Magellan Financial Group Ltd
Annual Report 2024
ABN 59 108 437 592
Five year summary
30 June
2024
30 June
2023
30 June
2022
30 June
2021
30 June
2020
Group Results
Total Revenue
$'000
378,626
431,650
553,530
715,012
693,952
Total Expenses
$'000
51,647
163,372
116,582
336,048
178,874
Net Profit Before Tax
$'000
337,351
255,570
495,986
337,243
515,078
Net Profit After Tax
$'000
238,759
182,655
383,011
265,156
396,214
Adjusted Revenue and Other Income1
$'000
345,684
379,352
647,251
697,944
692,941
Adjusted Expenses1
$'000
106,851
126,774
130,799
110,451
119,751
Adjusted Net Profit Before Associates1
$'000
166,907
185,842
394,415
454,201
438,299
Adjusted Net Profit After Tax1
$'000
177,865
174,310
401,016
412,419
438,299
Effective Tax Rate
%
29.2
28.5
22.8
21.4
23.1
Funds Under Management2
Average Funds Under Management
$m
36,819
48,849
94,251
103,680
95,458
Closing Funds Under Management
$m
36,630
39,693
61,291
113,902
97,184
Funds Under Management comprises:
Retail
$m
17,188
18,396
22,169
30,883
26,769
Institutional
$m
19,442
21,297
39,122
83,019
70,415
Average Base Management Fee (per annum)3
bps
70
67
62
61
62
Average AUD/USD Exchange Rate
$
0.656
0.6732
0.7257
0.7469
0.6716
Funds Management Business1
Total Revenue
$'000
279,909
345,104
609,137
662,594
674,811
Total Expenses
$'000
102,410
121,324
125,807
106,115
116,799
Net Profit Before Tax
$'000
177,499
223,780
483,330
556,479
558,012
Net Profit Before Tax and Performance Fees1
$'000
158,294
212,274
471,858
526,405
477,048
Employee Expenses / Total Expenses
%
67.0
71.0
67.9
65.6
63.2
Cost to Income Ratio (expense/revenue)
%
36.6
35.2
20.7
16.0
17.3
Cost to Income Ratio (excluding performance fees)
%
39.3
36.4
21.0
16.8
19.7
Assets
Total Assets
$'000
1,089,244
1,198,974
1,241,401
1,216,166
1,123,873
Net Assets
$'000
1,019,529
962,502
1,026,760
989,434
1,045,927
Net Tangible Assets Per Share
$
5.05
4.71
4.95
4.77
5.08
Shareholder Value
Basic Earnings Per Share
cents
131.8
100.0
206.9
144.6
218.3
Diluted Earnings Per Share
cents
131.8
100.0
206.9
144.6
218.3
Adjusted Basic and Diluted Earnings Per Share1
cents
98.2
95.5
216.6
224.9
241.5
Total Dividends Per Share comprises:
cents
65.1
116.7
179.0
211.2
214.9
Ordinary Dividends Per Share4
cents
65.1
86.7
179.0
211.2
214.9
Special Dividends Per Share
cents
-
30.0
-
-
-
Franking
%
50
85
75
75
75
Other Information
Number of Employees
109
115
135
139
131
Average Number of Employees
112
125
137
135
128
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
Executive Chairman's Letter
4
Performance Overview
7
Directors’ Report
16
Remuneration Report
27
Auditor's Independence Declaration
46
Financial Statements
Consolidated Statement of Profit or Loss and Comprehensive Income
47
Consolidated Statement of Financial Position
48
Consolidated Statement of Changes in Equity
49
Consolidated Statement of Cash Flows
50
Notes to the Financial Statements
51
1.
Basis of Preparation
51
Results for the Year
2.
Segment Information
53
3.
Earnings Per Share
56
4.
Revenue
56
5.
Taxation
58
6.
Reconciliation of Operating Cash Flows
60
Investments
7.
Financial Assets
61
8.
Associates
63
9.
Intangibles
65
Operating Assets and Liabilities
10.
Loans and Receivables
66
11.
Leases
67
12.
Payables
68
13.
Employee Benefits
68
14.
Financial Liabilities
69
Capital and Financial Instrument Risk Management
15.
Capital Management
70
16.
Contributed Equity
71
17.
Reserves
72
18.
Dividends
73
19.
Share-Based Payments
73
20.
Subsidiaries
75
21.
Related Parties
76
22.
Financial Instrument Risk Management
77
Other Items
23.
Commitments, Contingent Assets and Contingent Liabilities
81
24.
Parent Entity Information
81
25.
Auditor Remuneration and Independence
82
26.
Subsequent Events
83
Consolidated Entity Disclosure Statement
84
Directors’ Declaration
85
Independent Auditor's Report
86
Corporate Sustainability and Responsibility Report
93
Corporate Information
107
Shareholder Information
108
Executive Chairman's Letter
For the year ended 30 June 2024
Dear Shareholder,
It is my pleasure to update you on the strategic progress, leadership developments, and financial performance for Magellan Financial
Group Ltd (‘Magellan’, ‘the Group’ or ‘MFG’) for the year ended 30 June 2024.
The Board’s primary focus has been our clients, whilst seeking to restore stability to the business and addressing legacy issues. We
are pleased with the good progress we have made so far on this front, and therefore, we have enhanced our focus on opportunities to
rebuild and restore growth. The heart of our future success remains on focusing on delivering excellence for our clients. We sincerely
thank you for your continued support, which has been invaluable over this period.
FY24 Performance
For the financial year ended 30 June 2024, Magellan has demonstrated resilience and stability. Our Funds Under Management (FUM)
stood at $36.6 billion as at 30 June 2024. Outflows have slowed quarter on quarter across both retail and institutional clients, and
pleasingly, FUM had risen to $38.4 billion as at 31 July 2024. The progress made in the business is reflected in several impressive client
wins, with Airlie seeing success in both retail and institutional channels and the Infrastructure strategy seeing a recent institutional
client win. These successes highlight the benefits of a diversified investment offering across our business.
Adjusted net profit after tax for the year was $177.9 million, a 2% increase from FY23, with adjusted diluted earnings per share of 98.2
cents. Our statutory net profit after tax for the year rose to $238.8 million, up from $182.7 million in FY23, with the increase including
the net benefit related to the elimination of the liability associated with the Magellan Global Fund Options. Despite management fees in
our Funds Management business being down 22%, as a result of lower average FUM, the business generated robust performance fees
in Global Equities. Additionally, after-tax profits from associates were encouraging, with MFG’s share of profits reaching $11.0 million,
a material improvement from the $11.5 million loss in FY23.
These results indicate a positive shift following a challenging few years for the business. While there is still work to be done, our
financial strength, strong profitability and operating cashflows, have allowed us to continue to pay attractive dividends to shareholders
and also invest for the future.
People & Leadership
The past year has seen changes in our executive leadership team that will position the business for future success. As you would
be aware, I became Executive Chair in October 2023 and in February 2024 we announced the appointment of Sophia Rahmani as
Managing Director of our core operating subsidiary and asset management business, Magellan Asset Management Limited. It is of
no surprise that since joining the business in May 2024, Sophia has hit the ground running, bringing fresh ideas to the business and
working well with myself, the Board, the senior leadership team and our broader team. The Board is confident that Sophia will excel at
Magellan and intends to appoint Sophia as Chief Executive Officer of Magellan Financial Group Ltd within the next six to nine months.
We are confident that the current transitionary leadership arrangements will ensure a smooth transition in executive leadership and
drive the long-term success of Magellan.
We have also made important progress on our remuneration framework, undertaking an extensive review that included engaging with
and seeking feedback from shareholders, proxy advisors, and our staff. The critical first step in this process was to resolve the share
purchase plan loans held by our staff, which was achieved through the October 2023 announcement of additional retention payments
that will fully repay these loans for the vast majority of staff by September 2025. Today, in our Remuneration Report, we announced
the next step with the introduction from the 2025 financial year of equity-based incentive programs, with deferral into equity under
our Short-Term Incentive Plan (STI) the senior leadership team and equity-based Long-Term Incentives (LTI) for key management
personnel and other senior management. In addition, for our broader staff, we have introduced a one-off equity grant of $5,000
(in the form of performance rights) as well as an equity matching plan to encourage and increase employee ownership, recognising
that a large number of staff divested some or all their MFG shares to partly settle their outstanding loans. The Board believes these
arrangements will strengthen the alignment of staff to business and shareholder outcomes and assist in retaining and attracting high
quality talent across our business.
Our people continue to be our greatest asset, with their expertise, dedication, and innovative thinking key to delivering value to
our clients and shareholders. We have continued to focus on improving employee engagement and satisfaction and measuring this
through regular employee surveys. Our engagement score in our most recent staff survey in June 2024 was 55%, a slight increase
from the first survey in December 2023 but still well below where we desire to be. Evidently there is much more to be done, and this
will be a key strategic objective for our senior leadership team, who will be accountable for this in our new remuneration framework.
Finally, it is worth providing a brief update on the Board. Board renewal continued throughout the 2024 financial year with the
the appointments of Deborah Page and Cathy Kovacs. Hamish McLennan has indicated his intention not to stand for re-election at
Magellan Financial Group Ltd | Annual Report 2024
Page 4
Executive Chairman's Letter
For the year ended 30 June 2024
Magellan's 2024 AGM - I would like to express my sincere thanks to Hamish for over 8 years of dedicated service as a Non-Executive
Director of Magellan, including stepping in as Non-Executive Chairman at an important time for the company. We are pleased with the
skill mix, expertise, independence and diversity on the Board, and I look forward to returning to your Non-Executive Chairman at the
appropriate time.
Strategic Update
As mentioned at the outset, a key focus over the past year has been on restoring stability, strengthening client relationships and
positioning the business for future growth. To that end, we successfully resolved a number of legacy issues facing the business,
including the employee share purchase plan loans as previously discussed and, subsequent to year end, successfully completing the
conversion of Magellan Global Fund Closed Class Units into Open Class Units, which received overwhelming support from unitholders
and has been positively received by our clients. While this has seen some one-off outflows, primarily from specialist traders and
investors, by addressing these issues we have reinforced our client-first approach and are now well-positioned to focus on our strategic
priorities for the future.
Our strategic vision is to become the asset manager of choice in the Australian market across a diversified offering. Given the high level
of change within the industry, it is vital that active funds management companies continue to invest if they want to stay relevant to
clients. As we have said previously, to achieve this strategic objective, we have actively engaged in discussions with investment teams
and talent to enhance Magellan’s platform. To that end, we are very excited with today’s announcement of a strategic partnership
with Vinva Investment Management (‘Vinva’), a pioneer in systematic equity investing in Australia. Under the strategic partnership,
Magellan will distribute Vinva’s systematic equity products globally and to certain retail and wholesale clients in Australia. Magellan
has also taken a strategic equity stake in Vinva of 29.5%. We see this strategic partnership as the coming together of two culturally
aligned businesses focused on delivering for clients, and importantly, see significant growth potential for both partners into the future.
Our highly regarded distribution capabilities have been a significant asset in the conversations we have been having, complemented
by the strength of our operating platform. As we pursue these strategic growth opportunities, we remain committed to a disciplined
approach, with our client-first philosophy at the forefront of our decision-making.
Expanding our global distribution capabilities is a strategic priority we have identified, particularly in the US – a key growth market
for Magellan. Given the market’s size and scale, and our existing distribution infrastructure, we view it as a significant opportunity
over the long-term. In February, we announced the appointment of new leadership of our US distribution platform, who have spent
time diligently assessing our capabilities and are now focused on opportunities to enhance and add value to the platform. A notable
area for investment is to expand our US platform’s capabilities into the retail market. While this will take some time to bear fruit, we
are excited about the opportunities in this market, our ambitions are high, and we are committed to investing in a disciplined and
value-accretive manner.
While we are building the future of Magellan, we also recognise the importance of maintaining a strong core business. This begins
with delivering the exceptional investment performance that Magellan has been renowned for over the years. Admittedly, performance
across some of our strategies has been mixed. In our Global Equities strategy, over the long-term, the Magellan Global Fund has
delivered on its goal of 9% net of fees through the cycle, however, has underperformed its benchmark over the medium-term. Since
the change in portfolio management in February 2022, the fund has shown improved performance, and our High Conviction and
Global Opportunities funds have also delivered robust returns over the last two years. Our Infrastructure Strategy has encountered
medium-term performance challenges given its strict definition of infrastructure it will invest in and we maintain confidence in its
long-term potential due to its rigorous investment criteria, deliberate approach and holdings of high quality infrastructure assets. Our
Australian Equities business, Airlie Funds Management, has been a standout performer, with the flagship Airlie Australian Share Fund
consistently outperforming its benchmark, and promising early returns from the Airlie Small Companies Fund.
As our clients increasingly prioritise Environmental, Social and Governance (ESG) considerations, we are proud of the solid progress we
have made in this area. Today, alongside our Annual Report, we released our inaugural Climate Report aligned to the recommendations
of the Task Force on Climate-Related Financial Disclosures (TCFD) – an important milestone for our business. I would encourage you to
read our Climate Report as well as our Corporate Sustainability and Responsibility Report, which highlight our team’s efforts not only in
addressing environmental risks and opportunities, but also in navigating social and governance challenges at both the corporate and
investment levels. Our commitment to sustainability, ethical governance, and social responsibility reflects our core values and positions
us to meet and exceed the evolving expectations of our clients and stakeholders.
Finally, on capital, Magellan continues to maintain a robust balance sheet and capital base, which has benefited us during recent
challenges. This capital not only instils confidence in our clients regarding our financial strength but also assures shareholders that
we prioritise long-term value creation over short-term decision-making. As of 30 June 2024, we estimate that our ‘Strategic Capital &
Stability Buffer’ stands at $325 million. Over time, we expect reduced reliance on this buffer as the business becomes more resilient
and the impacts of initiatives such as the Magellan Global Fund Closed Class conversion dissipate. We also, of course, require capital
Magellan Financial Group Ltd | Annual Report 2024
Page 5
Executive Chairman's Letter
For the year ended 30 June 2024
to execute our strategic growth agenda, which we consider will set up the business for long-term success. As demonstrated in FY23
when the Board declared a special dividend, we are committed to ongoing active capital management that both allows investment and
growth in the business, whilst managing the balance sheet to maximise shareholder returns. Our dividend policy remains unchanged,
allowing us to continue to pay attractive dividends to shareholders, and we have recently extended our on-market buyback to April
2025, with approximately 5 million shares bought back under the buyback since inception. The Board intends to provide a further
update on capital management to shareholders at our Interim Results in February 2025.
Concluding Remarks
In conclusion, we have made significant strides in restoring stability and positioning Magellan for future growth. With a strengthened
leadership team in place, we are well-equipped to execute our strategic objectives and deliver value to our clients and shareholders. I
would like to thank my fellow Directors on the Board, as well as the broader Magellan team for their tireless efforts over the past year.
I also thank you, our shareholders, for your unwavering support and look forward to updating you on our progress in the coming year.
Yours sincerely,
Andrew Formica
Executive Chairman
Magellan Financial Group Ltd | Annual Report 2024
Page 6
Performance Overview
For the year ended 30 June 2024
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 its Airlie Funds Management business).
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 business is 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 2024 reflects the progress the business has made in restoring stability
and establishing the foundations for future growth.
FUM was $36.6 billion as at 30 June 2024, representing a slowing of quarterly outflows across both retail and institutional clients and
robust growth from investment returns. Average FUM for the year was down 25% to $36.8 billion (FY23: $48.8 billion).
The Group’s statutory net profit after tax for the year ended 30 June 2024 was $238.8 million (FY23: $182.7 million). The Group’s
statutory net profit after tax was up on the 2023 financial year, primarily due to the $42.7 million net benefit to the Group resulting
from changes in the fair value of Magellan’s liability to fund the exercise discount in respect of the options over the Magellan Global
Fund Closed Class Units (“MGF Options”).
The Group believes adjusted net profit after tax provides meaningful information about the performance of the business, particularly
in comparative analysis.
The Group’s adjusted net profit after tax for the year ended 30 June 2024 was $177.9 million (FY23: $174.3 million). Adjusted
earnings per share was 98.2 cents per share (FY23: 95.5 cents per share). Adjusted financial measures for the period exclude:
•
non-cash amortisation expense of $1.4 million;
•
net unrealised gains from the Fund Investments segment of $30.0 million (net of tax: $21.0 million);
•
net non-cash remeasurement of share purchase loans of $1.7 million;
•
non-cash employee share option expense of $3.1 million;
•
gain on dilutions and disposal of associates of $0.1 million (net of tax: $0.1 million); and
•
net benefit related to strategic initiatives of $61.1 million (net of tax: $42.7 million), which reflects changes in the fair value of
Magellan’s liability to fund the 7.5% exercise discount in respect of the MGF Options and the cost of the on-market purchase of
MGF Options by the Group.
Profit before tax and performance fees from the Group's Funds Management business was $158.3 million (FY23:
$212.3 million).
Fund Investments made a gain of $81.7 million before tax. This primarily comprised dividend and distribution income of
$13.6 million, realised capital gains of $38.1 million and net unrealised capital gains of $30.0 million. Earnings from dividends and
distributions and realised capital gains/losses are included in other revenue in the table on the next page.
The Group’s share of the after-tax profits of associate investments was $11.0 million (FY23: after-tax losses of $11.5 million).
The Directors have declared total ordinary dividends of 65.1 cents per share in respect of the year ended 30 June 2024, 50% franked.
This compares with 86.7 cents per share in 2023 financial year. This comprises:
•
An Interim Dividend of 29.4 cents per share paid in March 2024, franked at 50% (46.9 cents per share for the six months to
31 December 2022, franked at 85%);
•
A Final Dividend in respect of the six months to 30 June 2024, of 28.6 cents per share, franked at 50% (35.6 cents per share, 85%
franked, in 2023), which is expected to be paid on 4 September 2024; and
Magellan Financial Group Ltd | Annual Report 2024
Page 7
Performance Overview
For the year ended 30 June 2024
•
A Performance Fee Dividend of 7.1 cents per share also franked at 50% (4.2 cents per share, 85% franked, in FY23).
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. This remained unchanged for the year ended 30 June 2024. 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 franking rate applied of 50% to the Interim Dividend and 50% to the Final Dividend
and Performance Fee Dividend has been determined having regard to the franking credits that are expected to be available to the
Group. The reduction in the franking rate in the 2024 financial year is due to the impact of the on-market purchase of MGF Options
by the Group.
The payment of dividends by the Group will be subject to corporate, legal and regulatory considerations.
Magellan Financial Group Ltd | Annual Report 2024
Page 8
Performance Overview
For the year ended 30 June 2024
The following table summarises the Group's profitability over the past two financial years1:
30 June 2024
$'000
30 June 2023
$'000
Change
%
Management and services fees
257,948
330,247
(22%)
Performance fees
19,206
11,524
67%
Other revenue and income
68,530
37,581
82%
Adjusted revenue and other income
345,684
379,352
(9%)
Adjusted expenses
(106,851)
(126,774)
(16%)
Adjusted net profit before tax
238,833
252,578
(5%)
Adjusted tax expense
(71,926)
(66,736)
8%
Adjusted net profit after tax and before associates
166,907
185,842
(10%)
Share of after tax profit/(loss) of associates1
10,958
(11,532)
195%
Adjusted net profit after tax
177,865
174,310
2%
Net benefit/(expense) related to Magellan Global Fund options2
42,744
(18,602)
nm
Transaction costs related to strategic initiatives
-
(1)
nm
Amortisation of intangible assets
(1,408)
(3,580)
nm
Net non-cash remeasurement of share purchase loans
1,672
(795)
nm
Non-cash employee share option expense
(3,137)
(3,846)
nm
Net unrealised change in fair value of financial assets and liabilities
20,969
35,348
nm
Gain on dilutions and disposals of associates
54
(179)
nm
Total non-IFRS adjustments
60,894
8,345
Statutory net profit after tax
238,759
182,655
31%
Key statistics
Diluted earnings per share (cents per share)
131.8
100.0
32%
Adjusted diluted earnings per share (cents per share)
98.2
95.5
3%
Dividends
Interim and final dividends (cents per share)
58.0
82.5
(30%)
Annual performance fee dividend (cents per share)
7.1
4.2
69%
Total dividends (cents per share)3
65.1
86.7
(25%)
1 Share of after-tax profit/(loss) of associates of $10.3 million adjusted for tax on undistributed associate profit of $0.7 million. A reconciliation to the
reported statutory net profit is outlined in section 1.4.1 of the Directors' Report.
2 Reflects the change in value of the obligation associated with the Magellan Global Fund ("MGF") Options issued under the MGF Partnership Offer
and Bonus MGF Option Issue and, for the period ended 30 June 2024, also includes the cost of the on-market purchase of MGF Options ("MGFO")
by the Group and related transaction costs.
3 Excludes special dividends.
Funds Management Business
As at 30 June 2024, the Group’s Funds Management business had FUM of $36.6 billion. This business 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 2024, the Funds Management business profit before tax was $177.5 million (FY23: $223.8 million).
Excluding performance fees, profit before tax was $158.3 million (FY23: $212.3 million). The Funds Management business 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 3.1 of the Directors’ Report and note 2 in the financial statements for the breakdown of these items).
Magellan Financial Group Ltd | Annual Report 2024
Page 9
Performance Overview
For the year ended 30 June 2024
The following table summarises the profitability of the Funds Management business for the year ended 30 June 2024 compared with
the prior corresponding period:
30 June 2024
$'000
30 June 2023
$'000
Change
%
Revenue
Management fees
256,748
327,647
(22%)
Performance fees
19,206
11,524
67%
Services fees
1,200
2,600
(54%)
Other revenue and income
2,755
3,333
(17%)
279,909
345,104
(19%)
Expenses
Employee expenses
68,656
86,124
(20%)
Fund administration and operational costs
13,260
14,749
(10%)
Information, technology and data
8,647
8,695
(1%)
Marketing
1,830
1,962
(7%)
Other expenses
10,017
9,794
2%
102,410
121,324
(16%)
Net profit before tax
177,499
223,780
(21%)
Net profit before tax and performance fees1
158,294
212,274
(25%)
Key statistics
Average funds under management ($ million)
36,819
48,849
(25%)
Average AUD/USD exchange rate
0.6560
0.6732
(3%)
Average number of employees
112
125
(10%)
Employee expenses / total expenses
67.0%
71.0%
Cost / income
36.6%
35.2%
Cost / income, excl. performance fees1
39.3%
36.4%
1 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 19% to $279.9 million. This was driven by a 22% decrease in total management fee revenue,
as a result of a 25% decrease in average FUM over the period. Performance fees before tax of $19.2 million were earned for the
year (FY23: $11.5 million). Performance fees were primarily driven by the Group’s Global Equities Strategy which exhibited strong
investment performance in the six months to 30 June 2024. Performance fees can, and very often do, vary significantly from period
to period.
Expenses
Funds Management business expenses reduced by 16% from the prior corresponding period to $102.4 million, within the provided
guidance range of $97.5 to $102.5 million, and reflecting disciplined cost management.
Employee expenses decreased by 20% to $68.7 million and made up 67% of the operating expenses of the Funds Management
business in the year, compared with 71% in the prior corresponding period. Reduced employee expenses during the period reflects
a reduction in the average number of employees across the business, partly as a result of the organisational realignment in October
2022, as well as lower staff cash retention payment expenses recognised in FY24 compared to FY23. As a fund manager, Magellan’s
business is heavily reliant on human capital and we continue to invest in our people to deliver excellence for our clients, which in turn
will drive shareholder outcomes.
During the period, Magellan announced additional retention payments to current employees with outstanding Employee Share
Purchase Plan Loans (‘ESPP Loans’), which has substantially resolved the concern and distraction the ESPP Loans were causing and
will close out the ESPP Loans for the vast majority of staff by September 2025. The FY24 expense associated with these additional
retention payments was approximately $1.6 million.
Magellan Financial Group Ltd | Annual Report 2024
Page 10
Performance Overview
For the year ended 30 June 2024
The Funds Management business cost to income ratio (excluding performance fees) was 39.3% (FY23: 36.4%). The increase to
Magellan’s cost to income ratio primarily reflects the decrease in revenue resulting from a reduction in FUM during the period, partially
offset by a decrease in expenses.
The Group continues to pay close attention to costs and has a disciplined cost management approach.
The following table sets out total employee numbers:
30 Jun 2024
30 Jun 2023
Investment
Portfolio Managers/Analysts
23
25
Dealers
3
3
26
28
Distribution & Marketing
211
23
Other (including Finance, Risk & Compliance, Admin)
491
47
Frontier
5
8
Airlie
8
9
Total
109
115
Average number of employees
112
125
1 As part of organisational changes, the Performance & Reporting team now report to the CFO/COO and have moved from being recorded under
"Distribution & Marketing" to "Other".
Funds Under Management
The following table sets out the composition of Magellan's FUM:
30 June 2024
30 June 2023
Retail
17.2
18.4
Institutional
19.4
21.3
Total FUM ($ billion)
36.6
39.7
Retail (%)
47%
46%
Institutional (%)
53%
54%
FUM subject to performance fees (%)
44%
47%
Breakdown of FUM
Global equities
15.8
19.1
Infrastructure equities
15.5
16.1
Australian equities
5.4
4.5
Total FUM ($ billion)
36.6
39.7
Average base management fee (bps) per annum excluding performance fees1
70
67
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 2024, the Group had FUM of $36.6 billion, split between:
•
Global Equities (43%);
•
Infrastructure Equities (42%); and
•
Australian Equities (15%).
This compares with FUM of $39.7 billion as at 30 June 2023. The decrease in FUM was driven by:
•
net outflows of $5.9 billion;
•
cash distributions paid (net of reinvestment) of approximately $0.5 billion; offset by
Magellan Financial Group Ltd | Annual Report 2024
Page 11
Performance Overview
For the year ended 30 June 2024
•
positive investment returns of approximately $3.3 billion.
The following table sets out the drivers of FUM changes for each investment strategy:
FUM by strategy
($ billions)
30 Jun 2023
1H24 Net
Flows
2H24 Net
Flows
Investment
Performance
Distributions
30 Jun 20241
Global Equities
19.1
(4.5)
(1.2)
2.8
(0.4)
15.8
Infrastructure Equities
16.1
(0.3)
(0.2)
(0.0)
(0.1)
15.5
Australian Equities
4.5
0.1
0.2
0.6
(0.0)
5.4
Total1
39.7
(4.6)
(1.3)
3.3
(0.5)
36.6
1 May not add due to rounding
As seen in the table above, net outflows across the business reduced materially in the second half of the financial year compared to the
first half. The Group also saw institutional inflows in the fourth quarter of the financial year, the first positive quarter of net institutional
flows in over two years.
The Group’s FUM rose to $38.4 billion as at 31 July 2024.
Importantly, delivering outstanding investment returns is key to the growth of the business’ existing investment capabilities. Set out
in the table below is the investment performance since inception of the Group’s three flagship funds, the Magellan Global Fund, the
Magellan Infrastructure Fund and the Airlie Australian Share Fund.
Investment Performance for the Period to
30 June 20241
6 months
%
1 Year
%
3 Years
% p.a.
5 Years
% p.a.
Since
Inception
% p.a.2
Magellan Global Fund3
15.5
19.3
8.3
8.9
11.3
MSCI World NTR Index ($A)
14.2
19.8
11.1
12.9
8.3
Magellan Infrastructure Fund
(1.2)
(0.1)
1.6
0.6
6.5
Infrastructure Benchmark ($A)4
4.9
5.8
5.6
3.0
5.2
Airlie Australian Share Fund
1.6
12.4
7.1
10.8
10.2
S&P/ASX 200 Accum. Index
4.2
12.1
6.4
7.3
8.4
1 Calculations are based on exit price with distributions reinvested, after ongoing fees and expenses but excluding individual tax, member fees and
entry fees (if applicable). Annualised performance is denoted with “p.a.” for the relevant period.
2 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).
Magellan-branded funds
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. While long-term investment performance is strong, with all strategies
outperforming their respective benchmarks since inception, improvement is needed in the medium-term investment performance of
the Group’s Global Equities and Infrastructure strategies. Each of the Group’s investment teams remain highly focused on delivering
positive investment outcomes for clients.
The Global Equities Strategy experienced the majority of outflows in the period with $5.7 billion of net outflows, $3.2 billion
of which were from the institutional channel. Investment performance in the strategy has been mixed, with improved investment
performance across the Magellan Global Fund and the High Conviction strategies in recent years but remaining soft over the medium
term. Pleasingly, investment performance was strong in the second half of the year and Magellan earned material performance fees
with investment returns over the course of the year adding $2.8 billion in FUM.The Global Opportunities strategy, launched in January
2022, has performed strongly since inception and is approaching its key three year track record.
Magellan’s Infrastructure Equities Strategy remains a highly regarded offering globally with a strong long-term performance track
record since inception. Medium-term performance within the strategy has been soft, however, the reasons for underperformance
Magellan Financial Group Ltd | Annual Report 2024
Page 12
Performance Overview
For the year ended 30 June 2024
against the benchmark are well understood in the market. In short, Magellan’s approach to infrastructure investing is built on a
strict definition of infrastructure which intentionally differs from broader market definitions to exclude companies whose earnings are
exposed to certain significant external risks, such as commodity price movements, competitive pressures, or sovereign risks. Using this
disciplined approach, the strategy invests in monopoly-like assets that provide essential services, face reliable demand, and generate
predictable cashflows, and as a result, can lead to periods where the strategy underperforms the common infrastructure index. Despite
the recent performance challenges, Magellan remains confident that the strategy is well-placed to deliver strong investment returns
over the long-term. The infrastructure strategy has a strong following amongst clients, and has seen recent institutional client wins
in FY24.
Airlie-branded funds
Magellan’s Australian Equities business, Airlie Funds Management, continued its success in the Australian equities asset class, with
exceptional performance in the Airlie Australian Share Fund (ASX: AASF / APIR: MGE9705AU), which has outperformed its benchmark
over 1 year, 3 years, 5 years and since inception, as at 30 June 2024. These strong investment returns added FUM of $0.6 billion over
the year. The business also saw net inflows of $0.3 billion over the year, with consistent retail inflows in each month of the financial
year. In July 2024, post-period, the Airlie business saw institutional inflows of $1.4 billion, demonstrating client recognition of the
team’s exceptional investment approach and strong performance.
Strategic update
Across the Group as a whole, the 2024 financial year marked a period of improved stability across many aspects of the business.
To achieve this, the Group successfully implemented transitional leadership arrangements, resolved activism activity relating to the
Magellan Global Fund including through the acquisition of 750 million MGF Options, proceeded with the conversion of the Magellan
Global Fund Closed Class Units into Open Class Units, resolved employee share purchase plan loans for current employees and
progressed the Group’s new remuneration framework.
The Group has also continued to focus on strategic initiatives to drive business growth. As part of the Group’s strategy to become the
asset manager of choice in the Australian market across a diversified offering, on 15 August 2024, the Group was pleased to announce
a strategic partnership with Vinva Investment Management (“Vinva”), a global investment management firm specialising in systematic
equity strategies. Under the strategic partnership, the Group will distribute Vina’s systematic equity products globally and to certain
retail and wholesale clients in Australia. The Group also acquired a 29.5% shareholding in Vinva for cash consideration of $138.5 million
as part of the strategic partnership. The strategic partnership is in line with Magellan’s strategic objectives and will allow Magellan to
bring Vinva’s innovative investment capabilities to the Group’s client base.
During the financial year, the Group also appointed new leadership to the Group’s US distribution platform, a key market for future
growth, with the aim of enhancing the platform’s capabilities into the intermediary market and exploring opportunities to make
investments in high quality managers.
With FUM of $38.4 billion at 31 July 2024, the business remains a profitable fund manager of scale. The business continues to generate
strong operating cash flows supporting attractive dividends, and the business’ financial strength positions it well to execute on its
strategic growth agenda into the future.
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 is important for Magellan’s clients and
shareholders. In addition to providing strategic flexibility and optionality, the Group’s Fund Investments ensure the Group holds a
meaningful level of liquid assets for operational risk purposes and allows Magellan to seed new investment strategies and co-invest
with clients.
As at 30 June 2024, the Group had net Fund Investments of $371.1 million, compared with $392.0 million at 30 June 2023. On a per
share basis, net Fund Investments were $2.05 per share (based on 180.7 million shares at 30 June 2024).
Magellan Financial Group Ltd | Annual Report 2024
Page 13
Performance Overview
For the year ended 30 June 2024
The following table sets out a summary of the Group’s Fund Investments as at 30 June 2024 and 30 June 2023:
30 June 2024
30 June 2023
Cash
0.2
0.4
Investments in:
Magellan funds1
398.5
412.9
Net seed portfolios
5.6
7.0
Other2
0.4
0.2
Total
404.7
420.5
Net deferred tax liability3
(33.6)
(28.5)
Net Fund Investments
371.1
392.0
1 Investments are set out in note 7 of the financial statements.
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.
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 18.1%, 7.6% and 8.4% per annum over the last 1, 3 and 5 years to
30 June 2024 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 10.8% 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.
Associate Investments
As at 30 June 2024, Magellan held two investments in associates. These are held on Magellan's balance sheet and are
managed separately:
•
36% economic interest (4.99% 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 gain of $11.0 million during the year ended 30 June 2024 (FY23: after tax-loss of
$11.5 million).
Barrenjoey was profitable over the year with net profit after tax of $34.7 million following record revenues. With all key businesses
now established, Barrenjoey saw revenue growth across all business lines, particularly Fixed Income, and the business demonstrated
disciplined cost management with operating expenses up only 4%. Barrenjoey maintained a strong capital position, well above the
minimum required, and saw strong cash generation allowing all working capital facilities to be repaid. Barrenjoey intends to commence
paying dividends given the growth in earnings, cash generation and capital (subject to Barrenjoey Board approval).
FinClear’s contribution to the Group improved marginally as result of revenue growth from a recovery in market trading volumes and
new cash and FX products that target the changing needs of brokers.
Magellan continues to be a supportive shareholder, and will manage these investments with a view to maximising shareholder value.
With the Group’s strategic investment in Vinva in August 2024, Vinva will become the third investment in associates held by the Group,
which will be reflected in the 2025 financial year.
2 Excluding the impact of any potential dilution arising from unexercised issued options.
Magellan Financial Group Ltd | Annual Report 2024
Page 14
Performance Overview
For the year ended 30 June 2024
Capital Management
As at 30 June 2024, the Group's financial position included:
•
investment assets (cash and cash equivalents, financial assets and investments in associates) of $889.0 million (June 2023:
$945.3 million);
•
net tangible assets of $912.2 million (June 2023: $853.7 million) equating to $5.05 per share (June 2023: $4.71);
•
total liabilities of $69.7 million (June 2023: $236.5 million) which include payables, employee benefits, income tax payable and
lease liabilities; and
•
shareholders' funds of $1.0 billion (June 2023: $962.5 million).
The Group has no debt.
As at 30 June 2024, Magellan had bought back 4,969,671 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 Group’s strong balance sheet has benefited clients and shareholders in recent periods by protecting the business from challenges
at the corporate level. Magellan’s strong capital position continues to provide the business strategic optionality and flexibility, with the
Group assessing that it holds approximately $325 million of capital available for strategic purposes and as a stability buffer.
Magellan Financial Group Ltd | Annual Report 2024
Page 15
Directors’ Report
For the year ended 30 June 2024
The Directors present their report together with the financial statements of Magellan Financial Group Ltd (the “Company” or “MFG”)
and its controlled entities, which together form the Group, for the year ended 30 June 2024.
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 2024, dividends amounting to $179,864,000 were paid representing 99.2 cents per ordinary share
(June 2023: $212,655,000 representing 115.8 cents per ordinary share).
On 15 August 2024, the Directors declared total dividends of 35.7 cents per ordinary share (50% franked) in respect of the six months
to 30 June 2024 (June 2023: 69.8 cents per ordinary share 85% franked). These dividends comprise a Final Dividend of 28.6 cents per
ordinary share and a Performance Fee Dividend of 7.1 cents per ordinary share (June 2023: 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). The total
amount of the Final Dividend and Performance Fee Dividend (which is not recognised as a liability as at 30 June 2024) is approximately
$64,526,000 (June 2023: $126,639,000) and is expected to be paid on 4 September 2024.
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 7 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 Executive Chairman's Letter on page 4 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 2024 was $238,759,000, up $56,104,000 on the prior year.
The Group's adjusted net profit after tax was $177,865,000 (June 2023: $174,310,000) which takes into account various non-IFRS
adjustments as shown on the following page.
Magellan Financial Group Ltd | Annual Report 2024
Page 16
Directors’ Report
For the year ended 30 June 2024
30 June 2024
30 June 2023
Statutory
$'000
Non-IFRS
$'000
Statutory
$'000
Non-IFRS
$'000
Management and services fees
257,948
257,948
330,247
330,247
Performance fees
19,206
19,206
11,524
11,524
Other revenue and income
101,472
101,472
89,879
89,879
Total revenue and other income
378,626
378,626
431,650
431,650
Adjust for: net unrealised change in fair value of financial assets
and liabilities
(29,956)
(50,497)
Adjust for: non-cash interest related to share purchase loans
(2,986)
(1,801)
Adjusted revenue and other income
345,684
379,352
Total expenses
(51,647)
(51,647)
(163,372)
(163,372)
Adjust for: net (benefit)/expense related to MGF options1
(61,063)
26,575
Adjust for: transaction costs related to strategic initiatives2
-
1
Adjust for: amortisation of intangible assets
1,408
3,580
Adjust for: non-cash expenses related to share purchase loans
1,314
2,596
Adjust for: non-cash employee share option expense
3,137
3,846
Adjusted expenses
(106,851)
(126,774)
Income tax
(98,592)
(98,592)
(72,915)
(72,915)
Adjust for: tax on above adjustments
27,306
7,176
Adjust for: tax on undistributed associate profit
(663)
(921)
Adjust for: tax on gain from associate dilutions and disposals
23
(76)
Adjusted income tax
(71,926)
(66,736)
Adjusted net profit before associates
166,907
185,842
Share of after-tax profit/(loss) of associates
10,295
10,295
(12,453)
(12,453)
Adjust for: tax on undistributed associate profit
663
921
Net gain/(loss) on dilutions and disposals of associates
77
77
(255)
(255)
Adjust for: net gain on dilutions and disposals of associates
(77)
255
Net profit after tax
238,759
182,655
Adjusted net profit after tax
177,865
174,310
Basic earnings per share
131.8
100.0
Adjusted basic earnings per share
98.2
95.5
1 Reflects the change in value of the obligation associated with the Magellan Global Fund ("MGF") Options issued under the MGF Partnership Offer
and Bonus MGF Option Issue and, for the period ended 30 June 2024, also includes the cost of the on-market purchase of MGF Options ("MGFO")
by the Group and related transaction costs.
2 Comprises transaction costs associated with the MGF closed class conversion.
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 Ltd | Annual Report 2024
Page 17
Directors’ Report
For the year ended 30 June 2024
1.4.3. Statement of Financial Position
The Group is in a strong financial position and at 30 June 2024 reported:
•
investment assets (cash and cash equivalents, financial assets and investments in associates) of $889,016,000 (June
2023: $945,341,000);
•
shareholders’ funds of $1,019,529,000 (June 2023: $962,502,000); and
•
net tangible asset per share of $5.05 (June 2023: $4.71).
1.5. Risk Management
The Directors believe that the management of risk is a continual process and an integral part of good business management
and corporate governance. The Group's Risk Management Framework has been designed to enable risk-informed decision making
within established tolerance limits. It sets the Board's risk appetite and mechanisms to manage material risks within the approved
risk appetite.
Presented below are the Group's material risks together with mitigations employed. Each material risk also encompasses reputation
risk which is the risk of possible damage to the Group's reputation resulting from an action or inaction which could be perceived by
clients, consultants, service providers and regulators to be inappropriate, unethical or inconsistent with the Group's values, cultures
and beliefs.
Mitigation strategies are designed to reduce the likelihood of the risk occurring and/or to minimise the adverse consequences of the
risk should it ever occur. However, some risks are affected by factors external to and beyond the control of the Group.
The Group's operations are not significantly impacted by environmental regulations under a law of the Commonwealth or of a state
or any other territory of Australia in which it operates.
Material risk description
Mitigations employed
Strategic risks
Strategic alignment and execution
The risk that the Group does not recognise and/or innovate
essential elements needed to successfully deliver value to the
Group's existing clients and shareholders.
✓
Strategic decisions are made with due consideration
of the established and Board-approved Risk
Management Framework.
✓
Robust pre-investment due diligence programme
commensurate with the size and nature of proposed initiatives.
✓
Key risks are identified, assessed and provided to the Board.
✓
Annual strategy and budget process, with outcomes and
priorities approved by the Board.
✓
Regular reporting to the Board on the progress of
strategic initiatives.
Business model
The risk of loss or harm to the Group resulting from an
inability to:
•
recognise and react to the actions of competitors;
•
plan for, and adapt to technological or other innovations
that create new market opportunities or disrupt
existing ones;
•
adequately identify and assess economic, regulatory
or industry issues that adversely impact the
Group's business model or demand for the Group's
investment strategies.
✓
Periodic monitoring of the external macro-economic, financial
and regulatory landscape.
✓
Ongoing review and analysis of product offerings.
✓
Marketing and branding strategy.
✓
Ongoing monitoring and reporting of emerging risks against
Board appetite.
✓
Client engagement and relationship management to gain
deeper insight into client needs.
Environmental, Social and Governance ("ESG")
The risk that the Group fails to adequately execute its ESG,
Responsible Investment and Stewardship Strategy.
✓
Client representation in matters of corporate governance
through the proxy voting process.
Magellan Financial Group Ltd | Annual Report 2024
Page 18
Directors’ Report
For the year ended 30 June 2024
Material risk description
Mitigations employed
Failure to meet ESG commitments or expectations, or
manage ESG risks, could harm the Group's reputation,
impact performance, limit access to capital or impact the
Group's ability to attract and retain talent.
✓
Dedicated Head of ESG.
✓
Ongoing integration of ESG considerations into investment
processes for relevant strategies.
✓
Regular review and enhancement of the Group's ESG,
Responsible Investment and Stewardship Strategy.
✓
ESG product offerings to investors.
✓
ESG targets that are reviewed and monitored.
✓
Training provided periodically on specific ESG-related topics
such as Modern Slavery.
✓
Signatory to the Net Zero Asset Manager initiative.
Operational risks
Cyber and information security
The risk that the Group, its partners, third parties or client
base is impacted by a cyber event which causes loss, harm,
damage or disruption.
A cyber incident could cause disruption to client services
and critical business processes. Actual or perceived failures
in the Group's technology security capability and control
environment could result in financial loss and impact the
Group's reputation and brand.
✓
Information Technology Risk Committee (“ITRC”) providing
governance and oversight of the Group's information
technology risk management activities.
✓
Defined IT security policies and implementation of top-tier
security products including firewalls and antivirus.
✓
Use of VPN networks and Two-Factor Authentication on any
external device accessing the internal network.
✓
Independent penetration testing conducted annually.
✓
Annual testing of business continuity plan.
✓
Cyber security incident response plan tested annually.
✓
Regular cyber training provided to staff with completion
statistics monitored and results provided to the ITRC.
Distribution
The risk that the Group's distribution strategy is ineffective or
that it is poorly executed.
✓
The distribution strategy is reviewed and approved by the
Board annually.
✓
Ongoing review and monitoring of the distribution strategy by
senior executives.
✓
Committed to attracting and retaining skilled distribution
specialists with global experience and reach.
✓
Board oversight and reporting.
People
The Group’s success is dependent on attracting and retaining
talent. Loss of key investment management and other
personnel could adversely impact financial performance and
business growth.
This risk is elevated by changes in employee working
operating model expectations, wage inflation and the
competitive environment for talent globally in the disciplines
in which the Group recruits.
There is also a risk of concentration whereby a material
proportion of the Group's revenue is delivered by a
few strategies which creates reliance on a few key
investment personnel.
✓
Competitive remuneration structures to attract, motivate and
retain talent.
✓
Brand and business diversification.
✓
Ongoing succession planning process to attract, develop and
retain talent for sustainable growth.
✓
Employee engagement surveys to support retention.
✓
Training, development and well-being programs.
✓
Maintenance of a strong reputation and culture which
promotes an attractive and safe workplace.
✓
Short-term and long-term incentive plans currently
being developed.
✓
Flexible work policies and hybrid work model.
✓
Work Health & Safety Policy which considers both physical and
psychological health of employees.
Magellan Financial Group Ltd | Annual Report 2024
Page 19
Directors’ Report
For the year ended 30 June 2024
Material risk description
Mitigations employed
Behaviour and conduct
The risk of inappropriate, unethical or unlawful behaviour by
employees which is not aligned to the Group's core values.
This includes the risk of the Board and senior management
failing to set an appropriate cultural 'tone from the top'
which may result in the delivery of detrimental or suboptimal
outcomes for clients and shareholders.
✓
Clearly defined Code of Ethics outlining the expected behaviour
of employees.
✓
Code of Ethics training at induction and annually.
✓
Compensation structures that incentivise staff to behave in
ways consistent with the Code of Ethics and risk culture
outlined in the Risk Management Framework.
✓
The Group maintains Whistle-blowing and Human Resources
policies which specifically relate to conduct and behaviour.
✓
Employee compliance with the Group's policies and procedures
is included in the performance assessment process.
✓
Employee engagement surveys.
Outsourcing
The Group's operating model places high reliance on the
availability and reliability of third-party software, hardware
and information technology, including data centres and
communication systems. Failure or disruption may impact
on the execution of critical business processes affecting
the Group's ability to service its clients and shareholders.
Incidents could result in financial penalties, client loss,
missed business critical deadlines and increased costs.
✓
Established Outsourcing Policy defining the requirements
for the appointment and ongoing monitoring of outsourced
service providers.
✓
Due diligence review of material service providers ahead of
appointment, including an assessment of business continuity.
✓
Legal contracts in place with material service providers.
✓
Reliance on independent audits of the internal controls of
material service providers.
Legal and regulatory compliance
The Group is impacted by numerous laws and regulations,
including corporate, privacy, sanctions, employment, tax and
financial reporting.
There is a risk the Group's activities may have contravened
laws or regulations in one or more jurisdictions. This could
result in financial loss and reputational damage.
There is also a risk that changes to laws and regulations
are not effectively responded to impacting strategy, business
performance and future compliance costs.
✓
Defined Compliance Framework with documented policies.
✓
Risk and compliance monitoring protocols and processes.
✓
Induction and periodic refresher training on compliance
policies to applicable teams.
✓
Experienced and appropriate level of legal, risk and compliance
and tax resources to manage obligations.
✓
Monthly or quarterly compliance attestations to the Chief
Compliance Officer from team managers.
✓
Incident and Breach Management Policy.
✓
Risk & Compliance team review of incidents and breaches to
assess control breakdowns and improvements.
✓
External audits of key processes and procedures.
✓
Risk & Compliance and Legal teams use a variety of information
sources to stay abreast of legal obligations (e.g. subscriptions
to legal commentary and research services, news alerts from
professional services firms and ASIC and attendance at law
firms' briefings).
✓
Regulatory tracker presented and discussed at the Group's
Board and Risk & Compliance Committee meetings.
Investment and performance
The risk that there is a material deviation from the
investment process or that poor performance of the equity
markets and/or the funds adversely impacts the Group (e.g.
due to factors such as economic conditions, government
regulations, market sentiment, political events) leading to a
✓
An established, well-defined and documented investment
process supported by a compliance and risk framework.
✓
Governance and reporting frameworks to oversee the
investment process and related outcomes.
✓
The application of portfolio risk controls applied to manage
market risk.
Magellan Financial Group Ltd | Annual Report 2024
Page 20
Directors’ Report
For the year ended 30 June 2024
Material risk description
Mitigations employed
loss of funds under management or an inability to attract
new clients.
✓
Oversight by the Group's Boards and Committees.
Financial risks
Proprietary investments
The risk that the Group's proprietary investments are
significantly concentrated in any fund and lack diversification
compounding the financial impacts on the Group of poor
performance of any funds.
✓
A capital management plan is reviewed periodically by
the Board.
✓
Ongoing monitoring and reporting of the performance of the
proprietary investments by senior executives.
Financial and treasury
The Group is exposed to a variety of financial risks including
counterparty credit, foreign exchange and liquidity.
There is a risk that the Group fails to maintain appropriate
regulatory capital and is unable to meet contractual,
payment or redemption obligations.
There is also a risk of error in financial reporting due to
inadequate or ineffective financial processes and controls.
✓
Budgeting, performance monitoring and Board
reporting process.
✓
Monitoring of regulatory capital requirements per
Magellan Asset Management Limited's Australian Financial
Services Licence.
✓
Regular review and approval of cash flow forecasts.
✓
Quarterly or semi-annual liquidity testing and annual stress
testing for Magellan Funds with results reported to the Board.
✓
Ongoing oversight of investment in associates through Board
representation and receipt of financial information from equity
accounted investments.
✓
Annual impairment testing of the Group's non-financial assets.
✓
Early engagement and consultation with external auditors on
significant transactions and key accounting policies.
✓
Refer to note 22 of the Financial Statements for more detail on
how the Group manages its financial risks.
1.6. 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 2024 other than as disclosed in
this report.
1.7. 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 2024.
Funds Under Management
On 6 August 2024, the Company announced on the ASX announcements platform that its FUM was $38.4 billion as at 31 July 2024.
MGF Closed Class Conversion
On 22 July 2024, conversion of the Closed Class Units of MGF to Open Class Units, as approved by unitholders at meetings held in
June 2024, was implemented. Eligible Closed Class unitholders received 0.736 Open Class Units for every Closed Class Unit held on
the conversion record date.
MGF's transition to an open-ended structure has seen outflows of $1.2 billion as at 13 August 2024.
Magellan Financial Group Ltd | Annual Report 2024
Page 21
Directors’ Report
For the year ended 30 June 2024
Investment in Vinva
On 15 August 2024, the Group acquired a 29.5% shareholding in Vinva Holdings Limited ("Vinva"), a systematic investment
management firm founded in Australia, for cash consideration of $138,500,000. The equity interest forms part of a strategic
partnership under which the Group will distribute Vinva's systematic equity products globally and to retail and certain wholesale clients
in Australia.
1.8. 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 46.
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 2024.
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.
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.
1.9. 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.
Magellan Financial Group Ltd | Annual Report 2024
Page 22
Directors’ Report
For the year ended 30 June 2024
2. Directors and Officers
The Directors of the Company during the year and up to the date of this report were:
Appointed
Resigned
Andrew Formica
Executive Chairman1
26 July 2023
-
Hamish McLennan
Deputy Chairman, Independent Non-Executive Director2
1 March 2016
-
David Dixon
Independent Non-Executive Director
15 December 2022
-
John Eales AM
Independent Non-Executive Director
1 July 2017
-
Cathy Kovacs
Independent Non-Executive Director
6 November 2023
-
Deborah Page AM
Independent Non-Executive Director
3 October 2023
-
Robert Fraser3
Independent Non-Executive Director
23 April 2014
18 August 2023
Colette Garnsey OAM
Independent Non-Executive Director
30 November 2020
8 November 2023
David George
Chief Executive Officer
19 July 2022
24 October 2023
1 Mr Formica was appointed Chairman with effect from 18 August 2023 and subsequently appointed Executive Chairman with effect from
25 October 2023.
2 During the period ended 30 June 2024, Mr McLennan served as Chairman from 1 July 2023 through 17 August 2023. He was subsequently appointed
Deputy Chairman with effect from 25 October 2023.
3 Mr Fraser continues to act as Chairman of MAM, the Group's principal operating subsidiary.
Secretary
Marcia Venegas has been Company Secretary since 2019.
Information on Directors and Officers
Andrew Formica
Executive Chairman
Andrew 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.
Hamish McLennan
Deputy Chairman 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, and Chairman of ARN Media (formerly HT&E
Limited, appointed October 2018), an Australian media and entertainment company. 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).
Hamish was previously Chairman of Rugby Australia (June 2020 to November 2023), 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.
Magellan Financial Group Ltd | Annual Report 2024
Page 23
Directors’ Report
For the year ended 30 June 2024
David Dixon
Independent Non-Executive Director
Committees: Member of the Audit & Risk Committee and the Remuneration & Nominations Committee
David 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) and FUJIFILM Data Management Solutions Pty Ltd. He continues to serve as a consultant to some Australian and
international companies. John has authored books, is the Chair of the World Rugby Hall of Fame and was on the Rugby Australia Bid
Advisory Committee for the Rugby World Cup 2027.
John 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. He holds a Bachelor of Arts from the University of Queensland and is a
graduate of the Australian Institute of Company Directors.
Cathy Kovacs
Independent Non-Executive Director
Committees: Member of the Audit & Risk Committee and the Remuneration & Nominations Committee
Cathy is an experienced company director and financial services professional, currently serving on the boards of ASX listed, private and
not for profit companies. She is a Non-Executive Director of wealth tech HUB24 (appointed July 2021), international payments provider
OFX (appointed February 2021), Universities Admission Centre (UAC) for ACT and NSW, and lendtech Grapple Holdings Limited.
Cathy has 30 years' broad experience across the financial services sector including senior leadership roles at BT Investment Bank,
Macquarie Group, Ellerston Capital and Westpac Banking Group. In her last executive role she was responsible for driving Westpac's
strategic initiatives towards the future of financial services and managing a portfolio of investments in early stage innovative and
disruptive fintech businesses.
She holds a Bachelor of Commerce from UNSW, a Masters of Applied Finance from Macquarie University, is a graduate and Member
of the Australian Institute of Company Directors, and is a Member of the Association of Superannuation Funds Australia.
Magellan Financial Group Ltd | Annual Report 2024
Page 24
Directors’ Report
For the year ended 30 June 2024
Deborah Page AM
Independent Non-Executive Director
Committees: Chair of the Audit & Risk Committee and member of the Remuneration & Nominations Committee
Deborah is an experienced chair and company director with broad industry experience spanning various ASX listed, private, public
sector and regulated entities including in the funds management, property, utilities, insurance, technology and renewables sectors.
She is currently a Non-Executive Director of Brickworks Limited (appointed July 2014), Growthpoint Properties Australia Limited
(appointed March 2021) and The Star Entertainment Group Limited (appointed March 2023). She was previously Non-Executive
Director of Pendal Group Limited (April 2014 to January 2023 and Chairman from January 2022), Investa Listed Funds Management
Limited (the responsible entity of ASX Listed Investa Office Fund), Service Stream Limited (September 2010 to April 2023), GBST
Holdings Limited, Australian Renewable Fuels Limited and Investa Property Group. She was also formerly Non-Executive Director of
The Colonial Mutual Life Assurance Society Limited and Commonwealth Insurance Limited.
Deborah is a Chartered Accountant with dual audit partner and CFO experience during her executive career, and she brings extensive
governance, Board and Audit Committee Chair experience as well as corporate finance, accounting, audit, mergers and acquisitions,
capital markets, insurance and joint venture arrangements.
Deborah has been a professional director since 2001, holds a degree in Economics from the University of Sydney and is a Fellow of
Chartered Accountants Australia and New Zealand and the Australian Institute of Company Directors. She is also a Member of the
Takeovers Panel and Chief Executive Women. In 2006, she was made a Member of the Order of Australia for services to public health,
business and the accounting profession.
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 Directors
Robert Fraser
Robert is a company director and corporate adviser with over 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 FFI Holdings Limited
(since October 2011), MFF Capital Investments Limited (since May 2019) and Supply Network Limited (since April 2024). He was
previously Non-Executive Director (April 2014 to August 2023) and Deputy Chairman (February 2022 to August 2023) of Magellan
Financial Group Ltd and, between April 2014 and August 2023, Chairman of its Audit & Risk Committee and a member of its
Remuneration & Nominations Committee. He is the President of the Muscular Dystrophy Association of New South Wales.
Robert has 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.
Colette Garnsey OAM
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) and Seven West Media Limited (since December 2018).
Colette was previously a Non-Executive Director of Magellan Financial Group Ltd (November 2020 to November 2023), as well as a
member of its Audit & Risk Committee and its Remuneration & Nominations Committee.
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, Australian Government Innovation
Magellan Financial Group Ltd | Annual Report 2024
Page 25
Directors’ Report
For the year ended 30 June 2024
Council, Federal Trade and Investment Ministers, Australian Fashion Week and the Melbourne Fashion Festival. She holds an Executive
MBA from the Graduate School of Business at Stanford University.
David George
David was previously Managing Director and Chief Executive Officer (19 July 2022 to 24 October 2023) and Chief Investment Officer
(17 October 2022 to 17 August 2023) of Magellan Financial Group Ltd. Prior to that, he spent 14 years at the Future Fund (Australia’s
Sovereign Wealth Fund) and 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.
Directors' Meetings
The number of meetings of the Board and Board Committees held during the year ended 30 June 2024 and the number of those
meetings attended by each Director are set out below:
Board
Audit & Risk Committee
Remuneration &
Nominations Committee
Held1
Attended
Held1
Attended
Held1
Attended
Andrew Formica2
16
16
4
4
4
4
Hamish McLennan
18
18
10
10
10
10
David Dixon
18
18
10
10
10
10
John Eales
18
17
10
10
10
10
Cathy Kovacs
11
11
6
6
6
6
Deborah Page
12
12
6
6
8
8
Robert Fraser
5
5
2
2
1
1
Colette Garnsey
8
8
4
4
4
4
David George
7
6
-
-
-
-
1 The number of meetings held during the time the Director was a member of the Board or of the relevant Committee.
2 Mr Formica was a member of the Audit & Risk and the Remuneration & Nominations committees from 26 July 2023 to 24 October 2023. Upon his
appointment to Executive Chairman he was required by the charters of both committees to cease membership.
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 Ltd | Annual Report 2024
Page 26
Directors’ Report
For the year ended 30 June 2024
3. 2024 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 2024. 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 2024 financial year has been a period focused on restoring stability within our business, to enable our investment teams and
operational functions to deliver excellence to our clients. A key part of this has been implementing new transitional leadership
arrangements across the business, resolving the Employee Share Purchase Plan ("SPP") loans held by our employees, and re-designing
and implementing a new remuneration framework for our executives and employees that is aligned to shareholders. Whilst the
financial year ended 30 June 2024 continued to present challenges for the Group, our shareholders and our people, we are pleased
with the progress made. In outlining the changes to the remuneration framework, it is helpful to understand that the Board considered
it important to prioritise the resolution of historical concerns, such as the SPP, before we could cleanly look forward to the future. Some
of these changes have occurred in this financial year and others are proposed for the 2025 financial year.
Over the course of the year, we have addressed the following:
•
Completion of Board renewal. In July 2023, Mr Andrew Formica joined as a Non-Executive Director and was subsequently
appointed Chairman on 18 August 2023. Mrs Deborah Page AM and Ms Catherine Kovacs joined as Non-Executive Directors in
October and November 2023, respectively. The new Board members have brought a wealth of funds management and broad
industry experience, and the Board renewal process is now complete as four of the six Board members joined the Board in the
last two years. Mr Hamish McLennan will retire from the Board of Magellan Financial Group Ltd at the 2024 AGM following the
completion of the renewal process and after nearly nine years of service to the Company.
•
Interim leadership. Following the announcement of Mr David George's departure in October 2023, the Board considered it was
imperative to provide stability and leadership to the business and was pleased Mr Andrew Formica assumed the role of Executive
Chair, while we undertook a search for a new Chief Executive Officer. Mr Formica is an experienced leader with over 30 years’
experience in funds management, 14 of which were in the Chief Executive capacity, and the Board was pleased he agreed to
step in to provide that stability during the period for our business, clients and employees. Mr Formica's appointment to Executive
Chair was not intended to be a long-term solution. Mr Formica delivered a number of key strategic initiatives this year including
the resolution of the SPP loan arrangement for current employees, purchase of Magellan Global Fund Closed Class Options and
the conversion of the Magellan Global Fund Closed Class into the Open Class. In addition, he led the appointment of Ms Sophia
Rahmani as Managing Director – Magellan Asset Management.
•
Future leadership. Ms Sophia Rahmani commenced in May 2024 as Managing Director – Magellan Asset Management, the
Group's main operating business. It is the intention of the Board to appoint Ms Rahmani as CEO within 12 months of her
commencement, at which time Mr Formica would revert to Non-Executive Chairman of MFG. With over 20 years’ experience in
financial services that involved leading and growing asset management businesses both in Australia and globally, Ms Rahmani
brings a wealth of experience to the Group. To maintain the stability that Mr Formica has bought to the business, the Board
considered it was appropriate to have a period of time where the business would have both Mr Formica and Ms Rahmani in their
respective executive leadership roles. We have been incredibly pleased with how Mr Formica and Ms Rahmani have collaborated
in their respective leadership roles.
•
Resolved historical concerns regarding SPP loans. SPP loans have continued to be a source of tension for employees. The
Board considered it was imperative to resolve the matter for current employees before focusing on changes in the remuneration
structure, including employee incentive plans. In October 2023, an additional retention program was announced that provided
relevant current employees with retention bonuses which, when paid, would assist with the settlement of outstanding SPP
loan balances. These retention arrangements provided by the Group mean that the outstanding SPP loans will be fully repaid
in September 2025 for the vast majority of current employees. The retention arrangements announced in October 2023 are
conditional on employees remaining employed at September 2025 and were very well received by employees.
Magellan Financial Group Ltd | Annual Report 2024
Page 27
Directors’ Report
For the year ended 30 June 2024
Investing in our future
Following engagement with proxy advisers and investors, we understand that concerns relating to Executive remuneration and the
variable remuneration framework were the overarching contributors to receiving a ‘first strike’ on our 2023 Remuneration Report
with 58.19% of votes cast against the Report. The Board understands shareholders' concerns related to strengthening variable
remuneration linkage in line with individual and collective performance across the Group and during the year we conducted an
extensive review of our remuneration framework.
The review resulted in the following key changes to remuneration arrangements to be effective from the 2025 financial year for
Executive KMP (excluding the Executive Chair who does not participant in variable remuneration):
•
A Long-Term Incentive Plan ("LTI") will be introduced for Executive KMP and other key executives. The LTI will be
delivered in performance rights and will be tested over a three-year period against a relative total shareholder return ("rTSR")
measure based on a comparator group of asset and funds management companies that are listed on the ASX;
•
Deferral under our Short-Term Incentive Plan ("STI") will be increase from 35% to 50% for Executive KMP.
Deferral will also be delivered in restricted equity (rather than cash which is the current arrangement) to be released in equal
instalments annually over a two-year period. The intention is to increase this to three years from the 2026 financial year; and
•
Improved metrics in respect of our STI measures will be introduced. Specific financial (50%) and non-financial (50%)
measures including People and Culture, Clients, Growth and Risk, Regulatory Management and ESG will be in place for the FY25
STI for Executive KMP, aligned with our strategy. All measures will be aligned with our strategy and values and disclosed in the
2025 Remuneration Report.
In addition, we will provide a one-off grant of equity to employees (excluding Executive KMP) and have introduced an equity matching
plan where all eligible employees may purchase MFG shares and receive a bonus match of MFG shares at the end of two years,
provided they remain employed and hold the shares purchased. The Board believes it remains important to ensure employees are
aligned to shareholders by being owners of the business and are aware that many employees divested some or all of their MFG shares
to partly settle their outstanding SPP loan balance.
2024 Performance and Remuneration Outcomes
With a period of continued change and the importance of stability for our clients and shareholders, the Board has focused on
recognising the efforts of our employees. We have also worked hard to ensure that remuneration outcomes for the 2024 financial year
are reflective of performance, the effort of the individual employee and the future of the business. It remains important to maintain
stable and motivated employees and an executive team focused on delivering our long-term strategy.
Fixed remuneration
After a detailed review of external market data, fixed remuneration for Executive KMP for the upcoming year has been adjusted slightly
to reflect the market. Across the Group, increases to fixed remuneration for the 2025 financial year were modest and determined with
reference to external market data. When Ms Rahmani is appointed as Chief Executive Officer of Magellan Financial Group, the Board
will review her remuneration package at that point in time.
Variable remuneration
For the year ended 30 June 2024, neither Mr Formica nor Ms Rahmani was eligible to receive variable remuneration. The remaining
Executive KMP were awarded performance-based variable incentives of between 68% and 87% of their fixed remuneration. This
reflects the 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 remains committed to ensuring the remuneration strategy reflects good governance and supports both the Group's strategic
priorities and shareholder alignment in the short, medium and long-term. The detailed work undertaken this year on the remuneration
framework, and in particular the LTI and STI, involved consultation with key stakeholders to ensure the design drives executive
performance and sustainable shareholder value. Subject to the shareholders’ consideration of the Employee Share Plan Rules at
the MFG AGM in October 2024, the LTI is anticipated to apply to the 2025 financial year onwards. We believe the changes in the
remuneration framework will enhance our performance assessment approach through clarity and appropriate alignment of targets
whilst strengthening variable remuneration linkage in-line with individual and collective performance across the Group.
Magellan Financial Group Ltd | Annual Report 2024
Page 28
Directors’ Report
For the year ended 30 June 2024
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 Ltd | Annual Report 2024
Page 29
Directors’ Report
For the year ended 30 June 2024
3.1. Response to feedback provided on the FY23 Remuneration Report
FY25 executive remuneration changes
At the 2023 AGM, some shareholders expressed concerns regarding the Group's remuneration arrangements, resulting in a ‘first strike’
against the adoption of the Remuneration Report for the year ended 30 June 2023 (with 58.19% votes cast against).
The Board values shareholder feedback and has, over the last year, engaged with proxy advisors and shareholders and undertaken
an extensive review of our remuneration structure with an aim to meet external expectations as well as achieves our strategic goal of
becoming the home for the best investment talent which will enable us to deliver long-term value to our clients and shareholders.
Subject to shareholder approval where required, the table below outlines how key feedback areas have been incorporated into the
Group's remuneration arrangements from the 2025 financial year.
Feedback area
Response
Fixed pay level
for CEO was
above ASX-listed funds
management peers.
•
Ms Rahmani commenced as Managing Director – Magellan Asset Management Limited in May 2024.
•
Fixed remuneration (inclusion of superannuation) was set at $850,000 which is significantly less than
the fixed remuneration of the previous CEO.
•
Further benchmarking of CEO remuneration will be undertaken when setting Ms Rahmani's base salary
on appointment to CEO.
STI outcomes did not
appear to align with
financial performance or
shareholder experience
in FY23.
•
Specific financial (50% weighting) and non-financial (50% weighting) measures (including People and
Culture, Clients, Growth and Risk, Regulatory Management and ESG) will be in place for the FY25 STI
for Executive KMP, aligned with our strategy and values. These measures will be disclosed in the FY25
Remuneration Report.
•
To further align executives with shareholders over the medium to long-term, the STI deferral
percentage for Executive KMP will increase from 35% to 50% (vesting in 2 equal instalments annually
over 2 years) and will be delivered in MFG restricted equity (previously cash). The intention is to
increase the vesting period to 3 years from FY26. The Board will consider partial investment of the
deferral in Magellan Funds in the future.
Absence of an equity-
based LTI scheme
that would remunerate
senior executives
based on longer-term
company performance
and shareholder returns.
•
The Group will introduce an LTI plan in the form of performance rights. The LTI will ensure that
Executive KMP will have a key component of their remuneration tied to the long-term performance of
the Company and aligned with shareholder returns.
•
While full details will be disclosed in the 2024 Notice of Meeting:
•
A three-year performance period is considered an appropriate performance period with regards to
our strategy and market practice of our peers.
•
The performance measure will be rTSR, assessed against a group of asset and funds management
companies listed on the ASX. The vesting profile will be as follows: 50% will vest where the Group's
performance is at the 50th percentile; and 100% will vest where the Group's performance is at
or above the 75th percentile (with straight line vesting in between) and 0% will vest where the
Group's performance is below 50%.
•
The Board will retain the ability to exercise discretion should it consider that while the metrics may
have been met, the payment of some or all of the LTI would not be in the interest of shareholders.
•
Additional measures such as EPS, increase in FUM and return on capital employed ("ROCE") were
considered but it was determined they were not appropriate at this stage. We will review this in future
years to determine if a second measure should be incorporated into the LTI.
Questions on the
quantum and absence of
performance measures
for a predominantly
cash retention award for
one executive.
•
No cash retention awards were provided to Executive KMP or former Executive KMP in FY24. One
current Executive KMP and one former Executive KMP received an additional retention award to further
assist with the repayment of outstanding SPP loan balances. This is not expected to be repeated in
future years.
Magellan Financial Group Ltd | Annual Report 2024
Page 30
Directors’ Report
For the year ended 30 June 2024
Broader employee arrangements
The SPP loans have continued to be a source of tension for those employees that have a SPP loan. The Board considered it imperative
to resolve these loans for employees before focusing on new remuneration and equity plans.
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. Payments were made over the 2024 financial year in relation to
these retention arrangements. The last tranche of payments associated with these retention arrangements will be paid in September
2024. For over 50% of the employees that received these payments, the after-tax retention amount was applied directly to the
employee loans under the SPP reducing their SPP loan balance.
In February 2022, the Board suspended the SPP indefinitely as it considered it no longer met its intended purpose of employee
alignment. While the retention arrangements referred to above have been applied to the SPP loan balances, there was still 30% of
employees with loans which were in excess of the value of the underlying shares. As the loans are full recourse loans, participants are
liable to repay their loan irrespective of the performance of the Group's shares.
In October 2023, we announced an additional retention program to current employees to further assist with the repayment of
outstanding SPP loan balances. These retention arrangements involved selling either all or a portion of the underlying shares and the
retention payment covering the loan shortfall. These retention arrangements mean that for the vast majority of employees their SPP
loan balances will be closed out in September 2025. This program was well received by employees and we received strong support
from shareholders at the time.
In addition, the Board considered it important to ensure that our employees are aligned with shareholders by being owners of MFG. In
this context, in FY25, the Board has decided to:
•
provide a one-off grant of $5,000 worth of equity to all employees employed as at 1 September 2024, except for the Senior
Management Team (which includes the Executive KMP). This grant will be in the form of performance rights and will vest provided
the employee remains employed on the two-year anniversary of the grant; and
•
offer an equity matching plan. All employees will be offered the opportunity to purchase up to $10,000 worth of MFG shares, and
provided they hold the shares for two years and remain employed by the Group at the end of the period, they would receive a
1:1 match of MFG shares.
Magellan Financial Group Ltd | Annual Report 2024
Page 31
Directors’ Report
For the year ended 30 June 2024
3.2. Key Management Personnel
This Remuneration Report outlines the remuneration arrangements for the KMP of the Group for the year ended 30 June 2024. 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 2024 financial year, the KMP for the Group included the Non-Executive Directors and other Group Executives as set out below.
Term as KMP
Directors1
Andrew Formica2
Executive Chairman
From 26 July 2023
Hamish McLennan3
Deputy Chair, Independent Non-Executive Director
Full year
David Dixon
Independent Non-Executive Director
Full year
John Eales
Independent Non-Executive Director
Full year
Cathy Kovacs
Independent Non-Executive Director
From 6 November 2023
Deborah Page
Independent Non-Executive Director
From 3 October 2023
Executive KMP1
Sophia Rahmani
Managing Director - Magellan Asset Management
From 13 May 2024
Kirsten Morton
Chief Financial Officer and Chief Operating Officer
Full year
Former KMP - Directors and Executives
Robert Fraser4
Independent Non-Executive Director
Until 18 August 2023
Colette Garnsey
Independent Non-Executive Director
Until 8 November 2023
David George
Executive Director, Chief Executive Officer
Until 24 October 2023
Rebecca Smith5
Head of Strategy and Special Projects
Until 24 October 2023
Marcia Venegas6
Company Secretary, Chief Risk Officer and Chief Compliance Officer
Until 10 May 2024
1 All functional titles are as at 30 June 2024.
2 Mr Formica was appointed a Non-Executive Director with effect from 26 July 2023 and Chairman with effect from 18 August 2023. Following the
departure of Mr George, Mr Formica stepped in as Executive Chairman from 25 October 2023.
3 Mr McLennan served as Chairman from 1 July 2023 through 17 August 2023. He was subsequently appointed Deputy Chairman with effect from
25 October 2023.
4 Mr Fraser continues to chair the Board of Magellan Asset Management Limited.
5 Ms Smith ceased to be a KMP on the appointment of Mr Formica as Executive Chairman.
6 Ms Venegas ceased to be a KMP on the appointment of Ms Rahmani.
The Remuneration Report has been prepared and audited against the disclosure requirements of the Corporations Act 2001 (Cth).
3.3. Remuneration philosophy and principles
The Group strives to attract and retain the best talent to enable the successful delivery of our business strategy to deliver outcomes for
our clients and shareholders. The Group's remuneration philosophy is centred on fair compensation for performance and contribution
that achieves planned business outcomes.
The last few years have been challenging for the Group and its shareholders, and it has been considered a priority to retain key
employees for the stability that this brings to the business. Remuneration decisions have been made with the intention that we
continue to retain and incentivise key members of the team to continue their dedication and focus to better deliver to our clients
and shareholders.
Executive remuneration 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:
Magellan Financial Group Ltd | Annual Report 2024
Page 32
Directors’ Report
For the year ended 30 June 2024
Remuneration structure
For the year ended 30 June 2024, the Group's remuneration arrangements for the 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 three 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 the Group in determining annual variable remuneration.
Variable incentives are paid partly as a current year cash bonus and partly as a conditional deferred cash bonus, generally over a period
of up to three years (in equal monthly payments) for senior employees and Executive KMP, subject to continued employment.
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. Subject to a minimum threshold, variable incentives are partly paid as a cash
bonus in the current year and partly paid as a monthly conditional deferred cash bonus over a period of up to three years, subject to
the employee not having resigned. The longer deferral period applies to those in more senior positions.
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; and/or
•
A performance component 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 Ltd | Annual Report 2024
Page 33
Directors’ Report
For the year ended 30 June 2024
Remuneration oversight
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
Remuneration & Nominations Committee
Information and exchange with other
Board committees
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.
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.
Executive Chair, Managing Director & 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 Ltd | Annual Report 2024
Page 34
Directors’ Report
For the year ended 30 June 2024
3.4. Remuneration of Executive KMP
As noted above, the remuneration of the Executive KMP comprised fixed remuneration and performance-based variable remuneration
(excluding the Executive Chairman who does not participate in 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 2024.
Executive Chair remuneration structure
As noted above, Mr Formica commenced as Executive Chairman on 25 October 2023. The table below outlines Mr Formica’s
remuneration arrangements.
Component
Detail
Fixed remuneration
(including
superannuation)
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. For the 2024 financial year, Mr
Formica's fixed remuneration (inclusive of superannuation) was $1,350,000 per annum. Mr Formica is not
paid the Chairman fee whilst Executive Chair.
Variable
remuneration
Mr Formica is not eligible for any variable remuneration as Executive Chairman.
One-off payment for
incentives foregone
As outlined in the ASX announcement of Mr Formica's appointment to Executive Chairman on 25 October
2023, there were incentives that Mr Formica had from his previous employment that were potentially at risk
of lapsing if he were to accept the Executive Chairman role.
The Group has confirmed that his previous employer lapsed these incentives, therefore a one-off payment
for incentives foregone (as outlined in the ASX announcement) has/will be made as follows:
•
$715,010 was paid on 15 March 2024;
•
$574,470 will be paid in March 2025; and
•
$666,254 will be paid in March 2026.
Payments are subject to Mr Formica not having resigned, given notice of resignation or been summarily
dismissed at the relevant payment date.
Managing Director - Magellan Asset Management remuneration structure
As noted above, Ms Rahmani commenced as Managing Director - Magellan Asset Management on 13 May 2024. The table below
outlines Ms Rahmani's remuneration arrangements which were disclosed at the time of her appointment. The Remuneration and
Nominations Committee determines, and the Board approves, the performance-based variable incentive to be awarded to the
Managing Director on an annual basis with regards to the determined performance metrics.
Component
Detail
Fixed remuneration
(including
superannuation)
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 2024 financial year, Ms Rahmani's fixed remuneration (inclusive of superannuation) was
$850,000 per annum.
Given the demonstrable change in role, the Board has determined that Ms Rahmani will be eligible for a
remuneration package review (including variable remuneration and LTI Plan) upon appointment to CEO.
Variable
remuneration
There is no variable remuneration awarded to Ms Rahmani for the 2024 financial year.
From the 2025 financial year, Ms Rahmani is eligible to receive a performance-based variable incentive of
up to 100% of fixed remuneration based on the performance metrics agreed between the Board and Ms
Rahmani. These performance metrics will be disclosed in the 2025 Remuneration Report.
Long-Term
Incentive Plan
From the 2025 financial year, Ms Rahmani is eligible to receive a long-term incentive of up to 100% of
fixed remuneration under the proposed LTI based on the performance metrics outlined earlier in this
report. Further detail on these performance metrics will be disclosed in the 2025 Remuneration Report.
One-off payment for
incentives foregone
As outlined in the ASX announcement of Ms Rahmani's appointment on 15 February 2024, in recognition
of the bonus and other incentives that she was forfeiting from her current employer for the 2024 financial
year, Ms Rahmani has/will receive a cash award as follows:
•
$350,000 was paid on 15 May 2024; and
Magellan Financial Group Ltd | Annual Report 2024
Page 35
Directors’ Report
For the year ended 30 June 2024
Component
Detail
•
$350,000 is payable in November 2024, which will be the six-month anniversary of Ms Rahmani’s
commencement with the Group, subject to her remaining employed at that date.
To further compensate Ms Rahmani for the loss of incentive opportunities from her former employer, she
will also receive an issuance of MFG shares to the total value of $2,500,000, subject to shareholder approval
(the "Forfeited Award Bonus"). The number of MFG shares awarded will be 285,388, which was determined
by dividing the award by the 5-day volume-weighted average price ("VWAP") immediately preceding
her commencement on 13 May 2024. Given the timing of the approval of the award by shareholders,
shareholder approval will also be sought for an additional issue of shares as compensation for the FY24 full
year dividend that she will have forgone.
The vesting schedule of the Forfeited Award Bonus mirrors that of the equity that Ms Rahmani forfeited from
her previous employer. It will vest on 31 December 2026. The Forfeited Award Bonus vesting is conditional
on Ms Rahmani:
•
not having ceased to be employed on or before 31 December 2025 due to her resignation; and
•
not having ceased to be employed on or before 31 December 2025 in circumstances where she has
been terminated for cause.
Remuneration structure for other Executive KMP
The below table outlines remuneration arrangements for the remaining Executive KMP for the 2024 financial year. As noted in section
3.1, a formal LTI plan and greater rigour around STI measures will be introduced from the 2025 financial year.
Component
Detail
Fixed remuneration
(including
superannuation)
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
at least annually and is benchmarked against external market data.
Total fixed remuneration
(annualised)
Kirsten Morton
$526,000
David George (former)
$1,800,000
Rebecca Smith (former)
$500,000
Marcia Venegas (former)
$469,000
Variable
remuneration (STI)
When considering variable remuneration, the Board's primary objective is shareholder outcomes and this
is achieved where Executive 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 Executive Chairman makes recommendations to the Remuneration and Nominations Committee on the
amount of variable incentive to be paid to other Executive 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 Executive 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
monthly instalments).
As noted above, from FY25, specific financial and non-financial measures will be in place for the STI for
Executive KMP, aligned with our strategy and values, with an increased deferral percentage and deferral in
shares. A formal LTI plan will also be introduced.
The Group may require Executive KMP to act as a Director of a subsidiary or associate of the Group for no additional remuneration.
Magellan Financial Group Ltd | Annual Report 2024
Page 36
Directors’ Report
For the year ended 30 June 2024
3.5. Summary of 2024 variable remuneration outcomes
The financial performance of the Group is a significant contributor to the performance-based variable remuneration outcomes for the
Executive KMP. While there have continued to be challenges in the past 12 months with $5.9bn in FUM outflows over the course of
the financial year, this outflow has slowed from the prior year with FUM closing at $36.6bn. The FUM outflow has had an impact on
the revenue for the Group over the last few years but we have seen a relative stabilisation of the financial performance in the past 12
months with Group adjusted net profit after tax ("NPAT") up 2% and performance fees up 67% on prior year.
With the reduction in FUM, a key focus of Executive KMP has been strong management of the expenses of the business and these
were down 16% from the prior year. The Group's financial performance, specifically the strong management of expenses has been
reflected in the variable remuneration outcome (as a % of fixed remuneration) below. A 5-year overview of financial performance is
contained in section 3.9.
Executive KMP
Variable
remuneration
outcome (%
of fixed
remuneration)
Comments
Kirsten Morton
$460,000
(87%)
•
Delivered FY24 FM expenses within market guidance at $102.4m and adjusted NPAT
of $177.9m, up 2% on prior year by maintaining cost discipline of controllable costs
across Group.
•
Whilst no systemic risk issues or events, evolved technology infrastructure to ensure
ongoing robustness and uplifted cybersecurity program.
•
In conjunction with the Group's distribution team, completed the build out of the client
service support model and client service strategies, with a focus on retail clients.
•
Maintained high quality and operationally efficient control functions that support the
business with delivery of long-term solutions over tactical fixes.
Rebecca Smith
(former)
$132,000
(85%)
•
Led the strategy and resolution of MGF Closed Class activism and purchase of associated
options including significant engagement with stakeholders.
•
Led significant strategic analysis for the Board and management.
•
Led review and analysis of corporate development opportunities in line with the
Company's strategy to add talent and teams to platform.
•
Introduced a program of increased and systematic proactive shareholder and wider
stakeholder engagement.
•
Significant contribution to US leadership transition.
•
Led and executed an active media strategy to reduce press coverage.
Marcia Venegas
(former)
$276,000
(68%)
•
Evolved risk framework to manage ESG risks.
•
Continued to strengthen the regulatory reporting framework to better manage
regulatory requirements and associated controls.
•
Proactive regulatory engagement ensuring transparency and well managed outcomes.
•
Continued commitment to risk culture across all activities and roles.
Components of 2024 performance-based variable remuneration
The table below provides a summary of variable remuneration outcomes for Executive KMP for the years ended 30 June 2024 and
30 June 2023. 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 3.7.
Magellan Financial Group Ltd | Annual Report 2024
Page 37
Directors’ Report
For the year ended 30 June 2024
Performance-based
Retention
Cash
bonus
$'0001
Conditional
deferred
cash bonus
$'0002
Total
performance-
based
remuneration
awarded
$'000
Fixed
remuneration
(incl. super)
$'000
Performance-
based
remuneration
as % of fixed
remuneration
%
Cash
incentive
$'0003
Equity
$'0004
Executive Director
Andrew Formica
2024
-
-
-
925
-
1,956
-
Executive KMP
Kirsten Morton5
2024
325
135
460
526
87%
50
-
2023
341
144
485
578
84%
120
-
Sophia Rahmani6
2024
-
-
-
117
-
-
2,378
Former KMP
David George7
2024
-
-
-
900
-
-
(365)
2023
694
333
1,027
1,712
60%
-
365
Rebecca Smith8
2024
94
38
132
156
85%
(1,300)9
-
2023
331
138
469
469
100%
2,350
228
Marcia Venegas10
2024
202
74
276
404
68%
193
-
2023
270
105
375
469
80%
-
-
Total KMP11
2024
621
247
868
3,028
899
2,013
2023
1,636
720
2,356
3,228
2,470
593
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 The retention incentive awarded to Mr Formica during the year ended 30 June 2024 replaces the awards from his former employer that were
forfeited. Incentives disclosed for Group Executives reflect awards under a broader employee retention program that will be delivered in cash
subject to satisfactory performance and employment conditions. Where Group Executives 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 The retention incentive awarded to Ms Rahmani during the year ended 30 June 2024 will be settled in MFG shares subject to shareholder approval
at the AGM in October 2024. Amounts disclosed for the year ended 30 June 2023 reflect Employee Share Options awarded to Executive KMP that
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 Ms Morton's fixed remuneration for the 2023 year reflects her dual role as Interim CEO and Chief Financial Officer until 18 July 2022.
6 Ms Rahmani's fixed remuneration for the 2024 year reflects the period from 13 May 2024 to 30 June 2024.
7 Mr George's fixed remuneration for the 2024 year reflects the period from 1 July 2023 to 24 October 2023.
8 Ms Smith's fixed remuneration for the 2024 year reflects the period from 1 July 2023 to 24 October 2023.
9 During the year ended 30 June 2024, Ms Smith voluntarily waived her right to a portion of the unvested cash retention incentives granted to her in
the previous year.
10 Ms Venegas' fixed remuneration for the 2024 reflects the period from 1 July 2023 to 10 May 2024.
11 Comparative information does not include details of remuneration related to the year ended 30 June 2023 for persons who ceased to be KMP in the
2023 year.
Magellan Financial Group Ltd | Annual Report 2024
Page 38
Directors’ Report
For the year ended 30 June 2024
3.6. 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
Details
Market competitive
•
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
Group's 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.
Independence and impartiality
•
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.
Shareholder alignment
•
Non-Executive Directors are encouraged to have equity ownership in line with their personal
circumstances, to ensure alignment with shareholders.
Fee pool
Non-Executive Directors are paid from an aggregate annual fee pool which is $1,750,000 (June 2023: $1,750,000), as approved by
the shareholders in December 2022.
Fee schedule
The table below sets out the fees (inclusive of superannuation) of the Non-Executive Directors of the Group as at 30 June 2024 and
30 June 2023.
Position
30 June 2024
$'000
30 June 2023
$'000
MFG Board (Group)
Chair
290
290
Deputy Chair1
160
-
Member
120
120
MFG Audit & Risk Committee
Chair
40
40
Member
20
20
MFG Remunerations & Nominations Committee
Chair
40
40
Member
20
20
MAM Board
Chair
220
150
Member
60
60
1 Deputy Chair fee applied whilst Mr Formica assumes the role of Executive Chairman given this role is the lead Independent Non-Executive Director.
The Group has reimbursed or borne expenses incurred by the Non-Executive Directors in the discharge of their duties of $2,000 (June
2023: $3,000).
Magellan Financial Group Ltd | Annual Report 2024
Page 39
Directors’ Report
For the year ended 30 June 2024
3.7. Details of Remuneration
The total amount paid or payable to KMP of the Group is detailed below:
Short-term benefits
Long-term benefits
Salary
$'000
Cash
bonus
'0001
Retention
benefit
$'000
Superan-
nuation
$'000
Termination
benefits
$'000
Total
cash
remuneration
$'0002
Leave
benefits
$'0003
Retention
incentives
$'0004
Other
benefits
$'0005
Total
statutory
remuneration
$'0006
Non-Executive Directors
David Dixon
2024
200
-
-
22
-
222
-
-
-
222
2023
120
-
-
13
-
133
-
-
-
133
John Eales
2024
216
-
-
24
-
240
-
-
19
259
2023
174
-
-
18
-
192
-
-
17
209
Andrew Formica7
2024
70
-
-
9
-
79
-
-
-
79
Cathy Kovacs
2024
130
-
-
14
-
144
-
-
-
144
Hamish McLennan
2024
238
-
-
26
-
264
-
-
648
328
2023
260
-
-
23
-
283
-
-
10
293
Deborah Page
2024
162
-
-
18
-
180
-
-
-
180
Executive Director
Andrew Formica7
2024
905
-
-
20
-
925
-
1,190
139
2,128
Executive KMP
Kirsten Morton
2024
499
553
-
27
-
1,079
4
179
13
1,275
2023
553
692
120
25
-
1,390
34
287
2810
1,739
Sophia Rahmani
2024
113
-
-
4
-
117
10
195
70011
1,022
Former KMP
Robert Fraser12
2024
43
-
-
-
-
43
-
-
-
43
2023
270
-
-
-
-
270
-
-
-
270
Colette Garnsey13
2024
71
-
-
8
-13
79
-
-
9913
178
2023
161
-
-
17
-
178
-
-
13
191
David George14
2024
886
-
-
14
82015
1,720
45
(199)
-
1,566
2023
1,687
833
-
25
-
2,545
85
199
60016
3,429
Rebecca Smith17
2024
147
115
-
9
-
271
12
(340)
-
(57)
2023
445
354
400
25
-
1,224
34
1,111
-
2,369
Marcia Venegas18
2024
380
326
-
24
-
730
21
149
16
916
2023
444
455
-
25
-
924
(3)
179
5
1,105
Karen Phin
2023
37
-
-
4
-
41
-
-
-
41
Craig Wright
2023
148
27
-
13
432
620
(9)
(18)
94
687
Total KMP
2024
4,060
994
-
219
820
6,093
92
1,174
924
8,283
2023
4,299
2,361
520
188
432
7,800
141
1,758
767
10,466
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 earned in the financial year.
2 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.
3 Comprises annual leave and long service leave entitlements accrued and not taken during the year.
4 Represents the portion of the retention incentives accrued as an employee expense during the financial year. Included in the amount for Ms Morton,
Ms Rahmani, Ms Smith and Ms Venegas is share-based payment expense of $47,000, $195,000, $36,000 and $40,000, respectively.
5 Unless otherwise noted, represents the non-cash cost of providing interest-free loans to Participants in the SPP.
6 No non-monetary benefits or other short-term benefits not otherwise disclosed above were paid during the years presented.
7 Mr Formica's 2024 remuneration reflects his role as a Non-Executive Director from 18 July 2023 to 24 October and as Executive Director from
25 October 2023 to 30 June 2024.
8 Mr McLennan repaid his SPP loan in full during the period. At termination of his loan the remaining balance of unrecognised interest was $53,000
and has been included in his other benefits in the 2024 year.
9 Reflects Mr Formica's non-monetary benefits in respect of external legal advice.
10 Includes Ms Morton's $25,000 "10 Year Service" award.
11 Reflects Ms Rahmani's cash signing bonus.
12 Mr Fraser's 2024 remuneration reflects the period from 1 July 2023 to 18 August 2023.
13 Ms Garnsey's 2024 remuneration reflects the period from 1 July 2023 to 8 November 2023. Upon her retirement from the board, the remaining
balance of unrecognised interest on her SPP loan was $95,000 which has been included in other benefits. Not included above is a non-cash
termination benefit valued at $129,000 representing an extension of the period within which Ms Garnsey must repay her outstanding SPP loan.
14 Mr George's 2024 remuneration reflects the period from 1 July 2023 to 24 October 2023.
15 Includes non-monetary benefits of $3,000 relating to external legal advice.
16 Reflects Mr George's cash signing bonus.
17 Ms Smith's 2024 remuneration reflects the period from 1 July 2023 to 24 October 2023.
18 Ms Venegas' 2024 remuneration reflects the period from 1 July 2023 to 10 May 2024.
Magellan Financial Group Ltd | Annual Report 2024
Page 40
Directors’ Report
For the year ended 30 June 2024
3.8. Governance
Use of remuneration consultants
The Committee engages external remuneration advisors from time to time to conduct benchmarking and advise on regulatory and
market developments. To ensure independence and avoid conflicts of interest, a remuneration advisor is directly engaged by the
Committee's Chair or upon their instruction and reports must be delivered directly to the Committee's Chair.
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 (Cth). During the year, no external advisor provided any remuneration
recommendations as defined by the Corporation Act 2001 (Cth)
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 2024 are
summarised below.
Element
Further detail
Duration
Ongoing
Periods of notice required
to terminate
Executive KMP may terminate the contract by giving the following notice:
•
Mr Formica and Ms Rahmani: 6 months’ written notice
•
Ms Morton: 3 months’ written notice
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.
Termination payments
Executive 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, any termination payment made to an Executive KMP would comprise any
accrued fixed compensation, including superannuation, after set-off of any loss suffered by the Group
from the acts of the Executive KMP which led to their termination, and any amounts of accrued annual
and long service leave.
On termination, any Executive 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.
Restraints
Executive KMP are subject to appropriate post-employment restraints as follows:
•
Mr Formica and Ms Rahmani: 12 months non-compete and non-solicitation
•
Ms Morton: 6 months
Former CEO termination arrangements
As noted above, the former CEO, Mr George ceased being a KMP on 24 October 2023 and concluded his employment with the Group
on 31 December 2023. The table below outlines Mr George's exit arrangements:
Component
Detail
Notice period
Mr George’s contractual notice period was 12 months. Mr George was available for part of this notice
period from 24 October 2023 to 31 December 2023 and was paid in lieu of the balance of 6 months’
notice at that time.
Short-term incentive
Mr George was not awarded an STI payment for his service for the year ended 30 June 2024.
Treatment of options
Mr George had 400,000 Employee Options under the Employee Share Option Plan. The options lapsed
under the plan rules upon his resignation on 24 October 2023.
Magellan Financial Group Ltd | Annual Report 2024
Page 41
Directors’ Report
For the year ended 30 June 2024
3.9. 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 2022
Net
additions/
(disposals)
Closing
balance
30 June 2023
Net
additions/
(disposals)
Closing
balance
30 June 2024
Non-Executive Directors
John Eales
Ordinary shares
80,854
-
80,854
-
80,854
MFG 2027 Options
10,112
-
10,112
-
10,112
Cathy Kovacs1
Ordinary shares
-
-
-
12,400
12,400
Hamish McLennan
Ordinary shares
105,248
-
105,248
(63,948)
41,300
MFG 2027 Options
13,157
-
13,157
-
13,157
Deborah Page2
Ordinary shares
-
-
-
6,200
6,200
Executive KMP
Andrew Formica3
Ordinary shares
-
-
-
40,000
40,000
Kirsten Morton
Ordinary shares
25,644
(18,896)
6,748
(6,748)
-
MFG 2027 Options
3,206
-
3,206
-
3,206
ESOP issued options4
75,000
-
75,000
-
75,000
Former KMP - Directors and Executives
Robert Fraser5
Ordinary shares
500,000
-
500,000
-
500,000
MFG 2027 Options
62,502
-
62,502
-
62,502
Colette Garnsey6
Ordinary shares
30,740
-
30,740
-
30,740
MFG 2027 Options
3,843
-
3,843
-
3,843
David George7
Ordinary shares
-
-
-
25,000
25,000
ESOP issued options4
-
-
400,000
(400,000)
-
Rebecca Smith8
ESOP issued options4
-
250,000
250,000
-
250,000
Marcia Venegas9
Ordinary shares
14,737
(4,000)
10,737
(5,367)
5,370
MFG 2027 Options
1,843
-
1,843
(682)
1,161
ESOP issued options4
75,000
-
75,000
-
75,000
1 Ms Kovacs became a Director on 6 November 2023. The 30 June 2023 balance represents the number of ordinary shares held by her and her
associates as at the date of her appointment.
2 Ms Page became a Director on 3 October 2023. The 30 June 2023 balance represents the number of ordinary shares held by her and her associates
as at the date of her appointment.
3 Mr Formica became a Director on 26 July 2023. The 30 June 2023 balance represents the number of ordinary shares held by him and his associates
as at the date of his appointment.
4 Employee Share Options are exercisable from 1 September 2024 at an exercise price of $35.00 per option, subject to continued employment with
the Group, and expire on 16 April 2027. Refer to note 18 of the financial statements for further information.
5 The 30 June 2024 balance represents the number of ordinary shares and options held by Mr Fraser and his associates as at 18 August 2023.
6 The 30 June 2024 balance represents the number of ordinary shares and options held by Ms Garnsey and her associates as at 8 November 2023.
7 The 30 June 2024 balance represents the number of ordinary shares and options held by Mr George and his associates as at 24 October 2023.
8 The 30 June 2024 balance represents the number of ordinary shares and options held by Ms Smith and her associates as at 24 October 2023.
9 The 30 June 2024 balance represents the number of ordinary shares and options held by Ms Venegas and her associates as at 10 May 2024.
Unless specified above, no other KMP held ordinary shares or options over ordinary shares in the Company.
Magellan Financial Group Ltd | Annual Report 2024
Page 42
Directors’ Report
For the year ended 30 June 2024
Relevant interests in Magellan Funds
Details of each KMPs relevant interests in registered schemes made available by the Group, are set out below:
Closing
balance
30 June 2022
Net
additions/
(disposals)1
Closing
balance
30 June 2023
Net
additions/
(disposals)1
Closing
balance
30 June 2024
Magellan Global Fund - Open Class Units
Marcia Venegas2
5,752
261
6,013
232
6,245
Magellan Global Fund - Closed Class Units
John Eales
396,396
-
396,396
-
396,396
Robert Fraser3
266,241
-
266,241
-
266,241
Hamish McLennan
118,026
-
118,026
-
118,026
Kirsten Morton
46,610
-
46,610
-
46,610
Deborah Page4
-
-
32,031
-
32,031
Marcia Venegas2
93,705
-
93,705
-
93,705
MGF Options expiring 1 March 2024
John Eales
235,377
-
235,377
(235,377)
-
Robert Fraser3
158,092
-
158,092
-
158,092
Hamish McLennan
70,083
-
70,083
(70,083)
-
Kirsten Morton
26,702
-
26,702
(26,702)
-
Marcia Venegas2
11,394
-
11,394
(11,394)
-
Magellan Core ESG Fund
David George5
-
-
-
6,000
6,000
Magellan Core Infrastructure Fund
David George5
-
-
-
15,000
15,000
Magellan Global Fund (Hedged)
Deborah Page4
-
-
12,711
-
12,711
Magellan High Conviction Trust
John Eales
231,012
8,984
239,996
3,662
243,658
Robert Fraser3
267,398
10,397
277,795
4,238
282,033
Hamish McLennan
38,452
1,495
39,947
1,169
41,116
Kirsten Morton
23,071
847
23,918
702
24,620
Marcia Venegas2
92,164
149
92,313
(92,313)
-
Magellan Infrastructure Fund (Currency Hedged)
Marcia Venegas2
3,990
163
4,153
179
4,332
Airlie Australian Share Fund
David George5
-
-
-
7,000
7,000
John Eales
16,685
-
16,685
-
16,685
1 Includes the reinvestment of June and December distributions in the years ended 30 June 2022 and 30 June 2023 respectively.
2 The 30 June 2024 balance represents the number of units held by Ms Venegas and her associates as at 10 May 2024.
3 The 30 June 2024 balance represents the number of units held by Mr Fraser and his associates as at 18 August 2023.
4 Ms Page became a Director on 3 October 2023. The 30 June 2023 balance represents the number of units held by her and her associates as at the
date of her appointment.
5 The 30 June 2024 balance represents the number of units held by Mr George and his associates as at 24 October 2023.
Unless specified above, no other KMP held units in Magellan Funds.
Magellan Financial Group Ltd | Annual Report 2024
Page 43
Directors’ Report
For the year ended 30 June 2024
Loans to KMP
The Group has made full recourse interest-free loans to Non-Executive Directors and Executive KMP in connection with shares acquired
under the Group's SPP. As at 30 June 2024, two KMP held SPP loans totalling $1,359,000 (June 2023: five KMP with SPP loans totalling
$2,347,000). 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
number
Opening
loan
balance
$'000
Loans
made
$'000
Loans
(repaid)
$'000
Closing loan balance
$'000
Face value1
Carrying value2
Directors
Hamish McLennan
2024
-
324
-
(324)
-
-
2023
-
398
-
(74)
324
262
John Eales
2024
-
481
-
(52)
429
353
2023
-
543
-
(62)
481
358
Executive KMP
Kirsten Morton
2024
-
304
-
(207)
97
95
2023
-
312
-
(8)
304
274
Former KMP
Colette Garnsey
2024
-
685
-
(28)
657
599
2023
-
718
-
(33)
685
521
Marcia Venegas
2024
-
276
-
(100)
176
170
2023
-
284
-
(8)
276
220
Craig Wright
2023
-
284
-
(7)
277
176
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 Ltd | Annual Report 2024
Page 44
Directors’ Report
For the year ended 30 June 2024
Link between performance and remuneration paid by the Group
2024
2023
2022
2021
2020
Group Results
Net profit after tax
$'000
238,759
182,655
383,011
265,156
396,214
Adjusted revenue1
$'000
345,684
379,352
647,251
699,072
692,941
Adjusted expenses1
$'000
106,851
126,774
132,082
111,339
119,751
Adjusted net profit before associates1
$'000
166,907
185,842
393,132
454,441
438,299
Adjusted net profit after tax1
$'000
177,865
174,310
399,733
412,659
438,299
Funds Management Business
Net profit before tax
$'000
177,499
223,780
482,047
556,690
558,012
Net profit before tax and performance fees
$'000
158,294
212,274
470,575
526,616
477,048
Shareholder Value
Diluted EPS
cps
131.8
100.0
206.9
144.6
218.3
Adjusted diluted EPS1
cps
98.2
95.5
216.6
225.0
241.5
Total dividends paid
cps
65.1
116.7
179.0
211.2
214.9
Closing share price (ASX code: MFG)2
$
8.42
9.49
12.92
53.86
58.01
KMP Remuneration
Total KMP remuneration:3
Fixed compensation4
$'000
4,371
4,628
6,165
6,197
6,052
Variable compensation5
$'000
3,912
5,838
7,358
4,772
5,164
8,283
10,466
13,523
10,969
11,217
Number of KMP for the year
13
11
11
11
10
Growth rates
Net profit after tax
%
31%
-52%
44%
-33%
78%
Adjusted net profit after tax
%
2%
-56%
-3%
-6%
35%
FM net profit before tax
%
-21%
-54%
-13%
0%
39%
FM net profit before tax and performance fees
%
-25%
-55%
-11%
10%
29%
Diluted EPS
%
32%
-52%
43%
-34%
75%
Adjusted diluted EPS
%
3%
-56%
-4%
-7%
33%
Total KMP remuneration
%
-21%
-23%
23%
-2%
-34%
Dividends paid
%
-44%
-35%
-15%
-2%
38%
Total KMP remuneration as % of net profit after tax
%
3%
6%
4%
4%
3%
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 3.7.
5 Variable compensation comprises cash bonuses, retention incentives, termination benefits and other benefits outlined in section 3.7.
This report is made in accordance with a resolution of the Directors.
Andrew Formica
Executive Chairman
Sydney
15 August 2024
Magellan Financial Group Ltd | Annual Report 2024
Page 45
Ernst & Young
200 George Street
Sydney NSW 2000 Australia
GPO Box 2646 Sydney NSW 2001
Tel: +61 2 9248 5555
Fax: +61 2 9248 5959
ey.com/au
Auditor’s independence declaration to the Directors of Magellan Financial
Group Limited
As lead auditor for the audit of the financial report of Magellan Financial Group Limited for the
financial year ended 30 June 2024, I declare to the best of my knowledge and belief, there have been:
a.
No contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit;
b.
No contraventions of any applicable code of professional conduct in relation to the audit; and
c.
No non-audit services provided that contravene any applicable code of professional conduct in
relation to the audit.
This declaration is in respect of Magellan Financial Group Limited and the entities it controlled during
the financial year.
Ernst & Young
Clare Sporle
Partner
15 August 2024
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
Magellan Financial Group Ltd | Annual Report 2024
Page 46
Consolidated Statement of Profit or Loss and
Comprehensive Income
For the year ended 30 June
Note
2024
$'000
2023
$'000
Revenue
Management fees
4
256,748
327,647
Performance fees
4
19,206
11,524
Services fees
4
1,200
2,600
Advisory fees
1,195
1,230
Dividend and distribution income
13,628
34,697
Interest income
18,540
13,770
Net change in the fair value of financial assets and liabilities:
Realised
38,071
(11,207)
Unrealised
29,956
50,497
Net foreign exchange gain/(loss)
82
892
Total revenue and other income
378,626
431,650
Expenses
Employee expenses
72,774
92,121
Non-Executive Director fees
1,442
1,096
Fund administration and operational costs
13,335
14,857
Information, technology and data
8,647
8,695
Marketing
1,830
1,962
Professional services fees
4,497
4,038
Travel and entertainment
1,233
1,224
Depreciation and amortisation
3,958
6,036
Net (benefit)/expense related to Magellan Global Fund options
2
(61,063)
26,575
Transaction costs related to strategic initiatives
2
-
1
Finance costs
1,035
1,503
Other expenses
3,959
5,264
Total expenses
51,647
163,372
Share of after tax profit/(loss) of associates
8
10,295
(12,453)
Net gain/(loss) on dilution of interests in associates
77
(255)
Net profit before tax
337,351
255,570
Income tax expense
5
(98,592)
(72,915)
Net profit after tax
238,759
182,655
Other comprehensive income for the year
Exchange differences on translation of foreign operations
(65)
1,289
Other comprehensive income for the year, net of tax
(65)
1,289
Total comprehensive income for the year
238,694
183,944
Basic earnings per share (cents per share)
3
131.8
100.0
Diluted earnings per share (cents per share)
3
131.8
100.0
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 Ltd | Annual Report 2024
Page 47
Consolidated Statement of Financial Position
As at 30 June
Note
2024
$'000
2023
$'000
Current assets
Cash and cash equivalents
322,567
373,445
Loans and receivables
10
58,775
58,271
Financial assets
7
1,666
1,666
Prepayments
993
982
Other assets
902
1,289
Total current assets
384,903
435,653
Non-current assets
Loans and receivables
10
23,101
26,482
Financial assets
7
404,825
420,643
Associates
8
159,958
149,587
Property, plant and equipment
455
420
Right-of-use assets
11
5,431
7,507
Intangible assets
9
107,291
108,780
Net deferred tax asset
5
-
45,843
Other assets
3,280
4,059
Total non-current assets
704,341
763,321
Total assets
1,089,244
1,198,974
Current liabilities
Payables
12
10,966
11,535
Employee benefits
13
31,148
36,090
Financial liabilities
14
-
159,855
Income tax payable
8,832
12,773
Lease liabilities
11
2,775
2,608
Total current liabilities
53,721
222,861
Non-current liabilities
Employee benefits
13
3,169
5,975
Provisions
244
72
Net deferred tax liability
5
7,750
-
Lease liabilities
11
4,831
7,564
Total non-current liabilities
15,994
13,611
Total liabilities
69,715
236,472
Net assets
1,019,529
962,502
Equity
Contributed equity
16
627,188
632,323
Reserves
17
392,210
330,697
Retained earnings
131
(518)
Total equity
1,019,529
962,502
The Consolidated Statement of Financial Position should be read in conjunction with the Notes to the Financial Statements.
Magellan Financial Group Ltd | Annual Report 2024
Page 48
Consolidated Statement of Changes in Equity
For the year ended 30 June
Note
Contributed
equity
$’000
Profits
reserve
$'000
Share-
based
payments
reserve
$'000
Foreign
currency
translation
reserve
$’000
Retained
earnings
$'000
Total
equity
$’000
Opening balance at 1 July 2023
632,323
321,037
5,129
4,531
(518)
962,502
Net profit after tax for the year
-
-
-
-
238,759
238,759
Other comprehensive income for the year
-
-
-
(65)
-
(65)
Total comprehensive income for the year
-
-
-
(65) 238,759
238,694
Shares bought back on-market and cancelled
16
(5,186)
-
-
-
-
(5,186)
Transaction costs, net of tax
16
(3)
-
-
-
-
(3)
Dividends paid
18
-
(179,864)
-
-
-
(179,864)
SPA expense
16
54
-
-
-
-
54
Share-based payment expense
19
-
-
3,332
-
-
3,332
Transfer (from retained earnings)/to
profits reserve
24
-
238,110
-
- (238,110)
-
Closing balance at 30 June 2024
627,188
379,283
8,461
4,466
131
1,019,529
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
-
-
-
-
182,655
182,655
Other comprehensive income for the year
-
-
-
1,289
-
1,289
Total comprehensive income for the year
-
-
-
1,289
182,655
183,944
Issuance of shares on exercise of MFG
2027 Options
16
6
-
-
-
-
6
Shares bought back on-market and cancelled
16
(39,487)
-
-
-
-
(39,487)
Transaction costs, net of tax
16
(27)
-
-
-
-
(27)
Dividends paid
18
-
(212,655)
-
-
-
(212,655)
SPA expense
16
115
-
-
-
-
115
Share-based payment expense
19
-
-
3,846
-
-
3,846
Transfer (from retained earnings)/to
profits reserve
24
-
220,459
-
-
(220,459)
-
Closing balance at 30 June 2023
632,323
321,037
5,129
4,531
(518)
962,502
The Consolidated Statement of Changes in Equity should be read in conjunction with the Notes to the Financial Statements.
Magellan Financial Group Ltd | Annual Report 2024
Page 49
Consolidated Statement of Cash Flows
For the year ended 30 June
Note
2024
$'000
2023
$'000
Cash flows from operating activities
Management and services fees received
284,211
376,491
Performance fees received
12,983
120
Advisory fees received
1,256
1,191
Dividends and distributions received
14,356
15,500
Interest received
15,589
11,312
Finance cost payments
(1,141)
(1,569)
Tax payments
(48,735)
(73,941)
Payments to suppliers and employees
(132,519)
(142,452)
Payments related to Magellan Global Fund options
(98,616)
(67)
Payments of transaction costs related to strategic initiatives
-
(4)
Net cash from operating activities
6
47,384
186,581
Cash flows from investing activities
Proceeds from the sale of financial assets and liabilities
84,662
34,016
Purchases of financial assets and liabilities
(2,970)
(17,414)
Purchases of property, plant and equipment
(458)
(112)
Net placements of cash on term deposits
-
(16)
Net cash from investing activities
81,234
16,474
Cash flows from financing activities
Proceeds from share issuances, net of transaction costs
-
(29)
Proceeds from repayment of share purchase plan loans
6,990
3,478
Dividend payments
18
(178,729)
(211,118)
Lease payments
(2,616)
(2,501)
Shares bought back on-market
16
(5,189)
(40,439)
Net cash used in financing activities
(179,544)
(250,609)
Net increase/(decrease) in cash and cash equivalents
(50,926)
(47,554)
Effects of exchange rate changes on cash and cash equivalents
48
1,077
Cash and cash equivalents at the beginning of the year
373,445
419,922
Cash and cash equivalents at the end of the year
322,567
373,445
The Consolidated Statement of Cash Flows should be read in conjunction with the Notes to the Financial Statements.
Magellan Financial Group Ltd | Annual Report 2024
Page 50
Notes to the Financial Statements
For the year ended 30 June 2024
Overview
Magellan Financial Group Ltd (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 15 August 2024 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. Unless it is early adopted, AASB 18 Presentation and Disclosure in Financial Statements, issued on 14 June
2024, will first apply to the Group in the financial year ending 30 June 2028. The Directors have yet to assess the impact of this new
standard on the Group's financial statements. No other 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.
Magellan Financial Group Ltd | Annual Report 2024
Page 51
Notes to the Financial Statements
For the year ended 30 June 2024
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.
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 Ltd | Annual Report 2024
Page 52
Notes to the Financial Statements
For the year ended 30 June 2024
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"):
Australian funds
RE
IM
International funds
IM
Magellan Global Fund
✓
✓
MFG Global Fund1
✓
Magellan Global Fund (Hedged)
✓
✓
MFG Select Infrastructure Fund1
✓
Magellan Global Equities Fund (Currency Hedged)
✓
✓
MFG Global Sustainable Fund1
✓
Magellan Infrastructure Fund
✓
✓
Frontier MFG Core Infrastructure Fund2
✓
Magellan Infrastructure Fund (Unhedged)
✓
✓
Frontier MFG Global Sustainable Fund2
✓
Magellan Infrastructure Fund (Currency Hedged)
✓
✓
Magellan High Conviction Fund
✓
✓
Magellan High Conviction Trust
✓
✓
Magellan Core ESG Fund3
✓
✓
Magellan Core Global Fund3
✓
✓
Magellan Core Infrastructure Fund3
✓
✓
Magellan Sustainable Fund
✓
✓
Magellan Global Wholesale Fund
✓
✓
Magellan Energy Transition Fund
✓
✓
Airlie Australian Share Fund4
✓
✓
Airlie Concentrated Share Fund4
✓
✓
Airlie Small Companies Fund4
✓
✓
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 Ltd | Annual Report 2024
Page 53
Notes to the Financial Statements
For the year ended 30 June 2024
Segment Financial Results
30 June 2024
Funds
Management
$’0001
Fund
Investments
$’000
Associate
Investments
$’000
Corporate
$’000
Total
$’000
Segment revenue
Management fees
256,748
-
-
-
256,748
Performance fees
19,206
-
-
-
19,206
Services and advisory fees
2,395
-
-
-
2,395
Dividend and distribution income
36
13,592
-
-
13,628
Interest income
1,466
9
104
13,975
15,554
Net change in the fair value of financial assets and liabilities:
Realised
(21)
38,092
-
-
38,071
Unrealised
-
29,956
-
-
29,956
Net foreign exchange gain/(loss)
79
5
-
(2)
82
Total segment revenue and other income
279,909
81,654
104
13,973
375,640
Segment expenses
Employee expenses
68,656
-
-
85
68,741
Non-Executive Director fees
511
-
-
931
1,442
Other expenses
33,243
73
-
3,352
36,668
Total segment expenses
102,410
73
-
4,368
106,851
Share of after tax profit/(loss) of associates
-
-
10,295
-
10,295
Total segment operating profit before tax
177,499
81,581
10,399
9,605
279,084
Other comprehensive income
Exchange differences on translation of foreign operations
(65)
-
-
-
(65)
Other comprehensive income, before tax
(65)
-
-
-
(65)
Total comprehensive income, before tax
177,434
81,581
10,399
9,605
279,019
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
Note
30 June 2024
$'000
30 June 2023
$'000
Total segment operating profit before tax
279,084
290,622
Add back:
Amortisation of intangible assets1
(1,408)
(3,580)
Net non-cash remeasurement of SPA loans
1,672
(795)
Non-cash employee share option expense
(3,137)
(3,846)
Net benefit/(expense) related to Magellan Global Fund options
14
61,063
(26,575)
Net gain/(loss) on dilution of interests in associates
77
(255)
Transaction costs related to strategic initiatives:
Commitment to Magellan FuturePay
-
(1)
Total benefits/(expenses) related to strategic initiatives
-
(1)
Statutory net profit before tax for the year
337,351
255,570
Income tax expense
(98,592)
(72,915)
Statutory net profit after tax for the year
238,759
182,655
1 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 Ltd | Annual Report 2024
Page 54
Notes to the Financial Statements
For the year ended 30 June 2024
Segment Financial Results (continued)
30 June 2023
Funds
Management
$’0001
Fund
Investments
$’000
Associate
Investments
$’000
Corporate
$’000
Total
$’000
Segment revenue
Management fees
327,647
-
-
-
327,647
Performance fees
11,524
-
-
-
11,524
Services and advisory fees
3,830
-
-
-
3,830
Dividend and distribution income
-
34,697
-
-
34,697
Interest income
1,218
11
1,155
9,585
11,969
Net change in the fair value of financial assets and liabilities:
Realised
-
(11,207)
-
-
(11,207)
Unrealised
-
50,497
-
-
50,497
Net foreign exchange gain/(loss)
885
16
-
(9)
892
Total segment revenue and other income
345,104
74,014
1,155
9,576
429,849
Segment expenses
Employee expenses
86,124
-
-
62
86,186
Non-Executive Director fees
319
-
-
777
1,096
Other expenses
34,881
106
-
4,505
39,492
Total segment expenses
121,324
106
-
5,344
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
1,289
-
-
-
1,289
Other comprehensive income, before tax
1,289
-
-
-
1,289
Total comprehensive income, before tax
225,069
73,908
(11,298)
4,232
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.
Segment Assets and Liabilities
Funds
Management
$’000
Fund
Investments
$’000
Associate
Investments
$’000
Corporate
$’000
Total
$’000
30 June 2024
Financial assets
1,666
404,128
695
-
406,489
Associates
-
-
159,958
-
159,958
Other assets
214,566
544
-
307,687
522,797
Total liabilities
(52,659)
(33,557)
(183)
16,684
(69,715)
Net assets
163,573
371,115
160,470
324,371
1,019,529
30 June 2023
Financial assets
1,666
419,948
695
-
422,309
Associates
-
-
149,587
-
149,587
Other assets
223,612
(27,942)1
(823)1
432,231
627,078
Total liabilities
(62,858)
-
-
(173,614)
(236,472)
Net assets
162,420
392,006
149,459
258,617
962,502
1 Reflects tax liabilities within the Group's net deferred tax asset.
Magellan Financial Group Ltd | Annual Report 2024
Page 55
Notes to the Financial Statements
For the year ended 30 June 2024
3. Earnings Per Share
Basic earnings per share ("EPS") is calculated as net profit/(loss) after income tax expense for the year divided by the weighted
average number of ordinary shares on issue. Diluted EPS is calculated by adjusting the basic EPS to take into account the effect of
any costs associated with dilutive potential ordinary shares and the weighted average number of additional ordinary shares that would
have been outstanding assuming the conversion of all dilutive potential ordinary shares.
30 June 2024
30 June 2023
Basic and diluted EPS
Net profit attributable to shareholders ($'000)
238,759
182,655
Weighted average number of shares for basic and diluted EPS ('000)
181,088
182,569
Basic and diluted EPS (cents)
131.8
100.0
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 19) are not included in the calculation of diluted earnings per share because they are antidilutive for the
year ended 30 June 2024. 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.
30 June 2024
$'000
30 June 2023
$'000
Magellan Global Fund
126,279
142,029
Magellan Global Fund (Hedged)
5,798
8,329
Magellan Global Equities Fund (Currency Hedged)
1,476
1,851
Magellan Infrastructure Fund
18,483
25,100
Magellan Infrastructure Fund (Unhedged)
7,538
10,045
Magellan Infrastructure Fund (Currency Hedged)
6,971
8,457
Magellan High Conviction Fund
2,950
3,538
Magellan High Conviction Trust
6,758
7,213
Magellan Core Infrastructure Fund
1,476
1,301
MFG Global Fund
1,179
3,908
MFG Select Infrastructure Fund
1,309
2,209
Frontier MFG Funds
3,988
8,884
Airlie Funds
3,757
3,137
Other funds and mandates
68,786
101,646
Total management fees
256,748
327,647
Services Fees
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 Ltd | Annual Report 2024
Page 56
Notes to the Financial Statements
For the year ended 30 June 2024
distributions). Performance measurement periods vary across funds and mandates and are typically 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.
High watermark
unit price
($)1
30 June 2024
$'000
30 June 2023
$'000
Based on performance relative to both market index and
absolute return hurdle
Magellan Global Fund
3.0375
12,374
10,802
Magellan Global Fund (Hedged)
1.8964
197
93
Magellan Global Equities Fund (Currency Hedged)
3.7820
51
18
Magellan Infrastructure Fund
1.2552
-
18
Magellan Infrastructure Fund (Unhedged)
1.7875
61
546
Magellan Infrastructure Fund (Currency Hedged)
2.7631
-
3
Magellan Sustainable Fund
2.8355
14
32
Based on performance relative to absolute return hurdle
Magellan High Conviction Fund (Class A/B)
2.3204/1.4489
2,026
-
Magellan High Conviction Trust
1.8843
4,089
-
Based on performance relative to a market index and/or
absolute return hurdle
Other funds and mandates
various
394
12
Total performance fees
19,206
11,524
1 The high watermark as at 30 June 2024 and adjusted for distributions. The high watermark is the 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
30 June 2024
$'000
30 June 2023
$'000
Management and services fees
Retail
198,775
234,791
Institutional
59,173
95,456
Performance fees
Retail
19,206
11,523
Institutional
-
1
Total management, services and performance fees
277,154
341,771
Total Retail
217,981
246,314
Total Institutional
59,173
95,457
Total management, services and performance fees
277,154
341,771
Management, Services and Performance Fees by Geographic Location
30 June 2024
$'000
30 June 2023
$'000
Australia & New Zealand
235,425
272,280
United Kingdom & Europe
8,172
20,919
North America
12,996
27,911
Asia
20,561
20,661
Total management, services and performance fees
277,154
341,771
Magellan Financial Group Ltd | Annual Report 2024
Page 57
Notes to the Financial Statements
For the year ended 30 June 2024
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
30 June 2024
$'000
30 June 2023
$'000
Net profit before tax
337,351
255,570
Prima facie income tax expense at 30%
(101,205)
(76,671)
Effect of amounts which are non-deductible/(assessable) in calculating taxable income:
Concessional tax rate on offshore banking unit ("OBU")
-
9,031
Share of profit/(losses) of associates
3,752
(2,814)
Non-assessable income and non-deductible expenses
(404)
(1,419)
US state and local taxes (net of tax credits)
25
(113)
Differences in overseas tax rates
(294)
(213)
Imputed interest, expense and allowances relating to SPA loans
(497)
(239)
(Under)/over provision of prior year income tax
31
(477)
Income tax expense
(98,592)
(72,915)
Components of Income Tax Expense
30 June 2024
$'000
30 June 2023
$'000
Current income tax expense
(44,759)
(68,094)
Deferred income tax expense
(53,595)
(4,018)
Differences in overseas tax rates
(294)
(213)
US state and local taxes (net of tax credits)
25
(113)
(Under)/over provision of prior year income tax
31
(477)
Income tax expense
(98,592)
(72,915)
Effective Tax Rate
For the year ended 30 June 2024, the Company's effective tax rate was 29.2% (June 2023: 28.5%), which includes tax paid (net of
tax credits in relation to dividends, distributions and income from foreign jurisdictions). This rate is below the Australian company tax
rate of 30% primarily as a result of the share of after tax profit recognised by the Group in respect of its associates. Associate profit
recognised during the period is not subject to taxation until such time as it is distributed to the Group by its associates.
Additionally, up until 30 June 2023, assessable offshore banking income from funds management and advisory activities provided to
clients outside of Australia and New Zealand, net of costs, was subject to a concessional tax rate of 10%. During the year ended
30 June 2023, the impact of the concessional tax rate was a benefit in the income tax expense recognised in the Consolidated
Statement of Profit or Loss and Comprehensive Income of $9,031,000. The concessional tax rate was abolished from 1 July 2023.
This change has resulted in the Group paying higher income tax in Australia in the 2024 financial year, which in turn has generated
additional franking credits available to frank the Group's dividends to shareholders (all other variables being equal).
Magellan Financial Group Ltd | Annual Report 2024
Page 58
Notes to the Financial Statements
For the year ended 30 June 2024
Reconciliation of Net Deferred Tax Asset/(Liability)
Charged to
30 June
2024
$'000
Equity
$'000
Profit
$'000
30 June
2023
$'000
Financial assets held at fair value
(33,557)
-
(5,019)
(28,538)
Accruals and provisions
12,841
-
(2,577)
15,418
Investment in associates
(184)
-
640
(824)
Business-related costs deductible over 5 years
9,763
2
(2,069)
11,830
Financial liability related to Magellan Global Fund option discount funding
-
-
(47,957)
47,957
Unused tax losses related to Magellan Global Fund options
3,387
-
3,387
-
Net deferred tax asset/(liability)
(7,750)
2
(53,595)
45,843
At 30 June 2024, deferred tax assets of $5,950,000 (June 2023: $9,702,000) relating to the Group's share of post-tax losses from
associates and $2,193,000 (June 2023: $1,527,000) relating to non-Australian revenue losses 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 stand-alone 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 $51,078,000 (June 2023: $61,213,000) were assumed by MFG of which $9,534,000
remained receivable from other entities under the tax funding agreement as at the reporting date (June 2023: $6,591,000).
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.
Magellan Financial Group Ltd | Annual Report 2024
Page 59
Notes to the Financial Statements
For the year ended 30 June 2024
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.
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 reconciles net profit after tax, as prepared on an accruals basis, to net cash from operating activities.
30 June 2024
$'000
30 June 2023
$'000
Net profit after tax
238,759
182,655
Adjustments for non-cash items of profit or loss:
Net change in the fair value of financial assets and liabilities:
Unrealised
(29,956)
(50,497)
Recorded as dividend and distribution income
1,626
(448)
Share of (profit)/loss of associates
(10,295)
12,453
Net (gain)/loss on dilution of interest in associates
(77)
255
Depreciation and amortisation expense
3,958
6,036
Net foreign exchange (gain)/loss
(82)
(892)
Non-cash remeasurement of SPA loans
(1,672)
795
Share-based payment expense
3,332
3,846
Adjustments for which cash effects are investing activities:
Realised changes in the fair value of financial assets and liabilities
(38,071)
11,207
Dividends and distributions reinvested
(585)
(18,078)
Adjustments for operating asset and liability movements:
(Increase)/decrease in receivables
(1,263)
10,183
(Increase)/decrease in prepayments
(11)
12
(Increase)/decrease in net deferred tax asset
53,595
4,365
Increase/(decrease) in payables and provisions
(168,012)
30,445
Increase/(decrease) in income tax payable
(3,879)
(5,710)
Effects of exchange rates on cash and cash equivalents
17
(46)
Net cash from operating activities
47,384
186,581
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 Ltd | Annual Report 2024
Page 60
Notes to the Financial Statements
For the year ended 30 June 2024
7. Financial Assets
30 June
2024
$'000
30 June
2023
$'000
Term deposits - at amortised cost1
1,666
1,666
Total current financial assets
1,666
1,666
Investments - fair value through profit or loss
Magellan Funds2
Magellan Core ESG Fund
13,200
11,886
Magellan Core Global Fund
13,136
12,022
Magellan Energy Transition Fund
1,681
1,611
Magellan Global Equities Fund (Currency Hedged)
24,686
21,123
Magellan Global Fund - Open Class3
100,178
167,236
Magellan Global Fund - Closed Class
112,613
82,318
Magellan Global Fund (Hedged)
1,042
908
Magellan Global Wholesale Fund
1,230
1,061
Magellan High Conviction Fund
12,307
10,280
Magellan High Conviction Trust
48,856
39,914
Magellan Infrastructure Fund (Currency Hedged)
11,356
11,819
Magellan Sustainable Fund
6,580
5,520
Magellan Wholesale Plus Global Fund
9,152
9,361
Magellan Wholesale Plus Infrastructure Fund
6,227
6,241
MFG Global Sustainable Fund
2,513
2,060
Airlie Small Companies Fund
2,310
1,932
Frontier MFG Core Infrastructure Fund
8,567
8,718
Frontier MFG Global Sustainable Fund
22,891
18,880
Total investments in Magellan Funds
398,525
412,890
Seed investments
MC Fund
1,239
1,014
Portfolios - securities by domicile of primary stock exchange:
United States
4,366
5,449
Europe and United Kingdom
-
595
Total seed investments
5,605
7,058
Unlisted entities
695
695
Total non-current financial assets
404,825
420,643
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 2024, MFG held the following investments: Magellan Core ESG Fund 74.5% (June 2023: 80.4%), Magellan Core Global Fund 48.2% (June
2023: 48.9%), Magellan Energy Transition Fund 96.6% (June 2023: 96.6%), Magellan Global Equities Fund (Currency Hedged) 22.6% (June 2023:
17.6%), Magellan Global Fund Open Class 1.6% and Closed Class 3.3% (June 2023: 2.4% and 3.4%), Magellan Global Fund (Hedged) 0.3% (June
2023: 0.2%), Magellan Global Wholesale Fund 12.6% (June 2023: 13.8%), Magellan High Conviction Fund 7.2% (June 2023: 5.7%), Magellan High
Conviction Trust 10.7% (June 2023: 8.9%), Magellan Infrastructure Fund (Currency Hedged) 1.8% (June 2023: 1.6%), Magellan Sustainable Fund
77.3% (June 2023: 74.6%), Magellan Wholesale Plus Global Fund 2.6% (June 2023: 2.0%), Magellan Wholesale Plus Infrastructure Fund 7.9% (June
2023: 5.1%), MFG Global Sustainable Fund 1.8% (June 2023: 1.6%), Airlie Small Companies Fund 61.2% (June 2023: 69.7%), Frontier MFG Core
Infrastructure Fund 1.4% (June 2023: 1.2%) and Frontier MFG Global Sustainable Fund 54.0% (June 2023: 39.6%).
3 MFG sold 30,762,132 units for $80.2 million during the year.
Magellan Financial Group Ltd | Annual Report 2024
Page 61
Notes to the Financial Statements
For the year ended 30 June 2024
Reconciliation of Financial Assets Carrying Value
30 June
2024
$'000
30 June
2023
$'000
Current
Opening balance at 1 July
1,666
1,650
Cash placed on term deposit
1,666
1,666
Matured term deposits
(1,666)
(1,650)
Closing balance
1,666
1,666
Non-current
Opening balance at 1 July
420,643
379,438
Acquisitions
2,309
35,478
Disposals
(84,549)
(34,011)
Changes in value of accrued distributions
(1,605)
448
Net change in fair value
Realised
38,071
(11,207)
Unrealised
29,956
50,497
Closing balance
404,825
420,643
Classification and Measurement
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 Ltd | Annual Report 2024
Page 62
Notes to the Financial Statements
For the year ended 30 June 2024
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.
Ownership
interest
Investment carrying value
Associate
Industry
2024
%
2023
%
30 June 2024
$'000
30 June 2023
$'000
Barrenjoey Capital Partners Group Holdings Pty
Ltd ("Barrenjoey")1
Financial services
36
36
136,363
123,857
FinClear Holdings Ltd ("FinClear")2,3
Financial services
16
16
23,595
25,730
159,958
149,587
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 $37,500,000 of unsecured working capital finance. During the year ended 30 June 2024, no
amounts were drawn under the facility (June 2023: an aggregate of $25,000,000 was drawn in varying amounts). During the financial
year, the Group earned $104,000 in commitment fees and interest income from the facility (June 2023: $1,155,000). The facility was
undrawn at 30 June 2024.
During the year ended 30 June 2024, the Group received brokering services in respect of the Company's on-market MFG share
buy-back programme and its on-market purchase of Magellan Global Fund options. The Group paid Barrenjoey $80,000 in brokerage
fees for the year ended 30 June 2024 (June 2023: $15,000).
During the 2022 financial year, the Group sold its shares in Guzman y Gomez (Holdings) Limited ("GYG") to an investment trust
managed by Barrenjoey. 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 Ltd | Annual Report 2024
Page 63
Notes to the Financial Statements
For the year ended 30 June 2024
Associates' Financial Information
The tables below provide summarised financial information about the Group's associates. 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
30 June
2024
$'000
30 June
2023
$'000
Current assets
7,686,697
5,327,211
Non-current assets
185,361
177,327
Current liabilities
(6,876,461)
(4,565,796)
Non-current liabilities
(752,604)
(730,702)
Net assets
242,993
208,040
Group's interest in net assets
73,066
59,367
Goodwill and transaction costs
86,892
90,220
Investment carrying amount
159,958
149,587
Summarised Statement of Profit or Loss and Comprehensive Income
30 June
2024
$'000
30 June
2023
$'000
Revenue
394,025
293,111
Profit or loss from continuing operations
18,994
(44,559)
Other comprehensive income
-
-
Total comprehensive income
18,994
(44,559)
Group's share of associates' after tax profit/(loss)
10,295
(12,453)
Dividends received from associates
-
-
Magellan Financial Group Ltd | Annual Report 2024
Page 64
Notes to the Financial Statements
For the year ended 30 June 2024
9. Intangibles
Intangible assets comprise goodwill and customer relationships resulting from the acquisition of Airlie and the Frontier Group.
30 June 2024
30 June 2023
Customer
relationships
$'000
Goodwill
$'000
Total
$'000
Customer
relationships
$'000
Goodwill
$'000
Total
$'000
At cost
25,871
106,152
132,023
25,853
106,251
132,104
less: accumulated amortisation
and impairment
(24,732)
-
(24,732)
(23,324)
-
(23,324)
Total intangible assets
1,139
106,152
107,291
2,529
106,251
108,780
Movements:
Opening balance at 1 July
2,529
106,251
108,780
5,999
105,288
111,287
Amortisation expense
(1,408)
-
(1,408)
(3,580)
-
(3,580)
Net foreign exchange differences
18
(99)
(81)
110
963
1,073
Closing balance
1,139
106,152
107,291
2,529
106,251
108,780
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. 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 2023: 3.0%). In estimating net FUM flows, management have
considered external forecasts of long-term global equity market returns. A perpetuity growth rate of 3.0% (June 2023: 2.5%) was used
to derive a terminal value and a pre-tax discount rate of 15.2% (June 2023: 14.9%) was applied to net cash flows.
In forecasting cash flows over the assessment period, the current economic conditions and the FM CGU 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 2024.
Magellan Financial Group Ltd | Annual Report 2024
Page 65
Notes to the Financial Statements
For the year ended 30 June 2024
10. Loans and Receivables
30 June 2024
$'000
30 June 2023
$'000
Current
Fees receivable
54,367
53,223
Distributions receivable from Magellan Funds
336
225
Other receivables
1,072
1,187
Loans issued under share purchase agreements:
Current employees
2,478
2,759
Other parties1
522
877
58,775
58,271
Non-current
Other receivables
1,217
-
Loans issued under share purchase agreements:
Current employees
3,651
7,839
Other parties1
18,233
18,643
Total loans and receivables
81,876
84,753
1 Other parties include current and former 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 $3,588,000 were past due at 30 June 2024 (June 2023: $3,870,000). 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 2023: 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. The SPP was
suspended in February 2022 and there have been no new SPA loans entered into since that time.
At 30 June 2024, the weighted average duration of the SPA loans was 5.0 years, with individual terms ranging from 1.3 years to 12.4
years (June 2023: weighted average duration of 6.2 years, with individual terms ranging from 0.2 years to 13.4 years). The five largest
individual loans represent 57% of the closing loan balance (June 2023: 49%), and are all held with other parties.
Magellan Financial Group Ltd | Annual Report 2024
Page 66
Notes to the Financial Statements
For the year ended 30 June 2024
Reconciliation of SPA Loans
30 June 2024
30 June 2023
Number of
shares
SPA loans
$'000
Number of
shares
SPA loans
$'000
Opening balance at 1 July
1,237,382
30,118
1,378,354
33,517
Imputed interest income/(expense)
-
2,986
-
1,801
Repayments - cash
-
(4,091)
-
(3,478)
Repayments - dividends (refer to note 19)
-
(1,135)
-
(1,537)
Repayments - from share disposals
(255,791)
(2,899)
-
-
Expected credit losses1
-
(95)
-
(185)
Shares released on loan termination
(125,045)
-
(140,972)
-
Closing balance
856,546
24,884
1,237,382
30,118
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 2024, $1,219,000 was recognised within employee expenses (June 2023: $2,411,000).
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.
The total value of MFG ordinary shares securing the SPA loans to SPA participants applying MFG’s closing share price at 30 June 2024
of $8.42 was $7,212,000 (June 2023: $11,743,000 at a share price of $9.49). 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 2024, additional
expected credit losses of $95,000 (June 2023: $185,000) have 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 or 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.
Magellan Financial Group Ltd | Annual Report 2024
Page 67
Notes to the Financial Statements
For the year ended 30 June 2024
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 2024
30 June 2023
ROU assets
$'000
Lease liabilities
$'000
ROU assets
$'000
Lease liabilities
$'000
Opening balance at 1 July
7,507
10,172
9,560
12,552
Additions and remeasurements
52
49
319
319
Lease terminations
-
-
(201)
(207)
Lease payments
-
(2,980)
-
(2,944)
Depreciation expense
(2,129)
-
(2,172)
-
Interest expense
-
365
-
450
Net foreign exchange differences
1
-
1
2
Closing balance
5,431
7,606
7,507
10,172
The Group's undiscounted lease payments are contractually due in the following time periods:
30 June 2024
30 June 2023
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
Total
$'000
Lease liabilities
3,034
4,996
-
8,030
2,972
7,984
-
10,956
12. Payables
Payables represent liabilities for goods and services received prior to the end of the year which remain unpaid at the reporting date.
30 June 2024
$'000
30 June 2023
$'000
Trade payables and accruals
9,490
9,928
GST and fringe benefits tax payable
1,476
1,607
Total payables
10,966
11,535
Trade payables are unsecured and are recognised at the amounts due to suppliers. Accruals represent amounts due for supplies and
services received but not invoiced at reporting date.
13. Employee Benefits
Employee benefits comprise wages, salaries, annual and long service leave obligations, bonuses and cash retention incentives.
30 June 2024
$'000
30 June 2023
$'000
Accrued employee entitlements
27,534
31,841
Leave obligations
3,614
4,249
Total current employee benefits
31,148
36,090
Accrued employee entitlements
1,920
4,629
Leave obligations
1,249
1,346
Total non-current employee benefits
3,169
5,975
Wages, Salaries and Annual Leave
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.
Magellan Financial Group Ltd | Annual Report 2024
Page 68
Notes to the Financial Statements
For the year ended 30 June 2024
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
2024, the contingent liability is $8,126,000 (June 2023: $8,203,000). Of this amount, $3,576,000 would be payable during the year
ending 30 June 2025 and $4,372,000 would be payable during the years ending 30 June 2026 and 30 June 2027, 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.
During the year ended 30 June 2024, the Group offered certain employees with SPA loans additional retention incentives. Subject
to satisfactory performance and continued employment, these additional retention incentives will be directed to repayment of
outstanding loan balances in September 2025, September 2026 and September 2027.
Additionally, during the year ended 30 June 2024, the Group offered Mr Andrew Formica (Executive Chairman) cash incentives to
replace termination benefits from his previous employer that were forfeited when he accepted an executive role with the Group. The
incentives are payable in March 2024, March 2025 and March 2026 subject to his continued association with the Group.
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 unrecognised portion of retention incentives payable in cash for services provided by employees in future periods is a contingent
liability. At 30 June 2024, the contingent liability is $6,065,000 (June 2023: $5,722,000). Of this amount, $796,000 would be payable
during the year ending 30 June 2025 and $5,269,000 would be payable during the years ending 30 June 2026 through 30 June 2028,
subject to the vesting conditions being met.
14. Financial Liabilities
30 June 2024
$'000
30 June 2023
$'000
Financial liabilities - fair value through profit or loss
Obligation to fund the discount offered on MGF Options
-
159,855
Total financial liabilities
-
159,855
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"). At that time, in accordance with
accounting standards, a funding obligation was recognised as a financial liability assuming all MGF Options were exercised over the
Magellan Financial Group Ltd | Annual Report 2024
Page 69
Notes to the Financial Statements
For the year ended 30 June 2024
three-year option term. 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.
During the year ended 30 June 2024, the Group purchased 750,000,000 MGF Options on-market at a price of 10 cents per MGF
Option before transaction costs. The MGF Options acquired by the Group were allowed to lapse on expiry of the option term in March
2024. The liability relating to the discount funding of all MGF Options unexercised at expiry of the option term has been reversed and
recognised as a gain in the Consolidated Statement of Profit or Loss and Comprehensive Income.
Reconciliation of Financial Liabilities Carrying Value
The movement in the carrying value of the Group's obligation to fund the MGF Options discount is as follows:
30 June
2024
$'000
30 June
2023
$'000
Opening balance at 1 July
159,855
133,349
Items recognised in the Consolidated Statement of Profit or Loss and Comprehensive Income:
Increase/(decrease) in liability from changes in the MGF NAV
851
26,575
Decrease in liability from the expiry of unexercised MGF Options held external to the Group
(26,346)
-
Decrease in liability from the expiry of unexercised MGF Options held by the Group
(112,800)
-
(138,295)
26,575
Exercise of MGF Options during the period
(21,560)
(69)
Closing balance as at 30 June
-
159,855
Reconciliation of Net Benefit Related to MGF Options
30 June
2024
$'000
30 June
2023
$'000
(Benefit)/expense resulting from changes in the obligation to fund the MGF Options discount
(138,295)
26,575
Cost of on-market purchase of MGF Options by the Group
75,000
-
Transaction costs associated with the purchase of MGF Options
2,232
-
Net (benefit)/expense related to MGF Options
(61,063)
26,575
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.
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 Group's capital consists of contributed equity and reserves, including 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. In order to maintain an optimal capital structure, the Board may:
Magellan Financial Group Ltd | Annual Report 2024
Page 70
Notes to the Financial Statements
For the year ended 30 June 2024
•
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 2024 financial year
MAM complied with these requirements at all times.
16. Contributed Equity
30 June 2024
30 June 2023
Number of
securities
'000
Contributed
equity
$'000
Number of
securities
'000
Contributed
equity
$'000
Ordinary shares
Opening balance
181,432
632,868
185,089
672,261
Shares issued:
On exercise of MFG 2027 Options
-
-
-
6
Shares bought back on-market and cancelled
(686)
(5,186)
(3,657)
(39,487)
Transaction costs, net of tax
-
(3)
-
(27)
SPA expense
-
54
-
115
Total ordinary shares1,2
180,746
627,733
181,432
632,868
MFG 2027 Options
Opening balance
23,216
(545)
23,216
(545)
Shares issued from exercise of options during period
-
-
-
-
Total MFG 2027 Options
23,216
(545)
23,216
(545)
Total contributed equity
203,962
627,188
204,648
632,323
1 Includes 856,546 ordinary shares held by SPA participants (June 2023: 1,237,382). Refer to note 10 for further details.
2 Includes 529,100 ordinary shares subject to voluntary escrow which expires in respect of 98,438 shares on 31 May 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).
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.
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 2024, the Group bought back and cancelled 685,571 shares at a cost of $5,186,000 (June 2023: 3,657,140 shares a total cost
of $39,487,000). The shares were acquired at an average price (inclusive of transaction costs) of $7.57 per share, with prices ranging
from $6.91 to $8.35. 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 2025.
Magellan Financial Group Ltd | Annual Report 2024
Page 71
Notes to the Financial Statements
For the year ended 30 June 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 19.
17. Reserves
30 June 2024
$'000
30 June 2023
$'000
Profits reserve
Opening balance at 1 July
321,037
313,233
Transfer from retained earnings
238,110
220,459
Payment of dividends
(179,864)
(212,655)
Closing balance at 30 June
379,283
321,037
Share-based payments reserve
Opening balance at 1 July
5,129
1,283.00
Recognised in employee expenses
3,332
3,846
Closing balance at 30 June
8,461
5,129
Foreign currency translation reserve
Opening balance at 1 July
4,531
3,242
Recognised in other comprehensive income
(65)
1,289
Closing balance at 30 June
4,466
4,531
Total reserves
392,210
330,697
Profits Reserve
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 and other share-based awards granted to employees
over the award vesting period (refer to note 19).
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.
Magellan Financial Group Ltd | Annual Report 2024
Page 72
Notes to the Financial Statements
For the year ended 30 June 2024
18. Dividends
Cents per
share
Franking
%1
Total
$'000
Date Paid
During the year ended 30 June 2024
Prior year final dividend paid
35.6
85%
64,590
7 September 2023
Prior year performance fee dividend paid
4.2
85%
7,620
7 September 2023
Prior year special dividend paid
30.0
85%
54,429
7 September 2023
Total prior year final, performance fee and special
dividend paid
69.8
126,639
Interim dividend paid
29.4
50%
53,225
6 March 2024
Total dividends declared and paid during the year2
99.2
179,864
During the year ended 30 June 2023
Prior year final dividend paid
65.0
80%
120,308
6 September 2022
Prior year performance fee dividend paid
3.9
80%
7,218
6 September 2022
Total prior year final and performance fee dividend paid
68.9
127,526
Interim dividend paid
46.9
85%
85,129
8 March 2023
Total dividends declared and paid during the year2
115.8
212,655
1 At the corporate tax rate of 30%.
2 Includes dividends of $1,135,000 which were not paid in cash but rather applied directly against the balances of SPA loans (June 2023: $1,537,000)
(refer to note 10).
Dividend Declared
On 15 August 2024, the Directors declared total dividends of 35.7 cents per ordinary share (50% franked at the corporate tax rate
of 30%) in respect of the six months to 30 June 2024 (June 2023: 69.8 cents per ordinary share 85% franked). The total dividends
comprise a Final Dividend of 28.6 cents per ordinary share and a Performance Fee Dividend of 7.1 cents per ordinary share (June 2023:
Final Dividend of 35.6 cents per ordinary share, Performance Fee Dividend of 4.2 cents per ordinary share and Special Dividend of 30.0
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 and Performance Fee Dividend
for the six months to 30 June 2024 totalling approximately $64,526,000 are not recognised as liabilities in the 2024 financial year. The
Final Dividend and Performance Fee Dividend is expected to be paid on 4 September 2024.
Imputation Credits
The Group has a total of $14,889,000 imputation credits available for subsequent reporting periods based on a tax rate of 30% (June
2023: $24,359,000 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 15 August 2024 will be partially franked out of existing franking credits, or out of franking credits arising from the
payment of income tax.
19. Share-Based Payments
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 MFG
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
Magellan Financial Group Ltd | Annual Report 2024
Page 73
Notes to the Financial Statements
For the year ended 30 June 2024
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:
Number of
options
Weighted average
exercise price
Outstanding at 1 July 2023
6,927,500
$35.00
Granted
-
-
Lapsed
(910,000)
$35.00
Outstanding at 30 June 20241
6,017,500
$35.00
Exercisable at 30 June 2024
-
-
1 The options outstanding at 30 June 2024 have a contractual life of 2.8 years.
Fair Value
There were no options granted under the ESOP during the year ended 30 June 2024. The weighted average fair value at measurement
date of employee options granted during the year ended 30 June 2023 was $0.93 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 previous reporting period:
2023
Weighted average share price
$12.33
Exercise price
$35.00
Expected share price volatility1
45.1%
Expected dividend yield
7.4%
Risk-free interest rate
3.3%
Expected option life
5.5 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
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 2024 is
$3,137,000 (June 2023: $3,846,000).
MD Forfeited Award Bonus
In May 2024, the newly appointed MAM Managing Director was offered a Forfeited Award Bonus to compensate her for the loss
of incentive opportunities from her former employer. Subject to regulatory and shareholder approval, the bonus will be delivered in
285,388 restricted MFG shares on 31 December 2026 provided she remains employed through to 31 December 2025.
The total share-based payment expense recorded in respect of the Forfeited Award Bonus for the year ended 30 June 2024 is $195,000
(June 2023: nil).
Magellan Financial Group Ltd | Annual Report 2024
Page 74
Notes to the Financial Statements
For the year ended 30 June 2024
20. Subsidiaries
Country of incorporation/
Principal place of business
% equity interest1
30 June 2024
30 June 2023
Magellan Asset Management Limited
Australia
100
100
Magellan Capital Partners Pty Limited
Australia
100
100
Magellan Capital Partners No. 2 Pty Limited
Australia
100
100
Magellan Capital Partners No. 4 Pty Limited
Australia
100
100
MFG Services LLC2
United States of America
100
100
Frontier North American Holdings Inc.3
United States of America
100
80
Frontier Partners Inc.
United States of America
100
100
Frontegra Strategies LLC
United States of America
100
100
Frontegra Asset Management Inc.
United States of America
100
100
1 The proportion of ownership interest is equal to the proportion of voting power held.
2 MFG Services LLC ("MFGS") is a service company and provides MAM with investment research and distribution services.
3 Frontier North American Holdings Inc. ("FNAH") is the US holding company of the Frontier Group. During the year ended 30 June 2024, MFG
exercised its call option to purchase the 20% non-controlling interest in FNAH for US$1.
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 Ltd | Annual Report 2024
Page 75
Notes to the Financial Statements
For the year ended 30 June 2024
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. Income tax
liabilities assumed by MFG and settled by subsidiaries of the Group under a tax sharing agreement are set out in note 5. 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:
30 June 2024
$'000
30 June 2023
$'000
Revenue recognised by parent entity
Dividends1
130,357
185,278
Reimbursed expenses
725
274
Expenses recognised by parent entity
Expense reimbursements
97
71
Equity contributions to/(returns from) subsidiaries
Cash
(15,775)
25,095
Transactions between subsidiaries at international transfer prices
Service fees and recharged expenses
5,658
8,838
1 Comprising dividends from MAM of $130,000,000 and MFG Services LLC of $357,000 (June 2023: $170,000,000 from MAM and $15,278,000 from
Magellan Capital Partners No. 2).
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
30 June 2024
$'000
30 June 2023
$'000
Short-term benefits
5,054
7,180
Post-employment benefits
219
188
Termination benefits
820
432
Long-term benefits
1,069
1,440
Share-based payments
119
367
Other benefits
1,002
859
Total KMP remuneration
8,283
10,466
The KMP of the Group are listed in section 3.2 of the Remuneration Report and the remuneration of each KMP is included in section
3.7 of the Remuneration Report.
Magellan Financial Group Ltd | Annual Report 2024
Page 76
Notes to the Financial Statements
For the year ended 30 June 2024
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 the Magellan 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 Magellan 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 2024, the credit quality of NT’s senior debt is rated by Standard and Poor’s as A+ and
by Moody’s as A2 (June 2023: 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 2024, 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 Aa2 by Moody's (June 2023: 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 2024 and 30 June 2023, MFG held a negligible cash balance with MLI.
Magellan Financial Group Ltd | Annual Report 2024
Page 77
Notes to the Financial Statements
For the year ended 30 June 2024
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 2024, the total SPA loan shortfall was $14,786,000 (June 2023:
$15,406,000). 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 2024, the Group applied probabilities of default to its SPA loans ranging from 4% to 5% (June 2023: 3% to 4.5%) resulting
in an aggregate recognised allowance for ECLs of $655,000 (June 2023: $560,000). For each 1% increase in the applied probability
of default, the Group's total allowance for ECLs would increase by $148,000.
Undrawn Loan Commitments
The Group has provided Barrenjoey with up to $37,500,000 of working capital finance under an unsecured revolving facility that
matures in September 2024.
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 2024, the Group had an obligation to settle trade creditors and other payables of $10,966,000 (June 2023: $11,535,000)
within 30 days (refer to note 12). A further obligation of $8,832,000 (June 2023: $12,773,000) is payable between 30-150 days for
the Group's tax instalment and final income tax payment. On 4 September 2024, $64,526,000 is expected to be paid in respect of the
Final and Performance Fee dividends (refer to note 18). The Group had cash of $322,567,000 (June 2023: $373,445,000) and a further
$55,775,000 (June 2023: $54,635,000) of receivables to cover these liabilities.
The Group's reported current assets of $384,903,000 and current liabilities of $53,721,000 result in a net current asset surplus of
$331,182,000. Accordingly, the Group has sufficient liquid funds and current assets to meet its current liabilities.
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
Magellan Financial Group Ltd | Annual Report 2024
Page 78
Notes to the Financial Statements
For the year ended 30 June 2024
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 -14% and
+39% (in USD) and between -6% and +28% (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, with all other variables held constant, would have had the following
impact on the recorded value of the Group's financial instruments:
30 June 2024
$'000
30 June 2023
$'000
Financial assets at fair value through profit or loss
28,338
29,445
Financial liabilities at fair value through profit or loss
-
(12,678)
Total impact on net profit after tax equity
28,338
16,767
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 2024
30 June 2023
Increase/(decrease)
Increase/(decrease)
USD
$'000
GBP
$'000
Other
$'000
USD
$'000
GBP
$'000
Other
$'000
Cash and cash equivalents
(576)
(3)
-
(418)
(7)
(2)
Financial assets
(2,462)
-
-
(2,285)
(5)
(33)
Receivables
(800)
(50)
(1)
(1,007)
(45)
0
Payables
98
3
23
95
3
22
Employee benefits
14
-
-
19
-
-
Lease liabilities
14
-
3
20
-
2
Total impact on net profit after tax and equity
(3,712)
(50)
25
(3,576)
(54)
(11)
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.
Magellan Financial Group Ltd | Annual Report 2024
Page 79
Notes to the Financial Statements
For the year ended 30 June 2024
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 FUM. As at 30 June 2024, approximately 74% of the Group's
FUM was exposed to movements in the Australian dollar relative to other currencies (June 2023: 77%).
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:
Level 1
$'000
Level 2
$'000
Level 3
$'000
Total
$'000
30 June 2024
Magellan Fund investments
330,605
67,9201
-
398,525
Seed portfolios
4,366
1,239
-
5,605
Unlisted entities
-
-
6952
695
Financial liabilities at fair value through profit or loss
-
-
-
-
Total financial assets and liabilities at fair value
334,971
69,159
695
404,825
30 June 2023
Magellan Fund investments
351,838
61,0521
-
412,890
Seed portfolios
6,044
1,014
-
7,058
Unlisted entities
-
-
6952
695
Financial liabilities at fair value through profit or loss
-
(159,855)
-
(159,855)
Total financial assets and liabilities at fair value
357,882
(97,789)
695
260,788
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.
There were no transfers between any fair value hierarchy levels during the years ended 30 June 2024 and 30 June 2023. 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.
Magellan Financial Group Ltd | Annual Report 2024
Page 80
Notes to the Financial Statements
For the year ended 30 June 2024
23. Commitments, Contingent Assets and Contingent 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:
30 June 2024
$'000
30 June 2023
$'000
Within one year
18
18
Later than one year but no later than five years
35
49
More than five years
-
-
Total
53
67
Contingent Assets and Liabilities
The Group has contingent assets and liabilities in respect of the following items:
•
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
30 June 2024
$'000
30 June 2023
$'000
Assets
Current assets
263,556
302,166
Non-current assets
781,872
846,216
Total assets
1,045,428
1,148,382
Liabilities
Current liabilities
9,308
189,519
Non-current liabilities
20,815
-
Total liabilities
30,123
189,519
Net assets
1,015,305
958,863
Equity
Contributed equity
627,560
632,696
Reserves
387,745
326,167
Retained earnings
-
-
Total equity
1,015,305
958,863
Net profit after income tax expense for the year
238,110
220,459
Total comprehensive income for the year
238,110
220,459
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 2024, MFG has a contingent liability in respect of the dividend reinvestment plan of MGF (refer to note 23).
Magellan Financial Group Ltd | Annual Report 2024
Page 81
Notes to the Financial Statements
For the year ended 30 June 2024
25. Auditor Remuneration and Independence
30 June 2024
$'000
30 June 2023
$'000
Australia - Ernst & Young
Fees for audit and review of statutory financial reports of:
MFG Group and controlled entities
223
156
Magellan Funds in Australia
347
303
570
459
Fees for regulatory audits required to be performed by the auditor
12
9
Fees for other audit related assurance services1
116
88
Fees for other services:
Taxation compliance services2
139
150
Taxation advisory services3
-
25
139
175
Total Australia
837
731
Overseas - Ernst & Young, Plante Moran
Fees for audit of statutory financial report of:
Frontegra Strategies LLC
26
23
Magellan Funds in Ireland
77
72
103
95
Fees for other services:
Taxation advisory services4
85
50
85
50
Total overseas
188
145
Total auditor remuneration
1,025
876
Percentage of total auditor remuneration paid as non-audit fees to the Group's auditors
33.2%
35.7%
1 Comprises various assurance services (ICR audits, 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.
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 2024 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, based on a recommendation
from management. Particular consideration is 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, and should this occur, the Group ensures the signing
audit partner is not common to both parties.
Non-audit services provided by Ernst & Young include 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 and routine tax surveillance reviews. Other non-audit services not required by regulation mainly comprise 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 and
Ernst & Young’s appointment offers greater risk management by providing a higher level of detection of risks or errors given their
holistic and detailed understanding of the Group.
Magellan Financial Group Ltd | Annual Report 2024
Page 82
Notes to the Financial Statements
For the year ended 30 June 2024
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 18 for details of the dividend declared in respect of the six months ended 30 June 2024.
Funds Under Management
On 6 August 2024, the Group announced on the ASX announcements platform that its FUM was $38.4 billion as at 31 July 2024.
MGF Closed Class Conversion
On 22 July 2024, conversion of the Closed Class Units of MGF to Open Class Units, as approved by unitholders at meetings held in
June 2024, was implemented. Eligible Closed Class unitholders received 0.736 Open Class Units for every Closed Class Unit held on
the conversion record date.
MGF's transition to an open-ended structure has seen outflows of $1.2 billion as at 13 August 2024.
Investment in Vinva
On 15 August 2024, the Group acquired a 29.5% shareholding in Vinva Holdings Limited ("Vinva"), a systematic investment
management firm founded in Australia, for cash consideration of $138,500,000. The equity interest forms part of a strategic
partnership under which the Group will distribute Vinva's systematic equity products globally and to retail and certain wholesale clients
in Australia.
Magellan Financial Group Ltd | Annual Report 2024
Page 83
Consolidated Entity Disclosure Statement
As at 30 June 2024
Body corporates
Tax residency
Entity name
Entity type
Place
incorporated
% of share
capital held
Australian
or Foreign
Foreign
jurisdiction
Magellan Asset Management Limited
Body corporate
Australia
100
Australian
N/A
Magellan Capital Partners Pty Limited
Body corporate
Australia
100
Australian
N/A
Magellan Capital Partners No. 2 Pty Limited
Body corporate
Australia
100
Australian
N/A
Magellan Capital Partners No. 4 Pty Limited
Body corporate
Australia
100
Australian
N/A
MC Fund
Trust
N/A
N/A
Australian
N/A
MFG Services LLC
Body corporate
USA
100
Foreign
USA
Frontier North American Holdings Inc.
Body corporate
USA
100
Foreign
USA
Frontier Partners Inc.
Body corporate
USA
100
Foreign
USA
Frontegra Strategies LLC
Body corporate
USA
100
Foreign
USA
Frontegra Asset Management Inc.
Body corporate
USA
100
Foreign
USA
Magellan Financial Group Ltd | Annual Report 2024
Page 84
Directors’ Declaration
For the year ended 30 June 2024
In the Directors’ opinion,
a.
the financial statements and notes set out on pages 47 to 83 are in accordance with the Corporations Act 2001 (Cth), including:
i.
giving a true and fair view of the Group's financial position as at 30 June 2024 and of its performance for the year ended on
that date; and
ii.
complying with Accounting Standards, the Corporations Regulations 2001 (Cth), International Financial Reporting Standards
as disclosed in note 1 and other mandatory professional reporting requirements;
b.
the consolidated entity disclosure statement required by section 295(3A) of the Corporations Act 2001 (Cth), set out on page 84,
is true and correct as at 30 June 2024; and
c.
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 2024.
This declaration is made in accordance with a resolution of the Directors.
Andrew Formica
Executive Chairman
Sydney
15 August 2024
Magellan Financial Group Ltd | Annual Report 2024
Page 85
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
Ernst & Young
200 George Street
Sydney NSW 2000 Australia
GPO Box 2646 Sydney NSW 2001
Tel: +61 2 9248 5555
Fax: +61 2 9248 5959
ey.com/au
Independent auditor’s report to the members of Magellan Financial Group
Ltd
Report on the audit of the financial report
Opinion
We have audited the financial report of Magellan Financial Group Ltd (the Company) and its subsidiaries
(collectively the Group), which comprises the consolidated statement of financial position as at 30 June
2024 and the consolidated statement of profit or loss and comprehensive income, consolidated
statement of changes in equity and consolidated statement of cash flows for the year then ended, notes
to the financial statements, including material accounting policy information, the consolidated entity
disclosure statement and the directors’ declaration.
In our opinion, the accompanying financial report of the Group is in accordance with the Corporations
Act 2001, including:
a.
Giving a true and fair view of the consolidated financial position of the Group as at 30 June 2024
and of its consolidated financial performance for the year ended on that date; and
b.
Complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s responsibilities for the audit of the financial report
section of our report. We are independent of the Group in accordance with the auditor independence
requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional
and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including
Independence Standards) (the Code) together with the ethical requirements that are relevant to our audit
of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance
with the Code.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our
audit of the financial report of the current year. These matters were addressed in the context of our audit
of the financial report as a whole, and in forming our opinion thereon, but we do not provide a separate
opinion on these matters. For each matter below, our description of how our audit addressed the matter
is provided in that context.
We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the audit of the
financial report section of our report, including in relation to these matters. Accordingly, our audit
included the performance of procedures designed to respond to our assessment of the risks of material
misstatement of the financial report. The results of our audit procedures, including the procedures
Magellan Financial Group Ltd | Annual Report 2024
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Liability limited by a scheme approved under Professional Standards Legislation
performed to address the matters below, provide the basis for our audit opinion on the accompanying
financial report.
1. Management and performance fee revenue
Why significant
How our audit addressed the key audit matter
For the year ended 30 June 2024, management
fees were $256,748,000 and performance fees
were $19,206,000 which equates to 67.81% and
5.07% of total revenue and other income
respectively as disclosed in Note 4 to the financial
report.
The Group’s key revenue streams are
management and performance fees earned by
Magellan Asset Management Limited (MAM), a
consolidated subsidiary, through the investment
management agreements in place with third
parties and Magellan Funds.
Revenue from management and performance
fees is earned and calculated in accordance with
the Investment Management Agreements and
Constitutions of the funds. Performance fees are
dependent on the portfolio outperforming certain
hurdles and are only recognised in the statement
of profit or loss and comprehensive income when
MAM’s entitlement to the fee is highly probable,
which is at the end of the relevant performance
period.
Due to the quantum of these revenue streams
and the impact that the variability of market-based
returns can have on the recognition and earning
of performance fees, this was considered a key
audit matter.
Our audit procedures included:
•
Recalculating management fees, on a sample
basis, in accordance with contractual
arrangements;
•
Assessing the performance fees recognised
for the year from funds and mandates, on a
sample basis, and assessing whether they
met the relevant recognition criteria per the
requirements of the Australian Accounting
Standards. This included assessing the inputs
into the calculation model, its clerical accuracy
and assessing the methodology applied in
accordance with contractual arrangements;
and
•
Assessing the adequacy of the disclosures
included in Note 4 to the financial report in
accordance with Australian Accounting
Standards.
Magellan Financial Group Ltd | Annual Report 2024
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2. Investments in associates
Why significant
How our audit addressed the key audit matter
As at 30 June 2024, the Group’s associates were
valued at $159,958,000 which account for
14.69% of total assets. The equity accounted
share of profit from associates was $10,295,000.
The Group classifies investments in entities over
which it has determined to have significant
influence as associates in the statement of
financial position and applies equity method
accounting in accordance with the requirements
of AASB 128 Investments in Associates and Joint
Ventures.
The Group’s accounting for its associates,
including the determination that the Group has
significant influence over the entities, equity
method accounting and impairment assessments
was considered a key audit matter due to the
quantitative impact on the Group’s financial
statements.
Our audit procedures included:
•
Evaluating the Group’s assessment of
significant influence over the investments, and
the relevant accounting treatment and
presentation thereon;
•
Testing the appropriateness of the equity
accounting for the Group’s investments in
associates. We issued audit instructions to the
auditors of the associates (components)
where required, covering matters significant to
the Magellan audit. We assessed the auditor’s
final report and confirmed procedures were
performed in accordance with our instructions
and the conclusion reached was appropriate
for the purposes of our audit;
•
Evaluating the Group’s assessment of
impairment indicators for their investments in
associates; and
•
Assessing the adequacy of the disclosures
included in Note 8 and Note 21 to the financial
report in accordance with Australian
Accounting Standards.
3. Investment in listed equities and Magellan Funds
Why significant
How our audit addressed the key audit matter
The Group has a significant investment portfolio
consisting of listed equities and investments in
Magellan Funds. As at 30 June 2024, the value of
these non-current financial assets, as disclosed in
Note 7 to the financial report totalled
$404,825,000 which equates to 37.17% of the
total assets held by the Group.
Note 7 to the financial report discloses that the
Group’s investments are classified as ‘financial
assets at fair value through profit or loss’
(“FVTPL”) in accordance with the requirements of
AASB 9 Financial Instruments.
Our audit procedures included:
•
Obtaining and assessing the assurance
reports on the controls of the funds’
administrator in relation to investment
management services and evaluating the
auditor’s opinion, their competence, objectivity
and the results of their procedures;
•
Agreeing all investment holdings to third party
sources at 30 June 2024;
•
Agreeing the fair value of investments in the
portfolio held at 30 June 2024 to independent
pricing sources for listed securities/funds. For
unlisted funds, on a sample basis, we agreed
the investment prices to available redemption
information; and
Magellan Financial Group Ltd | Annual Report 2024
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Pricing, exchange rates and other market drivers
can have a significant impact on the value of
these financial assets and the financial report,
therefore the valuation of the investment portfolio
was a key audit matter.
•
Assessing the adequacy of the disclosures
included in Note 7 and Note 22 to the financial
report in accordance with Australian
Accounting Standards.
4. Goodwill impairment assessment
Why significant
How our audit addressed the key audit matter
The group has goodwill of $106,152,000 as at 30
June 2024.
Goodwill has been recognised as a result of the
Group’s historical acquisitions, representing the
excess of the purchase consideration over the fair
value of assets and liabilities acquired. On
acquisition date, the goodwill has been allocated
to the applicable Cash Generating Units
(“CGUs”).
Goodwill is required to be tested for impairment
on at least an annual basis. The determination of
recoverable amount requires judgement on the
part of management in both identifying and then
calculating the value of the relevant CGUs.
Recoverable amounts are based on
management’s view of variables and market
conditions such as future price and assets under
management growth rates, the timing of future
operating expenditure, and the most appropriate
discount and long-term growth rates. Accordingly,
it was considered a key audit matter.
Our audit procedures included the following:
•
Assessing the Group’s determination of the
CGUs to which goodwill is allocated;
•
Assessing managements methodology used
in the impairment model to calculate the
recoverable amount of each CGU;
•
Agreeing the projected cash flows used in the
impairment models to the Board approved
plan of the Group;
•
Considering the accuracy of historical cash
flow forecasts;
•
Comparing the Group’s implied growth rate
assumption to comparable companies;
•
Assessing managements methodology and
assumptions used in the determination of the
discount rate, including comparison of the rate
to market benchmarks;
•
Testing the mathematical accuracy of the
impairment model for each CGU;
•
Assessing the Group’s sensitivity analysis and
evaluating whether any reasonable
foreseeable change in assumptions could lead
to a material impairment; and
•
Assessing the adequacy of the disclosures
included in Note 9 to the financial report in
accordance with Australian Accounting
Standards.
Information other than the financial report and auditor’s report thereon
The Directors are responsible for the other information. The other information comprises the information
included in the Company’s 2024 annual report, but does not include the financial report and our auditor’s
report thereon.
Our opinion on the financial report does not cover the other information and accordingly we do not
express any form of assurance conclusion thereon, with the exception of the Remuneration Report and
our related assurance opinion.
Magellan Financial Group Ltd | Annual Report 2024
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A member firm of Ernst & Young Global Limited
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In connection with our audit of the financial report, our responsibility is to read the other information and,
in doing so, consider whether the other information is materially inconsistent with the financial report or
our knowledge obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the Directors for the financial report
The directors of the Company are responsible for the preparation of:
a.
The financial report (other than the consolidated entity disclosure statement) that gives a true and
fair view in accordance with Australian Accounting Standards and the Corporations Act 2001; and;
b.
The consolidated entity disclosure statement that is true and correct in accordance with the
Corporations Act 2001, and
for such internal control as the directors determine is necessary to enable the preparation of:
i.
The financial report (other than the consolidated entity disclosure statement) that gives a true and
fair view and is free from material misstatement, whether due to fraud or error; and
ii.
The consolidated entity disclosure statement that is true and correct and is free of misstatement,
whether due to fraud or error.
In preparing the financial report, the directors are responsible for assessing the Group’s ability to
continue as a going concern, disclosing, as applicable, matters relating to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes
our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit
conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material if,
individually or in the aggregate, they could reasonably be expected to influence the economic decisions
of users taken on the basis of this financial report.
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional
judgment and maintain professional scepticism throughout the audit. We also:
►
Identify and assess the risks of material misstatement of the financial report, whether due to fraud
or error, design and perform audit procedures responsive to those risks, and obtain audit evidence
that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a
material misstatement resulting from fraud is higher than for one resulting from error, as fraud may
involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal
control.
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►
Obtain an understanding of internal control relevant to the audit in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Group’s internal control.
►
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by the directors.
►
Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If
we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s
report to the related disclosures in the financial report or, if such disclosures are inadequate, to
modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our
auditor’s report. However, future events or conditions may cause the Group to cease to continue as
a going concern.
►
Evaluate the overall presentation, structure and content of the financial report, including the
disclosures, and whether the financial report represents the underlying transactions and events in a
manner that achieves fair presentation.
►
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or
business activities within the Group to express an opinion on the financial report. We are
responsible for the direction, supervision and performance of the Group audit. We remain solely
responsible for our audit opinion.
We communicate with the Directors regarding, among other matters, the planned scope and timing of
the audit and significant audit findings, including any significant deficiencies in internal control that we
identify during our audit.
We also provide the Directors with a statement that we have complied with relevant ethical requirements
regarding independence, and to communicate with them all relationships and other matters that may
reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate
threats or safeguards applied.
For the matters communicated to the Directors, we determine those matters that were of most
significance in the audit of the financial report of the current year and are therefore the key audit matters.
We describe these matters in our auditor’s report unless law or regulation precludes public disclosures
about the matter or when, in extremely rare circumstances, we determine that a matter should not be
communicated in our report because the adverse consequences of doing so would reasonably be
expected to outweigh the public interest benefits of such communication.
Report on the audit of the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 27 to 45 of the directors’ report for the year
ended 30 June 2024.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
Magellan Financial Group Ltd | Annual Report 2024
Page 91
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
In our opinion, the Remuneration Report of Magellan Financial Group Ltd for the year ended 30 June
2024 complies with section 300A of the Corporations Act 2001.
Responsibilities
The Directors of the Company are responsible for the preparation and presentation of the Remuneration
Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an
opinion on the Remuneration Report, based on our audit conducted in accordance with Australian
Auditing Standards.
Ernst & Young
Clare Sporle
Partner
Sydney
15 August 2024
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Corporate Sustainability and Responsibility Report
For the year ended 30 June 2024
We are pleased to be making progress in the efforts of the business in addressing environmental, social and governance (ESG) related
priorities, within our investments, as an asset manager, and at the broader corporate level. These priorities are summarised in this
report, and we encourage you to read the other resources referred to in this report which address these important issues, all of which
can be found on our website at www.magellangroup.com.au.
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Corporate Sustainability and Responsibility Report
For the year ended 30 June 2024
Climate
In 2024, we released our first Climate Report, alongside our Annual Report. This report aligns to the recommendations of the Task
Force on Climate Related Financial Disclosures (TCFD). It details our ongoing commitment to climate change efforts and outlines our
management strategies for climate-related risks and opportunities in both our corporate operations and in investee companies. This
section of the report offers a summary of our activities and performance in 2024. For more detailed information, please refer to our
Climate Report, which can be found on our website.
The Climate Report includes our annual reporting on corporate Greenhouse Gas (GHG) emissions and the carbon footprint of our
portfolio that were previously disclosed in the Annual Report.
As part of the Net Zero Asset Manager’s (NZAM) commitment, we have focused our efforts in the last year on assessing the ‘alignment’
of our investee companies to net zero utilising the Net Zero Investment Framework (NZIF). This analysis undertaken by Magellan’s
investment team informs reporting progress against the targets set in calendar year 2023.
•
A year after setting our NZAM targets, our investment team conducted an analysis of all investee companies’ alignment to net
zero. This was achieved by reviewing near term and net zero targets, emissions disclosures, alignment with TCFD reporting,
and assessing the credibility of their climate strategy to reach net zero. Based on the investment team’s analysis, the ESG team
determined the investee companies’ ‘alignment’ to net zero using the NZIF framework.
•
We are pleased to report the in-scope portfolios are tracking well against our targets.
•
Results of the NZIF alignment have informed our engagement and stewardship activities throughout the year, in accordance with
our Climate Stewardship Strategy. Engaging with investee companies is crucial to evaluate the credibility of their targets and to
comprehend any technological hurdles in committing to these targets, which subsequently inform future alignment assessments.
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Corporate Sustainability and Responsibility Report
For the year ended 30 June 2024
Governance
Magellan is committed to best practice corporate governance standards. The Group’s governance structures and practices support
the Board in their oversight of the Group in delivering its corporate objectives. Magellan views that achieving best practice corporate
governance standards adds value to stakeholders and raises regulator and investor confidence in our business. To achieve this
objective, Magellan has in place a framework of Board committees and sub-committees, policies, processes and systems that facilitate
decision making within a Board approved risk management framework. These systems, policies and processes apply to various
aspects of our business, including, but not limited to, Board and management, risk management, corporate reporting, disclosures,
remuneration, as well as policies and procedures specific to our core operations as a funds management business.
Governance highlights in the 2024 financial year include:
•
Completion of Magellan’s Board renewal program which commenced in November 2022 and has resulted in the appointment of
four new directors;
•
Implementation of a new transitionary leadership structure with the appointment of Andrew Formica as Executive Chair, Hamish
McLennan as Deputy Chair and Lead Independent Director, and Sophia Rahmani as Managing Director of Magellan Asset
Management Limited; and
•
Adoption of a new risk management framework for climate-related risks and opportunities.
In the 2025 financial year, Magellan intends to undertake a governance review to ensure we continue to embody the highest standards
of best practice across our business.
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 October 2023, Magellan announced additional retention payments to current employees with outstanding share purchase plan
(SPP) loans which will close these loans out for the vast majority of staff by September 2025. Magellan is now in the process of
implementing new employee equity plans that will enable staff to have ownership of Magellan shares with the SPP loan program
suspended in 2022.
As at 30 June 2024, approximately 45% 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 like-for-like roles to ensure that there
are no pay inequalities and adjusting compensation based on this review if required, so as to ensure that variances in compensation
reflect the relative performance of employees. This year the Workplace Gender Equality Authority (WGEA) published the Gender Pay
Gap for all Australian companies. Magellan’s gender pay gap is largely driven by more males in senior higher paid roles across the
business. While we have a relatively even split of females to males across the business, there is a higher proportion of males in
senior higher paid roles within the business, whereas a higher proportion of our females are in more junior or support roles which
are generally paid at a lower rate. Magellan is committed to maintaining pay equity for like roles and performance. We continue to
monitor and review our people processes to ensure that there is no bias in how we select, promote and reward our people.
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For the year ended 30 June 2024
Engagement and retention
The continued engagement and retention of our people is critical to the success of Magellan.
Magellan launched a full Engagement Survey in December 2023 and followed this with a Pulse Check in June 2024. With a very high
response rate from staff to both surveys, we were able to understand what was important to them and this forms the basis of a number
of our people initiatives.
With the appointment of Andrew Formica as Executive Chair in October 2023 and Sophia Rahmani as Managing Director of Magellan
Asset Management Limited in May 2024, all staff have had the opportunity to engage with each of them in small group settings within
the first month of their appointment. These sessions were used as an opportunity for each to get to know the whole team and all staff
to have the opportunity to get to know their new leaders. These sessions have continued throughout the first half of 2024 and given
the strong response from our people the intention is to continue these sessions.
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. This year we introduced a formal
feedback process to the annual reviews enabling staff to seek feedback from a wider group of stakeholders from across Magellan.
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.
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 has adopted a hybrid work environment that enables our people to have the flexibility to
choose the arrangements that best suit their circumstances.
Wellbeing initiatives
Magellan provides a number of health and wellbeing initiatives 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.
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.
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For the year ended 30 June 2024
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.
This year we introduced a series of "lunch and learn" sessions which have enabled our staff to learn about a range of different
topics, including having our charity partners through Hearts and Minds sharing the work that they have been able to do through
Magellan’s support.
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 the Board, 40% for senior management and 40% for the overall Group. The gender
representation across the Group as at 30 June 2024 is shown below.
As noted above, 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”). A copy of Magellan’s 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.
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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 four 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 including hosting a “Stock Pitch” competition.
Given the success of the program and the diverse talent we have been able to attract via it, Magellan’s intention is to add a summer
internship program going forward that would offer opportunities across the different Magellan teams, both within the investment
function and the other areas of Magellan. We hope these initiatives will lead to employment opportunities within the Group.
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 need for flexibility. Magellan recognises
individual employees have different requirements when it comes to flexibility 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.
Whistleblower Policy
Magellan is committed to an environment where employees (and non-employees) can report issues in an environment free from
victimisation. Magellan maintains a Whistleblowing Policy which is designed to ensure that wrongdoing is uncovered and to give
individuals the confidence to speak up.
Magellan is committed to identifying and addressing wrongdoing as early as possible and protecting and supporting the dignity,
wellbeing, career (for employees) and good name of anyone reporting an issue. Magellan’s Whistleblowing Policy can be found on
Magellan’s website: www.magellangroup.com.au.
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
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.
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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.
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 and the J.P. Morgan Corporate Challenge.
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 2024 financial year, this equated to
approximately $0.6 million in respect of funds managed by Magellan. Magellan is a foundation member and had an allocation of 8.5%
of the assets under management of FGG at 30 June 2024.
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. During the year, Magellan hosted charity partners through Hearts & Minds Investments at Magellan’s offices to learn about
the important work these charities do for the community.
Climate
During the year we have published our first inaugural Climate Report, aligned to the recommendations of the Task Force on Climate
Related Financial Disclosures (TCFD). This builds on Magellan’s previous climate related reporting through the annual reports and CDP.
Refer to Climate Report which can be found on our website.
Modern Slavery
Magellan’s Modern Slavery 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.
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Magellan is committed to Responsible Investment across our Magellan-branded funds and Airlie-branded funds. In our Magellan-
branded funds, we believe that successful investing is about identifying quality companies and investing for the long term. As
long-term owners we look for unique attributes in our companies that enable them to protect and grow earnings into the future. This
includes material Environmental, Social and Governance (ESG) issues that may impact the sustainability of future cash flows. As a
result, we integrate ESG issues into our investment process, exercise our proxy voting rights and engage with portfolio companies on
a broad range of issues to manage risk for our investors.
Stewardship is integral to our investment process. Magellan’s annual Proxy and Engagement Review highlights the philosophy and
implementation of our stewardship activities and provides details and statistics on our engagement and proxy voting activities. For our
latest Investment Stewardship Reports visit: www.magellangroup.com.au/about/responsible-investing.
In the last year we have continued to add to our investor insights related to Responsible Investment including focused annual reviews:
‘InReview’, ‘Magellan In The Know’ podcasts, interviews with company executives focused on sustainability topics and ‘Magellan
Minutes’, all available on our website.
Industry Certification
Magellan is a signatory to several 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 human rights and climate change.
In the last year,
•
We have met our commitments under the Net Zero Asset Managers initiative through setting targets for funds in scope and
releasing our first Climate report.
•
We have joined the World Benchmarking Alliance (WBA) through the Collective Impact Coalition (CIC) for Ethical Artificial
Intelligence (AI), signing the Investor statement on Ethical AI.
•
Contributed to the RIAA Human rights working group and the RIAA AI and Human rights toolkit.
•
Received improved PRI, RIAA, and CDP scores on our most recent submissions.
By contributing to 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.
We continue to enhance our ESG integration, stewardship, and client communication, which has been recognised this year by the
Principles for Responsible Investment (PRI) in our 2023 assessment.
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We are also pleased to be named a Responsible Investor in the RIAA benchmark report. This acknowledges our commitment to
responsible investing and our explicit consideration of ESG factors in investment decision making.
This year, Magellan Core ESG Fund has received classification as a ‘Sustainable Plus’ investment product from the Responsible
Investment Association of Australasia (RIAA). The classification signifies the degree to which sustainability is a consideration and
binding investment criteria and that the Magellan Core ESG Fund has adopted the operational and disclosure practices required
under the Responsible Investment Certification Program and meet all requirements of the Responsible Investment Standard. See
www.responsiblereturns.com.au for details.
As part of our process, we continue to assess the material ESG risks and opportunities and in the last year we have deepened our
research and integration on Climate change and Human rights as priority investment themes across the investment team.
Climate Change
During the year we have published our first inaugural Climate Report, aligned to the recommendations of the Task Force on Climate
Related Financial Disclosures (TCFD). This builds on Magellan’s previous climate related reporting through the annual reports, CDP,
and PRI. The Climate Report details our commitment to addressing climate change and elaborates on our strategies for managing
climate-related risks and opportunities within our investee companies.
Over the past year, we have focused on assessing the portfolio companies progress towards targets and credibility of their climate
strategy as part of our commitment to Net Zero Asset Manager initiative using the Net Zero Investment Framework (NZIF). This
analysis supports the targets Magellan has set for in scope funds
3, and our broader climate risk management across all funds to ensure
that companies in our portfolios remain resilient and take advantage of opportunities.
The analysis has helped to inform our stewardship activities on Climate Change by prioritising portfolio companies that are ‘not aligned’
to the attainment of Net Zero. Where we have seen no progress from companies in terms of setting Net Zero aligned targets or other
criteria in assessing alignment to Net Zero as defined by NZIF, staged escalation will be considered including voting and potentially
divestment. We recognise that Climate Change is a long-term complex issue that requires a long-term approach. We have made a
commitment in line with our NZAM targets and will provide annual updates on our progress. For further information, please refer to
the Climate Report.
Human Rights
The companies we invest in have a responsibility to respect human rights through meeting international standards, policies and
increasing expectations from employees, customers and other stakeholders. Mismanagement of human rights risk can expose the
investee company to future government regulation or changes in consumption patterns due to an erosion in trust or social licence to
operate, potentially making them a higher risk investment from investors’ perspective4. Exposure to human rights violations differs
across industry and geography, this is assessed and monitored by the investment team. We incorporate human rights risk into our ESG
3 In scope funds, identified as part of our commitment to NZAMi, include Magellan Global Sustainable, Core ESG and Energy Transition Fund.
4 Magellan ESG Policy: magellangroup.com.au/general/docs/responsible-investing/esg-policy/
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assessment where material, with an additional analysis for all portfolio companies with respect to modern slavery, as defined within
the Australian Modern Slavery Act 2018.
This year, we have expanded our human rights research to further incorporate the human rights risk related to the rapid uptake
in AI. While we have a high conviction in the structural tailwinds of AI, we must also understand the potential human rights risks
associated with this expansive technology. We have focused our research on the assessment of the human rights impact from the
uptake in AI incorporating this into company engagement, investor education and collaboration across the responsible investment
industry. More information is available on Magellan’s website, under Responsible Investing.
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 investment team that analysts assess as material to those companies within our proprietary ESG risk and
opportunities assessment framework.
ESG issues are considered as part of Magellan’s investment process, as gaining a robust understanding of these 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 consider material risks that could impact future cashflows. 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 to support improved shareholder returns over time:
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.
2.
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.
During the financial year ended 30 June 2024, Magellan met with over 180 companies across more than 500 engagements on a range
of ESG topics. These engagements were split across ESG as follows: 24% on environmental issues, 39% on social issues, and 37%
of engagements on governance issues. A further breakdown of topics discussed with investee companies are displayed 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.
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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 2024 is provided below:
Category1
In line with Company
Recommendation
Against Company
Recommendation
Board Related
98%
2%
Compensation
88%
12%
Audit/Financials
100%
0%
Capital Management
96%
4%
Other
93%
7%
Shareholder Proposals:
- Environmental
78%
22%
- Social
85%
15%
- Governance
44%
56%
1 Statistics based on ballots that are not subject to re-registration requirements.
Airlie - Responsible Investing
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 2024, Airlie engaged with portfolio companies on a range of material ESG. These engagements
were split across ESG as follows: 27% on environmental issues, 33% on social issues, and 40% of engagements on governance issues.
A further breakdown of topics discussed with investee companies are displayed in the graphic below. There was a continued focus on
the key issues of climate change and energy transition, modern slavery and executive remuneration.
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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 2024 is provided below:
Category1
In line with Company
Recommendation
Against Company
Recommendation
Board Related
94%
3%
Compensation
80%
7%
Shareholder Proposals:
100%
0%
- Environmental
100%
0%
- Social
100%
0%
Capital Management
45%
0%
Audit/Financials
100%
0%
Changes to Company Statutes
100%
0%
Other
100%
0%
1 May not add to 100% as Management do not provide a recommendation for all resolutions, most often due to a conflict of interest.
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Corporate Information
As at 15 August 2024
Directors
Andrew Formica – Executive Chairman
Hamish McLennan – Deputy Chairman
David Dixon – Deputy Chairman of MAM
John Eales AM
Cathy Kovacs
Deborah Page AM
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 Ltd 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 Ltd | Annual Report 2024
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Shareholder Information
As at 9 August 2024
Substantial Shareholders
Shareholder
Date
noticed received
Number of
shares
Percentage of
capital in notice
BlackRock Group (BlackRock Inc. and subsidiaries)
19 March 2024
11,006,898
6.05
Dimensional Fund Advisors LP (and subsidiaries, associates and
related bodies corporate)
11 March 2024
9,045,573
5.00
Voting Rights
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.
Analysis of Holdings
Fully paid ordinary shares
Holdings ranges
Number of
holders
Number of
shares
Percentage of
shares on issue
1-1,000
26,540
9,517,931
5.27
1,001-5,000
9,961
22,444,204
12.42
5,001-10,000
1,410
10,250,025
5.67
10,001-100,000
979
22,161,483
12.26
100,001 and over
72
116,372,685
64.38
Total
38,962
180,746,328
100.00
Number of holders with less than a marketable parcel of securities
3,701
109,998
MFG 2027 Options
Holdings ranges
Number of
holders
Number of
options
Percentage of
options on issue
1-1,000
44,617
4,660,938
20.08
1,001-5,000
1,093
2,230,964
9.61
5,001-10,000
168
1,193,395
5.14
10,001-100,000
266
7,750,836
33.38
100,001 and over
30
7,379,402
31.79
Total
46,174
23,215,535
100.00
Options issued to employees under the MFG ESOP
Holdings ranges
Number of
holders
Number of
options
Percentage of
options on issue
1-1,000
-
-
-
1,001-5,000
4
20,000
0.33
5,001-10,000
4
40,000
0.67
10,001-100,000
59
3,107,500
51.64
100,001 and over
16
2,850,000
47.36
Total
83
6,017,500
100.00
Magellan Financial Group Ltd | Annual Report 2024
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Shareholder Information
As at 9 August 2024
Twenty Largest Holders
Fully paid ordinary shares
Holder Name
Number
of shares
Percentage of
shares on issue
HSBC Custody Nominees (Australia) Limited
38,883,499
21.51
Citicorp Nominees Pty Limited
26,769,137
14.81
JP Morgan Nominees Australia Pty Limited
20,306,942
11.24
Netwealth Investments Limited - Wrap Services
3,770,432
2.09
National Nominees Limited
2,388,425
1.32
Mr David Doyle
1,500,000
0.83
BNP Paribas Nominees Pty Ltd - Agency Lending
1,486,723
0.82
BNP Paribas Nominees Pty Ltd
1,459,328
0.81
ACE Property Holdings Pty Ltd
1,370,000
0.76
Merrill Lynch (Australia) Nominees Pty Limited
1,208,957
0.67
Aljamat Pty Ltd - C & D Baer Family
1,150,000
0.64
Jash Pty Limited
891,030
0.49
BNP Paribas Nominees Pty Ltd - IB AU Noms Retailclient
854,970
0.47
UBS Nominees Pty Ltd
775,532
0.43
IOOF Investment Services Limited - IPS Superfund
698,897
0.39
Glenn Hargraves Investments Pty Ltd
650,000
0.36
BNP Paribas Nominees Pty Ltd - Barclays
611,086
0.34
BNP Paribas Nominees Pty Ltd - Hub24 Custodial Serv Ltd
585,562
0.32
Citicorp Nominees Pty Limited - Colonial First State Inv
456,459
0.25
Mr Frank Casarotti
450,000
0.25
Total shares held by the 20 largest shareholders
106,266,979
58.79
Total ordinary shares on issue
180,746,328
MFG 2027 Options
Holder Name
Number
of options
Percentage of
options on issue
HSBC Custody Nominees (Australia) Limited
746,478
3.22
HSBC Custody Nominees (Australia) Limited - A/C 2
648,010
2.79
Citicorp Nominees Pty Limited
549,093
2.37
Vagabond Ventures Pty Ltd - Vagabond Investments
500,000
2.15
Nelle Rett 1D Pty Ltd
343,112
1.48
JP Morgan Nominees Australia Pty Limited
335,823
1.45
Orange Clogs Pty Ltd - Orange Clogs Superfund
325,522
1.40
Mr Ernst Kohler
305,627
1.32
Weth Share Trading Pty Ltd
249,578
1.08
Mrs Anjana Nandha
236,500
1.02
Mrs Jolande Jantje Den Otter
231,336
1.00
Mrs Bhavna Rajeshkumar Soni
225,000
0.97
Mr Mohan Singh Nandha
221,000
0.95
Ms Jie Chen
205,803
0.89
Mr James Lindesay Napier Aitken
200,000
0.86
Mr David Doyle
187,500
0.81
Marsev Pty Limited - Marsev Unit
183,729
0.79
Mr Sureshbir Krishna Kaushal & Mrs Meenakshi Kaushal
171,351
0.74
Aljamat Pty Ltd - C & D Baer Family
163,750
0.71
Ms Chiung Hua Wang - The C H Wang Family
149,773
0.65
Total MFG 2027 Options held by the 20 largest option holders
6,178,985
26.62
Total MFG 2027 Options on issue
23,215,535
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