2013 ANNUAL REPORT
MAGELLAN FINANCIAL GROUP LIMITED
2013 ANNUAL REPORT
Contents
Page
Chief Executive Officer’s Annual Letter
Directors’ Report
Auditor’s Independence Declaration
Consolidated Statement of Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Financial Statements
Directors’ Declaration
Independent Auditor’s Report
Corporate Information
- Corporate Governance Statement
- Shareholder Information
- Corporate Directory
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MAGELLAN FINANCIAL GROUP LIMITED
CHIEF EXECUTIVE OFFICER’S ANNUAL LETTER
Dear Shareholder,
I am delighted to write to you in the 2013 Annual Report for Magellan Financial Group Limited
(“the Group”).
OVERVIEW OF RESULTS
The Group had a successful year which was characterised by strong growth in assets under
management and the solid investment performance of our Global Equities and Infrastructure
Equities strategies. This is reflected in the Group’s strong growth both in earnings and
dividends.
For the year ended 30 June 2013, the Group recorded a net profit after tax of $66.6 million
($13.7 million for 2012). Fully diluted earnings per share was 40.0 cents per share (8.5 cents
per share for 2012). The full year net profit included a realised after tax gain on the in-specie
distribution of the Group’s holding in Magellan Flagship Fund Limited (MFF) of approximately
$18.1 million. The Group’s underlying net profit after tax, excluding the gain on the in-specie
distribution, was $48.5 million for the year ended 30 June 2013. Underlying fully diluted
earnings per share was 29.2 cents per share.
The Group’s underlying net profit includes:
•
revenues, excluding realised and unrealised investment gains and foreign exchange
gains/losses, of $90.9 million compared with revenues of $35.8 million for the prior
year. These revenues included management and performance fee revenues of $84.5
million, an increase of $53.4 million or 172% over the prior year; and
•
total operating expenses of $25.9 million, compared with total operating expenses of
$16.7 million for the prior year.
The Group’s total revenue of $120.9 million for the year to 30 June 2013 ($35.8 million for the
year to 30 June 2012) included realised and unrealised investment gains on financial assets
(including the effect of the in-specie distribution) of $28.5 million.
Future revenue growth will depend upon the Group’s average level of funds under
management, and the investment performance of our funds and client mandates. Reported
revenues will also include any realised gains or losses on investments.
1
MAGELLAN FINANCIAL GROUP LIMITED
CHIEF EXECUTIVE OFFICER’S ANNUAL LETTER
The Group is in a strong financial position with an extremely strong balance sheet. As at 30
June 2013:
•
•
the Group had investment assets (including the cash and fixed and variable rate debt
investments) of approximately $153.3 million and shareholders’ funds of $153.0 million;
and
the Group’s NTA per share (diluted for MFG 2016 Options and the conversion of the
Class B Shares) was approximately $1.02 ($0.91 at 30 June 2012, diluted only for the
conversion of the Class B Shares as the MFG share price was below the MFG 2016
Options exercise price).
The Group completed the in-specie distribution of its investment in Magellan Flagship
Fund Limited (MFF) on 19 February 2013. The in-specie distribution of this holding of
MFF shares and options reduced the Group’s investment assets by approximately $54.7
million and fully diluted NTA by $0.28 per share.
On 31 July 2013, a controlled entity of the Company, and a member of the Group’s tax
consolidated group was declared an Offshore Banking Unit (OBU). Under the current
legislation, assessable offshore banking (OB) income derived from defined OB funds
management and advisory activities provided to clients outside of Australia and New Zealand,
net of costs, will be subject to a concessional tax rate of 10%. Revenues earned from non-
resident clients that are invested in the Group’s global equities strategy meet the current
definition of assessable OB income.
The Directors have proposed a final fully franked dividend of 16.5 cents per ordinary share in
respect of the 2013 financial year, which represents a final dividend of approximately $25.2
million. In accordance with accounting standards, the final dividend has not been provided for
in the 30 June 2013 financial statements. A fully franked interim dividend of 5.0 cents per
share was paid in April 2013 following the 31 December 2012 half year results. The Directors
have affirmed the policy of paying a dividend of 75% to 80% of the net profit after tax (NPAT)
of the Group’s funds management business, with the NPAT calculation to include any
crystallised performance fees, which may fluctuate materially from period to period. The
payment of dividends by the Group will be subject to available franking credits and corporate,
legal and regulatory considerations.
2
MAGELLAN FINANCIAL GROUP LIMITED
CHIEF EXECUTIVE OFFICER’S ANNUAL LETTER
Funds Management Business
For the year ended 30 June 2013, the Group’s funds management business generated
revenues of approximately $86.0 million ($32.7 million for 2012) and had expenses of
approximately $25.2 million ($16.4 million for 2012), which resulted in a profit before tax of
$60.8 million ($16.3 million for 2012).
The following table summarises the profitability of the funds management business over the
past two years:
Revenue
Management fees
Performance fees
Consulting fees
Interest & other income
Expenses
Employee expense
US marketing/consulting fees1
Other expense
30 June
2013
$’000
30 June
2012
$’000
Change
%
56,007
28,449
1,200
325
85,981
17,428
1,598
6,182
25,208
21,976
9,066
1,218
400
32,660
11,378
-
4,983
16,361
155%
214%
(2)%
(19)%
163%
53%
-
24%
54%
Profit before tax
60,773
16,299
273%
Key Statistics
Net assets ($’000)
Average number of employees
Employee expenses / Total expenses
Cost / income
Cost / income, excl. performance fees
178%
34%
35,547
51
69.1%
29.3%
43.8%
12,803
38
69.5%
50.1%
69.3%
Management fee and performance fee revenues increased as a result of higher average funds
under management over the period and strong investment performance.
Employee expense increased by 53% over the prior year, to $17.4 million. This was due to a
34% increase in the average number of employees and an increase in remuneration levels. At
31 July 2013 there were 61 employees across the Investment, Distribution, and Business
Support and Control functions. Based on our current plans we expect that in the 2013/14
financial year the number of employees will increase modestly above the current level.
1 Pursuant to the agreement Frontier Partners Inc. is entitled to receive 20% of net management and
performance fees from institutional mandates with clients in North America.
3
MAGELLAN FINANCIAL GROUP LIMITED
CHIEF EXECUTIVE OFFICER’S ANNUAL LETTER
Based on current plans, we expect total employee expenses to increase approximately 40%
over the last year based on the increase in the average number of employees and increased
remuneration levels.
The funds management business showed an improvement in the cost to income (excluding
performance fees) ratio which decreased from 69.3% to 43.8% for the 2012/13 financial year.
Employee expenses as a percentage of total expenses remained relatively flat.
The following table sets out the total employee numbers over the past 3 years, and as at 31
July 2013.
Employee Summary
Investment
- professional
- administration
Distribution
- professional
- administration
Business Support & Control
- professional
- administration
Total
Average number of employees
31 July
2013
30 June
2013
30 June
2012
30 June
2011
22
2
24
14
2
16
19
2
21
61
22
2
24
14
1
15
17
2
19
58
51
14
2
16
12
1
13
13
2
15
44
38
12
1
13
10
1
11
6
1
7
31
28
We have made a significant investment in people and capability in 2012/13. We added 14
people during the year with key hires including a Chief Financial Officer and Chief Risk Officer
which further developed our financial risk and compliance teams and will provide greater
experience and capability to support growth across the Group. Our Investment team has
experienced the most growth with an additional seven people added to our research sector
teams and a second person joining our trading function. We are extremely pleased with the
quality of the people we have hired and the overall development of the team.
We have been busy adding capability, along with improving the controls and processes of our
business. During the year we implemented a customised trading order management system
and moved our key Australian managed funds to a new custodian. In August we expect to
launch a UCITS fund based out of Ireland initially to service institutional investors interested in
our Global Equity strategy.
4
MAGELLAN FINANCIAL GROUP LIMITED
CHIEF EXECUTIVE OFFICER’S ANNUAL LETTER
As at 31 July 2013, the Group had funds under management of approximately $15,982 million,
split between global equities (82%) and infrastructure equities (18%). This compares with
funds under management of $14,695 million at 30 June 2013 and $4,006 million at 30 June
2012.
The following table sets out the composition of funds under management over the past three
financial years:
Funds Under Management
A$ million
Retail
Institutional
- Australia/New Zealand
- North America
- Rest of World
Total FUM
Percentage
Retail
Institutional
- Australia/ New Zealand
- North America
- Rest of World
31 July
2013
30 June
2013
30 June
2012
30 June
2011
4,962
4,542
1,750
1,082
2,589
3,085
5,346
11,020
2,424
2,891
4,838
10,153
1,924
306
26
2,256
1,674
-
-
1,674
15,982 14,695
4,006
2,756
31%
31%
44%
39%
16%
20%
33%
69%
16%
20%
33%
69%
48%
7%
1%
56%
61%
-
-
61%
Total FUM
100%
100%
100%
100%
FUM subject to Performance Fees (%)
39%
39%
53%
39%
Institutional Funds Under management (%)
- Active
- Enhanced beta
79%
21%
80%
20%
35%
65%
11%
89%
Breakdown of Funds under management (A$ million)
- Global Equities
- Infrastructure Equities
13,094
2,888
12,088
2,607
2,357
1,649
1,046
1,710
Average Base Management fee (bps), excluding
Performance Fees(A)
(A) calculated using management fees (excluding performance fees) for the prior six month period divided by the average of month end funds
under management over the same period
66
71
61
5
MAGELLAN FINANCIAL GROUP LIMITED
CHIEF EXECUTIVE OFFICER’S ANNUAL LETTER
We note that our retail business has higher fees than our institutional business and our
infrastructure enhanced beta product has lower fees than other institutional mandates.
We consider that the theoretical capacity of our global equities and infrastructure strategies is
approximately US$50 billion. We carefully take into account the investment universe, the
market capitalisation established for the strategy and liquidity requirements in ascertaining the
theoretical capacity of each of our strategies.
We further note that at 31 July 2013 we were managing around US$14.3 billion (A$16.0
billion) and the above capacity numbers are purely theoretical and should in no way be taken
as a forecast or indication as to the level of funds under management that Magellan may
manage in the future.
Retail Funds Under Management
At 30 June 2013 the Group had total retail funds under management of $4,542 million. We
experienced total net retail inflows of $1,783 million for the 12 months to 30 June 2013.
The Magellan Global Fund and the Magellan Infrastructure Fund continue to enhance their
reputations with research houses and major financial planning groups in Australia and New
Zealand. We have an outstanding team of business development managers, led by Frank
Casarotti, with offices in Sydney, Melbourne, Brisbane and Auckland. Both these funds have
established strong performance records.
On 1 July 2013 we launched three new funds for Australian and New Zealand investors.
Complementing our existing funds, we have launched the Magellan Global Fund (Hedged), a
currency hedged offering of our Global Equities strategy, and Magellan Infrastructure Fund
(Unhedged). We also launched a new investment product, the Magellan High Conviction Fund.
This fund is a highly concentrated global equity strategy (8-12 stocks) and will be managed by
myself, as Lead Portfolio Manager. It is available to financial advisers in Australia and New
Zealand with a focus on higher net worth individual investors. The fee structure is a base
management fee of 1.5% of funds under management plus a performance fee of 10% of
returns above 10% per annum, subject to a high water mark. The estimated capacity of this
product is approximately US$3 billion. We view this new product as highly complementary to
our current investment offerings and importantly leverages our existing investment research
and processes.
The following sets out the investment performance of the Magellan Global Fund and Magellan
Infrastructure Fund over the past 5 years.
Investment Performance as at 30 June 2013*
1 Year
3 Years
p.a.
5 Years
p.a.
Magellan Global Fund
MSCI World NTR Index ($A)
Excess Return
Magellan Infrastructure Fund
UBS Dev Infra & Utilities NTR Index Hedged ($A)
Excess Return
39.7%
32.8%
6.9%
17.7%
14.4%
3.3%
19.2%
10.7%
8.5%
19.2%
12.0%
7.2%
15.6%
3.7%
11.9%
9.3%
2.5%
6.8%
5 Years
cumul.
106.5%
19.8%
86.7%
56.0%
13.1%
42.9%
*Calculations are based on exit price with distributions reinvested, after ongoing fees and expenses but excluding individual tax,
member fees and entry fees (if applicable). Annualised 5 Year performance is denoted with “p.a.”, cumulative 5 year performance is
denoted with “cumul.”
6
MAGELLAN FINANCIAL GROUP LIMITED
CHIEF EXECUTIVE OFFICER’S ANNUAL LETTER
The retail component of the Magellan Global Fund / Colonial First State Magellan Global Option
had funds under management of approximately $3,889 million as at 30 June 2013 and
experienced strong net inflows on a monthly basis. Pleasingly, we have experienced monthly
retail net inflows of approximately $167 million, on average, over the last 3 months (to 30
June 2013). The following chart sets out the monthly net inflows into the Magellan Global
Fund/Colonial First State Magellan Global Option over the past 3 years.
* FUM & Flows includes Colonial First State Magellan Global Option from April 2011 – retail only
The following sets out some key information of the distribution penetration for the Magellan
Global Fund.
Platforms:
BT Wrap (including Lonsdale’s AssetLink, Count’s Wealth-e-Account, Genesys’ Solar)
Macquarie Wrap (including AMP’s badge Wealth View and Hillross’ Definitive Wrap)
Colonial First State First Choice (including Investment Superannuation, Pension and
Wholesale)
Colonial First State First Wrap (including Count’s Star Portfolio, PIS’s Investment
Exchange and Centric’s Encircle)
MLC Wrap (including the Navigator range)
Westpac-owned Asgard (including the Hillross badge, Portfolio Care)
NetWealth
AMP North
AMP Summit
Perpetual Wealth Focus
IOOF (Pursuit and The Portfolio Service)
7
MAGELLAN FINANCIAL GROUP LIMITED
CHIEF EXECUTIVE OFFICER’S ANNUAL LETTER
Retail researcher ratings:
Morningstar
Lonsec
Zenith
Van Eyk
The number of dealer groups using MGF is approximately 560.
The number of advisers that attended the August 2013 roadshows was 1,600 (approximately
1,200 in 2012 and 700 in 2011). The Auckland roadshow is scheduled for 3 September 2013
and approximately 150 advisers are planning to attend.
Institutional Funds Under Management
At 30 June 2013 the Group had total institutional funds under management of $10,153 million.
We experienced institutional net inflows of $6,190 million for the 12 months to 30 June 2013.
We are pleased with the development of our institutional funds management business.
In September 2011 we entered into an agreement with Frontier Partners Inc. to distribute our
global equity and infrastructure capabilities to clients in the North America. Since this time we
have established meaningful relationships with many potential clients and asset consultants in
North America and this year won nine global equity mandates and one infrastructure mandate.
We also act as sub-adviser to two institutional mutual funds in the United States (Frontegra
MFG Global Equity Fund and Frontegra MFG Infrastructure Fund). These mutual funds are for
US based investors that would not qualify for our separate account minimum. At 30 June 2013
we had total funds under management of approximately $2,891 million from clients in North
America. We are pleased with our relationship with Frontier Partners and the depth of the
prospective client pipeline.
We have had considerable success in the United Kingdom in the past 12 months. In February
2013 we announced that we had won a mandate from St James’s Place with an initial funding
amount of approximately $3.0 billion. At 30 June 2013 this account had grown to $3.7 billion.
In May 2012, a UK insurance company (in partnership with FTSE and the Group) launched an
infrastructure fund that replicates the Magellan Core Infrastructure (enhanced beta) strategy.
The fund has proven popular with small to medium sized pension funds in the UK and had
approximately $986 million in investments at 30 June 2013.
On 8 November 2012, Magellan Asset Management Limited (MAM), a controlled entity of the
Company, received authorisation from the Central Bank of Ireland to act as a promoter and
investment manager to Irish authorised collective investment schemes. In August 2013, MFG
Investment Fund plc, a company incorporated in Ireland, sought approval by the Central Bank
of Ireland to be authorised under the European Communities (Undertakings for Collective
Investment in Transferable Securities (UCITS)) Regulations, and appoint MAM as promoter
and investment manager to a proposed initial sub-fund MFG Global Fund. MFG Global Fund
will offer the Group’s global equities strategy to global institutional clients. At the time of this
report, MFGIF has not received confirmation of its authorisation from the Central Bank of
Ireland. We are encouraged by the client interest for this fund when it is launched.
8
MAGELLAN FINANCIAL GROUP LIMITED
CHIEF EXECUTIVE OFFICER’S ANNUAL LETTER
We are very pleased with the progress we are making in Australia with asset consultants and
prospective institutional clients. At 30 June 2013 we had 25 Australian institutional clients
across our business with total funds under management of $2,424 million.
Infrastructure
Our infrastructure team, led by Gerald Stack and Dennis Eagar, have established a strong
institutional business in Australia, with a developing presence in the UK and North America.
Investment performance has been strong and the infrastructure team had funds under
management of $2,607 million, compared with $1,649 million at 30 June 2012. The
infrastructure business’ FUM is split approximately 92% institutional and 8% retail at 30 June
2013.
It is still 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 delivering returns for the investment
funds entrusted to us, whilst maintaining the positive relationships we have with asset
consultants, financial planners and investors in our funds.
INVESTMENTS IN MAGELLAN’S FUNDS AND PRINCIPAL INVESTMENTS
At 30 June 2013 the Group had total principal investments of $127.9 million (net of tax and
settlements payable), which compares with total investment assets of approximately $131.1
million at 30 June 2012. The Group completed the in-specie distribution of its holding in MFF
on 19 February 2013. The in-specie distribution reduced the Group’s investment assets by
approximately $54.7 million.
Over time we hope to earn satisfactory returns for shareholders through the sensible
deployment of the Group’s capital, whilst maintaining capital strength to underpin the
business. We intend for the Group 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.
Our principal investments supplement our funds management business, including being used
as seed capital for our funds.
On 1 July 2013, the Group seeded the Magellan High Conviction Fund with approximately $13
million by way of an in-specie transfer of a portion of its principal investment portfolio.
This conservative balance sheet approach benefited the Group, particularly during the early
stages of the funds management business, and we believe will benefit Magellan in the future.
9
MAGELLAN FINANCIAL GROUP LIMITED
CHIEF EXECUTIVE OFFICER’S ANNUAL LETTER
The following table sets out a summary of the Group’s principal investments over the past 2
financial years:
MFG Group’s Principal Investments
A$ million
2013
2012
Cash(A)
Fixed Term Deposits
Magellan Flagship Fund
Magellan Unlisted Funds(B)
Listed shares
Listed subordinated bank notes
Other(C)
Total
Deferred tax liability(D)
Net principal investments
Net principal investments per
share (cents)(E)
24.3
9.7
-
73.1
21.6
4.3
2.8
135.8
(7.9)
127.9
0.5
23.1
42.2
52.6
9.1
1.7
2.8
132.0
(0.9)
131.1
78.7
81.1
(A)
Settlements payable at 30 June 2013 of $8.8 million (refer to note 10 in the financial statements) has been deducted from cash.
(B)
Magellan Unlisted Funds include Magellan Global Fund, Magellan Infrastructure Fund and the Frontegra MFG Funds, and for the
year ended 30 June 2013, the Magellan Global Fund (Hedged), Magellan Infrastructure Fund (Unhedged) and the Magellan High
Conviction Fund.
(C)
Comprises distributions receivable and unlisted funds and shares.
(D)
Deferred tax liability arising from changes in the fair value of financial assets and net capital losses carried forward.
(E)
Based on the aggregate of 152,782,876 ordinary shares on issue at 30 June 2013 and 9,732,697 ordinary shares being the ordinary
shares that the 10,200,000 Class B Shares would be entitled to convert into at 30 June 2013. At 30 June 2012, it is based on
152,558,341 ordinary shares and 9,153,500 ordinary shares that the 10,200,000 Class B Shares would have been entitled to
convert into at 30 June 2012.
I would like to thank my colleagues on the management committee (Nerida Campbell, Gerald
Stack and Frank Casarotti) who have done an outstanding job in leading the business and
have provided invaluable support to me throughout the year.
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,
Hamish M Douglass
Managing Director & Chief Executive Officer
16 August 2013
10
MAGELLAN FINANCIAL GROUP LIMITED
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2013
The Directors of Magellan Financial Group Limited (the “Company”) submit their financial report for
the Company and its controlled entities which together form the consolidated entity (the “Group”) in
respect of the year ended 30 June 2013.
1. Operations and Activities
1.1 Company Overview
The Company is a listed public company and incorporated in Australia. The shares and options of
the Company are publicly traded on the Australian Securities Exchange under ASX Codes: MFG and
MFGOC respectively. The Company also has on issue unlisted Class B shares.
Its principal place of business is Level 7, 1 Castlereagh Street, Sydney, New South Wales, 2000.
1.2 Principal Activity
The principal activity of the Group is funds management with the objective to offer international
investment funds to high net worth and retail investors in Australia and New Zealand, and
institutional investors.
1.3 Dividends and Distributions
During the year, dividends amounting to $12,218,787 were paid representing 8.0 cents per share
(June 2012: $4,566,996 representing 3.0 cents per share). The Company also paid an in-specie
distribution of $13,975,944 on 19 February 2013 which represented 9.16 cents per share.
Since the end of the year, the Directors have declared a final fully franked dividend of 16.5 cents
per ordinary share in respect of the year ended 30 June 2013 (June 2012: 3.0 cents per share),
which represents approximately $25,209,000.
The Directors have affirmed the policy of paying a dividend of 75% to 80% of the net profit
after tax (NPAT) of the Group’s funds management business, with the NPAT calculation to
include any crystallised performance fees, which may fluctuate materially from period to period.
The payment of dividends by the Group will be subject to available franking credits and
corporate, legal and regulatory considerations.
Financial Results for the year
1.4 Review of Operations
The Group’s net profit after tax for the year ended 30 June 2013 was $66,600,000 (June 2012:
$13,660,000) compared with net profit after tax of $13,660,000 for the prior year. In addition, total
operating expenses of $25,904,000, compared with total operating expenses of $16,693,000 for the
previous corresponding year.
The Group is in a strong financial position with an extremely strong balance sheet and at 30 June
2013 reported:
•
investment assets (including cash and fixed and variable rate debt investments) of
approximately $153,269,000 and shareholders’ funds of $153,039,000; and
• NTA per share (diluted for MFG 2016 Options and the conversion of the Class B Shares) of
$1.02 (June 2012:$0.91 at 30 June 2012, diluted only for the conversion of the Class B Shares
as the MFG share price was below the MFG 2016 Options exercise price).
Refer to the Chief Executive Officer’s Annual Letter for further information, including details on the
Group’s strategy and future outlook.
11
MAGELLAN FINANCIAL GROUP LIMITED
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2013
1.5 Likely Developments and Expected Result of Operations
The Group will continue to pursue its financial objectives which are to increase the profitability of
the Group over time by increasing the value and performance of funds under management and
seeking to grow the value of the Group’s investment portfolio. Additional comments on expected
results of certain operations of the Group are included in this report under the review of operations
at section 1.4. Refer also to the Chief Executive Officer’s Annual Letter for further information.
1.6 Significant changes in the State of Affairs
There were no significant changes in the state of affairs of the Group that occurred during the year
not otherwise disclosed in this report or the financial statements.
1.7 Events Subsequent to the end of the Financial Year
On 28 June 2013, the Group launched the following three new funds:
o
Magellan Infrastructure Fund (Unhedged) (MIFU), a unit trust that invests in a focussed
global portfolio of listed infrastructure investments;
Magellan High Conviction Fund (MHCF), a unit trust that invests in a concentrated
portfolio of global equities; and
o
Magellan Global Fund (Hedged) (MGFH), a unit trust that invests in a focussed portfolio
o
of global equities.
The Company initially seeded the new Funds by way of a small cash investment and an in-specie
transfer for the Magellan High Conviction Fund, which is discussed further at note 8 d). These funds
were open to external investors from 1 July 2013 and for the period to 13 August 2013 MIFU, MHCF
and MGFH have received approximately $1,360,000, $42,241,000 and $686,900 of new fund inflows
from external investors respectively. On 27 July 2013, the Company invested a further $4,250,000
into the Magellan High Conviction Fund.
On 26 July 2013, ASIC consented to the repayment of the $1,150,000 loan the Company
provided to its wholly owned entity, Magellan Asset Management Limited (MAM). MAM repaid
the loan in full on 2 August 2013 (refer to note 14c)i) for further details).
On 31 July 2013, MAM, a member of the Group’s tax consolidated group was declared an Offshore
Banking Unit (OBU) by the Assistant Treasurer of Australia in the Commonwealth of Australia
Government Notices Gazette. Under the current legislation, assessable offshore banking (OB)
income derived from defined OB funds management and advisory activities provided to clients
outside of Australia and New Zealand, net of costs, will be subject to a concessional tax rate of
10%. Revenues earned from non-resident clients that are invested in the Group’s global equities
strategy meet the current definition of assessable OB income.
On 8 November 2012, MAM received authorisation from the Central Bank of Ireland to act as a
promoter and investment manager to Irish authorised collective investment schemes. In August
2013, MFG Investment Fund plc, a company incorporated in Ireland, sought approval by the Central
Bank of Ireland to be authorised under the European Communities (Undertakings for Collective
Investment in Transferable Securities (UCITS)) Regulations, and appoint MAM as promoter and
investment manager to a proposed initial sub-fund MFG Global Fund. MFG Global Fund will offer the
Group’s global equities strategy to global institutional clients. At the time of this report, MFGIF has
not received confirmation of its authorisation from the Central Bank of Ireland.
12
MAGELLAN FINANCIAL GROUP LIMITED
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2013
1.7 Events Subsequent to the end of the Financial Year (continued)
Other than the items on page 13, the Directors are not aware of any other matter or circumstance
not otherwise dealt with in this report that has significantly affected 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.
1.8 Environmental Regulation
The Group is not subject to any particular or significant environmental regulation under
Commonwealth, State or Territory legislation.
1.9 Unissued Shares
MFG 2016 Options
As at 30 June 2013 there were 7,771,605 unexercised MFG 2016 Options to take up one new
ordinary share each in the Company at an exercise price of $2.6411 per share. The options expire
on 30 June 2016. As at 12 August 2013, there were 7,771,605 unexercised MFG 2016 Options. A
total of 110,395 ordinary shares have been issued from the exercise of the MFG 2016 Options.
Refer to note 11 c)ii) for further details on the MFG 2016 Options, including the terms and
conditions applying to their exercise, and note 14 d)iii) in the financial statements for the MFG 2016
Options held by the Directors and Key Management Personnel of the Company.
The options are not entitled to dividends or distributions and ordinary shares issued on exercise of
the options rank equally with all other ordinary shares from the date the ordinary share is issued.
MFG Class B Shares
As at the date of this report, Mr Douglass held 10,200,000 MFG Class B Shares which have no
entitlement to dividends and convert into the Company’s ordinary shares on 21 November 2016 in
accordance with a conversion formula. Refer to note 11c)iii) for further details. The service
conditions attached to the conversion of the MFG Class B shares into MFG ordinary shares were
satisfied on 1 July 2012.
13
MAGELLAN FINANCIAL GROUP LIMITED
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2013
2.0 Directors and Officers
2.1 Directors
The following persons were Directors of the Company during the year and up to the date of this
report:
Directorship
Chairman and Executive Director
Name
Chris Mackay
Hamish Douglass Chief Executive Officer and Managing Director
Brett Cairns
Paul Lewis
Naomi Milgrom
Non-executive Director
Non-executive Director
Non-executive Director
Appointed
21 November 2006
21 November 2006
22 January 2007
20 December 2006
20 December 2006
Secretaries
2.2
The following persons were Company Secretaries of the Company during the year and up to the
date of this report:
Nerida Campbell
Leo Quintana
There are no other officers of the Company.
2.3
Information on Directors and Officers
Chris Mackay
Chairman and Executive Director
Chris is a Director of Seven Group Holdings Limited (appointed June 2010) and was a Director of
Consolidated Media Holdings Limited (formerly Publishing & Broadcasting Limited) from 2006 until
its takeover by News Corporation in November 2012. He is also a Director of Magellan Flagship Fund
Limited (appointed September 2006). Chris retired as Chairman of the investment bank UBS
Australasia, in March 2006, having previously been its Chief Executive Officer. He is a member of
the Federal Treasurer’s Financial Sector Advisory Council, and is 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
Hamish is a member of the Australian Government’s Foreign Investment Review Board (FIRB), a
member of the Australian Government’s Financial Literacy Board, Acting President of the Australian
Government’s Takeovers Panel, a member of the Forum of Young Global Leaders – World Economic
Forum and former Co-Head of Global Banking at Deutsche Bank, Australasia. He was a Director of
Magellan Flagship Fund Limited from September 2006 until 6 February 2013.
14
MAGELLAN FINANCIAL GROUP LIMITED
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2013
2.3
Information on Directors and Officers (continued)
Naomi Milgrom AO
Non-executive Director
Naomi is the Executive Chair and CEO of Australia’s largest specialty women’s fashion retailer, the
Sussan Group - comprising Sussan, Suzanne Grae and Sportsgirl. One of Australia’s top business
entrepreneurs, Naomi has combined business leadership with leadership in the arts, sciences and
women’s health, as a Member of the Board of Trustees of the National Gallery of Victoria, former
Chair of the Australian Centre for Contemporary Art (ACCA), former Chair of the Melbourne Fashion
Festival, and director of the Howard Florey Institute. Naomi was the first woman to deliver the
Batman Oration on Australia Day 2006. She was awarded The Centenary of Federation Medal for
her outstanding contribution to business and the fashion industry, and in 2011, Naomi 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. In further recognition of her accomplishments in business, in 2011,
Naomi was the first woman to be awarded an Honorary Doctorate of Business by RMIT.
Paul Lewis
Non-executive Director and Chairman of the Audit and Risk Committee
Paul 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. Paul led major assignments in financial services –
retail banking, life insurance and stock exchanges, energy, manufacturing, telecommunications, rail,
air, container shipping and government. Paul also served on senior advisory panels with ministerial
representation in Hong Kong, Malaysia and Indonesia, and from 2003 to 2010 was a member of
British Telecom’s Global Advisory Board. Paul 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
Brett was formerly co-head of the Capital Markets Group within Structured Finance at Babcock &
Brown, which he joined in 2002. Brett 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, Brett spent 3 years with Credit Suisse Financial Products, the then derivatives bank of the
Credit Suisse group.
Nerida Campbell
Company Secretary
Nerida 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 Australasia. Nerida is the Chief Operating Officer and Company Secretary of Magellan Asset
Management Limited and Magellan Flagship Fund Limited. Nerida 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.
15
MAGELLAN FINANCIAL GROUP LIMITED
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2013
2.3
Information on Directors and Officers (continued)
Leo Quintana
Company Secretary
Leo has over 10 years experience as a corporate lawyer. He is the Legal Counsel and Company
Secretary of Magellan Asset Management Limited and Magellan Flagship Fund 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. Leo is a member of the Law Society of New South Wales and a member of
the Australian Corporate Lawyers Association.
2.4 Directors’ Meetings
The number of Board meetings, including meetings of Board Committees, held during the year
ended 30 June 2013 and the number of those meetings attended by each Director is set out below:
Chris Mackay
Brett Cairns
Hamish Douglass
Paul Lewis
Naomi Milgrom
Board
Held
Attended
Audit & Risk Committee
Attended
Held
while a Director
6
6
6
6
4
6
6
6
6
6
while a member
-
-
7
7
7
7
7
7
-
-
2.5 Directors’ Interests
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.
16
MAGELLAN FINANCIAL GROUP LIMITED
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2013
3.
2013 Remuneration Report (Audited)
This report outlines the Key Management Personnel remuneration arrangements of the Company
and the 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 and corporate entities having “authority and responsibility for planning, directing and
controlling activities of the entity”. Key Management Personnel of the Group are the Non-executive
Directors, Executive Directors and the Group’s senior executives with authority for the planning,
directing and controlling the activities of the Group, as set out below:
Chris Mackay Chairman and Executive Director
Hamish Douglass Chief Executive Officer and Managing Director
Brett Cairns
Paul Lewis
Naomi Milgrom
Nerida Campbell
Gerald Stack
Frank Casarotti
Non-executive Director
Non-executive Director
Non-executive Director
Chief Operating Officer and Company Secretary
Head of Research
Head of Distribution
The Board does not grant options to Key Management Personnel or the Group’s employees under its
remuneration policy.
3.1 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 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 remuneration of the Non-executive Directors is not linked to the performance or earnings of the
Group.
The Non-executive Directors are eligible to participate in the Company’s Share Purchase Plan (SPP)
which is described later in this report. Remuneration for two of the Non-executive Directors’
remuneration includes share based payment amounts that represent the non cash expense to the
Group of providing interest free loans under the SPP.
The Company has reimbursed or borne expenses incurred by the non-executive directors in the
discharge of their duties of $13,344 (June 2012: $776).
3.2 Remuneration of Executive Directors and Other Key Management Personnel
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.
Executive Directors
The Executive Directors’ remuneration is determined by the Board, which may utilise the services of
external advisors. In respect of the year ended 30 June 2013 it comprised fixed compensation and
in respect of Mr Douglass only, a variable compensation amount in the form of a short term
incentive payment.
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.
17
MAGELLAN FINANCIAL GROUP LIMITED
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2013
3.
2013 Remuneration Report (Audited)
3.2 Remuneration of Executive Directors and Other Key Management Personnel
(continued)
The amount of fixed compensation was not 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. The amount of variable compensation paid to Mr Douglass in respect of the year ended
30 June 2013 was determined with reference to Mr Douglass’ achievement of agreed criteria and
performance metrics. Mr Mackay was not entitled to receive a short term or long term incentive in
respect of the year ended 30 June 2013.
Details of the employment agreements of the Executive Directors are described later in this report.
Other Key Management Personnel
The Other Key Management Personnel’s remuneration comprises fixed and variable remuneration
that takes into account the individual’s experience, abilities, achievements, contribution to the
Group, and in one case is determined to be at least an agreed fixed percentage of the net revenues
earned by the Group in respect to the investment strategy for which that individual has
responsibility.
Other Key Management Personnel’s 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
variable compensation paid to one member of Other Key Management Personnel, is based on a
fixed percentage of the net revenues earned by the Group in respect to the investment strategy for
which that employee has responsibility.
The Board considers that a focus on short term indicators for the determination of short term
variable compensation, such as movements in the Company’s share price, may encourage
performance that is not in the best interests of the Group and its shareholders. The Board is more
concerned that Other Key Management Personnel 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 Board believes that the participation in the Group’s SPP by Other Key Management Personnel
closely aligns their interests with the long term interests of shareholders.
The Chief Executive Officer determines the amount of variable compensation to be paid to Other
Key Management Personnel, taking into consideration the individual’s performance, contribution
during the year, and where applicable the agreed fixed percentage of the net revenues earned by
the Group in respect of the investment strategy for which that individual has responsibility. The
variable component of the Other Key Management Personnel is not dependent on the satisfaction of
performance conditions (except as noted), the Company’s share price, or dividends paid by the
Company.
Other Key Management Personnel are eligible to participate in the Group’s SPP which is described
later in this report. Other Key Management Personnel remuneration includes share based payment
amounts that represent the non-cash expense to the Group of providing interest free loans under
the SPP.
18
MAGELLAN FINANCIAL GROUP LIMITED
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2013
3.
2013 Remuneration Report (Audited)
3.2 Remuneration of Executive Directors and Other Key Management Personnel
(continued)
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 the weighted average sale price of the shares on the ASX over
the five trading days immediately preceding the day the offer is made.
Details of the closing price of the Company’s shares since inception of the Company 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
30 June 2011
30 June 2012
30 June 2013
MFG shares
closing price
$2.20
$0.53
$0.55
$1.13
$1.32
$2.15
$9.64
SPP offer date
10 September 2007
20 October 2008
8 September 2009
10 November 2010
2 March 2011
30 September 2011
12 March 2013
SPP offer issue price
of MFG shares
$1.66
$0.52
$0.78
$1.35
$1.75
$1.20
$7.33
The Directors believe that the Key Management Personnel and employee 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 12 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.
19
MAGELLAN FINANCIAL GROUP LIMITED
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2013
3.
2013 Remuneration Report (Audited)
3.3 Details of Remuneration
The Key Management Personnel of the Group received the following amounts during the year:
Short term Benefits
Post-
employment
Benefits
Super-
annuation
$
Long
-term
Benefits
Other
(F)
$
Share
based
Payment
Under
SPP(A)
$
Cash
Bonus(D)
$
-
-
-
1,651
-
826
-
-
-
14,331
14,331
-
Salary
$
18,349
20,000
9,174
Total
$
34,331
34,331
10,000
583,530
383,530
100,000
725,000
16,470
16,470
51,884
34,101
-
-
751,884
1,159,101
333,530
333,530
333,530
325,000
325,000
524,207
16,470
16,470
16,470
38,839
35,049
35,993
18,290
167,580
34,651
732,129
877,629
944,851
2,015,173
1,999,207
84,827
195,866
249,183
4,544,256
18,349
20,000
9,174
-
-
-
234,225
234,225
150,000
150,000
252,975
271,725
252,975
250,000
250,000
408,335
1,651
-
826
15,775
15,775
15,775
15,775
15,775
-
-
-
-
-
14,331
14,331
-
34,331
34,331
10,000
-
-
400,000
400,000
30,856
27,343
28,218
11,535
29,168
13,656
561,141
594,011
718,959
1,293,648
1,208,335
81,352
86,417
83,021 2,752,773
2013
Non-executive Directors
Brett Cairns
Paul Lewis
Naomi Milgrom
Executive Directors
Chris Mackay(E)
Hamish Douglass
Other Key Management
Personnel
Nerida Campbell
Frank Casarotti(B) (C)
Gerald Stack(B)
Total Key Management
Personnel
2012
Non-executive Directors
Brett Cairns
Paul Lewis
Naomi Milgrom
Executive Directors
Chris Mackay
Hamish Douglass
Other Key Management
Personnel
Nerida Campbell
Frank Casarotti(B)
Gerald Stack(B)
Total Key Management
Personnel
(A) Share based payments represent the expense of providing interest free loans to Participants in the Share Purchase
Plan (see section 3.2 of the Remuneration Report in the Directors’ Report). These are non cash items. Refer note 15b).
(B) Mr Casarotti and Mr Stack have been determined as KMPs in the year ended 30 June 2013.
(C) Mr Casarotti disposed of 150,000 MFG shares held under the SPP and fully discharged the loan made to him by MFG
under the SPP during the year ended 30 June 2013.
(D) The cash bonus amount includes the current year cash bonus and deferred components of the prior year bonus which
have been paid over the course of the current year.
(E) Mr Mackay was not entitled to receive a short-term or long-term incentive in respect of the year 30 June 2013. Mr
Mackay’s 2013 cash bonus of $100,000 comprises the deferred component of a bonus awarded in respect to the year
ended 30 June 2012.
(F) Includes long service entitlements accrued during the year. Mr Mackay and Mr Douglass were employed under
employment agreements that commenced on 27 June 2008 and were not eligible to accrue long service entitlements
in 2012. Mr Mackay may become entitled to an amount of $100,000, which has been accrued, in respect of the
investment restriction described in section 3.5 of the Remuneration Report.
20
MAGELLAN FINANCIAL GROUP LIMITED
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2013
3. 2013 Remuneration Report (Audited)
Service Agreements
3.4
Remuneration and other terms of employment for the Non-executive Directors are formalised in
service agreements with the Company.
Naomi Milgrom AO, Non-executive Director
Commenced on 20 December 2006
No term of agreement has been set unless the Director is not re-elected by shareholders of the
Company
Base salary, inclusive of superannuation, for the year ended 30 June 2013 of $10,000 paid by
the Group
Paul Lewis, Non-executive Director and Chairman of the Audit and Risk Committee
Commenced on 20 December 2006
No term of agreement has been set unless the Director is not re-elected by shareholders of the
Company
Base salary, inclusive of superannuation, for the period ended 30 June 2013 of $20,000 paid by
the Group
Brett Cairns, Non-executive Director and member of the Audit and Risk Committee
Commenced on 22 January 2007
No term of agreement has been set unless the Director is not re-elected by shareholders of the
Company
Base salary, inclusive of superannuation, for the period ended 30 June 2013 of $20,000 paid by
the Group
During the year, the Board approved an increase to non-executive Director fees with effect from 1
July 2013 as follows:
MFG Board fee - $20,000 per annum (inclusive of superannuation)
MFG Audit Risk & Committee Member - $10,000 per annum (inclusive of superannuation)
MAM Board fee - $25,000 per annum (inclusive of superannuation)
Employment Agreements
3.5
The Executive Directors and Other Key Management Personnel are engaged under employment
agreements with Magellan Asset Management Limited (MAM), a controlled entity of the Company.
Chris Mackay, Chairman and Executive Director
The Director is employed under a contract with MAM, with effect from 1 March 2008 and which will
continue indefinitely until terminated.
Under the terms of the contract, which applied for the year to 30 June 2013, the Director:
o
receives fixed compensation structured as a total employment cost package of $600,000
per annum, inclusive of superannuation, which may be received as a combination of cash,
non-cash benefits and superannuation contributions;
o
is not entitled to receive short term or long term incentive payments;
21
MAGELLAN FINANCIAL GROUP LIMITED
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2013
3.
2013 Remuneration Report (Audited)
3.5
Employment Agreements (continued)
o has undertaken to MAM that for the period up to and including 1 July 2017 neither he nor
his associates will, within Australia and New Zealand, invest in any outside business which
in the reasonable opinion of MAM is primarily engaged in the business of funds
management, other than an investment in MFG, the Magellan Flagship Fund Limited, MAM
and related entities, and any managed investment scheme in which MAM acts as trustee or
responsible entity. The restrictions will cease to apply prior to 1 July 2017, if a third party
acquires control of MAM or MFG, or the employment contract is terminated for any reason.
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.
In consideration for complying with the above investment restriction, the Director will
receive an amount of $500,000 paid on or before 15 July 2017. If prior to 1 July 2017,
employment ceases by reason of termination of the contract by MAM; or due to the death,
total and permanent disability, ill health or genuine redundancy of the Director, and MAM
reasonably considers that the investment restrictions had been complied with, the amount
will be paid on a pro rated basis.
o may terminate the contract at any time by giving not less than 3 months written notice to
MAM. MAM may terminate the contract by providing 3 months written notice or providing
payment in lieu of that notice;
o may have his contract terminated by MAM at any time without notice if serious misconduct
has occurred. Where the contract is terminated for cause, MAM must pay any accrued but
unpaid amounts to which the Director is entitled after setting off for misfeasance for any
loss suffered by MAM from the acts which caused the termination;
o
is restrained from soliciting employees and clients of MAM for a period of 3 months after
termination of employment.
On 2 July 2013, Mr Mackay’s fixed base salary was subject to annual review and increased to
$1,250,000 per annum (inclusive of superannuation) effective from 1 July 2013. In all other respects
Mr Mackay’s employment contract remained unchanged, including that he will not receive any short
or long term incentives.
22
MAGELLAN FINANCIAL GROUP LIMITED
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2013
3.
2013 Remuneration Report (Audited)
3.5
Employment Agreements (continued)
Hamish Douglass, Chief Executive Officer and Managing Director, and Executive Director
The Director is employed under a contract with MAM, with effect from 1 March 2008 and which will
continue indefinitely until terminated.
Under the terms of the contract, which applied for the year to 30 June 2013, the Director:
o
o
receives fixed compensation structured as a total employment cost package of $400,000
per annum, inclusive of superannuation, which may be received as a combination of
cash, non-cash benefits and superannuation contributions.
receives variable compensation comprising an annual short term incentive amount up to
but not exceeding 200% of his fixed compensation. Where MFG and its controlled
entities’ (MFG Group) diluted earnings per share (EPS) is less than ten (10) cents per
share the maximum amount of annual short incentive will be 125% of the Director’s fixed
compensation. If MFG Group’s diluted EPS is equal to or exceeds twenty (20) cents per
share, the MFG Board and the Director will review the maximum short term incentive
amount and negotiate any changes to the maximum short term incentive amount.
The Director’s annual short term incentive amount is based on the following three key
criteria and relative weight distributions:
MFG Group performance and profitability (50% weighting)
Other Criteria as determined by the MFG Board in its absolute discretion (10%
Investment Performance of the Global Equity Strategy (40% weighting)
weighting)
Specific performance metrics for the above have been set by the MFG Board.
o has undertaken to MAM that for the period up to and including 1 July 2017, neither he
nor his associates will, within Australia and New Zealand, invest in a business which in
the reasonable opinion of MAM is primarily engaged in the business of funds
management, other than an investment in MFG, the Magellan Flagship Fund Limited,
MAM and related entities, and any managed investment scheme in which MAM acts as
trustee or responsible entity. These restrictions will cease to apply prior to 1 July 2017,
if a third party acquires control of MAM or MFG, or if the employment contract is
terminated for any reason. 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.
23
MAGELLAN FINANCIAL GROUP LIMITED
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2013
3.
2013 Remuneration Report (Audited)
3.5
Employment Agreements (continued)
Hamish Douglass, Chief Executive Officer and Managing Director, and Executive Director
In consideration for complying with this investment restriction MAM shall pay the Director an
amount of $500,000 on or before 15 July 2017 and:
o may terminate the contract at any time by giving not less than 3 months written notice
to the Investment Manager and the Investment Manager may terminate the contract by
providing 12 months written notice or providing payment in lieu of that notice.
o may have his contract terminated by the Investment Manager at any time without notice
if serious misconduct has occurred.
o is restrained from soliciting employees and clients of the Investment Manager for a
period of 3 months after termination of employment
Under the terms of a replacement agreement with MAM which was executed on 31 May 2013, from
1 July 2013, the Director:
o receives fixed compensation structured as a total employment cost package of
$1,250,000 per annum, inclusive of statutory superannuation contributions, which may
be received as a combination of cash, non-cash benefits and superannuation
contributions. Fixed compensation is subject to review on 1 July 2016.
o is eligible to receive in respect of each of the three (3) financial years ended 30 June
2014, 30 June 2015 and 30 June 2016, a maximum short term incentive amount of up to
but not exceeding 100% of his fixed compensation for that financial year. The amount of
the short term incentive received is wholly based on the investment performance of the
Group’s “Global Equity Strategy” applying the following performance metrics and relative
weighting:
STI Payment
Criteria
Investment
Performance of the
Global Equity
Strategy
Performance Metrics
Weighting
Ranking in Peer Group (rolling 3 years)
Absolute Performance – Gross Return (rolling 3 years)
Relative gross investment performance against
Benchmark Index (rolling 3 years)
33.3%
33.3%
33.3%
The Board, in consultation with the Director have determined the underlying quantitative
measures for each of the performance metrics that apply, which are subject to review at
1 July 2016.
Should the Director’s employment cease by reason of the retirement, death, total and
permanent disability, ill health or the genuine redundancy, the Board may at its sole
discretion allow a short term incentive amount to be paid in whole or in part.
24
MAGELLAN FINANCIAL GROUP LIMITED
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2013
3.
2013 Remuneration Report (Audited)
3.5
Employment Agreements (continued)
Hamish Douglass, Chief Executive Officer and Managing Director, and Executive Director
The investment restrictions and the terms applying to the payment of $500,000 to the
Director in consideration for compliance with the investment restrictions are unchanged,
except the period of restraint from soliciting employees and clients has been increased to 12
months after termination of employment.
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. The service conditions attached to the
conversion of the MFG Class B shares to MFG ordinary shares were satisfied on 1 July 2012.
Other Key Management Personnel
Other Key Management Personnel have rolling employment contracts with MAM and these may be
terminated by providing three months written notice. On termination, the Other Key Management
Personnel are required to repay any loan amounts outstanding in respect to shares acquired under
the Company’s Share Purchase Plan in accordance with the SPP terms and conditions. There are no
provisions for any termination payments other than for unpaid remuneration and accrued annual
leave to be paid to Other Key Management Personnel.
25
MAGELLAN FINANCIAL GROUP LIMITED
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2013
4. Other
Indemnification and Insurance of Directors and Officers
4.1
The Company insures the Directors and Officers of the Group in office to the extent permitted by
law for losses, liabilities, costs and charges 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.
During the year, the Group paid insurance premiums to insure the Directors and Officers of the
Company. The terms of the contract prohibit the disclosure of the premiums paid.
4.2 Auditor
Ernst & Young continues in office in accordance with section 327 of the Corporation Act 2001.
4.3 Non-audit Services
During the year, Ernst & Young, the Group’s auditor, has performed other services in addition to its
statutory duties. Details of the amounts paid or payable to the auditor are set out in note 17 to the
financial report.
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 for the following reasons:
all non-audit services have been reviewed by the Audit Committee to ensure that they do not
impact the impartiality and objectivity of the auditor
none of the services undermine the general principles relating to auditor independence as set
out in APES 110 Code of Ethics for Professional Accountants.
4.4 Auditor’s Independence Declaration
A copy of the Auditor’s Independence Declaration as required under section 307C of the
Corporations Act 2001 is set out on page 28.
4.5 Rounding 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 have been
rounded off to the nearest thousand dollars in accordance with that Class Order, unless otherwise
indicated.
This report is made in accordance with a resolution of the Directors.
Hamish M Douglass
Director
Sydney, 16 August 2013
26
MAGELLAN FINANCIAL GROUP LIMITED
AUDITOR’S INDEPENDENCE DECLARATION
27
MAGELLAN FINANCIAL GROUP LIMITED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2013
Consolidated
Company
Note
2013
2012
2013
2012
$ ’000
$ ’000
$ ’000
$ ’000
Revenue
Management fees
Performance fees
Consulting fees
Dividend and distribution income
Interest income
Net changes in fair value of held for trading
financial assets
Net gain/(loss) on sale of available-for-sale
financial assets
Net foreign exchange gains/(losses)
Other revenue
Total revenue
Expenses
Employee expense
Fund administration and operational costs
Travel and entertainment expense
Marketing expense
US marketing/consulting fee expense
Occupancy expense
Auditor’s remuneration
Depreciation and amortisation expense
Legal and professional fees
Other
Total expenses
6 a)
6 b)
6 d)
8 c)
6 e)
17
9
56,007
21,976
28,449
1,200
2,308
2,965
3,698
24,805
1,459
15
9,066
1,218
1,145
2,412
34
(7)
(2)
4
-
-
-
33,582
2,178
3,698
24,805
776
-
-
-
3,545
1,462
34
(7)
(2)
15
-
120,906
35,846
65,054
5,032
17,509
11,457
751
335
1,861
2,006
908
1,122
1,598
587
273
104
467
1,475
700
681
-
474
184
117
172
902
-
-
-
-
-
-
-
-
-
-
104
72
-
-
153
358
10
170
587
25,904
16,693
1,366
Operating profit before income tax expense
95,002
19,153
63,688
4,445
Income tax expense
5 a)
(28,402)
(5,493)
(9,603)
(351)
Net profit for the year
66,600
13,660
54,085
4,094
28
MAGELLAN FINANCIAL GROUP LIMITED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2013
Note
Consolidated
2013
$ ’000
2012
$ ’000
Company
2013
$ ’000
2012
$ ’000
Other comprehensive income
Items that may be reclassified to profit and loss in
future years
Changes in the fair value of available-for-sale
financial assets
Net gain/(loss) on sale of available-for-sale
financial assets recycled through profit or loss
Income tax benefit/(expense) on the above item
Other comprehensive income
for the year, net of tax
Total comprehensive income
for the year
8 c)
31,093
16,313
31,093
16,313
6 e)
5 b)
(24,805)
(1,852)
7
(4,899)
(24,805)
(1,852)
7
(4,899)
4,436
11,421
4,436
11,421
71,036
25,081
58,521
15,515
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
3
3
43.6
40.0
9.0
8.5
The Consolidated Statement of Comprehensive Income is to be read in conjunction with the accompanying
notes to the Financial Statements.
29
MAGELLAN FINANCIAL GROUP LIMITED
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
AS AT 30 JUNE 2013
Consolidated
Company
Note
2013
2012
2013
2012
$ ’000
$ ’000
$ ’000
$ ’000
15
8 a)
7
12
14 c)i)
8 b)
5 d)
12
14 c)i)
9
10
5 d)
38,096
14,685
35,181
1,489
-
326
89,777
-
100,488
-
2,835
-
341
103,664
193,441
17,842
16,839
34,681
5,721
5,721
40,402
1,052
30,565
9,638
1,658
-
164
27,300
8,719
10,490
1,489
1,150
44
454
12,197
2,822
1,658
-
68
43,077
49,192
17,199
-
107,595
200
4,661
-
272
112,728
155,805
12,539
12,539
100,488 107,595
-
2,835
-
-
-
4,661
1,150
-
115,862 125,945
165,054 143,144
4,465
4,124
8,589
8,913
16,839
25,752
47
4,124
4,171
-
-
7,910
889
7,910
889
8,589
33,662
5,060
Assets
Current assets
Cash and cash equivalents
Financial assets
Receivables
Loans - share purchase plan
Loan to controlled entity
Prepayments
Total current assets
Non-current assets
Investments in controlled entities
Financial assets
Deferred tax assets
Loans - share purchase plan
Loan to controlled entity
Property, plant and equipment
Total non-current assets
Total assets
Liabilities
Current liabilities
Payables
Income tax payable
Total current liabilities
Non-current liabilities
Deferred tax liability
Total non-current liabilities
Total liabilities
Net assets
153,039
147,216
131,392 138,084
Equity
Contributed equity
Available-for-sale reserve
Retained profits
Total attributable to members of
the Group
Total Equity
11
76,378
21,420
55,241
115,395
16,984
14,837
76,753 115,770
16,074
20,510
6,240
34,129
153,039
147,216
131,392 138,084
153,039
147,216
131,392 138,084
The Consolidated Statement of Financial Position is to be read in conjunction with the accompanying notes
to the Financial Statements.
30
MAGELLAN FINANCIAL GROUP LIMITED
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2013
Attributable to Equity Holders of the Consolidated entity
2013 Note
Contributed
Equity
Retained
Profits
Available
for Sale
Reserve
$’000
$’000
$’000
Total
$’000
Equity - 1 July 2012
115,395
14,837
16,984
147,216
Net profit for the year
Other comprehensive income
Total comprehensive income
for the year
-
- -
66,600
-
4,436
66,600
4,436
-
66,600
4,436
71,036
Transactions with owners in their capacity as
owners:
Issue of securities:
- on employee share purchase plan 11 a)
- on exercise of MFG 2016 Options 11 a)
Dividends paid 4
In-specie distribution 4,11 a)
SPP expense for the year 11 a)
Total transactions with equity holders in
their capacity as equity owners
Equity - 30 June 2013
2012
765
292
-
(40,772)
- -
- -
(12,219)
(13,977)
-
-
698 - -
765
292
(12,219)
(54,749)
698
(39,017)
(26,196)
-
(65,213)
76,378
55,241
21,420
153,039
Equity - 1 July 2011
114,529
5,743
5,563 125,835
Net profit for the year
Other comprehensive income
Total comprehensive income
for the year
-
-
13,660
-
-
11,421
13,660
11,421
-
13,660
11,421
25,081
Transactions with owners in their capacity as owners:
Issue of securities - employee SPP 11 a)
Dividends paid 4
SPP expense for the year 11 a)
Total transactions with equity holders in their
capacity as equity owners
Equity - 30 June 2012
578
-
288
-
(4,566)
-
866
(4,566)
-
-
-
-
578
(4,566)
288
(3,700)
115,395
14,837
16,984 147,216
31
MAGELLAN FINANCIAL GROUP LIMITED
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2013
Attributable to Equity Holders of the Company
2013 Note
Contributed
Equity
Retained
Profits
Available
for Sale
Reserve
Total
$’000
$’000
$’000
$’000
Equity - 30 June 2012
115,770
6,240
16,074 138,084
Net profit for the year
Other comprehensive income
Total comprehensive income
for the year
-
54,085
-
54,085
- -
4,436
4,436
-
54,085
4,436
58,521
Transactions with owners in their capacity as owners:
Issue of securities:
- on employee share purchase plan 11 a)
- on exercise of MFG 2016 Options 11 a)
Dividends paid 4
765
292
-
- -
765
- -
(12,219)
292
(12,219)
(54,749)
-
-
In-specie distribution 4,11 a)
(40,772)
(13,977)
SPP expense for the year 11 a)
Total transactions with equity holders in their
capacity as equity owners
698
- -
698
(39,017)
(26,196)
- (65,213)
Equity - 30 June 2013
76,753
34,129
20,510 131,392
2012
Equity - 30 June 2011
114,904
6,712
4,653 126,269
Net profit for the year
Other comprehensive income
Total comprehensive income
for the year
-
4,094
-
4,094
- -
11,421
11,421
-
4,094
11,421
15,515
Transactions with owners in their capacity as owners:
Issue of securities - employee SPP 11 a)
Dividends paid 4
SPP expense for the year 11 a)
Total transactions with equity holders in their
capacity as equity owners
578
-
288
-
(4,566)
-
866
(4,566)
-
-
-
-
578
(4,566)
288
(3,700)
Equity - 30 June 2012
115,770
6,240
16,074 138,084
The Consolidated Statement of Changes in Equity is to be read in conjunction with the accompanying notes
to the Financial Statements.
32
MAGELLAN FINANCIAL GROUP LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2013
Note
Consolidated
2012
$ ’000
2013
$ ’000
Company
2013
$ ’000
2012
$ ’000
Cash flows from operating activities
Management and consulting fees received
Performance fees received
Interest received
Proceeds from sale of held for trading financial assets
Other income received
Dividends and distributions received
Tax paid
Payments to suppliers and employees (inclusive of GST)
Net cash inflows/(outflows) from operating
activities
49,616
10,999
1,947
23
-
952
(11,583)
(20,701)
21,922
4,964
2,191
209
-
1,195
(3,125)
(13,945)
-
-
1,161
23
15
952
(11,583)
(592)
-
-
1,268
209
-
1,195
(3,125)
(272)
15 a)
31,253
13,411
(10,024)
(725)
Cash flows from investing activities
Proceeds from sale of available-for-sale financial assets
Payments for available-for-sale financial assets
Net matured term deposits classified as loans and
receivables
Proceeds from sale of held to maturity financial assets
Net cash flows from foreign exchange transactions
Payments for property, plant and equipment
Dividend received from controlled entities 14 c)iii)
Net cash inflows/(outflows) from investing
activities
9 i)
11,312
(14,541)
34
(11,336)
11,312
(14,541)
34
(11,335)
15,754
-
(11)
(173)
-
(3,469)
352
(2)
(144)
-
3,352
-
(11)
-
31,274
4,364
352
(2)
-
2,400
12,341
(14,565)
31,386
(4,187)
Cash flows from financing activities
Proceeds from issue of securities
Payments received from controlled entities
Proceeds from repayment of SPP loan
Dividends paid
Net cash inflows/(outflows) from financing
activities
14 c)ii)
4
501
-
3,698
(12,219)
4,137
-
1,010
(4,566)
501
12,716
3,698
(12,219)
4,137
4,090
1,010
(4,566)
(8,020)
581
4,696
4,671
Net increase/(decrease) in cash and cash
equivalents
Effects of exchange rates on cash and cash equivalents
Cash and cash equivalents at the beginning of year
Cash and cash equivalents at the end of year
35,574
1,470
1,052
38,096
(573)
-
1,625
1,052
26,058
788
454
27,300
(241)
-
695
454
15
The Consolidated Statement of Cash Flows is to be read in conjunction with the accompanying notes to the
Financial Statements.
33
MAGELLAN FINANCIAL GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013
1.
Summary of Significant Accounting Policies
This financial report is for Magellan Financial Group Limited (the “Company”) and its controlled
entities (the “Group”) for the year ended 30 June 2013. The report was authorised for issue in
accordance with a resolution of the directors on 16 August 2013.
The principal accounting policies adopted in the preparation of this financial report are set out
below. These policies have been consistently applied to all the years presented, unless otherwise
stated.
(a) Basis of Preparation
This financial report is a general purpose financial report which is presented in Australian dollars
and has been prepared in accordance with the Corporations Act 2001, Australian Accounting
Standards and Interpretations issued by the Australian Accounting Standards Board and other
mandatory professional reporting requirements. The Company is a for-profit entity for the purpose
of preparing this financial report.
Compliance with IFRS
The financial report complies with Australian Accounting Standards (AASB) and International
Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board.
Historical cost convention
This financial report has been prepared on a going concern basis and under the historical cost
convention except for assets and liabilities which are measured at fair value.
New accounting standards
During the year, the Group and Company applied AASB 2011-9: Amendments to Australian
Accounting Standards – Presentation of Items of Other Comprehensive Income. This amended
AASB 101 Presentation of Financial Statements and required items in other comprehensive income
to be presented in two groups, based on whether they may be recycled to profit or loss in the
future. This has not affected the measurement of any of the items recognised in the statement of
comprehensive income. None of the other new standards or amendments to standards that are
mandatory for the first time in this financial report affected any of the amounts recognised or the
disclosures in the current or prior year.
New accounting standards issued but not yet adopted
The following accounting standards and interpretations issued or amended but not yet mandatory
have not been adopted by the Company in the preparation of this financial report. The impact of
these standards, along with the effective date, is set out below:
AASB 119: Employee Benefits and AASB 2011-10 Amendments to Australian
Accounting Standards arising from AASB 119 (effective 1 July 2013)
AASB 119 Employee Benefits revised the definition of short-term and long-term employee
benefits and now requires all employee benefits to be calculated and classified based on
when the employee benefit is expected to be taken rather than when it vests. Discounting
will apply to all benefits classified as long-term. During the year the Group assessed this
standard and determined it will have no material impact on the Group or Company’s
financial performance or financial position as at 30 June 2013.
34
MAGELLAN FINANCIAL GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013
1.
Summary of Significant Accounting Policies (continued)
(a) Basis of Preparation (continued)
AASB 2012-5: Amendments to Australian Accounting Standards – Mandatory
Effective Date of AASB 9 and Transition Disclosures (effective 1 July 2013)
AASB 2012-5 comprises minor amendments to AASB 1, 101, 116, 132 and 134 and no
impact on the Group or Company’s financial performance or financial position is expected
once these amendments are applied.
AASB 2012-2: Amendments to Australian Accounting Standards – Disclosures –
Offsetting Financial Assets and Financial Liabilities and AASB 2012-3
Amendments to Australian Accounting Standards – Offsetting Financial Assets
and Financial Liabilities (effective 1 July 2014)
AASB 2012-2 and AASB 2012-3 amends AASB 7 Financial Instruments: Disclosures and
AASB 132 Financial Instruments: Presentation by revising and clarifying the criteria where
financial assets and liabilities can be offset in the financial statements. As at 30 June 2013,
neither the Group nor the Company has any offsetting arrangements and as a result no
additional disclosures or material impact on the financial performance or financial position
is expected on adoption of the amendments.
AASB 9: Financial Instruments and AASB 2012-6: Amendments to Australian
Accounting Standards – Mandatory Effective Date of AASB 9 and Transition
Disclosures (effective 1 July 2015)
AASB 9 contains new requirements for classification, measurement and de-recognition of
financial assets and liabilities, replacing the recognition and measurement requirements in
AASB 139 Financial Instruments: Recognition and Measurement. Under the new
requirements the four current categories of financial assets discussed at note 1(i) will be
replaced with two measurement categories: fair value and amortised cost. Financial assets
will only be able to be measured at amortised cost where very specific conditions are met.
At 30 June 2013, no significant impact is expected on adoption of this standard as the
Group and Company currently classify its financial assets and financial liabilities at either
fair value or amortised cost and the carrying value of investments measured at amortised
cost approximates fair value. However the Group continues to evaluate the disclosure
requirements of this standard.
AASB 13: Fair Value Measurement and AASB 2011-8: Amendments to Australian
Accounting Standards arising from AASB 13 (effective 1 July 2013)
AASB 13 establishes a single source of guidance for determining the fair value of assets
and liabilities. AASB 13 does not change when the Group or Company is required to use fair
value but, rather, provides guidance on how to determine fair value when fair value is
required or permitted, and expands the disclosure requirements for assets and liabilities
carried at fair value. During the year, the Company has undertaken an assessment of all
assets and liabilities and determined only cash and cash equivalents are held at fair value.
No impact is expected on the Company’s financial performance or financial position nor are
additional disclosures required upon adoption of this Standard as the necessary fair value
disclosure is currently provided under AASB 7 for these assets.
35
MAGELLAN FINANCIAL GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013
1.
Summary of Significant Accounting Policies (continued)
(a) Basis of Preparation (continued)
AASB 10: Consolidated Financial Statements, AASB 11: Joint Arrangements,
AASB 12: Disclosure of Interests in Other Entities, AASB 127: Separate Financial
Statements, AASB 128 Investments in Associates and Joint Ventures, AASB
2011-7 Amendments to Australia Accounting Standards arising from the
Consolidation and Joint Arrangements Standards (effective 1 July 2013)
AASB 10 replaces all guidance on control and consolidation in AASB 127 Consolidated and
Separate Financial Statements, and Interpretation 12 Consolidation – Special Purpose
Entities. AASB 10 establishes a new control model and broadens the situations when an
entity is considered to be controlled by another entity as it focuses on the need to have
both power and rights or exposure to variable returns. Control generally exists when the
investor can use its power to affect the amount of its returns. AASB 11 replaces AASB 131
Interests in Joint Ventures and uses the principle of control in AASB 10. During the year,
the Company has undertaken an assessment of its investments and does not anticipate
AASB 10 or AASB 11 will have a significant impact on its composition.
In addition to the above, an amendment to IFRS 10 was issued on October 2012 which
provides an exemption from consolidating controlled investments where the Company
meets the definition of an Investment Entity. This permits the Investment Entity to
measure its controlled investments in funds at fair value through the profit and loss rather
than consolidating investments on a line-by-line basis. An ‘investment entity’ is defined as
an entity whose business purpose is to invest funds solely for returns from capital
appreciation and/or investment income. This amendment was released on 14 August 2013
and the Company will shortly assess whether it qualifies as an Investment Entity.
AASB 12 requires disclosures relating to the Group and Company’s interests in subsidiaries,
joint arrangements, associates and structured entities. It introduces new disclosures about
the judgements made by management to determine whether control exists and requires
summarised information about joint arrangements, associates and structured entities and
subsidiaries with non-controlling interests. It is not expected that the new standard will
have a significant impact on the type of information disclosed in relation to the Group and
Company’s investments.
(b) Principles of consolidation
The consolidated financial report comprises the assets and liabilities of all controlled entities and
the results of all controlled entities for the year. The Company and its controlled entities are
collectively referred to in this financial report as the Group or the consolidated entity.
Controlled entities
i)
Controlled entities (which are listed at note 14 b)) are entities over which the Group has the power
to govern the financial and operating policies, generally accompanying a shareholding or more
than one-half of the voting rights. The existence and effect of potential voting rights that are
currently exercisable or convertible are considered when assessing whether the Group controls
another entity. Controlled entities are fully consolidated from the date control commenced and de-
consolidated from the date that control ceased.
36
MAGELLAN FINANCIAL GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013
1.
Summary of Significant Accounting Policies (continued)
(b) Principles of consolidation (continued)
i)
Controlled entities (continued)
All inter-entity balances and transactions between entities in the Group, including unrealised profits
or losses, have been eliminated in full on consolidation.
Investments in Associates
ii)
Investments in associates are accounted for using the equity method of accounting in the
consolidated financial statements. 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.
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.
(c) 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. 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. Acquisition 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.
37
MAGELLAN FINANCIAL GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013
1.
Summary of Significant Accounting Policies (continued)
(d) 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. The chief operating decision maker has been determined as the
Chief Executive Officer, Mr Hamish Douglass.
(e) Foreign Currency Translation
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 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 Reuters London 4pm
exchange rates at balance date. The fair values of financial assets are determined using the
Reuters London 4pm exchange rates at balance date. Foreign currency exchange differences
relating to financial assets are included in net changes in fair value in the Statement of
Comprehensive Income. All other foreign currency exchange differences are presented separately
in the Statement of Comprehensive Income as net gains/losses on foreign exchange.
(f) Revenue Recognition
Management, Administration and Performance Fees
Management and administration fees arise from providing:
investment management services as investment manager and sub-advisor to the funds and
external wholesale client mandates set out at note 6; and
Trustee and Responsible Entity services where the Company acts as Trustee and Responsible
Entity to the funds as set out in note 6.
Management fee revenue, which is based on a percentage of the portfolio value, is recognised in
the Statement of Comprehensive Income as it is earned and calculated in accordance with the
Investment Management Agreements and Constitutions of the funds as set out in note 6.
The Group may earn performance fees from its retail funds and from some institutional mandates.
Where a performance fee is applicable to an institutional client mandate, the base management
fee will generally be lower than earned from mandates where no performance fee applies. The
Group’s entitlement to performance fees for any given performance period is dependent on it
outperforming certain hurdles, which may be index relative hurdles, return hurdles or a
combination of both. Performance fees are generally subject to either a high water mark
arrangement or a deficit clause, which ensures that fees are not earned more than once on the
same performance.
Performance fees are recognised in the Statement of Comprehensive Income only when the
Group’s entitlement to the fee becomes certain, which is at the end of the relevant performance
period. Performance periods for the Group’s performance fee arrangements range from three
months to three years.
Refer to note 6 for further details on the management, administration fees and performance fees.
38
MAGELLAN FINANCIAL GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013
1.
Summary of Significant Accounting Policies (continued)
(f) Revenue Recognition (continued)
Consulting Fees
Consulting fee income is recognised when the Group is entitled to it, which is determined by the
terms and conditions of the contractual arrangement.
Interest Income
Interest income is recognised on an accruals basis using the effective interest rate method.
Dividend/Distribution Income
Dividend/distribution income is recognised on the applicable ex-dividend date.
Net gain/loss on sale
The gain or loss on disposal of assets is calculated as the difference between the carrying amount
of the asset at the date of disposal and the net proceeds from disposal and is included in the
Statement of Comprehensive Income in the year of disposal.
If revenue is not received at balance date, it is included in the Statement of Financial Position as a
receivable and carried at amortised cost.
Expenses
(g)
Expenses are recognised in the Statement of Comprehensive Income on an accruals basis.
Directors’ fees (including superannuation) and related employment taxes are included as an
expense in the Statement of Comprehensive Income as incurred. Information regarding the
Directors’ remuneration is included in note 14 d)v).
Income Tax
(h)
The income tax expense/benefit is the tax payable/receivable on the current year’s taxable income
based on the current income tax rate adjusted by changes in deferred tax assets and liabilities
attributable to temporary differences between the tax bases of assets and liabilities and their
carrying amounts in the financial statements, and to unused tax losses. Taxable profit differs from
net profit as reported in the Statement of Comprehensive Income as items of income or expense
are taxable or deductible in years other than the current year and in addition some items are
never taxable or deductible.
Deferred tax assets and liabilities are recognised for all deductible temporary differences and
unused tax losses carried forward to the extent that it is probable that future taxable amounts will
be available against which the deductible temporary differences and the carry-forward of unused
tax credits and unused tax losses can be utilised.
The carrying amount of deferred income tax assets is reviewed at each reporting date and
recognised only to the extent that it is probable that future taxable profits will be available against
which the asset can be utilised. Unrecognised deferred income tax assets are reassessed at each
reporting date and are recognised only to the extent that it is probable that future taxable profits
will allow the deferred tax asset to be recovered.
Current tax and deferred tax assets and liabilities are measured at the tax rates that are expected
to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax
laws) that have been enacted or substantively enacted by the end of balance date.
39
MAGELLAN FINANCIAL GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013
1.
Summary of Significant Accounting Policies (continued)
(h)
Income Tax (continued)
Tax Consolidation - Australia
Magellan Financial Group Limited (MFG) and its wholly owned Australian controlled entities formed
a tax consolidated group for the purpose the tax consolidation legislation, which it formed on 1
July 2007. MFG is the head entity of the tax consolidated group.
Under the tax consolidation legislation, the head entity and each controlled entity continues to
account for its own current and deferred tax amounts. These tax amounts are measured as if each
entity in the tax consolidated group continues to be a standalone taxpayer in its own right. In
addition, MFG also recognised the 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.
On forming a the tax consolidation group, each entity in the tax consolidated group entered into a
tax sharing agreement, which limits the joint and several liability of the wholly owned entities in
the case of a default of the head entity, MFG. The Company has also entered into a tax funding
agreement under which the wholly owned entities fully compensate MFG for any current tax
payable assumed and are compensated by MFG for any current tax receivable and deferred tax
assets relating to unused tax losses or unused tax credits that are transferred to MFG under the
tax consolidation legislation. The funding amount is determined by reference to the amounts
recognised in the financial report. Assets and liabilities arising under the tax funding agreement
with the tax consolidated entities are recognised as related party receivables or payables and
these amounts are due upon demand from MFG.
MFG may also require payment of interim funding amounts to assist with its obligations to pay tax
instalments and the funding amounts are also recognised as related party receivables or payables.
Any difference between the amounts assumed and amounts receivable or payable under the tax
funding agreement are recognised as a contribution to (or distribution from) wholly owned tax
consolidated entities.
(i) Goods and Services Tax (GST)
Revenue, expenses and assets (with the exception of receivables) are recognised net of the
amount of GST, except when GST incurred on a purchase of goods and services is not recoverable
from the taxation authority, in which case the GST is recognised as part of the cost of that
purchase or as an expense. Receivables and payables are stated inclusive of GST. The net amount
of GST recoverable from, or payable to, the taxation authority is included in the Statement of
Financial Position as receivable or payable.
Cashflows are included in the Statement of Cashflows on a gross basis. The GST component of
cash flows arising from financing activities which are recoverable from, or payable to the taxation
authority, are presented as operating cash flows.
40
MAGELLAN FINANCIAL GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013
1.
Summary of Significant Accounting Policies (continued)
Financial Assets and Liabilities
(j)
The Group classifies its financial assets in the following categories: financial assets at fair value
through profit or loss, loans and receivables, held-to-maturity investments and available-for-sale
financial assets. The classification depends on the purpose for which financial assets were
acquired. Designation is re-evaluated at each financial year end, but there are restrictions on
reclassifying to other categories. Financial liabilities are classified as financial liabilities at amortised
cost. Classification of financial assets and liabilities depends on the purpose for which the assets
and liabilities were acquired. The Group’s classifications are set out below:
Financial
asset/liability
Cash
Receivables
Financial assets
Loans to
controlled entity
Payables
Classification
Fair value through profit or loss
Loans and receivables
Loans and receivables
Available-for-sale
Held for trading
Available-for-sale
Valuation
basis
Fair value
Amortised cost
Amortised cost
Fair value
Fair value
Fair value
Refer to note 1(k)
Refer to note 1(l)
Refer to note 1(n)
Refer to note 1(n)
Refer to note 1(n)
Refer to note 1(n)(i)
Financial liability at amortised cost
Amortised cost
Refer to note 1(q)
Derecognition of Financial Assets and Liabilities
Financial assets and financial liabilities are derecognised when the Group no longer controls the
contractual rights that comprise the financial instrument which is normally the case when the
instrument is sold.
(k) Cash and Cash Equivalents
Cash includes cash at bank and deposits. 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. Term deposits with a term of 90 days or less from the date
of inception are classified as cash equivalents. Refer also to note 1(n)(iii).
Receivables
(l)
Receivables are initially recognised at fair value and subsequently measured at amortised cost
using the effective interest method less any allowance for uncollectible amounts. In the case of the
Group this is the original invoice amount rendered for management, administration and
performance fees, less a provision for any uncollected debt. Collectability of receivables is
reviewed on an ongoing basis, and bad debts are written off by reducing the amount of the
receivable in the Statement of Financial Position. A specific provision is made for doubtful debts
where evidence exists that the amount will not be collected.
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.
41
MAGELLAN FINANCIAL GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013
1.
Summary of Significant Accounting Policies (continued)
(m) Derivatives
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 recognised as assets when their fair value is positive and as liabilities
when their fair value is negative.
(n) Financial Assets
The Company’s financial assets comprise and are classified as follows:
Type
of
Financial asset
Listed shares
Subordinated
bank notes
Unlisted funds
Unlisted shares
Term deposits
Classification
Valuation basis
Available-for-sale
Available-for-sale
Fair value
Fair value
Refer to note 1(n)(i)
Refer to note 1(n)(i)
Available-for-sale
Available-for-sale
Loans and receivable
Fair value
Fair value
Amortised cost
Refer to note 1(n)(i)
Refer to note 1(n)(i)
Refer to note 1(n)(iii)
Held-for-Trading Financial Assets are short-term trading securities which are carried at fair value.
Changes in fair value are recognised in the Statement of Comprehensive Income.
Available-for-sale Financial Assets
i)
Available-for-sale financial assets are non-derivatives that are either designed in the financial asset
category or not classified in any other financial asset category. Investments are designated as
available-for-sale financial assets if they do not have fixed maturities, fixed or determinable
payments and management intends to hold them for the medium-to-long term. These
investments are carried at fair value. Loans to/from controlled entities and investments in
controlled entities are also classified as available-for-sale financial assets. Changes in the fair
value of available-for-sale financial assets are recognised in the available-for-sale reserve in the
Statement of the Financial Position and included in other comprehensive income until the
investment is disposed or impaired. When available-for-sale financial assets are sold or impaired,
cumulative gains recognised in the available-for-sale reserve are recognised in the statement of
comprehensive income. Cumulative losses are recognised in the available-for-sale reserve to the
extent that they reverse previously recorded gains, and when previously recorded gains have been
reversed in full, any impairment loss below original cost (when significant and prolonged) is
recognised in the Statement of Comprehensive Income.
In assessing whether an available-for-sale 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.
Available-for-sale financial assets are classified as non-current assets unless management intends
to dispose of the investments within 12 months of balance date.
42
MAGELLAN FINANCIAL GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013
1.
Summary of Significant Accounting Policies (continued)
(n)
Financial Assets (continued)
Purchases and Sales of Financial Assets
ii)
All purchases and sales of financial assets are recognised on the trade date, being the date that
the Group or Company commits to purchase or sell the asset. Purchases or sales of financial assets
are purchases or sales under contracts that require delivery of the assets or settlement within the
period generally established by regulation or convention in the market place. Payments and
receipts relating to the purchase and sale of investment securities are classified as cash flows from
operating activities, as movements in the fair value of these securities represent the Company’s
main income generating activity.
(iii) Loans and Receivable
Term deposits with a term greater than 90 days from the date of inception are classified as loans
and receivables. The deposits are initially recognised at fair value and then carried at amortised
cost using the effective interest rate method. They are classified as current assets where the term
to maturity from balance date is less than 12 months and non-current assets where the term to
maturity is greater than 12 months. Changes in the fair value of investments are recognised in the
Statement of Comprehensive Income. When investments are disposed, the net gain and loss on
sale is recognised in the Statement of Comprehensive Income on the date of sale.
Impairment of Assets
(o)
All non-financial assets are reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable. Where an indicator or objective
evidence of impairment exists, an estimate of the asset’s recoverable amount is made. An
impairment loss is recognised in the Statement of Comprehensive Income for the amount by which
the asset’s carrying amount exceeds its recoverable amount. Recoverable amount is the higher of
an asset’s fair value less costs to sell and value in use.
Property, Plant and Equipment
(p)
Property, plant and equipment is stated at historical cost less accumulated depreciation and
impairment. Historical cost includes expenditure that is directly attributable to its acquisition.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset.
Depreciation and Amortisation
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
The assets’ residual values and useful lives are reviewed at each balance date. An asset’s carrying
amount is written down to recoverable amount where an indicator of impairment or objective
evidence exists. An impairment loss is recognised in the Statement of Comprehensive Income
where the asset’s carrying amount is greater than its estimated 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. Gains and losses on disposals are determined by
comparing proceeds with the carrying amount. These are included in the Statement of
Comprehensive Income.
43
MAGELLAN FINANCIAL GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013
1.
Summary of Significant Accounting Policies (continued)
Payables
(q)
Payables comprise trade creditors and accrued expenses owing by the Group at balance date
which are unpaid. Trade creditors represent liabilities for goods and services received by the Group
prior to the end of the year end that remain unpaid at balance date. They are unsecured and
usually paid within 30 days of recognition. Payables are recognised at amortised cost at the point
where the Group becomes obliged to make payments in respect of the purchase of these goods
and services.
A dividend payable to shareholders of the Group is recognised for the amount of any dividend
declared, determined or publicly recommended by the Directors on or before balance date but not
paid at balance date.
Employee Expenses and Entitlements
(r)
Wages, Salaries, Annual Leave and Long Service Leave
Liabilities for wages and salaries (including non-monetary benefits) and annual leave are
recognised in payables within accrued employee entitlements and are measured at the amounts to
be expected to be paid when the liabilities are settled.
The employee entitlement liability expected to be settled within 12 months from balance date is
recognised in current liabilities. Liabilities for non-accumulating sick leave are recognised when the
leave is taken and measured at the rates paid or payable. Employee benefit on-costs are included
in accrued employee entitlements in the Statement of Financial Position and employee costs in the
Statement of Comprehensive Income when the employee entitlements to which they relate are
recognised in liabilities.
Long Service Leave
Liabilities for long service leave are recognised when employees reach a qualifying period of
continuous service and are measured at the amount expected to be settled within 12 months from
balance date. Any amount which is expected to be payable after 12 months from balance date is
classified as a non-current liability and measured as the present value of expected future
payments. Consideration is given to expected future wage and salary levels, experience of
employee departures and periods of service and discounted using market yields at balance date on
national government bonds with terms to maturity that match, a closely as possible, the estimated
future cash outflows.
Bonus Plan
A liability and an expense for bonuses are recognised where the Group is contractually obliged or
where there is past practice that has created a constructive obligation.
(s) Share Purchase Plan
The Company has in place a Share Purchase Plan (SPP) for employees and Non-executive
Directors (‘Participants’) to purchase shares in the Company (see Directors Report – Remuneration
Report – Share Purchase Plan). The Company provides financial assistance to Participants, by way
of an interest free loan. Loans to Participants are initially recognised at fair value, which is
determined by discounting loans to their net present value using the risk-free 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
44
MAGELLAN FINANCIAL GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013
1.
Summary of Significant Accounting Policies (continued)
(s) Share Purchase Plan (continued)
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 are provided in note 12.
Leases
(t)
Leases where the lessor retains substantially all the risks and benefits of ownership of the asset
are classified as operating leases. Net rental payments for operating leases are recognised as an
expense in the Statement of Comprehensive Income on a straight-line basis over the period of the
lease.
(u) Contributed Equity
The Group’s ordinary shares, MFG 2016 Options and Class B Shares are classified as equity and
recognised at the value of consideration received by the Group. Incremental costs directly
attributable to the issue of new shares are recognised in equity as a deduction, net of tax.
(v) Earnings Per Share
Basic earnings per share is calculated as net profit/(loss) after income tax expense for the year
divided by the weighted average number of ordinary shares on issue. Diluted earnings per share is
calculated by adjusting the basic earnings per share to take into account the effect of any costs
associated with dilutive potential ordinary shares and the weighted average number of additional
ordinary units that would have been outstanding assuming the conversion of all dilutive potential
ordinary shares. Refer to note 3 for further details.
(w) Rounding of Amounts
The Group is of a kind referred to in the Australian Securities & Investments Commission’s Class
Order 98/0100 (as amended) and amounts in the financial statements have been rounded off to
the nearest thousand dollars in accordance with that Class Order, or in certain cases, the nearest
dollar.
(x) Critical Accounting Estimates and Judgements
The preparation of the financial statements requires the Directors to make judgements, estimates
and assumptions that affect the amounts reported in the financial statements. The Directors base
their judgements and estimates on historical experience and various other factors they believe to
be reasonable under the circumstances, but which are inherently uncertain and unpredictable, the
result of which forms the basis of the carrying values of assets and liabilities. As such, actual
results could differ from those estimates. The
The main area where a higher degree of judgement or complexity arises or areas where
assumptions and estimates are significant to the Group and Company’s financial statements is the
valuation of unlisted investments. The valuation techniques used, which involves estimates, are
discussed in detail at note 8. Apart from the above, none of the other Group and Company’s assets
and liabilities are subject to significant judgment or complexity primarily due to the timing of when
revenues or expenses are accrued and recognised.
45
MAGELLAN FINANCIAL GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013
2.
Segment Information
The Group’s business activities are organised into the following reportable operating segments for
internal management purposes:
Funds Management
The funds management activities of the Company, which are undertaken by the controlled entity,
Magellan Asset Management Limited (MAM), comprise acting as:
Trustee, Responsible Entity and Investment Manager for the following managed investment
schemes offered primarily to Australian and New Zealand investors:
o Magellan Global Fund
o Magellan Global Fund (Hedged)
o Magellan Infrastructure Fund
o Magellan Infrastructure Fund (Unhedged); and
o Magellan High Conviction Fund (the Unlisted Funds)
Trustee and Investment Manager for the Magellan Core Infrastructure Fund (MCIF), which is
an unregistered managed investment scheme offered to Australian wholesale investors;
Investment Manager for the Magellan Flagship Fund Limited (the Flagship Fund), a listed
investment company;
Subadviser to the Frontegra MFG Global Equity Fund and the Frontegra MFG Core
Infrastructure Fund, which are offered to US wholesale investors; and
Investment Manager or Subadviser to other external wholesale client mandates.
Principal Investments
The principal investment portfolio is comprised of investments in the Unlisted Funds, the Frontegra
MFG Funds and in a select portfolio of Australian and international listed companies, cash and
fixed interest securities, other investments, and any net deferred tax assets/liabilities arising from
changes in fair value of financial assets and net capital losses carried forward.
Unallocated - Corporate
This includes interest income on employees and Non-executive Directors’ Share Purchase Plan
(SPP) loans, costs associated with the Board, ASX listing, audit and regulatory compliance activities
of the Group and tax payable at the corporate level. All current tax liabilities and deferred tax
assets/liabilities excluding those arising from changes in the fair value of financial assets and net
capital losses carried forward.
46
MAGELLAN FINANCIAL GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013
2.
Segment Information (continued)
Segment financial results
(i)
The operating results of the Group’s segments are as follows:
2013
Revenue
Management fees
Performance fees
Consulting fees
Dividend income
Other revenue
Interest income
Net changes in fair value of financial assets
Net gain/(loss) on disposal of financial assets
Net foreign exchange gain/(loss)
Expense
Employee benefits expense
Employee benefits expense - SPP
Other expenses
Operating profit before income tax
2012
Revenue
Management fees
Performance fees
Consulting fees
Dividend income
Other revenue
Interest income
Net changes in fair value of financial assets
Net gain/(loss) on disposal of financial
assets
Net foreign exchange gain/(loss)
Expense
Employee benefits expense
Employee benefits expense - SPP
Other expenses
Operating profit before income tax
Funds
Management
$ ’000
Principal
Investments
$ ’000
Unallocated
- Corporate
$ ’000
Consolidated
$ ’000
-
-
-
2,308
15
1,492
3,698
24,805
1,459
33,777
-
-
-
-
33,777
-
-
-
1,145
-
1,539
34
(7)
(2)
2,709
-
-
-
-
2,709
-
-
-
-
-
1,148
-
-
-
1,148
52
29
615
696
452
-
-
-
-
477
-
-
-
477
50
29
253
332
145
56,007
28,449
1,200
2,308
15
2,965
3,698
24,805
1,459
120,906
16,811
698
8,395
25,904
95,002
21,976
9,066
1,218
1,145
4
2,412
34
(7)
(2)
35,846
11,169
288
5,236
16,693
19,153
56,007
28,449
1,200
-
-
325
-
-
-
85,981
16,759
669
7,780
25,208
60,773
21,976
9,066
1,218
-
4
396
-
-
-
32,660
11,119
259
4,983
16,361
16,299
47
MAGELLAN FINANCIAL GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013
2.
i)
Segment Information (continued)
Segment financial results (continued)
Other comprehensive income before tax expense of the Group’s segments are as follows:
Funds
Management
Principal
Investments
Unallocated
- Corporate
Consolidated
$ ’000
$ ’000
$ ’000
$ ’000
30 June 2013
Net loss on sale of available-for-sale financial assets
recycled through profit or loss
Changes in the fair value of available-for-sale
financial assets
30 June 2012
Net gain on sale of available-for-sale financial assets
recycled through profit or loss
Changes in the fair value of available for sale
financial assets
-
-
-
-
(24,805)
31,093
7
16,313
-
-
-
-
(24,805)
31,093
7
16,313
The Group’s net investment into its funds management business activities as at 30 June 2013:
Capital invested in controlled entity
Subordinated loan to controlled entity(A)
Consolidated
2013
$ ’000
12,500
1,150
2012
$ ’000
12,500
1,150
13,650
13,650
(A) On 26 July 2013, ASIC consented to the repayment of the $1,150,000 subordinated loan. The
Company has since repaid this amount on 2 August 2013 (refer note 14c)i) for details).
48
MAGELLAN FINANCIAL GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013
2.
Segment Information (continued)
Segment Assets and Liabilities
ii)
The assets and liabilities of the Group’s segments are as follows:
Funds
Management
(B)
Principal
Investments
Unallocated
– Corporate
Elimination
(A)
Consolidated
$ ’000
$ ’000
$ ’000
$ ’000
$ ’000
2013
Cash and cash equivalents
Financial assets
Loans – SPP
Other assets
Total assets
Other liabilities
Total liabilities
Net assets
2012
Cash and cash equivalents
Financial assets
Loans – SPP
Other assets
Total assets
Other liabilities
Total liabilities
Net assets
5,000
5,000
-
34,475
44,475
8,928
8,928
35,547
557
7,500
-
9,164
17,221
4,418
4,418
12,803
33,096
110,173
-
1,328
-
-
4,324
10,357
-
-
-
(10,312)
144,597
14,681
(10,312)
16,727
16,727
25,059
(10,312)
25,059
(10,312)
127,870
(10,378)
495
130,660
-
909
132,064
935
935
131,129
-
-
6,319
3,331
9,648
6,366
6,366
3,284
-
-
-
-
(3,130)
(3,130)
(3,130)
(3,130)
38,096
115,173
4,324
35,848
193,441
40,402
40,402
153,039
1,052
138,160
6,319
10,274
155,805
8,589
8,589
-
147,216
(A) Eliminations include adjustments and eliminations for inter-segment transactions and netting of items on the
Statement of Financial Position.
(B) Funds management maintain a minimum of $5,000,000 in cash and cash equivalents, and a minimum of $10,000,000 in
liquid assets (including cash and cash equivalents) to meet regulatory and operating requirements.
49
MAGELLAN FINANCIAL GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013
3.
Earnings per Share (EPS)
Basic earnings per share
Net profit attributable to shareholders ($’000)
Weighted average number of securities for basic EPS (‘000)
Basic earnings per share (cents)
Diluted earnings per share
Net profit attributable to shareholders ($’000)
Weighted average number of shares for diluted EPS (‘000)
Diluted earnings per share (cents)
Weighted average number of securities
The reconciliation of the weighted average number of securities on a
fully diluted basis used to calculate diluted EPS is below:
Consolidated
2013
2012
66,600
152,624
43.6
13,660
152,393
9.0
66,600
166,409
40.0
13,660
161,537
8.5
Weighted average number of securities on issue used in calculating
basic EPS (‘000)
Add adjustments:
- equivalent number of unexercised MFG 2016 Options(A)
- equivalent number of Class B shares(B)
Weighted average number of securities used in calculating
diluted EPS (‘000)
152,624
152,393
3,943
9,842
-
9,144
166,409
161,537
(A) The MFG 2016 Options (refer to note 11 b)) are considered to be potential ordinary shares for the purposes of the
diluted earnings per share calculation and have been included in the determination of diluted earnings per share to the
extent they are dilutive. For the year ended 30 June 2013, the MFG share price was below the MFG 2016 Options
exercise price.
(B) The Class B Shares (refer to note 11 c)) are considered to be potential ordinary shares for the purposes of the
diluted earnings per share calculation and have been included in the determination of diluted earnings per share to the
extent they are dilutive. The equivalent number of Class B Shares for the purposes of calculating the diluted earnings per
share has been determined as the weighted average number of ordinary shares that the Class B Shares would convert to
assuming the 7,882,483 MFG 2016 Options had been exercised at 1 July 2012, and applying a conversion factor of 0.06
up to 19 February 2013, the date of the in-specie distribution to shareholders, and a conversion factor of 0.0637028
after that date.
50
MAGELLAN FINANCIAL GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013
4.
Dividends/Distributions paid and payable
Consolidated
Note
Declared and paid during the year
i)
Fully franked interim dividend - 5.0 cents per ordinary share:
paid 10 April 2013
Fully franked final dividend - 3.0 cents per ordinary share:
paid 19 October 2012
Fully franked interim dividend - 1.5 cents per ordinary share:
paid 18 April 2012
Fully franked final dividend - 1.5 cents per ordinary share:
paid 18 October 2011
Total dividends paid during the year
2013
$’000
2012
$’000
7,635
4,584
-
-
-
2,288
-
12,219
2,278
4,566
In-specie distribution
Fully franked dividend component of in-specie distribution -
9.16 cents per ordinary share: paid 19 February 2013 4 iii),15 b)
Total dividends and in specie distributions
13,977
26,196
-
4,566
Dividend proposed
ii)
Since the end of the year, the Directors have declared a final fully franked dividend of 16.5 cents
per ordinary share in respect of the year ended 30 June 2013 (June 2012: 3.0 cents per share),
which represents approximately $25,209,000.
In-specie distribution
iii)
On 14 December 2012, the Company announced an in-specie distribution to MFG shareholders
which involved distributing MFG’s holdings of shares and options in Magellan Flagship Fund Limited
(MFF). This distribution, which was approved by shareholders at an extraordinary general meeting
on 5 February 2013, involved distributing 50,109,307 MFF shares and 16,627,507 MFF options,
approximately 3.29 MFF shares and 1.09 MFF options for every 10 MFG ordinary shares held by
shareholders on the record date of 13 February 2013. The distribution was completed on 19
February 2013. The capital reduction amount was approximately $54,749,000 equating to $0.3589
per MFG ordinary share, which was determined using the average of the volume weighted average
price (VWAP) for MFF shares of $1.0176 and MFF options of $0.2210 for the five trading days
immediately preceding the distribution date. The in-specie distribution of the MFF shares and MFF
options to MFG shareholders resulted in a realised gain of approximately $25,778,000 before
income tax.
Imputation credits
iv)
The balance of the imputation credit account at the end of the year adjusted for imputation credits
that will arise from the payment of the amount of the provision for income tax and from the
receipt of dividends recognised as receivables at balance date.
Imputation credits available for subsequent reporting
periods based on a tax rate of 30% (2012 – 30%)
2013
$’000
2012
$’000
19,578
6,611
51
MAGELLAN FINANCIAL GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013
5.
Income Tax
a) Income tax expense recognised during the year
through profit or loss:
Current income tax expense
Over/(under) provision of prior year tax
Deferred income tax expense from:
- origination and reversal of temporary differences
b) Income tax expense on items recognised in
other comprehensive income:
- changes in fair value of available-for-sale financial
assets
- sale of available-for-sale financial assets
c) Income tax attributable to the financial year
differs from the prima facie amount payable on
operating profit. The difference is reconciled as
follows
Operating profit before income tax expense
Prima facie income tax (expense) on net profit - 30%
Over/(under) provision of prior year tax
Share purchase plan
Tax effect of franked dividends/distributions received
Non-assessable income and non-deductible expenses
d) Deferred tax at 30 June as it relates to the
following:
Net capital losses carried forward
Changes in the fair value of financial assets
Other temporary differences
Consolidated
2013
$ ’000
2012
$ ’000
Company
2013
$ ’000
2012
$ ’000
(29,447)
(73)
(6,299)
99
(9,547)
(73)
1,118
(28,402)
707
(5,493)
17
(9,603)
(530)
99
80
(351)
(9,352)
(4,897)
(9,352)
(4,897)
7,500
(2)
7,500
(2)
(1,852)
(4,899)
(1,852)
(4,899)
95,002
(28,501)
(73)
135
15
22
(28,402)
19,153
(5,746)
99
56
-
98
(5,493)
63,688
(19,106)
(73)
135
15
9,426
(9,603)
4,445
(1,333)
99
56
-
827
(351)
-
(7,921)
2,200
(5,721)
1,286
(2,128)
1,042
200
-
(7,921)
11
(7,910)
1,286
(2,129)
(46)
(889)
e) Tax consolidation
During the year, income tax liabilities of $19,900,000 (June 2012: $5,770,000) were assumed by
MFG, the head entity of the tax consolidated group. Payments totalling $12,716,000 (June 2012:
$4,090,000) were made to MFG from the other entities in the tax consolidated group under the tax
funding agreement during the year. At 30 June 2013, $9,165,000 remains receivable from other
entities in the tax consolidated group. Refer to notes 1(h) and 14 c)ii) for further details on the tax
consolidated group and transactions.
52
MAGELLAN FINANCIAL GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013
6.
Revenue
a) Management fees
The Company receives management and administration fees from acting as:
Magellan Global Fund
Magellan Infrastructure Fund
Magellan High Conviction Fund
Magellan Global Fund (Hedged); and
Magellan Infrastructure Fund (Unhedged) (the Unlisted Funds);
Trustee, Responsible Entity and Investment Manager for the following managed investment
schemes offered primarily to Australian and New Zealand investors:
o
o
o
o
o
Trustee and Investment Manager for the Magellan Core Infrastructure Fund (MCIF), an
unregistered managed investment scheme offered to Australian wholesale investors;
Investment Manager for the Magellan Flagship Fund Limited (the Flagship Fund), a listed
investment company; and
Investment Manager for other external wholesale client mandates.
It also received sub-advisory fees from acting as Subadviser to the Frontegra MFG Global Equity
Fund and the Frontegra MFG Core Infrastructure Fund.
The management fees received/receivable during the year were:
Magellan Global Fund
Magellan Infrastructure Fund
Magellan Flagship Fund
Magellan Core Infrastructure Fund
Other mandates
Total management fees during the year
2013
$ ’000
29,902
2,812
4,656
936
17,701
56,007
2012
$ ’000
11,969
1,530
3,809
772
3,896
21,976
Performance fees
b)
During the year ended 30 June 2013, performance fees were also earned on the following funds
and mandates as the market index and relative hurdles were met:
Magellan Global Fund
Magellan Infrastructure Fund
Other mandates
Total performance fees during the year
2013
$ ’000
16,613
706
11,130
28,449
2012
$ ’000
7,519
148
1,399
9,066
53
MAGELLAN FINANCIAL GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013
6.
Revenue (continued)
Management and performance fees by geographic location
c)
The Group derives management and performance fees from Australian investment vehicles and its
the management,
international
administration and performance fees is as follows:
investment mandates. The geographical breakdown of
Australia
United States of America
United Kingdom
Canada
Total
2013
$ ’000
71,678
7,438
5,191
149
84,456
2012
$ ’000
31,042
-
-
-
31,042
Consulting fees
d)
Consulting fees of $1,200,000 (June 2012: $1,200,000) were earned under a contract that expired
on 30 June 2013.
e)
Net gain/loss on sale on available-for-sale financial assets
Net gain/(loss) from:
- in-specie distribution of listed shares – Magellan Flagship Fund
- disposal of units in unlisted investments(A)
- disposal of other listed investments
Total net gain/loss on sale
2013
$ ’000
22,080
381
2,344
24,805
2012
$ ’000
-
-
(7)
(7)
(A) units in Magellan Infrastructure Fund were disposed and the proceeds from disposal were
invested in Magellan Infrastructure Fund (Hedged).
For further details refer to note 1(f).
7.
Receivables
Fees receivable
Distributions receivable
Other
Related party receivables
- Controlled entity
Total receivables
33,856
1,286
39
35,181
8,796
832
10
9,638
-
1,286
39
1,325
-
832
10
932
-
35,181
-
9,638
9,165
10,490
1,980
2,822
Distributions receivable are due from Magellan Global Fund and Magellan Infrastructure Fund.
Further details on related party receivables are set out in note 14 c).
54
MAGELLAN FINANCIAL GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013
8.
Financial Assets
Consolidated
2013
$ ’000
Company
2013
$ ’000
2012
$ ’000
2012
$ ’000
Current
a)
Financial assets classified as loans and receivables
Term deposits
Total current financial assets
14,685
14,685
30,565
30,565
8,719
8,719
12,197
12,197
b) Non-Current
Available-for-sale financial assets
Investments in listed shares
(by domicile of primary stock exchange)
- Australia(A)
- United States
- Switzerland
- France
- Netherlands
- United Kingdom
- Hong Kong
Investments in listed
subordinated bank notes
- Australia
Total listed investments
Investments in unlisted funds
- Magellan Global Fund
- Magellan Global Fund (Hedged)(B)
- Magellan Infrastructure Fund
- Magellan Infrastructure Fund (Unhedged)(B)
- Magellan High Conviction Fund(B)
- Frontegra MFG Global Equity Fund
- Frontegra MFG Core Infrastructure Fund
- Other
-
18,575
733
436
131
1,660
-
42,167
7,522
1,445
-
133
-
62
-
18,575
733
436
131
1,660
-
42,167
7,522
1,445
-
133
-
62
4,262
25,797
1,708
53,037
4,262
25,797
1,708
53,037
58,230
500
1,970
1,498
200
7,459
3,259
1,400
41,695
-
2,988
-
-
5,273
2,597
1,830
58,230
500
1,970
1,498
200
7,459
3,259
1,400
41,695
-
2,988
-
-
5,273
2,597
1,830
Investments in unlisted shares
- Other
Total unlisted investments
Total non-current financial assets
(A) this investment comprised entirely of the Group’s investment in Magellan Flagship Fund Limited, which
was fully disposed of during the year, as part of an In-specie Distribution to the Company’s shareholders.
175
54,558
100,488 107,595 100,488 107,595
175
74,691
175
74,691
175
54,558
(B) these new funds, which were launched on 28 June 2013, were initially seeded by the Company (refer to
further details at note 18).
55
MAGELLAN FINANCIAL GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013
8.
Financial Assets (continued)
c) Reconciliations
The movement in the carrying value of the Group’s financial assets can be analysed as follows:
2012
$ ’000
2013
$ ’000
Current
Balance at 1 July
Disposals
In-specie Distribution(A)
Cash placed on term deposit
Matured term deposits
Matured fixed and floating rate securities
Net changes in fair value of investments(A)
Balance at 30 June
30,565
-
(3,698)
14,685
(30,565)
-
3,698
14,685
27,879
(199)
-
30,368
(27,155)
(362)
34
30,565
Non-Current
Balance at 1 July
Acquisitions(B)
Disposals
Net changes in fair value of investments
Balance at 30 June
(A) On 17 October 2012, the Company received 16,627,507 listed options in Magellan Flagship Fund for nil
consideration. The options were classified as held for trading, and fully disposed of during the year as
part of an in-specie distribution to the Company’s shareholders.
107,595
24,343
(62,543)
31,093
100,488
79,980
11,336
(34)
16,313
107,595
(B) The Group seeded the new funds launched on 28 June 2013. Refer to note 18 for further details.
In-specie transfer to Magellan High Conviction Fund
d)
At 30 June 2013, the Group and Company held an investment in Magellan High Conviction Fund
(MHCF) of $200,000. On 1 July 2013, the Company seeded a further investment in MHCF by way
of an in-specie transfer of a portion of its investment in listed shares (set out in note 8 b)) and
associated dividend receivables, and cash into MHCF. Had the in-specie transfer occurred on 30
June 2013, the in-specie seed investment would have resulted in a decrease in investments in
listed shares by approximately $12,915,000 and an equal increase in investments in unlisted funds
– MHCF.
Fair Value Disclosures
e)
The Group classifies the fair value measurements of financial assets and financial liabilities using
the three level fair value hierarchy set out below, to reflect the source of valuation inputs used
when determining the fair value:
Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities. The fair
value of these investments is based on the closing bid price for the security as quoted
on the relevant exchange;
Level 2: valuation techniques using market observable inputs either directly or indirectly. 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 fund.
Level 3: valuation techniques using non-market observable inputs. The Group invests in unlisted
trusts which typically invest in unlisted entities. The Group has an investment in an
unlisted company. The fair value is based on a Director’s valuation.
56
MAGELLAN FINANCIAL GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013
8.
Financial Assets (continued)
Fair Value Disclosures (continued)
d)
The table below presents the financial assets and liabilities measured and recognised at fair value:
Note
Consolidated
2012
$ ’000
2013
$ ’000
Company
2013
$ ’000
2012
$ ’000
Available-for-sale financial assets
- Level 1: Listed shares and subordinated
bank notes
- Level 2: Unlisted funds – Magellan and
Frontegra MFG
- Level 3: Unlisted funds - Other
- Level 3: Unlisted shares - Other
Total financial assets
(i)
(ii)
(iii)
25,797
53,037
25,797
53,037
73,116
1,400
175
52,553
1,830
175
100,488 107,595 100,488 107,595
73,116
1,400
175
52,553
1,830
175
(i) Unlisted funds – Magellan and Frontegra MFG
The fair value of investments in the unlisted funds operated by the Group and the Frontegra MFG
funds is determined with reference to the redemption price 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.
(ii) Unlisted funds – Other
Investments in unlisted funds – other comprise investments in private equity funds. As there is no
active market for these units, the fair value is a Directors’ valuation that is determined with
reference to the unit price of the fund. A discount is applied to the unit price, as determined by the
fund’s investment manager, to reflect the illiquidity of the units and estimated impact of the
investee companies periodic re-financing requirements. The Directors believe the estimated fair
value, based on other unlisted funds’ valuations undertaken by the investment manager and the
discount assumptions applied, are reasonable and appropriate.
iii) Unlisted shares - Other
Investments in unlisted shares – other comprises a shareholding in a unlisted funds
management business. As there is no active market for the shares, the Directors’ have valued
this investment at cost after giving consideration to the most current unaudited net asset
position of the Company.
There were no transfers in or out of level 3 during the year and a reconciliation of the fair value
movements within level 3 for the year is shown below:
Level 3
Opening balance – 1 July
Capital calls
Acquisitions – unlisted shares
Return of capital
Net change in fair value
Closing Balance – 30 June
Consolidated
2012
$ ’000
1,806
24
175
-
-
2,005
2013
$ ’000
2,005
-
-
(146)
(284)
1,575
Company
2013
$ ’000
2,005
-
-
(146)
(284)
1,575
2012
$ ’000
1,806
24
175
-
-
2,005
57
MAGELLAN FINANCIAL GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013
8.
Financial Assets (continued)
The fair value of all other financial assets and liabilities approximate their carrying values in the
Statements of Financial Position.
9.
Property, Plant and Equipment
Leasehold
Improve-
ments
Consolidated
30 June 2013
Office
Equipment,
Fixture &
Fittings
Consolidated
30 June 2012
Total
Leasehold
Improve-
ments
Total
Office
Equipment,
Fixtures &
Fittings
$ ’000
$ ’000 $ ’000
$ ’000
$ ’000
$ ’000
At cost
Less: accumulated depreciation
& impairment losses
Total property, plant &
equipment
118
113
929 1,047
593
706
117
112
757
874
490
602
5
336
341
5
267
272
Reconciliation
(i)
Reconciliations of the carrying amount for each class of property, plant and equipment at the
beginning and end of the financial year are set out below:
Carrying amount at beginning of
year
Additions
Depreciation expense
Carrying amount at end of
year
5
1
(1)
5
267
172
(103)
272
173
(104)
26
-
(21)
219
144
(96)
245
144
(117)
336
341
5
267
272
Property, plant and equipment is held by a controlled entity, MAM. The carrying value of property,
plant and equipment of the Company at 30 June 2013 is nil (30 June 2012: nil).
10.
Payables
Consolidated
Company
Trade payables and accruals
Settlements payable – shares purchased
Accrued employee entitlements
US marketing/consulting costs payable
GST payable
Fringe benefits tax payable
2013
$ ’000
1,160
8,816
5,714
1,217
918
17
17,842
2012
$ ’000
394
-
3,435
-
621
15
4,465
58
2013
2012
$ ’000 $ ’000
47
-
-
-
-
-
47
97
8,816
-
-
-
-
8,913
MAGELLAN FINANCIAL GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013
11.
Contributed Equity
Ordinary shares
MFG 2016 options
Class B shares
Total contributed equity
(a) Ordinary Shares
Consolidated
Opening balance
Shares issued from exercise of MFG
2016 options
Shares issued under SPP
Recognition of SPP expense for year
Less: capital component of in-specie
distribution
Total ordinary shares
Company
Opening balance
Shares issued from exercise of MFG
2016 options
Shares issued under SPP
Recognition of SPP expense for year
Less: capital component of in-specie
distribution
Total ordinary shares
Consolidated
2013
$ ’000
76,378
-
-
76,378
2012
$ ’000
115,395
-
-
115,395
Company
2013
$ ’000
76,753
-
-
76,753
2012
$ ’000
115,770
-
-
115,770
30 June
2013
Number
of shares
‘000
30 June
2012
Number
of shares
‘000
$’000
$’000
30 June
2013
30 June
2012
152,558
151,893
115,395
114,529
111
114
-
-
-
665
-
-
292
765
698
(40,772)
-
578
288
-
152,783
152,558
76,378
115,395
115,569
114,904
115,770
114,904
111
114
-
-
-
665
-
-
292
765
698
(40,772)
-
578
288
-
115,794
115,569
76,753
115,770
(b) MFG 2016 Options
Opening balance
Shares issued from exercise of options
Closing balance – MFG 2016 Options
The number of MFG 2016 Options on issue, and movement of those options, for the Company
during the year is the same as the consolidated entity.
7,882
-
7,882
7,882
(111)
7,771
-
-
-
(c) Class B Shares
-
Opening balance
-
Closing balance – Class B Shares
The number of Class B shares on issue, and movement of those shares, for the Company
during the year is the same as the consolidated entity.
10,200
10,200
10,200
10,200
-
-
-
-
-
59
MAGELLAN FINANCIAL GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013
11.
Contributed Equity (continued)
Terms and conditions
Ordinary shares
c)
i)
Fully paid ordinary shares entitle the holder to receive dividends declared and proceeds on winding
up the Company in proportion to the number of and amounts paid up on shares held. Ordinary
shares entitle their holder to one vote, either in person, or by proxy, at a meeting of the Company.
MFG 2016 Options
ii)
MFG 2016 Options (‘options’) expire on 30 June 2016 but can be exercised during any two month
period commencing two business days following the announcement of the Group’s full and half
year results in each year prior to the expiry date, except for the final exercise period which
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 the Option, the option holder is
issued one new ordinary share in the Company.
The in-specie distribution on 19 February 2013 (refer to note 4 iii) for further details) had the
effect of reducing the exercise price of the MFG 2016 Options by $0.3589 per MFG Option.
Accordingly, the adjusted exercise price of each option at 30 June 2013 is $2.6411 (June 2012:
$3.00).
Options are not entitled to dividends or distributions. Ordinary shares issued on exercise of the
options rank equally with all other ordinary shares from the date of issue. An ordinary share issued
on exercise of an option is only entitled to receive a dividend or distribution where the option was
exercised and the ordinary share is issued on or before the record date for that distribution.
Ordinary shares issued pursuant to the exercise of an option will not be issued until after the
record date for any dividend or distribution payable in respect of the half year period immediately
prior to the exercise period during which that option was exercised. The holder of an option may
only participate in new issues of the Company if the holder exercises that option and becomes the
holder of ordinary shares on or prior to the record date for the new issue of ordinary shares.
Class B shares
iii)
The Class B Shares were issued to Mr Hamish Douglass with certain service conditions which were
satisfied on 1 July 2012. Incorporating the effect of the in-specie distribution made to the
Company’s shareholders on 19 February 2013, the Class B Shares will convert into the number of
ordinary shares equal to 0.0637028 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 conversion of the
Class B Shares will occur on the first business day 21 November 2016. The maximum number of
ordinary shares that will be issued on conversion of all Class B Shares is 10,829,476. Prior to the
in-specie distribution, the conversion factor was 0.06 times and the maximum number of ordinary
shares that would have been issued on conversion was 10,200,000.
Mr Douglass holds 10,200,000 Class B Shares which at 30 June 2013 were entitled to convert into
9,732,697 ordinary shares of the Company on 21 November 2016.
Based on the Company’s ordinary shares on issue and assuming all options are fully exercised as
at 30 June 2013, the 10,200,000 Class B Shares would be entitled to convert to 10,227,770
ordinary shares being equal to 0.0637028 times 160,554,481 securities at 30 June 2013
(comprising 152,782,876 ordinary shares on issue and 7,771,605 unexercised options).
60
MAGELLAN FINANCIAL GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013
11.
Contributed Equity (continued)
Terms and conditions (continued)
c)
iii) Class B shares (continued)
At 30 June 2012, the 10,200,000 Class B Shares would be entitled to convert to 9,153,500
ordinary shares being equal to 0.06 times 152,558,341 ordinary shares on issue. The Class B
shares have no entitlement to receive dividends and until the Class B Shares are converted into
ordinary shares they confer no rights to participate in any bonus issue or subscribe for new
securities in the Company unless the Directors determine otherwise in accordance with the Terms
of Issue of the Class B Shares.
Share Purchase Plan (SPP)
12.
The Group has put in place a Share Purchase Plan (the ‘Plan’ or ‘SPP’) for its employees and Non-
executive Directors (‘Participants’). The Plan provides 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. At 30 June 2013, 4,767,558 ordinary shares were held by the
Participants under the SPP (June 2012: 6,714,210).
Employees are invited to apply for a specified number of fully paid ordinary shares in the
Company. Subject to the Listing Rules, the Directors have overall discretion in relation to the Plan
and may vary the rules. The Directors 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 offer is made; and
ii) such further number of shares as requested and approved by the Board, subject to:
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
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 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 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 is the fair market value of the shares at the offer date. This is 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 is funded by way of a full recourse interest free
loan from the Company.
61
MAGELLAN FINANCIAL GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013
12.
Share Purchase Plan (SPP) (continued)
Participants are required to apply an amount equal to 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. Although employees are not entitled to repay their loan early, the Board may
from time to time permit an early repayment under certain circumstances.
Loans to Participants under the Plan are secured on the shares issued to that Participant. The
shares are not transferable until the loan is fully paid. Once the loan has been fully repaid, the
shares issued under the Plan are freely transferable.
Dividends are payable on the shares issued under the Plan on the same basis as all other issued
fully paid ordinary shares, and the amount of the dividends are applied to repay the loan until the
loan has been fully repaid. The shares issued under the Plan have the same rights to participate in
any entitlements or bonus issues and 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 the participant 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:
Current: due within 1 year
Non-current: due later than 1 year and within 10 years
2012
Consolidated
2013
Company
2013 2012
$ ’000 $ ’000 $ ’000 $ ’000
1,658
1,489
2,835
4,661
4,324 6,319
1,658
4,661
6,319
1,489
2,835
4,324
During the year, participants disposed of 284,893 ordinary shares under the SPP, and from these
disposals, proceeds of $1,708,000 were applied directly to participants loans. Total SPP loan cash
repayments during the year were $3,698,000.
62
MAGELLAN FINANCIAL GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013
12.
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
8 September 2009
10 November 2010
2 March 2011
21 September 2011
12 March 2013
5-day weighted average share price
$1.66
$0.52
$0.78
$1.35
$1.75
$1.20
$7.33
The value of shares securing the loans to Participants at balance date applying the Company’s 30
June 2013 closing market price of $9.64 was $46,000,000 (June 2012: $14,400,000). No amounts
are past due or considered impaired as the SPP 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 2013
30 June 2012
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
November 2010 tranche
Face value of loans
Estimated weighted average duration of loans
Imputed interest rate
March 2011 tranche – fully repaid
Face value of loans
Estimated weighted average duration of loans
Imputed interest rate
September 2011 tranche
Face value of loans
Estimated weighted average duration of loans
Imputed interest rate
March 2013 tranche
Face value of loans
Estimated weighted average duration of loans
Imputed interest rate
63
$2.6m
2.3 years
7.0%
$0.1m
1.2 years
5.0%
$0.5m
1.1 years
5.3%
$0.7m
1.9 years
5.5%
-
-
-
$0.3m
2.5 years
4.0%
$0.6m
3.5 years
3.4%
$4.7m
2.6 years
7.0%
$0.1m
1.9 years
5.0%
$0.9m
3.3 years
5.3%
$1.4m
4.4 years
5.5%
$0.2m
4.4 years
5.5%
$0.7m
6.8 years
4.0%
-
-
-
MAGELLAN FINANCIAL GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013
12.
Share Purchase Plan (SPP) (continued)
Amounts recognised in the Statement of Comprehensive Income in respect of the SPP loans are:
Company
2013
$ ’000
1,148
(698)
Consolidated
2012
$ ’000
477
(288)
2013
$ ’000
1,148
(698)
2012
$ ’000
477
(288)
Interest income
Employee benefits expense
Net credit in Statement of Comprehensive
Income
450
189
450
189
Both the change 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 not cash items and
therefore are not reflected within the Group’s cash flow statement. 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. Refer to note 1(s) for further details.
13.
Capital and Financial Risk Management
Financial Risk Management
a)
The activities of the Group and the Company expose it to various types of risks, both direct and
indirectly: price risk, credit risk, currency risk and liquidity risk.
Exposure to risk occurs through the impact on the Group’s and the Company’s net 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 foreign exchange rate movements on the Group’s funds under
management and the consequent impact on the management and performance fees
earned.
The Group’s investment assets comprise strategic investments in:
unlisted funds of which MAM, a wholly owned entity of the Group, is the Responsible Entity
and Investment Manager;
a direct portfolio of investments; and
two unlisted United States institutional mutual funds, being the Frontegra MFG funds, of
which MAM is the Investment Manager.
The investment portfolios of the unlisted funds and the Frontegra MFG 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 entities
can be found in the annual report of the Product Disclosure Statement (PDS) of the Magellan
unlisted funds, and the prospectuses of the Frontegra MFG funds.
64
MAGELLAN FINANCIAL GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013
13.
Capital and Financial Risk Management
Capital Management
b)
The Group and the Company’s approach to capital management remained unchanged during the
year, which was to ensure that it continues as a going concern, it has sufficient cash flow to meet
its operating requirements, it is able to support the payment of dividends to shareholders in
accordance with the Group’s dividend policy, and it retains the flexibility to retain capital if required
for future business expansion. The Group and the Company’s capital consists entirely of
shareholder equity. The Group and the Company has no external net borrowings at 30 June 2013.
The Directors believe that the Group’s core business, funds management, is scalable over time and
the funds under management should continue to grow without the need to make material
additional capital investment into the business.
A controlled entity of the Company, Magellan Asset Management Limited (MAM) is subject to
regulatory financial requirements by virtue of it holding an Australian Financial Services License
(AFSL). These regulatory requirements, which are set out by the Australian Securities and
Investment Commission (ASIC), were amended for Responsible Entities of Registered Managed
Investment Schemes from 1 November 2012. From this date to the period ended 30 June 2013,
MAM maintained required net tangible assets of $5,000,000 and satisfied the liquidity requirements
of cash and cash equivalents of at least $2,500,000 (equal to 50% of required net tangible assets)
and liquid assets of at least $5,000,000 (equal to the amount of required net tangible assets). The
Directors of MAM determined on 2 November 2012 that notwithstanding the liquidity requirements
of the AFSL, MAM would hold both a greater amount of cash and cash equivalents, being at least
$5,000,000 and a greater amount of liquid assets, being at least $10,000,000. From 1 July 2013,
the required net tangible assets, will be determined as 10% of MAM’s average revenues in
accordance with ASIC Regulatory Guide 166.
Liquidity Risk
c)
Liquidity risk is the risk that the Group and the Company will encounter difficulty in meeting
obligations associated with financial liabilities on the due date or will be forced to sell financial
assets at a value which is less than they are worth.
The Group and the Company manage liquidity risk by maintaining sufficient cash reserves to cover
its liabilities. On 20 February 2013, the Board of the Company determined that the Company would
maintain a minimum amount of $10,000,000 in cash and equivalents and a minimum amount of
liquid assets equal to 0.5% of the Group’s funds under management subject to a maximum
amount of $100 million. The amounts held by the Company are in addition to the cash and cash
equivalent and liquid asset amounts maintained by its controlled entity, MAM.
As at 30 June 2013, the Group had an obligation to settle trade creditors and other payables of
$17,842,000 (June 2012: $4,465,000) within 30 days. The Group had cash (including term
deposits maturing within 30 days) of $38,096,000 (June 2012: $1,052,000) and a further
$35,181,000 (June 2012: $9,638,000) of receivables and $14,685,000 of term deposits which
mature greater than 90 days (June 2012: $30,565,000) to cover these liabilities. In addition, the
Group reported current assets of $89,743,000 and current liabilities of $34,681,000 resulting in a
net current asset surplus of $55,062,000. Accordingly the Group has sufficient liquid funds and
current assets to meet its current liabilities.
65
MAGELLAN FINANCIAL GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013
13.
Capital and Financial Risk Management (continued)
c)
Liquidity Risk (continued)
Maturities of financial liabilities
At 30 June 2013, the Group’s financial liabilities comprise trade creditors and payables which
mature in 1 year or less (June 2012: 1 year or less).
Price Risk
d)
Price risk is the risk that the value of the Group and Company’s direct and indirect investments in
equities will increase or decrease as a result of changes in market prices, caused by factors specific
to the individual stock or the market as a whole. Price risk exposure arises from the Group’s and
the Company’s investments in listed equities, unlisted Magellan funds and the Frontegra MFG
funds, and from the Group’s entitlement to investment management and performance fees on its
funds under management.
All of the Group and Company’s 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 MSCI Total Return Net World Index varied between +40% and -21% (in AUD)
and +31% and -29% (in USD). The past performance of markets is not always a reliable guide to
future performance, and the Company’s investment portfolio does not attempt to mirror the global
indices, but this very wide range of historic movements in the indices provides an indication of the
magnitude of equity price movements that might reasonably occur within the portfolio over a 12
month period. The impact of equity price movements, expressed in percentage terms, on the net
profit reported by the Company, is linear.
Impact arising from the Group’s and Company’s own investments
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 equity:
Impact on net profit for the year
Impact on available-for-sale reserve, net of tax
Total impact on net profit and equity
Consolidated
2012
$ ’000
2013
$ ’000
-
3,517
3,517
-
3,766
3,766
Company
2013
2012
$ ’000 $ ’000
-
3,517
3,517
-
3,766
3,766
Assumptions and explanatory notes
i)
the Group and the Company hold an investment in an unlisted fund that invests in unlisted
equities. The fair value of this fund is determined by a Director’s valuation. The underlying
values of the unlisted equities are determined by the fund’s investment manager 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 fund.
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 and the Company recognises impairment losses on available-for-sale investments in
accordance with the accounting policy disclosed in note 1(n). For the purposes of the
66
MAGELLAN FINANCIAL GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013
13.
Capital and Financial Risk Management (continued)
Price Risk (continued)
d)
iv) 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.
Impact arising on entitlements to management and performance fees
Management fees
The Group earns management fees on funds under management, which are based on a
percentage of the value of the clients’ and the funds’ portfolios. Management fees earned from
funds under management will be impacted by movements in the underlying prices in local
currency, exchange rate movements, or a combination of both. Each incremental increase of 5%
in the average value of funds under management of the Group during the years ended 30 June
2013 and 30 June 2012 would have increased the base management fees recognised in net profit
and equity as follows:
Consolidated
Company
2013
$ ’000
2012
$ ’000
2013
2012
$ ’000 $ ’000
Impact on net profit for the year
Total impact on net profit and equity
1,959
1,959
769
769
-
-
-
-
Assumptions and explanatory notes
i)
a decrease of 5% in the average value of funds under management of the Group would have
an equal and opposite effect to the changes disclosed above.
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)
Performance fees
The Group may earn performance fees from its funds and from some institutional client mandates
to which it provides investment management services. Where a performance fee is applicable to
an institutional client mandate, the base management fee will generally be lower than that earned
from mandates where no performance fee applies. The Company’s entitlement to performance
fees for any given performance period is dependent on it outperforming certain hurdles, which
may be index relative hurdles, return hurdles or a combination of both. Performance fees are
generally subject to either a high water mark arrangement or a deficit clause, which ensures that
fees are not earned more than once on the same performance. These fees also accrue over
different calculation periods, ranging from three months to three years. The fees recognised in
follows:
the
Comprehensive
characterised
Statement
Income
are
as
of
Consolidated
Company
Based on performance relative to a market index
Based on performance relative to a return hurdle
Based on performance relative to both a market
index and a return hurdle
Total performance fees
67
2013
$ ’000
5,702
4,569
2012
$ ’000
1,233
154
2013
2012
$ ’000 $ ’000
-
-
-
-
18,178
28,449
7,679
9,066
-
-
-
-
MAGELLAN FINANCIAL GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013
13.
Capital and Financial Risk Management (continued)
Currency Risk
e)
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 has direct
exposure to currency risk on foreign currency denominated:
-
-
-
investments designated as available for sale (refer note 8);
cash balances and term deposits (refer note 15 c) and 8 a); and
payables and receivables, such as income receivable from foreign investments, outstanding
settlements on purchase or sale of foreign investments and management and performance
fees invoiced in foreign currency (refer note 7 and 10).
At 30 June 2013 had the Australian dollar strengthened by 10% relative to each currency to which
the Group and Company had significant exposure, with all other variables held constant, the
impact on the Group and Company’s equity and net profit would have been:
Consolidated
Assets denominated in:
US dollars
Euro
Swiss francs
Hong Kong dollars
Company
US dollars
Euro
Swiss francs
British pounds
Hong Kong dollars
Increase / (decrease)
in net profit
2013
$ ’000
2012
$ ’000
(1,251)
(10)
(2)
-
(1,110)
(10)
(2)
-
-
(8)
-
-
-
(8)
-
-
-
-
Increase / (decrease)
in equity
2013
$ ’000
(2,663)
(52)
(67)
-
(2,663)
(52)
(67)
(151)
-
2012
$ ’000
(1,399)
(12)
(131)
(6)
(1,399)
(12)
(131)
(131)
(6)
A decrease of 10% in the Australian dollar relative to each currency would have an opposite
impact.
The Group and Company also has indirect exposure to foreign currency via its investments in
unlisted funds. The unlisted funds are denominated in Australian dollars and the Frontegra MFG
funds are US dollar denominated. The underlying investment portfolios of these funds comprise
entities predominantly denominated in foreign currencies, and with extensive operating exposure
to global currency fluctuations which will drive portfolio values. Changes in their fair value are
therefore influenced by movements in currencies. The sensitivity analysis disclosed above
disregards the impact on the foreign currency movement on the underlying portfolios.
The Group’s management and performance fees are also indirectly exposed to fluctuations in
foreign currency where the management and performance fees earned from funds under
management are subject to adverse movements in the exchange rate of the Australian dollar
relative to foreign currencies. For the year ended 30 June 2013, approximately 93% of the Group’s
management, administration and performance fee revenues were indirectly exposed to
movements in the Australian dollar relative to other currencies (June 2012: 82%).
68
MAGELLAN FINANCIAL GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013
13.
Capital and Financial Risk Management (continued)
Interest Rate Risk
f)
Interest rate risk is the risk that the fair value of a financial instrument will fluctuate due to
changes in market interest rates. The Group and Company’s exposure to interest rate risk relates
primarily to cash and cash equivalents and also term deposits. Substantially all of the Group and
Company’s holdings of cash and cash equivalents are held with major Australian banks. Term
deposits are of short duration and their fair value would not be materially affected by changes in
interest rates.
Sensitivity analysis
Based on the cash and cash equivalents held by the Group and the Company at balance date, the
sensitivity on the Group and the Company’s net profit and equity of a decrease of 50 basis points
in floating interest rates, assuming all other variable remain constant is:
Increase in net profit and equity
Consolidated
Company
2013
$ ’000
184
2012
$ ’000
109
2013
$ ’000
126
2012
$ ’000
44
An increase of 50 basis points in floating rate interest rates would have an equal but opposite
effect on interest income and net profit.
Credit Risk
g)
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 when valued at fair
value. The maximum exposure to credit risk at balance date is therefore the carrying amount of
financial assets recognised in the Statement of Financial Position.
The Group and Company minimises concentrations of credit risk by ensuring cash balances, term
deposits and the listed subordinated notes are held with and managed by counterparties that are
reputable financial intermediaries with acceptable credit ratings determined by a recognised rating
agency. In addition, credit limits are reviewed by management and may be updated throughout
the year. During the year ended 30 June 2013, the Group and Company held cash and term
deposits with Australian banks and the credit quality of these counterparties at 30 June 2013 are
rated by Standard & Poor’s as being AA-, and by Moody’s as being Aa2 (AA and Aa2 respectively at
30 June 2012).
The Group and Company also manages credit risk by regularly monitoring loans and receivable
balances throughout the year. A provision for doubtful debts is made where collection is deemed
uncertain. At 30 June 2013, the provision for doubtful debts was nil (June 2012: nil).
At 30 June 2013 the Group and the Company also had credit exposure to the participants with
loans under the share purchase plan. At 30 June 2013, the outstanding balance on the loans
totalled $4,324,000 (June 2012: $6,319,000). MFG shares valued at $46,000,000 (June 2012:
$14,400,000) were held as security for these loans. The loans were made to the Group’s
employees and certain Non-executive Directors of the Company on a full recourse basis. Further
information is provided in note 12.
69
MAGELLAN FINANCIAL GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013
13.
Capital and Financial Risk Management (continued)
Credit Risk (continued)
g)
The Company in its capacity as Trustee and Responsible Entity of the following registered
managed investment schemes has appointed The Northern Trust Company (NT) as the custodian:
Appointment Date
Magellan Global Fund(A)
29 November 2012
Magellan Infrastructure Fund(A)
29 November 2012
Magellan High Conviction Fund(B)
28 June 2013
Magellan Global Fund (Hedged)(B)
28 June 2013
Magellan Infrastructure Fund (Unhedged)(B) 28 June 2013
(A) The former custodian and prime broker of the funds was Merrill Lynch International (MLI).
(B) The funds were established on 28 June 2013
The credit quality of NT’s senior debt is rated, as at 30 June 2013, by Standard and Poors as AA-
and by Moody’s as Aa3 (AA- and Aa3 respectively at 30 June 2012).
The Company in its capacity as Trustee of the Magellan Core Infrastructure Fund (MCIF) has
appointed J.P. Morgan Chase N.A (JPM) as MCIF’s custodian. The credit quality of JPM’s senior
debt is rated, as at 30 June 2013, by Standard and Poors as AA- and by Moody’s as Aa3 (AA- and
Aa3 respectively at 30 June 2012).
In acting as custodians, NT and JPM are required to comply with the relevant provisions of the
Corporations Act, applicable ASIC regulatory guides and class orders relating to registered
managed investment scheme property arrangements with custodians.
At 30 June 2013 and 30 June 2012, the Group and Company’s maximum exposure to credit risk is
the carrying amount of the financial assets recognised in the Statements of Financial Position.
Ageing analysis of receivables
At 30 June 2013, all of the Group’s and Company’s receivables are due within 0 to 30 days (June
2012: 0 to 30 days). No amounts are impaired or past due at 30 June 2013 or 30 June 2012.
70
MAGELLAN FINANCIAL GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013
14. Related Party Transactions
Ultimate Parent entity
a)
Magellan Financial Group Limited (MFG) is the ultimate parent entity.
Controlled entities
b)
The consolidated financial statements incorporate the assets, liabilities and result of the following
controlled entities in accordance with the accounting policy described in note 1(b)(i):
Country of
Incorporation
Class of
Shares
2013 2012
Australia
Magellan Asset Management Limited (MAM)
Australia
Magellan Capital Partners Pty Limited (MCP)
Magellan Infrastructure Fund (Unhedged)
Australia
Magellan High Conviction Fund Australia
Magellan Global Fund (Hedged) Australia
c) Transactions with Related Parties
The following transactions occurred with related parties:
Subordinated loan to MAM
Amounts received/(paid) under the tax funding
agreement from controlled entities
Amounts receivable from MAM pursuant to tax
funding agreement
Dividends received from MAM
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
%
100
100
100
100
100
%
100
100
-
-
-
Company
2013
$’000
1,150
2012
$’000
1,150
Note
(i)
(ii)
(ii)
(iii)
9,165
1,980
12,716
31,274
4,090
2,400
i) The Company provided an interest-free subordinated loan of $1,150,000 to its wholly owned
subsidiary, MAM, on 29 November 2006. Under the terms of MAM’s Australian Financial Services
Licence (AFSL), the loan cannot be repaid without the prior consent of the Australian Securities
and Investments Commission (ASIC). At 30 June 2013, the loan amount drawn down was
$1,150,000 (June 2012: $1,150,000). On 26 July 2013, ASIC consented to the repayment of the
subordinated loan and MAM has since repaid the loan in full to the Company on 2 August 2013.
ii) During the year, MAM’s income tax liabilities of $19,900,000 (June 2012: $5,770,000) were
assumed by MFG, the head entity of the tax consolidated group. Payments totalling $12,716,000
(June 2012: $4,090,000) were received by MFG and MCP from MAM under the tax funding
agreement during the year and $9,165,000 was receivable by the Company from MAM in respect
of amounts arising from the transfer of MAM’s tax liability to the Company (June 2012: $1,980,000
payable). Refer to note 1(h) for further details on the tax consolidated group.
iii) Dividends amounting to $31,274,000 representing $2.502 per share were paid by MAM to
MFG during the year ended 30 June 2013 (June 2012: $0.192 per share representing $2,400,000).
Since the end of the year, the Directors declared a final dividend of $20,900,000 representing
$1.672 per share, which was paid on 2 August 2013.
71
MAGELLAN FINANCIAL GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013
14. Related Party Transactions (continued)
d)
Key Management Personnel Disclosures
Directors
i)
The Directors of Magellan Financial Group Limited during the financial year and up to the date of
this report were:
Chairman and Executive Director
Chris Mackay
Hamish Douglass Chief Executive Officer and Managing Director
Naomi Milgrom
Paul Lewis
Brett Cairns
Non-executive Director
Non-executive Director
Non-executive Director
Other key management personnel (KMP)
ii)
In addition to the Directors, the following persons also had authority for the strategic direction and
management of the Group, directly or indirectly, during the financial year:
Nerida Campbell
Gerald Stack
Frank Casarotti
Chief Operating Officer and Company Secretary
Head of Research
Head of Distribution
Shareholdings relating to key management personnel
iii)
The number of ordinary shares, Class B shares and MFG 2016 Options held during the year by
each key management personnel, including their personally-related parties, is set out below. All
additions, disposals/cancellations are shown gross:
Ordinary Shares
Directors
Naomi Milgrom
Paul Lewis
Brett Cairns
Hamish Douglass
Chris Mackay
Other Key Management
Personnel
Nerida Campbell
Frank Casarotti
Gerald Stack(1)
Balance
1 July
2011
Additions/
(Disposals or
cancellations)
Balance
1 July
2012
Additions/
(Disposals or
cancellations)
Balance at
30 June
2013
6,182,360
1,900,747
1,095,481
10,436,508
18,077,777
-
100,000
-
83,409
-
6,182,360
2,000,747
1,095,481
10,519,917
18,077,777
-
-
-
-
-
6,182,360
2,000,747
1,095,481
10,519,917
18,077,777
660,019
806,927
340,963
-
-
50,000
660,019
806,927
390,963
-
(150,000)
-
660,019
656,927
390,963
(1) Acquisitions during the year under the Company’s Share Purchase Plan
Class B shares
Hamish Douglass
10,200,000
-
10,200,000
-
10,200,000
There were no additions or disposals of Class B shares during the year (June 2012: nil). The key
terms and conditions of the MFG Class B Shares are at note 11 c)iii).
72
MAGELLAN FINANCIAL GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013
14. Related Party Transactions (continued)
Key Management Personnel Disclosures (continued)
Shareholdings relating to key management personnel (continued)
d)
iii)
The number of MFG 2016 Options held during the year by each key management personnel,
including their personally-related parties, is set out below:
MFG 2016 Options
Directors
Naomi Milgrom
Paul Lewis
Brett Cairns
Hamish Douglass
Chris Mackay
Balance
1 July
2011
Additions/
(Disposals)
(A)
Balance
1 July
2012
Additions/
(Disposals)
(A)
Balance
30 June
2013
16,532
5,790
11,467
297,792
2,644,354
-
-
-
-
-
16,532
5,790
11,467
297,792
2,644,354
Other Key Management
Personnel
Nerida Campbell
Frank Casarotti
Gerald Stack
The key terms attaching to the MFG 2016 Options are at note 11 c)ii).
39,600
-
-
39,600
-
-
-
-
-
-
-
-
-
-
-
-
-
16,532
5,790
11,467
297,792
2,644,354
39,600
-
-
Unit Holdings in Unlisted Funds
The number of units held during the year by each key management personnel, including their
personally-related parties, in funds managed by the Group are:
Magellan Global Fund
Directors
Paul Lewis
Hamish Douglass(B)
Chris Mackay
Other Key Management
Personnel
Nerida Campbell
Gerald Stack
Frank Casarotti(B)
331,908
829,995
415,676
20,326
51,964
-
6,067
15,169
7,597
337,975
845,164
423,273
6,086
15,221
7,624
344,061
860,385
430,897
371
950
-
20,697
52,914
-
373
953
-
21,070
53,867
-
Magellan Infrastructure Fund
Directors
Paul Lewis
Other Key Management
Personnel
Gerald Stack
33,530
3,453
36,983
1,422
38,405
-
67,268
67,268
2,586
69,854
(A) includes the reinvestment of 30 June 2011 and 30 June 2012 distributions in the years ended 30 June 2012 and 30
June 2013 respectively.
(B) in addition to the above holdings, Mr Douglass and Mr Casarotti selected the Magellan Global Fund product via their
superannuation funds and currently have holdings of 385,356 and 155,739 units at a value of $387,206 and $239,837
respectively as at 30 June 2013 (June 2012: nil).
Unless specified above, no other KMP held units in the Magellan Global Fund or Magellan
Infrastructure Fund.
73
MAGELLAN FINANCIAL GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013
14. Related Party Transactions (continued)
d)
Key Management Personnel Disclosures (continued)
Loans to key management personnel
iv)
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
section 3.2 of the Remuneration Report in the Director’s Report.
SPP Shares
acquired
during year
Loan
Balance
1 July 12
Loans
made
Repayments
Loan Balance
at 30 June 2013
Directors
Paul Lewis
Brett Cairns
Other Key
Management
Personnel
Nerida Campbell
Gerald Stack
Frank Casarotti
Number
$
-
-
-
-
-
1,215,000
1,215,000
223,238
385,901
720,327
$
-
-
-
-
-
Face value
$
$
(80,000)
(80,000)
1,135,000
1,135,000
Carrying
Value
$
970,354
970,354
(41,407)
(65,929)
(720,327)
181,831
319,972
-
166,705
250,051
-
SPP Shares
acquired
during year
Loan
Balance
1 July 11
Loans
made
Repayments
Loan Balance
at 30 June 2012
Number
$
-
-
1,245,000
1,245,000
$
-
-
Face value
$
$
Carrying
Value
$
(30,000)
(30,000)
1,215,000
1,215,000
970,343
970,343
-
50,000
-
242,139
371,468
751,378
-
45,000
-
(18,901)
(30,567)
(31,051)
223,238
385,901
720,327
176,452
296,904
676,314
Directors
Paul Lewis
Brett Cairns
Other Key
Management
Personnel
Nerida Campbell
Gerald Stack
Frank Casarotti
74
MAGELLAN FINANCIAL GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013
14. Related Party Transactions (continued)
d)
Key Management Personnel Disclosures (continued)
v)
Remuneration to key management personnel
Key Management Personnel of the Group received the following amounts during the year:
Short term Benefits
- Salary
- Cash Bonus
Post-employment Benefits
- Superannuation
Long-term Benefits
- Other
Share based Payment
- Under SPP(A)
Total remuneration
Consolidated
2013
$
2012
$
Company
2013
$
2012
$
2,015,173
1,999,207
1,293,648
1,208,335
47,523
-
47,523
-
84,827
81,352
2,477
2,477
195,866
86,417
-
-
249,183
83,021
4,544,256 2,752,773
249,183
299,183
83,021
133,021
(A) Share based payments represent the expense of providing interest free loans to Participants in the Share Purchase
Plan (refer to section 3.2 in the Directors Report – Remuneration Report – Share Purchase Plan).
75
MAGELLAN FINANCIAL GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013
15.
Statement of Cash Flows Reconciliation
a) Reconciliation of Net Profit after Tax to Net Cash Flows from Operating Activities:
Net profit after income tax expense
Adjusted for:
Net losses/(gains) on disposal of held for
trading financial assets
Net losses/(gains) on disposal of available-for
sale financial assets
Dividends and distributions reinvested
Depreciation
Income tax paid
Dividends received from controlled entity
Net foreign exchange (gains)/losses
Unrealised net foreign exchange (gains)/losses
Imputed interest on loans under the SPP
Employee expense on loans under SPP
(Increase)/decrease in receivables
(Increase)/decrease in prepayments
Decrease in deferred tax liabilities
Decrease in held for trading financial assets
Increase in payables
Increase in current tax liabilities
Net cash inflows/(outflows) from
operating activities
Consolidated
2012
$ ’000
2013
$ ’000
Company
2013
$ ’000
2012
$ ’000
66,600
13,660
54,085
4,094
(3,675)
-
(3,675)
-
(24,805)
(831)
104
(11,583)
-
11
(1,470)
(1,148)
698
(25,416)
(162)
(4,248)
-
24,463
12,715
7
(894)
117
(3,124)
-
2
-
(476)
288
(4,182)
(25)
(3,011)
175
8,139
2,735
(24,805)
(831)
-
(11,583)
(31,274)
11
(787)
(1,148)
698
(360)
23
(3,146)
-
53
12,715
7
(894)
-
(3,124)
(2,400)
2
-
(476)
288
1,226
23
(2,385)
175
4
2,735
31,253
13,411
(10,024)
(725)
b) Non-cash financing and investing activities:
In-specie distribution (refer to note 4)iii)
Issue of ordinary shares under SPP
Imputed interest on loans under SPP
Share based payments under SPP
Acquisition of available-for-sale financial assets
via dividend/distribution reinvestment plan
13,977
765
(1,148)
698
-
578
(476)
288
13,977
765
(1,148)
698
-
578
(476)
288
-
894
-
894
c) Reconciliation of cash
Reconciliation of cash at the end of the year (as shown in the Statement of Cashflows) to the related
item in the financial report
Cash at bank
38,096
27,300
1,052
454
Term deposits with maturity dates greater than 90 days from inception date are included in
financial assets (refer note 8 a)).
76
MAGELLAN FINANCIAL GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013
16.
Contingent Assets, Liabilities and Commitments
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:
Due within one year
Due between one year and five years
Consolidated
2012
$ ’000
2013
$ ’000
Company
2013
2012
$ ’000 $ ’000
676
1,787
2,463
413
1,707
2,120
-
-
-
-
-
-
Contingent Assets and Contingent Liabilities
The Group has contingent liabilities of $1,024,000 (June 2012: $400,000) comprising:
(i) $524,000 for uncalled capital amounts on an investment in an unlisted fund held by the
Company (June 2012: $400,000). Of this amount, $124,000 may be called up until October
2013 as a capital distribution of $124,000 was received from the unlisted fund during the
year; and
(ii) $500,000 which is payable under the investment restriction contract entered into with Mr
Hamish Douglass on 1 July 2012 providing Mr Douglass remains in employment until 1 July
2017. Assuming the conditions of the contract are complied with, MAM is required to pay Mr
Douglass $500,000 on or before 15 July 2017 (refer to further details of the contract in section
3.5 in the 2013 Remuneration Report in the Directors’ Report) (June 2012: $nil).
The Directors are not aware of any other contingent assets or contingent liabilities at balance date.
Guarantees
The Company has issued a letter of comfort to a client of its controlled entity, MAM, whereby MFG
undertakes to provide support and assistance as required to ensure MAM complies with the
financial conditions of its Australian Financial Services Licence.
Auditor’s Remuneration
17.
Amounts received or due and receivable by the auditor of the Group, Ernst & Young:
$
$
$
$
Audit services
Statutory audit and review of the financial reports
- the Company
- the Unlisted Funds
Regulatory required audits
Other
Non-audit services
Taxation services
Total auditor’s remuneration
77
134,261
27,000
16,000
20,000
197,261
79,900
26,000
15,000
19,000
139,900
94,820
-
-
-
94,820
75,964
9,000
273,225 184,098 103,820
44,198
64,900
-
-
-
64,900
7,150
72,050
MAGELLAN FINANCIAL GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013
18.
Events Subsequent to Balance Date
On 28 June 2013, the Group launched the following three new funds:
o
Magellan Infrastructure Fund (Unhedged) (MIFU), a unit trust that invests in a focussed
global portfolio of listed infrastructure investments;
Magellan High Conviction Fund (MHCF), a unit trust that invests in a concentrated
portfolio of global equities; and
o
Magellan Global Fund (Hedged) (MGFH), a unit trust that invests in a focussed portfolio
o
of global equities.
The Company initially seeded the new Funds by way of a small cash investment and an in-specie
transfer for the Magellan High Conviction Fund, which is discussed further at note 8 d). These
funds were open to external investors from 1 July 2013 and for the period to 13 August 2013
MIFU, MHCF and MGFH have received approximately $1,360,000, $42,241,000 and $686,900 of
new fund inflows from external investors respectively. On 27 July 2013, the Company invested a
further $4,250,000 into the Magellan High Conviction Fund.
On 26 July 2013, ASIC consented to the repayment of the $1,150,000 loan the Company
provided to its wholly owned entity, Magellan Asset Management Limited (MAM). MAM
repaid the loan in full on 2 August 2013 (refer to note 14c)i) for further details).
On 31 July 2013, MAM, a member of the Group’s tax consolidated group was declared an Offshore
Banking Unit (OBU) by the Assistant Treasurer of Australia in the Commonwealth of Australia
Government Notices Gazette. Under the current legislation, assessable offshore banking (OB)
income derived from defined OB funds management and advisory activities provided to clients
outside of Australia and New Zealand, net of costs, will be subject to a concessional tax rate of
10%. Revenues earned from non-resident clients that are invested in the Group’s global equities
strategy meet the current definition of assessable OB income.
On 8 November 2012, MAM received authorisation from the Central Bank of Ireland to act as a
promoter and investment manager to Irish authorised collective investment schemes. In August
2013, MFG Investment Fund plc, a company incorporated in Ireland, sought approval by the
Central Bank of Ireland to be authorised under the European Communities (Undertakings for
Collective Investment in Transferable Securities (UCITS)) Regulations, and appoint MAM as
promoter and investment manager to a proposed initial sub-fund MFG Global Fund. MFG Global
Fund will offer the Group’s global equities strategy to global institutional clients. At the time of this
report, MFGIF has not received confirmation of its authorisation from the Central Bank of Ireland.
Other than the above, the Directors are not aware of any other matter or circumstance not
otherwise dealt with in this report that has significantly affected 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 years.
78
MAGELLAN FINANCIAL GROUP LIMITED
DIRECTORS DECLARATION
FOR THE YEAR ENDED 30 JUNE 2013
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 2013 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 and Corporations Regulations 2001; and
(b)
there are reasonable grounds to believe that the Company and Consolidated Entity will be
able to pay their 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 2013.
On behalf of the Board
Hamish M Douglass
Director
Sydney, 16 August 2013
79
MAGELLAN FINANCIAL GROUP LIMITED
INDEPENDENT AUDITOR’S REPORT
80
MAGELLAN FINANCIAL GROUP LIMITED
INDEPENDENT AUDITOR’S REPORT
81
MAGELLAN FINANCIAL GROUP LIMITED
CORPORATE GOVERNANCE STATEMENT
Overview
Magellan Financial Group Limited (MFG or Group) (ASX:MFG) is listed on the Australian Securities
Exchange (ASX). The Group, as a listed entity, must comply with the Corporations Act 2001(Cth)
(the Act), the ASX Listing Rules and other Australian and international laws. ASX Listing Rules
require the Group to report against the current version of the ASX Corporate Governance Council’s
Corporate Governance Principles and Recommendations (ASX Recommendations). Where, after
due deliberation, the Group's corporate governance practices differs from an ASX Corporate
Governance Council’s Corporate Governance Principles and Recommendation, the Group will set
out the reasons for the difference. The website contains copies of charters and policies mentioned
in this document.
Where one of MFG’s controlled entities have adopted their own policies and practices to deal with
specific matters relevant to their business, they align to this Statement.
1.
Governance Structures and Processes
1.1 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 has approved a
formal Charter which contains the Board’s role, powers, duties and functions. The Charter is
reviewed regularly, or whenever significant change occurs, to remain relevant to the Group and its
activities. The Board has retained all authority required by law and has specifically reserved the
following powers:
Appointment and removal of the Chairman, Chief Executive 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;
Assessing the performance of the Board and individual Directors and determining the
remuneration of Directors and Committee members;
Assessing the Group’s overall performance and approving the reports provided to
shareholders;
Providing strategic advice and direction to the Group’s senior management; and
Approval and oversight of the risk management and compliance framework and the
effective design and operation of its relevant controls, polices and processes.
1.2 Board Composition
The Group’s Constitution provides that there must be a minimum of three and a maximum of ten
Directors. The Board currently comprises five (5) Directors, three (3) of whom are independent
non-executive Directors. The Board actively seeks to maintain a balance of skills, knowledge and
experience to direct and oversee the activities of the Group. Details of each Director’s background
date of appointment and attendance at Board meetings are set out in the Directors’ Report.
Director remuneration is set out in the Remuneration Report. The Board considers that collectively
the Directors have an appropriate range of skills, experience and expertise to understand and
competently deal with current and emerging business issues and effectively monitor and review
the performance of the Group and exercise independent judgment.
82
MAGELLAN FINANCIAL GROUP LIMITED
CORPORATE GOVERNANCE STATEMENT
Chairman
1.3
The Chairman of the Board, Mr Chris Mackay, is an executive Director and a resident Australian
citizen. The Board has a different view to ASX Recommendation 2.4 of the need for the Chair to be
independent and considers that the Chairman’s experience and proven leadership is beneficial as
the primary link between management and the Board. More information about the Chairman’s
responsibilities is contained in the Group’s Board Charter.
1.4 Director Independence
The Board comprises a majority of independent non-executive Directors. An independent non-
executive Director is a non-executive Director who is independent of the Group and free of 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. In making
this determination, the Board has reviewed and assessed previous and current relationships. The
Board believes that Directors have sufficient time to discharge their responsibilities and individual
Director’s other commitments are shown in the Directors’ Report.
1.5 Board Audit and Risk Committee
The Board has established a Board Audit and Risk Committee. The Committee has been
established under a separate Charter which is available on the Group’s website. The Charter
contains the delegated role, responsibilities, functions and powers of the Committee and is
reviewed regularly, or whenever significant change occurs. The Committee allows the Board to
devote and focus time and effort that may not be possible at a wider Board meeting. The Board
appointed a majority of non-executive Directors to the Committee with due regard to the collective
and individual skills, experience and expertise of the Directors. The Board is aware that ASX
Recommendation 4.2 requests all members of the Committee be non-executive but is of the
opinion that the appointment of one executive director facilitates transparent and direct
accountability to the Committee and the Board.
The Chairman of the Committee is an independent, non-executive Director who is a resident of
Australia and not the Chairman of the Board. The role of the Committee is to oversee the Group’s
responsibilities relating to financial reporting, relevant statutory requirements, internal controls,
risk management functions and audit. Full details are in the Committee Charter which is available
on the Group’s website. The Committee will meet at minimum, four times each year. The
Chairman of the Committee will report to the Board in respect of each Committee meeting. During
the year, in accordance with the Committee’s Charter, the Committee conducts an appraisal of the
performance of the Committee’s members and the achievement of the Committee’s objectives.
1.6 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 Chairman of the Board. Where the Chairman 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 Chairman of the Board Audit and Risk Committee.
83
MAGELLAN FINANCIAL GROUP LIMITED
CORPORATE GOVERNANCE STATEMENT
1.7 Board Meetings
The Chairman, in conjunction with the Company Secretary, sets the agenda for the meeting. Any
Director may request an item to be raised in addition to the standing items which typically include
minutes and matters arising, periodic reviews, standing reports and specific proposals. Board
papers are sent in combinations of hard and electronic copy. At each meeting there is an
opportunity for the Board to meet and discuss matters without the executive directors and
members of management present. Directors are free to request and access any information they
feel is necessary to take fully-informed, risk-aware decisions.
1.8 Appointment, Induction, Succession Planning and Retirement of Directors and
Executives
The Board regularly reviews its skills, expertise and composition. The Board recognises ASX
Recommendation 2.4 on creating a Nominations Committee. After due consideration the Board has
retained both the responsibility for succession planning and renewal as well as any related
decisions. The Board is aware of the importance of Board renewal and takes each Director’s
tenure into account when reviewing its mix of skills, previous and current relationships,
competencies, time commitments, expertise and experience. The Board has decided that a
Director must retire from office no later than the later of the third annual general meeting of the
Group or three years following the Director’s last election or appointment.
Upon appointment to the Board, Directors are required to sign a letter which sets out the terms of
and conditions of their appointment. Directors are provided with induction training similar to that
provided to senior executives. Directors are expected to maintain the skills and knowledge
required to discharge their obligations. The Group has an induction program in place for all of its
new employees, including senior executives. As part of this induction program, new senior
executives will receive briefings on the Group’s business and its policies and procedures. These
briefings will focus on the core governance and corporate structures as well as key operational,
regulatory, risk and compliance issues that are of relevance to the Group.
Performance Evaluation of Directors and Senior Executives
1.9
Under the Board’s 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 as well as the collective and individual performance of
the Board and each Director. The review is conducted through a combination of written and verbal
communications and is discussed by the whole Board. An individual Director’s performance is
considered when the Board determines whether or not to support the Director for re-election. The
Chief Executive Officer undertakes annual performance reviews of each member of the senior
executive team.
Fair and Responsible Decision-Making
Conflicts of Interest
2.
2.1
The Board has adopted procedures to recognise, manage and monitor actual or perceived conflicts
of interest. Directors are required to disclose events or circumstances that may affect, or may be
perceived to affect, their ability to exercise independent judgement. Where a Director has an
actual or perceived conflict of interest, they must leave the meeting and take no part in any
discussion or decision-making regarding that matter.
84
MAGELLAN FINANCIAL GROUP LIMITED
CORPORATE GOVERNANCE STATEMENT
Code of Conduct
2.2
The Group has a Corporate Code of Conduct that applies to all Directors and employees of the
Group. The Board expects all Directors and employees to comply with the Code and failure to
comply with the Code is a serious matter and will be investigated. 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
Explain 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 website.
Trading Policy
2.3
The Group has a Trading Policy that sets out the circumstances in which the Group’s Directors and
employees may trade in the Group’s securities. The Policy states the Board’s expected behaviours
for Directors and employees who wish to trade in the Group’s securities. The Trading Policy
prohibits Directors from dealing when they are in possession of price-sensitive information that is
not generally available to the market and also places restrictions and notification requirements,
including the imposition of blackout periods, trading windows and the need to obtain pre-trade
approval. The Trading Policy aligns to the ASX Listing Rules and relevant guidelines. A copy of the
Group’s Trading Policy has been lodged with the Australian Securities Exchange(ASX) and is
available on the Group’s website.
2.4 Diversity
The Group recognises the value of attracting and retaining employees with different backgrounds,
knowledge, experience and abilities. The Group’s policy is to recruit and manage on the basis of
competence and performance regardless of age, race, gender, nationality, beliefs, sexuality,
physical ability or cultural background. The Board annually reviews the measurable objectives it
has set for to achieve improvement in the diversity of employees. The measurable objectives are
consistent with those identified last year to allow for accurate and cumulative measurement.
Position
Objective
Board of Directors
At least one-third of independent directors
to be female(A)
Senior
Management
Increase the representation of women in
senior management roles
Group
Increase the overall percentage of women
employed
Goal
33.33%
As at 30 June
2013
33.33%
Comparison
Performance
12.70%(B)
Achieved
40.00%
46.67%
10.10%(B)
Achieved
40.00%
36.84%
36.20%(C)
In Progress
(A) This acknowledges that the two founders and executive directors are male and it is not envisaged their Board
positions will change in the foreseeable future
(B) Benchmark averages have been taken from the 2012 Australian Census of Women in Leadership and relate to the
ASX200
(C) Workplace Gender Equality Agency: ABS (2013) Labour Force, Australia, Detailed, Quarterly, cat no 6291.0.55.003
The Group has adopted a Diversity Policy, a copy of which is available on the Group’s website.
85
MAGELLAN FINANCIAL GROUP LIMITED
CORPORATE GOVERNANCE STATEMENT
2.5 Remuneration Committee
ASX Recommendation 8.1 provides that the Board should establish a Remuneration Committee.
The Board has determined that remuneration is a decision reserved for the entire Board.
Remuneration for the independent non-executive Directors is set at market rates commensurate
with their responsibilities. Remuneration for employees is approved by the Board. Further
information is provided in the Remuneration Report.
Financial Reporting
Independent external audit and assurance
3.
3.1
The Group’s independent external auditor is Ernst & Young. The Audit and Risk 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.
The external auditors regularly attend the Committee’s meetings and when the Group’s Financial
Statements are being considered or where relevant items are on the Committee’s agenda. The
Group’s external auditors attend the Group’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’s in preparing the Financial Statements and the
independence of the auditors.
In respect of the year ending 30 June 2013 the Chief Executive Officer, Chief Operating 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.
Shareholders
Communication to Shareholders
4.
4.1
The Board recognises that shareholders, as the ultimate owners of the Group, are entitled to
accurate, timely and relevant information and should be fully informed of material matters that
affect the Group’s position and prospects. Any prospective investors should be able to make
informed investment decisions regarding the Group. It seeks to accomplish this through:
The release of the Group’s Half Year Results in February each year;
The release of the Group’s Full Year Results and Annual Report in August each year;
The release of the Chief Executive Officer’s Annual Letter to Shareholders each year;
The release of the Chairman’s and Chief Executive Officer’s addresses to the Annual General
Meeting; and
The posting of significant information on the Group’s website promptly after it is disclosed to
the market.
All information is available on the Group’s website after it has been disclosed to the ASX.
86
MAGELLAN FINANCIAL GROUP LIMITED
CORPORATE GOVERNANCE STATEMENT
Continuous Disclosure Policy
4.2
The Board has adopted a Continuous Disclosure Policy that assists with clear and effective
communication with shareholders by ensuring:
The Group as a minimum complies with its continuous disclosure obligations under the
Corporations Act 2001 and the ASX Listing Rules;
The Group 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 Group’s securities be identified and appropriately considered by
the Directors for disclosure to the market.
The Continuous Disclosure Policy is available on the website.
Shareholder Meetings
4.3
The Group recognises the importance of shareholder interaction and supports the principle of
participation. The Group holds its Annual General Meeting in October and a copy of the notice of
Annual General Meeting is posted on the Group’s website and 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 by the Chairman and Chief
Executive Officer at the Annual General Meeting are disclosed to the market.
The Group’s external auditor will 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 Auditor’s
Report.
Risk Management and Compliance
5.
5.1 Risk Management Responsibility
The Board is responsible for reviewing and approving the risk management framework and
associated policies and practices provided of the Group. The Board, through the Audit and Risk
Committee, is responsible for ensuring that:
The risk profile of the Group is accurate;
An effective system of risk management and internal controls has been adopted and
implemented;
There are adequate policies for the oversight and management risks to the Group;
Incidents have been identified, reported, escalated and resolved;
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.
5.2 Risk Management System
The Group understands that risk is inherent in its operations and that risk affects the Group’s
ability to meet its business objectives. The Group manages risk in an active manner to benefit
from opportunities and minimise negative impacts.
The Group recognises that risk management and compliance functions are only effective when a
robust and transparent corporate governance framework exists and is actively supported at all
levels of the organisation.
87
MAGELLAN FINANCIAL GROUP LIMITED
CORPORATE GOVERNANCE STATEMENT
5.2 Risk Management System (continued)
The Board has a strong, documented commitment to corporate governance that goes beyond the
absolute legal requirements to always act in the best interests of investors. The Board has a
proven and clearly communicated commitment to a risk aware and compliant culture. The Board
expects all staff to actively identify and report risks.
The Board reviews and approves the Risk Management Statement annually or whenever significant
change occurs. The Risk Management Statement is a clear, effective and robust structure with
defined, transparent and consistent lines of responsibility. Identified senior executives are
accountable and responsible for designing and consistently implementing and maintaining policies,
processes and systems for managing risk across the Group, consistent with risk capacity and risk
appetite. Notwithstanding the above, the Group recognises that risk events and incidents will take
place that realise impacts. In those circumstances, the Group will take aggressive and
comprehensive action to address the incidents, and establish new processes and controls to
minimise the chance of reoccurrence.
Table cross-referencing the Group’s disclosures with the ASX Corporate Governance Council’s
Corporate Governance Principles and Recommendations.
Principle and Recommendation
Group
Reference
Principle 1 – Lay solid foundations for management and oversight
1.1
Companies should establish the functions reserved to the board
and those delegated to senior executives and disclose those
functions.
Companies should disclose the process for evaluating the
performance of senior executives.
1.1, 3.1
1.1
Companies should provide the information indicated in the Guide to
reporting on Principle 1.
1.1, 3.1
1.2
1.3
Principle 2 – Structure the board to add value
2.1
A majority of the board should be independent directors.
2.2
2.3
2.4
2.5
2.6
The chair should be an independent director.
The roles of chair and chief executive officer should not be
exercised by the same individual.
The board should establish a nomination committee.
Companies should disclose the process for evaluating the
performance of the board, its committees and individual directors.
Companies should provide the information indicated in the Guide to
reporting on Principle 2.
Principle 3 - Promote ethical and responsible decision-making
Companies should establish a code of conduct and disclose the
3.1
code or a summary of the code as to:
• the practices necessary to maintain confidence in the Group’s
integrity
• the practices necessary to take into account their legal
obligations and the reasonable expectations of their stakeholders
• the responsibility and accountability of individuals for reporting
and investigating reports of unethical practices.
88
1.2, 1.3, 1.4, 1.8,
1.9
1.3, 1.4, 1.8, 1.9
1.3, 1.4, 1.8
1.2, 1.3, 1.8, 1.9
1.8, 1.9
1.1, 1.2, 1.3, 1.4,
1.7, 1.8, 1.9
1.6, 2.1, 2.2, 2.3,
3.1
MAGELLAN FINANCIAL GROUP LIMITED
CORPORATE GOVERNANCE STATEMENT
Principle and Recommendation
Group
Reference
Principle 3 - Promote ethical and responsible decision-making (continued)
3.2 Companies should establish a policy concerning diversity and
2.4
disclose the policy or a summary of that policy. The policy should
include requirements for the board to establish measurable
objectives for achieving gender diversity for the board to assess
annually both the objectives and progress in achieving them.
Companies should disclose in each annual report the measurable
objectives for achieving gender diversity set by the board in
accordance with the diversity policy and progress towards
achieving them.
Companies should disclose in each annual report the proportion of
women employees in the whole organisation, women in senior
executive positions and women on the board.
Companies should provide the information indicated in the Guide to
reporting on Principle 3.
3.3
3.4
3.5
Principle 4 - Safeguard integrity in financial reporting
The board should establish an audit committee.
4.1
The audit committee should be structured so that it:
4.2
• consists only of non-executive directors
• consists of a majority of independent directors
• is chaired by an independent chair, who is not chair of the board
• has at least three members.
The audit committee should have a formal charter.
Companies should provide the information indicated in the Guide to
reporting on Principle 4.
4.3
4.4
Principle 5 - Make timely and balanced disclosure
5.1
Companies should establish written policies designed to ensure
compliance with ASX Listing Rule disclosure requirements and to
ensure accountability at a senior executive level for that compliance
and disclose those policies or a summary of those policies.
Companies should provide the information indicated in the Guide to
reporting on Principle 5.
5.2
Principle 6 - Respect the rights of shareholders
6.1
Companies should design a communications policy for promoting
effective communication with shareholders and encouraging their
participation at general meetings and disclose their policy or a
summary of that policy.
Companies should provide the information indicated in the Guide to
reporting on Principle 6.
6.2
Principle 7- Recognise and manage risk
7.1
Companies should establish policies for the oversight and
management of material business risks and disclose a summary of
those policies.
89
2.4
2.4
1.6, 2.1, 2.2, 2.3,
2.4, 3.1
1.5, 1.6, 3.1
1.5, 1.6
1.5, 1.6
1.5, 1.6, 3.1
1.6, 2.3, 4.1, 4.2,
4.3
1.6, 2.3, 4.1, 4.2,
4.3
2.3, 4.1, 4.2, 4.3
2.3, 4.1, 4.2, 4.3
1.5, 1.6, 5.1, 5.2
MAGELLAN FINANCIAL GROUP LIMITED
CORPORATE GOVERNANCE STATEMENT
Principle and Recommendation
Principle 7- Recognise and manage risk (continued)
7.2
The board should require management to design and implement
the risk management and internal control system to manage the
Group's material business risks and report to it on whether those
risks are being managed effectively. The board should disclose that
management has reported to it as to the effectiveness of the
Group's management of its material business risks.
Group
Reference
1.5, 1.6, 5.1, 5.2
7.3
The board should disclose whether it has received assurance from
the chief executive officer (or equivalent) and the chief financial
officer (or equivalent) that the declaration provided in accordance
with section 295A of the Corporations Act is founded on a sound
system of risk management and internal control and that the
system is operating effectively in all material respects in relation to
financial reporting risks.
3.1
7.4
Companies should provide the information indicated in the Guide to
reporting on Principle 7.
1.5, 1.6, 3.1, 5.1,
5.2
Principle 8- Remunerate fairly and responsibly
8.1
8.2
The board should establish a remuneration committee.
The remuneration committee should be structured so that it:
• consists of a majority of independent directors
• is chaired by an independent chair
• has at least three members.
Companies should clearly distinguish the structure of non-executive
directors’ remuneration from that of executive directors and senior
executives.
Companies should provide the information indicated in the Guide to
reporting on Principle 8.
8.3
8.4
2.5
2.5
2.5
2.5
90
MAGELLAN FINANCIAL GROUP LIMITED
SHAREHOLDER INFORMATION
AS AT 13 AUGUST 2013
Distribution of Shareholders
The distribution of shareholders of the Company as at 13 August 2013 is presented below:
Distribution Schedule of Holdings
Number
of
Holders
Number of
Ordinary
Shares
Percentage
of Shares in
Issue
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
1,394
1,697
523
795
126
732,002
4,526,667
3,985,556
23,045,267
120,493,384
4,535 152,782,876
0.48
2.96
2.61
15.08
78.87
100.000
69
671
0.000
Twenty Largest Shareholders
The names of the twenty largest shareholders of the Company as at 13 August 2013 are listed
below:
Holder Name
Magellan Equities Pty Limited
Cavalane Holdings Pty Ltd
Midas Touch Investments Pty Ltd
Citicorp Nominees Pty Limited
National Nominees Limited
UBS Wealth Management Australia Nominees Pty Ltd
Nota Bene Investments Pty Ltd
JP Morgan Nominees Australia Limited
Emmanuel Capital Pty Ltd
HSBC Custody Nominees (Australia) Limited
Christopher John Mackay
ABN Amro Clearing Sydney Nominees Pty Ltd
Mr David Doyle
Netwealth Investments Limited
Aljamat Pty Ltd
PAJ Lewis Superannuation Fund Pty Ltd
PAJ Lewis Pty Ltd
BNP Paribas Nominees Pty Ltd (DRP)
Jash Pty Limited
Smallco Investment Manager Ltd
Number of
Ordinary
Shares
15,355,551
12,724,871
9,761,508
9,277,462
8,605,070
6,204,950
6,006,006
4,090,550
3,364,602
2,951,343
2,232,022
2,213,995
1,500,000
1,325,796
1,310,000
1,000,747
1,000,000
993,087
969,742
893,210
Percentage
of Shares in
Issue
10.05
8.33
6.39
6.07
5.63
4.06
3.93
2.68
2.20
1.93
1.46
1.45
0.98
0.87
0.86
0.66
0.66
0.65
0.64
0.59
Total shares held by the twenty largest shareholders
91,780,512
60.07
Total shares on issue
152,782,876
91
MAGELLAN FINANCIAL GROUP LIMITED
SHAREHOLDER INFORMATION
AS AT 13 AUGUST 2013
Substantial Shareholders
The names of the substantial shareholders appearing on the Company’s Register of Substantial
Shareholders at 13 August 2013 are listed below:
Shareholder
Chris Mackay and associates (1)
Cavalane Holdings Pty Ltd (2)
Hamish Douglass, Midas Touch Investments Pty Ltd and associates (3)(4)
Number of
Ordinary Shares
18,077,777
13,781,069
10,519,917
(1) Includes shares acquired after substantial shareholder notice lodged on 27 March 2008 – 16,830,301 shares
(2) As per latest substantial shareholder notice lodged on 16 February 2011
(3) Includes shares acquired after substantial shareholder notice lodged on 16 June 2009 – 9,408,448 shares.
(4) Mr Douglass holds 10,200,000 Class B Shares which at 30 June 2013 were entitled to convert into 9,732,697 ordinary
shares of the Company on 21 November 2016 (refer to note 11 c)iii) for further details).
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 ordinary shares and “MFGOC” for the listed MFG 2016
Options.
92
MAGELLAN FINANCIAL GROUP LIMITED
CORPORATE DIRECTORY
Directors
Chris Mackay – Chairman
Hamish Douglass – Managing Director and Chief Executive Officer
Brett Cairns
Paul Lewis
Naomi Milgrom AO
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 Registry
Boardroom Pty Limited
Level 7, 207 Kent Street
Sydney NSW 2000
Telephone: +61 2 9290 9600
Fax: +61 2 9279 0664
Email: enquiries@boardroomlimited.com.au
Securities Exchange Listing
Australian Securities Exchange
ASX code (ordinary shares): MFG
ASX code (listed options): MFGOC
Website
www.magellangroup.com.au
93
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