is also consistent with
United States industry practice.
This approach to remuneration has been in place at Lighthouse since prior to its acquisition in January 2008. The
Lighthouse senior executives have each earned a $250,000 base salary since that time, and this has not been
increased in over 12 years. In addition, select Lighthouse senior executives have had bonus entitlements specified in
their employment contracts since Lighthouse joined the Navigator Group, and these contractual arrangements remain in
place (see page 30 for additional details).
Simplicity
A simple, direct metric for setting annual variable remuneration provides an incentive structure that is easily
understandable to both staff and shareholders. An increase in operating results therefore translates into both an
increase in the available bonus pool for Lighthouse staff and a higher dividend payment for shareholders.
This simplicity also extends to the Board exercising its discretion in setting the total amount of variable compensation,
as well as the CEO being able to exercise discretion in allocating bonuses to individuals based on their performance
and contribution. Whilst individual results are important, we also encourage a culture which is able to reward effort,
ethical behaviour and commitment outside of formulaic metrics.
The Board is satisfied that the current arrangements are consistent with alternative asset management industry practice
in the United States, and allow employees to focus on achieving results for clients, which is ultimately in the long-term
interests of shareholders.
24
Annual Report 2020 | Directors’ Report
Remuneration report (audited)
Remuneration structure
The remuneration of staff across the Group, including our senior executives, is comprised of two key components:
Fixed
Variable
Fixed
Fixed remuneration is comprised of:
base salary; and
employer contributions to superannuation and retirement plans
and health care benefits.
Fixed remuneration is generally determined by reference to
benchmark information where available, and having regard to
responsibilities, performance, qualifications and experience.
For senior Lighthouse employees, fixed remuneration is also
determined in accordance with the general principle that fixed
remuneration is the smaller component of their overall
compensation package. As such, these employees receive a base
salary of $250,000, and this has remained unchanged for over 12
years.
Fixed remuneration is reviewed at least annually, or on promotion,
to ensure that it is competitive and reasonable. There are no
guaranteed increases to the fixed remuneration amount.
The amount of fixed remuneration is not dependent on the
satisfaction of a performance condition, or the performance of the
Group or business unit, the Company's share price, or dividends
paid by the Company.
Variable
Variable remuneration is comprised of participation in a cash bonus
pool.
While the Group does not currently have any equity compensation
arrangements in place, should these be enacted, variable
remuneration would also include participation in such arrangements
for select employees.
The existing variable remuneration arrangements are short-term in
nature, and are designed to motivate staff to create value for both:
our clients, thorough investment returns and a high level of
client service; and
the Company's shareholders
The performance of individual staff members, including senior
executives, is conducted at least annually, after which the award of
variable remuneration is considered.
The Board:
approves the overall size of the variable remuneration pool,
approves an award to the CEO,
confirms any contractual obligations regarding variable
remuneration have been complied with, and
delegates authority to the CEO to exercise his discretion to
make variable remuneration allocations to individual staff.
For the 2020 financial year, the proportion of fixed remuneration as compared to performance linked remuneration across the Group was as
follows:
Fixed Remuneration
Variable Remuneration
Chief Executive Officer
42%
58%
Chief Financial Officer
Other executive key
management personnel
All other staff
92%
8%
24%
76%
58%
42%
Further detail regarding the methodology for determining the 2020 financial year variable remuneration pool is contained on page 27.
Annual Report 2020 | Directors’ Report
25
Remuneration report (audited)
Long term incentive arrangements
The Group does not currently have any equity incentive schemes or
other long-term incentive arrangements in place.
The Board acknowledges that an equity incentive scheme is a
common component of corporate remuneration structures, and
regularly reviews whether the implementation of equity incentive
arrangements for senior employees would be an appropriate
addition to the Group’s remuneration structure.
Other benefits
Lighthouse employees are entitled to additional benefits that may
include educational assistance, adoption assistance and health
care benefits.
Lighthouse employees are also able to make investments into
Lighthouse managed funds without incurring a management fee.
There is no incremental cost incurred by the Group in providing fee-
free investment management services via the Lighthouse funds to
employees. Having employees invest their own assets into
Lighthouse managed funds is viewed positively by clients and
potential clients as it demonstrates an alignment of interest between
the Lighthouse employee and future investment results for clients.
Nil fee arrangements for employees is common practice in the
United States asset management industry.
26
Annual Report 2020 | Directors’ Report
Remuneration report (audited)
Relationship between remuneration policy and company performance
In implementing the remuneration policy and structure, the Board has had regard to what it considers to be the key measure
of the profitability of the Company:
EBITDA - earnings before interest, tax, depreciation, and amortisation from continuing operations.
As an asset management business, the Group’s EBITDA is largely consistent with the cash flow which it generates from its operating activities,
and which is available to pay dividends to shareholders. It is for this reason that NGI’s dividend policy has been set as a pay-out ratio based on
EBITDA.
The following table shows how cash bonuses paid to key management personnel compares to EBITDA and cash flows from operating activities
over the past 5 years:
EBITDA
Cash flows from operating activities
Dividends paid during the financial year
Closing share price (AUD dollars)
Change in share price (AUD dollars)
Key management personnel:
Bonus
Bonus as a % of EBITDA
Bonus as a % of dividends paid during the financial year
US$’000
2020
2019
2018
2017
2016
30,518
32,562
28,208
1.19
(2.75)
3,091
10%
11%
37,652
22,5652
27,451
3.94
(1.40)
4,6713
12%
17%
34,2121
29,8481
32,921
24,390
5.34
2.94
30,088
21,023
2.40
0.11
29,490
30,125
17,222
2.29
0.22
3,967
3,293
3,858
12%
16%
11%
16%
13%
22%
1 Underlying earnings before interest, tax, depreciation, amortisation and impairment losses from continuing operations.
2 Reflects the change in US employee bonus cycle from calendar years to financial years (see page 29).
3 Includes bonus amounts for the 12 months to 31 December 2018 and 6 months to 30 June 2019 for Sean McGould and Scott Perkins (see page 29 for additional detail).
Distribution of revenue between shareholders and employees:
The following charts shows how total revenue recognised in 2020 and 2019 has been distributed between shareholders (as dividends),
employee remuneration, other operating expenses and capital management:
0
2
0
2
9
1
0
2
Employee
remuneration
41%
Other operating
expenses
Dividend
30%
22%
7%
Capital
Management
Employee
remuneration
39%
Other operating
expenses
Dividend
28%
24%
9%
Total Revenue
$101.5m
$114.9m
Annual Report 2020 | Directors’ Report
27
Remuneration report (audited)
Variable compensation for the 2020 financial year
The Board has established a simple, direct methodology for balancing how we reward staff and deliver value to shareholders
through company financial performance. The two metrics which are used to create annual variable remuneration pools are:
Lighthouse general pool
Company performance metric
Basis of variable remuneration
Lighthouse EBITDA
(excluding performance fees, before bonuses
and adjusted for other specified items)
30% allocated to Lighthouse general
bonus pool
Lighthouse incentive fee pool
Performance fees
50% allocated to Lighthouse incentive fee
bonus pool
The Board retains the discretion to vary the final amounts approved after calculation based on the above pools, to ensure that they can also factor
in extenuating circumstances.
Allocation of bonuses for the 2020 financial year took into account the 2 very different investment results experienced by the Group’s equity
portfolios compared to the Group’s multi-strategy portfolios through the extremely volatile global market conditions arising under the COVID-19
pandemic, particularly in March 2020:
the strong performance of the Lighthouse equity portfolios;
the under-performance of the Lighthouse multi-strategy portfolios, particularly in March 2020.
Lighthouse general pool
Incentive fee pool
All Lighthouse staff are eligible to participate in the Lighthouse
general bonus pool, the amount of which is calculated as 30% of
Lighthouse’s EBITDA (before the bonus pools and excluding
performance fee revenue and adjusted for other specified items).
Senior members of the Lighthouse investment team are
eligible to participate in a bonus pool determined as 50% of
performance fee revenue earned by the Lighthouse business from
its Commingled Funds and Customised Solutions portfolios.
- Allocation of the Lighthouse general bonus pool to staff (other
than as noted below) is determined by the CEO in accordance
with remuneration structure and guidelines established by the
Remuneration and Nominations Committee.
This pool is allocated at the discretion of the CEO based on his
assessment of the contribution of each eligible staff member to the
creation of the performance fee revenue. These staff members
may still also receive an allocation from the general bonus pool.
- No individual bonus can be greater than 10% of the
Lighthouse general bonus pool without board approval.
- A bonus for the CEO is determined and approved by the board
based on an assessment of his performance. This bonus
amount forms part of the overall Lighthouse general bonus
pool.
-
In accordance with their service agreements, Kelly Perkins
and Rob Swan are entitled to semi-annual compensation
calculated as 1.25% and 1.00% respectively of the gross
revenue of Lighthouse. This is paid on a semi-annual basis,
and forms part of the Lighthouse general bonus pool.
Corporate bonus pool
A discretionary bonus pool of $45,000 has been allocated for staff
who directly contribute to the operation of the listed parent
company, namely staff involved in finance and company secretarial
functions in Australia. The Remuneration and Nominations
Committee recommends a bonus amount for the Chief Financial
Officer, which is allocated from the Corporate bonus pool.
28
Annual Report 2020 | Directors’ Report
Non-executive director remuneration
Non-executive directors may receive director fees. The
Company’s policy is to remunerate non-executive directors at
market rates for comparable companies having regard to the time
commitments and responsibilities assumed. The aggregate of non-
executive director fees is capped at a maximum of $750,000 per
annum (including superannuation), as approved by shareholders
at the AGM held on 20 November 2014.
Fees paid to non-executive directors are USD, and for the 2020
financial year were as follows:
Chairman
Non-executive directors
USD 170,000 per annum
(plus superannuation)
USD 100,000 per annum
(plus superannuation)
Actual remuneration for non-executive directors for the financial
year ended 30 June 2020 was $393,630 (2019: $331,850).
A Bluhm has elected not to receive remuneration from the
Company for his role as a non-executive director.
Non-executive directors’ fees cover all main board activities and
membership of any committee. Executive and non-executive
directors may be reimbursed for reasonable expenses properly
incurred in their role as a director. Non-executive directors are not
entitled to participate in executive remuneration schemes, may not
receive performance-linked equity or bonus payments, and are not
provided with retirement benefits other than statutory
superannuation entitlements. Non-executive directors are not
entitled to any benefits or payments on retirement from office.
Remuneration report (audited)
CEO remuneration arrangements
Mr McGould performs two key roles for the Group. He is both:
- Chief Executive Officer of the Group; and
- Co-Chief Investment Officer of Lighthouse.
The Board considers that Mr McGould’s remuneration needs to
encompass both of these roles, and that it should also be
structured so that it is consistent with remuneration principles
which operate in the United States alternative asset management
industry. In particular, this means that Mr McGould’s remuneration
is substantially weighted towards variable remuneration.
Mr McGould has a base salary of $250,000, which has remained
unchanged since the Company acquired the Lighthouse business
in 2008. Mr McGould is also entitled to receive health care
benefits and retirement benefits.
The Board has not set specific key performance indicators (KPIs)
for the CEO. Instead, the Board awards Mr McGould a
discretionary bonus amount, taking into account the following
factors:
-
-
-
investment results achieved for clients;
achievement of board-approved budgets and targets, strategic
goals, capital and business restructuring and development of
new business opportunities;
growth in AUM, through both net investment flows and
investment performance of Lighthouse portfolios; and
- Group financial results and dividends paid to shareholders.
Given Mr McGould’s low base salary, his variable remuneration is
not capped as a % of base salary, as is commonly the case in
Australia. Instead, the CEO’s bonus is capped at a maximum of
10% of the Lighthouse general bonus pool. In practice, this means
that Mr McGould’s variable remuneration is constrained by the
profitability of the Group’s operating business unit.
Mr McGould received a bonus of $400,000 for the year ended 30
June 2020. The significant reduction on his prior year bonus (even
after adjusting for the 18 months of bonus paid to 30 June 2019
per page 29) is in acknowledgement of the underperformance of
the Lighthouse multi-strategy portfolios in March 2020, as well as
the generally negative impacts expected on the Group’s operating
performance due to the impacts of this negative performance on
assets under management.
Annual Report 2020 | Directors’ Report
29
Remuneration report (audited)
Key management personnel remuneration disclosures
Directors’ and executive officers’ remuneration
The following remuneration was paid to key management personnel:
Benefit Category
Short-term
Post-
employment
Other long-
term
Total
Salary & fees
Bonus
Other1
Pension &
superannuation
Long service
leave
$
$
$
$
$
$
Non-Executive Directors
Michael Shepherd
Fernando Esteban
Randall Yanker
Executive Director
Sean McGould
Executives
Kelly Perkins
Scott Perkins
Rob Swan
Amber Stoney
Total
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
170,000
150,000
100,000
80,000
100,000
80,000
-
-
-
-
-
-
250,000
250,000
400,000
1,075,0002
250,000
250,000
250,000
250,000
250,000
250,000
215,808
204,109
1,150,000
1,225,000
600,000
1,475,0003
920,000
875,000
20,589
21,039
1,585,808
3,090,589
1,514,109
4,671,039
-
-
-
-
-
-
21,620
20,557
21,620
20,557
21,620
20,557
21,620
20,557
-
-
86,480
82,228
14,130
14,250
9,500
7,600
-
-
17,100
25,800
22,975
-
7,500
16,800
17,100
16,800
14,129
14,715
102,434
95,965
-
-
-
-
-
-
-
-
-
-
-
-
-
-
9,780
3,215
9,780
3,215
184,130
164,250
109,500
87,600
100,000
80,000
688,720
1,371,357
1,444,595
1,495,557
879,120
1,762,357
1,208,720
1,162,357
260,306
243,078
4,875,091
6,366,556
1 Other short-term fixed remuneration amounts relate to health care benefits paid on behalf of Lighthouse staff.
2 Due to the change in bonus cycle to coincide with financial years rather than calendar years (refer below), the bonus amount for Sean McGould includes
$850,000 paid for the 12 months to 31 December 2018 and $225,000 paid for the 6 months to 30 June 2019.
3 Due to the change in bonus cycle to coincide with financial years rather than calendar years (refer below), the bonus amount for Scott Perkins includes
$1,000,000 paid for the 12 months to 31 December 2018 and $475,000 paid for the 6 months to 30 June 2019.
Change in timing of bonus cycle at June 2019
Since its acquisition in 2008 the Lighthouse bonus cycle was based on calendar years, and accordingly bonuses were generally paid in December
of each year. Effective at 30 June 2019, the Board resolved to change the bonus cycle to be based on financial years. To effect the change,
bonuses for Lighthouse staff were determined and paid for the six months to 30 June 2019. This resulted in 18 months of bonus being paid for the
period 1 July 2018 to 30 June 2019.
30
Annual Report 2020 | Directors’ Report
Remuneration report (audited)
Analysis of bonuses included in remuneration
Details of the vesting profile of the short-term incentive bonuses awarded as remuneration to key management personnel of the Group in the
current reporting period are detailed below:
Included in
remuneration
Proportion of
remuneration which is
performance based
% Vested in year
% Forfeited in year
Sean McGould1
Kelly Perkins2
Scott Perkins3
Rob Swan2
Amber Stoney4
$400,000
$1,150,000
$600,000
$920,000
$20,589
58%
80%
68%
76%
8%
100% 1
100% 2
100% 3
100% 2
100% 4
0%
0%
0%
0%
0%
1 Sean McGould’s bonus is paid annually on a financial year basis. No amounts vest in future financial years in respect of the financial year ended 30 June 2020.
2 As per their service agreements, Kelly Perkins and Rob Swan are entitled to semi-annual compensation calculated as 1.25% and 1.00% respectively of the
gross revenue of Lighthouse Investment Partners, LLC. No amounts vest in future financial years in respect of the financial year ended 30 June 2020. These
arrangements have been in place since the acquisition of Lighthouse in 2008.
3 Scott Perkins bonus is paid annually on a financial year basis. No amounts vest in future financial years in respect of the financial year ended 30 June 2020.
4 The short-term incentive plan for Amber Stoney is discretionary and no amounts vest in future financial years in respect of the financial year ended 30 June
2020. Per her revised remuneration arrangements effective from 1 July 2019, Ms Stoney’s short-term incentive bonus is capped at 20% of her combined
annual base salary and superannuation.
Contractual arrangements
The Group has entered into service agreements with each
member of key management personnel, excluding non-executive
directors. These agreements specify the duties and obligations to
be fulfilled.
Refer to page 28 for details regarding the appointment and
remuneration of non-executive directors.
Lighthouse senior executives
Sean McGould, Scott Perkins, Kelly Perkins and Rob Swan
entered into service agreements commencing on 7 March 2011.
The agreements were for an initial term of four years and
thereafter automatically extend for a one-year term unless either
the Group or the employee gives not less than sixty days’ notice of
their intention not to extend the agreement.
The Group may terminate the agreement at any time for gross
negligence or willful misconduct (‘Good Cause Termination’). In
these circumstances there is no entitlement to a termination
payment.
The Group may terminate the agreement for any reason other than
gross negligence or willful misconduct at any time by giving not
less than sixty days’ notice.
The employee may terminate the agreement at any time if the
Group fails to comply in any material respect with the terms of the
agreement, there is a material reduction in the compensation
opportunities or there is a material and unconsented change to
responsibilities.
The employee may terminate the agreement and their employment
at any time for any reason other than those noted above by giving
not less than sixty days’ notice.
Shareholders approved potential termination benefit arrangements
at the 2018 Annual General Meeting for US executives as follows:
A severance payment of up to $1 million on cessation of
employment, except where their employment has been
terminated for Cause as defined by their employment
contract. Any severance payment made is in lieu of any
unpaid short-term incentive bonus which they would
otherwise be entitled to receive for their performance during
the relevant year in which they ceased employment. The
amount of the severance payment will be pro-rata’d based on
the number of days of service provided by the US Relevant
Executive during a year prior to cessation of their
employment.
Restraint payments may be paid to enforce post-employment
restraint clauses if considered necessary and/or appropriate
to protect matters such as confidential information or
intellectual property. In some jurisdictions, restraint clauses
may be legally unenforceable, or difficult to successfully
enforce, without payment.
The amount of the restraint payment is determined based on
the following circumstances:
-
If employment ceases due to termination for Cause, their
providing notice to the Company, or them not renewing
their contract then:
o
o
they will be entitled to restraint payments for 6
months at their monthly base salary, and
the Board will have the option, but not the obligation,
to extend the restraint period for up to an additional 6
months by paying the Relevant Executive a restraint
payment of up to USD 166,667 per month.
Annual Report 2020 | Directors’ Report
31
Remuneration report (audited)
-
If employment ceases due to the Company providing the
required contractual notice, the Board has the discretion,
but not the obligation, to enforce the restraint clauses in
the employment contract for up to 12 months by paying
the Relevant Executive a restraint payment of up to USD
166,667 per month.
- These payments are capped at a maximum of $2 million.
Sean McGould and Scott Perkins are entitled to participate in
incentive plans, including equity-based plans.
Kelly Perkins and Rob Swan, in addition to their base salary, are
entitled to semi-annual compensation calculated as 1.25% and
1.00% respectively of the gross revenue of Lighthouse Investment
Partners, LLC for the relevant six-month period and are entitled to
participate in equity-based plans.
Navigator Global Investments senior executives
Amber Stoney is engaged pursuant to an executive services
agreement. Ms Stoney’s working hours are 25 hours per week for
a base salary of A$330,000 per annum inclusive of
superannuation, and a cap to any short-term incentive bonus of
20% of this amount.
The Group may terminate Ms Stoney’s executive services
agreement at any time, without notice for a number of reasons
including bankruptcy, gross negligence or willful and serious
misconduct. In these circumstances there is no entitlement to a
termination payment. Ms Stoney may terminate the agreement at
any time by giving 6 months’ notice and the Group may terminate
the agreement at any time by giving 6 months’ notice or payment
in lieu.
Analysis of performance rights over equity instruments granted as remuneration
As at 30 June 2020 and 30 June 2019 there were no outstanding performance rights granted to any key management person of the Group.
Additional information
Movement in shares
The movement during the reporting period in the number of shares in the Company held, directly, indirectly or beneficially, by key management
personnel, including their related parties, is as follows:
Balance
1 July 2019
Purchases
Sales
Balance
30 June 2020
Directors
Michael Shepherd1
Fernando Esteban2
Andy Bluhm3
Sean McGould4
Executives
Scott Perkins
Kelly Perkins
Rob Swan
Amber Stoney5
125,000
27,000
13,101,982
19,438,083
2,936,512
2,405,624
2,936,512
180,374
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
125,000
27,000
13,101,982
19,438,083
2,936,512
2,405,624
2,936,512
180,374
1
2
3
4
5
125,000 shares are held indirectly by Tidala Pty Ltd as Trustee for the Shepherd Provident Fund.
27,000 shares are held indirectly by FJE Superannuation Fund.
13,101,982 shares are held indirectly by Delaware Street Capital Master Fund, LP (DSC). Mr Bluhm is the founder and principal of DSC Advisors, LP, which is
the investment manager of DSC.
19,436,083 shares are held indirectly by SGM Holdings, LLC.
162,396 shares are held indirectly by AJ Stoney Family Trust.
Other transaction with key management personnel
There were no other transactions with key management personnel during the year.
32
Annual Report 2020 | Directors’ Report
Indemnification and insurance
Rounding of amounts
In accordance with ASIC Corporations (Rounding in
Financial/Directors’ Reports) Instrument 2016/191
dated 24 March 2016, amounts in the financial report and
directors’ report have been rounded off to the nearest
thousand dollars, unless otherwise stated.
This report is made in accordance with a resolution of directors:
Michael Shepherd, AO
Chairman and Non-Executive Director
F P (Andy) Esteban
Non-Executive Director
Sydney, 13 August 2020
The Company has a Deed of Indemnity, Insurance and Access in
place with each of the Directors (‘the Deeds’). Pursuant to the
Deeds, the Company indemnifies each Director to the extent
permitted by law for losses and liabilities incurred by the Director
as an officer of the Company or of a subsidiary. This indemnity
remains in force for a period of 7 years from the date the Director
ceases to hold office as a director of the Company.
In addition, the Company will advance reasonable costs incurred
or expected to be incurred by the Director in defending relevant
proceedings on terms determined by the Board. No such
advances were made during the financial year.
During the year, the Group paid insurance premiums to insure the
Directors and Officers of the Company. The terms of the contract
prohibit the disclosure of the premiums paid.
Auditor
Ernst & Young is the auditor of the Group in accordance with
section 327 of the Corporations Act 2001.
Non-audit services
There were no non-audit services provided by the entity’s auditors
during the financial year.
Details of remuneration paid to auditors is presented in Note 22 of
the financial statements.
Indemnification
To the extent permitted by law, the Company has agreed to
indemnify its auditors, Ernst & Young Australia, as part of the
terms of its audit engagement agreement against claims by third
parties arising from the audit (for an unspecified amount).
No payment has been made to indemnify Ernst & Young Australia
during or since the end of the financial year.
Auditor’s independence declaration
The lead auditor’s independence declaration as required under
section 307C of the Corporations Act 2001 is set out on page 32
and forms part of the directors’ report for the financial year ended
30 June 2020.
Environmental regulation
The Group is not subject to any particular or significant
environmental regulation under any Australian Commonwealth,
State or Territory legislation.
Ernst & Young
111 Eagle Street
Brisbane QLD 4000 Australia
GPO Box 7878 Brisbane QLD 4001
Tel: +61 7 3011 3333
Fax: +61 7 3011 3100
ey.com/au
Auditor’s Independence Declaration to the Directors of Navigator Global
Investments Limited
As lead auditor for the audit of Navigator Global Investments Limited for the financial year ended 30
June 2020, I declare to the best of my knowledge and belief, there have been:
a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
b) no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Navigator Global Investments Limited and the entities it controlled during
the financial year.
Ernst & Young
Rebecca Burrows
Partner
13 August 2020
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
33
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36
37
38
39
40
41
Income statement
Statement of comprehensive income
Statement of financial position
Statement of changes in equity
Statement of cash flows
Notes to the financial statements
Results for the year
1. Operating segments
2.
3.
4.
5.
6.
7.
8.
Revenue
Expenses
Finance income and costs
Cash
Income tax
Dividends
Earnings per share
Operating assets and
liabilities
9.
10.
Trade and other receivables
Investments recognised at fair
value
11. Plant and equipment
12. Leases
13.
14. Trade and other payables
Employee benefits
15.
Intangible assets
Capital and risk
16. Capital management
17. Capital and reserves
18. Financial risk management
Group structure
Other disclosures
Basis of preparation
19. Group entities
20. Parent entity disclosures
21. Related parties
22. Auditors’ remuneration
23. Commitments
24. Contingent liabilities
25. Subsequent events
26. Corporate information
27. Statement of compliance
28. Basis of measurement
29. Functional and presentation
currency
30. Other accounting policies
Directors’ declaration
Independent auditor’s report
77
78
36
Annual Report 2020 | Financial Statements
Income statement
For the year ended 30 June 2020
Management fee revenue
Performance fee revenue
Revenue from reimbursement of fund operating expenses
Revenue from provision of office space and services
Other income
Total revenue
Operating expenses
Results from operating activities
Finance income
Finance costs
Profit before income tax
Income tax expense
Profit for the period
Consolidated US$’000
Note
2020
2019
2
2
2
2
2
3
4(a)
4(a)
6(a)
87,511
5,576
7,068
1,354
-
105,392
1,135
6,319
1,905
116
101,509
114,867
(75,910)
25,599
1,234
(964)
25,869
(7,721)
18,148
(78,718)
36,149
347
(192)
36,304
(9,461)
26,843
Attributable to equity holders of the parent
18,148
26,843
Earnings per share
Basic earnings per share
Diluted earnings per share
Consolidated US cents
2020
11.19
11.19
2019
16.55
16.55
8
8
The accompanying notes form part of these consolidated financial statements
Annual Report 2020 | Financial Statements
37
Statement of comprehensive income
For the year ended 30 June 2020
Consolidated US$’000
Note
2020
2019
Profit attributable to equity holders of the parent
18,148
26,843
Other comprehensive income
Other comprehensive income not to be reclassified to profit or loss in
subsequent periods:
Change in fair value of financial assets at fair value through other
comprehensive income
Income tax on financial assets at fair value through other comprehensive
income
Other comprehensive loss for the year
Total comprehensive income for the year, net of tax
4(b)
4(b)
(3,799)
926
(2,873)
15,275
(350)
94
(256)
26,587
Attributable to equity holders of the parent
15,275
26,587
The accompanying notes form part of these consolidated financial statements
38
Annual Report 2020 | Financial Statements
Statement of financial position
As at 30 June 2020
Assets
Cash
Trade and other receivables
Current tax assets
Total current assets
Investments recognised at fair value
Plant and equipment
Right-of-use assets
Deferred tax assets
Intangible assets
Other non-current assets
Total non-current assets
Total assets
Liabilities
Trade and other payables
Lease liabilities
Employee benefits
Current tax liabilities
Total current liabilities
Trade and other payables
Lease liabilities
Employee benefits
Total non-current liabilities
Total liabilities
Net assets
Equity
Share capital
Reserves
Accumulated losses
Total equity attributable to equity holders of the Company
The accompanying notes form part of these consolidated financial statements
Note
5(a)
9
6(b)
10
11
12
6(c)
13
14
12
15
6(b)
14
12
15
17
17(b)
Consolidated US$’000
2020
2019
27,032
16,047
19
43,098
14,734
7,389
19,280
45,972
94,513
2,503
184,391
227,489
2,944
2,377
485
-
5,806
218
20,783
90
21,091
26,897
29,029
19,423
-
48,452
17,953
4,791
-
52,584
95,656
1,422
172,406
220,858
3,343
-
600
6
3,949
2,687
-
102
2,789
6,738
200,592
214,120
257,355
13,682
(70,445)
200,592
257,355
33,119
(76,354)
214,120
Annual Report 2020 | Financial Statements
39
Statement of changes in equity
For the year ended 30 June 2020
Consolidated US$’000
Amounts attributable to equity holders of the parent
Share
Based
Payments
Reserve
Fair Value
Reserve
(financial
assets at
FVOCI)
Parent
Entity
Profits
Reserve
Accum-
ulated
Losses
Translation
Reserve
Total Equity
Note
Share
Capital
Balance at 1 July 2018
Net profit for the year
Transfer to parent entity profits
reserve1
20
Other comprehensive income
Net change in fair value of
financial assets at fair value
through other comprehensive
income
Income tax on other
comprehensive income
Total other comprehensive loss,
net of tax
Total comprehensive income
for the year, net of tax
4(b)
4(b)
Dividends to equity holders
7
Balance at 30 June 2019
Adoption of new accounting
standard
Balance at 1 July 2019
Net profit for the year
Transfer to parent entity profits
reserve1
20
Other comprehensive income
Net change in fair value of
financial assets at fair value
through other comprehensive
income
Income tax on other
comprehensive income
Total other comprehensive loss,
net of tax
Total comprehensive income
for the year, net of tax
4(b)
4(b)
Dividends to equity holders
7
257,355
13,326
2,281
850
14,911
(73,739)
214,984
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(350)
94
(256)
(256)
-
-
-
-
-
-
-
-
-
26,843
26,843
29,458
(29,458)
-
-
-
-
-
-
-
(350)
94
(256)
29,458
(2,615)
26,587
(27,451)
-
(27,451)
257,355
13,326
2,025
850
16,918
(76,354)
214,120
-
-
-
-
-
(595)
(595)
257,355
13,326
2,025
850
16,918
(76,949)
213,525
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(3,799)
926
(2,873)
(2,873)
-
-
-
-
-
-
-
-
-
18,148
18,148
11,644
(11,644)
-
-
-
-
-
-
-
(3,799)
926
(2,873)
11,644
6,504
15,275
(28,208)
-
(28,208)
Balance at 30 June 2020
257,355
13,326
(848)
850
354
(70,445)
200,592
1 Relates to the net profit of the parent entity (Navigator Global Investments Limited).
The accompanying notes form part of these consolidated financial statements
40
Annual Report 2020 | Financial Statements
Statement of cash flows
For the year ended 30 June 2020
Consolidated US$’000
Note
2020
2019
5(b)
Cash flows from operating activities
Cash receipts from operating activities
Cash paid to suppliers and employees
Cash generated from operations
Bank interest received
Lease interest received
Lease interest paid
Income taxes paid
Net cash from operating activities
Cash flows from investing activities
Acquisition of plant and equipment
Proceeds from disposal of investments
Acquisition of investments
Transaction costs associated with MAS transaction
Distributions received from investments
Acquisition of other non-current assets
Net cash used in investing activities
Cash flows from financing activities
Lease payments received from finance leases
Payment of principal portion of lease liabilities
Dividends paid to equity holders
Net cash used in financing activities
Net decrease in cash
Cash balance at 1 July
Effect of exchange rate fluctuations on cash balances held in foreign currencies
Cash balance as at 30 June
5(a)
The accompanying notes form part of these consolidated financial statements
106,509
(73,282)
33,227
166
13
(823)
(21)
32,562
(4,204)
561
(414)
-
1
(916)
(4,972)
108
(1,536)
(28,208)
(29,636)
(2,046)
29,029
49
27,032
110,002
(87,492)
22,510
119
-
-
(64)
22,565
(1,506)
277
(1,900)
(1,088)
-
(50)
(4,267)
-
-
(27,451)
(27,451)
(9,153)
38,212
(30)
29,029
Annual Report 2020 | Financial Statements
41
Notes to the financial statements
For the year ended 30 June 2020
Results for the Year
This section of the notes to the financial statements focuses on the results and performance of the Navigator Global Investments Limited
Group. On the following pages you will find disclosures explaining the Group’s results for the year, segment information, taxation and
earnings per share.
Where an accounting policy or key estimate is specific to a single note, the policy or estimate is described in the note to which it relates.
Operating segments
As at 30 June 2020, the Group had one reportable segment, being
the US based Lighthouse Group, which operates as a global
absolute return funds manager for investment vehicles.
Corporate includes assets and liabilities and corporate expenses
relating to the corporate parent entity, Navigator Global
Investments Limited, and balances that are eliminated on
consolidation of the Group and are not considered to be operating
segments.
No operating segments have been aggregated to form the above
reportable operating segments.
The CEO is responsible for day-to-day operations and the
implementation of business strategy. Internal management reports
are provided to the CEO on a monthly basis to monitor the
operating results of its business for the purpose of making
decisions about resource allocation and performance assessment.
Business unit performance is evaluated based on the financial
information as set out below, as well as other key metrics such as
Assets under Management and the average management fee rate.
Lighthouse US$’000
Corporate US$’000
Consolidated US$’000
2020
2019
2020
2019
2020
2019
Operating revenue
Other revenue
92,953
106,386
134
8,422
8,340
-
141
-
93,087
106,527
8,422
8,340
Total revenue from contracts with
customers
Operating expenses (excluding depreciation
and amortisation)
101,375
114,726
134
141
101,509
114,867
(68,781)
(76,353)
(3,131)
(891)
(71,912)
(77,244)
Result from operating activities
32,594
38,373
(2,997)
(750)
29,597
37,623
Net finance income / (costs) (excluding
interest)
Earnings before interest, tax, depreciation
and amortisation
Interest revenue
Interest expense
887
53
34
(24)
921
29
33,481
38,426
(2,963)
(774)
30,518
37,652
58
(824)
83
-
116
(1)
(17)
43
-
(4)
174
(825)
126
-
(3,998)
(1,474)
Depreciation and amortisation
(3,981)
(1,470)
Reportable segment profit / (loss) before
income tax
28,734
37,039
(2,865)
(735)
25,869
36,304
Income tax expense
(7,721)
(9,461)
- -
(7,721)
(9,461)
Reportable segment profit / (loss) after
income tax
Segment assets
Segment liabilities
Net assets
21,013
27,578
(2,865)
(735)
18,148
26,843
215,983
202,416
11,506
18,442
227,489
220,858
(25,985)
(6,461)
(912)
(277)
(26,897)
(6,738)
189,998
195,955
10,594
18,165
200,592
214,120
42
Annual Report 2020 | Financial Statements
Notes to the financial statements
For the year ended 30 June 2020
Revenue
Management fees from commingled funds
Management fees from customised solutions clients
Performance fees
Operating revenue
Revenue from reimbursement of fund operating expenses
Revenue from provision of office space and services
Other income
Other revenue
Consolidated US$’000
2020
49,917
37,594
5,576
93,087
7,068
1,354
-
8,422
2019
62,435
42,957
1,135
106,527
6,319
1,905
116
8,340
Total revenue from contracts with customers
101,509
114,867
Management fees
Management fees are received from customers for providing:
investment management / advice and related services to
commingled funds; and
investment management / advice and / or managed account
services to customised solutions clients.
Management fee revenue is based on a percentage of the
customer’s portfolio value and is calculated in accordance with the
applicable document or agreement which creates the contractual
relationship with the customer. The management fee is a single
fee which covers all of the individual components which make up
the management service. Management fee revenue is variable in
nature as it is based on a percentage of the customer’s portfolio
value.
The Group’s obligation to provide management services to
customers is satisfied as and when the customer receives and
consumes the services on a continuous basis. The Group
recognises revenue for the services performed at the end of each
month.
Performance fees
Performance fees may be received from some commingled fund
share classes and some customised solutions clients.
The amount of the performance fee is calculated in accordance
with the terms of the applicable contract with the customer. The
entitlement to performance fees for any given performance period
is dependent on the customer’s portfolio achieving a positive
performance, and in some cases in outperforming an agreed
hurdle. Performance fees are generally also subject to a high
watermark arrangement which ensures that fees are not earned
more than once on the same performance.
The Group satisfies its obligations to provide services in exchange
for the performance fee revenue on a continuous basis, however
the right to receive the revenue is constrained by achieving the
required performance hurdles and/or high watermark. As such,
performance fee revenue is only recognised to the extent that it is
probable that a significant reversal of the revenue will not occur.
Due to the uncertainty associated with the estimate of performance
fees prior to the end of the performance period, this revenue is not
recognised in the income statement until the entitlement to receive
the fee becomes certain, which is at the end of the relevant
performance period. At all times prior to this, there is a high
probability of any revenue recognised being reversed.
Performance periods for performance fee arrangements range
from between 1 month to 1 year.
Annual Report 2020 | Financial Statements
43
Notes to the financial statements
For the year ended 30 June 2020
Revenue (continued)
Major revenue source
14% (2019: 14%) of the Group’s operating revenue relates to
management fees and performance fees earned on the Lighthouse
Diversified commingled funds.
13% (2019: 14%) of the Group’s operating revenue relates to
management fees and performance fees earned on the Lighthouse
Global Long/Short commingled funds.
The Group’s largest individual client represents 11% of operating
revenue (2019: 8%).
The Group’s three largest individual clients combined represent
22% of operating revenue (2019: 16%).
Revenue from reimbursement of fund operating
expenses
The Group is entitled to reimbursement for fund expenses that it
has paid on behalf of the funds. While the funds generally pay
their own operating expenses directly, there are some expenses,
such as financial data services, software and technology
expenses, where it is more practical for the Group to incur and pay
the expense and then be reimbursed by the funds.
The Group enters into contracts for the relevant good or service
directly with the third party service providers, and hence the Group
controls the good or service until it subsequently directs the good
or service to be transferred to the fund.
As the Group controls the good or service before it is transferred,
the Group is not acting in a capacity as agent for the fund. The
Group is required to recognise both:
the expense incurred under the contract with the third-party
service providers (see note 3) to receive the good or service;
and
the revenue to which it expects to be entitled from the fund in
exchange for transferring the good or service.
The revenue and expense in relation to these reimbursed costs
directly off-set as the Group does not add a margin to the original
cost of the good or service transferred to the fund.
Revenue from the provision of office space and
services
The Group has a number of agreements with external parties to
license office space at its New York and London offices. As part of
these agreements, licensees are charged license fees and service
charges on a monthly basis.
The Group has two obligations in relation to these agreements:
to provide office space to licensees, including services in
connection with licensees’ use and occupancy of the office
space; and
to provide other on-going business services.
The Group’s obligation to provide office space services and its
obligation to provide business services to licensees are satisfied
as and when the customer receives and consumes the services on
a continuous basis. The Group recognises revenue as the amount
to which it has a right to invoice for the period.
The Group is entitled to:
a license fee and an occupancy-related service charge as per
the terms of the applicable contract with each licensee as it
satisfies its obligations to provide office space and related
services; and
a service charge as per the terms of the applicable contract
with each licensee as it satisfies its obligations to provide
business services.
44
Annual Report 2020 | Financial Statements
Notes to the financial statements
For the year ended 30 June 2020
Expenses
Employee expense
Professional and consulting expenses
Information and technology expense
Reimbursable fund operating expenses
Occupancy expense
Distribution expense
Travel expense
Depreciation of plant and equipment
Lease depreciation
Amortisation of intangible assets
Impairment losses
Other expenses
Total expenses
Consolidated US$’000
2020
2019
(44,216)
(48,573)
(8,143)
(3,540)
(7,068)
(1,583)
(2,798)
(785)
(1,606)
(2,018)
(374)
(769)
(3,010)
(75,910)
(6,800)
(3,631)
(6,319)
(3,959)
(3,401)
(1,719)
(975)
-
(499)
-
(2,842)
(78,718)
Employee expense
The largest operating expense is employee expense. Employee
expense includes salaries and wages, together with the cost of
other benefits provided to employees such as contributions to
superannuation and retirement plans, health care benefits,
educational assistance and cash bonuses. It also includes
regulatory costs such as payroll tax.
Employee expense for the year ended 30 June 2020 includes
contributions to defined contribution superannuation and pension
plans of $1,156 thousand (2019: $1,527 thousand).
A defined contribution plan is a post-employment benefit plan
under which the Group pays fixed contributions to a separate entity
and will have no legal or constructive obligation to pay further
amounts. Obligations for contributions to defined contribution
plans are recognised as an employee benefit expense in profit or
loss in the periods during which services are rendered by
employees.
Reimbursable fund operating expenses
The Group is entitled to reimbursement for fund expenses that it
has paid on behalf of the funds. While the funds generally pay
their own operating expenses directly, there are some expenses,
such as financial data services, software and technology
expenses, where it is more practical for the Group to incur and pay
the expense and then be reimbursed by the funds.
A corresponding amount of revenue from reimbursement of fund
operating expenses has also been recognised for the year (see
note 2).
Occupancy expense
Under AASB 16 Leases, occupancy expense in the current year
relates to short-term leases and common area maintenance costs.
The comparative information continues to be presented under
AASB 117, which includes all payments made for operating leases
charged to profit or loss on a straight-line basis over the period of
the lease.
Distribution expense
Distribution expenses are paid to external intermediaries for
marketing and investor servicing, largely in relation to commingled
funds. Distribution expenses are variable in line with AUM and the
associated management fee revenue. This expense is recognised
on an accrual basis.
Lease depreciation
Lease depreciation has been recognised in the current year in
accordance with AASB 16 Leases. The Group’s right-of-use asset
is depreciated using the straight-line method over the term of the
lease.
Annual Report 2020 | Financial Statements
45
Notes to the financial statements
For the year ended 30 June 2020
Finance income and costs
a) Recognised directly in profit or loss
Finance income
Interest income on bank deposits
Finance income on net investment in finance lease
Net foreign exchange gain
Net change in fair value of financial assets at fair value through profit or loss
Distribution income from financial assets at fair value through profit or loss
Total finance income
Finance costs
Bank charges
Net foreign exchange loss
Lease interest expense
Other interest expense
Total finance costs
Net finance costs recognised in profit or loss
Finance income
Interest income is recognised in profit or loss as it accrues.
Finance income on net investment in finance lease is recognised
over the term of the lease based on a pattern reflecting a constant
rate of return on the lessor’s net investment in the lease. Refer to
Note 12 for additional detail.
Distribution income is recognised on the date that the Group’s right
to receive payment is established.
Foreign currency gains and losses are reported on a net basis as
either finance income or finance costs depending on whether
foreign currency movements result in a net gain or net loss
position for the reporting period.
Financial assets at fair value through profit or loss are carried in
Consolidated US$’000
2020
2019
161
13
332
727
1
1,234
(139)
-
(823)
(2)
(964)
270
126
-
-
221
-
347
(126)
(66)
-
-
(192)
155
the statement of financial position at fair value, with changes in fair
value reported in the profit or loss on a net basis as either finance
income or finance costs depending on whether the fair value
movements result in a net gain or net loss position for the reporting
period.
Finance costs
Lease interest expense relates to the Group’s lease liabilities and
is charged to profit or loss over the lease period so as to produce a
constant periodic rate of interest on the remaining balance of the
liability for each period. Refer to Note 12 for additional detail.
Other interest expense reflects the current period finance cost
associated with unwinding the discount recognised on the Group’s
office lease make good provision.
46
Annual Report 2020 | Financial Statements
Notes to the financial statements
For the year ended 30 June 2020
Finance income and costs (continued)
b) Recognised directly in other comprehensive income
Change in fair value of financial assets at fair value through other comprehensive income
Income tax expense recognised directly in equity
Finance income attributable to equity holders recognised directly in equity
Recognised in:
Fair value reserve
Consolidated US$’000
2020
(3,799)
926
(2,873)
2019
(350)
94
(256)
(2,873)
(256)
Financial assets at fair value through other comprehensive income
are carried in the statement of financial position at fair value, with
changes in fair value reported in other comprehensive income and
presented in the fair value reserve in equity (refer note 10).
Upon sale or derecognition of these investments, any gain or loss
will be transferred to retained earnings.
Cash
a) Cash
Cash at bank
Term deposits less than 90 days
Consolidated US$’000
2020
16,232
10,800
27,032
2019
12,429
16,600
29,029
At balance date, AUD deposits earn interest of 0.05% (2019:
1.05%); USD deposits earn interest between 0% and 0.73% (2019:
between 0% and 2.15%).
The carrying amount of these assets is a reasonable
approximation of fair value. The Group’s exposure to interest rate
and foreign currency risk on cash is disclosed in note 18.
Annual Report 2020 | Financial Statements
47
Notes to the financial statements
For the year ended 30 June 2020
Cash (continued)
b) Reconciliation of cash flows from operating activities
Consolidated US$’000
Cash flows from operating activities
Profit for the period
Adjustments for:
Depreciation of plant and equipment
Lease depreciation
Amortisation of intangible assets
Impairment losses
Distributions from financial asset at fair value through profit or loss
Net foreign exchange (gain) / loss
Fair value gain on financial assets at fair value through profit or loss
Other interest expense (non-cash)
Income tax expense, less income tax paid
Operating cash flow before changes in working capital and provisions
Decrease / (increase) in receivables
(Increase) / decrease in other current assets
(Decrease) / increase in payables
Increase in deferred rent expense
Decrease in employee benefits
Net cash from operating activities
Note
3
3
3
3
4(a)
4(a)
4(a)
4(a)
2020
18,148
1,606
2,018
374
769
(1)
(332)
(727)
2
7,700
29,557
5,005
(1,562)
(315)
-
(123)
32,562
2019
26,843
975
-
499
-
-
66
(221)
-
9,397
37,559
(4,872)
24
1,027
9
(11,182)
22,565
48
Annual Report 2020 | Financial Statements
Notes to the financial statements
For the year ended 30 June 2020
Income tax
The Company is the only Australian resident tax-paying entity within the Group. Non-Australian entities within the Group are part of a US
consolidated tax group.
Income tax expense comprises current and deferred tax and is recognised in profit or loss, except to the extent that it relates to items
recognised directly in equity or in other comprehensive income.
a) Reconciliation of effective tax rate
Profit before income tax
Income tax using the Company’s domestic tax rate of 30% (2019: 30%)
Effect of tax rates in foreign jurisdictions
Non-deductible / non-assessable amounts included in accounting profit
Amounts not included in accounting profit
Current year tax losses for which no deferred tax asset is initially recognised
Changes in estimates related to prior years
Consolidated US$’000
2020
25,869
(7,760)
1,026
(886)
(320)
330
(111)
2019
36,304
(10,891)
2,064
(247)
(146)
141
(382)
Total income tax expense reported in profit or loss
(7,721)
(9,461)
b) Current tax assets and liabilities
Current tax assets
Current tax liabilities
Current tax assets and liabilities represent the amount of income
taxes receivable or payable to the relevant tax authority, using
rates current at reporting date.
Consolidated US$’000
2020
19
-
2019
-
(6)
Annual Report 2020 | Financial Statements
49
Notes to the financial statements
For the year ended 30 June 2020
Income tax (continued)
c) Deferred tax assets
Deferred tax is recognised in respect of temporary differences
between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for taxation purposes.
Deferred tax is not recognised for temporary differences related to
investments in wholly-owned subsidiaries to the extent that it is
probable that they will not reverse in the foreseeable future.
Deferred tax is measured at the tax rates that are expected to be
applied to temporary differences when they reverse, based on the
laws that have been enacted or substantively enacted by reporting
date.
Deferred tax assets and liabilities are offset if there is a legally
enforceable right to offset, and they relate to income taxes levied
by the same tax authority on a tax consolidated group of entities.
Deferred tax assets – US Group
Deferred tax assets have been recognised in respect of the following items:
Carried forward tax losses
Goodwill and intangible assets
Employee benefits
Financial assets at fair value through profit or loss
Financial assets at fair value through other comprehensive income
Other items
In determining the amount of current and deferred tax, the Group
takes into account the impact of uncertain tax positions and
whether additional taxes and interest may be due. This
assessment relies on estimates and assumptions and may involve
interpretations of tax law and judgements about future events. New
information may become available that causes the Group to
change its judgement regarding the calculation of tax balances,
and such changes will impact the profit or loss in the period that
such a determination is made.
A deferred tax asset is recognised only to the extent that it is
probable that future taxable profits will be available against which
the asset can be utilised. Deferred tax assets are reduced to the
extent that it is no longer probable that the related tax benefit will
be realised.
The carrying value of both recognised and unrecognised deferred
tax assets are reassessed at each reporting date.
Consolidated US$’000
2020
32,455
11,448
92
(432)
264
2,145
45,972
2019
30,647
20,635
20
(269)
(658)
2,209
52,584
As at 30 June 2020 it is considered more likely than not that the
US Group’s carried forward tax losses and deductible temporary
differences will be fully recovered. This position is supported by
the current profitability of the US Group which is expected to
continue into the future.
Carried forward tax losses relating to the US Group which existed
prior to 1 January 2018 have a life of 20 years, and will expire
during the period from 2029 to 2038. Any tax losses incurred after
1 January 2018 will have an indefinite life.
50
Annual Report 2020 | Financial Statements
Notes to the financial statements
For the year ended 30 June 2020
Income tax (continued)
c) Deferred tax assets (continued)
Deferred tax assets – Australian Group
Deferred tax assets have not been recognised in respect of the following items:
Deductible temporary differences
Tax losses
Consolidated US$’000
2020
80,623
2,962
83,585
2019
59,262
3,370
62,632
Unrecognised deferred tax assets relating to the Australian Group
consist of deductible temporary differences (including impairment
losses recognised in previous financial years), and carried forward
operating tax losses.
As at 30 June 2020, it is not probable that the Australian Group will
produce sufficient taxable profits or capital gains against which
these deferred tax assets can be utilised and therefore the
deferred tax assets remain unrecognised.
$80,623 thousand (30 June 2019: $59,262 thousand) of the
deductible temporary differences not recognised relate to
impairment write-downs taken during the years ended 30 June
2009 and 30 June 2020 on the carrying value of the Lighthouse
Group. The realisation of this tax asset is subject to the application
of relevant tax legislation and the structure of any future business
transactions in relation to the Lighthouse Group, if and when any
such transaction was to occur.
Tax losses relating to the Australian Group and deductible
temporary differences do not expire under current tax legislation.
Annual Report 2020 | Financial Statements
51
Notes to the financial statements
For the year ended 30 June 2020
Dividends
a) Dividends paid
The following dividends were paid by the Company:
Interim ordinary dividend for the year ended 30 June 2020 of USD 8.5 cents
Final ordinary dividend for the year ended 30 June 2019 of USD 9.0 cents
Interim ordinary dividend for the year ended 30 June 2019 of USD 8.0 cents
Final ordinary dividend for the year ended 30 June 2018 of USD 9.0 cents
The Directors have determined a final unfranked dividend of 5.5
cents per share (with 0% conduit foreign income credits). The
dividend will be paid on 4 September 2020.
The dividends were not determined or provided for as at 30 June
2020, and there are no income tax consequences.
b) Dividend franking account
Amount of franking credits available to shareholders of Navigator Global Investments Limited
for subsequent financial years
Dividends paid and declared during the 2020 financial year have
been unfranked. The movement in the franking account balance
relates to foreign currency movements only.
Consolidated US$’000
2020
13,668
14,540
-
-
28,208
2019
-
-
12,741
14,710
27,451
Consolidated US$’000
2020
707
2019
722
52
Annual Report 2020 | Financial Statements
Notes to the financial statements
For the year ended 30 June 2020
Earnings per share
Basic earnings per share
Diluted earnings per share
Reconciliation of earnings used in calculating earnings per share
Basic and diluted earnings per share
Profit attributable to ordinary equity holders of the Company used in calculating basic
and diluted earnings per share
Consolidated US$’000
2020
11.19
11.19
2019
16.55
16.55
Consolidated US$’000
2020
18,148
2019
26,843
Weighted average number of shares used in calculating basic and diluted earnings per share
Issued ordinary shares at 1 July
16
Weighted average number of ordinary shares used in calculating basic,
diluted and underlying earnings per share
The Company did not have any potential ordinary shares
outstanding at balance date. The weighted average number of
shares used in calculating basic and diluted earnings per share are
therefore the same.
’000 shares
2020
162,148
162,148
2019
162,148
162,148
Annual Report 2020 | Financial Statements
53
Notes to the financial statements
For the year ended 30 June 2020
Operating assets and liabilities
This section of the notes to the financial statements provides information on the operating assets and liabilities of the Navigator Global
Investments Limited Group, including explanations of the Group’s key assets used to generate operating results and the corresponding
liabilities. Information on other assets and liabilities can be found in the following sections:
Section 1 – Cash; Deferred tax assets
Section 3 – Capital and reserves
Where an accounting policy or key estimate is specific to a single note, the policy or estimate is described in the note to which it relates.
Trade and other receivables
Trade receivables from contracts with customers
Other receivables and prepayments
Consolidated US$’000
2020
13,674
2,373
16,047
2019
18,733
690
19,423
Trade receivables from contracts with customers
Other receivables and prepayments
Trade receivables due from contracts with customers comprise
management service fees, performance fees, recoverable costs,
licence fees, outgoings and other operating expenses on-charged
under agreements with external parties to licence office space.
Trade receivables are non-interest bearing and are generally on
30 to 90 day terms. Trade receivables are initially recognised at
fair value, being the amount to which the Group has the right to
invoice for the period for the services or recoverable costs
provided.
Due to the short-term nature of the Group’s trade receivables and
the historically low default rate on payment by customers, there is
no credit allowance against trade receivables as at 30 June 2020
or 30 June 2019. In determining this credit allowance, the Group
has considered forward looking factors specific to the receivables
and the economic environment and determined that any allowance
would be insignificant.
Other receivables and prepayments relate to items such as
prepaid expenses (principally in relation to software licences and
insurance policies), short-term deposits, interest receivable on
cash deposits, pending redemptions from investments in Group
managed products, and the current portion of finance leases
receivable.
The carrying amount of these assets is a reasonable
approximation of fair value. The Group’s exposure to credit risk,
currency risk and impairment losses related to trade and other
receivables is disclosed in note 18.
54
Annual Report 2020 | Financial Statements
Notes to the financial statements
For the year ended 30 June 2020
Consolidated US$’000
2020
1,489
13,245
14,734
2019
5,288
12,665
17,953
Investments recognised at fair value
Financial assets at fair value through other comprehensive income
Financial assets at fair value through profit or loss
Financial assets at fair value through other comprehensive income
Financial assets at fair value through other comprehensive income
comprise non-controlling equity holdings in unquoted securities of
US based companies over which the Group does not have
significant influence.
The Group has elected to account for these investments at fair
value with changes to fair value recognised through other
comprehensive income in the fair value reserve. Upon sale or
derecognition of these investments, any gain or loss will be
transferred to retained earnings.
Note 18 provides details on the methods used to determine fair
value for measurement and disclosure purposes.
Financial assets at fair value through profit or loss
These assets have been classified as fair value through profit or
loss upon initial recognition with changes in fair value recognised
in profit or loss. Note 18 provides details on the methods used to
determine fair value for measurement and disclosure purposes.
Annual Report 2020 | Financial Statements
55
Notes to the financial statements
For the year ended 30 June 2020
Plant and equipment
Cost
Balance at 1 July 2018
Additions
Disposals
Balance at 30 June and 1 July 2019
Additions
Disposals
Balance at 30 June 2020
Depreciation
Balance at 1 July 2018
Depreciation for the year
Disposals
Balance at 30 June and 1 July 2019
Depreciation for the year
Disposals
Balance at 30 June 2020
Carrying amounts
At 1 July 2018
At 30 June and 1 July 2019
As at 30 June 2020
Consolidated US$’000
Furniture &
equipment
Computer
equipment &
software
Leasehold
improvements
Total
1,847
695
-
2,542
520
-
3,062
(1,068)
(150)
-
(1,218)
(188)
-
(1,406)
779
1,324
1,656
3,459
848
(41)
4,266
2,208
(5)
6,469
(2,582)
(568)
4
(3,146)
(1,110)
5
(4,251)
877
1,120
2,218
1,580
1,572
-
3,152
1,476
-
4,628
(548)
(257)
-
(805)
(308)
-
(1,113)
1,032
2,347
3,515
6,886
3,115
(41)
9,960
4,204
(5)
14,159
(4,198)
(975)
4
(5,169)
(1,606)
5
(6,770)
2,688
4,791
7,389
Recognition and measurement
Items of plant and equipment are measured at cost less
accumulated depreciation and impairment.
Cost includes expenditures that are directly attributable to the
acquisition of the asset. Purchased software that is integral to the
functionality of the related equipment is capitalised as part of that
equipment. Ongoing repairs and maintenance is expensed as
incurred.
An item of plant and equipment is derecognised upon disposal or
when no further future economic benefits are expected from its
use. Gains and losses on disposal of an item are determined by
comparing the proceeds from disposal with the carrying amount,
and are recognised in profit or loss.
Depreciation
Depreciation is recognised in the profit or loss on a straight-line
basis over the estimated useful life of the asset as follows:
Leasehold improvements:
Lease term
Computer software and equipment:
2-3 years
Furniture and equipment:
5-20 years
The residual value, the useful life and the depreciation method
applied to an asset are reassessed at least annually. The carrying
value of plant and equipment is reviewed for impairment when
events or changes in circumstances indicate the carrying value
may not be recoverable.
56
Annual Report 2020 | Financial Statements
Notes to the financial statements
For the year ended 30 June 2020
Leases
The Group has a number of leases for office premises and equipment with lease terms varying from 2 months to 9 years. The Group adopted
AASB 16 on 1 July 2019 under the modified retrospective approach and therefore the comparative information continues to be reported under
AASB 117. Refer to Note 30 for the impact of change in accounting policy.
a) Group as lessee
Amounts recognised in the balance sheet
Right-of-use assets
Balance at 1 July 2019
Additions
Depreciation for the period
Balance at 30 June 2020
Lease liabilities
Consolidated US$’000
Office premises
Total
14,101
7,197
(2,018)
19,280
14,101
7,197
(2,018)
19,280
Consolidated US$’000
Balance at
1 July 2019
Cash flows
Foreign
exchange
New leases
Other
Balance at
30 June 2020
Lease liabilities - current
Lease liabilities – non-current
1,629
16,383
18,012
(1,536)
-
(1,536)
-
(339)
(339)
39
6,984
7,023
2,245
(2,245)
-
2,377
20,783
23,160
The ‘Other’ column includes the effect of reclassification of non-current portion of lease liabilities to current due to the passage of time. The
Group classifies interest paid as cash flows from operating activities.
Lease payments have been discounted using the following incremental borrowing rates:
Office premises:
3.23% to 4.36%
The Group discounts lease payments using its incremental borrowing rate as of 1 July 2019 or the date of entering into a new lease.
Incremental borrowing rates are determined for each lease based on its maturity profile. The rates for US based leases were determined in
reference to the 1 month USD Swap Monthly Money rate to effectively swap the Group’s current Line of Credit borrowing rate (1 month USD
LIBOR) to a fixed longer term borrowing. For non-US based leases, comparable country specific reference rates were selected. All rates were
supplemented by a margin to reflect a leasing risk premium.
Consolidated US$’000
Contractual
cash flows
6 months
or less
6-12
months
1-2 years
2-5 years
More than
5 years
30 June 2020
Lease liabilities
(27,292)
(1,430)
(1,837)
(3,629)
(9,540)
(10,856)
Total undiscounted lease liabilities
(27,292)
(1,430)
(1,837)
(3,629)
(9,540)
(10,856)
Future finance charges
Lease liabilities in the statement of financial position
Current
Non-current
(4,132)
23,160
2,377
20,783
Annual Report 2020 | Financial Statements
57
Notes to the financial statements
For the year ended 30 June 2020
Leases (continued)
Amounts recognised in the statement of profit or loss
Lease interest expense (included in finance costs)
Expense relating to short-term leases (included in occupancy expense)
Expense relating to leases of low-value assets that are not shown above as short-term leases (included in
occupancy expense)
Income from subleasing right-of-use assets
Consolidated
US$’000
2020
823
520
18
13
Total cash outflow for leases in 2020 was $2.8 million.
Lease accounting policies
At inception of a contract, the Group assesses whether a contract
is, or contains, a lease. A contract is, or contains, a lease if the
contract conveys the right to control the use of an identified asset
for a period of time in exchange for consideration.
Contracts may contain both lease and non-lease components. The
Group allocates the consideration in the contract to the lease and
non-lease components based on their relative stand-alone prices.
Leases are recognised as a right-of-use asset and a
corresponding liability at the date at which the leased asset is
available for use by the Group. Assets and liabilities arising from a
lease are initially measured on a present value basis.
The Group has elected not to recognise right-of-use assets and
lease liabilities for short-term leases of office premises that have a
lease term of 12 months or less, and leases of low-value assets
comprising certain equipment. The Group recognises the lease
payments associated with these leases as an expense on a
straight-line basis over the lease term.
The lease liability is initially measured at the present value of the
remaining lease payments, discounted using the interest rate
implicit in the lease or, if that rate cannot be readily determined,
the Group’s incremental borrowing rate. Generally, the Group uses
its incremental borrowing rate as the discount rate.
Lease liabilities include the net present value of fixed payments
(including in-substance fixed payments) less any lease incentives
receivable, variable lease payments (linked to an index or a rate),
and any expected residual value guarantee payments.
Lease payments to be made under reasonably certain extension
options are also included in the measurement of the liability.
Possible future cash outflows amounting to $13.5 million were not
included in the lease liability because it is not reasonably certain
that the leases will be extended.
Lease payments are allocated between principal and finance cost.
The finance cost is charged to profit or loss over the lease period
so as to produce a constant periodic rate of interest on the
remaining balance of the liability for each period.
The right-of-use asset is initially measured at cost, which
comprises the initial amount of the lease liability adjusted for any
lease payments made at or before the commencement date, plus
any initial direct costs incurred or restoration obligations, less any
lease incentives received.
The right-of-use asset is subsequently depreciated using the
straight-line method over the term of the lease. An impairment
review is undertaken for any right-of-use lease asset that shows
indicators of impairment, and an impairment loss is recognised
against any right-of-use lease asset that is impaired.
58
Annual Report 2020 | Financial Statements
Notes to the financial statements
For the year ended 30 June 2020
Leases (continued)
b) Group as sublessor
Amounts recognised in the balance sheet
Consolidated US$’000
Contractual
cash flows
6 months or
less
6-12
months
1-2 years
2-3 years
30 June 2020
Finance lease receivable
Total undiscounted lease receivable
Unearned finance income
Finance lease receivable in the statement of financial position
Current
Non-current
Amounts recognised in the statement of profit or loss
290
290
(13)
277
112
165
Finance income on net investment in the lease
60
60
60
60
120
120
50
50
Consolidated
US$’000
2020
13
The Group currently subleases one of its office premises. Under
AASB 16, this is classified as a finance lease as the sublease is for
the whole of the remaining term of the head lease. This lease was
accounted for as an operating lease under AASB 117.
When the Group is an intermediate lessor, it accounts for its
interests in the head lease and the sublease separately. At
inception of each sublease, the Group determines whether it is a
finance lease or an operating lease. It assesses the lease
classification with reference to the right-of-use asset arising from
the head lease, not with reference to the underlying asset.
If an arrangement contains lease and non-lease components, the
Group applies AASB 15 to allocate the consideration in the
contract.
Finance income is recognised over the term of the sublease based
on a pattern reflecting a constant rate of return on the lessor’s net
investment in the lease. For purposes of calculating finance
income on the sublease, the Group has used the incremental
borrowing rate on the head lease.
Annual Report 2020 | Financial Statements
59
Notes to the financial statements
Consolidated US$’000
Goodwill
Trademarks
Software
Client
relationships
Total
499,519
-
499,519
-
499,519
(405,718)
-
1,900
-
1,900
-
1,900
(998)
(95)
2,050
-
2,050
-
2,050
(1,675)
(250)
(1,925)
(125)
-
-
1,077
1,077
-
1,077
-
(154)
(154)
(154)
(769)
503,469
1,077
504,546
-
504,546
(408,391)
(499)
(408,890)
(374)
(769)
93,801
93,801
93,801
902
807
712
375
125
-
-
923
-
95,078
95,656
94,513
Balance at 30 June and 1 July 2019
(405,718)
(1,093)
Amortisation for the year
Impairment losses
-
-
(95)
-
Balance at 30 June 2020
(405,718)
(1,188)
(2,050)
(1,077)
(410,033)
For the year ended 30 June 2020
Intangible assets
Cost
Balance at 1 July 2018
Additions
Balance at 30 June and 1 July 2019
Additions
Balance at 30 June 2020
Amortisation and impairment losses
Balance at 1 July 2018
Amortisation for the year
Carrying amounts
At 1 July 2018
At 30 June and 1 July 2019
At 30 June 2020
Intangible assets
Goodwill
Goodwill that arises upon the acquisition of subsidiaries is included
in intangible assets. For the Group’s accounting policy relating to
the measurement of goodwill at initial recognition, see note 19.
Following initial recognition, goodwill is measured at cost less any
accumulated impairment losses
Other intangible assets
Other intangible assets acquired by the Group, which have finite
lives, are measured at cost less accumulated amortisation and
accumulated impairment losses.
Client relationships
The Group’s United States subsidiary, Lighthouse Investment
Partners, LLC (Lighthouse) acquired the rights to manage $5.4
billion of assets on behalf of clients from Mesirow Advanced
Strategies (MAS) on 1 July 2018, at which time intangible client
relationships of $1,077 thousand were recognised in the statement
of financial position. A straight-line amortisation basis was selected
over a period of 7 years.
Due to a higher than anticipated level of redemptions on the MAS
assets, it was determined that the economic benefits associated
with the client relationships had been materially consumed by the
Group over the past 2 years. As such, an impairment loss of $769
thousand has been recorded in the current period to reduce the
value of the investment management relationships to $nil.
60
Annual Report 2020 | Financial Statements
Notes to the financial statements
For the year ended 30 June 2020
13. Intangible assets (continued)
Amortisation
Except for goodwill, intangible assets are amortised on a straight-
line basis in profit or loss over their estimated useful lives, from the
date that they are available for use. The estimated useful lives for
the current and comparative periods are as follows:
The carrying value of the CGU tested at 30 June 2020 includes
$7,329 thousand of directly attributable plant and equipment
(2019: $4,775 thousand).
Impairment testing carried out on the US CGU as at 30 June 2019
and 30 June 2020 did not result in the recognition of any
impairment losses.
Trademarks
Capitalised software development costs
20 years
5 years
Recoverable amount
Amortisation methods, useful lives and residual values are
reviewed at each reporting date and adjusted if appropriate.
The recoverable amount of the CGU was determined based on a
value-in-use calculation.
The calculation utilises five years of cash flow projections. The first
three years of these projections are based on financial forecasts
approved by the board of directors, which are then extrapolated
over an additional two years.
Revenue for the additional two years is extrapolated using an
industry long term growth rate. Investment management costs and
operating expenses are extrapolated based on ratios consistent
with the third year of the approved financial forecasts.
Key assumptions used in the calculation are discount rates and
terminal value growth rates:
Key assumption
Discount rate
Terminal value growth rate
2020
12.2%
1.6%
2019
15.6%
3.7%
The discount rate is a post-tax measure calculated based on US
risk factors as well as other risk factors specific to the industry and
operational nature of the business, including an assumed debt
leveraging of 20% (2019: 10%) at a market interest rate of 3.58%
(2019: 4.72%).
The terminal growth rate is based on the forecast long-term growth
rate for Open-End Investment Funds in the United States.
A reasonably possible change in these assumptions would not
result in an implied impairment of this CGU.
Impairment testing of intangible assets
The carrying amounts of the Group’s intangible assets which have
an indefinite life are reviewed at least annually, or when an
impairment indicator exists. An impairment loss is recognised if the
carrying amount of an asset or its related cash-generating unit
(CGU) exceeds its estimated recoverable amount.
The recoverable amount of an asset or CGU is the greater of its
value in use and its fair value less costs to sell. In assessing value
in use, the estimated future cash flows are discounted to their
present value using a discount rate that reflects current market
assessments of the time value of money and the risks specific to
the asset or CGU. For the purpose of impairment testing, assets
are grouped together into the smallest group of assets that
generates cash inflows from continuing use that are largely
independent of the cash inflows of other assets or CGU.
Impairment losses are recognised in profit or loss. An impairment
loss recognised in respect of a CGU is allocated first to reduce the
carrying amount of any goodwill allocated to the CGU and then to
reduce the carrying amount of the other assets in the CGU on a
pro-rata basis.
An impairment loss in respect of goodwill is not reversed. In
respect of other assets, an impairment loss is reversed only to the
extent that the asset's carrying amount does not exceed the
carrying amount that would have been determined, net of
depreciation and amortisation, if no impairment loss had been
recognised.
Impairment testing as at 30 June
Cash generating unit
For the purpose of impairment testing, intangible assets are
allocated to a US based funds management cash generating unit
(US CGU):
Goodwill
Trademarks
Software
Consolidated US$’000
Carrying Amount
2020
93,801
712
-
2019
93,801
807
125
94,513
94,733
Annual Report 2020 | Financial Statements
61
Notes to the financial statements
For the year ended 30 June 2020
Trade and other payables
Current
Trade creditors
Deferred rent liability
Other creditors and accruals
Non-current
Deferred rent liability
Other long-term liabilities
Consolidated US$’000
2020
2019
152
-
2,792
2,944
-
218
218
160
108
3,075
3,343
2,637
50
2,687
Trade creditors are non-interest bearing and normally settle on
30 to 90 day terms.
Other creditors and accruals relate to items such as accrued
distribution costs, accrued operating expenses, and product costs
and expenses.
The Group’s deferred rent liability was derecognised on transition
to AASB 16 on 1 July 2019. See Note 30 for change in accounting
policy.
The carrying amount of these liabilities is a reasonable
approximation of fair value. The Group’s exposure to currency and
liquidity risk related to trade and other payables is disclosed in
note 18.
62
Annual Report 2020 | Financial Statements
Notes to the financial statements
For the year ended 30 June 2020
Employee benefits
Current
Short-term incentives
Liability for annual leave
Non-current
Liability for long service leave
Consolidated US$’000
2020
2019
371
114
485
90
470
130
600
102
Short-term benefits
Long-term benefits
Short-term employee benefit obligations are expensed as the
related service is provided. A liability is recognised for the amount
expected to be paid under short-term cash bonus or profit-sharing
plans if the Group has a present legal or constructive obligation to
pay this amount as a result of past service provided by the
employee, and the obligation can be measured reliably. These
liabilities are not discounted.
The Group’s obligation in relation to long-term employee benefits
is the amount of future benefits that employees have earned in
return for their service in the current and prior periods. That benefit
is discounted to determine its present value. The discount rate
used is the relevant corporate bond rate at reporting date.
Annual Report 2020 | Financial Statements
63
Notes to the financial statements
For the year ended 30 June 2020
Capital and risk
This section of the notes to the financial statements provides information on how Navigator Global Investments Limited manages its capital and
financial risk. On the following pages you will find disclosures explaining the Group’s:
•
•
capital management, including structure, policies, and related accounts balances; and
exposure to financial risks, including market risks, credit risk, liquidity risk, and the risk arising from financial instruments.
Where an accounting policy or key estimate is specific to a single note, the policy or estimate is described in the note to which it relates.
Capital management
Capital management of the Group focuses on aiming to ensure:
Line of Credit
The Group has renewed its existing $15 million Line of Credit for a
further two years until 27 July 2022. The facility is secured by a
charge over certain of the Group’s assets. This Line of Credit has
not been drawn during the year ended 30 June 2020 and remains
undrawn at the date of this report.
Regulatory Capital Requirements
In accordance with the requirements of the Central Bank of
Ireland, wholly-owned subsidiary LHP Ireland Fund Management
Limited must maintain a prescribed capital amount, determined as
a base requirement of 125 thousand Euros plus .02% of excess
over 250 million Euros in assets under management, plus an
additional .01% of the assets under management for potential
liability risk. This requirement was complied with throughout the
year.
Shares ‘000
2020
162,148
2019
162,148
that the Group continues as a going concern;
there is sufficient cash flow to meet operating
requirements;
flexibility is maintained for future business expansion;
and
that the payment of dividends is supported in
accordance with the Group’s dividend policy.
As at 30 June 2020 and 30 June 2019, the Company’s capital
comprises ordinary shares on issue.
Capital and reserves
a) Ordinary shares on issue
Ordinary shares on issue as at 30 June
Ordinary shares are classified as equity. Incremental costs directly
attributable to the issue of ordinary shares and share options are
recognised as a deduction from equity, net of any tax effects. The
Company does not have authorised capital or par value in respect
of issued shares. All ordinary shares rank equally with regard to
the Company’s residual assets. Ordinary shares have the right to
receive dividends as declared and are entitled to one vote per
share at general meetings of the Company.
64
Annual Report 2020 | Financial Statements
Notes to the financial statements
For the year ended 30 June 2020
17. Capital and reserves (continued)
b) Nature and purpose of reserves
Parent entity profits reserve
Translation reserve
Fair value reserve
Share-based payments reserve
The parent entity profits reserve comprises the balance of
accumulated profit for the Company not yet distributed as
dividends and represents profits available for distribution to
shareholders as dividends in future years.
The translation reserve is used to record foreign currency
differences arising from the translation of the financial statements
of operations which have a functional currency that is different to
the Group’s presentation currency.
Financial risk management
Classes of financial instruments
Definitions
Consolidated US$’000
2020
354
850
(848)
13,326
13,682
2019
16,918
850
2,025
13,326
33,119
The fair value reserve comprises of the increase or decrease in the
fair value of financial assets at fair value through other
comprehensive income above or below their original purchase
value.
The share-based payments reserve records share based
payments associated with historical performance rights and share
options.
During the years ended 30 June 2019 and 2020, the Group held the following non-derivative financial assets and liabilities:
Classification
Description
Financial assets at amortised
cost
Other financial liabilities at
amortised cost
Financial assets at fair value
through profit or loss
Financial assets at fair value
through other comprehensive
income
The carrying amount of these assets is a reasonable approximation of fair value
Cash
Trade and other receivables
The carrying amount of these assets is a reasonable approximation of fair value
Trade and other payables
Lease liabilities
Investments in unquoted securities of Group managed entities
Non-controlling equity holdings in US based companies over which the Group
does not have significant influence. Fair value movements in these assets are
recognised through other comprehensive income.
Note
5
9
14
12
10
10
Annual Report 2020 | Financial Statements
65
Notes to the financial statements
For the year ended 30 June 2020
18. Financial risk management (continued)
Derecognition of financial instruments
Offset of financial instruments
The Group derecognises a financial asset when the contractual
rights to the cash flows from the asset expire, or it transfers the
rights to receive the contractual cash flows on the financial asset in
a transaction in which control, or substantially all the risks and
rewards of ownership are transferred.
Financial assets and liabilities are offset and the net amount
reported in the statement of financial position if there is a currently
enforceable legal right to offset the recognised amounts and there
is an intention to either to settle on a net basis or to realise the
asset and settle the liability simultaneously.
The Group derecognises a financial liability when its obligations
under the liability is discharged or cancelled or expire.
Fair value of financial instruments
Fair value hierarchy
The Group classifies fair value measurements using a fair value hierarchy that reflects the subjectivity of the inputs used in making the
measurements. The different levels of fair value hierarchy are:
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities
Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or
indirectly (i.e. derived from prices)
Level 3: inputs for the asset or liability that are not based on observable market data.
Fair value measurements
The following table shows the fair values of financial assets and their levels in the fair value hierarchy.
Note
Level 1
Level 2
Level 3
Total
30 June 2019
Financial assets at fair value through other
comprehensive income
Investment in unquoted securities of
externally managed entities
Financial assets at fair value through profit
or loss
Investments in unquoted securities of Group
managed entities
Financial assets at fair value through other
comprehensive income
Investment in unquoted securities of
externally managed entities
Financial assets at fair value through profit
or loss
Investments in unquoted securities of Group
managed entities
10
10
10
10
-
-
-
-
-
5,288
5,288
12,665
-
12,665
30 June 2020
-
1,489
1,489
13,245
-
13,245
There were no transfers between levels during the financial years ended 30 June 2020 or 30 June 2019.
66
Annual Report 2020 | Financial Statements
Notes to the financial statements
For the year ended 30 June 2020
18. Financial risk management (continued)
Valuation techniques used to derive level 2 and level 3 fair values
Boutique asset manager
Due to a change in capital structure as a result of the business’s
inability to service its debt, there is significant uncertainty as to the
on-going viability of this business. As such, the carrying value of
this investment has been revalued to $nil.
Text analytics platform provider
The fair value of this investment is based on the transaction price
per share of additional capital issued by the entity as part of a
Series B capital raising which was completed in March 2019.
A 10% increase (decrease) in the transaction price would result in
an increase (decrease) in fair value of $148 thousand.
Operator of an online marketplace for alternative investments
Due to significant uncertainty as to the on-going viability of this
investment, the carrying value of this investment continues to be
$nil after it was revalued to $nil during the 2019 financial year.
The fair value of financial instruments that are not in an active
market are determined using valuation techniques. These
valuation techniques maximise the use of observable market data
where it is available. If the significant inputs required to fair value
an instrument are observable, the instrument is included in level 2.
If one or more of the significant inputs is not based on observable
market data, the instrument is included in level 3, as is the case for
unlisted equity securities.
Specific valuation techniques used to value level 2 and level 3
financial instruments include:
Share in unquoted securities of Group managed entities
The Group holds investments in Group managed entities. Each
investment entity has an external administrator who is responsible
for determining the fair value of the underlying investments of each
entity and using this to calculate the net asset value per share at
which any investor in the entity can redeem their investment
holding (‘the exit price’). The fair value of these investments as at
30 June 2020 and 30 June 2019 is the exit price as calculated and
provided by the external administrator of the investment entities.
All significant inputs required to fair value the investments are
therefore observable.
Unquoted securities of externally managed entities
The shares held in other externally managed entities are unquoted
and are considered level 3 as the inputs to the fair value are not
based on observable market prices.
Movement in Level 3 assets
The following table presents the change in Level 3 assets for the financial years ended 30 June 2020 and 30 June 2019:
Opening balance 30 June 2018
Decrease in fair value through other comprehensive income
Closing balance 30 June 2019
Decrease in fair value through other comprehensive income
Closing balance 30 June 2020
There were no transfers in or out of Level 3 during the financial year ended 30 June 2020.
Note
Investment in
unquoted securities
5,638
(350)
5,288
(3,799)
1,489
10
10
Annual Report 2020 | Financial Statements
67
Notes to the financial statements
For the year ended 30 June 2020
18. Financial risk management (continued)
Financial Risk Management
Interest rate risk
The Group has direct and indirect exposure to credit risk, liquidity
risk and market risk (including currency risk, interest rate risk and
equity price risk) arising from its activities.
These risks can impact the Group’s net profit and total equity value
through:
fluctuations in the value of the Group’s investments and other
financial assets and liabilities;
the effect of market risks on the Group’s Assets Under
Management (AUM), which can impact management and
performance fees; and
the amount of interest earned on the Group’s cash balances.
Credit risk
Credit risk is the risk of financial loss to the Group if a customer or
counterparty to a financial instrument fails to meet its contractual
obligations, and arises principally from the Group’s cash deposits
and receivables. The carrying amount of these financial assets
represents the Group’s maximum credit risk exposure.
Cash and lease guarantee deposits
Cash and lease guarantee deposits held in Australia are held with
bank counterparties which are rated A-1+ (Standard & Poor’s).
Cash and lease guarantee deposits held in the United States are
held in deposit accounts which are rated A / A-1 (Standard &
Poor’s).
Trade and other receivables
At reporting date, 70% of the Group's trade and other receivables
related to amounts receivable from products managed by the
Group (2019: 79%).
As at reporting date, the Group did not have any receivables which
were past due. Due to the short-term nature of the Group’s trade
receivables, the fact that the majority relate to Group managed
products, and the historically low default rates, the application of
the expected credit loss model has not resulted in the recording of
a material credit allowance as at 30 June 2020 or 30 June 2019.
In determining this credit allowance, the Group has considered
forward looking factors specific to the receivables and the
economic environment.
Market risk
As at 30 June 2020, the Group’s exposure to interest rate risk
relates primarily to the Group’s cash and term deposits which
mature in less than 90 days.
A change in interest rates at reporting date would not have
impacted the carrying value of the Group's variable rate deposits,
and would therefore not have impacted the Group's equity or profit
or loss.
Currency risk
The Group is exposed to currency risk on revenue, expenses,
receivables and payables that are denominated in a currency other
than the respective functional currencies of the Group entities. The
following significant exchange rates applied during the year:
AUD/USD: Average rate
AUD/USD: 30 June spot rate
2020
0.6713
0.6863
2019
0.7156
0.7013
At reporting date, the Group’s direct exposure to currency risk
relates to:
AUD denominated balances recognised by Navigator Global
Investments Limited which has a functional currency of USD.
Due to Navigator Global Investments Limited’s position as the
parent entity of the Australian listed group, it retains a number
of working capital balances denominated in AUD which
include cash, current receivables, current trade and other
payables and employee benefits.
AUD denominated balances recognised by the Lighthouse
Group which has a functional currency of USD. These
balances comprise of trade receivables due from a third party
for management and performance fees on funds for which
Lighthouse performs investment services.
The following table summarises the sensitivity of the balance of
financial instruments held at reporting date to movement in the
AUD/USD exchange rate, with all other variables held constant.
Consolidated US$’000
2020
2019
112
(112)
61
(61)
Market risk is the risk that changes in market prices, such as
interest rates, foreign exchange rates and equity prices will affect
the Group’s income or the value of its holdings of financial
instruments.
AUD/USD: appreciation of 10%,
net of tax
AUD/USD: depreciation of 10%,
net of tax
68
Annual Report 2020 | Financial Statements
Notes to the financial statements
For the year ended 30 June 2020
18. Financial risk management (continued)
Price risk
The Group is exposed to price risk in relation to the value of its
investments, and indirectly through the impacts on management
and performance fees earned from the fluctuations in the value of
the AUM in the investment products it manages due to market
price movements.
Investments
The Group’s investments comprise:
financial assets at fair value through profit or loss, which are
comprised of investments in the unquoted securities of
investment funds
financial assets at fair value through other comprehensive
income which are comprised of investments in the unquoted
securities of US based companies.
The following table summarises the sensitivity of the fair value
(after tax) of these assets to movements in market prices:
Consolidated US$’000
2020
2019
Financial assets at fair value through
profit or loss
Profit or loss (decrease) /
increase
Fair value + 5%, net of tax
Fair value - 5%, net of tax
Financial assets at fair value through
other comprehensive income
Equity (decrease) / increase –
Fair value + 5%, net of tax
Fair value - 5%, net of tax
465
(465)
468
(468)
52
(52)
195
(195)
Management fees
The Group earns management fees as a percentage of the assets
it manages on behalf of its funds and clients. Management fees
will be impacted by changes in the value of these assets from
movements in the individual prices of the underlying securities held
as well as the fluctuations in exchange rates for assets which are
not denominated in USD.
The following table summarises the sensitivity of management
fees to a change in AUM due to movements in market prices:
Consolidated US$’000
2020
2019
Profit or loss (decrease) /
increase
Fair value + 5%, net of tax
3,070
3,896
Fair value - 5%, net of tax
(3,070)
(3,896)
The impact of any change to management fees due to changes in
AUM from inflows and outflows of assets by clients due to changes
in market prices has not been estimated.
Performance fees
The Group earns performance fees from some of its funds and
clients. The Group’s entitlement to performance fees varies
between the relevant funds and clients, and generally is dependent
on the relevant fund or client portfolio outperforming a high
watermark and in some cases a benchmark hurdle over a
performance period. Given the nature of performance fees, the
Group is subject to the risk that in any given financial year it may
earn no performance fees.
Annual Report 2020 | Financial Statements
69
Notes to the financial statements
For the year ended 30 June 2020
18. Financial risk management (continued)
Liquidity risk
Liquidity risk is the risk that the Group will encounter difficulty in
meeting the obligations associated with its financial liabilities that
are settled by delivering cash or another financial asset. The
Group’s approach to managing liquidity is to ensure, as far as
possible, that it has sufficient resources available to meet its
liabilities when due, under both normal and stressed conditions,
without incurring unacceptable losses or risking damage to the
Group’s reputation.
The Group maintains 12 month rolling forecasts, which assist it in
monitoring cash flow requirements. The Group ensures that it has
sufficient cash on demand to meet operational requirements. The
Group also has access to a $15 million line of credit (refer Note
16). This approach excludes the potential impact of extreme
circumstances which cannot be predicted.
The following are the contractual maturities of non-derivative financial liabilities as at balance date:
Consolidated US$’000
Note
Carrying
value
Cont-
ractual
cash flows
6 months
or less
6-12
months
1-2 years
2-5 years
More than
5 years
30 June 2020
Trade and other payables -
current
Trade and other payables –
non-current
30 June 2019
Trade and other payables -
current
Trade and other payables –
non-current
14
14
14
14
2,944
(2,944)
(2,944)
50
(50)
-
2,994
(2,994)
(2,944)
3,235
(3,235)
(3,235)
50
(50)
-
3,285
(3,285)
(3,235)
-
-
-
-
-
-
-
-
-
-
-
-
-
(50)
(50)
-
(50)
(50)
-
-
-
-
-
-
Refer to Note 12 for contractual maturities of the Group’s lease liabilities.
Trade and other payables
It is not expected that the cash flows included in the maturity
analysis for these liabilities could occur significantly earlier, or at
significantly different amounts.
70
Annual Report 2020 | Financial Statements
Notes to the financial statements
For the year ended 30 June 2020
Group structure
This section of the notes to the financial statements outlines how the Navigator Global Investments Limited’s group structure affects the financial
position and performance of the Group as a whole. On the following pages you will find disclosures explaining the Group’s composition and key
parent entity disclosures.
Where an accounting policy or key estimate is specific to a single note, the policy or estimate is described in the note to which it relates.
Group entities
The Group’s consolidated financial statements include the financial statements of Navigator Global Investments Limited and its subsidiaries:
Name
Country of incorporation
% Equity interest
2020
2019
HFA Lighthouse Holdings Corp
HFA Lighthouse Corp
LHP Investments, LLC
Lighthouse Investment Partners, LLC
Lighthouse Partners NY, LLC
Lighthouse Partners UK, LLC
North Rock Capital Management LLC
Lighthouse Partners Limited (HK)
LHP Ireland Fund Management Limited
LDO 906 Limited
MSW Director Services Limited
NR Technology Group, LLC1
United States
United States
United States
United States
United States
United States
United States
Hong Kong
Ireland
Cayman Islands
Cayman Islands
United States
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
-
1 NR Technology Group, LLC is a single member LLC of which the sole member is Lighthouse Partners NY, LLC. It was formed on 8 July 2019 in the US state of
Delaware.
Business combinations
The purchase method of accounting is used to account for all
business combinations regardless of whether equity instruments or
other assets are acquired. Cost is measured as the fair value of
the assets given, shares issued, or liabilities incurred or assumed
at the date of exchange.
Basis of consolidation
The consolidated financial statements are those of the Group,
comprising Navigator Global Investments Limited and all entities
that Navigator Global Investments Limited controlled during the
period and at reporting date.
Control is achieved when the Group is exposed, or has rights, to
variable returns from its involvement in the investee and has the
power to affect those returns through its power over the investee.
Consolidation of a subsidiary begins when the Group obtains
control over the subsidiary and ceases when the Group loses
control of the subsidiary. The assets, liabilities, income and
expenses of a subsidiary are included in the consolidated financial
statements from the date the Group gains control, until the date
the Group ceases to control the subsidiary.
All intra-group assets and liabilities, equity, income, expenses and
cash flows relating to transactions between members of the Group
are eliminated in full on consolidation.
Annual Report 2020 | Financial Statements
71
Notes to the financial statements
For the year ended 30 June 2020
Parent entity disclosures
As at, and throughout the financial year ended 30 June 2020, the parent company of the Group was Navigator Global Investments Limited.
Result of the parent entity
(Loss) / profit for the year
Total comprehensive (loss) / income for the year
Financial position of the parent at year end
Current assets
Total assets
Current liabilities
Total liabilities
Net assets
Total equity of the parent comprising of
Share capital
(Accumulated losses) / Retained earnings
Parent entity profits reserve
Translation reserve
Share based payments reserve
Total equity
Company US$’000
2020
2019
(80,876)
(80,876)
12,213
177,375
(697)
(911)
29,458
29,458
18,812
285,825
(175)
(277)
176,464
285,548
257,355
(90,123)
354
5,070
3,808
257,355
2,397
16,918
5,070
3,808
176,464
285,548
72
Annual Report 2020 | Financial Statements
Notes to the financial statements
For the year ended 30 June 2020
Other disclosures
This section includes information that the Directors do not consider to be significant in understanding the financial performance and position of
the Group, but must be disclosed to comply with the Accounting Standards, the Corporations Act 2001 or the Corporations Regulations.
Related parties
Key management personnel remuneration
The key management personnel remuneration included in ‘employee expense’ (see note 3) is as follows:
Consolidated US$
2020
2019
4,762,879
6,267,376
9,780
102,434
3,215
95,965
4,875,093
6,366,556
For the years ended 30 June 2020 and 30 June 2019, the Group
has not recorded a credit allowance relating to amounts owed by
related parties. Additional information regarding the Group’s
assessment of credit risk in relation to related party receivables
and investments is disclosed in note 18.
Other
There have been no guarantees provided or received for any
related party receivables.
Short-term employee benefits
Long-term employee benefits
Post-employment benefits
Individual directors’ and executives’
remuneration disclosure
Apart from the details disclosed in this note, no director has
entered into a material contract with the Group since the end of the
previous financial year and there were no material contracts
involving directors' interests existing at year-end.
Other related party transactions
Revenue from group managed products
During the financial year Group entities recognised management
fees, performance fees and fund reimbursement revenue received
or receivable of $91,780,976 (2019: $103,048,954) from
investment products for which group entities act as general
partner, investment manager or platform service provider.
Amounts receivable from these products at 30 June 2020 were
$11,254,984 (2019: $15,426,885).
Investment in products
As at 30 June 2020, Group entities hold $13,245,015 of
investments in products for which they act as investment manager
or platform service provider (2019: $12,665,544). Refer note 10 for
additional detail.
During the financial year, the Group recognised distributions from
its investments in these products of $669 (2019: $nil).
Annual Report 2020 | Financial Statements
73
Notes to the financial statements
For the year ended 30 June 2020
Auditors’ remuneration
Fees to Ernst & Young
EY (Australia): Audit and review of financial reports
Overseas member firms of EY (Australia): Audit and review of financial reports
Total fees to Ernst & Young
Fees to other audit firms
Other audit firms (Australia): Other services (taxation)
Other audit firms (Australia): Other services (advisory)
Total fees to other audit firms (Australia)
Overseas member firms of other auditors: Audit and review of financial reports
Overseas member firms or other auditors: Other services (advisory)
Total fees to overseas member firms of other auditors
Total fees to other audit firms
Consolidated US$
2020
2019
94,351
151,484
245,835
20,422
143,107
163,529
19,244
450,000
469,244
632,773
111,208
197,848
309,056
35,243
-
35,243
24,216
-
24,216
59,459
Total auditor’s remuneration
878,608
368,515
Commitments
Operating lease commitments
Group as lessor
Group as lessee
The Group has a number of leases for office premises and
equipment with remaining lease terms varying from 2 months to 9
years. The Group adopted AASB 16 on 1 July 2019. Refer to Note
30 for a reconciliation of operating lease commitments as at 30
June 2019 to lease liabilities recognised as at 1 July 2019.
The Group is party to an operating sub-lease for one of its office
premises. The lease has a remaining life of 2 years. This sublease
is now captured on the Statement of Financial Position under
AASB 16.
74
Annual Report 2020 | Financial Statements
Notes to the financial statements
For the year ended 30 June 2020
Contingent liabilities
Investment fund related obligations
Sale of Australian business
The Company’s subsidiary Lighthouse Investment Partners, LLC
acts as the Investment Manager for certain private investment
funds under Delaware Law, Cayman Islands Law and Irish
Law. Due to its role as Investment Manager the subsidiary may be
subject to contingent liabilities as a result of its obligations to the
funds. The directors of Lighthouse Investment Partners, LLC
consider that all obligations have been met to 30 June 2020.
The Share Sale Agreement for the sale of Certitude Global
Investments Limited completed on 30 April 2015 included a
number of representations to, and warranties and indemnities for
the benefit of, the purchaser. These representations, warranties
and indemnities relate to potential losses arising from the conduct
of the Certitude business as a responsible entity whilst a member
of the Group. As part of the sale, the Company has purchased a
professional indemnity and directors and officer insurance policy
which provides run-off cover for a period of 7 years from the date
of the sale.
Subsequent events
Events occurring after reporting period
Line of credit facility
The Group has renewed its existing $15 million Credit Facility for a
further two years until 27 July 2022. This Line of Credit has not
been drawn during the year ended 30 June 2020 and remains
undrawn at the date of this report.
Proposed acquisition of portfolio of strategic
investments
On the 13th of August, NGI announced that it has entered into a
definitive agreement to acquire six minority ownership interests in
leading established alternative asset managers from investment
funds managed by Dyal Capital Partners, a division of Neuberger
Berman.
The transaction is expected to complete between December 2020
and January 2021 and remains subject to shareholder and certain
regulatory approvals (including FIRB) and the satisfaction of other
customary closing conditions.
There has not arisen in the interval between the end of the
reporting period and the date of this report, any other item,
transaction or event of a material nature, likely to affect
significantly the operations of the Group, the results of those
operations, or the state of affairs of the Group, in future financial
years.
Annual Report 2020 | Financial Statements
75
Notes to the financial statements
For the year ended 30 June 2020
Basis of preparation
This section sets out the basis upon which the Group’s financial statements are prepared as a whole. Specific accounting policies are described
in their respective notes to the financial statements. This section also shows information on new accounting standards, amendments and
interpretations, and whether they are effective for the current or later years. We explain how these changes are expected to impact the financial
position and performance of the Group.
Corporate information
Basis of measurement
The financial report of Navigator Global Investments Limited (the
‘Company’) for the year ended 30 June 2020 was approved by the
board of directors on the 13th day of August 2020.
The consolidated financial statements have been prepared on a
going concern basis. The consolidated financial statements have
been prepared on a historical cost basis except for the following
items:
The consolidated financial statements of the Company as at and
for the year ended 30 June 2020 comprise the Company and its
subsidiaries (the ‘Group’) (see note 19).
Items
The Company is a for profit company limited by shares
incorporated in Australia and is listed on the Australian Securities
Exchange. The registered office of the Company is Level 21, 10
Eagle Street, Brisbane QLD 4000.
Financial instruments at fair value
through profit or loss
Financial instruments at fair value
through other comprehensive income
Measurement
basis
Fair value
Fair value
Statement of compliance
The consolidated financial statements are general purpose
financial statements which have been prepared in accordance with
the requirements of the Corporations Act 2001, Australian
Accounting Standards (AASB) and other authoritative
pronouncements of the Australian Accounting Standards Board.
The consolidated financial statements also comply with the
International Financial Reporting Standards (IFRS) as issued by
the International Accounting Standards Board.
During the period, disclosures reflect changes to the comparative
period to conform to the current period’s presentation.
Details of the Group’s accounting policies, including changes
during the year, are included in note 30 as well as within the
individual notes to the financial statements.
The methods used to measure fair value are discussed further in
note 18.
Functional and presentation
currency
The consolidated financial statements are presented in US dollars
(‘USD’), which is the Company’s functional currency.
The amounts contained in this financial report have been rounded
to the nearest thousand dollars in accordance with the ASIC
Corporations (Rounding in Financial/Directors’ Reports) Instrument
2016/191 dated 24 March 2016, unless otherwise stated.
Translation of foreign currency
Transactions in foreign currencies are translated to the respective
functional currency of Group entities at rates of exchange ruling on
the date of those transactions. Foreign exchange gains and losses
resulting from the settlement of such transactions, and from the
translation at the year-end exchange rate of monetary assets and
liabilities denominated in foreign currencies, are recognised in
profit or loss.
76
Annual Report 2020 | Financial Statements
Notes to the financial statements
For the year ended 30 June 2020
Other accounting policies
Assumptions and estimation uncertainties
Information about assumptions and estimation uncertainties that
have a significant risk of resulting in a material adjustment within
the next financial year are included in the following notes:
note 6 - recognition of deferred tax assets: availability of
future taxable profit against which carried forward tax losses
can be used;
note 13 - impairment test: key assumptions underlying
recoverable amounts of intangible assets; and
notes 10 and 18 - fair value measurement of investments.
Measurement of fair values
A number of the Group’s accounting policies and disclosures
require the determination of fair value. The methods used to
determine fair values for measurement and / or disclosure
purposes are included in the following notes:
notes 10 and 18 - investments in financial assets at fair value
through profit or loss; and
Consolidated
USD’000
Operating lease commitments disclosed as at
30 June 2019
Discounted using the Group's incremental
borrowing rate
Exemption applied for short term leases
Exemption applied for low-value leases
Adjustment for fixed leases payments
assessed as being non-lease components
Adjustment for variable lease payments
assessed as being in-substance fixed
20,771
(3,730)
(311)
(19)
(2,450)
3,751
Lease liabilities recognised as at 1 July 2019
18,012
The associated right-of-use assets were measured on a
retrospective basis as if the new rules had always been applied,
but using the transition discount rate rather than the discount rate
at inception.
notes 10 and 18 - investment in financial assets at fair value
through other comprehensive income.
In applying AASB 16 for the first time, the Group has used the
following practical expedients permitted by the standard:
Changes in accounting policies
New and amended standards
The Group has adopted all of the new and revised Standards and
Interpretations issued by the Australian Accounting Standards
Board (the AASB) that are relevant to its operations and effective
for the current reporting period:
AASB 16 Leases
As indicated in Note 12, the Group adopted AASB 16 Leases from
1 July 2019 under the modified retrospective approach and
therefore the comparative information continues to be reported
under AASB 117.
On adoption of AASB 16, the Group recognised an additional
$14.1 million of right-of-use assets, $18.0 million of lease liabilities,
and $0.4 million of finance lease receivables; derecognised $2.7
million of deferred rent liabilities; increased deferred tax assets by
$0.2m to recognise the tax effect; and recognised the difference of
$0.6 million in accumulated losses.
When measuring lease liabilities, the Group discounted lease
payments using its incremental borrowing rate as of 1 July 2019.
An incremental borrowing rate was determined for each lease
based on its maturity profile, ranging from 4.15% to 4.36%. The
rates were determined in reference to the 1 month USD Swap
Monthly Money rate to effectively swap the Group’s current Line of
Credit borrowing rate (1 month USD LIBOR) to a fixed longer term
borrowing. The rates were supplemented by a margin to reflect a
leasing risk premium.
A reconciliation of operating lease commitments as at 30 June
2019 to lease liabilities recognised as at 1 July 2019 is as follows:
the accounting for operating leases with a remaining lease
term of less than 12 months as at 1 July 2019 as short-term
leases, and
the option to adjust the right-of-use asset by the amount of
any provision for onerous leases recognised in the balance
sheet immediately before the date of initial application.
AASB Interpretation 23 Uncertainty over Income Tax
Treatments
The Group does not currently have any uncertain tax positions
where there is doubt as to whether a taxation authority would
accept the Group’s tax treatment. As such, there was no impact on
the Group’s financial statements.
Accounting standards and interpretations issued but
not yet effective
The following Australian accounting standards and interpretations
that are relevant to the Group’s operations have been issued but
are not yet effective and have not been adopted by the Group for
the year ended 30 June 2020. These standards are not expected
to have a significant impact on the Group’s consolidated financial
statements:
AASB 2018-7 Amendments to Australian Accounting
Standards – Definition of Material
AASB 2019-1 Amendments to Australian Accounting
Standards – References to the Conceptual Framework
AASB 17 Insurance Contracts
AASB 2014-10 Sale or Contribution of Assets between an
Investor and its Associate or Joint Venture (Amendments to
IFRS 10 and IAS 28)
Annual Report 2020 | Directors’ declaration
77
Directors’ declaration
In the opinion of the directors of Navigator Global Investments Limited (the ‘Company’):
(a)
the consolidated financial statements and notes that are set out on pages 34 to 76, and the Remuneration report on pages 22 to 31 of
the Directors' report, are in accordance with the Corporations Act 2001, including:
(i) giving a true and fair view of the Group’s financial position as at 30 June 2020 and of its performance for the financial year ended
on that date; and
(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001; and
(b)
there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.
2. The directors have been given the declarations required by Section 295A of the Corporations Act 2001 from the Chief Executive Officer and
Chief Financial Officer for the financial year ended 30 June 2020.
3. The directors draw attention to note 27 to the consolidated financial statements, which includes a statement of compliance with International
Financial Reporting Standards.
Signed in accordance with a resolution of the directors.
Michael Shepherd, AO
F P (Andy) Esteban
Chairman and Non-Executive Director
Non-Executive Director
Sydney, 13 August 2020
Ernst & Young
111 Eagle Street
Brisbane QLD 4000 Australia
GPO Box 7878 Brisbane QLD 4001
Tel: +61 7 3011 3333
Fax: +61 7 3011 3100
ey.com/au
Independent Auditor's Report to the Members of Navigator Global
Investments Limited
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of Navigator Global Investment Limited (the Company) and its
subsidiaries (collectively the Group), which comprises the statement of financial position as at 30 June
2020, the income statement, statement of comprehensive income, statement of changes in equity
and statement of cash flows for the year then ended, notes to the financial statements, including a
summary of significant accounting policies, and the directors' declaration.
In our opinion, the accompanying financial report of the Group is in accordance with the Corporations
Act 2001, including:
a)
giving a true and fair view of the consolidated financial position of the Group as at 30 June
2020 and of its consolidated financial performance for the year ended on that date; and
b)
complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial
Report section of our report. We are independent of the Group in accordance with the auditor
independence requirements of the Corporations Act 2001 and the ethical requirements of the
Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional
Accountants (including Independence Standards) (the Code) that are relevant to our audit of the
financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with
the Code.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in
our audit of the financial report of the current year. These matters were addressed in the context of
our audit of the financial report as a whole, and in forming our opinion thereon, but we do not provide
a separate opinion on these matters. For each matter below, our description of how our audit
addressed the matter is provided in that context.
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We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of the
Financial Report section of our report, including in relation to these matters. Accordingly, our audit
included the performance of procedures designed to respond to our assessment of the risks of
material misstatement of the financial report. The results of our audit procedures, including the
procedures performed to address the matters below, provide the basis for our audit opinion on the
accompanying financial report.
Recoverability of deferred tax assets
Refer to Note 6 of the financial report
Why significant
How our audit addressed the key audit matter
Deferred tax assets represent 20% of total
assets. Assessing their recoverability was
subject to significant judgements made by the
Group in forecasting future taxable profits and
determining the availability and expected timing
of utilising the deferred tax assets against future
taxable income in accordance with tax laws in
each applicable jurisdiction.
These judgements included those concerning the
ability of the US based Lighthouse Group to earn
sufficient future taxable profits to utilise
deferred tax assets, which include prior period
tax losses, prior to the tax losses expiring.
The judgements also included those concerning
COVID-19 and the impact the pandemic may
have on the company’s ability to earn sufficient
future taxable profits to utilise deferred tax
assets.
Our audit procedures included the following:
• Assessed the mathematical accuracy of the
Group’s deferred tax asset utilisation model;
• Agreed the amount of unused tax losses
carried forward as deferred tax assets to
prior period lodged income tax returns;
•
•
•
Evaluated the company’s assumptions and
estimates in relation to the likelihood of
generating sufficient future taxable income
based on most recent Board approved
forecasts, prepared by the Group, principally
by performing sensitivity analyses and
evaluating and testing the key assumptions
used to determine the amounts recognised;
Evaluated the company’s consideration of
the impact of COVID-19 in the forecasted
cash flows;
Ensured the assumptions and estimates used
were consistent with the criteria used for
testing the recoverability of the Lighthouse
cash generating unit;
• Assessed the historical accuracy of the
Group’s previous future taxable profit
forecasts by comparing to actual
performance;
•
Involved our tax specialists to review the
recognition of the deferred tax assets under
the tax law;
• Assessing the Group’s determination of
availability and expected timing of utilisation
of deferred tax assets for consistency with
tax laws in each applicable jurisdiction; and
• Assessed the adequacy of the related
disclosures in the financial report.
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Recoverability of the US cash generating unit
Refer to Note 13 of the financial report
Why significant
How our audit addressed the key audit matter
The recoverability of the US cash generating unit
(“US CGU”) was a key audit matter due to the
value of goodwill allocated to the CGU relative to
total assets and the degree of judgement
involved in determining the value in use of the
CGU.
The model used by the Group to determine value
in use is subject to significant judgement due to
the assumptions and estimations utilised in
forecasting the future cash flows of the CGU and
related impacts to these forecasts due to the
COVID-19 pandemic.
Our audit procedures included the following:
• Assessed the mathematical accuracy of the
CGU’s value in use model;
•
•
•
Evaluated the company’s assumptions and
estimates in relation to the forecast cash
flows based on most recent Board approved
forecasts, prepared by the Group, principally
by performing sensitivity analysis and
evaluating and testing the key assumptions
used to determine the value in use;
Evaluated the company’s consideration of
the impact of COVID-19 in the forecasted
cash flows;
Ensured the assumptions and estimates were
consistent with the criteria used for testing
recoverability of deferred tax assets;
• Assessed the historical accuracy of the
Group’s previous cash flow forecasts by
comparing forecasts to actual performance;
•
•
Involved our valuation specialists in the
assessment of key assumptions utilised in the
value in use model. Where applicable, we
corroborated key assumptions with external
information;
Performed sensitivity analysis by varying key
assumptions and assessing the impact on the
recoverability of goodwill; and
• Assessed the adequacy of the related
disclosures in the financial report.
Information Other than the Financial Report and Auditor’s Report Thereon
The directors are responsible for the other information. The other information comprises the
information included in the Company’s 2020 Annual Report, but does not include the financial report
and our auditor’s report thereon.
Our opinion on the financial report does not cover the other information and accordingly we do not
express any form of assurance conclusion thereon, with the exception of the Remuneration Report
and our related assurance opinion.
In connection with our audit of the financial report, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
report or our knowledge obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this
other information, we are required to report that fact. We have nothing to report in this regard.
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Responsibilities of the Directors for the Financial Report
The directors of the Company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
and for such internal control as the directors determine is necessary to enable the preparation of the
financial report that gives a true and fair view and is free from material misstatement, whether due to
fraud or error.
In preparing the financial report, the directors are responsible for assessing the Group’s ability to
continue as a going concern, disclosing, as applicable, matters relating to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
Auditor's Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is
free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of this financial report.
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional
judgment and maintain professional scepticism throughout the audit. We also:
•
•
•
•
•
Identify and assess the risks of material misstatement of the financial report, whether due to
fraud or error, design and perform audit procedures responsive to those risks, and obtain audit
evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not
detecting a material misstatement resulting from fraud is higher than for one resulting from
error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the
override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Group’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by the directors.
Conclude on the appropriateness of the directors’ use of the going concern basis of accounting
and, based on the audit evidence obtained, whether a material uncertainty exists related to
events or conditions that may cast significant doubt on the Group’s ability to continue as a going
concern. If we conclude that a material uncertainty exists, we are required to draw attention in
our auditor’s report to the related disclosures in the financial report or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up
to the date of our auditor’s report. However, future events or conditions may cause the Group
to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial report, including the
disclosures, and whether the financial report represents the underlying transactions and events
in a manner that achieves fair presentation.
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•
Obtain sufficient appropriate audit evidence regarding the financial information of the entities
or business activities within the Group to express an opinion on the financial report. We are
responsible for the direction, supervision and performance of the Group audit. We remain solely
responsible for our audit opinion.
We communicate with the directors regarding, among other matters, the planned scope and timing of
the audit and significant audit findings, including any significant deficiencies in internal control that we
identify during our audit.
We also provide the directors with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other
matters that may reasonably be thought to bear on our independence, and where applicable, actions
taken to eliminate threats or safeguards applied.
From the matters communicated to the directors, we determine those matters that were of most
significance in the audit of the financial report of the current year and are therefore the key audit
matters. We describe these matters in our auditor’s report unless law or regulation precludes public
disclosure about the matter or when, in extremely rare circumstances, we determine that a matter
should not be communicated in our report because the adverse consequences of doing so would
reasonably be expected to outweigh the public interest benefits of such communication.
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Report on the Audit of the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in the directors' report for the year ended 30
June 2020.
In our opinion, the Remuneration Report of Navigator Global Investments Limited for the year ended
30 June 2020, complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the
Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our
responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in
accordance with Australian Auditing Standards.
Ernst & Young
Rebecca Burrows
Partner
Brisbane
13 August 2020
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
83
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Annual Report 2020 | ASX additional information
85
ASX additional information
As at 5 October 2020
Additional information required by the Australian Securities Exchange Limited Listing Rules is set out below.
Substantial shareholdings (not less than 5%)
The following parties have a substantial relevant interest in ordinary shares of Navigator Global Investments Limited:
Category
Sean McGould, his controlled entities and associates
Eley Griffiths Group
Delaware Street Capital Master Fund, LP
Perennial Value Management Limited
Twenty largest shareholders
Name
Citicorp Nominees Pty Limited
HSBC Custody Nominees (Australia) Limited
J P Morgan Nominees Australia Pty Limited
National Nominees Limited
BNP Paribas Noms Pty Ltd
BNP Paribas Nominees Pty Ltd
UBS Nominees Pty Ltd
HSBC Custody Nominees (Australia) Limited
BNP Paribas Nominees Pty Ltd
Brispot Nominees Pty Ltd
Australian Executor Trustees Limited
Mr Shay Shimon Hazan-Shaked
BNP Paribas Nominees Pty Ltd Hub24 Custodial Serv Ltd
Winchester Global Trust Company Limited
Mr Mark Sheffield Hancock & Brig Ian Denis Westwood
Bond Street Custodians Limited
Mr Shay Shimon Hazan-Shaked
Krumpet No 16 Pty Limited
Mr Richard James Williams & Ms Jane Clare Frobisher Dunlop
EHCL Pty Ltd
Number of ordinary
shares
19,438,083
14,722,949
13,101,982
12,517,331
%
11.99%
9.08%
8.08%
7.72%
Number of ordinary
shares held
Percentage of
capital held
54,127,121
24,441,248
22,045,682
11,450,594
3,791,802
2,455,969
2,310,284
2,262,479
1,983,433
1,642,727
1,083,000
950,000
706,977
655,158
635,252
469,807
400,000
377,200
326,000
280,000
33.38%
15.07%
13.60%
7.06%
2.34%
1.51%
1.42%
1.40%
1.22%
1.01%
0.67%
0.59%
0.44%
0.40%
0.39%
0.29%
0.25%
0.23%
0.20%
0.17%
86
Annual Report 2020 | ASX additional information
Distribution of shareholdings
Range
1-1,000
1,001-5,000
5,001-10,000
10,001-50,000
50,001 – 100,000
100,001 and over
Total
Number of holders
of ordinary shares
% of holders
Number of ordinary
shares
% of share
931
1,369
578
563
53
54
26.24%
38.59%
16.29%
15.87%
1.49%
1.52%
3,401
100.00%
488,467
3.811.586
4,362,158
11,882,467
3,858,605
137,744,614
162,147,897
0.30%
2.35%
2.69%
7.33%
2.38%
84.95%
100.00%
The number of shareholders holding less than a marketable parcel of ordinary shares is 281.
Voting rights
Ordinary Shares
The Company has 162,147,897 fully paid ordinary shares on
issue.
The fully paid ordinary shareholders of the Company are entitled to
vote at any meeting of the members of the Company and their
voting rights are:
on a show of hands – one vote per shareholder; and
on a poll – one vote per fully paid ordinary shares.
On-market buy-back
There is no current on-market buy-back.
Unquoted equity securities
There are no unquoted equity securities.