PENGANA
CAPITAL GROUP
LIMITED
ANNUAL REPORT
ACN 43 059 300 426
30 JUNE
2020
PENGANA CAPITAL
HEAD OFFICE
Level 12, 167 Macquarie Street
Sydney NSW 2000
Australia
Ph: +61 2 8524 9900
PENGANA.COM
ANNUAL REPORT
PENGANA
CAPITAL GROUP
LIMITED
TABLE OF
CONTENTS
Corporate directory
Letter from the Chairman
Chief Executive Officer’s Report
Directors’ Report
Auditor’s Independence Declaration
Statement of profit or loss
Statement of other 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
2
3
5
11
20
21
22
23
24
25
26
65
66
Shareholder information
69
ANNUAL REPORT
PENGANA
CAPITAL GROUP
LIMITED
PENGANA
CAPITAL
Pengana Capital Group Limited
Corporate directory
30 June 2020
Directors
Warwick Negus - Non-Executive Chairman
Russel Pillemer - Managing Director and Chief Executive Officer
Jeremy Dunkel - Non-Executive Director
Kevin Eley - Non-Executive Director
David Groves - Non-Executive Director
Company secretary
Paula Ferrao
Registered office
Share register
Auditor
Level 12, 167 Macquarie Street
Sydney NSW 2000
Tel: +61 2 8524 9900
Computershare Investor Services Pty Limited
Level 4, 60 Carrington Street
Sydney NSW 2000
Tel: 1300 787 272
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 code: PCG)
Website
www.pengana.com
Corporate Governance Statement
The directors and management are committed to conducting the business of
Pengana Capital Group Limited in an ethical manner and in accordance with the
highest standards of corporate governance. Pengana Capital Group Limited has
adopted and has substantially complied with the ASX Corporate Governance
Principles and Recommendations (Third Edition) ('Recommendations') to the extent
appropriate to the size and nature of its operations.
The group’s Corporate Governance Statement, which sets out the corporate
governance practices that were in operation during the financial year and identifies
and explains any Recommendations that have not been followed and ASX Appendix
4G are released to the ASX on the same day the Annual Report is released. The
Corporate Governance Statement and Corporate Governance Compliance Manual
can be found on the company’s website at www.pengana.com
2 | PENGANA CAPITAL GROUP
ANNUAL REPORT
LETTER FROM THE CHAIRMAN
Dear fellow shareholders,
I am pleased to present the 30 June 2020 Annual Report for Pengana Capital Group Limited (ASX:
PCG, “Pengana”). My introductory comments will no doubt mirror those of countless others’ reports
and letters you will read this financial year end, but it is impossible to discuss the year without
mentioning the incomparable circumstances we find ourselves in. This pandemic has created one of the
most serious challenges of a generation, affecting a multitude of facets - our health, our lifestyle, our
relationships and our financial security.
For Pengana, the most immediate concerns at the outset of the pandemic were two-fold: protecting the
health of our employees and protecting the wealth of our investors.
Having significantly restructured both our sources of revenues and our cost base last year, we entered
this financial year in a position of relative strength, and delivered a 22% increase in Operating Profit
before Income Tax, Depreciation and Amortisation (“Operating EBITDA”). PCG was not a beneficiary
of any Federal Government financial assistance. In the year, we continued to shift Funds under
Management (“FUM”) to higher margin products; we earned increased performance fees primarily from
our strategies that aim to minimise the risk of losing capital and we started to see the full impact of the
cost restructure undertaken in the prior year. We delivered growth in revenue and Operating EBITDA
while continuing to invest in people, products and processes.
Pleasingly, a growing portion of the growth in FUM over the year came from our responsible investment
strategies. We have seen our responsible investment portfolios outperform traditional portfolios in
this period, and the current crisis has only accelerated the trend towards allocation of capital to more
sustainable companies, goods and services. Our range of responsible investment products is well
positioned to take advantage of this trend and form a key focus for our future growth.
We are keenly aware of the importance of dividends to our shareholders, so it was pleasing that
the $12.5 million Underlying Profit after Tax earned in the current financial year (up 14.3% from the
prior comparable period) supported the fully franked 4 cent per share final dividend the PCG Board
declared today. The final dividend is payable 24 September 2020 to shareholders on the register as at
10 September 2020. This brings the total dividends declared for the 2020 financial year to 8 cents per
share, up from the 4 cents per share declared for the 2019 financial year.
In June 2019, the Company announced its intention to implement an on-market buy back of no more
than 10% of the Company’s shares over the following twelve months. The Company invested $1.9
million to acquire 1,082,839 shares. This represents 1% of our issued capital.
3 | PENGANA CAPITAL GROUP
Ahead of any government directive, Pengana made the decision in early March to urge as many of
our employees as possible to work from home. Implementing work from home arrangements, while
ensuring we continued to operate seamlessly with no detrimental impact on the delivery of our services
to our investors, was only possible because of the extraordinary operational and risk management
infrastructure that we already had in place. It is also a testament to the excellence of our management
team, who showed exceptional leadership in very challenging circumstances.
Every single employee plays an important part in Pengana’s ability to deliver on its core purpose: to
create and manage wealth for our investors. We believe we are “smarter together”, and aim to ensure
that our purpose and values are not just internally aligned, but also aligned with that of our investors by
encouraging staff and directors to also become Pengana owners.
During the year we extended our Employee Loan Share Plan to an additional 15 staff members,
allocating 831,996 PCG shares vesting through to 2024. In addition, we implemented a Non-Executive
Director (NED) Equity plan, whereby NEDs can salary sacrifice their Directors’ fees into PCG shares. The
Plan was implemented in April 2020 and 114,616 shares were purchased on market on behalf of the
NEDs.
At the upcoming AGM, we will be seeking your approval to grant the NEDs new PCG shares in place
of their Directors’ fees. The NED Equity Plan will operate on a fee sacrifice basis, it does not involve
additional cost to Pengana and enhances the alignment between the NEDs and our Shareholders.
In the months and years ahead of us, we will continue to invest in our people, our products and our
processes, as these form the basis of future growth and stability for Pengana. We believe that our
success in the 2020 financial year was driven by the restructures undertaken in the prior financial years,
our exceptional investment and management teams and our robust and scalable infrastructure. We
commit to taking a long-term strategic view to ensure continued growth in the value we deliver to our
shareholders.
I hope you can join us at this year’s Annual General Meeting, which will, for the first time, be held
virtually, on 21 October 2020 at 9:30 am Sydney time. Thank you for your continued support.
Yours faithfully,
Warwick Negus
Chairman
Pengana Capital Group
4 | PENGANA CAPITAL GROUP
ANNUAL REPORT
CEO’S REPORT 2020
The 2020 financial year was a successful period for Pengana Capital Group Limited (“PCG” or “the
Company” or “Pengana”). In the midst of unprecedented turmoil in global markets, the foundations
we laid over the last few years (and discussed in my FY2019 CEO Report) have started to bear fruit,
resulting in higher profitability and increased growth prospects.
Key Developments over the year included:
•
•
•
Strong 12 month performance across funds positioned for growth
Expansion of distribution and marketing team and capabilities
PE1 rights issue raising $94m
• Acquisition of controlling stake in Lizard International LLC
•
Launch of Lizard International long-only strategy- now managing ~$170m
• New JV relationship to manage the Pengana Alpha Israel Fund
•
Launch of the Pengana Property Securities Fund
Exceptional 12 month performance across funds positioned for growth
Our premise that the value added benefit of active managers would become apparent in more volatile
markets could not have been more stark than in the first weeks of March when the Dow posted its worst
day since 2008 and the NYSE halted trading for the first time since 1997, after an extraordinary sell off.
In the erratic weeks and months that followed, our fund managers stuck to their investment thesis and
delivered returns substantially in excess of the markets. Pleasingly, this was particularly evident amongst
our funds that we aim to grow strongly over the coming years as shown belowi :
Fund
%
16.2
11.9
3.7
7.6
Benchmark
%
Outperformance
%
3.0
3.0
(3.7)
3.0
13.2
8.9
7.4
4.6
Pengana International Fundii
Pengana International Ethical Fundiii
Pengana Global Small Companies Fundiv
Pengana WHEB Sustainable Impact Fundv
FUNDS UNDER MANAGEMENT
FUM reduced slightly from $3.3 billion at the start of the financial year to $3.1 billion at 30 June
2020. Net inflows of $50 million were offset by negative investment performance of $14 million and
distributions paid of $178 million. The strong absolute (and relative) performance of our international
products in particular insulated us from the worst of the market downturn; and our net inflows, including
from some strategic acquisitions, shifted our FUM towards higher margin products.
5 | PENGANA CAPITAL GROUP
Since 30 June, our FUM has grown further to $3.2 billion, despite paying $74 million in distributions in
July 2020. This is as a result of the successful rights issue for PE1, which raised an additional $94 million
and inflows of $66 million into our Lizard Investors LLC division. In addition, we added $55 million in
performance.
30 June 20
30 June 17
40%
3%
Australian multi-caps
Global small-caps
Australian small-caps
Global private equity
Global multi-caps
Other
21%
FINANCIAL RESULTS
24%
1%
7%
6%
2%
28%
25%
43%
Pengana generated an underlying net profit before tax of $12.5 million which represents 8.38 cents per
share after normalised tax.
Pengana Capital Group
Underlying profit before taxvi
Management fee revenue
Performance fee revenue
Net fund direct expenses
Operating expenses
Team profit share
Non-controlling interests
Operating EBITDAvii
Interest and investment income distributions
Interest on loan funded share plan
Financing costs
June 2020
($’000)
June 2019
($’000)
38,091
37,619
6,080
4,909
(3,062)
(3,241)
(18,174)
(17,283)
(13,210)
(13,891)
168
9,893
799
2,034
(245)
(10)
8,103
641
2,233
(53)
Underlying profit before tax attributable to Pengana Shareholders
12,481
10,924
Basic EPS on underlying profit after normalised tax at 27.5% viii
8.38c
7.65c
Gross management fee revenue of $38.1 million was marginally higher than the $37.6 million posted in
the prior comparable period (the year ended 30 June 2019). Average FUM was higher in the previous
financial year; however, the shift in FUM over the course of the 2020 financial year to products that
derive higher net fees to Pengana drove a 1.3% increase in gross management fee. We expect this
trend to continue through 2021 and beyond.
6 | PENGANA CAPITAL GROUP
ANNUAL REPORT
We earned $6 million in gross performance fees, 23% above the $4.9 million derived in the prior
comparable period. Although still well below our long-term performance fee averages, we see these
fees as proof that good active managers are essential in preserving capital in times of market sell offs
and that diversification in performance fee structures across vehicles is highly valuable. Performance
fees income fluctuates, especially over relatively short periods of time. However, over the long term, we
expect a reversion to the mean.
Last year we restructured our product offering, and this year we have seen the full impact of that
rationalisation with a 6% reduction in Net Fund Direct Expenses. Operating expenses at $18.2 million
were 5% above the $17.3 million posted in the prior comparable period, driven predominantly by
increased investment in our sales and distribution capabilities. In the last quarter of 2020 we made
some significant reductions in operating expenses, the extent of which should be evident in 2021.
Despite an increase in gross management and performance fees, profit share payments to our
various fund management teams at $13.2 million were down almost 5% year-on-year due to a greater
proportion of the FUM held in products with higher net fees due to PCG.
The combination of the restructure of our cost base with increased funds under management from
products with a higher fee margins to PCG meant that our Operating EBITDA at $9.9 million was 22%
higher than the prior financial year.
In the last two years, our focus has been to not only increase fee revenue through increased FUM and
leveraging current scalable infrastructure, but to ensure that our efforts are focused on products that
have strong growth prospects and that deliver higher fee margins.
BALANCE SHEET
At 30 June 2020, our Underlying Net Tangible Assetsix were $54.9 million, or 51 cents per share.
During the year we paid $3.3 million or 4 cents per share in dividends, reduced our borrowings by 25%
and bought back $1,894,315 in PCG shares under the buyback announced in June 2019 and at 30
June 2020 had $31 million in cash and investments.
During 2020 the Company made two strategic acquisitions. In November 2019 PCG announced it had
acquired a majority stake in Chicago-based Lizard Investors LLC (“Lizard”), a management firm based
in Chicago with an excellent long-term track record in managing global small cap strategies. More
recently, we also entered into a joint venture with Israel-based Alpha LTI (“Alpha”), a leader in investing
in Israeli listed companies. I will expand on the significance of these two additions to our suite of
products later in this report.
The management of our balance sheet is critically important to our business and the returns we deliver
shareholders in the long term, as it allows us to take advantage of strategic opportunities as they arise.
FOUNDATION FOR FUTURE GROWTH
In recent years, PCG has been focused on identifying future growth opportunities. This has meant
that we have had to invest heavily in building the foundations for growth, to the detriment of past
profitability. In recent years we have significantly restructured the business, both from a cost base
and from a product offering perspective and we believe we have built a highly diversified funds
management business that is now poised to deliver significant upside over the medium to long term.
We have built a highly scalable infrastructure and, backed by a strong brand, distribution and marketing
capabilities, we have amassed a significant loyal client base at the higher end of the retail market. Our
suite of products is highly diversified across geographies and markets
7 | PENGANA CAPITAL GROUP
segments and as evidenced by our recent expansion into private equity, our scalable infrastructure gives
us the opportunity to expand into further asset classes when the right opportunity presents itself.
The current product mix has attractive fee margins, including diversification in terms of performance fee
potential, and over 20% of the current FUM is in closed-ended listed vehicles. In particular, a number of
our strategies currently present significant growth opportunities:
Indicative
Additional
Capacity
Indicative Gross
Fee Margin
(from Base +
Performance Fees)
Indicative Net Fee
Margin Adding to
PCG EBITA
International Equities Fund
International Equities Ethical Fund
Pengana Private Equity Trust (ASX: PE1)
>5bn
>3bn
>3bn
Pengana Global Small Companies Fund
>700m
Pengana Wheb Sustainable Impact Fund
>500m
Pengana Alpha Israel Fund
Lizard International Small Cap Funds
>700m
>2bn
1.0%
1.0%
2.0%
0.8%
0.6%
1.0%
1.0%
45%
45%
100%
50%
50%
50%
37%
International Equities
The Pengana International Fund (“PIF”) recently celebrated its fifth anniversary with exceptional top
quartile returns since inception. The unique investment process delivered true diversified returns from
a highly differentiated portfolio with very limited exposure to large cap US growth stocks. The last
financial year presented the full gamut of market challenges, from the US tech stock driven market
exuberance to the massive sell offs experienced as the initial Covid-19 shockwaves first hit financial
markets. The fund outperformed through all these cycles, validating the team’s stringent investment
process.
The fund is an attractive addition to an investor’s portfolio that blends well with other international funds
as well as providing core international equity exposure with consistent returns whilst preserving capital
in market downturns. With a capacity of several billion dollars and the ability to deliver total fee margins
of circa 1% (with approximately 45% of this falling to our bottom line), this strategy is a key growth
opportunity for PCG.
International Ethical Equities
The international equities team also manages PIF’s responsible investment fund counterpart, the
Pengana International Fund - Ethical (“PIFE”), which has recently passed its third year under PCG’s
management. Similarly to PIF, PIFE has delivered exceptional returns since the team took over the
strategy, with top quartile returns relative to peers in the International Ethical Equities Sector. The last
few years has seen an almost exponential increase in demand for responsible investment strategies
worldwide, and Australian responsible investment funds are increasingly held in high regard globally.
8 | PENGANA CAPITAL GROUP
ANNUAL REPORT
PIFE has demonstrable capability to deliver an ethically screened, ESG aware portfolio without
compromising financial returns and with a capacity of several billion dollars, it has the ability to be a key
driver of PCG’s FUM growth in the medium term. The team also run a mirror of the PIFE strategy in a
listed vehicle, Pengana International Equities Limited (ASX: PIA).
Pengana Private Equity Trust (ASX: PE1)
PE1 remains the only access point for retail investors to access global private equity through an
ASX listed vehicle. The attractiveness of the product was evident in that PE1 consistently traded at
a premium to its NAV through-out the financial year, including through the recent rights issue offer
period. The rights issue attracted significant interest, raising an additional $94 million in the midst of the
Covid-19 crisis.
Investor’s allocation to private equity as a percentage of their total investable portfolio continues to
grow, and PE1 is uniquely placed to be the product of choice for the Australian retail market. The
strategy has the capacity to deliver total fee margins in excess of 2%, all of which fall directly to PCG’s
EBITDA and with very large capacity; it is a key area of focus for our future growth.
Global Small Companies
In 2015 we entered into a joint venture to launch the Pengana Global Small Companies Fund with
Chicago-based Lizard Investors LLC, a highly regarded specialist global small-cap manager. The fund
has attracted good research house ratings and has delivered solid performance since inception. With
a lack of credible competitors in Australia, growing demand for the sector and a capacity in excess of
$700 million, the fund presents a further growth opportunity for PCG.
WHEB Sustainable Impact
We entered into a joint venture with London-based WHEB Asset Management LLP in 2017 to launch
the Pengana WHEB Sustainable Impact Fund. WHEB is a global leader in sustainable investing with a
focus on the opportunities created by the transition to more sustainable, resource efficient and energy
efficient economies. The fund has attracted very strong research house ratings and very strong and
growing investor demand. Impact investing is experiencing phenomenal growth, and Pengana’s WHEB
Sustainable Impact Fund is well placed to capture a significant portion of the interest in the Australian
market.
Israel Alpha Fund
Our latest joint venture is with Israel-based Alpha LTI (“Alpha”). In early calendar 2020, Pengana
entered into a joint venture with Alpha, becoming the trustee for Alpha’s existing Australian wholesale
unit trust, now renamed the Pengana Alpha Israel Fund. Alpha is a leader in investing in listed Israeli
companies, one of the world most attractive investment markets, which has been driven by high-tech
start-ups to rival Silicon Valley, and industrial companies utilising cutting edge technology. Alpha has
delivered excellent long term returns, and while Israeli companies remain underrepresented in investor’s
portfolios, the sector is attracting strong interest as Israel’s reputation as the ‘Start Up’ nation continues
to grow. The Alpha strategy has in excess of $700 million capacity and should deliver circa 2% in total
fee margins, of which 50% will fall to PCG’s bottom line.
Lizard International Small Cap Strategies and US Expansion Platform
In early calendar 2020 we also acquired a significant stake in Chicago-based Lizard Investors LLC
(“Lizard”), the sub-advisers of the Pengana Global Small Companies Fund. The acquisition extended
what has been a successful partnership to date, presenting an opportunity for Pengana to take an
ownership stake in a synergistic premium funds management business which has growth opportunities
and a sophisticated investor base.
9 | PENGANA CAPITAL GROUP
Like Australia, the US only has a limited number of global small cap managers with good long-term
track records and in that space Lizard is a stand out. Post our acquisition, we launched the Lizard Small
Cap long-only strategies which attracted strong and immediate interest from institutional investors. As it
is usual with institutional funds, fee margins depend upon type of strategy (i.e. lower for long-only and
higher for hedge funds) as well as size of mandates.
Lizard has the potential to transform into a platform for the management of a suite of strategies to be
distributed to the US institutional market and it is our intention to initially launch two strategies into the
US market, both of which are currently marketed by Pengana in Australia.
OUTLOOK
PCG is very well positioned to successfully navigate through the investment challenges the next few
years will undoubtedly present. We are fortunate to have our strategies managed by superb investment
teams that have the skills and adaptability to manage portfolios through challenging times. We have a
strong and scalable platform that enables us to be nimble and take advantage of strategic opportunities
when and if they arise. In addition, we have a brand and culture that underpins our ability to deliver
growth and long-term shareholder value.
As always, I thank you for your continued investment and confidence in Pengana, and look forward to
meeting you at our first virtual Annual General Meeting.
Russel Pillemer
Chief Executive Office
Pengana Capital Group
i Performance one year to 31 July 2020. 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
ii Benchmark: MSCI All Country World Total Return Index in AUD
iii Benchmark: MSCI All Country World Total Return Index in AUD
iv Benchmark: MSCI All Country World Index SMID Cap unhedged in Australian dollars
v Benchmark: MSCI World Total Return Index (net, AUD unhedged
vi Benchmark: Tel Aviv Stock Exchange Small And Medium Cap 60 Index)
vi Source: Pengana Management Accounts
vii As per Pengana Capital Group Limited 30 June 2020 Annual Report
viii Calculated on 107,927,281 weighted average number of shares (i.e. including treasury shares) (2019: 103,534,926 shares)
ix Net Assets as per the 2020 Financial Statements of $85 million, adding off balance sheet employee loans of $32 million and
deferred taxes of $5 million, and subtracting intangibles of $67 million, calculated on 107,927,281 weighted average number of
shares (i.e. including treasury shares).
10 | PENGANA CAPITAL GROUP
ANNUAL REPORT
Pengana Capital Group Limited
Directors' report
30 June 2020
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 2020.
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 increasing investor wealth by developing,
offering and managing investment funds in Australia and globally as opportunities arise.
Dividends
Dividends paid during the financial year were as follows:
Consolidated
2020
$'000
2019
$'000
On 28 August 2018, a fully franked final dividend of 6.5 cents per ordinary share was
declared for the year ended 30 June 2018 and paid on 28 September 2018 to the
shareholders registered on 14 September 2018
-
5,188
On 25 February 2020, a 50% franked interim dividend of 4.0 cents per ordinary share was
declared for the year ended 30 June 2020 and paid on 19 March 2020 to the shareholders
registered on 5 March 2020 (2019: Unfranked interim dividend of 4.0 cents per ordinary
share)
3,346
3,346
3,193
8,381
On 28 August 2020, the directors declared a final dividend for the year ended 30 June 2020 of 4 cents per ordinary
share. The dividends are 100% franked to be paid on 24 September 2020 to eligible shareholders on the register on 10
September 2020.
Review of operations
The profit for the group after providing for income tax and non-controlling interest amounted to $6,118,000 (30 June 2019:
loss of $14,295,000).
Please refer to the Chief Executive Officer's Report for further information on the current year results and future outlook.
Significant changes in the state of affairs
On 1 January 2020, the group acquired 66.67% of the units in Lizard Investors LLC ('Lizard') for the consideration of
$2,699,000. Refer to note 29 of the financial statements for further details.
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
The impact of the Coronavirus (COVID-19) pandemic is ongoing and while it did not have any significant impact for the
group up to 30 June 2020, it is not practicable to estimate the potential impact, positive or negative, after the reporting
date. The situation is rapidly developing and is dependent on measures imposed by the Australian Government and other
countries, such as maintaining social distancing requirements, quarantine, travel restrictions and any economic stimulus
that may be provided.
11 | PENGANA CAPITAL GROUP
Pengana Capital Group Limited
Directors' report
30 June 2020
PENGANA
CAPITAL
Apart from the dividend declared as discussed above, no other matter or circumstance has arisen since 30 June 2020 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); Virgin Australia Holdings Limited (ASX:
VAH) and Washington H Soul Pattinson and Company Limited (ASX: SOL)
Former directorships (last 3 years): URB Investments Limited (ASX:URB)
Special responsibilities:
Interests in shares:
Member of the Audit and Risk Committee
3,440,000 ordinary shares
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.
Pengana International Equities Limited (ASX: PIA)
Other current directorships:
Former directorships (last 3 years): None
None
Special responsibilities:
10,350,081 ordinary shares and 15,872,528 ordinary shares (treasury shares held
Interests in shares:
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
1,803,150 ordinary shares
Interests in shares:
12 | PENGANA CAPITAL GROUP
ANNUAL REPORT
Pengana Capital Group Limited
Directors' report
30 June 2020
Name:
Title:
Experience and expertise:
Other current directorships:
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.
Milton Corporation Limited (ASX: MLT); EQT Holdings Ltd (ASX: EQT) and HGL
Limited (ASX: HNG)
Former directorships (last 3 years): None
Special responsibilities:
Interests in shares:
Member of the Nomination and Remuneration Committee
250,000 ordinary shares
Name:
Title:
Experience and expertise:
Other current directorships:
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
Accountants Australia and New Zealand and a fellow of the Australian Institute of
Company Directors.
Pengana International Equities Limited (ASX: PIA) and Redcape Hotel Group (ASX:
RDC)
Former directorships (last 3 years): Pyrolyx AG (ASX: PLX) - resigned on 7 June 2019
Special responsibilities:
Chairman of the Audit and Risk Committee and member of the Nomination and
Remuneration Committee
531,669 ordinary shares
Interests in 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.
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 2020, and the number of meetings attended by each director were:
Full Board
Attended
Held
Nomination and
Remuneration Committee
Attended
Held
Audit and Risk Committee
Attended
Held
Warwick Negus
Russel Pillemer
Jeremy Dunkel
Kevin Eley
David Groves
10
10
10
10
10
10
10
10
10
10
-
-
1
1
1
-
-
1
1
1
4
-
4
-
4
4
-
4
-
4
13 | PENGANA CAPITAL GROUP
Pengana Capital Group Limited
Directors' report
30 June 2020
Warwick Negus
Russel Pillemer
Jeremy Dunkel
Kevin Eley
David Groves
PENGANA
CAPITAL
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 and 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.
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.
During the year, the company implemented a Non-executive director equity plan (‘NED Plan’). The NED Plan will operate
on a fee sacrifice basis and therefore will not involve additional cost to the group. The Non-executive directors will be given
the opportunity to sacrifice up to 100% of fees (excluding compulsory company superannuation contribution) in return for
rights to acquire shares of equivalent value. The NED Plan will be effective for fees earned from 1 March 2020 and the first
period of fees sacrificed will be until 30 June 2020. The fees sacrificed during the period were used to purchase on-market
fully paid ordinary shares in the company, which determine the number of rights for this period. For subsequent financial
years, shareholder approval for these grants of rights will be sought at the Annual General Meeting (‘AGM’) held in the
financial year of the offer and grants will be made immediately following the AGM. It is anticipated, on exercise of the
rights, they will be settled by the issue of new shares. The NED Plan was disclosed to the ASX on 6 April 2020.
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.
14 | PENGANA CAPITAL GROUP
ANNUAL REPORT
Pengana Capital Group Limited
Directors' report
30 June 2020
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 2020.
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 Hunter Hall 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 2020, the group, through the Nomination and Remuneration Committee, engaged
Godfrey Remuneration Group Pty Ltd, remuneration consultants, to set up the NED Plan as detailed in the 'non-executive
directors' remuneration' section above. This resulted in the implementation of NED Plan which became effective in the
current financial year. Godfrey Remuneration Group Pty Ltd was paid a fees of $24,000 for these services.
An agreed set of protocols were put in place to ensure that the remuneration recommendations would be free from undue
influence from key management personnel. These protocols include requiring that the consultant not communicate with
affected key management personnel without a member of the Nomination and Remuneration Committee being present,
and that the consultant not provide any information relating to the outcome of the engagement with the affected key
management personnel. The Board is also required to make inquiries of the consultant's processes at the conclusion of the
engagement to ensure that they are satisfied that any recommendations made have been free from undue influence. The
Board is satisfied that these protocols were followed and as such there was no undue influence.
Voting and comments made at the company's 2019 Annual General Meeting ('AGM')
At the 2019 AGM, shareholders voted to approve the adoption of the remuneration report for the year ended 30 June 2019.
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
15 | PENGANA CAPITAL GROUP
Pengana Capital Group Limited
Directors' report
30 June 2020
PENGANA
CAPITAL
Short-term benefits
Post-
employment
benefits
Long-term
benefits
Share-
based
payments
2020
Non-Executive Directors:
Warwick Negus
Jeremy Dunkel
Kevin Eley
David Groves
Executive Directors:
Russel Pillemer
Other KMP:
Katrina Glendinning
2019
Non-Executive Directors:
Warwick Negus
Jeremy Dunkel
Kevin Eley
David Groves
Executive Directors:
Russel Pillemer
Other KMP:
Katrina Glendinning
Cash salary
and fees
$
Cash
bonus
$
Non-
monetary
$
Super-
annuation
$
Long
service
leave
$
Equity-
settled
$
42,618
27,397
24,353
30,442
12,146
7,808
6,941
8,676
-
-
-
-
40,176
21,003
12,141
85,236
54,795
48,706
60,883
564,354
360,851
1,174,825
-
-
-
-
-
-
-
-
164,986
21,002
77,576
6,792
18,933
28,246
28,246
416,891
1,464,566
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
$
140,000
90,000
80,000
100,001
637,674
-
-
-
-
-
Total
$
140,000
90,000
80,000
100,000
627,267
-
-
-
-
-
-
-
-
-
12,146
7,808
6,940
8,675
-
-
-
-
72,017
20,531
11,783
127,854
82,192
73,060
91,325
522,936
354,468
1,251,835
-
-
-
-
-
-
-
Non-executive directors' remuneration is 100% fixed.
The share-based payments relate to the LSP.
Name
Executive Directors:
Russel Pillemer
Other KMP:
Katrina Glendinning
-
72,017
20,531
76,631
6,970
18,753
22,891
22,891
404,860
1,442,127
Fixed remuneration
2019
2020
LTI
2020
2019
100%
100%
-
-
93%
94%
7%
6%
16 | PENGANA CAPITAL GROUP
ANNUAL REPORT
Pengana Capital Group Limited
Directors' report
30 June 2020
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:
Term of agreement:
Details:
Name:
Title:
Term of agreement:
Details:
Russel Pillemer
Managing Director and Chief Executive Officer
Ongoing - no fixed minimum term
A total fixed salary of $625,533 per annum, which includes statutory superannuation
contributions and any salary sacrifice arrangements. Russel participates in the loan
share plan. Either party may terminate the employment agreement by providing six
months’ notice.
Katrina Glendinning
Chief Financial Officer
Ongoing - no fixed minimum term
Salary: A total fixed salary of $381,854 per annum, which includes statutory
superannuation contributions and any salary sacrifice arrangements. Katrina
participates in the loan share plan. 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 2020 loans outstanding under the LSP and not recorded as a receivable on statement of financial
position totalled $31,948,963 (2019: $29,395,315). 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 2020 outstanding loans to Russel Pillemer and Katrina Glendinning respectively are $19,060,240 (2019:
$18,533,517) and $553,295 (2019: $529,215).
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
03/03/2017
Expiry date
01/03/2024
Name
Number of
loan shares Exercise price grant date
Fair value per
loan shares at
Katrina Glendinning
422,899
$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 2020 and 30 June 2019.
17 | PENGANA CAPITAL GROUP
Pengana Capital Group Limited
Directors' report
30 June 2020
Additional disclosures relating to KMP
PENGANA
CAPITAL
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 personally related parties, is set out below:
Ordinary shares
Warwick Negus
Jeremy Dunkel
Kevin Eley
David Groves
Russel Pillemer
Katrina Glendinning
Balance at
the start of
the year
Received
as part of
remuneration*
Additions
Disposal/
other
3,440,000
1,803,150
250,000
531,669
10,350,081
2,159,530
18,534,430
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Balance at
the end of
the year
3,440,000
1,803,150
250,000
531,669
10,350,081
2,159,530
18,534,430
-
-
-
-
-
-
-
*
During the year, rights were granted to directors under the NED Plan in return for sacrificing fees. These rights were
not exercisable until 21 August 2020 at which time 114,616 shares were allocated to and are held in trust on behalf of
relevant directors.
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 personally 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.
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
20/12/2019
05/06/2020
Expiry date
28/02/2024
28/02/2024
01/03/2024
01/10/2025
18/12/2026
04/06/2027
Exercise
price
Number of
loan shares
$1.49
$1.20
$1.49
$4.33
$1.50
$0.86
5,149,796
10,722,732
6,790,895
604,998
926,000
233,645
24,428,066
The value of loans issued under the LSP total $30,952,000 (2019: $29,220,000) 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.
18 | PENGANA CAPITAL GROUP
ANNUAL REPORT
Pengana Capital Group Limited
Directors' report
30 June 2020
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 2020 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.
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 Office
Pengana Capital Group
28 August 2020
Sydney
Warwick Negus
Chairman
Pengana Capital Group
19 | PENGANA CAPITAL GROUP
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 2020, 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, 28 August 2020
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
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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.
ANNUAL REPORT
Pengana Capital Group Limited
Statement of profit or loss
For the year ended 30 June 2020
Revenue
Management fees
Performance fees
Other fees
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
Fund manager profit share
Fund operating
Impairment of other receivables
Occupancy expenses
Cost of establishing Pengana Private Equity Trust
Non-cash issue of alignment shares to Pengana Private Equity Trust
Technology and communications
Marketing and investment research
Insurance
Professional, registry and listing related
Acquisition and restructuring costs
Depreciation and amortisation
Other operating
Finance costs
Product development
Total expenses
Profit/(loss) before income tax expense
Income tax expense
Profit/(loss) after income tax expense for the year
Profit/(loss) for the year is attributable to:
Non-controlling interest
Owners of Pengana Capital Group Limited
Consolidated
Note
2020
$'000
2019
$'000
2
3
4
4
4
4
5
37,473
6,192
1,419
45,084
352
141
966
46,543
(13,668)
(13,209)
(3,660)
-
(478)
-
-
(1,299)
(1,020)
(742)
(1,132)
-
(3,508)
(577)
(286)
(623)
(40,202)
37,735
4,952
859
43,546
(239)
147
837
44,291
(14,048)
(13,891)
(4,001)
(299)
(980)
(6,299)
(10,260)
(781)
(1,430)
(548)
(678)
(168)
(2,652)
(275)
(53)
-
(56,363)
6,341
(12,072)
(391)
(2,213)
5,950
(14,285)
(168)
6,118
10
(14,295)
5,950
(14,285)
Basic earnings per share
Diluted earnings per share
Cents
Cents
35
35
7.28
7.07
(17.75)
(17.75)
The above statement of profit or loss should be read in conjunction with the accompanying notes
21 | PENGANA CAPITAL GROUP
Pengana Capital Group Limited
Statement of other comprehensive income
For the year ended 30 June 2020
PENGANA
CAPITAL
Consolidated
2020
$'000
2019
$'000
Profit/(loss) after income tax expense for the year
5,950
(14,285)
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
Reclassify gain or loss on disposal of equity instruments net of tax to retained earnings
Items that may be reclassified subsequently to profit or loss
Foreign currency translation
Other comprehensive income for the year, net of tax
87
47
20
154
(570)
-
-
(570)
Total comprehensive income for the year
6,104
(14,855)
Total comprehensive income for the year is attributable to:
Non-controlling interest
Owners of Pengana Capital Group Limited
(168)
6,272
10
(14,865)
6,104
(14,855)
The above statement of other comprehensive income should be read in conjunction with the accompanying notes
22 | PENGANA CAPITAL GROUP
ANNUAL REPORT
Pengana Capital Group Limited
Statement of financial position
As at 30 June 2020
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Contract assets - accrued management and performance fees
Income tax refund due
Prepayments
Security deposits
Total current assets
Non-current assets
Trade and other receivables
Investments accounted using the equity method
Equity investment in financial assets at fair value through other comprehensive
income
Property, plant and equipment
Intangibles
Right-of-use assets
Prepayments
Security deposits
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Employee benefits
Bank loan
Lease liabilities
Income tax liability
Total current liabilities
Non-current liabilities
Employee benefits
Other
Bank loan
Lease liabilities
Deferred tax
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
Total equity
Consolidated
Note
2020
$'000
2019
$'000
6
7
8
5
7
9
10
11
12
13
14
15
16
17
5
15
16
17
5
18
19
15,309
532
3,839
570
693
601
21,544
863
6,914
9,126
275
66,674
526
120
73
84,571
14,446
442
4,747
-
723
349
20,707
873
4,275
8,988
263
65,455
-
153
476
80,483
106,115
101,190
11,251
958
1,250
316
-
13,775
145
66
2,500
227
4,916
7,854
7,657
992
1,250
-
1,182
11,081
93
57
3,750
-
5,766
9,666
21,629
20,747
84,486
80,443
99,430
32,839
(47,615)
84,654
(168)
101,477
29,263
(50,340)
80,400
43
84,486
80,443
The above statement of financial position should be read in conjunction with the accompanying notes
23 | PENGANA CAPITAL GROUP
Pengana Capital Group Limited
Statement of changes in equity
For the year ended 30 June 2020
PENGANA
CAPITAL
Consolidated
Contributed
equity
$'000
Reserves
$'000
Accumulated
losses
$'000
Non-
controlling
interest
$'000
Total equity
$'000
Balance at 1 July 2018
87,914
29,445
(27,664)
Profit/(loss) 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 18)
Share-based payments
Dividends on treasury shares
Dividends paid (note 20)
-
-
-
-
(14,295)
(570)
-
(570)
(14,295)
13,563
-
-
-
-
446
(58)
-
-
-
-
(8,381)
33
10
-
10
-
-
-
-
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
Consolidated
Contributed
equity
$'000
Reserves
$'000
Accumulated
losses
$'000
Non-
controlling
interest
$'000
Total equity
$'000
Balance at 1 July 2019
101,477
29,263
(50,340)
43
80,443
Profit/(loss) 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 18)
Share buy-back (note 18)
Reclassify gain or loss on disposal of equity
instruments net of tax to retained earnings
Treasury shares (note 18)
Share-based payments
Reserves arising on business combinations
Derecognition of non-controlling interest
Dividends on treasury shares
Dividends paid (note 20)
-
-
-
1,331
(1,900)
-
(1,478)
-
-
-
-
-
-
154
154
-
-
-
-
769
2,712
-
(59)
-
6,118
(168)
5,950
-
-
154
6,118
(168)
6,104
-
-
(47)
-
-
-
-
-
(3,346)
-
-
-
-
-
-
(43)
-
-
1,331
(1,900)
(47)
(1,478)
769
2,712
(43)
(59)
(3,346)
Balance at 30 June 2020
99,430
32,839
(47,615)
(168)
84,486
The above statement of changes in equity should be read in conjunction with the accompanying notes
24 | PENGANA CAPITAL GROUP
ANNUAL REPORT
Pengana Capital Group Limited
Statement of cash flows
For the year ended 30 June 2020
Cash flows from operating activities
Receipts from customers (inclusive of GST)
Payments to suppliers, customers and employees (inclusive of GST)
Dividends received
Interest received
Rental and other income
Finance costs
Income taxes paid
Consolidated
Note
2020
$'000
2019
$'000
49,442
(40,285)
458
141
509
(286)
(3,264)
47,901
(49,711)
478
104
283
-
(272)
Net cash from/(used in) operating activities
33
6,715
(1,217)
Cash flows from investing activities
Payment for purchase of subsidiary, net of cash acquired
Payments for property, plant and equipment
Payments for purchase of management rights
Payments for purchase of investments associates
Proceeds from disposal of investments in associates
Payments for security deposits
Proceeds from security deposits
Net cash from investing activities
Cash flows from financing activities
Proceeds from borrowings
Repayment of borrowings
Repayment of lease liabilities
Payments to non-controlling interests
Payment for purchase of treasury shares
Payments for share buy-backs
Dividends paid to company shareholders, net of treasury shares reinvested
Net cash used in financing activities
Net increase/(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
1,936
(102)
(700)
(351)
3,438
(37)
-
4,184
-
(1,250)
(712)
(2,359)
(147)
(1,900)
(3,346)
65
(98)
-
-
2,967
-
40
2,974
5,000
-
-
-
-
-
(8,381)
(9,714)
(3,381)
1,185
14,446
(322)
(1,624)
16,070
-
Cash and cash equivalents at the end of the financial year
6
15,309
14,446
The above statement of cash flows should be read in conjunction with the accompanying notes
25 | PENGANA CAPITAL GROUP
Pengana Capital Group Limited
Notes to the financial statements
30 June 2020
Note 1. Operating segments
PENGANA
CAPITAL
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 development,
offering of and management of investment funds. 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 2. 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 over time – performance fees
Consolidated
2020
$'000
2019
$'000
38,892
6,192
38,594
4,952
45,084
43,546
Disaggregation of revenue based on major service line is shown on the face of the statement of profit or loss.
Note 3. Other income and gains
Dividends and distributions
Rental income
Other income
Consolidated
2020
$'000
2019
$'000
458
294
214
966
479
283
75
837
26 | PENGANA CAPITAL GROUP
ANNUAL REPORT
Pengana Capital Group Limited
Notes to the financial statements
30 June 2020
Note 4. Expenses
Profit/(loss) before income tax includes the following specific expenses:
Depreciation
Leasehold improvements
Fixtures and fittings
Plant and equipment
Right-of-use assets
Total depreciation
Amortisation
Acquired relationships
Other intangible assets
Total amortisation
Total depreciation and amortisation
Finance costs
Interest and finance charges paid/payable on borrowings
Interest and finance charges paid/payable on lease liabilities
Finance costs expensed
Net foreign exchange loss
Net foreign exchange loss
Leases
Minimum lease payments
Amortisation of deferred lease incentives
Defined contribution 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
2020
$'000
2019
$'000
37
11
79
830
957
2,408
143
2,551
3,508
245
41
286
(36)
-
-
-
703
37
13
79
-
129
2,405
118
2,523
2,652
53
-
53
48
949
(27)
922
740
769
446
-
-
-
6,299
10,260
16,559
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 ended 30 June 2019.
27 | PENGANA CAPITAL GROUP
Pengana Capital Group Limited
Notes to the financial statements
30 June 2020
Note 5. Income tax
Income tax expense
Current tax
Deferred tax - origination and reversal of temporary differences
Aggregate income tax expense
Deferred tax included in income tax expense comprises:
Decrease/(increase) in deferred tax assets
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 27.5% (2019: 30%)
Tax effect amounts which are not deductible/(taxable) in calculating taxable income:
Non-assessable income
Permanent differences
Share-based payment expense
Non-deductible expenses
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
Adjustment to deferred tax balances as a result of change in statutory tax rate
Prior period adjustments
Recognise tax deduction for PE1 development costs
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
PENGANA
CAPITAL
Consolidated
2020
$'000
2019
$'000
1,279
(888)
391
2,003
210
2,213
(888)
210
6,341
(12,072)
1,744
(3,622)
(103)
-
195
185
650
-
-
2,671
(422)
(170)
(1,732)
44
(153)
57
134
-
670
3,078
1,893
2,057
-
(518)
-
674
391
2,213
Consolidated
2020
$'000
2019
$'000
38
(171)
2,611
2,247
718
674
At 30 June 2019 a potential income tax benefit of $1,890,000, being the tax effect of Pengana Private Equity Trust
development costs of $6,299,000 was not recognised pending the outcome of a private ruling application lodged with the
Australian Taxation Office ("ATO"). Subsequently the ATO has issued a favorable ruling with respect to the tax deductibility
of $3,938,000 in brokerage costs and the directors are of the opinion the group has a reasonably arguable position with
respect to the tax deductibility of the remaining $2,361,000 costs incurred. Accordingly, following adjustments for the
change in tax rate from 30% to 27.5%, a tax benefit of $732,000 has been included in income tax expense for the year
ended 30 June 2020.
28 | PENGANA CAPITAL GROUP
ANNUAL REPORT
Pengana Capital Group Limited
Notes to the financial statements
30 June 2020
Note 5. Income tax (continued)
Deferred tax liability
Deferred tax asset/(liability) comprises temporary differences attributable to:
Amounts recognised:
Property, plant and equipment
Provisions
Unrealised losses/(gains)
Identifiable intangibles
Right-of-use assets and lease liabilities
Deferred tax liability
Movements:
Opening balance
Credited/(charged) to profit or loss
Credited/(charged) to equity
Additions through business combinations (note 29)
Tax effects on intangibles
Closing balance
Income tax refund due
Income tax refund due
Provision for income tax
Provision for income tax
Note 6. Cash and cash equivalents
Current assets
Cash on hand and at bank
Cash on deposit
29 | PENGANA CAPITAL GROUP
Consolidated
2020
$'000
2019
$'000
53
473
92
(5,538)
4
65
603
119
(6,553)
-
(4,916)
(5,766)
(5,766)
888
(38)
-
-
(6,077)
(210)
171
(135)
485
(4,916)
(5,766)
Consolidated
2020
$'000
2019
$'000
570
-
Consolidated
2020
$'000
2019
$'000
-
1,182
Consolidated
2020
$'000
2019
$'000
9,252
6,057
14,433
13
15,309
14,446
Pengana Capital Group Limited
Notes to the financial statements
30 June 2020
Note 7. Trade and other receivables
Current assets
Trade receivables
Other receivables
Non-current assets
Other loans
PENGANA
CAPITAL
Consolidated
2020
$'000
2019
$'000
311
221
532
441
1
442
863
873
1,395
1,315
Allowance for expected credit losses
The group has recognised a loss of $nil (2019: $nil) in profit or loss in respect of the expected credit losses for the year
ended 30 June 2020.
The Coronavirus (COVID 19) pandemic has had no impact on the ability of the group to recover debts.
The ageing of the receivables and allowance for expected credit losses provided for above are as follows:
Consolidated
Not overdue
Expected credit loss rate
2020
%
2019
%
Carrying amount
2019
$'000
2020
$'000
Allowance for expected
credit losses
2020
$'000
2019
$'000
-
-
311
441
-
-
Note 8. Contract assets - accrued management and performance fees
Current assets
Contract assets
Consolidated
2020
$'000
2019
$'000
3,839
4,747
Contract assets have decreased by $908,000 compared to the previous financial year due to lower revenues in June 2020
compared to June 2019.
Allowance for expected credit losses:
The group has recognised a loss of $nil (2019: $nil) in profit or loss in respect of the recoverability of contract assets for the
year ended 30 June 2020.
Note 9. Investments accounted using the equity method
Non-current assets
Investments in associates
Refer to note 31 for further information on interests in associates.
30 | PENGANA CAPITAL GROUP
Consolidated
2020
$'000
2019
$'000
6,914
4,275
ANNUAL REPORT
Pengana Capital Group Limited
Notes to the financial statements
30 June 2020
Note 10. Equity investment in financial assets at fair value through other comprehensive income
Non-current assets
Investments in listed equity securities
Investment in unlisted unit trust
Refer to note 22 for further information on fair value measurement.
Note 11. Property, plant and equipment
Non-current assets
Leasehold improvements - at cost
Less: Accumulated depreciation
Furniture and fittings - at cost
Less: Accumulated depreciation
Plant and equipment - at cost
Less: Accumulated depreciation
Consolidated
2020
$'000
2019
$'000
7,393
1,733
9,126
7,255
1,733
8,988
Consolidated
2020
$'000
2019
$'000
200
(119)
81
141
(119)
22
990
(818)
172
275
162
(83)
79
256
(228)
28
954
(798)
156
263
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 2018
Additions
Disposals
Depreciation expense
Balance at 30 June 2019
Additions
Additions through business combinations (note 29)
Depreciation expense
Balance at 30 June 2020
Leasehold
improvements
$'000
Furniture and
fittings
$'000
Plant and
equipment
$'000
Total
$'000
116
-
-
(37)
79
39
-
(37)
81
52
3
(14)
(13)
28
5
-
(11)
22
147
93
(5)
(79)
156
57
38
(79)
172
315
96
(19)
(129)
263
101
38
(127)
275
31 | PENGANA CAPITAL GROUP
Pengana Capital Group Limited
Notes to the financial statements
30 June 2020
Note 12. Intangibles
Non-current assets
Goodwill - at cost
Acquired relationships - at cost
Less: Accumulated amortisation
Other intangible assets - at cost
Less: Accumulated amortisation
PENGANA
CAPITAL
Consolidated
2020
$'000
2019
$'000
46,537
43,612
27,220
(7,419)
19,801
597
(261)
336
26,520
(5,011)
21,509
452
(118)
334
66,674
65,455
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 2018
Additions through business combinations (note 29)
Amortisation expense
Balance at 30 June 2019
Additions
Additions through business combinations (note 29)
Additions arising from identifiable intangibles
Amortisation expense
Goodwill
$'000
Acquired
relationships
$'000
Other
intangible
assets
$'000
Total
$'000
40,627
2,985
-
43,612
-
2,693
232
-
23,914
-
(2,405)
21,509
700
-
-
(2,408)
-
452
(118)
334
145
-
-
(143)
64,541
3,437
(2,523)
65,455
845
2,693
232
(2,551)
Balance at 30 June 2020
46,537
19,801
336
66,674
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 16.8% (2019:13.2%);
b. Projected growth rate of 2.0% (2019:2.5%) 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 2020, 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.
32 | PENGANA CAPITAL GROUP
ANNUAL REPORT
Pengana Capital Group Limited
Notes to the financial statements
30 June 2020
Note 12. Intangibles (continued)
The remaining amortisation period for the acquired relationships is between 2 and 20 years.
Note 13. Right-of-use assets
Non-current assets
Right-of-use assets
Less: Accumulated depreciation
Consolidated
2020
$'000
2019
$'000
1,356
(830)
526
-
-
-
The group leases office premises and office equipment (e.g. photocopier) under agreements expiring between one to four
years with, in some cases, options to extend. The leases have various escalation clauses. On renewal, the terms of the
leases are renegotiated and a new lease entered into.
The group leases office equipment under agreements of less than one year. These leases are either short-term or low-
value, so have been expensed as incurred and not capitalised as right-of-use assets.
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 2018
Balance at 30 June 2019
Adoption of AASB 16 on 1 July 2019 (refer note 38)
Additions
Disposals
Depreciation expense
Balance at 30 June 2020
Note 14. Trade and other payables
Current liabilities
Trade payables
Accrued expenses
Fund manager profit share
Payable to non-controlling interests
Other payables
Refer to note 21 for further information on financial instruments.
33 | PENGANA CAPITAL GROUP
Office
premises
$'000
Others
$'000
Total
$'000
-
-
1,063
200
-
(751)
512
-
-
72
21
(69)
(10)
14
-
-
1,135
221
(69)
(761)
526
Consolidated
2020
$'000
2019
$'000
79
2,168
2,922
5,634
448
56
2,531
4,645
-
425
11,251
7,657
Pengana Capital Group Limited
Notes to the financial statements
30 June 2020
Note 15. Employee benefits
Current liabilities
Annual leave
Long service leave
Non-current liabilities
Long service leave
Note 16. Bank loan
Current liabilities
Bank loan
Non-current liabilities
Bank loan
Refer to note 21 for further information on financial instruments.
Total secured liabilities
The total secured liabilities are as follows:
Bank loan
PENGANA
CAPITAL
Consolidated
2020
$'000
2019
$'000
396
562
958
145
485
507
992
93
1,103
1,085
Consolidated
2020
$'000
2019
$'000
1,250
1,250
2,500
3,750
3,750
5,000
Consolidated
2020
$'000
2019
$'000
3,750
5,000
During the year ended 30 June 2019 the company borrowed $5,000,000 from Investec Australia Finance Pty Limited for
costs associated with developing 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%.
34 | PENGANA CAPITAL GROUP
ANNUAL REPORT
Pengana Capital Group Limited
Notes to the financial statements
30 June 2020
Note 17. Lease liabilities
Current liabilities
Lease liability
Non-current liabilities
Lease liability
Consolidated
2020
$'000
2019
$'000
316
227
543
-
-
-
Refer to note 21 for further information on financial instruments.
Note 18. Contributed equity
Consolidated
2020
Shares
2019
Shares
2020
$'000
2019
$'000
Ordinary shares - fully paid
Convertible preference shares - fully paid
Less: Treasury shares
103,026,317 103,277,160
4,909,228
(23,458,720)
4,909,228
(24,428,066)
119,869
10,260
(30,699)
120,437
10,260
(29,220)
83,507,479
84,727,668
99,430
101,477
Movements in ordinary share capital
Details
Date
Shares
$'000
1 July 2018
Balance
Issue of shares on acquisition of PT Private Capital Pty Ltd
21 August 2018
Issue of shares under the Pengana Capital Group Loan Share Plan 3 October 2018
Balance
30 June 2019
Share buy-back
August 2019
Share buy-back
September 2019
Share buy-back
October 2019
November 2019
Share buy-back
Issue of shares under the Pengana Capital Group Loan Share Plan December 2019
Share buy-back
February 2020
101,689,016
983,146
604,998
103,277,160
(22,656)
(131,323)
(369,263)
(463,552)
831,996
(96,045)
115,134
3,303
2,000
120,437
(39)
(218)
(677)
(827)
1,332
(139)
Balance
30 June 2020
103,026,317
119,869
Movements in convertible preference share capital
Details
Date
Shares
$'000
Balance
Alignment shares issued to Pengana Private Equity Trust
1 July 2018
29 April 2019
-
4,909,228
-
10,260
Balance
Balance
30 June 2019
4,909,228
10,260
30 June 2020
4,909,228
10,260
35 | PENGANA CAPITAL GROUP
Pengana Capital Group Limited
Notes to the financial statements
30 June 2020
Note 18. Contributed equity (continued)
Movements in treasury shares
PENGANA
CAPITAL
Details
Date
Shares
$'000
Balance
Issue of shares under the Pengana Capital Group Loan Share Plan 3 October 2018
1 July 2018
Balance
Issue of shares under the Pengana Capital Group Loan Share Plan December 2019
Existing shares acquired under the Pengana Capital Group Loan
Share Plan
30 June 2019
June 2020
(22,853,722)
(604,998)
(23,458,720)
(831,996)
(27,220)
(2,000)
(29,220)
(1,332)
(137,350)
(147)
Balance
30 June 2020
(24,428,066)
(30,699)
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 were issued on 29 April 2019 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. Alignment shares are not redeemable as cash.
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 34 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
During the year, the company bought back 1,082,839 shares at a cost of $1,899,000. The buy-back program expired on 27
June 2020.
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.
36 | PENGANA CAPITAL GROUP
ANNUAL REPORT
Pengana Capital Group Limited
Notes to the financial statements
30 June 2020
Note 18. Contributed equity (continued)
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 2020 PCL and PIML were required to maintain
$5,000,000 and $1,200,000 (2019: $5,000,000 and $3,200,000) respectively in liquid assets, of which 50% (2019: 50%) is
held in cash or cash equivalents.
The directors believe the group has adequate capital at 30 June 2020 to maintain the groups existing business activities
and facilitate growth.
The capital risk management policy remains unchanged from the 2019 Annual Report.
Note 19. Reserves
Profits reserve
Foreign currency reserve
Share-based payments reserve
Financial assets at fair value through other comprehensive income reserve
Acquisition reserve
Consolidated
2020
$'000
2019
$'000
23,867
20
6,505
(265)
2,712
23,867
-
5,795
(399)
-
32,839
29,263
Foreign currency reserve
The reserve is used to recognise exchange differences arising from the translation of the financial statements of foreign
operations to Australian dollars. It is also used to recognise gains and losses on hedges of the net investments in foreign
operations.
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.
Acquisition reserve
The reserve is used to recognise contributions arising from business combinations.
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.
37 | PENGANA CAPITAL GROUP
Pengana Capital Group Limited
Notes to the financial statements
30 June 2020
Note 19. Reserves (continued)
Movements in reserves
Movements in each class of reserve during the current and previous financial year are set out below:
PENGANA
CAPITAL
Foreign
currency
reserve
$'000
Share-
based
payments
reserve
$'000
Available-
for-sale
reserve
$'000
Financial
assets at
fair value
through OCI Acquisition
reserve
$'000
reserve
$'000
Total
$'000
Consolidated
Balance at 1 July 2018
Revaluation - gross
Deferred tax
Transfer from available-for-sale
reserve to fair value through
OCI reserve
Share-based payments
Dividends on treasury shares
Balance at 30 June 2019
Revaluation - gross
Foreign currency translation
Share-based payments
Dividends on treasury shares
Reclassification to retained
earnings on disposal of
investments
Reserve arising on acquisition
of Lizard Investors LLC
Profits
reserve
$'000
23,867
-
-
-
-
-
23,867
-
-
-
-
-
-
-
-
-
-
-
-
-
-
20
-
-
-
-
5,407
-
-
-
446
(58)
5,795
-
-
769
(59)
-
-
Balance at 30 June 2020
23,867
20
6,505
Note 20. Dividends
Dividends
Dividends paid during the financial year were as follows:
171
-
-
(171)
-
-
-
-
-
-
-
-
-
-
-
(813)
243
171
-
-
(399)
87
-
-
-
47
-
-
-
-
-
-
-
-
-
-
-
-
-
29,445
(813)
243
-
446
(58)
29,263
87
20
769
(59)
47
2,712
2,712
(265)
2,712
32,839
Consolidated
2020
$'000
2019
$'000
On 28 August 2018, a fully franked final dividend of 6.5 cents per ordinary share was
declared for the year ended 30 June 2018 and paid on 28 September 2018 to the
shareholders registered on 14 September 2018
-
5,188
On 25 February 2020, a 50% franked interim dividend of 4.0 cents per ordinary share was
declared for the year ended 30 June 2020 and paid on 19 March 2020 to the shareholders
registered on 5 March 2020 (2019: Unfranked interim dividend of 4.0 cents per ordinary
share)
3,346
3,346
3,193
8,381
On 28 August 2020, the directors declared a final dividend for the year ended 30 June 2020 of 4 cents per ordinary
share. The dividends are 100% franked to be paid on 24 September 2020 to eligible shareholders on the register on 10
September 2020.
38 | PENGANA CAPITAL GROUP
ANNUAL REPORT
Pengana Capital Group Limited
Notes to the financial statements
30 June 2020
Note 20. Dividends (continued)
Franking credits
Consolidated
2020
$'000
2019
$'000
Franking credits available for subsequent financial years based on a tax rate of 27.5%
(2019: 30%)
3,387
2,468
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 21. 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 is not exposed to any significant foreign
currency risk, except for translation of financial assets and liabilities of foreign subsidiaries into presentation currency.
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
2020
2019
Weighted
average
interest rate
Balance
$'000
Weighted
average
interest rate
Balance
$'000
0.41%
0.65%
4.69%
9,252
6,057
(3,750)
11,559
0.54%
2.00%
5.50%
14,433
13
(5,000)
9,446
39 | PENGANA CAPITAL GROUP
Pengana Capital Group Limited
Notes to the financial statements
30 June 2020
Note 21. Financial instruments (continued)
The table below summarises the impact of a 50 basis point movement in interest:
PENGANA
CAPITAL
Consolidated - 2020
Net exposure to cash flow
interest rate risk
Consolidated - 2019
Net exposure to cash flow
interest rate risk
Basis points increase
Effect on
profit/loss
before tax
$'000
Basis points
change
Effect on
equity $'000
Basis points
change
Basis points decrease
Effect on
profit/loss
before tax
$'000
Effect on
equity $'000
50
58
40
(50)
(58)
(40)
Basis points increase
Effect on
profit/loss
before tax
$'000
Basis points
change
Effect on
equity $'000
Basis points
change
Basis points decrease
Effect on
profit/loss
before tax
$'000
Effect on
equity $'000
50
47
33
(50)
(47)
(33)
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 2020 owed the group 100% (2019:
100%) of trade receivables and contract assets. 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.
Other loans receivables amount to $863,000 as at 30 June 2020 (2019: $873,000). 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.
40 | PENGANA CAPITAL GROUP
ANNUAL REPORT
Pengana Capital Group Limited
Notes to the financial statements
30 June 2020
Note 21. Financial instruments (continued)
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 - 2020
Non-derivatives
Non-interest bearing
Trade payables
Other payables
Fund manager profit share
Payable to LLC members
Interest-bearing - variable
Bank loans
Interest-bearing - fixed rate
Lease liability
Total non-derivatives
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
1 year or less
$'000
Between 1
and 2 years
$'000
Between 2
and 5 years Over 5 years
$'000
$'000
Remaining
contractual
maturities
$'000
79
448
2,922
5,634
-
-
-
-
-
-
-
-
1,406
1,348
1,284
485
10,974
126
1,474
43
1,327
-
-
-
-
-
-
-
79
448
2,922
5,634
4,038
654
13,775
1 year or less
$'000
Between 1
and 2 years
$'000
Between 2
and 5 years Over 5 years
$'000
$'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
The cash flows in the maturity analysis above are not expected to occur significantly earlier than contractually disclosed
above.
41 | PENGANA CAPITAL GROUP
Pengana Capital Group Limited
Notes to the financial statements
30 June 2020
Note 22. Fair value measurement
PENGANA
CAPITAL
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 - 2020
Assets
Investment in financial assets at fair value through other
comprehensive income
Total assets
Consolidated - 2019
Assets
Investment in financial assets at fair value through other
comprehensive income
Total assets
There were no transfers between levels during the financial year.
Level 1
$'000
Level 2
$'000
Level 3
$'000
Total
$'000
7,393
7,393
1,733
1,733
Level 1
$'000
Level 2
$'000
Level 3
$'000
7,255
7,255
1,733
1,733
-
-
-
-
9,126
9,126
Total
$'000
8,988
8,988
The carrying amounts of 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.
Note 23. 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
2020
$
2019
$
1,339,811
77,576
18,933
28,246
1,323,852
76,631
18,753
22,891
1,464,566
1,442,127
42 | PENGANA CAPITAL GROUP
ANNUAL REPORT
Pengana Capital Group Limited
Notes to the financial statements
30 June 2020
Note 24. 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
Note 25. Contingent liabilities
The group had no contingent liabilities at 30 June 2020 and 30 June 2019.
Note 26. Commitments
Lease commitments - operating
Committed at the reporting date but not recognised as liabilities, payable:
Within one year
One to five years
Consolidated
2020
$
2019
$
186,000
182,300
Consolidated
2020
$'000
2019
$'000
-
-
-
729
467
1,196
At 30 June 2020, operating lease commitments are disclosed as $nil due to the adoption of AASB 16 'leases'. Refer note
38 for further details.
Note 27. Related party transactions
Parent entity
Pengana Capital Group Limited is the parent entity.
Subsidiaries
Interests in subsidiaries are set out in note 30.
Associates
Interests in associates are set out in note 31.
Key management personnel
Disclosures relating to key management personnel are set out in note 23 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
43 | PENGANA CAPITAL GROUP
Consolidated
2020
$
2019
$
37,444,250
6,100,642
37,891,554
4,956,821
Pengana Capital Group Limited
Notes to the financial statements
30 June 2020
Note 27. Related party transactions (continued)
Receivable from and payable to related parties
The following balances are outstanding at the reporting date in relation to transactions with related parties:
PENGANA
CAPITAL
Current receivables:
Trade receivables and contract assets from other related parties
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.
Note 28. 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
Financial assets at fair value through other comprehensive income reserve
Accumulated losses
Total equity
Consolidated
2020
$
2019
$
4,149,304
5,004,169
Parent
2020
$'000
2019
$'000
5,248
(5,303)
5,248
(5,303)
Parent
2020
$'000
2019
$'000
23,813
18,023
231,972
233,120
1,250
3,750
1,246
6,780
223,612
6,505
-
(1,895)
225,660
5,853
(47)
(5,126)
228,222
226,340
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 2020 and 30 June 2019.
Contingent liabilities
The parent entity had no contingent liabilities as at 30 June 2020 and 30 June 2019.
44 | PENGANA CAPITAL GROUP
ANNUAL REPORT
Pengana Capital Group Limited
Notes to the financial statements
30 June 2020
Note 28. Parent entity information (continued)
Capital commitments - Property, plant and equipment
The parent entity had no capital commitments for property, plant and equipment as at 30 June 2020 and 30 June 2019.
Significant accounting policies
The accounting policies of the parent entity are consistent with those of the group, as disclosed in note 38, 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.
Note 29. Business combinations
Lizard Investors LLC
On 1 January 2020, the group acquired a 66.67% stake in Lizard Investors LLC ('Lizard'), for the total consideration of
$2,699,000. Lizard is a Chicago-based asset management firm that specialises in global to mid-cap equities, which was
founded in 2008 by Leah Zell, one of the foremost global small cap fund managers in the United States of America and a
pioneer in global small cap investing. The acquisition builds on an existing joint venture entered in 2015 between the group
and Lizard whereby Lizard provides sub-advisory services to the Pengana Global Small Companies Fund.
The goodwill of $2,693,000 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 $1,940,000 and loss after tax of $474,000 to the group for the period from 1 January
2020 to 30 June 2020.
Net assets and liabilities acquired are shown at 66.67% of the fair value at acquisition. Deferred consideration payable
amounting to US$1,000,000 is discounted using a rate of 6% per annum.
The purchase price allocation of the acquisition is final at 30 June 2020.
45 | PENGANA CAPITAL GROUP
Pengana Capital Group Limited
Notes to the financial statements
30 June 2020
Note 29. Business combinations (continued)
Details of the acquisition are as follows:
Cash and cash equivalents
Trade receivables
Other receivables
Investments in associates
Plant and equipment
Trade payables
Other payables to members of LLC
Net assets acquired
Goodwill
Acquisition-date fair value of the total consideration transferred
Representing:
Cash paid or payable
Deferred consideration
Cash used to acquire business, net of cash acquired:
Cash paid or payable to vendor
Less: cash and cash equivalents acquired
Net cash used
PENGANA
CAPITAL
Fair value
$'000
1,291
361
151
3,666
25
(159)
(5,329)
6
2,693
2,699
1,428
1,271
2,699
1,428
(1,291)
137
PT Private Capital Pty Ltd (comparative period)
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. The goodwill of $2,985,000 represents profitability of the acquired business and the synergistic opportunities
that will arise from the acquisition. 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
46 | PENGANA CAPITAL GROUP
Fair value
$'000
65
22
452
(85)
(136)
318
2,985
3,303
3,303
12
ANNUAL REPORT
Pengana Capital Group Limited
Notes to the financial statements
30 June 2020
Note 30. 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 38:
Name
Principal place of
business/Country
of incorporation*
Australia
Australia
Pengana Holdings Pty Ltd
Pengana Capital Ltd
Pengana European Asset
Management Pty Limited
Pengana Affinity Funds Pty
Ltd**
Pengana Singapore Pte. Ltd** Singapore
Pengana Investment
Management Ltd
PT Private Capital Pty Ltd
Lizard Investors LLC
Australia
Australia
Australia
Australia
United States of America
Parent
Ownership
interest
2020
%
Ownership
interest
2019
%
Non-controlling interest
Ownership
interest
2020
%
Ownership
interest
2019
%
100.00%
100.00%
100.00%
100.00%
-
-
-
-
50.00%
50.00%
50.00%
50.00%
-
-
100.00%
100.00%
66.67%
70.00%
100.00%
100.00%
100.00%
30.00%
-
30.00%
-
-
-
-
33.33%
-
-
-
*
**
Principal activities of the subsidiaries listed above are provision of Investment Management Services.
Entity deregistered during the current financial year.
Summarised financial information for subsidiaries that have non-controlling interests, has not been provided as they are not
material to the group.
Note 31. 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 International Fund
Global Credit Investments Pty Ltd
High Conviction Property Securities Fund
Pengana Private Equity Trust
Lizard International Master Fund LP
Australia
Australia
Australia
Australia
Cayman Islands
Ownership interest
2019
2020
%
%
0.96%
-
9.67%
0.07%
2.15%
1.07%
34.65%
-
-
-
47 | PENGANA CAPITAL GROUP
Pengana Capital Group Limited
Notes to the financial statements
30 June 2020
Note 31. Interests in associates (continued)
PENGANA
CAPITAL
Summarised financial information relating to associates that are material to the group are set out below:
Summarised financial information
Pengana International Fund Global credit Investments
2020
$'000
2019
$'000
2020
$'000
2019
$'000
Lizard
International
Master Fund
LP
2020
$'000
100,347
94,606
100,347
94,606
1,045
1,045
697
697
99,302
93,909
-
-
-
-
-
1,218
367,407
1,218
367,407
281
281
937
106,569
106,569
260,838
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
16,543
(1,091)
15,452
-
15,452
-
Total comprehensive income
15,452
7,924
Reconciliation of the group's carrying amount
Opening carrying amount
Share of profit/(loss) after income tax
Distributions declared
Additions through business combinations (note
29)
Disposal
Exchange differences
1,096
98
(234)
-
-
-
1,046
50
-
-
-
-
9,120
(1,196)
2,193
(1,711)
7,924
-
7,924
-
482
-
482
-
482
3,178
259
-
-
(3,437)
-
1,324
(2,224)
(900)
155
(8,128)
(3,514)
(11,642)
-
(745)
(11,642)
-
-
(745)
(11,642)
3,436
(258)
-
-
-
-
-
-
-
5,498
-
112
5,610
Closing carrying amount
960
1,096
-
3,178
The carrying amount of investments in associates approximate their fair value.
48 | PENGANA CAPITAL GROUP
ANNUAL REPORT
Pengana Capital Group Limited
Notes to the financial statements
30 June 2020
Note 32. 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 33. Cash flow information
Reconciliation of profit/(loss) after income tax to net cash from/(used in) operating activities
Profit/(loss) after income tax expense for the year
Adjustments for:
Depreciation and amortisation
Share of loss/(profit) - associates
Share-based payments
Cost of alignment shares issued to Pengana Private Equity Trust
Other non-cash items
Change in operating assets and liabilities:
Decrease/(increase) in trade and other receivables
Decrease/(increase) in contract assets - accrued management and performance fees
Decrease/(increase) in income tax refund due
Decrease/(increase) in prepayments
Increase/(decrease) in trade and other payables
Increase/(decrease) in provision for income tax
Decrease in deferred tax liabilities
Increase in employee benefits
Decrease in liability to LLC unitholders
Consolidated
2020
$'000
2019
$'000
5,950
(14,285)
3,508
(352)
710
-
(208)
(90)
908
(570)
63
3,594
(1,182)
-
18
(5,634)
2,652
297
446
10,260
169
4,765
(4,747)
759
(286)
(2,182)
1,182
(311)
64
-
Net cash from/(used in) operating activities
6,715
(1,217)
49 | PENGANA CAPITAL GROUP
Pengana Capital Group Limited
Notes to the financial statements
30 June 2020
Note 33. Cash flow information (continued)
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
Alignment shares issued to Pengana Private Equity Trust
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
Dividends withheld from company shareholders with outstanding other loans
Dividends applied on outstanding other loans
Changes in liabilities arising from financing activities
Consolidated
Balance at 1 July 2018
Net cash from financing activities
Balance at 30 June 2019
Net cash used in financing activities
Adoption of AASB 16 on 1 July 2019
Changes through business combinations (note 29)
Other changes
Balance at 30 June 2020
Note 34. Share-based payments
PENGANA
CAPITAL
Consolidated
2020
$'000
2019
$'000
-
1,479
(1,479)
-
-
-
(977)
977
(42)
42
3,303
2,000
(2,000)
10,260
5,500
(5,500)
(127)
127
-
-
-
13,563
Bank
loan
$'000
Lease
liabilities
$'000
-
5,000
5,000
(1,250)
-
-
-
3,750
-
-
-
(712)
1,135
99
21
543
Loan Funded Share Plan ('LSP')
The group operates a LSP, whereby limited recourse loans totalling $30,772,000 (2019: $29,220,000) were provided to
employees and fund managers to acquire shares in the company. Under the plan the CEO has 15,872,528 (2019:
15,872,528) shares, employees and fund managers have 8,555,538 (2019: 7,586,192) 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 $769,000 has been recognised in profit or loss for the year ended 30 June 2020 (2019: $446,000).
50 | PENGANA CAPITAL GROUP
ANNUAL REPORT
Pengana Capital Group Limited
Notes to the financial statements
30 June 2020
Note 34. Share-based payments (continued)
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 2020 total outstanding loans related to treasury shares were $31,948,963
(2019: $29,395,000).
Set out below are summaries of shares granted under the LSP:
2020
Grant date
Expiry date
01/03/2017
01/03/2017
03/03/2017
03/10/2018
20/12/2019
05/06/2020
28/02/2024
28/02/2024
01/03/2024
01/10/2025
18/12/2026
04/06/2027
Exercise
price
$1.49
$1.20
$1.49
$4.33
$1.50
$0.86
Balance at
the start of
the year
5,149,796
10,722,732
6,981,194
604,998
-
-
23,458,720
Granted
Exercised
-
-
-
-
926,000
233,645
1,159,645
Expired/
forfeited/
other
Balance at
the end of
the year
-
-
-
-
-
-
-
-
-
(190,299)
-
-
-
(190,299)
5,149,796
10,722,732
6,790,895
604,998
926,000
233,645
24,428,066
Weighted average exercise price
$1.43
$1.37
$0.00
$1.49
$1.43
2019
Grant date
Expiry date
01/03/2017
01/03/2017
03/03/2017
03/10/2018
28/02/2024
28/02/2024
01/03/2024
01/10/2025
Exercise
price
$1.49
$1.20
$1.49
$4.33
Balance at
the start of
the year
5,149,796
10,722,732
6,981,194
-
22,853,722
Granted
Exercised
Expired/
forfeited/
other
Balance at
the end of
the year
-
-
-
604,998
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
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
01/03/2017
28/02/2024
28/02/2024
2020
Number
2019
Number
5,149,796
10,722,732
5,149,796
10,722,732
15,872,528
15,872,528
The weighted average share price during the financial year was $1.52 (2019: $2.62) per ordinary share.
The weighted average remaining contractual life of shares granted under the LSP outstanding at the end of the financial
year was 3.84 years (2019: 4.72 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
20/12/2019
05/06/2020
30/06/2020
04/06/2027
$1.60
$1.07
$1.50
$0.86
39.04%
41.86%
5.00%
7.48%
0.97%
0.44%
$0.372
$0.217
51 | PENGANA CAPITAL GROUP
Pengana Capital Group Limited
Notes to the financial statements
30 June 2020
Note 34. Share-based payments (continued)
PENGANA
CAPITAL
*
The expected price volatility is based on a period of observed historic volatility of a range of peer group companies.
Note 35. Earnings per share
Profit/(loss) after income tax
Non-controlling interest
Consolidated
2020
$'000
2019
$'000
5,950
168
(14,285)
(10)
Profit/(loss) after income tax attributable to the owners of Pengana Capital Group Limited
6,118
(14,295)
Weighted average number of ordinary shares used in calculating basic earnings per share
Adjustments for calculation of diluted earnings per share:
Number
Number
84,019,221
80,528,415
Dilutive impact of treasury shares accounted for as options
2,470,131
-
Weighted average number of ordinary shares used in calculating diluted earnings per share
86,489,352
80,528,415
Basic earnings per share
Diluted earnings per share
Cents
Cents
7.28
7.07
(17.75)
(17.75)
The weighted average number of ordinary shares to calculate basic earnings per share excludes 24,428,066 (30 June
2019: 23,458,720) treasury shares.
Note 36. Events after the reporting period
The impact of the Coronavirus (COVID-19) pandemic is ongoing and while it did not have any significant impact for the
group up to 30 June 2020, it is not practicable to estimate the potential impact, positive or negative, after the reporting
date. The situation is rapidly developing and is dependent on measures imposed by the Australian Government and other
countries, such as maintaining social distancing requirements, quarantine, travel restrictions and any economic stimulus
that may be provided.
Apart from the dividend declared as disclosed in note 20, no other matter or circumstance has arisen since 30 June 2020
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.
Note 37. 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 28 August 2020. The
directors have the power to amend and reissue the financial financial statements.
52 | PENGANA CAPITAL GROUP
ANNUAL REPORT
Pengana Capital Group Limited
Notes to the financial statements
30 June 2020
Note 38. 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 Interpretation 23 Uncertainty over Income Tax Treatments ('Interpretation 23')
The group has adopted Interpretation 23 from 1 July 2019. The interpretation clarifies how to apply the recognition and
measurement requirements of AASB 112 ‘Income Taxes’ in circumstances where uncertain tax treatments exists. The
interpretation requires: the group to determine whether each uncertain tax treatment should be treated separately or
together, based on which approach better predicts the resolution of the uncertainty; the group to consider whether it is
probable that a taxation authority will accept an uncertain tax treatment; and if the group concludes that it is not probable
that the taxation authority will accept an uncertain tax treatment, it shall reflect the effect of uncertainty in determining the
related taxable profit (tax loss), tax bases, unused tax losses, unused tax credits or tax rates, measuring the tax uncertainty
based on either the most likely amount or the expected value. In making the assessment it is assumed that a taxation
authority will examine amounts it has a right to examine and have full knowledge of all related information when making
those examinations. Interpretation 23 was adopted using the modified retrospective approach and as such comparatives
have not been restated. There was no impact of adoption on opening retained profits as at 1 July 2019.
AASB 16 Leases
The group has adopted AASB 16 from 1 July 2019. The standard replaces AASB 117 'Leases' and for lessees eliminates
the classifications of operating leases and finance leases. Except for short-term leases and leases of low-value assets,
right-of-use assets and corresponding lease liabilities are recognised in the statement of financial position. Straight-line
operating lease expense recognition is replaced with a depreciation charge for the right-of-use assets (included in
operating costs) and an interest expense on the recognised lease liabilities (included in finance costs). In the earlier
periods of the lease, the expenses associated with the lease under AASB 16 will be higher when compared to lease
expenses under AASB 117. However, EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation) results
improve as the operating expense is now replaced by interest expense and depreciation in profit or loss. For classification
within the statement of cash flows, the interest portion is disclosed in operating activities and the principal portion of the
lease payments are separately disclosed in financing activities. For lessor accounting, the standard does not substantially
change how a lessor accounts for leases.
Impact of adoption
AASB 16 was adopted using the modified retrospective approach and as such the comparatives have not been restated.
The impact of adoption on opening accumulated losses as at 1 July 2019 was as follows:
Operating lease commitments as at 1 July 2019 (AASB 117)
Operating lease commitments discounted based on the weighted average incremental borrowing rate of
5.25% (AASB 16)
Right-of-use assets (AASB 16)
Lease liabilities - current (AASB 16)
Lease liabilities - non-current (AASB 16)
Impact on opening accumulated losses as at 1 July 2019
1 July
2019
$'000
1,196
(61)
1,135
(691)
(444)
-
53 | PENGANA CAPITAL GROUP
Pengana Capital Group Limited
Notes to the financial statements
30 June 2020
Note 38. Significant accounting policies (continued)
PENGANA
CAPITAL
When adopting AASB 16 from 1 July 2019, the group has applied the following practical expedients:
●
applying a single discount rate to the portfolio of leases with reasonably similar characteristics;
accounting for leases with a remaining lease term of 12 months as at 1 July 2019 as short-term leases;
●
excluding any initial direct costs from the measurement of right-of-use assets;
●
using hindsight in determining the lease term when the contract contains options to extend or terminate the lease; and
●
not apply AASB 16 to contracts that were not previously identified as containing a lease.
●
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 39.
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 28.
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 2020 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.
54 | PENGANA CAPITAL GROUP
ANNUAL REPORT
Pengana Capital Group Limited
Notes to the financial statements
30 June 2020
Note 38. Significant accounting policies (continued)
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.
Revenue recognition
The group recognises revenue as follows:
Revenue from contracts with customers
Revenues are derived from the provision of investment management services to customers and are measured based on
the amounts to which the group expects to be entitled based on the services delivered. This revenue is variable in nature
and is measured by reference to management fees and performance fees. Revenue is recognised over-time, by reference
to the ongoing delivery of investment management services. The delivery of investment management services is best
represented by the passage of time as an ongoing service.
Management fees
Management fees are based on a percentage of the portfolio value of the fund and are calculated in accordance with the
Investment Management Agreement or Constitution.
Performance fees
Performance fees may be earned from funds. The group’s entitlement to a performance fee for any given performance
period is dependent on outperforming certain benchmarks.
Revenue from performance fees is not recognised while constrained - an estimate of the variable consideration is recorded
as revenue when it is highly probable that a significant revenue reversal in the amount of cumulative revenue recognised
will not occur when the associated uncertainty with the variable consideration is subsequently resolved (that is, the
constraint is removed).
Performance fee arrangements give risk to element of variable consideration for the investment management services.
Revenue from performance fees is not recognised while constrained, an estimate of the variable consideration is recorded
when it is highly probable that a significant revenue reversal in the amount of cumulative revenue recognised will not occur
when the associated uncertainty with the variable consideration is subsequently resolved. The performance fee revenue is
recognised to the extent the revenue is no longer constrained.
Dividends and distributions
Dividends and distributions are recognised when received or when the right to receive payment is established.
55 | PENGANA CAPITAL GROUP
Pengana Capital Group Limited
Notes to the financial statements
30 June 2020
Note 38. Significant accounting policies (continued)
PENGANA
CAPITAL
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.
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.
Current and non-current classification
Assets and liabilities are presented in the statement of financial position based on current and non-current classification.
56 | PENGANA CAPITAL GROUP
ANNUAL REPORT
Pengana Capital Group Limited
Notes to the financial statements
30 June 2020
Note 38. Significant accounting policies (continued)
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.
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.
57 | PENGANA CAPITAL GROUP
Pengana Capital Group Limited
Notes to the financial statements
30 June 2020
Note 38. Significant accounting policies (continued)
PENGANA
CAPITAL
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.
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 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.
58 | PENGANA CAPITAL GROUP
ANNUAL REPORT
Pengana Capital Group Limited
Notes to the financial statements
30 June 2020
Note 38. Significant accounting policies (continued)
Right-of-use assets
A right-of-use asset is recognised at the commencement date of a lease. The right-of-use asset is measured at cost, which
comprises the initial amount of the lease liability, adjusted for, as applicable, any lease payments made at or before the
commencement date net of any lease incentives received, any initial direct costs incurred, and, except where included in
the cost of inventories, an estimate of costs expected to be incurred for dismantling and removing the underlying asset,
and restoring the site or asset.
Right-of-use assets are depreciated on a straight-line basis over the unexpired period of the lease or the estimated useful
life of the asset, whichever is the shorter. Where the group expects to obtain ownership of the leased asset at the end of
the lease term, the depreciation is over its estimated useful life. Right-of use assets are subject to impairment or adjusted
for any remeasurement of lease liabilities.
The group has elected not to recognise a right-of-use asset and corresponding lease liability for short-term leases with
terms of 12 months or less and leases of low-value assets. Lease payments on these assets are expensed to profit or loss
as incurred.
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
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.
59 | PENGANA CAPITAL GROUP
Pengana Capital Group Limited
Notes to the financial statements
30 June 2020
Note 38. Significant accounting policies (continued)
PENGANA
CAPITAL
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.
Lease liabilities
A lease liability is recognised at the commencement date of a lease. The lease liability is initially recognised at the present
value of the lease payments to be made over the term of the lease, discounted using the interest rate implicit in the lease
or, if that rate cannot be readily determined, the group's incremental borrowing rate. Lease payments comprise of fixed
payments less any lease incentives receivable, variable lease payments that depend on an index or a rate, amounts
expected to be paid under residual value guarantees, exercise price of a purchase option when the exercise of the option
is reasonably certain to occur, and any anticipated termination penalties. The variable lease payments that do not depend
on an index or a rate are expensed in the period in which they are incurred.
Lease liabilities are measured at amortised cost using the effective interest method. The carrying amounts are remeasured
if there is a change in the following: future lease payments arising from a change in an index or a rate used; residual
guarantee; lease term; certainty of a purchase option and termination penalties. When a lease liability is remeasured, an
adjustment is made to the corresponding right-of use asset, or to profit or loss if the carrying amount of the right-of-use
asset is fully written down.
Finance costs
Finance costs are expensed in the period in which they are incurred based on the effective interest method.
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.
60 | PENGANA CAPITAL GROUP
ANNUAL REPORT
Pengana Capital Group Limited
Notes to the financial statements
30 June 2020
Note 38. Significant accounting policies (continued)
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.
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.
61 | PENGANA CAPITAL GROUP
Pengana Capital Group Limited
Notes to the financial statements
30 June 2020
Note 38. Significant accounting policies (continued)
PENGANA
CAPITAL
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.
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.
Receivables and payables 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.
62 | PENGANA CAPITAL GROUP
Pengana Capital Group Limited
Notes to the financial statements
30 June 2020
Note 38. Significant accounting policies (continued)
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 2020. 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.
Conceptual Framework for Financial Reporting (Conceptual Framework)
The revised Conceptual Framework is applicable to annual reporting periods beginning on or after 1 January 2020 and
early adoption is permitted. The Conceptual Framework contains new definition and recognition criteria as well as new
guidance on measurement that affects several Accounting Standards. Where the group has relied on the existing
framework in determining its accounting policies for transactions, events or conditions that are not otherwise dealt with
under the Australian Accounting Standards, the group may need to review such policies under the revised framework. At
this time, the application of the Conceptual Framework is not expected to have a material impact on the group's financial
statements.
Note 39. 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.
Coronavirus (‘COVID-19') pandemic
Judgement has been exercised in considering the impacts that the COVID-19 pandemic has had, or may have, on the
group based on known information. This consideration extends to the nature of the products and services offered,
customers, supply chain, staffing and geographic regions in which the group operates. Other than as addressed in specific
notes, there does not currently appear to be either any significant impact upon the financial statements or any significant
uncertainties with respect to events or conditions which may impact the group unfavourably as at the reporting date or
subsequently as a result of the COVID-19 pandemic.
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.
63 | PENGANA CAPITAL GROUP
Pengana Capital Group Limited
Notes to the financial statements
30 June 2020
PENGANA
CAPITAL
Note 39. Critical accounting judgements, estimates and assumptions (continued)
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 38. 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 38, 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 32 are not consolidated by the 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 21.
64 | PENGANA CAPITAL GROUP
ANNUAL REPORT
Pengana Capital Group Limited
Directors' declaration
30 June 2020
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 38 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
2020 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 Office
Pengana Capital Group
28 August 2020
Sydney
Warwick Negus
Chairman
Pengana Capital Group
65 | PENGANA CAPITAL GROUP
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 2020, the consolidated statement of profit
or loss and 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 2020 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.
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
12. 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 Private Capital Pty Ltd on 21
August 2018 gave rise to goodwill of $2,985k and other
intangible assets of $452k. The acquisition of Lizard Investors
LLC on 1 January 2020 gave rise to goodwill of $2,693k.
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 Impairment of assets;
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 2020, 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.
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: https://www.auasb.gov.au/auditors_responsibilites/ar1_2020.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 14 to 18 of the Directors’ report for the year 30 June 2020.
In our opinion, the Remuneration Report of Pengana Capital Group Limited for the year ended 30 June 2020 complies
with section 300A of the Corporations Act 2001.
Responsibilities
The Directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance
with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report,
based on our audit conducted in accordance with Australian Auditing Standards.
Grant Thornton Audit Pty Ltd
Chartered Accountants
M A Adam Smith
Partner – Audit & Assurance
Sydney, 28 August 2020
ANNUAL REPORT
Pengana Capital Group Limited
Shareholder information
30 June 2020
The shareholder information set out below was applicable as at 5 August 2020.
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:
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)
Radd Holdings Pty Limited (Myers Family A/C)
Damian Crowley Julie Crowley (Damian C Crowley Family Fund)
HSBC Custody Nominees (Australia) Limited - A/C 2
Russel Craig Pillemer
DBR Corporation Pty Ltd
Tark Family Holdings Pty Ltd (Tark Family A/C)
LMCTA Pty Ltd (LMCTA Family A/C)
Ed Prendergast
Steve Black (Black Family A/C)
Meg O'hanlon (O'hanlon Family A/C)
Pretage Pty Ltd
WHSP Hunter Hall Pty Ltd
Mr Steve Black + Mrs Sarah Black (Black Super Fund A/C)
Number
of holders
of ordinary
shares
466
519
232
239
58
1,514
264
Ordinary shares
Number held
% of total
shares
issued
27,176,596
24,795,404
6,641,522
5,434,653
2,728,256
2,079,994
1,803,150
1,591,904
1,526,780
1,321,761
1,262,205
1,255,260
1,100,162
983,146
973,701
672,335
672,335
630,051
575,133
540,000
83,764,348
26.38
24.07
6.45
5.28
2.65
2.02
1.75
1.55
1.48
1.28
1.23
1.22
1.07
0.95
0.95
0.65
0.65
0.61
0.56
0.52
81.32
69 | PENGANA CAPITAL GROUP
Pengana Capital Group Limited
Shareholder information
30 June 2020
PENGANA
CAPITAL
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:
Ordinary shares
Number held
% of total
shares
issued
Washington H Soul Pattinson and Company, WHSP Hunter Hall Pty Ltd and WHSP
Pengana Pty Ltd
Russel Craig Pillemer *
39,827,904
34,892,763
38.66
33.87
* The substantial notice lodged for Russel Pillemer discloses that he has a relevant interest in 34,892,763 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)
34,892,763 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
Ordinary shares
Ordinary shares
Ordinary shares
Expiry date
Until 15 February 2023 (portions to be released
annually)
1 June 2022
Until 3 October 2023
Number
of shares
1
6,981,194
604,998
7,586,193
70 | PENGANA CAPITAL GROUP
PENGANA
CAPITAL GROUP
LIMITED
PENGANA
CAPITAL GROUP
LIMITED
ACN 43 059 300 426
Level 12, 167 Macquarie Street,
Sydne, NSW 2000
T: +61 2 8524 9900
F: +61 2 8524 9901
PENGANA.COM