Platinum Investment Management : Annual Report 2020

Platinum Asset Management Limited Annual Report 2020

A

ANNUAL REPORT 2020

Platinum Asset Management Limited

ABN 13 050 064 287

1. Platinum Asset Management Limited Annual Report 2020

Directors

Michael Cole

Stephen Menzies

Anne Loveridge

Brigitte Smith

Tim Trumper

Andrew Clifford

Kerr Neilson

Elizabeth Norman

Andrew Stannard

Shareholder Liaison

Elizabeth Norman

Company Secretary

Joanne Jefferies

Registered Office

Level 8, 7 Macquarie Place

Sydney NSW 2000

Phone	1300 726 700 (Australia only)
Phone	0800 700 726 (New Zealand only)
Phone	[phone]

Share Registrar

Computershare Investor Services Pty Ltd

Level 3, 60 Carrington Street

Sydney NSW 2000

Phone	1300 855 080 (Australia only)
Phone	[phone]
Fax	[phone]

Auditor and Taxation Advisor

PricewaterhouseCoopers

One International Towers

Watermans Quay

Barangaroo NSW 2000

Securities Exchange Listing

Platinum Asset Management Limited shares are listed on the Australian Securities Exchange (ASX code: PTM)

Website

www.platinum.com.au/Shareholder-information/

Corporate Governance Statement

The 2020 Corporate Governance Statement can be viewed at https://www.platinum.com.au/PlatinumSite/media/About/ptm_ corp_gov.pdf

Platinum Asset Management Limited Annual Report 2020

1

CONTENTS

Chairperson's Report	2
Managing Director's Letter	6
Shareholder Information	16
Directors' Report	19
Auditor's Independence Declaration	47
Statement of Profit or Loss and Other Comprehensive Income	48
Statement of Financial Position	50
Statement of Changes in Equity	52
Statement of Cash Flows	54
Notes to the Financial Statements	55
Directors' Declaration	101
Independent Auditor's Report	102
The Dam Has Broken
article by Julian McCormack	IV

2 Platinum Asset Management Limited Annual Report 2020

CHAIRMAN'S REPORT 2020

Funds Under Management ("FUM")

It has been a somewhat challenging year for Platinum Asset Management Limited ("Platinum") with investment returns for our flagship Platinum International Fund overshadowing some strong investment performance in other areas, most notably our Asia ex-Japan and International Health Care focused strategies. This underperformance in the flagship fund translated into net fund outflows and lower funds under management, albeit that overall revenues were flat for the year and profit after tax was down only slightly, by 2%, when compared to the prior period.

FUM at 30 June 2020 was $21.4 billion, a decrease of 14% from the 30 June 2019 closing FUM of $24.8 billion. The reduction in FUM was driven primarily by net fund outflows of $3.0 billion.

Average FUM for the year decreased by 6% to $23.7 billion from an average FUM of $25.3 billion for the previous year.

The ongoing uncertainty in relation to the US/China trade war and bleaker prospects for future economic growth caused by the COVID-19 pandemic has led investors in global equity markets to remain nervous, even as those markets have continued to appreciate in value. Investors once again reacted to their fears by favouring companies perceived to be immune from external events, with technology and healthcare stocks in particular being propelled to extraordinarily high valuations relative to their future earnings prospects. In contrast, value stocks and/or those with a degree of earnings cyclicality were avoided by the majority of investors, and those stocks generally became cheaper.

Platinum has always believed that attractive valuations should be the starting point for any investment decision. This growing divergence between growth and perceived safety on the one hand and attractive valuations on the other, has consequently led to some investment underperformance for Platinum's funds in recent years. That said, it was encouraging to see how Platinum's investment approach successfully protected investor capital during the tumultuous market sell-off in March 2020. From peak to trough1, the Platinum International Fund outperformed the index2 by over 8% with our investors consequently avoiding a substantial portion of the losses experienced by the broader market. Even though this strong result was ultimately overshadowed by an unusually sharp subsequent rally (by historical standards) in equity prices, it was pleasing to observe that Platinum's investment process, one that seeks to protect clients in "down markets", performed well when our clients were likely at their most fearful.

Also pleasing to observe was the strong performance of Platinum's Asia ex-Japan and International Health Care equity strategies, both of which outperformed their respective indices3 by over 10% in the year to 30 June 2020. As well as serving clients who were invested

1. From 21 February to 23 March 2020.
2. MSCI All Country World Net Index in A$. Source FactSet Research Systems.
3. MSCI All Country Asia ex-Japan Net Index in A$ and MSCI All Country World Health Care Net Index in A$. Fund/strategy returns are the returns of the C Class units of the relevant Platinum Trust Fund, are net of fees and costs and assume the reinvestment of distributions. Source: Platinum for fund/ strategy returns, and FactSet Research Systems for index returns.

Past performance is not a reliable indicator of future returns.