Contents ..................................................................................................................................... 1
Pinnacle Glossary ....................................................................................................................... 3
Chair’s Letter .............................................................................................................................. 6
Overview, Operating and Financial Report ................................................................................ 8
Nature of operations and principal activities ..................................................................................... 9
Contents
Key financial highlights ..................................................................................................................... 10
Pinnacle Affiliates .............................................................................................................................. 13
Business strategies and prospects for future financial years ........................................................... 19
Economic conditions and material business risks ............................................................................. 19
Review of Group Results ................................................................................................................... 20
Statement of Comprehensive Income .............................................................................................. 20
Consolidated Statement of Financial Position .................................................................................. 21
Corporate Sustainability .......................................................................................................... 22
Directors’ Profiles ..................................................................................................................... 23
Directors’ Report ...................................................................................................................... 27
Remuneration Report ....................................................................................................................... 29
Letter from the Chair of the Remuneration and Nominations Committee ...................................... 30
Key Management Personnel ............................................................................................................. 32
Role of Remuneration and Nominations Committee ....................................................................... 33
Executive remuneration policy and framework for the Company ................................................... 34
Links between performance and outcomes ..................................................................................... 38
Details of Executive Key Management Personnel remuneration ..................................................... 39
Executive service agreements........................................................................................................... 41
Non-executive director remuneration .............................................................................................. 44
Share-based payment compensation ............................................................................................... 46
Annual Report
1
Equity instrument disclosures relating to Key Management Personnel .......................................... 47
Loans to Key Management Personnel .............................................................................................. 48
Equity Capital .................................................................................................................................... 49
Auditor’s Independence Declaration ....................................................................................... 53
Financial Statements ................................................................................................................ 55
Consolidated statement of profit or loss .......................................................................................... 56
Consolidated statement of comprehensive income ......................................................................... 57
Consolidated statement of financial position ................................................................................... 58
Consolidated statement of changes in equity .................................................................................. 59
Consolidated statement of cash flows .............................................................................................. 60
Notes to the consolidated financial statements ............................................................................... 61
Directors’ Declaration ............................................................................................................ 117
Independent Auditor's Report ............................................................................................... 118
Shareholder Information ....................................................................................................... 125
Corporate Directory ............................................................................................................... 129
Annual Report
2
01
Pinnacle
Glossary
Annual Report
3
Term
Meaning
2020 Annual Report
the Group’s annual report for the 2020 financial year.
2020 financial year
the period 1 July 2019 to 30 June 2020.
2021 Annual Report
this document.
2021 Financial Year
the period 1 July 2020 to 30 June 2021.
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
Antipodes
ASX Principles
Auditor
Board
Board Committees
Chair
Company
Aikya Investment Management Limited.
Antipodes Partners Limited.
the Corporate Governance Principles and Recommendations 3rdEdition, published by the ASX
Corporate Governance Council.
PricewaterhouseCoopers.
the Board of Directors.
the Audit, Compliance and Risk Management Committee and the Remuneration and Nominations
Committee.
Alan Watson, the Chair of the Board.
Pinnacle Investment Management Group Limited.
Company Secretary
Calvin Kwok, who held the position during the 2021 financial year.
Coolabah or CCI
Coolabah Capital Investments Pty Ltd.
Corporations Act
Corporations Act 2001 (Cth).
Deutsche Australia
EOSP
Firetrail
Foundation
FUM
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.
Pinnacle Employee Option Share Plan.
Firetrail Investments Pty Limited.
the Pinnacle Charitable Foundation.
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 32 of the 2021 Annual Report.
LTI
Longwave
long-term incentives offered to individuals who are employees of the Group.
Longwave Capital Partners Pty Limited.
Managing Director
Ian Macoun, who was appointed as an executive director on 25 August 2016.
Metrics or MCP
Metrics Credit Partners Pty Limited.
New Loans
is a reference to the loans more fully described at page 48.
net profit after tax.
net profit before tax.
net tangible assets.
Omega Global Investors Pty Limited.
NPAT
NPBT
NTA
Omega
Annual Report
4
Term
Palisade
PIML
Meaning
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.
PIML LTI Scheme
the long-term incentive scheme described on page 37 of the 2021 Annual Report.
Pinnacle or PNI
Pinnacle Investment Management Group Limited.
Pinnacle Omnibus Plan
the Pinnacle Omnibus Incentive Plan described on page 37 of the 2021 Annual Report.
Plato
PL8
Plato Investment Management Limited.
Plato Income Maximiser Limited (ASX: PL8)
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
Sellers
Solaris
Spheria
STI
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.
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 offered to individuals who are employees of the Group.
Two Trees
Two Trees Investment Management Pty Limited.
Annual Report
5
02
Dear Fellow Shareholders,
I am pleased to present Pinnacle's Annual Report for the
financial year ended 30 June 2021.
Chair’s Letter
client outcomes with performance. We have a healthy
mixture of base fees and performance fees, which we
believe yields optimal overall business outcomes –
ample consistent base fee revenues whilst maximising
average annual revenue by a diversified range of
substantial potential performance fees. We are
encouraged by the balance and diversity of our fee
structures and asset classes at this stage of our
development and growth.
Your Company has concluded a successful year,
delivering record profits, record funds inflows – both
institutional and retail – together with an enhanced,
more robust platform, well positioned for further
growth. We have commenced the 2022 financial year
with by far our highest level of Funds Under
Management ever achieved, and distribution and
infrastructure capabilities to allow for substantial
further growth, both in Australia and overseas.
Our distribution force continues to excel, both at home
and overseas. We delivered record inflows during the
2021 financial year across domestic institutional, retail
and offshore. This is despite the continued and well-
understood challenges in the Australian institutional
market, which we expect to continue into FY22. We are
encouraged particularly by the momentum we are
building in offshore markets, where the opportunity for
further growth in Funds Under Management is
significant.
In summary, during the 2021 financial year, Pinnacle
produced:
• NPAT attributable to shareholders of $67.0m
(up 108% from $32.2m in the 2020 financial
year), representing basic earnings per share of
38.2 cents per share (up 103% from 18.8 cents
in the 2020 financial year);
•
•
•
Aggregate Affiliate revenue (at 100%) growth
of 43% to $415.5m (including performance
fees of $86.2m, and Coolabah revenues for the
full financial year);
Growth in our share of aggregate Affiliate
NPAT of 75% to $66.4m:
Growth in Funds Under Management of 52.3%
to $89.4 billion at 30 June 2021, up from $58.7
billion at 30 June 2020;
• Net inflows of $16.7 billion, of which retail was
$4.5 billion;
Funds Under Management commenced the 2021
financial year at $58.7 billion. Net inflows of $16.7
billion were achieved during the year and gains from
market movements and investment performance
totalled $14.0 billion, resulting in Funds Under
Management at the start of the 2022 financial year of
$89.4 billion. Notably, this is in excess of 20% higher
than our average Funds Under Management through
the 2021 financial year.
Since 2016 we have pursued a strategy of diversification
of our business and we believe that this has led to a
platform that is flexible, strong and sufficiently
adaptable to pursue both organic and inorganic growth,
domestically and offshore. We do not know what
opportunities will present themselves to us, or when;
however, we will continue to apply our rigorous criteria
to any such opportunities. Nonetheless, our business
enters FY22 in excellent shape as we progress to the
next stage of our growth.
During the 2021 financial year, seven Affiliates delivered
performance fees totalling $86.2 million, of which
Pinnacle’s share, after tax, was $19.5 million. This is a
significant increase on 2020, in which five Affiliates
delivered performance fees totalling $26.7 million of
which Pinnacle’s share, after tax, was $6.6 million. We
continue to pursue a deliberate strategy to seek
performance fee structures as an alternative to higher
base fees – they are direct substitutes and a means of
maximising average annual revenue potential,
particularly in capacity-constrained strategies and/or
strategies in extremely high demand, and further align
Annual Report
6
•
A strong and flexible balance sheet, with FY21
year end net financial assets of $55.0 million,
comprising cash and Principal Investments of
$155.0 million, and debt of $100.0 million.
In recognition of these strong financial results the Board
has declared a fully franked final dividend of 17.0 cents
per share, double the fully franked final dividend of 8.5
cents per share declared in FY20, making a fully franked
total of 28.7 cents for the full year (86% higher than
total dividends of 15.4 cents for FY20).
These results are only achievable by the combined effort
of the people of Pinnacle and all the Affiliates working
both tirelessly and symbiotically for the benefit of our
clients, and I wish to acknowledge their diligence and
commitment on behalf of all shareholders.
Further operational detail is discussed in The Operating
and Financial Report commencing on page 8, and detail
of our remuneration philosophy and outcomes are
described from page 29 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 26 October, 2021.
Yours sincerely
Finally, we wish to express our thanks to you, our
owners, for your continued support of our Company as
shareholders.
Alan Watson
4 August 2021
Annual Report
7
03
Overview,
Operating and
Financial
Report
Annual Report
8
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 in Australia and overseas.
•
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 2021 financial
year were:
Founded in 2006, Pinnacle currently consists of 16 investment
Affiliates. At 30 June 2021, the Pinnacle Affiliates collectively
managed approximately $89.4 billion in assets across a
diverse range of asset classes. Pinnacle offers its Affiliates:
•
•
developing and operating investment management
businesses; and
providing distribution services, business support
and responsible entity services to the Pinnacle
Affiliates.
The diagram below shows the Pinnacle Affiliates and
Pinnacle’s effective interest in each as at the date of this
report.
•
•
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
Annual Report
9
Key financial highlights
During the 2021 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 $89.4 billion in FUM as at 30 June 2021.
In the 2021 financial year:
Pinnacle Affiliates generated aggregate revenues (at 100%) of $415.5 million, up
42.7% from $291.1 million in the previous year. Of this, $86.2 million was
performance fees ($26.7m in the previous year).
Pinnacle generated total NPAT attributable to shareholders of $67.0 million, up
108.1% from $32.2 million in the prior year.
Pinnacle’s share of NPAT from Pinnacle Affiliates was $66.4 million, up 74.7% on the
prior year.
The table below outlines the performance of the Pinnacle Group for the 2021 and
2020 financial years:
FY2021
FY2020
Pinnacle Affiliates (100% aggregate basis)
FUM ($billion)*
89.4
58.7
Revenue ($million)
Net profit before tax
Tax expense
Net profit after tax
Pinnacle Group ($million)
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
*Non-statutory measure
415.5
245.4
(65.9)
179.5
32.5
(31.9)
66.4
67.0
-
67.0
-
67.0
38.2
38.2
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
Annual Report
10
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.
Annual Report
11
Pinnacle’s focus during
the year was on
continuing to support
each of the Pinnacle
Affiliates and assisting
them to grow their
businesses and
profitability.
Annual Report
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Pinnacle Affiliates
Pinnacle remains strongly focused on supporting each of the Pinnacle Affiliates and assisting them to grow their businesses
and profitability. Pinnacle continues to carefully invest in additional resourcing ahead of further growth, both in
distribution and in infrastructure, with a continuing focus on growing the Group's international distribution and
infrastructure capabilities. 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 2021 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 was founded in 2015 and manages global, Asian and emerging markets
equities. Its 30-strong investment team serves a global client base from offices in
Sydney and London.
Antipodes adopts a ‘pragmatic value’ style and 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.
Annual Report
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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 27 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.
Firetrail Investments
Firetrail is an investment management boutique 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, High Net Worth individuals, Financial Advisors and Retail
Investors.
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 Fund 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 and, since March
2021, investors have been able to invest in the Hyperion Global Growth
Companies Fund (Managed Fund) via the ASX (ASX:HYGG). As at 30 June 2021, the
fund has outperformed its benchmark by 12.57% (per annum, since inception,
gross of fees).
Annual Report
14
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.
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.
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.
Subsequent to 30 June 2021, Omega, Plato and Pinnacle have agreed that
Omega will integrate into Plato, as Plato continues to build-out a multi-strategy
‘quant powerhouse’.
Annual Report
15
Palisade
Palisade provides institutional and wholesale investors with access to Australian
infrastructure assets 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 2021, Funds Under Management and investor commitments
totalled approximately $3.2 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 strategies outperformed in the financial year, and the
firm saw pleasing growth in assets under management. Plato hired one of its
Women in Finance Scholarship winners during the year, following a successful
internship.
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 also being made available through a Cayman Islands vehicle
from April 2020.
Annual Report
16
Resolution Capital
Resolution Capital is a specialist global listed real assets manager, with a 26-
year investment track record. 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 securities with an emphasis on
avoiding fundamental flaws which could reasonably result in permanent
impairment of the underlying investments. All strategies managed by the firm
have outperformed their respective benchmarks since inception.
The firm continues to grow and diversify its investment and operational
capabilities. The firm recently 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 has notably grown its funds sourced from international markets.
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, Income and Long Short strategies
with after-tax investment as a specialty.
Solaris’s core strategy has outperformed the S&P/ASX 200 Index by 1.3% per
annum since inception on 9 January 2008 (to 30 June 2021). The information
ratio for the strategy is notably favourable since inception.
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.
Annual Report
17
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 a UCITS vehicle, which is
domiciled in Ireland.
Annual Report
18
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 2020 financial year,
we made a conscious decision to keep our core
capabilities well-resourced to enable us to both continue
to support the Pinnacle Affiliates and to remain well-
positioned for further growth. During the 2021 financial
year, we saw the results of this decision and the
exceptional efforts and flexibility of our people as our
business emerged from the crisis in excellent shape.
We continue to carefully invest in additional resources,
particularly in support of our international capabilities, to
enable 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,
even though this may retard our profitability somewhat in
the short-term.
Our platform is strong and sufficiently adaptable to
consider both organic and inorganic growth from a
significantly enhanced base, both domestic and offshore.
We will consider acquisitions only when we believe they
are synergistic with our existing core, will not place the
Company at risk and are both relatively low risk and offer
a high medium term return on the capital deployed.
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.
The 2020 financial year was unprecedented. The
extensive impact of the COVID-19 virus crisis, particularly
during the second half of the year, caused extreme
disruption in financial markets and the global economy
more broadly. As we entered the 2021 financial year, a
broad market recovery was already underway,
underpinned by extraordinary levels of fiscal stimulus as
governments sought to mitigate the financial impacts of
the virus and associated lockdowns.
During the 2020 financial year, the S&P/ASX 300 index fell
by 10.8%, whilst the MSCI World rose by only 0.3%; both
indices suffered precipitous falls during March 2020 and
rebounded towards the end of that financial year. During
the 2021 financial year, the S&P/ASX 300 rose by 24.7%,
whilst the MSCI World rose by 37.2%; the increase in
Funds Under Management driven by these rising markets,
as well as record inflows during the 2021 financial year,
have led to significant revenue increases in both Pinnacle
and the Affiliates.
As we have explained in the past, we have deliberately
sought to build a robust, diverse business that is able to
succeed across market cycles. The growth in size and
breadth of the Affiliate base is delivering clear benefits to
shareholders, with greater diversification across different
asset classes and investment strategies and enhanced
performance fee potential across a range of strategies
and market conditions.
Having been somewhat suppressed in the prior financial
year given the dislocation in markets, we delivered record
net inflows in the current financial year across all three
major ‘channels’ – retail, domestic institutional and
offshore, pleasingly across a range of Affiliates, further
evidencing the benefits of the diversity of our platform.
Whilst market conditions during the 2021 financial year
and to date have been supportive, we recognize that
there remains uncertainty around global economic
conditions due to, inter alia, the continuing COVID-19
crisis and continuing geopolitical tensions, any of which
could have a significant impact on wider market
conditions. We are, however, confident that our business
is in excellent shape and there is cause for optimism for
what lies ahead.
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 will continue to develop its
business model to accommodate the changing
environment within which it operates. We continue to
invest in our Legal, Risk and Compliance function, adding
onshore resources in the UK during FY21.
Annual Report
19
Review of Group Results
Total net profit after tax (NPAT) attributable to
shareholders for the 2021 financial year was $67.0
million. NPAT from continuing operations attributable to
shareholders was also $67.0 million, with discontinued
operations now concluded.
• The Group delivered a $67.0 million total NPAT
attributable to shareholders for the 2021
financial year, a 108% improvement compared
with the 2020 financial year. This was
underpinned by a 75% increase in Pinnacle’s
share of net profits from the Pinnacle Affiliates
to $66.4 million (of which $19.5 million was
Pinnacle's share of performance fees earned by
seven Affiliates during the financial year, after
tax, compared with $6.6 million in the 2020
financial year).
•
FUM increased by 52.3% to $89.4 billion in the
2021 financial year.
• Group net tangible assets have increased by
29% to $243.9 million.
• Basic earnings per share attributable to
shareholders of 38.2 cents have increased by
103% from 18.8 cents.
• The Board has declared a fully franked final
dividend of 17 cents per share payable on 17
September 2021.
Statement of Comprehensive
Income
The following commentary provides an analysis of
revenues and expenses for the 2021 financial year in
comparison to the prior financial year.
During the 2021 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
Revenue from continuing operations increased $10.1
million to $32.5 million, from $21.1 million in the prior
financial year. Shareholders will be aware that there is
typically a 'skew' in revenues towards the second half of
the financial year, when certain 'performance-based'
distribution fee revenues crystallize. Revenues were
$14.4 million in the first half of the financial year and
$18.1 million in the second half.
We remind shareholders that, due to the decline in the
market in the second half of the 2020 financial year and
the impact on net inflows during March and April 2020,
these performance-based fees were lower than might
otherwise have been expected and there was no such
skew in revenues during the prior financial year (revenues
were $11.0 million in the second half of the 2020 financial
year, compared with $11.4 million in the 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
This reflects the mark-to-market gains or losses on the
Group’s Principal Investments.
During the year to 30 June 2021, the Group made a net
$2.2 million gain on its Principal Investments, on a mark-
to-market basis. This gain consists of distribution and
dividends received of $2.3 million, and realized and
unrealized losses of $0.1 million. As shareholders will be
aware, we substantially hedge our equity market
exposure on these investments.
Expenses from Continuing Operations
During FY21, the Group has continued to carefully add
additional resources to support future growth. Employee
benefits expense increased by $0.9 million to $14.5
million.
Shareholders will recall that there were significant
reductions to STI in the 2020 financial year, given that
results for that year fell short of our original expectations.
In the 2021 financial year, STI increased by $4.5 million to
$7.4 million, representing a more normal level of STI,
recognizing the outstanding contribution our people have
made this year and the excellent results they have
delivered.
Share of net profit of jointly controlled
entities
Share of net profit of jointly controlled entities accounted
for using the equity method relates to the Group’s share
of the profits of the Pinnacle Affiliates which are equity
accounted. Pinnacle’s share of the net profits after tax
from Pinnacle Affiliates for the 2021 financial year was
$66.4 million (of which $19.5 million was Pinnacle's share
of performance fees earned by seven Affiliates during the
financial year, after tax, compared with $6.6 million in the
2020 financial year); up 75% or $28.4 million on the prior
financial year. Underlying Base management fees within
the Pinnacle Affiliates also increased 25% on the prior
financial year.
Pinnacle Affiliates’ FUM, which underpins the share of
Pinnacle Affiliates’ profits, increased by 52.3% to $89.4
billion in the 2021 financial year. We remind shareholders
that a significant proportion of our Affiliates' FUM is
linked to movements in equity markets, which rallied
strongly during the year, with the S&P/ASX 300 up by
24.7% and the MSCI World up by 37.2%.
Further information is provided in note 23 to the financial
statements.
Annual Report
20
Discontinued Operations
Discontinued operations have now concluded and made
no contribution to the Group’s result in the current
financial year.
Consolidated Statement of
Financial Position
The following commentary provides an analysis of assets
and liabilities for the 2021 financial year.
Cash. Cash and cash equivalents increased by $80.1
million to $96.1 million at year-end compared to $16.1
million at the end of the prior year. Cash inflows from
operating activities were $33.0 million, which included
dividends received from Affiliates of $49.1 million,
compared with $33.0 million in the prior year. In June
2021, we increased our facility with the Commonwealth
Bank of Australia (CBA) by $70.0 million, which was
drawn down on 30 June 2021. Subsequent to the year
end, we have invested the additional cash in liquid funds
managed by our Affiliates.
Further information is provided at notes 6 and 25.
Trade and other receivables. The value of trade and
other receivables increased by $1.0 million during the
year, given the 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
$58.9 million, an increase of $24.9 million on the prior
year. 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 $58.9 million, $56.5
million is held in strategies managed by Pinnacle
Affiliates. The Group has substantially 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
$1.7 million to $2.8 million at year end. This balance
includes loans to entities under joint control. There were
advances to Affiliate executives during the current
financial year to assist with further equity recycling,
whilst a working capital loan provided to one of the
Pinnacle Affiliates was converted to equity during the
year. 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 Affiliates. This increased by $25.1 million
during the period to $187.0 million. The change is
attributable to the equity accounted profits of $66.4
million from Pinnacle Affiliates, less the dividends
received from the Pinnacle Affiliates of $49.1 million,
plus additional net capital contributed to the Pinnacle
Affiliates during the year of $9.1 million, less impairment
of $1.4 million (where loan funding is provided to
Affiliates, equity-accounted losses are treated as
‘impairments’ to these loan balances, which reverse
when Affiliates reach profitability). Further information
is provided at note 23 of the financial statements.
Intangible assets decreased by $0.9 million. Plato, 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. The costs
associated with the acquisition of that contract have
been capitalized 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 $7.7 million to
$17.5 million, which includes the final $5.0 million
additional consideration payable relating to the Group’s
acquisition of an interest in Coolabah, given that the
agreed profitability milestones were reached as at 30
June 2021. The balance also includes accrued incentives
which, as set out previously, are significantly higher than
in the prior year. Further information is provided at note
14 of the financial statements.
Provisions. The value of current and non-current
provisions decreased by $4.6 million compared with the
prior year. $5.0 million payable in relation to the
Group’s acquisition of an interest in Coolabah has been
transferred to trade and other payables, given that the
agreed profitability milestones were reached as at 30
June 2021. In the prior year, the amount was held as a
provision as the Group assessed that the profitability
milestones were likely to be reached but they had not
been at that time. The balance relates directly to the
increase in staff costs. Further information is provided at
note 15 of the financial statements.
Lease liabilities decreased by $0.6 million and Right-of-
use assets decreased by $0.9 million compared with the
prior year. The Group leases offices in Brisbane and
Sydney. During the current financial year, the Group
reduced its leased space in Sydney with a resulting
reduction in both the associated asset and liability.
Further information is provided at note 12.
Borrowings increased to $100.0m. The Group secured a
$30.0 million Loan Facility with the CBA during the prior
financial year, which was fully drawn as at 30 June 2020
to fund the acquisition of a 25% interest in Coolabah
Capital Investments Pty Ltd. During the current year, the
Group has extended this facility by a further $30.0
million with an additional $40.0 million extension as
additional ‘dry powder’. The facility was drawn down in
full on 30 June 2021. Subsequent to the year end, we
have invested the additional cash in liquid funds
managed by our Affiliates.
Further information is provided at note 19.
Annual Report
21
04
Corporate
Sustainability
We are focused on continuous improvement, striving to do better by
building a long-term, sustainable firm that focuses on our
employees, customers and shareholders, as well as the communities
in which we engage.
Further information is set out in our Corporate Sustainability Report,
which can be viewed at
https://pinnacleinvestment.com/sustainability-report/.
Annual Report
22
05
Directors’
Profiles
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 and an independent non-executive director of Australis Oil and Gas, listed on ASX.
ASX Listed Company Directorships held in
last 3 years (current & recent):
Interests in shares and options
159,181 ordinary shares in the Company
Director of Australis Oil & Gas
Annual Report
23
Ian Macoun
(Managing Director) CFA, B Com, MFM, Dip FinSer (FP), FCPA, FAICD
Mr Macoun was appointed 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 PIML 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 (QIC)- 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)
None
Interests in shares and options
18,276,077 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.
Ms Beale is also the Chair of the Melbourne Convention Bureau and a director of Fed Square Pty Ltd,
Visit Victoria and The Production Company.
ASX Listed Company Directorships held in
last 3 years (current & recent)
Interests in shares and options
118,710 ordinary shares in the Company
None
Annual Report
24
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 the CIMA Society 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
25,000 ordinary shares in the Company
Antipodes Global Investment Company Limited
Plato Income Maximiser Limited
Spheria Emerging Companies Limited
Hearts and Minds Investments Limited
Gerard Bradley AO
(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
72,177 ordinary shares in the Company
Star Entertainment Group Limited
Annual Report
25
Andrew Chambers
(Executive Director) MSc, B Arts (Hons), Grad Dip App Fin
Mr Chambers was appointed Executive Director of the Company on 1 September 2016 and has been
a senior executive with PIML 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
5,303,614 ordinary shares in the Company
None
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
3,103,614 ordinary shares in the Company
Spheria Emerging Companies Limited
Annual Report
26
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 2021.
Directors
The directors of the Company during the whole of the financial year and up to the date of this report were:
Mr A Watson
Mr I Macoun
Ms D Beale AM
Ms L Berends
Mr G Bradley AO
Mr A Chambers
Mr A Whittingham
Information on the qualifications, experience and responsibilities of the directors is included in the directors’ profiles on
pages 23 to 26 of the 2021 Annual Report.
Annual Report
27
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
Dividends
2021
Cents
38.2
36.5
38.2
36.5
2020
Cents
18.9
18.0
18.8
17.9
In the 2021 financial year, the following dividends were paid:
• a fully franked final dividend of 8.5 cents per share on 11 September 2020.
• a fully franked interim dividend of 11.7 cents per share on 19 March 2021.
Since the end of the financial year, the Company has declared:
• a fully franked final dividend of 17 cents per share, to be paid on 17 September 2021.
Total dividends declared in respect of the FY21 financial year were 28.7 cents per share (2020: 15.4 cents per share).
Operating and Financial Review
The Operating and Financial Review can be found at pages 8 to 21 of the 2021 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 102, 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:
•
•
•
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.
Annual Report
28
Remuneration Report
The Group’s 2021 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.
2.
3.
4.
5.
6.
7.
8.
9.
Letter from the Chair of the Remuneration and Nominations Committee
Key Management Personnel
Role of Remuneration and Nominations Committee
Executive remuneration policy and framework for the Company
Links between performance and outcomes
Details of Executive Key Management Personnel remuneration
Executive service agreements
Non-executive director remuneration
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.
Annual Report
29
.
Letter from the Chair of the Remuneration and Nominations
1
Committee
Dear Fellow Shareholders
In presenting the Remuneration Report for the year ended 30 June 2021 I would like to begin by reiterating the vital
importance of outstanding people both in Pinnacle and in the Affiliates, especially given the ongoing challenges this year of
the COVID-19 pandemic.
Our people continued to demonstrate resilience, dedication, and flexibility in investing significant effort to achieve strong
commercial outcomes for the business during the past year. Growth in both responsibility and role scope occurred in various
areas as employees adapted and responded to meet both client and company needs. Their efforts and dedication to our
organisation are to be commended.
We continue to recognise the importance of attracting and retaining top talent within Pinnacle and the Affiliates. This
includes ensuring all behaviours and interests are aligned with our values and those of our clients and shareholders. The
focus is on empowering our employees, fostering a high-performance culture, and building leadership capability and
business model resilience in a flexible and entrepreneurial environment.
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.
Our remuneration system requires a combination of both quantitative and qualitative criteria be assessed to determine
appropriate remuneration outcomes. Performance is evaluated against both role specific and Pinnacle wide key performance
indicators, the latter which reflect our Purpose and Values. Quantitative factors such as profitability, revenue growth, cost
control and net sales are all vitally important. Non-quantifiable factors such as team effort, consideration of Pinnacle’s
Purpose and Values, flexibility, work ethic, innovation, fostering risk awareness and personal contribution to a positive work
environment are equally valuable and must also be taken into consideration. Preserving our flexible scheme in rewarding
employees, the weighting of each attribute may differ depending on role.
Consistent with previous years, STI amounts are determined 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. Given our strong
results, in general, we are awarding 100% of target maximum this year. Our senior executives continue to have a significant
exposure to Pinnacle equity, further aligning employee and shareholder interests. LTI awards have also been proposed in
circumstances where there has been a large increase in role responsibility.
Each year we report to shareholders on the key quantifiable factors which have been considered in determining STI grants
for the year. Our strong financial results and quantitative outcomes are discussed on page 38 of this report and I repeat the
key factors here for completeness:
•
•
•
•
•
•
growth in basic earnings per share attributable to shareholders of 102.1% in the 2021 financial year; compound
annual growth rate (CAGR) in basic earnings per share attributable to shareholders of 49.0% over the five years
to 30 June 2021
growth in total NPAT attributable to shareholders from $32.2 million in the 2020 financial year to $67.0 million in
the 2021 financial year; CAGR in total NPAT attributable to shareholders of 63.1% over the five years to 30 June
2021
increase in FUM from $58.7 billion as of 30 June 2020 to $89.4 billion as of 30 June 2021
net FUM inflows of $16.7 billion during the 2021 financial year
net retail FUM inflows of $4.5billion during the 2021 financial year
80% 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 2021
Annual Report
30
The process used to determine remuneration outcomes remains unchanged. Recommendations are put forward by the
Managing Director to the Remuneration and Nominations Committee for STI and LTI payment amounts 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 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.
Our remuneration framework supports us in rewarding and empowering employees. We remain confident that this
approach is optimised to meet business needs and we regularly review our approach to ensure continued alignment with the
Company’s strategy and growth.
We hope you find the Information set out in this letter and the Remuneration Report that follows to be instructive and helpful.
Deborah Beale AM
Chair of Remuneration and Nominations Committee
Annual Report
31
2. Key Management Personnel
This Remuneration Report provides details of the remuneration of the Key Management Personnel of the Group For the
year ended 30 June 2021. The Key Management Personnel for this period are listed in the tables below:
In accordance with the Corporations Amendment (Improving Accountability on Director and Executive Remuneration) Act
2011 (Cth), the Key Management Personnel of the Group during the year ended 30 June 2021 comprised:
• each non-executive director of the Company;
•
Ian Macoun, Andrew Chambers and Adrian Whittingham, each being executive directors of the Company;
• Dan Longan as Chief Financial Officer*
• Calvin Kwok as Chief Legal, Risk and Compliance Officer*
Executive Key Management Personnel
Name
Ian Macoun
Position
Managing Director and Executive Director
Andrew Chambers
Executive Director
Adrian Whittingham
Executive Director
Dan Longan*
Calvin Kwok*
Chief Financial Officer (from 6 July 2020)
Chief Legal, Risk and Compliance Officer (from 1 September 2020)
Alex Ihlenfeldt*
Chief Operating Officer (until 1 September 2020)
Non-Executive Key Management Personnel
Name
Alan Watson
Position
Chair
Deborah Beale AM
Non-executive Director
Lorraine Berends
Non-executive Director
Gerard Bradley AO
Non-executive Director
* Dan Longan was appointed as the Chief Financial Officer of the Company on 6 July 2020 and became a KMP from that date. Calvin Kwok became a KMP from
1 September 2020. Alex Ihlenfeldt ceased to be a KMP from 1 September 2020.
Annual Report
32
3. Role of Remuneration and Nominations Committee
The Remuneration and Nominations Committee is a committee of the Board. The committee performs its role consistent
with the overall objective of ensuring maximum shareholder benefit from the retention of a high quality, high performing
Board and executive team. Its responsibilities during the 2021 financial year 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 Board or to any relevant management
position and recommending individuals accordingly for consideration by the Board;
establishing procedures, for recommendation to the Chair, for the proper oversight of the Board and
management;
preparing, 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 Remuneration and Nominations Committee by the
Board.
During the 2021 financial year, the Remuneration and Nominations Committee received recommendations on the
remuneration for employees from the Managing Director. These recommendations were reviewed and, following
discussion, recommendations were made to the Board.
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/
Annual Report
33
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 2021 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. Section 5 of this Remuneration Report illustrates the sustained
growth in Earnings Per Share (EPS) that the Company has delivered for its shareholders over a number of years. We have
made some important changes to the hurdles in our LTI plan to further align future outcomes for employees with our
shareholders, which we explain in further detail in the sections following.
Our approach to remuneration is aligned with our vision, to enable better lives through investment excellence, and our
values. Pinnacle has a core set of KPIs, against which the performance of all employees is measured, in addition to KPIs set
at a team or individual level, to ensure that these values are embedded in the behaviours of all employees and considered
consistently as part of the remuneration process. These 'Common KPIs' are set out below:
Pinnacle Purpose and Values
Understand, and contribute strongly to Pinnacle’s Purpose and Values
Client Focus
Flexibility
Work Ethic
Innovation
Risk
Sustainability
Demonstrate commitment to and accountability for strong client service and satisfaction,
both with external clients and Affiliates through delivering on the promises we make to our
clients
Demonstrate flexibility and a preparedness to adapt to the changing needs of the Company
Demonstrate a strong personal work ethic and commitment to being highly productive at all
times
Contribute to a culture of innovation and continuous improvement by suggesting ways in
which we can enhance the manner in which we operate and interact with clients
Foster a risk aware culture in which business activity occurs within Pinnacle’s Risk
Management Framework and Risk Appetite Statement
Contribute to a culture of acting lawfully, ethically and responsibly by complying with our
legal, regulatory and ethical obligations in particular adhering to Pinnacle’s Code of Conduct
and policies relevant to your role
Contribute to an inclusive culture that enables performance and fosters collaboration,
leading to investment excellence
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.
Employees are offered a competitive base salary, which is reviewed on promotion or a substantial change in
responsibilities.
There are no guaranteed base salary increases included in any employee’s contract.
During the 2021 financial year, there were no increases in base salary for any Executive Key Management Personnel, other
than Dan Longan, who became an Executive Key Management Personnel on 6th July 2021 (Andrew Chambers and Alex
Ihlenfeldt received modest increases in the 2019 financial year; the first increases since 2015). Additionally, Alex Ihlenfeldt
and Adrian Whittingham both transitioned to part-time contracts in the 2021 financial year. The fixed remuneration of the
Managing Director, Ian Macoun remains unchanged (and has not been changed since 2015) as detailed in section 6.
Annual Report
34
Short-term incentives (STI)
STI is a discretionary ‘at risk’ cash incentive payment which is paid to employees on an annual basis and in accordance with
remuneration policies and the terms and conditions of employment.
The Remuneration and Nominations Committee is responsible for reviewing recommendations from the Managing
Director for STI and recommending them to the Board for approval.
All executives have an annual ‘maximum’ STI expectation (up to, but not exceeding, 100% of their base salaries, in some
cases) and, if their personal performance is strong, their work unit delivers on its key objectives and overall business
performance meets or exceeds our objectives, then they should receive that expectation. We are clear that ‘results matter’
in determining remuneration, both at an individual and overall business level, and we have regard to performance against
each of the 'Pinnacle-wide KPIs' in determining STI, ensuring that all employees exhibit behaviours aligned with our values,
together with individual performance. 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. During the prior financial year, results fell below our expectations and, even though this was due to
circumstances largely outside of our control, it is important that the remuneration of our people reflects this, and
reductions were therefore made to the ‘maximum STI’ people were eligible to receive in that year. We must always strike a
balance between rewarding individual excellence, and recognizing that we are accountable, as a group, for the overall
outcomes of the business.
As Pinnacle exceeded the original financial and FUM inflow expectations in the 2021 financial year, the maximum STI
payable to any executive was 100% of the predetermined maximum.
Performance against KPIs for the Company’s Executive Directors who received STI during the year is set out in the tables
below:
Managing Director
Key Performance Indicators
Outcomes
•
•
•
•
•
•
•
•
•
•
Growth in NPAT
Growth in basic EPS
Growth in gross FUM
Net FUM inflows
Net Retail FUM inflows
Investment performance of Affiliates
Approval rating from Affiliate MDs with respect to
Pinnacle Distribution and Infrastructure Services
Progress towards Enablement of Horizon 3
initiatives
Succession plans in place for Pinnacle and Affiliate
critical roles
•
•
•
•
•
•
•
•
•
NPAT increased by 108% to $67.0m
Target exceeded
Basic EPS increased by 103% to 38.2c per share
Target exceeded
FUM increased 52% to $89.4m
Target exceeded
Net FUM inflows of $16.7 billion
Target exceeded
Net Retail FUM inflows of 4.5 billion
Target exceeded
80% of Affiliate strategies have outperformed
their benchmark
KPI met
Client advocacy scores with respect to
Distribution and Infrastructure services from
Affiliate MDs
KPI met
KPI met
Emergency, ready now succession plans in
place, development plans in place for
successors 2-3 years out
KPI met
Drive high performance culture
•
KPI met
Financial
Growth Strategy, Client and
Investment Performance
People
Annual Report
35
Operations, Risk Management
and Regulatory
Pinnacle Purpose and Values
Client Focus
Flexibility
Work Ethic
Innovation
Risk
Sustainability
•
•
•
•
•
•
•
•
•
•
•
Enhance operational effectiveness
No significant regulatory issues in AU, EU, USA
Protect and enhance the reputation of Pinnacle and
promote a culture of risk management and
disclosure
Understand, and contribute strongly to Pinnacle’s
Purpose and Values
Demonstrate commitment to and accountability for
strong client service and satisfaction, both with
external clients and Affiliates, through delivering on
the promises we make to our clients
Demonstrate flexibility and a preparedness to adapt
to the changing needs of the Company
Demonstrate a strong personal work ethic and
commitment to being highly productive at all times
Contribute to a culture of innovation and continuous
improvement by suggesting ways in which we can
enhance the manner in which we operate and
interact with clients
Foster a risk aware culture in which business activity
occurs within Pinnacle’s Risk Management
Framework and Risk Appetite Statement
Contribute to a culture of acting lawfully, ethically
and responsibly by complying with our legal,
regulatory and ethical obligations in particular
adhering to Pinnacle’s Code of Conduct and policies
relevant to your role
Contribute to an inclusive culture that enables
performance and fosters collaboration, leading to
investment excellence
•
•
•
•
•
•
•
•
KPI met
KPI met
KPI met
KPI met
KPI met
KPI met
KPI exceeded
KPI met
•
KPI met
•
KPI met
Executive Director, Institutional
and International Distribution
Key Performance Indicators
Outcomes
Financial
People
Pinnacle Purpose and Values
Client Focus
Flexibility
Work Ethic
Innovation
Risk
Sustainability
•
•
•
•
•
•
•
•
•
•
Institutional net inflows (including international),
with particular reference to the Contained Annual
Revenue of net inflows (FUM x Fee rate)
Drive high performance culture
Understand, and contribute strongly to Pinnacle’s
Purpose and Values
Demonstrate commitment to and accountability for
strong client service and satisfaction, both with
external clients and Affiliates, through delivering on
the promises we make to our clients
Demonstrate flexibility and a preparedness to adapt
to the changing needs of the Company
Demonstrate a strong personal work ethic and
commitment to being highly productive at all times
Contribute to a culture of innovation and continuous
improvement by suggesting ways in which we can
enhance the manner in which we operate and
interact with clients
Foster a risk aware culture in which business activity
occurs within Pinnacle’s Risk Management
Framework and Risk Appetite Statement
Contribute to a culture of acting lawfully, ethically
and responsibly by complying with our legal,
regulatory and ethical obligations in particular
adhering to Pinnacle’s Code of Conduct and policies
relevant to your role
Contribute to an inclusive culture that enables
performance and fosters collaboration, leading to
investment excellence
•
•
•
Net institutional inflows $12.2 billion
Inflows & Revenue targets exceeded
KPI met
KPI met
•
KPI met
•
•
•
KPI met
KPI exceeded
KPI met
•
KPI met
•
KPI met
Annual Report
36
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 employees 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 the 22 August 2018, the Board approved the Pinnacle Omnibus Incentive Plan, which constitutes a set of LTI
arrangements that provide for the ability to offer options, performance rights and loan funded shares to employees.
Executives will principally be offered loan funded ordinary shares in the Company, whereby the Company will provide
limited recourse loans to executives to acquire shares at their current market value at the time of grant. Shares issued
prior to the current financial year only vest if the employee remains employed with the Group for 5 years from the time of
grant, with a portion vesting only upon the satisfaction of 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.
For shares issued during the year ended 30 June 2021, and for future issues, 100% are subject to satisfaction of various
performance conditions, as follows:
o
o
o
For Operations employees, 100% of their award will vest on a graduated basis, based on EPS growing by an
average annual growth rate of at least 10% - 15% p.a. over a five-year period;
For Retail Distribution employees, 50% of their award will vest on a graduated basis, based on EPS growing by an
average annual growth rate of at least 10% - 15% p.a. over a five-year period, and the remaining 50% will be
earnt on a graduated basis, subject to the satisfaction of total annual retail net inflow targets; and
For Institutional Distribution employees, 50% of their award will vest on a graduated basis, based on EPS growing
by an average annual growth rate of at least 10% - 15% p.a. over a five-year period, and the remaining 50% will
be earnt on a graduated basis, subject to the satisfaction of Contained Annual Revenue in net inflow targets
During the 2021 financial year, 600,000 loan shares and 150,000 options were forfeited by existing and departed
employees. Additionally, 1,500,000 loan shares and 300,000 options were issued, predominantly to existing employees.
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 was ‘swapped’ for equity in the Company and a deed
of acknowledgment was put in place, the 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-agreed formula. The PIML Acquisition, including the terms
of these equity arrangements for senior executives, was approved by shareholders on 16 August 2016. The service
condition was fulfilled by all relevant employees at December 2020.
Annual Report
37
5. Links between performance and outcomes
During the 2021 financial year, the Managing Director conducted performance reviews of executives and made
recommendations to the Remuneration and Nominations Committee in respect of their STIs and any awards of LTI. 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 2021
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 102.1% in the 2021 financial year;
compound annual growth rate (CAGR) in basic earnings per share attributable to shareholders of 49.0% over
the five years to 30 June 2021
growth in total NPAT attributable to shareholders from $32.2 million in the 2020 financial year to $67.0
million in the 2021 financial year; CAGR in total NPAT attributable to shareholders of 63.1% over the five
years to 30 June 2021
increase in FUM from $58.7 billion as at 30 June 2020 to $89.4 billion as at 30 June 2021
net FUM inflows of $16.7 billion during the 2021 financial year
net retail FUM inflows of $4.5 billion during the 2021 financial year
80% of Affiliate strategies and products that have a track record of at least 5 years outperformed their
benchmarks over the 5 years to 30 June 2021
2021
2020
2019
2018
2017
Net profit/(loss) after tax from continuing operations attributable to
shareholders ($m)
67.0
Total net profit/(loss) after tax attributable to shareholders ($m)
67.0
32.4
32.2
58.7
3.0
0.9
30.5
30.5
54.3
6.5
2.9
23.1
23.5
38.0
7.9
2.2
12.0
13.1
26.5
4.9
2.5
89.4
16.7
4.5
11.97
3.92
4.38
5.37
2.90
28.7
38.2
36.5
38.2
36.5
15.40
15.40
11.60
7.00
18.9
18.0
18.8
17.9
18.3
17.1
18.3
17.1
14.3
13.2
14.5
13.4
8.1
7.6
8.9
8.2
Funds Under Management ($bn)*
Net FUM Inflows*
Net Retail FUM Inflows*
Closing share price ($)
Dividend per share (cents)
Basic earnings per share (cents) from continuing operations
Diluted earnings per share (cents) from continuing operations
Basic earnings per share (cents) attributable to shareholders
Diluted earnings per share (cents) attributable to shareholders
* Non-statutory measure
Annual Report
38
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 2021.
Ian Macoun
Andrew Chambers
Adrian Whittingham
Dan Longan**
Calvin Kwok**
Alex Ihlenfeldt*
Fixed Remuneration
Performance-based remuneration
45%
36%
100%
40%
42%
63%
STI
45%
35%
0%
39%
31%
12%
LTI
10%
29%
0%
21%
27%
25%
*Alex Ihlenfeldt ceased being a KMP from 1 September 2020
**Dan Longan commenced being a KMP from 6 July 2020. Calvin Kwok commenced being a KMP from 1 September 2020
***Adrian Whittingham was not awarded any LTI during FY21 and the loan shares previously awarded to him under the Omnibus Incentive Plan were forfeited when he transitioned to
a part-time role on 1 January 2021
Ian Macoun
In the 2021 financial year, Mr Macoun’s base salary remained unchanged at $600,000 per annum (inclusive of
superannuation) and he earned an STI of $600,000 (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 2021 financial year, Mr Chambers’ base salary remained unchanged at $425,000 per annum (inclusive of
superannuation) and he earned an STI of $425,000 (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.
Adrian Whittingham
In the 2021 financial year, Mr Whittingham’s employment status transitioned from a full-time to part-time role, as
requested by him. His base salary in that role was $195,000 per annum (inclusive of superannuation) with no eligibility for
short-term or long-term incentives. In the prior year, his base salary was $400,000 per annum (inclusive of superannuation)
and he did not receive an STI. From 1 July 2021, Mr Whittingham has returned to a full-time role with the Company as
Executive Director – Pinnacle International.
Dan Longan
Mr Longan became a KMP on 6 July 2020. His base salary was $290,000 per annum (inclusive of superannuation) from 1
September 2020 and he earned an STI of $290,000 (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.
Annual Report
39
Calvin Kwok
Mr Kwok became a KMP on 1 September 2020. His base salary was $320,000 per annum (inclusive of superannuation) and
he earned an STI of $240,000 (inclusive of superannuation). STI is a performance incentive of up to 75% of base salary
awarded on the basis of meeting business and strategic objectives.
Remuneration details for Executive Key Management Personnel (calculated in accordance with applicable accounting
standards) are set out in the table below:
Short-term
employee benefits
Post-employment
benefits
Long-term
benefits
Share
based pay-
ments
Cash salary
& fees
$
Cash Bonus
(STI)
$
Name
Non-
monetary
benefits
$
Super
annu
ation
$
Retire-
ment
Benefits
$
Total
short-term
and post-
employ-
ment
benefits
$
Long
Service
leave
$
Options &
Rights (LTI)
$
Terminatio
n benefits
$
Total
$
Portion of
remunerati
on at risk -
STI
%
Portion of
remunerati
on at risk -
LTI
%
Managing Director
Ian Macoun
2021
575,000
600,000
2020
575,000
300,000
-
-
25,000
25,000
Other Key Management Personnel
Andrew Chambers
2021
400,000
425,000
2020
400,000
212,500
Adrian Whittingham
2021**
*
234,753
2020
375,000
-
-
Alex Ihlenfeldt
2021*
48,706
12,177
2020
295,000
80,000
Dan Longan
-
-
-
-
-
-
25,000
25,000
22,302
25,000
17,960
25,000
--
--
--
--
--
--
--
--
1,200,000
10,115
136,953
900,000
9,909
153,200
850,000
7,019
354,754
637,500
(9,266)
370,826
--
--
--
--
1,347,068
45%
10%
1,063,109
28%
14%
1,211,774
35%
29%
999,060
21%
37%
257,055
(60,487)
(202,808)
--
(6,240)
0%
0%
400,000
6,559
154,296
--
560,855
0%
27%
78,843
590
26,689
400,000
4,998
117,409
--
--
106,122
11%
25%
522,407
15%
23%
2021** 258,150
286,102
-
24,664
--
568,916
4,319
154,396
--
727,631
39%
21%
Calvin Kwok
2021** 245,833
200,000
-
20,833
--
466,667
6,990
173,593
--
647,250
31%
27%
Totals
2021
1,762,443
1,523,279
2020
1,645,000
592,500
-
-
135,759
100,000
--
--
3,421,480
(31,454)
643,578
2,337,500
12,200
795,731
--
--
4,033,605
3,145,431
*Alex Ihlenfeldt ceased being a KMP from 1 September 2020. Remuneration is pro-rated until this date.
**Dan Longan commenced being a KMP from 6th July 2020. Calvin Kwok commenced being a KMP from 1 September 2020. Remuneration is pro-rated from the this date.
***Adrian Whittingham was not awarded any LTI during FY21 and the loan shares previously awarded to him under the Omnibus Incentive Plan were forfeited when he transitioned to
a part-time role on 1 January 2021
Annual Report
40
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 2021 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 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 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 (in August 2021), the date on which any of the underlying shares are sold or within six months of the cessation of
Mr Macoun’s employment. Events of default under the loan include cessation of employment.
In November 2018, 300,000 loan shares were issued to Mr Macoun 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 three 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.
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.
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 (in August 2021), 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.
Annual Report
41
Adrian Whittingham
Adrian Whittingham, an executive director of the Company, was engaged under an employment agreement dated 28 April
2008 and subsequently amended on 7 May 2015 and 25 August 2016. He transitioned to a part-time role from 1 January
2021, under a new employment agreement that commenced on this date. The contract provides for termination by either
party on at least four weeks' notice except where termination is due to misconduct. From 1 July 2021, Mr Whittingham has
returned to a full-time role with the Company.
In June 2009, July 2011 and January 2012, PIML advanced to Mr Whittingham’s nominated shareholding entity, three
unsecured, limited recourse and interest free loans to acquire shares in PIML. The loans were immediately repayable if Mr
Whittingham ceased employment with the Company or sold some or all of his shares. In May 2015, and as part of the PIML
LTI Scheme, PIML advanced to Mr Whittingham’s 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 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. These loans were repaid in full during the 2021 financial year.
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 (in August 2021), 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.
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 underlying equity is sold, whichever occurs earlier. These loan
shares were forfeited in the current year, following Mr Whittingham's transition to a part-time role on 1 January 2021.
Dan Longan
Dan Longan, the Chief Financial Officer, is engaged under an employment agreement dated 9 November 2015. The
contract provides for termination by either party on one month’s notice except where termination is due to misconduct.
In September 2018, 150,000 loan shares were issued to Mr Longan 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 September 2020, a further 200,000 loan shares were issued to Mr Longan under the Pinnacle Omnibus Plan. The shares
are all subject to both service and performance conditions and will vest after five years, if all of those conditions are met.
The loans are interest free and limited in recourse to the shares. They are repayable on termination of employment or
when the underlying equity is sold, whichever occurs earlier.
Calvin Kwok
Calvin Kwok, the Chief Legal, Risk and Compliance Officer, is engaged under an employment agreement dated 10
November 2014. The contract provides for termination by either party on one month’s notice except where termination is
due to misconduct.
In September 2018, 250,000 loan shares were issued to Mr Kwok 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.
Annual Report
42
In September 2020, a further 200,000 loan shares were issued to Mr Kwok under the Pinnacle Omnibus Plan. The shares
are all subject to both service and performance conditions and will vest after five years, if all of those conditions are met.
The loans are interest free and limited in recourse to the shares. They are repayable on termination of employment or
when the underlying equity is sold, whichever occurs earlier.
Alex Ihlenfeldt
Alex Ihlenfeldt transitioned to a part-time role and ceased to be Chief Operating Officer and a KMP of the Company from 1
September 2020.
Annual Report
43
8. Non-executive director remuneration
The structure of non-executive director remuneration is separate and distinct from that of executive remuneration.
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.
Non-executive directors’ fees are determined within an aggregate non-executive directors’ fee pool limit, with any increase
in the fee pool requiring approval by shareholders. The current aggregate fee 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 2021 financial year. Non-executive directors are not eligible to
receive STI.
From the 2019 financial year, non-executive directors are able to sacrifice up to 100% of their fees in favour of immediately
vesting Performance Rights under the Pinnacle Omnibus Incentive Plan, as approved at the AGM on 15 November 2018.
During the 2021 financial year, 26,609 (2020: 28,256) performance rights were granted to non-executive directors; 27,708
(2020: 30,863) were exercised during the year. The performance rights were granted in lieu of fees.
The fees paid to non-executive directors from 1 July 2020 for Board and Committee positions are set out in the table
below:
Chair
Non-executive Director
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
For clarity, non-executive directors do not receive, nor are eligible for, STI, any non-monetary benefits, termination
allowances, long-service leave or LTI. 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.
Annual Report
44
Total remuneration for the non-executive directors in relation to the Company, Committee positions and subsidiaries for
the 2021 financial year was $565,000 and is presented in accordance with applicable accounting standards and shown in
the table below:
Name
Non-executive Directors
Alan Watson
2021
2020
Deborah Beale
2021
2020
Gerard Bradley
2021*
2020
Lorraine Berends
2021
2020
Totals
2021
2020
Cash salary & fees
$
Superannuation
$
Perfor-mance Rights
$
Total
$
101,370
99,699
76,712
77,738
112,178
80,356
100,457
89,175
360,717
349,968
9,630
9,471
7,288
7,385
1,822
3,644
9,543
8,471
28,283
28,971
74,000
75,830
36,000
34,877
36,000
36,000
-
12,354
146,000
159,061
185,000
185,000
120,000
120,000
150,000
120,000
110,000
110,000
565,000
535,000
*Includes $30,000 fee for Pinnacle Fund Services Limited compliance committee.
New non-executive director appointments
On appointment to the Board, new non-executive directors are provided with a letter of appointment setting out the
Company’s expectations, their responsibilities, rights and the terms and conditions of their engagement. All new non-
executive directors participate in an induction process, which covers the operation of the Board and its committees and
financial, strategic, operational and risk management issues. For further detail, refer to the Corporate Governance
Statement on the Company’s website.
Annual Report
45
Share-based payment compensation
9.
Loan Shares
The terms and conditions of each grant of equity and associated loan to Key Management Personnel is provided at pages
41 to 43. Details of the loan arrangements affecting remuneration in the previous, this or future reporting periods as at 30
June 2021 are as follows:
Name
Date of grant
Number of
loan shares
Loan value at
date of grant
Key Management Personnel of the Group
Ian Macoun
Share based
payments
value (i)
Vesting date
Number of
shares vested
Value ($) of
shares vested
(ii)
Number of
shares
forfeited
/lapsed /sold
Value ($) of
shares
forfeited
/lapsed /sold
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
Andrew Chambers
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
287,888
2,044,005
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
$1814,807
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
287,888
2,044,005
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
-
-
300,000
1,697,460
Sub-Total
2,120,719
2,871,587
$732,161
1,532,831
3,531,873
300,000
1,697,460
Dan Longan
Loan Shares
17-Sep-18
150,000
1,093,755
$388,592
16-Sep-23
Loan Shares
11-Sep-20
200,000
1,048,080
$497,565
10-Sep-25
Sub-Total
350,000
2,141,835
$886,157
Calvin Kwok
Loan Shares
17-Sep-18
250,000
1,822,925
$647,653
16-Sep-23
Loan Shares
11-Sep-20
200,000
1,048,080
$497,565
10-Sep-25
Sub-Total
450,000
2,871,005
$1,145,218
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(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 arrangement. (ii) The amount is based on the intrinsic
value of the option or right at vesting date.
Annual Report
46
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 2021 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
2021
18,838
26,609
2020
1,358,445
28,256
(27,708)
(1,367,863)
0
17,739
0
18,838
*Includes changes due to employees 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.
Non-executive directors
Alan Watson
Lorraine Berends
Deborah Beale
Gerard Bradley
Executive directors
Ian Macoun
Andrew Chambers
Adrian Whittingham
Balance at
start of year
145,137
20,832
111,878
64,451
27,276,077
5,603,614
4,403,614
Key Management Personnel
Alex Ihlenfeldt
4,934,290
Dan Longan
Calvin Kwok
-
-
* includes changes resulting from commencing or ceasing to be KMP
Granted
during
reporting
year as
compensation
Received
during the
year on the
exercise of
options and
rights
Other
changes
during the
year*
Balance at the
end of the
year
-
-
-
-
-
-
-
14,044
-
159,181
-
4,168
25,000
6832
-
118,710
6,832
894
72,177
-
-
-
-
-
-
(9,000,000)
18,276,077
(300,000)
5,303,614
(1,300,000)
3,103,614
(610,000)
4,324,290
350,000
350,000
467,044
467,044
Annual Report
47
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
Other
changes
during the
year
$
Balance at
start of year
$
Repayments
made
$
New Loans
Issued
$
Loan Shares
Forfeited
$
Interest paid
and payable
for the year
$
Interest not
charged
$
Balance at
end of year
$
Number
in Group at
end of year
2021
13,964,165
(431,719)
(1,051,860)
2,096,160
(1,627,504)
43,963
640,711
12,993,205 5
*Includes changes due to employees commencing or ceasing to be Key Management Personnel during the year. Alex Ihlenfeldt ceased being a KMP from 1 September 2020. Dan Longan
commenced being a KMP from 6th July 2020. Calvin Kwok commenced being a KMP from 1 September 2020.
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
Other
changes
during the
year
$
Balance at
start of year
$
Repayments
made
$
New Loans
Issued
$
Loan Shares
Forfeited
$
Interest paid
and payable
for the year
$
Interest not
charged
$
Balance at
end of
year
$
Highest
indebtedn
ess during
the year
Ian Macoun
2,497,858
Andrew Chambers 5,476,798
Adrian
Whittingham
2,732,113
-
-
-
(162,252)
(238,719)
(554,283)
Alex Ihlenfeldt
3,257,396
(3,259,710)
-
-
-
-
-
Dan Longan
Calvin Kwok
-
-
1,060,480
(40,656)
1,048,080
1,767,467
(55,950)
1,048,080
-
-
13,883
103,347
2,349,489 2,500,194
13,883
245,689
5,251,962 5,479,131
(1,627,504)
13,883
72,647
564,209
2,734,448
-
-
-
2,314
23,777
-
3,259,687
-
-
83,718
2,067,904 2,098,907
111,533
2,759,597 2,799,459
*Includes changes due to employees commencing or ceasing to be Key Management Personnel during the year. Alex Ihlenfeldt ceased being a KMP from 1 September 2020. Dan Longan
commenced being a KMP from 6th July 2020. Calvin Kwok commenced being a KMP from 1 September 2020.
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 41 to 43 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 41 to 43 for further details on the terms of the loans.
During the year to 30 June 2021, a further 400,000 loan shares were issued to Key Management Personnel. Additionally,
600,000 loan shares were forfeited by Key Management Personnel during the year to 30 June 2021.
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.
Annual Report
48
12. Equity Capital
Shares under option/rights
Unissued ordinary shares of the Company under option at 30 June 2021 are as follows:
Date options granted
Expiry date
Exercise price of options
Number under option
21 December 2017
12 June 2023
$3.93
15 November 2018
15 November 2023
$5.6582
13 November 2020
13 November 2021
Nil
25 March 2020
25 March 2025
11 September 2020
10 September 2025
30 December 2020
30 December 2025
$2.9683
$5.2404
$6.8450
TOTAL
400,000
100,000
17,739
200,000
200,000
100,000
1,167,739
200,000 of the options granted on 21 December 2017 lapsed during the current financial year, leaving a remaining balance
at 30 June 2021 of 400,000.
On 15 November 2018, 250,000 options were issued to overseas employees under the Pinnacle Omnibus Plan. 150,000 of
these options were forfeited by departing employees during the year ended 30 June 2021.
On 15 November 2019 28,256 performance rights were granted to non-executive directors under the plan, of which 9,418
were exercised during previous year. During the current year, an additional 26,609 performance rights were granted to
non-executive directors and a further 27,708 were exercised during the year.
On 25 March 2020, 200,000 options were issued to overseas employees under the Pinnacle Omnibus Plan.
On 11 September 2020 and 30 December 2020, 200,000 and 100,000 options respectively were issued to employees under
the Pinnacle Omnibus Plan.
End of Remuneration Report
Annual Report
49
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 2021
and the number of meetings attended by each director were as follows:
Board
Audit, Compliance and Risk Committee
Remuneration and Nominations
Committee
Attended
Eligible to Attend
Attended
Eligible to Attend
Attended
Eligible to Attend
A Watson
I Macoun
D Beale AM
G Bradley AO
L Berends
A Chambers
A Whittingham
11
11
11
11
11
11
10
11
11
11
11
11
11
11
7
7
7
7
7
-
-
*A Watson and I Macoun attended respective meetings by invitation.
Board Committee Membership
-*
-*
7
7
7
-
-
7
7
7
7
7
-
-
7
-*
7
7
7
-
-
As at the date of this report, the Company had an Audit, Compliance and Risk Management Committee and a
Remuneration and Nominations Committee.
Members acting on the Board Committees are:
Audit, Compliance and Risk Committee
Remuneration and Nominations Committee
G Bradley AO (Chair)
D Beale AM (Chair)
D Beale AM
L Berends
Company Secretary
L Berends
G Bradley AO
A Watson
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.
Annual Report
50
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 of the Company and/or
of certain of its related bodies corporate against all liabilities to another 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:
•
•
all non-audit services have been reviewed by the Audit, Compliance and Risk Management Committee to ensure
they do not impact the impartiality and objectivity of the Auditor; and
none of the services undermine the general principles relating to auditor independence as set out in APES 110
Code of Ethics for Professional Accountants, 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.
Annual Report
51
During the 2021 financial year the following fees were paid or are payable for services provided by
the Auditor, its related practices and non-related audit firms:
2021
$
2020
$
(i) Audit and other assurance services
Audit and review of financial statements
241,601
266,621
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
91,059
-
354,599
61,893
61,893
-
416,492
416,492
21,939
102,744
50,000
441,304
93,759
93,759
2,987
538,050
538,050
* 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 53 of the 2021 Annual Report.
Rounding of amounts
The Company is of a kind referred to in ASIC Corporations (Rounding in Financial/Directors reports) Instrument 2016/191,
issued by the Australian Securities and Investments Commission, relating to 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.
A Watson
Chair
Pinnacle Investment Management Group Limited
Sydney
4 August 2021
Annual Report
52
07
Auditor’s
Independence
Declaration
Annual Report
53
Auditor’s Independence Declaration
As lead auditor for the audit of Pinnacle Investment Management Group Limited for the year ended 30
June 2021 I declare that, to the best of my knowledge and belief, there have been:
(a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
(b) no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Pinnacle Investment Management Group Limited and the entities it
controlled during the period.
Ben Woodbridge
Partner
PricewaterhouseCoopers
Brisbane
4 August 2021
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.
08
ABN 22 100 325 184
Financial Report – 30 June 2021
Pinnacle Investment Management Group Limited
Financial
Statements
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
56
57
58
59
60
61
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.
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.
A description of the nature of the consolidated entity’s operations and its principal activities is included in the Directors'
report, which is not part of these financial statements.
These financial statements were authorised for issue by the directors on 4 August 2021. The directors have the power to
amend and reissue the financial statements.
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
Annual Report
55
Consolidated statement of profit or loss
For the year ended 30 June 2021
Revenue from contracts with customers and other revenue
1
32,514
22,407
Fair value gains/(losses) on financial assets at fair value through profit or loss
(93)
(1,292)
Notes
2021
$’000
2020
$’000
Employee benefits expense
Short-term incentives expense
Long-term incentives expense
Professional services expense
Property expense
Travel and entertainment expense
Technology and communications expense
(14,489)
(13,567)
(7,436)
(2,931)
28(d)
(2,007)
(1,961)
(1,435)
(2,131)
2
(843)
(1,148)
(232)
(407)
(1,224)
(1,003)
Donations
2, 32
(1,311)
(356)
Other expenses from operating activities
2
(2,867)
(3,210)
Share of net profit of associates and joint ventures accounted for using the equity method
23(d)
66,440
37,953
Profit before income tax
Income tax expense
67,017
32,354
3
-
-
Profit from continuing operations
67,017
32,354
Profit/(loss) from discontinued operations (attributable to equity holders of the Company)
-
(148)
Profit for the year
Profit for the year is attributable to:
67,017
32,206
Owners of Pinnacle Investment Management Group Limited
67,017
32,206
Earnings per share:
Cents
Cents
For profit from continuing operations attributable to owners of Pinnacle Investment Management Group Limited
Basic earnings per share
Diluted earnings per share
For profit attributable to owners of Pinnacle Investment Management Group Limited
Basic earnings per share
Diluted earnings per share
The above consolidated statement of profit or loss should be read in conjunction with the accompanying notes.
5
5
5
5
38.2
36.5
38.2
36.5
18.9
18.0
18.8
17.9
Annual Report
56
Consolidated statement of comprehensive income
For the year ended 30 June 2021
Profit for the year
Other comprehensive income:
Items that may be reclassified to profit or loss
Notes
2021
$’000
2020
$’000
67,017
32,206
Changes in the fair value of financial assets at fair value through other comprehensive income
-
-
Total comprehensive income/(loss) for the year
67,017
32,206
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
The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.
67,017
67,017
32,206
32,206
67,017
32,354
-
(148)
67,017
32,206
Annual Report
57
Consolidated statement of financial position
For the year ended 30 June 2021
Notes
2021
$’000
2020
$’000
6
7
8
13
9
23
13
12
11
14
12
19
15
12
19
15
96,136
17,361
58,866
858
223
16,066
16,387
33,986
858
123
173,444
67,420
186,957
161,867
153
167
2,914
2,565
162
1,026
3,823
4,335
192,756
171,213
366,200
238,633
17,505
1,375
22
1,719
20,621
9,827
1,566
21
6,357
17,771
1,531
2,241
100,000
30,000
156
101,687
122,308
74
32,315
50,086
243,892
188,547
16
17(a)
17(b)
266,274
237,663
(50,494)
(48,060)
28,112
(1,056)
243,892
188,547
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
Retained Earnings/(Losses)
Total equity
The above consolidated statement of financial position should be read in conjunction with the accompanying notes.
Annual Report
58
Consolidated statement of changes in equity
For the year ended 30 June 2021
Balance at 1 July 2019
Total comprehensive income for the year
TRANSACTIONS WITH OWNERS IN THEIR CAPACITY AS OWNERS:
Contributed
equity
$’000
Reserves
$’000
Accumulated
losses
$’000
Total equity
$’000
Notes
231,255
(50,694)
(3,508)
177,053
-
-
32,206
32,206
Share-based payments
17(a)
-
1,961
Shares issued on exercise of options
Shares issued
2,096
698
Dividends paid to shareholders
18
1,907
Performance rights
Employee loan arrangements
170
16, 17(a) 1,537
-
-
-
(11)
684
-
-
1,961
2,096
698
(29,754)
(27,847)
159
2,221
-
Balance at 30 June 2020
Balance at 1 July 2020
Total comprehensive income for the year
6,408
2,634
(29,754)
(20,712)
237,663
(48,060)
(1,056)
188,547
237,663
(48,060)
(1,056)
188,547
-
-
67,017
67,017
TRANSACTIONS WITH OWNERS IN THEIR CAPACITY AS OWNERS:
Share-based payments
17(a)
-
2,007
Shares issued on exercise of options
4,749
(4,749)
Shares issued via underwritten DRP
21,309
Dividends paid to shareholders
Performance rights
18
969
146
-
-
-
-
-
2,007
-
21,309
(37,849)
(36,880)
146
1,746
Employee loan arrangements
16, 17(a) 1,438
308
-
Balance at 30 June 2021
266,274
(50,494)
28,112
243,892
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
28,611
(2,434)
(37,849)
(11,672)
Annual Report
59
Consolidated statement of cash flows
For the year ended 30 June 2021
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Notes
2021
$’000
2020
$’000
32,572
23,117
(25,120)
(23,612)
Dividends and distributions received from financial assets at fair value through profit or loss
564
344
Dividends and distributions received from jointly controlled entities
Interest received
Finance and borrowings costs paid
Proceeds from disposal of financial assets at fair value through profit or loss
Payments for financial assets at fair value through profit or loss
49,075
32,995
119
(566)
132
(526)
13,898
16,047
(37,571)
(26,403)
Net cash inflow/(outflow) from operating activities
25
32,971
22,094
Cash flows from investing activities
Payments for property, plant and equipment
Proceeds from sale of investments accounted for using the equity method
Payments for intangible assets
(55)
-
-
(124)
261
(2,574)
Payments for investments accounted for using the equity method
(5,404)
(35,026)
Loan repayments from shareholders
Loan repayments from related parties
Loan advances to related parties
Net cash inflow/(outflow) from investing activities
Cash flows from financing activities
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
Cash and cash equivalents at end of year
6
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
1,746
576
(2,657)
(5,794)
2,221
295
(1,030)
(35,977)
(36,880)
(27,847)
(1,536)
70,000
21,309
52,893
80,070
16,066
96,136
(1,718)
30,000
2,794
3,229
(10,654)
26,720
16,066
Annual Report
60
Page
62
63
64
65
66
67
67
68
68
69
69
70
71
72
72
73
75
76
77
78
85
86
87
90
91
92
94
95
102
102
103
104
Notes to the consolidated financial statements
Group Results
1
2
3
4
5
Revenue
Expenses
Income tax expense
Segment information
Earnings per share
Operating Assets and Liabilities
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
Contributed equity
Reserves and retained earnings/(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
25
26
27
28
29
30
31
32
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
Annual Report
61
Group Results
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
Service charges – over time
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.
2021
$’000
30,022
30,022
44
112
2,328
8
2,492
32,514
2020
$’000
21,305
21,305
44
169
818
71
1,102
22,407
Annual Report
62
2. Expenses
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
2021
$’000
650
650
2020
$’000
641
641
Amortisation expense under AASB 16 leases – included in property costs*
1,461
1,721
Depreciation and amortisation expense – included in other expenses from operating activities
Depreciation – property, plant and equipment
Amortization - intangible assets
Total depreciation and amortisation expense
Donations
Total donations
64
859
922
81
693
774
1,311
356
The Company made donations totalling $1,311,000 during the current financial year, compared with $356,000 in the prior year, principally to the
Pinnacle Charitable Foundation. Through building and growing the capacity of excellent Australian charities, the Foundation is helping to deliver
tangible impact within communities across five key causes – identified as highly important by Affiliates, employees, shareholders and client groups:
o
o
o
o
o
promotion of strong mental health awareness, together with support for prevention and early intervention strategies aimed at
reducing mental illness and driving down suicide rates;
support for children from a range of environments who face acute and / or systemic disadvantage;
legal assistance and advocacy for victims of sexual abuse and domestic violence;
capacity building for world-leading medical researchers seeking treatments and cures for children’s genetic diseases and for
Alzheimer’s sufferers; and
building awareness in a COVID-19 world of the critical need for kindness, empathy, community and resilience.
The amount of the donation represents the $641,000 received during the current financial year under the Government's Jobkeeper scheme, into
which the Company elected during the previous financial year (see Note [32bb]), in addition to the amount of approximately $670,000 that would
otherwise have been donated to charities in FY21. The Company did not participate in Jobkeeper 2.0. Consequently, the level of FY21 NPAT was
unaffected by Jobkeeper receipts.
Annual Report
63
3. Income tax expense
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)
2021
$’000
2020
$’000
-
-
-
3,475
(3,475)
-
-
3,475
-
3,475
-
-
-
(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% (2020: 30%)
67,017
-
67,017
20,105
32,354
(148)
32,206
9,662
Tax effect of amounts which are not deductible (taxable) in calculating taxable income:
Share of profits of entities under joint control
(19,932)
(11,386)
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%
-
642
2,114
2,928
-
(2,928)
-
48,018
14,406
-
611
1,673
560
-
(560)
-
61,333
18,400
Annual Report
64
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.
d) Tax consolidation legislation
Pinnacle Investment Management Group Limited and its wholly-owned Australian controlled entities implemented the tax
consolidation legislation from 1 July 2003. Next Financial Limited and its subsidiaries joined the tax consolidated group on 1
April 2009. Pinnacle Investment Management Limited and its subsidiaries joined the tax consolidated Group on 25 August
2016. The accounting policy in relation to this 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.
Annual Report
65
5. Earnings per share
a) Basic earnings per share
From continuing operations
From discontinued operations
2021
Cents
38.2
-
Total basic earnings per share attributable to the ordinary equity shareholders of the Company
38.2
b) Diluted earnings per share
Attributable to the ordinary equity shareholders of the Company
From continuing operations
From discontinued operations
36.5
-
Total diluted earnings per share attributable to the ordinary equity shareholders of the Company
36.5
c) Reconciliations of earnings used in calculating earnings per share
Basic and diluted earnings per share
2020
Cents
18.9
(0.1)
18.8
18.0
(0.1)
17.9
Profit/(loss) attributable to the ordinary owners of the Company used in calculating basic and diluted earnings per share:
From continuing operations
From discontinued operation
Profit used in calculating basic and diluted earnings per share
67,017
-
67,017
32,354
(148)
32,206
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
175,291,025
170,927,363
Adjustments for calculation of diluted earnings per share:
Weighted average treasury stock (see note 16(d))
7,295,214
7,238,633
Weighted average options
869,216
1,956,724
Weighted average number of ordinary and potential ordinary shares used as the denominator in
calculating diluted earnings per share
183,455,455
180,122,720
e) Information concerning the classification of securities
Options and loan shares granted to employees under the employee share schemes are considered to be potential ordinary
shares and have been included in the determination of diluted earnings per share to the extent to which they are dilutive.
The options and loan shares have not been included in the determination of basic earnings per share.
Annual Report
66
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
2021
$’000
96,136
-
2020
$’000
15,796
270
96,136
16,066
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 0.01% and 0.04% (2020: 0.04% and 1.20%). 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
2021
$’000
6,926
7,965
1,767
703
2020
$’000
7,562
4,707
3,930
188
17,361
16,387
a) Fair values of trade receivables
Due to the short-term nature of the current receivables, their carrying amount is considered to be 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).
Annual Report
67
8.
Financial assets at fair value through profit or loss
Australian listed securities
Other unlisted equity securities
Derivative financial assets
Unlisted unit trusts
2021
$’000
6,017
631
1,775
50,443
58,866
2020
$’000
12,941
479
1,075
19,491
33,986
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(d). See also note 26.
9. Assets held at amortised cost
Loans to entities under joint control
2021
$’000
223
223
2020
$’000
123
123
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 (including affiliate executives) 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.
Annual Report
68
10. Net deferred tax assets
Deferred tax assets (a)
Deferred tax liabilities (b)
Net deferred tax assets
a) Deferred tax assets
The deferred tax asset balance comprises temporary differences attributable to:
Unrealised loss on fair value assets
Lease liabilities
Other
Total deferred tax assets
2021
$’000
2,368
2020
$’000
1,953
(2,368)
(1,953)
-
-
309
1,263
796
2,368
376
1,415
162
1,953
Set-off of deferred tax liabilities pursuant to set-off provisions
(2,368)
(1,953)
Net deferred tax assets
-
-
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).
b) Deferred tax liabilities
The deferred tax liabilities balance comprises temporary differences attributable to:
Financial assets at fair value through profit or loss
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
2021
$’000
2020
$’000
1,131
307
874
56
2,368
2021
$’000
2,565
2,565
185
565
1,146
57
1,953
2019
$’000
4,335
4,335
As outlined in note 32(l)(ii) loans to entities under joint control (including affiliate executives) 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. See note 26.
Annual Report
69
12. Leases
The Group leases offices in Brisbane and Sydney. Rental contracts are typically made for fixed periods of 3 – 5 years. See
note 32(g) for further details.
The balance sheet shows the following amounts relating to leases:
RIGHT-OF-USE ASSETS
30 June 2021
$'000
30 June 2020
$'000
Office leases
4,249
5,544
Office leases – accumulated amortization
(1,335)
(1,721)
2,914
3,823
Additions to the right-of-use assets during the 2021 financial year were $2,568,000 (2020: $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)
1,375
1,531
2,906
1,461
1,461
83
1,566
2,241
3,807
1,721
1,721
94
Annual Report
70
13. Intangible assets
Plato Income Maximiser Limited (ASX: PL8) undertook an entitlement and shortfall offer in August 2019. As part of the
arrangements pursuant to which it was appointed as distributor to the offer, and will be paid distribution fees, the Group
agreed to pay the costs associated 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 capitalized as an
intangible asset and are being amortised over the distribution agreement period of three years.
Software
$'000
Customer
Contracts
$'000
Total
$'000
15
(12)
3
3
2,574
(693)
1,884
2,589
(705)
1,884
1,884
-
(859)
1,025
-
-
-
-
2,574
(691)
1,883
2,574
(691)
1,883
1,883
-
(858)
1,025
2,574
2,589
(1,549)
(1,564)
1,025
1,025
15
(12)
3
3
-
(2)
1
15
(14)
1
1
-
(1)
-
15
(15)
-
AT 1 JULY 2019
Cost
Accumulated amortisation
Net book value
YEAR ENDED 30 JUNE 2020
Opening net book value
Additions
Amortisation charge
Closing net book value
AT 30 JUNE 2020
Cost
Accumulated amortisation
Net book value
YEAR ENDED 30 JUNE 2021
Opening net book value
Additions
Amortisation charge
Closing net book value
AT 30 JUNE 2021
Cost
Accumulated amortisation
Net book value
Annual Report
71
14. Trade and other payables
Trade payables
Accrued expenses
Accrued bonuses
Other payables (see also note 15)
15. Provisions
Current
Employee benefits - annual leave and long service leave
Contingent consideration - investment in affiliates*
Non-Current
Employee benefits - long service leave
2021
$’000
2,515
1,873
7,442
5,675
17,505
2021
$’000
1,719
-
1,719
156
156
2020
$’000
3,977
844
3,057
1,949
9,827
2020
$’000
1,357
5,000
6,357
74
74
*$5.0 million payable in relation to the Group’s acquisition of an interest in Coolabah has been transferred to trade and
other payables, given that the agreed profitability milestones were reached as at 30 June 2021. In the prior year, the
amount was provided for as contingent consideration as the Group assessed that the profitability milestones were likely to
be reached but they had not been at that time.
a) Movements in provisions
Movements in each class of provision during the financial year, are set out below:
Current
BALANCE AT 1 JULY 2020
Amounts provided for during the year
Amounts transferred to other payables during the year
Balance at 30 June 2021
Non-Current
BALANCE AT 1 JULY 2020
Amounts provided for during the year
Balance at 30 June 2021
Annual Report
72
Contingent
Consideration
$'000
Employee Benefits
$'000
5,000
-
(5,000)
-
-
-
-
1,357
362
-
1,719
74
82
156
16. Contributed equity
a) Share capital
Ordinary shares:
2021
Shares
2020
Shares
2021
$'000
Fully paid contributed equity (b)
178,467,333
173,132,050
266,274
Total contributed equity
178,467,333
173,132,050
266,274
2020
$'000
237,663
237,663
b) Movements in ordinary share capital
Date
Details
Number of shares
Issue price
$'000
30 June 2019
Closing Balance
169,676,000
231,255
Issue of ordinary shares on exercise of options
2,125,000
$0.99
2,096
Issue of ordinary shares
708,192
$0.99
698
Issue of ordinary shares on exercise of performance rights
30,863
Transfer from performance rights reserve on exercise of
performance rights
-
-
-
-
170
Dividend reinvestment
Treasury stock vested (d)
30 June 2020
Closing Balance
Issue of ordinary shares on exercise of options
491,097
$3.88
1,907
100,898
173,132,050
1,079,365
1,537
237,663
-
4,749
-
-
Transfer from options reserve on exercise of options
-
Issue of ordinary shares via underwritten DRP, net of costs
2,450,542
$8.83
21,309
Issue of ordinary shares on exercise of performance rights
27,708
Transfer from performance rights reserve on exercise of
performance rights
-
-
-
Dividend reinvestment
Treasury stock vested (d)
30 June 2021
Closing Balance
c) Ordinary shares
152,951
$6.34
1,624,717
178,467,333
-
146
969
1,438
266,274
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.
Annual Report
73
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.
Treasury stock movement for the year includes the issue of 1,500,000 and the forfeiture of 600,000 loan shares to
employees, issued under the Pinnacle Omnibus Plan approved by the board on 22 August 2018.
Date
Details
30 June 2019
Closing Balance
Number of
treasury shares
Issue price
13,192,287
34,966
Issue of loan shares under Pinnacle Omnibus Plan
150,000
445
Forfeited loan shares
Loan share repayments
(400,000)
(2,647)
-
(1,550)
Treasury stock vested during the year
(100,898)
(96)
30 June 2020
Closing Balance
12,841,389
31,118
Issue of loan shares under Pinnacle Omnibus Plan
1,500,000
8,422
Forfeited loan shares
(600,000)
(3,702)
Treasury stock vested during the year
(1,624,717)
(1,438)
30 June 2021
Closing Balance
12,116,672
34,400
e) Employee share plans
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.
Annual Report
74
17. Reserves and retained earnings/(accumulated losses)
a) Reserves
Share-based payments reserve
Options reserve
2021
$'000
9,065
-
2020
$'000
6,750
4,749
Transactions with non-controlling interests reserve
(59,603)
(59,603)
Performance rights reserve
MOVEMENTS:
Share-based payments reserve
Balance at 1 July
Share-based payments expense
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
44
(50,494)
(48,060)
6,750
2,007
308
9,065
4,106
1,961
683
6,750
4,749
4,749
-
(4,749)
-
-
-
4,749
(59,603)
(59,603)
(59,603)
(59,603)
The share-based payments reserve is used to recognise:
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 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 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).
Annual Report
75
b) Retained earnings/(accumulated losses)
Movements in retained earnings/(accumulated losses) were as follows:
Balance at 1 July
2021
$'000
2020
$'000
(1,056)
(3,508)
Profit/(loss) for the year attributable to owners of Pinnacle Investment Management Group Limited
67,017
32,206
Dividends paid to shareholders
Balance at 30 June
18. Dividends
a) Ordinary shares
(37,849)
(29,754)
28,112
(1,056)
2021
$'000
2020
$'000
Interim dividend for the year ended 30 June 2021 of 11.7 cents per fully paid ordinary share paid on 19 March 2021 (2020 – 6.9 cents paid on 20
March 2020)
Fully franked based on tax paid @ 30.0%
22,041
12,759
Final dividend for the year ended 30 June 2020 of 8.5 cents per fully paid ordinary share paid on 11 September 2020 (2020 – 9.3 cents paid on 4
October 2019)
Fully franked based on tax paid @ 30.0%
Total dividends paid
15,808
16,995
37,849
29,754
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 a final dividend of [17]
cents per fully paid ordinary share (2020 – 8.5 cents). The aggregate amount of the proposed dividend to be paid on 17
September 2021 out of retained earnings at 30 June 2021, but not recognised as a liability at year end, is $32,399,000
(2020 – $15,808,000).
c) Franked dividends
The final dividends recommended after 30 June 2021 will be fully franked out of existing franking credits.
Franking credits available for subsequent financial years based on a tax rate of 30% (2020: 30%)
29,085
32,766
2021
$'000
2020
$'000
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.
Annual Report
76
19. Borrowings and Financing arrangements
a) Secured liabilities and assets pledged as security
In June 2021, 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 30 June 2022 and for the Loan Facility is until 30 June 2024. The Loan Facility was
increased from $30 million to $100 million. Further details regarding the Corporate Card Facility and Bank Guarantee are
provided in Note 21.
Secured
Bank Loan
Total Borrowings
2021
Current
$’000
22
22
Non-Current
$’000
Total
$’000
100,000
100,022
100,000
100,022
2020
Current
$’000
20
20
Non-Current
$’000
Total
$’000
30,000
30,020
30,000
30,020
The amended facility agreement includes the following covenants:
•
•
•
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:
o $130,000,000; and
o an amount equal to 75% of the tangible net wealth in respect of the previous financial year.
The Group has provided the bank with a security interest over its property, excluding its holdings in Affiliates. Compliance
with covenants is reviewed on a regular basis and compliance has been maintained during the period. As at 30 June 2021,
the interest cover ratio was 139x, the net leverage cover ratio was 0.06 times and the tangible net wealth was $243m
(173% of the tangible net wealth at 30 June 2020).
The Loan Facility is split into two Tranches – ‘Tranche A’ is $60 million and is for general corporate purposes. ‘Tranche B’ is
$40 million and is for acquisitions, or investments into certain liquid investment strategies managed by the Pinnacle
Affiliates. The Loan Facility was fully drawn as at 30 June 2021. The initial $30m was used to fund the acquisition of a 25%
interest in Coolabah Capital Investments Pty Ltd in the previous financial year. The extra $70 million will be invested in
liquid Affiliate Funds and available for future growth opportunities. The loan is a variable rate, Australian-dollar
denominated loan which is carried at amortised cost. The facility term is three years from drawdown.
The carrying amounts of assets pledged as security at balance date in relation to the bank 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
2021
$'000
96,136
58,866
223
17,361
172,586
153
2,565
2,718
2020
$'000
16,066
33,986
123
16,387
66,562
162
4,335
4,497
Total assets pledged as security
175,304
71,059
Annual Report
77
b) Interest rate risk exposure
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 Is 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.
The Group holds the following financial instruments:
2021
$'000
2020
$'000
96,136
16,066
16,658
16,199
58,866
33,986
2,565
223
4,335
123
174,448
70,709
2021
$'000
17,505
1,375
1,531
22
2020
$'000
9,827
1,566
2,241
21
100,000
30,000
120,433
43,655
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)
Annual Report
78
a) Market risk
(i) Foreign exchange risk
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 (FVPL).
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.
The majority of the Group's equity investments are Australian listed equity securities and unlisted unit trusts as shown in
the table below:
Total
$'000
6,017
631
50,443
1,775
58,866
12,941
479
19,491
1,075
33,986
30 June 2021
ASSETS
Australian listed equity securities
Other unlisted equity securities
Unlisted unit trusts
Derivative financial instruments
Total assets at FVPL
30 June 2020
ASSETS
Australian listed equity securities
Other unlisted equity securities
Unlisted unit trusts
Derivative financial instruments - futures
Total assets at FVPL
Annual Report
79
Sensitivity
The table below summarises the impact of increases/decreases in equity securities prices on the Group’s after tax profit for
the year and on equity. The analysis is based on the assumption that equity securities prices had increased/decreased by
+/- 15% (2020: +/- 15%) at 30 June 2021 with all other variables held constant and all the Group’s equity investments
included in financial assets at fair value through profit and loss moved in correlation with the index.
Group
(iii) Interest rate risk
Impact on after-tax profit
Impact on equity
2021
$'000
+1,307/-
1,307
2020
$'000
2021
$'000
2020
$'000
+721/-721
+1,307/-1,307 +721/-721
The Group's main interest rate risk arises from holding cash and cash equivalents and borrowings with variable rates.
During 2021 and 2020, 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:
30 June 2021
30 June 2020
Weighted
average
interest rate
%
Floating
interest rate
$'000
Weighted
average
interest rate
%
Floating
interest rate
$'000
Cash and cash equivalents
0.01%
96,136
0.06%
16,066
Exposure to cash flow interest rate risk
96,136
16,066
30 June 2021
30 June 2020
2021 $’000
% of total
borrowings 2020 $’000
% of total
borrowings
Variable rate borrowings
100,000
100%
30,000
100%
Exposure to cash flow interest rate risk
100%
100%
The Group's loans to jointly controlled associates (including Affiliate executives) 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 2021, 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 $27,000 lower/higher (2020: change of 100 basis points:
$112,000 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 defaulting on their
financial obligations resulting in a loss to the Group. These obligations primarily relate to distribution and management
fees. The Group does not carry significant trade receivable exposure to either a single counterparty or a group of
counterparties. For banks and financial institutions, only independently rated parties with a minimum rating of BBB+ / A-1
are accepted as counterparties. As at the reporting date, the Group held the following credit risks:
Annual Report
80
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).
2021
$'000
96,136
2020
$'000
16,066
16,658
16,199
58,866
33,986
2,565
223
4,335
123
174,448
70,709
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 losses. Loans to joint associates are
considered to be low credit risk when they have a low risk of default 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 and within our risk appetite. 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 2021 and 30 June 2020, 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 2021
(30 June 2020: $nil). This is because there is no history of default, revenue is generated primarily through providing
services to 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 2021 (2020 - $nil).
Annual Report
81
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
Credit quality
2021
$'000
2020
$'000
17,361
16,387
-
-
17,361
16,387
2,788
2,788
4,458
4,458
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-
2021
$'000
2020
$'000
96,136
16,066
96,136
16,066
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 2021 the Group has $155.0 million in
available cash and Principal Investments ($55.0 million net of the $100.0 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. 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 below 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.
CONTRACTUAL MATURITIES OF FINANCIAL
LIABILITIES
At 30 June 2021
1 - 30
days
$'000
30 days to
90 days
90 days to
1 year
$'000
$'000
Trade and other payables
10,063
7,442
Borrowings (see note 19)
-
-
-
22
1 to 2
years
$'000
-
-
Total
contractual
cash flows
2 to 5 years
$'000
$'000
Carrying
amount
$'000
-
17,505
17,505
100,000
100,022
100,022
Lease liabilities (see note 12)
114
229
1,032
1,223
357
2,955
2,906
Total financial liabilities
10,177
7,671
1,054
1,223
100,357
120,482
120,433
Annual Report
82
$'000
9,827
At 30 June 2020
$'000
$'000
$'000
$'000
$'000
$'000
Trade and other payables
6,770
3,057
Borrowings (see note 19)
-
-
-
21
-
30,000
-
-
9,827
30,021
30,021
Lease liabilities (see note 12)
146
292
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
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:
a) quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1);
b)
c)
inputs other than quoted prices included within level 1 that are observable for the asset or liability, either
directly (as prices) or indirectly (derived from prices) (level 2); and
inputs for the asset or liability that are not based on observable market data (unobservable inputs) (level 3).
The following table presents the Group's Principal Investments measured and recognised at fair value:
Level 1
$'000
Level 2
$'000
Level 3
$'000
Total
$'000
30 June 2021
ASSETS
Australian listed equity securities
Other unlisted equity securities
Unlisted unit trusts
Derivative financial instruments
Total assets
No liabilities were held at fair value at 30 June 2021.
30 June 2020
ASSETS
6,017
-
-
1,775
7,792
-
-
50,443
-
-
631
-
-
50,443
631
Australian listed equity securities
8,920
4,021
Other unlisted equity securities
-
-
Unlisted unit trusts
Derivative financial instruments - futures
Total assets
1,075
9,995
No liabilities were held at fair value at 30 June 2020.
-
479
-
-
19,491
-
23,512
479
6,017
631
50,443
1,775
58,866
12,941
479
19,491
1,075
33,986
There were no transfers between levels for recurring fair value measurements 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.
Annual Report
83
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 included in level 1.
The quoted market price used for unlisted unit trusts is the current exit unit price. These instruments are included in level
2.
The fair value of unlisted equity securities is determined using valuation techniques. The Group uses 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.
Fair value measurements using significant unobservable inputs (level 3)
Level 3 items include unlisted equity securities held by the Group. The following table presents the changes in level 3
instruments for the years ended 30 June 2021 and 30 June 2020:
Closing balance 30 June 2019
Contingent consideration received
Fair value adjustments recognised in profit or loss
Closing balance 30 June 2020
Contingent consideration received
Fair value adjustments recognised in profit or loss
Closing balance 30 June 2021
(i) Valuation process
Unlisted equity
securities
$'000
479
-
-
479
-
152
631
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 company. Where there is no recent information or the
information is otherwise unavailable, the value is derived from calculations based on the value per security of the
underlying net tangible assets of the investee company.
Annual Report
84
21. Contingencies and commitments
a) Secured liabilities and assets pledged as security
(i) Guarantees
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:
(i) Pinnacle Funds Services Limited - $5,000,000 (2020: $5,000,000)
(ii) Pinnacle RE Services Limited - $50,000 (2020: $50,000)
The Group has also provided guarantees in respect of its leased premises:
(iii) Pinnacle Services Administration Pty Ltd - $632,000 (30 June 2020 - $786,000)
The guarantee for the leases noted above is held between Pinnacle Investment Management Group Limited ($175,000)
and Pinnacle Investment Management Limited ($457,000).
The unused bank guarantee facility available at balance date was $275,000 (30 June 2020: $24,000). The Group has also
provided guarantees in relation to its corporate credit card facility (facility limit of $400,000 of which $371,000 was unused
at balance date).
These guarantees may give rise to liabilities in the Company if the related entities do not meet their obligations that are
subject to the guarantees.
No material losses are anticipated in respect of any of the above contingent liabilities.
b) Commitments
(i) Capital commitments
There were no capital expenditure commitments and no other expenditure commitments at balance sheet date.
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.
Annual Report
85
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.
Name of entity
Country of
incorporation
Class of security
Equity holding
2021
%
2020
%
Pinnacle Investment Management Limited
Australia
Ordinary share
Pinnacle Funds Services Limited
Australia
Ordinary share
Pinnacle Services Administration Pty Ltd
Australia
Ordinary share
Pinnacle RE Services Limited
Australia
Ordinary share
Priority Funds Management Pty Ltd
Australia
Ordinary share
Priority Investment Management Pty Ltd
Australia
Ordinary share
Ariano Pty Ltd
Australia
Ordinary share
Next Financial Holding Company Pty Ltd
Australia
Ordinary share
PNI Option Plan Managers Pty Ltd
Australia
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
100
100
100
100
100
100
100
100
100
100
100
Annual Report
86
23. Investment accounted for using the equity method
a) Carrying amounts
The Group holds investments in entities under joint control that undertake investment management activities. Information
relating to these entities under joint control is set out below.
Ownership interest
Carrying Value
Name of company
Principal Activity
2021
2020
2021
Unlisted
%
%
$'000
Plato Investment Management Limited
Funds Management
42.66
42.66
1,335
Palisade Investment Partners Limited
Funds Management
37.60
37.60
9,715
2020
$'000
1,274
8,127
Hyperion Holdings Limited
Funds Management
49.99
49.99
18,633
16,560
Foray Enterprises Pty Limited
Funds Management
44.50
44.50
20,816
18,839
Solaris Investment Management Ltd
Funds Management
40.00
40.00
4,043
Spheria Asset Management Pty Ltd
Funds Management
40.00
40.00
4,666
Antipodes Partners Holdings Pty Ltd
Funds Management
23.57
23.57
13,383
3,415
1,565
8,277
Two Trees Investment Management Pty Ltd
Funds Management
49.00
43.96
3,046
-
Firetrail Investments Limited
Funds Management
23.50
23.50
17,663
15,552
Metrics Credit Holdings Pty Limited
Funds Management
35.00
35.00
46,730
45,769
Omega Global Investors Pty Limited
Funds Management
44.95
42.97
2,017
Longwave Capital Partners Pty Limited
Funds Management
40.00
40.00
1,952
Riparian Capital Partners Pty Limited
Funds Management
40.00
40.00
1,196
Reminiscent Capital Pty Limited
Funds Management
40.00
40.00
1,667
1,861
1,131
1,284
1,135
Coolabah Capital Investments Pty Ltd
Funds Management
25.00
25.00
37,950
35,860
Aikya Investment Management Limited
Funds Management
32.50
32.50
2,145
1,218
186,957
161,867
Each of the above entities 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.
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.
An impairment trigger assessment was carried out at 30 June 2021 and no impairment triggers were deemed to exist at
this date. 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 2021 (30 June 2020: $nil).
Revenues generated by Affiliates are impacted by movements in equities and other markets which, in turn, could impact
the Group’s share of net profit of associates and joint ventures accounted for using the equity method. Revenues
generated by Affiliates may also be impacted by movements in interest rates which, in turn, could impact the Group’s
share of net profit of associates and joint ventures accounted for using the equity method.
Annual Report
87
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
Metrics
Credit
Holdings
Pty Ltd**
2021
$000
2020
$000
2021
$000
2020
$000
2021
$000
2020
$000
2021
$000
2020
$000
2021
$000
Coolabah
Capital
Investme
nts Pty
Ltd**
2021
$000
Firetrail
Investme
nts Ltd**
2021
$000
Summarised statement of financial position
Total current assets
30,906
25,220
29,792
20,610
32,936
31,328
11,439
10,008
45,618
14,581
25,550
Total non-current assets
13,353
15,169
4,779
4,855
8,950
7,134
986
366
57,732
10,542
2,470
Total current liabilities
(7,183)
(7,415)
(14,662)
(10,588)
(8,871)
(6,514)
(3,601)
(3,739)
(9,069)
(4,471)
(8,057)
Total non-current liabilities
(26)
(78)
(1,024)
(557)
(11,627)
(15,153)
(57)
(62)
(50,074)
(7,070)
(1,620)
Net Assets
37,050
32,896
18,885
14,320
21,388
16,795
8,766
6,573
44,207
13,582
18,343
Group share in %
49.99%
49.99%
44.5%
44.5%
37.60%
37.60%
40.0%
40.0%
35.0%
25.0%
23.5%
Reconciliation to carrying
amounts:
Opening net assets 1 July
32,896
22,764
14,320
11,426
16,795
13,671
6,573
8,057
41,415
4,559
9,362
Issued shares
Reserves
-
-
-
-
-
-
-
708
622
125
125
286
263
-
-
-
-
390
(1)
-
-
-
Total comprehensive income 42,435
24,813
21,440
14,769
12,407
9,953
14,621
13,316
13,093
17,457
22,046
Dividends paid
(38,281)
(14,681)
(17,000)
(12,000)
(8,100)
(7,800)
(13,050)
(14,800)
(10,310)
(8,824)
(13,065)
Closing net assets
37,050
32,896
18,885
14,320
21,388
16,795
8,766
6,573
15,230
13,582
18,343
Group's share of net assets
18,522
16,445
8,404
6,372
8,042
6,315
3,507
2,629
15,472
3,396
4,311
Excess consideration over
share of net assets
111
115
12,412
12,467
1,673
1,812
536
786
31,258
34,554
13,352
Carrying amount
18,633
16,560
20,816
18,839
9,715
8,127
4,043
3,415
46,730
37,950
17,663
Summarised statement of
comprehensive income
Revenue
72,738
44,467
54,254
39,973
30,107
25,577
28,719
27,395
42,585
39,915
38,507
Net profit for the year after
tax
42,435
24,813
21,440
14,769
12,407
9,953
14,621
13,316
13,093
17,457
22,046
Other comprehensive income -
-
-
-
-
-
-
-
-
-
-
Total comprehensive income 42,435
24,813
21,440
14,769
12,407
9,953
14,621
13,316
13,093
17,457
22,046
Dividends received from joint
venture entities (Pinnacle
share)
19,140
7,341
7,565
5,280
3,078
3,207
5,220
5,920
3,609
2,274
3,070
*holding company for Resolution Capital Limited
**Metrics, Firetrail and Coolabah became material for the first time In the year ended 30 June 2021. They are reported in aggregate as part of the Individually Immaterial jointly
controlled entities In the prior year.
Annual Report
88
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.
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
Dividends received/receivable
2021
$'000
31,407
11,057
-
11,057
2020
$'000
114,926
9,984
-
9,984
2021
$'000
2020
$'000
161,867
113,351
7,725
-
66,440
43,819
(261)
37,953
(49,075)
(32,995)
Carrying amount at the end of the financial year
186,957
161,867
d) Share of entities' revenue, expenses and results
2021
$'000
2020
$'000
151,112
105,676
(59,497)
(51,412)
91,688
54,264
(25,175)
(16,311)
66,440
37,953
Revenues
Expenses
Profit before income tax
Income tax expense
Profit after income tax
Annual Report
89
e) Summary of entities under joint control
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net assets
2021
$'000
101,878
39,637
2020
$'000
73,788
36,639
141,515
110,427
29,632
31,352
60,984
80,531
23,520
12,027
35,547
74,880
24. Parent Entity financial information
a) Summary financial information
The individual financial statements for the Parent Entity (PNI) show the following aggregate amounts:
2021
$'000
2020
$'000
1,588
2,623
166,829
140,865
168,417
143,488
113
112
10,019
10,029
10,132
10,141
158,285
133,347
261,524
237,663
(54,697)
(57,012)
(48,542)
(47,304)
158,285
137,347
36,599
30,520
36,599
30,520
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)
Annual Report
90
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
2021
$'000
96,136
2020
$'000
16,066
96,136
16,066
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
Interest Expense
2021
$'000
67,017
922
1,543
(1,170)
2,153
1
2020
$'000
32,206
774
1,815
(460)
2,120
21
Net losses/(gains) on financial assets at fair value through profit or loss
(3,266)
1,530
Assets at amortised cost
8
(37)
Change in operating assets and liabilities, net of effects from acquisition and disposal of businesses:
Trade and other receivables
Investments accounted for using the equity method
Financial assets at FVTPL
Trade and other payables
Provisions
(974)
(445)
(17,365)
(4,958)
(20,444)
(10,592)
4,102
444
(101)
221
Net cash inflow/(outflow) from operating activities
32,971
22,094
The reconciliation of net cash flow from operating activities to profit/(loss) includes both continuing and discontinued
operations.
Annual Report
91
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 and note 26(g).
Details of dividend payments from entities under joint control are provided in note 23.
c) Key Management Personnel and Compensation
Disclosure relating to KMP 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:
(i) Movement in loans to KMP - Loans provided 25 August 2016
Upon acquisition of the non-controlling interests of Pinnacle Investment Management Limited, the Company provided
senior executives of its subsidiary Pinnacle Investment Management Limited with loans totalling $3,000,002, the proceeds
of which were used to partially fund the acquisition of shares from Deutsche Australia. This included loans of $500,000
each to Mr Ian Macoun, Mr Adrian Whittingham and Mr Andrew Chambers who are KMP of the Group and Mr Alex
Ihlenfeldt who ceased being a KMP from 1 September 2020.
The key terms of the loans are as follows:
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 (in August 2021), 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 exercise its rights to enforce its security including
by the appointment of a receiver.
During the year interest of $13,883 accrued on each of these loans to KMP. The balance of each loan at 30 June 2021
including capitalised interest was $564,209.
(ii) Movement in loans to KMP - 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 Adrian Whittingham
and Mr Andrew Chambers who are KMP of the Group and Mr Alex Ihlenfeldt who ceased being a KMP from 1 September
2020.
Annual Report
92
The loans date from 2009, 2011, 2012 and 2015 and were used to assist the executives to acquire 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.
The value of re-issued loans for each of the KMP and repayments made during the year were as follows:
Key Management
Personnel
Loan balance – 1 July
2020
$
Repayments made
$
Other changes during the
year
$
Loan balance – 30 June 2021
$
Ian Macoun
300,723
(116,372)
-
184,351
Alex Ihlenfeldt
586,106
-
(586,106)
Adrian Whittingham
534,977
Andrew Chambers
534,977
(534,977)
(116,372)
-
-
*Alex Ihlenfeldt ceased being a KMP from 1 September.
(iii) Loan Shares issued under the Pinnacle Omnibus Plan
-
-
418,605
During the year to 30 June 2021, 0.4 million additional loan shares were issued to KMP under the Pinnacle Omnibus Plan
(no additional loan shares were issued during the year to 30 June 2020).
The additional loan shares issued during the year to 30 June 2021 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 on termination of employment or when the underlying equity is sold, whichever occurs earlier.
The existing loan shares are subject to service and performance conditions and will vest after five years, if the 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.
The value of the loans issued for each of the KMP at period end and repayments made during the year were as follows:
Key Management
Personnel
Loan balance –
1 July 2020
$
Ian Macoun
1,646,810
Alex Ihlenfeldt
2,120,961
Adrian
Whittingham
1,646,810
Andrew Chambers
4,391,494
Dan Longan
Calvin Kwok
-
-
New loans issued
$
Repayments made
$***
Loan shares
forfeited* $
Other changes
during the year*
$
Loan balance – 30
June 2021
$
-
-
-
-
(45,880)
-
(2,120,961)
(19,306)
(1,627,504)
-
1,600,930
-
-
(122,347)
4,269,147
1,048,080
(40,656)
1,060,480
2,067,904
1,048,080
(55,950)
1,767,467
2,759,597
*Includes changes due to employees commencing or ceasing to be KMP during the year. Dan Longan commenced being a KMP from 6th July 2020. Calvin Kwok commenced being a KMP
from 1 September 2020. Alex Ihlenfeldt ceased being a KMP from 1 September 2020.
**Adrian Whittingham was not awarded any LTI during FY21 and the loan shares previously awarded to him under the Omnibus Incentive Plan were forfeited when he transitioned to a
part-time role on 1 January 2021
***Repayments are from dividends received In relation to the loan shares.
(iv) Loans to other Related Parties
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 $0.2m were made. The balance of the loans
at 30 June 2021 including capitalized interest was $1.6m.
Annual Report
93
e) Loans to/from related parties
Loans to joint associates (including Affiliate executives)
Balance at 1 July
Loans advanced
Interest accrued
Loans repaid
Share of equity accounted losses from Affiliates
Balance at 30 June
f) Guarantees
2021
$
2020
$
4,458,806
6,047,018
2,657,334
1,030,000
109,618
125,467
(4,437,704)
(2,471,852)
-
(271,827)
2,788,054
4,458,806
The Group has provided guarantees to subsidiaries as described in note 21.
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 $30,022,351 (2020: 21,070,413). Also see
note 13
(ii)
Transactions associated with Principal Investments managed by jointly controlled affiliates
o
o
o
Purchase of financial assets at fair value through profit and loss $36,068,000 (2020: $25,025,000)
Proceeds for disposal of financial assets at fair value through profit and loss $13,897,517 (2020:
$15,335,538)
Balance of financial assets at fair value through profit and loss at 30 June 2021 $56,459,977 (2020:
$32,431,785)
(v)
Dividend revenue $2,328,453 (2020: $818,324)
(vi)
Balance of trade receivables to jointly controlled entities at 30 June 2021 $17,360,658 (2020: $16,387,019)
27. Key Management Personnel
a) Key Management Personnel compensation
Short-term employee benefits
Post-employment benefits
Long-term benefits
Share-based payments
2021
$
2020
$
3,285,722
2,237,500
135,759
100,000
(31,454)
12,200
643,578
795,731
Total Key Management Personnel compensation
4,033,605
3,145,431
Annual Report
94
Certain KMP are party to the long-term employee incentive arrangement described in note 32(s)(vii). At 30 June 2021, the
balance of loans issued to Key Management Personnel was $11,300,535 (2020: $11,762,818) relating to 4,121,460 shares
issued in the Company (2020: 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 KMP of the Group,
including their related parties, are set out below.
(i) Aggregates for Key Management Personnel
Balance at the
start of the
year
$
Interest paid
and payable
for the year
$
Loans
advanced
during the year
$
Loan repayments
received
$
Other
Changes*
$
Balance at the
end of the year
$
Interest not
charged
$
2021
13,964,165
43,963
2,096,160
(1,051,860)
(2,059,223)
12,993,205
640,711
2020
14,451,181
54,312
-
(541,328)
-
13,964,165
705,861
*Includes changes due to employees commencing or ceasing to be KMP during the year.
Number in
Group at the
end of the
year
5
4
The amounts shown for interest not charged in the table above represents the difference between the amount paid and
payable for the year and the amount of interest that would have been charged on an arm’s length basis.
28. Share-based payments
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, 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.
a) 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).
b) 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 long-term incentives for employees (including
executive and non-executive directors) to deliver long-term shareholder returns. The plan provides for the ability to offer
options, performance rights and loan funded shares to employees. 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.
Annual Report
95
(i) Loan Shares
Grant
date
2021
Expiry
date
Exercise
price
Balance at
start of
the year
Granted
during
the year
Exercised
during
the year
Forfeit
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
2,200,000
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
-
-
-
-
11 September 2020
10 September 2025
$5.2404
30 December 2020
29 December 2024
$6.8450
-
-
1,150,000
350,000
4,550,000
1,500,000
Weighted average exercise price
$6.27
$5.61
2020
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
4,800,000
150,000
Weighted average exercise price
$6.45
$2.97
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(300,000)
1,900,000
(300,000)
1,100,000
-
-
-
-
800,000
150,000
1,150,000
350,000
(600,000)
5,700,000
$6.48
$6.06
(400,000)
2,200,000
-
-
-
1,400,000
800,000
150,000
(400,000)
4,550,000
$7.29
$6.27
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,500,000 loan shares were issued to employees during the financial year and 600,000 loan shares were forfeit by
employees during the year. The shares are subject to service and 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
Expected price volatility of the Company's shares: 36%
Expected dividend yield: 0.0%
Risk-free interest rate: 2.28%
Annual Report
96
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%
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 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%
Annual Report
97
Fair value of interests granted – 11 September 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: $2.4878 per loan share
Exercise price: $5.2404
Grant date: 11 September 2020
Vesting date: 10 September 2025
Share price at grant date: $4.99
Expected price volatility of the Company's shares: 61%
Expected dividend yield: 0.0%
Risk-free interest rate: 0.28%
Fair value of interests granted – 30 December 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: $3.7704 per loan share
Exercise price: $6.8450
Grant date: 30 December 2020
Vesting date: 29 December 2025
Share price at grant date: $7.24
Expected price volatility of the Company's shares: 61%
Expected dividend yield: 0.0%
Risk-free interest rate: 0.34%
Annual Report
98
(ii) Options
Grant
date
2021
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
11 September 2020
10 September 2025
$5.2404
30 December 2020
29 December 2025
$6.8450
-
-
-
-
200,000
100,000
450,000
300,000
Weighted average exercise price
$4.46
$5.78
2020
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
-
-
-
-
-
-
-
-
-
-
-
(150,000)
100,000
-
-
-
200,000
200,000
100,000
(150,000)
600,000
$5.66
$4.88
-
-
-
-
250,000
200,000
450,000
$4.46
-
-
-
-
-
-
-
-
-
-
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.
Annual Report
99
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 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: $0.75 per option
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.
Fair value of interests granted – 11 September 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 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: $1.88 per option
Exercise price: $5.2404
Grant date: 11 September 2020
Vesting date: 10 September 2025
Share price at grant date: $4.99
Expected price volatility of the Company's shares: 61%
Expected dividend yield: 3.7%
Risk-free interest rate: 0.28%
Options issued under the plan carry no dividend and voting rights.
Annual Report
100
Fair value of interests granted – 30 December 2020
100,000 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: $2.86 per option
Exercise price: $6.8450
Grant date: 30 December 2020
Vesting date: 29 December 2025
Share price at grant date: $7.24
Expected price volatility of the Company's shares: 61%
Expected dividend yield: 3.7%
Risk-free interest rate: 0.34%
Options issued under the plan carry no dividend and voting rights.
c) Expenses arising from share-based transactions
Total expenses arising from share-based payment transactions recognised during the period as part of incentive expenses
were as follows:
Pinnacle Investment Management Group Employee Option Share Plan
Pinnacle Omnibus Plan
Pinnacle Long-term Employee Incentive Plan
2021
$’000
-
1,961
46
2020
$’000
76
1,823
62
Total share-based payment transactions
2,007
1,961
Annual Report
101
29. Remuneration of auditors
During the year the following fees were paid or payable for services provided by the auditor of the Company and its related
practices:
a) PricewaterhouseCoopers Australia
(i)
The deferred tax asset balance comprises temporary differences attributable to:
Audit and review of financial statements
241,601
266,621
2021
$
2020
$
Other assurance services:
Audit of regulatory returns
Audit of compliance plan - Responsible entity *
Other assurance services
21,939
91,059
-
21,939
102,744
50,000
Total remuneration for audit and other assurance services
354,599
441,304
(ii) Taxation services
Tax services
Total remuneration for taxation services
(iii) Other services
Other services
61,893
61,893
93,759
93,759
-
2,987
Total remuneration of PricewaterhouseCoopers Australia
416,492
538,050
Total remuneration of auditors
416,492
538,050
* 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.
Annual Report
102
31. Critical accounting estimates and judgements
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 discussed below.
(i) Estimated impairment of non-financial assets
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 utilized. 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 the
group holds a minority shareholding (20%-49.99%) of the voting rights (with no preferential rights to returns) and there is a
requirement for unanimous decision making in relation to a number of strategic matters contained in the shareholders
agreements. (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 liabilities outlined in note
21(a). These assumptions are based on all existing information available through to the date of signing the Financial
Report.
Annual Report
103
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 Act 2001. The Group is a for
profit entity for the purpose of preparing the financial statements.
(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 2020:
•
•
•
•
•
AASB 2018-7 Amendments to Australian Accounting Standards – Definition of Material
AASB 2018-6 Amendments to Australian Accounting Standards – Definition of a Business
AASB 2019-3 Amendments to Australian Accounting Standards – Interest Rate Benchmark Reform
AASB 2019-5 Amendments to Australian Accounting Standards – Disclosure of the Effect of New IFRS Standards
Not Yet issued in Australia
Conceptual Framework for Financial Reporting and AASB 2019-1 Amendments to Australian Accounting
Standards – References to the Conceptual Framework.
The amendments listed above did not have any impact on the Group's accounting policies and did not have any impact on
the amounts recognised in prior periods and are not expected to significantly affect the current or future periods.
(iii) 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 2020.
(iv) 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.
Annual Report
104
The acquisition method of accounting is used to account for business combinations by the Group (refer to note 32(h)).
Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated.
Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred.
Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by
the Group.
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)).
(iii) Entities under joint control
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).
(i) Changes in ownership interests
The Group treats transactions with non-controlling interests that do not result in a loss of control as transactions with
equity owners of the Group. A change in ownership interest results in an adjustment between the carrying amounts of the
controlling and non-controlling interests to reflect their relative interests in the subsidiary. Any difference between the
amount of the adjustment to non-controlling interests and any consideration paid or received is recognised in a separate
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 reclassified to the consolidated statement of comprehensive
income.
Annual Report
105
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)).
Annual Report
106
f)
Income tax
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. These tax amounts are measured as if each
entity in the tax consolidated group continues to be a standalone taxpayer in its own right.
In addition to its own current and deferred amounts, Pinnacle Investment Management Group Limited also recognises the
current tax liabilities (or assets) and the deferred tax assets arising from unused tax losses and unused tax credits assumed
from controlled entities in the tax consolidated 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 between the amounts assumed and amounts
receivable or payable under the tax funding agreement 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.
Annual Report
107
Leases are recognized 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 between the liability and finance cost. The finance cost is charged to
profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the
liability for each period. The right-of-use asset is depreciated over the shorter of the asset’s useful life and 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
the exercise price of a purchase option if the lessee is reasonably certain to exercise that option, and
payments of penalties for terminating the lease, if the lease term reflects the lessee exercising that 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.
To determine the incremental borrowing rate, the 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
uses a build-up approach that starts with a risk-free interest rate adjusted for credit risk for leases held by the
Group, which does not have recent third party financing, and
makes adjustments specific to the lease, e.g. term, country, currency and security.
Right-of-use assets are measured at cost comprising the following:
•
•
•
•
the amount of the initial measurement of the lease liability
any lease payments made at or before the commencement date, less any lease incentives received
any initial direct costs, and
restoration costs.
h) Business combinations
The acquisition method of accounting is used to account for all business combinations, including business combinations
involving entities or businesses under common control, regardless of whether 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 interest's proportionate share of the acquiree's net identifiable
assets.
The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition
date fair value of any previous equity interest in the acquiree over the fair value 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.
Annual Report
108
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. Amounts classified
as a financial liability are subsequently remeasured to fair value with changes in fair value recognised in the consolidated
statement of comprehensive income.
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.
l)
Investments and other financial assets
Classification and measurement
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.
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109
(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 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. Significant financial difficulties of the counterparty, probability that the counterparty will
enter bankruptcy or financial reorganisation, and default in payments are all considered indicators that a loss allowance
may be required. If the credit risk increases to the point that it is considered to be credit impaired, interest income will be
calculated based on the gross carrying amount adjusted for the loss allowance.
The amount of the impairment loss is recognised in the statement of comprehensive income on a separate line item. When
a loan receivable for which an impairment allowance had been recognised 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.
Annual Report
110
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.
The Group holds the following derivative instruments:
Futures are contractual obligations to buy or sell financial instruments on a future date at a specified price established in
an organised market. The futures contracts are collateralised by cash 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.
Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when
it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be
measured reliably. All repairs and maintenance are charged to profit or loss during the reporting period in which they are
incurred.
Depreciation is calculated using the straight-line method to allocate their cost, net of their residual values, over their
estimated useful lives or in the case of leasehold improvements, the shorter lease term as follows:
-
-
-
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.
Customer contracts
Costs incurred which are directly associated with the acquisition of a customer contract, have been capitalized as an
intangible asset and are being amortised over the agreement term of 3 years. Amortisation is calculated on a straight-line
basis over the contract term.
Annual Report
111
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.
q) Borrowings
Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured
at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is
recognised in profit or loss over the period of the borrowings 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 noncash 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 in profit or loss, which is measured as the
difference between the carrying amount of the financial 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 within 12 months after
the end of the reporting period in which the employees render the related service are recognised in the provision for
employee benefits. They are measured as the present value of expected future payments to be made in respect of services
provided by employees up to the end of the reporting period using the projected unit credit method. Consideration is
given to 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.
Annual Report
112
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.
(iii) Retirement benefit obligations
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.
(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
Termination benefits are payable when employment is terminated by the Group before the normal retirement date, or
when an employee accepts voluntary redundancy in exchange for these benefits. 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
Annual Report
113
over all of the specified vesting conditions are to be satisfied. The inflows and outflows associated with these
arrangements are accounted for on a net basis, as the arrangements 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.
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 average number of ordinary shares outstanding during the financial year, adjusted for bonus
elements in ordinary shares issued during the year and excluding treasury shares (see note 16(d)).
(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 investing or financing activities
which are recoverable from, or payable to, the taxation authority, are presented as operating cash flows.
x) Discontinued operations
Annual Report
114
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.
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 2021
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.
Annual Report
115
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 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. This amount, in its entirety, has been
donated for worthy charitable purposes, in addition to the amount which would otherwise have been donated by the
Group, as explained in Note 2.
Annual Report
116
09
Directors’
Declaration
In the directors’ opinion:
a) the financial statements and notes set out on pages 55 to 116 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 2021 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.
Alan Watson, Chair
Sydney, 4 August 2021
Annual Report
117
10
Independent
Auditor's
Report
Annual Report
118
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 2021 and of
its financial performance for the year then ended
(b) complying with Australian Accounting Standards and the Corporations Regulations
2001.
What we have audited
The Group financial report comprises:
•
•
•
•
•
•
•
the consolidated statement of financial position as at 30 June 2021
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 significant
accounting policies and other explanatory information
the directors’ declaration.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our
responsibilities under those standards are further described in the Auditor’s
responsibilities for the audit of the financial report section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our opinion.
Independence
We are independent of the Group in accordance with the auditor independence
requirements of the Corporations Act 2001 and the ethical requirements of the
Accounting Professional & Ethical Standards Board’s APES 110 Code of Ethics for
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.
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.
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 $3,350 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, Pinnacle Services
Administration Pty Ltd and Pinnacle RE Services Limited. We performed targeted audit
procedures over the remaining significant balances and 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 our 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 period. The key audit
matters were addressed in the context of our audit of the financial report as a whole, and
in forming our opinion thereon, and we do not provide a separate opinion on these
matters. Further, any commentary on the outcomes of a particular audit procedure is
made in that context. We communicated the key audit matters to the Audit, Compliance,
and Risk Management Committee.
Key audit matter
Share of net profit of associates and
joint ventures accounted for using
the equity method
Refer to note 23(d) - $66,440k
Share of net profit of associates and joint
ventures accounted for using the equity
method is calculated by reference to
Pinnacle’s share of each Affiliate’s net
profit for the year.
How our audit addressed the key audit
matter
We performed the following procedures, amongst
others:
• For a sample of Pinnacle Affiliates, we
• Obtained supporting evidence for a sample
of changes in Pinnacle’s equity ownership
during the year;
• Obtained the share registers of the
Affiliates and recalculated Pinnacle’s
ownership percentage;
Key audit matter
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 are set out
in relevant Product Offering Documents.
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.
This was a key audit matter because the
share of net profit of associates and joint
ventures accounted for using the equity
method is material, and 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.
How our audit addressed the key audit
matter
• Obtained the Affiliates’ profit and loss
statement, assessed whether consistent
accounting policies were adopted, and
recalculated Pinnacle’s share of net profit.
• For a sample of performance fees recorded by
Pinnacle Affiliates, we obtained the relevant
source documents and:
• 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.
• Compared the hurdle rates and any
accumulated deficiency clauses to the
relevant contracts.
• Obtained the evidence from relevant
external sources to assess key inputs into
the calculations (for example net asset
values and fund returns).
• Reperformed the performance fee
calculation with reference to the key inputs
used in the calculations.
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 2021 but does
not include the financial report and our auditor’s report thereon.
Our opinion on the financial report does not cover the other information and 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 29 to 49 of the directors’
report for the year ended 30 June 2021.
In our opinion, the remuneration report of Pinnacle Investment Management Group
Limited for the year ended 30 June 2021 complies with section 300A of the Corporations
Act 2001.
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 2021
11
Shareholder
Information
Annual Report
125
The shareholder information set out below is correct as at 2 August 2021.
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
No. of shareholders
No. of shares
% of issued
shares
1,819
1,830
551
512
119
824,328
4,874,092
4,061,363
14,364,355
0.43
2.56
2.13
7.54
166,459,867
87.34
0.00
4,831
190,584,005
100.00
Unmarketable parcels
Minimum $500 parcel at $13.20 per unit
38
163
473
Minimum parcel size
No. of shareholders
No. of shares
Twenty largest shareholders (as at 2 August 2021)
Rank
Name
1
2
3
4
5
6
7
8
9
10
11
HSBC Custody Nominees (Australia) Limited
J P Morgan Nominees Australia Pty Limited
Macoun Generation Z Pty Ltd
National Nominees Limited
Andrew Chambers & Fleur Chambers
Mr Alexander William Macdonald
Kinauld Pty Ltd
Citicorp Nominees Pty Limited
Macoun Superannuation Pty Ltd
BNP Paribas Noms Pty Ltd
Mr Adrian Whittingham
Annual Report
126
No. of shares
% of issued
shares
33,300,625
17.47
27,446,224
14.40
13,617,506
7.15
7,346,331
5,303,614
5,270,090
4,740,000
4,409,537
3,777,999
3,514,631
3,103,614
3.85
2.78
2.77
2.49
2.31
1.98
1.84
1.63
Rank
Name
No. of shares
% of issued
shares
12
13
14
15
16
17
18
19
20
Vestinoz Pty Ltd
AJF Squared Pty Ltd
Mr David Francis Cleary
Mr David Noel Groth
Earlston Nominees Pty Ltd
HSBC Custody Nominees (Australia) Limited
BNP Paribas Nominees Pty Ltd
Mark Cormack and Melanie Cormack
Mirrabooka Investments Limited
Total
Total remaining holders balance
2,987,766
2,896,609
2,807,149
2,801,224
2,280,000
2,177,869
1,924,664
1,585,435
1,226,582
1.57
1.52
1.47
1.47
1.20
1.14
1.01
0.83
0.64
132,517,469
69.53%
58,066,536
30.47%
The names of the shareholders who have notified the Company of a substantial holding in accordance with section 671B of
the Corporations Act are:
Substantial shareholder
Steve Wilson and associates
Ian Macoun and associates
No. of shares
% of shares
18,767,500
18,276,077
9.8%
9.6%
Voting rights
Upon a poll each share shall have one vote.
Options and performance rights on issue
Distribution of securities
Options
There are 1,000,000 options on issue as at 2 August 2021.
The options are held by:
A&T Structured Finance Services Pty Ltd as trustee for the Pinnacle Investment Management Group Employee Option
Share Plan;
Alison Maschmeyer; and
Ben Cossey.
The options are not listed.
Annual Report
127
Performance rights
There are 17,739 performance rights on issue as at 2 August 2021.
The performance rights are held by:
Alan Watson;
Dab Hand Pty Ltd; and
Gerard Bradley
Voting rights
There are no voting rights attaching to the options or performance rights.
Annual Report
128
12
Corporate
Directory
Annual Report
129
Pinnacle Investment Management Group Limited
Incorporated in Queensland on 23 April 2002
Auditor
PricewaterhouseCoopers
480 Queen Street,
Brisbane QLD 4000
Australia
Brisbane
Registered Office
Level 19, 307 Queen Street
Brisbane QLD 400
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
ABN
22 100 325 184
Directors
Alan Watson,
Chair (appointed director 15 July 2013, appointed Chair 23 October
2015)
Ian Macoun,
Managing Director (appointed MD 17 August 2016; appointed
director 25 August 2016)
Deborah Beale AM (appointed 1 September 2016)
Lorraine Berends (appointed 1 September 2018)
Gerard Bradley AO (appointed 1 September 2016)
Andrew Chambers (appointed 1 September 2016)
Adrian Whittingham (appointed 1 September 2016)
Chief Legal, Risk and Compliance Officer
and Company Secretary
Calvin Kwok
Chief Financial Officer
Dan Longan
Share Registry
Computershare Investor Services Pty Limited
Level 1, 200 Mary Street
Brisbane QLD 4000
Telephone 1300 850 505
ASX Code
PNI
Shares are listed on the Australian Securities Exchange.
Bankers
Commonwealth Bank of Australia
240 Queen Street,
Brisbane QLD 4000
Annual Report
130
Website address
www.pinnacleinvestment.com
Annual Report
131