PG&E
Annual Report 2020

Plain-text annual report

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 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. 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 

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