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BELLUS Health Inc.Annual Report 2020
The future is worth
investing in
Delivering investment
strategies globally
Pendal is a global independent
investment management business
focused on delivering superior
investment returns for clients
through active management.
Investment strategies
Regional Equities
Global and International Equities
Cash and Fixed Income
Multi-Asset
Environmental, Social and Governance (ESG)
For a complete overview of our investment strategies,
fund performance and our investment management
teams, go to annual-report-2020.pendalgroup.com/
investment-strategies
Contents
FY20 Overview
Chairman’s Letter
Group Chief Executive Officer’s Report
Global Operating Review
Markets: A Year in Review
Sustainability Overview
Directors' Report
Financial Report
Shareholder Information
Glossary
Corporate Directory & Key Dates
2
3
6
9
20
22
25
68
116
118
120
North America
Investment & sales personnel
Pendal office locations
Funds under management (FUM) classified
by client domicile.
$26.2BFUM21 UK, Europe & Asia
Australia & NZ
Pendal offers a global distribution network which services a diverse client base, including:
High net-worth individuals / Family offices
Sovereign wealth funds
Superannuation and pension funds
Sub-advisory
Endowment funds
Investment platforms and wirehouses
Financial planners
Charitable organisations
Annual Report 2020 | 1
4959$23.0BFUM$43.2BFUM FY20 Overview
Diversification underpins
business resilience
Improved investment
performance
Investment for the
markets of tomorrow
• Cash NPAT of $146.8 million
• 72 per cent of FUM
• Base management fees of
outperformed over one year
• Onboarded new
investment team
$458.1 million
• Strong performance in global
• Launched new products
• Positive flows in Institutional
and US wholesale channels
and Australian equities,
cash and fixed income
• Performance fees
of $13.4 million
• Realigned distribution model
with regional leadership
•
Invested in technology
enabled global
operating platform
Average FUM
Cash NPAT
Cash EPS
Fee revenue
Dividend
Investment outperformance1
$94.8 billion
$146.8 million
45.5 cents per share
$474.8 million
37.0 cents per share
72%
of FUM over
one year
71%
of FUM over
three years
70%
of FUM over
five years
88%
of FUM
since inception
1 Fund performance is pre-fee, pre-tax and relative to the fund benchmark; % of FUM outperformed relates to FUM with sufficient
track record only
2 | Pendal Group
Chairman’s Letter
While we are seeing continued market volatility, overall, in the
last quarter, markets have rallied from March lows. However,
we are not complacent. Markets are fickle, and we operate in a
globally contested marketplace.
Our investment management teams are actively engaging with
our clients, so they are in no doubt that we are being proactive
in the management of the funds entrusted to us. Clients are
seeing the value of active managers, who as experienced and
skilled investors, can adjust their portfolios both to manage
the prevailing circumstances and position for emerging
opportunities. In ‘emotional’ times such as these, our ‘true to
label’ portfolio managers think and act with discipline.
Last year I commented that our strength is our people and our
unrelenting conviction in the positions we take to build wealth
for our clients and shareholders. Being willing and able to
respond to market changes and deploy creative strategies that
tackle problems is what Pendal does best. Where others see a
problem, we see both a challenge and an opportunity.
Without envisioning the COVID-19 ‘Black Swan’ event, this
attitude and approach has never been more important. We have
taken current circumstances in our stride, confident that
our long-term strategy will deliver positive outcomes for all
stakeholders, over time and through the cycles.
2020 was a year of many parts. Brexit.
Geo-political tensions and global trade impacts
arising from the US/China trade disputes.
And there was the COVID-19 global pandemic.
All these events impacted markets to varying
degrees and affected client sentiment and
confidence. Of course, the most severe was
the ‘Black Swan’ event of COVID-19. No one
could have predicted the depth and extent of
the pandemic and its impact on every facet of
our lives.
Overview of the 2020 Financial Year
In response, we are managing an environment hitherto
unknown. Until a vaccine is found, the COVID-19 pandemic
will continue to disrupt our lives; to impact our communities
and nations, and affect our economies – domestic and global.
We are mindful of the effects and the disruption the pandemic
is having on our people, our clients, markets and society
in general.
The health and welfare of our people is paramount, as is
business continuity and supporting our clients. We are a talent
business and without our people, our business does not exist.
This pandemic has shown our ability to adjust and adapt in
this new environment, without disruption to our business, and
I would like to acknowledge and thank our employees for their
effort and commitment. COVID-19 might be with us for some
time, but we cannot let it dominate us.
Annual Report 2020 | 3
Chairman's Letter (continued)
Pendal has a strong balance sheet, with no debt. We continue to
be profitable with a healthy cashflow and good margins.
Financial results
In the year just gone, our key measure of financial performance,
Cash Net Profit After Tax (Cash NPAT), was $146.8 million,
down by 10 per cent. This represents a reduction of 11 per cent
in cash earnings per share (Cash EPS) from 51.3 to 45.5 cents.
This is to be expected. Performance of the business is largely
determined by revenue from base management fees, meaning
we are linked to markets and the value of our funds under
management (FUM).
In the period from January to the end of March FUM fell by
15 per cent to $86.0 billion. In the final quarter, FUM recovered
to $92.4 billion for a net fall of $8.0 billion over the year.
Importantly, investment performance has improved in a range
of our key funds, resulting in positive inflows in the fourth
quarter of the 2020 Financial Year and higher performance fees
for Pendal Australia.
The Board recognises how important dividends are to our
shareholders. Some companies are presently delaying or not
declaring dividends but Pendal’s strong balance sheet and
diversified business model enables it to continue to support
returns to shareholders, and with no change to the Group’s
dividend payout ratio.
A final dividend of 22.0 cents per share was declared,
compared to the 25.0 cents in the prior year. The final dividend
will be 10 per cent franked and paid on 17 December 2020 to
ordinary shareholders at a record date of 4 December 2020.
The full year dividend was 37.0 cents per share, compared
to 45.0 cents in the previous year, and reflects a payout ratio
of 81 per cent, which is within the 80 to 90 per cent of Cash
NPAT range of the dividend policy. The Dividend Reinvestment
Plan has been activated for the 2020 final dividend and will
support the Group’s increased pace of investment over the
coming years.
Looking at performance over the long term, Total Shareholder
Return since listing is 128 per cent, which is well above
the 53 per cent return of the Standard and Poor’s ASX200
Accumulation Index over the same period.
Risk management
Risk management has been front and centre for your Board.
We have conducted double the number of Board meetings
this year and have engaged closely with our regional business
leaders and our fund managers.
The Board regularly reviews and approves the design of the risk
management framework, and sets the risk appetite. This year,
we assessed and reset the risk management framework to
prioritise the response to the COVID-19 pandemic.
Specific areas included staff wellbeing, culture, effective
remote working, continued excellent client service,
enhanced liquidity risk management, day-to-day management
of portfolios, enhanced communication, and maintaining
operational resilience.
We are mindful of protecting the culture that has been at the
core of Pendal’s success. Our culture encourages individuals
to act with integrity and honesty, and to value the interests
of our clients as the first priority. Our products are clear in
their investment goals and transparent in their fees, and our
boutique business model provides our fund managers with
investment independence and agility. While we are seasoned
to market cycles, we cannot control the markets, only our
own actions.
Diversified business model supports resilience
Pendal is a diversified business. We have a stable revenue base
from annuity style cashflows and also have the ability to earn
performance fees. This diversification extends to the range and
type of funds we manage.
Within the Pendal universe, clients have a broad choice of
investment strategies, including defensive, growth, value,
fixed income, and multi-asset. By offering a broad range of
investments we ensure that, given investment trends vary
at any particular time, Pendal always has a fund that meets
clients’ needs.
We have a stable and diversified client base, which includes
some of the world’s largest and strongest financial institutions,
including pension funds, insurers, and wealth managers. As an
active fund manager, we are fully cognisant of demonstrating
the added value we deliver for our clients.
4 | Pendal Group
Positioned for growth
Pendal has a strong balance sheet, with no debt. We continue
to be profitable with a healthy cashflow and good margins.
Our cost base contains a material component which is variable,
and linked to revenue. When revenue declines, there is a
natural offset with lower costs, particularly lower employee
variable remuneration.
All of our strategic considerations and investments,
particularly global diversification, look to support material
FUM and revenue growth.
As a global fund manager, we have developed an operating
model around key regions and regional CEOs for the US, UK,
Europe and Asia, and Australia. This model is evolving with the
changed dynamics of the business and markets. This global
regional model will be fundamental to managing the company’s
future growth opportunities.
With a talented Global Executive Team in place, and long-
tenured fund managers with outstanding track records,
we have the right leadership on the ground, which ensures
that we are able to respond quickly and effectively to changed
circumstances and take advantage of market opportunities.
ESG and stewardship
Pendal has a long track record in sustainable investment.
Our acquisition of Regnan last year was an important strategic
move to ensure Pendal is well placed to capitalise on our
history and reputation, as the worldwide demand for impact
and other sustainable investment products gathers pace.
Outlook
The world may have recovered from the initial shock of the
COVID-19 pandemic, but it is far from being resolved. We are all
looking forward to the development of a vaccine. However, the
ramifications of restrictions on the movement of people and the
consequences of extraordinary fiscal measures are yet to fully
play out. Nevertheless, human nature has an infinite capacity
to surprise, and is attuned to thrive not despite, but because of,
exceptional circumstances.
We are entering a new era. Companies around the world are
reconfiguring their operations and how they engage with their
stakeholders. There has been exponential growth in the use
and development of communications technology. With this
changed communications model, Pendal has reassessed how
we engage with our clients and our global workforce. This has,
and will continue to, require us to develop and invest in our
digital capabilities. We believe it will bring about innovation
and efficiencies in the way we conduct our business. We see
opportunities to broaden our distribution capabilities, enhance
our client engagement and service and extend our reach
through digital marketing. We will not revert to old ways for the
sake of it; at Pendal we always look to the future.
The 2020 Financial Year marked the final sell-down by
Westpac of its residual 9.5 per cent stake in Pendal.
We acknowledge the support of Westpac as a long-term
shareholder and as a client. Importantly, we continue to have a
strong client relationship with Westpac and currently manage
$16 billion in FUM on their behalf. This constitutes 17 per cent
of our total FUM compared to 64 per cent in 2007.
We are seeing a fast-paced change worldwide in investor
requirements for environmental, social and governance
(ESG) credentials. Pendal sees ESG as a significant growth
opportunity and we are further investing in our capabilities in
this market segment accordingly.
Finally, I would like to thank the management team and all of
our employees for their personal contribution during what has
been a particularly difficult year, and for stepping up for our
clients, while dealing with the personal and physical challenges
arising during the pandemic.
I would like also to acknowledge and thank my Board
colleagues for the significant extra time they have contributed
to Pendal this year and for their ongoing resolve, commitment,
and support for the long-term success of the business.
James Evans,
Chairman
Annual Report 2020 | 5
Group Chief Executive
Officer’s Report
2020 has been an extraordinary year and a
reminder of the importance of having a robust
business to be able to manage through the
most unpredictable of circumstances. The
tumultuous and volatile market conditions as
a result of the onset of COVID-19 tested many
companies. Throughout, Pendal has remained
strong thanks to our financial strength and a
business model that provides resilience in the
face of macroeconomic uncertainty and market
volatility. This allowed us to continue to invest in
key strategic initiatives despite the difficult times.
Whilst trading conditions during the year were challenging and
Cash NPAT was lower by 10 per cent we remained focused on
delivering long-term results for our clients which, over the full
cycle, will deliver financial outcomes for our shareholders.
Our key measure of profitability Cash NPAT was $146.8 million,
a decline of 10 per cent on FY19. Performance fees were higher
at $13.4 million compared to $5.9 million the prior year.
Total FUM at the close of the year was $92.4 billion, down from
$100.4 billion the previous year. This eight per cent decline in
FUM was mainly driven by net outflows of $6.5 billion. Our key
driver of revenue is average FUM. It was $94.8 billion, down four
per cent on the prior year.
The benefits of our diversification strategy meant we saw
inflows into our International Select strategy of $1.0 billion and
our Global Opportunities strategy of $0.7 billion. However, the
onset of the pandemic, a lacklustre growth outlook for Europe
and investment underperformance resulted in net outflows for
our European strategies of $3.3 billion.
In the Australian market, conditions remain challenged,
impacted by the aftermath of the Hayne Royal Commission
into Misconduct in the Banking, Superannuation and Financial
Services Industry, the major banks exiting their wealth
businesses, low levels of confidence, consolidation and
increased regulation. Nonetheless, we saw a change in trend
in flows from negative to positive as the year progressed on
the back of strong investment performance in our Australian
equity and fixed income strategies during COVID-19, the
inclusion of strategies in client model portfolios, a successful
brand campaign that significantly raised the brand awareness
of Pendal as well as increased interest in the Australian range
of sustainability funds. These achievements have been
recognised with Pendal Australia being named Fund Manager
of the Year by respected research house, Zenith.
There were also several significant wins in the institutional
market, particularly in Australian equities and the
International Select strategy which have performed well
over the COVID-19 period.
Overall, our investment performance across the Group
improved, with 72 per cent of FUM outperforming over a
one-year period. Long-term performance also remains solid
with 71 per cent of FUM outperforming over a three-year period
and 70 per cent of FUM outperforming over a five-year period.
The past 12 months also showcased the dedication and
resilience of our people. I am proud of the way the team
has seamlessly navigated their way to a remote working
environment while remaining focused on delivering for our
clients in heightened market conditions.
At the onset of COVID-19, we established a response team led
by our Group Chief Risk Officer based in London. Separately,
crisis management teams met regularly around the globe
in Sydney, London and the US to co-ordinate our response,
provide regular communication to staff, and ensure consistent
communications with clients who were keen to understand
and hear directly from our portfolio managers. Our level of
communication and engagement increased considerably as
clients looked to us to provide insight and guidance on how to
navigate through very uncertain times.
6 | Pendal Group
During the year we witnessed significant market volatility,
including one of the quickest market recoveries in history,
yet the economic fundamentals had Treasurers using the words
"economic contraction" and "deep recession".
In volatile market conditions certain strategies will perform
better than others and our own experience has showed this,
hence our strategy of offering a range of diversified strategies
across style and approach. Our investment teams operate
autonomously within agreed parameters based on a stated
investment philosophy and process for each investment
strategy. This is applied consistently and our clients invest with
us on that basis. It also means that our portfolio of investment
strategies will perform differently under varying market
conditions giving clients investment options to choose from to
suit their needs.
Not surprisingly, this year we saw significant divergence
in investment performance across our funds with our best
strategy outperforming its benchmark by 24.1 per cent and
another strategy underperforming by 13.5 per cent. This should
not come as a surprise, as some of the strategies that are
currently underperforming have been some of our best
performers in the past. The strategies that have not performed
well are those with a value bias and an investment philosophy
well embedded in the investment process where investors
expect a particular style and approach irrespective of the
market conditions.
People and talent
At Pendal Group we focus on our people, culture and trust.
This provides the foundation to attracting and retaining the
right talent to deliver exceptional investment returns for
our clients.
Top investment talent is attracted to our principles of providing
investment autonomy, independence of thought, a transparent
remuneration structure, ability to manage capacity and equity
in the business. We promote a multi-boutique investment-
led culture. Attracting and retaining the best talent within an
investment-led culture is at the core of our proposition.
We are increasingly seeing new opportunities to onboard new
talent and launch new strategies. Our most recent appointment
was a team to manage a Global Equities Impact Solutions
strategy. This expands our suite of ESG products, where we
are seeing increased demand in line with our diversification
strategy. This is an investment in the future and demonstrates
the strength of our business model and ability to attract the
best talent in the marketplace.
This follows on from key appointments made to the Global
Executive team including a Group Chief Risk Officer and
regional CEOs to lead our JOHCM businesses in the US and
UK, Europe and Asia. These appointments will sharpen our
focus and better position the firm to seek out opportunities
for growth. In a period such as the last 12 months where we
have seen significant disruption due to the global pandemic,
the expanded leadership team and the on the ground presence
and insights have been invaluable in ensuring our business
continued to perform.
This year we have further evolved our remuneration programs
to ensure we remain globally competitive, particularly once
a team has established themselves in the marketplace.
The ongoing assessment and review of our remuneration
schemes is what differentiates Pendal as an employer.
Different programs serve different purposes but overall,
they fall into three categories. Attracting talent and growing
FUM in the early phase; retaining talent and continuing to grow
FUM once established; and succession planning.
Locking in our key talent by providing the right environment and
remuneration schemes that rewards over a full career reduces
business risk and enables us to continue to deliver strong
financial outcomes for our clients and shareholders. We have 85
investment professionals with an average of 20 years' industry
experience providing a depth of experience and knowledge that
our clients value. Having cultivated much of this experience
within the business and being in a position to nurture and
mentor a new generation of investors, it is important that we
retain the talent we have invested in over many years.
During the year we also invested in people with technology
skills in Sydney, London and New York. To succeed in the future,
our business needs to adjust to an operating model that is
more technologically enabled in operations, client service and
managing investment data sets. We will invest in the right talent
that will support and guide us on that journey. COVID-19 has
shown the important role that technology plays in our society
and has accelerated the digitisation of customer interactions,
which will become an increasing feature of our business.
Diversifying the business
Core to our strategy is to build a diversified business where
we offer different styles of investment strategies for different
clients across geographies. This produces a more balanced
portfolio but also achieves higher profitability. By expanding
our reach and appeal we can explore new avenues for sales and,
in turn, increase our potential to increase profits.
The US and Europe represent significant growth opportunities
and, despite our success in growing in those markets, there is
enormous potential for Pendal Group as we have a small market
presence. In Australia, where we are the largest active manager
of Australian equities, it is a more mature market.
The US is the world’s largest market and in the past five years
US client domiciled assets have grown from $12.3 billion to
$26.2 billion. This market remains largely untapped and, with
the expansion of our product range and the increasing number
of strategies in the region reaching their three-year track
record, we will be investing in our distribution capability to
better access a deeper and broader client base.
Similarly, in Europe, we see the opportunity to expand
our presence. While the UK formally left the EU on the
31 January 2020, it immediately entered an 11-month transition
period to negotiate the terms of the future UK-EU relationship.
In the coming year, we will establish a physical presence in
Europe. The European market presents a significant growth
opportunity for the Group, particularly in ESG strategies where
we have expanded our product offering, further enhancing our
opportunity to diversify.
The enhanced distribution capability will leverage the reach
and efficiencies brought about by our investment in technology
and the development of our global operating platform.
COVID-19 has accelerated industry trends that were previously
evident but none more than the need to invest in technology
that connects businesses with their clients. Where previously
much of the technology enabled business initiatives were
seen as an enhancement, it is now a need in order to compete,
particularly as clients have become much more accepting of
technology as a way of doing business.
Annual Report 2020 | 7
Group CEO’s Report (continued)
Our confidence to succeed comes from the quality of our people,
our robust business model and financial strength.
Positioning Pendal for the markets of tomorrow
The global pandemic is a pivotal moment in history, and our
business model is once again proving to be resilient. In an
environment of change, opportunities will arise to accelerate and
place the business in an even stronger position. COVID-19 has
had the effect of accelerating business trends that were already
in motion, including a number that will have a profound impact
on how we work and do business.
Zoom and Microsoft Teams became the globally accepted form
of virtual communications in a matter of days and emphasised
the importance of technology in how we do business. The
pandemic has also raised the focus on social responsibility for
consumers and corporates. This combined with the devastating
bushfires in Australia and California and events surrounding the
destruction of historical indigenous sites in Western Australia,
has increased the focus on ESG considerations when investing.
We see this as an opportunity to position the business for the
markets of tomorrow by accelerating our own investment in
technology and product development to capture these trends.
It is an opportunity to take advantage of our global scale, as well
as drive efficiencies in the business for our people and clients
and accelerate our ESG growth strategy.
Our investment in technology and the improvement of systems
started in 2019 as part of the plan to move off the Westpac
supported systems, where we identified a broader opportunity
to re-configure our operating platform to better gain scale.
We made significant progress in FY20 with the launch of a global
platform for substantial shareholder reporting and the roll-out of
a global HR system. Additionally, this year we developed a global
data management strategy. This exciting multi-year project will
drive scale efficiencies, portfolio management data collection,
and provide a better client experience. It will also facilitate a path
to enhance our digital capability that will dramatically improve
our reach and support our global distribution network. This will
provide more effective information on where the opportunities
lie and deliver more tailored and targeted marketing campaigns.
Building a more effective global operational platform not only
better connects us with our clients in a more meaningful and
dynamic way but also provides the opportunity to lower costs.
Pendal has a strong heritage in ESG having managed ESG
strategies since 1984. We have been at the forefront of
development in ESG in Australia including being a founding
member of the Investor Group on Climate Change. Pendal
Australia currently manages $3.1 billion in ESG-specific
strategies, including institutional mandates for some of
Australia’s largest pension funds. In 2001, we established the
BT Governance Advisory Service1 which was the precursor
to establishing Regnan, a specialist ESG firm to provide
Governance Research and Engagement services in partnership
with our clients in 2007.
Regnan is now a wholly owned business within the Pendal Group
and has developed specialist ESG investment management
capability with the launch of a range of Impact products,
leveraging off Pendal Group's global platform. The market
opportunity is significant. In the US alone, there are
US$12.02 trillion of professionally managed sustainable assets
and US$14.02 trillion in Europe. With Regnan, we have the
opportunity to differentiate our investment offering built on the
foundation of strong ESG credentials.
In February 2020 we launched the first specialist strategy under
the Regnan brand, the Regnan Credit Impact Trust. This is an
actively managed portfolio investing in fixed income securities
where the proceeds are used to create specific and measurable
positive environment and social impacts. As mentioned earlier
in my report, we also announced the appointment of a proven
investment team based in London to manage the Regnan Global
Equities Impact Solutions strategy. This strategy is being
launched in the UK, Europe and Australia in the fourth quarter of
the calendar year 2020, and has already received strong interest
from clients.
History shows that Pendal has successfully navigated
through crises before and come out stronger on the other
side. In mid-2011, when the sovereign debt crisis was at its
peak, we purchased J O Hambro Capital Management. The
purchase transformed our business, providing much needed
diversification and growth.
Our confidence to succeed comes from the quality of our people,
our robust business model and financial strength. Our very
experienced investment managers have been tested through
market cycles and understand the importance of not chasing
returns in the short term at the expense of long-term value
outcomes. Investor patience is required. The rewards will come.
In the near term, COVID-19 and other economic and geo-political
issues will continue to create headwinds. Equally we see
opportunities to invest in the business for future growth and
potentially accelerate our strategic plans and diversification
objectives through M&A. These investments do come at a
cost but we do so with the confidence that it will deliver higher
revenue and profitable outcomes in the future for shareholders.
It truly has been a most extraordinary year. These unprecedented
times have seen our teams around the world not only move to
home offices and virtual meetings but work incredibly hard to
harness opportunities. I sincerely thank them for their hard work
and dedication and our clients for their ongoing support.
Emilio Gonzalez CFA
Group Chief Executive Officer
1 When Pendal Group was part of the BT Financial Group
2 Global Sustainable Investment Alliance - 2018 Global Sustainable Investment Review
8 | Pendal Group
Global Operating Review
Who we are
Pendal is an independent, global investment management business focused on delivering
superior investment returns for clients through active management. Our proven and
experienced fund managers are given autonomy and independence of thought to make
decisions with conviction. Our business is built on a philosophy of meritocracy that fosters
success from a diversity of insights and approaches to investment.
Pendal does not have a ‘house view’ and operates a multi-boutique structure offering a broad range of investment strategies.
Investment teams are supported by a global operating platform and distribution network allowing our fund managers to focus on
generating returns for our clients.
Our business is designed to attract and retain superior investment talent by offering a transparent remuneration model with the
ability to manage capacity, which aligns the incentives of our investment professionals with client outcomes. Employees are given
the opportunity to own equity in the business and this approach aligns our employees with our shareholders.
We strive for superior results through an investment-led performance culture that backs independent actions. Team members are
recruited for their distinctive skills, experience and perspective, and shared values of integrity, honesty, respect, teamwork and
high performance. It is through this culture that we earn and maintain the long-term trust of our clients and shareholders. This trust
is critical to our success.
Continued attraction and retention of a talented investment team
85
investment
professionals
20
years' average
industry
experience
20
investment
teams
10
years' average
tenure
Turnover of investment staff is two per cent
over the past five years
Annual Report 2020 | 9
Global Operating Review (continued)
Strategic Developments
• Launched first Impact strategy - the Regnan Credit
Impact Trust
• Extended successful JOHCM Global Income Builder strategy
with launch of JOHCM Credit Income strategy for US market
• Developed Regnan Global Equity Impact strategy
• Enhanced the Pendal Ethical Share Fund to better meet
investor needs
Investment capabilities
Identifying new investment
capabilities to diversify and
provide for future growth
People
Attract, develop, and retain
investment talent
• Global executive team now in place with appointment of
Nick Good as JOHCM CEO - USA
• Invested in leadership development program to support
succession planning
• Onboarded the Regnan Global Equity Impact team
• Evolved key remuneration plans to strengthen investment
talent retention
10 | Pendal Group
a • Realigned distribution model with regional leadership
• Launched Regnan brand globally
• Launched new fund vehicles for US institutional clients
• Raised Pendal Australia’s brand awareness with award-winning
marketing campaign
Distribution
Develop and enhance
distribution channels
to drive sales
• Developed global data strategy and commenced implementation
• Progressed transition away from Westpac back-office services
• Implemented global platform for substantial shareholder reporting
• Implemented global HR system
• Invested in technology that enabled a smooth transition to
working remotely
Operating platform
Create an operating platform
that enables efficient execution
of strategic priorities
Annual Report 2020 | 11
Global Operating Review (continued)
Financial Performance
The 2020 Financial Year saw heightened market volatility, particularly in the March quarter
as a result of COVID-19 before recovering in the second half of the year. Cash Net Profit After
Tax (Cash NPAT) was $146.8 million, a decrease of 10.2 per cent on the previous year,
while Statutory NPAT declined 24.7 per cent to $116.4 million. Funds under management
(FUM) declined eight per cent to $92.4 billion primarily due to net outflows of $6.5 billion,
resulting in a 3.3 per cent decline in revenue to $474.8 million for the year.
Five-year profile
Cash NPAT ($m)
Statutory NPAT ($m)
Operating revenue ($m)
Operating expenses ($m)
Cash EPS (cps)
Dividends (cps)
Average FUM ($b)
Closing FUM ($b)
FY16
156.0
142.0
493.9
297.0
50.8
42.0
80.2
84.0
FY17
173.1
147.5
491.0
281.9
55.3
45.0
90.4
95.8
FY18
201.6
202.0
558.5
316.9
63.7
52.0
99.5
101.6
FY19
163.5
154.5
491.2
290.2
51.3
45.0
98.8
100.4
FY20
146.8
116.4
474.8
298.5
45.5
37.0
94.8
92.4
Funds under management (FUM)
Closing FUM was $92.4 billion as at 30 September 2020,
eight per cent lower than pcp ($100.4 billion). The decline in
FUM was primarily the result of net outflows of $6.5 billion and
unfavourable foreign currency movements of $2.3 billion as the
US dollar (-5.1%) and British pound (-0.9%) weakened against
the Australian dollar. Market movements and investment
performance combined added $0.8 billion to FUM with strong
investment performance more than offsetting the adverse
impact of market movements.
Outflows were primarily the result of $3.3 billion in net
redemptions from European strategies as investors continued
to reduce their exposure to the region over Brexit concerns and
investment underperformance.
Additionally, Westpac outflows totalled $2.6 billion due to
the ongoing run-off of the legacy book as well as further
transitioning of corporate superannuation portfolios during
the year.
Positive net flows were achieved in a number of
strategies including International Select (+$1.0 billion),
Global Opportunities (+$0.7 billion), UK Dynamic (+$0.5 billion)
and UK Opportunities (+$0.4 billion).
$b
Institutional
Wholesale
Australia
OEICs
US Pooled
Pendal Group Core Funds
Westpac - Other1
Westpac - Legacy
Total Pendal Group FUM
30-Sep-19
Closing FUM
38.0
Net flows
0.3
Other2
0.4
FX impact
(0.8)
8.2
19.1
16.3
81.6
13.8
5.0
100.4
(0.5)
(4.1)
0.4
(3.9)
(1.1)
(1.5)
(6.5)
(0.4)
(2.6)
3.6
1.0
(0.2)
0.8
(1.5)
(2.3)
(2.3)
30-Sep-20
Closing FUM
37.9
7.3
12.4
18.8
76.4
12.7
3.3
92.4
1 Represents all Westpac directed mandates covering corporate and retail superannuation, multi-manager portfolios, managed accounts
and Westpac capital
2 Includes market movement, investment performance and distributions
12 | Pendal Group
Investment performance
Global equity markets were volatile during the year. Following a rally in the four months to January 2020, markets contracted
significantly in February and March upon the outbreak of the COVID-19 pandemic before recovering ground in the June and
September quarters.
For the 12 months to 30 September 2020, market returns across the globe were quite varied. The MSCI ACWI Index in local
currency terms returned 6.3 per cent and the S&P 500 rose 13.0 per cent, while the S&P/ASX All Ordinaries Index and the
FTSE 100 fell 11.6 per cent and 20.6 per cent, respectively. Markets in Europe were particularly affected by the pandemic and
declined significantly while Asian markets experienced mixed returns.
Pendal's investment performance during the year saw notable improvement with 72 per cent of the Group's FUM outperforming
respective benchmarks. Global and Australian equity strategies performed particularly strongly, as well as those in cash and
fixed income. Long-term investment performance remains strong with 71 per cent of investment strategies outperforming their
benchmarks over the three years to 30 September 2020 and 70 per cent over five years.
FUM FY20
($b)
% FUM outperformed1
1 Yr
Global/International Equities
33.9
Australian Equities
Cash
Fixed Income
UK Equities
Emerging Market Equities
Multi-Asset
European Equities
Property
Asian Equities
Other
Total FUM
15.1
12.1
8.1
7.9
4.8
4.0
2.9
1.7
1.6
0.3
92.4
79%
95%
92%
89%
14%
43%
1%
37%
100%
83%
21%
72%
3 Yr
79%
94%
100%
89%
8%
51%
1%
0%
100%
82%
21%
71%
5 Yr
88%
82%
100%
55%
9%
78%
1%
0%
100%
3%
96%
70%
Since inception
83%
97%
100%
82%
83%
97%
67%
86%
100%
73%
96%
88%
1 Fund performance is pre-fee, pre-tax and relative to the fund benchmark; % of FUM outperformed relates to FUM with sufficient track record only.
Revenue
Total fee revenue was $474.8 million, down 3.3 per cent on
the previous year, primarily due to lower base management
fees which declined by 5.1 per cent. Average FUM over the
year was 4.0 per cent lower at $94.8 billion and fee margins
declined one basis point to 48 basis points as a result of
outflows in higher margin channels. Performance fees for the
year totalled $13.4 million, a $7.5 million increase on the prior
year led by strong outperformance in the Pendal MicroCap
Opportunities Fund.
With global markets and flows stabilising in the second half of
the year, and investment performance strong in a number of
key investment strategies, momentum is positive heading into
the 2021 Financial Year.
Expenses
Total operating expenses were $298.5 million, a 2.8 per cent
increase on FY19. During the year there was a natural reduction
in certain expenses due to COVID-19 including travel, sales
conferences and administrative expenses as activity was
scaled back. Despite the challenging environment, investment
in people, product and operations continued. The Group
expanded its Global Executive team with the appointment of
Nick Good, as JOHCM CEO – USA, onboarded a UK-based
Global Equity Impact team and enhanced the operating
platform with an increased focus on data and technology.
In the coming year, investment into strategic growth initiatives
will continue. The Group is looking to expand its responsible
investment capabilities, building on its strong reputation in the
rapidly growing ESG sector, and broaden its global distribution
network to capture market share, particularly in Europe and
the US. Investment in the Group’s operating platform will be
elevated, particularly in data and digital marketing to drive
efficiencies and leverage global scale.
New underlying profit measure
from FY21
From the 2021 Financial Year, Pendal Group
will be using “Underlying Profit After Tax
(UPAT)” to report the underlying earnings
of the business. Under UPAT there will be no
adjustment for certain employee expenses
which have historically been adjusted under
Cash NPAT. This will simplify reporting and is
aligned to market practice.
UPAT will continue to adjust for the amortisation
and impairment of intangible assets, and gains
and losses from financial assets including the
Group’s seed portfolio. Both of these items are
not considered part of the underlying earnings
of the business.
The Group’s UPAT, if applied to the 2020
Financial Year, was $132.6 million.
Annual Report 2020 | 13
Global Operating Review (continued)
Financial Position
Pendal retains a strong balance sheet, with net assets at 30 September 2020
of $895.8 million, cash and seed investments of $407.9 million and no debt.
This financial strength provides a platform to support ongoing investment
for growth and diversification.
Cash
Cash held by the Group as at 30 September 2020 was
$207.5 million (2019: $150.1 million). Cash increased
on the prior year as redemptions from the seed
portfolio during the year were yet to be deployed into
new strategies.
Cash flows from ongoing operations are typically held
for working capital purposes, to acquire equity for
employee share schemes, and to fund strategic initiatives
including seed investments. Surplus cash above these
requirements are paid to shareholders in the form of
dividends. Cash flows earned by overseas subsidiaries
within the Group are held in foreign currencies,
British pounds, Euro and US dollars, until repatriated to
the Australian parent through inter-company dividends
through the year. Those dividends remain hedged in
Australian dollars until paid.
Seed investments
Seed investments are an important contributor to the
Group’s future growth. Investments are made into
new fund vehicles, as they establish an investment
performance track record, and existing funds to provide
scale as they become marketable to clients.
At 30 September 2020, the seed portfolio was
$200.4 million (2019: $259.0 million).
The seed portfolio is assessed regularly for investment
performance and scale against targets and may be
redeemed when fund size and maturity are achieved, or an
investment strategy is closed. In total, seed investments
with a market value of $132.1 million were redeemed in the
2020 Financial Year, including the JOHCM Global Smaller
Companies and JOHCM US SMID strategies.
The majority of the cash realised from redeeming
investments was redeployed to support a number of fund
vehicles including the JOHCM Global Opportunities UK
OEIC, the JOHCM Global Income Builder OEIC, and its
extension strategy, the JOHCM Credit Income mutual
fund which was launched for the US market in August
2020. Subsequent to year end, $18.3 million was also
deployed into the Regnan Global Equity Impact UK OEIC,
the Group's first Impact product for the UK market.
14 | Pendal Group
Net cash1 ($m)
207.5
177.5
153.4
163.7
150.1
Sep 16
Sep 17
Sep 18
Sep 19
Sep 20
Seed movements1 ($m)
80.2
(132.1)
(6.7)
259.0
Sep 19
seed
portfolio
200.4
Additions
Redemptions
Other
movements
Sep 20
seed
portfolio
1 Seed investments and net cash exclude escrowed fund manager
deferred remuneration held in trust
Intangibles
Pendal's balance sheet as at 30 September 2020 carried
intangible assets of $532.1 million. This comprises the
goodwill and management rights associated with the
acquisition of JOHCM in 2011 and goodwill arising from
Pendal Group Limited’s IPO in 2007.
During the year, the Group expanded its operating
segments to split the historically reported Pendal
International segment, between Europe, the UK and Asia
(EUKA) and the US regions. Consequently, the goodwill
associated with the JOHCM acquisition has been
separately attributed to the US and EUKA for the purpose
of impairment testing. There was no impairment to
the carrying value of goodwill across the Group during
the year. The management rights associated with the
acquisition of JOHCM continue to be amortised over time.
Liabilities and debt
Pendal's liabilities primarily consist of trade creditors
and accruals, lease liabilities and employee benefits.
Total liabilities were $210.6 million at 30 September 2020
(2019: $185.9 million), an increase of $24.7 million.
The increase can largely be attributable to a change
in accounting standards from the 2020 Financial Year
affecting the recognition of lease liabilities (and assets).
This change had the effect of increasing the Group’s
liabilities by $36.9 million over the year with a
corresponding offset in lease assets.
The Group continues to have no debt outstanding at
30 September 2020. A $25.0 million multi-currency
revolving loan facility is maintained and remained
undrawn throughout the financial year.
Equity and dividends
The issued capital of Pendal Group Limited remained
constant during the 2020 Financial Year and there was no
change to ordinary shares on issue. The Directors declared
a final 2020 dividend of 22.0 cents per share, bringing total
dividends for the year to 37.0 cents per share, a 17.8 per cent
decrease on last year’s dividend of 45.0 cents per share.
The total dividend represents a payout ratio of 81 per cent,
which is within the Group’s payout ratio target of
80 to 90 per cent of Cash NPAT. The Dividend Reinvestment
Plan has been activated for the 2020 final dividend.
From the 2021 Financial Year, the Board has revised the
Group’s payout ratio policy and will pay 80-95 per cent
of UPAT following the change in the Group’s alternative
profit measure.
Dividends (cps)
83%
81%
82%
88%
81%
52.0
45.0
45.0
42.0
24.0
26.0
30.0
25.0
18.0
19.0
22.0
20.0
37.0
22.0
15.0
FY16
FY17
FY18
FY19
FY20
Final dividend
Interim dividend
Payout ratio
Annual Report 2020 | 15
Global Operating Review (continued)
Risk Management
Our risk management framework continues to provide a strong foundation from which we can
successfully deliver our strategic priorities. The Group has a culture of effective risk management
and risk aware decision making is embedded into our key processes. The Board sets the risk
appetite and this guides management to proactively identify, monitor and manage the material
and emerging risks that could impact our organisation.
Our approach to risk management
Overall accountability for risk management lies with the
Pendal Group Board. The Group Audit & Risk Committee assists
the Board in its oversight of risk management, financial and
assurance matters. The Board regularly reviews and approves
the design of the risk management framework and sets the risk
appetite. This process incorporates a review of key aspects
of the strategy and assesses whether adjustments to the
material risks, risk appetite and related tolerances (i.e. limits
and capacity) need to be made as the Group’s operating
environment and strategy evolves.
During FY20 in addition to embedding the enhanced risk
framework, the key area of focus related to managing the risks
associated with the unprecedented COVID-19 pandemic.
Separate COVID-19 risk registers were developed and
this is a ‘live’ process with the key COVID-19 risks being
identified, monitored and managed. Areas of specific focus
include staff wellbeing, culture, effective remote working,
continued excellent client service, enhanced liquidity risk
management, day-to-day management of portfolios, enhanced
communication and maintaining operational resilience.
COVID-19 was also part of the strategy update discussions with
future threats and opportunities for the Group being key areas
of consideration.
The Board delegates responsibility for implementing the risk
management framework and managing the material risks within
the appetite set to the Group Chief Executive Officer.
The Group Chief Risk Officer is responsible for designing the
Group risk framework and working with the local risk teams
to support and challenge the identification, assessment,
monitoring and reporting of risk exposures and their
associated mitigants.
Managing risk to deliver our strategy
The Board endorsed an updated risk framework during
2019 and this was implemented across the Group in 2020.
When setting the risk appetite statement and updating
annually, the Board acknowledges and recognises that in the
normal course of business the Group is exposed to risk and
that it is willing to accept a certain level of risk in managing
the business to deliver its strategic objectives. As part of this
exercise the Board also considers the key risk indicators and
risk limits it is willing to accept in relation to each material
risk. Management are then held to account for managing
the material risks within the risk appetite set, thus enabling
the Group to make risk conscious decisions and generate
appropriate returns, in a controlled and deliberate manner.
The Board has a lower risk appetite in the management of
critical areas such as investment performance, regulation and
legislation, behaviour and conduct, and the risks associated
with managing the COVID-19 pandemic, as all of these could
have a significant impact on the Group’s reputation and
performance. The Group accepts a higher risk appetite,
consistent with its strategic objectives, in relation to risks
associated with business growth and change initiatives,
including investing shareholder funds in the form of seed capital
to support future growth.
Material risks
The Group actively manages a range of financial and
non-financial business risks and uncertainties which can
potentially have a material impact on the Group and its ability
to achieve its stated objectives. While every effort is made
to identify and manage material risks and emerging risks,
additional risks not currently known or detailed below may also
adversely affect future performance. The Board has identified
the Group’s material risks as outlined in the following table.
16 | Pendal Group
Risk alignment to relevant
strategic priorities
Investment capabilities
Distribution
People
Operating platform
Material risk
Risk description
Risk management
Strategic and business
COVID-19
Pandemic
The risk that the Group is unable to continue
servicing clients and manage the health, safety and
wellbeing of employees.
The risk that the Group fails to effectively consider
the future threats and opportunities resulting from
the COVID-19 pandemic.
Both risks can impact on the ability of the Group to
continue operating and deliver the strategy.
• Business Continuity Plans (BCPs) plans re-tested and crisis
management teams in place
• Successful and timely transition to 'Working from Home' in
all jurisdictions. Technology and home equipment enhanced to
support remote working, including cyber risk management
• Client service and portfolio management processes continued
and enhancements made where appropriate, e.g. proactive and
more frequent client communications and enhanced liquidity
risk management
Strategic
Alignment
and Execution
The risk that the Group’s strategy is not aligned to
maximise shareholder and client value or we fail to
effectively execute the Group’s strategy.
Both risks can impact on the ability of the Group to
deliver on expected outcomes.
Business model
The risk that the business model does not respond
effectively to external change which could result
in loss or missed opportunities. This includes
external factors such as the markets, geo-political
events and competition.
People
The Group’s performance is largely dependent
on its ability to attract and retain talent. Loss of
key personnel could adversely affect financial
performance and business growth.
There is also the risk of concentration whereby
a material proportion of the Group’s revenue is
delivered via a few strategies and therefore creates
reliance on a few key investment personnel.
The risk that our investors seek other investment
products if we are unable to meet investment
objectives.
• Enhanced risk management processes with specific COVID-19 risk
registers in place
• Additional oversight to ensure material suppliers and third party
providers continue to deliver on the agreed service levels
• Staff wellbeing seminars and increased leadership focus on
communication and employee welfare, with regular staff surveys
and feedback mechanisms in place
• Updated the Group strategy taking COVID-19 threats and
opportunities into consideration
• Annual strategy and budget process, with outcomes and priorities
approved by the Board
• Regular monitoring of strategic execution and strong reporting
mechanisms, to support effective Board oversight
• Clearly articulated objectives and governance structure
• Employee performance management process and remuneration
aligned to delivery of strategic objectives
• Robust search and due diligence for acquisitions, engaging
subject matter experts and external consultants
• Annual strategy and budget process
• Strategy and risk management processes to continuously monitor
and manage external threats and opportunities
• Clearly articulated governance processes to enable effective
decision making
• Variable remuneration aligned to strategic objectives
• Brexit Steering Committee in place and the Irish Management
Company established, to allow the continued distribution of
relevant products across Europe
• Global project underway to further develop the Group’s
Responsible Investment business under the 'Regnan' brand in a
disciplined and controlled manner. New Regnan branded products
will continue to be launched and a highly regarded Impact
investing team has joined the Group, with their product being
launched early in FY21
• Competitive remuneration structures in the relevant employment
markets to attract, motivate and retain talent, with alignment to
client and shareholder outcomes
• Long-term retention plans
• Succession planning to develop or attract talent for
sustainable growth
• Maintenance of a strong reputation and culture which promotes
an attractive workplace
• Employee engagement surveys to support retention
• Performance management processes to help develop and
grow talent
• Board review proposals for new team acquisitions to ensure
areas, such as cultural fit, product offering, and financials,
are robustly considered
Annual Report 2020 | 17
Global Operating Review (continued)
Material risk
Risk description
Risk management
Behaviour
and conduct
The risk of inappropriate, unethical or unlawful
behaviour by employees, which is not in line with the
Group’s core values.
• Comprehensive recruitment and performance management
processes to assess behaviour and conduct
• Clearly defined Code of Conduct which outlines the expected
This includes the risk of senior management failing
to set an appropriate cultural ‘tone from the top’,
which may result in the delivery of detrimental or
suboptimal outcomes for clients and shareholders.
Transformation
(change
management)
Failure to effectively manage material change
projects which could result in loss or missed
opportunities. Such a risk could result from poor
planning, ineffective project governance, insufficient
resources (including human capital), ineffective
execution, and poor management of project
interdependencies.
Pendal Australia is undergoing a major
transformational change program as it enhances its
operational infrastructure and therefore there are
heightened risks which are being carefully managed.
Product and performance
Product and
investment
performance
The risk that the Group’s products and solutions do
not meet client preferences. This includes changing
client needs, fee structures, and asset classes.
The risk that portfolios will not meet client
investment objectives or that there is a failure to
achieve consistent long-term performance that
delivers on their expectations.
Distribution
The risk that the design and execution of the
distribution strategy is ineffective, resulting in a
failure to positively identify, engage and support
clients, which in turn results in a failure to deliver
budgeted fund flows.
Funds flows have been negatively impacted in the UK
and Europe primarily by external factors, including
Brexit and COVID-19. FY20 Q4 has seen early signs of
improvement and a return to positive net inflows. In
Australia, the Banking Royal Commission has had a
significant impact on the industry, and outflows from
historically significant client Westpac have continued
as they execute their exit from wealth management.
18 | Pendal Group
behaviour of all individuals
• Whistleblowing Framework in place
• Embedded Risk Management Framework, which incorporates
conduct risk management
• Ongoing HR, Risk and Compliance training and confidential staff
engagement surveys
•
Internal audit program incorporating conduct assessment
• Annual strategy and budget process, with transformation change
priorities approved by the Board
• Dedicated change management team and effective approach
and processes in place
• Risk management embedded within the change
management process
• Appropriate governance processes in place to monitor, escalate
and report on progress to the relevant Committees and Boards
•
Internal audit providing independent oversight over major
change projects
• Strategic skill sets for project teams tasked with
transformational projects
• During FY20 a key transformation program focusing on global
data commenced, this includes how we buy data related
technology; use data to improve the client experience and our
overall performance; and how we continue to protect data in line
with regulation and legislation
• Talent hiring and succession planning
• Clearly defined investment strategies and investment processes
within stated risk parameters
• Regular investment risk reviews and analysis of portfolio risks
across all asset classes and strategies (including market,
liquidity and credit counterparty)
•
Investment monitoring performed independently of our
portfolio managers
• Regular client reporting and performance update calls
• Formal approach to product governance and innovation, including
management of the product lifecycle (design, approval, launch,
post implementation review, ongoing monitoring and support)
• Ongoing external insights into how client preferences
are changing
• During FY20, several new products were launched to meet
client demands and the inaugural 'Value for Money' report was
published for the in-scope JOHCM funds
• Client engagement and distribution is a key part of the overall
strategy that is approved and monitored by the Board
• Ongoing external insights into how client preferences and market
requirements are developing
• Fee structures benchmarked and updated where required
• Regular Board reporting and discussions on market trends and
changes in FUM
• Operational restructure and recruitment to expand distribution
capability has largely been completed in Australia and is
underway in the UK/Europe and US
Material risk
Risk description
Risk management
Operational
Regulation
and legislation
There is a risk that the Group will not be able
to respond effectively to regulatory change or
comply with relevant laws and regulations in
multiple jurisdictions. Failure to effectively manage
these risks could result in sanctions, fines and
reputational damage.
The volume of regulatory and legislative change
remains challenging. Examples of this include the
developments coming from the UK's FCA Asset
Management Market Study and the Senior Managers
and Certification Regime; US enhancements to
liquidity management rules; and the enhanced
whistleblowing and modern slavery requirements
in Australia. As a result, the cost of compliance
remains high.
There is also an increased focus on Responsible
Investing, including areas such as climate risk.
The implementation of the European Stewardship
Code and other global regulatory initiatives should
help to improve transparency and consistency in the
ESG space.
• Clearly defined compliance framework to meet
compliance obligations
• Establishing policies and procedures supporting the risk
and compliance framework
• Experienced and appropriate level of legal, risk, tax and
compliance resources to manage obligations
• Regular and constructive engagement with regulators, including
participation in industry bodies
• Ongoing monitoring, reporting and review of regulatory
obligations, including new and proposed legislation
• External advisors used where necessary to complement
in-house knowledge
•
Independent non-executive directors appointed to subsidiary
UK regulated entities
• Tax management framework to identify, manage and
communicate key tax risks
• Projects underway to improve processes and systems such as
substantial shareholder reporting
Technology
and data
(including cyber)
The risk that the Group does not optimise the use
of its data and develop appropriate technological
solutions. This may negatively impact the Group’s
ability to deliver growth.
• Global data management project is underway to enhance
processes and systems. Recruitment of dedicated data specialists
is largely completed
• Participation in external forums and hosting industry insights tech
Coupled with the risk that the existing technology
operating platform is inadequate and may suffer
disruptions such as system failures, faults, illegal
unauthorised use of data and cybercrime.
Data management and digital transformation will
continue to be key areas of future focus.
Supplier
management
(including
outsourcing)
The risk of loss or reputation damage arising
from inadequate supplier selection and
oversight processes.
The Group has a number of key outsource providers,
particularly with respect to fund administration
and custody services. Over the next two years, the
Group’s operations will be exposed to heightened
supplier risks as the business seeks to transition and
introduce new infrastructure suppliers, for example,
back office providers.
Market financial
and treasury
The Group’s fee income is derived from the assets
managed on behalf of clients and the associated
fee rates.
The assets under management face a variety of risks
arising from the unpredictability of financial markets,
including movements in equity markets, interest
rates and foreign exchange rates.
The Group also invests its own capital alongside that
of clients when establishing new financial products
and building them to scale. This exposes the Group
to the same potential loss of capital as clients.
COVID-19 related market falls has seen this risk
increase and this is reflected in significant mark-to-
market losses on the seed portfolio over the year.
There is also the risk of the failure of the Group to
maintain appropriate working capital and reserves to
respond to unexpected adverse events.
advisory board meetings
•
Independent review of the design and effectiveness of
technological and data internal controls
• Annual review and testing of Disaster Recovery and Business
Continuity Plans
• Regular information security training
• Ongoing penetration testing and consultation with cyber
security specialists
• Strategy process incorporates clarity on what areas we want to
use third party suppliers
• Supplier management due diligence process
• Clearly defined governance framework, policies and procedures
• Regular monitoring and review of service level agreements and
performance standards
•
Independent annual audit of the design and effectiveness of
internal controls
• Ongoing monitoring and reporting
• Regular communication/meetings with key outsource providers
• Major project underway, following a disciplined change
methodology, to transition to new back/front office supplier/s
• Diversification across asset classes, investment styles and
geographies
• Budgeting and financial forecast management
• Ongoing monitoring and review of strategy
• Conservative approach to leverage and the use of debt –
currently no borrowings
• Monthly offshore earnings hedged into Australian dollars
• Capital policy in place with limits, including a seed capital policy
• Ongoing monitoring and annual board review of seed capital
portfolio performance
• Capital requirements regularly monitored and stress testing
carried out, including COVID-19 considerations
Annual Report 2020 | 19
Markets: A Year in Review
As with everyday life everywhere, the past 12 months in financial markets have been,
to use one of the words of 2020, unprecedented.
European equities, as measured by the MSCI Europe Index,
fared better but still returned a disappointing -9.2 per cent
in Euro terms. Emergency measures provided support for the
rebound, but resurgent COVID-19 case numbers across the
continent in early September, provoked investor concern about
the strength and durability of the nascent economic recovery.
US
US equities topped the global leaderboard, with US large-
cap technology stocks lifting indices higher and ensuring a
remarkable recovery for the overall US market at the headline
level. The S&P 500 Index returned 13.0 per cent over the
year, in US dollar terms (for context, the MSCI World index
returned 8.5 per cent in US dollar terms). But these figures belie
underlying disparities at the stock level and what was actually
very narrow market leadership.
Emerging markets
Emerging market equities achieved solid gains over the year,
with the MSCI Emerging Markets Index returning 8.1 per cent in
US dollar terms. With the US Federal Reserve’s monetary taps
fully opened, the US dollar weakened significantly, providing a
welcome boost to emerging markets and commodity prices.
With technology stocks proving to be clear pandemic winners,
it was no surprise to see Asia lead the gains. China, along with
the tech-heavy markets of South Korea and Taiwan, were the
top performers.
Australia
The Australian equity market ended the period down
11.6 per cent in AUD terms (S&P/ASX All Ords), lagging the
global index in the rebound and over the year due in part to
a smaller index exposure to the large cap growth stocks,
particularly in tech, that have driven global equity returns.
Overall, Australia has weathered the impact of COVID-19
relatively well compared to most other advanced economies.
Tourism and travel were hit hard by the lack of international
travellers as well as state border closures. However retail
spending remained strong, supported by a large fiscal stimulus
package. Chinese demand for iron ore has proved resilient,
although other commodity export volumes have been affected
by political friction.
Investors had reasons for optimism early in the period.
President Trump and Chinese Vice Premier Liu He signed a
‘Phase 1’ trade deal in January, putting an end to prolonged
and damaging trade war rhetoric. In the UK, the resounding
victory of Prime Minister Johnson’s Conservative Party in the
December 2019 general election facilitated the UK’s departure
from the EU with a 12-month transition period and seemingly
brought clarity after a long period of uncertainty in UK politics.
On the financial front, 2019 proved to be a banner year for
global stock markets amid abundant liquidity from the major
central banks.
This period of relative serenity in global economies and
financial markets then rapidly evaporated as the COVID-19
pandemic rapidly became a global crisis. The resultant
government-imposed lockdowns of economies around the
world, introduced in an effort to halt the global pandemic,
prompted a rapid and brutal stock market sell-off in February
and March that proved to be the fastest bear market in history.
As societies effectively closed down for weeks on end in a
bid to halt the contagion, economies suffered unparalleled
declines. Amid concerns over rapidly escalating job losses
and permanent scarring of the corporate sector, particularly
those areas of the economy most hurt by the lockdowns such
as travel and hospitality, governments responded with a
historically unmatched level of fiscal stimulus and packages,
including furlough schemes to preserve jobs. Central banks
dovetailed with government rescue efforts by providing a
torrent of liquidity.
This global policy largesse caused stock markets to rebound
quickly. The resurgent US equity market was in the vanguard,
powered by technology stocks, many of which were deemed
‘stay at home’ winners and whose business models were
largely unaffected by lockdown. Healthcare and consumer
discretionary stocks also experienced major gains globally.
Energy, financial and real estate stocks suffered significant
losses over the 12-month period.
Government and corporate bond markets enjoyed a strong
12 months amid interest rate cuts, severe risk aversion in the
depths of the pandemic and major purchases of corporate bond
assets by central banks, such as the US Federal Reserve.
UK and Europe
In the UK, COVID-19 aside, Brexit dominated headlines and
ensured that UK equities remained out of favour with investors,
with the FTSE 100 index returning -20.6 per cent over the
12 months to 30 September 2020. Against this turbulent
backdrop, the UK stock market was hit hard, with domestic-
facing and ‘value’ stocks taking the brunt of the blow.
20 | Pendal Group
Equity market movements
12 months to 30 September 2020
20%
15%
10%
5%
0%
-5%
-10%
-15%
-20%
13.0%
14.7%
8.1%
8.5%
-9.2%
-11.6%
-20.6%
FTSE 100 (GBP)
S&P/ASX All Ords (AUD)
MSCI Europe (EUR)
MSCI World (USD)
MSCI Emerging Markets (USD)
MSCI Asia ex Japan (USD)
S&P 500 (USD)
10-year government bond yields
1.7%
1.0%
0.8%
0.7%
0.5%
0.2%
0.0%
-0.2%
-0.6% -0.5%
USA
Australia
UK
Germany
Japan
30/09/2019
30/09/2020
Annual Report 2020 | 21
Sustainability Overview
At Pendal, we recognise the benefit and
importance of identifying material sustainability
risks in our business operations as well as our
investments. We view effective management of
these risks as critical to establishing a long-term
sustainable business and delivering value
to our stakeholders.
For additional information, please refer to:
• Corporate Sustainability Report1
• Corporate Governance Statement2
• Risk Management Report (page 16)
Our people
Our people are our greatest assets.
Our clients
We partner with our clients
for long-term success.
Our community & environment
We make a positive contribution
to society.
FY20 Highlights
Highlight
People
Client
Community
Established Diversity and Inclusion (D&I) committees to champion
initiatives and support our Group’s D&I priorities
Continued to expand our range of responsible investment strategies
with the launch of the Group's first Impact strategy, the Regnan Credit
Impact Trust and onboarding of the Global Equity Impact team
Boosted investment team knowledge of responsible investment topics
through dedicated workshops run by our ESG specialist business, Regnan
Managed COVID-19 related risks and enhanced governance processes
to ensure business continuity, employee wellbeing and leading
client service
Enhanced our corporate governance framework and decision-
making processes
Formed Community Committees to identify and prioritise opportunities
for community engagement
Improved overall employee engagement
Implemented a new global HR system
1 pend.al/CSR-2020
2 pend.al/CGS-2020
22 | Pendal Group
Engagement in action
JOHCM and International
Select Team
Australian equities focus
on cultural heritage
Throughout the year, the JOHCM Global and
International Select team collaborated with Regnan
on a multi-month engagement with a food producer
across several ESG priorities. Regnan's bespoke
research on the company and deep ESG expertise
supported a better-informed view of the company's
risk profile and shaped the objectives sought in their
collaborative engagement. Throughout the year
the company has implemented several changes
directly addressing priority areas. The company
acknowledged that the feedback enhanced their
understanding of business risks and the value in
pursuing a more sustainable business model.
Throughout the year, the issue of cultural heritage
risks for resource companies was thrust into the
spotlight with revelations of the destruction of
ancient Aboriginal rock shelters at Juukan Gorge.
While issues around native title and benefit sharing
with traditional owners have been discussed in
engagement with resource companies for a few years,
this incident, and the heightened public scrutiny that
resulted, has elevated reputational and stakeholder
risks across the resource sector more broadly. In
a multi-month program of engagement, the team
engaged at board, executive and site level with five
companies operating in the Pilbara region of Western
Australia to make known our wishes that companies
take a more holistic approach to stakeholder issues,
and to demonstrate that they do not just rely on legal
minimums in making decisions.
JOHCM UK Equity Income Fund
engagement with an oil and gas major
Pendal BIDS team (Australia) engagement
with a European railway company
In the year, the team engaged with an international
oil and gas company, after identifying concerns
about its capital allocation priorities. It was clear that
the company needed to accelerate its investments
in low carbon and renewable energy projects
and that, to fund this multi-year move, its regular
dividend distribution would have to be lowered.
Despite the shortfall in income that shareholders
would receive, the team felt that such a move would
be in all stakeholders' interests and in time would
reduce the company’s cost of capital. Subsequently
the company announced a 50 per cent cut in their
annual dividend to fund an ambitious expansion of
their low carbon activities, as well as announcing
a commitment to steadily reduce its hydrocarbon
production over the next decade.
While this issuer had otherwise strong sustainability
credentials, particularly on climate change,
a deterioration in safety performance and a
lack of disclosure on management's response
raised concerns. Prior to making an investment
decision, our BIDS team worked with Regnan
to develop a plan of action for engagement to
address these shortcomings. They then held a
detailed discussion with the issuer, probing safety
performance across employee, contractor, and
customer segments, and encouraged disclosure
enhancement, conveying the materiality of
safety to the team's evaluation of the company’s
sustainability performance.
Annual Report 2020 | 23
2020 Directors’ Report and Financial Report
Contents
Directors’ Report
Directors’ Report
Remuneration Report
Auditor’s Independence Declaration
Financial Report
Consolidated Statement of Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Consolidated Financial Statements
A. About this Report
A1. Statement of compliance
A2. Basis of preparation
A3. New and amended accounting standards
B. Results for the year
B1. Segment information
B2. Revenue and other income
B3. Earnings per share
B4. Taxation
B5. Reconciliation of cash flow from operating activities
C. Capital and financial risk management
C1. Capital management
C2. Contributed equity
C3. Reserves
C4. Dividends
C5. Financial assets held at FVTPL
C6. Borrowings
C7. Financial risk management
D. Employee remuneration
D1. Employee benefits
D2. Share-based payments
D3. Key management personnel disclosures
E. Group structure
E1. Parent entity information
E2. Subsidiaries and controlled entities
E3. Structured entities
E4. Related party transactions
F. Other
F1. Intangible assets
F2. Capital commitments
F3. Lease assets and liabilities
F4. Contingent liabilities
F5. Remuneration of auditors
F6. Subsequent events
Directors’ Declaration
Independent Auditor’s Report
25
34
67
68
69
70
71
72
72
72
72
74
75
75
76
77
78
80
81
81
82
84
85
86
86
87
93
93
94
97
98
98
99
101
101
102
102
104
105
106
106
106
107
108
24 | Pendal Group
Directors' Report
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2020
The Directors present their report and the annual financial report for Pendal Group Limited (the Company) and its
consolidated subsidiaries (together referred to as the Pendal Group or the Group) for the 2020 Financial Year.
Board of Directors
The Directors of the Company during the 2020 Financial Year and up to the date of this report are:
Director
Date of Appointment
James Evans
Appointed to the Board on 2 June 2010
Appointed Chairman on 6 December 2013
Period
Full year
Emilio Gonzalez
Appointed Managing Director & Chief Executive Officer on 22 January 2010
Full year
Sally Collier
Andrew Fay
2 July 2018
1 October 2011
Christopher Jones
8 November 2018
Kathryn Matthews
1 December 2016
Deborah Page AM
7 April 2014
Full year
Full year
Full year
Full year
Full year
Details of the qualifications, experience and responsibilities of the current Directors are set out below:
James Evans
BEc CA F Fin FAICD
Independent Non-executive
Chairman
Board Committees: Nil
Emilio Gonzalez
BCom (Ec) CFA
Group CEO & Managing Director
Board Committees: Nil
James Evans, who is based in Australia, brings to the
Board over 40 years of corporate leadership experience
in finance, risk management and business development
and operations. James’ corporate experience spans
accounting, capital markets, corporate finance,
mergers & acquisitions, insurance, joint venture
arrangements, strategy and technology for companies
including the Commonwealth Bank, Lendlease Group,
GEC Australia and Grace Bros.
James has significant experience as a company director
across ASX listed, private and regulated entities and
accordingly, brings to the Board both executive and
company director skills in financial and risk management,
strategy and corporate governance and compliance.
Specifically, he has sector experience and expertise
in banking and financial services, including funds
management, superannuation and financial services
technology, property investment, lease financing and life
and general insurance.
James is currently Chairman of ME Bank Limited and J O
Hambro Capital Management Holdings Limited and a Non-
executive Director of Investa Wholesale Funds Management
Limited and ICPF Holdings Limited.
Directorships of other listed entities over the
past three years: Nil
Emilio Gonzalez is the Group’s Managing Director &
Chief Executive Officer. He was appointed a member
of the Group’s Global Executive Committee on its
establishment on 1 May 2016. Prior to joining Pendal Group,
Emilio was Group Executive, Global Equities at Perpetual
Limited. Prior to this role, he was the Chief Investment
Officer for seven years. During his early tenure at Perpetual,
Emilio was responsible for establishing and running a
currency program, tactical asset allocation strategies,
Perpetual’s diversified and balanced funds, as well as
being Head of Research.
Prior to joining Perpetual, Emilio worked as the Chief Dealer
at Nikko Securities (Australia) Limited and as a retail client
adviser at Norths Stockbroking Limited.
Emilio is a Director of JOHCM (USA) Inc, Pendal UK
Limited and J O Hambro Capital Management
Holdings Limited. Emilio is also a Director of The Banking
and Finance Oath Limited.
Directorships of other listed entities over the
past three years: Nil
Annual Report 2020 | 25
Annual Report 2020 | 25
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2020Directors' Report Directors' Report
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2020
Sally Collier
BEc GAICD
Independent Non-executive
Director
Board Committees:
Member of the Audit & Risk
Committee and the Remuneration
& Nominations Committee
Andrew Fay
BAgEc (Hons) A Fin
Independent
Non-executive Director
Board Committees:
Chair of the Remuneration &
Nominations Committee
Sally Collier, who is based in Australia, brings to the Board
20 years of investment banking experience and 10 years
of asset management executive experience. Most of
Sally’s executive career was spent in the USA (two years),
London (23 years) and Hong Kong (four years). Prior to
returning to Australia, Sally was a partner at the
international private equity and infrastructure investment
firm, Pantheon, where she held leadership roles in business
and product development, investor relations, and marketing
and communications. This followed nearly 20 years in
investment banking, mostly at HSBC Investment Bank in the
UK, where she was engaged in a broad range of transactions
including mergers & acquisitions, capital markets (both debt
and equity) and initial public offerings, before joining the
Management Committee as an Executive Director.
Since returning to Australia in 2013, Sally has held non-
executive positions in the financial services sector covering
funds management and financial services technology,
across ASX listed, private and regulated entities.
Sally brings to the Board, through her executive and
non-executive experience, skills in merger & acquisitions,
strategic development, international markets, stakeholder
engagement, and capital markets.
Sally is currently a Non-executive Director of J O Hambro
Capital Management Holdings Limited, Indue Ltd, Utilities
Trust of Australia and the Clayton Utz Foundation.
Directorships of other listed entities over the
past three years: Nil
Andrew Fay, who is based in Australia, brings to the
Board over 30 years’ experience in funds and investment
management. Andrew’s significant experience includes
Chief Executive Officer and Chief Investment Officer
roles at Deutsche Asset Management (Australia)
Limited. He also held a number of other senior
investment roles at Deutsche Asset Management and
previously at AMP Capital. From 1998 to 2006, he was
a member of the Investment Board Committee of the
Financial Services Council.
Andrew has experience as a company director across ASX
listed, private and regulated entities and accordingly brings
to the Board skills in financial and risk management, capital
markets, executive remuneration frameworks, strategy,
investment and corporate governance. Specifically, he
has sector experience and expertise in financial services,
including investment, funds, property and infrastructure
management.
Andrew is currently a Non-executive Director of J O Hambro
Capital Management Holdings Limited, Cromwell Property
Group, Spark Infrastructure RE Limited and National Cardiac
Pty Limited.
Andrew has previously served as the Chairman of Deutsche
Asset Management (Australia) Limited, Deutsche Managed
Investments Limited and Tasman Lifestyle Continuum
Limited.
Directorships of other listed entities over the
past three years:
Gateway Lifestyle Operations Limited (2015-2018)
26 | Pendal Group
26 | Pendal Group
Directors' ReportFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2020 Directors' Report
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2020
Directors' Report
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2020
Sally Collier
BEc GAICD
Independent Non-executive
Director
Board Committees:
Member of the Audit & Risk
Committee and the Remuneration
& Nominations Committee
Andrew Fay
BAgEc (Hons) A Fin
Independent
Non-executive Director
Board Committees:
Chair of the Remuneration &
Nominations Committee
Sally Collier, who is based in Australia, brings to the Board
Andrew Fay, who is based in Australia, brings to the
20 years of investment banking experience and 10 years
Board over 30 years’ experience in funds and investment
of asset management executive experience. Most of
management. Andrew’s significant experience includes
Sally’s executive career was spent in the USA (two years),
Chief Executive Officer and Chief Investment Officer
London (23 years) and Hong Kong (four years). Prior to
roles at Deutsche Asset Management (Australia)
returning to Australia, Sally was a partner at the
Limited. He also held a number of other senior
international private equity and infrastructure investment
investment roles at Deutsche Asset Management and
firm, Pantheon, where she held leadership roles in business
previously at AMP Capital. From 1998 to 2006, he was
and product development, investor relations, and marketing
a member of the Investment Board Committee of the
and communications. This followed nearly 20 years in
Financial Services Council.
investment banking, mostly at HSBC Investment Bank in the
UK, where she was engaged in a broad range of transactions
including mergers & acquisitions, capital markets (both debt
and equity) and initial public offerings, before joining the
Management Committee as an Executive Director.
Andrew has experience as a company director across ASX
listed, private and regulated entities and accordingly brings
to the Board skills in financial and risk management, capital
markets, executive remuneration frameworks, strategy,
investment and corporate governance. Specifically, he
Since returning to Australia in 2013, Sally has held non-
has sector experience and expertise in financial services,
executive positions in the financial services sector covering
including investment, funds, property and infrastructure
funds management and financial services technology,
management.
across ASX listed, private and regulated entities.
Sally brings to the Board, through her executive and
non-executive experience, skills in merger & acquisitions,
strategic development, international markets, stakeholder
engagement, and capital markets.
Sally is currently a Non-executive Director of J O Hambro
Capital Management Holdings Limited, Indue Ltd, Utilities
Trust of Australia and the Clayton Utz Foundation.
Directorships of other listed entities over the
past three years: Nil
Andrew is currently a Non-executive Director of J O Hambro
Capital Management Holdings Limited, Cromwell Property
Group, Spark Infrastructure RE Limited and National Cardiac
Pty Limited.
Limited.
Andrew has previously served as the Chairman of Deutsche
Asset Management (Australia) Limited, Deutsche Managed
Investments Limited and Tasman Lifestyle Continuum
Directorships of other listed entities over the
past three years:
Gateway Lifestyle Operations Limited (2015-2018)
Christopher Jones
MA (Cantab) CFA
Independent
Non-executive Director
Board Committees:
Member of Audit &
Risk Committee
Kathryn Matthews
BSc BEc
Independent
Non-executive Director
Board Committees:
Member of the Remuneration
& Nominations Committee
Christopher Jones, who is based in New York City, has
over 35 years’ experience in the financial services industry.
He has significant experience in investment management
as both a Chief Investment Officer and Portfolio Manager
in the US.
Most recently, Christopher was Principal of CMVJ Capital
LLC, a private investor and adviser in the financial services,
asset management and technology industries. In the two
years prior to 2016, Christopher was Head of Blackrock’s
US Global Fundamental Equity and co-head of Global Active
Equity. Previously, he spent 32 years in a range of roles at
Robert Fleming and Co and JP Morgan Asset Management,
including being Managing Director and Chief Investment
Officer, Growth and Small Cap Equities for a period of
10 years.
Christopher brings to the Board skills in financial and risk
management, financial services technology, strategy
and investment governance. Specifically, he has sector
experience and expertise in international financial services,
including investment and funds management.
Christopher is currently a Non-executive Director of
J O Hambro Capital Management Holdings Limited.
Directorships of other listed entities over the
past three years: Nil
Kathryn Matthews, who is based in the United Kingdom,
brings to the Board nearly 40 years’ experience in funds
and investment management. She has extensive experience
in global investment management businesses in the
UK and Hong Kong, including as Chief Investment Officer,
Asia Pacific ex Japan at Fidelity International based in
Hong Kong. She commenced her career at Baring Asset
Management, holding a broad range of roles over 16 years as
a global equity portfolio manager and latterly as the Head of
Institutional Business, Europe and UK.
Kathryn has experience as a company director across listed,
private and regulated entities and accordingly brings to
the Board skills in financial and risk management, strategy,
marketing and distribution, investment and corporate
governance. Specifically, she has sector experience and
expertise in financial services, including banking, funds
and investment management.
Kathryn is currently Chair of Barclays Investment Solutions
Limited, a Non-executive Director of J O Hambro Capital
Management Holdings Limited as well as the following
UK-based companies: Barclays Bank UK Plc and
VinaCapital Vietnam Opportunity Fund Limited.
Kathryn is also a member of the Council and Chairman
of Pension Trustees for the Duchy of Lancaster,
the private estate of the British sovereign.
Directorships of other listed entities over the
past three years:
Rathbones Plc, JPMorgan Chinese Investment Trust
(Both listed on LSE).
26 | Pendal Group
Annual Report 2020 | 27
Annual Report 2020 | 27
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2020Directors' Report Directors' Report
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2020
Deborah Page AM
BEc FCA FAICD
Independent
Non-executive Director
Board Committees:
Chair of the Audit &
Risk Committee
Group Company Secretary
& Head of Corporate
Governance
Joanne Hawkins
BCom LLB Grad Dip CSP FGIA
FCG GAICD
Joanne Hawkins is responsible for Company Secretarial
and Corporate Governance functions for all entities
across the Group.
Joanne has extensive experience in corporate governance
within the funds management industry. Joanne started her
career as a solicitor at a major law firm and then held in-
house and legal roles in New Zealand and Solomon Islands.
Prior to joining Pendal Group in 2017, Joanne held the role
of Company Secretary at Perpetual Limited, which included
responsibility for the Legal, Compliance and Company
Secretariat functions across the Perpetual group of
companies.
Deborah Page, who is based in Australia, brings to the Board
extensive financial expertise from her time at Touche Ross/
KPMG including as a Partner, and subsequently from senior
finance and operating executive roles with the Lend Lease
Group, Allen, Allen & Hemsley and the Commonwealth
Bank. She has specific experience in corporate finance,
accounting, audit, mergers & acquisitions, capital markets,
insurance and joint venture arrangements.
Deborah is a member of Chief Executive Women and has
extensive experience as a company director gained across
ASX listed, private, public sector and regulated entities
since 2001. Her relevant sector experience includes funds
management, life and general insurance, superannuation
and financial services technology. Deborah’s experience
includes Board leadership, governance and compliance, risk
management, remuneration practices, technology, investor
relations and health, safety and environment.
Deborah is currently a Non-executive Director of Brickworks
Limited, J O Hambro Capital Management Holdings Limited
and Service Stream Limited.
Directorships of other listed entities over the past three
years:
GBST Holdings Limited (2016 - 2019 retired as entity
delisted in November 2019).
Name
Board
Audit & Risk Committee
Remuneration &
Nominations Committee
James Evans
Emilio Gonzalez
Sally Collier
Andrew Fay
Christopher Jones
Kathryn Matthews*
Deborah Page AM
A
15
15
15
15
15
15
15
B
15
15
15
15
15
15
15
A
-
-
6
6
-
6
A - Meetings eligible to attend as a member of the Board or Committee.
B - Meetings attended as a member of the Board or Committee.
B
-
-
6
-
6
-
6
A
-
-
9
9
-
9
-
B
-
-
9
9
-
8
-
* Kathryn Matthews was unable to attend one unscheduled meeting of the Remuneration and Nominations Committee. She
contributed her views to the Chairman of the Board prior to the meeting.
28 | Pendal Group
28 | Pendal Group
Directors' ReportFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2020 Directors' Report
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2020
Deborah Page AM
BEc FCA FAICD
Independent
Non-executive Director
Board Committees:
Chair of the Audit &
Risk Committee
Group Company Secretary
& Head of Corporate
Governance
Joanne Hawkins
BCom LLB Grad Dip CSP FGIA
FCG GAICD
Deborah Page, who is based in Australia, brings to the Board
Joanne Hawkins is responsible for Company Secretarial
extensive financial expertise from her time at Touche Ross/
and Corporate Governance functions for all entities
KPMG including as a Partner, and subsequently from senior
across the Group.
finance and operating executive roles with the Lend Lease
Group, Allen, Allen & Hemsley and the Commonwealth
Bank. She has specific experience in corporate finance,
accounting, audit, mergers & acquisitions, capital markets,
insurance and joint venture arrangements.
Joanne has extensive experience in corporate governance
within the funds management industry. Joanne started her
career as a solicitor at a major law firm and then held in-
house and legal roles in New Zealand and Solomon Islands.
Prior to joining Pendal Group in 2017, Joanne held the role
Deborah is a member of Chief Executive Women and has
of Company Secretary at Perpetual Limited, which included
extensive experience as a company director gained across
responsibility for the Legal, Compliance and Company
ASX listed, private, public sector and regulated entities
Secretariat functions across the Perpetual group of
since 2001. Her relevant sector experience includes funds
companies.
management, life and general insurance, superannuation
and financial services technology. Deborah’s experience
includes Board leadership, governance and compliance, risk
management, remuneration practices, technology, investor
relations and health, safety and environment.
Deborah is currently a Non-executive Director of Brickworks
Limited, J O Hambro Capital Management Holdings Limited
and Service Stream Limited.
Directorships of other listed entities over the past three
years:
GBST Holdings Limited (2016 - 2019 retired as entity
delisted in November 2019).
Name
Board
Audit & Risk Committee
Remuneration &
Nominations Committee
James Evans
Emilio Gonzalez
Sally Collier
Andrew Fay
Christopher Jones
Kathryn Matthews*
Deborah Page AM
A
15
15
15
15
15
15
15
B
15
15
15
15
15
15
15
A
-
-
6
6
-
6
A - Meetings eligible to attend as a member of the Board or Committee.
B - Meetings attended as a member of the Board or Committee.
B
-
-
6
-
6
-
6
A
-
-
9
9
-
9
-
B
-
-
9
9
-
8
-
* Kathryn Matthews was unable to attend one unscheduled meeting of the Remuneration and Nominations Committee. She
contributed her views to the Chairman of the Board prior to the meeting.
28 | Pendal Group
Directors' Report
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2020
Global Executive Committee
In May 2016, the Company established a Global Executive Committee. The current members of Global Executive Committee are:
Name of Group Executive Position
Joined the Pendal Group
Appointed to current position
Emilio Gonzalez
Group Chief Executive Officer
Alexandra Altinger
Chief Executive Officer, JOHCM UK, Europe & Asia
Richard Brandweiner
Chief Executive Officer, Pendal Australia
Nick Good
Chief Executive Officer, JOHCM USA
Bindesh Savjani
Group Chief Risk Officer
Cameron Williamson
Group Chief Financial Officer
2010
2019
2018
2019
2019
2008
2016
2019
2018
2019
2019
2016
Details of the qualifications, experience and responsibilities of the members of the Global Executive Committee are set out below:
Emilio Gonzalez
BCom (Ec) CFA
Group Chief Executive Officer
Refer to Directors’ biographies.
Alexandra Altinger
BA MA CFA
Chief Executive Officer, JOHCM
UK, Europe and Asia
Richard Brandweiner
BEc CFA
Chief Executive Officer,
Pendal Australia
Richard Brandweiner was appointed Chief Executive Officer,
Pendal Australia in February 2018.
Richard has 25 years’ experience in investment management
and is responsible for the Australian arm of Pendal Group,
including asset management, operations, sales and marketing.
Before joining the Company, Richard was Chief Investment
Officer at Aware Super (formerly First State Super), one of
Australia’s largest pension funds. Prior to that, Richard was
Group Executive at Perpetual Investments.
Richard is a CFA Charterholder and holds a Bachelor of
Economics from the University of New South Wales. Richard
is currently Chair of the Australian Advisory Board on Impact
Investing and is a member of the NSW Government Social
Impact Investment Expert Advisory Group. He is a former
President of the CFA Society of Sydney.
Alexandra was appointed Chief Executive Officer, JOHCM UK,
Europe and Asia in July 2019 and commenced employment in
September 2019.
Alexandra has 26 years’ experience in the wealth and asset
management industry across Europe, Asia and the US. She
was previously CEO of Sandaire Investment Office, a UK multi-
family office, for four years and oversaw the integration of
Lord North Street Private Office after it was acquired in 2014.
Prior to Sandaire, Alexandra was an executive at Lansdowne
Partners International, successfully repositioning its long-only
products in global institutional markets. Between 2001-11,
she held senior roles at Wellington Management International,
and led Wellington’s European sub advisory and mutual fund
business. She has also worked at John Hancock in Boston,
Goldman Sachs in Tokyo and London and with Banque
Nationale de Paris in Tokyo.
Alexandra has a Bachelor of Arts and a Master of Arts in
International Economics from Université de Paris-Dauphine,
Paris. She is a CFA Charterholder, a member of the CFA UK
Advisory Council and a founding member of the Advisory
Committee of The Diversity Project, promoting diversity across
the UK asset management sector. She serves as an adjunct
Faculty Member for Duke CE (Duke University) for Leadership
Coaching. She is fluent in English, German, Italian and French
and proficient in Dutch and Japanese.
Annual Report 2020 | 29
Annual Report 2020 | 29
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2020Directors' Report Directors' Report
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2020
Nick Good
MA (Oxon)
Chief Executive Officer,
JOHCM USA
Bindesh Savjani
BA (Hons) FCCA
Group Chief Risk Officer
Nick Good joined Pendal Group as Chief Executive Officer,
JOHCM USA in December 2019.
Nick has over 24 years’ industry experience across the US and
Asia. Most recently, Nick served as Executive Vice President,
Chief Growth and Strategy Officer at State Street Corporation,
based in Boston. In this role, he was responsible for setting
overall business strategy and leading corporate development
at State Street.
Previously, he was co-head of State Street Global Advisors’
Global ETF business, with primary responsibility for North
America and Latin America. During his tenure, the Global ETF
business grew assets under management by 50 per cent,
including the launch of the SPDR Portfolio ETFs in the US.
Prior to joining State Street, Nick worked at BlackRock (initially
Barclays Global Investors) in San Francisco and Hong Kong,
including five years as head of the iShares ETF business in
Asia-Pacific, which enjoyed rapid growth under his leadership.
Nick also worked at the Boston Consulting Group in San
Francisco and at the Kalchas Group in New York and London.
Nick has a Bachelor of Arts and a Master of Arts in Biochemistry
from the University of Oxford. He previously served on the
Security & Futures Commission Product Advisory Committee in
Hong Kong and on the Executive Committee of the Hong Kong
Investment Funds Association.
Bindesh Savjani joined Pendal Group as the Group Chief Risk
Officer in March 2019. He is a qualified accountant and has over
20 years’ experience in investment management.
Bindesh has extensive experience in risk management,
compliance and internal audit from his time as a consultant
at Ernst & Young and thereafter for several asset managers.
Prior to joining Pendal Group, Bindesh was the Global Chief
Risk Officer for Intermediate Capital Group (ICG) where he
developed ICG’s risk framework and was responsible for
Risk, Compliance and Legal. Earlier in his career, Bindesh
established the risk management function at Morley Fund
Management. He then moved to Scottish Widows Investment
Management (SWIP) as the Director of Risk, Legal and
Compliance. He was a core member of the executive team that
sold SWIP to Aberdeen Asset Management and thereafter
worked to integrate the two businesses.
Bindesh is also an external member of the Edinburgh University
Audit and Risk Committee.
Bindesh has a Bachelor of Arts from the University of
Westminster and is a Fellow Chartered Certified Accountant.
Cameron Williamson was appointed Chief Financial Officer in February 2010, having
joined the Company in 2008. He was appointed Group Chief Financial Officer and a
member of the Global Executive Committee on its establishment, on 1 May 2016.
With more than 20 years’ experience in financial markets, Cameron is responsible
for Pendal Group’s overall financial operations and reporting, business planning,
taxation and investor relations.
Cameron is Chairman of PFSL, PIL and a director of Pendal UK Limited.
Prior to joining the Company, Cameron held Chief Financial Officer and
Company Secretary responsibilities at Clairvest Group, a mid-market private
equity group in Toronto. His previous positions also included senior finance roles
with Franklin Templeton and CIBC World Markets in Toronto, UBS in the UK and
KPMG in Australia.
Cameron has a Bachelor of Arts in Accounting from the University of South Australia
and is a qualified Australian Chartered Accountant.
Cameron Williamson
BAcc CA
Group Chief Financial Officer
30 | Pendal Group
30 | Pendal Group
Directors' ReportFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2020 Directors' Report
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2020
Nick Good
MA (Oxon)
Chief Executive Officer,
JOHCM USA
Bindesh Savjani
BA (Hons) FCCA
Group Chief Risk Officer
Nick Good joined Pendal Group as Chief Executive Officer,
Bindesh Savjani joined Pendal Group as the Group Chief Risk
JOHCM USA in December 2019.
Nick has over 24 years’ industry experience across the US and
Officer in March 2019. He is a qualified accountant and has over
20 years’ experience in investment management.
Asia. Most recently, Nick served as Executive Vice President,
Bindesh has extensive experience in risk management,
Chief Growth and Strategy Officer at State Street Corporation,
compliance and internal audit from his time as a consultant
based in Boston. In this role, he was responsible for setting
at Ernst & Young and thereafter for several asset managers.
overall business strategy and leading corporate development
Prior to joining Pendal Group, Bindesh was the Global Chief
at State Street.
Previously, he was co-head of State Street Global Advisors’
Global ETF business, with primary responsibility for North
America and Latin America. During his tenure, the Global ETF
business grew assets under management by 50 per cent,
including the launch of the SPDR Portfolio ETFs in the US.
Prior to joining State Street, Nick worked at BlackRock (initially
Barclays Global Investors) in San Francisco and Hong Kong,
including five years as head of the iShares ETF business in
Asia-Pacific, which enjoyed rapid growth under his leadership.
Nick also worked at the Boston Consulting Group in San
Risk Officer for Intermediate Capital Group (ICG) where he
developed ICG’s risk framework and was responsible for
Risk, Compliance and Legal. Earlier in his career, Bindesh
established the risk management function at Morley Fund
Management. He then moved to Scottish Widows Investment
Management (SWIP) as the Director of Risk, Legal and
Compliance. He was a core member of the executive team that
sold SWIP to Aberdeen Asset Management and thereafter
worked to integrate the two businesses.
Bindesh is also an external member of the Edinburgh University
Audit and Risk Committee.
Francisco and at the Kalchas Group in New York and London.
Bindesh has a Bachelor of Arts from the University of
Westminster and is a Fellow Chartered Certified Accountant.
Nick has a Bachelor of Arts and a Master of Arts in Biochemistry
from the University of Oxford. He previously served on the
Security & Futures Commission Product Advisory Committee in
Hong Kong and on the Executive Committee of the Hong Kong
Investment Funds Association.
Cameron Williamson was appointed Chief Financial Officer in February 2010, having
joined the Company in 2008. He was appointed Group Chief Financial Officer and a
member of the Global Executive Committee on its establishment, on 1 May 2016.
With more than 20 years’ experience in financial markets, Cameron is responsible
for Pendal Group’s overall financial operations and reporting, business planning,
taxation and investor relations.
Cameron is Chairman of PFSL, PIL and a director of Pendal UK Limited.
Prior to joining the Company, Cameron held Chief Financial Officer and
Company Secretary responsibilities at Clairvest Group, a mid-market private
equity group in Toronto. His previous positions also included senior finance roles
with Franklin Templeton and CIBC World Markets in Toronto, UBS in the UK and
Cameron has a Bachelor of Arts in Accounting from the University of South Australia
and is a qualified Australian Chartered Accountant.
Cameron Williamson
BAcc CA
Group Chief Financial Officer
KPMG in Australia.
Directors’ Report
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2020
Principal activities
The principal activity of Pendal Group during the 2020 Financial Year was the provision of investment management services. There
has been no significant change in the nature of this activity during the year ended 30 September 2020.
Operating and Financial Review
The Operating and Financial Review (OFR) containing information on the operations and financial position of Pendal Group is set out
in the Chairman’s Letter, Group CEO’s Report and Global Operating Review on pages 3 to 19 of this Annual Report. These pages
also describe the Group’s business strategy, how the Group has executed against its strategy in the last year and areas of focus for
the coming 12 months.
COVID-19
The Coronavirus (COVID-19) pandemic has caused a global health crisis and significant economic impacts during the year. Pendal
Group’s priority during this time has been to ensure the health and safety of the Group’s employees and to maintain our ability to
service our clients and continue to manage their portfolios. Global business continuity plans were activated under the oversight of
the COVID-19 response team led by the Group Chief Risk Officer. Staff across our business worked remotely from March 2020, with
partial transitioning back to our offices in some locations, with appropriate social distancing and COVID-safe measures, as the
financial year progressed.
Global equity markets were particularly volatile as the pandemic took hold and resulted in a decline of 15% in Pendal Group’s funds
under management (FUM) during the March quarter. In the second half of the financial year, equity markets have partially recovered
those declines as record global stimulus packages have favourably supported asset prices.
Pendal Group’s robust business model, operational responsiveness and focus on delivering strong investment performance for our
clients have mitigated the impacts of COVID-19 on the business. The Group has not required the benefit of rental relief or
Government support initiatives such as JobKeeper in Australia, the Job Retention Scheme in the UK, or the Coronavirus Aid, Relief
and Economic Security (CARES) Act in the USA. The Group has not participated in any programs or Government support initiatives
beyond those which are generally available or automatically applied, such as the Singapore Job Support Scheme (benefit of $67,781
received in the 2020 Financial Year).
Business Review
During the 2020 Financial Year, Pendal Group changed its management reporting structure to operate under three operating
segments (formerly two) comprising the investment management businesses in Australia (Pendal Australia), Europe, the UK and
Asia (Pendal EUKA) and the United States of America (Pendal US).
The statutory net profit after tax (Statutory NPAT)1 of the Group for the year was $116.4 million (2019: $154.5 million), a decline of
24.7%. Statutory NPAT was significantly impacted by mark-to-market movements in the Group’s seed investments, which
experienced losses over the year of $14.3 million versus gains of $16.1 million in the 2019 Financial Year.The Group’s cash net profit
after tax (Cash NPAT)1 for the 2020 Financial Year was $146.8 million (2019: $163.5 million) representing a 10.2% decline on the
previous year. The decrease in Cash NPAT was primarily due to lower base management fees as a result of a decline in average
funds under management (FUM) which was impacted by COVID-19-related market volatility and net outflows.
For the 12 months to 30 September 2020, market returns across the globe varied. The MSCI ACWI Index in local currency terms
returned 6.3 per cent and the S&P 500 rose 13.0 per cent, while the All Ordinaries Index and the FTSE 100 fell 11.6 per cent and 20.6
per cent, respectively. Markets in Europe were particularly affected by the pandemic and declined significantly while Asian markets
experienced mixed returns.
Pendal Group’s FUM declined by 8.0% during the year to $92.4 billion (2019: $100.4 billion). Markets and investment performance
were positive overall contributing $0.8 billion to FUM, however net outflows were $6.5 billion and unfavourable currency
movements further reduced FUM by $2.3 billion as the Australian dollar strengthened against key major currencies.
Net outflows of $6.5 billion during the year reflected continuing negative sentiment for European strategies (-$3.3 billion) as well as
redemptions from the Westpac book (-$2.6 billion) following further consolidation of their superannuation offerings. Pleasingly,
there were positive inflows into global equities strategies (+$0.5 billion) and UK equity strategies (+$0.5 billion) through the year.
Base management fees for the financial year were $458.1 million, a 5.1% decline on the prior year. This was a result of lower average
FUM levels (-4.0%) and a contraction in fee margins; which declined one basis point to 48bps (2019: 49bps) primarily due to
outflows in higher margin channels.
Investment performance across the Group saw improvement with 72% of the Group’s FUM exceeding respective benchmarks for
the 12 months to 30 September 2020. Pendal Group earned performance fees of $13.4 million (2019: $5.8 million) led by strong
outperformance in a number of Australian equities strategies, in particular the Pendal MicroCap Opportunities Fund.
30 | Pendal Group
Annual Report 2020 | 31
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2020Directors' Report
Directors’ Report
FOR THE FINANCIAL YEAR E NDED 30 SEPTEMBER 2020
Pendal Group’s cash operating expenses were 2.9% higher over the year to $298.5 million (2019: $290.2 million). Variable
employee costs were lower in line with revenue and other activities affected by COVID-19 restrictions such as travel, sales events
and administration expenses were also lower. However, strategic investment in people, products and operations continued during
the year including developing our ESG and Impact capabilities and products, broadening executive leadership to deliver regional
growth, and creating a more scalable global operating platform.
During the year, Pendal Group hired a UK-based Global Equities Impact team to capture a growing segment of the market with
product launches for the UK, Europe and Australian markets scheduled for the December 2020 quarter. The products will be
launched under the Regnan brand, continuing our strategic development of Regnan into a globally-recognised responsible
investment management business.
In December 2019, the Global Executive Committee was expanded with the appointment of Nick Good as CEO of J O Hambro Capital
Management (JOHCM) in the USA, to implement the Group’s strategic initiatives in the region. The appointment complements the
addition of Alexandra Altinger in September 2019 as CEO of JOHCM Europe, UK and Asia. These regions remain strategically
important to Pendal Group’s future growth and diversification.
The underlying fundamentals of Pendal Group’s business are strong. A balance sheet with no debt, a seed portfolio deployed to
underpin future growth and a resilient operating model that is proven through economic and market cycles. Our experienced
executive team remains committed to the long-term strategy of growth through diversification, while stable and proven investment
teams navigate through the cycles with an active, high conviction approach to deliver superior investment performance for our
clients.
From the 2021 Financial Year, the Group is amending its alternative profit measure from Cash NPAT to Underlying profit after tax
(UPAT). Cash NPAT has been historically adjusted for certain employee related costs which will no longer be adjusted under UPAT.
UPAT will comprise statutory net profit after tax, adjusted to exclude amortisation and impairment of intangible assets and gains or
losses from financial assets held at FVTPL. The Directors believe that UPAT is a more appropriate measure of underlying
profitability of the Group. The Group’s UPAT for the 2020 Financial Year was $132.6 million (2019: $148.5 million).
Reconciliation of Statutory NPAT to Cash NPAT1
SSttaattuuttoorryy NNPPAATT
Add back:
Amortisation and impairment of intangibles2
Net (gains)/losses on financial assets held at fair value through profit or loss (FVTPL)3
Adjust for tax effect
UUnnddeerrllyyiinngg pprrooffiitt aafftteerr ttaaxx ((UUPPAATT))
Add back:
Amortisation of employee equity grants
Amortisation of employee deferred share of performance fees and related incentives
Deduct:
Cash cost of ongoing equity grants in respect of the current year
Cash cost of employee deferred share of performance fees and related incentives in respect of the
current year
Adjust for tax effect
Cash NPAT
2020
$’000
111166,,338866
6,140
14,316
(4,247)
113322,,559955
35,192
3,270
(30,079)
–
5,835
146,813
2019
$’000
115544,,447777
6,758
(15,416)
2,689
114488,,550088
44,852
6,744
(32,710)
(4,120)
181
163,455
1. Net profit after tax (Statutory NPAT) includes accounting adjustments required under International Financial Reporting Standards (IFRS) for amortisation of
employees’ equity grants, amortisation of employee deferred share of performance fees and related incentives, amortisation and impairment of intangible
assets, and realised and unrealised gains or losses from financial assets held at FVTPL. Cash NPAT excludes the effect of these adjustments.
2. Amortisation and impairment of intangibles relates to fund and investment management contracts.
3. Net gains or losses on financial assets held at FVTPL primarily relate to seed investments in pooled funds managed by Pendal Group. Realised gains or losses
on financial assets held at FVTPL are excluded from Cash NPAT from the beginning of the 2020 Financial Year.
32 | Pendal Group
Directors' ReportFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2020 Directors’ Report
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2020
Dividends
The Directors have resolved to pay a final dividend of 22.0 cents (10% franked4) per share, (2019: 25.0 cents per share 10% franked)
on ordinary shares. The amount of dividend which has not been recognised as a liability at 30 September 2020 is $68.6 million
(2019: $76.1 million). The Company paid an interim dividend of 15.0 cents per share ($46.8 million) on 1 July 2020.
Equity dividends on ordinary shares
(a)
Dividends declared and paid during the financial year
Final 10% franked4 dividend for the 2019 Financial Year: 25.0 cents per share
(2018 Financial Year: 30.0 cents per share 15% franked)
Interim 10% franked4 dividend for the 2020 Financial Year: 15.0 cents per share
(2019 Financial Year: 20.0 cents per share 10% franked)
(b)
Dividends proposed to be paid subsequent to the end of the financial year
and not recognised as a liability
2020
$’000
2019
$’000
82,571
90,666
46,782
129,353
59,897
150,563
Final dividend for the 2020 Financial Year 22.0 cents (10% franked4) per share
(2019 Financial Year: 25.0 cents per share 10% franked)
68,612
76,078
4. The whole of the unfranked amount of the dividend will be Conduit Foreign Income, as defined in the Income Tax Assessment Act 1997.
Significant changes in the state of affairs
There have been no significant changes in the state of affairs of Pendal Group during the 2020 Financial Year.
Matters subsequent to the end of the financial year
At the date of signing this Report, the future impact of COVID-19 on global and domestic economies and equity market indices, and
their resulting impact on Pendal Group, remains uncertain.
Following the formal withdrawal of the UK from the European Union (“Brexit”) on 31 January 2020, the transition period in which the
UK effectively remains in the EU’s customs union and single market ends on 31 December 2020. As part of the Group’s Brexit
planning, an Irish domiciled UCITS management company was established in 2019 to allow the continued management and
distribution of relevant products within Europe. While Brexit negotiations between the UK and EU are ongoing, future European
regulatory and licensing requirements for Group entities may be subject to change.
There is no other matter or circumstance which is not otherwise reflected in this Financial Report that has arisen subsequent to the
balance date, which has significantly affected or may significantly affect the operations of Pendal Group, the results of those
operations or the state of affairs of the Group in subsequent financial periods.
Likely developments and expected results of operations
The OFR sets out the information on the business strategies and prospects for future financial years (refer to our Chairman’s Letter,
Group CEO’s Report and Global Operating Review on pages 3 to 19 of the Annual Report accompanying this Directors’ Report).
Information in the OFR is provided to enable shareholders to make an informed assessment about the business strategies and
prospects for future financial years of Pendal Group.
Environmental regulations
The operations of Pendal Group are not subject to any particular or significant environmental regulation under any law of the
Commonwealth of Australia or of any state or territory thereof.
The Group has not incurred any liability (including rectification costs) under any environmental legislation.
Indemnities and insurance
In accordance with the provisions of the Corporations Act 2001, Pendal Group has insurance policies covering directors' and officers'
liabilities. Under the terms of the policies, disclosure of the amount of cover and premiums paid is prohibited.
Annual Report 2020 | 33
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2020Directors' Report
Directors’ Report − Remuneration Report
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2020
A message from the Chair of the Remuneration & Nominations Committee
On behalf of the Board, I present the Pendal Group Remuneration Report for the 2020 Financial Year. Our Remuneration Report is
designed to demonstrate the link between strategy, performance and remuneration outcomes for Key Management Personnel and
Non-Executive Directors. We also provide an overview of our remuneration approach for key employee groups, namely our sales
teams and investment managers given their significant role in our business.
Our vision has not changed: to be a global asset management business that delivers exceptional investment returns to clients by
attracting and retaining superior investment talent. As a global investment management business, we need to have a remuneration
framework in place that is market related; supports our business model, vision and values; while meeting the expectations of our
shareholders.
2020 was a challenging year for Pendal Group, particularly with the global impact of the Coronavirus (COVID-19) pandemic. The
Pendal Group’s focus at this time has been on the health and well-being of our employees to ensure we maintain our ability to
service our clients and continue to manage their portfolios. The most significant impact to the business as a result of COVID-19 has
been volatility in global equity markets, initially posting some of the most severe market falls since the December quarter 2008, only
to bounce back quickly with a number of key global equity markets recovering to pre COVID-19 levels.
While governments globally this year introduced wage subsidy schemes to assist employers with the ongoing employment of their
workforce during the COVID-19 pandemic, Pendal Group’s businesses did not apply for, or request assistance from, government
support arrangements (e.g. Australia’s JobKeeper Scheme, the UK’s Job Retention Scheme and the USA's Coronavirus Aid, Relief
and Economic Act), beyond those automatically applied, such as the Singapore Job Support Scheme (benefit of $67,781 received in
the 2020 Financial Year).
The Group’s overall performance has been reflected in remuneration outcomes for the Executive team. No fixed remuneration
increases were awarded to Executive team members in the 2020 Financial Year. 2020 Short Term Incentive (STI) awards for the
Executive team were reduced with the Group CEO receiving 50% of target and 25% of maximum opportunity and an average
outcome of 93% of target and 55% of maximum opportunity for other members of the Executive Team. The Board believes the
outcomes for 2020 reflect the balance between employee and shareholder interests appropriately. This alignment with shareholder
returns is also incorporated in remuneration outcomes through the deferral of up to 50 per cent of the STI in Pendal shares, vesting
over five years with the reduction in the Pendal share price impacting shares issued in prior STI payments. Further, as the Cash
Earnings Per Share and the Total Shareholder Return hurdles in the 2017 Long Term Incentive (LTI), due to vest in 2020, did not
meet their targets, Pendal executives forfeited 100 per cent of their original 2017 LTI grants.
Pendal’s Global Reward Framework is made up of three key principles that are directly aligned to our business strategy. Firstly,
remuneration is weighted towards medium and long-term share rewards because we want our employees to be aligned to our
shareholders and have an ownership mindset. Secondly, recruiting exceptional talent relies on market benchmarking, paying fairly
for skills, ability and responsibility. The third principle is performance accountability which includes delivering annual business
results within the risk tolerances set by the Board. The Board applies these principles to attract and retain the talent necessary to
deliver for our clients and create long-term value for our shareholders.
During the year, we carried out the following actions to maintain a relevant remuneration framework:
•
•
•
Implemented the Senior Managers and Certification Regime in the UK in line with regulatory requirements in December
2019;
Reviewed the Corporate bonus pool for the Australian business and the JOHCM Senior Staff bonus pool;
Evaluated and considered long term revenue share plans as an important retention strategy for JOHCM Fund Managers;
• Oversaw the appointment of the independent Chair of the JOHCM Limited Board to further strengthen governance
arrangements;
• Approved the issue of Fund Linked Equity (FLE) Scheme grants;
•
Reviewed and confirmed the Key Management Personnel remuneration structures; and
• Reviewed our remuneration practices in jurisdictions where regulatory changes required the adoption of new standards.
Pendal is a talent business and the core of our Remuneration Framework is to support the attraction of the best talent and retention
of our key employees. During a year of heightened uncertainty for all our shareholders due to COVID-19, we have taken the
opportunity to review our remuneration schemes to ensure they remain competitive, promote the interests of our clients and
continue to focus our executives on growing long-term shareholder value.
Andrew Fay
Chair of the Remuneration & Nominations Committee
34 | Pendal Group
[SEC=PROTECTED]
11
Directors' Report - Remuneration ReportFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2020
Directors’ Report − Remuneration Report
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2020
Introduction to the 2020 Remuneration Report
The Directors are pleased to present the Remuneration Report for the year ended 30 September 2020. The Remuneration Report
includes remuneration information for the Company’s Key Management Personnel (KMP) and insights into how Fund Managers,
sales teams and other corporate employees are rewarded.
Report structure
The Remuneration Report is structured in the following sections:
SSeeccttiioonn
1. Key Management Personnel
2. Global Reward Framework
3. Remuneration Structure
4. Oversight and Governance
5. Link between Remuneration Outcomes and Group Performance
6. Details of the Global Executive Committee Remuneration Outcomes
7. Global Executive Committee Members’ Employment Agreements
8. Non-Executive Director Remuneration
9. Director and Global Executives’ Holdings
10. Other Disclosure Details
1. Key Management Personnel
PPaaggee
35
36
38
44
46
53
60
63
65
65
KMP are defined as those persons who have authority and responsibility for planning, directing and controlling the activities of the
Pendal Group. The Global Executive Committee holds such authority within the Pendal Group and are the reportable Executives for
the 2020 Financial Year. From 1 October 2019 to 30 September 2020, the KMP for the Pendal Group were the Non-Executive
Directors (NED) of the Company and the members of the Global Executive Committee.
In line with the previously announced decision to appoint dedicated CEOs for the JOHCM business in UK, Europe and Asia and a
CEO for the USA business to support growth in offshore markets, Nick Good commenced in the role of Chief Executive Officer,
JOHCM USA on 2 December 2019.
Non-Executive Directors during the 2020 Financial Year
NNaammee
James Evans
Sally Collier
Andrew Fay
Christopher Jones
Kathryn Matthews
Deborah Page
PPoossiittiioonn
Chairman
Director
Director
Director
Director
Director
Global Executive Committee during the 2020 Financial Year
NNaammee
Emilio Gonzalez
Alexandra Altinger
PPoossiittiioonn
Group Chief Executive Officer
Chief Executive Officer, JOHCM UK/Europe and
Asia
TTeerrmm aass KKMMPP
Full year
Full year
Full year
Full year
Full year
Full year
TTeerrmm aass KKMMPP
Full year
Full year
Richard Brandweiner
Chief Executive Officer, Australia
Full year
Nick Good1
Bindesh Savjani
Cameron Williamson
Group Chief Financial Officer
Notes:
Group Chief Risk Officer
Full year
Full year
Chief Executive Officer, JOHCM USA
2 December 2019 to 30 September 2020
1
Nick Good was appointed to the role of Chief Executive Officer, JOHCM USA and commenced employment with the Company on 2 December 2019.
[SEC=PROTECTED]
22
Annual Report 2020 | 35
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2020Directors' Report - Remuneration Report Directors’ Report − Remuneration Report
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2020
2. Global Reward Framework
Pendal Group’s remuneration approach is directly aligned to our Corporate Vision and Strategic Drivers. The success of our reward
framework is evidenced by both our long-term business growth and the attraction and retention track record of our investment
talent and corporate employees. Below is further detail of our framework and how it links to the Company’s strategy. Further in the
Remuneration Report there are illustrations of our historical results for Total Shareholder Return (TSR) and Cash Earnings Per Share
(Cash EPS). The hurdles in our LTI Plan continue to align our Executives to our shareholders at a time of significant change in the
industry and through periods of extreme market volatility.
Pendal Group Corporate Vision
Pendal Group Strategic Priorities
To be a global asset management business
that delivers exceptional investment
returns to clients by attracting and retaining
superior investment talent.
• Attract and retain investment talent that creates a portfolio of complementary
strategies
• Preserve investment performance through disciplined capacity management
• Develop extension strategies and new products in line with evolving client needs
• Build out and leverage our global distribution network to drive new client
relationships
• Develop world class Environmental, Social and Governance/Responsible
•
Investment capability
Invest in technology to provide for future long-term growth, drive efficiencies and
better serve our clients
A Global Total Reward Framework aligns our Corporate Vision and Strategy to deliver a balance between short-term
achievement and long-term performance. Our remuneration policies are framed by three principles and weighted towards
longer term rewards encouraging share ownership that aligns our employees’ interests to our shareholders.
Pendal Reward Framework
36 | Pendal Group
[SEC=PROTECTED]
33
Directors' Report - Remuneration ReportFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2020
Directors’ Report − Remuneration Report
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2020
Risk management is a fundamental consideration for the Pendal Group when determining variable remuneration outcomes.
Pendal Group ensures that its risk management culture is supported by its reward framework by ensuring sound risk management
practices are incorporated into variable remuneration arrangements including:
• Employees being ineligible for a variable remuneration payment if they exhibit poor risk behaviours;
• Incorporating risk management performance measures in all Global Group Executive scorecards;
• Reviewing the alignment between remuneration outcomes and performance achievement for incentive plans on an annual basis;
• Deferring a significant portion of variable remuneration in PDL Performance Share Rights and restricted shares to align employee
remuneration with shareholders;
• Assessing outcomes with longer term Company performance;
• An ability for the Board to adjust incentive payments, if required;
• A provision for the Board to lapse variable remuneration (Performance Share Rights and restricted shares) in certain
circumstances; and
• Continuous monitoring of remuneration outcomes by the Board, to ensure that results are promoting behaviours that support
Pendal Group’s long-term financial position and the desired culture.
Target remuneration mix
The Remuneration & Nominations Committee sets a target remuneration mix. The elements are set referring to market
benchmarking and are designed to attract and retain the calibre of executives required to drive Pendal Group’s strategic outcomes.
Charts 1 and 2 below outline target remuneration mix. Actual variable remuneration outcomes will depend on achievement against
performance measures of both short-term and long-term incentives. The cash portion of STI awards are paid to members of the
Global Group Executive Committee in December each year.
Charts 1 and 2: Global Executive Committee – target remuneration mix
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3. Remuneration Structure
Group CEO Remuneration
The Group CEO has the following remuneration components in place:
• Fixed Remuneration of $800,000;
• Target STI of $1.4 million with a STI floor of $0 and a maximum range of $2.8 million for performance that exceeds aggregate Key
Performance Indicators; and
• LTI opportunity of $1.0 million.
The actual outcome reflects the Board’s assessment against clearly specified performance indicators. Performance indicators are
designed to create sustainable shareholder value and are scaled to reflect profit outcomes. The Group CEO’s LTI (and the
component of STI deferred into equity) provides a direct link to real earnings and shareholder value creation in the medium to long
term. For the 2020 Financial Year, the entirety of the LTI award, granted in 2017, has not vested. This is explained further in Section
5 of this Remuneration Report. Pendal is committed to providing LTI only where justified by company performance.
A significant proportion of the Group CEO’s variable reward (STI deferral) and the vesting or forfeiture of the LTI component of his
remuneration is impacted by increases and decreases in the share price over time. Pendal determines the value of underlying shares
for both STI deferral and LTI grants at the time of allocation, not at the time of vesting. Therefore, the Group CEO continues to carry
exposure to share price movements during the vesting period for both types of awards.
Graph 1: Group CEO’s Variable Reward over time
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The table below outlines the Group CEO’s remuneration structure for the 2020 Financial Year.
Remuneration component Description
Fixed Remuneration
Consists of base salary (and includes any fringe benefits and applicable taxes) as well as employer
contributions to superannuation.
Target STI
The Group CEO’s target STI opportunity is determined annually by the Board with reference to external market benchmarking.
The Group CEO’s target STI for the 2020 Financial Year was unchanged from the 2019 Financial Year and was $1.4 million with a
STI floor of $0 and a maximum of $2.8 million for performance that exceeds aggregate Key Performance Indicators.
The Board has the discretion to vary the Group CEO’s awarded STI outcome (up or down) with consideration to Pendal Group’s
financial performance and the Group CEO’s overall performance.
The Group CEO’s awarded STI outcome is approved annually by the Board. Fifty per cent of the awarded STI is delivered as
cash, with the remaining 50 per cent deferred into restricted shares that vest over five years. This provides long-term exposure
to the share price movement in addition to the separate LTI Award.
For the 2020 Financial Year, the Group CEO’s key performance indicators included the following. Performance against these
key performance indicators has been outlined in section 5:
Financial
Cash NPAT
Base Management Fee Revenue
(targets previously agreed with Board)
Execute on Growth Strategy
Progress against strategic objectives previously approved by the Board including
the achievement of competitive investment performance, capital allocation,
business strength and global synergies.
Business Development
Progress towards the development of new business opportunities, enhancement
of the distribution strategy and strengthening of succession plans.
Risk Management and
Operational Effectiveness
Effective risk management framework that embeds quality risk culture, ensures
business operates within agreed Risk Appetite framework with sound outcomes
and a robust operational platform with the right governance structures, processes
and resources to support business model and strategy including Brexit
developments.
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LTI grant
After receiving approval from shareholders, the Group CEO was granted Performance Share Rights to PDL shares for no
consideration. The Group CEO’s LTI opportunity represents the maximum incentive opportunity under the award and is
determined with reference to market benchmarking. The number of rights is determined at grant; therefore, share price
movements during the vesting period impact the value of the ultimate award that may vest.
The award is subject to two equally weighted hurdles, measured over three years:
a) 50 per cent subject to relative TSR performance; and
b) 50 per cent subject to Fully Diluted Cash EPS growth.
Hurdles are designed to be reasonably stable over the cycle.
TSR performance hurdle
The TSR portion of awards vests as follows, subject to relative performance against the constituents of the S&P/ASX 200 Index
on the date of the award.
TSR performance
Below weighted median
At weighted median
Percentage of TSR-tested award to vest
Nil
50%
Between the weighted median and top quartile
Vesting occurs on a straight-line basis from 50% to 100%
At or above top quartile
100%
Fully Diluted Cash EPS performance hurdle
The Cash EPS portion of awards vests as follows, based on compounded annual growth rate (CAGR) performance.
Cash EPS CAGR
Percentage of cash EPS-tested award to vest
Less than or equal to 5% CAGR
At 5% CAGR
Nil
50%
Above 5% CAGR but less than 10% CAGR
Vesting occurs on a straight-line basis from 50% to 100%
At or above 10% CAGR
100%
Details of equity based remuneration
Details of the various equity-based reward plans are noted in the table below. As at 30 September 2020, approximately 10 per cent
of the share register represents employee interests. From a governance and administration perspective, external Trustees are
responsible for managing the two employee equity plan trusts which the Company uses to facilitate the acquisition and holding
of shares for employee incentive arrangements.
In accordance with the disclosure requirements under Listing Rule 4.10.22, during the 2020 Financial Year, it should be noted that
the Trustee of the Pendal Group Employee Benefit Trust acquired a total of 4,706,197 PDL shares at an average price of $7.97,
totalling $37.5 million. These securities were acquired to satisfy the Pendal Group’s obligations under various employee equity
plans.
The number of shares allocated to the employee at grant date is based on the value of the equity award they received as part of their
variable reward outcome, divided by the average price that the equity was acquired at. Price risk on the purchase of the equity award
an individual employee receives is borne by the employee. Pendal estimates that for the next 12 months its share purchase
requirements will be $25 million which will be acquired via on market purchasing and employee share sales throughout the year,
with the exception of the FLE shares which are issued. It should be noted that shares issued to fulfil the FLE scheme are designed to
be Cash EPS neutral. In a scenario where FUM declines post issuance of the grant, or the share of revenue to the firm decreases, the
Cash EPS outcome may be adversely affected.
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LTI grant
After receiving approval from shareholders, the Group CEO was granted Performance Share Rights to PDL shares for no
consideration. The Group CEO’s LTI opportunity represents the maximum incentive opportunity under the award and is
determined with reference to market benchmarking. The number of rights is determined at grant; therefore, share price
movements during the vesting period impact the value of the ultimate award that may vest.
The award is subject to two equally weighted hurdles, measured over three years:
a) 50 per cent subject to relative TSR performance; and
b) 50 per cent subject to Fully Diluted Cash EPS growth.
Hurdles are designed to be reasonably stable over the cycle.
The TSR portion of awards vests as follows, subject to relative performance against the constituents of the S&P/ASX 200 Index
Percentage of TSR-tested award to vest
Between the weighted median and top quartile
Vesting occurs on a straight-line basis from 50% to 100%
TSR performance hurdle
on the date of the award.
TSR performance
Below weighted median
At weighted median
At or above top quartile
Less than or equal to 5% CAGR
At 5% CAGR
At or above 10% CAGR
Nil
50%
100%
Nil
50%
100%
Fully Diluted Cash EPS performance hurdle
The Cash EPS portion of awards vests as follows, based on compounded annual growth rate (CAGR) performance.
Cash EPS CAGR
Percentage of cash EPS-tested award to vest
Above 5% CAGR but less than 10% CAGR
Vesting occurs on a straight-line basis from 50% to 100%
Details of equity based remuneration
Details of the various equity-based reward plans are noted in the table below. As at 30 September 2020, approximately 10 per cent
of the share register represents employee interests. From a governance and administration perspective, external Trustees are
responsible for managing the two employee equity plan trusts which the Company uses to facilitate the acquisition and holding
of shares for employee incentive arrangements.
In accordance with the disclosure requirements under Listing Rule 4.10.22, during the 2020 Financial Year, it should be noted that
the Trustee of the Pendal Group Employee Benefit Trust acquired a total of 4,706,197 PDL shares at an average price of $7.97,
totalling $37.5 million. These securities were acquired to satisfy the Pendal Group’s obligations under various employee equity
plans.
The number of shares allocated to the employee at grant date is based on the value of the equity award they received as part of their
variable reward outcome, divided by the average price that the equity was acquired at. Price risk on the purchase of the equity award
an individual employee receives is borne by the employee. Pendal estimates that for the next 12 months its share purchase
requirements will be $25 million which will be acquired via on market purchasing and employee share sales throughout the year,
with the exception of the FLE shares which are issued. It should be noted that shares issued to fulfil the FLE scheme are designed to
be Cash EPS neutral. In a scenario where FUM declines post issuance of the grant, or the share of revenue to the firm decreases, the
Cash EPS outcome may be adversely affected.
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The table below provides details on all equity programs available to employees.
Equity-based employee reward schemes/plans
Variable Reward
Scheme/Plan
Description
Pendal Australia
Corporate Variable
Reward (VR) Scheme,
CEO, Pendal Australia
VR Plan, JOHCM
Senior Staff Bonus
Scheme and General
Staff Bonus Scheme
The four schemes are designed to reward performance specifically for senior and general employees
(including the CEO, Pendal Australia, CEO, JOHCM UK/Europe and Asia and CEO, JOHCM USA) who
work within the Pendal Australia and JOHCM corporate support teams and who do not participate in a
revenue share arrangement. The variable component for each individual employee is set annually and is
based on regular analysis of competitor market data for each role.
The schemes are linked to the performance of Pendal Australia and JOHCM through the creation of
variable reward pools from which employees are paid their variable reward outcomes. The size of the
variable reward pool for each of the four schemes is based on performance against their financial
objectives. With the exception of the General Staff Bonus Scheme, these plans apply compulsory deferral
into PDL equity.
Participants
Corporate roles
including Global
Executive Committee
members and
investment teams not
covered by the
Boutique VR Scheme
Sales Incentive Plans
The Sales Incentive Plans are designed to reward performance specifically for business development
managers who work within the Pendal Australia and JOHCM sales teams.
Sales roles
Awards are determined based on a range of factors, including client retention, actual sales performance,
cross-selling, and other team behaviours. Compulsory variable reward deferral applies to these plans.
Pendal Australia and
JOHCM Performance
Reward Schemes
(PRS)
The PRS was implemented in 2012 and is a broad-based LTI program which provides all eligible corporate
employees with an amount of equity in the form of Performance Share Rights, aimed at rewarding
success.
Vesting of PRS awards is contingent on Cash EPS and TSR performance hurdles being met at the end of a
three-year performance period.
PRS awards granted in 2017 were tested against performance hurdles at the end of the 2020 Financial
Year.
Vesting outcomes for 2017 PRS awards are set out in Charts 4a and 4b.
Pendal Australia
Boutique Variable
Reward (VR)
Scheme
JOHCM Fund
Manager
Remuneration
Schemes (FMRS)
The Boutique VR Scheme seeks to reward performance specifically for investment employees who are in
boutiques on a revenue share arrangement. For the 2020 Financial Year, the Equity Strategies, Bond,
Income & Defensive Strategies and Global Equities boutiques operated under their own arrangements, as
per the Boutique VR Scheme. The VR pool for each boutique is based on an agreed formula that accounts
for profit share directly attributable to the boutique. Compulsory deferral into PDL equity applies to these
plans.
Some funds attract performance fees. In the event an investment strategy exceeds a pre-determined
performance hurdle for a specific fund over the measurement period (generally for the twelve month
period end June) a performance fee is paid by the client. The performance fee is shared between the fund
management team and the Company.
The FMRS are designed to recognise and reward Fund Managers for growth in the strategies they manage
and asset/client retention. The FMRS cater for two plans; a legacy plan and the FLE Scheme. Fund
Managers managing more established funds receive a variable reward opportunity as part of a revenue
share arrangement, with a portion of the variable reward deferred into PDL equity with a vesting period of
up to five years.
Fund Managers managing new funds are eligible to participate in the FLE Scheme that rewards for
business building outcomes measured through FUM. Fund Managers can also choose not to participate in
the FLE Scheme.
Some funds attract performance fees. In the event an investment strategy exceeds a pre-determined
performance hurdle for a specific fund in the calendar year, a performance fee is paid by the client. The
performance fee is shared between the fund management team and the Company. Further detail on the FLE
Scheme is outlined in the Fund Manager Remuneration section.
Corporate roles
including the Group
CEO and other Global
Executive Committee
members and
Australian investment
teams not covered by
the Pendal Australia
Boutique VR Scheme
Fund Managers
Fund Managers
JOHCM Long-Term
Retention Equity
The LTI plan provides long-term retention of certain Fund Managers which is linked to individual
performance. Part of the LTI plan is time-based where a portion of the variable reward is issued as equity
and vests over a period up to six years. Selected employees are also issued retention equity which vests
over a specified holding period or after cessation of employment, provided certain conditions have been
satisfied.
Fund Managers
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Variable Reward
Scheme/Plan
CEO, JOHCM, USA
LTI Arrangements
Description
As the newly appointed CEO, JOHCM, USA, Nick Good, to align his remuneration with the long-term
performance of the JOHCM USA business, and to provide a further retention mechanism, has been
offered Performance Share Rights vesting at the end of a four-year performance period.
The 314,559 Performance Share Rights are subject to three equally weighted long term performance
hurdles of USA Client Revenue, JOHCM (USA) Inc Operating Profit and Net New Money raised from
nominated strategies. Vesting conditions specifically relate to Pendal's USA business, given its strategic
importance, over a period where actions are expected to achieve results, with the performance period
commencing 1 October 2019.
Participants
CEO, JOHCM USA
Fund Manager remuneration
This section describes our approach to Fund Manager remuneration to provide shareholders with further insight into our
business model.
Fund Managers are provided fixed remuneration at market competitive rates, approved at the beginning of the financial year
by the relevant CEO.
In Australia, variable remuneration is based on a profit share approach. Our funds management teams are not awarded a set
percentage of profits. Each team negotiates an arrangement with the CEO upon joining the Pendal Group. Our bespoke
approach makes sure that the variable reward delivered to teams and Fund Managers reflects the value each team adds to
the Group and its shareholders.
Where revenue is directly attributable to the skill and efforts of the funds management team (e.g. performance fees) this will
generally attract a greater profit share percentage.
Outside Australia, the revenue share arrangements with Fund Managers within the JOHCM Group are based on a different formula
and differ between more established funds and newer investment strategies. Performance fees similarly attract a greater revenue
share and so JOHCM Fund Manager total remuneration will vary over time, dependent on the source of funds and performance.
How Fund Managers earn equity in the business
Pendal Group seeks to align Fund Manager remuneration with longer term shareholder interests through equity ownership in the
business without compromising client outcomes. Equity in the Group is earned by Fund Managers from either the FLE scheme or
the FMRS revenue share component . The Fund Manager remuneration scheme that a team participates in will vary depending on
the lifecycle of their fund, the complexity of the team structure and the market in which they operate.
For teams managing funds in the early phase of their development, the business offers a FLE program where remuneration
arrangements have a greater focus on rewarding business building outcomes, such as growth in recurring investment management
fees. Once teams are rewarded for the development phase of their strategy through the FLE scheme, and the strategy becomes
more established, the program may transition to a long term scheme that rewards for retention and growth of FUM. This scheme is
in line with the revenue share principles of the organisation and is designed to retain talent that has delivered investment
performance. The introduction of a long-term approach supports our ability to retain talent for delivering investment performance
that has resulted in FUM growth.
Fund Managers can participate in a number of plans as outlined below.
JOHCM Fund Linked Equity Scheme
To attract new teams and reward for value in newly created strategies, JOHCM operates an FLE Scheme that rewards Fund
Managers with PDL equity as a result of growing recurring investment management fees.
The FLE Scheme has been an instrumental part of the JOHCM business model in attracting investment talent to the Company.
The FLE Scheme was introduced in the 2009 Financial Year, prior to JOHCM becoming part of the Pendal Group. The FLE Scheme
runs for seven years from product launch and participating Fund Managers have the right to partly convert the revenue generated by
the investment strategy into PDL equity over time, with full conversion required by the end of the seven year period. The conversion
formula takes revenue generated by the FUM linked to the strategy, applies an after-tax operating margin and then applies a
multiple to determine an implied market value of the investment strategy. This capitalised value is shared between the Fund
Managers and the Pendal Group and is delivered to Fund Managers in the form of PDL equity. The benefit of the model for
shareholders is that no equity is granted until FUM and revenue is generated by the strategy. During the 2020 Financial Year, the
Company did not issue any ordinary shares under the FLE Scheme.
When the FLE has been converted to PDL equity, the revenue share to which the Fund Managers are entitled decreases in exchange
for the equity grant which has a positive contribution to the future earnings of the Group. If shares are issued to satisfy the equity
grant, the net result is designed to be broadly Cash EPS neutral provided FUM or the Company’s revenue is maintained. In a
scenario where FUM declines post issuance of the grant, or the share of revenue to the firm decreases, the Cash EPS outcome may
be adversely affected. The shares are subject to time vesting restrictions of up to five years as a retention mechanism. As the PDL
equity is considered to have been earned, it is not subject to further performance hurdles and attracts dividends and voting rights
from the time of issuance.
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Variable reward in PDL shares
For teams managing established funds, a portion of the variable reward is mandatorily deferred into PDL equity and vests over five
years. The deferred shares are not subject to any additional performance conditions, beyond continued employment. Participants
receive dividends and voting rights from the time of grant.
The table below summarises the operation of the FLE scheme and how it interacts with Fund Manager remuneration and key
Pendal Group metrics.
Operation of plan – JOHCM FLE scheme
Year 0 through to year 3
Year 3 through to year 7
Funds Under Management
FUM growth over time.
Revenue Share
Fund Managers remunerated through a
revenue-share arrangement, based on a
pre-determined percentage.
Equity
No PDL equity granted during the period
as the revenue share is delivered in cash.
Revenue from FUM raised in the investment strategy is used as the basis to
determine rights to PDL equity (i.e. through the conversion ratio).
On election by Fund Managers, a proportion of revenue share can be taken in
the form of PDL equity (with vesting restrictions over a period of four or five
years). Conversion into PDL equity reduces the Fund Manager’s revenue share
percentage and is designed to be broadly Cash EPS neutral. Full conversion is
required by the end of year seven.
Equity awarded on FLE conversion approximates the market value for the FLE
based on revenue generated by the fund (and other market factors). The award
of equity results in the decrease in revenue share percentage for the Fund
Manager and the Group retains a higher proportion of the fund’s revenue.
Note that restricted PDL shares issued on conversion vest equally over a
period of four or five years.
Cash Earnings
Per Share
Reflected in earnings as a result of
growth in FUM.
Due to the reduction in Fund Manager revenue share, Cash EPS should be
broadly neutral, provided FUM or the share of revenue to the firm is
maintained.
Participation in the FLE
During the 2020 Financial Year no PDL shares were issued to satisfy the remaining conversion of the FLE scheme.
Investment strategies participating in the FLE Scheme represents FUM of $2.1 billion as at 30 September 2020. Based on the FUM
as at 30 September 2020, the value of PDL equity that may be granted to participants in the FLE Scheme is approximately $11.8
million over future years. The value of PDL equity to be granted under the FLE Scheme will vary from year to year based on market
movements, FUM growth, management fee margins, foreign currency, and new teams participating in the FLE Scheme.
If shares are issued to meet the delivery of the $11.8 million in PDL equity, this would equate to 2.1 million newly issued shares based
on a theoretical PDL share price of $5.62 in accordance with the FLE Scheme rules. The 2.1 million shares would increase the fully
diluted share count by 0.7 per cent.
Assuming other remaining FLE rights are converted into PDL equity at the end of year 7, the estimated number of PDL shares to be
issued over the coming years is outlined in the table below.
Investment strategies participating in the FLE scheme
Financial years
Estimated number of shares to be issued (m)
2021
0.4
2022
0.8
2023
0
2024+
0.9
Notwithstanding the share issuance under the FLE, shareholders’ portion of revenue from the investment strategies increases (as Fund
Manager share of revenue is reduced) such that Cash EPS should be broadly neutral, provided FUM or the share of the revenue to the
firm is maintained post issuance.
For employee incentive arrangements other than the FLE, PDL equity has been delivered by either purchasing shares on market and
or accessing shares from employees selling post restrictions. In the case of the FLE Scheme, significant equity requirements are
planned to be delivered by way of new shares.
Our business model is designed to provide ’the best of both worlds’ where Fund Managers operate in an environment that is
investment-led with independence, where they share in economic value created, have creative independence and an absence of
bureaucratic structures combined with the strengths of a significant institution that provides a strong operational platform (i.e.
brand, distribution, risk, compliance, back-office).
The result for funds management teams is that their income each year is a direct function of the financial success of their own efforts
while their longer term wealth is driven by the success of the overall Group.
As a result of our approach, our Senior Fund Managers have a significant shareholding in the Pendal Group which produces strong
alignment between the interests of Fund Managers and shareholders. Consequently, Fund Managers also have a keen interest in the
Pendal Group’s dividends and earnings per share performance.
By providing equity in a listed entity (i.e. Pendal Group Limited), equity value can be tracked on a daily basis and value can be
realised over time.
We believe this approach has cultivated a performance oriented and stable environment that has aligned Fund Managers to the
business, therefore promoting a desirable business for our clients when determining a suitable Fund Manager.
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The FLE scheme is a long-term scheme designed to attract investment management talent to the business and reward for value in
newly created strategies. As outcomes from the FLE scheme taper off through the vesting of equity, those Fund Managers coming
off the FLE scheme may transition to a long term scheme in line with those managing established funds. The scheme is aligned with
the revenue share principles of the organisation and is designed to retain talented employees who have delivered investment
performance. A material component of the revenue share is deferred into PDL equity and into the fund strategies managed by the
Fund Manager, with vesting periods up to five years. This aligns the interests of the Fund Manager with both the Company and
clients and continues to reward them in line with historical levels. It will have an upfront cost to the business as it is implemented,
however the initial investment will be balanced by mitigating the loss of key talent resulting in decline in FUM and revenue, and will
improve the long-term sustainability of the Company’s revenue stream.
Sales remuneration
Business Development Managers within our retail and institutional sales teams are provided market competitive fixed and variable
remuneration. Consistent with other employee groups, fixed remuneration is reviewed at the beginning of each financial year.
Variable remuneration has continued to evolve in order to reflect the changing needs of our business and our clients while balancing
regional differences in approach to remuneration. Generally, awards are now derived by balancing actual sales performance with
additional indicators of success, such as client retention, cross-selling, and other team behaviours.
The formula may vary between the institutional sales channel versus the wholesale channels. In line with greater regulatory scrutiny
on sales practices in the UK and Australia there has been reduced emphasis on direct sales commission. Consistent with Fund
Managers and other employees, sales employees are required to take a portion of their variable remuneration in the form of deferred
equity, vesting between three and five years.
The time horizon of payments for the revenue generation scheme varies between one to three years. Typically, payment outcomes
are provided over shorter time horizons to reinforce the link between revenue generation and reward.
4. Oversight and governance
The Board, through its Remuneration & Nominations Committee and its subsidiary JOHCM Holdings Limited Remuneration
Committee (together, the Remuneration Committees), provides oversight of remuneration and incentive policies. This includes
specific recommendations on remuneration packages and other terms of employment for Executive Directors, Senior Executives,
NEDs and Fund Managers.
In summary, the Remuneration Committees are responsible for the following functions and responsibilities:
• Review and make recommendations to the Board in relation to remuneration arrangements and policies for the Group CEO and
other Global Group Executive members as well as other Senior Executives and appointments;
• Approve Group equity allocations and Group VR pools;
• Significant changes in remuneration policy and structure, including employee equity plans and benefits;
• Review and make recommendations to the Board in relation to the succession plans for the Group CEO and review succession
plans for other Global Group Executives;
• Provide oversight over the Company’s strategic human resource initiatives, including diversity, culture and leadership;
• Assess the collective skills required to effectively discharge the Board’s duties, having regard to the Company’s performance,
financial position, strategic direction and performance of Directors;
• Review the composition, functions, responsibilities, size of the Board and Director tenure; and
• Consider the suitability of candidates and make recommendations to the Board for the appointment of directors, director
appointment criteria and succession planning.
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During the 2020 Financial Year, the Board and Remuneration Committees actioned the following significant items in relation to
remuneration arrangements as outlined in the table below.
Significant matters considered during the 2020 Financial Year
Approved various equity scheme
awards
Implemented the Senior Manager and
Certification Regime UK
Oversaw the appointment of the
independent Chair of the JOHCM
Limited Board
Approved the issue of FLE Scheme grants.
The regime was implemented in line with regulatory requirements in December 2019.
An independent Chair was appointed to the Board of JOHCM Limited, our UK regulated subsidiary.
Evaluated changes to the FLE scheme
for JOHCM Fund Managers
Evaluated and considered long-term revenue share plans as an important retention strategy for JOHCM
Fund Managers.
Reviewed Corporate Remuneration
Arrangements
Reviewed the Corporate bonus pool for the Pendal Australia business and the JOHCM Senior Staff bonus
pool.
Reviewed and confirmed the Key Management Personnel remuneration structures.
Reviewed our remuneration practices in jurisdictions where regulatory changes required the adoption of
new standards.
Engagement of remuneration consultants
The Remuneration & Nominations Committee has a Charter in place that acknowledges its obligations under the
Corporations Act 2001 in respect of remuneration advice or remuneration recommendations for KMP. This includes:
• Committee approval is required to appoint any remuneration consultant to advise in relation to KMP remuneration;
• Any advice from the remuneration consultant must be provided directly to the Chair of the Committee and not to management;
and
• Dialogue between KMP to whom the advice relates and the remuneration consultant is precluded and a declaration of their
independence from the KMP to whom their recommendations relate. Confirmation that the Remuneration & Nominations
Committee’s conditions of engagement have been observed is also required.
By observing these requirements, the Remuneration & Nominations Committee receives assurance that the remuneration advice
and recommendations provided by remuneration consultants are independent from management.
Independent Board advice and services
Guerdon Associates continued to act as the Remuneration & Nominations Committee’s appointed remuneration adviser.
No consultants were engaged to provide recommendations to the Remuneration & Nominations Committee in relation to KMP
remuneration that fit within the definition of a ‘remuneration recommendation’ under the Corporations Amendment (Improving
Accountability on Directors and Executive Remuneration) Act 2011.
Services provided to management and the Committee
The following organisations provided management with remuneration benchmarking data for employees:
• Financial Institutions Remuneration Group (FIRG)
• McLagan
The following organisations provided management with assistance on assessment of regulatory impacts as it relates to
remuneration arrangements:
• Tapestry Global Compliance Partners
• Ernst & Young (EY); EY also provided management updates on legislative and regulatory developments in the financial services
industry
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5. Link between remuneration outcomes and group performance
Pendal Group’s position against peer groups
For the purpose of assessing the Group CEO’s remuneration, Pendal is positioned in the upper quartile against the Australian ASX
benchmarks for market capitalisation amongst the Australian Asset Management peers. Pendal is placed closer to the lower
quartile against the UK market peers.
Graph 2 below outlines the Pendal Group CEO’s annual total reward since he joined the organisation relative to share price growth. It
bears noting that the Company did not have a LTI scheme for the Group CEO until the 2012 Financial Year, when it was introduced in
response to shareholder feedback. The introduction of the Group CEO LTI required alignment with the intent of both short-term and
long-term incentives and with shareholder outcomes. On this basis, the STI component decreased, with the result that the Group
CEO’s remuneration opportunity reduced for three years until the first LTI vesting in 2014. Under both STI deferral and the LTI
program, the number of underlying shares are determined at grant, ensuring the Group CEO’s exposure to share price movements
during the vesting period.
Except for some minor adjustments to reflect Superannuation Guarantee legislation increases, the Fixed Remuneration element for
the Group CEO has remained unchanged since his commencement in 2010 until 1 January 2017, when it was increased as per the
2017 Remuneration Report. There were no changes made to the Group CEO’s arrangements this year.
As can be seen from Graph 2 and Table 1(b) the Group CEO’s total remuneration including the value of vested equity has decreased
by approximately 33 per cent in 2020 when compared to 2019. This was driven by the share price decline and zero vesting of the LTI
award (see vesting of LTI Grants on page 48). The alignment of the Group CEO’s variable remuneration with shareholders is evident
in this outcome.
Graph 2: Group CEO’s Total Remuneration over time
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How the share of profits (pre-tax pre-variable reward) is divided
As part of Pendal Group’s remuneration philosophy, our business model involves sharing profits amongst Fund Managers,
generated by the efforts and skill of the funds management teams with the support of corporate employees, and between
shareholders and employees via the variable reward schemes. These schemes vary for different groups of employees to reward
outcomes and behaviours appropriate to their roles and responsibilities.
The allocation of profits attributed to both shareholders and employees is outlined in Chart 3. This is calculated taking into
account all of the variable remuneration schemes across the business as described above, when the share of pre-tax pre-variable
reward profits (revenue less operating costs of running the business prior to distribution of variable reward and profits to
shareholders) is assessed.
Chart 3: Actual share of profits (pre-tax pre-variable reward
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Graph 3 demonstrates the linkage between Pendal Group performance (i.e. Cash NPAT) and overall remuneration outcomes (i.e.
variable reward and total employee expenses) over the last five years.
Remuneration outcomes and Pendal Group’s performance is linked primarily via the contracted revenue scheme for the Fund
Managers and the variable reward schemes for Corporate employees including the Group CEO and other members of the Global
Executive Committee. The schemes link variable remuneration to either a change in revenue (as is the case for the Fund Managers
under a revenue sharing agreement) or a change in Company profitability (in the case of corporate employees).
The 2020 Financial Year resulted in lower variable employee expense as a result of lower base fees generated but offset by higher
employee variable expense due to higher performance fees generated where the fund managers get a larger share of the revenue.
The total remuneration expense was higher as a result of increase FTE supporting the business growth strategy including the first
full year expense for the JOHCM regional CEOs and Group CRO.
Graph 3: VR outcomes compared to Company performance over the last five years
Vesting of LTI grants
The 2017 Financial Year LTI grants awarded to the Group CEO and other Global Executive Committee members under the
Performance Reward Scheme have not vested. The number of underlying shares for the awards were determined at grant, ensuring
that participants were aligned to shareholders during the vesting period. The LTI grants were subject to two performance hurdles,
TSR and fully diluted Cash EPS. The performance of the hurdles during the three year period was as follows:
1. Fully Diluted Cash EPS growth: 50 per cent of award. Target range of greater than 5 per cent to 10 per cent annual compound
growth. Cash EPS over the three year performance period was -6.0 per cent, therefore the Cash EPS portion of the award has
not vested.
2. TSR: 50 per cent of award. Target range of ASX 200 median to the top quartile. Pendal Group's TSR over the three-year
performance period of -37.3 per cent was in the third quartile of the ASX 200 comparator group and so the relative TSR portion of
the award has not vested.
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Graphs 4a and 4b illustrate the performance against LTI hurdles over time under the Performance Reward Scheme at the end of
each 3 year performance period.
Graph 4a: Performance Reward Scheme – Cash EPS outcome achieved at the end of each performance period against the LTI
hurdle for the last five years
Graph 4b: Performance Reward Scheme – TSR % outcome achieved at the end of each performance period against the LTI
hurdle for the last five years
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Vesting of LTI grants and link to Pendal Group’s Performance
Why relative TSR and Fully Diluted Cash EPS hurdles?
The TSR hurdle of 50-100% is aligned with common market practice to ensure an equitable reward for executives to peer executives
assessed on a similar basis. The TSR ASX 200 peer group represents the primary investable universe from which shareholders can
choose to invest. Vesting based on Pendal results relative to the ASX 200 provides strong alignment between Pendal Executives
and shareholders in terms of where investor capital may be allocated. The Cash EPS hurdle of 5-10% has been set by the Board to
encourage management to build a business that is sustainable through various economic cycles, irrespective of whether the
markets rise or fall. The Board set the 5-10% band for Cash EPS vesting by considering the evidence and expectations for
reasonable long-term earnings growth. The goal is to maintain a consistent hurdle across the market cycle so that the goals are very
clear for management and shareholders, to be realistically achievable but not easy, and to represent a result that would produce a
healthy return for shareholders. Graphs 5a and 5b below provides a historical overview of Pendal Group’s Cash EPS and TSR relative
performance against the S&P/ASX 200 Accumulation Index.
Graph 5a: Pendal Group Cash EPS (cps) over time
Graph 5b: Pendal yearly TSR and yearly S&P/Accumulation Index over time
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Group CEO and other Global Executive Committee members’ performance outcomes in the
2020 Financial Year
Group CEO Performance and Short Term Incentive Outcome
The Group CEO remuneration structure that applied in the 2020 Financial Year is in line with the remuneration structure set out
earlier in this Remuneration Report.
The 2020 Financial Year short term incentive outcome of $0.7 million reflects the Boards assessment of the Group CEO’s
performance against the Key Performance Indicators including financial and non-financial measures as outlined below.
Group CEO performance against key performance indicators and remuneration outcomes
Description of key performance indicators and performance
Performance
Measure
Key Performance
Indicators (KPIs)
Weighting
FY20 Performance
Against KPIs
Financial
Cash NPAT
Base Management Fee Revenue
30%
Profit was down for the year primarily driven by lower revenue resulting
from large outflows with markets hindered by COVID-19 impacts.
Execute on
Growth Strategy
Progress against Strategic
Objectives regarding investment
performance, capital allocation,
business strength and global
synergies.
Short-Term
Incentive
$0.7m
Business
Development
Progress towards the
development of new business
opportunities, enhancement of the
distribution strategy and
strengthening of succession plans.
Risk
Management &
Operational
Effectiveness
Effective risk management and
operational risk framework that
embeds quality risk culture to
ensure the business operates
within agreed Risk Appetite
framework with sound outcomes,
utilising a robust operational
platform with the right governance
structures, processes and
resources to support business
model and strategy including
Brexit developments.
Pendal experienced a challenging operating environment, resulting in
pressure across key financial measures including:
• Average FUM of -4%
• Base management fee revenue of -5%
• Cash net profit after tax of -10%
• Cash earnings per share of -11%
Overall below target
30%
Key investment strategies outperforming with 71% of FUM over three
years above benchmarks and 70% over five years above benchmarks.
Global Executive Committee senior positions filled and operating well.
Updated thorough SWOT analysis completed for each region, including
likely longer term COVID-19 impacts on the business eg Digital
marketing, product and distribution priorities.
Good progress on global operating platform to improve efficiency.
COVID-19 environment had some negative impact on executing on the
growth strategy but managed well.
Overall below target
30% Good progress on growing Regnan business.
Successful launch of ESG Credit Impact product, hiring of Global Equity
Impact team well executed with imminent launch of fund.
Early implementation of global data hub to enhance distribution and
client experience in all regions.
Well developed long term remuneration scheme for Investment
professionals aimed at mitigating the loss of key talent that improves
the long-term sustainability of the Company’s revenue stream.
Good progress on strengthening succession plans for key investment
teams.
Overall slightly below target
10%
Outstanding response to Covid-19 environment with effective switch to
work from home across the Group. No errors or significant issues
identified.
Joint working groups identifying global operational synergies and
creating operational efficiencies.
Further enhancements in Group risk reporting on regulatory and
compliance matters.
Embedded quality risk culture throughout the Group.
Clean US SEC regulatory review with confirmation of “No Action” letter.
Long standing FCA investigation successfully resolved.
Business positioned for either hard or negotiated Brexit decision.
Overall above target
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Description of Long-Term Incentive Award performance hurdles and outcome
performance
Long-Term
Incentive Award
$1,000,000
0% vesting of
2017 LTI Award
The Group CEO was awarded $1 million face value equivalent of Performance Share Rights to PDL shares for no consideration for the
2020 Financial Year, following a vote by shareholders at the 2019 Annual General Meeting. The Group CEO’s LTI opportunity represents the
maximum incentive opportunity under the award and is determined with reference to market benchmarking. Hurdles are designed to be
reasonably stable over the cycle.
Vesting of the award is subject to two equally weighted hurdles, measured over three years:
a) 50% ($500,000) subject to relative TSR performance; and
b) 50% ($500,000) subject to Cash EPS growth.
For the LTI award for which performance was measured over three years from 1 October 2017 to 30 September 2020, the TSR and Cash EPS
performance hurdles have been tested. Neither the TSR nor the Cash EPS have met their minimum hurdles resulting in 0% vesting and a zero
award for the LTI Award that was issued in in the 2017 Financial Year.
Other Global Executive Committee Members’ Performance
Each year the Group CEO, taking into account market data and the scope of the role, considers the appropriate variable reward
target for each member of the Global Executive Committee. The recommendations are presented to the Remuneration &
Nominations Committee who discuss and approve the remuneration package for each individual. Company profitability is an
important determinant in Senior Executive variable reward outcomes along with non-financial factors, including risk management,
also having an influence. Financial performance indicators considered include profitability, expense management and sales
performance.
The Group CEO determined a set of priorities and key deliverables for the Global Executives that align with the strategic goals of the
business. The Group CEO undertakes a review with each Global Executive and conducts a formal discussion with them about their
key achievements during the performance year, and identifies areas for improvement. The non-financial measures that are
incorporated will differ from one Global Executive to the next depending on the role but are made up of business critical objectives
such as business strategy, people management, quality and delivery of project work, client satisfaction, support to the investment
teams, ability to resolve issues and risk management.
Once the objectives are agreed, the Group CEO meets regularly with his direct reports to assess progress and adjust or change
priorities depending on the needs of the business. A more formal review of achievements and an assessment against objectives is
carried out twice per year. The Group CEO reviews the performance of the Global Executive Committee members annually with the
Remuneration & Nominations Committee.
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6. Details of the Global Executive Committee remuneration outcomes
The following section contains both statutory (in accordance with applicable accounting standards and regulations) and voluntary
disclosures of awarded remuneration for KMP.
Table 1a Short Term Incentive (STI) outcomes for the Global Executive Committee in the 2020 and 2019 Financial Years
The table below sets out the Global Executive Committee’s (KMP) STI outcomes for the 2020 and 2019 Financial Years. STI outcomes are
awarded in both cash and Pendal shares with deferred vesting on the shares. The total STI represents the actual cost to the Company and is
charged to Cash NPAT.
The number of shares granted to each KMP is subject to the STI outcome with a portion paid in deferred PDL shares which are purchased by
the Company on behalf of employees and acquired by the Pendal Group Employee Benefit Trust through a combination of on-market and
off-market purchases. The shares vest over a 5 year period providing alignment between executives and shareholders.
CCuurrrreenntt KKMMPP
Emilio Gonzalez
Alexandra Altinger3, 4
Richard Brandweiner
Nick Good5, 6, 7
Bindesh Savjani3
Cameron Williamson
Total
FY
20
19
20
19
20
19
20
19
20
19
20
19
2200
1199
Cash STI
($)
350,000
575,000
458,920
-
303,000
270,000
788,000
-
477,330
380,780
187,513
253,258
STI deferred into
Equity 1,2
($)
350,000
575,000
196,680
-
303,000
270,000
-
-
204,570
163,191
62,487
100,742
Total STI
($)
700,000
1,150,000
655,600
-
606,000
540,000
788,000
-
681,900
543,971
250,000
354,000
Total STI as
% STI Maximum
25%
41%
45%
-
51%
45%
59%
-
91%
75%
31%
44%
2,564,763
1,116,737
3,681,500
1,479,038
1,108,933
2,587,971
Notes to Table 1a
1 Equity-based remuneration represents the actual short term equity awarded for performance for the 2020 Financial Year. These projected amounts were
determined after performance reviews were completed, and approved by the Board. It should be noted there may be immaterial changes to these figures
following final approval of the relative proportions of cash and equity as part of the annual remuneration review cycle.
2 Actual number of shares allocated for the 2020 Financial Year award will be determined closer to the allocation date on 4 December 2020.
3 Alexandra Altinger and Bindesh Savjani are remunerated in Pound Sterling. An average exchange rate of 0.5323 (2019:0.5515) has been applied to convert
their total STI to Australian dollars.
4 Alexandra Altinger commenced employment with JOHCM on 9 September 2019 and did not qualify for a STI for the 2019 Financial Year.
5 Nick Good is remunerated in US Dollars. An average exchange rate of 0.6789 has been applied to convert his total STI to Australian dollars.
6 Nick Good commenced employment on 2 December 2019 so he received no STI for the 2019 Financial Year.
7 Equity exposure to Pendal Group shares for Nick Good is via the CEO, JOHCM, USA LTI arrangement.
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Table 1b: Global Executive Committee remuneration – actual or realised remuneration received in the 2020 and 2019 Financial
Years
This table shows the actual remuneration paid to, and the equity which vested for, each Global Executive Committee member (KMP) in the
2020 and 2019 Financial Years. This includes:
• Fixed remuneration received during the year;
• The cash component of STI awarded in 2020 and 2019;
• Deferred STI equity awarded in prior years that vested in 2020 and 2019;
• LTI equity awarded in prior years that vested in 2020 and 2019; and
• Other payments.
Fixed
Remuneration
($)
FY
Cash
component of
STI4
($)
Vesting of
prior years
STI awards5
($)
Vesting of
prior years
LTI awards6
($)
Dividends paid
on deferred
shares and
hurdled LTI
equity7
($)
Other8
($)
Total
($)
Current KMP
Emilio Gonzalez1
Alexandra Altinger2,3
Richard Brandweiner1
Nick Good2,3
Bindesh Savjani2,3
Cameron Williamson1
Former KMP
Andrew Shiels2
20
19
20
19
20
19
20
19
20
19
20
19
20
19
803,077
350,000
432,314
800,000
575,000
681,789
586,686
458,920
34,591
-
-
-
552,116
303,000
63,527
550,001
270,000
35,913
429,617
788,000
140,201
-
-
-
661,281
477,330
209,476
339,587
380,780
-
451,731
187,513
66,541
445,120
253,258
104,942
-
397,779
-
-
-
-
Total Global
Executive Committee
Remuneration
20
3,484,508
2,564,763
912,059
19
2,567,078
1,479,038
822,644
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
89,311
-
11,,667744,,770022
160,352
300,000
22,,551177,,114411
-
-
21,029
11,907
20,589
-
22,084
-
-
-
-
11,,004455,,660066
3344,,559911
993399,,667722
886677,,882211
1,026,661
22,,440055,,006688
-
-
--
11,,337700,,117711
-
375,340
11,,009955,,770077
14,342
25,492
-
-
-
-
-
-
772200,,112277
882288,,881122
--
339977,,777799
167,355
1,026,661
8,155,346
197,751
675,340
5,741,851
Notes to Table 1b
1 The 2020 Financial Year fixed remuneration for Emilio Gonzalez, Richard Brandweiner and Cameron Williamson did not increase from the 2019 Financial
Year. The difference is attributable to moving our pay day as part of the transition to a new payroll system.
2 Alexandra Altinger and Bindesh Savjani, are remunerated in Pounds Sterling. An average exchange rate of 0. 5323 for 2020 (2019: 0.5515) has been applied
to convert their remuneration to Australian dollars. Nick Good is remunerated in US dollars .An average exchange rate of 0.6789 for 2020 has been applied to
convert his remuneration to Australian dollars. Andrew Shiels was remunerated in Pounds Sterling in the 2019 Financial Year.
3 Nick Good commenced employment with JOHCM on 2 December 2019 and his total fixed remuneration reflects the period that he worked in the 2020
Financial Year from his employment start date. The total fixed remuneration for both Alexandra Altinger and Bindesh Savjani for the 2019 Financial Year also
reflects the period that they worked from their employment start dates of 9 September 2019 and 4 March 2019 respectively. Alexandra Altinger did not qualify
for a bonus or equity for the 2019 Financial Year.
4 The cash component of STI represents the award for performance during the 2020 Financial Year and will be paid in December 2020. These amounts were
determined after performance reviews were completed, and were approved by the Board. It should be noted there may be changes to these figures following
final approval of the relative proportions of cash and equity as part of the annual remuneration review cycle.
5 The equity awards that vested on 1 October 2020 are treated as vesting in the 2020 Financial Year. The equity value has been calculated as the number of
securities that vested during the year ended 30 September 2020, multiplied by the closing PDL share price on the date of vesting.
6 The LTI granted in the 2017 Financial Year has not vested in 2020 as it did not meet the minimum performance hurdles for TSR or Cash EPS. The LTI granted
in the 2016 Financial Year did not vest in 2019 as it did not meet the minimum performance hurdles for TSR or Cash EPS.
7 Dividend payments are dividends paid on STI shares granted from previous years’ rewards that have been deferred in accordance with the Equity Plan Rules.
There were no dividend equivalent payments made in 2020 and 2019 in relation to Performance Share Rights because they did not vest.
Directors’ Report − Remuneration Report
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2020
8 Other payments to Nick Good represent 2020 Financial Year cash payments for deferred remuneration foregone following the commencement of his
employment. Future payments for deferred remuneration foregone are scheduled to be paid in diminishing instalments over the next three financial years as a
retention mechanism, subject to employment conditions. Other payments made in the 2019 Financial Year represent a one–off cash payment to Emilio
Gonzalez in recognition of the additional responsibilities he fulfilled as interim CEO of JOHCM and a cash payment for deferred remuneration foregone to
Bindesh Savjani following the commencement of his employment.
Table 1c: Statutory remuneration for the Global Executive Committee in the 2020 and 2019 Financial Years
The table below details the statutory accounting expense of all remuneration-related items for the Global Executive Committee (KMP) in
relation to both the 2020 and 2019 Financial Years.
Table 1c shows the remuneration based on accrual accounting amounts determined in accordance with the Australian Accounting
Standards (refer to the footnotes to the table below). It is different from Table 1b’s actual remuneration outcomes which the Directors believe
is more informative as to what was actually realised for senior executives in the period. Please see footnote 8 to Table 1c for greater
clarification.
Short term benefits
Post-
Other long-
employment
benefits
term
benefits
Equity based payments
component of
Cash
STI4
($)
Non-
monetary
benefits5
($)
Salary
& fees
($)
Super-
annuation
($)
Long
service
leave6
($)
FY
STI
Equity7
($)
LTI
Equity8
($)
Other10
($)
Total
($)
Dividends
paid on
deferred
shares and
hurdled LTI
equity9
($)
Current KMP
Alexandra
Altinger2,3
Richard
Brandweiner1
Bindesh
Savjani2,3
Cameron
Williamson1
Former KMP
Emilio Gonzalez1
20
778,077
350,000
9,647
25,000
12,333
606,815
390,548
89,311
19
775,000
575,000
12,502
25,000
23,363
696,668
311,284
160,352
300,000
20
582,698
458,920
8,298
3,988
65,284
293,222
19
34,591
-
-
20
527,116
303,000
25,000
7,615
203,851
273,854
21,029
19
525,001
270,000
18,000
25,000
7,925
126,598
255,747
11,907
Nick Good2,3
20
429,617
788,000
27,612
726,804
692,531
20,589
1,026,661
19
-
-
-
-
20
601,165
477,330
18,576
60,116
364,800
161,001
22,084
19
334,751
380,780
6,256
4,836
246,660
73,034
-
375,340
11,,442211,,665577
20
426,731
187,513
2,100
25,000
(8,303)
83,844
108,181
14,342
19
420,120
253,258
25,000
15,330
132,390
121,827
25,492
-
-
-
-
-
-
-
-
22,,226611,,773311
22,,887799,,116699
11,,441122,,441100
3344,,559911
11,,336611,,446655
11,,224400,,117788
33,,771111,,881144
--
11,,770055,,007722
883399,,440088
999933,,441177
--
339977,,777799
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2200 33,,334455,,440044
22,,556644,,776633
6666,,223333
113399,,110044
1111,,664455
22,,005511,,339988
11,,991199,,333377
116677,,335555
11,,002266,,666611
1111,,229911,,990000
1199 22,,448877,,224422
11,,447799,,003388
3366,,775588
7799,,883366
4466,,661188
11,,220022,,331166
776611,,889922
119977,,775511
667755,,334400
66,,996666,,779911
Andrew Shiels2
20
-
19
397,779
Total Global
Executive
Committee
Remuneration
Note to Table 1c:
1
The 2020 Financial Year fixed remuneration for Emilio Gonzalez, Richard Brandweiner and Cameron Williamson did not increase from the 2019 Financial
Year. The difference is attributable to moving our pay day as part of the transition to a new payroll system.
2 Alexandra Altinger and Bindesh Savjani are remunerated in Pounds Sterling. An average exchange rate of 0.5323 for 2020 (2019: 0.5515) has been applied
to convert their remuneration to Australian dollars. Nick Good is remunerated in US dollars. An average exchange rate of 0.6789 for 2020 has been applied
to convert his remuneration to Australian dollars. Andrew Shiels was remunerated in Pounds Sterling in the 2019 Financial Year.
3 Nick Good commenced employment with JOHCM on 2 December 2019 and his total fixed remuneration reflects the period that he worked in the 2020
Financial Year from his employment start date. The total fixed remuneration for both Alexandra Altinger and Bindesh Savjani for the 2019 Financial Year also
reflects the period that they worked from their employment start dates of 9 September 2019 and 4 March 2019 respectively. Alexandra Altinger did not
qualify for a bonus or equity for the 2019 Financial Year.
-
-
-
-
-
2222
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FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2020
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2020
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2020
8 Other payments to Nick Good represent 2020 Financial Year cash payments for deferred remuneration foregone following the commencement of his
employment. Future payments for deferred remuneration foregone are scheduled to be paid in diminishing instalments over the next three financial years as a
8 Other payments to Nick Good represent 2020 Financial Year cash payments for deferred remuneration foregone following the commencement of his
8 Other payments to Nick Good represent 2020 Financial Year cash payments for deferred remuneration foregone following the commencement of his
retention mechanism, subject to employment conditions. Other payments made in the 2019 Financial Year represent a one–off cash payment to Emilio
Gonzalez in recognition of the additional responsibilities he fulfilled as interim CEO of JOHCM and a cash payment for deferred remuneration foregone to
Bindesh Savjani following the commencement of his employment.
employment. Future payments for deferred remuneration foregone are scheduled to be paid in diminishing instalments over the next three financial years as a
employment. Future payments for deferred remuneration foregone are scheduled to be paid in diminishing instalments over the next three financial years as a
retention mechanism, subject to employment conditions. Other payments made in the 2019 Financial Year represent a one–off cash payment to Emilio
retention mechanism, subject to employment conditions. Other payments made in the 2019 Financial Year represent a one–off cash payment to Emilio
Gonzalez in recognition of the additional responsibilities he fulfilled as interim CEO of JOHCM and a cash payment for deferred remuneration foregone to
Gonzalez in recognition of the additional responsibilities he fulfilled as interim CEO of JOHCM and a cash payment for deferred remuneration foregone to
Bindesh Savjani following the commencement of his employment.
Bindesh Savjani following the commencement of his employment.
Table 1c: Statutory remuneration for the Global Executive Committee in the 2020 and 2019 Financial Years
Table 1c: Statutory remuneration for the Global Executive Committee in the 2020 and 2019 Financial Years
Table 1c: Statutory remuneration for the Global Executive Committee in the 2020 and 2019 Financial Years
The table below details the statutory accounting expense of all remuneration-related items for the Global Executive Committee (KMP) in
relation to both the 2020 and 2019 Financial Years.
The table below details the statutory accounting expense of all remuneration-related items for the Global Executive Committee (KMP) in
The table below details the statutory accounting expense of all remuneration-related items for the Global Executive Committee (KMP) in
relation to both the 2020 and 2019 Financial Years.
relation to both the 2020 and 2019 Financial Years.
Table 1c shows the remuneration based on accrual accounting amounts determined in accordance with the Australian Accounting
Standards (refer to the footnotes to the table below). It is different from Table 1b’s actual remuneration outcomes which the Directors believe
Table 1c shows the remuneration based on accrual accounting amounts determined in accordance with the Australian Accounting
Table 1c shows the remuneration based on accrual accounting amounts determined in accordance with the Australian Accounting
is more informative as to what was actually realised for senior executives in the period. Please see footnote 8 to Table 1c for greater
Standards (refer to the footnotes to the table below). It is different from Table 1b’s actual remuneration outcomes which the Directors believe
Standards (refer to the footnotes to the table below). It is different from Table 1b’s actual remuneration outcomes which the Directors believe
clarification.
is more informative as to what was actually realised for senior executives in the period. Please see footnote 8 to Table 1c for greater
is more informative as to what was actually realised for senior executives in the period. Please see footnote 8 to Table 1c for greater
clarification.
clarification.
FY
Current KMP
Current KMP
Current KMP
Emilio Gonzalez1
20
Emilio Gonzalez1
Emilio Gonzalez1
19
Alexandra
Altinger2,3
Alexandra
Alexandra
Altinger2,3
Altinger2,3
Richard
Brandweiner1
Richard
Richard
Brandweiner1
Brandweiner1
Nick Good2,3
Nick Good2,3
Nick Good2,3
Bindesh
Savjani2,3
Bindesh
Bindesh
Savjani2,3
Savjani2,3
Cameron
Williamson1
Cameron
Cameron
Williamson1
Williamson1
Former KMP
20
19
20
19
20
19
20
19
20
19
Total Global
Executive
Total Global
Total Global
Committee
Executive
Executive
Remuneration
Committee
Committee
Remuneration
Remuneration
Note to Table 1c:
1
Short term benefits
Short term benefits
Short term benefits
Post-
employment
benefits
Other long-
term
benefits
Post-
Post-
employment
employment
benefits
benefits
Other long-
Other long-
term
term
benefits
benefits
Equity based payments
Equity based payments
Equity based payments
Salary
& fees
($)
Cash
component of
Cash
Cash
STI4
component of
component of
($)
STI4
STI4
($)
($)
Non-
monetary
Non-
Non-
benefits5
monetary
monetary
($)
benefits5
benefits5
($)
($)
Salary
Salary
& fees
& fees
($)
($)
Super-
annuation
($)
Super-
Super-
annuation
annuation
($)
($)
Long
service
leave6
($)
Long
Long
service
service
leave6
leave6
($)
($)
FY
FY
STI
Equity7
($)
STI
STI
Equity7
Equity7
($)
($)
LTI
Equity8
($)
Dividends
paid on
Dividends
Dividends
deferred
paid on
paid on
shares and
deferred
deferred
hurdled LTI
shares and
shares and
equity9
hurdled LTI
hurdled LTI
($)
equity9
equity9
($)
($)
LTI
LTI
Equity8
Equity8
($)
($)
Other10
($)
Other10
Other10
($)
($)
Total
($)
Total
Total
($)
($)
778,077
350,000
9,647
25,000
12,333
606,815
390,548
89,311
-
22,,226611,,773311
20
20
775,000
778,077
778,077
350,000
350,000
9,647
9,647
575,000
12,502
25,000
25,000
12,333
12,333
606,815
606,815
390,548
390,548
25,000
23,363
696,668
311,284
775,000
775,000
19
19
582,698
458,920
575,000
575,000
12,502
12,502
8,298
25,000
25,000
3,988
23,363
23,363
-
696,668
696,668
311,284
311,284
65,284
293,222
89,311
89,311
160,352
300,000
-
-
22,,887799,,116699
22,,226611,,773311
22,,226611,,773311
160,352
160,352
-
300,000
300,000
-
22,,887799,,116699
22,,887799,,116699
11,,441122,,441100
20
20
582,698
582,698
34,591
458,920
458,920
-
8,298
8,298
-
3,988
3,988
-
-
19
19
34,591
34,591
527,116
303,000
-
-
-
20
20
527,116
527,116
303,000
303,000
525,001
270,000
18,000
-
-
-
-
25,000
-
-
7,615
25,000
25,000
25,000
7,925
7,615
7,615
203,851
203,851
273,854
273,854
126,598
255,747
-
-
-
-
65,284
65,284
-
293,222
293,222
-
-
203,851
-
-
273,854
-
-
21,029
-
-
-
-
-
19
19
525,001
525,001
270,000
270,000
429,617
788,000
18,000
18,000
27,612
25,000
25,000
-
7,925
7,925
-
126,598
126,598
255,747
255,747
726,804
692,531
21,029
21,029
11,907
11,907
11,907
20,589
1,026,661
-
-
11,,441122,,441100
11,,441122,,441100
3344,,559911
3344,,559911
3344,,559911
11,,336611,,446655
-
-
11,,224400,,117788
11,,336611,,446655
11,,336611,,446655
11,,224400,,117788
11,,224400,,117788
33,,771111,,881144
20
20
429,617
429,617
-
788,000
788,000
-
27,612
27,612
-
-
19
19
601,165
-
-
477,330
-
-
18,576
-
-
60,116
-
-
-
-
20
20
601,165
601,165
477,330
477,330
334,751
380,780
18,576
18,576
6,256
60,116
60,116
4,836
-
-
-
19
19
334,751
334,751
426,731
380,780
380,780
187,513
6,256
6,256
2,100
4,836
4,836
25,000
(8,303)
-
-
726,804
726,804
-
692,531
692,531
-
20,589
20,589
-
1,026,661
1,026,661
-
33,,771111,,881144
33,,771111,,881144
--
-
-
364,800
-
-
161,001
-
-
22,084
-
-
-
364,800
364,800
161,001
161,001
246,660
73,034
22,084
22,084
-
375,340
--
--
-
-
11,,770055,,007722
-
-
11,,442211,,665577
11,,770055,,007722
11,,770055,,007722
246,660
246,660
73,034
73,034
83,844
108,181
14,342
-
-
375,340
375,340
-
11,,442211,,665577
11,,442211,,665577
883399,,440088
-
-
-
-
20
20
426,731
426,731
420,120
187,513
187,513
253,258
19
19
420,120
420,120
253,258
253,258
25,000
25,000
(8,303)
(8,303)
25,000
15,330
83,844
83,844
108,181
108,181
132,390
121,827
14,342
14,342
25,492
25,000
25,000
15,330
15,330
132,390
132,390
121,827
121,827
25,492
25,492
-
-
-
2,100
2,100
-
-
-
-
-
-
-
-
-
-
883399,,440088
883399,,440088
999933,,441177
999933,,441177
999933,,441177
--
--
--
339977,,777799
-
-
1111,,229911,,990000
339977,,777799
339977,,777799
Former KMP
Former KMP
Andrew Shiels2
20
-
Andrew Shiels2
Andrew Shiels2
20
20
-
-
19
397,779
-
-
-
-
19
19
2200 33,,334455,,440044
397,779
397,779
22,,556644,,776633
-
-
6666,,223333
113399,,110044
1111,,664455
-
-
-
-
-
-
-
-
-
-
-
-
-
-
22,,005511,,339988
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
11,,991199,,333377
116677,,335555
11,,002266,,666611
2200 33,,334455,,440044
2200 33,,334455,,440044
22,,556644,,776633
22,,556644,,776633
6666,,223333
6666,,223333
1199 22,,448877,,224422
11,,447799,,003388
3366,,775588
113399,,110044
113399,,110044
1111,,664455
1111,,664455
22,,005511,,339988
22,,005511,,339988
11,,991199,,333377
11,,991199,,333377
7799,,883366
4466,,661188
11,,220022,,331166
776611,,889922
116677,,335555
116677,,335555
11,,002266,,666611
11,,002266,,666611
1111,,229911,,990000
1111,,229911,,990000
119977,,775511
667755,,334400
66,,996666,,779911
1199 22,,448877,,224422
1199 22,,448877,,224422
11,,447799,,003388
11,,447799,,003388
3366,,775588
3366,,775588
7799,,883366
7799,,883366
4466,,661188
4466,,661188
11,,220022,,331166
11,,220022,,331166
776611,,889922
776611,,889922
119977,,775511
119977,,775511
667755,,334400
667755,,334400
66,,996666,,779911
66,,996666,,779911
Note to Table 1c:
Note to Table 1c:
1
1
The 2020 Financial Year fixed remuneration for Emilio Gonzalez, Richard Brandweiner and Cameron Williamson did not increase from the 2019 Financial
Year. The difference is attributable to moving our pay day as part of the transition to a new payroll system.
The 2020 Financial Year fixed remuneration for Emilio Gonzalez, Richard Brandweiner and Cameron Williamson did not increase from the 2019 Financial
The 2020 Financial Year fixed remuneration for Emilio Gonzalez, Richard Brandweiner and Cameron Williamson did not increase from the 2019 Financial
Year. The difference is attributable to moving our pay day as part of the transition to a new payroll system.
Year. The difference is attributable to moving our pay day as part of the transition to a new payroll system.
2 Alexandra Altinger and Bindesh Savjani are remunerated in Pounds Sterling. An average exchange rate of 0.5323 for 2020 (2019: 0.5515) has been applied
to convert their remuneration to Australian dollars. Nick Good is remunerated in US dollars. An average exchange rate of 0.6789 for 2020 has been applied
to convert his remuneration to Australian dollars. Andrew Shiels was remunerated in Pounds Sterling in the 2019 Financial Year.
2 Alexandra Altinger and Bindesh Savjani are remunerated in Pounds Sterling. An average exchange rate of 0.5323 for 2020 (2019: 0.5515) has been applied
2 Alexandra Altinger and Bindesh Savjani are remunerated in Pounds Sterling. An average exchange rate of 0.5323 for 2020 (2019: 0.5515) has been applied
to convert their remuneration to Australian dollars. Nick Good is remunerated in US dollars. An average exchange rate of 0.6789 for 2020 has been applied
to convert their remuneration to Australian dollars. Nick Good is remunerated in US dollars. An average exchange rate of 0.6789 for 2020 has been applied
to convert his remuneration to Australian dollars. Andrew Shiels was remunerated in Pounds Sterling in the 2019 Financial Year.
to convert his remuneration to Australian dollars. Andrew Shiels was remunerated in Pounds Sterling in the 2019 Financial Year.
3 Nick Good commenced employment with JOHCM on 2 December 2019 and his total fixed remuneration reflects the period that he worked in the 2020
Financial Year from his employment start date. The total fixed remuneration for both Alexandra Altinger and Bindesh Savjani for the 2019 Financial Year also
3 Nick Good commenced employment with JOHCM on 2 December 2019 and his total fixed remuneration reflects the period that he worked in the 2020
3 Nick Good commenced employment with JOHCM on 2 December 2019 and his total fixed remuneration reflects the period that he worked in the 2020
reflects the period that they worked from their employment start dates of 9 September 2019 and 4 March 2019 respectively. Alexandra Altinger did not
qualify for a bonus or equity for the 2019 Financial Year.
Financial Year from his employment start date. The total fixed remuneration for both Alexandra Altinger and Bindesh Savjani for the 2019 Financial Year also
Financial Year from his employment start date. The total fixed remuneration for both Alexandra Altinger and Bindesh Savjani for the 2019 Financial Year also
reflects the period that they worked from their employment start dates of 9 September 2019 and 4 March 2019 respectively. Alexandra Altinger did not
reflects the period that they worked from their employment start dates of 9 September 2019 and 4 March 2019 respectively. Alexandra Altinger did not
qualify for a bonus or equity for the 2019 Financial Year.
qualify for a bonus or equity for the 2019 Financial Year.
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4 The cash component of VR represents the award for performance during the 2020 Financial Year and will be paid in December 2020. These projected
amounts were determined after performance reviews were completed, and were approved by the Board. It should be noted that there may be changes to
these figures following final approval of the relative proportions of cash and equity as part of the annual remuneration review cycle.
5 The non-monetary benefit for Emilio Gonzalez, Richard Brandweiner and Cameron Williamson is a salary sacrifice benefit which is accessible to all
employees and includes but is not limited to car parking, novated leases and/or computers, etc. The non-monetary benefits provided to Alexandra Altinger,
Nick Good and Bindesh Savjani includes healthcare coverage, life cover and long-term disability cover.
6 Although long service leave benefits continue to accumulate, the amount recognised in the financial statements for such benefits has been re-valued in
accordance with actuarial-based valuation methodologies.
7
Equity-based remuneration represents the amortisation of the ‘fair value’ at grant date over the vesting period of all grants. ‘Fair value’ is determined as
required by accounting standards as ‘the amount for which an asset could be exchanged, a liability settled, or an equity instrument granted could be
exchanged’.
8 LTI does not represent what has vested. The actual value of the 2017 LTI grant measured in 2020 as highlighted in Table 1b is zero. The values in Table 1c
above have been determined independently by an external valuation expert using valuation based methodologies which take into account the performance
hurdles relevant to the issue of those equity instruments. The equity based payment is the amount expensed for the year in relation to all LTI grants that
have been awarded (as outlined in Table 4) and includes adjustments to reflect the expectation as at 30 September 2020 of the likely level of vesting of the
EPS hurdled LTI. For the 2017 EPS hurdled LTI grant which has not vested, 100 per cent of the amortisation expense has been reversed. For grants with
market conditions such as TSR, the number of shares expected to vest is included in the estimated fair value of securities at grant date. This does not allow
for adjustments during the performance period or at testing if performance hurdles are not met. For the 2017 TSR hurdled LTI grant, which has not vested,
the amortisation expense has not been reversed. The accounting treatment of EPS and TSR hurdled LTI equity is in accordance with Accounting Standards.
9 Dividend payments are dividends paid on STI shares granted from previous years’ rewards that have been deferred in accordance with the Equity Plan
Rules. There were no dividend equivalent payments made in 2020 and 2019 in relation to Performance Share Rights because they did not vest.
10 Other payments to Nick Good represent 2020 Financial Year cash payments for deferred remuneration foregone following the commencement of his
employment. Future payments for deferred remuneration foregone are scheduled to be paid in diminishing instalments over the next three financial years
as a retention mechanism, subject to employment conditions. Other payments made in the 2019 Financial Year represent a one–off cash payment to Emilio
Gonzalez in recognition of the additional responsibilities he fulfilled as interim CEO of JOHCM and a cash payment for deferred remuneration foregone to
Bindesh Savjani following the commencement of his employment.
56 | Pendal Group
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Table 2 illustrates the relative proportions of fixed, cash VR and equity remuneration in the relevant financial year (calculated based
on statutory accounting disclosures; i.e. Table 1(c)) as a percentage of total remuneration. Table 2 differs to Charts 1 and 2 which are
based on the target equity-based remuneration.
Table 2: Global Executive Committee 2020 and 2019 Financial Years’ fixed and variable remuneration as a proportion of total
remuneration
Global Executive Committee
Emilio Gonzalez
Alexandra Altinger
Richard Brandweiner
Nick Good
Bindesh Savjani
Cameron Williamson
Notes to Table 2:
Fixed remuneration
as a percentage of
total remuneration1
Cash VR as a percentage
of total remuneration
Equity as a percentage
of total remuneration2
2020
(%)
36
42
41
40
40
53
2019
(%)
39
100
46
n/a
51
47
2020
(%)
15
32
22
21
28
22
2019
(%)
20
-
22
n/a
27
25
2020
(%)
49
26
37
39
32
25
2019
(%)
41
-
32
n/a
22
28
1 Non-monetary benefits and long service leave have been included in the fixed remuneration calculation, if applicable.
2 The equity component represented in this table includes the equity-based remuneration awarded for the 2020 and 2019 Financial Years and long-
term incentives.
Share based-payments
Details of the shares in Pendal granted as compensation to the Group CEO and other Global Executive Committee Members under
the Employee Equity Plan during the reporting period are set out below.
Table 3: Group CEO and other Global Executive Committee members’ short-term equity allocations
Date of grant
Number of
shares granted
(#)
Value of
award at grant
($ per award)
Number of
shares vested1
1 Oct 2020
(#)
Proportion of
award vested
(%)
Proportion of
award forfeited
(%)
Group CEO
Emilio Gonzalez
Other Global Executive
Committee Members
Richard Brandweiner
Nick Good
Bindesh Savjani
Cameron Williamson
3-Dec-15
8-Dec-16
7-Dec-17
6-Dec-18
5- Dec 19
6-Dec-18
5-Dec- 19
31-Dec -19
15-Mar-19
5-Dec-19
3-Dec-15
8-Dec-16
7-Dec-17
6-Dec-18
5-Dec-19
94,638
81,714
68,347
74,085
71,389
23,813
33,522
137,263
66,275
20,261
15,457
7,688
11,712
12,696
12,507
13.01
10.82
10.69
8.18
8.06
8.18
8.06
8.59
8.94
8.06
13.01
10.82
10.69
8.18
8.06
18,928
16,343
13,670
14,817
14,278
4,763
6,704
25,307
31,327
4,053
3,091
1,538
2,343
2,540
2,501
100
80
60
40
20
40
20
18
47
20
100
80
60
40
20
-
-
-
-
-
-
-
-
-
-
Notes to Table 3:
1 The shares allocated for deferred VR, sign on and retention vest over five years with vesting dates of 1 October each year in most cases.
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Pendal Group’s remuneration policy focuses on driving performance and creating shareholder alignment in the longer term. We do
this by providing our Global Executive Committee members with LTI awards in the form of Performance Share Rights with three or
four year vesting periods.
Table 4 below provides an overview of the Group CEO and other Global Executives’ current LTI awards which have not yet vested.
Table 4: Group CEO and other Global Executive Committee members’ long-term incentive awards
Commencement
of Test Period
for Grant3
Award vehicle2
Value
of award at
grant TSR
Hurdle1
($)
Award
granted
(#)
Value
of award
at grant
Non TSR
Hurdle1
($)
Vested
during
the year
(#)
Lapsed
during
the year
(#)
Balance
as at
1 Oct 2020
(#)
Date of
vesting
Emilio Gonzalez
1-Oct-17
Performance Share Rights
90,546
6.85
11.04
1-Oct-20
1-Oct-18
Performance Share Rights
114,887
5.33
8.70
1-Oct-21
1-Oct-19
Performance Share Rights
136,085
Alexandra Atlinger
1-Oct-19
Performance Share Rights
123,984
Richard Brandweiner
1-Oct-17
Performance Share Rights
31,691
6.75
5.86
6.85
8.76
1-Oct-22
8.33
1-Oct-22
11.04
1-Oct-20
1-Oct-18
Performance Share Rights
68,932
5.33
8.70
1-Oct-21
1-Oct-19
Performance Share Rights
81,651
5.86
8.33
1-Oct-22
Nick Good
1-Oct-19
Performance Share Rights
60,491
6.72
8.93
1-Oct -22
Bindesh Savjani
1-Oct-18
Performance Share Rights
31,224
5.33
8.70
1-Oct-21
1-Oct-19
Performance Share Rights
314,559
-
6.80
1-Oct-23
Cameron Williamson
1-Oct-17
Performance Share Rights
27,164
6.85
11.04
1-Oct-20
1-Oct-19
Performance Share Rights
37,195
5.86
8.33
1-Oct-22
1-Oct-18
Performance Share Rights
34,466
5.33
8.70
1-Oct-21
1-Oct-19
Performance Share Rights
40,825
5.86
8.33
1-Oct-22
-
-
-
-
-
-
-
-
90,546
-
-
-
114,887
136,085
123,984
31,691
-
-
68,932
81,651
60,491
314,559
-
31,224
37,195
27,164
-
-
34,466
40,825
Notes to Table 4:
1 The fair value of the Performance Share Rights is based on Australian Accounting Standards and has been independently calculated using Binomial/Monte-
Carlo simulation models. For further details on the fair value methodology, refer to Note D2 within the financial statements.
2 The LTIs are subject to performance hurdles which are tested at the end of three or four years.
3 The Performance Share Rights allocated to the Group CEO and other Global Executives with a test period commencement date of 1 October 2017 did not
meet the performance hurdles and are shown as not vesting in this table accordingly.
58 | Pendal Group
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Table 5: Equity components of variable remuneration
The table below outlines STI deferred equity and Performance Share Rights that has been awarded to the Group CEO and other
Global Executive Committee members with an associated vesting schedule for the 2020 Financial Year. The equity grants vest over
a period of up to five years, provided that the vesting conditions are met. No equity grants will vest if the vesting conditions are not
satisfied and the minimum value of the equity grant yet to vest is nil. The face value represents the cost of the equity grants to the
Company at the time of allocation.
The maximum value of the equity grants yet to vest has been determined in accordance with accounting standards and represents
the fair value of the equity grants at allocation date.
Maximum fair value of equity grants allocated
by the company that may vest in future years1
Global Executive
Committee
Emilio Gonzalez
Face value of
the equity
grants
($)
Fair value of
equity grants
at grant
($)
619,179
1,231,240
849,997
884,145
FY of
grant
2016
2017
2018
700,000
730,629
2019
700,000
606,015
2019
1,000,000
806,175
2020
575,000
575,395
2020
1,000,000
1,055,340
Alexandra Altinger
2020
911,079
879,666
Richard Brandweiner
2019
225,000
194,790
2019
600,000
483,703
2020
270,000
270,187
2020
600,000
579,313
Nick Good
2020
1,116,024
1,179,089
2020
444,510
473,341
2020
2,655,259
2,139,001
Minimum
total value
of grant
yet to vest
($)
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
FY23
($)
FY24
($)
FY25
onwards
($)
FY21
($)
246,253
FY22
($)
-
176,831
176,820
-
-
146,122
146,122
146,122
121,203
121,203
121,203
121,203
-
806,175
-
-
115,081
115,081
115,081
115,080
115,072
-
-
1,055,340
-
879,666
38,961
38,961
38,953
38,954
-
483,703
-
-
-
-
54,034
54,034
54,034
54,034
54,051
579,313
832,843
262,734
83,512
-
-
-
-
473,341
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,139,001
-
-
Bindesh Savjani
2019
576,887
592,499
Nil
226,709
85,727
Cameron Williamson
2019
271,788
219,102
2020
163,191
163,304
2020
273,324
263,900
2016
2017
2018
2019
101,129
201,096
79,971
83,184
119,960
125,201
119,960
103,853
2019
300,000
241,851
2020
100,472
100,806
2020
300,000
289,655
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
-
219,102
32,667
32,659
32,659
32,659
32,660
-
40,214
-
-
16,641
16,620
263,900
-
-
25,036
25,036
25,036
-
-
-
-
20,769
20,769
20,769
20,769
-
241,851
-
-
-
-
-
-
-
-
20,158
20,158
20,158
20,158
20,174
-
-
289,655
-
-
Notes to Table 5:
1 The equity grants comprise shares and Performance Share Rights. The equity grants issued vest over three or five years with vesting dates of 1 October each
year in most cases.
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7. Global Executive Committee members’ employment agreements
Remuneration and other terms of employment for the Group CEO and other Global Executive Committee members are also
formalised in employment agreements. Each of these agreements takes into consideration the provision of fixed remuneration
(which is reviewed annually), performance-based cash incentives, other benefits, and participation, when eligible, in relevant
equity-based plans. The employment agreements for the Group CEO and other Global Executive Committee members are currently
open-ended, permanent, full time, common law employment agreements. Other significant provisions of the agreements relating to
remuneration are set out below.
Summary of notice periods
Name
Emilio Gonzalez
Alexandra Altinger
Richard Brandweiner
Nick Good
Bindesh Savjani
Cameron Williamson
Summary of termination entitlements
Term
Who
Conditions
Notice period
6 months
6 months
6 months
6 months
6 months
3 months
Termination
with notice
Emilio
Gonzalez
Any amount payable on the termination of employment will be made up of the following components:
• accrued but unpaid fixed remuneration as at the date of termination of employment (Termination Date);
• accrued but unused annual leave and long service leave as at the Termination Date;
• any vested portion of any Equity Grants will be released in accordance with the Equity Plan Rules;
• all unvested shares will be determined by the Board at its discretion;
• any payment of a variable reward in the year of termination, including cash and/or equity, will be determined by the Board
at its discretion; and
• Pendal Group retains the right to bring the employment to an immediate end and pay an amount in lieu of notice, equal to
the fixed remuneration that would have applied during the notice period.
Alexandra
Altinger
Any amount payable on the termination of employment will be made up of the following components:
• accrued but unpaid base salary as at the Termination Date;
• any accrued but unused holiday and cost to the Company of providing company benefits;
• any vested entitlement of equity grants which have been allocated as at the Termination Date will be released in
accordance with the relevant Equity Plan Rules;
Richard
Brandweiner
• any unvested equity grants which have been allocated as at the Termination Date will be subject to the relevant Equity Plan
Rules;
• any payment of a variable reward in the year of termination, including cash and/or equity, will be determined by the Board
at its discretion; and
• Pendal Group retains the right to bring the employment to an immediate end and pay an amount in lieu of notice, equal to
the fixed remuneration that would have applied during the notice period.
Any amount payable on the termination of employment will be made up of the following components:
• accrued but unpaid fixed remuneration as at the Termination Date;
• accrued but unused annual leave and long service leave as at the Termination Date;
• any vested portion of Equity Grants will be released in accordance with the relevant Equity Plan Rules;
• all unvested shares will be determined by the Board at its discretion;
• any payment of a variable reward in the year of termination, including cash and/or equity, will be determined by the Board
in its discretion; and
• Pendal Group retains the right to bring the employment to an immediate end and pay an amount in lieu of notice, equal to
the fixed remuneration that would have applied during the notice period.
60 | Pendal Group
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Term
Who
Conditions
Nick Good Any amount payable on the termination of employment will be made up of the following components:
• accrued but unpaid base salary as at the Termination Date;
• any accrued but unused holiday and cost to the Company of providing company benefits;
• any vested entitlement of equity grants which have been allocated as at the Termination Date will be released in
accordance with the relevant Equity Plan Rules;
• any unvested equity grants which have been allocated as at the Termination Date will be subject to the relevant Equity Plan
Rules;
• any payment of a variable reward in the year of termination, including cash and/or equity, will be determined by the Board
at its discretion; and
• Pendal Group retains the right to bring the employment to an immediate end and pay an amount in lieu of notice, equal to
the fixed remuneration that would have applied during the notice period.
Bindesh
Savjani
Any amount payable on the termination of employment will be made up of the following components:
• accrued but unpaid base salary as at the Termination Date;
• any accrued but unused holiday and cost to the Company of providing company benefits;
• any vested entitlement of equity grants which have been allocated as at the Termination Date will be released in
accordance with the relevant Equity Plan Rules;
Cameron
Williamson
• any unvested equity grants which have been allocated as at the Termination Date will be subject to the relevant Equity Plan
Rules;
• any payment of a variable reward in the year of termination, including cash and/or equity, will be determined by the Board
at its discretion; and
• Pendal Group retains the right to bring the employment to an immediate end and pay an amount in lieu of notice, equal to
the fixed remuneration that would have applied during the notice period.
Any amount payable on the termination of employment will be made up of the following components:
• accrued but unpaid fixed remuneration package as at the Termination Date;
• accrued but unused annual leave and long service leave as at the Termination Date;
• any vested portion of any Equity Grants, will be released in accordance with the Equity Plan Rules;
• all unvested shares will be determined by the Board at its discretion;
• any payment of variable reward in the year of termination, including cash and/or equity, will be determined by the Board at
its discretion; and
• Pendal Group retains the right to bring the employment to an immediate end and pay an amount in lieu of notice, equal to
the fixed remuneration that would have applied during the notice period.
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FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2020
Term
Who
Conditions
Termination
for cause
Emilio
Gonzalez
Alexandra
Altinger
Richard
Brandweiner
Any amount payable on the termination of employment will be made up of the following components:
• accrued but unpaid fixed remuneration package as at the date of termination of employment (Termination Date);
• accrued but unused annual leave and long service leave as at the Termination Date;
• any vested portion of any Equity Grants, will be released in accordance with the Equity Plan Rules; and
• no entitlement to any variable reward for the year in which termination occurs or to any unvested equity grants.
Any amount payable on the termination of employment will be made up of the following components:
• accrued but unpaid base salary package as at the Termination Date;
• accrued but unused annual leave as at the Termination Date;
• any vested entitlement of equity grants which have been allocated as at the Termination Date will be released in accordance
with the relevant Equity Plan Rules; and
• no entitlement to any variable reward for the year in which termination occurs or to any unvested equity grants.
Any amount payable on the termination of employment will be made up of the following components:
• accrued but unpaid fixed remuneration package as at the date of the Termination Date;
• accrued but unused annual leave and long service leave as at the Termination Date;
• any vested portion of any Equity Grants, will be released in accordance with the Equity Plan Rules; and
• no entitlement to any variable reward for the year in which termination occurs or to any unvested equity grants.
Nick Good Any amount payable on the termination of employment will be made up of the following components:
• accrued but unpaid base salary package as at the Termination Date;
• accrued but unused annual leave as at the Termination Date;
• any vested entitlement of equity grants which have been allocated as at the Termination Date will be released in accordance
with the relevant Equity Plan Rules; and
• no entitlement to any variable reward for the year in which termination occurs or to any unvested equity grants.
Any amount payable on the termination of employment will be made up of the following components:
• accrued but unpaid base salary package as at the Termination Date;
• accrued but unused annual leave as at the Termination Date;
• any vested entitlement of equity grants which have been allocated as at the Termination Date will be released in accordance
with the relevant Equity Plan Rules; and
Bindesh
Savjani
Cameron
Williamson
• no entitlement to any variable reward for the year in which termination occurs or to any unvested equity grants.
Any amount payable on the termination of employment will be made up of the following components:
• accrued but unpaid fixed remuneration package as at the Termination Date;
• accrued but unused annual leave and long service leave as at the Termination Date;
• any vested portion of any Equity Grants, will be released in accordance with the Equity Plan Rules; and
• no entitlement to any variable reward for the year in which termination occurs or to any unvested equity grants.
Make Good payments1
Where Global Executive Committee member employment agreements include a make good payment in the form of cash and/or
equity and their employment is terminated with notice before the payment has been fulfilled, the payment will generally continue to
be made in the amounts and at the times agreed, unless the Pendal Board in its sole discretion decides otherwise. If the termination
is for cause, then make good cash payments will be subject to repayment conditions and the unvested equity awards will be
forfeited, in accordance with the Pendal Equity Plan Rules.
Post-employment restraint
Employment agreements for the Group CEO and other Global Executive Committee members include a post-employment restraint
clause which prohibits the solicitation of employees or clients of the Company for a period of six months following cessation of
employment. The exception is Cameron Williamson, Group CFO who has a three month post-employment restraint period.
1Payments made to offset deferred remuneration foregone due to a change in employment.
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8. Non-Executive Director remuneration
NED remuneration in the 2020 Financial Year
NED annual fee pool
The total NED fee pool for the 2020 Financial Year was $1.6 million, which was approved by shareholders at the 2015 AGM.
For the 2020 Financial Year, $1.56 million (97 per cent) of the annual fee pool was used. This is an increase on the 2019 Financial
Year due to Chris Jones fulfilling his first full financial year as a NED, having joined early in the 2019 Financial Year.
NED Fees
NEDs are paid a fixed fee for their service on the Board. NEDs (with the exception of the Chairman of the Board) also receive
additional fees for their service on the Board’s committees. In addition to these fixed fees, NEDs receive superannuation
contributions that are made in accordance with legislative requirements. NEDs do not receive performance-based remuneration and
are not eligible to participate in any Pendal Group share plan or other incentive arrangements.
NED pay levels have been determined using the same peers as used in benchmarking for the CEO described in Section 5. The
Company is positioned in the upper quartile against the Australian ASX benchmarks for market capitalisation and Australian Asset
Management peers. The Company is placed in the third quartile against an average of UK and ASX listed Asset Management peers.
While Pendal is listed on the ASX, the NEDs must understand the nuances of a global business subject to complex market and
regulatory dynamics. Further, all NEDs serve on the UK based J O Hambro Capital Management Holdings Limited Board, for which
there is no additional fee.
A summary of the annual fees payable to NEDs during the 2020 Financial Year are set out in the table below and were unchanged
from the 2019 Financial Year.
Non-Executive Director fees
Pendal Group Board fees
Board Chairman
Other Non-Executive Directors
Pendal Group Board Committee fees
Audit & Risk Committee – Chair
Audit & Risk Committee – Member
Remuneration & Nominations Committee – Chair
Remuneration & Nominations Committee – Member
Retirement allowances
Fee policy
(AUD’000s)
400
160
Fee policy
($’000s)
40
20
40
20
Fee Policy
(GBP’000s)
Fee Policy
(USD’000s)
110
144
15
15
20
20
No allowance is payable on the retirement of NEDs. Superannuation payments are made in line with legislative requirements.
NED Director shareholdings
NEDs (including the Chairman) are expected to hold a minimum number of shares in the Company that is equal to the value of the
Director’s annual base fee. Newly appointed NEDs are expected to reach the minimum shareholding within three years of their
appointment to the Board.
The number of Pendal Group shares held by each NED is set out in Table 6.
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NED employment agreements
On appointment to the Board, all NEDs enter into an employment agreement with the Company in the form of a letter of
appointment. The letter summarises the Board policies in relation to tenure, remuneration and other matters relevant to the
office of the NED.
Remuneration for NEDs
The fees paid to NEDs in the 2020 and 2019 Financial Years are shown in Table 6 below.
Table 6: 2020 and 2019 Financial Years’ Non-Executive Director remuneration
2020 Financial Year
Current NEDs
James Evans2
Sally Collier2
Christopher Jones3
Andrew Fay2
Kathryn Matthews4
Deborah Page2
Total
20
19
20
19
20
19
20
19
20
19
20
19
20
19
Fees1
($)
Superannuation
($)
400,301
398,467
200,151
199,234
241,567
209,420
200,151
199,234
234,830
231,188
200,151
199,234
1,477,151
1,436,777
25,000
25,000
19,014
18,927
-
-
19,014
18,927
-
-
19,014
18,927
82,042
81,781
Total
($)
442255,,330011
442233,,446677
221199,,116655
221188,,116611
224411,,556677
220099,,442200
221199,,116655
221188,,116611
223344,,883300
223311,,118888
221199,,116655
221188,,116611
1,559,193
1,518,558
Notes to Table 6:
1 The Director fees took effect from 1 January 2017. No adjustments to the base fees were made in the 2020 Financial Year.
2 The 2020 Financial Year fixed remuneration for James Evans, Sally Collier, Andrew Fay and Deborah Page did not increase from the 2019 Financial Year. The
difference is attributable to moving our pay day as part of the transition to a new payroll system.
3 Christopher Jones is remunerated in US dollars and an average exchange rate of 0.6789 for 2020 (2019: 0.7038) has been applied to convert his annual fees
to Australian dollars. His total remuneration in the 2019 Financial Year reflects the period that he worked from his employment start date of 8 November 2018.
4 Kathryn Matthews is remunerated in Pound Sterling. An average exchange rate of 0.5323 for 2020 (2019: 0.5515) has been applied to convert her annual fees
to Australian dollars.
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9. Director and Global Executive holdings
The table below outlines all holdings, including holdings not yet vested. For vesting, refer to Table 5.
Table 7: Director and Global Executives’ holdings
Type of
holding
Equity held at
1 Oct 2019
In the 2020 Financial Year:
Number of
securities
acquired
Number of
securities granted
as remuneration
Net change
other1
Equity held at
30 Sep 2020
Non-Executive Directors
James Evans2
Sally Collier
Christopher Jones
Andrew Fay
Kathryn Matthews
Deborah Page
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
50,000
14,000
22,000
63,609
25,000
39,993
-
10,000
-
-
-
-
Total for Non-Executive Directors
214,602
10,000
Global Executive Committee
Emilio Gonzalez
Ordinary
1,684,215
Performance share rights
317,306
Alexandra Altinger
Performance share rights
-
Richard Brandweiner
Ordinary
23,813
Performance share rights
100,623
Nick Good
Ordinary
Performance share rights
Bindesh Savjani
Ordinary
Performance share rights
-
-
66,275
31,224
Cameron
Williamson
Ordinary
180,240
Performance share rights
81,207
Total for Global Executive Committee
2,484,903
Notes to Table 7:
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
71,389
136,085
123,984
33,522
81,651
137,263
60,491
20,261
37,195
12,507
40,825
755,173
-
-
-
-
-
-
-
(111,873)
-
(4,763)
-
-
-
(16,000)
-
(115,000)
50,000
24,000
22,000
63,609
25,000
39,993
224,602
1,755,604
341,518
123,984
52,572
182,274
137,263
60,491
70,536
68,419
77,747
(19,577)
102,455
(267,213)
2,972,863
1 Net change other relates to the conversion of Performance Share Rights to ordinary shares, sale of shares and shares forfeited.
2 Please see the Company's Notice of Annual General Meeting which we intend to issue on 11 November 2020 for an update in relation to James Evans' holdings
in the Company's shares.
10. Other Disclosure Details
Loans to KMP and their related parties
No loans were provided to KMP or their related parties during the year or as at the date of this Remuneration Report.
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Directors’ Report
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2020
Rounding of amounts
Amounts in this report and the accompanying Financial Report have been rounded to the nearest thousand dollars, in accordance
with ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191, unless otherwise stated.
Loans to Directors and Senior Executives
There were no loans made to, nor are there any outstanding loans with, Directors or Senior Executives.
2020 Corporate Governance Statement
Pendal Group’s 2020 Corporate Governance Statement can be viewed on the Group’s website at www.pend.al/CGS-2020.
Non-audit services
Details of the amounts paid or payable to the external auditor, PricewaterhouseCoopers (PwC), for non-audit services provided
during the financial year are set out in Note F5 to the financial statements.
The Directors are satisfied that the provision of the non-audit services is compatible with the general standard of independence for
auditors imposed by the Corporations Act for the following reasons:
• all non-audit services have been reviewed by the Audit & Risk Committee to ensure they do not impact the impartiality and
objectivity of the auditor; and
• none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for
Professional Accountants.
Auditor’s independence declaration
A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act is set out on page 67.
This Directors’ Report is made in accordance with a resolution of Directors.
James Evans
Chairman
4 November 2020
Emilio Gonzalez
Managing Director and Group Chief Executive Officer
4 November 2020
66 | Pendal Group
Directors' ReportFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2020
Auditor’s Independence Declaration
As lead auditor for the audit of Pendal Group Limited for the year ended 30 September 2020, I declare
that to the best of my knowledge and belief, there have been:
(a)
no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
(b)
no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Pendal Group Limited and the entities it controlled during the period.
Andrew Wilson
Partner
PricewaterhouseCoopers
Sydney
4 November 2020
PricewaterhouseCoopers, ABN 52 780 433 757
One International Towers Sydney, Watermans Quay, Barangaroo, GPO BOX 2650, SYDNEY NSW 2001
T: +61 2 8266 0000, F: +61 2 8266 9999, www.pwc.com.au
Level 11, 1PSQ, 169 Macquarie Street, Parramatta NSW 2150, PO Box 1155 Parramatta NSW 2124
T: +61 2 9659 2476, F: +61 2 8266 9999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
Annual Report 2020 | 67
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2020Auditor’s Independence Declaration
Consolidated Statement of Comprehensive Income
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2020
Revenue
Investment management fees
Performance fees
Total revenue
Other income
Expenses
Employee expenses
Salaries and related expenses
Amortisation of employee equity grants
Amortisation of employee deferred share of performance fees and related
incentives
Information, technology and data
Fund administration
Depreciation, amortisation and impairment
General office and administration
Business development and promotion
Professional services
Occupancy
Investment management
Product distribution
Finance costs
Total expenses
Profit before income tax
Income tax expense
Profit after tax attributable to shareholders
Earnings per share for profit attributable to shareholders
Basic earnings per share
Diluted earnings per share
Profit after tax for the financial year
OOtthheerr ccoommpprreehheennssiivvee iinnccoommee ffoorr tthhee ffiinnaanncciiaall yyeeaarr
Items that may be reclassified to profit or loss
Exchange differences on translation of foreign operations
Gain / (loss) on derivative hedging instruments
Other comprehensive income, net of tax
Notes
B2
B2
D2
B4
B3
B3
C3
C3
2020
$’000
461,339
13,417
474,756
(8,600)
175,688
35,192
3,270
27,114
18,519
16,098
10,106
10,059
8,118
4,064
3,418
1,596
1,515
314,757
151,399
35,013
116,386
Cents
39.8
38.6
$’000
116,386
(1,995)
3,147
1,152
2019
$’000
485,489
5,840
491,329
22,780
166,489
44,852
6,744
23,837
16,104
9,202
8,762
13,396
9,003
9,571
2,266
1,544
131
311,901
202,208
47,731
154,477
Cents
54.4
51.2
$’000
154,477
4,999
(2,482)
2,517
Total comprehensive income for the financial year attributable to shareholders
117,538
156,994
The above Consolidated Statement of Comprehensive Income should be read in conjunction with the accompanying Notes.
68 | Pendal Group
Consolidated Statement of Comprehensive IncomeFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2020
Consolidated Statement of Financial Position
AS AT 30 SEPTEMBER 2020
Current assets
Cash and cash equivalents
Trade and other receivables
Current tax assets
Derivatives
Prepayments
Total current assets
Non-current assets
Property, plant and equipment
Right-of-use assets
Financial assets held at FVTPL
Deferred tax assets
Intangible assets
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Employee benefits
Derivatives
Lease liabilities
Current tax liabilities
Total current liabilities
Non-current liabilities
Employee benefits
Lease liabilities
Deferred tax liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Retained earnings
Total equity
Notes
B5
F3
C5
B4
F1
D1
F3
D1
F3
B4
C2
C3
2020
$’000
207,485
66,969
6,923
78
7,102
2019
$’000
150,071
68,563
–
–
6,975
288,557
225,609
8,665
36,927
211,171
28,931
532,103
817,797
9,050
–
278,075
43,488
540,346
870,959
1,106,354
1,096,568
41,660
96,019
–
7,356
20,235
165,270
1,974
33,204
10,148
45,326
210,596
895,758
471,249
205,340
219,169
895,758
42,605
93,452
1,288
957
14,724
153,026
6,718
2,729
23,391
32,838
185,864
910,704
419,431
258,319
232,954
910,704
The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying Notes.
Annual Report 2020 | 69
AS AT 30 SEPTEMBER 2020Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2020
Balance at 30 September 2019
Correction of immaterial prior period error
Change in accounting policy
A3
Notes
Contributed
equity
$’000
419,431
–
–
Reserves
$’000
258,319
–
–
Retained
earnings
$’000
232,954
(667)
(151)
Total
equity
$’000
910,704
(667)
(151)
Restated balance at 1 October 2019
419,431
258,319
232,136
909,886
Profit for the financial year
Other comprehensive income for the financial year
Total comprehensive income for the financial year
Transactions with owners in their capacity as owners:
Treasury shares acquired
Treasury shares released
Share-based payments
Dividends paid
C2
C2
C3
C4
–
–
–
–
1,152
1,152
116,386
116,386
–
1,152
116,386
117,538
(37,532)
–
89,350
(89,350)
35,219
–
–
–
(37,532)
–
35,219
–
(129,353)
(129,353)
Balance at 30 September 2020
471,249
205,340
219,169
895,758
Balance at 1 October 2018
Profit for the financial year
Other comprehensive income for the financial year
Total comprehensive income for the financial year
Transactions with owners in their capacity as owners:
Treasury shares acquired
Treasury shares released
Share-based payments
Dividends paid
C2
C2
C3
C4
427,137
237,381
229,040
893,558
–
–
–
–
154,477
154,477
2,517
2,517
–
2,517
154,477
156,994
(34,790)
–
27,084
(27,084)
45,505
–
–
–
(34,790)
–
45,505
–
(150,563)
(150,563)
Balance at 30 September 2019
419,431
258,319
232,954
910,704
The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying Notes.
70 | Pendal Group
–
–
–
–
Consolidated Statement of Changes in EquityFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2020
Consolidated Statement of Cash Flows
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2020
Cash flows from operating activities
Fees and other income received
Interest received
Distributions from unit trusts
Expenses paid
Fund application settlement amounts paid
Income tax paid
Net cash inflows from operating activities
Cash flows from investing activities
Payments for property, plant and equipment
Payments for financial assets held at FVTPL
Proceeds from sales of financial assets held at FVTPL
Payments for IT development
Proceeds from / (Payments for) derivative hedging instruments
Notes
2020
$’000
2019
$’000
B5
496,854
508,993
163
895
459
1,427
(285,303)
(287,644)
(443)
(35,084)
177,082
(1,927)
(80,142)
140,539
(997)
1,837
(1,027)
(50,011)
172,197
(5,473)
(13,431)
16,596
(1,607)
(899)
Net cash inflows/ (outflows) from investing activities
59,310
(4,814)
Cash flows from financing activities
Payments for purchase of treasury shares
Interest and other financing costs
Payments for leases and related finance costs
Fund application settlement amounts received
Dividends paid
Net cash outflows from financing activities
Net increase/ (decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Effects of exchange rate changes on cash and cash equivalents
Cash and cash equivalents at the end of the financial year
(37,532)
(34,790)
(59)
(9,797)
443
(131)
–
1,027
(129,353)
(150,563)
(176,298)
(184,457)
60,094
150,071
(2,680)
207,485
(17,074)
168,134
(989)
150,071
The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying Notes.
Annual Report 2020 | 71
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2020Consolidated Statement of Cash Flows
Notes to the Consolidated Financial Statements
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2020
A. About this report
This is the financial report of Pendal Group Limited (the Company) and its consolidated subsidiaries (together referred to as Pendal
Group or the Group). The Company is domiciled in Australia and Pendal Group is a for-profit entity for the purpose of preparing
financial statements.
A1.
A2.
A3.
Statement of compliance
Basis of preparation
New and amended accounting standards
72
72
74
A1. Statement of compliance
The consolidated financial statements are general purpose financial statements which have been prepared in accordance with
Australian Accounting Standards (AASBs) adopted by the Australian Accounting Standards Board (AASB) and the Corporations Act
2001. The consolidated financial statements comply with International Financial Reporting Standards (IFRSs) adopted by the
International Accounting Standards Board (IASB).
A2. Basis of preparation
The Financial Report is presented in Australian dollars, which is the Company’s functional and presentation currency, with all values
rounded to the nearest thousand ($’000), in accordance with ASIC Corporations (Rounding in Financial/Directors' Reports)
Instrument 2016/191, unless otherwise stated. The Financial Report has been prepared on a historical cost basis, except for the
revaluation of financial assets and liabilities at fair value through profit or loss.
Significant accounting policies
The principal accounting policies adopted in the preparation of the Financial Report are contained within the notes to which they
relate. These policies have been consistently applied to all the years presented, unless otherwise stated.
Critical accounting assumptions and estimates
The preparation of financial statements requires the use of certain critical accounting estimates. It also requires management to
exercise its judgement in the process of applying Pendal Group’s accounting policies. The areas involving a higher degree of
judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are outlined below.
Accounting assumptions and estimates
Share-based payments
Deferred tax on share-based payments
Subsidiaries and controlled entities
Intangibles
Note
D2
D2
E2
F1
Coronavirus (COVID-19)
COVID-19, which is an illness caused by a new form of coronavirus, was characterised as a pandemic by the World Health
Organisation in March 2020. The COVID-19 pandemic and measures implemented in response to the health emergency have had a
significant impact on the economic environment in the financial markets in which Pendal Group operates, including Australia, the
UK, Europe, Singapore and the United States. The Group has considered the impact of COVID-19 and related response measures in
preparing its financial statements and in the exercise of critical accounting assumptions and estimates, including impacts occurring
during the reporting period and the uncertainty of future effects of the pandemic.
Financial and trading position
Pendal Group continues to operate effectively during the pandemic, and maintains a strong financial position. Key factors applied in
this assessment include:
• Management’s response to the COVID-19 pandemic has been to ensure employee health and welfare, business continuity and
client service. The Group activated its global business continuity plans and appointed a COVID-19 response team led by the
Group Chief Risk Officer. Investments were made in enhancing remote working capabilities, IT and cybersecurity infrastructure,
and a seamless transition to secure remote working was achieved. Increasing client support and communication, and ensuring
there was no disruption to services from core suppliers, enabled the Group to continue to provide ongoing management of client
funds, actively position portfolios and deliver services to clients;
72 | Pendal Group
Notes to the Consolidated Financial StatementsFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2020
Notes to the Consolidated Financial Statements
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2020
• The financial impact of the COVID-19 pandemic, together with other business and market circumstances, contributed to a decline
in the Group’s total revenue of 3.4%, and a decline in the fair value of financial assets of 5.1% (on opening values) in the 2020
Financial Year. Overall, operating cash flows remained significantly positive at $177.1 million for the year, and no liquidity issues
have arisen. Pendal Group retains a strong balance sheet to withstand further market volatility arising from COVID-19, with net
tangible assets of $363.7 million at 30 September 2020, largely represented by highly liquid cash and seed capital investments,
and no debt. The Group has not participated in the significant government support programmes available to severely affected
businesses in Australia, the UK and the US. Some widely available measures have been automatically applied to the Group, such
as the Singapore Job Support Scheme. The benefit of these measures is not material to Pendal Group, and the Group is not
exposed to the potential withdrawal of such support;
• The Group maintains significant flexibility to respond and adapt to further COVID-19 impacts through its business model and
capital management strategies. The revenue streams of the business are predominantly comprised of reliable, annuity-style fees,
received regularly from institutional investors and Pendal Group fund vehicles. The operating costs of the business are highly
variable, mitigating the impact of any potential future reductions in revenue which may result from COVID-19. Dividends to
shareholders may also be varied if necessary, however dividends for the 2020 Financial Year remained within the Group’s stated
dividend payout range. The Group also has the ability, if required, to take other measures to address significant market and profit
impacts, such as deploying cash reserves, redeeming seed investments, utilising borrowing facilities, reactivating the dividend
reinvestment plan and/ or issuing new shares;
• In response to the added uncertainty of COVID-19 and its impacts, management has stress-tested a range of business and
financial scenarios and their effects on forecast future revenue and cash flows of the Group. This analysis has assisted in risk
management and contingency planning, and demonstrated the resilience and flexibility of the Group’s business model to
maintain profitability and liquidity in volatile markets. In addition, testing outcomes provide management with confidence to
continue the Group’s commitment to invest in strategic initiatives for growth, and to position the business optimally for future
global economic recovery.
Fair value of financial assets
The Group holds investments in unlisted securities recognised at fair value through profit or loss and listed at Note C5. The
determination of the investments’ fair value included consideration of the appropriateness of inputs to valuations in light of the
impacts of COVID-19. In particular, the impact of price volatility and market liquidity in respect of the investments held has been
incorporated into valuation estimates at balance date.
Deferred tax assets
Deferred tax assets are recognised by the Group in relation to temporary differences arising between the tax bases of assets and
liabilities and their carrying amounts in the financial statements as described at Note B4. The impact of COVID-19 has been
considered in determining if it is probable that future taxable amounts will be available to utilise those temporary differences.
Management forecasts of the profitablility and taxable income of Group entities over the periods in which deferred tax assets are
expected to be realised include the estimated impacts of COVID-19 on future FUM, revenues and expenses.
Intangibles
The Group has considered the impact of COVID-19 in its estimation of the recoverable amounts of intangible assets including fund
and management contracts and goodwill as disclosed at Note F1. The carrying values of intangible assets are tested for impairment
at each reporting period, and have been tested in light of the COVID-19 pandemic during the 2020 Financial Year. The recoverable
amounts are determined using a “fair value less cost of disposal” methodology, utilising cash flow projections based on
management’s best estimates over a five year period, applying a terminal value in perpertuity and discounting to present value.
Cash flow assumptions included the potential impact of COVID-19 on FUM, revenue and expenses over the forecast period through
multiple scenarios for FUM flows and equity market growth profiles, based on historical data of previous severe market shock
events, their duration and subsequent recovery levels and timeframes.
Financial risk management
Pendal Group’s risk management framework continues to be applied across the business to identify, assess and manage the impact
of COVID-19 on the Group’s material risk exposures. Management of the Group’s financial risk is described at Note C7, and includes
the key financial risk areas of market risk, credit risk and liquidity risk. The appropriateness of the levels of reasonably possible
movements in FUM, seed investment prices and effective interest rates, adopted to estimate potential market risks to the Group’s
profits and cash, has been reviewed in light of the additional financial market uncertainty and volatility caused by COVID-19. The
potential impact of COVID-19 on the financial position of the Group’s major counterparties has also informed the assessment of
credit risk for the Group. The Group’s maintenance of sufficient cash and working capital to address liquidity risk has been
confirmed after considering the present and uncertain future impacts of COVID-19 on the Group’s financial position and estimated
cash flows.
Annual Report 2020 | 73
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2020Notes to the Consolidated Financial Statements
Notes to the Consolidated Financial Statements
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2020
A3. New and amended accounting standards
New and amended accounting standards adopted by Pendal Group
Pendal Group has adopted all of the mandatory new and amended standards and interpretations issued by the AASB that are
relevant to its operations and effective for the current reporting period. The impact of mandatory new and amended standards
adopted by the Group for the year ended 30 September 2020 is set out below.
AASB 16 Leases
AASB 16 Leases provides a new lessee accounting model which requires lessees to recognise right-of-use assets and liabilities to
pay rentals for all leases with a term of more than 12 months, unless the underlying asset is of low value.
Pendal Group adopted AASB 16 Leases using the modified retrospective method from 1 October 2019, with comparatives not being
restated for the 2019 reporting period, as permitted under the specific transition provisions in the standard. The reclassifications
and adjustments arising from the new leasing standard are therefore recognised in the opening balance sheet on 1 October 2019.
On adoption of AASB 16 Leases, the Group recognised lease liabilities in relation to leases which had previously been classified as
‘operating leases’ under the principles of AASB 117 Leases. These liabilities were measured at the present value of the remaining
lease payments, discounted using an incremental borrowing rate adjusted for the nature of the asset as of 1 October 2019. The
weighted average incremental borrowing rate applied by Pendal Group to the lease liabilities on 1 October 2019 was 3.3%.
The adoption of AASB 16 Leases has also resulted in costs relating to leases, previously recognised as occupancy expense in the
Statement of Comprehensive Income, being recognised as depreciation expense and finance costs. In addition, lease related
payments in the Statement of Cash Flows previously disclosed as operating activities have been classified as financing activities.
Practical expedients
In applying AASB 16 Leases for the first time, Pendal Group has used the following practical expedients permitted by the standard:
• applying a single discount rate to a portfolio of leases with reasonably similar characteristics; and
• relying on previous assessments on whether leases are onerous as an alternative to performing an impairment review.
Pendal Group has also elected not to reassess whether a contract is or contains a lease at the date of initial application. Instead, for
contracts entered into before the transition date the Group relied on its assessment made applying AASB 117 Leases.
The following tables show the adjustments recognised for each individual line item as a result of the new classification and
measurement of leases.
SSttaatteemmeenntt ooff FFiinnaanncciiaall PPoossiittiioonn ((eexxttrraacctt))
30 September 2019
$’000
AASB 16
$’000
1 October 2019
$’000
Right-of-use assets
Lease liabilities
Retained Earnings
Reversal of onerous
lease provision and
lease incentives
Recognition of right-
of-use assets and
lease liabilities
–
(3,686)
232,954
(3,686)
3,686
–
47,003
(47,219)
(151)
Measurement of lease liabilities
Operating lease commitment disclosed as at 30 September 2019
Discounted using the lessee’s incremental borrowing rate at the date of initial application
LLeeaassee lliiaabbiilliittyy rreeccooggnniisseedd aass aatt 11 OOccttoobbeerr 22001199
Represented by:
Current lease liabilities
Non-current lease liabilities
Total lease liabilities recognised as at 1 October 2019
43,317
(47,219)
232,803
$’000
51,876
47,219
47,219
5,238
41,981
47,219
New and amended accounting standards not yet adopted by Pendal Group
Certain new accounting standards and interpretations have been published that are not mandatory for 30 September 2020
reporting periods and have not been early adopted by the Pendal Group. These standards are not expected to have a material
impact on the entity in the current or future reporting periods and on foreseeable future transactions.
74 | Pendal Group
Notes to the Consolidated Financial StatementsFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2020
Notes to the Consolidated Financial Statements
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2020
B. Results for the year
This section provides information that is most relevant to understanding the financial performance of Pendal Group.
B1.
B2.
B3.
B4.
B5.
Segment information
Revenue and other income
Earnings per share
Taxation
Reconciliation of cash flow from operating activities
75
76
77
78
80
B1. Segment information
Description of segments
Operating segments have been reported in a manner consistent with internal management reporting provided to the chief operating
decision-maker (CODM) for assessing performance and in determining the allocation of resources. The CODM consists of the Group
Chief Executive Officer and other members of the Global Executive Committee.
Pendal Group’s business revenues are predominantly derived from a single activity, being the provision of investment management
services globally. The CODM assesses the performance of the business across geographic locations. Pendal Group has determined
that it has three operating segments:
• Pendal Australia, the Group’s investment management business operating in Australia;
• Pendal EUKA the Group’s investment management business operating in Europe, UK and Asia; and
• Pendal US, the Group’s investment management business operating in the United States of America.
Previously, Pendal EUKA and Pendal US were considered to be a single segment, reported to the CODM as Pendal International.
Prior year comparatives have been restated to reflect the business performance of the three operating segments.
(a) Segment information provided to the CODM:
The CODM assesses the performance of each operating segment based on operating profit before tax, which excludes the
amortisation and impairment of intangibles and non-operating items such as gains and losses on seed investments, interest income
and expense, foreign exchange gains and losses and tax.
Pendal Australia
Pendal EUKA
Pendal US
Total Group
2020
$’000
2019
$’000
2020
$’000
2019
$’000
2020
$’000
2019
$’000
2020
$’000
2019
$’000
Revenue
151,715
151,180
152,632
184,261
170,402
155,730
474,749
491,171
Inter-segment revenue
(4,380)
(4,429)
107,637
105,979
(103,257)
(101,550)
–
–
Total segment revenue
147,335
146,751
260,269
290,240
67,145
54,180 474,749
491,171
Operating expenses
Inter-segment expense
(127,327)
(122,467)
(141,151)
(138,973)
(29,979)
(28,648)
(298,457)
(290,088)
6,615
7,134
(1,906)
(2,954)
(4,709)
(4,180)
–
–
Total segment expenses
(120,712)
(115,333) (143,057)
(141,927)
(34,688)
(32,828) (298,457) (290,088)
Operating profit before income tax
26,623
31,418
117,212
148,313
32,457
21,352
176,292
201,083
The CODM assesses the performance of the total consolidated Pendal Group using a measure of cash net profit after tax (Cash
NPAT), which is the Group’s operating profit before tax adjusted to include non-operating items such as gains and losses on seed
investments, interest income and expense, foreign exchange gains and losses and tax. From the 2021 Financial Year, the alternative
profit measure for the Group will be amended from Cash NPAT to Underlying profit after tax (UPAT). Group UPAT and segment
operating profit before income tax reported to the CODM will both include the amortisation of employee equity grants and deferred
compensation, in line with Statutory profit before income tax.
Total assets and liabilities are reviewed at a consolidated Pendal Group level, and segment assets and liabilities are not regularly
reviewed by the CODM.
Annual Report 2020 | 75
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2020Notes to the Consolidated Financial Statements
Notes to the Consolidated Financial Statements
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2020
(b) Reconciliation of total operating profit before income tax to Statutory profit before tax:
OOppeerraattiinngg pprrooffiitt bbeeffoorree iinnccoommee ttaaxx11
Deduct:
Amortisation of employee equity grants
Amortisation of employee deferred share of performance fees and related incentives
Amortisation and impairment of intangibles2
Add back:
Net gains/(losses) on financial assets held at FVTPL3
Non-operating items
Cash cost of ongoing equity grants
Cash cost of employee deferred share of performance fees and related incentives
2020
$’000
2019
$’000
176,292
201,083
(35,192)
(44,852)
(3,270)
(6,140)
(14,316)
3,946
30,079
–
(6,744)
(6,758)
16,148
6,501
32,710
4,120
Statutory profit before income tax
151,399
202,208
1. Operating profit before income tax reported to the CODM includes the cash cost of ongoing equity grants and employee deferred share of performance fees
and related incentives, and excludes amortisation of these items. From the 2021 Financial Year, operating profit before income tax reported to the CODM will
include the amortisation of employee equity grants and deferred compensation, in line with Statutory profit before income tax.
2. Amortisation and impairment of intangibles relates to fund and investment management contracts.
3. Net gains or losses on financial assets held at FVTPL primarily relate to seed investments in pooled funds managed by Pendal Group.
B2. Revenue and other income
Management, fund and trustee fees
Performance fees
Other revenue
Total revenue
Net gains/(losses) on financial assets held at FVTPL
Distributions from unit trusts
Net foreign exchange loss
Interest income
Total other income
Total revenue and other income
2020
$’000
2019
$’000
457,690
482,136
13,417
3,649
5,840
3,353
474,756
491,329
(14,316)
6,466
(913)
163
(8,600)
466,156
16,148
6,359
(186)
459
22,780
514,109
During the year, the Group redeemed seed investments of $132.5m (financial assets held at FVTPL) and realised gains of $38.9m
over the period of the investments, including $2.6m of realised losses recognised for the year ended 30 September 2020, and
$41.5m of gains which had been recognised in prior years.
76 | Pendal Group
Notes to the Consolidated Financial StatementsFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2020
Notes to the Consolidated Financial Statements
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2020
Accounting policy
Revenue
Revenue is measured at an amount the Group expects to be entitled to receive in exchange for services provided to clients.
Revenue is recognised as performance obligations to the client are satisfied.
Management, fund and
trustee fees
Management, fund and trustee fees are recognised based on the applicable service contracts, usually on
a time proportionate basis. Management fees related to investment funds are recognised over the period
the service is provided.
Performance fees
Performance fees are subject to investment performance, market volatility and uncertainty and are only
recognised when performance conditions have been satisfied at the end of the performance period.
Other income
Distributions from unit
trusts
Gain / (loss) on sale of
financial assets held at
FVTPL
Distributions are recognised as revenue when the right to receive payment is established.
Unrealised gains and losses on financial assets held at FVTPL represent the fair value movements in seed
investments held at FVTPL during the financial year.
Realised gains and losses on sale of financial assets held at FVTPL are recognised as the proceeds
received, less costs incurred on the disposal of seed investments.
Net foreign
exchange gain / (loss)
Net foreign exchange gains and losses represent exchange differences in the translation or settlement of
foreign denominated monetary and intercompany balances.
B3. Earnings per share
The calculation of basic earnings per share is based on the profit attributable to ordinary shareholders and the weighted-average
number of ordinary shares outstanding (i.e. ordinary shares on issue less treasury shares) during the financial year. The calculation
of diluted earnings per share also includes the weighted average number of any potential ordinary shares outstanding during the
financial year.
Basic earnings per share
Profit attributable to shareholders of the Company ($’000)
Weighted average number of ordinary shares on issue (’000)
Weighted average number of treasury shares (’000)
Weighted average number of ordinary shares (’000)
Basic earnings per share (cents per share)
Diluted earnings per share
Profit attributable to shareholders of the Company ($’000)
Weighted average number of ordinary shares on issue (’000)
Weighted average number of treasury shares (’000)
Weighted average number of deferred shares (’000)
Weighted average number of options (’000)
Weighted average number of rights (’000)
2020
116,386
322,802
(30,063)
292,739
39.8
2020
116,386
322,802
2019
154,477
318,900
(34,880)
284,020
54.4
2019
154,477
318,900
(30,063)
(34,880)
4,871
3,653
–
5,139
12,306
–
Weighted average number of ordinary shares and potential ordinary shares (’000)
301,263
301,465
Diluted earnings per share (cents per share)
38.6
51.2
Annual Report 2020 | 77
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2020Notes to the Consolidated Financial Statements
2020
$’000
115511,,339999
4455,,442200
2019
$’000
220022,,220088
6600,,666622
(16,204)
(17,986)
2,285
3,998
101
(499)
310
(393)
(5)
2,745
2,639
363
(593)
486
(568)
(17)
35,013
47,731
33,698
1,708
(393)
45,634
2,665
(568)
Deferred tax
asset
Deferred tax
liability
Deferred tax
asset
Deferred tax
liability
2020
$’000
16,484
12,840
779
(218)
395
–
–
(1,258)
(91)
28,931
2020
$’000
–
–
–
–
–
–
10,148
–
–
2019
$’000
31,783
10,784
241
317
177
9
–
–
177
10,148
43,488
2019
$’000
–
–
–
161
–
–
10,175
13,055
–
23,391
Notes to the Consolidated Financial Statements
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2020
B4. Taxation
(a) Reconciliation of income tax expense
The income tax expense in the Statement of Comprehensive Income reconciles to
accounting profit as follows:
PPrrooffiitt bbeeffoorree ttaaxx
IInnccoommee ttaaxx ccaallccuullaatteedd aatt tthhee AAuussttrraalliiaann ttaaxx rraattee ooff 3300%% ((22001199:: 3300%%))
Tax effect of amounts which are not deductible (taxable) in calculating taxable income:
Differences in overseas tax rates
Previously unrecognised deferred tax assets
State, local and withholding taxes
Effect on deferred taxes of changes in tax rates
Sundry non-assessable/ non-deductible items
Employee equity grant amortisation
Adjustments for current tax of prior financial year
Tax credits and rebates
Total income tax expense
Represented by:
Current tax
Deferred tax
Adjustments for current tax of prior periods
(b) Deferred tax balances
Employee equity grants
Employee benefits
Accrued expenses
Property, plant and equipment
Lease expenses
Business-related costs
Intangible assets
Financial assets held at FVTPL
Foreign exchange gain/loss
Total
78 | Pendal Group
Notes to the Consolidated Financial StatementsFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2020
Notes to the Consolidated Financial Statements
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2020
(c) Movements in deferred tax balances
Balance as at
1 October
$’000
Charged to
profit or loss
$’000
Charged to
comprehensive
income
$’000
Charged to
equity
$’000
Balance as at
30 September
$’000
2020
Deferred tax assets
Deferred tax liabilities
2019
Deferred tax assets
Deferred tax liabilities
4433,,448888
((2233,,339911))
4422,,446655
((2200,,665544))
(14,787)
13,079
(6)
(2,659)
138
164
376
(78)
92
–
653
–
(d) Unrecognised temporary differences
Temporary difference relating to investments in subsidiaries for which deferred tax liabilities have not been recognised:
Foreign currency translation
Unrecognised deferred tax liabilities relating to the above temporary differences
2020
$’000
48,214
14,464
28,931
(10,148)
43,488
(23,391)
2019
$’000
47,006
14,102
Accounting policy
Current tax
Current tax assets and liabilities are measured at the amount of income taxes payable or recoverable for the period, using
tax rates and laws enacted or substantively enacted by the reporting date in the countries where the Company and its
subsidiaries operate. The main corporate tax rates applicable for the current period are 30% (2019: 30%) on Australian
taxable income, 19% (2019: 19%) on UK taxable income, 21% (2019: 21%) on US federal taxable income and 17% (2019: 17%)
on Singapore taxable income.
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.
Deferred tax
Deferred tax is accounted for in respect of temporary differences between the tax bases of assets and liabilities and their
carrying amounts in the consolidated financial statements. Deferred tax liabilities are recognised for all taxable temporary
differences and deferred tax assets are recognised for all deductible temporary differences to the extent that it is probable
that taxable profit will be available against which the asset can be utilised.
Deferred tax is not recognised if it arises from the initial recognition of goodwill or an asset or liability in a transaction, other
than a business combination, which affects neither taxable income nor accounting profit or from investments in controlled
entities, or foreign operations where the Company is able to control the timing of the reversal of the temporary differences
and it is probable that the differences will not reverse in the foreseeable future.
Deferred tax is measured using tax rates (and laws) that have been enacted or substantively enacted for each jurisdiction by
the end of the reporting period and are expected to apply when the temporary differences reverse.
Deferred tax assets and liabilities are offset where there is a legally enforceable right to offset current tax assets and
liabilities and where the deferred tax balances relate to the same taxation authority.
Current and deferred tax is recognised in profit and loss, except to the extent that it relates to items recognised in other
comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or
directly in equity, respectively.
Tax consolidation
The Company and its wholly-owned Australian controlled entities are part of a tax consolidated group under Australian tax
legislation. The Company is the head entity in the tax-consolidated group. Entities within the tax consolidated group have
entered into a tax funding and a tax sharing agreement with the head entity.
Under the terms of the tax funding agreement, the Company and each entity in the tax consolidated group has agreed to pay
(or receive) a tax equivalent payment to (or from) the head entity, based on the current tax liability or current tax asset of the
entity. The funding amounts are recognised as current inter-company receivables or payables.
Annual Report 2020 | 79
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2020Notes to the Consolidated Financial Statements
Notes to the Consolidated Financial Statements
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2020
B5. Reconciliation of cash flow from operating activities
(a) Reconciliation of cash flow from operating activities
PPrrooffiitt aafftteerr ttaaxx ffoorr tthhee ffiinnaanncciiaall yyeeaarr
Adjustments for non-cash expense items:
Depreciation and write-off of fixed assets
Amortisation and impairment of intangibles
Amortisation of employee equity grants
Reinvested distribution income
Net loss/(gain) on sale of financial assets held at FVTPL
Interest and finance costs
Net exchange differences
Change in operating assets and liabilities:
Decrease in trade and other receivables
Increase in prepayments
Decrease in deferred tax assets
Decrease in trade and other payables
Decrease in employee benefits
Decrease in lease liabilities
Decrease in current tax liabilities
Increase/(decrease) in deferred tax liabilities
Net cash inflow from operating activities
(b) Cash and cash equivalents
Cash at bank and on hand
Deposits at call
Total cash and cash equivalents
Accounting policy
2020
$’000
111166,,338866
9,288
6,810
35,192
(5,612)
14,316
1,515
913
1,594
(127)
14,584
(945)
(2,177)
–
(1,412)
(13,243)
177,082
2020
$’000
109,041
98,444
2019
$’000
115544,,447777
2,444
6,758
44,852
(4,995)
(16,148)
131
187
1,338
(1,694)
6
(3,310)
(7,536)
(2,026)
(4,945)
2,658
172,197
2019
$’000
84,295
65,776
207,485
150,071
Cash at bank and on hand
Cash and cash equivalents include cash on hand and deposits held at call with financial institutions.
Deposits at call
Deposits at call are invested in cash management trusts managed by the Group.
80 | Pendal Group
Notes to the Consolidated Financial StatementsFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2020
Notes to the Consolidated Financial Statements
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2020
C. Capital and financial risk management
This section provides information relating to Pendal Group’s capital structure and its exposure to financial risk and how
they are managed.
C1.
C2.
C3.
C4.
C5.
C6.
C7.
Capital management
Contributed equity
Reserves
Dividends
Financial assets held at FVTPL
Borrowings
Financial risk management
C1. Capital management
81
82
84
85
86
86
87
Pendal Group's objectives when managing capital are to maintain a strong capital base in excess of regulatory requirements
throughout all business cycles that supports the execution of its strategic goals, in order to optimise returns to its shareholders,
while ensuring compliance with the Group’s Risk Appetite Statement.
Group Capital
The Group’s capital is generated through free cash flow from ongoing operations and predominantly consists of cash to fund
working capital and regulatory capital requirements, as well as provide capital for strategic initiatives to facilitate future growth. This
includes the provision of seed capital for new funds and investment strategies. The Group’s corporate seed portfolio totalled $200.4
million as at 30 September 2020, which sits within the Board’s risk appetite.
Capital distribution
Surplus capital is returned to shareholders in the form of annual dividends, with the Company’s current dividend policy set to pay
out 80% - 90% of Cash NPAT. While Cash NPAT has served as the Group’s alternative profit measure since its initial public offering
in 2007, the Board has determined that employee related expense adjustments included in Cash NPAT are no longer required.
From the 2021 Financial Year, the Group’s alternative profit measure will include statutory employee related expenses and the Cash
NPAT measure will be replaced with Underlying profit after tax (UPAT). The dividend policy from 2021 will also be revised to pay out
80-95% of annual UPAT. UPAT comprises statutory net profit adjusted to exclude amortisation and impairment of intangible
assets, and both realised and unrealised gains and losses in financial assets held at FVTPL which are substantially comprised of
seed investments.
Capital risk management
Cash profits generated from offshore business units, beyond working capital and regulatory requirements, are repatriated back to
the Company through inter-company dividends, for which a hedging program is in place to mitigate foreign exchange risk. In
accordance with the Company’s capital management plan, and to the extent possible, retention of franking credits is minimised.
The Board regularly reviews the Group’s free cash flow generation, cash and cash equivalents, borrowings, seed investments, tax
and other financial factors in order to maintain an optimal capital structure. Debt may also be used at times to provide capital to the
Group, and an uncommitted multi-currency debt facility is available for this purpose and is not utilised at balance date. In order to
maintain an optimal capital structure, the Board may:
• adjust the amount of dividends paid to shareholders;
• utilise the dividend reinvestment plan;
• return capital to shareholders;
• increase or decrease borrowings;
• contribute to or redeem seed investments; or
• issue new shares.
Annual Report 2020 | 81
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2020Notes to the Consolidated Financial Statements Notes to the Consolidated Financial Statements
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2020
Regulatory capital requirements
The Group operates legal entities in jurisdictions that are subject to various regulatory and capital requirements. These include:
• In Australia, Pendal Fund Services Limited (PFSL) acts as responsible entity/ trustee of the Pendal Australia registered and
unregistered trusts and Pendal Institutional Limited (PIL) provides investment management services to institutional clients and
all Pendal Australia’s registered and unregistered trusts. These companies are required to maintain minimum capital
requirements under the Australian Financial Services Licence conditions regulated by the Australian Securities and Investments
Commission. The level of regulatory capital required as at 30 September 2020 was $6.1 million.
• J O Hambro Capital Management Limited (JOHCM) provides investment management services to a UK Open Ended Investment
Companies (OEIC), Irish UCITS fund, US mutual funds, institutional clients and other Group entities. JOHCM is regulated by the
Financial Conduct Authority (FCA) as a MiFID investment firm (under the Markets in Financial Instruments Directive), and by the
US Securities and Exchange Commission (SEC) under the Investment Advisers Act of 1940 as an investment adviser. It has
established an Internal Capital Adequacy Assessment Process (ICAAP) that is used to determine the amount of regulatory capital
required to meet its licensing requirements. The level of regulatory capital required as at 30 September 2020 in accordance with
the ICAAP was $64.3 million (£35.6 million).
• JOHCM Funds (UK) Limited is authorised by the FCA as a collective portfolio management investment firm and is the Authorised
Corporate Director (ACD) of the UK OEIC, J O Hambro Capital Management UK Umbrella Fund. The level of regulatory capital
required for JOHCM Funds (UK) Limited was $1.3 million (£0.7 million) at 30 September 2020.
• JOHCM Funds (Ireland) Limited is authorised by the Central Bank of Ireland as a UCITS management company, and is the
investment manager of the Irish-domiciled UCITS, J O Hambro Capital Management Umbrella Fund plc. The level of regulatory
capital required as at 30 September 2020 was $4.5 million (€2.7 million).
• JOHCM (Singapore) Pte Limited provides investment management services to institutional clients, other Group entities and a
Cayman investment fund. It is required to maintain minimum capital requirements as part of its licensing requirements with the
Monetary Authority of Singapore. The level of regulatory capital required as at 30 September 2020 was $2.2 million (S$2.1
million).
• JOHCM (USA) Inc. provides investment management services to Delaware Statutory Trusts, Collective Investment Trusts,
institutional clients and other Group entities. It is registered as an investment adviser with the SEC and is not required to hold
minimum regulatory capital.
All entities complied with regulatory capital requirements at all times throughout the 2020 Financial Year.
C2. Contributed equity
Ordinary shares 322,802,391 (2019: 322,802,391) each fully paid
Treasury shares 26,768,913 (2019: 37,969,700)
Total contributed equity 296,033,478 (2019: 284,832,691)
2020
$’000
617,668
(146,419)
471,249
2019
$’000
617,668
(198,237)
419,431
(a) Ordinary shares
Ordinary shares entitle the holder to participate in dividends as declared and in the event of a winding up of the Company, to participate
in the proceeds in proportion to the number of and amounts paid on the shares held. Ordinary shares entitle the holder to one vote per
share, either in person or by proxy, at a meeting of the Company shareholders. All ordinary shares issued have no par value.
Movements in ordinary shares during the year:
BBaallaannccee aatt tthhee bbeeggiinnnniinngg ooff tthhee ffiinnaanncciiaall yyeeaarr
Fund linked equity share issuance 1
2020
Shares ’000
332222,,880022
–
2020
$’000
661177,,666688
–
Balance at the end of the year
322,802
617,668
1. The shares were issued to fund managers who participate in the FLE Scheme.
2019
Shares ’000
331188,,000077
4,795
322,802
2019
$’000
661177,,666688
–
617,668
82 | Pendal Group
Notes to the Consolidated Financial StatementsFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2020
Notes to the Consolidated Financial Statements
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2020
(b) Treasury shares
Treasury shares are those shares issued through the Fund Linked Equity (FLE) Scheme, together with those shares purchased as
necessary, in order to meet the obligations of Pendal Group under its employee share plans. These represent shares either held by
the employee benefit trusts for future allocation or shares held by employees within Group share plans, subject to sale restrictions.
Movements in treasury shares during the financial year were as follows:
2020
Shares ’000
2020
$’000
2019
Shares ’000
2019
$’000
BBaallaannccee aatt tthhee bbeeggiinnnniinngg ooff tthhee yyeeaarr
((3377,,997700))
((119988,,223377))
((3366,,440066))
((119900,,553311))
Treasury shares acquired
Fund linked equity share issuance 2
Treasury shares released
(4,706)
(37,532)
–
15,908
–
89,350
(4,216)
(4,795)
7,447
(34,790)
–
27,084
Balance at the end of the year
(26,768)
(146,419)
(37,970)
(198,237)
2. The shares were issued to fund managers who participate in the FLE Scheme.
Details of treasury shares at the end of the year were as follows:
Unallocated shares held by trustees
Shares allocated to employees
Balance at the end of the year
Accounting policy
2020
Shares ’000
10,930
15,838
26,768
2020
$’000
78,218
68,201
146,419
2019
Shares ’000
18,394
19,576
37,970
2019
$’000
130,524
67,713
198,237
Ordinary shares
Ordinary shares are recognised at the amount paid per ordinary share, net of directly attributable issue costs.
Treasury shares
Where the Company or other entities of Pendal Group purchase shares in the Company, the consideration paid is deducted
from total shareholders' equity and the shares treated as treasury shares. Treasury shares are recorded at cost and when
restrictions on the sale of shares granted to employees are lifted from the employee share plans, the cost of such shares is
appropriately adjusted to the share-based payment reserve.
Annual Report 2020 | 83
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2020Notes to the Consolidated Financial Statements
Notes to the Consolidated Financial Statements
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2020
C3. Reserves
Share-based payment reserve
The share-based payment reserve relates to the amortised portion of the fair value of equity instruments granted to employees for
no consideration, recognised as an expense. Deferred tax in relation to amounts not recognised in the Statement of Comprehensive
Income is also recognised in the share-based payment reserve. The balance of the share-based payment reserve is reduced by the
payment of certain dividends not paid from retained earnings, where the requirements of the Corporations Act are met.
Foreign currency translation reserve
Exchange differences arising on the translation of the foreign controlled entities, in addition to gains and losses on derivatives that
are designated as net investment hedges, are recognised in other comprehensive income and accumulated in the foreign currency
translation reserve. The cumulative amount is reclassified to profit or loss when the net investment is partially disposed of or sold.
Cash flow hedge reserve
The cash flow hedge reserve is used to record gains or losses on hedging instruments that are designated and qualify as cash flow
hedges and that are recognised in other comprehensive income. Amounts are reclassified to profit or loss when the associated
hedged transactions affect profit or loss.
Common control reserve
The common control reserve relates to the Company’s purchase of the Australian investment management business on 19 October
2007. Any difference between the cost of acquisition (fair value of consideration paid), and the amounts at which the assets and
liabilities are recorded, has been recognised directly in equity as part of a business combination under the common control reserve.
Balance at 1 October 2019
Share-based payment expense
Deferred tax
Treasury shares released
Currency translation difference
Gain/(loss) on hedging activities
Balance at 30 September 2020
Balance at 1 October 2018
Share-based payment expense
Deferred tax
Treasury shares released
Currency translation difference
Gain/(loss) on hedging activities
Share-based
payment
reserve
$’000
Foreign
currency
translation
reserve
$’000
Cash flow
hedge reserve
$’000
Common
control
reserve
$’000
Total
reserves
$’000
223366,,775577
4477,,000066
2288
((2255,,447722))
225588,,331199
35,192
27
(89,350)
–
–
182,626
–
–
–
(1,995)
3,203
48,214
–
–
–
–
(56)
(28)
–
–
–
–
–
35,192
27
(89,350)
(1,995)
3,147
(25,472)
205,340
221188,,333366
4444,,550077
1100
((2255,,447722))
223377,,338811
44,852
653
(27,084)
–
–
–
–
–
4,999
(2,500)
–
–
–
–
18
28
–
–
–
–
–
44,852
653
(27,084)
4,999
(2,482)
(25,472)
258,319
Balance at 30 September 2019
236,757
47,006
84 | Pendal Group
Notes to the Consolidated Financial StatementsFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2020
Notes to the Consolidated Financial Statements
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2020
C4. Dividends
Equity dividends on ordinary shares
((ii))
DDiivviiddeennddss ddeeccllaarreedd aanndd ppaaiidd dduurriinngg tthhee FFiinnaanncciiaall YYeeaarr
Final 10% franked1 dividend for the 2019 Financial Year: 25.0 cents per share
(2018 Financial Year: 30.0 cents per share 15% franked1)
Interim 10% franked1 dividend for the 2020 Financial Year: 15.0 cents per share
(2019 Financial Year: 20.0 cents per share 10% franked1)
2020
$’000
2019
$’000
82,571
90,666
46,782
129,353
59,897
150,563
((iiii))
DDiivviiddeennddss pprrooppoosseedd ttoo bbee ppaaiidd ssuubbsseeqquueenntt ttoo tthhee eenndd ooff tthhee FFiinnaanncciiaall YYeeaarr aanndd nnoott
rreeccooggnniisseedd aass aa lliiaabbiilliittyy
Final dividend for the 2020 Financial Year 22.0 cents (10% franked1) per share
(2019 Financial Year: 25.0 cents per share 10% franked1)
68,612
76,078
1. The whole of the unfranked amount of the dividend will be Conduit Foreign Income, as defined in the Income Tax Assessment Act 1997.
Franked dividends
Dividends declared or paid during the year were 10% franked, at the Australian corporate tax rate of 30%.
The franked portions of the final dividend declared or paid after 30 September 2020 will be franked out of existing franking credits or
out of franking credits arising from the payment of income tax in the year ending 30 September 2021.
Franking credits available for subsequent financial years
2020
$’000
5,547
2019
$’000
33
The above amounts represent the balance of the franking account as at the end of the financial year, adjusted for:
(i)
(ii)
(iii)
franking credits that will arise from the payment of the amount of the provision for income tax
franking debits that will arise from the payment of dividends recognised as a liability at the reporting date
franking credits that will arise from the receipt of dividends recognised as receivables at the reporting date.
The impact on the franking account of the dividends declared or paid by the Directors since year end, but not recognised as a
liability at financial year end, will be a reduction in the franking account of $3,043,565 (2019: $3,260,420).
Accounting policy
Dividends
A provision is made for the amount of any dividend declared by the Directors before or at the end of the financial year but
not distributed at balance date.
Annual Report 2020 | 85
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2020Notes to the Consolidated Financial Statements
Notes to the Consolidated Financial Statements
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2020
C5. Financial assets held at FVTPL
Unlisted securities
Units held in pooled funds
Escrow units held in pooled funds1
Interest in James Hambro & Partners LLP
Total
2020
$’000
2019
$’000
200,438
259,036
8,196
2,537
211,171
16,148
2,891
278,075
1. Escrow units held in pooled funds relate to deferred employee remuneration that is held by Pendal Group in trust until certain service conditions have been
satisfied by the employee. A corresponding employee benefit liability is recognised on the Consolidated Statement of Financial Position.
Accounting policy
Financial assets held at FVTPL
Financial assets held at FVTPL are equity instruments that the entity has not elected to recognise fair value gains and losses
through other comprehensive income.
The fair value of quoted investments in active markets are based on current bid prices. If the market for a financial asset is
not active, Pendal Group establishes fair value by using valuation techniques. These include the use of recent arm’s length
transactions, discounted cash flow analysis, option pricing models and other valuation techniques commonly used by
market participants.
The determination of the investments’ carrying value included consideration of the appropriateness of inputs to valuations
in light of the impacts of COVID-19. In particular, the impact of price volatility and market liquidity in respect of the
investments held has been incorporated into valuation estimates at balance date.
C6. Borrowings
Multi-currency debt facility
During the year, Pendal Group Limited entered into a $25 million uncommitted multi-currency debt facility agreement with ANZ
Banking Group Limited for a three year term, following the expiry of a previous debt facility. The facility remains undrawn at balance
date.
Accounting policy
Borrowings
Borrowings are initially recognised at fair value, net of transaction costs. They are subsequently measured at amortised cost
using the effective interest method.
Fees paid on the establishment of loan facilities are recognised as finance costs of the loan to the extent that it is probable
that some or all of the facility will be drawn down. To the extent there is no evidence that it is probable that some or all of the
facility will be drawn down, the fee is capitalised as a prepayment for liquidity services and amortised over the period of the
facility to which it relates.
Borrowings are removed from the Statement of Financial Position when the obligation specified in the contract is
discharged, cancelled or expires. The difference between the carrying amount of a financial liability that has been
extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or
liabilities assumed, is recognised in the Statement of Comprehensive Income as other income or finance costs.
86 | Pendal Group
Notes to the Consolidated Financial StatementsFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2020
Notes to the Consolidated Financial Statements
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2020
C7. Financial risk management
Pendal Group manages its business in Australia and outside of Australia and is consequently exposed to a number of financial risks.
The key financial risks are market risk (including price risk, interest rate risk and foreign exchange risk), credit risk and liquidity risk.
The Board is responsible for the establishment and oversight of an effective system of risk management. The Board delegates
authority to management to conduct business activity within the limits of the approved business plans, policies and procedures.
The Group held the following financial instruments as at 30 September:
Financial assets
Cash and cash equivalents
Trade and other receivables
Financial assets held at FVTPL
Derivatives
Total financial assets
Financial liabilities
Trade and other payables
Lease liabilities
Derivatives
Total financial liabilities
(a) Market risk
2020
$’000
207,485
66,969
211,171
78
2019
$’000
150,071
68,563
278,075
–
485,703
496,709
41,660
40,560
–
82,220
42,605
3,686
1,288
47,579
Pendal Group may bear exposure to market risks which include securities’ price risk, interest rate risk and foreign exchange risk due
to the nature of its investments and liabilities. The key direct risks are a result of investment and market volatility which have a
resulting impact on the funds under management (FUM) of the Group. A reduction in FUM will reduce management fee income,
calculated as a percentage of FUM, and will reduce gains on financial assets held at fair value through profit or loss, which
consequently reduces net profit or loss after tax (Statutory NPAT). The Group estimates the potential movements in overall FUM,
covering all its asset classes, and their impact on Statutory NPAT to be as follows:
Profit sensitivity to movement in FUM:
FUM ($ billion)
Statutory NPAT ($'000)
2020
10%
increase
9.2
10%
decrease
(9.2)
42,313
(42,273)
2019
10%
increase
10.0
51,549
10%
decrease
(10.0)
(51,588)
The sensitivity calculation is made on the basis of FUM as at 30 September 2020 increasing or decreasing by 10%. The profit or
loss sensitivity calculation is derived by holding net flows, foreign currencies and market movements flat for 12 months,
maintaining the current management fee margin, and flowing the revenue result through the current operating cost parameters
and/or assumptions. The appropriateness of the level of reasonably possible movements in FUM, has been reviewed in light of the
additional financial market uncertainty and volatility caused by COVID-19. Depending on the extent and duration of an actual FUM
movement, management would respond with appropriate measures which would change the parameters and/or assumptions and
potentially reduce or improve the calculated profit or loss impact.
(i) Price risk
The Group is exposed to securities’ price risk. This arises from both FUM and investments directly held by Pendal Group for which
prices in the future are uncertain. The majority of the Group's revenue consists of fees derived from FUM. Exposure to securities
price risk could result in fluctuations in FUM that would impact the Group's profitability.
Exposure to price risk also arises from directly held units in funds managed by the Group (refer Note C5), which invest in shares in
unlisted companies and other investments.
Annual Report 2020 | 87
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2020Notes to the Consolidated Financial Statements
Notes to the Consolidated Financial Statements
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2020
Price risk sensitivity
The Group provides seed capital to a number of funds which invest in regions including the UK, Europe, Emerging Markets, US, Asia
(ex Japan) and Australia which may be subject to price volatility. The appropriateness of the levels of reasonably possible
movements in seed investment prices has been reviewed in light of the additional financial market uncertainty and volatility caused
by COVID-19. In aggregate, if the price increased or decreased by 10% with all other variables held constant, the Statement of
Comprehensive Income would be impacted by:
Statutory NPAT ($’000)
2020
10%
increase
$’000
14,623
10%
decrease
$’000
(14,623)
2019
10%
increase
$’000
19,436
10%
decrease
$’000
(19,436)
(ii) Interest rate risk
The Group is subject to interest rate risk, which impacts both the Group's FUM and the Group's cash balances and borrowings. This
risk is managed through asset/liability management strategies that seek to limit the impact arising from interest rate movements.
Fair value sensitivity analysis
Pendal Group does not account for any fixed rate financial instruments at fair value through profit or loss. Therefore a change in
interest rates at the reporting date would not result in a change of fair value affecting profit or loss.
Cash flow sensitivity analysis for variable rate instruments
A change in interest rates would be applicable to the Group’s cash balances. A change of 25 bps in the average of the effective
interest rates over the year ended 30 September 2020 would have increased/(decreased) Statutory NPAT and equity by the
amounts shown below. The appropriateness of the levels of reasonably possible movements in effective interest rates has been
reviewed in light of the additional financial market uncertainty and volatility caused by COVID-19. This analysis assumes that all
other variables remain constant.
Interest rates – increase by 25 bps (2019: 50 bps)
Interest rates – decrease by 25 bps (2019: 50 bps)
Profit or loss after tax
Equity
2020
$’000
387
(387)
2019
$’000
562
(562)
2020
$’000
–
–
2019
$’000
–
–
(iii) Foreign exchange risk
Pendal Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures. Foreign
exchange risk arises from future commercial transactions and recognised assets and liabilities denominated in a currency that is not
the Group’s functional currency.
Under AASB 9 any gain or loss on the hedging instrument relating to the effective portion of the hedge is recognised in other
comprehensive income and accumulated in reserves in equity. The gain or loss relating to any ineffective portion is recognised
immediately in Statement of Comprehensive Income within other income or other expenses. Gains or losses accumulated in equity
are reclassified to Statement of Comprehensive Income when the foreign operation is partially disposed of or sold.
In order to manage the Group’s dividend requirements, a hedging program using foreign currency forwards is in place to hedge a
portion of its investment in its offshore operations.
As at 30 September 2020, the notional exposure of the Company’s hedging instruments totalled $68.6 million (2019: $79.3
million). During the year, a gain of $3.1m was recognised on hedging activities (2019: $2.5m hedging loss).
88 | Pendal Group
Notes to the Consolidated Financial StatementsFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2020
Notes to the Consolidated Financial Statements
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2020
The following table details Pendal Group’s net exposure to foreign currency as at reporting date in Australian dollar
equivalent amounts:
Financial assets
Trade
receivables
$’000
Financial
assets held at
FVTPL
$’000
Cash at bank
$’000
Financial liabilities
Total
Derivatives
$’000
Trade
payables
$’000
Derivatives
$’000
Lease
liabilities
$’000
Net exposure
$000
2020
GBP
EUR
USD
SGD
2019
GBP
EUR
USD
SGD
81,530
20,482
102,030
78
(16,879)
5,823
1,994
1,293
418
990
24,682
106,218
231
1,933
64,327
21,405
60,479
5,209
4,599
568
1,005
1,436
24,026
117,041
213
2,027
–
–
–
–
–
–
–
(4,918)
(3,639)
(474)
–
–
–
–
(31,173)
156,068
–
2,313
(3,223)
126,032
(482)
2,501
(12,957)
(1,288)
(3,686)
128,280
(6,204)
(5,340)
(1,198)
–
–
–
–
–
–
1,446
140,326
1,610
The table below shows the impact on Pendal Group’s Statutory NPAT and equity of a 10% movement in foreign currency exchange
rates against the Australian dollar for financial assets and financial liabilities:
2020
GBP
EUR
USD
SGD
2019
GBP
EUR
USD
SGD
Profit or loss after tax
Equity
10% increase
$’000
10% decrease
$’000
10% increase
$’000
10% decrease
$’000
9,305
231
12,718
298
4,298
145
22,418
161
(9,305)
(231)
(12,718)
(298)
(4,298)
(145)
(22,418)
(161)
6,302
(6,302)
–
(115)
(48)
–
115
48
8,659
(8,659)
–
488
–
–
(488)
–
(b) Credit risk
Credit risk is the risk that a counterparty will fail to perform contractual obligations, either in whole or in part under a contract. Credit
risk exposures are monitored regularly with all Pendal Group counterparties. The major counterparties are The Westpac Group,
HSBC, the funds for which Pendal Australia and JOHCM are the fund managers and trade debtors, including wholesale and
institutional clients. Exposure to credit risk arises on the Group's financial assets which are disclosed at the beginning of this Note.
Based on the credit quality of the Group’s counterparties and the immaterial historical credit losses experienced by Pendal Group,
no expected loss provisions were recognised during the year (2019: Nil).
The credit quality of financial assets can be assessed by reference to external credit ratings (if available) or to historical information
about counterparty default rates. The credit quality of financial assets is AA- for The Westpac Group (2019: AA-) and A- for HSBC
(2019: A). The credit quality of each wholesale or institutional client is assessed by taking into account its financial position, past
experience and other factors. The potential impact of COVID-19 on the financial position of the Group’s major counterparties has
also informed the assessment of credit risk for the Group.
Credit risk further arises in relation to financial guarantees given to certain parties (refer Note E1). Such guarantees are only provided
in exceptional circumstances and are subject to specific Board approval.
Annual Report 2020 | 89
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2020Notes to the Consolidated Financial Statements
Notes to the Consolidated Financial Statements
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2020
(c) Liquidity risk
Liquidity risk is the risk that Pendal Group may not be able to meet its financial obligations in a timely manner at a reasonable cost.
The Group maintains sufficient cash and working capital in order to meet future obligations and statutory regulatory capital
requirements. This assessment has been confirmed after considering the present and uncertain future impacts of COVID-19 on the
Group’s financial position and estimated cash flows.
Maturities of financial liabilities
The table below analyses the Group’s financial liabilities into relevant maturity groupings based on the remaining period at the
reporting date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows.
2020
Trade and other payables
Lease liabilities
Derivatives
2019
Trade and other payables
Lease liabilities
Derivatives
(d) Fair value estimation
Less than
1 year
$’000
Between
1–2 years
$’000
41,660
8,790
–
42,605
957
1,288
–
8,142
–
–
2,511
–
Over
2 years
$’000
–
28,106
Total
contractual
cash flows
$’000
Carrying
amount of
liabilities
$’000
41,660
45,038
41,660
40,560
–
–
–
–
218
–
42,605
42,605
3,686
1,288
3,686
1,288
Pendal Group measures and recognises its financial assets held at FVTPL (refer Note C5) and derivatives at fair value on a recurring
basis, and its borrowings initially at fair value and subsequently at amortised cost (refer Note C6).
The Group also has a number of financial instruments which are not measured at fair value in the balance sheet. Due to the short-
term nature of the current receivables and current payables, the carrying amount is assumed to approximate their fair value.
(i) Fair value hierarchy
The Group classifies fair value measurements using a fair value hierarchy that reflects the subjectivity of the inputs used in making
the measurements. The fair value hierarchy has the following levels:
• Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities;
• Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (that
is, as prices) or indirectly (that is, derived from prices);
• Level 3 - Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs).
Changes in Level 2 and 3 fair values are analysed at each reporting date and there were no transfers between Levels 2 and 3 during
the financial year.
Level 1
$’000
Level 2
$’000
Level 3
$’000
Total
$’000
–
–
–
–
–
200,438
8,196
–
78
208,712
–
–
2,537
–
2,537
200,438
8,196
2,537
78
211,249
2020
Financial assets
Financial assets held at FVTPL:
Units held in pooled funds 1
Escrow units held in pooled funds 2
Interest in James Hambro & Partners LLP 3
Derivatives
Total financial assets
90 | Pendal Group
Notes to the Consolidated Financial StatementsFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2020
Notes to the Consolidated Financial Statements
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2020
2019
Financial assets
Financial assets held at FVTPL:
Units held in pooled funds 1
Escrow units held in pooled funds 2
Interest in James Hambro & Partners LLP 3
Total financial assets
Financial liabilities
Derivatives
Total financial liabilities
Level 1
$’000
Level 2
$’000
Level 3
$’000
Total
$’000
–
–
–
–
–
–
259,036
16,148
–
275,184
(1,288)
(1,288)
–
–
2,891
2,891
–
–
259,036
16,148
2,891
278,075
(1,288)
(1,288)
Notes:
1. These securities represent shares held in unlisted pooled funds managed by the Group and are measured at fair value. The fair value is measured with
reference to the underlying net asset values of the pooled funds.
2. Escrow units held in pooled funds relate to deferred employee remuneration that is held by the Group in trust until certain service conditions have been
satisfied by the employee. A corresponding employee benefit liability is recognised on the Consolidated Statement of Financial Position.
3. JH&P is an independent private asset management partnership business.
(ii) Valuation techniques used to derive Level 2 and Level 3 fair values
The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for disclosure
purposes. The fair value of financial instruments that are not in an active market are determined using valuation techniques. These
valuation techniques maximise the use of observable market data where it is available and do not rely on entity specific estimates. If
all significant inputs required to fair value an instrument are observable, the instrument is included in Level 2.
If one or more of the significant inputs is not based on observable market data, the instrument is included in Level 3, as is the case
for unlisted equity securities.
The fair values of quoted investments in active markets are based on current bid prices. If the market for a financial asset is
not active, Pendal Group establishes fair value by using valuation techniques. These include the use of recent arm’s length
transactions, discounted cash flow analysis, option pricing models and other valuation techniques commonly used by
market participants. The determination of the investments’ fair value included consideration of the appropriateness of inputs to
valuations in light of the impacts of COVID-19. In particular, the impact of price volatility and market liquidity in respect of the
investments held has been incorporated into valuation estimates at balance date.
Specific valuation techniques used to value financial instruments include:
Pooled funds
During the year JOHCM managed two OEICs domiciled in the United Kingdom, two UCITS funds domiciled in Ireland, and an open-
ended registered investment company responsible for the JOHCM mutual fund range and a Delaware Statutory Trust, both
domiciled in the United States of America. Each investment vehicle is an umbrella scheme with various sub-funds, each with their
own investment strategy. Each sub fund had a single price directly linked to the fair value of its underlying investments.
Pendal Australia manages unit trusts, domiciled in Australia where units are redeemable at any time for cash based on redemption
price, which is equal to a proportionate share of the unit trust’s net asset value.
Partnership interests
The interest in JH&P is included in Level 3 of the fair value hierarchy, as the inputs to the asset valuation are not based on
observable market prices, and are measured at fair value. For the financial year ended 30 September 2020, the fair value has been
measured at an estimated price that would be received to sell the asset, having regard to the terms of the partnership agreement
and adjusted for risk assumptions. Pendal Group performs the valuations for Level 3 financial assets for financial reporting purposes
half-yearly in line with the Group’s reporting dates.
Derivatives
The fair value of derivative foreign exchange forward contracts that are designated as hedging instruments was determined using
forward exchange rates at balance date.
Annual Report 2020 | 91
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2020Notes to the Consolidated Financial Statements
Notes to the Consolidated Financial Statements
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2020
(iii) Unobservable inputs
The following table represents the movement in Level 3 financial instruments:
2020
BBaallaannccee aatt tthhee bbeeggiinnnniinngg ooff tthhee ffiinnaanncciiaall yyeeaarr
Loss recognised in profit and loss
Effects of foreign exchange movements
Balance at the end of the financial year
2019
BBaallaannccee aatt tthhee bbeeggiinnnniinngg ooff tthhee ffiinnaanncciiaall yyeeaarr
De-recognition on consolidation
Gains recognised in profit and loss
Effects of foreign exchange movements
Balance at the end of the financial year
Shares in
Regnan
$’000
Interest in
James Hambro
& Partners LLP
$’000
Total fair
value –
level 3
$’000
Carrying
amount
$’000
–
–
–
–
110000
(100)
–
–
–
22,,889911
(325)
(29)
2,537
221100
–
2,679
2
2,891
22,,889911
(325)
(29)
2,537
331100
(100)
2,679
2
2,891
22,,889911
(325)
(29)
2,537
331100
(100)
2,679
2
2,891
92 | Pendal Group
Notes to the Consolidated Financial StatementsFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2020
Notes to the Consolidated Financial Statements
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2020
D. Employee remuneration
This section provides a breakdown of how Pendal Group rewards and remunerates its employees, including key management
personnel (KMP). Talent management is at the centre of the Group’s remuneration framework which is aimed at attracting, retaining
and equitably rewarding its highly talented workforce while safeguarding the interests of its clients and delivering returns to
shareholders.
Further information on the Group’s overall remuneration approach, remuneration of KMP and insights into how the fund managers,
sales teams and general corporate employees are remunerated can be found in the Remuneration Report.
D1.
D2.
D3.
Employee benefits
Share-based payments
Key management personnel disclosures
D1. Employee benefits
Annual leave
Long service leave
Provision for incentives
Total current employee liabilities
Long service leave
Provision for incentives
Total non-current employee liabilities
93
94
97
2019
$’000
1,888
1,878
89,686
93,452
1,319
5,399
6,718
2020
$’000
2,764
2,380
90,875
96,019
883
1,091
1,974
Included in employee expenses recognised in the Consolidated Statement of Comprehensive Income is an amount related to Pendal
Group's defined contributions to employees' superannuation and pensions of $6.1 million (2019: $5.2 million).
Accounting policy
Employee benefits
Employee benefit liabilities represents accrued wages, salaries, annual and long-service leave entitlements and other
incentives recognised in respect of employee services up to the end of the reporting period and are measured at the
amounts expected to be paid when the liabilities are settled and include related on-costs, such as payroll tax and national
insurance.
Annual Report 2020 | 93
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2020Notes to the Consolidated Financial Statements
Notes to the Consolidated Financial Statements
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2020
D2. Share-based payments
(a) Share options and performance share rights
Pendal Group has four long-term incentive plans which are aimed at driving performance by delivering value only when
specific performance hurdles are met or exceeded. Under these plans eligible employees are granted either nil cost options or
performance share rights in the Company, which convert to ordinary shares on a one-to-one basis when performance and
service conditions are met.
Scheme
Description
Pendal Australia
Performance Reward
Scheme
(Pendal Aust PRS)
JOHCM Performance
Reward Schemes
(JOHCM PRS)
This scheme gives the employee the right to receive ordinary shares
at a future point in time upon meeting specified vesting conditions,
with no amount payable. They are granted at no consideration and
carry no dividend entitlement or voting rights until they vest,
however, there will be a dividend-equivalent payment made for
dividends attributable to performance share rights that vest at the
end of the performance period.
This scheme gives the employee the right to receive ordinary shares
at a future point in time upon meeting specified vesting conditions,
with no amount payable. They are granted at no consideration and
carry no dividend entitlement or voting rights until they vest,
however, there will be a dividend-equivalent payment made for
dividends attributable to performance share rights that vest at the
end of the performance period.
Vesting period
Up to 8 years
Vesting conditions
Continued employment and
performance hurdles based on
Total shareholder return (TSR),
and Cash earnings per share
growth (Cash EPS).
Continued employment and
performance hurdles based on
TSR, and Cash EPS.
3 years
JOHCM Long Term
Retention Equity –
nil cost options
(LTR – NCOs)
JOHCM Long Term
Retention Equity
(NCOs)
As part of the acquisition of JOHCM, JOHCM fund managers were
awarded nil cost options which will vest and be exercised into
ordinary shares in the Company, on a one-to-one basis.
Continued employment and FUM
retention.
Up to 1 year post
fund manager
departure
Following the JOHCM acquisition additional awards were made.
The number of other nil cost options awarded is determined with
reference to individual performance each year through the
performance period ending 30 September.
Continued employment.
Up to 4 years
Number and weighted average share price at date of exercise and grant date fair value of nil cost options and performance share
rights awarded during the year:
Pendal Aust PRS
JOHCM PRS
LTR – NCOs
Rights
No.
$
Rights
No.
$
Rights
No.
$
NCOs
Rights
No.
$
2020
OOuuttssttaannddiinngg aatt 11 OOccttoobbeerr
998866,,779966
668811,,112255
44,,002299,,990011
99,,887755,,119944
Granted
512,423
7.10
646,372
7.10
–
–
1,119,954
8.06
Vested / Exercised
(13,219)
8.03
–
–
(681,343)
8.08
(8,673,612)
8.20
Forfeited
Lapsed
OOuuttssttaannddiinngg aatt 3300 SSeepptteemmbbeerr
Exercisable at 30 September
2019
(36,872)
(278,745)
11,,117700,,338833
19,966
(20,026)
(191,822)
11,,111155,,664499
–
–
–
33,,334488,,555588
681,336
–
–
22,,332211,,553366
–
OOuuttssttaannddiinngg aatt 11 OOccttoobbeerr
885566,,881122
559955,,554477
44,,993377,,228822
88,,225544,,228866
Granted
437,341
7.02
335,308
7.02
–
–
1,620,908
8.18
Vested / Exercised
(105,619)
8.59
(99,948)
8.59
(681,343)
8.59
Forfeited
Lapsed
OOuuttssttaannddiinngg aatt 3300 SSeepptteemmbbeerr
Exercisable at 30 September
(63,188)
(138,550)
998866,,779966
33,185
(49,810)
(99,972)
668811,,112255
–
–
(226,038)
44,,002299,,990011
681,337
–
–
–
–
99,,887755,,119944
8,254,286
94 | Pendal Group
Notes to the Consolidated Financial StatementsFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2020
Notes to the Consolidated Financial Statements
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2020
Fair value of nil cost options granted during the year
The fair value of the options are valued with reference to the Company’s share price at grant date. The fair value at grant date of the
nil cost options issued during the year was $8.06 (2019: $8.18). The weighted average remaining contractual life of outstanding nil
cost options as at 30 September 2020 was 2.0 years (2019: 0.8 years).
Fair value of performance share rights awarded during the year
The fair value of the performance share rights linked to Cash EPS or revenue targets are valued with reference to the Company’s
share price at grant date and the fair value of performance share rights linked to TSR are determined using a Monte Carlo simulation
pricing model with the following inputs:
• Risk free interest rate
• Volatility
• Dividend yield
0.69%
28%
0%
The fair value at grant date of the performance share rights issued during the year was $5.86 (2019: $5.33) for the TSR performance
share rights and $8.33 (2019: $8.70) for the Cash EPS performance share rights. The weighted average remaining contractual life of
outstanding performance share rights at 30 September 2020 was 1.3 years (2019: 1.2 years).
(b) Equity grants
Pendal Group has a number of short-term incentive schemes, under which ongoing equity grants are made to employees and key
management personnel. Details of the schemes are as follows:
Scheme
Description
Pendal Australia new
and existing employee
equity grants
Pendal Australia
Boutique variable
reward scheme
New and existing employees may receive one-off equity grants
for retention.
Eligible fund managers receive variable remuneration based on a
profit share arrangement directly attributed to the boutique, with
a portion of the variable reward deferred into ordinary shares in
the Company.
Vesting conditions
Vesting period
Continued employment
Up to 5 years
Continued employment
Up to 5 years
Pendal Australia
Corporate variable
reward scheme
Management employees are paid a combination of fixed and
variable reward in the form of cash and mandatorily deferred
ordinary shares in the Company.
Continued employment
Up to 5 years
Pendal Australia
Annual CEO award
To recognise individual achievement, the winner of the Annual
CEO Award is eligible to receive ordinary shares in the Company to a
value of $5,000.
Continued employment
Up to 1 year
Sales Incentive
Plans
Pendal Australia and JOHCM sales teams receive variable
remuneration based on performance measured against sales
targets.
JOHCM Fund manager
variable reward
scheme
Eligible fund managers receive variable remuneration based on a
revenue share arrangement with a portion of the variable reward
deferred into ordinary shares in the Company.
JOHCM Corporate
variable reward
scheme
Management employees are paid a combination of fixed and
variable reward in the form of cash and/or ordinary shares in
the Company.
Continued employment
Up to 5 years
Continued employment
Up to 5 years
Continued employment
Up to 5 years
Number and weighted average grant date fair value of equity grants awarded during the year:
Total
Equity grants
2020
Number
Fair value
2020
$
Equity grants
2019
Number
2,862,424
8.06
3,104,459
Fair value
2019
$
8.18
Fair value of equity grants awarded during the year
The fair value of the equity grants was estimated using the Company’s share price on grant date and a discount rate reflecting the
expected dividend yield over the applicable vesting periods.
Annual Report 2020 | 95
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2020Notes to the Consolidated Financial Statements
Notes to the Consolidated Financial Statements
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2020
(c) Fund linked equity (FLE)
The FLE Scheme allows JOHCM fund managers to convert part of the revenue generated from the growth in FUM related to their
investment strategies into ordinary shares in the Company based on a pre-determined formula.
Prior to conversion, no dividends are payable on the FLE awards, and the awards do not carry voting rights.
The fair value of the FLE awards at the time of grant is independently determined based on a market-based valuation of the relevant
investment strategies.
At the time of conversion, the number of ordinary shares in the Company converted from FLE awards is based on a pre-determined
formula which applies a market-based measure to the after-tax profits generated by the relevant investment strategies. The
ordinary shares in the Company allocated on conversion are then subject to vesting over a further period of five years.
The FLE Scheme is an equity-settled scheme which is not re-measured after grant date. If the scheme was re-measured to reflect
after-tax profits generated by the investment strategies at the time of conversion, the value of the FLE awards issued may exceed
the valuation accounted for at grant date.
During the year, new FLE awards were issued to one investment team who had rights to participate in the FLE Scheme and no
ordinary shares were issued to investment teams converting previously issued awards under the FLE Scheme (2019: 4,795,815
shares issued).
Further details on the FLE Scheme are outlined on pages 42 to 44 of the Remuneration Report.
(d) Expenses arising from share-based payment transactions
Expenses of Pendal Group arising from share-based payment transactions recognised during the financial year as part of employee
benefit expense were as follows:
Total amortisation of employee equity grants
2020
$’000
35,192
2019
$’000
44,852
Critical accounting assumptions and estimates: Share based payments
The cost of equity-settled share-based payments is measured by reference to the fair value of the equity instruments at the
date at which they are granted. The fair value calculation is performed by an external valuation expert and is determined
using Binomial/Monte-Carlo simulation valuation techniques and other market based valuation techniques, taking into
account the terms and conditions upon which the equity instruments were granted. The valuation methodologies involve a
number of judgements and assumptions which may impact the share based payment expense taken to profit and loss and
equity.
The tax effect of the excess of estimated future tax deductions for share-based payments over the related cumulative
remuneration expense is recognised directly in equity. The estimated future tax deduction is based on the share price of
ordinary shares in the Company at balance date in accordance with AASB 112 Income Taxes.
Accounting policy
Share-based payments
Share-based payment compensation benefits are provided to employees via employee shares, performance share rights
and option schemes. The fair value of shares, performance share rights and options granted to employees for no
consideration is recognised as an expense over the vesting period, with a corresponding increase in shareholders’ equity.
The fair value of shares, performance share rights and options granted without market-based vesting conditions
approximates the listed market price of the shares on the ASX at the date of grant. The fair value of shares granted with
market-based vesting conditions has been determined using option-equivalent valuation methodologies. The fair value of
performance share rights and options granted are measured using Binomial/Monte-Carlo simulation valuation techniques,
taking into account the terms and conditions upon which the performance share rights and options were granted.
96 | Pendal Group
Notes to the Consolidated Financial StatementsFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2020
Notes to the Consolidated Financial Statements
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2020
D3. Key management personnel disclosures
(a) KMP compensation
Short-term employee benefits
Post-employment benefits
Long-term benefits
Share-based payments
Total
(b) Shareholdings
2020
$
2019
$
8,480,212
6,115,154
221,146
11,645
161,617
46,618
4,138,090
2,161,959
12,851,093
8,485,348
The following table sets out details of number of ordinary shares in the Company held by KMP (including their related parties):
HHeelldd aatt tthhee bbeeggiinnnniinngg ooff tthhee yyeeaarr
Granted as remuneration
Purchases
Sales
Other changes1
Held at the end of the year
2020
2019
22,,116699,,114455
11,,990000,,884477
274,942
10,000
176,869
112,683
(135,763)
(50,000)
–
28,746
2,318,324
2,169,145
1. Other changes relate to the conversion of performance share rights to ordinary shares and change of KMP during the year.
(c) Other equity instruments
The following table sets out the number of performance share rights held by KMP (including related parties):
HHeelldd aatt tthhee bbeeggiinnnniinngg ooff tthhee yyeeaarr
Granted as remuneration
Vested during the year
Lapsed during the year
Held at the end of the year
2020
553300,,336600
480,231
–
(131,450)
879,141
2019
440033,,004477
249,509
(61,097)
(61,099)
530,360
Annual Report 2020 | 97
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2020Notes to the Consolidated Financial Statements
Notes to the Consolidated Financial Statements
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2020
E. Group structure
This section explains significant aspects of the Pendal Group structure including changes during the year. The ultimate parent
entity within the Group is Pendal Group Limited which is a listed entity in Australia with subsidiaries in Australia and overseas.
E1.
E2.
E3.
E4.
Parent entity information
Subsidiaries and controlled entities
Structured entities
Related party transactions
E1. Parent entity information
(a) Summary financial information
Profit for the financial year
Total comprehensive income for the financial year
Current assets
Total assets
Current liabilities
Total liabilities
Shareholders’ equity:
Contributed equity
Reserves
Common control reserve
Share-based payment reserve
Net investment hedge reserve
Cash flow hedge reserve
Retained earnings
Total equity
98
99
101
101
2019
$’000
144,305
141,822
83,989
829,074
39,061
48,492
Company
2020
$’000
173,233
176,380
121,034
881,261
52,018
56,696
484,221
434,886
(25,471)
160,448
(4,680)
(28)
210,075
824,565
(25,471)
214,606
(7,883)
28
164,416
780,582
(b) Guarantees entered into by the parent entity
The parent entity has guaranteed the obligations of its subsidiary, PIL, to its institutional clients. The effect of the guarantee, which
is capped at $5 million, is to provide recourse to capital exceeding the minimum regulatory capital required to be maintained by PIL.
(c) Contingent liabilities of the parent entity
The parent entity has contingent liabilities as outlined in Note F4.
(d) Contractual commitments for the acquisition of property, plant or equipment
The parent entity had no contractual commitment for the acquisition of property, plant and equipment at balance date (2019: $nil).
98 | Pendal Group
Notes to the Consolidated Financial StatementsFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2020
Notes to the Consolidated Financial Statements
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2020
Accounting policy
The financial information for the parent entity has been prepared on the same basis as the consolidated financial statements
of the Pendal Group, except for the items below.
Capital contributions
The grant by the Company of interests in its equity instruments to the employees of its subsidiaries is treated as a capital
contribution to that subsidiary. The fair value of employee services received, measured by reference to the grant date fair
value, is recognised over the vesting period as an increase to investment in subsidiaries, with a corresponding credit to
equity. The amounts recognised are reduced to the extent that the fair value of equity grants is recharged by the Company to
the subsidiary.
Financial guarantees
Where the Company has provided financial guarantees in relation to loans and payables of subsidiaries for no compensation,
the fair values of the guarantees are accounted for as contributions and recognised as part of the cost of the investment.
E2. Subsidiaries and controlled entities
Name
Pendal Institutional Limited
Pendal Fund Services Limited
Regnan – Governance Research and Engagement Pty Ltd
Pendal UK Limited
J O Hambro Capital Management Holdings Limited
J O Hambro Capital Management Limited
JOHCM (USA) Inc.
JOHCM (Singapore) Pte Limited
JOHCM Funds (UK) Limited
JOHCM Funds (Ireland) Limited
Pendal Group Limited Employee Equity Plan Trust
Pendal Group Employee Benefit Trust
Country of
incorporation/
formation
Australia
Australia
Australia
UK
UK
UK
USA
Singapore
UK
Ireland
Australia
Jersey
Class of
shares
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
–
–
Equity holding
2020
%
2019
%
100
100
100
100
100
100
100
100
100
100
–
–
100
100
100
100
100
100
100
100
100
100
–
–
Annual Report 2020 | 99
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2020Notes to the Consolidated Financial Statements
Notes to the Consolidated Financial Statements
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2020
Accounting policy
Principles of consolidation
The Financial Report incorporates the financial statements of the Company and entities controlled by Pendal Group and its
subsidiaries. Subsidiaries are all those entities over which the Group has the power to govern the financial and operating
policies, generally accompanying a shareholding of more than one half of the voting rights. Subsidiaries are fully
consolidated from the date on which the Company obtains control and until such time as control ceases.
In preparing the Financial Report, all Intercompany transactions, balances and unrealised gains arising within the Group
are eliminated in full.
Controlled entities within the Group conduct investment management and other fiduciary activities as responsible entity,
trustee or manager on behalf of individuals, trusts, retirement benefit plans and other institutions. These activities involve
the management of assets in investment schemes and superannuation funds, and the holding or placing of assets on
behalf of third parties.
Where the controlled entities, as responsible entity or trustee, incur liabilities in respect of these activities, a right of
indemnity exists against the assets of the applicable trusts. To the extent these assets are sufficient to cover liabilities,
and it is not probable that the controlled entity will be required to settle them; the liabilities are not included in the
consolidated financial statements.
Foreign currency translation
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the date 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 Statement of Comprehensive Income.
The results and financial position of foreign operations that have a functional currency different from the presentation
currency are translated into the presentation currency as follows:
• assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet;
• income and expenses included in the Statement of Comprehensive Income 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); and
• all resulting exchange differences are recognised in other comprehensive income in the foreign currency translation reserve.
Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of
the foreign operation and translated at the closing rate.
Critical accounting assumptions and estimates: Subsidiaries and controlled entities
The Group holds interests in certain investment funds for which subsidiaries of the Group provide fiduciary and investment
management services. Such interests are not considered to be interests in controlled entities, and are recognised in the
consolidated financial statements as financial assets held at fair value through profit and loss. This classification involves
the use of judgement in assessing whether the Group controls each relevant fund, including consideration of the nature
and significance of various factors such as the exposure of Group entities to variability of returns from the funds,
remuneration to which Group entities are entitled from the funds, the scope of the Group entities’ decision-making
authority over the fund and the rights held by third parties to remove Group entities as the fund manager.
100 | Pendal Group
Notes to the Consolidated Financial StatementsFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2020
Notes to the Consolidated Financial Statements
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2020
E3. Structured entities
A structured entity is an entity that has been designed so that voting or similar rights are not the dominant factor in deciding who
controls the entity and the relevant activities are directed by means of contractual arrangements. Pendal Group has significant
influence over the funds it manages due to its power to participate in the financial and operating policy decisions of the investee
through its investment management agreements.
The Group considers all its fund vehicles to be structured entities. The Group invests its own capital for the purpose of seeding fund
vehicles to develop a performance track record prior to external investment being received. The Group also receives management
and performance fees for its role as investment manager.
The funds’ objectives range from achieving returns of income and/ or capital exceeding certain benchmarks over the medium to
long term. The funds invest in a number of different financial instruments including equities and debt instruments. The funds finance
their operations by issuing redeemable shares or units which are puttable at the holder’s option and entitle the holder to a
proportional stake in the respective fund’s net assets.
Pendal Group holds redeemable shares or units in some of its managed funds. The nature and extent of the Group’s interests in
funds is summarised by asset class below:
2020
Cash and cash equivalents
Trade and other receivables
Financial assets held at FVTPL
Total Assets
Maximum exposure to loss
Australian
equities
$’000
Australian
diversified
and property
$’000
Australian
cash and fixed
income
$’000
International
equities
$’000
Other
$’000
Total
$’000
–
1,912
–
1,912
1,912
–
–
–
–
–
98,444
–
1,951
25,621
–
205
98,444
29,689
–
208,634
–
208,634
100,395
234,255
100,395
234,255
205
205
336,767
336,767
Net asset value of funds
3,370,746
1,485,724
5,883,082
32,849,861
310,820
43,900,233
2019
Cash and cash equivalents
Trade and other receivables
Financial assets held at FVTPL
Total Assets
Maximum exposure to loss
–
2,125
–
2,125
2,125
–
–
–
–
–
65,776
–
2,053
29,746
–
275,184
67,829
304,930
67,829
304,930
–
260
–
260
260
65,776
34,184
275,184
375,144
375,144
Net asset value of funds
3,421,735
1,769,567
4,859,259
37,090,800
688,965
47,830,326
Unless specified otherwise, the Group’s maximum exposure to loss is the total of its on-balance sheet positions as at reporting date.
There are no additional off-balance sheet arrangements which would expose the Group to potential loss in respect of
unconsolidated structured entities.
During the year the Group earned both management and performance fee income from structured entities of $289,216,189 (2019:
$298,585,573).
E4. Related party transactions
Compensation and other transactions with key management personel are set out in Note D3 and the Remuneration Report on pages
34 to 65.
The Group earns management and performance fees from investment fund vehicles managed by subsidiaries of the Group (refer
Note E3). JOHCM Funds (UK) Limited, as ACD of J O Hambro Capital Management UK Umbrella Fund, operates a bank account for
investor subscriptions and redemptions and processed transactions in the 2020 Financial Year with a total value of approximately
$3.1 billion (2019: $0.9 billion) for subscriptions and $4.3 billion (2019: $1.3 billion) for redemptions.
During the 2019 Financial Year, J D Hambro ceased to be a related party of the Group, having resigned as Deputy Chairman of J O
Hambro Capital Management Holdings Limited, a wholly owned subsidiary of the Company, effective 30 September 2019.
Annual Report 2020 | 101
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2020Notes to the Consolidated Financial Statements
Notes to the Consolidated Financial Statements
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2020
F. Other
This section provides details on other required disclosures to comply with the Australian Accounting Standards and International
Financial Reporting Standards.
F1.
F2.
F3.
F4.
F5.
F6.
Intangible assets
Capital commitments
Lease assets and liabilities
Contingent liabilities
Remuneration of auditors
Subsequent events
F1. Intangible assets
2020
102
104
105
106
106
106
Fund and
investment
management
contracts
$’000
Goodwill
$’000
Other
intangibles
$’000
Total
$’000
NNeett bbooookk vvaalluuee aass aatt 11 OOccttoobbeerr 22001199
447788,,330055
5599,,990066
22,,113355
554400,,334466
Additions
Foreign exchange loss
Amortisation expense
Impairment loss
–
(2,212)
–
–
–
(323)
(5,745)
(395)
1,102
1,102
–
(2,535)
(670)
(6,415)
–
(395)
Net book value as at 30 September 2020
476,093
53,443
2,567
532,103
Represented by:
Cost
476,093
134,525
6,794
617,412
Accumulated amortisation and impairment
–
(81,082)
(4,227)
(85,309)
2019
NNeett bbooookk vvaalluuee aass aatt 11 OOccttoobbeerr 22001188
447766,,992299
6666,,229900
11,,779944
554455,,001133
Additions
Foreign exchange gain
Amortisation expense
Impairment loss
–
1,376
–
–
–
374
(5,633)
(1,125)
968
–
968
1,750
(627)
(6,260)
–
(1,125)
Net book value as at 30 September 2019
478,305
59,906
2,135
540,346
Represented by:
Cost
478,305
135,762
5,678
619,746
Accumulated amortisation and impairment
–
(75,856)
(3,543)
(79,400)
102 | Pendal Group
Notes to the Consolidated Financial StatementsFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2020
Notes to the Consolidated Financial Statements
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2020
Fund and investment management contracts:
Fund management contracts relate to contractual relationships to manage open-ended funds (OEICs). Investment management
contracts comprise contractual relationships with individual clients. The contracts were acquired by Pendal Group when it
purchased JOHCM and are recognised as follows:
Fund management contracts – OEICs
Investment management contracts – Segregated mandates
Total
2020
$’000
49,959
3,484
53,443
2019
$’000
55,009
4,897
59,906
The recoverable amount of each fund and management contract has been measured using the present value of future cash flows
expected to be derived for each asset. The discount rate used to discount the cash flow projections (post-tax) is 11.8% (2019:12%),
based on the cost of capital.
An impairment loss of $0.4 million (2019: $1.1 million), due to the re-measurement of the fund and investment management
contracts to the lower of their carrying value and their recoverable amount, is included in the depreciation, amortisation and
impairment expense in the Statement of Comprehensive Income. Impairment losses may be reversed in certain circumstances if
there has been a change in forecasts and market conditions used in determining the recoverable and carrying amounts.
Goodwill:
Goodwill has been derived from the following business combinations:
Purchase of the Pendal (formerly BTIM) investment management business effective 19 October 2007
Purchase of JOHCM effective 1 October 2011
Total
2020
$’000
233,300
242,793
476,093
2019
$’000
233,300
245,005
478,305
For the purpose of impairment testing, assets are grouped at the lowest level for which there are separately identifiable cash
inflows which are largely independent of the cash inflows from other assets or groups of assets (cash generating units or CGUs).
To determine if goodwill is impaired, the carrying value of the identified CGU to which the goodwill is allocated is compared to its
recoverable amount.
Goodwill is allocated to CGUs according to operating segments (refer Note B1). During the year, the Group’s reporting structure was
amended to recognise three operating segments: Pendal Australia, Pendal EUKA and Pendal US. Consequently, the carrying value
of goodwill recognised on acquisition of JOHCM of $242.8 million (£135.2 million), which was previously allocated to the former
Pendal International CGU, has been reallocated to the Pendal EUKA and Pendal US CGUs. This reallocation was based on the
relative values of the two business units using discounted cash flow calculations for each business. Goodwill attributable to Pendal
Australia, Pendal EUKA and Pendal US is $233.3 million, $156.6 million and $86.2 million respectively.
The recoverable amount of each CGU is determined using a ‘Fair value less cost of disposal’ methodology that utilises cash flow
projections (post-tax) based on management’s best estimates over a 5 year period and then applies a terminal value in perpetuity of
2.5%. The discount rate used to discount the cash flow projections is 11.8% for each CGU (2019: 11.0% for Pendal Australia and 12.0%
for Pendal International) based on the cost of capital (post-tax) for each of the CGUs.
In forecasting cashflows over the period, management has considered the uncertain impact of COVID-19 in the short to medium
term. Cash flow forecasts are sensitive to movements in equity markets, which have been significantly affected by COVID-19 in the
2020 Financial Year. Market assumptions have considered the potential for growth in equity markets over the near-term to be
slower than the long-term market growth rate.
Management is of the view that reasonably possible changes in the key assumptions, such as an increase to the discount rate of 2%
or a reduction in cash flow of 10%, would not cause the recoverable amount for each CGU to fall short of the carrying amounts as at
30 September 2020. The current head room for Pendal Australia is $67.6 million (2019: $91.2 million). For the estimated
recoverable amount of the goodwill attributable to Pendal Australia to be equal to its carrying amount, the post-tax discount rate
would have to increase to 14.1%, or the projected cash flows would need to reduce by 21.9%.
There has been no impairment of goodwill during the year ended 30 September 2020. The amount of goodwill relating to the
JOHCM acquisition has been translated from British pounds to Australian dollars using the spot exchange rate at 30 September
2020.
Annual Report 2020 | 103
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2020Notes to the Consolidated Financial Statements
Notes to the Consolidated Financial Statements
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2020
Accounting policy
Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value of Pendal Group’s share of the net identifiable
assets acquired at the date of acquisition. Goodwill is carried at cost less accumulated impairment losses.
Fund and investment management contracts
Fund and investment management contracts acquired as part of a business combination are recognised separately from
goodwill. They are carried at their fair value at the date of acquisition less accumulated amortisation and impairment losses.
Amortisation is calculated based on the timing of projected cash flows of the contracts over their estimated useful lives,
currently estimated at between 5 and 20 years.
Other intangibles
Other intangibles consist of IT development and software costs incurred in developing products or systems and costs
incurred in acquiring software and licences that will contribute to future period financial benefits through revenue
generation and/or cost reduction. Costs capitalised include external direct costs of service and are recognised as intangible
assets. Amortisation is calculated on a straight-line basis between three and five years.
Impairment
Goodwill and other intangible assets are tested each reporting period for impairment or more frequently if events or
changes in circumstances indicate that they might be impaired, or whenever events or changes in circumstances indicate
the carrying amount may not be recoverable.
An impairment loss is recognised through the Statement of Comprehensive Income for any amount by which the asset’s
carrying amount exceeds its recoverable amount. Intangible assets other than goodwill are reviewed for possible reversal of
impairment losses at each reporting date. Reversals are made in certain circumstances if there has been a change in
forecasts and market conditions used in determining the recoverable and carrying amounts.
Critical accounting assumptions and estimates: Intangible assets
The fund and investment management contracts are initially measured at their fair value. This involves the use of
judgements, estimates and assumptions about future fund flows and investment performance, based largely on past
experience and contractual arrangements.
Pendal Group tests whether goodwill has suffered any impairment at each reporting period. The recoverable amount of
a cash generating unit (CGU) is determined based on ‘fair value less cost of disposal’ methodology which requires the use
of assumptions. Key assumptions requiring judgement include projected cash flows, growth rate assumptions and
discount rates.
F2. Capital commitments
Commitments for non-cancellable capital amounts are payable as follows:
Within one year
Later than one year but not later than five years
Later than five years
Total commitments
2020
$’000
–
–
–
–
2019
$’000
7,023
28,223
16,630
51,876
As at 30 September 2019, lease and capital commitments comprised non-cancellable amounts under operating leases. From 1
October 2019, operating leases have been recognised as right-of-use assets and lease liabilities on the Statement of Financial
Position (refer Note A3).
104 | Pendal Group
Notes to the Consolidated Financial StatementsFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2020
Notes to the Consolidated Financial Statements
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2020
F3. Lease assets and liabilities
Right-of-use assets
Office space
Equipment
Right-of-use lease assets
Additions to right-of-use assets during the 2020 Financial Year were $48.0 million.
Lease liabilities
Current
Non current
Balance at the end of the financial year
The following amounts relating to leases are disclosed in the Statement of Comprehensive Income:
Finance Costs
Depreciation charge of right-of-use assets:
Office space
Equipment
Total lease related amounts in the Statement of Comprehensive Income
The total cash outflow for leases in 2020 was $9.8 million.
2020
$’000
36,819
108
36,927
2020
$’000
7,356
33,204
40,560
2020
$’000
1,456
6,946
25
8,427
2019
$’000
–
–
–
2019
$’000
957
2,729
3,686
2019
$’000
–
–
–
–
Accounting policy
Leases
Pendal Group’s leases consist predominantly of property leases which are used as corporate offices by the Group. Assets
and liabilities arising from each lease are initially measured on a present value basis.
Lease liabilities include the net present value of the following lease payments, where applicable:
• fixed payments, less any lease incentives receivable;
• variable lease payments that are based on an index or a rate, initially measured using the index or rate at the commencement
date;
• amounts expected to be payable by the Group under residual value guarantees;
• the exercise price of a purchase option or payments under extension options if the Group is reasonably certain to exercise
that option; and
• payments of penalties for terminating the lease, if the lease term reflects the Group exercising that option.
The lease payments are discounted using the interest rate implicit in the lease, unless that rate cannot be readily
determined. The lessee’s incremental borrowing rate is used for the Group’s leases, being the rate that would have to be
paid to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic
environment with similar terms, security and conditions.
To determine the incremental borrowing rate, the Group, where possible, uses recent third-party financing received or, for
leases held by entities within the Group which have not obtained recent third party financing, a risk-free interest rate
adjusted for credit risk. Adjustments specific to the lease are applied, which may include the lease term, geographical
location, currency and security.
Right-of-use assets are measured at cost, comprising the amount of the initial measurement of lease liability, any lease
payments made at or before the commencement date less any lease incentives received and any initial direct costs or
restoration costs.
Annual Report 2020 | 105
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2020Notes to the Consolidated Financial Statements
Notes to the Consolidated Financial Statements
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2020
F4. Contingent liabilities
Regulatory authority
JOHCM has been the subject of an investigation by its UK regulator relating to the eligibility of certain services paid for out of dealing
commissions between 2006 and 2016. During the year, the regulator closed the investigation with no further action taken.
Capital guarantee
The Company has guaranteed the obligations of PIL to its institutional clients. The effect of the guarantee, which is capped at $5
million in aggregate, is to provide recourse to capital exceeding the minimum regulatory capital required to be maintained by PIL.
F5. Remuneration of auditors
(a) Audit and other services – Australia
PricewaterhouseCoopers
Audit services
Audit and review of Financial Reports
Audit of Australian Financial Service Licences
Non-audit services
Internal controls report (GS007)
Other review services
Total remuneration for services – Australia
(b) Audit and other services – outside of Australia
PricewaterhouseCoopers
Audit services
Audit and review of Financial Reports
Financial Conduct Authority client assets report
Non-audit services
Internal controls report (SOC1)
Total remuneration for services – outside of Australia
(c) Other services to non-consolidated trusts
2020
$
2019
$
465,374
437,073
27,178
25,884
82,238
–
62,000
14,000
574,790
538,957
2020
$
2019
$
417,161
142,892
181,574
741,627
318,380
176,449
144,144
638,973
The Company’s external auditor provides audit and non-audit services to non-consolidated trusts for which PFSL and PIL act as
trustee, manager or responsible entity. The fees were $1,339,528 for the financial year (2019: $1,330,176), including fees for non-
audit services (compliance plan audits) of $129,780 (2019: $123,600).
F6. Subsequent events
At the date of issue of this Financial Report, the future impact of COVID-19 on global and domestic economies and equity market
indices, and their resulting impact on Pendal Group, remains uncertain.
Following the formal withdrawal of the UK from the European Union (“Brexit”) on 31 January 2020, the transition period in which the
UK effectively remains in the EU’s customs union and single market ends on 31 December 2020. As part of the Group’s Brexit
planning, an Irish domiciled UCITS management company was established in 2019 to allow the continued management and
distribution of relevant products within Europe. While Brexit negotiations between the UK and EU are ongoing, future European
regulatory and licensing requirements for Group entities may be subject to change.
There is no other matter or circumstance which is not otherwise reflected in this Financial Report that has arisen subsequent to the
balance date, which has significantly affected or may significantly affect the operations of Pendal Group, the results of those
operations or the state of affairs of the Group in subsequent financial periods.
106 | Pendal Group
Notes to the Consolidated Financial StatementsFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2020
Directors’ Declaration
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2020
In the Directors’ opinion:
a) the financial statements and notes set out on pages 68 to 106 are in accordance with the Corporations Act, including:
i) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional
reporting requirements
ii) giving a true and fair view of Pendal Group’s financial position as at 30 September 2020 and of its performance for the year
ended on that date; and
b) there are reasonable grounds to believe that Pendal Group Limited will be able to pay its debts as and when they become due
and payable.
Note A1 confirms that the financial statements also comply with International Financial Reporting Standards as issued by the
International Accounting Standards Board.
The Directors have been given the declarations required under section 295A of the Corporations Act by the Group Chief Executive
Officer and Group Chief Financial Officer.
This declaration is made in accordance with a resolution of the Directors.
For and on behalf of the Board.
James Evans
Chairman
Emilio Gonzalez
Managing Director and Group Chief Executive Officer
Sydney, 4 November 2020
Annual Report 2020 | 107
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2020Directors' Report
Independent auditor’s report
To the members of Pendal Group Limited
Report on the audit of the financial report
Our opinion
In our opinion:
The accompanying financial report of Pendal Group Limited and its controlled entities (together the
Group) is in accordance with the Corporations Act 2001, including:
(a)
giving a true and fair view of the Group's financial position as at 30 September 2020 and of its
financial performance for the year then ended
(b)
complying with Australian Accounting Standards and the Corporations Regulations 2001.
What we have audited
The Group financial report comprises:
•
•
•
•
•
•
the consolidated statement of financial position as at 30 September 2020
the consolidated statement of comprehensive income for the year then ended
the consolidated statement of changes in equity for the year then ended
the consolidated statement of cash flows for the year then ended
the notes to the consolidated financial statements, which include a summary of significant
accounting policies
the directors’ declaration.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s responsibilities for the audit of the financial
report section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Independence
We are independent of the Group in accordance with the auditor independence requirements of the
Corporations Act 2001 and the ethical requirements of the Accounting Professional & 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 also
fulfilled our other ethical responsibilities in accordance with the Code.
PricewaterhouseCoopers, ABN 52 780 433 757
One International Towers Sydney, Watermans Quay, Barangaroo, GPO BOX 2650, SYDNEY NSW 2001
T: +61 2 8266 0000, F: +61 2 8266 9999, www.pwc.com.au
Level 11, 1PSQ, 169 Macquarie Street, Parramatta NSW 2150, PO Box 1155 Parramatta NSW 2124
T: +61 2 9659 2476, F: +61 2 8266 9999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
108 | Pendal Group
Independent Auditor's Report
Our audit approach
An audit is designed to provide reasonable assurance about whether the financial report is free from
material misstatement. Misstatements may arise due to fraud or error. They are considered material if,
individually or in aggregate, they could reasonably be expected to influence the economic decisions of
users taken on the basis of the financial report.
We tailored the scope of our audit to ensure that we performed enough work to be able to give an
opinion on the financial report as a whole, taking into account the geographic and management
structure of the Group, its accounting processes and controls and the industry in which it operates.
The Group provides investment management services through its three operating segments comprised
of the investment management business in Australia (Pendal Australia), Europe, UK and Asia regions
(Pendal EUKA) and the United States (Pendal US).
Materiality
Audit scope
Key audit matters
•
For the purpose of our audit
we used overall Group
materiality of $7.6 million,
which represents
approximately 5% of the
Group’s profit before tax.
• We applied this threshold,
together with qualitative
considerations, to determine
the scope of our audit and the
nature, timing and extent of
our audit procedures and to
evaluate the effect of
misstatements on the financial
report as a whole.
• We chose Group profit before
tax because, in our view, it is
the benchmark against which
the performance of the Group
is most commonly measured.
• We utilised a 5% threshold
based on our professional
• Our audit focused on where
the Group made subjective
judgements; for example,
significant accounting
estimates involving
assumptions and inherently
uncertain future events.
•
•
The Group engagement team
directed the involvement of the
component audit team, who
performed an audit of the
financial information of Pendal
EUKA & Pendal US. All other
procedures were performed by
the Group engagement team.
•
For the work performed by
component audit teams, we
considered the level of
involvement we needed to have
in their audit work to be able to
evaluate whether sufficient
appropriate audit evidence had
been obtained as a basis for
• Amongst other relevant topics,
we communicated the following
key audit matters to the Audit
and Risk Committee:
−− Carrying value of intangible
assets - goodwill and fund
and investment management
contracts
−− Accounting for employee
remuneration schemes
−− Recognition of fee revenue
These are further described in
the Key audit matters section of
our report.
Annual Report 2020 | 109
judgement, noting it is within
the range of commonly
acceptable thresholds.
our opinion on the Group’s
financial report as a whole.
This included active dialogue
during the audit with
component audit teams and
review of their work.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in
our audit of the financial report for the current period. The key audit matters were addressed in the
context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do
not provide a separate opinion on these matters. Further, any commentary on the outcomes of a
particular audit procedure is made in that context.
Key audit matter
How our audit addressed the key audit matter
Carrying value of intangible assets - goodwill
and fund and investment management
contracts
Refer to Note F1 of the financial report
This was a key audit matter as the intangible assets
were the largest asset balance ($532 million as at 30
September 2020) and due to the complexity and
judgements in the discounted cash flow models used
by the Group to perform an impairment assessment of
the assets.
The Group's significant judgements included
forecasting cash flows of the Group into perpetuity for
goodwill and between five and twenty years for fund
and investment management contracts, which involved
making revenue growth rate and discount rate
assumptions.
Our audit procedures on the goodwill asset included,
amongst others:
• Obtaining an understanding and evaluating
relevant controls associated with the Group's
goodwill impairment assessment process.
• Assessing whether the Group's determination
of Cash Generating Units (CGUs), which are
the smallest identifiable groups of assets that
can generate largely independent cash inflows,
was consistent with our understanding of the
nature of the Group's operations and internal
Group reporting.
•
Testing the mathematical accuracy of the
calculations in the discounted cash flow
models used in the impairment assessment
(the models).
• Evaluating the cash flow forecasts used in the
models and the process by which they were
developed, including comparing the forecasts
to historical results and the latest Board-
approved management accounts.
• Assessing the historical ability of the Group to
forecast future cash flows by comparing the
last three years actual results with prior
forecast to consider whether any forcasts
included assumptions that, with hindsight,
110 | Pendal Group
Independent Auditor's Report
Key audit matter
How our audit addressed the key audit matter
had been optimistic.
• Obtaining evidence for the key assumptions
for revenue growth rates and assessing
discount rates against external benchmarks.
• Assessing if the disclosures relating to
goodwill are in accordance with the
requirements of Australian Accounting
Standards.
Our audit procedures on the fund and investment
management contracts included, amongst others:
•
Selecting a sample of contracts based on
certain risk criteria and assessing the
historical ability of the Group to forcast cash
flows in the discounted cash flow model used
to assess impairment, by compairing the last
three years actual results with prior forecast.
• Recalculating the amortisation charge for the
year for each contract and comparing this to
the Group's calculations, checking that the key
inputs were consistent with contractual terms.
• Assessing if the Group's disclosures relating to
fund and investment management contracts
are in accordance with the requirements of
Australian Accounting Standards.
Annual Report 2020 | 111
Key audit matter
How our audit addressed the key audit matter
Accounting for employee remuneration
schemes
Refer to Section D of the financial report and the
remuneration report
Accounting for employee remuneration schemes and
incentives, specifically Fund Linked Equity (FLE) and
share-based payments, was a key audit matter due to
the financial significance of the expenses in the
consolidated statement of comprehensive income, and
the level of judgement that is applied in their
determination, including assessing the likelihood of
specific performance hurdles being achieved.
Our audit procedures performed on the FLE expense
included, amongst others:
• Recalculating the value of the equity disclosed
within the remuneration report that would
have to be granted upon full conversion of
FLE rights and agreeing the key inputs in the
calculation (such as the listed share price of
the Group, Funds Under Management,
margin) to appropriate supporting data.
• Assessing the disclosures in the financial
report in light of our understanding and the
requirements of Australian Accounting
Standards.
Our audit procedures performed on the share-based
payments expense included, amongst others:
•
•
•
For a sample of employees, comparing the
number of shares granted in the year to third
party confirmations and approval by the
Company, and agreeing the grant date share
price to published pricing data.
For grants made in prior periods,
recalculating the amortisation expense for the
current year based upon the grant date share
price and the number of shares.
For a sample of share-based payment
expenses recognised during the year,
obtaining the relevant employee contract and
checking the performance and service
conditions were met by obtaining relevant
evidence.
• Recalculating the current and deferred tax
impact of the accounting entries posted.
112 | Pendal Group
Independent Auditor's Report
Key audit matter
How our audit addressed the key audit matter
Recognition of fee revenue
Refer to Note B2 of the financial report
This was a key audit matter because revenue was the
most significant account balance in the consolidated
statement of comprehensive income.
Revenue of $475 million comprises:
•
•
Investment management fees ($458 million)
Performance fees ($13 million)
•
• Other revenue ($4 million)
In relation to the fee revenue recognised by Pendal
Australia:
• Obtaining the most recent report issued by the
external provider of accounting and
administration services setting out the
controls in place at that service organisation
(including those over the recognition of fee
revenue). This report included an independent
audit opinion over the design and operating
effectiveness of those controls.
From the report developing an understanding
of: the control objectives and associated
control activities; the tests undertaken by the
auditor; the results of these tests and the
conclusions formed by the auditor on the
design and operational effectiveness of
controls to the extent relevant to our audit of
the Group.
For Pendal Australia, Pendal EUKA & Pendal US we
also performed the following audit procedures,
amongst others:
• Assessing whether the revenue accounting
policy was consistent with the requirements of
Australian Accounting Standards.
• Agreeing a sample of investment
management, performance and advisory fees
back to invoices and relevant supporting
external evidence, such as underlying fund
financial statements and third party
calculations.
• Recalculating a sample of investment
management fees and performance fees.
Other information
The directors are responsible for the other information. The other information comprises the
information included in the annual report for the year ended 30 September 2020, but does not include
the financial report and our auditor’s report thereon.
Annual Report 2020 | 113
Our opinion on the financial report does not cover the other information and accordingly we do not
express any form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
report or our knowledge obtained in the audit, or otherwise appears to be materially misstated.
If, based on the work we have performed on the other information that we obtained prior to the date of
this auditor’s report, we conclude that there is a material misstatement of this other information, we
are required to report that fact. We have nothing to report in this regard.
Responsibilities of the directors for the financial report
The directors are responsible for the preparation of the financial report that gives a true and fair view
in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such
internal control as the directors determine is necessary to enable the preparation of the financial
report that gives a true and fair view and is free from material misstatement, whether due to fraud or
error.
In preparing the financial report, the directors are responsible for assessing the ability of the Group to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of 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.
Report on the remuneration report
Our opinion on the remuneration report
We have audited the remuneration report included in pages 34 to 65 of the directors’ report for the
year ended 30 September 2020.
114 | Pendal Group
Independent Auditor's Report
In our opinion, the remuneration report of Pendal Group Limited for the year ended 30 September
2020 complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors are responsible for the preparation and presentation of the remuneration report in
accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an
opinion on the remuneration report, based on our audit conducted in accordance with Australian
Auditing Standards.
PricewaterhouseCoopers
Andrew Wilson
Partner
Sydney
4 November 2020
Annual Report 2020 | 115
Shareholder Information
The shareholder information set out below is current as at 15 October 2020.
Securities Exchange Listing
The ordinary shares of Pendal Group Limited are listed on the Australian Securities Exchange under the ASX code
PDL.
Number of shareholders and shares on issue
The Company has 322,802,391 ordinary shares on issue, held by 28,590 shareholders.
Twenty largest shareholders
Details of the 20 largest holders of ordinary shares in the Company are:
Name
Number of shares
%
HSBC Custody Nominees (Australia) Limited
80,466,565
24.93
J P Morgan Nominees Australia Pty Limited
41,706,146
12.92
Citicorp Nominees Pty Limited
Pacific Custodians Pty Limited
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