Good morning, ladies and gentlemen, fellow shareholders, colleagues, and visitors. I have just turned my own phone off after last year's embarrassment, so if I could ask you all to do the same, that would be great. Welcome to our 2026 Annual General Meeting. Thank you for taking the time to join us in person and online. I begin by acknowledging the Gadigal people of the Eora Nation, traditional custodians of the land on which this AGM is being held, and pay my respects to elders past, present, and emerging. My name is Alan Watson. I am Chair of Pinnacle Investment Management Group Limited. Before we begin with today's agenda, I would like to introduce my fellow Board members. First, on my left, we have Ian Macoun, our Managing Director. Next to Mr. Macoun, we have Ms. Deborah Beale, Lorraine Berends, Ms. Christa Lenard, and Mr. Andrew Chambers, our Executive Director.
We also have Matthew Lamb, our Executive Director based in London, joining us by video conference, and a very late good evening to him. Thank you for staying up, Matthew. Also here is Terence Kwong, our Company Secretary and Chief Legal and Risk Compliance Officer, Kyle Macintyre, Head of Wholesale and Retail Distribution, and Dan Longan, who is our Chief Financial Officer. I would also like to welcome the company's auditor, Mr. Marcus Laithwaite, and Ms. Rebecca Otto, joining by video conference from PwC, who are here to answer any questions that shareholders may have in relation to the 2026 financial statements. I now turn to the agenda for today's meeting, as shown on the screen. The meeting will commence with our formal business, and after that, Ian will provide an update from the Managing Director.
I have been informed by our Company Secretary that we have a quorum, and I now declare the meeting open. I am also advised there are no apologies recorded prior to the commencement of this meeting, and that the notice of meeting was sent to all registered members in the notice period required. I now table the notice of meeting, and unless there are any objections, I will take the notice convening this matter as read. Thank you. I will now proceed with the formal meeting of the business in the order that it appears in the notice of meeting.
There are six items of business to attend to, being the formal tabling of the 2026 Financial statements, the adoption of the remuneration report, election and re-election of directors, acquisition of shares by Andrew Chambers under the Omnibus Incentive Plan, ratification of prior issue of shares as partial consideration under the PAM transaction, and approval to issue shares as a partial consideration under the AVI transaction. Shareholders may ask questions prior to each resolution being put to the vote, and there will be an opportunity at the end of Ian's session, when you have heard what he has to say, to ask further questions. Shareholders attending in person, please raise your blue or yellow card if you would like to ask a question.
If you are joining online, please click on the Q&A icon, select the topic your question relates to from the dropdown list, type your question in the text box. Once you have finished typing, please hit the send button. Shareholders joining online who would like to ask verbal questions, please follow the instructions below the broadcast window. You will be placed in a queue to ask your question. When it is your turn, the moderator will advise you to introduce yourself and ask your question. I would, with respect, request shareholders to limit themselves to two questions and only ask questions at the time in respect to matters relevant to the item of business being considered. Questions may be moderated or amalgamated if there are multiple questions on the same topic.
Ian will be providing a full update after the formal business, and as I mentioned, there will be an opportunity to ask further general questions after that. The people entitled to vote are shareholders, representatives and attorneys of shareholders, and proxy holders, all of whom should be holding the blue admission cards. You are attending in person. On the reverse of your blue admission card is your voting card and instructions. Please also ensure you print your name where indicated. When you have completed your voting card, please lodge it in a ballot box to ensure your votes are counted. If you require any assistance, please raise your hand. If you are joining online, please click on the vote icon to access your voting card. Please select for, against, or abstain on each resolution. Please note there is no enter or send buttons, as votes are automatically recorded.
You may also change your vote up until the time I declare voting closed. As noted in the notice of meetings, resolutions will be decided by a poll, which I now declare open. I will put these resolutions to the meeting shortly. All valid proxies received have been recorded, and these will be reported to the ASX after the meeting. For shareholders' information, we will display on the screen prior to the consideration of each resolution, the proxy voting for each resolution. Please, slide seven. The first item of formal business on the notice of meeting is to consider the financial statements of the company for the year end 30 June 2026, together with the Director's Report and Auditor's Report as set out in the 2026 Annual Report, and which have been made available to shareholders.
I formally table the financial statements of the company for the year end of 30 June 2026, and the related Director's Report, Director's Declaration, and Auditor's Report. I will take all of these reports as read. If anyone has any questions in relation to the financial statements, the content of PwC's audit report, the accounting policies adopted by the company in relation to the preparation of the financial statements, or the independence of the auditor in relation to the conduct of the audit, please submit them now or raise your hand. Next item of business is to consider the adoption of the remuneration report for the 2026 financial year. The report is contained within the 2026 annual report and forms part of the director's report.
The remuneration report incorporates information required by Section 300A of the Corporations Act and sets out the remuneration policy of the company and reports the remuneration arrangements in place for key management personnel, including the directors. Section 250R(2) of the Corporations Act requires companies to put a resolution to their members that the remuneration report contained in the director's report be adopted. If anyone has questions in relation to the remuneration report resolution, submit them now or raise your hand.
Richardson, shareholder. Just, interesting that the STIs for everybody 100% met, which is probably interesting. It's an observation of how good the management team are, but do the Board have any concerns that those STI levels are perhaps too easily set?
I don't think we have any concerns that they're too easily met. I think what we've always maintained over the years is that we want, the management want, and we want a high degree of, or as high a degree as is reasonable, of discretion over STIs. A good example would be how we direct the sales force. When you have 19 affiliates to look at, you have to be able to, throughout the year, achieve certain objectives, which are not just exclusively related to, say, the volume of sales you get. I think the past 12 months would be a good example where that served us well, that there are certain topics we've had to spend a lot of time on with clients, which are more educative and resistant to redemptions in nature than perhaps going out and selling easy wins.
If you take that philosophy, which underpins just about everything we do, we do expect that as the year goes on, we have to switch our focus at various times. That is important in setting STIs, that they don't accidentally become too constrictive by making them too formulaic and deterministic. Do you want to add to that?
Yes. I think we report in our annual report the outcomes of each objective. I think in all cases of all of our major objectives, we have exceeded anything that shareholders expect. If you look at our profit growth, our net inflows, our no risk or regulatory issues, and all that sort of thing, absolutely. It is not true that everyone got 100%, though. I did not get quite 100%, and that reflected a couple of things where we thought we could do better. The ones you are looking at are the reported ones, like our CFO, Andrew Chambers, et cetera, and they did get 100%. Not all executives got 100%, and not all people in the company. We do take them very seriously. We need to make sure that REM is related to the key deliverables from all of our executives and all of our people.
We use that as a very strong tool. Without being immodest, I think we can say objectively, shareholders or institutional shareholders are very happy with the outcomes that we have delivered. You will see just for the quarter gone, with strong inflows, a lot of the industries in outflow, conditions have been fairly challenging. People do believe we are delivering well, and we have got a lot of outstanding people, and we need to keep them, because I can tell you, most of the industry would love to poach distribution executives, and executives generally, from Pinnacle.
I believe you are doing a great job too, but just wondered if the STI is actually variable or non-variable.
Yeah.
You are still with it? Just that question.
Definitely variable.
You can see over the years, there have been times when it has been substantially below 100%.
I think it was 50% during COVID, I think.
Yes. Yes. We have an override for market conditions, so that even if we are doing a great job, if the market conditions are not good, our STI is substantially lower.
I am happy to share with you, I have not got the data in front of me, but I am happy to get it and share with you the percentage of people that did not get 100%, without individuals, obviously. Okay, any other questions on the REM report? I will now put the resolution to the meeting. The number of proxies received by the company as at 48 hours prior to this meeting are shown on screen. Please cast your vote on your voting card.
Computershare app. There is another vote here now.
I think we have. Do not we fill them all out?
Yes.
I f you fill them all out, then we will get someone to come around and collect them-
Right
- at the end of all the resolutions. The meeting now needs to consider the election and re-election of Directors. Under the Constitution and ASX Listing Rule 14.4, any Director appointed by the Directors holds office only until the end of the next general meeting following their appointment and is eligible for election at that meeting. Matt Lamb was appointed as a Director by the Directors effective from 5th of August 2026. Accordingly, Matt is required to retire and stand for election at this AGM. The explanatory statement attached to the notice of meeting provides information in relation to Matt. Matt is a founding Partner and Chief Executive Officer of Pacific Asset Management, PAM, which is a member of our group, and he has significant experience in the funds and asset management industry.
Prior to founding PAM, Matt was the Managing Director and Global Head of Liquid Alternative Investment Sales at Deutsche Asset Management. From 2003 to 2015, Matt worked at GAM in London, where he was the U.K. and Middle East Head of Institutional Funds Distribution and Global Head of Retail Multi-Asset Sales. If anyone has any questions in relation to Matt, submit them now or raise your hand.
W e have a question from Mr. Stephen Mayne online. "Thanks for disclosing the proxies to the ASX last night. There was a modest proxy protest vote against Matthew Lamb's election. Did a proxy advisor recommend against? Have you investigated who voted against? What is the issue?
The answer to that is a proxy advisor recommended against both Matt and Andrew Chambers' election on the basis that proxy advisor considered me non-independent, and in that case, the Board would be non-independent majority if we elected these two Directors.
A second advisor.
A second advisor said that.
A similar view against Andrew.
Against Andrew, yes. What have we done about that? If you recall, this time last year, there was a vote to re-elect me as Independent Board Member for three years. That finishes in two years' time. We have conferred, the Board has reaffirmed in its consideration of my independence that they consider me independent, and therefore, we don't consider the Board majority non-independent. We have discussed it with our shareholders, and it's noteworthy that superannuation fund advisors have recommended supporting all, as ACSI, have recommended supporting all the resolutions. Do you want to add anything to that, sorry?
Chair, could we, if it's possible with the link-up, could we hear from Matt about his experience so far with the company and how the two businesses are coming together, opportunities he sees, what he's learned from Pinnacle, and what he's contributing?
I think it's probably a bit more what we're learning from him, but we'll have it both ways.
Yeah.
Matt, are you there?
I'm here. Yes, I think so, in terms of what?
What have you observed about Pinnacle? What have you observed about PAM? How are the working together of the two groups going, and how has that allowed you to develop your ambitions for PAM as it proceeds?
I think, firstly, it is important to say how culturally aligned PAM and Pinnacle are. The tagline that Ian once used with me of supported independence is one that I stole about five minutes after meeting Ian, because it encompassed in a very few words exactly how we believe. I think it is incredibly easy to suggest that you can support fund management businesses and support talented investors, and it is very easy to say and not get involved and actually genuinely give them the independence to them to do the work that they should be doing. Most people can not help but meddling.
The success we have had of being a home for interesting craft investment talent has been around delivering all the support that fund managers need so they can focus on their day job to deliver sort of owner-managed, aligned investment returns for institutional, wholesale, and retail investors. That is exactly what Pinnacle do. I think we were sort of twins from that perspective, both culturally and from a vision. I think the other thing is that the energy and enthusiasm for all things asset management is something that the entire Pinnacle leadership team has, and it is something, for anybody who knows me for a long time, I have been obsessed with for 25 years and the very first time I got into asset management.
I have learned a lot from Ian and the team in terms of. Some of the stuff that we have done was probably a little dogmatic and purist, and we probably could have grown even faster if we had learned some of the lessons that Pinnacle have developed. I think we are adding a lot of value around technology and the future of model portfolio solutions and separately managed accounts. We have also got complementary teams, investment teams that I think complement the existing opportunities that Pinnacle has. It is massively fun. It is really interesting. I am hugely proud to be part of it, and hopefully I can add value beyond just revenues and raising assets.
I would be delighted to say that we are thrilled to have Matt on board, and he has already contributed to our Board conversations with that broader international thought process, which I think, as we have talked to everyone here, has been one of our major drivers of the great opportunity that lies in front of us, which Ian will focus on in his speech as well.
I would just add that we have gotten to know Matthew and his colleagues and his business progressively over quite a long period of time. Our relation started off with not an equity relationship, but a distribution relationship. Then we acquired 25% of the business, which Matt was very supportive of, and I think it is a benefit for PAM in that.
Then we finally moved to 100%, which enables us to do so much together without any sort of friction involved. We have progressively seen the opportunity for our business model to grow overseas, but the real challenge is finding people over there who think similarly to us, who have a similar culture, and who are of that kind of caliber and standard. W e were delighted to find Matt and Pacific, and really, we have got another Pinnacle based over in the U.K., and it is a very successful business.
I think we are operating independently because both businesses are going so well, growing so fast, we do not want to disturb that. On the other hand, there are a lot of areas where we can work together and where the combination is a lot more powerful than either of the two could be on their own. I t is working very well.
Are there differences in the services that the two businesses have provided historically to them?
There are some, I would call-
Nuances.
-modest, yeah, nuances, some subtle differences. But it is fundamentally, funds management is not that different everywhere in the world, and the services that are needed by top-quality investment management professionals is kind of similar. But their tech is tremendous, and we are benefiting from a lot of their tech, as we mentioned, in what we call managed accounts in Australia. They call model portfolio solutions over there. We are benefiting from that. But a lot of areas of distribution around the world where we are working together.
The future of the business is all about really global growth in a really substantial way. The weight of capital globally is in the Northern Hemisphere, so to have Matt's insights sitting in the Northern Hemisphere on the Board is incredibly valuable with that endgame and vision in mind. That is the way we are going to sustain very high EPS growth rates, is by replicating everything we have done so well in Australia in a global context. That is where I think Matt brings enormous benefit to the Board conversation.
Charlie Kingston, just on the same topic, a few questions relating to PAM and AVI, the acquisition. Obviously, AVI was 100% acquisitioned. Is that a change in the model going forward? Are you going to look to acquire in full in terms of managers? But also just, could you comment on the fees multiple that you acquired AVI on? I may have missed it. Also just the outlook for a business like that, because I really like reading about their funds. I have spoken to the team, and I like their Japanese strategy in particular. I think the fund is very well-structured for investors. I think there is a buyback mechanism to
That is correct.
There is a discount. T he fees are always quite low and favorable to investors, but it is always that balance between manager and investors. Sorry, a few parts of that, but yes, the 100% acquisition, the multiple, and then the outlook. How are you going to go?
We will ask Matt to add.
Just from my perspective, initially, Charlie, I mentioned there are some subtle differences. Philosophically, PAM and Pinnacle think extremely similarly, as Matt Lamb said. Supported independence for the most talented investment professionals in each particular field. But subtle differences, so outside of Australia, it is a lot more common, or in a multi-boutique kind of business, for them to be 100% owned, and they get the alignment in a different way, often profit share, that sort of thing. PAM had quite a lot of that. Matt and his Board were quite comfortable with the 100%, but still getting the alignment in other ways. I am very confident it is going to be a very strong business. We might ask Matt Lamb to comment on the business itself. In terms of, I do not think it signals any philosophical change on Pinnacle's part.
We've always said we really like the minority equity and executives, investment professionals having real equity, we call it. There's more than one way to skin a cat, and we've also said to ourselves, as we look to do things outside of Australia, we need to be flexible, we need to have an open mind about what works best in different places.
Just before Matt speaks, I think if you look at our other affiliates, I think Ian 's always said we would be a natural buyer of succeeding principals' equity in due course, and that's going to inevitably affect our shareholdings. We've got to make sure that we would do that in a way that we don't take unnecessary control or remove that alignment with the principals.
In terms of assigning 100% of PAM's completely different from other affiliates, which are standalone fund managers. It's a platform, it's
Yeah.
Okay.
Just before Matt addresses it, could he include the retention mechanism? When 100% of the equity, are the cash payments staggered?
Yeah.
Good question.
Yes.
Matt, the comments are on. Did you hear the question on AVI and retention?
Yeah. While optically it looked, I mean, we did buy 100% of the share capital. As Ian alluded to, all we are doing is restructuring the business so that we can create efficiencies, better regulatory alignment, and things like that. In reality, post the acquisition, they have more alignment and more profit share than they had previously. They had an external shareholder that was a passive shareholder that we acquired out. It was easiest to effectively buy the entire share capital and then rejig their alignment. You will see that mostly Pinnacle have never gone above 50% for single manager businesses. In this example, AVI will have a 50% profit share. We will also book some of the costs associated with supporting them in PAM's half of that 50%, i.e., we will not be allocating desks, chairs, centralized costs, et cetera.
They end up with a much simpler operating model and ultimately more alignment than they had before. We are definitely not of the view that we are going to create an environment where we buy 100% of businesses and pay fund managers on discretionary bonuses. That is what big industrialized players do. That is not why they come to us. While optically it looks like we acquired 100% because that is what we did do, the nuances behind it is that they have actually got more alignment. I am really glad you mentioned the Japan point because it is nice to hear you are excited, because we are extremely excited about that, and we have already had some positive traction in that space.
And one of the problems is that they took their engagement strategy, which has been very successful since the late 80s, and under Joe, the CEO there for, and Principal Fund Manager for 20 years. But the Japan strategy launched in 2018, and it's done incredibly well. And it's a complete, it's an ever-growing team. T oo much of the alignment was linked with the global team and not enough with the Japanese team. T his allowed us to restructure that so that there was more alignment to the future drivers of return, not just the historic ones. So, that hopefully gives a bit of color on that. In terms of retention, there is retention in terms of the exiting shareholder took cash because we want them to exit. They were a passive shareholder.
Whilst all of the remaining staff have not only got more alignment, higher compensation, better distribution, less cost allocated to them, but they also own Pinnacle stock, which is locked up over a vesting period of three years. W e think we're in a good place from a retention perspective. They're also a team we've known for a long time and incredibly nice people. Joe, who is the CIO and the CEO, and the rest of his team, they were a business that had one client, which was an investment company, to a business that ran segregated accounts for some of the biggest institutions in the world that was doing Japanese equities. They do Korea engagement equities. They do global equities. And he was running a business, and he didn't want to run a business. He wanted to run money.
And he told me that he has a very long runway to running money, as long as we can take away the bits that he doesn't like about his job, which is running the business. And that's what Pinnacle and PAM's job is.
Matt, in terms of the price we paid, our expected return, without giving away any confidential information, of course, it's fair to say that you, even before we acquired it, you had a plan for sourcing extra fund for them to manage and for growing their revenues. And we feel very good about the expected returns on that investment.
Yeah. It is easy to say, hard to deliver, but we cross our fingers. I think certainly, where we are in the cycle, it is a really appealing time for strategies like this. Sum-of-the-parts valuations, Japanese equities, and there is a theme that some people have heard of, HALO, sort of heavy assets or hard assets, low obsolescence. These are often the beneficiaries of AI, or they are companies that cannot be disrupted by AI. That is really what AVI is all about. It is engagement, it is closing that discount to NAV. But as Ian said, effectively, this was a single- digits multiple acquisition, and I think with some assets that we had in the wings that we needed them to run, it becomes a low single-digit acquisition if we can deliver. It will take time to move funds and merge funds around.
I certainly can think just with captive distribution, and solving problems for existing clients, we see AUM going up 10% in the first 12 months without having to sell anything.
Okay. Any other questions before I put Matt's slightly sounding sore throat to the vote? Okay. I will now put the resolution to the meeting. The number of proxies received by the company on the 48 hours beforehand is as such. Please cast your vote in box number two on your voting card. Constitution. Thank you. The constitution also requires that each general meeting of the company, that 1/3 of the directors eligible for rotation retire. The directors to retire by rotation at each annual general meeting are those who have been longest in office since their election or last re-election. As the company currently has five directors eligible for rotation, two directors are required to retire from office at the AGM. Of the directors eligible for rotation, Andrew Chambers and Christa Lenard have been longest in office since their election or last re-election at an AGM of the company.
The explanatory statement to the notice provides information in relation to Andrew. Andrew, who I think most of you know well, has extensive multi-channel, so retail, wholesale, and institutional, and multi-jurisdictional distribution experience. He is currently responsible for leading the firm's institutional and international distribution divisions. He previously worked for Legg Mason, one of the world's largest multi-affiliate firms. Bachelor of Arts with honors from the University of Melbourne, Master of Science and International Relations from the London School of Economics, and Political Science, and a graduate of the Diploma of Applied Finance and Investment from Kaplan. If anyone has any questions in relation to Andrew, please submit them now or raise your hand.
I have another question from Mr. Stephen Mayne. What does Andrew regard as the two best decisions he thinks was made during his latest term on the Board?
It's a great question. I think we've made several very good Do you want me to pick up that, Andrew? I think we've made several very good decisions along the way. I feel very strongly about offshore distribution expansion in particular. The reality is, all of our affiliates have a global orientation towards raising capital, a way to really amplify the growth of those businesses to be more relevant in more markets more often. We've been adding people in Abu Dhabi, in South Korea, Canada, United States, and we're going to continue to build on those teams in the Northern Hemisphere in particular.
In that period of time, we've added substantial distribution resource, as you can see now in the flow numbers which have been coming through in the past several years from offshore, constituting now about AUD 75 billion of our AUM from over 60 countries around the world. That's only going to accelerate from here. That's probably the really critical one, is really globalizing the platform in particular, and obviously the acquisition of PAM, which is associated with that as well, is probably the other really major one. Not only does that amplify the growth of that platform, so we have two parallel distribution platforms raising capital around the world, but we're moving into areas with structural growth, so managed accounts, model portfolio solutions. This fiduciary outsourcing concept, which has been happening in Australia about 20 years ago.
We went from about 4,500 corporate pension plans to less than 10 today in this country, as they rolled into outsourced CIO at an institutional level. It's now happening in private wealth in a major way. We're at the front end of that big trend, and the product that Pacific Asset Management have is world-class in what it does. Think beyond the U.K. and their growth rates and their to what we bring to Australia, to what we bring to other parts of the world which haven't adopted model portfolio solutions and managed accounts. This gets us in the game of something we didn't have before in a really substantial and global way. I'd say those two things in particular are the ones which I'm probably most proud of from a Pinnacle standpoint.
I think we'll have the largest single impact on the future growth of the business.
Charlie.
Just a question. I think, Andrew, you're on the Metrics as well. Also looking at it as a potential interesting opportunity, given that the listed funds are all trading at very large discounts to their properly scrutinized NTAs. What's the strategy to close those discounts? I think a lot of the other newer credit funds, they have that buyback mechanism at NAV or NTA, to allow investors to exit the NTA. I think a lot of these had a listed investment company, they go to unlisted. Spheria has a mechanism, et cetera, but maybe I've just spoken about with their Japanese fund, but is there a plan with the Metrics listed funds? The MXT is at 16%.
Yeah. Sorry, Charlie. There's some difference between the ones you've mentioned, which were LICs and LITs, because with LITs, there's a trustee or a responsible entity who's ultimately responsible for decisions like the ones you're talking about. So, some difference there.
Obviously, as well, you're talking about private markets asset class, so the conversion to an ETF is not possible in the context of the underlying liquidity of the assets or for an active ETF. So that's not a possibility. Obviously, there's an enormous amount of work that Kyle and his team and Chris Meyer does as well, working with the education with advisors to close that discount. And guys, if you want to add anything to what we're doing there specifically, step process.
Yeah, for sure. As you mentioned, Andrew, there's a big educational campaign that's going on. We've been through this before. You saw a similar sort of discount previously when we went through the period of COVID, educating investors around the opportunity, around the underlying quality of the portfolios. Pleasingly, the underlying quality of the portfolios as a result of these audits has not changed, educating investors about what they're investing in, the opportunity. Then there's a large amount of work going on with the intermediaries, particularly areas of the market like the platforms, where there has been a short-term impact around the accessibility of the funds and being able to access them. We're working through that with the intermediaries there to get it opened back up so that the demand side can be fulfilled through those platforms.
Three key areas that we've been working through.
If the question relates to Pinnacle balance sheet, the use of Pinnacle balance sheet, then obviously we use that for very strategic purposes of seeding managers, vehicles, and things like that, rather than necessarily trading from a proprietary perspective to make returns on our capital. I mean, if you want to add anything to that, but that's a fair summary.
Yeah.
I think the other thing is, we've got to remind ourselves that it's the listed vehicles of Metrics and the discounts to NTA is quite a recent thing. I mean, it feels like we're in the eye of the storm with that stuff at the moment. We need to just give it time to heal before we make any major decisions like what you're suggesting, where you institute a buyback or something more dramatic. It just needs These things can be cyclical and they can be structural. We need a bit of time to determine which of those two things are driving those discounts. At the moment, it's somewhat technical because some of the investment platforms are only allowing selling of those vehicles and not buying. That stuff needs to normalize before we make any permanent decisions like something like a buyback mechanism.
Assuming discounts do persist in the next 12 months or thereabouts, it is something that you would consider doing?
I just think that is speculative and it is not something Pinnacle.
Well, that is Pinnacle's decision. That is the problem.
Well, they.
I think also, just adding to that, the medium to long-term demand for yield in a world where you have aging demographics everywhere in all developed markets around the world, including this country here, with more than 50% of the AUM are retirement phase, need for diversifying defensive assets with high income and regular monthly income is only going to increase. The asset class alongside traditional public bonds themselves are not going to save you alone. There was 15% negative returns coming out of the bond market in 2021, 2022. People forget about that. It is supposed to be defensive. You need diversification, so you need a combination of these things.
I think the validity of the asset class remains there, and if you look at the way the equity income funds trade at a premium in the LIC markets, it just shows you that demand for yield from retirees in particular. I think it does self-correct over time, as long as it is a performing portfolio, of course.
The bank hybrid market satisfied a huge amount of that demand previously, and that is all gone. There is a big gap to be filled over time.
I understand that. Those are three funds that have been really in focus, and they are all trading at very large discounts. It is a reasonable question why the other managers do have mechanisms to close those discounts. It is a question for Metrics, but Andrew and Ian, I think you both sit on the Metrics Board.
Yes.
Obviously, you are going to have input to help close those discounts. I think the unlisted fund does actually buy shares in the listed fund to help close that discount. Is that right? There already is a mechanism in place, but-
Yeah.
-it looks like an interesting opportunity, right? If the NTAs are real, and at some stage, if there is an ability to redeem that NTA, I think that is the question.
No, no, that is fair enough, but it would not be appropriate for us as directors of Metrics to speculate publicly about discussions that
Not speculating, but it is something that you would consider doing. Is that fair?
As you say, the mechanism's there.
Okay.
Yes.
Just a comment back to the resolution to thank Andrew publicly for his extraordinary contributions and the opportunities he continues to open up, by the sound of it.
Yeah, thank you. Very grateful.
Appreciate it.
I mean, I think it is pretty well known, Andrew is effectively a founder of Pinnacle, been with us for 18 or 19 years. The success of the areas under his responsibility, domestic institutional distribution, offshore distribution, we have had enormous success. And in, especially the domestic market, you have seen massive structural change. A lot of our competitors have struggled with that, but we have done well. I completely concur. We owe Andrew an enormous debt for the job that he has done over the last 18 years or so.
Round of applause.
I would like to put his resolution to the meeting.
Yeah.
That resolution is there.
Vote for the re-election.
It is. The number of proxies received by the company at 48 hours prior to this are now as shown on screen. Please cast your vote, box 3B, back of the blue card. Turning to Christa now, the explanatory statement attached to the notice of meeting provides information. Christa specializes in employment and workplace law, with a practice that spans both the public and private sectors. She has 20 years experience in advising and representing clients on a wide range of very contentious and non-contentious employment law matters, including discrimination laws, industrial disputation, enterprise bargaining, day-to-day employment law advisory, managing psycho-social welfare and organizational change, workplace investigations, and alternative dispute resolutions. She is a trusted advisor to many government agencies and works with clients across a range of industries, including the banking and financial services, health and aged care, maritime and logistics, technology, and the amusement industry.
I think I would say to you that we all know that we are essentially a people business, and as we expand our numbers of people, both in ourselves and the affiliates, and internationally, having someone with a great grasp of employment law and employment practices is incredibly helpful. If anyone has any other questions in relation to Christa, please submit them now or raise your hand. Okay.
I will now put the resolution to the meeting. The number of proxies received by the company at less than 48 hours prior to this meeting for the resolution shown on the screen. Please cast your vote in box 3C, fourth box down on the back of the blue card. Okay. The next item of business is to consider the acquisition of shares by Andrew Chambers under the Omnibus Incentive Plan. Shareholder approval is being sought to grant 125,000 Loan Shares to Andrew.
These Loan Shares form part of the company's FY 2027 remuneration program and are proposed to be issued on the same terms as the long-term incentive grants issued to other staff, except that the issue price will be determined after the receipt of shareholder approval, noting the price of grants are based on VWAP, volume-weighted average price, for the five days immediately prior to their issue date. If anyone has any questions in relation to this resolution, please submit them now or raise your hand. Okay. I will now put the resolution to the meeting. The number of proxies received by the company at less than 48 hours prior to this meeting are now shown on the screen. Please cast your vote on the voting card. Item number four, which is the fifth box down. Thank you.
The next item of business is to consider the ratification of prior issue of shares as partial consideration under the PAM transaction. The company issued 10,546,794 shares to the sellers under the PAM transaction as partial consideration for the acquisitions under the PAM transaction in April this year. Shareholder approval is being sought to approve and ratify this issue under and for the purposes of ASX Listing Rule 7.4. If anyone has any questions in relation to this, please raise their hands. Okay. We have received the following proxies 48 hours prior to the resolution. Please now cast on the voting card in item five, which is the sixth box down on the blue card. Final item of business is to approve the issue of shares as partial consideration under the AVI transaction.
The company issued just over 2,027,928 shares as partial consideration to the sellers under the AVI transaction earlier this month. As we have articulated, some of those are locked up for three. Shareholder approval is being sought to approve this issue under and for the purposes of ASX Listing Rule 7.4. If anyone has any questions in relation to that, raise their hands.
In relation to these transactions in general. The capability within Pinnacle, maybe Ian could talk about. Is there a dedicated team or is it something you just manage among top tier? If the velocity of acquisitions is increasing, or maybe this was just an unusual period, but is there structural change at the top if there is going to be an increasing sort of velocity of acquisitions?
Yeah. So we very deliberately do not have a separate dedicated sort of M&A acquisitions team. That is very deliberate because we believe that fundamental to making good decisions, and we look at a lot, and we have always looked at a lot, fundamental to that is the market understanding we have about the demand and the trends in the market, and the demand for the proposition that is involved.
The other big aspect is assessing the people. That is really important, both the skills and backgrounds and the character of the people, et cetera. That is something that several Pinnacle executives all get involved in because it is an assessment to be made, a subjective assessment, but very important. You need a lot of experience to do that very well. So, yeah, we have sort of been adding to the number of people working with those executives, but it is not as a separate team.
I would argue it has worked very well for us. We think it is a competitive advantage for us relative to other groups that have, "Oh, there is the acquisition team. They do their work. Then they hand it over to the distribution and ops people and say, 'There you go. Best of luck with that.'" Whereas with us, our key distribution people and our key Dan Longan is always involved, et cetera. They eat their own cooking. They have to make it work because they are involved in the decision to select that partnership. We do not see that changing even as the tempo steps up.
The aspiration for success as well as the fear of failure about that decision rests with us all, that accountability. It is very motivating.
It is.
That is very, very powerful. We cannot say, "Oh, that was the corporate finance team's fault." Some Claude model got that wrong. If anyone has questions in relation to this resolution. Here are the votes here. If anyone has further questions, I will put this to the meeting. Please vote in the final box on the blue card. Now, shareholders in person that have completed their blue cards, we get someone to. There is the voting box. Well done.
Can I ask a general question?
Sure.
A lot of the gloss has come off private credit in the last 12 months through different occurrences, mainly the recent one of the Bathla situation.
Yes.
I was wondering whether Metrics has any possibility of being involved with that, and if so, how would that affect Pinnacle?
Yeah. Bathla, they have been very clear they have got no involvement at all with that. You say the gloss has come off. There is certainly been a lot of press and commentary, et cetera. I also do not think there is any doubt that the general conditions around private credit, especially in Australia, especially around real estate, conditions have deteriorated. We always knew that there would be cycles to private credit. We always asked ourselves the question, "What happens then?" We always said that will be a double-edged sword for Metrics. On the one hand, it will be a negative for the sector that they are in, and there will be negative sentiment for a period of time until it recovers. On the other hand, we also said it will sort the sheep from the goats.
It will demonstrate that a rising tide lifts all boats, and we have had very favorable conditions, and there is a range of capabilities in private credit. We think Metrics will benefit from that experience after it is all over.
Yeah. There was a period where there was a lot of money being raised in private credit on the basis of what are going obligations.
Yeah.
That was pretty much uninterrupted all this year.
Yeah.
Yeah.
And that is particularly the situation in Australia where real estate is a bigger part. I had issues in the U.S. where lending just for software investments of private equity was an issue. We have not had that in Australia. But one thing I would say, Andrew Chambers is more an expert than me on all this, so we will ask him to comment, but private credit is going to remain a major asset class globally. If you look at other parts of the world, you look at the big players, they are all gearing up for expansion in private credit.
Last Sorry.
No, you go, Drew.
Last year, sorry, Stuart, first half of this financial year, calendar year, should say, abroad has been the biggest fundraising year on record. 208 billion USD raised into private credit.
Yeah.
Everyone, these investors here, like in North America, Europe, asset allocators, institutional capital is putting money to work, and the foreigners coming here and buying up private credit because they think we have the best risk-adjusted returns in the world, notwithstanding the backdrop to real estate. You can see all the big players are coming here and putting money to work because they see attraction in the market. They cannot understand the headlines that we see in this market. They just see best risk-adjusted returns in the world, best corporate insolvency laws in the world for lenders, and they are going to deploy more and more. The demand is not going away. Equity takes first loss rather than credit. You always got to remember that. No one is talking about what is happening in the equity market. Equity market suggests there is not a problem, if you looked at that.
That is not to say there are not issues in the market, just a case of global capital just deploying more into the space. It is a very good liability matching asset class. It is great for insurers who have capital charges applied to what they can actually invest in as well. It is here to stay, but it will go through a cycle in terms of sentiment, and we are just in that point at the moment in Australia, because people in this country are still learning about the asset class. There is still a lot of education happening. That is our job, to continue to do that with investors.
It just seemed that with the huge amount of capital that was being raised, that the ability to charge higher rates to the lenders was diminishing because there would be competition for the best investments.
Yes.
That would necessarily mean that it would not be as able to charge as high fees.
Well, that's the great advantage of Metrics, because they lend across the entire spectrum of private credit, not just real estate. There's more competition in a particular space, like leverage finance has been in the last few years. National Australia Bank, Westpac have been heavy lenders to that space, so margins have come in. They've been doing more real estate where they've got the best risk-adjusted returns on history. If you're just leverage finance only, real estate only, when conditions change, you just can only continue to invest in that space. That's why they cross all dimensions of private credit, corporate, publicly traded companies, private companies, leveraged finance, project finance, infrastructure debt, and real estate debt.
There's no doubt you're correct. It's been negative sentiment. It's obviously affected our share price, this sentiment.
Yeah, the discount that we were talking about.
Absolutely. We just have to get through that.
Yeah.
Good question.
Just a follow-on on that. I want to ask about the balance sheet settings in general, but as a specific follow-on, the tranche B of your debt facility is for acquisitions or investments into certain liquid investment strategies managed by affiliates. Can we assume some of that is in Metrics Funds, or have you disclosed, or can you disclose, is that in Metrics Funds? On the balance sheet generally, are you happy with the current settings and the mix of how you've handled the growth and transactions and seeding of funds in the past, and see the next five, 10 years evolving in much the same kind of way, with replacements as opportunities come up, that kind of thing? Or do you see some kind of change in the capital structure, appetite for leverage within the Pinnacle Parent?
Just to comment on the use of it for liquid-type investments first.
Yeah. The simple answer to that question is no. There's nothing in Metrics Funds currently. We had in the past used Coolabah or Metrics as a parking mechanism, where we'd raise more capital than we had an immediate need for because they were only that stable, big deal. But we sold those positions down entirely to fund the PAM equity. That's gone. We no longer have a situation of having a surplus of capital that we're just looking to keep somewhere. We've spent most of, if not all of the capital we raise now in the VSS, PAM, and Advantage transactions, and that's traditionally been how we've operated. We paid out the vast majority of our cash profits to shareholders, and if we found something that we want to buy, we've gone and asked shareholders to support us in doing that.
We haven't yet decided to change from that discipline, but what we have done is we've right-sized the debt facility. That's now at AUD 250 million. That's a similar earnings multiple to when we moved it up to AUD 100 million a few years ago, and that gives us a little bit of flexibility to do things without needing to go to the market to fund a transaction.
Currently fully drawn, or no?
It is fully drawn. Some of it's in seed. And those are strategic seed positions where we put the first dollar of capital in until there's investor capital, and then we can repatriate that money.
Because our profits and our financials generally have grown so much that we can support supporting 250 was similar to supporting 100 when we first took it on, so we feel comfortable with that. Jim, the one thing we have said is that our dividends may not grow at the same rate as our profits going forward.
That, and I think we've highlighted last year that as we get a greater percentile of our earnings from offshore, we're going to have less franking. We do recognize that we should be distributing franking as much as we can to shareholders. That's very important. To the extent that we can use We generate a lot of capital internally. To the extent we can use a portion of that rather than issuing more equity, that may be a better use of funds.
Because at the moment, if you're fully drawn on your debt facilities and an opportunity came up that was a great opportunity, and you need to rely on issuing stock, and maybe your stock price is down due to whatever factors, you're a bit up against it. You're going to issue your own stock cheaply.
You haven't got that flex.
We've always said we wouldn't build big cash stockpiles because we think that's not good. I think you just have to trust us to be able to figure these things out. We've done that continually over 10 years now. We did do a substantial raise when our share price was over $20, and we only deployed part of that. The rest was in Metrics and Coolabah, but we've now I mean, it was just wonderful that we had that money, and we were able to do the 100% acquisition of PAM and AVI and Advantage Partners, so that's all great. We're pretty happy with the way that's all gone.
Final thing I would add is, I think 13 of the affiliates we have are things that we have grown from scratch, and the returns on those things that we have built have been extraordinarily high, and the capital requirements are very, very low. Those things we can fund out of ongoing cash.
Also, there is the earnings yield on the acquisitions too.
Yeah.
Do you have any experience or visibility on how long the Australian private credit issues take to get resolved? The Bathla's, the Metrics, you know, is there?
You are going to get three different answers.
Yeah. History doesn't repeat, but it rhymes. History is a guide only to some degree. We can all speculate about all those forces that are out there that are going to impact it. The answer is we don't know for sure. We do know that it takes some time. Obviously, we have to get on top of inflation. This is affecting interest rates. That's a major force behind the changes in the credit conditions. Government decisions on tax and so on are all relevant, so we don't know for sure. I'm old enough to have lived through the early 1990s real estate problems, where the banks really had a lot of problems and so on. I don't think it'll get that bad because I think there's a lot of learning by the regulators from that period, but we don't know for sure.
I think you can definitely say it's not going to be just quick over next quarter. Would be, I think, stating the obvious.
I was going to say.
Yeah, that's not a big call.
We'll give you a medal for that.
Yeah, not a big call to say that, but we don't know for sure.
I mean, effectively, you are issuing loans, and those loans have a maturity, and if your maturity is not 10 years, but it's one or two years, then you get a natural pullback to par because the probability of defaulting with every day that goes past goes down. That then perpetuates more reassurance, which then closes discounts, which then sees capital flows going back from the assets. If inflation remains high and the cost of capital remains high, you're then reissuing loans at a much higher interest rate, which is also very increasingly appealing for the points that Chambo said, as there is a demand for income. At the same time, it might not be the next quarter. I don't think these issues are a They're not a three to five-year issue. I think it's a much shorter time, in my view.
Yeah. The big point that I would make for shareholders of Pinnacle, private credit is just one of, you might say, 18 businesses that we have. It was like 10% of our profits last year. It's easy to exaggerate the impact of it. We've always known that as we expand and diversify our affiliates, at any point in time, there's going to be, call it, two or three of them that are not experiencing good conditions. The beauty of the diversification is we have a hell of a lot that are experiencing good conditions. As the flows that we've reported for the last quarter show, we got a lot of affiliates that are getting strong inflows and good outcomes. It's in that context of a diversified portfolio.
Last question. Could you see any outsized opportunities in this space as people get into trouble? Could you see some huge potential deal flow, or unlikely?
We are always looking, and we will not speculate. But, yeah, when can you
Logic would say yes, but we do not know yet. We do not know, to everyone's point, how far are we down through that curve? I think we have seen My view is I do not think the sector has yet seen maximum distress. Any other questions? Just slightly lightheartedly, I did ask the Company Secretary yesterday if I could insist that everyone who asks a question on Metrics has to ask one on Life Cycle, Coolabah.
I tried.
I was told I couldn't enforce that, so apologies. All right. Thank you. I'll now declare the poll closed, and the results of the poll will be announced to the ASX as soon as they're available. That concludes the formal business of the meeting, and I'll hand over to Ian for his address.
Thanks, Alan. Good morning, everyone. Welcome. The slide on the screen, slide 23, sets out the topics that I plan to cover today. I'll begin with key themes and outcomes for our company for the 2026 financial year, and briefly review the financial results. I'll then provide an update on the September quarter, which is the first quarter of the new 2027 financial year. From there, I'll turn to our growth agenda, including an update on affiliates and growth initiatives. I'll talk about the themes that we see in our industry around the world, and why we believe our model is well-placed for them. I'll finish with our progress in the area of corporate sustainability and the work of the PNI Foundation. Before I begin, a word about two significant milestones.
This year marks 20 years since the formal commencement of Pinnacle Investment Management, and 10 years since we became a listed pure-play funds management company. These are important milestones for us. Over the last 20 years, we've seen enormous changes in geopolitics and global inflation expectations, together with associated central bank responses to those changes, leading to significant volatility across all investment markets. Add in a pandemic, together with unprecedented technological change over the period, and you create an investment climate of both unexpected headwinds and opportunity. Over this time, we have provided our clients with an increased diversity of asset class opportunity. 20 years ago, we were two affiliates with just over AUD 1 billion assets under management, and today, we are AUD 238 billion with 18 affiliates and a U.K.-headquartered asset management business across multiple asset classes.
We have purposefully pursued this diversification, believing this will serve our clients best whilst trying to stay true to our best-in-breed philosophy, recognizing there will be periods when certain classes of asset outperform and others underperform as the cycles continue. My message to shareholders on these milestones, very similar to what I have shared with our people, both employees of Pinnacle itself and people in the affiliates, it is, of course, appropriate for us to reflect what is, in our industry, objectively a long period of time. We are, I think, rightly proud of what we have achieved over the past 20 years, and this gives us strong confidence that we can continue for many years growing at very high rates.
We must seek a confidence that is grounded in reality, in a clear-eyed knowledge of the risks and challenges inherent in our industry, and in the humility and determination to navigate these risks and challenges very well. That is the balance that we must strike, and strike continually. I do feel tremendous pride in what the Pinnacle family has achieved over these 20 years. I have had the privilege of working with so many truly exceptional people. I am, by nature, someone who looks ahead, who is focused on what is not yet done, and I am even more excited by what lies in front of us than by what has been achieved to date. Since Pinnacle became listed 10 years ago, we have compounded EPS at 27% a year, dividends per share at 34% a year, FUM at 28% a year.
Shareholders who have been with us since the first day of listing have earned a total return of around 30% a year compounded. The most important success of all is the investment performance of the affiliates, a remarkably consistent record with more than 80% of strategies outperforming their benchmarks over every rolling five-year period in our history. Performance for clients is paramount, and everything else follows from it. It has not always been plain sailing. We have had periods of worry and frustration, but we have been resilient, dogged, and determined because we have never lost belief in our mission and our purpose, and we never lose focus on what matters most, our clients. After 20 years, I truly believe we are only just beginning. I will share more on that when I come to growth later in this presentation. I will move quickly.
I would like to thank our clients, our industry partners, the affiliates, our people, and the shareholders have been an important part of that journey. Our purpose, to enable better lives through investment excellence, is one that many of you share, and it is one that we can only deliver together.
Just going to be rude and interrupt you for a second. Two of our Directors, Lorraine and Deb, have to get midday flights, and apparently there is industrial action at the airport. So, with your permission, we will allow them to head off now.
They know already what I'm going to say. In fact, they told me what to say.
All right.
That's all right. Thank you. Apologies, everybody, but the airport's going to be a disaster.
Lorraine, Deb.
Two weeks ago.
I might just keep going with. See you soon.
Now, for the 2026 financial year, FY 2026 key themes and outcomes. Slide 24 serves as a reminder of our progress to date in building a high-quality, scalable, multi-affiliate platform that has compounded earnings and dividends through cycles. Our platform has proven diversified and resilient, with multiple growth drivers, which I'll address in more detail in a minute. We've continued to evolve our platform to meet the needs of our many clients in an expanding number of markets. As I've just mentioned, we place investment excellence at its core. In FY 2026, we delivered record net inflows, record funds under management, and the strongest growth in our international business seen to date.
It was also a year of significant investment in the future of the business, and one in which performance fees, while solid, were below the exceptional outcome of the prior year. Slide 25, now on the screen, is from our annual results presentation of the 4th of August, and sets out how we summarize the key themes and outcomes for the 2026 financial year under four headings. For several years now, we have been explaining our strategy of increasing the diversity and robustness of our business, more affiliates, more asset classes, more distribution channels, and more geographies. We have been candid in that this strategy can suppress earnings in the short term, particularly where we are building new capabilities from scratch under Horizon 2, or paying for new capabilities under Horizon 3.
2026 financial year showed the growing benefits of this strategy, a step change in the scale and reach of the platform, and a year of investment that offset a portion of the associated revenue growth. I will take the four headings in turn quickly. The first is strong core earnings growth. Net profit after tax was AUD 176.7 million, up 31% on the prior year, and diluted EPS were AUD 0.781, up 25%. Excluding the non-cash gain of AUD 46.2 million arising from our move to full ownership of Pacific Asset Management, which accounting standards require us to recognize when an investment is held as an associate becomes a subsidiary, and excluding the returns on our principal investments, which is how we think of the underlying earnings power of the business, net profit was AUD 138 million, up 21%.
Affiliate margins on funds management activities before performance fees were around 10% higher than in the prior year, reflecting the growing weight of retail and international business in the mix. We continued to invest in our distribution teams in Australia and offshore, and in product and innovation, which I will have more to speak about shortly in this presentation.
Excuse me, Ian. Do you mean 10 percentage points higher than in your previous?
Yeah. 10 whole percentage points. It is quite
That is a 10% increment. For example, then cut margins of 30%-33%, not 30%-40%.
I see. Okay.
The number of people employed in Pinnacle Parent globally rose from 144 to 182 over the year, and total people costs rose by AUD 12.2 million, or 28%, to AUD 55.5 million. Together with the consolidation of Pacific Asset from April, this lifted Pinnacle Parent expenses to AUD 95.3 million. Pinnacle Parent revenues from affiliates, fees we earn for distribution, operations, risk, technology, and responsible entity services, excluding Pacific Asset and principal investments, rose by AUD 25.3 million, or 50%, to AUD 76.1 million. These are core. Sorry, these are core repeatable revenues, and they grew faster than our costs.
Just understanding the NPAT, that includes look-through earnings, right? Which do not. While you made a look-through earning, a total of AUD 176 million, maybe you only have AUD 100 million-
Yeah.
-profit in the company. Is that right?
Yeah. The big number-
Because the rest is held out in the Affiliate.
Yeah. No. The big number is AUD 138 million-
Okay
-because there was an accounting impact from the PAM thing. If you look at the 138, that includes our share of the affiliate's profits, so whatever percentage we own. So that's a true measure of our net profit. The dividends we receive, timing varies a bit, but broadly speaking, we get that amount of dividends from our affiliates, or at quite a high percentage. So it's a genuine profit measure.
I knew it was genuine. It was just whether it's in your hands-
Yeah
-or whether it's still out in the affiliates.
We have shareholder protections in our affiliate shareholder agreements which prevent them from retaining most of the profits. Unless we agree for a particular reason, they have to distribute the majority of their profits back up, including to us.
One important thing that has changed. The Pinnacle platform exists really to support the affiliates and to enable their success. That has always been the main-
Yeah
-reason for the business existing. What has changed in the last couple of years, up until, I think, two or three years ago, Pinnacle, the business, was loss-making. We charged our services at cost, and we supported non-profit-making affiliates by doing it for free. Pinnacle itself was a loss-making entity. As we built the strength of the distribution platform, particularly now internationally, we can actually charge higher rates for that. The Pinnacle business now is profitable on a standalone basis, plus we get the profits coming through from the affiliates. That has actually been a big change in the last year particularly.
To your point, our share of the profits is up with us. The remaining, the affiliates' share of their own profits stays with them.
That is the pattern that we expect to continue. Sourcing for growth, easily funded by the revenue that that growth produces, with the operating leverage in the platform showing through as funds under management and affiliate revenues compound. Second heading is record net inflows. Net inflows for the year were AUD 33.4 billion, compared with AUD 23.1 billion in the prior year, which itself was a record. AUD 16.3 billion of the AUD 33.4 billion was in the second half. Importantly, net inflows were positive and substantial across all three of our channels. AUD 10.2 billion from Australian retail investors, equivalent to 26% of opening retail FUM. AUD 10.9 billion from Australian institutions, 12% of opening institutional FUM, and AUD 12.3 billion from international clients, which was 24% of opening international FUM, and more than 2.5x the prior year.
International flows were the largest contributor for the first time. Funds under management closed the year at AUD 229.4 billion, up 28% on opening FUM, and approximately 1/3 of that is now from clients outside of Australia. The third heading is continuing investment excellence, which remains the foundation of everything else. 81% of affiliate strategies with a track record of five years or more had outperformed their benchmarks over the five years at the end of June, and 21% had outperformed by more than 5% a year. The past year was not an easy one for some investment styles. Confusion and exuberance in both directions found around artificial intelligence, a war that moved the oil price, and persistent inflation concerns made for volatile markets. Styles such as quality and growth, which have enjoyed favorable conditions for much of the past decade, met headwinds.
Not every high-quality manager outperforms in every period. What is notable is how the composition of our outperformers changes over time. We stay in close contact with every affiliate, and we retain high conviction in those whose shorter-term numbers have been below their usual standard. Their time will come again. Performance fees sit under this heading too. 12 affiliates earned performance fees in the 2026 financial year, totaling AUD 146.6 million at the affiliate level, despite the challenges for some investment styles I have just described. That is a solid outcome, but it was 5% below the prior year, and because of the mix of strategies that earned them, Pinnacle's share after tax was AUD 35.6 million, down from AUD 46.6 million. Performance fees are a significant and ongoing component of our earnings. They are also variable from year to year, and the 2025 outcome, led by Hyperion, was exceptional.
The opportunity continues to grow. There are now 35 strategies with the ability to earn material performance fees on AUD 61 billion of funds under management, up from 31 strategies on AUD 50 billion a year earlier. At the end of June, 67% of that fund was at its high-water mark, and 80% was at or within 2% of it. Fourth heading is the evolution of Pinnacle into a global platform. We now manage AUD 75 billion for clients in more than 50 countries outside Australia, of which AUD 33 billion is from wholesale and retail investors. Our model of supported independence is resonating strongly across the globe. We have demonstrated that we can execute and grow rapidly across Horizons 2 and 3 internationally.
Under Horizon 2, more than AUD 50 billion of fund was built from scratch across Akadia, Palisade Real Assets, Langdon, Lifecycle, with Lifecycle alone reaching AUD 42 billion in less than 2.5 years, and is now the largest affiliate on our platform by funds under management. Under Horizon 2, we note the ongoing success of the more recent transactions involving U.S.-based private markets manager VSS, Advantage Partners, Japan's largest homegrown private markets platform, and our U.K. partners in Pacific Asset Management. Pacific Asset continues to grow strongly. Assets under management were $24.4 billion at the 30th of June, up from $21 billion three months earlier, with $653 million of net inflows in the June quarter. When we first invested in Pacific Asset, its run rate earnings were around 9.4 million pounds a year.
By the time we moved to full ownership, they were 17.9 million pounds, and they have grown since. There is further detail on Pacific Asset in the FY 2026 in the review section of this deck. in August, we were delighted to welcome Pacific Asset's Chief Executive, Matthew Lamb, to the Pinnacle Board as an Executive Director. As you know, he joins us by video link today from the U.K.
Matt's appointment reflects the weight that the United Kingdom now carries in our group, with Aikya, Life Cycle, and Pacific Asset, and its partner boutiques all based in London, and the importance of having that business represented at the Board table. Internationally domiciled affiliates now account for around 40% of total funds under management, and the business is, as we put it to investors in Boston in August, Australia-listed, but not Australia-dependent. Come back to these as we turn to growth.
Now, Chair, I might skip through slide 26, which refers to growth, and slide 27, which goes further over our financial results. I think people are able to read those from the slide. Slide 28 has details on our core earnings growth. Slide 29 shows our record of earnings growth over the full 10 years since we became listed Pinnacle in 2016. Compounded net profit after tax at 40.7% a year, or 36.5% on an underlying basis, and diluted EPS at 27% a year. Slide 30 has performance fees detail. 31, funds under management and net flow history. I think I will move to slide 35, which is the September quarter update. Yep. So, turning to the September quarter, which of course is the first quarter of the new financial year, which is hot off the press numbers.
The aggregate of affiliates funds under management is now AUD 238.1 billion at 30th September. This is up AUD 8.7 billion, or 4%, from AUD 229.4 billion at 30th of June. It is up by AUD 6.3 billion, or 3%, excluding fund acquired by Antipodes through their transaction with Bennelong during the quarter. Total net inflows for the 3 months to the 30th of September were AUD 5.9 billion, of which AUD 2.7 billion was Australian retail, AUD 400 million was from international clients, and AUD 2.8 billion was from Australian institutional investors. Included with these flows was AUD 804 million into PAM, of which AUD 600 million was into its model portfolio solutions, or what we call managed accounts, during the quarter. So turning to slide 36, we highlight some of the key themes during the quarter.
I would just say those flow numbers for the quarter, they are not as good as the best that we have produced in the past, but they are very strong numbers. A lot of our peers are out there reporting net outflows.
They are the net flow numbers.
Yeah.
Is there a change in composition? Is it more outflows offset by
Absolutely, always. Every period, we have large-
Relative to the past. Like-
Yeah
-this particular quarter, is there a change in the-
L ook, one quarter is very lumpy, and it moves all around. I would say, and my colleagues who are directly responsible for these areas might jump up and maybe change what I say, but my perception is for a few years now at least, the churn has been high. The size of the net inflows and the net outflows has been very large. Our industry has been undergoing quite major change. We are doing just fine, notwithstanding that.
Just a quick question to help my understanding. FUM's gone up a little bit. That doesn't represent the increase in your equity holding of PAM, so the total amount of FUM that's going to be contributing profit to the company is actually greater than that?
Yes. That increase, as I mentioned, a little bit of it was acquired, but 6.3 billion of the increase was what one might call organic, so inflows and market movements, not acquired.
But your share of that is actually more because you now have more equity in PAM.
Absolutely. If you were to look at our effective ownership, absolutely. PAM is really important. Everyone should be in no doubt about that. It is the biggest thing we have ever done, and we have done that with great confidence because we knew Matthew and his team and his business very well by the time we took that big step. It was a big step. We are now 100% of it. We and Matthew are very much tied at the hip. Just quickly, slide 36 is key themes for the quarter. I think in the interest of time, I will leave it to people to read these. Our slides were published with the ASX, lodged with the ASX last night, and they will remain there for people to review.
At the end of September, 20 of our 35 strategies with the ability to earn material performance fees were at their high-water mark. That was 65% of performance fee fund, and 80% were at or within 2%. We will not know till the end of the half and then the end of the year what our performance fees will be, but these are the best indicators we have at this stage, just a quarter into the new financial year. Again, most affiliates and strategies continue to deliver performance to expectations or better. 81% of affiliates, strategies, and products with track records exceeding five years have outperformed their benchmarks over the last five years to the end of September. It is the same proportion as was the case to the end of June.
Now, slide 44 is about our Three Horizons of Growth that I think shareholders are quite familiar with. Slide 45 expands on how we can move ahead with sustained growth. Mentioned before, we are confident we can continue to grow strongly because we have a diversified business. Similarly, I think I might move right through to slide 52 at corporate sustainability now. We just want to make the point here that our sustainability agenda is structured around three focus areas: purpose, people, and planet. Pinnacle affiliates approach responsible investment in the ways most relevant to their own strategies, and all of them integrate environmental, social, and governance considerations into their investment decisions. Our role is to support and advise. We do not participate in their investment activities.
But during the 2026 financial year, we maintained our certification as a family-friendly workplace, continued to embed our work and family action plan, submitted our fourth voluntary Modern Slavery Statement, and we are actively working on our FY 2026 Modern Slavery Statement submission. We continue to work towards our 40:40:20 gender target across the board, the leadership team, and the workforce. Our Women in Finance scholarships, which have been extremely successful in bringing talented young women into the industry, continued with 11 scholarships across five universities. On climate, we have maintained our carbon-neutral certification and made progress towards our target that all significant suppliers disclose greenhouse gas data aligned with recognized standards by the 2028 financial year. There is more detail set out in our corporate sustainability report on our website, which I would encourage you to read.
Also, we have continued to grow our contributions to the PNI Foundation, and they have continued to increase the amount of donations that they make to a range of very important charities. Before taking your questions, may I conclude by restating that we believe that we service our clients best over the long term by providing them with diversity in asset class opportunity. If we are successful in that, we will also serve our shareholders well. As I have previously said, we know that asset classes move in and out of favor, and we are not blind to the risks that that brings. However, if we are able to support the best of breed to prosper over the long term, then that bodes well for our clients and our shareholders. Thank you all for your patience and your attention. Be pleased to take questions now.
I am sorry we have run over time a little bit.
I would like You talked a bit about AI.
Yeah.
There is benefits and there is risks. But I worry, the implication of AI is it is going to try and mine your information to make it available for others.
Yeah.
The perimeter of your environment is now absolutely critical.
Yeah.
It is getting bigger. I just wondered if you wanted to talk a little bit about, you offer those services to all this. There is a lot of people now inside.
Yeah.
The threats to an organization mostly come from inside, not from outside.
Yeah.
Are you going to need a CTO?
Yeah.
Or something like that.
We have one.
Here is one we did earlier.
Yeah. We have substantially expanded our technology, IT resourcing, our data resourcing, which is fundamental, and we have a specialist AI team, which Kevin Yeoh here is responsible for. We have incredibly talented people leading these teams. We have been able to recruit terrific people, mostly fairly young people, with all of these skills. We are deploying AI extensively in Pinnacle itself. We are assisting and facilitating the affiliates to use it. It is hugely important to the future of investment management. Happily, humans and the talent and skill of humans remains fundamental as well. Kevin, could I just invite you. A CTO, we call Dan our CFO. He is actually CFO, CTO, COO. He has also a lot of talented people who work for him, but he coordinates it all.
I wonder whether, a little bit of time we have got, Chair, Kevin might not like to say just a few things.
Thanks. I would also like you just to share a little bit of Kevin's background, because it is very different than the-
Yeah. Obviously, huge changes in thinking about AI. I mentioned it is about tech, it is about data, it is about specialist AI. We knew Kevin Yeoh as a very experienced senior portfolio manager in MFS, one of the shareholders in us. We knew him, he knew us very well. Our view was always, we need incredible specialist talent in AI, but it should be led. The strategy of AI, the determination of priorities, the drive of it should be led by a person with investment experience, talent, expertise, who, of course, has to have a lot of tech knowledge, and it needs to be someone who is passionate about AI. Kevin, there he is. We were very fortunate to find that Kevin had this deep interest within him in AI. He has gone beyond investing to leading our AI strategy team.
Just before Kevin speaks, I am going to take a non-executive decision and ask Chambo and Dan Longan and Kyle Macintyre. We have got to present at a Barrenjoey conference in 15 minutes, so if I may ask those three to go on, and Christa Lenard as well. You will get left with Ian Macoun, myself, and Kevin Yeoh, everyone else. Kevin, apologies. Thanks.
Yeah. So just to say, so we go on now, 11:00 A.M., Barrenjoey, then Macquarie. We have a very large number of institutional shareholders who will ask us lots of questions.
Ian, last year you compared your longevity in the business to Warren Buffett, and I am just saying, Buffett allows six hours for his AGM, so take that on notice for next year.
We will see what we can do.
Yeah.
Yeah, thank you for your question. AI across the entire economy is certainly, it is a very challenging issue. We as funds management, I guess it goes to the heart of it because it is about intelligence, and funds management is ultimately about critical decision-making. Looking at AI, it is generative AI, so that has opportunities and challenges. I would say, certainly, I think it is very good for fund managers in terms of summarization efficiency. If you are wanting to summarize Pinnacle's annual report, for me, it used to take a whole day just reading through things and digesting things. Now, you can ask ChatGPT or Claude within five minutes, and you get a summary. That is how I think a lot of fund managers are using generative AI.
But I have yet to see any real sort of standard cookie-cutter approach that is going to help you generate alpha sustainably over the long term, because it still is very much about summarization. I think alpha generation, human judgment is still critical to that. I think the summarization is really useful for experienced investors, because a generalist portfolio manager can look across several sectors really quickly and get a view, can ask its analyst team for a summary of certain sectors. But if you are looking at a new sector for the first time, I think it is quite dangerous, because you will really not know whether what that large language model is telling you, whether it is true, whether it is just hallucinating. Within Pinnacle, the organization itself, we have had a lot of success deploying agentic workflows across many different business functions.
The sales team is seeing a lot of benefit, the operations team, legal and compliance, marketing. Our view, our philosophy is that it should be augmenting the roles of our employees, and it really is. It is allowing our employees to A lot of the so-called grunt work can be done by agents, therefore our employees are able to use their brain to think about more value-enhancing projects, and therefore, again, more value-enhancing.
In terms of security, we do everything possible to protect. Back to the extent that I wanted to use Claude when I was doing some work preparing for our annual results. One of Kevin's people came to me and said, "That is market-sensitive, confidential material. You are not allowed to use Claude on that. You have got to use ChatGPT that we have got very tight perimeter around it." I was not even allowed to use Claude because they said it was not I said, "Surely it is secure." They said, "Well, not quite secure enough." I was kept within the boundaries.
There is a lot of that going on, but a good example of something which was not possible before is, for example, that decision playing off process you were talking to me about yesterday.
Increasingly, a lot of the affiliates are asking, I guess, my team to help them in the investment process. For example, one of the private markets investors, a very experienced investor, was interested in actually, I guess you could call it a rational acting agent. Think of like a Nash equilibrium, game theory type of agent. And just wanted to test his perspective, his investment thesis-
Around industry dynamics in an industry.
Yeah. Potentially helping to deal with-
Yes.
-a potential deal.
Negotiation, a partner negotiate.
Exactly. This business partner who they have a lot of familiarity with, how could that business partner potentially act with this potential deal going forward? Certainly, a lot of that knowledge is already in the head of that investor. He just wanted a different perspective. That is an area where I think generative AI is quite useful to act as a potential devil's advocate or just another, think of it as another analyst sitting around the table as a different perspective.
Good. Okay. Kevin is around if you want to chat further. Are there any other questions for him?
Well, I have one more. Basically, I understand equities and equity markets, but your diversification-
Yeah
-takes me to places I don't understand.
Yeah.
The private capital stuff and all that, and the implications of that.
Yeah.
Can I even evaluate the risk of what I'm doing?
Yeah.
Is there an education program or something like that?
Yeah. We sort of do our best to explain each partnership that we have, each affiliate. You are not alone. A lot of our institutional investors say, "Hey, we are equities people. We do not understand private credit and private equity and so on." Our job is to protect the future of the company and maximize its potential by knowing the market extremely well. I would argue it is probably the most important function of Pinnacle. We are a distribution shop. We know our markets very well. These are our people who are out there every day talking to clients, et cetera. So we can see trends. Before a lot of people see them, we know what our clients are looking for, how investing is changing. Investing has changed a lot. It is going to continue to change, like radically. Private markets have grown, but you ain't seen nothing yet.
Private markets are going to grow enormously. Portfolios will not be optimal without quite a bit of private markets in it, whether you are talking private credit, private equity, infrastructure, real estate. Now, they all have their own challenges, and they are all different, but they are all important components of portfolios. What we have found, happily, we do not want to go anywhere we do not understand. Never. How the mighty fall is they go-
Yeah.
-wandering off, which is why we've been at such pains to explain, as we go into other geographies, are we going to get ourselves into trouble? As we go into other asset classes. But what we found, happily, this is wonderful news, our business model is just as applicable and valuable, attractive in other parts of the world and in other asset classes. People are asking for Pinnacle to participate in these things. They say, "Why aren't there more Pinnacles in the world?" Well, it's harder than it looks, for a start. But we feel that it's incumbent on us not to do everything, but where our model can do investment excellence, why wouldn't we do it?
Now, I know that makes us harder to understand, but I would submit it's much better to have a business that's growing its earnings rapidly and in a diversified and resilient way that's harder to understand than an easy-to-understand business that is not going well.
Just on that, the Five V, can you just give us a few words about Five V? Because you're talking about private markets and that-
Yeah
-has been part of the move, but we haven't heard a lot.
Yeah. In a nutshell, they are mid-market private equity and venture capital. A huge area of opportunity. I think most people are aware of the big private equity groups, KKR, Blackstone, all those. They are huge, and most professional portfolios have some of that large buyout-type funds in them. An area of and we have always played in space where the return for risk trade-off is better. We did mid-market infrastructure with Palisade. We do a lot of mid-market stuff, where the big people will not get out of bed for these deals. It is too hard. It is very resource-intensive. They can just deploy a lot of money quickly in big deals. Five V are in the mid-market. There is generational change occurring, actually all around the world, but just focus on Australia.
Baby boomers who have built, spent a lifetime building wonderful businesses, most of which we had never heard of unless we want to go and get a service done, they are retiring. The next generation is either not interested or not capable. What a tragedy if they die. You need the skills that a Five V have to work with those founders, help them have succession, et cetera. There is enormous opportunity in that space, and there is a need for those sort of returns for risk that they can produce. We are very excited about it. It is a little different in that a material part of their revenues and profits are in carry, performance fees. That occurs over time.
They had a big vision to grow, and they wanted us in there to help them do that, to take them to the wholesale market, which they had not been in previously. The partnership is going very well, but it takes time. We always knew it was a medium-term opportunity. It is going well.
Call a few years ago, though, maybe closer to the time you bought in, you were talking about the substantial carry. Is most of that still embedded?
Yeah.
Has a chunk of it been realized already? Where are we on that journey?
Most of it is still embedded. We are getting closer. They are fund four.
Yeah, the next asset they sell.
The next asset they sell will produce quite large performance fees.
They've paid back most of the hurdle.
That's right.
The next one is carry that we'll start participating in that fund.
And there is an identified asset they're trying to sell, or you're just saying in general?
There are a few. Any one of which.
Okay. The carry that you were excited about three years ago or whatever is still there, maybe just taking a little longer to-
Yeah
-flow through the pipeline.
Yeah. It hasn't been a great-
In a pipeline-
-environment for exits.
Any other questions? You better keep going.
Do you mind if I go? Otherwise, they will accuse me of not-
I'll formally close the meeting. If we have a six -hour AGM next year, I'll insist on questions on Coolabah Life Cycle. Plato, good stuff.
Call it a two-hour AGM. Allow two.
Right. Well, we did just about two hours.
Just about.
Thanks very much, everyone.
Thanks very much.