Perpetual Limited · ASX:PPT
Perpetual — FY2006 Earnings Presentation
50 slides from Perpetual's earnings presentation, Aug 17, 2006
Slide 1: 2006 Full Year Results
2006 Full Year Results Analyst and Investor Briefing 17 August 2006 Perpetua
Slide 2: Agenda
Agenda Group highlights — David Deverall Financial results — John Nesbitt 2007 Outlook — David Deverall Perpelvaip
Slide 3: Agenda
Agenda oup highlights ~ David Deverall Financial results ~- John Nesbitt 2007 Outlook — David Deverall Perpelvaip
Slide 4: A solid full year result
A solid full year result 2006 2005 Change $m $m %o Operating profit after tax 131.5 116.3 13 Net profit after tax 135.3 179.1 14 EPS®) 323¢ 299¢ 8 Dividend per share — ordinary 326¢ 260¢ 25 Dividend per share — special 100¢ 100¢ - “ Operating profit after tax excludes significant items and net estab
Slide 5: Track record of continued growth
Track record of continued growth Operating profit after tax up 13% EBITDA up 20% $M $M 150 250- 212.5 2007 1007 150 > 1007 507 504 June June June June June june june june June June 02 03 04 0s 06 02 «403 4 O05 06 Perpelvaip
Slide 6: 20% growth in EBITDA - cash earnings
20% growth in EBITDA” — cash earnings 2006 2005 Change $m $m % Wealth Management 185.1 152.3 22 Corporate Trust 33.3 30.5 9 Group and Support Services (5.9) (5.1) 16 Total EBITDA 212.5 177.7 20 EBITDA margin 54% 51% - () Excludes significant items and net establishment costs for our new global equit
Slide 7: Shareholders rewarded in a year of continued investment in our strategy
Shareholders rewarded in a year of continued investment in our strategy a Interim ordinary dividend of $1.62 per share fully franked « Final ordinary dividend of $1.64 per share fully franked ea Special dividend of $1.00 fully franked -_ = A total dividend payment of $4.26 per share fully franked in
Slide 8: Ordinary dividend per share up 25%
Ordinary dividend per share up 25% 110 130 June 02 June 03 June 04 June 05 June 06 Perpelvaip
Slide 9: Perpetual has returned approximately 36% per annum to shareholders
Perpetual has returned approximately 36% per annum to shareholders over the last 10 years $1,200,000 4 $50,000 invested in Perpetual shares and reinvested dividends $1,100,009 5 in 1996 would be worth over $1 million in 2006 $1,000,000 pow wwe nie st son et et He HO HOR He et tt a HE St A tH a HH HE
Slide 10: Strong growth in all businesses
Strong growth in all businesses Perpetual Investments Perpetual Private Clients Corporate Trust FUA FUM up 23% FUA up 14% up 24% 35) 28 7 6.6 1807 Vee June June June June June June June June June Jure June June June June June 2 38 04 ob 06 0 8 4 05 6 02 08 OF O5 06 Excludes externally advised ‘do-it
Slide 11: Operating profit before tax up 15%
Operating profit before tax) up 15% 2006 2005 Change $m $m % Wealth Management 165.7 139.9 18 Corporate Trust 32.0 29.0 10 Group and support services (10.6) (6.1) 74 Total operating profit before tax (PBT) 187.1 162.8 15 PBT margin 47% 46% - (1) Excludes significant items and net establishment costs
Slide 12: Wealth Management operating profit before tax up 18%
Wealth Management operating profit before tax up 18% 2006 2005 Change $m $m % Total revenues 321.4 282.9 14 Perpetual Investments 248.4 220.2 13 Perpetual Private Clients 73.0 62.7 i6 Operating expenses 136.3 130.6 4 Depreciation and amortisation 19.4 12.4 57 Operating profit before tax 165.7 139.9
Slide 13: Perpetual Investments: net inflows of $2.4 billion
Perpetual Investments: net inflows of $2 .4 billion 30 June Net 30 June 2005 ~=inflows Other?) 2006 Funds Under Management $b $b $b $b Retail 7.5 (0.1) 4.0 8.4 Intermediary (masterfund and wrap) 13.5 0.6 1.3 15.4 Institutional 5.7 1.9 14 9.0 All channels 26.7 2A 3.7 32.8 Australian equities 18.9 0.4
Slide 14: Market
market # $400 million in flows into Quantitative investments this year # First half of the year was impacted by active Australian equities re-balancing by ___ institutional clients « Over $1.9 billion into cash and fixed interest ~ Mainly from institutional clients -~ New exact cash fund balance at
Slide 15: Clients experienced strong growth
ients experienced strong growth Funds under advice” $B 85 Jun 02 Jun 03 Jun 04 Jun 05 Jun 06 “) Excludes externally advised do-it-yourself (DIY) and Investor Direct Portfolio Services (DPS) funds under Perpetual administration of $1.4 billion in 2006 (2008: $1.5 billion)
Slide 16: Perpetual Private Clients net inflows performing strongly
Perpetual Private Clients net inflows performing strongly 30 June Net 30 June 2005 inflows Otherl®) 2006 FUA $b $b $b $b Financial advisory 3.7 0.3 0.4 44 Fiduciary services 2.1 0.1 - 2.2 All Channels 5.8 0.4 0.4 6.6 « Financial advisory Net inflows driven by improved service delivery, new clients a
Slide 17: Perpetual Private Clients emerging strongly
Perpetual Private Clients emerging strongly « Benefits of cost and efficiency initiatives « Price increases implemented # Strong growth in volumes w Now represents approximately 20% of Perpetual’s group operating profit before tax e Reorganised team ~ Sales and marketing focus e Expand sales team Pe
Slide 18: Solid foundations
ETT 2006 2005 Change $b $b % Perpetual investments FUM 32.8 26.7 23 Perpetual Private Clients FUA 6.6 5.8 14 Solid foundations Continue to maximise core business Results emerging from new initiatives Good future growth prospects subject to market conditions Perpetnalio
Slide 19: Continued strong growth for Corporate Trust
Continued strong growth for Corporate Trust 2006 2005 Change $m $m % Total revenues 58.2 57.1 2 Operating expenses 24.9 26.6 (6) Depreciation and amortisation 1.3 1.5 (13) Profit before tax 32.0 29.0 10 PBT Margin 55% 51% - Perpelvaip
Slide 20: Strong Corporate Trust volumes driven by RMBS
Strong Corporate Trust volumes driven by Residential Mortgage Backed Securities (RMBS) Corporate Trust Funds Under Administration $B 2007 1505 1007 RMBS FUA - totals $140 504 billion 0! | Jun 03 Jun 04 Jun 05 Jun 06 Composition of FUA CMBS & ABS” 27% 22% 22% 22% RMBS - non bank 40% 41% 36% 36% RMBS
Slide 21: Corporate Trust revenue
Revenue 2006 2005 Change 6, $m $m %o Securitisation 40.0 35.9 41 Other CT revenue 18.2 21.2 (14) Total 58.2 57.1 2 Large client internalised their responsible entity service leading to loss of client in June 2005 (as advised last year) Securitisation FUA increased by 24% to $178.6 billion at June 20
Slide 22: Competitive advantage
competitive advantage . Il. Develop * Funds management policies and processes e Z new growth * Relationship with financial planners Ly ore engines » Trusted brand lll. Fully engage our people to deliver our strategy Perpetual
Slide 23: Expanding our asset management footprint
t foot Expanding our asset managemen print Domestic Stock Picking Mortgage Lending LPT Stock Picking Infrastructure Investing Quantitative investing Global Credit investing Global Stock Emerging Picking Markets . Hedge Global Thematic / Funds Broad Direct Property Investing : Duration ~ Vanilla Mana
Slide 24: Outstanding growth in new credit capability
Outstanding growth in new credit capability Funds have outperformed benchmark every month to date resulting in strong FUM growth FUM $B 3.07 2.5) 2.07 1.5) 1.0) 0.54 0.0 Jun05 Dec05 Jun 06 Focus on the credit enhanced product New higher margin products ~ Exact Market Cash Fund ~ Diversified Income F
Slide 25: Strong interest in new Long Short Fund
le <*) oO 2 gg o 2 Oo. cc x oO OE Ok ep) Es SE o— w O c 2 Ow a ne Oo 8 > 3 £C Strong In new Long Short Fund in « New QI Long Short Fund launched September 2005 « Attracted commitments of approx imately $650 million to date ince trongly s ings ion t « Provides performance fees « QI Long Short Fund pe
Slide 26: Global equities - key strategic building block
Global equities — key strategic building block Asset management team now in place with full complement of asset managers on board Solid investment performance in second half of 2006 Full year net establishment costs of $9.1 million after tax in 2006 down frorn $20.5 million after tax in 2005 # Excel
Slide 27: Property securities and other initiatives
2006 Property securities ~ Acquired remaining 50% of Perpetual James Fielding ~ Top quartile performance and steady flows Direct property ~ Tear established in December 2005 — perpetual Wholesale Property Fund launched in April Diversified infrastructure fund reopened for second raising in July 2006
Slide 28: Strategic initiatives producing tangible benefits
Strategic initiatives producing tangible benefits Continue to maximise core business potential More sources of potential growth Portfolio of businesses more diversified Portfolio more resilient =e Perpetual is better positioned for the future Perpelvaip
Slide 29: Name change and Board renewal
Name change and Board renewal we Change of name to Perpetual Limited in early January e Board renewal program completed: - Robert Savage (Chairman) -~ David Deverall (CEO and Managing Director) ~ Meredith Brooks ~ Paul McClintock - Sandra McPhee ~ Elizabeth Proust ~ Peter Scott ~ Philip Twyman Perpe
Slide 30: Agenda
Agenda Group highlights — David Deverall [Fhancia results — John Nesbitt 2007 Outlook — David Deverall Perpelvaip
Slide 31: Overview
Overview # Building off a solid base ~ Sound fundamentals ~ Continued focus on expenses « Moving decisively to implement strategy ~ Investment in skill base 2 Sharpened focus on capital management ~ Sale of non-core assets ~ Special dividend « Commenced and substantially completed the administration
Slide 32: A solid result
A solid result 2006 2005 Change $m $m % Operating revenue 394.1 351.5 12 Operating expenses (181.6) (173.8) 4 EBITDA 212.5 177.7 20 Depreciation and amortisation (23.0) (14.9) 54 interest (2.6) (2.5) 4 Plus: associate profits (eg. APRL) 0.2 2.5 - Profit before tax 187.1 162.8 15 Operating profit aft
Slide 33: Margins expand while business investment continues
Margins expand while business investment continues Operating profit before tax to revenue margin EBITDA to revenue margin % fo 605 607 June 02 June03 June04 JureOS June 06 0 June 02 June 03 June04 June 05 June 06 Perpelvaip
Slide 34: Operating profit after tax for the year ended June 2006
Operating profit after tax for the year ended June 2006 2005 1505 131.5 1 1007 507 0 ing Profit on _ Sale & Net establishment Admin process Net profit after tax profit after tax sale of APRL investments costs for our review costs new global equities business f Perpetual in Irdand Sr
Slide 35: Modest increase in expense base
Modest increase in expense base 2006 2005 Change $m $m % Employee related expenses 119.0 118.4 3 Occupancy expenses 75 4.9 53 G&A expenses 55.1 53.8 2 Total operating “cash” expenses 181.6 173.8 4 Depreciation and amortisation 23.0 14.9 54 interest expense 2.6 2.5 4 | Total expenses") 207.2 191.2 8
Slide 36: Expense drivers
Short terrn employee incentive costs higher in line with increased profits Increase in long term performance-based equity amortisation expenses Increased investment and administration fees for outsourced operations (FUM based fees) Property securities team Direct property team Infrastructure team St
Slide 37: Administration process review
Administration process review » End to end review of policies, practices and processes around fund accounting and unit pricing (in line with “ASIC/APRA Unit Pricing — Guide to Good Practice”) e Costs incurred of $12 million before tax include professional fees, refinement of policies and procedures
Slide 38: A strong balance sheet
A strong balance sheet June June Change 2006 2005 % $m $m Cash holdings 203.0 167.9 21 Investments at market value 146.1 111.7 31 Liquid assets 349.1 279.6 25 Net Assets 331.0 269.3 23 Key Financial Ratios Gross debt") to book equity 13.6% 16.7% interest coverage (EBITDA)® times 74 63 Franking credi
Slide 39: $757 million in Structured Investments on balance sheet
$757 million in Structured Investments on balance sheet June June 2006 2005 $m $m Structured Investment Asset 757 8 Structured Investment Liability (757) (8) Impact on shareholders’ funds - - # Structured Investment comprises exact market cash products ® Perpetual guarantees the benchmark return on
Slide 40: Dividend policy is to pay out 90% of underlying cash earnings
Dividend policy is to pay out 90% of “underlying” cash earnings to shareholders $m Operating profit after tax 131.5 Add: Equity amortisation costs 15.7 90% 2006 Underlying cash earnings 447.2 Payout = $132.5m Number of shares on issue (million) ~~~ 40.7 Dividend per share (cents) 326 Perpelvaip
Slide 41: Capital management update
Capital management update Step 3 Step 4 What capital is required’? Regulatory capital Seed and incubation funds Contingency and working capital Growth needs A. How much capital is available? — = Distrioutable surolus/franking credits available — = $1.00 Special Dividend Declared Perpelvaip
Slide 42: AGAAP/AIFRS OPAT overview
AGAAP/AIFRS OPAT overview 30 June 2005 AIFRS 116.3 30 June 2006 AIFRS 131.5 % increase over previous year 13% 30 June 2005 AGAAP 111.6 30 June 2006 AIFRS ‘“» increase over previous year 131.5 Perpelvaip
Slide 43: AIFRS impacts on 2005 OPAT
AIFRS impacts on 2005 OPAT 2005 $m Reported operating profit under AGAAP 111.6 AIFRS adjustments Arnortisation of goodwill no longer provided 3.4 Additional amortisation of deferred staff incentives (options and shares) (0.7) Taxation effect of adjustments above 0.2 Equity accounting for APRL (goodw
Slide 44: Impact of AIFRS on EPS
Impact of AIFRS on EPS 2006 2005 Change $m $m % Operating Profit After Tax 131.5 116.3 13 EPS ~— Basic 345¢ < 309¢ 12 EPS ~ Diluted rh 323¢ | 299¢ 8 Il t Reconciliation of Shares on Issue: ; Million Million Average number of shares on issue basic 38.2 37.6 Treasury shares on issue) i 2.3 0.9 Dilutiv
Slide 45: Agenda
Agenda Group highlights — David Deverall Financial results - John Nesbitt [ho Outlook — David Deverall Perpelvaip
Slide 46: Favourable operating environment
Favourable operating environment » Australia’s managed funds market is forecast to continue growing at 10 per cent per annum e Government legislation focused on addressing the retirement savings gap - Future Fund - Removal of tax on superannuation lump sum and annuity payouts - Replacement of Reason
Slide 47: Our strategy is delivering
Our strategy is delivering « Significant growth in Perpetual Private Clients « Inflows into new managed funds (credit enhanced, quantitative investments, property securities, infrastructure, structured) a Global equities — early days, foundation setting « New Corporate Trust business in mortgage var
Slide 48: 2007 Outlook
2007 Outlook « Strong business fundamentals #« Favourable operating environment » Strategic initiatives starting to deliver » Solid starting position for funds under management and funds under administration and advice Will update our first half outlook at the AGM in October 2006 Perpetual
Slide 49: Key messages
Key messages a Good result in a period of significant activity # Strategic initiatives producing tangible outcomes -- More diversified portfolio of businesses ~ Better opportunities for growth ~ improved environment for the team « Well positioned for continued growth and more resilient for what the
Slide 50: 2006 Full Year Results
2006 Full Year Results Analyst and Investor Briefing 17 August 2006 Perpetua