Perpetual Limited - Annual Report 2022

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Perpetual Limited ABN 86 000 431 827

16 September 2022

ASX Limited ASX Market Announcements Office Exchange Centre 20 Bridge Street Sydney NSW 2000

Angel Place, Level 18, 123 Pitt Street Sydney NSW 2000 Australia Phone +61 9229 9000 www.perpetual.com.au

Perpetual Limited - Annual General Meeting 2022

The following announcements to the market are provided:

AGM Notice of Meeting

Proxy Form

Shareholder Question Form

Online Guide from Link Market Services

Letter to Shareholders

 Perpetual Annual Report 2022

Yours faithfully,

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Sylvie Dimarco Company Secretary (Authorising Officer)

Page 1

Enduring Prosperity

Annual Report 2022

Trust is earned.

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Enduring Prosperity Annual Report 2022
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Trust is earned.
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Corporate Governance Statement For the Year Ended 30 June 2022 2022
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About Perpetual

Our purpose

Our vision

Our values

Why invest in Perpetual

Perpetual Annual Report 2022

Group at a glance

We are a global business committed to growing sustainably.

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Chris Green Chief Financial Officer

The strong FY22 result saw double digit earnings growth across each of our four divisions, while we also invested in growing our business through new capabilities, both in Australia and offshore.

Underlying profit after tax 21% on FY21

Total dividends per share 16% on FY21

$148.2m

$2.09

Five-year profle	June 2018	June 2019	June 2020	June 2021 June 2022
Total revenue1($m)	531.4	512.1	487.6	650.2 748.2
UnderlyingEBITDA2,3,10($m)	227.0	196.0	178.9	214.0 248.5
Underlying proft before tax(UPBT)3,4,10($m)	196.3	162.2	136.1	169.3 201.2
Underlying proft after tax(UPAT)3,4,10 ($m)	139.0	115.9	95.1	122.8 148.2
Netproft after tax(NPAT)5($m)	140.2	115.9	82.0	72.9 101.2
Earningsper share(UPAT)6,10 (cents)	297	246	200	218 258
Earningsper share(NPAT)6 (cents)	299	246	173	130 177
Return on average shareholders’ equity– UPAT7,10 (%)	21.5	17.5	14.4	15.7 16.2
Return on average shareholders’ equity– NPAT8 (%)	21.6	17.5	12.5	9.3 11.0
Dividendper share – ordinary9 (cents)	275	250	155	180 209
Total equityat 30 June10 ($m)	661.1	662.2	650.8	907.1 925.8
Assets under management – PAMA11($b)	30.8	27.1	22.8	24.7 21.3
Assets under management – PAMI11($b)	–	–	5.6	73.6 69.1
Funds under advice – PP11($b)	14.1	14.8	14.3	17.0 17.4
Funds under administration – PCT11($b)	693.2	764.5	941.9	922.8 1,092.3
Capital expenditure($m)	28.6	38.8	12.5	26.2 19.1
Market capitalisation($m)	1,937	1,967	1,406	2,266 1,637
No. of shares on issue – weighted average12(m)	46.8	47.1	47.8	56.2 57.3
No. of shares on issue at 30 June(m)	46.6	46.6	47.4	56.6 56.7
Shareprice at 30 June($)	41.60	42.24	29.67	40.05 28.88
Shareprice range foryear($ low)	38.25	29.70	20.27	27.03 27.87
($ high)	56.20	46.11	47.27	40.05 42.27

Excludes income from structured investments.
EBITDA represents earnings before interest, taxation, depreciation, amortisation of intangible assets, equity remuneration expense and significant items.
June 2020 figure re-presented based on the revised definition of UPAT. Figures prior to June 2020 have not been re-presented. 4. Excludes significant items.
Attributable to equity holders of Perpetual Limited.
Diluted earnings per share calculated using the weighted average number of ordinary shares and potential ordinary shares on issue.
Calculated using underlying profit after tax. 8. Calculated using net profit after tax.
Dividends declared with respect to the financial year.
June 2021 and June 2020 figures have been restated for the change in accounting policy relating to Software-as-a-Service (SaaS) arrangements.
Represents 30 June closing balances.
Includes ordinary shares and potential ordinary shares. The weighted average number of ordinary shares for the June 2021 and June 2020 period were adjusted retrospectively in accordance with AASB 133 Earnings per Share following the issues of new shares at a discount to market value during the period.

Our performance Directors’ Report

Operating and Financial Review

Financial Report

FY22 operational highlights

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79%

of all investment strategies[1] outperformed their benchmarks over 3 years[2]

~$ 3b raised in global equities strategies[4]

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new
3 Active ETFs 3
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trading on the ASX in Perpetual Asset Management Australia

New milestone for Perpetual $1.09t Corporate Trust of >$1 trillion in Funds under Administration

Perpetual Private reports its

9th consecutive year of client net inflows

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Group NPS [5] +49
+
49
a record result
reflecting strong
client advocacy
+45 +44
FY20 FY21 FY22
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Our global presence

1 2 3 Head Office Brisbane, Canberra, Sydney, NSW, QLD, Australia ACT, Australia Australia 7 8 9 Chicago, Hong Kong Singapore IL, USA (SAR)

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6
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4 5 Melbourne, VIC, Australia 10 11 Amsterdam, Netherlands

Melbourne, VIC, Australia

Adelaide, Perth, SA, Australia WA, Australia

London, United Kingdom

1 2 3 Boston, San Francisco, Edinburgh, MA, USA CA, USA United Kingdom

1 Dallas, TX, USA

3
11 10
1
1. Includes both PAMI and PAMA. 2. As at 30 June 2022. Past performance 7 is not indicative of future performance. See perpetual.com.au for relevant performance. The product disclosure statements (PDS) of any 1 8 of the capabilities or funds should be considered before deciding whether 2 9 to acquire or hold units in any fund.
1. Exchange Traded Managed Funds, commonly referred to as Active ETFs.
1. From all sources, all regions, flows are converted monthly using the 6 month-end exchange rate. Includes both Barrow Hanley and Trillium Global Equities strategies. 5
1. Net Promoter Score. 4 3 2 1

Perpetual Annual Report 2022

Chairman’s Report

We were pleased to be able to report an uplift in revenue, earnings and dividends on the prior year, with the results including strong contributions from PCT and PP and a full year’s contribution from Barrow Hanley.

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Dear Shareholders,

The 2022 financial year was both a year of opportunities and challenges for our business as we continued to drive growth globally.

While investment performance in our asset management businesses was strong, we were not immune to the movements in investment markets through the year. Global markets fell 8%[1] , impacted by the devastating war in Ukraine, as well as rising inflation and the subsequent response from central banks. This impacted our assets under management (AUM), which also declined 8%.

Importantly, Perpetual’s unique combination of businesses means that we are partly protected from negative market swings by the relative stability of our earnings in our corporate trust business (PCT) and the non-market related earnings within our private wealth business, Perpetual Private (PP).

Financial results and dividends

Group revenue increased 20% to $767.7 million, underlying profit after tax (UPAT) was $148.2 million, up 21% on FY21, and net profit after tax (NPAT) was $101.2 million, up 39%, despite a number of one-offs relating to acquisitions of new businesses, including Barrow Hanley, Jacaranda Financial Planning and Laminar Capital. UPAT earnings per share (EPS) was $2.58, up 18%.

On the first year anniversary of the completion of the Barrow Hanley Global Investors (Barrow Hanley) transaction in November 2021, we delivered on our promise to achieve in excess of 20% EPS accretion within 12 months of acquisition. It has been unfortunate that this strong outcome has more recently been impacted by negative market movements.

Total dividends declared were $2.09 per share, up 16%, and representing a pay out ratio of 80% of UPAT, towards the upper end of the Board’s stated policy to payout 60% to 90% of UPAT. The Board determined to continue with the dividend reinvestment plan, enabling shareholders to reinvest their dividends without transaction costs.

Strategy execution

The 2022 financial year saw us further progress Perpetual’s strategy to strengthen and grow its business globally.

Across the business, there was a significant level of activity aligned to the Group’s strategy for growth. Following the successful acquisition of Barrow Hanley in the 2021 financial year and the establishment of Perpetual’s first international division, we built on our global presence by investing further in investment distribution, marketing and product developments, as well as the central support functions required to implement a global operating model.

MSCI All Countries World Net Total Return Index, expressed in Australian dollars.

Our performance Directors’ Report

Operating and Financial Review

Financial Report

In PP, the Board oversaw the expansion into the pre-retirement segment of the market through the acquisition of Jacaranda Financial Planning in August 2021. The acquisition opens a new channel of client growth and opportunities to expand across the Australian eastern seaboard.

PP also continues to play a strong role in the areas of philanthropy and advice to Native Title trusts. As one of the largest managers of philanthropic funds in Australia, in FY22 our Philanthropy team distributed $120 million to not-for-profit and charitable organisations – the largest ever total distribution we have made as a business on behalf of our clients.

In PCT, we invested further in our digital capabilities by acquiring Laminar Capital in October 2021. Laminar Capital is a specialist debt markets business with digital-led fixed income solutions. We subsequently created Perpetual Digital, which brings together PCT’s digital services, including Laminar Capital. We are excited about the opportunity it will create for us to further grow our digital capabilities.

Subsequent to the end of the financial year, we announced the acquisition of Pendal Group Limited, an ASX-listed asset management business with operations in Australia, Europe, UK and US, and AUM of over $111 billion (as at 30 June 2022) following a period of active discussion and engagement. We consider the transaction to be strategically and financially compelling, and if successful will double our AUM, while also delivering an expected double-digit EPS accretion in year one[2] . Subject to Pendal shareholders voting in favour of the transaction and other regulatory approvals and conditions, the transaction is expected to complete either late in calendar year 2022 or early 2023.

For further information about the transaction please go to our website to read the full announcement (perpetual.com.au/about/ shareholders). I look forward to discussing the acquisition in more detail with shareholders at our Annual General Meeting in October this year.

EPS accretion is on an underlying basis and assumes the full run rate of disclosed synergies. It also assumes a 31 December 2022 implementation. EPS accretion calculated with reference to broker consensus earnings for both Pendal and Perpetual. Note accounting treatment and definitions of UPAT will need to need to be aligned post transaction.

Perpetual’s Sustainability Strategy

Post the completion of the financial year, together with this Annual Report and our Sustainability Report, we launched our new Sustainability Strategy, Perpetual’s Prosperity Plan . This is a major milestone for our company which builds on our existing sustainability activities to set out key activities across four key pillars: planet, people, communities and governance.

In each of our businesses, we are progressing our thinking and approach to environmental, social and governance (ESG) issues, including how we better serve our clients in this area. We believe we have a critical role to play, not just in our direct impact, but in the investments we make on behalf of clients and how we can help clients better understand and contribute to a more sustainable world.

The Board has been closely involved in the development of the commitments within Perpetual’s Prosperity Plan and we look forward to reporting on our progress.

Recognising our people

On behalf of the Board, I would like to thank our people across the business for their continued dedication and hard work during the year. Our teams have worked collaboratively and flexibly, through continued challenges relating to COVID-19, to ensure we progress our strategy for global growth, and continue to deliver a high standard of service to our clients.

I would also like to extend the Board’s thanks to the Executive Committee, led by CEO and Managing Director, Rob Adams, for their dedication and leadership throughout the year.

Lastly, on behalf of the Board, the Executive Committee and all our teams, I would like to thank you, our shareholders for your continued support. I would also like to thank my fellow Board members for their strong oversight during the year. The Board is looking forward to meeting shareholders in person at our AGM on 20 October 2022.

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We are committed to growing our products and services that support a low carbon future, and becoming carbon neutral in our operations by FY23.

Tony D’Aloisio AM

Chairman

Perpetual Annual Report 2022

CEO’s Report

We have made excellent progress in all areas of our strategy, while at the same time reporting solid financial results against a market backdrop that became increasingly volatile throughout the year.

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Dear Shareholders,

The 2022 financial year can be characterised by further investment across all areas of our business, with a focus on strengthening our new international asset management businesses.

In 2022, we continued to invest globally to strengthen, expand and create new growth opportunities across our business. We have made excellent progress executing on our strategy, while at the same time reporting strong financial results against a market backdrop that became increasingly volatile throughout the year.

Delivering strong financial and operational results

Underlying NPAT for the year was $148.2 million, an increase of 21% on FY21 and statutory NPAT was $101.2 million, up 39%. The year included a full 12-month contribution from Barrow Hanley, acquired in November 2020, as well as part contributions from two businesses acquired through the year: Jacaranda Financial Planning in PP, and Laminar Capital in PCT. EPS was $2.58, an increase of 18% on the prior year, enabling an 16% increase in dividends to shareholders, which totalled $2.09 per share. Importantly, we remained well capitalised and as at 30 June 2022 had a conservative gearing ratio of 22%.

In our asset management businesses, Perpetual Asset Management International (PAMI) and Perpetual Asset Management Australia (PAMA), our combined AUM was $90.4 billion, lower than the prior year ($98 billion at 30 June 2021), mainly due to declines in global investment markets. Despite these market movements, our investment performance across our asset management businesses has been strong, with our ‘value-style’ in Perpetual Australia equities and in Barrow Hanley, well-suited to current market conditions. In Australia, recognising our strong investment performance and client service, PAMA was the recipient of the “Fund Manager of the Year” award from Zenith[1] for the first time in over 10 years – a fantastic result and a credit to the team’s commitment to generating strong results for our clients.

A strategic area of focus this year was to further support our asset management businesses to grow AUM by building out a world class distribution team and launching new product structures across key regions. During the year we hired several highly experienced distribution executives dedicated to growing our clients across US institutional, US intermediary and European markets.

The Zenith Fund Awards were issued 15 October 2021 by Zenith Investment Partners (ABN 27 103 132 672, AFSL 226872).

Our performance Directors’ Report

Operating and Financial Review

Financial Report

We also invested in a number of new product structures to support future growth, including US mutual funds, UCITS[2] sub-funds in Europe and Exchange Traded Managed Funds (Active ETFs) in Australia. All of these structures allow investors across key regions to better access our capabilities. While it is still early days, we are already seeing meaningful impact with over A$0.7 billion[3] in new monies raised over the year across these structures.

PCT continued to demonstrate its leadership position in the debt markets securitisation and managed funds services sectors, providing key components of the essential infrastructure for the financial services industry in Australia. Funds under administration (FUA) grew by 18% to surpass the $1 trillion milestone, ending the year at $1.09 trillion. Recognising the growing digital capabilities within PCT, we created a new division, Perpetual Digital, which combines Laminar Capital, acquired in October 2021, with our existing digital businesses. With four products launched in the year, we are excited about the growth potential of Perpetual Digital.

In PP, we are seeing continued inflows of new client monies with FY22 being the ninth consecutive year of positive net flows, which have been further supplemented

by the acquisition of Jacaranda Financial Planning in August 2021. Jacaranda expands our services to clients in pre-retirement and provides growth opportunities for PP around Australia. We also saw increasing interest from our clients in our philanthropy services and are growing our Native Title trusts client base.

Growing our Environmental, Social and Governance (ESG) capabilities

We continue to see strong interest in our ESG capabilities where we are well placed to participate in what we believe to be one of the most important mega-trends of the next decade and beyond. Over the last 12 months, we have attracted over A$1 billion in new client funds into our ESG investment capabilities[4] , particularly through Trillium Asset Management (Trillium), our dedicated ESG asset manager, and we expect this to grow further over time. We are also developing new solutions across our business, including in PP and PCT, to better serve our clients’ needs in this area.

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The 2022 financial year can be characterised by further investment across all areas of our business, with a focus on strengthening our new international asset management businesses.

Undertakings for the Collective Investment in Transferable Securities.
Conversion rate AUD:USD at 30 June 2022 was 0.68765.
Includes Trillium flows from all sources, all regions, Barrow Hanley’s Global Value ESG UCITS (Undertakings for the Collective Investment in Transferable Securities) and flows into PAMA funds which include the Ethical, Ethical Credit and ESG Real Return strategies. Flows are converted using the month-end exchange rate.

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Group operating revenue
Perpetual Asset $
Management International 218.8m
Perpetual Asset $
Management Australia 169.0m
$767.7m Perpetual Private $211.2m
20% on FY21
Perpetual $
Corporate Trust 158.5m
Perpetual Group Support Services $10.2m
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Perpetual Annual Report 2022

CEO’s Report continued

Perpetual’s Prosperity Plan sets out a clear vision and set of commitments to achieve our goals and demonstrate our role in advancing a sustainable and equitable world.

perpetual.com.au/ sustainability

Perpetual’s Prosperity Plan

Perpetual has a deep heritage of responsible investing and ESG principles. This year, we built on the actions we have been taking over many years, including the past 12 months, to launch Perpetual’s Prosperity Plan . The plan sets out a clear vision and set of commitments to achieve our goals and demonstrate our role in advancing a sustainable and equitable world. We have published the plan within our Sustainability Report, which is available on our website at perpetual.com.au/sustainability.

We are proud of our work across the business to support our clients to prosper over time. A highlight of the year was achieving a new record Net Promoter Score (NPS) of +49 for the group, which measures our client advocacy. This is an improvement from +44 in 2021 and is a great reflection of the client service in all areas of our business.

Our people are clearly our most important asset. With a tight labour market globally, we have further increased our efforts to better attract and retain high quality people. We are really pleased with our progress in this area, which includes introducing a market-leading 20 weeks paid parental leave policy in Australia, doubling the leave for wellbeing and community service to two weeks per year and for the fifth year in a row being awarded an Employer of Choice for Gender Equality by Workplace Gender Equality Agency (WGEA). We have also been implementing our Diversity and Inclusion Strategy, launched in FY21, which aims to empower our people to work with the best, be their best, and work where and how they work best.

We believe our trusted brand, combined with our flexible working model, employee benefits and great culture, make Perpetual an attractive place to work for talented people. The high-quality talent who have joined Perpetual over the last year supports this.

Proposed acquisition of Pendal Group

As referenced in Tony’s letter, subsequent to the end of the financial year, and following a period of active discussion and engagement, we announced the acquisition of Pendal

Group Limited, an ASX-listed asset management business with operations in Australia, Europe, UK and US, and AUM over $111 billion. We consider that the transaction is strategically and financially compelling, aligning with our ambitions to grow globally. Combining the businesses will create a global asset management business with significant scale, diversified and high-quality boutique investment strategies, established ESG capabilities and a world-class global distribution network complemented by high-quality wealth management and trustee businesses. Subject to Pendal shareholders voting in favour of the transaction at a Scheme Meeting and other conditions, the transaction is expected to complete late in the calendar year 2022 or early 2023. More information on the transaction is available on our website at perpetual.com.au/about/shareholders.

Conclusion

It has been an exceptionally busy year for our people. I would like to acknowledge and thank the Board for their guidance and advice as we execute our strategy, and I would like to thank my fellow Executive Committee members and all of our people across the firm for their continued dedication and for delivering another successful year. I would also like to thank our shareholders for supporting Perpetual as we continue to transform the business and drive growth.

Across our business we have deep experience and a long history of successfully navigating financial market cycles, including through times of market volatility. We are executing on our strategy to grow our business globally, and we have great momentum across our businesses leading into FY23.

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Rob Adams CEO and Managing Director

Our performance

Directors’ Report

Operating and Financial Review

Financial Report

Strategy Update

We are delivering on all areas of our strategy

Strategic Client First imperatives

Exceptional products Outstanding service

Future Fit New Horizons Empowering our people to New capabilities deliver high performance Global footprint

FY22 Delivered contemporary priorities investment solutions – Active ETFs, ESG We made development, adding excellent new strategies progress against the Invested in refreshed key initiatives marketing across key we set out high‑performing capabilities to deliver on, or further progress, at the start of the year. Delivering improved digital client experience through innovation and digital solutions

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Further developed our global operating model to drive efficiencies and support expected global growth

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Delivering cloud‑based infrastructure, creating a more agile and scalable operating platform

Invested in a culture of diversity, inclusion and high performance

Further built‑out our global distribution teams and supporting infrastructure across US, UK, Europe and Asia

Expanded Jacaranda Financial Planning’s unique distribution model

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Developed and launched a new corporate sustainability strategy perpetual.com.au/sustainability

Continued to embed global governance and risk frameworks - perpetual.com.au/corporate governance

Continued to invest in new product and channel development across all regions

Remain focused Group on service NPS Score excellence +49

Implemented future ways of working to support engagement and productivity

Building‑out additional investment capabilities for both Trillium and Barrow Hanley

Focused on inorganic opportunities to add further capabilities and additional growth potential across all divisions

Strategic enablers

Brand

Leadership

Innovation

Perpetual Annual Report 2022

Business division updates

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David Lane

Group Executive, Perpetual Asset Management International

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28.5%
total revenue
Assets under
management
$69.1b
FY22
FY21 $73.6b
Profit before tax
$
52.9m
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Trillium named among the 2022 “Best for the World” Certified B Corps, a recognition achieved every year running since 2013

“Best ESG Fund Methodology – Global Reach” and

“Best ESG Fund Performance – Global Reach” WealthBriefing Wealth for Good Awards, 2022

Perpetual Asset Management International

Financial performance

New product structures attracting new clients

PAMI completed its first full financial year in FY22 after its establishment in November 2020.

PAMI successfully launched seven mutual funds in FY22, expanding access for Barrow Hanley strategies in the US$30+ trillion US intermediary channel for the first time.

PAMI reported underlying profit before tax (UPBT) of $52.9 million, an increase of $12.1 million or 30% on FY21. Revenue of $218.8 million increased by $79.7 million, or 57% on FY21. Both UPBT and revenue increases were largely due to earnings from a full 12 months’ contribution of Barrow Hanley, together with higher average AUM over the period.

Strong demand for our capabilities saw PAMI also launch three ESG-themed UCITS sub-funds in 2H22, providing further investment opportunities for international clients seeking opportunities in the ESG sector as we build our distribution capability in Europe, UK and Asia. Highlighting the strength of our offering, the UCITS sub-funds have attracted more than A$730 million in new client flows.

FY22 expenses of $165.9 million were up 68% on FY21, largely due to a full 12 months of Barrow Hanley operations, the impact of exchange rates, and continued investment in global distribution capability and supporting infrastructure.

Collateralised Loan Obligation (CLO) equity fund, which is capable of supporting in excess of US$1b of CLOs.

AUM was $69.2 billion at 30 June 2022, a decrease of $4.5 billion from year end FY21. Average AUM revenue margins in FY22 were 29 bps, remaining relatively stable across all asset classes since the acquisition of Barrow Hanley late in 2021.

Trillium was again recognised as a leader in the ESG sector after winning three global awards throughout the financial year[2] . This unique position in the market, strength of offering and support from Perpetual’s global distribution capability, is reflected in a strong pipeline of future client investment including the two largest individual institutional investments in Trillium capabilities in their 40-year history.

FY22 business commentary

PAMI made excellent progress against its strategy to support Trillium and Barrow Hanley by expanding our global distribution capabilities and supporting infrastructure. We also continued to invest in new product and distribution channel development with a particular focus on key regions including North America, Europe and Asia.

Trillium’s shareholder and social advocacy efforts continued to make an impact and will be strengthened by the appointment of a Director of International Shareholder Advocacy to ensure these efforts extend to non-US based companies over the coming years.

Product development achievements include launching seven Barrow Hanley mutual funds on a newly created mutual fund platform in the United States, establishing a UCITS[1] platform and launching three sub-funds, which together have $1.2 billion in client investment, and establishing Barrow Hanley’s inaugural

In a year of global market uncertainty, investment performance was strong across PAMI, with 96% of strategies outperforming benchmark over three and five years respectively[3] .

UCITS stands for Undertakings for the Collective Investments in Transferable Securities.
Trillium named among the 2022 “Best for the World” Certified B Corps, a recognition achieved every year running since 2013; winner of ‘Best ESG Fund Methodology – Global Research’ and ‘Best ESG Fund Performance – Global Reach’ bestowed by WealthBriefing. These awards are not indicative of the future performance of Trillium Asset Management.
Gross of fees. Past performance is not indicative of future performance. See barrowhanley.com and trilliuminvest.com for relevant performance. The disclosure documents of any of the strategies should be considered before deciding whether to invest in any strategy.

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Our performance

Directors’ Report

Operating and Financial Review

Financial Report

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Amanda Gillespie Group Executive, Perpetual Asset Management Australia

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22.0% total revenue

Assets under management

$21.3b

FY22 FY21 $24.7b

Profit before tax

$ 49.9m

Net Promoter Score

highest 46 ever score

“Fund Manager of the Year 2021” Zenith

Australian Equities – Alternative Strategies Perpetual Share Plus Long Short Fund won the Australian Equities

Multi‑Asset Real Return Perpetual Diversified Real Return Fund

Perpetual Asset Management Australia

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Financial performance

PAMA reported UPBT of $49.9 million, $7.8 million or 18% higher than FY21. Operating revenue of $169 million was $3.3 million or 2% up on FY21. Factors contributing to the increase of both underlying profit and revenue included higher average equity markets compared to FY21 and improved investment performance.

Average AUM revenue margins were 67 basis points (bps), 4 bps lower than FY21, driven by lower performance fees earned. Excluding performance fees earned, underlying average margins of 63 bps remained in line with the prior year. Total AUM as at 30 June 2022 were $21.3 billion, a decrease of $3.4 billion on FY21.

Providing contemporary solutions for investors

The Perpetual Ethical SRI Fund (Managed Fund) (ASX:GIVE), Perpetual Global Innovation Share Fund (Managed Fund) (ASX:IDEA) and the Barrow Hanley Global Share Fund (Managed Fund) (ASX:GLOB) were listed on the ASX in FY22. The launch of these three Active ETFs provides investors with simple and easy access to Perpetual’s world-class investment capabilities and aligns with our strategy of providing contemporary investment solutions to meet the evolving needs of our clients.

Total expenses for PAMA were $119.1 million, 4% lower than the previous year. The decrease was mainly due to lower variable remuneration, including the impact of lower performance fees paid, partially offset by investment in growth initiatives such as the launching of three Active ETFs.

Business commentary

We continue to make excellent progress against our long-term strategy to invest in new products and capabilities, and in FY22 we launched three new Active ETFs that are now easily accessible to investors on the ASX.

PAMA continued to invest in our capabilities, products, distribution channels and brands to drive further growth for clients and shareholders.

In a year that saw general market sentiment continue to rotate from growth to value equities, PAMA’s disciplined approach to active value investing saw all but one of our Australian equity strategies outperform their respective benchmarks over the financial year[1] .

Underpinning all of this, and central to the ongoing success of our business, is PAMA’s commitment to building and maintaining strong client relationships. In FY22, PAMA achieved our highest ever NPS score, recording +46, up from +38 in FY21 – an outstanding result for the business which reflects the time and effort we invest to help meet the needs of our clients.

PAMA was named “Fund Manager of the Year” in the Zenith 2021 Fund Awards[2] , while the Perpetual Diversified Real Return Fund took out the Multi-Asset Real Return category for a third consecutive year and the Perpetual Share Plus Long Short Fund won the Australian Equities – Alternative Strategies category, highlighting the continued strength of our investment teams and process[2] .

Past performance is not an indicator of future performance. See perpetual.com.au for relevant performance. The product disclosure statements (PDS) of the strategies should be considered before deciding whether to acquire or hold units in any fund.
The Zenith Fund Awards were issued on 15 October 2021 by Zenith Investment Partners (ABN 27 130 132 672, AFSL 226872) and are determined using proprietary methodologies.

Perpetual Annual Report 2022

Business division updates continued

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Mark Smith Group Executive, Perpetual Private

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27.5% total revenue

Funds under advice $17.4b FY22 FY21 $17.0b

Profit before tax $44.3m

Net Promoter Score

+ 42

Perpetual is a signatory of Philanthropy Australia’s pledge to attempt to double giving in the country by 2030

Perpetual Private

Financial performance

PP reported UPBT of $44.3 million, $9.3 million or 26% higher than FY21.

The increase was mainly driven by higher market-related revenue due to higher average equity markets; positive net flows driven by the growth of the business and acquisitions; higher performance fees due to strong performance of the portfolio; and, non-market related revenue improving with higher insurance revenue partly offsetting the impact of the low interest rate environment.

PP generated revenue of $211.2 million, 15% higher than the previous year. Marketrelated revenue was $153 million, 21% higher than FY21. Expenses of $166.9 million were 12% higher and were largely driven by continued investment in supporting future business growth, the acquisition of Jacaranda Financial Planning, higher variable remuneration and technology investments.

Funds under advice (FUA) at the end of FY22 was $17.4 billion, 2% higher than FY21, primarily due to positive net flows supported by organic growth and the acquisition of Jacaranda Financial Planning.

Business commentary

PP recorded its ninth consecutive year of positive net flows – a tremendous achievement that highlights the continued trust our clients place in us to deliver products, services and solutions to meet their evolving needs.

The acquisition of Jacaranda Financial Planning was a significant milestone and supports our strategic growth objectives to expand our client base in the pre-retirement segment. We also launched our new MultiFamily Office, which delivers both financial and non-financial advice services to ultrahigh net wealth clients. Both segments have already seen growth and we are well positioned to capitalise on the increasing need for advice clients in the coming years.

Addressing the demand for high-quality financial advice

Acquired in August 2021, Jacaranda Financial Planning is a fast-growing financial planning business with a high-quality advice model and culture which is closely aligned to Perpetual’s. The integration of Jacaranda’s business, people and processes was delivered ahead of expectations, and supported by PP’s broader team of dedicated specialists and established infrastructure. Plans to expand across the Australian eastern seaboard in FY23 are on track. Together with our adviser growth strategy, which was implemented in 2019 and achieved $1 billion in flows in FY22, Jacaranda will be a key pillar of growth for PP in the years to come.

PP continued its strong support of the community, particularly for non-government and charitable organisations, and working with Native Title trusts. As one of the largest managers of philanthropic funds in Australia, FY22 saw our Philanthropy team distribute $120 million to not-for-profit and charitable organisations, with $27 million going to more than 360 organisations through our IMPACT program. This is the largest year of distributions we’ve made as a business on behalf of our clients – a great outcome for many organisations who have been impacted by the pandemic over the past few years.

While PP services a broad range of clients, the strength of our client relationships has once again been demonstrated through our client NPS results. In FY22, PP achieved a score of +42, up from +37 in FY21. Our notfor-profit team recorded their highest score in five years and Fordham, our specialised business advisory team, achieved a score of +73. These results are exceptionally high and reflect the deep-rooted relationships that PP has formed over generations.

Our performance

Directors’ Report

Operating and Financial Review

Financial Report

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Richard McCarthy Group Executive, Perpetual Corporate Trust

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20.6% total revenue

Funds under administration

$1,092.3b

FY22

FY21 $922.8b

Profit before tax

$72.6m

Net Promoter Score

2021 Trustee of the Year KangaNews[1]

Perpetual Corporate Trust

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Financial performance

PCT – consisting of Managed Funds Services (MFS), Debt Market Services (DMS) and Perpetual Digital – reported UPBT of $72.6 million in FY22, $8.9 million or 14% higher than FY21. Revenue of $158.5 million increased 18%.

Supporting the digital transformation of the banking and finance industry

Consistent with our strategy to grow our digital capabilities, Perpetual acquired Laminar Capital, a specialist debt markets, advisory and SaaS business, in October 2021. The acquisition led to the creation of a new business division in PCT – Perpetual Digital. Perpetual Digital combines Perpetual’s existing holistic and growing range of innovative SaaS solutions and data services products with Laminar Capital’s specialist offerings.

MFS revenue of $70.3 million was $10.5 million, or 17% higher than the previous year, driven primarily by activity within the real assets sector, managed investment schemes and higher asset prices.

DMS revenue of $68.7million was up $6.3 million, or 10%, on FY21. This uplift was driven largely by underlying growth in the securitisation portfolio from new and existing clients.

Since its inception in 2009, the team at Laminar has developed a strong reputation as a trusted adviser, with deep client relationships and expertise as a treasury and debt markets specialist, digitally enabled through their proprietary SaaS platform Treasury Direct. Acquiring Laminar provides a unique opportunity to accelerate PCT’s position as a specialist fiduciary and digital solutions provider to the banking and financial services industry.

PCT’s newest division, Perpetual Digital, reported revenue of $19.5 million, $6.9 million or 17% higher than FY21. The increase was primarily due to the strategic acquisition of Laminar Capital together with continued growth from new and existing products.

Total expenses for PCT in FY22 were $85.9 million, $14.1 million or 21% higher than FY21. The increase in expenses was mainly driven by higher employment and technology costs to support business growth and new digital solutions, together with the operating expenses of Laminar Capital.

Our core business divisions – MFS and DMS – continued their strong growth trajectory. The MFS business, which provides trustee, custody and responsible entity (RE) services to a range of Australian and global financial institutions, reached two important milestones in FY22. FUA in our Custody segment grew to $212 billion, and our Wholesale Trustee FUA is now over $100 billion. In our DMS division, FUA was up 18% on FY21 to $663 billion.

Business commentary

PCT delivered another year of consistent and sustainable growth. Total FUA reached a major milestone in FY22, with the business now administering more than $1 trillion ($1.09 trillion as of 30 June) for the first time.

The acquisition of Laminar Capital in FY22 led to the creation of Perpetual Digital. This new division is already performing ahead of expectations, with three new products launched and $3.98 trillion in assets under administration across its four business lines.

Through the year our commitment to providing service excellence did not waver. PCT delivered an NPS score of +61, up from +58 last year. Recognition of PCT as a leading corporate trustee business was highlighted by once again being awarded “Trustee of the Year” in the KangaNews Awards[1] – for the sixth consecutive year.

Trustee of the Year awarded by KangaNews. All copyrights reserved 2021.

Perpetual Annual Report 2022

Business division updates continued

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Sam Mosse Chief Risk Officer

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Amanda Gazal Chief Operating Officer, Perpetual Client Solutions

Provided support services for the acquisition of Jacaranda Financial Planning and Laminar Capital

Embedded ESG risk and control processes across all Perpetual businesses

Transitioned to State Street, one of the world’s leading custodians, to contemporise products and services for our clients and people

Supporting a growing global business

As a growing global business with offices across Australia and internationally in Asia, Europe and North America, the way we operate is crucial to providing a seamless experience and quality outcome for our clients and our people.

regulatory permissions and licences in multiple overseas jurisdictions including Hong Kong and the Netherlands.

With an increasing business-wide focus on ESG and Sustainability, LARCC embedded broader ESG and Sustainability risk management and control processes across all Perpetual business units, including our global fund managers Trillium Asset Management and Barrow Hanley.

Client solutions and operations

Risk and Compliance

Perpetual’s Client Solutions (PCS) team, led by Chief Operating Officer Amanda Gazal, aims to champion and enhance our internal and external clients’ experience and redefine how our business is run using technology, data and uplifted processes.

Perpetual’s Legal, Audit, Risk, Compliance and Company Secretariat & Governance (LARCC) is a dedicated support function led by Chief Risk Officer Sam Mosse.

LARCC is responsible for the design, implementation, maintenance and assurance of Perpetual’s risk and compliance frameworks, governance processes, programs, policies and tools to help manage the key risks faced by the Group. In a year of regulatory changes, the teams within LARCC responded by delivering customer-centric solutions to new and updated regulatory guidance across breach reporting, complaints handling and design and distribution obligations. LARCC addressed the increasing geopolitical risk real time through sanctions compliance and asset risk analysis.

PCS continued its implementation of a Microsoft-first strategy, and in the first half of FY22 commenced programs of work, with the main focus on replacing legacy technology and continuing to move core technology infrastructure to the Azure cloud. Our ongoing strategic partnership with Microsoft has helped create a holistic and secure digital platform that will serve the needs of the entire organisation, all around the world, expediting access to information and streamlining operations. Combined with material improvements in information security we are positioning ourselves to more nimbly respond to future growth opportunities. The appointment of a new Chief Technology Officer, Craig Squires, in March 2022 will significantly enhance our technology maturity.

A key pillar of Perpetual’s growth strategy includes exploring both local and global acquisition opportunities. LARCC is deeply involved in the legal, governance, risk and compliance elements of acquisitions including due diligence, licensing disclosure, reporting and meeting obligations. In providing this support, the primary objective is to ensure that acquisitions deliver for our business, clients and shareholders. During FY22, LARCC provided services to support the acquisition of Jacaranda Financial Planning (August 2021) and Laminar Capital (October 2021).

PCS continues to focus on driving benefits from key strategic partners, and in FY22 successfully transitioned to one of the world’s leading custodians, State Street. This transition will significantly strengthen and contemporise the products and services portfolio we offer our clients and our people. PCS also provided significant operational support to PAMI and PAMA following the launch of UCITS sub-funds offshore and the listing of Active ETFs in Australia, as well as further integrating Jacaranda Financial Planning into the Group.

The team also plays a vital role in broadening our current asset management distribution capabilities both in Australia and overseas. In FY22 numerous risk management and compliance frameworks were established, along with continued work towards

Our performance

Directors’ Report

Operating and Financial Review

Financial Report

Sustainability at Perpetual

For more than 135 years, Perpetual has helped protect and grow our clients’ wealth and prosperity.

Our ongoing commitment to building a prosperous future

For more than 135 years, Perpetual has helped protect and grow our clients’ wealth and prosperity. Throughout our history, built from strong foundations as a trustee company, we have supported our clients and our communities through periods of great change, volatility and prosperity.

We are deeply proud of our heritage and as a growing global business we realise the crucial role we play in creating a prosperous and sustainable future for our clients, our people and the communities we are part of. If we want to ensure a prosperous world, we must first build a sustainable world.

During FY22, following extensive client and stakeholder engagement, we developed Perpetual’s Prosperity Plan – a comprehensive, business-wide sustainability strategy that sets out a clear vision and set of commitments to achieve our goals, demonstrating our role in advancing a sustainable and equitable world, and upholding the high standards of governance we hold ourselves to every day.

Perpetual’s Prosperity Plan is focused on four key pillars

Planet People Accelerate the low carbon transition Champion inclusion and Help our clients navigate the risks and high performance opportunities of a low carbon future and Create a harmonious, diverse and reduce our own carbon footprint. inclusive workplace culture that enhances wellbeing and supports each Key commitments: of our people to bring their best. Grow our products and services that support a low carbon future Key commitments: Carbon neutral operations by FY23 40%+ women in leadership by FY24 100% renewably powered operations by FY25 80%+ of our people feel that Perpetual welcomes diverse people and views by FY24 75%+ of our people feel that Perpetual supports their wellbeing by FY24 Communities Governance Support strong communities Set the highest standard Leverage our services, time and philanthropy Draw on our trusted brand and deep history, to support not-for-profit organisations, give to uphold best practices, accountability and back to communities, and help advance integrity in all we do. First Nations prosperity. Key commitments: Key commitments: Increase ESG skills and capabilities across Deliver our 2021-23 Stretch Reconciliation our business Action Plan Uphold our values and always act with Give equivalent to 1% of profit through integrity community giving and volunteering Maintain strong client advocacy with Launch a Global Human Rights Framework 40+ NPS by FY25

We launched this sustainability strategy in our FY22 Sustainability Report and look forward to reporting on the strategy’s progress and outcomes over the coming years. A selection of the 35 commitments in our sustainability strategy are highlighted on the following pages.

For more information on our sustainability strategy and activities see our sustainability reporting at

perpetual.com.au/about/sustainability.

Perpetual Annual Report 2022

Sustainability at Perpetual continued

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Paul Chasemore Executive General Manager, People and Culture

Building a diverse and inclusive workplace is a key priority for Perpetual, and in FY22, we were recognised by the Workplace Gender Equality Agency (WGEA) as an Employer of Choice for Gender Equality, which we have held since 2018.

Accelerating the low carbon transition

Transitioning to a more sustainable planet will transform economies across the globe. As a diversified multi-boutique and global business, each of our asset managers have their own investment philosophies and approaches to managing climate risk and opportunities for our clients.

Trillium, a pioneer in sustainable investing, was among the first group of signatories globally to publish their 2030 interim net zero target in November 2021 in the lead up to the United Nations Climate Change Conference (COP26) in Glasgow. Their interim target is for 75% of the holdings of Trillium-advised larger cap-equity strategies to commit to set science-based targets for reducing their greenhouse gas emissions by 2030. As at 30 June 2022, 60% of Trillium’s investments in larger cap equities had committed to setting such targets, up from 15% on 31 December 2019, which is the baseline for the target.

During FY22, Barrow Hanley provided additional data on climate risks and carbon emissions to their clients. The firm believes setting a science-based target can be an important measure of the commitment a company is making to demonstrate progress toward a low-carbon future. The lack of an ambitious target is often a basis for engagement.

The PAMA Australian Equities team conducted an extensive review in FY22 of how prepared companies in the ASX 300 are for the low a carbon transition. A proprietary net zero scoring framework has also been developed to assess climate-related risks and opportunities for listed companies going forward.

Championing inclusion and high performance

We support our people to thrive at both work and home, as we recognise that our people have full lives, which impact on their experience at work. A number of new initiatives were announced in FY22 including an industry-leading, gender-neutral 20-week paid parental leave program, and a new leave benefit offering our people 10 additional days of community and wellbeing leave each year, up from five previously. In June 2022, we launched LinkedIn Learning for our employees in Australia, giving our people access to more than 6,000 courses designed to support their ongoing education and professional development. This will also be extended to Trillium and Barrow Hanley in the first half of FY23.

Building a diverse and inclusive workplace is a key priority for Perpetual, and in FY22 we were recognised by the WGEA as an Employer of Choice for Gender Equality, which we have held since 2018.

Currently, 34% of our senior leader cohort across our global businesses are women, which is down 36% on the previous year. We are actively seeking to increase the representation of women in investment management and financial advice roles and are encouraging women early in their career to pursue roles in finance through our ongoing collaboration with Future IM/Pact, and a new partnership with F3 – Future Females in Finance, where we hosted 10 university students to complete a six-week work experience program. We also entered into a new partnership with Out Leadership to help to remove the barriers facing LGBTQ+ people in the workplace.

It is also important that we take steps to reduce the environmental footprint from our operations and we have recently appointed a new Sustainability and Environment Manager to drive forward this agenda.

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Our performance Directors’ Report Operating and Financial Review Financial Report 17
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Supporting strong communities

Perpetual is one of the largest managers of philanthropic funds in Australia, and our commitment to helping communities grow and prosper dates back to the 1890s, when we became the trustee of one of Australia’s first charitable trusts.

FY22 saw our clients distribute more than $120 million of their philanthropic funds to not-for-profit and charitable organisations. Over the past 11 years, Perpetual has helped our clients distribute more than $1 billion to the community sector. We partnered with Stanford University to create a philanthropy toolkit to help philanthropists assess not-forprofits and identify the ones that are best aligned to the causes that matter to them.

To hold ourselves accountable for our community giving, we have made a commitment to give equivalent to 1% of our underlying profit before tax through community giving and volunteering. We are aligning our measurement of community giving with the Business for Societal Impact framework, which is a globally recognised standard. Based on this framework, our total community giving and volunteering was equivalent to nearly $2.4m, which was 1.2% of FY22 UPBT.

As trustee of many Native Title agreements, our Native Title team works with Aboriginal and Torres Strait Islander communities to help create intergenerational wealth. One such project working with a Pilbara-based Native Title group, has helped to increase home ownership in one Pilbara community from 2% in 2019 to 30% in June 2022. Our support for First Nations Peoples also extends to our global businesses.

Over the course of the year, Trillium supported Native American activists who were seeking to change the disparaging name and logo of the Kansas City Football team through an engagement with a key commercial sponsor of the team. We fully support the engagement our US-based firms, particularly Trillium, have with these communities.

Setting the highest standard

Strong client relationships are built on foundations of trust, longevity and integrity. In FY22, Perpetual recorded our highest ever NPS of +49, up from +44 in FY21. This demonstrates the strong relationships we continue to have with our clients, which has been of even greater importance in another year of uncertainty due to the COVID-19 pandemic.

Importantly, in FY22, Perpetual continued to deliver ESG products and solutions that meet the growing and evolving needs of our clients. Strong demand for our ESG capabilities saw PAMI launch three ESG UCITS sub-funds in Europe, and have one other authorised, during the year, while PAMA launched our first Active ETF, the Perpetual Ethical SRI Fund (Managed Fund) (ASX: GIVE), on the ASX – providing investors an easy and accessible way to access our world-class investment capabilities.

Community contributions equivalent to

$2.4m in total community giving and volunteering

Net Promoter Score

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+
49
+45 +44
FY20 FY21 FY22
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See our full Sustainability Report for 2022

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Enduring Prosperity
Sustainability Report 2022
Trust is earned.
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perpetual.com.au/ sustainability

Perpetual Annual Report 2022

Directors’ Report

for the year ended 30 June 2022

Directors

The Directors present their report together with the consolidated financial report of Perpetual Limited, (‘Perpetual’ or the ‘Company’) and its controlled entities (the ‘consolidated entity’), for the year ended 30 June 2022 and the auditor’s report thereon.

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Tony D’Aloisio AM Chairman and Independent Director

Mona Aboelnaga Kanaan Independent Director

Gregory Cooper Independent Director

BA LLB (Hons) (Age 72)

Mr D’Aloisio has been an Independent Non-Executive Director of Perpetual since December 2016. Mr D’Aloisio became Chairman of Perpetual in May 2017.

Skills and experience

Mr D’Aloisio has held leadership roles in listed and non-listed companies. He was CEO and MD at the Australian Securities Exchange from 2004–2006. Mr D’Aloisio was Chief Executive Partner at Mallesons Stephen Jaques between 1992–2004 having first joined the firm in 1977. Mr D’Aloisio was appointed a Commissioner for the Australian Securities and Investments Commission (ASIC) in 2006 and Chairman in 2007 for a four-year term. He was Chairman of the (International) Joint Forum of the Basel Committee on banking supervision from 2009–2011.

Most recently Mr D’Aloisio was Chairman of IRESS Limited (technology). He was a Non-Executive director of PPB Advisory Pty Ltd 2012–2016 (financial reconstructions) and a Non-Executive Director of ASX-listed Boral Limited 2002–2004 as well as a director of the Business Council of Australia 2003–2006 and the World Federation of Exchanges 2004–2006. He was President of the Australian Winemakers Federation 2012–2016.

Currently Mr D’Aloisio is also a Director of the Aikenhead Centre for Medical Discovery Pty Ltd and President of the European Capital Markets Cooperative Research Centre as well as Chairman of Aircellar Pty Ltd.

Listed company directorships held during the past three financial years:

IRESS Limited (from June 2012 to May 2021)

Board Committee memberships

Chairman of the Nominations Committee

BSc (Econ) MBA (Age 54)

Ms Aboelnaga Kanaan has been an Independent

Non-Executive Director since 2021.

Skills and experience

Based in New York, USA, Ms Aboelnaga Kanaan is a seasoned director, entrepreneur and asset management executive having held leadership positions over a distinguished career spanning more than 30 years. She is currently the Managing Partner of K6 Investments LLC, an independent private equity firm which she founded in 2011.

Previously, Ms Aboelnaga Kanaan served as President and CEO of Proctor Investment Managers, a firm she co-founded in 2002 to acquire and scale traditional and alternative asset managers. Ms. Aboelnaga Kanaan sold the firm to National Bank of Canada in 2006, acquired affiliates managing nearly $14 billion in assets under management and continued as Proctor’s President and CEO until 2013.

With expertise in public as well as private financial services firms, Ms Aboelnaga Kanaan is currently a Director of Webster Financial Corporation (WBS), FinTech Acquisition Corp VI (Nasdaq: FTVI) and has served as a Board Member of a number of traditional and alternative asset managers in the United States including, Siguler Guff’s BDC and Peridiem Global Investors. With a commitment to education and economic empowerment, she also has extensive non-profit board experience in those fields including as an investment committee

member of sizeable educational endowments.

Listed company directorships held during the past three financial years

Webster Financial Corporation
(from February 2022 following merger with Sterling Bancorp)

FIA, FIAA, BEc (Actuarial Studies) (Age 51) Mr Cooper has been an Independent Non-Executive Director of Perpetual since September 2019.

Skills and experience

Mr Cooper has more than 26 years of global investment industry experience in the UK, Asia and Australia with a deep understanding of international funds management.

Mr Cooper brings strong financial services and strategy expertise to the Perpetual Board predominantly gained from his executive career at Schroders Australia where he was the Chief Executive Officer from 2006 to 2018 with responsibility for Schroders’ institutional business across Asia Pacific and then globally, and his current non-executive career across the superannuation, banking and technology sectors.

Mr Cooper currently serves as a Non-executive Director of NSW Treasury Corporation, where he also chairs the Investment Committee. He is currently the Chairman of Avanteos Investments Limited (part of the Colonial First State Group). Mr Cooper is a Non-Executive Director of Australian Payments Plus Limited and its subsidiaries/related entities; Catholic Church Insurance, OpenInvest Holdings, the Australian Indigenous Education Foundation and EdStart. Previously Mr Cooper acted as a Non-executive Director to the Financial Services Council and held the position of Chairman from 2014 to 2016.

Board Committee memberships

Member of the Audit, Risk and Compliance Committee
Member of the Investment Committee
Member of the People and Remuneration Committee
Fintech Acquisition Corp. VI (from February 2021 to present)

Board Committee memberships

Member of the Investment Committee
Member of the People and Remuneration Committee

Our performance Directors’ Report

Operating and Financial Review

Financial Report

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Nancy Fox AM Independent Director

BA JD (Law) FAICD (Age 65)

Ms Fox has been an Independent Non-Executive Director of Perpetual since September 2015.

Skills and experience

Ms Fox has more than 30 years’ experience in financial services, securitisation and risk management gained in Australia, the US and across Asia. A lawyer by training, she was Deputy Chairman of the Board of Taronga Conservation Society Australian until 2021, Managing Director for Ambac Assurance Corporation from 2001 to 2011 and previously Managing Director of ABN Amro Australia from 1997 to 2001.

Ms Fox brings to the Board a deep knowledge of developing and leading successful financial services businesses and extensive experience with securitisation, regulatory frameworks, risk management and governance.

She is currently Chairman of Perpetual Equity Investment Company Limited, a Non-executive Director of Lawcover Pty Ltd, Mission Australia, Aspect Studios Pty Ltd and O’Connell Street Associates.

Listed company directorships held during the past three financial years

Perpetual Equity Investment Company Limited (from July 2017 to present)

Board Committee memberships

Chair of the People and Remuneration Committee
Member of the Audit, Risk and Compliance Committee
Member of the Nominations Committee

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Ian Hammond Independent Director

BA (Hons) FCA FCPA FAICD (Age 64)

Mr Hammond has been an Independent Non-Executive Director of Perpetual since March 2015.

Skills and experience

Mr Hammond was a partner at PricewaterhouseCoopers for 26 years and during that time held a range of senior management positions including lead partner for several major financial institutions. He has previously been a member of the Australian Accounting Standards Board and represented Australia on the International Accounting Standards Board.

Mr Hammond has a deep knowledge of the financial services industry and brings to the Board expertise in financial reporting, risk management, and mergers and acquisitions. He has provided extensive advisory and audit services to PwC’s domestic and global clients in banking, insurance and asset management. Mr Hammond is a Non-Executive Director of Suncorp Group Limited, and Venues NSW, and a Board Member of not-for-profit organisations including Mission Australia and Chris O’Brien Lifehouse.

Listed company directorships held during the past three financial years

Suncorp Group Limited (from October 2018 to present)

Board Committee memberships

Chairman of the Audit, Risk and Compliance Committee
Member of the Investment Committee
Member of the Nominations Committee

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Fiona Trafford-Walker Independent Director

BEc, M. Fin (Age 55)

Ms Trafford-Walker has been an Independent Non-Executive Director of Perpetual since December 2019.

Skills and experience

Ms Trafford-Walker has over 30 years of senior executive and business management experience within the investment industry, bringing extensive knowledge of investment management and a strong institutional and international perspective to the Perpetual Board.

Ms Trafford-Walker began her career in institutional investment consulting in 1992, and until December 2019 was an Investment Director at Frontier Advisors (Frontier). At various times during her tenure, she was responsible for the original development and on-going management of Frontier’s business, as well as providing investment and governance advice to a number of the firm’s clients.

Currently Ms Trafford-Walker is a Non-Executive Director of Victorian Funds Management Corporation, Prospa Group Ltd, Link Administration Holdings, Eclipx Group, an Investment Committee Member of the Walter and Eliza Hall Institute and a Strategic Advisor to the QE Advisory Board.

Listed company directorships held during the past three financial years

Prospa Group Limited (from March 2018 to present)
Link Administration Holdings (from October 2015 to present)
Eclipx Limited (from July 2021 to present)

Board Committee memberships

Member of the Investment Committee
Member of the People and Remuneration Committee

Perpetual Annual Report 2022

Directors’ Report

for the year ended 30 June 2022

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P Craig Ueland Independent Director

BA (Hons and Distinction) MBA (Hons) CFA (Age 63)

Mr Ueland has been an Independent Non-Executive Director of Perpetual since September 2012.

Skills and experience

Mr Ueland was formerly President and Chief Executive Officer of Russell Investments, a global leader in multi-manager investing. He previously served as Russell’s Chief Operating Officer, Chief Financial Officer, and Managing Director of International Operations, which he led from both London and the firm’s headquarters in the US. Earlier in his career he opened and headed Russell’s first office in Australia.

Mr Ueland brings to the Board detailed knowledge of global financial markets and the investment management industry, gleaned from more than 20 years as a senior executive of a major investment firm, along with a strong commitment to leadership development and corporate strategy development and execution.

Mr Ueland is a Committee member of the Endowment Investment Committee for The Benevolent Society and is a Board Member of the Stanford Australia Foundation and the Supervisory Board of OneVentures Innovation and Growth Fund II.

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Rob Adams Chief Executive Officer and Managing Director

BBus (Accounting) (Age 56)

Mr Adams has been the Chief Executive Officer and Managing Director of Perpetual since September 2018.

Skills and experience

Mr Adams is a proven financial services business leader with over 30 years’ experience locally and globally across funds management, financial advice and fiduciary services.

Before Perpetual, Mr Adams was Head of Pan-Asia and a member of the Global Executive Committee of Janus Henderson where he had been for six years. Prior to that, he was Chief Executive of Challenger Funds Management, and was previously CEO of First State Investments UK.

Mr Adams holds a Bachelor of Business degree (Accounting). He is Chairman of the Abbotsleigh Foundation.

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Sylvie Dimarco Company Secretary

LLB, GradDipAppCorpGov, FGIA, FCG, GAICD Ms Dimarco was appointed Company Secretary of Perpetual in April 2020.

Skills and experience

Ms Dimarco joined Perpetual in 2014 and is currently Head of Company Secretariat & Governance at Perpetual. She is also Company Secretary of Perpetual Equity Investment Company Limited (ASX: PIC) and all of Perpetual’s subsidiary boards. She is a member of the Perpetual Limited Continuous Disclosure Committee.

Ms Dimarco has over 15 years’ experience in company secretariat practice and administration for listed and unlisted companies. Before Perpetual, she practised as a commercial lawyer in Sydney and Canberra for 11 years, working in predominantly mid-sized law firms.

Ms Dimarco holds a Bachelor of Laws degree from the University of Sydney and has completed the Governance Institute of Australia’s Graduate Diploma of Applied Corporate Governance. Ms Dimarco is a Graduate of the Australian Institute of Company Directors course.

Board Committee memberships

Chairman of the Investment Committee
Member of the Audit, Risk and Compliance Committee
Member of the Nominations Committee

Directors’ Report

Our performance

Operating and Financial Review

Financial Report

Directors’ meetings

The number of Directors’ meetings which Directors were eligible to attend (including meetings of Board Committees) and the number of meetings attended by each Director during the financial year to 30 June 2022 were:

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AUDIT, RISK AND PEOPLE AND
COMPLIANCE REMUNERATION INVESTMENT NOMINATIONS
BOARD COMMITTEE (ARCC) COMMITTEE (PARC) COMMITTEE COMMITTEE
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			MEMBER		MEMBER		MEMBER		MEMBER
	ELIGIBLE		ELIGIBLE		ELIGIBLE		ELIGIBLE		ELIGIBLE
	TO		TO		TO		TO		TO
DIRECTOR	ATTEND	ATTENDED	ATTEND	ATTENDED	ATTEND	ATTENDED	ATTEND	ATTENDED	ATTEND	ATTENDED
Tony D'Aloisio	23	23	–	–	–	–	–	–	–	–
Mona Aboelnaga Kanaan	23	23	–	–	4	4	4	4	–	–
Gregory Cooper	23	23	6	6	7	7	6	6	–	–
Nancy Fox	23	23	6	6	7	7	–	–	–	–
Ian Hammond	23	23	6	6	–	–	6	6	–	–
Fiona Trafford-Walker	23	23	–	–	7	7	6	6	–	–
Craig Ueland	23	23	6	6	–	–	6	6	–	–
Rob Adams	23	23	–	–	–	–	–	–	–	–

Directors from time to time may and do attend committee meetings even though they may not be a member of that committee.

Corporate Governance Statement

Perpetual’s Corporate Governance Statement, which meets the requirements of ASX Listing Rule 4.10.3, is located on the Corporate - Governance page of Perpetual’s website at perpetual.com.au/about/corporate governance

Principal activities

The principal activities of the consolidated entity during the financial year were portfolio management, financial planning, trustee, responsible entity and compliance services, executor services, accounting and tax services, investment administration and custody services.

Perpetual Annual Report 2022

Directors’ Report

for the year ended 30 June 2022

Review of operations

A review of operations is included in the Operating and Financial Review section of the Annual Report.

For the financial year to 30 June 2022, Perpetual reported a net profit after tax attributable to equity holders of Perpetual Limited of $101.2 million compared to the net profit after tax attributable to equity holders of Perpetual Limited for the financial year to 30 June 2021 of $72.9 million.

For the financial year to 30 June 2022, Perpetual reported an underlying profit after tax (UPAT) attributable to equity holders of Perpetual Limited of $148.2 million compared to the UPAT attributable to equity holders of Perpetual Limited for the financial year ended 30 June 2021 of $122.8 million.

UPAT attributable to equity holders of Perpetual Limited excludes certain items, that are either significant by virtue of their size and impact on net profit after tax attributable to equity holders of Perpetual Limited, or are determined by the Board and management to be outside normal operating activities. UPAT attributable to equity holders of Perpetual Limited is disclosed as it is useful for investors to gain a better understanding of Perpetual’s financial results from normal operating activities.

The reconciliation of net profit after tax attributable to equity holders of Perpetual Limited to UPAT attributable to equity holders of Perpetual Limited for the financial year to 30 June 2022 is shown below.

	30 JUNE 2022	30 JUNE 2021
	$M	$M
Net proft after tax attributable to equity holders of Perpetual Limited	101.2	72.9
Signifcant items after tax
Expense cloud computing costs1	–	0.7
Transaction and integration costs2	22.2	32.1
Non-cash amortisation of acquired intangible assets3	18.6	13.6
Unrealised losses/(gains) on fnancial assets4	10.9	(6.8)
Accrued incentive compensation liability5	(4.7)	10.3
Underlying proft after tax attributable to equity holders of Perpetual Limited	148.2	122.8

Reflects a restatement of prior year comparatives for the change in accounting policy relating to Software-as-a-Service (SaaS) arrangements. Refer to Section 6-4(a) of the financial statements for further details.
Relates to costs associated with the acquisition/establishment of Trillium, Barrow Hanley and other entities. Costs include professional fees, administrative and general expenses and staff costs related to specific retention and performance grants.
Relates to amortisation expense on customer contracts and non-compete agreements acquired through business combinations.
Relates to unrealised mark to market gains and losses on EMCF, seed fund investments and financial assets held for regulatory purposes.
This liability reflects the value of employee owned units in Barrow Hanley.

Directors’ Report

Our performance

Operating and Financial Review

Financial Report

UPAT attributable to equity holders of Perpetual Limited reflects an assessment of the result for the ongoing business of the consolidated entity as determined by the Board and management. UPAT has been calculated in accordance with ASIC’s Regulatory Guide 230 – Disclosing non-IFRS financial information . UPAT attributable to equity holders of Perpetual Limited has not been audited by our external auditors; however, the adjustments to net profit after tax attributable to equity holders of Perpetual Limited have been extracted from the books and records that have been audited.

COVID-19 continues to have an impact on global economies and financial markets, resulting in significant economic uncertainty and market volatility. It has also led to material structural shifts in the behaviour of the economy and unprecedented actions by financial markets, governments and regulators. Financial markets are also dealing with the impact of Russia’s invasion of Ukraine and rising inflation and interest rates. The consolidated entity continues to monitor the impact of these factors on its operations, control environment and financial reporting.

Consistent with the approach applied in the preparation of the half-year financial statements at 31 December 2021, management has evaluated whether there were any additional areas of significant judgement or estimation uncertainty, assessed the impact of market inputs and variables potentially impacted by prevailing conditions on the carrying values of its assets and liabilities, and considered the impact on the consolidated entity’s financial statement disclosures. As disclosed in the interim financial report, the consolidated entity’s revenues have a high degree of exposure to market volatility which has the potential to lead to a material financial impact. The US operations are similarly exposed to market movements due to the nature of the business. Whilst this has been factored into the preparation of the financial report, the accounting policies and methodologies have been applied on a consistent basis to the half-year financial report. The Directors and management continue to closely monitor developments with a focus on potential financial and operational impacts as developments arise.

Dividends

Dividends paid or provided by the Company to members since the end of the previous financial year were:

		TOTAL
	CENTS	AMOUNT	FRANKED 1/	DATE OF
	PER SHARE	$M	UNFRANKED	PAYMENT
Declared and paid during the fnancial year 2022
Final 2021 ordinary	96	54.3	Franked	24 Sep 2021
Interim 2022 ordinary	112	63.4	Franked	01 Apr 2022
Total		117.7
Declared after the end of the fnancial year 2022
After balance date, the Directors declared the following dividend:
Final 2022 ordinary	97	55.0	Franked	30 Sep 2022
Total		55.0

All franked dividends declared or paid during the year were franked at a tax rate of 30% and paid out of retained earnings.

The financial effect of dividends declared after year end are not reflected in the 30 June 2022 financial statements and will be recognised in subsequent financial reports.

State of affairs

There were no significant changes in the state of affairs of the consolidated entity during the financial period.

Perpetual Annual Report 2022

Directors’ Report

for the year ended 30 June 2022

Events subsequent to reporting date

A final dividend of 97 cents per share fully franked was declared on 25 August 2022 and is to be paid on 30 September 2022.

On 25 August, Perpetual announced that it is has entered into a binding Scheme Implementation Deed (‘SID’) with Pendal Group (‘Pendal’) (ASX:PDL) under which Perpetual will acquire 100% of shares in Pendal by way of a Scheme of Arrangement (‘the Acquisition’).

The Scheme is subject to customary conditions and approvals including court, regulatory and Pendal shareholder approval as well as obtaining the appropriate number of Pendal client consents.

Pendal’s Board of Directors has unanimously recommended that Pendal shareholders accept Perpetual’s offer, in the absence of any superior proposal and subject to independent expert’s opinion that the scheme is in the best interests of shareholders.

The acquisition is currently expected to close by late calendar year 2022 or early calendar year 2023, subject to requisite shareholder and regulatory approvals.

The acquisition will be effected via a share exchange with every 7.50 shares of Pendal common stock exchanged for one newly issued share in Perpetual and A$1.976 cash per Pendal share. Based on the last closing share price of Perpetual at 24 August 2022 of $30.30, the offer implies an acquisition price of $6.02 for each Pendal share.

The cash component of the offer, totalling $757 million, will be funded via a new debt facility. The new facility will also re-finance the existing debt facility and includes undrawn headroom for liquidity management purposes. The new facility will consist of three core facilities, three acquisition facilities and a bridge loan facility. The core facilities will consist of:

a multi-currency redrawable loan facility with a maximum commitment of A$175 million or equivalent and a term of three years expiring in November 2025 (Facility Core 1);
a multi-currency term loan facility with a maximum commitment of USD128 million or equivalent and a term of four years expiring in November 2026 (Facility Core 2); and
a redrawable Letter of Credit facility with a maximum commitment of A$160 million and a term of three years expiring in November 2025 (Facility Core 3).

The acquisition facilities will consist of:

a multi-currency redrawable loan facility with a maximum commitment of A$115 million and a term of three years expiring in November 2025 (Facility Acquisition 1);
a UK pound term loan facility with a maximum commitment of GBP115 million and a term of three years expiring in November 2025 (Facility Acquisition 2); and
a multi-currency term loan facility with a maximum commitment of USD45 million and a term of four years expiring in November 2026 (Facility Acquisition 3).

The bridge loan facility will have a maximum commitment of A$400 million and a term of two years expiring in November 2024 (Bridge Facility).

Interest expense on the new facilities other than Facility Core 3 will be based on the relevant floating rate benchmark plus a margin. Interest expense on Facility Core 3 is at a flat rate.

As previously indicated, Perpetual will not be raising equity to fund any portion of the cash consideration.

Other than the matters noted above, the Directors are not aware of any other event or circumstance since the end of the financial year not otherwise dealt with in this report that has affected or may significantly affect the operations of the consolidated entity, the results of those operations or the state of affairs of the consolidated entity in subsequent financial years.

Directors’ Report

Our performance

Operating and Financial Review

Financial Report

Likely developments

Information about the business strategies and prospects for future financial years of the consolidated entity are included in the Operating and Financial Review. With the exception of the previous disclosure regarding the acquisition, further information about likely developments in the operations of the consolidated entity and the expected results of those operations in future financial years has not been included in this report because disclosure of the information would be likely to result in unreasonable prejudice to the consolidated entity because the information is commercially sensitive.

Environmental regulation

The consolidated entity acts as trustee or custodian for a number of property trusts which have significant developments throughout Australia. These fiduciary operations are subject to environmental regulations under both Commonwealth and State legislation in relation to property developments. Approvals for commercial property developments are required by State planning authorities and environmental protection agencies. The licence requirements relate to air, noise, water and waste disposal. The responsible entity or manager of each of these property trusts is responsible for compliance and reporting under the government legislation.

The consolidated entity is not aware of any material non-compliance in relation to these licence requirements during the financial year.

The consolidated entity has determined that it is not required to register to report under the National Greenhouse and Energy Reporting Act 2007 , which is Commonwealth environmental legislation that imposes reporting obligations on entities that reach reporting thresholds during the financial year.

Indemnification of Directors and officers

The Company and its controlled entities indemnify the current Directors and officers of the companies against all liabilities to another person (other than the Company or a related body corporate) that may arise from their position as Directors of the consolidated entity, except where the liabilities arise out of conduct involving a lack of good faith. The Company and its controlled entities will meet the full amount of any such liabilities, including costs and expenses. The auditor of the Company is in no way indemnified out of the assets of the Company.

Insurance

In accordance with the provisions of the Corporations Act 2001 , the Company has a Directors and officers’ liability policy which covers all Directors and officers of the consolidated entity. The terms of the policy specifically prohibit disclosure of details of the amount of the insurance cover and the premium paid.

Perpetual Annual Report 2022

Directors’ Report

for the year ended 30 June 2022

Directors’ interests in registered schemes

As at the date of this report, directors had the following relevant interests in registered schemes made available by the Company or a related body corporate of the Company.

		RELEVANT INTEREST
NAME	REGISTERED SCHEME	(UNITS)
Tony D’Aloisio	Perpetual Credit Income Trust	227,000
	Perpetual Pure Microcap Fund Class A	65,608
	Perpetual Wholesale Industrial Share Fund	149,490
	Perpetual Share Plus Long Short Fund	71,721
	Perpetual Wholesale Global Share Fund	77,156
Ian Hammond	Perpetual Wholesale Geared Australian Fund	133,660
	Perpetual Wholesale Industrial Share Fund	252,942
	Eley Griffths Group Small Companies Fund	152,591
Nancy Fox	Perpetual Credit Income Trust	10,935
	Perpetual Wholesale Ethical SRI Fund	42,429
	Perpetual Global Innovation Share Fund Class A	93,337
	Perpetual Ethical SRI Credit Fund	28,206
	Trillium Global Sustainable Opportunity Fund	29,847
	Implemented Real Estate Portfolio	23,012
Craig Ueland	Perpetual Pure Credit Alpha Fund Class W	23,670
	Perpetual Global Innovation Share Fund Class A	4,062,542
	Perpetual Pure Equity Alpha Fund	460,803
Rob Adams	Perpetual Industrial Share Fund	47,743
	Perpetual Australian Share Fund	6,296
	Perpetual Wholesale Diversifed Income Fund	154,919
	Perpetual Wholesale Plus Global Share Fund	149,981

Chief Executive Officer and Managing Director’s and Chief Financial Officer’s declaration

The CEO and Managing Director, and the CFO declared in writing to the Board, in accordance with section 295A of the Corporations Act 2001 , that the financial records of the Company for the financial year have been properly maintained, and that the Company’s financial report for the year ended 30 June 2022 complies with accounting standards and presents a true and fair view of the Company’s financial condition and operational results. This statement is required annually.

Directors’ Report

Our performance

Operating and Financial Review

Financial Report

Remuneration Report

Dear Shareholder,

On behalf of your Board, as always it gives me great pleasure to present our Remuneration Report for the financial year ended 30 June 2022 (FY22).

Perpetual’s purpose is ‘enduring prosperity’. In our view, this is best achieved by having highly engaged people creating superior client outcomes, which in turn delivers underlying earnings growth for shareholders. Our Remuneration Report provides our shareholders and other stakeholders with a thorough and transparent explanation of how remuneration outcomes for our Key Management Personnel (KMP) align with our recent performance, long-term objectives, and reflect the current economic and labour market context.

Perpetual’s performance in FY22

Perpetual delivered strong financial performance in FY22. Underlying profit after tax (UPAT) was $148.2m, exceeding prior year by 21% and the Board-approved business plan by 3%. Underlying earnings per share (EPS) of $2.58 represented growth of +18% on prior year.

Perpetual demonstrated growth in UPBT across all four divisions in FY22, reflecting the strength of our diversified business model. Importantly, Perpetual’s recent acquisitions translated into shareholder value in FY22. Barrow Hanley exceeded the stated target of 20% underlying EPS accretion in the first full year following acquisition, Trillium Asset Management delivered over A$639m of positive net inflows and the acquisitions of Jacaranda Financial Planning and Laminar Capital, which each completed early in the financial year, are performing ahead of expectations for key growth and financial metrics.

Perpetual takes a long-term view of performance, with the delivery of multi-year strategic priorities of particular importance. Successful delivery of the strategy is assessed by clear annual client, people, growth and financial measures which are aligned to long-term strategic objectives, thereby balancing short-term outcomes with the necessary investments for long-term sustainable growth.

Perpetual’s financial results were delivered while continuing to invest in future growth and value-generating initiatives for our core businesses. Perpetual established the first of a suite of Collateralised Loan Obligation (CLO) funds, launched a suite of US Mutual Funds, listed a suite of active ASX ETFs for our Australian and global investment teams and increased our investment in technology relative to FY21.

In FY22 our Australian Equities and Barrow Hanley investment teams delivered strong investment performance relative to agreed benchmarks. More broadly, Perpetual’s Group Net Promoter Score (NPS) outcome of +49 was improved on the prior year outcome of +44 and exceeded Perpetual’s goal of maintaining NPS above +40.

FY22 variable remuneration outcomes

Perpetual continues to use a balanced scorecard that considers short, medium and long-term strategic priorities. Perpetual’s group scorecard remains weighted 60% to financial performance measures and 40% to other strategically important non-financial measures that the Board considers to be key lead indicators of future business value creation.

The People and Remuneration Committee (PARC) and the Board spend considerable time each year evaluating the contribution and performance of the CEO and other Executive KMP. In arriving at the proposed Variable Incentive outcomes for Executive KMP, the Board weighed up strong financial performance despite continued pressure on net flows in our asset management businesses, continued delivery on client outcomes, successful implementation of strategy and shareholder alignment and returns. The Board has determined to award the CEO a Variable Incentive award of 106% of target, or 61% of maximum opportunity, with individual outcomes for other Executive KMP averaging 103% of target, or 59% of maximum opportunity. The aggregate Variable Incentive outcomes approved for the CEO and other Executive KMP align to the bonus funding levels approved more broadly across Perpetual.

Perpetual Annual Report 2022

Directors’ Report

Remuneration Report for the year ended 30 June 2022

External market conditions

FY22 presented dynamic market conditions globally. The COVID-19 pandemic continued to be a driver of volatility in several markets in which Perpetual operates. As we emerged from the pandemic, it became evident that the market for key talent was increasingly competitive. For Perpetual, this resulted in a return to pre-COVID employee turnover rates, challenges in filling some open vacancies and increasing pressure on wages across many parts of the organisation. Perpetual is not alone in facing these market challenges, and in early FY22 we made a number of proactive changes to benefits, leave entitlements and other flexibility initiatives to further enhance the overall employee experience. Despite this investment, Perpetual has remained disciplined in its approach to cost control, with expense growth remaining within guidance.

As foreshadowed in the FY21 Remuneration Report, changes to fixed remuneration and Variable Incentive targets were made for the Executive KMP as part of the July 2021 remuneration review. The aggregate impact of these fixed remuneration adjustments was a 3.2% increase to fixed pay for the Executive team during FY22 (see Section 1.1 for further information).

Looking forward to FY23

Perpetual’s long-term success depends on its ability to attract, motivate and retain talented people. The competition for top talent is intensifying both in Australia and overseas. With this in mind, and in recognition that Perpetual is increasingly competing for talent globally, the Board reviewed compensation for Executive KMP and considered whether the current long-term incentive (LTI) plan should be enhanced. A number of resulting changes will take effect for the performance period commencing FY23, as summarised below:

Aggregate fixed pay increases of 5.3% have been agreed and will take effect from 1 September 2022, (with no change being made to the CEO’s fixed pay). More substantial changes have been made to Variable Incentive targets for some Executive KMP (including the CEO) with effect from 1 July 2022.
Perpetual will decouple the Hurdled Equity component from the combined Variable Incentive with effect from 1 July 2022. The Hurdled Equity component of the Variable Incentive structure will remain subject to the existing long-term absolute TSR performance hurdle and performance range of 7–10% CAGR, however awards will no longer be subject to the group scorecard assessment prior to allocation. The Cash and Unhurdled Equity components of the Variable Incentive will remain unchanged and be subject to the group scorecard assessment. Each Executive KMP will continue to have a target Hurdled Equity amount that will form the starting basis for the Board’s determination of each year’s allocation. While the Board will retain discretion to adjust individual Executive KMP Hurdled Equity allocations higher or lower each year, it is expected that this change will result in more consistent Hurdled Equity allocations being made to Executive KMP across business cycles – similar to a traditional LTI.

Executive KMP Growth Long-term Incentive

– Perpetual has made a number of strategic acquisitions and investments over the past two years and the next three to five years will be a critical period for Perpetual to realise the scale and benefit of these investments and deliver improved returns for shareholders. In order to support successful integration and implementation across a number of key deliverables, in September 2022, the Company will grant a growth-orientated long-term incentive to Executive KMP. This grant will be subject to meeting a stretch compound annual growth (CAGR) absolute TSR hurdle, with awards that will vest over a period of three to five years, with any vested shares held under restriction for a full five-year period. See Section 7.6 for further information.

Conclusion

On behalf of the Board, I would like to thank shareholders and other stakeholders for your valuable feedback and ongoing dialogue on our remuneration approach. We are confident that we have balanced shareholder interests whilst also ensuring that our team is appropriately remunerated such that your company has the best possible opportunity to deliver on our strategic goals.

Yours sincerely,

==> picture [135 x 42] intentionally omitted <==

Nancy Fox Chairman, People and Remuneration Committee

Directors’ Report

Our performance

Operating and Financial Review

Financial Report

1.	Key Management Personnel	29
2.	Governance	31
3.	Our people	32
4.	Our remuneration philosophy and structure	36
5.	Managing risk within Perpetual	38
6.	Aligning Perpetual Group performance and reward	41
7.	Variable reward	45
8.	Data disclosures – Executive KMP	54
9.	Non-executive Director remuneration	62
10.	Key terms	65

1. Key Management Personnel

NAME	POSITION	TERM AS KMP IN FY22
Executive KMP
CEO and Managing Director
Rob Adams	Chief Executive Offcer and Managing Director	Full year
Group Executives
Amanda Gazal	Chief Operating Offcer	Full year
Amanda Gillespie	Group Executive, Perpetual Asset Management Aust.	Full year
Chris Green	Chief Financial Offcer	Full year
David Lane	Group Executive, Perpetual Asset Management Int.	Full year
Richard McCarthy	Group Executive, Perpetual Corporate Trust	Full year
Sam Mosse	Chief Risk Offcer	Full year
Mark Smith	Group Executive, Perpetual Private	Full year
Non-executive KMP
Non-executive Directors
Tony D'Aloisio	Chairman	Full year
Mona Aboelnaga Kanaan	Independent Director	Full year
Gregory Cooper	Independent Director	Full year
Nancy Fox	Independent Director	Full year
Ian Hammond	Independent Director	Full year
Fiona Trafford-Walker	Independent Director	Full year
Craig Ueland	Independent Director	Full year

Perpetual Annual Report 2022

Directors’ Report

Remuneration Report for the year ended 30 June 2022

1.1 Summary of key outcomes for Executive KMP

Executive KMP remuneration changes during FY22

Section 8 of this report provides further information on individual Executive KMP remuneration levels. As foreshadowed in the FY21 Remuneration Report, changes to fixed remuneration and Variable Incentive Targets were made as part of the July 2021 remuneration review. All increases were determined in consideration of relevant market data and trends, as well as to reflect continued development in role and the increasing complexity and breadth of managing a global business.

The aggregate impact of the fixed pay adjustments was a 3.2% increase to the aggregate fixed pay of Executive KMP during FY22. The CEO did not receive a fixed pay change in FY22.

Variable Incentive awards FY22

Section 7 of the Remuneration Report summarises business performance and associated Executive KMP Variable Incentive outcomes, which averaged 103% of target (59% of maximum target) for Executive KMP (excl. CEO) and 106% of target (61% of max) for the CEO in FY22.

Arrangements for Executive KMP who joined or ceased in FY22

No Executive KMP joined or ceased during FY22.

Remuneration changes for FY23

Following a detailed review of KMP remuneration in FY22, several changes to fixed remuneration levels and target Variable Incentive opportunity levels have been agreed for FY23. The Board is attuned to the current competitive landscape and believe the agreed arrangements for FY23 position the Group to maintain a stable and motivated Executive team, with particular focus on incentivising our KMP to continue to deliver on our agreed longer term strategic priorities.

Executive KMP target packages for FY23

Aggregate fixed pay increases of 5.3% have been agreed and will take effect from 1 September 2022. The CEO’s fixed remuneration will not change for FY23 and has not been adjusted since his appointment to the role in September 2018.
More substantial changes to Variable Incentive targets for some Executive KMP (including the CEO) have also been agreed with effect from 1 July 2022. The Board believes that increasing the CEO’s target Variable Incentive (from 186% to 219% of fixed pay in total) instead of fixed remuneration increases supports our pay-for-performance philosophy, while ensuring market competitiveness against comparable roles in the diversified financial services industry is maintained.

Executive KMP Variable Incentive structure

For FY22 Perpetual operated a combined Variable Incentive structure for Executive KMP, which consists of a Cash, Unhurdled Equity and Hurdled Equity component (see Section 4 for more detail). Under the combined Variable Incentive, each component of the Variable Incentive structure is subject to a group scorecard assessment at the conclusion of the performance year, which determines the size of the allocation for each Executive KMP member.
For FY23 (effective for the performance period commencing 1 July 2022), the Hurdled Equity component of the Variable Incentive structure will remain subject to the existing long-term absolute TSR performance hurdle and performance range of 7–10% CAGR, however awards will no longer be subject to the group scorecard assessment prior to allocation. Each Executive KMP will continue to have a target Hurdled Equity amount that will form the starting basis for the Board’s determination of each year’s allocation. While the Board will retain discretion to adjust individual Executive KMP allocations higher or lower each year, it is expected that this change will result in more consistent allocations being made to Executive KMP across business cycles.

Further detail on this change will be provided in the FY23 Remuneration Report.

Directors’ Report

Our performance

Operating and Financial Review

Financial Report

Executive KMP Growth Incentive

Perpetual has made a number of strategic acquisitions and investments over the past two years and the next three to five years will be a critical period for Perpetual to realise the scale and benefit of these investments and deliver improved returns for shareholders.

In recognition of this critical period, during FY22 the Board reviewed whether the current long-term incentive compensation program in place for Executive KMP should be modified or enhanced. Effective September 2022, the Company will grant a new growth orientated long-term incentive to Executive KMP (Growth LTI).

The Growth Incentive aims to further align Executive KMP with the Perpetual shareholder experience through incentivising the delivery of sustained shareholder value from recent strategic investments. Importantly, these awards will only deliver value when absolute TSR exceeds the existing 7–10% per annum vesting range in the KMP Hurdled Variable Incentive Awards. The Board believes this represents a significant degree of stretch performance when compared to the TSR achieved by the Company in recent years, which will require ongoing significant expansion in underlying EPS.
The vesting hurdle for these awards will be CAGR absolute TSR of at least 10% (0% vesting) to 15% (100% vesting). Subject to meeting this hurdle, vesting will occur equally after three, four and five years, with any vested equity restricted until year five.
The proposed Growth LTI award for the CEO, which will be subject to shareholder approval at the forthcoming AGM, is an award of Hurdled Performance Rights with a fair value[ 1] of $1.4 million, and for other Executive KMP, aggregate awards with a fair value totalling $4.3 million.

Further details of these awards, including individual allocations and associated hurdles and conditions, are provided in Section 7.6.

1.2 Non-executive Director (NED) fees

NED Fees were changed for FY22 in accordance with advice provided in the 2021 Remuneration Report. No adjustments to Non-executive Director fees are currently being considered for FY23. Further detail is available in Section 9.

Total remuneration available to Non-executive Directors of $2.25 million (the NED Fee Cap) was approved by shareholders at the 2006 Annual General Meeting and has remained unchanged since this date. While total fees paid to NEDs in FY22 of $1,724,665 remain comfortably below the NED Fee Cap, the Board will seek shareholder approval at the FY22 Annual General Meeting to increase the NED Fee Cap to $3.5 million. This resolution aims to provide flexibility for the Board to consider any additional appointments or changes to Board composition as needed to allow for the continued execution of Perpetual’s global strategy.

Details of this resolution will be made available in the Company’s Notice of Meeting for the forthcoming AGM in October 2022, with full details to be provided in the FY23 Remuneration Report.

2. Governance

2.1 The People and Remuneration Committee

The People and Remuneration Committee (PARC) is a committee of the Board and is comprised of independent Non-executive Directors. Operating under delegated authority from the Board, the PARC evaluates and monitors people and remuneration practices to ensure that the performance of Perpetual is optimised with an appropriate level of governance while balancing the interests of shareholders, clients and employees. The PARC’s terms of reference are available on our website[2] . The terms of reference are intentionally broad, encompassing remuneration as well as the key elements of Perpetual’s people and culture strategy. This enables the PARC to focus on ensuring high-quality talent management, succession planning and leadership development at all levels of Perpetual.

The PARC met seven times during the year, with attendance details set out on page 21 of this Annual Report. A standing invitation exists to all Directors to attend PARC meetings. At the PARC’s invitation, the CEO and the Executive General Manager People and Culture attended meetings, except where matters associated with their own performance evaluation, development or remuneration were considered. The PARC considers advice and views from those invited to attend meetings and draws on services from a range of external sources, including remuneration advisers where considered appropriate.

Fair value calculations will be performed at the grant date of 1 September, meaning the exact Face Value of each award is yet to be confirmed. The estimated Face Value of the award for the CEO (R Adams) is approximately $4.6m, the estimated Face Value of the award for C Green is approximately $2.3m, and the estimated Face Value for each remaining KMP is approximately $1.95m.
perpetual.com.au/~/media/perpetual/pdf/shareholders/role-of-the-board/people_and_remuneration_committee_terms_of_reference_document.ashx.

Perpetual Annual Report 2022

Directors’ Report

Remuneration Report for the year ended 30 June 2022

2.2 Use of external advisers

During the year, Aon and Ernst & Young assisted the PARC with providing information on the remuneration competitiveness of the CEO and Executive KMP, which included analysis of the structure of the Executive KMP Variable Incentive Plan. The information provided did not include any specific recommendations in relation to the remuneration or fees paid to KMP.

3. Our people

Our people strategy, a key enabler of our business strategy, is focused on attracting and retaining the best talent. The goal of our people strategy is to enable business growth by building the capabilities we need for the future and creating an environment in which our people can thrive. During FY22, bringing to life our Perpetual people promise, Perpetual introduced a number of market-leading benefits that focused on the wellbeing of our people (noting that benefit offerings differ by employee location). This included:

an additional two weeks of wellbeing and community leave per year (on top of existing four weeks annual leave)
20 weeks of paid parental leave for either caregiver
an annual financial wellbeing allowance
free employee access to LinkedIn Learning
a truly hybrid flexible working model that empowers our people to work where we work best
a refreshed employee financial advice offering for our people; and
a new framework to support global mobility assignments.

Our people promise

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----- Start of picture text -----

1
Join a trusted
brand with
respected
expertise
6 2
Grow your Thrive at work
career and home
Our purpose
To create
enduring
prosperity
3
5
differenceMake a a growing Be part of
global team
4
Experience a
collegial and
inclusive
culture
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1. Join a trusted brand with respected expertise

Iconic and respected 135+ year-old brand with a proven track record
Consistent fund management performance and expertise
Four generations of clients
Opportunity to learn from the best

2. Thrive at work and home

We invest in the wellbeing of our people so that they can be their best selves at work and at home
Wellbeing programs and initiatives that enhance physical, mental, social and financial wellbeing
Programs that support our people through different age and life stages
Market leading parental leave scheme and support for carers

3. Be part of a growing global team

A growing global brand and team – offices in Australia, Asia, UK, Europe and USA
Access to global career pathways and mobility opportunities
Learn from experts in our global markets

4. Experience a collegial and inclusive culture

Collaborative teams
Leaders who encourage innovation, learning and empowerment
Authentically inclusive environment – not just lip service
Diversity and inclusion is highly valued and there are numerous employee-led D&I networks
and hybrid working

5. Make a difference

Giving back is part of our Perpetual DNA. As Australia’s largest philanthropy business, we have a strong commitment to supporting the communities within which we live and work
Strong and longstanding community partnerships and commitment to sustainability
Partner with clients as a trusted adviser and make a difference to their lives
Contribute openly and have a voice at the table
Broad, varied and meaningful roles – Contribute to the Perpetual purpose of enduring prosperity

6. Grow your career

Be challenged and supported to grow
Strong self-led learning culture
Leadership development, mentoring programs and secondment opportunities to support our people to grow

Our performance Directors’ Report

Operating and Financial Review

Financial Report

3.1 Refreshing our behaviours for growth

To position Perpetual for further growth and to promote a more innovative and adaptable culture for our business, Perpetual’s enterprise behaviours were refreshed in FY22. These behaviours bring to life Perpetual’s purpose, vision and values and provide the behavioural expectations for how our people interact with their colleagues, clients and the community.

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Perpetual Annual Report 2022

Directors’ Report

Remuneration Report for the year ended 30 June 2022

3.2 Diversity and Inclusion

At Perpetual, we’re committed to building diverse and inclusive teams to support our high-performance culture. We believe that an inclusive culture will enable growth and will deliver better outcomes for our people, clients and shareholders.

The Perpetual Board is responsible for the endorsement of Perpetual’s Diversity and Inclusion (D&I) strategy and Policy, and the PARC has oversight and ongoing responsibility of implementation. Our D&I strategy has been developed by our dedicated Diversity and Inclusion Council. Focus in FY22 has been on progressing the strategy which is supported by a comprehensive roadmap that aims to embed D&I in Perpetual’s DNA. The roadmap prioritises key initiatives across our seven employee-led working groups that focus on a range of diverse areas of identity – gender equality, cultural diversity, age and life stages, LGBTQ+, disability, parents and carers and cognitive diversity. Key diversity and inclusion achievements in FY22 are outlined below.

	–	New Parental Leave Beneft launched on 1 July 2022
Launched a Market-leading Parental Leave Beneft	– –	Paid leave allowance increased to 20 weeks and primary and secondary carer distinctions removed (gender neutral) Enhanced fexibility of the policy
	–	New paid leave allowances for fertility treatments (5 days), pre-adoption leave (2 days) and
		grandparent’s leave (1 day)
	–	Perpetual Pride Network formed – 20+ active members
	–	Membership with Out Leadership formally commenced, announced to Perpetual global staff
Established the		during Pride Month
Perpetual Pride Network	–	Developed LGBTQ+ strategy and action plan
	–	Pride Network are engaged and have commenced delivery of LGBTQ+ action plan
	–	Perpetual participation in three events with Future IM/Pact
	–	Pilot partnership with F3 (Future Females in Finance) completed and three high-performing
Growing our		participants offered Perpetual mentoring opportunity
Female Talent Pipeline	–	Four candidates from Future IM/Pact and F3 program referred to Perpetual’s graduate
		program and will be shortlisted
	–	New partnership with Uni 2 Beyond, offering two internships to individuals with an
		intellectual disability
New Partnership	–	Individuals were placed in PCT and PCS for 9 weeks
with Uni 2 Beyond	–	Interns were also given the opportunity to meet Rob Adams
	–	Extremely positive feedback from the interns’ managers and the interns
	–	Recognised as an Employer of Choice for Gender Equality for the ffth consecutive year
	–	Each submission requires organisations to demonstrate a higher standard of achievement
Recognised as WGEA		and progress towards gender equality outcomes
Employer of Choice for the 5th Consecutive Year	–	In addition, Perpetual achieved compliance in the 2021-22 WGEA Compliance
		Report submission
	–	Perpetual upgraded its membership with Jawun to the ‘Transform Partnership’ tier
	–	The Transform Partnership means that in 2022 we will have 6 employee secondments,
New Tier of Membership		4 Executive Visits, and 2 female Senior Leaders participate in the ‘Stories of Female
with Jawun		Leadership’ convention.
	–	Celebrated nine years of partnership between Perpetual and Jawun with LinkedIn post and
		panel event hosted in July 2022 as part of NAIDOC week.

Directors’ Report

Our performance

Operating and Financial Review

Financial Report

A key focus of our D&I Strategy is building global awareness. Initial steps have been taken to broaden focus beyond our domestic Australian business, notably through Perpetual’s partnership with Out Leadership, whose events, development opportunities and educational resources provide a global offering.

FY22 FY23 2022 Enhanced Parental Leave – Inclusive Leadership Program
Domestic 2022 Enhanced Parental Leave approach Benefit implementation plan to D&I (Phase 1: Australia)
PAC policy review project with the lens of various D+I pillars

approach to D&I	Beneft implementation plan (Phase 1: Australia)	–	PAC policy review project with the lens of various D+I pillars
	Grow D&I Partnerships: F3 (Gender Equality),	–	Analysis and development of life stage
	Uni 2 Beyond (Disability)		personas to inform D+I Strategy
	Program Management of existing	–	Understanding reasonable adjustment
	D+I partnerships and programs – Jawun (Cultural Diversity), Future IM/Pact (Gender Equality), Parents At Work (Parents + Carers)	–	considerations for Disability strategy Exploring job share opportunities at senior levels
	Pilot Early Career Female Mentoring Program (Gender Equality)	–	Future IM/Pact program for 2023 early career female talent
	D+I reporting – enhancements and operating rhythm	–	Commence WGEA Employer of Choice plan for 2023 application
Global	Barrow Hanley Analyst Program	–	Parental Leave Beneft Phase 2:
approach to D&I	New Partnership with Out Leadership & establishment of global Pride Network	–	global harmonisation Global inclusion within our Pride Network
	Continued focus on Women in Leadership	–	Expanded global representation
	and Asset Mgmt. (AU and Global)		on Diversity Council
	Trillium Active Bystander training	–	Develop cultural diversity profle and metrics
	and inclusive workplace discussions

The Perpetual Executive Committee, the PARC and the Perpetual Board regularly review the progress of the D&I strategy, as well as key diversity metrics for the organisation and at the business unit level. These include:

gender equality metrics (such as women in senior leadership, women in key business line roles, gender representation in talent and development programs, mobility and turnover);
flexibility utilisation;
gender pay gap analysis; and
key employee demographics such as cultural and religious diversity, sexual orientation and disability.

A key component of Perpetual’s gender equality strategy is to reduce our organisation-wide gender pay gap (GPG), and maintain gender pay equity on a ‘like for like’ role basis. The organisation-wide GPG refers to the difference between women’s and men’s average weekly full-time earnings. The two key levers for decreasing our GPG are (i) increasing the percentage of women in senior leadership roles; and (ii) increasing the percentage of women in asset management and key business-line roles. Perpetual has committed to achieving a 40% ‘women in senior leadership’ target and a 25% ‘women in asset management’ target by the end of 2024. Each of these targets is supported by a robust action plan. In addition, Perpetual has committed to a GPG reduction target of 10% by 2024.

Perpetual Annual Report 2022

Directors’ Report

Remuneration Report for the year ended 30 June 2022

4. Our remuneration philosophy and structure

Perpetual’s remuneration philosophy is designed to enable the achievement of our business strategy, ensure that remuneration outcomes are aligned with our shareholder, client and community best interests and are market competitive. To that end, we have created a set of guiding principles that direct our remuneration approach.

4.1 Remuneration principles

Our remuneration policy is designed around six guiding principles, which aim to:

attract, motivate and retain the desired talent within Perpetual
balance value creation for shareholders, clients and employees
facilitate the accumulation of equity or investments in product to drive an ownership mentality and long-term alignment of interests
embed and encourage sound risk management, behaviours and conduct
be simple, transparent, equitable and easily understood and administered; and
be supported by a governance framework that avoids conflicts of interest and ensures proper controls are in place.

4.2 Remuneration policy and practice

CEO and other Executive KMP remuneration

Perpetual has implemented a transparent remuneration model that is aligned to our business strategy and supports the attraction and retention of talent. The core elements of our Executive KMP remuneration framework in FY22[ 1] are unchanged from FY21 and include both fixed and variable incentives as follows[ 2] .

Fixed	Fixed remuneration	Set in consideration of the total target remuneration package and the desired remuneration mix for the role, taking into account the remuneration of market peers, internal relativities and the skill and expertise brought to the role. Calculated on a “total cost to company” basis, consisting of cash salary, pension, and in Australia, packaged employee benefts and associated fringe benefts tax (FBT).	Paid as cash
Variable Incentive (if payable)	Cash	Each participant has a Variable Incentive target, expressed as a defned $ target amount. Annual Variable Incentive outcomes are linked to performance against key business metrics directly linked to our strategy. The Variable Incentive is awarded as a mix of cash and equity. Equity must be retained for at least four years. The Unhurdled Equity component is awarded as Share Rights, which vest after two years into Restricted Shares for a further two years. The Hurdled Equity component is awarded in the form of Performance Rights (subject to performance hurdles of absolute total shareholder return) which vests equally over three and four years (with any vested equity tested after three years restricted for a further year). The emphasis on equity ensures that Variable Incentive outcomes are linked to shareholder experience through reinforcing long-term ownership of Perpetual shares.
	Unhurdled Equity		Awarded as equity
	Hurdled Equity

Changes foreshadowed to CEO and Executive Remuneration in the Chairman’s letter and Section 1 above for FY23 are not described in this section.
Any other contracts are at arm’s length in the normal course of business and on normal commercial terms consistent with other employees and clients. Those transactions may involve investments in Perpetual managed funds and financial advice by Perpetual Private.

Directors’ Report

Our performance

Operating and Financial Review

Financial Report

Asset manager remuneration

Perpetual seeks to align asset manager remuneration with longer-term value creation for our clients, which in turn is expected to benefit shareholder outcomes. Asset manager remuneration is aligned to Perpetual’s performance-based remuneration philosophy and principles. The remuneration arrangements for asset managers are typically structured to recognise and reward strong investment outcomes to our clients and also align to the growth in revenue or manageable profit of the strategies they support.

Asset management staff within Trillium, including its UK-based ESG Global Equities team, and Barrow Hanley receive performance-based variable remuneration linked to overall business earnings and individual performance. Trillium operates a bonus plan that is determined with reference to the financial performance of the business, with adjustments also made for investment performance, growth goals and other strategic focus areas (which includes risk overlays). Further, to align the interests of key staff with investors, senior Trillium staff are eligible to receive deferred variable incentives as units in Trillium funds that they manage or as Perpetual shares.
Barrow Hanley operates a bonus plan which is funded primarily via reference to the pre-bonus manageable profit of the boutique. Most investment employees participate in the bonus plan, whereby a set percentage of payments are made in cash and the remaining portion is distributed as unit interests in Barrow Hanley[ 1] .
PAMA asset managers typically have a portion of their variable remuneration quantitatively determined by performance against investment targets, which is generally assessed over one, two and three years. Portfolio managers managing mature funds and those who are growing businesses may have a portion of their remuneration aligned to other business measures. For example, Perpetual’s Australian Equities portfolio managers have their long-term incentives determined through a revenue share that provides a team-based goal and focus.
Generally, all asset managers have a portion of their variable remuneration awarded as either deferred short-term incentives (STI) or long-term incentives (LTI) each year.
This cycle of rolling awards ensures retention arrangements are in place and avoids cliff vesting events. For most asset managers, deferred incentives can be invested into either Company equity or units in funds that they are responsible for, further aligning asset managers to client outcomes and shareholder interests.

General employee remuneration

Employees receive salary, a competitive retirement and benefit offering and are commonly eligible to receive an STI or bonus.

Performance against the group balanced scorecard and other factors determines the size of the bonus pool for the financial year. Relative divisional performance against a range of inputs then determines the distribution of the bonus pool to each division. An individual’s performance rating is determined based on performance against objectives agreed at the commencement of the performance year. An individual’s bonus outcome is generally based on this performance rating, which is reflective of performance against targets in an individual scorecard, delivery of goals against Perpetual’s behavioural framework and an employee’s approach to the management of risk.

Some senior employees are also eligible to participate in a long-term incentive plan. All other Australian-based employees are eligible to participate in the One Perpetual Share Plan whereby eligible employees can be awarded annual grants of up to $1,000 of Perpetual shares subject to Perpetual meeting our Group profit target. This scheme is limited to Australian-based staff due to the legal and tax environments in other geographies. In addition, Perpetual offers a comprehensive range of employee benefits across wealth, health and lifestyle categories in the geographies where staff are employed.

Although Barrow Harrow staff are issued with unit interests each year in the normal course of business, this may not occur every year if previous year allocations have been significant.

Perpetual Annual Report 2022

Directors’ Report

Remuneration Report for the year ended 30 June 2022

5. Managing risk within Perpetual

Risk management continues to be a fundamental focus within our business, with the Perpetual Board having the responsibility and commitment to ensure that Perpetual has a sound risk management framework in place. Perpetual’s Risk Group is a centralised corporate function, managed by the Chief Risk Officer, who reports directly to the CEO. The Risk Group has developed risk measurement systems and practices that are utilised when determining ‘at risk’ remuneration. To this effect, risk management is a key performance metric at a Group, divisional and individual level.

Risk and behavioural performance

The Board, the PARC and people leaders have a range of mechanisms available to adjust remuneration and incentive outcomes to reflect behavioural, risk or compliance outcomes (both strong and weak) at a Group, divisional and individual level. The table below summarises the range of mechanisms available and their intended operation.

MECHANISM	DESCRIPTION/INTENTION OF THE MECHANISM
Risk dashboards (apply at	Incentive funding can be adjusted (upwards or downwards) following a combined Audit, Risk and
a Group or divisional level)	Compliance Committee (ARCC) and PARC review of Group and divisional risk ‘dashboards’, which
	are produced by the Risk and Internal Audit functions throughout the year as well as leading into fnancial year-end.
Behavioural ratings –	Behavioural and risk assessments are collected for most employees at Perpetual – noting that
Perpetual Behaviours and	recently acquired businesses often operate their own risk and behavioural frameworks. The
Risk Ratings	behavioural and risk components of the scorecard effectively moderate employee performance
	outcomes. Behavioural ratings are provided across a four-point scale and can result in either
	upward or downward adjustments to performance ratings and reward outcomes. Additionally,
	a discrete risk assessment is undertaken for most employees using a consistent framework
	covering a range of risk measures and expectations across various seniority levels of the
	organisation.
Malus provisions or	These allow for the Board to adjust or lapse any unvested incentive awards where, in the opinion
international equivalents	of the Board, the participant has acted fraudulently and/or dishonestly, has breached his or her
(apply to all deferred STI and	obligations to the Group, where outcomes have been misstated, or where the Board determines
long-term incentive plans)	at its sole discretion that outcomes are inappropriate.
Clawback provisions or	These allow for the Board to reclaim (or ‘claw back’) vested incentives where, in the opinion of
international equivalents	the Board, vesting occurred as a result of fraud, dishonesty, a breach of obligations or where
(apply to all deferred STI and	outcomes have been misstated. This applies to both current and former employees.
long-term incentive plans)
Board discretion (all	Overriding the above mechanisms, the Board, and in some instances management, has
incentive plans)	discretion to adjust proposed incentive or vesting outcomes, subject to the applicable rules
	governing each incentive plan. The discretion to vary incentive outcomes from the agreed
	formulas range from absolute unfettered discretions to more limited discretions which may only be applied in specifc circumstances.

In addition to the above mechanisms, Perpetual:

performs detailed scenario testing on potential outcomes under any new or changed incentive plans
reviews the alignment between proposed remuneration outcomes and performance achievement for incentive plans on an annual basis; and
delivers a significant portion of variable remuneration as deferred incentives (for more senior employees) in equity or investments in products to align remuneration outcomes with longer term shareholder and client value.

Directors’ Report

Our performance

Operating and Financial Review

Financial Report

Link between risk and reward

An employee’s approach to managing risk is a key factor when considering his or her yearly performance. Risk management performance measures are overlaid in employee scorecards as per the graphic below. These measures are considered when assessing overall performance and incentive payments.

TO BE ELIGIBLE FOR A VARIABLE INCENTIVE, ALL EMPLOYEES MUST MEET MINIMUM RISK CRITERIA

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----- Start of picture text -----

Embeds appropriate Applies the Risk Escalate issues Completes
risk behaviours in Appetite Statement to Risk within compliance tasks
all endeavours and in decision making five days on time and
effectively balances processes accurately (training
risk with opportunity and management
of obligations)
----- End of picture text -----

FY22 risk performance

FY22 full year risk performance results demonstrate continued focus on risk across the Group and are considered positive given the extent of organisational change that has continued over the last 12 months, which has included:

the integration of onshore acquisitions (Laminar Capital and Jacaranda Financial Planning);
ongoing transition and expansion of offshore businesses;
the residual impacts of COVID-19; and
management of major project activity throughout the business.

Notwithstanding this, there are some isolated metrics across the divisions where improvements are required. Resourcing constraints have remained elevated during the period which have impacted some metrics, arising from the evolving post COVID-19 working environment and supporting the numerous strategic initiatives/projects across the Group, accompanied by an increasing complexity of the business through the onshore acquisitions and an increasing global presence. This continues to be closely monitored by Executive KMP.

On balance given the above, and the environment in which we have operated in the past 12 months, no risk adjustments to bonus funding levels were recommended at the Group or divisional level. In addition, no adjustments were made to individual Executive KMP Variable Incentive outcomes for FY22 based on risk performance.

Further information on the Board’s review of prior year vesting is available in Section 7.7.

Perpetual Annual Report 2022

Directors’ Report

Remuneration Report for the year ended 30 June 2022

Minimum shareholding guideline

A minimum shareholding guideline applies to Executive KMP. The purpose of this guideline is to strengthen the alignment between Executive KMP and shareholders’ interests related to the long-term performance of Perpetual. Under this guideline, Executive KMP are expected to establish and hold a minimum shareholding to the value of:

CEO: 1.5 times fixed remuneration
Other Executive KMP: 0.5 times fixed remuneration

The value of each vested Restricted Share still held under restriction for the Executive KMP is treated as being equal to 50% of actual value, as this approximates the value of the share in the hands of the Executive after allowing for tax. Unvested shares or rights do not count towards the target holding.

A five-year transition period from the date of appointment to an Executive KMP role gives Executive KMP reasonable time to meet their shareholding guideline. Where the guideline is not met after the required time period, the CEO and other Executive KMP may be restricted from trading vested shares.

As at 30 June 2022, progress towards the minimum shareholding target for each Executive KMP was as follows.

Minimum shareholding guidelines

	VALUE OF ELIGIBLE	VALUE OF MINIMUM	TARGET DATE TO
	SHAREHOLDINGS AS AT	SHAREHOLDING	MEET MINIMUM
	30 JUNE 2022 1	GUIDELINE	SHAREHOLDING
	$	$	GUIDELINE	GUIDELINE MET 2
Executives
R Adams	767,212	1,953,945	24 September 2023
A Gazal	281,118	262,500	7 April 2025	✔
C Green	581,961	337,500	1 October 2013	✔
D Lane	348,018	285,000	10 April 2022	✔
R McCarthy	228,860	270,000	15 October 2023
S Mosse	149,194	287,500	18 February 2024
M Smith	741,133	315,740	19 November 2017	✔
A Gillespie	147,259	255,000	18 November 2025

Value is calculated through reference to the closing Perpetual share price at 30 June 2022 of $28.88.
Executives have a five-year transition period to meet their shareholding requirement.

Hedging and share trading policy

Consistent with Corporations Act obligations, Perpetual’s Share Trading Policy prohibits employees and Directors from entering into hedging arrangements in relation to Perpetual shares.

Share dealing approval

Perpetual has a policy for trading in Perpetual shares which stipulates certain trading black-out periods and requires all employees to seek pre-trade approval via an automated platform. A copy of the policy has been lodged with the ASX and appears on Perpetual’s website[ 1] .

perpetual.com.au/about/corporate-governance/informed-market-and-share-dealings.

Directors’ Report

Our performance

Operating and Financial Review

Financial Report

6. Aligning Perpetual Group performance and reward

6.1 Alignment of performance and reward to strategy

In September 2019, Perpetual launched our five-year strategy and purpose of ‘Enduring Prosperity’. Successful delivery of the strategy is defined by clear client, people, strategic and financial measures which link our annual targets with our long-term strategic objectives; that is, balancing short-term financial outcomes with the necessary investments for long-term sustainable growth.

for our clients, enduring prosperity means pursuing a strategy that is focused on delivering quality products and outstanding service;
for our people, enduring prosperity means empowering them to deliver superior performance and to explore new capabilities and establish a global footprint;
for our shareholders, enduring prosperity means delivering above average, sustainable growth over the medium to long term; and
for the community, enduring prosperity means delivering a positive contribution to the sustainability of society.

In our view, this is best achieved by having highly engaged people creating superior client outcomes, which in turn delivers underlying earnings growth for shareholders.

Our people strategy

2024 strategy

Our purpose Our vision Our values Enduring Prosperity Most trusted in Financial Services Excellence, Integrity, Partnership

People vision

To enable our People and Perpetual to do great thing ~~s an~~ d grow

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||||
|---|---|---|
|Client First|Future Fit|New Horizons|
|Exceptional products|Empowering our people to|New capabilities|
|Outstanding service|deliver high performance|Global footprint|
|– Exceed client needs with products|– Agile, efficient and scalable operating|– Buy or build global investment|
|and services|platform to manage growth|& distribution capabilities|
|– Improve client connectivity and delivery|– A strong culture where people are|– Improve and diversify our growth|
|through innovative digital solutions|positively challenged and empowered|potential via an active M&A agenda|
|– Set industry leading standards in|within our stated risk appetite|across our businesses|
|all that we do|– Contemporary technology|– Deliver innovative solutions to|
|our clients|
|Transform our Service Offering|Build a culture that is Future Fit|Support Business Growth|
|– Define and execute our People|– Redefine our Future Workplace and|– Globalise our operating model|
|Technology Roadmap|employee experience|– People advice and execution for|
|– Enhance our client-centric|– Connect our people to Perpetual’s|M&A agenda|
|self-service model|EVP (incl. our purpose, values, strategy|– Ensure our Performance & Reward|
|– Leverage our data and analytics|and brand)|framework supports the Group|
|capability to provide value-|– Grow our Leaders to build high|strategy and complies with|
|added insights|performing teams|regulatory requirements|
|– People response to COVID-19|– Define and execute a future-focused|
|including ongoing mental health|Talent Acquisition & Management|
|and wellbeing strategy.|strategy and solution|
|– Refresh our D&I strategy and approach|

----- End of picture text -----

Work with the best — Work where + how you work best — Be your best

Perpetual Annual Report 2022

Directors’ Report

Remuneration Report for the year ended 30 June 2022

Variable remuneration is designed to reward Executive KMP for their performance over the course of the year, provided they have achieved performance standards based on financial and non-financial measures focused on delivering short and long-term value. The variable remuneration structure is designed to drive business strategy with outcomes being aligned to shareholders.

6.2 Features of the Executive KMP Variable Incentive Plan[ 1]

The Variable Incentive Plan has a cash component and an equity component split into three parts, unhurdled Share Rights and two tranches of hurdled Performance Rights with three and four-year performance testing and vesting schedules. All equity is restricted from sale for a four-year period.

Under the Variable Incentive Plan, the full Variable Incentive, and the total value of Share and Performance Rights granted annually, is subject to a holistic assessment of Group, divisional and individual Executive performance at year-end, of which the annual group balanced scorecard is a key input.

Remuneration mix

Executive KMP have a significant portion of their remuneration linked to performance and risk, with the Board able to risk-adjust remuneration if required. There is a strong alignment to long-term incentives for Executive KMP, as Perpetual believes in meaningful equity ownership for this key group.

Total remuneration continues to be determined using a range of factors including Perpetual’s market peers. The table below shows the FY22 on-target remuneration mix for Perpetual Executive KMP.[2 ]

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GROUP
EXECUTIVES 38–55% 15–20% 15–22% 15–22% Fixed
Variable Cash
Variable Equity
Unhurdled
CEO 35% 13% 24% 28%
Variable Equity
Hurdled
0% 20% 40% 60% 80% 100%
----- End of picture text -----

Changes foreshadowed to CEO and Executive remuneration in the Chairman’s letter and Section 1 above for FY23 are not described in this section..
Actual remuneration mix will vary from year to year due to promotions and remuneration changes.

Directors’ Report

Our performance

Operating and Financial Review

Financial Report

Equity components of the Variable Incentive Plan

The diagram below summarises the structure and vesting schedules of the Executive KMP Variable Incentive Plan awards for FY22.

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----- Start of picture text -----

25% of Variable Incentive Equity subject to a
4-year CAGR Absolute TSR hurdle
Performance Rights
25% of Variable Incentive Equity subject to a Restricted shares
Initial 3-year CAGR Absolute TSR hurdle entitled to dividends
Performance Performance Rights
Year for
Variable
Incentive
50% of Variable Incentive Equity Restricted shares
Share Rights entitled to dividends
30 June 30 June 30 June 30 June 30 June 30 June
September September
Variable Incentive Equity
Vesting/Release from restrictions
Cash
----- End of picture text -----

The absolute three and four-year TSR performance hurdles will be aligned to the following achievement scale.

COMPOUND ANNUAL GROWTH IN TSR	PERCENTAGE OF RELEVANT TRANCHE OF PERFORMANCE RIGHTS THAT VEST
Less than 7% per annum	0%
7% to 10% per annum	Straight-line vesting from 50% to 100%
10% or above per annum	100%

Malus and Clawback provisions give the Board the discretion to claw back vested and unvested equity. The number of Performance Rights granted for FY22 performance will be determined by dividing the relevant variable incentive award dollar amount by the five-day VWAP[1] prior to the grant date. This approach is consistent with the practice adopted every year for Executive KMP awards.

The Volume Weighted Average share price provides the average price that a security has traded at throughout the day or agreed period.

Perpetual Annual Report 2022

Directors’ Report

Remuneration Report for the year ended 30 June 2022

6.3 Approval processes

The Board, through the Chairman of the Board, conducts a formal review of the performance of the CEO and other Executive KMP on an annual basis.

For the CEO, the Chairman, in consultation with the PARC, makes recommendations directly to the Board for approval of the Variable Incentive allocation.

For other Executive KMP, the CEO makes recommendations to the PARC on Variable Incentive allocations. Once recommendations are reviewed and endorsed, the PARC makes recommendations for the Executive KMP to the Board for final approval.

Termination of employment

Treatment on termination of employment is as follows.

EVENT	EVENT	UNPAID VARIABLE INCENTIVE	RIGHTS	RESTRICTED SHARES
–	Resignation	No further variable incentive is payable in respect of the	Forfeited.	Retained under the
–	Termination for poor performance	current or prior performance years as at the date of notice.		plan with restriction periods continuing to apply.
–	Termination by	A pro-rated variable incentive based on the period of the	Retained under	Retained under the
	Perpetual on notice	performance year completed (excluding notice paid in lieu)	the plan with	plan with restriction
		and full year performance score will be delivered at the	restriction periods	periods continuing
		normal time.	and hurdles	to apply.
		The Performance Tested Equity Component will be granted as Performance Rights (subject to normal terms and	(where applicable) continuing to apply.
		conditions) and the remaining incentive will be paid in cash.
–	Summary dismissal	No further variable incentive is payable in respect of the	Forfeited.	Forfeited.
		current or prior performance years as at the date of notice
		of termination.
–	Death	A pro-rated variable incentive based on the period of the	Immediate vesting	Immediate
		performance year completed (excluding notice paid in lieu)	(subject to Board	conversion to
		and full year performance score will be delivered at the	approval).	unrestricted shares
		normal time.		(subject to Board
		The Performance Tested Equity Component will be granted		approval).
		as Performance Rights (subject to normal terms and
		conditions) and the remaining incentive will be paid in cash.
–	Mutual agreement	A pro-rated variable incentive based on the period of the	Retained under	Retained under the
– – –	Retirement (requires Board approval)1 Redundancy Total and permanent	performance year completed (excluding notice paid in lieu) and full year performance score will be delivered at the normal time. The Performance Tested Equity Component will be granted as Performance Rights (subject to normal terms and	the plan with restriction periods and hurdles (where applicable) continuing to apply.	plan with restriction periods continuing to apply.
	disablement (TPD)	conditions) and the remaining incentive will be paid in cash.

In circumstances where the Board concludes at its absolute discretion that a participant is retiring. The Board needs to be satisfied that the Executive does not intend to engage in any work similar to their role at Perpetual. Six months after retirement, the Executive must provide a signed declaration affirming that this requirement has been adhered to, subject to the approval of the Board, otherwise all rights will lapse. The Board may also decide to delay payment of any unpaid variable incentive until this requirement has been satisfied. Restricted shares under the Variable Incentive Plan are not impacted by the six-month declaration requirement and will convert to unrestricted shares in accordance with the terms of the Variable Incentive Plan.

This approach to treatment of incentives on termination of employment in conjunction with the broader plan design strengthens the alignment of interests between Executive KMP and shareholders over the long term. The extended vesting and restriction periods encourage Executive KMP to make decisions that are in the long-term interests of shareholders, with implications of those decisions extending beyond an Executive KMP’s tenure at Perpetual while they continue to have shares retained in the plan.

Directors’ Report

Our performance

Operating and Financial Review

Financial Report

6.4 Dilution limits for share plans

Shares awarded under Perpetual’s employee share plans may be purchased on market or issued subject to Board discretion and the requirements of the Corporations Act 2001 and the ASX Listing Rules.

As at 30 June 2022, the proportion of unvested shares and Performance Rights (excluding unallocated shares as a result of forfeitures) held in Perpetual’s employee share plans as a percentage of issued shares was 2.50%. This has increased from FY21’s percentage of 2.24%.

7. Variable reward

7.1 FY22 Variable Incentive outcomes

In determining annual Variable Incentive outcomes for the Executive KMP, the Board seeks to balance shareholder and client outcomes, while encouraging and rewarding Executive KMP for creating sustainable shareholder value. Performance, risk and reward are considered within the context of the longer-term business strategy. The table below provides the total Variable Incentive outcome (both cash and equity portions) received by the Executive KMP for the FY22 performance year.

The Variable Incentive outcomes determined by the Board for the CEO and other Executive KMP for FY22 are, in the Board’s judgement, appropriate. These decisions were made in consideration of business performance as measured against the Company scorecard, divisional and individual performance.

NAME VARIABLE INCENTIVE CASH $ VARIABLE INCENTIVE UNHURDLED EQUITY 1 $ VARIABLE INCENTIVE HURDLED EQUITY 2 $ TOTAL VARIABLE INCENTIVE $ Current Executives R Adams 530,000 942,280 1,090,680 2,562,960 A Gazal 150,000 150,000 150,000 450,000 C Green 325,000 355,338 355,338 1,035,676 D Lane 300,000 300,000 300,000 900,000 R McCarthy 300,000 300,000 300,000 900,000 S Mosse 172,800 172,800 172,800 518,400 M Smith 272,051 334,895 334,895 941,841 A Gillespie 225,000 225,000 225,000 675,000 Total 2,274,851 2,780,313 2,928,713 7,983,877	FY22 VARIABLE INCENTIVE TARGET $ FY22 VARIABLE INCENTIVE (AS % OF TARGET) 3 % 2,417,886 106% 450,000 100% 1,035,676 100% 900,000 100% 750,000 120% 480,000 108% 1,023,740 92% 675,000 100% 7,732,302 103%	MAXIMUM OPPORTUNITY @ 175% OF TARGET 4 $ FY22 VARIABLE INCENTIVE (AS % OF MAXIMUM VI OPPORTUNITY) %
		4,231,301 61% 787,500 57% 1,812,433 57% 1,575,000 57% 1,312,500 69% 840,000 62% 1,791,545 53% 1,181,250 57%
		13,531,529 59%

Variable Incentive Equity awarded as Share Rights with tenure based hurdles only.
Variable Incentive Equity awarded as Performance Rights with an absolute Total Shareholder Return hurdle.
Represents the total Variable Incentive outcome for FY22 as a percentage of target Variable Incentive.
Maximum opportunity Executives may earn under the CEO and Group Executive Variable Incentive Plan.

Perpetual Annual Report 2022

Directors’ Report

Remuneration Report for the year ended 30 June 2022

7.2 FY22 Performance highlights

Perpetual delivered strong financial performance in FY22. Underlying profit after tax (UPAT) was $148.2m, exceeding prior year by +21% and the Board-approved business plan by 3%. Underlying EPS of $2.58 represented growth of +18 % on prior year. Perpetual delivered growth in profit across each division:
Perpetual Corporate Trust delivered Underlying profit after tax (UPBT) of $72.6m, representing growth of $8.9m or 13.9% on FY21. Continued organic growth was complemented by the acquisition of Laminar Capital in early FY22, which expanded PCT’s product and service line offerings to new and existing clients. PCT’s total funds under administration (FUA) was A$1.09 trillion as at 30 June 2022, up 18% on 30 June 2021. PCT’s continued growth demonstrates the critical role it performs as a fiduciary, providing important infrastructure to support the Australian banking and financial services markets.
Perpetual Private delivered UPBT of $44.3m in FY22, representing growth of $9.3m or 26% on prior year. Perpetual Private delivered a ninth consecutive year of positive net flows, with AUM finishing the year at $17.4b, representing incremental growth of 2% on 30 June 2021, despite a volatile Q4. The acquisition of Jacaranda Financial Planning in early FY22 provided an opportunity for Perpetual Private to add a high-growth business with a high-quality advice model and complementary culture.
While Perpetual’s Asset Management businesses delivered strong financial performance, challenges in improving Group net flows remain. PAM International delivered UPBT of $52.9m in FY22 (growth of $12.1m on FY21), while PAM Australia delivered UPBT of $49.9m (growth of $7.8m on prior year). While net flows across some channels were disappointing, Perpetual continues to invest in new channels and strategies that offer future growth opportunities in FY23 and beyond.
- Following the successful closing of Barrow Hanley’s inaugural Collateralised Loan Obligation (CLO) fund in FY22, Perpetual expects to attract approximately A$2.0 billion (US$1.4 billion) of new flows over the next 12–18 months. The first of three CLO’s is currently being constructed and is expected to launch in 1H23.
- A total of seven US mutual funds were launched in FY22, expanding access for Barrow Hanley and Trillium to broader distribution opportunities in the key US intermediary segment. In addition, as part of a focused effort to better access European and Asian institutional investors, multiple UCITS sub-funds were launched in FY22, with pleasing early interest from investors.
- A suite of active ASX Exchange Traded Funds (ETFs) were launched for our Australian and global investment teams in FY22, providing important channel diversification for Perpetual and another platform for clients to access Perpetual’s range of investment strategies.
- When considered collectively, despite continued pressure on net flows in FY22, progress against the above strategic priorities and strong UPBT growth in each division were ultimately viewed to be a strong overall result in the context of the current economic environment.
Perpetual’s acquisitions translated into tangible shareholder value in FY22. Barrow Hanley exceeded the stated target of 20% EPS accretion in the first full year following acquisition; Trillium continued to deliver positive net flows and profit growth; while the acquisitions of Jacaranda Financial Planning and Laminar Capital, which were completed early in FY22, are both performing ahead of expectations for key growth metrics and financials.
Perpetual’s group Net Promoter Score (NPS) outcome of +49 was improved on FY21’s outcome of +44 and remains above Perpetual’s long-term target of +40.
Perpetual’s investment teams delivered strong investment performance relative to agreed benchmarks, particularly in Australian Equities and Barrow Hanley:
Barrow Hanley’s investment performance was very strong, with 92% of equity strategies and 85% of all strategies outperforming their benchmarks over three years to 30 June 2022.
91% of Perpetual’s Australian Equities funds were outperforming their benchmarks over the three years to 30 June 2022.

Directors’ Report

Our performance

Operating and Financial Review

Financial Report

7.3 FY22 Company scorecard performance

In FY22, the Perpetual scorecard was weighted 60% to financial measures and 40% to non-financial measures that are designed to deliver value in current and future years, within appropriate risk tolerance levels. We set our balanced scorecard each year based on the business and financial plan approved by the Board that is aligned to our strategy. Under our Variable Incentive Plan, our balanced scorecard acts as the starting basis for evaluating current and future value creation with a risk management overlay. This section explains the performance outcomes delivered for FY22.

STRATEGIC MEASURE	WEIGHT	FULL YEAR PERFORMANCE	FULL YEAR PERFORMANCE
Financial	60%	Outcome	Comments
Group UPAT1	30%	Target: $143.8m	–	FY22 UPAT is $4.4m (3%) above plan and $25.4m (21%) above last year’s
		Actual: $148.2m		actual outcome of $122.8m. Growth in UPAT was achieved across all
		Above plan		four divisions in FY22, with Perpetual Corporate Trust (PCT) growing
				UPBT by $8.9m (13.9%), Perpetual Private by $9.3m (26%), PAMA by
				$7.8m (18%) and PAMI by $12.1m (30%).
Perpetual	5%	Target: $14.1m	–	PCT delivered an above-plan outcome of $20.5m, driven by key client
Corporate Trust		Actual: $20.5m		wins across all business lines. PCT continues to deliver on a clear
(PCT) – New		Above plan		growth strategy, which includes organic growth, new products and
business revenue				revenue streams, and exploration of appropriate inorganic growth
				opportunities.
Perpetual Asset Management	5%	Target: -$1.1m Actual: -$2.8m	–	Strong performance in the wholesale channel (+$1.8m ANR) was offset by weaker institutional fows (-$2.5m ANR). Net infows into the Barrow
Australia (PAMA) – Annualised Net		Below plan		Hanley Global Equity Fund and Credit and Fixed Income strategies were offset by continued net outfows across a range of large-cap
Revenue (ANR)				Australian Equity strategies.
Perpetual Asset Management International (PAMI)	5%	Target: -A$0.3b Actual: -A$5.0b Below plan	–	The FY22 outcome of -A$5.0b is substantially below plan. The headline number was driven primarily by outfows in Barrow Hanley’s lower margin Fixed Income and US Equity strategies. Outfows were
– Net Flows (+ANR)				concentrated primarily on the US institutional channel. Barrow
				Hanley’s International, Global and Emerging Market Equity strategies each delivered positive net fows in FY22.
			–	Trillium continued to deliver positive net fows, despite market volatility, delivering full year positive net fows of $0.6b in FY22.
Perpetual Private	5%	Target: $892m	–	Net Flows of $999m in FY22 represented an above-plan outcome and
(PP) – Net Flows		Actual: $999m Above plan		an outcome that was 28% above the FY21 full year result of $783m. FY22 represented the 9th consecutive year of positive net fows for
				Perpetual Private. At 30 June 2022, funds under advice for Perpetual
				Private was $17.4b, up slightly on prior year (30 June 2021: $17.0b).
			–	Net Flows benefted from $470m worth of net infows from Laminar
				Capital, representing the potential for relevant products and services
				to be offered across business lines following recent acquisitions.
				The FY22 result was delivered despite ongoing COVID-19 restrictions
				which limited face-to-face client meetings. Notable contributions
				were delivered from Native Title and Philanthropy clients and above-forecast Jacaranda fows. Outfows from legacy low margin
				clients partially offset the full year result.
Underlying Earnings Per Share	10%	Target: $2.54 Actual: $2.58	–	Underlying EPS of $2.58 represented growth of +18% on prior year, driven by underlying proft growth across all business units in FY22.
(EPS)		Above plan		This improvement in underlying EPS in FY22 also translated into an
				improved dividend per share (DPS). Total dividends of 209cps were
				declared in respect of FY22, representing growth of 16% on FY21.

Perpetual Annual Report 2022

Directors’ Report

Remuneration Report for the year ended 30 June 2022

STRATEGIC MEASURE	WEIGHT	FULL YEAR PERFORMANCE
Client First	10%	Outcome Comments
Maintain client advocacy – external Net Promoter Score (NPS) performance	5%	Target: Maintain above 40 Actual: 49 Above plan – The FY22 outcome of 49 is substantially above prior year (44) and Perpetual’s goal of maintaining NPS above 40. The result was driven by improvements across each division: • PAMA: 46 in FY22 (38 in FY21). • PCT: 61 in FY22 (58 in FY21). • Perpetual Private: 42 in FY22 (37 in FY21). – NPS scoring was extended to PAMI in FY22, however not all results were collected prior to 30 June, meaning the numbers have been excluded from the overall results. Benchmark scores for all completed teams as at 30 June were sitting above 70. PAMI NPS outcomes will be included in the headline numbers and divisional breakdown in FY23.
% of funds/ mandates meeting investment objectives. Funds Target: 60% Mandates Target: 50%	PAMA 2.5%	Funds: 91% Mandates: 66% Above plan – PAMA’s Australian equities investment performance continues to be strong with 91% of equities funds outperforming their benchmarks over the three years to 30 June 2022, which positions these strategies well for future fows. – Strong investment performance in PAMA’s Australian equities strategies generated a total of A$10.6 million in performance fees for the full year.
	PAMI 2.5%	Funds: 79% Above plan – BH investment performance relative to agreed benchmarks remained very strong in 2022 with 92% (25/27) of investment strategies meeting objectives over three years. – Market volatility and sector rotation (including a shift to energy in early 2022), resulted in 29% (2/7) of Trillium Asset Management’s funds meeting their performance objectives at 30 June 2022.
Future Fit	10%	Outcome Comments
Mood monitor	5%	Stable At plan – Employee sentiment remained stable during FY22 despite ongoing management of COVID-19, signifcant business activity and a higher level of aggregate turnover.
High performer voluntary turnover		Target: Less than 11% Actual: 9% Above plan – Retention levels for employees receiving high performance ratings in FY21 have remained substantially below the organisation-wide turnover rate. The full year outcome of 9% voluntary turnover of top talent represents a strong outcome for FY22. For Perpetual, FY22 represented a return to pre-COVID employee turnover rates, challenges in flling some open vacancies and increasing pressure on wages across many parts of the organisation. In response, Perpetual made a number of proactive changes to benefts, leave entitlements and other fexibility initiatives to further enhance the overall employee experience.
Women in Leadership (WiL)		Target: 38% Actual: 34% Below plan – The year-end outcome of 34% is below plan and represents a move backwards against our stated 2024 WiL representation target of 40%. Despite continued efforts, meaningfully improving female representation in leadership and asset management roles remains a challenge for Perpetual. Renewed focus on female talent development, attraction and retention as well as an enhanced reporting rhythm to increase transparency and accountability to targets have been implemented to drive improvements in FY23.
Delivery of key projects	5%	Board assessment At plan – Of 24 formally funded projects planned to be delivered in FY22, 83% of projects (20 projects in total) were assessed to be meeting business objectives as defned for FY22 (based on objective implementation review outcomes). Projects are reviewed quarterly and the project portfolio has been reviewed leading into FY23.

Directors’ Report

Our performance

Operating and Financial Review

Financial Report

STRATEGIC MEASURE	WEIGHT	FULL YEAR PERFORMANCE	FULL YEAR PERFORMANCE
New Horizons	20%	Outcome	Comments
PAMA Gross Flows	5%	Target: AU $3.2b	–	PAMA Gross Flows of AU $3.5b in FY22 were above the business plan
		Actual: AU $3.5b		of AU $3.2b. Outperformance was driven through the wholesale
		Above plan		channel, with Credit and Fixed Income and Global Equity strategies
				the strongest performers. Importantly, as part of our focus on investing
				for future growth a number of initiatives were launched in FY22:
				• Perpetual launched three active ETFs during FY22 including the
				PPT Ethical SRI Fund (ASX: GIVE), PPT Global Innovation Share Fund
				(ASX:IDEA) and the Barrow Hanley Global Share Fund (ASX:GLOB).
				• Perpetual established an operating model that will facilitate the effcient launch of future active ETFs.
PAMI Gross Flows	5%	Target: US $8.2b	–	The successful build-out and early momentum of Perpetual’s Global
		Actual: US $6.7b		Distribution team was recognised as being critical to Perpetual’s
		Below plan		momentum in FY22. The inclusion of Gross Flows (in addition to Net Flows) aimed to both (i) increase the overall weighting of growth/fows
				in the overall scorecard; and (ii) allow for a sharper focus on sales in new
				channels and geographies.
			–	The full year outcome is below plan, with outperformance in the UK and Europe, offset by weaker gross fows in the US Institutional
				channel. Despite this, several achievements were noted in FY22:
				• Trillium Asset Management continues to generate strong client interest, with net positive infows of A$639m in FY22.
				• Barrow Hanley continues to see strong interest in its various higher margin global equities capabilities, with particularly strong fows
				into the UK and EU in FY22.
				• ESG funds continue to offer opportunities for future growth.
				Following the launch of a Global Value ESG UCITS sub-fund for
				Barrow Hanley in mid-FY22, two additional ESG UCITS sub-funds
				were launched in Q4 FY22, providing a platform for future growth
				into FY23.
BH Underlying EPS	3.3%	Target > 20%	–	Underlying EPS accretion of 23.7% excl. FX (or 20.4% absorbing the
accretion (excl. FX)		Actual 23.7%		unfavourable FX) exceeded the EPS accretion target set by the Board
		At plan		on announcement of the Barrow Hanley acquisition.
Barrow Hanley	3.3%	Trillium	–	Trillium delivered strong client, advocacy, and fnancial performance
and Trillium Manageable Proft vs. Business Plan for FY22		Above plan Barrow Hanley Below plan	–	in FY22. Strong markets and investment performance in early FY22, combined with continued strong fows across the full year translated into a manageable proft result that was above plan in FY22. Barrow Hanley continued to face outfows in both US Equities and Credit and Fixed Income in FY22. While net infows into higher margin
				Global Equity and Emerging Market Equity products helped to offset these headwinds, Barrow Hanley delivered manageable proft that was
				below plan in FY22.
Execution	3.3%	Board Assessment	–	Launch of Barrow Hanley’s inaugural Collateralised Loan Obligation
of value-add		At plan		(CLO) Equity Fund. The business case approved by PPT Board included
initiatives to core businesses				a commitment to provide seed funding. US$121m of equity was raised, with the frst fund expected to deliver AUM of US$400m in FY23.
			–	US Mutual Fund launch. Key component of strategy to diversify
				Barrow Hanley earnings from institutional clients into the wholesale
				channel (noting at acquisition Barrow Hanley’s client base was 100%
				institutional). At 30 June 2022 Barrow Hanley has US $476m in AUM.
			–	Perpetual established an Irish UCITS umbrella in FY22, as part of a
				focused effort to meet European client demand for both Trillium and
				Barrow Hanley ESG strategies. AUM in this UCITS umbrella exceeded
				US $500m at 30 June 2022.

Perpetual reports profit on both a statutory basis (NPAT) and on an underlying (UPAT) basis. As disclosed previously UPAT adjusts NPAT for significant items that are material in nature and do not reflect the normal operating activities and excludes the non-cash tax-effected amortisation of acquisition intangibles. Adjusted items are clearly defined, consistently applied and disclosed in accordance with ASIC Regulatory Guide – 230 – Disclosing “Non IFRS information”. UPAT is provided as it is considered useful for investors to gain a better understanding of Perpetual’s financial results from normal operating activities. This measure is an appropriate metric for assessing business and Executive performance within the context of the global business strategy.

Perpetual Annual Report 2022

Directors’ Report

Remuneration Report for the year ended 30 June 2022

7.4 FY22 CEO Variable Incentive commentary

Individual Variable Incentive awards are determined through an assessment of performance against the Group balanced company scorecard, divisional performance against agreed priorities and individual performance, which includes an assessment of behavioural expectations for all Executive KMP. Executive KMP must also meet risk and compliance requirements to be eligible to receive a Variable Incentive payment.

The relative weights of Company and divisional performance reflect our primary focus on delivering strong Group outcomes for our shareholders. CEO outcomes are weighted 70% Perpetual Group performance and 30% individual performance. Commencing FY22, Executive KMP have a weighting of 60% Perpetual Group performance and 40% division and individual performance. The combined focus on Perpetual Group and divisional/individual performance ensures shared accountability for overall Perpetual performance among Executive KMP, balanced with the need to deliver on divisional priorities.

	PERPETUAL	DIVISIONAL		INDIVIDUAL
	PERFORMANCE	PERFORMANCE		PERFORMANCE
CEO	70%	0%		30%
Other Executive KMP	60%		40%

FY22 CEO performance and reward outcomes

The Board has considered the individual contribution of the CEO for FY22 with reference to progress against key strategic and individual priorities agreed at the commencement of the performance year. In addition to overall responsibility for Perpetual’s performance against the company scorecard, the CEO had a number of achievements during FY22 which are highlighted below:

Throughout FY22, the CEO continued to make decisive, balanced and effective decisions regarding the strategic investments required for Perpetual to achieve its global growth objectives and ultimately deliver on its current strategy.
The CEO continues to build his Executive team, assisting their development and overall team dynamics. In FY22, this involved utilising an external executive assessment programme to identify gaps and opportunities across his team.
As Perpetual built its global distribution capability, the CEO continued to provide direction and was involved in the sourcing of key staff across US and UK/Europe and has provided regular support to Perpetual’s Global Head of Asset Management Distribution.
The CEO continues to lead Perpetual through a highly uncertain period, achieving consistently high employee sentiment results, driven by an open and transparent internal communication programme. As Chair of Perpetual’s D&I Council, he has driven a full review and restructure of the refreshed strategy.

In considering each of the above items, the Board has determined to award the CEO an overall incentive outcome of 106% of target, or 61% of the maximum, in respect of FY22, reflective of both strong Group and individual performance.

Directors’ Report

Our performance

Operating and Financial Review

Financial Report

7.5 Alignment of Variable Incentive outcomes to five-year Group performance

One of Perpetual’s guiding principles for remuneration is that the remuneration structure should balance value creation for our shareholders, clients and employees. This section displays the degree of alignment between Perpetual Group performance and remuneration outcomes for Executive KMP over the last five years. The table below shows Perpetual’s five-year performance across a range of metrics and corresponding incentive outcomes.

		FY18	FY19	FY20	FY21	FY22
		30 JUNE	30 JUNE	30 JUNE	30 JUNE	30 JUNE
		2018	2019	2020	2021	2022
Underlying proft after tax – UPAT1	$m	139.0	115.9	95.1	122.8	148.2
Earnings per share – UPAT	cps	297	246	200	218	258
Total dividends paid/payable per ordinary share 2	cps	275	250	155	180	209
Closing share price	$	41.6	42.24	29.67	40.05	28.88
1-year TSR	%	-21	8	-26	40	-23
3-year CAGR TSR	%	-1	7	-13	4	-6
4-year CAGR TSR	%	2.1	2.2	-0.7	-3.2	-2.7
5-year CAGR TSR	%	8	3	-3	5	-6
CEO – Variable Incentive as % of target3,4,5 CEO – Variable Incentive as % of maximum target3,4,5 GE – Average Variable Incentive as % of target3 GE – Average Variable Incentive as % of maximum target3 CEO – % of Variable Incentive equity awarded as hurdled6 GE – % of Variable Incentive equity awarded as hurdled6	% % % % % %	34 19 76 43 NA 0	65 37 56 32 50 0	60 34 48 27 100 100	100 57 93 53 50 50	106 61 103 59 54 50

UPAT & EPS – UPAT from five-year profile.
Dividends paid are for the respective financial year.
CEO Variable Incentive outcomes for FY18 are for Perpetual’s previous CEO, Mr Lloyd.
Mr Lloyd ceased employment with Perpetual in FY18, and therefore FY18 represents variable cash only given the forfeiture of Variable Incentive equity for FY18.
FY19–FY22 Variable Incentive outcomes are for Mr Adams.
Excludes sign-on grants.

Perpetual Annual Report 2022

Directors’ Report

Remuneration Report for the year ended 30 June 2022

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SHAREHOLDERS CLIENTS
UPAT ($M) EPS 3-YEAR TSR (CAGR) [ 1] 4-YEAR TSR (CAGR) [ 1] NPS [ 2]
148 297 49
139 7% 45
44
258
123 246 4%
40
116
218 2% 2%
200 34
95
-1%
-1%
-3% -3%
-6%
-13%
2018 2019 2020 2021 2022 2018 2019 2020 2021 2022 2018 2019 2020 2021 2022 2018 2019 2020 2021 2022 2018 2019 2020 2021 2022
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Three and four-year CAGR TSR disclosed to align with the performance hurdle period of the CEO and Group Executives from FY21. 2. NPS FY19 rebased from 39 to 40 to reflect new target markets.

7.6 KMP Growth Incentive

Perpetual is undergoing strategic transformation to deliver improved total shareholder returns. Over the past two years, there have been a number of strategic acquisitions and investments across the Company and the next three to five years will be a critical period for Perpetual to realise the scale and benefit of these investments and deliver improved returns for shareholders. In FY22 the Board reviewed whether the current long-term incentive compensation program in place for the Executive KMP team should be enhanced to provide additional incentives for Executive KMP to realise the benefits of these investments and deliver strong returns for shareholders. As a result of this review, the Board decided to award a long-term incentive (Growth LTI) to Executive KMP to deliver growth above the existing KMP Variable Incentive scheme reward’s stretch performance. Key terms of the structure are outlined below:

Under the Growth LTI, a grant of Performance Rights will be made to Executive KMP in September 2022. The threshold for vesting will be set at 10% CAGR in absolute TSR, with 100% vesting at 15% CAGR absolute TSR (noting vesting commences at 0% for delivering 10.0% CAGR absolute TSR). The CAGR absolute TSR performance range for existing Hurdled Equity is 7.0%–10.0%, meaning value is delivered under this award only where the existing stretch hurdle is exceeded. The Board believes this represents a significant degree of stretch performance when compared to the TSR achieved by the Company in recent years, which will require ongoing significant expansion in underlying EPS.
The Growth LTI will vest in three equal tranches across three, four and five years, subject to meeting the relevant CAGR absolute TSR performance hurdle. Any Performance Rights that vest at three and four years will be retained as restricted shares until five years post the initial grant date. Performance Rights that do not vest are forfeited and not retested. The five-year performance and restriction period for the LTI award extends the time horizon of Executive KMP long-term incentive arrangements to align to the longer-dated timeframe of the Company strategy and provides an alignment mechanism for the core executive team during the integration of these acquisitions and strategic investments.
All other terms and conditions of the awards will be consistent with the existing Hurdled Equity component of the Executive KMP Variable Incentive. The Board will retain discretion to not vest a portion or all of the award if they are not comfortable that all other terms and conditions of the award have been satisfied (including, but not limited to, compliance with and alignment to the Company’s Risk Appetite Statement).
Individual Growth LTI awards are provided in the below table. The Board has determined individual awards on a Fair Value basis given the degree of stretch embedded in the performance hurdles. The Fair Value calculation will be performed at grant date and will be disclosed in the FY23 Remuneration Report, however an estimate of the Face Value of each award is provided in the footnote below. The Board will continue to allocate awards under the existing Variable Incentive Plan on a Face Value basis. The Fair Value amounts in the table below will be expensed over the three to five-year life of the award.
Further details of the CEO award will be available in the Company’s Notice of Meeting for the AGM in October 2022, with full details on the awards made to Executive KMP provided in the FY23 Remuneration Report.

Our performance Directors’ Report

Operating and Financial Review

Financial Report

	GROWTH LONG-TERM
EXECUTIVE	INCENTIVE: FAIR VALUE 1
R Adams	$1,400,000
C Green	$700,000
A Gazal	$600,000
A Gillespie	$600,000
D Lane	$600,000
M Smith	$600,000
R McCarthy	$600,000
S Mosse	$600,000

Final fair value calculations will be performed at the grant date of 1 September. The estimated Face Value of the CEO (R Adams) award is $4.6m, the estimated Face Value of the award for the CFO (C Green) is $2.3m, and the estimated Face Value for each remaining KMP is $1.95m. These amounts will be confirmed at the grant date.

7.7 Vesting outcomes of prior year equity awards

In September 2021, some Variable Incentive Unhurdled Equity awarded for the FY19 financial year vested for eligible Executive KMP. These awards are now held under restriction for an additional two-year period, aligning Executive KMP to shareholder outcomes for a full four-year period.

The current Hurdled Equity structure was introduced for the CEO in FY19. Therefore 50% of the CEO’s FY19 Variable Incentive Equity was awarded as unhurdled equity and 50% as hurdled equity with an absolute TSR hurdle and vesting to occur over three and four years.

Other Executive KMP did not start to participate in this scheme until FY20 and consistent with plan design at the time, the equity component of the grants made to other Executive KMP for FY19 were awarded entirely as unhurdled equity.

The value of this equity at vesting was, on average, 67% of the original Executive KMP’s Variable Incentive equity targets (or 38% of the original maximum equity target).

The overall outcome of 67% of target (or 38% of maximum) occurred despite initial grants being positioned at, on average, 58% of Variable Incentive targets (or 33% of maximum). An increase in the Perpetual share price in the period leading up to vesting in September 2021 increased vesting outcomes for Executive KMP.
However, the two-year restrictions on dealing and recent declines in Australian and global share markets mean that as at 1 July 2022 these restricted shares were valued at, on average, 47% of the original target or 27% of maximum.

The Board believes this outcome provides appropriate alignment between Executive KMP remuneration and shareholder experience. The Board did not believe it was necessary to adjust FY19 equity vesting outcomes given no hurdle was originally applied to vesting of outcomes, no material risk events were identified and Executive KMP are required to continue to hold the equity for an additional two-year restriction period.

Perpetual Annual Report 2022

Directors’ Report

Remuneration Report for the year ended 30 June 2022

8. Data disclosures – Executive KMP

Remuneration of Executive KMP – Statutory Reporting

		SHORT-TERM	BENEFITS
		VARIABLE
		INCENTIVE	NON-MONETARY
	CASH SALARY 1	CASH 2	BENEFITS 3	OTHER 4
NAME	$	$	$	$
Current Executives
R Adams
2022	1,277,776	530,000	–	82,196
2021	1,147,498	500,000	–	26,867
A Gazal
2022	493,333	150,000	–	15,878
2021	435,750	116,350	–	9,143
C Green
2022	645,858	325,000	–	1,651
2021	592,639	281,125	–	(12,352)
D Lane
2022	529,165	300,000	12,882	11,806
2021	493,544	336,000	6,123	5,880
R McCarthy
2022	511,667	300,000	–	7,882
2021	428,566	250,800	–	(2,349)
S Mosse
2022	545,833	172,800	–	–
2021	472,816	136,285	–	(23,269)
M Smith
2022	606,626	272,051	–	21,086
2021	575,045	229,174	–	(17,784)
A Gillespie
2022	479,167	225,000	–	10,256
2021	278,825	102,945	–	(10,824)
Total 2022	5,089,425	2,274,851	12,882	150,755
Total 2021	4,424,683	1,952,679	6,123	(24,688)

Cash salary is the ordinary cash salary received in the year including payment for annual, long service, sick or other types of paid leave taken.
Variable Incentive cash payments consist of cash payments to be made in September 2022 for the CEO and Group Executives.
Non-monetary benefits represents those amounts salary sacrificed from fixed remuneration to pay for benefits such as leased motor vehicles, car parking, and purchased leave.
Other short-term benefits relate to:
salary continuance and death and total and permanent disability insurance provided as part of the remuneration package; and
the value of accrued annual leave for FY22 less leave taken which is depicted as cash salary.

Directors’ Report

Our performance

Operating and Financial Review

Financial Report

	POST-EMPLOYMENT BENEFITS EQUITY-BASED BENEFITS 5 TERMINATION PAYMENTS $ TOTAL $ SUPERANNUATION OTHER LONG-TERM BENEFITS 6 VARIABLE INCENTIVE EQUITY 7 SHARES PERFORMANCE RIGHTS $ $ $ $ $
	25,000 21,722 645,029 170,988 – – 2,752,711 25,000 21,721 417,525 161,993 – – 2,300,654
	25,000 9,575 69,329 23,074 – – 786,189 25,000 8,087 25,660 189,136 – – 809,126
	25,000 15,062 237,644 – – – 1,250,215 25,000 10,840 270,691 – – – 1,167,943
	25,000 10,752 192,581 – – – 1,082,186 25,000 9,208 171,161 – – – 1,046,916
	25,000 (11,179) 173,222 – 11,664 – 1,018,256 25,000 (33,206) 119,882 – 54,657 – 843,350
	25,000 10,573 101,601 20,607 – – 876,414 25,000 10,418 56,241 75,835 – – 753,326
	25,000 10,531 207,922 – – – 1,143,216 25,000 10,531 212,860 – – – 1,034,826
	25,000 10,465 82,362 – 111,558 – 943,808 15,411 8,544 22,704 – 80,168 – 497,773
	200,000 77,501 1,709,690 214,669 123,222 – 9,852,995 190,411 46,143 1,296,724 426,964 134,825 – 8,453,914

Share-based remuneration has been valued using the binomial method, which considers the performance hurdles relevant to each issue of equity instruments. The value of each equity instrument has been provided by PricewaterhouseCoopers. Share-based remuneration is the amount expensed in the financial statements for the year and includes adjustments to reflect the most current expectation of vesting of LTI grants with non-market condition hurdles. For grants with non-market conditions including earnings per share hurdles, the number of shares expected to vest is estimated at the end of each reporting period and the amount to be expensed in the financial statements is adjusted accordingly. For grants with market conditions such as total shareholder return hurdles, the number of shares expected to vest is not adjusted during the life of the grant and no adjustment is made to the amount expensed in the financial statements (except if service conditions are not met). The accounting treatment of non-market and market conditions are in accordance with accounting standards.
The value of accrued long service leave for FY22 less leave taken, which is depicted as cash salary.
Variable Incentive equity includes costs incurred in FY22 for the FY18, FY19, FY20, FY21 Variable Incentive equity grants.

Perpetual Annual Report 2022

Directors’ Report

Remuneration Report for the year ended 30 June 2022

Executive KMP Remuneration received FY22

The table below represents the actual remuneration received by the Executive KMP during FY22. This table differs to the statutory remuneration table on page 54 that has been prepared in accordance with the Corporations Act and Australian Accounting Standards. The difference between the two tables is predominantly due to the accounting treatment of the share-based payments.

				DIVIDENDS
				PAID ON
			EQUITY	UNVESTED
		VARIABLE	VESTED	SHARES	SIGN-ON AND	PAYMENTS
	TOTAL FIXED	INCENTIVE	DURING	DURING	RELOCATION	MADE ON
	REMUNERATION 1	CASH 2	YEAR 3	YEAR 4	BENEFITS	TERMINATION	TOTAL
NAME	$	$	$	$	$	$	$
Current Executives
R Adams	1,304,801	500,000	439,555	22,279	–	–	2,266,634
A Gazal	520,076	116,350	177,061	4,672	–	–	818,160
C Green	672,509	281,125	502,545	–	–	–	1,456,179
D Lane	572,276	336,000	236,004	–	–	–	1,144,280
R McCarthy	538,318	250,800	258,298	–	–	–	1,047,416
S Mosse	572,484	136,285	219,474	4,475	–	–	932,718
M Smith	633,277	229,174	347,569	–	–	–	1,210,020
A Gillespie	506,577	102,945	105,697	–	–	–	715,219
Totals	5,320,318	1,952,679	2,286,203	31,426	–	–	9,590,626

Fixed remuneration consists of cash salary, superannuation, packaged employee benefits and associated fringe benefits tax.
Represents the cash portion of Variable Incentive outcome for FY21 paid in September 2021.
Represents the value of equity grants awarded in previous years which vested during the year. For Ms Gazal, this relates to sign-on shares granted at the commencement of employment. For Mr McCarthy, this represents 3859 Share Rights granted on 1 October 2018 as a Long Term Incentive that vested on 1 October 2021, as well as 3663 Share Rights granted on 1 September 2019 that vested on 1 September 2021. For Mr Smith, Lane and Green the numbers reflect Share Rights granted to KMP in September 2019 which converted to Restricted Shares two years after the grant date. The holding lock is removed four years after the grant date, as per the terms of the Executive Leadership Team Variable Incentive Plan.
Dividends paid during FY22 on sign-on shares granted to Mr Adams on 24 September 2018, Ms Gazal on 7 April 2020 and Ms Mosse on 18 February 2019. Dividends paid to Mr McCarthy relate to deferred STI shares awarded in previous role.

Remuneration components as a proportion of total remuneration

The remuneration components below are determined based on the remuneration of the Executive KMP – Statutory Reporting table on page 54. This table includes fixed remuneration and Variable Incentives – cash and equity.

NAME FIXED REMUNERATION %	PERFORMANCE LINKED BENEFITS OTHER EQUITY 1 TOTAL % VARIABLE INCENTIVE CASH % VARIABLE INCENTIVE EQUITY %
Current Executives R Adams 51% A Gazal 69% C Green 55% D Lane 54% R McCarthy 52% S Mosse 66% M Smith 58% A Gillespie 56%	19% 23% 6% 100% 19% 9% 3% 100% 26% 19% 0% 100% 28% 18% 0% 100% 29% 18% 0% 100% 20% 12% 2% 100% 24% 18% 0% 100% 24% 21% 0% 100%

Other equity includes sign-on equity for Mr Adams, Ms Gazal and Ms Mosse.

Directors’ Report

Our performance

Operating and Financial Review

Financial Report

Value of unvested remuneration that may vest in future years

Estimates of the maximum future cost of equity-based remuneration granted by Perpetual should all targets be met in the future.

	30/06/2023 1	30/06/2024 1	30/06/2025 1	30/06/2026 1	30/06/2027 1
	MAXIMUM	MAXIMUM	MAXIMUM	MAXIMUM	MAXIMUM
	$	$	$	$	$
CEO and Managing Director
R Adams	937,521	780,587	238,914	64,502	7,200
Current Group Executives
A Gazal	102,175	97,884	30,974	8,798	990
A Gillespie	201,596	150,088	40,389	12,332	1,485
C Green	316,131	278,813	82,049	21,218	2,344
D Lane	268,880	235,101	70,205	18,133	1,980
R McCarthy	247,121	225,205	65,982	17,531	1,980
S Mosse	148,815	133,562	38,873	10,163	1,141
M Smith	283,113	253,538	75,562	19,916	2,211

The minimum value of the grants is $nil if the performance targets are not met. The values above are determined in accordance with accounting standards. The fair value of granted shares is recognised as an employee expense with a corresponding increase in equity. Fair value is measured at grant date and amortised over the performance and/or service period.

Shareholdings

The table below summarises the movement in holdings of ordinary shares held during the year and the balance at the end of the year, directly, indirectly, or by a related party.

	TOTAL					SHARES HELD	SHARES HELD	TOTAL
	SHARES					PERSONALLY	NOMINALLY	SHARES
	HELD AT		VESTING OF	VESTING OF	SALES/	AT	AT	HELD AT
NAME	1 JULY 2021	PURCHASES	SHARES	RIGHTS	REDUCTIONS	30 JUNE 2022	30 JUNE 2022 1	30 JUNE 2022
Current Executives
R Adams	21,290		–	10,551	–	30,034	1,807	31,841
A Gazal	4,867	–	4,867	–	–	9,734	–	9,734
C Green	18,931	–	–	12,063		30,994	–	30,994
D Lane	12,758		–	5,665	–	18,423	–	18,423
R McCarthy	3,234	–	–	6,522		9,756	–	9,756
S Mosse	–	–	4,661	1,010	–	5,671	–	5,671
M Smith	26,385	7,905	–	8,343	7,905	18,131	16,597	34,728
A Gillespie	2,240	–	–	2,859	–	5,099	–	5,099

Shares held nominally are included in the “Total shares held at 30 June 2022” column. Total shares are held directly by the KMP and indirectly by the KMP’s related parties, inclusive of domestic partner, dependents and entities controlled, jointly controlled or significantly influenced by the KMP.

Perpetual Annual Report 2022

Directors’ Report

Remuneration Report for the year ended 30 June 2022

Unvested Share and Performance Rights holdings of the Executive KMP

The table below summarises the Share and Performance Rights holdings and movements by number granted to the Executive KMP by Perpetual, for the year ended 30 June 2022. For details of the fair valuation methodology, refer to Section 4.1 of the notes to, and forming part of the financial statements.

			GRANT
			PRICE
NAME	INSTRUMENT	GRANT DATE	$	VESTING DATE
Current Executives
R Adams2	Shares	24 September 2018	42.01	24 September 2022
	Share Rights	2 September 2019	42.01	1 September 2021
	Performance Rights	2 September 2019	42.01	1 September 2022
	Performance Rights	2 September 2019	42.01	1 September 2023
	Performance Rights4	1 September 2020	31.15	1 September 2023
	Performance Rights4	1 September 2020	31.15	1 September 2024
	Performance Rights7	1 September 2021	41.23	1 September 2024
	Performance Rights7	1 September 2021	41.23	1 September 2025
	Share Rights4	1 September 2021	41.23	1 September 2023
		Aggregate value
A Gazal2	Shares	7 April 2020	25.86	7 October 2021
	Performance Rights7	1 September 2021	41.23	1 September 2024
	Performance Rights7	1 September 2021	41.23	1 September 2025
	Share Rights8	1 September 2021	41.23	1 September 2023
		Aggregate value
C Green	Share Rights3	2 September 2019	35.30	1 September 2021
	Performance Rights4	1 September 2020	31.15	1 September 2023
	Performance Rights4	1 September 2020	31.15	1 September 2024
	Performance Rights7	1 September 2021	41.23	1 September 2024
	Performance Rights7	1 September 2021	41.23	1 September 2025
	Share Rights8	1 September 2021	41.23	1 September 2023
		Aggregate value
D Lane2	Share Rights3	2 September 2019	35.30	1 September 2021
	Performance Rights4	1 September 2020	31.15	1 September 2023
	Performance Rights4	1 September 2020	31.15	1 September 2024
	Performance Rights7	1 September 2021	41.23	1 September 2024
	Performance Rights7	1 September 2021	41.23	1 September 2025
	Share Rights8	1 September 2021	41.23	1 September 2023
		Aggregate value
R McCarthy5	Share Rights	1 October 2018	34.97	1 October 2021
	Share Rights3	2 September 2019	35.30	1 September 2021
	Performance Rights4	1 September 2020	31.15	1 September 2023
	Performance Rights4	1 September 2020	31.15	1 September 2024
	Performance Rights7	1 September 2021	41.23	1 September 2024
	Performance Rights7	1 September 2021	41.23	1 September 2025
	Share Rights8	1 September 2021	41.23	1 September 2023
		Aggregate value

Directors’ Report

Our performance

Operating and Financial Review

Financial Report

	HELD AT 1 JULY 2021	MOVEMENT DURING THE YEAR 1 HELD AT 30 JUNE 2022 FAIR VALUE OF INSTRUMENT AT GRANT DATE $ GRANTED FORFEITED VESTED NUMBER OF INSTRUMENTS NUMBER OF INSTRUMENTS
	NUMBER OF INSTRUMENTS
	10,711 10,551 5,276 5,275 21,938 21,937	– – – 10,711 42.01 – – 10,551 – 28.89 – – – 5,276 8.22 – – – 5,275 8.40 – – – 21,938 12.09 – – – 21,937 12.42 10,780 10,780 20.14 10,780 10,780 17.05 21,560 21,560 34.07 $1,777,838 $– $439,555
	4,867	– 4,867 – 25.86 1,410 1,410 20.14 1,410 1,410 17.05 2,821 2,821 34.07 $232,578 $– $177,061
	12,063 8,026 8,025	– – 12,063 – 28.89 – – – 8,026 12.09 – – – 8,025 12.42 3,727 3,727 20.14 3,727 3,727 17.05 7,454 7,454 34.07 $614,657 $– $502,545
	5,665 6,019 6,019	– – 5,665 – 28.89 – – – 6,019 12.09 – – – 6,019 12.42 3,357 3,357 20.14 3,357 3,357 17.05 6,714 6,714 34.07 $553,636 $– $236,004
	2,859 3,663 6,019 6,019	– – 2,859 – 34.97 – – 3,663 – 28.89 – – – 6,019 12.09 – – – 6,019 12.42 2,754 2,754 20.14 2,754 2,754 17.05 5,509 5,509 34.07 $454,231 $– $258,298

Perpetual Annual Report 2022

Directors’ Report

Remuneration Report for the year ended 30 June 2022

			GRANT
			PRICE
NAME	INSTRUMENT	GRANT DATE	$	VESTING DATE
S Mosse2	Shares	18 February 2019	35.37	21 September 2021
	Share Rights3	2 September 2019	35.30	1 September 2021
	Performance Rights4	1 September 2020	31.15	1 September 2023
	Performance Rights4	1 September 2020	31.15	1 September 2024
	Performance Rights7	1 September 2021	41.23	1 September 2024
	Performance Rights7	1 September 2021	41.23	1 September 2025
	Share Rights8	1 September 2021	41.23	1 September 2023
		Aggregate value
M Smith	Share Rights3	2 September 2019	35.30	1 September 2021
	Performance Rights4	1 September 2020	31.15	1 September 2023
	Performance Rights4	1 September 2020	31.15	1 September 2024
	Performance Rights7	1 September 2021	41.23	1 September 2024
	Performance Rights7	1 September 2021	41.23	1 September 2025
	Share Rights8	1 September 2021	41.23	1 September 2023
		Aggregate value
A Gillespie6	Share Rights	1 October 2018	34.97	1 October 2021
	Share Rights	1 October 2019	31.53	1 October 2022
	Share Rights	1 October 2020	23.82	1 October 2023
	Performance Rights7	1 September 2021	41.23	1 September 2024
	Performance Rights7	1 September 2021	41.23	1 September 2025
	Share Rights8	1 September 2021	41.23	1 September 2023
		Aggregate value

Granted aggregate value is calculated by multiplying the number of instruments by the grant price. Vested and forfeited aggregate value is calculated by multiplying the number of shares by the Perpetual closing share price on the vesting date.
Mr Adams’ shares, Ms Gazal’s shares and Ms Mosse’s shares are sign-on shares.
Share Rights granted to KMP in September 2017, 2018 & 2019 convert to Restricted Shares two years after the grant date. The holding lock is removed four years after the grant date, as per the terms of the Executive Leadership Team Variable Incentive Plan. These Share Rights are not included in the Table after vesting.
Performance Rights granted to KMP in September 2020 were issued as two tranches with a TSR hurdle. T1 is subject to a three-year performance period before vesting into Restricted Shares for one year. T2 was subject to a four-year performance period before vesting. Vested Performance Rights with a holding lock are not included in the Table after vesting.
Some of Mr McCarthy’s shares and Performance Rights were granted prior to his KMP appointment date of 15 October 2018. We have included his holdings and movements prior to 15 October 2018 for completeness.
All of Ms Gillespie’s Share Rights were granted prior to her KMP appointment date of 18 November 2020. We have included these holdings for completeness.
Performance Rights granted to KMP in September 2021 were issued as two tranches with a TSR hurdle. T1 is subject to a three-year performance period before vesting into Restricted Shares for one year. T2 was subject to a four-year performance period before vesting. Vested Performance Rights with a holding lock are not included in the Table after vesting.
Share Rights granted to KMP in September 2021 convert to Restricted Shares two years after the grant date. The holding lock is removed four years after the grant date, as per the terms of the Executive Leadership Team Variable Incentive Plan. These Share Rights are not included in the Table after vesting.

Directors’ Report

Our performance

Operating and Financial Review

Financial Report

	HELD AT 1 JULY 2021	MOVEMENT DURING THE YEAR 1 HELD AT 30 JUNE 2022 FAIR VALUE OF INSTRUMENT AT GRANT DATE $ GRANTED FORFEITED VESTED NUMBER OF INSTRUMENTS NUMBER OF INSTRUMENTS
	NUMBER OF INSTRUMENTS
	4,661 1,010 4,012 4,012	– – 4,661 – 35.37 – – 1,010 – 28.89 – – – 4,012 12.09 – – – 4,012 12.42 1,652 1,652 20.14 1,652 1,652 17.05 3,305 3,305 34.07 $272,489 $– $219,474
	8,343 6,019 6,019	– – 8,343 – 28.89 – – – 6,019 12.09 – – – 6,019 12.42 3,421 3,421 20.14 3,421 3,421 17.05 6,842 6,842 34.07 $564,191 $– $347,569
	2,859 4,123 6,298	– – 2,859 – 34.97 – – – 4,123 31.53 – – – 6,298 23.82 1,248 1,248 20.14 1,248 1,248 17.05 2,496 2,496 34.07 $205,820 $– $105,697

Perpetual Annual Report 2022

Directors’ Report

Remuneration Report for the year ended 30 June 2022

Termination terms for Executive KMP

Following are the Executive KMP contractual arrangements.

TERM	WHO	CONDITIONS
Duration of contract	All Executive KMP	Ongoing until notice is given by
		either party
Notice to be provided by the Executive to terminate	CEO and Managing Director	9 months
the employment agreement	Other Executive KMP	6 months
Notice to be provided by Perpetual to terminate the	CEO and Managing Director	9 months
employment agreement without cause	Other Executive KMP	6 months
Notice to be provided by Perpetual for	All Executive KMP	No notice
summary dismissal
Post-employment restraint	CEO and Managing Director and	12 months from the date on which
	Other Executive KMP	notice of termination was given

The agreements also allow Perpetual to make a payment in lieu of notice, subject to Board approval.

9. Non-executive Director remuneration

9.1 Remuneration policy and data

Perpetual’s Remuneration Policy for Non-executive Directors aims to ensure that we attract and retain suitably skilled, experienced and committed individuals to serve on your Board. Non-executive Directors do not receive performance-related remuneration and are not entitled to receive performance shares or options over Perpetual shares as part of their remuneration arrangements.

Fee framework

Non-executive Directors receive a base fee. Except for the Chairman, they also receive fees for participating in Board Committees (other than the Nominations Committee), either as Chairman or as a member[ 1] .

As advised in the FY21 Remuneration Report, NED fees were adjusted with an effective date of 1 July 2021. This was the first change to base Chairman and Director fees (other than the temporary reduction in FY21) since an adjustment made leading into FY16.

	FY21	FY22	FY22	FY23	FY23
NON-EXECUTIVE DIRECTORS’ FEES	AUD	AUD	USD 1	AUD	USD 1
Chairman	300,000	340,000		340,000
Directors	150,000	165,000	180,000	165,000	180,000
Audit, Risk and Compliance Committee Chairman	35,000	35,000		35,000
Audit, Risk and Compliance Committee member	17,000	17,000	17,000	17,000	17,000
People and Remuneration Committee Chairman	35,000	35,000		35,000
People and Remuneration Committee member	17,000	17,000	17,000	17,000	17,000
Investment Committee Chairman	25,000	25,000		25,000
Investment Committee member	13,000	13,000	13,000	13,000	13,000
Nominations Committee member	Nil	Nil	Nil	Nil	Nil
Overseas travel allowance per trip (long-haul)2		10,000	10,000	10,000	10,000

Apply to US-based Directors only.
This allowance is paid once for each return overseas trip where the flight time, one way, is at least eight hours.

The fees detailed above are inclusive of any superannuation or pension contributions, capped at the maximum prescribed under any applicable legislation.

Any other contracts are at arm’s length in the normal course of business and on normal commercial terms consistent with other employees and clients. Those transactions may involve investments in Perpetual managed funds and financial advice by Perpetual Private.

Directors’ Report

Our performance

Operating and Financial Review

Financial Report

Australian-based Non-executive Directors may receive employer superannuation contributions in one of Perpetual’s employee superannuation funds or in a complying fund of their choice. Non-executive Directors can also salary sacrifice superannuation contributions out of their base fee.

Total fees paid to Non-executive Directors in FY22 were $1,724,665. More details are provided in the table below.

Retirement policy

Non-executive Directors who have held office for three years since their last appointment must retire and seek re-election at the Annual General Meeting.

In order to revitalise the Board, Perpetual’s Non-executive Directors agree not to seek re-election after three terms of three years. However, the Board may invite a Non-executive Director to continue in office beyond nine years if there is a compelling reason and, as determined by the Board, if in the best interests of shareholders.

Outside of superannuation contributions, no retirement benefits are paid to Non-executive Directors.

Remuneration of the Non-executive Directors (statutory reporting)

Details of Non-executive Director remuneration are set out in the table below.

NAME	SHORT-TERM BENEFITS POST EMPLOYMENT BENEFITS TOTAL 3 $ PERPETUAL BOARD FEES 1 $ SUPERANNUATION 2 $
T D'Aloisio 2022 2021	326,432 23,568 350,000 248,742 21,258 270,000
G Cooper 2022 2021	201,818 20,182 222,000 180,235 7,765 188,000
N Fox 2022 2021	206,364 20,636 227,000 177,626 16,874 194,500
I Hammond 2022 2021	213,318 9,682 223,000 189,000 – 189,000
M A Kanaan4 2022 2021	280,665 – 280,665 2,000 – 2,000
F Trafford-Walker 2022 2021	205,000 – 205,000 163,973 7,027 171,000
C Ueland 2022 2021	198,182 18,818 217,000 165,068 15,682 180,750
Total 2022 Total 2021	1,631,779 92,886 1,724,665 1,126,644 68,606 1,195,250

All Australian Non-executive Directors travelled to the US during FY22 once. Their fees therefore include the $10,000 overseas travel allowance detailed in the NED fees table.
Australian Non-executive Directors can elect to take superannuation contributions in excess of their Superannuation Guarantee Contribution as additional base fees.
Non-executive Directors do not receive any non-cash benefits as part of their remuneration.
US-based Directors do not receive any payments such as pension contributions in addition to Board fees. US fees are shown as the actual AUD cost of USD payments.

Perpetual Annual Report 2022

Directors’ Report

Remuneration Report for the year ended 30 June 2022

Alignment with shareholder interests

The constitution requires Non-executive Directors to acquire a minimum of 500 Perpetual shares on appointment and hold a total of at least 1,000 shares when they have held office for three years. However, Non-executive Directors are encouraged to hold ordinary Perpetual shares equivalent in value to 100% of their annual base fee within a reasonable period of their appointment.

Non-executive Directors do not receive share rights or options and are required to comply with Perpetual’s Hedging and Share Trading policies.

Non-executive Director shareholdings

The table below summarises the Non-executive Director movement in holdings of ordinary shares held during the year and the balance at the end of the year. The table includes shares held both in total (directly or indirectly) and held by related parties.

NAME	TOTAL SHARES HELD AT 1 JULY 2021 PURCHASES SALES/ REDUCTIONS SHARES HELD PERSONALLY AT 30 JUNE 2022 SHARES HELD NOMINALLY AT 30 JUNE 2022 1 TOTAL SHARES HELD AT 30 JUNE 2022 1,000 SHAREHOLDING REQUIREMENT MET NUMBER OF SHARES
T D'Aloisio G Cooper N Fox I Hammond M Kanaan2 F Trafford-Walker C Ueland	9,072 – – 9,072 9,072 ✔ 5,758 324 – – 6,082 6,082 ✔ 5,641 317 – 5,958 – 5,958 ✔ 12,967 – 2,149 10,818 12,967 ✔ – 500 – 500 – 500 * 1,803 102 – 1,905 – 1,905 ✔ 7,991 – 3,995 3,996 7,991 ✔

Shares held nominally are included in the ‘Total shares held at 30 June 2022’ column. Total shares are held directly by the KMP and indirectly by the KMP’s related parties, inclusive of domestic partner, dependents and entities controlled, jointly controlled or significantly influenced by the KMP.
Ms Kanaan joined the Board on 28 June 2021. The constitution requires Non-executive Directors to acquire a minimum of 500 Perpetual shares on appointment and hold a total of at least 1,000 shares when they have held office for three years.

Our performance Directors’ Report

Operating and Financial Review

Financial Report

Directors’ Report

for the year ended 30 June 2021

10. Key terms

10. Key terms
Balanced scorecard	The performance measures of fnancial, client, growth and people as agreed by the Board to assess
	short and long-term Perpetual Group performance for the purposes of determining the amount of
	variable remuneration payable (if any).
Cash	Refers to the Cash component of the Variable Incentive Plan. The Cash component of the plan is
	delivered to KMP following the completion of the performance year.
Executive KMP	Executive Key Management Personnel. Those people who have the authority and responsibility for
	planning, directing and controlling Perpetual’s activities, either directly or indirectly. Key Management
	Personnel disclosed in this report are the CEO and Managing Director and other Executive KMP
	(collectively Executive KMP).
Fixed remuneration	Fixed remuneration consists of cash salary, superannuation, packaged employee benefts and associated fringe benefts tax.
Group	Perpetual Limited and its controlled entities.
Hurdled Equity	The Hurdled Equity component is awarded in the form of Performance Rights (subject to performance
	hurdles of absolute total shareholder return) equally over three years (with any vested equity restricted
	for a further year) and four years.
Market peers	For the purposes of benchmarking remuneration practices and levels, Perpetual’s market peers refer to listed companies in the diversifed fnancial services industry, excluding major banks and other fnancial
	services companies in the Standard & Poor’s (S&P)/ASX 200.
Mood Monitor	With the decision not to run a formal engagement survey in FY20, it was decided to implement the
	Mood Monitor to seek more frequent, in-the-moment feedback to gauge the mood of employees
	through regular pulse surveys.
Non-Executive Director	Non-Executive Directors (NEDs) or Non-Executive KMP are members of a company's board of directors
(NED)	who are not part of the executive team.
NPAT	NPAT is the net proft after tax in accordance with the Australian Accounting Standards.
Performance Rights	Performance Rights are granted under the Hurdled Equity component of the Executive Variable
	Incentive Plan.
Restricted Shares	Once Share Rights are held for a two-year vesting period, and if the vesting conditions are met, they
	are converted to Restricted Shares on a one share for one Share Right basis. Restricted shares are then
	held for a further two years.
Share Rights	Share Rights are issued around September each year, following the performance period. Share Rights
	have a two-year vesting period, at which point, if the vesting conditions are met, they are converted to
	Restricted Shares on a one share for one Share Right basis.
STI	A short-term incentive paid to employees for meeting annual targets aimed at delivering our longer-term
	strategic plan. Under the STI Plan, employees may be paid a discretionary incentive (less applicable taxes)
	based on their individual performance as well as business performance. The CEO and Executive KMP
	participate in their own Variable Incentive plans, and therefore no longer participate in the Group STI plan.
Unhurdled Equity	The Unhurdled Equity component is awarded as Share Rights, which vest after two years into Restricted
	Shares for a further two years.
UPAT	UPAT is underlying net proft after tax in accordance with the Australian Accounting Standards.
Variable Incentive	Variable Incentive includes both cash and equity components of the CEO and other Executive KMP
	Variable Incentive Plan.

Perpetual Annual Report 2022

Directors’ Report

Remuneration Report for the year ended 30 June 2022

Non-audit services provided by the External Auditor

Fees for non-audit services paid to KPMG in the current year were $189,313 (2021: $74,877).

The Board has a review process in relation to any non-audit services provided by the external auditor. The Board considered the non-audit services provided by the auditor and is satisfied that the provision of these non-audit services by the auditor is compatible with, and does not compromise, the auditor independence requirements of the Corporations Act 2001 for the following reasons:

all non-audit services are subject to the corporate governance procedures adopted by the Company and are reviewed by the Audit, Risk and Compliance Committee to ensure that they do not impact the integrity and objectivity of the auditor; and
non-audit services provided do not undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants , as they do not involve reviewing or auditing the auditor’s own work, acting in a management or decision-making capacity for the Company, acting as an advocate for the Company or jointly sharing risks and rewards.

The Lead Auditor’s independence declaration for the 30 June 2022 financial year is included at the end of this report.

Rounding off

The Company is of a kind referred to in ASIC Corporations Instrument 2016/191 dated 1 April 2016 and, in accordance with that Instrument, amounts in the financial report and the Directors’ Report have been rounded off to the nearest one hundred thousand dollars, unless otherwise stated.

This report is made in accordance with a resolution of the Directors.

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Tony D’Aloisio Chairman

Rob Adams

Chief Executive Officer and Managing Director

Sydney 25 August 2022

Our performance Directors’ Report

Operating and Financial Review

Financial Report

Lead Auditor’s Independence Declaration

under section 307C of the Corporations Act 2001

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Lead Auditor’s Independence Declaration under Section 307C of the Corporations Act 2001

To the Directors of Perpetual Limited

I declare that, to the best of my knowledge and belief, in relation to the audit of Perpetual Limited for the financial year ended 30 June 2022, there have been:

i. no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit; and

ii. no contraventions of any applicable code of professional conduct in relation to the audit.

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KPMG Brendan Twining Partner Sydney

25 August 2022

KPMG, an Australian partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under Professional Standards Legislation.

Perpetual Annual Report 2022

Operating and Financial Review

for the 12 months ended 30 June 2022

Disclaimer

The following information should be read in conjunction with the Group’s audited consolidated financial statements and associated notes for the 12 months ended 30 June 2022 contained in the Annual Report for the financial year ended 30 June 2022 (FY22). The Group’s audited consolidated financial statements for the 12 months ended 30 June 2022 were subject to an independent audit by KPMG.

No representation or warranty is made as to the accuracy, adequacy or reliability of any statements, estimates, opinions or other information contained in this review (any of which may change without notice). To the maximum extent permitted by law, the Perpetual Group, its Directors, officers, employees, agents and contractors and any other person disclaim all liability and responsibility (including without limitation any liability arising from fault or negligence) for any direct or indirect loss or damage which may be suffered through use of or reliance on anything contained in or omitted from this review.

This review contains forward-looking statements. These forward-looking statements should not be relied upon as a representation or warranty, express or implied, as to future matters. Prospective financial information has been based on current expectations about future events but is, however, subject to risks, uncertainties, contingencies, and assumptions that could cause actual results to differ materially from the expectations described in such prospective financial information. The Perpetual Group undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date of this review, subject to disclosure requirements applicable to the Group.

Review of Group

1	About Perpetual	69
1.1	Overview	69
1.2	Group Financial Performance	71
1.3	Group Financial Position	74
1.4	Regulatory Developments and Business Risks	77
1.5	Outlook	82
Review of Businesses
2	Review of Businesses	83
2.1	Perpetual Asset Management International	83
2.2	Perpetual Asset Management Australia	86
2.3	Perpetual Private	89
2.4	Perpetual Corporate Trust	91
2.5	Perpetual Group Support Services	93
Appendices
3	Appendices	94
3.1	Appendix A: Segment Results	94
3.2	Appendix B: Bridge For FY22 Statutory Accounts and OFR	98
3.3	Appendix C: Perpetual Average Assets Under Management	100
3.4	Appendix D: Full Time Equivalent Employees	101
3.5	Appendix E: Dividend History	101
3.6	Glossary	102

Notes

Note that in this review:

FY22 refers to the financial reporting period for the 12 months ended 30 June 2022
1H22 refers to the financial reporting period for the 6 months ended 31 December 2021
2H22 refers to the financial reporting period for the 6 months ended 30 June 2022

with similar abbreviations for previous and subsequent periods.

This is a review of Perpetual’s operations for the 12 months ended 30 June 2022 (FY22). It also includes a review of its financial position as at 30 June 2022.

The following information should be read in conjunction with the Group’s audited consolidated financial statements and associated notes for FY22.

All amounts shown are stated in Australian dollars unless otherwise noted and are subject to rounding.

Additional information is available on the Group’s website perpetual.com.au.

A glossary of frequently used terms and abbreviations can be found at the end of the review.

Operating and Financial Review

Our performance

Directors’ Report

Financial Report

Review of Group

1. About Perpetual

1.1 Overview

Perpetual Limited (Perpetual) is a global financial services firm operating in asset management, financial advisory and trustee services. Perpetual services a global client base from its offices in Australia as well as its international offices in the United States, United Kingdom, the Netherlands, Singapore and Hong Kong. Perpetual earns the majority of its revenue from fees charged on assets under either management, advice or administration. Revenue is influenced by movement in the underlying asset values, margin on assets and net client flows. The business model provides Perpetual with recurring revenue streams and leverage to movement in asset values. As a provider of high-quality financial services, employment costs comprise the largest component of the Group’s expenses.

1.1.1 Strategy

Perpetual’s vision is to be the ‘most trusted in financial services’[1] .

Perpetual’s strategy is focused on delivering sustained growth and seeks to build on the foundation of three core businesses, forming a scalable business model supported by shared central services and a strong brand.

In pursuing its growth strategy, the Group is committed to the following strategic imperatives:

Client first – delivering exceptional products and outstanding service;
Future fit – a scalable business platform that empowers our people to deliver high performance; and
New horizons – adding new capabilities and building a global footprint.

Perpetual’s unique combination of market-leading businesses provides the group with a broad array of growth opportunities.

Perpetual Asset Management’s vision is to create a market-leading global business of high-quality asset management capabilities delivered by the two operating segments of Perpetual Asset Management International (PAMI) and Perpetual Asset Management Australia (PAMA). Perpetual Asset Management provides a foundation for sustained quality growth by offering world-class investment capabilities, expanding its global distribution footprint and investment in a contemporary and scalable global business.

Perpetual Private’s vision is to empower families, businesses and communities to achieve their aspirations by delivering advisory service excellence. With a client-centred fiduciary heritage, Perpetual Private reaches into segments where client goals are aligned to a ‘protect first’ and then ‘grow’ investment philosophy.

Perpetual Corporate Trust’s vision is to be the most trusted fiduciary and the leading digital solutions provider to the banking and financial services industry, with a mission to support the delivery of its client’s strategy through the provision of service excellence and digital solutions. Perpetual Corporate Trust builds on its strategy of enabling client success by leveraging its long-standing relationships and supporting its clients with innovative and automated digital solutions to help them meet business challenges today and into the future.

Measured as part of an annual brand strengths survey with the Perpetual Private target market and the Perpetual Asset Management Australia retail target market.

Perpetual Annual Report 2022

Operating and Financial Review

for the 12 months ended 30 June 2022

1.1.2 Operating segments and principal activities

Perpetual Asset Management International provides investment products and services to global retail and institutional clients, including a distribution presence in the United States, United Kingdom, the Netherlands and Hong Kong. Investment management firm, Barrow Hanley Global Investors (Barrow Hanley), and boutique ESG investment management firm, Trillium Asset Management (Trillium), form part of this operating segment to offer a breadth of high-quality global investment capabilities to our clients.

Perpetual Asset Management Australia provides investment products and services to Australian and New Zealand retail, corporate, superannuation and institutional clients, with investment capabilities spanning Australian equities, credit and fixed income, multi-asset and global equities.

Perpetual Private is an advisory services business focused on the comprehensive needs of families, businesses and communities. Support for clients spreads across financial advice, risk, estate administration, trustee services and tax and accounting as well as portfolio management. The business is focused on client service excellence and attracting and retaining exceptional talent to meet those standards in our chosen segments.

Perpetual Corporate Trust provides a broad range of fiduciary, agency and digital products to the debt capital markets and managed funds industries both domestically and internationally. Debt Market Services includes trustee, document custodian, agency, trust management, accounting, standby servicing and reporting solutions. Perpetual Digital provides data services, industry roundtables, and our new Perpetual Intelligence platform-as-a-service products supporting the banking and financial services industry. Managed Funds Services provides services including independent responsible entity, wholesale trustee, custodian, investment management and accounting.

The business units are supported by Group Support Services comprising Group Investments, CEO, Finance, Corporate Affairs, Marketing, Legal, Audit, Risk, Compliance, Company Secretary, Technology, Project & Change Management, Operations, Product and People & Culture.

Operating and Financial Review

Our performance

Directors’ Report

Financial Report

1.2 Group Financial Performance

Profitability and key performance indicators

	FY22	FY21 2	FY22 V	FY22 V
FOR THE PERIOD	$M	$M	FY21	FY21
Operating revenue	767.7	640.6	127.1	20%
Total expenses	(566.5)	(471.2)	(95.3)	(20%)
Underlying proft before tax (UPBT)	201.2	169.3	31.9	19%
Tax expense	(53.0)	(46.6)	(6.5)	(14%)
Underlying proft after tax (UPAT)1	148.2	122.8	25.4	21%
Signifcant items3	(47.0)	(49.9)	2.9	6%
Net proft after tax (NPAT)	101.2	72.9	28.3	39%

Underlying profit after tax (UPAT) attributable to equity holders of Perpetual Limited reflects an assessment of the result for the ongoing business of the Group as determined by the Board and management. UPAT has been calculated in accordance with ASIC’s Regulatory Guide 230 – Disclosing non-IFRS financial information. Refer to Appendix B for a reconciliation of the adjustments between Statutory Accounts and the OFR. UPAT attributable to equity holders of Perpetual Limited is disclosed as it is useful for investors to gain a better understanding of Perpetual’s financial results from normal operating activities.
Prior periods comparative has been restated due to a change in accounting policy on the treatment of Software-as-a-service (SaaS) costs. Refer to Section 6-4 in the Financial Statements.
Significant items include (refer to Appendix A and Appendix B for further details):

			PROFIT/(LOSS) AFTER	PROFIT/(LOSS) AFTER	TAX
	FY22	FY21	FY22 V	2H22	1H22	2H21	1H21
FOR THE PERIOD	$M	$M	FY21	$M	$M	$M	$M
Transaction and
Integration costs	(22.2)	(32.8)	10.6	(5.7)	(16.5)	(11.9)	(20.9)
– Trillium	(3.0)	(2.9)	(0.1)	(1.7)	(1.4)	(1.5)	(1.4)
– Barrow Hanley	(16.8)	(28.8)	12.0	(2.5)	(14.4)	(9.6)	(19.2)
– Other	(2.4)	(1.1)	(1.3)	(1.6)	(0.8)	(0.8)	(0.2)
Non-cash amortisation
of acquired intangibles	(18.6)	(13.6)	(5.0)	(9.0)	(9.5)	(9.1)	(4.5)
Unrealised gains/losses on fnancial assets	(10.9)	6.7	(17.6)	(10.2)	(0.7)	3.3	3.5
Accrued incentive
compensation liability	4.7	(10.2)	14.9	(2.3)	7.0	(8.8)	(1.5)
Total signifcant items	(47.0)	(49.9)	2.9	(27.3)	(19.8)	(26.5)	(23.4)

Perpetual Annual Report 2022

Operating and Financial Review

for the 12 months ended 30 June 2022

		FY22 V	FY22 V
KEY PERFORMANCE INDICATORS (KPI)	FY22 FY21 5	FY21	FY21
Proftability
UPBT margin on revenue (%)	26 26	(0)
Shareholder returns
Diluted earnings per share (EPS)1on NPAT (cps)	176.5 129.6	46.9	36%
Diluted earnings per share (EPS)1on UPAT (cps)	258.4 218.4	40.1	18%
Dividends (cps)	209.0 180.0	29.0	16%
Franking rate (%)	100 100	–
Dividend payout ratio2(%)	80 83	(3)
Return on Equity (ROE)3on NPAT (%)	11.0 9.3	1.7
Return on Equity (ROE)3on UPAT (%)	16.2 15.7	0.4
Growth
Perpetual average assets under management (AUM) $B4	107.2 75.8	31.4	41%
Average funds under advice (FUA) $B	18.3 15.4	2.9	19%
Closing Debt Markets Services FUA $B	682.2 582.9	99.3	17%
Closing Managed Funds Services FUA $B	410.1 339.9	70.2	21%

Diluted EPS is calculated using the weighted average number of ordinary shares and potential ordinary shares on issue of 57,346,980 for FY22 (FY21: 56,226,656).
Dividends paid/payable as a proportion of UPAT on ordinary fully paid shares at the end of each reporting period.
The return on equity (ROE) quoted in the above table is an annualised rate of return based on actual results for each period. ROE is calculated using the UPAT or NPAT attributable to equity holders of Perpetual Limited for the period, divided by average equity attributable to equity holders of Perpetual Limited, multiplied by the number of such periods in a calendar year in order to arrive at an annualised ROE.
Refer to Appendix C for a breakdown by operating segment.
Prior periods comparative has been restated due to a change in accounting policy on the treatment of Software-as-a-service (SaaS) costs. Refer to Section 6-4 in the Financial Statements.

Operating and Financial Review

Our performance

Directors’ Report

Financial Report

1.2.1 Financial performance

For the 12 months to 30 June 2022, Perpetual’s UPAT was $148.2 million and NPAT was $101.2 million.

FY22 UPAT was 21% higher than FY21 driven by earnings growth across all four operating segments:

Perpetual Asset Management International largely due to the acquisition of Barrow Hanley (completed on 17 November 2020), higher average AUM for the period due to higher average equity markets and investment performance, partially offset by the build-out of global distribution infrastructure and capability
Improved performance across Perpetual Asset Management Australia asset classes with increased average AUM due to higher average equity markets and investment performance
– Positive momentum in Perpetual Private driven by market-related revenue, continued positive net flows (supported by growth initiatives and acquisition of Jacaranda in 1H22) and strong performance of the portfolio
Strong growth in Perpetual Corporate Trust across all of its service lines, along with the establishment of Perpetual Digital following the acquisition of Laminar Capital in 1H22.

FY22 NPAT was 39% higher than FY21, due to significant increase in UPAT as mentioned above and slightly lower significant items (refer to Appendix A and Appendix B).

The key drivers of revenue and expenses at Group level are summarised below. Analysis of performance for each of Perpetual’s operating segments is provided in Section 2.

1.2.2 Revenue

The main driver of revenue in Perpetual Asset Management International and Perpetual Asset Management Australia is the value of assets under management (AUM), which is primarily influenced by the level of the US, Global and Australian equity markets. Perpetual Private’s main driver of revenue is funds under advice (FUA) and for Perpetual Corporate Trust it is funds under administration (FUA). Revenue is sensitive to a number of factors, including but not limited to: the performance of funds under the Group’s management and advice; the exposure to currency volatility; the impact and timing of flows on AUM and FUA[2] – inflows, outflows and distributions; and changes in pricing policy, channel and product mix.

In FY22, Perpetual generated $767.7 million of total operating revenue, which was $127.1 million or 20% higher than FY21. Revenue growth was primarily driven by higher average AUM due to higher equity markets, 12 months contribution of Barrow Hanley in Perpetual Asset Management International and continued growth (organic and inorganic) in Perpetual Corporate Trust and Perpetual Private. This was partially offset by the impact of net outflows within Perpetual Asset Management International.

Performance fees earned in FY22 were $17.4 million, $3.3 million lower than FY21[ 1] .

1.2.3 Expenses

Total expenses in FY22 were $566.5 million, $95.3 million or 20% higher than FY21, impacted by:

The operating expenses of the acquisitions of Barrow Hanley, Jacaranda Financial Planning and Laminar Capital, as well as expenses related to the distributions on employee owned units in Barrow Hanley
Higher variable remuneration driven by group-wide short-term incentive schemes
Continued investment into technology and headcount to support business growth.

1.2.4 Shareholder returns and dividends

The Board announced a final fully franked ordinary dividend for FY22 of 97 cents per share to be paid on 30th September 2022.

This represents a payout ratio of 80% for the 12 months ended 30 June 2022. This is in line with Perpetual’s dividend policy to pay dividends within a range of 60% to 90% of UPAT on an annualised basis and maximising returns to shareholders.

The Dividend Reinvestment Plan (DRP) will be operational for the final dividend. No discount will apply and the DRP will be met by issuing new shares.

Perpetual’s return on equity (ROE) on NPAT was 11.0% for the period compared with 9.3% in FY21.

Perpetual’s return on equity (ROE) on UPAT was 16.2% for the period compared with 15.7% in FY21.

Includes performance fees earned by Perpetual Asset Management International, Perpetual Asset Management Australia and Perpetual Private. 2. FUA refers to both funds under advice in Perpetual Private and funds under administration in Perpetual Corporate Trust.

Perpetual Annual Report 2022

Operating and Financial Review

for the 12 months ended 30 June 2022

1.3 Group Financial Position

	2H22	1H22	2H21 1	1H21 1
BALANCE SHEET AS AT	$M	$M	$M	$M
Assets
Cash and cash equivalents	175.4	130.9	147.1	172.1
Receivables	122.9	144.5	132.7	117.5
Structured products – EMCF assets	186.3	189.2	163.9	216.2
Liquid investments	152.0	154.8	150.4	133.7
Goodwill and other intangibles	951.7	929.2	862.9	863.5
Tax assets	57.2	48.9	47.2	35.5
Property, plant and equipment	77.8	84.8	91.1	98.6
Other assets	23.2	23.2	21.6	21.4
Total assets	1,746.5	1,705.5	1,616.8	1,658.5
Liabilities
Payables	93.8	90.0	90.7	75.9
Structured products – EMCF liabilities	187.7	189.2	163.3	215.7
Tax liabilities	14.9	19.2	23.2	16.4
Employee benefts	119.4	90.2	117.6	79.0
Lease liabilities	72.3	78.3	83.2	89.9
Provisions	10.5	10.0	6.4	7.5
Borrowings	258.4	248.1	166.0	219.4
Accrued incentive compensation	48.6	45.6	48.0	41.4
Other liabilities	15.2	15.6	11.3	12.0
Total liabilities	820.7	786.2	709.8	757.1
Net assets	925.8	919.3	907.1	901.4
Shareholder funds
Contributed equity	817.7	815.6	815.3	820.8
Reserves	34.3	8.8	2.5	(10.9)
Retained earnings	73.8	94.9	89.3	91.5
Total equity	925.8	919.3	907.1	901.4

Prior periods comparative has been restated due to a change in accounting policy on the treatment of Software-as-a-service (SaaS) costs. Refer to Section 6-4 in the Financial Statements.

Operating and Financial Review

Our performance

Directors’ Report

Financial Report

	FY22	FY21 5	2H22	1H22	2H21 5	1H21 5
DEBT METRICS	$M	$M	$M	$M	$M	$M
Corporate debt $M1	260.8	170.3	260.8	251.4	170.3	224.6
Corporate debt to capital ratio%2	22.0%	15.9%	22.0%	21.5%	15.9%	20.0%
Interest coverage calculation for
continuing operations (times)3	34x	21x	34x	23x	21x	30x
NTA per share ($)4	(1.14)	0.22	(1.14)	(0.52)	0.22	0.42

	FY22	FY215	2H22	1H22	2H215	1H215
CASH FLOW FOR THE PERIOD	$M	$M	$M	$M	$M	$M
Net cash from operating activities	170.9	120.6	135.5	35.4	100.0	20.6
Net cash used in investing activities	(69.3)	(479.0)	(20.8)	(48.5)	(9.4)	(469.6)
Net cash from/(used in) fnancing activities	(66.6)	344.3	(68.7)	2.1	(119.0)	463.3
Effective movements in exchange rates
on cash held	(6.7)	(3.0)	(1.5)	(5.2)	3.3	(6.3)
Net (decrease)/increase in
cash and cash equivalents	28.3	(17.1)	44.5	(16.2)	(25.1)	8.0

Corporate Debt represents the gross corporate debt excluding the offset of capitalised debt costs.
Corporate debt / (corporate debt + equity).
EBIT/gross interest expense in accordance with banking covenants.
Calculation includes lease assets and liabilities.
Prior periods comparative has been restated due to a change in accounting policy on the treatment of Software-as-a-service (SaaS) costs. Refer to Section 6-4 in the Financial Statements.

1.3.1 Balance sheet analysis

Key movements in Perpetual’s consolidated balance sheet are described below.

Structured products – EMCF assets increased by $22.4 million due to a net increase in units on issue.

Goodwill and other intangibles increased by $88.8 million primarily due to the acquisition of Laminar Capital and Jacaranda Financial Planning during the year and foreign currency movements.

Structured products – EMCF liabilities increased by $24.4 million broadly in line with the increase in the units on issue.

Borrowings increased by $92.4 million primarily due to the drawdown of $75.0 million in debt to fund various strategic initiatives during the year and foreign currency movements.

Reduction in NTA is driven by the increase in intangible assets due to acquisition activity.

Perpetual Annual Report 2022

Operating and Financial Review

for the 12 months ended 30 June 2022

1.3.2 Capital management

Perpetual’s principles for its capital management are as follows:

maximising returns to shareholders;
enabling the Group’s strategy;
ensuring compliance with the Group’s risk appetite statement and regulatory requirements; and
withstanding shocks to the market.

Perpetual maintains a conservative balance sheet with low gearing levels. As part of its capital management strategy, the Group continually reviews options to ensure that it is optimising its use of capital and maximising returns to shareholders.

The Group uses a risk-based capital model to assess its capital requirements. The model requires capital to be set aside for operational, credit and market risk and any known capital commitments.

At the end of FY22, total base capital requirements were $41 million compared to $314 million of available liquid funds.

During FY22, the Group has maintained its balance sheet strength through:

continuing to maintain the overall credit quality of the Group’s risk assets;
maintaining syndicated debt facility arrangements. Arrangements consist of a multi-currency term loan with a maximum commitment of $US117 million or equivalent, a multi-currency revolving loan facility with a maximum commitment of $US78 million or equivalent, a multi-currency revolving loan facility with a maximum commitment of $100 million or equivalent and a bank guarantee facility with a maximum commitment of $135 million to be used primarily for satisfying regulatory requirements; and
continued management of discretionary expenses within each business unit and support group.

1.3.3 Liquidity

The Group actively manages liquidity risk by preparing cash flow forecasts for future periods, reviewing them regularly with senior management, maintaining a committed credit facility, and engaging regularly with its debt providers.

In FY22, cash and cash equivalents increased by $28.3 million to $175.4 million as at 30 June 2022. This increase was driven by inflows from the drawdown of debt and operating cash activities. These were partially offset by outflows associated with the acquisitions of Jacaranda Financial Planning and Laminar Capital and the payment of the final FY21 and interim FY22 dividends.

1.3.4 Debt

Perpetual’s corporate debt as at 30 June 2022 was $260.8 million compared to $170.3 million at the end of FY21. An additional $75 million of debt was drawn in FY22 to fund various strategic initiatives. An additional $122.3 million of debt facilities remain undrawn as at 30 June 2022. $132.4 million of bank guarantees have been issued under the syndicated facilities. The bank guarantees are not shown on the balance sheet.

The facility is subject to the Group meeting certain debt covenants including shareholder funds as a percentage of total assets, a maximum ratio of gross debt to EBITDA and a minimum interest cover. The Group complied with all the relevant covenants throughout the period.

The Group’s gearing ratio is 22.0% (FY21: 15.9%) at the end of FY22.

Operating and Financial Review

Our performance

Directors’ Report

Financial Report

1.4 Regulatory Developments and Business Risks

1.4.1 Regulatory developments

The financial services industry continues to be subject to legislative and regulatory reform which affects or could affect the Group’s operations globally.

The following summarises key regulatory change projects that commenced in the last reporting period or are set to commence in this period.

Australia

Financial Accountability Regime (FAR)

The previous Government had proposed to extend the Banking Executive Accountability Regime (BEAR) to all APRA regulated entities, including RSE licensees – the Financial Accountability Regime (FAR).

The Financial Accountability Regime Bill had been introduced into the House of Representatives and been referred to the Senate Economics Legislation Committee for a report that was produced on 15 February 2022. However, the Bill was dissolved following dissolution of the Federal Parliament in light of the election in May 2022.

The Group is awaiting further developments in order to consider the impact of the regime on the Group.

Greenwashing Guidance

On 14 June 2022, ASIC released an information sheet (22/141MR) for issuers of managed funds and superannuation products to help issuers avoid ‘greenwashing’ when offering or promoting sustainability-related products.

The Group is conducting gap analysis and assessing marketing materials to ensure alignment with the ASIC guidance.

Security Legislation Amendment (Critical Infrastructure) Act 2021 (formerly 2020) and Security Legislation Amendment (Critical Infrastructure Protection) Act 2022

These Acts propose an enhanced regulatory framework over physical facilities, supply chains, information technologies and communication networks, which if destroyed, degraded or rendered unavailable for an extended period, would significantly impact the social or economic wellbeing of the nation, or affect Australia’s ability to conduct national defence and ensure national security.

The mandatory notification of cyber security incidents has commenced. From 8 July 2022, Responsible Entities of certain designated critical infrastructure assets will be required to prepare reports about critical cyber security incidents, that is a cyber security incident which has a significant impact on the availability of an asset within 12 hours of becoming aware of the incident; and other cyber security incidents (i.e., a cyber security incident which has a relevant impact on an asset) within 72 hours of becoming aware of the incident.

From 8 October 2022, ‘reporting entities’ (being Responsible Entities and direct interest holders of certain designated critical infrastructure assets) will be required to give the following information to the Register:

with respect to responsible entities – operational information about the critical infrastructure asset; and
with respect to direct interest holders – interest and control information about the direct interest holder and the critical infrastructure asset.

The Group has sought clarification from the regulator as to the application of these Acts to the Group’s activities and has implemented relevant aspects of these requirements, as applicable to the Group.

Corporate Collective Investment Vehicle (CCIV) Regime

On 23 June 2022, ASIC released new and updated guidance supporting the CCIV regime which commenced from 1 July 2022.

The CCIV Act inserts a new Chapter 8B into the Corporations Act to establish a CCIV as a new type of company limited by shares. A CCIV will have a public company as a director (the Corporate Director) with an AFSL authorising it to operate the business.

The CCIV will be able to conduct its affairs through sub-funds. Each sub-fund will constitute a distinct and protected part of the CCIV’s business, registered independently with ASIC, and segregated from any other sub-fund of the CCIV and receive returns referable to their share of capital in that sub-fund. The CCIV regime provides the ability to run multiple sub-funds under the same structure, which should allow a fund manager the ability to host all of its products within one single vehicle (with multiple and distinct sub-funds).

Perpetual Annual Report 2022

Operating and Financial Review

for the 12 months ended 30 June 2022

The CCIV regime also introduces amendments to the Income Tax Assessment Act, which contains rules that treat each CCIV sub-fund as a trust for tax purposes and the CCIV as the trustee of each CCIV sub-fund trust. Each CCIV sub-fund trust will, in turn, be deemed to be a unit trust with its members deemed to hold fixed entitlements to income and capital of the relevant sub-fund trust based on their entitlements to dividends and capital distributions of that CCIV sub-fund.

The Group has varied a number of its AFSLs to allow licensees to provide financial product advice on and/or deal in securities in a CCIV.

International

UK – Financial Conduct Authority (FCA) Business Plan

In April 2022, The Financial Conduct Authority (FCA) published its Business Plan for 2022/23. The Business Plan takes a different form to its predecessors. It’s a shorter summary of priorities and planned activity that relies more on links to other sources, particularly the three-year strategy the regulator has also published and the Regulatory Initiatives Grid. The Plan centres around three focus areas which demonstrate how the FCA positions its priorities moving forward which are: reducing and preventing serious harm – dealing with problem firms and the harm they cause; setting and testing higher standards – improving consumer outcomes, imposing ESG standards; and promoting competition and positive change – being globally competitive through high international standards.

UK – Investment Firms Prudential Regime (IFPR)

The IFPR came into effect in the UK on 1st January 2022. The legislation is designed to mirror the current EU prudential regime. As part of the implementation of necessary model and policy revisions and disclosures, Perpetual has assessed the relevant UK entity as an ‘SNI’ – small non-interconnected firm. In particular the ICAAP document is now replaced by an ICARA document which takes a much more thorough risk assessment of firms capital adequacy and wind-down processes.

EU – Sustainable Finance Action Plan and Sustainable Disclosure Regulation (SFDR)

After notable delays, the implementation of the second phase of the SFDR will take place in January 2023. SFDR’s function is to make disclosure of the financial products’ performance on ESG issues compulsory for asset managers as part of a wider push for the EU to leverage the power of capital markets to meet its emissions reduction targets. Perpetual has engaged external compliance consultants and legal counsel to assist with ensuring ongoing compliance with this legislation, including appropriate categorisation of Perpetual subsidiary firm funds.

US – SEC Advisor Advertisement Rule Changes

Amended Rule 206(4)-1 is a modernised marketing rule that impacts advertising and marketing for registered Investment Advisors. Firms must transition to the new marketing rule on or before 4 November 2022. We continue to work through implementation with our US Businesses.

US – ESG Disclosures for Investment Advisers and Investment Companies

The SEC proposed amendments to rules and disclosure forms to promote consistent, comparable and reliable information for investors concerning funds’ and advisers’ incorporation of ESG factors. The public comment period will close on 16 August 2022. If the proposed rules are adopted, we will work through implementation with our US Businesses.

1.4.2 Business risks

Risk Management Framework

Perpetual’s approach to risk management globally is based on a Risk Appetite Statement set by the Perpetual Board, which outlines the risk boundaries and minimum expectations of Perpetual Management. The Board’s Audit, Risk and Compliance Committee (ARCC) is responsible for overseeing Perpetual’s risk management process. Perpetual has dedicated Risk and Compliance functions, led by the Chief Risk Officer, which have day-to-day responsibility for the design, implementation and maintenance of Perpetual’s Risk Management Framework, and an independent Internal Audit department.

The Risk Management Framework is underpinned by the Three Lines of Defence model. This model sees the first line, being business unit management, accountable for the day-to-day identification and management of risks. Perpetual’s Risk, Compliance and Client Advocacy functions represent the second line and are responsible for overseeing first line activities. Internal Audit provides independent assurance, representing the third line, and has an independent reporting line to the Chair of the ARCC.

The Group’s Risk Management Framework and the Three Lines of Defence model are designed to manage and formulate responses to the key business risks faced by the Group which are set out below.

The primary mitigants in place to manage these risks include Perpetual’s risk and compliance frameworks, policies, clearly defined behaviours and performance assessment process, education and risk and compliance training, defined governance processes and delegation of authorities.

Operating and Financial Review

Our performance

Directors’ Report

Financial Report

1.4.3 Risks relating to COVID-19

COVID-19 and the prevalence of new variants continues to have an impact on global economies and financial markets, resulting in significant economic uncertainty and market volatility. It has also led to material structural shifts in the behaviour of the economy and unprecedented actions by financial markets, governments and regulators. The consolidated entity continues to monitor the impact of COVID-19 on its operations, control environment and financial reporting as developments arise.

This has resulted in several of the risk categories below to be heightened as the Group continues to respond to the challenges introduced by the pandemic.

Perpetual’s Pandemic Response Plan was developed in line with regulatory guidance and defines an escalating series of response measures based on the World Health Organisation and Government pandemic alert levels. The plan was activated in January 2020 and has seen us implement enhanced measures as the pandemic worsened.

Key measures include:

Perpetual’s crisis management processes have been activated with multiple teams established to monitor all aspects of the response including key risks, safety and business continuity;
segregation of teams into different cohorts to limit the impact of infection events;
remote working from home has been successfully implemented for all teams;
enhanced hygiene and cleaning practices have been implemented in Perpetual’s offices;
heightened monitoring of material service providers is in place to ensure they are responding effectively; and
enhanced monitoring and oversight by the Perpetual Executive Committee and the Perpetual Limited Board has been developed to identify, monitor and manage key business risks that have escalated through COVID-19.

Perpetual’s global operations (including Barrow Hanley and Trillium in the US) continue to operate at full capacity. Response measures to regional events and changing government restrictions (such as localised lockdowns) are well practised and have not had a material impact on operations.

Perpetual Annual Report 2022

Operating and Financial Review

for the 12 months ended 30 June 2022

1.4.4 Key business risks

The key business risks faced by Perpetual are set out below.

RISK CATEGORY	RISK DESCRIPTION/IMPACT RISK MITIGANTS
Strategic	Risk arising from adverse strategic decisions, improper implementation of strategic decisions, a lack of responsiveness to industry changes or exposure to economic, market or demographic considerations that affect Perpetual’s market position and client value proposition. – Considered strategic and business planning processes, including well defned Mergers and Acquisitions (M&A) Framework – Strategic measures cascaded through performance management – Application of Risk Appetite Statement in strategic decision-making and monitoring – Ongoing monitoring by Perpetual’s Executive Committee (ExCo) and reporting to Perpetual’s Board on strategic execution and achievement of intended benefts
People	Risk arising from an inability to attract, engage and retain quality and appropriate people to execute Perpetual’s business strategy, particularly in key investment management roles. – Succession planning, talent identifcation programs, retention strategies, remuneration benchmarking and reporting to the People and Remuneration Committee – Alignment of remuneration outcomes, including asset manager (portfolio manager and investment analyst) remuneration, to longer term value creation for shareholders and clients – Employee engagement monitoring
	Risk arising from an inability to safeguard our people, clients and suppliers from work health and safety (WH&S) issues with potential detrimental impact. – Well defned WH&S policies, procedures and training – WH&S Committee – Incident and injury management processes – Employee Assistance Program – Employee engagement monitoring
Financial	Risk that the strength of Perpetual’s balance sheet, proftability or liquidity are inadequate for its business activities. This includes inappropriate accounting, fnancial reporting, or related disclosures. – Budget planning process – Reconciliation and review processes – Regular income and expense, debt and equity reviews – Internal and external auditors
	Exposure to, or reliance on, revenue streams linked to equity markets resulting in potentially volatile earnings (revenue diversity and asset pricing market risk). – Diversifcation of revenue sources – Active management of the cost base – Ongoing monitoring of key balance sheet metrics
	Impacts on proftability due to currency fuctuations. – Treasury Risk Management Framework – The US denominated debt has been designated as a net investment hedge in a foreign operation and provides a natural hedge for US denominated business lines
Investment	Risk arising from ineffective investment strategies relative to peers and benchmarks, non-adherence to investment style and investment governance or inadequate management of market, credit and liquidity risks within the funds or client accounts. – Well defned and disciplined investment processes and philosophy for selection – Established investment governance frameworks in place – Robust pre and post-trade investment compliance – Independent fund and mandate monitoring and reporting
Operational	Risk arising from inadequate or failed internal processes, systems, people or from external events. This includes (but is not limited to) processing errors, fraud or an event which disrupts business continuity. – Clearly defned policies, procedures, roles and responsibilities – Controls testing in the form of control self-assessment – Effective issues management processes to respond to events that may arise – Business continuity planning and disaster recovery programs – Independent assurance – Robust Insurance program covering all material insurable risks to the Perpetual Group

Operating and Financial Review

Our performance

Directors’ Report

Financial Report

RISK CATEGORY	RISK DESCRIPTION/IMPACT	RISK MITIGANTS	RISK MITIGANTS
Information	Risk arising from failed, corrupted,	–	Defned information security program and IT security policies
Technology &	breached or inadequate information	–	Implementation of operational security technology (including
Cyber Security	systems resulting from inadequate		frewalls and antivirus)
	infrastructure, applications, cloud services, security controls and support. Includes (but is not limited to) loss of confdentiality, integrity and availability of sensitive or critical data as well as	– – – –	Security (penetration) testing of key systems Information security response plans Business continuity planning and disaster recovery programs Independent assurance
	business disruption resulting from	–	Cyber Insurance
	a cyber security event or failure of
	technology service provider to meet
	business requirements.
Outsourcing	Risk that Perpetual enters into	–	Partnered with well-regarded and proven strategic partners
	inappropriate servicing arrangements	–	Outsourced relationships are managed at a senior level
	and/or services performed by external service providers, including related and third parties, that are not managed in line with the servicing contract or the	– – –	Outsourcing and vendor management framework Legal contracts/service level agreements in place and monitored Independent assurance
	operational standards.
Environmental,	Risk arising from inadequate or	–	Development and implementation of Sustainability Strategy
Social &	inappropriate Environmental, Social	–	Partnered with well-regarded, environmental and socially
Governance	and Governance (ESG) considerations		responsible partners
	in business and investment decision-making.	–	Continued build out of ESG Investment capability in the US, UK and Australia reinforcing our commitment to ESG
		–	Established and well defned governance framework
		–	Well defned and disciplined ESG investment processes and
			philosophy for selection
		–	Mandated training on Perpetual’s Code of Conduct and
			behaviours expected of all staff
		–	Sustainable Finance Disclosure Regulation (SFDR)
			implementation
Compliance	Risk that Perpetual breaches its	–	Independent legal and compliance team, and training
& Legal	regulatory and legal obligations		across teams
	(including licence conditions and	–	Compliance obligations are documented and monitored
	client commitments).	–	Clearly defned policies, procedures, roles and responsibilities
		–	Controls testing in the form of control self-assessment
		–	Independent assessment of issues for compliance implications
		–	Independent assurance
Conduct	Risk arising from conduct by	–	Effective risk management framework that sets out how risk
	Perpetual’s Directors, employees or		is managed, including Three Lines of Defence risk model and
	contractors that is unethical or does		application of risk appetite statement which outlines the risk
	not align with Perpetual’s values, policies or expected behaviours or, the expectation of Perpetual’s internal and external stakeholders.	–	behaviours expected of all Perpetual Directors, employees and contractors Mandated training on Perpetual’s Code of Conduct and Risk Management Framework and behaviours of all staff that form part of the performance assessment process
		–	Partnered with well-regarded, environmental and socially
			responsible partners
		–	Media monitoring
		–	Net Promoter Score measurement and reporting
		–	Whistleblowing arrangements managed by an
			independent vendor

Perpetual Annual Report 2022

Operating and Financial Review

for the 12 months ended 30 June 2022

1.5 Outlook

While the macroeconomic and geopolitical conditions pose challenges for the global financial services industry, the outlook for Perpetual remains positive. Perpetual’s unique combination of businesses provides the Group with diversification of earnings and growth opportunities, and a level of downside protection in times of market volatility through our non-market linked revenues in PCT and PP. In addition, the strength of the Perpetual brand, built over generations as a leading provider of fiduciary services, has created a confidence and trust that gives the Group a strong foundation for future growth.

Perpetual enters the new financial year with positive momentum across each division. The acquisition of Pendal is a significant milestone in Perpetual’s long history, bringing together two businesses with premium brands and aligned multi-boutique approaches, to create a leading global asset manager significantly leveraging the build-out of our global asset management business over the last two years.

The completion of the Pendal acquisition will deliver significant scale and global reach, diversified independent brands promoting investment autonomy at all times and delivering a broad array of high quality investment capabilities, a global leadership position in ESG investing and a substantial, high-quality global distribution team, all complemented by our industry-leading wealth management and trustee businesses.

The Perpetual Corporate Trust business continues to deliver consistent growth in its core offerings, and the newly created Perpetual Digital business is well positioned to support our clients’ needs and provide additional channels for earnings. Positive net flows and growth is also expected in Perpetual Private through its proven advice model and new capabilities via the integration and expansion of Jacaranda Financial Planning.

Perpetual remains focused on its strategy to deliver disciplined growth with a larger balance sheet and proven track record of acquiring and integrating complementary capabilities that, together, deliver greater shareholder returns.

We will continue to provide quarterly business updates on the underlying drivers of our business, the execution of our strategy and market conditions.

Operating and Financial Review

Our performance

Directors’ Report

Financial Report

Review of Businesses

2. Review of Businesses

The results and drivers of financial performance in FY22 for the four Perpetual operating segments are described in the following sections. A description of revenues and expenses at the Group Support Services level is also provided.

Perpetual Asset Management, our asset management division, is reported under its two operating segments Perpetual Asset Management International and Perpetual Asset Management Australia.

2.1 Perpetual Asset Management International

2.1.1 Business overview

Perpetual Asset Management International (PAMI) is the operating segment that includes all asset management operations outside of Australia and New Zealand.

PAMI provides world-class investment capabilities through two US-based subsidiary asset management boutiques;

Barrow Hanley – global asset manager with a consistent long-term track-record of value investing; and
Trillium – pioneering environmental, social and governance (ESG) investment firm with a 40-year history.

With a strong presence in the US, complemented by a growing presence in the UK, Europe and Asia, PAMI is focused on meeting the needs of institutional and retail investors outside of Australia and New Zealand.

2.1.2 Financial performance

In Australian dollars

	FY22	FY21	FY22 V	FY22 V	2H22	1H22	2H21	1H21
FOR THE PERIOD	$M	$M	FY21	FY21	$M	$M	$M	$M
Revenue by asset class
– Equities	198.7	122.2	76.5	63%	100.0	98.7	89.7	32.5
– Fixed income	20.1	16.6	3.4	21%	8.9	11.1	11.2	5.5
– Other	0.1	0.3	(0.2)	(80%)	0.0	0.0	0.0	0.3
Total revenue	218.8	139.2	79.7	57%	109.0	109.8	100.9	38.3
Operating expenses	(162.6)	(95.8)	(66.8)	(70%)	(86.2)	(76.4)	(69.4)	(26.3)
EBITDA	56.2	43.4	12.8	30%	22.8	33.5	31.5	11.9
Depreciation and amortisation	(2.3)	(1.7)	(0.6)	(34%)	(1.1)	(1.1)	(0.9)	(0.8)
Equity remuneration expense	(0.4)	(0.4)	(0.0)	(12%)	(0.4)	(0.1)	0.2	(0.6)
Interest expense	(0.6)	(0.6)	(0.1)	(13%)	(0.3)	(0.3)	(0.5)	(0.1)
Underlying proft before tax	52.9	40.7	12.1	30%	21.0	31.9	30.3	10.5

In FY22, Perpetual Asset Management International reported underlying profit before tax of $52.9 million, an increase of $12.1 million or 30% versus FY21. The increase on FY21 was largely driven by additional earnings from a full 12 months contribution of Barrow Hanley, together with higher average AUM over the period. This has been partially offset by the development of the CLO strategy, continued investment in global distribution capability and infrastructure to support the growth in the business.

Perpetual Annual Report 2022

Operating and Financial Review

for the 12 months ended 30 June 2022

2.1.3 Drivers of performance

Revenue

FY22 revenue of $218.8 million increased by $79.7 million or 57% versus FY21, largely due to a full 12 months of Barrow Hanley results, higher average AUM driven by higher equity markets and favourable foreign exchange movement, partially offset with net outflows.

Expenses

FY22 expenses of $165.9 million was up $67.5 million or 69% compared to FY21, largely due to a full 12 months of Barrow Hanley operations, the impact of exchange rates, the development of the CLO strategy, investment in global distribution capability and infrastructure to support the growth in the business.

2.1.4 Assets under management

PAMI closing AUM summary in Australian dollars

		AUM	MOVEMENTS	MOVEMENTS			NET FLOWS
				FOREIGN
				EXCHANGE
	FY22	NET FLOWS	OTHER 1	IMPACTS	FY21	2H22	1H22	2H21	1H21
AT END OF	$B	$B	$B	$B	$B	$B	$B	$B	$B
Institutional	62.2	(5.4)	(5.7)	6.2	67.0	(3.0)	(2.3)	(3.5)	(0.6)
Intermediary	6.9	0.4	(0.6)	0.7	6.6	0.0	0.3	0.3	(0.1)
All distribution channels	69.1	(5.0)	(6.3)	6.8	73.6	(3.0)	(2.0)	(3.2)	(0.7)
US equities	44.2	(5.5)	(3.0)	4.5	48.2	(3.2)	(2.3)	(2.3)	(0.5)
Global equities	15.8	3.1	(1.8)	1.4	13.0	1.4	1.7	(0.1)	(0.0)
Equities	60.0	(2.4)	(4.8)	5.9	61.2	(1.9)	(0.5)	(2.4)	(0.6)
Fixed income	9.2	(2.6)	(1.5)	0.9	12.4	(1.1)	(1.4)	(0.9)	(0.1)
All asset classes	69.1	(5.0)	(6.3)	6.8	73.6	(3.0)	(2.0)	(3.2)	(0.7)

PAMI closing AUM summary in US dollars

		AUM	MOVEMENTS	MOVEMENTS			NET FLOWS
				FOREIGN
				EXCHANGE
	FY22	NET FLOWS	OTHER 1	IMPACTS	FY21	2H22	1H22	2H21	1H21
AT END OF	$B	$B	$B	$B	$B	$B	$B	$B	$B
Institutional	42.8	(3.9)	(3.7)	–	50.3	(2.2)	(1.7)	(2.7)	(0.5)
Intermediary	4.8	0.3	(0.4)	–	4.9	0.0	0.2	0.2	(0.0)
All distribution channels	47.6	(3.6)	(4.1)	–	55.3	(2.1)	(1.5)	(2.5)	(0.5)
US equities	30.4	(4.0)	(1.9)	–	36.2	(2.3)	(1.7)	(1.8)	(0.4)
Global equities	10.8	2.2	(1.2)	–	9.8	1.0	1.3	(0.1)	(0.0)
Equities	41.2	(1.7)	(3.0)	–	46.0	(1.3)	(0.4)	(1.8)	(0.4)
Fixed income	6.3	(1.9)	(1.1)	–	9.3	(0.8)	(1.1)	(0.7)	(0.1)
All asset classes	47.6	(3.6)	(4.1)	–	55.3	(2.1)	(1.5)	(2.5)	(0.5)

Includes changes in market value of assets, income, reinvestments, distributions and asset class rebalancing within the Group’s diversified funds.

Operating and Financial Review

Our performance

Directors’ Report

Financial Report

AUM

Perpetual Asset Management International AUM as at 30 June 2022 was $69.1 billion, a decrease of $4.5 billion on FY21. The decrease was driven by net outflows of $5.0 billion and lower equity markets phased particularly towards the end of the year, partly offset by strengthening of foreign exchange impacts.

Outflows were largely in the institutional channel and were predominantly driven by US Equities and low margin fixed income mandates managed by Barrow Hanley, partially offset by net inflows and strong performance in Trillium.

Revenue margin

	FY22	FY21	FY22 V	FY22 V	2H22	1H22	2H21	1H21
FOR THE PERIOD	BPS	BPS	FY21	FY21	BPS	BPS	BPS	BPS
By asset class:
– Equities	31	32	–	(1)	32	31	31	37
– Fixed income	18	21	–	(3)	18	19	18	33
Average revenue margin	29	30	–	(1)	30	29	29	36

Performance fees in Australian dollars

	FY22	FY21	FY22 V	FY22 V	2H22	1H22	2H21	1H21
FOR THE PERIOD	$M	$M	FY21	FY21	$M	$M	$M	$M
By asset class:
– Equities	(0.3)	(0.3)	(0.0)	14%	(0.3)	(0.0)	(0.3)	–
– Fixed income	–	2.3	(2.3)	(100%)	–	–	0.0	2.3
Total performance fees	(0.3)	2.0	(2.3)	(117%)	(0.3)	(0.0)	(0.2)	2.3

Average AUM revenue margins in FY22 at 29 bps have remained relatively stable since the acquisition of Barrow Hanley late in 1H21.

Perpetual Annual Report 2022

Operating and Financial Review

for the 12 months ended 30 June 2022

2.2 Perpetual Asset Management Australia

2.2.1 Business overview

Perpetual Asset Management Australia (PAMA) is one of Australia’s most respected and longstanding active investment managers, focused on the needs of Australian and New Zealand investors. PAMA is a dynamic, active manager, offering an extensive range of specialist investment capabilities including Australian and global equities, credit and fixed income, multi-asset as well as Environmental, Social and Governance (ESG) focused products.

2.2.2 Financial performance

	FY22	FY21	FY22 V	FY22 V	2H22	1H22	2H21	1H21
FOR THE PERIOD	$M	$M	FY21	FY21	$M	$M	$M	$M
Revenue by asset class1
– Equities	131.7	132.5	(0.8)	(1%)	65.2	66.5	70.7	61.7
– Cash and fxed income	34.0	29.8	4.3	14%	17.4	16.6	14.6	15.1
– Other AUM related	3.3	3.4	(0.1)	(3%)	1.6	1.6	1.2	2.2
Total revenue	169.0	165.7	3.3	2%	84.2	84.8	86.6	79.1
Operating expenses	(108.7)	(112.5)	3.9	3%	(55.6)	(53.0)	(57.4)	(55.1)
EBITDA	60.3	53.2	7.2	13%	28.5	31.8	29.2	24.0
Depreciation and amortisation	(5.5)	(5.3)	(0.3)	(5%)	(2.9)	(2.7)	(2.7)	(2.6)
Equity remuneration expense	(4.8)	(5.7)	0.9	16%	(2.1)	(2.7)	(2.8)	(2.9)
Interest expense	(0.1)	(0.1)	(0.0)	(32%)	(0.0)	(0.0)	(0.0)	(0.1)
Underlying proft before tax	49.9	42.2	7.8	18%	23.6	26.4	23.7	18.5

Removed “other non-AUM related” category due to nominal balance. 1H22 revenue re-presented between Equities and Other AUM related by $0.3M.

In FY22, Perpetual Asset Management Australia reported underlying profit before tax of $49.9 million, $7.8 million or 18% higher than FY21.

The increase on FY21 was largely driven by an increase in average AUM to $25.1 billion due to higher average equity markets, improved performance and lower variable remuneration, partially offset by net outflows, distributions and product repricing primarily from the prior year.

The cost to income ratio in FY22 was 70% compared to 75% in FY21. The improvement in cost to income ratio is driven by higher average AUM and disciplined cost management.

Operating and Financial Review

Our performance

Directors’ Report

Financial Report

2.2.3 Drivers of performance

Revenue

Perpetual Asset Management Australia generated revenue of $169.0 million in FY22, $3.3 million or 2% higher than in FY21.

The increase in revenue on FY21 was mainly driven by higher average AUM due to higher average equity markets and improved investment performance, partially offset by lower performance fees, distributions, product repricing and net outflows primarily from the prior year.

Australian Equities strategies generated $10.6 million in performance fees in FY22, mainly from the Pure Equity Alpha and Pure Microcap funds.

Average AUM revenue margins in FY22 were 67 basis points (bps), 4 bps lower than FY21, driven by lower performance fees earned. Excluding performance fees earned, underlying average margins of 63 bps remained in line with the prior year, with the impact of prior year repricing being offset by a change in mix towards higher margin asset classes.

Movements in average margins usually result from changes in the mix of AUM between lower-margin institutional and higher-margin retail investors, as well as changes in the mix of asset classes such as cash and fixed income (generally lower margin) and equities (generally higher margin) and the contribution of performance fees earned.

Expenses

Total expenses for Perpetual Asset Management Australia in FY22 were $119.1 million, $4.5 million or 4% lower than in FY21.

The decrease in expenses on FY21 was mainly due to lower variable remuneration including the impact of lower performance fees paid, partially offset by investment in growth initiatives such as the launching of exchange traded managed funds.

2.2.4 Assets under management

PAMA closing AUM summary

	AUM MOVEMENTS NET FLOWS
	FY22 NET FLOWS OTHER 1 FY21 2H22 1H22	2H21	1H21
AT END OF	$B $B $B $B $B $B	$B	$B
Institutional	3.9 (2.4) (0.0) 6.3 (2.4) (0.0)	0.4	(1.5)
Intermediary	12.4 0.8 (1.1) 12.7 0.4 0.4	(0.6)	(0.8)
Retail	4.1 (0.2) (0.3) 4.7 (0.1) (0.1)	(0.1)	(0.2)
Listed Investment Vehicles	0.9 0.0 (0.1) 1.0 0.0 0.0	0.0	0.0
All distribution channels	21.3 (1.9) (1.5) 24.7 (2.2) 0.3	(0.3)	(2.5)
Australian equities	11.7 (1.0) (1.2) 13.9 (0.3) (0.6)	(1.0)	(1.6)
Global equities	1.3 0.2 (0.6) 1.7 0.0 0.2	0.3	(0.1)
Equities	13.0 (0.8) (1.8) 15.6 (0.3) (0.5)	(0.7)	(1.7)
Cash and fxed income	7.5 (1.0) 0.2 8.3 (1.8) 0.8	0.5	(0.8)
Other	0.8 (0.1) 0.0 0.9 (0.0) (0.0)	0.0	(0.0)
All asset classes	21.3 (1.9) (1.5) 24.7 (2.2) 0.3	(0.3)	(2.5)

Includes changes in market value of assets, income, reinvestments, distributions and asset class rebalancing within the Group’s diversified funds.

Perpetual Annual Report 2022

Operating and Financial Review

for the 12 months ended 30 June 2022

AUM

Perpetual Asset Management Australia’s AUM as at 30 June 2022 was $21.3 billion, a decrease of $3.4 billion on FY21. The decrease was driven by net outflows of $1.9 billion, distributions and lower equity markets particularly towards the end of the year, partly offset by positive performance.

Points of note in relation to the AUM and flows data for FY22:

outflows in the institutional channel include $1.7 billion from Enhanced Cash at low margin; and
inflows in the intermediary channel were from fixed income (primarily Diversified Income), Global Equities and Diversified Real Return. This was partly offset by outflows in Australian Equities, however at materially reduced levels compared to FY21.

Revenue margin

	FY22	FY21	FY22 V	FY22 V	2H22	1H22	2H21	1H21
FOR THE PERIOD	BPS	BPS	FY21	FY21	BPS	BPS	BPS	BPS
By asset class:1
– Equities	87	94	–	(7)	88	86	95	92
– Cash and fxed income	37	35	–	2	38	37	37	33
– Other AUM related	38	43	–	(5)	39	38	31	57
Average revenue margin	67	71	–	(4)	68	67	74	68

Performance fees

	FY22	FY21	FY22 V	FY22 V	2H22	1H22	2H21	1H21
FOR THE PERIOD	$M	$M	FY21	FY21	$M	$M	$M	$M
By asset class:
– Equities	10.6	16.2	(5.5)	(34%)	6.1	4.6	10.9	5.2
– Cash and fxed income	1.2	2.0	(0.8)	(39%)	0.6	0.6	1.2	0.8
Total performance fees	11.8	18.1	(6.3)	(35%)	6.7	5.1	12.1	6.0

1H22 Other AUM related margin re-presented in line with $0.3M revenue adjustment between Equities and Other AUM related.

The drivers of revenue margins by asset class are described below:

Equities : Revenue represents fees earned on Australian and Global equities products. Revenue in FY22 was $131.7 million, a decrease of 1% on FY21. FY22 revenue was impacted by lower performance fees and repricing. This was mostly offset by higher average AUM compared to FY21 as a result of higher average equity markets and improved performance, partially offset by net outflows and prior period distributions. The average margin in FY22 was 87 bps, 7 bps lower than FY21, primarily due to lower performance fees and repricing.

Cash and fixed income : Revenue is derived from the management of cash and fixed income products. Revenue in FY22 was $34.0 million, an increase of 14% on FY21. The increase was mainly driven by the impact of net inflows in higher margin fixed income products. The FY22 revenue margin of 37 bps increased by 2 bps compared to FY21, mainly driven by a change in mix towards higher margin product (e.g. Diversified Income Fund).

Other AUM related : Revenue mainly includes management fees for external funds on the WealthFocus platform. Revenue in FY22 was $3.3 million, a decrease of 3% on FY21 driven by prior year repricing, partly offset by slightly higher average AUM.

Operating and Financial Review

Our performance

Directors’ Report

Financial Report

2.3 Perpetual Private

2.3.1 Business overview

Perpetual Private (PP) is an advisory services business focused on the comprehensive needs of families, businesses and communities.

Perpetual Private aims to empower families, businesses and communities to achieve their aspirations by delivering advisory service excellence. Perpetual Private utilises a targeted client segment approach to grow its FUA by offering quality advice and wealth management services to established, wealthy business owners, medical practitioners and other professionals, not-for-profit organisations and native title trusts. In 2021, the business enhanced its Family Office service through the creation of a new team of specialists dedicated to ultra-high net worth clients and family offices.

Perpetual Private acquired Jacaranda Financial Planning, a leading Sydney and Melbourne-based boutique advisory firm focused on the high net worth market segment in August 2021.

Perpetual Private is one of Australia’s largest managers of philanthropic funds. Philanthropy and fiduciary services remain an important part of our heritage and contributor to our business. Funds under advice for charitable trusts and endowments funds was $3.5 billion at the end of FY22.

2.3.2 Financial performance

	FY22	FY21	FY22 V	FY22 V	2H22	1H22	2H21	1H21
FOR THE PERIOD	$M	$M	FY21	FY21	$M	$M	$M	$M
Market related revenue	153.0	126.7	26.3	21%	75.1	77.9	65.6	61.1
Non-market related revenue	58.3	57.1	1.2	2%	29.1	29.1	29.0	28.1
Total revenues	211.2	183.8	27.5	15%	104.3	107.0	94.5	89.2
Operating expenses	(151.5)	(134.2)	(17.3)	(13%)	(75.9)	(75.6)	(67.9)	(66.3)
EBITDA	59.7	49.6	10.1	20%	28.3	31.4	26.7	23.0
Depreciation and amortisation	(9.3)	(10.5)	1.2	11%	(4.7)	(4.7)	(5.0)	(5.5)
Equity remuneration expense	(4.0)	(3.5)	(0.5)	(13%)	(2.2)	(1.8)	(1.9)	(1.7)
Interest expense	(2.1)	(0.6)	(1.6)	(277%)	(1.1)	(1.0)	(0.1)	(0.5)
Underlying proft before tax	44.3	35.0	9.3	26%	20.4	23.9	19.7	15.3
Funds under advice ($B)
Closing FUA	$17.4B	$17.0B	$0.4B	2%	$17.4B	$19.0B	$17.0B	$15.5B
Average FUA	$18.3B	$15.4B	$2.9B	19%	$18.4B	$18.3B	$16.1B	$14.7B
Market related revenue margin	84bps	82bps	–	2bps	82bps	85bps	81bps	83bps

In FY22, Perpetual Private reported underlying profit before tax of $44.3 million, $9.3 million or 26% higher than FY21.

The increase on FY21 was mainly driven by higher market related revenue due to higher average equity markets, positive net flows driven by the growth of the business and acquisitions, higher performance fees due to strong performance of the portfolio and non-market related revenue improving with higher insurance revenue partly offsetting the impact of the low interest rate environment.

Perpetual Private experienced continued new client growth within the high net worth segment in FY22, supported by the organic growth of the business and acquisition of Jacaranda. The cost to income ratio in FY22 was 79% compared to 81% in FY21.

Perpetual Annual Report 2022

Operating and Financial Review

for the 12 months ended 30 June 2022

2.3.3 Drivers of performance

Revenue

Perpetual Private generated revenue of $211.2 million in FY22, $27.5 million higher or 15% higher than FY21.

Market related revenue was $153.0 million, $26.3 million or 21% higher than FY21. The increase compared to FY21 was mainly due to higher average equity markets, positive net flows, strong performance of the portfolio and receipt of performance fees.

Non-market related revenue was $58.3 million, $1.2 million or 2% higher than FY21. The increase was mainly driven by an uplift in Fordham and higher insurance revenue driven by Priority Life, partially offset by a low interest rate environment and legacy product closure.

Perpetual Private’s market related revenue margin was 84 bps (80 bps excluding performance fees) in FY22 compared to 82 bps in FY21.

Expenses

Total expenses for Perpetual Private in FY22 were $166.9 million, $18.1 million or 12% higher than FY21. The increase in expenses on FY21 was mainly driven by continued investment in supporting future business growth, acquisition of Jacaranda, higher variable remuneration and technology investments.

2.3.4 Funds under advice

Perpetual Private’s FUA at the end of FY22 was $17.4 billion, $0.4 billion or 2% higher than FY21, primarily due to positive net flows supported by the organic growth and the acquisition of Jacaranda Financial Planning partly offset by the drop in investment markets. FUA for Jacaranda Financial Planning was $0.9 billion at the end of FY22.

		NET
	FY22	FLOWS	OTHER 1	FY21	2H22	1H22	2H21	1H21
AT END OF	$B	$B	$B	$B	$B	$B	$B	$B
Total FUA	17.4	1.0	(0.6)	17.0	17.4	19.0	17.0	15.5

Includes reinvestments, distributions, income and asset growth and $0.9 billion from the addition of Jacaranda Financial Planning in August 2021.

Operating and Financial Review

Our performance

Directors’ Report

Financial Report

2.4 Perpetual Corporate Trust

2.4.1 Business overview

Perpetual Corporate Trust (PCT) is the leading provider of corporate trustee, agency, custody and digital solutions to the managed funds and debt capital markets industry comprising of the following:

Perpetual Digital – Perpetual Digital combines PCT’s existing digital assets and the platform of Laminar Capital, acquired in October 2021, to provide innovative solutions to PCT clients. Perpetual Digital provides a holistic and growing number of products including Data Services (RBA & ESMA regulatory, investor and intermediary reporting), Perpetual Roundtables (benchmarking, industry and client portfolio insights) and our new Perpetual Intelligence platform-as-a-service products providing a multitude of digital solutions to the banking and financial services industry. The newly acquired Laminar Capital which is a specialist debt markets and advisory business includes the Treasury Direct platform and the new specialised capability of Laminar’s ESG Risk Score.

Debt Market Services – provides a holistic suite of products which include trustee, agency, trust management, accounting, document custody and standby servicing solutions to the Australian debt capital markets and securitisation industry.

Managed Funds Services – provides services including independent responsible entity, custodian, wholesale trustee, investment management and accounting. Singapore products include trustee, agency and escrow services. Managed Funds Services has a global client base serviced from our Singapore and Australian offices, administrating a broad range of asset classes including property and infrastructure, debt, fixed income, equity, private equity, emerging markets and hedge funds.

2.4.2 Financial performance

	FY22	FY21	FY22 V	FY22 V	2H22	1H22	2H21	1H21
FOR THE PERIOD	$M	$M	FY21	FY21	$M	$M	$M	$M
Debt Market Services1	68.7	62.4	6.3	10%	35.6	33.1	31.8	30.6
Managed Funds Services	70.3	59.8	10.5	17%	36.8	33.5	31.0	28.8
Perpetual Digital1	19.5	12.6	6.9	54%	9.6	9.9	6.4	6.2
Total revenues	158.5	134.9	23.7	18%	82.0	76.6	69.2	65.6
Operating expenses	(75.4)	(60.9)	(14.6)	(24%)	(41.0)	(34.4)	(31.5)	(29.3)
EBITDA	83.1	74.0	9.1	12%	40.9	42.1	37.7	36.3
Depreciation and amortisation	(8.0)	(8.6)	0.6	7%	(4.0)	(4.0)	(4.2)	(4.4)
Equity remuneration expense	(1.8)	(1.2)	(0.6)	(51%)	(1.1)	(0.7)	(0.7)	(0.5)
Interest expense	(0.7)	(0.4)	(0.2)	(50%)	(0.3)	(0.4)	(0.2)	(0.2)
Underlying proft before tax	72.6	63.8	8.9	14%	35.5	37.1	32.6	31.2

Newly formed service line which includes revenue from Laminar Capital and PCT’s Data and Analytics Solutions (previously reported under Debt Markets Services).

In FY22, Perpetual Corporate Trust reported underlying profit before tax of $72.6 million, $8.9 million or 14% higher than FY21. The cost to income ratio in FY22 was 54% compared to 53% in FY21.

Perpetual Annual Report 2022

Operating and Financial Review

for the 12 months ended 30 June 2022

2.4.3 Drivers of performance

Revenue

Perpetual Corporate Trust generated revenue of $158.5 million in FY22, $23.7 million or 18% higher than in FY21. The main drivers of the improvement by business line were as detailed below.

In FY22, Debt Markets Services revenue was $68.7 million, $6.3 million or 10% higher than in FY21. The primary drivers for the increase on FY21 were underlying growth in the securitisation portfolio from new and existing clients, particularly from RMBS non bank and ABS clients, higher document custody volumes and additional new clients in trust management.

In FY22, Managed Funds Services revenue was $70.3 million, $10.5 million or 17% higher than FY21. The increase was primarily due to continued market activity within commercial property and managed investment funds segments, supported by higher asset prices.

In FY22, Perpetual Digital revenue was $19.5 million, $6.9 million or 54% higher than FY21. The increase was primarily due to the acquisition of Laminar Capital together with continued growth from new and existing products.

Expenses

Total expenses for Perpetual Corporate Trust in FY22 were $85.9 million, $14.8 million or 21% higher than FY21.

The increase in expenses on FY21 was mainly driven by higher employment and technology costs to support business growth, new digital solutions and to meet regulatory requirements, together with the operating expenses of Laminar Capital.

2.4.4 Funds under administration

	FY22	FY21	FY22 V	FY22 V	2H22	1H22	2H21	1H21
AT END OF	$B	$B	FY21	FY21	$B	$B	$B	$B
Public Market Securitisation
RMBS – bank (ADI)	57.4	56.9	0.5	1%	57.4	57.7	56.9	65.5
RMBS – non bank	78.4	63.9	14.5	23%	78.4	70.1	63.9	56.9
CMBS and ABS	52.3	39.5	12.8	32%	52.3	45.5	39.5	39.5
Balance Sheet Securitisation
RMBS – repos	398.9	331.4	67.6	20%	398.9	366.1	331.4	367.7
Covered bonds	76.3	72.9	3.5	5%	76.3	73.2	72.9	80.3
Debt Market Services – Securitisation1	663.4	564.6	98.8	18%	663.4	612.7	564.6	609.8
Corporate and Structured Finance	18.8	18.3	0.5	3%	18.8	18.2	18.3	18.5
Total Debt Market Services	682.2	582.9	99.3	17%	682.2	630.9	582.9	628.3
Custody	212.0	173.4	38.6	22%	212.0	187.9	173.4	163.9
Wholesale Trustee	100.6	79.4	21.3	27%	100.6	83.1	79.4	75.1
Responsible Entity	49.5	48.2	1.3	3%	49.5	46.0	48.2	32.2
Singapore	48.0	38.9	9.1	23%	48.0	42.5	38.9	36.7
Managed Funds Services	410.1	339.9	70.2	21%	410.1	359.5	339.9	307.9
Total FUA	1,092.3	922.8	169.5	18%	1,092.3	990.4	922.8	936.2

Includes warehouse and liquidity finance facilities.

At the end of FY22, Securitisation FUA in the Debt Market Services business was $663.4 billion, an increase of $98.8 billion or 18% on FY21. The movement was driven by higher issuances in lower margin RMBS – repos and continued growth in the RMBS – non bank and ABS.

At the end of FY22, Managed Funds Services FUA was $410.1 billion, an increase of $70.2 billion or 21% on FY21. The increase was driven by growth in all segments.

Operating and Financial Review

Our performance

Directors’ Report

Financial Report

2.5 Perpetual Group Support Services

2.5.1 Business overview

Group Support Services consist of Group Investments, CEO, Finance, Corporate Affairs, Marketing, Legal, Audit, Risk, Compliance, Company Secretary, Technology, Project & Change Management, Operations, Product and People & Culture. It provides technology, operations, vendor management, marketing, property, legal, risk, financial management and human resources support to the business units.

Costs retained by Group Support Services reflect costs that management deems to be associated with corporate functions rather than reportable business segment activity. These include costs associated with the Board of Directors and 50% of the costs associated with the Group Executives of each of the Group Support Services business units. Costs and revenues associated with the capital structure of the Group, including interest income, financing costs, ASX listing fees and distributions of employee owned units of acquired entities are also retained within Group Support Services.

2.5.2 Financial performance

	FY22	FY21	FY22 V	FY22 V	2H22	1H22	2H21 1	1H21 1
FOR THE PERIOD	$M	$M	FY21	FY21	$M	$M	$M	$M
Interest income	0.3	0.4	(0.2)	(38%)	0.2	0.1	0.2	0.2
Other income	9.9	16.7	(6.7)	(40%)	3.2	6.7	8.5	8.2
Total revenue	10.2	17.1	(6.9)	(40%)	3.4	6.8	8.7	8.4
Operating expenses	(21.0)	(23.3)	2.2	10%	(8.4)	(12.6)	(12.7)	(10.5)
EBITDA	(10.9)	(6.2)	(4.7)	(76%)	(5.0)	(5.8)	(4.0)	(2.1)
Depreciation and amortisation	(2.1)	(1.7)	(0.4)	(25%)	(1.0)	(1.1)	(1.0)	(0.6)
Equity remuneration expense	(0.1)	(0.7)	0.6	88%	0.3	(0.4)	(0.4)	(0.3)
Interest expense	(5.5)	(3.9)	(1.6)	(43%)	(3.1)	(2.4)	(1.6)	(2.2)
Underlying proft before tax	(18.5)	(12.4)	(6.2)	(50%)	(8.8)	(9.7)	(7.1)	(5.3)

Prior periods comparative has been restated due to a change in accounting policy on the treatment of Software-as-a-service (SaaS) costs. Refer to Section 6-4 in the Financial Statements.

2.5.3 Drivers of performance

Revenue

In FY22, Group Investments revenue was $10.2 million, $6.9 million or 40% lower than FY21. The decrease was driven by movement in the investing in product (IIP) portfolio and lower distribution income received from unit trust investments held in seed funds, partially offset by higher investment income.

Expenses

Total expenses, comprising operating expenses, depreciation, amortisation, equity remuneration and interest expenses for Group Support Services in FY22 were $28.7 million, $0.8 million or 3% lower than in FY21.

The decrease in total expenses was predominantly due to lower variable remuneration and disciplined cost management across the support areas, offset by distributions on the employee-owned units in Barrow Hanley and higher interest expense.

Perpetual Annual Report 2022

Operating and Financial Review

for the 12 months ended 30 June 2022

Appendices

3. Appendices

3.1 Appendix A: Segment Results

PERIOD			FY22	FY22
	PERPETUAL
	ASSET	PERPETUAL
	MANAGE-	ASSET
	MENT	MANAGE-		PERPETUAL	GROUP
	INTER-	MENT	PERPETUAL	CORPORATE	SUPPORT
	NATIONAL	AUSTRALIA	PRIVATE	TRUST	SERVICES	TOTAL
	$M	$M	$M	$M	$M	$M
Operating revenue	218.8	169.0	211.2	158.5	10.2	767.7
Operating expenses	(162.6)	(108.7)	(151.5)	(75.4)	(21.0)	(519.2)
EBITDA	56.2	60.3	59.7	83.1	(10.9)	248.5
Depreciation and amortisation	(2.3)	(5.5)	(9.3)	(8.0)	(2.1)	(27.2)
Equity remuneration	(0.4)	(4.8)	(4.0)	(1.8)	(0.1)	(11.0)
EBIT	53.5	50.0	46.4	73.3	(13.0)	210.2
Interest expense	(0.6)	(0.1)	(2.1)	(0.7)	(5.5)	(9.0)
UPBT	52.9	49.9	44.3	72.6	(18.5)	201.2
Signifcant Items Pre Tax	(41.0)	(2.2)	(5.0)	(2.7)	(13.1)	(64.0)
Reportable Segment NPBT	11.9	47.7	39.2	69.9	(31.6)	137.2

PERIOD FY21

	PERPETUAL
	ASSET	PERPETUAL
	MANAGE-	ASSET
	MENT	MANAGE-		PERPETUAL	GROUP
	INTER-	MENT	PERPETUAL	CORPORATE	SUPPORT
	NATIONAL	AUSTRALIA	PRIVATE	TRUST	SERVICES	TOTAL
	$M	$M	$M	$M	$M	$M
Operating revenue	139.2	165.7	183.8	134.9	17.1	640.6
Operating expenses1	(95.8)	(112.5)	(134.2)	(60.9)	(23.3)	(426.6)
EBITDA	43.4	53.2	49.6	74.0	(6.2)	214.0
Depreciation and amortisation1	(1.7)	(5.3)	(10.5)	(8.6)	(1.7)	(27.7)
Equity remuneration	(0.4)	(5.7)	(3.5)	(1.2)	(0.7)	(11.4)
EBIT	41.3	42.2	35.6	64.2	(8.5)	174.8
Interest expense1	(0.6)	(0.1)	(0.6)	(0.4)	(3.9)	(5.5)
UPBT 1	40.7	42.2	35.0	63.8	(12.4)	169.3
Signifcant Items Pre Tax 1	(68.1)	0.9	(2.1)	(3.5)	7.3	(65.5)
Reportable Segment NPBT 1	(27.4)	43.1	33.0	60.3	(5.1)	103.8

Prior periods comparative has been restated due to a change in accounting policy on the treatment of Software-as-a-service (SaaS) costs. Refer to Section 6-4 in the Financial Statements.

Operating and Financial Review

Our performance

Directors’ Report

Financial Report

		2H22	2H22					1H22	1H22
PERPETUAL						PERPETUAL
ASSET	PERPETUAL					ASSET	PERPETUAL
MANAGE-	ASSET					MANAGE-	ASSET
MENT	MANAGE-		PERPETUAL	GROUP		MENT	MANAGE-		PERPETUAL	GROUP
INTER-	MENT	PERPETUAL	CORPORATE	SUPPORT		INTER-	MENT	PERPETUAL	CORPORATE	SUPPORT
NATIONAL	AUSTRALIA	PRIVATE	TRUST	SERVICES	TOTAL	NATIONAL	AUSTRALIA	PRIVATE	TRUST	SERVICES	TOTAL
$M	$M	$M	$M	$M	$M	$M	$M	$M	$M	$M	$M
109.0	84.2	104.3	82.0	3.4	382.8	109.8	84.8	107.0	76.6	6.8	384.9
(86.2)	(55.6)	(75.9)	(41.0)	(8.4)	(267.2)	(76.4)	(53.0)	(75.6)	(34.4)	(12.6)	(252.0)
22.8	28.5	28.3	40.9	(5.0)	115.6	33.5	31.8	31.4	42.1	(5.8)	132.9
(1.1)	(2.9)	(4.7)	(4.0)	(1.0)	(13.7)	(1.1)	(2.7)	(4.7)	(4.0)	(1.1)	(13.6)
(0.4)	(2.1)	(2.2)	(1.1)	0.3	(5.4)	(0.1)	(2.7)	(1.8)	(0.7)	(0.4)	(5.6)
21.3	23.6	21.5	35.8	(5.7)	96.5	32.2	26.4	24.9	37.5	(7.3)	113.8
(0.3)	(0.0)	(1.1)	(0.3)	(3.1)	(4.9)	(0.3)	(0.0)	(1.0)	(0.4)	(2.4)	(4.1)
21.0	23.6	20.4	35.5	(8.8)	91.6	31.9	26.4	23.9	37.1	(9.7)	109.6
(21.1)	(1.4)	(3.1)	(0.9)	(13.1)	(39.6)	(19.8)	(0.8)	(2.0)	(1.8)	(0.0)	(24.4)
(0.2)	22.2	17.3	34.7	(21.9)	52.0	12.1	25.6	22.0	35.3	(9.7)	85.2

		2H21	2H21					1H21	1H21
PERPETUAL
ASSET	PERPETUAL					PERPETUAL	PERPETUAL
MANAGE-	ASSET					ASSET	ASSET
MENT	MANAGE-		PERPETUAL	GROUP		MANAGE-	MANAGE-		PERPETUAL	GROUP
INTER-	MENT	PERPETUAL	CORPORATE	SUPPORT		MENT INTER-	MENT	PERPETUAL	CORPORATE	SUPPORT
NATIONAL	AUSTRALIA	PRIVATE	TRUST	SERVICES	TOTAL	NATIONAL	AUSTRALIA	PRIVATE	TRUST	SERVICES	TOTAL
$M	$M	$M	$M	$M	$M	$M	$M	$M	$M	$M	$M
100.9	86.6	94.5	69.2	8.7	359.9	38.3	79.1	89.2	65.6	8.4	280.6
(69.4)	(57.4)	(67.9)	(31.5)	(12.7)	(239.0)	(26.3)	(55.1)	(66.3)	(29.3)	(10.5)	(187.6)
31.5	29.2	26.7	37.7	(4.0)	120.9	11.9	24.0	23.0	36.3	(2.1)	93.0
(0.9)	(2.7)	(5.0)	(4.2)	(1.0)	(13.9)	(0.8)	(2.6)	(5.5)	(4.4)	(0.6)	(13.9)
0.2	(2.8)	(1.9)	(0.7)	(0.4)	(5.6)	(0.6)	(2.9)	(1.7)	(0.5)	(0.3)	(5.9)
30.7	23.7	19.8	32.8	(5.5)	101.5	10.6	18.5	15.8	31.4	(3.0)	73.3
(0.5)	(0.0)	(0.1)	(0.2)	(1.6)	(2.4)	(0.1)	(0.1)	(0.5)	(0.2)	(2.2)	(3.1)
30.3	23.7	19.7	32.6	(7.1)	99.1	10.5	18.5	15.3	31.2	(5.3)	70.3
(40.9)	0.6	(1.0)	(1.8)	3.4	(39.8)	(27.2)	0.3	(1.0)	(1.7)	3.9	(25.8)
(10.7)	24.2	18.7	30.8	(3.7)	59.3	(16.7)	18.8	14.3	29.5	(1.4)	44.5

Perpetual Annual Report 2022

Operating and Financial Review

for the 12 months ended 30 June 2022

3.1.1 Breakdown of Significant Items Pre Tax

PERIOD			FY22	FY22
	PERPETUAL
	ASSET	PERPETUAL
	MANAGE-	ASSET
	MENT	MANAGE-		PERPETUAL	GROUP
	INTER-	MENT	PERPETUAL	CORPORATE	SUPPORT
	NATIONAL	AUSTRALIA	PRIVATE	TRUST	SERVICES	TOTAL
	$M	$M	$M	$M	$M	$M
Transaction and Integration costs1	(27.0)	(0.2)	(2.2)	(0.5)	–	(29.8)
– Trillium	(3.5)	–	–	–	–	(3.5)
– Barrow Hanley	(23.4)	–	–	–	–	(23.4)
– Other	–	(0.2)	(2.2)	(0.5)	–	(2.9)
Non-cash amortisation of acquired intangibles2	(20.3)	–	(2.9)	(2.2)	–	(25.5)
Unrealised gains/losses on fnancial assets3	–	(1.9)	–	–	(13.1)	(15.1)
Accrued incentive compensation liability4	6.4	–	–	–	–	6.4
Signifcant Items Pre Tax	(41.0)	(2.2)	(5.0)	(2.7)	(13.1)	(64.0)

Relates to costs associated with the acquisition/establishment of Barrow Hanley, Trillium and other entities. Costs include professional fees, administrative and general expenses and staff costs related to specific retention and performance grants.
Relates to amortisation expense on customer contracts and non-compete agreements acquired through business combinations.
Relates to unrealised mark to market gains and losses on EMCF, seed fund investments and financial assets held for regulatory purposes.
This liability reflects the value of employee-owned units in Barrow Hanley.

Operating and Financial Review

Our performance

Directors’ Report

Financial Report

		2H22	2H22					1H22	1H22
PERPETUAL	PERPETUAL					PERPETUAL	PERPETUAL
ASSET	ASSET					ASSET	ASSET
MANAGE-	MANAGE-		PERPETUAL	GROUP		MANAGE-	MANAGE-		PERPETUAL	GROUP
MENT INTER-	MENT	PERPETUAL	CORPORATE	SUPPORT		MENT INTER-	MENT	PERPETUAL	CORPORATE	SUPPORT
NATIONAL	AUSTRALIA	PRIVATE	TRUST	SERVICES	TOTAL	NATIONAL	AUSTRALIA	PRIVATE	TRUST	SERVICES	TOTAL
$M	$M	$M	$M	$M	$M	$M	$M	$M	$M	$M	$M
(10.2)	–	(1.6)	(0.3)	–	(12.2)	(16.7)	(0.2)	(0.6)	(0.1)	–	(17.7)
(1.6)	–	–	–	–	(1.6)	(2.0)	–	–	–	–	(2.0)
(8.7)	–	–	–	–	(8.7)	(14.8)	–	–	–	–	(14.8)
–	–	(1.6)	(0.3)	–	(1.9)	–	(0.2)	(0.6)	(0.1)	–	(0.9)
(10.3)	–	(1.5)	(0.6)	–	(12.3)	(10.1)	–	(1.4)	(1.7)	–	(13.1)
–	(1.4)	–	–	(13.1)	(14.5)	–	(0.6)	–	–	(0.0)	(0.6)
(0.6)	–	–	–	–	(0.6)	7.0	–	–	–	–	7.0
(21.1)	(1.4)	(3.1)	(0.9)	(13.1)	(39.6)	(19.8)	(0.8)	(2.0)	(1.8)	(0.0)	(24.4)

Perpetual Annual Report 2022

Operating and Financial Review

for the 12 months ended 30 June 2022

3.2 Appendix B: Bridge For FY22 Statutory Accounts and OFR

UPAT represents Perpetual’s measure of the results for the ongoing business of the Group as determined by the Board and management. UPAT has been calculated in accordance with ASIC’s Regulatory Guide 230 – Disclosing non-IFRS financial information has been followed when presenting this information. UPAT attributable to equity holders of Perpetual Limited has not been audited by the Group’s external auditors, however, the adjustments have been extracted from the books and records that have been reviewed. Underlying profit after tax attributable to equity holders of Perpetual Limited is disclosed as it is useful for investors to gain a better understanding of Perpetual’s financial results from normal operating activities.

Post completion of Barrow Hanley acquisition in November 2020, the definition of UPAT was revised to reflect changes to the Group’s operating cash flows from both existing and future opportunities. As shown in the table below, FY22 reporting adjusted NPAT for the four types of significant items:

those that are material in nature and in Perpetual’s view do not reflect normal operating activities;
non-cash tax-effected amortisation of acquired intangibles;
tax-effected unrealised gains/losses on financial assets, this excludes unrealised gains/losses on financial assets held as a hedge to the Investing in Product scheme; and
accrued incentive compensation liability.

Operating and Financial Review

Our performance

Directors’ Report

Financial Report

	OFR ADJUSTMENTS
FY22 STATUTORY ACCOUNTS EMCF 1	TRANSACTION AND INTEGRATION COSTS NON-CASH AMORTIS- ATION OF ACQUIRED INTANGIBLES UNREALISED GAINS/ LOSSES ON FINANCIAL ASSETS ACCRUED INCENTIVE COMPEN- SATION LIABILITY FY22 OFR TRILLIUM BARROW HANLEY OTHER
$M $M	$M $M $M $M $M $M $M
Revenue 749.6 (0.2)	– – – – 18.3 – 767.7
Staff related expenses excluding equity remuneration expense (367.8) Occupancy expenses (6.4) Administrative and general expenses (162.6) Distributions and expenses relating to structured products (0.2) 0.2 Equity remuneration expense (13.4) Depreciation and amortisation expense (52.7) Financing costs (9.2)	9.6 0.9 (6.4) (363.7) (6.4) 0.5 10.9 2.0 (149.2) – 1.2 1.1 (11.1) 25.5 (27.2) 1.8 1.8 (3.2) (8.8)
Total expenses (612.2) 0.2	3.5 23.4 2.9 25.5 (3.2) (6.4) (566.5)
Net proft before tax 137.3 –	3.5 23.4 2.9 25.5 15.1 (6.4) 201.2
Income tax expense (36.1) –	(0.5) (6.6) (0.5) (6.9) (4.1) 1.7 (53.0)
Net proft after tax 101.2 –	3.0 16.8 2.4 18.6 10.9 (4.7) 148.2
Signifcant Items (net of tax) Transaction and Integration costs – Trillium – Barrow Hanley – Other Non–cash amortisation of acquired intangibles Unrealised gains/losses on fnancial assets Accrued incentive compensation liability	(3.0) (16.8) (2.4) (18.6) (10.9) 4.7
Net proft after tax attributable to equity holders	101.2

Income from the EMCF structured products is recorded on a net basis, for statutory purposes, revenue and distributions are adjusted to reflect the gross revenue and expenses of these products.

Perpetual Annual Report 2022

100

Operating and Financial Review

for the 12 months ended 30 June 2022

3.3 Appendix C: Perpetual Average Assets Under Management

FOR THE PERIOD	FY22	FY21	FY22 V	FY22 V	2H22	1H22	2H21	1H21
IN AUSTRALIAN DOLLARS	$B	$B	FY21	FY21	$B	$B	$B	$B
By asset class:
– US equities	48.3	29.6	18.8	63%	47.6	49.0	45.5	13.6
– Global equities	15.0	8.0	7.0	88%	15.7	14.3	11.9	4.1
– Fixed income	11.1	8.0	3.1	39%	10.2	12.0	12.6	3.4
PAMI average AUM	74.4	45.6	28.9	63%	73.5	75.4	70.1	21.0
By asset class:
– Australian equities	13.6	12.9	0.7	5%	13.4	13.8	13.5	12.3
– Global equities	1.6	1.2	0.3	26%	1.5	1.6	1.4	1.1
– Cash and fxed income	9.0	8.5	0.5	6%	9.2	8.9	7.8	9.2
– Other	0.9	0.8	0.1	8%	0.8	0.9	0.8	0.8
PAMA average AUM	25.1	23.5	1.6	7%	24.9	25.2	23.5	23.4
PP average AUM	7.7	6.8	0.9	13%	7.7	7.8	7.1	6.5
Total average AUM	107.2	75.8	31.4	41%	106.1	108.4	100.7	51.0

FOR THE PERIOD	FY22	FY21	FY22 V	FY22 V	2H22	1H22	2H21	1H21
IN US DOLLARS	$B	$B	FY21	FY21	$B	$B	$B	$B
By asset class:
– US equities	35.1	22.5	12.5	56%	34.3	35.9	35.0	10.1
– Global equities	10.9	6.1	4.8	79%	11.3	10.5	9.2	3.0
Total equities	45.9	28.6	17.3	61%	45.5	46.3	44.1	13.1
Fixed income	8.1	6.1	2.0	32%	7.3	8.8	9.7	2.5
PAMI average AUM	54.0	34.7	19.3	56%	52.9	55.1	53.8	15.6

Operating and Financial Review

Our performance

Directors’ Report

Financial Report

101

3.4 Appendix D: Full Time Equivalent Employees

AT END OF	2H22	1H22	2H21	1H21
Perpetual Asset Management International	184	164	156	147
Perpetual Asset Management Australia	81	81	88	82
Perpetual Private	419	371	360	360
Perpetual Corporate Trust	286	234	205	203
Group Support Services	400	378	358	356
Total operations	1,370	1,228	1,166	1,148
Permanent	1,346	1,211	1,163	1,142
Contractors	25	16	3	5
Total operations	1,370	1,228	1,166	1,148

3.5 Appendix E: Dividend History

Perpetual’s dividend policy is to a payout ratio range of between 60% and 90% of UPAT on an annualised basis.

An extended history of Perpetual’s dividends paid including the dividend reinvestment price can be found via this link: - perpetual.com.au/about/shareholders/dividend history

			DIVIDEND	FRANKING	COMPANY	DRP
YEAR	DIVIDEND	DATE PAID	PER SHARE	RATE	TAX RATE	PRICE
FY22	Final	30 Sep 2022	97 cents	100%	30%	Not determined at
						time of publication
FY22	Interim	1 Apr 2022	112 cents	100%	30%	$34.67
FY21	Final	24 Sep 2021	96 cents	100%	30%	$41.31
FY21	Interim	26 Mar 2021	84 cents	100%	30%	$32.34
FY20	Final	25 Sep 2020	50 cents	100%	30%	$28.54
FY20	Interim	27 Mar 2020	105 cents	100%	30%	$28.06
FY19	Final	30 Sep 2019	125 cents	100%	30%	$36.70
FY19	Interim	29 Mar 2019	125 cents	100%	30%	$41.62
FY18	Final	8 Oct 2018	140 cents	100%	30%	$42.20
FY18	Interim	26 Mar 2018	135 cents	100%	30%	$50.34
FY17	Final	29 Sep 2017	135 cents	100%	30%	$52.33
FY17	Interim	24 Mar 2017	130 cents	100%	30%	$51.86

Perpetual Annual Report 2022

102

Operating and Financial Review

for the 12 months ended 30 June 2022

3.6 Glossary

AASB	Australian Accounting Standards Board
ABS	Asset backed securities
ADI	Authorised deposit-taking institution
All Ords	All Ordinaries Price Index
APRA	Australian Prudential Regulatory Authority
ARCC	Audit, Risk and Compliance Committee
ASIC	Australian Securities and Investments Commission
ASX	Australian Securities Exchange
AUD	Australian dollars
AUM	Assets under management
B	Billion
BEAR	Banking Executive Accountability Regime
bps	Basis point (0.01%)
CCIV	Collective Corporate Investment Vehicles
CEO	Chief executive offcer
CLO	Collateralised Loan Obligation
CMBS	Commercial mortgage backed securities
COVID-19	Coronavirus disease
cps	Cents per share
DPS	Dividend(s) per share
DRP	Dividend Reinvestment Plan
EBIT	Earnings before interest and tax
EBITDA	Earnings before interest, tax, depreciation and amortisation of intangible assets, equity remuneration expense, and signifcant items
EMCF	Perpetual Exact Market Cash Fund
EPS	Earnings per share
ESG	Environmental, Social and Governance
ESMA	European Securities and Markets Authority
FAR	Financial Accountability Regime
FCA	Financial Conduct Authority
FTE	Full time equivalent employee
FUA	Funds under advice (for Perpetual Private) or funds under administration (for Perpetual Corporate Trust)
Group	Perpetual Limited and its controlled entities (the consolidated entity) and the consolidated entity’s
	interests in associates
GBP	British pounds
HKD	Hong Kong dollars
HNW	High net worth
IFPR	Investment Firms Prudential Regime
IFRS	International Financial Reporting Standards
IIP	Investing in Product – portfolio managers can invest deferred incentives into units in their own funds,
	aligning deferred remuneration to client outcomes

Operating and Financial Review

Our performance

Directors’ Report

Financial Report

103

IT	Information technology
KPI	Key performance indicator
M	Million
MAS	Monetary Authority of Singapore
NM	Not meaningful
NPBT	Net proft before tax
NPAT	Net proft after tax
NTA	Net tangible asset
N/A	Not applicable
OFR	Operating and Financial Review
PAMA	Perpetual Asset Management Australia
PAMI	Perpetual Asset Management International
PCT	Perpetual Corporate Trust
PP	Perpetual Private
RAS	Risk Appetite Statement
RBA	Reserve Bank of Australia
RMBS	Residential mortgage backed securities
RMF	Risk Management Framework
ROE	Return on equity
RSE	Registrable Superannuation Entity
SFDR	Sustainable Finance Action Plan and Sustainable Disclosure Regulation
SGD	Singapore dollars
SREIT	Singapore real estate investment trust
UK	United Kingdom
UPAT	Underlying proft after tax
UPBT	Underlying proft before tax
US	United States
USD	United States dollars
WH&S	Work health and safety

Perpetual Annual Report 2022

104

Financial Report

Financial Statements of Perpetual Limited and its Controlled Entities

for the year ended 30 June 2022

Primary statements

Primary statements
Consolidated Statement of Proft or Loss and Other	Comprehensive	Income	105
Consolidated Statement of Financial Position			106
Consolidated Statement of Changes in Equity			107
Consolidated Statement of Cash Flows			108
Section 1		Section 4
Group performance	109	Risk management	131
1-1 Operating segments	109	4-1 Financial risk management	131
1-2 Revenue	112
		Section 5
1-3 Expenses	113	Other disclosures	140
1-4 Income taxes	114
		5-1 Structured products assets and liabilities	140
1-5 Earnings per share	117	5-2 Parent entity disclosures	142
1-6 Dividends	118
		5-3 Controlled entities	143
1-7 Net cash from operating activities	119	5-4 Deed of cross guarantee	146
Section 2		5-5 Unconsolidated structured entities	148
Operating assets and liabilities	120	5-6 Share-based payments	148
2-1 Business combinations	120	5-7 Key management personnel and related parties	151
2-2 Receivables	120	5-8 Auditor’s remuneration	152
2-3 Other fnancial assets	121	5-9 Subsequent events	153
2-4 Property, plant and equipment	122
		Section 6
2-5 Intangibles	123	Basis of preparation	154
2-6 Provisions	125
2-7 Employee benefts	126	6-1 Reporting entity 6-2 Basis of preparation	154 154
2-8 Lease liabilities	127	6-3 Other signifcant accounting policies	157
2-9 Accrued incentive compensation	127	6-4 Changes in signifcant accounting policies	159
Section 3		6-5 New standards and interpretations not yet adopted	161
Capital management and fnancing	128
3-1 Cash and cash equivalents	128
3-2 Borrowings	128
3-3 Contributed equity	129
3-4 Reserves	130
3-5 Commitments and contingencies	130

Directors’ declaration

Independent auditor’s report to the shareholders of Perpetual Limited

Additional information

Securities exchange and investor information

162 163

170

Financial Report

Our performance Directors’ Report

Operating and Financial Review

105

Financial Report

Consolidated Statement of Profit or Loss and Other Comprehensive Income

for the year ended 30 June 2022

		2022	20211
	SECTION	$M	$M
Revenue	1-2	749.6	652.1
Expenses	1-3	(603.1)	(538.2)
Financing costs		(9.2)	(10.1)
Net proft before tax		137.3	103.8
Income tax expense	1-4	(36.1)	(30.9)
Net proft after tax		101.2	72.9
Other comprehensive income
Items that are or may be reclassifed subsequently to proft or loss:
Foreign currency translation differences		32.2	(19.1)
Other comprehensive income, net of income tax		32.2	(19.1)
Total comprehensive income		133.4	53.8
Total comprehensive income attributable to:
Equity holders of Perpetual Limited		133.4	53.8
Earnings per share1
Basic earnings per share – cents per share	1-5	179.6	131.4
Diluted earnings per share – cents per share	1-5	176.5	129.6

Prior year comparatives have been restated for the change in accounting policy relating to Software-as-a-Service (SaaS) arrangements. Refer to Section 6-4(a) for further details.

The Consolidated Statement of Profit or Loss and Other Comprehensive Income is to be read in conjunction with the ‘Notes to and forming part of the financial statements’ set out on pages 109 to 161.

Perpetual Annual Report 2022

106

Financial Report

Consolidated Statement of Financial Position

as at 30 June 2022

	2022	20211
	SECTION $M	$M
Assets
Cash and cash equivalents	3-1 175.4	147.1
Receivables	2-2 122.9	132.7
Current tax assets	1-4 3.6	–
Structured products – EMCF assets	5-1 186.3	163.9
Other assets	10.2	13.7
Total current assets	498.4	457.4
Other fnancial assets	2-3 152.0	150.4
Property, plant and equipment	2-4 77.8	91.1
Intangibles	2-5 951.7	862.9
Deferred tax assets	1-4 53.6	47.2
Other assets	13.0	7.9
Total non-current assets	1,248.1	1,159.5
Total assets	1,746.5	1,616.9
Liabilities
Payables	54.0	73.0
Structured products – EMCF liabilities	5-1 187.7	163.3
Current tax liabilities	1-4 –	7.6
Employee benefts	2-7 90.1	91.2
Lease liabilities	2-8 16.4	13.1
Provisions	2-6 5.8	1.6
Other liabilities	15.2	11.4
Total current liabilities	369.2	361.2
Payables	39.7	17.7
Borrowings	3-2 258.4	166.0
Deferred tax liabilities	1-4 14.9	15.6
Employee benefts	2-7 29.3	26.4
Accrued incentive compensation	2-9 48.6	48.0
Lease liabilities	2-8 55.9	70.1
Provisions	2-6 4.7	4.8
Total non-current liabilities	451.5	348.6
Total liabilities	820.7	709.8
Net assets	925.8	907.1
Equity
Contributed equity	3-3 817.7	815.3
Reserves	3-4 34.3	2.5
Retained earnings	73.8	89.3
Total equity attributable to equity holders of Perpetual Limited	925.8	907.1

Prior year comparatives have been restated for the change in accounting policy relating to Software-as-a-Service (SaaS) arrangements. Refer to Section 6-4(a) for further details.

The Consolidated Statement of Financial Position is to be read in conjunction with the ‘Notes to and forming part of the financial statements’ set out on pages 109 to 161.

Financial Report

Our performance

Directors’ Report

Operating and Financial Review

107

Financial Report

Consolidated Statement of Changes in Equity

for the year ended 30 June 2022

						TOTAL EQUITY
						ATTRIBUTABLE
				FOREIGN		TO SHARE-
	GROSS	TREASURY	EQUITY	CURRENCY		HOLDERS OF
	CONTRIBUTED	SHARE COMPENSATION		TRANSLATION	RETAINED	PERPETUAL
$M	EQUITY	RESERVE	RESERVE	RESERVES	EARNINGS	LIMITED
Balance at 1 July 2021	854.6	(39.3)	21.3	(18.8)	89.3	907.1
Total comprehensive income/(expense)	–	–	–	32.2	101.2	133.4
Movement on treasury shares	(1.8)	14.6	(13.8)	–	1.0	–
Issue of ordinary shares	5.3	–	–	–	–	5.3
Repurchase of shares on market	–	(15.7)	–	–	–	(15.7)
Equity remuneration expense	–	–	13.4	–	–	13.4
Dividendspaid to shareholders	–	–	–	–	(117.7)	(117.7)
Balance at 30 June 2022	858.1	(40.4)	20.9	13.4	73.8	925.8

						TOTAL EQUITY
						ATTRIBUTABLE
				FOREIGN		TO SHARE-
	GROSS	TREASURY	EQUITY	CURRENCY		HOLDERS OF
	CONTRIBUTED	SHARE	COMPENSATION	TRANSLATION	RETAINED	PERPETUAL
$M	EQUITY	RESERVE	RESERVE	RESERVES	EARNINGS	LIMITED
Balance at 1 July 2020	582.1	(42.3)	19.1	0.3	95.2	654.4
Impact of change in accounting policy1	–	–	–	–	(3.5)	(3.5)
Total comprehensive income/(expense)	–	–	–	(19.1)	72.9	53.8
Movement on treasury shares	(0.9)	10.6	(10.1)	–	0.4	–
Issue of ordinary shares	278.4	–	–	–	–	278.4
Transaction costs	(5.0)	–	–	–	–	(5.0)
Repurchase of shares on market	–	(7.6)	–	–	–	(7.6)
Equity remuneration expense	–	–	12.3	–	–	12.3
Dividendspaid to shareholders	–	–	–	–	(75.7)	(75.7)
Balance at 30 June 2021	854.6	(39.3)	21.3	(18.8)	89.3	907.1

Opening retained earnings has been adjusted for the change in accounting policy relating to Software-as-a-Service (SaaS) arrangements. Refer to Section 6-4(a) for further details.

The Consolidated Statement of Changes in Equity is to be read in conjunction with the ‘Notes to and forming part of the financial statements’ set out on pages 109 to 161.

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108

Financial Report

Consolidated Statement of Cash Flows

for the year ended 30 June 2022

	2022	20211
	SECTION $M	$M
Cash fows from operating activities
Cash receipts in the course of operations	834.1	669.9
Cash payments in the course of operations	(596.4)	(501.4)
Dividends received	0.5	0.1
Interest received	0.4	0.7
Interest paid	(8.2)	(6.1)
Income taxespaid	(59.6)	(42.6)
Net cash from operating activities	1-7 170.8	120.6
Cash fows from investing activities
Payments for property, plant, equipment and software	(15.0)	(13.7)
Payments for investments	(43.1)	(97.3)
Payment for acquisition of a business	(49.8)	(431.0)
Cash acquired as part of acquisition of business	3.5	2.0
Proceeds from sale of investments	35.2	61.1
Net cash used in investing activities	(69.2)	(478.9)
Cash fows from fnancing activities
Proceeds from issue of shares	–	275.1
Transaction costs related to issue of shares	–	(5.0)
Transaction costs related to borrowings	–	(5.4)
Lease fnancing costs	(14.4)	(15.2)
Receipt from borrowings	75.0	174.6
Repurchase of shares on market	(14.8)	(7.6)
Dividendspaid	(112.4)	(72.4)
Net cash (used in)/from fnancing activities	(66.6)	344.1
Net increase/(decrease) in cash and cash equivalents	35.0	(14.2)
Cash and cash equivalents at 1 July	147.1	164.1
Effect of movements in exchange rates on cash held	(6.7)	(2.8)
Cash and cash equivalents at 30 June	3-1 175.4	147.1

Prior year comparatives have been restated for the change in accounting policy relating to Software-as-a-Service (SaaS) arrangements. Refer to Section 6-4(a) for further details.

The Consolidated Statement of Cash Flows is to be read in conjunction with the ‘Notes to and forming part of the financial statements’ set out on pages 109 to 161.

Financial Report

Our performance

Directors’ Report

Operating and Financial Review

109

Notes to and forming part of the financial statements

for the year ended 30 June 2022

Section 1 Group performance

This section focuses on the results and performance of Perpetual as a consolidated entity. On the following pages you will find disclosures explaining Perpetual’s results for the year, segmental information, taxation, earnings per share and dividend information.

Where an accounting policy is specific to a single note, the policy is described in the section to which it relates.

1-1 Operating segments

An operating segment is a component of the consolidated entity that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the consolidated entity’s other components and for which discrete financial information is available. All operating segments’ operating results are regularly reviewed by the consolidated entity’s CEO to make decisions about resources to be allocated to the segment and assess their performance.

Segment results that are reported to the CEO include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly corporate assets, head office expenses, income tax expenses, assets and liabilities.

The following summary describes the operations in each of the reportable segments:

i. Services provided

Perpetual is a global financial services firm operating in Australia, United States, United Kingdom, the Netherlands, Singapore and Hong Kong. Perpetual provides a diverse range of financial products and services including asset management, financial advisory and trustee services via its four business segments, supported by Group Support Services.

Perpetual Asset	Provides investment products and services to global retail and institutional clients, including a
Management International	distribution presence in the United States, United Kingdom, the Netherlands and Hong Kong.
	Investment management frm, Barrow Hanley Global Investors (Barrow Hanley), and boutique ESG
	investment management frm, Trillium Asset Management (Trillium), form part of this operating
	segment to offer a breadth of high-quality global investment capabilities to our clients.
Perpetual Asset	Provides investment products and services to Australian and New Zealand retail, corporate,
Management Australia	superannuation and institutional clients, with investment capabilities spanning Australian equities,
	credit and fxed income, multi-asset and global equities.
Perpetual Private	Is an advisory services business focused on the comprehensive needs of families, businesses and
	communities. Support for clients spreads across fnancial advice, risk, estate administration, trustee
	services and tax and accounting as well as portfolio management. The business is focused on client
	service excellence and attracting and retaining exceptional talent to meet those standards in our
	chosen segments.
Perpetual Corporate Trust	Provides a broad range of fduciary, agency and digital products to the debt capital markets and
	managed funds industries both domestically and internationally. Debt Market Services includes
	trustee, document custodian, agency, trust management, accounting, standby servicing and
	reporting solutions. Perpetual Digital provides data services, industry roundtables, and our new
	Perpetual Intelligence platform-as-a-service products supporting the banking and fnancial services
	industry. Managed Funds Services provides services including independent responsible entity,
	wholesale trustee, custodian, investment management and accounting.
Group Support Services	The business units are supported by Group Support Services comprising Group Investments,
	CEO, Finance, Corporate Affairs, Marketing, Legal, Audit, Risk, Compliance, Company Secretary,
	Technology, Project & Change Management, Operations, Product and People & Culture.

ii. Geographical information

The consolidated entity operates in Australia, United States, United Kingdom, the Netherlands, Singapore and Hong Kong. The majority of the consolidated entity’s revenue and assets relate to operations in Australia and the United States. The Australian operations are represented by Perpetual Asset Management Australia, Perpetual Private and Perpetual Corporate Trust. The United States operations are represented by Perpetual Asset Management International. The operations in the United Kingdom, the Netherlands, Singapore and Hong Kong do not meet the definition of an operating segment as at balance date, as they represent less than 10 percent of revenue, profit and assets of the Group.

Perpetual Annual Report 2022

110

Financial Report Notes to and forming part of the financial statements

for the year ended 30 June 2022

1-1 Operating segments continued

iii. Major customer

The consolidated entity does not rely on any major customer.

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PERPETUAL PERPETUAL
ASSET ASSET
MANAGEMENT MANAGE- PERPETUAL TOTAL GROUP CONSOLIDATED
INTER- MENT PERPETUAL CORPORATE REPORTABLE SUPPORT SIGNIFICANT INCOME
NATIONAL AUSTRALIA [1] PRIVATE TRUST SEGMENT SERVICES ITEMS STATEMENT
$M $M $M $M $M $M $M $M
30 June 2022
Major service lines
Equities 198.7 131.7 – – 330.4 – – 330.4
Cash and fixed income 20.1 32.7 – – 52.8 – – 52.8
Other AUM related 0.1 3.3 – – 3.4 – – 3.4
Market related – – 153.0 – 153.0 – – 153.0
Non-market related – – 55.2 – 55.2 – – 55.2
Income from structured
products – 1.4 – – 1.4 – – 1.4
Debt Market Services – – – 68.7 68.7 – – 68.7
Managed Funds Services – – – 70.3 70.3 – – 70.3
Perpetual Digital – – – 19.5 19.5 – – 19.5
Investment income – – 3.0 – 3.0 12.4 – 15.4
Net gain on sale of
investments – – – – – 4.6 (1.2) 3.4
Unrealised gains/(losses)
on financial assets (0.1) (1.9) – – (2.0) (6.8) (15.1) (23.9)
Total revenue 218.8 167.2 211.2 158.5 755.7 10.2 (16.3) 749.6
Operating expenses (162.6) (108.8) (151.5) (75.4) (498.3) (21.0) (17.7) (537.0)
Depreciation and
amortisation (2.3) (5.5) (9.3) (8.0) (25.1) (2.1) (25.5) (52.7)
Equity remuneration
amortisation (0.4) (4.8) (4.0) (1.8) (11.0) (0.1) (2.3) (13.4)
Financing costs (0.6) (0.1) (2.1) (0.7) (3.5) (5.5) (0.2) (9.2)
Profit/(loss) before tax 52.9 48.0 44.3 72.6 217.8 (18.5) (62.0) 137.3
Income tax expense (36.1)
Net profit after tax 101.2
Reportable segment
assets 693.7 229.1 252.8 246.6 1,422.2 324.3 1,746.5
Reportable segment
liabilities (129.8) (214.3) (44.0) (22.9) (411.0) (409.7) (820.7)
Capital expenditure 0.1 2.8 0.1 6.0 9.0 7.6 16.6
----- End of picture text -----

Segment information for Perpetual Asset Management Australia includes the Perpetual Exact Market Return Fund, refer to Section 5-1(i).

Financial Report

Our performance

Directors’ Report

Operating and Financial Review

111

	PERPETUAL		PERPETUAL
	ASSET		ASSET
	MANAGEMENT		MANAGE-		PERPETUAL		TOTAL	GROUP				CONSOLIDATED
	INTER-		MENT	PERPETUAL	CORPORATE		REPORTABLE	SUPPORT		SIGNIFICANT		INCOME
	NATIONAL		AUSTRALIA1	PRIVATE	TRUST		SEGMENT	SERVICES		ITEMS		STATEMENT
	$M		$M	$M	$M		$M	$M		$M		$M
30 June 2021
Major service lines
Equities	122.2		132.5	–		–	254.7		–		–	254.7
Cash and fxed income	16.6		28.2	–		–	44.8		–		–	44.8
Other AUM related	0.3		3.4	–		–	3.7		–		–	3.7
Market related		–	–	126.7		–	126.7		–		–	126.7
Non-market related		–	–	57.1		–	57.1		–		–	57.1
Income from structured
products		–	1.8	–		–	1.8		–		–	1.8
Debt Market Services		–	–	–	62.4		62.4		–		–	62.4
Managed Funds Services		–	–	–	59.6		59.6		–		–	59.6
Perpetual Digital					12.6		12.6		–		–	12.6
Investment income		–	–	–	0.2		0.2	9.0			–	9.2
Net gain on sale of
investments		–	–	–		–	–	4.0			–	4.0
Unrealised gains/(losses) on fnancial assets		–	0.9	–		–	0.9	4.3		10.3		15.5
Total revenue	139.1		166.8	183.8	134.8		624.5	17.3		10.3		652.1
Operating expenses	(95.8)		(112.7)	(134.2)	(60.8)		(403.5)	(23.3)		(55.4)		(482.2)
Depreciation and
amortisation	(1.7)		(5.3)	(10.5)	(8.6)		(26.1)	(1.7)		(15.9)		(43.7)
Equity remuneration
amortisations	(0.4)		(5.7)	(3.5)	(1.2)		(10.8)	(0.7)		(0.8)		(12.3)
Financing costs	(0.6)		(0.1)	(0.6)	(0.4)		(1.7)	(3.9)		(4.5)		(10.1)
Proft/(loss) before tax	40.6		43.0	35.0	63.8		182.4	(12.3)		(66.3)		103.8
Income tax expense												(30.9)
Net proft after tax												72.9
Reportable segment
assets	627.5		208.0	234.7	205.1		1,275.3	341.6				1,616.9
Reportable segment
liabilities	(144.9)		(190.6)	(19.1)	(11.1)		(365.7)	(344.1)				(709.8)
Capital expenditure		–	5.2	0.1	4.7		10.0	13.5				23.5

Segment information for Perpetual Asset Management Australia includes the Perpetual Exact Market Return Fund, refer to Section 5-1(i).

Perpetual Annual Report 2022

112

Financial Report

Notes to and forming part of the financial statements

for the year ended 30 June 2022

1-2 Revenue

	2022	2021
	$M	$M
Revenue from contracts with customers	753.3	621.6
Income from structured products	1.4	1.8
Dividends	0.6	0.1
Interest and unit trust distributions	5.4	9.1
Net realised gains on sale of investments	3.4	4.0
Unrealised (losses)/gains on fnancial assets	(23.9)	15.5
Other	9.4	–
	749.6	652.1

Accounting policies

Revenue is measured based on the consideration specified in a contract with a customer and excludes amounts collected on behalf of third parties. The consolidated entity recognises revenue when it transfers control over a product or service to a customer.

Revenue from contracts with customers

The consolidated entity earns revenue from the provision of financial products and services. These include investment management and administration, financial advisory and trustee services (including responsible entity, superannuation, philanthropic and estate administration).

The majority of the consolidated entity’s revenue arises from service contracts where performance obligations are satisfied over time. Customers obtain control of services as they are delivered, and revenue is recognised over time as those services are provided.

Investment management and administration revenue is calculated as a percentage of the funds invested in accordance with the investment mandates or the respective product disclosure statements. Some investment products and mandates include performance fees, which are contingent on achieving or exceeding a defined performance hurdle and the revenue is recognised when it is highly probable that a significant reversal in the cumulative amount of the revenue would not occur. While performance fees are recognised over time, they are typically constrained until meeting or exceeding the performance hurdle due to market volatility.

Revenue from financial advisory services is assessed on a contract by contract basis. Revenue is recognised over the period the services are provided. Revenue may be charged on a fixed fee, fee for service (`time and costs’) or as a percentage of assets under administration basis:

Under fixed fee contracts, revenue is recognised as the related services are provided on a percentage of completion basis, or when specified milestones in the contract have been achieved. Fees received in advance are deferred as a contract liability until the service has been provided.
Revenue charged under fee for service contracts is recognised based on the amount the consolidated entity is entitled to invoice for services performed to date, based on the contracted rates.

Trustee Services are also assessed on a contract by contract basis. Contracts may include a fee to establish a trust, as well as ongoing trustee and other service fees. Establishment fees are recognised when the trust has been established and is based on the standalone value of the service.

A small part of the consolidated entity’s revenue is recognised at a point in time, generally when a performance obligation is linked to a particular event (i.e. an application or redemption transaction for a customer). Revenue is recognised when the consolidated entity executes a specific transaction on behalf of the customer.

Financial Report

Our performance

Directors’ Report

Operating and Financial Review

113

Income from structured products

Income represents fees earned from managing the Exact Market Cash Funds.

Dividends

Dividend income is recognised in profit or loss on the date the consolidated entity’s right to receive payment is established which, in the case of quoted securities, is the ex-dividend date.

Interest and unit trust distributions

Interest income is recognised as it accrues, taking into account the effective yield of the financial asset.

Unit trust distributions are recognised in profit or loss as they are received.

Net realised gains on sale of investments

Net gain on sale of investments represents proceeds less costs on sale of financial assets.

Unrealised gains on financial assets

Represents movement in the fair value of the consolidated entity’s financial assets classified as Fair Value Through Profit and Loss (FVTPL) during the financial year.

1-3 Expenses

	2022	20211
	$M	$M
Staff related expenses excluding equity remuneration expense	367.8	329.7
Occupancy expenses	6.4	7.1
Administrative and general expenses	162.6	145.1
Distributions and expenses relating to structured products	0.2	0.3
Equity remuneration expense	13.4	12.3
Depreciation and amortisation expense	52.7	43.7
	603.1	538.2

Prior year comparatives have been restated for the change in accounting policy relating to Software-as-a-Service (SaaS) arrangements. Refer to Section 6-4(a) for further details.

Accounting policies

Expenses are recognised at the fair value of the consideration paid or payable when services are received.

Perpetual Annual Report 2022

114

Financial Report

Notes to and forming part of the financial statements

for the year ended 30 June 2022

1-4 Income taxes

2022	20211
$M	$M
Current year tax expense Current year tax expense 48.1 Prioryear adjustments 0.8	38.5 (2.4)
Total current tax expense impacting income taxes payable 48.9	36.1
Deferred tax expense Prior year adjustments (0.8) Temporarydifferences (12.0)	3.4 (8.6)
Total deferred tax expense (12.8)	(5.2)
Total income tax expenses 36.1	30.9
Net proft before tax for the year 137.3 ‘Prima facie income tax expense calculated at 30% (2021: 30%) on proft for the year’ 41.2 – Recognition of previously unrecognised capital and revenue losses (2.5) – Non-assessable income (2.8) – Prior year adjustments – – Effect of tax rates in foreign jurisdictions (1.7) – Other non-deductible expenses 1.9	103.8 31.1 (2.5) – 1.0 0.7 0.6
Total 36.1	30.9
Effective tax rate (ETR) 26.3%	29.8%
Income taxes payable at the beginning of the year 7.6 Income taxes payable for the fnancial year 48.9 Less: Tax paid during the year (59.6) Other (0.5)	13.3 37.0 (42.6) (0.1)
Income taxes (receivable)/payable at the end of the year (3.6)	7.6
Represented in the Statement of Financial Position by: Current tax (assets)/liabilities (3.6)	7.6

Prior year comparatives have been restated for the change in accounting policy relating to Software-as-a-Service (SaaS) arrangements. Refer to Section 6-4(a) for further details.

Financial Report

Our performance

Directors’ Report

Operating and Financial Review

115

Basis of calculation of effective tax rate

The ETR is calculated as total income tax expenses divided by net profit before tax for the year.

The consolidated entity currently has tax obligations in Australia, United States, Singapore, the Netherlands, the United Kingdom (UK) and Hong Kong. Operations in Singapore, the Netherlands, the UK and Hong Kong do not materially impact the calculation of the ETR.

Explanation of variance to the legislated 30% tax rate

The consolidated entity’s ETR for the year was 26.3% (2021: 29.8%). The decrease of 3.7% in the effective tax rate compared to the legislated 30% is mainly attributed to the availability of carry-forward capital losses, which offset the realised capital gains received on trust distribution income, and the inclusion in accounting income during the year of an adjustment to the deferred consideration of an acquisition in a previous year which does not constitute assessable income for tax purposes. It is also impacted by lower tax rates applicable to non-Australian jurisdictions. This reduction in income tax expense and ETR is partially reversed by the upward impact of non-deductible expenses.

Capital tax (gains)/losses calculated at 30% tax in Australia

The total tax benefits of realised capital losses are $21,327,854 (30 June 2021: $24,030,718 comprising $3,000,000 (30 June 2021: $3,000,000) recognised in deferred tax assets and $18,327,854 (30 June 2021: $21,030,718) not recognised in deferred tax assets. These are net of realised tax capital gains and losses incurred in the current and/or prior year and are available to be utilised by the Australian income tax consolidated group in future years.

Perpetual Annual Report 2022

116

Financial Report Notes to and forming part of the financial statements

for the year ended 30 June 2022

1-4 Income taxes continued

Movement in deferred tax balances

		RECOGNISED	ACQUIRED
	BALANCE	IN PROFIT	IN BUSINESS	BALANCE
	1 JULY 2021	OR LOSS	COMBINATION	30 JUNE 2022
2022	$M	$M	$M	$M
Deferred tax assets
Provisions and accruals	4.7	1.5	–	6.2
Capital expenditure deductible over fve years	0.2	–	–	0.2
Employee benefts	29.1	0.7	0.1	29.9
Property, plant and equipment	2.4	0.8	–	3.2
Intangible assets	3.7	(0.2)	–	3.5
Recognised capital losses	3.0	–	–	3.0
Unrealised net capital losses	–	1.0	–	1.0
Lease adjustments AASB 16	4.1	0.3	0.1	4.5
Other items	–	2.1	–	2.1
Deferred tax assets	47.2	6.2	0.2	53.6
Deferred tax liabilities
Intangible assets	(6.8)	0.8	(5.9)	(11.9)
Lease adjustment AASB 16	–	(0.5)	–	(0.5)
Unrealised net capital gains	(6.1)	6.1	–	–
Capital raising costs	(2.4)	0.3	–	(2.1)
Other items	(0.3)	(0.1)	–	(0.4)
Deferred tax liabilities	(15.6)	6.6	(5.9)	(14.9)
Net deferred tax assets	31.6	12.8	(5.7)	38.7

		RECOGNISED	ACQUIRED
	BALANCE	IN PROFIT	IN BUSINESS	BALANCE
	1 JULY 2020	OR LOSS	COMBINATION	30 JUNE 2021
2021	$M	$M	$M	$M
Deferred tax assets
Provisions and accruals	6.4	(1.7)	–	4.7
Capital expenditure deductible over fve years	1.2	(1.2)	0.2	0.2
Employee benefts	21.3	6.2	1.6	29.1
Property, plant and equipment	2.2	0.2	–	2.4
Recognised revenue losses	–	3.7	–	3.7
Recognised capital losses	3.0	–	–	3.0
Lease adjustments AASB 16	5.3	(0.8)	(0.4)	4.1
Other items	0.6	(0.7)	0.1	–
Deferred tax assets	40.0	5.7	1.5	47.2
Deferred tax liabilities
Intangible assets	(13.9)	7.1	–	(6.8)
Unrealised net capital gains	(0.3)	(5.8)	–	(6.1)
Capital raising costs	(2.7)	0.3	–	(2.4)
Other items	(0.5)	0.2	–	(0.3)
Deferred tax liabilities	(17.4)	1.8	–	(15.6)
Net deferred tax assets	22.6	7.5	1.5	31.6

Financial Report

Our performance

Directors’ Report

Operating and Financial Review

117

Accounting policies

Income tax expense comprises current and deferred tax. Income tax expense is recognised in the net profit or loss except to the extent that it relates to items recognised directly in equity, in which case it is recognised in other comprehensive income. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at reporting date and any adjustment to tax payable in respect of previous years.

Deferred tax is recognised in respect of temporary differences between carrying amounts of assets and liabilities for financial reporting purposes and amounts used for taxation purposes.

Deferred tax is not recognised for the following temporary differences:

the initial recognition of goodwill
the initial recognition of assets or liabilities that affect neither accounting nor taxable profit
differences relating to investments in subsidiaries to the extent that they probably will not reverse in the foreseeable future.

Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date.

A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which temporary differences can be utilised. Deferred tax assets are reviewed at each balance date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

Deferred tax assets and liabilities are netted when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.

Additional income taxes that arise from the distribution of dividends are recognised at the same time as the liability to pay the related dividend is recognised.

Perpetual Limited and its wholly owned Australian entities elected to form an income tax consolidated group as of 1 July 2002. As a consequence, all members of the tax consolidated group are taxed as a single entity and governed by a tax funding agreement. Under the agreement, all wholly owned Australian entities fully compensate Perpetual Limited for any current income tax payable assumed and are compensated by Perpetual Limited for any current tax receivable and deferred tax assets relating to unused tax losses or unused tax credits that are transferred to Perpetual Limited under the income tax consolidation legislation. The funding amounts are determined by reference to the amounts recognised in the members’ financial statements.

1-5 Earnings per share

	CENTS PER SHARE1
	2022 2021
Basic earnings per share Diluted earnings per share	179.6 131.4 176.5 129.6
	$M $M
Net proft after tax attributable to equity holders of Perpetual Limited	101.2 72.9

Prior period comparatives have been restated for the change in accounting policy relating to Software-as-a-Service (SaaS) arrangements. Refer to Section 6-4(a) for further details.

	NUMBER OF SHARES	NUMBER OF SHARES
Weighted average number of ordinary shares (basic)	56,356,663	55,458,177
Effect of dilutivepotential ordinaryshares(includingthose subject to rights)	990,317	768,479
Weighted average number of ordinary shares (diluted)	57,346,980	56,226,656

Perpetual Annual Report 2022

118

Financial Report

Notes to and forming part of the financial statements

for the year ended 30 June 2022

1-5 Earnings per share continued

Accounting policies

The consolidated entity presents basic and diluted earnings per share (EPS) data for its ordinary shares.

Basic EPS is calculated by dividing the net profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period, adjusted for shares held by the Company’s employee share plan trust. Diluted EPS is determined by dividing the net profit or loss attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding, adjusted for shares held by the Company’s sponsored employee share plan trust and for the effects of all dilutive potential ordinary shares, which comprise shares and options/rights granted to employees under long-term incentive and retention plans.

1-6 Dividends

		TOTAL
	CENTS PER	AMOUNT	FRANKED/	DATE OF
	SHARE	$M	UNFRANKED	PAYMENT
2022
Final 2021 ordinary	96	54.3	Franked	24 Sep 2021
Interim 2022 ordinary	112	63.4	Franked	01 Apr 2022
Total amount	208	117.7
2021
Final 2020 ordinary	50	28.2	Franked	25 Sep 2020
Interim 2021 ordinary	84	47.5	Franked	26 Mar 2021
Total amount	134	75.7

All franked dividends declared or paid during the year were franked at a tax rate of 30% and paid out of retained earnings.

The Company’s Dividend Reinvestment Plan (DRP) is optional and offers ordinary shareholders in Australia and New Zealand the opportunity to acquire fully paid ordinary shares, without transaction costs. Shareholders can elect to participate in or terminate their involvement in the DRP at any time.

Subsequent events

Since the end of the financial year, the Directors declared the following dividend. The dividend has not been provided for and there are no tax consequences.

			CENTS PER	TOTAL AMOUNT1	FRANKED/	DATE OF
			SHARE	$M	UNFRANKED	PAYMENT
Final	2022	ordinary	97	55.0	Franked	30 Sep 2022

Calculation based on the estimated ordinary shares on issue at the record date.

The financial effect of this dividend has not been brought to account in the financial statements for the year ended 30 June 2022 and will be recognised in subsequent financial reports.

	2022	2021
DIVIDEND FRANKING ACCOUNT	$M	$M
Amount of franking credits available to shareholders for subsequent fnancial years	27.8	37.9

The above available amounts are based on the balance of the dividend franking account at 30 June 2022 adjusted for franking credits that will arise from the payment of the current tax liabilities, and franking credits that will arise from the receipt of dividends recognised as receivables by the tax consolidated group at the year end.

Financial Report

Our performance

Directors’ Report

Operating and Financial Review

119

The ability to utilise the franking credits is dependent upon there being sufficient available profits to declare dividends. The impact on the dividend franking account of dividends proposed after the balance date, but not recognised as a liability, is to reduce it to $4,200,000 (2021: $14,638,000).

Accounting policies

Dividends are recognised as a liability in the year in which they are declared.

1-7 Net cash from operating activities

	2022	20211
	$M	$M
Reconciliation of proft for the year to net cash from operating activities
Proft for the year	101.2	72.9
Items classifed as investing/fnancing activities:
Proft on sale of investments	(3.4)	(4.0)
Deferred acquisition consideration	16.1	(20.9)
Assets acquired from business combinations	3.5	2.0
Lease fnancing costs	14.4	15.1
Non-cash items:
Depreciation and amortisation expense	52.7	43.7
Equity remuneration expense	13.4	12.3
Transfer to foreign currency translation reserve	(32.2)	19.1
Reinvestment of dividends and unit distributions	(4.0)	(4.4)
Accrued fxed asset additions	(1.5)	(1.6)
Mark to market movements on fnancial assets	23.9	(15.5)
Fair value adjustment to put liability	(4.7)	10.7
Other	(7.4)	(3.3)
(Increase)/decrease in assets
Receivables	9.8	(40.7)
Current tax assets	(3.6)	–
Other assets	(1.6)	0.4
Deferred tax assets	(6.4)	(7.2)
Increase/(decrease) in liabilities
Payables	3.0	0.5
Provisions	4.1	(2.5)
Current tax liabilities	(7.6)	(5.7)
Deferred tax liabilities	(0.7)	(1.8)
Employee benefts	1.8	51.5
Net cash from operating activities	170.8	120.6

Prior year comparatives have been restated for the change in accounting policy relating to Software-as-a-Service (SaaS) arrangements. Refer to Section 6-4(a) for further details.

Perpetual Annual Report 2022

120

Financial Report

Notes to and forming part of the financial statements

for the year ended 30 June 2022

Section 2 Operating assets and liabilities

This section shows the assets used to generate Perpetual’s trading performance and the liabilities incurred as a result. Liabilities relating to the consolidated entity’s financing activities are addressed in Section 3.

2-1 Business combinations

The purchase consideration (at present value) for the two acquisitions below totalled approximately $52 million.

Laminar Capital Pty Ltd

On 1 October 2021, Perpetual acquired Laminar Capital Pty Ltd (Laminar), a fixed income specialist providing capital markets, advisory and investment management services to institutional, middle market and high net worth clients. This strategic acquisition accelerates Perpetual Corporate Trust’s position as a specialist fiduciary and digital solutions provider to the banking and financial services industry.

Whilst this was a strategic acquisition, it was not material to the Group’s assets or results.

Jacaranda Financial Planning Pty Ltd

On 12 August 2021, Perpetual acquired Jacaranda Financial Planning Pty Ltd (Jacaranda), a leading Sydney and Melbourne-based boutique wealth advisory firm focused on the high net worth market segment. This strategic acquisition accelerates Perpetual Private’s adviser growth strategy and complements its existing private client and family office offering.

While this was a strategic acquisition, it was not material to the Group’s assets or results.

2-2 Receivables

	2022	2021
	$M	$M
Current
Trade receivables	120.4	117.2
Less: Provision for doubtful debts	(3.0)	(3.1)
	117.4	114.1
Other receivables	5.5	18.6
	122.9	132.7
Movements in the provision for doubtful debts are as follows:
Balance as at beginning of the year	3.1	1.2
Doubtful debts provided for during the year	1.7	2.4
Receivables written off duringtheyear as uncollectible	(1.8)	(0.5)
Balance as at end of the year	3.0	3.1

Financial Report

Our performance

Directors’ Report

Operating and Financial Review

121

Movements in the provision for doubtful debts have been recognised in Administrative and general expenses in Section 1-3. Amounts charged to the provision account are generally written off when there is no expectation of additional recoveries. In subsequent periods, any recoveries of amounts previously written off are credited against Administrative and general expenses in Section 1-3. Based on the analysis at the end of the reporting period, the impairment under the expected credit loss (ECL) method is considered to be immaterial and currently no amount is recognised in the financial statements.

Accounting policies

Receivables comprise trade and other receivables. Trade and other receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less an allowance for ECL. Collectability of trade receivables is reviewed on an ongoing basis and at balance date, in addition to the ECL, specific impairment losses are recorded for any doubtful debts.

2-3 Other financial assets

	2022	2021
	$M	$M
Non-current
Listed equity securities	50.2	26.2
Unlisted unit trusts	89.8	120.2
Debt securities	3.4	4.0
Unlisted investment funds	8.6	–
	152.0	150.4

Accounting policies

Financial assets

The consolidated entity’s investments in equity securities, unlisted unit trusts, unlisted investment funds and debt securities are classified at Fair Value Through Profit and Loss (FVTPL) with the associated realised and unrealised gains and losses taken to the Income Statement. Refer to Section 4-1 (iv).

Fair values for investments in equity securities, unlisted unit trusts and other securities are obtained from quoted market prices in active markets, including market transactions and valuation techniques (such as discounted cash flow models and option pricing models), as appropriate.

Unlisted investment funds represent an equity interest in an unlisted investment fund established to invest its assets primarily in the economic equity interests of multiple collateralised loan obligation (CLO) transactions and warehouse facilities in connection therewith. Fair values for unlisted investment funds are obtained from an independent, third-party fund administrator and are based on the net asset value of the fund at the reporting date.

Perpetual Annual Report 2022

122

Financial Report

Notes to and forming part of the financial statements

for the year ended 30 June 2022

2-4 Property, plant and equipment

			PROJECT
PLANT AND	LEASEHOLD		WORK IN
EQUIPMENT	IMPROVEMENTS	ROU ASSETS	PROGRESS	TOTAL
$M	$M	$M	$M	$M
Year ended 30 June 2022 Cost 11.3 Foreign exchange movement (0.1) Accumulated depreciation (9.7)	61.3 – (43.7)	91.4 0.9 (33.7)	0.1 – –	164.1 0.8 (87.1)
Carrying amount 1.5	17.6	58.6	0.1	77.8
Movement Balance as at 1 July 2021 1.6 Additions 0.5 Additions through business combinations – Transfers from work in progress – Depreciation (0.7) Foreign exchange movement 0.1	21.4 – – 0.6 (4.4) –	67.6 0.2 1.1 – (12.1) 1.8	0.5 0.2 – (0.6) – –	91.1 0.9 1.1 – (17.2) 1.9
Balance as at 30 June 2022 1.5	17.6	58.6	0.1	77.8

Accounting policies

Recognition and measurement

Property, plant and equipment are measured at cost or deemed cost less accumulated depreciation and impairment losses.

Right-of-use assets represents leased office premises and are initially measured at cost, and subsequently measured at cost less any accumulated depreciation and impairment losses, and adjusted for certain remeasurements of the lease liability.

Where parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items of property, plant and equipment.

Project work in progress

Work in progress is measured at cost and relates to assets not yet available for use.

Depreciation

Depreciation is recognised on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment. Depreciation for right-of-use assets is recognised on a straight-line basis over the shorter of the asset’s useful life and the lease term. The estimated useful lives for the current and comparative periods are as follows:

plant and equipment: 4 – 15 years
leasehold improvements: 3 – 15 years
right-of-use assets: 9 – 20 years.

The residual value, useful life and depreciation method applied to an asset are reassessed at least annually.

Financial Report

Our performance

Directors’ Report

Operating and Financial Review

123

2-5 Intangibles

2-5 Intangibles
	GOODWILL INTANGIBLE ASSETS
$M	CUSTOMER CONTRACTS CAPITALISED SOFTWARE1 PROJECT WORK IN PROGRESS1 OTHER TOTAL
Year ended 30 June 2022 At cost Foreign exchange movement Accumulated amortisation
	601.8 313.1 94.5 25.4 54.5 1,089.3
	14.9 12.2 0.3 – 2.5 29.9
	– (83.5) (73.5) – (10.5) (167.5)
Carrying amount	616.7 241.8 21.3 25.4 46.5 951.7
Balance at 1 July 2021 Additions Additions through business combinations Transfers Foreign exchange movement Amortisation expense	554.5 224.3 19.2 17.3 47.6 862.9
	– – – 18.2 – 18.2
	39.5 19.7 1.1 – – 60.3
	– – 10.1 (10.1) – –
	22.7 19.3 0.3 – 4.1 46.4
	– (21.5) (9.4) – (5.2) (36.1)
Balance as at 30 June 2022	616.7 241.8 21.3 25.4 46.5 951.7
Year ended 30 June 2021 At cost Foreign exchange movement Accumulated amortisation	562.3 293.4 83.3 17.3 54.5 1,010.8 (7.8) (7.1) – – (1.6) (16.5) – (62.0) (64.1) – (5.3) (131.4)
Carrying amount	554.5 224.3 19.2 17.3 47.6 862.9
Balance at 1 July 2020 Impact of change in accounting policy Additions Additions through business combinations Transfers Foreign exchange movement Amortisation expense	361.3 40.9 21.8 12.1 8.3 444.4 – – (5.3) (2.5) – (7.8) – – 0.4 20.0 – 20.4 201.0 205.5 0.2 – 44.5 451.2 – – 12.3 (12.3) – – (7.8) (7.1) – – (1.6) (16.5) – (15.0) (10.2) – (3.6) (28.8)
Balance as at 30 June 2021	554.5 224.3 19.2 17.3 47.6 862.9

Prior year comparatives have been restated for the change in accounting policy relating to Software-as-a-Service (SaaS) arrangements. Refer to Section 6-4(a) for further details.

Perpetual Annual Report 2022

124

Financial Report

Notes to and forming part of the financial statements

for the year ended 30 June 2022

2-5 Intangibles continued

	2022	2021
	$M	$M
Goodwill Impairment Testing
The following cash-generating units have signifcant carrying amounts of goodwill:
Perpetual Asset Management International, comprising CGUs:
– Trillium	50.0	45.9
– Barrow Hanley	214.3	195.7
Perpetual Asset Management Australia, comprising CGU:
– Australian Equity	3.5	3.5
Perpetual Private	190.2	168.4
Perpetual Corporate Trust	158.7	141.0
	616.7	554.5

The recoverable amount has been determined on a consistent basis across each cash-generating unit (CGU) by using their value in use. The following assumptions have been applied across each CGU:

The value in use is estimated based on the net present value of future cash flow projections to be realised from each of the CGUs over the next five years plus a terminal value.
The pre-tax discount rates used in the current year ranged from 14.0% to 15.9% (2021: 14.5% to 16.4%) for Australian CGUs and from 15.0% to 15.4% (2021: 15.6% to 16.1%) for US CGUs.

The forecast cash flows used in impairment testing are based on assumptions as to the level of profitability for each business over a projected five-year period. These forecasted cash flows are based on a five-year forecast, three years of which has been approved by the Board and a further two years of management forecasts have been applied. The main drivers of revenue growth are the value of assets under management (AUM) in the Trillium, Barrow Hanley and Australian Equity CGUs, funds under advice (FUA) in the Perpetual Private CGU and securitisation and capital flows in the Perpetual Corporate Trust CGU. A terminal value with a growth rate of 2.5% has also been applied.

Other than the normal operating changes linked to ongoing business initiatives, the assumptions do not include the effects of any future restructuring to which the consolidated entity is not yet committed or of future cash outflows by the consolidated entity which will improve or enhance the consolidated entity’s performance. At the reporting date, there is no reasonable change in key assumptions that could cause the carrying amount to exceed the recoverable amount.

The estimated recoverable amount is greater than the carrying value for each CGU. For the estimated recoverable amount to be equal to the carrying amount, the pre-tax discount rate would have to increase from 14.0% to 26.4% (2021: 14.5% to 37.7%) for Australian CGUs and from 15.0% to 25.3% (2021: 15.6% to 16.6%) for US CGUs.

Accounting policies

Goodwill

Goodwill that arises upon the acquisition of subsidiaries is included in intangible assets.

Goodwill represents the excess of acquisition cost over the fair value of the consolidated entity’s share of the net identifiable assets of the acquired subsidiary or associate at the date of acquisition. Goodwill is allocated to cash-generating units and is not amortised, but tested for impairment annually.

Goodwill is measured at cost less accumulated impairment losses. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.

Financial Report

Our performance

Directors’ Report

Operating and Financial Review

125

Amortisation

For those intangible assets which are amortised, the amortisation is calculated over the cost of the asset, or another amount substituted for cost, less its residual value.

The estimated useful lives in the current and comparative periods are as follows:

capitalised software: 2.5 – 8 years
customer contracts and relationships acquired: 5 – 15 years
non-compete (included in other intangible assets): 3 – 5 years.

Amortisation methods, useful lives and residual values are reviewed at each financial year end and adjusted if appropriate.

Software

Certain internal and external costs directly incurred in acquiring and developing software have been capitalised and are amortised over their useful lives. Development costs include only those costs directly attributable to the development phase and are only recognised following completion of a technical feasibility study and where the consolidated entity has an intention and ability to use the asset. Costs incurred on software maintenance are expensed as incurred.

Other intangible assets

Brand names acquired by the consolidated entity are included in other intangible assets. Brand names have an indefinite useful life and are not amortised, but tested for impairment annually. Brand names are measured at cost less accumulated impairment losses.

Other intangible assets acquired by the consolidated entity, which have finite useful lives, are stated at cost less accumulated amortisation and impairment losses.

Subsequent expenditure

Subsequent expenditure is capitalised only when it increases future economic benefits embodied in the specific asset to which it relates. All other expenditure is expensed as incurred.

2-6 Provisions

	2022	2021
	$M	$M
Current
Insurance and legal provision	1.8	0.3
Operational process review provision	3.6	0.2
Makegood and other occupancyrelatedprovisions	0.4	1.1
	5.8	1.6
Non-current
Makegood and other occupancyrelatedprovisions	4.7	4.8
	4.7	4.8

	CARRYING	ADDITIONAL	UNUSED		CARRYING
	AMOUNT AT	PROVISION	AMOUNTS	PAYMENTS	AMOUNT AT
$M	1 JULY 2021	MADE	REVERSED	MADE	30 JUNE 2022
Legal provision	0.3	1.7	–	(0.2)	1.8
Operational process review provision	0.2	5.1	–	(1.7)	3.6
Makegood and other occupancyrelatedprovisions	5.9	0.4	(0.4)	(0.8)	5.1
Total provisions	6.4	7.2	(0.4)	(2.7)	10.5

Perpetual Annual Report 2022

126

Financial Report

Notes to and forming part of the financial statements

for the year ended 30 June 2022

2-6 Provisions continued

Accounting policies

A provision is recognised in the Statement of Financial Position when the consolidated entity has a present legal or constructive obligation as a result of a past event that can be measured reliably and it is probable that an outflow of economic benefits will be required to settle the obligation.

Management exercises judgement in estimating provision amounts. It may be possible, based on existing knowledge, that outcomes in the next annual reporting period differ from amounts provided and may require adjustment to the carrying amount of the liability affected.

Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. The unwinding of the discount is recognised as a finance cost.

Legal provision

A provision for litigation is recognised when reported litigation claims arise and are measured at the cost that the consolidated entity expects to incur in settling the claim (refer to Section 3-5).

Operational process review

A provision for operational process reviews is recognised when operational errors are identified and represents the cost that the consolidated entity expects to incur in rectification and restitution costs.

Make good and other occupancy related provisions

A provision for make good and other occupancy related provisions is recognised when certain make good conditions exist upon exit of a premises lease. The provision is expected to be settled at the end of the term of the related lease.

2-7 Employee benefits

2-7 Employee benefts
AGGREGATE LIABILITY FOR EMPLOYEE BENEFITS, INCLUDING ON-COSTS	2022 2021
$M	CURRENT NON-CURRENT CURRENT NON-CURRENT
Provision for annual leave Provision for long service leave Other employee benefts1 Provision for distribution – Barrow Hanley Provision for long-term incentive plans Restructuring provision	8.1 – 5.2 – 8.7 2.5 8.1 2.8 70.6 9.9 75.0 10.9 2.6 – 2.8 – – 16.9 – 12.7 0.1 – 0.1 –
	90.1 29.3 91.2 26.4

Short-term incentives (STI) and deferred STI.

The non-current portion of the long service leave provision has been discounted using a rate of 5.3% (2021: 2.7%) which is based on the 10 year corporate bond rate. The provision for long-term incentive plans has been discounted using a range of 3.0% to 3.1% (2021: 1.4% to 1.7%), which is based on the relevant US Treasury note rate that matches the expected payment term.

The number of full time equivalent employees at 30 June 2022 was 1,370 (2021: 1,166).

Accounting policies

Short-term employee benefits

Short-term employee benefits are expensed as the related service is provided. A liability is recognised for the amount expected to be paid if the consolidated entity has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.

Financial Report

Our performance

Directors’ Report

Operating and Financial Review

127

Other long-term employee benefits

The consolidated entity’s net obligation in respect of long-term employee benefits is the amount of future benefit that employees have earned in return for their service in the current and prior periods. That benefit is discounted to determine its present value. Re-measurements are recognised in profit or loss in the period in which they arise.

Restructuring

A provision for restructuring is recognised when the consolidated entity has approved a detailed and formal restructuring plan and the restructuring has either commenced or has been announced publicly. Future operating costs are not provided for.

Provision for long-term incentive plans

The provision for long-term incentive plans relates to schemes operated by Barrow Hanley.

The liability is not dependent on estimate. The liability is dependent on the achievement of future revenue and profit hurdles, which have been measured using management’s estimate of likely outcomes. The accrued liability represents the pro-rated portion (based on service provided to date) of the estimated future cash payments, discounted using the relevant US Treasury bond rate. The liability will be reassessed at each reporting period based on the latest consolidated entity’s forecasts, with fair value adjustments recognised in profit and loss.

2-8 Lease liabilities

	2022	2021
	$M	$M
Current
Lease liabilities	16.4	13.1
	16.4	13.1
Non-current
Lease liabilities	55.9	70.1
	55.9	70.1

Accounting policies

Lease liabilities

Lease liabilities are initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the consolidated entity’s incremental borrowing rate.

2-9 Accrued incentive compensation

	2022	2021
	$M	$M
Non-current
Accrued incentive compensation	48.6	48.0
	48.6	48.0

Barrow Hanley, a Group subsidiary, has a profit-sharing plan (the Plan). Under the Plan, Barrow Hanley may award annual bonuses to key employees, a portion of which may be paid to the eligible employees through the issuance of unit interests. The awards of unit interests have a three-year vesting period from the grant date, and the value is determined at grant date based on a predetermined formula. Under the provisions of the Plan, these awards contain a feature whereby shares may be put back to the Parent of Barrow Hanley (Perpetual US Holding Company, Inc) in the future.

Movement in the fair value of the liability is taken to staff related expenses. The liability is re-measured each period until settlement.

Unit interests are also entitled to distributions, which are accrued at each reporting date. An increase to staff related expenses is recorded with the corresponding increase to the liability included in employee benefits.

Perpetual Annual Report 2022

128

Financial Report Notes to and forming part of the financial statements

for the year ended 30 June 2022

Section 3 Capital management and financing

This section outlines how Perpetual manages its capital structure and related financing costs, including its balance sheet liquidity and access to capital markets. Perpetual’s objectives when managing capital are to safeguard its ability to continue as a going concern, to continue to provide returns to shareholders and benefits to other stakeholders, and to reduce the cost of capital.

3-1 Cash and cash equivalents

2022	2021
$M	$M
Bank balances 158.4 Short-term deposits 17.0	139.6 7.5
175.4	147.1

Short-term deposits represent rolling 90 day term deposits.

3-2 Borrowings

2022	2021
$M	$M
The consolidated entity has access to the following credit facilities: Total facility used 258.4 Facility unused 122.3	166.0 189.1

The existing syndicated facility consists of a multi-currency term loan with a maximum commitment of $117 million USD or equivalent (Facility A1), a multi-currency revolving loan facility with a maximum commitment of $78 million USD (Facility A2), a multi-currency revolving loan facility with a maximum commitment of $100 million AUD or equivalent (Facility B) and a bank guarantee facility with a maximum commitment of $135 million AUD. Facilities A1 and A2 attract an interest rate equal to LIBOR plus a margin, Facility B has an interest rate of BBSY plus a margin and Facility C is at a flat rate. All the facilities have a term of three years, expiring in November 2023. The syndicated facility is unsecured and had a weighted average floating interest rate of 2.05% at 30 June 2022, inclusive of the undrawn line fee (30 June 2021: 1.22%).

The consolidated entity utilised Facilities A1 and A2 to fund the purchase of Barrow Hanley in the prior year and the amount borrowed remains outstanding as at 30 June 2022. The loans are held in USD. The consolidated entity drew down on Facility B during the period, primarily to fund the acquisitions of Jacaranda Financial Planning Pty Ltd and Laminar Capital Pty Ltd. The loan is held in AUD. The consolidated entity relies on bank guarantees issued under Facility C to meet its regulatory capital requirements (refer to Section 3-5).

When the syndicated facility was established, the consolidated entity incurred costs of $5.4 million (including underwriting fees). These costs have been capitalised and will be released to profit and loss over the term of the facility. There currently remains $2.4 million of capitalised borrowing costs that have yet to be released to the profit and loss account.

The consolidated entity has agreed to various debt covenants including shareholders’ funds as a specified percentage of total assets, a maximum ratio of gross debt to EBITDA and a minimum interest cover. The consolidated entity is in compliance with the covenants at 30 June 2022. Should the consolidated entity not satisfy any of these covenants, the outstanding balance of the loans may become due and payable.

The consolidated entity’s bank facility is subject to annual review and management intends to refinance the existing facility for a further period prior to the due date.

Financial Report

Our performance

Directors’ Report

Operating and Financial Review

129

Accounting policies

Borrowings are initially recognised at fair value net of transaction costs incurred. Subsequent to initial recognition, interest-bearing borrowings are stated at amortised cost. The financial liability under the facility has a fair value equal to its carrying amount.

Interest-bearing borrowings are removed from the Consolidated Statement of Financial Position when the obligation specified in the contract is discharged, cancelled or expired.

Financing costs comprise interest payments on borrowings and derivative financial instruments calculated using the effective interest method, and unwinding of discounts on provisions.

3-3 Contributed equity

	2022	2021
	$M	$M
Fully paid ordinary shares 56,713,419 (2021: 56,573,279)	858.1	854.6
Treasuryshares 651,437(2021: 615,080)	(40.4)	(39.3)
	817.7	815.3

	2022 2021
	NUMBER OF SHARES $M NUMBER OF SHARES $M
Movements in share capital Balance at beginning of year Shares issued: – Issue of ordinary shares1 – Movement on treasuryshares	55,958,199 815.3 46,714,750 539.8 140,140 5.3 9,184,671 273.4 (36,357) (2.9) 58,778 2.1
Balance at end of year	56,061,982 817.7 55,958,199 815.3

During the period the consolidated entity issued 62,171 ($2.6 million) and 77,969 ($2.7 million) shares in September 2021 and April 2022 respectively to satisfy Dividend Re-investment Plan requirements.

The Company does not have authorised capital or par value in respect of its issued shares.

Terms and conditions

Holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at shareholders’ meetings.

In the event of winding up of the Company, ordinary shareholders rank after creditors and are fully entitled to any surplus capital.

Accounting policies

Ordinary shares

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares are recognised as a deduction from equity, net of any tax effects.

Repurchase of share capital (treasury shares)

When share capital recognised as equity is repurchased or held by employee share plans and subject to vesting conditions, the amount of the consideration paid, including directly attributable costs, is recognised as a deduction from equity. When treasury shares are sold or reissued subsequently, the amount received is recognised as an increase in equity.

Perpetual Annual Report 2022

130

Financial Report

Notes to and forming part of the financial statements

for the year ended 30 June 2022

3-4 Reserves

	2022	2021
	$M	$M
Foreign currency translation reserve	13.3	(18.9)
General reserve	0.1	0.1
	13.4	(18.8)
Equitycompensation reserve	20.9	21.3
	34.3	2.5

Accounting policies

Foreign currency translation reserve

The Foreign Currency Translation Reserve (FCTR) records the foreign currency differences from the translation of the financial information of foreign operations that have a functional currency other than Australian dollars.

Equity compensation reserve

The equity compensation reserve represents the value of the Company’s own shares held by an equity compensation plan that the consolidated entity is required to include in the consolidated financial statements. This reserve will be reversed against share capital when the underlying shares vest to the employee. No gain or loss is recognised in profit or loss on the purchase, sale, issue or cancellation of the consolidated entity’s own equity instruments.

3-5 Commitments and contingencies

	2022	2021
	$M	$M
(a) Commitments
Capital expenditure commitments
Contracted but not provided for and payable within one year	38.6	3.5
Capital expenditure contracted but not provided for and payable within one year primarily relates
to further investments in the unlisted investment fund which is primarily invested in multiple
collateralised loan obligation transactions and warehouse facilities in connection therewith.
(b) Contingencies
Contingent liabilities
Bank guarantee in favour of the ASX Settlement and Transfer Corporation Pty Limited with respect
to trading activities	1.0	1.0
Bank guarantee in favour of certain Group subsidiaries in relation to the provision of responsible
entity services and custodial or depository services	127.8	127.8
Bankguarantee issued in respect of the lease ofpremises of Perpetual Limited	0.6	0.6
	129.4	129.4

In the ordinary course of business, contingent liabilities exist in respect of claims and potential claims against entities in the consolidated entity. The consolidated entity does not consider that the outcomes of any such claims known to exist at the date of this report, either individually or in aggregate, are likely to have a material effect on its operations or financial position.

Accounting policies

Contingent liabilities

A contingent liability is a possible obligation arising from past events that may be incurred subject to the outcome of an uncertain future event not wholly within the consolidated entity’s control.

Financial Report

Our performance

Directors’ Report

Operating and Financial Review

131

Section 4 Risk management

Perpetual’s activities expose it to a variety of financial and non-financial risks. Financial risks include credit risk, liquidity risk and market risks (including currency risk, interest rate risk and price risk). Key financial exposures are operational risk and a failure to meet regulatory compliance obligations. The nature of the financial risk exposures arising from financial instruments, the objectives, policies and processes for managing these risks, and the methods used to measure them are detailed below.

4-1 Financial risk management

Perpetual recognises that risk is part of doing business and that the ongoing management of risk is critical to its success. The approach to managing risk is articulated in the Risk Management Framework. The Risk Management Framework is supported by the Risk Group, who is responsible for the design and maintenance of the framework, establishing and maintaining group-wide risk management policies, and providing regular risk reporting to the Board, the Audit, Risk and Compliance Committee (ARCC) and the Group Executive Leadership Team. This framework is approved by the Perpetual Board of Directors (the Board) and is reviewed for adequacy and appropriateness on an annual basis.

The Board regularly monitors the overall risk profile of the consolidated entity and sets the risk appetite for the consolidated entity, usually in conjunction with the annual planning process. The Board is responsible for ensuring that management has appropriate processes in place for managing all types of risk, ranging from financial risk to operational risk. To assist in providing ongoing assurance and comfort to the Board, responsibility for risk management oversight has been delegated to the ARCC. The main functions of this Committee are to oversee the consolidated entity’s accounting policies and practices, the integrity of financial statements and reports, the scope, quality and independence of external audit arrangements, the monitoring of the internal audit function, the effectiveness of risk management policies and the adequacy of insurance programs. This Committee is also responsible for monitoring overall legal and regulatory compliance.

The activities of the consolidated entity expose it to the following financial risks: credit risk, liquidity risk and market risk. These are distinct from the financial risks borne by customers which arise from financial assets managed by the consolidated entity in its role as fund manager, trustee and responsible entity.

The risk management approach to, and exposures arising from, the Exact Market Cash Fund (EMCF 1) are disclosed in Section 5-1.

i. Credit risk

Credit risk refers to the risk that a customer or counterparty to a financial instrument will fail to meet its contractual obligations resulting in financial loss to the consolidated entity. Credit risk arises principally from the consolidated entity’s cash and trade receivables.

The consolidated entity mitigates its credit risk by ensuring cash deposits are held with high credit quality financial institutions and other highly liquid investments are held with trusts operated by the entity.

The maximum exposure of the consolidated entity to credit risk on financial assets which have been recognised on the Consolidated Statement of Financial Position is the carrying amount, net of any provision for doubtful debts. The table below outlines the consolidated entity’s maximum exposure to credit risk as at reporting date.

	2022	2021
	$M	$M
Cash and cash equivalents	175.4	147.1
Trade receivables	117.4	114.1
Other receivables and other fnancial assets	5.5	18.6
Listed equity securities and unlisted unit trusts	140.0	146.4
Unlisted investment fund	8.6	–
Debt securities	3.4	4.0

Perpetual Annual Report 2022

132

Financial Report

Notes to and forming part of the financial statements

for the year ended 30 June 2022

4-1 Financial risk management continued

i. Credit risk continued

Details of the assets held in debt securities are listed below:

	AAA TO	A+ TO	BBB+ TO
	AA-	A-	BBB-	TOTAL
30-JUN-22	$M	$M	$M	$M
Debt securities	0.2	0.7	2.5	3.4

Credit risk is managed on a functional basis across the various business segments. As a result of the swap agreements between EMCF 1 and the consolidated entity, the consolidated entity consolidates EMCF 1 and is hence exposed to credit risk on its exposure to the $186.3 million (2021: $163.9 million) of underlying investments held by EMCF 1.

The maximum exposure would only be realised in the unlikely event that the recoverable value of all the underlying investments held by EMCF 1 decline to $nil. Further details of the credit risk relating to EMCF 1 are disclosed in Section 5-1.

(a) Investments held by seed fund investments

Perpetual incubates new investment strategies through the establishment of seed funds for the purpose of building investment track records and developing asset management skills before releasing products to Perpetual’s investors. Exposure to credit risk arises on the consolidated entity’s financial assets held by the seed funds, mainly being debt securities, loans, deposits with financial institutions and derivative financial instruments.

The exposure to credit risk is monitored on an ongoing basis by the funds’ investment managers and managed in accordance with the investment mandate of the funds.

(b) Other financial assets

The consolidated entity’s exposure to trade receivables is influenced mainly by the individual characteristic of each customer.

Trade receivables are managed by the accounts receivable department. Outstanding fees and receivables are monitored on a daily basis and an aged debtors report is prepared and monitored by Group Finance. Management assesses the credit quality of customers by taking into account their financial position, past experience and other factors.

Credit risk further arises in relation to financial guarantees given to wholly owned subsidiaries. Such guarantees are only provided in exceptional circumstances and are subject to specific Board approval and are monitored on a quarterly basis as part of the consolidated entity’s regulatory reporting.

The consolidated entity held cash and cash equivalents of $175.4 million at 30 June 2022 (2021: $147.1 million). The cash and cash equivalents are held with bank and financial institution counterparties, which are predominantly rated ‘BBB’ or higher, based on Standard & Poor’s rating.

The credit quality of financial assets that are neither past due nor impaired is assessed by reference to external credit ratings, if available, or to historical information on counterparty default rates.

The tables below provide an aged analysis of the financial assets which were past due but not impaired:

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30 JUNE 2022 30 JUNE 2021
LESS MORE LESS MORE
THAN 30 TO 60 TO THAN THAN 30 TO 60 TO THAN
30 DAYS 60 DAYS 90 DAYS 90 DAYS TOTAL 30 DAYS 60 DAYS 90 DAYS 90 DAYS TOTAL
$M $M $M $M $M $M $M $M $M $M
Trade
and other
receivables 5.0 1.3 1.2 1.8 9.3 3.6 1.6 0.5 1.8 7.5
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The nominal values of financial assets which were impaired and have been provided for are as follows:

	2022	2021
	$M	$M
Trade and other receivables	3.0	3.1

The impaired financial assets relate mainly to independent customers and investors who are in unexpectedly difficult economic situations, where the consolidated entity is of the view that the full carrying value of the receivable cannot be recovered. The consolidated entity does not hold any collateral against the trade and other receivables.

Financial Report

Our performance

Directors’ Report

Operating and Financial Review

133

(c) Unlisted investment fund

The consolidated entity holds an equity interest in an unlisted investment fund established to invest its assets primarily in the economic equity interests of multiple collateralised loan obligation (CLO) transactions and warehouse facilities in connection therewith. Exposure to credit risk arises on the underlying pool of bank loan assets which serve as collateral for the CLO’s.

At 30 June 2022, the underlying pool of bank loan assets were issued by counterparties rated ‘B-‘ or higher, based on Standard & Poor’s rating.

Exposure to credit risk is monitored on an ongoing basis by the funds’ investment managers and managed in accordance with the investment mandate of the funds.

ii. Liquidity risk

Liquidity risk is the risk that the financial obligations of the consolidated entity cannot be met as and when they fall due without incurring significant costs.

The consolidated entity’s approach to managing liquidity is to maintain a level of cash or liquid investments sufficient to meet its ongoing financial obligations. The consolidated entity has a robust liquidity risk framework in place which is principally driven by the Capital Management Review (refer to Section 4-1(v) for further information).

At 30 June 2022, total base capital requirements were $41 million, as per the Group Treasury Policy, compared to $314 million of available liquid funds.

The consolidated entity manages liquidity risk by continually monitoring forecast and actual cash flows, and by matching the maturity profiles of financial assets and liabilities. Surplus funds are generally only invested in instruments that are tradeable in highly liquid markets. In addition, a six-month forecast of liquid assets, cash flows and balance sheet is reviewed by the Board on a semi-annual basis to ensure there is sufficient liquidity within the consolidated entity.

The tables below show the maturity profiles of the financial liabilities for the consolidated entity. These have been calculated using the contractual undiscounted cash flows.

	30 JUNE 2022 30 JUNE 2021
	LESS THAN 1 YEAR $M 1 TO 5 YEARS $M GREATER THAN 5 YEARS $M TOTAL $M LESS THAN 1 YEAR $M 1 TO 5 YEARS $M GREATER THAN 5 YEARS $M TOTAL $M
Liabilities Payables Borrowings Lease liabilities	58.1 39.7 – 97.8 73.0 21.7 – 94.7 – 260.8 – 260.8 – 170.3 – 170.3 13.8 41.3 6.8 61.9 12.8 50.7 10.3 73.8
	71.9 341.8 6.8 420.5 85.8 242.7 10.3 338.8

iii. Market risk

Market risk is the risk that changes in market prices – such as foreign exchange rates, interest rates and equity prices – will affect the consolidated entity’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return.

The consolidated entity is subject to the following market risks:

(a) Currency risk

The consolidated entity’s investment of capital in foreign operations – for example, subsidiaries or associates with functional currencies other than the Australian dollar – exposes the consolidated entity to the risk of changes in foreign exchange rates. Variations in the value of these foreign operations arising as a result of exchange differences are reflected in the foreign currency translation reserve in equity.

The consolidated entity is exposed to currency risk relating to the United States (USD), United Kingdom (GBP), Singapore (SGD), Europe (EUR) and the Hong Kong (HKD) operations.

Where it is considered appropriate, the consolidated entity takes out economic hedges against larger foreign exchange denominated revenue streams (primarily US dollar). The primary objective of hedging is to ensure that, if practical, the effect of changes in foreign exchange rates on the consolidated capital ratios are minimised.

Perpetual Annual Report 2022

134

Financial Report

Notes to and forming part of the financial statements

for the year ended 30 June 2022

4-1 Financial risk management continued

iii. Market risk continued

(a) Currency risk continued

Exposure to currency risk

The summary quantitative data about the consolidated entity’s exposure to currency risk as reported to management of the consolidated entity is as follows. The following are financial assets and liabilities in currencies other than the reporting currency of the consolidated entity.

	30 JUNE 2022 30 JUNE 2021
	USD $M GBP $M SGD $M EUR $M HKD $M USD $M GBP $M SGD $M
Financial assets and liabilities Cash and cash equivalents Receivables Other fnancial assets Unlisted investment fund Payables Borrowings	72.3 3.3 11.2 1.3 1.3 66.3 1.4 8.8 35.0 – 1.6 – – 34.6 – 0.3 50.6 – – – – 39.8 – – 8.6 – – – – – – (4.3) (0.1) (0.3) – (0.1) (24.1) (0.1) (0.2) (185.8) – – – – (170.3) – –
Net statement of fnancial position exposure	(23.6) 3.2 12.5 1.3 1.2 (53.7) 1.3 8.9

The table below demonstrates the impact of a 10% strengthening/(weakening) of the Australian dollar against the currencies noted above at 30 June, on the net profit after tax and equity of the consolidated entity with all other variables held constant:

	30 JUNE 2022 30 JUNE 2021
	IMPACT ON NET PROFIT AFTER TAX $M IMPACT ON EQUITY $M IMPACT ON NET PROFIT AFTER TAX $M IMPACT ON EQUITY $M
+/- 10%	(4.5)/4.5 0.4/(0.4) (3.1)/3.1 3.3/(3.3)
AUD weakens by 10%	4.5 (0.4) 3.1 (3.3)

(b) Interest rate risk

Interest rate risk is the risk to the consolidated entity’s earnings and capital arising from changes in market interest rates. The financial instruments held that are impacted by interest rate risk consist of cash and borrowings.

The consolidated entity’s exposure to interest rate risk arises predominantly on the $383.1 million syndicated facility, of which $260.8 million was drawn as at 30 June 2022 (refer to Section 3-2). This loan facility is rolled on a one-month, three-month or six-month term.

Financial Report

Our performance

Directors’ Report

Operating and Financial Review

135

The consolidated entity’s exposure to interest rate risk for the financial assets and liabilities is set out as follows:

	FLOATING	FIXED
	INTEREST	INTEREST	NON-INTEREST
	RATE	RATE	BEARING	TOTAL
	$M	$M	$M	$M
At 30 June 2022
Financial assets
Cash and cash equivalents	158.4	17.0	–	175.4
Receivables	1.3	–	121.6	122.9
Other fnancial assets	0.4	3.0	148.6	152.0
	160.1	20.0	270.2	450.3
Financial liabilities
Payables	–	–	93.7	93.7
Lease liabilities	–	72.3	–	72.3
Borrowings	260.8	–	–	260.8
	260.8	72.3	93.7	426.8
At 30 June 2021
Financial assets
Cash and cash equivalents	142.7	4.4	–	147.1
Receivables	1.6	–	131.1	132.7
Other fnancial assets	–	3.9	146.4	150.3
	144.3	8.3	277.5	430.1
Financial liabilities
Payables	–	–	90.7	90.7
Lease liabilities	–	83.2	–	83.2
Borrowings	170.3	–	–	170.3
	170.3	83.2	90.7	344.2

The table below demonstrates the impact of a 1% change in interest rates, with all other variables held constant, on the net profit after tax and equity of the consolidated entity.

after tax and equity of the consolidated entity.
	30 JUNE 2022 30 JUNE 2021
	IMPACT ON NET PROFIT AFTER TAX $M IMPACT ON EQUITY $M IMPACT ON NET PROFIT AFTER TAX $M IMPACT ON EQUITY $M
+/- 1%	(0.7)/0.7 (0.7)/0.7 (0.2)/0.2 (0.2)/0.2

The impact on net profit after tax for the year would be mainly as a result of an (increase)/decrease in interest expense on borrowings.

Perpetual Annual Report 2022

136

Financial Report

Notes to and forming part of the financial statements

for the year ended 30 June 2022

4-1 Financial risk management continued

iii. Market risk continued

(c) Market risks arising from assets under management and funds under advice

The consolidated entity’s revenue is significantly dependent on assets under management (AUM) and funds under advice (FUA). Management calculates the expected impact to annualised revenue from a 10% movement in AUM and FUA to be approximately $48.8 million.

(d) Market risks arising from seed funds

The consolidated entity is exposed to equity price risk on investments held by its seed funds. The funds may also be exposed, to a small extent, to the other risks which influence the value of those shares or units (including foreign exchange rates and interest rates).

The asset management divisions’ Investment Review Committee is responsible for reviewing and recommending new incubation strategies and ensuring management has appropriate processes and systems in place for managing investment risk for each fund. The funds’ specialist asset managers aim to manage the impact of price risks through the use of consistent and carefully considered investment guidelines. Risk management techniques are used in the selection of investments, including derivatives, which are only acquired if they meet specified investment criteria. Daily monitoring of trade restrictions and derivative exposure against limits is undertaken, with any breach of these restrictions reported to the Chief Risk Officer.

These funds may be party to derivative financial instruments in the normal course of business in order to hedge exposure to fluctuations in foreign exchange rates, interest rates and equity indices in accordance with the funds’ investment guidelines.

The seed funds may be exposed to currency risk and interest rate risk. Their investment managers may enter into derivative contracts (such as forwards, swaps, options and futures) through approved counterparties to manage this risk. However, the use of these contracts must be consistent with the investment strategy and restrictions of each seed fund, and agreed acceptable level of risk. These funds are also exposed to interest rate risk on cash holdings. Interest income from cash holdings is earned at variable interest rates and investments in cash holdings are at call.

(e) Market risks arising from the Exact Market Cash Fund

The consolidated entity is further subject to market risks through the Exact Market Cash Fund (EMCF 1). The Fund was established with the purpose of providing an exact return utilising the Bloomberg AusBond Bank Bill Index (the benchmark index) to investors. The impact of EMCF 1 on the consolidated entity’s financial results is dependent on the performance of the Fund relative to the benchmark. Unrealised gains/losses are taken through profit and loss.

The risk management approach to, and exposures arising from EMCF 1 are disclosed in Section 5-1.

iv. Fair value

The following tables present the consolidated entity’s assets and liabilities measured and recognised at fair value, by valuation method, at 30 June 2022. The different levels have been defined as follows:

Level 1: Quoted prices in active markets for identical assets and liabilities;
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: Inputs for the asset or liability that are not based on observable market data.

Financial Report

Our performance

Directors’ Report

Operating and Financial Review

137

	LEVEL 1	LEVEL 2	LEVEL 3	TOTAL
AT 30 JUNE 2022	$M	$M	$M	$M
Financial assets
Listed equity securities	50.2	–	–	50.2
Unlisted unit trusts	–	89.8	–	89.8
Unlisted investment fund	–	–	8.6	8.6
Structured products – EMCF assets	1.8	184.5	–	186.3
Debt securities	3.4	–	–	3.4
	55.4	274.3	8.6	338.3

	LEVEL 1	LEVEL 2	LEVEL 3	TOTAL
AT 30 JUNE 2021	$M	$M	$M	$M
Financial assets
Listed equity securities	26.2	–	–	26.2
Unlisted unit trusts	–	120.2	–	120.2
Structured products – EMCF assets	18.2	145.7	–	163.9
Debt securities	4.0	–	–	4.0
	48.4	265.9	–	314.3

The following table shows a reconciliation from the opening balances to the closing balances for Level 3 fair values:

	2022	2021
	$M	$M
Balance at 1 July	–	–
Investments	9.2	–
Capital returns	(0.6)	–
Withdrawals	–	–
Foreign exchange movements	0.7	–
Net change in fair value(unrealised)	(0.7)	–
Balance at 30 June	8.6	–

The investment in the unlisted investment fund, representing equity interests of multiple collateralised loan obligation (CLO) transactions, is classified as a Level 3 fair value instrument as it is an unlisted entity, valued using unobservable inputs. The fair value of the unlisted investment fund has been determined using the net asset value of the fund as at 30 June 2022 obtained from an independent, third-party fund administrator.

Perpetual Annual Report 2022

138

Financial Report Notes to and forming part of the financial statements

for the year ended 30 June 2022

4-1 Financial risk management continued

iv. Fair value continued

For the fair value of the unlisted investment fund, reasonably possible changes at the reporting date to the net asset value of the fund, holding other inputs constant, would have the following effects:

	30 JUNE 2022 30 JUNE 2021
	IMPACT ON NET PROFIT AFTER TAX $M IMPACT ON EQUITY $M IMPACT ON NET PROFIT AFTER TAX $M IMPACT ON EQUITY $M
+/- 10%	0.6/(0.6) 0.6/(0.6) – –

The fair value of financial instruments traded in active markets (such as publicly traded derivatives, and trading securities) is based on quoted market prices at the reporting date. The quoted market price used for financial assets held by the consolidated entity is the last traded price. Marketable shares included in other financial assets are traded in an organised financial market and their fair value is the current quoted last traded price for an asset. The carrying amounts of bank term deposits and receivables approximate fair value. The fair value of investments in unlisted shares in other corporations is determined by reference to the underlying net assets and an assessment of future maintainable earnings and cash flows of the respective corporations.

The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is determined using valuation techniques. The estimates of fair value where valuation techniques are applied are subjective and involve the exercise of judgement. Changing one or more of the assumptions applied in valuation techniques to reasonably possible alternative assumptions may impact on the amounts disclosed.

The carrying amount of financial assets and financial liabilities, less any impairment, approximates their fair value, except for those outlined in the table below, which are stated at amortised cost.

	2022 2021
	CARRYING AMOUNT $M FAIR VALUE $M CARRYING AMOUNT $M FAIR VALUE $M
Structured products – EMCF liabilities	187.7 186.3 163.3 163.9

v. Capital risk management

A Capital Management Review is carried out on an annual basis and is submitted to the CFO for review and approval. If changes are required to funding requirements, the capital structure or to the capital management strategy of the consolidated entity, the CFO will present their recommendation to the Board via the Audit, Risk and Compliance Committee. The Group Policy – Treasury ensures that the level of financial conservatism is appropriate for the Company’s businesses including acting as custodian and manager of clients’ assets and operation as a trustee company. This policy also aims to provide business stability and accommodate the growth needs of the consolidated entity. This policy comprises three parts:

(a) Dividend policy

Dividends paid to shareholders are typically in the range of 60–90% of the consolidated entity’s underlying profit after tax attributable to members of the Company, which is in line with the new policy announced in December 2020. In certain circumstances, the Board may declare a dividend outside of that range.

Financial Report

Our performance

Directors’ Report

Operating and Financial Review

139

(b) Review of capital and distribution of excess capital

A review of the consolidated entity’s capital base is performed at least semi-annually and excess capital that is surplus to the consolidated entity’s current requirements may potentially be returned to shareholders in the absence of a strategically aligned, value accretive investment opportunity.

(c) Gearing policy

The current gearing policy aims to target an investment grade credit rating by maintaining a corporate debt to capital ratio (corporate debt/(corporate debt + equity)) of 30% or less and EBIT interest cover (EBIT/interest expense) of more than ten times. The gearing ratio is 22.0% as at 30 June 2022 (2021: 15.6%). The EBIT interest cover ratio for the consolidated entity as at 30 June 2022 was 21 times (2021: 21 times).

Accounting policies

The consolidated entity initially recognises receivables on the date that they are originated. All other financial assets (including assets designated at fair value through profit or loss) are recognised initially on the trade date at which the consolidated entity becomes a party to the contractual provisions of the instrument.

Financial liabilities (including liabilities designated at fair value through profit or loss) are recognised initially on the trade date at which the consolidated entity becomes a party to the contractual provisions of the instrument. The consolidated entity derecognises a financial liability when its contractual obligations are discharged or cancelled or expire.

Financial assets at fair value through profit or loss

Financial assets are mandatorily classified and measured at fair value through profit or loss on initial recognition. Attributable transaction costs are recognised in profit or loss when incurred. Financial assets mandatorily classified at fair value through profit or loss are measured at fair value and changes recognised in profit or loss.

Receivables

The consolidated entity derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. Any interest in transferred financial assets that is created or retained by the consolidated entity is recognised as a separate asset or liability.

Financial assets and liabilities are offset and the net amount presented in the Consolidated Statement of Financial Position when, and only when, the consolidated entity has a legal right to offset the amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.

Derivative financial instruments

The consolidated entity holds derivative financial instruments within funds to hedge its interest rate, foreign exchange and market risk exposures.

Derivatives are recognised initially at fair value. Attributable transaction costs are recognised in profit or loss when incurred.

Financial guarantee contracts

Financial guarantee contracts are recognised as a financial liability at the time the guarantee is issued. Financial guarantees are given to wholly owned subsidiaries, within the consolidated entity. Such guarantees are only provided in exceptional circumstances and are subject to specific Board approval and are monitored on a quarterly basis as part of the consolidated entity’s regulatory reporting.

The liability is initially measured at fair value and subsequently at the higher of the amount determined in accordance with AASB 137 Provisions, Contingent Liabilities and Contingent Assets and the amount initially recognised less cumulative amortisation, where appropriate.

Where guarantees in relation to loans or other payables of subsidiaries are provided for no compensation, the fair values are accounted for as contributions and recognised as part of the cost of the investment.

Receivables are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, receivables are measured at amortised cost using the effective interest method less impairment losses.

Perpetual Annual Report 2022

140

Financial Report Notes to and forming part of the financial statements

for the year ended 30 June 2022

Section 5 Other disclosures

This section contains other miscellaneous disclosures that are required by accounting standards.

5-1 Structured products assets and liabilities

i. Exact Market Cash Fund

	2022	2021
	$M	$M
Current assets
Perpetual Exact Market Cash Fund	186.3	163.9
	186.3	163.9
Current liabilities
Perpetual Exact Market Cash Fund	187.7	163.3
	187.7	163.3

The Exact Market Cash Fund (EMCF 1) current asset balances reflect the fair value of the net assets held by the Fund. The current liabilities balances represent the consolidated entity’s obligation to the Fund’s investors. The difference between the current assets and current liabilities balance has been recorded in profit and loss.

EMCF 1 was established with the purpose of providing an exact return that matched the Bloomberg AusBond Bank Bill Index (the benchmark index), or a variant thereon, to investors. The Fund’s ability to pay the benchmark return to the investors is guaranteed by the consolidated entity. The National Australia Bank has provided EMCF 1 product with a guarantee to the value of $3 million (2021: $3 million) to be called upon in the event that the consolidated entity is unable to meet its obligations. Due to the guaranteed benchmark return to investors, the consolidated entity is exposed to the risk that the return of EMCF 1 differs from that of the benchmark. The return of EMCF 1 is affected by risks to the underlying investments in the EMCF 1 portfolio, which are market, liquidity and credit risks.

The underlying investments of EMCF 1 are valued on a hold to maturity basis for unit pricing purposes, which is consistent with the way in which Perpetual manages the portfolio.

EMCF 1 use professional investment managers to manage the impact of the above risks by using prudent investment guidelines and investment processes. The investment managers explicitly target low volatility and aim to achieve this through a quality screening process that is designed to assess the likelihood of default and difficult trading patterns during periods of rapid systematic risk reduction.

There is a clearly defined mandate for the inclusion of sectors and issuances. In periods of risk reduction, diversification may be narrowly focused on cash and highly liquid investment-grade assets. At times of higher risk tolerance, appropriate diversification should be expected.

Interest rate exposure is limited to +/- 90 days versus the benchmark. The portfolios are constructed with the goal of having a diversified set of securities, while largely retaining the low risk characteristics of a cash investment.

Liquidity risk of EMCF 1 is managed by maintaining a level of cash or liquid investments in the portfolios which is sufficient to meet a level and pattern of investor redemptions (consistent with past experience), distributions or other of the Fund’s financial obligations. This is complemented by a dynamic portfolio management process that ensures liquidity is increased when there is an expectation of a deterioration in market conditions. Cash flow forecasts are prepared for the Fund, including the consideration of the maturity profile of the securities, interest and other income earned by the Fund, and projected investor flows based on historical trends and future expectations.

Furthermore, the credit quality of financial assets is managed by EMCF 1 using Standard & Poor’s rating categories or equivalent, in accordance with the investment mandate of EMCF 1. The exposure in each credit rating category is monitored on a daily basis. This review process allows assessment of potential losses as a result of risks and the undertaking of corrective actions. The investment managers have undertaken to restrict the asset portfolio of the underlying funds to securities, deposits or obligations with a Standard & Poor’s or equivalent ‘BBB’ fund credit quality rating or higher.

Financial Report

Our performance

Directors’ Report

Operating and Financial Review

141

The investment managers of the underlying Funds invested by EMCF 1 enter into a variety of derivative financial instruments such as credit default swaps and foreign exchange forwards in the normal course of business in order to mitigate credit risk exposure and to hedge fluctuations in foreign exchange rates.

Details of the assets held by the underlying Funds are set out below:

	AAA TO	A+ TO	BBB+ TO
	AA-	A-	BBB-	TOTAL
30 JUNE 2022	$M	$M	$M	$M
Corporate bonds and money market securities	66.4	40.5	7.4	114.3
Mortgage and asset backed securities	70.2	–	–	70.2
Cash	1.8	–	–	1.8
	138.4	40.5	7.4	186.3

30 JUNE 2021 Corporate bonds and money market securities Mortgage and asset backed securities Cash	AAA TO AA- $M A+ TO A- $M BBB+ TO BBB- $M TOTAL $M
	33.1 25.9 6.6 65.6 80.0 – – 80.0 18.3 – – 18.3
	131.4 25.9 6.6 163.9

The table below demonstrates the impact of a 1% change in the fair value of the underlying assets of EMCF 1, due to market price movements, based on the values at reporting date.

	2022	2021
	$M	$M
1% increase	1.9	1.6
1% decrease	(1.9)	(1.6)

The actual impact of a change in the fair value of the underlying assets of EMCF 1 on the consolidated profit before tax is dependent on the performance of the Fund relative to the benchmark index. If the Fund’s performance is below the benchmark return, then the consolidated entity will be obliged to make payments to the investor. Conversely, if the Fund’s performance is higher than the benchmark, then the benefit of the higher performance accrues to the consolidated entity.

In addition, any variance between the consolidated entity’s current assets EMCF 1 balance and the consolidated entity’s current liabilities EMCF 1 balance would be reflected in profit and loss.

Accounting policies

The EMCF product, consisting of EMCF 1, is consolidated as the consolidated entity is exposed to variable returns and has the power to affect those returns. The swap agreements result in the benchmark rate of return being paid to the unitholders in the Fund. The swap agreements are inter-company transactions between a subsidiary of the Company and the Funds and are eliminated on consolidation.

Assets and liabilities of EMCF 1 are disclosed separately on the face of the Consolidated Statement of Financial Position as structured product assets and structured product liabilities. The benchmark return generated by EMCF 1 and distributions to unitholders are disclosed in Section 1-3 Expenses as distributions and expenses related to structured products.

The financial assets represented by the structured products assets balance are accounted for in accordance with the underlying accounting policies of the consolidated entity. These consist of investments that are mandatorily classified at FVTPL.

Perpetual Annual Report 2022

142

Financial Report

Notes to and forming part of the financial statements

for the year ended 30 June 2022

5-2 Parent entity disclosures

As at, and throughout, the financial year ended 30 June 2022 the parent entity of the consolidated entity was Perpetual Limited.

2022	2021
$M	$M
Result of the parent entity Proft after tax for theyear 61.6	96.7
Total comprehensive income for the year 61.6	96.7
Financial position of the parent entity at year end Current assets 523.5	394.4
Total assets 1,644.4	1,536.6
Current liabilities 438.3	336.0
Total liabilities 749.7	572.4
Total equity of the parent entity comprising: Share capital 817.7	815.3
Reserves 7.3	24.9
Retained earnings 69.7	124.0
Total equity 894.7	964.2

Parent entity contingencies

The Directors are of the opinion that provisions are not required in respect of any parent entity contingencies, as it is not probable that a future sacrifice of economic benefits will be required or the amount is not capable of reliable measurement.

	2022	2021
	$M	$M
Uncalled capital of the controlled entities	12.5	12.5

In the ordinary course of business, contingent liabilities exist in respect of claims and potential claims against the parent entity. The parent entity does not consider that the outcome of any such claims known to exist at the date of this report, either individually or in aggregate, are likely to have a material effect on its operations or financial position.

Parent entity guarantees

In November 2020, the Company provided a financial guarantee to secure a syndicated banking facility (refer to Section 3-2). The bank facility covers a period of three years.

No liability was recognised by the Company in relation to this guarantee as the fair value of this guarantee is considered to be immaterial. The Company does not expect the financial guarantee to be called upon.

Financial Report

Our performance

Directors’ Report

Operating and Financial Review

143

5-3 Controlled entities

5-3 Controlled entities

NAME OF COMPANY

BENEFICIAL INTEREST
COUNTRY OF
INCORPORATION AND
PRINCIPAL PLACE OF
BUSINESS
2022
%
2021
%

Perpetual Limited5
Controlled Entities1
Australian Trustees Limited5
Commonwealth Trustees Pty Ltd2
Fordham Business Advisors Pty Ltd2
Perpetual Acquisition Company Ltd5
Perpetual Assets Pty Ltd2
Perpetual Australia Pty Limited2,5
Perpetual Digital Holdings Pty Limited2
Perpetual Investment Management Limited
Perpetual Mortgage Services Pty Limited2
Perpetual Services Pty Limited2
Perpetual Superannuation Limited
Perpetual Tax and Accounting Pty Ltd2
Perpetual Trust Services Limited
Perpetual Trustee Company (Canberra) Limited5
Perpetual Trustee Company Limited4
Perpetual Trustees Consolidated Limited5
Perpetual Trustees Queensland Limited5
Perpetual Trustees Victoria Limited5
Perpetual Trustees WA Ltd5
Queensland Trustees Pty Ltd2
Trillium ESG Global High Conviction Equity Fund
Perpetual Capital Accumulation Portfolio
Perpetual Exact Market Cash Fund
Perpetual Exact Market Cash Fund No. 2
Perpetual Nominees Limited
Barrow Hanley US ESG Value
BHMS All Country World Ex-U.S. Value
BHMS Credit
BHMS Global Value Dividend
BHMS Concentrated U.S. Opportunities
BHMS US Opportunistic Value DLCV, SCV
Trillium ESG Global Equity Fund
BHMS Diversifed Small Cap Value Strategy

100
100
Australia
100
100
Australia
100
100
Australia
100
100
Australia
100
100
Australia
100
100
Australia
100
100
Australia
100
100
Australia
100
100
Australia
100
100
Australia
100
100
Australia
100
100
Australia
100
100
Australia
100
100
Australia
100
100
Australia
100
100
Australia
100
100
Australia
100
100
Australia
100
100
Australia
100
100
Australia
100
100
Australia
–
100
Australia
100
100
Australia
–
100
Australia
100
100
Australia
100
100
USA
100
100
USA
100
100
USA
–
100
USA
100
100
USA
100
100
USA
52
58
USA
100
–
USA

Perpetual Annual Report 2022

144

Financial Report

Notes to and forming part of the financial statements

for the year ended 30 June 2022

5-3 Controlled entities continued

5-3 Controlled entitiescontinued
NAME OF COMPANY	BENEFICIAL INTEREST COUNTRY OF INCORPORATION AND PRINCIPAL PLACE OF BUSINESS 2022 % 2021 %
Entities under the control of Perpetual Acquisition Company Limited The Trust Company Limited Fintuition Pty Limited2 Fintuition Institute Pty Limited2 Skinner Macarounas Pty Limited2 Perpetual US Holding Company, Inc PPT Asset Management UK Limited Trillium Asset Management UK Limited Perpetual Europe Holding Company B.V Jacaranda Financial Planning Pty Ltd6 Perpetual Asia – Hong Kong Ltd10 PPT Finance UK Ltd11	100 100 Australia 100 100 Australia 100 100 Australia 100 100 Australia 100 100 USA 100 100 UK 100 100 UK 100 100 Netherlands 100 – Australia 100 – Hong Kong 100 – UK
Entities under the control of PPT Finance UK Ltd Barrow Hanley Concentrated Emerging Markets Fund Trillium ESG Global Conviction Fund	100 – Ireland 100 – Ireland
Entities under the control of Perpetual Digital Holdings Pty Limited Perpetual Digital Pty Ltd2 Perpetual Roundtables Pty Limited2 Perpetual Wholesale Fiduciary Services Pty Ltd Laminar Capital Pty Ltd7	100 100 Australia 100 100 Australia 100 100 Australia 100 – Australia
Entities under the control of Laminar Capital Pty Ltd Easterly Asset Management Pty Ltd8 Laminar Advisory Pty Ltd9	100 – Australia 100 – Australia
Entities under the control of Perpetual Trustee Company Limited Perpetual Corporate Trust Limited Perpetual Custodians Ltd P.T. Limited	100 100 Australia 100 100 Australia 100 100 Australia
Entities under the control of P.T. Limited Perpetrust Nominees Proprietary Limited2	100 100 Australia
Entities under the control of The Trust Company Limited Perpetual (Asia Holdings) Pte. Ltd. The Trust Company (Australia) Limited The Trust Company (UTCCL) Limited Perpetual CT (Asia) Limited	100 100 Singapore 100 100 Australia 100 100 Australia 100 100 Hong Kong
Entities under the control of The Trust Company (Australia) Limited The Trust Company (Nominees) Limited The Trust Company (PTAL) Limited The Trust Company (RE Services) Limited	100 100 Australia 100 100 Australia 100 100 Australia

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Operating and Financial Review

145

NAME OF COMPANY	BENEFICIAL INTEREST COUNTRY OF INCORPORATION AND PRINCIPAL PLACE OF BUSINESS 2022 % 2021 %
Entities under the control of Perpetual US Holding Company, Inc Trillium Asset Management Group, LLC Perpetual US Services, LLC Perpetual US TDC, LLC BHMS, LLC BHMS Investment GP, LLC	100 100 USA 100 100 USA 100 100 USA 74 74 USA 100 100 USA
Entities under the control of Trillium Asset Management Group, LLC Trillium Asset Management, LLC Trillium Impact GP, LLC	100 100 USA 100 100 USA
Entities under the control of Perpetual US TDC, LLC Barrow Hanley Concentrated Emerging Markets ESG Opportunities Fund Barrow Hanley Emerging Markets Value Fund	50 61 USA 100 – USA
Entities under the control of Perpetual Europe Holding Company B.V Perpetual Netherlands B.V	100 100 Netherlands
Entities under the control of Perpetual (Asia Holdings) Pte. Ltd. Perpetual (Asia) Limited	100 100 Singapore
Entities under the control of The Trust Company (RE Services) Limited The Trust Company (Sydney Airport) Limited	100 100 Australia
Associates Loan RQ Ltd3	26 26 Australia

Entities in bold are directly owned by Perpetual Limited.
A small proprietary company as defined by the Corporations Act 2001 and is not required to be audited for statutory purposes.
The carrying amount of this investment is $nil (2021: $nil).
Perpetual Trustee Company Limited has a branch operation in New Zealand known as Perpetual Trustee Company Limited (New Zealand branch).
Company is a party to the Deed of Cross Guarantee as noted in Section 5-4.
Jacaranda Financial Planning was acquired in August 2021.
Laminar Capital Pty Ltd was acquired in October 2021.
Easterly Asset Management was acquired in October 2021.
Laminar Advisory Pty Ltd was acquired in October 2021.
Perpetual Asia – Hong Kong Ltd was incorporated in November 2021.
PPT Finance UK Ltd was incorporated in March 2022.

Perpetual Annual Report 2022

146

Financial Report Notes to and forming part of the financial statements

for the year ended 30 June 2022

5-4 Deed of cross guarantee

Perpetual Limited and certain wholly owned subsidiaries listed below (collectively, ‘the Closed Group’) have entered into a Deed of Cross Guarantee (‘the Deed’) effective 29 June 2017. The effect of the Deed is that Perpetual Limited has guaranteed to pay any deficiency in the event of a winding up of any of the subsidiaries under certain provisions of the Corporations Act 2001 . The subsidiaries have also given a similar guarantee in the event that Perpetual Limited is wound up.

Pursuant to ASIC Corporations (wholly owned companies) Instrument 2016/785 (‘Instrument’), the wholly owned subsidiaries noted below within the Closed Group are relieved from the Corporations Act 2001 requirements for preparation, audit and lodgement of their financial reports.

The subsidiaries to the Deed forming the Closed Group are:

Perpetual Trustees Consolidated Limited
Perpetual Trustee Company (Canberra) Limited
Perpetual Trustees Victoria Limited
Perpetual Trustees Queensland Limited
Perpetual Trustees WA Limited
Perpetual Australia Pty Limited
Perpetual Acquisition Company Limited
Australian Trustees Limited.

A summarised Consolidated Statement of Profit or Loss and Other Comprehensive Income and Consolidated Statement of Financial Position comprising the Closed Group as at 30 June 2022 are set out below.

	YEAR ENDED	YEAR ENDED
	30 JUNE	30 JUNE
	2022	2021
	$M	$M
Revenue	97.3	136.1
Expenses	(42.9)	(37.1)
Financing costs	(8.1)	(5.6)
Net proft before tax	46.3	93.4
Income tax beneft	14.7	2.5
Net proft after tax	61.0	95.9
Other comprehensive income,net of income tax	–	–
Total comprehensive income	61.0	95.9
Total comprehensive income attributable to:
Equity holders of the Company	61.0	95.9

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Directors’ Report

Operating and Financial Review

147

2022	2021
$M	$M
Current assets Cash and cash equivalents 65.9	55.5
Receivables 278.4	176.6
Current tax assets 4.1	–
Structured Products – EMCF assets 186.3	163.9
Prepayments 5.8	11.0
Total current assets 540.5	407.0
Non-current assets Other fnancial assets 1,083.9	1,044.3
Property, plant and equipment 53.3	62.6
Intangibles –	0.1
Deferred tax assets 38.9	32.7
Other assets 0.9	–
Total non-current assets 1,177.0	1,139.7
Total assets 1,717.5	1,546.7
Current liabilities Payables 288.7	153.3
Structured Products – EMCF liabilities 187.7	163.3
Current tax liabilities –	5.3
Employee benefts 69.3	64.1
Lease liabilities 11.7	10.4
Provisions –	1.7
Total current liabilities 557.4	398.1
Non-current liabilities Borrowings 258.4	166.0
Deferred tax liabilities –	1.6
Employee benefts 17.0	13.7
Lease liabilities 37.9	50.3
Provisions 4.6	4.8
Total non-current liabilities 317.9	236.4
Total liabilities 875.3	634.5
Net assets 842.2	912.2
Equity Contributed equity 817.7	815.3
Reserves 7.3	24.9
Retained earnings 17.2	72.0
Total equity 842.2	912.2

Perpetual Annual Report 2022

148

Financial Report

Notes to and forming part of the financial statements

for the year ended 30 June 2022

5-5 Unconsolidated structured entities

Perpetual Limited and its subsidiaries have interests in various structured entities that are not consolidated. 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, such as when any voting rights relate to administrative tasks only and the relevant activities are directed by means of contractual arrangements.

Perpetual has an interest in a structured entity when the Company has a contractual or non-contractual involvement that exposes it to variable returns from the performance of the entity. The Company’s interest includes investments held in securities or units issued by these entities and fees earned from management of the assets within these entities.

Information on the Company’s interests in unconsolidated structured entities as at 30 June is as follows:

		MAXIMUM
	CARRYING	EXPOSURE
	AMOUNT	TO LOSS1
INVESTMENT FUNDS – COMPANY MANAGED	$M	$M
Year ended 30 June 2022
Statement of Financial Position line item
Other fnancial assets – non-current	96.7	98.3
Year ended 30 June 2021
Statement of Financial Position line item
Other fnancial assets – non-current	98.9	85.2

The maximum exposure to loss is the maximum loss that could be recorded through profit and loss as a result of the involvement with these entities.

Company managed investment funds

The Company manages investment funds through asset management subsidiaries. Control over these managed investment funds may exist since the Company has power over the activities of the fund. However, these funds have not been consolidated because the Company does not have the ability to affect the level of returns and is not exposed to significant variability in returns from the funds. The Company earns management fees from the management of these investment funds which are commensurate with the services provided and are reported in revenue from the provision of services. Management fees are generally based on the value of the assets under management. Therefore, the fees earned are impacted by the composition of the assets under management and fluctuations in financial markets. The revenue earned is included in revenue from the provision of services in Section 1-2.

Investment funds are investment vehicles that consist of a pool of funds collected from several investors for the purpose of investing in securities such as money market instruments, debt securities, equity securities and other similar assets. For all investment funds, the Company’s maximum exposure to loss is equivalent to the cost of the investment in the fund. Investment funds are generally financed through the issuance of fund units.

5-6 Share-based payments

i. Employee share purchase plans

(a) Long-term Incentive Plan (LTI)

The LTI plan was introduced for the purpose of making future long-term incentive grants to eligible employees.

(b) One Perpetual Share Plan (OPSP)

The OPSP awards eligible employees with annual grants of up to $1,000 worth of Perpetual shares subject to the Company meeting its net profit after tax target. Shares granted under the OPSP cannot be sold or transferred until the earlier of three years from the date the shares are allocated or cessation of employment. Employees who are granted shares have full dividend and voting rights during this time.

For financial accounting purposes, shares granted under the OPSP are deemed to vest immediately because there is no risk of forfeiture. Accordingly, the fair value of the grant is recognised as an expense over the performance period with the corresponding entry directly in equity.

(c) Details of the movement in employee shares

All shares granted under the LTI and OPSP plans in the 2022 financial year were issued at market price. Dividends on employee shares are either received directly by the employees or held in the share plan bank account depending on the likelihood of the shares vesting.

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Directors’ Report

Operating and Financial Review

149

During the year, $13,531,639 (2021: $12,216,989) of amortisation relating to shares, performance rights and share rights was recognised as an expense with the corresponding entry directly in equity.

Shares are granted to eligible employees under the LTI plan. The number of shares granted is determined by dividing the value of the grant by the VWAP of Perpetual shares traded on the ASX in the five business days up to and including the grant date.

The following table illustrates the movement in employee shares during the financial year:

	OPENING		SHARES	SHARES			CLOSING
	BALANCE	VESTED	PURCHASED	ISSUED	FORFEITED	GRANTED	BALANCE AT
NUMBER	1 JULY	SHARES	ON MARKET	ON MARKET	SHARES	SHARES	30 JUNE
2022	615,080	(366,205)	402,562	–	(204,479)	204,479	651,437
2021	673,858	(254,406)	195,628	–	(235,557)	235,557	615,080

ii. Rights

During the year, the Company granted $11,057,375 (30 June 2021: $8,919,923) of Share Rights and Performance Rights in accordance with the LTI plan.

Share Rights are granted to Executives under the Variable Incentive Plan. The number of Share Rights granted is determined by dividing the value of the grant by the VWAP of Perpetual shares traded on the ASX in the five business days up to and including the grant date.

Performance Rights are granted to eligible employees under the LTI Plan. The number of Performance Rights granted is determined by dividing the value of the LTI grant by the VWAP of Perpetual shares traded on the ASX in the five business days up to and including the grant date, discounted for the non-payment of dividends during the performance period, as calculated by an independent external adviser.

Performance Rights and Share Rights do not receive dividends or have voting rights until they have vested and have been converted into Perpetual shares.

==> picture [518 x 343] intentionally omitted <==

----- Start of picture text -----

30 JUNE 2022 MOVEMENT IN NUMBER OF RIGHTS GRANTED
TSR HURDLE OUTSTANDING
GRANT VEST EXPIRY OR NON-TSR AT 30 JUNE
DATE DATE DATE HURDLE ISSUE PRICE 1 JULY 2021 GRANTED FORFEITED VESTED 2022
Oct 2016 Oct 2019 Sep 2031 Non TSR $39.40 1,776 – – (1,776) –
Sep 2017 Sep 2019 Sep 2032 Non TSR $46.93 21,386 – – (21,386) –
Oct 2017 Oct 2020 Sep 2032 Non TSR $44.64 6,013 – – (3,024) 2,989
Jul 2018 Sep 2021 Sep 2034 Non TSR $28.70 44,864 – – – 44,864
Jul 2018 Sep 2022 Sep 2034 TSR $8.22 5,276 – – – 5,276
Jul 2018 Oct 2022 Oct 2034 Non TSR $31.53 11,131 – – – 11,131
Jul 2018 Sep 2023 Sep 2034 TSR $8.40 5,275 – – – 5,275
Sep 2018 Sep 2020 Sep 2033 Non TSR $37.03 30,951 – – – 30,951
Oct 2018 Oct 2021 Oct 2033 Non TSR $34.97 246,288 – (2,593) (103,279) 140,416
Jul 2019 Sep 2023 Sep 2035 TSR $12.30 52,034 – – – 52,034
Jul 2019 Sep 2024 Sep 2035 TSR $12.63 52,031 – – – 52,031
Oct 2019 Oct 2021 Oct 2034 Non TSR $33.64 13,811 – (1,039) (12,772) –
Oct 2019 Oct 2022 Oct 2034 Non TSR $31.53 171,487 – (11,303) (2,418) 157,766
Oct 2020 Oct 2023 Oct 2030 Non TSR $23.82 305,280 – (18,992) (1,376) 284,912
Jul 2020 Sep 2023 N/A [1] Non TSR $33.72 – 56,701 – – 56,701
Jul 2020 Sep 2024 N/A [1] Non TSR $19.93 – 28,349 – – 28,349
Jul 2020 Sep 2025 N/A [1] Non TSR $16.88 – 28,349 – – 28,349
Oct 2021 Oct 2024 N/A [1] Non TSR $32.66 – 243,177 (5,967) – 237,210
Dec 2021 Dec 2024 N/A [1] Non TSR $34.43 – 4,646 – – 4,646
967,603 361,222 (39,894) (146,031) 1,142,900
----- End of picture text -----

Rights either vest or are forfeited on the vesting date, hence there is no expiry date.

Perpetual Annual Report 2022

150

Financial Report Notes to and forming part of the financial statements

for the year ended 30 June 2022

5-6 Share-based payments continued

ii. Rights continued

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30 JUNE 2021 MOVEMENT IN NUMBER OF RIGHTS GRANTED
----- End of picture text -----

			TSR HURDLE						OUTSTAND
	VEST		OR NON-TSR						-ING AT
GRANT DATE	DATE	EXPIRY DATE	HURDLE	ISSUE PRICE	1 JULY 2020	GRANTED	FORFEITED	VESTED	30 JUNE 2021
Oct 2016	Oct 2019	Sep 2031	Non TSR	$39.40	4,059	–	–	(2,283)	1,776
Sep 2017	Sep 2019	Sep 2032	Non TSR	$46.93	21,386	–	–	–	21,386
Oct 2017	Oct 2020	Sep 2032	Non TSR	$44.64	99,981	–	(336)	(93,632)	6,013
Jul 2018	Oct 2020	Oct 2034	Non TSR	$35.76	3,404	–	–	(3,404)	–
Jul 2018	Sep 2021	Sep 2034	Non TSR	$28.70	44,864	–	–	–	44,864
Jul 2018	Oct 2021	Oct 2034	Non TSR	$33.64	2,474	–	(835)	(1,639)	–
Jul 2018	Sep 2022	Sep 2034	TSR	$8.22	5,276	–	–	–	5,276
Jul 2018	Oct 2022	Oct 2034	Non TSR	$31.53	16,411	–	(2,946)	(2,334)	11,131
Jul 2018	Sep 2023	Sep 2034	TSR	$8.40	5,275	–	–	–	5,275
Sep 2018	Sep 2020	Sep 2033	Non TSR	$37.03	30,951	–	–	–	30,951
Oct 2018	Oct 2020	Sep 2033	Non TSR	$37.29	1,417	–	–	(1,417)	–
Oct 2018	Oct 2021	Oct 2033	Non TSR	$34.97	261,311	–	(5,391)	(9,632)	246,288
Jul 2019	Sep 2023	Sep 2035	TSR	$12.30	–	52,034	–	–	52,034
Jul 2019	Sep 2024	Sep 2035	TSR	$12.63	–	52,031	–	–	52,031
Oct 2019	Oct 2021	Oct 2034	Non TSR	$33.64	15,720	–	(1,782)	(127)	13,811
Oct 2019	Oct 2022	Oct 2034	Non TSR	$31.53	190,185	–	(12,540)	(6,158)	171,487
Oct 2020	Oct 2023	Oct 2030	Non TSR	$23.82	–	320,070	(14,394)	(396)	305,280
					702,714	424,135	(38,224)	(121,022)	967,603

The fair value of services received in return for Performance Rights and Share Rights granted is based on the fair value of rights granted, measured using a face value approach for scorecard performance conditions, Monte Carlo simulation for TSR performance conditions and the Black Scholes option pricing formula for Share Rights and EPS performance conditions, with the following inputs:

	VALUATION	VALUATION	VALUATION	VALUATION	VALUATION	VALUATION	VALUATION	VALUATION	VALUATION
	DATE	DATE	DATE	DATE	DATE	DATE	DATE	DATE	DATE
	1 OCT 2016	1 SEP 2017	1 OCT 2017	1 SEPT 2018	1 OCT 2018	1 OCT 2018	1 OCT 2018	1 SEP 2019	1 SEP 2019
Performance period	3 years	2 years	3 years	2 years	1 year	2 years	3 years	1 year	2 years
Share price ($)	46.28	54.70	51.94	43.89	42.40	42.40	42.40	35.55	35.55
Dividend yield (%)	5.5	5.1	5.2	6.4	6.6	6.6	6.6	6.5	6.7
Expected volatility (%)	N/A	25	N/A	20	N/A	N/A	N/A	30	30
Risk free interest rate (%)	N/A	N/A	N/A	N/A	1.93	2.00	2.07	0.70	0.70

	VALUATION	VALUATION	VALUATION	VALUATION	VALUATION	VALUATION	VALUATION	VALUATION	VALUATION
	DATE	DATE	DATE	DATE	DATE	DATE	DATE	DATE	DATE
	1 SEP 2019	1 OCT 2019	1 OCT 2019	1 OCT 2019	1 SEP 2020	1 SEP 2020	1 OCT 2020	1 OCT 2020	1 OCT 2020
Performance period	3 years	1 year	2 years	3 years	3 years	4 years	1 year	2 years	3 years
Share price ($)	35.55	37.85	37.85	37.85	30.62	30.62	28.40	28.40	28.40
Dividend yield (%)	6.7	5.7	5.9	6.1	5.5	5.5	5.0	5.5	5.9
Expected volatility (%)	30	N/A	N/A	N/A	40	40	N/A	N/A	N/A
Risk free interest rate (%)	0.70	N/A	N/A	N/A	0.27	0.39	N/A	N/A	N/A

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	VALUATION	VALUATION	VALUATION
	DATE	DATE	DATE
	1 SEP 2021	1 SEP 2021	1 SEP 2021
Performance period	2 years	3 years	4 years
Share price ($)	41.66	41.66	41.66
Dividend yield (%)	4.8	5.0	5.0
Expected volatility (%)	30	30	30
Risk free interest rate (%)	0.01	0.44	0.44

Accounting policies

Employee share purchase plans

Share incentive programs allow employees to acquire shares in the Company. The fair value of shares and/or rights granted under these programs is recognised as an employee expense with a corresponding increase in equity. Fair value is measured at grant date and amortised over the period during which employees become unconditionally entitled to the shares.

The fair value of the rights granted is measured using a binomial model, taking into account the terms and conditions upon which the rights were granted. The amount recognised as an expense is adjusted to reflect the actual number of rights that vest except where forfeiture is due to share prices not achieving their threshold for vesting.

Deferred staff incentives

The Company grants certain employees shares under long-term incentive, short-term incentive and retention plans. Under these plans, shares vest to employees over relevant vesting periods. To satisfy the long-term incentives granted, the Company purchases or issues shares under the LTI Plan.

The fair value of the shares granted is measured by the share price adjusted for the terms and conditions upon which the shares were granted. This fair value is amortised on a straight-line basis over the applicable performance and vesting period.

The consolidated entity makes estimates of the number of shares that are expected to vest. Where appropriate, revised estimates are reflected in profit or loss with the corresponding adjustment to the equity compensation reserve. Where shares containing a market linked hurdle do not vest, due to total shareholder return not achieving the threshold for vesting, an adjustment is made to retained earnings and equity compensation reserve.

Rights

Performance Rights and Share Rights are issued for the benefit of eligible Perpetual employees pursuant to the LTI Plan.

Unlike Perpetual’s other employee share plans, there will be no treasury shares issued to employees at the rights grant date.

Over the vesting period of the rights, an equity remuneration expense will be amortised to the equity compensation reserve based on the fair value of the rights at the grant date.

On vesting, the intention is to settle the rights with available treasury shares. A fair value adjustment between contributed equity and treasury shares will be recognised to revalue the recycled shares to the fair value of the rights at the vesting date.

5-7 Key management personnel and related parties

Total compensation of key management personnel

2022	2021
$	$
Short-term 9,159,692	7,485,441
Post-employment 292,886	259,017
Share-based 2,047,581	1,858,563
Other long-term 77,501	46,143
Total 11,577,660	9,649,164

Perpetual Annual Report 2022

152

Financial Report

Notes to and forming part of the financial statements

for the year ended 30 June 2022

5-7 Key management personnel and related parties continued

Related party disclosures

Executives have not entered into material contracts with the Company or a member of the consolidated entity since the end of the previous financial year and there were no material contracts involving key management personnel’s interests existing at year end. Perpetual services and products, including financial advice by Perpetual Private, are made available to Directors and KMP on normal commercial terms consistent with other employees and clients.

Controlled entities and associates

The consolidated entity has a related party relationship with its key management personnel (see Remuneration Report).

Business transactions with related parties are on normal commercial terms and conditions no more favourable than those available to other parties unless otherwise stated.

5-8 Auditor’s remuneration

2022	2021
$	$
Audit and review services Auditors of the Group – KPMG Australia Audit and review of fnancial statements – Group 852,443 Audit and review of fnancial statements – controlled entities 205,961 Audit and review of fnancial statements – Perpetual Funds1 1,992,612 Audit and review of fnancial statements – Administrator or Trustee2 396,797	685,872 173,130 2,046,181 352,544
3,447,813	3,257,727
Overseas KPMG Firms Audit and review of fnancial statements – Group 194,513 Audit and review of fnancial statements – controlled entities 304,515	178,771 188,412
Total audit and review services 3,946,841	3,624,910
Assurance Services Auditors of the Group – KPMG Australia Regulatory assurance services 255,426 Other assurance services 470,178	250,175 463,509
725,604	713,684
Overseas KPMG Firms Regulatory assurance services 21,160 Other assurance services 23,164	– 43,443
Total Assurance Services 769,928	757,127
Other Services3 Auditors of the Group – KPMG Australia Advisory Services 153,558 Other non-assurance services 35,755	43,988 30,889
Total Other Services 189,313	74,877
4,906,082	4,456,914

These fees are incurred by the consolidated entity on behalf of managed funds and superannuation funds for which Perpetual Investment Management Limited and Perpetual Superannuation Limited act as responsible entity or trustee for and are recovered from the funds via management fees.
These fees are incurred by the consolidated entity on behalf of external funds for which the consolidated entity act as administrator, responsible entity or trustee for and are recovered from the funds via management fees.
Other services primarily relate to the provision of risk and controls gap analysis and agreed upon procedures.

Non-audit services paid to KPMG are in accordance with the Company’s auditor independence policy as outlined in Perpetual’s Corporate Responsibility Statement.

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Operating and Financial Review

153

5-9 Subsequent events

A final dividend of 97 cents per share fully franked was declared on 25 August 2022 and is to be paid on 30 September 2022.

On 25 August, Perpetual announced that it has entered into a binding Scheme Implementation Deed (‘SID’) with Pendal Group (‘Pendal’) (ASX:PDL) under which Perpetual will acquire 100% of shares in Pendal by way of a Scheme of Arrangement (‘the Acquisition’).

The Scheme is subject to customary conditions and approvals including court, regulatory and Pendal shareholder approval as well as obtaining the appropriate number of Pendal client consents.

The acquisition is currently expected to close by late calendar year 2022 or early calendar year 2023, subject to requisite shareholder and regulatory approvals.

a multi-currency redrawable loan facility with a maximum commitment of A$175 million or equivalent and a term of three years expiring in November 2025 (Facility Core 1);
a multi-currency term loan facility with a maximum commitment of USD128 million or equivalent and a term of four years expiring in November 2026 (Facility Core 2); and
a redrawable Letter of Credit facility with a maximum commitment of A$160 million and a term of three years expiring in November 2025 (Facility Core 3).

The acquisition facilities will consist of:

a multi-currency redrawable loan facility with a maximum commitment of A$115 million and a term of three years expiring in November 2025 (Facility Acquisition 1);
a UK pound term loan facility with a maximum commitment of GBP115 million and a term of three years expiring in November 2025 (Facility Acquisition 2); and
a multi-currency term loan facility with a maximum commitment of USD45 million and a term of four years expiring in November 2026 (Facility Acquisition 3).

The bridge loan facility will have a maximum commitment of A$400 million and a term of two years expiring in November 2024 (Bridge Facility).

Interest expense on the new facilities other than Facility Core 3 will be based on the relevant floating rate benchmark plus a margin. Interest expense on Facility Core 3 is at a flat rate.

As previously indicated, Perpetual will not be raising equity to fund any portion of the cash consideration.

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154

Financial Report

Notes to and forming part of the financial statements

for the year ended 30 June 2022

Section 6 Basis of preparation

This section sets out Perpetual’s accounting policies that relate to the financial statements as a whole. Where an accounting policy is specific to a single note, the policy is described in the note to which it relates. This section also shows new accounting standards, amendments and interpretations, and whether they are effective in 2022 or later years. We explain how these changes are expected to impact the financial position and performance of Perpetual.

6-1 Reporting entity

Perpetual Limited (‘the Company’) is domiciled in Australia. The consolidated financial report of the Company as at and for the year ended 30 June 2022 comprises the Company and its controlled entities (together referred to as ‘the consolidated entity’) and the consolidated entity’s interests in associates.

Perpetual is a for-profit entity and primarily involved in portfolio management, financial planning, trustee, responsible entity and compliance services, executor services, investment administration and custody services.

The financial report was authorised for issue by the Directors on 25 August 2022.

The Company is a public company listed on the Australian Securities Exchange (code: PPT), incorporated in Australia and operating in Australia, United States, United Kingdom, the Netherlands, Singapore and Hong Kong.

The consolidated annual report for the consolidated entity as at and for the year ended 30 June 2022 is available at perpetual.com.au.

6-2 Basis of preparation

i. Statement of compliance

The financial report is a general purpose financial report prepared in accordance with Australian Accounting Standards adopted by the Australian Accounting Standards Board (AASB) and the Corporations Act 2001 .

The financial report of the consolidated entity also complies with International Financial Reporting Standards (IFRS) adopted by the International Accounting Standards Board (IASB).

ii. Basis of preparation

The consolidated financial statements have been prepared on a historical cost basis, except for financial assets which are measured at fair value.

The consolidated financial statements are presented in Australian dollars, which is the functional currency of the majority of the consolidated entity.

The Company is of a kind referred to in ASIC Corporations Instrument 2016/191 dated 1 April 2016 and in accordance with that Instrument, all financial information presented in Australian dollars has been rounded to the nearest one hundred thousand dollars, unless otherwise stated.

Where necessary, comparative information has been restated to conform to changes in presentation in the current year.

Financial Report

Our performance

Directors’ Report

Operating and Financial Review

155

Use of judgements and estimates

The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised prospectively.

Management has evaluated whether there were any additional areas of significant judgment or estimation uncertainty, assessed the impact of market inputs and variables potentially impacted by prevailing conditions on the carrying values of its assets and liabilities, and considered the impact on the consolidated entity’s financial statement disclosures. The consolidated entity’s revenues have a high degree of exposure to market volatility which has the potential to lead to a material financial impact. The US operations are similarly exposed to market movements due to the nature of the business. Whilst this has been factored into the preparation of the financial report, the accounting policies and methodologies have been applied on a consistent basis throughout the financial year. The Directors and management continue to closely monitor developments with a focus on potential financial and operational impacts as developments arise.

Significant areas of estimation, uncertainty and critical judgements in applying accounting policies are described below:

(a) Judgements

Information about critical judgements in applying accounting policies in accordance with Australian Accounting Standard AASB 10 Consolidated Financial Statements is included in Section 5-3 Controlled entities.

(b) Assumptions and estimation uncertainties

Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment within the year ended 30 June 2022 are included in the following notes:

Section 1-2 Revenue
Section 1-3 Expenses
Section 1-4 Income taxes
Section 2-1 Business combinations
Section 2-5 Intangibles
Section 2-6 Provisions
Section 2-7 Employee benefits
Section 2-8 Lease liabilities
Section 2-9 Accrued incentive compensation
Section 3-5 Commitments and contingencies
Section 4-1 Financial risk management
Section 5-1 Structured products assets and liabilities
Section 5-6 Share-based payments

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Financial Report

Notes to and forming part of the financial statements

for the year ended 30 June 2022

6-2 Basis of preparation continued

ii. Basis of preparation continued

(b) Assumptions and estimation uncertainties continued

The consolidated entity has considered the impact of prevailing conditions specifically with respect to the recognition of Expected Credit Losses (ECLs) on the consolidated entity’s Receivables (Section 2-2), Intangibles and the impairment of goodwill and other intangible assets (Section 2-5), Structured products assets and liabilities (Section 5-1), and Other financial assets (Section 2-3).

While there has been an increase in the estimation uncertainty and the application of further judgement within these areas, they are not considered to have had a material financial impact on these areas.

Measurement of fair values

A number of the consolidated entity’s accounting policies and disclosures require the measurement of fair values for both financial and non-financial assets and liabilities.

The consolidated entity has an established control framework with respect to the measurement of fair values. This includes overseeing all significant fair value measurements.

Significant unobservable inputs and valuation adjustments are regularly reviewed. If third party information, such as broker quotes or pricing services, is used to measure fair values, an assessment is made of the evidence obtained from the third parties. This is used to support the conclusion that such valuations meet the requirements of AASB 9 Financial Instruments , including the level in the fair value hierarchy in which such valuations should be classified.

Significant valuation issues are reported to the Audit, Risk and Compliance Committee.

When measuring the fair value of an asset or a liability, the consolidated entity uses market observable data as far as possible. Fair values are categorised into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows:

Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (ie as prices) or indirectly (ie derived from prices).
Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

If the inputs used to measure the fair value of an asset or a liability might be categorised in different levels of the fair value hierarchy, then the fair value measurement is categorised in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement.

The consolidated entity recognises transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred.

Further information about the assumptions made in measuring fair values is included in the following notes:

Section 2-7 Employee benefits
Section 2-9 Accrued incentive compensation
Section 4-1 Financial risk management
Section 5-1 Structured products assets and liabilities
Section 5-6 Share-based payments

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6-3 Other significant accounting policies

Significant accounting policies have been included in the relevant notes to which the policies relate. Other significant accounting policies are listed below:

i. Basis of consolidation

(a) Subsidiaries

Subsidiaries are entities controlled by the consolidated entity. The consolidated entity controls an entity when it 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 over the entity. The financial statements of subsidiaries are included in the consolidated financial statements from the date control commences until the date control ceases.

(b) Transactions eliminated on consolidation

Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are eliminated in preparing consolidated financial statements. Unrealised gains arising from transactions with associates are eliminated against the investment to the extent of the consolidated entity’s interest in the associate. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment. Gains and losses are recognised when the contributed assets are consumed or sold by the associates or, if not consumed or sold, when the consolidated entity’s interest in such entities is disposed of.

(c) Collateralised loan obligation (CLO)

Perpetual holds an equity interest in a collateralised loan obligation investment fund (the ‘Fund’) established to invest its assets primarily in the economic equity interests of multiple CLO transactions and warehouse facilities in connection therewith. The Fund is managed by Barrow Hanley Credit Management L.L.C (‘BH Credit’).

A significant judgement for Perpetual is whether the Group controls the Fund and is therefore required to consolidate the Fund in the results of the consolidated entity. Control is determined based on the consolidated entity’s assessment of decision making authority, rights held by other parties, remuneration and exposure to returns.

In assessing whether the consolidated entity controls the Fund it is necessary to consider whether the consolidated entity acts in capacity of principal or agent for the Fund. In doing so, the consolidated entity has assessed in combination, whether the kick-out rights of third-party investors into the Fund are substantive and the aggregate economic interest of the consolidated entity into the Fund. Based on our assessment, we have determined that the Fund does not require consolidation into the Group.

ii. Foreign currency

(a) Foreign currency transactions and balances

Foreign currency transactions are translated into the 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 year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the profit or loss.

Translation differences on financial assets and liabilities carried at fair value are reported as part of their fair value gain or loss. Translation differences on non-monetary financial assets and liabilities such as equities held at fair value through profit or loss are recognised in profit or loss as part of the fair value gain or loss.

(b) Foreign operations

The results and financial position of subsidiaries that have a functional currency different from the presentation currency are translated into Australian dollars as follows:

Assets and liabilities for each statement of financial position item presented are translated at the closing rate at the date of that statement of financial position.
Income and expenses for each statement of comprehensive income item are translated at average exchange rates (unless this is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions).

Foreign currency differences are recognised in other comprehensive income. When an international operation is disposed of, in part or in full, the relevant amount in the foreign currency translation reserve is transferred to profit or loss or to non-controlling interest as part of the profit or loss on disposal.

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Financial Report

Notes to and forming part of the financial statements

for the year ended 30 June 2022

6-3 Other significant accounting policies continued

iii. Payables

Payables are non-interest-bearing and are stated at amortised cost, with the exception of contingent consideration recognised in business combinations, which is recorded at fair value at the acquisition date.

Contingent consideration recognised in business combinations is classified as a financial liability and is subsequently remeasured to fair value with changes in fair value recognised in profit or loss.

iv. Impairment

(a) Financial assets (including receivables)

ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the difference between the present value of the cash flows due to the entity in accordance with the contract and the present value of cash flows that the consolidated entity expects to receive.

The consolidated entity has applied the simplified approach under AASB 9 to calculate expected credit losses for Receivables. Under this approach, expected credit losses are calculated based on the life of the instrument. During this process, the probability of the non-payment of the receivables is assessed using the single loss rate approach.

Impairment losses on financial assets measured at amortised cost are recognised in profit or loss and deducted from the gross carrying amount of the assets. When a subsequent event causes the amount of impairment loss to decrease, the decrease in impairment loss is reversed through profit or loss.

(b) Non-financial assets

The carrying amounts of the consolidated entity’s non-financial assets, other than deferred tax assets (see Section 1-4), are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated. For goodwill and intangible assets that have indefinite lives or that are not yet available for use, recoverable amount is estimated at each reporting date.

The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the ‘cash-generating unit’ or CGU).

Subject to an operating segment ceiling test, for the purposes of goodwill impairment testing, CGUs to which goodwill has been allocated are aggregated so that the level at which impairment is tested reflects the lowest level at which goodwill is monitored for internal reporting purposes.

The consolidated entity’s corporate assets do not generate separate cash inflows. If there is an indication that a corporate asset may be impaired, then the recoverable amount is determined for the CGU to which the corporate asset belongs.

An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. Impairment losses are recognised in the Statement of Comprehensive Income. Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the units and then, to reduce the carrying amount of the other assets in the unit on a pro rata basis.

An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognised in prior periods are assessed at each balance sheet date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

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v. Hedge accounting

A foreign currency exposure arises from a net investment in subsidiaries that have a different functional currency from that of the consolidated entity. The risk arises from the fluctuation in spot exchange rates between the functional currency of the subsidiaries and the consolidated entity’s functional currency, which causes the amount of the net investment to vary in the consolidated financial statements. This risk may have a significant impact on the consolidated entity’s financial statements. The consolidated entity’s policy is to hedge these exposures only when not doing so would be expected to have a significant impact on the regulatory capital ratios of the Company and its subsidiaries.

The hedged risk in the net investment hedge is the variability in the US dollar exchange rate against the Australian dollar that will result in a reduction in the carrying amount of the consolidated entity’s net investment in the subsidiaries. An economic relationship exists between the hedged net investment and hedging instrument due to the shared foreign currency risk exposure.

The consolidated entity uses foreign currency denominated debt as a hedging instrument. The consolidated entity assesses effectiveness by comparing past changes in the carrying amount of the debt that are attributable to a change in the spot rate with past changes in the investment in the foreign operation due to movement in the spot rate (the offset method).

The consolidated entity’s policy is to hedge the net investment only to the extent of the debt principal; therefore, the hedge ratio is established by aligning the principal amount of the debt with the carrying amount of the net investment that is designated. There are no sources of ineffectiveness because changes in the spot exchange rate are designated as the hedged risk.

6-4 Changes in significant accounting policies

Except as described below, the accounting policies applied in these financial statements are the same as those applied in the consolidated entity’s financial statements as at and for the year ended 30 June 2021.

(a) Software-as-a-Service (SaaS) arrangements

The International Financial Reporting Standards Interpretations Committee (IFRIC) has issued an agenda decision on configuration or customisation costs in a cloud computing arrangement (April 2021). This decision discusses whether configuration or customisation expenditure relating to SaaS arrangements can be recognised as an intangible asset and if not, over what time period the expenditure is expensed.

The Group’s accounting policy has historically been to capitalise all costs related to SaaS arrangements as intangible assets in the Statement of Financial Position. The adoption of the above agenda decisions has resulted in a reclassification of these intangible assets to either a prepaid asset in the Statement of Financial Position and/or recognition as an expense in the Statement of Comprehensive Income, impacting both the current and/or prior periods presented.

SaaS arrangements are service contracts providing the Group with the right to access the cloud provider’s application software over the contract period. As such the Group does not receive a software intangible asset at the contract commencement date. The Group does not have control over the software nor can it restrict others’ access to the benefits of the software.

Key judgements in applying the accounting policy

In applying the entity’s accounting policy, the Directors made the following key judgements that may have the most significant effect on the amounts recognised in the financial statements.

Determination whether configuration and customisation services are distinct from the SaaS access

Where the SaaS arrangement supplier provides both configuration and customisation services, judgement has been applied to determine whether each of these services are distinct or not from the underlying use of the SaaS application software. Distinct configuration and customisation costs are expensed as incurred. Non-distinct configuration and customisation costs are capitalised as a prepayment and expensed over the term of the SaaS contract.

The Group recognised $7.0m (2021: $0.2m) as prepayments in implementing SaaS arrangements.

Impact of change in accounting policy

As a result of adopting the new SaaS policy, associated costs previously capitalised and amortised as software assets but now considered to be SaaS arrangements have been identified.

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Financial Report

Notes to and forming part of the financial statements

for the year ended 30 June 2022

6-4 Changes in significant accounting policies continued

(a) Software-as-a-Service (SaaS) arrangements continued

Impact of change in accounting policy continued

The change has been applied retrospectively and impacted the financial statements of the consolidated entity as follows:

Consolidated Statement of Financial Position

	AS PREVIOUSLY
	REPORTED	ADJUSTMENTS	AS RESTATED
YEAR ENDED 30 JUNE 2021	$M	$M	$M
Intangible assets	870.6	(7.7)	862.9
Other assets	7.9	–	7.9
*Total non-current assets*	1,167.2	(7.7)	1,159.5
Total assets	1,624.6	(7.7)	1,616.9
Deferred tax liability	17.9	(2.3)	15.6
*Total non-current liabilities*	350.9	(2.3)	348.6
Total liabilities	712.1	(2.3)	709.8
Net assets	912.5	(5.4)	907.1
Retained earnings	94.7	(5.4)	89.3
Total equity	912.5	(5.4)	907.1

Consolidated Statement of Financial Position

	AS PREVIOUSLY
	REPORTED	ADJUSTMENTS	AS RESTATED
AS AT 1 JULY 2020	$M	$M	$M
Intangible assets	444.5	(4.9)	439.6
*Total non-current assets*	663.5	(4.9)	658.6
Total assets	1,169.1	(4.9)	1,164.2
Deferred tax liability	17.4	(1.4)	16.0
*Total non-current liabilities*	124.0	(1.4)	122.6
Total liabilities	514.8	(1.4)	513.4
Net assets	654.3	(3.5)	650.8
Retained earnings	95.2	(3.5)	91.7
Total equity	654.3	(3.5)	650.8

Financial Report

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Consolidated Statement of Profit and Loss and Other comprehensive income

	AS PREVIOUSLY
	REPORTED	ADJUSTMENTS	AS RESTATED
FULL YEAR 30 JUNE 2021	$M	$M	$M
Administrative and general expenses	140.0	5.1	145.1
Depreciation and amortisation	45.9	(2.3)	43.7
*Net proft before tax*	106.7	(2.9)	103.8
Income tax expense	(31.8)	0.9	(30.9)
*Net proft after tax*	74.9	(2.0)	72.9
Total comprehensive income	55.7	(2.0)	53.7
Earnings per share
Basic EPS – cents per share	135.0	(3.6)	131.4
Diluted – cents per share	133.2	(3.6)	129.6

Consolidated Statement of Cash Flows

	AS PREVIOUSLY
	REPORTED	ADJUSTMENTS	AS RESTATED
FULL YEAR 30 JUNE 2021	$M	$M	$M
Cash payments in the course of operations	(493.3)	(8.2)	(501.5)
*Net cash from operation activities*	128.7	(8.2)	120.5
Payments for property plant, plant equipment and software	(21.9)	8.2	(13.7)
*Net cash used in investing activities*	(487.2)	8.2	(478.9)

6-5 New standards and interpretations not yet adopted

There are no new standards, amendments to standards, and interpretations effective for the first time in the current financial period that would have a material impact to the consolidated entity.

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Directors’ declaration

In the opinion of the Directors of Perpetual Limited (the ‘Company’):
(a) the consolidated financial statements and notes set out on pages 105 to 161, and the Remuneration Report in the Directors’ Report, are in accordance with the Corporations Act 2001 , including:
- (i) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2022 and of its performance for the financial year ended on that date; and
- (ii) complying with Australian Accounting Standards and the Corporations Regulations 2001 ;
(b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.
There are reasonable grounds to believe that the Company and the certain wholly owned subsidiaries identified in Section 5-4 will be able to meet any obligations or liabilities to which they are or may become subject to by virtue of the Deed of Cross Guarantee between the Company and these entities pursuant to ASIC Corporations (Wholly owned Companies) Instrument 2016/785 .
The Directors have been given the declarations required by section 295A of the Corporations Act 2001 from the Chief Executive Officer and Managing Director and the Chief Financial Officer for the financial year ended 30 June 2022.
The Directors draw attention to Section 6-2(i) of the consolidated financial statements which includes a statement of compliance with International Financial Reporting Standards.
Signed in accordance with a resolution of the Directors:
Dated at Sydney this 25th day of August 2022.

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Tony D’Aloisio Chairman

Rob Adams

Chief Executive Officer and Managing Director

Financial Report

Our performance Directors’ Report

Operating and Financial Review

163

Independent Auditor’s Report

To the shareholders of Perpetual Limited

Independent Auditor’s Report

To the shareholders of Perpetual Limited

Report on the audit of the Financial Report

Opinion

We have audited the Financial Report of The Financial Report comprises: Perpetual Limited (the Company). • Consolidated statement of financial position as at In our opinion, the accompanying Financial 30 June 2022; Report of the Company is in accordance with the Corporations Act 2001 , including: • Consolidated statement of profit or loss and other comprehensive income, Consolidated statement • giving a true and fair view of the of changes in equity, and Consolidated statement Consolidated Entity ’s financial position as of cash flows for the year then ended; at 30 June 2022 and of its financial • Notes including a summary of significant performance for the year ended on that accounting policies; and date; and • Directors’ Declaration. • complying with Australian Accounting Standards and the Corporations The Consolidated Entity consists of the Company Regulations 2001 . and the entities it controlled at the year-end or from time to time during the financial year.

Basis for opinion

We conducted our audit in accordance with Australian Auditing Standards . We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

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 Consolidated Entity in accordance with 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 (including Independence Standards) (the Code) that are relevant to our audit of the Financial Report in Australia. We have fulfilled our other ethical responsibilities in accordance with these requirements.

Key Audit Matters

The Key Audit Matters we identified are:

The Key Audit Matters we identified are: Key Audit Matters are those matters that, in our • Revenue recognition; professional judgement, were of most significance in our audit of the Financial Report of the current period. • Valuation of goodwill; and These matters were addressed in the context of our • Employee remuneration. 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.

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Independent Auditor’s Report

To the shareholders of Perpetual Limited

Revenue recognition ($753m)

Revenue recognition ($753m)	Revenue recognition ($753m)

Refer to Section 1-2 ‘Revenue’ to the Financial Report
The key audit matter	How the matter was addressed in our audit
Revenue is a Key Audit Matter due to: • its significance to the financial performance of the Consolidated Entity; • the significant audit effort required as a result of: − the various streams of revenue generated from a diverse range of products and services, each with varying fee rates and contractual terms; − the generation of revenue in multiple geographical locations across two of the Consolidated Entity’s operating segments; − key inputs used in the calculation of revenue are sourced from several of the Consolidated Entity’s third party service organisations which provide custody, investment administration and unit registry services, as well as custodian banks. This required us to understand the key processes and assess the key controls of these service organisations relevant to the Consolidated Entity’s revenue recognition; and • involvement of senior team members in assessing the Consolidated Entity’s accounting policy for performance fees against the requirements of the accounting standards, for which the Consolidated Entity’s revenue recognition policy is dependent on varying contractual terms. Significant revenue streams include fees from: • the provision of investment management services to institutional mandate clients, investment funds and superannuation funds; • trustee and document custodian services; • management and administrative services for securitisation trusts; and • the provision of financial advice and accounting services.	Our procedures included: • Inquiring of the Consolidated Entity to understand processes for key revenue streams, and testing key controls at the Consolidated Entity related to these revenue streams. • Assessing the Consolidated Entity’s policies for recognition of revenue against the requirements of the accounting standards. • Testing statistical samples of revenue across each key revenue stream. We performed the following: − Inspected contracts and assessed whether revenue is recognised in accordance with the revenue recognition criteria; − Recalculated the investment management and adviser services revenue recognised based on the various fee rates in the underlying contracts, and the underlying funds under management (FUM) or funds under advice (FUA), sourced from third party service organisation reports or statements from custodial banks. We compared this to invoices and the revenue recognised by the Consolidated Entity; − Agreed securitisation and trustee services revenue to invoices and subsequent cash receipts; and − Agreed financial advice and accounting services revenue to invoices, engagement letters and subsequent cash receipts. • Analysing data within the investment management revenue stream to identify trends and outliers to further inform our work. Examples of outliers included contracts where fees exhibit an inverse movement to FUM flows or client fees falling considerably outside of statistical trends. For outliers identified, we recalculated the revenue recognised based on the underlying contracts and the FUM. We compared this to the revenue recognised by the Consolidated Entity. • Obtaining and reading the Consolidated Entity’s third party service organisations GS007_(Guidance_ Statement 007 Audit Implications of the Use of Service Organisations for Investment Management _Services)_and SOC 1 (System and Organisation Controls) assurance reports to understand the

128

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Operating and Financial Review

165

service organisations’ processes and assess controls related to investment administration, custody and unit registry.

Assessing the reputation, professional competence and independence of the auditors of the GS007 and SOC 1 assurance reports.
Testing a sample of performance fee revenue recognised to the Consolidated Entity’s bank statements. We recalculated the performance fee revenue based on the underlying contractual terms and product performance relative to the benchmark, such as the Reserve Bank of Australia Cash Rate. We compared this to the performance fee revenue recognised by the Consolidated Entity.

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Independent Auditor’s Report

To the shareholders of Perpetual Limited

Valuation of goodwill ($617m)

Valuation of goodwill ($617m)	Valuation of goodwill ($617m)

Refer to Section 2-5 ‘Intangibles’ to the Financial Report
The key audit matter	How the matter was addressed in our audit
The Consolidated Entity’s annual testing of goodwill for impairment is a key audit matter given the: • size of the balance (being 35% of total assets); • net outflow of FUM experienced by certain Cash Generating Units (CGUs) of the Consolidated Entity in the current year. This increases the possibility of goodwill being impaired; • forward-looking assumptions applied by the Consolidated Entity in its value-in-use models, including: − forecast operating cash flows, growth rates and terminal growth rates which are influenced by subjective drivers such as FUM, FUA, securitisation and capital flows. These are difficult to predict as they rely on the Consolidated Entity’s expectation of future customer activity and market performance, which can be impacted by economic uncertainties arising from the ongoing geopolitical events; − the Consolidated Entity operating across different geographies with varying pressures on market performance and capital flows, which increases the risk of an inaccurate forecast or wider range of possible outcomes; − discount rates, including CGU specific risk premiums, which are complicated in nature and vary according to the conditions and environment the specific CGU is subject to from time to time; and • we involved valuation specialists to supplement our senior audit team members in assessing this key audit matter.	Working with our valuation specialists, our procedures included: • Considering the appropriateness of the value in use method applied by the Consolidated Entity to perform the annual test of goodwill for impairment against the requirements of the accounting standards. • Assessing the integrity of the value-in-use models used, including the determination of carrying values and the accuracy of the underlying calculation formulas. • Assessing the accuracy of previous Consolidated Entity forecasts to inform our evaluation of forecasts incorporated in the models. • Comparing the forecast cash flows contained in the value-in-use models to Board approved forecasts and our inquiries with management of the Consolidated Entity for consistency. • Challenging the Consolidated Entity’s forecast operating cash flows and growth assumptions in light of the Consolidated Entity’s net FUM flows and the ongoing economic uncertainty arising from the geopolitical events in the current year. We compared forecast growth rates and terminal growth rates to published studies of industry trends and expectations. In doing so, we also considered the differences between industry trends and the Consolidated Entity’s operations and used our knowledge of the Consolidated Entity, its past performance, business, customers, committed future plans and our industry experience. • Independently developing a range of discount rates considered comparable with the Consolidated Entity, using publicly available market data for comparable entities, adjusted by CGU specific risk factors. • Performing sensitivity analysis by varying key assumptions, such as forecast growth rates, terminal growth rates and discount rates, within a reasonably possible range to identify CGUs at higher risk of impairment, assumptions at higher risk of bias and determining where to focus our further procedures. • Assessing the disclosures in the financial report using our understanding of the issues obtained from our testing, and against the requirements of the accounting standards.

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Financial Report

Our performance

Directors’ Report

Operating and Financial Review

167

Employee remuneration ($381m)

Refer to Section 1-3 ‘Expenses’, Section 2-7 ‘Employee benefits’, Section 2-9 ‘Accrued Incentive Compensation’, and Section 5-6 ‘Share-based payments’ of the Financial Report

The key audit matter

Employee remuneration is a key audit matter due to:

the size of the balance relative to the Consolidated Entity’s results (63% of expenses);
complexities associated with varying share incentive programs and other employee benefits plans across the Consolidated Entity, which increases the risk of interpretational differences against the principles-based criteria contained in the accounting standards;
the involvement of senior team members to assess the valuation methodology, assumptions and inputs, such as the share price and vesting period, used by the Consolidated Entity and its external valuation experts in the valuation of share incentive rights granted during the year;
the involvement of technical accounting specialists to supplement senior team members in assessing the Consolidated Entity’s measurement of complex employee benefit plans under the Australian Accounting Standards;
forward-looking assumptions applied by the Consolidated Entity in valuing long-term employee benefit plans, including:
forecast business growth assumptions, which are influenced by subjective drivers such as FUM flows, and are difficult to predict as they rely on the Consolidated Entity’s expectation of future customer activity and market performance;
the Consolidated Entity operating across different geographies with varying pressures on market performance and FUM flows, which increases the risk of an inaccurate forecast or wider range of possible outcomes; and
largely manual calculation of equity remuneration expenses, which increases the risk of error.

How the matter was addressed in our audit

Our procedures included:

Enquiring of the Consolidated Entity and inspecting a sample of share incentive programs and other employee benefit plans to understand the remuneration process, structure and various share incentive program offerings.
Assessing the Consolidated Entity’s accounting policy for share incentive program arrangements and working with our technical accounting specialists to assess the accounting treatment of complex employee benefit plans, against the principles based criteria in the accounting standards.
Evaluating the Consolidated Entity’s external valuation expert’s scope of work, competence and objectivity with respect to their valuation of share incentive program rights granted during the year.
Assessing the external valuation expert’s methodology against industry practice and the requirements of the accounting standards.
Checking the grant date share price and vesting period used in the external expert’s valuation against the Consolidated Entity’s share price and share incentive program agreements.
Testing a statistical sample of equity remuneration expenses. We checked the various inputs to the Consolidated Entity’s manual calculation, such as grants, vests and forfeitures to underlying offer letters, share incentive program agreements and the grant date fair value calculated by the Consolidated Entity’s external expert. We recalculated the equity remuneration expense and compared this to the expense recognised by the Consolidated Entity.
Challenging the Consolidated Entity’s forecast business growth assumptions and judgement related to whether performance hurdles would be achieved in the measurement of complex employee benefit plans. We did this by comparing forecast growth rates to industry trends and expectations.
Assessing the Consolidated Entity’s disclosures of the key terms and valuation assumptions, as required by the accounting standards.

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To the shareholders of Perpetual Limited

Independent Auditor’s Report

Other Information

Other Information is financial and non-financial information in Perpetual Limited’s annual reporting which is provided in addition to the Financial Report and the Auditor's Report. The Directors are responsible for the Other Information.

The Other Information we obtained prior to the date of this Auditor’s report was the Directors’ Report, Corporate Governance Statement, Remuneration Report, Operating and Financial Review and Securities Exchange and Investor Information. The Chairman’s report, 2022 Highlights, CEO’s Report, 2022 Group Results and Business Unit Overview and 2022 Sustainability Report are expected to be made available to us after the date of the Auditor’s Report.

Our opinion on the Financial Report does not cover the Other Information and, accordingly, we do not and will not express an audit opinion or any form of assurance conclusion thereon, with the exception of the Remuneration Report and our related assurance opinion.

In connection with our audit of the Financial Report, our responsibility is to read the Other Information. In doing so, we 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.

We are required to report if we conclude that there is a material misstatement of this Other Information, and based on the work we have performed on the Other Information that we obtained prior to the date of this Auditor’s Report we have nothing to report.

Responsibilities of the Directors for the Financial Report

The Directors are responsible for:

preparing the Financial Report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
implementing necessary internal control to enable the preparation of a Financial Report that gives a true and fair view and is free from material misstatement, whether due to fraud or error
assessing the Consolidated Entity and Company’s ability to continue as a going concern and whether the use of the going concern basis of accounting is appropriate. This includes disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless they either intend to liquidate the Consolidated Entity and Company or to cease operations, or have no realistic alternative but to do so.

Auditor’s responsibilities for the audit of the Financial Report

Our objective is:

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 Australian Auditing Standards will always detect a material misstatement when it exists.

Misstatements can arise from fraud or error. They 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 the 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/admin/file/content102/c3/ar1_2020.pdf This description forms part of our Auditor’s Report.

132

Financial Report

Our performance

Directors’ Report

Operating and Financial Review

169

Report on the Remuneration Report

Opinion

In our opinion, the Remuneration Report of Perpetual Limited for the year ended 30 June 2022, complies with Section 300A of the Corporations Act 2001 .

Directors’ 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 responsibilities

We have audited the Remuneration Report included in pages 13 to 50 of the Directors’ report for the year ended 30 June 2022.

Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards .

KPMG

Brendan Twining

Partner

Sydney

25 August 2022

133

Perpetual Annual Report 2022

170

Securities exchange and investor information

2022 Annual General Meeting

The 2022 Annual General Meeting of the Company will be held at Perpetual’s offices, Level 18, 123 Pitt Street, Sydney on Thursday 20 October 2022 commencing at 10:00am. Shareholders can also participate online.

Securities exchange listing

The ordinary shares of Perpetual Limited are listed on the Australian Securities Exchange (ASX) under the ASX code PPT, with Sydney being the home exchange.

Substantial shareholders

	NUMBER OF	% OF	DATE OF LAST SUBSTANTIAL
NAME	SHARES	INTEREST	SHAREHOLDER NOTIFICATION
State Street Corporation and its controlled entities	3,789,604	6.68	22 July 2022
Black Rock Inc. and subsidiaries	3,742,578	6.62	8 December 2020
Vanguard Groupand its controlled entities	2,836,386	5.00	10 May2022

Unmarketable parcels of shares

There are 574 shareholders holding less than a marketable parcel of ordinary shares, as at 3 August 2022.

DISTRIBUTION SCHEDULE OF HOLDINGS
AS AT 3 AUGUST 2022	NUMBER OF HOLDERS	NUMBER OF SHARES
1 – 1,000 shares	16,857	6,657,236
1,001 – 5,000 shares	5,957	12,703,288
5,001 – 10,000 shares	576	4,055,390
10,001 – 50,000 shares	263	4,800,904
50,001 – 100,000 shares	12	896,168
100,001 and over shares	24	27,600,433
Total	23,689	56,713,419

Financial Report

Our performance

Directors’ Report

Operating and Financial Review

171

Twenty largest shareholders as at 3 August 2022

	NUMBER OF	PERCENTAGE OF
NAME	ORDINARY SHARES	ISSUED CAPITAL
HSBC Custody Nominees (Australia) Limited1	7,716,119	13.61%
JP Morgan Nominees Australia Pty Limited1	6,456,245	11.38%
Citicorp Nominees Pty Limited1	3,888,290	6.86%
National Nominees Limited1	2,375,739	4.19%
BNP Paribas Noms Pty Ltd (DRP)1	1,273,388	2.25%
Washington H Soul Pattinson and Company Limited	1,231,982	2.17%
Mutual Trust Pty Ltd	850,852	1.50%
Queensland Trustees Pty Ltd2(Long Term Incentive Plan)	638,714	1.13%
Carlton Hotel Ltd	424,964	0.75%
Enbeear Pty Ltd	369,832	0.65%
Pacifc Custodians Pty Limited (PPT Plans Ctrl)1	292,802	0.52%
BNP Paribas Nominees Pty Ltd (Agency Lending DRP A/C)1	276,106	0.49%
First Samuel Ltd ACN 086243567 (ANF ITS MDA Clients A/C)1	252,222	0.44%
BNP Paribas Nominees Pty Ltd HUB24 Custodial Serv Ltd (DRP A.C)1	215,352	0.38%
Netwealth Investments Limited (Wrap Services A/C)	175,615	0.31%
Citicorp Nominees Pty Limited (Colonial First State Inv A/C)1	168,200	0.30%
J S Millner Holdings Pty Limited	166,300	0.29%
David Davidson Financial Services Pty Ltd (David Davidson Financial Services Unit)	144,108	0.25%
HSBC Custody Nominees (Australia) Limited (NT-COMNWLTH Super Corp A/C)1	143,196	0.25%
Dixson Trust PtyLimited	117,391	0.21%
Total	27,177,417	47.93%

Held in capacity as executor, trustee or agent.
The total number of shares held by Queensland Trustees Pty Ltd as trustee of the various Employee Share Plans is 649,425 shares.

Perpetual Annual Report 2022

172

Securities exchange and investor information

Restricted securities

There are no securities subject to voluntary escrow.

Unquoted securities

The Company has the following unquoted rights on issue under its Employee Share Plans:

930,145 performance rights

For further information, please refer to Section 5-6 in the Financial Report.

Other information

Perpetual Limited, incorporated and domiciled in Australia, is a publicly listed company limited by shares.

Enquiries

If you have any questions about your shareholding or matters such as dividend payments, tax file numbers or change of address, you are invited to contact the Company’s share registry office below, or visit its website at linkmarketservices.com.au or email [email protected].

Link Market Services Limited

1A Homebush Bay Drive Rhodes NSW 2138

Locked Bag A14 Sydney South NSW 1235 Perpetual Shareholder Information Line: Tel: 1300 732 806 Fax: (02) 9287 0303

Any other enquiries which you may have about the Company can be directed to the Company’s registered office, or visit the Company’s website at perpetual.com.au

Voting rights

Under the Company’s Constitution, each member present at a general meeting (whether in person, by proxy, attorney or corporate representative) is entitled:

on a show of hands to one vote; and
on a poll to one vote for each share held.

If a member is present in person, any proxy of that member is not entitled to vote.

Principal registered office

Level 18 123 Pitt Street Sydney NSW 2000 Tel: (02) 9229 9000 Fax: (02) 8256 1461

Company Secretary

Voting by proxy

Voting by proxy allows shareholders to express their views on the direction and management of the economic entity without attending a meeting in person.

Sylvie Dimarco Website address: perpetual.com.au

Shareholders who are unable to attend the 2022 Annual General Meeting may appoint a proxy to vote on their behalf, either by accessing our Perpetual’s registry’s website at linkmarketservices.com.au and following the prompts, or by following the instructions in the proxy form posted on Perpetual’s website at perpetual.com.au/About/Shareholders.

On-market buyback

There is no current on-market buyback.

Final dividend

The final dividend of 97 cents per share will be paid on 30 September 2022 to shareholders entitled to receive dividends and registered on 9 September 2022, being the record date.

Financial Report

Our performance

Directors’ Report

Operating and Financial Review

173

Corporate Directory

New South Wales

Angel Place Level 18, 123 Pitt Street Sydney NSW 2000

Queensland

Central Plaza 1 Level 15, 345 Queen Street Brisbane QLD 4000

Australian Capital Territory

Level 9, Nishi Building 2 Phillip Law Street Canberra ACT 2601

Amsterdam

Apollolaan 151, 1077AR Amsterdam Netherlands

London

20 North Audley Street London W1K 6LX United Kingdom

Hong Kong

Unit 22, Level 10 BOC Group Life Assurance Tower 139 Des Voeux Road Central Central Hong Kong

Victoria

Level 28 and 29 Rialto South Tower, 525 Collins Street Melbourne VIC 3000

South Australia

Level 11, 101 Grenfell Street Adelaide SA 5000

Western Australia

Exchange Tower Level 29, 2 The Esplanade Perth WA 6000

Singapore

16 Collyer Quay #07-01 Singapore 049318

TRILLIUM ASSET MANAGEMENT:

Boston

Two Financial Center 60 South Street, Suite 1100 Boston, MA 02111 USA

San Francisco

160 Spear Street, Suite 250 San Francisco, CA 94105 USA

Edinburgh

15 Queen Street Edinburgh EH2 1JE United Kingdom

Chicago

155 N Wacker Drive Suite 4250 Chicago, IL 60606 USA

BARROW HANLEY GLOBAL INVESTORS:

Dallas

2200 Ross Avenue, 31st Floor Dallas, TX 75201 USA

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perpetual.com.au

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Perpetual Limited — Annual Report 2022

10538_rns_2022-09-15_80d185e7-5822-41d4-af4d-d5022e648ffd.pdf

Perpetual Limited - Annual General Meeting 2022

About Perpetual

Our purpose

Our vision

Our values

Group at a glance

We are a global business committed to growing sustainably.

$2.09

FY22 operational highlights

79%

Our global presence

Chairman’s Report

Dear Shareholders,

Financial results and dividends

Strategy execution

Perpetual’s Sustainability Strategy

Recognising our people

CEO’s Report

Dear Shareholders,

Delivering strong financial and operational results

Growing our Environmental, Social and Governance (ESG) capabilities

CEO’s Report continued

Perpetual’s Prosperity Plan

Proposed acquisition of Pendal Group

Conclusion

Strategy Update

We are delivering on all areas of our strategy

Business division updates

David Lane

Perpetual Asset Management International

Financial performance

New product structures attracting new clients

FY22 business commentary

$ 49.9m

Perpetual Asset Management Australia

Financial performance

Providing contemporary solutions for investors

Business commentary

Business division updates continued

Perpetual Private

Financial performance

Business commentary

Addressing the demand for high-quality financial advice

Perpetual Corporate Trust

Financial performance

Business commentary

Business division updates continued

Supporting a growing global business

Client solutions and operations

Risk and Compliance

Sustainability at Perpetual

For more than 135 years, Perpetual has helped protect and grow our clients’ wealth and prosperity.

Our ongoing commitment to building a prosperous future

Perpetual’s Prosperity Plan is focused on four key pillars

Sustainability at Perpetual continued

Accelerating the low carbon transition

Championing inclusion and high performance

Supporting strong communities

Setting the highest standard

Directors’ Report

for the year ended 30 June 2022

Directors

Skills and experience

Board Committee memberships

Skills and experience

Listed company directorships held during the past three financial years

Skills and experience

Board Committee memberships

Board Committee memberships

Skills and experience

Board Committee memberships

Skills and experience

Listed company directorships held during the past three financial years

Board Committee memberships

Skills and experience

Listed company directorships held during the past three financial years

Board Committee memberships

Perpetual Limited Annual Report 2022