2010 ANNUAL REPORT
MAGELLAN FINANCIAL GROUP LIMITED
Contents
Page
Annual Shareholder Letter
Directors’ Report
Auditor’s Independence Declaration
Statement of Comprehensive Income
Statement of Financial Position
Statement of Changes in Equity
Statement of Cash Flows
Notes to the Financial Statements
Directors’ Declaration
Independent Auditor’s Report
Corporate Information
- Corporate Governance Statement
- Shareholder Information
- Corporate Directory
1
4
17
18
20
21
23
24
65
66
68
76
78
MAGELLAN FINANCIAL GROUP LIMITED
ANNUAL SHAREHOLDER LETTER
Dear Shareholder,
OVERVIEW OF RESULTS
Magellan Financial Group Limited (‘Magellan’ or ‘Group’) recorded a full year net profit
after tax of $3.8 million for the year ended 30 June 2010.
The Group’s underlying operating result, excluding significant items and unrealised mark-
to-market investment gains, was a profit after tax of $3.6 million. This compares with a
corresponding underlying operating profit after tax for the previous financial year of $1.1
million.
The Group’s reported result includes:
• revenues, excluding realised and unrealised investment gains and foreign exchange
gains, of $12.3 million compared with underlying revenues of $9.8 million for the previous
corresponding period; and
• total operating expenses of $7.2 million, compared with total operating expenses of $7.7
million for the previous corresponding period.
Magellan is in a strong financial position with an extremely strong balance sheet. As at 30
June 2010:
• the Group had cash, fixed term deposits, and fixed and variable rate debt investments of
approximately $28.6 million, investment assets (excluding the cash and fixed and variable
rate debt investments) of approximately $68.3 million and shareholders funds of $111.1
million; and
• the Group’s NTA per share (diluted for the conversion of the Class B shares) was
approximately $0.71 (2009:$0.66).
The underlying revenues for 2011 and future years will depend upon the Group’s average
level of funds under management, the investment performance of the individual funds, as
well as interest, dividend and fee income. Reported revenues will also include the effect of
mark-to-market accounting on the Group’s trading portfolio and any realised gains or
losses on investments.
MAGELLAN’S FUNDS MANAGEMENT BUSINESS
For the year ended 30 June 2010, the funds management business generated revenues of
approximately $9.0 million (2009: $6.3 million) and had expenses of approximately $6.7
million (2009: $6.5 million), which resulted in a profit before tax of $2.3 million (2009: loss
of $0.2 million).
We believe that over time Magellan is likely to generate an attractive return from our
investment in the funds management business. This core business should be scalable over
1
MAGELLAN FINANCIAL GROUP LIMITED
ANNUAL SHAREHOLDER LETTER
time, and Magellan’s funds under management should continue to grow without the need
to make material additional capital investment into the business.
Over the past 12 months we have added additional high quality employees, particularly
specialists in relationship management and distribution for the funds management
business. We have opened offices in Brisbane and Melbourne to service our growing
relationships with financial planners around the country. We believe that developing and
maintaining strong and trusted relationships with financial planners is an important factor
in Magellan’s future.
As at 23 August 2010, the Group had funds under management of approximately $1.3
billion, split between global equities and infrastructure equities. This compares with funds
under management of $393 million at 30 June 2009 and $1.1 billion at 30 June 2010. The
directors are comfortable that Magellan continues to be well placed to attract funds under
management:
• the Magellan Global Fund has continued to build its reputation with research houses and
major financial planning groups, with solid investment outperformance in these difficult
markets (31.2% above the market benchmarks for the first 3 years to 30 June 2010). As
at 23 August 2010 the Magellan Global Fund had funds under management of
approximately $283 million, compared with $70.6 million at 30 June 2009 and $261 million
at 30 June 2010.
• our infrastructure team has built momentum and continues to have promising
discussions with a number of institutional clients. We are hopeful that these discussions
will result in a number of additional mandates being awarded in the 2011 financial year.
It is still very early days in the life of our business and there are no grounds for any
complacency or lack of focus. We will only succeed for the long-term through rigorous
analytical processes and a disciplined focus upon managing risks as well as returns for the
investment funds entrusted to us, whilst maintaining positive relationships with financial
planners and investors in our funds.
INVESTMENTS IN MAGELLAN’S FUNDS AND PRINCIPAL INVESTMENTS
As at 30 June 2010, Magellan’s investment assets comprised $60.7 million invested in the
three funds we manage and an investment portfolio of $7.6 million (which excludes cash,
fixed term deposits, and fixed and floating rate debt investments of $28.6 million). Over
time we hope to earn satisfactory returns for shareholders via the sensible deployment of
the Group’s capital, whilst maintaining capital strength to underpin the business. We
intend for Magellan to maintain a very strong balance sheet including a high level of
liquidity to ensure our business will withstand almost any market condition or unforseen
event. This conservative balance sheet approach has benefited the Group, particularly
during the early stages of the funds management business in the extreme markets of the
last three years and will benefit Magellan in the future.
We consider the Group’s investments in our funds as “look through” investments in the
underlying companies which comprise the portfolios. The following table aggregates these
2
MAGELLAN FINANCIAL GROUP LIMITED
ANNUAL SHAREHOLDER LETTER
“look through” investments with the Group’s direct portfolio investments to show the ten
largest aggregated “look through” equity investments as at 30 June 2010.
We are delighted with the quality of the investments in our funds and believe that
Magellan has acquired interests in high quality companies at attractive prices.
Many of these businesses have extraordinary and sustainable competitive advantages.
They generate strong cash flows and returns well above their cost of capital. They have
above average growth profiles with market leading positions in emerging markets, as well
as leadership in most developed markets. We believe that, in aggregate, that these
companies continued to strengthen their competitive advantages and gained market share
in 2009/10.
Although economic growth and overall business profitability is likely to be subdued in
many parts of the world, we expect these companies to continue to demonstrate business
resilience.
30 June 2010 A$m market
price
MFG’s ten largest investments on a “look
through” basis
American Express
Nestlé
Yum! Brands
eBay
Wal-Mart
Coca-Cola
McDonald's Corp
Google
Wells Fargo
PepsiCo
MAGELLAN FINANCIAL
The other listed holdings in which the Group has “look through” holdings valued in excess
of $2 million as at 30 June 2010 market prices are Procter & Gamble and Colgate-
Palmolive.
10.5
7.6
7.3
6.0
5.4
4.3
3.8
3.5
3.5
3.4
Thank you for your ongoing interest in Magellan and we look forward to meeting you
either at the Annual General Meeting or over the years ahead.
Yours faithfully,
Chris Mackay
Chairman
26 August 2010
Hamish Douglass
Managing Director & CEO
3
MAGELLAN FINANCIAL GROUP LIMITED
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2010
The Directors of Magellan Financial Group Limited (the “Company”) submit their report for the
Company and its controlled entities which together form the consolidated entity (the “Group”) in
respect of the year ended 30 June 2010.
Directors
The following persons were Directors of the Company during the year and up to the date of this
report unless otherwise stated.
Directorship
Chairman and Executive Director
Name
Chris Mackay
Hamish Douglass Managing Director and Chief Executive Officer
Naomi Milgrom
Paul Lewis
Brett Cairns
Non-executive Director
Non-executive Director
Non-executive Director
Appointed
21 November 2006
21 November 2006
20 December 2006
20 December 2006
22 January 2007
Corporate Information
The Company is limited by shares and incorporated in Australia. The shares and options of the
Company that are publicly traded on the Australian Securities Exchange (ASX) are ASX Code: MFG,
MFGOB, and MFGOC. The Company also has on issue unlisted Class B shares.
Principal Activity
The primary business activity of the Group is funds management with the objective to offer
international investment funds to Australian and New Zealand investors.
Trading Results
The Group’s net profit after tax for the year ended 30 June 2010 was $3,826,000 (2009:
$12,365,000 loss).
The Group’s underlying operating result, excluding significant items and unrealised mark-to-market
investment gains, was a profit after tax of $3.6 million. This compares with a corresponding
underlying operating profit after tax for the previous financial year of $1.1 million.
The Group’s reported result includes:
• revenues, excluding realised and unrealised investment gains and foreign exchange gains, of
$12.3 million compared with underlying revenues of $9.8 million for the previous corresponding
period; and
• total operating expenses of $7.2 million, compared with total operating expenses of $7.7 million
for the previous corresponding period.
Magellan is in a strong financial position with an extremely strong balance sheet. As at 30 June
2010:
• the Group had cash, fixed term deposits, and fixed and variable rate debt investments of
approximately $28.6 million, investment assets (excluding the cash and fixed and variable rate
debt investments) of approximately $68.3 million and shareholders funds of $111.1 million; and
• the Group’s NTA per share (diluted for the conversion of the Class B shares) was approximately
$0.71 (2009:$0.66).
4
MAGELLAN FINANCIAL GROUP LIMITED
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2010
Dividends and Distributions
No dividends have been declared by the Directors and none have been paid or are payable during
the year and to the date of this report.
Unissued Shares
Share Options
As at the date of this report, there were 13,916,425 unissued ordinary shares under option as
follows:
•
•
6,033,942 MFG 2011 Options to take up one new ordinary share in the Company at an
exercise price of $1.30. The options expire on 30 June 2011
7,882,483 MFG 2016 Options to take up one new ordinary share in the Company at an
exercise price of $3.00. The options expire on 30 June 2016
Option holders do not have any right, by virtue of the option, to participate in any share issue or
interest issue of the Company.
MFG Class B Shares
As at the date of this report, Mr Douglass held 10,200,000 MFG Class B Shares which will convert
into the Company’s ordinary shares on 21 November 2016 in accordance with a conversion
formula. The maximum number of the Company’s ordinary shares that will be issued on
conversion of all the Class B shares is 10,200,000.
Changes in the State of Affairs
There were no significant changes in the state of affairs of the Group that occurred during the
year.
Events Subsequent to the end of the Financial Year
The Directors are not aware of any other matter or circumstance not otherwise dealt with in this
report or in the financial statements that has significantly or may significantly affect the operations
of the Group, the result of those operations or the state of affairs of the Group in subsequent
financial periods.
Likely Developments and Expected Result of Operations
The Group will continue to pursue its financial objective which is to increase the profitability of the
Group over time by increasing the value and performance of funds under management, seeking to
grow the value of the Group’s investment portfolio and by containing costs.
The methods of operating the Group are not expected to change in the foreseeable future.
5
MAGELLAN FINANCIAL GROUP LIMITED
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2010
Rounding Off of Amounts
The Group is of a kind referred to in the Australian Securities & Investments Commission’s Class
Order 98/0100 (as amended) and consequently amounts in the Directors’ Report and financial
statements have been rounded off to the nearest thousand dollars in accordance with that Class
Order, unless otherwise indicated.
Environmental Regulation
The Group is not subject to any particular or significant environmental regulation under
Commonwealth, State or Territory legislation.
Auditor
Ernst & Young (the “Auditor”) continues in office in accordance with section 307C of the
Corporation Act 2001.
Audit and Non-audit Services
Details of the amounts paid or payable to the Auditor for audit and non-audit services provided
during the year are set out below.
The Directors, in accordance with advice received from the Audit Committee, are satisfied that the
provision of those non-audit services during the year by the Auditor is compatible with the general
standard of independence for auditors imposed by the Corporations Act 2001. The Directors are
satisfied, considering the nature and quantum of the non-audit services that the provision of non-
audit services by the Auditor, as set out below, did not compromise the Auditor independence
requirements of the Corporations Act 2001.
Audit services:
Ernst & Young - audit and review of the financial statements of:
- the Company and its operating subsidiaries
- wholesale unit trust
KPMG - audit and review of the financial statements of:
- the Magellan unlisted funds
Other services:
Ernst & Young:
- other regulatory audit services
- tax compliance
- tax advice
KPMG
- compliance plan audit
- tax compliance (tax returns)
- tax advice
6
2010 2009
$
$
73,850 151,498
-
6,000
23,130 26,167
102,980 177,665
29,500 10,000
18,600
8,500
14,300 15,000
9,900 10,250
- 44,341
5,364
-
72,300 93,455
MAGELLAN FINANCIAL GROUP LIMITED
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2010
Auditors’ Independence Declaration
A copy of the Auditors’ Independence Declaration as required under section 307C of the
Corporations Act 2001 is set out on page 17.
Information on Directors
Chris Mackay
Chairman and Executive Director (Chief Investment Officer)
Mr Mackay is an experienced finance industry executive and co-founded Magellan with Mr
Douglass. He is also a Non-executive director of Consolidated Media Holdings Limited [formerly
Publishing & Broadcasting Limited] (appointed March 2006), Seven Group Holdings Limited
(appointed June 2010) and Magellan Flagship Fund Limited (appointed September 2006). He was
previously a director of Crown Limited (2007 – 2008), and New Privateer Holdings Limited (2006 –
2007). Mr Mackay retired as Chairman of the investment bank UBS Australasia in 2006, having
previously been its Chief Executive Officer. Mr Mackay is a member of the Federal Treasurer’s
Financial Sector Advisory Council and a former member of the Business Council of Australia and
Director of the International Banks & Securities Association.
Hamish Douglass
Managing Director and Chief Executive Officer, and member of the Audit and Risk Committee
Mr Douglass has more than 20 years experience in financial services and was formerly the Co-head
of Global Banking at Deutsche Bank, Australasia. Mr Douglass is a Non-executive director of
Magellan Flagship Fund Limited (appointed September 2006). Mr Douglass is a member of the
Australian Government’s Foreign Investment Review Board (FIRB), the Australian Government’s
Financial Literacy Board, the Australian Government’s Takeovers Panel, and a member of the
Forum of Young Global Leaders of the World Economic Forum.
Naomi Milgrom AO
Non-executive Director
Ms Milgrom is the Executive Chair and CEO of Australia’s largest speciality women’s fashion
retailer, the Sussan Group - comprising Sussan, Suzanne Grae and Sportsgirl. One of Australia’s
top business entrepreneurs, Ms Milgrom has combined business leadership with leadership in the
arts, sciences and women’s health, as Chair of the Australian Centre for Contemporary Art (ACCA),
Chair of the Melbourne Fashion Festival, and director of the Howard Florey Institute. Ms Milgrom
was the first woman to deliver the Batman Oration on Australia Day 2006. The Centenary of
Federation Medal was awarded to Ms Milgrom for her outstanding contribution to business and the
fashion industry. In 2010, Ms Milgrom received an Officer of the Order of Australia "for service to
business as a leader and mentor in the fashion industry, and to the community through advisory
and management roles of a wide range of arts, health and philanthropic bodies".
7
MAGELLAN FINANCIAL GROUP LIMITED
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2010
Paul Lewis
Non-executive Director and Chairman of the Audit and Risk Committee
Mr Lewis was Managing Partner and Chief Executive – Asia, based in Hong Kong from 1992 –
2004, for PA Consulting Group, at the conclusion of which PA had offices in Hong Kong, Beijing,
Tokyo, Bangalore, Singapore, Kuala Lumpur and Jakarta. Mr Lewis led major assignments in
financial services – retail banking, life insurance and stock exchanges, energy, manufacturing,
telecommunications, rail, air, container shipping and government. Mr Lewis also served on senior
advisory panels with ministerial representation in Hong Kong, Malaysia and Indonesia, and from
2003 to 2009 was a member of British Telecom’s Global Advisory Board. Mr Lewis is currently
Chair of NAB’s Private Wealth Advisory Council, Chairman of PSP International, Deputy Chairman
of the Australian British Chamber of Commerce, and a board member of St Vincent’s Hospital
Prostate Cancer Centre.
Brett Cairns
Non-executive Director and member of the Audit and Risk Committee
Mr Cairns was formerly co-head of the Capital Markets Group within Structured Finance at Babcock
& Brown, which he joined in 2002. Mr Cairns was a former Managing Director and Head of Debt
Capital Markets for Merrill Lynch in Australia where he worked from 1994 to 2002. Prior to joining
Merrill Lynch, Mr Cairns spent 3 years with Credit Suisse Financial Products, the then derivatives
bank of the Credit Suisse group.
Information on Company Secretaries
Nerida Campbell
Company Secretary
Ms Campbell has over 20 years experience in the investment banking and finance industry,
previously holding various finance and management roles including that of Chief Financial Officer
for UBS AG, Australia and New Zealand. She is also the Company Secretary of Magellan Flagship
Fund Limited and Magellan Asset Management Limited. Ms Campbell is a member of the Institute
of Chartered Accountants in Australia, a Fellow of the Financial Services Institute of Australasia,
and a graduate member of the Australian Institute of Company Directors.
Leo Quintana
Company Secretary
Leo has 8 years experience as a corporate lawyer. He is the Legal Counsel for the Company and
the Legal Counsel and Company Secretary of Magellan Flagship Fund Limited and Magellan Asset
Management Limited. Leo is admitted as a solicitor of the Supreme Court of New South Wales and
holds a Bachelor of Laws and a Bachelor of Business. He was previously an Associate –
commercial and corporate group, of Harris Friedman Hyde Page Lawyers. Leo is a member of the
Law Society of New South Wales and a member of the Australian Corporate Lawyers Association.
David Simpson
Company Secretary (resigned 20 November 2009)
8
MAGELLAN FINANCIAL GROUP LIMITED
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2010
Directors’ Meetings
The following table sets out the number of meetings of the Company’s Directors held during the
year ended 30 June 2010 and attended by each Director.
Board Meetings
Held
Attended
While a Director
Audit and Risk Committee
Meetings
Held
Attended
While a Member
Chris Mackay
Hamish Douglass
Naomi Milgrom
Paul Lewis
Brett Cairns
4
4
4
4
4
4
4
4
4
4
Remuneration Report (audited)
5
5
5
4
5
5
This report outlines the Key Management Personnel and Other Executive remuneration
arrangements of the Company and Group in accordance with the requirements of the Corporations
Act 2001 and its Regulations. For the purposes of this report Key Management Personnel of the
Group are defined as those persons having “authority and responsibility for planning, directing and
controlling activities of the entity”. Key Management Personnel for the Group are the Non-
executive Directors, Executive Directors and other Key Management Personnel identified below.
Other Executives are employees that are senior managers of the Group, and the company
secretary of the Company. The Group has no senior managers, other than Key Management
Personnel, with executive authority.
The Board’s remuneration policy is designed to attract and retain appropriately experienced, skilled
and qualified personnel in order to achieve the Group’s objectives. The Board does not grant
options under its remuneration policy.
Remuneration of Non-executive Directors
The Board reviews and determines the remuneration of the Non-executive Directors and may
utilise the services of external advisors. The remuneration of the Non-executive Directors is not
linked to the performance of the Group.
The Non-executive Directors are eligible to participate in the Group’s Share Purchase Plan (SPP)
which is described later in this report. Non-executive Directors’ remuneration includes share based
payment amounts that represent the cost to the Group of providing interest free loans under the
SPP.
Remuneration of Executive Directors, Other Key Management Personnel and Other
Executives
Executive Director, Other Key Management Personnel and Other Executive remuneration
comprises fixed and variable remuneration that takes into account the individual’s experience,
abilities, achievements, and contribution to the Group.
9
MAGELLAN FINANCIAL GROUP LIMITED
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2010
Executive Directors
The Executive Directors’ remuneration is determined by the Board, which may utilise the services
of external advisors. The Executive Directors’ fixed compensation is unchanged from the previous
year, and similarly to the previous year there are no variable compensation amounts. The
Executive Directors fixed remuneration is not dependent on the performance of the Group, the
Company’s share price, or dividends paid by the Company. Details of the employment agreements
of the Executive Directors are described later in this report.
Other Key Management Personnel and Other Group Executives
Other Key Management Personnel and the Other Executive are eligible to participate in the Group’s
SPP which is described later in this report. Other Key Management Personnel and Other Executive
remuneration includes share based payment amounts that represent the cost to the Group of
providing interest free loans under the SPP.
Other Key Management Personnel and Other Executive fixed compensation is structured as a total
employment cost package, which may be received as a combination of cash, non-cash benefits
and superannuation contributions. Fixed compensation is reviewed annually to ensure that it is
competitive and reasonable, however there are no guaranteed increases to the fixed compensation
amount. The amount of fixed compensation is not dependant on the satisfaction of a performance
condition, or the performance of the Group, the Company’s share price, or dividends paid by the
Company.
The Board determines the total amount of discretionary variable compensation to be paid to the
Group’s employees with regard to the profitability of the Group’s funds management business.
The amount of the variable compensation payable to an individual is not dependent on the
satisfaction by employees of a performance condition, or the performance of the Group, the
Company’s share price, or dividends paid by the Company, and is paid to employees after the
finalisation and public release of the Group’s full year results.
The Executive Directors determine the amount of variable compensation to be paid to Other Key
Management Personnel and the Other Executive, taking into consideration each individual’s
performance and contribution during the year.
As neither the fixed or variable component of the Other Key Management Personnel and the Other
Executive remuneration is dependent on the satisfaction of a performance condition, or the
performance of the Group, the Company’s share price, or dividends paid by the Company, a
discussion of the relationship between the Board’s remuneration policy and the Group’s
performance is not provided.
The Board considers that a focus on short term indicators for the determination of short term
discretionary compensation, including the Group’s earnings, and movements in the Company’s
share price over the period since its re-capitalisation in November 2006, may encourage
performance that is not in the best interests of the Group and its shareholders. The Directors are
more concerned that the Other Key Management Personnel and the Other Executive are motivated
to build investment returns for investors in the funds managed by the Group and to build
shareholder wealth over the long term. The Directors believe that the participation in the SPP by
the Other Key Management Personnel and the Other Executive closely align their interests with the
long term interests of shareholders.
10
MAGELLAN FINANCIAL GROUP LIMITED
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2010
Share Purchase Plan (SPP)
The Group has put in place a SPP that provides financial assistance to Non-executive Directors and
employees (‘Participants’), by way of an interest free loan, to invest in shares in the Company.
The issue price of shares under the SPP is their fair market value on the offer date.
Details of the closing price of the Company’s shares at each financial year end since the
Company’s re-capitalisation are provided below together with the issue price of shares under the
SPP.
30 June 2007
30 June 2008
30 June 2009
30 June 2010
MFG shares
closing price
$2.20
$0.53
$0.55
$1.13
Offer date
10 September 2007
20 October 2008
23 September 2009
MFG shares
Issue price
$1.66
$0.52
$0.78
The Directors believe that the Key Management Personnel and Other Executive participation in the
SPP closely aligns their interests with the interests of the shareholders of the Group.
Further details of the SPP are provided in note 13 to the financial statements.
Directors’ fees
The Non-executive and Executive Directors’ base remuneration is reviewed annually.
Retirement benefits for Directors
No retirement benefits (other than superannuation) are provided to Directors.
11
MAGELLAN FINANCIAL GROUP LIMITED
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2010
Details of Remuneration
The Key Management Personnel of the Group, including the Non-executive and Executive Directors
of the Company, and the Other Executives received the following amounts during the year:
Short term
Benefits
Salary
$
Cash
Bonus(2)
$
Post-
employment
Benefits
Superannuation
Termination
Benefits
$
$
Share
based
Payment
Under
SPP(1)
$
Total
$
Non-executive
Directors
Naomi Milgrom
Paul Lewis
Brett Cairns
Executive
Directors
Chris Mackay
Hamish Douglass
Other Key
Management
Personnel
Nerida Campbell
Total Key
Management
Personnel
Other
Executives
Leo Quintana
13,485
20,000
18,349
235,539
235,539
-
-
-
-
-
1,215
-
1,651
14,461
14,461
198,539
50,000
14,461
721,451
50,000
46,249
142,202
20,000
12,798
-
-
-
-
-
-
-
-
-
71,657
71,657
14,700
91,657
91,657
250,000
250,000
5,120
268,120
148,434
966,134
3,573
178,573
Total
863,653
70,000
59,047
152,007 1,144,707
(1) Share based payments represent the cost of providing interest free loans to Participants in the Share
Purchase Plan (see Directors Report – Remuneration Report – Share Purchase Plan)
(2) The cash bonus entitlements relating to the year ended 30 June 2010 were discretionary and are payable
on 15 September 2010.
12
MAGELLAN FINANCIAL GROUP LIMITED
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2010
Comparative information for the year ended 30 June 2009 is as follows:
Short term
Benefits
Salary
$
Cash
Bonus
$
Post-
employment
Benefits
Superannuation
Termination
Benefits
$
$
Share
based
Payment
Under
SPP(1)
$
Total
$
13,379
20,000
79,223
-
-
13,380
1,204
-
5,865
-
-
83,626
-
71,657
71,657
14,583
91,657
253,751
236,255
236,255
199,255
-
-
-
13,745
13,745
13,745
-
-
-
-
-
250,000
250,000
1,823
214,823
784,367
13,380
48,304
83,626
145,137
1,074,814
132,569
-
11,931
-
754
145,254
Non-executive
Directors
Naomi Milgrom
Paul Lewis
Brett Cairns
Executive
Directors
Chris Mackay
Hamish Douglass
Other Key
Management
Personnel
Nerida Campbell
Total Key
Management
Personnel
Other
Executives
Leo Quintana
Total
916,936
13,380
60,235
83,626
145,891 1,220,068
(1) Share based payments represent the cost of providing interest free loans to Participants in the Share
Purchase Plan (see Directors Report – Remuneration Report – Share Purchase Plan).
Executive Directors, Other Key Management Personnel and Other Executives were remunerated by
Magellan Asset Management Limited, a controlled entity.
Mr Cairns was employed as an Executive by Magellan Asset Management Limited during the period
10 November 2008 to 22 May 2009, and received remuneration of $175,427 (inclusive of a cash
bonus of $13,380, superannuation of $5,727 and a termination payment of $83,626) in that
capacity. Mr Cairns was contractually entitled to the cash bonus paid to him, which was not
performance related. Mr Cairns’ employment costs relating to his Executive appointment were
fully reimbursed by UBS Investment Bank (UBS) under the Strategic Alliance announced on 3
October 2008.
All other payments to Non-Executive Directors were made by the Company.
There are no Other Executives other than as disclosed in the tables above.
13
MAGELLAN FINANCIAL GROUP LIMITED
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2010
Service Agreements
Remuneration and other terms of employment for the Non-executive Directors are formalised in
service agreements.
Employment Agreements
The Executive Directors (Messrs Douglass and Mackay), Mr Cairns while employed in the capacity
of Chief Executive Officer of Magellan Capital Partners Pty Limited, Key Management Personnel,
Executives and all other employees are engaged under employment agreements.
The Executive Directors are employed under employment contracts with the following key terms.
The Chairman, Mr. Mackay, is employed under a contract with effect from 1 March 2008 and which
will continue indefinitely until terminated. Under the terms of the contract:
• Mr. Mackay receives fixed remuneration of $250,000 per annum, inclusive of
superannuation.
• Mr. Mackay may receive a bonus at the discretion of the Board.
• Mr. Mackay has undertaken to the Company that for the period up to and including 1
July 2012 he will not, within Australia and New Zealand, invest in a business of funds
management other than an investment in a Magellan entity. The restrictions will cease
to apply prior to 1 July 2012, if a third party acquires control of the Company, or the
Company terminates the employment contract. The restrictions do not apply in respect
of any investment in:
(a) shares in a company; or
(b) interests in a managed investment scheme; or
(c) other interests in an entity,
which represent less than 10% of the issued shares in that company, interests in that
managed investment scheme or other interests in that other entity respectively.
• Mr. Mackay may terminate the contract at any time by giving not less than 3 months
written notice to the Company and the Company may terminate the contract by
providing 12 months written notice or providing payment in lieu of that notice.
• The Company may terminate the contract at any time without notice if serious
misconduct has occurred. Where the contract is terminated for cause, the Company
must pay Mr. Mackay any accrued but unpaid amounts to which he is entitled after
setting off for misfeasance for any loss suffered by the Company from the acts which
caused the termination.
14
MAGELLAN FINANCIAL GROUP LIMITED
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2010
The Managing Director and Chief Executive Officer, Mr. Douglass, is employed under a contract
with effect from 1 March 2008 and which will continue indefinitely until terminated. Under the
terms of the contract:
• Mr. Douglass receives fixed remuneration of $250,000 per annum, inclusive of
superannuation.
• Mr. Douglass may receive a bonus, at the discretion of the Board.
• Mr. Douglass has undertaken to the Company that for the period up to and including 1
July 2012 he will not, within Australia and New Zealand, invest in a business of funds
management other than an investment in a Magellan entity. The restrictions will cease
to apply prior to 1 July 2012, if a third party acquires control of the Company or the
Company terminates the employment contract. The restrictions do not apply in respect
of any investment in:
(a) shares in a company; or
(b) interests in a managed investment scheme; or
(c) other interests in an entity,
which represent less than 10% of the issued shares in that company, interests in that
managed investment scheme or other interests in that other entity respectively.
• Mr. Douglass may terminate the contract at any time by giving not less than 3 months
written notice to the Company and the Company may terminate the contract by
providing 12 months written notice or providing payment in lieu of that notice.
• The Company may terminate the contract at any time without notice if serious
misconduct has occurred. Where the contract is terminated for cause, the Company
must pay Mr. Douglass any accrued but unpaid amounts to which he is entitled after
setting off for misfeasance for any loss suffered by the Company from the acts which
caused the termination.
Mr. Douglass also holds MFG Class B shares which have no entitlement to receive a dividend and
which convert into MFG ordinary shares on the first business day after 21 November 2016 in
accordance with a conversion formula. Mr. Douglass’ Class B shares will convert into only one MFG
ordinary share on the first business day after 21 November 2016 if, before 1 July 2012, he ceases
to be a director or employee of MFG, or a subsidiary of MFG (other than through death or
incapacity) or his employment has been terminated for cause.
Key Management Personnel and other employees have rolling contracts. The Group may terminate
the employee’s employment agreement by providing up to three months written notice. On
termination, the employee is required to repay any loan amounts outstanding in respect to shares
acquired under the Share Purchase Plan in accordance with the plan terms and conditions. There
are no provisions for any termination payments other than for unpaid remuneration and accrued
annual leave.
15
MAGELLAN FINANCIAL GROUP LIMITED
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2010
Directors’ Interests in Contracts
No Director has or has had any interest in a contract entered into up to the date of this Directors’
Report with the Company or any related entity other than as disclosed in this report.
Indemnification and Insurance of Directors and Officers
The Group has paid premiums to insure each of its Directors and Officers in office against liabilities
for costs and expenses incurred by them in defending any legal proceedings arising out of their
conduct while acting in the capacity of Directors and Officers of the Group, other than conduct
involving a wilful breach of duty in relation to the Group.
This report is made in accordance with a resolution of the Directors.
Chris Mackay
Chairman
Sydney
26 August 2010
16
MAGELLAN FINANCIAL GROUP LIMITED
AUDITOR’S INDEPENDENCE DECLARATION
.
17
MAGELLAN FINANCIAL GROUP LIMITED
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2010
Revenue
Management fee revenue
Interest income
Dividend and distribution income
Net changes in the fair value of
financial assets
Note
4 a)
Consolidated
2010
$ ’000
2009
$ ’000
Parent
2010
$ ’000
2009
$ ’000
7,320
2,364
1,138
4,017
2,947
794
-
2,169
1,138
-
2,455
797
5
214
(15,331)
214
(16,714)
Net gain / (loss) on sale of financial assets
Foreign exchange gain / (loss)
Other revenue
4 b)
Total revenue
Expenses
Employee benefits expense
Depreciation and amortisation
Occupancy expense
Audit fees
Legal and professional fees
Fund administration expenses
Marketing expense
Other operating expenses
Total expenses
Share of income from associate entity
Finance cost – external unitholders’ share
of net profit
Operating profit / (loss) before
significant items and income tax
6
40
1,496
(137)
(231)
2,000
6
41
-
(547)
(342)
1
12,578
(5,941)
3,568
(14,350)
4,954
121
377
137
54
351
330
837
7,161
(292)
5,519
154
342
198
80
251
260
902
7,706
272
-
(484)
345
-
-
59
7
-
-
159
570
-
-
763
-
-
123
21
-
-
168
1,075
-
-
5,125
(13,859)
2,998
(15,425)
Income tax (expense) / benefit
6 a)
(1,406)
4,254
(764)
4,905
Net operating profit / (loss) before
significant items
3,719
(9,605)
2,234
(10,520)
18
MAGELLAN FINANCIAL GROUP LIMITED
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2010
Significant Items
Finance cost – revaluation of
external unit holders’ units in unlisted funds
Gain to Group on loss of significant
influence over associate entity
Deemed loss to Group on
loss of control of unlisted funds
Write down of carrying value of
controlled entities
AASB 132 Accounting Adjustment
Income tax (expense) / benefit on
significant items
Net profit / (loss) attributable to
members of the parent
Other comprehensive income
Net loss realised on disposal of
available-for-sale financial assets
Net impact of deemed disposal upon ending
of significant influence over associate entity
Net impact of deemed disposal of
controlling interest in unlisted funds
Revaluation of available-for-sale financial
assets
Share of revaluation of available-for-sale
financial assets of an associate
Impairment loss on available-for-sale
financial assets
Income tax expense on items of
other comprehensive income
Other comprehensive income for the
year, net of tax
Total comprehensive income for the
year
Consolidated
2010
$ ’000
2009
$ ’000
Parent
2010
$ ’000
2009
$ ’000
Note
18
-
153
-
-
-
(769)
-
(4,118)
-
1,327
-
-
-
-
-
-
-
-
-
(20,084)
1,327
-
6 a)
(46)
800
3,826
(12,365)
2,234
(29,277)
(6)
18
(153)
137
-
-
4,084
-
-
-
547
-
-
5,372
(2,178)
6,517
(4,467)
18
1,444
(1,290)
-
14,478
-
-
15,977
6 b)
(1,997)
(3,959)
(1,955)
(3,589)
4,660
11,272
4,562
8,468
8,486
(1,093)
6,796
(20,809)
Earnings per share
Earnings attributable to shares
Basic earnings / (loss) per share
Diluted earnings / (loss) per share
Consolidated
2010
2009
7
7
2.6 cents
(8.5 cents)
2.5 cents
(8.5 cents)
The Statement of Comprehensive Income is to be read in conjunction with the accompanying notes to the
Financial Statements.
19
MAGELLAN FINANCIAL GROUP LIMITED
STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2010
Assets
Current assets
Cash and cash equivalents
Financial assets
Trade and other receivables
Loans - share purchase plan (SPP)
Prepayments
Total current assets
Non-current assets
Investment in associate
Investments in controlled entities
Financial assets
Deferred tax asset
Loans - share purchase plan (SPP)
Loan to controlled entity
Property, plant and equipment
Total non-current assets
Consolidated
Parent
2010
$ ’000
2009
$ ’000
2010
$ ’000
2009
$ ’000
2,243
27,057
3,181
357
176
33,014
-
-
67,595
6,683
4,922
-
268
79,468
39,622
3,316
2,310
-
223
45,471
15,441
-
27,054
9,874
4,217
-
359
56,945
234
25,098
956
357
112
26,757
-
12,539
67,595
6,433
4,922
1,150
-
92,639
35,969
3,075
1,093
-
140
40,277
15,441
12,539
27,054
9,826
4,217
1,150
-
70,227
Note
9
12 a)
10
13 a)
11
12 b)
6 d)
13 b)
20 a)
14
Total assets
112,482
102,416
119,396
110,504
Liabilities
Current liabilities
Trade and other payables
Loan from controlled entity
Income tax payable
Total current liabilities
Non-current liabilities
Trade and other payables
Total non-current liabilities
Total liabilities
Net assets
15 a)
1,177
-
172
1,349
707
-
-
707
39
2,000
172
2,211
124
-
-
124
15 b)
-
-
-
-
1,639
1,639
2,569
2,569
1,349
707
3,850
2,693
111,133
101,709
115,546
107,811
Equity
Contributed equity
Available-for-sale reserve
Retained profits / (Accumulated losses)
Total attributable to
members of the Group
17
108,630
2,552
(49)
107,692
(2,108)
(3,875)
109,005
1,642
4,899
108,067
(2,921)
2,665
111,133
101,709
115,546
107,811
Total equity
111,133
101,709
115,546
107,811
The Statement of Financial Position is to be read in conjunction with the accompanying notes to the
Financial Statements.
20
MAGELLAN FINANCIAL GROUP LIMITED
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2010
Attributable to Equity Holders of the Group
Contributed
Equity
$’000
Retained
Profits /
(Accumulated
Losses)
$’000
Available-for-
sale Reserve
$’000
Total
$’000
Equity as at 1 July 2009
107,692
(3,875)
(2,108)
101,709
Net profit for the year
Other comprehensive income
Total comprehensive income
Issue of securities:
- under share purchase plan (SPP)
SPP expense for the year
Total transactions with
equity holders in their capacity
as equity owners
-
-
-
647
291
938
3,826
-
-
4,660
3,826
4,660
3,826
4,660
8,486
-
-
-
-
-
-
647
291
938
Equity as at 30 June 2010
108,630
(49)
2,552
111,133
Attributable to Equity Holders of the Group
Contributed
Equity
$’000
Retained
Profits /
(Accumulated
Losses)
$’000
Available-for-
sale Reserve
$’000
Total
$’000
Equity as at 1 July 2008
106,757
8,490
(13,380)
101,867
Net loss for the year
Other comprehensive income
Total comprehensive income
Issue of securities:
- under employee share scheme (SPP)
SPP expense for the year
Total transactions with
equity holders in their capacity
as equity owners
-
-
-
209
726
935
(12,365)
-
-
11,272
(12,365)
11,272
(12,365)
11,272
(1,093)
-
-
-
-
-
-
209
726
935
Equity as at 30 June 2009
107,692
(3,875)
(2,108)
101,709
The Statement of Changes in Equity is to be read in conjunction with the accompanying notes to the
Financial Statements.
21
MAGELLAN FINANCIAL GROUP LIMITED
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2010
Attributable to Equity Holders of the Parent
Contributed
Equity
$’000
Retained Profits
/ (Accumulated
Losses)
$’000
Available-for-
sale Reserve
$’000
Total
$’000
Equity as at 1 July 2009
108,067
2,665
(2,921)
107,811
Net profit for the year
Other comprehensive income
Total comprehensive income
Issue of securities
- under share purchase plan (SPP)
SPP expense for the year
Total transactions with
equity holders in their capacity
as equity owners
-
-
-
647
291
938
2,234
-
-
4,562
2,234
4,562
2,234
4,562
6,796
-
-
-
-
-
-
647
291
938
Equity as at 30 June 2010
109,005
4,899
1,641
115,545
Attributable to Equity Holders of the Parent
Contributed
Equity
$’000
Retained Profits
/ (Accumulated
Losses)
$’000
Available-for-
sale Reserve
$’000
Total
$’000
Equity as at 1 July 2008
107,132
31,942
(11,389)
127,685
Net loss for the year
Other comprehensive income
-
-
(29,277)
-
-
8,468
(29,277)
8,468
Total comprehensive income
(29,277)
8,468
(20,809)
Issue of securities
- under share purchase plan (SPP)
SPP expense for the year
Total transactions with
equity holders in their capacity
as equity owners
209
726
935
-
-
-
-
-
-
209
726
935
Equity as at 30 June 2009
108,067
2,665
(2,921)
107,811
The Statement of Changes in Equity is to be read in conjunction with the accompanying notes to the
Financial Statements.
22
MAGELLAN FINANCIAL GROUP LIMITED
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2010
Cash flows from operating activities
Receipt of fee income
Interest received
Proceeds from sale of held-for-trading financial
assets
Purchases of held-for-trading financial assets
Other revenue received
Dividends received
Tax paid
Payments to suppliers and employees
Net cash inflows / (outflows) from
operating activities
Cash flows from investing activities
Consolidated
Parent
Note
2010
$ ’000
2009
$ ’000
2010
$ ’000
2009
$ ’000
6,940
1,615
169
(297)
1,196
578
-
4,085
2,762
1,777
(263)
1,293
475
(30)
-
1,423
169
(297)
-
578
-
-
2,273
1,466
(263)
-
140
-
(6,197)
(9,810)
(297)
(324)
16 a)
4,004
289
1,576
3,292
Proceeds from sale and maturity of financial assets
5,528
7,951
5,528
Purchases of financial assets
(46,921)
(14,692)
(45,220)
Cash outflow on loss of control of unlisted trusts
Net cash flows from foreign exchange contracts
Purchase of plant and equipment
Net cash (outflows)/ inflows from
investing activities
Cash flows from financing activities
Proceeds from issue of securities and units
Payments for redemption of units
Borrowings from controlled entities
Repayment of loans
Distributions paid by controlled unlisted trusts
Net cash inflows / (outflows) from
financing activities
Net increase / (decrease) in
cash and cash equivalents
Effects of exchange rate movements
Cash and cash equivalents at
the beginning of the year
Cash and cash equivalents at
the end of the year
-
37
(30)
(9,343)
(1,162)
(2)
-
37
-
2,879
(9,215)
-
(138)
-
(41,386)
(17,248)
(39,655)
(6,474)
-
-
-
-
-
-
4,770
(1,978)
-
-
(247)
-
-
66
-
2,341
6,001
-
-
-
-
2,545
2,341
6,067
(37,382)
(14,414)
(35,738)
3
673
3
2,885
(204)
39,622
53,363
35,969
33,288
9
2,243
39,622
234
35,969
The Statement of Cash Flows is to be read in conjunction with the accompanying notes to the Financial
Statements.
23
MAGELLAN FINANCIAL GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2010
1.
Corporate Information
The financial report of Magellan Financial Group Limited for the year ended 30 June 2010 was
authorised for issue in accordance with a resolution of the directors on 26 August 2010.
Magellan Financial Group Limited (the “Company”) is a company limited by shares and
incorporated in Australia. The shares of the Company are publicly traded on the Australian
Securities Exchange (ASX).
The nature of the operations and the principal activities of the Company and its controlled entities
(the “Group”) are described in the Directors’ Report.
2.
Summary of Significant Accounting Policies
The financial report is a general purpose financial report which has been prepared in accordance
with the requirements of the Corporations Act 2001, Australian Accounting Standards and other
authoritative pronouncements of the Australian Accounting Standards Board.
(a) Basis of Preparation
The principal accounting policies adopted in the preparation of the financial report are set out
below. These policies have been consistently applied to all periods presented, unless otherwise
stated.
These financial statements have been prepared under the historical cost convention, except for
financial assets and certain financial liabilities, which have been measured at fair value.
The financial report is presented in Australian dollars and all values are rounded to the nearest
thousand dollars ($000) unless otherwise stated.
(b) Compliance with IFRS
The financial report complies with Australian Accounting Standards (AASB) and International
Financial Reporting Standards (IFRS).
The preparation of the financial statements in conformity with AASB and IFRS requires the use of
critical accounting estimates and judgements. The following balances rely on such judgements:
• balances relating to the Share Purchase Plan. Details are provided in note 2 (p) and note
13;
investment in other unlisted funds. Details are provided in note 12 (c).
•
24
MAGELLAN FINANCIAL GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2010
2.
Summary of Significant Accounting Policies (continued)
(c) New Accounting Standards
Except as described below, the accounting policies applied by the Group in this financial report are
the same as those applied by the Group for the year ended 30 June 2009.
(i) New Standards Adopted
The Group has adopted the following new and amended Australian Accounting Standards and
AASB interpretations which are applicable for interim and annual periods beginning on or after 1
January 2009:
• AASB 101 Presentation of Financial Statements (revised 2007) effective 1 January 2009.
The Statement of Comprehensive Income presents all items of recognised income and
expense, either in one single statement or in two linked statements. The Group has
elected to present one statement.
• AASB 7 Financial Instruments: Disclosures effective 1 January 2009. The amended
Standard requires additional disclosures about fair value measurement and liquidity risk.
Fair value measurement related to all financial instruments recognised and measured at fair
value are to be disclosed by source of inputs using a three level fair value hierarchy, by
class. The fair value measurement disclosures are presented in note 12 (c). The liquidity
risk disclosures presented in note 19 (c) are not impacted by the amendments.
(ii) New Standards Not Yet Adopted
Australian Accounting Standards and Interpretations that have recently been issued or amended,
but are not yet effective, have not been adopted by the Group in the preparation of this financial
report. The following standards, amendments to standards and interpretations have been
identified as those which may impact the Group in the period of initial application:
• AASB 9 Financial Instruments effective 1 January 2013. The amendments require financial
assets to be measured at fair value through profit or loss, unless:
- the criteria for amortised cost measurement are met, or
- the Group qualifies and elects to recognise gains and losses on equity securities that are
not held-for-trading directly in other comprehensive income.
Where the Group elects to recognise gains and losses on qualifying securities directly in
other comprehensive income there will be no requirement to recognise either impairment
losses or cumulative changes in fair value on de-recognition of the assets in profit or loss.
A number of other Australian Accounting Standards and Interpretations have been issued but are
not effective for the current year. The adoption of these Standards and Interpretations will not
affect the reported results and position of the Group. Adoption may result in changes to
information currently disclosed in the financial statements. The Group does not intend to adopt
any of these pronouncements before their effective dates.
25
MAGELLAN FINANCIAL GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2010
2.
Summary of Significant Accounting Policies (continued)
(d) Basis of Consolidation
The financial report of the Group comprises the consolidated financial reports of the Company and
its controlled entities. Controlled entities included within the consolidated financial report are:
Magellan Asset Management Limited
New Privateer Holdings Pty Limited
Magellan Capital Partners Pty Limited
% Ownership
30 June
2010
100.0
*
100.0
30 June
2009
100.0
100.0
100.0
* New Privateer Holdings Pty Limited was voluntarily de-registered on 23rd June 2010
All inter-entity balances and transactions between entities in the consolidated group, including
unrealised profits or losses, have been eliminated on consolidation. Policies of the controlled
entities have been changed where necessary to ensure consistency with those policies adopted by
the parent entity.
Acquisitions have been accounted for using the purchase method of accounting, which involves
allocating the cost of the business combination to the fair value of assets acquired and the
liabilities and contingent liabilities assumed at the date of the acquisition.
(e) Business Combinations
The purchase method of accounting is used to account for all business combinations regardless of
whether equity instruments or other assets are acquired. Cost is measured as the fair value of the
assets given, shares issued or liabilities incurred or assumed at the date of exchange plus costs
directly attributable to the combination. Where listed equity instruments are issued in a business
combination, the fair value of the instruments is the published closing market bid price as at the
date of the exchange. Where unlisted equity instruments are issued in a business combination, the
fair value of the instruments will be determined by the Directors using an appropriate valuation
methodology. Transaction costs arising on the issue of equity instruments are recognised directly
in equity.
Except for non-current assets or disposal groups classified as held for sale (which are measured at
fair value less costs to sell), all identifiable assets acquired and liabilities and contingent liabilities
assumed in a business combination are measured initially at their fair values at the acquisition
date. The excess of the cost of the business combination over the net fair value of the Group’s
share of the identifiable net assets acquired is recognised as goodwill. If the cost of the acquisition
is less than the Group’s share of the net fair value of the identifiable net assets of the controlled
entity, the difference is recognised as a gain in profit or loss, but only after a reassessment of the
identification and measurement of the net assets acquired.
Where settlement of any part of the consideration is deferred, the amounts payable in the future
are discounted to their present value as at the date of exchange. The discount rate used is the
Company’s incremental borrowing rate, being the rate at which a similar borrowing could be
obtained from an independent financier under comparable terms and conditions.
26
MAGELLAN FINANCIAL GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2010
2.
Summary of Significant Accounting Policies (continued)
(f) Operating Segment Reporting
An operating segment is a distinguishable component of the Group that is engaged in business
activities from which the Group earns revenues and incurs expenses, whose operating results are
regularly reviewed by the Group’s chief operating decision maker in order to make decisions about
the allocation of resources to the segment and assess its performance, and for which discrete
financial information is available.
(g) Foreign Currency Translation
Functional and Presentation Currency
The functional and presentation currency of the Company and its controlled entities as determined
in accordance with AASB 121: The Effects of Changes in Foreign Exchange Rates is the Australian
dollar.
Transactions and Balances
Transactions denominated in foreign currencies are translated into Australian dollars at the foreign
currency exchange rate ruling at the date of the transaction. Monetary assets and liabilities
denominated in foreign currencies are translated to Australian dollars at the London 4pm exchange
rates at balance date. The fair values of financial assets are determined using the London 4pm
exchange rates at balance date.
Foreign currency exchange differences relating to financial assets are included in changes in fair
value disclosed in other comprehensive income or profit or loss account. All other foreign currency
exchange differences are presented separately in profit or loss.
(h) Cash and Cash Equivalents
Cash comprises current accounts with banks. Cash equivalents are short-term highly liquid
investments that are readily convertible to known amounts of cash, are subject to an insignificant
risk of changes in value, and are held for the purpose of meeting short-term cash commitments
rather than for investment or other purposes. Fixed term deposits (maturity less than 90 days from
date of inception) are classified as cash equivalents.
(i) Trade and Other Receivables
Receivables are recognised as and when they are due. They are initially recognised at fair value
and are subsequently measured at amortised cost using the effective interest method, less any
allowance for uncollectible amounts.
Debts which are known to be uncollectible are written off. A provision for doubtful debts is raised
when there is evidence the amount will not be collected. An impairment provision is recognised
when there is objective evidence that the Group will not be able to collect the receivable. Financial
difficulties of the debtor, default payments or debts more than 60 days overdue are considered
objective evidence of impairment. The amount of the impairment loss is the receivable carrying
amount compared to the present value of estimated future cash flows, discounted at the original
effective interest rate.
27
MAGELLAN FINANCIAL GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2010
2.
Summary of Significant Accounting Policies (continued)
(j) Derivative Financial Instruments
The Group may enter into a variety of derivative financial instruments to manage its exposure to
interest rate and foreign exchange rate risk, including forward foreign exchange contracts and
interest rate swaps.
Derivatives are categorised as held-for-trading financial assets and are initially recognised at fair
value on the date a derivative contract is entered into and are subsequently remeasured to their
fair value at each reporting date. The resulting gain or loss is recognised in profit or loss
immediately unless the derivative is designated and effective as a hedging instrument, in which
event, the timing of the recognition in profit or loss depends on the nature of the hedge
relationship.
Derivatives are carried as assets when their fair value is positive and as liabilities when their fair
value is negative.
The Group has not entered into any transactions that qualify as cashflow or fair value hedges.
(k) Financial Assets
Financial assets in the scope of AASB139: Financial Instruments: Recognition and Measurement
are categorised as; financial assets at fair value through profit or loss, loans and receivables, held-
for-trading, held-to-maturity investments, or available-for-sale financial assets. The classification
depends on the purpose for which investments were acquired. Designation is re-evaluated at each
financial year end, but there are restrictions on reclassifying to other categories.
When financial assets are recognised initially, they are measured at fair value, plus in the case of
assets not at fair value through profit or loss, directly attributable transaction costs.
Recognition and De-recognition
All regular way purchases and sales of financial assets are recognised on the trade date, ie the
date that the group commits to purchase or sell the asset. Regular way purchases or sales are
purchases or sales of financial assets under contracts that require delivery of the assets or
settlement within the year generally established by regulation or convention in the market place.
Financial assets are derecognised when the right to receive cash flows from the financial assets
have expired or been transferred.
Held-for-Trading Financial Assets
Short-term trading securities are classified as held-for-trading financial assets and are carried at
fair value. Changes in fair value are recognised in profit or loss.
Held-to-Maturity Financial Assets
Fixed and floating rate bonds are classified as held-to-maturity where it is the intention to hold
them until maturity date. These securities are initially recognised at fair value and then are carried
at amortised cost using the effective interest rate method.
28
MAGELLAN FINANCIAL GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2010
2.
Summary of Significant Accounting Policies (continued)
(k) Financial Assets (continued)
Loans and Receivables
Fixed term deposits that have a term of 90 days or greater from date of inception are classified as
loans and receivables. These deposits are initially recognised at fair value and are then carried at
amortised cost using the effective interest rate method. They are classified as current assets if the
term to maturity from reporting date is less than 12 months and non-current if the term to
maturity is greater than 12 months.
Available-for-Sale Financial Assets
Long term investments are classified as available-for-sale financial assets and are carried at fair
value. Unrealised changes in fair value are taken to an available-for-sale reserve until the asset is
sold, or until the investment is determined to be impaired, at which time the cumulative change in
fair value previously reported in other comprehensive income is recognised in profit or loss.
Investments in operating subsidiaries are also classified as available-for-sale financial assets and
are carried at cost in accordance with AASB 127: Consolidated and Separate Financial Statements.
From time to time, the Company may hold controlling interests in unlisted unit trusts which classify
their long-term investments as ‘at fair value through profit or loss’. On consolidation of these
trusts into the results of the Group, their long-term investments are designated as available-for-
sale financial assets to achieve consistency with long-term investments held directly by the
Company. Unrealised changes in fair value are taken to an available-for-sale reserve until the
asset is sold, at which time the cumulative change in fair value previously reported in equity is
recognised in profit or loss.
Impairment Losses on Available-For-Sale Financial Assets
An impairment loss on available-for-sale financial assets is recognised where the Board assesses
that there has been a significant or prolonged decline in the value of the asset, in accordance with
AASB 139: Financial Instruments: Recognition and Measurement. In assessing whether an asset is
impaired, the Board will consider a number of quantitative and qualitative factors, including the
current market price of the asset, research performed internally by experienced equity analysts,
and, where appropriate, external research that provides guidance on the long-term underlying
value of the asset.
If an asset is deemed to be impaired, the difference between fair value and cost will be recognised
as an impairment charge in profit or loss, less any impairment losses relating to that asset that
have been recognised in previous periods. Subsequent reversals of impairment losses are
recognised directly in equity through the available-for-sale reserve.
Investments in Associates
Investments in associates are accounted for using the equity method of accounting in the
consolidated financial statements and at fair value in the parent. An associate is an entity over
which the Group is determined to have significant influence and that is neither a subsidiary nor a
joint venture. The Group generally deems it has significant influence if it has greater than a 20%
share in the entity.
29
MAGELLAN FINANCIAL GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2010
2.
Summary of Significant Accounting Policies (continued)
(k) Financial Assets (continued)
Under the equity method, the investment in an associate is carried in the consolidated Statement
of Financial Position at cost plus post acquisition changes in the Group’s share of net assets of the
associate. Where an associate was previously a controlled entity of the Group, the deemed cost
for the purpose of applying the equity method is the fair value on the date that the Group ceased
to have a controlling interest.
After application of the equity method, the Group determines whether it is necessary to recognise
any impairment loss with the respect to the Group’s net investment in associates.
The Group’s share of an associate’s post-acquisition profit or loss is recognised in profit or loss,
and its share of post-acquisition movements in reserves, including its available-for-sale reserve, is
recognised in reserves. The cumulative post-acquisition movements are adjusted against the
carrying amount of the investment. Dividends receivable from an associate are recognised in the
Company’s Statement of Comprehensive Income as income, while in the consolidated financial
statements they reduce the carrying value of the investment.
(l) Property, Plant and Equipment
Property, plant and equipment are stated at historical cost less accumulated depreciation and any
accumulated impairment losses. Depreciation is calculated on a straight-line basis over the
estimated useful life of the assets as follows:
- Furniture, fittings and leasehold improvements
- Computer equipment
- over three to five years
- over three to five years
If the estimated recoverable amount of an asset is less than its carrying amount, the carrying
amount will be written down to the recoverable amount.
An item of property, plant and equipment is derecognised upon disposal or when no further future
economic benefits are expected from its use.
(m) Comparative Information
Comparative information in respect of the previous period’s Operating Segment Information (Note
3 to the financial statements) has been re-classified to assist in the understanding of the current
period’s financial report.
(n) Trade and Other Payables
Trade and other payables are carried at amortised cost. They represent liabilities for goods and
services received by the Group prior to the end of the financial period that remain unpaid at
balance date. They are recognised at the point where the Group becomes obliged to make future
payments in respect of the purchase of these goods and services.
30
MAGELLAN FINANCIAL GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2010
2.
Summary of Significant Accounting Policies (continued)
(o) Provisions and Employee Benefits
Wages and Salaries, Annual Leave and Sick Leave
Liabilities for wages and salaries, including non-monetary benefits, and annual leave expected to
be settled within 12 months of the reporting date are recognised in respect of employees’ services
up to the reporting date, measured at the amounts expected to be paid when the liabilities are
settled. Expenses for non-accumulating sick leave are recognised when the leave is taken and are
measured at the rates paid or payable.
Long Service Leave
Liabilities for long service leave are recognised when employees reach a qualifying period of
continuous service.
Bonus Plan
Liabilities and expenses for bonuses are recognised where contractually obliged or where there is a
past practice that has created a constructive obligation.
Directors’ Entitlements
Liabilities for Directors’ entitlements to fees are accrued at nominal amounts calculated on the
basis of current fee rates. Contributions to Directors’ superannuation plans are charged as an
expense as the contributions are paid or become payable.
(p) Share Purchase Plan
The Company has in place a Share Purchase Plan for employees and Non-executive Directors
(‘Participants’) to purchase shares in the Company (see Directors Report – Remuneration Report –
Share Purchase Plan).
Loans to Participants are initially recognised at fair value, which is determined by discounting loans
to their net present value using the risk-fee interest rate at the time the loan is granted and an
estimated repayment schedule. Following initial recognition, they are carried at amortised cost
using the effective interest rate method, adjusted for changes in the projected repayment
schedule. Changes in the carrying value of these are recognised in ‘interest income’ in profit or
loss. The cost of providing the benefit to Participants is recognised as an employee benefits
expense in profit or loss on a straight line basis over the expected life of the loan, in accordance
with AASB 2: Share Based Payments.
Details of the loans outstanding at balance date, and of the changes in carrying value of the loans
and employee benefits expense recognised in profit or loss during the year ended 30 June 2010
are provided in note 13.
31
MAGELLAN FINANCIAL GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2010
2.
Summary of Significant Accounting Policies (continued)
(q) Contributed Equity
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new
shares or options are shown in equity as a deduction, net of tax, from the proceeds of the issue of
shares and options.
(r) Revenue Recognition
Management Fee Revenue
Base management fee revenue is recognised in profit or loss as it accrues based on the
entitlements set out in the relevant investment management agreements, and unlisted funds
constitutions or product disclosure statements. Performance fee revenue is recognised in profit or
loss when the Group’s entitlement to it becomes certain, usually at the end of the period to which
the fee relates.
Interest Income
Interest income is recognised in profit or loss as it accrues, using the effective interest rate
method and if not received at balance date it is reflected in the Statement of Financial Position as
a receivable.
Dividend Income
Dividend income is recognised on the applicable ex-dividend date.
Consulting Fee Income
Consulting fee income is recognised when the Group is entitled to it, which is determined by the
terms and conditions of the contractual arrangement.
(s) Expense Recognition
Expenses are recognised in profit or loss when a present obligation exists (legal or constructive) as
a result of a past event that can be reliably measured. Expenses are recognised in profit or loss if
expenditure does not produce future economic benefits that qualify for recognition in the
Statement of Financial Position.
(t) Leases
Operating equipment lease payments are recognised as an expense in profit or loss on a straight-
line basis over the lease term.
(u) Income Tax
The current income tax payable is based on the Group’s taxable profit for the year. Taxable profit
differs from profit as reported in the Statement of Comprehensive Income because of items of
income or expense that are taxable or deductible in other years and items that are never taxable
or deductible. The Group’s liability for current tax is calculated using tax rates that have been
enacted or substantively enacted by the end of the reporting period.
Deferred tax is recognised on temporary differences between the carrying amounts of assets and
liabilities in the financial statements and the corresponding tax bases used in the computation of
taxable profit. Deferred tax liabilities are recognised for all taxable temporary differences. Deferred
tax assets are recognised for all deductible temporary differences to the extent that it is probable
that taxable profits will be available against which those deductible temporary differences can be
utilised.
32
MAGELLAN FINANCIAL GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2010
2.
Summary of Significant Accounting Policies (continued)
(v) Earnings Per Share
Basic earnings per share is determined by dividing the net profit attributable to members of the
parent by the weighted average number of ordinary shares outstanding during the financial year.
Diluted earnings per share is determined by dividing the net profit attributable to members of the
parent, adjusted for the impact of potential equity, divided by the weighted average number of
ordinary shares and dilutive potential ordinary shares.
(w) Dividends
Provision is made for the amount of any dividend declared, determined or publicly recommended
by the Directors on or before the end of the financial year but not paid at balance date.
(x) Goods and Services Tax (GST)
Revenue, expenses and assets are recognised net of the amount of recoverable GST. Where GST
is not recoverable from the taxation authority, the GST is recognised as part of the applicable
expense or cost of the asset acquired.
3.
Operating Segment Information
The Group’s business activities are organised into the following reportable operating segments for
internal management purposes:
Funds management
Funds management activities are undertaken by the controlled entity, Magellan Asset Management
Limited (MAM). MAM acts as investment manager for the Magellan Flagship Fund Limited (the
Flagship Fund), a listed investment company (ASX code: MFF) and other wholesale
client mandates. It acts as Responsible Entity and investment manager for the Magellan Global
Fund and Magellan Infrastructure Fund which are managed investment schemes offered to
Australian and New Zealand investors. MAM also acts as trustee for the Magellan Infrastructure
Beta Fund which is an unregistered managed investment scheme offered to Australian wholesale
investors.
Principal investments
The principal investment portfolio is comprised of investments in the Flagship Fund, the Unlisted
Funds, and in a select portfolio of Australian and international listed companies, cash and fixed
interest securities and other investments.
Unallocated - Corporate
Costs associated with the Board, ASX listing, audit and regulatory compliance activities of the
Group.
33
MAGELLAN FINANCIAL GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2010
3.
Operating Segment Information (continued)
The operating results of the Group’s operating segments are as follows:
30 June 2010
Revenue
Management fees
Consulting fees
Interest income
Dividend income and distribution income
Changes in fair value of
financial assets
Net gains on disposal of financial assets
Foreign exchange losses
Other revenue
Expense
Employee benefits expense
Employee benefits expense - (SPP)
Other expenses
Share of income from an associate
Operating profit before significant
items and income tax
30 June 2009
Revenue
Management fees
Consulting fees
Interest income
Dividend income
Changes in fair value of
financial assets
Net losses on disposal of financial assets
Foreign exchange losses
Other revenue
Expense
Employee benefits expense
Employee benefits expense - (SPP)
Other expenses
Share of income from an associate
Finance cost – external units holder’
share of net profit
Operating (loss) before significant
items and income tax
Funds
management
$ ’000
Principal
Investments
$ ’000
Unallocated
- Corporate
$ ’000
7,320
1,490
193
-
-
-
-
6
9,009
4,609
147
1,982
6,738
-
2,271
-
-
1,756
1,138
214
6
40
-
3,154
-
-
-
-
(292)
2,862
-
-
415
-
-
-
-
-
415
54
144
225
423
-
(8)
Funds
management
$ ’000
Principal
Investments
$ ’000
Unallocated
- Corporate
$ ’000
4,017
1,747
271
-
-
-
-
249
6,284
4,756
582
1,188
6,526
-
-
-
2,638
794
(15,331)
(137)
(231)
4
(12,263)
-
-
-
-
272
-
-
38
-
-
-
-
-
38
38
143
999
1,180
-
-
(484)
-
Total
$ ’000
7,320
1,490
2,364
1,138
214
6
40
6
12,578
4,663
291
2,207
7,161
(292)
5,125
Total
$ ’000
4,017
1,747
2,947
794
(15,331)
(137)
(231)
253
(5,941)
4,794
725
2,187
7,706
272
(484)
(242)
(12,475)
(1,142)
(13,859)
34
MAGELLAN FINANCIAL GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2010
3.
Operating Segment Information (continued)
The assets and liabilities of the Group’s operating segments are as follows:
30 June 2010
Cash and cash
equivalents
Financial assets
Loan to Unallocated –
Corporate
Loans – share
purchase plan (SPP)
Other assets
Total assets
Loan from Funds
management
Other liabilities
Total liabilities
Funds
management
$ ’000
Principal
Investments
$ ’000
Unallocated
- Corporate
$ ’000
Eliminations*
$ ’000
1,971
1,958
2,000
-
4,445
10,374
-
2,286
2,286
272
92,694
-
-
7,502
100,468
-
213
213
-
-
-
5,279
1,150
6,429
2,000
1,639
3,639
-
-
-
-
(4,789)
(4,789)
-
(4,789)
(4,789)
Total
$ ’000
2,243
94,652
2,000
5,279
8,308
112,482
2,000
(651)
1,349
Net assets
8,088
100,256
2,790
-
111,133
30 June 2009
Cash and cash
equivalents
Financial assets
Investment in
associate
Loans – share
purchase plan (SPP)
Other assets
Total assets
Other liabilities
Total liabilities
Funds
management
$ ’000
Principal
Investments
$ ’000
Unallocated
- Corporate
$ ’000
Eliminations*
$ ’000
3,617
240
-
-
4,616
8,473
2,075
2,075
36,005
30,130
15,441
-
10,696
92,272
-
-
-
-
-
4,217
1,150
5,367
2,328
2,328
-
-
-
-
(3,696)
(3,696)
(3,696)
(3,696)
Total
$ ’000
39,622
30,370
15,441
4,217
12,766
102,416
707
707
Net assets
92,272
*Eliminations includes adjustments and eliminations for inter-segment transactions and netting of items in the Statement
of Financial Position.
6,398
3,039
-
101,709
The Group’s net investment into its funds management business activities is as follows:
2009
$ ’000
12,500
1,150
13,650
Capital invested in controlled entity
Subordinated loan to controlled entity
2010
$ ’000
12,500
1,150
13,650
Cash and cash equivalents
Fixed term deposits
Loan to parent company from controlled entity
Net investment in funds management business
The Group’s business activities are conducted in Australia.
35
1,971
1,718
2,000
7,961
3,617
-
-
10,033
MAGELLAN FINANCIAL GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2010
4.
Revenue
a) Management fee revenue
Consolidated
Parent
Management and administration fees
2010
$ ’000
7,320
7,320
2009
$ ’000
4,017
4,017
2010
$ ’000
-
-
2009
$ ’000
-
-
MAM is the Responsible Entity and investment manager of the Magellan Global Fund and Magellan
Infrastructure Fund (the Unlisted Funds) and is entitled to receive monthly management and
administration fees from these funds. MAM is the trustee and investment manager for the
Magellan Infrastructure Beta Fund and is entitled to receive monthly management and
administration fees from this fund. MAM is also the investment manager of Magellan Flagship Fund
Limited (the Flagship Fund) an ASX listed investment company, and is entitled to receive a
quarterly management fee.
MAM may also be entitled to receive performance fees from the Unlisted Funds and the Flagship
Fund depending on specific hurdles being achieved.
The total fees earned by MAM for the year ended 30 June 2010 from these entities was
$6,419,000 (2009: $3,934,000).
b) Other revenue
Consolidated
Parent
Consulting fee income
Other revenue*
2010
$ ’000
1,490
6
1,496
2009
$ ’000
1,746
254
2,000
2010
$ ’000
-
-
-
2009
$ ’000
-
1
1
* Other revenue in 2009 includes reimbursement by UBS of costs paid by MAM, as disclosed in the Directors’ report.
5.
Changes in the Fair Value of Financial Assets
The changes in fair value of financial assets recognised in profit or loss comprise:
Consolidated
Parent
2010
$ ’000
2009
$ ’000
2010
$ ’000
2009
$ ’000
214
-
214
(853)
(14,478)
(15,331)
214
-
214
(737)
(15,977)
(16,714)
Change in the fair value of financial assets
- Fair value movements – held-for-trading
- Unrealised impairment loss – available-for-sale
36
MAGELLAN FINANCIAL GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2010
6.
Income Tax
a) Total income tax expense recognised
during the year comprises:
Income tax (expense) / benefit attributable to
operating profit / (loss)
Income tax (expense)/ benefit attributable to
significant items
Total income tax (expense) /benefit
recognised in Profit or Loss
Current income tax (expense) / benefit
Prior year adjustment
Deferred income tax (expense) / benefit
- origination and reversal of temporary
differences
(b) Income tax expense recognised in
other comprehensive income:
- Arising from the revaluation of
available-for-sale financial assets
- Arising from the disposal of
available-for-sale financial assets
- Arising from the loss of significant influence
over associate entity
- Arising from the recognition of impairment
losses in other comprehensive income
- Arising from the deemed disposal of
controlling interest in unlisted funds
- Arising from the formation of a consolidated
tax group
Total income expense recognised in other
comprehensive income
Consolidated
Parent
2010
$ ’000
2009
$ ’000
2010
$ ’000
2009
$ ’000
(1,406)
4,254
(764)
4,905
(46)
800
-
-
(1,452)
5,054
(764)
4,905
(1,458)
29
-
-
(577)
36
-
-
(23)
5,054
(223)
4,905
(1,452)
5,054
(764)
4,905
(1,564)
1,428
(1,957)
1,339
-
(244)
(433)
-
-
-
-
(4,459)
(790)
106
2
-
-
-
-
(234)
-
(4,939)
245
(1,997)
(3,959)
(1,955)
(3,589)
37
MAGELLAN FINANCIAL GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2010
6.
Income Tax (continued)
c) Income tax attributable to the
financial year differs from the prima
facie amount payable on operating profit
/ (losses). The difference is reconciled
as follows:
Operating profit / (loss) before significant
items and income tax expense
Prima facie income tax (expense) / benefit on
operating loss at 30%
Prior year adjustments
Adjustments arising on tax consolidation
Tax expense relating to controlled entity
recognised by parent
Share purchase plan
Tax effect of franked dividends received
Other non-assessable income and non-
deductible expenses
Tax effect of contribution from unlisted unit
trusts
i)
ii)
iii)
Consolidated
Parent
2010
$ ’000
2009
$ ’000
2010
$ ’000
2009
$ ’000
5,125
(13,859)
2,998
(15,425)
(1,537)
4,158
(899)
4,628
29
-
37
-
65
-
(1,406)
-
181
-
(206)
3
12
106
4,254
36
-
37
-
62
-
-
539
(71)
(206)
-
15
-
(764)
4,905
i)
These adjustments reflect the increase or decrease to deferred tax assets arising from re-setting the
tax cost base of financial assets under the tax consolidation regime. Tax consolidation requires that
the tax cost bases of a subsidiary member’s assets be re-set at joining date to align them to the tax
cost base of the consolidated tax group’s interests in that subsidiary member. The tax cost base
setting process allocates the cost of the membership interests in the subsidiary to the assets that the
subsidiary has brought into the consolidated tax group in proportion to the assets’ market values.
ii)
These are nominal interest and expenses recognised in accordance with AASB 2: Share Based
Payments (see note 2 (p)) on which there is no tax effect.
iii)
This represents the tax effect, calculated at 30% of the net contribution to the Group’s operating profit
from controlled trusts, excluding the Company’s share of distributions made by the trusts for the year
on which a tax provision has been raised.
38
MAGELLAN FINANCIAL GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2010
6.
Income Tax (continued)
d) Deferred tax balances
Tax losses carried forward
Net capital losses carried forward
Costs associated with the issue of
securities deductible in future years
Revaluation of financial assets
Other temporary differences
Deferred tax asset
e) Tax consolidation
Consolidated
Parent
2010
2009
2010
2009
$ ’000
$ ’000
$ ’000
$ ’000
806
971
210
1,863
943
395
4,509
6,681
186
(8)
806
971
210
4,509
(63)
1,863
943
395
6,681
(56)
6,682
9,874
6,433
9,826
Members of the tax consolidated group
The Company and its 100% owned Australian subsidiary Magellan Asset Management Limited
formed a tax consolidated group on 1 July 2007. The 100% owned Australian subsidiary and
Magellan Capital Partners Pty Limited joined the tax consolidated group on 20 March 2008. The
Company is the head entity of the tax consolidated group.
Tax effect accounting by members of the tax consolidated group
The head entity and its controlled entities in the tax consolidated group continue to account for
their own current and deferred tax amounts. In addition to its own current and deferred tax
amounts, the head entity also recognises current tax assets or liabilities and the deferred tax
assets arising from unused tax losses and unused tax credits assumed from controlled entities in
the tax consolidated group.
39
MAGELLAN FINANCIAL GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2010
Earnings Per Share
7.
The following reflects the earnings and weighted average share data used in calculation of basic
and diluted earnings per share.
a) Earnings per Share
Basic earnings per share
Net profit / (loss) attributable to security holders – basic
Weighted average number of securities for
basic earnings per security (‘000)
Basic (loss) / earnings per share
Diluted earnings per share
Net profit / (loss) attributable to security holders – diluted
Weighted average number of securities for
diluted earnings per security (‘000)
Consolidated
2010
$ ’000
2009
$ ’000
3,826
(12,365)
146,906
145,774
2.6 cents
(8.5 cents)
3,826
(12,365)
155,721
145,774
Diluted (loss) / earnings per share
2.5 cents
(8.5 cents)
The weighted average number of securities on a fully diluted
basis can be reconciled to the weighted average number of
securities used to calculate basic earnings per share as follows:
Weighted average number of shares already issued (‘000)
Weighted average number of shares on assumed exercise of:
MFG 2011 Options (‘000)
MFG 2016 Options (‘000)
Class B shares
Weighted average number of shares for
diluted earnings per share (‘000)
146,906
145,774
-
-
8,815
-
-
-
155,721
145,774
b) Further information
The Company has on issue 6.0 million MFG 2011 Options (2009: 6.0 million), 7.9 million MFG 2016
Options (2009: 7.9 million) and 10.2 million Class B shares (2009: 10.2 million) that represent
potential ordinary shares. The Class B shares have the right to a pro-rata share of net assets on
winding up of the Group but as they do not carry the right to participate in dividends, they have
been deemed not to represent ordinary shares already on issue. Further details of the terms of
these options and shares are included in note 17.
For the calculation of the diluted earnings per share for the year ended 30 June 2010, the effect of
the Class B shares is dilutive as the Group has reported a net profit attributable to share holders.
The Class B shares have the potential to dilute basic earnings per share in the future. If the Class
B shares were converted for the year ended 30 June 2010, the total weighted average number of
securities for the purposes of calculating the diluted earnings per share would be 155,720,857
(2009: 156,030,149). For the calculation of the diluted earnings per share for the year ended 30
June 2009, the effect of the Class B shares is anti-dilutive as the Group has reported a net loss
attributable to share holders
40
MAGELLAN FINANCIAL GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2010
7.
Earnings Per Share (continued)
The 2011 and 2016 options are anti-dilutive because their respective exercise prices were in
excess of the market price of the Company’s ordinary shares throughout the year. These securities
have the potential to dilute basic earnings per share in the future but it is not possible to estimate
the potential impact they will have on the total weighted average number of shares for purposes
of calculating diluted earnings per share in the future.
8.
Dividends
No dividends were paid during the financial year (2009: nil). No final dividend has been declared.
Franking credit balance
The amount of franking credits available for
subsequent financial year are:
Franking credits arising from the payment of
income tax payable
9.
Cash and cash equivalents
Cash and cash equivalents comprise:
Cash at bank
Fixed term deposits
Parent
2010
$ ’000
830
172
1,002
2009
$ ’000
816
-
816
Consolidated
Parent
2010
$ ’000
643
1,600
2009
$ ’000
9,950
29,672
2,243
39,622
2010
$ ’000
234
-
234
2009
$ ’000
9,469
26,500
35,969
Fixed term deposits with maturity dates greater than 90 days from inception date are classified as
financial assets and are designated as loans and receivables.
10.
Trade and Other Receivables
Trade receivables
Accrued interest
Other
Related party receivables
- Controlled entity
- Other related parties
Consolidated
Parent
2010
$ ’000
2009
$ ’000
2010
$ ’000
2009
$ ’000
1,008
14
31
1,053
-
2,128
3,181
701
255
35
991
-
1,319
2,310
-
-
31
31
-
925
956
-
226
31
257
341
495
1,093
41
MAGELLAN FINANCIAL GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2010
11.
Investment in Associate
Magellan Global Fund ceased to be an associate of the Group on 13 August 2009, the date when
loss of significant influence over the associate occurred. Since that date Magellan Global Fund has
been treated as an investment by the Group and classified as a non-current available-for-sale
financial asset (refer to note 12 (b)).
a)
Reconciliation of the carrying value of the investment in associate:
Carrying value – 1 July (2009: Cost at 4 December 2008)
Additional amounts invested ^
Share of profits for the period
Distribution receivable
Share of unrealised gains / (losses) on available for sale financial
assets ^
Reclassification of carrying value at date of loss of significant
influence over associate to available-for-sale financial assets
Consolidated
2010
$ ’000
15,441
2,318
(292)
-
2009
$ ’000
14,278
2,500
272
(319)
1,443
(1,290)
(18,910)
-
15,441
Carrying value - 30 June
^ 2010 figures relate to period from 1 July 2009 to date of loss of significant influence over associate.
-
At 30 June 2009 the carrying value of Group’s investment in Magellan Global Fund was equal to
the fair value, which comprised of 17,789,949 units at a redemption unit price of $0.85.
b)
Summarised financial information
The following table provides summarised financial information at balance date relating to the
investment in associate for the prior year for comparative purposes:
Total assets
Total liabilities
Net assets
Company’s share of net assets
Revenue
Net profit
Distributions payable
Unrealised losses on investments recognised in other
comprehensive income
30 June 2010
30 June 2009
$’000
*
*
*
*
$’000
71,103
(1,682)
69,421
15,441
1 July 2009 to
13 August
2009
4 December 2008
to
30 June 2009
$’000
*
*
*
*
$’000
462
(43)
(1,427)
(2,992)
* Not applicable since investment in Magellan Global Fund is reflected as an investment in available-for-sale
financial asset as at 30 June 2010
42
MAGELLAN FINANCIAL GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2010
12.
Financial Assets
a) Current
Held-for-trading
(by domicile of primary stock exchange)
- Listed shares – Australia
Held-to-maturity
Consolidated
Parent
2010
$ ’000
2009
$ ’000
2010
$ ’000
2009
$ ’000
1,072
684
1,072
684
- Fixed and floating rate securities
9,622
2,391
9,622
2,391
Loans and receivables
- Fixed term deposits
16,363
27,057
241
14,404
-
3,316
25,098
3,075
The movement in the carrying value of the Group’s current financial assets can be analysed as
follows:
Balance at 1 July
Acquisitions
Disposals
Reclassification of held-to-maturity securities from non-current to current
Cash placed on fixed term deposit
Maturities of fixed and floating rate securities
Changes in fair value
Balance at 30 June
2010
$ ’000
3,316
9,826
(168)
2,822
16,122
(5,400)
539
27,057
2009
$ ’000
3,200
2,734
(1,765)
-
-
(853)
3,316
b) Non-current
Held-to-maturity
- Fixed and floating rate securities
Available-for-sale financial assets
(by domicile of primary stock exchange)
- Listed shares – Australia
- Magellan Flagship Fund
- Listed shares – United States
- Listed shares – Switzerland
- Listed shares – Europe
- Unlisted funds - Magellan
- Magellan Global Fund
- Magellan Infrastructure Fund
- Unlisted funds - Other
Consolidated
Parent
2010
$ ’000
2009
$ ’000
2010
$ ’000
2009
$ ’000
352
2,822
352
2,822
27,507
3,252
1,420
134
29,822
3,347
1,761
15,499
2,613
1,143
122
**
3,172
1,683
27,507
3,252
1,420
134
29,822
3,347
1,761
15,499
2,613
1,143
122
**
3,172
1,683
67,595
27,054
67,595
27,054
** the Company and the Group’s investment in Magellan Global Fund was classified as an Investment in an Associate as
at 30 June 2009 (see note 11).
43
MAGELLAN FINANCIAL GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2010
12.
Financial Assets (continued)
b) Non-current (continued)
The movement in the fair value of the Group’s non-current financial assets can be analysed as
follows:
Balance at 1 July
Acquisitions
Reclassification of investment in associate
Disposals
Reclassification of held-to-maturity securities from non-current to current
Changes in fair value
Balance at 30 June
c) Fair Value Disclosures
i) Financial Assets carried at Fair Value
2010
$ ’000
27,054
19,215
18,910
(128)
(2,822)
5,366
67,595
2009
$ ’000
26,327
8,133
-
(2,879)
-
(4,527)
27,054
Accounting standards require financial instruments to be recognised and measured at fair value
and disclosed by source of inputs using a three level fair value hierarchy:
• Level 1 : The Group invests in liquid securities quoted on major stock exchanges. The fair
value of these investments is based on quoted bid prices.
• Level 2 : The Group invests in unlisted trusts which in turn invest in liquid securities
quoted on major stock exchanges. The fair value is estimated using the redemption price
provided by the investment manager of the unlisted trust.
• Level 3 : The Group invests in unlisted trusts which typically invest in unlisted companies.
The fair value is estimated based on Director’s valuation.
The three level fair value hierarchy has been applied to the Group’s equity financial instruments
only and does not apply to the Group’s investments in loans and receivables or held-to-maturity
financial assets.
Listed shares
The fair value of the Group’s listed shares has been determined directly by reference to published
price quotations in an active market and are categorised as Level 1 in the fair value hierarchy. The
fair value of the Group’s listed securities categorised as Level 1 is $33,385,000 (2009:
$20,061,000) which comprises both held-for-trading and available-for-sale listed securities.
Unlisted funds - Magellan
The fair values of investments in the Magellan Global Fund and Magellan Infrastructure Fund are
calculated using the redemption unit prices at balance date. They are categorised as Level 2 in the
fair value hierarchy on the basis that the inputs into the redemption unit price are directly
observable from published price quotations. The fair value of the Group’s investment in these
funds categorised as Level 2 is $33,169,000 (2009: $3,172,000).
44
MAGELLAN FINANCIAL GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2010
c) Fair Value Disclosures (continued)
i) Financial Assets carried at Fair Value (continued)
Unlisted funds – other
‘Unlisted funds – other’ comprises units in two private equity funds, for which there is no active
market. These funds invest in equity and debt securities of unlisted companies, which are valued
by the funds’ investment manager using valuation techniques. The Group’s Directors’ have applied
a discount to the unit prices provided by the funds’ investment manager to reflect the illiquidity of
the units, and the estimated impact on the investment manager valuations of investee companies
of periodic re-financing requirements.
The Directors’ valuation is based on assumptions which are not supported by observable market
prices and therefore categorised as Level 3 in the fair value hierarchy. The Directors believe the
estimated fair value based on other unlisted funds’ investment manager valuations and these
discount assumptions recorded in the Statement of Financial Position and the related changes in
fair value recorded in other comprehensive income are reasonable and the most appropriate at the
reporting date.
Reconciliation of Level 3 fair value movements:
Balance at 1 July
Acquisitions
Capital calls
Impairment charge during the year
Balance at 30 June
2010
$ ’000
1,683
-
78
-
1,761
2009
$ ’000
3,155
-
101
(1,573)
1,683
There were no transfers between Level 1 and Level 2 during the year.
ii) Held-to-maturity financial assets
Fixed and floating rate securities are recognised at amortised cost and have a carrying value of
$9.97 million at 30 June 2010. Two independent broker quotes are obtained for these securities as
at 30 June 2010 in order to estimate the fair value. The fair value of these securities is estimated
to be $9.73 million.
iii) Loans and receivables
Fixed term deposits are carried at amortised cost which is a close approximation to fair value.
d) Fixed charge
Certain of the Group’s investment assets are held in custody with Merrill Lynch International (MLI),
a wholly owned subsidiary of Bank of America. The Group has granted MLI a fixed charge over the
Group’s rights, title and interest in these assets as security for the performance of its obligations
under an International Prime Brokerage Agreement (IPBA) which it has entered into with MLI.
45
MAGELLAN FINANCIAL GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2010
13.
Share Purchase Plan (SPP)
The Group has put in place a Share Purchase Plan (the ‘Plan’) for its employees and Non-executive
Directors (‘Participants’). The Plan will provide assistance to Participants to invest in shares in the
Company in order to more closely align the interests of Participants with the interests of the
shareholders of the Group.
Employees will be invited to apply for a specified number of fully paid ordinary shares in the
Company once a year. Subject to the Listing Rules, the Directors have overall discretion in relation
to the Plan and may vary the rules. They have currently determined that the number of Company
shares that may be offered is limited to:
i) shares with a market value equal to a multiple of one times the employee’s after-tax bonus for
the financial year (ending 30 June) prior to the financial year in which the subsequent offer is
made; and
ii) such further number of shares as requested and approved by the Board, subject to:
(cid:131) where the total amount of the financial assistance being provided to an employee
participant will exceed $750,000 or will exceed three times the amount of an
employee participant’s annual base salary inclusive of superannuation, the prior
approval of the Board is required; and
(cid:131)
the maximum amount of financial assistance that may be provided by the company
to an individual employee is $1,000,000.
and, in each case:
iii) subject to a maximum of $750,000 worth of shares per employee in each financial year, other
than in the case of a new employee where the Board may resolve, in its absolute discretion, to
initially offer additional shares to the new employee; and
iv) the aggregate maximum number of shares issued under each subsequent offer under the Plan
will not exceed 5% of the total number of shares on issue at the time of the offer provided
that the Company may issue additional Company shares in any subsequent offer up to, but not
exceeding, the number of shares that it has bought back in the period since the last offer of
shares under the Plan.
No performance hurdles will attach to the invitation to participate in, or the issue of shares under,
the Plan. The Directors can resolve to vary the timing of these invitations.
The issue price for the shares will be the fair market value of the shares at the offer date. This will
ordinarily be calculated using the volume weighted average price of traded shares in the 5
business days prior to the offer date. Participants may be required to make an upfront contribution
of up to 25% of the issue price at the time of issue. The remaining amount of the issue price will
be funded by way of a full recourse interest free loan from the Company. The Directors waived the
requirement in respect of offers made pursuant to the SPP in respect of the years ended 30 June
2009 and 30 June 2010.
Participants will be required to apply 25% of their after tax annual bonus each year to repay the
loan until the loan has been fully repaid. The maximum term of the loan for employee Participants
is 10 years. Any outstanding balance at the end of 10 years must be repaid by the employee.
Employees are not entitled to repay their loan early.
46
MAGELLAN FINANCIAL GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2010
13.
Share Purchase Plan (SPP) (continued)
Participating Non-executive Directors will be required to repay the loan on the fifth anniversary of
the date of issue of their shares. Participating Non-executive Directors will be entitled to repay
their loan early.
Loans to Participants under the Plan will be secured on the shares issued to that Participant. The
shares will not be transferable until the loan is fully paid. Once the loan has been fully repaid, the
shares issued under the Plan will be freely transferable.
Dividends will be payable on the shares issued under the Plan on the same basis as all other
issued fully paid ordinary shares, and will be applied to repay the loan until the loan has been fully
repaid.
The shares issued under the Plan will have the same rights to participate in any entitlements or
bonus issues and will otherwise rank equally with all other issued ordinary shares.
Upon request from the Company, the outstanding loan amount must be repaid in full immediately
without further demand or notice upon the earliest of:
i) any breach by the Participant of the Share Purchase Plan Rules (the ‘Plan Rules’) where the
breach is not remedied within 7 days of the Company's notice to the Participant to do so; or
ii) an application being made to a court for an order, or an order being made, that the Participant
be made bankrupt (or any similar event in any jurisdiction as determined by the Board in its
discretion).
If a Participant ceases to be an Employee whilst a loan to that Participant is outstanding, the
Participant must:
i)
repay the total amount owing under the loan within 3 months (or, in the event that a
Participant has died, within 6 months), or such longer period determined by the Board in its
discretion, of ceasing to be an Employee and, upon payment of such amount the holding lock
and any security over the shares issued under the Plan will be released and the Participant
shall be entitled to retain his or her shares issued under the Plan; or
ii) require the shares issued under the Plan to be bought back or sold by the Company and must
pay to the Company the balance (if any) of the total amount owing outstanding under the loan
after the application of the proceeds of sale.
The carrying value of loans outstanding at balance date was:
a) Current
Amounts due within one year
b) Non-current
Amounts due later than one year and within ten
years
47
Consolidated
Parent
2010
$ ’000
2009
$ ’000
2010
$ ’000
2009
$ ’000
357
-
357
-
4,922
4,217
4,922
4,217
5,279
4,217
5,279
4,217
MAGELLAN FINANCIAL GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2010
13.
Share Purchase Plan (SPP) (continued)
Shares are issued to Participants at an issue price equal to the fair market value of the shares at
offer date calculated using the volume weighted average price of traded shares in the five
business days prior to the offer date.
Offer date
10 September 2007
20 October 2008
23 September 2009
5-day weighted average share price
$1.66
$0.52
$0.78
The value of shares securing the loans to Participants at balance date applying the Company’s
closing market price of $1.13 was $7.6 million (2009:$3.0 million). No amounts are past due nor
considered impaired as the Plan provides that any shortfall between the loan amount and the
value of the shares is recoverable from the Participants.
The following information has been used to determine the carrying value of the loans as at:
30 June 2009
30 June 2010
September 2007 tranche
Face value of loans
Estimated weighted average duration of loans
Imputed interest rate
October 2008 tranche
Face value of loans
Estimated weighted average duration of loans
Imputed interest rate
September 2009 tranche
Face value of loans
Estimated weighted average duration of loans
Imputed interest rate
$5.8m
4.5 years
7.0%
$0.2m
6.1 years
5.0%
$1.0m
7.7 years
5.3%
$5.8m
5.8 years
7.0%
$0.2m
4.8 years
5.0%
-
n/a
n/a
The increase in the estimated weighted average duration of loans between June 2009 and June
2010 resulted from changes in assumptions surrounding the repayment patterns of the loans.
Amounts recognised in profit or loss in respect of the SPP loans are as follows:
Included in:
Interest income
Employee benefits expense
Net credit / (charge) to
profit or loss before tax
Consolidated
2010
$ ’000
2009
$ ’000
415
(291)
38
(725)
Parent
2010
2009
$ ’000 $ ’000
415
(291)
38
(725)
124
(687)
124
(687)
48
MAGELLAN FINANCIAL GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2010
13.
Share Purchase Plan (SPP) (continued)
Both the increase in the carrying value of the loans recorded in interest income and the cost of
providing the benefit to Participants recorded in employee benefits expense are non-cash items.
Over the life of the loans the amounts credited to interest income and the amounts recognised as
employee benefits expense will exactly offset each other. The accounting treatment of these loans
is described further in note 2 p).
14.
Property, Plant and Equipment
2010
2009
Consolidated
Leasehold
Improvements
$ ’000
119
Equipment,
Fixtures and
Fittings
$ ’000
481
Total
$ ’000
600
Leasehold
Improvements
$ ’000
361
Equipment,
Fixtures and
Fittings
$ ’000
238
-
-
-
-
30
-
-
30
-
43
-
-
29
198
-
-
92
241
-
-
121
(241)
-
(1)
119
25
(19)
(1)
38
Total
$ ’000
599
-
2
(1)
241
2
-
481
600
63
19
-
88
-
(1)
116
154
Cost at 30 June
119
511
630
Cost at 1 July
Reclassifications
Additions
Disposals
Accumulated
depreciation and
impairment losses
at 1 July
Reclassification
Disposals
Depreciation charge
for the year
Accumulated
depreciation and
impairment losses
at 30 June
72
290
362
43
198
241
Net carrying amount
221
at 30 June
Property, plant and equipment is held by a controlled entity of the parent company. The carrying value of
property, plant and equipment of the parent company at 30 June 2010 is $nil (2009:$ nil).
283
268
76
47
359
15.
Trade and Other Payables
a) Current
Trade payables
Accrued expenses
Other payables
b) Non-current
Related party payables - Controlled entities
49
Consolidated
Parent
2010
$ ’000
2009
$ ’000
2010
$ ’000
2009
$ ’000
110
870
197
1,177
-
-
189
247
271
707
4
24
11
39
42
71
11
124
-
-
1,639
1,639
2,569
2,569
MAGELLAN FINANCIAL GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2010
16.
Statement of Cash Flows Reconciliation
a) Reconciliation of Net Profit / (Loss) after Tax to
Net Cash Flows from Operating Activities:
Consolidated
Parent
Net profit / (loss) after tax
Adjusted for:
Amounts attributable to external unitholders
Deemed loss to parent on loss of control of unlisted funds
Deemed gain to parent on loss of significant influence
over associate
AASB 132 Adjustment
Losses / (gains) on sale of available-for-sale financial
assets
Unrealised impairment losses on available-for-sale
financial assets
Impairment of controlled entities
Change in carrying value of fixed and floating rate
securities
Dividends and distributions on available-for-sale financial
assets reinvested
Depreciation
Unrealised foreign exchange (gains) / losses
Net cash flows from foreign exchange contracts
Imputed interest on loans under share purchase plan
(SPP)
Employee expense on loans under SPP
Share of income of an associate
Intra-group transfer of sundry balances via loan account
with controlled entities
(Increase) / decrease in trade and other receivables
(Increase) / decrease in prepayments
(Increase) / decrease in deferred tax assets
(Increase) / decrease in held-for-trading financial assets
Increase / (decrease) in trade and other payables
Increase / (decrease) in current tax liabilities
2010
$ ’000
3,826
2009
$ ’000
(12,365)
2010
$ ’000
2,234
2009
$ ’000
(29,277)
-
-
97
-
(6)
-
-
(320)
(495)
121
(3)
(37)
(415)
291
-
-
303
43
306
(388)
509
172
1,253
4,118
-
(1,327)
-
-
-
-
-
-
-
(1,327)
168
(6)
547
14,478
-
-
-
15,977
20,084
(40)
(320)
(40)
(508)
154
(793)
1,024
(38)
725
(272)
-
(159)
26
(5,232)
2,288
(3,211)
-
(495)
(508)
-
(3)
(37)
(415)
291
-
-
54
27
507
(388)
(45)
172
-
342
-
(38)
725
-
644
(80)
(123)
(4,957)
1,295
28
-
Net cash inflows / (outflows) from operating activities
4,004
289
1,576
3,292
b) Non-cash financing and investing activities:
Issue of shares under SPP
Share based payments under SPP
Acquisition of financial assets by means of amounts
payable to controlled entities
Acquisition of available-for-sale financial assets via
dividend and distribution reinvestment plans
50
647
291
-
495
143
726
-
647
291
-
508
495
143
726
746
508
MAGELLAN FINANCIAL GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2010
17.
Contributed Equity
Contributed equity
Consolidated
Parent
2010
$ ’000
2009
$ ’000
2010
$ ’000
2009
$ ’000
108,630
107,692
109,005
108,067
108,630
107,692
109,005
108,067
a) Movement during the year of Group securities on issue was as follows:
Balance at 1 July 2009
Issue of shares under share purchase plan (SPP)
Balance at 30 June 2010
Balance at 1 July 2009
Issue of shares under SPP
Recognition of SPP expense for the year
Balance at 30 June 2010
Number
MFG
2011
Options
‘000
6,034
-
MFG
2016
Options
‘000
7,882
-
Class
B
Shares
’000
10,200
-
6,034
7,882
10,200
Shares
’000
145,945
1,253
147,198
Value
Consolidated
Parent
$‘000
107,692
647
291
$‘000
108,067
647
291
108,630
109,005
The key terms and rights attaching to the MFG 2011 Options are as follows:
- MFG 2011 Options can be exercised during any two month period following the
announcement of the Company’s full or half year results in each year prior to the expiry
date. However, the final exercise period commences on the date that is two business days
after the release of the results for the half year to 31 December 2010 and ends on 30 June
2011.
- Upon exercise of an MFG 2011 Option, the option holder will be issued with one new
ordinary share in the Company.
- The exercise price of the MFG 2011 options is $1.30.
- The MFG 2011 options expire on 30 June 2011.
The key terms and rights attaching to the MFG 2016 Options are as follows:
- MFG 2016 Options can be exercised during any two month period following the
announcement of the Company’s full or half year results in each year prior to the expiry
date. However, the final exercise period commences on the date that is two business days
after the release of the results for the half year to 31 December 2015 and ends on 30 June
2016.
- Upon exercise of an MFG 2016 Option, the option holder will be issued with one new
ordinary share in the Company.
- The exercise price of the MFG 2016 options is $3.00.
- The MFG 2016 options expire on 30 June 2016.
51
MAGELLAN FINANCIAL GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2010
17.
Contributed Equity (continued)
The key terms and rights attaching to the 10,200,000 Class B Shares issued to Hamish Douglass
are as follows:
- No entitlement to receive dividends.
-
If Mr Douglass has met certain service conditions, the Class B shares will convert to the
number of ordinary shares equal to 0.06 times the number of ordinary shares of the
Company on issue on 21 November 2016 (up to a maximum of 170,000,000 ordinary
shares). The maximum number of ordinary shares that will be issued on conversion of all
the Class B shares is 10.2 million.
For example, based on the issued capital as at 30 June 2010 the 10,200,000 the Class B shares
would be entitled to convert to approximately 8.83 million ordinary shares, being equal to 0.06
times 147.2 million ordinary shares on issue.
b) Capital Management
The Directors aim to earn satisfactory returns for shareholders over time via the sensible
deployment of the Group’s capital, whilst maintaining capital strength to underpin the business.
The Directors intend to maintain a very strong balance sheet including a high level of liquidity to
ensure the business will withstand almost any market conditions or unforseen event. This
conservative balance sheet approach has benefitted the Group, particularly during the early stages
of the funds management business in the extreme markets of the last three years, and will benefit
the Group in the future.
The Directors believe that the Group’s core business, funds management, is scalable over time and
the Group’s funds under management should continue to grow without the need to make material
additional capital investment into the business.
The Group’s capital consists of its shareholders equity and the Group has no external net
borrowings. The Company’s wholly owned subsidiary, Magellan Asset Management (‘MAM’), is the
holder of an Australian Financial Services License (‘AFSL’). As a holder of an AFSL, the Australian
Securities and Investment Commission (ASIC) sets out requirements in respect of holdings of Net
Tangible Assets and Surplus Liquid Funds. MAM has complied with all externally imposed
requirements to hold an AFSL during the year.
There were no changes in the Group’s approach to capital management during the year. Other
than the requirements imposed under the AFSL, the Group is not subject to any externally
imposed capital requirements.
18. Deemed Gain to Group on Loss of Significant Influence Over Associate Entity
At 1 July 2009, the Magellan Global Fund was deemed to be an associate entity as the percentage
of units held by the Group was sufficient to provide the Group with significant influence. On 13
August 2009, the Group’s percentage holding in Magellan Global Fund was diluted below 20% by
inflows into the Fund from external unit holders. At this date, the Fund ceased to be an associate
entity and was classified as an available-for-sale investment.
52
MAGELLAN FINANCIAL GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2010
18. Deemed Gain to Group on Loss of Significant Influence Over Associate Entity
(continued)
In accordance with AASB 128: Investments in Associates, on the day that the Fund ceased to be
an associate of the Group, the Group is deemed to have disposed of its share of the underlying
assets of the Fund as if it held those assets directly. The profit that arose on this deemed disposal
is recognised in the profit or loss account.
The fair value of the Group’s ongoing investment in the Fund following the loss of significant
influence is determined by the redemption unit price of the Fund on the applicable date.
Subsequent changes in the fair value of the investment in the Fund are recognised in the
available-for-sale reserve and disclosed in other comprehensive income.
19.
Financial Risk Management Objectives and Policies
a) Financial Risk Management Objectives, Policies and Processes
The activities of the Group and the Company give rise to exposure to direct and indirect financial
risk, including market risk, credit risk and liquidity risk. Risks are managed through a process of
ongoing identification, measurement and monitoring.
Exposure to financial risk occurs through the impact on the Group’s and the Company’s profit and
total equity arising from:
• changes in the value of the Group’s and the Company’s investment portfolios and changes
•
in other financial assets and liabilities; and
the effect of market movements on the Group’s funds under management and the
consequent impact on the management fees earned.
The Group’s investment assets comprise long term, strategic investments in the Magellan Flagship
Fund and two Magellan unlisted funds of which a controlled entity of the Group is the investment
manager, and the application of a portion of the Group’s cash reserves into a small, direct portfolio
of investments. The investment portfolios of Magellan Flagship Fund and the two Magellan
unlisted funds are managed on a daily basis by the investment manager in accordance with the
investment objectives and mandates of those funds. Further details of the risk management
objectives and policies of those funds can be found in the annual report of Magellan Flagship Fund
and the Product Disclosure Statement (PDS) of the Magellan unlisted funds.
The Group earns management fees on funds under management, which are typically based on a
percentage of the value of those funds. Market movements will therefore affect the management
fees that the Group earns. The Group may also be entitled to earn performance fees on a portion
of the funds that it manages. These performance fees are reliant on the performance of portfolios
compared to absolute and index relative hurdles and hence have some exposure to market risk.
The remainder of this note provides further details of the specific risks faced by the Group and the
Company and illustrates the potential impact of changes in risk variables on profit or loss and the
Statement of Changes in Equity.
53
MAGELLAN FINANCIAL GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2010
19.
Financial Risk Management Objectives and Policies (continued)
b) Market Risk
Market risk is the risk that the Group’s revenues and the fair value or future cash flows of financial
instruments will fluctuate due to changes in market variables such as equity prices, foreign
exchange rates, and interest rates.
(i) Equity Price Risk
Equity price risk is the risk that the fair value of equities increases or decreases as a result of
changes in market prices, caused by factors specific to the individual stock or affecting all
instruments in the market. Equity price risk exposures arise from the Group’s entitlement to
investment management fees on the funds under management, and from the Group’s and the
Company’s direct investment in equity securities.
All equity investments are carried at fair value with changes arising from held-for-trading
investments reflected in profit or loss, and changes arising from available-for-sale investments
reflected in other comprehensive income.
Over the past 10 years, the annual movement in the major global indices has varied between
+40% and -24% (in AUD) and +22% and -31% (in USD). Past performance of markets is not
always a reliable guide to future performance, and neither the Company’s own investment
portfolio, nor the portfolios managed by the Group, attempt to mirror the global indices. However,
this very wide range of historical movements in the index provides an indication of the magnitude
of equity price movements that might reasonably be expected within the portfolio over the next
twelve months.
Impact arising from the Group’s own investment portfolio
Each incremental increase of 5% in the market prices of the Group’s and the Company’s
investments held at balance date would have had the following impact on net profit and total
reserves:
Impact on net profit after tax
attributable to members of the parent
Impact on available-for-sale reserve,
net of tax
Total impact on equity
Assumptions and explanatory notes
Group
Parent
2010
$ ’000
2009
$ ’000
2010
2009
$ ’000 $ ’000
38
24
38
24
2,410
2,448
1,381
1,405
2,410
1,381
2,448
1,405
i) The Company and the Group hold an investment in an unlisted trust that invests in unlisted equities.
The fair value of this trust is determined by Director’s valuation. The underlying values of the unlisted
equities are determined with reference to the projected cash flows of those businesses, which may or
may not be correlated with changes in market prices of listed equities. No assessment has been made
of the impact of changes in market prices on the fair value of that trust.
ii) A decrease of 5% in the market prices of the Group’s and the Company’s investments held at balance
date would have an equal and opposite effect to the changes disclosed above.
iii) The Group recognises impairment losses on available-for-sale investments in accordance with the
accounting policy disclosed in note 2(k). For the purposes of the sensitivity disclosed above, it has
been assumed that a 5% change in market prices would have no impact on the assessment of
whether individual assets are impaired.
54
MAGELLAN FINANCIAL GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2010
19.
Financial Risk Management Objectives and Policies (continued)
(i) Equity Price Risk (continued)
Impact arising from the Group’s funds under management
Each incremental increase of 5% in the average funds under management of the Group during the
years ended 30 June 2010 and 30 June 2009 would have increased the net profit after tax as
follows:
Impact on net profit after tax
attributable to members of the parent
Total impact on equity
Assumptions and explanatory notes
Group
Parent
2010
$ ’000
2009
$ ’000
2010
2009
$ ’000 $ ’000
256
256
147
147
-
-
-
-
i) A decrease of 5% in the average funds under management of the Group would have an
equal and opposite effect to the changes disclosed above;
ii) The potential impact of performance fees has not been estimated, as these arise from the
performance of the funds managed by the Group relative to the market, as well as to
movements in the overall market. The Group did not earn any material performance fees
during the year ended 30 June 2010 (2009: nil) and therefore the impact of market
movements on future performance fees will not reduce the Group’s net profit after tax;
iii) Changes in market prices may impact the inflows to, and outflows from, the Group’s funds
under management. This impact has not been estimated.
(ii) Currency Risk
Currency risk is the risk that the fair value or future cash flows of a financial instrument will
fluctuate due to changes in foreign exchange rates. The Group and the Company are potentially
exposed to currency risk on foreign currency denominated:
- held-for-trading financial assets;
- available-for-sale financial assets;
cash balances and overdrafts;
-
currency derivatives;
-
- payables and receivables, such as income receivable from foreign investments or
outstanding settlements on purchase or sale of foreign investments.
To the extent that changes in the fair value of available-for-sale financial assets arise from
currency movements, this will be recognised in the Statement of Changes in Equity.
At balance date, the Group’s direct currency risk exposure arose from:
-
-
foreign currency financial assets designated as available-for-sale;
foreign currency cash balances.
55
MAGELLAN FINANCIAL GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2010
19.
Financial Risk Management Objectives and Policies (continued)
(ii) Currency Risk (continued)
An increase of 10% in the Australian dollar relative to each currency to which the Group and
Company had significant exposure would have the following impact on amounts recognised in
profit or loss and amounts recognised in other comprehensive income:
Group
Assets denominated in:
US dollars
Swiss francs
Parent Company
Assets denominated in:
US dollars
Swiss francs
Increase / (decrease)
in net profit
Increase / (decrease)
other comprehensive
income
2010
$ ’000
(5)
-
2009
$ ’000
(68)
-
2010
$ ’000
(296)
(129)
2009
$ ’000
(124)
(54)
Increase / (decrease)
in net profit
Increase / (decrease)
other comprehensive
income
2010
$ ’000
(5)
2009
$ ’000
(68)
-
2010
$ ’000
(296)
(129)
2009
$ ’000
(124)
(54)
The Group and the Company held a US dollar cash balance at 30 June 2010, which gives rise to
the currency exposure recognised in net profit. The rest of the Group’s and the Company’s foreign
currency exchange exposure arises on non-monetary assets and is recognised directly in other
comprehensive income, unless financial assets are sold. A decrease of 10% in the Australian
dollar relative to each currency would have an opposite impact of materially similar magnitude on
amounts recognised in profit or loss and amounts recognised directly in equity for both the Group
and the Company.
The Group and the Company also have indirect foreign exchange exposure via the investments in
Magellan Flagship Fund, Magellan Global Fund and Magellan Infrastructure Fund. Magellan
Flagship Fund is listed on the Australian Securities Exchange and its market value is denominated
in Australian dollars.
Magellan Global Fund and Magellan Infrastructure Fund (‘the Funds’) are unlisted registered
schemes, also denominated in Australian dollars. These entities’ investment portfolios comprise
companies predominantly denominated in foreign currencies, and with extensive operating
exposure to global currency fluctuations. Changes in their fair value are therefore influenced by
movements in currencies. The sensitivity analysis disclosed above disregards the impact on the
fair value of these investments.
56
MAGELLAN FINANCIAL GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2010
19.
Financial Risk Management Objectives and Policies (continued)
(iii) Interest Rate Risk
Interest rate risk arises from the possibility that changes in interest rates will affect future cash
flows or the fair value of financial instruments. At balance date, the Group and the Company’s
exposure to changes in interest rates arises from:
-
-
cash balances, including amounts on term deposit;
floating rate notes.
The Group and the Company also held some fixed interest securities. These are designated as
“held-to-maturity” and recognised at amortised cost. Future changes in interest rates will not
affect the carrying value of these securities, nor the future cash flows to be received.
Substantially all of the Group’s and Company’s holdings of cash and cash equivalents are held with
major Australian banks. Cash term deposits are of short duration and their fair value would not be
materially affected by changes in interest rates.
The sensitivity of the Group’s and the Company’s statement of comprehensive income to changes
in interest rates is reflected in the impact on the interest that would be earned. Based on the cash
and cash equivalents held by the Group and the Company at balance date, the effect on the
annual interest income of an increase of 100 basis points in floating interest rates would be as
follows:
Impact on net profit after tax attributable to
members of the parent
Group
Parent Company
2010
$ ’000
2009
$ ’000
2010
$ ’000
2009
$ ’000
149
303
121
276
A decrease of 100 basis points in floating rate interest rates would have an equal but opposite
effect on the annual interest income and the net profit after tax attributable to members of the
parent company.
c) Liquidity Risk
Liquidity risk is the risk that the Group will encounter difficulty in meeting obligations associated
with financial liabilities. The Group manages liquidity risk by maintaining sufficient cash reserves to
cover its liabilities and by receiving management fee income on a regular basis.
As at 30 June 2010, the Group had an obligation to settle trade creditors of $1.2 million (2009:
$0.7 million) within 30 days. The Group had sufficient cash reserves of $2.2 million (2009: $39.6
million) and a further $3.2 million (2009: $2.3 million) of receivables collectable within 30 days to
cover these liabilities and accordingly the Group does not have a significant direct exposure to
liquidity risk.
The loan to the Company from the controlled entity is repayable on demand. The Company has
sufficient cash reserves of $2.2 million to repay this loan as required.
57
MAGELLAN FINANCIAL GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2010
19.
Financial Risk Management Objectives and Policies (continued)
d) Credit Risk
Credit risk represents the loss that would be recognised if counterparties failed to perform as
contracted. Market prices generally incorporate credit assessments into valuations and risk of loss
is implicitly provided for in the carrying value of financial assets and liabilities as they are marked
to market. The total credit risk for on-Statement of Financial Position items including securities is
therefore limited to the amount carried on the Statement of Financial Position. The Group
minimises concentrations of credit risk by undertaking transactions with counterparties that are
recognised and reputable or are recognised and reputable financial intermediaries with acceptable
credit ratings determined by a recognised rating agency.
The Group has entered into International Prime Brokerage Agreements (IPBA) with Merrill Lynch
International (MLI), a wholly owned subsidiary of Bank of America. The Company has entered into
an IPBA, and two further IPBAs have been entered into by a controlled entity in its capacity as
Responsible Entity of the Unlisted Funds. The services provided by MLI to the Group include
clearing and settlement of transactions, financing, securities lending and acting as custodian for
the Company and the Unlisted Funds’ assets. The IPBA with Merrill is in a form that is typical of
prime brokerage arrangements. In acting as custodian of the each Unlisted Funds’ assets, MLI
complies with the relevant provisions of the Corporations Act and applicable ASIC policy
statements relating to registered managed investment scheme property arrangements with
custodians. In the unlikely event of MLI becoming insolvent the Company and the Unlisted Funds
may rank as an unsecured creditor in regard to any investments that have been lent or used as
collateral by MLI.
As at 30 June 2010, the credit quality of Bank of America / Merrill Lynch’s senior debt is rated by
Standard & Poor’s as being A and by Moody’s as being A2.
At 30 June 2010 the Group had an outstanding balance totalling $5.3 million (2009: $4.2 million)
for loans to participants under the share purchase plan and held at 30 June 2010 Company shares
valued at $7.6 million (2009: $3.0 million) as security for the loans (note 13 provides further
information). The loans were made to Company employees and Directors on a full recourse basis.
At 30 June 2010 all cash and receivables are collectable within 30 days and there are no amounts
which are past due.
58
MAGELLAN FINANCIAL GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2010
20. Transactions with Related Parties
a) Magellan Asset Management Limited (‘MAM’)
(i) Sub-ordinated Loan to MAM
The Company has provided an interest-free sub-ordinated loan facility to its wholly owned
subsidiary MAM. Under the terms of MAM’s Australian Financial Services Licence, the loan cannot
be repaid without the prior consent of the Australian Securities and Investments Commission. The
current loan agreement commenced on 29 November 2006, following the Company’s acquisition of
MAM. The amount drawn down on the facility at 30 June 2010 was $1,150,000 (2009:
$1,150,000).
(ii) Amounts due to MAM
At balance date, a net amount of $1,638,000 (2009: $2,568,000) was payable by the Company to
MAM in respect of amounts arising from the transfer of MAM’s tax losses to the Company.
(iii) Amounts due from MAM
At balance date, a net amount of $76,000 (2009: $341,000) was payable by MAM to the Company
representing employee share purchase plan (SPP) loan repayments withheld from employee
bonuses in accordance with the SPP rules. As at balance date MAM has an unsecured, interest free
loan to the Company of $2,000,000 which is repayable on demand.
b) Disclosures Relating to Key Management Personnel
Share Holdings
The number of ordinary shares held in the Company at 30 June 2010:
Name
Directors
Naomi Milgrom
Paul Lewis
Brett Cairns
Hamish Douglass
Chris Mackay
Other Key
Management
Personnel
Nerida Campbell (1)
Balance at
1 July 2009
Acquisitions
Cancellations/
Disposals
Balance at
30 June 2010
6,182,360
1,569,747
1,086,427
9,408,448
18,077,777
-
331,000
-
1,028,060
-
435,019
150,000
-
-
-
-
-
-
6,182,360
1,900,747
1,086,427
10,436,508
18,077,777
585,019
(1) Acquisitions during the period under the Company’s Share Purchase Plan
59
MAGELLAN FINANCIAL GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2010
20. Transactions with Related Parties (continued)
The number of ordinary shares held in the Company at 30 June 2009:
Balance at
1 July 2008
Acquisitions
Cancellations/
Disposals
Name
Directors
Naomi Milgrom
Paul Lewis
Brett Cairns
Hamish Douglass
Chris Mackay
6,182,360
1,070,213
1,086,427
7,643,813
17,051,781
-
499,534
-
1,764,635
1,025,996
Other Key
Management
Personnel
Nerida Campbell (1)
(1) Acquisitions during the period under the Company’s Share Purchase Plan
358,096
76,923
Balance at
30 June 2009
6,182,360
1,569,747
1,086,427
9,408,448
18,077,777
435,019
-
-
-
-
-
-
The number of MFG Class B shares held in the Company at 30 June 2010:
Name
Balance at
1 July 2009
Acquisitions
Disposals
Balance at
30 June 2010
Hamish Douglass
10,200,000
The key terms and rights attaching to the MFG Class B Shares are disclosed in note 17. MFG Class
B shares disclosed above are identical to 30 June 2009 disclosures.
10,200,000
-
-
Option Holdings
The number of MFG 2011 Options (ASX: MFGOB) expiring on 30 June 2011 held at 30 June 2010:
Name
Directors
Brett Cairns
Balance at
1 July 2009
Acquisitions
Disposals
Balance at
30 June 2010
9,054
-
-
9,054
The number of MFG 2016 Options (ASX: MFGOC) expiring on 30 June 2016 held at 30 June 2010:
Name
Directors
Naomi Milgrom
Paul Lewis
Brett Cairns
Hamish Douglass
Chris Mackay
Other Key
Management
Personnel
Nerida Campbell
Balance at
1 July 2009
16,532
5,790
11,467
297,792
2,644,354
39,600
Acquisitions
Disposals
Balance at
30 June 2010
-
-
-
-
-
-
-
-
-
-
-
-
16,532
5,790
11,467
297,792
2,644,354
39,600
The key terms and rights attaching to the MFG 2011 Options, and MFG 2016 Options are disclosed
in note 17. Option Holdings disclosed above are identical to 30 June 2009 disclosures.
60
MAGELLAN FINANCIAL GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2010
20. Transactions with Related Parties (continued)
Unit Holdings in the Unlisted Funds
The number of units in Magellan Global Fund held at 30 June 2010:
Name
Directors
Paul Lewis
Hamish Douglass
Chris Mackay
Balance at
1 July 2009
161,793
800,659
400,985
Other Key
Management
Personnel
Nerida Campbell
* including reinvestment of 30 June 2009 distributions
-
Acquisitions*
Disposals
Balance at
30 June 2010
164,961
16,447
8,237
20,010
-
-
-
-
326,754
817,106
409,222
20,010
The number of units in Magellan Global Fund held at 30 June 2009:
Balance at
1 July 2008
Acquisitions*
Disposals
Balance at
30 June 2009
Name
Directors
Paul Lewis
Hamish Douglass
Chris Mackay
* including reinvestment of 30 June 2008 distributions
26,744
781,959
391,619
135,049
18,700
9,366
-
-
-
161,793
800,659
400,985
The number of units in Magellan Infrastructure Fund held at 30 June 2010:
Balance at
1 July 2009
Acquisitions*
Disposals
Balance at
30 June 2010
Name
Directors
Paul Lewis
* including reinvestment of 30 June 2009 distributions
27,792
1,551
-
29,343
The number of units in Magellan Infrastructure Fund held at 30 June 2009:
Name
Directors
Paul Lewis
* including reinvestment of 30 June 2008 distributions
26,360
Balance at
1 July 2008
Acquisitions*
Disposals
Balance at
30 June 2009
1,432
-
27,792
61
MAGELLAN FINANCIAL GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2010
20. Transactions with Related Parties (continued)
c) Loans
The Company has made full recourse interest free loans to Non-executive Directors and Key
Management Personnel in connection with shares acquired under the Company’s Share Purchase
Plan (SPP). The terms and conditions of the loans, including repayment terms, are disclosed in the
Remuneration Report – Share Purchase Plan.
Shares
acquired
during
the year
Loan
Balance
at 1 July
2009
Loans
made Repayments
Loan Balance at 30 June
2010
Number
$
- 1,245,000
- 1,245,000
$
-
-
Face value
$
Carrying
Value
$
1,245,000
1,245,000
1,087,431
1,087,431
$
-
-
150,000
30,575
117,000
-
147,575
111,295
Name
Directors
Paul Lewis
Brett Cairns
Other Key
Management
Personnel
Nerida Campbell
Comparative information for the year ended 30 June 2009 is as follows:
Shares
acquired
during
the year
Loan
Balance
at 1 July
2008
Loans
made Repayments
Loan Balance at 30 June
2009
Number
$
- 1,245,000
- 1,245,000
$
-
-
Face value
$
Carrying
value
$
1,245,000
1,245,000
1,016,291
1,016,291
$
-
-
76,923
575
30,000
-
30,575
30,575
Name
Directors
Paul Lewis
Brett Cairns
Other Key
Management
Personnel
Nerida Campbell
62
MAGELLAN FINANCIAL GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2010
20. Transactions with Related Parties (continued)
d) Remuneration
The Key Management Personnel of the Group, including the Non-executive and Executive Directors
of the Company, received the following amounts during the year:
Short term Benefits
- Salary
- Cash Bonus
Post-employment Benefits
- Superannuation
Termination Benefits
Share based Payment
- Under SPP (1)
Total
Consolidated
2010
$
2009
$
Parent
2010
$
2009
$
721,451
784,367
46,834
33,658
50,000
13,380
-
-
46,249
48,304
2,866
1,790
-
83,626
-
-
148,434
145,137
966,134 1,074,814
148,434
145,137
198,134 180,585
(1) Share based payments represent the cost of providing interest free loans to Participants in the Share
Purchase Plan (see Directors Report – Remuneration Report – Share Purchase Plan)
21.
Contingent Liabilities and Commitments for Expenditure
Capital Commitments
The directors are not aware of any capital commitments as at the date of this report.
Lease Commitments
A controlled entity, Magellan Asset Management Limited (‘MAM’), has entered into non-cancellable
operating leases for its office premises in Sydney, Melbourne and Brisbane as well as for office
equipment.
Commitments for minimum lease payments in relation to
non-cancellable operating leases are payable as follows:
Within one year
Later than one year but not later than five years
Consolidated
Parent
2010
$ ’000
2009
$ ’000
2010
$ ’000
2009
$ ’000
375
292
668
334
610
944
-
-
-
-
-
-
63
MAGELLAN FINANCIAL GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2010
21.
Contingent Liabilities and Commitments for Expenditure (continued)
Contingent Liabilities
The Group has a contingent liability for uncalled amounts of $0.4 million (2009: $0.5 million) on
units in other unlisted unit trusts that are held for investment purposes. The directors are not
aware of any other contingent liabilities at balance date.
22.
Events Subsequent to Reporting Date
No significant events have occurred since the balance date which would impact on the financial
position of the Group as at 30 June 2010 and on the results for the year ended on that date.
23.
Auditor’s Remuneration
Consolidated
Parent
2010
$
2009
$
2010
$
2009
$
73,850
151,498
58,850
122,551
6,000
29,500
18,600
14,300
-
10,000
9,291
15,000
-
-
6,600
-
23,130
26,167
9,900
-
-
10,250
44,341
5,364
-
-
-
-
-
-
-
-
-
-
18,150
-
175,280
271,120
65,450 140,701
Amounts received or due and receivable by
Ernst & Young Australia for:
-
audit and review of the financial statements for
the Company and its operating subsidiaries
audit of the financial statements for the wholesale
unit trust
other regulatory audit services
tax compliance (tax returns)
tax advice
-
-
-
-
Amounts received or due and receivable by
KPMG Australia for:
-
audit and review of the financial statements for
the Magellan unlisted funds
audit of the compliance plan for each of the
Magellan unlisted funds
-
-
-
tax compliance (tax returns)
tax advice
64
MAGELLAN FINANCIAL GROUP LIMITED
DIRECTORS’ DECLARATION
In accordance with a resolution of the Directors of Magellan Financial Group Limited, I state that:
In the opinion of the Directors:
(a)
the financial statements, notes and the additional disclosures included in the Directors
Report designated as audited, of the company and of the consolidated entity are in
accordance with the Corporations Act 2001, including:
(i)
giving a true and fair view of the financial position of the company and the
consolidated entity as at 30 June 2010 and of their performance for the year ended
on that date; and
(ii)
complying with Australian Accounting , International Financial Reporting Standards
(IFRS) as disclosed in Note 1(b) and Corporations Regulations 2001; and
(b)
there are reasonable grounds to believe that the company will be able to pay its debts as
and when they become due and payable.
This declaration has been made after receiving the declarations required to be made to the
directors in accordance with section 295A of the Corporations Act 2001 for the financial year
ending 30 June 2010.
On behalf of the Board
Chris Mackay
Chairman
Sydney
26 August 2010
65
MAGELLAN FINANCIAL GROUP LIMITED
INDEPENDENT AUDITOR’S REPORT
66
MAGELLAN FINANCIAL GROUP LIMITED
INDEPENDENT AUDITOR’S REPORT
67
MAGELLAN FINANCIAL GROUP LIMITED
CORPORATE GOVERNANCE STATEMENT
INTRODUCTION
This Corporate Governance Statement (‘Statement’) applies to Magellan Financial Group Limited
(the ‘Company’) and its controlled entities (collectively, the ‘Group’). The Company’s Directors
and Group senior management recognise the importance of good corporate governance. The
Group’s corporate governance framework, policies and practices are designed to ensure the
effective management and operation of the Group, and will remain under regular review.
Some of the Company’s controlled entities have adopted their own policies and practices to deal
with specific matters relevant to their business including, for instance, compliance with the
conditions of an Australian Financial Services Licence. Where such policies and practices have been
adopted, they have been developed in line with the standards referred to in this Statement.
This Statement reports against the ASX Corporate Governance Council’s Corporate Governance
Principles and Recommendations (‘ASX Recommendations’). As required by the ASX Listing
Rules, this statement sets out the extent to which the ASX Recommendations have been followed
or, where appropriate, indicates a departure from them with an explanation.
1.
LAY SOLID FOUNDATIONS FOR MANAGEMENT AND OVERSIGHT
Role and responsibilities of the Board
The Board is responsible for the overall operation and stewardship of the Group and is
responsible for its overall success and long-term growth and corporate governance. The
Board will act in the best interests of the Group to ensure the business of the Group is
properly managed. The Group’s corporate governance arrangements revolve around the
Company’s Board Charter, the purpose of which is to:
•
•
•
promote high standards of corporate governance;
clarify the role and responsibilities of the Board; and
enable the Board to provide strategic guidance for the Group and effective
operational oversight.
The Board may review and amend the Board Charter at any time. The Company’s Board
Charter is available by contacting the Company Secretary.
The principal responsibilities of the Board include:
•
•
•
•
•
•
•
•
assessing the Group’s overall performance;
providing strategic advice to the Group’s senior management;
approving the appointment and removal of the Chairman, Chief Executive Officer,
Chief Financial Officer and the Company Secretary;
establishing committees of the Board and, in relation to each committee, appointing
the members and the Chairman, setting committee charters and delegating
authority to relevant committees;
subject to the law and the Company’s Constitution, determining the remuneration of
Non-executive Directors (including the members of all committees of the Board);
reporting to shareholders;
reviewing the Group’s investment activities;
approving an annual operating budget for the Group;
68
MAGELLAN FINANCIAL GROUP LIMITED
CORPORATE GOVERNANCE STATEMENT
•
•
•
•
•
•
approving the Group’s annual Financial Statements and reports to shareholders;
approving the Group’s half year Financial Statements and reports to shareholders;
reviewing and overseeing the implementation of a Corporate Code of Conduct;
monitoring and ensuring compliance with legal and regulatory requirements and
ethical standards and policies;
monitoring and ensuring compliance with best practice corporate governance
requirements; and
ensuring the Group’s risk management systems, including internal controls,
operating systems and compliance processes, are operating efficiently and
effectively.
Subject to legal or regulatory requirement and the Company’s Constitution, the Board may
delegate any of the above powers to individual Directors, or committees of the Board. Any
such delegation shall be in compliance with the law and the Company’s Constitution.
Evaluation of senior executive performance
The Group’s Chief Executive Officer reviews the performance of the Group’s senior
executives. The Chief Executive Officer sets performance objectives for each senior
executive at the beginning of each financial year. Performance reviews of each senior
executive are carried out against their objectives with input from appropriate stakeholders.
Induction of senior executives
The Group has an induction process in place for all new employees of the Group, including
senior executives. As part of this induction process, new senior executives will receive
briefings on the Group’s business and its policies and procedures. These briefings will focus
on the key operational, regulatory, risk and compliance issues that are of relevance to the
Group.
2.
STRUCTURE THE BOARD TO ADD VALUE
Board Composition
The Company’s Board must comprise:
•
•
Directors with an appropriate range of skills, experience and expertise; and
Directors who can understand and competently deal with current and emerging
business issues.
The following persons were Directors of the Company during the year:
•
•
•
•
•
C. Mackay (Chairman and Executive Director)
H. Douglass (Executive Director)
N. Milgrom (Independent Non-Executive Director)
P. Lewis (Independent Non-Executive Director)
B. Cairns (Independent Non-Executive Director)
Details of each Board member’s background, date of appointment and attendance at Board
meetings are set out in the Directors’ Report. The Board is confident that each of the
Directors will bring the skills and qualifications which will enable them to effectively
discharge their individual and collective responsibilities as Directors of the Company.
69
MAGELLAN FINANCIAL GROUP LIMITED
CORPORATE GOVERNANCE STATEMENT
The Company’s Constitution provides that there must be a minimum of three Directors and
a maximum of ten Directors. Having regard to the size of the Group and the nature of its
business, the Board has determined that a five member Board is the appropriate
composition for the Board and will enable it to continue to effectively discharge its
responsibilities. However, the composition of the Board will be reviewed periodically and
its independence, and that of the individual Directors, will be assessed as part of those
reviews.
Independent Directors
The Board has a majority of Independent Non-Executive Directors. Directors of the
Company are considered to be independent when they are independent of management
and free from any business or other relationship that could materially interfere with, or
could reasonably be perceived to materially interfere with, the exercise of their unfettered
and independent judgment.
The Chairman of the Board is not an independent director. This is a departure from ASX
Recommendation 2.2, which recommends that the Chair should be an independent
director. The Board believes that Mr Mackay is the most appropriate person to lead the
Board as Chairman and that he is able to and does bring independent judgment to all
relevant issues falling within the scope of the role of Chairman and that the Company and
Group as a whole benefits from his experience and expertise.
Access to information
Directors have access to any information they consider necessary to fulfil their
responsibilities and to exercise independent judgment when making decisions. Directors
may obtain independent professional advice at the Group’s expense, subject to making a
request to, and obtaining the prior authorisation of, the chairperson of the Board. Where
the chairperson of the Board wishes to obtain independent professional advice, he or she is
required to make a request to, and obtain the prior authorisation of, the chairperson of the
Audit and Risk Committee of the Board.
Retirement of Directors
A Director must retire from office no later than the later of the third Annual General
Meeting of the Company or three years following the Director’s last election or
appointment.
Nominations and appointment of new Directors
ASX Recommendation 2.4 provides that the Board should establish a Nominations
Committee. Given the size and the nature of the Group, the Board has determined that a
Nomination Committee not warranted. The Board considers the issues that would otherwise
be considered by a Nominations Committee.
Review of Board performance
Under the Company’s Board Charter, the Board will conduct a review of its collective
performance and the performance of its Directors every two years. This review will
consider the Board’s role; the processes of the Board and its Committees; the Board’s
performance; and each Director’s performance before the Director stands for re-election.
This review was undertaken by the Board in August 2010.
70
MAGELLAN FINANCIAL GROUP LIMITED
CORPORATE GOVERNANCE STATEMENT
3.
PROMOTE ETHICAL AND RESPONSIBLE DECISION MAKING
Corporate Code of Conduct
The Company has a Corporate Code of Conduct (the “Code”) that applies to all Directors
and employees of the Group. The purpose of this Code is to:
•
•
•
•
articulate the high standards of honest, ethical and law-abiding behaviour that is
expected of Directors and employees of the Group;
encourage the observance of those standards so as to protect and promote the
interests of shareholders and other stakeholders;
guide Directors and employees of the Group as to the practices thought necessary
to maintain confidence in the Group’s integrity; and
set out the responsibilities and accountabilities of Directors and employees of the
Group to report and investigate reports of unethical practices.
A copy of the Corporate Code of Conduct is available on the Company’s website.
Personal Trading Policy
The Company has a Personal Trading Policy that sets out the circumstances in which the
Directors and employees of the Group may trade in the Company’s securities.
The Policy places restrictions and notification requirements, including the imposition of
blackout periods, trading windows and the need to obtain pre-trade approval.
A copy of the Company’s Personal Trading Policy is available the Company’s website.
One of the Company’s controlled entities, Magellan Asset Management Limited (‘MAM’),
has also established its own Personal Trading Policy. This Policy sets out the
circumstances in which MAM’s Executive Directors and employees may trade in the
Company’s securities and in securities generally. The Policy also places restrictions and
notification requirements, including the imposition of blackout periods, trading windows
and the need to obtain pre-trade approval.
4.
SAFEGUARD INTEGRITY IN FINANCIAL REPORTING
Audit and Risk Committee
Committee composition
The Company has established and Audit & Risk Committee (‘Committee’). The following
persons were members of the Committee during the year:
•
•
•
P. Lewis (Chairman and Independent Non-Executive Director)
B. Cairns (Independent Non-Executive Director)
H. Douglass (Executive Director)
Details of each Committee member’s background and attendance at Audit & Risk
Committee meetings are set out in the Directors’ Report.
71
MAGELLAN FINANCIAL GROUP LIMITED
CORPORATE GOVERNANCE STATEMENT
The Chairman of the Committee is an Independent Non-Executive Director and is not the
Chairman of the Board. The Committee also consists of a majority of Independent Non-
Executive Directors. This is a departure from ASX Recommendation 2.4 which recommends
that the Audit Committee should consist only of non-executive directors. Given the size and
the nature of the Group, and the skills and expertise of each Committee member, the
Board considers that a Committee comprised of a majority of Independent Non-Executive
Directors is appropriate.
Objectives and responsibilities of the Committee
The objective of the Committee is to assist the Board to discharge its responsibilities in
relation to:
•
•
•
•
•
effective management of financial and operational risks;
compliance with laws and regulations;
accurate management and financial reporting;
maintenance of an effective and efficient audit; and
high standards of business ethics and corporate governance.
These objectives form the foundation of the Committee’s Charter. A copy of the
Committee’s Charter can be found on the Company’s website.
The Committee will endeavour to:
•
•
•
•
•
•
maintain and improve the quality, credibility and objectivity of the financial
accountability process;
promote a culture of compliance within the Group;
ensure effective communication between the Board and the Group’s senior financial
and compliance management;
ensure effective audit functions and communications between the Board and the
Group’s auditor;
ensure that compliance strategies and compliance functions are effective; and
ensure that Directors are provided with financial and non-financial information that
is of high quality and relevant to the judgments to be made by them.
The Committee will meet a minimum of three times each year. The Chairman of the
Committee will report to the Board after each Committee meeting.
Independent external audit
The Group’s independent external auditor is Ernst & Young. The Committee is responsible
for recommending to the Board the appointment and removal of the external auditor. The
independence and effectiveness of the external auditor is reviewed regularly. The
Committee is also responsible for ensuring that the external audit engagement partners are
rotated in accordance with relevant statutory requirements, and otherwise after a
maximum of five years' service.
The external auditors attend the Committee’s meetings when the Group’s half year and full
year Financial Statements are being considered. The external auditors also attend other
meetings where relevant items are on the Committee’s agenda.
72
MAGELLAN FINANCIAL GROUP LIMITED
CORPORATE GOVERNANCE STATEMENT
The Group’s external auditors attend the Company’s Annual General Meeting and are
available to answer questions from shareholders in relation to the conduct of the audit, the
Audit Report, the accounting policies adopted by the Group in preparing the Financial
Statements and the independence of the auditors.
5.
MAKE TIMELY AND BALANCED DISCLOSURE
The Company is committed to complying with its continuous disclosure obligations under
the Corporations Act 2001 and the ASX Listing Rules and releasing relevant information to
the market and shareholders in a timely and direct manner and to promote investor
confidence in the Company and its securities.
Continuous Disclosure Policy
The Board has adopted a Continuous Disclosure Policy that is designed to ensure the
Company:
•
•
•
as a minimum complies with its continuous disclosure obligations under the
Corporations Act 2001 and the ASX Listing Rules;
provides shareholders and the market with timely, direct and equal access to
information issued by it; and
that information which is not generally available and which may have a material
effect on the price or value of the Company’s securities be identified and
appropriately considered by the Directors and Group senior executives for
disclosure to the market.
The Policy, which can be found on the Company’s website, also sets out procedures which
must be followed in relation to releasing announcements to the market and discussions
with analysts, the media or shareholders.
The Company’s market announcements will also be available on its website after they are
released to the ASX.
6.
RESPECT THE RIGHTS OF SHAREHOLDERS
Communication to Shareholders
The Board is committed to ensuring that shareholders are fully informed of material
matters that affect the Group’s position and prospects. It seeks to accomplish this through
a strategy which includes the release of:
•
•
•
•
•
•
the Group’s Half Year Results released in February each year;
the Group’s Full Year Results released in August each year;
the Chairman’s and Chief Executive Officer’s Letter to Shareholders each year;
the Group’s Annual Report released in September each year;
the Chairman’s address to the Annual General Meeting; and
the posting of market announcements on the Group’s website after they are
disclosed to the market.
73
MAGELLAN FINANCIAL GROUP LIMITED
CORPORATE GOVERNANCE STATEMENT
Shareholder Meetings
The Company holds its Annual General Meeting in October and a copy of the notice of the
Annual General Meeting is released to the ASX and also mailed to shareholders. The Board
encourages shareholders to attend the Annual General Meeting or to appoint a proxy to
vote on their behalf if they are unable to attend. The formal addresses at the Annual
General Meeting are disclosed to the market.
The Group’s external auditor will be invited to attend any Annual General Meeting and will
be available to answer questions about the conduct of the audit and the preparation and
contents of the Audit Report.
7.
RECOGNISE AND MANAGE RISK
Risk management responsibility
The Board, through the Audit and Risk Committee, is responsible for ensuring that:
•
•
•
there are adequate policies for the oversight and management of material business
risks to the Group;
there are effective systems in place to identify, assess, monitor and manage the
risks of the Group and to identify material changes to the Group’s risk profile; and
arrangements are adequate for monitoring compliance with laws and regulations
applicable to the Group.
Risks assessed include:
•
•
•
•
•
implementing strategies (strategic risk);
operations or external events (operational risk);
legal and regulatory compliance (legal risk);
changes in community expectation of corporate behaviour (reputation risk); and
being unable to fund operations or convert assets into cash (liquidity risk).
Risk Management Framework
The Group has implemented risk management and compliance frameworks. These
frameworks ensure that:
•
•
•
•
•
emphasis is placed on maintaining a strong control environment;
accountability and delegations of authority are clearly identified;
risk profiles are in place and regularly reviewed and updated;
timely and accurate reporting is provided to Group senior management and
respective Committees; and
compliance with the law, contractual obligations and internal policies (including the
Corporate Code of Conduct) is communicated and demonstrated.
The Group’s senior management reports periodically to the Audit and Risk Committee on
the effectiveness of its risk management and compliance frameworks.
74
MAGELLAN FINANCIAL GROUP LIMITED
CORPORATE GOVERNANCE STATEMENT
Assurance
In respect of the year ending 30 June 2010 the Chief Executive Officer and Chief Financial
Officer have made the following certifications to the Board:
•
•
The Group’s Financial Statements and notes applicable thereto represent a true and
fair view of its financial position and performance and comply with the requirements
of the Accounting Standards, Corporations Act and Corporations Regulations; and
The risk management and internal compliance and control systems are sound,
appropriate, operating efficiently and effectively managing the Group’s material
business risks.
Responsible Entity and Trustee Governance
Magellan Asset Management Limited (‘MAM’) is a wholly owned controlled entity of the
Company. It is the holder of an Australian Financial Services Licence (‘AFSL’) and is the
Responsible Entity of two registered managed investment schemes and the Trustee of one
unregistered managed investment scheme (collectively, the ‘Magellan Funds’).
There are currently four Directors on the MAM Board: Hamish Douglass, Paul Lewis, Naomi
Milgrom and Brett Cairns. At least half of the Board of MAM is comprised of External
Directors, within the meaning of section 601JA of the Corporations Act.
As the Responsible Entity or Trustee of each of the Magellan Funds, MAM has a fiduciary
obligation to act in the best interests of the investors in the Magellan Funds. The Directors
of MAM are conscious of their fiduciary obligations to investors and continually assess their
decisions in light of these obligations. The MAM Board has responsibility for the
management of risks that arise from its duties as the Responsible Entity and Trustee of the
Magellan Funds and the provision of financial services under its AFSL.
8.
REMUNERATE FAIRLY AND RESPONSIBLY
Remuneration Committee
ASX Recommendation 8.1 provides that the Board should establish a Remuneration
Committee. Given the size and the nature of the Group the Board has determined that a
Remuneration Committee is not warranted, nor does it have a Remuneration Policy to
disclose. The Board considers the issues that would otherwise be considered by a
Remuneration Committee.
Remuneration Framework and Structure
The remuneration details for Directors and senior executives are provided in the
Remuneration Report which commences on page 9 of the Directors’ Report.
75
MAGELLAN FINANCIAL GROUP LIMITED
SHAREHOLDER INFORMATION
AS AT 20 AUGUST 2010
Distribution of Shareholders
The distribution of shareholders of the Company as at 20 August 2010 is presented below:
Distribution Schedule of Holdings
1-1,000
1,001-5,000
5,001-10,000
10,001-100,000
100,001 and over
Total
Number of holders with less than a marketable
parcel
Number
of
Holders
Number of
Ordinary
Shares
Percentage
of Shares in
Issue
643
842
379
745
128
408,710
2,257,067
2,948,903
22,701,451
118,882,123
2,737 147,198,254
0.278
1.533
2.003
15.422
80.763
100.000
98
16,470
0.011
Twenty Largest Shareholders
The names of the twenty largest shareholders of the Company as at 20 August 2010 are listed
below:
Holder Name
Cavalane Holdings Pty Ltd
Magellan Equities Pty Limited
Midas Touch Investments Pty Ltd
Nota Bene Investments Pty Ltd
UBS Wealth Management Australia Nominees Pty Ltd
Vahedin Pty Limited
Citicorp Nominees Pty Limited
Emmanuel Capital Pty Ltd
HSBC Custody Nominees (Australia) Limited
ABN Amro Clearing Sydney Nominees Pty Ltd
ANZ Nominees Limited
Christopher John Mackay
National Nominees Limited
J P Morgan Nominees Australia Limited
Mr David Doyle
Aljamat Pty Ltd
Innisfallen Investments Pty Limited
UBS Nominees Pty Ltd
Giwah Pty Ltd
JDV Limited
Number of
Ordinary
Shares
16,689,645
15,355,551
9,686,508
6,006,006
5,769,070
5,348,638
3,777,249
3,380,196
2,925,341
2,542,522
2,370,284
2,232,012
1,592,540
1,572,886
1,500,000
1,462,000
1,356,662
1,246,289
1,241,873
1,228,767
Percentage
of Shares
in Issue
11.338
10.432
6.581
4.080
3.919
3.634
2.566
2.296
1.987
1.727
1.610
1.516
1.082
1.069
1.019
0.993
0.922
0.847
0.844
0.835
Total shares held by the twenty largest shareholders
87,284,039
59.297
Total shares in issue
147,198,254
76
MAGELLAN FINANCIAL GROUP LIMITED
SHAREHOLDER INFORMATION
AS AT 20 AUGUST 2010
Substantial Shareholders
The names of the substantial shareholders appearing on the Company’s Register of Substantial
Shareholders at 20 August 2010 are listed below:
Shareholder
Cavalane Holdings Pty Ltd
(an entity controlled by Consolidated Press Holdings Ltd)
Chris Mackay and associates (1)
Hamish Douglass, Midas Touch Investments Pty Ltd and associates (2)
Number of
Ordinary
Shares
18,006,006
18,077,777
10,436,508
(1) includes shares acquired after substantial shareholder notice that was lodged on 27 March 2008 – 16,830,301 shares
(2) includes shares acquired after substantial shareholder notice that was lodged on 16 June 2009 – 9,408,448 shares
Voting Rights
Subject to the Company Constitution:
a) at meetings of shareholders, each shareholder is entitled to vote in person, by proxy, by
attorney or by representative;
b) on a show of hands, each shareholder present in person, by proxy, by attorney or by
representative is entitled to one vote; and
c) on a poll, each shareholder present in person, by proxy, by attorney or by representative is
entitled to one vote for every share held by the shareholder.
In the case of joint holdings, only one joint holder may vote.
Stock Exchange Listing
The Company’s ASX code is “MFG” for its shares and “MFGOB”, and “MFGOC” for its listed options.
77
MAGELLAN FINANCIAL GROUP LIMITED
CORPORATE DIRECTORY
Directors
Chris Mackay – Chairman
Hamish Douglass – Managing Director and Chief Executive Officer
Naomi Milgrom
Paul Lewis
Brett Cairns
Company Secretaries
Nerida Campbell
Leo Quintana
Registered Office
Magellan Financial Group Limited
Level 7, 1 Castlereagh Street
Sydney NSW 2000
Telephone: +61 2 8114 1888
Email: info@magellangroup.com.au
Fax: +61 2 8114 1800
Auditors
Ernst & Young
680 George Street
Sydney NSW 2000
Share Registrar
Registries Limited
Level 7, 207 Kent Street
Sydney NSW 2000
Telephone: +61 2 9279 0664
Email: registries@registries.com.au
Securities Exchange Listing
Australian Securities Exchange
ASX code: MFG
Website
http://www.magellangroup.com.au
78
THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK