Directors Guy Strapp Stephen Menzies Anne Loveridge Brigitte Smith Philip Moffitt Andrew Clifford Elizabeth Norman Andrew Stannard Kerr Neilson (retired on 16 November 2022) Company Secretary Joanne Jefferies Shareholder Liaison Elizabeth Norman 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 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 Ernst & Young The EY Centre Level 34, 200 George Street Sydney 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 The Corporate Governance Statement can be viewed at www.platinum.com.au/PlatinumSite/media/About/ptm_corp_gov.pdf CONTENTS Chair’s Report Year in Review Managing Director’s Letter Our Journal Shareholder Information Directors’ Report Remuneration 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 1 2 6 9 14 18 21 34 73 74 76 78 80 81 121 122 Platinum Asset Management Limited Annual Report 2023 2 CHAIR’S REPORT 2023 Markets were presented with an array of challenges over the financial year, including the dampening effect of rapidly rising interest rates, several bank failures and weakness in the Chinese economy. Against this backdrop, the Platinum International Fund (C Class) (“PIF”) returned 13.9% for the year ended 30 June 2023, a solid return in an absolute sense.1 While the market2 delivered a stronger outcome, this was largely due to the nuances of index composition, specifically a surge in mega-cap US technology stocks perceived to be beneficiaries of an anticipated boom in artificial intelligence (AI) technologies. Platinum prides itself on “thinking differently” and our flagship international portfolio is quite unique compared to other offerings in the marketplace. The contrast is even starker when one sees how similar many other investment managers’ portfolios are. Platinum also seeks to actively reduce downside risk during periods of market volatility by taking short positions and managing the portfolio’s net invested position, which can sometimes act as a drag on relative investment performance. Given the challenging market conditions, Platinum has been deploying these tools with PIF’s average net invested position at 68% for the last twelve months. When one critically analyses the investment team, the performance engine is working, with PIF’s return reflective of our “true to label” investment style. That said, the alternative for many investors is some form of passive investment, with these passive options skewed towards the largest companies in the market, and, for the time being, big is best. However, this has not always been the case over the long history of markets. So, while it might be tempting to crowd into the current market favourites, such as Apple, Amazon and Microsoft, we feel it is highly improbable that this trend will continue infinitely. So, whilst we have delivered strong absolute investment returns over the period, in order to grow funds under management (FUM), and hence profits and shareholder returns, our performance outcomes need to be attractive to particular segments and for a large number of these, it’s still relative performance that matters. I want to take this opportunity to remind shareholders of Platinum’s long-term business strategy. In summary, Platinum’s strategy is to maintain a strong team and culture, deliver good investment returns over the long term, grow FUM both domestically and by building offshore distribution capability, and ensure we have efficient and scalable infrastructure. The Platinum team continues to make good progress in delivering many aspects of the strategic plan. 1 Source: Platinum for Fund returns and Factset Research Systems for MSCI returns. Fund returns are calculated using the relevant fund’s NAV unit price for C Class and represent the combined income and capital returns over the specified period. Fund returns are net of accrued fees and costs, pre-tax, and assume the reinvestment of distributions. Past performance is not a reliable indicator of future returns. 2 MSCI AC World Net Index (A$). Source: FactSet Research Systems. Platinum Asset Management Limited Annual Report 2023 3 Funds Under Management (”FUM“) FUM as of 30 June 2023 was $17.3 billion, a decrease of 4.9% from the 30 June 2022 closing FUM of $18.2 billion. Average FUM for the year decreased by 15.4% to $18.1 billion from an average FUM of $21.4 billion for the previous year. The change in FUM was driven by investment performance of $2.0 billion, net fund outflows of $2.4 billion and the net distribution paid to investors of $0.4 billion. Most of Platinum’s investment strategies delivered absolute returns above 12% for the year ended 30 June 2023.3 The strongest-performing funds were the Platinum Global Fund (Long Only), Platinum European Fund and Platinum Global Fund, which all delivered returns above 20% for the year ended 30 June 2023. The Platinum Asia Fund (C Class) (“PAF”) returned 2.1% over the year, which matches the MSCI AC Asia ex Japan Net Index (A$) return over the same period. PAF’s returns continued to exceed the MSCI AC Asia ex Japan Net Index (A$) over 3-year, 5-year and 10-year periods to 30 June 2023 on an annualised basis.4 Operating Performance Profit before tax decreased by 20.4% to $116.8 million for the year ended 30 June 2023 (2022: $146.7 million). Basic earnings per share for the 2023 financial year were down 3.4 cents to 14.1 cents per share (2022: 17.5 cents). The main drivers of the decrease in profit and earnings per share were a decrease in fee revenues and an increase in employee expenses, which were partially offset by improved returns from seed investments. Total fee revenue decreased by 19.8% to $202.7 million for the year ended 30 June 2023 (2022: $252.7 million). Management fees decreased by 18.1%, due primarily to the 15.4% decline in average FUM. In addition, performance fees decreased to $1.2 million (2022: $6.7 million). Seed investments, including the share of associates’ profits and losses, contributed a profit before tax for the year of $6.3 million (2022: loss before tax of $24.1 million). The gain on seed investments included strong returns on Platinum’s global, health sciences and Japan strategies. Underlying profit after tax, which excludes gains and losses on seed investments (net of tax), was down 35.3% to $76.5 million (2022: $118.2 million). 3 See footnote 1. 4 See footnote 1. Platinum Asset Management Limited Annual Report 2023 4 CHAIR’S REPORT 2023 CONTINUED Costs Total employee expenses (including share-based payment expenses) increased by $16.6 million on the prior financial year. The increase in employee expenses primarily reflects an increase in short-term cash variable compensation costs arising as a result of strong weighted average relative investment performance for the one and three years ended 31 March 2023. In addition, share-based payment expenses increased by $1.0 million primarily due to additional deferred equity granted to employees during the year. Other (non-employee) costs decreased by $2.1 million on the prior year due to cost savings achieved in custody and insurance. These cost savings were partly offset by an increase in travel costs due to a return to more normal levels of travel activity. Total expenses for the financial year increased by $14.5 million to $100.6 million. Dividends The Directors have determined to pay a 2023 final fully franked ordinary dividend of 7 cents per share. This will be paid on 15 September 2023. A 2023 interim fully franked ordinary dividend of 7 cents per share was paid during the year. The full-year dividend of 14 cents represents a dividend yield of 8.0% based on the 30 June 2023 closing share price. Whilst the Company has a dividend reinvestment plan in place, it has not been activated. Business Development Throughout the year, two new products were launched: the Platinum World Portfolios - Health Sciences Fund in October 2022 and the Platinum Global Transition Fund (Quoted Managed Hedge Fund) in February 2023. The former provides foreign investors access to Platinum’s existing Health Care strategy. The latter is a new strategy that provides Australian and New Zealand investors with an opportunity to invest in global companies that are seeking to financially benefit from the carbon transition. The energy transition is a structural area of change that will span many decades and, we believe, will provide very attractive investment opportunities across a variety of industries. The fund is structured to provide two concurrent ways of transacting for investors: the ease of an exchange-traded format via the ASX or an unlisted format via the unit registry. We continued to develop a variety of high-quality business development activities for investors and advisers, namely: a return to physical events for our annual client roadshow; improved content through subject matter, channel and distribution; new advertising campaigns; and on-target progress for the launch of our new website. With the continued growth of separately managed accounts (SMAs), we have taken steps to provide greater access to this advised segment of the market through the introduction of a new wholesale fee rate (subject to thresholds). Platinum Asset Management Limited Annual Report 2023 5 Environmental, Social and Governance (”ESG“) We continue to progress our approach to ESG and investing. Developments during 2023 included becoming a participant in the UN Global Compact Network Australia and hiring a new Head of Stewardship. The Head of Stewardship works closely with the investment team to strengthen our approach to environmental, social and corporate governance considerations in our stock valuations and our engagement with companies on these issues. For further information on Platinum’s approach to ESG, please read Platinum’s Corporate Responsibility and Sustainability Report available on our website www.platinum.com.au/esg. Annual General Meeting (”AGM“) The Company’s AGM will be held as a hybrid event, whereby shareholders can either attend in person or join online. The AGM notice will include details of how to attend the meeting and will be dispatched to shareholders in the coming weeks. Remuneration Included in the remuneration report on page 34 of the Company’s 2023 annual report is a letter from the Chair of the Nomination and Remuneration Committee (NRC). I encourage all shareholders to read the letter, which outlines the Company’s remuneration framework for executive key management personnel including the link between Company performance and variable remuneration outcomes. Board Succession The NRC continued its work in relation to Board succession, with Kerr Neilson, Platinum’s founder, retiring as a Non-Executive Director of the Company at the close of the November 2022 AGM, the final stage of a long-planned leadership transition. Philip Moffitt was elected to the Board by shareholders at the November 2022 AGM (having been appointed to the Board prior to Kerr’s retirement) in recognition of the importance of maintaining strong asset management capability on the Board. Finally Andrew Clifford will step aside from his role as Managing Director/Chief Executive Officer, whilst maintaining the role of Co-Chief Investment Officer. The Board acknowledges Andrew’s enormous contribution in the role of Chief Executive Officer of the Platinum Group. In his capacity as Co-Chief Investment Officer and co-portfolio manager of the global and Asia strategies, Andrew’s extensive investment and portfolio management experience will continue to play an integral part in delivering strong absolute returns for our clients. The Board will commence the search for the CEO role. Guy Strapp Chair 23 August 2023 Platinum Asset Management Limited Annual Report 2023 6 YEAR IN REVIEW FOR YEAR ENDED 30 JUNE 2023 Net profit after tax (down 20%) $81m Final dividend of (8.0% annualised yield*) 7cps fully franked Total revenue and other income down -7% Total expenses up 17% Profit before tax on seed investments $6.3m Average FUM down -15% on June 2022 $18.1b * Using 30 June 2023 closing share price of $1.74 and including 2023 interim dividend of 7 cps. Platinum Asset Management Limited Annual Report 2023 7 Investment performance of the Platinum Trust Funds to 30 June 2023 1 year p.a. 5 year compound p.a. 10 year compound p.a. International Fund 13.9% 5.5% 9.1% Global Fund (Long Only) 22.9% 4.9% 10.1% Asia Fund European Fund Japan Fund 2.1% 4.9% 9.2% 20.7% 4.0% 8.8% 18.3% 4.9% 10.5% International Brands Fund 12.3% 5.3% 9.2% International Health Care Fund 15.0% 6.7% 11.8% International Technology Fund 16.5% 9.3% 11.7% Source: Platinum Investment Management Limited. Fund returns are annualised, calculated using the relevant fund’s NAV unit price for C Class and represent the combined income and capital returns over the specified period. Fund returns are net of accrued fees and costs, pre-tax, and assume the reinvestment of distributions. Past performance is not a reliable indicator of future performance. Platinum Asset Management Limited Annual Report 2023 MANAGING DIRECTOR’S LETTER 2023 9 Global equity markets performed strongly over the financial year. Initially, markets were subdued as they absorbed the impact of central bank efforts to control inflation through higher interest rates. However, once it became clear that inflationary pressures had likely peaked, investors’ enthusiasm for equities returned. The emergence of artificial intelligence (AI) tools such as ChatGPT, together with bullish statements from NVIDIA, whose semiconductors are used in developing AI models, created a frenzy among investors searching for AI opportunities as well as a return to many of the favourite high-growth stocks that drove the market to its highs in 2021. It is interesting that many investors are so readily prepared to return to the same investment approach of chasing the highly valued growth stocks that caused significant damage to their portfolios in 2021-22. As is so often the case, the words change to fit the music, with the prevalent fears of a recession that were present in mid-2022 changing to a soft landing for the US economy at worst. Many commentators are labelling the current rally in equity markets as the beginning of the next bull market. However, we remain extremely cautious on markets. In past economic cycles, it has taken 18 months or more for the impact of higher interest rates to flow through to the economy and company earnings, and it’s only been 15 months since the first interest rate increase in the US. The availability of credit remains tight on numerous measures, and money supply growth remains negative. Certainly, the US economy remains robust overall for the moment. However, the problem with relying on economic data is that by the time a slowdown is apparent, markets will have already fallen. The Japanese market performed strongly over the course of the financial year. A decade of reform in corporate governance in Japan has finally started to show concrete results, with numerous examples of minority shareholders changing boards and successfully pressuring companies to buy back stock and increase dividends. Many Japanese companies have hoarded excess cash and securities, and there is significant value to be realised for investors if this trend continues. News that Warren Buffett’s Berkshire Hathaway had added to its investments in the Japanese trading houses further buoyed the market. China was the weak spot in global markets, with consumer and business confidence failing to fully recover post the pandemic lockdowns of 2022. While the government continues to implement stimulatory measures, they remain measured, with their reticence likely driven by a desire not to repeat the mistake of 2008-09 when government stimulus resulted in rapid growth in debt and an overbuild of capacity in a wide range of industries. The government’s restrained approach means that it still has the opportunity to act if the economy doesn’t naturally build momentum in the year ahead. Despite the dull performance of the overall economy, underneath the surface, the country’s private sector has continued to build leading positions in a range of industries at the centre of the global energy transition. These encompass electric vehicles (EVs), including battery technology and battery materials, solar panels and the supporting supply chain, and wind turbines.1 The country is also the largest market for these industries, reflecting the pace of investment in decarbonising the global economy. 1 Source: International Energy Agency, Bloomberg. Platinum Asset Management Limited Annual Report 2023 10 MANAGING DIRECTOR’S LETTER 2023 CONTINUED Our Platinum Trust Funds produced strong absolute returns for the year, with the exception of the Asia Fund. Our flagship International Fund produced a return of 7.7% since the peak in global equity markets at the end of 2021, 6.1% ahead of the index.1 While the Asia Fund’s performance has been held back by the weakness in the Chinese market, it has outperformed the index2 across 1-year, 5-year and 10-year periods. Funds Under Management – Retention and Growth Funds Under Management ($ million, to 30 June 2023) OPENING BALANCE (1 JULY 2022) FLOWS PERFORMANCE INVESTMENT DISTRIBUTION AND OTHER CLOSING BALANCE % OF (30 JUNE 2023) TOTAL 10,858 (1,184) 1,241 (385) 10,530 61% FUNDS Retail offerings Platinum Trust Funds (excluding funds fed from PIXX and PAXX) and Platinum Global Fund (mFund) Quoted Managed Hedge Funds PIXX, PAXX and PGTX Listed Investment Companies PMC and PAI 821 414 – – 43 59 (20) 437 2% (44) 836 5% MLC Platinum Global Fund Institutional mandates 573 (57) 114 Management Fee Mandates 1,894 (432) 232 UCITS Platinum World Portfolios Cayman Funds 376 (240) 34 – “Absolute” Performance Fee Mandates 287 (63) “Relative” Performance 19 2 37 – – – – – 630 4% 1,694 10% 155 36 1% 0% 261 1% Fee Mandates 2,957 (419) 215 (5) 2,748 16% TOTAL 18,214 (2,395) 1,962 (454) 17,327 100% Source: Platinum Investment Management Limited. The ‘Distribution and Other’ figure is comprised of the distribution from the Platinum Trust Funds/PGF/PIXX/PAXX/ PGTX (as applicable). 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). Past performance is not a reliable indicator of future returns. 1 Fund returns are calculated from 31 December 2021 to 30 June 2023 using the relevant fund’s NAV unit price for C Class and represent the combined income and capital returns over the specified period. Fund returns are net of accrued fees and costs, pre-tax, and assume the reinvestment of distributions. The Index reference is the MSCI All Country World Net Index (A$). Past performance is not a reliable indicator of future performance. 2 MSCI All Country Asia ex Japan Net Index (A$). Platinum Asset Management Limited Annual Report 2023 11 The strong absolute returns for the year to 30 June across the majority of our funds translated to an almost $2 billion addition to the company’s total funds under management. However, this has not translated to an improvement in fund flows. There are a number of factors behind this. While the absolute and relative performance of our flagship international strategy has improved, it has not been significant enough to attract attention in a very crowded marketplace. Our Asia strategy has produced good relative outcomes, however, the absolute returns, while positive, have remained low, and more broadly, investors are fearful of China and reducing their exposures. As we have discussed in past years, competition for investors’ savings has become fierce, with passive strategies, ETFs and private asset opportunities crowding the marketplace. The latest competitor to re-emerge as interest rates have risen are term deposits, where returns of 4% to 5% are on offer. As an investment-led business, we maintain our belief that the key to turning around fund flows is performance. However, we are also continuing our work to extend and broaden our client base through product development and sales efforts. In February 2023, we launched our first new investment strategy in 19 years, a new carbon transition strategy that focuses on the impending transition away from a currently carbon-intensive world economy. This strategy is available via a dual-access managed fund structure, which allows investors to acquire units either through a traditional managed fund application process or via units quoted on the ASX. The strategy aims to take advantage of the wide variety of investment opportunities that are seeking to financially benefit from the transition away from fossil fuel-derived energy and goods production and consumption, that is, the carbon transition. The strategy is managed using Platinum’s well-established and consistent investment approach. We introduced a wholesale fee class to participate in the move by many advisory groups towards separately managed accounts (SMAs) for their clients. We are actively engaging with the relevant stakeholders in the industry (advisers, platforms, research houses and investment consultants) as we develop this segment of the business. This year saw a return to our annual physical roadshow for investors and advisers, including our listed investment company, managed fund, quoted managed fund and European-based clients. We continued to provide clients with a variety of content and engagement opportunities through the production and distribution of relevant and timely investment content. This can be accessed via webinars, videos, podcasts and articles, available not only on our website but through a range of mediums, including social media, advertising and external content distributors. Attendance at industry events likewise returned, and we were active participants in several events. Work is also progressing on the development of our new website, which we expect to launch in the first quarter of 2024. Platinum Asset Management Limited Annual Report 2023 12 MANAGING DIRECTOR’S LETTER 2023 CONTINUED We have also been able to return to physical visits with existing and potential clients with our offshore business in London and the AccessAlpha team in the US. We have made many marketing visits to Europe, including the October product launch of the Platinum World Portfolio - Health Sciences Fund for the UK and European markets. With regard to Environmental, Social and Governance (ESG), we have a core belief that if we responsibly and successfully look after our clients’ money, our business should prosper. This belief has led us to maintain a deep and persistent commitment to responsible and sustainable business practices, including strong governance and environmental and social awareness. We seek to apply a pragmatic approach to both how we run our business and the expectations that we place on the companies in which we invest. As always, our central endeavour is to generate good absolute returns for investors over the long term by investing in companies that we believe are undervalued. Analysis of ESG issues may be taken into account as part of our fundamental investment research process to the extent that such issues impact our view of a company’s inherent value. Consideration of such ESG issues provides us with an expanded information set by which we assess the risks and opportunities facing companies. This year, we have continued to evolve and refine our responsible investing and stewardship processes while maintaining investment performance for our clients as our primary objective. For further information on this, I encourage you to read our ‘Corporate Responsibility and Sustainability Report’. Over 2021-22, we made a number of key changes to the investment team in roles that were at the heart of our investment approach. The new Head of Investment (HOI) role and appointment of a Co-Chief Investment Officer (CIO) have made great headway on the management of the investment team and the rigour of the day-to-day debate around investment ideas. As we have said previously, ensuring there is also a smooth succession when individuals depart is critical for maintaining performance and the confidence of clients and shareholders. Lastly, we are progressing well with the overhaul of our investment-related middle and back office. The aim of this project, which is expected to conclude in FY25, is to enhance the capability, scalability and resilience of our operations and related technology stack. It includes the introduction of a new, cloud-native, middle-office data store with related oversight and reporting tools, together with an integration layer that enables better control over our large quantity of external data feeds. These new technologies will enable certain routine processing tasks to be outsourced, with our skilled operational teams then being able to focus more on oversight and other higher-value activities. I am delighted to report that we are already experiencing cost savings as a result of this project, thanks to bringing forward $2.1 million in service provider cost reductions into the current financial year. Platinum Asset Management Limited Annual Report 2023 13 Outlook Platinum’s investment philosophy has always been to find mispriced stocks and opportunities in areas that are out of favour and away from the crowd. With the continued significant divergence in stock price performance and valuations across different sectors and countries, many companies continue to trade at high valuations, while others trade at levels consistent with difficult economic and market conditions. The opportunity for us is similar to that at the start of 2022, which is to avoid (or short) the former while buying the latter. While we would not be surprised to see a significant setback in markets as the impact of higher interest rates flows through to earnings, we are not overly focused on such predictions. We believe the best approach is not to get caught up in the short term and instead focus on likely outcomes in different sectors over the next five years and beyond. Concluding Remarks I have made the decision to step aside from the role of Managing Director/Chief Executive Officer, allowing me to fully concentrate on the positions of Co-Chief Investment Officer and co-portfolio manager of our global and Asia strategies. Platinum’s business has developed substantially since its beginnings nearly 30 years ago, and as such, this now requires a greater focus on the strategic direction of the business. I very much look forward to continuing to provide strong absolute returns for our clients. I thank our shareholders for their support throughout my time as CEO. I would also like to acknowledge the dedicated professionals within Platinum who I will continue to work alongside in my Co-CIO role; those that provide client service and communications, the daily processing of fund transactions, settling our purchases and sales of shares for our products, navigating the regulatory environment, maintaining and developing our IT systems, and managing our finances. All members of these teams make an enormous contribution to running our business. Andrew Clifford Managing Director Platinum Asset Management Limited Annual Report 2023 14 OUR JOURNAL You can find a range of thought-provoking articles and videos on our website, www.platinum.com.au. For ad hoc commentary on the latest market trends and investment themes, look up The Journal under Insights & Tools. If you find yourself short on time to read our in-depth reports and articles, have a listen to our audio podcasts or watch brief market updates in video format. Article By Clay Smolinski 22 June 2023 Video By Andrew Clifford 9 November 2022 Article By Liam Farlow & Jodie Bannan 10 March 2023 Platinum Asset Management Limited Annual Report 2023WHY TODAY'S HEADWINDS HAVE ACCELERATED A MULTI-GENERATIONAL SHIFTThe energy transition is rapidly accelerating. Portfolio managers Jodie Bannan and Liam Farlow outline why the opportunity is too good to ignore and compelling investments they are currently seeing.THE TIMES ARE CHANGINGThe economic environment has changed significantly over the past 18 months. We have gone from an environment that was extremely favourable for stock and asset prices with easy money, low interest rates, positive attitudes to risk and strong demand to an adverse environment with higher inflation, rising interest rates and concerted efforts by central banks to curb demand. The historic bubble in tech and growth stocks has burst, and a recession in the US is probable.INVESTING IN A BEAR MARKETIn a fireside chat with Investment Specialist Henry Polkinghorne, CEO and Co-CIO Andrew Clifford provides a timely reminder of Platinum’s investment approach as well as his thoughts on markets, performance and portfolio positioning.Many sectors that were left behind in the bull market have extraordinary valuations, and there are many interesting investment thematics playing out. 15 Video By Cameron Robertson & Kirit Hira 21 February 2023 Article By James Halse 25 July 2023 Video By Cameron Robertson & Dr Bianca Ogden 26 May 2023 Platinum Asset Management Limited Annual Report 2023IMPRESSIVE OPPORTUNITIES ABOUND ACROSS ASIA The Chinese equity market has bounced strongly in recent months, and while we continue to find plenty of investment opportunities there, we are also discovering other exciting companies to invest in across the region. Portfolio managers Kirit Hira and Cameron Robertson discuss two such companies they visited during recent research trips to Vietnam and South Korea.HOW JAPAN REGAINED ITS MOJOThe Japanese stock market is booming in 2023, up 21% for the year to date, outperforming all other major developed market indices. Global investors have net-bought ¥7.2 trillion (US$50 billion) this year in a major reversal of recent trends. So, what has changed, and more importantly for investors, is this rally sustainable?FINDING VALUE IN THE MUCH-HYPED AI SPACE Artificial intelligence has certainly captured everyone’s attention of late. While there has been a lot of hype around some of the players, there are also areas that are being overlooked, particularly in the healthcare sector.Cameron Robertson and Dr Bianca Ogden discuss areas they have invested in and ones to watch in this exciting area. PLATINUM ASSET MANAGEMENT LIMITED General InformationThe financial statements were authorised for issue, in accordance with a resolution of Directors, on 23 August 2023. The Directors have the power to amend and reissue the financial statements.FINANCIAL STATEMENTS 2023 18 SHAREHOLDER INFORMATION The shareholder information set out below was applicable as at 10 August 2023. 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 Total Holding less than a marketable parcel (of $500) NUMBER OF HOLDERS OF ORDINARY SHARES 4,725 9,322 3,485 3,703 179 21,414 1,329 Platinum Asset Management Limited Annual Report 2023 19 Ordinary Shareholders Twenty largest ordinary shareholders The names of the twenty largest shareholders of the Company are listed below: ORDINARY SHARES K Neilson HSBC Custody Nominees (Australia) Limited Citicorp Nominees Pty Limited J P Morgan Nominees Australia Pty Limited Platinum Investment Management Limited (nominee) NUMBER HELD 126,037,420 65,650,468 62,176,531 48,424,717 29,364,201 Pacific Custodians Pty Limited (Platinum EMP Share TST A/C) 17,464,113 UBS Nominees Pty Limited Jilliby Pty Limited 8,211,718 6,500,000 BNP Paribas Nominees Pty Limited (IB AU NOMS Retail Client DRP) 6,280,256 National Nominees Limited J Clifford Starbrook Enterprises Pty Limited Neweconomy Com Au Nominees Pty Limited BNP Paribas Nominees Pty Limited Ecapital Nominees Pty Limited Garrett Smythe Limited Xetrov Pty Limited Navigator Australia Limited Ace Property Holdings Pty Limited HSBC Custody Nominees (Australia) Limited – A/C 2 6,216,964 5,000,000 3,100,000 2,968,692 2,834,863 2,398,359 2,152,500 1,500,000 1,428,086 1,200,000 1,137,037 % OF TOTAL SHARES ISSUED 21.48 11.19 10.60 8.25 5.01 2.98 1.40 1.11 1.07 1.06 0.85 0.53 0.51 0.48 0.41 0.37 0.26 0.24 0.20 0.19 400,045,925 68.19 Unquoted ordinary shares There are no unquoted ordinary shares, however, the Company has share-based payment arrangements through which a total of 38,192,965 deferred and performance 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 will be allocated to these employees (please refer to the Remuneration Report and Note 17 for further details). Platinum Asset Management Limited Annual Report 2023 20 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: K Neilson J Clifford, Moya Pty Limited, A Clifford ^ Based on the last substantial shareholder notice lodged. Distribution of Annual Report to Shareholders ORDINARY SHARES NUMBER HELD 126,037,420^ 32,831,449^ % OF TOTAL SHARES ISSUED 21.48 5.60 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 payment date These dates are indicative and may be changed. Notice of Annual General Meeting 31 August 2023 1 September 2023 15 September 2023 The Annual General Meeting (“AGM”) of Platinum Asset Management Limited will be held as a hybrid meeting on Wednesday, 15 November 2023. Details of how to attend the meeting will be included in the AGM Notice. 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 2023 DIRECTORS’ REPORT 21 The Directors present their report, together with the financial statements, on the consolidated entity (referred to hereinafter as the 'consolidated entity', ‘Group’ or ‘Platinum’) consisting of Platinum Asset Management Limited (referred to hereinafter as the 'Company' or 'parent entity') and the entities it controlled at the end of, or during, the year ended 30 June 2023. 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: Guy Strapp Stephen Menzies Anne Loveridge Brigitte Smith Philip Moffitt Andrew Clifford Elizabeth Norman Andrew Stannard Kerr Neilson Principal Activities Chair and Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director Chief Executive Officer/Managing Director Executive Director and Director of Investor Services and Communications Executive Director and Finance Director Non-Executive Director (retired on 16 November 2022) The Company is the non-operating holding company of Platinum Investment Management Limited (“PIML”) and its controlled entities. PIML, trading as Platinum Asset Management, operates a funds management business. Operating and Financial Review Funds Under Management (“FUM”) at 30 June 2023 were $17.3 billion and this represented a decrease of 4.9% from the 30 June 2022 closing FUM of $18.2 billion. The closing FUM figure at 30 June 2023 was reduced by the annual net distribution outflow of $0.4 billion. Average FUM of $18.1 billion for the year was lower than the average FUM of $21.4 billion for the previous year. The change in closing FUM was driven by positive investment returns of $2.0 billion, net fund outflows of $2.4 billion and the 30 June 2023 net distribution. The Group’s profit before tax was $116.8 million for the year ended 30 June 2023, which is a $29.9 million decrease from the previous year. The main cause of the decrease in profit was a $44.6 million decrease in management fees due primarily to the decrease in average FUM. The Group earned performance fee revenue of $1.2 million primarily from relative performance fee mandates (2022: $6.7 million primarily from absolute performance fee mandates). Staff costs were $16.6 million higher compared to the prior period, primarily due to higher investment team variable compensation expenses as a result of strong weighted average relative investment performance for the one and three years ended 31 March 2023, which is the reference period for investment team variable compensation. Platinum Asset Management Limited Annual Report 2023 22 DIRECTORS’ REPORT CONTINUED Operating and Financial Review – continued Share-based payment expenses increased by $1.0 million mainly due to an additional grant of performance rights under the Platinum Partners’ LTIP in June 2023. These awards will only vest in the event that total shareholder return hurdles are met (refer to the Remuneration Report for details). The first quarter of the June 2022 and the second quarter of the June 2021 Platinum Partners’ LTIP grants were tested against total shareholder return hurdles for the performance periods ended 30 June 2023 and did not vest (2022: The first quarter of the June 2021 grant was tested against TSR for the year to 30 June 2022 and did not vest). However, accounting rules require a share-based payments expense of $1.7 million to be recorded in the current financial year for those performance rights. Non-staff expenses were $2.1 million lower compared with the prior year primarily due to the renegotiation of custody and insurance expenses. Underlying profit after tax, which excludes gains and losses on seed investments (net of tax), was $76.5 million (30 June 2022: $118.2 million). On the product development front, Platinum launched its first dual access product, the Platinum Global Transition Fund (Quoted Managed Hedge Fund) (ASX: PGTX) in February 2023.1 This product is investing in companies that are seeking to financially benefit from the transition away from fossil fuel-derived energy and goods production and consumption i.e. the carbon transition. Platinum believes it is well positioned to play an important role in the global equity funds management sector because: • We offer a highly differentiated investment style and a strong position in the Australian retail market; • Our offshore initiatives provide a platform for growth over the medium term; and • Our investment team continues to deliver high-quality research and a large idea base. The Company is in a solid financial position, with a strong balance sheet. However, the most significant driver of sustainable future growth is, and will always be, the delivery of superior long-term investment returns for our clients. The Chair’s Report and Managing Director’s Letter to shareholders provide further discussion and analysis of the Group’s financial results and investment performance. 1 This information is general in nature and does not take into account the investment objectives, financial situation or needs of any person. You should read the latest product disclosure statement (PDS) and target market determination (TMD) for the fund prior to making any investment decision. The PDS and TMD are available at www.platinum.com.au/Investing-with-Us/New-Investors. Platinum Asset Management Limited Annual Report 2023 23 Events After the Reporting Period On 23 August 2023 Andrew Clifford advised the Board of his intention to step aside as Managing Director/Chief Executive Officer (CEO) of Platinum. The Board will shortly commence a search process for a new CEO. Whilst this search is underway, Andrew will continue to hold the CEO role on an interim basis until his successor is appointed. Andrew Clifford will continue in the positions of Co-Chief Investment Officer and co-portfolio manager of the Global and Asia strategies. Likely Developments Information about the business strategies and prospects for future financial years of the consolidated entity are included in the Operating and Financial Review. Further information about likely developments in the operations of the consolidated entity and the expected results of those operations in future financial years has not been included in this report because disclosure of such information would likely result in unreasonable prejudice to the consolidated entity as the information is commercially sensitive. 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 determined a 2023 final fully franked dividend of 7 cents per share ($41,067,523 including dividend paid on treasury shares), with a record date of 1 September 2023 and payable to shareholders on 15 September 2023. A 2023 interim fully franked dividend of 7 cents per share ($41,067,523 including dividend paid on treasury shares) was paid on 17 March 2023. A 2022 final fully franked dividend of 7 cents per share ($41,067,523 including dividend paid on treasury shares) was paid on 15 September 2022. 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, Social & Governance (“ESG”) Reporting Shareholders are encouraged to read Platinum’s Corporate Responsibility and Sustainability Report which is available at www.platinum.com.au/ESG. It is noted that the consolidated entity is not subject to any significant environmental regulation under Commonwealth, State or Territory laws. Platinum Asset Management Limited Annual Report 2023 24 DIRECTORS’ REPORT CONTINUED Information on Directors Guy Strapp BCOM, DIP AF&I, CFA Mr Guy Strapp was appointed as an independent Non-Executive Director on 27 August 2020. He was elected Board Chair on 21 November 2020. Mr Strapp serves as a member of the Audit, Risk & Compliance Committee and Nomination & Remuneration Committee. Mr Strapp has over 35 years’ experience in the investment and financial services sectors, having worked in a variety of roles in Australia and abroad at Bank of America, JP Morgan Investment Management, Citigroup Asset Management and BT Financial Group. Mr Strapp’s most recent executive role was as CIO and CEO of Eastspring Investments (formerly Prudential Asset Management) in Hong Kong. Mr Strapp brings to the Board extensive local and international experience in asset management, gained on both the investment and distribution side of the business. Stephen Menzies BECON, LLB, LLM Mr Stephen Menzies was appointed as an independent Non-Executive Director on 11 March 2015. He serves as a member of Audit, Risk & Compliance Committee and Nomination and Remuneration Committee (Chair until 26 October 2021). Mr Menzies has over 30 years’ experience as a corporate lawyer specialising in capital markets and mergers and acquisitions. Mr Menzies is a retired partner of Ashurst law firm and prior to his retirement in 2015 was consistently ranked as one of Australia’s leading corporate lawyers. During his time at Ashurst he was the Head of China Practice and oversaw the Shanghai and Beijing offices of that firm. Mr Menzies is a Non-Executive Director of Platinum World Portfolios Plc, a director of SAIC Motor Australia Pty Ltd and is Chair of Silicon Quantum Computing Pty Limited. He was previously the Chair of the Centre for Quantum Computation & Communication Technology and served as a member of its Advisory Committee. Anne Loveridge AM, BA (HONS), FCA (AUSTRALIA), GAICD Ms Anne Loveridge was appointed as an Independent Non-Executive Director on 22 September 2016. She was elected Chair of the Audit, Risk & Compliance Committee and serves as a member of the Nomination & Remuneration Committee. Ms Loveridge has over 30 years’ experience in business. She is formally trained as a Chartered Accountant and has a breadth of experience in people leadership and remuneration as well as audit, risk, regulatory compliance and finance skills. Ms Loveridge had a 30-year career at PwC Australia, where she retired as Senior Audit Partner and Deputy Chair in 2015. Ms Loveridge brings to the Board extensive financial services and company director experience gained through her numerous senior leadership and director roles in highly regulated ASX listed organisations (in financial services and health sectors) as well as arts related not-for-profit and Government entities. Ms Loveridge is a Non-Executive Director of ASX listed companies National Australia Bank Limited and NIB Holdings Limited and of the government agency, Destination NSW. She was previously the Chair of Bell Shakespeare. In 2023, Ms Loveridge was awarded as a Member of the Order of Australia for significant service to theatre administration and to business. Platinum Asset Management Limited Annual Report 2023 25 Brigitte Smith B.CHEM ENG (HONS), MBA, MALD, FAICD Ms Brigitte Smith was appointed as an independent Non-Executive Director on 31 March 2018. She serves as a member of the Audit, Risk & Compliance Committee and became Chair of the Nomination & Remuneration Committee on 26 October 2021. Ms Smith has over 20 years’ experience in the investment and financial services sector. Ms Smith brings to the Board extensive financial service experience within Australia and the US with a focus on supporting business strategy, human resources and operations. Ms Smith is the co-founder and Managing Director of GBS Venture Partners. Prior to GBS, Ms Smith worked in the US and Australia in operating roles with fast growth technology- based businesses, and at Bain & Company as a strategic management consultant. Ms Smith is a Non-Executive Director of Amber Electric and Moximed Inc, serves as an Investment Committee member for Diversified Impact Fund at Social Ventures Australia and Investment Advisor to the Victorian Government’s Equity Investment Attraction Fund. Philip Moffitt BECON (HONS), BLAS PSYCH (HONS), GRADDIPPSYCH, ASSOCIATE FINSIA Mr Philip Moffitt was appointed as an independent Non-Executive Director on 17 December 2021. He serves as a member of the Audit, Risk & Compliance Committee and Nomination & Remuneration Committee. Mr Moffitt has over 35 years’ experience in investment management. Mr Moffitt was previously a partner at Goldman Sachs (London and Sydney) and also Chair of Goldman Sachs Australia Managed Fund Board. Prior to this he held a number of senior roles within Tokai Asia in Hong Kong and Bankers Trust in Australia. Mr Moffitt is a Non-Executive Director of Aware Super and serves as Chair of its Investment Committee and Direct Assets Committee, is a Director of Green Road Consulting, and the Chair of Newington College Foundation. Andrew Clifford BCOM (HONS) Mr Andrew Clifford was appointed as an Executive Director on 8 May 2013. Mr Clifford is a co-founder of Platinum and was appointed Platinum’s Managing Director on 1 July 2018. Mr Clifford continues to serve as the Co-Chief Investment Officer having been appointed to that role 8 May 2013. Mr Clifford has over 30 years’ experience in investment and funds management with a focus on global equity markets. Prior to co-founding Platinum, Mr Clifford was a Vice President at Bankers Trust Australia covering Asian equities and managing the BT Select Market Trust - Pacific Basin Fund, where he worked alongside Platinum’s other co-founder, Kerr Neilson. Mr Clifford is a Non-Executive Director of the JAAM Foundation and Australian Wildlife Conservancy. Platinum Asset Management Limited Annual Report 2023 26 DIRECTORS’ REPORT CONTINUED Information on Directors – continued Elizabeth Norman BA, GRADUATE DIPLOMA IN FINANCIAL PLANNING Ms Elizabeth Norman was appointed as an Executive Director on 8 May 2013. She is also Platinum’s Director of Investor Services and Communications. Ms Norman joined Platinum in February 1994 in the role of Investor Services and Communications Manager. Ms Norman has over 30 years’ experience in investor services, marketing, brand and investor communications. Prior to joining Platinum, Ms Norman 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 Mr Andrew Stannard was appointed as an Executive Director on 10 August 2015. He is also Platinum’s Finance Director. Mr Stannard has over 30 years’ experience in finance with expertise in audit, financial control, operations, funds management, financial services regulation and corporate governance. Prior to joining Platinum, Mr Stannard was Chief Financial Officer of Alliance Bernstein for its Asia-Pacific region. Information on Former Directors Kerr Neilson BCOM, ASIP Mr Kerr Neilson was an Executive Director from 12 July 1993 to 31 August 2020 and then a Non-Executive Director until his retirement on 16 November 2022. During his tenure as Non-Executive Director, he served as a member of the Audit, Risk & Compliance Committee and Nomination & Remuneration Committee. Mr Neilson founded Platinum in 1994 and was the Managing Director from its incorporation to 30 June 2018. Mr Neilson has over 40 years’ experience in investment markets and funds management within Australia, Asia, UK and South Africa. Prior to Platinum, Mr Neilson was an Executive Vice President at Bankers Trust Australia. Previously he worked in South Africa in stockbroking. Platinum Asset Management Limited Annual Report 2023 27 Information on Company Secretary Joanne Jefferies BCOM, LLB, GAICD Ms Joanne Jefferies was appointed Platinum’s General Counsel and Group Company Secretary on 17 October 2016. Ms Jefferies serves as the Company Secretary for Platinum and a number of its subsidiary entities and ASX listed investment companies, Platinum Asia Investments Limited and Platinum Capital Limited. Ms Jefferies is an English law qualified solicitor with more than 27 years’ experience in financial services law and corporate governance specialising in asset management and banking, in England and across Asia Pacific. Ms Jefferies previously worked for BNP Paribas Securities Services, where she was Head of Legal, Asia Pacific and Company Secretary of all Australian subsidiaries. Prior to this Ms Jefferies held senior legal positions with Russell Investments, Morley Funds Management (Aviva Investors) and Lord Abbett. She also 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 2023, and the number of meetings attended by each Director were: BOARD ATTENDED/ HELD NOMINATION & REMUNERATION COMMITTEE ATTENDED*/HELD AUDIT, RISK & COMPLIANCE COMMITTEE ATTENDED*/HELD DUE DILIGENCE COMMITTEE ATTENDED*/HELD Guy Strapp Stephen Menzies Anne Loveridge Brigitte Smith Philip Moffitt Andrew Clifford Elizabeth Norman Andrew Stannard Kerr Neilson1 Joanne Jefferies2 6/6 6/6 6/6 6/6 6/6 6/6 6/6 6/6 3/4 – 5/5 4/5 4/5 5/5 5/5 – – – 0/1 – 4/4 4/4 4/4 4/4 4/4 – – – 1/2 – 1/1 – – – – 1/1 1/1 1/1 – 1/1 * 1 2 Executive Directors may be invited to attend committee meetings as guests. Kerr Neilson retired as a non-executive director at the conclusion of the Annual General Meeting on 16 November 2022 and was only eligible to attend meetings prior to his resignation date. Joanne Jefferies is not a director of the Company, however, is the Group Company Secretary and also a member of Due Diligence Committee. Platinum Asset Management Limited Annual Report 2023 28 DIRECTORS’ REPORT CONTINUED Risk Management Framework Platinum believes that the management of risk is a continual process and an integral part of good business management and corporate governance. Platinum' risk management framework is set in our risk management policy (available at www.platinum.com.au/ about-platinum/ptm-shareholders) which is approved by the Board. The framework sets the Board’s risk appetite for the Company and mechanisms to manage the material risks within the approved risk appetite. The material risks are set out below: RISK CATEGORY RISK DESCRIPTION RISK MANAGEMENT Strategic Risk Legal, Regulatory and Compliance Risk Strategic Risk is defined as adverse strategic decisions, improper implementation of strategic decisions, a lack of responsiveness to industry changes or exposure to economics, market or demographic considerations that affect our market position. The risk that the framework of rules, relationships, systems and processes within Platinum does not enforce compliance with the Group’s obligations arising as a listed entity and financial services licensee. Operational Risk Operational Risk is the risk of losses resulting from inadequate or failed internal processes, people and systems, or from external events. • Board approved strategic objectives • Regular reporting to the Board of management activities to achieve objectives • KMP’s KPI’s aligned to strategic objectives • Defined compliance framework with documented policies • Training on compliance policies to applicable teams • Regulatory change forum monitors impact of new legislation on Platinum’s business and products • Defined risk management framework with supporting policies • Independent control testing as part of control self-assessment program • Compliance and Risk Department review incidents and breaches to assess control breakdowns and improvements • Insurance arrangements cover material insurable risks Platinum Asset Management Limited Annual Report 2023 29 RISK CATEGORY RISK DESCRIPTION RISK MANAGEMENT Outsourcing Risk Market and Investment Risk Financial Risk (including Liquidity) Outsourcing risk is the risk arising from failure in processes and or controls undertaken by third parties which result in the breakdown in Platinum’s ability to provide its services. Market and Investment Risk is the risk of losses resulting from ineffective investment strategies, management or structures resulting in sustained under performance relative to benchmarks and investment objectives. Financial Risk is the risk that Platinum or the Schemes cannot meet its contractual, payment or redemption obligations in a timely manner. Information Technology (IT) and Cybersecurity Risk Information Technology (IT) and Cybersecurity Risk is the risk of financial loss, disruption or damage to the reputation of an organisation from a failure of its information technology systems. • Due diligence review of material service providers undertaken in 2022/23 • Legal contracts in place with material services providers • Clearly defined investment strategy • Independent pre and post-trade investment mandate compliance monitoring • Monitoring of seed capital risks • Monitoring of regulatory capital requirements • Regular review and approval of cashflow forecasts • Defined IT security policies • Independent security testing • Business continuity plan regularly tested • Periodic cyber training provided to staff Platinum Asset Management Limited Annual Report 2023 30 DIRECTORS’ REPORT CONTINUED Risk Management Framework – continued RISK CATEGORY RISK DESCRIPTION RISK MANAGEMENT People, Culture and Conduct Risk People, Culture and Conduct Risk is the uncertainty and potential for loss or failure arising from conduct by employees, directors or service providers that does not align with Platinum’s values. The risk arising from an inability to attract and retain talent to execute the strategy of Platinum. Environmental, Social and Governance Risk Environmental, Social and Governance Risk is the risk arising from inappropriate or inadequate environmental, social or governance (ESG) considerations in business and investment decision making. • Clearly defined Business Rules of Conduct (BROC) outlines Platinum’s expected standards of behaviour by staff • Mandatory training for all staff on the BROC • Annual staff attestation of the BROC • Launch of employee engagement survey • Alignment of long term variable remuneration to future value creation for shareholders • Succession planning for key roles across the Group • Creation and appointment of new Head of Stewardship • Stewardship Committee responsible for reviewing ESG developments impacting the Group and monitoring of ESG initiatives Platinum Asset Management Limited Annual Report 2023 31 Interests in Registered Schemes The relevant interests in units of registered managed investment schemes managed by PIML, for each Director is set out below. REGISTERED SCHEME Platinum Asia Fund DIRECTOR 30 JUNE 2023 30 JUNE 2022 Andrew Clifford 5,881,457 5,815,931 Kerr Neilson* n/a* 34,257,123 Elizabeth Norman 900,169 1,344,078 Philip Moffitt 87,160 87,160 Platinum International Fund Andrew Clifford 36,771,659 34,350,010 Kerr Neilson* n/a* 14,895,881 Elizabeth Norman 577,119 577,119 Stephen Menzies – 62,530 Platinum Global Fund Andrew Clifford 6,799,140 6,366,104 Kerr Neilson* n/a* 5,000,000 Elizabeth Norman 737,039 737,039 Platinum European Fund Kerr Neilson* n/a* 9,001,064 Elizabeth Norman 324,327 324,327 Platinum Japan Fund Kerr Neilson* n/a* 29,742,298 Elizabeth Norman 267,109 267,109 Platinum Global Fund (Long Only) Kerr Neilson* n/a* 25,013,152 Elizabeth Norman 186,478 186,478 Platinum International Brands Fund Kerr Neilson* n/a* 2,549,266 Platinum International Health Care Fund Kerr Neilson* n/a* 12,798,071 Elizabeth Norman 187,350 187,350 Platinum International Technology Fund Kerr Neilson* n/a* 9,284,213 Platinum International Fund (Quoted Managed Hedge Fund) Anne Loveridge 17,897 15,972 Platinum Asia Fund (Quoted Managed Hedge Fund) Anne Loveridge Brigitte Smith Stephen Menzies 18,550 124,118 – 17,927 60,358 29,674 * Not applicable as Mr Neilson retired on 16 November 2022. Platinum Asset Management Limited Annual Report 2023 32 DIRECTORS’ REPORT CONTINUED Indemnity and Insurance of Directors and Officers During the year, the Group incurred a premium in respect of a contract for indemnity insurance for the Directors and officers of the Company named in this report. The Group insures the Directors and officers of the Group to the extent permitted by law for losses, liabilities, costs and charges in defending any legal proceedings arising out of their conduct while acting in the capacity of Directors and officers of the Group, other than conduct involving a wilful breach of duty in relation to the Group or a contravention of sections 182 and 183 of the Corporations Act 2001. During the year, the Group paid insurance premiums to insure the Directors and officers of the Company and its subsidiaries as permitted by the Corporations Act 2001. The terms of the contract prohibit the disclosure of the premiums paid. Indemnity of Auditor To the extent permitted by law, the Company has agreed to indemnify its auditors, Ernst & Young Australia, as part of the terms of its audit engagement agreement against claims by third parties arising from the audit (for an unspecified amount). No payment has been made in satisfaction of any indemnity provided to Ernst & Young Australia during or since the financial year. Non-Audit Services Details of the amounts paid or payable to the auditor for non-audit services provided during the financial year by the auditor are outlined in Note 24 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 24 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 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 Ethics 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. Platinum Asset Management Limited Annual Report 2023 33 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. 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 73. 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 Guy Strapp Chair 23 August 2023 Sydney Andrew Clifford Managing Director Platinum Asset Management Limited Annual Report 2023 34 REMUNERATION REPORT A Message from the Chair of the Nomination and Remuneration Committee (“Committee”) Dear Shareholders In acknowledgement of the Company’s profit and share price performance, this year the Board applied significant oversight and judgement to ensure remuneration outcomes were fair, appropriate and competitive having regard to both financial and investment performance. Whilst the investment team received a substantial boost to short term incentive compensation due to much improved investment performance (as at 31 March 2023), in recognition of the firm’s lower profitability; • Aggregate non-investment team1 short term variable compensation was reduced by 18% in aggregate on the prior year; • Long term incentive awards to all staff were reduced by 23% in aggregate on the prior year; • KMP short term incentive awards were 55% of the maximum; • CEO, on his recommendation, did not receive any short term incentive under the CEO Plan; • CEO has requested that his short term incentives (earned as Co CIO under the investment team plans) be delivered as long term incentives and thus subject to achieving future TSR hurdles and an eight year service condition, and • A review of investment team compensation was initiated which aims to better align team outcomes with overall business performance. 1 i.e.: excluding KMP. Platinum Asset Management Limited Annual Report 2023 35 Investment Team compensation reflective of strong investment performance Platinum remained focussed on delivering strong investment performance for our clients. Being an investment led business, investment performance is a key driver of the remuneration outcomes for our investment team with the terms of the existing investment team plans i.e. the Investment Team Plan (ITP) and Profit Share Plan (PSP) designed to reward investment outperformance relative to the broader equity market over both 1 and 3 year rolling periods to 31 March. For the 1 year rolling period to 31 March 2023, Platinum’s flagship funds, the Platinum International Fund and the Platinum Asia Fund, delivered relative outperformance of 13.9% and 4.6%, and, for the 3 year rolling period to 31 March 2023, delivered relative performance of -0.6% and +2.3%1, respectively. Given the strong investment outperformance, the hurdles for pool creation of the PSP were met for the first time since 2018, creating a pool equivalent to 4.2% of the Company’s profit which was distributed between key contributors within the investment team based on pre-determined allocations. In light of these strong investment returns, total remuneration for the investment team this year is significantly up on the prior year. Plan review initiated With the Company not immune to the broader business challenges being faced by the listed asset management sector more generally, we recognise the inconsistency between the strong investment performance that we have delivered for clients on the one hand and the more subdued financial performance that we have delivered to our shareholders on the other. In order to address this, we have engaged an external consultant to review the existing remuneration framework for our investment team. One of the key objectives of this review is to better align short term incentive (STI) remuneration outcomes of the investment team with the broader business results, whilst still recognising that we are an investment led business and delivering strong investment performance must remain the key focus of our investment talent. We expect that this new framework will be in place for the next performance period commencing 1 April 2024. Alignment between shareholders and non-investment team remains strong Despite making significant progress on a number of key strategic projects over the course of this year which will help Platinum deliver in future periods, shareholder returns, whether measured by profit or share price were disappointing. The compensation arrangements for non-investment team members reflected this, with total variable remuneration for our non-investment team staff (excluding KMP) down 18% in aggregate on the prior year. 1 Source: Platinum for Fund returns and Factset Research Systems for MSCI returns. Investment returns are calculated using the Fund’s NAV unit price (i.e. exclude buy/sell spread) for C Class and represent the combined income and capital returns for the specified period. Past performance is not a reliable indicator of future performance. Platinum Asset Management Limited Annual Report 2023 36 REMUNERATION REPORT CONTINUED KMP Reward Outcomes The key reward decisions for FY2023 were as follows: • Despite the achievement of a number of strategic and individual KPIs, the Board used its discretionary modifier to reflect the financial outcomes in the STI awards for executive KMP (Mr Andrew Stannard and Ms Elizabeth Norman) applying downward adjustments of between 69%-71% to their balanced scorecard raw scores. Consequently, Mr Stannard and Ms Norman each received STI awards equivalent to 55% of their maximum potential with at least 33% of those awards received as deferred rights under the Deferred Remuneration Plan and thus subject to a 4 year continuous service vesting condition.1 • For the last several years, on his recommendation, Mr Andrew Clifford (Platinum’s CEO/ Co-CIO) has not received any STI awards. In recognition of the Company’s disappointing financial results this year, his recommendation to the Committee was that he not be awarded any STI award under the CEO Plan. • This year, in his role as Co-CIO, Mr Clifford is eligible for STI awards under the rules of the ITP and PSP to be delivered as deferred rights under the Deferred Remuneration Plan in accordance with the terms of his employment arrangements. However, in order to seek better alignment with future shareholder outcomes, Mr Clifford has voluntarily elected to receive these STI awards as an equivalent award of performance rights under the Platinum Partners Long Term Incentive Plan (Platinum Partners LTIP), subject to shareholder approval. This means they must meet the total shareholder return (TSR) hurdles under the plan before they can vest and will also be subject to an 8 year continuous service exercise condition.2 • Prior to the introduction of the Platinum Partners LTIP in 2021, Platinum had not, for many years, included a long term incentive (LTI) component in executive remuneration such that the proportion of share ownership by key staff remains low vis a vis that of Platinum’s competitors. The Platinum Partners LTIP was introduced to address this issue and to align executive remuneration with future shareholder value creation. With this in mind, the executive KMP will receive LTI awards this year, subject to shareholder approval at the forthcoming AGM. Retaining key talent remains an essential business consideration. This is also true for talent within the business and operational teams, given the competitive nature of our sector. Accordingly, the Board rewarded key individuals in those teams with LTI awards under the Platinum Partners LTIP as part of its broader retention and staff ownership strategy. Subject to “good leaver” provisions and other forfeiture and malus provisions. 1 2 See footnote 1. Platinum Asset Management Limited Annual Report 2023 37 A More Transparent Reward Framework We have continued to use shareholder and proxy adviser feedback as a key consideration in our decision making process on executive KMP reward. In the previous financial year, we introduced maximum STI award caps and a Board modifier to provide greater clarity on what the Board considers to be appropriate STI award outcomes having regard to Company performance. We also included additional disclosures in our remuneration report to provide greater transparency on performance outcomes and to clearly communicate the Board’s decision-making processes including its use of discretion in determining executive reward outcomes. These improvements received strong support from our shareholders at the last AGM, with over 94% of the votes cast in favour of the FY2022 remuneration report, and have been carried through in this year’s report. As part of this year’s review, the Board determined to retain the existing TSR CAGR thresholds as the Board is of the view that they continue to be appropriate having regard to the current economic environment. The Board further considered feedback in relation to 1 and 2 year TSR measures but decided to retain these measures particularly given that the eight year deferral exercise condition is much longer than industry norms. Other FY2023 Activity Platinum’s Nomination and Remuneration Committee continued its ongoing review and further improvement of its executive remuneration framework during FY2023. In particular, the Committee: • Reviewed and recommended to the Board the aggregate variable remuneration pool for staff, assessed the individual executive KMP performance within the context of the Company’s performance and reviewed and recommended to the Board the individual STI and LTI awards for the CEO, other executive KMP and key staff members; • Enhanced the KPI structure of the executive KMP for FY2024 with an increased emphasis on strategic outcomes and a strengthened alignment to shareholder results. A greater proportion of the overall KPIs has been focussed on financial measures (i.e. weighting of the KPI which focuses on revenue and profit growth has been increased for all executive KMP) and an explicit risk and behaviour gate-opener has been introduced; • Engaged an external consultant to review the remuneration framework for the investment team; and • Approved Platinum’s revised diversity and inclusion policy and objectives, aligning these with Platinum’s broader stewardship aspirations. Platinum Asset Management Limited Annual Report 2023 38 REMUNERATION REPORT CONTINUED Looking Forward Platinum’s core purpose remains to deliver good investment returns to clients over the medium to long-term, consistent with a risk profile that seeks to preserve clients’ capital during market downturns. Platinum believes that good medium to long-term investment performance is the primary driver of fund inflows, profit growth and ultimately long-term value creation for shareholders. Platinum’s remuneration policy continues to be shaped around this core purpose as it aims to balance this with the need to reward strong individual performance and retain talent. We will continue to refine and review our remuneration arrangements to ensure that they align with Platinum’s core purpose, business strategy and shareholder returns, and we welcome your feedback. Brigitte Smith Chair of Nomination & Remuneration Committee Platinum Asset Management Limited Annual Report 2023 39 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 2023. The remuneration report forms part of the Directors’ Report. The information provided in this remuneration report has been audited by the Company's auditor, Ernst & Young, as required by section 308(3C) of the Corporations Act 2001. Table of Contents 1. Summary of Remuneration Outcomes for FY2023 2. Overview of Remuneration Framework 3. Key Management Personnel (KMP) 4. Remuneration of Executive KMP 5. Remuneration of Non-Executive Directors 6. Link Between Company Performance and KMP Remuneration Paid by the Consolidated Entity 7. Oversight and Governance 8. Remuneration Services Provided to the Nomination and Remuneration Committee 9. Key Terms of KMP Employment/Service Contracts 10. Interests of KMP in PTM Shares 11. Directors’ Interests in Contracts 12. Loans to KMP and Their Related Parties 13. Other Related-Party Payments Involving KMP 14. Shareholders’ Approval of the FY2022 (Prior Year) Remuneration Report Platinum Asset Management Limited Annual Report 2023 40 REMUNERATION REPORT CONTINUED 1. Summary of Remuneration Outcomes for FY2023 The Board remains focused on ensuring there is a robust and rigorous process in place to determine remuneration outcomes and, for FY2023, applied significant oversight and judgement to ensure remuneration outcomes were fair, appropriate and competitive having regard to both individual and Company performance. In determining remuneration outcomes this year, the Board: • Sought to ensure executive Key Management Personnel (KMP) remuneration outcomes reflected the disappointing financial results. Specifically: – – – – – Despite meeting a number of their individual KPIs for FY2023, short term incentive (STI) outcomes for Mr Andrew Stannard and Ms Elizabeth Norman reflected only 55% of the maximum opportunity after the Board applied significant downward adjustments to their KPI-derived remuneration, with at least 33% of those STI awards being satisfied via deferred equity pursuant to Platinum’s Deferred Remuneration Plan. Mr Andrew Clifford in his role as CEO, recommended to the Nomination and Remuneration Committee (“Committee”) that he should not receive any STI award under the CEO Plan. Due to strong investment performance, Mr Clifford in his role as Co-CIO is eligible to receive metricated awards under the Profit Share Plan (PSP) and Investment Team Plan (ITP), to be delivered as deferred rights under the Platinum’s Deferred Remuneration Plan thus subject to a 4 year vesting period. However, in order to align Mr Clifford’s remuneration with future shareholder outcomes, Mr Clifford has requested to receive these awards as performance rights under the Platinum Partner’s Long Term Incentive Plan (Platinum Partners’ LTIP), subject to shareholder approval at the forthcoming AGM. If approved by shareholders, these performance rights will only vest if the total shareholder return (TSR) hurdles related to Platinum’s compound annual growth rate (CAGR) (more detail on page 62) under the Platinum Partner’s LTIP are met, otherwise they will lapse. Any vested performance rights will also be subject to an 8 year service condition (from grant date) before they can be exercised. Consistent with the Board’s objective to align executive remuneration with future shareholder value creation, the executive KMP will receive LTI awards, subject to shareholder approval at the forthcoming AGM. The face value of the proposed LTI awards for executive KMP is down 17% in aggregate on the prior year. There are no fixed remuneration increases proposed for any of the executive KMP. In the previous financial year, the Board made a decision to weight executive KMP remuneration towards variable remuneration and use incentives to retain, motivate and reward Platinum executives. Further to the Board’s adjustment, the variable remuneration component of the CEO/Co-CIO represents 91% of his total remuneration outcome for FY2023 whereas for the other executive KMP, this ratio ranges between 66% and 70%. The higher variable remuneration component for the CEO/Co-CIO vis a vis the other executive KMP reflects the fact that his base salary is below market when considered in light of our sector peers and other comparable ASX listed companies. Platinum Asset Management Limited Annual Report 2023 41 • Continued to progress with grants of LTI outside executive KMP to create stronger shareholder alignment and retention of key staff over a longer time horizon. This involved rewarding selected investment and non-investment team members who represent key talent and made outstanding contributions during the year. In addition to retaining strong investment talent, the Board recognises that it is critical that the Company retain talented business and operational staff to incentivise future innovation, significant operational improvements and business growth. The overall FY2023 award outcomes were as follows: • The investment team’s remuneration in aggregate increased significantly on the prior year, in line with the rules of the PSP and ITP, as a result of the strong relative investment performance outcomes for clients over the 1 and 3 year rolling periods to 31 March 2023 (calculated as an average of the 1 and 3 year relative investment performance weighted based on FUM). • Outstanding one year relative investment performance led to the ITP pool achieving its maximum cap (of 200% of aggregate salary costs for the team). • Given the investment outperformance, select members of the investment team were also eligible to participate in the PSP for the first time since 2018. Investment outperformance lead to a metricated pool equivalent to 4.2% (maximum is capped at 5%) of profit before tax, which was allocated to key contributors in the investment team on a pre-agreed basis. • A total of $8.9 million (compared to $8.5 million in 2022) in STI awards were deferred for four years via the issuance of deferred rights under the existing Deferred Remuneration Plan. These rights will vest in June 2027 subject to service conditions. Other forfeiture (including malus) provisions also apply. The accounting impact of the awards will be expensed through the profit and loss statement over the five-year service period of the awards, so the expense impact will be apportioned over time. • A total of $15.5 million LTI awards (compared to $20.2 million in 2022), were awarded to employees (excluding executive KMP) under the Platinum Partners LTIP, down 23% in aggregate on the prior year reflecting the change in the Company’s profitability. Vesting of the performance rights is subject to total shareholder return (TSR) hurdles being met. These rights have an exercise date of June 2031 and are subject to service conditions. Certain forfeiture (including malus) and clawback provisions also apply. The awards will be expensed through the profit and loss statement over their nine-year accounting service period, so the expense impact will be apportioned over time. Platinum Asset Management Limited Annual Report 2023 42 REMUNERATION REPORT CONTINUED The allocation of the FY2023 profits attributed to both shareholders and staff (in the form of remuneration) is outlined in the first graph below. It shows that shareholders (through dividends and retained earnings) received a more significant share of profits than staff. The second graph shows the proportion of shares owned by executive directors and other staff vis a vis non-related shareholders. The proportion of employee shareholding has declined in this period. This has been as a result of an early founder of the business retiring from the Board in November 2022. When the Platinum Partners LTIP was introduced, a key rationale for its implementation was to address the low levels of staff shareholding relative to industry standards by key employees. It was also an important mechanism for ensuring employee retention over time. The Board continues to be cognisant of the need to increase the equity ownership of key personnel over time, subject to the creation of shareholder value. This year’s LTI awards (whilst down on last year’s) are an important step in reducing this risk and thereby helping to ensure Platinum’s future success. 8% 43% 37% 20% Public & institutional shareholders 92% Platinum Asset Management Limited Annual Report 2023Graph 1: Share of FY2023 profit (pre-tax and pre-staff costs)Staff costs andshare-based payments expenseTax (community)Dividends to shareholders & retained earningsGraph 2: Composition of PTM share ownershipExecutive directors and staff 43 2. Overview of Remuneration Framework The core purpose of the Company is to deliver good investment returns to clients over the medium to long-term, consistent with a risk profile that seeks to protect clients’ capital against downside market risk. The Company can only achieve this by attracting and retaining superior investment talent, supported by a team of similarly talented client service, business development and operational staff. The efficacy of our remuneration program is best measured by our long-term investment performance outcomes and the retention rate of key staff members. Platinum’s remuneration program has three key elements: i. ii. iii. Fixed Remuneration: This is set at a level sufficient to attract exceptional talent. It includes salary, benefits and superannuation. Fixed remuneration is benchmarked to external market data at least annually and reflects the nature of the role and the required levels of skill and experience. Short Term Incentives (STI): cash and deferred rights: Each employee is assessed annually across a range of quantitative and/or qualitative KPI’s, as well as appropriate risk management and behavioural criteria. STI recommendations are generally made annually based on meeting performance objectives following rigorous review by senior management and the Nomination and Remuneration Committee (comprised entirely of non-executive directors), before ultimately being approved by the Board. Variable awards can be made in the form of cash or by an award of deferred rights which are subject to a four-year continuous service vesting condition.1 Long Term Incentives (LTI): performance rights:2 Key members of staff will be periodically invited by the Board (upon the recommendation of the Nomination and Remuneration Committee), to participate in the Platinum Partners Long Term Incentive Plan (Platinum Partners LTIP) in order to directly align their remuneration with future shareholder value creation. These awards take the form of performance rights which are tested against total shareholder return (TSR) hurdles and subject to an eight-year continuous service exercise condition.3 Subject to “good leaver” provisions and other forfeiture and malus provisions. 1 2 Platinum also has two inactive long term variable remuneration plans, being an “Options and Performance Rights Plan” (OPRP) and a “Fund Appreciation Rights Plan” (FARP). There were no allocations under either plan in the current or prior year. 3 Subject to “good leaver” provisions and other forfeiture and malus provisions. Platinum Asset Management Limited Annual Report 2023 44 REMUNERATION REPORT CONTINUED Platinum’s STI and LTI equity awards have long deferral periods relative to Platinum’s peers to promote staff retention, increase alignment with shareholders and foster sound financial, operational and risk management practices. FIXED REMUNERATION 1 Fixed Remuneration • Set to attract exceptional talent • Benchmarked to market • Rewards each employee for their skills, attributes and role accountabilities 3 LONG TERM INCENTIVES (Performance Rights) Long Term Incentives (Performance Rights) • On an invitation only basis • Improves alignment of employees and shareholders to future value creation • Vesting subject to achieving performance hurdles • Eight-year deferral period to encourage a long term commitment to the firm Reward Framework 2 SHORT TERM INCENTIVES (Cash & Deferred Rights) Short Term Incentives (Cash and Deferred Rights) • Performance goals set annually at the beginning of each performance period • Awards made annually with reference to individual performance • Other performance considerations include: – Company performance – Investment performance – Risk management factors – Leadership and behavioural factors • Deferred rights: – Improve alignment of employees and shareholders – Four-year deferral element to foster sustainable growth and sound financial, operational and risk management practices Platinum Asset Management Limited Annual Report 2023 45 3. Key Management Personnel (“KMP”) For the purposes of this report, the KMP of the consolidated entity in office during the financial year were: NAME Guy Strapp Kerr Neilson* Stephen Menzies Anne Loveridge Brigitte Smith Philip Moffitt Andrew Clifford Elizabeth Norman POSITION Chair and Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director Managing Director, Chief Executive Officer (CEO) and Co-Chief Investment Officer Executive Director and Director of Investor Services and Communications Andrew Stannard Executive Director, Finance Director * Mr Neilson retired from the Board at the conclusion of the 2022 Annual General Meeting on 16 November 2022. There were no other employees that were KMP within the Company or consolidated entity. Platinum Asset Management Limited Annual Report 2023 46 REMUNERATION REPORT CONTINUED 4. Remuneration of Executive KMP a) Executive KMP Remuneration Framework Our executive KMP remuneration framework is designed to support Platinum’s strategic priorities. We have a clear set of principles which guide our remuneration decisions and design. As we operate in a dynamic and rapidly evolving market, we review our approach to remuneration at least annually so that we are aligned to market expectations and business objectives. Platinum’s three core values underpin its purpose and business strategy and are set forth below. PLATINUM’S PURPOSE “To deliver good investment returns over the medium to long-term that help clients secure their financial futures” PLATINUM’S BUSINESS STRATEGY 1. Deliver good investment returns for our clients 2. Maintain a strong team and distinctive culture 3. Maintain and grow our Australian retail business 4. Capitalise on the attractive and deep offshore institutional opportunity 5. Ensure an efficient and scalable infrastructure that prioritises client service UNDERPINNED BY PLATINUM’S VALUES EXCELLENCE INTEGRITY TEAM MINDSET We set high standards We invest in our people to excel We do what we say we will do We look for ways to continuously improve We embrace diverse thinking We always act in the interests of our clients We take responsibility for our actions We do what is right rather than what is easy We communicate transparently We don’t hold back, we contribute fully We align team, organisation and personal goals We contribute to teams beyond our own We work in an inclusive and collaborative manner We seek to understand and consider others We build cohesion and respect differences As a “pure play” investment manager, the value of Platinum is entirely linked to the skills and expertise of its people and, as a heavily regulated fiduciary business, we believe that ensuring our staff consistently live the Company’s values is an important driver of long term shareholder returns. It is therefore appropriate that the executive KMP remuneration framework focuses on a well-balanced mix of financial and non-financial KPIs. Platinum Asset Management Limited Annual Report 2023 47 The table below summarises Platinum’s remuneration framework for its executive KMP: FIXED REMUNERATION VARIABLE REMUNERATION PURPOSE DELIVERY Attract and retain talented executives. Base salary (including salary sacrifice) and superannuation. LONG TERM INCENTIVES (LTI) Rewards the creation of long term shareholder value. All executive KMP are eligible to participate in the Platinum Partners LTIP. Awards are delivered via performance rights. SHORT TERM INCENTIVES (STI) Rewards for performance during current year. CEO: Mr Andrew Clifford is eligible for STI awards under the CEO Plan (capped at A$1 million), subject to meeting the annual KPIs as set by the Board. Any award under the CEO Plan must be delivered via deferred rights. This award is linked to the achievement of the annual KPI’s. Co-CIO: As the Co-CIO, Mr Clifford is also eligible to receive STI awards via the Investment Team Plan (ITP) (capped at $3m) and the Profit Share Plan (PSP), which must be delivered via deferred rights. Other Executive KMP: Under our current practice, at least 33% of the STI awards are delivered via deferred rights, with the remainder delivered as cash. This award is linked to the achievement of the annual KPI’s. The total STI award for the Director of Investor Services and Communications is capped at $1.35m. The Finance Director’s total STI award is capped at $1m. Platinum Asset Management Limited Annual Report 2023 48 REMUNERATION REPORT CONTINUED FIXED REMUNERATION VARIABLE REMUNERATION APPROACH Reviewed annually by checking relativities against a peer group of financial services and other comparable ASX listed companies. LONG TERM INCENTIVES (LTI) Designed to retain key talent and align remuneration outcomes with future shareholder returns. Performance rights awarded will be divided into four equal tranches and tested against TSR performance hurdles over four consecutive years. Vesting of each tranche is subject to achieving the minimum TSR performance hurdles. Exercise of performance rights is subject to continued service of 8 years and other non-forfeiture provisions. SHORT TERM INCENTIVES (STI) Annual performance is measured using a mix of financial and non-financial KPIs including: • Investment performance; • Revenue and profit growth; • Diversification of client base; • People and culture leadership; and • Risk management and operational effectiveness. In addition to the above, the Board has discretion to apply a performance modifier to KPI-derived remuneration having regard to Company performance. Allocations for the Co-CIO under the PSP are driven by investment performance and determined in accordance with a pre-agreed formula. Vesting of deferred rights is subject to continued service of 4 years and other non- forfeiture provisions. No exercise conditions. Platinum Asset Management Limited Annual Report 2023 49 Details of Executive KMP Remuneration Framework Fixed Remuneration The fixed remuneration (base salary plus superannuation) is positioned against both sector peers and comparable roles within other ASX listed companies. In the case of our CEO, his fixed remuneration is very conservatively positioned with the result that the ratio of his variable remuneration to fixed remuneration may appear higher when compared to peers and the broader market. Variable Remuneration – STI and LTI The current remuneration mix for executive KMP remains weighted towards variable remuneration with at least 33% of total remuneration being delivered in the form of deferred rights (under the Deferred Remuneration Plan) and performance rights (under the Platinum Partners’ LTIP) with longer vesting periods than industry norms. Recipients of deferred rights and performance rights are not permitted to hedge their economic interests. STI awards can be made to executive KMP in the form of cash and deferred rights, with the exception of the CEO/Co-CIO whose STI awards are required to be delivered only as deferred rights under the terms of his employment arrangements. Deferred rights will vest after a four-year period subject to continuous service during that period. Employees who leave before the relevant vesting date will forfeit their unvested deferred rights. Similar to last year, Platinum proposes to grant LTI awards to the executive KMP to strengthen the alignment between long term interests of shareholders and executives. Platinum will present these awards for the approval of shareholders at Platinum’s 2023 AGM. If approved by shareholders, these LTI awards will be delivered as performance rights pursuant to the Platinum Partners LTIP. The terms of the Platinum Partners LTIP are set out later in this report. In summary, under the terms of the plan, each award will be split into four equal tranches with each tranche tested annually against absolute TSR compound annual growth rate (CAGR) performance conditions. This is to ensure that “windfall” gains do not accrue to the executives and to better align the award with the actual shareholder experience for each year of the applicable four-year award testing period. A tranche of performance rights will lapse if they fail the TSR CAGR test for the relevant testing year. The exercise of these performance rights is also subject to an eight-year continuous service condition, to encourage a long term commitment to the firm. Platinum Asset Management Limited Annual Report 2023 50 REMUNERATION REPORT CONTINUED Executive KMP Maximum Remuneration Opportunity The table below includes individual components of the executive KMP’s maximum remuneration. EXECUTIVE KMP REMUNERATION $ CEO CO-CIO (ITP)** TOTAL CEO & CO-CIO (ITP) % OF TOTAL (INCL. SUPER) DIRECTOR OF INVESTOR SERVICES AND COMMUNICATIONS % OF TOTAL (INCL. SUPER) FINANCE DIRECTOR % OF TOTAL (INCL. SUPER) 1 FIXED 525,292 – 525,292 9% MAX STI (DEFERRED EQUITY) 1,000,000 3,000,000 4,000,000 66% MAX LTIP (FACE VALUE) 1,500,000 – 1,500,000 25% 1 FIXED MAX STI (CASH & DEFERRED EQUITY) MAX LTIP (FACE VALUE) 500,292 21% 1,350,000 59% 450,000 20% 1 FIXED MAX STI (CASH & DEFERRED EQUITY) MAX LTIP (FACE VALUE) 500,292 25% 1,000,000 52% 450,000 23% Fixed Compensation includes both salary and superannuation for FY2023. 1 ** Mr Clifford’s maximum PSP entitlement is not included in this table as it is not an absolute amount. Platinum Asset Management Limited Annual Report 2023 51 b) Executive KMP Performance Against FY2023 KPIs When determining the STI allocations for the executive KMP for the 2023 financial year, the Nomination and Remuneration Committee considered a number of factors including each KMP’s individual contributions against their KPIs, their respective individual contributions to the firm and their level of demonstrated alignment to Platinum’s purpose, business strategy and values. Under Platinum’s balanced scorecard approach, each KMP scorecard is assessed against same overall KPIs (with varied % target based on their role and accountability for the area). However, the CEO/Co-CIO’s performance was also assessed against additional performance metrics relating to the investment performance of the portfolios for the relevant period (31 March 2023). The table below summarises the executive KMPs’ KPIs and performance outcomes for the 2023 financial year. KEY PERFORMANCE INDICATORS – 2023 FINANCIAL YEAR PERFORMANCE MEASURES FY2023 KEY PERFORMANCE INDICATORS AND ASSESSED OUTCOMES CEO/CO-CIO WEIGHTING DIRECTOR OF INVESTOR SERVICES & COMM’NS WEIGHTING FINANCE DIRECTOR WEIGHTING 20% – – 20% 20% 20% INVESTMENT PERFORMANCE REVENUE AND PROFIT GROWTH Weighted average 1- and 3-year investment performance as at 31 March 2023 was fully met. Returns of flagship funds versus peers was partially met. The downside capture for flagship funds over 3 years was partially met. Assessment: The target was met. Base fee revenue fell by 18% and adjusted profit (ex-investment income and performance fees) fell by 37%. Run-rate fund flows were below but close to the target. International Brands and International Healthcare Funds did not meet their flow targets. Assessment: The target was not met. Platinum Asset Management Limited Annual Report 2023 52 REMUNERATION REPORT CONTINUED KEY PERFORMANCE INDICATORS – 2023 FINANCIAL YEAR PERFORMANCE MEASURES FY2023 KEY PERFORMANCE INDICATORS AND ASSESSED OUTCOMES CEO/CO-CIO WEIGHTING DIRECTOR OF INVESTOR SERVICES & COMM’NS WEIGHTING FINANCE DIRECTOR WEIGHTING 20% 40% 20% DIVERSIFICATION OF CLIENT BASE Retention of existing clients was very positive. Engagement with Financial Advisers, who are the key access point to end clients was achieved. Investment and deepening of brand awareness contributed to the achievement of this KPI. The business: • Achieved targeted client retention statistics and loss/ churn rates; • Increased Net Promoter Score outcomes with key financial advisers; • Launched first dual access managed fund with a carbon transition theme; and • 101% year on year growth in traffic via advertising and a 38% increase in traffic via social media to the website. Further progress was made in opening new funds offshore and increasing prospect engagement. Online content delivery platforms are on track for launch in 2024. Overall growth in client assets was somewhat disappointing. Assessment: Objectives were largely met. Platinum Asset Management Limited Annual Report 2023 53 PERFORMANCE MEASURES PEOPLE AND CULTURE LEADERSHIP KEY PERFORMANCE INDICATORS – 2023 FINANCIAL YEAR FY2023 KEY PERFORMANCE INDICATORS AND ASSESSED OUTCOMES CEO/CO-CIO WEIGHTING DIRECTOR OF INVESTOR SERVICES & COMM’NS WEIGHTING FINANCE DIRECTOR WEIGHTING 20% 20% 20% Delivered succession planning and leadership development across key functions and created new roles to further optimise the organisation. Ensured strong cohesion and stability within the investment team by attracting, retaining and developing key staff. Delivered programs that aim to improve culture that is centred on integrity, collaboration, excellence and process improvement. Assessment: Objectives were met. RISK MANAGEMENT AND OPERATIONAL EFFECTIVENESS No significant regulatory issues identified in FY2023. 20% 20% 40% No significant errors or breaches of investment guidelines. Continued enhancement of risk management and corporate governance. Operational and IT systems and processes maintained and enhanced with a particular focus on cyber security and improving operational effectiveness. Assessment: Objectives were met. While Platinum’s overall strategy and business focus does not envisage a significant change in FY2024, the overall number of FY2024 performance measures will be less in number compared to recent years and are designed to focus on specific outcomes with easily quantifiable KPIs and a stronger weighting towards revenue and profit growth. Platinum Asset Management Limited Annual Report 2023 54 REMUNERATION REPORT CONTINUED c) Executive KMP Remuneration Outcomes for FY2023 Awarded remuneration represents the value of remuneration that has been awarded in the 2023 financial year, as determined by the Board, and incudes fixed remuneration, STI awards (cash and deferred rights) and LTI awards (performance rights). The actual value of the deferred rights realised will depend on future share price outcomes and performance rights will only deliver value to the executives if shareholder TSR hurdles are achieved. This ensures strong alignment with shareholder interests. Fixed Remuneration There are no proposed increases to the executive KMP’s fixed remuneration. Whilst the CEO’s fixed remuneration remains below the market median, the Board did not feel it was appropriate to increase fixed remuneration due to our shareholders’ experience in the last 12 months. KPI derived Short Term Incentives and Board Modifier When assessing the 2023 financial year performance outcomes against Platinum’s balanced scorecard, the Board considered it appropriate to adjust those STI remuneration outcomes to recognise the Company’s share price performance. As a result, the Board applied a modifier to the KPI derived STI remuneration outcomes resulting in a downwards adjustment to those outcomes as summarised in the table below: EXECUTIVE KMP A. Clifford (CEO Plan) A. Clifford (ITP)* E. Norman A. Stannard UNADJUSTED KPI STI OUTCOME (% OF MAX STI) BOARD MODIFIER ADJUSTED KPI STI OUTCOME (% OF MAX STI) 73% 81% 78% 80% – 41% 71% 69% 0% 33% 55% 55% * No Board modifier was applied to the CEO plan as Mr Clifford recommended to the Committee that no STI should be payable under the CEO Plan despite having achieved some of his KPI’s. A. Clifford's maximum STI (as the Co-CIO) is capped at $3,000,000. He was eligible for $1,000,000 under the ITP due to positive investment performance (to be delivered as deferred rights). Mr Clifford’s PSP payment has not been included in this table as it was allocated using a pre-agreed formula. This table does not account for the fact that Mr Clifford has elected to take his STI awards as LTI awards, subject to shareholder approval at the forthcoming AGM. Platinum Asset Management Limited Annual Report 2023 55 Long Term Incentives Subject to approval of shareholders at Platinum’s forthcoming AGM, Platinum proposes to grant LTI awards to the CEO, Director of Investor Services and Communications and the Finance Director to strengthen the alignment between long term interests of shareholders and executives. A Clifford – Managing Director, CEO and Co-CIO Mr Andrew Clifford is the Managing Director, CEO and Co-Chief Investment Officer (Co-CIO) of the Company. Mr Clifford is eligible for awards under the CEO Plan (capped at A$1 million), subject to meeting his KPIs. Any amounts awarded to Mr Clifford under the CEO Plan, must be provided to Mr Clifford as an equivalent award of deferred rights under the Deferred Remuneration Plan. Upon meeting the predetermined targets for investment performance, Mr Clifford is entitled to receive awards in relation to his role as Co-CIO under the Investment Team Plan (ITP) and the Profit Share Plan (PSP) subject to caps on both plans and Board discretion in relation to the ITP. As a portfolio manager, Mr Clifford was directly responsible for generating approximately $203 million in annualised fee revenue. Despite the achievement of a number of his CEO KPIs (Mr Clifford’s STI outcome based on the balanced scorecard was 73% of his maximum award), Mr Clifford did not receive any STI award under the CEO Plan. Given the outperformance for clients, the Board elected to make an award to Mr Clifford equivalent to 33% ($1,000,000) of his maximum award under the ITP. He is also eligible for an award under the rules of the PSP equivalent to $684,133 in value based on the investment outperformance generated for clients. Both awards are required to be delivered as deferred rights. However, in order to seek better alignment with future shareholder outcomes, Mr Clifford’s preference is to receive these STI awards as an equivalent award of performance rights under the Platinum Partners LTIP (subject to shareholder approval). This will ensure the exercise of the awards will be deferred over an 8 year period1 (rather than 4 years) and vesting of the awards will be subject to meeting the total shareholder return (TSR) hurdles under the plan. Accordingly, if the minimum TSR hurdles are not met, Mr Clifford’s earned PSP and ITP awards for FY2023 will lapse. As a matter of good corporate governance, this proposed arrangement will be presented to shareholders for approval at the forthcoming AGM. 1 Subject to “good leaver” provisions and other forfeiture and malus provisions. Platinum Asset Management Limited Annual Report 2023 56 REMUNERATION REPORT CONTINUED A Clifford – Managing Director, CEO and co-CIO – continued Mr Clifford was also awarded an LTI which is approximately 2.3 x his fixed remuneration for FY2023 (or $1,200,000). As a matter of good corporate governance, this award will also be presented to shareholders for approval at the forthcoming AGM. EXECUTIVE KMP YEAR SALARY $ SUPER $ STI – CASH STI (ITP) – DEF- ERRED STI (PSP) – DEF- ERRED A CLIFFORD (CEO) 2023 500,000 25,292 A CLIFFORD (CO-CIO) 2023 – – TOTAL CEO & CO-CIO 2023 500,000 25,292 – – – – – – – – – TOTAL STI % OF MAX STI LTIP (FACE VALUE) LTIP (FAIR VALUE)1 – 0% 1,200,000 1,044,000 – 57% 1,684,133* 1,465,000 – 42% 2,884,133 2,509,000 1 The LTI awards are subject to shareholder approval, which will be sought at Platinum’s 2023 Annual General Meeting. The number of rights allocated will be based on the five-day VWAP in September 2023. The fair value estimate is independently calculated and is also used to determine the accounting value which is amortised over future vesting periods. The fair value of the FY2023 award disclosed above has been estimated at 87% of the face value, based on an independent valuation as at 20 June 2023. Includes ITP STI award of $1,000,000 and PSP STI award of $684,133 which will both be delivered by way of an LTI award subject to shareholder approval at the AGM. * E Norman – Executive Director, Director of Investor Services and Communications Due to the dual CEO/Co-CIO role performed by Mr Andrew Clifford, Ms Elizabeth Norman’s role is more extensive in scope than is typical for the industry and her remuneration reflects her position accountabilities. Ms Norman has responsibility for product maintenance and development, Australian, US and European distribution, retail marketing, brand and advertising, investment consultant relations, and investor and shareholder relations. Ms Norman is responsible for over 50,000 direct retail and adviser relationships in Australia and for the development of the business offshore. Ms Norman is also an Executive Director of the Company. Ms Norman is eligible for STI awards under the General Employee Plan, subject to meeting her KPIs. These awards may be issued as cash or as deferred rights under the Deferred Equity Plan. The STI paid to Elizabeth Norman this year reflects her leadership and involvement in the development of several important business initiatives during the year including a new fund focused on the carbon transition. Ms Norman was also responsible for the extensive development of the content and delivery of our communications with both investors and advisers, expansion of client relationships, as well as ongoing work associated with our European and US business development operations. The Board determined a pre-adjustment STI outcome, based the balanced scorecard, of 78% of her maximum award. However, in light of overall disappointing FY2023 shareholder outcomes, the Board applied an STI modifier to adjust the final STI downwards to approximately 55% of her maximum STI award. Platinum Asset Management Limited Annual Report 2023 57 Ms Norman was awarded an LTI which is 80% of her fixed remuneration for 2023. This award will be presented to shareholders for approval at the forthcoming AGM. EXECUTIVE KMP YEAR SALARY $ SUPER $ STI – CASH (67%) STI – DEFERRED (33%) TOTAL STI % OF MAX STI LTIP (FACE VALUE) LTIP (FAIR VALUE)1 E NORMAN 2023 475,000 25,292 500,000 250,000 750,000 55% 400,000 348,000 1 The LTI award will be granted subject to shareholder approval, which will be sought at Platinum’s 2023 Annual General Meeting. The number of rights allocated will be based on the five-day VWAP in September 2023. The fair value estimate is independently calculated and is also used to determine the accounting value which is amortised over future vesting periods. The fair value of the FY2023 award disclosed above has been estimated at 87% of the face value, based on an independent valuation as at 20 June 2023. A Stannard – Executive Director, Finance Director Mr Andrew Stannard also performs a broader role, as both Chief Financial Officer (CFO) and Chief Operating Officer (COO). This role is more extensive in scope than is typical for the industry and includes responsibility for nine operational teams being Finance, Legal, Risk and Compliance, Investment Operations, Information Technology, Projects, Data, and Unit Registry. Mr Stannard is also an Executive Director of the Company. Mr Stannard is eligible for STI awards under the General Employee Plan, subject to meeting his KPIs. These awards may be issued as cash or as deferred rights under the Deferred Equity Plan. The STI incentive paid to Mr Stannard this year reflects his input into various strategic business initiatives, the provision of technical and operational support for a number of new business development opportunities (both onshore and offshore), the delivery of the first phase of a multi-year project to upgrade Platinum’s operational effectiveness as well as implementing strong cost control measures. The Board determined a pre-adjustment STI outcome, based on the balanced scorecard, of 80% of Mr Stannard’s maximum award. However, in light of overall poor FY2023 shareholder outcomes, the Board applied an STI modifier that reduced the final STI to approximately 55% of his maximum STI award. Mr Stannard was awarded an LTI which is 80% of his fixed remuneration for 2023. This award will be presented to shareholders for approval at the forthcoming AGM. EXECUTIVE KMP YEAR SALARY $ SUPER $ STI - CASH (55%) STI - DEFERRED (45%) TOTAL STI % OF MAX STI LTIP (FACE VALUE) LTIP (FAIR VALUE)1 A STANNARD 2023 475,000 25,292 300,000 250,000 550,000 55% 400,000 348,000 1 The LTI award will be granted subject to shareholder approval, which will be sought at Platinum’s 2023 Annual General Meeting. The number of rights allocated will be based on the five-day VWAP in September 2023. The fair value estimate is independently calculated and is also used to determine the accounting value which is amortised over future vesting periods. The fair value of the FY2023 award disclosed above has been estimated at 87% of the face value, based on an independent valuation as at 20 June 2023. Platinum Asset Management Limited Annual Report 2023 58 REMUNERATION REPORT CONTINUED d) Executive KMP Remuneration Received for FY2023 The table below presents disclosure of the remuneration provided by the consolidated entity to executive KMPs of the consolidated entity, based on the amounts received by the individuals during the financial year. CASH SALARY 1 $ SUPER- ANNUATION $ SHORT TERM INCENTIVE (CASH) 2 $ VESTED SHORT TERM INCENTIVE (DEFERRED) 3 $ VESTED LONG TERM INCENTIVE $ VARIABLE REMUNER ATION AS A % OF TOTAL TOTAL REMUNER ATION 4 $ 2023 Andrew Clifford Elizabeth Norman Andrew 500,000 25,292 – – – 525,292 0% 475,000 25,292 500,000 129,348 – 1,129,640 56% Stannard 475,000 25,292 300,000 55,435 – 855,727 1,450,000 75,876 800,000 184,783 – 2,510,659 2022 Andrew Clifford Elizabeth Norman Andrew 475,000 23,568 – 283,113 – 781,681 450,000 23,568 500,000 99,091 – 1,072,659 Stannard 450,000 23,568 300,000 42,468 – 816,036 1,375,000 70,704 800,000 424,672 – 2,670,376 42% 39% 36% 56% 42% 46% 1 Cash salary was last increased on 1 July 2022. There were no cash salary increases for any of the executive KMP on 1 July 2023. 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 “short term variable remuneration (deferred)” amount noted above reflects the number of shares that vested in the period multiplied by the closing Platinum share price on the date of vesting. Andrew Clifford received no vested awards (2022: 165,563 shares at $1.71), Elizabeth Norman received vested awards of 76,087 shares at $1.70 (2022: 57,948 shares at $1.71) and Andrew Stannard received 32,609 vested shares at $1.70 per share (2022: 24,835 shares at $1.71). 4 Fixed remuneration refers to salary and superannuation. Variable remuneration refers to both cash and deferred components. Platinum Asset Management Limited Annual Report 2023 59 The table below presents the remuneration provided by the consolidated entity to executive KMP of the consolidated entity, in accordance with accounting standards. The LTI awards for executive KMP under the Platinum Partners LTIP for the financial year to 30 June 2023 are subject to shareholder approval at the upcoming AGM. CASH SALARY $ SUPER- OTHER 1 ANNUATION $ $ STI (CASH) 2 $ STI <I (DEFERRED) 3 $ VARIABLE REMUNER ATION AS A % OF TOTAL TOTAL REMUNER ATION 4 $ 2023 Andrew Clifford Elizabeth Norman Andrew 500,000 (8,427) 25,292 – 415,145 932,010 45% 475,000 11,924 25,292 500,000 448,023 1,460,239 65% Stannard 475,000 25,134 25,292 300,000 286,024 1,111,450 1,450,000 28,631 75,876 800,000 1,149,192 3,503,699 53% 56% 2022 Andrew Clifford Elizabeth Norman Andrew 475,000 39,805 23,568 – 239,997 778,370 31% 450,000 10,990 23,568 500,000 377,899 1,362,457 64% Stannard 450,000 23,959 23,568 300,000 184,800 982,327 1,375,000 74,754 70,704 800,000 802,696 3,123,154 49% 51% 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 STI and LTIP award is spread over the respective five-year and nine-year service periods. The accounting valuation attributable to Andrew Clifford represents the current year portion of the 2023 STI award of $1,684,133 and the 2022 LTIP award of $1,185,000. The accounting valuation attributable to Elizabeth Norman represents the current year portion of the 2023 STI award of $250,000, the 2022 LTIP award of $355,000, the 2022 STI award of $250,000, the 2021 STI award of $500,000, the 2020 STI award of $450,000 and the 2019 STI award of $350,000. The accounting valuation attributable to Andrew Stannard represents the current year portion of the 2023 STI award of $250,000, the 2022 LTIP award of $355,000, the 2022 STI award of $250,000, the 2021 STI award of $250,000, the 2020 STI award of $150,000 and the 2019 STI award of $150,000.Under accounting standard LTI expenses continue to accrue even where those awards fail to meet their respective total shareholder return hurdles and thus lapse. This was the case in respect to the first tranche of the KMP awards granted in November 2022. 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 2023 60 REMUNERATION REPORT CONTINUED e) Variable Remuneration Plans There were three STI plans in operation during the 2023 financial year, each of which operated in conjunction with the Deferred Remuneration Plan. Each plan is overseen by the Nomination and Remuneration Committee. The investment team is eligible to participate in the Investment Team Plan (ITP) and the Profit Share Plan (PSP). All other staff are covered by the General Employee Plan. Each STI award is apportioned between a cash amount, which is generally paid in June and an award of deferred rights under the Deferred Remuneration Plan, the value of which is linked to the PTM share price. Deferred rights are subject to a four-year continuous service vesting condition unless good leaver provisions apply. The table below summarises the main characteristics of the Investment Team Plan and the Profit Share Plan, each of which are then discussed in more detail in the following section. PLAN SUMMARY PARTICIPANTS POOL FORMULA CAP Investment Team Plan Investment team Weighted average 1- and 3-year performance 2 x salary of investment team (caps out at 5% outperformance) HURDLE MSCI1 Profit Share Plan Investment team Weighted average 1- and 3-year performance 5% of adjusted net profit (caps out at 6% outperformance) MSCI +1% AWARD TYPE Cash and/or deferred rights award Investment Team Plan (ITP) (only members of the investment team are eligible) 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 aggregate base salaries when average outperformance is 5% or more. The pool is allocated across the investment team having regard to 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 timeframe and is relative to a nominated market index. 1 MSCI refers to the relevant MSCI index applicable to each strategy. Platinum Asset Management Limited Annual Report 2023 61 The total remuneration outcome (comprising both fixed and variable components) for each investment professional is also benchmarked to appropriate external market data. In a period where there is aggregate weighted average underperformance or where performance is uneven across different funds or portfolio 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-year and 3-year investment performance. Profit Share Plan (PSP) (only selected members of the investment team are eligible) 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-year and 3-year rolling performance of our funds and mandates exceeded the weighted benchmark by 2.5%, then 1.5% of the Company’s adjusted net profit (excludes investment income) would be made available to the PSP pool. The profit share figure is limited each year to 5% of adjusted net profit, though the Nomination and 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 Employee Plan (all non-investment team members are eligible) Performance is assessed against pre-determined operational and business performance indicators relevant to each employee, which flow down from the executive KMP’s KPIs. These performance indicators take into account the responsibilities, skills and experience of each employee, and their contribution during the year. This plan covers those employees whose activity is related to generating new business as well as operational staff. Total remuneration outcomes (comprising both fixed and variable components) are also benchmarked to relevant external market data. Equity Incentive Plan There are two sub-plans operating under the Company’s Equity Incentive Plan, the Deferred Remuneration Plan and the Platinum Partners LTIP. The main objectives of the Equity Incentive Plan are to directly align employees’ remuneration with shareholder value creation, foster sustainable growth, as well as sound financial, operational and risk management practices, and to retain talent. Platinum Asset Management Limited Annual Report 2023 62 REMUNERATION REPORT CONTINUED Details of each sub-plan are set forth below: Deferred Remuneration Plan (all staff are eligible) Eligible employees are selected by the CEO, generally during the annual award cycle. The proportion of each short term incentive awards that are allocated as deferred rights under the plan will vary by employee. The number of deferred rights awarded is determined by dividing the dollar value of the deferred portion of the STI award amount by the PTM share price, using a volume-weighted average price (VWAP) at which PTM shares were traded on the ASX over the seven trading days prior to the grant date. Deferred rights are subject to a four-year continuous service vesting condition. The employee then has a further five years to exercise their deferred rights. If an employee resigns from Platinum before the four-year vesting period, in most circumstances, the deferred rights will be forfeited. Awards of deferred rights may also be forfeited in accordance with other forfeiture and malus provisions under the plan rules. In order to satisfy the obligations of the Company that arise from the granting of deferred rights to eligible employees, the Company may purchase PTM shares on-market and hold these shares within an employee share trust or otherwise issue shares. Upon the exercise of a deferred right, an eligible employee will receive one PTM ordinary share in satisfaction of the right. No amount is payable by any eligible employee on either grant or exercise of the right. There is flexibility within the plan for the Board to award cash or some other instrument rather than deferred rights, but the Board currently envisages awarding rights over 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. Platinum Partners Long Term Incentive Plan (by invitation of the Board only) LTI awards are currently made under the Platinum Partners LTIP. Eligible employees are invited to participate in the Platinum Partners LTIP by the Board (upon the recommendation of the Nomination and Remuneration Committee), generally as part of the annual award cycle following a robust selection process that takes into account the performance of the individual, their contribution to the broader business and their likely contribution to future shareholder value creation. The number of performance rights awarded is determined by dividing the dollar amount of the award amount by the PTM share price, using a volume- weighted average price (VWAP) at which PTM shares were traded on the ASX over the seven trading days prior to the grant date. Platinum Asset Management Limited Annual Report 2023 63 The vesting of the performance rights is conditional upon the Company meeting minimum Total Shareholder Return (TSR) compound annual growth rate (CAGR) performance hurdles (TSR Hurdle) as set forth in the table below. The Board considers that an absolute TSR is an appropriate performance hurdle for the following reasons: • There are very few listed companies in the Australian market with a business that is directly comparable to Platinum’s; and • A broader market index is not considered an appropriate peer group as there is risk of misalignment between remuneration and shareholder value creation. For example, using a broad market index may mean that remuneration outcomes are impacted by broad market movements of other companies (e.g. mining companies) that don’t correspond to long-term value creation for Platinum shareholders. Each award that is granted, is divided into four equal tranches, with one quarter of the award being tested annually against the TSR Hurdle measured from the beginning of the relevant performance period to the end of the relevant performance period, for up to four years (each a Performance Period). The start price for the TSR Hurdle calculation will be the VWAP at which PTM shares were traded on the ASX over the seven trading days prior to the first ASX trading day of the relevant Performance Period, and the end price will be the VWAP at which PTM shares were traded on the ASX over the seven trading days up to and including the ASX last trading day of the relevant Performance Period. The number of PTM shares that an employee will be entitled to receive upon exercise of a performance right within a tranche, will depend on the annualised TSR achieved by the Company during the relevant Performance Period (see table below). If the minimum TSR Hurdle (i.e. 7.5%) for a Performance Period is not met, then that tranche of performance rights being tested will not meet the vesting condition and will lapse. AWARD PERFORMANCE PERIOD PROPORTION OF AWARD THAT IS TESTED AGAINST THE TSR HURDLE Year 1 Year 2 Year 3 Year 4 25% 25% 25% 25% TSR 1-year TSR 2-year annualised TSR 3-year annualised TSR 4-year annualised TSR TSR HURDLE (VESTING CONDITION) TSR < 7.5% ENTITLEMENT TO RESULTING PTM SHARES PER DEFERRED RIGHT Nil TSR between 7.5% and 10% (target) Between 0.75 and 1 (on a pro rata straight line basis) TSR between 10% and 15% Between 1 and 2 (on a pro rata straight line basis) TSR at or above 15% 2 Platinum Asset Management Limited Annual Report 2023 64 REMUNERATION REPORT CONTINUED The exercise of performance rights that have vested i.e. those performance rights that have met or exceeded the TSR Hurdle for a Performance Period, is also subject to an eight-year continuous service condition. In order to protect shareholders from the dual risks of loss of revenue and the loss of other key staff, Platinum has introduced certain “bad leaver” provisions under the Platinum Partners LTIP rules. Under these rules, if an eligible employee leaves Platinum prior to the expiry of the eight-year service condition, the employee will forfeit all performance rights awarded (both vested and unvested) if the Board determines, acting reasonably, that the employee is a “bad leaver”. A bad leaver is defined under the plan rules, and includes a failure to comply with Platinum’s non-compete / non-solicit / non-poaching conditions. Furthermore, awards of performance rights may also be forfeited in accordance with the malus and clawback provisions of the plan rules. Following the expiry of the eight-year service condition, an eligible employee has a further five years to exercise any vested performance rights. In certain limited situations, as set forth in the plan rules, the right to exercise performance rights (both vested and those that subsequently vest after the relevant leaving date) may be accelerated if an eligible employee leaves Platinum prior to the expiry of the eight-year service condition, provided that the Board has not determined that the employee is a “bad leaver”. In order to satisfy the obligations of the Company that may arise from the granting of performance rights, the Company intends to either purchase PTM shares on-market and hold these shares within an employee share trust or issue shares to satisfy performance rights that are exercised. No amount is payable in cash by any eligible employee on either grant or exercise of a performance right. Eligible employees will have no voting or dividend rights until their performance rights have been exercised and their shares have been allocated. However, the performance rights carry an entitlement to an alternative dividend equivalent payment. This entitlement arises once a tranche of an award meets its TSR Hurdle for a Performance Period and continues until the corresponding performance rights are exercised (Holding Period). During the Holding Period, an eligible employee will receive an amount approximately equal to the amount of dividends that would have been paid to the employee had they held the relevant resultant number of shares from the date the TSR Hurdle was met. Other Incentive Plans Platinum has two inactive long-term incentive plans, being an “Options and Performance Rights Plan” (OPRP) and a “Fund Appreciation Rights Plan” (FARP). There were no allocations under either plan in the current or prior year. Platinum Asset Management Limited Annual Report 2023 65 5. 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 remuneration 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 recommend the remuneration of the non-executive directors to the Nomination and Remuneration Committee 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). 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. 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 non-executive director may retire or resign from the Board, or be removed by a resolution of shareholders. Platinum Asset Management Limited Annual Report 2023 66 REMUNERATION REPORT CONTINUED Remuneration Structure The following table displays the non-executive directors in office during the financial year and the relevant Board and Committee Chairs at 30 June 2023: NON-EXECUTIVE DIRECTOR GUY STRAPP STEPHEN MENZIES ANNE LOVERIDGE BRIGITTE SMITH PHILIP MOFFITT KERR NEILSON* Board Audit, Risk & Compliance Committee Nomination & Remuneration Committee Chair Director Director Director Director Director Member Member Chair Member Member Member Member Member Member Chair Member Member * Mr Neilson retired from the Board at the conclusion of the 2022 Annual General Meeting on 16 November 2022. The table below shows the annualised fixed remuneration (excluding superannuation) amounts for the non-executive directors during the financial year based on the Board and Committee Chair positions held at 30 June 2023. NON-EXECUTIVE DIRECTOR GUY STRAPP STEPHEN MENZIES ANNE LOVERIDGE BRIGITTE SMITH PHILIP MOFFITT KERR NEILSON* Board $230,000 $130,000 $130,000 $130,000 $130,000 $130,000 Audit, Risk & Compliance Committee Nomination & Remuneration Committee $15,000 $15,000 $30,000 $15,000 $15,000 $15,000 $15,000 $15,000 $15,000 $30,000 $15,000 $15,000 Total $260,000 $160,000 $175,000 $175,000 $160,000 $160,000 * Mr Neilson retired from the Board at the conclusion of the 2022 Annual General Meeting on 16 November 2022. Platinum Asset Management Limited Annual Report 2023 67 The table below presents actual amounts received by the non-executive directors. The decrease in total remuneration is primarily due to non-executive director changes. CASH SALARY $ SUPER- ANNUATION $ VARIABLE REMUNER- ATION (CASH) $ VARIABLE REMUNER- ATION (DEFERRED) $ 2023 Guy Strapp Stephen Menzies Anne Loveridge Brigitte Smith Philip Moffitt Kerr Neilson 260,000 160,000 175,000 175,000 160,000 25,292 16,800 18,375 18,375 16,800 (until 16/11/22) 61,074 6,413 991,074 102,055 2022 Guy Strapp Stephen Menzies Anne Loveridge Brigitte Smith Philip Moffitt (from 17/12/21) Kerr Neilson Tim Trumper 260,000 164,769 175,000 166,631 86,761 160,000 24,176 16,500 17,500 17,000 8,676 16,000 (until 17/11/21) 61,333 6,133 1,074,494 105,985 – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – TOTAL $ 285,292 176,800 193,375 193,375 176,800 67,487 1,093,129 284,176 181,269 192,500 183,631 95,437 176,000 67,466 1,180,479 Stephen Menzies is Platinum Investment Management Limited’s (PIML’s) representative on the Board of the Dublin domiciled Platinum World Portfolios Plc (PWP) and his director’s fees are paid by PWP. Amounts paid in the current year were €24,000 (equivalent to A$36,962) (2022: €24,000 (equivalent to A$36,204)). Platinum Asset Management Limited Annual Report 2023 68 REMUNERATION REPORT CONTINUED 6. Link Between Company Performance and KMP Remuneration Paid by the Consolidated Entity The table below shows Platinum’s five-year performance across a range of metrics and corresponding KMP remuneration outcomes. 2023 2022 2021 2020 2019 Closing funds under management ($m) Average funds under management ($m) Net flows ($m) Average base 17,327 18,214 23,522 21,385 24,769 18,061 21,350 23,363 23,749 25,394 (2,438) (2,169) (2,255) (3,031) (246) management fee (bps p.a.) Base fee revenue ($m) 112 201 115 246 114 265 116 276 116 295 Total revenue and other income ($’000) 217,410 232,847 316,419 298,666 299,320 Total expenses ($’000) 100,640 86,129 82,207 77,897 76,421 Profit after income tax expense ($’000) 80,863 101,493 163,258 155,611 158,336 Basic earnings per share (cents per share) 14.10 17.54 28.17 26.76 27.03 Total dividends (cents per share) 14 Share price at end of year ($) 1.74 Total aggregate KMP 17 1.74 24 4.91 24 3.73 27 4.85 fixed remuneration ($)1 2,684,598 2,737,141 2,717,490 2,854,551 2,808,483 Total aggregate KMP variable remuneration ($)2,3 1,949,192 1,602,696 2,237,498 1,738,200 1,792,575 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 Dublin domiciled Platinum World Portfolios PLC). 2 The increase in 2023 KMP variable remuneration reflected Partners Plan LTIP awards made to each KMP in that year. 3 The reduction in 2022 KMP variable remuneration reflected a decrease in General Employee Plan awards made to Elizabeth Norman and Andrew Stannard in that year but does not include KMP LTI awards approved at the November 2022 AGM. The level of aggregate KMP remuneration paid each year reflects a combination of factors, including investment performance for clients, the operating performance of the Company, individual and team performance, and the degree of competition for executive talent. Platinum Asset Management Limited Annual Report 2023 69 7. Oversight and Governance The Nomination and Remuneration Committee ensures that appropriate remuneration policies and practices are in place which align with the Company’s purpose, strategic objectives and values. It makes recommendations to the Board on the development of the Company’s remuneration policies and practices which are designed to recognise strong individual and Company performance as well as to promote effective management of financial and non-financial risks in alignment with the Company’s risk appetite. The Nomination and Remuneration Committee is also responsible for making recommendations to the Board regarding variable remuneration outcomes. When considering the variable remuneration outcomes, the Nomination and Remuneration Committee will consider the extent to which remuneration is aligned with outcomes for shareholders and clients. In making its recommendations to the Board, it will incorporate feedback from the Chief Executive Officer, Chief People and Culture Officer and Chief Compliance Officer (regarding risk and compliance behaviours), external benchmarking data and may also consult with independent remuneration consultants. The role of the Nomination and Remuneration Committee is set out in its Charter. Its responsibilities include the following: • To review and make recommendations to the Board in respect of the CEO, executive KMP 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/Co-CIO, other executive KMP, senior managers and key investment team members; • To provide oversight on the overall aggregate variable remuneration outcome for Platinum, ensuring appropriate alignment with all stakeholders; • To review significant changes in remuneration policies and the framework, including employee incentive plans and benefits; • 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 independence and tenure; and • To ensure appropriate Board succession planning. Platinum Asset Management Limited Annual Report 2023 70 REMUNERATION REPORT CONTINUED 8. Remuneration Services Provided to the Nomination and Remuneration Committee The Company utilised Financial Institutions Remuneration Group (FIRG) as the primary sources of remuneration benchmarking data and PartnersInRem for support on the Remuneration Report. In addition, executive KMP roles were benchmarked to publicly available information of comparable ASX listed companies. 9. Key Terms of KMP Employment/Service Contracts The key aspects of the KMP service contracts are outlined below: • Remuneration and other terms of service for non-executive directors are formalised in letters of appointment. Remuneration and other terms of service for the executive KMP are set forth in employment agreements. • All contracts (for both executive KMP and non-executive directors) include the components of remuneration that are to be paid and provide for periodic review of remuneration, but do not prescribe how remuneration levels are to be modified from year to year. • • • Executive KMP do not have a contractual right to receive STI awards (excluding awards under the PSP), any allocations are at the Board’s discretion. Non-executive directors are not entitled to receive any variable remuneration. In the event of termination, all KMP are entitled to receive their statutory leave entitlements and superannuation benefits. In relation to variable remuneration for executive KMP, STIs are generally only paid if the KMP remains employed by Platinum at the date of payment and has not given notice of resignation. However, the Board retains discretion to make STI payments (both cash and deferred rights) in certain exceptional circumstances, such as bona-fide retirement. • All directors, except for the Managing Director, Mr Andrew Clifford, must stand for re-election by shareholders at the third AGM after their initial election or otherwise their last re-election. • All executive KMP can terminate their appointment by providing at least six months’ notice. • All executive KMP have entered into post-employment restraints whereby they may not solicit either employees or clients of Platinum for a period of twelve months. • Non-executive directors may resign by written notice to the Chair. 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 2023 71 10. Interests of KMP in PTM Shares The relevant interest in ordinary shares of the Company that each KMP held at balance date was: OPENING BALANCE ADDITIONS DISPOSALS RETIREMENT CLOSING CONTINGENT RIGHTS 1 BALANCE VESTED RIGHTS 1 Guy Strapp 72,000 28,000 Stephen Menzies 40,000 Anne Loveridge Brigitte Smith Philip Moffitt 50,000 84,000 50,000 Andrew Clifford 32,831,449 Elizabeth Norman 766,748 Andrew Stannard – Kerr Neilson (until 16/11/22)2 126,037,420 – – – – – – – – – – – – – – – – – – – – – 100,000 40,000 50,000 84,000 50,000 – – – – – – – – – – – 32,831,449 671,303 165,563 – – 766,748 719,339 247,314 – 587,756 78,996 – (126,037,420) – – – 1 Represents contingent rights to receive shares and vested, but unexercised, rights to receive shares pursuant to awards made under the Company’s Deferred Remuneration Plan or Long Term Incentive Plan as at 30 June 2023. 2 Net change other represents the number of ordinary shares held by Kerr Neilson on the date he retired as a director and therefore ceased to be a KMP. Platinum Asset Management Limited Annual Report 2023 72 REMUNERATION REPORT CONTINUED 11. 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 and its role as responsible entity of its registered managed investment schemes. 12. 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. 13. Other Related-Party Payments Involving KMP No other related-party payments were made to KMP during the year or as at the date of this report. 14. Shareholders' Approval of the FY2022 (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 (held 16 November 2022), the Company’s remuneration report was carried on a poll receiving a 94.08% vote in favour of the report. Platinum Asset Management Limited Annual Report 2023 AUDITOR’S INDEPENDENCE DECLARATION TO THE DIRECTORS OF PLATINUM ASSET MANAGEMENT LIMITED 73 Ernst & Young 200 George Street Sydney NSW 2000 Australia GPO Box 2646 Sydney NSW 2001 Tel: +61 2 9248 5555 Fax: +61 2 9248 5959 ey.com/au As lead auditor for the audit of the financial report of Platinum Asset Management Limited for the financial year ended 30 June 2023, I declare 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; (b) No contraventions of any applicable code of professional conduct in relation to the audit; and (c) No non-audit services provided that contravene 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 financial year. Ernst & Young Rita Da Silva Partner 23 August 2023 A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation Platinum Asset Management Limited Annual Report 2023 74 CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2023 Revenue Management fees Performance fees Total revenue Other income Interest Distributions and dividends Share of profit/(loss) of associates Gains/(losses) on financial asset at fair value through profit or loss Foreign exchange gains/(losses) on overseas bank accounts Total revenue and other income Expenses Employee expenses Salaries and employee-related expenses Share-based payments Custody and unit registry Business development Technology, research and data Legal, compliance and other professional Depreciation of right-of-use assets Depreciation of fixed assets Mail house, periodic reporting and share registry Insurance Rent and other occupancy Finance costs on lease liabilities Other Total expenses Profit before income tax expense Income tax expense Profit after income tax expense NOTE CONSOLIDATED 2023 $’000 2022 $’000 201,439 246,004 1,225 6,665 3 202,664 252,669 3 6 17 9 9 15 7 5,164 2,899 2,245 498 3,695 (17,998) 4,070 (6,096) 368 79 217,410 232,847 56,465 12,931 40,926 11,908 5,756 7,845 6,479 4,529 1,940 789 1,152 1,983 308 104 359 9,147 7,020 5,551 4,695 1,934 882 1,222 2,168 305 152 219 100,640 86,129 116,770 35,907 80,863 146,718 45,225 101,493 Platinum Asset Management Limited Annual Report 2023 75 NOTE CONSOLIDATED 2023 $’000 2022 $’000 Other comprehensive income Exchange rate translation impact of foreign subsidiaries and associates Other comprehensive income for the year, net of tax Total comprehensive income for the year 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 8 8 288 5,733 288 5,733 81,151 107,226 80,851 101,493 12 – 80,863 101,493 CENTS 14.10 13.99 CENTS 17.54 17.43 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 2023 76 CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2023 Assets Current assets Cash and cash equivalents Term deposits Trade and other receivables Income tax receivable Total current assets Non-current assets Equity investments in associates Financial assets at fair value through profit or loss Fixed assets Right-of-use assets Total non-current assets Total assets Liabilities Current liabilities Trade and other payables Employee benefits Lease liabilities Income tax payable Total current liabilities Non-current liabilities Provisions Employee benefits Lease liabilities Net deferred tax liabilities Total non-current liabilities Total liabilities Net assets NOTE CONSOLIDATED 2023 $’000 2022 $’000 12 6 10 9 9 14 13 15 13 13 15 7 86,183 99,876 24,977 1,422 87,449 89,876 29,771 – 212,458 207,096 71,696 62,250 1,664 2,914 138,524 350,982 8,658 4,973 2,141 658 16,430 1,408 970 1,112 1,531 5,021 21,451 92,394 43,315 2,103 4,851 142,663 349,759 6,090 4,160 2,005 3,901 16,156 1,481 846 3,249 4,473 10,049 26,205 329,531 323,554 Platinum Asset Management Limited Annual Report 2023 77 Equity Issued capital Reserves Retained profits Total equity attributable to the owners of Platinum Asset Management Limited Non-controlling interests Total equity NOTE CONSOLIDATED 2023 $’000 2022 $’000 18 19 702,022 706,595 (551,440) (560,123) 177,589 177,082 328,171 323,554 1,360 – 329,531 323,554 The above consolidated statement of financial position should be read in conjunction with the accompanying notes. Platinum Asset Management Limited Annual Report 2023 78 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2023 CONSOLIDATED ISSUED CAPITAL $’000 RESERVES $’000 RETAINED PROFITS $’000 NON- CONTROLLING INTERESTS $’000 TOTAL EQUITY $’000 Balance at 1 July 2022 706,595 (560,123) 177,082 – 323,554 Profit after income tax expense for the year Other comprehensive income Exchange rate translation impact of foreign subsidiaries and associates Total comprehensive income for the year Treasury shares acquired (net) (Note 18) Share-based payments reserve Dividends paid Transactions with non-controlling interests – – 80,851 12 80,863 – – 288 – – 288 288 80,851 12 81,151 (4,573) – – – 8,395 – (80,344) – – – (4,573) 8,395 (80,344) – – – Balance at 30 June 2023 702,022 (551,440) 177,589 1,360 329,531 – – 1,348 1,348 Platinum Asset Management Limited Annual Report 2023 79 CONSOLIDATED ISSUED CAPITAL $’000 RESERVES $’000 RETAINED PROFITS $’000 NON- CONTROLLING INTERESTS $’000 TOTAL EQUITY $’000 Balance at 1 July 2021 714,893 (575,834) 202,965 – 342,024 Profit after income tax expense for the year Other comprehensive income Exchange rate translation impact of foreign subsidiaries and associates Total comprehensive income for the year – – 101,493 – 101,493 – – 5,733 – – 5,733 5,733 101,493 – 107,226 Treasury shares acquired (net) (Note 18) (8,298) Share-based payments reserve Dividends paid – – – 9,978 – – – (127,376) Balance at 30 June 2022 706,595 (560,123) 177,082 – – – – (8,298) 9,978 (127,376) 323,554 The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes. Platinum Asset Management Limited Annual Report 2023 80 CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2023 Cash flows from operating activities Receipts from operating activities Payments for operating activities Finance costs paid Income taxes paid Income tax refund received NOTE CONSOLIDATED 2023 $’000 2022 $’000 207,509 (81,047) (104) 251,194 (69,380) (152) (44,337) (59,002) 1,336 – Net cash from operating activities 16 83,357 122,660 Cash flows from investing activities Interest received Proceeds on maturity of term deposits Purchase of term deposits Payments for purchases of fixed assets Receipts from sale of financial assets Payments of purchases of financial assets Proceeds from sale of investments in associates 6(c) Payments of purchases of equity investments 4,341 110,521 395 98,644 (120,521) (138,644) (363) 20,347 (33,394) 60,205 (219) 22,488 (27,205) 2,498 – 3,677 (38,366) in associates 6(c) (38,314) Dividends and distributions received Net cash provided by/(used in) investing activities 2,896 5,718 Cash flows from financing activities Dividends paid Payments for purchases of treasury shares Payment of lease liability principal Proceeds from units issued from non-controlling interests Net cash used in financing activities (80,344) (127,376) (9,707) (2,006) (10,952) (1,873) 1,348 – (90,709) (140,201) Net movement in cash and cash equivalents (1,634) (55,907) Cash and cash equivalents at the beginning of the year Effects of exchange rate changes on cash and cash equivalents 87,449 143,277 368 79 Cash and cash equivalents at the end of the year 86,183 87,449 The above consolidated statement of cash flows should be read in conjunction with the accompanying notes. Platinum Asset Management Limited Annual Report 2023 81 NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2023 Note 1. Corporate information Platinum Asset Management Limited (the “Company”) is a for-profit entity that is incorporated and domiciled in Australia. The Company is listed on the Australian Securities Exchange (ASX code: PTM). The principal activities of the Company and its subsidiaries (the “Group”) are described in Note 4 segment information. This financial report was authorised for issue in accordance with a resolution of the Directors on 23 August 2023 and Directors have the power to amend and reissue the financial report. Note 2. Significant accounting policies Basis of preparation 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 (“IFRS”) adopted by the International Accounting Standards Board (“IASB”). The consolidated financial statements are presented in Australian Dollars, which is also the Company’s functional currency. All values are 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 certain financial assets at fair value through profit or loss. The principal accounting policies have been included in the relevant notes to which the policy relates and have been 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 requires 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. In the process of applying the Group’s accounting policies, management has made the following judgements, which have the most significant effect on the amounts recognised in the consolidated financial statements. 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. This includes the assessment of whether the Group has significant influence or control of those entities and impacts on how their financial results are presented within these financial statements and the valuation of these investments (including impairment assessment). Platinum Asset Management Limited Annual Report 2023 82 NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2023 Note 2. Significant accounting policies – continued Critical accounting judgements, estimates and assumptions – continued Estimating fair value for share-based payment transactions requires determination of the most appropriate valuation model, which depends on the terms and conditions of the grant. This estimate also requires determination of the most appropriate inputs to the valuation model including the expected life of the right, volatility and dividend yield and making assumptions about service period completion. The Group initially measures the fair value of these share rights using a Monte Carlo simulation option pricing model. Accounting standards and interpretations not yet mandatory or early adopted during the year There are no standards that are not yet effective that are expected to have a material impact on the Group in the current or future reporting periods and on foreseeable future transactions. The Group has not early adopted any standards, interpretations or amendments that have been issued but are not yet effective. Accounting Standards adopted during the year There are no standards that are effective for the first time in the current period that have a material impact on the Group. Note 3. Revenue & other income The Group derived revenue (management and performance fees) from Australian and offshore investment vehicles and mandates as follows: Revenue breakdown by geographic region Australia Offshore: United States, Ireland and Cayman Islands Distributions and dividends is comprised of: Dividends received from equity securities held by Platinum Global Transition Fund (Quoted Managed Hedge Fund) (“PGTX”) Dividend received from Platinum Asia Investments Limited (“PAI”) Dividend received from equity securities held by the Cayman and other seed funds Distribution received from investment in the Platinum Trust funds Total distributions and dividends 2023 $’000 2022 $’000 199,199 3,465 202,664 244,951 7,718 252,669 2023 $’000 2022 $’000 79 – 1,500 2,550 1,314 1,127 6 2,899 18 3,695 Platinum Asset Management Limited Annual Report 2023 83 Note 3. Revenue & other income – continued ACCOUNTING POLICY Revenue is measured at an amount the Group expects to be entitled to receive in exchange for services provided to clients and recognised as performance obligations to the client are satisfied. Management fees are recognised over the period the service is provided. Management fees are based on a percentage of net assets/portfolio value of the fund or mandate and calculated in accordance with the relevant investment management agreement or constitution. 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 are a form of variable consideration. Performance fees are recognised as revenue only to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognised will not occur when the uncertainty associated with the variable consideration is subsequently resolved. Other income is recognised if it meets the criteria below: • 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 Group becomes entitled to the income. • Dividends: 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 financial assets held directly by the consolidated investments, and recognised as and when the fair value of these investments changes and if disposed, the proceeds less carrying amount of financial assets disposed. Note 4. Segment information The Group 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; and Investments and other: through the Group’s investment in the (a) ASX listed, PAI (b) PWP (c) unlisted Platinum Trust funds and (d) other investments and seed funds. Also included in this category are Australian dollar term deposits as well as associated interest derived from these. Platinum Asset Management Limited Annual Report 2023 84 NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2023 Note 4. Segment information – continued The segment financial results, segment assets and liabilities are disclosed below: 30 JUNE 2023 30 JUNE 2022 FUNDS MANAGEMENT $’000 INVESTMENTS AND OTHER $’000 FUNDS TOTAL MANAGEMENT $’000 $’000 INVESTMENTS AND OTHER $’000 TOTAL $’000 Revenue and other income Management and performance fees 202,664 – 202,664 252,669 – 252,669 Interest 1,960 3,204 5,164 189 309 498 Net gains/(losses) on financial assets and equity in associates Distributions and dividends Net foreign exchange (losses)/gains on overseas bank accounts Total revenue and other income/(loss) – – – 6,315 6,315 2,899 2,899 368 368 – – – (24,094) (24,094) 3,695 3,695 79 79 204,624 12,786 217,410 252,858 (20,011) 232,847 Expenses 99,890 750 100,640 85,472 657 86,129 Profit/(loss) before income tax expense/(benefit) 104,734 Income tax 12,036 116,770 167,386 (20,668) 146,718 expense/(benefit) 32,296 3,611 35,907 51,425 (6,200) 45,225 Profit/(loss) after income tax expense/(benefit) Other comprehensive 72,438 8,425 80,863 115,961 (14,468) 101,493 income/(loss) 89 199 288 (32) 5,765 5,733 Total comprehensive income/(loss) 72,527 8,624 81,151 115,929 (8,703) 107,226 Total assets 67,167 283,815 350,982 74,301 275,458 349,759 Total liabilities 20,836 615 21,451 23,569 2,636 26,205 Net assets 46,331 283,200 329,531 50,732 272,822 323,554 Platinum Asset Management Limited Annual Report 2023 85 Note 4. Segment information – 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 Executive Directors of the Company, who are responsible for the allocation of resources to operating segments and assessing their performance. Note 5. Group information The consolidated financial statements of the Group include: OWNERSHIP INTEREST NAME McRae Pty Limited Platinum Asset Pty Limited Platinum Investment Management Limited (“PIML”) Platinum Employee Share Trust^ Platinum GP Pty Limited Platinum Arrow Trust Platinum Global Transition Fund (Quoted Managed Hedge Fund)* PRINCIPAL PLACE OF BUSINESS / COUNTRY OF INCORPORATION Australia Australia Australia Australia Australia Australia Australia Platinum UK Asset Management Limited** United Kingdom Platinum Management Malta Limited** Malta Platinum Asia Ex-Japan Opportunities Master Fund Ltd Cayman Islands Platinum Asia Ex-Japan Opportunities Fund Ltd Platinum Global Opportunities Master Fund Ltd Cayman Islands Cayman Islands Platinum Global Opportunities Fund Limited Cayman Islands Platinum Europe Opportunities Master Fund Ltd*** Cayman Islands Platinum Europe Opportunities Fund Ltd*** Cayman Islands Platinum Japan Opportunities Master Fund Ltd*** Cayman Islands Platinum Japan Opportunities Fund Ltd*** Cayman Islands 2023 % 100 100 100 100 100 100 89 100 100 100 100 100 100 100 100 100 100 2022 % 100 100 100 100 100 100 – 100 100 100 100 100 100 100 100 100 100 ^ Platinum Employee Share Trust holds PTM shares on behalf of employees selected to participate in the Deferred Remuneration Plan and Platinum Partners’ LTIP (see Note 17 for further details). * Platinum Global Transition Fund (Quoted Managed Hedge Fund) was seeded on 4 July 2022 and its units were quoted on the ASX on 15 February 2023. ** Platinum UK Asset Management Limited and Platinum Management Malta Limited both act as sales and servicing centres for the Group, predominantly with the objective of generating additional fund inflows into PWP. *** Dormant entities. Platinum Asset Management Limited Annual Report 2023 86 NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2023 Note 5. Group information – continued ACCOUNTING POLICY 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 closing rate 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. Principles of consolidation The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Platinum Asset Management Limited as at 30 June 2023 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. Platinum Asset Management Limited Annual Report 2023 87 Note 6. Equity investments in associates The Group’s investments in PAI and PWP 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 INCOR- PORATION EQUITY INTEREST % FAIR VALUE $’000 CARRYING AMOUNT $’000 REASON FOR ASSESSMENT OF SIGNIFICANT INFLUENCE 2023 2022 2023 2022 2023 2022 PAI Australia 8.1 8.2 25,650 25,800 31,086 32,246 Ownership interest was 8.1% at 30 June 2023; PIML acts as investment manager (IM) in accordance with an investment management agreement; PIML provides performance and exposure reports to the PAI Board. PWP Ireland 26.1 16.8 40,610 60,148 40,610 60,148 Ownership interest was 26.1% at 30 June 2023; PIML acts as IM in accordance with an investment management agreement; the Group provides performance and exposure reports to the PWP Board and Stephen Menzies is a Director of PWP and a Director of the Company. 66,260 85,948 71,696 92,394 The fair value of PAI reflects the 30 million shares held multiplied by the PAI closing share price at 30 June 2023 of $0.855 (2022: $0.86). The fair value of PWP is approximated by the shares held in the sub-funds multiplied by their respective closing share prices at 30 June 2023. The carrying value reflects the Group’s share of each associate’s net assets, applying the equity method, including assessment of any impairment (see Note 6c for further details). Platinum Asset Management Limited Annual Report 2023 88 NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2023 Note 6. Equity investments in associates – continued b. Associates’ statement of financial position TOTAL ASSETS^ $’000 TOTAL LIABILITIES* $’000 NET ASSETS $’000 30 June 2023 Associates’ financial position PAI PWP** Total associates’ statement of financial position Group’s share of associate PAI PWP Total Group’s carrying amount of investment in associate 30 June 2022 Associates’ financial position PAI PWP Total associates’ statement of financial position Group’s share of associate PAI PWP Total Group’s carrying amount of investment in associate 384,846 157,959 1,425 2,218 31,201 40,734 115 124 397,163 377,439 1,522 2,162 32,369 60,644 124 495 383,421 155,741 539,162 31,086 40,610 71,696 395,641 375,277 770,918 32,245 60,149 92,394 ^ Associates’ total assets include non-current assets of $3,936,000 (2022: $5,709,000). * Associates’ total liabilities include non-current liabilities of $0 (2022: $0). ** The decrease in PWP’s total assets during the year ended 30 June 2023 is primarily due to redemptions by one large institutional investor. Platinum Asset Management Limited Annual Report 2023 89 2023 $’000 2022 $’000 92,394 107,622 – (21,891) 803 1,917 (1,527) 71,696 (2,498) – (15,417) 5,268 (2,581) 92,394 – – – – – – – – – – – – 24,344 (9,843) 14,501 (2,513) 11,988 2,830 (1,822) 1,008 (205) 803 (1,527) 2,969 2,245 Note 6. Equity investments in associates – continued c. Carrying amount of investment using the equity method Opening balance Sale of Platinum Asia Fund (Quoted Managed Hedge Fund) (“PAXX”) units Sale of PWP units Share of associates’ profit/(loss) (see Note 6d) Exchange rate translation impact Dividends received and dilution of unitholding (see Note 6d) Closing balance (see Note 6a) d. Associates’ net income 30 June 2023 Associates’ net income Total investment income/(loss) Total expenses Profit/(loss) before tax Income tax expense Total profit/(loss) after tax Group’s share of associate Total investment income/(loss) Total expenses Profit/(loss) before tax Income tax benefit Total profit/(loss) after tax 12,526 (5,477) 7,049 (2,513) 4,536 1,016 (444) 572 (205) 367 11,818 (4,366) 7,452 – 7,452 1,814 (1,378) 436 – 436 Dividend received and dilution of unitholding (1,527) – Transfer from foreign currency translation reserve – Share of profit/(loss) of associates (1,160) 2,969 3,405 * PAXX’s net income disclosed only for 30 June 2022 when PAXX was an associate. PAI $’000 PWP $’000 PAXX * $’000 TOTAL $’000 Platinum Asset Management Limited Annual Report 2023 90 NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2023 Note 6. Equity investments in associates – continued d. Associates’ net income – continued PAI $’000 PWP $’000 PAXX $’000 TOTAL $’000 30 June 2022 Associates’ net income Total investment income/(loss) (60,053) Total expenses Profit/(loss) before tax Income tax benefit Total profit/(loss) after tax Group’s share of associate Total investment income/(loss) Total expenses Profit/(loss) before tax Income tax benefit Total profit/(loss) after tax (7,151) (67,204) 19,750 (47,454) (4,892) (583) (5,475) 1,609 (3,866) Dividend received and dilution of unitholding (2,582) – Share of profit/(loss) of associates (6,448) (11,444) (81,014) (5,492) (86,506) – (17,241) (158,308) – (12,643) (17,241) (170,951) – 19,750 (86,506) (17,241) (151,201) (10,523) (921) (11,444) – (11,444) (107) – (107) – (107) 1 (106) (15,522) (1,504) (17,026) 1,609 (15,417) (2,581) (17,998) Platinum Asset Management Limited Annual Report 2023 91 Note 6. 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 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 applying the equity method. Critical accounting judgements, estimates and assumptions Assessment of significant influence: At 30 June 2023, the consolidated entity was assessed as having significant influence over PAI and PWP, as a result of its direct investment and investment management activities and other factors outlined in Note 6a. 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 2023, no impairment was identified for PAI or PWP. The carrying amount for PAI is equal to the fair value of PAI’s underlying net assets. Platinum Asset Management Limited Annual Report 2023 92 NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2023 Note 7. Income tax (a) Income tax expense The income tax expense attributable to profit comprises: Current tax Deferred tax 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 Share-based payments Other non-deductible expenses Prior year and other adjustments Franking credits and foreign tax credit received Income tax expense (b) Non-current liabilities – net deferred tax liabilities Deferred tax liabilities comprise temporary differences attributable to: Unrealised foreign exchange gains/(losses) on cash Share-based payments Employee provisions Unrealised gains on investments Capital expenditure on fixed assets and lease liabilities not immediately deductible Expense accruals Net deferred tax liabilities 2023 $’000 38,329 (2,422) 35,907 2022 $’000 53,218 (7,993) 45,225 116,770 35,031 146,718 44,015 (269) – 1,856 92 5 (808) 35,907 (740) 615 2,536 58 (71) (1,188) 45,225 2023 $’000 2022 $’000 (1) 3,882 (2,205) 922 (661) (406) 1,531 27 4,657 (1,946) 2,636 (584) (317) 4,473 Platinum Asset Management Limited Annual Report 2023 93 Note 7. Income tax – continued (b) Non-current liabilities - net deferred tax liabilities – continued The net deferred tax liability figure is comprised of $3,273,000 (2022: $2,847,000) of deferred tax assets and $4,804,000 (2022: $7,320,000) of deferred tax liabilities. The deferred tax assets that will be recovered or settled within 12 months are estimated to be $2,613,000 at 30 June 2023 (2022: $2,642,000). Deferred tax includes $520,000 (2022: $1,260,000) recorded in the share-based payments reserve and foreign currency translation reserve within equity. 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 and is expected to cease after 30 June 2023. 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 2023 94 NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2023 Note 8. 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 earnings per share Adjustment for performance rights Weighted average number of ordinary shares used in calculating diluted earnings per share Basic earnings per share Diluted earnings per share 2023 $’000 2022 $’000 80,851 101,493 NUMBER NUMBER 573,594,056 578,659,423 4,179,326 3,626,061 577,773,382 582,285,484 CENTS 14.10 13.99 CENTS 17.54 17.43 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. The weighted average number of ordinary shares used to calculate basic (and diluted) earnings per share does not include treasury shares. 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 potential ordinary shares that have a dilutive impact. Platinum Asset Management Limited Annual Report 2023 Note 9. Depreciable assets Fixed assets – at cost Less: Accumulated depreciation Right-of-use asset – at cost Less: Accumulated depreciation 95 2023 $’000 6,344 (4,680) 1,664 10,642 (7,728) 2,914 2022 $’000 6,109 (4,006) 2,103 10,638 (5,787) 4,851 Reconciliations Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below: Balance at 1 July 2021 Additions Disposal Depreciation expense Balance at 30 June 2022 Additions Disposal Depreciation expense Balance at 30 June 2023 FIXED ASSETS $’000 2,777 219 (11) (882) 2,103 363 (13) (789) 1,664 RIGHT-OF-USE ASSET $’000 6,767 18 – (1,934) 4,851 3 – (1,940) 2,914 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 of 2.5 to 8 years using the diminishing balance method. 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. Right-of-use assets are measured at cost comprising the amount of the measurement of the lease liability adjusted for any lease payments made before commencement date. Right-of-use assets are depreciated over the lease term on a straight-line basis. Platinum Asset Management Limited Annual Report 2023 96 NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2023 Note 10. Financial assets at fair value through profit or loss Platinum Trust fund investments Equity securities held by the seeded investments Unlisted shares* Platinum Asia Investments Limited options Convertible note* 2023 $’000 189 55,681 6,237 143 – 62,250 2022 $’000 164 38,151 1,000 – 4,000 43,315 * In March 2022, the Group invested $1 million to acquire a 0.25% shareholding in an unlisted entity and also acquired $4 million of convertible notes issued by the same unlisted entity. In March 2023, the $4 million of convertible notes converted to unlisted shares. ACCOUNTING POLICY The classification of financial assets at initial recognition depends on the financial asset’s contractual cash flow characteristics and the consolidated entity’s process for managing them. The consolidated entity’s 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 participants 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 for the Platinum Trust funds. Note 11. 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: (i) quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1); (ii) 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 (iii) inputs for the assets or liabilities that are not based on observable market data (unobservable inputs) (level 3). The investments in 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, PWP would be classified as level 2 whilst PAI would be classified as level 1. Further details of the fair value of investments in associates is provided in Note 6. Platinum Asset Management Limited Annual Report 2023 97 Note 11. Fair value measurement – continued 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 2023 and 30 June 2022. 2023 Financial assets LEVEL 1 $’000 LEVEL 2 $’000 LEVEL 3 $’000 TOTAL $’000 Equity securities held by wholly owned seed funds 55,521 Unlisted shares Platinum Trust fund investments – – 55,521 303 – 189 492 – 6,237 – 6,237 55,824 6,237 189 62,250 2022 Financial assets Equity securities held by LEVEL 1 $’000 LEVEL 2 $’000 LEVEL 3 $’000 TOTAL $’000 wholly owned seed funds 38,034 Unlisted shares & convertible note Platinum Trust fund investments – – 38,034 117 – 164 281 – 38,151 5,000 – 5,000 5,000 164 43,315 Valuation techniques used to classify assets as level 2 The direct investments in the Platinum Trust funds are valued using their respective net asset values (adjusted for the buy-sell spread) and include the impact of the 30 June distribution. Accordingly, management has assessed the fair value investments as being level 2 investments. Valuation techniques used to classify assets as level 3 Level 3 financial assets consist of: • Investment in unlisted equity investment. The investment is initially recognised at fair value, being the consideration given. After initial recognition, the shareholding continues to be measured at fair value based on the recent transaction price between independent parties. Platinum Asset Management Limited Annual Report 2023 98 NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2023 Note 11. Fair value measurement – continued Valuation techniques used to classify assets as level 3 – continued These assets are valued in accordance with a valuation policy established by PIML. Level 3 assets were 1.9% of net assets at 30 June 2023 (2022: 1.5%). Further details related to the level 3 securities are not disclosed, as the amounts are not material to the Group. Opening balance Purchases during the year Transfers to Level 1 Gains/(losses) during the year Closing balance Note 12. Trade and other receivables Management fees receivable Performance fees receivable Prepayments Distribution receivable Interest receivable Sundry debtors 2023 $’000 5,000 – – 1,237 6,237 2023 $’000 20,539 1,009 2,260 21 980 168 2022 $’000 260 5,000 (80) (180) 5,000 2022 $’000 22,231 4,510 2,637 18 156 219 24,977 29,771 Management and performance fees receivable(s) are received between three to 30 days after balance date. ACCOUNTING POLICY Trade receivables represent amounts receivable for services that have been delivered. These amounts are initially recognised at fair value. An analysis is performed at each balance date to measure any expected credit loss. Expected credit losses are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the Group expects to receive, discounted at the original effective interest rate. No material adjustment was required for expected credit losses during the year or prior period. Distributions are recognised when the consolidated entity becomes entitled to the income. Platinum Asset Management Limited Annual Report 2023 Note 13. Provisions & employee benefits Current liabilities Annual leave Long service leave Non-current liabilities Long service leave Provision for payroll tax on Deferred Remuneration Plan 2023 $’000 2,825 2,148 4,973 970 1,408 2,378 99 2022 $’000 2,495 1,665 4,160 846 1,481 2,327 ACCOUNTING POLICY Employee benefit liabilities represents accrued 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. Note 14. Trade and other payables Trade payables GST payable 2023 $’000 7,085 1,573 8,658 2022 $’000 4,254 1,836 6,090 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. Platinum Asset Management Limited Annual Report 2023 100 NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2023 Note 15. Leases The Group has entered into lease agreements for the Sydney and London premises it occupies and pays rent on a monthly basis. Set out below are the carrying amounts of lease liabilities for the Sydney premises and the movements during the period: Balance at 1 July Payments Accretion of interest Balance at 30 June Current Non-current 2023 $’000 5,254 (2,105) 104 3,253 2,141 1,112 2022 $’000 7,110 (2,008) 152 5,254 2,005 3,249 The following amounts are recognised in the statement of profit or loss in respect of leases: Rent* and other occupancy Depreciation of right of use asset Finance costs on lease liabilities 30 JUNE 2023 $’000 308 1,940 104 2,352 Future minimum rentals payable under short-term leases are as follows: Within one year* * Primarily relates to the short-term lease for the London premises. 30 JUNE 2023 $’000 78 30 JUNE 2022 $’000 305 1,934 152 2,391 30 JUNE 2022 $’000 74 Platinum Asset Management Limited Annual Report 2023 101 Note 15. Leases – continued ACCOUNTING POLICY Assets and liabilities arising from the premises lease are initially measured on a present value basis. Lease liabilities include the net present value of the future lease payments, less any lease incentives receivable. The lease payments used to determine the lease liability were discounted using an estimated incremental borrowing rate of 2.5% at the date of initial application. The consolidated entity is exposed to potential future increases in variable lease payments based on an index or rate, which are not included in the lease liability until they take effect. When adjustments to lease payments based on an index or rate take effect, the lease liability is reassessed and adjusted against the right-of- use asset. Lease payments are allocated between principal and finance cost. The finance cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The lease payments for short-term leases are charged to the consolidated statement of profit or loss and other comprehensive income. Note 16. Reconciliation of profit after income tax to net cash from operating activities Profit after income tax expense for the year Adjustments for: Share-based payments expense Foreign exchange differences on foreign bank account Distributions and dividends Depreciation of fixed assets Loss on fixed assets disposal Depreciation of right-of-use asset Interest income (Gain)/loss on investments Movement in operating assets and liabilities: Movement in trade and other receivables Movement in income tax payable Movement in trade and other payables Movement in deferred tax assets Movement in deferred tax liabilities Movement in provisions Net cash from operating activities 2023 $’000 2022 $’000 80,863 101,493 12,931 (368) (2,899) 789 12 1,940 (5,164) (6,315) 5,306 (4,065) 2,405 (1,174) (1,768) 864 11,908 (79) (3,695) 882 – 1,934 (498) 24,094 (2,159) (5,903) 878 (823) (5,910) 538 83,357 122,660 Platinum Asset Management Limited Annual Report 2023 102 NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2023 Note 17. Share-based payments Deferred Remuneration Plan In June 2016, a “Deferred Bonus Plan” (now known as a “Deferred Remuneration Plan” or “DRP”) was approved by the Nomination & Remuneration Committee of the Company. The main objective of the Deferred Remuneration Plan is to recognise the contributions made by key employees and to retain their skills within the firm. Vesting is conditional on continuous employment for a period of four years from the date of grant. 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. The number of rights granted and the accounting expense for the current and comparative year is shown below. The Platinum Employee Share Plan Trust will generally purchase an equivalent number of the Company’s shares on market and will hold these shares until the vesting date (four years from each grant) and subsequent exercise. Opening balance Granted during the year Forfeited during the year Vested and exercised Closing balance Exercisable at the end of the period NUMBER OF DEFERRED RIGHTS 2023 2022 11,156,804 6,973,139 5,222,868 5,003,258 (131,734) (958,471) (31,218) (788,375) 15,289,467 11,156,804 2,004,143 1,344,191 Platinum Asset Management Limited Annual Report 2023 103 Note 17. Share-based payments – continued Long-Term Remuneration Plan The Nomination & Remuneration Committee approved the Platinum Partners Long Term Incentive Plan (“Platinum Partners’ LTIP”) in July 2021. The objective of the Platinum Partners’ LTIP is to directly align employees’ compensation with shareholder value creation, foster sustainable growth, sound financial, operational and risk management practices, and to retain key talent. The vesting of the performance rights is conditional upon the Company meeting minimum Total Shareholder Return (“TSR”) performance hurdles as set forth in the table below (“TSR Hurdle”). Each award that is granted, is divided into four tranches, with one quarter of the award being tested against the TSR Hurdle at the end of each year following the award grant date (“Performance Period”), for four years. The start price for the TSR Hurdle calculation will be the VWAP at which PTM shares were traded on the ASX over the seven trading days prior to the first trading day of the relevant Performance Period, and the end price will be the VWAP at which PTM shares were traded on the ASX over the seven trading days up to and including the last trading day of the relevant Performance Period. The number of PTM shares that an employee will be entitled to receive upon exercise of a performance right within a tranche, will depend on the annualised TSR achieved by the Company during the relevant Performance Period (see table below). If the minimum TSR Hurdle (i.e. 7.5%) for a Performance Period is not met, then that tranche of performance rights will not meet the vesting condition and will lapse. AWARD PERFORMANCE PERIOD PROPORTION OF AWARD THAT IS TESTED AGAINST THE HURDLE Year 1 Year 2 Year 3 Year 4 25% 25% 25% 25% HURDLE 1-year TSR 2-year annualised TSR 3-year annualised TSR 4-year annualised TSR TSR HURDLE (VESTING CONDITION) TSR < 7.5% ENTITLEMENT TO RESULTING PTM SHARES PER PERFORMANCE RIGHT Nil TSR between 7.5% and 10% (target) Between 0.75 and 1 (on a pro-rata straight line basis) TSR between 10% and 15% Between 1 and 2 (on a pro-rata straight line basis) TSR at or above 15% 2 The exercise of performance rights that have vested (i.e. those performance rights that have met or exceeded the TSR Hurdle for a Performance Period) is also subject to an eight-year continuous service condition unless “good leaver” provisions apply. Platinum Asset Management Limited Annual Report 2023 104 NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2023 Note 17. Share-based payments – continued Long-Term Remuneration Plan – continued Eligible employees will have no voting or dividend rights until their performance rights have been exercised and their shares have been allocated. However, the performance rights carry an entitlement to an alternative dividend equivalent payment. This entitlement arises once a tranche of an award meets its TSR Hurdle for a Performance Period and continues until the corresponding performance rights are exercised (“Holding Period”). During the Holding Period, an eligible employee will receive an amount approximately equal to the amount of dividends that would have been paid to the employee had they held the relevant resultant number of shares from the date the TSR Hurdle was met. The second 25% of the June 2021 Platinum Partners’ LTIP grant was tested against TSR hurdles for the period ended 30 June 2023 and did not vest (2022: The first 25% of the June 2021 Platinum Partners’ LTIP grant was tested against TSR hurdles for the period ended 30 June 2022 and did not vest). The first 25% of the June 2022 Platinum Partners’ LTIP grant and the November 2022 KMP Partner Plan grant were tested against TSR hurdles for the period ended 30 June 2023 and did not vest. In the current year, the total fair value of performance rights arising from the June 2023 allocation awards was $13,565,514 (June 2022 allocation: $16,093,342), which was based on the 9,165,888 performance rights (2022: 11,920,994) granted. The fair value of performance rights was estimated at $1.48 (2022: $1.35) based on the share price at grant date of $1.69 (2022: $1.71) adjusted for the fair value of dividends forfeited and graded vesting based on the TSR Hurdle. The fair value was estimated using a Monte Carlo model with expected volatility of 35% (2022: 35%), expected dividend yield of 6.8% (2022: 9.2%) and risk-free rate of 4.0% (2022: 3.4%). In the current year, the total fair value of performance rights arising from the KMP awards approved at Platinum’s annual general meeting in November 2022 was $2,262,737 (30 June 2022 allocation: nil), which was based on the 1,432,112 rights (2022: nil) granted. The fair value of rights was estimated at $1.58 (2022: nil) based on the share price at grant date of $1.85 (2022: nil) adjusted for the fair value of dividends forfeited and graded vesting based on the TSR Hurdle. The fair value was estimated using a Monte Carlo model with expected volatility of 35% (2022: nil), expected dividend yield of 7.2% (2022: nil) and risk-free rate of 3.1% (2022: nil). Platinum Asset Management Limited Annual Report 2023 105 Note 17. Share-based payments – continued Expenses arising from Share-Based Payment transactions (DRP & Platinum Partners’ LTIP) ACCOUNTING EXPENSE Performance rights granted in 2023: Platinum Partners’ LTIP Performance rights granted in 2022: Platinum Partners’ LTIP Performance rights granted in 2021: Platinum Partners’ LTIP Deferred rights granted in 2023: DRP Deferred rights granted in 2022: DRP Deferred rights granted in 2021: DRP Deferred rights granted in 2020: DRP Deferred rights granted in 2019: DRP Deferred rights granted in 2018: DRP Total share-based payments expense 2023 $’000 1,311 1,860 2,435 1,540 1,429 1,500 1,486 1,370 – 2022 $’000 – 1,554 2,665 – 1,476 1,408 1,343 1,268 2,194 12,931 11,908 ACCOUNTING POLICY AASB 2: Share-based Payment 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 an employee becomes unconditionally entitled to the share. In measuring the share-based payment expense, 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 and performance rights granted. Adjustments are made to the share-based payments expense, if the number of deferred and performance rights 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 2023 106 NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2023 Note 18. Issued capital 2023 SHARES 2022 SHARES 2023 $’000 2022 $’000 Ordinary shares – fully paid(a) 586,678,900 586,678,900 751,355 751,355 Treasury shares(b) Total issued capital (17,949,392) (13,858,865) (49,333) (44,760) 568,729,508 572,820,035 702,022 706,595 (a) Ordinary shares: entitles shareholders to participate in dividends as determined 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 16 September 2022, the Company announced a 12-month extension to the on-market share buy-back program, in which shares will be bought-back, should the Board consider that such is in the interest of shareholders as a whole. No shares have been bought-back as at 30 June 2023. (b) Treasury shares: are shares that have been purchased by the employee share trust, pursuant to the Deferred Remuneration Plan (Refer to Note 17). 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 Shares acquired by the employee share trust 2023 SHARES 2022 SHARES 2023 $’000 2022 $’000 13,858,865 8,018,094 44,760 36,462 5,675,399 6,420,446 9,691 10,934 Shares transferred to employees (1,584,872) (579,675) (5,118) (2,636) Balance at the end of the financial year 17,949,392 13,858,865 49,333 44,760 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 purchases shares in the Company, the consideration paid is deducted from total shareholders' equity and the shares are 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. Platinum Asset Management Limited Annual Report 2023 107 2023 $’000 (313) 2022 $’000 (601) (588,144) (588,144) 37,017 28,622 (551,440) (560,123) Note 19. Reserves Foreign currency translation reserve Capital reserve Share-based payments reserve Foreign currency translation reserve Exchange differences arising on translation of foreign controlled entities and associates are recognised in other comprehensive income and accumulated as a separate reserve within equity. The movement in the current year relates primarily to translating the net assets of PWP and the Cayman Funds. 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 PIML 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 PIML. 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. Share-based payments reserve The amount in the share-based payments reserve is comprised of the amortisation of the rights granted and any associated future tax deduction. Platinum Asset Management Limited Annual Report 2023 108 NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2023 Note 19. Reserves – continued 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 2021 18,644 (6,334) (588,144) (575,834) Exchange rate translation impact Movement in share-based payments reserve Balance at 30 June 2022 – 5,733 9,978 28,622 – – – 5,733 9,978 (601) (588,144) (560,123) Exchange rate translation impact – Movement in share-based payments reserve Balance at 30 June 2023 8,395 37,017 288 – – – 288 8,395 (313) (588,144) (551,440) Note 20. Dividend paid and proposed Dividends paid Dividends paid during the financial year were as follows: Final dividend paid for the 2022 financial year (7 cents per share) Interim dividend paid for the 2023 financial year (7 cents per share) Final dividend paid for the 2021 financial year (12 cents per share) Interim dividend paid for the 2022 financial year (10 cents per share) 2023 $’000 2022 $’000 40,145 40,199 – – 80,344 – – 69,454 57,922 127,376 Platinum Asset Management Limited Annual Report 2023 109 Note 20. Dividend made and proposed – continued Dividends not recognised at year-end Since 30 June 2023, the Directors determined to pay a 2023 final fully franked dividend of 7 cents per share, payable out of profits for the 12 months to 30 June 2023. The dividend has not been provided for at 30 June 2023, because the dividend was determined 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% 2023 $’000 2022 $’000 74,469 66,545 (1,422) 3,517 73,047 70,062 ACCOUNTING POLICY A provision is made for the amount of any dividend determined by the Directors before or at the end of the financial year but not distributed at balance date. Note 21. Financial risk management Financial risk management objectives The Group’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: • PAI and PWP; and • Equity and other securities held by the seeded investments, being the offshore Cayman Island domiciled funds Platinum Global Opportunities Fund Ltd, Platinum Asia Ex-Japan Opportunities Fund Ltd (the “Cayman Funds”), Platinum Global Transition Fund (Quoted Managed Hedge Fund) (“PGTX”), other seed funds and investments. 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, Platinum International Fund (Quoted Managed Hedge Fund) (“PIXX”), PAXX and PGTX; • its ASX-listed investment companies, Platinum Capital Limited (“PMC”) and PAI; and • PWP. Platinum Asset Management Limited Annual Report 2023 110 NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2023 Note 21. Financial risk management – continued Financial risk management objectives – continued The Group does not derive any management fees or performance fees directly from PIXX and PAXX. PIXX and PAXX invest in Platinum International Fund and Platinum Asia Fund respectively. Management and performance fees are borne at the Platinum International Fund/Platinum Asia Fund level and are paid directly by these funds to the Group. This note mainly discusses the direct exposure to risk of the Group. The Group'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 Group 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 redemptions from Platinum’s investment products and the termination of investment mandate arrangements; (ii) market volatility: Platinum invests in global markets. It follows that a decline in overseas stock markets, adverse exchange rates and/or interest rate movements will all impact on FUM; (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 fund outflows occur despite positive investment performance. A decline in investment performance will also directly impact on performance fees earned by the Group. Historically, the amount of performance fees earned by the Group has fluctuated significantly from year to year and has been a material source of fee revenue. For those funds or investment mandates that pay a performance fee, the fee is calculated either semi-annually or annually and is based on an absolute or relative outperformance. Platinum Asset Management Limited Annual Report 2023 111 Note 21. Financial risk management – continued Market risk – continued Performance fees may be earned by the Group, if the investment return of a Platinum Trust fund, PMC, PAI, PWP, PGTX or any other applicable investment mandate exceeds their hurdle rates. Should the actual performance of one or more of these entities be higher than the applicable hurdle rate, a performance fee would be receivable. As at 30 June 2023, performance fees of $1,009,000 (2022: $4,510,000) were receivable. If global equity markets fell 10% over the course of the year and consequently the Group'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 the performance of investment funds or mandates over the course of the year that resulted in negative absolute performance 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. Platinum may seek to manage market risk through the use of 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 below mainly discusses the direct impact of foreign currency risk, price risk and interest rate risk on the Group's financial instruments held at 30 June 2023. Foreign currency risk The Group is exposed to foreign currency risk, because it holds foreign currency cash, as well as securities which are denominated in foreign currencies, either directly or through its direct investments in PWP, PAI, Cayman Funds, PGTX and other seed funds and receivables/ payables dominated in USD. The following tables demonstrate the sensitivity to a reasonably possible change in USD and HKD exchange rates, with all other variables held constant. The impact on the Group’s profit before tax is due to changes in the fair value of financial assets and liabilities. The Group’s exposure to foreign currency changes for all other currencies is not material. Platinum Asset Management Limited Annual Report 2023 112 NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2023 Note 21. Financial risk management – continued Foreign currency risk – continued FINANCIAL ASSETS AND LIABILITIES IMPACT ON NET PROFIT BEFORE TAX OF 10% INCREASE/(DECREASE) IN AUSTRALIAN DOLLAR HKD $’000 INCREASE/(DECREASE) USD $’000 INCREASE/(DECREASE) 30 JUNE 2023 30 JUNE 2022 30 JUNE 2023 30 JUNE 2022 Cash and cash equivalents (733)/895 (732)/894 (3,692)/4,512 (5,468)/6,683 – – (2,826)/3,454 (2,931)/3,583 – – – – Investments in: PWP PAI Equity securities held by the seeded investments (5,062)/6,187 (4,197)/5,130 Platinum Trust funds Receivables Payables (17)/21 (36)/43 58/(71) (15)/18 (80)/98 7/(9) – – – – – – – – 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$319,386 lower/A$390,360 higher (2022: A$721,972 lower/A$882,436 higher). Price risk The Group is exposed to indirect price risk through its equity-accounted investments and investments in financial assets at fair value through profit or loss. The impact of price risk is summarised in the table below: ENTITY PAI PWP Equity securities held by seeded investments Platinum Trust funds PAI option Unlisted shares and convertible notes IMPACT ON NET PROFIT BEFORE TAX OF 10% INCREASE/(DECREASE) IN 30 JUNE VALUES 2023 $’000 INCREASE/(DECREASE) 2022 $’000 INCREASE/(DECREASE) 3,109/(3,109) 4,061/(4,061) 5,568/(5,568) 19/(19) 14/(14) 624/(624) 3,225/(3,225) 6,015/(6,015) 4,616/(4,616) 16/(16) – 500/(500) Platinum Asset Management Limited Annual Report 2023 113 Note 21. Financial risk management – continued Price risk – continued Interest rate risk At 30 June 2023, cash and term deposits are the only significant assets with potential exposure to interest rate risk held by the Group. A movement of +/-1% in Australian interest rates occurring throughout the year ended 30 June 2023 would cause the Group’s net profit before tax to be $1,860,596 higher/lower (2022: $1,773,253 higher/lower), based on the impact on its interest-bearing cash balances. An interest rate movement at 30 June 2023 will not impact the profit earned from term deposits, as term deposit interest rates are determined on execution. Credit risk Credit risk relates to the risk of a counterparty defaulting on a financial obligation resulting in a loss to the Group (typically “non-equity” financial instruments). Credit risk also arises from the financial assets of the Group that include: cash and term deposits and trade and other receivables. 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 for which PIML is the investment manager, will result in reduced investment performance. There is no direct loss for the Group other than through the ensuing reduction in FUM, as noted above in the section on “market risk”. The credit quality of cash and term deposits held by each entity in the Group, by counterparty, can be assessed by reference to the counterparty’s external credit ratings. All term deposits are held with Australian banks that have a credit rating of AA- (2022: AA-) or higher. At 30 June 2023 and 30 June 2022, the relevant credit ratings were as follows: RATINGS AA- A+ A 2023 $’000 2022 $’000 180,775 168,807 4,575 709 7,891 625 186,059 177,323 Platinum Asset Management Limited Annual Report 2023 114 NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2023 Note 21. Financial risk management – continued Liquidity risk Liquidity risk is the risk that the Group will encounter difficulty in meeting obligations associated with its liabilities. The Group 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. Remaining contractual maturities The following table details the Group's remaining contractual maturity for its trade and other payable and lease 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. 2023 Trade and other payables Lease liabilities Total 2022 Trade and other payables Lease liabilities Total AT CALL $’000 – – – AT CALL $’000 – – – WITHIN 30 DAYS $’000 8,658 185 8,843 WITHIN 30 DAYS $’000 6,090 173 6,263 BETWEEN 1 AND 3 MONTHS $’000 OVER 3 MONTHS $’000 – 370 370 – 2,814 2,814 BETWEEN 1 AND 3 MONTHS $’000 OVER 3 MONTHS $’000 – 345 345 – 4,900 4,900 TOTAL $’000 8,658 3,369 12,027 TOTAL $’000 6,090 5,418 11,508 Financial liabilities at fair value through profit or loss The Group had no financial liabilities at fair value through profit or loss at 30 June 2023 or 30 June 2022. The Group does not have a significant direct exposure to liquidity risk. Fair value of financial instruments Unless otherwise stated, the carrying amounts of financial instruments reasonably approximate their fair value. Platinum Asset Management Limited Annual Report 2023 115 Note 21. 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) External requirements PIML is required to hold an Australian Financial Services Licence (“AFSL”) issued by the Australian Securities and Investments Commission (“ASIC”). The AFSL authorises PIML to deal in certain financial products, provide general financial product advice in respect of certain financial products and to operate registered managed investment schemes. PIML has complied with all financial conditions of its AFSL during the financial year. Note 22. Related party transactions Subsidiaries and associates Interests in subsidiaries and associates are set out in Note 5 and Note 6. Key management personnel Disclosures relating to key management personnel are set out in Note 23 and the Remuneration Report in the Directors' Report. Tax consolidation and dividend transactions Platinum Asset Management Limited is the head entity of the Australian consolidated tax group and is also 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 and Note 20. Tax payable by the Australian consolidated group and dividends to shareholders are paid using income sourced from the main operating subsidiary, PIML. Fees received PIML provides investment management services to: (i) the Platinum Trust funds and Platinum Global Fund; (ii) the Irish domiciled, PWP; (iii) two ASX-listed investment companies, PMC and PAI; (iv) three ASX quoted managed funds, PIXX, PAXX and PGTX; and (v) the Cayman Funds. Platinum Asset Management Limited Annual Report 2023 116 NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2023 Note 22. Related party transactions – continued Fees received – continued PIML 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, PWP, PMC, PAI and PGTX. The Group 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 Group. The total related party fees and receivables were as follows: Recognised in the statement of profit or loss and other comprehensive income 2023 $ 2022 $ 163,636,309 202,632,121 Receivable in the statement of financial position 15,202,485 18,440,903 PIML recognised management fee and performance fee of $4,076,916 (2022: $5,623,006) from PAI. PIML recognised management fee and performance fee of $1,433,012 (2022: $2,844,024) from PWP. Investment transactions During the year, the subsidiary PIML received a final 2022 fully franked dividend of $750,000 (2022: $1,800,000) and an interim 2023 fully franked dividend of $750,000 (2022: $750,000) from its investment in PAI. On 13 April 2023, PIML was allotted PAI options on a one for four basis. PIML was allotted 7,500,000 PAI options for 30 million ordinary shares that it held in the Company, and held 7,500,000 PAI options at 30 June 2023. PIML also received the 30 June 2023 distribution of $5,703 from the Platinum Trust funds (2022: $18,296). Other related-party transactions Mr Stephen Menzies is PIML’s nominated representative on the Board of PWP. PIML reimburses Stephen Menzies for any incidental travel and accommodation associated with attendance at PWP Board meetings in Ireland. During the year, the amount reimbursed was $12,819 (2022: $7,996). PIML incurred a fee of $2,925,017 (2022: $2,592,825) for general marketing and distribution services provided by Platinum UK Asset Management Limited. PIML incurred a fee of $182,863 (2022: $132,836) for general marketing and distribution services provided by Platinum Management Malta Limited. In the current year, the cash amount transferred to the Platinum Employee Share Trust was $8,900,000 (2022: $8,460,000). 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 2023 117 Note 22. Related party transactions – continued 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. Note 23. Key management personnel The aggregate remuneration that the Group provided to Executive and Non-Executive Directors was as follows: Cash salary, Directors’ fees and short-term incentive cash awards Accounting expense related to the KMP allocation under the Deferred Remuneration Plan and Platinum Partners’ LTIP^ Superannuation Increase in the Group's annual and long service leave provision 2023 $’000 2022 $’000 3,241 3,249 1,149 178 29 4,597 803 177 75 4,304 ^ Andrew Clifford, Elizabeth Norman and Andrew Stannard are the only members of KMP who have received an allocation of rights under the Deferred Remuneration Plan and Platinum Partners’ LTIP. The expense attributable to KMP are based on the allocation of performance rights in the current and prior years is as follows: 2023 GRANT 2022 GRANT (UNVESTED) (UNVESTED) 2021 GRANT (UNVESTED) 2020 GRANT (UNVESTED) 2019 GRANT (VESTED) TOTAL Number of rights allocated during each year under the Deferred Remuneration Plan Number of rights allocated during the year under the Platinum Partners’ LTIP Accounting expense attributed to KMP 294,990 295,000 153,462 160,859 108,696 1,013,007 1,432,112 – – – – 1,432,112 $666,143 $87,000 $144,000 $132,000 $119,999 $1,149,142 Platinum Asset Management Limited Annual Report 2023 118 NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2023 Note 23. Key management personnel – continued 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 NET CHANGE OTHER CLOSING CONTINGENT RIGHTS 1 BALANCE VESTED RIGHTS 1 Guy Strapp 72,000 28,000 Stephen Menzies 40,000 Anne Loveridge Brigitte Smith Philip Moffitt 50,000 84,000 50,000 Andrew Clifford1 32,831,449 Elizabeth Norman1 766,748 Andrew Stannard1 – – – – – – – – – – – – – – – – – – – – – 100,000 40,000 50,000 84,000 50,000 – – – – – – – – – – – 32,831,449 671,303 165,563 – – 766,748 719,339 247,314 – 587,756 78,996 Kerr Neilson (until 16/11/2022)2 126,037,420 – – (126,037,420) – – – 1 Represents contingent rights to receive shares and vested, but unexercised, rights to receive shares pursuant to awards made under the Company’s Deferred Remuneration Plan or Platinum Partners’ LTIP as at 30 June 2023. 2 Net change other represents the number of ordinary shares held by Kerr Neilson on the date he retired as a director and therefore ceased to be a KMP. Platinum Asset Management Limited Annual Report 2023 119 Note 24. Remuneration of auditors During the financial year, the following fees were paid or payable for services provided by the auditor of the Company, Ernst & Young Australia (“EY”), and its overseas network firms as indicated below: FIRM 2023 $ 2022 $ Audit services Audit and review of the financial statements and AFSL audit Audit of financial statements EY Overseas EY Total audit, compliance and assurance services Taxation services Compliance services Compliance services Total taxation services Total fees paid and payable to the auditors and their related practices EY Overseas EY 177,103 10,312 187,415 35,200 1,706 36,906 176,962 10,554 187,516 29,500 1,941 31,441 224,321 218,957 Note 25. 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 PARENT 2023 $’000 83,000 83,000 2022 $’000 129,069 129,069 Platinum Asset Management Limited Annual Report 2023 120 NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2023 Note 25. Parent entity information – continued Statement of financial position Total current assets Total assets Total current liabilities Total liabilities Net assets Equity Issued capital Reserves Retained profits Total equity 2023 $’000 76,023 752,360 – – PARENT 2022 $’000 85,895 754,524 3,315 3,315 752,360 751,209 702,023 706,577 48,132 2,205 43,291 1,341 752,360 751,209 ACCOUNTING POLICY The accounting policies of the parent entity are consistent with those of the consolidated entity except for the following: • Investments in subsidiaries are accounted for at cost in the parent entity; and • Dividends received from subsidiaries are recognised as other income by the parent entity. Note 26. Events after the reporting period On 23 August 2023 Andrew Clifford advised the Board of his intention to step aside as Managing Director/Chief Executive Officer (CEO) of Platinum. The Board will shortly commence a search process for a new CEO. Whilst this search is underway, Andrew will continue to hold the CEO role on an interim basis until his successor is appointed. Andrew Clifford will continue in the positions of Co-Chief Investment Officer and co-portfolio manager of the Global and Asia strategies. Apart from the above and the dividend determined on 23 August 2023, no other matter or circumstance has arisen since 30 June 2023 that has significantly affected, or may significantly affect the Group's operations, the results of those operations, or the Group's state of affairs in future financial years. Platinum Asset Management Limited Annual Report 2023 121 DIRECTORS’ DECLARATION 30 JUNE 2023 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 2023 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 Guy Strapp Chair 23 August 2023 Sydney Andrew Clifford Managing Director Platinum Asset Management Limited Annual Report 2023 122 INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF PLATINUM ASSET MANAGEMENT LIMITED Ernst & Young 200 George Street Sydney NSW 2000 Australia GPO Box 2646 Sydney NSW 2001 Tel: +61 2 9248 5555 Fax: +61 2 9248 5959 ey.com/au REPORT ON THE AUDIT OF THE FINANCIAL REPORT Opinion We have audited the financial report of Platinum Asset Management Limited (the Company) and its subsidiaries (collectively the Group), which comprises the consolidated statement of financial position as at 30 June 2023, the consolidated statement of profit or loss and other comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, notes to the financial statements, including a summary of significant accounting policies, and the directors’ declaration. In our opinion, the accompanying financial report of 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 2023 and of its consolidated financial performance for the year ended on that date; and (b) Complying with Australian Accounting Standards and the Corporations Regulations 2001. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation Platinum Asset Management Limited Annual Report 2023 INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF PLATINUM ASSET MANAGEMENT LIMITED 123 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 are independent of the Company in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key audit matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial report of the current year. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, but we do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context. We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the financial report section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the financial report. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying financial report. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation Platinum Asset Management Limited Annual Report 2023 124 INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF PLATINUM ASSET MANAGEMENT LIMITED Revenue recognition of management and performance fees WHY SIGNIFICANT HOW OUR AUDIT ADDRESSED THE KEY AUDIT MATTER The Group’s key revenue streams are management and performance fees earned by Platinum Investment Management Limited (PIML), a consolidated subsidiary, through the Investment Management Agreements in place with Platinum Funds and other investment vehicles. For the year ended 30 June 2023, management fees and performance fees were $202,664,000 as disclosed in Note 3 to the financial report. Due to the quantum of these revenue streams and the impact that the variability of market-based returns can have on the recognition and earning of performance fees, this was considered a key audit matter. Our procedures included: – Recalculating management fees, on a sample basis, in accordance with contractual arrangements. – Assessing the performance fees recognised for the period to 30 June 2023 from investments vehicles on a sample basis, and assessing whether they met the relevant revenue recognition criteria per the requirements of AASB 15 Revenue from Contracts with Customers. This included assessing the inputs into the calculation model and examining the methodology applied in accordance with contractual arrangements. – Assessing the adequacy of the disclosures included in Note 3 to the financial report in accordance with Australian Accounting Standards. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation Platinum Asset Management Limited Annual Report 2023 INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF PLATINUM ASSET MANAGEMENT LIMITED 125 Accounting for investments in associates WHY SIGNIFICANT HOW OUR AUDIT ADDRESSED THE KEY AUDIT MATTER The Group’s investments in associates where significant influence was deemed to be present as at 30 June 2023 totalled $71,696,000 as disclosed in Note 6 to the financial report. The determination of the appropriate accounting treatment of investments held by the Group depends upon its ability to exercise control or significant influence on the investees. This matter was considered a key audit matter as judgement is required in determining the appropriate accounting, particularly due to the Group’s practice of seeding investment products, resulting in ownership percentages changing over time. Our procedures included: – Evaluating the Group’s assessment of control or significant influence for each investment vehicle, and relevant accounting treatment and presentation thereon; – Performing independent assessment of control or significant influence over the associate investments with consideration to: • Equity ownership • Representation on the Board of the directors of the investee • Participation and ability for the Group to influence decision making of the investee • Material transactions between the Group and the investee – Obtaining external confirmation of the Group’s ownership interest in the investees, recalculated the carrying amount by agreeing inputs such as net asset value and share prices of the investees. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation Platinum Asset Management Limited Annual Report 2023 126 INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF PLATINUM ASSET MANAGEMENT LIMITED Accounting for investments in associates – continued WHY SIGNIFICANT HOW OUR AUDIT ADDRESSED THE KEY AUDIT MATTER – Performing an impairment assessment on investment in associates. This included an assessment of objective evidence of impairment, in accordance with the Australian Accounting Standards, for associates where the carrying amount exceeded the fair value. – Assessing the adequacy of the disclosures included in Note 6 to the financial report in accordance with Australian Accounting Standards. Information other than the financial report and auditor’s report thereon The directors are responsible for the other information. The other information comprises the information included in the Company’s 2023 annual report, but does not include the financial report and our auditor’s report thereon. Our opinion on the financial report does not cover the other information and accordingly we do not express any form of assurance conclusion thereon, with the exception of the Remuneration Report and our related assurance opinion. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, 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. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation Platinum Asset Management Limited Annual Report 2023 INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF PLATINUM ASSET MANAGEMENT LIMITED 127 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 Group’s ability to continue as a going concern, disclosing, as applicable, matters relating 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 this financial report. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation Platinum Asset Management Limited Annual Report 2023 128 INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF PLATINUM ASSET MANAGEMENT LIMITED As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgment and maintain professional scepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors. • Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern. • Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether the financial report represents the underlying transactions and events in a manner that achieves fair presentation. • Obtain sufficient appropriate audit evidence regarding the financial information of the business activities within the entity to express an opinion on the financial report. We are responsible for the direction, supervision and performance of the audit. We remain solely responsible for our audit opinion. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation Platinum Asset Management Limited Annual Report 2023 INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF PLATINUM ASSET MANAGEMENT LIMITED 129 We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied. From the matters communicated to the directors, we determine those matters that were of most significance in the audit of the financial report of the current year and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation Platinum Asset Management Limited Annual Report 2023 130 INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF PLATINUM ASSET MANAGEMENT LIMITED REPORT ON THE AUDIT OF THE REMUNERATION REPORT Opinion on the Remuneration Report We have audited the Remuneration Report included in pages 34 to 72 of the directors’ report for the year ended 30 June 2023. In our opinion, the Remuneration Report of Platinum Asset Management Limited for the year ended 30 June 2023, 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. Ernst & Young Rita Da Silva Partner 23 August 2023 Sydney Platinum Asset Management Limited Annual Report 2023 Designed and produced by3C Creative Agency 3c.com.au