A
Annual Report
2019
Platinum Asset Management Limited
ABN 13 050 064 287
PLATINUM ASSET MANAGEMENT LIMITED ANNUAL REPORT 2019 B
Directors
(as at 30 June 2019)
Michael Cole
Stephen Menzies
Anne Loveridge
Brigitte Smith
Tim Trumper
Andrew Clifford
Kerr Neilson
Elizabeth Norman
Andrew Stannard
Shareholder Liaison
Elizabeth Norman
Company Secretary
Joanne Jefferies
Registered Office
Level 8, 7 Macquarie Place
Sydney NSW 2000
Phone 1300 726 700 (Australia only)
Phone 0800 700 726 (New Zealand only)
Phone +61 2 9255 7500
+61 2 9254 5555
Fax
Share Registrar
Computershare Investor Services Pty Ltd
Level 3, 60 Carrington Street
Sydney NSW 2000
Phone 1300 855 080 (Australia only)
Phone +61 3 9415 4000
+61 3 9473 2500
Fax
Auditor and Taxation Advisor
PricewaterhouseCoopers
One International Towers
Watermans Quay
Barangaroo NSW 2000
Securities Exchange Listing
Platinum Asset Management Limited shares are listed
on the Australian Securities Exchange (ASX code: PTM)
Website
www.platinum.com.au/About-Platinum/ptm-shareholders
Corporate Governance Statement
https://www.platinum.com.au/PlatinumSite/media/About/
ptm_corp_gov.pdf
PLATINUM ASSET MANAGEMENT LIMITED ANNUAL REPORT 2019 1
Contents
Chairman’s Report
Managing Director’s Letter
Shareholder Information
Directors’ Report
Auditor’s Independence Declaration
Statement of Profit or Loss and Other Comprehensive Income
Statement of Financial Position
Statement of Changes in Equity
Statement of Cash Flows
Notes to the Financial Statements
Directors’ Declaration
Independent Auditor’s Report
2
5
14
17
43
44
46
48
50
51
98
99
PLATINUM ASSET MANAGEMENT LIMITED ANNUAL REPORT 2019 2
Chairman’s Report 2019
Funds Under Management (“FUM”)
It has been a challenging year for Platinum Investment Management Limited (“Platinum”) with
investment returns for most of our managed funds and portfolios lagging the broader market
returns for the 12 months to 30 June 2019. This underperformance translated into lower fund
flows, lower investment performance fees and a consequent decline in earnings per share,
and dividends for Platinum Asset Management Limited (“the Company” or “PTM”).
FUM at 30 June 2019 was approximately $24.8 billion, a decrease of 4% from the 30 June 2018
closing FUM of approximately $25.7 billion. The reduction in FUM was driven by net fund outflows
of $0.2 billion and the year-end net cash distribution and other capital outflows of $0.9 billion,
which was only partly offset by positive market returns of $0.2 billion.
Average FUM for the financial year decreased by 4% to $25.3 billion from an average FUM of
$26.4 billion for the previous year.
The ongoing uncertainty in relation to the US-China trade war and the bleaker prospects for
future economic growth caused investors in global equity markets to remain nervous, even
as markets continued to appreciate in value. Investors generally reacted to these fears by
favouring companies perceived to be immune from external events, such as the US-China trade
war. In contrast, value stocks and/or those with a degree of earnings cyclicality were avoided
by the majority of investors, and those stocks generally became cheaper.
Platinum has always believed that attractive valuations should be the starting point for any
investment decision. This growing divergence between growth and perceived safety on one hand
and attractive valuation on the other, led to some short-term investment underperformance
for Platinum.
Operating Performance
For the 12 months to 30 June 2019, total revenue and other income for PTM decreased by 15%
to $299.3 million (2018: $353.3 million). Profit after tax attributed to members decreased by
17% to $157.7 million (2018: $189.2 million). Earnings per share for the financial year were
27 cents per share.
This decline in total revenue and other income were mainly due to a $22 million drop in the
investment performance fees received by Platinum and a $21 million decline in gains from
Platinum’s seed investments.
The Directors’ Report contains a detailed explanation of the important role seeding investments
has in product innovation, even though it can produce distortions to underlying profitability
from year to year. The decline in investment management fees (excluding performance fees)
was 4%, broadly consistent with the decline in average FUM. Average fee margins were
maintained.
PLATINUM ASSET MANAGEMENT LIMITED ANNUAL REPORT 2019 3
Remuneration
Included in the 2019 Remuneration Report on page 25 of the Company’s 2019 Annual Report
is a letter from the Chair of the Nomination and Remuneration Committee. I encourage all
shareholders to read this letter, which outlines the remuneration policy of the Company and
also its focus on investment performance based remuneration.
As a result of negative weighted average 1 and 3 year investment performance and also
lower revenue and profit for the 2019 financial year, the aggregate variable remuneration
across PTM was well down from that of the prior financial year.
Specifically, no member of the investment team received any variable awards under the Profit
Share Plan and the Chief Executive Officer (CEO)/Chief Investment Officer, Andrew Clifford,
elected not to receive any variable awards for the 2019 financial year, either under the CEO Plan
or the Investment Team Plan. The two other executive key management personnel (KMPs),
Elizabeth Norman (Director of Investor Services and Communications) and Andrew Stannard
(Finance Director), both received reduced variable awards under the General Employee Plan
for the 2019 financial year when compared to their awards for the prior financial year.
Dividends
The Directors have declared a 2019 final fully-franked ordinary dividend of 14 cents per share.
This will be paid on 20 September 2019.
A 2019 interim fully-franked ordinary dividend of 13 cents per share was also declared during
the year.
Whilst the Company has a Dividend Reinvestment Plan in place, it has not been activated.
Business Development
During the 2019 financial year, Platinum established a distribution office in London. A team
of three new staff members is now in place. This initiative will strengthen our efforts in
establishing a European business.
In addition, we continued to leverage our distribution relationship with AccessAlpha Worldwide
in the US, with quarterly trips to the US being conducted by our investment specialists and
members of our investment team, which included meetings with a number of institutional
prospects.
Sell-down of shares by Kerr Neilson
In March 2019, the Company’s founder and former CEO, Kerr Neilson together with
Judith Neilson, disposed of 60 million ordinary PTM shares by way of a fully underwritten
private placement to institutional and professional investors, thus deepening the Company’s
institutional shareholder base.
Following the sale, Kerr Neilson together with Judith Neilson retain voting control of
approximately 43% of the Company’s issued share capital. Kerr Neilson also remains
on the Board and is an active member of the investment team.
PLATINUM ASSET MANAGEMENT LIMITED ANNUAL REPORT 2019 4
Chairman’s Report 2019 – continued
Hayne Royal Commission
With the Hayne Royal Commission into Misconduct in the Banking, Superannuation and Financial
Services Industry completed, it was gratifying to note that issues raised by Commissioner
Hayne in relation to grandfathered commissions and conflicts of interest within vertically
integrated advice businesses, were not applicable to Platinum. Platinum was vocal in
advocating for change in the wealth management sector, and made three separate written
submissions to the Royal Commission in 2018.
The Board and its Associated Committees
The Nomination and Remuneration Committee, and the Audit, Risk and Compliance Committee
both had a busy and productive year.
The Nomination and Remuneration Committee set the new CEO’s remuneration plan and KPIs,
oversaw the smooth transition of the CEO responsibilities from Kerr Neilson to Andrew Clifford,
recommended the aggregate 2019 variable remuneration pool and awards for the CEO,
Executive Directors and other senior managers within Platinum, and continued with the
Company’s program of succession planning.
The Audit, Risk and Compliance Committee approved Platinum’s risk management framework
and internal audit plan, received regular reporting on risk management matters and the results
of internal audits, considered the independence of the external auditor, recommended the
appointment of the external auditor and monitored the impact of changes to the legal and
regulatory environment affecting Platinum.
Finally
This has been a challenging period for value investors like Platinum but it retains a strong share
of the Australian retail investor market, a highly differentiated product and a strong 25-year
track record.
I encourage you to read the Managing Director’s letter to shareholders by Andrew Clifford,
which explains the basis of our investment philosophy and why Platinum may at times
experience periods of investment underperformance. Andrew also discusses the investment
outlook and some broader industry observations.
Michael Cole
Chairman
20 August 2019
PLATINUM ASSET MANAGEMENT LIMITED ANNUAL REPORT 2019 Managing Director’s Letter 2019
5
Investment Performance
Our flagship Platinum International Fund (the Fund) delivered a compound return of 9.5% p.a.
over the five years to 30 June 2019 and a cumulative return of 57.3% for the same period, which
on face value was a reasonable outcome. However, this outcome lagged the broader market,
which delivered a compound return of 12.6% p.a. and a cumulative return of 81.4% over the same
period. In the last 12 months, the Fund returned 0.7% against a market return of 11.3%.1 This last
year represents approximately three quarters of the Fund’s underperformance over the last five
years. The Fund’s performance is representative of the performance of all our global equity
mandates, which in total account for 65% of our funds under management (FUM).2
The reason for commencing an analysis of our business with a discussion of recent investment
performance is straightforward. As I wrote in my letter to shareholders last year, Platinum was
established on the premise that “we had an investment approach that had proven to produce
good investment returns”. While it has most certainly done that over our 25 years in business,
it is certainly fair to question whether this has been the case in recent years.
To answer this question requires some context around the composition of market returns and
how we have positioned the portfolios in response to those returns. The other reason to discuss
recent investment performance is that it is the best lead indicator of short-term fund flows and
thus near-term business performance.
The defining characteristic of global equity markets in recent years has been the outperformance
of the so-called growth stocks over value stocks. The investment industry terminology here
refers to stocks that have high (for growth) or low (for value) valuations relative to earnings or
net assets. We would not define value in this fashion, but nevertheless it serves the purpose for
examination of the source of returns for equity markets over long periods of time. Chart 1 shows
the performance of value over growth since 1926. When the line is rising, value is outperforming
growth. Value, having outperformed growth for much of the period since the 1930s, has now
trailed growth for 12 years, the longest period in history. Indeed, it is worth noting that the last
period of significant outperformance of growth over value ended with the ‘tech wreck’ of 2001.
1.
Source: Platinum Investment Management Limited and FactSet. Fund returns are C Class returns to
30 June 2019, after fees and costs, pre-tax, and assume the reinvestment of distributions. Market returns
are the MSCI All Country World Net Index to 30 June 2019. Past performance is not a reliable indicator of
future returns.
2.
Source: Platinum Investment Management Limited.
PLATINUM ASSET MANAGEMENT LIMITED ANNUAL REPORT 2019 6
Managing Director’s Letter 2019 – continued
Chart 1 – Value Factor
5000
4000
3000
2000
1000
0
1926 1931 1936 1941 1946 1951 1956 1961 1966 1971 1976 1981 1986 1991 1996 2001 2006 2011 2016
Source: https://mba.tuck.dartmouth.edu/pages/faculty/ken.french/data_library.html and Platinum Investment
Management Limited. Calculated as the return on the 30% of stocks with the lowest price-to-book less the return
on the 30% of stocks with the highest price-to-book for each period.
Low interest rates are the typical explanation offered for this unusual period. Undoubtedly,
lower interest rates justify higher valuations of equities and indeed higher relative valuations
of growth over value. What we see in the market at an aggregate level and an individual stock
level is not in line with this expected outcome. While growth stocks have seen their valuation
multiples rise significantly, value stocks have at best held their valuations or declined
(see Chart 2). Interest rates account for part of the phenomenon but not all of it.
Chart 2 – US Valuation Dispersion
Top Quintile
Bottom Quintile
60
50
40
30
20
10
0
1985
1988
1991
1994
1997
2000
2003
2006
2009
2012
2015
2018
Source: Platinum Investment Management Limited. Top and bottom quintiles for listed US company
price-to-earnings ratios.
PLATINUM ASSET MANAGEMENT LIMITED ANNUAL REPORT 2019 7
We think the changing risk preferences of investors is a better explanation of the performance
differential. Today, investors face a range of risks and variables that were, for the main part,
not present prior to 2007. Negative or near zero interest rates are prevalent across much of the
developed world, with over US$16 trillion3 in fixed interest investments providing a return of less
than zero to their owners. This certainly provides an incentive for investors to find alternative
investments. However, the business landscape has become considerably more complex with
many traditional businesses impacted by new business models due to the internet and growth
in e-commerce. In addition, the political environment across the globe has deteriorated
significantly. The most notable outcome has been the trade war initiated by the US, not only
on China, but on many of its trading partners. Beyond this, there is also Brexit, the fall-out over
the Iranian nuclear deal, ongoing protests in Hong Kong, and India’s recent actions in Kashmir,
just to name a few.
The intuitive response of investors in this environment is to seek out businesses they perceive
to be immune to well-known risks and avoid those that are susceptible. As such, investors have
strongly favoured defensive businesses (e.g. consumer staples, real estate, utilities, and
infrastructure) and high-growth businesses, and avoided businesses directly exposed to the
trade war or those with any degree of cyclicality. It is our assessment that this intuitive and fearful
approach of the crowd has been critical in driving the differential in performance of value and
growth stocks. This conclusion arises from a consideration of likely returns from a wide range of
individual companies based on our expectations of future earnings and cash flows. Without doubt,
we currently see far superior investment opportunities from the value end of the spectrum.4
As an example, consider the opportunity the market gave investors in US company, Micron
Technology in the past year. Micron is one of three producers of memory chips (DRAM) and one
of five producers of flash memory chips (NAND). These products are found in computers of all
types from mobile phones to servers found in large data centres. During the year, the business
experienced a cyclical downturn as mobile phone sales and investment in data centres slowed,
and then found itself in the centre of the trade disputes as a major supplier to Huawei. The stock
was sold off aggressively and traded at levels around book value, which was an extraordinary
valuation given the accumulated intellectual property and industrial expertise in this company.
Earnings have fallen sharply, but, in our conservative assessment, should recover to levels that
place the stock (based on the lows of the year) on a price-to-earnings ratio (P/E) of 4 to 5 times.
At this level, the recovered earnings represents an annual return of 20 to 25% to investors
who purchased the stock at its lows, from a business that has net cash and has committed to
using free cash flow to buy back stock. Compare this with a market favourite such as Paypal,
a company that we exited in the past 12 months. Paypal is a well-positioned online payments
business growing its business at a rate in the mid-teens. We have no great issue with the
market’s favourable view of Paypal, but the company trades on a P/E of over 50 times, or an
initial earnings yield of a little under 2%. It needs to grow at a high rate for a long period of time
to ever provide an investor with a reasonable return.
3.
4.
Source: Bloomberg, 18 August 2019 and https://www.abc.net.au/news/2019-08-18/a-third-of-global-
bonds-17-trillion-dollars-have-negative-yields/11420860
Refer to Platinum’s The Journal on our website for further reading: https://www.platinum.com.au/
Insights-Tools/The-Journal/Macro-Overview-June-2019
PLATINUM ASSET MANAGEMENT LIMITED ANNUAL REPORT 2019 8
Managing Director’s Letter 2019 – continued
Conceptually, in our view the investment logic to sell Paypal and to buy Micron is absolutely rock
solid. Of course, we may be wrong about the prospects for either of these individual stocks, but
the point is that there are currently a multitude of opportunities for investors to sell high-flying
favourites and to acquire more attractively priced but somewhat imperfect companies. Despite
the sound logic of such a move, there is of course a significant dilemma in taking such a path;
simply that investors’ current preference for growth over value will remain in place and that in
the short term, investment performance will continue to lag. Given the recent falls in interest
rates and the escalation of the US trade war, this would appear to be a very real prospect.
However, as an investment manager we believe it is more important to minimise the risk of loss
to clients than to achieve the maximum return possible, even if at times it means that our
investment returns lag the competition. There is no question in our mind that Micron is a much
safer and higher returning investment than Paypal over the long term. As such, not only have we
continued to migrate our portfolios towards the better value available in markets, we have
reduced our net exposure to markets through increased cash and short positions. Undoubtedly,
these moves have suppressed investment returns in recent years as we have sought to reduce
risk in portfolios. In addition, we also note that our portfolios are highly differentiated by both
industry and geography from the growth strategies of many of our competitors that have not
surprisingly been popular in recent years, providing an important diversification in portfolios for
our clients. In assessing the adequacy of our medium-term returns, we would suggest that they
be viewed in the context of our risk averse and differentiated approach.
PLATINUM ASSET MANAGEMENT LIMITED ANNUAL REPORT 2019 9
Funds Under Management – Retention and Growth
Funds Under Management ($ million, to 30 June 2019)
FUNDS
Retail offerings
Platinum Trust Funds
(excluding funds fed
from PIXX and PAXX)
and Platinum Global
Fund (mFund)
OPENING
BALANCE
(1 JULY
2018)
FLOWS
INVESTMENT
PERFORMANCE
DISTRIBUTION
AND OTHER
CLOSING
BALANCE
(30 JUNE
2019)
% OF
TOTAL
16,927
(254)
46
(780)
15,939
64
Quoted Managed Funds
(PIXX and PAXX)
313
201
Listed Investment
Companies (PMC and PAI) 934
–
MLC Platinum
Global Fund
Institutional mandates
Management Fee
Mandates
UCITS Platinum
World Portfolios
“Absolute” Performance
Fee Mandates
“Relative” Performance
Fee Mandates
970
(134)
2,421
(13)
444
(22)
498
(55)
3,192
31
TOTAL
25,699
(246)
Source: Platinum Investment Management Limited
5
8
(1)
58
(1)
2
(33)
486
(94)
848
835
2
3
3
–
–
–
–
2,466
10
421
445
2
2
107
224
(1)
3,329
14
(908)
24,769
100
The ‘Distribution and Other’ figure is comprised of the distribution from the Platinum Trust Funds/PGF/PIXX/PAXX
to investors and also to clients who have selected the “relative” performance fee mandate. The balance also
includes dividend and tax payments made by the Listed Investment Companies – Platinum Capital Limited
(ASX code: PMC) and Platinum Asia Investments Limited (ASX code: PAI).
PLATINUM ASSET MANAGEMENT LIMITED ANNUAL REPORT 2019
10
Managing Director’s Letter 2019 – continued
Short-term investment performance is the best lead indicator of fund flows in the asset
management business. This is simply the result of human nature, as our cognitive biases
strongly attract us to assets that performed well recently. In this light, the fact that funds
under management only fell by 3.6% over the course of the year is a good result.
We would attribute this outcome to the strong understanding and appreciation of our
investment approach by our clients and their advisers. Simply, they have benefited from our
cautious approach in ‘hot’ markets before. In addition, our increased engagement with financial
advisers and clients over recent years has ensured that they have remained well informed
about our views on markets and the positioning of our funds.
Despite this relatively good outcome for the year ending 30 June 2019, this is unlikely to be
maintained in the year ahead if performance remains subdued, particularly relative to the
broader market. As expected, the trend in flows has deteriorated in the second half of the year,
which saw net outflows of $935 million (excluding year-end fund distributions of $780 million)
versus net inflows in the first half of the year of $689 million.
As always, there is a very clear focus within the business on investment results, though
improved outcomes cannot be ‘willed’ into place. It is a case of maintaining our quality of
research and discipline in the investment decision process. In the meantime, we are not simply
sitting back and waiting for investment returns to improve. There is ongoing investment in the
business, which will provide us with a solid platform for future growth.
Our investment specialists function, first established in 2013, has been a step change in
our engagement with the adviser channel in Australia and New Zealand. We now have four
investment specialists focused on the financial adviser channel, each with significant
experience in financial markets, with three being former Platinum investment analysts. A full
program of annual events for advisers has been developed, including a capital city roadshow
(annual since 2012) and a regional adviser roadshow (annual since 2014), which this year
will visit a combined 36 locations. The investment specialists also conduct several hundred
meetings each year with advisers around the country, research professionals, and also
speak at a range of industry events, dealer group conferences and at advisers’ client events.
Members of the investment team present at selected events on their specific areas of expertise.
Our New Zealand annual roadshow has been going since 1999, and has extended its reach in
recent years to some of New Zealand’s smaller cities.
We have now made our direct investor roadshow across six capital cities an annual event
(previously a biannual event having commenced in 1999). There are ongoing efforts to build
informative and thoughtful content for investors, accessible via our website and widely
distributed through external channels.
PLATINUM ASSET MANAGEMENT LIMITED ANNUAL REPORT 2019 11
A key opportunity to grow the business lies with our offshore efforts. This commenced with the
launch of our UCITS funds for the European market in 2015. In late 2018, we established our
UK office to enhance our efforts to develop and service the European client base. The efforts
of the UK team continue to be supplemented on a regular basis by visits from members of the
investment team and investment specialists. Our partnership with AccessAlpha Worldwide to
develop our US institutional client base is well advanced, with ongoing regular visits to potential
clients by the team. In late 2018, appropriate fund structures were created for our prospective
US clients.
In the local market, we are focused on improving access to our services to a wider range of
investors. An example of this was our launch of our quoted managed funds in September 2017,
which provided a mechanism for accessing our flagship International Fund and Asia Fund via the
convenience of an ASX transaction. These funds have continued to experience inflows over the
last 12 months. We continue to look for opportunities to expand investors’ access to our various
equity strategies.
We are quietly ambitious to grow our business, though we do have self-imposed limitations.
Within the wealth management industry there is increasing innovation and complexity in
product development, often with new incentive mechanisms to attract funds. At times, it is far
from clear whether these innovations are for the benefit of the product manufacturer or the end
client. As an investment-led business, we want to be clear that any initiative we pursue will be
first and foremost for the benefit of potential clients. In addition, we are also equally clear that
our efforts to grow the business must not impact our ability to deliver good investment
outcomes to our longstanding and loyal clients.
Costs
The most important resource within Platinum is its employees, and as such accounts for well
over half of the company’s expenses. Total costs fell by $8.6 million to $76.4 million, driven by a
$14.1 million fall in cash variable remuneration (bonuses). The fall in cash variable remuneration
is a direct result of our approach to linking remunerating outcomes for employees within our
investment team to investment performance. In an ideal world, I would prefer to see these costs
rising, reflecting good client investment outcomes.
Excluding the fall in cash variable remuneration, costs otherwise increased by $5.5 million.
The increase predominantly reflected an increase in the number of employees and ongoing
increases in the amortisation costs associated with our Deferred Remuneration Plan.
The increase in the size of our team reflects the ongoing investment in the business outlined
earlier: in particular, an increase in the size of our investment specialists team, including our
UK office, to support the increasing engagement with financial advisers locally and development
of the business offshore. There has also been an ongoing increase in the development of the
investment team’s capacity, which as at 30 June 2019 accounted for 36 of Platinum’s
114 employees.
PLATINUM ASSET MANAGEMENT LIMITED ANNUAL REPORT 2019 12
Managing Director’s Letter 2019 – continued
Selected employees are awarded stock under the Deferred Remuneration Plan, with a vesting
period of four years. These grants are made annually to allow employees to gradually increase
their ownership of the company. At the balance date, rights to 5.1 million shares were
outstanding under the plan, and to date, none have vested with employees. The plan ensures
that employees who contribute to the development of the business over the long term are
rewarded, and serves as an important mechanism for employee retention.
Royal Commission
Much has been written about the Royal Commission into Misconduct in the Banking,
Superannuation, and Financial Services Industry. For our business in particular, the long-term
issue has centred on the conflicts of interest in the industry that have prevented us, as an
independent investment manager, from participating in the entirety of the market. Ideally, in
a post-Royal Commission world, the government and regulators will work with the industry to
substantially reduce, if not eliminate, these conflicts.
The critical role a financial adviser plays in managing the financial affairs of individual investors
should not be forgotten. In an environment where each individual is required to save (at a
minimum via compulsory superannuation contributions), everyone is an investor. Investing well
is not easy, not only because of the complexity of tax regulations, but also because our intuitive
responses to investment issues often lead us astray. There remains an important role for
independent financial advisers to guide individuals through the investing process.
Outlook
Our recent investment performance may lead one to a take a subdued view of our future
prospects. However, I believe that the long period of outperformance of growth over value,
discussed at the outset, is setting up an extraordinary opportunity for Platinum to make a
substantial difference to our clients’ investment outcomes. As such, I remain optimistic in
our ability to grow the business over the long term. We have been here before.
Finally, I would like to thank our clients and shareholders for your support. I appreciate that our
results over the last 12 months have been far from what you would have desired or expected.
I can assure you that the entire team at Platinum has been and will continue to work diligently
to improve both client and business outcomes. During the year, we celebrated 25 years in
business. On the occasion, we recognised 21 employees who have worked with us for over
15 years. We are fortunate to have a team of great ability, and with this depth of experience,
we will continue to work to serve the interests of our clients and shareholders.
Andrew Clifford
Managing Director
PLATINUM ASSET MANAGEMENT LIMITED ANNUAL REPORT 2019 13
Financial Statements 2019
Platinum Asset Management Limited
General Information
The financial statements were authorised for issue, in accordance with a resolution of Directors,
on 20 August 2019. The Directors have the power to amend and reissue the financial statements.
PLATINUM ASSET MANAGEMENT LIMITED ANNUAL REPORT 2019 14
Shareholder Information
The shareholder information set out below was applicable as at 15 August 2019.
Distribution of ordinary shares
Analysis of number of ordinary shareholders by size of holding:
1 to 1,000
1,001 to 5,000
5,001 to 10,000
10,001 to 100,000
100,001 and over
Holding less than a marketable parcel (less than $500)
NUMBER
OF HOLDERS
OF ORDINARY
SHARES
6,069
13,533
3,816
2,355
70
25,843
501
PLATINUM ASSET MANAGEMENT LIMITED ANNUAL REPORT 2019
15
Ordinary shareholders
Twenty largest ordinary shareholders
The names of the twenty largest shareholders of the Company are listed below:
ORDINARY SHARES
J Neilson
K Neilson
HSBC Custody Nominees (Australia) Limited
Citicorp Nominees Pty Limited
Platinum Investment Management Limited (nominee)
JP Morgan Nominees Australia Limited
National Nominees Limited
Jilliby Pty Limited
Pacific Custodians Pty Limited
J Clifford
BNP Paribas Nominees Pty Limited
BNP Paribas Nominees Pty Limited
Citicorp Nominees Pty Limited
Xetrov Pty Limited
BKI Investment Company Limited
HSBC Custody Nominees (Australia) Limited
Mrs Michele Martinez
Warbont Nominees Pty Limited
Navigator Australia Limited
AMP Life Limited
NUMBER HELD
126,037,421
126,037,420
65,175,020
34,282,877
29,364,201
28,779,804
10,629,682
6,500,000
5,095,797
5,000,000
3,826,373
2,422,074
2,143,172
1,500,000
1,238,000
1,125,859
1,072,309
942,325
899,848
878,590
% OF TOTAL
SHARES ISSUED
21.48
21.48
11.11
5.85
5.01
4.91
1.81
1.11
0.87
0.85
0.65
0.41
0.37
0.26
0.21
0.19
0.18
0.16
0.15
0.15
452,950,772
77.21
Unquoted ordinary shares
There are no unquoted ordinary shares, however under the Deferred Remuneration Plan, a total
of 5,095,797 deferred rights have been allocated to eligible employees of Platinum Investment
Management Limited, and on vesting and exercise of these rights, an equivalent number of PTM
shares (that have already been acquired on-market) will be allocated to these employees
(please refer to the Remuneration Report and Note 20 for further details).
PLATINUM ASSET MANAGEMENT LIMITED ANNUAL REPORT 2019
16
Shareholder Information – continued
Substantial shareholders
The following parties have notified the Company that they have a substantial relevant interest
in the ordinary shares of Platinum Asset Management Limited in accordance with section 671B
of the Corporations Act 2001:
J Neilson, K Neilson
J Clifford, Moya Pty Limited, A Clifford
^ Based on the last substantial shareholder notice lodged.
ORDINARY SHARES
NUMBER HELD
252,074,841
32,831,449
% OF TOTAL
SHARES ISSUED
42.97 ˆ
5.9 ˆ
Distribution of Annual Report to Shareholders
The law allows for an “opt in” regime through which shareholders will receive a printed “hard
copy” version of the Annual Report only if they request one. The Directors have decided to only
mail out an Annual Report to those shareholders who have “opted in”.
Financial Calendar
Ordinary shares trade ex-dividend
Record date (books close) for dividend
Dividend paid
These dates are indicative and may be changed.
27 August 2019
28 August 2019
20 September 2019
Notice of Annual General Meeting
The details of the Annual General Meeting (AGM) of Platinum Asset Management Limited are:
10am Wednesday 20 November 2019
Fort Macquarie Room
InterContinental Hotel Sydney
117 Macquarie Street
Sydney NSW 2000
Questions for the AGM
If you would like to submit a question prior to the AGM to be addressed at the AGM, you may
email your question to invest@platinum.com.au.
PLATINUM ASSET MANAGEMENT LIMITED ANNUAL REPORT 2019
Directors’ Report
17
The Directors present their report, together with the financial statements, on the consolidated
entity (referred to hereafter as the ‘consolidated entity’, ‘group’ or ‘Platinum’) consisting of
Platinum Asset Management Limited (referred to hereafter as the ‘Company’ or ‘parent entity’)
and the entities it controlled at the end of, or during, the year ended 30 June 2019.
Directors
The following persons were Directors of Platinum Asset Management Limited during the whole
of the financial year and up to the date of this report, unless otherwise stated:
Michael Cole
Stephen Menzies
Anne Loveridge
Brigitte Smith
Tim Trumper
Andrew Clifford
Kerr Neilson
Elizabeth Norman Executive Director and Director of Investor Services and Communications
Andrew Stannard
Chairman and Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director (from 1 August 2018)
Chief Executive Officer/Managing Director
Executive Director
Executive Director and Chief Financial Officer
Principal Activities
The Company is the non-operating holding company of Platinum Investment Management
Limited (“PIML”) and its controlled entities. Platinum Investment Management Limited
(“Platinum”), trading as Platinum Asset Management, operates a funds management business.
Operating and Financial Review
FUM at 30 June 2019 was $24.8 billion and this represented a decrease of 3.6% from the
30 June 2018 closing FUM of $25.7 billion. The FUM at 30 June 2019 is after the impact of the
30 June 2019 net distribution outflow of $0.8 billion. Average FUM for the year decreased by
4.1% to $25.3 billion from an average FUM of $26.4 billion for the previous year. The reduction in
FUM was driven by net fund outflows of $246 million. Despite the fund outflows, the absolute
investment return remained positive contributing $224 million to FUM during the financial year.
Our two ASX quoted managed funds, Platinum International Fund (Quoted Managed Hedge Fund)
(ASX code: PIX) and Platinum Asia Fund (Quoted Managed Hedge Fund) (ASX code: PAX)
continued to do well with total FUM increasing to $486 million at 30 June 2019 (30 June 2018:
$312.5 million).
PLATINUM ASSET MANAGEMENT LIMITED ANNUAL REPORT 2019 18
Directors’ Report – continued
The profit before income tax expense, excluding performance fees, for the funds management
business was $219.5 million for the year ended 30 June 2019, down 1.4% on the previous year
(see table below).
FUNDS MANAGEMENT BUSINESS SEGMENT
Profit before income tax expense*
Less: Performance fees
Profit before income tax expense,
excluding performance fees
*
Refer to note 11.
JUNE 2019
$A’000
219,491
30
JUNE 2018
$A’000
244,436
21,878
% DECREASE
219,461
222,558
(1.4)%
Performance fee revenue was negligible for the year at $30,000 (2018: $21.9 million) and
our seed investments made an overall loss for the year of $988,000, including dividends
and distributions (2018: $19.5 million gain) and these two highly variable factors, which
are dependent on investment performance and market conditions, combined to reduce
overall profitability.
It is important to explain why PIML makes seed investments. Over the course of the last few
years, Platinum has expanded the range of investment products offered by it thereby growing
its investor base and FUM. Seeding is an important part of our overall growth strategy as it
provides new products with some key benefits:
–
–
–
–
–
It demonstrates the investment manager’s commitment to the product and strategy;
It aligns the interest of the investment manager with that of investors;
It provides the additional scale required to effectively construct and manage the
portfolio from inception;
It helps to dilute and manage the impact of cash flows, providing stability to the
portfolio; and
It removes the investment and operational risks for initial investors who would
otherwise be the first investor.
The investment manager’s seeding of its newly created products is not intended to be a
long-term commitment. As each product grows to sufficient size and scale, it is the intention of
Platinum to reduce or eliminate its level of investment and to recycle that cash into other parts
of the business. The decision to invest is driven by the strategic growth needs of the business.
The investments are not intended to be held for the purposes of market speculation.
PLATINUM ASSET MANAGEMENT LIMITED ANNUAL REPORT 2019
19
Total expenses decreased by $8.5 million or 10.1% from the previous financial year. The decrease
primarily related to a 17.4% decline in staff costs (including share-based payments and related
on-costs) from $52.8 million in 2018 to $43.6 million for 2019. This decline was mostly due to
investment team remuneration decreasing in line with investment performance. Other non-staff
expenses were controlled, increasing just 2% when compared to the previous year.
For the reasons noted, profit after tax attributed to members declined to $157.7 million
(2018: $189.2 million) for the year. This represents a decline in profit after tax of 16.7%.
Earnings per share was 27.03 (2018: 32.36) cents per share.
During the financial year, Platinum UK Asset Management Limited commenced operations in
London as the European distribution and servicing centre for Platinum and Platinum World
Portfolios Plc, which currently has three employees.
Platinum continues to be positioned for the future:
–
–
–
–
The investment team are able to find good value in the market;
The smooth leadership transition has helped ensure continuity of key people;
The Company has made significant progress in relation to its future growth plans; and
Platinum continues to invest in people, processes and technology.
The consolidated entity is in a strong financial position, with a strong balance sheet. However,
the most significant driver of our sustainable future growth is, and will always be, the delivery
of superior, long-term, investment returns for our clients.
Dividends
The Company has limited capital requirements and generally expects that most, if not all,
future profits will continue to be distributed by way of dividends, subject to ongoing
capital requirements.
Since the end of the financial year, the Directors have declared a 2019 final fully-franked
dividend of 14 cents per share ($82,135,046), with a record date of 28 August 2019 and
payable to shareholders on 20 September 2019.
A 2019 interim fully-franked dividend of 13 cents per share ($75,816,914) was paid on
18 March 2019. A 2018 final fully-franked dividend of 16 cents per share ($93,313,125)
was paid on 21 September 2018.
Significant Changes in the State of Affairs
There were no significant changes in the state of affairs of the consolidated entity during
the financial year and up to the date of this report.
Environmental Regulation
The consolidated entity is not subject to any significant environmental regulation under
Commonwealth, State or Territory laws.
PLATINUM ASSET MANAGEMENT LIMITED ANNUAL REPORT 2019 20
Directors’ Report – continued
Information on Directors
Michael Cole AM, BECON, MECON, FFIN
Independent Non-Executive Director, Chairman and member of the Audit, Risk & Compliance
and Nomination & Remuneration Committees since 10 April 2007.
Mr Cole has over 41 years of experience in the investment banking and funds management
industry. Mr Cole was an Executive Director/Executive Vice President at Bankers Trust Australia
for over 10 years. Mr Cole is Chairman of Ironbark Capital Limited.
Stephen Menzies BECON, LLB, LLM
Independent Non-Executive Director and member of the Audit, Risk & Compliance and
Nomination & Remuneration Committees since 11 March 2015 and Chair of the Nomination
& Remuneration Committee since 19 June 2017.
Mr Menzies is Chairman of Silicon Quantum Computing Pty Limited and is a past Chairman of
the Centre for Quantum Computation & Communication Technology. Mr Menzies retired as a
partner at Ashurst law firm in 2015 and until his retirement was consistently ranked as one
of Australia’s leading corporate lawyers. As Head of China Practice for Ashurst, Mr Menzies
oversaw the Shanghai and Beijing offices of that firm. Previously, Mr Menzies was National
Director of Enforcement at the Australian Securities Commission and has a long history in the
funds management sector. Mr Menzies is a director of Platinum World Portfolios Plc.
Anne Loveridge BA (HONS), FCA (AUSTRALIA), GAICD
Independent Non-Executive Director and member of the Audit, Risk & Compliance Committee
and Nomination & Remuneration Committees since 22 September 2016 and Chair of the Audit,
Risk & Compliance Committee since 24 February 2017.
Ms Loveridge is currently a Non-Executive Director for the National Australia Bank (NAB)
Group and NIB Holdings Limited. Ms Loveridge retired as a partner and deputy chairman of
PricewaterhouseCoopers (PwC) in 2015. At PwC, she had over 30 years of experience in the
Financial Services Assurance practice. Ms Loveridge has extensive senior management
and people leadership experience, knowledge of financial and regulatory reporting and
risk management.
Brigitte Smith B.CHEM ENG (HONS), MBA, MALD, FAICD
Independent Non-Executive Director and member of the Audit, Risk & Compliance and
Nomination & Remuneration Committees since 31 March 2018.
Ms Smith was co-founder and Managing Director of GBS Venture Partners for twenty years and
has worked with Australian and US fast growth companies as an investor and board member,
supporting business strategy, human resources and operations. Ms Smith has worked in the
US and Australia in operating roles with fast growth technology based businesses, and at
Bain & Company as a strategic management consultant.
PLATINUM ASSET MANAGEMENT LIMITED ANNUAL REPORT 2019 21
Tim Trumper MBA, UNE
Independent Non-Executive Director and member of the Audit, Risk & Compliance and
Nomination & Remuneration Committees since 1 August 2018.
Mr Trumper is Chair of the NRMA, advisor and shareholder in Quantium, Australia’s leading
data and analytics company and holds interests in several private high growth innovative
companies. He is an authority on the utilisation of data to drive innovation, and corporate
strategy. Mr Trumper is an experienced non-executive director, former CEO, and advisor for
high-performance global and Australian companies. His career has spanned diverse categories
including artificial intelligence and machine learning, big data, digital transformation, mobility
and transport, financial services and media.
Along with fellow directors and the then Chairman the late Hon. R J Hawke, Tim helped to
establish The Bestest Foundation. This charity has raised over $4 million for disadvantaged
Australian children.
Andrew Clifford BCOM (HONS)
Managing Director since 1 July 2018 and Chief Investment Officer since 8 May 2013.
Mr Clifford joined Platinum as a co-founding member in 1994 in the capacity of director of
Platinum Investment Management Limited and Deputy Chief Investment Officer. In May 2013,
Mr Clifford was appointed Chief Investment Officer. Effective 1 July 2018, Andrew Clifford was
appointed as the Chief Executive Officer/Managing Director of the Platinum group. Previously
he was a Vice President at Bankers Trust Australia covering Asian equities and managing the
BT Select Market Trust – Pacific Basin Fund.
Kerr Neilson BCOM, ASIP
Managing Director to 30 June 2018 and Executive Director since 12 July 1993.
Mr Neilson joined Platinum as a co-founding member in 1994 and was the Managing Director
of the Company from incorporation to 30 June 2018. Prior to Platinum, Mr Neilson was an
Executive Vice President at Bankers Trust Australia. Previously he worked in both the UK and
South Africa in stockbroking.
Elizabeth Norman BA, GRADUATE DIPLOMA IN FINANCIAL PLANNING
Director of Investor Services and Communications since 8 May 2013.
Ms Norman joined Platinum in February 1994 in a role of Investor Services and Communications
Manager. Previously she worked at Bankers Trust Australia in product development and within
the retail funds management team.
Andrew Stannard BMS(HONS), GRADUATE DIPLOMA IN APPLIED FINANCE AND INVESTMENT, CA
Director and Chief Financial Officer since 10 August 2015.
Mr Stannard joined Platinum from AllianceBernstein where he held the position of Chief Financial
Officer for the Asia-Pacific region. Mr Stannard has 29 years of finance experience with expertise
in audit, financial control, operations, funds management, financial services regulation and
corporate governance.
PLATINUM ASSET MANAGEMENT LIMITED ANNUAL REPORT 2019 22
Directors’ Report – continued
Information on Company Secretary
Joanne Jefferies BCOM, LLB
Company Secretary since 17 October 2016.
Ms Jefferies is an English law qualified solicitor with more than 24 years of legal experience in
the asset management and securities services sectors, in England and across Asia Pacific.
Ms Jefferies joined Platinum in October 2016 as General Counsel and Group Company Secretary,
having spent the previous six years at BNP Paribas Securities Services as Head of Legal Asia
Pacific, Company Secretary for all Australian subsidiaries and a member of the Asia Pacific
Executive Committee. Joanne has previously held senior legal positions with Russell
Investments, Morley Funds Management (Aviva Investors) and Lord Abbett, and served
as the General Counsel for the UK’s funds management industry association, the
Investment Association.
Meetings of Directors
The number of meetings of the Company’s Board of Directors (“the Board”) and of each Board
committee held during the year ended 30 June 2019, and the number of meetings attended
by each Director were:
BOARD (HELD 7)
ATTENDED
NOMINATION &
REMUNERATION
COMMITTEE (HELD 5)
ATTENDED
AUDIT, RISK &
COMPLIANCE
COMMITTEE (HELD 4)
ATTENDED
Michael Cole
Stephen Menzies
Anne Loveridge
Brigitte Smith
Tim Trumper
Andrew Clifford
Kerr Neilson
Elizabeth Norman
Andrew Stannard
7
7
7
7
6
5
5
6
7
5
5
5
5
4
–
–
–
–
4
4
4
4
4
–
–
–
–
Tim Trumper was only eligible to attend 6 Board meetings and 4 Nomination & Remuneration/
Audit, Risk & Compliance Committee meetings as he joined the Board on 1 August 2018. During
the financial year, in addition to the four scheduled Board meetings, three adhoc Board meetings
were scheduled to approve an extension of the on-market share buy-back period, to approve the
CEO’s remuneration and Key Performance Indicators (KPIs) and to approve the release of the
Company’s cleansing statement in connection with Kerr Neilson’s proposed controller sale.
PLATINUM ASSET MANAGEMENT LIMITED ANNUAL REPORT 2019
23
Indemnity and Insurance of Officers
During the year, the Company incurred a premium in respect of a contract for indemnity
insurance for the Directors and Officers of the Company named in this report.
Indemnity and Insurance of Auditor
The Company has not, during or since the end of the financial year, indemnified or agreed to
indemnify the auditor of the Company or any related entity against a liability incurred by
the auditor.
During the financial year, the Company has not paid a premium in respect of a contract to insure
the auditor of the Company or any related entity.
Non-Audit Services
Details of the amounts paid or payable to the auditor for non-audit services provided during
he financial year by the auditor are outlined in Note 22 to the financial statements.
The Directors are satisfied that the provision of non-audit services during the financial year,
by the auditor (or by another person or firm on the auditor’s behalf), is compatible with the
general standard of independence for auditors imposed by the Corporations Act 2001.
The Directors are of the opinion that the services as disclosed in Note 22 to the financial
statements do not compromise the external auditor’s independence requirements of the
Corporations Act 2001 for the following reasons:
–
–
All non-audit services have been reviewed and approved by the PTM Audit, Risk and
Compliance Committee to ensure that they do not impact the integrity 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 …thics for Professional Accountants issued by the
Accounting Professional and Ethical Standards Board.
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 ‘rounding-off’. Amounts in this report have been rounded off in
accordance with that Instrument to the nearest thousand dollars, or in certain cases, the
nearest dollar.
Managing Tax Risk
The Board is committed to acting with integrity and transparency in all tax matters. The Company
aims to meet all of its obligations under the law and pay the appropriate amount of tax to the
relevant authorities.
PLATINUM ASSET MANAGEMENT LIMITED ANNUAL REPORT 2019 24
Directors’ Report – continued
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 43.
Auditor
PricewaterhouseCoopers continues in office in accordance with section 327 of the
Corporations Act 2001.
This report is made in accordance with a resolution of Directors, pursuant to section
298(2)(a) of the Corporations Act 2001.
On behalf of the Directors
Michael Cole
Chairman
20 August 2019
Sydney
Andrew Clifford
Director
PLATINUM ASSET MANAGEMENT LIMITED ANNUAL REPORT 2019
25
Remuneration Report
A Message from the Chair of the Nomination & Remuneration Committee
As shareholders may well know, the core purpose of the Company is to deliver exceptional
investment returns to clients over the medium to long-term, consistent with a risk profile that
seeks to preserve investors’ capital. Platinum believes that long-term investment performance
is the primary driver of fund inflows, profit growth and ultimately long-term value creation
for shareholders.
The remuneration policy is shaped around this core purpose. The Company can only achieve
exceptional investment performance by attracting and retaining superior investment talent,
supported by a team of similarly talented client service and operational staff.
Platinum’s remuneration program has two key elements, being fixed remuneration (salary and
superannuation) and variable incentive awards, which are made either in the form of cash or by
way of a deferred equity award. To ensure the alignment of the investment team with strong
client investment returns, the size of the variable remuneration pool for the investment team
largely varies with the extent of investment performance generated for clients, measured over
both 1 and 3 year periods.
That said, there can be times when, despite Platinum’s sound stock selection process, capital
markets can work against Platinum’s investment style, resulting in relative underperformance.
As Platinum’s investment approach builds portfolios from the bottom up on an index agnostic
basis, periods of underperformance relative to the broader market are almost inevitable.
In these transitory periods, the Directors retain the right to make appropriate
discretionary awards.
The Board is also conscious of the need to align remuneration outcomes with shareholder
returns. We note the trend by some other corporates to focus on Total Shareholder Return
(“TSR”) as a basis for designing Key Management Personnel (“KMP”) and employee
remuneration structures. TSR measures share price appreciation or depreciation plus dividend
reinvestment between two points in time. Whilst, over long periods of time, TSR will usually
reflect the underlying performance of a company’s business, it is Platinum’s view that there
are a number of problems associated with the use of TSR as the primary factor for determining
employee remuneration. Shorter term variables, such as the macroeconomic environment or
interest rates, are factors outside of the control of employees, but these can often overwhelm
underlying developments in the business, and determine a company’s share price. The result is
that employees may be either unduly rewarded or punished by variables outside of their control.
The use of TSR as an incentive tool, in our view, encourages a focus on short-term outcomes
such as current year earnings, or short-term investment returns, potentially at the expense
of longer-term business outcomes. Given the strong alignment between employees and
shareholders that already exists at Platinum due to the significant employee shareholding, we
believe that Platinum’s shareholders are better served by a remuneration policy that closely
aligns remuneration with the investment performance that we generate for our clients.
PLATINUM ASSET MANAGEMENT LIMITED ANNUAL REPORT 2019 26
Directors’ Report – continued
Remuneration Report – continued
Your Nomination & Remuneration Committee has been active in the 2019 financial year and
up to the date of this report. In particular, we have:
–
–
–
–
–
–
Continued to push forward our program of Board renewal, including the appointment
of Mr Tim Trumper to the Board in August 2018;
Worked to ensure the smooth transition of CEO responsibilities to Mr Andrew Clifford,
including the design and recommendation to the Board of his new remuneration
arrangements and KPIs;
Reviewed and recommended that the Board approve the aggregate 2019 variable
remuneration pool for Platinum as well as the individual awards for the CEO, Executive
Directors and Senior Managers;
Reviewed and updated the Board skills matrix to better reflect the required skills of
the Board;
Conducted an annual review of UCITS V remuneration and disclosure rules; and
Discussed the Company’s remuneration practices with external stakeholders.
We will continue to refine and review our remuneration arrangements to ensure that they
align with Platinum’s core purpose and we welcome your feedback.
Stephen Menzies
Chair of Nomination & Remuneration Committee
PLATINUM ASSET MANAGEMENT LIMITED ANNUAL REPORT 2019 27
Introduction
The Company’s Directors present the Remuneration Report prepared in accordance with section
300A of the Corporations Act 2001 for the Company and consolidated entity for the year ended
30 June 2019. The Remuneration Report forms part of the Directors’ Report.
The information provided in this Remuneration Report has been audited by the Company’s auditor,
PricewaterhouseCoopers, as required by section 308 (3C) of the Corporations Act 2001.
Summary of Remuneration Outcomes for 2019
–
As noted in the Managing Director’s letter, the investment team’s remuneration is closely
aligned with the investment returns that are generated for clients;
–
–
–
–
–
–
The underperformance of our funds versus market indices and/or lower revenues for
the 2019 adversely affected variable remuneration outcomes for Platinum's employees
in aggregate. With the exception of a very small group of employees who each made
outstanding contributions to the business, variable awards were significantly down
on prior year and salary increases were kept modest, mostly reflecting increased
competition for key staff;
There were no awards made under the Profit Share Plan (“PSP”) due to the underperformance
of our funds versus the indices and the investment team and general employee plan pools
were substantially reduced;
The Chief Executive Officer/Chief Investment Officer, Mr Andrew Clifford, elected not to
receive any variable awards in 2019;
A total of $7.47m was awarded to eligible participants under the Deferred Remuneration
Plan in the 2019 financial year. The accounting impact of the award will be expensed
through the profit and loss statement over the five year period of the award, so the
expense impact is apportioned;
The allocation of 2019 profits attributed to both shareholders and employees is outlined
in the first graph on the following page. It shows that the compensation awarded to
employees was modest, relative to the returns to shareholders, with shareholders
receiving a share of profits four times greater than staff; and
The second graph shows that alignment between employees and the owners of the
business also remains very strong, with several key staff being primarily remunerated by
way of dividends and capital appreciation, in exactly the same way as other shareholders.
PLATINUM ASSET MANAGEMENT LIMITED ANNUAL REPORT 2019 28
Directors’ Report – continued
Remuneration Report – continued
Graph 1: Actual Share of 2019 Profit
Graph 1: Actual Share of 2019 Profit
(pre tax and pre staff costs)
(pre tax and pre staff costs)
Graph 2: Composition of PTM
Graph 2: Composition of PTM
share ownership
share ownership
Staff costs*
Staff costs*
15%
15%
25%
25%
Tax
Tax
60%
60%
Shareholders
Shareholders
* Includes staff costs and share based payments expense
* Includes staff costs and share based payments expense
Non
Non
employee
employee
50%
50%
50%
50%
Directors
Directors
and staff
and staff
Guiding Principles of KMP and Staff Remuneration
The core purpose of the Company is to deliver exceptional investment returns to clients over
the medium to long-term, consistent with a risk profile that seeks to protect against downside
market risk. It achieves this purpose by attracting and then retaining superior investment
talent, supported by a team of similarly talented client service and operational staff.
The success of our remuneration program can be evidenced by our strong long-term investment
performance track record, a history of high retention rates amongst key investment and
operational staff, and a record of profitable growth.
Platinum’s remuneration program has two1 key elements:
1.
2.
Fixed Remuneration: This is set at a level sufficient to attract exceptional talent. It includes
salary, benefits and statutory entitlements. Fixed remuneration is benchmarked to market
at least annually and reflects the scope of the individual role, and the required level of skill
and experience.
Variable Remuneration: Each employee is assessed annually across a range of quantitative
and qualitative factors, as well as appropriate risk management and behavioural criteria.
Variable award recommendations are generally made annually on a discretionary basis
following rigorous review by senior management and the Nomination & Remuneration
Committee, which comprises non-executive directors only, before ultimately being
approved by the Board. Variable awards can be made in the form of cash or a deferred
equity award that vests over a four year period. This deferral element is designed to foster
sustainable growth, as well as sound financial, operational and risk management practices,
and to retain talent.
1.
Platinum also has two inactive long-term Remuneration Plans, being an “Options and Performance Rights
Plan” (OPRP) and a “Fund Appreciation Rights Plan” (FARP). There was no allocation under either plan in either
the current or the prior year.
PLATINUM ASSET MANAGEMENT LIMITED ANNUAL REPORT 2019
29
Fixed Remuneration
– Set to attract exceptional talent
– Benchmarked to market
– Rewards each employee for their skills,
attributes and role accountabilities
1. Fixed
Remuneration
Reward
Framework
2. Variable
Remuneration
(Deferred
equity)
2. Variable
Remuneration
(Cash)
Variable Remuneration (Deferred equity)
– Improves alignment of employees
and shareholders
– Significant deferral element to foster
sustainable growth and sound
financial, operational and risk
management practices
Variable Remuneration (Cash)
– Performance goals set annually at the
beginning of each performance period
– Awards made annually with reference
to individual performance
– Other performance conditions include:
• Company performance
• Risk management factors
• Leadership and behavioural factors
• Competition for key staff
Variable Remuneration Plans
There were three variable remuneration plans in operation during the 2019 financial year, which
were supported by a Deferred Remuneration Plan. Each plan is overseen by the Nomination &
Remuneration Committee. The investment team has access to the Investment Team Plan and
the Profit Share Plan. All other staff are covered by the General Employee Plan. Each variable
remuneration award is then apportioned between a cash amount, which is generally paid in
June and a deferred amount, which will vest in four years so long as the employee remains
employed by Platinum during that time.
PLATINUM ASSET MANAGEMENT LIMITED ANNUAL REPORT 2019 30
Directors’ Report – continued
Remuneration Report – continued
The table below summarises the main characteristics of each plan, each of which are then
discussed in more detail in the following section.
PLAN
SUMMARY
Investment
Team Plan
PARTICIPANTS
POOL FORMULA
CAP
HURDLE
AWARD TYPE
Investment team Weighted
average 1
and 3 year
performance2
2x salary of
investment team
(caps out at 5%
outperformance)
Profit Share
Plan
Investment team Weighted
average 1
and 3 year
performance
5% of adjusted
net profit (caps
out at 6%
outperformance)
General
Employee
Plan
Non-investment
team staff
Discretionary
Award
n/a
0%
1%
n/a
Cash and/
or deferred
equity
award
Investment Team Plan (applies to members of the investment team only)
Under this plan, in a period where there is aggregate weighted average outperformance (relative
to a weighted benchmark comprised of nominated market indices) the annual investment team
award pool is calculated as a percentage of the aggregate base salary of the investment team.
The percentage level relates to the weighted average of 1 year and 3 year rolling outperformance
of all funds and mandates under management (relative to a weighted benchmark comprised of
nominated market indices). The pool starts at 100% of the aggregate of the base salaries of the
investment team. For each 1% increase in this average outperformance, the pool is increased by
20% and is then capped at 2 times salary when average outperformance is 5% or more.
The pool is allocated across the investment team based on performance assessments that are
based on both quantitative and qualitative measures. Quantitative measures used to assess
individual performance include the performance of any portfolios under the management of an
individual and the performance of the individual investment ideas that the person has proposed.
Individual investment performance is usually assessed over a rolling 1 year and 3 year time
frame and is relative to a nominated market index.
The total remuneration outcome (comprising both fixed and variable components) for each
investment professional is then benchmarked to appropriate external market data to ensure
that their package remains competitive.
2.
The Board can elect to make discretionary awards in excess of the pool amount should it be required. In this
case, annual awards for investment team members may then be determined by an individual assessment of
each employee’s contribution.
PLATINUM ASSET MANAGEMENT LIMITED ANNUAL REPORT 2019 31
In a period where there is aggregate weighted average underperformance or where performance
is uneven across different funds or fund managers, annual awards for investment team
members will then be determined by an individual assessment of each employee’s contribution
to the investment team during the period. Individual awards will generally range from 0% to
120% of base salary and reflect the business necessity of retaining high performing talent
during the inevitable short term dips in weighted 1 and 3 year investment performance.
Profit Share Plan (“PSP”) (applies to selected members of the investment team only)
The PSP is designed to reward key members of the investment team for their contribution to the
development of Platinum’s business through the generation of strong investment performance
(relative to a weighted benchmark comprised of nominated market indices). Eligible members
of the investment team are issued notional units in the PSP. The notional units have no capital
value and cannot be sold or transferred to a third party. Notional units of an eligible member of
the PSP are adjusted each year based upon a prospective assessment of each such member’s
long-term contribution potential to the future development of Platinum. Each year the profit
share percentage pool is determined based upon the weighted average 1 year and 3 year rolling
outperformance of all funds and mandates under management (relative to a weighted
benchmark comprised of nominated market indices).
There is no profit share until weighted average 1 year and 3 year rolling outperformance is
greater than 1%. So, for example, if the average of the 1 and 3 year rolling performance of our
funds and mandates exceeded the weighted benchmark by 2.5%, then 1.5% of the Company’s
management fee-based3 net profit before tax would be made available to the PSP pool. The profit
share figure is limited each year to 5% of profit before tax, though the Nomination & Remuneration
Committee may elect to carry over investment outperformance to future periods if investment
returns indicate a profit share in excess of the 5% level.
General …mployee Plan (applies to non‑investment team staff)
Performance is assessed against pre-determined operational performance indicators relevant
to each employee. These performance indicators take into account the responsibilities, skill and
experience of each employee and their contribution during the year. Total remuneration outcomes
(comprising both fixed and variable components) are then benchmarked to appropriate external
market data to help ensure that high performing talent is retained.
3. Excluding investment related revenue and expenses.
PLATINUM ASSET MANAGEMENT LIMITED ANNUAL REPORT 2019 32
Directors’ Report – continued
Remuneration Report – continued
Deferred Remuneration Plan (applies to all staff)
In June 2016, the Nomination & Remuneration Committee approved the implementation of the
Deferred Remuneration Plan. The main objectives of the Plan are to foster sustainable growth,
as well as sound financial, operational and risk management practices, and to retain talent.
Eligible employees are selected by the Nomination & Remuneration Committee, generally
during the annual award cycle, and the proportion of each variable award that is deferred
varies by employee. The number of deferred rights awarded is determined by dividing the
discretionary deferred award amount by the PTM share price, using a volume weighted average
price (VWAP) of the PTM shares over the seven (7) trading days prior to the award acceptance
date. If an eligible employee remains employed at Platinum after the four year vesting period,
the employee then has a further five years to exercise their deferred right. If an employee
resigns from Platinum before they have met their service condition then, in most
circumstances, the deferred rights will be forfeited.
In order to satisfy the obligation to the Company that arises from the granting of deferred
awards, the Company intends to purchase shares on-market and then hold these shares within
an Employee Share Trust. Upon vesting, eligible employees will receive one ordinary share in
PTM from the Employee Share Trust in satisfaction of each of their rights. No amount is payable
by any eligible employee on either award or on exercise. There is flexibility within the plan for
the Committee to award cash or some other instrument rather than deferred shares, but the
Committee currently envisages awarding shares only.
Eligible employees will have no voting or dividend rights until their deferred rights have been
exercised and their shares have been allocated. However, the deferred rights also carry an
entitlement to a dividend equivalent payment. Upon the valid exercise of a deferred right
(or deemed exercise), an eligible employee will be entitled to receive an amount approximately
equal to the amount of dividends that would have been paid to the eligible employee had they
held the share from the grant date to the date that the deferred rights are exercised.
Long-Term Remuneration Plans
Platinum has two inactive long-term Remuneration Plans, being an “Options and Performance
Rights Plan” (OPRP) and a “Fund Appreciation Rights Plan” (FARP). There was no allocation under
either plan in either the current or prior year.
PLATINUM ASSET MANAGEMENT LIMITED ANNUAL REPORT 2019 33
Key Management Personnel (“KMP”)
For the purposes of this report, KMP of the consolidated entity in office at any time during the
financial year were:
NAME
POSITION
Michael Cole
Chairman and Non-Executive Director
Stephen Menzies
Non-Executive Director
Anne Loveridge
Non-Executive Director
Brigitte Smith
Non-Executive Director
Tim Trumper
Non-Executive Director (from 1 August 2018)
Andrew Clifford
Chief Executive Officer (CEO) and Managing Director
Kerr Neilson
Executive Director
Elizabeth Norman Executive Director and Director of Investor Services and Communications
Andrew Stannard
Executive Director and Chief Financial Officer
There were no other employees that held a KMP position within the Company or
consolidated entity.
Managing Director and other KMP Remuneration
Managing Director/C…O Remuneration
With effect from 1 July 2018, Mr Andrew Clifford assumed the role of Managing Director/CEO
in addition to his existing responsibilities as Chief Investment Officer (CIO).
As a consequence of this change, Mr Clifford was, from 1 July 2018, eligible for discretionary
awards under the new CEO Plan (capped at A$1 million), subject to meeting certain key
performance indicators (KPIs), as set by the Board.
In addition, Mr Clifford retained his entitlement to receive discretionary awards in relation to his
role as CIO via the Investment Team Plan (subject to a $1.5 million cap) and the Profit Share Plan
(subject to a $1.5 million cap)4.
Despite the achievement of a number of KPI’s, (see table on following page) in light of the
disappointing investment performance achieved by the flagship funds and reduced profitability
of the Company, Mr Clifford chose not to receive any variable incentive awards from the CEO
Plan, Investment Team Plan or the Profit Share Plan. The Board accepted his election.
4.
For further information on Mr Clifford’s employment terms and remuneration package, please refer to the
Company’s ASX announcement dated 28 June 2018.
PLATINUM ASSET MANAGEMENT LIMITED ANNUAL REPORT 2019 34
Directors’ Report – continued
Remuneration Report – continued
CEO PLAN:
SHORT TERM
INCENTIVE
KEY PERFORMANCE INDICATORS AND PERFORMANCE
PERFORMANCE MEASURES
(EQUALLY WEIGHTED)
Financial
Strategic
Execution
MAXIMUM
AWARD: $1M
AWARDED: NIL
People
Leadership
Risk Management
& Operational
Effectiveness
FY19 PERFORMANCE AGAINST KPI’S
Average fee margins maintained.
Adjusted profit margin was not maintained.
Average FUM fell 4%.
Total Shareholder Return fell 11%.
Overall only partially met target
New distribution team in London established.
Asset consultant ratings for key Australian funds
were maintained.
Significant increase in offshore client engagement.
Advocacy on behalf of clients to both the Royal
Commission and Franking Credit enquiry.
Some progress on building offshore clients.
However, due mostly to disappointing relative
investment performance coupled with poor general
equity market conditions, overall growth in client
assets was disappointing in 2019.
Overall partially met target
Enhanced cohesion and stability of the investment
team with no regretted departures.
New hires in business development and investment
research.
Revised policies around work flexibility to enhance
“employer of choice” status.
Overall met target
No significant regulatory issues identified in 2019.
No significant errors or breaches of investment
guidelines.
Continued enhancement of risk management
framework.
Upgraded corporate governance framework.
Overall met target
Other KMP Remuneration
Kerr Neilson continued to waive his ability to receive variable compensation. This waiver was
accepted by the Nomination & Remuneration Committee and agreed by the Board.
PLATINUM ASSET MANAGEMENT LIMITED ANNUAL REPORT 2019 35
The variable compensation paid to Elizabeth Norman reflected her role as Director of Investor
Services and Communications and her leadership and involvement in the development of
several initiatives during the year, including the marketing of new offshore funds (to support
US business initiatives), ongoing work associated with our European business operations,
the successful growth of the Quoted Managed Funds, the deployment of a new website and
a substantial expansion of our communications with both advisors and investors.
The variable compensation paid to Andrew Stannard reflected the leadership and strategic
input that he provided into various business development opportunities for the business.
This included the implementation of a new investment trading platform and various operational
initiatives as well as overseeing the operational set-up of the offshore business.
Remuneration of Executive Key Management Personnel (KMP)
The table below presents the remuneration provided by the consolidated entity to executive
KMP of the consolidated entity, in accordance with accounting standards.
CASH
SALARY
$
OTHER(1)
$
SUPER-
ANNUATION
$
VARIABLE
REMUNERA-
TION
VARIABLE
REMUNERA-
TION
(CASH) (2) (DEFERRED) (3)
$
$
VARIABLE
REMUNERA-
TION AS A %
OF TOTAL
REMUNERA-
TION (4)
TOTAL
$
2019
Andrew Clifford
Kerr Neilson
Elizabeth Norman
Andrew Stannard
2018
Andrew Clifford
Kerr Neilson
Elizabeth Norman
Andrew Stannard
450,000
450,000
425,000
425,000
23,512
(29,211)
20,155
(14,154)
20,531
20,531
20,531
20,531
–
–
900,000
425,000
174,000
–
224,525
69,050
668,043
441,320
1,590,211
925,427
1,750,000
302
82,124
1,325,000
467,575
3,625,001
450,000
450,000
425,000
425,000
1,750,000
4,428
(5,384)
(3,364)
(4,151)
(8,471)
20,049
20,049
20,049
20,049
2,632,000
–
1,300,000
450,000
174,000
–
163,645
42,950
3,280,477
464,665
1,905,330
933,848
80,196
4,382,000
380,595 6,584,320
26%
0%
71%
53%
49%
86%
0%
77%
53%
72%
(1) “Other” represents the increase/(decrease) in the accounting provision for annual and long service leave.
These amounts were not received by the Executive Directors and represent provisions made in the
consolidated entity’s statement of financial position.
(2) See the “Variable Remuneration Plans” section for further details. Andrew Clifford received no cash variable
awards from either the Investment Team Plan or the Profit Share Plan. The cash awards made to Elizabeth
Norman and Andrew Stannard were made under the General Employee Plan.
(3) The accounting fair value attributed to each deferred award is spread over the five year service period. The
accounting valuation of $174,000 attributable to Andrew Clifford represents the current year portion of the
2018 deferred award of $1,000,000. The accounting valuation of $224,525 attributable to Elizabeth Norman
represents the current year portion of the 2019 deferred award of $350,000, the 2018 award of $350,000,
the 2017 award of $300,000 and the 2016 award of $300,000. The accounting valuation of $69,050
attributable to Andrew Stannard represents the current year portion of the 2019 deferred award of
$150,000, 2018 deferred award of $150,000 and the 2017 award of $100,000.
(4) Fixed remuneration refers to salary, superannuation and provisions or payments made for annual and long
service leave. Variable remuneration refers to both cash and deferred components.
PLATINUM ASSET MANAGEMENT LIMITED ANNUAL REPORT 2019
36
Directors’ Report – continued
Remuneration Report – continued
The table below presents supplementary disclosure of the remuneration provided by the
consolidated entity to executive KMP of the consolidated entity, based on the amounts awarded
to the individuals during the year.
CASH
SALARY
$
SUPER-
ANNUATION
$
VARIABLE-
REMUNERA-
TION
VARIABLE-
REMUNERA-
TION
(CASH)(1) (DEFERRED)(2)
$
$
VARIABLE
REMUNERA-
TION AS A %
OF TOTAL
REMUNERA-
TION(3)
TOTAL
$
2019
Andrew Clifford
Kerr Neilson
Elizabeth Norman
Andrew Stannard
2018
Andrew Clifford
Kerr Neilson
Elizabeth Norman
Andrew Stannard
450,000
450,000
425,000
425,000
20,531
20,531
20,531
20,531
–
–
900,000
425,000
–
–
350,000
150,000
470,531
470,531
1,695,531
1,020,531
1,750,000
82,124
1,325,000
500,000
3,657,124
450,000
450,000
425,000
425,000
20,049
20,049
20,049
20,049
2,632,000
–
1,300,000
450,000
1,000,000
–
350,000
150,000
4,102,049
470,049
2,095,049
1,045,049
1,750,000
80,196
4,382,000
1,500,000
7,712,196
0%
0%
74%
56%
50%
89%
0%
79%
57%
76%
(1) See the “Variable Remuneration Plans” section above for further details. The “variable remuneration (cash)”
attributable to Andrew Clifford is comprised of awards under the Investment Team Plan. The cash awards made
to Elizabeth Norman and Andrew Stannard were made under the General Employee Plan.
(2) The “variable remuneration (deferred)” amount noted above reflects the award amounts attributed to each
individual in the current financial year. These awards vest 4 years after the award date.
(3) Fixed remuneration refers to salary and superannuation. Variable remuneration refers to both cash and
deferred components.
PLATINUM ASSET MANAGEMENT LIMITED ANNUAL REPORT 2019
37
Remuneration of Non-Executive Directors
Remuneration Policy
The Company’s remuneration policy for Non-Executive Directors is designed to ensure that
the Company can attract and retain suitably-qualified and experienced directors.
It is the policy of the Board to remunerate at market rates. Non-Executive Directors receive a
fixed fee and mandatory superannuation payments. Non-Executive Directors do not receive
variable compensation and are not eligible to participate in any variable remuneration plans.
The Executive Directors examine the base pay of the Non-Executive Directors annually and
may utilise the services of an external advisor to assist with this.
The Executive Directors determine the remuneration of the Non-Executive Directors within the
maximum approved shareholder limit. The aggregate amount of remuneration that can be paid
to the Non-Executive Directors, which was approved by shareholders at a general meeting in
April 2007, is $2 million per annum (including superannuation).
No other retirement benefits (other than mandatory superannuation) are provided to the
Non-Executive Directors. There are no termination payments payable on the cessation of
office and any Director may retire or resign from the Board, or be removed by a resolution
of shareholders. The Constitution of the Company specifies that any change to the maximum
amount of remuneration that can be paid to the Non-Executive Directors requires the approval
of shareholders.
Remuneration Structure
The following table displays the current Non-Executive Directors and their roles at 30 June 2019.
MICHAEL
COLE
ANNE
LOVERIDGE
STEPHEN
MENZIES
BRIGITTE
SMITH
TIM
TRUMPER
Board
Chair
Director
Director
Director
Director
Audit, Risk & Compliance
Committee
Member
Chair
Member
Member
Member
Nomination & Remuneration Member
Committee
Member
Chair
Member
Member
PLATINUM ASSET MANAGEMENT LIMITED ANNUAL REPORT 2019
38
Directors’ Report – continued
Remuneration Report – continued
The table below shows how the cash salary remuneration is allocated reflecting their roles at
30 June 2019.
MICHAEL
COLE
ANNE
LOVERIDGE
STEPHEN
MENZIES
BRIGITTE
SMITH
TIM
TRUMPER *
Board
$170,000
$130,000
$130,000
$130,000
$119,167
Audit, Risk & Compliance
Committee
$15,000
$30,000
$15,000
$15,000
$13,750
Nomination & Remuneration $15,000
Committee
$15,000
$30,000
$15,000
$13,750
Total
$200,000
$175,000
$175,000
$160,000
$146,667
*
We note that Tim Trumper was appointed as a Director on 1 August 2018.
Remuneration of Non-Executive Directors
The table below presents actual amounts received by the Non-Executive Directors.
CASH
SALARY
$
SUPER-
ANNUATION
$
VARIABLE
REMUNERATION
(CASH)
$
VARIABLE
REMUNERATION
(DEFERRED)
$
2019
Michael Cole
Stephen Menzies
Anne Loveridge
Brigitte Smith
200,000
175,000
175,000
160,000
Tim Trumper
(from 1 August 2018) 146,667
2018
Michael Cole
Stephen Menzies
Anne Loveridge
Brigitte Smith
(from 31 March 2018)
856,667
200,000
175,000
175,000
40,000
590,000
19,000
16,625
16,625
15,200
13,933
81,383
19,000
16,625
16,625
3,800
56,050
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
TOTAL
$
219,000
191,625
191,625
175,200
160,600
938,050
219,000
191,625
191,625
43,800
646,050
PLATINUM ASSET MANAGEMENT LIMITED ANNUAL REPORT 2019
39
Stephen Menzies is Platinum Investment Management Limited’s (PIML’s) nominee on the Board
of the offshore UCITS company, Platinum World Portfolios Plc (PWP) and payments are made
directly by PWP. Amounts paid in the current year were Euro 24,000 (equivalent to A$38,309)
(2018: Euro 22,032 (equivalent to A$34,257)).
Managing Director and other Senior Executive employment agreements
The key aspects of the KMP contracts are outlined below:
–
–
–
–
–
–
–
Remuneration and other terms of employment for Non-Executive Directors are formalised
in letters of appointment.
All contracts (both Executive and Non-Executive) include the components of remuneration
that are to be paid to KMP and provide for annual review, but do not prescribe how
remuneration levels are to be modified from year to year.
The tenure of all Directors, except for the Managing Director, Mr Andrew Clifford, is subject
to approval by shareholders at every third AGM or other general meeting convened for the
purposes of election of Directors.
In the event of termination, all KMP are entitled to receive their statutory leave
entitlements and superannuation benefits. In relation to variable remuneration plans,
upon resignation, variable remuneration is only paid if the Executive Director is still
employed at the date of payment. However, the Board retains discretion to make variable
remuneration payments (both cash and deferred) in certain exceptional circumstances,
such as bona-fide retirement.
Mr Andrew Clifford can terminate his employment by providing twelve months’ notice.
Mr Kerr Neilson can terminate his appointment by providing three months’ notice. All other
Executive Directors can terminate their appointment by providing six months’ notice.
Mr Andrew Clifford has entered into a post-employment restraint whereby he may not
solicit either employees or clients for a period of twelve months.
Non-Executive Directors may resign by written notice to the Chairman and where
circumstances permit, it is desirable that reasonable notice of an intention to resign is
given to assist the Board in succession planning.
PLATINUM ASSET MANAGEMENT LIMITED ANNUAL REPORT 2019 40
Directors’ Report – continued
Remuneration Report – continued
Interests of Non-Executive and Executive Directors in shares
The relevant interest in ordinary shares of the Company that each Director held at balance
date was:
OPENING BALANCE
ADDITIONS
DISPOSALS
CLOSING BALANCE
Michael Cole
Stephen Menzies
Anne Loveridge
Brigitte Smith
Tim Trumper
Andrew Clifford(1)
Kerr Neilson
Elizabeth Norman(2)
Andrew Stannard(3)
240,000
40,000
22,000
41,666
–
–
–
–
–
18,900
32,831,449
312,074,841
766,748
–
–
–
–
–
–
–
–
–
–
–
60,000,000
–
–
240,000
40,000
22,000
41,666
18,900
32,831,449
252,074,841
766,748
–
(1) Andrew Clifford also has contingent rights to receive up to 165,563 shares pursuant to awards made under
the Company’s deferred remuneration plan.
(2) Elizabeth Norman also has contingent rights to receive up to 247,314 shares pursuant to awards made under
the Company’s deferred remuneration plan.
(3) Andrew Stannard has contingent rights to receive up to 78,996 shares pursuant to awards made under the
Company’s deferred remuneration plan.
Oversight and Governance
The Board, through its Nomination & Remuneration Committee, provides oversight of
remuneration and incentive policies. This particularly includes oversight of the remuneration
and employment packages and terms of employment for Executive Directors, Non-Executive
Directors (NEDs) and Senior Managers.
The role of the Nomination & Remuneration Committee is set out in its Charter. Its responsibilities
include the following functions that are relevant to remuneration:
–
–
–
–
To review and make recommendations to the Board in respect of the CEO, Executive
Director, and Non-Executive Director appointments;
To review and make recommendations to the Board in respect of the variable remuneration
awards in respect of the CEO/CIO, Executive Directors, Senior Managers and Portfolio
Managers;
To provide oversight on the overall aggregate variable remuneration outcome for Platinum,
ensuring appropriate alignment with all stakeholders;
To review significant changes in remuneration policy and structure, including deferred
remuneration plans and benefits;
PLATINUM ASSET MANAGEMENT LIMITED ANNUAL REPORT 2019
41
–
–
–
–
To oversee the Company’s strategic human resources initiatives, including diversity
and inclusion;
To make ongoing assessments of the collective skills required to effectively discharge
the Board’s duties;
To review the composition, functions, responsibilities and size of the Board as well as
Director tenure; and
To ensure appropriate Board succession planning.
During the 2019 financial year, the Nomination & Remuneration Committee dealt with the
following significant items that relate to remuneration arrangements:
–
–
–
–
–
–
Designed and recommended the Board approve the incoming CEO’s new remuneration
arrangements and key performance indicators;
Reviewed and made recommendations to the Board regarding Platinum’s aggregate
variable remuneration pool as well as the individual awards for the CEO, Executive
Directors and Senior Managers;
Ongoing implementation and review of Board succession plans, including the appointment
of Mr Trumper as a Non-Executive Director in August 2018;
Reviewed and updated the Board skills matrix to better reflect the required skills of
the Board;
Reviewed the UCITS V remuneration and disclosure rules; and
Discussed with external stakeholders, the Company’s remuneration practices.
Remuneration services provided to management and the Committee
The firm utilised Financial Institutions Remuneration Group (FIRG) as the primary source of
remuneration benchmarking data and the firm has historically used PricewaterhouseCoopers
(PwC) as a consultant to the remuneration and benefit plans both in Australia and also in the UK.
In addition, certain KMP roles were benchmarked to publically available information at
comparable companies.
No consultants were engaged by the Nomination & Remuneration Committee in relation to KMP
remuneration during the year.
Directors’ interests in contracts
The Directors received remuneration that is ultimately derived from net income arising from
Platinum Investment Management Limited’s investment management contracts.
Loans to KMP and their related parties
No loans were provided to KMP or their related parties during the year or at the date of
this report.
PLATINUM ASSET MANAGEMENT LIMITED ANNUAL REPORT 2019 42
Directors’ Report – continued
Remuneration Report – continued
Other related party payments involving KMP
In the current year, the consolidated entity paid $70,000 (2018: $50,000) to OneVue Services
Pty Limited for the provision of services associated with the build, customisation and
enhancement of the Platinum web-site. OneVue is a related party of the Chairman of Platinum
Asset Management Limited, Mr Michael Cole. These services are provided on an arms length
basis and the Chairman was not involved in the decision to utilise OneVue’s services.
Shareholders’ Approval of the 2018 (prior year) Remuneration Report
A 25% or higher “no” vote on the Remuneration Report at an AGM triggers a reporting obligation
on a listed company to explain in its next Annual Report how concerns are being addressed.
At the last AGM, the Company’s Remuneration Report was carried on a poll and received a vote
in favour of 96.6%.
Link between performance and KMP remuneration paid by the consolidated entity
The table below shows Platinum’s five year performance across a range of metrics and
corresponding KMP incentive outcomes.
2019
2018
2017
2016
2015
Revenue ($’000)
299,320
353,290
333,549
344,658
360,422
Expenses ($’000)
76,421
84,966
62,971
62,464
58,872
158,336
191,594
192,647
199,870
213,499
27.03
32.36
31.74
34.24
36.66
27
32
30
32
47
Operating profit after
tax ($’000)
Basic earnings per share
(cents per share)
Total dividends
(cents per share)
Total aggregate fixed
remuneration
paid ($)(1)
2,808,483
2,510,503
2,558,913
2,518,991
2,362,901
Total aggregate
variable remuneration
paid ($)
1,792,575
4,762,595
1,721,800
1,452,200
1,125,000
(1) Total aggregate fixed remuneration paid represents salaries and superannuation (and includes the
Director’s Fees disclosed and paid to Stephen Menzies for his Directorship of the UCITS fund). The increase in
2019 reflects the appointment of additional Directors in FY2019 and FY2018.
The level of aggregate KMP remuneration paid each year reflects a combination of factors,
including investment performance for clients, the operating performance of the firm, individual
and team performance and also the degree of competition for executive talent.
PLATINUM ASSET MANAGEMENT LIMITED ANNUAL REPORT 2019
Auditor’s Independence Declaration
43
As lead auditor for the audit of Platinum Asset Management Limited for the year ended
30 June 2019, 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 Platinum Asset Management Limited and the entities it
controlled during the period.
R Balding
Partner
PricewaterhouseCoopers
20 August 2019
PricewaterhouseCoopers, ABN 52 780 433 757
One International Towers Sydney, Watermans Quay, Barangaroo, GPO Box 2650, Sydney NSW 2001
T: +61 2 8266 0000, F: +61 2 8266 9999, www.pwc.com.au
Level 11, 1PSQ, 169 Macquarie Street, Parramatta NSW 2150, PO Box 1155 Parramatta NSW 2124
T: +61 2 9659 2476, F: +61 2 8266 9999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
PLATINUM ASSET MANAGEMENT LIMITED ANNUAL REPORT 2019 44
Consolidated Statement of Profit or Loss and
Other Comprehensive Income
For the year ended �0 June 2019
NOTE
CONSOLIDATED
2019
$’000
2018
$’000
Revenue
Management fees
Performance fees
Other income
Interest
Distributions and dividends
Share of (loss)/profit of associates
(Losses) on financial assets at fair value
through profit or loss
Foreign exchange gains on overseas bank accounts
Gains on forward currency contracts
Total revenue and other income
Expenses
Staff
Custody and unit registry
Business development
Share-based payments
Legal, compliance and other professional
Research
Technology
Rent and other occupancy
Mail house, periodic reporting and share registry
Depreciation
Insurance
Audit fee
Other
Total expenses
11
2, 11
11
11
20
7
22
Profit before income tax expense
Income tax expense
Profit after income tax expense for the year
12(a)
295,188
30
295,218
3,542
3,714
(2,599)
(2,103)
1,548
–
306,803
21,878
328,681
3,744
23,272
9,211
(12,954)
1,296
40
299,320
353,290
38,743
12,755
49,231
13,348
7,119
4,858
2,892
2,617
2,366
1,944
1,192
737
589
447
162
7,429
3,558
2,813
2,214
1,995
1,661
990
724
460
444
99
76,421
222,899
64,563
158,336
84,966
268,324
76,730
191,594
PLATINUM ASSET MANAGEMENT LIMITED ANNUAL REPORT 2019
45
Other comprehensive income
Exchange rate translation impact of foreign subsidiaries 15
Other comprehensive income for the year, net of tax
NOTE
CONSOLIDATED
2019
$’000
(16)
(16)
2018
$’000
7
7
Total comprehensive income for the year
158,320
191,601
Profit after income tax expense for the year is attributable to:
Owners of Platinum Asset Management Limited
Non-controlling interests
Basic earnings per share
Diluted earnings per share
10
10
157,651
685
158,336
CENTS
27.03
27.03
189,221
2,373
191,594
CENTS
32.36
32.36
The above consolidated statement of profit or loss and other comprehensive income should be read in
conjunction with the accompanying notes.
PLATINUM ASSET MANAGEMENT LIMITED ANNUAL REPORT 2019
46
Consolidated Statement of Financial Position
As at �0 June 2019
Assets
Current assets
Cash and cash equivalents
Term deposits
Trade and other receivables
Income tax receivable
Total current assets
Non‑current assets
NOTE
CONSOLIDATED
2019
$’000
2018
$’000
112,947
163,799
6
81,877
27,922
–
222,746
183
3,616
121,392
344,138
27,876
52,557
3,333
247,565
95,920
98,796
2,986
197,702
445,267
8,108
3,809
5,082
23,544
3,249
–
16,999
26,793
1,560
4,491
6,051
23,050
321,088
1,145
6,214
7,359
34,152
411,115
Equity investments in associates
2(a)
117,593
Financial assets at fair value through profit or loss
Fixed assets
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Employee benefits
Income tax payable
Total current liabilities
Non‑current liabilities
Provisions
Net deferred tax liabilities
Total non-current liabilities
Total liabilities
Net assets
5
7
8
9
9
12(b)
PLATINUM ASSET MANAGEMENT LIMITED ANNUAL REPORT 2019
47
Equity
Issued capital
Reserves
Retained profits
Total equity attributable to the owners of
Platinum Asset Management Limited
Total equity attributable to non‑controlling interests:
Non-controlling interests
Total equity
NOTE
14
15
16
4
CONSOLIDATED
2019
$’000
2018
$’000
723,490
731,245
(576,863)
(582,006)
174,461
185,940
321,088
335,179
–
321,088
75,936
411,115
The above consolidated statement of financial position should be read in conjunction with the
accompanying notes.
PLATINUM ASSET MANAGEMENT LIMITED ANNUAL REPORT 2019
48
Consolidated Statement of Changes in Equity
For the year ended �0 June 2019
CONSOLIDATED
ISSUED
CAPITAL
$’000
RESERVES
$’000
RETAINED
PROFITS
$’000
NON-
CONTROLLING
INTERESTS
$’000
TOTAL
EQUITY
$’000
Balance at 1 July 2017
742,933
(585,818)
177,959
–
335,074
Profit after income tax
expense for the year
Other comprehensive income
Exchange rate translation
impact of foreign
subsidiaries (Note 15)
Total comprehensive income
for the year
Transactions with owners in
the capacity as owners
Treasury shares acquired
(Note 14)
Share-based payments
reserve (Note 15)
Dividends paid (Note 17)
Decrease in retained
earnings on
deconsolidation
of PIXX (Note 4)
Additional external
investment in
PAXX (Note 4)
–
–
–
(11,688)
–
–
–
–
–
189,221
2,373
191,594
7
7
–
3,805
–
–
7
189,221
2,373
191,601
–
–
–
–
(11,688)
3,805
–
(181,240)
(16,845)
(198,085)
–
–
–
–
(1,357)
(1,357)
91,765
75,936
91,765
411,115
Balance at 30 June 2018
731,245
(582,006)
185,940
PLATINUM ASSET MANAGEMENT LIMITED ANNUAL REPORT 2019
49
CONSOLIDATED
ISSUED
CAPITAL
$’000
RESERVES
$’000
RETAINED
PROFITS
$’000
NON-
CONTROLLING
INTERESTS
$’000
TOTAL
EQUITY
$’000
Balance at 1 July 2018
731,245
(582,006)
185,940
75,936
411,115
Profit after income tax
expense for the year
Other comprehensive income
Exchange rate translation
impact of foreign
subsidiaries (Note 15)
Total comprehensive
income for the year
Transactions with owners in
the capacity as owners
Treasury shares acquired
(Note 14)
Share-based payments
reserve (Note 15)
Dividends paid (Note 16)
Transactions with
non-controlling interests
Decrease in retained
earnings on
deconsolidation
of PAXX (Note 4)
Decrease in equity
on deconsolidation
of PAXX
–
–
–
–
157,651
685
158,336
(16)
–
–
(16)
(16)
157,651
685
158,320
(7,755)
–
–
–
–
–
–
5,159
–
–
–
–
–
–
(169,130)
–
–
–
(7,755)
5,159
(169,130)
–
56,199
56,199
–
(1,701)
(1,701)
–
(131,119)
(131,119)
Balance at 30 June 2019
723,490
(576,863)
174,461
–
321,088
The above consolidated statement of changes in equity should be read in conjunction with the
accompanying notes.
PLATINUM ASSET MANAGEMENT LIMITED ANNUAL REPORT 2019
50
Consolidated Statement of Cash Flows
For the year ended �0 June 2019
Cash flows from operating activities
Receipts from operating activities
Payments for operating activities
Income taxes paid
Net cash from operating activities
Cash flows from investing activities
Interest received
Purchase of term deposits
Proceeds on maturity of term deposits
NOTE
CONSOLIDATED
2019
$’000
2018
$’000
299,886
328,304
(75,982)
(57,569)
(91,242)
(82,516)
13
166,335
154,546
3,435
3,869
(375,752)
(518,250)
321,753
565,394
Payments for purchases of fixed assets
7
(1,367)
(881)
Dividends and distributions received
from seed investments
Receipts from sale of financial assets
Payments for purchases of financial assets
Purchase of units held directly by PAXX
(whilst consolidated)
Net cash (used in) investing activities
Cash flows from financing activities
2,421
–
–
1,700
36,695
(52,949)
4
(56,199)
(105,709)
(64,673)
(29,095)
Dividends paid
17
(169,130)
(181,240)
Proceeds from units issued (net applications into
PAXX and other non-controlling interests)
Net cash (used in) financing activities
(Decrease)/ increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the
financial year
Effects of exchange rate changes on cash and
cash equivalents
Cash and cash equivalents at the end of the financial year
56,199
64,673
(112,931)
(116,567)
(52,305)
8,884
163,799
154,263
1,453
112,947
652
163,799
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
PLATINUM ASSET MANAGEMENT LIMITED ANNUAL REPORT 2019
Notes to the Financial Statements
�0 June 2019
51
Statement of Compliance
The consolidated financial statements are general purpose financial statements which have
been prepared in accordance with Australian Accounting Standards adopted by the Australian
Accounting Standards Board (AASB) and the Corporations Act 2001. The consolidated financial
statements comply with International Financial Reporting Standards (IFRSs) adopted by the
International Accounting Standards Board (IASB).
Basis of Preparation
The consolidated financial statements are presented in Australian Dollars, which is the
consolidated entity’s functional and presentation currency, with all values rounded to the
nearest thousand dollars (‘$000), in accordance with ASIC Corporations (Rounding in Financial/
Directors’ Reports) Instrument 2016/191, unless otherwise stated. The consolidated financial
statements have been prepared on a historical cost basis, except for the revaluation of financial
assets and liabilities at fair value through profit or loss.
Platinum Investment Management Limited (“PIML”) has seeded or invested in a number of the
products it offers to investors and this has impacted on the accounting treatment adopted in
the consolidated financial statements as follows:
PIML OWNERSHIP INTEREST
AT 30 JUNE 2019
ACCOUNTING TREATMENT
ADOPTED IN THESE ACCOUNTS
ENTITY
Platinum Trust Funds
Platinum Asia Fund
(Quoted Managed Hedge
Fund) (“PAXX”)
Interest is less than 1%
in each Fund.
14.7%
Fair value accounting applied
(see Note 5).
Consolidation accounting was
applied until 20 May 2019. From
20 May 2019, PAXX has been
treated as an investment in
associate and equity accounting
has been applied (see Note 2).^
Investment in associate.
Equity accounting applied
(see Note 2).*
Investment in associate.
Equity accounting applied
(see Note 2).*
Platinum World Portfolios Plc 14.6%
(“PWP”)
Platinum Asia Investments
Limited (“PAI”)
8.3%
^
*
PAXX’s absolute return for FY2019 was lower than FY2018, and hence PIML’ s exposure to variable returns
was also relatively much lower. Furthermore, PIML’s ownership interest in PAXX decreased during the period.
These factors, in combination, led to the assessment that from 20 May 2019, PIML was no longer considered
to control PAXX, and PAXX was deconsolidated from the consolidated group. PIML (and the consolidated
entity) was assessed as having significant influence over PAXX and equity accounting was applied, following
consideration of factors such as (i) ownership interest and (ii) exposure or rights to variable returns.
At 30 June 2019, PIML (and the consolidated entity) was assessed as having significant influence over
Platinum Asia Fund (Quoted Managed Hedge Fund) (“PAXX”), Platinum Asia Investments Limited (“PAI”)
and Platinum World Portfolios Plc (“PWP”) (Refer to Note 2 for further details).
PLATINUM ASSET MANAGEMENT LIMITED ANNUAL REPORT 2019
52
Notes to the Financial Statements
�0 June 2019
In order to better present the accounting treatment of the investments adopted in these
consolidated accounts (as presented in the table on the previous page), management has
presented the notes in three parts:
PART A – Notes 1 to 4: Notes that explain the accounting treatment of the entities
that form part of the Platinum consolidated group or investments in associates
PART B – Notes 5 to 22: Operations – Notes that explain the operations of the
consolidated entity
PART C – Notes 23 to 27: Miscellaneous Notes that are required by the accounting standards
Significant accounting policies
The principal accounting policies have been included in the relevant notes to which the
policy relates and consistently applied to all financial years presented in these consolidated
financial statements.
Critical accounting judgements, estimates and assumptions
The preparation of the consolidated financial statements require management to make
judgements, estimates and assumptions. The areas where assumptions and estimates are
significant to the consolidated financial statements are outlined after the relevant accounting
policy in the relevant notes. The accounting impact of the treatment of the products that PIML
has seeded or invested in, is the most critical accounting judgement, estimate or assumption
within these consolidated financial statements.
PLATINUM ASSET MANAGEMENT LIMITED ANNUAL REPORT 2019 53
PART A – Notes 1 to 4
Notes that explain the accounting treatment of the entities that form part of the Platinum
consolidated group or investments in associates
Notes 1 to 4 focus on the accounting treatment adopted in these accounts and contain key
information relating to the parent entity, subsidiaries, controlled entities and associates.
Note 1 Subsidiaries and controlled entities
At 30 June 2019 and 30 June 2018, the Company’s subsidiaries and the ownership interests
were as follows.
NAME
McRae Pty Limited
Platinum Asset Pty Limited
Platinum Investment
Management Limited
Platinum Employee Share Trust^
Platinum Investment
Management Australia (PIMA) Corp.
Platinum GP Pty Limited
Platinum UK Asset
Management Limited*
PRINCIPAL PLACE OF BUSINESS/
COUNTRY OF INCORPORATION
OWNERSHIP INTEREST
2019
%
2018
%
Australia
Australia
Australia
Australia
United States
Australia
United Kingdom
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
n/a
^
*
Platinum Employee Share Trust holds PTM shares on behalf of employees selected to participate in the
Deferred Remuneration Plan (see Note 20 for further details).
During the financial year, Platinum incorporated in the UK, Platinum UK Asset Management Limited,
a wholly-owned subsidiary company.
PLATINUM ASSET MANAGEMENT LIMITED ANNUAL REPORT 2019
54
Notes to the Financial Statements
�0 June 2019
Note 1. Subsidiaries and controlled entities – continued
ACCOUNTING
POLICY
Principles of consolidation
The consolidated financial statements incorporate the assets and liabilities of all
subsidiaries of Platinum Asset Management Limited (“Company” or “parent entity”)
as at 30 June 2019 and the results of all subsidiaries for the financial year. Platinum
Asset Management Limited and its subsidiaries together are referred to in these
consolidated financial statements as the ‘consolidated entity’ or ‘group’.
Subsidiaries are all those entities over which the consolidated entity has control.
The consolidated entity controls an entity when the consolidated entity 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 consolidated entity. They are deconsolidated from the date
that control ceases.
In preparing the consolidated financial statements, all intercompany transactions,
balances and unrealised gains arising within the consolidated entity are eliminated
in full.
Foreign currency translation
Foreign currency transactions are translated into the functional currency using
the exchange rates prevailing at the date of the transactions. Foreign exchange
gains and losses resulting from the settlement of such transactions and from the
translation at balance date exchange rates of monetary assets and liabilities
denominated in foreign currencies are recognised in the consolidated statement
of profit or loss and other comprehensive income.
The results and financial position of foreign operations that have a functional
currency different from the presentation currency are translated into the
presentation currency as follows:
–
–
–
Assets and liabilities for each financial position presented are translated at
the balance date;
Income and expenses included in the consolidated statement of profit or loss
and other comprehensive income are translated at average exchange rates
(unless this is not a reasonable approximation of the cumulative effect of the
rates prevailing on the transaction dates, in which case income and expenses
are translated at the dates of the transactions); and
All resulting exchange differences are recognised in other comprehensive
income in the foreign currency translation reserve.
Critical accounting judgements, estimates and assumptions
Assessment of control: from 20 May 2019, the consolidated entity was
assessed as no longer exerting control over PAXX, for the purpose of applying
the consolidation accounting standard. On 20 May 2019, PIML’s ownership
interest in PAXX reduced, as did its exposure or rights to PAXX’s variable returns.
From 20 May 2019, PIML was considered to exert significant influence over PAXX,
and equity accounting was applied.
PLATINUM ASSET MANAGEMENT LIMITED ANNUAL REPORT 2019 55
Note 2. Equity investments in associates
At 30 June 2019, the consolidated entity’s investment(s) in Platinum Asia Investments Limited
(“PAI”), Platinum World Portfolios Plc (“PWP”) and Platinum Asia Fund (Quoted Managed Hedge
Fund) (“PAXX”) represent interests in associates which are accounted for using the equity
method of accounting. Information relating to this is shown below:
a. Interests in associates
ENTITY
(COUNTRY
OF INCORP‑
ORATION)
PAI
(Australia)
PWP
(Ireland)
EQUITY
INTEREST
%
FAIR VALUE
$’000
CARRYING AMOUNT
$’000
REASON FOR ASSESSMENT OF
SIGNIFICANT INFLUENCE
2019
2018
2019
2018
2019
2018
8.3
8.3
30,900
37,800
32,567
34,972 Level of ownership interest
was 8.3% at 30 June 2019;
PIML acts as Investment
Manager (IM) in accordance
with the Investment
Management Agreement;
PIML provides performance
and exposure reports to
the PAI Board.
14.6
13.7 63,444
63,409
61,631
60,948 Level of ownership
interest was 14.6% at
30 June 2019; PIML acts
as Investment Manager
(IM) in accordance with the
Investment Management
Agreement; the Company
provides performance and
exposure reports to the
PWP Board and Stephen
Menzies is a Director of
PWP and a Director
of Platinum Asset
Management Limited.
Level of ownership
interest was 14.7% at
30 June 2019; PIML acts
as Investment Manager
(IM) for PAXX and its
underlying fund, Platinum
Asia Fund.
PAXX
(Australia)
14.7
19.9
23,395
19,641
23,395
n/a
117,739 120,850 117,593
95,920
PLATINUM ASSET MANAGEMENT LIMITED ANNUAL REPORT 2019
56
Notes to the Financial Statements
�0 June 2019
Note 2. Equity investments in associates – continued
a. Interests in associates – continued
The fair value of PAI reflects the 30 million shares held multiplied by the PAI closing share price
at 30 June 2019 of $1.03 (2018: $1.26).
The fair value of PWP reflects the shares held in the sub-funds multiplied by their respective
closing unit prices at 30 June 2019.
The fair value of PAXX reflects units held multiplied by the PAXX’s 30 June 2019 ex-redemption
price of $4.20 (2018: $4.40). PIML held more units in PAXX in 2019 relative to 2018 because
PIML reinvested its 2018 distribution into additional units.
The carrying value reflects the consolidated entity’s share of each associate’s net assets,
including assessment of any impairment (see Note 2b for further details).
b. Share of associates’ statement of financial position
PLATINUM ASIA
INVESTMENTS
LIMITED
$’000
GROUP’S SHARE
OF ASSOCIATE
$’000
PLATINUM
WORLD
PORTFOLIOS
$’000
GROUP’S SHARE
OF ASSOCIATE
$’000
30 June 2019
Total assets
Total liabilities
Net assets
Total assets
Total liabilities
Net assets
401,222
7,900
393,222
33,221
426,498
654
4,653
32,567
421,845
62,311
680
61,631
PLATINUM ASIA FUND
(QUOTED MANAGED
HEDGE FUND) (“PAXX”)
$’000
GROUP’S SHARE
OF ASSOCIATE
$’000
168,320
9,602
158,718
24,810
1,415
23,395
Total group’s share of associates’ statement of financial position (share of PAI’s net assets
of $32,567,000, PWP’s net assets of $61,631,000 and PAXX’s net assets of $23,395,000)
= $117,593,000.
PLATINUM ASSET MANAGEMENT LIMITED ANNUAL REPORT 2019
57
Note 2. Equity investments in associates – continued
b. Share of associates’ statement of financial position – continued
30 June 2018
Total assets
Total liabilities
Net assets
PLATINUM ASIA
INVESTMENTS
LIMITED
$’000
GROUP’S SHARE
OF ASSOCIATE
$’000
PLATINUM
WORLD
PORTFOLIOS
$’000
GROUP’S SHARE
OF ASSOCIATE
$’000
432,464
12,788
419,676
36,038
1,066
446,975
2,098
34,972
444,877
61,235
287
60,948
Total group’s share of associates’ statement of financial position (share of PAI’s net assets of
$34,972,000 and PWP’s net assets of $60,948,000) = $95,920,000.
c. Carrying amount of investment using the equity method
Opening balance
2019
$’000
2018
$’000
95,920
91,692
Initial recognition of PAXX as an equity investment on deconsolidation 24,272
Share of associates’ profit (see Note 2d on following page)
Dividends paid (see Note 2d on following page)
Partial disposal of PAI
Acquisition of additional PWP units (Japan sub-fund)
Closing balance (see Note 2a)
1,100
(3,699)
–
–
117,593
–
8,031
(1,700)
(21,252)
19,149
95,920
PLATINUM ASSET MANAGEMENT LIMITED ANNUAL REPORT 2019
58
Notes to the Financial Statements
�0 June 2019
Note 2. Equity investments in associates – continued
d. Associate’s net income
PLATINUM ASIA
INVESTMENTS
LIMITED
$’000
GROUP’S SHARE
OF ASSOCIATE
$’000
PLATINUM
WORLD
PORTFOLIOS
$’000
GROUP’S SHARE
OF ASSOCIATE
$’000
2019
Total investment income
Total expenses
(Loss)/profit before tax
Income tax benefit
(Loss)/profit after tax
Dividend received and dilution
of unitholding throughout the
year and foreign currency
translation impact
Realised and unrealised gain on
investment in associate
6,284
(6,552)
(268)
110
(158)
520
(543)
(23)
8
(15)
(18,038)
(6,791)
(24,829)
–
(2,635)
(992)
(3,627)
–
(24,829)
(3,627)
(2,390)
(2,405)
4,310
683
PLATINUM
ASIA FUND (QUOTED
MANAGED HEDGE
FUND) (“PAXX”)
$’000
GROUP’S
SHARE OF
ASSOCIATE
$’000
GROUP’S
SHARE OF ALL
ASSOCIATES
(TOTAL)
$’000
Total investment income
Total expenses
Profit/(loss) before tax
Income tax benefit
Profit/(loss) after tax
Dividend received and dilution
of unitholding throughout the
year and foreign currency
translation impact
Realised and unrealised gain/(loss)
on investment in associate
2,757
–
2,757
–
2,757
406
–
406
–
406
(1,709)
(1,535)
(3,244)
8
(3,236)
(1,283)
637
(877)
(2,599)
The other comprehensive income was $nil.
PLATINUM ASSET MANAGEMENT LIMITED ANNUAL REPORT 2019
59
Note 2. Equity investments in associates – continued
d. Associate’s net income – continued
PLATINUM
ASIA
INVESTMENTS
LIMITED
$’000
GROUP’S SHARE
OF ASSOCIATE
$’000
PLATINUM
WORLD
PORTFOLIOS
$’000
GROUP’S SHARE
OF ASSOCIATE
$’000
5,107
(884)
4,223
–
4,223
(504)
3,719
2018
Total investment income
Total expenses
Profit before tax
Income tax expense
Profit after tax
Realised equity accounting gain
on partial disposal of PAI shares,
dividend received and dilution
of unitholding throughout the
year and foreign currency
translation impact
Realised and unrealised gain on
investment in associate
Total investment income
Total expenses
Profit before tax
Income tax expense
Profit after tax
Realised equity accounting gain
on partial disposal of PAI shares,
dividend received and dilution
of unitholding throughout the
year and foreign currency
translation impact
Realised and unrealised gain on
investment in associate
79,884
(6,940)
72,944
(21,466)
51,478
6,679
(578)
6,101
(1,789)
4,312
37,276
(6,454)
30,822
–
30,822
1,180
5,492
GROUP’S
SHARE OF ALL
ASSOCIATES (TOTAL)
$’000
11,786
(1,462)
10,324
(1,789)
8,535
676
9,211
The other comprehensive income was $nil.
PLATINUM ASSET MANAGEMENT LIMITED ANNUAL REPORT 2019
60
Notes to the Financial Statements
�0 June 2019
Note 2. Equity investments in associates – continued
ACCOUNTING
POLICY
Investments in associates are accounted for using the equity method. The share of
profit recognised under the equity method is the consolidated entity’s share of the
investment in associate’s profit or loss based on the ownership interest held.
Associates are entities in which the consolidated entity, as a result of its voting
rights and other factors, has significant influence, but not control or joint control,
over its financial and operating policies.
Investments in associates are carried at the lower of the equity accounted carrying
amount and the recoverable amount. When the consolidated entity’s share of
losses exceeds the carrying amount of the equity accounted investment (including
assets that form part of the net investment in the associate), the carrying amount
is reduced to nil and recognition of further losses is discontinued except to the
extent that the consolidated entity has obligations in respect of the associate.
Dividends from associates represent a return on the consolidated entity’s
investment and, as such, are applied as a reduction to the carrying value of the
investment. Unrealised gains arising from transactions with equity accounted
investments are eliminated against the investment in the associate to the extent of
the consolidated entity’s interest in the associate. Unrealised losses are eliminated
in the same way as unrealised gains, but only to the extent that there is no evidence
of impairment. Other movements in associates’ reserves are recognised directly in
the consolidated entity’s consolidated reserves.
Critical accounting judgements, estimates and assumptions
Assessment of significant influence: At 30 June 2019, the consolidated entity was
assessed as having significant influence over Platinum Asia Investments Limited
(“PAI”), Platinum World Portfolios Plc (“PWP”) and Platinum Asia Fund (Quoted
Managed Hedge Fund ) (“PAXX”), as a result of its direct investment and investment
management activities and other factors outlined on page 55.
We have conducted an impairment assessment of the carrying amount of the
investment in associates, including a look-through of each of the underlying assets
and liabilities. Our assessment is that at 30 June 2019, no impairment write-down
was required for PAI because the underlying value of each asset and liability has
been measured in accordance with the accounting standards. The carrying value
of the PWP investment is less than its fair value and the carrying value of the
investment in PAXX is equal to its fair value.
PLATINUM ASSET MANAGEMENT LIMITED ANNUAL REPORT 2019 61
2019
$’000
169,120
169,120
PARENT
2018
$’000
181,222
181,222
2019
$’000
118,574
749,062
(5,082)
(5,082)
PARENT
2018
$’000
110,734
744,557
–
–
743,980
744,557
723,490
731,245
18,854
1,636
11,666
1,646
743,980
744,557
Note 3. Parent entity information
Set out below is supplementary information about the parent entity.
Statement of profit or loss and other comprehensive income
Profit after income tax
Total comprehensive income
Statement of financial position
Total current assets
Total assets
Total current liabilities
Total liabilities
Net assets
Equity
Issued capital
Capital reserve
Retained profits
Total equity
PLATINUM ASSET MANAGEMENT LIMITED ANNUAL REPORT 2019
62
Notes to the Financial Statements
�0 June 2019
Note 4. Non-controlling interest(s)
On 20 May 2019, the consolidated entity no longer exerted control over Platinum Asia Fund
(Quoted Managed Hedge Fund) (“PAXX”) for the purpose of applying the consolidation
accounting standard but exerts significant influence for the purpose of the investment in
associates accounting standard (see note 2). As a result of the deconsolidation from the
Platinum group, the external (non-related parties) non-controlling interest in the Platinum group
was $nil at 30 June 2019.
Opening balance
2019
$’000
75,936
Profit after income tax attributable to non-controlling interests – PAXX
685
Additional external investment into PAXX during the year
Decrease in retained earnings on deconsolidation of PAXX/PIXX
Decrease in equity on deconsolidation of PAXX
Distribution paid to external unitholders of PAXX
Profit after income tax attributable to non-controlling interests – PIXX
56,199
(1,701)
(131,119)
–
–
–
2018
$’000
–
1,016
91,765
(1,357)
–
(16,845)
1,357
75,936
PLATINUM ASSET MANAGEMENT LIMITED ANNUAL REPORT 2019
63
PART B – Notes 5 to 22
Operations – Notes that explain the operations of the consolidated entity
Note 5. Non-current assets – financial assets at fair value through profit or loss
Platinum Trust Fund investments
Unit trust – held directly by Platinum
Asia Fund (Quoted Managed Hedge
Fund) (“PAXX”)^
2019
$’000
183
–
183
2018
$’000
194
98,602
98,796
^
At 30 June 2019, the financial assets of PAXX have been classified as an equity investment in an associate
and have been valued in the consolidated statement of financial position based on PIML’s share of PAXX’s net
assets (see note 2).
ACCOUNTING
POLICY
Under AASB 9: Financial Instruments, the consolidated entity’s investments are
managed on a fair value basis and the consolidated entity evaluates the information
about its investments on a fair value basis together with other related financial
information. Consequently, these investments are measured at fair value through
profit or loss.
The consolidated entity has applied AASB 13: Fair Value Measurement as the
basis to value its financial assets at fair value through profit or loss. AASB 13
defines fair value as “the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market employees at the
measurement date”.
The standard prescribes that the most representative price within the bid-ask
spread should be used for valuation purposes. With respect to the consolidated
entity, the last-sale or “last” price is the most representative price within the
bid-ask spread, because it represents the price that the unit last changed hands
from seller to buyer.
The fair value includes the impact of the 30 June distribution.
PLATINUM ASSET MANAGEMENT LIMITED ANNUAL REPORT 2019
64
Notes to the Financial Statements
�0 June 2019
Note 6. Current assets – trade and other receivables
Management fees receivable
Performance fees receivable
Interest receivable
Prepayments
Sundry debtors
Distribution receivable from PAXX since deconsolidation
Distribution receivable – PAXX investment in
Platinum Asia Fund whilst consolidated
2019
$’000
24,467
5
246
1,561
329
1,314
–
27,922
2018
$’000
27,959
1,180
138
1,693
36
–
21,551
52,557
Management and performance fees receivable(s) are received between three to 30 days after
balance date.
Interest receivable comprises accrued interest on term deposits and cash accounts. Interest on
term deposits is received on maturity.
ACCOUNTING
POLICY
All receivables are measured at amortised cost, are not discounted, and are
recognised when a right to receive payment is established. Any debts that are
known to be uncollectible are written off. Distributions are recognised when the
consolidated entity becomes entitled to the income.
PLATINUM ASSET MANAGEMENT LIMITED ANNUAL REPORT 2019
Note 7. Non-current assets – fixed assets
Computer equipment – at cost
Less: Accumulated depreciation
Software and applications – at cost
Less: Accumulated depreciation
Communications equipment – at cost
Less: Accumulated depreciation
Office premises fit out – at cost
Less: Accumulated depreciation
Furniture and equipment – at cost
Less: Accumulated depreciation
65
2018
$’000
1,530
(1,204)
326
5,775
(4,321)
1,454
146
(120)
26
2,566
(1,547)
1,019
729
(568)
161
2,986
2019
$’000
1,710
(1,312)
398
6,010
(4,691)
1,319
163
(131)
32
3,473
(1,761)
1,712
756
(601)
155
3,616
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous
financial year are set out below:
COMPUTER
SOFTWARE &
EQUIPMENT APPLICATIONS
$’000
$’000
COMMUN-
ICATIONS
EQUIPMENT
$’000
Balance at 1 July 2017
Additions
Disposals
217
216
–
Depreciation expense
(107)
Balance at 30 June 2018
Additions
Disposals
326
181
–
Depreciation expense
(109)
Balance at 30 June 2019
398
1,208
570
–
(324)
1,454
235
–
(370)
1,319
21
13
–
(8)
26
17
–
(11)
32
OFFICE
PREMISES
FIT OUT
$’000
1,250
23
–
(254)
1,019
907
–
(214)
1,712
FURNITURE &
EQUIPMENT
$’000
TOTAL
$’000
133
2,829
59
–
881
–
(31)
(724)
161
27
–
2,986
1,367
–
(33)
(737)
155
3,616
PLATINUM ASSET MANAGEMENT LIMITED ANNUAL REPORT 2019
66
Notes to the Financial Statements
�0 June 2019
Note 7. Non-current assets – fixed assets – continued
At 30 June 2019, there was software and applications in the course of construction and
development of $10,800 (2018: $406,252), which is included as part of the software &
applications additions and balance at 30 June 2019.
ACCOUNTING
POLICY
Fixed assets are stated at historical cost less depreciation. Fixed assets
(other than in-house software and applications in the course of construction
and development) are depreciated over their estimated useful lives using the
diminishing balance method.
The expected useful lives are as follows:
Computer equipment
Software
In-house software and applications
Communications equipment
Office fit out
Office furniture and equipment
4 years
2½ years
4 years
4 – 10 years
3 – 13 years
5 – 13 years
The residual values, useful lives and depreciation methods are reviewed, and
adjusted if appropriate, at each reporting date.
A fixed asset is derecognised upon disposal or when there is no future economic
benefit to the consolidated entity. Gains and losses between the carrying amount
and the disposal proceeds are taken to profit or loss.
Critical accounting judgements, estimates and assumptions
…stimation of useful lives of assets: Management exercises judgement in determining
the estimated useful lives and related depreciation charges for its fixed assets.
The useful lives could change significantly as a result of technical innovations or
some other event. The depreciation charge will increase where the useful lives are
less than previously estimated.
PLATINUM ASSET MANAGEMENT LIMITED ANNUAL REPORT 2019 67
Note 8. Current liabilities – trade and other payables
Trade payables
GST payable
Distribution payable – PAXX to unitholders (whilst consolidated)
2019
$’000
5,995
2,113
–
8,108
2018
$’000
4,326
2,373
16,845
23,544
ACCOUNTING
POLICY
Payables represent amounts owing at balance date. Trade payables relate to
services provided to the consolidated entity at balance date, which are unpaid.
Due to their general short-term nature, they are measured at amortised cost and
are not discounted. The amounts are unsecured and are usually paid within 14 to
30 days of being invoiced.
Note 9. Current and non-current liabilities – employee benefits
Current liabilities
Annual leave
Long service leave
Non‑current liabilities
2019
$’000
1,489
2,320
3,809
2018
$’000
1,337
1,912
3,249
Payroll tax on Deferred Remuneration Plan
1,560
1,145
ACCOUNTING
POLICY
Employee benefit liabilities represents accrued wages, salaries, annual and
long-service leave entitlements and other incentives (including any provision for
estimated staff incentive payments and related on-costs), that are recognised in
respect of employee services up to balance date and are measured at the amounts
expected to be paid when the liabilities are settled and include related on-costs,
such as payroll tax.
Critical accounting judgements, estimates and assumptions
With respect to the interim/half-year financial report, in accordance with AASB 137:
Provisions, Contingent Liabilities and Contingent Assets, management may include
a provision at 31 December for staff incentive payments, if the consolidated entity
has achieved strong performance for its clients at that point in time, even though
the annual assessment period is from 1 April to 31 March.
PLATINUM ASSET MANAGEMENT LIMITED ANNUAL REPORT 2019
68
Notes to the Financial Statements
�0 June 2019
Note 10. Earnings per share
Profit after income tax attributable to the owners of Platinum
Asset Management Limited
Weighted average number of ordinary shares used in
calculating basic and diluted earnings per share
Basic earnings per share
Diluted earnings per share
2019
$’000
2018
$’000
157,651
189,221
NUMBER
NUMBER
583,162,543
584,732,213
CENTS
27.03
27.03
CENTS
32.36
32.36
ACCOUNTING
POLICY
Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to the
owners of Platinum Asset Management Limited, excluding any costs of servicing
equity other than ordinary shares, by the weighted average number of ordinary
shares outstanding during the financial year. Treasury shares are excluded from the
weighted average number of ordinary shares used to calculate basic (and diluted)
earnings per share.
Diluted earnings per share
Diluted earnings per share adjusts the weighted average number of shares used
to determine basic earnings per share to take into account any options that are
“in the money”, but not exercised.
Note 11. Operating segments
The consolidated entity is organised into two main operating segments being:
–
–
Funds management: through the generation of management and performance fees from
Australian investment vehicles, its US-based investment mandates and Platinum World
Portfolios Plc. (“PWP”) and associated costs including those of the London office; and
Investments and other: through the consolidated entity’s investment in the (a) ASX
quoted, Platinum Asia Investments Limited (b) PWP (c) unlisted Platinum Trust Funds and
(d) the quoted managed fund, PAXX. Also included in this category are Australian dollar
term deposits as well as associated interest derived from these.
PLATINUM ASSET MANAGEMENT LIMITED ANNUAL REPORT 2019
69
Note 11. Operating segments – continued
The segment financial results, segment assets and liabilities are disclosed on the
following page(s).
2019
Revenue
Management and performance fees
Interest
Distributions and dividends*
Net losses on financial assets and equity in
associates^
Net foreign exchange gains on overseas
bank accounts
Total revenue and other income
Expenses
Profit before income tax expense
Income tax expense
Profit after income tax expense
Other comprehensive income
Total comprehensive income
Assets
Cash and cash equivalents
Financial assets and equity in associates
Term deposits
Receivables and other assets
Total assets
Liabilities
Payables and provisions
Tax liabilities
Total liabilities
Net assets
FUNDS
MANAGEMENT
$’000
INVESTMENTS
AND OTHER
$’000
TOTAL
$’000
295,218
265
–
–
–
295,483
(75,992)
219,491
(64,289)
155,202
(16)
–
295,218
3,277
3,714
3,542
3,714
(4,702)
(4,702)
1,548
3,837
(429)
3,408
(274)
3,134
–
1,548
299,320
(76,421)
222,899
(64,563)
158,336
(16)
155,186
3,134
158,320
8,294
–
–
29,978
38,272
13,477
6,848
20,325
17,947
104,653
117,776
81,877
1,560
112,947
117,776
81,877
31,538
305,866
344,138
–
2,725
2,725
13,477
9,573
23,050
303,141
321,088
PLATINUM ASSET MANAGEMENT LIMITED ANNUAL REPORT 2019
70
Notes to the Financial Statements
�0 June 2019
Note 11. Operating segments – continued
2018
Revenue
FUNDS
MANAGEMENT
$’000
INVESTMENTS
AND OTHER
$’000
TOTAL
$’000
Management and performance fees
Interest
328,681
436
–
3,308
328,681
3,744
Distributions, dividends and gains on forward
currency contracts*
Net losses on financial assets and equity in
associates^
Net foreign exchange gains on overseas
bank accounts
Total revenue and other income
Expenses
Profit before income tax expense
Income tax expense
Profit after income tax expense
Other comprehensive income
Total comprehensive income
Assets
Cash and cash equivalents
Financial assets and equity in associates
Term deposits
Receivables and other assets
Total assets
Liabilities
Payables and provisions
Tax liabilities
Total liabilities
Net assets
–
–
–
329,117
(84,681)
244,436
(69,013)
175,423
7
23,312
23,312
(3,743)
(3,743)
1,296
24,173
(285)
23,888
(7,717)
16,171
–
1,296
353,290
(84,966)
268,324
(76,730)
191,594
7
175,430
16,171
191,601
4,299
–
–
37,187
41,486
11,093
1,496
12,589
28,897
159,500
194,716
27,876
21,689
163,799
194,716
27,876
58,876
403,781
445,267
16,845
4,718
21,563
27,938
6,214
34,152
382,218
411,115
PLATINUM ASSET MANAGEMENT LIMITED ANNUAL REPORT 2019
71
Note 11. Operating segments – continued
*
The amount in the tables on the previous pages disclosed as “Distributions, dividends (and gains on forward
currency contracts)” is comprised of:
Dividend received by PIML from its investment in PAXX since deconsolidation
Distribution received by PAXX from Platinum Asia Fund whilst consolidated
Dividend received by PIML from its investment in PAI
Distribution received by PIML from its investment in the
Platinum Trust Funds
Distributions and dividends (total as appears in the consolidated
statement of profit or loss and other comprehensive income)
Net gains on forward currency contracts
2019
$’000
1,299
–
2,400
15
3,714
–
3,714
2018
$’000
–
21,551
1,700
21
23,272
40
23,312
^
The amount in the tables on the previous pages disclosed as “Net (losses)/gains on financial assets and
equity in associates” is comprised of:
Realised/unrealised losses from PAXX
(during the period of consolidation)
(Un)realised losses on Platinum Trust Fund investments
Losses on financial assets (total as appears in the
consolidated statement of profit or loss and other
comprehensive income)
Share of (loss)/profit of associates
2019
$’000
(2,092)
(11)
(2,103)
(2,599)
(4,702)
2018
$’000
(12,968)
14
(12,954)
9,211
(3,743)
The consolidated entity derived management and performance fees from Australian investment
vehicles, its “absolute” US performance fee mandates and PWP and also derived investment
income from its seed investments, as follows:
Revenue breakdown by geographic region
Australia
Offshore: United States and Ireland
2019
$’000
2018
$’000
291,238
8,082
299,320
320,719
32,571
353,290
PLATINUM ASSET MANAGEMENT LIMITED ANNUAL REPORT 2019
72
Notes to the Financial Statements
�0 June 2019
Note 11. Operating segments – continued
ACCOUNTING
POLICY
Operating segments are presented using the ‘management approach’, where the
information presented is on the same basis as the internal reports provided to
the Chief Operating Decision Makers (“CODM”). The CODM refers to the Board of the
Company, who are responsible for the allocation of resources to operating segments
and assessing their performance. Revenue as disclosed in the consolidated
statement of profit or loss and other comprehensive income is measured at the fair
value of the consideration received or receivable and is recognised if it meets the
criteria below:
–
–
–
–
–
–
Management fees: recognised based on the applicable investment
management agreements and recognised as they are earned. The majority
of management fees were derived from the Platinum Trust Funds C Class.
The management fee for this Class was calculated at 1.35% per annum of
each Fund’s daily Net Asset Value.
Performance fees: recognised as income at the end of the relevant period
to which the performance fee relates, when the consolidated entity’s
entitlement to the fee becomes certain.
Interest income: recognised in the consolidated statement of profit or
loss and other comprehensive income and is based on the effective
interest method.
Distributions: recognised when the consolidated entity becomes entitled
to the income.
Dividend income: brought to account on the applicable ex-dividend date.
Net gains/(losses) on financial assets at fair value through profit and loss:
relates to net gains/(losses) on seeded and other investments, and recognised
as and when the fair value of these investments change and if disposed,
the proceeds less costs on sale of investments.
PLATINUM ASSET MANAGEMENT LIMITED ANNUAL REPORT 2019 Note 12. Taxation
(a) Income tax expense
The income tax expense attributable to profit comprises:
Current tax payable
Deferred tax – recognition of temporary differences
Deferred tax – credited to share-based payments reserve
Income tax expense
Numerical reconciliation of income tax expense:
Profit before income tax expense
Tax at the statutory tax rate of 30%
Tax effect amounts which are not deductible/(taxable) in
calculating taxable income:
Tax rate differential on offshore business income
Non-taxable losses/(gains) on investments
Other non-deductible expenses
Franking credits received
Income tax expense
(b) Non-current liabilities – net deferred tax liabilities:
73
2019
$’000
65,985
(1,723)
301
64,563
2018
$’000
71,318
5,165
247
76,730
222,899
66,870
268,324
80,497
(557)
(1,010)
8
(748)
(3,758)
447
95
(551)
64,563
76,730
2019
$’000
2018
$’000
Deferred tax liabilities comprises temporary differences attributable to:
Unrealised foreign exchange gains on cash
Deferred Remuneration Plan
Employee provisions
Unrealised gains on investments
Capital expenditure on fixed assets not immediately deductible
Expense accruals
Net deferred tax liabilities
851
4,082
(1,143)
1,874
(829)
(344)
4,491
402
3,633
(975)
4,316
(836)
(326)
6,214
PLATINUM ASSET MANAGEMENT LIMITED ANNUAL REPORT 2019
74
Notes to the Financial Statements
�0 June 2019
Note 12. Taxation – continued
The net deferred tax liability figure is comprised of $2,316,000 (2018: $2,137,000) of deferred
tax assets and $6,807,000 (2018: $8,351,000) of deferred tax liabilities.
It is estimated that most of the non-investment related deferred tax assets will be recovered
or settled within 12 months, and are estimated to be $1,487,000 (2018: $1,301,000).
ACCOUNTING
POLICY
Current tax
The income tax expense or benefit for the period is the tax payable on that period’s
taxable income based on the applicable income tax rate for each jurisdiction,
adjusted by the changes in deferred tax assets and liabilities attributable to
temporary differences, unused tax losses and the adjustment recognised for
prior periods, where applicable.
Deferred tax
Deferred tax is accounted for in respect of temporary differences between the
tax bases of assets and liabilities and their carrying amounts in the consolidated
financial statements. Deferred tax liabilities are recognised for all taxable
temporary differences and deferred tax assets are recognised for all deductible
temporary differences to the extent that it is probable that taxable profit will be
available against which the asset can be utilised.
Tax consolidation
The Company and its wholly-owned Australian controlled entities are part of a tax
consolidated group under Australian tax legislation. The Company is the head entity
of the tax-consolidated group.
Offshore Banking Unit (“OBU”) Legislation
In June 2010, the Australian Taxation Office declared that the consolidated group
is an Offshore Banking Unit (OBU) under Australian Taxation Law. This allows the
consolidated group to apply a concessional tax rate of 10% to net income it derives
from its offshore mandates. The concession was applied from 1 July 2010.
Critical accounting judgements, estimates and assumptions
Recovery of deferred tax assets: Deferred tax assets are recognised for deductible
temporary differences only if the consolidated entity considers it is probable that
future taxable amounts will be available to utilise those temporary differences
and losses.
PLATINUM ASSET MANAGEMENT LIMITED ANNUAL REPORT 2019 75
Note 13. Reconciliation of profit after income tax to net cash from operating activities
2019
$’000
2018
$’000
Profit after income tax expense for the year
158,336
191,594
Adjustments for:
Depreciation expense
Cash outlay on shares and transaction costs
associated with the Deferred Remuneration Plan
Share-based payments accounting expense (see Note 20)
Foreign exchange differences
Interest income
Dividend and distribution income pre-deconsolidation
(Gain)/loss on investments
Change in operating assets and liabilities:
Decrease/(increase) in trade and other receivables
(Increase) in sundry debtors
Increase/(decrease) in income tax payable
Decrease/(increase) in prepayments
Increase in trade creditors and GST
(Decrease) in income tax provision and expense
(Increase)/decrease in deferred tax assets
(Decrease)/increase in deferred tax liabilities
Increase in employee provisions and payroll tax
737
724
(7,470)
4,858
(1,548)
(3,542)
–
4,702
4,667
(293)
5,082
132
1,409
–
(166)
(1,544)
975
(11,703)
3,558
(1,138)
(3,744)
(23,272)
3,703
(377)
–
(3,333)
(535)
989
(7,757)
18
5,147
672
Net cash from operating activities
166,335
154,546
PLATINUM ASSET MANAGEMENT LIMITED ANNUAL REPORT 2019
76
Notes to the Financial Statements
�0 June 2019
Note 13. Reconciliation of profit after income tax to net cash from operating activities
– continued
ACCOUNTING
POLICY
In accordance with AASB 107: Statement of Cash Flows, cash includes deposits at
call and cash at bank that are used to meet short-term cash requirements. Cash
equivalents include short-term deposits of three months or less from the date of
acquisition that are readily convertible into cash. Cash and cash equivalents at
the end of the financial year, as shown in the consolidated statement of cash
flows are reconciled to the related item in the consolidated statement of financial
position.
Under AASB 107, term deposits that have maturities of more than three months
from the date of acquisition are not included as part of “cash and cash equivalents”
and have been disclosed separately in the consolidated statement of financial
position. All term deposits are held with licensed Australian banks.
Payments and receipts relating to the purchase and sale of term deposits are
classified as “cash flows from investing activities”.
Receipts from operating activities include management and performance
fees receipts. Payments for operating activities include payments to suppliers
and employees.
Note 14. Equity – Issued capital
2019
SHARES
2018
SHARES
Ordinary shares – fully paid(a) 586,678,900 586,678,900
Treasury shares(b)
Total issued capital
(5,095,797)
(3,471,866)
581,583,103
583,207,034
2019
$’000
751,355
(27,865)
723,490
2018
$’000
751,355
(20,110)
731,245
(a) Ordinary shares: entitles shareholders to participate in dividends as declared and in the event of winding
up of the Company, to participate in the proceeds in proportion to the number of and amounts paid on the
ordinary shares held. Ordinary shares entitle the shareholder to one vote per share, either in person or
by proxy, at a meeting of the Company’s shareholders. All ordinary shares issued have no par value.
On 13 September 2016, the Company announced an on-market share buy-back program, in which shares
will be bought-back if the Company’s shares trade at a discount to its underlying value. No shares have been
bought-back.
(b) Treasury shares: are shares that have been purchased by the Employee Share Trust, pursuant to the
Deferred Remuneration Plan (Refer to Note 20). Treasury shares are held by the Employee Share Trust for
future allocation to employees. Details of the balance of treasury shares at the end of the financial year
were given below:
Opening balance
Additional shares held by
the Employee Share Trust
Shares allocated to employees
Balance at the end of the
financial year
2019
SHARES
2018
SHARES
3,471,866
1,626,026
1,623,931
–
1,845,840
–
2019
$’000
20,110
7,755
–
2018
$’000
8,422
11,688
–
5,095,797
3,471,866
27,865
20,110
PLATINUM ASSET MANAGEMENT LIMITED ANNUAL REPORT 2019
77
Note 14. Equity – Issued capital – continued
ACCOUNTING
POLICY
Ordinary shares
Ordinary shares are recognised as the amount paid per ordinary share, net of
directly attributable issue costs.
Treasury shares
Where the consolidated entity purchase shares in the Company, the consideration
paid is deducted from total shareholders’ equity and the shares treated as treasury
shares. Treasury shares are recorded at cost and when restrictions on employee
shares are lifted which is dependent on vesting and exercise of the rights, the cost
of such shares will be adjusted to the share-based payments reserve.
Note 15. Equity – reserves
Foreign currency translation reserve
Capital reserve
Share-based payments reserve
2019
$’000
105
2018
$’000
121
(588,144)
(588,144)
11,176
6,017
(576,863)
(582,006)
Foreign currency translation reserve
Exchange differences arising on translation of foreign controlled entities are recognised in other
comprehensive income and accumulated as a separate reserve within equity. The balance of
the foreign currency translation reserve was $105,000 at 30 June 2019 (30 June 2018:
$121,000).The movement in the current year relates to translation of the Platinum UK Asset
Management Limited net assets.
Capital reserve
In 2007, in preparation for listing, a restructure was undertaken in which the Company sold or
transferred all of its assets, other than its beneficial interest in shares in Platinum Asset Pty
Limited and sufficient cash to meet its year to date income tax liability.
The Company then split its issued share capital of 100 shares into 435,181,783 ordinary
shares. It then took its beneficial interests in Platinum Investment Management Limited to
100%, through scrip for scrip offers, in consideration for the issue of 125,818,217 ordinary
shares in the Company.
As a result of the share split and takeover offers, the Company had 561,000,000 ordinary
shares on issue and beneficially held 100% of the issued share capital of Platinum Investment
Management Limited. Subsequently, 140,250,000 shares on issue representing 25% of the
issued shares of the Company were sold to the public by existing shareholders.
The amount of $588,144,000 was established on listing as a result of the difference between
the consideration paid for the purchase of non-controlling interests and the share of net assets
acquired in the minority interests.
PLATINUM ASSET MANAGEMENT LIMITED ANNUAL REPORT 2019
78
Notes to the Financial Statements
�0 June 2019
Note 15. Equity – reserves – continued
Share-based payments reserve
In June 2016, the consolidated entity established the Deferred Remuneration Plan. The amount
in the share-based payments reserve is comprised of the amortisation of the rights granted and
any associated future tax deduction.
Please refer to Note 20 for further information.
Movements in reserves:
Movements in each class of reserve during the current and previous financial year are set
out below:
SHARE-BASED
PAYMENTS
$’000
FOREIGN
CURRENCY
$’000
CAPITAL
$’000
TOTAL
$’000
Balance at 30 June 2017
2,212
114
(588,144)
(585,818)
Exchange rate translation
impact of foreign subsidiaries
Movement in share-based
payments reserve
Balance at 30 June 2018
Exchange rate translation impact
of foreign subsidiaries
Movement in share-based
payments reserve
Balance at 30 June 2019
Note 16. Equity – retained profits
–
3,805
6,017
7
–
–
–
7
3,805
121
(588,144)
(582,006)
–
(16)
5,159
11,176
–
105
–
–
(16)
5,159
(588,144)
(576,863)
2019
$’000
2018
$’000
Retained profits at the beginning of the financial year
185,940
177,959
Profit after income tax expense attributable to owners of
the Company
Dividends paid (Note 17)
Retained profits at the end of the financial year
157,651
189,221
(169,130)
(181,240)
174,461
185,940
PLATINUM ASSET MANAGEMENT LIMITED ANNUAL REPORT 2019
Note 17. Equity – dividends
Dividends paid
Dividends paid during the financial year were as follows:
Final dividend paid for the 2018 financial year (16 cents per share)
93,313
Interim dividend paid for the 2019 financial year (13 cents per share) 75,817
Final dividend paid for the 2017 financial year (15 cents per share)
Interim dividend paid for the 2018 financial year (16 cents per share)
–
–
2019
$’000
79
2018
$’000
–
–
87,758
93,482
169,130
181,240
Dividends not recognised at year-end
Since 30 June 2019, the Directors declared to pay a 2019 final fully-franked dividend of
14 cents per share, payable out of profits for the 12 months to 30 June 2019. The dividend
has not been provided for at 30 June 2019, because the dividend was declared after year-end.
Franking credits
Franking credits available at reporting date based on a tax
rate of 30%
Franking credits/(debits) that will arise from the payment/(refund)
of the provision for income tax at the reporting date based on
a tax rate of 30%
Franking credits available for subsequent financial years based
on a tax rate of 30%
2019
$’000
2018
$’000
64,017
77,903
5,082
(3,333)
69,099
74,570
ACCOUNTING
POLICY
A provision is made for the amount of any dividend declared by the Directors before
or at the end of the financial year but not distributed at balance date.
PLATINUM ASSET MANAGEMENT LIMITED ANNUAL REPORT 2019
80
Notes to the Financial Statements
�0 June 2019
Note 18. Financial risk management
Financial risk management objectives
The Company’s and consolidated entity’s activities expose it to both direct and indirect financial
risk, including: market risk, credit risk and liquidity risk. Material direct exposure to financial risk
occurs through the impact on profit of movements in funds under management (“FUM”) and
through its direct investments in:
–
–
–
Platinum Asia Investments Limited (“PAI”);
the offshore European-based fund, Platinum World Portfolios Plc (“PWP”); and
its investments in Platinum Asia Fund (Quoted Managed Hedge Fund) (“PAXX”).
Indirect exposure occurs because PIML is the Investment Manager for various investment
vehicles, including:
–
–
–
–
investment mandates;
various unit trusts, namely the Platinum Trust Funds, Platinum Global Fund, PIXX
and PAXX;
its ASX-listed investment companies, Platinum Capital Limited and PAI; and
PWP.
The consolidated entity does not derive any management fees or performance fees directly
from PIXX and PAXX. Management and performance fees are borne at the Platinum International
Fund/Platinum Asia Fund level and are paid directly by these Funds to the consolidated entity.
This note mainly discusses the direct exposure to risk of the consolidated entity. The consolidated
entity’s risk management procedures focus on managing the potential adverse effects on
financial performance caused by volatility of financial markets.
Market risk
The key direct risks associated with the consolidated entity are those driven by investment and
market volatility and the resulting impact on FUM or a reduction in the growth of FUM. Reduced
FUM will directly impact on management fee income and profit because management fee
income is calculated as a percentage of FUM. FUM can be directly impacted by a range of
factors including:
(i)
Poor investment performance: absolute negative investment performance will reduce
FUM and relative under performance to appropriate market benchmarks could reduce the
attractiveness of Platinum’s investment products to investors, which would impact on the
growth of the business. Poor investment performance could also trigger the termination of
Investment Mandate arrangements;
(ii)
Market volatility: Platinum invests in global markets. It follows that a decline in overseas
markets, adverse exchange rate or interest rate movements will all impact on FUM;
PLATINUM ASSET MANAGEMENT LIMITED ANNUAL REPORT 2019 81
Note 18. Financial risk management – continued
Market risk – continued
(iii)
A reduction in the ability to retain and attract investors: that could be caused by a decline
in investment performance, but also a range of other factors, such as the high level of
competition in the funds management industry;
(iv) A loss of key personnel; and
(v)
Investor allocation decisions: investors constantly re-assess and re-allocate their
investments on the basis of their own preferences. Investor allocation decisions could
operate independently from investment performance, such that funds outflows occur
despite positive investment performance.
A decline in investment performance will also directly impact on performance share fees and
performance fees earned by the consolidated entity. Historically, the amount of performance
share fees earned by the consolidated entity has fluctuated significantly from year to year and
can be a material source of fee revenue.
For those investment mandates that pay a performance share fee, the fee is based on a
proportion of each Mandate’s investment performance, and is calculated at the end of each
calendar year and is based on absolute (and not relative) return.
Performance fees may be earned by the consolidated entity, if the investment return of a
Platinum Trust Fund, Platinum Capital Limited, Platinum Asia Investments Limited, Platinum
World Portfolios or applicable mandate exceeds its specified benchmark. Should the actual
performance of one or more of these entities be higher than the applicable benchmark or index,
a performance fee would be receivable for the financial year. As at 30 June 2019, performance
fees of $4,842 (2018: $1,180,270) were receivable.
If global equity markets fell 10% over the course of the year and consequently the consolidated
entity’s FUM fell in line with global equity markets, it follows that management fees would fall by
10%. If there was a 10% decrease in performance of investment mandates over the course of the
year that resulted in an actual negative performance for the Investment Mandate for the year,
then no performance fee would be earned.
The above analysis assumes a uniform 10% fall across all global equity markets. This is
extremely unlikely as there is a large degree of variation and volatility across markets. For
example, it is quite feasible for the Chinese market to fall whilst other Asian markets go up.
To mitigate the impact of adverse investment performance on FUM, the Investment Manager
may employ hedging strategies to manage the impact of adverse market and exchange rate
movements on the funds it manages. Market risk may be managed through derivative
contracts, including futures, options and swaps. Currency risk may be managed through the
use of forward currency contracts.
The section on the following pages mainly discusses the direct impact of foreign currency risk,
price risk and interest rate risk on the consolidated entity’s financial instruments held at
30 June 2019.
PLATINUM ASSET MANAGEMENT LIMITED ANNUAL REPORT 2019 82
Notes to the Financial Statements
�0 June 2019
Note 18. Financial risk management – continued
Foreign currency risk
The consolidated entity is exposed to foreign currency risk, because:
–
–
–
it holds US Dollar cash, either directly or through its direct investments;
it derives management and performance fees from its US Dollar investment
mandates; and
it directly invests in Platinum World Portfolios, Platinum Asia Investments Limited
and PAXX.
US Dollar cash
At 30 June 2019, the consolidated entity held US$24,204,470 (equivalent to A$34,481,758) in
cash (2018: US$18,525,503 (equivalent to A$25,032,773). If the Australian Dollar had been 10%
higher/lower against the US Dollar than the prevailing exchange rate used to convert the balance
with all other variables held constant, net profit before tax would have been A$3,132,878 lower/
A$3,828,578 higher (2018: A$2,277,530 lower/A$2,783,989 higher).
US Dollar fees
If the Australian Dollar had been 10% higher/lower against the US Dollar than the prevailing
exchange rate used to convert the US mandate and PWP fees, with all other variables held
constant, then net profit before tax would have been A$542,546 lower/A$749,602 higher
(2018: A$2,496,946 lower/A$3,051,711 higher).
Investment in PWP
Platinum Investment Management Limited’s (PIML’s) investment in PWP is denominated in US
Dollars. If the Australian Dollar had been 10% higher/lower against the prevailing exchange rate
at 30 June 2019, then the consolidated entity’s net assets would have been A$5.6m lower/
A$6.8m higher (2018: A$5.8m lower/A$7.0m higher) (exchange rate translation effect).
Platinum World Portfolios’ investments are denominated in various foreign currencies specific
to the investments held in each of the portfolios. The foreign currency with the largest impact
on profit before tax, if there was a 10% currency movement at 30 June 2019, was the Japanese
Yen (2018: Hong Kong Dollar). A 10% increase/decrease in the Australian Dollar would have
caused net profit before tax to be A$2,081,556 lower/A$2,544,124 higher, based on PIML’s
interest in PWP at 30 June 2019 (2018: A$2,180,699 lower/A$2,719,894 higher).
Investment in PAI
Platinum Asia Investments Limited’s investments are also denominated in foreign currencies.
The foreign currency with the largest impact on profit before tax, if there was a 10% currency
movement at 30 June 2019, was the US Dollar (2018: Hong Kong Dollar), which was the currency
with the largest exposure in this entity at 30 June 2019. A 10% increase/decrease in the
Australian Dollar would have caused the consolidated entity’s net profit before tax to be
A$1,535,900 lower/A$1,877,211 higher (2018: A$1,417,016 lower/A$1,731,890 higher).
PLATINUM ASSET MANAGEMENT LIMITED ANNUAL REPORT 2019 83
Note 18. Financial risk management – continued
Foreign currency risk – continued
Investment in PAXX
PAXX is a feeder fund that invests in Platinum Asia Fund (PAF), which invests in undervalued
companies across the Asian region-ex Japan. The foreign currency with the largest impact on
profit before tax, if there was a 10% currency movement at 30 June 2019, was the US Dollar
(2018: Hong Kong Dollar), which was the currency with the largest exposure in PAXX at 30 June
2019. A 10% increase/decrease in the Australian Dollar would have caused the Company’s net
profit before tax to be A$980,579 lower/A$1,198,486 higher (2018: A$1,774,000 lower/
A$2,168,000 higher).
The US Dollar was the largest exposure because PAI/PAF was partly hedged back into the US
Dollar, via forward contracts.
Price risk
At 30 June 2019, the consolidated entity is exposed to indirect price risk through its equity-
accounted investments in Platinum Asia Investments Limited, Platinum World Portfolios and
PAXX. The impact of price risk is summarised in the table below:
Entity
IMPACT ON NET PROFIT BEFORE TAX OF 10%
INCREASE/(DECREASE) IN 30 JUNE NET ASSET VALUES
PAI
PWP
PAXX
2019
$’000
INCREASE/(DECREASE)
2018
$’000
INCREASE/(DECREASE)
3,257/(3,257)
6,163/(6,163)
2,339/(2,339)
3,497/(3,497)
6,094/(6,094)
1,964/(1,964)
Interest rate risk
At 30 June 2019, cash and term deposits are the only significant assets with potential exposure
to interest rate risk held by the consolidated entity. A movement of +/-1% in Australian interest
rates occurring on 30 June 2019 will cause the consolidated entity’s net profit before tax to be
$763,999 higher/lower (2018: $422,751 higher/lower), based on the impact on its interest-
bearing cash balances. An interest rate movement at 30 June 2019 will not impact the profit
earned from term deposits, as term deposit interest rates are determined on execution.
PLATINUM ASSET MANAGEMENT LIMITED ANNUAL REPORT 2019
84
Notes to the Financial Statements
�0 June 2019
Note 18. Financial risk management – continued
Credit risk
Credit risk relates to the risk of a counterparty defaulting on a financial obligation resulting in a
loss to the consolidated entity (typically “non-equity” financial instruments). Credit risk arises
from the financial assets of the consolidated entity that include: cash and term deposits.
All term deposits are held with licensed Australian banks that all have a AA- (2018: AA-)
credit rating.
The maximum exposure to direct credit risk at balance date is the carrying amount recognised
in the consolidated statement of financial position. No assets are past due or impaired.
Any default in the value of a financial instrument held within any of the entities that Platinum
Investment Management Limited acts as Investment Manager, will result in reduced investment
performance. There is no direct loss for the consolidated entity other than through the ensuing
reduction in FUM, as noted in the section on “market risk”. The Investment Manager employs
standard market practices for managing its credit risk exposure.
The credit quality of cash and term deposits held by each entity in the consolidated entity,
by counterparty, can be assessed by reference to external credit ratings. At 30 June 2019
and 30 June 2018, the relevant credit ratings were as follows:
Rating
AA–
A
BBB+
2019
$’000
2018
$’000
194,070
754
–
166,582
24,886
207
194,824
191,675
Liquidity risk
Liquidity risk is the risk that the consolidated entity will encounter difficulty in meeting
obligations associated with its liabilities. The consolidated entity manages liquidity risk by
maintaining sufficient cash reserves to cover its liabilities and receiving management fees to
meet operating expenses on a regular basis. Management monitors its cash position on a daily
basis and prepares forecasts on a weekly basis.
PLATINUM ASSET MANAGEMENT LIMITED ANNUAL REPORT 2019
85
Note 18. Financial risk management – continued
Liquidity risk – continued
Remaining contractual maturities
The following table details the consolidated entity’s remaining contractual maturity for its
liabilities. The table has been drawn up based on the undiscounted cash flows of liabilities based
on the earliest date on which the liabilities are required to be paid.
2019
Trade payables
GST payable
Current tax payable
AT CALL
$’000
–
–
–
Employee-related provisions
3,809
WITHIN
30 DAYS
$’000
5,995
2,113
–
–
3,809
8,108
Total
2018
Distribution payable –
PAXX to unitholders
Trade payables
GST payable
AT CALL
$’000
–
–
–
WITHIN
30 DAYS
$’000
16,845
4,326
2,373
–
Employee-related provisions
3,249
Total
3,249
23,544
BETWEEN
1 AND 3
MONTHS
$’000
OVER
3 MONTHS
$’000
–
–
–
–
–
–
–
5,082
1,560
6,642
BETWEEN
1 AND 3
MONTHS
$’000
OVER
3 MONTHS
$’000
–
–
–
–
–
–
–
–
1,145
1,145
TOTAL
$’000
5,995
2,113
5,082
5,369
18,559
TOTAL
$’000
16,845
4,326
2,373
4,394
27,938
Financial liabilities at fair value through profit or loss
The consolidated entity had no financial liabilities at fair value through profit or loss at
30 June 2019 or 30 June 2018.
Accordingly, the consolidated entity does not have a significant direct exposure to liquidity risk.
Fair value of financial instruments
Unless otherwise stated, the carrying amounts of financial instruments reflect their fair value.
PLATINUM ASSET MANAGEMENT LIMITED ANNUAL REPORT 2019
86
Notes to the Financial Statements
�0 June 2019
Note 18. Financial risk management – continued
Capital risk management
(i) Capital requirements
The Company has limited capital requirements and generally expects that most, if not all,
future profits will continue to be distributed by way of dividends, subject to ongoing
capital requirements.
(ii) …xternal requirements
Platinum Investment Management Limited is required to hold an Australian Financial Services
Licence (AFSL) issued by the Australian Securities and Investments Commission (ASIC). The
AFSL authorises Platinum Investment Management Limited to provide investment management
services and act as a Responsible Entity of Registered Managed Investment Schemes.
Platinum Investment Management Limited has complied with all externally imposed
requirements to hold an AFSL during the financial year.
Note 19. Fair value measurement
Fair value hierarchy
AASB 13: Fair Value Measurement requires the consolidated entity to classify those assets
measured at fair value using the following fair value hierarchy model (consistent with the
hierarchy model applied to financial assets and liabilities at 30 June 2018):
(i)
Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1);
(ii)
(iii)
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 assets or liabilities that are not based on observable market data
(unobservable inputs) (level 3).
At 30 June 2019, the investments by PIML in PAXX, PAI and PWP have not been measured at fair
value because they have been classified as equity investments in associates. If these were to
be measured at fair value, they would be classified as level 2.
PLATINUM ASSET MANAGEMENT LIMITED ANNUAL REPORT 2019 87
The following table analyses within the fair value hierarchy model, the consolidated entity’s
assets and liabilities, measured or disclosed at fair value, using the three level hierarchy model
at 30 June 2019 and 30 June 2018. The consolidated entity has no assets or liabilities that are
classified as level 3.
LEVEL 1
$’000
LEVEL 2
$’000
TOTAL
$’000
2019
Assets
Platinum Trust Fund investments
2018
Assets
Unit trust – held directly by Platinum Asia Fund
(Quoted Managed Hedge Fund) (“PAXX”)*
Platinum Trust Fund investments
–
–
–
–
–
183
183
183
183
98,602
194
98,796
98,602
194
98,796
*
At 30 June 2018, assets held directly by PAXX were classified as fair value investments, because PAXX was
consolidated into the Platinum group.
Valuation techniques used to classify assets and liabilities as level 2
PIML’s direct investments in the Platinum Trust Funds are valued using their respective Net
Asset Values (adjusted for the buy-sell spread) of the underlying assets and liabilities and
includes the impact of the 30 June distribution. Accordingly, management has assessed the
fair value investments as being Level 2 investments.
Note 20. Share-based payments
Deferred Remuneration Plan (applies to all staff)
In June 2016, a “Deferred Bonus Plan” (now known as a “Deferred Remuneration Plan”) was
approved by the Nomination & Remuneration Committee of Platinum Asset Management
Limited. The main objective of the Plan is to recognise the contributions made by key employees
and to retain their skills within the firm.
PLATINUM ASSET MANAGEMENT LIMITED ANNUAL REPORT 2019
88
Notes to the Financial Statements
�0 June 2019
Note 20. Share-based payments – continued
Deferred Remuneration Plan (applies to all staff) – continued
PLAN
DESCRIPTION
Deferred
Remuneration
Plan
Upon vesting and exercise of the deferred
rights, employees will receive ordinary
shares in the Company.
The deferred rights also carry an entitlement
to a dividend equivalent payment. Upon the
valid exercise of a deferred right, or deemed
exercise, of a deferred right, an eligible
employee will be entitled to receive an
amount approximately equal to the amount
of dividends that would have been paid to the
eligible employee had they held the share
from the grant date to the date that the
deferred rights are exercised.
VESTING CONDITION
Continuous
employment for a
period of 4 years
from the grant date.
The number of rights granted and the accounting expense for the current and comparative year
is shown below. The trust has purchased an equivalent number of PTM shares and will hold
these shares until the vesting date (four years from each grant) and subsequent exercise.
Opening balance
Granted during the year
Cancelled during the year
Closing balance
Accounting expense
Deferred rights granted in 2019
Deferred rights granted in 2018
Deferred rights granted in 2017
Deferred rights granted in 2016
Total share-based payments expense
Associated payroll tax expense on additional deferred rights
granted during the year
Total
2019
NUMBER OF
DEFERRED
2018
NUMBER OF
DEFERRED
RIGHTS GRANTED RIGHTS GRANTED
3,471,866
1,626,026
1,623,931
1,878,168
–
(32,328)
5,095,797
3,471,866
2019
$’000
1,300
2,144
797
617
4,858
416
5,274
2018
$’000
–
2,144
797
617
3,558
689
4,247
PLATINUM ASSET MANAGEMENT LIMITED ANNUAL REPORT 2019
89
Note 20. Share-based payments – continued
Deferred Remuneration Plan (applies to all staff) – continued
ACCOUNTING
POLICY
AASB 2: Share‑based Payments requires an organisation to recognise an expense
for equity provided for services rendered by employees. The amount that is
recognised as an expense for share-based payments is derived from the fair
value of the equity instruments granted. Deferred incentives to be settled in
the Company’s shares are considered to be a share-based payments award.
The fair value of the equity instruments granted and measured at grant date is
recognised over the term of the service period. The accounting expense will
commence when there is a “shared understanding” of the terms and conditions
of the offer. The service period may commence prior to grant date. In this case,
the expense is estimated and trued-up at grant date.
The fair value of the rights granted is recognised in the consolidated financial
statements as an expense with a corresponding entry to reserves. The fair value
is measured at grant date and amortised on a straight-line basis over the vesting
period that the employees become unconditionally entitled to the share. In
measuring the fair value, an allowance has been made for the risk or probability
of forfeiture, which measures the risk of selected eligible employees leaving
Platinum and forfeiting their rights.
At each balance date, the Company reviews the number of deferred rights granted.
Adjustments are made to the share-based payments expense, if the number of
deferred rights granted has changed (e.g. through forfeitures). The impact of any
revision to the original estimate will be recognised in the consolidated statement
of profit or loss and other comprehensive income with the corresponding entry
to reserves.
The purchase of shares on-market by the Company through an Employee Share
Trust for future allocation to key employees is shown in the consolidated statement
of financial position as a debit entry to the “treasury shares” account with the
corresponding credit entry to “cash”.
PLATINUM ASSET MANAGEMENT LIMITED ANNUAL REPORT 2019 90
Notes to the Financial Statements
�0 June 2019
Note 21. Key management personnel disclosures
2019
$’000
2018
$’000
The aggregate remuneration that the consolidated entity provided
Executive and Non-Executive Directors was as follows:
Cash salary, Directors’ fees and short-term incentive cash awards
3,932
6,722
Accounting expense related to the KMP unvested allocation under
the Deferred Remuneration Plan^
Superannuation
Decrease in the consolidated entity’s annual and long service
leave provision
468
163
–
4,563
381
136
(8)
7,231
^
Andrew Clifford, Elizabeth Norman and Andrew Stannard were the only members of KMP to receive an
allocation of rights under the Deferred Remuneration Plan. The expense attributable to KMP are based on
the allocation of deferred rights in the current and prior years, that have still not vested and is as follows:
2019 GRANT
2018 GRANT
2017 GRANT
2016 GRANT
TOTAL
Number of rights
allocated to KMP
during the year
Accounting expense
attributed to KMP
108,696
248,346
86,208
48,623
491,873
$87,000
$261,001
$67,393
$52,201
$467,575
The accounting valuation of $467,575 represents the amount expensed through the
income statement in the current year, with respect to grants made in each year between
2016 and 2019.
Interests of Non-Executive and Executive Directors in shares
The relevant interest in ordinary shares in the Company that each Director held at balance
date was:
OPENING BALANCE
ADDITIONS
DISPOSALS
Michael Cole
Stephen Menzies
Anne Loveridge
Brigitte Smith
Tim Trumper
Andrew Clifford
Kerr Neilson
Elizabeth Norman
Andrew Stannard
240,000
40,000
22,000
41,666
–
–
–
–
–
18,900
32,831,449
312,074,841
766,748
–
–
–
–
–
CLOSING
BALANCE
240,000
40,000
22,000
41,666
18,900
32,831,449
–
–
–
–
–
–
60,000,000
252,074,841
–
–
766,748
–
PLATINUM ASSET MANAGEMENT LIMITED ANNUAL REPORT 2019
91
Note 22. Remuneration of auditors
During the financial year, the following fees were paid or payable for services provided by
PricewaterhouseCoopers (the auditor of the Company) and its overseas network firms:
Audit services – PricewaterhouseCoopers
Audit and review of the financial statements and AFSL audit
96,542
93,730
2019
$
2018
$
Audit services for managed funds that Platinum Investment
Management Limited acts as responsible entity –
PricewaterhouseCoopers
Audit and review of the financial statements and compliance
plan audit
Audit services for managed funds that Platinum Investment
Management Limited acts as responsible entity – overseas
PricewaterhouseCoopers firms
Audit of financial statements
Total audit services
Taxation services – PricewaterhouseCoopers
Compliance services
Taxation services for managed funds for which Platinum
Investment Management Limited acts as responsible entity –
PricewaterhouseCoopers
295,992
300,369
54,478
447,012
50,000
444,099
116,745
87,090
Taxation services
556,017
487,580
Taxation services – overseas PricewaterhouseCoopers firms
Foreign tax agent fees
Services provided to Platinum UK Asset Management Limited
PwC US work associated with the set-up of the Cayman Funds
Total taxation services
Other services – PricewaterhouseCoopers
Compliance and assurance services
Total other services
42,597
62,926
–
778,285
17,855
–
3,892
596,417
163,943
163,943
148,083
148,083
Total fees paid and payable to the auditor and its related
practices
1,389,240
1,188,599
PLATINUM ASSET MANAGEMENT LIMITED ANNUAL REPORT 2019
92
Notes to the Financial Statements
�0 June 2019
PART C – Notes 23 to 27
Miscellaneous Notes – Miscellaneous Notes that are required by the accounting standards
Note 23. Related party transactions
Subsidiaries and associates
Interests in subsidiaries and associates are set out in Note 1 and Note 2.
Key management personnel
Disclosures relating to key management personnel are set out in Note 21 and the Remuneration
Report in the Directors’ Report.
Tax consolidation and dividend transactions
Any tax payable on income and gains from any entity within the tax consolidated group and
dividends are sourced from the main operating subsidiary, Platinum Investment Management
Limited (“PIML”), and paid out under the Company. Platinum Asset Management Limited is the
head entity of the consolidated tax group and is the parent entity, and consequently, is the
entity that ultimately pays out dividends to shareholders. The amounts paid are disclosed in
the consolidated statement of cash flows.
Fees received
Platinum Investment Management Limited provides investment management services to:
(i)
Its related party unit trusts – the Platinum Trust Funds and Platinum Global Fund;
(ii)
Its European-based offshore fund, Platinum World Portfolios Plc;
(iii)
(iv)
Its two ASX-listed investment companies (LICs), Platinum Capital Limited (PMC) and
Platinum Asia Investments Limited (PAI); and
Its two ASX quoted managed funds, Platinum International Fund (Quoted Managed
Hedge Fund) (ASX code: PIX) and Platinum Asia Fund (Quoted Managed Hedge Fund)
(ASX code: PAX).
Platinum Investment Management Limited is entitled to receive a monthly management fee,
either directly or indirectly, from each of these entities and a performance fee based on the
relative investment performance of the Platinum Trust Funds, Platinum World Portfolios Plc,
Platinum Capital Limited (“PMC”) and Platinum Asia Investments Limited (“PAI”). The consolidated
entity does not derive any management fees or performance fees directly from PIXX and PAXX.
Management and performance fees are borne at the Platinum International Fund/Platinum Asia
Fund level and are paid directly by these funds to the consolidated entity. The total related party
fees recognised in the statement of profit or loss and other comprehensive income for the
period ended 30 June 2019 and 30 June 2018 were as follows:
PLATINUM ASSET MANAGEMENT LIMITED ANNUAL REPORT 2019 93
Note 23. Related party transactions – continued
Fees received – continued
Related party fees
30 JUNE 2019
$
30 JUNE 2018
$
245,515,816
257,492,273
Included in these figures, is related party fees receivable, disclosed in the statement of financial
position as at 30 June 2019 and 30 June 2018 as follows:
Related party fees receivable
30 JUNE 2019
$
30 JUNE 2018
$
19,001,623
23,317,632
Investment transactions
During the year, PIML received the final 2018 fully-franked dividend of $1,800,000 (2018:
$500,000) and the interim 2019 fully franked dividend of $600,000 (2018: $1,200,000) from
its investment in PAI.
PIML also received the 30 June 2019 distribution of $1,298,813 (2018: $4,816,109) from PAXX
and $15,000 from the Platinum Trust Funds (2018: $21,000).
Other related party transactions
Mr Stephen Menzies is PIML’s nominee on the Board of PWP. PIML reimburses Stephen Menzies
for any incidental travel and accommodation associated with attendance at Board meetings in
Ireland. During the year, the amount reimbursed was $17,523 (2018: $nil).
In the current year, the consolidated entity paid $70,000 (2018: $50,000) to OneVue Services
Pty Limited for the provision of services associated with the enhancement of the Platinum
website. OneVue is a related party of the Chairman of Platinum Asset Management Limited,
Mr Michael Cole.
During the current financial year (on 17 September 2018), Platinum UK Asset Management
Limited was incorporated and PIML transferred A$1,094,920 as funding for Platinum UKs
operations and expenses. The service fee incurred by PIML was $1,902,272.
The Company allocated additional rights to eligible employees under the Deferred
Remuneration Plan. In the current year, the amount transferred to the Platinum Employee
Share Trust was $7,470,000 (2018: $11,873,050) and the Trust still retained $899,970
(2018: $170,518) at balance date mainly to settle a purchase of shares that was due to settle
on 1 July 2019. A further $300,000 was transferred after 30 June 2019 in order to settle a
pre-30 June 2019 trade.
Loan Agreements with related parties
There were no formal loan agreements executed with related parties at the current and previous
reporting date, but there are intercompany receivables and payables.
PLATINUM ASSET MANAGEMENT LIMITED ANNUAL REPORT 2019
94
Notes to the Financial Statements
�0 June 2019
Note 24. Disclosure of interests in other entities
Structured entity disclosures (excluding subsidiaries and associates)
A structured entity is an entity that is not part of the consolidated entity, despite one or more
entities within the consolidated entity purchasing units or shares in the other (structured)
entity. The relevant activities of unconsolidated structured entities are directed by the
Investment Manager by means of contractual arrangements, such as an Investment
Management Agreement.
At 30 June 2019, the consolidated entity holds an investment that can be described as a
structured entity, via Platinum Investment Management Limited (“PIML”) holding investments
of less than 1% in each of the Platinum Trust Funds and receiving fees for its role as Investment
Manager.
The following table provides information in relation to this investment:
Net Asset Value attributable to all investors
Platinum Trust Funds
2019
$’000
2018
$’000
17,705,018
18,421,972
Maximum exposure (includes PIMLs interest & fees receivable)
Platinum Trust Funds
18,175
20,879
Guarantees entered into by the parent entity in relation to the debts of its subsidiaries
There are no guarantees entered into by the parent entity in relation to debts of its subsidiaries,
no contingent liabilities and no capital commitments.
ACCOUNTING
POLICY
The consolidated entity has applied AASB 12: Disclosure of Interests in Other …ntities.
AASB 12 requires disclosure about the nature of, and risks associated with, the
consolidated entity’s interest in other entities. An interest in another entity refers to
involvement that exposes the entity to variability of returns from the performance of
another entity (excluding subsidiaries and associates). The consolidated entity will
apply the standard to its interest in the Platinum Trust Funds.
PLATINUM ASSET MANAGEMENT LIMITED ANNUAL REPORT 2019
Note 25. Commitments
Lease commitments – operating
Committed at the reporting date but not recognised as
liabilities, payable:
Within one year
One to five years
Greater than five years
95
2019
$’000
2018
$’000
1,838
8,102
1,279
1,768
7,796
3,422
11,219
12,986
On 23 June 2017, the consolidated entity entered into a new lease over the premises it occupies.
The lease is due to expire in January 2025.
The consolidated entity has no commitments for significant capital expenditure.
Please refer to Note 27 that discusses changes to the accounting for leases that will apply from
1 July 2019.
ACCOUNTING
POLICY
Platinum Investment Management Limited has entered into a lease agreement for
the premises it occupies and pays rent on a monthly basis. Payments made under
the operating lease are charged to the consolidated statement of profit or loss and
other comprehensive income.
Note 26. Events after the reporting period
Apart from the dividend declared in August 2019, no other matter or circumstance has arisen
since 30 June 2019 that has significantly affected, or may significantly affect the consolidated
entity’s operations, the results of those operations, or the consolidated entity’s state of affairs
in future financial years.
PLATINUM ASSET MANAGEMENT LIMITED ANNUAL REPORT 2019
96
Notes to the Financial Statements
�0 June 2019
Note 27. Accounting Standards and Interpretations not yet mandatory or early adopted
Australian Accounting Standards and Interpretations that are of relevance to the consolidated
entity but are not mandatory and have not been early adopted for the annual reporting period
ended 30 June 2019, and the consolidated entity’s assessment of the impact of these issued or
amended Accounting Standards and Interpretations, most relevant to the consolidated entity,
are set out below.
AASB 16: Leases
AASB 16 will apply for annual reporting periods commencing 1 July 2019. The standard
eliminates the classification of leases as either operating leases or finance leases for a lessee
and requires lease assets and lease liabilities to be recognised in the statement of financial
position, initially measured at present value of future lease payments. In addition, depreciation
of the lease assets and interest on lease liabilities will be recognised in the statement of profit
or loss and other comprehensive income and the statement of cash flows will need to separate
the total amount of cash paid into a principal portion and interest. This standard has been
assessed as increasing the value of the consolidated entity’s gross assets and gross liabilities,
however the standard has been assessed as not having a material impact on the consolidated
entity’s net assets, operations or results. The adoption of the standard for annual reporting
periods commencing 1 July 2019 will result in increased disclosure.
An assessment has been made on existing leases held by the consolidated entity and the
adoption of this standard is expected to result in the recognition of existing leased assets and
liabilities of approximately A$10,734,000 and A$10,889,000 respectively from 1 July 2019.
The difference relates to the inclusion of depreciation for the leased assets and interest for the
lease liabilities.
There are no other standards that are not yet effective that are expected to have a material
impact on the consolidated entity in the current or future reporting periods and on foreseeable
future transactions.
Note 28. Accounting Standards adopted during the financial year
(a) Adoption of AASB 15: Revenue from contracts with customers and associated amendments
The consolidated entity has adopted AASB 15 for reporting periods commencing 1 July 2018.
The standard provides a single revenue recognition model based on the transfer of goods and
services and the consideration expected to be received in return for that transfer. Revenue
recognised by an asset manager can only be recognised to the extent that it is highly probable
that a significant reversal in the amount of cumulative revenue recognised will not occur in
future periods. This means that performance fees will only be recognised once the contractual
measurement period is completed. However, management fees are recognised based on the
applicable investment management agreements and earned on a daily basis. These are
consistent with how performance and management fees are already recognised in the
consolidated entity’s accounts. AASB 15 has been applied by the consolidated entity and
did not result in a material change in revenue recognition for the consolidated entity.
PLATINUM ASSET MANAGEMENT LIMITED ANNUAL REPORT 2019 97
Note 28. Accounting Standards adopted during the financial year – continued
(b) Adoption of AASB 9: Financial Instruments (and applicable amendments) (“AASB 9”)
AASB 9: Financial Instruments addresses the classification, measurement and derecognition of
financial assets and financial liabilities. It introduced revised rules around hedging accounting
and impairment. The standard was applicable from 1 January 2018.
The consolidated entity has adopted AASB 9 for reporting periods commencing 1 July 2018.
AASB 9 replaces the classification and measurement model in AASB 139: Financial Instruments:
Recognition and Measurement with a new model that classifies financial instruments based
on the business model within which the financial instruments are managed, and whether the
contractual cash flows under the instrument solely represent the payment of principal and
interest.
Under the new standard, financial instruments are classified as:
–
–
–
Amortised cost if the objective of the business model is to hold the financial instruments
to collect contractual cash flows and those cash flows represent solely payments of
principal and interest (SPPI);
Fair value through other comprehensive income if the objective of the business model is
to hold the financial instruments to collect contractual cashflows from SPPI and to sell; or
All other financial instruments must be recognised at fair value through profit or loss.
An entity can, at initial recognition, also irrevocably designate a financial instrument
as measured at fair value through profit or loss if it eliminates or significantly reduces
a measurement or recognition inconsistency. Derivative and equity instruments are
measured at fair value through profit or loss unless, for equity instruments not held for
trading, an irrevocable option is taken to measure at fair value through other
comprehensive income.
AASB 9 has been applied retrospectively by the consolidated entity. Given no debt instruments
are held by the consolidated entity, which could result in a reclassification of the financial
instruments to amortised cost or fair value through other comprehensive income (‘FVOCI’),
the adoption of AASB 9 did not have any impact on the recognition and measurement of the
consolidated entity’s financial instruments.
There are no other standards that are effective for the first time in the current year that are
expected to have a material impact on the consolidated entity in the current or future reporting
periods and on foreseeable future transactions.
PLATINUM ASSET MANAGEMENT LIMITED ANNUAL REPORT 2019 98
Directors’ Declaration
�0 June 2019
In the Directors’ opinion:
–
–
–
–
the attached financial statements and notes comply with the Corporations Act 2001,
the Accounting Standards, the Corporations Regulations 2001 and other mandatory
professional reporting requirements;
the attached financial statements and notes comply with International Financial
Reporting Standards as issued by the International Accounting Standards Board as
described under Basis of Preparation to the financial statements;
the attached financial statements and notes give a true and fair view of the consolidated
entity’s financial position as at 30 June 2019 and of its performance for the financial year
ended on that date; and
there are reasonable grounds to believe that the Company and consolidated entity will be
able to pay its debts as and when they become due and payable.
The Directors have been given the declarations required by section 295A of the Corporations
Act 2001.
Signed in accordance with a resolution of Directors made pursuant to section 295(5)(a) of the
Corporations Act 2001.
On behalf of the Directors
Michael Cole
Chairman
20 August 2019
Sydney
Andrew Clifford
Director
PLATINUM ASSET MANAGEMENT LIMITED ANNUAL REPORT 2019
Independent Auditor’s Report
To the members of Platinum Asset Management Limited
99
Report on the Audit of the Financial Report
Our opinion
In our opinion:
The accompanying financial report of Platinum Asset Management 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 2019 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 2019
the consolidated statement of profit or loss and other comprehensive income for the
year then ended
the consolidated statement of changes in equity for the year then ended
the consolidated statement of cash flows for the year then ended
the notes to the financial statements, which include a summary of significant
accounting policies
the Directors’ declaration.
PricewaterhouseCoopers, ABN 52 780 433 757
One International Towers Sydney, Watermans Quay, Barangaroo, GPO Box 2650, Sydney NSW 2001
T: +61 2 8266 0000, F: +61 2 8266 9999, www.pwc.com.au
Level 11, 1PSQ, 169 Macquarie Street, Parramatta NSW 2150, PO Box 1155 Parramatta NSW 2124
T: +61 2 9659 2476, F: +61 2 8266 9999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
PLATINUM ASSET MANAGEMENT LIMITED ANNUAL REPORT 2019 100
Independent Auditor’s Report
To the members of Platinum Asset Management Limited
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities
under those standards are further described in the Auditor’s responsibilities for the audit of the
financial report section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide
a basis for our opinion.
Independence
We are independent of the Group in accordance with the auditor independence requirements
of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and
Ethical Standards Board’s APES 110 Code of …thics for Professional Accountants (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.
Our audit approach takes into account work undertaken by key third party service providers
relevant to our audit. This includes the administrator which proves custodian and administration
services for the trusts that the Group manages.
PLATINUM ASSET MANAGEMENT LIMITED ANNUAL REPORT 2019 101
Materiality
Key audit
matters
Audit scope
MATERIALITY
AUDIT SCOPE
–
–
–
–
–
–
For the purpose of our audit we used
overall Group materiality of $11.1 million,
which represents 5% of the Group’s profit
before tax.
We applied this threshold, together with
qualitative considerations, to determine
the scope of our audit and the nature,
timing and extent of our audit procedures
and to evaluate the effect of
misstatements on the financial report
as a whole.
We chose Group profit before tax because,
in our view, it is the benchmark against
which the performance of the Group is
most commonly measured.
–
We utlised a 5% threshold based on our
professional judgement, noting it is
within the range of commonly
acceptable thresholds.
Our audit focused on where the Group made
subjective judgements; for example,
significant accounting estimates involving
assumptions and inherently uncertain
future events.
We conducted an audit of the most
significant entities within the Group being
Platinum Investment Management Limited
(PIML) and Platinum Asia Fund (Quoted
Managed Hedge Fund (PAXX)). The Group
engagement team directed the
involvement of component auditors.
All other audit procedures were performed
by the Group engagement team.
For the work performed by component
auditors, we considered the level of
involvement we needed to have in their
audit work to be able to evaluate whether
sufficient appropriate audit evidence had
been obtained as a basis for our opinion
on the Group financial report as a whole.
This included active dialogue during the
audit and review of their work.
PLATINUM ASSET MANAGEMENT LIMITED ANNUAL REPORT 2019 102
Independent Auditor’s Report
To the members of Platinum Asset Management Limited
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, Risk and Compliance Committee.
KEY AUDIT MATTER
HOW OUR AUDIT ADDRESSED
THE KEY AUDIT MATTER
Revenue
Refer to note 11 – Operating segments
This was a key audit matter because revenue
is the Group’s most significant account
balance in the consolidated statement of
profit or loss and other comprehensive
income, as well as the related party nature
that makes them sensitive. Additionally,
although there was no significant judgement
involved in their determination, performance
fees fluctuate depending on market
performance.
We performed the following audit procedures,
amongst others:
–
–
–
–
Obtained the most recent report issued
by the third party service provider to
assess the design and operating
effectiveness of relevant controls over
the funds under management (FUM).
This report included an unqualified
independent audit opinion over the design
and operating effectiveness of those
controls.
Assessed our ability to place reliance on
the administrator’s auditor’s report by
considering the auditor’s independence,
experience, competency and the results
of their procedures.
Assessed whether the revenue
accounting policy was consistent with the
requirements of Australian Accounting
Standards.
Agreed a sample of management fees
back to relevant supporting external
evidence, such as management
agreements, underlying fund financial
statements and third party calculations.
–
Recalculated a sample of management
fees.
PLATINUM ASSET MANAGEMENT LIMITED ANNUAL REPORT 2019 103
KEY AUDIT MATTER
HOW OUR AUDIT ADDRESSED
THE KEY AUDIT MATTER
To assess the classification and accounting
treatment of the investment in each vehicle
we performed the following audit procedures,
amongst others:
–
–
Inspected the offer documents,
constitutions and the Investment
Management Agreement between PIML
and each investment vehicle to develop an
understanding, evaluate and assess the
scope of the power and decision making
authority held by the Group
Assessed the Group’s exposure to each
investment vehicles’ returns by
considering the ownership percentage of
the Group and multiplying the expected
management and performance fees by
the ownership percentage of the Group.
Accounting for investment vehicles
Refer to note 1 – Subsidiaries and
controlled entities
This was considered a key audit matter given
the judgement required in determining the
appropriate classification and accounting
for the Group’s investments in subsidiaries
and controlled entities in accordance with
Australian Accounting Standards.
This included:
–
–
–
The level of influence the Group has over
each investment vehicle
The extent of exposure to returns or
rights to variable returns from the Group’s
involvement
The ability for the Group to use its power
to affect the amount of the return from
each investment.
At 20 May 2019, the Group concluded that
it no longer controlled Platinum Asia Fund
(Quoted Managed Hedge Fund) (“PAXX”)
and as a result, this previously consoidated
investment was recognised as an investment
in associate and equity accounted from
that date.
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 2019, but does not include
the financial report and our auditor’s report thereon. Prior to the date of this auditor’s report, the
other information we obtained included the Directors’ report, the Chairman’s report, Shareholder
information and the Corporate directory. We expect the remaining other information to be made
available to us after the date of this auditor’s report.
Our opinion on the financial report does not cover the other information and we do not and will not
express an opinion or any form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other
information and, in doing so, consider whether the other information is materially inconsistent
with the financial report or our knowledge obtained in the audit, or otherwise appears to be
materially misstated.
PLATINUM ASSET MANAGEMENT LIMITED ANNUAL REPORT 2019 104
Independent Auditor’s Report
To the members of Platinum Asset Management Limited
If, based on the work we have performed on the other information that we obtained prior to the
date of this auditor’s report, we conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing to report in this regard.
When we read the other information not yet received, if we conclude that there is a material
misstatement therein, we are required to communicate the matter to the Directors and use our
professional judgement to determine the appropriate action to take.
Responsibilities of the directors for the financial report
The directors 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:
http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf.
This description forms part of our auditor’s report.
PLATINUM ASSET MANAGEMENT LIMITED ANNUAL REPORT 2019 105
Report on the Remuneration Report
Our opinion on the Remuneration Report
We have audited the remuneration report included in pages 25 to 42 of the Directors’ report
for the year ended 30 June 2019.
In our opinion, the remuneration report of Platinum Asset Management Limited for the year
ended 30 June 2019 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
R Balding
Partner
20 August 2019
Sydney
PLATINUM ASSET MANAGEMENT LIMITED ANNUAL REPORT 2019
106
PLATINUM ASSET MANAGEMENT LIMITED ANNUAL REPORT 2019