ANNUAL
REPORT
PENGANA CAPITAL
GROUP LIMITED
ANNUAL REPORT
30 JUNE
2019
PENGANA CAPITAL
HEAD OFFICE
ABN 43 059 300 426
Level 12, 167 Macquarie Street
Sydney NSW 2000
Australia
Ph: +61 2 8524 9900
Fax: +61 2 8524 9901
PENGANA.COM
PENGANA.COM
PENGANA IS A LEADING
PROVIDER OF PREMIUM
PRODUCTS THAT ARE
BENCHMARK UNAWARE
AND ACTIVELY MANAGED.
CURRENTLY, PENGANA
HAS CIRCA $3.3 BILLION
OF FUNDS UNDER
MANAGEMENT
ACROSS BOTH GLOBAL
AND AUSTRALIAN
INVESTMENT STRATEGIES.
2 | PENGANA CAPITAL GROUP
ANNUAL REPORT TABLE OF
CONTENTS
Corporate Directory
Letter from the Chairman
Chief Executive Officer’s Report
Chief Executive Officer’s Insights
Directors’ Report
Auditor’s Independence Declaration
Statement of Profit or Loss
Statement of Comprehensive Income
Statement of Financial Position
Statement of Changes in Equity
Statement of Cash Flows
Notes to the Financial Statements
Directors’ Declaration
Independent Auditor’s Report to the Members of Pengana Capital Group Limited
Shareholder Information
5
6
8
14
16
28
29
31
32
33
34
35
73
74
77
ANNUAL REPORT 2019 | 3
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4 | PENGANA CAPITAL GROUP
ANNUAL REPORT CORPORATE
DIRECTORY
DIRECTORS
Warwick Negus
Non-Executive Chairman
Russel Pillemer
Managing Director and Chief Executive Officer
Jeremy Dunkel
Non-Executive Independent Director
Kevin Eley
Non-Executive Independent Director
David Groves
Non-Executive Independent Director
COMPANY SECRETARY
Paula Ferrao
REGISTERED OFFICE
Level 12, 167 Macquarie Street
Sydney NSW 2000
Tel: +61 2 8524 9900
SHARE REGISTER
Computershare Investor Services Pty Limited
Level 3, 60 Carrington Street
Sydney NSW 2000
Tel: 1300 787 272
AUDITOR
Grant Thornton Audit Pty Ltd
Level 17, 383 Kent Street
Sydney NSW 2000
STOCK EXCHANGE
LISTING
Pengana Capital Group Limited shares are listed on
the Australian Securities Exchange (ASX: PCG)
WEBSITE
www.pengana.com
CORPORATE GOVERNANCE
STATEMENT
The Corporate Governance Statement which
is approved at the same time as the Annual Report
can be found at www.pengana.com/shareholders/
pengana-capital-group/corporate-governance/
ANNUAL REPORT 2019 | 5
ANNUAL
REPORT
6 | PENGANA CAPITAL GROUP
6 | PENGANA CAPITAL GROUP
LETTER FROM
THE CHAIRMAN
Dear fellow Pengana shareholders
Pengana Capital Group Limited (“PCG” or “the Company”) had
an eventful year in 2019 with substantial changes implemented across
the business. In my view, the Company is now particularly well positioned
to generate future growth in profitability and shareholder value.
Underlying profit after tax for the year was $8.7 million. This was a
reduction of 30% from the previous year, as illustrated in the CEO’s
report. The key reason for this reduction was reduced performance
fees across our major funds. Whilst this reduction was disappointing,
in hindsight it is not an unexpected outcome, when taking into account
the way in which our funds invest, i.e. in lower risks stocks that have
generally been out of favour over this period. I note that performance
fees by their very nature are variable over short timeframes but over
longer periods of time, generally revert to the mean.
When taking into account non-operating items as well as one off costs
(including $16.6 million from launching the Pengana Private Equity
Trust), the underlying profit after tax of $8.7m translates into a statuary
loss of $14.3 million.
In June the Company announced that it would embark on an on-
market share buy-back, with the capacity to acquire up to 10% of the
Company’s issued capital over a period of 12 months. The buy-back
is expected to be EPS accretive and in the best interests of all Pengana
shareholders. The buyback will be funded from Pengana’s existing cash
reserves and no target price has been set.
The Board has decided that a dividend will not be paid for the six
month period to 30 June 2019 as applying our capital to a share buy-
back is in our view more beneficial for shareholders, as it will result
in significant shareholder value accretion. Our decision was further
supported by the lack of any available franking credits as the Company
paid no tax for the period, i.e. any dividends to be paid would
therefore be unfranked.
The lack of any dividend for the last 6 months should not be taken
as a signal for future dividends, as the Board remains committed to
paying out a significant proportion of underlying profits as dividends
on an ongoing basis.
ANNUAL REPORT Pengana’s entrepreneurial spirit means that we are always on the lookout for opportunities that
deliver financial solutions that meet the financial needs of our investors and that, by extension,
will increase shareholder value. The strength of our balance sheet allows us to take advantage
of those opportunities when they arise.
One such opportunity and a key initiative for Pengana in the 2019 financial year was the
successful launch of the Pengana Private Equity (ASX: PE1) initial public offering. PE1 listed
on 30 April, having raised in excess of $205 million.
PE1 is an important asset for Pengana, given the opportunity it presented to partner with
Grosvenor Capital Management, L.P., a leading global alternative asset manager, PE1’s growth
potential and the relatively high margins it delivers.
In addition to looking for new opportunities, we remain focused on expenses, and during
the year we undertook a restructuring of the cost base, including the closure of an unprofitable
division. The cost savings of this restructure were in part re-invested back into areas that assist
in the growth of the Company, including increasing our sales and distribution capacity. The
combination of shifting funds under management to higher margin products and the cost base
restructure has resulted in a 21% improvement in our recurring fee revenue.
The extraordinary run in bull markets has seen funds reallocated from active managers to
passive ETF type strategies, which typically have lower fees. In volatile or falling markets, passive
strategies generally offer no downside risk protection, and in such an environment, we expect
investors to re-allocate to active strategies that seek to minimise the risk of losing capital. It is
inevitable that this time will come, and when it does, Pengana is well placed to benefit.
Pengana is a strong business with as broad range of growth options. We have a unique platform
from which we serve more than 50,000 investors and our scale, network of advisers and proven
ability to extract efficiencies provides a strong competitive advantage.
I’d like to acknowledge the Pengana team who demonstrate ongoing commitment in working
torealise this potential. And as always, our thanks to our shareholders for your ongoing
investment and support of Pengana.
Yours sincerely
Warwick Negus
Chairman
Pengana Capital Group Limited
ANNUAL REPORT 2019 | 7
ANNUAL
REPORT
8 | PENGANA CAPITAL GROUP
8 | PENGANA CAPITAL GROUP
CEO’S
REPORT
The past year has been an atypical year for Pengana Capital Group
Limited (“PCG” or “the Company” or “Pengana”). On the face of
it, it might appear that our business has deteriorated as we have
experienced negative growth in both funds under management
(“FUM”) as well as profitability. However, a closer examination shows
that we have made substantial improvements to the Company and
that we are now particularly well poised for future growth.
The focus of our activities over the period has been twofold, i.e. firstly
to invest in areas where we see the greatest opportunity for future
growth and secondly to restructure our cost base to support that growth.
Throughout this period, we have remained investor centric, which is the
key tenant to the creation of long term value for our business. The most
significant activities undertaken across the group were:
• launch of the Pengana Private Equity Trust (ASX:PE1)
• further development of our International Equity strategy, and
• restructuring of our support engine to reduce costs and increase sales.
LAUNCH OF THE PENGANA PRIVATE EQUITY TRUST
The successful launch of the ASX listed Pengana Private Equity
Trust provides a key stepping stone for our future growth. PE1
is the realisation of an important strategic development for Pengana,
meeting all of our key criteria for undertaking new products:
• large and growing demand from retail and high-net-worth investors
for private equity exposure
• product that delivers attractive long term returns with anticipated
low levels of volatility
• lack of competitor products available to address a known
gap in investor portfolios
• ability to leverage Pengana’s infrastructure, relationships
and expertise; and
• creation of a highly profitable and valuable business line
for PCG shareholders.
PE1 is a first in the Australian market in several aspects. It provides
an opportunity for Australian retail and high-net-worth investors to
invest in an asset class that is notoriously difficult to access. In addition,
offering private equity in a listed form means that one of the biggest
impediments for these investors is removed – the lack of liquidity.
ANNUAL REPORT The structure of the offer was also unique. Current market practice meant Pengana as the
manager paid for the expenses of the capital raising, however, in addition, for every dollar
raised through the offer, Pengana issued 5 cents of convertible preference shares in PCG
for effectively no cost to PE1 investors, effectively guaranteeing that the net asset value
of PE1 on listing would benefit from an immediate 5% uplift, incentivising potential investors
to participate in the IPO and not wait for the after-market.
The cost of launching PE1 was $16.6 million, including $6.3 million paid in cash and
$10.3 million in PCG equity. This is a meaningful cost for the Company but it is small relative
to the potential earnings that will be earned by Pengana over many years from:
• Base management fees estimated at 0.85-0.95% per annum; and
• Performance fees (not likely before year 2) of 20% of excess returns over 8.0%., paid half yearly.
The permanent capital nature of PE1 eliminates the requirement for the investment manager
to liquidate positions to meet redemptions, making the vehicle perfectly suited to hold illiquid
assets. Pengana will retain the Management Agreement for this income stream for a minimum
of 10 years.
Importantly, PE1 has a large capacity with potential to capitalise on the strong and growing
demand from investors for exposure into private equity, particularly relevant in the current
environment of low interest rates and highly volatile equity markets. We are extremely happy
with the investment we made in the development and launch of this product. We look forward
to growing it to meet investor demand.
FURTHER DEVELOPMENT OF THE PENGANA INTERNATIONAL
EQUITY RANGE OF FUNDS
On 1 July 2019, the Pengana International Equity team celebrated its fourth anniversary. Headed
by Jordan Cvetanovski and Steven Glass, the various funds managed by the team are attracting
increased support from key gate keepers, ratings agencies and research teams of independent
financial planning groups, with increased presence in platforms and approved product lists.
A largely untapped capacity means International Equities represents another key growth avenue
for Pengana over the coming years.
On the face of it, the long term performance of the Pengana International Equities Fund since
inception does not look particularly impressive, having only matched the marketi since inception
with a return of 9.7%ii. However, detailed analysis evidences that performance has been highly
compelling, as the fund has generated its returns with a vast underweighting to large US
technology stocks, which have been the predominant drivers of the growth in equity markets.
As many investors are now wary of the high prices of large US technology stocks and the
possibility of substantial volatility and falls, they are seeking strategies managed by teams who
have the ability to generate strong returns across multiple sectors and geographies and under
multiple conditions. Over the past four years, the Pengana International Equity team have
proven their ability to do exactly this, which is a rare feat in the industry. It is for this reason that
our funds are particularly well placed to raise significant inflows over the coming years.
ANNUAL REPORT 2019 | 9
ANNUAL
REPORT
CEO’S REPORT (CONTINUED)
The table below shows the performance of the Pengana International Equity
Fund in each of the main regions and sectors since inception, illustrating
the team’s excellent stock-picking skills and ability to generate strong returns
across the markets.
PENGANA INTERNATIONAL FUND PERFORMANCE
SINCE INCEPTION TO 30 JUNE 2019iii, iv
Region
Europe ex UK
US
Sector
Consumer Staples
Materials
IT
Financials
Market Cap
USD 5bn–10bn
>100bn USD
Source: Pengana and Bloomberg
Portfolio
average
weight
Indexiv
average
weight
Portfolio
returnv
Index
returnv, vi
28.50%
14.90%
12.00%
5.40%
43.40%
56.80%
12.50%
11.10%
14.60%
12.40%
8.90%
12.50%
8.20%
5.00%
11.80%
7.40%
11.90%
13.50%
17.70%
17.16%
10.10%
18.00%
19.90%
6.00%
13.70%
8.50%
11.80%
-0.40%
22.10%
33.40%
10.90%
14.70%
BUSINESS RESTRUCTURING TO REDUCE COSTS
AND INCREASE SALES
During the year, we undertook a restructuring of the business. We reduced
our cost base substantially by closing unprofitable components, including
the closure of our loss-making Singapore operations. This had a negative
impact on our funds under management in the short term, however these
strategies were unprofitable with limited growth prospects.
We have re-invested these cost savings in areas where we see the greatest
opportunities to increase long term shareholder value, by increasing our
sales and distribution capabilities in order to raise additional inflows across
our funds.
10 | PENGANA CAPITAL GROUP
10 | PENGANA CAPITAL GROUP
ANNUAL REPORT
DEVELOPMENTS IN THE FUNDS MANAGEMENT INDUSTRY
The Hayne Royal commission shone a spotlight on the Australian financial services sector, resulting in significant
and wide ranging impacts. Whilst pure-play fund managers were essentially excluded from the debate, the
industry has been indirectly impacted via large scale changes occurring in the financial advice industry. As an
independent fund manager whose predominant source of funds under management is derived from financial
advisors, we have felt this impact. Nevertheless, we are firmly of the view that independent, non-conflicted
market participants will be the big winners from these industry changes that will inevitably result in the breakup
of large vertically integrated groups.
The performance of equity markets has also posed challenges to active fund managers. The decade long
unbroken bull market has exacerbated the flight to passive, low cost index-type investment products, making
fund raising difficult for active managers. However, in my view, the bull market is unlikely to continue for very
much longer and when the market does turn, there is likely to be a reversal of these flows back to the best of
the active managers.
I outlined the opportunities for true active managers like Pengana in more volatile times in a recent article written
for the Australian Financial Review, which is re-printed in full in the next section of this Annual Report.
FUNDS UNDER MANAGEMENT
FUM reduced from $3.5 to $3.3 billion for the year. This was caused mainly by unusually large fund distributions
to investors of $269m. This was a result of unusually large realisations of capital gains in our bigger funds. Overall
PCG experienced a net fund outflow for the 12 month period of $50 million. Increases in FUM from investment
performance was substantially lower than the average of previous years at only $71 million.
We consider the reduction in assets to be a temporary phenomenon and anticipate returning to positive growth
in the near future, driven by our range of international equities funds as well as PE1.
6%
1%
1%
7%
26%
Australian multi-caps
Hedge funds
Australian small-caps
Other
Global multi-caps
Private equity
Global small-caps
24%
35%
ANNUAL REPORT 2019 | 11
ANNUAL
REPORT
CEO’S REPORT (CONTINUED)
FINANCIAL RESULTS
Pengana generated an underlying net profit after tax of $8.7 million which represents 8.40 cents per share.
Pengana Capital Group
Operating EBITDAiii
Management fee revenue
Performance fee revenue
Net fund direct expenses
Operating expenses
Team profit share
Operating EBITDA
Interest and investment income distributions
Interest on loan funded share plan
Underlying profit before tax
Income tax expense
Underlying profit after tax
June 2019
($’000)
June 2018
($’000)
37,554
4,909
(3,241)
(17,229)
(13,891)
8,102
641
2,233
10,976
(2,282)
8,694
38,450
11,580
(2,830)
(16,610)
(18,750)
11,840
1,531
2,110
15,481
(3,081)
12,400
Gross management fee revenue of $37.6 million was marginally below the $38.5 million derived in prior
comparable period (the year ended 30 June 2018) while gross performance fee revenue at $4.9 million was
58% below the $11.6 million derived in prior comparable period. Fees of $13.9 million were shared with our
fund management partners.
It is important to note that performance fees will fluctuate, especially over relatively short periods of time.
However, over the long term, we expect a reversion to the mean. The strong bull market has favoured
momentum investors, with well-diversified active managers struggling to outperform indices that have
run hard and fast, often driven by one single sector.
During the year we restructured our cost base significantly. Operating expenses at $17.2 million were 4%
above the $16.6 million posted in the prior comparable period. This relatively small net increase was comprised
of a reduction in our cost base from the closure of unprofitable components, including loss-making Singapore
operations, offset by an increase in expenses to fund improved sales and distribution capabilities.
The combination of the restructure of our cost base with increased funds under management from products with
a higher fee margin has seen our share of recurring fee revenue increase by 20.7% in the 2019 financial year:
Recurring fee profit
Management fee revenue
Net fund direct expenses
Operating expenses
Management fee profit share
Recurring fee profit
Key ratios
June 2019
$m
June 2018
$m
Variance
$m
Variance
%
38.19
(3.38)
(15.77)
(11.59)
38.85
(3.28)
(16.12)
(13.28)
7.45
6.17
(0.66)
(0.10)
0.35
1.69
1.28
(1.7)
3.0
(2.2)
(12.7)
20.7
Total expenses / management fee revenue
Management fee profit share / management fee revenue
Profit margin
50%
30%
19%
50%
34%
16%
12 | PENGANA CAPITAL GROUP
ANNUAL REPORT
As the business grows, our aim is to not only increase top line revenue, but also to ensure that more of it falls
directly to bottom line profit. We aim to achieve this by leveraging the current scalable infrastructure and by
focusing on growth from more profitable products such as PE1.
ANNOUNCEMENT OF SHARE BUY-BACK
The Company’s shares are very thinly traded and in response to the weaker share price in recent months
the Board announced its intention to buy back up to 10% of the Company’s issued capital over a period
of 12 months. The buy-back is expected to be EPS accretive and in the best interests of all Pengana shareholders.
The buyback will be funded from Pengana’s existing cash reserves and no target price has been set.
OUTLOOK
Our business remains well positioned due to the breath of strategies with excellent long term track records
as well as the strength of our brand and distribution capabilities.
Pengana has built a strong and strategic framework for long term value creation, and growth in the
coming year will be driven by focusing our sales and distribution capabilities on the areas that have the
biggest growth capacity.
In closing I would like to thank our investors for entrusting us to manage their wealth. I am confident that over
the next year we will continue to deliver superior investment outcomes for our investors and, by extension,
create value for our shareholders.
As always, I thank you for your continued support and look forward to meeting you at our Annual
General Meeting.
Russel Pillemer
Chief Executive Officer
Pengana Capital Group Limited
i. MSCI All Country World Total Return Index in AUD, with an annualised performance of 10.1% in the period from 1 July 2015 to 30 June 2019.
ii.
Annualised performance of the Pengana International Fund since inception (1 July 2015) to 30 June 2019, after all fees and expenses
and assume reinvestment of distributions. Past performance is not a reliable indicator of future performance, the value of investments
can go up and down.
iii. Net performance figures are shown after all fees and expenses, and assume reinvestment of distributions. Past performance is not a reliable
indicator of future performance, the value of investments can go up and down.
iv. Inception 1st July 2015.
v. MSCI ACWI refers to MSCI All Country World Total Return Index in AUD.
vi. Annualised total return in local currency.
vii. Source: Pengana Management Accounts.
ANNUAL REPORT 2019 | 13
ANNUAL
REPORT
14 | PENGANA CAPITAL GROUP
14 | PENGANA CAPITAL GROUP
CEO’S
INSIGHTS
A GOLDEN ERA FOR ACTIVE FUND MANAGERS IS COMING
Russel Pillemer, Australian Financial Review – 21 July 2019
The constant barrage of reports about the demise of the active fund
manager is relentless.
The average investor might conclude the age of active is over and it’s
time to switch to low cost index-type solutions. However, more informed
investors understand nothing could be further from the truth.
The coming years are likely to be a golden era for active managers. It is
highly improbable the next decade will be a repeat of the last decade’s
smooth sailing.
Over the past 10 years, markets have experienced an incredible run
with indices soaring. Momentum has been a key driver, and in times like
these, fundamentals hardly matter, leading active managers to struggle
to outperform.
There were many active managers who were, in reality, closet index
managers. As the cost of index funds has decreased significantly, many
of these managers have lost clients and been forced to close – and
rightfully so.
Meanwhile, there has been a proliferation of active, with many raising too
much money. It’s a well understood phenomena that if a fund manager
manages too much money (relative to the size of their market) they will
be unable to perform well.
Asset gatherers are insufficiently incentivised to outperform.
Many of the large Australian institutional investors withdrew from active
managers and moved to index funds. Either they consider low fees
to be their primary objective (with returns being a distant second), or
alternatively they have defined risk as the divergence of returns from the
index, rather than the risk of losing capital.
This reasoning makes sense in a bull market, where index products have
outperformed high-cost active strategies. However, it is patently obvious
this is nonsensical in a sideways or downwards market.
It is not a stretch to imagine the next 10 years will be a golden age for
Australian active managers.
Due to the large number of closures and losses of mandates, there is far
less competition for fundamental trades. This is particularly significant
for small and mid-cap companies, which includes almost all of the
Australian market.
And passive index-style strategies are ideal counterparties for active
managers who can identify mis-pricing opportunities that index strategies
create by virtue of their “dumb” trading rules.
ANNUAL REPORT Survive and thrive
The index trade is overcrowded. We know this as so many investors have capitulated and moved to index-type
solutions. But history teaches us that overcrowded trades will inevitably unwind.
Finally, active managers tend to thrive in volatile markets – and while it would be foolish to attempt to predict
the direction of the markets over the next decade, it is reasonable to assume that volatility will be higher.
Investors need to identify active managers that are well-positioned to survive and thrive.
Look for highly skilled teams or individuals with substantial experience and proven track records. Ensure they
have stuck to their guns and not surrendered their investment style to pressures emanating from the extended
bull market.
A credible manager will construct their strategies with an interest in downside protection and limit the amount of
money they are willing to accept. I would add that such a manager defines risk as in “the risk of losing money”
not “the risk of divergence from the market return”.
Good fund managers should be backed by appropriately resourced businesses so they are not faced with
existential risks or operational complexity. Critically, they should not be hostage to large institutional investors
who pose undue concentration risks.
While the investing masses are piling into low-cost index-type solutions, the smart money is seeking alternative
managers with the above attributes.
These intelligent investors are predicting a very different decade ahead and focused on securing allocations in
expert managers. Investors who are doing this are likely to be handsomely rewarded over the coming years.
Investors who are opting for low-cost solutions will inevitably realise the cheap lunch is likely to cost them dearly.
Russel Pillemer is the chief executive of Pengana Capital Group.
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you must not re-use this work without the permission of the copyright owner or Copyright Agency
ANNUAL REPORT 2019 | 15
DIRECTORS’ REPORT
30 JUNE 2019
The directors present their report, together with the financial statements, on the consolidated entity (referred
to hereafter as the ‘group’) consisting of Pengana Capital Group Limited (referred to hereafter as the ‘company’
or ‘parent entity’) and the entities it controlled at the end of, or during, the year ended 30 June 2019.
DIRECTORS
The following persons were directors of Pengana Capital Group Limited during the whole of the financial year
and up to the date of this report, unless otherwise stated:
Warwick Negus
Non-Executive Chairman
Russel Pillemer
Managing Director and Chief Executive Officer
Jeremy Dunkel
Non-Executive Independent Director
Kevin Eley
Non-Executive Independent Director
David Groves
Non-Executive Independent Director
PRINCIPAL ACTIVITIES
The principal activity of the group is funds management with the objective of offering investment funds to high
net worth and retail investors in Australia and New Zealand.
DIVIDENDS
Dividends paid during the financial year were as follows:
On 28 August 2018, fully franked final dividend of 6.5 cents per ordinary share was
declared for the year ended 30 June 2018 to be paid on 28 September 2018 to
shareholders registered on 14 September 2018. (2018: 4.5 cents per ordinary share)
On 22 February 2019, an unfranked interim dividend of 4.0 cents per ordinary share
was declared for the year ended 30 June 2019 and paid on 15 March 2019 to the
shareholders registered on 1 March 2019 (2018: 6.5 cents per ordinary share)
Consolidated
2019
$’000
2018
$’000
5,188
3,538
3,193
5,111
8,381
8,649
REVIEW OF OPERATIONS
The loss for the group after providing for income tax and non-controlling interest amounted to $14,295,000
(30 June 2018: profit of $6,980,000).
Please refer to the Chief Executive Officer’s Report for further information on the current year results and
future outlook.
16 | PENGANA CAPITAL GROUP
ANNUAL REPORT SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
On 21 August 2018, the group acquired 100% of the shares in PT Private Capital Pty Ltd for the consideration
of $3,303,000. Refer to note 32 of the financial statements for further details.
On 4 December 2018 the group closed the Pengana Absolute Return Asia Pacific Fund.
On 24 April 2019 the company’s latest product offering, Pengana Private Equity Trust, (ASX: PE1) was admitted
to the Official List of ASX Limited. Refer to note 6 for further information.
There were no other significant changes in the state of affairs of the group during the financial year.
MATTERS SUBSEQUENT TO THE END OF THE FINANCIAL YEAR
No matter or circumstance has arisen since 30 June 2019 that has significantly affected, or may significantly affect
the group’s operations, the results of those operations, or the group’s state of affairs in future financial years.
LIKELY DEVELOPMENTS AND EXPECTED RESULTS OF OPERATIONS
Refer to the Chief Executive Officer’s Report for information on likely developments and further outlook.
ENVIRONMENTAL REGULATION
The group is not subject to any significant environmental regulation under Australian Commonwealth or State law.
INFORMATION ON DIRECTORS
Name:
Title:
Experience and expertise:
Other current directorships:
Warwick Negus
Non-Executive Chairman
Warwick has more than 30 years’ experience in the finance industry across
Asia, Europe and Australia. His previous executive roles include the Chief
Executive Officer (‘CEO’) of Colonial First State Global Asset Management,
co-founder and CEO of 452 Capital, and a Managing Director of Goldman
Sachs in Australia, London and Singapore. He was also a Vice President
of Bankers Trust Australia.
Bank of Queensland Limited (ASX: BOQ); URB Investments Limited
(ASX: URB); Virgin Australia Holdings Limited (ASX: VAH) and Washington
H. Soul Pattinson and Company Limited (ASX: SOL)
Former directorships (last 3 years): None.
Special responsibilities:
Member of the Audit and Risk Committee.
Interests in shares:
3,440,000 ordinary shares.
ANNUAL REPORT 2019 | 17
DIRECTORS’ REPORT – 30 JUNE 2019 (CONTINUED)
Name:
Title:
Experience and expertise:
Russel Pillemer
Managing Director and Chief Executive Officer
Russel co-founded Pengana in 2003 together with the Hon.
Malcolm Turnbull. He has been Pengana’s CEO since inception. Prior
to founding Pengana, Russel worked in the Investment Banking Division
of Goldman Sachs in New York where he specialised in providing
advice to funds management businesses. Before moving to New York,
he was responsible for leading Goldman Sachs’ Australian Financial
Institutions Group. He was previously Chairman of Centric Wealth Group
and a Principal of Turnbull Pillemer Capital.
Other current directorships:
Pengana International Equities Limited (ASX: PIA)
Former directorships (last 3 years): None.
Special responsibilities:
None.
Interests in shares:
10,350,081 ordinary shares and 15,872,528 ordinary shares (treasury shares
held under the loan share plan).
Name:
Title:
Experience and expertise:
Jeremy Dunkel
Non-Executive Independent Director
Jeremy is a director of Taurus Capital, a family office investment consultancy
specialising in philanthropy. His accounting and finance experience includes
working for Chemical Bank, Chase Manhattan and Price Waterhouse. He
is a director of Education Heritage Foundation, and the Moriah College
Foundation, as well as being the Chair of Y2i.
Other current directorships:
None.
Former directorships (last 3 years): None.
Special responsibilities:
Chairman of the Nomination and Remuneration Committee and member
of the Audit and Risk Committee.
Interests in shares:
1,803,150 ordinary shares.
18 | PENGANA CAPITAL GROUP
ANNUAL REPORT Name:
Title:
Experience and expertise:
Kevin Eley
Non-Executive Independent Director
Kevin has over 30 years’ experience in management and investment
in a broad range of industries including, manufacturing, mining, retail,
finance and investment. He has worked for a major international accounting
firm, two investment banks and was CEO of HGL Limited.
Other current directorships:
Milton Corporation Limited (ASX: MLT); EQT Holdings Ltd (ASX: EQT)
and HGL Limited (ASX: HNG).
Former directorships (last 3 years): Po Valley Energy Limited (ASX: PVE).
Special responsibilities:
Member of the Nomination and Remuneration Committee.
Interests in shares:
250,000 ordinary shares.
Name:
Title:
Experience and expertise:
David Groves
Non-Executive Independent Director
David has over 25 years’ experience as a company director. He is Chairman of
Tasman Sea Salt Pty Ltd and is a non-executive director of Pengana International
Equities Limited, Redcape Hotel Group Management Ltd as responsible
entity of the Redcape Hotel Group and of Pipers Brook Vineyard Pty Ltd.
He is a former director of EQT Holdings Ltd, Tassal Group Ltd and GrainCorp
Ltd and a former executive with Macquarie Bank Limited and its antecedent,
Hill Samuel Australia. David is a member of the Council of Wollongong
University. He is a member of the Institute of Chartered Accounts Australia
and New Zealand and a fellow of the Australian Institute of Company Directors.
Other current directorships:
Pengana International Equities Limited (ASX: PIA) and Redcape Hotel Group
(ASX: RDC).
Former directorships (last 3 years): Pyrolyx AG (ASX: PLX).
Special responsibilities:
Chairman of the Audit and Risk Committee and member of the Nomination
and Remuneration Committee
Interests in shares:
531,669 ordinary shares.
‘Other current directorships’ quoted above are current directorships for listed entities only and excludes
directorships of all other types of entities, unless otherwise stated.
‘Former directorships (last 3 years)’ quoted above are directorships held in the last 3 years for listed entities
only and excludes directorships of all other types of entities, unless otherwise stated.
ANNUAL REPORT 2019 | 19
DIRECTORS’ REPORT – 30 JUNE 2019 (CONTINUED)
COMPANY SECRETARY
Ms Paula Ferrao has held the role of Company Secretary since 4 January 2017. Paula is an executive of the group
and was previously interim CEO of Hunter Hall International Limited, having previously held the position of
Chief Financial Officer since 2010. Paula has 20 years’ experience in the funds management industry with strong
expertise in financial reporting and tax for corporate entities, listed investment companies, managed investment
schemes and public offer superannuation funds and in all aspects of funds operations.
MEETINGS OF DIRECTORS
The number of meetings of the company’s Board of Directors (‘the Board’) and of each Board committee
held during the year ended 30 June 2019, and the number of meetings attended by each director were:
Full Board
Nomination and
Remuneration Committee
Audit and Risk
Committee
Attended
Held
Attended
Held
Attended
Held
9
9
9
9
8
9
9
9
9
9
–
–
1
1
1
–
–
1
1
1
Warwick Negus
Russel Pillemer
Jeremy Dunkel
Kevin Eley
David Groves
Warwick Negus
Russel Pillemer
Jeremy Dunkel
Kevin Eley
David Groves
3
–
4
–
4
4
–
4
–
4
Board Sub-committee
Held
Attended
1
1
1
1
1
1
1
1
1
1
Held: represents the number of meetings held during the time the director held office or was a member of the
relevant committee.
REMUNERATION REPORT (AUDITED)
The remuneration report details the key management personnel (‘KMP’) remuneration arrangements for the
group, in accordance with the requirements of the Corporations Act 2001 and its Regulations.
KMP are those persons having authority and responsibility for planning, directing and controlling the activities
of the entity, directly or indirectly, including all directors.
20 | PENGANA CAPITAL GROUP
ANNUAL REPORT
Principles used to determine the nature and amount of remuneration
The objective of the group’s executive reward framework is to ensure reward for performance is competitive and
appropriate for the results delivered. The framework aligns executive reward with the achievement of strategic
objectives and the creation of value for shareholders, and it is considered to conform to the market best practice
for the delivery of reward. The Board of Directors (‘the Board’) ensures that executive reward satisfies the
following key criteria for good reward governance practices:
• competitiveness and reasonableness;
• acceptability to shareholders;
• performance linkage/alignment of executive compensation; and
• transparency.
The Nomination and Remuneration Committee (‘NRC’) is responsible for determining and reviewing
remuneration arrangements for its directors and executives. The performance of the group depends on the
quality of its directors and executives. The remuneration philosophy is to attract, motivate and retain high
performance and high quality personnel.
In accordance with best practice corporate governance, the structure of non-executive director and executive
director remuneration is separate.
Non-Executive Directors’ remuneration
Non-Executive Directors each have a letter of appointment with the company. Fees and payments to Non-
Executive Directors reflect the demands and responsibilities of their role. Non-Executive Directors’ fees and
payments are reviewed annually by the NRC. The NRC may, from time to time, receive advice from independent
remuneration consultants to ensure Non-Executive Directors’ fees and payments are appropriate and in line with
the market. The Chairman’s fees are determined independently to the fees of other Non-Executive Directors
based on comparative roles in the external market. The Chairman is not present at any discussions relating to the
determination of his own remuneration. Non-Executive Directors do not receive share options or other incentives.
ASX listing rules require the aggregate non-executive directors’ remuneration be determined periodically by a
general meeting. The most recent determination was at the Annual General Meeting held on 28 November 2017,
where the shareholders approved a maximum annual aggregate remuneration of $750,000.
Executive remuneration
The group aims to reward executives based on their position and responsibility, with a level and mix of
remuneration which has both fixed and variable components.
The executive remuneration and reward framework has the following components:
• fixed remuneration, including superannuation and long service leave;
• share-based payments; and
• discretionary cash bonus.
The combination of these comprises the executive’s total remuneration.
Fixed remuneration, consisting of base salary, superannuation and non-monetary benefits, will be reviewed
annually by the NRC based on individual and business unit performance, the overall performance of the group
and comparable market remuneration.
Executives may receive their fixed remuneration in the form of cash or other fringe benefits where it does
not create any additional costs to the group and provides additional value to the executive.
Short Term Incentives (‘STI’) are payable to KMP and other executives at the discretion of the Board and are
not directly linked to the group profitability, however the profitability of the group is taken into consideration
when determining bonuses. No STI was paid to KMP and other executives for the year ended 30 June 2019.
ANNUAL REPORT 2019 | 21
DIRECTORS’ REPORT – 30 JUNE 2019 (CONTINUED)
REMUNERATION REPORT (AUDITED) (CONTINUED)
Long-Term incentives (‘LTI’)
The long-term incentives (‘LTI’) include long service leave and share-based payments.
The group operates a Loan Share Plan (‘LSP’) which is outlined below in the section ‘Share-based compensation’.
A condition of the merger in the year ended 30 June 2017 was a voluntary escrow of equity owned by KMP
and other executives. The escrow periods range from one to six years.
Use of remuneration consultants
During the financial year ended 30 June 2019, the group did not engage any remuneration consultants.
Voting and comments made at the Company’s 2018 Annual General Meeting (‘AGM’)
At the 2018 AGM, shareholders voted to approve the adoption of the remuneration report for the year
ended 30 June 2018. The company did not receive any specific feedback at the AGM regarding its
remuneration practices.
Details of remuneration
Amounts of remuneration
Details of the remuneration of KMP of the group are set out in this section.
The KMP of the group consisted of the Directors of Pengana Capital Group Limited and the following person:
• Katrina Glendinning – Chief Financial Officer
Short-term benefits
Post-
employment
benefits
Long-
term
benefits
Share-
based
payments
Cash salary
and fees
$
Cash
bonus
$
Non-
monetary
$
Super-
annuation
$
Long
service
leave
$
Equity-
settled
$
Total
$
–
–
–
–
–
–
–
–
–
–
–
12,146
7,808
6,940
8,675
–
–
–
–
–
–
–
–
140,000
90,000
80,000
100,000
72,017
20,531
11,783
–
627,267
–
20,531
6,970
22,891
404,860
72,017
76,631
18,753
22,891 1,442,127
2019
Non-Executive Directors:
Warwick Negus
Jeremy Dunkel
Kevin Eley
David Groves
127,854
82,192
73,060
91,325
Executive Directors:
Russel Pillemer
522,936
Other KMP:
Katrina Glendinning
354,468
1,251,835
22 | PENGANA CAPITAL GROUP
ANNUAL REPORT Short-term benefits
Post-
employment
benefits
Long-
term
benefits
Share-
based
payments
Cash salary
and fees
$
Cash
bonus
$
Non-
monetary
$
Super-
annuation
$
Long
service
leave
$
Equity-
settled
$
Total
$
2018
Non-Executive Directors:
Warwick Negus
Robert Barry*
Jeremy Dunkel
Kevin Eley
David Groves
127,854
24,353
82,192
73,060
91,325
Executive Directors:
Russel Pillemer
583,530
Other KMP:
Katrina Glendinning
344,124
1,326,438
* KMP of the group until 31 October 2017
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
12,146
2,314
7,808
6,940
8,675
–
–
–
–
–
–
–
–
–
–
140,000
26,667
90,000
80,000
100,000
20,049
25,560
–
629,139
20,049
12,013
22,891
399,077
77,981
37,573
22,891 1,464,883
Non-Executive Directors’ remuneration is 100% fixed. The share-based payment incentive relates to the LSP.
Name
Executive Directors:
Russel Pillemer
Other KMP:
Katrina Glendinning
Fixed remuneration
LTI
2019
%
2018
%
2019
%
2018
%
100
100
94
94
–
6
–
6
ANNUAL REPORT 2019 | 23
DIRECTORS’ REPORT – 30 JUNE 2019 (CONTINUED)
SERVICE AGREEMENTS
Remuneration and other terms of employment for group executives are formalised in employment agreements.
Details of the employment agreements with KMP are as follows:
Name:
Title:
Russel Pillemer
Managing Director and Chief Executive Officer
Term of agreement:
Ongoing - no fixed minimum term
Details:
Name:
Title:
A total fixed salary of $615,077 per annum, which includes statutory
superannuation contributions and any salary sacrifice arrangements.
Russel participates in the loan share plan (LSP). Either party may
terminate the employment agreement by providing six months’ notice.
Katrina Glendinning
Chief Financial Officer
Term of agreement:
Ongoing – no fixed minimum term
Details:
A total fixed salary of $375,471 per annum, which includes statutory
superannuation contributions and any salary sacrifice arrangements.
Katrina participates in the loan share plan (LSP). Either party may
terminate the employment agreement by providing six months’ notice.
KMP have no entitlement to termination payments in the event of removal for misconduct.
SHARE-BASED COMPENSATION
Issue of shares under the Loan Share Plan (‘LSP’)
The group operates a LSP whereby limited recourse loans were provided to employees and fund managers to
acquire shares in the company. As the share acquisitions were funded by limited recourse loans, for accounting
purposes the arrangement is treated as equity-settled share-based payments. The shares issued under the
LSP (referred to as ‘treasury shares’) are fair valued on the date they are granted and amortised as an expense
in profit or loss over the vesting period. The impact of this accounting treatment is a reduction in net assets
equivalent to the value of loans outstanding under the LSP. As at 30 June 2019 loans outstanding under the LSP
and not recorded as a receivable on the statement of financial position totalled $29,395,315 (2018: $27,527,613).
Treasury shares have a service vesting period of 5 years, except those granted to Russel Pillemer all of which
vested on the date they were granted.
As at 30 June 2019 outstanding loans to Russel Pillemer and Katrina Glendinning respectively are $18,533,517
(2018: $18,883,945) and $529,215 (2018: $523,606).
The terms and conditions of each grant of shares under the LSP affecting remuneration of directors and other
KMP in this financial year or future reporting years are as follows:
Grant date
Name
Number of
loan shares
Expiry
date
Exercise
price
Fair value per loan
shares at grant date
03/03/2017
Katrina Glendinning
422,899
01/03/2024
$1.49
$0.271
There were no other options over ordinary shares granted to or vested in directors and other KMP as part
of compensation during the year ended 30 June 2019 and 30 June 2018.
24 | PENGANA CAPITAL GROUP
ANNUAL REPORT ADDITIONAL DISCLOSURES RELATING TO KMP
Shareholding
The number of shares in the company, excluding shares under the LSP, held during the financial year by each
director and other members of KMP of the group, including their related parties, is set out below:
Balance at
the start of
the year
Received
as part of
remuneration
Additions Disposal/other
Ordinary shares:
Warwick Negus
Jeremy Dunkel
Kevin Eley
David Groves
Russel Pillemer
Katrina Glendinning
3,425,000
1,803,150
200,000
393,667
10,350,081
2,186,620
18,358,518
–
–
–
–
–
–
–
15,000
–
50,000
138,002
–
–
(27,090)
2,159,530
203,002
(27,090)
18,534,430
Balance at
the end of
the year
3,440,000
1,803,150
250,000
531,669
10,350,081
–
–
–
–
–
Shares under the Loan Share Plan
The number of shares under the LSP in the company held during the financial year by each director and other
members of KMP of the group, including their related parties, is set out below:
Shares under the Loan
Share Plan:
Russel Pillemer
Katrina Glendinning
Balance at
the start of
the year
15,872,528
422,899
16,295,427
Granted
Exercised
Expired/
forfeited/
other
Balance at
the end of
the year
–
–
–
–
–
–
–
–
–
15,872,528
422,899
16,295,427
This concludes the remuneration report, which has been audited.
ANNUAL REPORT 2019 | 25
DIRECTORS’ REPORT – 30 JUNE 2019 (CONTINUED)
SHARES UNDER THE LOAN SHARE PLAN AND SHARES UNDER OPTIONS
Shares under the LSP in Pengana Capital Group Limited and reported as treasury shares at the date of this report
are as follows:
Grant date
01/03/2017
01/03/2017
03/03/2017
03/10/2018
Expiry date
28/02/2024
28/02/2024
01/03/2024
01/10/2025
Exercise price
Number of loan shares
$1.49
$1.20
$1.49
$4.33
5,149,796
10,722,732
6,981,194
604,998
23,458,720
The value of loans issued under the LSP total $29,220,000 (2018: $27,220,000) and the related treasury shares
are reported as a reduction in issued capital, due to the operability of the LSP being accounted for as a share-
based payments arrangement, similar in nature to the issue of options.
There were no unissued ordinary shares of Pengana Capital Group Limited under option outstanding at the date
of this report.
SHARES ISSUED ON THE EXERCISE OF OPTIONS
There were no ordinary shares of Pengana Capital Group Limited issued on the exercise of options during the
year ended 30 June 2019 and up to the date of this report.
INDEMNITY AND INSURANCE OF OFFICERS
The company has indemnified the directors and executives of the company for costs incurred, in their capacity
as a director or executive, for which they may be held personally liable, except where the indemnity is not
permitted by law.
During the financial year the group paid premiums in respect of contracts to insure the directors and executives
of the company and group. The contract of insurance prohibits disclosure of the nature of the risks insured and
the amount of the premium.
INDEMNITY AND INSURANCE OF AUDITOR
The company has not, during or since the end of the financial year, indemnified or agreed to indemnify the
auditor of the company or any related entity against a liability incurred by the auditor.
During the financial year, the company has not paid a premium in respect of a contract to insure the auditor of
the company or any related entity.
PROCEEDINGS ON BEHALF OF THE COMPANY
No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring
proceedings on behalf of the company, or to intervene in any proceedings to which the company is a party for
the purpose of taking responsibility on behalf of the company for all or part of those proceedings.
26 | PENGANA CAPITAL GROUP
ANNUAL REPORT NON-AUDIT SERVICES
There were no non-audit services provided during the financial year by the auditor.
OFFICERS OF THE COMPANY WHO ARE FORMER PARTNERS OF GRANT THORNTON AUDIT PTY LTD
There are no officers of the company who are former partners of Grant Thornton Audit Pty Ltd.
ROUNDING OF AMOUNTS
The company is of a kind referred to in Corporations Instrument 2016/191, issued by the Australian Securities
and Investments Commission, relating to ‘rounding-off’. Amounts in this report have been rounded off
in accordance with that Corporations Instrument to the nearest thousand dollars, or in certain cases, the
nearest dollar.
AUDITOR’S INDEPENDENCE DECLARATION
A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001
is set out immediately after this directors’ report.
AUDITOR
Grant Thornton Audit Pty Ltd continues in office in accordance with section 327 of the Corporations Act 2001.
This report is made in accordance with a resolution of directors, pursuant to section 298(2)(a) of the
Corporations Act 2001.
On behalf of the Directors,
Russel Pillemer
Chief Executive Officer
26 August 2019
Sydney
ANNUAL REPORT 2019 | 27
AUDITOR’S INDEPENDENCE
DECLARATION
Level 17, 383 Kent Street
Sydney NSW 2000
Correspondence to:
Locked Bag Q800
QVB Post Office
Sydney NSW 1230
T +61 2 8297 2400
F +61 2 9299 4445
E info.nsw@au.gt.com
W www.grantthornton.com.au
Auditor’s Independence Declaration
To the Directors of Pengana Capital Group Limited
In accordance with the requirements of section 307C of the Corporations Act 2001, as lead auditor for the audit of Pengana
Capital Group Limited for the year ended 30 June 2019, I declare that, to the best of my knowledge and belief, there have
been:
a
b
no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
no contraventions of any applicable code of professional conduct in relation to the audit.
Grant Thornton Audit Pty Ltd
Chartered Accountants
M A Adam-Smith
Partner – Audit & Assurance
Sydney, 26 August 2019
Grant Thornton Audit Pty Ltd ACN 130 913 594
a subsidiary or related entity of Grant Thornton Australia Ltd ABN 41 127 556 389
www.grantthornton.com.au
‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients
and/or refers to one or more member firms, as the context requires. Grant Thornton Australia Ltd is a member firm of Grant Thornton International
Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. GTIL and each member firm is a separate legal entity. Services are
delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate one
another and are not liable for one another’s acts or omissions. In the Australian context only, the use of the term ‘Grant Thornton’ may refer to
Grant Thornton Australia Limited ABN 41 127 556 389 and its Australian subsidiaries and related entities. GTIL is not an Australian related entity to
Grant Thornton Australia Limited.
Liability limited by a scheme approved under Professional Standards Legislation.
28 | PENGANA CAPITAL GROUP
ANNUAL REPORT
STATEMENT OF
PROFIT OR LOSS
For the year ended 30 June:
Revenue
Management fees
Performance fees
Other fee revenue
Total revenue
Share of profits/(losses) of associates accounted for using the equity method
Interest revenue calculated using the effective interest method
Other income and gains
Total revenue and income
Expenses
Human resources expenses
Fund manager profit share expense
Fund operating expenses
Distribution expenses
Impairment of financial assets
Occupancy expenses
Net change in assets attributable to unitholders
Cost of establishing Pengana Private Equity Trust
Non-cash issue of alignment shares to Pengana Private Equity Trust
Technology and communications expenses
Marketing and investment research expenses
Insurance expenses
Professional, registry and listing related expenses
Acquisition and restructuring costs
Depreciation and amortisation expenses
Other operating expenses
Finance costs
Total expenses
Profit/(loss) before income tax expense
Income tax expense
Note
Consolidated
2019
$’000
2018
$’000
37,735
4,952
859
39,621
11,696
–
43,546
51,317
(239)
147
837
311
182
2,383
44,291
54,193
(14,048)
(13,891)
(4,001)
–
(299)
(980)
–
(6,299)
(10,260)
(781)
(1,430)
(548)
(678)
(168)
(2,652)
(275)
(53)
(12,343)
(18,634)
(3,761)
(195)
–
(1,021)
(281)
–
–
(972)
(1,397)
(502)
(968)
(633)
(2,559)
(756)
–
(56,363)
(44,022)
(12,072)
10,171
(2,213)
(3,081)
4
5
6
6
6
6
7
Profit/(loss) after income tax expense for the year
(14,285)
7,090
The above statement of profit or loss should be read in conjunction with the accompanying notes.
ANNUAL REPORT 2019 | 29
STATEMENT OF PROFIT OR LOSS (CONTINUED)
For the year ended 30 June:
Profit/(loss) for the year is attributable to:
Non-controlling interest
Owners of Pengana Capital Group Limited
Basic earnings per share
Diluted earnings per share
Consolidated
2019
$’000
10
(14,295)
(14,285)
Cents
(17.75)
(17.75)
2018
$’000
110
6,980
7,090
Cents
8.88
7.73
Note
38
38
The above statement of profit or loss should be read in conjunction with the accompanying notes.
30 | PENGANA CAPITAL GROUP
ANNUAL REPORT STATEMENT OF OTHER
COMPREHENSIVE INCOME
For the year ended 30 June:
Consolidated
2019
$’000
2018
$’000
Profit/(loss) after income tax expense for the year
(14,285)
7,090
Other comprehensive income
Items that will not be reclassified subsequently to profit or loss
Loss on the revaluation of equity instruments at fair value
through other comprehensive income, net of tax
Items that may be reclassified subsequently to profit or loss
Gain on the revaluation of available-for-sale financial assets, net of tax
Other comprehensive income for the year, net of tax
(570)
–
(570)
–
168
168
Total comprehensive income for the year
(14,855)
7,258
Total comprehensive income for the year is attributable to:
Non-controlling interest
Owners of Pengana Capital Group Limited
10
(14,865)
(14,855)
110
7,148
7,258
The above statement of other comprehensive income should be read in conjunction with the accompanying notes.
ANNUAL REPORT 2019 | 31
STATEMENT OF
FINANCIAL POSITION
As at 30 June:
Assets
Current Assets
Cash and cash equivalents
Trade and other receivables
Contract assets
Income tax refund due
Other current assets
Total current assets
Non-current assets
Other receivables
Investments accounted using the equity method
Equity investment in financial assets at fair value
through other comprehensive income
Investments in available-for-sale financial assets
Property, plant and equipment
Intangibles
Prepayments
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Bank loan
Income tax liability
Employee benefits
Total current liabilities
Non-current liabilities
Deferred tax
Employee benefits
Other
Bank loan
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Accumulated losses
Equity attributable to the owners of Pengana Capital Group Limited
Non-controlling interest
Note
Consolidated
2019
$’000
2018
$’000
8
9
10
7
11
12
13
14
15
16
17
18
7
19
7
20
21
22
14,446
442
4,747
–
1,072
16,070
5,206
–
759
782
20,707
22,817
1,349
4,275
8,988
–
263
65,455
153
80,483
1,732
7,481
–
9,637
315
64,541
197
83,903
101,190
106,720
7,657
1,250
1,182
992
11,081
9,889
–
–
943
10,832
5,766
6,077
93
57
3,750
9,666
20,747
80,443
101,477
29,263
(50,340)
80,400
43
78
5
–
6,160
16,992
89,728
87,914
29,445
(27,664)
89,695
33
Total equity
80,443
89,728
The above statement of financial position should be read in conjunction with the accompanying notes.
32 | PENGANA CAPITAL GROUP
ANNUAL REPORT STATEMENT OF
CHANGES IN EQUITY
Consolidated
Balance at 1 July 2017
Profit after income tax expense for the year
Other comprehensive income for the year,
net of tax
Total comprehensive income for the year
Transactions with owners in their capacity as owners:
Contributions of equity,
net of transaction costs (note 21)
Share-based payments (note 37)
Dividends paid (note 23)
–
–
–
753
–
–
Contributed
equity
$’000
Reserves
$’000
Accumulated
losses
$’000
87,161
28,899
(25,995)
–
6,980
–
Non-
controlling
interest
$’000
52
110
–
Total
equity
$’000
90,117
7,090
168
168
168
–
378
–
6,980
110
7,258
–
–
–
–
753
378
(8,649)
(129)
(8,778)
Balance at 30 June 2018
87,914
29,445
(27,664)
33
89,728
Consolidated
Balance at 1 July 2018
Profit/(loss) after income tax expense
for the year
Other comprehensive income for the year,
net of tax
Total comprehensive income for the year
Contributed
equity
$’000
Reserves
$’000
Accumulated
losses
$’000
87,914
29,445
(27,664)
–
–
–
–
(14,295)
(570)
–
(570)
(14,295)
Transactions with owners in their capacity as owners:
Contributions of equity,
net of transaction costs (note 21)
Share-based payments (note 37)
Dividends on treasury shares
Dividends paid (note 23)
13,563
–
–
–
–
446
(58)
–
–
–
–
(8,381)
Non-
controlling
interest
$’000
33
10
–
10
–
–
–
–
Total
equity
$’000
89,728
(14,285)
(570)
(14,855)
13,563
446
(58)
(8,381)
Balance at 30 June 2019
101,477
29,263
(50,340)
43
80,443
The above statement of changes in equity should be read in conjunction with the accompanying notes.
ANNUAL REPORT 2019 | 33
STATEMENT OF
CASH FLOWS
For the year ended:
Cash flows from operating activities
Receipts from customers (inclusive of GST)
Payments to suppliers, customers and employees (inclusive of GST)
Dividends received
Interest received
Other revenue
Proceeds from the sale of financial instruments held at fair value
Purchase of financial instruments held at fair value through profit or loss
Income taxes paid
Net cash from/(used in) operating activities
Cash flows from investing activities
Cash acquired on acquisition of subsidiaries
Payments for property, plant and equipment
Proceeds from disposal of interests in subsidiaries
Proceeds from disposal of investments in associates
Proceeds from security deposits
36
32
Consolidated
2019
$’000
2018
$’000
Note
47,901
(49,711)
55,197
(49,078)
(1,810)
6,119
478
104
283
–
–
(272)
225
186
939
21,363
(16,790)
(4,327)
(1,217)
7,715
65
(98)
–
2,967
40
–
(85)
7,732
–
2
Net cash from investing activities
2,974
7,649
Cash flows from financing activities
Payments to unitholders
Proceeds from loan repayments
Proceeds from borrowings
Dividends paid to company shareholders, net of treasury shares
Dividends paid to non-controlling interests and unitholders
Net cash used in financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Effects of exchange rate changes on cash and cash equivalents
–
–
5,000
(8,381)
–
(11,080)
246
–
(8,542)
(129)
(3,381)
(19,505)
(1,624)
16,070
–
(4,141)
20,167
44
Cash and cash equivalents at the end of the financial year
8
14,446
16,070
The above statement of cash flows should be read in conjunction with the accompanying notes.
34 | PENGANA CAPITAL GROUP
ANNUAL REPORT
NOTES TO THE
FINANCIAL STATEMENTS
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies adopted in the preparation of the financial statements are set out below.
These policies have been consistently applied to all the years presented, unless otherwise stated.
NEW OR AMENDED ACCOUNTING STANDARDS AND INTERPRETATIONS ADOPTED
The group has adopted all of the new or amended Accounting Standards and Interpretations issued by the
Australian Accounting Standards Board (‘AASB’) that are mandatory for the current reporting period.
Any new or amended Accounting Standards or Interpretations that are not yet mandatory have not been early adopted.
The following Accounting Standards and Interpretations adopted during the year are most relevant to the group:
AASB 9 Financial Instruments
The group has adopted AASB 9 from 1 July 2018. The standard introduced new classification and measurement
models for financial assets. A financial asset shall be measured at amortised cost if it is held within a business model
whose objective is to hold assets in order to collect contractual cash flows which arise on specified dates and that
are solely principal and interest. A debt investment shall be measured at fair value through other comprehensive
income if it is held within a business model whose objective is to both hold assets in order to collect contractual
cash flows which arise on specified dates that are solely principal and interest as well as selling the asset on
the basis of its fair value. All other financial assets are classified and measured at fair value through profit or
loss unless the entity makes an irrevocable election on initial recognition to present gains and losses on equity
instruments (that are not held-for-trading or contingent consideration recognised in a business combination) in
other comprehensive income (‘OCI’). Despite these requirements, a financial asset may be irrevocably designated
as measured at fair value through profit or loss to reduce the effect of, or eliminate, an accounting mismatch. For
financial liabilities designated at fair value through profit or loss, the standard requires the portion of the change
in fair value that relates to the entity’s own credit risk to be presented in OCI (unless it would create an accounting
mismatch). New simpler hedge accounting requirements are intended to more closely align the accounting
treatment with the risk management activities of the entity. New impairment requirements use an ‘expected credit
loss’ (‘ECL’) model to recognise an allowance. Impairment is measured using a 12-month ECL method unless the
credit risk on a financial instrument has increased significantly since initial recognition in which case the lifetime
ECL method is adopted. For receivables, a simplified approach to measuring expected credit losses using a lifetime
expected loss allowance is available.
AASB 15 Revenue from Contracts with Customers
The group has adopted AASB 15 from 1 July 2018. The standard provides a single comprehensive model for
revenue recognition. The core principle of the standard is that an entity shall recognise revenue to depict the
transfer of promised goods or services to customers at an amount that reflects the consideration to which the
entity expects to be entitled in exchange for those goods or services. The standard introduced a new contract-
based revenue recognition model with a measurement approach that is based on an allocation of the transaction
price. This is described further in the accounting policies below. Credit risk is presented separately as an expense
rather than adjusted against revenue. Contracts with customers are presented in an entity’s statement of financial
position as a contract liability, a contract asset, or a receivable, depending on the relationship between the entity’s
performance and the customer’s payment. Customer acquisition costs and costs to fulfil a contract can, subject
to certain criteria, be capitalised as an asset and amortised over the contract period.
ANNUAL REPORT 2019 | 35
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Impact of adoption
The group has adopted Accounting Standards AASB 9 and AASB 15 for the year ended 30 June 2019.
The Accounting Standards were adopted from 1 July 2018 using transitional rules that allow for comparatives
not be restated. There was no change in the carrying amounts on adoption of the standards and there was
no impact on opening retained earnings.
The adoption of these Accounting Standards and Interpretations resulted in the following adjustments:
• interest revenue is now shown separately on the face of profit or loss;
• On 1 July 2018, investments classified as available for sale financial assets amounting to $9,637,000 under
AASB 139 were reclassified to fair value through other comprehensive income (‘FVTOCI’). The group intends
to hold the investments for the foreseeable future and has irrecovably elected to classify them as such on
transition date. As a result, $171,000 was transferred from the available for sale reserve to FVTOCI reserve
on 1 July 2018. There was no impact on the fair value of investments, retained earnings or reserves on
transition date;
• accrued income is now reclassified as contract assets; and
• additional disclosures relating to disaggregation of revenue which is included in note 4.
BASIS OF PREPARATION
These general purpose financial statements have been prepared in accordance with Australian Accounting
Standards and Interpretations issued by the Australian Accounting Standards Board (‘AASB’) and the
Corporations Act 2001, as appropriate for for-profit oriented entities. These financial statements also comply with
International Financial Reporting Standards as issued by the International Accounting Standards Board (‘IASB’).
Historical cost convention
The financial statements have been prepared under the historical cost convention, except for, where applicable,
the revaluation of financial assets and liabilities at fair value through profit or loss, financial assets at fair value
through other comprehensive income and derivative financial instruments.
Critical accounting estimates
The preparation of the financial statements requires the use of certain critical accounting estimates. It also
requires management to exercise its judgement in the process of applying the group’s accounting policies.
The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates
are significant to the financial statements, are disclosed in note 2.
PARENT ENTITY INFORMATION
In accordance with the Corporations Act 2001, these financial statements present the results of the group only.
Supplementary information about the parent entity is disclosed in note 31.
36 | PENGANA CAPITAL GROUP
ANNUAL REPORT PRINCIPLES OF CONSOLIDATION
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Pengana Capital
Group Limited (‘company’ or ‘parent entity’) as at 30 June 2019 and the results of all subsidiaries for the year then
ended. Pengana Capital Group Limited and its subsidiaries together are referred to in these financial statements
as the ‘group’.
Subsidiaries are all those entities over which the group has control. The group controls an entity when the group
is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect
those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the
date on which control is transferred to the group. They are de-consolidated from the date that control ceases.
Intercompany transactions, balances and unrealised gains on transactions between entities in the group are
eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment
of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure
consistency with the policies adopted by the group.
The acquisition of subsidiaries is accounted for using the acquisition method of accounting. A change in
ownership interest, without the loss of control, is accounted for as an equity transaction, where the difference
between the consideration transferred and the book value of the share of the non-controlling interest acquired
is recognised directly in equity attributable to the parent.
Non-controlling interest in the results and equity of subsidiaries are shown separately in the statement of profit
or loss, statement of financial position and statement of changes in equity of the group. Losses incurred by the
group are attributed to the non-controlling interest in full, even if that results in a deficit balance.
Where the group loses control over a subsidiary, it derecognises the assets including goodwill, liabilities and non-
controlling interest in the subsidiary together with any cumulative translation differences recognised in equity.
The group recognises the fair value of the consideration received and the fair value of any investment retained
together with any gain or loss in profit or loss.
OPERATING SEGMENTS
Operating segments are presented using the ‘management approach’, where the information presented
is on the same basis as the internal reports provided to the Chief Operating Decision Makers (‘CODM’). The
CODM are responsible for the allocation of resources to operating segments and assessing their performance.
FOREIGN CURRENCY TRANSLATION
The financial statements are presented in Australian dollars, which is Pengana Capital Group Limited’s functional
and presentation currency.
Foreign currency transactions
Foreign currency transactions are translated into the entity’s functional currency using the exchange rates
prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of
such transactions and from the translation at financial year-end exchange rates of monetary assets and liabilities
denominated in foreign currencies are recognised in profit or loss.
Foreign operations
The assets and liabilities of foreign operations are translated into Australian dollars using the exchange rates
at the reporting date. The revenues and expenses of foreign operations are translated into Australian dollars
using the average exchange rates, which approximate the rates at the dates of the transactions, for the period.
All resulting foreign exchange differences are recognised in other comprehensive income through the foreign
currency reserve in equity.
The foreign currency reserve is recognised in profit or loss when the foreign operation or net investment
is disposed of.
ANNUAL REPORT 2019 | 37
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
REVENUE RECOGNITION
The group recognises revenue as follows:
Revenue from contracts with customers
Revenue is recognised at an amount that reflects the consideration to which the group is expected to be entitled
in exchange for transferring goods or services to a customer. For each contract with a customer, the group:
identifies the contract with a customer; identifies the performance obligations in the contract; determines the
transaction price which takes into account estimates of variable consideration and the time value of money;
allocates the transaction price to the separate performance obligations on the basis of the relative stand-
alone selling price of each distinct good or service to be delivered; and recognises revenue when or as each
performance obligation is satisfied in a manner that depicts the transfer to the customer of the goods or
services promised.
Variable consideration within the transaction price, if any, reflects concessions provided to the customer such as
discounts, rebates and refunds, any potential bonuses receivable from the customer and any other contingent
events. Such estimates are determined using either the ‘expected value’ or ‘most likely amount’ method. The
measurement of variable consideration is subject to a constraining principle whereby revenue will only be
recognised to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue
recognised will not occur. The measurement constraint continues until the uncertainty associated with the
variable consideration is subsequently resolved. Amounts received that are subject to the constraining principle
are recognised as a refund liability.
Management fees
Management fee revenue is recognised over time.
Performance fees
Performance fees are recognised as revenue at a point in time when the right to receive payment has been
established. Performance fees which are contingent upon performance to be determined at future dates have
not been recognised as revenue or as a receivable at the reporting date as they are not able to be estimated
or measured reliably and it is highly probable that there could be a significant reversal of revenue.
Dividends and distributions
Dividends and distributions are recognised when received or when the right to receive payment is established.
Interest
Interest revenue is recognised as interest accrues using the effective interest method. This is a method of
calculating the amortised cost of a financial asset and allocating the interest income over the relevant period
using the effective interest rate, which is the rate that exactly discounts estimated future cash receipts through
the expected life of the financial asset to the net carrying amount of the financial asset.
Other revenue
Other fee revenue is recognised over time.
FUND MANAGER PROFIT SHARE EXPENSE
Fund manager profit share expense represents a ‘shadow equity’ program for fund managers under which the
fund managers receive an agreed percentage of the profits of their respective fund and/or strategy ensuring
alignment of interests between shareholders, fund managers and fund investors.
38 | PENGANA CAPITAL GROUP
ANNUAL REPORT INCOME TAX
The income tax expense or benefit for the period is the tax payable on that period’s taxable income based on
the applicable income tax rate for each jurisdiction, adjusted by the changes in deferred tax assets and liabilities
attributable to temporary differences, unused tax losses and the adjustment recognised for prior periods,
where applicable.
Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to be
applied when the assets are recovered or liabilities are settled, based on those tax rates that are enacted
or substantively enacted, except for:
• When the deferred income tax asset or liability arises from the initial recognition of goodwill or an asset
or liability in a transaction that is not a business combination and that, at the time of the transaction, affects
neither the accounting nor taxable profits; or
• When the taxable temporary difference is associated with interests in subsidiaries, associates or joint ventures,
and the timing of the reversal can be controlled and it is probable that the temporary difference will not
reverse in the foreseeable future.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is
probable that future taxable amounts will be available to utilise those temporary differences and losses.
The carrying amount of recognised and unrecognised deferred tax assets are reviewed at each reporting date.
Deferred tax assets recognised are reduced to the extent that it is no longer probable that future taxable profits
will be available for the carrying amount to be recovered. Previously unrecognised deferred tax assets are
recognised to the extent that it is probable that there are future taxable profits available to recover the asset.
Deferred tax assets and liabilities are offset only where there is a legally enforceable right to offset current
tax assets against current tax liabilities and deferred tax assets against deferred tax liabilities; and they relate
to the same taxable authority on either the same taxable entity or different taxable entities which intend to
settle simultaneously.
Tax consolidated group
Pengana Capital Group Limited (the ‘head entity’) and its wholly-owned Australian subsidiaries formed an
income tax consolidated group under the tax consolidation regime.
The head entity and each subsidiary in the tax consolidated group continue to account for their own current
and deferred tax amounts. The tax consolidated group has applied the ‘separate taxpayer within group’
approach in determining the appropriate amount of taxes to allocate to members of the tax consolidated group.
In addition to its own current and deferred tax amounts, the head entity also recognises the current tax liabilities
(or assets) and the deferred tax assets arising from unused tax losses and unused tax credits assumed from each
subsidiary in the tax consolidated group.
The head entity and its wholly owned subsidiaries have a tax funding agreement that ensures the tax payable
is met by Pengana Capital Group Ltd. Any difference between the amounts assumed and the amount receivable
or payable under the funding agreement is recognized as a contribution to, or distribution from, the parent.
CURRENT AND NON-CURRENT CLASSIFICATION
Assets and liabilities are presented in the statement of financial position based on current and non-current
classification.
An asset is classified as current when: it is either expected to be realised or intended to be sold or consumed
in the group’s normal operating cycle; it is held primarily for the purpose of trading; it is expected to be realised
within 12 months after the reporting period; or the asset is cash or cash equivalent unless restricted from being
exchanged or used to settle a liability for at least 12 months after the reporting period. All other assets are
classified as non-current.
A liability is classified as current when: it is either expected to be settled in the group’s normal operating cycle;
it is held primarily for the purpose of trading; it is due to be settled within 12 months after the reporting period;
or there is no unconditional right to defer the settlement of the liability for at least 12 months after the reporting
period. All other liabilities are classified as non-current.
Deferred tax assets and liabilities are always classified as non-current.
ANNUAL REPORT 2019 | 39
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CASH AND CASH EQUIVALENTS
Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-
term, highly liquid investments with original maturities of three months or less that are readily convertible to
known amounts of cash and which are subject to an insignificant risk of changes in value.
TRADE AND OTHER RECEIVABLES
Trade receivables are initially recognised at fair value and subsequently measured at amortised cost using
the effective interest method, less any allowance for expected credit losses. These receivables represent
management fees that are accrued daily and paid monthly by the funds. They are usually recoverable within
20 business days.
The group has applied the simplified approach to measuring expected credit losses, which uses a lifetime
expected loss allowance. To measure the expected credit losses, trade receivables have been grouped based
on days overdue.
Other receivables are recognised at amortised cost, less any allowance for expected credit losses.
CONTRACT ASSETS
Contract assets are recognised when the group has transferred goods or services to the customer but where
the group is yet to establish an unconditional right to consideration. Contract assets are treated as financial
assets for impairment purposes
ASSOCIATES
Associates are entities over which the group has significant influence but not control or joint control. Investments
in associates are accounted for using the equity method. Under the equity method, the share of the profits or
losses of the associate is recognised in profit or loss and the share of the movements in equity is recognised
in other comprehensive income. Investments in associates are carried in the statement of financial position at
cost plus post-acquisition changes in the group’s share of net assets of the associate. Goodwill relating to the
associate is included in the carrying amount of the investment and is neither amortised nor individually tested
for impairment. Dividends received or receivable from associates reduce the carrying amount of the investment.
When the group’s share of losses in an associate equals or exceeds its interest in the associate, including any
unsecured long-term receivables, the group does not recognise further losses, unless it has incurred obligations
or made payments on behalf of the associate.
The group discontinues the use of the equity method upon the loss of significant influence over the associate
and recognises any retained investment at its fair value. Any difference between the associate’s carrying amount,
fair value of the retained investment and proceeds from disposal is recognised in profit or loss.
INVESTMENTS AND OTHER FINANCIAL ASSETS
Investments and other financial assets are initially measured at fair value. Transaction costs are included as
part of the initial measurement, except for financial assets at fair value through profit or loss. Such assets are
subsequently measured at either amortised cost or fair value depending on their classification. Classification
is determined based on both the business model within which such assets are held and the contractual cash flow
characteristics of the financial asset unless, an accounting mismatch is being avoided.
Financial assets are derecognised when the rights to receive cash flows have expired or have been transferred
and the group has transferred substantially all the risks and rewards of ownership. When there is no reasonable
expectation of recovering part or all of a financial asset, it’s carrying value is written off.
Financial assets at amortised cost
A financial asset is measured at amortised cost only if both of the following conditions are met: (i) it is held
within a business model whose objective is to hold assets in order to collect contractual cash flows; and
(ii) the contractual terms of the financial asset represent contractual cash flows that are solely payments of
principal and interest.
40 | PENGANA CAPITAL GROUP
ANNUAL REPORT Financial assets at fair value through other comprehensive income
Financial assets at fair value through other comprehensive income (FVTOCI) are equity investments including
equity investments which the group intends to hold for the foreseeable future and has irrevocably elected
to classify them as such upon initial recognition. On disposal of these equity investments, any related balance
within the FVTOCI reserve is reclassified to retained earnings.
Impairment of financial assets
The group recognises a loss allowance for expected credit losses on financial assets which are either measured
at amortised cost or fair value through other comprehensive income. The measurement of the loss allowance
depends upon the group’s assessment at the end of each reporting period as to whether the financial
instrument’s credit risk has increased significantly since initial recognition, based on reasonable and supportable
information that is available, without undue cost or effort to obtain.
Where there has not been a significant increase in exposure to credit risk since initial recognition, a 12-month
expected credit loss allowance is estimated. This represents a portion of the asset’s lifetime expected credit
losses that is attributable to a default event that is possible within the next 12 months. Where a financial asset
has become credit impaired or where it is determined that credit risk has increased significantly, the loss
allowance is based on the asset’s lifetime expected credit losses. The amount of expected credit loss recognised
is measured on the basis of the probability weighted present value of anticipated cash shortfalls over the life
of the instrument discounted at the original effective interest rate.
For financial assets measured at fair value through other comprehensive income, the loss allowance is recognised
within other comprehensive income. In all other cases, the loss allowance is recognised in profit or loss.
PROPERTY, PLANT AND EQUIPMENT
Plant and equipment is stated at historical cost less accumulated depreciation and impairment. Historical cost
includes expenditure that is directly attributable to the acquisition of the items.
Depreciation is calculated on a straight-line basis to write off the net cost of each item of property, plant and
equipment over their expected useful lives as follows:
Leasehold improvements
Furniture and fittings
Plant and equipment
5 years
5–10 years
2–4 years
The residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each
reporting date.
Leasehold improvements and plant and equipment under lease are depreciated over the unexpired period
of the lease or the estimated useful life of the assets, whichever is shorter.
An item of property, plant and equipment is derecognised upon disposal or when there is no future economic
benefit to the group. Gains and losses between the carrying amount and the disposal proceeds are taken to
profit or loss.
LEASES
The determination of whether an arrangement is or contains a lease is based on the substance of the
arrangement and requires an assessment of whether the fulfilment of the arrangement is dependent on the use
of a specific asset or assets and the arrangement conveys a right to use the asset.
A distinction is made between finance leases, which effectively transfer from the lessor to the lessee substantially
all the risks and benefits incidental to the ownership of leased assets, and operating leases, under which the
lessor effectively retains substantially all such risks and benefits.
Finance leases are capitalised. A lease asset and liability are established at the fair value of the leased assets,
or if lower, the present value of minimum lease payments. Lease payments are allocated between the principal
component of the lease liability and the finance costs, so as to achieve a constant rate of interest on the
remaining balance of the liability.
ANNUAL REPORT 2019 | 41
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
NOTE 1. SIGNIFICANT ACCOUNT POLICIES (CONTINUED)
LEASES (CONTINUED)
Leased assets acquired under a finance lease are depreciated over the asset’s useful life or over the shorter
of the asset’s useful life and the lease term if there is no reasonable certainty that the group will obtain ownership
at the end of the lease term.
Operating lease payments, net of any incentives received from the lessor, are charged to profit or loss on
a straight-line basis over the term of the lease.
INTANGIBLE ASSETS
Intangible assets acquired as part of a business combination, other than goodwill, are initially measured at their
fair value at the date of the acquisition. Intangible assets acquired separately are initially recognised at cost.
Indefinite life intangible assets are not amortised and are subsequently measured at cost less any impairment.
Finite life intangible assets are subsequently measured at cost less amortisation and any impairment. The gains
or losses recognised in profit or loss arising from the derecognition of intangible assets are measured as the
difference between net disposal proceeds and the carrying amount of the intangible asset. The method and
useful lives of finite life intangible assets are reviewed annually. Changes in the expected pattern of consumption
or useful life are accounted for prospectively by changing the amortisation method or period.
Goodwill
Goodwill arises on the acquisition of a business. Goodwill is not amortised. Instead, goodwill is tested annually
for impairment, or more frequently if events or changes in circumstances indicate that it might be impaired,
and is carried at cost less accumulated impairment losses. Impairment losses on goodwill are taken to profit
or loss and are not subsequently reversed.
Acquired relationships
Relationships acquired in a business combination are amortised on a straight-line basis over the period of their
expected benefit, being their finite useful life of between 7 and 13 years.
Other intangible assets
Significant costs associated with other intangible assets are deferred and amortised on a straight-line basis over
the period of their expected benefit, being their finite useful life of between 3 and 4 years.
IMPAIRMENT OF NON-FINANCIAL ASSETS
Impairment of non-financial assets
Goodwill is not subject to amortisation and is tested annually for impairment, or more frequently if events
or changes in circumstances indicate that it might be impaired. Other non-financial assets are reviewed for
impairment whenever events or changes in circumstances indicate that the carrying amount may not be
recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds
its recoverable amount.
Recoverable amount is the higher of an asset’s fair value less costs of disposal and value-in-use. The value-in-use
is the present value of the estimated future cash flows relating to the asset using a pre-tax discount rate specific
to the asset or cash-generating unit to which the asset belongs. Assets that do not have independent cash flows
are grouped together to form a cash-generating unit.
TRADE AND OTHER PAYABLES
These amounts represent liabilities for goods and services provided to the group prior to the end of the financial
year and which are unpaid. Due to their short-term nature they are measured at amortised cost and are not
discounted. The amounts are unsecured and are usually paid within 30 days of recognition.
BORROWINGS
Loans and borrowings are initially recognised at the fair value of the consideration received, net of transaction
costs. They are subsequently measured at amortised cost using the effective interest method.
FINANCE COSTS
Finance costs are expensed in the period in which they are incurred based on the effective interest method.
42 | PENGANA CAPITAL GROUP
ANNUAL REPORT EMPLOYEE BENEFITS
Short-term employee benefits
Liabilities for wages and salaries, including non-monetary benefits, annual leave and long service leave expected
to be settled wholly within 12 months of the reporting date are measured at the amounts expected to be paid
when the liabilities are settled.
Other long-term employee benefits
The liability for annual leave, long service leave and other long term employee benefits not expected to be
settled within 12 months of the reporting date are measured as the present value of expected future payments
to be made in respect of services provided by employees up to the reporting date. Consideration is given
to expected future wage and salary levels, experience of employee departures and periods of service. Expected
future payments are discounted using market yields at the reporting date on high-quality corporate bonds with
terms to maturity and currency that match, as closely as possible, the estimated future cash outflows.
Defined contribution superannuation expense
Contributions to defined contribution superannuation plans are expensed in the period in which they are incurred.
Share-based payments
Equity-settled transactions are awards of shares, or options over shares, that are provided to employees in
exchange for the rendering of services. The group operates a loan share plan that is accounted for as equity-
settled share-based payments similar to options.
The cost of equity-settled transactions are measured at fair value on grant date. Fair value is independently
determined using the Black-Scholes option pricing model that takes into account the exercise price, the term of
the option/share under the loan share plan, the impact of dilution, the share price at grant date and expected
price volatility of the underlying share, the expected dividend yield and the risk free interest rate for the term of
the option/share under the loan share plan, together with non-vesting conditions that do not determine whether
the group receives the services that entitle the employees to receive payment. No account is taken of any other
vesting conditions.
The cost of equity-settled transactions are recognised as an expense with a corresponding increase in equity
over the vesting period. The cumulative charge to profit or loss is calculated based on the grant date fair value
of the award, the best estimate of the number of awards that are likely to vest and the expired portion of the
vesting period. The amount recognised in profit or loss for the period is the cumulative amount calculated at
each reporting date less amounts already recognised in previous periods.
Market conditions are taken into consideration in determining fair value. Therefore, any awards subject to market
conditions are considered to vest irrespective of whether or not that market condition has been met, provided all
other conditions are satisfied.
If equity-settled awards are modified, as a minimum an expense is recognised as if the modification has not
been made. An additional expense is recognised, over the remaining vesting period, for any modification that
increases the total fair value of the share-based compensation benefit as at the date of modification.
If the non-vesting condition is within the control of the group or employee, the failure to satisfy the condition is
treated as a cancellation. If the condition is not within the control of the group or employee and is not satisfied
during the vesting period, any remaining expense for the award is recognised over the remaining vesting period,
unless the award is forfeited.
If equity-settled awards are cancelled, it is treated as if it has vested on the date of cancellation, and any
remaining expense is recognised immediately. If a new replacement award is substituted for the cancelled award,
the cancelled and new award is treated as if they were a modification.
FAIR VALUE MEASUREMENT
When an asset or liability, financial or non-financial, is measured at fair value for recognition or disclosure purposes,
the fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date; and assumes that the transaction will take place
either: in the principal market; or in the absence of a principal market, in the most advantageous market.
ANNUAL REPORT 2019 | 43
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
NOTE 1. SIGNIFICANT ACCOUNT POLICIES (CONTINUED)
Fair value is measured using the assumptions that market participants would use when pricing the asset or
liability, assuming they act in their economic best interests. For non-financial assets, the fair value measurement is
based on its highest and best use. Valuation techniques that are appropriate in the circumstances and for which
sufficient data are available to measure fair value, are used, maximising the use of relevant observable inputs and
minimising the use of unobservable inputs.
Assets and liabilities measured at fair value are classified into three levels, using a fair value hierarchy that reflects
the significance of the inputs used in making the measurements. Classifications are reviewed at each reporting
date and transfers between levels are determined based on a reassessment of the lowest level of input that is
significant to the fair value measurement.
For recurring and non-recurring fair value measurements, external valuers may be used when internal expertise
is either not available or when the valuation is deemed to be significant. External valuers are selected based on
market knowledge and reputation. Where there is a significant change in fair value of an asset or liability from
one period to another, an analysis is undertaken, which includes a verification of the major inputs applied in the
latest valuation and a comparison, where applicable, with external sources of data.
CONTRIBUTED EQUITY
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction,
net of tax, from the proceeds.
DIVIDENDS
Dividends are recognised when declared during the financial year.
BUSINESS COMBINATIONS
The acquisition method of accounting is used to account for business combinations regardless of whether equity
instruments or other assets are acquired.
The consideration transferred is the sum of the acquisition-date fair values of the assets transferred, equity
instruments issued or liabilities incurred by the acquirer to former owners of the acquiree and the amount of any
non-controlling interest in the acquiree. For each business combination, the non-controlling interest in the acquiree
is measured at either fair value or at the proportionate share of the acquiree’s identifiable net assets. All acquisition
costs are expensed as incurred to profit or loss.
On the acquisition of a business, the group assesses the financial assets acquired and liabilities assumed for
appropriate classification and designation in accordance with the contractual terms, economic conditions, the
group’s operating or accounting policies and other pertinent conditions in existence at the acquisition-date.
Where the business combination is achieved in stages, the group remeasures its previously held equity interest in
the acquiree at the acquisition-date fair value and the difference between the fair value and the previous carrying
amount is recognised in profit or loss.
Contingent consideration to be transferred by the acquirer is recognised at the acquisition-date fair value.
Subsequent changes in the fair value of the contingent consideration classified as an asset or liability is
recognised in profit or loss. Contingent consideration classified as equity is not remeasured and its subsequent
settlement is accounted for within equity.
The difference between the acquisition-date fair value of assets acquired, liabilities assumed and any non-
controlling interest in the acquiree and the fair value of the consideration transferred and the fair value of any pre-
existing investment in the acquiree is recognised as goodwill. If the consideration transferred and the pre-existing
fair value is less than the fair value of the identifiable net assets acquired, being a bargain purchase to the acquirer,
the difference is recognised as a gain directly in profit or loss by the acquirer on the acquisition-date, but only after
a reassessment of the identification and measurement of the net assets acquired, the non-controlling interest in the
acquiree, if any, the consideration transferred and the acquirer’s previously held equity interest in the acquirer.
Business combinations are initially accounted for on a provisional basis. The acquirer retrospectively adjusts
the provisional amounts recognised and also recognises additional assets or liabilities during the measurement
period, based on new information obtained about the facts and circumstances that existed at the acquisition-
date. The measurement period ends on either the earlier of (i) 12 months from the date of the acquisition or
(ii) when the acquirer receives all the information possible to determine fair value.
44 | PENGANA CAPITAL GROUP
ANNUAL REPORT EARNINGS PER SHARE
Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to the owners of Pengana Capital Group
Limited, excluding any costs of servicing equity other than ordinary shares, by the weighted average number
of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued
during the financial year.
Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take
into account the after income tax effect of interest and other financing costs associated with dilutive potential
ordinary shares and the weighted average number of shares assumed to have been issued for no consideration
in relation to dilutive potential ordinary shares.
GOODS AND SERVICES TAX (‘GST’) AND OTHER SIMILAR TAXES
Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred
is not recoverable from the tax authority. In this case it is recognised as part of the cost of the acquisition of the
asset or as part of the expense.
Trade debtors and creditors are stated inclusive of the amount of GST receivable or payable. The net amount
of GST recoverable from, or payable to, the tax authority is included in other receivables or other payables in
the statement of financial position. All other receivables and payables are stated exclusive of GST recoverable
or payable.
Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing
activities which are recoverable from, or payable to the tax authority, are presented as operating cash flows.
Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the
tax authority.
ROUNDING OF AMOUNTS
The company is of a kind referred to in Corporations Instrument 2016/191, issued by the Australian Securities and
Investments Commission, relating to ‘rounding-off’. Amounts in this report have been rounded off in accordance
with that Corporations Instrument to the nearest thousand dollars, or in certain cases, the nearest dollar.
NEW ACCOUNTING STANDARDS AND INTERPRETATIONS NOT YET MANDATORY OR EARLY ADOPTED
Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet
mandatory, have not been early adopted by the group for the annual reporting period ended 30 June 2019.
The group’s assessment of the impact of these new or amended Accounting Standards and Interpretations, most
relevant to the group, are set out below.
AASB 16 Leases
This standard is applicable to annual reporting periods beginning on or after 1 January 2019. For lessee
accounting, the standard eliminates the ‘operating lease’ and ‘finance lease’ classification required by AASB 117
‘Leases’. Subject to exceptions, a ‘right-of-use’ asset will be capitalised in the statement of financial position,
measured as the present value of the unavoidable future lease payments to be made over the lease term.
The exceptions relate to short-term leases of 12 months or less and leases of low-value assets (such as personal
computers and office furniture) where an accounting policy choice exists whereby either a ‘right-of-use’ asset is
recognised or lease payments are expensed to profit or loss as incurred. A liability corresponding to the capitalised
lease will also be recognised, adjusted for lease prepayments, lease incentives received, initial direct costs incurred
and an estimate of any future restoration, removal or dismantling costs. Straight-line operating lease expense
recognition will be replaced with a depreciation charge for the leased asset (included in operating costs) and an
interest expense on the recognised lease liability (included in finance costs). For classification within the statement
of cash flows, the lease payments will be separated into both a principal (financing activities) and interest (either
operating or financing activities) components. The impact of adoption of this standard as at 1 July 2019, using
the modified retrospective approach, will result in the recognition of a right-of-use asset of approximately $729,000
with a corresponding increase in lease liability, in respect of the group’s operating leases over premises. Refer
to note 29 for undiscounted commitments in relation to non-cancellable operating leases as at 30 June 2019.
ANNUAL REPORT 2019 | 45
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
NOTE 1. SIGNIFICANT ACCOUNT POLICIES (CONTINUED)
NEW CONCEPTUAL FRAMEWORK FOR FINANCIAL REPORTING
A revised Conceptual Framework for Financial Reporting is applicable for annual reporting periods beginning on or
after 1 January 2020. This release impacts for-profit private sector entities that have public accountability that are
required by legislation to comply with Australian Accounting Standards and other for-profit entities that voluntarily
elect to apply the Conceptual Framework. Phase 2 of the framework is yet to be released which will impact for-
profit private sector entities. The application of new definition and recognition criteria as well as new guidance on
measurement will result in amendments to several accounting standards. The issue of AASB 2019-1 Amendments
to Australian Accounting Standards – References to the Conceptual Framework, also applicable from 1 January
2020, includes such amendments. Where the group has relied on the conceptual framework in determining
its accounting policies for transactions, events or conditions that are not otherwise dealt with under Australian
Accounting Standards, the group may need to revisit such policies. The group will apply the revised conceptual
framework from 1 July 2020 and is yet to assess its impact.
NOTE 2. CRITICAL ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS
The preparation of the financial statements requires management to make judgements, estimates and
assumptions that affect the reported amounts in the financial statements. Management continually evaluates
its judgements and estimates in relation to assets, liabilities, contingent liabilities, revenue and expenses.
Management bases its judgements, estimates and assumptions on historical experience and on other various
factors, including expectations of future events, management believes to be reasonable under the circumstances.
The resulting accounting judgements and estimates will seldom equal the related actual results. The judgements,
estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts
of assets and liabilities (refer to the respective notes) within the next financial year are discussed below.
Share-based payment transactions
The group measures the cost of equity-settled transactions with employees by reference to the fair value of the
equity instruments at the date at which they are granted. The fair value is determined by using the Black-Scholes
model taking into account the terms and conditions upon which the instruments were granted. The accounting
estimates and assumptions relating to equity-settled share-based payments would have no impact on the carrying
amounts of assets and liabilities within the next annual reporting period but may impact profit or loss and equity.
Fair value measurement hierarchy
The group is required to classify all assets and liabilities, measured at fair value, using a three level hierarchy,
based on the lowest level of input that is significant to the entire fair value measurement, being: Level 1:
Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the
measurement date; Level 2: Inputs other than quoted prices included within Level 1 that are observable for
the asset or liability, either directly or indirectly; and Level 3: Unobservable inputs for the asset or liability.
Considerable judgement is required to determine what is significant to fair value and therefore which category
the asset or liability is placed in can be subjective.
Goodwill
The group tests annually, or more frequently if events or changes in circumstances indicate impairment, whether
goodwill has suffered any impairment, in accordance with the accounting policy stated in note 1. The recoverable
amounts of cash- generating units have been determined based on value-in-use calculations. These calculations
require the use of assumptions, including estimated discount rates based on the current cost of capital and growth
rates of the estimated future cash flows.
Business combinations
As discussed in note 1, business combinations are initially accounted for on a provisional basis. The fair value
of assets acquired, liabilities and contingent liabilities assumed are initially estimated by the group taking into
consideration all available information at the reporting date. Fair value adjustments on the finalisation of the
business combination accounting is retrospective, where applicable, to the period the combination occurred and
may have an impact on the assets and liabilities, depreciation and amortisation reported.
Unconsolidated structured entities
The group has significant influence over the funds it manages due to its role as responsible entity and investment
manager together with direct holdings in the funds. The funds referred to in note 35 are not consolidated by the
46 | PENGANA CAPITAL GROUP
ANNUAL REPORT group, and instead, equity accounted as interests in associates, as the group does not have control or joint control.
These investments are managed in accordance with financial risk management practices as set out in note 24.
NOTE 3. OPERATING SEGMENTS
Identification of reportable operating segments
The main business activities of the group are the provision of funds management services. The Board of Directors
and the Chief Executive Officer are identified as the Chief Operating Decision Makers (‘CODM’), and they consider
the performance of the main business activities on an aggregated basis to determine the allocation of resources.
Other activities undertaken by the group, including investing activities, are incidental to the main business activities.
Based on the internal reports that are used by the CODM the group has one operating segment being the provision
of funds management services with the objective of offering investment funds to high net worth and retail investors
in Australia and New Zealand, and offshore investors globally. There is no aggregation of operating segments.
The operating segment information is the same information as provided throughout the financial statements and are
therefore not duplicated.
The information reported to the CODM is on a regular basis.
Major customers
There are no customers that account for more than 10% of the group’s revenue.
NOTE 4. REVENUE
Disaggregation of revenue
The disaggregation of revenue from contracts with customers is as follows:
Timing of revenue recognition
Services transferred over time - management and other fee revenue
Services transferred at a point in time - performance fees
Consolidated
2019
$’000
38,594
4,952
43,546
Disaggregation of revenue based on major service line is shown on the face of statement of profit or loss. The
revenue from contracts with customers is substantially all in Australia. AASB 15 was adopted using the modified
retrospective approach and as such comparatives relating to disaggregation of revenue have not been presented.
NOTE 5. OTHER INCOME AND GAINS
Dividends and distributions
Rental income
Realised and unrealised gains/(losses) on financial instruments
held at fair value through profit or loss
Realised and unrealised gains on held for trading financial assets
Other income
Consolidated
2019
$’000
479
283
–
–
75
837
2018
$’000
541
277
171
1,047
347
2,383
ANNUAL REPORT 2019 | 47
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
NOTE 6. EXPENSES
Profit/(loss) before income tax includes the following specific expenses:
Depreciation
Leasehold improvements
Fixtures and fittings
Plant and equipment
Total depreciation
Amortisation
Acquired relationships
Other intangible assets
Total amortisation
Total depreciation and amortisation
Finance costs
Interest and finance charges paid/payable
Net foreign exchange loss
Net foreign exchange loss
Rental expense relating to operating leases
Minimum lease payments
Amortisation of deferred lease incentives
Total rental expense relating to operating leases
Superannuation expense
Share-based payments expense – included in human resources expenses
Share-based payments expense
Cost incurred for Pengana Private Equity Trust
Cost of establishing Pengana Private Equity Trust
Non-cash issue of alignment shares to Pengana Private Equity Trust
Total Cost incurred for Pengana Private Equity Trust
Consolidated
2019
$’000
2018
$’000
37
13
79
36
29
88
129
153
2,405
118
2,523
2,652
53
1
949
(27)
922
740
446
6,299
10,260
16,559
2,406
–
2,406
2,559
–
4
967
(12)
955
625
378
–
–
–
Expenses incurred in relation to Pengana Private Equity Trust
Pengana Private Equity Trust (‘PPET’) (ASX:PE1) was admitted to the Official List of the Australian Securities Exchange
(‘ASX’) on the 24 April 2019 and provides an opportunity for investors to invest in a highly diversified portfolio of global
private equity investments through an ASX listed vehicle.
To reward initial investors PPET was issued 4,909,228 convertible preference shares (Alignment shares) in Pengana Capital
Group Ltd, valued at $10,260,000, for a nominal cost being an aggregate price of $1.00. Non-cash issue of alignment
shares have been treated similar to share-based payments and the fair value of the shares have been expensed to the
statement of profit or loss during the year. Further information on alignment shares can be found at note 21.
48 | PENGANA CAPITAL GROUP
ANNUAL REPORT NOTE 7. INCOME TAX
Income tax expense
Current tax
Deferred tax – origination and reversal of temporary differences
Consolidated
2019
$’000
2,003
210
2018
$’000
3,144
(63)
Aggregate income tax expense
2,213
3,081
Deferred tax included in income tax expense comprises:
Decrease/(increase) in deferred tax assets
210
(63)
Numerical reconciliation of income tax expense and tax at the statutory rate
Profit/(loss) before income tax expense
Tax at the statutory tax rate of 30%
Tax effect amounts which are not deductible/(taxable) in calculating taxable income:
Non-assessable income
Permanent differences
Share-based payment expense
Assessable income not in profit or loss
Non-cash issue of alignment shares to Pengana Private Equity Trust
Cost of establishing Pengana Private Equity Trust
Prior period adjustments
Derecognise tax asset related to capital losses
Income tax expense
Amounts charged/(credited) directly to equity
Deferred tax assets
Tax losses not recognised
Capital tax losses for which no deferred tax asset has been recognised
Potential tax benefit at statutory tax rates
(12,072)
10,171
(3,622)
3,051
(153)
57
134
670
3,078
1,893
(42)
(675)
113
634
–
–
2,057
3,081
(518)
674
–
–
2,213
3,081
(171)
2,247
674
72
–
–
A potential income tax benefit of up to $1,890,000, being the tax effect of PPET establishment costs of
$6,299,000, has not been recognised as it is subject to the outcome of a private ruling application the group
lodged with the Australian Taxation Office (‘ATO’) and will be recognised once the ATO provides a ruling.
ANNUAL REPORT 2019 | 49
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
NOTE 7. INCOME TAX (CONTINUED)
Deferred tax liability
Deferred tax asset/(liability) comprises temporary differences attributable to:
Amounts recognised:
Property, plant and equipment
Provision
Unrealised losses /(gains)
Acquired relationships
Deferred tax liability
Movements:
Opening balance
Credited/(charged) to profit or loss
Credited/(charged) to equity
Additions through business combinations (note 32)
Tax effect on intangibles
Closing balance
Income tax refund due
Income tax refund due
Provision for income tax
Provision for income tax
NOTE 8. CURRENT ASSETS – CASH AND CASH EQUIVALENTS
Cash on hand and at bank
Cash on deposit
Consolidated
2019
$’000
2018
$’000
65
603
119
73
429
595
(6,553)
(7,174)
(5,766)
(6,077)
(6,077)
(7,211)
(210)
171
(135)
485
63
(72)
–
1,143
(5,766)
(6,077)
–
759
1,182
–
14,433
13
12,406
3,664
14,446
16,070
50 | PENGANA CAPITAL GROUP
ANNUAL REPORT NOTE 9. CURRENT ASSETS – TRADE AND OTHER RECEIVABLES
Trade receivables
Accrued income
Other receivables
Consolidated
2019
$’000
441
–
441
1
442
2018
$’000
2
5,198
5,200
6
5,206
Allowance for expected credit losses
The group has recognised a loss of $nil (2018: $nil) in profit or loss in respect of the expected credit losses
for the year ended 30 June 2019.
The ageing of the receivables and allowance for expected credit losses provided for above are as follows
Consolidated
Not overdue
NOTE 10. CURRENT ASSETS – CONTRACT ASSETS
Contract assets
Expected
credit loss
rate
2019
%
Carrying
amount
2019
$’000
Allowance
for expected
credit losses
2019
$’000
–
441
–
Consolidated
2019
$’000
4,747
2018
$’000
–
Allowance for expected credit losses:
The group has recognised a loss of $nil in profit or loss in respect of the recoverability of contract assets for the
year ended 30 June 2019.
NOTE 11. CURRENT ASSETS – OTHER CURRENT ASSETS
Prepayments
Security deposits
Other deposits
723
–
349
1,072
725
40
17
782
ANNUAL REPORT 2019 | 51
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
NOTE 12. NON-CURRENT ASSETS – OTHER RECEIVABLES
Other receivables
Security deposits
Other loans
Consolidated
2019
$’000
–
476
873
2018
$’000
400
476
856
1,349
1,732
The group has recognised a loss of $299,000 (2018: $nil) in profit or loss in respect of the non-recoverability on other receivables for the year
ended 30 June 2019
NOTE 13. NON-CURRENT ASSETS – INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD
Investments in associates
4,275
7,481
Refer to note 34 for further information on interests in associates.
NOTE 14. NON-CURRENT ASSETS - EQUITY INVESTMENT IN FINANCIAL ASSETS AT FAIR VALUE
THROUGH OTHER COMPREHENSIVE INCOME
Investments in listed equity securities
Investment in unlisted managed investment funds
7,255
1,733
8,988
–
–
–
Refer to note 25 for further information on fair value measurement.
Refer to note 1 for impact of adoption of AASB 9 ‘Financial instruments’ on transition date 1 July 2018.
NOTE 15. NON-CURRENT ASSETS – INVESTMENTS IN AVAILABLE-FOR-SALE FINANCIAL ASSETS
Investments in available-for-sale financial assets at fair value
–
9,637
Refer to note 25 for further information on fair value measurement.
Refer to note 1 for impact of adoption of AASB 9 ‘Financial instruments’ on transition date 1 July 2018.
NOTE 16. NON-CURRENT ASSETS – PROPERTY, PLANT AND EQUIPMENT
Leasehold improvements - at cost
Less: Accumulated depreciation
Furniture and fittings - at cost
Less: Accumulated depreciation
Plant and equipment - at cost
Less: Accumulated depreciation
52 | PENGANA CAPITAL GROUP
Reconciliations
162
(83)
79
256
(228)
28
954
(798)
156
263
162
(46)
116
253
(201)
52
901
(754)
147
315
ANNUAL REPORT Reconciliations of the written down values at the beginning and end of the current and previous financial year
are set out below:
Consolidated
Balance at 1 July 2017
Additions
Write off of assets
Depreciation expense
Balance at 30 June 2018
Additions
Disposals
Depreciation expense
Balance at 30 June 2019
Leasehold
improvements
$’000
Furniture
and fittings
$’000
Plant and
equipment
$’000
151
1
–
(36)
116
–
–
(37)
79
72
9
–
(29)
52
3
(14)
(13)
28
139
97
(1)
(88)
147
93
(5)
(79)
156
Total
$’000
362
107
(1)
(153)
315
96
(19)
(129)
263
NOTE 17. NON-CURRENT ASSETS – INTANGIBLES
Goodwill – at cost
Acquired relationships – at cost
Less: Accumulated amortisation
Other intangible assets - at cost
Less: Accumulated amortisation
Consolidated
2019
$’000
2018
$’000
43,612
40,627
26,520
(5,011)
21,509
452
(118)
334
26,520
(2,606)
23,914
–
–
–
65,455
64,541
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year
are set out below:
Consolidated
Balance at 1 July 2017
Amortisation expense
Balance at 30 June 2018
Additions though business combinations (note 32)
Amortisation expense
Balance at 30 June 2019
Goodwill
$’000
Acquired
relationships
$’000
Other
intangible
assets
$’000
40,627
–
40,627
2,985
26,320
(2,406)
23,914
–
–
(2,405)
–
–
–
452
(118)
Total
$’000
66,947
(2,406)
64,541
3,437
(2,523)
43,612
21,509
334
65,455
ANNUAL REPORT 2019 | 53
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
NOTE 17. NON-CURRENT ASSETS – INTANGIBLES (CONTINUED)
The group identifies a single cash-generating unit (‘CGU’) and, therefore, the recoverable amount has been
determined at the group level.
The recoverable amount of the group’s goodwill has been determined by value-in-use calculations. The
calculations use cash flow projections based on the business plan approved by management covering a five year
period. Cash flows beyond the five year period are extrapolated using the estimated growth rates stated below.
The following key assumptions were used in the discounted cash flow model:
a. Pre-tax discount rate of 13.2% (2018:11.9%);
b. Projected growth rate of 2.5% (2018:2.5%) beyond five year period for the CGU; and
c. Increase in operating costs and overheads based on current expenditure levels adjusted for inflationary increases.
For the financial year ended 30 June 2019, the recoverable amount of net assets for the Group is greater than
the carrying value of the assets and therefore, the goodwill is not considered to be impaired.
Sensitivity analysis:
Management estimates that any reasonable changes in the key assumptions would not have a significant impact
on the value-in-use of goodwill that would require the assets to be impaired.
The remaining amortisation period for the acquired relationships is between 3 and 11 years.
NOTE 18. CURRENT LIABILITIES – TRADE AND OTHER PAYABLES
Consolidated
Trade payables
Accrued expenses
Fund manager profit share
Other payables
Refer to note 24 for further information on financial instruments.
NOTE 19. CURRENT LIABILITIES – EMPLOYEE BENEFITS
Annual leave
Long service leave
NOTE 20. NON-CURRENT LIABILITIES - BANK LOAN
Bank Loan
Refer to note 24 for further information on financial instruments.
Total secured liabilities
The total secured liabilities (current and non-current) are as follows:
Bank Loan
2019
$’000
56
2,531
4,645
425
7,657
485
507
992
3,750
5,000
2018
$’000
426
3,761
5,353
349
9,889
475
468
943
–
–
The company borrowed $5,000,000 from Investec Australia for costs associated with establishing Pengana Private
Equity Trust. The loan is secured by a general security charge over the assets of the group, together with specific
security over the bank account in which the fees from Pengana Private Equity Trust are deposited. The loan term
is 4 years and the loan is subject to variable interest rates, which are based on the bank bill swap rate (‘BBSY’),
plus a margin of 4.25%. Effective 28 June 2019 the interest rate is 5.5%. Facility limit of $5,000,000 was fully
drawn down at 30 June 2019.
54 | PENGANA CAPITAL GROUP
ANNUAL REPORT NOTE 21. EQUITY – CONTRIBUTED EQUITY
Consolidated
2019
Shares
2018
Shares
2019
$’000
2018
$’000
Ordinary shares – fully paid
103,277,160
101,689,016
120,437
115,134
Convertible preference shares
(Alignment shares) - fully paid
Less: Treasury shares
4,909,228
–
(23,458,720)
(22,853,722)
10,260
(29,220)
84,727,668
78,835,294
101,477
–
(27,220)
87,914
Movements in ordinary share capital
Details
Balance
Date
Shares
$’000
1 July 2017
101,477,092
114,381
Issue of shares as part consideration for investment
in Global Credit Investments Pty Ltd
19 June 2018
Issue of shares in accordance with short term incentive
29 June 2018
137,350
74,574
490
263
Balance
30 June 2018
Issue of shares on acquisition of PT Private Capital Pty Ltd 21 August 2018
101,689,016
983,146
115,134
3,303
Issue of shares under the Pengana Capital Group Loan
Share Plan
3 October 2018
604,998
2,000
Balance
30 June 2019
103,277,160
120,437
Movements in convertible preference share capital
Details
Balance
Balance
Date
1 July 2017
30 June 2018
Shares
$’000
–
–
–
–
Alignment shares issued to Pengana Private Equity Trust
29 April 2019
4,909,228
10,260
Balance
30 June 2019
4,909,228
10,260
Movements in treasury shares
Details
Balance
Balance
Issue of shares under the
Pengana Capital Group Loan Share Plan
Date
Shares
$’000
1 July 2017
(22,853,722)
(27,220)
30 June 2018
(22,853,722)
(27,220)
3 October 2018
(604,998)
(2,000)
Balance
30 June 2019
(23,458,720)
(29,220)
ANNUAL REPORT 2019 | 55
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
NOTE 21. EQUITY – CONTRIBUTED EQUITY (CONTINUED)
Ordinary shares
Ordinary shares entitle the holder to participate in dividends and the proceeds on the winding up of the
company in proportion to the number of and amounts paid on the shares held. The fully paid ordinary shares
have no par value and the company does not have a limited amount of authorised capital.
On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon
a poll each share shall have one vote.
Convertible preference shares (Alignment shares)
Alignment shares issued to Pengana Private Equity Trust (‘PPET’)(ASX:PE1) entitle the holder to participate in
dividends and the proceeds on the winding up of the company in proportion to the number of and amounts paid
on the shares held, with priority over ordinary shareholders. The alignment shares are not redeemable, quoted
or tradeable on the ASX and convert into ordinary shares on a one for one basis on being distributed by PPET
to its unitholders. The Responsible Entity of PPET intends to distribute the Alignment Shares to the unitholders,
subject to a determination by the responsible entity, approximately 2 years after the issue of the shares.
Alignment shares do not have any voting rights with the exception of a vote at a general meeting that affects
the rights attached to alignment shares and capital restructure.
Treasury shares
The company has an equity scheme pursuant to which certain employees and fund managers may access a loan
share plan (‘LSP’). The acquisition of shares under this LSP is fully funded by the company through the granting of
a limited recourse loan. The LSP shares are subject to escrow and transfer is restricted until the vesting conditions
are satisfied and the loan is repaid. Vested and unvested shares are recorded as treasury shares representing
a deduction against issued capital. These have been accounted for as a share-based payment. Refer to note
37 for further details. When the loans are settled the treasury shares are reclassified as ordinary shares and the
equity will increase by the amount of the loan repaid.
Share buy-back
On 27 June 2019, the company announced an on-market buy-back of up to 10% of the company’s issued capital
for a period of 12 months.
Capital risk management
The group’s objectives when managing capital are to safeguard its ability to continue as a going concern, so that
it can provide returns for shareholders and benefits for other stakeholders and to maintain an optimum capital
structure to reduce the cost of capital.
Capital is regarded as total equity, as recognised in the statement of financial position, plus net debt. Net debt
is calculated as total borrowings less cash and cash equivalents.
Two wholly owned subsidiaries of the group, Pengana Capital Limited (‘PCL’) and Pengana Investment
Management Ltd (‘PIML’), hold an Australian Financial Services License and are subject to regulatory financial
requirements that include maintaining a minimum level of net tangible assets. As at 30 June 2019 PCL and PIML
were required to maintain $5,000,000 and $3,200,000 (2018: $5,000,000 and $4,000,000) respectively in liquid
assets, of which 50% (2018: 50%) is held in cash or cash equivalents.
The directors believe the group has adequate capital at 30 June 2019 to maintain the groups existing business
activities and facilitate growth.
The capital risk management policy remains unchanged from the 2018 Annual Report.
56 | PENGANA CAPITAL GROUP
ANNUAL REPORT NOTE 22. EQUITY – RESERVES
Profits reserve
Share-based payments reserve
Available-for-sale reserve
Financial assets at fair value through other comprehensive income reserve
Consolidated
2019
$’000
23,867
5,795
–
(399)
2018
$’000
23,867
5,407
171
–
29,263
29,445
Profits reserve
The reserve records the 2013 Pengana Holdings profit, which has not been offset against accumulated losses
from prior years.
Share-based payments reserve
The reserve is used to recognise the value of equity benefits provided to employees and fund managers as part
of their remuneration, and other parties as part of their compensation for services.
Available-for-sale reserve
The reserve is used to recognise increments and decrements in the fair value of available-for-sale financial assets.
Financial assets at fair value through other comprehensive income (‘OCI’) reserve
The reserve is used to recognise increments and decrements in the fair value of financial assets at fair value
through other comprehensive income.
Movements in reserves
Movements in each class of reserve during the current and previous financial year are set out below:
Available-
for-sale
reserve
$’000
Financial assets
at fair value
through OCI
reserve
$’000
Total
$’000
28,899
240
(72)
378
Consolidated
Balance at 1 July 2017
Revaluation - gross
Deferred tax
Share-based payments
Profits
reserve
$’000
Share-based
payments
reserve
$’000
23,867
5,029
–
–
–
–
–
378
Balance at 30 June 2018
23,867
5,407
Revaluation - gross
Deferred tax
Transfer from available-for-sale reserve
to fair value through OCI reserve
Share-based payments
Dividends on treasury shares
–
–
–
–
–
–
–
–
446
(58)
Balance at 30 June 2019
23,867
5,795
3
240
(72)
–
171
–
–
(171)
–
–
–
–
29,445
(813)
243
171
–
–
(813)
243
–
446
(58)
(399)
29,263
ANNUAL REPORT 2019 | 57
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
NOTE 23. EQUITY – DIVIDENDS
Dividends
Dividends paid during the financial year were as follows:
On 28 August 2018, fully franked final dividend of 6.5 cents per ordinary share was
declared for the year ended 30 June 2018 to be paid on 28 September 2018 to
shareholders registered on 14 September 2018. (2018: 4.5 cents per ordinary share)
On 22 February 2019, an unfranked interim dividend of 4.0 cents per ordinary share
was declared for the year ended 30 June 2019 and paid on 15 March 2019 to the
shareholders registered on 1 March 2019 (2018: 6.5 cents per ordinary share)
Consolidated
2019
$’000
2018
$’000
5,188
3,538
3,193
8,381
5,111
8,649
Franking credits
Franking credits available for subsequent financial years based on a tax rate of 30%
2,468
3,553
The above amounts represent the balance of the franking account as at the end of the financial year, adjusted for:
• franking credits that will arise from the payment of the amount of the provision for income tax at the
reporting date
• franking debits that will arise from the payment of dividends recognised as a liability at the reporting date
• franking credits that will arise from the receipt of dividends recognised as receivables at the reporting date
NOTE 24. FINANCIAL INSTRUMENTS
Financial risk management objectives
The group’s activities expose it to a variety of financial risks: market risk (including foreign currency, interest
rate and price risk), credit risk and liquidity risk. The group’s overall risk management program focuses on the
unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance
of the group. The group uses different methods to measure different types of risk to which it is exposed,
including sensitivity analysis.
In particular, the group manages the investments of certain funds and clients where it is entitled to receive
management fees and fees contingent upon performance of the portfolio managed, on an annual basis or
longer. All fees are exposed to significant risk associated with the funds’ performance, including market risks
(interest rate risk and indirectly market risk and foreign exchange risk) and liquidity risk as detailed below.
Risk management is carried out by the Board of Directors and discussed at board meetings. Management
identifies and evaluates financial risks.
Market risk
Foreign currency risk
Foreign exchange risk arises from future commercial transactions and recognised financial assets and financial
liabilities denominated in a currency that is not the entity’s functional currency. The group undertakes certain
transactions denominated in foreign currency (mainly US dollar) and the balances at the reporting date are
not material and a 10% movement in those balances would not cause a significant fluctuation in profit or loss
or equity of the group.
58 | PENGANA CAPITAL GROUP
ANNUAL REPORT Price risk
The group is not exposed to any significant price risk.
Interest rate risk
The group’s main interest rate risk arises from its borrowings and cash at bank. Borrowings and cash at bank
issued at variable rates expose the group to interest rate risk. Borrowings issued at fixed rates expose the group
to fair value risk.
As at the reporting date, the group had the following variable rate bank accounts and borrowings:
Consolidated
Cash at bank
Cash on deposit
Bank Loan
Net exposure to cash flow interest rate risk
2019
Weighted
average
interest rate
0.54%
2.00%
5.50%
Balance
$’000
14,433
13
(5,000)
9,446
2018
Weighted
average
interest rate
0.14%
2.00%
–
Balance
$’000
12,406
3,664
–
16,070
The table below summarises the impact of a 50 basis point movement in interest:
Consolidated – 2019
Basis points increase
Basis points decrease
Effect on
profit/loss
before tax
$’000
Effect on
equity
$’000
Basis
points
change
Effect on
profit/loss
before tax
$’000
Effect on
equity
$’000
Basis points
change
Net exposure to cash flow interest rate risk
50
47
33
(50)
(47)
(33)
Consolidated – 2018
Net exposure to cash flow interest rate risk
50
80
56
(50)
(80)
(56)
An analysis by remaining contractual maturities is shown in ‘liquidity and interest rate risk management’ below.
Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial
loss to the group. The maximum exposure to credit risk at the reporting date to recognised financial assets is
the carrying amount, net of any expected credit loss allowance of those assets, as disclosed in the statement of
financial position and notes to the financial statements. The group does not hold any collateral.
The group has adopted a lifetime expected loss allowance in estimating expected credit losses to trade
receivables and contract assets through the use of a provisions matrix using fixed rates of credit loss
provisioning. These provisions are considered representative across all customers of the group based on recent
sales experience, historical collection rates and forward-looking information that is available.
The group has a credit risk exposure with the cash at bank, redemptions receivable, loans to shareholders
and fund managers and funds under management. The funds under management as at 30 June 2019 owed
the group 100% (2018: 100%) of trade receivables and accrued income. The balance was within its terms of
trade and no expected credit loss allowance was made as at the reporting date. These receivables represent
management fees that are accrued daily and paid monthly by the Funds.
Generally, trade receivables are written off when there is no reasonable expectation of recovery. Indicators
of this include the failure of a debtor to engage in a repayment plan, no active enforcement activity and a failure
to make contractual payments for a period greater than 1 year.
ANNUAL REPORT 2019 | 59
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
NOTE 24. FINANCIAL INSTRUMENTS (CONTINUED)
Other loans receivables amount to $873,000 as at 30 June 2019 (2018: $856,000). The loans were made to
shareholders and used to fund the purchase of shares in Pengana Capital Group Limited. The loans are interest
free and secured against the purchased shares in Pengana Capital Group Limited. The timing of these amounts
due under these agreements are at the discretion of the group.
Liquidity risk
Managing liquidity risk requires the group to maintain sufficient liquid assets (mainly cash and cash equivalents
and listed investments) to be able to pay debts as and when they become due and payable.
The group manages liquidity risk by maintaining adequate cash reserves and available borrowing facilities by
monitoring actual and forecast cash flows and matching the maturity profiles of financial assets and liabilities.
Remaining contractual maturities
The following tables detail the group’s remaining contractual maturity for its financial instrument liabilities. The
tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest
date on which the financial liabilities are required to be paid. The tables include both interest and principal cash
flows disclosed as remaining contractual maturities and therefore these totals may differ from their carrying
amount in the statement of financial position.
Consolidated – 2019
Non-derivatives
Non-interest bearing
Trade payables
Other payables
Fund manager profit share
Security deposits held
Interest-bearing - variable
Bank loans
Total non-derivatives
Consolidated – 2018
Non-derivatives
Non-interest bearing
Trade payables
Other payables
Fund manager profit share
Security deposits held
Total non-derivatives
1 year
or less
$’000
Between 1
and 2 years
$’000
Between 2
and 5 years
$’000
Over
5 years
$’000
Remaining
contractual
maturities
$’000
56
425
4,645
–
1,491
6,617
–
–
–
5
–
–
–
–
1,422
1,427
2,637
2,637
–
–
–
–
–
–
56
425
4,645
5
5,550
10,681
1 year
or less
$’000
Between 1
and 2 years
$’000
Between 2
and 5 years
$’000
Over
5 years
$’000
Remaining
contractual
maturities
$’000
426
349
5,353
–
6,128
–
–
–
5
5
–
–
–
–
–
–
–
–
–
–
426
349
5,353
5
6,133
The cash flows in the maturity analysis above are not expected to occur significantly earlier than contractually
disclosed above.
60 | PENGANA CAPITAL GROUP
ANNUAL REPORT NOTE 25. FAIR VALUE MEASUREMENT
Fair value hierarchy
The following tables detail the group’s assets and liabilities, measured or disclosed at fair value, using a three
level hierarchy, based on the lowest level of input that is significant to the entire fair value measurement, being:
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access
at the measurement date
Level 2: Observable market data used in valuation techniques to determine the fair value. Level 2 instruments
are not traded in an active market
Level 3: Unobservable inputs for the asset or liability
Consolidated – 2019
Assets
Investment in financial assets at fair value
through other comprehensive income
Total assets
Consolidated – 2018
Assets
Level 1
$’000
Level 2
$’000
Level 3
$’000
Total
$’000
7,255
7,255
1,733
1,733
–
–
Level 1
$’000
Level 2
$’000
Level 3
$’000
8,988
8,988
Total
$’000
9,637
9,637
Investments in available-for-sale financial assets
Total assets
9,637
9,637
–
–
–
–
There were no transfers between levels during the financial year.
The carrying amounts of cash and cash equivalents, trade and other receivables and trade and other payables
approximate their fair values due to their short-term nature.
The fair value of financial liabilities is estimated by discounting the remaining contractual maturities at the current
market interest rate that is available for similar financial liabilities.
ANNUAL REPORT 2019 | 61
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
NOTE 26. KEY MANAGEMENT PERSONNEL DISCLOSURES
Compensation
The aggregate compensation made to directors and other members of key management personnel of the group
is set out below:
Short-term employee benefits
Post-employment benefits
Long-term benefits
Share-based payments
Consolidated
2019
$
2018
$
1,323,852
1,326,438
76,631
18,753
22,891
77,981
37,573
22,891
1,442,127
1,464,883
NOTE 27. REMUNERATION OF AUDITORS
During the financial year the following fees were paid or payable for services provided by Grant Thornton Audit
Pty Ltd, the auditor of the company:
Audit services - Grant Thornton Audit Pty Ltd
Audit or review of the financial statements
182,300
203,318
NOTE 28. CONTINGENT LIABILITIES
The group had no contingent liabilities at 30 June 2019 and 30 June 2018.
NOTE 29. COMMITMENTS
Lease commitments – operating
Committed at the reporting date but not recognised as liabilities, payable:
Within one year
One to five years
Consolidated
2019
$’000
2018
$’000
729
467
1,196
829
1,196
2,025
The property leases are non-cancellable leases with a maximum 5 year term, with rent payable monthly
in advance.
62 | PENGANA CAPITAL GROUP
ANNUAL REPORT NOTE 30. RELATED PARTY TRANSACTIONS
Parent entity
Pengana Capital Group Limited is the parent entity.
Subsidiaries
Interests in subsidiaries are set out in note 33.
Associates
Interests in associates are set out in note 34.
Key management personnel
Disclosures relating to key management personnel are set out in note 26 and the remuneration report included
in the directors’ report.
Transactions with related parties – managed investment schemes
The following transactions occurred with related parties:
Sale of goods and services:
Management fees
Performance fees
Consolidated
2019
$
2018
$
37,891,554
39,557,398
4,956,821
11,696,361
Receivable from and payable to related parties
The following balances are outstanding at the reporting date in relation to transactions with related parties:
Current receivables:
Trade receivables and accrued income from other related parties
5,004,169
5,200,630
Loans to/from related parties
There were no loans to or from related parties at the current and previous reporting date.
Terms and conditions
All transactions were made on normal commercial terms and conditions and at market rates.
ANNUAL REPORT 2019 | 63
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
NOTE 31. PARENT ENTITY INFORMATION
Set out below is the supplementary information about the parent entity.
Statement of Profit or Loss and Other Comprehensive Income
Profit/(loss) after income tax
Total comprehensive income
Statement of Financial Position
Total current assets
Total assets
Total current liabilities
Total liabilities
Equity
Contributed equity
Share-based payments reserve
Available-for-sale reserve
Financial assets at fair value through other comprehensive income reserve
Parent
2019
$’000
(5,303)
(5,303)
18,023
233,120
1,246
6,780
225,660
5,853
–
(47)
2018
$’000
18,824
18,824
10,021
227,929
1,970
1,785
212,097
5,407
82
–
Retained profits/(accumulated losses)
Total equity
(5,126)
8,558
226,340
226,144
Guarantees entered into by the parent entity in relation to the debts of its subsidiaries
The parent entity had no guarantees in relation to the debts of its subsidiaries as at 30 June 2019 and 30 June 2018.
Contingent liabilities
The parent entity had no contingent liabilities as at 30 June 2019 and 30 June 2018.
Capital commitments – Property, plant and equipment
The parent entity had no capital commitments for property, plant and equipment as at 30 June 2019 and
30 June 2018.
Significant accounting policies
The accounting policies of the parent entity are consistent with those of the group, as disclosed in note 1,
except for the following:
• Investments in subsidiaries are accounted for at cost, less any impairment, in the parent entity.
• Investments in associates are accounted for at cost, less any impairment, in the parent entity.
• Dividends received from subsidiaries are recognised as other income by the parent entity and its receipt
may be an indicator of an impairment of the investment.
64 | PENGANA CAPITAL GROUP
ANNUAL REPORT NOTE 32. BUSINESS COMBINATIONS
PT Private Capital Pty Ltd
On 21 August 2018, the group acquired 100% of the shares in PT Private Capital Pty Ltd for the total
consideration of $3,303,000. PT Private Capital Pty Ltd provides portfolio management services to high net
worth clients. The purchase consideration was settled by issue of 983,146 shares in Pengana Capital Group
Limited. The shares were valued at the market price on the date of settlement.
The goodwill of $2,985,000 represents profitability of the acquired business and the synergistic opportunities
that will arise from the acquisition. None of the goodwill recognised is expected to be deductible for income tax
purpose. The acquired business contributed revenues of $859,000 and a loss after tax of $181,000 to the group
for the period from 21 August 2018 to 30 June 2019.
The purchase price allocation of the acquisition is final at 30 June 2019.
Details of the acquisition are as follows:
Cash and cash equivalents
Contract assets
Other intangible assets
Other payables
Deferred tax liability
Net assets acquired
Goodwill
Acquisition-date fair value of the total consideration transferred
Representing:
Pengana Capital Group Limited shares issued to vendor
Acquisition costs expensed to profit or loss
Fair value
$’000
65
22
452
(85)
(136)
318
2,985
3,303
3,303
12
ANNUAL REPORT 2019 | 65
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
NOTE 33. INTERESTS IN SUBSIDIARIES
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries
with non-controlling interests in accordance with the accounting policy described in note 1:
Parent
Non-controlling interest
Principal place
of business /
country of
incorporation*
Ownership
interest
2019
%
Ownership
interest
2018
%
Ownership
interest
2019
%
Ownership
interest
2018
%
Name
Pengana Holdings Pty Ltd
Pengana Capital Ltd
Pengana European Asset
Management Pty Limited
Australia
Australia
Australia
Pengana Affinity Funds Pty Ltd
Australia
Pengana Singapore Pte. Ltd
Singapore
Pengana Investment
Management Ltd
Australia
Rushcutter Investments Pty Ltd **
Australia
Bennelong Administration
Services Pty Ltd **
Australia
100%
100%
50%
70%
100%
100%
–
–
100%
100%
50%
70%
100%
100%
100%
100%
–
–
50%
30%
–
–
–
–
–
–
50%
30%
–
–
–
–
* Principal activities of the subsidiaries listed above are provision of Investment Management Services.
** Entity deregistered on 22 May 2019
Summarised financial information for subsidiaries that have non-controlling interests, has not been provided
as they are not material to the group.
66 | PENGANA CAPITAL GROUP
ANNUAL REPORT NOTE 34. INTERESTS IN ASSOCIATES
The following interests in associates are accounted for using the equity method of accounting:
Name
Principal place of business /
country of incorporation
Pengana Asia Special Events (Offshore) Fund
Cayman Islands
Pengana Global Small Companies Fund
Pengana International Fund
Global Credit Investments Pty Ltd
Australia
Australia
Australia
Ownership interest
2019
%
–
–
1.07%
34.65%
2018
%
2.49%
0.77%
1.38%
34.65%
Summarised financial information relating to associates that are material to the group are set out below:
Summarised financial information
Summarised Statement of Financial Position
Assets
Total assets
Liabilities
Total liabilities
Net assets
Summarised Statement of Profit or Loss
and Other Comprehensive Income
Revenue
Expenses
Profit/(loss) before income tax
Income tax benefit
Profit/(loss) after income tax
Other comprehensive income
Pengana
International Fund
2019
$’000
2018
$’000
94,606
78,788
94,606
78,788
697
697
685
685
Global Credit
Investments
2019
$’000
1,218
1,218
281
281
2018
$’000
1,596
1,596
243
243
93,909
78,103
937
1,353
9,120
6,565
1,324
2,000
(1,196)
(824)
(2,224)
(1,329)
7,924
5,741
–
–
(900)
155
7,924
5,741
(745)
–
–
–
671
–
671
–
Total comprehensive income
7,924
5,741
(745)
671
Reconciliation of the group’s carrying amount
Opening carrying amount
Share of profit/(loss) after income tax
Acquisition of interests
1,046
50
–
956
90
–
3,436
(258)
–
–
–
3,436
Closing carrying amount
1,096
1,046
3,178
3,436
The carrying amount of investments in associates approximate their fair value.
ANNUAL REPORT 2019 | 67
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
NOTE 35. UNCONSOLIDATED STRUCTURED ENTITIES
A structured entity is an entity that has been designed so that voting or similar rights are not the dominant factor
in deciding who controls the entity and the relevant activities are directed by means of contractual arrangements.
The group has significant influence over the funds it manages due to its power to participate in the financial and
operating policy decisions of the investee through its investment management agreement.
The group considers all funds to be structured entities. The group invests in its own managed funds to seed
the funds to develop a performance track record prior to external investment being received or provides early
stage capital.
The funds’ objectives are defined in the offer document and constitution of the respective fund. The funds invest
in a number of different financial instruments including equities and debt instruments. The funds’ finance their
operations by issuing redeemable units which are puttable at the holder’s option and entitle the holder to a
proportional stake in the respective fund’s net assets.
The group holds redeemable units in some of its own managed funds.
Unless specified otherwise, the group’s maximum exposure to loss is the total of its on-balance sheet positions
as at reporting date. There are no additional off balance sheet arrangements which would expose the group to
potential loss.
NOTE 36. CASH FLOW INFORMATION
Reconciliation of profit/(loss) after income tax to net cash from operating activities
Consolidated
Profit/(loss) after income tax expense for the year
Adjustment for:
Depreciation and amortisation
Share of loss/(profit) - associates
Share-based payments
Foreign exchange differences
Distributions paid to unitholders -financing activity
Unitholder share of profit or loss
Write downs
Cost of alignment shares issued to Pengana Private Equity Trust
Other non-cash items
Net (gain)/loss on financial assets
Proceeds from sale of investments in financial assets at fair value through profit or loss
2019
$’000
(14,285)
2,652
297
446
–
–
–
–
10,260
169
–
–
2018
$’000
7,090
2,559
(311)
378
(21)
627
281
136
–
(173)
(3,848)
103
68 | PENGANA CAPITAL GROUP
ANNUAL REPORT Change in operating assets and liabilities:
Decrease/(increase) in trade and other receivables
Decrease/(increase) in contract assets
Decrease/(increase) in income tax refund due
Decrease/(increase) in prepayments
Decrease/(increase) in other financial assets at fair value through profit or loss
Increase/(decrease) in trade and other payables
Increase/(decrease) in provision for income tax
Increase/(decrease) in deferred tax liabilities
Increase/(decrease) in employee benefits
Increase/(decrease) in other financial liabilities at fair value through profit or loss
Consolidated
2019
$’000
2018
$’000
4,765
(4,747)
759
(286)
–
(2,182)
1,182
(311)
64
–
(267)
–
–
–
26,768
(6,985)
146
–
–
(18,768)
Net cash from/(used in) operating activities
(1,217)
7,715
Non-cash investing and financing activities
Shares issued in relation to business combinations
Shares issued under loan share plan
Loans granted under loan share plan
Shares issued in relation to purchase of investments in Associates
Shares issued in accordance with short term retention scheme
Alignment shares issued to Pengana Private Equity Trust
Purchase of investment into associates- reinvestment of dividends
Sale of investment in associates
Purchase of property, plant and equipment
Sale of investments in available-for-sale financial assets
Purchase of investments in available-for-sale financial assets
Dividends withheld from company shareholders with outstanding loans
under loan share plan
Dividends applied on outstanding loans under loan share plan
Changes in liabilities arising from financing activities
Consolidated
Balance at 1 July 2017
Balance at 30 June 2018
Net cash from financing activities
Balance at 30 June 2019
3,303
2,000
(2,000)
–
–
10,260
–
–
–
5,500
(5,500)
(127)
127
–
–
–
490
263
–
(1,847)
1,571
(19)
–
–
–
–
13,563
458
Bank loan
$’000
–
–
5,000
5,000
ANNUAL REPORT 2019 | 69
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
NOTE 37. SHARE-BASED PAYMENTS
Loan Funded Share Plan (‘LSP’)
The group operates a LSP, whereby limited recourse loans totalling $29,220,000 (2018: $27,220,000) were
provided to employees and fund managers to acquire shares in the company. Under the plan the CEO has
15,872,528 (2018: 15,872,528) shares, employees and fund managers have 7,586,192 (2018: 6,981,194) shares.
The loans are interest bearing and have a maximum term of up to seven years. Recourse on the loans (including
associated interest) is limited to the associated shares and any dividend amounts applied to the loan balance.
The shares granted under the LSP are subject to a vesting condition, that the employees and fund managers must
remain continuously employed for five years from the grant date, except for shares associated with the LSP granted
to the CEO which are not subject to a vesting condition and vested on the date the shares were granted.
As the share purchases are funded by limited recourse loans they are treated for accounting purposes as grants
of share options and accounted for as equity-settled share-based payments. The shares issued under the LSP are
fair valued on the date they are granted and amortised as an expense in profit or loss over the vesting period.
As the loans and associated shares issued are not recorded on the statement of financial position on grant date,
there are no transactions in the statement of financial position relating to the issue of shares under the LSP,
however a share-based payment expense of $446,000 has been recognised in profit or loss for the year ended
30 June 2019 (2018: $378,000).
Interest accruing on the loans and dividends applied to the loans are not recorded in the financial statements
but do impact the outstanding loan balance. As at 30 June 2019 total outstanding loans related to treasury
shares were $29,395,000 (2018: $27,528,000).
Set out below are summaries of shares granted under the LSP:
2019
Grant date
Expiry date
Exercise
price
Balance at
the start of
the year
Granted
Exercised
Expired /
forfeited /
other
Balance at the
end of the year
01/03/2017
28/02/2024
$1.49
5,149,796
01/03/2017
28/02/2024
$1.20
10,722,732
03/03/2017
01/03/2024
$1.49
6,981,194
–
–
–
03/10/2018
01/10/2025
$4.33
–
604,998
22,853,722
604,998
–
–
–
–
–
–
–
–
–
–
5,149,796
10,722,732
6,981,194
604,998
23,458,720
Weighted average exercise price
$1.35
$4.33
$0.00
$0.00
$1.43
2018
Grant date
Expiry date
Exercise
price
Balance at
the start of
the year
Granted
Exercised
Expired /
forfeited /
other
Balance at the
end of the year
01/03/2017
28/02/2024
$1.49
5,149,796
01/03/2017
28/02/2024
$1.20
10,722,732
03/03/2017
01/03/2024
$1.49
6,981,194
22,853,722
–
–
–
–
–
–
–
–
–
–
–
–
5,149,796
10,722,732
6,981,194
22,853,722
Weighted average exercise price
$1.35
$0.00
$0.00
$0.00
$1.35
70 | PENGANA CAPITAL GROUP
ANNUAL REPORT Set out below are the shares granted under the LSP exercisable at the end of the financial year:
Grant date
Expiry date
01/03/2017
28/02/2024
01/03/2017
28/02/2024
2019
Number
2018
Number
5,149,796
5,149,796
10,722,732
10,722,732
15,872,528
15,872,528
The weighted average share price during the financial year was $2.62 (2018: $3.26).
The weighted average remaining contractual life of shares granted under the LSP outstanding at the end of the
financial year was 4.72 years (2018:5.67 years).
For the shares granted under the LSP during the current financial year, the Black-Scholes valuation model inputs
used to determine the fair value at the grant date, are estimated as follows:
Grant date
Expiry date
Share price
at grant date
Exercise
price
Estimated
Volatility*
Dividend
yield
Risk-free
interest rate
Fair value at
grant date
03/01/2018
01/10/2025
$3.31
$4.33
35.35%
2.53%
2.29%
$0.751
*The expected price volatility is based on a period of observed historic volatility of a range of peer group companies.
NOTE 38. EARNINGS PER SHARE
Profit/(loss) after income tax
Non-controlling interest
Profit/(loss) after income tax attributable to the owners
of Pengana Capital Group Limited
Weighted average number of ordinary shares used
in calculating basic earnings per share
Adjustments for calculation of diluted earnings per share:
Options over ordinary shares
Weighted average number of ordinary shares used
in calculating diluted earnings per share
Basic earnings per share
Diluted earnings per share
Consolidated
2019
$’000
(14,285)
(10)
2018
$’000
7,090
(110)
(14,295)
6,980
Number
Number
80,528,415
78,628,294
–
11,704,450
80,528,415
90,332,744
Cents
(17.75)
(17.75)
Cents
8.88
7.73
The weighted average number of ordinary shares for year ended 30 June 2019 does not include 23,458,720
treasury shares (2018: 22,853,722).
For the year ended 30 June 2019, options have been excluded in the weighted average number of shares used
to calculate diluted earnings per share as they were anti-dilutive.
ANNUAL REPORT 2019 | 71
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
NOTE 39. GENERAL INFORMATION
Pengana Capital Group Limited is a listed public company limited by shares, incorporated and domiciled
in Australia. Its registered office and principal place of business is:
Level 12
167 Macquarie Street
Sydney NSW 2000
A description of the nature of the group’s operations and its principal activities are included in the directors’
report, which is not part of the financial statements.
The financial statements were authorised for issue, in accordance with a resolution of directors,
on 26 August 2019. The directors have the power to amend and reissue the financial statements.
NOTE 40. EVENTS AFTER THE REPORTING PERIOD
No matter or circumstance has arisen since 30 June 2019 that has significantly affected, or may significantly
affect the group’s operations, the results of those operations, or the group’s state of affairs in future financial years.
72 | PENGANA CAPITAL GROUP
ANNUAL REPORT DIRECTORS’
DECLARATION
In the Directors’ opinion:
• the attached financial statements and notes comply with the Corporations Act 2001, the Accounting
Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements;
• the attached financial statements and notes comply with International Financial Reporting Standards as issued
by the International Accounting Standards Board as described in note 1 to the financial statements;
• the attached financial statements and notes give a true and fair view of the group’s financial position as at
30 June 2019 and of its performance for the financial year ended on that date; and
• there are reasonable grounds to believe that the company will be able to pay its debts as and when they
become due and payable.
The directors have been given the declarations required by section 295A of the Corporations Act 2001.
Signed in accordance with a resolution of directors made pursuant to section 295(5)(a) of the Corporations Act 2001.
On behalf of the Directors,
Russel Pillemer
Chief Executive Officer
26 August 2019
Sydney
Warwick Negus
Chairman
26 August 2019
Sydney
ANNUAL REPORT 2019 | 73
INDEPENDENT
AUDITOR’S REPORT
Level 17, 383 Kent Street
Sydney NSW 2000
Correspondence to:
Locked Bag Q800
QVB Post Office
Sydney NSW 1230
T +61 2 8297 2400
F +61 2 9299 4445
E info.nsw@au.gt.com
W www.grantthornton.com.au
Independent Auditor’s Report
To the Members of Pengana Capital Group Limited
Report on the audit of the financial report
Opinion
We have audited the financial report of Pengana Capital Group Limited (the Company) and its subsidiaries (the Group),
which comprises the consolidated statement of financial position as at 30 June 2019, the consolidated statement of profit
or loss, consolidated statement of other comprehensive income, consolidated statement of changes in equity and
consolidated statement of cash flows for the year then ended, and notes to the consolidated 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 Group’s financial position as at 30 June, 2019 and of its 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 (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.
Grant Thornton Audit Pty Ltd ACN 130 913 594
a subsidiary or related entity of Grant Thornton Australia Ltd ABN 41 127 556 389
www.grantthornton.com.au
‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients
and/or refers to one or more member firms, as the context requires. Grant Thornton Australia Ltd is a member firm of Grant Thornton International
Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. GTIL and each member firm is a separate legal entity. Services are
delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate one
another and are not liable for one another’s acts or omissions. In the Australian context only, the use of the term ‘Grant Thornton’ may refer to
Grant Thornton Australia Limited ABN 41 127 556 389 and its Australian subsidiaries and related entities. GTIL is not an Australian related entity to
Grant Thornton Australia Limited.
Liability limited by a scheme approved under Professional Standards Legislation.
74 | PENGANA CAPITAL GROUP
ANNUAL REPORT
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 period. These matters were addressed in the context of our audit of the financial report as a whole, and in
forming our opinion thereon, and we do not provide a separate opinion on these matters.
Key audit matter
How our audit addressed the key audit matter
Impairment of goodwill & other intangibles – refer to Note
17. Non-current assets - intangibles
The reverse acquisition of Hunter Hall on 1 June 2017 gave
rise to goodwill of $40,627k and acquired relationships of
$26,320k. The acquisition of PT Capital on 21 August 2018
gave rise to goodwill of $2,985k and other intangible assets of
$452k.
All assets must be assessed at each reporting date for any
indication of impairment. Goodwill must be tested annually for
impairment regardless of whether any indication of impairment
exists.
Pengana Capital Group Limited has utilised the value in use
method to calculate the recoverable amount of intangible
assets.
Due to the significant estimation involved in calculating the
recoverable amount, we have determined this to be a key
audit matter.
Our procedures included, amongst others:
Assessing the competence and objectivity of
management’s independent expert;
Assessing the reasonableness of management’s
independent expert’s conclusions and management’s bias
in the assessment of potential impairment indicators for
finite life intangible assets and also in performing the
impairment testing for goodwill;
Reviewing the goodwill impairment model for compliance
with AASB 136;
Assessing the determination of the Cash Generating Unit
(CGU) based on our understanding of how management
monitors the entity's operations and makes decisions
about groups of assets that generate independent cash
flows;
Verifying the mathematical accuracy of the underlying
model calculations and assessing the appropriateness of
the methodologies;
Evaluating the cash flow projections and the process by
which they were developed;
Performing sensitivity analysis in relation to cash flow
projections, discount and growth rate assumptions on
CGUs with a higher risk of impairment; and
Assessing the adequacy of financial report disclosures on
the application of judgement in estimating future cash
flows and the key methods and assumptions used in the
impairment assessment.
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
Group’s annual report for the year ended 30 June 2019, 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 we do not express any form of assurance
conclusion thereon.
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.
ANNUAL REPORT 2019 | 75
INDEPENDENT AUDITOR’S REPORT (CONTINUED)
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 related 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.
A further description of our responsibilities for the audit of the financial report is located at the Auditing and Assurance
Standards Board website at: http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf. This description forms part of our
auditor’s report.
Report on the remuneration report
Opinion on the remuneration report
We have audited the Remuneration Report included in pages 20 to 25 of the Directors’ report for the year ended 30 June
2019.
In our opinion, the Remuneration Report of Pengana Capital Group Limited, for the year ended 30 June 2019, 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.
Grant Thornton Audit Pty Ltd
Chartered Accountants
M A Adam-Smith
Partner – Audit & Assurance
Sydney, 26 August 2019
76 | PENGANA CAPITAL GROUP
ANNUAL REPORT
SHAREHOLDER
INFORMATION
The shareholder information set out below was applicable as at 16 August 2019.
DISTRIBUTION OF EQUITABLE SECURITIES
Analysis of number of equitable security holders by size of holding:
1 to 1,000
1,001 to 5,000
5,001 to 10,000
10,001 to 100,000
100,001 and over
Holding less than a marketable parcel
EQUITY SECURITY HOLDERS
Twenty largest quoted equity security holders
The names of the twenty largest security holders of quoted equity securities are listed below:
Number of holders
of ordinary shares
477
633
276
264
51
237
WHSP Pengana Pty Ltd
RC Pillemer Pty Ltd (RC Pillemer Family A/C)
WHSP Hunter Hall Pty Ltd
Washington H Soul Pattinson and Company Limited
Farnworth House Pty Ltd
DJG Services Pty Limited (DKI Account)
Roxtrus Pty Limited (Roxanne Dunkel No. 2 A/C)
Damian Crowley Julie Crowley (Damian C Crowley Family Fund)
Radd Holdings Pty Limited (Myers Family A/C)
Russel Craig Pillemer
DBR Corporation Pty Ltd
HSBC Custody Nominees (Australia) Limited (A/C 2)
Tark Family Holdings Pty Ltd (Tark Family A/C)
LMCTA Pty Ltd (LMCTA Family A/C)
Steve Black
Ed Prendergast
Steve Black (Black Family A/C)
Meg O’Hanlon (O’Hanlon Family A/C)
Pretage Pty Ltd
WHSP Hunter Hall Pty Ltd
Ordinary shares
Number
held
% of total
shares issued
27,176,596
24,795,404
26.31
24.01
6,641,522
5,434,653
2,728,256
2,079,994
1,803,150
1,789,325
1,341,904
1,262,205
1,255,260
1,201,173
1,100,162
983,146
973,701
973,701
672,335
672,335
630,051
575,133
6.43
5.26
2.64
2.01
1.75
1.73
1.30
1.22
1.22
1.16
1.07
0.95
0.94
0.94
0.65
0.65
0.61
0.56
ANNUAL REPORT 2019 | 77
SHAREHOLDER INFORMATION (CONTINUED)
EQUITY SECURITY HOLDERS (CONTINUED)
Unquoted equity securities
There are 4,909,228 fully paid preference shares on issue held by Pengana Investment Management Limited
as trustee for the Pengana Private Equity Trust registered in the name of BNP Paribas Securities Services.
SUBSTANTIAL HOLDERS
Substantial holders in the company are set out below:
Washington H Soul Pattinson and Company, WHSP Hunter Hall Pty Ltd
and WHSP Pengana Pty Ltd
Russel Craig Pillemer*
Ordinary shares
Number held
% of total
shares issued
39,827,904
35,284,021
39.25%
34.16%
* The substantial notice lodged for Russel Pillemer discloses that he has a relevant interest in 35,284,021 ordinary shares in the company.
These relevant interests are as follows:
• 1,262,205 shares held by Russel Pillemer
• 24,795,404 shares held by RC Pillemer Pty Ltd (which Russel Pillemer controls)
• 165,000 shares held by MRJ Capital Pty Limited (which Russel Pillemer controls)
35,284,021 shares held by Pengana staff or their related parties (including the 26,222,609 shares referred to
above held by Russel Pillemer, RC Pillemer Pty Ltd and MRJ Capital Pty Limited). As Russel Pillemer has voting
power in the company above 20% pursuant to section 608(3)(a) of the Corporations Act 2001 he is deemed to
have a relevant interest in these shares as the company has the power to prevent the disposal of each of these
shares pursuant to a voluntary escrow agreement between the company and the relevant holder.
VOTING RIGHTS
The voting rights attached to ordinary shares are set out below:
Ordinary shares
On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a
poll each share shall have one vote.
There are no other classes of equity securities.
SECURITIES SUBJECT TO VOLUNTARY ESCROW
Class
Expiry date
Number of shares
Ordinary shares
Until 15 February 2023 (portions to be released annually)
Ordinary shares
1 June 2022
Ordinary shares
Until 15 February 2020 (portions to be released annually)
Ordinary shares
Until 3 October 2023
Ordinary shares
Until 19 June 2020
21,565,475
6,981,194
1,337,736
604,998
137,350
30,626,753
78 | PENGANA CAPITAL GROUP
ANNUAL REPORT PENGANA.COM PENGANA CAPITAL GROUP LIMITED
ABN 30 103 800 568 AFSL 226566
Level 12, 167 Macquarie Street,
Sydney, NSW 2000
T: +61 2 8524 9900
F: +61 2 8524 9901
PENGANA.COM