Magellan Financial Group Limited
Annual Report 2023
ABN 59 108 437 592
Five year summary
Group Results
Total Revenue
Total Expenses
Net Profit Before Tax
Net Profit After Tax
Adjusted Revenue and Other Income1
Adjusted Expenses1
Adjusted Net Profit Before Associates1
Adjusted Net Profit After Tax1
Effective Tax Rate
Funds Under Management2
Average Funds Under Management
Closing Funds Under Management
Funds Under Management comprises:
Retail
Institutional
Average Base Management Fee (per annum)3
Average AUD/USD Exchange Rate
Funds Management Business1
Total Revenue
Total Expenses
Net Profit Before Tax
Net Profit Before Tax and Performance Fees1
Employee Expenses / Total Expenses
Cost to Income Ratio (expense/revenue)
Cost to Income Ratio (excluding performance fees)
Assets
Total Assets
Net Assets
Net Tangible Assets Per Share
Shareholder Value
Basic Earnings Per Share
Diluted Earnings Per Share
Adjusted Basic and Diluted Earnings Per Share1
Total Dividends Per Share comprises:
Ordinary Dividends Per Share4
Special Dividends Per Share
Franking
Other Information
Number of Employees
Average Number of Employees
30 June
2023
30 June
2022
30 June
2021
30 June
2020
30 June
2019
431,650
163,372
255,570
182,655
379,352
126,774
185,842
174,310
28.5
48,849
39,693
18,396
21,297
67
0.6732
345,104
121,324
223,780
212,274
71.0
35.2
36.4
553,530
116,582
495,986
383,011
647,251
130,799
394,415
401,016
22.8
715,012
336,048
337,243
265,156
697,944
110,451
454,201
412,419
21.4
94,251
61,291
103,680
113,902
22,169
39,122
62
0.7257
609,137
125,807
483,330
471,858
67.9
20.7
21.0
30,883
83,019
61
0.7469
662,594
106,115
556,479
526,405
65.6
16.0
16.8
693,952
178,874
515,078
396,214
692,941
119,751
438,299
438,299
23.1
95,458
97,184
26,769
70,415
62
0.6716
674,811
116,799
558,012
477,048
63.2
17.3
19.7
617,387
124,050
493,337
376,947
577,251
104,024
364,225
364,225
23.6
75,819
86,718
23,216
63,502
62
0.7155
561,326
101,537
459,789
376,182
61.8
18.1
21.3
$'000
$'000
$'000
$'000
$'000
$'000
$'000
$'000
%
$m
$m
$m
$m
bps
$
$'000
$'000
$'000
$'000
%
%
%
$'000
$'000
$
1,198,974
962,502
4.71
1,241,401
1,026,760
4.95
1,216,166
989,434
4.77
1,123,873
1,045,927
5.08
800,291
734,022
3.44
cents
cents
cents
cents
cents
cents
%
100.0
100.0
95.5
116.7
86.7
30.0
85
115
125
206.9
206.9
216.6
179.0
179.0
-
75
135
137
144.6
144.6
224.9
211.2
211.2
-
75
139
135
218.3
218.3
241.5
214.9
214.9
-
75
131
128
213.1
213.1
205.9
185.2
185.2
-
75
125
125
1 Adjustments are made for strategic, non-recurring, non-cash or unrealised items to provide additional meaningful information (refer to section 1.4.1
of the Directors’ Report and note 2 in the financial statements for the breakdown of these items).
2 As reported in the Group’s funds under management ("FUM") announcements published on the Australian Securities Exchange ("ASX").
3 Calculated using management fees (excluding services and performance fees) for the relevant year divided by the average of month end FUM over
the same year.
4 Ordinary dividends include interim, final and performance fee dividends declared in respect of the financial year.
Where accounting classifications have changed, or where changes in accounting policy are adopted retrospectively, comparatives have been revised
and may differ from results previously reported. The above Consolidated Statement of Profit or Loss and Comprehensive Income and Consolidated
Statement of Financial Position extracts are derived from the published financial statements. This table includes non-IFRS information as defined in
section 1.4.2 of the Directors’ Report.
The annual financial report has been prepared in accordance with Australian Accounting Standards and the Corporations Act 2001 (Cth). MFG has also
released information to the ASX in compliance with the continuous disclosure requirements of the ASX Listing Rules and these announcements are
available at www.asx.com.au (MFG's ASX code: MFG).
Contents
Chairman's Letter
Chief Executive Officer's Letter
Performance Overview
Directors’ Report
Remuneration Report
Auditor's Independence Declaration
Financial Statements
Consolidated Statement of Profit or Loss and Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Financial Statements
1.
Basis of Preparation
Results for the Year
2.
3.
4.
5.
6.
Segment Information
Earnings Per Share
Revenue
Taxation
Reconciliation of Operating Cash Flows
Investments
7.
8.
9.
Financial Assets
Associates
Intangibles
Operating Assets and Liabilities
10.
11.
12.
13.
14.
Loans and Receivables
Leases
Payables
Employee Benefits
Financial Liabilities
Capital and Financial Instrument Risk Management
15.
16.
17.
18.
19.
20.
21.
22.
Capital Management
Contributed Equity
Reserves
Employee Share Option Plan
Dividends
Subsidiaries
Related Parties
Financial Instrument Risk Management
Other Items
23.
24.
25.
26.
Commitments and Contingent Assets and Liabilities
Parent Entity Information
Auditor Remuneration and Independence
Subsequent Events
Directors’ Declaration
Independent Auditor's Report
Corporate Sustainability and Responsibility Report
Corporate Information
Shareholder Information
4
7
11
20
27
44
45
46
47
48
49
49
51
54
54
56
58
59
61
63
64
66
66
67
68
69
69
70
71
72
73
74
75
79
79
80
81
82
83
90
102
103
Chairman's Letter
For the year ended 30 June 2023
Dear Shareholder,
It is a pleasure to present the 2023 Annual Report of Magellan Financial Group Ltd ("Magellan" or “Company”).
The past 12 months have been a year of transition for our Company, following a period of accelerated change. We welcomed our new
CEO and Managing Director, David George, and announced our five year strategy, which is designed to build upon the quality attributes
and strong foundations that Magellan maintains, whilst transforming the business into a more diversified global fund manager of scale
with a range of capabilities and offerings for our clients.
Meaningful transformation takes time, but we are making good progress in delivering stability and signs of performance improvement
are emerging. Importantly, our strong balance sheet provides an excellent platform from which to implement our long-term growth
strategy and undertake the capital management initiatives outlined below.
As announced yesterday, this letter will be my last as Chairman of the Company, as I transition to the role of Deputy Chairman and
hand over the role of Chair to Andrew Formica, who brings 30 years’ experience in leading and growing global funds management
businesses and will lead Magellan into its next phase. This is one of a number of changes to the Board of Magellan that we announced
yesterday as part of our ongoing Board renewal program.
Governance & Board Update
As I noted in my letter to you last year, the Board recognises the need for strong governance to restore confidence and maintain
stability. We have undertaken a Board review and embarked upon a renewal program, with the aim of strengthening governance and
ensuring we have the right skill mix, expertise, independence and diversity to support Magellan’s future strategic direction, whilst
balancing the need for continuity and retention of corporate knowledge.
This process of Board renewal commenced late last year, following the retirement of Karen Phin, with the appointment of David Dixon
as a Non-Executive Director with effect from 15 December 2022. David has over 30 years’ experience in the funds management
industry, with extensive experience as a senior investment leader, board trustee and director of companies and has held roles as Chief
Investment Officer, Equities at First Sentier Investors (formerly Colonial First State Global Asset Management) and Chief Investment
Officer at Insurance Australia Group Limited.
More recently, in July 2023, we also welcomed Andrew Formica as a Non-Executive Director to the Board, who will take on the role
of Chair of the Company with effect from today. Andrew has over 30 years’ industry experience, including 14 years in CEO positions.
Most recently, Andrew was Chief Executive Officer and Director of Jupiter Asset Management plc. Prior to this, Andrew was Co-CEO of
Janus Henderson Group plc, and before that was the Chief Executive and a Board member of Henderson Group plc from 2008, before
its merger with Janus Capital in 2017.
In addition to the above changes, we also announced the appointment of Mrs Deborah Page as a Non-Executive Director, effective from
3 October 2023. Deborah is a deeply experienced company director with broad experience spanning various ASX-listed, private, public
sector and regulated entities, including significant experience in the funds management industry, having held Chair roles at Pendal
Group Limited and Investa Listed Funds Management Limited. Deborah will become the Chair of the Audit and Risk Committee (ARC)
from October and will also join the Board of Magellan Asset Management Limited ("MAM") at that time, with David Dixon to serve as
Chair of the ARC in the interim.
Finally, we also announced that Robert Fraser retires from the Board of the Company, effective today. Robert will continue as the
Chairman of MAM, our main operating subsidiary and we look forward to continuing to work with him in this capacity. We thank Robert
for his devoted service to the Board of Magellan.
These changes demonstrate our commitment to Board renewal, as we seek to ensure Magellan’s Board has the right skill mix,
expertise, independence and diversity to support Magellan's future strategy.
Investment Team Leadership Update
In October 2022, we announced that David George had been appointed to the role of Chief Investment Officer (“CIO”), alongside
his role as Magellan’s Chief Executive Officer (“CEO”) & Managing Director. In addition, Gerald Stack, who leads our Infrastructure
Strategy, was appointed to the role of Deputy CIO.
These appointments were made to facilitate an objective and forensic review of the performance of Magellan’s Global Equities Strategy
and to assess and implement changes that were in the Group’s control to assist in improving performance. During this period,
Magellan Financial Group Limited | Annual Report 2023
Page 4
Chairman's Letter
For the year ended 30 June 2023
deliberate and considered changes were implemented to support investment performance and drive efficiency and collaboration in our
investment team.
Following these changes, we have been pleased to see improvements in collaboration and information flow, analyst engagement,
and improved processes. Investment performance in Magellan’s Global Equities Strategy has also seen early signs of improvement,
generating $11.0 million of performance fees in the 12 months to 30 June 2023.
As a result of structural improvements in the investment team, we today announce we will revert our investment team leadership to
its former ‘business as usual’ structure, with David as CEO and Managing Director and Gerald as Head of Investments.
Capital Management
We are committed to enhancing shareholder value and in recognition of your ongoing support, I am pleased to advise that, in addition
to the ordinary dividends declared by the Board today, a special dividend has been declared.
For the six months ended 30 June 2023, the Board has declared a Final Dividend of 35.6 cents per share (cps) and a
Performance Fee Dividend of 4.2 cps, taking the total ordinary dividends for the 2023 financial year to 86.7 cps, 85% franked.
In addition, the Board has also declared a Special Dividend of 30.0 cps which is 85% franked. In determining to pay a Special
Dividend the Board has balanced its objectives of delivering capital efficiency to shareholders with the availability of franking credits
and having regard to the abolishment of the Offshore Banking Unit regime from 1 July 2023.
In line with Magellan’s dividend policy, the Final Dividend represents a payout ratio of 90%-95% of net profit after tax of the Group’s
Funds Management business excluding performance fees, and the Performance Fee Dividend represents a payout of 90%-95% of net
crystallised performance fees after tax. The Final and Performance Fee Dividends will be paid together with the Special Dividend on
7 September 2023 to shareholders on the register as at 24 August 2023.
Magellan’s ordinary dividends and the Special Dividend mean that total dividends of $1.167 per share have been declared in
respect of FY23.
On 3 April 2023, we extended our on-market buyback program to buy back up to 10 million ordinary shares in the 12 month period to
3 April 2024. As at 30 June 2023, we have acquired 4.3 million shares at a cost of $47 million. We believe these capital management
initiatives, taken together, are consistent with our continuing aim to deliver capital efficiency, solid dividends and attractive returns
to shareholders.
Strategy & Progress
Magellan’s strategic focus is centred on our funds management business.
We continue to have significant scale across our three primary strategies (Global Equities, Infrastructure Equities and Australian
Equities) and our immediate priority has been to create stability and deliver the investment performance and risk profile that our clients
have come to expect from Magellan.
Over the longer term, our priority of ensuring we deliver on our strategies’ investment objectives must remain, while also generating
sustainable growth, as we become a more diverse global fund manager. This requires reducing reliance on individual funds and
portfolio managers by leveraging our existing capabilities and skill sets to build depth and to develop and deliver new strategies
organically that make sense for our clients. With our strong balance sheet, we also have the opportunity to expand our platform by
adding to these primary strategies through synergistic inorganic growth, in a disciplined and value-enhancing manner, but only if
appropriate opportunities arise.
Our CEO and Managing Director, David George, in his CEO Letter provides a detailed update on the progress we are making in
implementing our strategy and delivering on our FY23 priorities. I am pleased to report that we have made excellent progress in
delivering stability after a period of accelerated change.
Our People
Our people are our most valued asset, so as we focus on the future, a key priority has been to refresh and reaffirm our culture and
values, to drive high performance and career development and align teams to the long term success of Magellan.
Magellan Financial Group Limited | Annual Report 2023
Page 5
Chairman's Letter
For the year ended 30 June 2023
As we noted at the time of Magellan’s half year 2023 results in February, we accelerated the staff retention program announced in
March 2022, bringing forward the cash retention payments by one year, to September 2023 and September 2024 respectively in order
to optimise their value as incentives. For the 61% of our employees that have an outstanding Share Purchase Plan (“SPP”) loans, these
retention bonuses assist in reducing the employee loans under the SPP, which will be reduced by the ordinary and special dividends
declared by the Board today and are secured by MFG shares with substantial value. Following the final cash retention payment in
September 2024, the outstanding balance of employee loans will be significantly reduced. This allows employees to remain focused
on our clients and the business during a period of change, while also aligning with shareholder outcomes.
We continue to develop and implement an accountability and alignment model designed to ensure our employee value proposition
remains and staff are aligned to delivering positive client and shareholder outcomes.
Concluding Remarks
Looking forward, I am pleased to report that good progress has been made in building on the recent improvements in investment
performance and stabilising the business. However, much work remains to be done. The Group’s number one priority remains
delivering on our strategies’ investment objectives, which in turn will provide the foundation for revenue growth and returns for
shareholders over the long term.
Importantly, Magellan remains a globally significant asset manager with a robust balance sheet, strong cash flows and significant
competitive strengths in the form of highly experienced portfolio management teams, extensive research, and market leading
distribution and operational capabilities. We remain confident that these foundations position us well to deliver attractive returns to
shareholders in the future.
I would like to thank my fellow Directors on the Board and Magellan employees for their dedication and hard work this year. It has
been my privilege to serve as Chairman of the Company and I look forward to continuing in my capacity as Deputy Chairman.
Finally, I would like to thank you, our shareholders, for your ongoing support of Magellan.
Yours sincerely,
Hamish McLennan
Chairman
Magellan Financial Group Limited | Annual Report 2023
Page 6
Chief Executive Officer's Letter
For the year ended 30 June 2023
Dear Shareholder,
Thank you for the opportunity to provide you with an update on Magellan Financial Group Ltd’s (“Magellan” or “Company”) financial
performance for the 2023 financial year (“FY23”), as well as a progress report on our five-year strategy.
FY23 Financial Performance
For the twelve months ended 30 June 2023, Magellan reported Management and Performance Fee Revenue of $339.2 million (FY22:
$600.1 million), Adjusted Net Profit after Tax (NPAT) of $174.3 million (FY22: $401.0 million) and Statutory Net Profit After Tax of
$182.7 million (FY22: $383.0 million).
As at 30 June 2023, Magellan had $39.7 billion of FUM across its three primary strategies, Global Equities, Infrastructure Equities and
Australian Equities (via Airlie Funds Management), compared to $61.3 billion at 30 June 2022. The timing of outflows, particularly in
FY22, meant that FY23 average FUM declined by 48%.
These figures reflect the changes the Company has experienced over the recent past, and the reduction in funds under management
(FUM) that has resulted. Nevertheless, we have made solid progress on our FY23 priorities and are executing on our five-year strategy.
Our immediate strategic focus remains on driving investment performance across our investment strategies and delivering disciplined
cost and capital management. Of particular focus has been the Global Equities Strategy. I am pleased to report that we are seeing
early signs of improvement in investment performance in this strategy, with the Magellan Global Fund returning over 20% net of fees
over the 12 months to 30 June 2023, and outperforming the MSCI World NTR Index ($A) benchmark over the six months to 30 June
2023. Our Global Equities Strategy more broadly generated performance fees of $11.0 million for the year compared to $2.6 million
in performance fees generated by this strategy in FY22.
Over the course of the year, we balanced our disciplined approach to cost management with investing to support client outcomes,
and are pleased our Funds Management business operated below our FY23 expense guidance range of $125 to $130 million at
$121.3 million. This included $15.4 million of costs associated with the organisational realignment and the staff retention payments
which do not form part of the underlying cost base of the business. We will continue to maintain our disciplined approach to cost
management with our Funds Management business operating expenses expected to be in the range of $95 to $100 million in the 2024
financial year.
Magellan remains in a strong financial position with $853.7 million of Net Tangible Assets at 30 June 2023 including investments in
funds and associates, no debt and strong net cash flows from operating activities of $186.6 million in FY23.
Strategy Update
Our long-term strategy is designed to position Magellan for the next phase of its evolution by building upon our strengths to transition
into a more diversified global fund manager that delivers sustainable growth and attractive shareholder returns.
To deliver this, we are focussed on three key areas; delivering stability, short term growth opportunities and long term growth
opportunities, underpinned by ongoing disciplined capital and cost management and alignment of our employee value proposition with
client and shareholder outcomes.
Whilst we recognise that meaningful transformation takes time, we are making good progress, an update on which follows.
1. Delivering stability - improving the performance of our funds management business
First and foremost, our focus has been to ensure that all three of our primary investment strategies are delivering on their investment
objectives. When investment performance is strong, positive inflows follow. To this end, we have made considered and deliberate
changes this year to support investment performance and drive efficiency and collaboration throughout the business across the
different strategies.
What remains unchanged is our investment philosophy. We still believe investing in the world’s best companies is a path to creating and
protecting long term wealth, particularly in a high inflationary environment. All our existing strategies are designed to deliver attractive
risk-adjusted returns to investors over the long term and our three primary strategies have outperformed the applicable benchmarks
since inception.
The underperformance in recent years of our Global Equities Strategy has been an area of focus. In October last year we announced
changes to the investment team’s organisational structure that were aimed at facilitating improved collaboration and information flow
Magellan Financial Group Limited | Annual Report 2023
Page 7
Chief Executive Officer's Letter
For the year ended 30 June 2023
and thus improve investment decisions by our Portfolio Managers. Gerald Stack was appointed as Deputy CIO with the task of driving
analyst engagement and communication with portfolio managers. As CIO, my role was to provide an objective and forensic lens to
the recent performance outcomes of our Global Equities Strategy to assess and amend the areas where we were falling short, and to
determine ways of improving upon factors that were in our control – work which is largely completed.
Our portfolios are now managed by a portfolio management group who have the right combination of skills and experience to gain
the most leverage from our research engine whilst supporting and developing our up and coming portfolio managers. We have
also enhanced our investment frameworks with disciplined and well organised processes designed to drive excellence in portfolio
construction and stringent risk management.
As I mentioned earlier, it is encouraging to start seeing positive outcomes in the form of improved performance within our Global
Equities Strategy. As a result, the Board determined that we will be reverting back to our ‘business as usual’ structure with Gerald as
Head of Investments and myself as CEO and Managing Director.
Magellan’s Infrastructure Strategy remains a highly rated offering globally with a strong long-term performance track record. Our
strict definition of infrastructure means we only invest in assets that provide essential services and generate reliable cash flows, and
exclude businesses with high sensitivity to commodity price movements, competitive pressure or sovereign risk. The success of this
disciplined approach is demonstrated in the strategy’s performance over the longer term, creating returns which are highly defensive,
linked to inflation, and with low correlation to other asset classes. In recent times, the strategy’s relative performance against
the benchmark has been impacted by being structurally underweight to companies in sectors we exclude due to commodity-price
exposure, namely, those that benefited from the energy price spikes in 2022. This is to be expected, however, and is the trade-off of the
highly defensive nature of the portfolio which seeks to gain exposure to reliable, predictable long-term earnings and hence long-term
investment returns.
In March, we announced that Airlie Funds Management (“Airlie”) founder John Sevior was retiring. John left with Airlie in a very strong
position, having developed a solid succession plan and a highly capable team under his leadership. I would like to congratulate Matt
Williams, who is the new Head of Australian Equities, and Emma Fisher, who was promoted to the newly created Deputy Head of
Australian Equities, on their new roles. I have full confidence that Airlie will evolve under their leadership with the support of the
broader Airlie investment team. Emma and Matt are the portfolio managers of the Airlie Australian Share Fund (ticker: AASF), which
has maintained a strong track record, outperforming the S&P/ASX200 Accumulation Index since inception and over the past one, three
and five years as at 30 June 2023. Matt is an industry veteran with 30 years’ experience in investment management, including as Head
of Equities at Perpetual where he worked with John for a number of years, before joining Airlie in July 2016 as portfolio manager on
behalf of institutional clients and co-portfolio manager of the Airlie Australian Share Fund.
We have also been focussed on our industry leading distribution team to support stabilisation of the platform, including directing focus
to the way we service both retail and institutional clients and expanding our geographical reach. In preparation for the retirement of
Frank Casarotti on 31 December 2023 after a remarkable 40 year career, 16 of which were at Magellan building and leading one of
the most successful distribution and client service organisations in Australia, we have appointed Mark Burgess as the new Head of
Distribution & Marketing with effect from 1 July 2023. Frank will remain with us as a Senior Adviser until the end of the calendar year
to ensure a smooth transition. Mark has been in leadership roles within Magellan’s distribution team since August 2010 and with over
25 years’ experience in the industry is well known to our retail client base.
2. Near term growth opportunities - adjacent investing offerings
In parallel with improving performance across our existing funds, we also have well-defined growth opportunities to leverage our
existing investment capabilities to create strategies that solve for client needs in areas of growing demand from investors. Magellan
has invested over the years across product, distribution, marketing and operational capabilities and is well positioned to expand our
offerings on a high quality platform where this is additive and does not dilute Magellan’s existing strengths.
In February this year we launched our new Energy Transition Investment Strategy. This strategy leverages our extensive
infrastructure and sustainability research experience to identify and invest in companies that are positioned to benefit from the energy
transition as the world’s economy shifts to dramatically lower carbon intensity over a multi-decade cycle. Since its launch our activity
has focussed on introducing the strategy to global institutional consultants and clients that are seeking solutions in this area and are
planning to make it available to retail clients in time.
Magellan Financial Group Limited | Annual Report 2023
Page 8
Chief Executive Officer's Letter
For the year ended 30 June 2023
In March we relaunched our Magellan Core Series with positive initial feedback and solid investor interest to date. The investment
universe defined by Magellan’s forward-looking and fundamental research differentiates the Core Series, making it scalable and
offering a strong value proposition catered towards low-cost client requirements. Each version of the Core Series represents the
broadest exposure to the Magellan research engine, namely companies with sustainable earnings moats and strong management
teams that meet our stringent quality criteria.
Our new Airlie Small Companies Fund, was also launched in March. It is a retail fund that capitalises on the Airlie team’s strong
track record in the Australian market, making expansion into this segment a logical and synergistic near term growth opportunity. Small
cap equities in Australia is an area where high quality managers can generate consistent outperformance and an offering that clients
seek, and whilst still early days, we are pleased with the initial response to the new fund from the market.
3. Future growth opportunities - diversifying our funds and expanding the depth and breadth of our team
Longer term, our focus is on sustainable growth that thoughtfully reduces the risk associated with concentration in a small number of
strategies and individuals. This involves taking steps to broaden and deepen the mix of our funds under management and thoughtful
succession planning to future-proof Magellan against key person risk.
We are proactively looking at opportunities for growth in areas where there are increasing allocations in client portfolios such as
alternatives or private markets. Our distribution, marketing and operational capabilities built over many years provide us with a
competitive advantage that provide a unique value proposition for fund managers.
Importantly, our approach to inorganic growth is disciplined. Any acquisition or investment we make will be timely, strategic, scalable
and complementary to our existing business and ultimately create long-term shareholder value and sustainable revenue growth.
People
Our people are our most valued asset, so a key priority has been to refresh and reaffirm our culture and values, to drive high
performance and career development and align teams to the long-term success of Magellan, our shareholders and clients.
Earlier this month, we announced our refreshed Company values to the team, a key step in reaffirming our culture. The values put into
words the existing great culture of our team whilst also seeking to bring new energy and purpose to the business. Magellan’s values
are: ‘We invest in our people for excellence. We put clients first, take ownership, are authentic, and succeed together’. We believe these
values will drive our future success.
We continue to develop and implement our accountability and alignment model which is being developed by our new Head of Human
Resources, Melissa Pascoe, who joined the business following over 20 years at Macquarie Group and more recently, as Head of Human
Resources at ASX-listed Nuix Ltd. The model will ensure our employee value proposition remains and staff are aligned to delivering
positive client and shareholder outcomes.
The staff retention program announced in March 2022 was accelerated by bringing forward the cash payments to September 2023 and
September 2024 to enhance their value as incentives. These payments have been important to allow employees to remain focused
on clients and the business during a period of change and uncertainty, while also aligning with shareholder outcomes.
I would like to thank all our people who have continued to focus on delivering strong outcomes for our clients through this period.
Outlook
The business has many opportunities for growth and continued refinement. The review and refinement of what we have and where we
are going was a key characteristic of FY23 and will continue to be in FY24 as we build on the initiatives implemented and commenced
during the year. We will need to stay nimble in what will likely be a challenging economic environment whilst also remaining focused
on the existing strategies and looking for opportunities that address clients’ portfolio needs. We remain committed to delivering on our
investment strategies’ objectives and shareholder returns in a disciplined way.
Magellan Financial Group Limited | Annual Report 2023
Page 9
Chief Executive Officer's Letter
For the year ended 30 June 2023
Conclusion
We are one year into our five-year transformation program and while I am pleased with the progress we have made this year we still
have much to do.
Finally, I would like to thank you, our shareholders, for your ongoing support of Magellan.
David George
Chief Executive Officer and Managing Director
Magellan Financial Group Limited | Annual Report 2023
Page 10
Performance Overview
For the year ended 30 June 2023
Overview of Results
Magellan Financial Group Ltd ("Magellan" or the "Group") is a specialist asset manager that has three primary investment strategies:
•
•
•
Global Equities;
Infrastructure Equities; and
Australian Equities (via Airlie Funds Management).
Assets are managed on behalf of:
•
•
retail investors in Australia and New Zealand; and
institutional investors located in Australia and around the world.
The Group’s Funds Management segment is the core business and the main driver of the Group’s revenues, profitability and therefore,
dividends paid to shareholders. Funds under management (“FUM”) is the primary driver of the Group’s revenues as it determines the
level of management fees earned by the Group.
The Group’s financial performance for the year ended 30 June 2023 reflects an accelerated period of change over the recent past, and
the reduction in FUM that has resulted.
Average FUM for the year was down 48% to $48.8 billion (FY22: $94.3 billion). As at 30 June 2023, FUM was $39.7 billion.
The Group’s statutory net profit after tax for the year ended 30 June 2023 was $182.7 million (FY22: $383.0 million).
The Group’s adjusted net profit after tax for the year ended 30 June 2023 was $174.3 million (FY22: $401.0 million).
Adjusted earnings per share was 95.5 cents per share (FY22: 216.6 cents per share).
The Group believes adjusted net profit after tax provides meaningful information about the performance of the business, particularly
in comparative analysis. Adjusted financial measures for the period reflect:
•
•
•
•
•
non-cash amortisation expense of $3.6 million;
net unrealised gains from the Fund Investments segment of $50.5 million (net of tax: $35.3 million);
net non-cash remeasurement of share purchase agreement loans of $0.8 million;
net non-cash employee share option expense of $3.8 million; and
net non-cash expenses related to strategic initiatives of $26.6 million (net of tax: $18.6 million), which primarily reflect changes
in the fair value of Magellan’s liability to fund the 7.5% exercise discount in respect of the MGF Options.
Profit before tax and performance fees from the Group's Funds Management business was $212.3 million (FY22:
$471.9 million).
Fund Investments made a gain of $73.9 million before tax. This primarily comprised dividend and distribution income of $34.7 million
and net unrealised capital gains of $50.5 million, which were partially offset by net realised capital losses of $11.2 million. Earnings
from dividends and distributions and realised capital gains/losses are included in other revenue.
The Group’s share of the after-tax losses incurred by associate investments was $11.5 million.
The Directors have declared total ordinary and special dividends of 116.7 cents per share in respect of the year ended 30 June 2023.
This compares with 179.0 cents per share in the 2022 financial year. This comprises:
•
•
•
•
A Final Dividend in respect of the six months to 30 June 2023, of 35.6 cents per share, franked at 85% (68.9 cents per share, 80%
franked, in 2022) which will be paid on 7 September 2023;
An Interim Dividend of 46.9 cents per share paid in March 2023 (110.1 cents per share for the six months to 31 December 2021),
franked at 85%;
A Performance Fee Dividend of 4.2 cents per share (3.9 cents per share for the 12 months to 30 June 2022), franked at 85%; and
A Special Dividend of 30.0 cents per share, franked at 85%.
The dividends for FY23 reflect the Group’s disciplined capital management and ongoing commitment to return value to
Magellan’s shareholders.
Magellan Financial Group Limited | Annual Report 2023
Page 11
Performance Overview
For the year ended 30 June 2023
The Group’s policy is to pay Interim and Final Dividends of 90% to 95% of the net profit after tax of the Group’s Funds Management
business excluding performance fees. Net profit after tax of the Funds Management business excludes amortisation of intangibles,
expenses/benefits related to strategic initiatives and gains/losses from non-cash remeasurements.
In addition to the Interim and Final Dividends, the Group will pay an annual Performance Fee Dividend of 90% to 95% of the net
crystallised performance fees after tax. Any Performance Fee Dividend will be paid annually alongside the Final Dividend.
The Board has a policy of paying out franking credits to the maximum extent possible over time, however, the level of franking attached
to dividends may vary from period to period. The Offshore Banking Unit (“OBU”) regime was abolished from 1 July 2023. The changes
to the OBU regime will likely lead to higher levels of franking paid to shareholders in the future, subject to availability of franking credits.
The payment of dividends by the Group will be subject to corporate, legal and regulatory considerations.
Magellan Financial Group Limited | Annual Report 2023
Page 12
Performance Overview
For the year ended 30 June 2023
The following table summarises the Group’s profitability over the past two financial years1:
Management and services fees
Performance fees
Other revenue and income
Adjusted revenue and other income
Adjusted expenses
Adjusted net profit before tax
Adjusted tax expense
Adjusted net profit after tax and before associates
30 June
2023
$'000
330,247
11,524
37,581
379,352
30 June
2022
$'0001
592,634
11,472
43,145
647,251
(126,774)
(130,799)
252,578
(66,736)
185,842
516,452
(122,037)
394,415
Change
%
(44%)
0%
(13%)
(41%)
(3%)
(51%)
(45%)
(53%)
Share of after tax profit/(loss) of associates2
(11,532)
6,601
(275%)
Adjusted net profit after tax
174,310
401,016
(57%)
Net (expenses)/benefits related to strategic initiatives3
Amortisation of intangible assets
Net non-cash remeasurement of share purchase loans
Non-cash employee share option expense
Net unrealised change in fair value of financial assets and liabilities (after tax)
Net gain on dilutions and disposals of associates (after tax)
Total non-IFRS adjustments
(18,603)
(3,580)
(795)
(3,846)
35,348
(179)
8,345
15,814
(4,585)
(3,291)
(1,283)
(65,055)
40,395
(18,005)
nm
nm
nm
nm
nm
nm
Statutory net profit after tax
182,655
383,011
(52%)
Key statistics
Diluted earnings per share (cents per share)
Adjusted diluted earnings per share (cents per share)
Dividends
Interim and final dividends (cents per share)
Annual performance fee dividend (cents per share)
Total dividends (cents per share)
100.0
95.5
82.5
4.2
86.7
206.9
216.6
175.1
3.9
179
(52%)
(56%)
(53%)
8%
(52%)
1 Prior period comparatives have been restated to reflect non-cash employee share option expense of $1,283,000 on a basis consistent with the
current reporting period.
2 Share of after-tax profit/(loss) of associates of $12.4 million adjusted for tax on undistributed associate profit of $0.9 million. A reconciliation to the
reported statutory net profit is outlined in section 1.4.1 of the Directors' Report.
3 Principally comprises the change in value of the obligation associated with Magellan Global Fund ("MGF") Options issued under the MGF Partnership
Offer and Bonus MGF Option Issue.
Funds Management Segment
As at 30 June 2023, the Group’s Funds Management business had FUM of $39.7 billion. This segment is Magellan’s core business and
the driver of the Group’s revenues, profitability, and therefore, dividends paid to shareholders.
For the year ended 30 June 2023, the Funds Management segment profit before tax was $223.8 million (FY22: $483.3 million).
Excluding performance fees, profit before tax was $212.3 million (FY22: $471.9 million). The Funds Management segment profit
excludes amortisation of intangibles, expenses/benefits related to strategic initiatives, gains/losses from non-cash remeasurements
and non-cash expenses related to the employee share option plan.
1 Adjusted financial measures are adjusted for strategic, non-recurring, non-cash or unrealised items to provide additional meaningful information
(refer to section 1.4.1 of the Directors’ Report and note 2 in the financial statements for the breakdown of these items).
Magellan Financial Group Limited | Annual Report 2023
Page 13
Performance Overview
For the year ended 30 June 2023
The following table summarises the profitability of the Funds Management segment for the year ended 30 June 2023 compared with
the prior corresponding period:
30 June
2023
$'000
30 June
2022
$'0001
Change
%
Revenue
Management fees
Performance fees
Services fees
Other revenue and income
Expenses
Employee expenses
Fund administration and operational costs
Information, technology and data
Marketing
Other expenses
Net profit before tax
327,647
11,524
2,600
3,333
345,104
86,124
14,749
8,695
1,962
9,794
121,324
223,780
588,594
11,472
4,040
5,031
609,137
85,433
20,441
8,183
2,349
9,401
125,807
483,330
Net profit before tax and performance fees2
212,274
471,858
Key statistics
Average funds under management ($ million)
Average AUD/USD exchange rate
Average number of employees
Employee expenses / total expenses
Cost / income
Cost / income, excl. performance fees2
48,849
0.6732
125
71.0%
35.2%
36.4%
94,251
0.7257
137
67.9%
20.7%
21.0%
(44%)
0%
(36%)
(34%)
(43%)
1%
(28%)
6%
(16%)
4%
(4%)
(54%)
(55%)
(48%)
(7%)
(9%)
1 Prior period comparatives have been restated to reflect non-cash employee share option expense of $1,283,000 on a basis consistent with the
current reporting period.
2 Adjusted for the current period performance fee impact on revenue and expenses for the 12-month period.
Revenues
The primary component of the Group’s revenues is management fees, which are based on FUM.
Revenues for the year decreased by 43% to $345.1 million. This was driven by a 44% decrease in total management fee revenue, as
a result of a 48% decrease in average FUM over the period. Performance fees before tax of $11.5 million were earned for the year
(FY22: $11.5 million). Performance fees were mainly driven by the Group’s Global Equities Strategy which generated $11.0 million with
improved investment performance in the six months to 30 June 2023. Performance fees can, and very often do, vary significantly from
period to period.
Expenses
Funds Management segment expenses decreased by 4% from the prior corresponding period to $121.3 million, below the previously
provided guidance range of $125-$130 million. A key priority throughout the year has been to balance cost management with
investment to support client outcomes.
As a fund manager, Magellan’s business is heavily reliant on human capital and its people are fundamental to delivering value
for clients. Payments to employees increased by 1% to $86.1 million and made up 71% of the operating expenses of the Funds
Management segment in the year, compared with 68% in the prior corresponding period. Employee expenses during the period reflect
the impact of market wide wage inflation and the cost of retaining high quality talent. Employee expenses also included a $15.4 million
expense for staff cash retention payments and costs associated with the organisational realignment announced in March 2022 and
October 2022 respectively, which do not form part of the underlying cost base of the business. Staff cash retention payments are
expected to be significantly lower in FY24 and will cease from September 2024.
Magellan Financial Group Limited | Annual Report 2023
Page 14
Performance Overview
For the year ended 30 June 2023
During the period, the vesting of the cash retention payments under the staff retention program was brought forward by one year
from September 2024 and September 2025 to September 2023 and September 2024, respectively, to enhance the value of these
incentives. Employee expenses reflect this change in vesting. These payments, alongside the broader staff retention program, have
been important to allow employees to remain focused on clients and the business during a period of change and uncertainty, while
also aligning with shareholder outcomes.
Employee expenses include the costs associated with the organisational realignment announced in October 2022, however, exclude
the non-cash expense associated with the employee share option plan.
The following table sets out total employee numbers:
Investment
Portfolio Managers/Analysts
Dealers
Distribution & Marketing
Other (including Finance, Risk & Compliance, Admin)
Frontier
Airlie
Total
Average number of employees
30 Jun 2023
30 Jun 2022
25
3
28
231
471
8
9
115
125
32
3
35
36
46
9
9
135
137
1 As part of organisational changes, the Performance & Reporting team now report to the CFO/COO and have moved from being recorded under
"Distribution & Marketing" to "Other".
“Other” expenses within the Funds Management business for the period were down 13% mainly driven by savings in fund
administration and operational costs (down 28%) driven by lower FUM levels and unitholder activity as well as disciplined
cost management.
The Funds Management business cost to income ratio (excluding performance fees) was 36.4% compared with 21.0% for the year
ended 30 June 2023. The increase to Magellan’s cost to income ratio primarily reflects the decrease in revenue resulting from a
reduction in FUM during the period.
The Group continues to pay close attention to costs and has a disciplined cost management approach.
Magellan Financial Group Limited | Annual Report 2023
Page 15
Performance Overview
For the year ended 30 June 2023
Funds Under Management
The following table sets out the composition of Magellan's FUM:
Retail
Institutional
Total FUM ($ billion)
Retail (%)
Institutional (%)
FUM subject to performance fees (%)
Breakdown of FUM
Global equities
Infrastructure equities
Australian equities
Total FUM ($ billion)
Average base management fee (bps) per annum excluding performance fees1
30 June 2023
30 June 2022
18.4
21.3
39.7
46%
54%
47%
19.1
16.1
4.5
39.7
67
22.2
39.1
61.3
36%
64%
40%
33.3
20.1
7.9
61.3
62
1 Calculated as management fees (excluding performance and services fees) for the relevant period divided by the average of month end FUM over
the same period.
As at 30 June 2023, the Group had FUM of $39.7 billion, split between:
•
•
•
Global Equities (48%);
Infrastructure Equities (41%); and
Australian Equities (11%).
This compares with FUM of $61.3 billion at 30 June 2022. The decrease in FUM was driven by:
•
•
•
net outflows of $25.2 billion;
cash distributions paid (net of reinvestment) of approximately $0.7 billion; offset by
positive investment performance of approximately $4.3 billion.
The following table sets out the drivers of FUM changes for each investment strategy:
FUM by strategy ($ billions)
30 Jun
2022
1H23 Net
Flows
2H23 Net
Flows
Investment
Performance
Distributions
Global Equities
Infrastructure Equities
Australian Equities
Total
1 May not add due to rounding
33.3
20.1
7.9
61.3
(13.3)
(1.5)
(0.1)
(15.0)
(4.8)
(0.9)
(4.5)
(10.2)
4.4
(1.3)
1.3
4.3
(0.5)
(0.2)
(0.0)
(0.7)
30 Jun
20231
19.1
16.1
4.5
39.7
Set out in the table below is the investment performance since inception of the Magellan Global Fund, the Magellan Infrastructure Fund
and the Airlie Australian Share Fund.
Magellan Financial Group Limited | Annual Report 2023
Page 16
Performance Overview
For the year ended 30 June 2023
Investment Performance for the Period to
30 June 20231
6 months
1 Year
3 Years
5 Years
Magellan Global Fund3
MSCI World NTR Index ($A)
Magellan Infrastructure Fund
Infrastructure Benchmark ($A)4
Airlie Australian Share Fund
S&P/ASX 200 Accum. Index
%
18.1
17.2
2.3
2.5
4.3
4.5
%
20.6
22.4
(1.5)
1.8
18.1
14.8
% p.a.
% p.a.
5.6
13.4
4.2
9.3
13.5
11.1
9.1
11.4
3.7
4.2
9.0
7.2
Since
Inception
% p.a.2
10.8
7.6
6.9
5.2
9.8
7.7
1 Calculations are based on exit price with distributions reinvested, after ongoing fees and expenses but excluding individual tax, member fees and
2
entry fees (if applicable). Annualised performance is denoted with “p.a.” for the relevant period.
Inception date for the Magellan Global Fund and Magellan Infrastructure Fund is 1 July 2007 and the inception date for the Airlie Australian Share
Fund is 1 June 2018.
3 Performance for the Magellan Global Fund Open Class
4 The Infrastructure benchmark is comprised of the following: from inception to 31 December 2014 the benchmark is UBS Developed
Infrastructure and
Utilities NTR Index (AUD Hedged) and from 1 January 2015 onwards, the benchmark is the S&P Global Infrastructure NTR Index (AUD Hedged).
All three flagship funds have long-term investment horizons and have outperformed their relevant indices since inception. Magellan’s
investment philosophy remains unchanged and Magellan continues to believe that investing in the world’s best companies is a path
to creating and protecting long term wealth.
Net outflows have predominantly been driven by client outflows in the Global Equities Strategy, in part due to the recent relative
underperformance of the strategy. As a result, in October 2022, the Group made deliberate changes to address this. The Group’s
portfolios are now managed by a consolidated portfolio management group who have the right combination of skills and experience
to gain the most leverage from Magellan’s research engine. Whilst the Group continues to see challenging flows in its Global Equities
strategy, the Group has seen early signs of improvement in investment performance in the second half of FY23.
Magellan’s Infrastructure Equities Strategy remains a highly rated offering globally with a strong long-term performance track
record. Magellan’s strict definition of infrastructure means the strategy only invests in assets that provide essential services and
generate reliable cash flows, and exclude businesses with high sensitivity to commodity price movements, competitive pressure or
sovereign risk. The success of this disciplined approach is demonstrated in the strategy’s performance over the longer term, creating
returns which are highly defensive, linked to inflation, and with low correlation to other asset classes. In recent times, the strategy’s
relative performance against the benchmark has been impacted by being structurally underweight to companies in sectors excluded
by the strategy due to commodity-price exposure, namely, those that benefited from the energy price spikes in 2022. This is to
be expected, however, and is the trade off of the highly defensive nature of the portfolio which seeks to gain exposure to reliable,
predictable long-term earnings and hence long-term investment returns.
The Airlie Australian Share Fund (ASX: AASF / APIR: MGE9705AU) has established an exceptional track record and continues to
deliver strong investment performance with the strategy outperforming its benchmark over the past 1 year, 3 years, 5 years and since
inception, as at 30 June 2023.
With $39.7 billion of FUM as at 30 June 2023, Magellan remains a fund manager of scale, with a strong track record of product
innovation, superior long-term investment research capabilities, leading marketing and distribution networks and a robust balance
sheet, all of which provide a strong foundation to support the Group’s five-year strategy.
Whilst the immediate priority is ensuring that Magellan is consistently delivering the investment performance and risk profile that
investors have come to expect from its current strategies, the Group is also focused on becoming a more diverse business.
To this end, Magellan is harnessing the investment knowledge it has built over many years to bring new offerings to market, which
are supported by the Group’s outstanding operations and distribution capabilities. Magellan has a strong track record of this type of
innovation, and it remains an ongoing priority and continuous process.
In February this year, Magellan’s new Energy Transition Strategy was launched. This strategy leverages Magellan’s extensive
infrastructure and sustainability research experience to identify and invest in companies that are positioned to benefit from the energy
transition as the global economy shifts to dramatically lower carbon intensity over a multi-decade cycle. Since its launch, the Group
Magellan Financial Group Limited | Annual Report 2023
Page 17
Performance Overview
For the year ended 30 June 2023
has been focussed on introducing the strategy to global institutional advisers and clients and is planning to make it available to retail
clients in time.
In March 2023, the Magellan Core Series was relaunched with positive initial feedback and solid investor interest to date. The
investment universe defined by Magellan’s forward-looking and fundamental research differentiates the Core Series, making it scalable
and offering a strong value proposition catered towards low-cost client requirements. Each version of the Core Series represents the
broadest exposure to the Magellan research engine, namely, companies with sustainable earnings moats and strong management
teams that meet Magellan’s stringent quality criteria.
The Airlie Small Companies Fund, an unlisted retail fund, was also launched to retail investors in April 2023. It is a retail fund
that capitalises on the Airlie team’s strong track record in the Australian market, making expansion into this segment a logical
and synergistic near-term growth opportunity. Small cap equities in Australia is an area where high quality managers can generate
consistent outperformance and is an offering that clients seek.
Fund Investments
Fund Investments is a sub-set of the Group’s balance sheet and largely comprises investments in Magellan’s funds and seed portfolios
for new strategies and initiatives. The Group believes that maintaining a strong balance sheet which can withstand almost any market
condition is important for Magellan’s clients and shareholders, and Magellan intends to review its balance sheet investments in the
2024 financial year. The Group’s Fund Investments are important for multiple reasons, including:
•
•
•
alignment with clients through co-investment in Magellan’s investment strategies;
seeding new investment strategies; and
providing a meaningful level of liquid assets for operational risk purposes.
As at 30 June 2023, the Group had net Fund Investments of $392.0 million, compared with $358.4 million at 30 June 2022. The
following table sets out a summary of the Group’s Fund Investments as at 30 June 2023 and 30 June 2022:
Cash
Investments in:
Magellan funds1
Net seed portfolios
Other2
Total
Net deferred tax liability3
Net Fund Investments
Net Fund Investments per share (cents)4
1
Investments are set out in note 7 of the financial statements.
30 June 2023
$'m
30 June 2022
$'m
0.4
0.3
412.9
7.0
0.2
420.5
(28.5)
392.0
374.0
4.7
0.3
379.3
(20.9)
358.4
216.1
193.6
2 Comprises receivables and payables.
3 Arises from changes in the fair value of financial assets offset by the deferred tax asset relating to unused tax losses.
4 Based on 181,431,899 shares on issue at 30 June 2023 (June 2022: 185,088,872 ordinary shares).
The Group aims to earn satisfactory returns on its Fund Investments portfolio over time while maintaining capital strength to underpin
the Group’s business. Magellan has established a pre-tax return hurdle of 10% per annum over the business cycle for the Fund
Investments portfolio.
The Group’s Fund Investments portfolio has returned pre-tax 19.8%, 6.0% and 8.5% per annum over the last 1, 3 and 5 years to
30 June 2023 respectively. Excluding the effect of the Group’s previous investment in MFF Capital Investments Limited, disposed of by
way of an in-specie distribution to shareholders in February 2013, the portfolio returned pre-tax 10.4% per annum since inception from
1 July 2007. The inception date of 1 July 2007 has been chosen to reflect the first purchase date of the investments in the Magellan
Global Fund and the Magellan Infrastructure Fund.
Magellan Financial Group Limited | Annual Report 2023
Page 18
Performance Overview
For the year ended 30 June 2023
Associate Investments
As at 30 June 2023, Magellan held two investments in associates. These are held on Magellan’s balance sheet and are
managed separately:
•
•
36% economic interest (5% voting interest) in Barrenjoey Capital Partners Group Holdings Pty Limited (“Barrenjoey”), a recently
established full-service financial services firm; and
16%2 interest in FinClear Holdings Limited (“FinClear”), a provider of technology, infrastructure and ASX market-access services.
Associate investments delivered a post-tax loss of $11.5 million during the year ended 30 June 2023.
During the year, Barrenjoey largely completed the build out of its key business lines, with Fixed Income Derivatives, Equity Financing
and Private Capital going live. Barrenjoey continued its focus on growing market share and diversifying revenues during the period.
Establishment costs of the business are expected to decline materially in the 2024 financial year.
FinClear’s public equity markets business has been impacted by weaker market conditions during the year, however, it continues to
invest in growth opportunities, including its FCX platform, a secure DLT-based platform for investors and private companies. FinClear
is in the process of applying for a tier 2 market licence that would allow FCX to offer wholesale peer to peer trading of private capital
in a secondary market.
Magellan is a supportive shareholder in these businesses and will manage these investments with a view to maximising
shareholder value.
Capital Management
As at 30 June 2023 the Group’s financial position included:
•
•
•
•
investment assets (cash and cash equivalents, financial assets and investments in associates) of $945.3 million (June 2022:
$963.3 million). The Group’s cash position at 30 June 2023 was $373.4 million and current loans and receivables were
$58.3 million. Dividends of $126.6 million are due to be paid to shareholders on 7 September 2023;
total liabilities of $236.5 million (June 2022: $214.6 million) which relate predominantly to the Group's financial commitments
regarding the Magellan Global Fund Options, but also include payables, employee benefits, income tax payable and lease liabilities.
The Group has no debt and has access to an undrawn debt facility;
shareholders' funds of $962.5 million (June 2022: $1,026.8 million); and
net tangible assets per share of $4.71 (June 2022: $4.95).
As at 30 June 2023, Magellan had bought back 4,284,100 shares pursuant to its on-market share buy-back program of up to 10 million
ordinary fully paid shares (representing 5.4% of shares on issue at announcement). The buy-back program was extended for a further
12 months in April 2023 and will remain in place until April 2024.
Magellan remains committed to an ongoing disciplined approach to capital management which aims to deliver capital efficiency and
attractive returns for shareholders.
2 Excluding the impact of any potential dilution arising from unexercised issued options.
Magellan Financial Group Limited | Annual Report 2023
Page 19
Directors’ Report
For the year ended 30 June 2023
The Directors present their report together with the financial statements of Magellan Financial Group Limited (the “Company” or
“MFG”) and its controlled entities, which together form the Group, for the year ended 30 June 2023.
1. Operations and Activities
1.1. Company Overview
The Company is a listed public company incorporated in Australia. The Group’s main operating company is Magellan Asset
Management Limited (“MAM”). The shares of the Company are publicly traded on the Australian Securities Exchange ("ASX") under
ASX Code: MFG.
The Company’s principal place of business is Level 36, 25 Martin Place, Sydney, New South Wales, 2000.
1.2. Principal Activity
The principal activity of the Group is the provision of funds management services to high net worth and retail investors in Australia
and New Zealand, and to institutional investors globally.
1.3. Dividends
During the year ended 30 June 2023, dividends amounting to $212,655,000 were paid representing 115.8 cents per ordinary share
(June 2022: $414,179,000 representing 224.2 cents per ordinary share).
On 18 August 2023, the Directors declared total dividends of 69.8 cents per ordinary share (85% franked) in respect of the six months
to 30 June 2023 (June 2022: 68.9 cents per ordinary share 80% franked). These dividends comprise a Final Dividend of 35.6 cents per
ordinary share, a Performance Fee Dividend of 4.2 cents per ordinary share and a Special Dividend of 30.0 cents per ordinary share
(June 2022: Final Dividend of 65.0 cents per ordinary share and a Performance Fee Dividend of 3.9 cents per ordinary share). The total
amount of the Final, Performance Fee and Special Dividend (which is not recognised as a liability as at 30 June 2023) is approximately
$126,639,000 (June 2022: $127,526,000) and is expected to be paid on 7 September 2023.
The Company’s policy is to pay Interim and Final Dividends of 90% to 95% of the net profit after tax of the Group’s funds management
business excluding performance fees. Net profit after tax of the funds management business excludes amortisation of intangibles,
expenses/benefits related to strategic initiatives and gains/losses from non-cash remeasurements. In addition to the Interim and Final
Dividends, the Directors will pay an annual Performance Fee Dividend of 90% to 95% of net crystallised performance fees after tax.
Any Performance Fee Dividend will be paid annually with the Final Dividend. The payment of dividends by the Group will be subject
to corporate, legal and regulatory considerations.
1.4. Review of Financial Results and Operations
Information relating to the Group's operations, the results of those operations and the Group's financial position is included in the
Performance Overview on page 11 of this report and in this section.
Information relating to the Group's business strategies, prospects for future financial years and likely developments in its operations
is included in the Chief Executive Officer's Letter on page 7 of this report.
Other than the information included in the sections of this report referred to above, information on other business strategies, prospects
for future financial years and likely developments has not been included as it would likely result in unreasonable prejudice to the Group.
1.4.1. Reconciliation of Net Profit After Tax to Adjusted Net Profit After Tax
The Group’s net profit after tax (“Statutory net profit”) and earnings per share are prepared in accordance with Australian Accounting
Standards. The Group also reports a number of non-International Financial Reporting Standards ("non-IFRS") financial measures
including "adjusted revenue and other income", "adjusted net profit before associates", "adjusted net profit after tax" and "adjusted
basic and diluted EPS" which are shown on the next page. Refer to section 1.4.2 for further details on non-IFRS financial measures.
The Group’s statutory net profit after tax for the year ended 30 June 2023 was $182,655,000, down $200,356,000 on the prior year.
The Group’s adjusted net profit after tax was $174,310,000 (June 2022: $401,016,000) which takes into account various non-IFRS
adjustments as shown on the following page.
Magellan Financial Group Limited | Annual Report 2023
Page 20
Directors’ Report
For the year ended 30 June 2023
30 June 2023
30 June 20221
Statutory
$'000
Non-IFRS
$'000
Statutory
$'000
Non-IFRS
$'000
Management and services fees
Performance fees
Other revenue and income
Total revenue and other income
Adjust for: net unrealised change in fair value of financial assets
and liabilities
Adjust for: non-cash interest related to share purchase loans
Adjusted revenue and other income
Total expenses
Adjust for: net expenses/(benefits) related to strategic initiatives2
Adjust for: amortisation of intangible assets
Adjust for: non-cash expenses related to share purchase loans
Adjust for: non-cash employee share option expense
Adjusted expenses
Income tax
Adjust for: tax on above adjustments
Adjust for: tax on undistributed associate profit
Adjust for: tax on gain from associate dilutions and disposals
Adjusted income tax
Adjusted net profit before associates
330,247
11,524
89,879
431,650
(163,372)
(72,915)
Share of after-tax profit/(loss) of associates
Adjust for: tax on undistributed associate profit
Net gain/(loss) on dilutions and disposals of associates
Adjust for: net gain on dilutions and disposals of associates
(12,453)
(255)
330,247
11,524
89,879
431,650
(50,497)
(1,801)
379,352
(163,372)
26,576
3,580
2,596
3,846
(126,774)
(72,915)
7,176
(921)
(76)
(66,736)
185,842
(12,453)
921
(255)
255
592,634
11,472
(50,576)
553,530
(116,582)
(112,975)
8,381
50,657
592,634
11,472
(50,576)
553,530
92,937
784
647,251
(116,582)
(22,592)
4,585
2,507
1,283
(130,799)
(112,975)
(21,104)
1,780
10,262
(122,037)
394,415
8,381
(1,780)
50,657
(50,657)
Net profit after tax
Adjusted net profit after tax
182,655
383,011
174,310
401,016
Basic and diluted earnings per share
Adjusted basic and diluted earnings per share
100.0
206.9
95.5
216.6
1 Prior period comparatives has been restated to reflect non-cash employee share option expense of $1,283,000 on a basis consistent with the current
reporting period.
2 Principally comprises the change in value of the obligation associated with Magellan Global Fund ("MGF") Options issued under the MGF Partnership
Offer and Bonus MGF Option Issue.
1.4.2. Non-IFRS Financial Measures
Non-IFRS financial measures are measures that are not defined or specified under IFRS. The Directors believe non-IFRS
financial measures assist in providing additional meaningful information about the performance of the business and period-to-
period comparability by adjusting for strategic, non-recurring, non-cash or unrealised items which affect the Group’s statutory
financial results.
Non-IFRS financial measures should be viewed in addition to, and not as a substitute for, the Group’s statutory results. These measures
may also differ from non-IFRS measures used by other companies.
The Group’s non-IFRS financial measures are presented with reference to the Australian Securities & Investments Commission
("ASIC") Regulatory Guide 230 Disclosing non-IFRS financial information, issued in December 2011. Non-IFRS financial measures are
not subject to audit or review.
Magellan Financial Group Limited | Annual Report 2023
Page 21
Directors’ Report
For the year ended 30 June 2023
1.4.3. Statement of Financial Position
The Group is in a strong financial position and at 30 June 2023 reported:
•
investment assets (cash and cash equivalents, financial assets and investments in associates) of $945,341,000 (June
2022: $963,305,000);
shareholders’ funds of $962,502,000 (June 2022: $1,026,760,000); and
NTA per share of $4.71 (June 2022: $4.95).
•
•
The Group has access to $150,000,000 through a revolving debt facility. The Group may use the facility to finance the partnership
benefits it has undertaken to fund as part of the MGF Partnership Offer.
1.5. Significant Changes in the State of Affairs
There were no significant changes in the state of affairs of the Group during the year ended 30 June 2023 other than as disclosed in
this report.
1.6. Events Subsequent to the End of the Financial Year
Other than the items noted below, 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 results of those operations or the state
of affairs of the Group in subsequent financial periods.
Dividend
Refer to section 1.3 for details of the dividend declared in respect of the six months ended 30 June 2023.
Board renewal
On 17 August 2023, the following changes were announced with the aim of strengthening governance and ensuring the MFG Board
has the right skill mix, expertise, independence and diversity to support Magellan’s future strategic direction, whilst balancing the need
for continuity and retention of corporate knowledge:
• Mr Andrew Formica will take on the role of Chair with effect from 9am on 18 August 2023;
• Mr Hamish McLennan will take on the role of Deputy Chair with effect from 9am on 18 August 2023;
• Mrs Deborah Page AM is appointed a Non-Executive Director with effect from 3 October 2023;
• Mr David Dixon will serve as Chair of the Audit and Risk Committee with effect from 9am on 18 August 2023, on an interim basis,
until the role is taken up by Mrs Page on 3 October 2023; and
• Mr Robert Fraser will retire from the Board with effect from 9am on 18 August 2023, however he will continue as the Chair of the
main operating subsidiary, MAM.
Funds Under Management
On 4 August 2023, the Company announced on the ASX announcements platform that its funds under management was $39.2 billion
as at 31 July 2023.
1.7. Auditor
Ernst & Young continues in office in accordance with section 327 of the Corporation Act 2001 (Cth) and a copy of the Auditor’s
Independence Declaration as required under section 307C of the Corporations Act 2001 (Cth) is set out on page 44.
Non-Audit Services
The Audit & Risk Committee has reviewed details of the amounts paid and payable for non-audit services provided by the Group's
auditors, Ernst & Young and Plante Moran, to the Group during the year ended 30 June 2023.
The Directors, in accordance with advice received from the Audit & Risk Committee, are satisfied that the provision of non-audit
services by the auditors did not compromise the auditor independence requirements of the Corporations Act 2001 (Cth) for the
following reasons:
•
all non-audit services have been reviewed by the Audit & Risk Committee to ensure that they did not impact the impartiality and
objectivity of the auditors;
the Board's own review conducted in conjunction with the Audit & Risk Committee concluded that the auditor independence was
not compromised, having regard to the Board's policy with respect to the engagement of auditors; and
none of the non-audit services provided by Ernst & Young or Plante Moran during the year had the characteristics of management,
decision making, self review, advocacy or joint sharing of risks.
•
•
Magellan Financial Group Limited | Annual Report 2023
Page 22
Directors’ Report
For the year ended 30 June 2023
For details regarding non-audit services provided by the auditors, fees paid to the auditors along with auditor tenure, refer to note 25
to the financial statements.
1.8. Rounding of Amounts
The Company is an entity to which the ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191 applies and,
in accordance with that Legislative Instrument, amounts in the Directors’ Report and the financial statements have been rounded to
the nearest thousand dollars unless stated otherwise.
2. Directors and Officers
The Directors of the Company during the year and up to the date of this report were:
Hamish McLennan
Robert Fraser1
David George
David Dixon
John Eales
Andrew Formica
Colette Garnsey
Karen Phin
Chair, Independent Non-Executive Director
Deputy Chair, Independent Non-Executive Director
Chief Executive Officer and Chief Investment Officer
Independent Non-Executive Director
Independent Non-Executive Director
Independent Non-Executive Director
Independent Non-Executive Director
Independent Non-Executive Director
Appointed
Resigned
1 March 2016
23 April 2014
19 July 20222
15 December 20223
1 July 2017
26 July 2023
30 November 2020
23 April 2014
-
-
-
-
-
-
-
20 October 2022
1 Mr Fraser is the Chair of Magellan Asset Management Limited ("MAM"), the Group's principal operating subsidiary.
2 Mr George was appointed Chief Executive Officer and Managing Director on 19 July 2022. He was subsequently appointed Chief Investment Officer
on 17 October 2022.
3 Mr Dixon was appointed a Director of MAM on 1 November 2022.
Secretary
Marcia Venegas has been Company Secretary since 2019.
Information on Directors and Officers
Hamish McLennan
Chair and Independent Non-Executive Director
Committees: Member of the Audit & Risk Committee and the Remuneration & Nominations Committee
Hamish has over 30 years of experience in the media industry. He is currently Chairman of REA Group Limited (appointed February
2012 and Chairman since April 2012), a global online real estate advertising company, Chairman of ARN Media (formerly HT&E
Limited, appointed October 2018), an Australian media and entertainment company, and Chairman of Rugby Australia (appointed June
2020). Hamish is also a Non-Executive Director of the tech firm Claim Central Consolidated (since January 2020) and an independent
director of Light & Wonder, a US gaming company (since November 2020). He was previously Executive Vice President, Office of the
Chairman, News Corporation, and Global Chairman & CEO of Young & Rubicam (Y&R) in New York, part of WPP, the world’s largest
communications services group. Hamish joined Young & Rubicam in 2002 as Chairman and CEO of Y&R Brands Australia/New Zealand,
one of the largest marketing services groups in Australasia, and led the firm’s global business operations from 2006 to 2011. He was
also previously Executive Chairman and Chief Executive Officer (March 2014 to July 2015) and Chief Executive Officer and Managing
Director (February 2013 to March 2014) of Australian media company Ten Network Holdings Limited. He has previously served on the
Boards of Directors for the United Negro College Fund (UNCF) and the US Ad Council.
Robert Fraser
Deputy Chair and Independent Non-Executive Director
Committees: Chair of the Audit & Risk Committee and member of the Remuneration & Nominations Committee
Robert is a company director and corporate adviser with 35 years of investment banking experience, specialising in mergers and
takeovers, corporate and financial analysis, capital management, equity capital markets and corporate governance.
Robert is currently the Managing Director of TC Corporate Pty Limited, the corporate advisory division of Taylor Collison Limited
stockbrokers of which he is a Director and Principal. He is the Non-Executive Chairman of ARB Corporation Limited (Non-Executive
Director since February 2004 and Chairman since September 2022). Robert is also a Non-Executive Director of F.F.I. Holdings
Limited (since October 2011) and MFF Capital Investments Limited (since May 2019). He is the President of the Muscular Dystrophy
Association of New South Wales.
Magellan Financial Group Limited | Annual Report 2023
Page 23
Directors’ Report
For the year ended 30 June 2023
Robert has a Bachelor of Economics and Bachelor of Laws (Hons) degrees from the University of Sydney and is also qualified as a
licensed business broker, licensed real estate agent and a registered tax (financial) adviser.
David George
Chief Executive Officer and Chief Investment Officer
David’s career spans over 20 years in institutional investment management across analytical roles, investment management and
organisational leadership in Australia and Canada. Most recently, David spent 14 years at the Future Fund (Australia’s Sovereign Wealth
Fund). This included roles evaluating and investing alongside external investment managers, leadership of a sector team, and finally as
Deputy Chief Investment Officer, Public Markets with responsibility for equities, credit, derivative overlays, public market alternatives,
cash and treasury. David also served as a member of the firm-wide Senior Management Team and on all relevant internal investment
portfolio management and risk committees.
Prior to the Future Fund, David held senior roles at Mercer Investment Consulting, the Royal Bank of Canada and Integra Capital
Management. David is a CFA and CAIA Charterholder and holds a Bachelor of Arts (Economics) degree from Western University
in Canada.
David Dixon
Independent Non-Executive Director
Committees: Member of the Audit & Risk Committee and the Remuneration & Nominations Committee
David Dixon has over 30 years’ experience in leading and growing investment businesses within the funds management industry. He
has extensive experience as a senior investment leader, board trustee and director of companies. From 2013 to 2020, David was Chief
Investment Officer, Equities at First Sentier Investors (formerly Colonial First State Global Asset Management) (“FSI”). In this role,
David was responsible for the Australian based equity teams managing domestic and international equities. He also was responsible
for the global equities dealing teams in Australia and overseas. From 2003 to 2013 he was FSI’s Global Chief Investment Officer, where
he was responsible for the investment functions within the entity, of the Australian and global equities, global infrastructure, global
resources, global property, quantitative equities, fixed income, private equity investments, economics and market research.
Prior to FSI, David was the Head of Equities (1995 to 2002) and Chief Investment Officer (2002 to 2003) at Insurance Australia Group
Limited. From 1986 to 1995 he held numerous roles at Westpac Investment Management including equity analyst, portfolio manager
and Head of Corporate Research.
David is currently a Non-Director Member of the Aware Super Investment Committee (appointed January 2021). He also previously
held directorial roles across a number of Commonwealth Bank of Australia subsidiaries within the Wealth Management division along
with member roles on ASIC's Market Supervision Advisory Panel and the Financial Services Council Investment Board.
David was awarded the Financial Services Council Industry Excellence Award in 2012. He holds a Bachelor of Business (Finance and
Economics) from the University of Technology Sydney.
John Eales AM
Independent Non-Executive Director
Committees: Chair of the Remuneration & Nominations Committee and member of the Audit & Risk Committee
John graduated from the University of Queensland in 1991 and enjoyed a 10 year international sporting career with the Australian
rugby team from 1991, captaining the Wallabies from 1996 until 2001.
John has served as an executive, adviser, director and investor in a number of listed and unlisted private organisations. John
co-founded the Mettle Group in 2003 – a corporate consultancy which was acquired by Chandler Macleod in 2007.
John is currently Chairman of Trajan Group (since March 2021) and also serves on the Boards of Flight Centre Travel Group (since
September 2012), FUJIFILM Data Management Solutions Pty Ltd and Executive Health Solutions. He continues to serve as a consultant
to major Australian companies, including Westpac. John is the author of two books, Learning from Legends Sport and Learning from
Legends Business. He is the Chair of the World Rugby Hall of Fame Selection Panel and was on the Rugby Australia Bid Advisory
Committee for the Rugby World Cup 2027.
He was made a Member of the Order of Australia in 1999 for services to the community and rugby and is a Patron of the Melanoma
Foundation, Hearts in Union and the Champagnat Trust.
John holds a Bachelor of Arts from the University of Queensland and is a graduate of the Australian Institute of Company Directors.
Magellan Financial Group Limited | Annual Report 2023
Page 24
Directors’ Report
For the year ended 30 June 2023
Andrew Formica
Independent Non-Executive Director
Committees: Member of the Audit & Risk Committee and the Remuneration & Nominations Committee
Andrew Formica has 30 years’ experience in leading and growing investment businesses within the funds management industry
globally, 14 years of which were as CEO. Most recently, Andrew was CEO and Director of Jupiter Asset Management plc, where he
served from March 2019 to September 2022. Prior to this, Andrew was Co-CEO of Janus Henderson Group plc, and prior was the
Chief Executive and a Board member of Henderson Group plc (“Henderson”) from 2008 before the merger with Janus Capital in
2017. Andrew was at Henderson and its prior business from 1993 and held various senior roles, including Joint Managing Director
of Henderson’s Listed Assets business (from September 2006) and Head of Equities (from September 2004). In the early part of his
career, Andrew was an equities portfolio manager and analyst for AMPAM and Henderson.
Andrew is a Fellow of the Institute of Actuaries both in the UK and Australia. Andrew was also previously Deputy Chairman of the Board
of the Investment Association and formerly a Board member of Hammerson Group plc.
Andrew earned a master’s degree in Economics from Macquarie University in 1992 and an MBA from London Business School in 2001.
Colette Garnsey OAM
Independent Non-Executive Director
Committees: Member of the Audit & Risk Committee and the Remuneration & Nominations Committee
Colette has over 40 years of experience in retail, marketing and distribution and played a key role in the development and growth of
the Australian retail industry using her established experience in branding, consumer insights, digital and marketing.
Colette is currently Chair of Laser Clinics Australia (appointed to the Board in November 2020 and Chairman since October 2021). She
also serves as a Director of Flight Centre Travel Group (since February 2018), Seven West Media Limited (since December 2018) and
Loreto Normanhurst (since January 2021).
Colette has previously held senior roles with David Jones, Pacific Brands and Premier Investments. She has also held directorial and
advisory positions for government boards and not-for-profit enterprises, including the CSIRO (1997 to 2001), Australian Government
Innovation Council (2010 to 2012), Federal Trade and Investment Ministers (2014 to 2018), Australian Fashion Week (1998 to 2009)
and the Melbourne Fashion Festival (2006 to 2013).
Colette was awarded the Medal of the Order of Australia in 2012 for services to business and professional organisations. She holds an
Executive MBA from the Graduate School of Business at Stanford University.
Marcia Venegas
Company Secretary
Marcia was appointed Company Secretary of the Company on 20 March 2019. Marcia also holds the role of Chief Risk Officer and Chief
Compliance Officer. Prior to joining the Group in November 2015, Marcia was Chief Compliance Officer at Platinum Asset Management
in Sydney and held senior roles including Chief Compliance Officer at Dodge & Cox in the US. Marcia brings more than 20 years
of experience in the financial services industry in Australia and the US, during which time she has been responsible for compliance
with national and international regulatory requirements, the development and maintenance of governance, risk and compliance
frameworks, licensing, proxy voting, training and liaising with regulators, auditors and clients. Marcia holds a Bachelor of Arts from the
University of Wollongong.
Former Director
Karen Phin
Independent Non-Executive Director
Committees: Member of the Audit & Risk Committee and the Remuneration & Nominations Committee
Karen has over 20 years of capital markets experience advising a range of top Australian companies on their capital management and
funding strategies. Until 2014, Karen was Managing Director and Head of Capital Management Advisory at Citigroup in Australia and
New Zealand. From 1996 to 2009, she worked at UBS where she was also a Managing Director and established and led the Capital
Management Group. Prior to joining Citigroup, Karen spent 12 months at ASIC as a Senior Specialist in the Corporations group. Karen
is currently a Non-Executive Director of Omni Bridgeway Ltd (since August 2017), Non-Executive Director of ARB Corporation Limited
(since June 2019) and is a member of the Takeovers Panel and the Ascham School Council of Governors. Karen has a Bachelor of
Arts/Law (Honours) from the University of Sydney and is a graduate of the AICD.
Magellan Financial Group Limited | Annual Report 2023
Page 25
Directors’ Report
For the year ended 30 June 2023
Directors' Meetings
The number of meetings of the Board and Board Committees held during the year ended 30 June 2023 and the number of those
meetings attended by each Director are set out below:
Hamish McLennan
Robert Fraser
David George
David Dixon
John Eales
Colette Garnsey
Karen Phin
Board
Audit & Risk Committee
Remuneration &
Nominations Committee
Held1
Attended
Held1
Attended
Held1
Attended
17
17
17
8
17
17
5
17
17
17
8
17
17
5
10
10
-
5
10
10
4
10
10
-
5
10
10
4
4
4
-
2
4
4
2
4
4
-
2
4
4
2
1 The number of meetings held during the time the Director was a member of the Board or of the relevant Committee.
Indemnification and Insurance of Directors and Officers
Under the Company's constitution, the Company indemnifies, to the extent permitted by law, all current and former Directors and
Secretaries of the Company against any liability incurred in that person's capacity as an Officer of the Company and against any legal
costs incurred by that person in defending any proceedings relating to any such liability. The Company has also entered into a deed of
indemnity with each current and former Director and Secretary on substantially the same terms as those set out in the Constitution.
During the year, the Company paid insurance premiums to insure the Directors and Officers of the Group, as permitted by the
Corporations Act 2001 (Cth), in respect of losses, liabilities, costs and charges incurred by those persons in their capacity as an Officer
of the Group. The terms of the policy prohibit the disclosure of the amount of the premiums paid by the Company.
Magellan Financial Group Limited | Annual Report 2023
Page 26
Directors’ Report
For the year ended 30 June 2023
3. 2023 Remuneration Report (Audited)
Message from the Chair of the Remuneration & Nomination Committee
Dear Shareholder,
On behalf of the Board of Directors, I am pleased to present the Group's Remuneration Report for the financial year ended
30 June 2023. As well as an explanation of the Group’s remuneration framework, performance and outcomes for the Executive Key
Management Personnel (“KMP”) and Non-Executive Directors, this Remuneration Report includes context on our culture and current
people initiatives.
Our year at a Glance
The financial year ended 30 June 2023 was another challenging year for Magellan, our shareholders and our people. There has been a
continued focus this year on our people and providing them with new leadership via CEO David George, a new strategy for the business
and what that means for them and the opportunities that it will provide them.
Renewed leadership and values
Over the course of the year, we have addressed the following:
•
• New CEO. In July 2022, Mr David George commenced with Magellan. He quickly focused on the strategy for Magellan and
presented this to shareholders at the AGM in October 2022. He has invested a significant amount of time focusing on the structure
for Magellan to ensure that it is appropriate for the size of the business today and to enable growth in the future.
Board renewal. During the year we announced the appointment of Mr David Dixon to the Board as a Non-Executive Director. In
July 2023, we also announced the appointment of Mr Andrew Formica to the Board as a Non-Executive Director. As outlined
in the Chairman’s report, Mr. Hamish McLennan will transition to the role of Deputy Chairman and Non-Executive Director and
Mr Andrew Formica has been appointed as Non-Executive Chairman of the Board, effective today. Also announced was the
appointment of Deborah Page AM as a Non-Executive Director, effective 3 October 2023. Mr. Dixon, Mr. Formica and Mrs. Page
bring a wealth of funds management and broad industry experience and Mrs. Deborah Page is an experienced chair and company
director. Mr. Robert Fraser will retire from the Board and remain as the Chair of Magellan’s main operating subsidiary, Magellan
Asset Management Limited. These appointments and changes form part of Magellan’s ongoing Board renewal process previously
announced to shareholders. The Board expects this Board renewal process to be complete by the 2023 AGM in November.
• Release of new values. During the year we took the opportunity to refresh the Magellan values and engaged with a significant
number of our staff through this process. We believe this articulation of our values reflect who Magellan is and aligns us to the
future we envisage for our clients, our people and our shareholders. More information on our values can be found in section 3.2.
Retention of our key talent
•
Staff engagement and retention. As outlined in last year’s Remuneration Report, a core focus remains our people around
whom our business is based. A retention program was implemented in April 2022 which included cash retention incentives,
employee share options and varying the terms of the share purchase plan (“SPP”) loans. This year, a key decision was made to
bring forward the cash retention payments from September 2024 and September 2025 to September 2023 and September 2024
respectively, in order to optimise their value as incentives. For the 61% of our employees who have an outstanding SPP loan, these
retention bonuses assist in reducing the employee loans under the Employee SPP with the after-tax retention amount typically
applied against their SPP loan balance.
• Review of SPP. As disclosed last year, the SPP was suspended indefinitely in February 2022. Participants in this plan include
employees, Group Executives and Non-Executive Directors. As the loans are full recourse, participants are liable to repay the loan
irrespective of the performance of the Group’s shares. The closing balance of SPP loans to current employees was $10.6m at
30 June 2023. This will be reduced by the total dividend of 69.8 cents per share declared by Directors today that will be paid on
the secured MFG shares. The shares were valued at $3.6m at 30 June 2023.
Magellan Financial Group Limited | Annual Report 2023
Page 27
Directors’ Report
For the year ended 30 June 2023
2023 Remuneration Outcomes
The Board recognises the impact of recent changes on the Group and believes that the remuneration outcomes for the 2023 financial
year provide an appropriate balance with the need to maintain stable and motivated employees and an executive team focused on
delivering our long-term strategy.
Fixed remuneration
In light of the continuing challenges, fixed remuneration for Executive KMP for the coming year is unchanged. The CEO has also waived
his contractual increase in fixed remuneration for the 2024 financial year. Across the Group the increase to fixed remuneration for the
2024 financial year was modest.
Variable remuneration
For the year ended 30 June 2023, the Executive KMP were awarded performance-based variable incentives of between 60% - 100% of
their fixed remuneration. This reflects strong commitment and continued performance of management over the year, whilst managing
many external factors outside of their control and ensuring market competitiveness against comparable roles in the financial services
industry is maintained. More details can be found in section 3.4.
Supporting the Group's Strategy
The Board is committed to ensuring the remuneration strategy reflects good governance, includes consultation with key stakeholders,
is transparent in its design to support the Group's strategy and drives sustainable shareholder value creation over the short,
medium and long-term. The Board continues to review Executive Remuneration to ensure that it is fit for purpose and in line with
market practices.
On behalf of the Board, we invite you to read the Remuneration Report and welcome your feedback.
Yours faithfully,
John Eales, Chair
Remuneration & Nominations Committee
Magellan Financial Group Limited | Annual Report 2023
Page 28
Directors’ Report
For the year ended 30 June 2023
3.1. Key Management Personnel
This Remuneration Report outlines the remuneration arrangements for the KMP of the Group for the year ended 30 June 2023. KMP
are defined as those persons and corporate entities having authority and responsibility for planning, directing and controlling activities
of the Group, directly or indirectly.
In the 2023 financial year, the KMP for the Group included the Non-Executive Directors, the Group’s CEO and other Group Executives
as set out below.
Chair
Hamish McLennan
Non-Executive Directors
Robert Fraser
David Dixon1
John Eales
Colette Garnsey
Karen Phin
Term as KMP
Full Year
Full Year
From 1 November 2022
Full Year
Full Year
Until 20 October 2022
Executive Directors2
David George3
Chief Executive Officer and Chief Investment Officer
From 19 July 2022
Group Executives (Other KMP)2
Kirsten Morton4
Rebecca Smith
Marcia Venegas
Craig Wright
Chief Financial Officer and Chief Operating Officer
Head of Strategy and Special Projects
Company Secretary, Chief Risk Officer and Chief Compliance Officer
Head of Magellan Capital & Advisory
Full Year
From 22 July 2022
Full Year
Until 31 October 2022
1 Mr Dixon was appointed as a Director of MAM on 1 November 2022 and a Director of MFG on 15 December 2022. For the purposes of transparency,
we have included Mr Dixon as a KMP from 1 November 2022.
2 All functional titles are as at 30 June 2023.
3 Mr George commenced as Managing Director and CEO on 19 July 2022.
4 Ms Morton held dual roles of Interim CEO and Chief Financial Officer for the period 1 July 2022 to 18 July 2022. From 19 July 2022, Ms Morton was
also appointed Chief Operating Officer.
The Remuneration Report has been prepared and audited against the disclosure requirements of the Corporations Act 2001 (Cth).
Magellan Financial Group Limited | Annual Report 2023
Page 29
Directors’ Report
For the year ended 30 June 2023
3.2. Oversight and Governance
Magellan Financial Group Board
•
•
•
Overall responsibility for the remuneration strategy and outcomes for Executives and Non-Executive Directors
Reviews and approves recommendations from the Remuneration & Nominations Committee
Approves the appointment of Non-Executive Directors and CEO
Information and exchange with other
Board committees
Notably the Audit & Risk Committee, to ensure
that all relevant matters are considered before the
Remuneration and Nominations Committee makes
remuneration recommendations and decisions.
Independent remuneration advisors
The Committee appoints an external independent
advisor to assist it with market and governance
issues, benchmarking, best practice observations and
general advice.
Remuneration & Nominations Committee
The Remuneration & Nominations Committee ("the Committee") supports
the Board by overseeing the Group's remuneration policies and practices.
Including its Chairman, the Committee has five members, all of whom
are independent Non-Executive Directors. The key responsibilities of the
Committee are as follows:
•
•
•
•
•
•
•
Review the composition, functions, responsibilities and size of the
Board and Directors' tenure;
Lead the process for the appointment of Directors and CEO;
Develop and implement a process for the evaluation of the
performance of Non-Executive Directors;
Provide oversight over the Company's strategic human resources
initiatives including diversity, culture and leadership;
Review and recommend significant changes in remuneration policy
and structure including employee incentive plans and awards;
Equitably, consistently and responsibly rewarding executives –
including performance-based variable remuneration targets and the
achievement of remuneration outcomes; and
Take appropriate action to ensure the Committee, Board and
senior management have available to them sufficient information
and external advice to ensure informed decision-making regarding
remuneration and make recommendations to the Board in relation to
employee remuneration.
CEO & Senior Management
Provides relevant data and information for the Committee to recommend:
•
•
•
•
Variable remuneration targets and outcomes
Remuneration policy
Individual remuneration and contractual arrangements
Culture and people matters
Magellan Financial Group Limited | Annual Report 2023
Page 30
Directors’ Report
For the year ended 30 June 2023
Remuneration Philosophy and Principles
The Group strives to attract and retain the best talent to enable the successful delivery of our business strategy. The Group’s
remuneration philosophy is centred on fair compensation for performance and contribution that achieves planned business outcomes.
Executive remuneration at Magellan is intended to support the Group’s strategic objectives and encourage behaviour that is aligned
with our values. The key drivers of the Group's remuneration philosophy and principles are:
For the year ended 30 June 2023, the Group’s remuneration arrangements for the CEO and Other KMP (“Executive KMP”) comprised
fixed remuneration and performance-based variable remuneration (as summarised below). Further detail is provided in Section 3.4.
A fixed remuneration amount (inclusive
of superannuation)
A performance based incentive which is determined annually
paid in cash and partly deferred over 3 years subject to
ongoing employment
Fixed Remuneration
Fixed remuneration is structured as a total employment cost package, which may be received as a combination of cash, non-cash
benefits and superannuation contributions. Fixed remuneration for employees is generally reviewed annually to ensure that it is
competitive and reasonable.
Performance-Based Variable Remuneration
The Board believes variable incentives should be aimed at areas where employees have a direct influence over the business and
the outcomes are aligned to the best interests of the Group’s clients and shareholders. The Board does not currently use measures
such as earnings per share or the share price performance of Magellan in determining annual variable remuneration. We continue to
develop and implement an accountability and alignment model designed to ensure out employee value proposition remains and staff
are aligned to delivering positive client and shareholder outcomes.
Variable incentives are paid partly as a current year cash bonus and partly as a conditional deferred cash bonus amount, generally
over a period of up to three years (in equal monthly payments) for senior employees and Executive KMP, subject to not having
voluntarily resigned.
Performance-Based Variable Remuneration arrangements for non-KMP
With the exception of certain portfolio managers, the variable incentive amount for non-KMP employees is discretionary and
is determined by reference to an employee’s individual performance and contribution, specific business performance in certain
circumstances, and the overall performance of the Group. Performance-based variable remuneration for these employees may be in
the range of 0-100% of the fixed remuneration amount and can be higher in exceptional circumstances.
The Board considers it appropriate that the way in which the portfolio managers are rewarded aligns to the interests of the Group’s
clients and shareholders. As such, the portfolio managers have variable remuneration arrangements that combine one or both of the
following components:
•
•
A discretionary component in the range of 0-150% of fixed remuneration or higher in certain circumstances; and/or
A performance component in the range of 0-150% of fixed remuneration dependent upon (i) the performance of the investment
strategies for which they are responsible, which is calculated over a three-year period, or a lesser term where a three-year period
is not available or appropriate and (ii) specific business outcomes in certain circumstances.
Magellan Financial Group Limited | Annual Report 2023
Page 31
Directors’ Report
For the year ended 30 June 2023
The Lead Portfolio Manager for the Group’s Global Listed Infrastructure strategy has a variable remuneration arrangement that is
directly tied to the net revenues, less certain allocated costs, of the Group’s Global Listed Infrastructure business and the performance
of the investment strategies for which he has primary responsibility. The Board considers that this arrangement appropriately rewards
and aligns his interests with those of the Group’s clients and shareholders.
Other Incentive Arrangements
Retention arrangements
In 2022, the Group introduced an employee retention program in addition to annual remuneration, which was disclosed in the
Remuneration Report for the 2022 financial year. The program was designed to retain key talent and skills and ensure leadership
continuity for both the renewal and future growth of the business. The cash retention component of the program involved an offer
of cash incentives payable in September 2024 and September 2025 provided that the employee remains continuously employed at
the relevant payment dates and performs to the Group’s satisfaction. This year, a key decision was made to bring forward the cash
retention payments from September 2024 and September 2025 to September 2023 and September 2024 respectively, in order to
optimise their value as incentives. For the 61% of our employees that have an outstanding SPP loan, these retention bonuses assist
in reducing the employee loans under the SPP with the after-tax retention amount typically applied to their SPP loan balances.
Certain adjustments to the cash retention incentives and timing of payments were made in December 2022 for some staff in
connection with the heightened corporate activity being experienced by the Group. The adjustments were thoughtfully considered
and tailored to maximise alignment to all stakeholders and had regard to any existing cash retention awards in the 2022 financial
year. Some payments were made during the 2023 financial year, with the remainder to be made between September 2023 and
September 2024.
Share Purchase Plan
As noted above, the Group does not operate a specific long-term incentive plan. In February 2022, the Board suspended the SPP
indefinitely as it considered it no longer met its intended purpose of employee alignment. The SPP loans remain on foot and as the
loans are full recourse, participants are liable to repay their loan irrespective of the performance of the Group’s shares.
For employees that have an outstanding SPP loan balance and receive cash retention payments, as outlined above, the after-tax
retention amount will typically be applied against their SPP loan balance.
Magellan Financial Group Limited | Annual Report 2023
Page 32
Directors’ Report
For the year ended 30 June 2023
3.3. Remuneration of Non-Executive Directors
The Board sets the fees for its Non-Executive Directors in line with the key objectives of the Group’s Non-Executive Director
remuneration approach set out below.
The Board periodically reviews, and determines, the remuneration of Non-Executive Directors. The Remuneration and Nomination
Committee makes recommendations to the Board regarding the remuneration of the Non-Executive Directors. The Group does not
make sign-on payments to new Non-Executive Directors, does not provide retirement benefits to Non-Executive Directors (other than
superannuation) and remuneration is not linked to the performance or earnings of the Group, which ensures that the Non-Executive
Directors are able to independently and objectively assess both executive and Group performance.
Element
Market competitive
Independence and impartiality
Shareholder alignment
Fee pool
Details
•
•
•
•
•
•
The Board’s policy is to pay Non-Executive Directors at market competitive rates to attract
and retain high calibre Directors with the necessary skills, expertise and experience for the
Magellan Board
In setting fees, the Board has considered fees payable by comparable companies (based on
external benchmarking data) as well as the time commitment and workloads of Non-
Executive Directors
No element of Non-Executive Director remuneration is ‘at risk’ (i.e. subject to performance
conditions) in order to preserve the Directors’ independence and impartiality
A number of the Non-Executive Directors have participated in the now suspended SPP. The
Board continues to hold the view that providing full recourse financial assistance to Non-
Executive Directors under the SPP did not hinder their independence from management and
as an equity interest, promotes independent thought and engagement that will be in the
long-term interests of the Group’s shareholders.
It is not intended to grant equity to Non-Executive Directors in the future
Non-Executive Directors are encouraged to have equity ownership in line with their personal
circumstances, to ensure alignment with shareholders
Non-Executive Directors are paid from an aggregate annual fee pool which is $1,750,000 (June 2022: $750,000), as approved by the
shareholders in December 2022. The increase in the fee pool enabled the Board to continue its process of Board renewal, including
the appointments of Mr David Dixon and Mr Andrew Formica as Non-Executive Directors and the announcement of the upcoming
appointment of Mrs Deborah Page as Non-Executive Director.
Fee schedule
During the financial year ended 2023, the Group undertook a review of Non-Executive Director fees. The Board determined that an
increase to Board and Committee fees was appropriate having regard to market relativities and the need to ensure the Group is able to
attract and retain high-calibre Non-Executive Directors with the requisite skills, expertise and experience. As noted above, the Board
is continuing its renewal work including the search for additional Non-Executive Directors. The table below sets out the fees (inclusive
of superannuation) of the Non-Executive Directors of the Group as at 30 June 2023 and 30 June 2022.
MFG Board (Group)
MFG Audit & Risk Committee
MFG Remunerations & Nominations Committee
MAM Board
Position
Chair
Member
Chair
Member
Chair
Member
Chair
Member
30 June 2023
$'000
30 June 2022
$'000
290
120
40
20
40
20
150
60
77
77
27
11
-
-
27
-
The Group has reimbursed or borne expenses incurred by the Non-Executive Directors in the discharge of their duties of $3,000 (June
2022: $17,000).
Magellan Financial Group Limited | Annual Report 2023
Page 33
Directors’ Report
For the year ended 30 June 2023
3.4. Remuneration of Executive KMP
The remuneration of the Executive KMP comprised fixed remuneration and performance-based variable remuneration. The summary
below provides further details of the different elements of the Executive KMP remuneration structures applicable during the year ended
30 June 2023.
CEO Remuneration
As noted above, Mr George commenced as CEO of the Group on 19 July 2022. The below table outlines Mr George's remuneration
arrangements and his performance metrics that are agreed with the Board. The Remuneration and Nominations Committee
determines, and the Board approves, the performance-based variable incentive to be awarded to the CEO on an annual basis with
regards to the determined performance metrics.
Component
Detail
Fixed remuneration
(including
superannuation)
Variable
remuneration
structure
Fixed remuneration is structured as a total employment cost package, which may be received as a
combination of cash, non-cash benefits and superannuation contributions. Fixed remuneration is reviewed
annually. For the 2023 financial year, Mr George's fixed remuneration (inclusive of superannuation)
was $1,800,000.
Mr George was eligible to receive a performance-based variable incentive of up to 100% of fixed
remuneration based on the performance metrics that are agreed between the Board and Mr George. In line
with the Executive KMP structure, any performance-based incentive comprises a cash bonus amount and
a conditional deferred cash bonus payable over three years (paid in 36 monthly instalments).
Variable
remuneration
outcome
Mr George's remuneration as CEO was appropriately aligned to the Group's strategy. In Mr George’s first 12
months as CEO, the Board considered the establishment of the strategy and the stabilisation of the platform
to be paramount. Strong leadership and direction of the Group including retaining and attracting new talent
was also considered significant for the Board. Governance, Risk and Compliance is a continued key focus
of the Board and considered an essential part of the CEO's performance.
The below table provides an overview of key achievements and business outcomes delivered by Mr George
that were considered when determining his variable remuneration for the year.
Strategic
leadership
(30%)
Business and
Financial
Management
(25%)
People and
Leadership
(25%)
Risk and
Operational
Management
(20%)
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Developed a five year strategy designed to position Magellan for diversification
and growth.
Delivered organisational structure changes to simplify the platform and product suite
and align to the focus on the core Funds Management business.
Reviewed the investment team and implemented changes to promote desired
performance and team development outcomes.
Execution within the product development pipeline, including the launch of the
Energy Transition strategy, the Airlie Small Companies Fund and the re-launch of the
Magellan Core Series.
Delivered disciplined cost management, with Funds Management expenses delivered
below guidance.
Sponsored continuous improvement in investment processes, portfolio construction
and risk management, supporting improved performance outcomes within the Global
Equities strategy.
Supported maintenance of an active client engagement approach designed to reduce
client outflows.
Positive retail flows within Airlie as part of an increased distribution focus.
Led organisational change with active communication, supported retention of key
staff and managing leadership transitions.
Revisited and refreshed organisational values.
Progress on coaching and career development planning within investment team and
in the broader organisation.
Delivered high quality and reliable service levels amid high levels of client activity,
with tight operational and compliance controls and a trusted environment for clients
and regulators.
Increased investor relations outreach and activity.
Improved the tone of, and reduced the profile of, media coverage of Magellan.
Magellan Financial Group Limited | Annual Report 2023
Page 34
Directors’ Report
For the year ended 30 June 2023
Component
Detail
•
•
Delivered successful Extraordinary General Meeting and Investor Showcase.
Enhancements to the product design and development process to support efficient
governance and decision making.
For the year ended 30 June 2023, Mr George received a total variable incentive of $1,027,000 representing
60% of his total fixed remuneration. The amount awarded comprised 60% of the maximum 100%.
CEO one-off signing bonus
As outlined in the ASX announcement of Mr George’s appointment on 11 May 2022, Mr George received a signing bonus with
two components.
The first was a cash signing bonus of $600,000 which was paid as follows:
•
•
$300,000 was paid on 17 May 2022; and
$300,000 was paid on 19 January 2023, which was payable within 5 days of the 6-month anniversary of Mr George’s
commencement date.
The second component was a grant of 400,000 options under the Employee Share Option Plan ("ESOP" or "Employee Options"). The
Employee Options awarded are exercisable from 1 September 2024 at an exercise price of $35.00 per option and can only be exercised
if Mr George remains employed within the Group at the relevant time. The Employee Options expire on 16 April 2027.
Remuneration Structure for Other KMP
The below table outlines remuneration arrangements for the Other KMP.
Component
Detail
Fixed remuneration
(including
superannuation)
Variable
remuneration
structure
Fixed remuneration is structured as a total employment cost package, which may be received as
a combination of cash, non-cash benefits and superannuation contributions. Fixed remuneration is
reviewed annually.
When considering variable remuneration, the Board’s primary objective is that KMP are motivated to
achieve high performance over areas where they have direct influence, while maintaining the Group's
reputation and mitigating risk. The core of the Group's culture is to put our clients first. If these objectives
are met, the interests of shareholders will also be satisfied.
The CEO makes recommendations to the Remuneration and Nominsations Committee on the amount of
variable incentive to be paid to Other KMP, subject to review of overall amounts by the Remuneration and
Nominations Committee and approval by the Board, taking into consideration each individual’s performance
and contribution during the year. The performance-based variable incentive of Other KMP is discretionary
and may be in the range of 0% to 100% of fixed remuneration (higher in exceptional circumstances) and
comprises a cash bonus amount and a conditional deferred cash bonus payable over periods of up to three
years (paid in 36 monthly instalments).
The Group may require KMP to act as a Director of a subsidiary of the Group or associate of the Group for no additional remuneration.
Summary of 2023 Variable Remuneration Outcomes
Performance-Based Variable Remuneration Outcomes
The table below outlines the performance-based variable remuneration outcomes (as a % of fixed remuneration) for the Other KMP
who were employed during the 2023 financial year, along with an overview of the key achievements of each Other KMP that were
considered when determining their variable remuneration for the year.
KMP
Variable
remuneration
outcome
Comments
Kirsten Morton
84%
•
•
Oversaw critical infrastructure upgrades to improve technology resilience.
Delivered enhancements to improve cyber readiness and resiliency.
Magellan Financial Group Limited | Annual Report 2023
Page 35
Directors’ Report
For the year ended 30 June 2023
KMP
Variable
remuneration
outcome
Comments
Rebecca Smith
100%
Marcia Venegas
80%
•
•
•
•
•
Enhanced ESG governance oversight across the Group: (i) to support Net Zero Asset
Managers initiative (NZAMi) commitments and development of targets, with a view to
supporting client objectives and returns over the long-term and (ii) active involvement
in the Group’s external independent ESG reporting/scoring.
Succession and key person risk management across operational teams significantly
advanced and tested, including Magellan’s US business.
Testing of tax risk management framework, with no material issues. Strong
management around tax risk with regards to impact of outflows on funds
and unitholders.
Led focused cost management across Group with 2023 Funds Management expense
delivered below guidance.
Leading role in the development of the Group’s five year strategic plan and delivery of
2023 financial year priorities.
• Managed all aspects of an active corporate development pipeline.
•
Key support to the CEO in identifying key opportunities and risks, internal and
external communication initiatives, and the design and execution of the organisational
structural changes.
Strategic management of Media and Investor Relations.
Developed and supported enhanced shareholder and research analyst outreach.
Enhancements to the product design and development process to support efficient
governance, assessment and decision making.
Involvement in successful launch of Magellan Energy Transition Fund and Airlie
Australian Small Companies Fund and re-launch of Magellan Core Series Funds.
Proactive ASIC and client engagement.
Effective management of risk and compliance issues affecting the business.
Enhanced visibility of modern slavery risks in the Group’s supply chain (including
investments) and overseeing supplier engagement on modern slavery risk.
Implemented the framework to support the Group’s compliance with NZAMi.
Successful and cost-effective implementation of regulation changes across various
products, including Sustainable Finance Disclosure Regime (“SFDR”) and Packaged
Retail and Insurance Based Investment Products (“PRIIP”) for the Group’s
UCITS products.
Delivered strong company secretarial support including facilitating the Group's Board
renewal program and Extraordinary General Meeting.
•
•
•
•
•
•
•
•
•
•
Craig Wright
0%
No performance-based incentive awarded as per the Board's discretion.
Magellan Financial Group Limited | Annual Report 2023
Page 36
Directors’ Report
For the year ended 30 June 2023
Components of 2023 Performance-Based Variable Remuneration
The table below provides a summary of variable remuneration outcomes for the Executive KMP for the years ended 30 June 2023 and
30 June 2022. The table outlines the portion of performance-based variable remuneration awarded for each financial year that is paid
in cash in the relevant year and the portion that is deferred over subsequent financial years, along with the retention incentives offered.
Details of the total remuneration paid or payable to all KMP, along with details of the employment agreements of Executive KMP, is
provided in section 3.5.
Performance-based
Cash
bonus
Conditional
deferred
cash bonus
$'0001
$'0002
Total
performance-
based
remuneration
awarded
$'000
Fixed
remuneration
(incl. super)
$'000
Performance-
based
remuneration
as % of fixed
remuneration
%
Retention
Cash
incentive
Options
$'0003
$'0004
Executive Director
David George5 2023
694
2023
2022
2023
Group Executives (Other KMP)
341
Kirsten
Morton6
100
331
Rebecca
Smith7
Marcia
Venegas
Craig
Wright8
2023
2022
2023
2022
270
100
-
100
Total KMP9
2023
2022
1,636
300
333
144
577
138
105
245
-
150
720
972
1,027
1,712
60%
-
365
485
677
469
375
345
-
250
2,356
1,272
578
1,157
469
469
455
161
455
3,389
2,067
84%
59%
100%
80%
76%
0%
55%
120
400
2,350
-
230
-
60
2,470
690
-
113
228
-
113
-
113
593
339
1 Cash bonus represents the portion of Executive KMP's awarded variable remuneration that is payable in September of the relevant year post the
release of the Group's Annual Report.
2 Conditional deferred cash bonus represents the portion of Executive KMP’s awarded variable remuneration for the financial year that is deferred and
paid in cash in future financial years, subject to employment conditions.
3 Retention incentives awarded to Executive KMP as part of a broader employee retention program include amounts paid in cash during the 2023
financial year and amounts payable in cash between September 2023 and September 2024, subject to satisfactory performance and employment
conditions. Where Executive KMP have an outstanding SPP loan, the after-tax cash retention incentive will firstly be directed to repayment of the
loan balance. Refer to section 3.3 for further details.
4 Employee Share Options awarded to Executive KMP are exercisable from 1 September 2024 at an exercise price of $35.00 per option, subject to
continued employment with the Group at the time of exercise. The value of the Employee Share Options was independently determined at grant date.
5 Mr George's fixed remuneration for the year ended 30 June 2023 is shown for the period 19 July 2022 to 30 June 2023.
6 Ms Morton's fixed remuneration for the year ended 30 June 2023 reflects her dual role as Interim CEO and Chief Financial Officer until 18 July 2022
and Chief Financial Officer and Chief Operating Officer from 19 July 2022 to 30 June 2023.
7 Ms Smith's fixed remuneration for the year ended 30 June 2023 is shown for the period 22 July 2022 to 30 June 2023.
8 Mr Wright's fixed remuneration for the year ended 30 June 2023 is shown for the period 1 July 2022 to 31 October 2022.
9 Comparative information does not include details of remuneration related to the year ended 30 June 2022 for former KMPs.
Magellan Financial Group Limited | Annual Report 2023
Page 37
Directors’ Report
For the year ended 30 June 2023
3.5. Details of Remuneration
The total amount paid or payable to KMP of the Group is detailed below:
Short-term benefits
Salary
Cash
bonus
Retention
benefit
Superan-
nuation
$'000
'0001
$'0002
$'000
Termination
benefits
Total
cash
remuneration
$'0003
$'000
Long-term benefits
Leave
benefits
Retention
incentives
$'0004
$'0005
Other
benefits
Total
statutory
remuneration
$'0007
$'0006
Non-Executive Directors
Hamish
McLennan
2023
2022
Robert
Fraser
David Dixon
John
Eales
Colette
Garnsey
Karen
Phin8
2023
2022
2023
2023
2022
2023
2022
2023
2022
Executive Director
2023
David
George9
260
79
270
131
120
174
79
161
79
37
79
-
-
-
-
-
-
-
-
-
-
-
1,687
833
Group Executives (Other KMP)
Kirsten
Morton11
2023
553
1,133
2022
692
332
354
455
218
27
182
-
-
445
444
432
148
432
22
692
Rebecca
Smith13
Marcia
Venegas
Craig
Wright14
2023
2023
2022
2023
2022
Former KMP
Paul Lewis15
Brett Cairns
2022
2022
2022
Hamish
Douglass16
Total KMP17 2023
2022
-
-
-
-
-
-
-
-
-
-
-
-
120
-
400
-
-
-
-
-
-
-
23
8
-
-
13
18
8
17
8
4
8
25
25
24
25
25
24
13
24
-
18
24
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
432
-
-
404
2,499
432
2,903
283
87
270
131
133
192
87
178
87
41
87
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
10
22
-
11
-
17
26
13
9
-
9
293
110
270
142
133
209
113
191
96
41
96
2,545
85
199
60010
3,429
1,390
1,489
1,224
924
674
620
638
22
1,114
7,962
7,800
12,378
34
46
34
(3)
17
(9)
29
-
50
126
141
268
287
46
1,111
179
32
(18)
18
-
-
-
1,758
96
2812
7
-
5
8
94
8
-
685
-
767
785
1,739
1,588
2,369
1,105
730
687
691
22
1,848
8,087
10,466
13,523
2,595
2,844
4,299
5,753
2,361
3,576
520
-
188
146
1 Represents the portion of awarded variable remuneration that is paid in September of the relevant year post the release of the Group's Annual Report
along with the portion of the conditional deferred bonus that each Executive KMP has become entitled to up to the date of this report. This amount
also includes the deferred components of prior period bonuses which have been paid in cash during the financial year.
2 Represents cash retention payments made in cash to Executive KMP during the 2023 financial year.
3 Total cash remuneration represents the cash amounts Group KMP have either received or become entitled to up to the date of this report, as distinct
from the accounting expense. As a result, it does not align to Australian Accounting Standards.
4 Comprises annual leave and long service leave entitlements accrued and not taken during the year.
5 Represents the portion of the retention incentives accrued as an employee expense during the financial year. Included in the amount for Mr George,
Ms Morton, Ms Smith and Ms Venegas is a share-based payment expense of $199,000, $47,000, $86,000 and $47,000, respectively.
6 Represents the non-cash cost of providing interest-free loans to Participants in the SPP. At the conclusion of Mr Wright's employment, the remaining
balance of unrecognised interest on his SPP loan totalling $85,000 was also included.
7 No non-monetary benefits or other short-term benefits not otherwise disclosed above were paid during the years presented.
8 Ms Phin's remuneration covers the period 1 July 2022 to 20 October 2022, being the date of her retirement from the Board.
9 Mr George's remuneration covers the period 19 July 2022 to 30 June 2023.
10 Mr George's other benefits reflect his cash signing bonus.
11 Ms Morton's salary reflects her dual role as Interim CEO and Chief Financial Officer from 6 December 2021 to 18 July 2022 and as Chief Financial
Officer and Chief Operating Officer from 19 July 2022 to 30 June 2023.
12 Ms Morton's other benefits include a $25,000 "10 Year Service" award payable to her in September 2023.
13 Ms Smith's remuneration covers the period 22 July 2022 to 30 June 2023.
14 Mr Wright's remuneration covers the period 1 July 2022 to 31 October 2022, being the date his employment with the Group concluded.
15 Mr Lewis' remuneration covers the period 1 July 2021 to 30 September 2021, being the date of his retirement from the Board.
16 Mr Douglass' remuneration covers the period 1 July 2021 to 15 June 2022, being the date of his resignation.
17 For transparency purposes, comparative information includes remuneration details for Directors and Executives who are no longer KMP in 2023.
Magellan Financial Group Limited | Annual Report 2023
Page 38
Directors’ Report
For the year ended 30 June 2023
Use of Remuneration Consultants
The Committee engages external remuneration advisors from time to time to conduct benchmarking and to advise on regulatory
and market developments. To ensure independence and avoid conflicts of interest, a remuneration advisor is directly engaged by the
Committee's Chairman or upon his/her instruction and reports must be delivered directly to the Committee’s Chairman.
The recommendations that the Committee makes to the Board are based on its own independent assessment of the advice and
information received from various sources, using its experience and having careful regard to the principles and objectives of the
remuneration framework, Group performance, shareholder and community expectation and good governance.
The Committee generally seeks information rather than specific remuneration recommendations from external remuneration advisers
within the definition of the Corporations Act 2001 (“the Act”). During the year, no external advisor provided any remuneration
recommendations as defined by the Act.
Executive KMP Employment Contracts
Remuneration and other terms of employment for the Executive KMP are formalised in employment agreements with MAM, a
controlled entity of the Group. The key contractual details for current Executive KMP who were employed at 30 June 2023 are
summarised below.
Element
Further Detail
Duration
Periods of notice required
to terminate
Ongoing
The Group or Executive KMP may terminate the contract by giving the following notice:
• Mr George: from 19 July 2023, 12 months’ written notice
•
Other KMP: 3 months’ written notice
Termination payments
Restraints
For all Executive KMP, the Group may terminate the employment agreement immediately without
notice in certain circumstances, including (but not limited to) where the relevant Executive KMP
engages in a serious breach of agreement or serious misconduct.
Other KMP may be entitled to termination payments in limited circumstances and subject to local
legislative requirements and practices (but not when the termination occurs for cause). A payment
may be made in lieu of notice at the discretion of the Board where termination occurs other than
for cause.
In the event of termination, the KMP termination payment would comprise any accrued fixed
compensation, including superannuation, after set-off of any loss suffered by the Group from the acts
of the KMP which led to their termination, and any amounts of accrued annual and long service leave.
On termination, any KMP with an outstanding SPP loan balance is required to repay the amount in
respect of shares acquired under the Group’s SPP in accordance with the SPP Rules.
All Executive KMP are subject to appropriate post-employment restraints as follows:
• Mr George: up to 12 months
•
Other KMP: 6 months
Magellan Financial Group Limited | Annual Report 2023
Page 39
Directors’ Report
For the year ended 30 June 2023
3.6. Other Disclosures
Shareholdings
The number of ordinary shares and options over ordinary shares held by each KMP (and their related parties) is set out below:
Closing
balance
30 June 2021
Net
additions/
(disposals)
Closing
balance
30 June 2022
Net
additions/
(disposals)
Closing
balance
30 June 2023
Non-Executive Directors
David Dixon1
Ordinary shares
John Eales
Ordinary shares
MFG 2027 Options
Robert Fraser
Ordinary shares
MFG 2027 Options
Colette Garnsey
Ordinary shares
MFG 2027 Options
Hamish McLennan
Ordinary shares
MFG 2027 Options
Karen Phin2
Ordinary shares
MFG 2027 Options
Executive Director
David George3
ESOP issued options4
Group Executives (Other KMP)
Kirsten Morton
Ordinary shares
MFG 2027 Options
ESOP issued options4
Rebecca Smith5
ESOP issued options4
Marcia Venegas
Ordinary shares
MFG 2027 Options
ESOP issued options4
Craig Wright6
Ordinary shares
MFG 2027 Options
ESOP issued options4
-
-
-
77,616
-
500,000
-
2,030
-
105,248
-
89,312
-
3,238
10,112
-
62,502
28,710
3,843
-
13,157
257
11,197
80,854
10,112
500,000
62,502
30,740
3,843
105,248
13,157
89,569
11,197
-
-
-
-
-
-
-
-
-
-
-
-
80,854
10,112
500,000
62,502
30,740
3,843
105,248
13,157
89,569
11,197
-
-
-
400,000
400,000
25,644
-
-
-
3,206
75,000
25,644
3,206
75,000
(18,896)
-
-
6,748
3,206
75,000
-
-
-
250,000
250,000
13,002
-
-
24,732
-
-
1,735
1,843
75,000
(17,896)
855
75,000
14,737
1,843
75,000
6,836
855
75,000
(4,000)
-
-
-
-
(75,000)
10,737
1,843
75,000
6,836
855
-
1 Mr Dixon was appointed as a Director on 15 December 2022. The closing balance as at 30 June 2022 represents the number of ordinary shares held
by him and his associates as at the date of his appointment.
2 The balance as at 30 June 2023 represents the number of ordinary shares and options held by Ms Phin and her associates at 20 October 2022, being
the date of her retirement from the Board.
3 Mr George became a KMP on 19 July 2022. The closing balances as at 30 June 2022 represent the number of ordinary shares and options held by
him and his associates as at 19 July 2022.
4 Employee Share Options awarded to Executive KMPs are exercisable from 1 September 2024 at an exercise price of $35.00 per option, subject
to continued employment with the Group. The Employee Share Options expire on 16 April 2027. Refer to note 18 of the financial statements for
further information.
5 Ms Smith became a KMP on 22 July 2022. The closing balances as at 30 June 2022 represent the number of ordinary shares and options held by
her and her associates as at 22 July 2022.
6 The balance as at 30 June 2023 represents the number of ordinary shares and options held by Mr Wright and his associates at 31 October 2022,
being the date his employment with the Company concluded.
Magellan Financial Group Limited | Annual Report 2023
Page 40
Directors’ Report
For the year ended 30 June 2023
Relevant Interests in Magellan Funds
Details of each KMPs relevant interests in registered schemes made available by the Group, are set out below:
Magellan Global Fund - Open Class Units
Marcia Venegas
5,545
207
5,752
261
6,013
Closing balance
30 June 2021
Net additions/
(disposals)1
Closing balance
30 June 2022
Net additions/
(disposals)1
Closing balance
30 June 2023
Magellan Global Fund - Closed Class Units
John Eales
Robert Fraser
Hamish McLennan
Karen Phin2
Kirsten Morton
Marcia Venegas
Craig Wright3
MGF Options expiring 1 March 2024
John Eales
Robert Fraser
Hamish McLennan
Karen Phin2
Kirsten Morton
Marcia Venegas
Craig Wright3
Magellan High Conviction Trust
John Eales
Robert Fraser
Hamish McLennan
Karen Phin2
Kirsten Morton
Marcia Venegas
Craig Wright3
388,435
260,893
115,655
115,909
45,674
93,390
69,791
235,377
158,092
70,083
70,237
26,702
11,394
42,291
224,934
260,363
37,440
122,714
22,464
92,063
74,881
7,961
5,348
2,371
2,376
936
315
1,431
-
-
-
-
-
-
-
6,078
7,035
1,012
2,023
607
101
(74,881)
396,396
266,241
118,026
118,285
46,610
93,705
71,222
235,377
158,092
70,083
70,237
26,702
11,394
42,291
231,012
267,398
38,452
124,737
23,071
92,164
-
Magellan Infrastructure Fund (Currency Hedged)
Marcia Venegas
3,835
155
3,990
Airlie Australian Share Fund
John Eales
Karen Phin2
Craig Wright3
Magellan FuturePay
Karen Phin2
16,685
19,049
-
-
-
-
30,050
16,685
19,049
30,050
-
-
-
-
-
-
-
-
-
-
-
-
-
-
8,984
10,397
1,495
1,469
847
149
-
163
-
-
3,000
396,396
266,241
118,026
118,285
46,610
93,705
71,222
235,377
158,092
70,083
70,237
26,702
11,394
42,291
239,996
277,795
39,947
126,206
23,918
92,313
-
4,153
16,685
19,049
33,050
33,653
33,653
(33,653)
-
1
Includes the reinvestment of June and December distributions in the years ended 30 June 2021 and 30 June 2022 respectively.
2 The balance as at 30 June 2023 represents the number of units held by Ms Phin and her associates at 20 October 2022, being the date of her
retirement from the Board.
3 The balance as at 30 June 2023 represents the number of units held by Mr Wright and his associates at 31 October 2022, being the date his
employment with the Company concluded.
Unless specified above, no other KMP held units in Magellan Funds.
Magellan Financial Group Limited | Annual Report 2023
Page 41
Directors’ Report
For the year ended 30 June 2023
Loans to KMP
The Group has made full recourse interest-free loans to Non-Executive Directors and Other KMP in connection with shares acquired
under the Group’s SPP. As at 30 June 2023, five KMP held SPP loans totaling $2,070,000 (June 2022: six KMP with SPP loans totalling
$2,255,000). The terms and conditions of the loans, including repayment terms, are disclosed in note 10 to the financial statements.
No loans were written down during the period. There are no other related party transactions with KMP other than those disclosed.
SPP shares
acquired
during year
Opening
loan
balance
Loans
made
Loans
(repaid)
Closing loan balance
number
$'000
$'000
$'000
$'000
Face value1 Carrying value2
-
-
-
-
-
-
-
28,710
-
-
-
-
-
-
-
-
398
541
-
138
543
663
718
-
-
114
312
327
284
341
284
297
-
-
-
-
-
-
-
750
-
-
-
-
-
-
-
-
(74)
(143)
-
(138)
(62)
(120)
(33)
(32)
-
(114)
(8)
(15)
(8)
(57)
(7)
(13)
324
398
-
-
481
543
685
718
-
-
304
312
276
284
277
284
262
323
-
-
358
401
521
538
-
-
274
247
220
215
176
186
Directors
Hamish McLennan
Robert Fraser
John Eales
Colette Garnsey
Karen Phin
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
Group Executives (Other KMP)
Kirsten Morton
Marcia Venegas
2023
2022
2023
2022
Former Group Executives
Craig Wright
2023
2022
1 The face value represents the loan balance due to be repaid to the Company.
2 The carrying value represents the loan balance as required by the accounting standards (for further detail, refer to note 10 of the
financial statements).
Magellan Financial Group Limited | Annual Report 2023
Page 42
Directors’ Report
For the year ended 30 June 2023
Link Between Performance and Remuneration Paid by the Group
Group Results
Total revenue
Total expenses
Net profit after tax
Adjusted revenue1
Adjusted expenses1
Adjusted net profit before associates1
Adjusted net profit after tax1
Funds Management Business
Net profit before tax
Net profit before tax and performance fees
Shareholder Value
Diluted EPS
Adjusted diluted EPS1
Total dividends paid
Closing share price (ASX code: MFG)2
KMP Remuneration
Total KMP remuneration:3
Fixed compensation4
Variable compensation5
2023
2022
2021
2020
2019
$'000
$'000
$'000
$'000
$'000
$'000
$'000
431,650
163,372
182,655
379,352
126,774
185,842
174,310
553,530
116,582
383,011
647,251
132,082
393,132
399,733
715,012
336,048
265,156
699,072
111,339
454,441
412,659
693,952
178,874
396,214
692,941
119,751
438,299
438,299
617,387
124,050
376,947
577,251
104,024
364,225
364,225
$'000
$'000
223,780
212,274
482,047
470,575
556,690
526,616
558,012
477,048
459,789
376,182
cps
cps
cps
$
100.0
95.5
116.7
9.49
206.9
216.6
179.0
12.92
144.6
225.0
211.2
53.86
218.3
241.5
214.9
58.01
$'000
$'000
4,628
5,838
10,466
6,165
7,358
13,523
6,197
4,772
10,969
6,052
5,164
11,217
213.1
205.9
185.2
51.00
5,568
3,153
8,721
Number of KMP for the year
11
11
11
10
10
Growth rates
%
Net profit after tax
%
Adjusted net profit after tax
%
FM net profit before tax
%
FM net profit before tax and performance fees
%
Diluted EPS
%
Adjusted diluted EPS
%
Total KMP remuneration
%
Dividends paid
Total KMP remuneration as % of net profit after tax %
-52%
-56%
-54%
-55%
-52%
-56%
-23%
-35%
6%
44%
-3%
-13%
-11%
43%
-4%
23%
-15%
4%
-33%
-6%
0%
10%
-34%
-7%
-2%
-2%
4%
5%
20%
21%
27%
2%
17%
29%
16%
3%
78%
35%
39%
29%
75%
33%
-34%
38%
2%
1 Adjustments are made for strategic, non-recurring, non-cash or unrealised items to provide additional meaningful information (refer to section 1.4.1
of the Directors’ Report and note 2 in the financial statements for the breakdown of these items).
2 As at 30 June.
3 As reported in historical Annual Reports and has not been adjusted for changes to KMP.
4 Fixed compensation comprises salary, superannuation and leave benefits outlined in section 3.5.
5 Variable compensation comprises cash bonuses, retention incentives, termination benefits and other benefits outlined in section 3.5.
This report is made in accordance with a resolution of the Directors.
Hamish McLennan
Chairman
Sydney
18 August 2023
Magellan Financial Group Limited | Annual Report 2023
Page 43
Magellan Financial Group Limited | Annual Report 2023
Page 44
Consolidated Statement of Profit or Loss and
Comprehensive Income
For the year ended 30 June
Revenue
Management fees
Performance fees
Services fees
Advisory fees
Dividend and distribution income
Interest income
Net change in the fair value of financial assets and liabilities:
Realised
Unrealised
Net foreign exchange gain
Total revenue and other income
Expenses
Employee expenses
Non-Executive Director fees
Fund administration and operational costs
Information, technology and data
Marketing
Professional services fees
Travel and entertainment
Depreciation and amortisation
Foreign and withholding taxes
Expenses/(benefits) related to strategic initiatives
Finance costs
Other expenses
Total expenses
Share of after tax profit/(loss) of associates
Net gain/(loss) on dilution of interests in associates
Net gain on disposal of interests in associates
Net profit before tax
Income tax expense
Net profit after tax
Other comprehensive income for the year
Exchange differences on translation of foreign operations
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
Note
4
4
4
2
8
5
3
3
2023
$'000
327,647
11,524
2,600
1,230
34,697
13,770
(11,207)
50,497
892
431,650
92,121
1,096
14,857
8,695
1,962
4,038
1,224
6,036
175
26,576
1,503
5,089
163,372
(12,453)
(255)
-
2022
$'000
588,594
11,472
4,040
1,536
17,600
422
19,353
(92,937)
3,450
553,530
88,654
503
20,642
8,183
2,349
4,366
924
7,142
351
(22,592)
2,227
3,833
116,582
8,381
17,002
33,655
255,570
495,986
(72,915)
(112,975)
182,655
383,011
1,289
1,289
3,344
3,344
183,944
386,355
100.0
100.0
206.9
206.9
The Consolidated Statement of Profit or Loss and Comprehensive Income should be read in conjunction with the Notes to the
Financial Statements.
Magellan Financial Group Limited | Annual Report 2023
Page 45
Consolidated Statement of Financial Position
As at 30 June
Current assets
Cash and cash equivalents
Loans and receivables
Financial assets
Prepayments
Other assets
Total current assets
Non-current assets
Loans and receivables
Financial assets
Associates
Property, plant and equipment
Right-of-use assets
Intangible assets
Net deferred tax asset
Other assets
Total non-current assets
Total assets
Current liabilities
Payables
Employee benefits
Financial liabilities
Income tax payable
Lease liabilities
Total current liabilities
Non-current liabilities
Employee benefits
Provisions
Lease liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Retained earnings
Total equity
Note
10
7
10
7
8
11
9
5
12
13
14
11
13
11
16
17
2023
$'000
373,445
58,271
1,666
982
1,289
435,653
26,482
420,643
149,587
420
7,507
108,780
45,843
4,059
763,321
1,198,974
11,535
36,090
159,855
12,773
2,608
222,861
5,975
72
7,564
13,611
236,472
962,502
632,323
330,697
(518)
962,502
2022
$'000
419,922
66,270
1,650
994
724
489,560
31,901
379,438
162,295
592
9,560
111,287
49,849
6,919
751,841
1,241,401
15,478
31,401
133,349
18,483
2,585
201,296
3,316
62
9,967
13,345
214,641
1,026,760
671,716
317,758
37,286
1,026,760
The Consolidated Statement of Financial Position should be read in conjunction with the Notes to the Financial Statements.
Magellan Financial Group Limited | Annual Report 2023
Page 46
Consolidated Statement of Changes in Equity
For the year ended 30 June
Contributed
equity
Profits
reserve
Note
$’000
$'000
Share-
based
payments
reserve
$'000
Foreign
currency
translation
reserve
$’000
Retained
earnings
Total
equity
$'000
$’000
Opening balance at 1 July 2022
671,716
313,233
1,283
3,242
37,286
1,026,760
Net profit after tax for the year
Other comprehensive income for the year
Total comprehensive income for the year
-
-
-
-
-
-
-
-
-
- 182,655
1,289
-
1,289 182,655
182,655
1,289
183,944
Issue of shares:
On exercise of MFG 2027 Options
Shares bought back on-market and cancelled
Transaction costs, net of tax
Dividends paid
SPA expense
Share-based payment expense
Transfer (from retained earnings)/to
profits reserve
16
16
16
19
16
18
24
6
(39,487)
(27)
-
115
-
-
-
-
(212,655)
-
-
-
-
-
-
-
3,846
-
-
-
-
-
-
-
-
-
-
-
-
6
(39,487)
(27)
(212,655)
115
3,846
-
220,459
-
- (220,459)
-
Closing balance at 30 June 2023
632,323
321,037
5,129
4,531
(518)
962,502
Opening balance at 1 July 2021
607,849
345,089
Net profit after tax for the year
Other comprehensive income for the year
Total comprehensive income for the year
-
-
-
-
-
-
Issue of shares:
Under Dividend Reinvestment Plan ("DRP")
Under share purchase agreements ("SPA")
On exercise of MFG 2027 Options
Shares bought back on-market and cancelled
Transaction costs, net of tax
Dividends paid
SPA expense
Share-based payment expense
Transfer (from retained earnings)/to
profits reserve
16
16
16
16
16
19
16
18
24
52,335
19,731
99
(7,796)
(709)
-
207
-
-
-
-
-
-
(414,179)
-
-
-
-
-
-
-
-
-
-
-
-
-
1,283
(102)
36,598
989,434
-
3,344
3,344
383,011
-
383,011
383,011
3,344
386,355
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
52,335
19,731
99
(7,796)
(709)
(414,179)
207
1,283
-
382,323
-
(382,323)
-
Closing balance at 30 June 2022
671,716
313,233
1,283
3,242
37,286
1,026,760
The Consolidated Statement of Changes in Equity should be read in conjunction with the Notes to the Financial Statements.
Magellan Financial Group Limited | Annual Report 2023
Page 47
Consolidated Statement of Cash Flows
For the year ended 30 June
Cash flows from operating activities
Management and services fees received
Performance fees received
Advisory fees received
Dividends and distributions received
Interest received
Finance cost payments
Tax payments
Payments to suppliers and employees
Payments of transaction costs related to strategic initiatives
Net cash from operating activities
Cash flows from investing activities
Proceeds from the sale of financial assets and liabilities
Purchases of financial assets and liabilities
Proceeds from the sale of associates
Purchases of associates
Purchases of property, plant and equipment
Net returns/(placements) of cash on term deposits
Net cash from/(used in) investing activities
Cash flows from financing activities
Proceeds from share issuances, net of transaction costs
Proceeds from repayment of share purchase plan loans
Dividend payments
Lease payments
Shares bought back on-market
Net cash used in financing activities
Net increase/(decrease) in cash and cash equivalents
Effects of exchange rate changes on cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
Note
2023
$'000
2022
$'000
376,491
120
1,191
15,500
11,312
(1,569)
(73,941)
(142,452)
(71)
186,581
34,016
(17,414)
-
-
(112)
(16)
16,474
(29)
3,478
(211,118)
(2,501)
(40,439)
(250,609)
(47,554)
1,077
419,922
373,445
661,808
31,991
1,384
14,987
1,053
(2,227)
(113,917)
(158,314)
(2,139)
434,626
43,832
(42,694)
136,858
(2,985)
(261)
-
134,750
23,035
3,120
(381,819)
(2,390)
(6,890)
(364,944)
204,432
3,913
211,577
419,922
6
19
16
The Consolidated Statement of Cash Flows should be read in conjunction with the Notes to the Financial Statements.
Magellan Financial Group Limited | Annual Report 2023
Page 48
Notes to the Financial Statements
For the year ended 30 June 2023
Overview
Magellan Financial Group Limited (the “Company” or “MFG”) is a for-profit entity that is incorporated and domiciled in Australia. The
Company is listed on the Australian Securities Exchange (ticker code: MFG).
The principal activities of the Company and its subsidiaries (the “Group”) are described in the segment information in note 2. This
financial report was authorised for issue in accordance with a resolution of the Directors on 18 August 2023 and the Directors have
the power to amend and reissue this financial report.
1. Basis of Preparation
This general purpose financial report is presented in Australian dollars and has been prepared in accordance with the Corporations Act
2001 (Cth), Australian Accounting Standards (“AASB”) and Interpretations issued by the Australian Accounting Standards Board and
other mandatory professional reporting requirements. It also complies with International Financial Reporting Standards (“IFRS”) as
issued by the International Accounting Standards Board.
This financial report has been prepared on a going concern basis and under the historical cost convention except for the measurement
of financial assets and liabilities at fair value through profit or loss. All amounts in this financial report are rounded to the nearest
thousand dollars ($’000) in accordance with ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191,
unless stated otherwise.
1.1. Accounting Policies
The accounting policies adopted in the preparation of this financial report are contained within the notes to which they relate. The
policies adopted in the preparation of this financial report are consistent with those of the previous financial year.
The Group has not early adopted any accounting standard, interpretation or amendment that has been issued but is not yet effective
at the reporting date. No accounting standards, interpretations or amendments that have been issued are expected to have a material
impact on the Group's financial statements.
1.2. Critical Accounting Estimates and Judgements
In applying the Group’s accounting policies, a number of estimates and assumptions have been made concerning the future. 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. As a result, actual results could differ from those estimates.
The main areas where a higher degree of judgement or complexity arises, or where assumptions and estimates are significant to the
financial statements are:
•
•
•
Determination of significant influence over associates for which the Group holds less than a 20 percent voting interest (refer to
note 8);
Estimation of useful lives and impairment of intangible assets including goodwill (refer to note 9); and
Classification of interests held in funds for which the Group provides management services (refer to note 20).
1.3. Foreign Currency Translation
Both the functional and presentation currency of the Group is Australian dollars. Transactions in foreign currencies are initially
recorded in the functional currency by applying the 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 the reporting
date. The fair values of financial assets where denominated in a foreign currency are translated to Australian dollars using the Reuters
London 4pm exchange rates at reporting date. Foreign currency exchange differences relating to financial assets are included in
net changes in fair value in the Consolidated Statement of Profit or Loss and Comprehensive Income. All other foreign currency
exchange differences are presented separately in the Consolidated Statement of Profit or Loss and Comprehensive Income as net
foreign exchange gains/(losses).
1.4. 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 Consolidated Statement of Financial Position as a receivable or payable.
Cash flows are included in the Consolidated Statement of Cash Flows on a gross basis. The GST component of cash flows arising from
financing activities which are recoverable from, or payable to the taxation authority, is presented as operating cash flows.
Magellan Financial Group Limited | Annual Report 2023
Page 49
Notes to the Financial Statements
For the year ended 30 June 2023
1.5. Expenses
Expenses are recognised in the Consolidated Statement of Profit or Loss and Comprehensive Income on an accruals basis at the fair
value of the consideration paid or payable for services rendered. Certain costs, such as depreciation of property, plant and equipment
and amortisation of intangible assets, are charged evenly over the useful life of the asset.
Employee expenses include salaries, wages, allowances and annual and long service leave, together with the cost of other benefits
provided to employees such as bonuses, share purchase loans and options. The Group makes some performance awards to employees
that are deferred over a specified vesting period. The cost of such awards is charged to the Consolidated Statement of Profit or Loss
and Comprehensive Income over the vesting period.
Information regarding the Directors’ remuneration is included in the Remuneration Report commencing on page 27.
1.6. Impairment of Non-Financial Assets
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 Consolidated Statement of Profit or Loss and 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.
1.7. Structured Entities
Structured entities are those entities that have been designed so that voting or similar rights are not the dominant factor in deciding
who has control, such as when any voting rights relate to administrative tasks only, or when the relevant activities are directed by
means of contractual arrangements.
The Group has determined that the funds for which it acts as Responsible Entity or Investment Manager (as set out in note 2) and
the funds in which it invests (as set out in note 7) are not structured entities. In making this assessment the decision-making rights
of the Group, as Responsible Entity or Investment Manager, as well as the various rights afforded to investors in the funds, including
the right to remove the Investment Manager and redeem holdings, have been taken into consideration.
Magellan Financial Group Limited | Annual Report 2023
Page 50
Notes to the Financial Statements
For the year ended 30 June 2023
2. Segment Information
The Group’s business activities are organised into the reportable operating segments listed below for internal management purposes.
Funds Management
The Funds Management segment provides investment funds management services to high net worth and retail investors in Australia
and New Zealand, and to institutional investors globally. Funds Management activities include:
•
•
•
Providing investment research and administrative services to certain clients;
Providing investment management and sub-advisory services under client mandates; and
Acting as Responsible Entity/Trustee ("RE") and/or Investment Manager ("IM") for the following funds (collectively the
"Magellan Funds"):
International funds
MFG Global Fund1
MFG Select Infrastructure Fund1
MFG Global Sustainable Fund1
Frontier MFG Global Equity Fund2
Frontier MFG Core Infrastructure Fund2
Frontier MFG Select Infrastructure Fund2
Frontier MFG Global Sustainable Fund2
IM
✓
✓
✓
✓
✓
✓
✓
Australian funds
Magellan Global Fund
Magellan Global Fund (Hedged)
Magellan Global Equities Fund (Currency Hedged)
Magellan Infrastructure Fund
Magellan Infrastructure Fund (Unhedged)
Magellan Infrastructure Fund (Currency Hedged)
Magellan High Conviction Fund
Magellan High Conviction Trust
MFG Core Infrastructure Fund3
MFG Core International Fund3
MFG Core ESG Fund3
Magellan Sustainable Fund
Magellan Global Wholesale Fund
Magellan Energy Transition Fund
Airlie Australian Share Fund4
Airlie Concentrated Share Fund4
Airlie Small Companies Fund4
RE
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
IM
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
1 Funds authorised under the European Commission (Undertakings for Collective Investment in Transferable Securities (“UCITS”)).
2 Collectively, the Frontier MFG Funds.
3 Collectively, the Core Series Funds.
4 Collectively, the Airlie Funds.
Fund Investments
The Fund Investments segment comprises the Group's direct investment in certain Magellan Funds and a select portfolio of listed
Australian and international equities.
Associate Investments
The Associate Investments segment comprises a portfolio of selective investments in businesses in which the Group has a
strategic interest.
Corporate
The Corporate segment principally comprises the Group's treasury management activities, corporate development and strategy
activities and the costs associated with governance and corporate management. The combined income tax consequences of the Group
are reported in the Corporate segment, with the exception of deferred income tax arising from changes in the value of financial assets
and associates, which are reported in the relevant segment.
No operating segments have been aggregated to form the above reportable operating segments and inter-segment revenues and
expenses (where applicable) have been eliminated on consolidation.
Magellan Financial Group Limited | Annual Report 2023
Page 51
Notes to the Financial Statements
For the year ended 30 June 2023
Segment Financial Results
30 June 2023
Funds
Management
$’0001
Fund
Investments
$’000
Associate
Investments
$’000
Segment revenue
Management fees
Performance fees
Services and advisory fees
Dividend and distribution income
Interest income
Net change in the fair value of financial assets and liabilities:
Realised
Unrealised
Net foreign exchange gain/(loss)
Total segment revenue and other income
Segment expenses
Employee expenses
Non-Executive Director fees
Other expenses
Total segment expenses
327,647
11,524
3,830
-
1,218
-
-
885
345,104
86,124
319
34,881
121,324
-
-
-
34,697
11
(11,207)
50,497
16
74,014
-
-
106
106
Corporate
Total
$’000
$’000
-
-
-
-
9,585
327,647
11,524
3,830
34,697
11,969
-
-
(9)
9,576
(11,207)
50,497
892
429,849
-
-
-
-
1,155
-
-
-
1,155
-
-
-
-
62
777
4,505
5,344
86,186
1,096
39,492
126,774
Share of after tax profit/(loss) of associates
-
-
(12,453)
-
(12,453)
Total segment operating profit before tax
223,780
73,908
(11,298)
4,232
290,622
Other comprehensive income
Exchange differences on translation of foreign operations
Other comprehensive income, before tax
Total comprehensive income, before tax
1,289
1,289
225,069
-
-
73,908
-
-
(11,298)
-
-
4,232
1,289
1,289
291,911
1
Includes elimination of income and expense under the transfer pricing agreements between MFG's wholly-owned subsidiary, Magellan Asset
Management Limited ("MAM"), and US controlled entities, within the Funds Management segment.
Reconciliation of Segment Operating Profit Before Tax to Statutory Net Profit After Tax
Total segment operating profit before tax
Add back:
Amortisation of intangible assets2
Net non-cash remeasurement of SPA loans
Non-cash employee share option expense
Net gain on dilutions and disposals of interests in associates
Net (expenses)/benefits related to strategic initiatives:
MGF Partnership Offer and Bonus MGF Option Issue
Commitment to Magellan FuturePay
Total benefits/(expenses) related to strategic initiatives
Statutory net profit before tax for the year
Income tax expense
Statutory net profit after tax for the year
Note
30 June 2023
$'000
30 June 2022
$'0001
290,622
431,896
8
14
(3,580)
(795)
(3,846)
(255)
(26,575)
(1)
(26,576)
255,570
(72,915)
182,655
(4,585)
(3,291)
(1,283)
50,657
22,961
(369)
22,592
495,986
(112,975)
383,011
1 Prior period segment operating profit before tax has been restated to exclude non-cash employee share option expense of $1,283,000 on a basis
consistent with the current reporting period.
2 Amortisation expense relates to intangible assets recorded on acquisition of Airlie Funds Management ("Airlie") and Frontier Partners Inc, Frontegra
Strategies LLC and Frontegra Asset Management Inc (collectively, the “Frontier Group”).
Magellan Financial Group Limited | Annual Report 2023
Page 52
Notes to the Financial Statements
For the year ended 30 June 2023
Segment Financial Results (continued)
30 June 20221
$’0002
$’000
Funds
Management
Fund
Investments
Corporate
Total
Associate
Investments
$’000
$’000
$’000
Segment revenue
Management fees
Performance fees
Services and advisory fees
Dividend and distribution income
Interest income
Net change in the fair value of financial assets and liabilities:
Realised
Unrealised
Net foreign exchange gain/(loss)
Total segment revenue and other income
Segment expenses
Employee expenses
Non-Executive Director fees
Other expenses
Total segment expenses
Share of after tax profit/(loss) of associates
588,594
11,472
5,576
-
99
-
-
3,396
609,137
85,433
314
40,060
125,807
-
-
-
-
17,600
1
19,353
(92,937)
54
(55,929)
-
-
205
205
-
-
-
-
-
739
-
-
-
739
-
-
-
-
-
-
-
-
367
-
-
-
367
588,594
11,472
5,576
17,600
1,206
19,353
(92,937)
3,450
554,314
26
189
4,572
4,787
85,459
503
44,837
130,799
8,381
-
8,381
Total segment operating profit before tax
483,330
(56,134)
9,120
(4,420)
431,896
Other comprehensive income
Exchange differences on translation of foreign operations
Other comprehensive income, before tax
Total comprehensive income, before tax
3,344
3,344
486,674
-
-
(56,134)
-
-
9,120
-
-
(4,420)
3,344
3,344
435,240
1 Segment operating profit before tax for the year ended 30 June 2022 has been restated to exclude non-cash employee share option expense of
2
$1,283,000 on a basis consistent with the current reporting period.
Includes elimination of income and expense under the transfer pricing agreements between MFG's wholly-owned subsidiary, MAM, and US controlled
entities, within the Funds Management segment.
Segment Assets and Liabilities
30 June 2023
Financial assets
Associates
Other assets
Total liabilities
Net assets
30 June 2022
Financial assets
Associates
Other assets
Total liabilities
Net assets
Funds
Management
$’000
Fund
Investments
$’000
Associate
Investments
$’000
Corporate
Total
$’000
$’000
1,666
-
223,612
(62,858)
162,420
1,650
-
249,813
(60,947)
190,516
419,948
-
(27,942)1
-
392,006
378,743
-
(20,351)1
-
358,392
695
149,587
(823)1
-
149,459
695
162,295
(1,821)1
-
161,169
-
-
432,231
(173,614)
258,617
422,309
149,587
627,078
(236,472)
962,502
-
-
470,377
(153,694)
316,683
381,088
162,295
698,018
(214,641)
1,026,760
1 Reflects tax liabilities within the Group's net deferred tax asset.
Magellan Financial Group Limited | Annual Report 2023
Page 53
Notes to the Financial Statements
For the year ended 30 June 2023
3. Earnings Per Share
Basic earnings per share ("EPS") is calculated as net profit/(loss) after income tax expense for the year divided by the weighted
average number of ordinary shares on issue. Diluted EPS is calculated by adjusting the basic EPS to take into account the effect of
any costs associated with dilutive potential ordinary shares and the weighted average number of additional ordinary shares that would
have been outstanding assuming the conversion of all dilutive potential ordinary shares.
Basic and diluted EPS
Net profit attributable to shareholders ($'000)
Weighted average number of shares for basic and diluted EPS ('000)
Basic and diluted EPS (cents)
30 June 2023
30 June 2022
182,655
182,569
100.0
383,011
185,125
206.9
The outstanding MFG 2027 Options and the outstanding options issued to certain employees under the MFG Employee Share Option
Plan (refer to notes 16 and 18) are not included in the calculation of diluted earnings per share because they are antidilutive for the
year ended 30 June 2023. However, these options could potentially dilute basic earnings per share in the future.
4. Revenue
The Group's primary source of revenue is fee income from investment management activities. Fee income includes management,
services and performance fees.
Management Fees
Management fees are based on an agreed percentage of the value of funds under management. Management fee revenue, determined
in accordance with Investment Management Agreements for mandates and Constitutions for managed funds, is recognised as the
service is provided and at the amount the Group is entitled to receive.
Magellan Global Fund
Magellan Global Fund (Hedged)
Magellan Global Equities Fund (Currency Hedged)
Magellan Infrastructure Fund
Magellan Infrastructure Fund (Unhedged)
Magellan Infrastructure Fund (Currency Hedged)
Magellan High Conviction Fund
Magellan High Conviction Trust
MFG Core Infrastructure Fund
MFG Global Fund
MFG Select Infrastructure Fund
Frontier MFG Funds
Airlie Funds
Other funds and mandates
Total management fees
Services Fees
30 June 2023
$'000
30 June 2022
$'000
142,029
8,329
1,851
25,100
10,045
8,457
3,538
7,213
1,301
3,908
2,209
8,884
3,137
101,646
327,647
212,610
17,618
3,749
29,333
11,515
9,174
7,243
12,067
1,464
15,501
2,733
25,089
2,468
238,030
588,594
Services fees arise from providing investment research and administrative services to MFF Capital Investments Limited as well as
research and advisory services under other mandates. Services fees are recognised when the relevant service is provided and it is
probable that the fee will be collected.
Performance Fees
Performance fees may be earned from certain funds and mandates. The Group's entitlement to a performance fee is dependent on
outperformance of certain hurdles over an agreed performance measurement period. These hurdles may be index relative (including
in some cases a fixed percentage above an index), absolute return or both absolute return and index relative. In addition, 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. The high-water mark is the Net Asset Value ("NAV") per unit at the end of the most
recent measurement period for which the Group was entitled to a performance fee, less any intervening income (including capital
Magellan Financial Group Limited | Annual Report 2023
Page 54
Notes to the Financial Statements
For the year ended 30 June 2023
distributions). Performance measurement periods vary across funds and mandates and are typically one, three, six or 12 month
periods. The measurement period for all Magellan funds is six months ending 30 June and 31 December each year.
Performance fee arrangements give rise to variable consideration and fees are only recognised where it is highly probable that a
significant reversal of such revenue will not occur in future periods, being when any uncertainty related to outperformance is resolved.
Performance fees are therefore typically recognised at the end of the performance period.
Based on performance relative to both market index and
absolute return hurdle
Magellan Global Fund (Open/Closed Class)
Magellan Global Fund (Hedged)
Magellan Global Equities Fund (Currency Hedged)
Magellan Infrastructure Fund
Magellan Infrastructure Fund (Unhedged)
Magellan Infrastructure Fund (Currency Hedged)
Magellan Sustainable Fund
Based on performance relative to absolute return hurdle
Magellan High Conviction Fund (Class A/B)
Magellan High Conviction Trust
MFG High Conviction Master Fund
Based on performance relative to a market index and/or
absolute return hurdle
Other funds and mandates
Total performance fees
High watermark
unit price
($)1
30 June 2023
$'000
30 June 2022
$'000
2.6375/1.9335
1.3986
2.7588
1.3077
1.8620
2.8788
2.7572
2.1973/1.3496
1.7335
-
10,802
93
18
18
546
3
32
-
-
-
104
13
2
5,336
1,838
1,648
-
791
1,052
680
various
12
11,524
8
11,472
1 The high watermark as at 30 June 2023 and adjusted for distributions. The high watermark is the Net Asset Value ("NAV") per unit at the end of the
most recent calculation period for which the Group was entitled to a performance fee, less any intervening income (including capital distributions).
Management, Services and Performance Fees by Investor Type
Management and services fees
Retail
Institutional
Performance fees
Retail
Institutional
Total management, services and performance fees
Total Retail
Total Institutional
Total management, services and performance fees
Management, Services and Performance Fees by Geographic Location
Australia & New Zealand
United Kingdom & Europe
North America
Asia
Total management, services and performance fees
Magellan Financial Group Limited | Annual Report 2023
30 June 2023
$'000
30 June 2022
$'000
234,791
95,456
11,523
1
341,771
246,314
95,457
341,771
345,324
247,311
10,590
881
604,106
355,914
248,192
604,106
30 June 2023
$'000
30 June 2022
$'000
272,280
20,919
27,911
20,661
341,771
404,976
97,925
80,232
20,973
604,106
Page 55
Notes to the Financial Statements
For the year ended 30 June 2023
Dividend and Distribution Income
Dividend and distribution income is recognised when it is declared and the Group's right to receive payment is established.
Interest Income
Interest income is calculated using the effective interest rate method and recognised on an accrual basis.
5. Taxation
Reconciliation of Income Tax Expense
Net profit before tax
Prima facie income tax expense at 30%
Effect of amounts which are non-deductible/(assessable) in calculating taxable income:
Concessional tax rate on offshore banking unit ("OBU")
Share of profit/(losses) of associates
Non-assessable income and non-deductible expenses
US state and local taxes (net of tax credits)
Differences in overseas tax rates
Imputed interest, expense and allowances relating to SPA loans
(Under)/over provision of prior year income tax
Income tax expense
Components of Income Tax Expense
Current income tax (expense)/benefit
Deferred income tax expense/(benefit)
Differences in overseas tax rates
US state and local taxes (net of tax credits)
(Under)/over provision of prior year income tax
Income tax expense
Offshore Banking Unit
30 June 2023
$'000
30 June 2022
$'000
255,570
(76,671)
9,031
(2,814)
(1,419)
(113)
(213)
(239)
(477)
(72,915)
495,986
(148,796)
32,358
5,870
(1,274)
(310)
(35)
(988)
200
(112,975)
30 June 2023
$'000
30 June 2022
$'000
(68,094)
(4,018)
(213)
(113)
(477)
(72,915)
(121,263)
8,433
(35)
(310)
200
(112,975)
MAM, a controlled entity of MFG and a member of the Australian tax consolidated group, was declared an OBU on 31 July 2013.
Assessable offshore banking (“OB”) income derived from the Group’s OB funds management and advisory activities provided to clients
outside of Australia and New Zealand, net of costs, is subject to a concessional tax rate of 10% and is determined with reference to
current Australian tax legislation definitions of assessable OB income, exclusive OB deductions and general OB deductions.
In September 2021, the Treasury Laws Amendment (2021 Measures No. 2) Bill 2021 received Royal Assent. This legislation abolishes
the OBU regime and removes the concessional tax rate of 10% applying to certain Group income and expenses from 1 July 2023.
This change does not result in any financial impact on the Group for the 2023 financial year, but will result in the Group paying higher
income tax in Australia from 1 July 2023, which in turn will generate additional franking credits available to frank the Group's dividends
to shareholders (all other variables being equal).
For the year ended 30 June 2023, the Company’s effective tax rate was 28.5% (June 2022: 22.8%), which includes tax paid (net of tax
credits in foreign jurisdictions). This rate is below the Australian company tax rate of 30% primarily as a result of MAM’s qualifying OB
income, net of costs. The impact of the OBU concessional tax rate during the year ended 30 June 2023 is a benefit of $9,031,000 in the
income tax expense recognised in the Consolidated Statement of Profit or Loss and Comprehensive Income (June 2022: $32,358,000).
Magellan Financial Group Limited | Annual Report 2023
Page 56
Notes to the Financial Statements
For the year ended 30 June 2023
Reconciliation of Net Deferred Tax Asset/(Liability)
Financial assets held at fair value
Accruals and provisions
Investment in associates
Business-related costs deductible over 5 years
Net deferred tax asset/(liability)
30 June
2023
$'000
(28,538)
63,375
(824)
11,830
45,843
Charged to
Equity
Profit
$'000
$'000
-
-
-
12
12
(7,632)
11,598
998
(8,982)
(4,018)
30 June
2022
$'000
(20,906)
51,777
(1,822)
20,800
49,849
At 30 June 2023, deferred tax assets of $9,702,000 (June 2022: $6,887,000) relating to the Group's share of post-tax losses from
associates have not been recognised in the Consolidated Statement of Financial Position.
Tax Consolidation
MFG and its wholly owned Australian subsidiaries have formed a tax consolidated group for income tax purposes. The entities in the
tax consolidated group are party to a tax sharing agreement, which limits the joint and several liability of the subsidiaries in the case
of a default of MFG. These entities are also party to a tax funding agreement under which each subsidiary has agreed to compensate
MFG for the amount of tax calculated as though the subsidiary were a tax paying entity. MFG, as head entity, and the subsidiaries in
the tax consolidated group continue to account for their own current and deferred tax amounts. The amounts are measured as if each
entity in the tax consolidated group were a standalone taxpayer in its own right. The subsidiary tax balances are transferred to MFG
via inter-company transactions and recognised as related party tax payables or receivables.
During the financial year, income tax liabilities of $61,213,000 (June 2022: $122,746,000) were assumed by MFG of which $6,591,000
remained receivable from other entities under the tax funding agreement as at the reporting date (June 2022: $5,687,000).
There is also a US tax consolidated group for income tax purposes which includes several US based entities.
Income Tax
Income tax expense/benefit is the tax payable/receivable on the current year’s taxable income adjusted by changes in deferred tax
assets and liabilities. Taxable profit differs from net profit reported in the Consolidated Statement of Profit or Loss and Comprehensive
Income as some items of income or expense are assessable or deductible in years other than the current year and some items are
never assessable or deductible.
Current and deferred tax is recognised in the profit or loss, except to the extent that it relates to items recognised in comprehensive
income or directly in equity. In this case, the tax is recognised in comprehensive income or equity respectively.
Current Tax
Current tax assets or liabilities are amounts receivable or payable in relation to income taxes attributable to taxable profits of the
current or prior financial years, less income tax instalments paid. The tax rates and laws used to calculate current taxes are those that
are enacted or substantively enacted as at the reporting date.
Deferred Tax
Deferred tax balances represent amounts that will become payable or recoverable in future accounting periods. They arise when there
are temporary differences between the tax bases of the Group's assets and liabilities and the related accounting values. Deferred tax
is not recognised if it arises from the initial recognition of goodwill, from an asset or liability in a transaction other than a business
combination which affects neither taxable income nor accounting profit or from investments in subsidiaries, associates and foreign
operations when the timing of reversal can be controlled and it is probable that the temporary differences will not reverse in the
foreseeable future.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable
amounts will be available to utilise the temporary differences and losses. The carrying amount of deferred tax assets is reviewed at
each reporting date and reduced to the extent that it is no longer probable that the tax benefit will be realised.
Magellan Financial Group Limited | Annual Report 2023
Page 57
Notes to the Financial Statements
For the year ended 30 June 2023
Deferred tax assets and liabilities are offset only when there is a legally enforceable right to set off current tax assets and current tax
liabilities and the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same taxation authority and for
which the tax consolidated group intends either to settle current tax liabilities and assets on a net basis, or to realise the assets and
settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax liabilities or assets are expected
to be settled or recovered.
Deferred tax is measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled
based on tax legislation that has been enacted or substantively enacted at the reporting date.
6. Reconciliation of Operating Cash Flows
The below table provides a reconciliation of net profit after tax, which is based on accounting rules, to operating cash flows.
Net profit after tax
Adjustments for non-cash items of profit or loss:
Net change in the fair value of financial assets and liabilities:
Unrealised
Recorded as dividend and distribution income
Share of (profit)/loss of associates
Net gain on dilution of interest in associates
Net gain on disposal of interests in associates
Depreciation and amortisation expense
Net foreign exchange (gain)/loss
Non-cash remeasurement of SPA loans
Share-based payment expense
Adjustments for which cash effects are investing activities:
Realised changes in the fair value of financial assets and liabilities
Dividends and distributions reinvested
Adjustments for operating asset and liability movements:
(Increase)/decrease in receivables
(Increase)/decrease in prepayments
(Increase)/decrease in net deferred tax asset
Increase/(decrease) in payables and provisions
Increase/(decrease) in income tax payable
Effects of exchange rates on cash and cash equivalents
Net cash from operating activities
30 June 2023
$'000
30 June 2022
$'000
182,655
383,011
(50,497)
(448)
12,453
255
-
6,036
(892)
795
3,846
92,937
(745)
(8,381)
(17,002)
(33,655)
7,142
(3,450)
3,291
1,283
11,207
(18,078)
(19,353)
(1,342)
10,183
12
4,365
30,445
(5,710)
(46)
186,581
49,521
358
(8,433)
(17,469)
6,907
6
434,626
Cash and cash equivalents comprise cash at bank and short term deposits with a maturity of 90 days or less that are readily convertible
to known amounts of cash and subject to an insignificant risk of change in value. Term deposits with maturities greater than 90 days
from inception date are classified as financial assets (refer to note 7).
Magellan Financial Group Limited | Annual Report 2023
Page 58
Notes to the Financial Statements
For the year ended 30 June 2023
7. Financial Assets
Term deposits - at amortised cost1
Total current financial assets
Investments - fair value through profit or loss
Magellan Funds2
Airlie Small Companies Fund3
Magellan Energy Transition Fund4
Magellan Global Equities Fund (Currency Hedged)
Magellan Global Fund - Open Class5
Magellan Global Fund - Closed Class6,7
Magellan Global Fund (Hedged)
Magellan Global Wholesale Fund
Magellan High Conviction Fund
Magellan High Conviction Trust
Magellan Infrastructure Fund (Currency Hedged)
Magellan Sustainable Fund
Magellan Wholesale Plus Global Fund
Magellan Wholesale Plus Infrastructure Fund
MFG Core International Fund
MFG Core ESG Fund
MFG Global Sustainable Fund
Frontier MFG Core Infrastructure Fund
Frontier MFG Global Sustainable Fund
Frontier MFG Global Plus Fund
Magellan FuturePay
Total investments in Magellan Funds
Seed investments
MC Fund
Portfolios - securities by domicile of primary stock exchange:
United States
Europe and United Kingdom
Total seed investments
Unlisted entities
30 June
2023
$'000
1,666
1,666
30 June
2022
$'000
1,650
1,650
1,932
1,611
21,123
167,236
82,318
908
1,061
10,280
39,914
11,819
5,520
9,361
6,241
12,022
11,886
2,060
8,718
18,880
-
-
412,890
1,014
5,449
595
7,058
695
-
-
19,850
153,875
55,518
839
908
8,654
34,212
12,660
4,760
9,079
6,334
10,175
9,857
1,655
8,526
15,290
11,594
9,454
373,240
795
4,184
524
5,503
695
Total non-current financial assets
420,643
379,438
1 Held with a major Australian bank and pledged against bank guarantees in respect of the Group's lease obligations. Should the Group fail to make
its lease payments, the bank can apply the deposits in settlement of the amount paid to the lessor under the guarantees.
2 At 30 June 2023, MFG held the following investments: Airlie Small Companies Fund 69.7% (June 2022: nil), Magellan Energy Transition Fund
96.6% (June 2022: nil), Magellan Global Equities Fund (Currency Hedged) 17.6% (June 2022: 12.3%), Magellan Global Fund Open Class 2.4% and
Closed Class 3.4% (June 2022: 1.6% and 2.8%), Magellan Global Fund (Hedged) 0.2% (June 2022: 0.1%), Magellan Global Wholesale Fund 13.8%
(June 2022: 99.9%), Magellan High Conviction Fund 5.7% (June 2022: 3.8%), Magellan High Conviction Trust 8.9% (June 2022: 6.4%), Magellan
Infrastructure Fund (Currency Hedged) 1.6% (June 2022: 1.4%), Magellan Sustainable Fund 74.6% (June 2022: 64.3%), Magellan Wholesale Plus
Global Fund 2.0% (June 2022: 1.3%), Magellan Wholesale Plus Infrastructure Fund 5.1% (June 2022: 4.0%), MFG Core International Fund 48.9%
(June 2022: 66.0%), MFG Core ESG Fund 80.4% (June 2022: 79.7%), MFG Global Sustainable Fund 1.6% (June 2022: 1.2%), Frontier MFG Core
Infrastructure Fund 1.2% (June 2022: 0.9%) and Frontier MFG Global Sustainable Fund 39.6% (June 2022: 30.7%).
3 MFG seeded the fund with $2,000,000 on 30 March 2023.
4 MFG seeded the fund with $1,400,000 on 30 January 2023.
5 MFG sold 3,454,813 units for $8,281,334 during the year.
6 MFG purchased 8,428,685 units for $11,933,472 during the year.
7 At 30 June 2023, MFG held 8,379,927 MGF Options (June 2022: 8,379,927 MGF Options).
Magellan Financial Group Limited | Annual Report 2023
Page 59
Notes to the Financial Statements
For the year ended 30 June 2023
Reconciliation of Financial Assets Carrying Value
Current
Opening balance at 1 July
Cash placed on term deposit
Matured term deposits
Closing balance
Non-current
Opening balance at 1 July
Acquisitions
Disposals
Changes in value of accrued distributions
Net change in fair value
Realised
Unrealised
Closing balance
Classification and Measurement
30 June
2023
$'000
30 June
2022
$'000
1,650
1,666
(1,650)
1,666
379,438
35,478
(34,011)
448
(11,207)
50,497
420,643
1,650
1,650
(1,650)
1,650
452,523
43,474
(43,603)
745
19,308
(93,009)
379,438
Financial assets are recognised initially at fair value on the date at which the Group becomes a party to the contractual provisions of
the instrument.
Financial assets are measured at amortised cost when their contractual cash flows represent solely payments of principal and interest
and they are held within a business model designed to collect cash flows. This classification typically applies to the Group's receivables,
loans and term deposits. The carrying value of financial assets at amortised cost is adjusted for impairment under an expected credit
loss model (refer to note 22).
All other financial assets are measured at fair value through profit or loss with future changes in the value of such assets recognised in
the Consolidated Statement of Profit or Loss and Comprehensive Income. The change in fair value of financial assets does not include
dividend and distribution income.
Financial assets are classified as non-current assets unless management intends to dispose of the assets within 12 months of
reporting date.
Derecognition
Financial assets are derecognised when the rights to receive cash flows from the assets have expired or have been transferred and
the Group no longer holds substantially all the risks and rewards of ownership.
Magellan Financial Group Limited | Annual Report 2023
Page 60
Notes to the Financial Statements
For the year ended 30 June 2023
8. Associates
Associates are entities in which the Group has an investment and over which it has significant influence, but not control, through
participation in financial and operating policy decisions. The Group accounts for associates using the equity method.
Under the equity method, investments are initially recognised in the Consolidated Statement of Financial Position at cost and adjusted
thereafter to recognise the Group's share of the associate's profit or loss and other comprehensive income. The Group's share
of the associate's profit or loss and other comprehensive income is included in the Consolidated Statement of Profit or Loss and
Comprehensive Income. Dividends received from an associate are accounted for as a reduction to the carrying value of the investment.
At each reporting date, the Group applies judgement to determine whether there is any indication that the carrying value of associates
may be impaired. If an associate is deemed to be impaired, the carrying value is reduced to the investment's recoverable amount. This
reduction is recognised as an impairment charge in the Consolidated Statement of Profit or Loss and Comprehensive Income.
Associate
Industry
Ownership
interest
Investment carrying value
2023
%
2022
%
30 June 2023
$'000
30 June 2022
$'000
Barrenjoey Capital Partners Group Holdings Pty
Ltd ("Barrenjoey")1
FinClear Holdings Ltd ("FinClear")2,3
Financial services
Financial services
36
16
36
16
123,857
25,730
149,587
133,240
29,055
162,295
1 Barrenjoey is an Australian-based financial services firm providing corporate and strategic advisory, capital market underwriting, research, prime
brokerage and fixed income services. The Group's voting interest in Barrenjoey is 4.99%.
2 FinClear is an Australian-based provider of technology, trading infrastructure and exchange market-access services to wealth, stockbroking, platform
and fintech customers. The Group's voting interest in FinClear is equal to its ownership interest.
3 Ownership interest reflects the Group's current entitlement and excludes the impact of any potential dilution arising from unexercised options issued
by FinClear.
Key Judgement
Through representation on the board of directors of each associate, the Group participates in financial and operating policy decisions.
As a result, the Group is deemed to have significant influence despite holding less than 20% of the voting rights of the entities.
Transactions with Associates
The Group provides Barrenjoey with up to $50,000,000 of unsecured working capital finance. During the year ended 30 June 2023
an aggregate of $25,000,000 was drawn in varying amounts (June 2022: $45,000,000) and all borrowings were subsequently repaid
in full. Interest income in respect of these borrowings amounted to $1,155,000 (June 2022: $739,000). The facility was undrawn at
30 June 2023.
During the year ended 30 June 2023, the Group received brokering services in respect of MFG's on-market share buy-back programme.
The Group paid Barrenjoey $15,000 in brokerage fees for the year ended 30 June 2023 (June 2022: $9,000).
During the year ended 30 June 2022, the Group received the following additional services from Barrenjoey:
•
•
DRP underwriting services in respect of the dividend declared for the six month period ended 30 June 2022. As part of the DRP
underwrite, Barrenjoey was issued 586,056 ordinary MFG shares, all of which were subsequently transferred to relevant MFG
shareholders. The Group paid Barrenjoey fees of $46,000 in connection with the underwriting service.
Arranging services in respect of the Group's disposal of its interest in GYG to a trust managed by Barrenjoey on behalf of investors.
The Group paid Barrenjoey $3,079,000 in arranging fees during the year ended 30 June 2022. As part of the transaction, the Group
executed an agreement with Barrenjoey which would see the Group receive further consideration of up to $6,117,000, net of
$125,000 in related arranging fees, subject to the performance of GYG and the realisation of the investment by the managed trust.
Magellan Financial Group Limited | Annual Report 2023
Page 61
Notes to the Financial Statements
For the year ended 30 June 2023
Associates' Financial Information
The tables below provide summarised financial information of the Group's associates aggregated on an industry classification
basis. The information reflects the amounts presented in the financial statements of the associates and not the Group's share of
those amounts (except where indicated). As required by the equity method of accounting, amounts have been amended to reflect
adjustments made by the Group, including fair value adjustments and modifications for differences in accounting policies.
Summarised Statement of Financial Position
Financial services
Consumer services
Total
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Net assets
30 June
2023
$'000
5,327,211
177,327
(4,565,796)
(730,702)
208,040
30 June
2022
$'000
5,296,420
93,404
(4,520,696)
(622,817)
246,311
Group's interest in net assets
Goodwill and transaction costs
Investment carrying amount
59,367
90,220
149,587
71,675
90,620
162,295
Summarised Statement of Profit or Loss and Comprehensive Income
30 June
2023
$'000
30 June
2022
$'000
30 June
2023
$'000
30 June
2022
$'000
5,296,420
93,404
(4,520,696)
(622,817)
246,311
5,327,211
177,327
(4,565,796)
(730,702)
208,040
59,367
90,220
149,587
71,675
90,620
162,295
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Financial services
Consumer services
Total
Revenue
Profit or loss from
continuing operations
Other comprehensive income
Total comprehensive income
30 June
2023
$'000
30 June
2022
$'000
293,111
273,536
(44,559)
-
(44,559)
45,580
-
45,580
Group's share of associates'
after tax profit/(loss)
Dividends received from associates
(12,453)
-
7,965
-
30 June
2023
$'000
30 June
2022
$'0001
30 June
2023
$'000
30 June
2022
$'000
-
-
-
-
-
-
139,536
293,111
413,072
3,267
-
3,267
(44,559)
-
(44,559)
48,847
-
48,847
416
-
(12,453)
-
8,381
-
1 Amounts presented in consumer services for the year ended 30 June 2022 reflect the period from 1 July 2022 to 30 April 2022 as the Group's interest
in Guzman y Gomez (Holdings) Ltd was divested in May 2022.
Magellan Financial Group Limited | Annual Report 2023
Page 62
Notes to the Financial Statements
For the year ended 30 June 2023
9. Intangibles
Intangible assets comprise goodwill and customer relationships resulting from the acquisition of Airlie and the Frontier Group.
30 June 2023
30 June 2022
Customer
relationships
$'000
Goodwill
Total
$'000
$'000
Customer
relationships
$'000
25,853
106,251
132,104
25,743
105,288
Goodwill
Total
$'000
$'000
131,031
(23,324)
2,529
-
106,251
(23,324)
108,780
(19,744)
5,999
-
105,288
(19,744)
111,287
5,999
(3,580)
110
2,529
105,288
-
963
106,251
111,287
(3,580)
1,073
108,780
10,222
(4,585)
362
5,999
102,840
-
2,448
105,288
113,062
(4,585)
2,810
111,287
At cost
less: accumulated amortisation
and impairment
Total intangible assets
Movements:
Opening balance at 1 July
Amortisation expense
Net foreign exchange differences
Closing balance
Customer Relationships
Customer relationships reflect existing agreements with clients and relationships with unitholders in the case of the Magellan Funds.
They are definite life assets with useful lives based on the following expected client attrition profile:
•
•
Airlie - 5 years
Frontier Group - 7 years
Customer relationship assets are recognised at fair value at the date of acquisition and amortised to profit or loss on a straight-line
basis over the useful lives stated above.
Goodwill
Goodwill arises when consideration paid for a business exceeds the fair value of the identifiable net assets acquired or liabilities
assumed at the date of acquisition. The Group's goodwill represents the value of expected synergies from the acquisitions of Airlie and
the Frontier Group, as well as the value of their respective workforces. Goodwill has an indefinite life. It is initially recognised at cost
at the date of a business acquisition and subsequently measured at cost less any accumulated impairment.
Impairment
Goodwill is tested for impairment annually or when circumstances indicate the carrying value may not be recoverable. In addition,
impairment tests for all assets are performed when there is an indication of impairment. All of the Group's goodwill is allocated to one
cash generating unit ("CGU"), being the Funds Management segment ("FM CGU"). The recoverable amount of the FM CGU has been
determined by taking a value-in-use approach which calculates the net present value of the CGU’s estimated future pre-tax cash flows.
Key Estimates and Judgements
Judgement is applied to assess the estimated useful life of intangible assets, the presence of indicators of impairment and the
recoverable amount of goodwill and customer relationship assets. Determination of the recoverable amount of goodwill requires
the application of significant judgement when making assumptions about the future cash flows of the FM CGU, including the
reasonableness of applied growth and discount rates.
In the Group's goodwill impairment testing, estimated future cash flows are based on financial budgets approved by the Directors for
a period of one year. Cash flows for the years beyond the approved budget period have been extrapolated assuming FUM flows, net
of fund performance, at an average annual growth rate of 3.0% (June 2022: 5.0%). In estimating net FUM flows, management have
considered external forecasts of long-term global equity market returns. A perpetuity growth rate of 2.5% (June 2022: 3.0%) was used
to derive a terminal value and a pre-tax discount rate of 12.5% (June 2022: 12.4%) was applied to net cash flows.
In forecasting cash flows over the assessment period, the current economic conditions and the Funds Management segment
performance were considered. Management is of the view that no reasonably possible change to a key assumption would cause the
recoverable amount of goodwill to fall short of the carrying amount. As such there is no impairment of goodwill at 30 June 2023.
Magellan Financial Group Limited | Annual Report 2023
Page 63
Notes to the Financial Statements
For the year ended 30 June 2023
10. Loans and Receivables
Current
Fees receivable
Distributions receivable from Magellan Funds
Other receivables
Loans issued under share purchase agreements:
Current employees
External parties1
Non-current
Loans issued under share purchase agreements:
Current employees
External parties1
Total loans and receivables
30 June 2023
$'000
30 June 2022
$'000
53,223
225
1,187
2,759
877
58,271
7,839
18,643
84,753
64,081
221
352
663
953
66,270
14,346
17,555
98,171
1 External parties include Non-Executive Directors, employees of associates and former employees of the Group.
Fees Receivable
Fees receivable comprise uncollected management, performance and services fees. These amounts are initially recognised at the fair
value of the amounts to be collected. An impairment analysis is performed at each balance date to determine whether a loss allowance
should be recognised for expected credit losses. Expected credit losses are based on the difference between the contractual cash flows
due in accordance with the contract and all the cash flows that the Group expects to receive, discounted at an approximation of the
original effective interest rate. The Group applies the simplified approach for trade receivables whereby the loss allowance is based
on lifetime expected credit losses at each balance date.
Receivables of $3,870,000 were past due at 30 June 2023 (June 2022: $3,521,000). Based on the credit quality of the Group's clients
(including Magellan Funds) and no historical credit losses, there were no provisions for expected credit losses recognised during the
year (June 2022: nil).
Share Purchase Agreements
The Group has entered into arrangements with certain of its employees, Non-Executive Directors and employees of associates
("participants") under which participants were offered financial assistance, in the form of a full recourse interest free loan ("SPA
loan"), to purchase MFG shares (referred to as "Share Purchase Agreements" or "SPA"). The arrangements were entered into with the
intention of aligning the interest of SPA participants more closely with those of MFG shareholders.
Each SPA loan is generally secured by the MFG shares that were issued to the relevant participant under the SPA. Any outstanding
balance at the end of the SPA loan term must be repaid by the participant and an employee participant who ceases to be employed
by the Group must repay the total amount owing under the SPA loan within three months of the cessation of their employment, or
within such longer period as determined by the Board.
Shares issued under each SPA were issued at the fair market value of those shares, which was calculated as the volume weighted
average price of traded shares on the five business days prior to the relevant offer date.
Shares issued under an SPA have the same rights as all other MFG ordinary shares except that they are subject to a holding lock which
remains in place for as long as the relevant SPA loan remains outstanding. Following full repayment of an SPA loan, the holding lock
and any security over the shares issued under the SPA are released and the participant has unrestricted access to their shares.
SPA loans to employees and Non-Executive Directors are subject to the Group's Share Purchase Plan (“SPP”) Rules. During the year
ended 30 June 2022, the terms relating to the repayment of SPA loans by employees of the Group were varied in accordance with
the SPP Rules. The variations did not amend the full recourse nature of the SPA loans. Rather the variations, which were intended to
provide greater flexibility to assist employees with the repayment of their SPA loan(s), included the following:
•
•
an extension of the maximum loan term from 10 to 15 years;
removal of the requirement for loan repayments to be made from an employee's annual cash bonus;
Magellan Financial Group Limited | Annual Report 2023
Page 64
Notes to the Financial Statements
For the year ended 30 June 2023
•
•
allowing voluntary loan repayments by participants with MFG retaining the absolute discretion to determine the allocation of loan
repayments where multiple loans are held by the participant so as to ensure appropriate security over the outstanding loan is
retained by the Group. For the same reason, where an employee has more than one SPA loan, dividends are not aggregated but
rather repayment occurs by applying the dividends received from the shares issued under each SPA loan to that particular SPA
loan; and
a requirement that an after-tax cash retention incentive (refer to note 13) received by an employee participant with an outstanding
SPA loan be applied to reduce that participant's outstanding SPA loan.
The SPP was suspended in February 2022 and there have been no new SPA loans entered into since that time.
At 30 June 2023, the weighted average duration of the SPA loans was 6.2 years, with individual terms ranging from 0.2 years to 13.4
years (June 2022: weighted average duration of 6.9 years, with individual terms ranging from 1.5 years to 14.4 years). The five largest
individual loans represent 49% of the closing loan balance at 30 June 2023, and are all held with external parties.
Reconciliation of SPA Loans
Opening balance at 1 July
Loan issuances
Modification adjustment
Imputed interest income/(expense)
Repayments - cash
Repayments - dividends (refer to note 19)
Expected credit losses1
Shares released on loan termination
Closing balance
30 June 2023
30 June 2022
Number of
shares
SPA loans
$'000
Number of
shares
SPA loans
$'000
1,378,354
-
-
-
-
-
-
(140,972)
1,237,382
33,517
-
-
1,801
(3,478)
(1,537)
(185)
-
30,118
1,196,445
566,503
-
-
-
-
-
(384,594)
1,378,354
25,458
15,029
(350)
(233)
(3,120)
(2,892)
(375)
-
33,517
1 Reflects an allowance for potential loan defaults recognised in accordance with the measurement requirements of AASB 9 Financial Instruments
(refer to note 22 for further discussion).
Classification and Measurement
SPA loans are initially recognised at fair value, which is determined by discounting loans to their net present value using an interest
rate reflective of the risk of the underlying asset at the time the loan is granted and an estimated repayment schedule. Subsequently,
the loans are carried at amortised cost using the effective interest rate method and adjusted for changes in the projected repayment
schedule. Changes in the carrying value of the SPA loans are recognised within interest income in the Consolidated Statement of Profit
or Loss and Comprehensive Income.
The cost of providing the interest free loans to SPA participants is capitalised at inception of the loan and subsequently expensed
on a straight-line basis over the expected life of the SPA loan. This cost, which reflects the foregone interest income of the Group,
is recorded within employee expenses in the Consolidated Statement of Profit or Loss and Comprehensive Income. During the year
ended 30 June 2023, $2,411,000 was recognised within employee expenses (June 2022: $2,132,000).
Both the change in the carrying value of the SPA loans recorded in interest income and the cost of providing the interest free loan
to participants recorded as employee expenses are non-cash items and therefore not included in the Group’s Consolidated Statement
of Cash Flows. Over the life of the SPA loans, the amounts credited to interest income and the amounts recognised within employee
expenses will exactly offset each other.
On variation of the SPA loan terms, the revised cash flows, reflecting the new loan maturities and repayment terms, were discounted
using the effective interest rate determined at inception of the original loan. The carrying values of the SPA loan, and the related
capitalised cost of providing those loans were adjusted and a net modification gain of $206,000 was recognised within interest income
in the Consolidated Statement of Profit or Loss and Comprehensive Income during the year ended 30 June 2022.
The total value of MFG ordinary shares securing the SPA loans to SPA participants applying MFG’s closing share price at 30 June 2023
of $9.49 was $11,743,000 (June 2022: $17,808,000 at a share price of $12.92). An impairment analysis is performed at each reporting
date to determine whether to recognise a loss allowance for potential loan defaults. During the year ended 30 June 2023, an expected
Magellan Financial Group Limited | Annual Report 2023
Page 65
Notes to the Financial Statements
For the year ended 30 June 2023
credit loss allowances of $560,000 (June 2022: $375,000) has been recognised within other expenses in the Consolidated Statement
of Profit or Loss and Comprehensive Income (refer to note 22 for further discussion).
11. Leases
The Group's lease arrangements primarily comprise operating leases of office space typically for fixed periods of up to 10 years.
At commencement of a lease, the Group records a lease liability in the Consolidated Statement of Financial Position reflecting the
present value of future contractual payments to be made over the lease term, discounted at the Group's incremental borrowing rate,
unless an interest rate is stated within the lease. A right-of-use ("ROU") asset is also recorded at the value of the lease liability plus
any initial direct costs incurred to obtain the leased asset.
Interest is accrued on the lease liability, and recognised within finance costs in the Consolidated Statement of Profit and Loss and
Comprehensive Income, whilst the liability balance is reduced as lease payments are made. The ROU asset is depreciated on a
straight-line basis over the shorter of the leased asset's useful life or the lease term.
The liability is remeasured upon the occurrence of certain events, such as a change in the lease term or the lease payments. The
amount of any liability remeasurement is adjusted against the value of the ROU asset.
Payments associated with short term leases and leases of low-value assets are recognised on a straight-line basis as an expense
in profit or loss. Short term leases have a term of 12 months or less and low-value assets comprise small items of technology and
office equipment.
30 June 2023
30 June 2022
ROU assets
$'000
Lease liabilities
$'000
ROU assets
$'000
Lease liabilities
$'000
Opening balance at 1 July
Additions and remeasurements
Lease terminations
Lease payments
Depreciation expense
Interest expense
Net foreign exchange differences
Closing balance
9,560
319
(201)
-
(2,172)
-
1
7,507
12,552
319
(207)
(2,944)
-
450
2
10,172
11,497
323
-
-
(2,270)
-
10
9,560
The Group's undiscounted lease payments are contractually due in the following time periods:
30 June 2023
30 June 2022
Within 1
year
$'000
Within 2
to 5 years
$'000
Beyond
5 years
$'000
Total
$'000
Within 1
year
$'000
Within 2
to 5 years
$'000
Beyond
5 years
$'000
Lease liabilities
2,972
7,984
-
10,956
3,036
10,721
-
14,600
313
-
(2,918)
-
547
10
12,552
Total
$'000
13,757
12. Payables
Payables represent liabilities for goods and services received prior to the end of the year which remain unpaid at the reporting date.
Trade payables and accruals
GST and Fringe Benefits Tax payable
Total payables
30 June 2023
$'000
30 June 2022
$'000
9,928
1,607
11,535
13,456
2,022
15,478
Trade payables are unsecured and are recognised at the amount due to suppliers. Accruals represent amounts due for supplies and
services received but not invoiced at reporting date.
Magellan Financial Group Limited | Annual Report 2023
Page 66
Notes to the Financial Statements
For the year ended 30 June 2023
13. Employee Benefits
Employee benefits comprise wages, salaries, annual and long service leave obligations, bonuses and cash retention incentives.
Accrued employee entitlements
Leave obligations
Total current employee benefits
Accrued employee entitlements
Leave obligations
Total non-current employee benefits
Wages, Salaries and Annual Leave
30 June 2023
$'000
30 June 2022
$'000
31,841
4,249
36,090
4,629
1,346
5,975
27,377
4,024
31,401
1,636
1,680
3,316
Liabilities for wages and salaries and annual leave are measured at the amounts expected to be paid when the liabilities are settled
and include related on-costs, for example payroll tax.
Long Service Leave
Liabilities for long service leave are recognised when employees reach a qualifying period of continuous service. Current liabilities are
measured at the amount expected to be settled within 12 months of the reporting date. Non-current liabilities are measured as the
present value of expected future payments and are expected to be paid beyond 12 months of the reporting date. Consideration is given
to expected future wage and salary levels, experience of employee departures and periods of service and discounted using high quality
corporate bond rates at reporting date, with terms to maturity that match, as closely as possible, the estimated future cash outflows.
Bonuses
Bonuses are recognised in respect of employee services received up to the end of the reporting period where the Group is contractually
obliged or where there is past practice that has created a constructive obligation to pay the bonus under the employee bonus plan. A
current liability is recorded for accrued bonuses to be paid within 12 months of reporting date. A non-current liability is recorded for
accrued bonuses to be paid beyond 12 months of the reporting date.
For certain employees, a portion of their annual bonus is deferred and paid in equal instalments for a period of up to 36 months
conditional on the employee being employed at the time of payment. The conditional deferred bonus paid each month is expensed in
the Consolidated Statement of Profit or Loss and Comprehensive Income as incurred.
The unrecognised portion of annual bonuses payable to employees by the Group in the future is a contingent liability. At 30 June
2023, the contingent liability is $8,203,000 (June 2022: $9,766,000). Of this amount, $3,831,000 would be payable during the year
ending 30 June 2024 and $4,372,000 would be payable during the years ending 30 June 2025 and 30 June 2026, subject to the vesting
conditions being met.
Cash Retention Incentives
During the year ended 30 June 2022, the Group offered a retention package to employees as part of its broader employee retention
program. The package included a cash incentive payable subject to satisfactory performance and continued employment up to
September 2024 and September 2025. During the year ended 30 June 2023, the payment dates for these retention incentives were
accelerated to be paid between September 2023 and September 2024. Where employees have a SPA loan outstanding, the cash
incentive payable on those dates will firstly be directed to repayment of the outstanding loan.
Retention incentives payable in cash are recognised in respect of employee services received up to the end of the reporting period. A
current liability is recorded for accrued incentives to be paid within 12 months of the reporting date. A non-current liability is recorded
for accrued incentives to be paid beyond 12 months of the reporting date.
The retention incentives payable in cash for services provided by employees in future periods is a contingent liability. At 30 June 2023,
the contingent liability is $5,722,000 (June 2022: $16,433,000). Of this amount, $1,390,000 would be payable during the year ending
30 June 2024 and $4,332,000 would be payable during the year ending 30 June 2025, subject to the payment conditions being met.
Magellan Financial Group Limited | Annual Report 2023
Page 67
Notes to the Financial Statements
For the year ended 30 June 2023
14. Financial Liabilities
Financial liabilities - fair value through profit or loss
Obligation to fund the discount offered on MGF Options1
Total financial liabilities
30 June 2023
$'000
30 June 2022
$'000
159,855
159,855
133,349
133,349
1
In January 2021, MFG committed to fund the 7.5% discount associated with options issued to MGF unitholders under the MGF Partnership Offer
and the Bonus MGF Option Issue (referred to collectively as "MGF Options"). In accordance with accounting standards, the funding obligation has
been recognised as a financial liability assuming all MGF Options are exercised over the three-year option term. As a result, the financial liability
moves in line with changes to the NAV per MGF Closed Class Unit and reduces when MGF Options are exercised or ultimately forfeited. Any increase
in the financial liability is recorded as an additional expense, and any decrease as a gain, in the Consolidated Statement of Profit or Loss and
Comprehensive Income.
Reconciliation
The movement in the carrying value of the Group's obligation to fund the MGF Options discount is as follows:
Opening balance at 1 July
Net increase/(decrease) in liability resulting from NAV changes recognised in the Consolidated
Statement of Profit or Loss and Comprehensive Income
Exercise of MGF Options during the period
Closing balance as at 30 June
30 June
2023
$'000
133,349
26,575
(69)
159,855
30 June
2022
$'000
157,093
(22,961)
(783)
133,349
Classification and Measurement
Financial liabilities are recognised initially at fair value on the date at which the Group becomes a party to the contractual provisions
of the instrument. These liabilities are subsequently measured at fair value through profit or loss if they are held for trading purposes
or designated as such upon initial recognition. Changes in the value of such liabilities are recognised in the Consolidated Statement
of Profit or Loss and Comprehensive Income.
All other financial liabilities are measured at amortised cost.
Financial liabilities are classified as current unless the Group has the unconditional right to defer settlement beyond 12 months from
the reporting date.
Magellan Financial Group Limited | Annual Report 2023
Page 68
Notes to the Financial Statements
For the year ended 30 June 2023
15. Capital Management
The Board of Directors is committed to prudent capital management and a conservative approach to protect shareholder value. The
Board's objectives when managing capital are to ensure that the Group continues as a going concern, has sufficient liquidity to meet its
operating requirements, is able to support the payment of dividends to shareholders in accordance with the Company's dividend policy,
and maintains the flexibility to retain capital if required for future business expansion. The Directors recognise and believe that the
Group’s core business, being funds management, is scalable over time without the need to make material additional capital investment
into the business.
The Group’s capital consists of contributed equity and a profits reserve which preserves the Company’s capacity to pay
future dividends.
The Board regularly reviews the Group's free cash flow generation, cash and cash equivalents, investments, tax and other financial
factors. The Group also has access to a revolving credit facility which remains fully undrawn as at 30 June 2023 (refer to the Liquidity
Risk discussion in note 22). In order to maintain an optimal capital structure, the Board may:
•
•
•
•
•
vary the amount of dividends paid to shareholders;
issue new shares;
utilise a dividend reinvestment plan;
increase or decrease borrowings; or
redeem and/or sell investments.
The Group is also subject to regulatory capital requirements by virtue of an Australian Financial Services Licence (“AFSL”) held by MAM.
Under the AFSL, MAM must hold a minimum level of net tangible assets and cash and cash equivalents. During the 2023 financial year
MAM complied with these requirements at all times.
16. Contributed Equity
Ordinary shares
Opening balance
Shares issued:
On exercise of MFG 2027 Options
Under Dividend Reinvestment Plan
Under SPA
Shares bought back on-market and cancelled1
Transaction costs, net of tax
SPA expense
Total ordinary shares2,3
Options
Opening balance
MFG 2027 Options issued 14 April 2022
Shares issued from exercise of options during period
Transaction costs of option issues, net of tax
Total options
30 June 2023
30 June 2022
Number of
securities
'000
Contributed
equity
$'000
Number of
securities
'000
Contributed
equity
$'000
185,089
672,261
183,794
607,849
-
-
-
(3,657)
-
-
181,432
23,216
-
-
-
23,216
6
-
-
(39,487)
(27)
115
632,868
(545)
-
-
-
(545)
3
1,353
566
(627)
-
-
185,089
-
23,219
(3)
-
23,216
99
52,335
19,731
(7,796)
(164)
207
672,261
-
-
-
(545)
(545)
Total contributed equity
204,647
632,323
208,305
671,716
1
2
3
Includes $nil in respect of share purchases that had not settled as at 30 June 2023 (June 2022: $906,000).
Includes 1,237,382 ordinary shares held by SPA participants (June 2022: 1,378,354). Refer to note 10 for further details.
Includes 725,976 ordinary shares subject to voluntary escrow which expires in respect of 98,438 shares on 2 October each year until 2025 and in
respect of 430,662 shares on 23 November 2031 (or such other date determined under the terms governing the issuance of those shares).
Magellan Financial Group Limited | Annual Report 2023
Page 69
Notes to the Financial Statements
For the year ended 30 June 2023
Ordinary Shares
Ordinary shares in the capital of the Company are fully paid and entitle the holder to receive declared dividends and proceeds on
winding up of the Company in proportion to the number of shares held. An ordinary share entitles the holder to one vote on a show
of hands, and to one vote for each share held on a poll, either in person, or by proxy, at a meeting of the Company shareholders.
MFG 2027 Options
Each MFG 2027 Option entitles the holder to acquire one ordinary share in the Company at an exercise price of $35.00 at any time prior
to 5pm (Sydney time) on 16 April 2027. The MFG 2027 Options do not confer a right to dividends. Ordinary shares issued on exercise
of the options rank equally with all other ordinary shares from the date of issue and are only entitled to a dividend if such shares have
been issued on or prior to the applicable record date for determining entitlements.
A total of 23,218,530 MFG 2027 Options were issued by the Company on 14 April 2022. The MFG 2027 Options are listed on the ASX
(ASX Code: MFGO).
Share Buy-back
The Company has an active on-market share buy-back program to purchase up to 10 million ordinary shares. During the year ended
30 June 2023, the Group bought back and cancelled 3,657,140 shares at a cost of $39,487,000 (June 2022: 626,960 shares a total cost
of $7,796,000). The shares were acquired at an average price (inclusive of transaction costs) of $10.80 per share, with prices ranging
from $7.55 to $13.28. The total acquisition cost, inclusive of after-tax transaction costs, was deducted from contributed equity. The
on-market buy-back program has a proposed end date of 3 April 2024.
Employee Options
Information relating to the MFG Employee Share Option Plan, including details of the options issued under the Employee Share Option
Plan, options that lapsed during the financial year and options outstanding at the end of the reporting period, is set out in note 18.
17. Reserves
Profits reserve
Opening balance at 1 July
Transfer from retained earnings
Payment of dividends
Closing balance at 30 June
Share-based payments reserve
Opening balance at 1 July
Recognised in employee expenses
Closing balance at 30 June
Foreign currency translation reserve
Opening balance at 1 July
Recognised in other comprehensive income
Closing balance at 30 June
Total reserves
Profits Reserve
30 June 2023
$'000
30 June 2022
$'000
313,233
220,459
(212,655)
321,037
345,089
382,323
(414,179)
313,233
1,283
3,846
5,129
3,242
1,289
4,531
-
1,283
1,283
(102)
3,344
3,242
330,697
317,758
The profits reserve consists of profits transferred from MFG's accumulated retained profits that are preserved for future dividend
payments. The profits reserve will reduce when dividends are paid from this reserve.
Share-based Payments Reserve
The share-based payments reserve is used to recognise the fair value of options issued to employees under the MFG Employee Share
Option Plan over the vesting period (refer to note 18).
Magellan Financial Group Limited | Annual Report 2023
Page 70
Notes to the Financial Statements
For the year ended 30 June 2023
Foreign Currency Translation Reserve
The foreign currency translation reserve comprises foreign exchange differences arising from translation of the financial statements
of the Group's US-based operations to Australian dollars.
18. Employee Share Option Plan
The MFG Employee Share Option Plan ("ESOP") was established in April 2022 as part of a broader employee engagement and retention
program. Participation in the ESOP is at the Board's discretion and no individual has a contractual right to participate or to receive any
guaranteed benefits.
Under the ESOP, participants have been granted options ("employee options") which vest on 1 September 2024 provided the
participant has not given or been given notice of the termination of their employment. Once vested, the employee options may be
exercised until 16 April 2027 provided the participant remains employed with satisfactory performance. Options are granted under the
ESOP for no consideration and carry no dividend or voting rights. If exercised, each employee option is converted into one ordinary
share at an exercise price of $35.00 per option.
Upon exercise of an employee option, participants can pay the exercise price in cash and be issued an equivalent number of ordinary
shares or, alternatively, can elect to set off the total applicable exercise price against the market value of the equivalent number of
shares that they are entitled to receive upon exercise ("cashless exercise"). Under a cashless exercise, the market value of the ordinary
shares is calculated as the volume weighted average MFG share price in respect of the 10 trading days ending on the day before the
exercise date.The number of ordinary shares issued to a participant who elects the cashless exercise alternative will be equivalent in
value to the number of employee options exercised, multiplied by the excess of the market value of the shares over the $35.00 option
exercise price.
Set out below is a summary of options granted under the ESOP:
Outstanding at 1 July 2022
Granted
Lapsed
Outstanding at 30 June 20231
Exercisable at 30 June 2023
Number of
options
Weighted average
exercise price
8,202,500
835,000
(2,110,000)
6,927,500
-
-
$35.00
$35.00
$35.00
-
1 The options outstanding at 30 June 2023 have a contractual life of 3.8 years.
Fair Value
The weighted average fair value at measurement date of employee options granted during the year ended 30 June 2023 was $0.93
per option (June 2022: $1.51 per option). Fair value at measurement date is independently determined using a binomial tree model
under the Black-Scholes-Merton framework that takes into account the exercise price, share price at grant date, price volatility of the
underlying share, expected option life, dividend yield and the risk-free interest rate for the term of the option. Set out below is a
summary of the model inputs for employee options granted during the current and previous reporting periods:
Weighted average share price
Exercise price
Expected share price volatility1
Expected dividend yield
Risk-free interest rate
Expected option life
2023
$12.33
$35.00
45.1%
7.4%
3.3%
5.5 years
2022
$16.62
$35.00
42.0%
7.6%
2.9%
5.8 years
1 Expected price volatility is based on historic volatility over a period commensurate with the remaining life of the options, adjusted for the impacts
of extraordinary periods of volatility not expected by the Directors to occur in the future.
Classification and Measurement
Over the vesting period, the fair value of the employee options is recognised as an employee expense within the Consolidated
Statement of Profit or Loss and Comprehensive Income, with a corresponding entry recognised in the share-based payments reserve
within equity. Where an option holder ceases to be an employee before their employee option(s) have vested, the cumulative
Magellan Financial Group Limited | Annual Report 2023
Page 71
Notes to the Financial Statements
For the year ended 30 June 2023
employee expense recognised in previous periods is reversed. There is no reversal of employee expense for vested options that
subsequently lapse or expire unexercised.
The total share-based payment expense recorded in respect of options issued under the ESOP for the year ended 30 June 2023 is
$3,846,000 (June 2022: 1,283,000).
19. Dividends
Cents per
share
Franking
%1
Total
$'000
Date Paid
During the year ended 30 June 2023
Prior year final dividend paid
Prior year performance fee dividend paid
Total prior year final and performance fee dividend paid
Interim dividend paid
Total dividends declared and paid during the year2
During the year ended 30 June 2022
Prior year final dividend paid
Prior year performance fee dividend paid
Total prior year final and performance fee dividend paid
Interim dividend paid
Total dividends declared and paid during the year2
65.0
3.9
68.9
46.9
115.8
102.6
11.5
114.1
110.1
224.2
80%
80%
85%
75%
75%
75%
120,308
7,218
127,526
85,129
212,655
188,573
21,136
209,709
204,470
414,179
6 September 2022
6 September 2022
8 March 2023
23 September 2021
23 September 2021
8 March 2022
1 At the corporate tax rate of 30%.
2
Includes dividends of $1,537,000 which were not paid in cash but rather applied directly against the balances of SPA loans (June 2022: $2,892,000)
(refer to note 10). During the year ended 30 June 2022 further dividends of $29,468,000 were not paid in cash as they were delivered in shares to
DRP participants.
Dividend Declared
On 18 August 2023, the Directors declared total dividends of 69.8 cents per ordinary share (85% franked at the corporate tax rate
of 30%) in respect of the six months to 30 June 2023 (June 2022: 68.9 cents per ordinary share 80% franked). The total dividends
comprise a Final Dividend of 35.6 cents per ordinary share, a Performance Fee Dividend of 4.2 cents per share and a Special Dividend
of 30.0 cents per ordinary share (June 2022: Final Dividend of 65.0 cents per ordinary share and a Performance Fee Dividend of 3.9
cents per ordinary share).
A dividend payable to shareholders of the Company is only recognised for the amount of any dividend declared by the Directors on
or before the end of the financial year, but not paid at reporting date. Accordingly, the Final Dividend, Performance Fee Dividend and
Special Dividend for the six months to 30 June 2023 totalling approximately $126,639,000 are not recognised as liabilities in the 2023
financial year. The Final, Performance Fee and Special Dividend will be paid on 7 September 2023.
Imputation Credits
The Group has a total of $24,359,000 imputation credits available for subsequent reporting periods based on a tax rate of 30% (June
2022: $39,363,000 at a 30% tax rate). The amount comprises the balance of the imputation account at the end of the reporting period,
adjusted for franking credits that will arise from the payment of income tax liabilities after the end of the year. The dividend declared
by the Directors on 18 August 2023 will be partially franked out of existing franking credits, or out of franking credits arising from the
payment of income tax.
Magellan Financial Group Limited | Annual Report 2023
Page 72
Notes to the Financial Statements
For the year ended 30 June 2023
20. Subsidiaries
Country of incorporation/
Principal place of business
% equity interest1
30 June 2023
30 June 2022
Magellan Asset Management Limited
Magellan FuturePay Pty Limited2
Magellan Capital Partners Pty Limited
Magellan Capital Partners No. 2 Pty Limited
Magellan Capital Partners No. 3 Pty Limited2
Magellan Capital Partners No. 4 Pty Limited
MFG Services LLC3
Frontier North American Holdings Inc.4
Frontier Partners Inc.
Frontegra Strategies LLC
Frontegra Asset Management Inc.
MFG High Conviction Master Fund GP LLC2
Australia
Australia
Australia
Australia
Australia
Australia
United States of America
United States of America
United States of America
United States of America
United States of America
United States of America
100
-
100
100
-
100
100
80
100
100
100
-
100
100
100
100
100
100
100
80
100
100
100
100
1 The proportion of ownership interest is equal to the proportion of voting power held.
2 Legal entity has been deregistered during the year ended 30 June 2023.
3 MFG Services LLC ("MFGS") is a service company and provides MAM with investment research and distribution services.
4 Frontier North American Holdings Inc. ("FNAH") is the US holding company of the Frontier Group. FNAH is 20% owned by a former shareholder of the
Frontier Group. MFG has a call option over the remaining 20% of the issued share capital of FNAH, the acquirer of the Frontier Group and a controlled
entity of MFG. The minority shareholder of FNAH, Mr Bill Forsyth, holds a put option over his interest in the issued share capital of FNAH. The options
can be exercised by either party during the period 1 January 2026 to 31 March 2026, at an exercise price based on a multiple of annualised average
earnings for a specified period. In addition to the above, MFG holds a further call option to purchase the remaining 20% of the issued share capital
of FNAH for $1. This option can be triggered at any time prior to 31 December 2025 in certain circumstances. At the date of this report, the Group
has no expectation that this call option would be triggered. The Group has determined that it has a present ownership interest in the non-controlling
interest of FNAH.
Inset names in the above table indicate that shares are held by the company listed immediately above it in the table. All
material subsidiaries have a 30 June reporting date. Transactions between MAM and foreign entities are subject to transfer
pricing arrangements.
The Group’s investments in other entities are set out in notes 7 and 8.
Key Judgement
Certain subsidiaries of the Group provide fiduciary and/or investment management services to funds in which the Group holds an
economic interest. Such interests are not considered to be interests in controlled entities and consequently have been recognised in the
Consolidated Statement of Financial Position as financial assets held at fair value through profit or loss. This classification involves the
use of judgement in assessing whether the Group controls each relevant fund, including consideration of the nature and significance
of various factors such as the exposure of the Group to variability of returns, compensation to which Group entities are entitled, the
scope of the Group entities' decision-making authority and the rights held by third parties to remove the Group entities as Responsible
Entity/Trustee or Investment Manager.
Principles of Consolidation
The consolidated financial report of the Group comprises the financial statements of the Company and its subsidiaries. Subsidiaries
are entities over which the Group has the power to govern the financial and operating policies, is exposed to variable returns from its
involvement in the entity and has the ability to affect those returns. Assets, liabilities, income and expenses of a subsidiary are included
from the date the Group gains control until the date control ceases. All inter-entity assets, liabilities, equity, income, expenses and cash
flows relating to transactions within the Group are eliminated in full on consolidation. When necessary, adjustments are made to the
results of subsidiaries to bring them into line with the Group’s accounting policies.
Foreign Subsidiaries
On consolidation, the assets and liabilities of foreign subsidiaries whose functional currency differs from the presentation currency
are translated into Australian dollars at the rate of exchange at the reporting date. Exchange differences arising on translation are
recognised in comprehensive income and accumulate in the foreign currency translation reserve within equity. On disposal of a foreign
subsidiary, the deferred cumulative amount recognised in equity relating to that particular foreign operation is recognised in the
Consolidated Statement of Profit or Loss and Comprehensive Income.
Magellan Financial Group Limited | Annual Report 2023
Page 73
Notes to the Financial Statements
For the year ended 30 June 2023
21. Related Parties
MFG is the ultimate parent entity of the Group. The related parties of the Group include its subsidiaries, associates, key management
personnel ("KMP"), close family members of KMP and any entity controlled by those entities.
Transactions with Related Parties
Management and performance fees from investment funds managed by subsidiaries of the Group are set out in note 4.
Transactions with associates are set out in note 8.
Other transactions that occurred between entities in the Group are fully eliminated on consolidation of the Group and include:
Revenue recognised by parent entity
Dividends1
Reimbursed expenses
Expenses recognised by parent entity
Expense reimbursements
Equity contributions to/(from) subsidiaries
Cash
Transactions between subsidiaries at international transfer prices
Service fees and recharged expenses
30 June 2023
$'000
30 June 2022
$'000
185,278
274
411,795
300
71
38
25,095
(94,604)
8,838
25,068
1 Comprising dividends from MAM of $170,000,000 and Magellan Capital Partners No. 2 of $15,278,000 (June 2022: $388,000,000 from MAM and
$23,795,000 from Magellan Capital Partners No. 3).
All transactions with related parties are conducted on standard commercial terms and conditions. Receivable and payable balances at
year end are unsecured and will be settled in cash. No guarantees have been given or received between entities in the Group.
KMP Remuneration
Short-term benefits
Post-employment benefits
Termination benefits
Long-term benefits
Share-based payments
Other benefits
Total KMP remuneration
30 June 2023
$'000
30 June 2022
$'000
7,180
188
432
1,440
367
859
10,466
9,330
144
2,903
201
35
910
13,523
The KMP of the Group are listed in section of the Remuneration Report and the remuneration of each KMP is included in section of the
Remuneration Report.
Magellan Financial Group Limited | Annual Report 2023
Page 74
Notes to the Financial Statements
For the year ended 30 June 2023
22. Financial Instrument Risk Management
The Group's operating and investing activities expose it to various forms of financial instrument risk including:
•
•
•
the risk that money owed to the Group will not be received (credit risk);
the risk that the Group may not have sufficient cash available to pay its creditors as they fall due (liquidity risk); and
the risk that the value of financial assets and liabilities will fluctuate as a result of movements in factors such as market prices,
interest rates and foreign exchange rates (market risk).
The Board has an approved risk management framework including policies, procedures and limits and uses different methods to
measure and manage these risks that are discussed in detail throughout this note.
The Group's primary exposure to financial instrument risk is derived from the financial instruments that it holds as principal. In
addition, due to the nature of the business, the Group's exposure extends to the impact on investment management and other
fees that are determined as a percentage of funds under management and are therefore impacted by the financial instrument risk
exposures of the Group's clients. This note deals only with the primary exposure of the risks from the Group's holding of financial
instruments and not the secondary exposure impacting the Group's revenue.
The investment portfolios of funds managed by MAM are monitored on a daily basis in accordance with the investment objectives and
mandates of those funds. Further details of the risk management objectives and policies applied in respect of the Group's managed
funds can be found in their product disclosure statements (“PDS”) and in the case of the Frontier MFG Funds, in their prospectuses.
Credit Risk
Credit risk refers to the risk that a counterparty will fail to meet its contractual obligations resulting in financial loss to the Group. Market
prices generally take counterparty credit into account and therefore the risk of loss is implicitly provided for in the carrying value of
financial assets and liabilities held at fair value.
The Group’s maximum exposure to credit risk is the carrying amount of all cash and cash equivalents, financial assets, receivables and
SPA loans recognised in the Consolidated Statement of Financial Position as well as the value of any undrawn loan commitments which
are accessible to counterparties at the reporting date.
Additionally, MAM in its capacity as Trustee and Responsible Entity of the Magellan Funds (as set out in note 2) has appointed The
Northern Trust Company (“NT”) as custodian. NT is required to comply with the relevant provisions of the Corporations Act 2001
(Cth), applicable ASIC regulatory guides and Regulatory Instruments relating to registered managed investment scheme property
arrangements with custodians. As at 30 June 2023, the credit quality of NT’s senior debt is rated by Standard and Poor’s as A+ and
by Moody’s as A2 (June 2022: A+ and A2 respectively).
Cash and Cash Equivalents
The Group minimises its credit risk by ensuring cash and term deposits are held with high credit quality financial institutions as
determined by a recognised rating agency. As at 30 June 2023, the Group's cash and term deposits were held with major Australian
and international banks rated no lower than AA-by Standard & Poor's or Aa3 by Moody's (June 2022: AA- and Aa3, respectively).
Financial Assets
The Group mitigates its credit risk by ensuring the majority of its financial assets are held with Magellan Funds for which MAM is the
Trustee or Responsible Entity.
MFG has entered into an International Prime Brokerage Agreement (“IPBA”) with Merrill Lynch International (“MLI”), a subsidiary of
Bank of America. The services provided by MLI under the IPBA include clearing and settlement of transactions, securities lending and
acting as custodian for MFG’s investment assets. The IPBA with MLI is in a form that is typical of prime brokerage arrangements. MFG
has granted MLI a fixed charge over the Company's right, title and interest in the assets held in custody with MLI, as security for the
performance of its obligations under the IPBA. In the event of MLI becoming insolvent, MFG would rank as an unsecured creditor and,
to the extent MLI has exercised a right-of-use over MFG’s securities, MFG may not be able to recover such equivalent securities in full.
In addition, cash which MLI holds or receives on behalf of MFG is not segregated from MLI’s own cash and may be used by MLI in
the course of its business. In the event of MLI becoming insolvent, MFG would rank as an unsecured creditor and may not be able to
recover the cash in full. At 30 June 2023 and 30 June 2022, MFG held a negligible cash balance with MLI.
Magellan Financial Group Limited | Annual Report 2023
Page 75
Notes to the Financial Statements
For the year ended 30 June 2023
Loans and Receivables
The Group manages credit risk by regularly monitoring receivables and SPA loan balances.
Fee receivables arise as a result of the Group's investment management activities and are typically paid between 15 and 45 days of
being invoiced. These counterparties generally do not have an independent credit rating and the Group assesses credit quality taking
into account each debtor's financial position, past experience and other available credit risk information. Historically, default levels have
been insignificant and unless a client has withdrawn its funds, there is an ongoing relationship between the Group and the client.
SPA loans are secured by the MFG shares that were issued to participants under the SPA and by the MFG 2027 Options that were
issued to SPA participants in respect of those shares. Additionally, whilst the SPA loan is outstanding, the Group is entitled to both the
dividends received from the secured shares and 100% of the after-tax cash retention bonuses paid to employees in September 2023
and September 2024 in repayment of the relevant participant's outstanding SPA loan amount.
The Group's credit exposure in relation to SPA loans is therefore limited to any shortfall represented by the difference between the
face value of SPA loans and the aggregate value of the MFG shares, MFG 2027 Options, dividends and after-tax cash retention
bonuses securing those loans for each SPA participant. At 30 June 2023, the total SPA loan shortfall was $15,406,000 (June 2022:
$11,614,000). As the SPA loans are full recourse, the Group is entitled to recover any shortfall from the SPA participant.
Expected credit losses ("ECL") are estimates of the shortfalls expected to result from defaults over the relevant timeframe. Given the
long-term nature of the SPA loans, the Group estimates ECLs over the life of the financial instruments. For an SPA loan, the ECL is
calculated by multiplying the shortfall amount to which the Group is exposed by the assessed probability of default. As historically there
has never been a default of an SPA loan, the Group determines the default probabilities to apply to SPA loans having regard to the
default probabilities published by the major Australian banks in respect of retail lending.
At 30 June 2023, the Group applied probabilities of default to its SPA loans ranging from 3% to 4.5% (June 2022: 2.5% to 4%)
resulting in an aggregate recognised allowance for ECLs of $560,000 (June 2022: $375,000). For each 1% increase in the applied
probability of default, the Group's total allowance for ECLs would increase by $154,000.
Undrawn Loan Commitments
The Group has provided Barrenjoey with up to $50,000,000 of working capital finance under an unsecured revolving facility that
matures in September 2023.
Liquidity Risk
Liquidity risk is the risk that the Group may not be able to meet its financial obligations in a timely manner or may be forced to sell
financial assets at a value which is less than their worth.
The Group manages liquidity risk by monitoring rolling cash flow forecasts in order to maintain sufficient cash reserves to meet future
obligations and regulatory capital requirements. Additionally, the Group has access to an undrawn credit facility (discussed below) and
liquid equity investments held in the Fund Investments portfolio.
As at 30 June 2023, the Group had an obligation to settle trade creditors and other payables of $11,535,000 (June 2022: $15,478,000)
within 30 days (refer to note 12). A further obligation of $12,773,000 (June 2022: $18,483,000) is payable between 30-150 days for
the Group’s tax instalment and final income tax payment. On 7 September 2023, $126,639,000 is expected to be paid in respect of
the Final and Performance Fee dividend (refer to note 19). Finally, the Group's obligation to fund the discount offered on MGF options
(refer to note 14) is classified as a current liability because the Group has no control over when options might be converted by the
holders of those instruments. The Group had cash of $373,445,000 (June 2022: $419,922,000) and a further $54,635,000 (June 2022:
$64,654,000) of receivables to cover these liabilities.
The Group's reported current assets of $435,653,000 and current liabilities of $222,861,000 result in a net current asset surplus of
$212,792,000. Accordingly, the Group has sufficient liquid funds and current assets to meet its current liabilities.
The Group has access to a $150,000,000 floating rate facility provided by a major Australian bank which may be drawn at any time
up to 19 February 2024. Commitment fees apply when the facility is undrawn. For the year ended 30 June 2023, these commitment
fees amounted to $1,055,000 (June 2022: $1,680,000) and were recognised within finance costs.
At 30 June 2023, the facility was undrawn and all financial covenants were complied with during the year.
Magellan Financial Group Limited | Annual Report 2023
Page 76
Notes to the Financial Statements
For the year ended 30 June 2023
Market Risk
The value of the Group's financial assets and liabilities is exposed to movements in market prices, foreign exchange rates and
interest rates.
Price Sensitivity
The value of investments held in the Fund Investments portfolio (refer to note 7) changes as a result of movements in equity prices
in local currency (caused by factors specific to the individual stock or the market as a whole), exchange rate movements, or a
combination of both. Additionally, certain financial liabilities held by the Group change as a result of movements in the estimated unit
prices of the funds to which they relate.
Over the past 10 financial years, the annual performance of the MSCI World Net Total Return Index has ranged between +39% and
-14% (in USD) and +28% and -6% (in AUD). The past performance of markets is not always a reliable guide to future performance,
and MFG’s Fund Investments portfolio does not attempt to mirror the global indices, however this wide range of historic movements
in the indices provides an indication of the magnitude of equity price movements that could occur within the portfolio.
For illustrative purposes, an increase of 10% in market prices would have had the following impact on the recorded value of the Group's
financial instruments:
Financial assets at fair value through profit or loss
Financial liabilities at fair value through profit or loss
Impact on net profit after tax/other comprehensive income and equity
30 June 2023
$'000
30 June 2022
$'000
29,445
(12,678)
16,767
26,561
(7,101)
19,460
A decrease of 10% in market prices would have an equal but opposite impact on net profit, comprehensive income and equity.
Foreign Exchange Sensitivity
The Group holds the following types of financial assets and liabilities for which fair value changes arise as a result of movements in
foreign exchange rates:
•
•
Cash and term deposits denominated in a foreign currency;
Financial assets denominated in a foreign currency (refer to note 7) as well as related dividend/distribution receivables and
outstanding settlements for sales/purchases;
• Management and performance fees receivable denominated in a foreign currency; and
•
Payables denominated in a foreign currency.
The Group’s foreign currency transactions are primarily conducted in the following currencies: United States dollars, British pounds,
Euros and New Zealand dollars.
For illustrative purposes, if the Australian dollar strengthened by 10% relative to each currency to which the Group had an exposure,
with all other variables held constant, the impact on net profit after tax and equity would have been:
30 June 2023
30 June 2022
Increase/(decrease)
Increase/(decrease)
Cash and cash equivalents
Financial assets
Receivables
Payables
Employee benefits
Lease liabilities
Total impact on net profit after tax and equity
USD
$'000
(418)
(2,285)
(1,007)
95
19
20
(3,576)
GBP
$'000
Other
$'000
(7)
(5)
(45)
3
-
-
(54)
(2)
(33)
-
22
-
2
(11)
USD
$'000
(626)
(2,895)
(1,694)
132
17
8
(5,058)
Magellan Financial Group Limited | Annual Report 2023
GBP
$'000
Other
$'000
(6)
(11)
(234)
4
-
-
(247)
(15)
(42)
(1)
18
-
5
(35)
Page 77
Notes to the Financial Statements
For the year ended 30 June 2023
A decrease of 10% in the Australian dollar relative to each currency would have an equal but opposite impact on net profit after tax
and equity.
The Group has indirect exposure to foreign currency via its investment in funds that are denominated in both Australian dollars, such as
the Group's Australian funds, and US dollars, such as the Group's international funds (refer to note 2). This is because the underlying
investment portfolios of these funds comprise equities predominantly denominated in foreign currencies and with operating exposure
to global currencies. As a result, the fair values of these funds are influenced by currency movements. The sensitivity analysis disclosed
above disregards the indirect impact of the foreign currency movement on the underlying fund portfolios.
In addition to its investments, the Group’s management and performance fees are also indirectly exposed to fluctuations in
foreign currency where fees are invoiced in a different currency to the underlying funds under management. As at 30 June 2023,
approximately 74% of the Group’s funds under management was exposed to movements in the Australian dollar relative to other
currencies (June 2022: 76%).
Interest Rate Sensitivity
The Group’s primary exposure to interest rate movements relates to its cash and term deposits. Term deposits are of relatively short
duration and their fair value would not be materially affected by changes in interest rates.
Cash and cash equivalents held by the Group are predominantly held with Australian financial institutions and the value of cash
balances is sensitive to the RBA cash rate. The Group does not hold any financial assets or liabilities for which a change in value as a
result of interest rate movements would impact on the Group's recorded net profit or equity.
Fair Value Disclosures
The Group classifies financial assets and liabilities that are measured at fair value into the following three levels, as prescribed under
the accounting standards, to provide an indication about the reliability of the inputs used in determining fair value:
•
•
•
Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities. Fair value is based on the closing price of
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 funds which
in turn invest in liquid securities quoted on major stock exchanges. Fair value is estimated using the redemption price provided
by the unlisted fund.
Level 3: valuation techniques using unobservable inputs such as is required where the Group invests in unlisted entities or unlisted
funds which in turn invest in unlisted entities.
The table below presents the Group's financial assets and liabilities measured at fair value according to the fair value hierarchy:
30 June 2023
Magellan Fund investments1
Seed portfolios
Unlisted entities2
Financial liabilities at fair value through profit or loss
Total financial assets and liabilities at fair value
30 June 2022
Magellan Fund investments1
Seed portfolios
Unlisted entities2
Financial liabilities at fair value through profit or loss
Total financial assets and liabilities at fair value
Level 1
$'000
Level 2
$'000
Level 3
$'000
Total
$'000
351,838
6,044
-
-
357,882
310,361
4,708
-
-
315,069
61,052
1,014
-
(159,855)
(97,789)
62,879
795
-
(133,349)
(69,675)
-
-
695
-
695
-
-
695
-
695
412,890
7,058
695
(159,855)
260,788
373,240
5,503
695
(133,349)
246,089
1 Fair value is determined by reference to the fund’s redemption unit price at reporting date and is categorised in level 2 given inputs into the
redemption unit price are directly observable from published price quotations.
2 Comprises a shareholding in an unlisted company for which management has assessed the investment cost is a reasonable approximation of fair
value at reporting date.
Magellan Financial Group Limited | Annual Report 2023
Page 78
Notes to the Financial Statements
For the year ended 30 June 2023
There were no transfers between any fair value hierarchy levels during the years ended 30 June 2023 and 30 June 2022. The Group’s
policy is to recognise transfers into and out of hierarchy levels as at the end of the reporting period.
The fair values of all other financial assets and liabilities approximate their carrying values in the Consolidated Statement of
Financial Position.
23. Commitments and Contingent Assets and Liabilities
Commitments
The Group has extended loan commitments to certain related parties, which remain undrawn at the reporting date (refer to note 22).
All other commitments relate to non-cancellable payments under short term and low value lease agreements as set out below:
Within one year
Later than one year but no later than five years
More than five years
Total
Contingent Assets and Liabilities
30 June 2023
$'000
30 June 2022
$'000
18
49
-
67
21
-
-
21
The Group has contingent assets and liabilities in respect of the following items:
• Dividend Reinvestment Plans of Magellan Funds: In accordance with the terms of a deed entered into with MAM as responsible
entity of Magellan Global Fund ("MGF"), the Group has agreed to pay MGF an amount equal to the MGF DRP discount. As a result,
the Group has a contingent liability where MGF offers a discount to the NAV per unit on units issued under the MGF DRP in future
periods. The quantum of the contingent liability is determined at each MGF distribution date and the amount is currently equal to
a 7.5% discount to the NAV per unit multiplied by the number of units participating in the MGF DRP. It is not practical to estimate
the future cost to the Group as there is uncertainty as to the level of participation in the MGF DRP, the NAV per unit and whether
the MGF DRP will be offered.
• Deferred proceeds in respect of GYG divestment: refer to note 8
• Deferred conditional bonuses and cash retention incentives: refer to note 13.
24. Parent Entity Information
Assets
Current assets
Non-current assets
Total assets
Liabilities
Current liabilities
Non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Retained earnings
Total equity
Net profit after income tax expense for the year
Total comprehensive income for the year
30 June 2023
$'000
30 June 2022
$'000
302,166
846,216
1,148,382
353,212
792,123
1,145,335
189,519
-
189,519
958,863
632,696
326,167
-
958,863
220,459
220,459
158,729
-
158,729
986,606
672,090
314,516
-
986,606
382,323
382,323
Magellan Financial Group Limited | Annual Report 2023
Page 79
Notes to the Financial Statements
For the year ended 30 June 2023
The financial information for the parent entity, MFG, has been prepared on the same basis as the Group’s consolidated financial
statements, except for investments in subsidiaries. Investments in subsidiaries are accounted for at cost less impairment expense, in
the financial statements of the parent entity. Dividends received from subsidiaries are recognised in the parent entity’s profit or loss
rather than being deducted from the carrying amount of the investment.
Contingent Assets and Liabilities
At 30 June 2023, MFG has a contingent liability in respect of the dividend reinvestment plan of MGF (refer to note 23).
25. Auditor Remuneration and Independence
Australia - Ernst & Young
Fees for audit and review of statutory financial reports of:
MFG Group and controlled entities
Magellan Funds in Australia
Fees for regulatory audits required to be performed by the auditor
Fees for other audit related assurance services1
Fees for other services:
Taxation compliance services2
Taxation advisory services3
Total Australia
Overseas - Ernst & Young, Plante Moran
Fees for audit of statutory financial report of:
Frontegra Strategies LLC
Magellan Funds in Ireland
Fees for other services:
Taxation advisory services4
Total overseas
Total auditor remuneration
30 June 2023
$'000
30 June 2022
$'000
156
303
459
9
88
150
25
175
731
23
72
95
50
50
145
876
175
294
469
9
83
151
149
300
861
19
64
83
66
66
149
1,010
Percentage of total auditor remuneration paid as non-audit fees to the Group's auditors
35.7%
44.5%
1 Comprises various assurance services (ICR audits, debt covenant audit, compliance plan review, GS007 controls review) required under legislation,
regulation or contractual arrangements which the Board determines are best provided by the auditor of the Group's statutory financial reports.
2 Comprises reviews of the income tax returns of both the Group and the Magellan Funds and reviews of the annual unitholder distributions of the
Magellan Funds.
3 Comprises transfer pricing reviews and withholding tax advice.
4 Comprises assistance with the UK and German tax calculations and lodgements for MFG Investment Fund plc.
Independence and Non-Audit Services
The Group’s external auditors are Ernst & Young and Plante Moran and the Audit & Risk Committee (“the Committee”) has
responsibility for monitoring the independence and objectivity of the external auditors. All auditors confirmed their independence
during 2023 and prior to issuing their opinions on financial reports. In addition, no Committee member has a connection with the
external auditors.
A key factor in ensuring auditor independence is the Committee’s consideration of the non-audit services performed by the auditors.
The Committee preserves independence and objectivity by maintaining a policy on the engagement of non-audit services provided
by an auditor and restricts the auditor to providing services that are closely related to the audit. Every audit and non-audit service is
considered and approved in writing by the Committee, or the Committee’s Chairman acting as a delegate. This is based on a written
recommendation from management. There is no delegation of approval provided to management for any engagement provided by the
auditor. Particular consideration is also given to where the Group’s auditor also performs services for the Group's associates and/or key
third party providers, for example fund administrators and custodians. Where this occurs, the Group ensures the signing audit partner
Magellan Financial Group Limited | Annual Report 2023
Page 80
Notes to the Financial Statements
For the year ended 30 June 2023
is not common to both parties. Approval is provided before work commences and reported to the Committee at the next scheduled
meeting of the Committee along with details regarding the nature of the service, quantum of fee and projected total non-audit fees for
the financial year. This is undertaken in addition to the auditor confirming that no prohibited non-audit services have been provided.
The Committee considers there may be circumstances where the auditor may hold specific expertise, know-how or company
knowledge which provides a compelling benefit to the Group through its appointment. In the current and prior financial year, non-audit
services provided by Ernst & Young were routine tax services, namely the review of the income tax returns of the Group and
the Magellan Funds and the annual distributions of the Magellan Funds, ad hoc assistance with lodging foreign withholding tax
registrations in Taiwan and routine tax surveillance reviews. The view was that Ernst & Young’s appointment in fact offered greater
risk management by providing a higher level of detection of risks or errors given its holistic and detailed understanding of the Group
and current issues along with the tax partner being an industry leader.
Other non-audit services not required by regulation mainly comprises assurance services in respect of a review of controls and
compliance plan and an audit of the indirect cost ratios for the Magellan Funds. The Committee considered these services were most
appropriately performed by Ernst & Young as they support the statutory audits as well as provide the external auditor with relevant
insights on aspects of the Group’s Australian business and are not considered to present a risk to auditor independence.
It is important to note that the Magellan Funds do not incur audit or non-audit fees and therefore unitholders of the Magellan Funds
do not incur this additional cost. Rather those fees are paid by the Responsible Entity of the Funds, MAM, a wholly owned entity of
the Group. As a result, this significantly increases non-audit fees reported by the Group and these will continue to increase in future
years when new funds are launched or the negotiated fee rate increases.
Subject to the Group’s external auditors maintaining independence, the Committee considers it is most important to ensure that the
highest level of risk management is provided to the Group and, where possible, that the services are delivered efficiently for the benefit
of the Group’s shareholders. The Committee does not view auditor independence as a binary matter and therefore does not believe
a fixed 50% threshold of non-audit fees exceeding total audit fees is the only relevant consideration when determining if non-audit
services are excessive and, by inference, whether auditor independence is at risk.
Oversight of External Auditors
A key part of the Committee’s work consists of overseeing the relationship with the Group’s external auditors, including safeguarding
independence and approving non-audit fees and their appointment.
Ernst & Young was appointed external auditor of the Australian entities and Irish funds in 2008. The external audit was last put out to
tender in 2018, which aligned to the auditor’s 10 year anniversary, and Ernst & Young was reappointed as auditor as it scored highest
across all requirements and the Board was satisfied that appropriate safeguards were in place to ensure the required independence
of Ernst & Young. The next external audit tender will take place within 10 years of Ernst & Young's re-appointment. Ms Clare Sporle
has served as lead audit partner since August 2019. In accordance with the Corporations Act 2001 (Cth), the next rotation of the lead
partner is planned to occur after the completion of the 30 June 2024 financial year audit.
Plante Moran was appointed auditor of a US subsidiary in 2012 and was reappointed as auditor in 2022 following a tender process
involving the incumbent and two additional US-based accounting firms.
As there is no contracted tenure with the Group’s external auditors, an audit tender can be called at any time.
26. Subsequent Events
Other than the items noted below, 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 results of those operations or the state
of affairs of the Group in subsequent financial periods.
Dividend
Refer to note 19 for details of the dividend declared in respect of the six months ended 30 June 2023.
Funds Under Management
On 4 August 2023, the Group announced on the ASX announcements platform that its funds under management was $39.2 billion as
at 31 July 2023.
Magellan Financial Group Limited | Annual Report 2023
Page 81
Directors’ Declaration
For the year ended 30 June 2023
In the Directors’ opinion,
a.
the financial statements and notes set out on pages 45 to 81 are in accordance with the Corporations Act 2001 (Cth), including:
i.
ii.
giving a true and fair view of the Group’s financial position as at 30 June 2023 and of its performance for the year ended on
that date; and
complying with Accounting Standards, the Corporations Regulations 2001 (Cth), International Financial Reporting Standards
as disclosed in note 1 and other mandatory professional reporting requirements; and
b.
there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.
This declaration has been made after receiving the declarations required to be made to the Directors in accordance with section 295A
of the Corporations Act 2001 (Cth) for the year ended 30 June 2023.
This declaration is made in accordance with a resolution of the Directors.
Hamish McLennan
Chairman
Sydney
18 August 2023
Magellan Financial Group Limited | Annual Report 2023
Page 82
Magellan Financial Group Limited | Annual Report 2023
Page 83
Magellan Financial Group Limited | Annual Report 2023
Page 84
Magellan Financial Group Limited | Annual Report 2023
Page 85
Magellan Financial Group Limited | Annual Report 2023
Page 86
Magellan Financial Group Limited | Annual Report 2023
Page 87
Magellan Financial Group Limited | Annual Report 2023
Page 88
Magellan Financial Group Limited | Annual Report 2023
Page 89
Corporate Sustainability and Responsibility Report
For the year ended 30 June 2023
Magellan is committed to acting responsibly and ethically in all areas of its business. Magellan seeks to engender a culture of building
trust with everyone who does business with the Group. As an asset manager, responsible investment is part of our investment process
and commitment to clients. We outline our sustainability priorities and activities for 2023 in the following sections: Environment,
People, Community, Cybersecurity and Privacy, and Modern Slavery.
Responsible Investment
Magellan is committed to responsible investment. At Magellan, we believe that successful investing is about identifying, and owning
for the long-term, companies that can sustainably generate excess returns on capital for years to come. As long-term owners we aim
to act as responsible stewards of our clients’ investments by integrating Environmental, Social and Governance (ESG) issues into our
investment process, exercising our proxy voting rights and having open dialogue with portfolio companies on a broad range of issues.
Magellan’s Responsible Investment Principles, which are available on the Group’s website, outline and summarise Magellan’s approach
to responsible investing, ESG integration, engagement and proxy voting. We also enhanced our public reporting on engagement
and voting outcomes for the year in our inaugural annual stewardship reports, including case studies where we have seen positive
outcomes. In addition, we are focussed on investor education with sustainability themed ‘Magellan In The Know’ podcasts and
‘Magellan Minutes’.
Magellan is a signatory to a number of industry initiatives and associations that support our commitment to responsible investment,
transparency to stakeholders and ability to elevate key company and industry issues such as climate change. In the last 12 months, we
have been focused on our commitments under the Net Zero Asset Manager initiative including firm wide and portfolio specific targets
supported by a climate specific stewardship (engagement and voting) strategy.
By joining these collaborative initiatives, our company and industry research is enhanced, our clients benefit from broader stakeholder
perspectives and our voice is made louder by joining with others that have similar long-term objectives.
Active Stewardship
Magellan’s long-term investment horizon gives us the opportunity to engage with companies over an extended period on issues that
are important to protecting and creating shareholder value. Magellan aims to engage with portfolio companies on a broad range of
themes identified by the ESG Team that investment analysts assess as material to those companies within our proprietary ESG risk
and opportunities assessment framework.
ESG issues are considered to be a natural component of Magellan’s investment process, as gaining a robust understanding of these
issues is a key part to assessing the outlook for future cash flow generation, the risks and opportunities facing investors. Magellan’s
investment process seeks to identify high quality companies and places lower value on pro-cyclical companies in the resource,
materials and oil and gas sectors. This approach is a natural filter which tends to reduce exposure to carbon intensive companies.
Magellan maintains an ESG Policy, which outlines how ESG issues are incorporated into Magellan’s investment analysis framework and
investment process.
Engagement has two primary objectives, both of which are designed to have a positive impact on shareholder returns over time:
Magellan Financial Group Limited | Annual Report 2023
Page 90
Corporate Sustainability and Responsibility Report
For the year ended 30 June 2023
1. Risk assessment, management and opportunities: To better understand the risks and opportunities over time. As long-term
investors, we build up knowledge and insight, which we discuss and challenge during engagements. These learnings often deepen
our understanding within and across industries.
Influence: To encourage and support change to a company’s approach or the setting of targets. As long-term investors, we build
constructive relationships which better enable us to drive positive change at the company.
2.
During the financial year ended 30 June 2023, Magellan engaged with 171 companies across more than 500 engagements on a
number of material ESG topics. These are highlighted in the graphic below. Stewardship reports for each strategy include a more
detailed analysis of voting and engagement and are reported on the Magellan website.
Magellan Financial Group Limited | Annual Report 2023
Page 91
Corporate Sustainability and Responsibility Report
For the year ended 30 June 2023
Note: The level of engagement reflects the importance of a particular risk to the company and sub-industry. In addition, the level of
engagement on ESG issues is also considered in the context of the relative size of Magellan’s investment.
Magellan Financial Group Limited | Annual Report 2023
Page 92
Corporate Sustainability and Responsibility Report
For the year ended 30 June 2023
Magellan’s Australian Equities business, Airlie Funds Management, also maintains a set of Responsible Investment Principles, an
ESG Policy and a Proxy Voting Policy which outline how the Airlie Investment Team integrate ESG risks and opportunities into their
investment decision making and how it acts as a responsible owner by engaging with portfolio companies and voting proxies.
Consideration of ESG issues is a component which is implicit in Airlie’s investment philosophy and selection process with the aim to
account for all relevant ESG issues in the same balanced way it does other key risks facing a company. These policies can be found
on the Airlie website: www.airliefundsmanagement.com.au.
During the financial year ended 30 June 2023, Airlie engaged with portfolio companies on a range of material ESG issues which are
summarised below. There was a continued focus on the key issues of climate change and energy transition, modern slavery and
executive remuneration.
Proxy Voting
At Annual and Extraordinary General Meetings, Magellan is typically tasked by its strategies’ clients to vote on meeting agenda items
on their behalf. These proxy votes, on behalf of our investors, are incredibly important and underpin the strongest of our stewardship
powers – the power to vote for or against agenda items, which may result in specific changes within a company. When votes are
exercised diligently, they can enhance client returns. Given this importance, we do not outsource our voting, rather we consider all
voting matters in house. We undertake proxy voting with the same deep due diligence as other aspects of our investment process.
Magellan maintains a Proxy Voting Policy and a set of Corporate Governance Principles which outline its approach to proxy voting and
engagement with portfolio companies. A summary of Magellan's proxy voting for the period ended 30 June 2023 is provided below:
Magellan Financial Group Limited | Annual Report 2023
Page 93
Corporate Sustainability and Responsibility Report
For the year ended 30 June 2023
Category1
Board Related (2,224)
Compensation (593)
Shareholder Proposals (198):
- Environmental (31)
- Social (84)
- Governance (83)
Capital Management (207)
Audit/Financials (424)
Other (167)
In line with Company
Recommendation
Against Company
Recommendation
99%
94%
78%
81%
93%
63%
99%
98%
11%
1%
6%
22%
19%
7%
37%
1%
2%
89%
1 Statistics based on ballots that are not subject to re-registration requirements.
Airlie recognises corporate governance is an important part of share ownership and that Airlie has a responsibility to act with the best
interests of clients in mind. One way Airlie represents its clients in matters of corporate governance is through the proxy voting process.
A summary of Airlie’s proxy voting for the period ended 30 June 2023 is provided below:
Category1
Board Related (144)
Compensation (107)
Shareholder Proposals (14):
- Environmental (7)
- Social (1)
- Governance (6)
Capital Management (1)
Audit/Financials (10)
Changes to Company Statutes (7)
Other (3)
In line with Company
Recommendation
Against Company
Recommendation
94%
90%
100%
100%
100%
100%
100%
90%
86%
100%
6%
4%
0%
0%
0%
0%
0%
10%
14%
0%
1 May not add to 100% as Management do not provide a recommendation for all resolutions.
Environment
Magellan understands the importance of mitigating its impact on the environment and is committed to environmental sustainability.
Magellan has been a member of the ‘Principles of Responsible Investment’ (”PRI”) since 2012 and Responsible Investment Association
Australasia (“RIAA”) since 2017. In 2022 Magellan extended its commitment to managing climate risk and became a member of the
Investor Group on Climate Change (“IGCC”) and the Net Zero Asset Manager initiative (“NZAMi”).
As part of the Net Zero Asset Manager’s commitment, “in line with the best available science on the impacts of climate change, we
acknowledge that there is an urgent need to accelerate the transition towards global net zero emissions and for asset managers to play
our part to help deliver the goals of the Paris Agreement and ensure a just transition. In this context, Magellan commits to support the
goal of net zero greenhouse gas (‘GHG’) emissions by 2050, in line with global efforts to limit warming to 1.5°C (‘net zero emissions
by 2050 or sooner’). It also commits to support investing aligned with net zero emissions by 2050 or sooner.”
The last year has focused on assessing the alignment of our portfolio companies to net zero using the Net Zero Investment Framework
(NZIF). This analysis supports the development of targets which have been submitted to the Net Zero Asset Manager initiative.
• We have set a 2030 target for assets to be managed in line with the attainment of net zero emissions by 2050 or sooner.
• We have developed a climate focused, stewardship and engagement strategy, with a clear escalation and voting policy, that is
consistent with an ambition for all assets under management to achieve net zero emissions by 2050 or sooner.
• We commit to review targets at minimum every 5 years, and monitoring progress against these targets annually.
Magellan aims to align its reporting to the Task Force on Climate-related Financial Disclosures (TCFD) through CDP and as part of the
commitment to the Net Zero Asset Manager initiative.
Magellan Financial Group Limited | Annual Report 2023
Page 94
Corporate Sustainability and Responsibility Report
For the year ended 30 June 2023
Magellan’s Board has ultimate oversight over risk management and compliance including setting Magellan’s risk appetite in relation to
key risks, including environmental risk. The Board considers the Group’s appetite for environmental risk on at least an annual basis as
part of its periodic review of Magellan’s risk management framework. In 2023, Magellan adopted a new Risk Management Framework
for climate related risks and opportunities.
Strategy
In 2023, Magellan launched an Energy Transition investment strategy to provide investors with a platform to invest in opportunities
arising from the long term energy transition thematic. The strategy provides clients with access to a portfolio of global companies
that are economically leveraged to the energy transition, have the capacity to deliver tangible environmental impact by advancing the
transition to a net-zero economy, and exhibit exceptional quality, as assessed by Magellan.
This follows the development of Magellan’s Sustainable strategies in 2016 which offer investors the opportunity to invest in a high
quality, attractive risk-adjusted return focused portfolio with materially lower carbon factor risk than global markets. In September
2016, the first of a series of Sustainable investment strategies that implement a proprietary low carbon overlay were launched
including the Global Sustainable strategy, followed by a Core ESG strategy in December 2020.
Climate change is an increasingly important issue for global companies and investors, with the potential to affect business models
through government regulation (e.g. carbon pricing), technology and changes in consumption patterns. Importantly, there are also
significant opportunities for companies to profitably deploy capital into areas that meet the needs of a decarbonising world. These
factors directly and indirectly impact the relative cost of companies’ products and services, customer demand and pricing power.
Risk Management
Identification of climate related risks
Environmental risks are identified at both the corporate/business strategy level and at the investment level (i.e. the companies held
in Magellan’s investment portfolios).
At the corporate level, Magellan aims to ensure that, where possible, business operations are conducted in an environmentally
sustainable way. Within environmental risk, Magellan has identified the following three areas where Magellan’s environmental
footprint lies:
•
•
•
Premises: Primarily Magellan’s head office in Sydney together with the regional offices in Australia and New Zealand. Consideration
may also be given to premises occupied by the Group’s subsidiaries where applicable.
Energy: Primarily energy usage across all Magellan offices.
Business travel: Primarily travel undertaken by the Investment and Distribution Teams for engagement with investee companies
and meetings with existing and prospective clients.
At the investment level, Magellan integrates climate considerations into investment and ownership decisions. Magellan and Airlie’s
Investment Team have responsibility for identifying material climate related risks and opportunities as well as their impact within
investment portfolios as part of their investment process. The ESG Team actively collaborates with analysts in the assessment of
climate related risks and opportunities.
Assessment of climate related risks
At the corporate level, Magellan’s energy usage and air travel mileage (from trips recorded by Magellan’s travel agent) are provided
to an independent consultancy to calculate Magellan’s Scope 1, 2 and 3 greenhouse gas emissions.
Given the nature of Magellan’s business and as a services firm of 115 employees, with approximately 83% of employees based in the
head office in Sydney, Magellan has a relatively small environmental footprint.
As noted above, there are three main areas where Magellan’s environmental footprint lies – premises, energy and business travel.
Magellan aims to ensure that, where possible, business operations are conducted in an environmentally sustainable way. For example,
Magellan’s head office is a 4.5-star NABERS3 rated office building. Magellan also continues to build awareness amongst its employees
and focuses on areas where it can make an impact, including recycling and minimising printing.
Magellan is a signatory to the CDP climate change program. CDP holds the largest global collection of self-reported climate change,
water and forest-risk data in an effort to transform the way the world does business to prevent dangerous climate change and protect
3 NABERS is a national rating system that measures the environmental performance of Australian buildings, tenancies and homes. NABERS is managed
nationally by the NSW Office of Environment and Heritage, on behalf of Commonwealth, state and territory governments.
Magellan Financial Group Limited | Annual Report 2023
Page 95
Corporate Sustainability and Responsibility Report
For the year ended 30 June 2023
natural resources. Magellan is also a member of the Investor Group on Climate Change (IGCC) and has also become a signatory to
the Net Zero Asset Managers Commitment.
Greenhouse Gas (“GHG”) emissions by Scope (metric tonnes CO2e)
Scope 1
Scope 2
Total GHG emissions
Total per employee
Total per A$ million of revenue
Calendar
Year 2018
Calendar
Year 2019
Calendar
Year 2020
Calendar
Year 2021
Calendar
Year 2022
0
135
135
1.07
0.3
0
139
139
1.07
0.2
0
122
122
0.90
0.2
0
113
113
0.81
0.1
0
60
60
0.50
0.2
As outlined in the table above, Magellan’s GHG emissions are relatively small, particularly on a per employee and per A$ million of
revenue basis. Magellan’s Scope 1 & 2 emissions intensity for calendar year 2022 of 0.2 tonnes CO2e per A$ million dollars of revenue
puts Magellan among the lowest emissions intensity companies globally.
Within Magellan’s Funds Management business, as discussed in the section titled “Responsible Investment”, Magellan considers
Environmental issues as a natural component of its investment process, particularly where such issues may impact the future cash
flows of the companies in which it is invested. Research reports compiled by the Investment Team include a discussion of climate
change risks and opportunities facing companies, if material, and includes a company’s emissions intensity. If a material risk is
identified, the Investment Team will incorporate cash flow impacts (either to capital expenditure or earnings margins) to reflect the
cost to the company of addressing or remediating the exposure. In general, the majority of Magellan’s investment universe is less
likely to be exposed to material transition risks, however, there are some companies in the infrastructure, industrials and transportation
sectors which have a greater exposure to transition risks. These risks will be incorporated into Magellan’s assessment of future cash
flows when transition risks are assessed likely and material.
In 2023, as part of Magellan’s commitment to the Net Zero Asset Manager Initiative (NZAMi), we have enhanced the assessment of
alignment to net zero for all investee companies utilising the net zero investment framework (NZIF). Where an investee company
does not have a net zero target, science-based targets or a credible strategy, we will prioritise engagement, particularly for the high
emitting sectors.
The Investment team is responsible for developing the climate strategy and engagement objectives. Progress of portfolio companies
towards climate related objectives is monitored by the ESG Team. In addition, Investment Team analysts monitor portfolio companies
for new climate targets and a credible strategy.
Engagement with portfolio companies is important to assess the credibility of their targets and understand any technological
challenges in committing to these targets.
Further, within the Airlie investment process, when assessing company specific risks and opportunities associated with climate change,
the Airlie Investment Team considers factors such as emissions intensity, physical and transition risks as well as the quality and
credibility of the company’s climate change mitigation activities within its assessment of business quality. Additionally, the Airlie
Investment Team will test a company’s stated transition plan, the costs of the plans and include carbon prices when incorporating the
risks and opportunities as part of the valuation process. As part of Magellan’s commitment under the Net Zero Asset Manager initiative,
Airlie will implement a stewardship and engagement strategy which includes an escalation and voting policy.
Metrics and Targets
In May 2017, Magellan became a signatory of the PRI’s Montreal Pledge. Under the Pledge, Magellan commits to measure and publicly
disclose the carbon footprint of its actively managed investment portfolios which are outlined in the table below:
Magellan Financial Group Limited | Annual Report 2023
Page 96
Corporate Sustainability and Responsibility Report
For the year ended 30 June 2023
Magellan Global Fund
Magellan Sustainable Fund
Magellan High Conviction Fund
Magellan Infrastructure Fund
Airlie Australian Share Fund
MFG Core International Fund
MFG Core ESG Fund
MFG Core Infrastructure Fund
US Sustainable Strategy
Airlie Small Companies Fund
Magellan Energy Transition Fund
Carbon footprint as at 30 June 2023
(tonnes CO2e per $US million revenue)1
61
23
146
694
98
67
23
946
26
39
582
1 Portfolio carbon intensities are calculated using the weighted average carbon intensity method.
Note: Certain information ©2023 MSCI ESG Research LLC. Reproduced by permission. The Fund's carbon intensity score is calculated
using MSCI data. In a limited number of circumstances, where data is not available or Magellan deems it appropriate, manual
adjustments are made to the MSCI carbon intensity score for certain investments held by the Fund.
It is important to note that the above reported carbon intensities are at a point in time, and that over time these could lie within a range
of intensities, depending on the strategy, the investment universe and relative valuations within that universe. Much higher carbon
intensities do not, of themselves, indicate companies exposed to higher decarbonisation risks. Indeed, the opposite could be true –
for example, regulated utilities companies that currently have fossil fuel power generation would likely report high carbon intensity,
but these utilities could be investing substantial capital expenditure into renewable energy sources and earning an attractive regulated
return on those investments. Over time, these utilities could show material reductions in their carbon intensity as renewables become
an increasing part of their energy generation mix.
As part of the Net Zero Asset Manager initiative, Magellan commits to the following goals and targets:
• Work in partnership with asset owner clients on decarbonisation goals, consistent with an ambition to reach net zero emissions
•
•
by 2050 or sooner across all assets under management (‘AUM’).
By 2030, set a target for AUM to be managed in line with the attainment of net zero emissions by 2050. Magellan will review
its interim target at least every five years and track progress annually. This target has been submitted to the Net Zero Asset
Manager initiative.
Implement a stewardship and engagement strategy, with a clear escalation and voting policy, that is consistent with our ambition
for all AUM to achieve net zero emissions by 2050 or sooner.
A working group has been established to continue to enhance Magellan’s alignment to the principles of the TCFD framework and track
progress against these targets.
People
As a funds management company, Magellan’s people are integral to the success of the business. Magellan takes an active involvement
in staff wellbeing, staff engagement and career development.
Remuneration
Magellan’s Remuneration Report outlines Magellan’s approach and philosophy to employee compensation. The remuneration
philosophy is centred on fair compensation for performance and contribution that achieves business outcomes and is underpinned by
four principles:
•
•
•
•
Promoting staff behaviour that is in the best interest of clients;
Attracting and retaining outstanding staff;
Building a culture that rewards performance while maintaining Magellan’s reputation and mitigating risk; and
Encouraging staff to think and act like long-term owners of the Group.
In December 2022, Magellan announced that the qualification dates for the cash retention component of the staff retention program
originally announced in March 2022, would be brought forward by one year to September 2023 and September 2024 respectively, from
Magellan Financial Group Limited | Annual Report 2023
Page 97
Corporate Sustainability and Responsibility Report
For the year ended 30 June 2023
September 2024 and September 2025 . These payments were brought forward in order to enhance their value as incentives and allow
employees to remain focused on clients and the business during a period of change, while also aligning with shareholder outcomes.
As at 30 June 2023, approximately 74% of employees had an individual shareholding in Magellan.
Magellan is focused on ensuring pay equality at the time of hire and ensuring pay equality through the employee lifecycle. Magellan
conducts an annual review of employee remuneration which includes comparing employees in the same role and with the same level of
experience to highlight any pay inequalities and adjusts compensation based on this review if required, so as to ensure that variances
in compensation reflect the relative performance of employees.
Engagement and Retention
The continued engagement and retention of our people is critical to the success of Magellan and we actively implement a number of
initiatives to promote staff engagement and retention, as well as maintaining the wellbeing of our people.
During the year, Magellan undertook an Employee Pulse Survey which was followed by a series of focus groups which allowed our
employees to discuss the themes that emerged from the Survey and provide ideas and suggestions as to what they would like to see.
This contributed to the next phase of engagement plans for our staff, the first of which was the launch of the refreshed Magellan values
which are outlined in Magellan’s Remuneration Report.
In addition to the formal Employee Pulse Survey, our managers and leaders seek regular feedback from employees and regularly
engage with them to understand their thoughts and ideas.
On an annual basis, Magellan also undertakes performance reviews with all employees to discuss performance against a set of internal
performance objectives and to identify development areas as well as any training requirements. While there is no formal 360 feedback
at Magellan, given the relative small size by number of employees (115 employees as at 30 June 2023), we consider that there are
open and transparent ways for our staff to provide feedback.
Magellan strongly believes that staff engagement and satisfaction go well beyond direct financial compensation and that the range
of initiatives that Magellan provides our employees is critical to the culture that has been built across the organisation. These
initiatives include:
•
•
•
•
•
Additional annual leave and family leave;
A range of wellbeing initiatives;
Service recognition;
Social connection; and
Parental leave and return to work initiatives.
Additional annual leave and family leave
Magellan’s annual leave policy encourages staff to take their full statutory requirement over each annual period by providing an
additional week of leave if they do so. In addition, in the last financial year, three additional wellbeing leave days were provided to all
staff, in recognition of the challenges that individuals had faced within the business in the recent past and to recognise the loyalty and
dedication that our team had shown.
Magellan understands the importance of family and provides family leave for all permanent employees. Under family leave, if
personal/sick leave has been used, employees can apply for family leave. Family leave is paid leave so employees can take time out to
care for a family member or manage a family situation. The amount of family leave an employee can take will be reviewed by Magellan
management on a case-by-case basis.
Magellan is committed to providing a flexible and family friendly working environment. Magellan recognises the importance of family
friendly working conditions and offers a range of initiatives to support its employees not only before and after the birth/adoption of
a child, but also managing broader carer’s obligations. Magellan’s aim is to reduce the impediments our employees face in balancing
work with their personal commitments and have adopted a hybrid work environment that enables our people to have the flexibility to
choose the arrangements which best suit their circumstances.
Wellbeing initiatives
Magellan provides a number of health and wellbeing initiatives available to our staff including annual flu vaccinations and annual skin
checks. In addition, all staff over the age of 45 have access to an annual executive health check.
Magellan Financial Group Limited | Annual Report 2023
Page 98
Corporate Sustainability and Responsibility Report
For the year ended 30 June 2023
All employees have access to Magellan’s Employee Assistance Program, a free counselling service available for employees and
their families.
Service and other recognition
In the year where an employee achieves 10 years of service, Magellan awards a $25,000 service award to mark the significant
milestone. At Magellan, we also look to acknowledge our staff members’ significant milestones such as birthdays and other life events.
Social connection
At Magellan, teamwork is incredibly important to our success and ensuring that our teams feel connected to one another is critical. As
such, in addition to the annual celebrations, Magellan has a social committee that is focussed on delivering the ability for our staff to
connect with one another in a more informal way. The focus for the next 12 months will be to strengthen that through giving back
to the community.
Parental leave and return to work
Magellan’s Paid Parental Leave Policy provides up to 15 to 18 weeks (depending on the length of employment), for permanent
employees who have the primary responsibility for the care of their child and who have worked for Magellan for at least 12 months
continuously at the time of the birth or adoption of that child. Employees receive superannuation payments on both their paid and
unpaid portion of parental leave for the first 12 months of parental leave. Employees on paid parental leave are eligible for the annual
remuneration review and variable incentive whilst on leave. In addition, if an employee returns to work during the period of paid
parental leave, Magellan will continue to pay the remaining period of paid parental leave in addition to their base salary and other
entitlements. Magellan offers a “Keep in Touch” Program with employees who are on paid parental leave.
Magellan also offers a childcare reimbursement of up to $150 per day for primary carers for the first 26 weeks after returning to
work, when returning to work within 12 months from the commencement of paid parental leave. All primary and secondary carers are
entitled to a 12 month subscription to Juggle Street to source local nanny or babysitting options for their families.
Diversity
Magellan is committed to workplace diversity and recognises the value of attracting and retaining employees with different
backgrounds, knowledge, experience and abilities. Magellan maintains a Workplace Diversity and Inclusion Policy that outlines
the Group’s commitment to diversity and inclusion in the workplace and provides a framework to achieve the Group’s diversity
goals for the business. The Group’s policy is to recruit and manage on the basis of competence and performance regardless of
age, race, gender, nationality, religion, sexuality, physical ability or cultural background. The policy can be found on Magellan’s
website: www.magellangroup.com.au.
The Board annually reviews the measurable objectives it sets to achieve improvement in the diversity of employees and has set
objectives for female representation of 33% for independent directors, 40% for senior management (classified by Magellan as direct
reports to the CEO) and 40% for the overall Group. The gender representation across the Group as at 30 June 2023 is shown below.
Non-executive independent
directors (5 total)
20%20%
80%80%
KMP (4 total)
75%75%
25%25%
Senior management (9 total)
Group (115 total)
44%44%
48%48%
56%56%
52%52%
0
20
40
60
80
100
Female
Male
The Board acknowledges that gender representation of non-executive independent directors as at 30 June 2023 was below the
objective set by the Board. Magellan continues to undertake the Board renewal process announced to shareholders in 2022, and
Magellan Financial Group Limited | Annual Report 2023
Page 99
Corporate Sustainability and Responsibility Report
For the year ended 30 June 2023
expects this process to be complete by Magellan’s 2023 AGM in November, at which point the Board expects gender representation
of non-executive directors to be in line with its objective.
Magellan also participates in the annual Workplace Gender Equality Reporting process, which under the Workplace Gender Equality Act
2012, requires non-public sector employers with 100 or more employees to submit a report to the Workplace Gender Equality Agency
(“WGEA”). Magellan’s participation not only meets its Australian compliance obligations, but also contributes to the WGEA’s dataset on
gender equality in Australian workplaces. The process also allows us to identify gender equality issues and put action plans in place.
A copy of the report can be found under the Shareholder Centre on Magellan’s website: www.magellangroup.com.au.
Two years ago, Magellan introduced a Magellan Asset Management Winter Internship Program with an aim to promote, engage and
attract more diverse talent into investing roles, with an initial focus being on women and candidates from diverse backgrounds.
Magellan’s Internship Program has been designed to provide students with an understanding of what it’s like to work within Magellan’s
Investment Team and working life at Magellan. This year the program involved the following:
•
•
A four-week paid internship for three students within the Investment Team; and
A partnership with the University Network for Investing and Trading (“UNIT”) on promoting Investment Management as an
engaging career choice.
Magellan’s intention is ultimately to rollout the Internship Program across various sector teams within Magellan’s Investment Team.
Health and Safety
The health and safety of the Group’s employees is of paramount importance. Magellan continues to operate in a hybrid
work environment where our employees have the opportunity to connect as teams but balance their work and personal
commitments. Magellan recognises individual employees have different preferences about working from home and working from the
office, but also believes there is great importance for the company’s culture of working together in the office. Magellan’s hybrid work
environment involves our employees being in the office three days a week and, in agreement with their manager, employees can
choose to work from home or in the office for the remaining days of the week. Whilst working from home, the Group’s employees have
stayed connected via virtual communication platforms and working remotely has not changed Magellan’s commitment to maintaining
its high level of client service and compliance obligations.
Magellan’s Workplace Conduct Policy details the Group’s approach in relation to harassment in the workplace, including bullying,
discrimination, sexual harassment, workplace violence and vilification, and provides procedures for dealing with complaints. On an
annual basis all employees and the Board undertake training to ensure that it is clearly understood what is expected of them in terms of
behaviour and conduct in the workplace. In addition, Magellan maintains a Work Health & Safety Policy which outlines the obligations
and responsibilities of Magellan and its employees in respect of compliance with the Work Health & Safety regulation and to ensure
that the workplace remains a safe environment for all employees.
Community
Magellan believes that an active contribution to community is important. Over the past financial year, Magellan’s employees
participated in Steptember raising funds for Cerebral Palsy, the J.P. Morgan Corporate Challenge, the Bloomberg Square Mile Relay,
and Magellan and its employees raised money for Equality Australia during Sydney World Pride Week.
Magellan is also a participating fund manager in the Future Generation Global Investment Company Limited (“FGG”). FGG is an ASX
listed investment company that invests in global equities investment strategies managed by prominent, Australian fund managers.
Participating fund managers manage the capital entirely pro-bono so that 1.0% of net assets each year can be donated to Australian
non-profit organisations committed to young Australians affected by mental health issues. In the 2023 financial year, this equated to
approximately $0.7 million in respect of funds managed by Magellan. Magellan is a foundation member and had an allocation of 7.5%
of the assets under management of FGG at 30 June 2023.
Magellan is also a Core Fund Manager to Hearts & Minds Investments. Hearts and Minds Investments Limited (“HM1”) is an ASX listed
investment company and as a Core Fund Manager, Magellan provides HM1 with its top three security recommendations on a quarterly
basis. HM1 foregoes any investment fees and instead makes a donation equal to 1.5% of net assets each year to certain charities.
Cybersecurity and Privacy
The cybersecurity threat environment is constantly evolving and managing cyber risk is one of Magellan’s highest priorities. To protect
client information and corporate data, Magellan employs leading cyber security solutions and maintains a formal information security
Magellan Financial Group Limited | Annual Report 2023
Page 100
Corporate Sustainability and Responsibility Report
For the year ended 30 June 2023
governance framework. Complementing the data protection and monitoring mechanisms it has in place, Magellan is continuously
assessing its multi-layered protection measures against the ever-changing threat environment.
Magellan’s Information Technology Risk Committee (ITRC) provides a key governance body to enhance the governance and oversight
of Magellan’s information technology risk management activities. The committee comprises key executives within Magellan and
meets quarterly to discuss cybersecurity risks, controls, policies, regulatory requirements, and any changes to the environment that
might affect the Group’s overall cybersecurity posture. Magellan’s Board is provided with regular updates on the Group’s overall
cybersecurity posture.
Magellan’s cybersecurity defence framework is aligned to the Australian Cyber Security Centre’s ‘Essential Eight framework’ and it
has implemented all Essential Eight strategies. Magellan has also mapped its approach to the National Institute of Standards and
Technology (NIST) cyber security framework. Magellan applies the principle of role-based least privilege with respect to data and
systems access to ensure staff can only access the minimal data set required to perform their role. Privileges are regularly re-certified.
As an independent assessment of the Group’s cybersecurity protection, Magellan engages an external consulting firm specialising in
IT security to conduct annual ‘penetration testing’ of the Group’s environment. Magellan maintains a Cybersecurity Incident Response
Plan that is tested annually and contains defined security roles, responsibilities, and procedures to follow if an event should ever occur.
As part of the Group’s Cybersecurity Program, all employees are required to complete cybersecurity awareness training upon joining
the firm as part of their induction process and on a quarterly basis thereafter. This ensures staff are aware of cyber-attack techniques
and of the need to always follow security best practices. Magellan also performs periodic social engineering tests on employees using
simulated email phishing and telephone-based phishing, to test the efficacy of the Group’s cyber-awareness training.
Third party risk management is a key component of Magellan’s information security program. All third-party relationships undergo a
rigorous security risk assessment as part of the due diligence process before being engaged. This includes an assessment of their
cybersecurity posture and data privacy/data access controls. The Group repeats the technology-focused due diligence process for all
critical third-party service providers on an annual basis.
Modern Slavery
Magellan published its first Modern Slavery Statement in 2021. The Statement can be found under the Responsible Investing section
of Magellan's website: www.magellangroup.com.au. All staff complete annual training on modern slavery.
The investment team continue to enhance the assessment of modern slavery for the portfolio companies through training with experts,
company engagement, integration of external data on industry and country risk together with company specific controversies from
external data providers. This is reported in the Modern Slavery statement.
Magellan Financial Group Limited | Annual Report 2023
Page 101
Corporate Information
As at 18 August 2023
Directors
Hamish McLennan – Chair
Robert Fraser – Deputy Chair and Chair of MAM
David George – Chief Executive Officer
David Dixon – Deputy Chair of MAM
John Eales AM
Andrew Formica
Colette Garnsey OAM
As announced by the Company on 17 August 2023, effective from 9:00am on 18 August 2023: Andrew Formica will be appointed
as the Non-Executive Chair of the Company's Board, Hamish McLennan will transition to the role of Deputy Chair and Non-Executive
Director and Robert Fraser will retire from the Company's Board and remain as Chair of MAM. Deborah Page will be appointed as a
Non-Executive Director with effect from 3 October 2023.
Company Secretary
Marcia Venegas
Registered Office
Level 36, 25 Martin Place, Sydney NSW 2000
Telephone: +61 2 9235 4888
Email: info@magellangroup.com.au
Website
www.magellangroup.com.au
Securities Exchange Listing
Magellan Financial Group Limited shares and the MFG 2027 Options are listed on the Australian Securities Exchange (ASX: MFG and
MFGO, respectively)
Corporate Governance Statement
The Corporate Governance Statement for MFG can be found at the Shareholder Centre at www.magellangroup.com.au
Auditor
Ernst & Young
200 George Street, Sydney NSW 2000
Share Registry
Boardroom Pty Limited
Level 8, 210 George Street, Sydney NSW 2000
Telephone: +61 2 9290 9600
Email: enquiries@boardroomlimited.com.au
InvestorServe is Boardroom's free, self-service website where shareholders can manage their interests online. The website
enables shareholders to view share balances, change address details, view payment and tax information, update payment
instructions and update communication instructions. Shareholders and option holders can register their email address at
www.boardroomlimited.com.au to receive shareholder communications electronically.
Electronic delivery of CHESS holding statements and notifications
The ASX has now launched the ASX CHESS Statements Portal, giving share and option holders the ability to receive electronic
notifications about their holdings. This shift away from paper-based communications may make it easier for investors to manage their
holdings, and benefit the environment by reducing waste.
To access the portal and electronic notifications, investors will need their broker to opt them in. Investors should contact their broker
to see if they have this service enabled. If an investor has not opted in, they will continue to receive CHESS holding statements and
notifications by mail. Once an investor has opted in, investor statements and notifications will be available through the ASX CHESS
Statements Portal and they will no longer receive paper statements.
Magellan Financial Group Limited | Annual Report 2023
Page 102
Shareholder Information
As at 14 August 2023
Analysis of Holdings
Fully paid ordinary shares
Holdings ranges
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 of securities
Number of
holders
32,525
11,815
1,544
1,057
84
47,025
4,337
Number of
shares
11,780,548
26,468,573
11,273,637
24,416,237
107,492,904
181,431,899
128,984
Percentage of
shares on issue
6.49
14.59
6.21
13.46
59.25
100.00
MFG 2027 Options
Holdings ranges
1-1,000
1,001-5,000
5,001-10,000
10,001-100,000
100,001 and over
Total
Options issued to employees under the MFG ESOP
Holdings ranges
1-1,000
1,001-5,000
5,001-10,000
10,001-100,000
100,001 and over
Total
Number of
holders
48,152
1,283
193
276
26
49,930
Number of
options
5,223,847
2,626,237
1,389,259
7,760,121
6,216,071
23,215,535
Percentage of
options on issue
22.50
11.31
5.98
33.43
26.78
100.00
Number of
holders
-
4
7
65
18
94
Number of
options
-
20,000
70,000
3,487,500
3,350,000
6,927,500
Percentage of
options on issue
-
0.29
1.01
50.34
48.36
100.00
Magellan Financial Group Limited | Annual Report 2023
Page 103
Shareholder Information
As at 14 August 2023
Twenty Largest Holders
Fully paid ordinary shares
Holder Name
HSBC Custody Nominees (Australia) Limited
Magellan Equities Pty Limited
JP Morgan Nominees Australia Pty Limited
Citicorp Nominees Pty Limited
Netwealth Investments Limited
BNP Paribas Nominees Pty Ltd
National Nominees Limited
Mr David Doyle
Aljamat Pty Ltd
Citicorp Nominees Pty Limited - 143212 NMMT Ltd
Jash Pty Limited
ACE Property Holdings Pty Ltd
Palm Beach Nominees Pty Limited
Merrill Lynch (Australia) Nominees Pty Limited
BNP Paribas Nominees Pty Ltd - IB AU Noms Retailclient
Glenn Hargraves Investments Pty Ltd
Emmanuel Capital Pty Ltd
BNP Paribas Nominees Pty Ltd Hub24 Custodial Serv Ltd
Neweconomy Com AU Nominees Pty Limited
Nulis Nominees (Australia) Limited
Total shares held by the 20 largest shareholders
Total ordinary shares on issue
MFG 2027 Options
Holder Name
HSBC Custody Nominees (Australia) Limited - A/C 2
Citicorp Nominees Pty Limited
HSBC Custody Nominees (Australia) Limited
Vagabond Ventures Pty Ltd
JP Morgan Nominees Australia Pty Limited
Mr Ernst Kohler
Weth Share Trading Pty Ltd
Mrs Anjana Nandha
Mrs Bhavna Rajeshkumar Soni
Mr Mohan Singh Nandha
Q & N Investments Pty Ltd
Mr James Lindesay Napier Aitken
Mr David Doyle
Marsev Pty Limited
Aljamat Pty Ltd
Jash Pty Limited
Superhero Securities Limited
Mr Kim Manh Lam
Nota Bene Investments Pty Ltd
Netwealth Investments Limited
Total MFG 2027 Options held by the 20 largest option holders
Total MFG 2027 Options on issue
Number of shares
Percentage of
shares on issue
28,630,563
15,214,104
12,676,261
11,475,517
7,251,211
4,332,001
2,702,649
1,500,000
1,310,000
1,227,957
1,163,886
1,060,000
884,207
837,367
785,598
650,000
630,000
608,310
547,451
496,956
93,984,038
181,431,899
15.78
8.39
6.99
6.33
4.00
2.39
1.49
0.83
0.72
0.68
0.64
0.58
0.49
0.46
0.43
0.36
0.35
0.34
0.30
0.27
51.80
Number of options
Percentage of
options on issue
693,077
576,500
560,887
500,000
360,880
305,420
249,578
236,500
225,000
221,000
200,436
200,000
187,500
183,729
163,750
145,486
140,589
140,455
134,375
126,130
5,551,292
23,215,535
2.99
2.48
2.42
2.15
1.55
1.32
1.08
1.02
0.97
0.95
0.86
0.86
0.81
0.79
0.71
0.63
0.61
0.61
0.58
0.54
23.91
Magellan Financial Group Limited | Annual Report 2023
Page 104
Shareholder Information
As at 14 August 2023
Substantial Shareholders
Shareholder
Chris Mackay, Magellan Equities Pty Ltd and associates1
BlackRock Group (BlackRock Inc. and subsidiaries)2
1 Last substantial shareholder notice lodged on 2 October 2020.
2 Last substantial shareholder notice lodged on 27 March 2023.
Voting Rights
Number of shares
17,522,248
15,432,520
Percentage of
shares on issue
9.66
8.51
Under the Company's Constitution, the voting rights attaching to ordinary shares at a meeting of shareholders are:
1. each shareholder is entitled to vote in person, by proxy, by attorney or by representative;
2. on a show of hands, each shareholder present in person, by proxy, by attorney or by representative is entitled to one vote; and
3. 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.
Neither the MFG 2027 Options nor options issued to employees under the MFG ESOP confer on the holder a right to receive notices of
general meetings (except as may be required by law), nor any right to attend, speak at or vote at general meetings of the Company.
Magellan Financial Group Limited | Annual Report 2023
Page 105