Perpetual Limited (PPT) Earnings Call Transcript & Summary

Good morning. I'm Tony D'Aloisio, the Chairman of Perpetual. It's 10:00 a.m. And as I've been advised that a quorum is present, I declare the 2023 Annual General Meeting open, and welcome you to Perpetual's AGM in this new venue to cater for our expanded shareholder base. Let me start with acknowledgment of country. We acknowledge the traditional owners of the land we're present on today, the Gadigal people of the Eora Nation, as the custodians of this land, recognizing their connection to land, waters and community. We pay our respects to Australia's First Peoples and to their oldest past, present and emerging. We would like to extend our respect to and welcome any Aboriginal Torres Strait Islander people who are joining us today. We also acknowledge the traditional owners of the many lands where our attendees are situated today, both here in Australia and overseas. As I said, I'd like to welcome you all our shareholders, proxy holders and guests both here in person and online and in particular, welcome to our long-standing existing shareholders, our new shareholders and to the Pendal shareholders who are now -- have become perpetual shareholders through the Pendal acquisition. For those of you that are joining us virtually today, we hope you found the virtual meeting online guide and welcome and summary letter we provided to you and published on our website useful. And of course, welcome to all of you as well. Just a short note on emergency procedures. Should there be some unexpected emergency, then staff will -- that are here will actually guide the meeting on how to respond to that if we need to, just to wait for instructions. With that, let me now just move to introductions of the Board and management and our auditor. In the room, seated at the main table, I'm joined by -- on my left, Rob Adams, our Chief Executive Officer and Managing Director; Sylvie Dimarco, our Company Secretary; Ian Hammond, Non-Executive Director; Greg Cooper, Non-executive Director. And Fiona Trafford-Walker with the vacant seat there as she's just off a flight from the U.S. and she'll join us shortly and apologize, but she will be joining us for the meeting, and then Nancy Fox, the Non-Executive Director and Chairman of the People and Remuneration Committee. Joining the meeting virtually today are non-executive directors Mona Aboelnaga Kanaan and Christopher Jones in the U.S.; and Kathryn Matthews in the U.K., as you see from the screen. They're -- obviously, they're our U.K. and U.S. Directors. I'd like to also introduce our executives in person here. We have the CFO, Chris Green, we've got the Chief Operating and Chief Integration Officer, Amanda Gazal; our Deputy Chief Operating Officer, Craig Squires; our Chief Executive of Corporate Trust; Richard McCarthy, our Chief Executive of Wealth Management, Mark Smith, and Chief People Officer, Paul Chasemore. Online joining us from London is our Chief Risk and Sustainability Officer, Sam Mosse. And finally, and probably most important, I'd like to welcome Brendan Twining, who is the company's auditor from KPMG. Brendan is here, of course, and is available to answer any questions that shareholders may have in relation to financial year '23 financial statements and the auditor's independence, and we will deal with those questions or questions of Brendan under the first item of business that I'll come to. Talking about items of business. Today's agenda is as follows: will be -- the presentation as usual of the financial year '23 financial statements and reports. The adoption of the remuneration report for financial year '23, the reappointment of myself as a Non-Executive Director, the reappointment of Ms. Fiona Trafford-Walker as a Non-Executive Director. The appointment of Christopher Jones as a Non-Executive Director and the approval of the financial year '23 variable incentive equity grants to the CEO and Managing Director. The notice of meeting, of course, you have further information on all these items, is of course, in the notice of meeting. I'll take the notice of meeting as tabled and read. A note on proxies. As described in the notice of meeting, proxy appointments were able to be lodged up to 48 hours before this meeting, and they are in. Now where I, as Chairman of the meeting, have been appointed as a shareholder's proxy or become their proxy by default. First, I will vote directed proxies as they've been directed by the proxy appointment and I will vote any available undirected or open proxies in favor of each resolution in accordance with the Board's recommendations. Now if you are participating as a shareholder and hold proxies, then you would have received an e-mail setting out instructions on how to vote those proxies using the voting mechanism on the platform. So that's proxies. Now voting. Voting on each resolution as is usual, Perpetual will be conducted by way of a poll. Karen Hopkins from KPMG will act as scrutineer, and Simon Duivenvoorde of Link Market Services will be the returning officer for the purposes of that poll. Each of the resolutions that we will have today will be ordinary resolutions and need to be passed by a simple majority. Now if you're voting in person, you would have received a yellow voting card when you registered today. they'll be used to cast your vote. And then once those votes or all votes accounted and proxy votes accounted will announce the results on each resolution to the ASX as is normal later this afternoon. The poll is now open, and you may cast your vote at any time. You may also change your vote at any point until I declare the poll closed. And the poll will remain open for 5 minutes after the end of today's meeting. Now I need to -- just to say a few words about voting online. The steps to those that are online to vote, to register to vote, click on the get a voting card button, enter your SRN and or HIN, and our Post Code. If you are appointed as a proxy, please enter the proxy number issued by Link in the proxy detail section, then click submit details and vote, fill out the voting card on each item of business, then click and submit vote. As you can vote on all -- and you can vote on all resolutions at any time until the poll closes. Now if you experience any difficulties in your online platform or you're unsure on how to vote, there is a help line available, which is 1800-990-363 within Australia and which is displayed on the screen. At the conclusion of the AGM, if you're online, you'll see a red bar along the top of the online platform with a countdown and you must log your votes prior to the end of that countdown period. So if you've not registered to vote, please do so now. And as I said, when it comes to actual voting as a poll, or I should say, when we actually are voting on each resolution, the actual proxy votes because we're voting on a poll, will appear on the screen behind me, so you'll see how the proxies have are running. Now that's voting. I hope that's clear. And as I get to each resolution, I can clarify it further for you. Now we've also got provision clearly for asking questions. I'll introduce each item of business or each resolution and then there will be an opportunity to ask a question. And we will take questions from shareholders in the room. Then from shareholders using the online platform and then take questions received over the phone. As I said, we will take questions under each item of business. If you're in the room and you wish to ask a question, you'll see that we've got microphones that are in the room. Please make your way to that. A staff member standing there will introduce you, and then you ask your question. And we encourage you to use those microphones. But if you're not able to move to a microphone, then please raise your hand and we'll get a roving microphone to you as quickly as we can. So that's questions for those in the room. Questions online for shareholders that are participating online, there's opportunities to ask questions during the meeting, and this function is now also open. Again, to do so, click the ask a question option, then ask a question in the box pop-up, and type that question in and submit. I will address written questions that we receive. And again, I'll do so under each item of business. And as I said, there's also a facility for telephone, which is -- it as easy as it we might make it. I'm not sure why, but it is -- it does involve quite a procedure. So to ask a question by phone, you'll require a unique PIN and you need to call Link on 1800-990-363, if you haven't already done so, and they'll issue you with a pin. To ask a question over the phone, you call 1800-577-505 from Australia and (612)-91892002 overseas. The moderator will ask you for your PIN and then we'll allow you to ask questions and you'll come into the meeting and then I'll answer the will answer the question. So that completes the formalities on proxies, on voting and asking questions. Hope that's set up, that's all clear. But as we get into the agenda, I can clarify things further. With that, I'd like to move to the Chairman's address before I ask Rob Adams to deliver the Managing Director's address to the meeting. And in doing that, what I'd like to do is to provide some comments on our performance and cover some other formal matters. Then importantly, I want to provide an update on our strategy and where we currently are on execution. Clearly, with the acquisitions we've made, it's important that we -- both the Chairman and the CEO, do that at this meeting. But before getting to that, first, on behalf of the Board, I'd like to acknowledge and thank all our people for their continued dedication and hard work in what has been a very significant year in many ways and in many ways, transformational for the Perpetual Group. And in particular, I'd like to thank the many teams who have worked through an intense period of change and continue to contribute to our strong and successful businesses in Asset Management, in Corporate Trust and in Wealth Management. Now they know that our work is not complete. And we will continue to work hard to deliver the benefits, which are commensurate with the return on the capital that we've invested for our shareholders. I'd like to particularly acknowledge and thank Rob Adams and the Executive Committee for their leadership throughout the year and the work they've done and continue to do in executing on strategy. Over the past few years, through their work, we've strengthened our 3 businesses, including by undertaking strategic acquisitions to support our growth initiatives. The most notable of these, of course, has been in the asset management area where we acquired Trillium and Barrow Hanley in 2020 and Pendal in 2023. Now the Board and I, as Chairman, remain accountable to our shareholders to deliver returns on that capital employed. We feel we're making good progress, and I will explain and go into that in a moment. While we're disappointed with our share price as it stands today, I'd like our shareholders to remain focused on the quality of our assets and the better competitive position we now have in each of our businesses when compared to those of our major competitors. The Board believes that these are the most important drivers to value accretion. And I'll come back to those acquisitions. First, just the results for financial year '23. The group reported underlying profit after tax, UPAT of $163.2 million, an uplift of 10% on the prior year, noting that the year included 5.5 months of Pendal earnings and we settled that in January this year. Statutory net profit after tax was $59 million, down 42% on the prior year due mainly to transaction and integration costs with the Pendal acquisition, which are primarily one-off in nature. Our final dividend of $0.65 was declared, which was 40% franked. The lower franking levels in financial year '23 reflect the increased contribution of the international sources of earnings as the proportion of our overseas business grows. Total dividends for the year were $1.55 per share. This represents a payout ratio of 78% for the full year within the board's stated dividend policy to pay between 60% and 90% of UPAT in dividends to shareholders. And total dividends would include the unusual first half '23 dividend period where we declared 2 quarterly dividends with the purpose of aligning earnings and dividends of Perpetual and Pendal shareholders. Our balance sheet. The Board has been very careful and is had careful regard to our balance sheet and our capacity of Perpetual as a group. While there's been an increase in debt levels to fund the cash component of the Pendal acquisition, the Board's view is that this level of debt is manageable and well supported by both the diversity of Perpetual's operations as well as our planned paydown period -- paydown schedule. At the time of the acquisition, management committed to reducing gross debt pro-forma EBITDA from 1.7 to 1.2x over the 3 years following completion, and we remain on track to achieve this commitment by January 2026. Our plans clearly have factored into them the continuation of our dividend policy as well as stress scenarios concerning movements in interest rates and market volatility. To maintain an alignment between management and shareholders and provide necessary incentives for management, the Board has implemented what it believes are fair and appropriate incentives for management to deliver the expected benefits. Importantly, the incentives for management include long-term incentives, premised on absolute total shareholder return or ATSR, and includes a special grant based on achieving absolute total shareholder return above 10%. The stretch components of these incentive arrangements are real as can be seen from a number of prior year incentives that may not have met -- that did not meet the required hurdles. Going through major acquisitions and change, of course, we would also be looking at the Board and turning now to the Board. As part of the acquisitions, the Board has reexamined its skill metrics to ensure that it has the skills to lead a much more expanded group in this execution stage. The Board invited 2 Pendal Directors to join, Kathryn Matthews and Christopher Jones that you saw on the screen earlier to join, based in the U.K. and U.S. and both bring extensive asset management and financial services experience to the Board. At the time of her appointment, Kathryn, who is online indicated that she would be unable to join the Board on a long-term basis beyond today's meeting. And on behalf of the Board, I would like to thank Kathryn for helping us through this initial integration phase. Now I'm also pleased to confirm that we have secured a new Board member, Mr. Phil Wagstaff to join the Board, replacing Kathryn and he will join us in November. We announced that appointment this morning. Phil has over 35 years' experience in asset management industry, leading global distribution teams for numerous U.K. listed asset managers. He's based in the U.K. and has extensive knowledge and experience in our businesses in the U.K. and Europe, including the important J O Hambro business, which was acquired as part of Pendal. In addition, following the retirement of Craig Ueland last year and with 2 other Board members due to retire in 2024 as part of our broader renewal process, we're actively searching for replacement, at least 2 replacement directors. These changes and those to come add fresh eyes and views to the Board as we drive the delivery of benefits and assess the new strategic opportunities that these businesses will bring for the group. And it's worth noting that this part of our governance review, we've also added 2 new committees; first, to formalize the oversight of the integration of Pendal into our business, including the delivery of the synergies, the Board has established an integration committee, which will be chaired by Fiona Trafford-Walker, who has joined us. Thanks, Fiona. And she chairs the integration committee and along with Nancy Fox and Christopher Jones on that committee. Secondly, the Board has also strengthened its oversight of Perpetual's technology and cyber risk through the establishment of a specific technology and cyber risk committee chaired by Mona Aboelnaga Kanaan and including Ian Hammond, Fiona Trafford-Walker and Christopher Jones. And at today's meetings, you as shareholders will have the opportunity to vote on the appointment of Christopher Jones and the reappointment of both Fiona and myself, when we get -- and we'll address those reappointments later in the meeting. So now let me move to an update on the strategy and its execution. Now some 4 years ago, after a careful review when recognizing the growth challenges that were then ahead of us with the businesses we had, we embarked on a strategy to reshape Perpetual to better, so that it's better positioned to face the changing market dynamics and deliver future growth. The strategy involves continuing to strengthen our 3 businesses: Corporate Trust, Wealth and Asset Management, both through our organic investments to build new capability and inorganic investments through our acquisitions. Now the major investments we've made have been in the Asset Management business. We considered that our Asset Management business which was Australian-based only good as it was and still is, lack the necessary scale and product set to grow and remain competitive, both domestically and internationally. And we're obviously also concerned at the time that it was in net outflow. Through a series of acquisitions, we have diversified across multiple strategies and distribution channels and have grown from around $27 billion in assets under management to $212 billion in financial year '23. Now today, our asset management business is larger, more diversified global businesses with 7 respected brands and quality investment capabilities across geography and product sets. And Rob will cover these in more detail. Transformational corporate strategies, such as these, particularly where M&A is involved can and do take time to deliver full benefits. As I said earlier, I think we are making good progress, and I'd just like to elaborate on that with a few points. In Asset Management, recognizing the growing trends in responsible investments, we purchased Trillium in 2020. And since then we've nearly doubled assets under management from $5.6 billion to $9.7 billion, including attracting $2.3 billion of net inflows. This acquisition is clearly delivering value for shareholders, particularly given what it could be worth today, knowing our highly valued such specialist ESG for firms are. Then at a time when the market was favoring growth investments, we saw the opportunity to acquire a 75% interest in Barrow Hanley, a value manager, and that tripled our assets under management and provided 21 new strategies across asset classes and geographies. Since then, there's been a significant rotation in the S&P 500 to value style investment, which has benefited Barrow Hanley. Currently, 100% of Barrow Hanley's equities capabilities and 100% of the fixed income capabilities are outperforming their respective benchmarks over 3 years to 30th September 2023. And of course, I should have mentioned that Trillium is based in Boston, and Barrow Hanley is based in Texas in the U.S. You will have also seen from our first quarter '24 release, update released last week that Barrow Hanley had a strong quarter achieving $0.5 billion in net inflows across strategies for that quarter. So over the past 9 months, Barrow Hanley has seen over $1 billion in net inflows, delivering on our expectation at the time of the acquisition that it would move into positive net flows in the third year of ownership, which is where we are in. And at that time, we committed that to achieve synergies, 20% annualized EPS accretion from that acquisition in the first year, and we achieved that. So we believe that Barrow Hanley and Trillium transactions have been value accretive for shareholders and are performing ahead of expectation at the time of acquisition. I think they proved that we can buy and our team can buy at a good price. It can also build and extract value from acquisitions such as these. To back that we -- and that continued growth -- we've also invested in significantly in larger global distribution capability where we've made a number of investments to attract new monies across all our businesses in asset management. The Board regularly reviews the distribution team's progress and its pipeline for new business, while we're still in the early days for our new team following these acquisitions with key appointments in June. We're encouraged by the recent new business wins and continue to see growing interest in Barrow Hanley strategies and a number of the J O Hambro strategies. So now turning to Pendal, despite being impacted by market volatility and net outflows in the short term, Pendal is a high-quality business, which combined with Perpetual delivers larger and more diversified asset management business that is now better positioned for future growth through the benefits of scale. At the time of the acquisition, we announced targeted synergies of $60 million over 2 years. We revised that to $80 million in annualized synergies. And at 30th June '23, annualized expense synergies were $29 million, on track to achieve our targets that we've set $40 million by January '24 and then the balance by January '25. So it's now been some 9 months following the completion of the acquisition in January of this business. And while we're still in the early phases of integration, we believe that this will be a value accretive acquisition if not in the immediate term, in the medium to long term. At the time we acquired Pendal, we were trading at an earnings multiple of 12.3x and Pendal was at 8.2x and we used the combination of shares and cash to fund the transaction as consideration. By doing that, we're able to acquire a high-quality business that was trading at a lower multiple. The Board's judgment at the time was that we may not have another opportunity from a relative valuation perspective, to acquire Pendal over the long term, and the Board took that opportunity. Now, we recognize that the market will generally only reward achievement. And as with Trillium and Barrow Hanley, we need to prove that through execution, what the Pendal accretive value will be for our shareholders. That's our focus for the foreseeable future. And we're not looking at deploying additional capital on acquisitions. Rob, in his presentation, will provide more detail on what has been done to deliver benefits from this important acquisition of Pendal. But I also mention that the Board is working and strengthening the 3 businesses. It wasn't -- asset management has been the main focus. But it's important to look at the strength of our other 2 businesses, the Corporate Trust and Wealth Management business. Our strategy just wasn't focused on 1 aspect. We are looking at strengthening the whole of the business. Now Corporate Trust, very high-quality business with an unrivaled position in debt market securitization managed fund services. It's delivered double-digit annual growth for the past 10 consecutive years. Funds under administration grew 6% in financial year '23 to $1.16 trillion and funds under administration grew further in the September quarter to $1.18 trillion. Over the past few years, there's been ongoing investments in developing digital solutions capability for corporate trust clients. And in 2019, we approved the acquisition of Laminar Capital. Perpetual Digital was created, providing new sources of revenue for the business. And in financial year '23, Perpetual Digital delivered $23.4 million revenues up 20%. So we've been investing in the Corporate Trust business. Our Wealth Management business continues to deliver returns for the group. Over a 5-year period, the business has diversified its service offering, supporting consistent and quality earnings, particularly through periods of market volatility from its non-market related revenue, which have been delivered through Fordham and Priority Life. Fordham has had a very strong year in financial year '23 following a rebounding in client activity post COVID lockdowns. And Priority Life, our specialist risk advisory business has had its best year since we acquired it, leading to the medical segment growing revenues by 17%. So as a Board, we remain fully focused on strengthening and bettering position and better really positioning these 3 businesses against our competitors. Strong business as such as these will enable us to deliver better returns for you, our shareholders, and quality businesses enable your Board to assess additional strategic options that may be thrown up to maximize value for shareholders. So our focus in summary, in repositioning Perpetual from where it was and where it is, we have great confidence that these businesses will deliver value. We've got a short-term issue, and we're focused on execution. And as we succeed, we believe that the share price should normally should follow. Just finally, just a word on -- before handing to Rob, on sustainability. This year we've made some important progress in the delivery of our sustainability strategy, Perpetual's prosperity plan, which we launched in '22 is important, and Rob will talk us through that. But let me just conclude to emphasize that the Perpetual Group today is a vastly different company than when it was indeed just looking at our shareholder base, it's almost doubled over that time from 55 million to over 100 million. We have scale. We have deeper capability, and we have a diversified business, which takes us into new markets, added new revenue streams and are opening up -- and are opening up new growth opportunities. But you can rest assured that your Board and the management team are absolutely focused on maximizing the full value from the capital that we've deployed. And on that and on behalf of the Board, I'd like to thank you, our shareholders, for your continued support. And I'll now hand over to Rob to present the Managing Director's report. Thanks, Rob.

Thank you, Tony. And good morning, everyone. Thank you for those who have joined us here in Sydney in the room. Thank you, and good morning to those that are joining us either online or via the telephone. I might just hand you that, Tony. Okay. As Tony mentioned in his address, the FY '23 financial year was indeed a significant year for Perpetual. Over the last 4 years, Perpetual has executed our stated strategy of adding new capabilities and services across each of our 3 businesses, driven by both acquisitions and organic development. Through the execution of this strategy, Perpetual now has a broader array of future growth opportunities. Acquisitions such as Trillium and Barrow Hanley in our Asset Management business, Jacaranda and Priority Life in our Wealth Management business and Laminar capital in our Corporate Trust business and now providing new avenues of growth for the firm. And into the future, we expect our recent acquisition of Pendal to similarly provide us with further future growth opportunities. Following the acquisition of Pendal, Perpetual is a transformed business. We are a diversified financial services company with 3 distinct market-leading divisions, which now includes a truly global asset management business. Through the acquisitions of Trillium, Barrow Hanley and Pendal, we have created a world-class multi-boutique asset management business with high-quality investment capabilities managed by investment teams who lead their respective categories, now supported by a global distribution team covering all key regions and all key channels. And we have significant capacity for future growth from those existing capabilities. We are now fully focused on driving that growth over time. With the acquisition of Pendal, we have doubled our AUM, as Tony mentioned, to $212 billion across our 7 leading asset management boutiques. Pendal's contribution since we completed the acquisition in January has been impacted by net outflows across a small number of capabilities, which, of course, has been disappointing. However, given the quality, the breadth and depth of our investment capabilities, we remain confident of returning to growth over time. Last week, we announced our business update for the first quarter of FY '24, which showed a marked improvement in net flows for our asset management business despite the difficult environment that we're currently operating in and our new business pipeline is healthy and growing. Importantly, we have retained all key investment talent and our investment performance is strong or improving and our combined global distribution team is starting to positively impact. We are entering a new phase at Perpetual. At our FY '23 results, we provided a strategy update with the key change being our move to being entirely focused on driving organic growth, delivering the expected benefits from our acquisitions made over the course of the last 4 years and across all divisions, as Tony has mentioned, including, of course, Corporate Trust and Wealth Management. And we are very focused on delivering returns to our shareholders on the investments that we have made. Importantly, through this change, we have been able to progress our sustainability strategy, Perpetual's prosperity plan, which we launched at the start of FY '23 just prior to the acquisition of Pendal. We have retained our 35 commitments across the 4 key pillars of that plan, and I'll provide an update on this shortly. Turning now to our headline results for FY '23, which Tony has touched on. Perpetual delivered operating revenues of $1013.8 million for the year, an increase of 32% on FY 2022, which reflected the 5.5 months contribution of Pendal and strong growth in our Corporate Trust and Wealth Management businesses. Tony mentioned our underlying profit after tax was $163.2 million, while statutory net profit after tax was $59 million. We believe this is a solid result in what has been a difficult operating environment for equity markets and for asset managers in general. In particular, this is -- we think this is a result that demonstrates the strength and diversification benefits of our unique combination of businesses, seen through the growing contributions of both our Corporate Trust and Wealth Management businesses, most particularly the growth in our nonmarket-linked revenues. Turning now to each of our divisions, starting with Asset Management, where underlying profit before tax was up 29% due to the inclusion of Pendal. Total AUM, as mentioned was $212 billion as at the 30th of June, which includes $110 billion in assets under management from the acquisition of Pendal, which we completed in January. Total AUM was supported by positive markets by strong relative investment performance and favorable currency movements. We reported total net outflows of $8.1 billion for the year, which, as mentioned, was disappointing and this was impacted by a variety of factors including the following: We saw underperformance in J O Hambro's global and international select strategies during the period, which impacted flows. We saw asset allocation shifts generally from clients from equities to fixed income, which primarily impacted flows in U.S. equities, both from Barrow Hanley and from the newly acquired TSW, which is part of the Pendal business. And thirdly, defined benefit schemes, particularly in the U.S., many schemes had become fully funded during the period given the performance of underlying assets, and hence, we have seen a derisking by some of those defined benefit clients reducing their equity exposures. And in addition, with the asset allocation shifts due to higher bond yields in general. Whilst the net flow result for the year, as said, was disappointing and that market conditions in general remain challenging. With our strong outperformance profile across our capabilities, we believe we are well positioned to see an improvement in flows with 78% of the group's strategies outperforming their benchmarks over the important 3-year period to 30th of June 2023. As mentioned, just last week, we reported our asset management flows for the first quarter of the '24 financial year, and it was pleasing to see a significant improvement with positive net flows in total across the group of $100 million positive for the period, despite declining markets and industry-wide outflows -- across geographies, those industry-wide outflows. Our new business pipeline continues to grow and as we start to see the benefits of our now truly global distribution footprint, deliver improvement. In Wealth Management, we reported strong growth in nonmarket-linked revenues supporting underlying profit before tax growth of 6% compared to the prior corresponding period. The diversity of services that we provide our clients in Wealth Management underpins its quality of earnings throughout market cycles. It's been pleasing to see our gross margin relatively stable despite a difficult operating environment. We have seen a material improvement in our nonmarket-linked revenue streams led by Fordham, which is our accounting and financial services business that sits within Wealth Management and Priority Life that Tony has touched on, our Risk Advisory business. Turning now to Corporate Trust. As Tony again mentioned, we have a very high-quality business in Corporate Trust that continues to deliver growth on the basis of the back of our unmatched long-term client relationships. Underlying profit before tax was up 12% and revenues up 12% in FY '23. It's been particularly pleasing to see the consistent delivery of the prized combination of strong margins and earnings growth, which has long been a feature of the Corporate Trust business. While the higher interest rate environment has put some pressure on competition and activity in general within the Corporate Trust segment, the business is well supported by the long-term client relationships I mentioned and by our service model. This was further evidenced in our Q1 business update last week, which highlighted continued growth in both our debt market services and Managed Fund Services businesses. Our relatively new digital division has shown consistent levels of top line growth, as Tony mentioned, 20% in the previous financial year, and we expect that rate of growth to continue in FY '24. Turning now to provide some further detail in relation to our asset management business and an update on our acquisition of Pendal. Prior to our acquisitions, Perpetual assets -- Perpetual's Asset Management business was an Australian focused business with Australian investment expertise offered to Australian clients only. Given the lack of depth in Australian capital markets and when combined with our ever-expanding compulsory superannuation sector, the market in general has been increasingly allocating assets outside of Australia necessarily so. And Perpetual simply could not participate in that permanent trend of allocating to asset classes outside of Australia as our capabilities were all domestic and focus. We, therefore, needed to add global investment capabilities in order to be more relevant to our Australian clients and to access growth opportunities outside of Australia. In June 2020, we acquired leading ESG specialist firm Trillium, and later that year, we acquired a 75% interest in Barrow Hanley, a leading global value investment firm, both organizations with 40-year histories. Following the acquisition of Pendal earlier this year, our Asset Management business is now a truly global business with significant exposures to the key markets of the U.S., which is 50% of the addressable market globally in asset management, the U.K., Europe and Asia. Our global multi-boutique model has now expanded to include 7 leading brands with the addition of Pendal, J O Hambro, TSW and Regnan through the acquisition. We have world-class investment teams managing in excess of 100 investment strategies, and those existing capabilities have a combined capacity of $1 trillion. So you can see a growth runway there over the long term. Our global distribution team has more than doubled in size and now has a deeper, broader footprint across all key markets and channels, better positioning us to generate growth in assets under management over time. This broader and deeper key market coverage would have taken Perpetual many, many years to develop ourselves. We are now more relevant to our Australian clients, and we have active and potential relationships around the world, presenting us with significant future growth opportunities. And from this point, it's all about successful execution. So let's move to execution in Asset Management. We are entirely focused on positive strategy execution for our asset management business. Since the completion, you'll see on the left-hand side of this slide, we have, importantly, retained all key investment professionals across our 7 boutique businesses and brands. We have simplified our asset management leadership team to create a globally aligned team with improved accountability and faster decision-making. We have combined all of our distribution teams across the key markets. Importantly, in the all-important U.S. market, we have appointed a new head of Americas Distribution, Mickey Janvier, who's been up and running with us now for probably 4 months, I think. Mickey is a deeply experienced distribution executive with over 20 years in asset management distribution experience in the U.S. And he joined us from Aberdeen, where he was most recently and he led both the intermediary and institutional distribution teams there, and he's already having a very positive impact for us. We have finalized and are now executing on a new global distribution strategy, which is built from the bottom up by region, by channel and across each of our boutiques. And as I've referenced, we have seen a material improvement in net flows in our Q1 FY '24 results, which included an improvement in net flows, importantly, for the international select strategy I mentioned before on the back end of improved relative performance from that important strategy. Now with the right people, the right structure and strategy in place, our focus over the next period -- our focus over the next period is to deliver on the following on the right-hand side of the slide. Our coordinated global distribution focus will be across priority products. You can't do -- you can't sell everything at once. We have a -- and we have a very clear plan in terms of our focus across priority products and driving a growing pipeline for those capabilities. We are focused on opening new channels and new regions for boutiques, which differs from boutique to boutique, as you would imagine. But a good example is opening up the U.S. intermediary channel, which, of course, is a significant opportunity for Barrow Hanley, which will be for the first time in their 40-year-plus history, that their services -- the capabilities will be available to the U.S. intermediary marketplace. And to put that in some focus, single advisory firms in the U.S. have more advisers in one brand and one shop than the entire Australian advisory marketplace. So there are very significant opportunities that we open up through the intermediary channel in the U.S. We have, as I've mentioned, strong investment performance across our capability. That is our product and our investment teams are delivering exceptional performance, and we need to better leverage that for more consistent growth. We will continue to streamline and rationalize our product structures to drive further efficiencies across the business, get the benefits of scale and to improve focus. And our new leadership structure now provides us with a global view to allocate resources to areas of best expected return. As mentioned, the quality of our investment teams, our strong relative investment performance and our newly combined global distribution team provide us with confidence that we will continue to see improvement in net flows into our asset management businesses, building on the improvement we've seen in the first quarter of FY '24. Now turning to an update on the integration. Of course, the successful integration of Pendal remains a key priority and I'd like to provide you with an update on the progress that we're making. Today, the acquisition of Pendal is nearly 9 months in and the headline is we remain on track to delivering on our upgraded targeted synergies. As at 30th of June, we had delivered $29 million in full run rate synergies, and we reaffirm our total synergy target of $80 million, which was upgraded from the original $60 million by January 2025. So that's 2 years post acquisition. The costs associated with gaining synergies to the 30th of June were approximately $39 million. Last week, as part of that business update, we reconfirmed that the integration remains on track and that we are on track to deliver the promised $40 million of annualized synergies by the first anniversary of the transaction. This financial year, our integration activities are focused on technology combining head offices here in Sydney and a program of work to optimize our third-party vendor costs. So whilst there's much for us to do, I firmly believe that this acquisition will deliver value to our shareholders over time. We have an enviable array of world-class investment managers, one that I think it would be almost impossible to replicate. They are delivering strong investment performance. We now have a truly global distribution team. We have an experienced management team, and our focus is fully on positive execution and delivery to our shareholders. Turning to the next slide. As said, and sorry for repeating it, but it's important. We are fully focused on building a stronger, simpler and better perpetual. The key message I want to reiterate is that following a period of M&A activity to expand our foundations for future growth, we have now moved to be entirely focused on driving organic growth and delivering to our shareholders the expected return on the investments that we have made. We also recognize that in the process of growing our businesses, we have become more complex. And hence, we see opportunities to streamline our businesses, and we recognize that we must be more agile and face into the current and expected future macroeconomic environment. Our 3 strategic imperatives are hot quality advice, strong investment performance and contemporary product and service solutions to support their needs. Simplify and streamline. We will seek areas of simplification across our portfolio of businesses, and we will be focused on areas where Perpetual adds value. Sustainable growth. As said, our focus going forward is to unlock the growth potential from the foundations we have built and to deliver our shareholders the expected return on investments made. Moving now to Perpetual's prosperity plan. As I mentioned earlier, in FY '23, Perpetual launched our prosperity plan, which comprised 35 commitments across 4 key pillars: governance, planet, people and communities. As an organization focused on sustainable growth, we understand the importance of upholding strong behaviors, managing our risks effectively and the role that we can play in accelerating the low-carbon transition, helping our clients navigate the risks and opportunities of a low-carbon future. We also see the benefits that an inclusive and diverse workplace can bring, and we are committed to supporting each of our people to bring their best. As a business that has important client segments, including not-for-profit clients, philanthropy and native title clients. We want to leverage our own services, our time and our own philanthropy to give back to communities and to help advance First Nations prosperity. Despite a significant period of change as we brought together Perpetual Group and Pendal, we have made good progress on our 35 commitments across those 4 pillars, with 27 of our 35 commitments, either being on track or having been achieved. And we have clear plans in place to better address those 8 that are not currently on track. Turning to the next slide, where I'll talk in more detail about some of the initiatives across those 4 pillars. On this slide, we showcased some of the examples of how we are executing on our prosperity plan, and we'll provide some of the highlights of what we achieved during FY '23. To call out just a few. In governance, our clients are telling us that we are delivering excellent client experience. And in the last financial year, we achieved a Net Promoter Score of plus 57, which is our highest-ever NPS score. But we are improving the tools that we have access to across our divisions and particularly in our asset management business as we consider ESG factors in our decision making. In planet, we continue to invest in our capabilities, products and services that support a low-carbon future. And in line with our commitment to grow this part of the business, in FY '23, we had over $1 billion in net inflows into funds that were defined as supporting a low-carbon future. We have also achieved a 100% renewable power position for our Australian offices with carbon reduction programs in place. Balance are strong areas of focus for Perpetual. For the sixth year in a row, we have been named a workplace gender equality agency, Employer of Choice, known as WGEA for gender equality, 6 years in a row. We've implemented market-leading benefits that support diversity, flexibility in the workplace and the well-being of our people. As at June 30, 2023, 34% of our senior cohort globally are women as we move towards our target of 40% by the end of this current financial year. So there's work to do. And finally, in communities. As one of the leading native title trust providers in Australia, we now manage over $1 billion on behalf of native title clients in Australia. We continue to support our philanthropy clients to distribute much needed funds to the community and have supported over $1 billion in distributions over the last 10 years. And importantly, Perpetual as a group gave the equivalent of $2.16 billion through community giving and volunteering. So whilst we've achieved a lot, as always, there's more work to do, and I'm confident that we will continue to make progress against all of our targets in the coming year. Turning now finally to the outlook for Perpetual before handing back to Tony. To again reiterate, we are fully focused on the successful execution of our plan, driving organic growth, leveraging our strong brand, leveraging our client relationships, our expanded product set and our geographic reach, and we will become a simpler and stronger business. In this new financial year, we will drive continued improvement in our net flows for asset management, cognizant of the difficult operating environment. We believe both our Wealth Management and Corporate Trust businesses will continue to deliver similar levels of growth into the future, including further growth from our nonmarket-linked revenues so important during times of equity market volatility. And we will drive simplification and streamlining across our businesses. As said, again, to repeat in closing, we will be entirely focused on delivering to our shareholders the expected return from the investments that we have made. Thank you.

Thanks, Rob. And hopefully, those 2 presentations really give you a feel for the strength of our businesses and also the passion that we have to ensure that we deliver results in the coming years. I now want to move to the formal items of business, the first one, which is the presentation of financial year '23 financial statements and statutory reports. And the first item of business is to consider those. I'll now formally table the financial report, the directors' report and the auditor's report for financial year 30 June '23. Now this, as you know, is not a voting item, but shareholders will have the opportunity to ask questions and make comments on this item. And of course, as we go to each other resolution and also give further opportunity to ask questions under those items of the agenda. The way that I'll handle this section is, first, I'll cover the questions that we've received prior to the meeting. I'll then invite questions from shareholders in the room. I will then answer any written questions that we received online during the meeting. And if you are online, use the online question box to ask a question, and then I'll answer any questions that come in by phone. As I said, earlier, Brendan Twining, our audit partner from KPMG, is available to answer questions, which relate to the work of the auditors and audit independence.

So with that, let's open it to questions. And first, with Sylvie, our Company Secretary, who will assist us navigate the questions and answers today. Sylvie, did we receive questions before the meeting?

Yes, Chairman, we received several questions. I will read out 3 questions now that cover the same theme. The first question is from Nuttall Superannuation Company PTI Limited. Their question is, can you explain why the acquisition of Pendal Group resulted in a massive fall in the share price if the deal was good and the market was performing positively. Can the CFO explain the impact of the deal on Perpetual's performance and share price. The next question is from Michael Santo Colorfiand he has asked -- can you please explain how you have eroded shareholder wealth by over 30% in less than 12 months?

Thank you. Thank you for the questions. We -- as I've said, we do particularly where M&As involve can and do take time to deliver their full benefits. As I said in my opening comments and reinforced by Rob's presentation, we're making good progress, and I'd like our shareholders to remain focused on the quality of our assets and the better competitive position that we now have with each of our businesses against those of our major competitors. And we certainly believe in the strategy. We believe that we can improve significantly shareholder returns, and we remain focused on doing that. In looking at share price, there are also other factors that are impacting. We recognize that investors are going to be necessarily cautious about the Pendal acquisition and the uncertainty which can be created for companies we're making such a large acquisition. And we also acknowledge that the sector has suffered price declines and caution towards equities and companies exposed to the markets. They are background factors, we will influence what we can influence, and we'll remain focused on executing against the strategies that we've put in place. Next question.

The next question is from Stephen Phillips McCarthy and Joanne McCarthy. Why would you consider granting share rights when return to shareholders has diminished?

Thank you. I'll ask Nancy as Chairman of our Remuneration Committee to answer that.

Mr. and Mrs. McCarthy. I don't know if you're in the room or not. I'm going to cover this further in my REM report. But to give you a synopsis on that, the structure of our remuneration model here is to align reward with shareholder outcomes. To do this, we use what's called a balanced scorecard and that balanced scorecard has financial metrics and nonfinancial metrics. Now this year was challenging, as you've seen from the results. So we had challenging results and we basically, as a committee looked at 4 factors that helped us reach our determination on what the incentive should be. The first one was that we had very strong investment performance over several of our strategies over the year. The second was the realization of the synergies that both Rob and Tony have discussed that are on track, which is very important in any major integration like this. The third is the solid performance in Corporate Trust and Wealth Management. You can't forget that we had 3 businesses we were running while we were taking on Pendal, and those 2 businesses have continued to perform well. And lastly, we've had very strong client outcomes. So when we waived that up, we made a determination to use our CEO as an example, to award him a 55% incentive, 55% of his target because we think that giving KMP Chief Executive share rights and performance to our interest. So that's why I've structured it that way.

Chairman, the next question is from day 27 Investments PTY Limited. How far behind are the performance metrics of the acquired businesses over the last 3 to 4 years relative to the acquisition assumptions and in particular, FUM expectations?

Thank you. I'll ask Chris Green, our Chief Financial Officer, to answer that question.

Thank you for the question. We've made 6 acquisitions over that 4-year period. We've talked a little bit about Pendal today. I'd say on Pendal, AUM is actually about where we expect it to be at 30 June 2023 and as we sit here today. The issue we have with Pendal performance to this point is that the mix of assets that we have seen in Pendal has been, unfortunately, higher-than-expected in lower-margin products and a little lower than we expected in higher-margin products, which means earnings expectations have been a little bit missed. We had 5 other transactions. Jacaranda was an acquisition in our Wealth Management business. It's tracking a little behind plan but not materially so. And then in Asset Management, with Barrow Hanley and Trillium acquisitions, they're both tracking ahead of our acquisition assumptions. And for Corporate Trust, where we acquired Laminar, it too is tracking ahead of the assumptions we made at the time of acquisition.

Chairman, the next question is from day 27 Investments PTY Limited. Has the discount rate applied in the valuation of businesses acquired over the last 4 years changed over that period. And by how much? Does this change reflect changes in interest rates and risk premium?

Again, I'll ask Chris Green, our CFO, to answer that.

Short answer is yes, and there's been a lot going on as I think everyone in this room would feel, particularly around interest rates, which has definitely impacted our cost of debt more recently. Also on cost of equity, which is another important element of our discount rate and our weighted average cost of capital. The risk-free weight is an important input into how we come up with the cost of equity. It's gone up in recent times as long-term government bond rates have gone up, which is really a proxy for that risk-free rate. And that's been particularly pronounced in the last month or so. So what we're seeing is upward pressure on our cost of equity from an increase in that risk free rate. And more recently, over the last 12 months, significant upward pressure on our cost of debt from the interest rate rises that we as a company have seen in the same way that may have seen as mortgage holders. The other dynamic going on our discount rate, though, is that over that same period of 4 years, we have taken on some debt and the cost of debt is lower than the cost of equity. And so that's having a countervailing impact on that discount rate. So interest rates and bond rates putting upward pressure on our discount rate and our debt coming on to the balance sheet, putting downward pressure. If we're looking forward, I would be saying if the interest rate environment remains as it is and what we're seeing around the world continues to put upward pressure on bond rates that we'd expect to see that discount rate continue to increase.

The next question is from Peter Georgewick. What is the potential for higher franking credits with future company dividends? When do you expect the benefits of the recent amalgamation of Perpetual and Pendal to show in financial results?

On the first of those, our franking levels, of course, are driven by the proportion of total group earnings and the Pendal acquisition along with Trillium and Barrow Hanley, which are offshore, seen that our offshore earnings has increased, which, of course, has had an impact on the group's ability to generate franking credits. But we do have very strong Australian businesses in Corporate Trust, Wealth Management, of course, asset management as well, which will assist in offsetting that. As a guide, our final dividend for financial year '23 was 40% franked. On the second part of your question on the benefits of the recent amalgamation, I think that I have covered that our immediate term, we are extracting synergies and benefits [indiscernible]. Sylvie, are there any further questions?

Chairman, there are no further questions.

Now we come to questions at the meeting itself. I'll invite shareholders in the room who would like to ask a question on this item of business to walk to one of the 2 microphones or a staff member will assist to introduce you and ask a question, and we'll do our very best to answer. And if we cannot answer, we'll take it on notice and answer it after the meeting. Okay. First question, please...

Thank you, Mr. Chairman. I would like to introduce Mr. Fred Olard.

Mr. Chairman, a year ago, the company had an indicative takeover bid at $33 a share. Interested -- you guys said that you've bought it undervalued the company and recommended people not pursue it. I'm interested to see how you feel about that a year later -- I am hoping you'll say that we're much better off having rejected that bit.

I think, look clearly, you handle things as they come. And that bid in terms, as we announced to the market in terms of its conditionality and its ability to be executed and delivered seem to the Board that it wouldn't be in the best interest of shareholders to then let the Pendal deal go and pursue that. We announced that to the market and we remain of that view. There was a second offer from -- and in both cases, we felt the value would not be there for the perpetual shareholders.

Mr. Chairman, I'd like to introduce William Prentice.

Mr. Chairman. I've just got 2 questions and 1 is following on from the previous gentleman. Has -- given your outlook, which you guys think is looking pretty good, has anyone approached Perpetual of late regarding a merger or a takeover. And the second question is...

Have you got something in mind?

No. Well, you guys seem to think everything is going well, and it's pretty blue skies ahead that perhaps -- but the market has a different view on that, not suggest, but you probably have a more informed running the business, but surely someone out there would be saying, "Hang on, this is a great business. We better start looking at it and selling at a very cheap price within the market. So if, for example, you had a bid at $30, I think it's roughly $20 now. They can say, look, we're 50% above what the market price is at the moment. So I don't know if anything, and I have no suggestion, I don't have the money to make a takeover for you guys. But surely, there may be a few people looking around. The second question I've got, and it was just results from the CFOs presentation or his answer to some questions there is -- and I apologize, it may be in your annual report is in relation to hedging of interest rates for your debt. And if you could just sort of explain that because I think you said the interest costs were going up, and that may be probably had some interest rate hedging in place. And I'm wondering whether you do any hedging in relation to foreign currencies because a lot of our -- we're Australian shareholders largely and whether or not movements in exchange rates are hedged so that our Australian dollar income is maximized.

And thank you for those 2 questions. Chris, do you want -- CFO, want to take the second one?

On hedging, no, we don't have hedges in place for currency or for interest rates. In terms of the interest rate exposures that we have and the currency exposures, we have multicurrency debt. So we have debt in the -- in sterling, in U.S. dollars and Australian. And that multicurrency debt acts as a partial hedge of our foreign currency exposures anyway, and we think that's sufficient, particularly as part of the rationale for our strategy over the years. The last few years has been to give ourselves more exposure outside of Australia. So we want some of that exposure. More recently, how that's manifested itself is, we put out our Q1 update last week and we saw that markets have been down during the quarter. But because a lot of our assets are in offshore in U.S. dollars and in sterling, the changes in interest rates actually -- the exchange rates actually buffeted us against those changes and drop in assets. So there's also some hedging that occurs in terms of the assets that we have in other currencies and the actions of the Australian dollar. But the short answer is that the hedge we have in place is really the debt we have that acts as a hedge against some of those foreign currency exposures.

In relation to the first question, I mean, what you're seeing in the market is the people are taking positions in terms of how they see the forward earnings and how they're positioning themselves on the share register and so on. So the market is still assessing what is happening with Perpetual and where it's headed. There are the positives that are coming on to the register probably along the lines of saying this could be a good buy, but there's also being sales on the other side. So it's still quite volatile in what's happening at that level. At the Board level, I mean, clearly, as we did with the Regal consortium in -- if we have some thing to announce to the market in terms of approaches and so we would do that in accordance with the continuous disclosure rules. So in short, I think, our focus continues to be to demonstrate the value. And hopefully, that -- not hopefully, that should, over time, see a more settled market about taking a position on these forward earnings. And as we succeed, should reflect itself in the share price. Whether people see it as a good buy, and they want to move or not that's a matter for them. It's not for the Board. We will consider and respond within the rules that -- within the ASX rules on continuous disclosure.

Chairman. I would like to introduce Ms. Luby Summons.

My pleasure. You've recalled that I attended last year. And when I did so, perhaps you also recall that I discussed the circumstances surrounding [indiscernible] to receive a considered response to the e-mail that I have recently wrote to Mr. Suzy Superina from client advocacy and also a copy to Mr. Rob Adams, CEO of Perpetual, I feel compelled to read the brief e-mail here and seek a response from you directly. It rates Superina, I trust you well. On this occasion, I'm writing to you in regards to my attendance at the upcoming Perpetual Limited AGM. Further, I am tendering an explanation as to why I have reluctantly decided to these colleagues have an opportunity to carefully consider what I will be making mention of and to hopefully there are multiple references to court proceedings and/or court orders and the -- of court hearing before a judge, wherein the parties have had an opportunity to articulate the pertinent matters prior to judgment. This has never been the case. And she is, therefore, a gross representation of the core elements of my complaint, namely the fraud surrounding the loan applications and the failure of both Challenger and Perpetual to recognize this and make appropriate inquiries as to the patent differences between the 2 loan applications. You claim that the nature of the contractual arrangements between Perpetual and Victoria, Perpetual Trustees, Victoria, and Challenger Financial Services, formerly known as Interstar and now known as advantage. Such that my complaint should be directed solely to advantage. In support of this proposition, you make reference to the Interstar Millennium mortgage program under the heading our position. I regret that the conclusion drawn by you in this regard and refer you to the case of Perpetual Trustees Victoria Limited versus Dale and Faith Burns were in Justice Henan from the Supreme Court of Western Australia concluded that Challenger and the originators were in fact acting as agents of Perpetual. Given should be directed to both Perpetual and advantage. Putting towards the physical disabilities of loan that was granted to me by Perpetual and Challenger are profound and cannot be discounted. Just as Henan's recitation of the contractual arrangements between Perpetual and Challenger is exhaustive. Having concluded that there was, in fact, a relationship with agency between Perpetual, Challenger and the loan originators just as Henan carefully considered the matter in which the loan applications were made and quite rightly concluded that Perpetual's conduct was unconscionable. In the extract from the judgments immediately below, just as Henan expands on his conclusions as to a relationship with agency and that of knowledge deemed to be known to both Challenger and Perpetual. I'd like to read it out, but my mouth is getting very dry. So maybe I'll skip that part. And so -- that's it.

We have it, so.

You have it?

Yes.

So my signature upon the deed of settlement is understandably given much prominence in your letter, but you fail to understand that I was under enormous pressure at that time and that I truly felt that I had no option but to agree to the onerous terms, kind regards. Chairman, late yesterday, I received an e-mail from the Head of advocacy that both she and Mr. Chris Green, Perpetual's Chief Financial Officer, will be meeting with me at the conclusion of the AGM. I very much thank Perpetual for this opportunity. And on this occasion I hope that the core elements of my complaint will be properly dealt with.

Thank you for reading that out. As you said, last year, when you put that to us, we did investigate and came back and to you, and you weren't satisfied with that result and hence the further letter. We've picked that up and after the AGM there will be a further meeting with you to go through that. And hopefully we'll get to some form of resolution for you. But this is quite a complex matter in terms of the years that it's run and it's probably best handled outside the AGM rather than within the AGM if you're comfortable with that, we'll deal with it after the meeting with Chris and Suzy, I think yes, and Suzy. So thank you.

Mr. Chairman, I'd like to introduce Mr. Michael Sanderson.

I'm a member of or an adviser to Bank Reform now, we have about 15,000 members. A member of Bank Reform now. I am also the member of the Bank Warriors, which is a splinter group, not quite as large, but very active. I've just got a couple of housekeeping questions to start with it relates to risk management and complaint resolution. The peak EDR in this country is the Australian Financial Complaints Authority, known as AFCA. AFCA is a private company limited by guarantee and as such, is required to being investigated by a Senate committee, Information characteristics of a company limited by guarantee is each member of the company has a single vote. The AFCA Constitution Section 3D states, the membership of the company is divided into the following classes, voting members and nonvoting members. My questions are, is Perpetual a voting member of AFCA. And does Perpetual think that it's fair that fee paying members of AFCA should be excluded from voting.

Can I ask the context in which you're asking this at an AGM, -- what's the context you have in mind? What's your organization seeking to do here?

I'm just trying to establish whether...

It's just factual, is it.

Yes. I'd just like to know, does the Board I know what I'm talking about [indiscernible] lot of money.

It was just really to understand -- that's fine. I don't know the answer as to whether we are a voting member, but I'm looking at my team here. We're not a member.

You are a member, I can tell you that.

So we're not a voting member. No, we're not a voting member. Our belief is that we're not a voting member, but we will confirm and send you an e-mail to that effect.

Do you think it's fair that you're not a voting member if that's the case?

All I can do on that is I'd like to take it on note. So you're asking the question, and I'd like to just take that on note, have a look at it and talk to the team. AFCA plays an important role as does ASIC as to all these institutions. And clearly, we support -- we would support them. Whether we then need voting or not, that's a separate issue for us to discuss and for management to consider.

I just got a follow-up one that's leading from the first question. The AFCA Constitution, Section 10.7, CII states on a poll, each voting member has 1 vote for each dollar paid by the member in respect of levies and case costs of the company. The members of AFCA, who have the most complaints will have the most fees and costs, and therefore, the most boats taking on Board, ASIC says a member should only have 1 vote. Not only does AFCA Constitution stop paid up members from voting, it also gives additional votes to the worst performers. My questions are, does Perpetual believe that putting the criminals in charge of the court is fair, impartial and just. If so, why? If not, what's it going to do about it?

I think it's one of those questions is -- remember how you answer it, you caught. Well, of course, in a way, the notion that you would put criminals in charge of something we would support that is ridiculous. But there's so much more complicated issue. I think we would need to look at the policy behind that and how it works and probably be guided also by the authorities that oversee AFCA as to what they're saying about that approach to fees. And I mean I guess it's based on something like that if you commit the crime, you pay or something. But I'm just talking about here because I have not studied that issue. Again, we'll have a look at it and a form of you.

I suggest you do. I'm an ex member of AFCA, by the way, just to demonstrate the competence of this organization. I didn't hide the fact that I was a consumer. I applied for AFCA, payment fees, put some questions up to be asked at the AGM, they balance me the night before the AGM. So anyway, I'll let some other people ask some questions. I've got some follow-up working questions.

Chairman, I'd like to introduce Mr. Craig Caulfield.

Can I first applaud the lady that was up here before because it clearly takes a lot of courage going through a long complaint process to actually say I'm going to travel to an AGM to raise some issues. So just my support, congratulations and acknowledgment of her courage. Just a couple of comments or corrections to my colleague, Michael Sanderson, I'm an adviser to Bank Reform now as well as Michael. And I'm a founder of Bank Quarry as well as Michael. Michael mentioned that there were nearly 15,000 members and followers. As of this morning, there's 15,400. So it's quite a group. So when we come here and I've traveled from Queensland, I'm not talking about issues just for myself, we're looking at the wider things for the benefit of customers and boards and companies and regulators.

And on that, I mean, I think our approach has always been as a company to allow the general meeting to be used people to raise issues, including issues that have been raised here. And we do our best to answer them at the meeting or to come back after the meeting and answer the questions.

Let me comment you because I think you've been a benchmark there because I attend many AGMs. And I think one thing you've allayed is the diversity of conversations and views and discussions. So I thank you for that. Just another point on Michael Sanderson. He mentioned that there's a Senate enquiry into asset. There are actually 2 Senate enquiries into ASIC at the moment. And it is quite relevant because ASIC is the overseer of AFCA. And AFCA is the person that you put on the end of your letters, including to the lady before to say if you're not happy with our decision, go see AFCA. So we have a lot of failures in the regulator, ASIC. We have a lot of failures in AFCA. And so complaints emanate up to AGMs because of a series of failures along the way. That was a preliminary comment on the way.

Just on that preliminary comment. I mean, I think -- it's not for us. I mean, ASIC, AFCA, they all have difficult jobs as well, and they're run by people that are motivated by doing their best in the public interest with my own background. And therefore, I think in listening and taking those issues, the issues you're raising on board, we obviously also need to look at their side of it and what they say.

I'm sure most of the people in those institutions and bodies are well-meaning, well-intentioned people. But that doesn't mean things all a part -- and that's why commissioner Hayne pointed out and excoriated both ASIC and AFCA for those types of reasons. Not saying it was under your charge at that time, et cetera. I did want to ask if you can confirm that your usual practice where directors will meet the small shareholders after the AGM over a cup of tea, et cetera.

That's a very good question because we've changed venue. I can see there's coffee out there. So that must be a good indicator, but I'll have to ask the Company Secretary if we... we do -- I was a bit aware because we've changed venues in the normal venue we would, of course. Yes. So that will be available after the meeting.

Yes, that's Universal to nearly all AGMs, the directors share some time talking to the small shareholders, except for ANZ, I would point out. INZ over 6 years is largely with a couple of exceptions, has largely failed at. So thank you for that. Now my main question here was, last year I raised the feeble model litigant principles that Perpetual listed on their website. I say feeble, that's compared with 10 other financial institutions I worked with to adopt and publish these principles.

So these are the model litigant principles...

Model litigant principles, which relate to a customer that's got a complaint if there are any type of legal dispute before a court, after a court, during a court proceeding perhaps would apply particularly to the lady we just heard from before. Perpetual's model litigant principles fall short of the basic minimum standards, protecting customers and that promote earlier resolutions of customer disputes. Last year, Chairman, you promised me you would get back to me to discuss these shortcomings when I raised it. You didn't contact me nor is the principles on your website being updated. My question is, will you agree right now, given you've had a year to review these? Just to adopt the minimum level of principles that are offered by the government and CBA for example, they have the minimum level of principles. ANZ, for example, have a much greater level that they've gone into detail. That would be wonderful if you adopted this, that CBA has the minimum. You're the only 1 of 11 institutions that I dealt with that has a, I would call it, substandard set of principles.

First, if I did promise to get back to you and didn't, I apologize and we'll do that. In actual fact, they were reviewed. I'm advised that our model litigant principles were reviewed as is our dispute resolution procedures on the website and our client, client complaint or client complaint approach. And the advice I received was that they do -- that they are rules to comply that we're comfortable with it. But obviously, I'm happy to look at that further, but we didn't ignore the review. We did the review. I apologize, I didn't come back to you. So I'm happy to do that with our people after the meeting and go through our reasons as to why we think what's there works and take on board any changes you're suggesting.

Yes, thank you. Probably what you've got there does work. It's more if there are emissions or not there, but we can discuss that later. I appreciate that.

Sylvie, we take that on.

Yes Chairman. Mr. Chairman, I'd like to introduce Charles Weeks.

Mr. Chairman, when you give you highlights, do you consider what the inflation is running at -- you mentioned the wealth management has gone up by 6%. But at the same month, the inflation was 6.8%. Hopefully, that's not for the year. If it is wealth management has gone back by 0.8%.

Thank you for the question. Could I ask Chris or Mark, on how we factor in inflation or the disconnect between inflation and returns?

All I'd say is I agree with you that in a higher inflationary environment, real returns matter to all of us in the room, and we're very cognizant of it, which is why we look at things like higher interest rates on things when we have cash that we're earning cash returns on. We're getting higher rates to compensate a little bit for that higher inflationary environment. But I think you're right, the way we like to look at this is real returns. And so we always have a focus on the return -- the risk return and reward on all the investments that we make and that is a more difficult equation when inflation is running higher, which it is. But we also have to take in consideration the interest rate environment in the other economic settings that are around it. So I take your point. I don't have a holistic answer, except to say it's a more difficult job when inflation is at the rate it is.

So you will admit that the wealth management has gone back at the moment.

Well, no, I won't. On the basis that was on print of 1-month inflation. So I'll limit that yes. Hope it's not for the year. Let's hope not. Yes.

Next question, please.

Chairman, I'd like to introduce Mr. Michael Sanderson.

There is nobody waiting down here, so who headed me down here. Again, on AFCA, I'll put it to the Perpetual Board that AFCA members use AFCA as a clearing house and a mechanism to avoid and deflect dealing with disputes directly. On receiving a Dodge AFCA determination in its favor, a financial service provider can hide behind that determination and claim the moral [indiscernible]. The FSP can also knowingly that there is no -- that there will be no challenge from asset treasury or the responsible minister. The FSP would also be comfortable with the knowledge that a merits review of an AFCA determination can only be obtained by the court system that is unaffordable and how to reach to consumers. I'm aware of one Perpetual dispute where Perpetual is attempting to push the consumer into the dysfunction and biased AFCA system rather than the agreed fair and transparent mediation -- remediation -- mediation, sorry. My question is Perpetual has an internal dispute resolution process. Why isn't perpetual working proactively with their customer to settle grievances instead of deflecting to AFCA for a determination that is based on past cases that would not be fair or transparent. Now that lady will be putting questions you online. So a simple question.

I think you need -- Michael, you need. Thank you and you need to look at the totality. I mean, in terms of how we handle issues. We first off, through client service, we really try and make sure that we deliver and don't have issues with our clients and customers. Where we do, we have an internal client liaison system to try and deal with the issues and resolve them in a practical, commercial, quick way that at times may escalate to needing to consider mediation or arbitration -- and that sometimes might even go to court proceedings. Sometimes, it may be with AFCA. There's a requirement to refer things to AFCA as a matter of [indiscernible] in certain situations. But I think from a Perpetual point of view, we have an array of or a range of things that we would be looking at with the client. But our focus is to really try and resolve it indeed -- in the example we had earlier to meet and see if we can resolve with the notion that we hired behind it isn't correct. But disputes can be quite complex and your ability to resolve it very quickly with a handshake and whatever may not always be there. So we are focused on service resolved with the client commercially if we need to go further, have a look mediation, sometimes it might require an independent expert to look at our file and advise the customer if we've done have someone else review or if you think we haven't done the right thing. And sometimes, we might get the mediation and in a very, very, very few cases, we might end up in court but that's Perpetual.

Again, it sounds noise and fluffy, but where you've got a disproportionality in strength and knowledge. You've got [indiscernible] consumer and you've got somebody that's got a legal team at their disposal. And your peak EDR is SaaS. There's an issue there. I'd like to speak to somebody else at the meeting. I've got a solution, but I just want to do one more thing.

Just on that. It's important that you don't go away thinking that because we're a big company, we just rely on hiring a whole lot of lawyers to deal with something, there's not the approach here. Perpetual's approach is to deliver the service, we try and resolve it with the client where they can, do it commercially, if you have to get into these other systems, okay, we need to deal with them. But deal with it commercially, sensibly because we do understand and we totally get it. I'm a consumer as well. We're all consumers and we don't like the pressure thing of people getting behind court cases and so on. So we're at one on that.

Again, I don't disagree with anything you said. But when you get to that point where there is [indiscernible] equity, there is no quality of arms in the court system if you're an impecunious litigant, actual fact you come across as being a fixation to get after a while because you're learning all the time and you add, you add, you add and it's not in anybody's interest.

I agree. And but we're not legal aid either in the sense that we've got to try and be fair with our clients.

I've just got -- you said what AFCA says. I've got something here about what AFCA says. Now I'd like to bring it the detention of a Perpetual that the Board and the Perpetual board that AFCA, the financial industry's Crown Casino, not only ignores consumers, but it ignores AFCA itself. For example, AFCA commissioned an internal assessment regarding loan serviceability, it became clear during the AFCA complaint process that the bank had used another company that had no relationship and made no undertaking to the bank to justify serviceability. The AFCA internal report stated, and I quote, "however, in my view, the bank failed to display the care and skill of a prudent and diligent banker while not linking the profits of S proprietary limit by taking a guarantee from [indiscernible] Limited to secure the loan to the company. " And again, I quote, "it is my view, a prudent and diligent lender would have directly linked the revenue stream to the borrowing by interlocking guarantees and in my view, this was poor banking practice to allow the interest-only obligation to continue without a review once the notice of sale of the business in 2009." And finally, it is my conclusion, the bank could have exercised greater skill and care by linking the cash flow sourced to the debt servicing directly to the loan. Despite basing -- despite AFCA basing its preliminary assessment on this report after refused to make the report available to the compliance until after the final determination, there was no opportunity for the consumers to highlight these damming conclusions or the flawed assumptions in that report. The bank -- as this bank as to other banks hide behind these Dodgy determinations, claiming AFCA is fair and independent. This is the tip of the iceberg and ASIC the treasury, the government and the responsible minister say they can't or won't do anything about it. The only mechanism for redress or merits review of AFCA determination is the unaffordable out of reach courts. After routinely withhold, key information from consumers and fails to treat them fairly, independently, efficiently or in a timely manner. Would Perpetual support demand or membership of AFCA, in other words, consumers that the financial industry? Like that is a financial industry consumer member of AFCA. And if not, why not? And what I'm saying is AFCA has supply side members of the financial service provider industry -- without demand side, there is no industry and it's within the rules. If you are a member of the industry, you can be a member of AFCA.

Well, thank you for putting the position and asking us to have a look at that, which we will but I'm not in a position to give you that sort of undertaking in this meeting. I think let us reflect on it and we can talk further.

Okay. Well, that's just one of many examples, but thank you very much.

I'd like to introduce Mr. Craig Caulfield.

Thank you, Chairman. Your annual report speaks of aligning incentives with shareholders, that's on Page 7. Governance is defined on Page 19 as systems, procedures and practices. I prefer stakeholders that include suppliers and customers, incentives should be balanced to include customer outcomes. Page 10 reports your improved Net Promoter Score of 57% and that does relate to customers.

Yes, it does.

And that is improved substantially on last year's and it's relatively high compared to a lot of other financial institutions, such as CBA with 4 or ANZ with 2 around those figures. So it is something that you can use. But I do find that it's [indiscernible] it conceals long-standing and serious customer complaints, the lady that stood up here first, well, she asked for feedback that contributed to a Net Promoter Score. [indiscernible] Rita Mazalevskis case in the 2019 AGM, and I note it remains unresolved 4 years later. I attended a 5-hour meeting with Mr. Adams and Ms. Mazalevskis and Mr. Adams offered mediation. Ms. Mazalevskis accepted mediation, but subsequently, Mr. Adams has changed the goal posts. You mentioned mediation 3x before as one of the options to be able to go through. If it's been offered, if it's being accepted, keep your word and follow through because this is dragging on and on too long. A shareholder in 2019 criticized the company for not resolving long-standing cases, including Mazalevskis. She might recall, he referred to the banana vendors and the Sandgropers. I think he was a fund manager or invested on behalf of people himself. He was upset that was happening. So why on earth is it still outstanding? And why does Mr. Adams not keep his word.

Well, let me -- I mean, in a sense, are you acting on behalf of Ms. Mazalevskis.

No, Ms. Mazalevskis will be online and she'll be able to ask your own questions but I attended with Mazalevskis.

I think just deal with it in that context because we spent a lot of time working through with her and so on where we would look at this matter to resolve, but it hasn't been capable of being resolved. Mediation was looked at that didn't look like it was going to work. So we offered an independent expert review of far. And as at this point, that hasn't been taken up. So I'm happy to deal with that if Ms. Mazalevskis comes online and ask the question, I'll deal with it. Then, it's not correct that we don't keep our word. We do keep our word. This is a complicated transaction. It has involved our client liaison team that's involved Rob. We haven't been able to resolve it, and we apologize to her and to you for that. But there are times when you can't resolve things because you can't get agreement. Now whether we're at that stage with that one, let's see what the questions are and I'll go into it in more detail then.

I'm happy to compliment your Chairman on certain issues, but you're not right there because this is -- this becomes very simple. Mediation was offered. Mediation was accepted, and Mr. Adams changed the goal post, end of story.

What can we come to that?

Yes, sure.

Mr. Chairman, I'd like to introduce Darius Patrick.

I would like to switch gears a little bit and go back to the financial position of the company. And I was -- I came here late, so I'm not sure maybe someone else was asking the similar question. But how much equity have the company lost compared to the time before Pendal acquisition? And now like over last I don't know, 12 months or maybe even 8 months? And what steps do you think the company needs to take to regain possibly some of this equity?

I think what you mean is how much is the share price going down? Is that what?

Yes.

As I said earlier, we are concerned that the share price is where it's at. And -- but certainly, when we look at these acquisitions and the value they're providing and we're looking at the value of continued execution of the Pendal transaction, we remain confident and optimistic that, that will, in time, reflect itself back through to the share price. And in terms of share price, there are other factors that are impacting on that share price at the moment. And what we're asking our shareholders to do is to stay with us as we work through this period and improve our execution, convince the market that just as we did with Pendel, with Barrow Hanley, and we do with Pendel these are good quality acquisitions that will lead to value accretion for shareholders as we have repositioned the company from where we were 5 years ago to where we are today. Sometimes, you do have to go through these cycles and -- and we recognize that the short-term impact is not liked by all of us as shareholders, but we feel we have a plan and an approach that will see us through that.

Chairman, I'd like to introduce Mr. Craig Corfield.

Chairman. This is about the auditor, but I think it's a question for the Board rather than for the auditor. You see as fit once I have asked it. At the 2019 AGM, I raised the proposal -- I raised the proposal to separate completely consulting and tax advice from audit services. At the 2020 AGM, I flagged a parliamentary inquiry was investigating conflicts of interest in auditing. Chairman, to avoid conflict real or perceived, why not carve out the $400,000 in fees for non-audit work, also recommended by the parliamentary inquiry? Massive adverse publicity on auditors, conflicts and failures has been exposed in the media and the parliamentary inquiries. Not least, 1,100 KPMG staff were cheating in exams. ASIC reported audit quality dived in the 2022 at KPMG. And I think it was -- I think they've done 33 investigations of their audits and -- it was 16 out of those were substandard. 16 audits, and that's the regulator asset looking at them. This is a board governance issue for directors to address squarely. You could, of course, find another auditor. If you were shocked over some of these revelations but a positive step is simply totally separating audit from consulting. And I can't understand why for a small amount of money of $400,000 in the consulting side, that can't be separated. Now I know you're going to come back and say, well, there are particular things that they have oversight of. We have all our safeguards in place to make sure that everything is fine. But surely, just with the smell at the moment of what's going on, sure that KPMG would say, why don't we just separate this out and find someone that's independent.

Look, at the end of the day, these -- the Board's got to look at what's before, what has to be done, the service it's getting, the conflict, as you say, conflict issues and so on. And we go through processes very carefully about these appointments and what people do. We do have to have regard to the skills and so on that we're looking for. And we're very comfortable with the audit work, and we're comfortable with why we're managing non-audit work through a range of service providers, not just KPMG. So I understand your point, you're raising a much bigger policy issue for government and so on. But we've got to look at our company and what we're doing. And at this point in time, we're comfortable with what we've put in place and the safeguards that we have in place.

Well, Graham Samuel, who you know, he has highly recommended just get on with it and do it and separate these.

That is great. Any other questions? Okay. We now move -- thank you, everyone. Thank you for the questions. And a number of the points, and particularly, the points -- the recent points that have been made, we will take on Board. We will engage further with you. But you are clearly using the meeting to raise much bigger policy issues, and we wish you well on those. But at the end of the day, it's -- sorry, I'm being there's one more question. I'm sorry. Yes. Thank you.

Mr. Chairman, I'd like to introduce Mr. [indiscernible].

Just a few clarifications about the Pendal acquisition. You mentioned costs of integration of $39.6 million and synergies over the next couple of years of $80 million. Is there any more costs going to be involved? Or is that it?

I think you're talking about the cost that we take out for the synergies. In other words, to -- for EPS, the slide up, our position to the market was initially, we said $60 million, then now focus is to extract that. If along the way, obviously, if we get further opportunity, we would look at that. But in terms of the market and in terms of what you're asking. That's our position. And we're on track in relation to achieving those over the 2-year period that we talked about. It's one of the issues that the market is looking at as we go. And obviously, if people are assessing, will they achieve these one day, et cetera. But basically, that's our position. And I've got to accept that.

I thought you had a slide there where you had costs for integration of 39.6%.

Yes, okay. The significant pass over to Rob on that one. I think. Sorry, if I misunderstood in.

Just a confirmed number. But yes, so the numbers that were up on the slide to your point were as at 30th of June. So we had extracted run rate cost synergies of $29 million, and there was the cost of, I think it was $39 million to extract those costs, in order to go from the $29 million eventually through to January 2025 to the expected $80 million, we will incur additional costs to implement that, which I think is $140 million in total.

Okay. So $140 million of costs to $80 million of asset benefit. Yes. Okay. The next clarification, it's around your debt of $730-odd million, and you gave a ratio of 1.7x growth. So again, and I apologize if I've got this wrong, your EBITDA was $310 million for this financial year.

I'll have to defer to my CFO on that one. But I'll ask Chris to answer this question. Please complete the question.

I'm just reading off here that your underlying EBITDA was $310 million. And your borrowings is $730-odd million. So to me, that ratio, again, for missing the point is more than 1.7x. Just a clarification around that, so I understand where all numbers are coming from. And you're wanting to get that down to 1.2x. So my question -- end question, I suppose, is going forward, roughly how much a year over the next 3 years, are you looking at paying down? And how is that going to affect potential dividends?

Well, as I said in my -- I'll ask Chris to pick up both those points. But on the dividend, as I made clear in the presentation. We have based our repayment schedule, and we've based our estimates on that debt level and bringing it down on the basis that our dividend policy would continue. So that's and we've also factored in interest rates and so no one can predict it's 3 years. But basically, our intention is to be able to service that debt, pay it down and maintain dividend policy. Chris, could you pick up the numbers and the ratio, please?

Yes. And the guidance we've given is that between now and the 1st of January 2026, we'll reduce that ratio down from 1.7x to 1.2x. We're higher than that at the moment. And it's obviously a function of 2 things, our earnings, as you've said, and the level of debt. So with a combination of paying down our debt over the next 2.5 years and an increase -- an expected increase in earnings, we're expecting to be at 1.2x within that period up to 1 January 2026. Dividend, we've also provided some guidance to say that last dividend, the payout ratio came down a little bit, which I had mentioned earlier in the year that because we do have debt, the payout ratio has moderated somewhat in terms of balancing, paying down the debt versus dividend. But we've guided to paying out at about the midpoint of our dividend payout ratio, 75% as being the payout ratio that we're targeting over that period.

If it helps you from the Board's perspective, we want this debt paid down the quickest possible time. Yes. That's like -- it's not a -- I mean we've -- as a company, we've enjoyed a strong balance sheet to go through this transformation stage, we've needed to buy to fund some of those acquisitions. But I can assure you, we remain very focused on getting that debt level down as quickly as possible because we recognize that asset management businesses, typically, the market doesn't like them carrying large debt. So totally focused on what you want to achieve. And if we need to give you more detail after the meeting from Chris, we'll do that to make sure that our numbers are -- you understand our numbers. Okay. We'll now move to online questions. Sylvie?

Thanks, Chairman. We have 9 online questions. The first question is from Rita Mazalevskis. And the question is Ian Hammond is Chairman of the Audit, Risk and Compliance Committee and a member of the Investments nominations, technology and cybersecurity committees, he has over 35 years at PwC, including 26 years as a partner. Recently, PwC were exposed for breathtaking tax leak scandals, noncompliance and unethical conduct in breach of the accounting ethical standards. The current Senate inquiry into ASIC expanded its scope to incorporate the PwC scandals. Has Perpetual fully investigated, Mr. Hammond given his extensive PwC history?

I think it's a very unfair question. But nevertheless, I'm happy to comment. Well, can I -- can I comment first and then hand over to Ian. But I mean, Ian, it's an important member of our Board, has been with our Board for a number of years. Utmost integrity, we have no issue at all in terms of what he is doing and so on. And there is this overhang in terms of PwC, but there's nothing in that from our point of view but Ian, do you want to?

Look, it is breathtaking. And obviously, being a former partner of PwC, it's a very unfortunate and shameful situation. I just wanted to point out that I did resign from PwC in April 2015, which is 8.5 years ago. And I've never practiced as a tax partner at PwC. My background was in auditing. And I have no involvement in the matters that are now being discussed.

Chairman, the next question is from Rita Mazalevskis. Pendal was offloaded by Westpac, where Sirius conflicts of interest remain. Pendal's House branded funds had outflows of $1.2 billion and $2.3 billion from J O Hambro. The horrific and Ron scandal reported a financial condition, which was sustained by an institutional systemic and creatively planned accounting fraud. The question is faring we are on the brink of another Enron, have Perpetual conducted a full independent and thorough audit of Pendal's assets? If so, to what degree? And if not, why not?

Rob, do you want to make some comments on that?