Annual Report
2020
2020 Annual Report 1
Contents
Pinnacle Glossary ................................................................................................................................................................. 4
Details of Executive Key Management Personnel remuneration ..............................................................................54
Chair’s Letter ......................................................................................................................................................................... 6
Executive service agreements ..........................................................................................................................................56
Overview, Operating and Financial Report .................................................................................................................... 10
Non-executive director remuneration ...........................................................................................................................59
Nature of operations and principal activities .................................................................................................................10
Share-based payment compensation ............................................................................................................................62
Key financial highlights ...................................................................................................................................................... 12
Equity instrument disclosures relating to Key Management Personnel ................................................................. 64
Pinnacle Affiliates ................................................................................................................................................................ 14
Loans to Key Management Personnel ............................................................................................................................65
Business strategies and prospects for future financial years .....................................................................................23
Equity Capital ...................................................................................................................................................................... 66
Economic conditions and material business risks .......................................................................................................23
Auditor’s Independence Declaration .............................................................................................................................. 70
Review of Group Results ...................................................................................................................................................24
Financial Statements .......................................................................................................................................................... 72
Statement of Comprehensive Income ...........................................................................................................................24
Consolidated statement of profit or loss .......................................................................................................................73
Consolidated Statement of Financial Position ..............................................................................................................26
Consolidated statement of comprehensive income ...................................................................................................74
Corporate Sustainability ................................................................................................................................................... 28
Consolidated statement of financial position ...............................................................................................................75
Directors’ Profile ................................................................................................................................................................. 36
Consolidated statement of changes in equity ..............................................................................................................76
Directors’ Report ................................................................................................................................................................ 42
Consolidated statement of cash flows ........................................................................................................................... 77
Remuneration Report ........................................................................................................................................................ 44
Notes to the consolidated financial statements ...........................................................................................................78
Letter from the Chair of the Remuneration and Nominations Committee ........................................................... 46
Directors’ Declaration ...................................................................................................................................................... 137
Key Management Personnel ............................................................................................................................................ 48
Independent Auditor’s Report ........................................................................................................................................ 138
Role of Remuneration and Nominations Committee ................................................................................................ 49
Shareholder Information ................................................................................................................................................. 146
Executive remuneration policy and framework for the Company .......................................................................... 50
Corporate Directory ......................................................................................................................................................... 150
Links between performance and outcomes .................................................................................................................53
2 Pinnacle Investment Management
2020 Annual Report 3
01.
Pinnacle
Glossary
Term
Meaning
Term
Meaning
2019 Annual Report
the Group’s annual report for the 2019 financial year.
Managing Director
Ian Macoun, who was appointed as an executive director on 25 August 2016.
2019 financial year
the period 1 July 2018 to 30 June 2019.
Metrics or MCP
Metrics Credit Partners Pty Limited.
2020 Annual Report
this document.
New Loans
is a reference to the loans more fully described at page 65.
2020 Financial Year
the period 1 July 2019 to 30 June 2020.
Affiliates or Pinnacle Affiliates
Pinnacle’s sixteen affiliated investment managers, being Aikya, Antipodes, Coolabah, Firetrail, Hyperion, Longwave,
Metrics, Omega, Palisade, Plato, Resolution Capital, Reminiscent, Riparian, Solaris, Spheria and Two Trees.
Aikya
Aikya Investment Management Limited.
Antipodes
Antipodes Partners Limited.
ASX Principles
the Corporate Governance Principles and Recommendations 3rd Edition, published by the ASX Corporate
Governance Council.
Auditor
Board
PricewaterhouseCoopers.
the Board of Directors.
NPAT
NPBT
NTA
Omega
Palisade
PIML
net profit after tax.
net profit before tax.
net tangible assets.
Omega Global Investors Pty Limited.
Palisade Investment Partners Limited.
Pinnacle Investment Management Limited, the principal operating subsidiary of the Group.
PIML Acquisition
the transaction approved by shareholders on 16 August 2016, pursuant to which the Company acquired the 24.99%
equity stake in PIML it did not already own.
Board Committees
the Audit, Compliance and Risk Management Committee and the Remuneration and Nominations Committee.
PIML LTI Scheme
the long-term incentive scheme described on page 51 of the 2020 Annual Report.
Chair
Company
Alan Watson, the Chair of the Board.
Pinnacle Investment Management Group Limited.
Pinnacle or PNI
Pinnacle Investment Management Group Limited.
Pinnacle Omnibus Plan
the Pinnacle Omnibus Incentive Plan described on page 51 of the 2020 Annual Report.
Company Secretary
Calvin Kwok, who held the position during the 2020 financial year.
Plato
Plato Investment Management Limited.
Coolabah
Coolabah Capital Investments Pty Ltd.
Corporations Act
Corporations Act 2001 (Cth).
Deutsche Australia
Deutsche Australia Limited, which held an 18.8% shareholding in the Company at the start of the 2016 financial year.
As at the date of this report, Deutsche Australia no longer has any shareholding in the Company.
EOSP
Firetrail
Pinnacle Employee Option Share Plan.
Firetrail Investments Pty Limited.
Foundation
the Pinnacle Charitable Foundation.
FUM
funds under management.
Group or Pinnacle Group
Pinnacle and the entities that it controlled during the 2020 financial year.
Hyperion
Hyperion Asset Management Limited.
Key Management Personnel
the individuals identified as such on page 48 of the 2020 Annual Report.
LTI
long-term incentives offered to individuals who are staff of the Group.
Longwave
Longwave Capital Partners Pty Limited.
4 Pinnacle Investment Management
Principal Investments
investments made by the Group in listed and unlisted equities and unit trusts on its own behalf.
Reminiscent
Reminiscent Capital Pty Limited.
Resolution Capital
Resolution Capital Limited.
Riparian
Riparian Capital Partners Pty Limited.
Securities business
the corporate finance, equity capital markets, institutional sales, research and private wealth management
businesses previously owned by the Company and now known as Wilsons Advisory.
Sellers
Solaris
Spheria
STI
each of Macoun Superannuation Fund Pty Ltd as trustee for the Macoun Superannuation Fund, Macoun Generation
Z Pty Ltd as trustee for the Macoun Generation Z Family Trust, Usinoz Pty Ltd as trustee for the Ihlenfeldt Family
Trust, AJF Squared Pty Ltd as trustee for the AJF Squared Family Trust, Andrew Chambers and Fleur Chambers as
trustee for the Andrew C Chambers Family Trust, Adrian Whittingham as trustee for the Whittingham Family Trust,
Mark Cormack and Melanie Cormack as trustee for the Cormack Family Trust and Dellreid Pty Limited as trustee for
the Dell Family Trust.
Solaris Investment Management Limited.
Spheria Asset Management Pty Limited.
short-term incentives.
Two Trees
Two Trees Investment Management Pty Limited.
2020 Annual Report 5
02.
Chair’s Letter
Dear Fellow Shareholders
My colleagues and I are pleased to present
for their commitment to the business and
Pinnacle’s Annual Report for the financial year
the success that they have achieved to date,
ended 30 June 2020.
It was indeed an unprecedented year -
challenging, disruptive, and confronting. The
extensive impact of the COVID-19 virus crisis,
particularly during the second half of the
year, is of course widely apparent in all global
economies and markets. Having recovered from
the significant downturn in the December 2018
quarter, equity markets moved to record highs in
late February 2020, before falling precipitously
in a matter of days in March as they sought
to incorporate the negative commercial and
economic effects of the virus, which continues
to spread and cause extraordinary suffering for
many across the globe. Here in Australia, the
2019-20 bushfire season saw devastation across
wide swathes of the country, with lives and
livelihoods lost or irrevocably changed; and to
this has been added the appalling consequences
and also to thank our shareholders for their
support. This year, perhaps as never before,
the vital importance of outstanding people
in our Company and its Affiliates has been
apparent. Therefore, I wish to commence my
letter by recognising the resilience, dedication
and flexibility of the people of Pinnacle
and its Affiliates, and thanking them for the
extraordinary efforts in supporting our clients
and their advisors, demonstrated through
their resourcefulness and adaptability whilst
maintaining high standards of investment and
service delivery throughout unprecedented crisis
conditions. In addition, we have been grateful for
the support of our shareholders, and the interest
of the equity research community, as we have
sought to keep everyone informed with frequent
briefings and updates submitted to the ASX as
events unfolded.
of COVID-19. Whilst we in Australia have
Last year, we stated that we are not soothsayers
not been immune, thankfully, at the time of
of financial markets; rather, we are seeking to
writing, we remain insulated from some of
develop a business that will continue to prosper
its worst effects. Still, the ultimate economic,
across the full range of market conditions,
social, and humanitarian impacts remain both
by enhancing our diversity of asset classes
unclear and uncertain.
In the past, I have closed this letter by thanking
the people of both Pinnacle and the Affiliates
6 Pinnacle Investment Management
under management, increasing the diversity
of sources of funds under management,
retaining a healthy percentage of funds under
management exposed to performance fees, and
billion at 30 June 2019 (up $1.4 billion or
maintaining a robust balance sheet. Although
2.6% excluding the $3.0 billion ‘acquired’
we are only part-way through this diversification
with Coolabah) despite the 10.8% drop in the
process, we believe these strategies have
ASX300 index over the 12 month period;
begun to demonstrate their worth during the
very challenging 2020 financial year. Whilst
clearly not immune from substantial short-
term pressure – the reduction in funds under
management due to the drop in market
• Net inflows of $3.0 billion, of which retail was
$0.9 billion;
• Total dividends of 15.4 cents per share, the
same as for the 2019 financial year;
(particularly equity market) valuations and
• Retained a strong and flexible balance sheet,
the reduction in net FUM inflows combined
with net financial assets of $20.1 million,
to depress Affiliate and Pinnacle revenues
comprising cash and Principal Investments of
substantially relative to prior expectations –
$50.1 million at the end of the year, and debt
the progress achieved at this stage in these
of $30.0 million
diversification efforts has, to a material extent,
mitigated the adverse market impacts and we
Further detail is provided in the Operating
and Financial Review component of this
have managed to deliver profit and earnings per
Annual Report.
share outcomes a little ahead of the previous
financial year. We were particularly assisted in
this regard by significant performance fees in five
Affiliates, by the pace of inflows from offshore
investors beginning to increase, and by the
performance and positioning of our increasingly
diverse stable of specialist, high conviction active
fund managers.
In summary, during the 2020 financial year,
Pinnacle produced a solid financial outcome in
the prevailing circumstances, albeit below that
which we expected at the start of the year:
• NPAT attributable to shareholders was $32.2m
(up 5.6% from $30.5m in the 2019 financial
year), which represented basic earnings per
share of 18.8 cents per share (up 2.7% from
18.3 cents in the 2019 financial year);
• Aggregate Affiliate revenues (at 100%) grew
22.9% to $291m (including performance fees
of $26.7m, and Coolabah revenues for part of
the year);
The Board has declared a fully franked final
dividend of 8.5 cents per share, making a total of
15.4 cents for the full year. In arriving at this level
of dividend distribution the Board was seeking to
recognise the sound financial outcome for the
year given prevailing circumstances, whilst also
maintaining the self-discipline associated with
paying a substantial proportion of earnings
as dividends; however, tempering these with
a level of caution that significant exogenous
uncertainties and challenges may still lie
before us.
Our strategies of carefully growing the number
of Affiliates and further increasing our asset class
diversification were advanced during the year
with the Horizon 3 acquisition of a 25% interest
in Coolabah Capital Investments (a long-only
and long-short public markets credit manager),
the Horizon 2 establishment of Aikya Investment
Management (a global emerging markets
manager, based in London) and the Horizon 2
• Pinnacle’s share of aggregate Affiliate NPAT
launch of Reminiscent Capital (a Discretionary
was $38.0m, up 14.8%;
• Funds under management reached $58.7
billion at 30 June 2020, up 8.1% from $54.3
Asia Macro firm, based in Sydney). Pinnacle is
both a retail and an institutional distribution
partner with each of these Affiliates.
2020 Annual Report 7
Finally, we have entered the 2021 financial
year in good shape. We are poised to
resume growth, to react to possible further
external adversity and to take advantage of
opportunities that may materialise. We have
been tested this year and I am proud to say that
our Company and the Affiliates have responded
vigorously during this adversity. We plan to
continue our strategy of further increasing the
diversity of asset classes under management,
and the diversity of sources of funds under
management (particularly international) and
retaining a healthy percentage of funds under
management exposed to performance fees,
thereby further increasing both the resilience
and growth potential of Pinnacle.
In closing, it would be remiss of me not to
thank, on all shareholders’ behalf, my fellow
executive and non-executive directors,
who have supported the ambitions of your
Company so tirelessly over the past year, and
continue to provide expertise and counsel as
we move forward.
Further operational detail is discussed in the
Operating and Financial Report commencing
on page 10, and detail of our remuneration
philosophy and outcomes are described from
page 44 in the Remuneration Report, including
the letter from the Chair of the Remuneration
and Nominations Committee.
We look forward to welcoming you to the
Company’s Annual General Meeting on 29
October, 2020, most likely by electronic
means.
Yours sincerely
Alan Watson
4 August 2020
8 Pinnacle Investment Management
2020 Annual Report 9
03.
Overview,
Operating
and Financial
Report
Nature of operations and principal activities
Pinnacle is a leading Australia-based multi-affiliate investment management firm. Our mission is to
establish, grow and support a diverse stable of world-class investment management firms.
Founded in 2006, Pinnacle currently consists of 16 investment Affiliates. At 30 June 2020, the
Pinnacle Affiliates collectively managed approximately $58.7 billion in assets across a diverse range
of asset classes. Pinnacle provides its Affiliates with:
• equity, seed capital and working capital;
• superior distribution services, business support and responsible entity services to allow
investment managers to focus on delivering investment outperformance; and
•
independence, including separate management reporting structures and boards of directors,
whilst still offering the economies of scale and financial support inherent in being part of a larger
investment group.
The principal activities of the Group during the 2020 financial year were:
• developing and operating investment management businesses; and
• providing distribution services, business support and responsible entity services to the Pinnacle
Affiliates.
The diagram on the following page shows the Pinnacle Affiliates and Pinnacle’s effective interest in
each as at the date of this report.
4
4
.
0
%
%
5
.
2
3
4
0
.
0
%
4
0.0
%
40.0%
4 4 . 5 %
%
0 . 0
4
42.7%
23.5%
%
5 . 0
2
2 3 . 5 %
49.9%
4
0.0
%
3
5
.
0
%
%
6
7.
3
4
3
.
0
%
10 Pinnacle Investment Management
2020 Annual Report 11
Key financial highlights
During the 2020 financial year, the Group held shareholdings (through
its principal operating subsidiary, PIML) of between 23.5% and 49.9%
in each of the Pinnacle Affiliates, which together have $58.7 billion in
FUM as at 30 June 2020.
In the 2020 financial year:
• Pinnacle Affiliates generated aggregate revenues (at 100%) of $291.1
million, up 22.9% from $236.8 million in the previous year. Of this,
$26.7 million was performance fees ($15.3m in the previous year).
• Pinnacle generated total NPAT attributable to shareholders of $32.2
million, up 5.6% from $30.5 million in the prior year.
• Pinnacle’s share of NPAT from Pinnacle Affiliates was $38.0 million,
up 14.8% on the prior year.
The table below outlines the performance of the Pinnacle Group for
the 2020 and 2019 financial years:
Pinnacle Affiliates (100% aggregate basis)
FUM ($billion)*
58.7
54.3
FY2020 ($m)
FY2019 ($m)
Revenue ($million)
Net profit before tax
Tax expense
Net profit after tax
Pinnacle
Revenue
Expenses
Share of Pinnacle Affiliates net profit after tax
NPBT from continuing operations attributable to
shareholders
Taxation
NPAT from continuing operations attributable to
shareholders
Discontinued operations
Total profit attributable to shareholders
Basic earnings per share (cents):
From continuing operations
Total attributable to shareholders
291.1
142.7
(42.5)
100.2
22.4
(28.0)
38.0
32.4
-
32.4
(0.2)
32.2
18.9
18.8
236.8
123.1
(34.0)
89.1
21.1
(23.7)
33.1
30.5
-
30.5
0.0
30.5
18.3
18.3
12 Pinnacle Investment Management
2020 Annual Report 13
*Non-statutory measure
1 Pinnacle FUM includes 100% of FUM managed by Pinnacle Affiliates.
2 Revenue shown is 100% of all Pinnacle Affiliates’ revenue. This is shown to indicate trend and excludes revenue derived by Pinnacle itself.
Pinnacle’s focus
during the year was on
continuing to support
each of the Pinnacle
Affiliates and assisting
them to grow their
business and profitability.
Pinnacle Affiliates
Pinnacle’s resourcing was increased significantly during the prior year, both in
distribution and in infrastructure, with further strategic hires during the current financial
year, with a focus on growing the Group’s international distribution capability. The
quality of the Pinnacle Affiliates was again affirmed and demonstrated during the year.
Following is an overview of each of the Pinnacle Affiliates during the 2020 financial year:
Aikya
Aikya Investment Management was founded in 2020 and specialises
in managing Emerging Markets equity portfolios. The team intends
to maintain a small and simple organisational structure in order to
avoid the bureaucracy and distractions that often arise in larger, more
complex investment management businesses.
Aikya’s edge is their long-term approach, which primarily focuses
on assessing the quality of the business owners and managers in
Emerging Markets. Aikya looks to identify long-term stewards who
have grown cash flows, navigated a few economic cycles, and
demonstrated fairness to all stakeholders. Their approach has proven
over time that such people create shareholder value and drive long-
term investment returns.
Sustainability is at the heart of Aikya’s investment approach. The
name Aikya means oneness in Sanskrit which reflects the team’s core
belief that true stewards align their businesses with the interests of
all stakeholders. Companies that take short cuts when it comes to
customers, employees, suppliers, the environment, or broader society
are unlikely to be rewarding long-term investments.
The Aikya Global Emerging Markets Fund was launched in March 2020.
Antipodes Partners
Antipodes Partners is a pragmatic value manager of global equities (long
and long-short) founded in 2015 by Jacob Mitchell, together with a
number of former colleagues and like-minded value investors.
Antipodes aspires to grow client wealth over the long-term by
generating absolute returns in excess of the benchmark at below
market levels of risk. Antipodes’ approach seeks to take advantage of the
market’s tendency for irrational extrapolation around change, identify
great businesses that are not valued as such and build high conviction
portfolios with a capital preservation focus.
As at 30 June 2020, Antipodes had $8.0 billion in funds under
management.
14 Pinnacle Investment Management
2020 Annual Report 15
Coolabah
Coolabah Capital Investments (CCI) is a leading long-only and long-
short active credit manager that is responsible for managing numerous
institutional mandates, the Smarter Money Investments’ product suite,
and the BetaShares Active Australian Hybrid ETF (ASX: HBRD).
CCI’s edge is in alpha generation in liquid, high-grade credit in contrast
to traditional fixed-income strategies that drive returns through adding
more interest rate duration, credit default, and/or illiquidity risk (beta). This
alpha is a function of the world-class analytical insights rendered by CCI’s
human capital, which includes 23 executives with a long-term track-
record of delivering prescient insights. In 2019, CCI’s portfolio managers
were selected as one of FE fundinfo’s Top 11 “Alpha Managers” based on
their risk-adjusted performance across all asset classes.
Pinnacle acquired a 25% holding in CCI in December 2019. As at 30
June 2020, CCI had $3.7 billion in funds under management.
Firetrail Investments
Firetrail is a boutique investment manager founded in 2018. The
firm was established with a goal to align its people with their clients.
Importantly, the firm is majority owned by its investment staff and the
team is invested alongside their clients in the investment strategies.
While founded in 2018, the Firetrail investment team have a long,
successful track record of investing in equities. Prior to establishing
Firetrail, the portfolio management team including Patrick Hodgens,
Blake Henricks and James Miller worked together at Macquarie for over
a decade. The team were responsible for managing the highly successful
Macquarie High Conviction Fund, which was one of the top-performing
Australian equity funds over the medium- and long-term.
Firetrail has a diverse client base across Institutional Investors,
Foundations, Family Offices, HNW individuals, Financial Advisors and
Retail Investors. As at 30 June 2020, funds under management for the
firm were $4.1 billion.
Hyperion Asset Management
Hyperion Asset Management exists to help clients protect and grow their
capital over the long-term. When investing capital in listed companies
on its clients’ behalf, Hyperion has the mindset of long-term business
owners, not short-term traders. The average holding period for the
companies in their portfolios is 10 years and the long-term sustainability
of the businesses Hyperion invests in is core to its philosophy.
The Hyperion Global Growth Companies Strategy was established in
2014 for wholesale investors. Based on the strong performance record
of the strategy, it was opened to retail investors during the 2019 financial
year. As at 30 June 2020, the fund has outperformed its benchmark by
11.0% (per annum, since inception, gross of fees). Hyperion’s total funds
under management at 30 June 2020 were $7.8 billion.
Longwave Capital Partners
Longwave is a boutique investment manager that is dedicated
to delivering superior, long-term results through the innovative
combination of technology, experience and insight.
David Wanis and Jai Beathe are the founders of Longwave. Together,
they have a long history of designing, building and managing highly
successful investment strategies. From pioneering the Schroders
Australia small and micro-cap strategies to running global multi-asset
portfolios, they have worked with a broad range of institutional, retail,
charitable and sovereign wealth fund clients.
The Longwave Australian Small Companies Fund, Longwave’s active
and diversified portfolio of high-quality small companies that has
been built through the combination of quantitative discipline and
fundamental insight, launched on 1 February 2019.
16 Pinnacle Investment Management
2020 Annual Report 17
Metrics
Metrics is the leading Australian non-bank corporate lender with
a presence in Sydney, Melbourne and Auckland, NZ. Metrics is an
alternative asset manager specialising in fixed income, private credit,
equity and capital markets. Through its managed funds, Metrics
provides unrivalled access to the highly attractive Australian private
debt market to investors ranging from individuals to global institutions.
Metrics launched its first wholesale fund in June 2013 and is the
manager of a number of wholesale and retail investment trusts
in addition to the MCP Master Income Trust (ASX: MXT), which
successfully listed on the ASX in October 2017. Metrics’ second ASX-
listed vehicle, MCP Income Opportunities Trust (ASX: MOT), was
successfully listed on the ASX in April 2019. Pinnacle acquired an equity
interest in Metrics in August 2018, having been its distribution partner
for a number of years. Assets under management at 30 June 2020
were $5.3 billion, of which FUM was $4.4 billion.
Omega Global Investors
Omega’s Smart Beta Plus” approach optimises exposures to factors
that are researched to be return drivers while controlling common
risk, thereby ensuring investors are appropriately rewarded.
Omega believes the benefits derived from Smart Beta Plus are
compelling, providing the opportunity for investors to improve
investment outcomes via a cost-effective systematic approach.
Omega offers smart beta, factor-based investing across bonds,
equities, FX and cash. Pinnacle acquired an equity interest in Omega
in July 2018. As at 30 June 2020, Omega had FUM of $4.3 billion.
Palisade
Palisade provides institutional and wholesale investors with access
to Australian infrastructure projects through tailored portfolios and
co-mingled funds. Palisade’s multi-disciplinary and experienced team
focuses on attractive mid-market assets that are essential to the
efficient functioning of the communities and economies they serve.
Palisade manages investments in assets within the Transport, Energy,
Utilities, Renewables, Agri-infrastructure and Social (PPP) sectors. Each
asset is specifically targeted in sectors where Palisade believes it can
exhibit a competitive advantage.
As at 30 June 2020, funds under management and investor
commitments totalled approximately $2.9 billion across Palisade’s
three pooled funds and separately managed accounts. Palisade’s
flagship fund, Palisade’s Diversified Infrastructure Fund, generated a
gross return of 7.7% for the year, including 8.7% yield.
Plato Investment Management
Plato was founded in Sydney, Australia, in 2006 and is majority-owned
and operated by its investment staff. Plato is a stable, research-led
organisation focused on and aligned to client outcomes. The firm’s
strategies today encompass global and Australian equities that are
tailored to specific investor objectives of wealth accumulation, income
generation and downside protection.
The majority of Plato’s domestic strategies outperformed in the
financial year, whilst global shares proved more challenging, with large
cap growth stocks leading the way. Whilst market volatility was high,
Plato experienced virtually no net redemptions from clients. The team
quickly responded to working in a COVID-19 environment. As at 30
June 2020, Plato had $5.2 billion in funds under management.
18 Pinnacle Investment Management
2020 Annual Report 19
Reminiscent
Reminiscent Capital is a Discretionary Asia Macro investment firm based
in Sydney, Australia. Reminiscent aims to deliver attractive, uncorrelated
absolute returns through a concentrated, directional and dynamic
investment portfolio of fixed income, foreign exchange and equities, by
employing an eclectic top-down approach for uncovering important
macro themes and using a combination of conventional and novel
methods for implementing skewed expressions of their best ideas.
Reminiscent was founded by David Adams, formerly of Brevan Howard
and Morgan Stanley, in partnership with Pinnacle.
The Reminiscent Capital Global Macro Fund was launched in February
2019, with the strategy being made available through the Cayman
Islands from April 2020.
Resolution Capital
Resolution Capital is a specialist global real estate securities manager,
with a 25-year track record of successfully investing in listed real
estate. The firm is majority employee-owned and is headquartered in
Sydney, Australia and maintains an office in New York.
The firm is a fundamental analysis-orientated investment manager with
the objective of delivering superior risk-adjusted long-term returns,
compared with recognised industry benchmarks. This is achieved
through investment in a concentrated portfolio of carefully selected
listed real estate securities with an emphasis on avoiding fundamental
flaws, which could reasonably result in permanent impairment of the
underlying investments.
The firm continues to grow and diversify its investment and operational
capabilities. During the year, the firm launched its listed Real Assets
Strategy and as part of this initiative expanded its research coverage to
include Australian and global listed infrastructure companies.
The firm also continues to diversify its client base and notably grow its
funds sourced from international markets.
Funds under management were $9.0 billion as at 30 June 2020.
Riparian Capital Partners
Riparian is a specialist water, agriculture and food investment firm,
established in early 2019 with the specific purpose of identifying,
acquiring and managing investments across the agricultural sector.
Riparian’s investment team has extensive experience in agriculture,
finance and asset management, predominantly in Australia but also
covering the United States and Asia-Pacific. The team has proven its
ability to identify key areas for operational efficiency, expansion and
redevelopment of agri-sector assets while driving value through active
management of water portfolios and exposures.
Solaris Investment Management
Solaris is a style neutral, Australian equities fund manager. The Solaris
team consists of a diverse and experienced group of investment
professionals.
Solaris analysts are empowered as portfolio managers, making them
fully accountable for their investment ideas and decisions. Solaris’s
tried and tested investment process offers Core, High Alpha and Long
Short strategies with after-tax investment as a specialty.
Solaris had $8.5 billion in funds under management as at 30 June 2020
with incremental funds coming from new and existing clients. Solaris’s
core strategy has outperformed the S&P/ASX 200 Index by 1.7% per
annum since inception on 9 January 2008 (to 30 June 2020). The
information ratio for the strategy is notably strong since inception.
Launched in the 2017 financial year, investors in the Solaris Australian
Equity Long Short Fund have benefited from strong investment
performance since inception of 9.5% per annum (gross of fees) against
the S&P/ASX 200 Index returning 5.2% per annum over the same period.
20 Pinnacle Investment Management
2020 Annual Report 21
Spheria
Spheria is a fundamental-based investment manager specialising in
small and microcap companies. Spheria specifically seeks out businesses
where the present value of future free cash flows can be reasonably
ascertained and the underlying security is trading at a discount to
its intrinsic value. Spheria’s mission is to achieve strong investment
performance for its clients with an emphasis on risk management.
At 30 June 2020, Spheria had $1.2 billion in funds under management.
Two Trees
Two Trees is an investment management firm that specialises in
systematic global macro investing. Two Trees’ mission is to help
institutions, advisers, and individuals around the world grow their long-
term wealth and attain genuine portfolio diversity for when they need
it most.
Two Trees’ competitive edge is in fusing together a deep philosophical
understanding of financial economics with rigorous scientific
techniques for forecasting returns, risk, and volatility, and the way in
which they change through time.
Two Trees’ Global Macro strategy is available through an Australian
trust and a UCITS vehicle, which is domiciled in Ireland. Funds under
management at 30 June 2020 were $91 million.
22 Pinnacle Investment Management
Business strategies and
prospects for future
financial years
We continue to build Pinnacle by taking
a measured approach to growth. Despite
the turbulence in markets and the broader
economy during the financial year ending on
30 June 2020, we made a conscious decision
to keep our core capabilities well-resourced
to enable us to both continue to support
our Affiliates and to remain well-positioned
for further growth. We invested in additional
resources, particularly in international
distribution, to support and drive this growth.
We will also continue to invest in and seed new
Affiliates where management teams have a
strong track record and growth potential.
Economic conditions and
material business risks
The major business risks facing the Group are
equity market conditions and regulatory risk.
Equity market conditions
The Group’s results and outlook are influenced
by prevailing equity market conditions and, to a
lesser extent, by broader economic trends and
investor sentiment.
As set out in the Chair’s letter, the 2020
financial year was unprecedented. The
extensive impact of the COVID-19 virus
crisis, particularly during the second half
of the year, is of course widely apparent in
all global economies and markets. Having
recovered from the significant downturn in
the December 2018 quarter, equity markets
moved to record highs in late February 2020,
before falling precipitously in a matter of days
in March as they sought to incorporate the
negative commercial and economic effects of
the virus, which continues to spread and cause
extraordinary suffering for many across the
globe. Here in Australia, in addition and prior to
the onset of the virus, the bushfire season saw
devastation across wide swathes of the country.
The ultimate economic, social, and humanitarian
impacts remain unclear and uncertain.
Stock markets both in Australia and overseas
have rallied strongly since the lows of March,
and we are beginning to see some early
signs of ‘work adaptation’ and normalisation
amongst our existing, and prospective, client
base. Social distancing has restricted the
ability of investors and consultants to conduct
in-person meetings or on-site manager due
diligence; however, there are emerging signs
of ‘virtual due diligence’. Pinnacle’s support
of its Affiliates has also been highlighted as
a key reason why investors in Australia and
abroad have been able to get comfortable
with early-stage investing or overcoming the
psychological and social ‘tyranny of distance’.
At Pinnacle, we have deliberately sought to
build a robust, diverse business, that is able
to succeed across market cycles. As we have
said in the past, we are not immune from the
effects of a deterioration in market conditions
- to a large extent, our Affiliates’ FUM and,
therefore, revenues are linked to movements
in equities markets - but we recognise that
our defence against such an event is to work
with our Affiliates to create the best conditions
within them where exceptional investment
professionals can deliver outstanding investment
performance. Whilst the past year has presented
exceptional challenges, long-term performance
remains excellent across the Affiliates. Pleasingly,
performance fees were generated in five Affiliates
during the financial year.
Pinnacle staff moved fully to remote-working
from early March in response to the COVID-19
crisis. We have had limited staff back in our
Brisbane and Sydney offices, from early July,
2020 Annual Report 23
but remain fully remote in Melbourne, London
will continue to develop its business model
and the US. Throughout this time, it has been
to accommodate the changing environment
largely ‘business as usual’; we have paid close
within which it operates. We continue to invest
attention to the health and well-being of
in our Legal, Risk and Compliance function.
our people and, thankfully, we experienced
minimal direct health impacts, but remain
vigilant. Across the business, we ensured
Review of Group Results
extensive contact, particularly within teams,
Total net profit after tax (NPAT) attributable
using appropriate technology. We have also
to shareholders for the 2020 financial year
had more engagement than ever with our
was $32.2 million. NPAT from continuing
clients and their advisers; we recognise that
operations attributable to shareholders was
their needs are greatest in times of difficulty.
$32.4 million, with discontinued operations
Net inflows for the financial year were lower
than in recent years and, indeed, lower than
our expectations at the start of the year but,
against the extreme turbulence in markets
and the broader economy, it is pleasing
that we saw net inflows in both the first and
second halves of the financial year, which is a
testament to the quality of our Affiliates, our
market-leading distribution capability and our
client-centric approach.
It is still far from clear what the medium- to
longer-term impacts of this crisis will be
or, indeed, if we are really reaching a point
of ‘true recovery’. There remains great
uncertainty about the spread of COVID-19,
and there are numerous other geopolitical
risks also threatening to impact on global
growth prospects. Despite the short-term
impact on our financial results, our approach
remains clear - to work very hard (especially
with clients and prospects) during the crisis
period; and to keep our core capabilities
well-resourced to enable us to both continue
to support our Affiliates and to remain well-
positioned for further growth.
Regulatory risk
The Group operates within a highly regulated
environment. The Group remains vigilant with
regard to regulatory requirements, which are
continually evolving and, in response, Pinnacle
24 Pinnacle Investment Management
now effectively concluded.
• The Group delivered a $32.2 million total
NPAT attributable to shareholders for the
2020 financial year, a 5.6% improvement.
This was underpinned by a 14.8% increase
to $38.0 million in Pinnacle’s share of net
profits from the Pinnacle Affiliates (of which
$6.6m was Pinnacle’s share of performance
fees earned by five Affiliates during the
financial year, after tax, compared with
$3.2m in the 2019 financial year).
• FUM increased by 8.1% to $58.7 billion in
the 2019 financial year, which includes
$3.0 billion ‘acquired’ in the Coolabah
transaction in December 2019.
• Group net tangible assets have increased by
5.4% to $186.7 million.
• Basic earnings per share attributable to
shareholders of 18.8 cents has increased by
2.7% from 18.3 cents.
• The Board has declared a fully franked final
dividend of 8.5 cents per share payable on
11 September 2020.
Statement of
Comprehensive Income
The following commentary provides an
analysis of revenues and expenses for the
2020 financial year in comparison to the prior
comparative period.
During the 2020 financial year, the Group’s
revenues and expenses were derived from
Pinnacle and its controlled entities, which
excludes the revenues and expenses of the
Pinnacle Affiliates, the effect of which is
reflected through Pinnacle’s share of equity
accounted net profits.
Revenue from Continuing
Operations
Expenses from Continuing
Operations
During FY20, the Group has made additional
strategic hires, predominantly in offshore
distribution, to support future growth.
Employee benefits expense increased $1.1
million to $13.6 million, mainly due to the ‘full-
year effect’ of significant recruitment activity in
FY19, together with these additional hires.
Short-term incentives reduced by $1.6 million
Revenue from continuing operations
to $2.9 million, recognising that results for the
increased by $1.3 million to $22.4 million,
year were below our expectations.
from $21.1 million in the prior period.
Shareholders will be aware that there is
typically a ‘skew’ in revenues towards the
second half of the financial year, when
Share of net profit of jointly
controlled entities
certain ‘performance-based’ distribution
Share of net profit of jointly controlled entities
fee revenues crystallize. Due to the decline
accounted for using the equity method relates to
in the market in the second half and the
impact on net inflows during March and
the Group’s share of the profits of the Pinnacle
Affiliates which are equity accounted. Pinnacle’s
April, these performance-based fees were
share of the net profits after tax from Pinnacle
lower than might otherwise have been
Affiliates for the 2020 financial year was $38.0
expected and there was no such skew in
million (of which $6.6m was Pinnacle’s share
revenues during the current financial year
of performance fees earned by five Affiliates
(revenues were $11.0 million in the second
during the financial year, after tax, compared
half, compared with $11.4 million in the
with $3.2m in the 2019 financial year); up 14.8%
first half).
Further information regarding revenues
is provided below and at note 1 of the
financial statements.
Gains/(losses) on financial assets at
fair value through profit or loss
or $4.9 million on the prior comparative period.
Underlying base management fees within the
Pinnacle Affiliates also increased 19.4% on the
prior comparative period.
Pinnacle Affiliates’ FUM, which underpins the
share of Pinnacle Affiliates’ profits, increased
by 8.1% to $58.7 billion in the 2020 financial
year, which includes $3.0 billion ‘acquired’ in
This reflects the mark-to-market gains or
the Coolabah transaction in December 2019.
losses on the Group’s Principal Investments.
We remind shareholders that a significant
During the year to 30 June 2020, the
Group lost a net $0.5 million on its Principal
Investments, on a ‘marked to market’
basis. This loss consists of distribution and
dividends received of $0.8 million, and
realised and unrealised losses of $1.3 million.
proportion of our Affiliates’ FUM is linked to
movements in equity markets, which dropped
severely during March, before recovering over
the remainder of the financial year (albeit
still some way short of the highs reached in
February 2020).
Further information is provided in note 23 to
the financial statements.
2020 Annual Report 25
Discontinued Operations
Discontinued operations contributed a $0.2
million decrease to NPAT. This represents
amounts paid to settle legacy claims associated
with the Securities business.
Consolidated Statement
of Financial Position
The following commentary provides an
analysis of assets and liabilities for the 2020
financial year for continuing operations.
Cash and cash equivalents decreased by $10.6
million to $16.1 million at year-end compared
to $26.7 million at the end of the prior year.
Cash inflows from operating activities were
$22.1 million, which included dividends
received from Affiliates of $33.0 million,
compared with $27.0 million in the prior year.
Further information is provided at notes 6 and
25 of the financial statements.
Trade and other receivables. The value
of trade and other receivables increased
by $0.3 million during the year in line with
marginally higher revenues in Pinnacle. Further
information is provided at note 7 of the
financial statements.
Financial assets at fair value through profit
or loss were $34.0 million, an increase of
$9.5 million on the prior period. During the
year, Pinnacle has continued to support its
Affiliates in both equity recycling and through
the provision of seed and foundation FUM for
strategies managed by our Affiliates. Of the
$34.0 million, $32.4 million is held in strategies
managed by Pinnacle Affiliates. The Group has
partially hedged its exposure to movements in
the underlying indices.
Assets held at amortised cost. The value
of current and non-current assets held at
amortised cost decreased by $1.5 million
26 Pinnacle Investment Management
to $4.5 million at year end, following the
repayment of certain loans to Affiliates and
Affiliate executives. This balance includes
loans to entities under joint control. Further
information is provided at note 9 of the
financial statements.
Investments accounted for using the
equity method reflects the carrying value
of Pinnacle’s investments in the Pinnacle
certain profitability milestones over the
next one- to four-year period. The Group
has recognised this amount as payable
as it believes that it is probable that those
milestones will be reached. The balance of the
increase relates directly to the increase in staff
costs. Further information is provided at note
15 of the financial statements.
Lease liabilities and Right-of-use assets
Affiliates. This increased by $48.5 million during
were $3.8m each. The Group leases offices in
the period to $161.9 million. The change is
attributable to the equity accounted profits
of $38.0 million from Pinnacle Affiliates, less
the dividends received from the Pinnacle
Affiliates of $33.0 million, plus additional net
capital contributed to the Pinnacle Affiliates
during the year of $43.3 million (including
the $29.1 million and $5.0 million contingent
consideration deployed in the Coolabah
transactions), plus impairment reversals of $0.2
million. Further information is provided at note
23 of the financial statements.
Brisbane and Sydney. Until 30 June 2019, these
leases were classified as operating leases; from
1 July 2019, leases are recognised as a right-
of-use asset and a corresponding liability at
the date at which the leased asset is available
for use by the Group. Further information is
provided at note 12 of the financial statements.
Borrowings increased to $30.0m. The
Group secured a $30.0 million Loan Facility
with the CBA during the financial year,
which was fully drawn as at 30 June 2020
to fund the acquisition of a 25% interest in
Intangible assets increased by $1.9m. Plato the
Coolabah Capital Investments Pty Ltd. Further
information is provided at note 19 of the
financial statements.
Investment Manager of PL8 and an Affiliate of
the Group, and the Group have entered into
a distribution agreement for a period of three
years. The costs associated with the acquisition
of that contract have been capitalised as an
intangible asset and are being amortised over
the distribution agreement period of three years.
Further information is provided at note 13.
Trade and other payables increased by $1.3
million to $9.8 million, which includes $1.4m
in funding due to Aikya under the terms of the
Shareholders Agreement entered into with
them. Further information is provided at note
14 of the financial statements.
Provisions. The value of current and non-
current provisions increased by $5.2 million
compared with the prior year. $5.0 million
relates to the recognition of contingent
consideration on the Coolabah transition,
which is payable if the business achieves
2020 Annual Report 27
04.
Corporate
Sustainability
We are focused on continuous
improvement, striving to do better by
building a long-term, sustainable firm
that focuses on our staff, customers
and shareholders, as well as the
communities in which we engage.
Responsible Investment
Pinnacle’s Affiliates are committed to investing responsibly, with ten Affiliates signatories to the
United Nations supported Principles of Responsible Investment (“PRI”). Further commitment to
responsible investing is highlighted on the following pages in reference to five of the Affiliates, as an
example of the commitment they have to Environmental, Social and Governance principles (ESG).
28 Pinnacle Investment Management
• PRI signatory
• GRESB participant
• Active role in Women’s Infrastructure Network
• Renewable energy portfolio powers over 350,000 homes and
abates over 1 million tonnes of CO2 per year
• Sunshine Coast Airport is the first and only carbon neutral airport
in Australia
• Very active at management sites in reducing power usage through
solar installations, LED lights etc. Darwin and Alice Springs airports
have on-site award-winning solar developments.
• Active scholarship program, focusing on women and financially
disadvantaged students
• Priority Goals set by the Palisade team, aligned with UN’s
Sustainable Development Goals.
• PRI signatory since 2011
• Member of the Climate Action 100+ investor group
• Founding member of ESG Research Australia
• Signatory to the Montreal Carbon Pledge and active subscriber to
carbon databases
• Built dedicated ESG tilted and Carbon Light portfolios for clients
• Women in Finance Scholarships at 3 universities
• Actively vote shares and engage with companies on important
ESG issues.
• Fundamentally integrates ESG into the investment decision making
process
• Philosophy of Ownership, Measurement & Engagement on ESG
specific issues
• Actively participate in over 200+ ESG specific company
engagements per annum
• Supporter of the 30% Club Australia since it launched in 2015 – to
promote diversity in Australian Listed Company Boards
2020 Annual Report 29
• Key focus on Modern Slavery issues in supply chain analysis in the
The Affiliates integrate ESG as follows:
companies they invest in
• Sponsorship of local community social and sporting groups
including Sydney Uni Cricket & Guide Dogs Australia
• Partnership with Mirabel Foundation to support Australian families
impacted by drug addiction
• Carbon offsetting for all staff travel on an annual basis since inception.
• PRI signatory since 2010
• UN Global Compact signatory (2019)
• Member of GRESB since 2017
• Member of ESG Research Australia
• Active engagement with investee companies – ESG disclosure,
board diversity, GRESB participation, governance practices
• ESG screen in infrastructure securities within Real Assets strategy
• ESG Committee including staff from across all areas of the business
• Measure the carbon footprint of the portfolios they manage.
• PRI signatory since 2010
• Responsible Investment Association Australasia (RIAA) member
• Global Investor Statement on Climate Change Signatory
• Signatory to “Investor Statement on Bangladesh”
• Participant in PRI Climate Change Corporate Lobbying Engagement
• Signatory to the Montreal Carbon Pledge and Paris Pledge for Action
• Signatory to PRI Investor Statement in support of Modern Slavery Act
• Climate Action 100+ Signatory
• Signatory to Global Investor Statement on Antibiotic Stewardship
(Member of FAIRR)
• Member RIAA Human Rights Working Group (Investor Toolkit –
Human Rights with Focus on Supply Chain – Guidance for Investors
re Modern Slavery Act)
• Member RIAA Corporate Engagement Working Group
30 Pinnacle Investment Management
• TCFD Supporter.
Affiliate
Aikya
Antipodes
Coolabah
Firetrail
Hyperion
Longwave
Metrics Credit
Omega
Palisade
Plato
Reminiscent
Resolution Capital
Riparian
Solaris
Spheria
Two Trees
Signatory to PRI
Incorporate ESG into investment
process
Have an ESG policy
Yes
Yes
No
No
Yes
Yes
Yes
No
Yes
Yes
No
Yes
Provisional
Yes
Yes
No
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
No
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
N/A
Yes
Yes
Yes
Yes
Yes
Carbon Offset and
Emissions
Since the 2019 Financial Year, Pinnacle has
been tracking and measuring its carbon
footprint for air travel, travel via cars to client
meetings, staff travel to and from work and
energy usage at each of its office locations.
Prior to COVID-19, we also sought to reduce
or avoid travel in favour of video conferencing
where possible.
To offset the firm’s carbon footprint, Pinnacle
made a donation to Greenfleet equivalent to
the amount of carbon emissions calculated for
the 2019 Financial Year, plus a 50% premium.
Greenfleet is a leading Australian not-for-profit
environmental organisation that takes practical
climate action by offsetting carbon emissions
through restoring forests.
We also made the commitment to move to
Green Energy by the end of calendar year
2020, which we remain on course to deliver.
Pinnacle will move further towards addressing
climate change risks by seeking Climate Active
carbon neutral certification by the Australian
Government.
We see climate change as an important issue
for our staff, clients and shareholders and will
look to implement further initiatives to reduce
our impact and to support the environment.
2020 Annual Report 31
Pinnacle believes in pay equity at the time of
interview. Pinnacle has also introduced ‘stay’
and shortlisted candidates for all positions,
joining the firm.
interviews which are conducted as needed
including Board and senior management
Sustainable use of resources
Taking an active approach in reducing
resources, a pre COVID-19 target was
established to reduce printing across the firm
by 25% in 2020. Paper and other materials
that go into preparing marketing information
have been a significant contributor to the
levels of resources used. Paper usage reduced
materially as a result of the move to remote-
working, and we will endeavour to ensure that
this change is permanent as more staff return
to ‘working from work’ in the coming months.
During the year we also implemented a project
to remove all single use plastic from the firm
by the end of calendar year 2020 and, where
possible, we switched to more eco-friendly
products (e.g., cleaning products). Over this
coming financial year, we aim to identify where
we can increase our recycling efforts.
People
In addition to remuneration incentives,
Pinnacle has a strong focus on the
development of its staff and facilitates practical
development initiatives such as secondments,
on the job rotational assignments and on
demand learning programs. Access to each
of these is based on merit, learning needs
and equality. Each individual within Pinnacle
has a personal development plan and meets
regularly with their manager to discuss
performance and relevant development
initiatives that support Pinnacle’s commercial
goals and the individual’s career aspirations.
In addition to these regular employee
check ins, to help ensure a sense of
purposeful direction for each employee and
connectedness, the Group comes together
at least twice yearly to hear directly from Ian
Macoun, Pinnacle’s Managing Director.
Our people are key to the success of the
Pinnacle is committed to providing a
Company and Pinnacle takes an active
flexible working environment that suits an
involvement in staff welfare, engagement and
employee’s personal circumstances. Several
career development.
Pinnacle is fully supportive of initiatives to
optimise the mental health of its employees.
Pinnacle has an Employee Assistance Program
for Pinnacle employees and their immediate
family members. Confidential counselling is
available to provide support on a range of
personal and work-related issues. Pinnacle
Directors monitor workloads, wellbeing and
resourcing to ensure mental health is not
compromised during periods of high stress.
The Company promotes and rewards
behaviours that are in the best interest of
clients and shareholders. Employees are
encouraged to always act in Pinnacle’s best
interests and maintain a line of sight to long-
term goals. To help enable this, as at 30 June
2020, approximately 36% of employees had
an individual shareholding in the Company.
32 Pinnacle Investment Management
employees are currently on part time working
arrangements to enable them to balance family
and personal responsibilities. Compressed
working weeks is another initiative Pinnacle
is receptive to in circumstances where it is
warranted. Following the birth of a child,
the relevant people manager remains in
communication with the employee on parental
leave via ‘Keeping in Touch’ days so they feel
informed and connected thereby assisting with
the transition back to work. Pinnacle provides
paid parental leave of up to 12 weeks for all
permanent employees who have worked for
Pinnacle for at least 12 months continuously at
the time of birth or adoption of the child. Up to
2 weeks paid parental leave for the non-primary
carer is also available to support new families.
Pinnacle prides itself on a culture that is based
on continuous feedback. All employees who
depart the organisation participate in an exit
to help understand how it can retain talented
appointments;
employees and maximise the engagement of
its employees.
Diversity
• flexible work arrangements to assist
employees to balance their work, personal
and family responsibilities;
• sponsoring Women in Finance scholarships
Pinnacle recognises the benefits of a diverse
to assist female university students in
group of employees reflecting different
gaining a greater understanding of and
backgrounds, perspectives, styles, knowledge,
experience in investment management;
experience and abilities. Workplace diversity
in this context includes but is not limited to
gender, gender identity, age, race, disability,
nationality, marital status, cultural background,
sexual orientation, religious belief and ethnicity.
We are committed to workplace diversity and
the Pinnacle Diversity Policy further outlines
•
taking a role as Founding Sponsor of the
University of Queensland’s first officially
sanctioned networking group with a focus
on women – UQWN;
• applying the principle of equality when
setting salaries and considering the short-
term and long-term incentives of all
its focus on recruiting, developing, rewarding
employees;
and retaining people with diverse backgrounds
to meet the needs of our clients, shareholders
and community. Our overall diversity
objectives are to:
•
recruit, retain and reward an appropriately
diverse and skilled workforce and Board,
appointed on merit, which will support the
achievement of the business’ objectives;
• cultivate a corporate culture characterised
• applying the principle of equality when
considering internal promotions and
succession planning; and
• comprehensive employee behaviour and
grievance resolution policy including
equal opportunity, harassment, bullying,
vilification, victimisation, whistleblowing and
grievance resolution.
by inclusive practices and behaviours for the
As at 30 June 2020, the Company had a total
benefit of all employees and directors;
of 30% females across all positions within
•
foster a work environment that values and
utilises the contributions of employees
and directors with diverse backgrounds,
experiences and perspectives through
improved awareness of the benefits of
workforce diversity; and
Pinnacle. The Company had a total of 22% of
females occupying senior executive positions
as at 30 June 2020, defined by those earning a
minimum of $200,000.
Community
•
facilitate a high return to work and retention
Through collaboration with the Pinnacle
rate of employees on parental leave.
Charitable Foundation (Foundation), the
To support the achievement of these diversity
objectives, Pinnacle has undertaken the
following initiatives:
• equal opportunity recruitment process that
draws a diverse pool of both applicants
Company and Affiliates have continued to
partner with a range of inspiring Australian
charities (Charitable Partners) to drive positive,
long-term social change. Through building the
capacity of excellent charities, we are helping
to deliver tangible impact within communities
2020 Annual Report 33
across five key causes – identified as
down suicide rates. Long-term partnerships
of suitable products offered across Affiliates,
In FY20 this included:
critically important by Affiliates, employees,
are in place with R U OK?, ReachOut
which include funds offering franking credits,
shareholders and client groups.
Australia and batyr Australia.
As summarised by Pinnacle’s Managing
Director, Ian Macoun:
“Each relationship is based on a long-term
commitment, with all Charitable Partners
carefully selected for their relevance to
Pinnacle’s brand values, importance to our
employees across Pinnacle and our Affiliates,
and their strategic fit with the interests of
particular fund managers. We are delighted
• Support for children from a range of
environments who face acute and / or
systemic disadvantage, with partnerships in
place with Mirabel Foundation, Yalari and
Raise Foundation.
• Legal assistance and advocacy for victims
of sexual abuse and domestic violence,
through a multi-faceted relationship with
the Full Stop Foundation.
that the Foundation continues to work so
• Capacity building for world-leading medical
closely and successfully with our Affiliates, to
researchers seeking treatments and cures
build the capacity and increase the impact of
for children’s genetic diseases and for
these great not-for-profit organisations.
dementia sufferers, through supporting
The determination, resilience and flexibility
shown by our partners during the COVID-19
pandemic is extraordinary. Their willingness
to see the ‘silver lining’ afforded by the virus’s
impact, and the immense sense of commitment
and responsibility that each partner feels
towards those they support – who are
increasingly vulnerable in these difficult times –
is both humbling and inspiring”.
Donations
Funds of $319,000 were made available
through the Foundation during the year,
supported by a further $135,000 from
Affiliates including Antipodes, Palisade, Plato,
Resolution Capital, Firetrail and Spheria.
These contributions of over $450,000 were
CMRI (Children’s Medical Research Institute)
and Australian Alzheimer’s Research
Foundation (AARF).
• Building awareness in a COVID-19 world
of the critical need for kindness, empathy,
community and resilience. In response to
the pressures and stresses associated with
the impact of COVID-19, a new relationship
has been built with The Kindness Factory.
Pinnacle is championing the organisation’s
mission to “inspire all humans to play kind,
have fun, stay connected with others,
know when to reach out for help, exercise
resilience and treat themselves, and the
planet, with dignity and respect”.
Pinnacle’s Backing
supplemented by access to facilities, advice,
With the financial backing of Pinnacle and
networks, volunteering time and events,
access to extensive pro bono services across
championing the ongoing efforts of frontline
investment management, portfolio reporting,
Charitable Partners working across Australia
finance, marketing and IT, the Foundation is
to address five core focus areas. These are the
able to operate in a highly efficient manner
following:
with low overheads and high impact.
• Promotion of strong mental health
awareness, together with support for
prevention and early intervention strategies
aimed at reducing mental illness and driving
Its investment strategy aims to provide
reasonable capital protection in volatile
markets whilst seeking to drive growth over the
longer term. Investments are held in a range
34 Pinnacle Investment Management
monthly income streams, global exposure
and a range of non-equity exposed assets.
As part of their broad commitment to the
Foundation, all Affiliates rebate management
fees associated with investments.
• Plato and Palisade fostering engagement
with women studying finance and
engineering through the provision of
scholarships across several leading city and
regionally based universities
• Palisade’s identification of Priority Goals,
This access to expertise, insight and market
relevant to the portfolios they manage and
knowledge creates excellent opportunities
issues that are of importance to the Palisade
for the Foundation to enable professional,
team. The Priority Goals are aligned with the
well-governed organisations to improve
United Nation’s Sustainable Development
the lives of those who need support –
Goals (SDGs) and will provide the focus for
through partnerships which help them
new ESG initiatives
to achieve greater impact and focus on
what matters most to them. https://www.
pinnacleinvestment.com/foundation
Workplace Giving
• Antipodes’ continued provision of pro bono
investment services to Future Generation
Global Investment Company Limited (FGG)
• Hyperion becoming an official supporter of
the Task Force on Climate-related Financial
Pinnacle and a number of Affiliates offer a
Disclosures (TCFD)
matched Workplace Giving Program, whereby
employee donations made to any charity of
choice are matched by employers. Deductions
are made pre-tax via salary sacrifice, with all
associated administrative and operations costs
covered by each employer.
In FY20, together, more than 50 charities
received in excess of $106,000 through the
program, which also involved a special appeal
• Together with the Foundation, employee
fundraising activities have been actively
encouraged, including for Palisade
employees participating in Movember.
Planned volunteering activities have been
undertaken across a number of Affiliates,
including the Firetrail team supporting
charity partner Mirabel Foundation, and the
Resolution Capital team and Indigigrow.
held across the entire business to aid bushfire
Donations have also been forthcoming to
relief in February 2020. Both Pinnacle and the
charities with a focus on land rehabilitation
Foundation each matched employee donations
following the bushfires (Antipodes) and
up to $50 given to selected emergency appeals,
hospital services at the onset of COVID-19
with extra contributions also made through
(Resolution Capital).
Pinnacle also supports and sponsors events
together with the wider funds management
industry, which resonate with the firm’s business
operations, strategic direction and values.
several lump sum donations from Affiliates. A
total of $51,650 was gifted through this initiative,
in support of the people, businesses, animals
and countryside so badly affected.
Collaboration
Substantial additional support is provided
by Pinnacle and Affiliates through other
initiatives, reflecting their strong adherence to
broad ESG principles.
2020 Annual Report 35
05.
Directors’
Profile
Alan Watson
(Non-executive Independent Chair; member of Remuneration and Nominations
Committee) BSc, GAICD
Mr Watson joined the board on 15 July 2013 and became Chair on 23
October 2015. Mr Watson is a Sydney-based former investment banker
with 35 years of experience within various global equity markets.
Over this period he established, directed and was responsible for the
conduct of securities business both in Europe and Asia advising many
companies on capital structuring, initial public offerings, takeovers and
mergers and investment relations strategies.
Mr Watson has held positions as Managing Director at Barclays
de Zoete Wedd Limited, Donaldson, Lufkin & Jenrette Securities
Corporation, at Lehman Brothers Holdings Inc and as Head of
Securities Europe for Macquarie Capital (Europe) Ltd.
Mr Watson is also an Independent Director of Airboss of America,
listed on the Toronto Stock Exchange; an Independent Non-Executive
Director of Australis Oil and Gas, listed on ASX; and Chair of The
Winifred West Schools Foundation.
ASX Listed Company Directorships held
in last 3 years (current & recent):
Interests in shares and options:
• Director of Australis Oil & Gas
• 145,137 ordinary shares in the
Company
36 Pinnacle Investment Management
Ian Macoun
(Managing Director) CFA, B Com, MFM, Dip FinSer (FP), FCPA, FAICD
Mr Macoun was appointed as Managing Director of the Company on 17
August 2016 and an executive director on 25 August 2016, having been
the Managing Director and Chair of Pinnacle since 2006. Mr Macoun’s
career to date has included more than 25 years as the CEO and Chief
Investment Officer of investment management firms, including the
establishment of Australia’s first “multi-boutique” funds management
firm (Perennial Investment Partners – founding Managing Director
from 1998), building a major new investment corporation (Queensland
Investment Corporation; inaugural Chief Executive from 1988), and
the management of a major Australian bank’s investment operation
(Westpac Investment Management; Managing Director from 1993).
Mr Macoun’s early experience, in more than 10 years at Queensland
Treasury, included extensive involvement with many major Australian
and international financial market participants, and the Queensland
Government’s commercial participation in many major industrial
development projects during the late 1970s and the 1980s. He was a
First Assistant Under Treasurer when he moved to build and lead QIC.
Mr Macoun is also a director of the following Pinnacle Affiliates: Aikya,
Antipodes, Coolabah, Hyperion, Metrics, Palisade, Plato, Resolution
Capital and Solaris.
ASX Listed Company Directorships held
in last 3 years (current & recent):
Interests in shares and options:
• None
• 27,276,077 ordinary shares in
the Company
Deborah Beale AM
(Non-executive Independent Director, Chair of Remuneration and Nominations
Committee and member of the Audit Compliance and Risk Management
Committee) B Comm, Grad Dip App Fin, MBA
Ms Beale began her working career in the finance industry where
she was employed by Merrill Lynch for over a decade. She then
moved to Ernst & Young where she specialised in risk management,
governance and public and government relations. Ms Beale also
served and continues to serve on a number of government, public,
private and not-for-profit boards. Her broad experience includes
the areas of finance, corporate governance, risk management,
government and public relations.
2020 Annual Report 37
Ms Beale is also the Chair of Federation Square Pty Ltd, and a
director of Visit Victoria, Victorian Ports Corporation (Melbourne)
and The Production Company.
ASX Listed Company Directorships held
in last 3 years (current & recent) :
Interests in shares and options:
• None
• 111,878 ordinary shares in the
Company
Lorraine Berends
(Non-executive Independent Director and member of Audit Compliance and Risk
Management Committee and Remuneration and Nominations Committee) B Sc,
FIAA, MAICD and FASFA
Ms Berends has worked in the financial services industry for 40 years
and possesses extensive experience in both investment management
and superannuation. Before moving to a non-executive career in 2014,
she worked for 15 years with US based investment manager Marvin
& Palmer Associates. Ms Berends contributed extensively to industry
associations throughout her executive career, serving on the boards of
the Investment Management Consultants Association (IMCA Australia,
now the CIMA Society of Australia) for 13 years (7 as Chair) and the
Association of Superannuation Funds Australia (ASFA) for 12 years (3 as
Chair). Ms Berends has been awarded Life Membership of both IMCA
Australia and ASFA. Ms Berends holds a BSc from Monash University, is
a Fellow of the Actuaries Institute and a Fellow of ASFA.
Ms Berends is an independent non-executive director of Antipodes
Global Investment Company Limited, Plato Income Maximiser
Limited, Spheria Emerging Companies Limited and Hearts and Minds
Investments Limited (listed investment companies) and a company
appointed director of Qantas Superannuation Limited.
ASX Listed Company Directorships held
in last 3 years (current & recent):
Interests in shares and options:
• Antipodes Global Investment
• 20,832 ordinary shares in the
Company Limited
Company
• Plato Income Maximiser
Limited
• Spheria Emerging Companies
Limited
• Hearts and Minds Investments
Limited
Gerard Bradley
(Non-executive Independent Director and Chair of the Audit Compliance and Risk
Management Committee and member of the Remuneration and Nominations
Committee) B Com, Dip Adv Acc
Mr Bradley is Chair of Queensland Treasury Corporation and related
companies, having served for 14 years as Under Treasurer and Under
Secretary of the Queensland Treasury Department. He has extensive
experience in public sector finance in both the Queensland and South
Australian Treasury Departments.
Mr Bradley has substantial board experience, including 10 years as Chair
of QSuper, and a wide range of directorships of major Government
financial and commercial corporations. Since 2012, he has worked in
non-executive director roles in the public and private sectors.
Mr Bradley is also a Fellow of the Australian Institute of Company
Directors, CPA Australia, Australian Institute of Chartered Accountants
and Institute of Managers and Leaders.
ASX Listed Company Directorships held
in last 3 years (current & recent):
Interests in shares and options:
• Star Entertainment Group
• 64,451 ordinary shares in the
Limited
Company
Andrew Chambers
(Executive Director) MSc, B Arts (Hons), Grad Dip App Fin
Mr Andrew Chambers was appointed as Executive Director to the
company on 1 September 2016 and has been a senior executive
with Pinnacle since he commenced with the firm in March 2008.
Mr Chambers has extensive multi-channel (retail, wholesale and
institutional) and multi-jurisdictional distribution experience and
is currently responsible for leading the firm’s institutional and
international distribution divisions. Prior to joining Pinnacle, Mr
Chambers worked for Legg Mason, one of the world’s largest, multi-
affiliate investment management firms.
Mr Chambers is also a director of the following Pinnacle Affiliates:
Metrics, Omega, Riparian and Two Trees.
ASX Listed Company Directorships held
in last 3 years (current & recent):
Interests in shares and options:
• None
• 5,603,614 ordinary shares in
the Company
38 Pinnacle Investment Management
2020 Annual Report 39
Adrian Whittingham
(Executive Director) B Bus
Prior to joining the Company in 2008, Mr Whittingham was Director,
Head of Retail Sales with Schroder Investment Management in
Sydney, from 2002 to April 2008. At Schroders, Mr Whittingham was
responsible for leading the business’s direction and engagement with
researchers, consultants, dealer groups and private clients.
Prior to Schroders, Mr Whittingham spent 8 years at Zurich in product,
research and business development roles.
Mr Whittingham is also a director of the following Pinnacle Affiliates:
Coolabah, Firetrail, Hyperion, Longwave and Spheria.
ASX Listed Company Directorships held
in last 3 years (current & recent):
Interests in shares and options:
• None
• 4,403,614 ordinary shares in
the Company
40 Pinnacle Investment Management
2020 Annual Report 41
06.
Directors’
Report
Your directors present their report on the Group, consisting of the
Company and the entities it controlled at the end of, or during,
the year ended 30 June 2020.
Directors
Dividends
The directors of the Company during the whole of the financial year and up to the date of this report were:
In the 2020 financial year, the following dividends were paid:
• Mr A Watson
• Mr I Macoun
• Ms D Beale AM
• Ms L Berends
• Mr G Bradley
• Mr A Chambers
• Mr A Whittingham
• a fully franked final dividend of 9.3 cents per share on 4 October 2019.
• a fully franked interim dividend of 6.9 cents per share on 20 March 2020.
Since the end of the financial year, the Company has declared:
• a fully franked final dividend of 8.5 cents per share, to be paid on 11 September 2020.
Total dividends declared in respect of the FY20 financial year were 15.4 cents per share (2019: 15.4
cents per share)
Information on the qualifications, experience and responsibilities of the directors is included in the
Operating and Financial Review
directors’ profiles on pages 36 to 40 of the 2020 Annual Report.
Earnings per share
From continuing operations
Basic earnings per share
Diluted earnings per share
Total attributable to shareholders
Basic earnings per share
Diluted earnings per share
42 Pinnacle Investment Management
2020
Cents
18.9
18.0
18.8
17.9
2019
Cents
18.3
17.1
18.3
17.1
The Operating and Financial Review can be found at pages 10 to 27 of the 2020 Annual Report.
Significant changes in the state of affairs
There were no significant changes in the state of affairs of the Group during the reporting period.
Matters subsequent to the end of the financial year
Other than as outlined in note 30 of the financial statements at page 118, there has not arisen in
the interval between the end of the financial year and the date of this directors’ report any item,
transaction or event of a material and unusual nature likely, in the opinion of the directors of the
Company, to significantly affect:
2020 Annual Report 43
•
•
•
the Group’s operations in future financial years; or
the results of those operations in future financial years; or
the Group’s state of affairs in future financial years.
Remuneration Report
The Group’s 2020 Remuneration Report sets out remuneration information for the Group’s non-
executive directors and Key Management Personnel.
The Remuneration Report contains the following sections:
1.
Letter from the Chair of the Remuneration and Nominations Committee
2. Key Management Personnel
3. Role of Remuneration and Nominations Committee
4. Executive remuneration policy and framework for the Company
5.
Links between performance and outcomes
6. Details of Executive Key Management Personnel remuneration
7.
Executive service agreements
8. Non-executive director remuneration
9.
Share based payment compensation
10. Equity instrument disclosures relating to Key Management Personnel
11. Loans to Key Management Personnel
12. Equity Capital
Information in this Remuneration Report has been audited as required by section 308(3C) of the
Corporations Act.
44 Pinnacle Investment Management
2020 Annual Report 45
1.
Letter from the Chair of the Remuneration and
Nominations Committee
Dear Fellow Shareholders
In presenting the Remuneration Report for the year ended 30 June 2020, I would like to begin by
echoing the statement made by our Board Chair, Alan Watson, that this year the vital importance of
outstanding people both in Pinnacle and in the Affiliates has never been more apparent.
Our people have responded to the challenges posed by the COVID-19 crisis by demonstrating
resilience, dedication, and flexibility. Everyone has worked hard to ensure a ‘business as usual’
environment including extensive interactions with clients and their advisors, using technology rather
fostering risk awareness and personal contribution to a positive work environment are all highly
valuable and must also be considered. The weighting applied to the various factors varies from case
to case so individual KPIs reflect the contribution required of each individual and each business unit
to the overall objectives, in the short-, medium-, and long-term, of the Company.
Each year we report to shareholders on the key quantifiable factors which have been considered
in determining STI grants for the year. This year they are set out on page 53 of this Remuneration
Report and I repeat the key factors here for completeness:
• growth in basic earnings per share attributable to shareholders of 2.7% in the 2020 financial year;
compound annual growth rate (CAGR) in basic earnings per share attributable to shareholders of
35.6% over the five years to 30 June 2020
• growth in total NPAT attributable to shareholders from $30.5m in the 2019 financial year to
$32.2m in the 2020 financial year; CAGR in total NPAT attributable to shareholders of 48.2% over
the five years to 30 June 2020
than ‘face to face’ meetings.
•
increase in FUM from $54.3bn as of 30 June 2019 to $58.7bn as of 30 June 2020
Last year in introducing the 2019 Remuneration Report I sought to explain in some detail the
Company’s remuneration philosophy. This philosophy has been specifically designed to serve the
needs of our business and our clients. It recognises the value of longevity and stability of both
investment processes and highly talented key employees, operating in a flexible and entrepreneurial
environment. It enables us to recruit, retain and reward outstanding people.
The remuneration challenges every year are to balance the need to reward outstanding performance
with the interests of shareholders, both in the short- and long-term.
Given the scale of the disruption, and that outcomes for shareholders are below the expectations
we had at the start of the financial year, overall remuneration outcomes have been very restrained
in each of the three key elements – base salary increases, short-term incentives and long-term
incentive grants. Salaries for most executives have remain unchanged and no net additional LTI
awards were made during this financial year.
STI amounts are determined both within the context of Pinnacle’s performance and progress in
achieving key commercial and business outcomes and the maximum potential reward specified for
the role. As Pinnacle fell short of the original financial and FUM inflow expectations, the maximum
STI payable during the 2020 financial year to any person was limited to 50% of the maximum
• net FUM inflows of $3.0bn during the 2020 financial year
• net retail FUM inflows of $0.9billion during the 2020 financial year
• 90% of Affiliate strategies and products that have a track record of at least 5 years outperformed
their benchmarks over the 5 years to 30 June 2020
•
two new affiliates, Reminiscent and Aikya commenced during 2020
• an equity stake in Coolabah was also successfully acquired.
The process described above culminates in recommendations by the Managing Director to the
Remuneration and Nominations Committee for an STI payment amount for every eligible person.
The Remuneration and Nominations Committee reviews the recommended amounts, considers
whether they are reasonable in the light of the results and outcomes of the Company’s key success
factors and decides on the amounts to be paid that it will recommend to the Board. Payments to
KMP, and the aggregate amounts to be paid by Pinnacle, are reported and subject to shareholder
review in our Annual Report and financial statements.
We are confident that this approach is highly effective in meeting the needs of our business.
Pinnacle’s approach to remuneration is regularly reviewed to ensure continued alignment with the
that would be possible had the Company experienced a fully successful year. The 50% reduction
Company’s strategy and growth.
was applied ‘across the board’ to the STI, including for the people assessed to have made truly
outstanding contributions.
Our remuneration system requires that this year, as occurs every year, a combination of both quantifiable
and non-quantifiable criteria be assessed to determine appropriate remuneration outcomes. We strongly
We hope you find the information set out in this letter and the Remuneration Report that follows to
be instructive and helpful.
believe that it is in the best interests of shareholders to have a flexible, rather than too formulaic, scheme
Deborah Beale AM
and regard this as extremely effective in contributing to excellence, a high-performance culture, and the
recruitment and retention of outstanding professionals vital for success.
Quantitative factors such as profitability, revenue growth, cost control and net sales are all vitally
important but must be interpreted reflecting prevailing circumstances. Non-quantifiable factors such
Chair of Remuneration and Nominations Committee
as team effort, consideration of Pinnacle’s Purpose and Values, flexibility, work ethic, innovation,
46 Pinnacle Investment Management
2020 Annual Report 47
2.
Key Management Personnel
3.
Role of Remuneration and Nominations Committee
This Remuneration Report provides details of the remuneration of the Key Management Personnel
The Remuneration and Nominations Committee is a committee of the Board. The committee performs its
of the Group for the year ended 30 June 2020. The Key Management Personnel for this period are
role consistent with the overall objective of ensuring maximum shareholder benefit from the retention of
listed in the tables below:
a high quality, high performing Board and executive team. Its responsibilities during the 2020 financial year
Executive Key Management Personnel
Name
Position
Ian Macoun
Managing Director and Executive Director
Andrew Chambers
Executive Director
Adrian Whittingham
Executive Director
Alex Ihlenfeldt
Chief Operating Officer and Chief Financial Officer*
Non-Executive Key Management Personnel
Name
Position
Alan Watson
Chair
Deborah Beale AM
Non-executive Director
Lorraine Berends
Non-executive Director
Gerard Bradley
Non-executive Director
In accordance with the Corporations Amendment (Improving Accountability on Director and
Executive Remuneration) Act 2011 (Cth), the Key Management Personnel of the Group for the year
ended 30 June 2020 comprised:
• each non-executive director of the Company;
•
Ian Macoun, Andrew Chambers and Adrian Whittingham, each being executive directors of
the Company;
included the following:
•
reviewing and making recommendations in relation to the Group’s remuneration policies and
practices to ensure that the Group provides a competitive and flexible remuneration structure;
fairly and responsibly rewards employees; recognises categories of financial and non-financial
performance; links reward to the creation of shareholder value; and adopts an appropriate
balance between fixed remuneration, short-term incentives and long- term incentives;
•
reviewing executive remuneration and incentives and making recommendations to the Board in
relation to share option schemes and equity participation plans;
• setting the terms and conditions of the employment of the Managing Director; advising the
Board on the Managing Director’s remuneration package; and reviewing the performance of
the Managing Director at least annually including progress made towards achieving the Group’s
strategic goals;
•
reviewing the remuneration of non-executive directors for serving on the Board or any
committee (both individually and in total) and recommending to the Board the remuneration and
retirement policies for non-executive directors having regard to market trends and shareholder
interests;
• setting the entitlements and expenses policy for the Chair, non-executive directors and the
Managing Director;
• ensuring the Group’s remuneration policies and practices comply with the provisions of the ASX
Listing Rules and the Corporations Act and have regard to the ASX Principles;
•
facilitating the review of individual directors’ performance and of the Board annually;
• making recommendations to the Board concerning the appointment of new directors and, to the
extent delegated to it by the Board, the Managing Director;
•
identifying individuals who, by virtue of their experience, expertise, skills, qualifications,
backgrounds, contacts or other qualities, are suitable candidates for appointment to the
• Alex Ihlenfeldt as Chief Operating Officer and Chief Financial Officer of the Company*.
Board or to any relevant management position and recommending individuals accordingly for
* Dan Longan was appointed as the Chief Financial Officer of the Company on 6 July 2020. Alex Ihlenfeldt remains the Chief Operating Officer.
48 Pinnacle Investment Management
consideration by the Board;
• establishing procedures, for recommendation to the Chair, for the proper oversight of the Board
and management;
• preparing and recommending for approval by the Board and overseeing the implementation of
the Company’s diversity policy;
• on an annual basis, reviewing the proportion of women who are employed by the Company and
submitting a report to the Board outlining its findings; and
•
reviewing and approving relevant policies delegated to the RNC by the Board.
2020 Annual Report 49
During the 2020 financial year, the Remuneration and Nominations Committee received
All executives have an annual ‘maximum’ STI expectation (up to, but not exceeding, 100% of their
recommendations on the remuneration for employees from the Managing Director. These
base salaries, in some cases) and, if their personal performance is strong, their work unit delivers
recommendations were reviewed and, following discussion, recommendations were made to the Board.
on its key objectives and overall business performance meets or exceeds our objectives, then they
The Charter for the Remuneration and Nominations Committee is incorporated in the Company’s
Corporate Governance Board Charters which can be found on the Company’s website at
http://www.pinnacleinvestment.com/shareholders-investor-centre/
4.
Executive remuneration policy and framework for
the Company
The Board remains focused on achieving sustainable growth and attractive returns for investors in
the medium to long-term. During the 2020 financial year, it has adopted a remuneration framework
consisting of base salary, short-term incentives and long-term incentives and a remuneration policy
which is aimed at motivating and retaining highly skilled executives and aligning their interests with
shareholders. The remuneration framework and policy apply to Pinnacle employees only as Affiliates
independently determine their own remuneration practices.
Base salary
Base salary is structured as a package, which may be delivered as a combination of cash and
prescribed non-financial benefits and includes superannuation contributions.
Executives are offered a competitive base salary that comprises a fixed component of pay and rewards.
An executive’s base salary is reviewed on promotion or a substantial change in responsibilities.
There are no guaranteed base salary increases included in any executive’s contract.
During the 2020 financial year, there were no increases in base salary for any executive Key
Management Personnel (Andrew Chambers and Alex Ihlenfeldt received modest increases in the
2019 financial year; the first increases since 2015). The fixed remuneration of the Managing Director,
Ian Macoun, and Executive Director, Adrian Whittingham, remain unchanged (and have not been
changed since 2015) as detailed in section 6.
Short-term incentives (STI)
should receive that expectation. We are clear that ‘results matter’ in determining remuneration, both
at an individual and overall business level. We do not believe, however, that inflexible, formulaic
targets against which personal performance is measured would achieve the best outcomes for
shareholders. We have a group of, now, 16 Affiliates and supporting those which are early in their
development and those which may be facing more challenging circumstances is as important to
preserving and growing the value of our business as is continuing to deliver for Affiliates in times of
great success. Certain initiatives require a significant investment of time, with no immediate reward,
in order to lay the platform for future growth in profitability. It is important that we are able to reward
people for genuine high-performance, even when the results of their efforts do not immediately
translate into numerical success. It is on that basis that STI is largely discretionary, with final
determination by the Remuneration and Nominations Committee, following recommendations from
the Managing Director, incorporating the input of all members of the leadership group.
As well as individual performance, we also consider the performance of the business as a whole
when determining STI for any given year. There may be years, such as the 2020 financial year, where
results fall below our expectations and, even when this may be due to circumstances outside of our
control, it is important that the remuneration of our people reflects this, through an adjustment to
reductions in the ‘maximum STI’ people may receive in that year. We must always strike a balance
between rewarding individual excellence, and recognising that we are accountable, as a Group, for
the overall outcomes of the business. As Pinnacle fell short of the original financial and FUM inflow
expectations in the 2020 financial year, the maximum STI payable to any person was 50% of the
maximum that would have been possible had the Company experienced a fully successful year.
Further detail relating to the Company’s approach to STI is set out in the letter from the Chair of the
Remuneration and Nominations Committee at the beginning of this Remuneration Report.
Long-term incentives (LTI)
LTI is designed to encourage alignment of the interests of staff with increased value to shareholders
in the long-term. Participants are granted LTI, which only vest subject to specific conditions being
met by the end of the vesting period.
LTI awards are granted at the Board’s discretion following recommendations from the Remuneration
and Nominations Committee, which has responsibility for reviewing recommendations made by the
Managing Director in relation to LTI awards.
Omnibus incentive plan
On 22 August 2018, the Board approved the Pinnacle Omnibus Incentive Plan, which constitutes a
new set of LTI arrangements that provide for the ability to offer options, performance rights and loan
STI is a discretionary ‘at risk’ cash incentive payment which is paid to executives and employees
funded shares to staff.
on an annual basis and in accordance with remuneration policies and the terms and conditions
of employment.
Executives will principally be offered loan funded ordinary shares in the Company, whereby the
Company will provide limited recourse loans to senior executives to acquire shares at their current
The Remuneration and Nominations Committee is responsible for reviewing recommendations from
market value at the time of grant. The shares only vest once the employee remains employed with
the Managing Director for STI and recommending them to the Board for approval.
the Group for 5 years from the time of grant, with a portion vesting only upon the satisfaction of
50 Pinnacle Investment Management
2020 Annual Report 51
the following performance condition (in addition to the 5 year service condition): the Company’s
earnings per share grows by an average annual growth rate of at least 15% per annum over the 5
year period.
During the 2020 financial year, 400,000 loan shares were forfeited by departed employees, whilst
150,000 loan shares and 200,000 options were issued, predominantly to new executives, resulting in
no net new LTI issuance during the 2020 financial year.
Options component
In December 2014, the Company negotiated the PIML LTI Scheme with the senior executive
shareholders of PIML. In July 2015, and as part of the PIML LTI Scheme, the Company issued 4.25
million options in the Company to senior executives under the EOSP at a strike price of 98.6 cents
per share, calculated as the higher of the Company’s NTA as at 1 January 2015 plus a premium
of 20%, or the volume weighted average price of the Company’s fully paid ordinary shares from 1
December 2014 to 31 March 2015.
5.
Links between performance and outcomes
During the 2020 financial year, the Managing Director conducted performance reviews of senior
executives and made recommendations to the Remuneration and Nominations Committee in
respect of their STIs. In making those recommendations, regard was had to the Group, team and
individual performance relative to expectations (both financial and non-financial) over the period, as
well as to the degree of responsibility involved in each role.
The table below shows key financial performance indicators which have been applied consistently
over many years, with the support and encouragement of shareholders, to measure the progress of
the Group’s performance during the 2020 financial year and over the last five financial years.
Key indicators of the Company’s progress towards achieving its medium-term objectives included:
• growth in basic earnings per share attributable to shareholders of 2.7% in the 2020 financial year;
50% of the options vested on 1 January 2018 and the balance vested on 1 January 2020. The
compound annual growth rate (CAGR) in basic earnings per share attributable to shareholders of
participation of certain Key Management Personnel in this scheme was approved by shareholders on
35.6% over the five years to 30 June 2020
26 June 2015.
Equity component
As part of the PIML LTI Scheme, in May 2015 the Company sold 4.29% of its equity in PIML to
senior executives, subject to claw back arrangements. As part of the PIML Acquisition, this equity
• growth in total NPAT attributable to shareholders from $30.5m in the 2019 financial year to
$32.2m in the 2020 financial year; CAGR in total NPAT attributable to shareholders of 48.2% over
the five years to 30 June 2020
•
increase in FUM from $54.3bn as at 30 June 2019 to $58.7bn as at 30 June 2020
was ‘swapped’ for equity in the Company and a deed of acknowledgment was put in place, the
• net FUM inflows of $3.0bn during the 2020 financial year
effect of which is to roll over and preserve the long-term retentive nature of the PIML LTI scheme
by continuing the service conditions. In particular, should the relevant executives of the Group
cease employment prior to certain dates ranging from March 2017 to December 2020, they will
be required to forfeit and repay increases in the value of certain equity holdings based on a pre-
• net retail FUM inflows of $0.9bn during the 2020 financial year
• 90% of Affiliate strategies and products that have a track record of at least 5 years outperformed
their benchmarks over the 5 years to 30 June 2020
agreed formula. The PIML Acquisition, including the terms of these equity arrangements for senior
•
two new affiliates, Reminiscent and Aikya, commenced during the 2020 financial year, and the
executives, was approved by shareholders on 16 August 2016.
equity stake in Coolabah was also successfully acquired.
2020
2019
2018
2017
2016
Net profit/(loss) after tax from continuing operations attributable
to shareholders ($m)
32.4
Total net profit/(loss) after tax attributable to shareholders ($m)
32.2
Funds under management ($bn)*
Net FUM Inflows*
Net Retail FUM Inflows*
Closing share price ($)
Dividend per share (cents)
58.7
3.0
0.9
3.92
15.40
Basic earnings per share (cents) from continuing operations
18.9
Diluted earnings per share (cents) from continuing operations
18.0
Basic earnings per share (cents) attributable to shareholders
18.8
Diluted earnings per share (cents) attributable to shareholders
17.9
* Non-statutory measure
30.5
30.5
54.3
6.5
2.9
4.38
15.40
18.3
17.1
18.3
17.1
23.1
23.5
38.0
7.9
2.2
5.37
11.60
14.3
13.2
14.5
13.4
12.0
13.1
26.5
4.9
2.5
2.90
7.00
8.1
7.6
8.9
8.2
5.8
4.5
19.8
2.1
0.6
1.45
3.30
5.2
5.2
4.1
4.1
52 Pinnacle Investment Management
2020 Annual Report 53
6.
Details of Executive Key Management Personnel
remuneration
The relative weightings of the three remuneration components for Key Management Personnel are
set out in the table below for the year to 30 June 2020.
Remuneration details for Executive Key Management Personnel (calculated in accordance with
applicable accounting standards) are set out in the table below:
Ian Macoun
Andrew Chambers
Adrian Whittingham
Alex Ihlenfeldt
Fixed Remuneration
Performance-based remuneration
58%
42%
73%
62%
STI
28%
21%
0%
15%
LTI
14%
37%
27%
23%
Short-term employee benefits
Post-employment
benefits
Cash
salary &
fees
Cash
Bonus
(STI)
Non-
monetary
benefits
Super
annu
ation
Retire-
ment
benefits
Long-
term
benefits
Share
based
pay-
ments
Total
short-
term and
post-
employ-
ment
benefits
Long
Service
leave
Options
& Rights
(LTI)
Termina-
tion
benefits
Name
$
$
$
$
$
$
$
$
$
Ian Macoun
In the 2020 financial year, Mr Macoun’s base salary remained unchanged at $600,000 per annum (inclusive of
superannuation) and he earned an STI of $300,000 (inclusive of superannuation). STI is a performance incentive of
up to 100% of base salary awarded on the basis of meeting business and strategic objectives. Mr Macoun’s salary has
remained unchanged since the 2016 financial year.
Andrew Chambers
In the 2020 financial year, Mr Chambers’ base salary remained unchanged at $425,000 per annum (inclusive of
superannuation) and he earned an STI of $212,500 (inclusive of superannuation). STI is a performance incentive
of up to 100% of base salary awarded on the basis of meeting business and strategic objectives.
Adrian Whittingham
In the 2020 financial year, Mr Whittingham’s base salary remained unchanged at $400,000 per annum (inclusive of
superannuation). He did not receive an STI. Mr Whittingham’s salary has remained unchanged since the 2016 financial year.
Alex Ihlenfeldt
In the 2020 financial year, Mr Ihlenfeldt’s base salary remained unchanged at $320,000 per annum (inclusive of
superannuation) and he earned an STI of $80,000 (inclusive of superannuation). STI is a performance incentive of up to
100% of base salary awarded on the basis of meeting business and strategic objectives.
Managing Director
Ian Macoun
2020
575,000
300,000
2019
575,000
450,000
-
-
25,000
25,000
Other Key Management Personnel
Andrew Chambers
2020
400,000
212,500
2019
400,000
318,750
Adrian Whittingham
2020
375,000
-
2019
375,000
200,000
Alex Ihlenfeldtv
2020
295,000
80,000
2019
295,000
-
Totals
2020
1,645,000
592,500
2019
1,645,000
958,750
-
-
-
-
-
-
-
-
25,000
25,000
25,000
25,000
25,000
25,000
100,000
100,000
-
-
-
-
-
-
-
-
-
-
900,000
9,909
153,200
1,050,000
9,910
117,250
637,500
(9,266)
370,826
743,750
(20,843)
254,876
400,000
6,559
154,296
600,000
(11,689)
119,545
400,000
4,998
117,409
320,000
7,595
109,949
2,337,500
12,200
795,731
2,713,750
(15,027)
601,620
-
-
-
-
-
-
-
-
-
-
Portion
of remu-
neration
at risk
- STI
Portion
of
remu-
neration
at risk
- LTI
$
$
Total
$
1,063,109
28%
14%
1,177,160
38%
10%
999,060
21%
37%
977,783
33%
26%
560,855
0%
27%
707,856
28%
17%
522,407
15%
23%
437,544
0%
25%
3,145,431
3,300,343
54 Pinnacle Investment Management
2020 Annual Report 55
7.
Executive service agreements
Remuneration and other terms of employment for Executive Key Management Personnel are
formalised in service agreements.
Ian Macoun
Mr Macoun’s contract provides for termination by either party upon giving three months’ notice except
where termination is due to misconduct. In addition, as part of the PIML Acquisition, shareholders
voted to approve the payment of termination benefits to Mr Macoun in an amount of $900,000 or
12 months’ salary (whichever is higher), should Mr Macoun’s employment be terminated in certain
circumstances and consistent with his previous terms of employment. The termination provisions were
agreed between Mr Macoun and PIML as part of his employment agreement in 2006 when he was
initially employed by the Group. Termination benefits are not payable in the event of misconduct. No
termination benefits were paid during the 2020 financial year.
In May 2015, PIML advanced to shareholding entities associated with Mr Macoun a loan of $547,293
to acquire shares in PIML. The loan was unsecured, limited recourse and interest free. As part of the
PIML Acquisition, this loan was repaid and new loans reissued by the Company under the EOSP on
substantially the same terms, save that it is now subject to a share mortgage.
In May 2015, and as part of the PIML LTI Scheme, PIML advanced to Mr Chambers’ nominated
shareholding entity, an unsecured, limited recourse and interest free loan of $547,293 to acquire shares
in PIML. The loan included clawback and share cancellation arrangements if Mr Chambers ceased
employment with the Company prior to certain key dates. As part of the PIML Acquisition, which was
approved by shareholders on 16 August 2016, all of the aforementioned loans were repaid and new
loans reissued by the Company under the EOSP on substantially the same terms, save that they are
now subject to various share mortgages.
In August 2016, as part of the PIML Acquisition, which was approved by shareholders on 16 August
2016, the Company advanced to Mr Chambers’ nominated shareholding entity a loan of $500,000
for the express purpose of acquiring shares in the Company in the secondary market from Deutsche
Australia. This loan is interest bearing and subject to a five-year term, limited recourse and secured by
way of a share mortgage. Repayment will occur at the earlier of the end of the five-year term, the date
on which any of the underlying shares are sold or within six months of the cessation of Mr Chambers’
employment. Events of default under the loan include cessation of employment.
In November 2018, 800,000 loan shares were issued to Mr Chambers under the Pinnacle Omnibus
Plan, approved by the board on 22 August 2018. The shares are subject to service and performance
conditions and will vest after five years, if those conditions are met. The loans are interest free and
limited in recourse to the shares. They are repayable 10 years from grant date, on termination of
employment or when the underlying equity is sold, whichever occurs earlier.
In August 2016, as part of the PIML Acquisition, which was approved by shareholders on 16 August
2016, the Company advanced to Mr Macoun’s nominated shareholding entity a loan of $500,000
Adrian Whittingham
for the express purpose of acquiring shares in the Company in the secondary market from Deutsche
Adrian Whittingham, an executive director of the Company, is engaged under an employment agreement
Australia. This loan is interest bearing and subject to a five-year term, limited recourse and secured by
dated 28 April 2008 and subsequently amended on 7 May 2015 and 25 August 2016. The contract
way of a share mortgage. Repayment will occur at the earlier of the end of the five-year term, the date
provides for termination by either party on at least three months’ notice except where termination is due to
on which any of the underlying shares are sold or within six months of the cessation of Mr Macoun’s
misconduct.
employment. Events of default under the loan include cessation of employment.
In June 2009, July 2011 and January 2012, PIML advanced to Mr Whittingham’s nominated shareholding
In November 2018, 300,000 loan shares were issued to Mr Macoun under the Pinnacle Omnibus
entity, three unsecured, limited recourse and interest free loans to acquire shares in PIML. The loans were
Plan, approved by the board on 22 August 2018. The shares are subject to service and performance
immediately repayable if Mr Whittingham ceased employment with the Company or sold some or all of his
conditions and will vest after three years, if those conditions are met. The loans are interest free and
shares. In May 2015, and as part of the PIML LTI Scheme, PIML advanced to Mr Whittingham’s nominated
limited in recourse to the shares. They are repayable 10 years from grant date, on termination of
shareholding entity, an unsecured, limited recourse and interest free loan of $547,293 to acquire shares
employment or when the underlying equity is sold, whichever occurs earlier.
Andrew Chambers
Andrew Chambers, an executive director of the Company, is engaged under an employment
agreement dated 9 March 2008 and subsequently amended on 7 May 2015 and 25 August 2016.
The contract provides for termination by either party on at least three months’ notice, except where
termination is due to misconduct.
In June 2009, July 2011 and January 2012, PIML advanced to Mr Chambers’ nominated shareholding
entity three unsecured, limited recourse and interest free loans to acquire shares in PIML. The loans
were immediately repayable if Mr Chambers ceased employment with the Company or sold some or
all of his shares.
56 Pinnacle Investment Management
in PIML. The loan included clawback and share cancellation arrangements if Mr Whittingham ceased
employment with the Company prior to certain key dates. As part of the PIML Acquisition, which was
approved by shareholders on 16 August 2016, all of the aforementioned loans were repaid and new loans
were reissued by the Company under the EOSP on substantially the same terms, save that they are now
subject to various share mortgages.
In August 2016, as part of the PIML Acquisition, which was approved by shareholders on 16 August 2016,
the Company advanced to Mr Whittingham’s nominated shareholding entity a loan of $500,000 for the
express purpose of acquiring shares in the Company in the secondary market from Deutsche Australia.
This loan is interest bearing and subject to a five-year term, limited recourse and secured by way of a share
mortgage. Repayment will occur at the earlier of the end of the five-year term, the date on which any of the
underlying shares are sold or within six months of the cessation of Mr Whittingham’s employment. Events
of default under the loan include cessation of employment.
2020 Annual Report 57
In November 2018, 300,000 loan shares were issued to Mr Whittingham under the Pinnacle Omnibus Plan,
approved by the board on 22 August 2018. The shares are subject to service and performance conditions
and will vest after five years, if those conditions are met. The loans are interest free and limited in recourse
to the shares. They are repayable 10 years from grant date, on termination of employment or when the
8.
Non-executive director remuneration
The structure of non-executive director remuneration is separate and distinct from that of executive
underlying equity is sold, whichever occurs earlier.
remuneration.
Alex Ihlenfeldt
Alex Ihlenfeldt, the Chief Operating Officer and Chief Financial Officer, is engaged under an
The Board seeks to set aggregate remuneration at a level that provides the Group with the ability to
attract and retain non-executive directors with the appropriate skills and experience while incurring
a cost that is acceptable to shareholders and other stakeholders.
employment agreement dated 1 February 2011 and subsequently amended on 30 January 2012, 7
Non-executive directors’ fees are determined within an aggregate non-executive directors’ fee pool
May 2015 and 25 August 2016. The contract provides for termination by either party on one month’s
limit, with any increase in the fee pool requiring approval by shareholders. The current aggregate fee
notice except where termination is due to misconduct.
In January 2012, PIML advanced to Mr Ihlenfeldt’s nominated shareholding entity, an unsecured,
limited recourse and interest free loan of $416,070 to acquire shares in PIML. The loan was
pool currently stands at $600,000 per annum and was approved by shareholders at the Company’s
annual general meeting on 24 October 2006. No changes were proposed or made to the aggregate
fee pool during the 2020 financial year.
immediately repayable if Mr Ihlenfeldt ceased employment with PIML or sold some or all of his
From the 2019 financial year, non-executive directors are able to sacrifice up to 100% of their fees
shares. In May 2015, PIML advanced to interests associated with Mr Ihlenfeldt a loan of $309,522 to
in favour of immediately vesting Performance Rights under the Pinnacle Omnibus Incentive Plan, as
acquire shares in PIML. The loan was interest free and limited recourse with various repayment terms
approved at the AGM on 15 November 2018. During the 2020 financial year 28,256 (2019: 32,165)
on cessation of employment, if before 31 December 2018, or following a sale of equity. As part of
performance rights were granted to non-executive directors; 30,863 (2019: 10,720) were exercised
the PIML Acquisition, both of the aforementioned loans have been repaid and loans on substantially
during the year. The performance rights were granted in lieu of fees.
The fees paid to non-executive directors from 1 July 2019 for Board and Committee positions are
set out in the table below:
similar terms reissued by the Company under the EOSP, save that they are now subject to share
mortgages.
In August 2016, as part of the PIML Acquisition, which was approved by shareholders on 16 August
2016, the Company advanced to Mr Ihlenfeldt’s nominated shareholding entity a loan of $500,000
for the express purpose of acquiring shares in the Company in the secondary market from Deutsche
Chair
Australia. This loan is interest bearing and subject to a five-year term, limited recourse and secured
Non-executive Director
by way of a share mortgage. Repayment will occur at the earlier of the end of the five-year term,
the date on which any of the underlying shares are sold or within six months of the cessation of Mr
Ihlenfeldt’s employment. Events of default under the loan include cessation of employment.
In November 2018, 300,000 loan shares were issued to Mr Ihlenfeldt under the Pinnacle Omnibus
Plan, approved by the board on 22 August 2018. The shares are subject to service and performance
conditions and will vest after five years, if those conditions are met. The loans are interest free and
limited in recourse to the shares. They are repayable 10 years from grant date, on termination of
employment or when the underlying equity is sold, whichever occurs earlier.
Audit Compliance and Risk Management Committee
• Chair
• Member
Remuneration and Nominations Committee
• Chair
• Member
Base fees
$180,000
$100,000
$15,000
$5,000
$15,000
$5,000
Non-executive directors are not eligible to receive STI but may be eligible to participate in the EOSP. There are
currently no outstanding grants to non-executive directors under the EOSP and during the 2020 financial year, no
non-executive directors participated in the EOSP.
Further details concerning the EOSP are set out from page 51.
58 Pinnacle Investment Management
2020 Annual Report 59
Total remuneration for the non-executive directors in relation to the Company, Committee positions and subsidiaries
for the 2020 financial year was $535,000 and is presented in accordance with applicable accounting standards and
Retirement allowances for non-executive directors
The Company does not provide retirement allowances for non-executive directors, which is
consistent with the guidance contained in the ASX Principles. Superannuation contributions required
under the Australian superannuation guarantee legislation are deducted from the relevant directors’
overall fee entitlements where their fees are paid through payroll.
New non-executive director appointments
On appointment to the Board, new non-executive directors are provided with a letter of
appointment setting out the Company’s expectations, their responsibilities, rights and the terms and
conditions of their engagement. All new non-executive directors participate in an induction process,
which covers the operation of the Board and its committees and financial, strategic, operational and
risk management issues. For further detail, refer to the Corporate Governance Statement on the
Company’s website.
shown in the table below:
Short-term
employee benefits
Post-employment
benefits
Long-
term
benefits
Perfor-
mance
Rights
Cash
salary &
fees
Cash
Bonus
(STI)
Non-
monetary
benefits
Super
annu
ation
Retire-
ment
benefits
Long
Service
leave
Perfor-
mance
rights
Termina-
tion
benefits
Name
$
$
$
$
$
$
$
$
Non-executive Directors
Total
exclu-
ding non
fee remu-
neration
Portion
of remu-
neration
at risk
- STI
Portion
of remu-
neration
at risk
- LTI
$
%
%
Total
$
Alan Watson
2020
99,699
2019
131,558
Deborah Beale
2020
77,738
2019
86,659
Gerard Bradley
2020
80,356
2019
97,032
Steven Wilson (i)
2020
-
2019
32,925
Lorraine Berends (ii)
2020
89,175
2019
64,764
Totals
2020
349,968
2019
412,938
-
-
-
-
-
-
-
-
-
-
-
-
-
9,471
-
12,498
-
-
-
-
-
-
-
-
-
-
7,385
8,233
3,644
-
-
-
8,471
6,153
28,971
26,884
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
75,830
50,303
34,877
20,750
36,000
22,968
-
-
12,354
20,750
159,061
114,771
-
-
-
-
-
-
-
-
-
-
-
-
185,000
109,171
194,359
144,056
120,000
85,123
115,642
94,892
120,000
84,000
120,000
97,032
-
-
32,925
32,925
110,000
97,646
91,667
70,917
535,000
375,940
554,593
439,822
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(i)2019: Mr Wilson was a Director until his resignation on 18 October 2018
(ii) 2019: Ms Berends was appointed a Director on 1 September 2018
60 Pinnacle Investment Management
2020 Annual Report 61
9.
Share-based payment compensation
Options
The terms and conditions of each grant of options affecting remuneration in the previous, this or
future reporting periods as at 30 June 2020 are as follows:
Grant date Category
Expiry
date
Exercise
period
Exercise
price
Number
of rights
/ options
granted
during the
year
Number
of rights
/ options
exercised
during the
year
Number
of rights
/ options
forfeited
during the
year
Number
of rights
/ options
at end of
financial
year
Value per
right /
option at
grant date
1 July 2015 Options
30 Jun 20
125 Days
$0.99
$0.32
0
1,337,000
0
0
% Vested
100%
Details of options provided as remuneration to Executive Key Management Personnel are set out
below. These options form part of the PIML LTI Scheme and were approved for Mr Macoun and
Loan Shares
The terms and conditions of each grant of equity and associated loan to Key Management Personnel
is provided at pages 56 to 58. Details of the loan arrangements affecting remuneration in the
previous, this or future reporting periods as at 30 June 2020 are as follows:
Loan value
at date of
grant
Share based
payments
value (i)
Vesting
date
Number
of shares
vested
Value of
shares
vested (ii)
Number
of shares
forfeited /
lapsed /
sold
Number
of shares
forfeited /
lapsed /
sold
Name
Date of
grant
Number of
loan shares
Key Management Personnel of the Group
Ian Macoun
Loan Shares
25-Aug-16
288,210
$273,799
$30,799
31-Dec-18
288,210
$1,265,242
Loan Shares
25-Aug-16
287,888
$273,494
$33,846
31-Jan-20
287,888
$1,378,984
Loan Shares
25-Aug-16
1,111,112
$500,000
$14,162
25-Aug-16
1,111,112
$1,955,555
Loan Shares
15-Nov-18
300,000
$1,697,460
$649,587
14-Nov-21
-
-
Sub-Total
1,987,210
$2,744,753
$728,394
1,687,210
$4,599,781
Mr Ihlenfeldt by shareholders on 26 June 2015. Mr Chambers and Mr Whittingham were not Key
Andrew Chambers
Management Personnel at the date of grant and accordingly their participation did not require
Loan Shares
25-Aug-16
133,509
$126,834
$1,221
21-Mar-17
133,509
$311,076
shareholder approval.
Name
Date of grant
Number of
options /
rights granted
Value ($) of
options /
rights granted
(i)
Vesting date
Number of
options /
rights vested
(ii)
Value of
options /
rights vested
(iii)
Number
of options
/ rights
forfeited /
lapsed /sold
Value ($)
of options
/ rights
forfeited /
lapsed /sold
Key Management Personnel of the Group
Ian Macoun
Options
Sub-total
Andrew Chambers
Options
Sub-total
Adrian Whittingham
Options
Sub-total
Alex Ihlenfeldt
Options
Sub-total
1-Jul-15
375,000
$120,525
1-Jan-20
375,000
$1,392,750
375,000
375,000
$1,392,750
1-Jul-15
375,000
$120,525
1-Jan-20
375,000
$1,392,750
375,000
375,000
$1,392,750
1-Jul-15
375,000
$120,525
1-Jan-20
375,000
$1,392,750
1-Jul-15
375,000
212,000
212,000
375,000
$1,392,750
$68,137
1-Jan-20
212,000
$787,368
212,000
$787,368
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(i) Fair values at grant date are calculated using a Black-Scholes option pricing model that takes into account the exercise price, the terms of the right
or option, the impact of dilution, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and
Loan Shares
25-Aug-16
288,210
$273,799
$30,799
31-Dec-18
288,210
$1,265,242
Loan Shares
25-Aug-16
287,888
$273,494
$36,392
31-Dec-20
-
-
Loan Shares
25-Aug-16
1,111,112
$500,000
$14,162
25-Aug-16
1,111,112
$1,955,555
Loan Shares
15-Nov-18
800,000
$4,526,560
$1,732,233
14-Nov-23
-
-
Sub-Total
2,620,719
$5,700,687
$1,814,807
1,532,831
$3,531,873
Adrian Whittingham
Loan Shares
25-Aug-16
133,509
$126,834
$1,221
21-Mar-17
133,509
$311,076
Loan Shares
25-Aug-16
288,210
$273,799
$30,799
31-Dec-18
288,210
$1,265,242
Loan Shares
25-Aug-16
287,888
$273,494
$36,392
31-Dec-20
-
-
Loan Shares
25-Aug-16
1,111,112
$500,000
$14,162
25-Aug-16
1,111,112
$1,955,555
Loan Shares
15-Nov-18
300,000
$1,697,460
$649,587
14-Nov-23
-
-
Sub-Total
2,120,719
$2,871,587
$732,161
1,532,831
$3,531,873
Alex Ihlenfeldt
Loan Shares
25-Aug-16
437,968
$416,070
$74,503
30-Jan-18
437,968
$2,023,412
Loan Shares
25-Aug-16
163,083
$154,929
$17,428
31-Dec-18
163,083
$715,934
Loan Shares
25-Aug-16
162,761
$154,623
$20,575
31-Dec-20
-
-
the risk free interest rate for the term of the right or option. Model inputs for the grants made are set out in note 26 to the financial statements.
Loan Shares
25-Aug-16
1,111,112
$500,000
$14,162
25-Aug-16
1,111,112
$1,955,555
(ii) On the vesting of each option/right, the holder becomes entitled to receive one fully paid ordinary share in the Company on exercise of the option/right.
(iii) The amount is based on the intrinsic value of the option or right at vesting date.
Loan Shares
17-Sep-18
300,000
$2,187,510
$777,184
16-Sep-23
-
-
Sub-Total
2,174,924
$3,413,132
$903,852
1,712,163
$4,694,901
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
62 Pinnacle Investment Management
2020 Annual Report 63
(i) Fair values are calculated using a Black-Scholes option pricing model that takes into account the exercise price, the terms of the arrangement,
the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk free interest rate for the
term of the arrangementment.
(ii) The amount is based on the intrinsic value of the option or right at vesting date.
10.
Equity instrument disclosures relating to Key
Management Personnel
Options and rights holdings
The number of options and rights over ordinary shares in the Company held during the 2020
financial year by the directors of the Company and other Key Management Personnel of the Group,
including personally related parties, are set out below.
Balance start of the year
Granted as compensation
Exercised
Expired and another changes
Balance at end of the year
2020
1,358,445
28,256
(1,367,863)
0
18,838
2019
1,337,000
32,165
(10,720)
0
1,358,445
*Includes changes due to staff commencing or ceasing to be Key Management Personnel during the year.
Shareholdings
The numbers of shares in the Company held during the financial year by each Director of the
Company and other Key Management Personnel of the Group, including their related parties, are set
out below.
Granted during
reporting
year as
compensation
Received during
the year on
the exercise
of options and
rights
Balance at start
of year
Other changes
during the year
Balance at the
end of the year
Non-executive directors
Alan Watson
Lorraine Berends
Deborah Beale
Gerard Bradley
Executive directors
Ian Macoun
Andrew Chambers
Adrian Whittingham
Key Management Personnel
130,936
11,944
105,668
55,691
27,654,085
5,525,414
4,325,414
Alex Ihlenfeldt
4,893,773
64 Pinnacle Investment Management
-
-
-
-
-
-
-
-
14,201
-
145,137
3,888
6,210
6,564
5,000
20,832
-
111,878
2,196
64,451
375,000
(753,008)
27,276,077
375,000
(296,800)
5,603,614
375,000
(296,800)
4,403,614
212,500
(171,983)
4,934,290
11.
Loans to Key Management Personnel
Details of loans made to Directors of the Company and other Key Management Personnel of the
Group, including their related parties, are set out below.
i. Aggregates for Key Management Personnel
Balance at start
of year Repayments made
Interest paid and
payable for the
year
Interest not
charged
Balance at end of
year
Number
in Group at end
of year
$
$
$
$
2020
14,451,181
(541,328)
54,312
705,861
13,964,165
4
Details of options provided as remuneration to Executive Key Management Personnel are set out below.
ii. Individuals with loans above $100,000 during the financial year
Balance at start
of year
Repayments made
Interest paid and
payable for the
year
Interest not
charged
Balance at end of
year
Number
in Group at end
of year
$
$
$
$
Ian Macoun
2,614,403
(130,123)
Andrew Chambers
5,654,668
(191,448)
Adrian
Whittingham
2,848,658
(130,123)
Alex Ihlenfeldt
3,333,452
(89,634)
13,578
13,578
13,578
13,578
123,137
2,497,858
2,617,786
284,387
5,476,798
5,658,048
135,680
2,732,113
2,852,040
162,656
3,257,396
3,336,790
The loans referenced in the above table comprise:
•
•
•
loans originally advanced by PIML for the purpose of acquiring shares in PIML
the New Loans
loans granted under the Pinnacle Omnibus Plan.
As part of the PIML Acquisition, shareholders approved the repayment of the original loans with the
proceeds of loans reissued by the Company on 25 August 2016, as well as the advance of the New
Loans. See pages 56 to 58 for further detail on the terms of the loans.
During the year to 30 June 2019, 1.7 million loan shares were issued to Key Management Personnel
under the Pinnacle Omnibus Plan, approved by the board on 22 August 2018. See pages 56 to 58 for
further details on the terms of the loans. No loan shares were issued to Key Management Personnel
during the year to 30 June 2020.
The amounts shown for interest not charged in the tables above represent the difference between
the amount paid and payable for the year and the amount of interest that would have been charged
on an arms’ length basis.
2020 Annual Report 65
12.
Equity Capital
Shares under option/rights
Unissued ordinary shares of the Company under option at 30 June 2020 are as follows:
Meetings of Board and Board Committees
The number of meetings of the Company’s Board and of the Board Committees held during the year
ended 30 June 2020 and the number of meetings attended by each director were as follows:
Date options granted
Expiry date
Exercise price of options
Number under option
Meetings of Board and Board Committees
21 December 2017
12 June 2023
14 March 2018
14 March 2021
$3.93
Nil
15 November 2018
15 November 2023
$5.6582
15 November 2019
15 November 2020
Nil
25 March 2020
25 March 2020
$2.9683
TOTAL
400,000
1,079,365
250,000
18,838
200,000
1,948,203
Under the terms of the transaction documents in respect of the PIML Acquisition, approved by
shareholders on 16 August 2016, in the event that the Company conducted a placement prior to 30
June 2020 in respect of the options issued on 1 July 2015, the Sellers were entitled to subscribe in the
placement for up to 1,416,667 ordinary shares at the subscription price of the options. The Sellers were
entitled to subscribe in the placement in proportions that are pro-rata to their unvested options.
On 3 May 2018, the Sellers subscribed for 708,192 additional ordinary shares pursuant to their
entitlement described above. On 15 April 2020, the Sellers subscribed for an additional 708,192
ordinary shares also pursuant to their entitlement described above.
Audit, Compliance and Risk Committee
Remuneration and Nominations
Committee
Attended
Eligible to Attend
Attended
Eligible to Attend
Attended
Eligible to Attend
10
10
8
10
10
10
9
10
10
10
10
10
10
10
6
6
4
6
6
-
-
-*
-*
6
6
6
-
-
6
6
5
6
6
-
-
6
-*
6
6
6
-
-
A Watson
I Macoun
D Beale AM
G Bradley
L Berends
A Chambers
A Whittingham
*A Watson and I Macoun attended respective meetings by invitation.
Committee Membership
As at the date of this report, the Company had an Audit, Compliance and Risk Management
200,000 of the options granted on 21 December 2017 lapsed during the current financial year, leaving
Committee and a Remuneration and Nominations Committee.
a remaining balance at 30 June of 400,000.
On 14 March 2018, PIML entered into an agreement with Firetrail for the acquisition of a 24.35%
ownership interest in Firetrail. This was funded partly by cash and partly by 2,158,733 zero-price
options, issued by PNI. 1,079,365 options were exercised in the prior year.
On 15 November 2018, 250,000 options were issued to overseas staff under the Pinnacle Omnibus
Plan. Additionally, 32,165 performance rights were granted to non-executive directors under the plan,
of which 10,720 were exercised during the previous year and the remaining 21,445 were exercised
during the year.
On 15 November 2019 a further 28,256 performance rights were granted to non-executive directors
under the plan, of which 9,418 were exercised during the year. Additionally, on 25 March 2020,
200,000 options were issued to overseas staff under the Pinnacle Omnibus Plan.
Shares issued under the EOSP
As part of the PIML Acquisition, on 25 August 2016, 37,043,917 ordinary shares were issued under the
EOSP to the Sellers as consideration for the sale of their equity in PIML. This allocation was approved
by shareholders on 16 August 2016.
End of Remuneration Report
66 Pinnacle Investment Management
Members acting on the committees of the Board are:
Audit, Compliance and Risk Committee
Remuneration and Nominations Committee
G Bradley (Chair)
D Beale AM
L Berends
D Beale AM (Chair)
L Berends
G Bradley
A Watson
Company Secretary
The role of Company Secretary is performed by Mr Calvin Kwok. Mr Kwok is also Chief Legal, Risk &
Compliance Officer of the Company with prior experience at Herbert Smith Freehills, UBS Global Asset
Management and Deutsche Bank. Mr Kwok holds a Masters of Applied Finance, a Graduate Diploma of
Applied Corporate Governance, a Bachelor of Laws and a Bachelor of Commerce.
Environmental regulation
The Group is not affected by any significant environmental regulation in respect of its operations.
2020 Annual Report 67
of the Company and/or of certain of its related bodies corporate against all liabilities to another
Audit of compliance plan – Responsible entity *
Insurance of officers
The Company has paid a premium for a contract insuring all directors and executive officers of the
Company and certain related bodies corporate against all liabilities and expenses arising as a result of
work performed in their respective capacities, to the extent permitted by law. The directors have not
included in this report details of the nature of the liabilities covered or the amount of the premium
paid in respect of the directors and executive officers insurance liability contract as disclosure is
prohibited under the terms of the contract.
The Company has agreed to indemnify each person who is, or has been a director, officer or agent
person (other than the Company or a related body corporate) that may arise from their position as
director, officer or agent, except where the liability arises out of conduct involving a lack of good
faith. The Company is required to meet the full amount of any such liabilities, including costs and
expenses for a period of seven years.
No liability has arisen since the end of the previous financial year which the Company would, by
operation of the above indemnities, be required to meet.
Audit and non-audit services
The Company may decide to employ the Auditor (PricewaterhouseCoopers Australia) on
assignments additional to their statutory audit duties.
Details of the amounts paid or payable to the Auditor for audit and non-audit services provided
during the year are set out below.
The Board has considered the position and, in accordance with the advice received from the
Audit, Compliance and Risk Management Committee, is 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. The directors are satisfied that the provision of non-audit services by
the Auditor, as set out below, did not compromise the auditor independence requirements of the
Corporations Act 2001 for the following reasons:
During the 2020 financial year the following fees were paid or are payable for services provided by
the Auditor, its related practices and non-related audit firms:
(i) Audit and another assurance services
Audit and review of financial statements
266,621
212,650
2020
$
2019
$
Other assurance services:
Audit of regulatory returns
Other assurance services
Total remuneration for audit and other assurance services
(ii) Taxation services
Tax services
Total remuneration for taxation services
(iii) Other services
Other services
Total remuneration of PricewaterhouseCoopers Australia
Total remuneration of auditors
21,939
102,744
50,000
441,304
93,759
93,759
2,987
538,050
538,050
21,299
91,198
-
325,147
108,873
108,873
60,808
494,828
494,828
* Compliance plan audit charges are on-charged to managed funds to which responsible entity services are provided.
Auditor’s independence declaration
A copy of the Auditor’s independence declaration as required under section 307C of the
Corporations Act 2001 is set out on page 70 of the 2020 Annual Report.
Rounding of amounts
• all non-audit services have been reviewed by the Audit, Compliance and Risk Management
The Company is of a kind referred to in ASIC Corporations (Rounding in Financial/Directors reports)
Committee to ensure they do not impact the impartiality and objectivity of the Auditor; and
Instrument 2016/191, issued by the Australian Securities and Investments Commission, relating to
• none of the services undermine the general principles relating to auditor independence as set
out in APES 110 Code of Ethics for Professional Accountants, including reviewing or auditing the
Auditor’s own work, acting in a management or a decision making capacity for the Company,
acting as advocate for the Company or jointly sharing economic risk and rewards.
the ‘’rounding off’’ of amounts in the directors’ report. Amounts in this report have been rounded
off in accordance with that instrument to the nearest thousand dollars, or in certain cases, to the
nearest dollar.
Auditor
PricewaterhouseCoopers continues in office in accordance with section 327 of the Corporations
Act. This report is made in accordance with a resolution of directors.
68 Pinnacle Investment Management
2020 Annual Report 69
A Watson, Chair
Pinnacle Investment Management Group Limited
Sydney, 4 August 2020
07.
Auditor’s
Independence
Declaration
Auditor’s Independence Declaration
As lead auditor for the audit of Pinnacle Investment Management
Group Limited for the year ended 30 June 2020, I declare that to the
best of my knowledge and belief, there have been:
Responsibilities
a. no contraventions of the auditor independence requirements of the
Corporations Act 2001 in relation to the audit; and
The directors of the Company are responsible for the preparation and presentation of the remuneration
report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an
opinion on the remuneration report, based on our audit conducted in accordance with Australian
Auditing Standards.
b. no contraventions of any applicable code of professional conduct in
relation to the audit.
This declaration is in respect of Pinnacle Investment Management Group Limited
and the entities it controlled during the period.
PricewaterhouseCoopers
Brisbane
Brisbane
4 August 2020
4 August 2020
Ben Woodbridge
Ben Woodbridge
Partner
Partner
PricewaterhouseCoopers
PricewaterhouseCoopers, ABN 52 780 433 757
480 Queen Street, BRISBANE QLD 4000, GPO Box 150, BRISBANE QLD 4001
T: +61 7 3257 5000, F: +61 7 3257 5999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
70 Pinnacle Investment Management
2020 Annual Report 71
08.
Financial
Statements
Pinnacle Investment Management Group Limited
ABN 22 100 325 184
Financial Report – 30 June 2020
Contents
Consolidated statement of profit or loss
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
These financial statements are the consolidated financial statements of the consolidated entity
consisting of Pinnacle Investment Management Group Limited and its subsidiaries. The financial
statements are presented in Australian currency.
Consolidated statement of profit or loss
For the year ended 30 June 2020
Revenue from contracts with customers and other revenue
Fair value gains/(losses) on financial assets at fair value through profit or loss
Employee benefits expense
Short-term incentives expense
Long-term incentives expense
Professional services expense
Property expense
Travel and entertainment expense
Technology and communications expense
Other expenses from operating activities
Notes
1
2020
$’000
22,407
2019
$’000
21,123
(1,292)
1,246
(13,567)
(12,420)
(2,931)
(4,485)
28(d)
(1,961)
(1,435)
(2,131)
(1,715)
(1,148)
(1,259)
(407)
(1,003)
(814)
(760)
(3,566)
(2,103)
2
2
73
74
75
76
77
78
Share of net profit of associates and joint ventures accounted for using the equity method
23(d)
37,953
33,133
Profit before income tax
Income tax expense
32,354
30,511
3
-
-
Profit from continuing operations
32,354
30,511
Profit/(loss) from discontinued operations (attributable to equity holders of the Company)
(148)
38
Profit for the year
Profit for the year is attributable to:
32,206
30,549
Owners of Pinnacle Investment Management Group Limited
32,206
30,549
Earnings per share:
Cents
Cents
For profit from continuing operations attributable to owners of Pinnacle Investment Management Group Limited
Pinnacle Investment Management Group Limited is a company limited by shares, incorporated and
domiciled in Australia. Its registered office is Level 19, 307 Queen St, Brisbane QLD 4000 and its
principal place of business is Level 35, 60 Margaret St, Sydney NSW 2000.
Basic earnings per share
Diluted earnings per share
A description of the nature of the consolidated entity’s operations and its principal activities is included
in the Director’s report, which is not part of these financial statements.
These financial statements were authorised for issue by the Directors on 4 August 2020. The Directors
Basic earnings per share
Diluted earnings per share
For profit attributable to owners of Pinnacle Investment Management Group Limited
have the power to amend and reissue the financial statements.
The above consolidated statement of profit or loss should be read in conjunction with the accompanying notes.
Through the use of the internet, we have ensured that our corporate reporting is timely and complete.
All press releases, financial reports and other information are available at the ‘about us’ and investor
relations pages on our website: www.pinnacleinvestment.com/ shareholders-investor-centre
72 Pinnacle Investment Management
5
5
5
5
18.9
18.0
18.8
17.9
18.3
17.1
18.3
17.1
2020 Annual Report 73
Consolidated statement of comprehensive income
Consolidated statement of financial position
For the year ended 30 June 2020
For the year ended 30 June 2020
Profit for the year
Other comprehensive income:
Items that may be reclassified to profit or loss
Notes
2020
$’000
2019
$’000
32,206
30,549
Changes in the fair value of financial assets at fair value through other comprehensive income
-
-
Total comprehensive income/(loss) for the year
32,206
30,549
Total comprehensive income for the year is attributable to:
Owners of Pinnacle Investment Management Group Limited
Total comprehensive income for the year attributable to owners of Pinnacle Investment Management
Group Limited arises from:
Continuing operations
Discontinued operations
32,206
30,549
32,206
30,549
32,354
30,511
(148)
38
32,206
30,549
The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Financial assets at fair value through profit or loss
Intangible assets
Assets held at amortised cost
Total current assets
Non-current assets
Investments accounted for using the equity method
Property, plant and equipment
Intangible assets
Right-of-use assets
Assets held at amortised cost
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Lease liabilities
Borrowings
Provisions
Total current liabilities
Non-current liabilities
Lease liabilities
Borrowings
Provisions
Total non-current liabilities
Total liabilities
Net assets
EQUITY
Contributed equity
Reserves
Accumulated losses
Total equity
Notes
2020
$’000
2019
$’000
6
7
8
13
9
23
13
12
11
14
12
19
15
12
19
15
16,066
16,387
33,986
858
123
26,720
16,055
24,464
-
2,234
67,420
69,473
161,867
113,351
162
1,026
3,823
4,335
118
3
-
3,813
171,213
117,285
238,633
186,758
9,827
1,566
21
6,357
17,771
2,241
30,000
74
32,315
50,086
8,495
-
-
1,119
9,614
-
-
91
91
9,705
188,547
177,053
16
237,663
231,255
17(a)
(48,060)
(50,694)
17(b)
(1,056)
(3,508)
188,547
177,053
74 Pinnacle Investment Management
2020 Annual Report 75
The above consolidated statement of financial position should be read in conjunction with the accompanying notes.
Consolidated statement of changes in equity
Consolidated statement of cash flows
For the year ended 30 June 2020
For the year ended 30 June 2020
Balance at 1 July 2018
154,762
(46,251)
(10,414)
98,097
Cash flows from operating activities
Notes
Contributed
equity
$’000
Reserves
$’000
Accumulated
losses
$’000
Total equity
$’000
Total comprehensive income for the year
TRANSACTIONS WITH OWNERS IN THEIR CAPACITY AS OWNERS:
Share-based payments
Options vested
Shares issued
Dividends paid to shareholders
Performance rights
Share purchase plan, net of issue costs
Share placement, net of issue costs
Employee loan arrangements
Balance at 30 June 2019
Balance at 1 July 2019
Total comprehensive income for the year
TRANSACTIONS WITH OWNERS IN THEIR CAPACITY AS OWNERS:
Share-based payments
Shares issued on exercise of options
Shares issued
Dividends paid to shareholders
Performance rights
Employee loan arrangements
17(a)
18
16
16
16, 17(a)
17(a)
18
16,
17(a)
-
-
1,434
4,749
(4,749)
-
2,177
61
9,860
57,677
1,969
-
54
-
(1,182)
-
30,549
30,549
Receipts from customers
Payments to suppliers and employees
-
-
1,434
-
-
(23,643)
(21,466)
115
9,860
57,677
787
-
-
Dividends and distributions received from financial assets at fair value through profit or loss
344
915
Dividends and distributions received from jointly controlled entities
Interest received
Finance and borrowings costs paid
32,995
27,028
132
(526)
64
(105)
Proceeds from disposal of financial assets at fair value through profit or loss
16,047
31,703
Payments for financial assets at fair value through profit or loss
(26,403)
(32,059)
Net cash inflow/(outflow) from operating activities
25
22,094
21,090
76,493
(4,443)
(23,643)
48,407
231,255
(50,694)
(3,508)
177,053
231,255
(50,694)
(3,508)
177,053
Cash flows from investing activities
Payments for property, plant and equipment
-
32,206
32,206
Proceeds from sale of investments accounted for using the equity method
Payments for intangible assets
Payments for investments accounted for using the equity method
(35,026)
(54,930)
-
-
2,096
698
1,907
170
1,537
1,961
-
-
-
(11)
684
-
-
1,961
2,096
698
(29,754)
(27,847)
159
2,221
-
Loan repayments from shareholders
Loan repayments from related parties
Loan advances to related parties
Net cash inflow/(outflow) from investing activities
Notes
2020
$’000
2019
$’000
23,117
15,851
(23,612)
(22,307)
6,408
2,634
(29,754)
(20,712)
Cash flows from financing activities
Balance at 30 June 2020
237,663
(48,060)
(1,056)
188,547
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
Dividends paid to shareholders
Lease payments
Proceeds from borrowings
Proceeds from issue of shares, net of issue costs
Net cash (outflow)/inflow from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
(124)
261
(2,574)
(53)
3,639
-
2,221
295
787
2,283
(1,030)
(1,500)
(35,977)
(49,774)
(27,847)
(21,465)
(1,718)
30,000
2,794
3,229
-
-
67,537
46,072
(10,654)
17,388
26,720
9,332
76 Pinnacle Investment Management
2020 Annual Report 77
Cash and cash equivalents at end of year
6
16,066
26,720
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
Notes to the consolidated financial statements
Group Results
Group Results
1
2
3
4
5
Operating Assets and Liabilities
Revenue
Expenses
Income tax expense
Segment information
Earnings per share
6
7
8
9
10
11
12
13
14
15
Cash and cash equivalents
Trade and other receivables
Financial assets at fair value through profit or loss
Assets held at amortised cost
Net deferred tax assets
Assets held at amortised cost – non-current
Leases
Intangible assets
Trade and other payables
Provisions
Capital and Financial Risk Management
16
17
18
19
20
21
Group Structure
22
23
24
Other Notes
25
26
27
28
29
30
31
32
Contributed equity
Reserves and accumulated losses
Dividends
Borrowings and financing arrangements
Financial risk management
Contingencies and commitments
Subsidiaries
Investments accounted for using the equity method
Parent Entity financial information
Additional cash flow information
Related party transactions
Key Management Personnel
Share-based payments
Remuneration of auditors
Events occurring after the reporting period
Critical accounting estimates and judgements
Summary of significant accounting policies
Page
This section provides information regarding the results and performance of the group during the
year, including further detail regarding revenue and expenses, income tax, segment reporting and
earnings per share.
1. Revenue from contracts with customers and other revenue
a. Disaggregation of revenue from contracts with customers
The Group derives its revenue from contracts with customers from the transfer of services over time. A
disaggregation of the Group’s revenue is shown below.
Revenue from contracts with customers
Services revenue – over time
Service charges
Other revenue
Directors fees
Interest received or due
Dividends and distributions
Other revenue
Dividends and distributions are received from financial assets held at fair value through profit or loss.
2020
$
2019
$
21,305
21,305
44
169
818
71
1,102
22,407
19,357
19,357
40
248
1,469
9
1,766
21,123
79
80
81
82
82
83
83
84
84
85
85
86
87
88
88
89
91
92
93
94
102
104
104
108
108
109
112
113
118
118
119
120
78 Pinnacle Investment Management
2020 Annual Report 79
2. Expenses
3.
Income tax expense
PROFIT BEFORE INCOME TAX INCLUDES THE FOLLOWING SPECIFIC EXPENSES:
Finance cost expense – included in other expenses from operating activities
Interest and finance charges
Total finance cost expense
Rental expense relating to operating leases – included in property costs*
Minimum lease payments
Total rental expense relating to operating leases
2020
$
2019
$
641
641
-
-
105
105
876
876
* From 1 July 2019, leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use
by the Group. See note 12 and 32(a)(iii) for details of the amount shown in the profit or loss relating to leases and for further details about the change
in accounting policy.
Depreciation and amortisation expense – included in other expenses from operating activities
Depreciation – property, plant and equipment
Amortisation - intangible assets
Total depreciation and amortisation expense
81
693
774
72
-
72
2020
$’000
2019
$’000
a. Income tax expense/(benefit)
Income tax expenses is attributable to:
Continuing operations
Discontinued operations
Total income tax expense/(benefit)
Current tax
Deferred tax
Adjustments for tax in respect of prior periods
Total current tax expense
Deferred income tax expense/(benefit) included in income tax expense/(benefit) comprises:
(Increase)/decrease in deferred tax assets
Increase in deferred tax liabilities
Total deferred tax expense/(benefit)
-
-
-
(3)
3
-
-
3
-
3
b. Numerical reconciliation of income tax expense to prima facie tax payable
Profit from continuing operations before income tax expense
Profit /(Loss) from discontinued operations before income tax expense
Profit before income tax
Tax at the Australian tax rate of 30% (2019: 30%)
Tax effect of amounts which are not deductible (taxable) in calculating taxable income:
32,354
(148)
32,206
9,662
-
-
-
(608)
608
-
-
608
-
608
30,511
38
30,549
9,164
Share of profits of entities under joint control
(11,386)
(9,940)
Impairment
Non-deductible expenditure
Sundry items
Adjustments for current tax in respect of prior periods
Deferred tax assets not recognised
Total income tax expense/(benefit)
c. Tax losses not recognised
Unused tax losses for which no deferred tax asset has been recognised
Potential tax benefit at 30%
-
611
1,673
560
-
(560)
-
61,333
18,400
-
466
-
(310)
-
310
-
60,364
18,109
A deferred tax asset in relation to tax losses is regarded as recoverable and therefore recognised only
when, on the basis of all available evidence, it can be regarded as probable that there will be suitable
taxable profits against which to recover the losses and from which the future reversal of underlying
timing differences can be deducted. Deferred tax assets have not been recognised in full on the basis
that there remains uncertainty regarding the timing and quantum of the generation of taxable profits.
80 Pinnacle Investment Management
2020 Annual Report 81
d. Tax consolidation legistation
e. Information concerning the classification of securities
Pinnacle Investment Management Group Limited and its wholly-owned Australian controlled entities
Options and loan shares granted to employees under the employee share schemes are considered
implemented the tax consolidation legislation from 1 July 2003. Next Financial Limited and its subsidiaries
to be potential ordinary shares and have been included in the determination of diluted earnings per
joined the tax consolidated group on 1 April 2009. Pinnacle Investment Management Limited and its
share to the extent to which they are dilutive. The options and loan shares have not been included in
subsidiaries joined the tax consolidated Group on 25 August 2016. The accounting policy in relation to this
the determination of basic earnings per share.
legislation is set out in note 32(f) and further information is provided at Note 32(aa).
4. Segment information
The Group operates one business segment being the funds management operations of Pinnacle.
The business is principally conducted in one geographic location, being Australia.
5. Earnings per share
a. Basic earnings per share
From continuing operations
From discontinued operations
Total basic earnings per share attributable to the ordinary equity shareholders of the Company
b. Diluted earnings per share
Attributable to the ordinary equity shareholders of the Company
From continuing operations
From discontinued operations
Total diluted earnings per share attributable to the ordinary equity shareholders of the Company
c. Reconciliations of earnings used in calculating earnings per share
Basic and diluted earnings per share
2020
Cents
2019
Cents
18.9
(0.1)
18.8
18.0
(0.1)
17.9
18.3
-
18.3
17.1
-
17.1
Profit/(loss) attributable to the ordinary owners of the Company used in calculating basic and diluted earnings per share:
From continuing operations
From discontinued operations
Profit used in calculating basic and diluted earnings per share
32,354
(148)
32,206
30,511
38
30,549
d. Reconciliations of earnings used in calculating earnings per share
Weighted average number of ordinary shares used as the denominator in calculating basic
earnings per share
170,927,363
166,781,949
Adjustments for calculation of diluted earnings per share:
Weighted average treasury stock (see note 16(d))
Weighted average options
Weighted average number of ordinary and potential ordinary shares used as the
denominator in calculating diluted earnings per share
7,238,633
1,956,724
8,239,835
3,724,021
180,122,720
178,745,805
82 Pinnacle Investment Management
Operating assets and liabilities
This section provides information regarding the assets and liabilities of the entity and includes more
detailed breakdowns of individual balance sheet items.
6. Cash and cash equivalents
Available cash at bank and on hand
Fixed-term deposits
a. Risk exposure
2020
$’000
15,796
270
16,066
2019
$’000
26,343
377
26,720
The Group’s exposure to interest rate risk is discussed in note 20. The maximum exposure to credit
risk at the end of each reporting period is the carrying amount of each class of cash and cash
equivalents mentioned above.
b. Fixed term and at call deposits
Fixed-term and at-call deposits bear floating interest rates between 0.04% and 1.20% (2019: 1.45%
and 1.75%). At-call deposits have an average maturity of 30 days. Fixed-term deposits have a maturity
ranging from 90 days to 1 year.
7. Trade and other receivables
Trade receivables
Income receivable
Other receivables
Prepayments
2020
$’000
7,562
4,707
3,930
188
2019
$’000
7,757
4,223
3,871
204
16,387
16,055
2020 Annual Report 83
a. Fair values of trade receivables
Due to the short-term nature of the current receivables, their carrying amount is considered to be
10. Net deferred tax assets
the same as their fair value.
b. Impairment and risk exposure
Information about the impairment of trade receivables and the Group’s exposure to credit risk,
foreign currency risk and interest rate risk can be found in note 20(a) and 20(b).
Deferred tax assets (a)
Deferred tax liabilities (b)
Net deferred tax assets
a. Deferred tax assets
8. Financial assets at fair value through profit or loss
The deferred tax asset balance comprises temporary differences attributable to:
Australian listed securities
Other unlisted equity securities
Derivative financial assets
Unlisted unit trusts
2020
$’000
12,941
479
1,075
19,491
33,986
2019
$’000
12,615
479
712
10,658
24,464
Unrealised loss on fair value assets
Lease liabilities
Other
Total deferred tax assets
Set-off of deferred tax liabilities pursuant to set-off provisions
Net deferred tax assets
2020
$’000
1,953
(1,953)
-
376
1,415
162
1,953
(1,953)
-
2019
$’000
315
(315)
-
-
315
315
(315)
-
A deferred tax asset in relation to tax losses is regarded as recoverable and therefore recognised only
when, on the basis of all available evidence, it can be regarded as probable that there will be suitable
taxable income against which to recover the losses and from which the future reversal of underlying
timing differences can be deducted. The deferred tax assets of the consolidated entity are currently
not recognised under these criteria - refer note 3(c).
Risk exposure and fair value measurements
Information about the Group’s exposure to price risk and the methods and assumptions used in
determining fair value is provided in note 20.
9. Assets held at amortised cost
Loans to entities under joint control
2020
$’000
123
123
2019
$’000
2,234
2,234
b. Deferred tax liabilities
The deferred tax liabilities balance comprises temporary differences attributable to:
Financial assets at fair value through profit or loss
Loans to entities under joint control includes any adjustments for accumulated equity accounted
losses where the associated equity investment value is less than zero as a result of accumulated
losses being greater than the carrying value of the investment.
As outlined in note 32(l)(ii) loans to entities under joint control are assessed at least annually for
possible indicators of impairment. Where indicators of impairment exist, the recoverability of these
loans is determined. If the carrying amount exceeds the recoverable amount an impairment expense
is recorded.
Intangible assets
Right-of-use assets
Receivables
Total deferred tax liabilities
11. Assets held at amortised cost – non-current
Loans to related parties
Note
26
2020
$’000
2019
$’000
185
565
1,146
57
1,953
2020
$’000
4,335
4,335
302
-
-
13
315
2019
$’000
3,813
3,813
84 Pinnacle Investment Management
2020 Annual Report 85
As outlined in note 32(l)(ii) loans to entities under joint control are assessed at least annually for
possible indicators of impairment. Where indicators of impairment exist, the recoverability of these
loans is determined. If the carrying amount exceeds the recoverable amount an impairment expense
is recorded.
12. Leases
13. Intangible assets
The Group leases offices in Brisbane and Sydney. Rental contracts are typically made for fixed periods
Plato Income Maximiser Limited (ASX: PL8) undertook an entitlement and shortfall offer in
of 3 – 5 years. Until 30 June 2019, these leases were classified as operating leases, from 1 July 2019,
August 2019. As part of the arrangements pursuant to which it was appointed as distributor
leases are recognised as a right-of-use asset and a corresponding liability at the date at which the
to the offer, and will be paid distribution fees, the Group agreed to pay the costs associated
leased asset is available for use by the Group, see note 32(a)(iii) and 32(g) for further details.
with the offer. Plato Investment Management Limited, the Investment Manager of PL8 and an
Affiliate of the Group, and the Group have entered into a distribution agreement for a period
of three years (customer contract). These costs, which are associated with the acquisition of
that contract, have been capitalised as an intangible asset and are being amortised over the
distribution agreement period of three years.
Software
$’000
Customer Contracts
$’000
The balance sheet shows the following amounts relating to leases:
RIGHT-OF-USE ASSETS
Office leases
Office leases – accumulated amortisation
Additions to the right-of-use assets during the 2020 financial year were $5,544,000.
LEASE LIABILITIES
Current
Non-current
The statement of profit or loss shows the following amounts relating to leases:
DEPRECIATION CHARGE OF RIGHT-OF-USE ASSETS (INCLUDED IN PROPERTY EXPENSES)
Office leases
Interest expense (included in other expenses from operating activities)
30 June 2020
$’000
1 July 2019
$’000
5,544
(1,721)
3,823
1,566
2,241
3,807
1,721
1,721
94
5,544
-
5,544
1,690
3,742
5,432
-
-
-
86 Pinnacle Investment Management
AT 1 JULY 2018
Cost
Accumulated amortisation
Net book value
Opening net book value
Additions
Amortisation charge
Closing net book value
Cost
Accumulated amortisation
Net book value
Opening net book value
Additions
Amortisation charge
Closing net book value
Cost
Accumulated amortisation
Net book value
1,800
(1,793)
7
7
-
(4)
3
15
(12)
3
3
-
(2)
1
15
(14)
1
Total
$’000
1,800
(1,793)
7
-
-
-
YEAR ENDED 30 JUNE 2019
-
-
-
-
-
-
-
7
-
(4)
3
AT 30 JUNE 2019
15
(12)
3
YEAR ENDED 30 JUNE 2020
-
2,574
(691)
1,883
2,574
(691)
1,883
3
2,574
(693)
1,884
AT 30 JUNE 2020
2,589
(705)
1,884
2020 Annual Report 87
14. Trade and other payables
16. Contributed equity
Trade payables
Accrued expenses
Accrued bonuses
Other payables
15. Provisions
Current
Employee benefits - annual leave and long service leave
Contingent consideration - investment in affiliates
Non-Current
Employee benefits - long service leave
2020
$’000
3,977
844
3,057
1,949
9,827
2020
$’000
1,357
5,000
6,357
74
74
2019
$’000
2,513
1,303
4,238
441
8,495
2019
$’000
1,119
-
1,119
91
91
For further details about contingent consideration - investment in affiliates see note 23.
a. Movements in provisions
Movements in each class of provision during the financial year, are set out below:
Current
BALANCE AT 1 JULY 2019
Amounts provided for during the year
Balance at 30 June 2020
Non-Current
BALANCE AT 1 JULY 2019
Amounts provided for during the year
Balance at 30 June 2020
Contingent
Consideration
$’000
Employee Benefits
$’000
-
5,000
5,000
-
-
-
1,119
238
1,357
91
(17)
74
a. Share capital
Ordinary shares:
2020
Shares
2019
Shares
Fully paid contributed equity (b)
173,132,050
169,676,000
Total contributed equity
173,132,050
169,676,000
2020
$’000
237,663
237,663
b. Movements in ordinary share capital
Date
Details
1 July 2018
Opening balance
Issue of ordinary shares on exercise of options
Transfer from options reserve on exercise of options
Share placement, net of issue costs
Share purchase plan, net of issue costs
Issue of ordinary shares on exercise of performance rights
Transfer from performance rights reserve on exercise of
performance rights
Dividend reinvestment
Treasury stock vested (d)
30 June 2019
Closing Balance
Issue of ordinary shares on exercise of options
Issue of ordinary shares
Issue of ordinary shares on exercise of performance rights
Transfer from performance rights reserve on exercise of
performance rights
Dividend reinvestment
Treasury stock vested (d)
Number of shares
Issue price
153,905,571
1,079,368
-
10,909,091
1,811,402
10,720
-
333,199
1,626,649
169,676,000
2,125,000
708,192
30,863
-
491,097
100,898
-
-
$5.50
$5.50
-
-
$6.53
-
$0.99
$0.99
-
-
$3.88
2019
$’000
231,255
231,255
$’000
154,762
-
4,749
57,677
9,860
-
61
2,177
1,969
231,255
2,096
698
-
170
1,907
1,537
30 June 2020 Closing Balance
173,132,050
237,663
c. Ordinary shares
Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the
Company in proportion to the number of and amounts paid on the shares held.
On a show of hands every holder of ordinary shares present at a meeting in person or by proxy is entitled to
one vote and upon a poll each share is entitled to one vote.
Ordinary shares have no par value and the Company does not have a limited amount of authorised capital.
88 Pinnacle Investment Management
2020 Annual Report 89
d. Treasury stock
Treasury stock are shares in Pinnacle Investment Management Group Limited that are subject to share
mortgage under employee loans used for the purposes of acquiring interests in the Company. The
value ascribed to treasury stock is the value of the loans secured by share mortgage at period end.
17. Reserves and accumulated losses
a. Reserves
Treasury stock movement for the year includes the issue of 150,000 and the forfeiture of 400,000
Share-based payments reserve
loan shares to employees, issued under the Pinnacle Omnibus Plan approved by the board on 22
Options reserve
2020
$’000
6,750
4,749
2019
$’000
4,106
4,749
August 2018. Shares issued to executive directors in the prior year were approved by shareholders at
Transactions with non-controlling interests reserve
(59,603)
(59,603)
the AGM on 18 October 2018.
Date
Details
1 July 2018
Opening balance
Issue of loan shares under Pinnacle Omnibus Plan
Loan share repayments
Treasury stock vested during the year
30 June 2019
Closing Balance
Issue of loan shares under Pinnacle Omnibus Plan
Forfeited loan shares
Loan share repayments
Treasury stock vested during the year
30 June 2020 Closing Balance
e. Employee share plans
Number of
treasury shares
10,018,936
4,800,000
(1,626,649)
13,192,287
150,000
(400,000)
(100,898)
12,841,389
Issue price
5,848
30,978
(786)
(1,074)
34,966
445
(2,647)
(1,550)
(96)
31,118
Information relating to the Pinnacle Investment Management Group Employee Option Share Plan
and Pinnacle Omnibus Plan, including details of options issued, exercised and lapsed during the
financial year and options outstanding at the end of the financial year, is set out in note 28.
f. Capital risk management
The Group’s objective when managing capital is to safeguard its ability to continue as a going
concern, so it can continue to provide returns for shareholders, benefits for other stakeholders and
to maintain an optimal capital structure to reduce the cost of capital.
In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends
paid to shareholders, return capital to shareholders, issue new shares or sell assets.
The Group monitors capital on the basis of both Group liquidity and capital and liquidity ratios
required under various licenses held by subsidiaries.
There have been no reportable instances of non-compliance with externally imposed capital
requirements in the current period.
Performance rights reserve
MOVEMENTS
Share-based payments reserve
Balance at 1 July
Share-based payments expense
Shares issued on exercise of options
Employee loans subject to share-based payments arrangements
Balance at 30 June
Options reserve
Balance at 1 July
Options issued (refer note 23(a))
Options exercised
Balance at 30 June
Transactions with non-controlling interests reserve
Balance at 1 July
Balance at 30 June
44
54
(48,060)
(50,694)
4,106
1,961
-
683
6,750
4,749
-
-
4,749
3,854
1,434
-
(1,182)
4,106
9,498
-
(4,749)
4,749
(59,603)
(59,603)
(59,603)
(59,603)
The share-based payments reserve is used to recognise:
•
•
•
•
the grant date fair value of options issued to employees but not exercised;
the grant date fair value of shares issued to employees;
the issue of shares held by employee share plans to employees; and
the grant date fair value of reissued loans under the Pinnacle Long-term Employee Incentive Plan
and Pinnacle Omnibus Incentive Plan approved by the board on 22 August 2018.
The transactions with non-controlling interests reserve is used to recognise the excess of the
consideration paid to acquire non-controlling interests above the carrying value of the non-
controlling interest at time of acquisition.
The options reserve is used to recognise the value of zero-priced options issued by Pinnacle
associated with investments in entities under joint control (see note 23).
90 Pinnacle Investment Management
2020 Annual Report 91
b. Accumulated losses
Movements in accumulated losses were as follows:
Balance at 1 July
Profit/(loss) for the year attributable to owners of Pinnacle Investment Management Group Limited
Dividends paid to shareholders
Balance at 30 June
18. Dividends
a. Ordinary shares
2020
$’000
(3,508)
32,206
(29,754)
(1,056)
2019
$’000
(10,414)
30,549
(23,643)
(3,508)
2020
$’000
2019
$’000
19. Borrowings and Financing arrangements
a. Secured liabilities and assets pledged as security
In December 2019, the Group entered into an amended facility deed, which is secured by a general
security deed over the assets of the Group and guarantees provided by the Company and other
Group entities. The availability period for the Corporate Card Facility and Bank Guarantee is until 12
December 2020 and for the Loan Facility is until 12 December 2021. Further details regarding the
Corporate Card Facility and Bank Guarantee are provided in Note 21.
Secured
Bank Loan
Total Borrowings
Current
$’000
Non-Current
$’000
2020
Total
$’000
Current
$’000
Non-Current
$’000
20
20
30,000
30,020
30,000
30,020
-
-
-
-
2019
Total
$’000
-
-
Interim dividend for the year ended 30 June 2020 of 6.9 cents per fully paid ordinary share paid on 20 March 2020 (2019 – 6.1 cents paid on 22
March 2019)
The amended facility agreement includes the following covenants:
Fully franked based on tax paid @ 30.0%
12,759
11,095
Final dividend for the year ended 30 June 2019 of 9.3 cents per fully paid ordinary share paid on 4 October 2019 (2019 – 7.0 cents paid on 5 October 2018)
Fully franked based on tax paid @ 30.0%
Total dividends paid
16,995
29,754
12,548
23,643
• The interest cover ratio must be at least 4.0 times.
• The net leverage cover ratio is no more than 2.0 times.
• The minimum tangible net wealth in respect of any financial year must be at least the greater of:
• $55,000,000; and
• an amount equal to 75% of the tangible net wealth in respect of the previous financial year.
b. Dividends not recognised at the end of the reporting period
In addition to the above dividends, since year end the directors have recommended the payment of
The Group has provided the bank with a security interest over its property excluding its holdings
a final dividend of 8.5 cents per fully paid ordinary share (2019 – 9.3 cents). The aggregate amount
in Affiliates. Compliance with covenants is reviewed on a regular basis and compliance has been
of the proposed dividend to be paid on 11 September 2020 out of retained earnings at 30 June
maintained during the period. As at 30 June 2020, the interest cover ratio was 83 times, the net
2020, but not recognised as a liability at year end, is $15,808,000 (2019 – $17,007,000).
leverage cover ratio was 0.9 and the tangible net wealth was $187m (134% of the tangible net wealth
at 30 June 2019).
The Loan Facility was fully drawn as at 30 June 2020 to fund the Acquisition of a 25% interest in
Coolabah Capital Investments Pty Ltd. The loan is a variable rate, Australian-dollar denominated
loan, which is carried at amortised cost. The facility term is two years from drawdown.
c. Franked dividends
The final dividends recommended after 30 June 2020 will be fully franked out of existing franking credits.
Franking credits available for subsequent financial years based on a tax rate of 30% (2019: 30%)
2020
$’000
32,766
2019
$’000
28,779
The above amounts represent the balance of the franking account as at the end of the reporting
period, adjusted for:
a. franking credits that will arise from the payment of the amount of the provision for income tax;
b. franking debits that will arise from the payment of dividends recognised as a liability at the
reporting date; and
c. franking credits that will arise from the receipt of dividends recognised as receivables at the end
of each reporting date.
The consolidated amounts include franking credits that would be available to the Company if
distributable profits of subsidiaries were paid as dividends.
92 Pinnacle Investment Management
2020 Annual Report 93
The carrying amounts of assets pledged as security at balance date in relation to the bank
The Group holds the following financial instruments:
guarantees are set out below:
Current
Cash and cash equivalents
Financial assets at fair value through profit or loss
Assets held at amortised cost
Receivables
Total current assets pledged as security
Non-current
Plant and equipment
Assets held at amortised cost
Total non-current assets pledged as security
Total assets pledged as security
b. Interest rate risk exposure
2020
$’000
2019
$’000
16,066
33,986
123
16,387
66,562
162
4,335
4,497
71,059
1
-
-
493
494
18
-
18
512
Information about the Group’s exposure to interest rate changes are provided in note 20.
20. Financial risk management
The Group’s activities expose it to a variety of financial risks: market risk (including interest rate risk,
foreign currency risk and price risk), credit risk and liquidity risk. A core focus of the Group’s overall
risk management program focuses on the volatility of the financial markets and seeks to minimise
potential adverse effects on the financial performance of the Group.
Risk governance is managed through the Board’s Audit, Compliance and Risk Management
Committee, which provides direct oversight of the Group’s risk management framework and
performance. The Board approves written principles for risk management covering areas such
as Principal Investments, including the use of appropriate hedging strategies, and cash flow
management. The management of risk throughout the Group is achieved through the procedures,
policies, people competencies and risk monitoring functions that form part of the overall Group
risk management framework. This is achieved through regular updates in the form of targeted
risk management analysis and reporting functions that provide an assessment of the Group’s risk
exposure levels and performance to benchmarks / tolerance limits.
Financial assets
Cash and cash equivalents
Trade and other receivables*
Financial assets at fair value through profit or loss
Loans to jointly controlled associates (including affiliate executives) (non-current)
Loans to jointly controlled associates (including affiliate executives) (current)
*Excludes prepayments (see note 7)
Financial liabilities
Trade and other payables
Lease liabilities (current)
Lease liabilities (non-current)
Borrowings (current)
Borrowings (non-current)
a. Market risk
i. Foreign exchange risk
2020
$’000
16,066
16,199
33,986
4,335
123
70,709
2020
$’000
9,827
1,566
2,241
21
30,000
43,655
2019
$’000
26,720
15,851
24,464
3,813
2,234
73,082
2019
$’000
8,495
-
-
-
-
8,495
The Group is not materially exposed to foreign exchange risk. All of its major contracts with
counterparties are denominated and settled in Australian dollars, which is the reporting and
operating currency of the Group. Substantially all of the Group’s principal investments are also
quoted and priced in Australian dollars.
ii. Price risk
Through its business transactions and investments, the Group is exposed to equity securities price
risk. This risk is the potential for losses in Group earnings as a result of adverse market movements
and arises from investments held by the Group that are classified on the consolidated statement of
financial position as financial assets at fair value through profit or loss.
The Group manages the price impact of market risk through an established risk management
framework. This includes the procedures, policies and functions undertaken by the business to
manage market risk within tolerances set by the Board. Equity derivatives are used as an active risk
mitigation function and the Group currently utilises such derivatives to reduce the market risk of its
equity exposures. The performance of the Group’s direct equity exposures and market risk mitigants
are monitored on a regular basis.
94 Pinnacle Investment Management
2020 Annual Report 95
The majority of the Group’s equity investments are Australian listed equity securities and unlisted unit
trusts as shown in the table below:
30 June 2020
ASSETS
Australian listed equity securities
Other unlisted equity securities
Unlisted unit trusts
Derivative financial instruments - futures
Total assets at FVPL
30 June 2019
ASSETS
Australian listed equity securities
Other unlisted equity securities
Unlisted unit trusts
Derivative financial instruments - futures
Total assets at FVPL
Sensitivity
Total
$’000
12,941
479
19,491
1,075
33,986
12,615
479
10,658
712
24,464
30 June 2020
30 June 2019
Weighted average
interest rate
%
Floating
interest rate
$’000
Weighted average
interest rate
%
Cash and cash equivalents
0.06%
Exposure to cash flow interest rate risk
16,066
16,066
1.17%
Floating
interest rate
$’000
26,720
26,720
30 June 2020
30 June 2019
2020 $’000
% of total borrowings
2019 $’000
% of total borrowings
Variable rate borrowings
30,000
Exposure to cash flow interest rate risk
100%
100%
-
0%
0%
The Group’s loans to entities under joint control are subject to fixed interest rates and carried at
amortised cost. They are therefore not subject to interest rate risk in AASB 7.
Sensitivity
At 30 June 2020, if interest rates had changed by +/-100 basis points from the year end rates with
all other variables held constant, after tax profit and equity for the year would have been $112,000
lower/higher (2019: change of 100 basis points: $187,000 lower/higher).
b. Credit risk
Credit risk arises from cash and cash equivalents, financial assets at fair value through profit or loss,
loans to entities under joint control, loans to shareholders and outstanding receivables.
Credit risk is managed on a Group basis. Credit risk relates to the risk of a client or counterparty
The table below summarises the impact of increases/decreases in equity securities prices on the
defaulting on their financial obligations resulting in a loss to the Group. These obligations primarily
Group’s after tax profit for the year and on equity. The analysis is based on the assumption that
relate to distribution and management fees. The Group does not carry significant trade receivable
equity securities prices had increased/decreased by +/- 15% (2019: +/- 15%) at 30 June 2020 with
exposure to either a single counterparty or a group of counterparties. For banks and financial
all other variables held constant and all the Group’s equity investments included in financial assets at
institutions, only independently rated parties with a minimum rating of BBB+ / A-1 are accepted as
fair value through profit and loss moved in correlation with the index.
counterparties. As at the reporting date, the Group held the following credit risks:
Group
+721/-721
+799/-799
+721/-721
+799/-799
Impact on after-tax profit
Impact on equity
2020
$’000
2019
$’000
2020
$’000
2019
$’000
iii. Interest rate risk
The Group’s main interest rate risk arises from holding cash and cash equivalents and borrowings
with variable rates. During 2020 and 2019, the Group’s cash and cash equivalents were denominated
in Australian dollars. The Group’s borrowings were also denominated in Australian dollars. The
Group reviews its interest rate exposure as part of the Group’s cash flow management and takes into
consideration the yields, duration and alternative financing options as part of the renewal of existing
positions. As at the reporting date, the Group had the following cash and cash equivalents and
borrowings:
96 Pinnacle Investment Management
Cash and cash equivalents
Trade and other receivables*
Financial assets at fair value through profit or loss
Loans to joint associates (including affiliate executives) (non-current)
Loans to joint associates (including affiliate executives) (current)
*Excludes prepayments (see note 7).
2020
$’000
16,066
16,199
33,986
4,335
123
70,709
2019
$’000
26,720
15,851
24,464
2,234
3,813
73,082
2020 Annual Report 97
Impaired trade, other and loan receivables
The group has the following types of financial assets that are subject to the expected credit loss model:
• Trade and other receivables
• Loans to joint associates
While cash and cash equivalents and financial assets at fair value through profit or loss are also
subject to the impairment requirements of AASB 9, the identified impairment loss was nil.
Loans to jointly controlled associates (including Affiliate executives)
All loans to jointly controlled associates are considered low credit risk, have had no significant increase
in credit risk during the year, and as such the loss allowance was limited to 12 months’ expected credit
Trade and other receivables
Neither past due nor impaired
Past due but not impaired
Loans held at amortised cost
Neither past due nor impaired
Total trade, other and loan receivables
losses. Loans to joint associates are considered to be low credit risk when they have a low risk of default
Credit quality
2020
$’000
2019
$’000
16,387
16,055
-
-
16,387
16,055
4,458
4,458
6,047
6,047
and the borrower has a strong capacity to meet its contractual cash flow obligations in the near term. New
loans provided to joint associates are only provided once the underlying prospects of the entity have been
fully evaluated. Additionally, loans to individuals to purchase shares are structured in such a way that they
are either full recourse or secured on the shares issued. As such, at 30 June 2020 and 30 June 2019, the
expected credit loss rate in relation to loans to joint associates was 0% and the loss allowance was $nil.
Refer to note 32(l) for more information on the investments and other financial assets policy of the Group.
Trade and other receivables
The group applies the AASB 9 simplified approach to measuring expected credit losses which uses a
lifetime expected loss allowance for all trade receivables. The expected loss rate and loss allowance
has been assessed as $nil as at 30 June 2020 (30 June 2019: $nil). This is because there is no history
of default, revenue is generated primarily through investments in jointly controlled entities and cost
recharges are also primarily to jointly controlled entities, hence the recoverability of receivables can
be determined with a high degree of certainty on a forward-looking basis. Furthermore, the Group
also considered the classification of trade receivables as shown below. Refer to note 32(k) for more
information on the trade receivables policy of the Group.
The Group records trade receivables and loans in the following classifications:
Neither past due nor impaired trade receivables and loans are those that are within their relevant
contractual payment terms and thus have no expected credit loss due to the reasons above.
Past due but not impaired trade receivables and loans are those that have fallen outside of their
contractual settlement terms. However there remains an expectation of full recovery, with no
change in credit risk based on the value of the underlying equities and the financial position of the
client or counterparty and as such there is no expected credit loss.
Past due and impaired trade receivables and loans are those that have fallen outside of the
prescribed settlement terms and/or there is evidence to suggest that the client or counterparty will
fail to meet their obligations and thus would result in an expected credit loss. This is $nil as at 30
June 2020 (2019 - $nil).
The credit quality of financial assets can be assessed by reference to external credit ratings. These
credit ratings are only available for cash assets, Australian listed debt securities and non-exchange
traded derivative financial assets:
Cash at bank and short-term bank deposits
AA-
2020
$’000
2019
$’000
16,066
26,720
16,066
26,720
c. Liquidity risk
The Group manages liquidity risk by continuously monitoring actual and forecast cash flows. Due to
the dynamic nature of the underlying businesses, the Group aims at maintaining flexibility in funding
through available cash and readily liquefiable investments in the Group’s Principal Investments
portfolio. At 30 June 2020, the Group has $50.1 million in available cash and Principal Investments
($20.1 million net of the $30.0 million debt facility).
Subsidiaries of the Company, Pinnacle Funds Services Limited, Pinnacle Investment Management
Limited and Pinnacle RE Services Limited hold Australian Financial Services Licences and hold
amounts in liquid assets in accordance with relevant ASIC regulations on the basis of expected
cash flows. This is generally carried out at a local level in the operating companies of the Group in
accordance with practice and limits set by the Group. In addition, the Group’s liquidity management
policy involves projecting cash flows and considering the level of liquid assets necessary to
meet these, monitoring liquidity ratios against internal and external regulatory requirements and
maintaining debt financing plans.
Maturities of financial liabilities
The table on the following page analyses the Group’s financial liabilities. The financial liabilities are broken
down into 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.
98 Pinnacle Investment Management
2020 Annual Report 99
CONTRACTUAL MATURITIES OF FINANCIAL
LIABILITIES
1 - 30 days
30 days to
90 days
90 days to 1
year
1 to 2 years
2 to 5 years
Total
contractual
cash flows
Carrying
amount
At 30 June 2020
$'000
$'000
$'000
$'000
$'000
$'000
$'000
Trade and other payables
6,770
3,057
Borrowings (see note 19)
Lease liabilities (see note 12)
-
146
-
292
-
21
-
30,000
-
-
9,827
9,827
30,021
30,021
1,128
1,029
1,310
3,905
3,807
Total financial liabilities
6,916
3,349
1,149
31,029
1,310
43,753
43,655
30 June 2019
ASSETS
Australian listed equity securities
Other unlisted equity securities
Unlisted unit trusts
Derivative financial instruments - futures
Level 1
$’000
Level 2
$’000
Level 3
$’000
Total
$’000
12,615
-
-
712
-
-
10,658
-
-
479
-
-
12,615
479
10,658
712
At 30 June 2019
Total assets
13,327
10,658
479
24,464
Trade and other payables
4,258
4,237
Total financial liabilities
4,258
4,237
-
-
-
-
-
-
8,495
8,495
8,495
8,495
No liabilities were held at fair value at 30 June 2019.
d. Fair value measurements
The fair value of financial assets and financial liabilities must be estimated for recognition and
measurement or for disclosure purposes.
AASB 13 Fair Value Measurement requires disclosure of fair value measurements by level of the
following fair value measurement hierarchy:
The Group has reclassified unlisted unit trusts from level 1 to level 2 during the current year. The
Group’s policy is to recognise transfers into and transfers out of fair value hierarchy levels as at
the end of the reporting period. The Group has also reclassified unlisted unit trusts as level 2 in the
prior year.
The fair value of Australian listed securities and exchange traded futures is based on quoted market
prices at the end of the reporting period. The quoted price used for Australian listed securities
and exchange traded options held by the Group is the current bid price. These instruments are
a. quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1);
included in level 1.
b. inputs other than quoted prices included within level 1 that are observable for the asset or liability,
The quoted market price used for unlisted unit trusts is the current exit unit price. These instruments
either directly (as prices) or indirectly (derived from prices) (level 2); and
are included in level 2.
c. inputs for the asset or liability that are not based on observable market data (unobservable inputs) (level 3).
The fair value of unlisted equity securities is determined using valuation techniques. The Group uses
The following table presents the Group’s assets and liabilities measured and recognised at fair value:
Level 1
$’000
Level 2
$’000
Level 3
$’000
Total
$’000
30 June 2020
ASSETS
Australian listed equity securities
Other unlisted equity securities
Unlisted unit trusts
Derivative financial instruments - futures
Total assets
No liabilities were held at fair value at 30 June 2020.
8,920
4,021
-
19,491
-
-
1,075
9,995
-
479
-
-
12,941
479
19,491
1,075
23,512
479
33,986
a variety of methods and makes assumptions that are based on market conditions existing at the end
of each reporting period. In the circumstances where a valuation technique for these instruments is
based on significant unobservable inputs, such instruments are included in level 3.
The carrying amounts of cash and cash equivalents and trade receivables and payables, are assumed
to approximate their fair values due to their short-term nature. Loans to entities under joint control
and loans to shareholders are carried at amortised cost. The fair value of financial liabilities for
disclosure purposes is estimated by discounting the future contractual cash flows at the current
market interest rate that is available to the Group for similar financial instruments.
100 Pinnacle Investment Management
2020 Annual Report 101
Fair value measurements using significant unobservable inputs (level 3)
These guarantees may give rise to liabilities in the Company if the related entities do not meet their
Level 3 items include unlisted equity securities held by the Group, and contingent consideration
from disposal of discontinued operations. The following table presents the changes in level 3
instruments for the years ended 30 June 2020 and 30 June 2019:
obligations that are subject to the guarantees.
No material losses are anticipated in respect of any of the above contingent liabilities.
Contingent
consideration
$’000
Unlisted equity
securities
$’000
b. Commitments
i. Capital commitments
Closing balance 30 June 2018
Contingent consideration received
Fair value adjustments recognised in profit or loss
Closing balance 30 June 2019
Contingent consideration received
Fair value adjustments recognised in profit or loss
Closing balance 30 June 2020
114
(152)
38
-
-
-
-
364
-
115
479
-
-
479
i. Transfer between levels 1 and 3
There were no transfers between levels 1 and 3 during the year.
ii. Valuation process
Unlisted equities valued under level 3 are investments in unlisted companies. Where possible,
the investments are valued based on the most recent transaction involving the securities of the
There were no capital expenditure commitments at balance sheet date.
ii. Lease commitments: Group as lessee
The Group leases offices in Brisbane and Sydney. Rental contracts are typically made for fixed
periods of 3 – 5 years. The lease agreements do not impose any covenants. Until the current
financial year, leases of property were classified as operating leases. From 1 July 2019, the Group
has recognised right-of-use assets for these leases, except for short-term and low-value leases, see
note 12 and note 32(a)(iii) for further information.
Commitments in relation to leases contracted for at the reporting date but not recognised as liabilities are payable as follows:
2020
$’000
Within one year
Later than one year but not later than five years
Non-cancellable operating leases
-
-
-
2019
$’000
1,583
2,695
4,278
company. Where there is no recent information or the information is otherwise unavailable, the
c. Other expenditure commitments
value is derived from calculations based on the value per security of the underlying net tangible
assets of the investee company.
21. Contingencies and commitments
a. Secured liabilities and assets pledged as security
i. Guarantees
Commitments contracted for at reporting date but not recognised as liabilities are payable as follows:
Within one year
Later than one year and not later than five years
2020
$’000
2019
$’000
-
-
-
-
-
-
Pinnacle Investment Management Group Limited has provided guarantees in relation to Australian
Financial Services License Net Tangible Asset obligations (via bank guarantee) in respect of:
d. Other commitments
i. Pinnacle Funds Services Limited - $5,000,000 (2019: $5,000,000)
ii. Pinnacle RE Services Limited - $50,000 (2019: $50,000)
The Group has also provided guarantees in respect of its leased premises
The Group has previously entered into agreements whereby it has agreed to advance sufficient
funds to entities under joint control to cover their operating expenses until such time as the entity
becomes profitable on a monthly basis and is generating positive cash flows. Further information in
relation to these balances is provided in note 26.
2020
$’000
2019
$’000
iii. Pinnacle Services Administration Pty Ltd - $786,000 (30 June 2019 - $251,000)
Joint Venture commitments contracted for at reporting date but not recognised as liabilities are payable as follows:
The guarantee for the leases noted above is held between Pinnacle Investment Management Group
Within one year
Limited ($426,000) and Pinnacle Investment Management Limited ($360,000).
Later than one year and not later than five years
The unused bank guarantee facility available at balance date was $24,000 (30 June 2019: $199,000).
The Group has also provided guarantees in relation to its corporate credit card facility (facility limit of
$660,000 of which $625,000 was unused at balance date).
102 Pinnacle Investment Management
-
-
-
-
-
-
2020 Annual Report 103
Group Structure
This section provides information regarding the Group’s subsidiaries and associates, and detail
regarding discontinued operations.
22. Subsidiaries
The consolidated financial statements incorporate the assets, liabilities and results of the following
significant subsidiaries in accordance with the accounting policy described in note 32(b). The
country of incorporation of all subsidiaries is also their principal place of business.
Country of
incorporation
Class of security
Equity holding
2020
%
Name of entity
Pinnacle Investment Management Limited
Pinnacle Funds Services Limited
Pinnacle Services Administration Pty Ltd
Pinnacle RE Services Limited
Priority Funds Management Pty Ltd
Priority Investment Management Pty Ltd
Ariano Pty Ltd
Next Financial Holdings Pty Ltd
PNI Option Plan Managers Pty Ltd
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Ordinary share
Ordinary share
Ordinary share
Ordinary share
Ordinary share
Ordinary share
Ordinary share
Ordinary share
Ordinary share
Pingroup IM Limited
United States
Ordinary share
Pinnacle Investment Management (UK) Ltd
United Kingdom
Ordinary share
100
100
100
100
100
100
100
100
100
100
100
23. Investment accounted for using the equity method
a. Carrying amounts
The Group holds investments in entities under joint control that undertake funds management
activities. Information relating to these entities under joint control is set out below.
Ownership interest
Carrying value
Name of company
Unlisted
Principal Activity
Plato Investment Management Limited
Funds Management
Palisade Investment Partners Limited
Hyperion Holdings Limited
Foray Enterprises Pty Limited
Solaris Investment Management Ltd
Spheria Asset Management Pty Ltd
Antipodes Partners Holdings Pty Ltd
Funds Management
Funds Management
Funds Management
Funds Management
Funds Management
Funds Management
Two Trees Investment Management Pty Ltd
Funds Management
Firetrail Investments Limited
Metrics Credit Holdings Pty Limited
Omega Global Investors Pty Limited
Funds Management
Funds Management
Funds Management
Longwave Capital Partners Pty Limited
Funds Management
Riparian Capital Partners Pty Limited
Reminiscent Capital Pty Limited
Funds Management
Funds Management
Coolabah Capital Investments Pty Ltd
Funds Management
Aikya Investment Management Limited
Funds Management
2020
%
42.66
37.60
49.99
44.50
40.00
40.00
23.57
43.96
23.50
35.00
42.97
40.00
40.00
40.00
25.00
32.50
104 Pinnacle Investment Management
2019
%
43.15
35.98
49.99
43.50
40.00
40.00
23.57
43.96
23.50
35.00
40.00
40.00
40.00
25.00
-
-
2020
$'000
1,274
8,127
16,560
18,839
3,415
1,565
8,277
-
15,552
45,769
1,861
1,131
1,284
1,135
35,860
1,218
161,867
2019
%
100
100
100
100
100
100
100
100
100
-
100
2019
$'000
425
5,645
11,492
16,362
4,009
1,559
6,950
-
14,797
48,881
1,839
420
588
384
-
-
113,351
Each of the entities in the previous table under joint control (except for Aikya Investment
Management Limited) is incorporated and has their principal place of business in Australia. Aikya
Investment Management Limited is incorporated and has its principal place of business in the United
Kingdom. Each of the above entities are accounted for using the equity method.
On 16 December 2019, the Group completed the acquisition of a 25% interest in Coolabah Capital
Investments Pty Ltd (CCI) for $29.1m, together with a further $5m upon the business achieving
certain profit milestones over the next one- to four-year period. The Group has assessed that it is
probable that the additional $5m will become payable and has therefore recorded the amount, in
full, as contingent consideration payable, with a corresponding increase in the carrying value of the
investment in CCI (see note 15).
The acquisition was funded by a facility from the Commonwealth Bank of Australia (CBA) (see note 19).
Impairment testing is carried out on the carrying value of the Group’s investments accounted
for using the equity method at each reporting date. For the purpose of impairment testing, each
investment is assessed individually as each represents a separate ‘cash generating unit’ (CGU), with
the carrying value compared to the ‘recoverable amount’. The ‘recoverable amount’ is defined as the
higher of each CGU’s fair value less costs of disposal and its value in use.
There are many accepted methods for valuing funds management businesses, including multiples
on revenue, EBITDA, NPAT and FUM. The measure used may be different depending on the type
(or relative maturity) of each business. During recent years, the Group has conducted a number of
transactions and therefore has recent and relevant data on which to base its assessment.
For CGUs where fair value less costs of disposal was utilised to assess the recoverable amount, the
assumptions were adjusted for any estimation uncertainty by stress testing the inputs to take into
consideration forecast economic uncertainty.
Other CGUs utilised the value in use method. Value in use is defined as the present value of the
future cash flows expected to be derived from an asset. In each case, the value in use has been
based on management’s best estimates over a five-year period, with a terminal value in perpetuity
of 2.5%. Management has considered the impacts of COVID-19 on investment markets and fund
flows and factored this into its best estimates. Management also assessed a range of scenarios
in consideration of the estimation uncertainty over the five-year period. Such scenarios included
whether performance fees will or will not be earned; variations in projected FUM flows; fee rates
on new business; and changes in discount rates. The assessment of recoverable amounts in a
reasonable range of possible scenarios were, in each case, higher than the carrying value.
As a result of these analyses, there has been no impairment to the Group’s investments accounted
for using the equity method in the financial year ended 30 June 2020 (30 June 2019: $nil).
2020 Annual Report 105
b. Summarised financial information for joint ventures
The tables below provide summarised financial information for those joint ventures and associates
that are material to the group. The Group assesses materiality based on each joint venture’s relative
contribution to share of carrying value and share of net profits, and other qualitative factors The
information disclosed reflects the amounts presented in the financial statements of the relevant
associates and joint ventures and not Pinnacle Investment Management Group Limited’s share of those
amounts. They have been amended to reflect adjustments made by the entity when using the equity
method, including fair value adjustments and modifications for differences in accounting policy.
Hyperion Holdings
Limited
Foray Enterprises Pty
Limited*
Palisade Investment
Partners Limited
Solaris Investment
Management Limited
2020
$000
2019
$000
2020
$000
2019
$000
2020
$000
2019
$000
2020
$000
2019
$000
Summarised statement of financial position
Total current assets
25,220
9,044
20,610
16,766
31,328
25,410
10,008
11,854
Total non-current assets
15,169
17,898
4,855
5,763
7,134
6,404
366
438
Total current liabilities
(7,415)
(4,068)
(10,588)
(10,467)
(6,514)
(13,107)
(3,739)
(4,191)
Total non-current liabilities
(78)
(110)
(557)
(636)
(15,153)
(5,036)
(62)
(44)
Net Assets
32,896
22,764
14,320
11,426
16,795
13,671
6,573
8,057
Aggregate carrying amount of individually immaterial joint ventures
Aggregate amounts of the Group’s share of:
Profit for the year
Other comprehensive income
Total comprehensive income
c. Movements in carrying amounts
Carrying amount at the beginning of the financial year
Purchase of shares in entities under joint control
Sales of shares in entities under joint control
Share of profit after income tax
Adjustment for loan Impairment
Dividends received/receivable
Group share in %
49.99%
49.99%
44.50%
43.50%
37.60%
35.98%
40.00%
40.00%
Carrying amount at the end of the financial year
Reconciliation to carrying amounts:
Opening net assets 1 July
22,764
21,782
11,426
8,759
13,671
12,982
8,057
7,900
d. Share of entities’ revenue, expenses and results
Issued shares
Reserves
-
-
-
-
-
125
-
65
708
263
-
136
-
-
-
-
Total comprehensive income
24,813
15,641
14,769
15,102
9,953
9,559
13,316
11,857
Dividends paid
(14,681)
(14,659)
(12,000)
(12,500)
(7,800)
(9,006)
(14,800)
(11,700)
Closing net assets
32,896
22,764
14,320
11,426
16,795
13,671
6,573
8,057
Group's share of net assets
16,445
11,380
6,372
4,970
6,315
4,919
2,629
3,223
Excess consideration over share of net
assets
115
112
12,467
11,392
1,812
726
786
786
Revenues
Expenses
Profit before income tax
Income tax expense
Profit after income tax
Carrying amount
16,560
11,492
18,839
16,362
8,127
5,645
3,415
4,009
e. Summary of entities under joint control
Summarised statement of comprehensive income
Revenue
44,467
31,217
39,973
37,192
25,577
25,600
27,395
24,582
Net profit for the year after tax
24,813
15,641
14,769
15,102
9,953
9,559
13,316
11,857
Other comprehensive income
-
-
-
-
-
-
-
-
Total comprehensive income
24,813
15,641
14,769
15,102
9,953
9,559
13,316
11,857
Dividends received from joint venture
entities
*holding company for Resolution Capital Limited
(7,341)
(7,328)
(5,280)
(5,278)
(3,207)
(3,410)
(5,920)
(4,680)
Individually immaterial jointly controlled entities
In addition to the interests disclosed above, the Group also has interests in a number of individually
immaterial entities under joint control that are accounted for using the equity method.
106 Pinnacle Investment Management
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net assets
2020
$’000
114,926
9,984
-
9,984
2020
$’000
113,351
43,548
(261)
37,953
271
(32,995)
161,867
2020
$’000
105,676
(51,412)
54,264
(16,311)
37,953
2020
$’000
73,788
36,639
110,427
23,520
12,027
35,547
74,880
2019
$’000
75,842
10,725
-
10,725
2019
$’000
55,601
54,930
(3,639)
33,133
354
(27,028)
113,351
2019
$’000
85,778
(39,732)
46,046
(12,913)
33,133
2019
$’000
61,156
32,635
93,791
26,191
17,773
43,964
49,827
2020 Annual Report 107
24. Parent Entity financial information
a. Summary financial information
The individual financial statements for the Parent Entity (PNI) show the following aggregate amounts:
Statement of financial position
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net assets
Shareholders’ equity
Contributed equity
Reserves
Accumulated losses
Total equity
Profit/(loss) for the year
Total comprehensive income/(loss)
b. Reconciliation of net cash flow from operating activities to profit
Profit/(loss) for the year
Depreciation and amortisation
Right-of-use asset depreciation and interest charge
Reinvested distributions received
Equity settled share-based payments
Net losses/(gains) on financial assets at fair value through profit or loss
Assets at amortised cost
Change in operating assets and liabilities, net of effects from acquisition and disposal of businesses:
Trade and other receivables
2020
$’000
2019
$’000
2,623
140,865
143,488
112
10,029
10,141
584
129,655
130,239
262
9,588
9,850
237,663
(57,012)
(47,304)
137,347
30,520
30,520
231,255
(62,794)
(48,072)
120,389
22,079
22,079
133,347
120,389
Investments accounted for using the equity method
Financial assets at FVTPL
Trade and other payables
Borrowings
Provisions
2020
$’000
32,206
774
1,815
(460)
2,120
1,530
(37)
(445)
(4,958)
(10,592)
(101)
21
221
2019
$’000
30,549
64
-
(554)
1,549
(1,695)
(183)
(5,492)
(6,106)
56
2,602
-
300
Net cash inflow/(outflow) from operating activities
22,094
21,090
The reconciliation of net cash flow from operating activities to profit/(loss) includes both continuing
and discontinued operations.
26. Related party transactions
a. Parent Entity
The Parent Entity of the Group is Pinnacle Investment Management Group Limited (refer note 24).
b. Subsidiaries and jointly controlled entities
Interests in subsidiaries are set out in note 22.
Interests in jointly controlled entities are set out in note 23.
Details of service charges to jointly controlled entities are provided in note 1.
Details of dividend payments from entities under joint control are provided in note 23.
b. Guarantees entered into by the Parent Entity
Details of guarantees entered into by the Group are provided at note 21.
25. Additional cash flow information
a. Reconciliation to cash at the end of the year
For the purposes of the consolidated statement of cash flows, cash and cash equivalents include
cash at bank and on hand, deposits at call and cash held in trust net of outstanding bank overdrafts.
Cash and cash equivalents at the end of the reporting period as shown in the consolidated
statement of cash flows can be reconciled to the related items in the consolidated statement of
financial position as follows:
Cash and cash equivalents
Balances per statement of cash flows
2020
$’000
16,066
16,066
2019
$’000
26,720
26,720
c. Key Management Personnel and Compensation
Disclosure relating to Key Management Personnel is set out in note 27.
Disclosure relating to share-based payments is set out in note 28.
d. Transactions with other related parties
The following transactions occurred with related parties: No new loans were issued in the current
financial year.
108 Pinnacle Investment Management
2020 Annual Report 109
i. Movement in loans to key management personnel - Loans provided 25 August 2016
iii. Loan Shares issued under the Pinnacle Omnibus Plan
Upon acquisition of the non-controlling interests of Pinnacle Investment Management Limited, the
During the year to 30 June 2019, 1.7 million loan shares were issued to Key Management Personnel
Company provided senior executives of its subsidiary Pinnacle Investment Management Limited
under the Pinnacle Omnibus Plan. No further loan shares were issued during the year to 30 June
with loans totalling $3,000,002, the proceeds of which were used to partially fund the acquisition
2020. The shares are subject to service and performance conditions and will vest after five years, if
of shares from Deutsche Australia. This included loans of $500,000 each to Mr Ian Macoun, Mr Alex
the conditions are met. The loans are interest free and limited in recourse to the shares. They are
Ihlenfeldt, Mr Adrian Whittingham and Mr Andrew Chambers who are key management personnel of
repayable 10 years from grant date, on termination of employment or when the underlying equity is
the Group.
sold, whichever occurs earlier.
The key terms of the loans are as follows:
The value of the loans issued for each of the key management personnel at period end and
a. The loans have a five year term, are limited recourse and are interest bearing;
b. They are secured by way of a share mortgage (see further detail below);
c. Repayment will occur at the earlier of the end of the five year term, the date on which any shares
are sold or within six months of cessation of employment;
d. Events of default include cessation of employment, insolvency or any representation or warranty
or statement of the borrower being incorrect or misleading.
As security for the loans, the Company has obtained a first ranking mortgage over 1,111,111 shares
held by each executive. In the occasion of any event of default under the loans, the Company can
repayments made during the half year were as follows:
Key Management Personnel
Loan balance – 1 July 2019
$
Repayments made
$
Loan balance – 30 June 2020
$
Ian Macoun
Alex Ihlenfeldt
Adrian Whittingham
Andrew Chambers
1,683,605
2,157,756
1,683,605
4,489,614
(36,795)
(36,795)
(36,795)
(98,120)
1,646,810
2,120,961
1,646,810
4,391,494
exercise its rights to enforce its security including by the appointment of a receiver.
iv. Loans to other Related Parties
During the year interest of $13,578 accrued on each of these loans to key management personnel.
The balance of each loan at 30 June 2020 including capitalised interest was $550,326.
ii. Movement in loans to key management personnel - Loans re-issued 25 August 2016
Upon acquisition of the non-controlling interest of Pinnacle Investment Management Limited,
existing loans amounting to $4,303,485 issued by Pinnacle Investment Management Limited in prior
years to its senior executives to assist executives to acquire equity were re-issued by the Company.
This included existing loans to Mr Ian Macoun, Mr Alex Ihlenfeldt, Mr Adrian Whittingham and Mr
Andrew Chambers who are key management personnel of the Group.
On 27 October 2017, a subsidiary of the Company provided loan funding totalling $5.226m to
a number of Executives of Palisade Investment Partners Limited (“Palisade”), an affiliate of the
Company, to facilitate their purchase of shares in Palisade from an exiting shareholder. The loans
have terms of between five and seven years, are interest-bearing and secured by shares in Palisade.
The loans are recorded within other non-current assets in the consolidated statement of financial
position.
During the year, interest of $0.1m accrued on these loans and repayments of $2.2m were made. The
balance of the loans at 30 June 2020 including capitalised interest was $1.7m.
The loans date from 2009, 2011, 2012 and 2015 and were used to assist the executives to acquire
e. Loans to/from related parties
equity in PIML. The loans are interest free and repayable on termination of employment or when the
underlying equity is sold, whichever event occurs earlier. The re-issued loans are also secured by
share mortgages with limited recourse to the shares.
Loans to joint associates (including affiliate executives)
The value of re-issued loans for each of the Key Management Personnel and repayments made
during the year were as follows:
Key Management Personnel
Loan balance – 1 July 2019
$
Repayments made
$
Loan balance – 30 June 2020
$
Ian Macoun
Alex Ihlenfeldt
Adrian Whittingham
Andrew Chambers
394,051
638,945
628,305
628,305
(93,328)
(52,839)
(93,328)
(93,328)
300,723
586,106
534,977
534,977
Balance at 1 July
Loans advanced
Interest accrued
Loans repaid
2020
$
2019
$
6,047,018
7,000,823
1,030,000
1,500,000
125,467
183,671
(2,471,852)
(2,282,847)
Share of equity accounted losses from affiliates
(271,827)
(354,629)
Balance at 30 June
4,458,806
6,047,018
110 Pinnacle Investment Management
2020 Annual Report 111
f. Guarantees
The amounts shown for interest not charged in the table on the previous page represents the
The Group has provided guarantees to subsidiaries as described in note 21.
difference between the amount paid and payable for the year and the amount of interest that would
g. Transactions with other related parties and jointly controlled entities
The following transactions occurred with related parties:
i. Sales of services to other related parties/jointly controlled affiliates $21,070,413 (2019:
19,151,893)
ii. Purchase of financial assets at fair value through profit and loss $25,025,000 (2019:
$31,113,928)
have been charged on an arm’s length basis.
28. Share-based payments
a. Pinnacle Investment Management Group Employee Option Share Plan
The establishment of the Pinnacle Investment Management Group Employee Option Share Plan
(EOSP) was approved by the Board during the 2007 financial year. The EOSP is designed to provide
long-term incentives for staff (including executive and non-executive directors) to deliver long-
iii. Proceeds for disposal of financial assets at fair value through profit and loss $15,335,538 (2019:
term shareholder returns. Under the plan, participants are granted options which only vest if certain
$31,703,327)
iv. Dividend revenue $818,324 (2019: $1,469,151)
27. Key Management Personnel
a. Key Management Personnel compensation
Short-term employee benefits
Post-employment benefits
Long-term benefits
Share-based payments
2020
$
2019
$
2,237,500
2,853,750
100,000
12,200
795,731
100,000
(15,027)
601,620
Total Key Management Personnel compensation
3,145,431
3,540,343
Certain Key Management Personnel are party to the long-term employee incentive arrangement
described in note 32(s)(vii). At 30 June 2020, the balance of loans issued to Key Management
Personnel was $11,762,818 (2019: $12,304,146) relating to 4,685,272 shares issued in the Company
(2019: 4,685,272 shares).
Detailed remuneration disclosures for Key Management Personnel are provided in the
Remuneration Report.
b. Loans to Key Management Personnel
Details of loans made to directors of Pinnacle Investment Management Group Limited and other Key
Management Personnel of the Group, including their related parties, are set out below.
Grant
date
2020
1 July 2016
(B)
service conditions are met. Participation in the plan is at the Board’s discretion and no individual has
a contractual right to participate in the plan or to receive any guaranteed benefits.
Set out below are summaries of options granted under the plan.
Expiry
date
Exercise
price
Balance at
start of
the year
Granted
during
the year
Exercised
during
the year
Forfeited
during
the year
Balance
at end of
the year
Vested and
exercisable
at end of
the year
30 June 2020
$0.986
2,125,000
Weighted average exercise price
2019
2,125,000
$0.99
1 July 2016 (B)
30 June 2020
$0.986
2,125,000
Weighted average exercise price
2,125,000
$0.99
-
-
-
-
-
-
2,125,000
2,125,000
$0.99
-
-
-
-
-
-
-
-
-
-
-
-
2,125,000
2,125,000
$0.99
-
-
-
-
-
-
2,125,000 options were exercised during the current year (2019: nil). In the current year, the
weighted average share price at the date of exercise of options exercised during the year was $4.70
(2019: $nil). The weighted average remaining contractual life of share options outstanding at the end
of the year was 0.0 years (2019: 1.0 years).
Under the plan, participants are granted options which vest if the employees are still employed by
the Group at the end of the vesting period. The Board may elect to waive the continuing service
condition (for example in cases of redundancy) and allow options to continue.
i. Aggregates for Key Management Personnel
Options granted under the plan carry no dividend or voting rights.
Balance at the
start of the
year
$
Interest paid
and payable
for the year
$
14,451,181
54,312
Loans
advanced
during the
year
$
-
Loan
repayments
received
$
(541,328)
4,652,865
52,828
10,108,990
(363,502)
2020
2019
Other
changes*
$
Balance at the
end of the year
$
Interest not
charged
$
Number in
Group at the
end of the
year
-
-
13,964,165
705,861
14,451,181
190,226
4
4
112 Pinnacle Investment Management
The plan is consolidated into the Group’s financial statements in accordance with note 32(b)(ii).
Fair value of interests granted – 1 July 2016 (B)
Options were granted for no consideration and vest based on fulfilment of specified service
conditions. Vested options are exercisable for a period of 6 months after vesting. The fair value of
options was determined using a Black-Scholes pricing model taking into account the exercise price,
2020 Annual Report 113
the term of the option, the share price at grant date and expected price volatility of the underlying
150,000 loan shares were issued to staff during the financial year and 400,000 loan shares were
share, the expected dividend yield and the risk free interest rate for the term of the instrument.
forfeited by staff who left employment during the year. The shares are subject to service and
• Fair value at grant date: $0.32 per option
• Exercise price: $0.986
• Grant date: 1 July 2016
• Vesting date: 1 January 2020
• Share price at grant date: $1.20
• Expected price volatility of the Company’s shares: 31%
• Expected dividend yield: 3.63%
• Risk-free interest rate: 2.31%
b. Pinnacle Long-term Employee Incentive Plan
Information regarding the Pinnacle Long-term Employee Incentive Plan is provided in notes
32(s)(vii) and 25(a).
c. Pinnacle Omnibus Plan
The establishment of the Pinnacle Omnibus Plan was approved by the Board on 22 August 2018
and by shareholders at the AGM on 18 October 2018. The Omnibus Plan is designed to provide
performance conditions and will vest after five years, if the conditions are met. The loans are interest
free (until vesting date) and limited in recourse to the shares. They are repayable 10 years from grant
date, on termination of employment or when the underlying equity is sold, whichever occurs earlier.
Loan shares issued under the plan carry dividend and voting rights.
Fair value of interests granted – 17 September 2018
The fair value of loan shares were determined using a Black-Scholes pricing model taking into
account the exercise price, the term of the option, the share price at grant date and expected price
volatility of the underlying share, the expected dividend yield and the risk free interest rate for the
term of the instrument.
• Fair value at grant date: $2.59 per loan share
• Exercise price: $7.2917
• Grant date: 17 September 2018
• Vesting date: 16 September 2023
• Share price at grant date: $7.31
long-term incentives for staff (including executive and non-executive directors) to deliver long-
• Expected price volatility of the Company’s shares: 36%
term shareholder returns. The plan provides for the ability to offer options, performance rights
and loan funded shares to staff. Under the plan, the shares and options only vest if certain service
and performance conditions are met. Participation in the plan is at the Board’s discretion and no
individual has a contractual right to participate in the plan or to receive any guaranteed benefits.
Set out below are summaries of options and loan shares granted under the plan.
i. Loan Shares
Grant
date
2020
Expiry
date
Exercise
price
Balance at
start of
the year
Granted
during
the year
Exercised
during
the year
Forfeited
during
the year
Balance
at end of
the year
Vested and
exercisable
at end of
the year
17 September 2018
16 September 2023
$7.2917
2,600,000
15 November 2018
14 November 2023
$5.6582
1,400,000
12 March 2019
11 March 2024
$5.1234
800,000
-
-
-
25 March 2020
24 March 2025
$2.9683
-
150,000
Weighted average exercise price
$6.45
$2.97
4,800,000
150,000
2019
17 September 2018
16 September 2023
$7.2917
15 November 2018
14 November 2023
$5.6582
12 March 2019
11 March 2024
$5.1234
Weighted average exercise price
-
-
-
-
-
2,600,000
1,400,000
800,000
4,800,000
$6.45
-
-
-
-
-
-
-
-
-
-
-
(400,000)
2,200,000
-
-
-
1,400,000
800,000
150,000
(400,000)
4,550,000
$7.29
$6.27
-
-
-
-
-
2,200,000
1,400,000
800,000
4,800,000
$6.45
-
-
-
-
-
-
-
-
-
-
-
• Expected dividend yield: 0.0%
• Risk-free interest rate: 2.28%.
Fair value of interests granted – 15 November 2018
The fair value of loan shares were determined using a Black-Scholes pricing model taking into
account the exercise price, the term of the option, the share price at grant date and expected price
volatility of the underlying share, the expected dividend yield and the risk free interest rate for the
term of the instrument.
• Fair value at grant date: $2.17 per loan share
• Exercise price: $5.6582
• Grant date: 15 November 2018
• Vesting date: 14 November 2023
• Share price at grant date: $5.64
• Expected price volatility of the Company’s shares: 40%
• Expected dividend yield: 0.0%
• Risk-free interest rate: 2.28%
114 Pinnacle Investment Management
2020 Annual Report 115
Fair value of interests granted – 12 March 2019
The fair value of loan shares were determined using a Black-Scholes pricing model taking into
account the exercise price, the term of the option, the share price at grant date and expected price
volatility of the underlying share, the expected dividend yield and the risk free interest rate for the
Grant
date
2019
Expiry
date
Exercise
price
Balance at
start of
the year
Granted
during
the year
Exercised
during
the year
Forfeited
during
the year
Balance
at end of
the year
Vested and
exercisable
at end of
the year
term of the instrument.
• Fair value at grant date: $2.31 per loan share
• Exercise price: $5.1234
• Grant date: 12 March 2019
• Vesting date: 11 March 2024
• Share price at grant date: $5.18
• Expected price volatility of the Company’s shares: 49%
• Expected dividend yield: 0.0%
• Risk-free interest rate: 1.76%
Fair value of interests granted – 25 March 2020
The fair value of loan shares were determined using a Black-Scholes pricing model taking into
account the exercise price, the term of the option, the share price at grant date and expected price
volatility of the underlying share, the expected dividend yield and the risk free interest rate for the
term of the instrument.
• Fair value at grant date: $1.02 per loan share
• Exercise price: $2.9683
• Grant date: 25 March 2020
• Vesting date: 24 March 2025
• Share price at grant date: $2.51
• Expected price volatility of the Company’s shares: 53%
• Expected dividend yield: 0.0%
• Risk-free interest rate: 0.48%
15 November 2018
14 November 2023
$5.6582
Weighted average exercise price
-
-
-
250,000
250,000
$5.66
-
-
-
-
-
-
250,000
250,000
$5.66
-
-
-
Fair value of interests granted – 15 November 2018
250,000 options were granted for no consideration and vest based on fulfilment of specified service
and performance conditions and will vest after five years if the conditions are met. The fair value of
options were determined using a Black-Scholes pricing model taking into account the exercise price,
the term of the option, the share price at grant date and expected price volatility of the underlying
share, the expected dividend yield and the risk free interest rate for the term of the instrument.
• Fair value at grant date: $1.86 per option
• Exercise price: $5.6582
• Grant date: 15 November 2018
• Vesting date: 14 November 2023
• Share price at grant date: $5.64
• Expected price volatility of the Company’s shares: 40%
• Expected dividend yield: 1.6%
• Risk-free interest rate: 2.28%
Options issued under the plan carry no dividend and voting rights.
Fair value of interests granted – 25 March 2020
200,000 options were granted for no consideration and vest based on fulfilment of specified service
and performance conditions and will vest after five years if the conditions are met. The fair value of loan
shares were determined using a Black-Scholes pricing model taking into account the exercise price, the
term of the option, the share price at grant date and expected price volatility of the underlying share, the
expected dividend yield and the risk free interest rate for the term of the instrument.
ii. Options
Grant
date
2020
Expiry
date
Exercise
price
Balance at
start of
the year
Granted
during
the year
Exercised
during
the year
Forfeited
during
the year
Balance
at end of
the year
Vested and
exercisable
at end of
the year
15 November 2018
14 November 2023
$5.6582
250,000
-
25 March 2020
24 March 2025
$2.9683
-
200,000
Weighted average exercise price
$5.66
$2.97
250,000
200,000
-
-
-
-
-
-
-
-
250,000
200,000
450,000
$4.46
-
-
-
-
116 Pinnacle Investment Management
• Fair value at grant date: $0.75 per loan share
• Exercise price: $2.9683
• Grant date: 25 March 2020
• Vesting date: 24 March 2025
• Share price at grant date: $2.51
• Expected price volatility of the Company’s shares: 53%
• Expected dividend yield: 3.7%
• Risk-free interest rate: 0.48%
Options issued under the plan carry no dividend and voting rights.
2020 Annual Report 117
d. Expenses arising from share-based transactions
Total expenses arising from share-based payment transactions recognised during the period as part
31. Critical accounting estimates and judgements
of incentive expenses were as follows:
Pinnacle Investment Management Group Employee Option Share Plan
Pinnacle Omnibus Plan
Pinnacle Long-term Employee Incentive Plan
Total share-based payment transactions
2020
$’000
76
1,823
62
1,961
2019
$’000
153
1,210
72
1,435
Estimates and judgements are continually evaluated and are based on historical experience and
other factors, including expectations of future events that may have a financial impact on the Group
and that are believed to be reasonable under the circumstances.
a. Critical accounting estimates and assumptions
The Group makes estimates and assumptions concerning the future in the preparation of the
financial statements. The resulting accounting estimates will, by definition, seldom equal the related
actual results. The estimates and assumptions that have a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities within the next financial year are
29. Remuneration of auditors
discussed below.
During the year the following fees were paid or payable for services provided by the auditor of the
i. Estimated impairment of non-financial assets
Company and its related practices:
a. PricewaterhouseCoopers Australia
2020
$’000
2019
$’000
i. The deferred tax asset balance comprises temporary differences attributable to:
Audit and review of financial statements
266,621
212,650
Other assurance services:
Audit of regulatory returns
Audit of compliance plan - Responsible entity *
Other assurance services
Total remuneration for audit and other assurance services
ii. Taxation Services
Tax services
Total remuneration for taxation services
iii. Other Services
Other services
Total remuneration of PricewaterhouseCoopers Australia
Total remuneration of auditors
21,939
102,744
50,000
441,304
93,759
93,759
2,987
538,050
538,050
21,299
91,198
-
325,147
108,873
108,873
60,808
494,828
494,828
* Compliance plan audit charges are on-charged to managed funds to which responsible entity services are provided.
30. Events occurring after the reporting period
No matter or circumstance has occurred subsequent to year-end that has significantly affected, or
may significantly affect, the operations of the Group, the results of those operations or the state of
affairs of the Group in subsequent financial years.
The Group tests at least annually whether assets have suffered any impairment, in accordance
with the accounting policy stated in note 32(i). Where required, the recoverable amounts of assets
have been determined based on value-in-use calculations. These calculations require the use of
assumptions. For impairment policies regarding financial assets see notes 32(k) and 32(l).
ii. Income taxes
The Group can recognise deferred tax assets relating to carried forward tax losses and deductible
timing differences to the extent that it is considered probable that there will be future taxable profits
relating to the same taxation authority against which the carried forward tax losses and deductible
timing differences will be utilised. As at the reporting date the deferred tax assets of the consolidated
entity have not been recognised on the basis that their recovery is not considered probable.
b. Critical judgements in applying the Group’s accounting policies
i. Fair value of financial assets
The fair value of financial assets that are not traded in an active market is determined by using
valuation techniques. The Group uses its judgement to select a variety of methods and make
assumptions that are mainly based on market conditions existing at each reporting date (refer to
note 20(d) for further details).
ii. Entities subject to joint control
Entities subject to joint control are not considered controlled entities for the purposes of AASB 10 on
the basis that all key strategic and operational decisions require a unanimous vote by the Board of
directors (refer to note 32(b) for further details).
iii. Share-based payments
The Group measures equity settled share-based payment transactions by reference to the fair
value of the equity instruments at the date at which they are granted. The fair value is determined
by management using option pricing models that use estimates and assumptions. Management
exercises judgement in preparing the valuations and these may affect the value of any share-based
payments recorded in the financial statements (refer to notes 32(s)(iv) and 26 for further details).
iv. Contingencies
The Group has made certain judgements and estimates relating to the contingent assets and
118 Pinnacle Investment Management
2020 Annual Report 119
liabilities outlined in note 21(a). These assumptions are based on all existing information available
iii. AASB 16 Leases – Impact of adoption
through to the date of signing the Financial Report.
v. Contingent consideration
The Group has made certain judgements and estimates relating to contingent consideration payable
outlined in notes 23 and 15. In the event that certain milestones are achieved over the next one- to
The Group has adopted AASB 16 retrospectively from 1 July 2019 but has not restated comparatives
for the 2018 reporting period, as permitted under the specific transitional provisions in the standard.
The reclassifications and adjustments arising from the new leasing rules are therefore recognised in
the opening balance sheet on 1 July 2019.
four-year period, the Group has estimated the fair value of the contingent consideration payable by
On adoption of AASB 16, the Group recognised lease liabilities in relation to leases which had
Act 2001. The Group is a for profit entity for the purpose of preparing the financial statements.
Lease liability recognised at 1 July 2019:
calculating the present value of the expected future cash flows.
32. Summary of significant accounting policies
The principal accounting policies adopted in the preparation of these consolidated financial statements
are set out below. These policies have been consistently applied to all the years presented, unless
otherwise stated. The financial statements are for the consolidated entity consisting of Pinnacle Investment
Management Group Limited and its subsidiaries (“the Group”) - refer to note 22.
a. Basis of preparation
These general purpose financial statements have been prepared in accordance with Australian Accounting
Standards and Interpretations issued by the Australian Accounting Standards Board and the Corporations
i. Compliance with IFRS
The consolidated financial statements of the Group also comply with International Financial Reporting
Standards (IFRS) as issued by the International Accounting Standards Board (IASB).
ii. New and amended standards adopted by the Group
The group has applied the following standards and amendments for the first time for their annual reporting
period commencing 1 July 2019:
• AASB 16 Leases
• AASB 2017-6 Amendments to Australian Accounting Standards – Prepayment Features with
Negative Compensation
• AASB 2017-7 Amendments to Australian Accounting Standards – Long-term Interests in
Associates and Joint Ventures
• AASB 2018-1 Amendments to Australian Accounting Standards – Annual Improvements 2015-
2017 Cycle
previously been classified as ‘operating leases’ under the principles of AASB117 Leases. These
liabilities were measured at the present value of the remaining lease payments, discounted using the
Group’s incremental borrowing rate as of 1 July 2019. The weighted average incremental borrowing
rate applied to the lease liabilities on 1 July 2019 was 2.5%.
Operating Lease Commitments disclosed at 30 June 2019:
Operating Lease Commitments disclosed at 30 June 2019
Discounted using the Group’s incremental borrowing rate at the date of initial application:
Current lease liability
Non-current lease liability
30 Jun 2019
$’000
4,278
4,166
4,166
1,690
3,742
5,432
The associated right-of-use assets were measured at the amount equal to the lease liability, adjusted
by the amount of any prepaid or accrued lease payments relating to that lease recognised in the
balance sheet as at 30 June 2019. There were no onerous lease contracts that would have required
an adjustment to the right-of-use assets at the date of initial application.
On 1 July 2019 an existing lease was surrendered, and a new lease entered into in relation to one of
the Group’s office leases. The lease liability recognized at 1 July 2019 is shown after the surrender of
the existing lease and includes the new lease.
The recognised right-of-use assets are shown below:
• AASB 2018-2 Amendments to Australian Accounting Standards – Plan Amendment, Curtailment
Office leases
or Settlement
•
Interpretation 23 Uncertainty over Income Tax Treatments.
Office leases – accumulated depreciation
30 June 2020
$’000
1 July 2019
$’000
5,544
(1,721)
3,823
5,544
-
5,544
The Group had to change its accounting policies and make retrospective adjustments as a result
of adopting AASB 16 Leases. The impact of the adoption of the leasing standard and the new
accounting policies are disclosed on the following page. The other standards did not have any
impact on the Group’s accounting policies and did not have any impact on the amounts recognised
The change in accounting policy affected the following items in the balance sheet on 1 July 2019:
• Right of use assets – increase by $5,544,000
• Lease liabilities – increase by $5,432,000
in prior periods and are not expected to significantly affect the current or future periods.
There is no additional impact on segment reporting, as the Group operates one business segment
being the funds management operations of Pinnacle. There was also no impact on earnings per
share as a result of the adoption of AASB 16.
120 Pinnacle Investment Management
2020 Annual Report 121
In applying AASB 16 for the first time, the Group has used the following practical expedients as
iii. Entities under joint control
permitted by the standard:
• Applying a single discount rate for its property leases, as permitted by the standard in relation to a
portfolio of leases with reasonably similar characteristics.
For details of the change in accounting policy, see note 32(g).
iv. Early adoption of standards
The Group has elected not to apply any of the pronouncements before their operative date in the
annual reporting period beginning 1 July 2019.
v. Historical cost convention
These financial statements have been prepared under the historical cost convention, as modified
by the revaluation of available for sale financial assets, and financial assets (including derivative
instruments) at fair value through profit or loss.
b. Principles of consolidation
i. Subsidiaries
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of
Pinnacle Investment Management Group Limited as at 30 June 2020 and the results of all subsidiaries
for the year then ended. Pinnacle Investment Management Group Limited and its subsidiaries together
are referred to in these financial statements as the “Group” or the “consolidated entity”.
Subsidiaries are all entities (including structured entities) over which the Group has control. The
Group controls an entity when the Group is exposed to, or has rights to, variable returns from its
involvement with the entity and has the ability to affect those returns through its power to direct the
activities of the entity.
Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are
deconsolidated from the date that control ceases.
The acquisition method of accounting is used to account for business combinations by the Group
(refer to note 32(h)).
Entities under joint control are all entities over which the Group has a shareholding of between
20% and 49.99% of the voting rights, which have been assessed to meet the classification of joint
venture under AASB 11 Joint arrangements, due to the requirement for unanimous decision making
in relation to a number of strategic matters contained in the shareholders agreements. Further,
the Group does not have direct rights to the assets, and obligations for the liabilities of the entities.
Investments in entities under joint control are accounted for in the consolidated financial statements
using the equity method of accounting, after initially being recognised at cost. The Group’s
investment in entities under joint control includes goodwill (net of any accumulated impairment
loss) identified on acquisition (refer to note 23).
The Group’s share of the post-acquisition profits or losses and other comprehensive income of
entities under joint control is recognised in the consolidated statement of comprehensive income.
The cumulative post-acquisition movements are adjusted against the carrying amount of the
investment. Dividends received or receivable from entities under joint control are recognised as a
reduction in the carrying amount of the investment in the consolidated statement of financial position.
When the Group’s share of losses in an entity under joint control equals or exceeds its interest in the
entity under joint control, including any other unsecured long-term receivables, the Group does not
recognise further losses, unless it has incurred obligations or made payments on behalf of the entity
under joint control.
Unrealised gains on transactions between the Group and entities under joint control are eliminated
to the extent of the Group’s interest in the entities under joint control. Unrealised losses are also
eliminated unless the transaction provides evidence of an impairment of the asset transferred.
Accounting policies of entities under joint control have been changed where necessary to ensure
consistency with the policies adopted by the Group.
The carrying amounts of investments in entities under joint control is tested for impairment in
accordance with the policy described in note 32(i).
iv. Changes in ownership interests
The Group treats transactions with non-controlling interests that do not result in a loss of control
Intercompany transactions, balances and unrealised gains on transactions between Group companies
as transactions with equity owners of the Group. A change in ownership interest results in an
are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the
adjustment between the carrying amounts of the controlling and non-controlling interests to reflect
impairment of the asset transferred. Accounting policies of subsidiaries have been changed where
their relative interests in the subsidiary. Any difference between the amount of the adjustment
necessary to ensure consistency with the policies adopted by the Group.
to non-controlling interests and any consideration paid or received is recognised in a separate
Non-controlling interests in the results and equity of subsidiaries are shown separately in the
consolidated statement of comprehensive income, consolidated statement of changes in equity and
consolidated statement of financial position, respectively.
ii. Employee share trust
The Group has formed a trust to administer the Group’s employee share plans. Where the substance
of the relationship is that control rests with the Group, the employee share trust is consolidated and
any shares held by the trust are disclosed as treasury stock and deducted from contributed equity
(refer to note 16 and note 28(a)).
122 Pinnacle Investment Management
transactions with non-controlling interests reserve within equity attributable to owners of Pinnacle
Investment Management Group Limited.
When the Group ceases to consolidate or equity account for an investment because of a loss
of control, joint control or significant influence, any retained interest in the entity is remeasured
to its fair value with the change in carrying amount recognised in the consolidated statement of
comprehensive income. This fair value becomes the initial carrying amount for the purposes of
subsequently accounting for the retained interest as an associate, entity under joint venture or
financial asset. In addition, any amounts previously recognised in other comprehensive income in
respect of that entity are accounted for as if the Group had directly disposed of the related assets or
liabilities. This may mean that amounts previously recognised in other comprehensive income are
2020 Annual Report 123
reclassified to the consolidated statement of comprehensive income.
f. Income tax
If the ownership interest in an entity under joint control is reduced but joint control or significant
influence is retained, only a proportionate share of the amounts previously recognised in other
comprehensive income is reclassified to profit or loss where appropriate.
c. Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the
chief operating decision maker.
d. Foreign currency translation
i. Functional and presentation currency
Items included in the financial statements of each of the Group’s entities are measured using
the currency of the primary economic environment in which the entity operates (‘the functional
currency’). The consolidated financial statements are presented in Australian dollars, which is also
the functional and presentation currency of all entities in the Group.
ii. Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates
prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the
settlement of such transactions and from the translation at year end exchange rates of monetary
assets and liabilities denominated in foreign currencies are recognised in the consolidated statement
of comprehensive income.
e. Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable. Amounts
disclosed as revenue are net of amounts collected on behalf of third parties. The Group recognises
revenue based on the principle that revenue is recognised when control of a good or service
transfers to a customer.
Revenue is recognised for the major business activities as follows:
i. Service charges
Revenue for providing services is recognised over time using the output method in the accounting
period when the services are rendered. Fees are not recognised where there is a risk of significant
revenue reversal. Where the contracts include multiple performance obligations, the transaction will
be allocated based on the stand-alone selling prices. Consideration is payable when invoiced.
ii. Interest received or due
Interest income is recognised using the effective interest method. Interest income is calculated
by applying the effective interest rate to the gross carrying amount of a financial asset except for
financial assets that subsequently become credit-impaired. For credit impaired financial assets,
interest income is calculated by applying the effective interest rate to the net carrying amount of the
financial asset (after deduction of the loss allowance).
iii. Dividends and distributions
Dividends and distributions are recognised as revenue when the right to receive payment is
established. This applies even if they are paid out of pre-acquisition profits. However, the investment
may need to be tested for impairment as a consequence (refer to note 32(i)).
124 Pinnacle Investment Management
The income tax expense or benefit for the period is the tax payable or receivable on the current
period’s taxable income based on the national income tax rate adjusted by changes in deferred tax
assets and liabilities attributable to temporary differences and to unused tax losses.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively
enacted at the end of the reporting period in the countries where the Company’s subsidiaries
and entities under joint control operate and generate taxable income. Management periodically
evaluates positions taken in tax returns with respect to situations in which applicable tax regulation
is subject to interpretation. It establishes provisions where appropriate on the basis of amounts
expected to be paid to the tax authorities.
Deferred income tax is provided in full, using the liability method, on temporary differences arising
between the tax bases of assets and liabilities and their carrying amounts in the consolidated
financial statements. However, deferred tax liabilities are not recognised if they arise from the
initial recognition of goodwill. Deferred income tax is also not accounted for if it arises from initial
recognition of an asset or liability in a transaction other than a business combination that at the time
of the transaction affects neither accounting nor taxable profit or loss.
Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially
enacted by the end of the reporting period and are expected to apply when the related deferred
income tax asset is realised or the deferred income tax liability is settled.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only
if it is probable that future taxable amounts will be available to utilise those temporary differences
and losses.
Deferred tax liabilities and assets are not recognised for temporary differences between the carrying
amount and tax bases of investments in controlled entities 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 assets and liabilities are offset when there is a legally enforceable right to offset
current tax assets and liabilities and when the deferred tax balances relate to the same taxation
authority. Current tax assets and tax liabilities are offset where the entity has a legally enforceable
right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability
simultaneously.
Current and deferred tax is recognised in profit or 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.
i. Tax consolidation legislation
Pinnacle Investment Management Group Limited and its wholly-owned Australian controlled entities
have implemented the tax consolidation legislation. As a consequence, these entities are taxed as a
single entity and the deferred tax assets and liabilities of these entities are set off in the consolidated
statement of financial position.
The head entity, Pinnacle Investment Management Group Limited, and the controlled entities in
the tax consolidated group continue to account for their own current and deferred tax amounts.
2020 Annual Report 125
These tax amounts are measured as if each entity in the tax consolidated group continues to be a
To determine the incremental borrowing rate, the Group:
standalone taxpayer in its own right.
In addition to its own current and deferred amounts, Pinnacle Investment Management Group
• where possible, uses recent third-party financing received by the individual lessee as a starting
point, adjusted to reflect changes in financing conditions since third party financing was received
Limited also recognises the current tax liabilities (or assets) and the deferred tax assets arising from
• uses a build-up approach that starts with a risk-free interest rate adjusted for credit risk for leases
unused tax losses and unused tax credits assumed from controlled entities in the tax consolidated
held by the Group, which does not have recent third party financing, and
group.
Assets or liabilities arising under tax funding agreements with the tax consolidated entities are
recognised as amounts receivable from or payable to other entities in the Group. Any difference
• makes adjustments specific to the lease, e.g. term, country, currency and security.
Right-of-use assets are measured at cost comprising the following:
between the amounts assumed and amounts receivable or payable under the tax funding agreement
•
the amount of the initial measurement of the lease liability
are recognised as a contribution to (or distribution from) wholly-owned tax consolidated entities.
Details about the tax funding agreement are disclosed in note 32(aa)(ii).
g. Leases
The Group leases offices in Brisbane and Sydney. Rental contracts are typically made for fixed
periods of 3 – 5 years. The lease agreements do not impose any covenants. Until the current
financial year, leases of property were classified as operating leases. Payments made under operating
leases (net of any incentives received from the lessor) were charged to profit or loss on a straight-
line basis over the period of the lease.
From 1 July 2019, leases are recognised as a right-of-use asset and a corresponding liability at the
date at which the leased asset is available for use by the Group. Each lease payment is allocated
• any lease payments made at or before the commencement date, less any lease incentives
received
• any initial direct costs, and
•
restoration costs.
Previous accounting policy for leases
Leases in which a significant portion of the risks and rewards of ownership were not transferred to
the Group as lessee were classified as operating leases (note 21). Payments made under operating
leases (net of any incentives received from the lessor) were charged to the consolidated statement
of comprehensive income on a straight-line basis over the period of the lease.
between the liability and finance cost. The finance cost is charged to profit or loss over the lease
h. Business combinations
period so as to produce a constant periodic rate of interest on the remaining balance of the liability
The acquisition method of accounting is used to account for all business combinations, including
for each period. The right-of-use asset is depreciated over the shorter of the asset’s useful life and
business combinations involving entities or businesses under common control, regardless of whether
the lease term on a straight-line basis.
Assets and liabilities arising from a lease are initially measured on a present value basis. Lease
liabilities include the net present value of the following lease payments:
• fixed payments (including in-substance fixed payments), less any lease incentives receivable
• variable lease payments that are based on an index or a rate
• amounts expected to be payable by the lessee under residual value guarantees
equity instruments or other assets are acquired. The consideration transferred for the acquisition
of a subsidiary comprises the fair values of the assets transferred, the liabilities incurred and the
equity interests issued by the Group. The consideration transferred also includes the fair value of any
contingent consideration arrangement and the fair value of any pre-existing equity interest in the
subsidiary. Acquisition-related costs are expensed as incurred. Identifiable assets acquired and liabilities
and contingent liabilities assumed in a business combination are, with limited exceptions, measured
initially at their fair values at the acquisition date. On an acquisition by acquisition basis, the Group
recognises any non-controlling interest in the acquiree either at fair value or at the non-controlling
•
the exercise price of a purchase option if the lessee is reasonably certain to exercise that option,
interest’s proportionate share of the acquiree’s net identifiable assets.
and
The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree
• payments of penalties for terminating the lease, if the lease term reflects the lessee exercising that
and the acquisition date fair value of any previous equity interest in the acquiree over the fair value
option.
Lease payments to be made under reasonably certain extension options are also included in the
measurement of the liability.
The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot
be determined, the lessee’s incremental borrowing rate is used, being the rate that the lessee would
have to pay to borrow the funds necessary to obtain an asset of similar value in a similar economic
environment with similar terms and conditions.
of the Group’s share of the net identifiable assets acquired is recorded as goodwill. If those amounts
are less than the fair value of the net identifiable assets of the subsidiary acquired, the difference is
recognised directly in the consolidated statement of comprehensive income as a bargain purchase.
Where settlement of any part of cash consideration is deferred, the amounts payable in the future are
discounted to their present value as at the date of exchange. The discount rate used is the Group’s
incremental borrowing rate, being the rate at which a similar borrowing could be obtained from an
independent financier under comparable terms and conditions.
Contingent consideration for a business combination is classified either as equity or a financial liability.
126 Pinnacle Investment Management
2020 Annual Report 127
Amounts classified as a financial liability are subsequently remeasured to fair value with changes in fair
l. Investments and other financial assets
value recognised in the consolidated statement of comprehensive income.
Classification and measurement
i. Impairment of non-financial assets
Non-financial assets are tested for impairment whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the
amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable
amount is the higher of an asset’s fair value less costs of disposal and value-in-use. For the purposes
of assessing impairment, assets are grouped at the lowest levels 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). Non-financial assets other than goodwill that suffered an
impairment are reviewed for possible reversal of the impairment at the end of each reporting period.
j. Cash and cash equivalents
For the purpose of presentation in the consolidated statement of cash flows, cash and cash equivalents
includes cash on hand, deposits held at call with financial institutions, and other short-term, highly
liquid investments with original maturities of three months or less that are readily convertible to known
amounts of cash and which are subject to an insignificant risk of changes in value.
Cash held in trust for clients is reported as other cash and cash equivalents and is included within
trade payables.
k. Trade receivables
Trade receivables are recognised initially at fair value and subsequently measured at amortised
cost using the effective interest method, less loss allowance. Trade receivables are amounts due
from customers for goods sold or services performed in the ordinary course of business. They
are generally due for settlement within 30 days and therefore are all classified as current. Trade
receivables are recognised initially at the amount of consideration that is unconditional unless they
contain significant financing components, when they are recognised at fair value. The Group holds
the trade receivables with the objective to collect the contractual cash flows and therefore measures
them subsequently at amortised cost using the effective interest method.
For trade receivables, the Group applies the simplified approach permitted by AASB 9, which requires
lifetime expected losses to be recognised from initial recognition of the receivables. The expected
loss rates are based on the payment profiles of sales over a period of 36 months before the reporting
date and the corresponding historical credit losses experienced within this period. The historical loss
rates are also adjusted to reflect current and forward-looking information on factors affecting the
ability of the customers to settle the receivables.
Trade receivables are written off if there is no reasonable expectation of recovery. Indicators that
there is no reasonable expectation of recovery include, amongst others, the failure of a debtor to
engage in a repayment plan with the group, and a failure to make contractual payments for a period
of greater than 180 days past due. Impairment losses on trade receivables are presented as net
impairment losses within operating profit. Subsequent recoveries of amounts previously written off
are credited against the same line item.
The classification and measurement of financial instruments is determined by the accounting
standard AASB 9 Financial Instruments. AASB 9 Financial Instruments addresses the classification,
measurement and derecognition of financial assets and liabilities, and is driven by the Group’s
business model for managing the financial assets and the contractual cash flow characteristics of the
financial instruments.
In accordance with AASB 9 Financial Instruments: Recognition and Measurement, the Group’s
investments and other financial assets are categorised in one of the three categories: amortised cost,
fair value through other comprehensive income and fair value through profit or loss.
i. Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss are financial assets held for trading. A financial
asset is classified in this category if acquired principally for the purpose of selling in the short-term.
Derivatives are also carried at fair value through profit or loss unless they are designated as hedges
(see note 32(m) for further details about the types of derivates held).
At initial recognition, the Group measures a financial instrument at fair value through profit or loss at
its fair value. Transaction costs of financial assets and liabilities at fair value through profit or loss are
expensed in the statement of comprehensive income.
Subsequent to initial recognition, all financial assets at fair value through profit or loss are measured
at fair value. Gains and losses arising from changes in the fair value of the ‘financial assets at fair
value through profit or loss’ category are presented in the statement of comprehensive income
within net gains/(losses) on financial instruments at fair value through profit or loss in the period in
which they arise.
Assets in this category are classified as current assets if they are expected to be settled within 12
months, otherwise they are classified as non-current.
ii. Loans at amortised cost
A financial asset is classified at amortised cost if the objective of the business model is to hold
the financial asset for the collection of the contractual cash flows and the contractual cash flows
under the instrument represent solely payments of principal and interest (SPPI) on the principal
outstanding. This comprises loans to joint associates (including affiliate executives), which are
included in other current and non-current assets within the statement of financial position.
Loans are held for collection of contractual cash flows and the contractual cash flows under the
instrument represent solely payments of principal and interest (SPPI) on the principal outstanding.
Loans assets are measured initially at fair value plus transaction costs and subsequently at amortised
cost using the effective interest rate method, less impairment losses if any. Such assets are reviewed
at each reporting date to determine whether there is objective evidence of impairment.
At each reporting date, the Group measures the loss allowance on loans at an amount equal to the
lifetime expected credit losses if the credit risk has increased significantly since initial recognition.
If, at the reporting date, the credit risk has not increased significantly since initial recognition, the
Group shall measure the loss allowance at an amount equal to 12-month expected credit losses.
128 Pinnacle Investment Management
2020 Annual Report 129
Significant financial difficulties of the counterparty, probability that the counterparty will enter
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as
bankruptcy or financial reorganisation, and default in payments are all considered indicators that a
appropriate, only when it is probable that future economic benefits associated with the item will
loss allowance may be required. If the credit risk increases to the point that it is considered to be
flow to the Group and the cost of the item can be measured reliably. All repairs and maintenance are
credit impaired, interest income will be calculated based on the gross carrying amount adjusted for
charged to profit or loss during the reporting period in which they are incurred.
the loss allowance.
Depreciation is calculated using the straight-line method to allocate their cost, net of their residual
The amount of the impairment loss is recognised in the statement of comprehensive income on a
values, over their estimated useful lives or in the case of leasehold improvements, the shorter lease
separate line item. When a loan receivable for which an impairment allowance had been recognised
term as follows:
becomes uncollectible in a subsequent period, it is written off against the allowance account.
Subsequent recoveries of amounts previously written off are credited against other expenses in the
statement of comprehensive income.
Recognition and derecognition
The Group recognises financial assets on the date it becomes party to the contractual agreement
(trade date) and recognises changes in fair value of the financial assets from this date.
Financial assets are derecognised when the right to receive cash flows from the investments has
expired or the Group has transferred substantially all risks and rewards of ownership.
m. Derivative financial instruments
Derivative instruments are initially recognised at fair value on the date a derivative contract is entered
into and are subsequently remeasured to their fair value through profit and loss at each reporting
date. Derivative instruments include equity futures, interest rate futures and equity options.
The Group enters into transactions in certain derivative financial instruments which have certain
risks. A derivative is a financial instrument or other contract which is settled at a future date and
whose value changes in response to the change in a specified interest rate, financial instrument
price, commodity price, foreign exchange rate, index of prices or rates, credit rating or credit index
or other variable.
Derivative financial instruments require no initial net investment or an initial net investment that is
smaller than would be required for other types of contracts that would be expected to have a similar
response to changes in market factors.
Derivative transactions include many different instruments such as forwards, futures and options.
The Group uses derivatives to manage its exposure to equity investments held.
• Plant and equipment
• Furniture and fittings
2 - 5 years
2 - 5 years
• Leasehold improvements
3 - 10 years
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of
each reporting period.
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s
carrying amount is greater than its estimated recoverable amount (note 32(i)).
Gains and losses on disposal are determined by comparing proceeds with carrying amount. These
are included in the consolidated statement of comprehensive income.
o. Intangible assets
IT development and software
Costs incurred in developing products or systems and acquiring software and licences that will
contribute to future period financial benefits through revenue generation and/or cost reduction are
capitalised to software and systems. The costs capitalised are external direct costs of materials and
services, and where applicable the direct payroll and payroll related costs of employees’ time spent
on the project. Amortisation is calculated on a straight-line basis over periods generally ranging from
3 to 5 years from the point at which the asset is ready to use.
IT development costs include only those costs directly attributable to the development phase that
can be reliably measured and are only recognised following completion of technical feasibility and
where the Group has an intention and ability to use the asset.
The Group holds the following derivative instruments:
Customer contracts
Futures
Costs incurred which are directly associated with the acquisition of a customer contract, have
Futures are contractual obligations to buy or sell financial instruments on a future date at a
been capitalised as an intangible asset and are being amortised over the agreement term of 3 years.
specified price established in an organised market. The futures contracts are collateralised by cash
Amortisation is calculated on a straight-line basis over the contract term.
or marketable securities. Changes in futures contracts’ values are usually settled net daily with the
exchange.
n. Property, plant and equipment
All property, plant and equipment is stated at historical cost less depreciation. Historical cost
includes expenditure that is directly attributable to the acquisition of the items.
130 Pinnacle Investment Management
p. Trade and other payables
These amounts represent liabilities for goods and services provided to the Group prior to the end
of financial year, which are unpaid. The amounts are unsecured and are usually paid within 30 days
of recognition. Trade and other payables are presented as current liabilities unless payment is not
due within 12 months after the reporting date. They are recognised initially at their fair value and
subsequently measured at amortised cost using the effective interest method.
2020 Annual Report 131
q. Borrowings
within 12 months after the end of the reporting period in which the employees render the related
Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are
service are recognised in the provision for employee benefits. They are measured as the present
subsequently measured at amortised cost. Any difference between the proceeds (net of transaction
value of expected future payments to be made in respect of services provided by employees up to
costs) and the redemption amount is recognised in profit or loss over the period of the borrowings
the end of the reporting period using the projected unit credit method. Consideration is given to
using the effective interest method.
Borrowings are removed from the balance sheet when the obligation specified in the contract is
discharged, cancelled or expired. The difference between the carrying amount of a financial liability
that has been extinguished or transferred to another party and the consideration paid, including any
non-cash assets transferred or liabilities assumed, is recognised in profit or loss as other income or
finance costs.
Where the terms of a financial liability are renegotiated and the entity issues equity instruments to
a creditor to extinguish all or part of the liability (debt for equity swap), a gain or loss is recognised
expected future wage and salary levels, experience of employee departures and periods of service.
Expected future payments are discounted using market yields at the end of the reporting period on
high quality corporate bonds with terms to maturity and currency that match, as closely as possible,
the estimated future cash outflows. Remeasurement as a result of experience adjustments and
changes in assumption are recognised in the consolidated statement of comprehensive income.
The obligations are presented as current liabilities in the consolidated statement of financial position
if the Group does not have an unconditional right to defer settlement for at least 12 months after the
reporting period, regardless of when the actual settlement is expected to occur.
in profit or loss, which is measured as the difference between the carrying amount of the financial
iii. Retirement benefit obligations
liability and the fair value of the equity instruments issued.
AASB101(69) Borrowings are classified as current liabilities unless the Group has an unconditional
right to defer settlement of the liability for at least 12 months after the reporting period.
r. Provisions
Provisions are recognised when the Group has a present legal or constructive obligation as a result
of past events, it is probable that an outflow of resources will be required to settle the obligation and
the amount can be reliably estimated. Provisions are not recognised for future operating losses.
Where there are a number of similar obligations, the likelihood that an outflow will be required
in settlement is determined by considering the class of obligations as a whole. A provision is
recognised even if the likelihood of an outflow with respect to any one item included in the same
class of obligations may be small.
Provisions are measured at the present value of management’s best estimate of the expenditure
required to settle the present obligation at the end of the reporting period. The discount rate used
to determine the present value is a pre-tax rate that reflects current market assessments of the time
value of money and the risks specific to the liability. The increase in the provision due to the passage
of time is recognised as interest expense.
s. Employee benefits
i. Short-term obligations
Liabilities for wages and salaries, including non-monetary benefits, and annual leave expected to
be settled within 12 months after the end of each reporting period in which the employees render
the related service are recognised in respect of employees’ services up to the end of the reporting
period and are measured at the amounts expected to be paid when the liabilities are settled. The
liability for annual leave is recognised in the provision for employee benefits. All other short-term
employee benefit obligations are presented as payables.
ii. Other long-term employee benefit obligations
The liabilities for long service leave and annual leave which are not expected to be settled wholly
132 Pinnacle Investment Management
Contributions to defined contribution funds are recognised as an employee benefits expense as they
become payable. Prepaid contributions are recognised as an asset to the extent that a cash refund or
a reduction in the future payments is available. The Group has no further payment obligations once
the contributions have been paid.
iv. Share-based payments
Share-based compensation benefits are provided to certain employees via the Pinnacle Investment
Management Group Employee Option Share Plan, the Pinnacle Omnibus Plan and where applicable,
Pinnacle long-term employee incentive agreements. Information relating to these schemes is set
out in note 28.
The fair value of options and rights granted under the plans is recognised as an employee benefits
expense with a corresponding increase in share based payments reserve. The total amount to be
expensed is determined by reference to the fair value of the options and rights granted, which
includes any market performance conditions and the impact of any non-vesting conditions but
excludes the impact of any service and non-market performance vesting conditions.
Non-market performance vesting conditions are included in assumptions about the number of
options that are expected to vest. The total expense is recognised over the vesting period, which is
the period over which all of the specified vesting conditions are to be satisfied. At the end of each
period, the entity revises its estimates of the number of options and rights that are expected to vest
based on the non-market vesting conditions. It recognises the impact of the revision to original
estimates, if any, in the consolidated statement of comprehensive income, with a corresponding
adjustment to the share based payment reserve.
The plan is administered by AET Structured Finance Services Pty Ltd, see note 32(b)(ii). When the
options are exercised, the trust transfers the appropriate amount of shares to the employee. The
proceeds received net of any directly attributable transaction costs are credited directly to equity.
The fair value at grant date of the plans is determined using option pricing models that take into
account the exercise price, the vesting period, the vesting and performance criteria, the impact of
dilution, the share price at grant date, expected price volatility of the underlying share, the expected
dividend yield, and the risk-free interest rate for the vesting period.
2020 Annual Report 133
v. Bonuses
The Group recognises a liability and an expense for bonuses where contractually obliged or where
there is a past practice that has created a constructive obligation.
vi. Termination benefits
v. Earnings per share
i. Basic earnings per share
Basic earnings after tax per share is calculated by dividing the profit attributable to owners of the
Company, excluding any costs of servicing equity other than ordinary shares by; the weighted
Termination benefits are payable when employment is terminated by the Group before the normal
average number of ordinary shares outstanding during the financial year, adjusted for bonus
retirement date, or when an employee accepts voluntary redundancy in exchange for these benefits.
elements in ordinary shares issued during the year and excluding treasury shares (see note 16(d)).
The group recognises termination benefits at the earlier of the following dates: (a) when the group
can no longer withdraw the offer of those benefits; and (b) when the entity recognises costs for a
restructuring that is within the scope of AASB 137 and involves the payment of terminations benefits.
In the case of an offer made to encourage voluntary redundancy, the termination benefits are
measured based on the number of employees expected to accept the offer. Benefits falling due
more than 12 months after the end of the reporting period are discounted to present value.
vii. Long-term employee incentive agreements
The Group has long-term employee incentive schemes which enable certain employees of the
Group, under full recourse and limited recourse loan arrangements, to acquire PNI shares. The
schemes are designed to align the interests of the employees with those of shareholders.
The fair value of the limited recourse loan arrangements under the long-term employee incentive
schemes are recognised as an employee benefits expense with a corresponding increase in share-
based payment reserve. The total amount to be expensed is determined by reference to the fair
value of the limited recourse loan arrangements, which includes any market performance conditions
and the impact of any non-vesting conditions but excludes the impact of any service and non-
market performance vesting conditions. The total expense is recognised over the vesting period,
which is the period over all of the specified vesting conditions are to be satisfied. The inflows and
ii. Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share
to take into account:
•
the after income tax effect of interest and other financing costs associated with dilutive potential
ordinary shares, and
•
the weighted average number of additional ordinary shares that would have been outstanding
assuming the conversion of all dilutive potential ordinary shares.
w. Goods and Services Tax (GST)
Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST
incurred is not recoverable from the taxation authority. In this case it is recognised as part of the cost
of acquisition of the asset or as part of the expense.
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The
net amount of GST recoverable from, or payable to, the taxation authority is included with other
receivables or payables in the consolidated statement of financial position.
Cash flows are presented on a gross basis. The GST components of cash flows arising from
outflows associated with these arrangements are accounted for on a net basis, as the arrangements
investing or financing activities which are recoverable from, or payable to, the taxation authority, are
are expected to be settled net.
Certain entities under joint control have similar incentive schemes and Pinnacle may provide cash
funding to certain employees of these entities in order for the employees to acquire shares in the
entities. Pinnacle accounts for these contributions as investments in entities under joint control.
Remuneration of the employees is recorded in the entities under joint control and Pinnacle records
its share of the profits or losses of these entities upon equity accounting. A liability is recorded to
the extent that Pinnacle has a net obligation to the employee of a jointly-controlled entity under the
employee contract.
t. Contributed equity
Ordinary shares are classified as equity (note 16).
Incremental costs directly attributable to the issue of new shares or options are shown in equity as a
deduction, net of tax, from the proceeds.
u. Dividends
Provision is made for the amount of any dividend declared being appropriately authorised and
no longer at the discretion of the Group, on or before the end of the reporting period but not
distributed at the end of the reporting period.
presented as operating cash flows.
x. Discontinued operations
A discontinued operation is a component of the Group’s business that has been disposed
of or is classified as held for sale and that represents a separate major line of business or
geographical area of operations, is part of a single coordinated plan to dispose of such line of
business or area of operations, or is a subsidiary acquired exclusively with a view to resale. The
results of discontinued operations are presented separately in the consolidated statement of
comprehensive income.
y. Rounding of amounts
The Company is of a kind referred to in ASIC Corporations (Rounding in Financial / Director’s
Reports) Instrument 2016/191, issued by the Australian Securities and Investments Commission,
relating to the ‘rounding off’ of amounts in the financial statements. Amounts in the financial
statements have been rounded off in accordance with that instrument to the nearest thousand
dollars, or in certain cases, the nearest dollar.
134 Pinnacle Investment Management
2020 Annual Report 135
z. New accounting standards and interpretations not yet adopted
Certain new accounting standards and interpretations have been published which are not
mandatory for 30 June 2020 reporting periods and have not been early adopted by the Group. The
Group’s assessment of the impact of these new standards and interpretations is set out below. These
standards that are not expected to have a material impact on the entity in the current or future
reporting periods and on foreseeable future transactions.
aa. Parent Entity financial information
The financial information for the Parent Entity, Pinnacle Investment Management Group Limited,
disclosed in note 24 has been prepared on the same basis as the consolidated financial statements,
except as set out below.
i.
Investments in subsidiaries
Investments in subsidiaries are accounted for at cost in the financial statements of Pinnacle
Investment Management Group Limited.
ii. Tax consolidation legislation
Pinnacle Investment Management Group Limited and its wholly-owned Australian controlled entities
have implemented the tax consolidation legislation – refer note 30(f)(i).
The entities have entered into a tax funding agreement under which the wholly-owned entities
fully compensate Pinnacle Investment Management Group Limited for any current tax payable
assumed and are compensated by Pinnacle Investment Management Group Limited for any current
tax receivable and deferred tax assets relating to unused tax losses or unused tax credits that
are transferred to Pinnacle Investment Management Group Limited under the tax consolidation
legislation. The funding amounts are determined by reference to the amounts recognised in the
wholly-owned entities’ financial statements.
The amounts receivable/payable under the tax funding agreement are due upon receipt of the
funding advice from the head entity. The head entity may also require payment of interim funding
amounts to assist with its obligations to pay tax instalments.
iii. Share based payments
The grant by the Parent Entity of options over its equity instruments to the employees of subsidiaries
in the Group 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 investments in subsidiaries, with a corresponding credit to share based payment reserve.
bb. Government Grants
Grants from the government are recognised at their fair value where there is a reasonable assurance
that the grant will be received and the group will comply with all attached conditions. Grants
related to income are presented as part of profit or loss, deducted in reporting the related expense.
Government Jobkeeper assistance of $564,000 is included in the ‘employee benefits expense’ line
item as an offset. There are no unfulfilled conditions or other contingencies attaching to these
grants. The Group did not benefit directly from any other forms of government assistance.
09.
Directors’
Declaration
In the directors’ opinion:
a) the financial statements and notes set out on pages 72 to 136 are in accordance with the
Corporations Act, including:
(i) complying with Accounting Standards, the Corporations Regulations 2001 and other
mandatory professional reporting requirements, and
(ii) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2020
and of its performance for the year ended on that date, and
b) there are reasonable grounds to believe that Pinnacle Investment Management Group Limited will
be able to pay its debts as and when they become due and payable.
Note 32(a) 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 by the Managing Director and Chief Financial Officer
required by section 295A of the Corporations Act.
This declaration is made in accordance with a resolution of the directors.
136 Pinnacle Investment Management
2020 Annual Report 137
Alan Watson, Chair
Sydney, 4 August 2020
10.
Independent
Auditor’s
Report
138 Pinnacle Investment Management
Independent auditor’s report
To the members of Pinnacle Investment Management Group Limited
Report on the audit of the financial report
Our opinion
In our opinion:
The accompanying financial report of Pinnacle Investment Management Group Limited (the Company)
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 June 2020 and of its financial
performance for the year then ended
(b) complying with Australian Accounting Standards and the Corporations Regulations 2001.
What we have audited
The Group financial report comprises:
●
●
●
●
●
●
●
the consolidated statement of financial position as at 30 June 2020
the consolidated statement of comprehensive income for the year then ended
the consolidated statement of profit or loss for the year then ended
the consolidated statement of changes in equity for the year then ended
the consolidated statement of cash flows for the year then ended
the notes to the consolidated financial statements, which include a summary of significant
accounting policies
the directors’ declaration.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s responsibilities for the audit of the financial report
section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Independence
We are independent of the Group in accordance with the auditor independence requirements of the
Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical
Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence
Standards) (the Code) that are relevant to our audit of the financial report in Australia. We have also
fulfilled our other ethical responsibilities in accordance with the Code.
PricewaterhouseCoopers, ABN 52 780 433 757
480 Queen Street, BRISBANE QLD 4000, GPO Box 150, BRISBANE QLD 4001
T: +61 7 3257 5000, F: +61 7 3257 5999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
2020 Annual Report 139
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.
During the year, the Group held equity interests in sixteen affiliated fund managers (the Pinnacle
Affiliates or Affiliates) with differing investment styles and offerings. The Group also provides distribution
services, business support and responsible entity services to the Pinnacle Affiliates and external parties
via subsidiaries.
The Group has minority shareholdings in the Pinnacle Affiliates and has assessed them to be joint
ventures due to the requirement for unanimous decision making in relation to a number of strategic
matters contained in the shareholders agreements. The financial results of the Group include the
consolidation of subsidiaries and the share of net profit of associates and joint ventures accounted for
using the equity method for the Pinnacle Affiliates.
Materiality
● For the purpose of our audit we used overall Group materiality of $1,617 thousand which represents
approximately 5% of the Group’s profit before tax from continuing operations.
● We applied this threshold, together with qualitative considerations, to determine the scope of our audit and
the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements on the
financial report as a whole.
● We chose Group profit before tax because, in our view, it is the benchmark against which the performance of
the Group is most commonly measured.
● We utilised a 5% threshold based on our professional judgement, noting it is within the range of commonly
acceptable thresholds.
Audit scope
● Our audit focused on where the Group made subjective judgements; for example, significant accounting
estimates involving assumptions and inherently uncertain future events.
● We audited the most financially significant subsidiaries within the Group, being Pinnacle Investment
Management Limited, Pinnacle Funds Services Limited and Pinnacle RE Services Limited. We performed
targeted audit procedures over the remaining significant balances, and we performed further audit
procedures over the consolidation process.
● We, or component auditors, performed an audit of each of the financially significant Pinnacle Affiliates on
a standalone basis. In establishing the overall approach to the Group audit, we considered the type of work
that needed to be performed by us, as the Group’s auditor, or by the component auditors operating under
instructions.
● We audited the Group’s equity accounting for the Pinnacle Affiliates, including the Group’s share of net
profit of jointly controlled entities accounted for using the equity method and the Group’s investments
accounted for using the equity method recognised in the Group financial statements.
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 year. 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. We communicated the key audit matters to the Audit and Risk
Committee.
Key audit matter
How our audit addressed the key audit matter
Share of net profit of associates and joint
ventures accounting for use the equity method
(Refer to note 23(d) - $37,953k)
Pinnacle Affiliates’ funds under management have the
potential to earn performance fees, based on an
assessment of performance relative to benchmarks.
These benchmarks are agreed between the Affiliates
and their clients and set out in relevant Product
Offering Documents.
This was a k ey audit matter because the performance
fee revenues recognised by Pinnacle Affiliates are
material in nature, and the variability of returns can be
significant depending on the performance relative to
contractual benchmarks.
The performance fee revenue has a significant impact
on the Group’s share of net profits of jointly controlled
entities accounted using the equity method.
We performed the following procedures, amongst
others:
● For a sample of performance fees recorded we
obtained the relevant source documents and :
o Read the source documents to develop an
understanding of the contractual arrangements.
o Assessed whether the calculation methodologies
used by management were in accordance with the
contractual arrangements, the Group accounting
policy, and the requirements of Australian
Accounting Standards.
o Compared the hurdle rates and any accumulated
deficiency clauses to the relevant contracts.
o Obtained evidence from relevant external sources
to assess k ey inputs into the calculations (for
example net asset values and fund returns).
o Reperformed the performance fee calculation
with reference to the k ey inputs used in the
calculations.
o Traced the performance fee revenue to
subsequent cash receipts in the bank statements.
140 Pinnacle Investment Management
2020 Annual Report 141
Assessment of carrying amount of
investments in Affiliates
(Refer to note 23(a) Investments accounted for using
the equity method - Carrying amounts) $161,867k
In accordance with Accounting Standard AASB 136
Impairment of Assets (AASB 136), interests in
associates and joint ventures need to be assessed for
indicators of impairment at the reporting date. If
indicators of impairment exist at a cash generating unit
(CGU), the recoverable amount for each CGU needs to
be estimated and compared to the carrying value.
These assessments involve significant judgements in
estimating future cash flows and the rate at which they
are discounted, and in evaluating fair value less costs of
disposal.
The Group has identified each Affiliate as a separate
CGU.
The impacts of the COVID-19 pandemic resulted in a
number of these Affiliates showing an indicator of
impairment at 30 June 2020.
This was a key audit matter given the extent of
judgement involved, particularly with regard to the
estimation uncertainty caused by the COVID-19
pandemic, and the financial significance of the carrying
values on the balance sheet.
We evaluated the Group’s methodologies used to
estimate the recoverable amounts of material interests
in associates and joint ventures.
For the samples selected, based on their financial
significance, and/or associated estimation uncertainty
of future cash flows, our procedures included:
● evaluating the Group’s assessments of whether
there were any indicators of impairment for each of
the CGUs
● evaluating the appropriateness of the methodology,
and reasonableness of the k ey assumptions
adopted in calculating the recoverable amount
● comparing previous profit before tax forecasts to
actual results to assess the ability of the Group to
forecast accurately
●
together with our valuations team experts, we
assessed if the discount rate assumption was
reasonable by comparing it to market data,
comparable companies, and other industry
research
● assessed the Group’s consideration of the
sensitivity to a change in k ey assumptions that
either individually or collectively would be required
for CGUs to be impaired and considered the
lik elihood of such a movement in those k ey
assumptions arising
● assessing certain underlying data used in
determining the carrying value and recoverable
amount of the relevant samples, and
● testing the mathematical accuracy of the Group’s
discounted cashflow models which were used to
determine the recoverable amount of the CGU.
We assessed the reasonableness of the Group’s
disclosures in the financial report in light of 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 June 2020, 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 accordingly we do not
express any form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
report or our knowledge obtained in the audit, or otherwise appears to be materially misstated.
If, based on the work we have performed on the other information that we obtained prior to the date of
this auditor’s report, we conclude that there is a material misstatement of this other information, we are
required to report that fact. We have nothing to report in this regard.
Responsibilities of the directors for the financial report
The directors of the Company are responsible for the preparation of the financial report that gives a true
and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for
such internal control as the directors determine is necessary to enable the preparation of the financial
report that gives a true and fair view and is free from material misstatement, whether due to fraud or
error.
In preparing the financial report, the directors are responsible for assessing the ability of the Group to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes
our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit
conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material if,
individually or in the aggregate, they could reasonably be expected to influence the economic decisions of
users taken on the basis of the financial report.
A further description of our responsibilities for the audit of the financial report is located at the Auditing
and Assurance Standards Board website at:
https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf
This description forms part of our auditor's report.
Report on the remuneration report
Our opinion on the remuneration report
We have audited the remuneration report included in pages 37 to 55 of the directors’ report for the year
ended 30 June 2020.
In our opinion, the remuneration report of Pinnacle Investment Management Group Limited for the year
ended 30 June 2020 complies with section 300A of the Corporations Act 2001.
142 Pinnacle Investment Management
2020 Annual Report 143
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the remuneration
report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an
opinion on the remuneration report, based on our audit conducted in accordance with Australian
Auditing Standards.
PricewaterhouseCoopers
Ben Woodbridge
Partner
Brisbane
4 August 2020
144 Pinnacle Investment Management
2020 Annual Report 145
11.
Shareholder
Information
The shareholder information set out below is correct as at 31 July 2020.
Shares on issue
Distribution of securities
Range
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 – 9,999,999,999
Rounding
Total
Unmarketable parcels
No. of shareholders
No. of shares
% of issued shares
1,063
1,522
526
540
128
492,687
4,219,344
3,833,985
14,513,797
162,913,626
0.26
2.27
2.06
7.80
87.60
0.01
3,779
185,973,439
100.00
Twenty largest shareholders (as at 31 July 2020)
Rank
Name
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
HSBC Custody Nominees (Australia) Limited
J P Morgan Nominees Australia Limited
Macoun Generation Z Pty Ltd
Macoun Superannuation Pty Ltd
Andrew Chambers & Fleur Chambers
National Nominees Limited
Kinauld Pty Ltd
Mr Alexander William Macdonald
Mr Adrian Whittingham
BNP Paribas Nominees Pty Ltd
Warragai Investments Pty Ltd
Usinoz Pty Ltd
AJF Squared Pty Ltd
Earlston Nominees Pty Ltd
Mr David Francis Cleary
Mr David Noel Groth
BNP Paribas Noms Pty Ltd
Citicorp Nominees Pty Limited
Mark Cormack and Melanie Cormack
20
Mr Barry Athol Bicknell
Total
Total remaining holders balance
No. of shares
26,726,743
21,391,885
20,367,506
6,027,999
5,603,614
5,038,979
4,720,000
4,670,090
4,403,614
3,101,724
3,100,000
3,061,827
3,037,609
3,000,000
2,907,149
2,811,224
1,987,953
1,951,003
1,585,435
1,175,000
% of issued
shares
14.37
11.50
10.95
3.24
3.01
2.71
2.54
2.51
2.37
1.67
1.67
1.65
1.63
1.61
1.56
1.51
1.07
1.05
0.85
0.63
126,669,354
59,304,085
68.11%
31.89%
Minimum $500 parcel at $5.05 per unit
100
172
3,235
accordance with section 671B of the Corporations Act are:
Minimum parcel size
No. of shareholders
No. of shares
The names of the shareholders who have notified the Company of a substantial holding in
146 Pinnacle Investment Management
Substantial shareholder
Ian Macoun and associates
Steve Wilson and associates
FIL Limited and associates
No. of shares
% of shares
27,276,077
21,350,000
13,303,197
14.67%
11.48%
7.15%
2020 Annual Report 147
Voting rights
Upon a poll each share shall have one vote.
Options and performance rights on issue
Distribution of securities
Options
There are 1,929,365 options on issue as at 31 July 2020.
The options are held by:
A&T Structured Finance Services Pty Ltd as trustee for the Pinnacle Investment Management Group
Employee Option Share Plan;
Redback Capital Pty Ltd;
Headlands Nominees Pty Ltd;
Roys Peak Pty Ltd;
Fist Family Pty Ltd;
Kyle Macintyre and Daniella Macintyre;
Alison Maschmeyer;
Ben Cossey; and
Nick Keem.
The options are not listed.
Performance rights
There are 18,838 performance rights on issue as at 3 August 2020.
The performance rights are held by:
Alan Watson
Dab Hand Pty Ltd
Gerard Bradley
Voting rights
There are no voting rights attaching to the options or performance rights.
148 Pinnacle Investment Management
2020 Annual Report 149
12.
Corporate
Directory
Pinnacle Investment Management Group Limited
Incorporated in Queensland on 23 April 2002
ABN
22 100 325 184
Directors
Alan Watson
Chair
Ian Macoun
Managing Director (from 17 August 2016; Executive
Director from 25 August 2016)
Deborah Beale AM (appointed 1 September 2016)
Lorraine Berends (appointed 1 September 2018)
Gerard Bradley (appointed 1 September 2016)
Andrew Chambers (appointed 1 September 2016)
Adrian Whittingham (appointed 1 September 2016)
General Counsel and Company
Secretary
Calvin Kwok
Chief Financial and Chief
Operating Officer
Alex Ihlenfeldt*
Share Registry
Computershare Investor Services Pty Limited
Level 1, 200 Mary Street
Brisbane QLD 4000
Telephone 1300 850 505
*Dan Longan was appointed as the Chief Financial Officer
of the Company on 6 July 2020. Alex Ihlenfeldt remains
the Chief Operating Officer.
ASX Code
PNI
Shares are listed on the Australian Securities Exchange
Bankers
Commonwealth Bank of Australia
240 Queen Street
Brisbane QLD 4000
Auditor
PricewaterhouseCoopers
480 Queen Street
Brisbane QLD 4000
Australia
Brisbane
Registered Office
Level 19, 307 Queen Street
Brisbane QLD 4000
Telephone 1300 651 577
Sydney
Level 35, 60 Margaret Street
Sydney NSW 2000
Telephone 1300 651 577
Melbourne
Level 18, 567 Collins Street
Melbourne VIC 3000
United Kingdom
London
7th Floor Dashwood House
69 Old Broad Street
London RC2M 1OS
Website address
www.pinnacleinvestment.com
150 Pinnacle Investment Management
2020 Annual Report 151
152 Pinnacle Investment Management