Business operations and strategy briefing. 12 December 2007

Transcription

1 Business operations and strategy briefing 12 December 2007

2 Schedule Arrival Welcome David Deverall 10:05 Strategy and structure David Deverall Australian Equities Emilio Gonzalez Question and answers Global Equities Emilio Gonzalez Des Sullivan David Boal Emilio Gonzalez Questions and answers Income & Multi Sector Richard Brandweiner Michael Korber Questions and answers Chief Executive Officer and Managing Director Chief Executive Officer and Managing Director Group Executive - Australian Equities Group Executive Global Equities Chief Investment Officer PIIML Managing Director PIIML Group Executive Global Equities Acting Group Executive Income & Multi Sector Head of Credit Break (5 mins) 1

3 Schedule Operations: Platforms & Structured Products Eric Wang Chief Operating Officer Questions and answers Perpetual Private Wealth David Deverall Scott Riedel Questions and answers Perpetual Corporate Trust Phil Vernon Chris Green Phil Yardy Questions and answers Wrap Up David Deverall Questions and answers Chief Executive Officer and Managing Director Head of Perpetual Private Clients Group Executive Perpetual Corporate Trust Head of Trust and Fund Services Head of Mortgage Services Chief Executive Officer and Managing Director Refreshments 2

4 David Deverall Strategy and structure

5 Our vision is to be Australia s leading creator and protector of wealth Focus on our four sources of competitive advantage Funds management policies and processes Relationship with financial planners Trusted brand Fiduciary services I. Develop a more balanced portfolio II. Develop new growth engines III. Fully engage our people to deliver our strategy

6 Key strategic business priorities Australian Equities New and innovative products in Australian equities to grow revenue margins Global Equities and Income & Multi Sector Aggressively grow funds under management Perpetual Private Wealth Accelerate growth by expanding adviser teams and improving support capabilities Perpetual Corporate Trust Rapidly grow our mortgage services business to become outsource partner of choice to the lending industry

7 Context for new structure Align organisational structure with business strategy Drive accountability and authority for execution of strategy around business units Focus team and individual responsibilities around business outcomes

8 New Organisation Structure 17 September 2007 Managing Director David Deverall Australian Equities Emilio Gonzalez Global Equities Emilio Gonzalez Income and Multi Sector Richard Brandweiner (acting) Operations Eric Wang Private Wealth David Deverall Corporate Trust Phil Vernon Risk Ivan Holyman People and Culture Cathy Doyle Finance John Nesbitt New business units

9 Organisation structure - new and existing business units Managing Director David Deverall Australian Equities Emilio Gonzalez Global Equities Emilio Gonzalez Income and Multi Sector Richard Brandweiner (acting) Operations Eric Wang Private Wealth David Deverall Asset Management Sales and Servicing Product Strategy Marketing Finance Asset Management Sales and Servicing Product Strategy Marketing Finance Asset Management Sales and Servicing Product Strategy Marketing Finance Technology Service & Operations Perpetual Private Clients Direct Product Advisor Distribution Investment Administration Fund Accounting Structured Products Platforms Business units headed by Group Executive: member of EXCO direct report to MD/CEO Analytics & Research

10 Emilio Gonzalez Australian Equities

11 Value proposition: consistent delivery of good performance over time Australian Equities business represents core Perpetual business Reputation and market position is backed by: - Highly awarded and experienced team (continuity, stability and track record of success) - Strong Perpetual brand Represented in shelf space on all major platforms Boutique culture in a publicly-listed company (best of both worlds) Where does Perpetual sit in today s competitive landscape? - doing well despite four year bull market - performs well in periods of uncertainty 10

12 Australian equities structure promotes clearer focus and alignment of responsibilities Australian Equities Emilio Gonzalez Active Asset Management John Sevior Quantitative Asset Management Vasant Khilnani Institutional Sales Justin Walsh Marketing TBA Retail Sales Paul Sewell Equities Product Strategy Edwina Maloney CFO and Business Strategy Michael Miller Adviser Distribution - Damian Crowley Investment Administration - Mark De Courcey Analytics & Research - Daniel Campbell New roles added in September 2007

13 AEQ strategic priorities about extracting best value from business Our aim is to grow our business by maintaining focus on good consistent investment performance in Australian equities and continuing to offer a range of new and innovative products We will achieve this by: - continuing investment in and development of team - ensuring breadth of portfolio management responsibilities - identifying niche products through new channels eg maximising revenue through long/short products with good revenue margins and potential performance fees eg SMAs - limited offerings to HNW/private banking targets We will deliver on our strategy while continuing to maintain revenue margins 12

14 Emilio Gonzalez Global Equities

15 Global equities is an opportunity Perpetual must participate in Interest in global broad based product Our focus is on growing the business Commitment to long-term strategic initiative Investment philosophy consistent with Perpetual brand Infrastructure built for a lasting global equities business Strengthened structure supports this initiative

16 Strengthened structure with improved sales capability Global Equities Emilio Gonzalez Asset Management Des Sullivan John Nolan Managing Director David Boal UK/Europe/Americas Institutional Sales Andrew Francis Australia/Asia Pacific Retail Sales Rory MacIntyre Australia Director of Business Development Martin Pattinson UK/Europe/Americas Chief Operating Officer Patti Eyers Adviser Distribution - Damian Crowley Investment Administration - Mark De Courcey Analytics & Research - Daniel Campbell New roles added September 2007

17 Des Sullivan Global Equities

18 Our commitment to success Our investment style & philosophy Bottom-up / mid-large cap focus Benchmark independent Sustainable value creation (quality) Valuation Long-term view Our team Strong team culture Single global strategy Focus on investment performance Interests aligned

19 Portfolio style characteristics Market CAP>AUD 150bn Low BETA High free cash flow yield High price momentum High debt/ev Low ROE High ROIC Source: UBS October 2007 Compared to MSCI World Index % deviation

20 Portfolio active sector weights Healthcare Industrials Utilities Telecom Financials Consumer staples Active weight % Source: Perpetual October 2007

21 Top 10 holdings* Top 10 PIIML holdings P/E 2007 P/E 2008 Dividend yield 2007 % Johnson & Johnson Free cash flow yield 2007 % 6.0 Nestle Total S.A GE Novartis Altria General Dynamics Siemens Exxon BNP Paribas N/A Total / average * End October 2007

22 David Boal Global Equities

23 Business development (ex-australia) Focus on established and growing markets for global equity Focus on long-term institutional market Focus on one product type global equity Distinctive style boutique manager with Perpetual management and infrastructure

24 Asset management market trends (ex-australia) Defined contribution growing/defined benefit under pressure liability-driven investment Asset class proliferation/entry of investment banks Emphasis on alpha growth of unconstrained Capacity limits/specialisation rise of boutiques Globalisation of investment flows and asset management Favourable market for a firm like Perpetual in global equities

25 US pensions and foundations market growth of global mandate Assets Weight Assets $bn (US) % weight of total foreign holdings Source: Intersect Research June 2007

26 Perpetual s Global Equities business development strategy Value proposition Good team continuity, track record Focus single product Distinctive style quality High conviction portfolio potential high alpha Strategy Institutional market focus UK and Ireland, North America, Asia Build institutional sales capability in UK and Australia Form long-term relationships with institutions and gatekeepers Retail marketing in Australia Structures in place - sales, infrastructure, licensing Where are we? Increasing levels of awareness in target markets: consultant rating typically good invitations to tender beginning to make short-list US takes at least three years Strong position to capitalise when performance kicks in

27 Emilio Gonzalez Global Equities

28 Portfolio reflects strong quality characteristics Analytics Perpetual Global portfolio MSCI World Index Return on equity Interest cover (times) Debt/equity ratio (%) Strongly representative of a quality portfolio Source: UBS analytics September 2007

29 Defining a global universe of quality stocks MSCI World Index High debt and non-dividend payers removed MSCI World Index ex-high debt and non-dividend payers Region Ranking process Two step process Industry/region Ranking process Top 20% ranked companies in each region by average of: 7 year dividend growth 7 year average ROE 7 year cash flow/sales ratio Top 20% ranked companies in each industry/region eg European energy stocks by average of: 7 year dividend growth 7 year average ROE 7 year cash flow/sales ratio Top 20% by region Top 20% of each industry group in each region Quality universe

30 This resulted in a quality universe possessing strong fundamentals similar to our portfolio Analytics Quality universe Perpetual Global portfolio MSCI World Index Return on equity Interest cover (times) Debt/equity ratio (%) Similar characteristics and strongly representative of a quality portfolio Source: UBS analytics September 2007

31 Quality outperforms over the long-term Universe of quality companies vs MSCI World Index - cumulative total return (AUD) 1988 September MSCI World Index Quality universe % p.a. Base to % p.a Sep-88 Sep-89 Sep-90 Sep-91 Sep-92 Sep-93 Sep-94 Sep-95 Sep-96 Sep-97 Sep-98 Sep-99 Sep-00 Sep-01 Sep-02 Sep-03 Sep-04 Sep-05 Sep-06 Sep-07

32 but it doesn t outperform all the time MSCI World 1 year rolling return versus universe of quality companies 60% 50% 40% 30% MSCI World 1 year rolling return 12m excess return The qualityuniverse has had strong performance in weaker markets, but also in strong mid 90s market 1 Year excess return 20% 10% 0% -10% Sep-89 Sep-90 Sep-91 Sep-92 Sep-93 Sep-94 Sep-95 Sep-96 Sep-97 Sep-98 Sep-99 Sep-00 Sep-01 Sep-02 Sep-03 Sep-04 Sep-05 Sep-06 Sep-07-20% -30% -40% Historically, the quality universe underperforms in the latter stages of bull markets The last four years have seen a prolonged period of underperformance

33 There are good prospects for Perpetual in global equities Excellent market opportunity We have the right team, right approach, right strategy We have ticked and cross-checked all the boxes Our infrastructure is in place Licences in target markets Telling our quality story to consultants Ready to capitalise when performance kicks in Indications are the end of a risk-indifferent period and a major rotation back toward quality

34 Richard Brandweiner Income & Multi Sector

35 Income & Multi Sector: new business/highly experienced team Income and Multi Sector Richard Brandweiner (acting) INCOME ASSET MANAGEMENT - $8bn Mortgages Marion Kraemer Cash/Fixed Interest Michael Korber MULTI SECTOR ASSET MANAGEMENT - $7bn Balanced Funds Richard Brandweiner Multi Manager Damien Webb Property Sean Murray and Goran Ujdur CFO & Business Strategy - John Coyle Institutional Sales - Matt Russell Retail Sales and Marketing - Jon Crook Product Strategy - Chris Hurst New roles added September 2007

36 Income & Multi Sector products and channels Products Institutional Mezzanine/Retail Credit Enhanced Cash Funds (2004) Exact Market Cash Fund (2005) Diversified Income Fund (2005) Mortgages Mezzanine Mortgage Fund (2003) Monthly Income Fund (1966) Property Direct Property Fund (2006) Property Securities Fund (2002) Property Income Fund (2004) Multi-sector Diversified Alternative Funds (2008) Perpetual Balanced Funds (1993) Select Diversified Funds (1995)

37 Strategic direction Aggressively grow and sell emerging capabilities (credit, property, multi-manager alternatives) and Objectives Explore the next phase of growth for mature capabilities (mortgages, diversified) with An empowered management team collectively accountable for delivery Tactics Focus on selling credit and property capabilities in the retail channel Globalise the asset management skill sets Re-package mortgage lending and diversified capabilities Develop and commercialise alternative capabilities within our multi-manager business Providing a range of products which meet the changing investment needs of our clients

38 Michael Korber Credit

39 Exact Income Treasury - Nov-07 Oct-07 5,500 5,000 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1, Jan-05 Feb-05 Mar-05 Apr-05 May-05 Jun-05 Jul-05 Aug-05 Sep-05 Oct-05 Nov-05 Dec-05 Jan-06 Feb-06 Mar-06 Apr-06 May-06 Jun-06 Jul-06 Aug-06 Sep-06 Oct-06 Nov-06 Dec-06 Jan-07 Feb-07 Mar-07 Apr-07 May-07 Jun-07 Jul-07 Aug-07 Sep-07 Growth in new products Inflows from $1m superannuation opportunity FUM ($)m

40 Perpetual s credit portfolio is high quality, diversified and short dated Quality Diversification Maturity AA rated fund 85% AA or better 100% investment grade No SIVs Predominately domestic 200 securities No security greater than 2.5% of portfolio Average exposure below 1% of portfolio Wide sectoral diversity 1.5 years average maturity 85% matures in less than 3 years 20%+ cash High quality liquid portfolio

41 Market environment summary There has been a sharp deterioration in confidence in debt markets Risk in AAA rated asset backed securities is unprecedented Liquidity is at a premium Risk has been significantly repriced - credit spreads are now at historically cheap levels There remains a large overhang - overhang as leveraged players are forced to exit - backlog as issuers are unable to access markets This cycle will sanitise markets generating significant opportunities

42 Jun-03 Aug-03 Oct-03 Dec-03 Feb-04 Apr-04 Jun-04 Aug-04 Oct-04 Dec-04 Feb-05 Apr-05 Jun-05 Aug-05 bps Oct-05 Dec-05 Feb-06 Apr-06 Jun-06 Aug-06 Oct-06 Dec-06 Feb-07 Apr-07 Jun-07 Aug-07 Oct-07 EUR Bank Tier 1 capital spreads

43 Australian RMBS spreads AAA MBS senior debt AA MBS sub debt

44 Overview of changes in the credit market Pre-July 2007 Valuations: negative Macro: positive Supply/demand: negative Technical: negative Score: NEGATIVE 2 Transition period Valuations: positive Macro: negative Supply/demand: negative Technical: negative Score: NEGATIVE 4 Recovery period Valuations: positive Macro: neutral Supply/demand: neutral Technical: positive Score: NEUTRAL Now What did credit look like What does credit look like What will credit look like Anatomy of a AAA RMBS deal 33% subordination BBSW+0.19% 32% subordination BBSW+0.20% 38% subordination BBSW+0.85% 50% subordination BBSW+1.08% 35% subordination BBSW+0.50% Key difference between the sub-prime issue and previous events is that quality paper has been impacted and amplified by gearing

45 Opportunities and challenges Volatility will remain in debt markets over the short to medium-term The risk re-pricing has resulted in a higher running yield for the portfolio - 56 bps now versus 19 bps earlier in the year We remain confident in our process and our portfolio positioning and characteristics Given the re-pricing, we believe the scope to add value is larger and we are seeing some good investment opportunities

46 Eric Wang Operations Platforms & Structured Products

47 Operations: two major areas of focus Wealth Management value chain Manufacturing Packaged administration Advice and direct to customer Australian Equities Operations: Platforms & Structured Products Private Wealth Business units Global Equities Income & Multi Sector Shared support Technology, Service, Operations, Product, Funding Accounting & Tax

48 Operations: established team in place Chief Operating Officer Eric Wang Business Solutions & IT Services Matt Pancino Service & Operations Keith McLachlan Unit Registry Program Alastair Bor Platforms Gai Ferrington Structured Products Russel Chesler Finance David Barton Product Hannele Robberds Shared support across business units and the group Business unit in Perpetual Investments Areas added in September 2007

49 Business assets and priorities Perpetual WealthFocus Perpetual Platform Solutions Perpetual SMA Perpetual SMSF Perpetual Structured Products Business head appointed (Aug 07) Technical services capability in place (Sep 07) Sales and service team in place (Oct 07) Expanded menu offering for WealthFocus (Dec 07) New unit registry system in full production (Jan 08) SMA launched exclusively to Private Clients (Jan 08) Perpetual Protected Investments - Series 1 - $160m - Series 2 - $60m - Series 3 - Jun 08 - Series 4 - Nov 08 New product - May 09 Committed to becoming the preferred provider of platform solutions to independent planners Become a leading provider of structured products in Australia

50 David Deverall Perpetual Private Wealth

51 Our target market is large, growing and fragmented opportunity for unconstrained growth HNW market size $385 billion 1 355,000 households have more than $500,000 investable assets in Australia FUA ($M) 14,000 12,000 10,000 8,000 Fragmented HNW market HNW market growth 6,000 4,000 Historical growth ( ) 2, % Forecast growth 2 ( ) 10.9% 0 Westpac PB UBS WM National PB ANZ PB Perpetual Private Client Myer Family Office Centric Wealth Investment Banks National Private Banks (retail/commercial) Domestic relationship/advice focused Macquarie PB Matrix St. George PB Note: 1. Investable assets includes financial assets only. Excludes own businesses and property Source: Household Wealth and Wealth Distribution Australian Bureau of Statistics, 9 Nov Credit Suisse Asia Pacific overview, Australian HNW growth analysis, The Boston Consulting Group, 2 Apr Private Client Services in Australia 2005, Datamonitor, August 2005

52 Our vision is to be the adviser of choice for financially successful Australians Perpetual Private Wealth Perpetual Professional Professional investors Wealth $10 m + Family office service model Exclusive and discrete Private Clients Sophisticated investors Wealth $1 10 m Relationship/team based model Sophisticated and exclusive Perpetual Premium Retail investors Wealth < $1 m Individual advice based model Privileged and special access Will use Perpetual Private Clients as foundation to grow absolute potential of Private Wealth business Scalable and integrated operational and technology support

53 Scott Riedel Perpetual Private Clients

54 What advisory services do HNW Clients want? Debt Services Investments Discretionary services Business Advisory Philanthropy Estates Strategic advice Risk Insurance Tax advice Trust Management Estate planning Super strategies Trusts Tax and accounting

55 We offer a comprehensive range of services for HNW clients Debt Services Investments Discretionary services Business Advisory Philanthropy Estates High Net Worth Client Strategic advice Risk Insurance Tax advice Trust Management Estate planning Super strategies Trusts Tax and accounting Strong capabilities We have the capability but need to grow and develop

56 We maintain a full range of services which are yet to be replicated by our competitors Business Comprehensive Advice 1 Range of Products / Services 2 Fiduciary Services 3 Perpetual Private Clients Independent Financial Advisers 2 Investment Banks 4 Brokers Trust Companies Regional Banks National Private Banks (eg. big four) Strong capabilities / competitive advantage Weakness / No Capabilities (1) Includes Investment, Structure, Tax and Risk Management advice (2) Includes investments, insurance, finance, custody and DIY services (3) Covers trust management, estate administration/planning and philanthropy

57 We have increased client satisfaction and improved the work environment for our advisers Increasing client numbers CAGR - 32% Increasing number of Advisers CAGR 17% Clients 5,000 4,000 3,000 2,000 Wilson Dillworth integration 2,100 3,600 4,300 4,800 Advisers ,

58 We have delivered strong volume and profit growth over the last four years Increasing FUA CAGR - 18% Increasing profit CAGR - 31% FUA ($B) PBT ($M)

59 Our strategy is to establish Perpetual as the adviser of choice for financially successful Australians Adviser growth and enhance offering Organic growth Aggressively recruit HNW advisers Develop on-boarding, training and development programs to build and retain staff Inorganic growth Acquire to increase HNW advisers and clients Acquire and partner to access new and differentiated capabilities Productivity and business scalability Focus on improving the productivity of advisers and support staff and to reduce the time to positively contribute for new starters Scalable organisation and highly efficient sales and service model that supports our client value proposition Efficient dealer services and product/service delivery

60 Phil Vernon Perpetual Corporate Trust

61 Efficiencies from organisational changes and execution of the one-stop shop value proposition Perpetual Corporate Trust Phil Vernon Mortgage Services Phil Yardy Fund Services Glenn Foster Trust & Fund Debt Services Chris Green Chief Financial Officer Business Strategy and Technology Mortgage Services Trust & Fund Services Mortgage preparation & settlement Postsettlement servicing Variations & discharge Document custody Trust services Trust management Investor services

62 Chris Green Securitisation

63 Australian RMBS issuance and pricing RMBS volumes issued by Australian Borrowers (A$bn) Domestic AAA tranche weighted average pricing (bps over BBSW) Source: Bloombergs, Reuters, ASF, Insto, S&P, Moody s Fitch, RAMS Home Loans Group Explanatory Memorandum B Note: Weighted average spread based on solely AAA tranches issued in Australian dollars

64 Securitisation: too important to go away Australian debt securities outstanding AUD million Sep-1998 Sep-1999 Sep-2000 Sep-2001 Sep-2002 Sep-2003 Sep-2004 Sep-2005 Sep-2006 Sep-2007 Source: Reserve Bank of Australia 2007 Corporate debt issues Government debt issues ABS debt issues

65 Building on our strengths Trust & Fund Services Mortgage Services Trust & Fund Services Mortgage preparation & settlement Post settlement servicing Variations & discharge Document custody Trust services Trust management Investor Services Challenged by drop off in new issuance More focus on the role of the trustee Investment in ABS Suite platform Working with ASF on transparency initiatives

66 Phil Yardy Mortgage Services

67 One-stop shop model mortgage services Mortgage Services Trust & Fund Services Mortgage preparation & settlement Postsettlement servicing Variations & discharge Document custody Trust services Trust management Investor Services Preparation of legal mortgage documents First home owners grant agent Attendance at settlement of loan Ongoing servicing of customers Loan system maintenance Processing of changes to loan documents Processing discharges when borrower repays loan

68 Building scale through acquisition in Perpetual Lenders Mortgage Services No. of transactions* 40,000 Volume of transactions in Perpetual Lenders Mortgage Services 40,000 30,000 20,000 10, ,500 11, * financial year

69 Evolution of Perpetual s mortgage processing capabilities Past capability Current capability Wignalls/NLS acquisition provided technology platform, national distribution network and more clients Opportunity: regional and localbased global banks plus non-banks Target capability Opportunity: to competitively pitch for major banks plus regional and localbased global banks plus non-banks Opportunity: non-banks - mortgage managers, start ups and originators PCT transaction volumes = 11,000 (2006) Total segment volume = 875,000 PCT transaction volumes = 110,000* 100% of market Potential transaction volumes = 2,500,000 pa One-of-panel outsourcing Whole of business and one-of-panel outsourcing Portion of business, whole of business, oneof-panel outsourcing * 2008 financial year estimate