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Level 14, The Chifley Tower
2 Chifley Square
Sydney NSW 2000
Australia
ABN 28 126 385 822
5 November 2021
Company Announcements Office
ASX Limited
20 Bridge Street
SYDNEY NSW 2000
Pendal Group Limited Full Year Profit Announcement for the 12 months ended 30
September 2021
The following documents are attached for lodgement:
Appendix 4E
ASX Announcement
Annual Report
Analyst Presentation
Shareholder Update
Appendix 4G
Corporate Governance Statement
Corporate Sustainability Report
Yours sincerely
Authorising Officer
Joanne Hawkins
Group Company Secretary
Pendal Group Limited
Tel: +61 2 9220 2000
{00021928.docx}
pendalgroup.com
Annual Report 2021
The future is worth
investing in
Pendal Group is an independent global investment
manager focused on delivering superior investment
returns for clients through active management.
Contents
FY21 Financial Highlights
Chairman’s Letter
Group Chief Executive Officer’s Report
Global Operating Review
Directors' Report
Financial Report
Shareholder Information
Glossary
Corporate Directory & Key Dates
1
2
5
8
21
67
117
119
121
To view the 2021 Annual Report, go to:
annual-report-2021.pendalgroup.com
Additional documents detailing our approach to corporate governance and management
of environmental, social and governance matters include:
Corporate governance statement
Sustainability report
ESG data pack
The Pendal Group Climate
Change Statement
The Pendal Group Human
Rights Statement
The Pendal Group Modern
Slavery Statement
Overview
1
Financial Highlights
Underlying profit after tax (UPAT)
Base management fees
$
165.3
Up 25%
million
$
522.8
million
Up 14%
Average FUM
Underlying earnings per share
$
107.9
billion
Up 14%
48.2
Up 17%
cents per share
Performance fees
$
57.5
Up $44.1m
million
Total dividend1
41.0
Up 11%
cents per share
Note: All comparative numbers to prior corresponding period, FY20, restated on a UPAT basis .
1 Final dividend of 24.0 cents per share
2
Chairman’s Letter
Dear Shareholder,
One year ago, when composing this letter and reflecting
on the sheer volume and pace of the changes the world
faced in 2020, I commented that being able to respond
to market changes and deploy creative solutions is what
Pendal does best. Well, 2021 has certainly given us a chance
to test that belief. Once again, a rapid convergence of
events has resulted in a year of accelerated change around
the globe. However, Pendal has emerged from the financial
year confidently, having successfully executed on our key
growth-oriented initiatives.
Our performance over the last year gives us confidence the
company is well positioned heading into FY22. It has been a
year of significant strategic achievements, providing a strong
foundation for future growth.
Overview of the 2021 Financial Year:
managing change
Change is a constant and it is incumbent upon companies to
plan for, and be prepared to actively and successfully, manage
change in the best interests of the company, its people,
clients, and shareholders.
Change is multifaceted and is not confined to financial
metrics. The way we work. Societal attitudes. Stakeholder
expectations. These are all evolving, and companies
must evolve too. Coupled with change itself is the rate of
change. Everything moves faster, facilitated by increasing
sophistication in communications. The choice is clear:
manage and anticipate change — indeed, embrace it — or be
left behind.
At Pendal there was much change during the 2021 Financial
Year, both external and internal. We instituted a new
five-year strategy, announced in November 2020 and after
11 years in the role, long-term Group CEO, Emilio Gonzalez,
stepped down in March 2021. The Board executed its
long-term succession plan, seamlessly transitioning
to Nick Good, who was CEO of the Pendal US business.
In May 2021, we made a compelling and strategic acquisition to
facilitate growth opportunities, particularly in the US market.
The external environment has persisted in being challenging,
as the COVID-19 pandemic evolved during its second year.
It continues to affect people and businesses around the world
and in different timeframes, with varying levels of severity.
However, our team at Pendal has continued to meet this
challenge by adapting to new ways of engaging with our
clients and our global workforce. In particular, our investment
management teams have been actively engaging with clients,
so they are in no doubt that we are being proactive in the
management of their investments.
That Pendal has come through these last challenging years
is proof of the resilience of our people, the robustness of our
business model, and the diversification within our business.
That’s not to say our business has not been impacted. Ours is
a business of people – of relationships. We sell no product
apart from the intellectual capital of our investment leaders.
Our currency is trust – between our clients and our people.
We are a global company with our leadership and investment
teams spread across four continents. Our inability to meet in
person with our clients and colleagues has undoubtedly had
an impact. While we have by necessity become increasingly
digitised in the way we conduct business, we consider that
personal interaction is important in fully assessing client needs
and in generating solutions for them. These days will return.
"The strong results for the year
demonstrate the continued successful
execution of our strategy for growth
and the strength of our diversified
business model."
Pendal Group Annual Report 2021 3
Managing change well in this environment has also required
significant extra time and input from your Board and I would
like to thank all Directors for their commitment. Long meetings
via Zoom at irregular hours are not desirable by any measure,
although necessary to navigate through these times. We all
look forward to getting back to our pre-pandemic schedule
when international travel is back on the agenda.
The macroeconomic environment and geo-political
environments have also seen significant change.
While we have observed global equity markets rebound,
we have also seen a corresponding shift in policy
frameworks as governments grapple with the market
impact of the COVID-19 pandemic.
As to government policy, we follow events closely. We are
a global business with people plugged into the world’s
major financial centres. Pendal is able to draw upon their
insights derived from being ‘on the ground.’ The resulting
‘whole’ is greater than the ‘sum of the parts.’ We have a truly
global perspective.
Financial results
Statutory Net Profit After Tax (Statutory NPAT) increased
by 42 per cent to $164.7 million, compared to the previous
corresponding period (pcp), reflecting a step-change in FUM
from the acquisition of Thompson, Siegel & Walmsley (TSW),
strong investment performance and positive mark-to-market
and currency contributions. Underlying Profit After Tax
(UPAT) was up 25 per cent to $165.3 million, compared to pcp,
as a result of a substantial uplift in annuity income from base
management fees and a four-fold increase in performance fees
to $57.5 million.
Underlying earnings per share increased by 17 per cent to
48.2 cents per share.
The Board declared a final dividend of 24 cents per share (cps)
which brings the total dividend for Financial Year 2021 (FY21)
to 41 cps, up 11 per cent compared to FY20.
The strong results for the year demonstrate the continued
successful execution of our strategy for growth and the
strength of our diversified business model.
Total Shareholder Return, since listing in December 2007
to 30 September 2021, is 247.8 per cent, compared to the
99.9 per cent return of the Standard and Poor’s ASX200
Accumulation Index over the same period.
Managing change: succession planning
Along with navigating external change, 2021 has also been
a year for managing internal changes at Pendal, all of which,
I’m pleased to say, were anticipated and well managed
and speak to Pendal’s strategy and growth aspirations.
Managing a CEO transition is one of the most important things
a Board has to do alongside promoting stability, stewarding
strategy and supporting a CEO. The Board has worked over
a number of years to have a robust CEO succession plan;
one which would ensure a smooth transition and business
continuity. This remains an ongoing process throughout
the organisation.
In March 2021, our Group CEO, Emilio Gonzalez, stepped
down. I’d like to take this opportunity to thank Emilio for his
leadership, contribution, and commitment for over 11 years.
Through a mixture of vision and disciplined execution,
he oversaw the transformation of Pendal from an Australian
only fund manager into a global asset management business.
Emilio led from the front with passion and sound judgement.
Under Emilio’s leadership the business underwent a
step-change in FUM, scale, distribution, product offerings
to clients, and importantly, shareholder returns.
Nick Good, previously our regional CEO in the US,
was appointed Group CEO. The biggest future potential
for the Group is in the US and with Nick based in Boston,
Pendal will be well-positioned and equipped as it transforms
its business to take advantage of future growth opportunities.
Nick’s undeniable suitability and smooth entry into this role
is testament to the company’s thoughtful and well-prepared
approach to succession. Pleasingly, succession came from
within the company.
Managing change for long-term growth:
the strategic acquisition of TSW
Managing significant change in the operating environment
and the world generally over the last two years has been
necessary. But we have continued to execute our long-
term strategy. It is pleasing the company is delivering on
the strategic imperatives laid out a year ago, including,
most notably, further diversification of our business
through our acquisition of 100 per cent of US-based
investment management company TSW. The acquisition
price represented 7.6x 1H21 EBITDA (annualised,
excluding synergies) and is expected to be double-digit
EPS accretive in the first full-year post completion.
The acquisition of TSW is strategic and expands our
successful diversified business model in the largest equity
market in the world. It delivers both scale and diversification
benefits across investment capabilities, asset classes
and channels.
The Board believes that the acquisition will strengthen
the diversity of earnings and accelerate growth and
shareholder returns.
This acquisition creates immediate value, doubles our
addressable market in the US and delivers a step change
in Pendal Group’s diversification, scale and client offering,
and importantly, expands our global distribution capabilities.
TSW is a highly regarded value-oriented investment manager,
with a track record of strong investment performance. That it
is such a natural strategic and cultural fit with Pendal is no
accident. Our internal M&A process is as thorough as it is
discerning. While there are growth objectives we endeavour
to meet, we will never pursue growth for the sake of growth.
Our acquisition of TSW illustrates the rigour we put into the
search for true cultural alignment but also complementarity.
As complementary businesses, with almost no overlap of
investment strategies, together we will be better placed to
take advantage of the many growth opportunities inherent
in the US market.
Chairman's Letter 4
Managing risk: capital management
and investing in the future
The $413 million purchase consideration was funded with a
combination of equity and debt. Equity was raised through a
fully underwritten Placement and, to enable retail shareholder
participation, a Share Purchase Plan (SPP).
The capital raising included a Placement component to
expeditiously deliver the funds necessary to undertake the
transaction with pricing certainty and a SPP component
to provide eligible shareholders with the opportunity to
participate at a price at least as advantageous as large
institutions, as Pendal welcomes and encourages the
involvement of its eligible shareholders on the Pendal register.
In May, we executed a $190 million fully underwritten
Institutional Placement of approximately 27.9 million
new fully paid ordinary shares to institutional investors,
which represented approximately 8.6 per cent of issued
capital. The Placement was significantly oversubscribed
with strong support from institutional investors,
including both existing and new shareholders.
The SPP received total applications of approximately
$218 million from eligible retail shareholders. An overall scale
back of 13 per cent was applied, resulting in a total equity
raising from the SPP of $190 million, the same amount as in
the Institutional Placement, and at the same issue price of
$6.80 per share.
We were pleased that Pendal shareholders, retail and
institutional, demonstrated their support for this compelling
and strategic acquisition through their strong participation
in the capital raisings.
The total equity raising was $380 million, reducing the
debt and balance sheet funding required to complete the
transaction to $57 million, providing additional balance
sheet strength and capacity for Pendal to accelerate
growth opportunities.
Managing change: corporate governance
Another important aspect of change for forward looking
companies is formal external Board review, and of course,
long-term Board renewal.
This year we have undertaken our three yearly external Board
review of our corporate governance procedures. This regular
assessment, which is an integral element of our business
strategy, considers the Board’s access to accurate and timely
information necessary to govern properly; structural and
process issues associated with oversight of a global company;
leadership and company culture; Board composition and
succession planning, and maintenance of a Board dynamic
of intellectualism and robust discussion and debate.
The review has concluded and the Board is considering
the recommendations for implementation.
At Pendal, we take an active approach to Board renewal to
support the evolution and transformation of the company
and our commitment to act and make changes that are in
the best interests of our valued shareholders.
Andrew Fay will this year retire from the Pendal Board at the
conclusion of the 2021 Annual General Meeting, after 10 years
of service. Andrew has been Chair of the Remuneration
and Nominations Committee since May 2018 and prior to
that was Chair of the Audit and Risk Committee from 2014 to
2016. Andrew joined the Board in October 2011; in the same
month our acquisition of J O Hambro Capital Management was
completed. As a former fund manager with an extensive range
of skills and experience in financial and risk management,
capital markets, executive remuneration frameworks,
strategy and governance, Andrew made a meaningful
and significant contribution to the Pendal Group during this
very important period of transformation and growth. We thank
him for his stewardship and service.
The Board renewal process is ongoing and includes recruiting
a replacement for Andrew.
Outlook
During this year, we have achieved much in executing our
long-term strategy, achieving further diversification of our
business to reduce risk, support resilience and to position
the company for sustainable, long-term growth.
I would like to thank the management team and all of our
employees for their personal contribution during what has
been another difficult year, and for continuing to step up for
our clients, and support the company’s long-term prosperity.
I would also like to acknowledge and thank my Board
colleagues for the significant extra time they have
contributed to Pendal this year, guiding and contributing
to the management of the significant corporate activity the
company had executed and the continuing challenges of
external environment.
Finally, I would like to acknowledge you, our valued
shareholders, for your support. While there are many
stakeholders, ultimately Pendal belongs to you.
James Evans
Chairman
Pendal Group Annual Report 2021
5
Group Chief Executive
Officer's Report
Dear Shareholder,
The past year has been one of positive momentum
and progress for Pendal, despite the challenges of the
continuing COVID-19 pandemic. We also celebrated a proud
milestone: it has been 50 years since our long heritage was
first established.1 I feel privileged and excited to have been
given the opportunity to lead this outstanding team of people
as we look ahead to the next 50 years. While my key focus is
on the opportunities that lie ahead for Pendal, I am also acutely
aware of how much value there is to be protected and nurtured
within this great organisation.
We are a company that is talent-led, defined by conviction,
and deeply connected with our clients. We have a spirit of
entrepreneurialism that compels us to grow, to build and
to seek out opportunity. It has been this spirit that has
transformed us from the Australian-based company that
began 50 years ago to the global, dynamic organisation we
have become.
Performing through volatility has always been our strength.
Over the last year we continued to adapt to new ways of doing
business against the backdrop of COVID-19, while taking
advantage of buoyant market conditions. Some of our
achievements over this time have been highly visible,
such as the acquisition of US-based Thompson, Siegel &
Walmsley (TSW), completed in July. However, much of the
progress we have made has been below the surface, in steadily
reinforcing and building upon our foundations for future
growth. Our commitment to delivering consistent performance
and a superior experience for our clients has been, and will
continue to be, our ongoing priority.
I would like to thank the Board for placing its trust in me
and to also acknowledge the outstanding contribution of my
predecessor, Emilio Gonzalez, during his 11 years of leadership.
His reputation as a thoughtful and committed leader was a big
factor in encouraging me to join Pendal, and he leaves with an
exceptional legacy.
The Pendal difference
Even before joining the Pendal Group, two years ago now, I was
well aware of its enviable reputation in the industry and among
investors. Since being appointed Group CEO, I have spent time
listening to our people, our clients and our shareholders. I have
learned much about our company – what it means to those
who know it well, and its potential.
I have heard three clear messages. Firstly, that the unique
culture at Pendal, which sets us apart from our competitors
and underpins our investment excellence, must be protected
and nurtured. It is a culture of conviction and integrity.
Our teams are united by their desire to deliver their very best in
the interests of our clients, and we must continue to empower
them to do so. While it does not appear as a line item in our
financial statements, we clearly know the value of our culture.
Secondly, there is no doubt that our success is ultimately
determined by our ability to attract, develop, and retain the
very best talent. Many of our fund managers are regarded
as thought leaders within our industry. We actively recruit
investment talent with deep expertise and a strong sense
of conviction, and we deliberately create an environment
of independence and autonomy in which they can thrive.
Our investment teams are supported by dedicated and highly
experienced specialists across our business who share the
same commitment to excellence and a “can do” mindset.
"We are a company that is talent-led,
defined by conviction, and deeply connected
with our clients. We have a spirit of
entrepreneurialism that compels us to grow,
to build and to seek out opportunity."
1 Ord-BT established Pendal Nominees, its first nominee company, in 1971.
Group Chief Executive Officer's Report 6
As our global footprint continues to grow at Pendal, we will
maintain our talent-led philosophy across all regions.
Achieving a step change in scale
and diversification: the TSW acquisition
Finally, one of the most compelling strengths of Pendal is
the depth of connection and trust we have with our clients.
Our client base is experienced and sophisticated - they
are well-informed, engaged, and proactive. They want
to feel connected to their fund managers and develop an
understanding of how they think and behave, and why they
make the investments decisions they do.
At Pendal, our fund managers actively foster a close
relationship with our clients. They communicate regularly
and with transparency, which gives our clients peace of
mind. The result is long-term confidence in the strength of
our stewardship across their investments. As we shape our
business moving forward, delivering to their needs and further
enhancing our relationship with them will continue to drive us.
FY21 financial results
During the past year, global equity markets experienced the
strongest 12-month growth period in more than 30 years.
Pendal was well placed to take advantage of these exceptional
conditions because of our scale, our diversified global
business model, and our ability to adapt in a fluctuating
environment. As a result, we have achieved a significant
increase in FUM, revenue, profitability and shareholder returns
over this period.
Our underlying net profit after tax (UPAT) was $165.3 million,
an increase of 25 per cent on the previous year, while statutory
net profit after tax (NPAT) lifted 42 per cent to $164.7 million.
We were also pleased to see a 17 per cent uplift in underlying
earnings per share (EPS). The results included two months of
contribution from TSW.
Our total fee revenue grew 23 per cent to $581.9 million,
with higher average FUM levels driving an increase in base
management fees that rose 14 per cent to $522.8 million.
A standout for the year was the uplift in performance fees
that increased to $57.5 million, from $13.4 million in pcp
with notable contributions from the International Select and
Global Select strategies as well as the MicroCap and Focus
Australian equity strategies.
Closing FUM was up 51 per cent to $139.2 billion as at
30 September 2021. The acquisition of TSW accounted for
an additional $33.1 billion in FUM, and organic growth of
$16.0 billion came from strong investment performance and
markets. Positive foreign currency movements also supported
FUM growth.
We start the new financial year with equity markets near all-
time highs. However, we see pressure on flows, particularly
in the institutional channel. While this may have short-term
effects, we are confident that the combination of improved
investment performance and disciplined investment in our
strategic initiatives will support sustainable long-term growth.
The addition of TSW to the Pendal family was a highlight of
FY21. Pendal has a strong presence and history of success in
the US. This acquisition resulted from a long-planned strategic
decision to deepen our participation and diversify our revenue
in the US market, given the opportunities for growth.
Not only does it double our addressable market in the US,
but the acquisition also expands our distribution capabilities
and product offering, and will facilitate our growth avenues in
both the short and long term. Notably, it also resulted in a step
change in FUM: more than doubling US FUM to A$63.9 billion
(US$46.0 billion) and increasing total Group FUM by
51 per cent to A$139.2 billion.
The acquisition was compelling and strategic. There was
much about TSW that appealed to us. It was a complementary
business in terms of its independent investment philosophy
and entrepreneurial culture, and it had only a minimal overlap
in investment strategies. Importantly, from our clients’
perspective, TSW’s product suite broadened and balanced the
portfolio we could offer via our expanded distribution network.
Given this natural alignment, integration of the business is
progressing well and to plan. The acquisition is expected to be
double-digit EPS accretive in its first full-year post completion.
John Reifsnider, former CEO of TSW, is leading our combined
presence in the US and brings great talent and experience
to Pendal. His collaboration was instrumental to the success
of our acquisition of TSW, and I look forward to working
closely with him as we pursue the opportunities we see in the
US market.
Solid progress achieved on multi-year strategy
Our strategic investment program consists of a targeted
set of initiatives that we invest in because we believe they
represent the areas of our business that will best enhance
our ability to deliver to our clients’ needs as well as deliver
the most long-term value to our shareholders.
1. Leveraging our global distribution capability
As signalled a year ago, we believe there is significant potential
for growth in Europe. To take advantage of that potential, we
have steadily been building our sales presence in Europe and
the UK during the year, including the appointment of a new
Head of Distribution. In FY22, we will open an office in Europe
and continue to expand our team, focusing on enhancing
existing relationships and establishing new ones, particularly
with global financial institutions in Nordic, German and French
speaking areas.
In the US, we are well advanced in organising our business to
take advantage of the strong market opportunities. We have
expanded our institutional distribution team, reorganised our
intermediary team and the JOHCM and TSW sales teams are
already actively pursuing cross-sell opportunities.
Pendal Group Annual Report 2021 7
Positioned for success
Our long-term strategy at Pendal has been to pursue growth
through diversification – which helps us to manage through
the inevitable market cycles, allowing us to deliver a range of
investment strategies for our clients and less volatile returns
for our shareholders.
What excites me most about the future for Pendal, is the
undeniable potential held by our global footprint and strong
boutique investment culture. Our investment teams can tap
into different perspectives and fresh thinking on behalf of our
clients, no matter which geography they are in. One of our
key points of difference is that we are able to offer the benefits
of both worlds to our clients: global insights and a diverse
product set, together with highly-personalised service in a
boutique culture.
As the world reopens following COVID-19, we are ready to take
advantage of the opportunities that will arise. Our commitment
to our multi-year investment program has strengthened our
foundations and we believe the pieces are coming together
to consolidate our position, particularly in the high growth
markets of Europe and the US. Our ability to strengthen
existing relationships as well as build new ones should be
greatly enhanced in FY22 as restrictions ease and the mobility
of our people improves.
We are a people business; our talented people and the
relationships they build with our clients are central to our
success. Our future strategy revolves around creating the
best conditions for them to do what they do best – create
outstanding value for our clients and our shareholders.
I would like to acknowledge and thank our truly exceptional
team of people at Pendal for their commitment, principles
and hard work, especially in these challenging times.
Looking to the future, we will continue to evolve so that we are
optimally positioned to respond and thrive in an increasingly
competitive and dynamic environment. I am confident we will
do this with the conviction, integrity and entrepreneurial spirit
that has carried us through the last 50 years.
Yours faithfully,
Nicholas Good
Group CEO
To underpin these efforts, we have also been boosting our
digital engagement with prospective and existing clients.
Highly targeted marketing campaigns have successfully drawn
more clients and prospects to Pendal in FY21. In addition,
in Australia we launched a new content strategy, “The Point”,
which is a weekly collection of short, sharp, relevant 200-word
articles, podcasts and insights from our portfolio managers,
that is highly valued by our clients.
2. Expansion and enhancement of product sets
FY21 saw a significant expansion of product offerings to
our clients. Our US clients gained access to the TSW suite
of products which has little overlap and complements our
existing US set. We believe there is also potential to offer
these products in other regions. As we expand globally as
a company, the ability to offer an expanded and diversified
product set provides a significant strategic advantage for our
company. It not only builds deeper and closer relationships
with our clients but is also a key point in attracting new
fund managers.
As part of our continued commitment to the rapidly growing
ESG/RI sector, this year we also launched two new products.
The Regnan Global Equity Impact Solutions strategy is now
available to clients in all regions and has attracted early client
support. We also attracted a highly respected new Sustainable
Water and Waste investment team. The team’s first product,
the Regnan Sustainable Water and Waste Fund was launched
in the UK in September 2021 and will be made available to
European investors in FY22.
In Australia, we evolved the Pendal Horizon Fund
(formerly the Pendal Ethical Share Fund) and the Pendal
Sustainable Australian Share Fund, enhancing the equity
strategies to better align with changing client needs.
Additionally, we delivered the flagship Global Select Fund to
Australian wholesale clients for the first time.
3. Streamlining our global operating platform
We are well advanced in our four-year program to create a
more streamlined and scalable global operating platform
which will both improve the productivity of our teams
and enhance service and interaction with our clients.
After a thorough selection process, we appointed Northern
Trust as our group-wide global custodian. We also established
a cloud-based group-wide data warehouse and infrastructure,
and we transitioned to a new Australian registry provider.
Additionally, we used our scale to renegotiate a number
of existing contracts with global vendors. One highlight
which saw immediate results was the transitioning of our
US mutual funds to a proprietary trust structure, which
reduced fees and improved governance for all fund holders.
These substantial initiatives will improve client service and
support future growth.
Group Chief Executive Officer's Report
8
Acquisition of Thompson,
Siegel & Walmsley
During the year, Pendal completed the acquisition of US value-oriented
investment manager, Thompson, Siegel & Walmsley (TSW).
Established in 1969 and headquartered in Richmond, Virginia,
TSW is a high-performing value-oriented investment firm with
a long history of delivering strong investment performance for
clients. Well-regarded with a stellar reputation, TSW provides
investment strategies across international equities,
US equities, multi-asset and fixed income.
Culturally, TSW and Pendal are strongly aligned. TSW has a
long tenured and talented investment team of 20, and share
the same fundamental "investment independence" philosophy.
Like Pendal, TSW has a spirit of entrepreneurialism, with a
boutique and "hands-on" feel to its business, which is
appreciated by its employees and clients alike.
With strong client support and no loss of mandates or key
personnel resulting from the acquisition, integration is
progressing well and to plan.
“As a result of the acquisition,
we will double our addressable
market in the US and extend
our ability to generate new FUM
through the distribution of both
TSW and JOHCM products across
an expanded global network.”
Nick Good
Group CEO
Strategic rationale
Step change in Pendal’s FUM:
more than doubling US FUM
to $63.9 billion.
Doubles Pendal's US distribution
footprint and provides access to a
broader base of institutional and
sub-advisory relationships.
TSW's suite of value-oriented
products provide a complementary
portfolio of investment strategies
for Pendal’s clients.
JOHCM US FUM
TSW FUM
Combined US FUM
1%
12%
11%
19%
$30.8b
18%
11%
5%
$33.1b
39%
29%
55%
34%
2%
6%
6%
9%
9%
$63.9b
34%
Subadvisory
Private Bank
Institutional
IWM
Broker/Dealers
Retail/Other
Subadvisory
SMA (Wrap)
Institutional
Retail/Other
Subadvisory
Private Bank
Institutional
IWM
Broker/Dealers
SMA (Wrap)
Retail/Other
Pendal Group Annual Report 2021
9
Strategic Report
During FY21 there was significant progress on a wide range of strategic initiatives.
Key highlights were the development and expansion of Pendal’s global distribution
capability, streamlining of the global operating platform to deliver scalability and
efficiencies, and adapting Pendal’s product offerings to ensure future relevance to
clients and long-term sustainability.
Global distribution
Expanded our footprint in key
growth markets
• Doubled addressable market
in the US and opened up
opportunities for cross-selling
• Progressed distribution build
out in continental Europe
• Enhanced sales leadership
in Europe and Australia
• Expanded global distribution
of key investment strategies
Product
diversification
Diversified our product
offering and broadened our
ESG/RI capabilities
• Significantly expanded
range of products available
to US clients
• Launched Regnan Global
Equity Impact Solutions
(RGEIS) strategy in all regions
• Onboarded Regnan
Sustainable Water & Waste
team and launched fund in
the UK
• Deepened ESG integration
and stewardship
Global operating
platform
Continued to streamline our
platform to leverage scale
and drive client benefits
• Appointed Northern Trust as
group-wide global custodian
• Established proprietary fund
structure for US mutual funds
•
Implemented cloud-based
group wide data warehouse
and infrastructure
• Transitioned to new
Australian registry provider
In the coming year, we will continue to drive sustainable growth through disciplined
investment in strategic initiatives. Key priorities include completing the TSW integration,
expanding our distribution footprint in Europe, and streamlining our global operating platform.
Global Operating Review 10
Delivering investment
strategies globally
US
$63.9B
FUM
28
Investment personnel
19
Sales personnel
Pendal office locations
Pendal Group Annual Report 2021 11
EUKA
$28.8B
FUM
37
Investment personnel
14
Sales personnel
Australia
$46.5B
FUM
42
Investment personnel
20
Sales personnel
Global Operating Review 12
Financial Performance
The 2021 Financial Year saw a significant increase in the Group’s funds under management,
revenue and profit primarily due to extraordinary growth in global equity markets and the
acquisition of Thompson, Siegel and Walmsley (TSW), a US value-oriented investment
manager during the year.
Underlying net profit after tax (UPAT) was $165.3 million, an increase of 25 per cent on the
previous year, while statutory net profit after tax (NPAT) lifted 42 per cent to $164.7 million.
Five-year profile
Average FUM ($b)
Closing FUM
Base management fee margin (bps)
Base management fees ($m)
Performance fees
Fee revenue
Operating expenses
Operating profit ($m)
Operating margin
UPAT ($m)
Statutory NPAT
Underlying EPS (cps)
Dividends
FY17
$90.4b
$95.8b
50bps
$447.2m
$37.9m
$491.0m
$296.7m
$194.2m
+40%
$153.8m
$147.5m
49.1cps
45.0cps
FY18
$99.5b
$101.6b
51bps
$501.1m
$54.5m
$558.5m
$315.7m
$242.7m
+43%
$197.8m
$202.0m
62.5cps
52.0cps
FY19
$98.8b
$100.4b
49bps
$482.6m
$5.9m
$491.2m
$304.9m
$186.3m
+38%
$148.5m
$154.5m
46.6cps
45.0cps
FY20
$94.8b
$92.4b
48bps
$458.1m
$13.4m
$474.8m
$306.9m
$167.9m
+35%
$132.6m
$116.4m
41.1cps
37.0cps
FY21
$107.9b
$139.2b
48bps
$522.8m
$57.5m
$581.9m
$377.8m
$204.1m
+35%
$165.3m
$164.7m
48.2cps
41.0cps
Funds under management (FUM)
FUM as at 30 September 2021 was $139.2 billion, a 51 per cent
increase over the year. The growth in FUM was largely the
result of the acquisition of TSW and a $16.0 billion contribution
from higher markets and investment performance. Favourable
foreign currency movements of $2.1 billion also supported
FUM growth. Net outflows were $3.7 billion for the year.
In the institutional and sub-advised channels, there was
$2.9 billion in outflows across the Group as clients took the
opportunity to rebalance portfolios and take profits following
the significant market appreciation through the year. This was
most pertinent in the International Select strategy following a
period of stellar outperformance.
Flows in the higher margin wholesale channel were mixed
with strong flows in the US Pooled funds (+$1.5 billion) and a
record year in the Australian funds (+$0.8 billion) being offset
by redemptions in the OEICs (-$1.6 billion) as UK equities
remained out of favour with investors. The Regnan Global
Equity Impact Solutions strategy attracted good early support
from UK and European wholesale investors following its launch
in the December 2020 quarter.
The Westpac book saw outflows of $1.4 billion with the
majority of this in lower margin cash strategies and was in line
with expectations.
During the year the Japan OEIC and International
Small-cap mutual fund were wound up and returned
to clients ($0.2 billion) upon closure.
FUM by asset class
5%
7%
15%
8%
5%
6%
9%
45%
FUM by geography
(client domicile)
46%
33%
21%
FUM by channel
39%
12%
17%
11%
6%
15%
Australian equities
Global equities
UK & European equities
US equities
Asian & EM equities
Cash
Fixed income
Multi asset
Australia1
EUKA
USA
1
Includes Australia and New Zealand
Institutional
Sub advisory
Wholesale - Australia
Wholesale - OEICs
Wholesale - US Pooled
Westpac
Pendal Group Annual Report 2021 Funds under management (AUD $billion)
Sep-20
Flows1
Other2
Australia (excl. Cash)
Institutional
Wholesale
Westpac
Total Australia (excl. Cash)
Europe, UK & Asia (EUKA)
Segregated Mandates
OEICs
Total EUKA
US
JOHCM Segregated Mandates
JOHCM US Pooled Funds
TSW – sub advisory
TSW – other
Total US
Total Pendal Group (excl. Cash)
Cash
Total Pendal Group
14.5
6.6
9.9
31.0
10.8
12.4
23.2
7.3
18.8
0.0
0.0
26.1
80.3
12.1
92.4
(1.4)
0.8
0.0
(0.6)
(0.2)
(1.6)
(1.8)
(0.7)
1.5
(0.5)
(0.1)
0.2
(2.2)
(1.5)
(3.7)
2.6
1.0
1.9
5.5
2.6
3.9
6.5
0.8
3.2
18.1
14.3
36.4
48.4
0.0
48.4
13
Sep-21
15.7
8.4
11.8
35.9
13.6
15.2
28.8
7.4
23.4
18.3
14.8
63.9
128.6
10.6
139.2
FX
0.0
0.0
0.0
0.0
0.4
0.5
0.9
0.0
(0.1)
0.7
0.6
1.2
2.1
0.0
2.1
1 TSW flows since completion on 23 July 2021
2 Other includes investment performance, market movement, distributions and FUM acquired upon completion of TSW
Investment performance
In the 2021 Financial Year, global equity markets
experienced the strongest 12-month period of growth in more
than 30 years. Market returns were higher across the board
with the MSCI ACWI Index in local currency terms and the
S&P/ASX All Ordinaries Index up 27 per cent while the S&P
500 rose 28 per cent. The FTSE 100 was 21 per cent higher.
Markets in Asia and Europe also rebounded strongly
during the year.
There was strong investment performance across a broad
range of strategies during the year with notable improvement
in the Group’s UK equity strategies. The UK Equity Income
fund outperformed its benchmark by 31.4 per cent while the
UK Dynamic fund also had a strong year returning 22.1 per
cent above its benchmark. Similarly, the UK Growth Fund had
a stellar year achieving 27.7 per cent outperformance for the
12 months to 30 September 2021.
The consistent performance in Australian Equity strategies
continued with 87 per cent of FUM outperforming their
respective benchmarks. Impressively, 100 per cent of
Australian equities FUM has outperformed relevant
benchmarks over the past five years and since inception.
Revenue
Revenue grew 23 per cent to $581.9 million
(2020: $474.8 million) with higher average FUM levels driving
a 14 per cent uplift in base management fees to $522.8 million.
Performance fees increased significantly to $57.5 million
(2020: $13.4 million) with notable contributions from the
JOHCM International Select and Global Select strategies
as well as the Pendal MicroCap and Focus Australian equity
strategies. Fee margins remained steady at 48 basis points.
Expenses
Total operating expenses were $377.8 million, a 23 per cent
increase on the 2020 Financial Year. The increase was
primarily driven by an uplift in variable employee expenses as
a result of higher performance fees, base management fees
and profit growth. As outlined in 2020, the Group has also
embarked on an investment program centred around global
distribution, product diversification and enhancing the global
operating platform. New employees have been recruited to
progress these initiatives.
Excluding the contribution of TSW, fixed costs were
9.6 per cent higher this year and the compensation ratio was
47 per cent, both in line with guidance provided in FY20.
During the year a distribution strategy was established for
Europe and senior sales leadership was refreshed in Europe
and Australia. Our ESG/RI capabilities were expanded with
the appointment in the UK of a thematic investment team
delivering a sustainable waste and water strategy and the
Regnan Global Equities Impact Solutions strategy was
rolled out across all regions attracting early client support.
Additionally, the Group’s flagship Global Select fund was
brought to the Australian market.
During the year a number of one-off global projects were
carried out enhancing the Group’s operating platform which
totalled approximately $5 million. These are expected to
deliver a recurring uplift to operating profit before tax of
approximately $5 million effective from the 2022 financial year.
In the coming financial year, strategic investments for growth
will continue. In the US, the TSW and JOHCM’s US sales
teams have commenced offering our clients in the region an
expanded range of investment strategies and, in continental
Europe, a branch office will be opened, and FTE added,
in order to capture market share in the region.
Global Operating Review 14
Financial Position
Pendal Group strengthened its financial position during the 2021 Financial Year
through robust profit growth and the acquisition of TSW. Net tangible assets increased
by 25 per cent to $454 million at 30 September 2021 while total net assets grew by
55 per cent to $1.4 billion. This solid financial base supports the Group’s ongoing
investment for growth.
Cash
Cash held by the Group as at 30 September 2021 was
$297.7 million (2020: $207.5 million) and represents a
seasonal high for the business. Cash levels increased through
the year due to higher profits and the acquisition of TSW.
Cash flows from ongoing operations are typically held for
regulatory and working capital purposes, to acquire shares
for employee share schemes, or 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, as well as existing funds to
provide scale as they become marketable to clients.
At 30 September 2021, the seed portfolio was
$264.1 million (2020: $200.4 million), benefiting
from market growth and additional investments made
during the year.
The seed portfolio is assessed regularly against
targets related to investment performance and scale.
Funds 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 $46.1 million were redeemed in the
2021 Financial Year.
Proceeds realised from redemptions were redeployed
to support a number of new fund vehicles.
They included four fund vehicles for the Regnan Global
Equity Impact Solutions (RGEIS) strategy launched
in the UK, European, Australian and US markets.
Additionally the Regnan Sustainable Water and Waste
fund was also seeded for the UK market.
($m)
200.4
Seed
capital
Sep-20
65.9
(46.1)
43.9
264.1
Investments Redemptions
Market
movements
Seed
capital
Sep-21
Pendal Group Annual Report 2021 15
Intangibles
Liabilities and debt
Pendal’s intangible assets increased to $930.2 million
at 30 September 2021 as goodwill, investment
management contracts, and trademarks were
recognised on the acquisition of TSW. These added to
the goodwill and management rights associated with the
acquisition of JOHCM in 2011 and goodwill arising from
Pendal Group Limited’s IPO in 2007.
There was no impairment to the carrying value of
goodwill across the Group during the year. The goodwill
values are attributed to an operating segment of the
Group for impairment-testing purposes. While the
Pendal Group Limited goodwill is attributed to the
Australian segment, the goodwill associated with
the JOHCM acquisition (completed in 2011) has been
separately attributed to the US and EUKA (Europe, UK
and Asia) regions, and the TSW goodwill to the
US segment.
The investment management contracts associated with
the acquisitions of JOHCM and TSW are amortised over
their expected useful lives.
6% 5%
Investment management - JOHCM
Investment management - TSW
27%
37%
25%
Goodwill - Pendal
Goodwill - JOHCM
Goodwill - TSW
Software & Trademarks
Shareholder equity
Pendal Group Limited’s share capital increased significantly
during the 2021 Financial Year, to $876.3 million at
30 September 2021 (2020: $471.2 million).
The acquisition of TSW was primarily funded through the issue
of Pendal shares to new and existing shareholders under an
institutional placement and a retail share purchase plan (SPP).
The $190 million fully underwritten institutional placement in
May 2021 was significantly oversubscribed, and approximately
27.9 million new fully-paid ordinary shares were issued. The
SPP was completed in June 2021 and was strongly supported
by retail shareholders with 10,118 eligible retail shareholders
applying. Equity raised under the SPP totalled $190 million
and approximately 27.9 million new fully-paid ordinary shares
were issued. The successful capital raising represented a
strong endorsement of the TSW acquisition.
Approximately 2.8 million new Pendal shares were also
issued to TSW employee owners as part of the purchase
consideration to acquire TSW.
TSW is a highly successful complementary business which
expands the Group’s growth potential in the US market and
has created immediate value for the Group.
Total liabilities were $337.4 million at 30 September 2021
(2020: $210.6 million).
The Group entered into a US$35.0 million ($48.6 million)
syndicated debt facility agreement for a three-year term to
partially fund the acquisition of TSW. The facility was fully
drawn on completion of the acquisition in July 2021.
Pendal’s other liabilities primarily consist of trade creditors
and accruals, lease liabilities and employee benefits.
Employee benefit liabilities increased, as variable employee
remuneration has risen with higher profits earned in the
2021 Financial Year.
A $25.0 million multi-currency revolving loan facility
is maintained and remained undrawn throughout the
financial year.
Dividend
The Directors declared a final dividend of
24.0 cents per share (cps), bringing total dividends
for the year to 41.0 cps, an 11 per cent increase on
the prior year’s dividend of 37.0 cps.
The total dividend represents a payout ratio
of 89 per cent, which is within the Group’s
payout ratio target of 80 to 95 per cent of UPAT.
The Dividend Reinvestment Plan was deactivated
for the 2021 interim dividend and remains
deactivated for the 2021 final dividend.
Dividends are franked to 10 per cent, reflecting the
significant proportion of the Group’s profit that is
earned offshore. In accordance with the Company’s
capital management plan, and to the extent
possible, retention of franking credits is minimised.
92%
97%
90%
89%
83%
52.0
45.0
45.0
30.0
26.0
25.0
41.0
24.0
37.0
22.0
19.0
22.0
20.0
15.0
17.0
FY17
FY18
FY19
FY20
FY21
Interim dividend
Final dividend
UPAT payout ratio
Global Operating Review 16
Risk Management
Our risk management framework provides 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 approves the Group’s risk management framework and sets the risk
appetite. This guides management to proactively identify, monitor and manage the
material and emerging risks that could impact the organisation.
Our approach to risk management
Managing risk to deliver our strategy
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 annually 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 evolves.
The Board delegates responsibility for implementing the risk
management framework, and managing the material risks
within the appetite set, to the Group CEO. The Group Chief Risk
Officer is responsible for designing and updating 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.
Management are held to account for managing the material
risks within the appetite, thus enabling the Group to make risk
conscious decisions and generate appropriate returns, in a
controlled and deliberate manner.
The Board endorsed an updated risk framework during
2021. The updates included the introduction of two new
material risks. The first related to Environmental, Social and
Governance (ESG) risk and the second, the longer-term risks
relating to the COVID-19 pandemic.
The Board has a lower risk appetite in the management of
critical areas such as investment performance, regulation and
legislation particularly new ESG-related laws and regulations,
behaviour and conduct and the risks associated with managing
the COVID-19 pandemic, as they 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.
With the completion of the acquisition of Thompson, Siegel &
Walmsley (TSW) in Q4 FY21, the Board commenced, and
will continue, its oversight of the integration of the TSW
risk framework with the Pendal Group risk framework.
Completion will occur in FY22.
Managing risks associated with COVID-19
Material risks
During FY21 in addition to the ongoing enhancement
and embedding of the risk framework, the key area of
continued focus was managing the risks resulting from the
unprecedented COVID-19 pandemic. Separate COVID-19
risk registers have been maintained and operated ‘live’ to
identify, monitor and manage the COVID-19 related risks.
Areas of specific focus 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.
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.
Pendal Group Annual Report 2021 17
Risk alignment with strategy
Investment capability
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
appropriately manage the health, safety
and wellbeing of employees.
The risk that the Group fails to
effectively consider the future impacts
resulting from the COVID-19 pandemic.
Both risks can impact on the ability of
the Group to continue operating and
deliver the strategy.
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 of which 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 opportunity. This includes
external factors such as the markets,
geopolitical 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 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.
• Business Continuity Planning (BCP) plans are tested and COVID-19
management teams are in place and meet regularly.
• 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 to
operate and enhancements made where appropriate e.g. proactive
and more frequent client communications and enhanced liquidity
risk management.
• 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.
• Return to office plan implemented and enhanced approach to
flexible working.
• 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 Board governance structure.
• Employee performance management process and remuneration aligned
to delivery of strategic objectives.
• Robust acquisition search, due diligence and integration processes,
engaging subject matter experts and external consultants for support.
• Annual strategy and budget process.
• Strategy and risk management processes to continuously monitor
and manage external threats and opportunities.
• Governance processes to support effective decision making.
• Variable remuneration aligned to strategic objectives.
• Post Brexit, Irish management company established, to allow the
continued distribution of relevant products across Europe.
• Continuing pipeline of new product with a thematic water
and waste investment team joining in FY21.
• US Mutual funds re-structured and in-house responsibilities
and governance implemented.
• Successful transition during FY21 from longstanding Group CEO to new
Group CEO through internal promotion.
• Acquisition of TSW during FY21 increased our pool of talent and
diversified investment strategies.
• Competitive remuneration structures in the relevant employment
markets to attract, motivate and retain talent, with alignment to client and
shareholder outcomes.
• A Global Head of Remuneration appointed during FY21 to oversee
remuneration practices across the Group.
• 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 of proposals for new team acquisitions to ensure areas such
as cultural fit, product offering and financials are robustly considered.
Increased focus on Diversity, Equity and Inclusion (DEI). Global steering
committee established.
•
Global Operating Review
18
Material risk
Risk description
Risk management
Environment,
Social &
Governance (ESG)
The risk that the Group fails
to adequately progress
on executing its ESG and
Responsible Investing strategy.
This includes the risk of not
developing products to meet
client needs in a timely manner or
failing to adequately meet evolving
ESG stakeholder expectations.
Behaviour
and conduct
The risk of inappropriate, unethical
or unlawful behaviour, by employees,
which is not in line with the Group’s
core values.
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 resource (including
human capital), ineffective execution
and poor management of project
interdependencies.
Failure to effectively manage the
material risks arising from our
global transformational change
program focused on enhancing
operational infrastructure.
• Regular review and enhancement of the Group’s ESG strategy.
• Specific ESG-related products launched, following a robust new product
development process. Including the Regnan Global Equity Impact
Solutions strategy and the Regnan Sustainable Water and Waste Fund in
the UK.
• Ongoing monitoring of external market Insights and evolving
•
client needs.
Internal and external training provided on specific ESG-related topics
such as Modern Slavery.
• Recruitment to build out specialist teams providing ESG support,
oversight and governance.
• Ongoing integration of ESG considerations into investment processes
for relevant strategies.
• Continued investment in processes and systems to enhance controls,
improve efficiency and help meet ESG regulatory changes.
• Ongoing evolution and enhancements in ESG practices within the
Group's operations, including Modern Slavery and Climate Change.
• Enhanced ESG related disclosure reports. This includes the Pendal
Australia Responsible Investments statement, Human Rights statement,
Pendal Group Sustainability Report, Pendal Group Corporate Governance
Statement and J O Hambro Capital Management's Stewardship Code
for 2020.
• Comprehensive recruitment process to assess behaviour and conduct.
• Remuneration and performance management processes supports good
behaviour and conduct.
• Clearly defined Code of Conduct which outlines the expected 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,
where relevant.
In response to regulatory developments, senior management roles,
responsibilities and accountabilities updated in J O Hambro Capital
Management (UK and Singapore).
• 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 Australian major
change projects.
• Continued monitoring of the global data transformation program,
including how we buy data related technology; use data to improve the
client experience and overall performance; and how we continue to
protect data in line with regulation and legislation.
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
their investment objectives or that there
is a failure to achieve consistent long-
term performance that delivers on the
clients’ expectations.
• Talent hiring and succession planning.
• Clearly defined investment strategies and investment processes within
stated risk parameters.
• Regular independent investment risk reviews and analysis of portfolio
risks across all asset classes and strategies (including market, liquidity
and credit counterparty).
• Regular client reporting and performance update.
• Formal approach to product governance and innovation including
management of the product lifecycle.
• Ongoing external insights into how client preferences are changing.
• Several new products were launched in FY21 to meet client demands,
such as an ESG related impact fund and a thematic fund.
Pendal Group Annual Report 2021
19
Material risk
Risk description
Risk management
Distribution
Operational
Regulation
and legislation
Technology and
data (including
cyber)
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.
In the current environment, failure
to manage the negative impact on
fund flows:
•
•
In the UK and Europe caused
primarily by external factors,
including Brexit and COVID-19.
In Australia, by the Banking Royal
Commission and by our significant
client Westpac as they execute their
exit from wealth management.
• The acquisition of TSW increased the Group’s FUM, provides future
growth opportunities and a broader product offering to help meet
client expectations.
• Client engagement and distribution is a key part of the overall Pendal
Group strategy. This was updated during the year and was approved by
the local Governance Committees and the Pendal Group Board.
• Progress updates on implementing the Distribution strategy is a key
part of the regular CEO reports to the Pendal Board and to the local
governance committees.
• Ongoing acquisition of external insights into how client preferences and
market requirements are developing.
• Fees structures benchmarked and updated where required.
• Daily monitoring of changes in FUM and the sales pipelines. Regular
Board reporting and discussions on market trends and material changes
in FUM.
• Operational restructure and recruitment to expand distribution capability
largely completed in Australia, in progress in the US with the acquisition
of TSW, and underway in Europe.
Implementation of technology solutions and data related enhancements
underway to better service clients.
•
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 Financial Conduct Authority
(UK)’s Senior Managers and
Certification Regime which
is being replicated by other
national regulators.
• The expansion of The UK
Stewardship Code.
• The implementation of the European
Sustainable Finance Disclosure
Regulation (SFDR) and similar global
regulatory initiatives.
• Legislation and regulation on
modern slavery and new financial
product design and distribution
obligations in Australia.
As a result, there is a risk of failing to
meet the new standards or account
for the increasingly higher costs
of compliance.
The risk that the Group does not
optimise the use of data and digital
technology. This may negatively impact
the Group’s ability to meet external
demands and deliver growth.
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.
• 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. Several projects are underway to
implement regulatory changes.
• 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 enhance processes and systems such as
substantial shareholder reporting and compliance employee
reporting requirements.
• Multi-year global technology and data management projects underway
to enhance processes and systems.
• Recruitment of dedicated data specialists continues.
• Technological and information security enhancements made where
appropriate, to support remote working as part of managing the
COVID-19 pandemic.
• Global Data Council in place to provide robust governance and oversight
over key technology related transformation projects.
• Participation in external forums to share good practices and enhance
•
internal processes and systems.
Independent internal audit and other assurance reviews carried out over
the design and effectiveness of technological, cyber and data systems of
internal controls.
• Range of technology and data related polices in place, these are
periodically updated, approved and communicated to colleagues.
• Regular review and testing of Disaster Recovery and Business
Continuity Plans.
• Periodic information security training.
• Ongoing penetration testing and consultation with cyber
security specialists.
Global Operating Review
20
Material risk
Risk description
Risk management
Supplier
management
(including
outsourcing)
The risk of loss or reputation damage
arising from inadequate supplier
selection and oversight processes.
Failure to manage the business’s
exposure to heightened supplier risks
as it introduces and transitions to new
infrastructure suppliers, e.g. 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 clients when establishing
new financial products and building
them to scale. This exposes the Group
to the same potential loss of capital
as clients.
There is also the risk of the failure of the
Group to maintain appropriate working
capital and reserves to respond to
unexpected adverse events.
• Periodic review of operating model includes consideration of the areas
where we want to use third party suppliers.
• Supplier management due diligence process. Enhancements
implemented as part of the Modern Slavery regulatory change
in Australia.
• Supplier management governance framework, policies and procedures.
• Regular monitoring and review of service level agreements and
•
performance standards in place.
Independent annual assurance review 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 plan for the 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. US$35m ($45m)
term debt facility with full repayment targeted over a three year term.
An additional undrawn A$25m working capital loan facility in place as a
risk management measure.
• Monthly offshore earnings hedged into Australian dollars.
• Capital management 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 tested.
Pendal Group Annual Report 2021
2021 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. Finance costs
B4. Earnings per share
B5. Taxation
B6. 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. Business combination
E3. Subsidiaries and controlled entities
E4. Structured entities
E5. Related party transactions
F. Other
F1. Intangible assets
F2. Lease assets and liabilities
F3. Contingent liabilities
F4. Remuneration of auditors
F5. Subsequent events
Directors’ Declaration
Independent Auditor’s Report
22
31
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67
68
69
70
71
71
71
71
72
72
72
74
75
75
76
79
80
80
81
83
84
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92
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109
Annual Report 2021 | 21
Directors' Report
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021
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 2021 Financial Year.
Board of Directors
The Directors of the Company during the 2021 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
Emilio Gonzalez
Appointed Managing Director & Chief Executive Officer on 22 January 2010
Nick Good
Appointed Managing Director & Chief Executive Officer on 1 April 2021
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
Period
Full-year
1 October 2020 to
31 March 2021
1 April 2021 to
30 September 2021
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
Nick Good
MA (Oxon)
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
and 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 J O Hambro Capital
Management Holdings Limited and a Non-executive
Director of AutoSports Group Limited.
Directorships of other listed entities over the
past three years: Nil
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.
Directorships of other listed entities over the
past three years: Nil
22 | Pendal Group
Annual Report 2021 | 25
Directors' ReportFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021 Directors' Report
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021
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 and 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.
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, Spark Infrastructure
RE Limited and National Cardiac Pty Limited.
Sally brings to the Board, through her executive and
non-executive experience, skills in merger and 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, The Tasmanian Public Finance Corporation,
Utilities Trust of Australia and the Clayton Utz Foundation.
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:
Cromwell Property Group
Directorships of other listed entities over the
past three years: Nil
26 | Pendal Group
Annual Report 2021 | 23
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021Directors' Report Directors' Report
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021
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.
Christopher is Chair of the Investment Committee of
Acorns Grow, an American financial technology and financial
services company that specialises in micro-investing and
robo-investing. Christopher is also Chair of the Advisory
Committee of Zoe Financial, an American financial
technology company which operates a digital marketplace
that enables consumers to find and engage qualified
financial advisors.
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).
24 | Pendal Group
Annual Report 2021 | 27
Directors' ReportFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021 Directors' Report
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021
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, Growthpoint Properties
Australia 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).
The number of meetings of the Board and of each Board Committee held during the 2021 Financial Year and the number of
meetings attended by each Director during that year are set out in the following table.
Name
Board
Audit & Risk Committee
Remuneration &
Nominations Committee
James Evans
Emilio Gonzalez
Nick Good
Sally Collier
Andrew Fay
Christopher Jones
Kathryn Matthews
Deborah Page AM
A
19
8
11
19
19
19
19
19
B
19
8
11
19
19
19
19
19
A
-
-
-
6
-
6
-
6
B
-
-
-
6
-
6
-
6
A
-
-
-
8
8
-
8
-
B
-
-
-
8
8
-
8
-
A - Meetings eligible to attend as a member of the Board or Committee.
B - Meetings attended as a member of the Board or Committee.
A Due Diligence Committee was formed in respect of the acquisition of TSW. The members of the Committee were Deborah Page (Chair),
Andrew Fay and Chris Jones. The Committee met 9 times and all members of the Committee attended each meeting.
28 | Pendal Group
Annual Report 2021 | 25
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021Directors' Report Directors' Report
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021
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
Nick Good
Group Chief Executive Officer
Alexandra Altinger
Chief Executive Officer, JOHCM UK, Europe & Asia
Richard Brandweiner
Chief Executive Officer, Pendal Australia
John Reifsnider
Chief Executive Officer, Pendal USA
Bindesh Savjani
Group Chief Risk Officer
Cameron Williamson
Group Chief Financial Officer
2019
2019
2018
2021
2019
2008
2021
2019
2018
2021
2019
2016
Details of the qualifications, experience and responsibilities of the members of the Global Executive Committee are set out below:
Nick Good
MA (Oxon)
Group Chief Executive Officer
Refer to Directors’ biographies.
Alexandra Altinger
BA MA CFA
Chief Executive Officer,
JOHCM UK, Europe
and Asia
Alexandra was appointed Chief Executive Officer, JOHCM UK,
Europe and Asia in July 2019 and commenced employment in
September 2019.
Alexandra has 28 years’ experience in the wealth and asset
management industry across Europe, Asia and the US. She
previously spent four years as CEO of Sandaire Investment
Office, a UK multi-family office, where she led the business
integration process after Sandaire acquired Lord North Street
Private Office.
Prior to Sandaire, Alexandra worked within the executive
team of Lansdowne Partners International, helping to lead
the firm’s repositioning efforts for its long-only products in
global institutional markets. Previously she was at Wellington
Management International where she held a number of
senior roles including European Head of Sub Advisory and
Distribution. Alexandra has also served as an Equity Research
Analyst at John Hancock in Boston and has worked in Japanese
equities research sales for Goldman Sachs in Tokyo and
London. She started her financial career as a Proprietary Trader
with Banque Nationale de Paris (Securities) in Tokyo.
Alexandra has a Bachelor of Sciences and a Master of Sciences
in International Economics from Université de Dauphine,
Paris and is a CFA Charterholder and member of the CFA UK
Advisory Council. She is a founding member of the Advisory
Committee of The Diversity Project, an ambitious initiative
to promote diversity in all its forms across the UK asset
management sector. Alexandra is also the current Chair of the
Investment Association’s Business Forum.
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.
26 | Pendal Group
Annual Report 2021 | 29
Directors' ReportFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021 Directors' Report
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021
John Reifsnider
BBA
Chief Executive Officer,
Pendal USA
Bindesh Savjani
BA (Hons) FCCA
Group Chief Risk Officer
John Reifsnider joined Pendal Group as Chief Executive Officer,
Pendal USA in July 2021 following the acquisition of Thompson,
Siegel & Walmsley LLC (TSW).
John has over 30 years’ experience in investment
management, specifically in business development,
strategy, and leadership.
John has been with TSW in Richmond, Virginia for over
16 years. He was appointed Co-President of TSW in
September 2018 and Chief Executive Officer in 2020. He is
responsible for the day-to-day management of Pendal USA.
Before joining TSW in 2005, he was a Founding Member of
Atlantic Capital Management, LLC, responsible for business
development and client service. John started his career in the
investment industry in 1990.
John has a Bachelor of Business Administration from the
University of Toledo and is registered as an Investment
Adviser Representative.
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 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
Annual Report 2021 | 27
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021Directors' Report Directors’ Report
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021
Principal activities
The principal activity of Pendal Group during the 2021 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 2021.
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 2 to 20 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.
Business Review
The 2021 Financial Year was a significant one for the business. Nick Good was appointed as Group Chief Executive Officer in April
2021, succeeding Emilio Gonzalez after eleven years in the role. The Group acquired Thompson Siegel and Walmsley LLC (TSW), a
value-oriented investment management firm based in Virginia, USA during the second half of the year, increasing the Group’s
presence in the largest equity market in the world. Additionally, global equity markets experienced the strongest 12-month period of
growth in more than 30 years, significantly increasing the Group’s funds under management (FUM) and associated revenue.
The net profit after tax (Statutory NPAT) of the Group for the year was $164.7 million (2020: $116.4 million), an increase of 41.5 per
cent on the prior corresponding period (pcp). The increase was largely the result of favourable mark-to-market movements on the
Group’s seed investments together with the growth in fee revenue on increased FUM. The Group’s preferred measure of business
performance, underlying profit after tax (UPAT), also increased during the year to $165.3 million (2020: $132.6 million), up 24.7 per
cent and underlying earnings per share rose to 48.2 cents per share, a 17.3 per cent increase.
During the year the Group’s FUM increased 50.7 per cent to $139.2 billion (2020: $92.4 billion). This uplift in FUM was primarily the
result of the acquisition of TSW, which added $32.4 billion, while higher markets and investment performance supported a further
increase of $16.0 billion. FUM was also assisted by favourable currency movements of $2.1 billion offset by net outflows of $3.7
billion through the year.
For the 12 months to 30 September 2021, the MSCI ACWI Index in local currency terms returned 27.2 per cent as the S&P 500
(+28.0 per cent), All Ordinaries Index (+27.0 per cent) and the FTSE 100 (+20.8 per cent) all returned substantial gains.
Net inflows of $1.5 billion were received in the US pooled funds in which global equities continued to attract strong client demand
and there was a record year of inflows in the Australian wholesale channel (+$0.8 billion) where Australian equities and fixed income
funds were well supported. However, there were significant redemptions from the OEICs (-$1.6 billion) where UK and European
equity strategies were in outflow and the Westpac book saw redemptions in lower-margin cash of $1.4 billion. There were additional
outflows of $2.9 billion in the institutional and sub-advised channels across the Group as a number of clients took the opportunity to
rebalance portfolios and take profits.
The Group’s operating revenue increased by 22.6 per cent to $581.9 million (2020: $474.8 million). Base management fees for the
financial year were $522.8 million, a 14.1 per cent increase on the prior year due to higher average FUM levels (+13.8 per cent) while
fee margins remained steady at 48 basis points (bps) (2020: 48 bps). Performance fees increased significantly to $57.5 million
(2020: $13.4 million), with notable contributions from the JOHCM International Select and Global Select strategies as well as the
Pendal Microcap and Focus strategies.
Total operating expenses increased 23.1 per cent to $377.8 million (2020: $306.9 million), largely due to an uplift in variable
employee expenses as a result of higher performance fees, base management fees and profit growth. Additionally, the investment
program as outlined in 2020 continued through the period, with significant progress made on the strategic priorities centred around
global distribution, product diversification and enhancing the global operating platform.
New employees have been added to progress these initiatives and excluding TSW, fixed costs (+9.6 per cent) and the overall
compensation ratio of 47 per cent were in line with the guidance that was provided in 2020. During the year, a number of one-off
global projects were carried out enhancing the Group’s operating platform which totalled approximately $5 million. These are
expected to deliver a meaningful recurring uplift to operating profit before tax of approximately $5 million, effective the 2022
Financial Year.
28 | Pendal Group
Directors' ReportFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021
Directors’ Report
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021
Strategic priorities
Consistent with the Group’s strategy to further develop its presence in the US and to accelerate growth in the region, the Group
acquired TSW in the second half of the financial year. The TSW acquisition brings scale and diversification benefits to Pendal across
investment strategies and distribution channels which are expected to strengthen the diversity of the Group’s earnings and enhance
shareholder returns.
Funding for the acquisition was predominantly through shareholder equity, with Pendal shares issued under an institutional
placement and share purchase plan raising approximately $380 million. A three-year term debt facility for US$35 million ($48.6
million) was also taken out with a banking syndicate and fully drawn on completion to deliver the acquisition funding. The debt
facility is expected to be fully repaid over its three-year term.
Following the completion of the acquisition in July 2021, the chief executive of TSW, John Reifsnider, was appointed CEO of
Pendal’s combined US business and became a member of the Group Executive team.
The Group continued to expand its ESG / RI product offering to clients. During the year, the Regnan Global Equity Impact Solutions
strategy (RGEIS) was launched and is now available to clients in the UK, Europe, Australia and US. There has been encouraging
early client support with assets of approximately $400 million raised in the 12 months to 30 September 2021. Additionally, the
Group appointed a UK-based investment team to run a global equities strategy with a focus on the water and waste sector. The
team’s first product, the Regnan Sustainable Water and Waste strategy, was rolled out to UK clients in September 2021 with a new
fund vehicle for European clients expected to be available in the December quarter.
The Group has continued to invest in its global distribution capabilities during the year. This has included appointing a new Head of
Sales and Distribution for the EUKA region with a focus on developing further into the continental European market. The Group is
currently enhancing its EU licence, which will enable a broadening of European client reach as well as establishing on the ground
sales presence in Europe. Additionally, new institutional sales roles have been added in Australia and the US to strengthen
distribution in that channel.
Significant progress has been made on the global operating platform during the year. This has included the appointment of
Northern Trust to become the global custodian for the Group with a transition plan established for the Australian and EUKA regions
over the coming two years (the US business is already utilising Northern Trust). This year saw the Group reorganise its US mutual
fund offering into a proprietary umbrella investment trust, which enhances administrative efficiencies and results in lower costs for
investors. Pendal Australia also transitioned its fund registry during the year to Mainstream, which continues to progress the
transition away from a number of Westpac support services.
COVID-19
The COVID-19 pandemic continued to impact individuals, businesses and society during the year, as the spread of further strains of
the virus was met with national vaccination programs together with localised community lockdowns and social restrictions. Fiscal
stimulus measures have largely been wound back as many countries have seen indicators of economic recovery. Pendal Group’s
global workforce has adapted to working remotely as and when required. The Group continued its focus on the health and safety of
employees, and maintaining quality service to clients while managing their portfolios.
During the financial year, there have not been any significant adverse operational or financial impacts on the Group as a result of
COVID-19. The Group has not participated in any COVID-19-related government programs or support beyond those that are
generally available or automatically applied, such as the Singapore Job Support Scheme ($26,487 received by the Group during the
year (2020: $67,781)).
Reconciliation of Statutory NPAT to UPAT1
SSttaattuuttoorryy NNPPAATT
Amortisation and impairment of intangibles1
Net (gains)/losses on financial assets held at fair value through profit or loss (FVTPL)2
Transaction and integration costs3
Adjust for tax effect
UUnnddeerrllyyiinngg pprrooffiitt aafftteerr ttaaxx ((UUPPAATT))
2021
$’000
116644,,770022
12,104
(38,743)
16,002
11,236
116655,,330011
2020
$’000
111166,,338866
6,140
14,316
-
(4,247)
113322,,559955
1 Amortisation and impairment of intangibles relates to fund and investment management contracts and trademarks.
2 Net gains or losses on financial assets held at FVTPL primarily relate to seed investments in pooled funds managed by Pendal Group.
3 Transaction and integration costs relate to the acquisition of TSW during the financial year.
Annual Report 2021 | 29
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021Directors' Report
Directors’ Report
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021
Dividends
The Directors have resolved to pay a final dividend of 24 cents (10 per cent franked4) per share (2020: 22.0 cents per share 10 per
cent franked) on ordinary shares. The amount of dividend, which has not been recognised as a liability at 30 September 2021, is
$89.1 million (2020: $68.6 million). The Company paid an interim dividend of 17.0 cents per share ($53.1 million) on 1 July 2021.
Equity dividends on ordinary shares
(a)
Dividends declared and paid during the financial year
Final 10 per cent franked5 dividend for the 2020 Financial Year: 22.0 cents per share
(2019 Financial Year: 25.0 cents per share 10 per cent franked)
Interim 10 per cent franked5 dividend for the 2021 Financial Year: 17.0 cents per share
(2020 Financial Year: 15.0 cents per share 10 per cent franked)
(b)
Dividends proposed to be paid subsequent to the end of the financial year
and not recognised as a liability
2021
$’000
2020
$’000
68,532
82,571
53,122
121,654
46,782
129,353
Final dividend for the 2021 Financial Year 24 cents (10 per cent franked5) per share
(2020 Financial Year: 22.0 cents per share 10 per cent franked)
89,053
68,612
Significant changes in the state of affairs
On 22 July 2021, Pendal Group acquired 100 per cent of the equity interests in Thompson Siegel & Walmsley LLC (TSW), a value-
oriented investment management firm based in Virginia, USA. The acquisition was funded by the issue of 55,882,288 ordinary
shares in the Company to new and existing shareholders under an institutional share placement and a share purchase plan, and a
new syndicated term debt facility. The Company issued 2,825,073 ordinary shares to TSW employee owners as part of the
consideration for the acquisition.
There have been no other significant changes in the state of affairs of Pendal Group during the 2021 Financial Year.
Matters subsequent to the end of the financial year
There are no matters or circumstances which are not otherwise reflected in this Financial Report that have arisen subsequent to the
balance date, which have 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 OFR5 sets out the information on the business strategies and prospects for future financial years. 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 (Cth), 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.
4 The whole of the unfranked amount of the dividend will be Conduit Foreign Income, as defined in the Income Tax Assessment Act 1997 (Cth).
5 Refer to the Chairman’s Letter, Group CEO’s Report and Global Operating Review on pages 2 to 20 of the Annual Report accompanying this Directors’
Report.
30 | Pendal Group
Directors' ReportFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021
Directors’ Report − Remuneration Report
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021
A message from the Chair of the Remuneration & Nominations Committee
On behalf of the Board, I present the Pendal Group Remuneration Report for the 2021 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 is to be a global asset management business that delivers exceptional investment returns to clients by attracting and
retaining superior investment talent. The acquisition of TSW builds on this vision with a remuneration framework in place that is
market related, supports our business model, vision and values; while meeting the expectations of our shareholders.
Whilst governments globally assisted employers through various support programs related to COVID-19, Pendal Group’s
businesses did not participate in any COVID
or automatically applied, such as the Singapore Job Support Scheme ($26,487 received by the Group during the year (2020:
$67,781)).
related government programs or support beyond those that are generally available
19
‐
‐
In March, Group Executive Officer (CEO) and Managing Director Mr Emilio Gonzalez announced his resignation. Under Mr.
Gonzalez’s strong leadership and contribution for over a decade, Pendal Group has transformed into a global asset manager. The
Group’s robust succession plan enabled the Board to appoint Nick Good as the new Group Chief Executive Officer and Managing
Director. Prior to the appointment, Mr Good was CEO of our J O Hambro Capital Management (JOHCM USA) operations in the US.
TSW’s Chief Executive Officer, John Reifsnider was appointed as the CEO of Pendal Group’s combined USA business, succeeding
Mr. Good. Mr. Gonzalez served out his notice period through to 30 September 2021.
Pendal Group continued to adhere to its policy of maintaining the alignment between its employees and shareholders in the 2021
Financial Year. The Group’s overall performance has been reflected in remuneration outcomes for the Executive team.
With the exception of Mr. Good who received an increase related to his promotion to Group CEO and Managing Director, no fixed
remuneration increases were awarded to Executive team members in the 2021 Financial Year.
As Mr Gonzalez remained with the Group for the full year, his Short Term Incentive (STI) award measured his performance against
his KPIs for the full year. Mr Good’s STI award was determined by measuring his performance against his original KPIs for the first six
months of the year and the Group CEO and Managing Director KPIs for the second half of the year.
2021 STI awards for the Executive team were higher than the previous year reflecting an improved year for the business with an
average outcome of 127% of target and 70% of maximum opportunity. The Group CEO and Managing Director received 136% of
target and 70% of maximum opportunity and took into account Nick Good’s previous role as CEO, JOHCM USA and his mid-year
appointment as Group CEO.
The Board believes the outcomes for the 2021 Financial Year appropriately reflect the balance between employee and shareholder
interests. The alignment with shareholder returns is also incorporated in remuneration outcomes through the deferral of up to 50
per cent of the STI in Pendal Group shares, vesting over five years with movements in the share price impacting the value of shares
issued in prior STI payments. Further, as the Cash Earnings Per Share and the Total Shareholder Return hurdles in the 2018 Long
Term Incentive (LTI), due to vest in 2021, did not meet their targets, Pendal Group executives forfeited 100 per cent of their original
2018 LTI grants. Mr. Good received a pro-rated LTI outcome in the 2021 Financial Year, based on Rights granted to him in October
2019 when in his role of CEO, JOHCM USA. The Board determined to pro-rata the original grant by 50%, reducing the measurement
period from four to two years and test it against the three equally weighted performance hurdles specific to the USA business, they
being (USA Client Revenue, JOHCM (USA) Inc Operating Profit and Net New Money raised from nominated strategies. The outcome
is reflected in Table 1b and represents 33% of the original grant. This adjustment was made as Mr. Good will be remunerated on the
Group based LTI program from 1 October 2021.
The Group’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 appetite 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:
•
•
•
Recommended to the Board the appointment and remuneration arrangements for the incoming Group CEO and Managing
Director, and the CEO, Pendal USA;
Conducted a review of TSW's existing remuneration structure prior to the TSW acquisition and approved new
remuneration schemes aligned with our business model;
Reviewed our remuneration practices in jurisdictions where regulatory changes required the adoption of new standards;
• Approved conversion and issuance of new offer letters under the Fund Linked Equity Scheme;
• Updated the performance reward scheme guidelines of Pendal and JOHCM to include Underlying Profit After Tax (UPAT)
as Pendal's alternative profit measure;
Annual Report 2021 | 31
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021Directors' Report - Remuneration Report
Directors’ Report − Remuneration Report
Directors’ Report − Remuneration Report
Directors’ Report − Remuneration Report
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021
•
•
•
Reviewed the Group Remuneration and Nominations Committee Charter to reflect organisational changes and to maintain
Reviewed the Group Remuneration and Nominations Committee Charter to reflect organisational changes and to maintain
Reviewed the Group Remuneration and Nominations Committee Charter to reflect organisational changes and to maintain
alignment with the ASX Principles; and
alignment with the ASX Principles; and
alignment with the ASX Principles; and
• Received independent remuneration benchmarking from an external consultant for the Key Management Personnel and
• Received independent remuneration benchmarking from an external consultant for the Key Management Personnel and
• Received independent remuneration benchmarking from an external consultant for the Key Management Personnel and
Non-Executive Directors.
Non-Executive Directors.
Non-Executive Directors.
Pendal is a talent business with people being at the heart of our value proposition. We will continue to refine our remuneration
Pendal is a talent business with people being at the heart of our value proposition. We will continue to refine our remuneration
Pendal is a talent business with people being at the heart of our value proposition. We will continue to refine our remuneration
arrangements to ensure they deliver on our goals, accounting for the ever-changing business environment, legislative reform and to
arrangements to ensure they deliver on our goals, accounting for the ever-changing business environment, legislative reform and to
arrangements to ensure they deliver on our goals, accounting for the ever-changing business environment, legislative reform and to
reflect your feedback.
reflect your feedback.
reflect your feedback.
Andrew Fay
Andrew Fay
Andrew Fay
Chair of the Remuneration & Nominations Committee
Chair of the Remuneration & Nominations Committee
Chair of the Remuneration & Nominations Committee
32 | Pendal Group
Directors' Report - Remuneration ReportFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021
Directors’ Report − Remuneration Report
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021
Introduction to the 2021 Remuneration Report
The Directors are pleased to present the Remuneration Report for the year ended 30 September 2021. 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
33
34
36
43
45
52
59
62
64
64
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 2021 Financial Year. From 1 October 2020 to 30 September 2021, the KMP for the Pendal Group were the Non-Executive
Directors (NED) of the Company and the members of the Global Executive Committee.
Following the announcement in March 2021 that Emilio Gonzalez would be stepping down from the role of Group CEO and Managing
Director, Nick Good was promoted to the role of CEO and Managing Director of Pendal Group as of 1 April 2021. In July 2021, John
Reifsnider was appointed to the role of Chief Executive Officer of Pendal’s combined US business, taking over the role of CEO,
JOHCM USA from Mr. Good.
Non-Executive Directors during the 2021 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 2021 Financial Year
TTeerrmm aass KKMMPP
Full year
Full year
Full year
Full year
Full year
Full year
NNaammee
Emilio Gonzalez1
Nick Good2
Alexandra Altinger
Richard Brandweiner
John Reifsnider3
Bindesh Savjani
Cameron Williamson
Notes:
PPoossiittiioonn
Group Chief Executive Officer
Group Chief Executive Officer
TTeerrmm aass KKMMPP
Until 31 March 2021
Effective from 1 April 2021
Chief Executive Officer, JOHCM UK/Europe and Asia Full year
Chief Executive Officer, Australia
Full year
Chief Executive Officer, Pendal USA
Effective from 23 July 2021
Group Chief Risk Officer
Group Chief Financial Officer
Full year
Full year
1 After stepping down from the Group CEO position effective from 1 April 2021, Mr. Gonzalez served out his notice period through to 30 September 2021.
2 Nick Good changed roles during the year, commencing as the Group CEO on 1 April 2021. Prior to that, Mr. Good was the CEO for JOHCM USA since 2 December 2019.
3 John Reifsnider joined Pendal Group as the CEO of Pendal USA, effective from 23 July 2021 and became a member of the Global Executive Committee. The disclosures in
this report are from that date onwards.
Annual Report 2021 | 33
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021Directors' Report - Remuneration Report
Directors’ Report − Remuneration Report
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021
2. Global Reward Framework
Pendal Group’s remuneration approach is directly aligned to our Corporate Vision and Strategic Priorities. The success of our
reward framework is evidenced by 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 Earnings Per Share
performance. 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
1
1. Previously Cash EPS was used. Further details in relation to replacing Cash EPS with Underlying EPS is provided on page 49 of this report.
34 | Pendal Group
Directors' Report - Remuneration ReportFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021
Directors’ Report − Remuneration Report
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021
Risk management is a fundamental consideration for Pendal Group when determining variable remuneration outcomes. The Pendal
Group risk management culture is supported by its reward framework with sound risk management practices 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 Pendal 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 (Pendal Performance Share Rights and restricted shares) in certain
circumstances;
• 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; and
• Ongoing review of existing reward frameworks across different employee groups, businesses and jurisdictions with a view to
encourage responsible business conduct and to support prudent risk taking.
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 the target remuneration mix. Fixed remuneration represents the sum of annual base salary,
superannuation guarantee payments (for executives based in Australia), and pension/retirement benefits (for executives outside
Australia). 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. Any year-on-year changes to the charts below reflect changes to Group Executives or their remuneration.
Charts 1 and 2: Global Executive Committee – target remuneration mix
Annual Report 2021 | 35
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021Directors' Report - Remuneration Report
Directors’ Report − Remuneration Report
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021
3. Remuneration Structure
Group CEO Remuneration
Following the resignation of Group CEO Emilio Gonzalez on 31 March 2021, Nick Good was appointed as the new Group Chief
Executive Officer and Managing Director for Pendal Group on 1 April 2021.
Details of the Mr Good’s remuneration package is summarised in this section:
• Base Cash Salary of US Dollars 600,000*;
• Target STI of US Dollars 950,000 with a STI floor of US Dollars 0 and a maximum range of US Dollars 1.9 million for performance
that exceeds aggregate Key Performance Indicators; and
• LTI opportunity of US Dollars 750,000.
The graph below provides a comparison of Mr. Good’s and Mr. Gonzalez’s respective target remuneration mixes. Mr. Good’s total
package value is subject to change due to fluctuations in A$/USD exchange rate.
Graph 1: Comparison of target remuneration mix - current and former Group CEOs
* Graph 1 is using an A$/US Dollars exchange rate of 0.7519. In addition to his base salary, Mr. Good is also eligible for 401K contributions and non-monetary benefits
including health and other employment related insurance benefits.
The actual outcome of variable pay 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. Mr. Good’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. Pendal is committed to providing LTI only where justified by Company performance.
A significant proportion of the Group CEO’s variable reward – the (STI deferral) and the vesting or forfeiture of the LTI component of
his remuneration - are 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.
36 | Pendal Group
Directors' Report - Remuneration ReportFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021
Directors’ Report − Remuneration Report
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021
Graph 2: Group CEO’s Variable Reward over time
1 FY21 EG – Represents Emilio Gonzalez’s (EG) actual remuneration.
2 FY21 NG - Represents Nick Good’s (NG) actual remuneration (excluding payments for deferred remuneration forgone following the commencement of his employment)
for FY21 pro-rata to take into account his change in role on 1 April 2021.
Mr Gonzalez’s remuneration arrangements
After stepping down from the Group CEO position effective from 1 April 2021, Mr. Gonzalez served out his notice period through to
30 September 2021. Mr. Gonzalez’s fixed remuneration remained unchanged in the 2021 Financial Year. He received fixed
remuneration and an STI outcome reflecting a full year contribution to the Group as per the Board’s discretion. His 2018 LTI lapsed
as LTI performance targets were not met for the 2018 LTI grant.
Mr. Gonzalez’s existing STI deferred equity awards will remain on-foot after cessation of his employment and will vest in the normal
course. His LTI awards have been prorated to reflect the period of employment up to 30 September 2021 and will vest in the normal
course subject to meeting performance hurdles.
Annual Report 2021 | 37
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021Directors' Report - Remuneration Report
Directors’ Report − Remuneration Report
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021
The table below outlines the Group CEO’s remuneration structure.
Remuneration component Description
Fixed Remuneration
Nick Good is located in the USA and is remunerated in US Dollars. His base salary is US Dollars 600,000. Mr. Good is also
eligible for 401K contributions and non-monetary benefits including health and other employment related benefits.
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 is US Dollars 950,000 with a STI floor of US Dollars 0 and a maximum range of US Dollars 1.9
million subject to Pendal’s performance and the executive’s performance during the 2021 Financial year.
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 equally over five years. This provides long-term
exposure to the share price movement in addition to the separate LTI award.
For the 2021 Financial Year, the Group CEO’s key performance indicators included the following.
Financial
Underlying Profit after Tax (UPAT)
Base Management Fee Revenue (targets previously agreed with Board)
Execute on growth strategy
Progress against Strategic objectives that strengthens the business model
including the implementation of the Regnan business model; identifying potential
acquisitions; review of efficiencies and investment performance; and the execution
and implementation of the Group governance plan.
Business development
Progress towards the development of new business opportunities, enhancement
of the distribution strategy and strengthening of succession plans.
Investment performance
Delivering exceptional investment performance and developing plans for
improving investment performance in underperforming strategies.
Risk management and
operational effectiveness
Effective risk management and operational risk framework that embeds a quality
risk culture to ensure the business operates within the agreed Risk Appetite
framework with sound outcomes, and a robust operational platform is utilised with
the right governance structures, processes and resources to support the business
model and strategy including Brexit developments.
The Group CEO’s performance against these KPIs is outlined in Section 5 of this Report.
38 | Pendal Group
Directors' Report - Remuneration ReportFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021
Directors’ Report − Remuneration Report
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021
Remuneration component Description
LTI grant
As a part of his Group CEO package, Mr. Good, subject to approval by shareholders at the 2021 AGM will receive an initial award
of restricted PDL Performance Share Rights (“PSRs”) for no consideration, with a value of US Dollars 750,000. This amount
represents the maximum incentive opportunity under the award and is determined with reference to market benchmarking. The
number of PSRs to be offered will be determined by dividing the value of the award in Australian Dollar equivalent by the 5-day
volume weighted average price (“VWAP”) of one ordinary share of Pendal Group Limited immediately prior to the start of the
performance period.
The award is subject to two equally weighted hurdles, measured over three years:
a) 50 per cent subject to relative Total Shareholder Return (TSR) performance; and
b) 50 per cent subject to Underlying EPS growth.
Hurdles are designed to be reasonably stable over the cycle.
TSR Rights 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
Percentage of TSR award to vest
Below the median of the S&P/ASX200
At median of the S&P/ASX200
Nil
50%
Between median and the 75th Percentile
Vesting occurs on a straight-line basis from 50% to 100%
At or above the 75th Percentile
100%
Underlying EPS Rights performance hurdle
The Underlying EPS portion of awards vests as follows, based on compounded annual growth rate (CAGR) performance.
Underlying EPS over the performance period
Percentage of underlying EPS award to vest
Less than or equal to 5%
At 5%
Nil
50%
More than 5% but less than 10%
Vesting occurs on a straight-line basis from 50% to 100%
At or above 10%
100%
Details of equity based remuneration
Details of the various equity-based reward plans are noted in the table below. As at 30 September 2021, approximately 10.6 per cent
of the share register represents employee interests. From a governance and administration perspective, external Trustees are
responsible for managing the 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 ASX Listing Rule 4.10.22, during the 2021 Financial Year, it should be noted
that the Trustee of the Pendal Group Employee Benefit Trust acquired a total of 4,570,572 PDL shares at an average price of $6.45
totaling $29.5million. 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 $60 million which will be acquired via on market purchasing and employee share sales throughout the year,
with the exception of Fund Linked Equity (FLE) shares which are issued.
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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
and TSW VR Plan
The 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, Pendal USA) who work
within the Group’s businesses 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 the regional businesses through the creation of variable
reward (VR) pools from which employees are paid their variable reward outcomes. The size of the variable
reward pool considers individual performance and performance against financial objectives. With the
exception of the General Staff Bonus Scheme, these plans apply compulsory deferral into PDL equity
subject to bonus levels. The TSW schemes were introduced from July 2021 post the completion of the
acquisition of the TSW business by Pendal Group on 23 July 2021.
Participants
General staff and
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, JOHCM and TSW 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 Underlying EPS and TSR performance hurdles being met
at the end of a three-year performance period. PRS awards granted in 2018 were tested against
performance hurdles at the end of the 2021 Financial Year. Vesting outcomes for 2018 PRS awards are set
out in Graphs 5a and 5b.
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 2021 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 in to 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 12 month period
ending 30 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 caters 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 funds under management (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
investment teams not
covered by the Pendal
Australia Boutique VR
Scheme
Fund managers
Fund managers
TSW Fund Manager
Remuneration
Scheme
JOHCM Long-Term
Retention Equity
In line with the principles of rewarding fund managers on a revenue share arrangement the TSW Fund
Manager Reward Scheme is a pool of funds based on a revenue share for retaining clients and a revenue
share rewarding for growth. This creates a bonus pool that is then distributed amongst the investment
team based on the individual performance and contribution to the overall success of the business.
Compulsory deferral into PDL equity applies to this plan.
Fund managers
The LTI plan provides for long-term retention of certain fund managers 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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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 and TSW are based on a different
formula and may differ between more established funds and newer investment strategies. Performance fees similarly attract a
greater revenue share and so fund manager total remuneration will vary over time, depending 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 through a revenue share program
or the FLE scheme. The fund manager remuneration scheme that a team participates in may 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 (FLE) 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 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. 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 2021 Financial Year, the
Company issued 400,178 ordinary shares under the FLE Scheme.
When the FLE is exercised, generally PDL shares are issued to satisfy the FLE conversion. The cost to the business impacts
Underlying EPS over a period of years as the equity issued is amortised over time. The shares are subject to time vesting restrictions
of up to five years as a retention mechanism. In return, the revenue share to which the fund managers are entitled to decreases
which has a positive contribution to PDL revenue. The amount of FUM or firm revenue retained post the issuance of shares and the
percentage share of revenue to the firm will have an impact on Underlying EPS. 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.
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.
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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 from FUM raised in the investment strategy is used as the basis to
determine rights to PDL equity (i.e. through the conversion ratio).
Revenue share
Fund managers remunerated through a
revenue-share arrangement, based on a
pre-determined percentage.
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 five years).
Conversion into PDL equity reduces the fund manager’s revenue share
percentage. Full conversion is required by the end of year seven.
Equity
PDL equity granted during the period as the
revenue share is delivered in cash.
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 five years.
Underlying EPS
Reflected in earnings as a result of
growth in FUM.
The amount of FUM or firm revenue retained post the issuance of shares and
the percentage share of revenue to the firm impacts Underlying EPS.
Participation in the FLE Scheme
During the 2021 Financial Year 400,178 PDL shares were issued to satisfy the remaining conversion of the FLE scheme.
Investment strategies participating in the FLE Scheme represents FUM of $2.6 billion as at 30 September 2021. Based on the FUM
as at 30 September 2021, the value of PDL equity that may be granted to participants in the FLE Scheme is approximately $13.7
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 $13.7 million in PDL equity, this would equate to 1.6 million newly issued shares based
on a theoretical PDL share price of $8.54 in accordance with the FLE Scheme rules. The 1.6 million shares would increase the fully
diluted share count by 0.4 per cent.
Assuming other remaining FLE rights are converted into PDL equity at the end of year seven, 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)
2022
0.9
2023
-
2024
-
2025+
0.7
Notwithstanding the share issuance under the FLE, shareholders’ portion of revenue from the investment strategies increases (as fund
manager share of revenue is reduced). The amount of FUM or firm revenue retained post the issuance of shares and the percentage
share of revenue to the firm impacts on Underlying EPS.
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 providing a strong operational platform covering
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 Pendal Group which produces strong
alignment between the interests of fund managers and shareholders. Consequently, fund managers also have a keen interest in
Pendal Group dividends and EPS 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 choosing a suitable fund manager.
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 the FLE scheme tapers 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. As fund managers transition from one scheme to another, there is an
upfront cost to the business as it is implemented, however the initial investment will improve the long-term sustainability of the
Company’s revenue stream as it mitigates the loss of key talent and any resulting in decline in FUM and revenue.
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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 sales incentive plans 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 Non-Executive Directors (NEDs), senior
executives, 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, other
Global Group Executive members and 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 NEDs;
• 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.
During the 2021 Financial Year, the Board and Remuneration Committees actioned the following significant items in relation to
remuneration arrangements in the table below.
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Significant matters considered during the 2021 Financial Year
Reviewed corporate remuneration
arrangements
Ongoing evaluation of the impact of Investment Firm Directive/Investment Firm Prudential Scheme
(IFD/IFPR) in the UK. Conducted a review of TSW’s existing remuneration structure prior to the acquisition
of TSW.
Recommended the appointment and
remuneration of executives
Appointment of the Chair of the Board and independent directors of JOHCM Funds (UK) Limited, and
appointment of Directors to the Regnan European UCITS Board.
Recommended to the Board the appointment and remuneration arrangements for the CEO, Pendal USA and
the incoming Pendal Group CEO.
Update of the existing performance
reward schemes
Updated the performance reward scheme guidelines of Pendal and JOHCM to reflect the change to
Pendal's alternative profit measure from Cash Net Profit After Tax (Cash NPAT) to Underlying Profit
After Tax (UPAT).
Approved various scheme awards
Approved conversion for and issuance of new offer letters under the Fund Linked Equity Scheme.
Ongoing review and update of the
Group Remuneration and Nominations
Committee Charter
Received independent remuneration
benchmarking from an external
consultant for the Key Management
Personnel and Non-Executive
Directors.
Ongoing review to reflect organisational changes and to maintain alignment with the ASX Principles.
Reviewed KMPs and NED remuneration against benchmark data from ASX listed and UK and US peer
financial groups.
Engagement of remuneration consultants
The Remuneration & Nominations Committee has a Charter in place that acknowledges its obligations under the
Corporations Act 2001 (Cth) 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. The consultant must provide 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 advisor.
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 (Cth).
Services provided to management and the Committee
The following organisations provided management with remuneration benchmarking data for employees:
• Financial Institutions Remuneration Group (FIRG)
• Aon McLagan
The following organisations provided management with assistance on assessing regulatory impacts on 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
Graph 3 below outlines Mr. Gonzalez’s annual total remuneration since he joined the organisation relative to share price growth. It
bears noting that the Company did not have a LTI scheme for Mr. Gonzalez 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 and long-
term incentives and with shareholder outcomes. On this basis, the STI component decreased, with the result that Mr. Gonzalez’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 his exposure to share price movements during the vesting
period.
Except for some minor adjustments to reflect changes in Australian Superannuation Guarantee legislation, the fixed remuneration
element for the Group CEO remained unchanged since his commencement in 2010 until 1 January 2017, when it was increased as per
the 2017 Remuneration Report. On 1 April 2021, Mr. Good took over as Group CEO and Managing Director from Mr. Gonzalez. While
Mr. Good’s benefits are reflective of his peers located in the United States, his short and long term incentives as well as the cash and
deferred component of his target pay mix maintain the close alignment between the group performance and his remuneration
outcomes. Graph 1 in this report presents a comparison of Mr. Good’s and Mr. Gonzalez’s respective target pay mix.
As can be seen from Graph 3 the Group CEO’s total remuneration is closely aligned with the movement of the share price. In periods
where the share price has performed well, total remuneration is higher due to the increase value in vested shares issued in previous
years. In periods where the share price is lower total remuneration has declined and in some cases the value of vested shares is less
than at the time of grant. The alignment of the Group CEO’s variable remuneration with shareholders is evident.
Graph 3: Group CEO’s Total Remuneration over time
1 FY21 EG – Represents Emilio Gonzalez’s (EG) actual remuneration.
2 FY21 NG - Represents Nick Good’s (NG) actual remuneration (excluding payments for deferred remuneration forgone following the commencement of his employment)
for FY21 pro-rata to take into account his change in role on 1 April 2021.
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How the share of reward is divided
As part of Pendal Group’s remuneration philosophy, our business model involves sharing revenue 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 remuneration to employees and the profits attributed to shareholders is outlined in Chart 3. This is calculated by taking into
account total variable remuneration paid to employees and profits post tax attributed to shareholders. It reflects how employees and
shareholders are rewarded . The increase in the employee share of reward in the 2021 Financial Year compared to 2020 Financial
Year reflects a higher performance fee earned (where the revenue share to fund managers is higher) in the 2021 Financial Year.
Chart 3: Share of reward 1
1. Share of reward reflects total employee remuneration and Underlying profit after tax (UPAT) attributed to shareholders.
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Graph 4 demonstrates the linkage between Pendal Group performance (i.e. profitability) 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 increase in 2021 Financial Year variable and total employee expenses reflects a year where overall business revenue and profits
were higher, including an improved year of performance fees where the fund managers get a larger share of the revenue. Total
employee expenses includes both variable and fixed expenses and the pro-rata employee expenses of the TSW business since
completion of the acquisition in July 2021. This was also higher as a result of an increase in full-time equivalent employees
supporting the multi year business growth program as outlined to shareholders in the 2020 AGM and the transitioning of fund
manager incentive schemes.
Graph 4: VR outcomes compared to Company performance over the last five years
Vesting of LTI grants
The 2018 Financial Year LTI grants awarded to Emilio Gonzalez 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 below 5 per cent, therefore the Cash EPS portion of the award did
not vest.
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 was in the third quartile of the ASX 200 comparator group and so the relative TSR portion of the award did
not vest.
Mr. Good received a pro-rated LTI outcome in the 2021 Financial Year, based on rights granted to him in October 2019 when in his
role of CEO, JOHCM USA. The Board determined to pro-rata the original grant by 50%, reducing the measurement period from four
to two years and test it against the three equally weighted performance hurdles specific to the USA business, they being USA Client
Revenue, JOHCM (USA) Inc Operating Profit and Net New Money raised from nominated strategies. The outcome is reflected in
Table 1b and represents 33% of the original grant. The adjustment was made as Mr. Good will be remunerated on the Group based
LTI program from 1 October 2021.
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Graphs 5a and 5b illustrate the performance against LTI hurdles over time under the Performance Reward Scheme at the end of
each three year performance period. Effective from the 2021 Financial Year, Pendal replaced cash EPS with Underlying EPS.
Graph 5a: Performance Reward Scheme – Cash EPS outcome achieved at the end of each performance period against the LTI
hurdle for the last five years
Graph 5b: 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
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Why relative TSR and Underlying EPS hurdles?
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021
Vesting of LTI grants and link to Pendal Group’s Performance
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021
The TSR hurdle of 50-100% is aligned with common market practice to ensure an equitable reward for executives to peer executives
Vesting of LTI grants and link to Pendal Group’s Performance
assessed on a similar basis. The TSR ASX 200 peer group represents the primary investable universe from which shareholders can
Why relative TSR and Underlying EPS hurdles?
Vesting of LTI grants and link to Pendal Group’s Performance
choose to invest. Vesting based on Pendal results relative to the ASX 200 provides strong alignment between Pendal Executives
The TSR hurdle of 50-100% is aligned with common market practice to ensure an equitable reward for executives to peer executives
Why relative TSR and Underlying EPS hurdles?
and shareholders in terms of where investor capital may be allocated. There is no change to the TSR hurdle.
Why relative TSR and Underlying EPS hurdles?
assessed on a similar basis. The TSR ASX 200 peer group represents the primary investable universe from which shareholders can
The TSR hurdle of 50-100% is aligned with common market practice to ensure an equitable reward for executives to peer executives
Since the Company was listed in 2007, Cash Net Profit After Tax (Cash NPAT) has been used as the alternative profit measure in
choose to invest. Vesting based on Pendal results relative to the ASX 200 provides strong alignment between Pendal Executives
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
announcing the performance of the business. Cash NPAT will continue to be used when assessing the performance outcome of the
and shareholders in terms of where investor capital may be allocated. There is no change to the TSR hurdle.
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
2018 and 2019 LTIs as it constituted one of the applicable LTI hurdles when those awards were approved and granted. Following a
choose to invest. Vesting based on Pendal results relative to the ASX 200 provides strong alignment between Pendal Executives
Since the Company was listed in 2007, Cash Net Profit After Tax (Cash NPAT) has been used as the alternative profit measure in
and shareholders in terms of where investor capital may be allocated. There is no change to the TSR hurdle.
review, Pendal replaced Cash EPS with Underlying EPS as the preferred alternative profit measure effective from the 2021 Financial
and shareholders in terms of where investor capital may be allocated. There is no change to the TSR hurdle.
announcing the performance of the business. Cash NPAT will continue to be used when assessing the performance outcome of the
Year. Accordingly, for LTI grants issued in December 2020 onwards, Underlying EPS replaced Cash EPS. We believe this change is
Since the Company was listed in 2007, Cash Net Profit After Tax (Cash NPAT) has been used as the alternative profit measure in
2018 and 2019 LTIs as it constituted one of the applicable LTI hurdles when those awards were approved and granted. Following a
Since the Company was listed in 2007, Cash Net Profit After Tax (Cash NPAT) has been used as the alternative profit measure in
more aligned with market practice and the preferred approach of proxy advisors. It simplifies reporting and the treatment of
announcing the performance of the business. Cash NPAT will continue to be used when assessing the performance outcome of the
review, Pendal replaced Cash EPS with Underlying EPS as the preferred alternative profit measure effective from the 2021 Financial
announcing the performance of the business. Cash NPAT will continue to be used when assessing the performance outcome of the
employee expenses in line with statutory accounts.
2018 and 2019 LTIs as it constituted one of the applicable LTI hurdles when those awards were approved and granted. Following a
Year. Accordingly, for LTI grants issued in December 2020 onwards, Underlying EPS replaced Cash EPS. We believe this change is
2018 and 2019 LTIs as it constituted one of the applicable LTI hurdles when those awards were approved and granted. Following a
review, Pendal replaced Cash EPS with Underlying EPS as the preferred alternative profit measure effective from the 2021 Financial
Under Cash NPAT, the variable employee expense is fully expensed as a cash item in the year the revenue is earned, whereas under
more aligned with market practice and the preferred approach of proxy advisors. It simplifies reporting and the treatment of
review, Pendal replaced Cash EPS with Underlying EPS as the preferred alternative profit measure effective from the 2021 Financial
Year. Accordingly, for LTI grants issued in December 2020 onwards, Underlying EPS replaced Cash EPS. We believe this change is
UPAT the variable employee expense is amortised over time. UPAT excludes items not considered as a part of the underlying
employee expenses in line with statutory accounts.
Year. Accordingly, for LTI grants issued in December 2020 onwards, Underlying EPS replaced Cash EPS. We believe this change is
more aligned with market practice and the preferred approach of proxy advisors. It simplifies reporting and the treatment of
earnings of the business (such as gains or losses on the firm’s seed portfolio).
more aligned with market practice and the preferred approach of proxy advisors. It simplifies reporting and the treatment of
Under Cash NPAT, the variable employee expense is fully expensed as a cash item in the year the revenue is earned, whereas under
employee expenses in line with statutory accounts.
The EPS hurdles of 5-10% have been set by the Board to encourage management to build a business that is sustainable through
employee expenses in line with statutory accounts.
UPAT the variable employee expense is amortised over time. UPAT excludes items not considered as a part of the underlying
Under Cash NPAT, the variable employee expense is fully expensed as a cash item in the year the revenue is earned, whereas under
various economic cycles, irrespective of whether markets rise or fall. The Board set the 5-10% band for Cash and Underlying EPS
earnings of the business (such as gains or losses on the firm’s seed portfolio).
Under Cash NPAT, the variable employee expense is fully expensed as a cash item in the year the revenue is earned, whereas under
UPAT the variable employee expense is amortised over time. UPAT excludes items not considered as a part of the underlying
vesting by considering the evidence and expectations for reasonable long-term earnings growth. The goal is to maintain a
UPAT the variable employee expense is amortised over time. UPAT excludes items not considered as a part of the underlying
The EPS hurdles of 5-10% have been set by the Board to encourage management to build a business that is sustainable through
earnings of the business (such as gains or losses on the firm’s seed portfolio).
consistent hurdle across the market cycle so that the goals are very clear for management and shareholders, to be realistically
earnings of the business (such as gains or losses on the firm’s seed portfolio).
various economic cycles, irrespective of whether markets rise or fall. The Board set the 5-10% band for Cash and Underlying EPS
achievable but not easy, and to represent a result that would produce a healthy return for shareholders. Graphs 6a and 6b below
The EPS hurdles of 5-10% have been set by the Board to encourage management to build a business that is sustainable through
vesting by considering the evidence and expectations for reasonable long-term earnings growth. The goal is to maintain a
The EPS hurdles of 5-10% have been set by the Board to encourage management to build a business that is sustainable through
provides a historical overview of Pendal Group’s Cash and Underlying EPS and TSR relative performance against the S&P/ASX 200
various economic cycles, irrespective of whether markets rise or fall. The Board set the 5-10% band for Cash and Underlying EPS
consistent hurdle across the market cycle so that the goals are very clear for management and shareholders, to be realistically
various economic cycles, irrespective of whether markets rise or fall. The Board set the 5-10% band for Cash and Underlying EPS
Accumulation Index.
vesting by considering the evidence and expectations for reasonable long-term earnings growth. The goal is to maintain a
achievable but not easy, and to represent a result that would produce a healthy return for shareholders. Graphs 6a and 6b below
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
provides a historical overview of Pendal Group’s Cash and Underlying EPS and TSR relative performance against the S&P/ASX 200
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 6a and 6b below
Accumulation Index.
Graph 6a: Pendal Group EPS (cents per share) over time
achievable but not easy, and to represent a result that would produce a healthy return for shareholders. Graphs 6a and 6b below
provides a historical overview of Pendal Group’s Cash and Underlying EPS and TSR relative performance against the S&P/ASX 200
provides a historical overview of Pendal Group’s Cash and Underlying EPS and TSR relative performance against the S&P/ASX 200
Accumulation Index.
Accumulation Index.
Graph 6a: Pendal Group EPS (cents per share) over time
Graph 6a: Pendal Group EPS (cents per share) over time
Graph 6a: Pendal Group EPS (cents per share) over time
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021
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FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021
Graph 6b: Pendal yearly TSR and yearly S&P/ASX200 Accumulation Index over time
* For the period FY08 – FY19 EPS reflects Cash EPS. Underlying EPS was used from FY20 onward.
Graph 6b: Pendal yearly TSR and yearly S&P/ASX200 Accumulation Index over time
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021
Graph 6b: Pendal yearly TSR and yearly S&P/ASX200 Accumulation Index over time
* For the period FY08 – FY19 EPS reflects Cash EPS. Underlying EPS was used from FY20 onward.
* For the period FY08 – FY19 EPS reflects Cash EPS. Underlying EPS was used from FY20 onward.
* For the period FY08 – FY19 EPS reflects Cash EPS. Underlying EPS was used from FY20 onward.
Annual Report 2021 | 49
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Group CEO and other Global Executive Committee members’ performance outcomes in the
2021 Financial Year
Group CEO performance and short term incentive outcome
During the year the Group underwent a change in CEO. Emilio Gonzalez announced his resignation in March 2021 and Nick Good
took over the role of Group CEO and Managing Director from 1 April 2021. The 2021 Financial Year short term incentive outcome for
both Mr. Gonzalez and Mr. Good reflects the Board’s assessment of Mr. Gonzalez’s and Mr. Good’s performance against the key
performance indicators including the financial and non-financial measures as outlined below.
Mr. Good’s STI outcome was determined by measuring against his original KPIs for the first six months of the year and the Group
CEO KPIs for the second half of the year. After stepping down from the Group CEO position effective from 1 April 2021, Mr. Gonzalez
served out his notice period through to 30 September 2021. As such, Mr Gonzalez’s STI performance was measured against his
KPIs for the full year. His 2018 LTI lapsed as LTI performance targets were not met for the 2018 LTI grant.
Description of key performance indicators and performance
Performance
Measure
Key Performance
Indicators (KPIs)
Weighting
FY21 Performance
Against KPIs
Financial
Underlying Profit After Tax
Base management fee revenue.
30%
Overall profit was up during the year on the back of higher base
management fees and performance fees. Base management fees
benefited from positive flows from the wholesale channel, particularly
the US and higher equity markets.
• Average FUM +14%
• Base management fee revenue + 14%
• Underlying Profit +25%
• Underlying earnings per share +17%
Execute on
growth strategy
Progress against Strategic
Objectives that strengthen the
business model including the
implementation of the Regnan
business model; identifying
potential acquisitions; review of
efficiencies and investment
performance; and the execution
and implementation of the Group
governance plan.
Short-Term
Incentive
Business
development
Progress towards the
development of new business
opportunities, enhancement of the
product and distribution strategy
and strengthening of succession
plans.
Overall above target
20%
Acquisition of TSW asset management in the US completed to provide
growth and diversification.
Key planks for growth strategy agreed and in place including on-
boarding of new teams, new products, continued roll-out of specialist
ESG firm Regnan, opening of new offices in Europe, product and
distribution priorities.
Improved efficiencies as a result of globalising operating platform and
significant progress in reducing the number of global custody service
providers.
Progress made in simplifying the Company’s structure
Smooth transition of Group CEO and good progress on establishing the
global governance structure.
Overall above target
30%
Identified key products of focus and clear mapping of channels with
positive contribution to fund flows, particularly in the US and Australia.
Launched the Regnan Water and Waste investment strategy as part of
building out the specialists ESG capability with cross selling
opportunities across geographies.
Substantial progress in Europe on ESG credentials and integration of
ESG into product design.
Recruited senior sales personnel to drive sales in Europe and the ,
Institutional market in Australia and expanded the distribution network
in the US with the TSW acquisition.
Overall slightly above target
Investment
performance
Delivering exceptional investment
performance and developing plans
for improving investment
performance in underperforming
strategies.
10%
Key investment strategies outperforming with 61% of FUM over three
years above benchmarks and 74% over five years above benchmarks.
Formal review of investment strategies where performance has been
weak completed with changes made to improve performance and in
some cases strategies were closed.
Overall below target
50 | Pendal Group
Directors' Report - Remuneration ReportFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021
Directors’ Report − Remuneration Report
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021
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,
and a robust operational platform
is utilised with the right
governance structures, processes
and resources to support business
model and strategy including
Brexit developments.
10%
Continued an outstanding response to handling the ongoing Global
pandemic with effective work from home environment across the Group
and tested in periods of “lock-down”. Uninterrupted service to clients
with no significant issues.
Updated risk framework and rolled out across the Group with key risks
(including non-financial risks) effectively identified. Business operated
within the agreed risk appetite and was consistent with the risk
framework.
Embedded quality risk culture within the Group with individuals held
accountable.
Operated an effective Internal audit process with control improvements
addressed in a timely manner.
Overall above target
Description of Long-Term Incentive Award performance hurdles and outcome
performance
Long-term
incentive
award
For Mr. Gonzalez LTI award for which performance was measured over three years from 1 October 2018 to 30 September 2021, the TSR and
Cash EPS performance hurdles were tested. Neither the TSR nor the Cash EPS met their minimum hurdles resulting in 0% vesting and a zero
award for the LTI award that was issued in the 2018 Financial Year.
Mr. Good did not participate in the 2018 LTI award.
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.
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 differ from one Global Executive to the next depending on the role. These measures 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 2021 and 2020 Financial Years
The table below sets out the Global Executive Committee’s (KMP) STI outcomes for the 2021 and 2020 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 for the 2020 Financial Year. Pendal has commenced using Underlying Profit After Tax (UPAT) as its alternative profit
measure effective from the 2021 Financial Year.
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
Nick Good3, 4
Alexandra Altinger5
Richard Brandweiner
John Reifsnider6
Bindesh Savjani5
Cameron Williamson
FFoorrmmeerr KKMMPP
Emilio Gonzalez7
Total
FY
21
20
21
20
21
20
21
20
21
20
21
20
21
20
2211
2200
Cash STI
($)
881,267
788,000
571,952
458,920
413,810
303,000
102,144
-
447,119
477,330
358,193
187,513
800,000
350,000
STI deferred into
Equity 1,2
($)
426,420
-
381,301
196,680
413,810
303,000
102,144
-
191,623
204,570
193,115
62,487
800,000
350,000
Total STI
($)
1,307,687
788,000
953,253
655,600
827,620
606,000
204,288
-
638,742
681,900
551,308
250,000
1,600,000
700,000
Total STI as
% STI Maximum
70%
59%
68%
45%
69%
51%
67%
-
88%
91%
69%
31%
57%
25%
3,574,485
2,508,413
6,082,898
2,564,763
1,116,737
3,681,500
Notes to Table 1a
1 Equity-based remuneration represents the actual short term equity awarded for performance for the 2021 Financial Year. These projected amounts may
change following the completion of Board approved performance reviews, and 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 2021 Financial Year award will be determined closer to the allocation date on 3 December 2021.
3 Nick Good is remunerated in US Dollars. An average exchange rate of 0.7519 (2020: 0.6789) has been applied to convert his total STI to Australian dollars for
the 2021 Financial Year.
4 Nick Good was appointed as the Group CEO, effective from 1 April 2021. His STI outcome for the 2021 Financial Year has been apportioned between the terms
of his employment as Group CEO and the previous terms of his employment as CEO, JOHCM USA (i.e. the CEO JOHCM USA in the first six months of the 2021
Financial Year and as the Group CEO in the second half of the year).
5 Alexandra Altinger and Bindesh Savjani are remunerated in Pound Sterling. An average exchange rate of 0.5493 (2020: 0.5323) has been applied to convert
their total STI to Australian dollars for the 2021 Financial Year.
6 John Reifsnider commenced his employment as the CEO of Pendal USA on 23 July 2021, following the acquisition of TSW, and his STI for the 2021 Financial
Year is that applicable to the period that he was employed by the Group. Mr. Reifsnider is remunerated in US Dollars, and an average exchange rate of 0.7519
has been applied to convert his total STI to Australian dollars.
7 Emilio Gonzalez ceased his position as Group CEO on 31 March 2021 and served his 6-months’ notice period between 1 April and 30 September 2021. His
remuneration outcome for the 2021 Financial Year reflects the full year.
52 | Pendal Group
Directors' Report - Remuneration ReportFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021
Directors’ Report − Remuneration Report
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021
Table 1b: Global Executive Committee remuneration – actual or realised remuneration received in the 2021 and 2020 Financial
Years
This table shows the actual remuneration paid to, and the equity which vested for, each Global Executive Committee member (KMP) in the
2021 and 2020 Financial Years. This includes:
•
•
•
•
•
Fixed remuneration received during the year;
The cash component of STI awarded in 2021 and 2020;
Deferred STI equity awarded in prior years that vested in 2021 and 2020;
LTI equity awarded in prior years that vested in 2021 and 2020; and
Other payments.
Fixed
Remuneration
($)
FY
Cash
component of
STI4
($)
Vesting of
prior years
STI awards5
($)
Vesting of
prior years
LTI awards6,7
($)
Dividends paid
on deferred
shares and
hurdled LTI
equity8
($)
Other9
($)
Total
($)
CCuurrrreenntt KKMMPP
Nick Good1,2
Alexandra Altinger1,3
Richard Brandweiner3
John Reifsnider1,10
Bindesh Savjani1,3
Cameron Williamson3
FFoorrmmeerr KKMMPP
Emilio Gonzalez3,11
Total Global
Executive Committee
Remuneration
21
20
21
20
21
20
21
20
21
20
21
20
21
20
21
694,906
881,267
614,849
844,067
31,483
508,046
33,,557744,,661188
429,617
788,000
140,201
567,996
571,952
44,082
586,686
458,920
-
550,766
413,810
160,211
552,116
303,000
63,527
101,133
102,144
-
-
-
-
640,816
447,119
282,857
661,281
477,330
209,476
450,553
358,193
85,797
451,731
187,513
66,541
800,984
800,000
554,243
803,077
350,000
432,314
-
-
-
-
-
-
-
-
-
-
-
-
-
20,589
1,026,661
22,,440055,,006688
10,677
-
32,479
21,029
-
-
31,056
22,084
12,691
14,342
75,644
89,311
-
-
-
-
-
-
-
-
-
-
-
-
11,,119944,,770077
11,,004455,,660066
11,,115577,,226666
993399,,667722
220033,,227777
11,,440011,,884488
11,,337700,,117711
990077,,223344
772200,,112277
22,,223300,,887711
11,,667744,,770022
3,807,154
3,574,485
1,742,039
844,067
194,030
508,046
10,669,821
20
3,484,508
2,564,763
912,059
-
167,355
1,026,661
8,155,346
Notes to Table 1b
1 Nick Good and John Reifsnider are remunerated in US Dollars. An average exchange rate of 0.7519 (2020: 0.6789) has been applied to convert their
remuneration to Australian dollars for the 2021 Financial Year. Alexandra Altinger and Bindesh Savjani, are remunerated in Pounds Sterling. An average
exchange rate of 0. 5493 (2020: 0. 5323) has been applied to convert their remuneration to Australian dollars for the 2021 Financial Year.
2 Nick Good’s remuneration outcome for the 2021 Financial Year represents the sum of his remuneration packages (i.e. as the CEO JOHCM USA in the first six
months of the 2021 Financial Year and as the Group CEO in the second half of the year). His total fixed remuneration for the 2019 Financial Year reflects the
period that he worked from his employment start date of 2 December 2019.
3 The 2021 Financial Year fixed remuneration for Emilio Gonzalez, Richard Brandweiner and Cameron Williamson did not increase from the 2020 Financial Year.
The difference is attributable to changes to the Australian superannuation guarantee contributions, effective from 1 July 2021. The 2021 Financial Year fixed
remuneration for Alexandra Altinger and Bindesh Savjani did not increase from the 2020 Financial Year. The difference is attributable to changes in the
exchange rate.
4 The cash component of STI represents the award for performance during the Financial Year and paid in December. The FY21 amounts were determined after
performance reviews were completed, and were approved by the Board. It should be noted there may be changes to FY21 amounts 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 2021 are treated as vesting in the 2021 Financial Year. The equity value has been calculated as the number of
securities that vested during the year ended 30 September 2021, multiplied by the closing PDL share price on the date of vesting.
6 The LTI granted in the 2018 Financial Year did not vest in 2021 as it did not meet the minimum performance hurdles for TSR and Cash EPS. The LTI granted
in the 2017 Financial Year did not vest in 2020 as it did not meet the minimum performance hurdles for TSR or Cash EPS.
Annual Report 2021 | 53
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7 The LTI award granted to Nick Good on commencement of employment in 2019 was pro-rated for a two year term following his appointment as Group CEO
from 1 April 2021, and measured on 1 October 2021. The portion of LTI awards for which performance hurdles were met as of 1 October 2021 has been treated
as vesting in the 2021 Financial Year.
8 Dividend payments are dividends paid on STI shares granted in previous years’ rewards that have been deferred in accordance with the Equity Plan Rules.
There were no dividend equivalent payments made in 2021 and 2020 in relation to Performance Share Right LTI awards because they did not vest.
9 Other payments to Nick Good represent 2021 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 two financial years as a
retention mechanism, subject to employment conditions.
10 John Reifsnider commenced employment with Pendal Group on 23 July 2021, following the acquisition of TSW, and his remuneration for the 2021 Financial
Year is that applicable to the period that he was employed by the Group.
11 Emilio Gonzalez ceased his position as Group CEO on 31 March 2021 and served out his notice period through to 30 September 2021.
Table 1c: Statutory remuneration for the Global Executive Committee in the 2021 and 2020 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 2021 and 2020 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-
employment
benefits
Other long-
term
benefits
Equity based payments
Salary
& fees
($)
Cash
component
of STI4
($)
Non-
monetary
benefits5
($)
Super-
annuation
($)
Long
service
leave6
($)
FY
STI
Equity7
($)
LTI
Equity8
($)
Dividends
paid on
deferred
shares and
hurdled LTI
equity9
($)
Other10
($)
Total
($)
CCuurrrreenntt KKMMPP
Nick Good1,2,10
Alexandra
Altinger1,3
Richard
Brandweiner3
John
Reifsnider1,11
Bindesh
Savjani1,3
Cameron
Williamson3
FFoorrmmeerr KKMMPP
Emilio
Gonzalez3,12
Total Global
Executive
Committee
Remuneration
513,148
493,811
31,483
508,046
33,,117722,,662233
726,804
692,531
20,589
1,026,661
21
20
21
20
21
20
21
20
21
20
21
20
631,733
881,267
49,962
63,173
429,617
788,000
27,612
-
564,355
571,952
9,078
3,641
582,698
458,920
8,298
3,988
-
-
-
-
525,141
413,810
527,116
303,000
-
-
101,133
102,144
4,175
-
-
-
582,560
447,119
12,822
58,256
601,165
477,330
18,576
60,116
164,801
622,860
10,677
65,284
293,222
-
25,625
8,111
305,737
273,404
32,479
25,000
7,615
203,851
273,854
21,029
-
-
-
-
-
-
31,773
-
-
-
-
-
263,044
124,002
31,056
364,800
161,001
22,084
424,928
358,193
-
25,625
8,095
116,042
136,702
12,691
426,731
187,513
2,100
25,000
(8,303)
83,844
108,181
14,342
21
775,984
800,000
11,219
25,000
13,877
1,543,551
461,207
75,644
20
778,077
350,000
9,647
25,000
12,333
606,815
390,548
89,311
2211
33,,660055,,883344
33,,557744,,448855
8877,,225566
220011,,332200
3300,,008833
22,,993388,,009966
22,,111111,,998866
119944,,003300
550088,,004466
1133,,225511,,113366
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
33,,771111,,881144
11,,994477,,336644
11,,441122,,441100
11,,558844,,330077
11,,336611,,446655
223399,,222255
--
11,,551188,,885599
11,,770055,,007722
11,,008822,,227766
883399,,440088
33,,770066,,448822
22,,226611,,773311
-
-
-
-
-
-
-
-
-
-
-
-
Notes to Table 1c:
1 Nick Good and John Reifsnider are remunerated in US Dollars. An average exchange rate of 0.7519 (2020:0.6789) has been applied to convert their
remuneration to Australian dollars for the 2021 Financial Year. Alexandra Altinger and Bindesh Savjani are remunerated in Pounds Sterling. An average
exchange rate of 0.5493 (2020:0.5323) has been applied to convert their remuneration to Australian dollars for the 2021 Financial Year.
2 Nick Good’s remuneration outcome for the 2021 Financial Year represents the sum of his remuneration packages (i.e. as the CEO JOHCM USA in the first six
months of the 2021 Financial Year and as the Group CEO in the second half of the year). His total fixed remuneration for the 2020 Financial Year reflects the
period that he worked from his employment start date of 2 December 2019.
54 | Pendal Group
Directors' Report - Remuneration ReportFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021
Directors’ Report − Remuneration Report
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021
3 The 2021 Financial Year fixed remuneration for Emilio Gonzalez, Richard Brandweiner and Cameron Williamson did not increase from the 2020 Financial
Year. The difference is attributable to changes to Australian superannuation guarantee contributions, effective from 1 July 2021. The 2021 Financial Year
fixed remuneration for Alexandra Altinger and Bindesh Savjani did not increase from the 2020 Financial Year. The difference is attributable to changes in
the exchange rate.
4 The cash component of STI represents the award for performance during the Financial Year and paid in December. The FY21 amounts were determined
after performance reviews were completed, and were approved by the Board. It should be noted there may be changes to the FY21 amounts 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, John Reifsnider and Bindesh Savjani includes insurance for healthcare, life 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
STI 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 during the Financial Year but is the amortisation expense for the Financial Year in relation to LTI grants that have
been awarded. The actual value of the 2018 LTI grant measured in 2021, 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 the LTI 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 2021 of the likely level of vesting of the EPS hurdled LTI. For the 2018 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 2018 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 2021 and 2020 in relation to Performance Share Rights.
10 Other payments to Nick Good represent 2021 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 two financial years as a
retention mechanism, subject to employment conditions.
11 John Reifsnider commenced employment with Pendal Group on 23 July 2021, following the acquisition of TSW, and his remuneration for the 2021 Financial
Year is that applicable to the period that he was employed by the Group.
12 Emilio Gonzalez ceased his position as Group CEO on 31 March 2021 and served out his notice period through to 30 September 2021.
Table 2 illustrates the relative proportions of fixed, cash based variable remuneration 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 2021 and 2020 Financial Years’ fixed and variable remuneration as a proportion of total
remuneration
CCuurrrreenntt KKMMPP
Nick Good
Alexandra Altinger
Richard Brandweiner
John Reifsnider
Bindesh Savjani
Cameron Williamson
FFoorrmmeerr KKMMPP
Emilio Gonzalez
Notes to Table 2:
Fixed remuneration
as a percentage of
total remuneration1
2021
(%)
2020
(%)
Cash VR as a percentage
of total remuneration
Equity as a percentage
of total remuneration2
2021
(%)
2020
(%)
2021
(%)
2020
(%)
39
30
35
44
43
42
22
40
42
41
n/a
40
53
36
28
30
26
43
29
33
22
21
32
22
n/a
28
22
15
33
40
39
13
28
25
56
39
26
37
n/a
32
25
49
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 2021 and 2020 Financial Years and long-
term incentives.
Annual Report 2021 | 55
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021Directors' Report - Remuneration Report
Directors’ Report − Remuneration Report
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021
Share based-payments
Details of the shares in Pendal granted as compensation to the previous and the new 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 2021
(#)
Proportion of
award vested
(%)
Proportion of
award forfeited
(%)
GGrroouupp CCEEOO
Nick Good
OOtthheerr GGlloobbaall EExxeeccuuttiivvee
CCoommmmiitttteeee MMeemmbbeerrss
Alexandra Altinger
Richard Brandweiner
Bindesh Savjani
Cameron Williamson
FFoorrmmeerr GGrroouupp CCEEOO
Emilio Gonzalez
Notes to Table 3:
31-Dec-19
137,263
8.59
81,452
78
3-Dec-20
6-Dec-18
5-Dec-19
3-Dec 20
15-Mar-19
5-Dec-19
3-Dec 20
8-Dec-16
7-Dec-17
6-Dec-18
5-Dec-19
3-Dec 20
8-Dec-16
7-Dec-17
6-Dec-18
5-Dec-19
3-Dec 20
27,238
23,813
33,522
42,175
66,275
20,261
28,476
7,688
11,712
12,696
12,507
8,697
81,714
68,347
74,085
71,389
48,718
7.02
8.18
8.06
7.02
8.94
8.06
7.02
10.82
10.69
8.18
8.06
7.02
10.82
10.69
8.18
8.06
7.02
5,476
4,763
6,704
8,435
25,359
4,052
5,695
1,536
2,342
2,539
2,501
1.740
16,342
13,669
14,817
14,278
9,744
20
60
40
20
86
40
20
100
80
60
40
20
100
80
60
40
20
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1
The shares allocated for deferred VR and retention vest over five years with vesting dates of 1 October each year in most cases.
56 | Pendal Group
Directors' Report - Remuneration ReportFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021
Directors’ Report − Remuneration Report
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021
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 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 2021
(#)
Date of
vesting
Nick Good
1-Oct-19
Performance Share Rights
60,491
6.72
8.93
1-Oct-22
1-Oct-19
Performance Share Rights 4
157,280
-
6.80
1-Oct-21
1-Oct-20
Performance Share Rights
76,285
5.10
7.02
1-Oct-23
Alexandra Atlinger
1-Oct-19
Performance Share Rights
123,984
5.86
8.33
1-Oct-22
1-Oct-20
Performance Share Rights
163,187
5,10
7.02
1-Oct-23
Richard Brandweiner
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
1-Oct-20
Performance Share Rights
108,448
5.10
7.02
1-Oct-23
Bindesh Savjani
1-Oct-18
Performance Share Rights
31,224
5.33
8.70
1-Oct-21
1-Oct-19
Performance Share Rights
37,195
5.86
8.33
1-Oct-22
1-Oct-20
Performance Share Rights
48,956
5.10
7.02
1-Oct-23
Cameron Williamson
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
1-Oct-20
Performance Share Rights
54,224
5.10
7.02
1-Oct-23
Emilio Gonzalez 5
1-Oct-18
Performance Share Rights
114,887
5.33
8.70
1-Oct-21
1-Oct-19
Performance Share Rights
90,723
6.75
8.76
1-Oct-22
1-Oct-20
Performance Share Rights
60,249
4.61
6.70
1-Oct-23
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
60,491
52,427
104,853
-
-
-
76,285
123,984
163,187
68,932
-
-
-
81,651
108,448
31,224
-
-
-
37,195
48,956
34,466
-
-
-
40,825
54,224
114,887
-
-
-
90,723
60,249
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 awards are subject to performance hurdles which are tested at the end of three years.
3 The Performance Share Rights allocated to the Global Executives with a test period commencement date of 1 October 2018 did not meet the performance
hurdles and accordingly are shown as not vested in this table.
4 Nick Good’s performance share rights granted in 2019 were pro-rated by 50% and the measurement period reduced from four to two years in line with his new
remuneration arrangements. The performance share rights that did not meet the performance hurdles are shown as not vesting in this table.
5 Emilio Gonzalez’s LTI awards have been prorated to reflect his period of employment up to 30 September 2021.
Annual Report 2021 | 57
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021Directors' Report - Remuneration Report
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FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021
Table 5: Equity components of variable remuneration
The table below outlines STI deferred equity and Performance Share Rights awarded to the previous and current Group CEO and
other Global Executive Committee members with an associated vesting schedule for the 2021 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.
GGlloobbaall EExxeeccuuttiivvee
CCoommmmiitttteeee
Nick Good
Alexandra Altinger
Face value of
the equity
grants
($)
Fair value of
equity grants
at grant
($)
1,116,024
1,179,089
444,510
473,341
FY of
grant
2020
2020
2020
1,327,629
1,069,501
2021
2020
2021
2021
422,060
462,288
911,079
879,666
196,694
192,194
902,853
988,914
Richard Brandweiner
2019
225,000
194,790
2020
270,000
270,187
2020
600,000
579,313
Bindesh Savjani
Cameron Williamson
FFoorrmmeerr EExxeeccuuttiivvee
Emilio Gonzalez
2021
2021
2019
2020
2020
2021
2021
2017
2018
2019
303,000
296,069
600,000
657,195
163,191
163,304
273,324
263,900
204,584
199,902
270,856
296,673
79,971
83,184
119,960
125,201
119,960
103,853
2020
100,472
100,806
2020
300,000
289,655
2021
2021
2017
2018
2019
2020
2020
2021
2021
62,487
61,053
300,000
328,597
849,997
884,145
700,000
730,629
700,000
606,015
575,000
575,395
666,667
703,560
350,000
342,000
333,333
340,706
Maximum fair value of equity grants allocated
by the company that may vest in future years1
Minimum
total value
of grant
yet to vest
($)
FY22
($)
FY23
($)
FY24
($)
FY25
($)
FY26
onwards
($)
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
262,734
83,512
-
473,341
-
-
-
462,288
-
-
879,666
-
713,000
-
-
-
-
-
-
-
-
-
-
-
-
38,442
38,442
38,442
38,442
38,426
-
-
988,914
38,961
38,953
38,954
-
-
54,034
54,034
54,034
54,051
-
579,313
-
-
-
-
-
-
59,214
59,214
59,214
59,214
59,213
-
-
-
657,195
-
-
-
32,659
32,659
32,659
32,660
-
263,900
-
-
-
-
-
-
39,979
39,979
39,979
39,979
39,986
-
16,620
-
-
25,036
25,036
296,673
-
-
20,769
20,769
20,769
-
-
-
-
20,158
20,158
20,158
20,174
-
289,655
-
-
-
-
-
-
-
-
12,215
12,215
12,208
12,208
12,207
-
176,820
-
-
146,122
146,122
328,597
-
-
121,203
121,203
121,203
-
-
-
-
115,081
115,081
115,080
115,072
-
703,560
-
-
-
-
-
-
-
-
68,403
68,403
68,403
68,396
68,395
-
-
340,706
-
-
576,887
592,499
Nil
85,727
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.
58 | Pendal Group
Directors' Report - Remuneration ReportFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021
Directors’ Report − Remuneration Report
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021
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
Nick Good
Alexandra Altinger
Richard Brandweiner
John Reifsnider
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
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 annual leave 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.
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 annual leave 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.
Annual Report 2021 | 59
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021Directors' Report - Remuneration Report
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FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021
Term
Who
Conditions
John
Reifsnider
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;
• accrued but unused annual leave and cost to the Company of providing company benefits;
• 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.
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 annual leave 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.
Cameron
Williamson
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.
60 | Pendal Group
Directors' Report - Remuneration ReportFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021
Directors’ Report − Remuneration Report
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021
Term
Who
Conditions
Termination
for cause
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.
Alexandra
Altinger
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.
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 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.
John
Reifsnider
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 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.
Bindesh
Savjani
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.
Cameron
Williamson
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
Annual Report 2021 | 61
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021Directors' Report - Remuneration Report
Directors’ Report − Remuneration Report
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021
8. Non-Executive Director remuneration
NED remuneration in the 2021 Financial Year
NED annual fee pool
For the 2021 Financial Year, $1.53 million (96 per cent) of the shareholder approved NED annual fee pool was used.
The NED annual fee pool has remained unchanged since 2015, when it was approved at a cap of $1.6 million. The proposal is to
increase this by $400,000 to a maximum aggregate amount of $2 million per annum, with effect from 1 January 2022, subject to
approval of shareholders at the 2021 AGM.
The rationale for the proposed increase is to support the Group’s key strategic objective, which is to grow the business across new
and existing markets and meet the increased scale and complexity of Pendal’s global footprint. The increased fee pool will provide
the flexibility to appoint additional NEDs to the board who have knowledge and experience in off-shore markets, continue to attract
and retain NEDs of the highest calibre, allow existing NEDs to be appointed to subsidiary boards within the Group and allow the size
of the Board to be expanded as part of an active Board renewal and succession planning process.
NED fees
NEDs are paid a fixed fee for their service on the Board. NEDs (with the exception of the Chairman of the Board) also receive
additional fees for their service on the Board’s committees, although no additional fee is paid for their UK based J O Hambro Capital
Management Holding Limited Board membership. In addition to these fixed fees, NEDs receive superannuation contributions that
are made in accordance with legislative requirements. NEDs do not receive performance-based remuneration and are not eligible to
participate in any Pendal Group share plan or other incentive arrangements.
No NED Board nor Committee fee increases are proposed for the next financial year.
A summary of the annual fees payable to NEDs during the 2021 Financial Year are set out in the table below.
Non-Executive Director fees
Pendal Group Board fees
Board Chairman
Other Non-Executive Directors
Pendal Group Board Committee fees
Audit & Risk Committee – Chair
Audit & Risk Committee – Member
Remuneration & Nominations Committee – Chair
Remuneration & Nominations Committee – Member
Retirement allowances
Fee policy
(AUD’000s)
400
160
Fee policy
($’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.
Pendal’s Australian based NEDs fees have increased as a result of the legislated increase to the superannuation guarantee
contribution rate from 9.5% to 10%, effective from July 2021.
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.
62 | Pendal Group
Directors' Report - Remuneration ReportFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021
Directors’ Report − Remuneration Report
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021
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 2021 and 2020 Financial Years are shown in Table 6 below.
Table 6: 2021 and 2020Financial Years’ Non-Executive Director remuneration
2021 Financial Year
Current NEDs
James Evans2
Sally Collier2
Christopher Jones3
Andrew Fay2
Kathryn Matthews4
Deborah Page2
Total
21
20
21
20
21
20
21
20
21
20
21
20
21
20
Fees1
($)
Superannuation
($)
400,000
400,301
200,000
200,151
218,114
241,567
200,000
200,151
227,562
234,830
200,000
200,151
1,445,676
1,477,151
25,625
25,000
19,269
19,014
-
-
19,269
19,014
-
-
19,269
19,014
83,432
82,042
Total
($)
442255,,662255
442255,,330011
221199,,226699
221199,,116655
221188,,111144
224411,,556677
221199,,226699
221199,,116655
222277,,556622
223344,,883300
221199,,226699
221199,,116655
1,529,108
1,559,193
Notes to Table 6:
1 The NED fees took effect from 1 January 2017. No adjustments to the base fees were made in the 2021 Financial Year.
2 The increase in the 2021 Financial Year total remuneration for James Evans, Sally Collier, Andrew Fay and Deborah Page is attributable to changes to the
Australian superannuation guarantee contributions, effective from 1 July 2021.
3 Christopher Jones is remunerated in US Dollars and an average exchange rate of 0.7519 for 2021 (2020: 0.6789) has been applied to convert his annual fees
to Australian dollars.
4 Kathryn Matthews is remunerated in Pound Sterling. An average exchange rate of 0.5493 for 2021 (2020: 0.5323) has been applied to convert her annual
fees to Australian dollars.
Annual Report 2021 | 63
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021Directors' Report - Remuneration Report
Directors’ Report − Remuneration Report
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021
9. Director and Global Executive holdings
The table below outlines all holdings, including holdings not yet vested of NEDs and Global Exeutive Committee members. For the
vesting of Global Executive Committee equity grants, refer to Table 5.
Table 7: Director and Global Executives’ holdings
Type of
holding
Equity held at
1 Oct 2020
In the 2021 Financial Year:
Number of
securities
acquired
Number of
securities granted
as remuneration
Net change
other1
Equity held at
30 Sep 2021
Non-Executive Directors
James Evans
Sally Collier
Andrew Fay
Christopher Jones
Kathryn Matthews2
Deborah Page3
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
50,000
24,000
63,609
22,000
25,000
39,993
Total for Non-Executive Directors
224,602
Global Executive Committee
Nick Good
Ordinary
Performance share rights
Alexandra Altinger
Ordinary
Performance share rights
Richard Brandweiner
Ordinary
John Reifsnider 4
Bindesh Savjani
Performance share rights
Ordinary
Ordinary
Performance share rights
Cameron Williamson
Ordinary
137,263
60,491
-
123,984
52,572
182,274
70,536
68,419
77,747
Former Executive
Emilio Gonzalez
Performance share rights
102,455
Ordinary
1,755,604
Performance share rights
341,518
21,912
4,412
13,236
10,000
-
8,824
58,384
-
-
-
-
-
-
-
-
4,412
-
4,412
-
-
265,727
-
-
-
-
-
-
-
-
390,844
27,378
163,187
42,175
108,448
-
28,476
48,956
8,697
54,224
-
-
-
-
-
-
-
(25,307)
-
-
-
(11,467)
(31,691)
-
(12,500)
-
(40,000)
(27,164)
71,912
28,412
76,845
32,000
25,000
48,817
282,986
111,956
451,335
27,378
287,171
83,280
259,031
265,727
86,512
117,375
50,856
129,515
48,718
(300,000)
1,508,734
180,746
(90,546)
431,718
Total for Global Executive Committee
2,972,863
274,551
1,101,849
(538,675)
3,810,588
Notes to Table 7:
1 Net change other relates to the conversion of Performance Share Rights to ordinary shares, sale of shares and shares forfeited.
2 Kathryn Matthews holds 42,733.252 units in the J O Hambro UK Equity Income Fund.
3 Deborah Page and related parties own the following units in registered schemes for which Pendal Fund Services Limited is the Responsible Entity: 86,493.68
units in Pendal Concentrated Global Share Fund; 56,195.56 units in Pendal Monthly Income Plus Fund and 22,552.15 units in Pendal Focus Australian Share
Fund.
4 Ordinary shares awarded to John Reifsnider were granted in exchange for his shares in TSW at the time of the acquisition.
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.
64 | Pendal Group
Directors' Report - Remuneration ReportFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021
Directors’ Report
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021
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.
2021 Corporate Governance Statement
Pendal Group’s 2021 Corporate Governance Statement can be viewed on the Group’s website at pend.al/CGS-2021.
Audit and non-audit services
Details of the amounts paid or payable to the external auditor, PricewaterhouseCoopers (PwC), for audit and non-audit services
during the financial year are set out in Note F4 to the financial statements.
PwC was appointed as auditor of the Company in September 2007 and Andrew Wilson has served as the lead audit partner for the
past three years ended 30 September 2021.
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 2001 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.
The auditor’s independence declaration for the financial year, as required under section 307C of the Corporations Act 2001, is on
page 66.
This Directors’ Report is made in accordance with a resolution of Directors.
James Evans
Chairman
5 November 2021
Nicholas Good
Managing Director and Group Chief Executive Officer
5 November 2021
Annual Report 2021 | 65
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021Directors' Report
Auditor’s Independence Declaration
As lead auditor for the audit of Pendal Group Limited for the year ended 30 September 2021, 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
5 November 2021
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.
66 | Pendal Group
Auditor’s Independence DeclarationFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021
Consolidated Statement of Comprehensive Income
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021
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 remuneration
Professional services
Information, technology and data
Fund administration
Depreciation, amortisation and impairment
General office and administration
Business development and promotion
Occupancy
Investment management
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
B5
B4
B4
C3
C3
2021
$’000
524,400
57,508
581,908
45,508
216,159
44,196
14,978
33,136
25,556
20,409
22,040
13,544
11,210
3,496
3,071
1,737
409,532
217,884
53,182
164,702
Cents
52.0
50.6
$’000
164,702
22,414
(1,396)
21,018
2020
$’000
461,339
13,417
474,756
(8,600)
175,688
35,192
3,270
8,118
27,114
19,770
16,098
10,106
10,404
4,064
3,418
1,515
314,757
151,399
35,013
116,386
Cents
39.8
38.6
$’000
116,386
(1,995)
3,147
1,152
Total comprehensive income for the financial year attributable to shareholders
185,720
117,538
The above Consolidated Statement of Comprehensive Income should be read in conjunction with the accompanying Notes.
Annual Report 2021 | 67
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021Consolidated Statement of Comprehensive Income
Consolidated Statement of Financial Position
AS AT 30 SEPTEMBER 2021
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 fair value through profit or loss (FVTPL)
Deferred tax assets
Intangible assets
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Employee benefits
Lease liabilities
Borrowings
Current tax liabilities
Total current liabilities
Non-current liabilities
Employee benefits
Lease liabilities
Borrowings
Deferred tax liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Retained earnings
Total equity
Notes
B6
F2
C5
B5
F1
D1
F2
C6
D1
F2
C6
B5
C2
C3
2021
$’000
297,742
96,520
7,141
659
9,430
411,492
10,639
39,898
287,214
42,134
930,220
1,310,105
1,721,597
57,002
139,836
8,234
–
28,707
233,779
7,979
35,774
48,570
11,263
103,586
337,365
1,384,232
876,333
245,682
262,217
1,384,232
2020
$’000
207,485
66,969
6,923
78
7,102
288,557
8,665
36,927
211,171
28,931
532,103
817,797
1,106,354
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
The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying Notes.
68 | Pendal Group
Consolidated Statement of Financial PositionAS AT 30 SEPTEMBER 2021
Consolidated Statement of Changes in Equity
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021
Balance at 1 October 2020
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:
Shares issued (net of costs after tax)
Treasury shares acquired
Treasury shares released
Share-based payments
Dividend reinvestment plan
Dividends paid
Notes
C2
C2
C2
C3
C4
Contributed
equity
$’000
471,249
–
–
–
397,978
(29,467)
31,218
–
5,355
–
Reserves
$’000
205,340
–
21,018
21,018
–
–
(31,218)
50,542
–
–
Retained
earnings
$’000
219,169
164,702
–
Total
equity
$’000
895,758
164,702
21,018
164,702
185,720
–
–
–
–
–
397,978
(29,467)
–
50,542
5,355
(121,654)
(121,654)
Balance at 30 September 2021
876,333
245,682
262,217
1,384,232
Balance at 1 October 2019
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
419,431
258,319
–
–
–
–
1,152
1,152
(37,532)
–
89,350
(89,350)
35,219
–
–
232,136
116,386
–
116,386
–
–
–
909,886
116,386
1,152
117,538
(37,532)
–
35,219
–
(129,353)
(129,353)
Balance at 30 September 2020
471,249
205,340
219,169
895,758
The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying Notes.
Annual Report 2021 | 69
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021
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 acquisition of subsidiary, net of cash acquired
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
Net cash inflows/ (outflows) from investing activities
Cash flows from financing activities
Proceeds from share issue (net of costs)
Proceeds from borrowings
Payments for purchase of treasury shares
Interest and other financing costs
Payments for leases
Fund application settlement amounts received
Dividends paid
Net cash inflows / (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
Notes
2021
$’000
2020
$’000
591,720
496,854
2
389
163
895
(315,075)
(285,303)
B6
E2
E2
C6
(1,466)
(46,765)
228,805
(379,024)
(1,910)
(84,437)
57,233
(360)
(3,445)
(411,943)
375,264
47,958
(29,467)
(444)
(8,809)
1,466
(116,291)
269,677
86,539
207,485
3,718
(443)
(35,084)
177,082
–
(1,927)
(80,142)
140,539
(997)
1,837
59,310
–
–
(37,532)
(59)
(9,797)
443
(129,353)
(176,298)
60,094
150,071
(2,680)
Cash and cash equivalents at the end of the financial year
297,742
207,485
The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying Notes.
70 | Pendal Group
Consolidated Statement of Cash FlowsFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021
Notes to the Consolidated Financial Statements
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021
A. About this report
This is the financial report of Pendal Group Limited (the Company) and its consolidated subsidiaries (together referred to as Pendal
Group or the Group). The Company is domiciled in Australia and Pendal Group is a for-profit entity for the purpose of preparing
financial statements.
A1.
A2.
A3.
Statement of compliance
Basis of preparation
New and amended accounting standards
71
71
72
A1. Statement of compliance
The consolidated financial statements are general purpose financial statements which have been prepared in accordance with
Australian Accounting Standards (AASBs) adopted by the Australian Accounting Standards Board (AASB) and the Corporations Act
2001. The consolidated financial statements comply with International Financial Reporting Standards (IFRSs) adopted by the
International Accounting Standards Board (IASB).
A2. Basis of preparation
The Financial Report is presented in Australian dollars, which is the Company’s functional and presentation currency, with all values
rounded to the nearest thousand ($’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
E3
F1
Coronavirus (COVID-19)
The COVID-19 pandemic and measures implemented in response to the health emergency continue to affect the economic
environment in the financial markets in which Pendal Group operates, including Australia, the UK, Europe, the United States and
Singapore. 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.
Annual Report 2021 | 71
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021Notes to the Consolidated Financial Statements
Notes to the Consolidated Financial Statements
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021
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 mandatory new and amended standards adopted by the
Pendal Group for the year ended 30 September 2021 have not had a significant impact on the current period or any prior period and
are not likely to have a significant impact in future periods.
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 2021 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.
B. Results for the year
This section provides information that is most relevant to understanding the financial performance of Pendal Group.
Segment information
Revenue and other income
B1.
B2.
B3. Finance costs 75
B4.
B5.
B6.
Earnings per share
Taxation
Reconciliation of cash flow from operating activities
75
76
79
72
74
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.
The Pendal US operating segment includes the business operations and earnings of JOHCM (USA) Inc. for the full financial year,
and also includes the business operations and earnings of Thompson Siegel & Walmsley LLC (TSW) from the date of its acquisition
into the Group on 22 July 2021.
72 | Pendal Group
Notes to the Consolidated Financial StatementsFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021
Notes to the Consolidated Financial Statements
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021
(a) Segment information provided to the CODM:
The CODM assesses the performance of each operating segment based on operating profit before tax. This measure excludes items
not considered relevant in evaluating segment performance, including the amortisation and impairment of intangible assets,
transaction and integration costs associated with mergers and acquisitions 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
2021
$’000
2020
$’000
2021
$’000
2020
$’000
2021
$’000
2020
$’000
2021
$’000
2020
$’000
Revenue
160,209
151,715
177,580
152,650
244,119
170,407
581,908
474,772
Inter-segment revenue
(4,803)
(4,366)
130,150
107,603
(125,347)
(103,237)
–
–
Total segment revenue
155,406
147,349
307,730
260,253
118,772
67,170
581,908
474,772
Operating expenses
(140,970)
(127,440)
(191,127)
(150,253)
(45,736)
(29,162)
(377,833)
(306,855)
Inter-segment expense
8,568
6,618
(1,952)
(1,892)
(6,616)
(4,726)
–
–
Total segment expenses
(132,402) (120,822) (193,079)
(152,145)
(52,352)
(33,888) (377,833) (306,855)
Operating profit before income tax
23,004
26,527
114,651
108,108
66,420
33,282
204,075
167,917
Inter-segment revenue comprises investment management fees paid by Pendal Group entities in one operating segment to Group
entities in another operating segment for portfolio management and distribution services provided. Inter-segment expenses
comprise fees paid between segments for management, operational and administrative support services provided. Fees for inter-
segment services are determined using arm’s length pricing methodologies and benchmarked commercial rates.
The CODM assesses the performance of the total consolidated Pendal Group using a measure of underlying profit after tax. UPAT is
the Group’s operating profit before tax adjusted to include interest income and expense, foreign exchange gains and losses and 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.
(b) Reconciliation of total operating profit before income tax to Statutory profit before tax:
OOppeerraattiinngg pprrooffiitt bbeeffoorree iinnccoommee ttaaxx
Amortisation and impairment of intangibles1
Net gains/(losses) on financial assets held at FVTPL2
Transaction and integration costs3
Non-operating items
Statutory profit before income tax
2021
$’000
204,075
(12,104)
38,743
(16,002)
3,172
217,884
2020
$’000
167,917
(6,140)
(14,316)
–
3,938
151,399
1 Amortisation and impairment of intangibles relates to fund and investment management contracts and trademarks.
2 Net gains or losses on financial assets held at FVTPL primarily relate to seed investments in pooled funds managed by Pendal Group.
3 Transaction and integration costs relate to the acquisition of TSW.
Annual Report 2021 | 73
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021Notes to the Consolidated Financial Statements
Notes to the Consolidated Financial Statements
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021
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 investment funds
Net foreign exchange gains/(losses)
Interest income
Total other income
Total revenue and other income
Accounting policy
2021
$’000
522,795
57,508
1,605
581,908
38,729
5,095
1,682
2
45,508
627,416
2020
$’000
457,690
13,417
3,649
474,756
(14,316)
6,466
(913)
163
(8,600)
466,156
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
investment funds
Gain / (loss) on sale of
financial assets held at
FVTPL
Distributions are recognised as revenue when the right to receive payment is established.
Gains and losses on financial assets held at FVTPL represent the fair value movements in seed
investments held at FVTPL during the financial year.
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.
74 | Pendal Group
Notes to the Consolidated Financial StatementsFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021
Notes to the Consolidated Financial Statements
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021
B3. Finance costs
Interest and finance charges on lease liabilities
Interest and finance charges on borrowings
Total finance costs
B4. Earnings per share
2021
$’000
1,292
445
1,737
2020
$’000
1,457
58
1,515
The calculation of basic earnings per share is based on the profit attributable to ordinary shareholders and the weighted-average
number of ordinary shares outstanding (i.e. ordinary shares on issue less treasury shares) during the financial year. The calculation
of diluted earnings per share also includes the weighted average number of any potential ordinary shares outstanding during the
financial year.
Basic earnings per share
Profit attributable to shareholders of the Company ($’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 ordinary shares and potential ordinary shares (’000)
Diluted earnings per share (cents per share)
2021
164,702
343,180
(26,223)
316,957
52.0
2021
164,702
343,180
(26,223)
5,725
2,599
325,281
50.6
2020
116,386
322,802
(30,063)
292,739
39.8
2020
116,386
322,802
(30,063)
4,871
3,653
301,263
38.6
Annual Report 2021 | 75
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021Notes to the Consolidated Financial Statements
Notes to the Consolidated Financial Statements
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021
B5. Taxation
(a) Income tax expense
The income tax expense attributable to profit comprises:
Current income tax
Current tax on profits for the year
Adjustments for current tax of prior periods
Total current tax expense
Deferred income tax
Decrease/ (increase) in deferred tax assets
Increase/ (decrease) in deferred tax liabilities
Total deferred tax expense/ (benefit)
Income tax expense attributable to continuing operations
(b) Reconciliation of income tax expense
The income tax expense attributable to profit reconciles to accounting profit as follows:
Profit before income tax
IInnccoommee ttaaxx ccaallccuullaatteedd aatt tthhee AAuussttrraalliiaann ttaaxx rraattee ooff 3300%% ((22002200:: 3300%%))
Tax effect of amounts which are not deductible (taxable) in calculating taxable income:
Differences in overseas tax rates
State, local and withholding taxes
Acquisition transaction costs
Amortisation of intangibles
Employee equity grant amortisation
Sundry non-assessable/ non-deductible items
Tax credits and rebates
Deferred tax assets of prior years derecognised/ (recognised) in the current year
Effect on deferred taxes of changes in tax rates
Adjustments for current tax of prior financial year
Income tax expense
(c) Effective tax rate
2021
$’000
54,115
408
54,523
(2,179)
838
(1,341)
53,182
2021
$’000
217,884
6655,,336655
(20,076)
6,285
5,157
(2,079)
259
(2,010)
–
(553)
426
408
2020
$’000
33,698
(393)
33,305
14,787
(13,079)
1,708
35,013
2020
$’000
151,399
4455,,442200
(16,204)
3,998
–
–
310
(499)
(5)
2,285
101
(393)
53,182
35,013
The effective tax rate (ETR) of the Group for the financial year, measured as income tax expense divided by net profit before tax, was
24.4% (2020: 23.1%). The ETR differs from the applicable Australian income tax rate of 30%, due mainly to the different corporate
tax rates applied in the jurisdictions in which the Group operates and earns profits. The main corporate tax rates applicable for the
current period are 30% (2020: 30%) on Australian taxable income, 19% (2020: 19%) on UK taxable income, 21% (2020: 21%) on US
federal taxable income and 17% (2020: 17%) on Singapore taxable income.
The UK Government has passed legislation which increases the corporate tax rate on taxable income earned in the UK from 19% to
25%, effective from 1 April 2023. Pendal Group has remeasured the deferred tax balances relating to its UK-based subsidiaries for
temporary differences expected to reverse from the 2023 financial year, and recognised the impact of the tax rate change in tax
expense in profit or loss, except to the extent that it relates to items previously recognised outside of profit or loss (such as share
based payment transactions recognised directly in equity).
76 | Pendal Group
Notes to the Consolidated Financial StatementsFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021
Notes to the Consolidated Financial Statements
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021
(d) Income tax amounts recognised directly in equity
Current and deferred tax arising in the reporting period and not recognised in net profit or loss or other comprehensive income, but
directly debited or credited to equity:
Current tax: restatement of error to prior period retained earnings
Deferred tax: change in accounting policy for leases
Deferred tax: share-based payment transactions
Income tax amounts debited/ (credited) to equity
(e) Deferred tax balances
Deferred tax balances comprise temporary differences attributable to:
2021
$’000
–
–
(6,346)
(6,346)
2020
$’000
(187)
(65)
(27)
(279)
Employee equity grants
Employee benefits
Accrued expenses and prepayments
Property, plant and equipment
Right-of-use assets
Lease liabilities
Intangible assets
Financial assets held at FVTPL
Borrowing costs
Foreign exchange gains and losses
Total deferred tax assets and liabilities
Set-off deferred tax balances
Net deferred tax assets and liabilities
Deferred tax
assets
Deferred tax
liabilities
Deferred tax
assets
Deferred tax
liabilities
2021
$’000
25,596
24,160
1,248
205
–
10,703
1,062
–
120
–
63,094
(20,960)
42,134
2021
$’000
–
–
504
709
9,810
–
11,263
9,827
–
110
32,223
(20,960)
11,263
2020
$’000
16,484
12,840
779
288
–
7,550
–
1,836
–
5
39,782
(10,851)
28,931
2020
$’000
–
–
–
506
7,155
–
10,148
3,094
–
96
20,999
(10,851)
10,148
(f) 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
Acquired in
business
combination
$’000
Balance as at
30 September
$’000
2021
Deferred tax assets
Deferred tax liabilities
2020
2288,,993311
((1100,,114488))
2,179
(838)
Deferred tax assets
4433,,448888
(14,787)
Deferred tax liabilities
((2233,,339911))
13,079
772
(277)
138
164
6,346
3,906
–
92
–
–
–
–
42,134
(11,263)
28,931
(10,148)
Annual Report 2021 | 77
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021Notes to the Consolidated Financial Statements
Notes to the Consolidated Financial Statements
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021
(g) 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
2021
$’000
88,776
26,633
2020
$’000
48,214
14,464
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.
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.
78 | Pendal Group
Notes to the Consolidated Financial StatementsFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021
Notes to the Consolidated Financial Statements
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021
B6. 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:
(Increase)/decrease in trade and other receivables
Increase in prepayments
(Increase)/decrease in deferred tax assets
Increase/(decrease) in trade and other payables
Increase/(decrease) in employee benefits
Increase/(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
Cash management trust units at call
Total cash and cash equivalents
Accounting policy
2021
$’000
116644,,770022
9,144
12,895
44,196
(4,730)
(38,729)
1,737
(1,682)
(13,832)
(1,443)
(4,353)
16,216
33,913
8,253
2,518
228,805
2021
$’000
233,061
64,681
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
297,742
207,485
Cash at bank and on hand
Cash and cash equivalents include cash on hand and deposits held at call with financial institutions.
Cash management trust units at call
Cash management trust units at call are invested in cash management trusts managed by the Group.
Annual Report 2021 | 79
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021Notes to the Consolidated Financial Statements
Notes to the Consolidated Financial Statements
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021
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
80
81
83
84
85
85
86
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
i)
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
$264.1 million as at 30 September 2021, which sits within the Board’s risk appetite.
During the financial year, Pendal Group raised additional capital to fund the acquisition of TSW, as part of the Group’s strategy to
build its business presence in the USA. Equity capital of approximately $380 million was raised through an institutional share
placement and a share purchase plan, both of which were over-subscribed. A three-year term debt facility was also drawn for US$35
million ($48.6 million) to complete the funding of the transaction.
Capital distribution
ii)
Surplus capital is returned to shareholders in the form of annual dividends, with the Company’s current dividend policy set to pay
out 80% - 95% of UPAT. UPAT comprises statutory net profit adjusted to exclude amortisation and impairment of intangible assets,
gains and losses in financial assets held at FVTPL which includes seed investments and costs associated with merger and
acquisition activity, including the TSW transaction this year. In accordance with the Company’s capital management plan, and to
the extent possible, retention of franking credits is minimised.
Capital risk management
iii)
Cash profits generated from offshore business units, beyond working capital and regulatory requirements and debt repayments, are
repatriated back to the Company through inter-company dividends, for which a hedging program is in place to mitigate foreign
exchange risk.
Debt may also be used at times to provide capital to the Group and during the year a three-year term debt facility was drawn to
partially fund the TSW transaction. Additionally, a $25 million multi-currency revolving loan facility was renewed for the Group,
which remained unutilised at balance date.
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. As a result, the Board may decide to:
• 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.
80 | Pendal Group
Notes to the Consolidated Financial StatementsFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021
Notes to the Consolidated Financial Statements
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021
Regulatory capital requirements
iv)
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 Australian registered and unregistered
trusts and Pendal Institutional Limited (PIL) provides investment management services to institutional clients and Australian unit
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 2021 was $6.8 million.
• J O Hambro Capital Management Limited (JOHCM) provides investment management services to UK Open Ended Investment
Companies (OEICs), Irish UCITS 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) as an investment adviser. An Internal Capital Adequacy Assessment Process
(ICAAP) is used to determine the amount of regulatory capital required to meet its licensing requirements. The level of regulatory
capital required at 30 September 2021 in accordance with the ICAAP was $61.4 million (£32.9 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 OEICs. The level of regulatory capital required for JOHCM Funds (UK) Limited was $1.5
million (£0.8 million) at 30 September 2021.
• JOHCM Funds (Ireland) Limited is authorised by the Central Bank of Ireland as a UCITS management company, and is the
manager of UCITS funds. The level of regulatory capital required at 30 September 2021 was $4.3 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 as part of its licensing requirements with the Monetary
Authority of Singapore. The level of regulatory capital required at 30 September 2021 was $11.1 million (S$11.3 million).
• JOHCM (USA) Inc. and TSW provide investment management services in the United States to a registered mutual fund, Delaware
Statutory Trusts, Collective Investment Trusts, institutional clients and other Group entities. Each entity 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 2021 Financial Year.
C2. Contributed equity
Ordinary shares 382,677,887 (2020: 322,802,391) each fully paid
Treasury shares 24,340,538 (2020: 26,768,913)
Total contributed equity 358,337,349 (2020: 296,033,478)
2021
$’000
1,021,001
(144,668)
876,333
2020
$’000
617,668
(146,419)
471,249
(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
Institutional placement and Share Purchase Plan (SPP)4
Shares issued as consideration for a business
combination5
Share issuance associated costs
Fund linked equity share issuance6
Dividend reinvestment plan
Balance at the end of the year
2021
Shares ’000
332222,,880022
55,882
2,825
–
400
769
2021
$’000
661177,,666688
379,975
22,714
(4,711)
–
5,355
2020
Shares ’000
332222,,880022
2020
$’000
661177,,666688
–
–
–
–
–
–
–
–
–
–
382,678
1,021,001
322,802
617,668
4 Shares were issued under the institutional placement and SPP in order to fund the acquisition of TSW, which completed on 22 July 2021.
5 Shares were issued to TSW employee owners as part of the purchase consideration paid to acquire TSW.
6 Shares were issued to fund managers who participate in the FLE Scheme.
Annual Report 2021 | 81
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021Notes to the Consolidated Financial Statements
Notes to the Consolidated Financial Statements
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021
(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 either shares 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:
2021
Shares ’000
2021
$’000
2020
Shares ’000
2020
$’000
BBaallaannccee aatt tthhee bbeeggiinnnniinngg ooff tthhee yyeeaarr
((2266,,776688))
((114466,,441199))
((3377,,997700))
((119988,,223377))
Treasury shares acquired
Fund linked equity share issuance
Treasury shares released
(4,571)
(400)
7,399
(29,467)
(4,706)
(37,532)
–
31,218
–
15,908
–
89,350
Balance at the end of the year
(24,340)
(144,668)
(26,768)
(146,419)
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
2021
Shares ’000
11,622
12,718
2021
$’000
80,821
63,847
24,340
144,668
2020
Shares ’000
10,930
15,838
26,768
2020
$’000
78,218
68,201
146,419
(c) Institutional placement and share purchase plan
On 11 May 2021, the Company completed a $190 million institutional placement of 27,941,177 new fully paid ordinary shares at $6.80
per share. The shares were issued on 14 May 2021, and did not participate in the interim dividend for the 2021 Financial Year which
was paid on 1 July 2021.
On 15 May 2021, the Company invited eligible retail shareholders to participate in an SPP at $6.80 per share. The SPP closed on 7
June 2021 and approximately $190 million was raised with 27,941,111 new fully paid ordinary shares issued. The shares were issued
on 15 June 2021, and ranked equally with existing shares on issue.
Directly attributable issue costs of $3.8 million were applied as a reduction to the issued share capital.
Accounting policy
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.
82 | Pendal Group
Notes to the Consolidated Financial StatementsFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021
Notes to the Consolidated Financial Statements
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021
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 in 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.
Share-based
payment
reserve
$’000
Foreign currency
translation
reserve
$’000
Cash flow
hedge reserve
$’000
Common control
reserve
$’000
Total
reserves
$’000
Balance at 1 October 2020
118822,,662266
4488,,221144
((2288))
((2255,,447722))
220055,,334400
Share-based payment expense
Deferred tax
Treasury shares released
Currency translation difference
Gain/(loss) on hedging activities
Balance at 30 September 2021
44,196
6,346
(31,218)
–
–
201,950
–
–
–
22,414
(2,864)
67,764
–
–
–
–
1,468
1,440
–
–
–
–
–
44,196
6,346
(31,218)
22,414
(1,396)
(25,472)
245,682
Balance at 1 October 2019
223366,,775577
4477,,000066
2288
((2255,,447722))
225588,,331199
Share-based payment expense
Deferred tax
Treasury shares released
Currency translation difference
Gain/(loss) on hedging activities
35,192
27
(89,350)
–
–
Balance at 30 September 2020
182,626
–
–
–
(1,995)
3,203
48,214
–
–
–
–
(56)
(28)
–
–
–
–
–
35,192
27
(89,350)
(1,995)
3,147
(25,472)
205,340
Annual Report 2021 | 83
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021Notes to the Consolidated Financial Statements
Notes to the Consolidated Financial Statements
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021
C4. Dividends
Equity dividends on ordinary shares
((ii))
DDiivviiddeennddss ddeeccllaarreedd aanndd ppaaiidd dduurriinngg tthhee FFiinnaanncciiaall YYeeaarr
Final 10% franked7 dividend for the 2020 Financial Year: 22.0 cents per share
(2019 Financial Year: 25.0 cents per share 10% franked7)
Interim 10% franked7 dividend for the 2021 Financial Year: 17.0 cents per share
(2020 Financial Year: 15.0 cents per share 10% franked7)
((iiii))
DDiivviiddeennddss pprrooppoosseedd ttoo bbee ppaaiidd ssuubbsseeqquueenntt ttoo tthhee eenndd ooff tthhee FFiinnaanncciiaall YYeeaarr aanndd nnoott
rreeccooggnniisseedd aass aa lliiaabbiilliittyy
Final dividend for the 2021 Financial Year 24.0 cents (10% franked7) per share
(2020 Financial Year: 22.0 cents per share 10% franked7)
2021
$’000
2020
$’000
68,532
82,571
53,122
121,654
46,782
129,353
89,053
68,612
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 2021 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 2022.
Franking credits available for subsequent financial years
2021
$’000
12,295
2020
$’000
5,547
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 $3,936,115 (2020: $3,043,565).
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.
7 The whole of the unfranked amount of the dividend will be Conduit Foreign Income, as defined in the Income Tax Assessment Act 1997.
84 | Pendal Group
Notes to the Consolidated Financial StatementsFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021
Notes to the Consolidated Financial Statements
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021
C5. Financial assets held at FVTPL
Unlisted securities
Units held in pooled funds
Escrow units held in pooled funds8
Interest in James Hambro & Partners LLP
Total
Accounting policy
2021
$’000
264,061
23,153
–
287,214
2020
$’000
200,438
8,196
2,537
211,171
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.
C6. Borrowings
USD 3 year term debt facility
During the year, Pendal USA Inc. entered into a US$35 million ($48.6 million) syndicated debt facility agreement with HSBC Bank
Australia Limited, The Northern Trust Company and Westpac Banking Corporation for a three year term to partially fund the
acquisition of TSW. The facility was fully drawn at balance date and is guaranteed by Pendal Group Limited and certain non-
regulated subsidiaries.
Current
Non-current
Total borrowings
2021
$’000
–
48,570
48,570
2020
$’000
–
–
–
Under the terms of the debt facility, the Group is required to comply with the following financial covenants:
• EBITDA/net interest no less than 3.0x
• Gross leverage (total debt/ EBITDA) no greater than 3.0x
The Group has complied with the financial covenants of its debt facility during the year.
Multi-currency revolving loan facility
During the year, Pendal Group Limited replaced its previous $25 million uncommitted multi-currency debt facility with ANZ,
establishing a new $25 million multi-currency revolving loan facility with HSBC Bank Australia Limited and Westpac Banking
Corporation. Both facilities remained undrawn throughout the year.
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.
8 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.
Annual Report 2021 | 85
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021Notes to the Consolidated Financial Statements
Notes to the Consolidated Financial Statements
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021
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
Borrowings
Total financial liabilities
(a) Market risk
2021
$’000
297,742
96,520
287,214
659
2020
$’000
207,485
66,969
211,171
78
682,135
485,703
57,002
44,008
48,570
41,660
40,560
–
149,580
82,220
Pendal Group may bear exposure to market risks which include securities’ price risk, interest rate risk and foreign exchange risk due
to the nature of its investments and liabilities. The key direct risks are a result of investment and market volatility, which have a
resulting impact on the funds under management (FUM) of the Group. A reduction in FUM will reduce management fee income,
calculated as a percentage of FUM, and will result in a decline in financial assets held at fair value through profit or loss, which
consequently reduces net profit or loss after tax (Statutory NPAT). The Group estimates the potential movements in overall FUM,
covering all its asset classes, and their impact on Statutory NPAT to be as follows:
Profit sensitivity to movement in FUM:
FUM ($ billion)
Statutory NPAT ($'000)
2021
10%
increase
12.5
51,368
10%
decrease
(12.5)
(51,448)
2020
10%
increase
9.2
42,313
10%
decrease
(9.2)
(42,273)
The sensitivity calculation is made on the basis of FUM as at 30 September 2021 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 resulting revenue 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
additional financial market uncertainty 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 affect 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.
86 | Pendal Group
Notes to the Consolidated Financial StatementsFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021
Notes to the Consolidated Financial Statements
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021
Price risk sensitivity
The Group provides seed capital to a number of funds that invest in regions including the UK, Europe, Emerging Markets, US, Asia
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 continued financial market uncertainty 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)
2021
10%
increase
$’000
19,104
10%
decrease
$’000
(19,104)
2020
10%
increase
$’000
14,623
10%
decrease
$’000
(14,623)
(ii) Interest rate risk
The Group is subject to interest rate risk, which affects both the Group's FUM and the Group's cash balances and borrowings. The
Group’s borrowings on the three-year term facility are at variable rates with interest only payments required until full principal
repayment at maturity of the facility. This interest rate risk on borrowings 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 and borrowings. A change of 25 bps in the average of
the effective interest rates over the year ended 30 September 2021 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 continued financial market uncertainty caused by COVID-19. This analysis assumes that all other variables
remain constant.
Interest rates – increase by 25 bps (2020: 25 bps)
Interest rates – decrease by 25 bps (2020: 25 bps)
Profit or loss after tax
Equity
2021
$’000
508
(508)
2020
$’000
387
(387)
2021
$’000
–
–
2020
$’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.
In order to manage the Group’s dividend requirements, a hedging program using foreign currency forward contracts is in place to
hedge a portion of its investment in its offshore operations. Foreign exchange risk is also hedged in respect of certain foreign
currency payments, including US dollar payments made during the year to complete the acquisition of TSW.
Any gain or loss on hedging instruments 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.
As at 30 September 2021, the notional exposure of the Company’s hedging instruments totalled $105.8 million (2020: $68.6
million). During the year, a loss of $1.4m was recognised on hedging activities (2020: $3.1m hedging gain).
The Group’s US dollar-denominated term debt facility is held by Pendal USA Inc., which has a US dollar functional currency, and
forms part of the Group’s US foreign operations. Exchange differences arising on the translation of the US dollar debt (and other
assets and liabilities) are recognised in other comprehensive income and accumulated in the foreign currency translation reserve.
Annual Report 2021 | 87
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021Notes to the Consolidated Financial Statements
Notes to the Consolidated Financial Statements
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021
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
Borrowings
$’000
Lease
liabilities
$’000
Net exposure
$000
2021
GBP
EUR
USD
SGD
2020
GBP
EUR
USD
SGD
127,150
23,339
143,729
659
(30,109)
4,697
521
1,184
62,798
51,893
115,670
1,262
220
–
81,530
20,482
102,030
5,823
1,994
1,293
418
990
24,682
106,218
231
1,933
–
–
–
78
–
–
–
(6,152)
–
–
(28,337)
236,431
–
250
(4,753)
(48,570)
(12,249)
164,789
(1,071)
(16,879)
(4,918)
(3,639)
(474)
–
–
–
–
–
(140)
271
(31,173)
156,068
–
2,313
(3,223)
126,032
(482)
2,501
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:
2021
GBP
EUR
USD
SGD
2020
GBP
EUR
USD
SGD
Profit or loss after tax
Equity
10% increase
$’000
10% decrease
$’000
10% increase
$’000
10% decrease
$’000
14,373
25
13,244
41
9,305
231
12,718
298
(14,373)
(25)
(13,244)
(41)
(9,305)
(231)
(12,718)
(298)
9,270
–
3,235
(14)
(9,270)
–
(3,235)
14
6,302
(6,302)
–
(115)
(48)
–
115
48
(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, JOHCM entities and TSW are the investment manager 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 (2020: 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 (2020: AA-) and A- for HSBC
(2020: A-). The credit quality of each wholesale or institutional client is assessed by taking into account its financial position, past
experience and other factors.
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.
88 | Pendal Group
Notes to the Consolidated Financial StatementsFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021
Notes to the Consolidated Financial Statements
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021
(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.
Less than
1 year
$’000
Between
1–2 years
$’000
Over
2 years
$’000
Total
contractual
cash flows
$’000
Carrying
amount of
liabilities
$’000
57,002
8,282
1,068
41,660
8,790
–
7,463
1,068
–
8,142
–
32,026
49,638
–
28,106
57,002
47,771
51, 774
41,660
45,038
57,002
44,008
48,570
41,660
40,560
2021
Trade and other payables
Lease liabilities
Borrowings
2020
Trade and other payables
Lease liabilities
(d) Fair value estimation
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 carrying amount of
borrowings approximates fair value, as the interest payable on the Group’s borrowings are close to market rates.
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.
Annual Report 2021 | 89
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021Notes to the Consolidated Financial Statements
Notes to the Consolidated Financial Statements
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021
(i) Fair value hierarchy (continued)
2021
Financial assets
Financial assets held at FVTPL:
Units held in pooled funds9
Escrow units held in pooled funds10
Derivatives
Total financial assets
Financial liabilities
Borrowings
Total financial liabilities
2020
Financial assets
Financial assets held at FVTPL:
Units held in pooled funds 9
Escrow units held in pooled funds10
Interest in James Hambro & Partners LLP11
Derivatives
Total financial assets
Level 1
$’000
Level 2
$’000
Level 3
$’000
Total
$’000
–
–
–
–
–
–
–
–
–
–
264,061
23,153
659
287,873
48,570
48,570
200,438
8,196
–
78
208,712
–
–
–
–
–
–
–
–
2,537
–
2,537
264,061
23,153
659
287,873
48,570
48,570
200,438
8,196
2,537
78
211,249
(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.
9 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.
10 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.
11 JH&P is an independent private asset management partnership business, and Pendal sold its 3.6% interest in March 2021.
90 | Pendal Group
Notes to the Consolidated Financial StatementsFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021
Notes to the Consolidated Financial Statements
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021
Specific valuation techniques used to value financial instruments include:
Pooled funds
During the year, JOHCM managed two OEICs domiciled in the United Kingdom and two UCITS funds domiciled in Ireland. JOHCM
(USA) Inc. manages a registered mutual fund and a Delaware Statutory Trust 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.
PIL 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 was included in Level 3 of the fair value hierarchy in the prior year, as the inputs to the asset valuation were not
based on observable market prices, and were measured at an estimated price that would be received to sell the asset. During the
year, the Group disposed of its investment in JH&P for $3.8 million, which included realised gains of $3.3 million over the period of
the investment, comprising $1.3 million of realised gains recognised for the year ended 30 September 2021 and $2.0 million of gains
which had been recognised in prior periods
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.
(iii) Unobservable inputs
The following table represents the movement in Level 3 financial instruments:
2021
BBaallaannccee aatt tthhee bbeeggiinnnniinngg ooff tthhee ffiinnaanncciiaall yyeeaarr
Gains recognised in profit and loss
Effects of foreign exchange movements
Disposals
Balance at the end of the financial year
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
Interest in
James Hambro
& Partners LLP
$’000
Total fair
value –
level 3
$’000
22,,553377
1,316
(11)
22,,553377
1,316
(11)
Carrying
amount
$’000
22,,553377
1,316
(11)
(3,842)
(3,842)
(3,842)
–
–
–
22,,889911
(325)
(29)
2,537
22,,889911
(325)
(29)
2,537
22,,889911
(325)
(29)
2,537
Annual Report 2021 | 91
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021Notes to the Consolidated Financial Statements
Notes to the Consolidated Financial Statements
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021
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
92
93
96
2020
$’000
2,764
2,380
90,875
96,019
883
1,091
1,974
2021
$’000
3,333
2,797
133,706
139,836
974
7,005
7,979
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 $6.5 million (2020: $6.1 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, national
insurance and social security taxes.
92 | Pendal Group
Notes to the Consolidated Financial StatementsFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021
Notes to the Consolidated Financial Statements
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021
D2. Share-based payments
(a) Share options and performance share rights
Pendal Group’s long-term incentive plans 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
Vesting conditions
Vesting period
Pendal Australia
Performance Reward
Scheme
(Pendal Aust PRS)
This scheme gives the employee the right to receive ordinary shares at
a future date if specified vesting conditions are met, 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 rights
that vest at the end of the performance period.
Continued employment and
performance hurdles based on
Total shareholder return (TSR)
and Underlying earnings per
share growth.
3 years
JOHCM Performance
Reward Schemes
(JOHCM PRS)
This scheme gives the employee the right to receive ordinary shares at
a future date if specified vesting conditions are met, 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 rights
that vest at the end of the performance period.
Continued employment and
performance hurdles based on
TSR and Underlying EPS.
3 years
JOHCM Long Term
Retention Equity –
nil cost options
(LTR – 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
JOHCM Long Term
Retention Equity
(NCOs)
Following the JOHCM acquisition, additional awards were made to
JOHCM fund managers. The number of other nil cost options awarded
is determined with reference to individual performance each year.
Continued employment.
Up to 4 years
JOHCM Long Term
Retention Equity
(2021 NCOs)
Under this scheme, employees 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
performance hurdles based on
Company share price and FUM
Up to 5 years
Number, grant date fair value and weighted average share price at date of exercise of nil cost options and performance share rights
awarded during the year:
Pendal Aust
PRS
Rights
JOHCM PRS
Rights
$
LTR – NCOs
Rights
$
$
NCOs
Rights
2021
NCOs
Rights
$
$
2021
OOuuttssttaannddiinngg aatt 11 OOccttoobbeerr
11,,117700,,338833
11,,111155,,664499
33,,334488,,556655
22,,332211,,553366
–
Granted
744,043
5.96
1,124,300 6.06
–
–
855,128
7.02 123,612
6.24
Vested / Exercised
(2,078)
7.63
–
–
(681,335)
6.04
Forfeited
Lapsed
(45,479)
(251,478)
(189,972)
(175,042)
–
–
–
–
–
–
–
–
–
–
OOuuttssttaannddiinngg aatt 3300 SSeepptteemmbbeerr
11,,661155,,339911
11,,887744,,993355
22,,666677,,223300
33,,117766,,666644
112233..661122
Exercisable at 30 September
17,888
–
681,335
–
2020
OOuuttssttaannddiinngg aatt 11 OOccttoobbeerr
998866,,779966
668811,,112255
44,,002299,,990088
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
(36,872)
(278,745)
(20,026)
(191,822)
–
–
–
–
OOuuttssttaannddiinngg aatt 3300 SSeepptteemmbbeerr
11,,117700,,338833
11,,111155,,664499
33,,334488,,556655
22,,332211,,553366
Exercisable at 30 September
19,966
–
681,336
–
–
–
–
–
–
–
––
–
Annual Report 2021 | 93
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021Notes to the Consolidated Financial Statements
Notes to the Consolidated Financial Statements
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021
Fair value of nil cost options granted during the year
The options are fair valued with reference to the Company’s share price at grant date. The fair value of the nil cost options issued
during the year was $7.02 (2020: $8.06). The weighted average remaining contractual life of outstanding nil cost options as at 30
September 2021 was 1.6 years (2020: 2.0 years).
Fair value of performance share rights awarded during the year
The fair value of the performance share rights linked to Underlying EPS 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
0.11%
35%
0%
The fair value of the TSR-hurdled performance share rights issued during the year was $5.10 (2020: $5.86) and for the Underlying
EPS-hurdled performance share rights was $7.02 (2020: $8.33). The weighted average remaining contractual life of outstanding
performance share rights at 30 September 2021 was 1.3 years (2020: 1.3 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
New and existing employees may receive one-off equity grants
for retention.
Pendal Australia
Boutique variable
reward scheme
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.
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.
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.
Vesting conditions
Vesting period
Continued employment
Up to 5 years
Continued employment
Up to 5 years
Continued employment
Up to 5 years
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.
Continued employment
Up to 5 years
JOHCM/ TSW 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/ TSW
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
Continued employment
Up to 5 years
Number and weighted average grant date fair value of equity grants awarded during the year:
Total
Equity grants
2021
Number
Fair value
2021
$
Equity grants
2020
Number
3,279,172
6.95
2,862,424
Fair value
2020
$
8.06
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.
94 | Pendal Group
Notes to the Consolidated Financial StatementsFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021
Notes to the Consolidated Financial Statements
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021
(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 converted 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. In addition,
the Company issued a total of 400,178 ordinary shares to one investment team who converted their previously issued FLE awards
(2020: nil shares issued). The shares issued are subject to vesting conditions for up to five years.
Further details on the FLE Scheme are outlined on pages 41 to 42 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
2021
$’000
44,196
2020
$’000
35,192
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 affect 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.
Annual Report 2021 | 95
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021Notes to the Consolidated Financial Statements
Notes to the Consolidated Financial Statements
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021
D3. Key management personnel disclosures
(a) KMP compensation
Short-term employee benefits
Post-employment benefits
Long-term benefits
Share-based payments
Total
(b) Shareholdings
2021
$
2020
$
9,221,297
8,480,212
284,752
30,083
221,146
11,645
5,244,112
4,138,090
14,780,244
12,851,093
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
Held at the end of the year
(c) Other equity instruments
2021
2020
22,,331188,,332244
22,,116699,,114455
155,444
332,935
274,942
10,000
(389,274)
(135,763)
2,417,429
2,318,324
The following table sets out the number of performance share rights held by KMP (including their 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
2021
887799,,114411
946,405
–
(149,401)
1,676,145
2020
553300,,336600
480,231
–
(131,450)
879,141
96 | Pendal Group
Notes to the Consolidated Financial StatementsFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021
Notes to the Consolidated Financial Statements
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021
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.
E5.
Parent entity information
Business combination
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
97
98
100
101
102
2020
$’000
173,233
176,380
121,034
881,261
52,018
56,696
Company
2021
$’000
136,252
137,648
137,481
1,317,705
58,420
60,862
894,845
484,221
(25,471)
173,427
(7,544)
1,440
220,147
1,256,844
(25,471)
160,448
(4,680)
(28)
210,075
824,565
(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.
The parent entity has provided a guarantee to a syndicate of banks in respect of obligations of its subsidiary, Pendal USA Inc. under
a US$35 million term debt facility agreement entered into to facilitate the acquisition of TSW.
(c) Contingent liabilities of the parent entity
The parent entity has contingent liabilities as outlined in Note F3.
(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 (2020: $nil).
Annual Report 2021 | 97
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021Notes to the Consolidated Financial Statements
Notes to the Consolidated Financial Statements
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021
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. Business combination
(a) Summary of acquisition
On 22 July 2021, the Group, through its wholly owned subsidiary Pendal USA Inc., acquired 100% of the issued share capital of
Thompson, Siegel & Walmsley LLC (TSW), a US-based value oriented investment management company. The acquisition
accelerates the Group’s growth in the US market and adds a complementary product range and distribution network to the Group.
Details of the purchase consideration, the net assets acquired and goodwill are as follows:
Purchase consideration (refer to (b) below):
Cash paid
Ordinary shares issued
Total purchase consideration
$’000
390,117
22,714
412,831
The fair value of the 2,825,073 shares in the Company issued as part of the consideration paid for TSW ($22.7 million) was based on
the closing share price on the Australian Stock Exchange on 22 July 2021 of $8.04 per share.
The assets and liabilities recognised at fair value as a result of the acquisition are as follows:
Cash
Trade and other receivables
Prepayments
Property, plant and equipment
Right of use assets
Financial assets held at FVTPL
Deferred tax assets
Intangible assets: investment management contracts
Intangible assets: trademarks and tradenames
Trade and other payables
Employee benefits
Lease liabilities
Net identifiable assets acquired
Add: goodwill
Net assets acquired
$’000
11,646
17,865
929
2,333
5,344
1
4,101
337,996
1,495
(465)
(16,701)
(5,344)
359,200
53,631
412,831
At 30 September 2021, the fair values of assets and liabilities recognised as a result of the acquisition are provisional and may be
revised in accordance with Accounting Standard AASB 3 Business Combinations.
98 | Pendal Group
Notes to the Consolidated Financial StatementsFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021
Notes to the Consolidated Financial Statements
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021
(i) Goodwill
Goodwill recognised on acquisition is attributable to the expected future profitability of the TSW business, its strong investment-led
culture and the skills and performance of TSW investment professionals, management and staff. The goodwill recognised is
expected to be deductible for U.S. income tax purposes.
(ii) Acquired receivables
The fair value of acquired receivables is $17,865,427. No loss allowance was recognised on acquisition.
(iii) Revenue and profit contribution
The TSW business contributed revenues of $23.0 million and net profit after tax of $12.4 million to the Group for the period from 22
July to 30 September 2021. If the acquisition had occurred on 1 October 2020, consolidated pro-forma revenue and profit for the
year ended 30 September 2021 would have been $723.4 million and $203.7 million respectively. These amounts have been
calculated using TSW’s pro-forma unadjusted results12 for the period.
(b) Purchase consideration – cash outflow
Outflows of cash to acquire subsidiary, net of cash acquired
Cash consideration
Less: Cash balances acquired
Net outflow of cash – investing activities
$’000
390,117
(11,093)
379,024
(i) Separately recognised transactions
Under the terms of the purchase agreement to acquire TSW, Pendal Group made seed investments in funds managed by TSW after
balance date, to replace seed investments redeemed by the exiting majority owner. Investments in TSW-managed funds totalling
US$12.3 million ($16.6 million) were made on 25 October 2021, and will be recognised in the Group’s 2022 financial statements as
financial assets held at fair value through profit or loss.
(ii) Acquisition-related costs
Acquisition related costs of $16.2 million that were not directly attributable to the issue of shares are included in professional
services and administrative expenses in the Consolidated Statement of Comprehensive Income in the period during which the
related service is received and in operating cash flows in the Consolidated Statement of Cash Flows.
The associated costs of issuing Pendal Group Limited shares to facilitate the acquisition were $4.7 million and have been
recognised in contributed equity in the Consolidated Statement of Changes in Equity. Borrowing costs of $0.5 million associated
with the debt financing of the acquisition have been included as finance costs in the Consolidated Statement of Comprehensive
Income.
There were no other business acquisitions in the year ended 30 September 2021 (2020: None).
12 Pro-forma unadjusted results comprise unaudited income statements prepared by TSW management for the period from 1 October 2020 to 22 July
2021, which are not adjusted for differences in accounting policies, transactions specific to pre-acquisition financial arrangements and fair values of
assets and liabilities recognised on acquisition.
Annual Report 2021 | 99
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021Notes to the Consolidated Financial Statements
Notes to the Consolidated Financial Statements
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021
E3. 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 Funds (UK) Limited
JOHCM Funds (Ireland) Limited
JOHCM (Singapore) Pte Limited
JOHCM (USA) Inc.
Pendal USA Inc.
Thompson, Siegel & Walmsley LLC
Pendal Group Limited Employee Equity Plan Trust
Pendal Group Employee Benefit Trust
Accounting policy
Country of
incorporation/
formation
Australia
Australia
Australia
UK
UK
UK
UK
Ireland
Singapore
USA
USA
USA
Australia
Jersey
Class of
shares
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
–
–
Equity holding
2021
%
2020
%
100
100
100
100
100
100
100
100
100
100
100
100
–
–
100
100
100
100
100
100
100
100
100
100
–
–
–
–
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.
100 | Pendal Group
Notes to the Consolidated Financial StatementsFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021
Notes to the Consolidated Financial Statements
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021
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.
E4. 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 include 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:
2021
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
–
2,559
–
2,559
2,559
–
–
–
–
–
64,681
–
1,453
52,552
–
287,214
66,134
339,766
66,134
339,766
Other
$’000
Total
$’000
–
205
–
205
205
64,681
56,769
287,214
408,664
408,664
Net asset value of funds
4,699,002
1,348,347
5,145,362
42,079,293
191,775
53,463,779
2020
Cash and cash equivalents
Trade and other receivables
Financial assets held at FVTPL
Total Assets
Maximum exposure to loss
–
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
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 $375,189,721 (2020:
$289,216,189).
Annual Report 2021 | 101
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021Notes to the Consolidated Financial Statements
Notes to the Consolidated Financial Statements
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021
E5. Related party transactions
Compensation and other transactions with key management personnel are set out in Note D3 and the Remuneration Report on
pages 31 to 64.
The Group earns management and performance fees from investment fund vehicles managed by subsidiaries of the Group (refer
Note E4). 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 2021 Financial Year with values totalling approximately
$2.6 billion (2020: $3.1 billion) for subscriptions and $3.7 billion (2020: $4.3 billion) for redemptions.
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.
Intangible assets
Lease assets and liabilities
Contingent liabilities
Remuneration of auditors
Subsequent events
F1. Intangible assets
102
105
106
106
107
Fund and
investment
management
contracts
$’000
Goodwill
$’000
Other intangibles
$’000
Total
$’000
2021
NNeett bbooookk vvaalluuee aass aatt 11 OOccttoobbeerr 22002200
476,093
53,443
Additions
Acquisition of business
Foreign exchange gain
Amortisation expense
Impairment loss
–
53,631
9,134
–
–
–
337,996
8,503
(9,310)
(2,650)
2,567
224
1,495
29
(935)
–
532,103
224
393,122
17,666
(10,245)
(2,650)
Net book value as at 30 September 2021
538,858
387,982
3,380
930,220
Represented by:
Cost
Accumulated amortisation and impairment
2020
538,858
–
483,998
(96,016)
8,544
(5,164)
1,031,400
(101,180)
NNeett bbooookk vvaalluuee aass aatt 11 OOccttoobbeerr 22001199
447788,,330055
5599,,990066
Additions
Foreign exchange loss
Amortisation expense
Impairment loss
Net book value as at 30 September 2020
Represented by:
Cost
Accumulated amortisation and impairment
102 | Pendal Group
–
(2,212)
–
–
476,093
476,093
–
–
(323)
(5,745)
(395)
53,443
134,525
(81,082)
22,,113355
1,102
–
(670)
–
2,567
6,794
(4,227)
554400,,334466
1,102
(2,535)
(6,415)
(395)
532,103
617,412
(85,309)
Notes to the Consolidated Financial StatementsFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021
Notes to the Consolidated Financial Statements
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021
Fund and investment management contracts:
Fund management contracts relate to contractual relationships to manage JOHCM open-ended funds (OEICs). Investment
management contracts comprise contractual relationships with institutional, wholesale and sub-advisory clients. The contracts
were recognised by Pendal Group when it acquired JOHCM and TSW, and are recognised as follows:
Fund management contracts – OEICs
Investment management contracts – segregated mandates (JOHCM)
Investment management contracts – sub-advisory and segregated accounts (TSW)
Total
2021
$’000
44,298
2,699
340,985
387,982
2020
$’000
49,959
3,484
–
53,443
The recoverable amount of JOHCM fund and management contracts 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%
(2020:11.8%), based on the cost of capital.
An impairment loss of $2.6 million (2020: $0.4 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.
The fair value of investment management contracts recognised on the acquisition of TSW has been measured in accordance with an
independent valuation of intangible assets of TSW as at the acquisition date of 22 July 2021 as part of the purchase price allocation,
using the multi-period excess earnings method, a specific application of the discounted cash flow method. The recoverable amount
of the TSW management contracts will be measured at subsequent reporting dates using the present value of future cash flows
expected to be derived for each contract.
Goodwill:
Goodwill has been derived from the following business combinations:
Purchase of Pendal (formerly BTIM) effective 19 October 2007
Purchase of JOHCM effective 1 October 2011
Purchase of TSW effective 22 July 2021
Total
2021
$’000
233,300
250,810
54,748
538,858
2020
$’000
233,300
242,793
–
476,093
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). Goodwill recognised on the acquisition of TSW is
allocated to the Pendal US operating segment, which comprises the JOHCM US CGU and the TSW CGU, each of which are tested
separately for impairment. The carrying value of goodwill is attributable to Pendal Australia ($233.3 million), Pendal EUKA ($161.7
million) and Pendal US (comprising JOHCM US ($89.1 million) and TSW ($54.8 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 (2020: 11.8%) based on the cost of capital
(post-tax) for each of the CGUs.
In forecasting cashflows over the period, management has considered economic and equity market conditions, including the
continuing uncertain impact of COVID-19 in the short to medium term.
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 2021. The current headroom for Pendal Australia is $81.0 million (2020: $67.6 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 14.3%, or the projected cash flows would need to reduce by 24.0%.
There has been no impairment of goodwill during the year ended 30 September 2021. The carrying values of JOHCM and TSW
goodwill have been translated to Australian dollars using the 30 September British pound and US dollar spot exchange rates
respectively.
Annual Report 2021 | 103
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021Notes to the Consolidated Financial Statements
Notes to the Consolidated Financial Statements
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021
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 business combinations 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 include 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.
Other intangibles also include trademarks and tradenames acquired as part of a business combination and recognised
separately to 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 estimated cash flows attributable to the trademarks
and tradenames over their estimated useful lives, currently estimated at 2 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.
104 | Pendal Group
Notes to the Consolidated Financial StatementsFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021
Notes to the Consolidated Financial Statements
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021
F2. Lease assets and liabilities
Right-of-use assets
Office space
Equipment
Right-of-use lease assets
Additions to right-of-use assets during the 2021 Financial Year were $11.0 million (2020:$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 2021 was $8.8 million (2020: $9.8 million).
2021
$’000
39,436
462
39,898
2021
$’000
8,234
35,774
44,008
2021
$’000
1,347
6,750
255
8,352
2020
$’000
36,819
108
36,927
2020
$’000
7,356
33,204
40,560
2020
$’000
1,456
6,946
25
8,427
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 2021 | 105
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021Notes to the Consolidated Financial Statements
Notes to the Consolidated Financial Statements
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021
F3. Contingent liabilities
Guarantee on bank borrowings
Pendal Group Limited and its subsidiaries, Pendal (UK) Limited and J O Hambro Capital Management Holdings Limited, act as
guarantors for the obligations of Pendal USA Inc. under a US$35 million three year term loan facility with a syndicate of financial
institutions comprising HSBC Bank Australia Limited, The Northern Trust Company and Westpac Banking Corporation.
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.
To the extent that Pendal Group, in the normal course of business, has incurred various contingent obligations at 30 September
2021, none of those contingent obligations is anticipated to result in any material loss.
F4. Remuneration of auditors
(a) Audit and other services – Australia
PricewaterhouseCoopers
Statutory audit services
2021
$
2020
$
Audit and review of statutory financial reports of the parent covering the Group
Audit of statutory financial reports of controlled entities
395,924
76,134
391.278
74,096
Audit-related services
Audit of Australian Financial Service Licences
27,925
27,178
Other assurance services
Internal controls report (GS007)
Agreed-upon procedures (AUP) reports
Non-audit related (other) services
Transaction due diligence services
Total remuneration for services – Australia
(b) Audit and other services – outside of Australia
PricewaterhouseCoopers
Statutory audit services
84,489
72,600
832,000
82,238
–
–
1,489,072
574,790
2021
$
2020
$
Audit and review of statutory financial reports of controlled entities
452,595
417,161
Audit-related services
Financial Conduct Authority client assets report
138,174
142,892
Other assurance services
Internal controls report (SOC1)
Non-audit related (other) services
Fund reorganisation tax services
Total remuneration for services – outside of Australia
172,067
181,574
548,945
1,311,781
–
741,627
106 | Pendal Group
Notes to the Consolidated Financial StatementsFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021
Notes to the Consolidated Financial Statements
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021
(c) Other services to non-consolidated trusts
The Company’s external auditor provides audit and other assurance services to non-consolidated trusts in Australia for which PFSL
and PIL act as trustee, manager or responsible entity. The financial statement audit fees were $1,321,008 for the financial year
(2020: $1,339,528), and $135,564 (2020: $129,780) for other assurance services comprising compliance plan audits.
The Company’s external auditor provides audit and non-audit services to non-consolidated investment funds outside of Australia
for which JOHCM or JOHCM (USA) Inc. act as trustee or investment manager. The audit fees were $570,954 for the financial year
(2020: $603,064), and $235,670 (2020: $241,862) for other assurance services comprising tax compliance and consulting
services.
F5. Subsequent events
There are no other matters or circumstances which are not otherwise reflected in this Financial Report that have arisen subsequent
to the balance date, which have 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.
Annual Report 2021 | 107
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021Notes to the Consolidated Financial Statements
Directors’ Declaration
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2020
In the Directors’ opinion:
a) the financial statements and notes set out on pages 67 to 107 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 2021 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
Nicholas Good
Managing Director and Group Chief Executive Officer
5 November 2021
108 | Pendal Group
Directors’ DeclarationFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2021
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 (the Group) 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 2021 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 2021
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 significant accounting policies
and other explanatory information
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.
Annual Report 2021 | 109
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 $9.7
million, which represents
approximately 5% of the Group’s
normalised profit before tax,
adjusted for certain items as
described below.
• 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 normalised profit
before tax because, in our view, it is
the benchmark against which the
performance of the Group is most
commonly measured.
• We adjusted profit before tax by
excluding the current year’s net
performance fee and including a
three year average net performance
• Our audit focused on
• Amongst other relevant
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 and Pendal US. All
other procedures were
performed by the Group
engagement team.
For the work performed
by the component audit
team, we considered the
level of involvement we
needed to have in their
•
•
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
−− Business Combination
related to the purchase of
Thompson, Siegel &
Walmsley (TSW)
•
These are further described
in the Key audit matters
section of our report.
110 | Pendal Group
Independent Auditor's Report
fee, to account for the volatility in
this fee year-on-year. Net
performance fee is the gross
performance fee revenue less the
expense paid to employees
attributable to the performance fee.
• We utilised a 5% threshold based on
our professional judgement, noting it
is within the range of commonly
acceptable thresholds.
audit work to be able to
evaluate whether
sufficient appropriate
audit evidence had been
obtained as a basis for
our opinion on the
Group’s financial report
as a whole. This included
active dialogue during the
audit with the component
audit team 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
Our audit procedures on the goodwill asset (except for
goodwill related to the purchase of TSW) included,
amongst others:
This was a key audit matter as the intangible assets
were the largest asset balance ($951 million as at 30
September 2021) and due to the complexity and
judgements in determining their recoverable
amounts.
The Group's significant judgements included
forecasting cash flows of the Group into perpetuity for
goodwill and between five and 20 years for fund and
investment management contracts, which involved
making revenue growth rate and discount rate
assumptions.
• 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 recoverable amount calculation (the
models).
• Evaluating the cash flow forecasts used in the
models and the process by which they were
developed.
• Assessing the historical ability of the Group to
forecast future cash flows by comparing the last
three years’ actual results with prior forecasts to
consider whether any forecasts included
Annual Report 2021 | 111
Key audit matter
How our audit addressed the key audit
matter
assumptions that, with hindsight, had been
optimistic.
• Assessing the assumptions for future 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 (except for investment
management contracts related to the purchase of
TSW) included, amongst others:
•
Selecting a sample of contracts based on certain
risk criteria and assessing the historical ability of
the Group to forecast cash flows in the discounted
cash flow model used to assess impairment, by
comparing the last three years’ actual results with
prior forecasts.
• 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.
Our audit procedures on the goodwill and investment
management contracts related to the purchase of
TSW included, amongst others:
• Assessing the appropriateness of assumptions
made by the Group in determining goodwill and
the value of the acquired contracts.
•
Selecting a sample of contracts and agreeing key
inputs to the Group’s PPA calculation.
• Assessing if the disclosures relating to goodwill
are in accordance with the requirements of
Australian Accounting Standards.
112 | Pendal Group
Independent Auditor's Report
Key audit matter
How our audit addressed the key audit
matter
Accounting for employee remuneration
schemes
Refer to Section D of the financial 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 was applied in their
determination, including assessing share price
forecasts, forfeiture rates and provisioning and the
likelihood of specific performance hurdles being
achieved.
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 $582
million comprises:
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.
Our audit procedures on the fee revenue recognised
by Pendal Australia included, amongst others:
• 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. This report
included an independent audit opinion over the
Annual Report 2021 | 113
Key audit matter
•
•
Investment management fees ($523 million)
Performance fees ($57 million)
• Other revenue ($2 million)
Business Combination
Refer to Note E2 of the financial report
On 22 July 2021 the Group, through its wholly-owned
subsidiary Pendal USA Inc., acquired 100% of the
issued share capital of Thompson, Siegel & Walmsley
(TSW), a US-based investment management
company.
How our audit addressed the key audit
matter
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, checking
that the key inputs were consistent with
contractual terms..
Our audit procedures on the business combination
included, amongst others:
• Agreeing the cash consideration paid to
supporting documents.
• Assessing the valuation methods used by the
Group to identify the value of intangible assets.
This was a key audit matter due to the complexity of
the valuation methods adopted in calculating the
intangible assets and the consequent accounting
treatment.
• Assessing the appropriateness of assumptions
made by the Group in determining the value of
the assets and liabilities acquired with a focus on
investment management contracts.
• Recalculating the tax impact of the accounting
entries posted.
114 | Pendal Group
Independent Auditor's Report
Key audit matter
How our audit addressed the key audit
matter
• Assessing the disclosures in the financial report
in light of our understanding and the
requirements of Australian Accounting
Standards.
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 2021, but does not include
the financial report and our auditor’s report thereon.
Our opinion on the financial report does not cover the other information and we do not and will not
express an opinion or 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.
When we read the other information not yet received, if we conclude that there is a material
misstatement therein, we are required to communicate the matter to the directors and use our
professional judgement to determine the appropriate action to take.
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
Annual Report 2021 | 115
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 31 to 64 of the directors’ report for the
year ended 30 September 2021.
In our opinion, the remuneration report of Pendal Group Limited for the year ended 30 September
2021 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
5 November 2021
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Independent Auditor's Report
Shareholder Information
The shareholder information set out below is current as at 18 October 2021.
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 382,677,887 ordinary shares on issue, held by 26,211 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
91,190,946
23.83
1
2
3
4
5
6
7
8
9
J P Morgan Nominees Australia Pty Limited
Citicorp Nominees Pty Limited
Pacific Custodians Pty Limited
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