Perpetual Limited (PPT) Earnings Call Transcript & Summary

Good morning. I'm Tony D'Aloisio, the Chairman of Perpetual. It's 10 a.m. And as I've been advised that a quorum is present, I declare the 2020 Annual General Meeting open. And I welcome you to Perpetual's first virtual AGM. In the spirit of reconciliation, Perpetual acknowledges the traditional custodians of country throughout Australia and their connections to land, sea and community. We pay our respect to their elders, past and present, and extend the respect to all aboriginal and Torres Strait Islander peoples today. As you know, due to the government restrictions and the potential health risks arising from COVID-19 pandemic, today's meeting is a virtual meeting in the sense that shareholders can participate in the meeting in real-time using the Link Market Services online platform. Now thank you for being online today, and we do hope that you found the virtual Annual General Meeting online guide useful. We also added a welcome and summary letter to our website on the AGM, which we published. We particularly added that additional summary to assist shareholders as this is the first virtual AGM that we've held, and we do hope you did not have difficulties in logging on. So thank you. On behalf of the Board, of course, we are disappointed that we're unable to hold our usual inform or get together over refreshments after the AGM. We do look forward to those. And hopefully, next year, we'll revert to physical meetings. Nevertheless, we thank you for your support over the year and for joining us today. Now let me make some introductions. In the room, our Chief Executive Officer and Managing Director, Rob Adams; our Company Secretary, Sylvie Dimarco; and our CFO, Chris Green. Now also joining the meeting virtually, our nonexecutive directors, you'll see there on the slide, Craig Ueland; Ian Hammond; and Greg Cooper; Fiona Trafford-Walker, who also appears here, resides in Melbourne, and she's on audio. But as Fiona is standing for reelection, she will address the meeting by video a little later. And consistent with social distancing, members of our Executive Committee, who you see on the next slide, are joining the meeting via audio today. These executives are Chief Risk Officer, Sam Mosse; Chief Operating Officer, Amanda Gazal; Group Executive Perpetual Private, Mark Smith; Group Executive, Perpetual Corporate Trust, Richard McCarthy; Group Executive, International Asset Management, David Lane; and Executive General Manager, People and Culture, Paul Chasemore. Finally, and not least, I would like to welcome Brendan Twining, who is the company's auditor from KPMG, who is also joining us today via audio. Brendan, of course, will be available to answer questions that shareholders may have in relation to the financial statements, auditor's independence. And we will deal with those under item 1 of the agenda. Now talking about the agenda. The items of business for today are to consider, clearly, the presentation of financial year '20 financial statements and reports. Then there are 4 voting resolutions: the adoption of the remuneration report; the reappointment of myself as a nonexecutive director; the reappointment of Fiona Trafford-Walker as a non-executive director; and the approval of the financial year '20 variable incentive equity grant for the Managing Director and CEO. A few more on formalities. The full information about today's agenda items for consideration by the meeting are, of course, set out in the notice of meeting and explanatory notes. I will, as is usual, take the notice of meeting as read. A quick word on proxies before we get underway. As described in the notice of meeting, proxy appointments were able to be lodged 48 hours before the meeting. Just to outline that I, as Chairman of the meeting, where I've been appointed as a shareholder's proxy or become their proxy by default, I will vote directed proxies as directed, of course. And I will vote any available undirected or open proxies in favor of each resolution. If you are participating as a shareholder and hold proxies, then of course, you would have received an e-mail setting out instructions for you on how to vote those proxies using the voting mechanism on the platform. Now, all important, voting and asking questions. First, voting. I will now formally open the poll on all resolutions. You may cast your vote at any time during the meeting now that the poll is open. You can also change your vote at any time until the poll closes. The poll will remain open until 5 minutes after the end of today's meeting, and a timer will be displayed on the portal. If you need to leave, please make sure that you have -- before the meeting ends -- if you need to leave before the meeting ends, please make sure that you've voted. Voting on each resolution will be conducted by way of a poll. Karen Hopkins from KPMG will act as scrutineer and Raki Amaranath of Link Market Services and returning officer -- the returning officer for the purpose of the polls. Now just a little bit more on voting and to explain, shareholders will be able to cast their vote using the electronic voting card. To register the vote, click, as you see on the screen, the Get a Voting Card button on the web page. The adjacent slide shows that button that you need to access. You'll need your SRN or HIN number and your post code. You will then see the slide formalities for casting your votes, how you can vote on each resolution. And of course, you can vote for, against or abstain. Important to outline that subject to any applicable restrictions, the Board recommends that shareholders vote in favor of each resolution. And voting restrictions are, of course, set out in the notice of meeting. Now if you -- we do recognize this is virtual and you may experience difficulties -- we don't think you will, but should you do that with the online platform, there is a help line number displayed at the top of the web page, which is 1-800-990-363 within Australia, which you can call and will help you. If you have not registered to vote, please do so now. And as I said, you can vote any time. So that's voting. Turning to asking questions and comment -- and comments. These are all important, and we do welcome comments, and we welcome questions. Now there's an opportunity to ask questions or make a comment during the meeting. And this function is now also open. You do not need to wait until we get to a particular item of business to -- and you can start putting in your questions and comments from now. The adjacent box on the web page asks you to follow that and follow instructions on posting a question and comment. Let me be clear, we will answer all questions both submitted during the meeting and prior to the meeting. We will do so under each relevant item of business, and we will do so in this way. The Company Secretary will read comments and questions to the meeting. They will be read unedited. We will not be summarizing the question, we will read them in full and unedited. I will then either respond or designate a member of the Board or a member of the Executive Team as appropriate to respond to the questions. So that's the process. And as we get to each agenda item, I'll go over the instructions on voting and posting questions and comments. Now in a moment, I'm going to ask Rob Adams to present his address. But before I do that, I would like to make some comments as your Chairman on behalf of the Board. And I'll do so under the 5 headings in the slide that you now see. Looking at the overview of financial year '20, shareholders would have seen that financial year '20 has been a disappointing year in terms of our financial results. Our NPAT, net profit after tax, at $82 million was down 29% on financial year '19. Our NPAT and our dividend in the second half was $0.50 and $1.55 fully franked for the year. This was 38% lower than financial year '19. When you look at that in a bit more detail, in the first half financial year '20, we had an NPAT of $51.6 million, but the second half delivered an NPAT of $30.4 million. Now you'll appreciate that much of our revenues are linked to the performance of investment markets. The negative impact of COVID-19 during the year on those markets, in addition to net funds outflow from Perpetual Investments, directly impacted our revenues and results for financial year '20. Our revenues in Perpetual Private were also impacted by the economic slowdown in the second half as well as the lower interest rate environment. Now clearly, we took steps to mitigate and offset these impacts and from key -- with key initiatives from management, including the implementation of an operating model review, which are expected to deliver cost savings in financial year '21 at the top end of the originally estimated $18 million to $23 million. In addition, this year -- in the year, we saw strong growth in Perpetual Corporate Trust as well as continued positive net flows into Perpetual Private. Although our financial year results are down on financial year '19, driven predominantly by the second half performance, as I said, we -- your Board, and we feel -- remains optimistic, and we feel that shareholders should remain optimistic about our company. We have a robust balance sheet, strong brand, a well diversified business, all of which continue to be key strengths for Perpetual. And let me just elaborate a bit on that by moving to the key strategic initiatives. Importantly, a number of key strategic initiatives, which were delivered in financial year '20, has set up the company well for future growth and backs the optimism that we feel we should have and shareholders should have in this company. The strategic direction of widening our geographic footprint this year culminated in the important acquisition of Trillium Asset Management in Boston in the U.S. Trillium is a pioneer in environmental, social and governance, ESG, investing, and this acquisition positions us well to take a lead in this fast-growing segment of the market. In late July, we also announced the 75% intended acquisition that's some $465 million of Barrow, Hanley, Mewhinney & Strauss, based in Dallas in the U.S. and coupled with a capital raising. That acquisition is expected to be completed by the end of November this year. Now as we advised the market, and it's an important point, this is an EPS-accretive acquisition on an underlying basis. And in future years, a significant share of our profits is expected to be coming from these overseas operations. Now as I said, in conjunction with announcing that acquisition, we also announced an equity raise, and we received very strong support in both the institutional placement and the share purchase plan, the SPP. We opted for a placement in SPP as the vehicle for the capital raise, which in the current market was seen by the Board and its advisers as providing the best results on price and on fairness for all our shareholders. The institutional placement raised $225 million. And due to the strong support from eligible shareholders in the SPP, we increased the size by $10 million above the original $40 million, raising a total of $50 million. And when combined with the institutional placement, all up, we raised $275 million in total. The decision to increase the size of the SPP was to ensure that non institutional retail investors were provided with a fair opportunity to participate in the equity raise. And just to expand a little on that, 4,159 valid applications were received from eligible retail investors. 58% of those receive their full allocation as they requested. The remaining 42% of applications were scaled back on a pro-rated basis. But those shareholders were no worse off in number of shares, and they would have been had we gone, for example, an entitlement renounceable offer. Now the balance of the funds needed for the acquisition of Barrow Hanley are being sourced via a U.S.-dominated debt facility of AUD 284 million. And as I indicated, we have a strong balance sheet to support this. Now as part of the announcement, we also indicated the gearing levels starting at 1.1x EBITDA with a pathway to reduce below 1 within 12 months and then to 0 within 5 years or, put it another way, to be able to fully pay down the transaction debt in that period. As part of the acquisition of both Trillium and Barrow Hanley, the Board is very conscious of the diversification geographically for the business, and we are -- have and are continuing to put in place specific oversight arrangement, both at management and Board level for our overseas operations. Just a brief word on Executive and Board remuneration, these will be covered by Nancy as Chairman of the -- of our committee when we look at the remuneration report. But clearly, we balanced up the financial performance being lower than we expected against the other things that management did, and we feel that we appropriately reached a variable incentive arrangement for them that was satisfactory, but it was awarded only in hurdled equity so that the fortunes on that follow the fortunes of shareholders over the next few years. As I said, Nancy will go further into that and into Board remuneration a little later. A brief word on dividend policy. Now as part of the announcement of the planned acquisition of Barrow Hanley, we foreshadowed a change in dividend policy from net profit after tax to underlying profit after tax or UPAT. Because of our international acquisitions, future dividends may not be fully franked. This change to UPAT will mean that our underlying profit will better reflect the operating cash flows of Perpetual post the acquisition of Barrow Hanley, and we're more broadly aligned with strategic imperatives of the group. In terms of what this means for dividend policy, we will be moving away from the 80% to 100% of NPAT to pay out a range, which we will announce, based on UPAT. As with the prior policy on dividends, clearly, the Board's aim will be to strike a balance between maximizing returns to our shareholders, ensuring we have sufficient cash flows to fund our operation and pay down debt and also carrying sufficient cash reserves. Now importantly, what does all that mean? We do not expect that this change will reduce future dividend, but that the amended policy provides the board greater flexibility to look through the noncash charges such as amortization of acquired intangibles as they impact NPAT. As we noted at the time of the announcement, we expect that the Barrow Hanley acquisition will deliver double-digit EPS and DPS accretion on an underlying basis and, thereby, improve all shareholder returns. Finally, a brief word on composition of the Board, following the retirements of Phil Bullock and Sylvia Falzon at last year's AGM, Greg Cooper and Fiona Trafford-Walker were appointed to the Board. They provide the Board with international investment experience and a deep understanding of institutional and global funds management. Greg's appointment was confirmed at last year's AGM. Fiona's appointment will be put forward for election at this meeting as she joined the Board in December 2019. As part of its ongoing review, the Board will, as part of the overseas acquisitions, be looking at adding an additional probably overseas-based director and possibly in time to also add technology skills to the Board. And in closing, the Board would particularly like to thank the CEO, Rob Adams, and his leadership team for the disciplined manner in which they have continued to execute Perpetual's strategy despite the challenges for this year. Given the year that we've had, it's also important for us as a Board to recognize the hard work and the dedication of all our people at Perpetual. We are particularly proud of the way all teams responded to the health and the safety issues as a result of COVID-19 and the support they've continued to provide to our clients, communities and each other throughout this period. On behalf of the Board, we thank all our people for their extraordinary dedication in such difficult times. And finally, on behalf of the Board and the Executive Committee and everyone at Perpetual, we'd like to thank you, our shareholders, for continuing to have the confidence in us and in our business and in our strategy, and we look forward to your continued support. Thank you. And I'll now hand over to Rob, who will present his report. Rob?

Well, good morning, everyone. Thank you for joining us here this morning. Thank you, Chairman. It's a privilege to be addressing you today at our AGM for the 2020 financial year, which is, of course, our first virtual AGM. As I reflect on the past 12 months, FY '20 has certainly been a mixed year for perpetual with disappointing financial results for the period. Whilst conversely, it has also been a rewarding year as we successfully executed a number of important strategic initiatives, which will provide growth and opportunity for perpetual. And I'm also extremely optimistic about the future ahead of perpetual. We entered into the year with a refreshed strategy, vision and purpose. And during the period, we have focused on delivering on our immediate strategic promise, whilst we also completed a difficult but much needed operating model review across the organization. This ultimately positioned us well for something that we couldn't have anticipated. And it enabled the focus, agility and resilience and the care required for us to respond to the extraordinary events brought about by COVID-19. Our headline numbers reflect the fact that it has been a difficult year, with our results impacted by a variety of factors, including those related to COVID-19. Total operating revenue of $489.2 million was down 5% on the prior period. This was primarily due to lower revenues in Perpetual Investments, reflecting the impact of net fund outflows and lower average funds under management across the year, plus a modest decline in Perpetual Private revenues over the period, partially offset by double-digit revenue growth in Perpetual Corporate Trust, showing the benefit of our diversified business model. On an underlying basis, our expenses were up just 1% on the previous financial year, demonstrating appropriate cost disciplines in these challenging times in addition to the expense savings that did arise from the implementation of our operating model review, which were at the top end of our projections, originally estimated to be between $18 million and $23 million per ounce. Throughout the period, we have invested in both organic and inorganic growth initiatives across our businesses. Our net profit after tax was $82 million, 29% lower than the prior corresponding period. Underlying profit was $93.5 million, down 19%, higher than our NPAT, with the difference reflecting the implementation costs associated with our new operating model. Perpetual Investment's closing funds under management was $28.4 billion, up some 5% on the previous year, primarily as a result of the completion of our acquisition of Trillium Asset Management, which completed on the 30th of June. Perpetual Private's total funds under advice of $14.3 billion, whilst marginally lower than last year, has held up well, given the volatility that we've seen in investment markets. And we had over $600 million in positive net flows for the period. This represents our seventh consecutive year of positive net flows for Perpetual Private. Fast approaching $1 trillion in funds under management, Perpetual Corporate Trust has built on its leadership position in both the Australian securitization and managed funds markets. Perpetual is a diversified business, and this has provided us with some protection from the market volatility that we have experienced since late February. The first chart you see before you shows that close to 40% of the group's revenue is not directly exposed to investment markets, and this provides us with a partial buffer to market volatility. Our nonmarket linked revenues come predominantly from perpetual Corporate Trust as well as some areas of Perpetual Private, including Fordham, and is largely driven by new clients, securitization issuances, cross-border flows and asset values. The second chart on the right shows perpetual Corporate Trust's growing importance to the group, contributing some 39% of operating profit before tax this year. As I mentioned earlier, we started the year with a refreshed purpose of Enduring Prosperity and our new strategy, which focuses on 3 strategic imperatives: firstly, client first, delivering exceptional products and outstanding service; secondly, future fit, empowering our people to deliver high performance; and thirdly, new horizons, building new capabilities and extending out to create a global footprint. Our strategy is designed to deliver sustained quality growth over time. This year, we've made solid progress despite the environment on delivering to our new stated strategy. In relation to our client first focus, our Net Promoter Score, which is a measure that can range from negative 100 to positive 100, and it measures how positive our clients are about us and how willing they are to recommend us to others, that measure improved from an already high plus 40 across Perpetual to plus 45 in FY '20. And that score puts us amongst the highest in the industry. The strength of our NPS, and this year's further improvement is particularly pleasing, given how volatile and how uncertain the environment has been. During these difficult times, we have been very focused on our communications with our clients across all forms of mediums, knowing that information supply is particularly important during periods of volatility. Perpetual Corporate Trust's NPS score of plus 62, up from plus 55 in the prior year, is particularly strong. And this reflects how highly the Perpetual Corporate Trust team, products and services are regarded by our clients. Additionally, for the fourth consecutive year for Perpetual Corporate Trust, we were awarded Trustee of the Year, which is a credit to our people and their complete focus on positive client outcomes as we continue to deliver more unique products and services to our clients. It has been a year of investment for Perpetual Private as we capitalize on the current industry dislocation and the desire of the industry's highest quality advisers to work for a trusted brand. This year, we welcomed 20 new advisers to Perpetual Private, growing our adviser ranks by 30%. Our new advisers were a major driver of Perpetual Private's record net flows of $600 million for the year. As I mentioned, this was our seventh consecutive year of positive net flows for the business, which was a particularly pleasing result given the uncertainties impacting during the second half. We will remain focused on prudently adding to our adviser ranks into the future as Perpetual Private remains an attractive alternative for the industry's best advisers and for their clients. In Perpetual Investments, our Australian credit and fixed income team, the core of which has been together for over 15 years, continued to perform well and saw strong growth in assets under management during the year. Our Global Innovation Fund reached its 3-year performance track record, delivering exceptional performance to investors and was recently ranked as the #3 fund in Morningstar's Top 20 Global Funds, returning 33% ahead of its benchmark for the year. This fund was seeded by perpetual, and we're excited about the growth potential as our distribution team now takes that capability to market. Whilst our value approach in Australian equities continues to be under pressure as the market favors growth stocks, we remain confident that our approach, which has been proven successful for more than 50 years throughout a variety of market cycles, that approach will generate excess returns over time. Moving now to future fit as the second pillar of our strategy. As mentioned, our new operating model is in place, and it's designed to drive efficiencies to help our people become more nimble and dynamic and to empower our people within our stated risk framework. At the center of our operating model was combining the IT operations and product functions for all of our businesses together as one unified group, which aims to achieve greater efficiencies and to improve processes in order to further leverage technology enhancements across the business, better positioning us to manage our expected future growth. During the second half, Amanda Gazal joined Perpetual as our Chief Operating Officer to manage these key functions, and we are already seeing the benefits from her capability, her energy and experience. While throughout the year, we've needed to pivot our focus in some areas. In other areas, we've been able to speed up the delivery of key technology projects, which have increased efficiency and enabled market-leading client services across many areas of our business. We've also invested in and enhanced our governance accountability and our risk frameworks to reflect the new structure to respond to emerging risks to empower our people and to streamline our decision-making. We firmly believe that all of our people have a clear responsibility to recognize and to manage risks appropriately. And this approach impacts every decision we make across our businesses. Finally, now to our third pillar, new horizons. We completed the acquisitions of Priority Life and Trillium Asset Management, as Tony mentioned, during the year, with both transactions, adding new capabilities and strong future growth potential. Priority Life has delivered ahead of expectations, and there is a high level of interest in Trillium as we introduce their world-class investment capabilities to the Australian market and we start to build out our distribution capabilities outside of Australia. The acquisition of Trillium, a true pioneer in integrated ESG investing dates back to 1982, and it was a genuine highlight for Perpetual this year, and it positions us very well to be front and center, a part of the fast-growing ESG market. We've recently launched Trillium products here in Australia, and we're excited about the growth prospects for Trillium in Australia, the U.S. and more broadly over time. Tony mentioned our plans to acquire a 75% interest in Barrow Hanley, which we announced in late July. This is a truly transformational opportunity for Perpetual, adding more than 20 investment capabilities to our group. And the transaction is expected to be completed by the end of November. Once complete, this acquisition will more than triple our total assets under management, adding world-class investment teams covering global equities, global emerging market equities, U.S. equities and fixed income capabilities to Perpetual. The acquisition will also support the acceleration of the build-out of our global distribution strategy, particularly in the U.S., which is, of course, the world's largest market opportunity, materially expanding Perpetual's opportunity set. To support this build-out, Adam Quaife joined Perpetual as our Head of Global Distribution late last year; and Chuck Thompson joined early this year as our Head of Distribution for the U.S. And they are making solid progress on implementing our global distribution plans, which will cover the key markets of Australia, the U.S., Europe and Asia. As we look ahead into FY '21, we have an active pipeline of inorganic opportunities across all of our businesses with a range of complementary bolt-on acquisitions at various stages of development and which aim to support our plans for future growth. Perpetual remains a strong and enduring brand, focused on deep client relationships, which we never take for granted. As a company, we are focused on creating a sustainable and enduring future for our clients, our people and for the communities in which we operate. This means delivering excellent service, providing a safe and inclusive workplace, helping increase investment in communities and reducing our impact on the environment. Our investment in digital capability to support client engagement and connectivity has been particularly important this year during COVID-19, where face-to-face contact has, of course, been limited. Since the impact of COVID-19, we have moved to digitize our mail room, and we have introduced electronic signatures to make it far easier to receive and process important client documents. Digitizing these processes has enabled our employees to respond to clients more promptly whilst also working flexibly. To help our clients and our shareholders navigate through this uncertain period, we've kept them updated through our dedicated COVID-19 hub on our website, and we have held over 40 information webinars with more than 4,300 clients attending. Pleasingly, our communication has been rated highly by our clients. Staying in touch via phone, e-mail and broader Perpetual communications were highly regarded by our clients across all of our businesses. Strong relationships and the quality of our advice were also highly rated. According to NMG Consulting's study in June of this year, Perpetual provided an exceptional level of support to our clients during our regular -- through our regular communications during the COVID-19 crisis. Perpetual was rated the second highest manager, a second best manager in relation to providing an exceptional level of support to clients. This year, as part of our ongoing commitment to deliver improved client service and to enhance the way in which we handle any client complaints, we have established an independent client advocacy team. We are focused on supporting our people to do great things to enjoy and develop in their roles and beyond. We have seen an improved employee engagement this year despite the difficulties associated with the current environment. More than 80% of our staff feel that we have responded well to the COVID-19 crisis. We have a strong commitment to diversity and inclusion at Perpetual, and we are targeting 40% representation of women in senior management roles. We currently have just over 36% of women in senior management roles, and we were recognized by the Workplace Gender Equality Agency as an employer of choice for gender equality for the third consecutive year. As one of Australia's largest managers of philanthropic funds, we have $2.9 billion of funds under advice. And in FY '20, we distributed $113 million to communities on behalf of our clients. We also supported many charitable trusts and endowments over the year. We are particularly proud of the work we did to help community organizations access over $4 million in immediate funding for not-for-profits to avoid disruptions to their critical services following the onset of COVID-19. Through the Perpetual Foundation, $11.4 million of funds were distributed to community organizations throughout the year. We are equally proud of our work alongside indigenous trust advisory councils and local leaders in ensuring emergency funds were made available for critical support as quickly as possible and, in some cases, even helping to secure food supplies for isolated communities. In FY '20, we have further developed our position on climate change and our commitment to reducing our own environmental impact. We have a published position on climate change and a climate change action plan. We offer products to clients who wish to screen their investments based on ESG criteria. And through our acquisition of Trillium, not only were we able to introduce new fully integrated ESG investment products to Australian retail and institutional markets, but we will also leverage Trillium's ESG expertise across all areas of our business over time. So in summary, whilst FY '20 was undoubtedly a challenging year, we have responded well to those challenges, and we have continued to execute on our stated strategy. Perpetual has a trusted brand. It's a key asset that we never assume will stay. We firmly believe that we earn the trust every day -- earn that trust every day through every action of every person at Perpetual. The combination of a trusted brand in financial services with the strong support of our shareholders, for our forward-looking strategy, focused on delivering quality growth over time is our core driver. Whilst FY '20 had its challenges, more than most years, we have made substantial ground in laying new foundations for our future growth. And like Tony and the Board, I remain very optimistic about our prospects of delivering that growth in the years ahead. Before I hand back to Tony, I would like to thank all of the people at Perpetual who have contributed so much to the firm during what has been a very challenging year. Our people have been resilient. They've remained fully focused on delivering the best possible results for our clients and for our shareholders, and they have adjusted to challenging times incredibly well. This year, we have been able to truly demonstrate our commitment to supporting our clients through volatile and uncertain times by earning their trust through our actions every day. I would also like to thank Tony and the Board for their continued support. Thank you.

Thanks, Rob. Now we move to the formal business of the meeting. The first item of business is to receive and consider the full financial statements, the reports of the directors and of the auditor, of course, for financial year June 30, 2020. So I now formally table the financial report, the director's report and the auditor's report for that year. This is not a voting item, but shareholders will have an opportunity to ask questions and make comments on -- using the online platform. And I should mention, as this is the first year that we're doing this, we will, after the meeting, seek feedback from our shareholders and participants to see how we can improve and if there's been any issues in participating online in the event that these become more regular, which we hope, of course, that we do go back to physical meetings. The way I intend to handle this section of the meeting or this item is as follows: first, last year, a number of matters came up at the AGM from shareholders, which we and I said we would take on board, and we have, and I'll provide a report on those; secondly, we will then cover questions that we received prior to this meeting; and thirdly, we will then look at questions that have come in and are continuing to come in during the meeting. So please continue to ask your questions and make your comments. In terms of the auditor under the second item of questions before the meeting -- before the AGM and then questions that have come in during the meeting, I will also pick up any questions to the auditor. Turning then first to matters that came up at last year's AGM. And [ Mr. Craig Caufield ] raised governance matters for the Board to consider. They were as follows and our response. The first matter was for Perpetual to consider adopting the model litigant principles and publish them on our website. We have since adopted the model litigant principles and have published them and a summary of these on our website. The second was to ask us to consider our position on political donations. We've reviewed our policy on gifts, bribery and corrupt practices and included a clearer position on political donations. Our policy prohibits any employee from making political donations on behalf of Perpetual. This policy too is on the website. The third matter was a query on whether Perpetual senior executives and Board members are signatories to the Banking and Finance Oath. While some of the Board and senior executives were already signatories, to strengthen our strong personal commitment to service integrity and doing the right thing at all times, I'm pleased to say that all of the Board and the executive team are now individual signatories to the Banking and Finance Oath. The fourth related to the separation of the role of tax auditor and consulting services. Now you may be aware that this is currently -- there's currently a senate inquiry on this into the regulation of auditing with final recommendations due in December of this year. Any recommendation or legislative changes arising from that inquiry will be considered as part of our annual review cycle of the policy. The fifth matter was to consider voluntary adopting APRA's BEAR accountability regime. While Perpetual is not currently required to comply with APRA's BEAR accountability regime, we will be required to comply with the finance accountability regime or the FAR regime, which is due to be released in late 2021. We are currently evaluating our remuneration policies and governance practices to ensure alignment with the requirements of FAR. The final matter was for Perpetual to consider publishing our APRA self-assessment. Perpetual Limited was not required to conduct an APRA self-assessment. However, Perpetual Superannuation Limited, our registrable superannuation entity licensee, was required to conduct a self-assessment of APRA. Our policy remains not to publish that self-assessment. Those were the 6 matters that we took on board, and we've considered them, and that's our response. There were also individual matters raised by Dr. Barry Landa, Ms. Rita Mazalevskis as well as Mr. Boyd Fraser in relation to his own matter and that of Mr. Dunlop. Mr. John Dunlop, and I'll briefly update you on each of those. First, we have worked closely with Dr. Barry Landa and his family following last year's AGM. We have resolved this matter to Dr. Landa and everyone's satisfaction. In relation to the matter raised by Ms. Rita Mazalevskis, with the information provided to us, we conducted a thorough internal investigation, which found no evidence of any wrongdoing by Perpetual. A full assessment report was provided to her and was also independently reviewed by our Head of Client Advocacy. We invited Ms. Mazalevskis to proceed to a mediation process if she was not satisfied, but this has not progressed further. And finally, in relation to matters raised by Mr. Boyd Fraser, we are continuing to work closely with these individuals and, where relevant, their families to work towards a resolution. COVID-19 has impacted the progress of these matters due to travel restrictions and social distancing requirements. However, we're committed to finalizing these matters and have recommended a formal mediation process with an independent retired judge as a way forward. And just to add, to further strengthen how we manage client matters or complaints, this year, we created a client advocacy team to provide a dedicated avenue for ensuring complaints are investigated and resolved fairly. And that position reports to the Chief Risk Officer. And -- but our Head of Client Advocacy operates independently of the business and works directly with clients to investigate and resolve issues. So that completes the update on the matters that -- that arise at last year's AGM. I'll now move to questions received leading up to the AGM. And as I said, the way that we would do that, I would ask the Company Secretary, Sylvie DiMarco, to read out the comment and question. And then either I will answer or I'll direct that another member of the Board or staff answer the question. So Company Secretary, Sylvie?

Thank you, Chairman.

Are there questions before the meeting?

Yes, there are Chairman. The following comments and questions were received in advance of the meeting from Richard Williams, a shareholder and a proxy holder on behalf of the Australian Shareholders' Association, ASA, and cover a number of topics, the first being Perpetual Investments, PI. Since 2018, the PI revenue has fallen 25%, and net profit before tax is down 50%. The dollar shortfall in Perpetual's profit before tax and revenue since 2018 can be attributed almost entirely to PI. While there have been some bright spots, fixed interest and the Global Innovation Fund, the underlying business is not traveling well. Chairman, the first question is, can you please reassure shareholders that, with the new acquisitions, this will not result in loss of focus on this core business and that shareholders will still have visibility of its separate performance?

Thank you, Richard, for your question. Of course, shareholders will continue to have visibility of Perpetual Investments business, subject to the completion of Barrow Hanley, which we expect towards the end of November, our intention is to continue to report Perpetual Investments and then to Add Perpetual International Asset Management as a further reporting unit. So in effect, we'll continue to report Australia as at present and add the international report. And we clearly remain committed to our local investment business as well as, of course, achieving the growth that we want from the international businesses. Thank you.

Chairman, the ASA have further -- 2 further questions on PI. Firstly, with the CEO also being the responsible executive of PI, does the Board have a higher level of oversight of PI? And secondly, given the long-term underperformance of PI, is the Board still confident that the Perpetual definition of value investing is still appropriate and that it is not Perpetual's Kodak moment.

Thank you. On the first question, yes, the CEO is responsible for Perpetual Investments. However, that may change depending on how our operating model evolves with the acquisition of Trillium and Barrow Hanley and of course, the Board, and part of its strategic oversight of all these businesses will continue. In answering your second question, our fundamental approach as a value manager for the investments business has not changed. We remain fully committed to active value investment. We will always be true to label and remain consistent with our proven, disciplined and highly regarded approach to value investment -- investing, which has delivered value over the long term. Whilst gross stocks have had a sustained period of outperforming value stocks, we remain confident that our proven investment approach, which has added substantial value to our clients over the last 50 years, will return to a period of outperformance as the economic cycles evolve. And we do not think that we're looking at any sort of Kodak moment. But thank you for your question.

Chairman, the next series of questions from the ASA are in respect of Perpetual's recent capital raising. What was the reason for the Board to opt for an institutional placement and a SPP rather than a pro rata accelerated institutional, tradable rights entitlement offer, PAITREO.

Thank you. The Board considers -- as you would expect in a capital raising, the Board considered several options, including so-called PAITREO when determining how best to structure and deal in this environment to get the best price and fairness to all shareholders. The institutional placement and the SPP were the ones that we consider to be most appropriate in this environment when taking into account the composition of our share register, the level of funding required for Barrow Hanley acquisition and the financial flexibility we're required to continue to execute on our organic and inorganic initiatives. The Board were also of the view that this structure provided a shorter risk period and favorable pricing for retail shareholders under the SPP to account for share price movements going on. Now it's important to note that those shareholders who participated in the SPP received their full allotted shares at the same price as the institutional placement. And as I said earlier, shareholders received either their full entitlement or their pro rata entitlement they would have received had we gone with an entitlement renounceable offer. So we believe, overall, we've been very fair to all shareholders. And importantly, we've achieved the best result for the company in this important capital raising which, by the way, is the first capital raising Perpetual has done. Thank you.

Chairman, the next question is in respect of the Barrow Hanley acquisition. The acquisition of Barrow Hanley is a bold step, and we note the increase in debt to fund it. Given the stated expectation that its funding debt will be paid back in 5 years, can you outline any additional risk associated with achieving this?

Thank you, Richard. Firstly, debt levels are within perpetual stated risk appetite statement and treasury policy. As I said earlier, the aim is to reduce the gearing level from 1.1x EBITDA to 1x within 12 months of completing the transaction and, I mentioned earlier, the paying down of the debt. We believe that the financial model that's supporting the business case includes a conservative revenue -- conservative revenue projections, which back up the repayment of this debt within -- on the transaction within 5 years. Should actual results be higher than these projections, this may produce an opportunity to repay earlier. Secondly, in terms of the acquisition, there are protective mechanisms in place in the purchase agreement. And for example, if client consents are lower than 92.5%, then the purchase price will be adjusted down and could also lower the level of debt. The investor presentation that we released and Rob and Chris in presenting it to shareholders really includes a very detailed risk assessment and the way that they and we, as a Board, will manage those risks. I emphasize that we are mindful that this is a geographic footprint that takes us overseas, but we have given that very careful consideration, and this is a transformative and good deal for this company.

Chairman, the next comment from the ASA and question is in respect of remote working. We congratulate Perpetual on its response to COVID-19, and in particular, the seamless deployment of its people to work from home. Given the experience with this, do you anticipate a permanent change in working arrangements available to staff?

Thank you for the question. This is really more of a question for our CEO to take up in terms of how he sees running the operations going forward. Rob?

Thanks, Tony, and thanks for the question, Richard. Perpetual has, for quite some time now, pre COVID, been known to -- been recognized for having an appropriate and flexible working environment for our people. In some ways, that really helped our transition to all staff working remotely. Over the last 6 months of having the majority of our people working remotely, we've learned a lot, that's for sure. And in terms of the desire of our staff over time, the majority -- in fact, the vast majority of our people have a preference to having some form of flexibility going forward. So I think it's a good question, and I think it's almost certain that there will be permanent learnings for us in terms of the way we manage our people and our workplace environment into the future.

Chairman, the following questions received from the ASA are directed to KPMG in respect of their auditor's report, and I will ask Brendan Twining to respond to them. Notwithstanding that KPMG's opinion on the financial report does not cover the other information provided to it, as outlined in the auditor's report, was information regarding the acquisition of 75% of Barrow Hanley as announced soon after the end of FY '20 read as part of other information? And if so, do KPMG's annual testing of goodwill for impairment, as a key audit matter, take into account the potential effects of this acquisition on the valuation of intangible -- sorry, intangible assets, given that total liabilities, total tangible assets are forecast to result in an increase from 42% to 121% as a result? And if not, why was that the case?

Brendan, [ do you want to respond ]?

Yes. Thank you for the questions. Look, firstly, as part of our audit of the financial report, our responsibility is to read the other information contained in Perpetual's annual reporting. In doing so, we consider whether the other information is materially inconsistent with the financial report, all the knowledge that we've obtained during the audit or otherwise appears to be materially misstated. With respect to the Barrow Hanley acquisition and in the context of the financial report as a whole, management's disclosure of the proposed acquisition as a subsequent event in Note 5-9 of the financial report is appropriate. In addition, we read the Barrow Hanley ASX announcement as part of our obligation to consider material subsequent events and their impact on the financial statements as a whole in accordance with the Australian Accounting Standards and the related auditing standards. In terms of the second question, the responsibility for the annual testing of goodwill for impairment remains with management and the directors of the company. The auditor is then required to perform audit procedures over this annual test, in this instance, June 30, 2020, as it's completed by management.

And then we note our responsibility to conduct an annual goodwill testing. And in respect to Barrow Hanley, as the acquisition is yet to be completed, there was no requirement, of course, to test that in the financial statements that are before the meeting. But we will undertake testing in financial year '21, the results of which will be provided to our external auditors. Sylvie, are there other questions?

Yes, Chairman. We have some questions online. Should I read them now?

Yes.

The first question is from [ Craig Caufield ] regarding general business. The question is, I'm really pleased to see model litigant principles I raised at the 2019 AGM adopted and published. These will benefit your customers should a dispute arise. I would appreciate if Perpetual would engage with me to consider some amendments as ANZ, Westpac and NAB did. I applaud the Board on this fabulous reform.

Thank you. Thank you, Craig. Look, consistent with the comment I made earlier about seeking shareholder feedback on issues, we will, of course, engage with you as we did post last year's AGM. Thank you, Sylvie.

Chairman, there's another question from [ Craig Caufield ] regarding general business. I thank the Board for very succinctly and clearly stating and publishing your policy that Perpetual makes no political donations. Bravo.

Thank you.

Chairman, I have a question from Rita Mazalevskis. Chairman, you said shareholders can participate in real-time. The AGM online guide states, note, we will endeavor to address as many of the more frequently raised relevant questions as possible during the course of the meeting. This is not aligned with Section 250 of the Corporations Act 2001. Please clarify and reconfirm all shareholder questions will be read.

Thank you for reminding me of that. And I apologize if what is in that guide isn't consistent with what I outlined to the meeting at the start. And that's quite clear that we will read out every question, every comment. We will not summarize. We will not add them together and so that we're transparent on those. And that's what our Company Secretary has been doing, and we'll continue to do with this meeting. We do understand, sometimes you do get multiple questions, and that can be irritating, similar questions to shareholders going over. But we've decided we will take that risk and read every question as it's been submitted and answer it.

Chairman, I have another question from [ Craig Caufield ]. I raised the benefits of Perpetual promoting membership to the Banking and Finance Oath at last year's AGM. I thank those 11 executives and directors who joined, including the Chairman and CEO since then. Mr. McCarthy, heading People and Culture, would be an ideal candidate to join. Will Mr. McCarthy and a director, not a member, please consider joining?

I'm not sure -- Sylvie, could you repeat that? I'm not sure that I understood the question.

I raised the benefits of Perpetual promoting membership to the Banking and Finance Oath at last year's AGM. I thank those 11 executives and directors who joined, including the Chairman and CEO since then. Mr. McCarthy, heading People and Culture would be an ideal candidate to join. Would Mr. McCarthy and a director, not a member, please consider joining?

I think that might be a reference to Paul Chasemore, and Paul is online. I think -- Paul, I think the -- Richard is -- Richard McCarthy has signed the oath, Craig, just to be clear. He's one of the ExCo members. I think you're referring to Paul Chasemore, who heads that People and Culture aspect of our business. We will discuss that with Paul. He's actually online if he'd like to comment, but we take your suggestion on board. Paul, would you like to make any comment?

Yes. Thank you, Chairman. Yes, I have signed that oath and that declaration.

Thank you.

For a period advised.

Sylvie?

Chairman, there's one question from Rita Mazalevskis. In regards to my prior question re shareholder questions, the Corporations Act states, Section 250 S, questions and comments by members on company management at AGM: one, the Chair of an AGM must allow a reasonable opportunity for the members as a whole at the meeting to ask questions about or make comments on the management of the company; two, an offense based on subsection 1 is an offense on strict liability. Note for strict liability, see section 6.1 of the criminal code.

Thank you for the comment and reminding us of our obligations. We are conducting this meeting in accordance with ASIC guidelines and in accordance with government direction. And as, again, I reiterate, we are not restricting any comments, we're not restricting any questions, and we will answer those fully, whether it's on management or other aspects of the financial statements, our business or of the auditors. But thank you for reminding us of those obligations.

Chairman, the next question is from [ Craig Caufield ]. Perpetual has a total of 16 members of the Banking and Finance Oath, largely the most senior executives with very few of the 1,000 other managers and employees. Will Perpetual engage with me to draft a letter, encouraging the substantial benefits of lifting trust and reputation in both Perpetual and the industry at large, circulated to all employees?

Thank you, Craig. Well, I'll take that up with the CEO after the meeting, and we'll come back to you on that. I think you should be pleased that you've made a lot of headway with us, and it's great, and we're fully behind just seeking to do. But we will take this offline with you after the meeting.

Chairman, I have another question from [ Craig Caufield ]. A parliamentary inquiry has investigated conflicts in auditing in Australia. At last year's AGM, I raised the proposal to separate completely consulting and tax advice from companies that provide audit services. Chairman, has Perpetual adopted this policy to avoid conflicts or perceived conflicts? KPMG provided submissions to this inquiry. Can the auditor also update regarding these conflicts?

Thanks, Craig. As I said when I was reporting on -- because you raised this matter last year, we are waiting to see what happens with the Senate inquiry and the government, and we will reassess when we have those recommendations as to what we, as Perpetual, might need to do. But we are not making any change in our existing policies at this point.

Chairman, the next question is from [ Craig Caufield ]. Has the APRA prudential report raised at last year's AGM, investigating culture, risk, accountability, integrity and governance been published by Perpetual as NAB, CBA and Westpac have?

This is the APRA report, is it? What...

That's correct. Yes.

Yes, I think as I said, Craig, we're not APRA-regulated in that sense and haven't been required to put that report. But to the extent that our superannuation entity has and has prepared self-assessment report, our policy is not to make that available publicly.

Chairman, the next question is from [ Craig Caufield ]. At the 2019 AGM, we discussed Perpetual publishing a simplified version of the APRA-required BEAR map. Has Perpetual published this people-friendly version of an executive accountability map? Please discuss the benefits of an accountability map in terms of the highest paid executives of Perpetual and whether publishing this simplified accountability map prevents confusion that was uncovered at the Royal Commission.

I think as I said earlier, we're not subject to the BEAR regime. We do note that we may well be subject to the FAR regime, and we will look at that closely as that comes online in 2021.

Chairman, the next question is from [ John Parrett ]. Are you issuing any UPAT and dividend guidance for 2021?

Thank you for that question. It's a very good question. The Board is -- as I said earlier, we clearly want our shareholders to understand what the benefits of moving from NPAT to UPAT, and then what the new policy that accompanies that. We will make that available as soon as we can. I think we want to complete the Barrow Hanley transaction, see where we are. And hopefully, we'll be able to give you that guidance with the first half results this year when they come online in February 2021. That's our hope. But because at that point, we also have to look at dividend, and we should do -- if we can do it earlier, we will do that. But clearly, as I said, this is -- the change is to better reflect the underlying cash business that we have with the changes in acquisitions that we're making. This is not a subtext to reduce dividends. With the acquisition and EPS accretive that we've talked about, our hope is that we go the other way. So thank you for the question, and we will come back to you.

Chairman, the next question is from Rita Mazalevskis. Perpetual's Board skills matrix in the corporate governance statement shows the individual skills and background as listed. This does not give the extent of experience for each Board member in the areas shown. Unlike the big banks, there is no scale showing the actual degree of set -- skill set for each Board member. If I have missed this, and there is a further Board skills matrix somewhere, could you please direct me to where to find this?

The Board skills matrix is in the corporate governance statement that we have, and we also look at that regularly with each year. We're happy to send that to you after the meeting. But talking more generally about skills of directors, at the end of the day, the responsibility of the Board and the Chairman is to ensure that we have the skills, irrespective of what might be in any sort of pro forma metrics, that we have the skills to conduct the business of the company and where it's headed. And I think, as I said earlier, with the addition of Greg and Fiona in terms of their skills and where we're moving the company, that's been a skill set we've added to the Board. And with the -- we're also now looking at whether we need an overseas, an additional overseas international experienced director, which we will do as part of the Barrow Hanley acquisition. And as also said earlier, we will probably, over time, be looking at adding additional technology skills to the Board. In other words, it's very live. The skills that sit around the table, we assess, we look at the issues. And if we need to adjust those, we do. But as I said earlier, we will send you the formal documents that we have to back that.

Chairman, the next question is from Rita Mazalevskis. With the Board skills matrix and experience of each Board member, could you please advise which Board members have legal experience or a legal background?

I think I do, just . And Nancy Fox does. But I am also sure that the experience that each of the other directors has -- have and their involvement in business over 20, 30 years, they also have considerable legal knowledge of corporate governance, the Corporations Act.

Chairman, the next question is from Rita Mazalevskis. Will Perpetual publish all questions lodged on their website for all shareholders to read? Please keep in mind, not all shareholders have access to watch a virtual AGM and lack technical experience or access.

Thank you for that question. I think we are going to do a review after this meeting about how the virtual meetings go, participation and so on. And if that is something that we think shareholders would find worthwhile, we will do that.

Chairman, this is a comment from [ Craig Caufield ]. Please thank the Chairman for his excellent responses to my 6 questions. I would like to encourage the Board to consider publishing the superannuation governance report and to make it more pliable, redact any names or confidential business matters. Would the Board consider this revised publication?

Thank you, Craig. I will take that on board. Thank you for the comment. It's probably not enough to get me to change my mind about publishing that self-assessment, but we will take it on board and come back to you.

Chairman, Rita Mazalevskis has asked, Perpetual Limited created a client advocacy team on 30th of March 2020. The CEO notified me that we had created that role, which acts independently of business. Chairman, how do you ensure that this process is independent to the business?

The position reports to Sam Mosse, our Chief Risk Officer. And the instructions in the setting up of the arrangement is that the position acts independently with the business having the clients as the main level of interest. The -- it's important here that this is something we've added to further strengthen the way we look after clients and look after stakeholders. It's not the only way that we do that and stay close. Indeed, as Rob said, client relationships and trust and integrity for this business are fundamental. So we have a number of other processes where we're looking after those interests. We're comfortable in the structure that it is independent and it will assist. And if we need to review that, we will. But at the end of the day, as all businesses, these are internal positions. They're not statutory positions that exist. Thank you for the comment.

Chairman, there are no further questions or comments on this item.

Thank you. I'm sorry?

There's one more question.

There is one more question. I'm sorry. I thought there were no more questions.

Chairman, another question has just come through. My apologies. This is from Rita Mazalevskis. Chairman, regarding your comments re my Perpetual case, substantial delays have occurred due to roadblocks by Mr. Adams and so-called independent report conducted in-house is not independent. It is Perpetual reviewing Perpetual. This is disingenuous. I continue to propose an external independent investigator chosen by myself. Mr. Adams has also imposed restrictions on a full and fair mediation. I am required an internal independent investigation.

I'll ask Rob to comment on that. I have also had an overview of the correspondence with you. And I'm satisfied that we're doing everything we can to get this resolved with you, including the latest position of an independent review and mediation. But I'll ask Rob to provide you with further details.

Yes. Thanks for the question, Rita. As Tony said, throughout the course of our discussions, we've regularly committed to an independent mediation process as our belief is being the best, the fairest and most independent way of trying to reach resolution to your issues. And that offer of an independent mediation process remains.

Thank you. Okay. If there are no further questions, Company Secretary...

Chairman, I have another question from Rita Mazalevskis. Without a borrower's knowledge, is it true that Perpetual becomes the proprietor of the bundle, which is securitized and then a green bond is created from carbon trading, which then creates an enormous cash flow profit for an unknown third party?

I think -- I'm not sure if that's an appropriate question, very detailed, and we'll take that question on board and come back to you separately.

Chairman, I have another question from Rita Mazalevskis. Thank you for the clarification regarding shareholder questions. It's actually a comment. Thank you.

Thank you for the comment.

Okay, that completes the first item of business. We now move to the formal part of the meeting. We have 4 resolutions to consider, which require voting. Just to remind you, you can vote at any time, and you can change your vote at any time up to 5 minutes after the close of this meeting. And just to -- for each resolution -- as you know, voting is by way of poll. For each resolution, we'll show you the proxies received prior to the meeting, the final number of votes, including the votes cast through the platform. We'll then aggregate those and release them to the ASX. So basically, votes received, votes cast and we'll combine those and release it to the ASX. Just to confirm again that I'm holding open proxies in my capacity as Chairman, and it's my intention to vote all undirected proxies in favor of the resolutions and all directed proxies, of course, as directed. And just to confirm also that each resolution will be a simple resolution requiring more than 50% of the vote. Okay. The first resolution is to adopt the remuneration report for the financial year June 30, 2020. The remuneration report, as you know, forms part of the director's report and is included in the company's annual report for the financial year ended 30th of June 2020. It provides information in relation to the Board's policy on remuneration that it pays to key personnel, the relationship between the remuneration and the company's performance, including information about performance measures that are applicable for the important variable incentives. And it details the remuneration paid to the KMP for the financial year ended 30th of June 2020. As you'll recall, the shareholder vote on this resolution is advisory only, and the outcome of the vote is not binding on the Board. However, as you know, if the company receives votes of 25% or more against the resolution at 2 successive AGMs, a resolution to call for a spill must be put to shareholders at that second AGM. Now before we formally move to consider and vote on this item, I'd like to call on Nancy Fox as Chairman of the Perpetual People and Remuneration Committee, to make a few comments on the remuneration report. Nancy?

Good morning, fellow shareholders. As Chairman of the People and Remuneration Committee, it is my pleasure to present to you today the highlights of our key remuneration outcomes for the 2020 financial year. As highlighted by Tony and Rob earlier, this year has been challenging for Perpetual. And while we have made good progress in many areas of our business, our financial performance has been impacted in the second half of the fiscal year by the economic effects of the COVID-19 pandemic and declining global investment markets. As shareholders would expect, these factors have impacted the variable incentive outcomes for key management personnel in financial year '20. When deciding whether an incentive is awarded for executives in any given year, your Board, through its people and rem committee, considers a range of factors. As outlined in our recently published remuneration report within the 2020 annual report, Perpetual uses a balanced scorecard to allow the organization to focus on short, medium and long-term strategic priorities. This approach has served the business well and continues to do so. The overall weighting of financial performance in the FY '20 scorecard is split, 55% to financial performance measures and 45% to other strategically important nonfinancial measures. While some financial targets have not been met in financial year '20, targets have been met in other important nonfinancial measures, which all contribute to the medium to long-term performance of the business. We believe that the agreed nonfinancial measures included in the scorecard are key lead indicators of future business value accretion. Despite the challenges presented in financial year '20, management has put in place strategic initiatives to position the business for the future, including the acquisition of Trillium Asset Management, the implementation of an operating model, which has delivered substantial expense reductions and record technology investment. We also capitalized on continued disruption within the advice industry with 20 new financial advisers joining Perpetual Private. The Perpetual Corporate Trust business has also grown, and it continues to grow in revenues across all lines of business. COVID-19 has presented a number of risks and opportunities in the business for this year. On balance, our management team responded remarkably well to the disruptive risks of COVID-19 by mobilizing our workforce quickly, ensuring that all parts of the business continue to operate smoothly in a remote work environment, enhancing internal and client communications and quickly gaining the confidence of both employees and clients. As mentioned by Rob, this has been validated by positive employee sentiment results and record client Net Promoter Score outcomes. Given a meaningful proportion of Perpetual's revenues are linked to equity and other capital market performance, COVID-19 has had a negative impact on financial performance in FY '20. While this was an unforeseeable event, it has not resulted in any change to financial targets being made by the Board for the current performance year. When performance is assessed overall for the year, the Board has determined that variable incentive awards should be allocated in respect of financial year '20. The range of variable incentive awards to current key management is between 37% and 69% of total variable incentive targets with an average outcome of 53%. The Board is mindful that NPAT for financial year '20 is 22% below target, and therefore, to align shareholder returns and the variable incentive remuneration for key management, variable incentive outcomes for financial year '20 will be awarded in hurdled equity only. Delivering awards solely in the form of hurdled equity means that both shareholders and executives will benefit through share price recovery. Conversely, if long-term share price growth is not delivered, the equity will be forfeited. In addition, effective the 1st of July 2020, the CEO and Managing Director, took a 20% reduction to fixed pay for a period of 6 months, and other group executives also took a pay reduction of 10% over the same period. The Board took a similar reduction in its fees with the Chairman taking a 20% reduction for a period of 6 months and director's base fee was reduced by 10% over the same period. We understand the importance of providing clarity and transparency in relation to the remuneration of key management personnel. We continue our commitment to this, particularly in the context of the current environment. Finally, I, too, would like to acknowledge and thank the many people in our organization for their daily contribution to delivering quality client outcomes, demonstrated by another year of exceptional client advocacy results, particularly in the context of a difficult year and given the many impacts and challenges that COVID-19 presented. Thank you.

Thank you, Nancy. We now move to questions and comment on this resolution, which is before you. As I outlined earlier, first, I will ask the company secretary to read out any questions that were received before the meeting, and then we will move to questions that have been received during the meeting. So Sylvie, are there questions before the meeting?

Thank you, Chairman. Yes, there is. I will now read out a comment we received from Richard Williams on behalf of the ASA. With respect of resolution 1, adoption of the revenue remuneration report; and resolution 4, adoption of the 2020 LTI variable incentive grant to the CEO and Managing Director. And we'll direct the question to the Chairman of the People and Remuneration Committee, Nancy. "The ASA intends to vote any undirected proxies against both these resolutions. The ASA welcomes the Board using its discretion to award any cash and unhurdled short-term incentives as hurdled equity and to make cuts to KMP and Board fixed remuneration in the first half of FY '21. However, the ASA considers that a long-term incentive hurdle should be measured over a minimum of 4 years with at least 2 metrics taken into account, example, TSR and EPS growth. In light of the following, Perpetual experiencing the worst profit result since 2014, the Board needing to use its discretion to award any cash and unhurdled short-term incentives as hurdled equity, an increase in nonfinancial KMP variable incentive metrics since FY '18, while, at the same time, financial performance has deteriorated. In a normal year, only 25%, the CEO, Managing Director's target remuneration is subject to any form of long-term testing. What factors will the Board consider in its scheduled FY '21 review of KMP variable remuneration? And can the Board reassure shareholders that the review will examine implementing a variable incentive scheme that more closely reflects company financial performance and shareholder experience?"

Richard, thank you for your comments. Firstly, let me just clarify a few of your comments. No cash or unhurdled incentives were granted to KMP in FY '20. The discretion used by the Board in FY '20 was to award the cash and unhurdled equity entitlements of the KMP variable incentive as hurdled equity. That is to say, discretion wasn't used to create awards that otherwise wouldn't have existed. The Board was very much mindful of the financial results delivered in financial year '20, and this was a key consideration in deciding to award the KMP variable incentive entirely in hurdled equity. We feel this struck an appropriate balance for our various shareholders and stakeholders. As we discussed, the Board will review the effectiveness of the variable incentive scheme like it would in any other year. Any change to design will always seek to strike the right balance of all stakeholders, including the views of our shareholders. Thank you.

Thank you, Nancy. Sylvie, any other questions before the meeting?

Chairman, we have no questions on this resolution.

So there's no questions during the meeting either?

No. No, Chairman.

Okay. Thank you. Thank you. It appears there are no further questions on this item of business. The proxies received are now shown. We'll move to voting online. Please cast your vote for, against or abstain if you haven't already voted. [Voting]

Thank you. That -- and you can vote at any time, as I said, up to 5 minutes after the end of the meeting. We now move to the second item, which is my reappointment as a director. As it involves me, it is not appropriate for me to chair this part of the meeting. And in normal practice, I will hand over to Nancy Fox as Chairman of our People and Remuneration Committee to chair this part of the meeting. Thank you. Nancy?

Thank you, Tony. Tony D'Aloisio was appointed as a nonexecutive director of Perpetual on the 13th of December 2016 and stood for reappointment at the 2017 AGM. He now stands for reappointment. Details of Tony D'Aloisio's career are set out in the explanatory memorandum accompanying the notice of meeting. The Board unanimously supports Tony's reelection. I would now like to ask Tony to provide the meeting with a few comments with respect to his background and current commitments outside Perpetual.

Thank you. Thank you, Nancy. I'm pleased and honored to be before you with the support of the Board for reelection for a second term of 3 years. I am enthusiastic about continuing to serve as a director and, with the Board's continued support, to be Chairman of this great company. When I came before you in 2017, I said I would devote the necessary time to Perpetual, and other than chairing IRESS Limited, I would not add additional commitments. That has been and remains a position, and I'm seeking reelection on that continued basis. The skills that I said I would bring to Perpetual as a former chief executive and in the fields of mergers and acquisitions and in regulation have all been brought to bear in the range of issues I have been privileged to lead as Chairman with our Board. We have, in that period, since my election, had a change of CEO and changes to senior management and, more recently, significant acquisitions to diversify the business, which Rob and I covered earlier in the meeting. I and our Board believe Perpetual is now set up for future growth and improved shareholder returns. In this next phase, we're going to work hard, and I will, as Chairman, to deliver results from the strategies that we've set. And in addition to accountability of management on delivering our strategy at Perpetual, as a Board and Chairman, we have a culture of integrity and trust, and this underpins everything we do. As we expand our geography, I and the Board will ensure that we maintain and build this culture across all our operations and our overseas operations. So thank you for the opportunity to continue to serve you, our shareholders, and thank you to the Board for its support. Thanks, Nancy.

Thank you, Tony. We note that we did not receive any questions on this resolution before the meeting. I will now respond to online questions asked during the meeting. Sylvie, do we have any questions?

Nancy, we have not received any questions online for this resolution.

Thank you. It appears that there are no further questions on this item of business. The proxies received for this resolution 2 are on your screen. Thank you. Please cast your vote now. If you already haven't done so, by selecting either for, against or abstain for resolution 2 through the online platform. [Voting]

Tony, you may now resume the chair.

Thank you. Well-chaired, Nancy. Thank you. We now move to the third item of business, which is the reappointment of Ms. Fiona Trafford-Walker. Fiona was appointed as a director of the company in accordance with 20.9.2 of the company's constitution in December last year and is now seeking reappointment from this next AGM. And Fiona is in -- unfortunately, locked down in Melbourne, but she is available and she's online. And I will ask her to make some comments with respect to her background and current commitments outside Perpetual. Fiona?

Thank you, and good morning, everyone. I would like to add my welcome to those in attendance at the AGM today. In the spirit of reconciliation, I would also like to echo Tony's welcome to country. My name is Fiona Trafford-Walker, and I'm standing for reelection to the Board. I've been on the Board since December 2019, and I'm a member of the Investment Committee and the People and Remuneration Committee. My executive career of around 30 years focused on the areas of investments, governance and superannuation as well as business strategy and management. I spent 20 years as the Managing Director and the Director of Consulting for Frontier Advisors, an Australian company focused on providing investment and related advice to institutional investors. My responsibilities encompass the strategic development and running of the Frontier business as its Managing Director as well as taking a hands-on approach to providing institutional investment and governance advice. At various times, I was also responsible for investment manager research. I'm currently a nonexecutive director on the Board of Link Administration Holdings, Prospa Group Ltd and the Victorian Funds Management Corporation. I have the time and, I believe, the experience and skills to contribute to the ongoing success of Perpetual. I'm excited to join the Board to support the organization on its continued transformation and strongly endorse the strategy of adding world-class global investment capabilities to complement our existing Australian capabilities. Of similar importance to our business and shareholders is, of course, continued success in Perpetual Private and Perpetual Corporate Trust. Perpetual is a strong and trusted brand, focused on deep client relationships. Trust is earned every day has been part of Perpetual's DNA for more than 130 years, and this particularly resonates very strongly with me. I thank my fellow board members for their support, and I thank you, our shareholders, for your consideration.

Thank you. Thank you, Fiona. Company secretary, Sylvie, are there any questions prior or during the meeting?

Chairman, we have no questions online for this resolution or prior to the meeting.

Thank you. So there are no further questions. I'll put the resolution. The proxies are shown in this next slide. Could you now please cast your vote, if you haven't already done so, for, against or abstain. [Voting]

That completes that item, and we now move to the final item of business resolution, which is the 2020 LTI variable incentive equity grant for the Managing Director and CEO, Mr. Rob Adams. That resolution is to approve the grant of 43,875 performance rights to Rob in accordance with Perpetual's variable incentive plan and Rob's contract of employment. The variable incentive outcome for financial year '20 will be awarded, as Nancy mentioned earlier, in hurdled performance equity only. And further information on those performance rights to Rob has been provided in the explanatory notes to the notice of meeting, and the Board unanimously supports this resolution. I will ask the company secretary if there have been any questions or comments on this resolution. There was an earlier comment from the ASA, which -- and question that Nancy did deal with. Are there any other questions, Sylvie?

Chairman, we have no questions on this resolution.

Thank you. I will then put the resolution now, and the next slide will show the proxies received. Please vote by casting your vote, for, against or abstain for that resolution. [Voting]

Thank you. That completes the business of the meeting. However, in line with what I said earlier to make sure that we've covered all comments and questions received from shareholders, I'll ask our company secretary, Sylvie, if there's been any other questions that have come in that we've not covered.

Thank you, Chairman. Yes, we have received a few. First question is from Craig Caulfield. "Please thank all directors and executives for making themselves available to meet with shareholders after last year's AGM finished. Perpetual did this very well, and the Chairman, CEO and executives all stayed for every shareholder that wished to meet. This great culture stands in contrast to ANZ where not a single director met any shareholders waiting at the [ sandwiches ]. I applaud Perpetual's engagement and transparency."

Thank you for that comment, Craig. It's very much appreciated.

The next comment is from Craig Caulfield. "I support Perpetual's 2 acquisitions and thank the very energetic CEO and team who has worked tirelessly to achieve these outcomes. I support both acquisitions of Trillium and Barrow. The COVID-19 has impacted all companies, and it seems Perpetual has contained damage and set itself up for renewed future. I am pleased to remain a shareholder in these most uncertain times. The hurdled equity is a balanced and appropriate response that I support."

Again, thank you for your comments.

The next question is from Rita Mazalevskis. "Chairman, if a borrower is not a party to any agreement that establishes the securitization vehicle or the agreements establishing the loan notes, how is any of this possible without the borrower's initial signature?"

Rita, that's a very complex, legal question to be -- for an AGM, but thank you for asking it. I think I'd prefer that we take that off-line with you and provide you with our response on how securitization and lending and so on works. I can assure you, in the way that our team carries it out, we fully comply with all our requirements, but it's best that we take this question off-line with you. Thank you.

Chairman, the next question is from Rita Mazalevskis. "When a bank assigns all its rights and obligations of a loan to Perpetual, and the bank becomes a servicer, who is the true mortgagee?"

Again, Rita, I'll take that off-line. We'll take that off-line with you.

A question from Rita Mazalevskis. "How is it possible to default a lender when, on a mortgage, there is no principal sum? Doesn't that mean you would be in default of nothing?"

Again, on a factual basis, we'd need to sit down and talk that through with you.

The next comment is from Mr. Boyd Fraser. "Dear Chairman, I would like to take this opportunity to thank you, Mr. Rob Adams and Mr. Mark Smith, for the tenor of continuing discussions that I am having re: the family of the late Sir Edward Weary Dunlop and of my father's estate. The goodwill is evident. And in accordance with Perpetual's renewed commitment to its core values of integrity, partnership and excellence, thank you and regards. Mr. Boyd Fraser."

Thank you. Any other?

There's one final one, Chairman, from Rita Mazalevskis. "Whilst the Board delegates the day-to-day responsibility for the management and operation of the company to the Managing Director and CEO, the Board remains responsible for overseeing management's performance. Has the Board reported or recorded any breaches by management in the last 12 months? If so, through which avenue and how many?"

The Board has an extensive risk metrics and policy, and Sam Mosse, our Chief Risk Officer, monitors all of those. So there's no -- the Board is across through those reports and what goes on, and there are no breaches.

Chairman, we have no further questions.

Thank you. I'll now just ask shareholders to ensure that you complete your voting for each resolution. And again, if you're uncertain, please use the support function. And as I mentioned earlier, voting will close 5 minutes after I close this meeting. And after the polls have closed, the returning officer will, of course, count the votes and will release this afternoon the outcome of the voting. Thank you again for persevering with a virtual meeting. As I said, this is the first time for Perpetual, although some of us have had other virtual meetings, we will seek feedback and analyze how it's worked with shareholders. And our intention is if virtual meetings remain, we'll seek to improve them. During the questions, as happened last year, we took onboard a number of issues. And as with last year, at next year's AGM or earlier, if that's possible, I will update shareholders on those issues that you take the time to raise. And on those issues that are complex from a factual point of view, as I said during the meeting, we will take those offline with you, and we can assist in providing answers. This is a great company. We -- our integrity, our trust and our relationship with our shareholders is paramount. We thank you, and I'll close the meeting.