PENGANA INTERNATIONAL EQUITIES LIMITED I ABN 107 462 966 I Levels 1, 2 & 3, 60 Martin Place, Sydney I T: +61 2 8524 9900 I E: [email protected] ASX ANNOUNCEMENT Markets Announcement Office ASX Limited Level 5, 20 Bridge Street Sydney NSW 2000 PENGANA INTERNATIONAL EQUITIES LIMITED (ASX: PIA) 2021 ANNUAL GENERAL MEETING Date: 21 October 2021 Attached is a copy of the address to be delivered by Mr Frank Gooch, Chairman, and slides to be presented by Mr Russel Pillemer, Managing Director and Mr Raymond Vars, Partner and Senior Portfolio Specialist at Harding Loevner, at the Company’s 2021 Annual General Meeting to be held today, 21 October 2021 at 9:30 am (Sydney time). Approved by the Board Shareholder Enquiries: Other Enquiries: Paula Ferrao, Pengana International Equities Limited Pengana Client Service [email protected] [email protected] +61 2 8524 9900 +61 2 8524 9900
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PENGANA INTERNATIONAL EQUITIES LIMITED I ABN 107 462 966 I Levels
1, 2 & 3, 60 Martin Place, Sydney I T: +61 2 8524 9900 I E:
[email protected]
ASX ANNOUNCEMENT
Markets Announcement Office ASX Limited Level 5, 20 Bridge Street Sydney NSW 2000
PENGANA INTERNATIONAL EQUITIES LIMITED (ASX: PIA)
2021 ANNUAL GENERAL MEETING
Date: 21 October 2021
Attached is a copy of the address to be delivered by Mr Frank Gooch, Chairman, and slides to be presented by Mr Russel Pillemer, Managing Director and Mr Raymond Vars, Partner and Senior Portfolio Specialist at Harding Loevner, at the Company’s 2021 Annual General Meeting to be held today, 21 October 2021 at 9:30 am (Sydney time).
Approved by the Board
Shareholder Enquiries: Other Enquiries: Paula Ferrao, Pengana International Equities Limited Pengana Client Service [email protected] [email protected] +61 2 8524 9900 +61 2 8524 9900
PENGANA INTERNATIONAL EQUITIES LIMITED I ABN 107 462 966 I Levels 1, 2 & 3, 60 Martin Place, Sydney I T: +61 2 8524 9900 I E: [email protected]
CHAIRMAN’S ADDRESS 2021 ANNUAL GENERAL MEETING PENGANA INTERNATIONAL EQUITIES LIMITED PIA delivered a strong profit result, increased its annual fully franked dividend, improved its distribution and shareholder communications and welcomed a new investment team. In May 2021, Pengana Capital Group appointed New Jersey-based Harding Loevner LP (“Harding Loevner”) to be the investment team responsible for PIA’s portfolio of international investments. There was a smooth and efficient transition of the portfolio in May 2021 and the performance of the new portfolio in June 2021 improved PIA’s relative performance for the year. In the 2021 financial year, the portfolio delivered investment returns, net of fees and expenses of 27.6%. This compared favourably with the benchmark return of 27.5%, which is not affected by fees and expenses. The strong investment result drove a 149% increase in profit after tax for the financial year to $60 million. The profit included $59.6 million of realised gains, which were largely due to the portfolio transition undertaken upon Harding Loevner’s appointment. The tax paid on these gains increased the franking credits available for distribution to shareholders. Delivering consistent fully franked dividends is a key component of PIA’s objective. It is pleasing to report that PIA exceeded its 2021 dividend target by declaring fully franked dividends totalling 5.1 cents per share and that the fully franked dividend target for the 2022 financial year has been increased to 5.4 cents per share. In addition, the Company announced in October 2020 that it would pay dividends each quarter. During the year PIA distributed $15.9 million in fully franked dividends to shareholders. These dividends comprised the 2020 final dividend of 2.5 cents per share and three quarterly 2021 interim dividends of 1.25 cents per share each. The final dividend declared for the 2021 financial year was 1.35 cents per share. The total of the fully franked dividends declared out of the 2021 financial year was 5.10 cents per share. This exceeded the Company’s original target of 5 cent per share. In August 2021, the Board reset the annual target for future fully franked dividends to 5.4 cents per share to be paid in quarterly instalments of 1.35 cents per share. This represents a 5.9% increase on the 2021 annual dividend. On Tuesday this week the Board declared the interim dividend for the first quarter of the current financial year. A fully franked dividend of 1.35 cents per share will be paid on 15 December to shareholders on the register on 1 December 2021. PIA’s current financial position, together with Harding Loevner's long-term track record of consistent superior returns, provide a strong and reassuring base from which the Company's directors believe a continued stream of quarterly fully franked dividends can be paid to shareholders. PIA’s share price at the end of the financial year was $1.32, up from the $1.07 at 30 June 2020.
PENGANA INTERNATIONAL EQUITIES LIMITED I ABN 107 462 966 I Levels 1, 2 & 3, 60 Martin Place, Sydney I T: +61 2 8524 9900 I E: [email protected]
The Total Shareholder Return (TSR), which includes dividends paid in the year ended 30 June 2021 was 29.2%. This return to shareholders does not take into account the additional value of the franking credits attached to the dividends. The Company’s share price reflects not only the performance of its portfolio, which drives growth in net assets and sustains the Company’s dividend policy, but it also reflects the efforts of promoting the benefits of an investment in PIA to existing and potential investors. In September this year, the Company undertook an extensive and well received shareholder engagement campaign. Email is the primary and most effective means of communication, but in an effort to reach all shareholders, a call campaign was undertaken targeting 400 self-advised shareholders holding over 15 million shares. Our strategy of promoting the benefits of an investment in PIA to the adviser market was gaining traction during the year with demand for PA shares growing, however, this was interrupted when the ratings agencies suspended their rating of PIA pending the completion of a review of the appointment of Harding Loevner to the investment team. Since the end of the financial year, three ratings agencies have completed their review of PIA and issued “Recommended” ratings, a crucial factor when promoting the Company in the advised market. Since then, there has been a sustained improvement in the Company’s share price when compared to the value of its net tangible assets. Looking forward the company is in a good position with assets totalling $380 million and no debt. It has franking credits and profit reserves to support the ongoing payment of fully franked dividends, a well-resourced, successful investment team, and a committed distribution team that will continue to promote the benefits of an investment in the company. I would like to conclude by thanking my fellow Board members for their contributions during the year. I would also like to thank the staff of Pengana Capital Group for their support and efforts in managing the investments and reporting to shareholders. Finally, on behalf of the Board I would like to thank our six and half thousand shareholders for their continued support.
1
Targeting fully-franked dividends, paid quarterly
Annual General Meeting 21 October 2021
CHAIRMAN’S WELCOME MR FRANK GOOCH ASX: PIA
IMPORTANT INFORMATION & DISCLOSURES
This report has been prepared by Pengana Investment Management Ltd (ABN 69 063 081 612, Australian Financial Services Licence No. 219462) (“Pengana”). This report does not contain any investment recommendation or investment advice and has been prepared without taking account of any person’s objectives, financial situation or needs. Therefore, before acting on the information in this report a person should consider the appropriateness of the information, having regard to their objectives, financial situation and needs.
Pengana is the manager for Pengana International Equities Limited (ACN 107 462 966, ASX: PIA) (“PIA”). Pengana has appointed Harding Loevner LP (“Harding Loevner”) as the sub-investment manager for PIA.
None of Pengana, Harding Loevner, nor any of their related entities, directors, partners or officers guarantees the performance of, or the repayment of capital, or income invested in PIA. An investment in PIA is subject to investment risk including a possible delay in repayment and loss of income and principal invested. Past performance is not a reliable indicator of future performance, the value of investments can go up and down.
Pengana has appointed Harding Loevner as Pengana’s corporate authorised representative under Pengana’s AFSL.
While care has been taken in the preparation of this information, neither Pengana nor Harding Loevner make any representation or warranty as to the accuracy, currency or completeness of any statement, data or value. To the maximum extent permitted by law, Pengana and Axiom expressly disclaim any liability which may arise out of the provision to, or use by, any person of this information.
3
FRANCIS GOOCH Independent Non-executive Chairman
SANDI ORLEOW Independent Non-executive Director
DAVID GROVES Non-executive Director
RUSSEL PILLEMER Managing Director
- Formal Business
- Q&A
First Quarter FY22 Dividend
Record date: 1 December 2021
Payment date: 15 December 2021
31.7% TSR grossed up for franking credits
Portfolio Return1
149%
EPS 23.57c
Annual Dividend Target 5.4c per share Fully Franked
Twelve months to 30 June 2021. Comparison period: twelve months to 30 June 2020.
1. Source: Bloomberg and Pengana Capital. Performance figures refer to the movement in net assets per share, reversing out the impact of movements in capital and payments of dividends, before tax paid or accrued on realised and unrealised gains. Past performance is not a reliable indicator of future performance, the value of investments can go up and down. Index & MSCI World refers to MSCI World Total Return Index, Net Dividends Reinvested, in A$
8
HARDING LOEVNER
101. As at May 2021
Investing in high-quality, growing businesses at reasonable prices leads over the long term to superior risk-adjusted returns. This “quality growth” investment philosophy has been the foundation of Harding Loevner’s strategies since the firm was founded.
• Harding Loevner has been investing globally in high-quality, growing businesses based on disciplined research since 1989
• Total assets in excess of US$84 billion • 32-year track record • Owner led firm • A single investment philosophy • Distinct decision-making process. No investment committee – individual decision making
and accountability
Being good investors may not be in our human nature, that’s why its in our process
10
RESPONSIBLE INVESTING Environmental, Social, and Governance (ESG) issues can contribute profoundly to the success or failure of our investments.
ESG risks and opportunities examined in each stage of our investment process.
ESG scorecard considers consequences of ESG-related concerns for business’s sustainability.
Materiality Map helps identify the environmental and social issues most relevant to an industry.
Signatories to the UN Principles for Responsible Investment and the UK Stewardship Code to promote sustainability.
Sustainable Investing
Tailor portfolio holdings, engagement, and proxy voting according to clients’ own goals.
Experience managing client accounts with custom ESG requirements since 1994.
Meeting Client Goals
Engage regularly with company management over the potential impact of ESG risks on long-term returns.
Encourage adoption of practices that foster sustainable growth.
Promote high standards of behavior and disclosure in every proxy vote.
Responsible Engagement
Adult content, alcohol, animal cruelty, fossil fuels, gambling, GMOs, human right abuses, mining, nuclear, old growth forests, tobacco, weapons
Ethical Screens
QUALITY & GROWTH INVESTMENT PHILOSOPHY
Harding Loevner Global Equity Model MSCI All Country World Index
5.0 5.7
FASTER GROWTHMORE PROFITABLE LOWER RISK
Source: FactSet, MSCI Inc. Growth and volatility metrics are based on five-year historical data; the other ratios are based on the most recent annual data. All metrics and ratios are percentages presented as weighted medians. Please read the disclosures, which are an integral part of this presentation. 13
Since HL began managing PIA the fund has returned +9.51% and the MSCI World +8.75%, this was from the 31/5/2021 to 30/9/2021. We consider the start of HL management as the first complete month after the transition, hence the first whole month being June 2021. Please read the disclosures, which are an integral part of this presentation.
PENGANA INTERNATIONAL EQUITIES LIMITED PERFORMANCE SUMMARY
PERFORMANCE (% TOTAL RETURN, AUD) 31/5/2021 – 30/9/2021
9.51 8.75
14
Japan
-1.9
3.8
4.1
4.4
4.6
5.8
6.5
6.5
7.6
10.1
10.6
14.1
14.3
31/5/2021 – 30/9/2021
Source: FactSet, MSCI Inc. Data as of September 30, 2021. Composite performance is gross of fees. Past performance does not guarantee future results. Please read the disclosures, which are an integral part of this presentation. 15
PERFORMANCE ATTRIBUTION: COMPOSITE VS. BENCHMARK 31/5/2021 – 30/9/2021
Ef fe
GEOGRAPHY
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
HLTH INFT INDU MATS DSCR STPL UTIL CASH FINA COMM ENER RLST
Selection Effect Allocation Effect Total Effect
SECTOR
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
Selection Effect Allocation Effect Total Effect
1.5 1.0 2.5
2.3 0.2 2.5
“Composite”: Global Equity Composite. “Benchmark”: MSCI All Country World Index. Past performance does not guarantee future results. Sector and Region Attribution and Contributors and Detractors are shown as supplemental information only and complement the fully compliant Global Equity Composite GIPS Presentation. The portfolio holdings identified above do not represent all of the securities held in the portfolio. It should not be assumed that investment in the securities identified has been or will be profitable. The following information is available upon request: 1) information describing the methodology of the contribution data and (2) a list showing the weight and relative contribution of all holdings during the quarter. Contribution is the contribution to overall relative performance over the period. Contributors and detractors exclude cash and securities in the Composite not held in the Model Portfolio. Quarterly data is not annualized. Please read the disclosures, which are an integral part of this presentation.
16
WHAT’S ON OUR MIND? RISING COSTS AMID STRONG SECULAR GROWTH DYNAMICS
Continued COVID indigestion
Continued strength in innovation
Continued focus on China
Global supply chains disrupted Rising labor and energy costs: one-time or new
normal? Prospect of rising interest rates Rise of “big government”
Digital transformation not slowing down Advent of the “AI economy” Golden age of healthcare innovation Reliance on semiconductors
What’s happening? Understanding risks and opportunities
17
Bubble size proportional to market cap. The Global Equity Model portfolio has a 10.2% weight in China and Hong Kong as of September 30, 2021. The portfolio is actively managed therefore holdings shown may not be current. The portfolio holdings identified above do not represent all of the securities held in the portfolio. It should not be assumed that investment in the securities identified has been or will be profitable. To request a complete list of portfolio holdings for the past year, contact Harding Loevner. Holdings are shown as supplemental information only and complement the fully compliant Global Equity Composite GIPS Presentation. Please read the disclosures, which are an integral part of this presentation.
OPPORTUNITIES IN CHINA – LOOKING BEYOND NEAR-TERM REGULATORY RISK INNOVATION AND COMPETITIVE EDGE UNDERPIN OUR DIVERSE SET OF INVESTMENTS IN CHINA.
Baidu
NetEase
Tencent
G ro
w th
R an
k Hi
gh Lo
OUR APPROACH IN CHINA Steadfast focus on quality and growth
Diversification
Consider government goals
Carbon Neutrality: ENN Energy
GLOBAL EQUITY HOLDINGS IN CHINA & HONG KONG 10% WEIGHT AS OF SEPTEMBER 30, 2021
18
June 1 – September 30, 2021. The portfolio is actively managed therefore holdings shown may not be current. The portfolio holdings identified above do not represent all of the securities held in the portfolio. It should not be assumed that investment in the securities identified has been or will be profitable. To request a complete list of portfolio holdings for the past year, contact Harding Loevner. Holdings are shown as supplemental information only and complement the fully compliant Global Equity Composite GIPS Presentation. Please read the disclosures, which are an integral part of this presentation.
COMPLETED PORTFOLIO TRANSACTIONS JUNE 1 – SEPTEMBER 30, 2021
POSITIONS SOLD
Company Country Sector Applied Materials US Info Technology Baidu China Comm Services CoStar Group US Industrials Netflix US Comm Services Pinterest US Comm Services WuXi AppTec China Health Care
POSITIONS ESTABLISHED
Company Country Sector Alibaba China Cons Discretionary DBS Group Singapore Financials Estée Lauder US Cons Staples Keyence Japan Info Technology Trip.com Group China Cons Discretionary VF Corporation US Cons Discretionary
Portfolio Turnover (5-year annualized average): 30.2%
19
¹Includes countries with less-developed markets outside the index. Source: Harding Loevner Global Equity Model; MSCI Inc. and S&P. Sector and region end weights, holdings, and active share are shown as supplemental information only and complement the fully compliant Global Equity Composite GIPS Presentation. Please read the disclosures, which are an integral part of this presentation.
PORTFOLIO POSITIONING AS OF SEPTEMBER 30, 2021
GEOGRAPHY HL % ACWI % (UNDER) / OVER Cash 3.6 – US 63.2 59.6 Emerging Markets 15.1 12.0 Frontier Markets¹ 0.0 – Middle East 0.0 0.1 Europe ex-EMU 7.6 7.9 Pacific ex-Japan 1.5 2.9 Europe EMU 6.4 8.5 Canada 0.0 2.8 Japan 2.6 6.2
SECTOR HL % ACWI % (UNDER) / OVER Health Care 23.4 11.7 Cash 3.6 – Comm Services 12.7 9.3 Industrials 10.9 9.7 Info Technology 22.8 22.3 Real Estate 1.9 2.6 Financials 13.3 14.4 Energy 2.1 3.5 Utilities 0.5 2.6 Cons Discretionary 7.8 12.4 Materials 0.0 4.7 Cons Staples 1.0 6.8 -12 -6 0 6 12
-12 -6 0 6 12 20
¹Includes countries with less-developed markets outside the index. Source: Harding Loevner Global Equity Model; MSCI Inc. and S&P. Sector and region end weights, holdings, and active share are shown as supplemental information only and complement the fully compliant Global Equity Composite GIPS Presentation. Please read the disclosures, which are an integral part of this presentation.
COMPANY MARKET SECTOR WT. (%)
First Republic Bank US Financials 3.6 Alphabet US Comm Services 3.4 SVB Financial Group US Financials 3.2
Amazon.com US Cons Discretionary 2.9
John Deere US Industrials 2.6
TEN LARGEST HOLDINGS – TOTAL WEIGHT: 26.9%
80% Active Share
COMPANY MARKET SECTOR WT. (%) WuXi Biologics China Health Care 2.4
Facebook US Comm Services 2.4
Microsoft US Info Technology 2.2
Illumina US Health Care 2.2
PayPal US Info Technology 2.0
21
DISCLOSURES
The information provided in this Presentation should not be considered a recommendation to purchase or sell a particular security. Unless otherwise stated, non-performance based criteria have been used to select the securities listed. The portfolio is actively managed therefore securities shown may not be current. It should not be assumed that investment in the securities identified has been or will be profitable. To request a complete list of portfolio holdings for the past year contact Harding Loevner. A complete list of holdings for the Global Equity Model at September 30, 2021 is available on request.
Investing in stocks entails the risks of market volatility. The value of all types of stocks may increase or decrease over varying time periods. To the extent the investments depicted herein represent international securities, you should be aware that there may be additional risks associated with international investing, including foreign economic, political, monetary and/or legal factors, changing currency exchange rates, foreign taxes, and differences in financial and accounting standards.
Quality & Growth Characteristics, Investment Statistics, Benchmark Returns, Performance Attribution, Portfolio Exposures and Portfolio Transactions are shown as supplemental information only and complement the fully compliant Global Equity Composite GIPS Presentation, which is available on request.
Alpha: a measure of risk-adjusted return. Beta: a measure of the portfolio’s sensitivity to the market. R-Squared: a measure of how well a portfolio tracks the market. Standard Deviation: the statistical measure of the degree to which an individual value in a probability distribution tends to vary from the mean of the distribution. Information Ratio: a measure of risk-adjusted return calculated by dividing the portfolio active return (i.e., portfolio returns minus benchmark return) by the standard deviation of the active return. Sharpe Ratio: the return over the risk free rate per unit of risk. Up/Down Capture: a measure of the manager’s performance in up/down markets relative to the market itself. Profit Margin: relationship of gross profits to net sales. Return on Assets: net income for past 12 months divided by total assets. Return on Equity: the net income divided by total common equity outstanding, expressed as a percent. Debt/Equity Ratio: total long-term debt divided by total shareholder’s equity. Sales Per Share: the total revenue earned per share over a 12-month period, net of returns, allowances, and discounts. Earnings Per Share: portion of a company’s profit allocated to each outstanding share of common stock. Cash Flow: a measure of the cash generating capability of a company calculated by adding non-cash charges (e.g. depreciation) and interest expense to pretax income. Turnover: calculated by dividing the lesser of Purchases or Sales by Average Capital. Active Share: the proportion of holdings by weight that differ from holdings of the benchmark index.
The MSCI All Country World Index is a free float-adjusted market capitalization index that is designed to measure equity market performance in the global developed and emerging markets. The index consists of 50 developed and emerging market countries. You cannot invest directly in this index.
All performance and data shown are in US dollar terms, unless otherwise noted.
Harding Loevner’s Quality, Growth, and Value rankings are proprietary measures determined using objective data. Quality rankings are based on the stability, trend, and level of profitability, as well as balance sheet strength. Growth rankings are based on historical growth of earnings, sales, and assets, as well as expected changes in earnings and profitability. Value rankings are based on several valuation measures, including price ratios.
The Composite and Attribution returns may show discrepancies due to the different data sources for these returns. Composite performance is preliminary and obtained from Harding Loevner’s accounting system and Attribution returns are obtained from the FactSet portfolio analysis system. Please note returns from FactSet are not audited for GIPS compliance and are for reference only.
Source (Benchmark Performance, Performance Attribution, Contributors and Detractors): FactSet, Harding Loevner Global Equity Composite; MSCI Inc.
Source (Portfolio Positioning, Portfolio Transactions, Portfolio Allocation Comparison, Quality & Growth Characteristics [Run date: October 4, 2021, based on the latest available data in FactSet on this date.]): FactSet; Harding Loevner Global Equity Model; MSCI Inc.
Source (Investment Statistics): eVestment Alliance; Harding Loevner Global Equity Composite, based on composite returns.
MSCI Inc. and S&P do not make any express or implied warranties or representations and shall have no liability whatsoever with respect to any GICS data contained herein.
FactSet Fundamentals, Copyright 2021 FactSet Research Systems, Inc. All rights reserved.
22
E: [email protected]
Levels 1, 2 & 3, 60 Martin Place, Sydney, NSW 2000
T: +61 2 8524 9900
F: +61 2 8524 9901
PENGANA.COM/PIA
AFSL 219462
Slide Number 1
Slide Number 2
IMPORTANT INFORMATION & DISCLOSURES
Slide Number 4
Slide Number 5
BENCHMARK PERFORMANCE
OPPORTUNITIES IN CHINA – LOOKING BEYOND NEAR-TERM REGULATORY RISK
COMPLETED PORTFOLIO TRANSACTIONS
ASX ANNOUNCEMENT
Markets Announcement Office ASX Limited Level 5, 20 Bridge Street Sydney NSW 2000
PENGANA INTERNATIONAL EQUITIES LIMITED (ASX: PIA)
2021 ANNUAL GENERAL MEETING
Date: 21 October 2021
Attached is a copy of the address to be delivered by Mr Frank Gooch, Chairman, and slides to be presented by Mr Russel Pillemer, Managing Director and Mr Raymond Vars, Partner and Senior Portfolio Specialist at Harding Loevner, at the Company’s 2021 Annual General Meeting to be held today, 21 October 2021 at 9:30 am (Sydney time).
Approved by the Board
Shareholder Enquiries: Other Enquiries: Paula Ferrao, Pengana International Equities Limited Pengana Client Service [email protected] [email protected] +61 2 8524 9900 +61 2 8524 9900
PENGANA INTERNATIONAL EQUITIES LIMITED I ABN 107 462 966 I Levels 1, 2 & 3, 60 Martin Place, Sydney I T: +61 2 8524 9900 I E: [email protected]
CHAIRMAN’S ADDRESS 2021 ANNUAL GENERAL MEETING PENGANA INTERNATIONAL EQUITIES LIMITED PIA delivered a strong profit result, increased its annual fully franked dividend, improved its distribution and shareholder communications and welcomed a new investment team. In May 2021, Pengana Capital Group appointed New Jersey-based Harding Loevner LP (“Harding Loevner”) to be the investment team responsible for PIA’s portfolio of international investments. There was a smooth and efficient transition of the portfolio in May 2021 and the performance of the new portfolio in June 2021 improved PIA’s relative performance for the year. In the 2021 financial year, the portfolio delivered investment returns, net of fees and expenses of 27.6%. This compared favourably with the benchmark return of 27.5%, which is not affected by fees and expenses. The strong investment result drove a 149% increase in profit after tax for the financial year to $60 million. The profit included $59.6 million of realised gains, which were largely due to the portfolio transition undertaken upon Harding Loevner’s appointment. The tax paid on these gains increased the franking credits available for distribution to shareholders. Delivering consistent fully franked dividends is a key component of PIA’s objective. It is pleasing to report that PIA exceeded its 2021 dividend target by declaring fully franked dividends totalling 5.1 cents per share and that the fully franked dividend target for the 2022 financial year has been increased to 5.4 cents per share. In addition, the Company announced in October 2020 that it would pay dividends each quarter. During the year PIA distributed $15.9 million in fully franked dividends to shareholders. These dividends comprised the 2020 final dividend of 2.5 cents per share and three quarterly 2021 interim dividends of 1.25 cents per share each. The final dividend declared for the 2021 financial year was 1.35 cents per share. The total of the fully franked dividends declared out of the 2021 financial year was 5.10 cents per share. This exceeded the Company’s original target of 5 cent per share. In August 2021, the Board reset the annual target for future fully franked dividends to 5.4 cents per share to be paid in quarterly instalments of 1.35 cents per share. This represents a 5.9% increase on the 2021 annual dividend. On Tuesday this week the Board declared the interim dividend for the first quarter of the current financial year. A fully franked dividend of 1.35 cents per share will be paid on 15 December to shareholders on the register on 1 December 2021. PIA’s current financial position, together with Harding Loevner's long-term track record of consistent superior returns, provide a strong and reassuring base from which the Company's directors believe a continued stream of quarterly fully franked dividends can be paid to shareholders. PIA’s share price at the end of the financial year was $1.32, up from the $1.07 at 30 June 2020.
PENGANA INTERNATIONAL EQUITIES LIMITED I ABN 107 462 966 I Levels 1, 2 & 3, 60 Martin Place, Sydney I T: +61 2 8524 9900 I E: [email protected]
The Total Shareholder Return (TSR), which includes dividends paid in the year ended 30 June 2021 was 29.2%. This return to shareholders does not take into account the additional value of the franking credits attached to the dividends. The Company’s share price reflects not only the performance of its portfolio, which drives growth in net assets and sustains the Company’s dividend policy, but it also reflects the efforts of promoting the benefits of an investment in PIA to existing and potential investors. In September this year, the Company undertook an extensive and well received shareholder engagement campaign. Email is the primary and most effective means of communication, but in an effort to reach all shareholders, a call campaign was undertaken targeting 400 self-advised shareholders holding over 15 million shares. Our strategy of promoting the benefits of an investment in PIA to the adviser market was gaining traction during the year with demand for PA shares growing, however, this was interrupted when the ratings agencies suspended their rating of PIA pending the completion of a review of the appointment of Harding Loevner to the investment team. Since the end of the financial year, three ratings agencies have completed their review of PIA and issued “Recommended” ratings, a crucial factor when promoting the Company in the advised market. Since then, there has been a sustained improvement in the Company’s share price when compared to the value of its net tangible assets. Looking forward the company is in a good position with assets totalling $380 million and no debt. It has franking credits and profit reserves to support the ongoing payment of fully franked dividends, a well-resourced, successful investment team, and a committed distribution team that will continue to promote the benefits of an investment in the company. I would like to conclude by thanking my fellow Board members for their contributions during the year. I would also like to thank the staff of Pengana Capital Group for their support and efforts in managing the investments and reporting to shareholders. Finally, on behalf of the Board I would like to thank our six and half thousand shareholders for their continued support.
1
Targeting fully-franked dividends, paid quarterly
Annual General Meeting 21 October 2021
CHAIRMAN’S WELCOME MR FRANK GOOCH ASX: PIA
IMPORTANT INFORMATION & DISCLOSURES
This report has been prepared by Pengana Investment Management Ltd (ABN 69 063 081 612, Australian Financial Services Licence No. 219462) (“Pengana”). This report does not contain any investment recommendation or investment advice and has been prepared without taking account of any person’s objectives, financial situation or needs. Therefore, before acting on the information in this report a person should consider the appropriateness of the information, having regard to their objectives, financial situation and needs.
Pengana is the manager for Pengana International Equities Limited (ACN 107 462 966, ASX: PIA) (“PIA”). Pengana has appointed Harding Loevner LP (“Harding Loevner”) as the sub-investment manager for PIA.
None of Pengana, Harding Loevner, nor any of their related entities, directors, partners or officers guarantees the performance of, or the repayment of capital, or income invested in PIA. An investment in PIA is subject to investment risk including a possible delay in repayment and loss of income and principal invested. Past performance is not a reliable indicator of future performance, the value of investments can go up and down.
Pengana has appointed Harding Loevner as Pengana’s corporate authorised representative under Pengana’s AFSL.
While care has been taken in the preparation of this information, neither Pengana nor Harding Loevner make any representation or warranty as to the accuracy, currency or completeness of any statement, data or value. To the maximum extent permitted by law, Pengana and Axiom expressly disclaim any liability which may arise out of the provision to, or use by, any person of this information.
3
FRANCIS GOOCH Independent Non-executive Chairman
SANDI ORLEOW Independent Non-executive Director
DAVID GROVES Non-executive Director
RUSSEL PILLEMER Managing Director
- Formal Business
- Q&A
First Quarter FY22 Dividend
Record date: 1 December 2021
Payment date: 15 December 2021
31.7% TSR grossed up for franking credits
Portfolio Return1
149%
EPS 23.57c
Annual Dividend Target 5.4c per share Fully Franked
Twelve months to 30 June 2021. Comparison period: twelve months to 30 June 2020.
1. Source: Bloomberg and Pengana Capital. Performance figures refer to the movement in net assets per share, reversing out the impact of movements in capital and payments of dividends, before tax paid or accrued on realised and unrealised gains. Past performance is not a reliable indicator of future performance, the value of investments can go up and down. Index & MSCI World refers to MSCI World Total Return Index, Net Dividends Reinvested, in A$
8
HARDING LOEVNER
101. As at May 2021
Investing in high-quality, growing businesses at reasonable prices leads over the long term to superior risk-adjusted returns. This “quality growth” investment philosophy has been the foundation of Harding Loevner’s strategies since the firm was founded.
• Harding Loevner has been investing globally in high-quality, growing businesses based on disciplined research since 1989
• Total assets in excess of US$84 billion • 32-year track record • Owner led firm • A single investment philosophy • Distinct decision-making process. No investment committee – individual decision making
and accountability
Being good investors may not be in our human nature, that’s why its in our process
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RESPONSIBLE INVESTING Environmental, Social, and Governance (ESG) issues can contribute profoundly to the success or failure of our investments.
ESG risks and opportunities examined in each stage of our investment process.
ESG scorecard considers consequences of ESG-related concerns for business’s sustainability.
Materiality Map helps identify the environmental and social issues most relevant to an industry.
Signatories to the UN Principles for Responsible Investment and the UK Stewardship Code to promote sustainability.
Sustainable Investing
Tailor portfolio holdings, engagement, and proxy voting according to clients’ own goals.
Experience managing client accounts with custom ESG requirements since 1994.
Meeting Client Goals
Engage regularly with company management over the potential impact of ESG risks on long-term returns.
Encourage adoption of practices that foster sustainable growth.
Promote high standards of behavior and disclosure in every proxy vote.
Responsible Engagement
Adult content, alcohol, animal cruelty, fossil fuels, gambling, GMOs, human right abuses, mining, nuclear, old growth forests, tobacco, weapons
Ethical Screens
QUALITY & GROWTH INVESTMENT PHILOSOPHY
Harding Loevner Global Equity Model MSCI All Country World Index
5.0 5.7
FASTER GROWTHMORE PROFITABLE LOWER RISK
Source: FactSet, MSCI Inc. Growth and volatility metrics are based on five-year historical data; the other ratios are based on the most recent annual data. All metrics and ratios are percentages presented as weighted medians. Please read the disclosures, which are an integral part of this presentation. 13
Since HL began managing PIA the fund has returned +9.51% and the MSCI World +8.75%, this was from the 31/5/2021 to 30/9/2021. We consider the start of HL management as the first complete month after the transition, hence the first whole month being June 2021. Please read the disclosures, which are an integral part of this presentation.
PENGANA INTERNATIONAL EQUITIES LIMITED PERFORMANCE SUMMARY
PERFORMANCE (% TOTAL RETURN, AUD) 31/5/2021 – 30/9/2021
9.51 8.75
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Japan
-1.9
3.8
4.1
4.4
4.6
5.8
6.5
6.5
7.6
10.1
10.6
14.1
14.3
31/5/2021 – 30/9/2021
Source: FactSet, MSCI Inc. Data as of September 30, 2021. Composite performance is gross of fees. Past performance does not guarantee future results. Please read the disclosures, which are an integral part of this presentation. 15
PERFORMANCE ATTRIBUTION: COMPOSITE VS. BENCHMARK 31/5/2021 – 30/9/2021
Ef fe
GEOGRAPHY
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
HLTH INFT INDU MATS DSCR STPL UTIL CASH FINA COMM ENER RLST
Selection Effect Allocation Effect Total Effect
SECTOR
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
Selection Effect Allocation Effect Total Effect
1.5 1.0 2.5
2.3 0.2 2.5
“Composite”: Global Equity Composite. “Benchmark”: MSCI All Country World Index. Past performance does not guarantee future results. Sector and Region Attribution and Contributors and Detractors are shown as supplemental information only and complement the fully compliant Global Equity Composite GIPS Presentation. The portfolio holdings identified above do not represent all of the securities held in the portfolio. It should not be assumed that investment in the securities identified has been or will be profitable. The following information is available upon request: 1) information describing the methodology of the contribution data and (2) a list showing the weight and relative contribution of all holdings during the quarter. Contribution is the contribution to overall relative performance over the period. Contributors and detractors exclude cash and securities in the Composite not held in the Model Portfolio. Quarterly data is not annualized. Please read the disclosures, which are an integral part of this presentation.
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WHAT’S ON OUR MIND? RISING COSTS AMID STRONG SECULAR GROWTH DYNAMICS
Continued COVID indigestion
Continued strength in innovation
Continued focus on China
Global supply chains disrupted Rising labor and energy costs: one-time or new
normal? Prospect of rising interest rates Rise of “big government”
Digital transformation not slowing down Advent of the “AI economy” Golden age of healthcare innovation Reliance on semiconductors
What’s happening? Understanding risks and opportunities
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Bubble size proportional to market cap. The Global Equity Model portfolio has a 10.2% weight in China and Hong Kong as of September 30, 2021. The portfolio is actively managed therefore holdings shown may not be current. The portfolio holdings identified above do not represent all of the securities held in the portfolio. It should not be assumed that investment in the securities identified has been or will be profitable. To request a complete list of portfolio holdings for the past year, contact Harding Loevner. Holdings are shown as supplemental information only and complement the fully compliant Global Equity Composite GIPS Presentation. Please read the disclosures, which are an integral part of this presentation.
OPPORTUNITIES IN CHINA – LOOKING BEYOND NEAR-TERM REGULATORY RISK INNOVATION AND COMPETITIVE EDGE UNDERPIN OUR DIVERSE SET OF INVESTMENTS IN CHINA.
Baidu
NetEase
Tencent
G ro
w th
R an
k Hi
gh Lo
OUR APPROACH IN CHINA Steadfast focus on quality and growth
Diversification
Consider government goals
Carbon Neutrality: ENN Energy
GLOBAL EQUITY HOLDINGS IN CHINA & HONG KONG 10% WEIGHT AS OF SEPTEMBER 30, 2021
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June 1 – September 30, 2021. The portfolio is actively managed therefore holdings shown may not be current. The portfolio holdings identified above do not represent all of the securities held in the portfolio. It should not be assumed that investment in the securities identified has been or will be profitable. To request a complete list of portfolio holdings for the past year, contact Harding Loevner. Holdings are shown as supplemental information only and complement the fully compliant Global Equity Composite GIPS Presentation. Please read the disclosures, which are an integral part of this presentation.
COMPLETED PORTFOLIO TRANSACTIONS JUNE 1 – SEPTEMBER 30, 2021
POSITIONS SOLD
Company Country Sector Applied Materials US Info Technology Baidu China Comm Services CoStar Group US Industrials Netflix US Comm Services Pinterest US Comm Services WuXi AppTec China Health Care
POSITIONS ESTABLISHED
Company Country Sector Alibaba China Cons Discretionary DBS Group Singapore Financials Estée Lauder US Cons Staples Keyence Japan Info Technology Trip.com Group China Cons Discretionary VF Corporation US Cons Discretionary
Portfolio Turnover (5-year annualized average): 30.2%
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¹Includes countries with less-developed markets outside the index. Source: Harding Loevner Global Equity Model; MSCI Inc. and S&P. Sector and region end weights, holdings, and active share are shown as supplemental information only and complement the fully compliant Global Equity Composite GIPS Presentation. Please read the disclosures, which are an integral part of this presentation.
PORTFOLIO POSITIONING AS OF SEPTEMBER 30, 2021
GEOGRAPHY HL % ACWI % (UNDER) / OVER Cash 3.6 – US 63.2 59.6 Emerging Markets 15.1 12.0 Frontier Markets¹ 0.0 – Middle East 0.0 0.1 Europe ex-EMU 7.6 7.9 Pacific ex-Japan 1.5 2.9 Europe EMU 6.4 8.5 Canada 0.0 2.8 Japan 2.6 6.2
SECTOR HL % ACWI % (UNDER) / OVER Health Care 23.4 11.7 Cash 3.6 – Comm Services 12.7 9.3 Industrials 10.9 9.7 Info Technology 22.8 22.3 Real Estate 1.9 2.6 Financials 13.3 14.4 Energy 2.1 3.5 Utilities 0.5 2.6 Cons Discretionary 7.8 12.4 Materials 0.0 4.7 Cons Staples 1.0 6.8 -12 -6 0 6 12
-12 -6 0 6 12 20
¹Includes countries with less-developed markets outside the index. Source: Harding Loevner Global Equity Model; MSCI Inc. and S&P. Sector and region end weights, holdings, and active share are shown as supplemental information only and complement the fully compliant Global Equity Composite GIPS Presentation. Please read the disclosures, which are an integral part of this presentation.
COMPANY MARKET SECTOR WT. (%)
First Republic Bank US Financials 3.6 Alphabet US Comm Services 3.4 SVB Financial Group US Financials 3.2
Amazon.com US Cons Discretionary 2.9
John Deere US Industrials 2.6
TEN LARGEST HOLDINGS – TOTAL WEIGHT: 26.9%
80% Active Share
COMPANY MARKET SECTOR WT. (%) WuXi Biologics China Health Care 2.4
Facebook US Comm Services 2.4
Microsoft US Info Technology 2.2
Illumina US Health Care 2.2
PayPal US Info Technology 2.0
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DISCLOSURES
The information provided in this Presentation should not be considered a recommendation to purchase or sell a particular security. Unless otherwise stated, non-performance based criteria have been used to select the securities listed. The portfolio is actively managed therefore securities shown may not be current. It should not be assumed that investment in the securities identified has been or will be profitable. To request a complete list of portfolio holdings for the past year contact Harding Loevner. A complete list of holdings for the Global Equity Model at September 30, 2021 is available on request.
Investing in stocks entails the risks of market volatility. The value of all types of stocks may increase or decrease over varying time periods. To the extent the investments depicted herein represent international securities, you should be aware that there may be additional risks associated with international investing, including foreign economic, political, monetary and/or legal factors, changing currency exchange rates, foreign taxes, and differences in financial and accounting standards.
Quality & Growth Characteristics, Investment Statistics, Benchmark Returns, Performance Attribution, Portfolio Exposures and Portfolio Transactions are shown as supplemental information only and complement the fully compliant Global Equity Composite GIPS Presentation, which is available on request.
Alpha: a measure of risk-adjusted return. Beta: a measure of the portfolio’s sensitivity to the market. R-Squared: a measure of how well a portfolio tracks the market. Standard Deviation: the statistical measure of the degree to which an individual value in a probability distribution tends to vary from the mean of the distribution. Information Ratio: a measure of risk-adjusted return calculated by dividing the portfolio active return (i.e., portfolio returns minus benchmark return) by the standard deviation of the active return. Sharpe Ratio: the return over the risk free rate per unit of risk. Up/Down Capture: a measure of the manager’s performance in up/down markets relative to the market itself. Profit Margin: relationship of gross profits to net sales. Return on Assets: net income for past 12 months divided by total assets. Return on Equity: the net income divided by total common equity outstanding, expressed as a percent. Debt/Equity Ratio: total long-term debt divided by total shareholder’s equity. Sales Per Share: the total revenue earned per share over a 12-month period, net of returns, allowances, and discounts. Earnings Per Share: portion of a company’s profit allocated to each outstanding share of common stock. Cash Flow: a measure of the cash generating capability of a company calculated by adding non-cash charges (e.g. depreciation) and interest expense to pretax income. Turnover: calculated by dividing the lesser of Purchases or Sales by Average Capital. Active Share: the proportion of holdings by weight that differ from holdings of the benchmark index.
The MSCI All Country World Index is a free float-adjusted market capitalization index that is designed to measure equity market performance in the global developed and emerging markets. The index consists of 50 developed and emerging market countries. You cannot invest directly in this index.
All performance and data shown are in US dollar terms, unless otherwise noted.
Harding Loevner’s Quality, Growth, and Value rankings are proprietary measures determined using objective data. Quality rankings are based on the stability, trend, and level of profitability, as well as balance sheet strength. Growth rankings are based on historical growth of earnings, sales, and assets, as well as expected changes in earnings and profitability. Value rankings are based on several valuation measures, including price ratios.
The Composite and Attribution returns may show discrepancies due to the different data sources for these returns. Composite performance is preliminary and obtained from Harding Loevner’s accounting system and Attribution returns are obtained from the FactSet portfolio analysis system. Please note returns from FactSet are not audited for GIPS compliance and are for reference only.
Source (Benchmark Performance, Performance Attribution, Contributors and Detractors): FactSet, Harding Loevner Global Equity Composite; MSCI Inc.
Source (Portfolio Positioning, Portfolio Transactions, Portfolio Allocation Comparison, Quality & Growth Characteristics [Run date: October 4, 2021, based on the latest available data in FactSet on this date.]): FactSet; Harding Loevner Global Equity Model; MSCI Inc.
Source (Investment Statistics): eVestment Alliance; Harding Loevner Global Equity Composite, based on composite returns.
MSCI Inc. and S&P do not make any express or implied warranties or representations and shall have no liability whatsoever with respect to any GICS data contained herein.
FactSet Fundamentals, Copyright 2021 FactSet Research Systems, Inc. All rights reserved.
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E: [email protected]
Levels 1, 2 & 3, 60 Martin Place, Sydney, NSW 2000
T: +61 2 8524 9900
F: +61 2 8524 9901
PENGANA.COM/PIA
AFSL 219462
Slide Number 1
Slide Number 2
IMPORTANT INFORMATION & DISCLOSURES
Slide Number 4
Slide Number 5
BENCHMARK PERFORMANCE
OPPORTUNITIES IN CHINA – LOOKING BEYOND NEAR-TERM REGULATORY RISK
COMPLETED PORTFOLIO TRANSACTIONS
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