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    KGI   AU000000KGI2

KAIZEN GLOBAL INVESTMENTS LIMITED

(KGI)
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Kaizen Global Investments : Audited annual report to June 30 2021

09/13/2021 | 03:32am EDT

'

ANNUAL REPORT 2021

CONTENTS

Chairman's Letter ................................................................................................................................................

1

Investment Manager's Letter ...............................................................................................................................

3

Directors' Report................................................................................................................................................

10

Corporate Governance Statement.....................................................................................................................

16

Remuneration Report ........................................................................................................................................

20

Financial Statements .........................................................................................................................................

23

Statement of Profit Or Loss And Other Comprehensive Income ...................................................................

23

Statement of Financial Position .....................................................................................................................

24

Statement of Changes In Equity ....................................................................................................................

25

Statement of Cash Flows ...............................................................................................................................

26

Notes to the Financial Statements .................................................................................................................

27

Directors' Declaration ........................................................................................................................................

42

Auditor's Independence Declaration..................................................................................................................

43

Independent Audit Report..................................................................................................................................

44

CHAIRMAN'S LETTER

To my fellow Shareholders,

There are shocks and there are risks.

I am writing this letter twenty years to the day of the terrorist attacks on the World Trade Center.

We all have stories to tell, of colleagues, friends, clients. I recall coming back into the office wondering why the TV channel had been changed. An hour later I had started to look at the market impact, knowing that this time the perpetrator had been successful, and war would be the likely response by the attacked country.

This attack was a shock. The withdrawal from Kabul last month by the allies, and the performance of this government in managing a vaccine portfolio, are examples of managing risks. Investment or market risks on the horizon will create volatility, think of the inevitable tapering by the US, and potential inflation. These might combine with climate change (temperature and drought outliers) impacting food prices and creating concerns over supply, which could in turn be a catalyst for civil unrest. These are risks which we can anticipate, monitor for change, and put a value on.

Unprecedented liquidity injections by central banks over the last eighteen months has created a distortion in asset prices, which at some stage will need to unwind. The risk though is that those individuals with long term

knowledge and experience of inflation have retired and are no longer being heard. It's 35 years ago now that mortgage rates were in the high teens. Whilst history doesn't repeat, it can rhyme.

Government bond yields around zero percent, and government led bailouts have become normalised, leading to a potential miscalculation or misperception of risk. Historically low yields also have a dampening effect on the resilience of managed funds and pension funds, who hold government bonds in the portfolio as

'insurance'. That insurance no longer exists as bond yields are low, meaning bond prices are high. Government bailouts aren't without risk, in our opinion.

In managing a portfolio our aim is to try and anticipate, understand and measure the risks, and be prepared to respond to shocks with a level head. Our goal is to build portfolios that minimise risk whilst having the highest possible reward.

Investment Strategy

KGI has the ability to use strategies to protect the downside risk of markets through a combination of holding cash, short selling or using derivatives. We continue with our declared strategy of investing part of our assets in unlisted companies in Australia, and re-investing the excess cash flows from those businesses back into the fund portfolio or other opportunities.

We remind you of our investment process, namely to identify secular thematic trends, conduct fundamental analysis, identify the companies best placed to benefit/lose out from those tailwinds/headwinds and invest while keeping a close eye on valuation and margin safety.

In the managers report you will hear more about our investment in private assets, and how we reinvest controlled cash flows. We believe that having this diversification is a way of investing in growth sectors and exceeding industry returns through knowledge and expertise, as well as managing our overall portfolio risk.

1

Investment Process

Our investment process remains committed to deep, fundamental analysis and investing in companies that we think are under-valued and cheap. This takes us off the beaten path and away from the popular names that are in large ETF baskets and increase in price irrespective of valuation.

A reminder of how we invest, a logical, repeatable process.

  • Identify investment opportunities
  • Complete fundamental analysis
  • Quantify Investment thesis
  • Consider macro-economic environment
  • Determine portfolio weighting
  • Maintain selling discipline

Shareholder engagement

As a relatively small investment company, we encourage you to have a direct relationship with KGI, and are open for ongoing discussion throughout the year.

Performance and NTA

In the 2021 financial year the post-tax net tangible asset (NTA) value of KGI increased by 31.33%, on a pre- tax level, the NTA was increased by 42.43%. When comparing returns it is important, in our view, to compare like with like, so an investment in the stock market or ETF index tracker will be pre-tax, when comparing KGI, the pre-tax return delivered in the year to June 2021 was 42.43%. Share capital remained unchanged, and we have not paid a dividend.

Post tax NTA at end June 2021 was at $1.2514 vs $0.9528 at the end of June 2020.

AGM

We will be contacting you shortly about our annual general meeting - which will provide you with the chance to meet with KGI's key management personnel, and ask any questions you may have. I look forward to seeing you there.

Yours sincerely,

Simon Winfield

13 September 2021

2

INVESTMENT MANAGER'S LETTER

Dear Shareholders,

Building a compounding machine

Begin with the end in mind

Stephen Covey

When we created Kaizen Global Investments (KGI) and our other managed funds we thought about a few key ideas around compounding an investment over the long term at superior rates of return. We came to the following conclusions.

Hot areas don't last forever

There are always hot areas in the market that can do well, typically for years, but then the music stops. In Chart 1 below, we note that 31 years after the peak, Japan's lead index, the Nikkei, is still off its highs. Could this happen with the darlings of the last decade i.e. the U.S. stock market and technology stocks? Time will tell;

Chart 1: Nikkei peaked in 1989 - after 20 years of enormous performance

Our first investment conclusion is that one has to invest in multiple markets, developed, emerging, across market cap. size looking for trends and opportunities everywhere.

Most 'global' fund managers today have done very well over the past decade. When we look closely at holdings most have huge allocations to the U.S. - they are U.S. funds in disguise. They are invested in the world's biggest market and it has been the best performing.

We believe that one always has to ask oneself a) have you been lucky to be in the right place/market b) is it by design and c) can you quickly pivot if things change? Our analysis of global funds and holdings shows a large weighting to the U.S. and should the music change, we wonder if there has been a great deal of luck (a)

3

This is an excerpt of the original content. To continue reading it, access the original document here.

Disclaimer

Kaizen Global Investments Ltd. published this content on 13 September 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 13 September 2021 07:31:03 UTC.


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Financials
Sales 2019 -0,07 M -0,05 M -0,05 M
Net income 2019 -0,14 M -0,10 M -0,10 M
Net cash 2019 3,70 M 2,65 M 2,65 M
P/E ratio 2019 -11,2x
Yield 2019 -
Capitalization 3,53 M 2,52 M 2,52 M
EV / Sales 2018 -38,0x
EV / Sales 2019 32,5x
Nbr of Employees -
Free-Float -
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