Good morning, all. My name is Primal De Silva. I work in the Strategy and Investor Relations team here at Magellan, and I'll be your moderator for today's Annual General Meeting. Before we commence today's proceedings, I'd like to first acknowledge the traditional owners of the land on which we meet today, the Gadigal people of the Eora Nation, and pay my respects to their elders, past, present, and emerging. I'll now start with some housekeeping matters. Today's AGM is an in-person event and is being live-streamed for those who could not make it. If there are any questions from shareholders or proxy holders, we'll be happy to address them. Questions will be addressed immediately after the Chairman's address, and questions relating to items of business will be addressed at the relevant resolution. I'll now provide an overview of how to vote. To...
Sorry, to ask questions and how to vote. To ask a question, please raise your blue or yellow card, and we'll call upon you to ask your question. Once called upon, a Magellan representative will come over to you with a microphone. Please wait till you receive the microphone to ask your question. We request that you ask a maximum of two questions to allow all shareholders a chance to ask their questions. Please also state your name and who you're representing when asking your question. Now on to how to vote. Upon registration, shareholders would have received a blue voting card that provides for the holding of a poll of, on the resolutions put to shareholders. You will need to complete this card in order for your vote to be counted. Shareholders who wish to vote for a resolution, please mark the For box.
Shareholders who wish to mark, vote against the resolution, please vote mark the Against box. Shareholders who wish to abstain from voting on the resolution should mark the Abstain box. Abstentions will not be counted in computing the required majority for the poll. If you're a proxy holder, you must comply with the direction of the shareholder if you wish to lodge a valid vote. If you've already submitted a proxy vote, your existing vote will be canceled and not counted today. On that note, I'll now like to pass on to Magellan's Chairman, Andrew Formica, to give to his address. Thanks.
Good morning, ladies and gentlemen. I'm Andrew Formica, Executive Chairman of Magellan Financial Group Limited. On behalf of the board, I welcome you to our 2023 Annual General Meeting, which is now formally open, as there is a quorum present. I also extend a warm welcome to those shareholders watching today's live stream. I would now like to introduce our directors, Hamish McLennan, Deborah Page, John Eales, Cathy Kovacs, David Dixon, and Colette Garnsey, and also our Company Secretary in the audience, Marcia Venegas. A brief biography of each of these appears in the company's annual report. We also welcome Clare Sporle, a partner from the company's external auditors, Ernst & Young, and representatives also of the share registry, Boardroom Pty Limited.
The minutes of the previous Annual General Meeting, held on the 20th of October, 2022, have been approved by the board and signed by the chairman. These minutes are tabled and are available for inspection for any shareholder wishing to see them by contacting the company. The notice of Annual General Meeting has been made available to all shareholders. I will take the notice of meeting as read. I'll now take a moment to outline this morning's agenda. We've allotted sufficient time for today's meeting, and it will conclude approximately midday. I will shortly make some opening remarks, and following this, we will consider the formal items of business, which are the receipt of the company's financial statements and reports, the adoption of Remuneration Report, the re-election of John Eales as director, and the elections of each of Cathy Kovacs, David Dixon, Deborah Page, and myself as directors.
I appoint David Parkinson from Boardroom Pty Limited as Returning Officer. The Returning Officer will arrange for the counting of the votes in accordance with the voting exclusions as set out in the notice of meeting. Following the polls, the meeting will be closed and the votes tallied. Results of the polls will be released to the ASX later today. They will also be made available on our website. On the screen is the formal disclaimer regarding any forward-looking statements that any of the directors may make today. All comments are subject to the formal disclaimer that is now shown on the screen. Turning now to my Chairman's address. Thank you for giving me the time to address you all today at our 2023 Annual General Meeting. Given my m...
Recent return to Australia from the U.K. after 27 years, I'm conscious many of you may not know me or my background. Briefly, I've worked in the funds management industry for over 30 years, the last 14 years of which were as CEO of global businesses. I was delighted to be appointed to the board of Magellan, a company I had admired from afar. I have now stepped into the business as Executive Chair of the board as it undertakes its search for the new CEO of Magellan. What attracted me to Magellan was the deep relationship it holds with its clients, its strong focus on the art of active investment management, and a clear history of innovation and growth.
For today's presentation, I will provide an update on governance and on our people, followed by an update on the business before moving on to my initial thoughts on the business and the opportunities that lie ahead, including my immediate priorities. Following my presentation, we will move to a Q&A session, starting with addressing pre-submitted questions and then open it up to the floor for further questions. Before I begin, I would like to address the leadership changes announced recently, which saw David George step down from his role in the business. This was a necessary change agreed by David and the board as we start to focus more prominently on our forward growth agenda. The board and I are grateful to David for his contribution to the business during what was a very challenging period.
During his time, David focused on stabilizing the business in the wake of changes to the investment team and leadership, rebasing our cost base to reflect the change conditions, to set about refining our strategy to diversify the business, finding more effective ways for the investment team to operate, and launching and seeding new products. David and I spoke about the immediate priorities of the business to move forward along its growth plans, and through these conversations, it was clear to us both that the business would be better suited, better served by a new leader, whose expected tenure would be aligned to the needs of the business and had a proven track record in the recruitment of new investment teams, especially through the skill set of negotiating and acquiring founder-led firms.
I thank David for his candor and openness in these conversations, and wish him the best for his future career. While the initiatives undertaken by David have set a strong foundation, it is important we now turn our attention towards activities to grow and deliver on our strategic objectives. The board and I are eager to restore Magellan as one of Australia's leading fund managers, and I'm personally committed to leading Magellan until such time as a new CEO is appointed. A necessary step in setting up Magellan for the future was to complete the board renewal process that we commenced at the end of 2022, and to bring a broad range of skill sets that will be required for our success in the future. Over the past 12 months, Magellan has welcomed David Dixon, Deborah Page, Cathy Kovacs, and myself as new directors to the board.
I would also like to thank Rob Fraser and Colette Garnsey for their tireless commitment and the wealth of experience they have brought to Magellan. I'm extremely pleased with the latest additions to the board and the wealth of experience and knowledge these new directors bring. Specifically, we have added expertise in the areas of investment management, technology, private markets, and acquisitions. We also recognize the importance of retaining historical corporate knowledge, and it is for this reason that I felt it was important to ask John Eales to remain on the board and to seek re-election as a director today. The combination of fresh perspectives while retaining our essential corporate knowledge through John and Hamish positions the board well to guide the company forward. The board now comprises five non-executive directors and myself as executive chair.
This arrangement will be in place while we conduct the search for a new Chief Executive Officer. To maintain independence for our committees and in line with good corporate governance, I have stepped off the Audit and Risk, and also the Remuneration and Nominations Committee, for the period that I remain Executive Chair. I strongly believe the board now has the right mix of skills, experience, and diversity for the business going forward. I'm also pleased that our gender diversity remained in line with our target of 33%. These changes position Magellan well to accelerate the implementation of our strategy and to drive the company's growth plans. Now, turning to our people. In my three months within the business, I've had the opportunity to sit down with pretty much all of our 113 people.
My initial observation is that they are an exceptional group of people, and importantly, they have shown an unwavering commitment to delivering for our clients and our shareholders, despite the recent challenges. It was, however, evident that the last 18 months have been tough on our employees. In particular, there was a continued anxiety and stress associated with the employee share purchase plan loans that are still outstanding for approximately 60% of staff. Anything that distracts employees to the extent is detrimental to our business outcomes, and that is why I was determined to address this. As a result, we announced on the 25th of October that additional retention payments of approximately AUD 7.7 million will be made to current employees who have outstanding ESPP loans. These will effectively close out the loans for the majority of staff by September 2025.
This was a crucial step to take to ensure our people remain focused on delivering for our clients and shareholders, and I appreciate the strong support in resolving this from many of the shareholders who I have spoken to subsequently. Another employee-related priority is replacing the equity participation mechanism that staff had through the ESPP with a more traditional equity participation model that is aligned to short-term and long-term shareholder outcomes. It needs to be remembered it was hard to engage with staff on this change until such time as the ESPP loans were resolved. Now, having achieved that, I'm committed to implementing the new Employee Accountability and Alignment Model by the end of June 2024, and I expect to bring it to shareholders for approval at our next AGM.
This equity participation plan will provide employees with short-term and long-term equity-based incentives that are designed to deliver positive outcome for shareholders. In designing this, we are engaging with proxy houses and institutional shareholders to ensure it reflects both market standard practices and the specific needs of our business. An employee incentive plan is pivotal to retaining and attracting talent to our business, which is central to our forward growth plans. It is necessary to establish Magellan as a home for exceptional talent. Finally, I've been pleased with the successful launch of Magellan's refreshed values. They are: our people put clients first, our people take ownership, our people are authentic, and our people succeed together. Corporate values drive behavior and underpin the outcomes of a business, and thus, it was imperative that new values reflecting our future direction were created....
These values were designed in consultation with staff, and we have held workshops across the organization to bring these to life. At the heart of these values lies Magellan's unwavering commitment to excellence for our clients and each other, which in turn will drive shareholder outcomes. Now, turning to an update on the business. Looking at the key metrics, as of the 31st of October, Magellan had funds under management of AUD 34.3 billion. This reflects a substantial decrease in funds under management compared to the heights of recent years. However, Magellan does, however, remain significant within the global landscape of fund managers, and I believe has the foundations upon which to rebuild. I know this level of assets under management is a cause of concern for you, our shareholders, and I want you to know that I am focused on it.
Over the last three months, I've made it a priority to meet with our clients and advisors, both existing and those that have left, to understand what could be done to improve the situation. Other key financial metrics for the full year 2023 financial year included: profit before tax and before performance fees of, for the fund management business of AUD 212 million, adjusted net profit after tax for the group of AUD 174 million, adjusted diluted earnings per share of AUD 0.955 per share, total ordinary and special dividends of AUD 1.167 per share, franked at 85%, comprising ordinary dividends of AUD 0.867 per share, and a special dividend of AUD 0.30 per share.
These financial metrics indicate that notwithstanding the significant challenge we faced, Magellan remains a profitable business, one with considerable potential. Alongside the announcement of our intention to make additional retention payments to staff, we also announced revised cost guidance for our fund management business from AUD 95 million-AUD 100 million to AUD 97.5 million-AUD 102.5 million for full year 2024. This reflects the full year 2024 impact of the additional retention program that I outlined earlier. Turning to the financial strength of the business, one of the enduring strengths of Magellan since its founding has been its strong balance sheet. Our strong balance sheet has consistently enabled the company to co-invest alongside our clients, to capitalize on attractive opportunities, and will provide us with the firepower to attract new talent and return the business to growth.
At the 30th June 2023, Magellan had AUD 945 million in cash, financial assets and investment in associates, as well as access to an undrawn debt facility. Net cash flow from operating activities in full year 2023 was AUD 187 million. This is a significant support for our business as we've addressed our challenges and is viewed positively by our clients. The board remains committed to disciplined capital management, but also recognize that our strong balance sheet provides flexibility to execute on our strategy. We will continually review the company's capital requirements in line with our objectives of ensuring capital efficiency and delivering attractive, sustainable return to shareholders. Finally, on performance of our key strategies, as of the 31st of October, all three of our established investment strategies are outperforming their respective benchmarks over one year and also since inception.
It is also pleasing that the Airlie Australian Share Fund is outperforming its benchmark over all the time horizons shown here. Across each of our strategies, including our newer products, the focus of our investment teams continued to be to deliver sustained long-term investment performance for our clients. Now that I've touched on where we've been over the last few months, as well as the business performance over the full year 2023, I wanted to share my initial observations of Magellan. Having spent most of my career offshore, I have always admired Magellan from afar. Founders Hamish Douglass and Chris Mackay built and fostered an entrepreneurial culture, which saw Magellan deliver new and innovative solutions for clients.
From being one of the first fund managers in Australia to offer a global equity strategy all the way back in 2006, to pioneering the development of the active ETF in 2015, and more recently, becoming a foundational investor in the highly successful Barrenjoey Capital Partners, this innovative and entrepreneurial spirit is embedded in Magellan's DNA. So why is this important? I am a firm believer that the impact on technology on the funds management industry in the coming years will be profound, and that those that adopt and evolve with this disruption will thrive. While the financial services sector has seen significant disruption and innovation over the past two decades, the funds management industry has lagged behind other sectors in terms of advancements in technology. The risk is even more acute with the rapid development in the field of artificial intelligence.
Although we are starting to see the initial impacts of this in our industry now, it really is only the beginning. Technology, along with other evolving investor preferences, such as their focus on ESG into social investing, and coupled with more pronounced economic cycles, and also the requirement for a dynamic regulatory environment that bring all this together, we have set the stage for the fund management industry to experience rapid and significant transformation in the coming years. Magellan has a significant opportunity to embrace its culture of innovation and to take advantage of this changing landscape by providing intelligent solutions for our clients through innovation.
The potential applications of this are far-reaching, ranging from enhancing our investment processes, to transforming the interactions we have with our clients, to optimizing our own business processes and operations, and even new areas that, of investments that today aren't even in the design stage. These opportunities excite me, and I'm particularly pleased that we've been able to add the extensive financial services experience of Cathy Kovacs to the board, who, in her most recent executive role, was responsible for driving Westpac's strategic initiatives towards the future of financial services and managing a portfolio of investment in early-stage, innovative and disruptive fintech businesses. Cathy's direction and guidance will be invaluable as the team embraces its culture of innovation and drive growth, and together with the rest of the board, who bring extensive experience in M&A, private markets, open up a lot of new opportunities for Magellan.
Now, turning to my broad strategic vision for Magellan. I am a firm believer that there is and continues to be an important role played by active management in the investment management industry. Our purpose as an active manager is twofold: It's firstly, to protect and grow the wealth of our clients, and doing so by allocating capital to areas of the businesses that build a better world for society and the planet we live in. The growth in recent years of passive investment strategies, and in Australia's particular case, the insourcing of management and the subsequent allocation of passive strategies by the superannuation industry, drives an even greater need for strong, local, active managers. This is essential to maintaining a balanced ecosystem and ensuring the most efficient allocator of capital through economic cycles to business that benefit the world we live in.
From this perspective, I believe there will always be demand for active investing. I should also be clear that the broad strategy to diversify the business outlined at last year's AGM remains unchanged. While not necessarily targeting AUD 100 billion in assets under management, to me, assets under management really is an outcome of delivering for our clients rather than a strategic goal. The underlying premise of the strategy remains, and that is to leverage our strong existing platform across investment, distribution, and operations, to diversify the business, and to increase the strong investment talent we have in the business, enabling us to deliver on our commitment to grow the wealth of our clients. Importantly, we are positioning Magellan for the next phase of its evolution, from a founder-led business into a more diversified global fund manager that delivers exceptional investment performance for our clients.
At the heart of this strategy lies a commitment to being a client-led organization, a quality that Magellan, that has been ingrained in the organization's ethos since its founding. As our shareholders are aware, our industry is fundamentally based on trust, and that is why it's paramount that we always prioritize our duty to our clients. Placing the client at the core of our business ensures that we always have the best interest in mind, and it means we align our investment strategies and decisions with the direction our clients are heading in. This commitment is key to our own success and growth. With clients at the top, the very next tier of importance, in my view, is our people. Key to achieving strong outcomes for our clients is the best-in-class talent, so it is essential that Magellan becomes a home for the best talent in the market.
With this in mind, we will nurture and develop our own in-house talent and capabilities, and also look to build upon the existing investment capabilities by strategically acquiring talented teams or boutiques that add to the intellectual capacity of the business as a whole. We are actively in discussions with teams and talent that recognize Magellan's extensive platform and distribution capabilities that will help fuel their own future growth. To this endeavor, we must also consider global trends and opportunities, such as technological disruption, societal and demographic shifts, and changes to allocation by our clients, driven by climate change, as we evaluate these opportunities. I believe if we get these two things right, that is, focusing on our clients and becoming a home for the best investment talent, we stand in a strong position to deliver growth and attractive returns for you, our valued shareholders.
Turning now to what I see are our immediate priorities. As I've mentioned, our chief focus is our clients, and it goes without saying that we must, as an organization, restore trust, confidence, and value to our clients. We are making progress on this journey. However, there is more to do. Over the last three months, I've spoken to many of our clients or our client advisors, and I'm encouraged by the support that they continue to give us as a business. But there is much more we can do, and our recent challenges have been an unwanted distraction against the successful management of their portfolios. They prefer to hear from us on our investment decisions rather than our corporate changes. Another key area of focus has been the Magellan Global Fund Closed Class, which is listed under the ASX ticker of MGF.
Magellan Asset Management Limited, or MAM, as responsible entity of the fund, has announced that it remains committed to the development of a proposal for the conversion of the Closed Class Unit into the Open Class Units. This is a significant piece of work that the team is undertaking, and MAM looks forward to providing investors further details in due course. If a conversion proposal was implemented and subject to unitholder and regulatory approvals, it would lead to the Closed Class Units converting into the Open Class Units and would permanently address the discount to the net asset value that has been prevalent for the last two years for this class of unitholders. It is also important we increase our focus on sales efforts in our newer products.
As shareholders may be aware, during full year 2023, we announced our new Energy Transition Investment Strategy, the relaunch of Magellan Core Series funds, and the launch of our new Airlie Small Companies Fund. While it will take time for these investment strategies to deliver track record and therefore grow client acceptance, these represent attractive products in areas of growth, and I'm excited to see these products increasing in front of our clients, and initial feedback and support is encouraging as they are important levers of future growth. It is also critical that we deliver on our existing ESG commitments and continue to build upon them in the future with our funds, but also at the corporate level. These objectives underpin our commitment to responsible and sustainable investment practices and demonstrate our dedication to reducing risk in our portfolio for our clients.
We are making good progress on the ESG front, but there remains a lot more we can do before we can truly be a leader in this space. Moving to our colleagues. With the launch of our refreshed Magellan values early in the year, it is now time to embed these values across the organization. As noted earlier, it has been pleasing to see workshops held across the business, where our staff have been able to engage on these values and share what the values mean to them and what it means to work at Magellan. These values guide our decision-making, set the tone for our corporate culture, and establish trust with our clients, who are increasingly seeking to invest with organizations that share their values, beliefs, and principles.
I'm also eager to continue working with our senior executives and to leverage my background in leadership and as a CEO of global funds management businesses, to develop and nurture this group. By providing guidance and support to the senior executives, and also the organization as a whole, we can speed up and streamline the decision-making across the group. As mentioned earlier, we are also committed to the development of our new Employee Accountability and Alignment Model by June 2024. This model is all about providing our employees with short-term and long-term equity incentives that align their interests with you, our shareholders. This is an important step in transitioning from a founder-led business to a more mature corporate. We're introducing traditional equity-based incentives to align our staff with investment and business outcomes by continuing to reward short-term success, while aligning them to long-term growth and sustainability of our organization.
Notably, we have actively engaging with our shareholders, clients, and other stakeholders to gather feedback on the model's design, and we'll be able to share more detail about this with you at our full year 2024 results. Now, turning to our capabilities. One of the near-term priorities will be enhancing our global distribution footprint. One of Magellan's significant strength is its market-leading distribution and marketing team, which has relationships with clients globally. Bolstering this distribution effort internationally will position us for growth as we diversify the business. It is also critical we do not stand still from a product development perspective. Our approach in this regard will be to continue to innovate and identify opportunities in segments where we anticipate future client demands to grow. Our key question here should not be: What do our clients want now?
But rather, what will our clients want three or five years from now? To this end, I am introducing a strategic product committee, which is bringing together our senior leaders in our distribution, investment, and corporate functions, who will own the product and investment capabilities we develop in the future. Whilst Executive Chair, I will also conduct a review of governance structures based on my experience leading global fund management businesses, leaning on the extensive experience of my board colleagues in this area. I think this is an area where we can improve. Finally, as I mentioned earlier, the disruption of the funds management industry through technology presents a significant opportunity for Magellan across our capabilities, including in our operations.
Implementing technological solutions through our operational functions should, in time, streamline our processes, reduce costs, and mitigate risks, but will also empower our team to make better, informed, data-driven decisions. I'm excited by the opportunities that present themselves in this space. So in conclusion, the priorities I have outlined here reflect my early views on where Magellan should be directing its attention over the next 12 months to return to growth. Before we move to Q&A, it's worth making some closing remarks. Magellan's extensive platform provides us with a competitive strength that is not easily replicable. We have a unique opportunity to leverage this and drive growth by introducing innovative products and offerings that meet our clients' current and future needs. Being led by our clients and becoming a home for the best investment talent are key pillars of this strategy.
As I mentioned earlier, we are actively exploring opportunities to invest in high-quality teams and capabilities in areas where we see potential for future growth. Our financial strength and robust balance sheet provide us with strategic optionality and the capacity to execute on our strategic vision. Each of these characteristics excite me for the next chapter of Magellan's growth, as we continue on the journey to restore Magellan as one of Australia's leading fund managers. Finally, I would like to again thank retired directors, Karen Phin and Robert Fraser, and retiring director, Colette Garnsey, for their commitment and contribution to Magellan over a large number of years. I would also like to take the opportunity to thank our people for their commitment and contribution through the year, and to extend my thanks to all my fellow directors for their continued support.
Importantly, I would also like to thank you, our shareholders, for your continued support in Magellan. I acknowledge and appreciate we have tried your patience over the last two years. The significant reduction in the share price, driven by the large shift in client assets we manage, has created a very difficult position for our long-standing shareholders. We are committed to improving the business performance through the acceleration of our strategic plans. We recognize, however, it will be a long path back to recovery, and we thank you for your support and commitment as we embark on this. We'll now move to answering shareholder questions. We're going to start with questions that were received in advance of the meeting, from shareholders before, we'll then open it up to the floor.
Where there are multiple questions on the same topic, from questions received, we've already amalgamated those, and questions relating to items of the business, which we address once we reach the relevant resolution, we'll address them then. Primal, please read out the first pre-submitted question.
Thank you, Andrew. We've received a number of questions relating to Magellan's share price and what we are doing to return it to previous levels.
Thank you, Primal. We acknowledge and appreciate our concerns of shareholders, given the share price decline. The board has been disappointed with the decline in Magellan's share price, and we are focused on improving outcomes for shareholders. The share price is a function of many factors, including our fund under management, our earnings, market conditions, and investor sentiment, to name a few. While we cannot predict where the share price will go, the company has a clear strategy in place, and we know that if we execute this strategy well, we can expect the business to return to growth.
Thank you. We've also received a number of questions on whether the board and management have a plan to turn around the company.
We do have a plan in place to return Magellan to growth and to turn around the company. To do this, we must execute our strategy over the long term, but also to address the current challenges facing the business and deliver on our more immediate priorities. Without recapping the full strategy, which I outlined earlier in my remarks, the key elements we need to get right to deliver growth are: delivering strong investment performance in our strategies. We then need to grow our offerings to clients organically and inorganically. We need to deliver exceptional client service to the engagement we have with our clients. And if we do these things right for our clients, we expect we'll be maximizing our ability to retain and then grow our funds under management, which is the key underlying driver of future earnings and, and returns.
The next pre-submitted question is: How long will it take to turn around the company?
Yeah, the turnaround will take time. We are confident that we have a very strong foundation of which to build and grow, with an excellent platform, with outstanding investment talent across multiple strategies, market-leading distribution team, I would point out, and great support functions. The key is to leverage these platforms to deliver exceptional outcomes for our clients, and if we do this well, we'll be well-placed to put Magellan back on a positive trajectory.
Thank you. The next question is whether there is a risk of the company collapsing.
Look, that is an important question to address concerns about the company's stability. Magellan remains a strong financial position with significant scale still in fund under management, a track record of profitability, and paying, good dividends, strong operating cash flows, and an extremely robust and strong balance sheet. We also continue to have careful risk management and strategic decision-making, and talented, experienced team in place. So I would say the, the risk is very low, given those characteristics.
The next question is: what actions are being taken by Magellan to address climate change in Magellan's own operations, as well as in its investments?
Thanks, Jamal. That's a very topical question. Magellan is highly committed to addressing climate change in our business and also in our investments. A lot of detail on the initiatives we support and undertake are outlined in our corporate sustainability and responsibility report that you can find in the 2023 annual report. However, I will mention some of the highlights that come from that. Within our fund management and investments, climate-related risks are integrated into our investment process, and we engage with companies on ESG risk regularly, including in relation to proxy voting. We are a signatory to a number of initiatives, including the Principles of Responsible Investment, the Responsible Investment Association Australasia, the Tobacco-Free Finance Pledge, and the Net Zero Asset Management Initiative.
Now, under the Net Zero Asset Management Initiative, we have set a 2030 target for assets to be managed in line with the goal of net zero emissions by 2050 or sooner. We've developed a climate-focused stewardship and engagement policy, which is also available on our website, and we have committed to reviewing targets at a minimum of every five years. If we now turn to the corporate level, as a capital-light fund management business, Magellan has a very modest environmental footprint, and we have low emissions intensity per AUD 1 million of revenue. We are also a signatory to CDP, previously known as the Climate Disclosure Project, which we have reported to for seven consecutive years and under which we measure and publicly disclose our Scope 1 and Scope 2 emissions annually.
Thank you, Andrew. The next question is: What is causing the continued institutional outflows, and what is being done to stop outflows?
Stabilizing funds under management is a key priority for the business, and we are focused on what we can control, which is focusing on delivering strong investment performance and delivering exceptional service to our clients. This includes engaging transparently with our clients, advisors, and research houses to ensure they understand what is happening with our portfolio and our business. Unfortunately, since the changes to our global investment team, driven by key personnel departures in that area, many of the consultants who supported us have recommended to their clients to review their holdings. This has led to a sustained and significant decrease in assets in this strategy held by institutional investors. This is despite encouraging performance in this strategy in recent periods, as I showed earlier.
The other side of this is inflows and attracting new assets under management, which will come through selling our strategies, including our newer strategies, to existing clients, but also getting in front of new clients in different markets. Inflows tend to lag investment returns, and if we can deliver sustained investment performance, we would expect to see inflows over time.
Thank you. The next question is: Staff costs represent an increasing percentage of Magellan's cost base. What measures will be undertaken to reduce staff costs in the remainder of FY 2024?
As a fund manager, our people, our business is heavily reliant on human capital, and our people are fundamental to delivering the value for clients and generating returns for our shareholders. Staff costs, therefore, represent the largest component of our cost base. We have, however, made good progress on reducing our cost base, and that's evident through the decrease in the fund management business expenses, which were AUD 121 million in full year 2023 to our 2024 expense guidance of AUD 97.5 million-AUD 102.5 million, so some 15% lower year-on-year. This included our organizational realignment that we set out in October 2022, where we made changes to the team, targeting simplicity and efficiency.
Thanks. What is the team doing to reinstate trust in the company?
Restoring trust in Magellan is a top priority, and we understand that this is crucial for our long-term success and our reputation in the industry. The key to achieving this will be to make clients the focal point of the decisions we make, and is ultimately delivering for our clients, which will deliver value to our shareholders. This includes being open and transparent, ensuring accountability and objectivity through the right governance structures, through maintaining a long-term focus and being honest about where we've made mistakes. This is an ongoing process that will take time, but we are making progress in this regard.
The next question is: How much is spent on director rewards, travel, and expenses?
A detailed breakdown of our expenses is outlined on page 45 of our annual report, and I would encourage you to look at that. But generally speaking, non-executive director fees and broader travel and entertainment expenses for all our staff represent only a very small proportion of our cost base, roughly 2%. Magellan's platform is lean, and the organization has always had a cost-conscious culture.
Moving to the final pre-submitted question, it is: Given the board's deep funds management experience and given the strength of Magellan's balance sheet, is there an example of a successful funds management business around the world which Magellan aspires to?
Yeah, that's a, that's a good question, and I do get asked that quite a bit. I'd say the most successful fund management businesses are diversified, and they continually evolve and meet client objectives through varying economic cycles. In order to achieve this, a fund management business needs to have diversified revenue streams that behave differently over these cycles. With Magellan's entrepreneurial DNA and my global experience, I'm confident we can restore Magellan as the leading fund management business here in Australia. And I sort of see Magellan as unique in the Australian marketplace, with a distinct culture and focus. But examples of firms that have a similar client-focused, active management approach, I would point to maybe Wellington, PIMCO, or The Capital Group in the U.S.
Also, there are firms that have shown a desire to embrace technology to drive change and innovation in the way they run their business. Examples of that could be Man Group in the U.K., Fidelity or BlackRock, which have used technology as a cornerstone for their strategy.
Thank you, Andrew. That concludes the questions received in advance. We'll now move to questions from the floor.
Thanks.
So, as noted earlier, to ask a question, please raise your blue or yellow card. Once called upon, a Magellan representative will come to you with the mic. As noted again, we ask that you ask only two questions to allow everyone the opportunity to ask their questions. Please also state your name and, where relevant, who you're representing. So we'll take some questions. Thanks.
Hi, my name is Dudy Jap. I'm a shareholder of Magellan. I've got numerous questions, but I'm gonna stick to two for now. First of all, I'd like to say to Mr. Frank Casarotti, you have been instrumental in getting Magellan to the funds under management of over AUD 100 billion. Can you delay your retirement? But other than that, my question is, on page 63, you've got intangible assets. Now, basically, your funds under management was over AUD 100 billion in 2021. Now, right now, in 2023, your funds under management is under AUD 35 billion, but you got customer relationships such as Airlie Group for five years and also Frontier Group for seven years.
But over the two-year period, your funds under management has decreased to, decreased by 66%. How can you say that via the pre-submitted questions and that you've got deep relationships, if that has happened? That's my first question.
Would you like me to answer that, or you give your second question, and then we'll answer both?
I'll probably get you to answer that question. Yeah, let's answer that question first.
Okay. Thank you. I appreciate and acknowledge the large decline we've seen in assets under management, which have predominantly been in our global strategy as we saw key leadership in that change about 18 months ago. We have also seen it in our Airlie business, where the retirement of the lead manager there, John Sevior, did see some institutional clients redeem their assets. So I agree with you, it's very disappointing to see that. In terms of the relationships, we still have a very loyal shareholder base, but some people have a policy. A lot of our institutional clients were advised by consultants who put us on watch and also have a policy when you see such significant changes to review their mandate.
And that is what's seeing the vast majority of those declines.
But it doesn't make sense that you put five years and seven years as a useful life of that asset, where you see a decline in funds under management. Are you gonna revise that, as in, say, less than, say, three to six months to seven years or something like that? And also, as well, and also as well, with regards to slide eight, I did not see that you put down there with Magellan's... The reason why I've invested in Magellan is because you follow the Warren Buffett's principle in regards to buying awesome, excellent businesses at heavily discounted prices. Why isn't that on that slide, instead of saying, "Oh, we want to invest of growth"? How do you mean by that? Like, basically, if you're saying, for example-...
NVIDIA and Tesla's poised for growth, are you willing to purchase that at any price, or, what's your strategy there, there? Or is it, is it still purchasing good businesses at heavily discounted price, which is Magellan's, Magellan's core principle, and that's why I invested in that.
Yeah. Thank you for your question. Just going back to your question around the five years and seven years. That, those are based on the accounting standards that were at the time of those acquisitions. So the acquisitions were made in 2018, and that was a period that we used over that, for that time. That's. They don't change because of that. They were set at that point. To your question on our philosophy and approach to investing, when we're talking here, we're talking about Magellan Financial Group as a company and how do we grow. What you're asking about, how we manage those portfolios, that is how our global team... Its philosophy and its investment, that is unchanged.
So while there's been leadership team at the top, the portfolio managers underneath that, the analysts are unchanged and still follow that same policy and principle as they have since 2006. So that, that principle that you appreciate of looking Warren Buffett-style questions for quality companies at intrinsically below their value, that remains at the core of the process that we do for those funds.
Thank you, Andrew. We've got a question in the center here. Thanks.
Kerry. Kerry Bible. As a representative for the self- managed super fund, and I hold proxies for several of a thousand, or another shareholder with several hundred, shares. Several thousand, actually. I've got a comment, and then I've got a question. First of all, I think it was a very good idea that you did the loan for the employees. I think that's a positive. It would certainly give them a better feeling in coming to the company, and I think that's good. I wouldn't be keeping my shares unless you pay a dividend, and the dividend is substantial at 90%-95%, and I think that should continue, because I'm thousands and thousands in the red on the cost base.
So if it didn't pay a dividend, I'd sell, and if I'm just typical of others, we'd all be selling. So that part was good, and I applaud the buyback as well, because that could help with the dividend, too. So that's the positive comment. Looking at the first page, the five-year summary of your report, I just noticed that your total expenses from June 2022 to June 2023, it went up from AUD 116,582 to AUD 163,372. Keeping in mind, the number of employees have gone down from 135 to 115. Even allowing for some severance payments or whatever, it just seems an awful lot of extra, cost base. Same with the, under the same thing, the funds under management business.
You've got total revenue and total expenses, and the difference between 2022 and 2023 just seems to be that your expenses are going up all the time when you've got less employees. And then you're talking about acquiring, in your speech, new teams and different things. That will only put your costs up even more, won't it?
Kerry, thank you for your questions. And firstly, on the comments you made, you know, I appreciate your support for the removal of the ESPP loans. And yes, I can confirm that the dividend policy of paying out 90%-95% remains unchanged, and your other comment on the share buyback. In regard to the expense performance, if you sort of look on page... My eyesight's not great here. On page 13, you can see that the adjusted expenses for the fund management business did go down, only modestly, but they went down 3%.
The difference in what you're seeing on the five-year plan is the impact of strategic initiatives, which is driven by investments we have in the funds and various other changes that do move around in the business and has driven a AUD 50 million increase year-on-year, as those unrealized gains and losses are reflected in our P&L. They can reverse, they can change, as we go. We tend to focus on the actual operating expenses, which is shown there on that, and we'd like to hope and expect that the strategic changes that you've seen there do end up being positive through time, but there will be periods where you see large swings, which you saw last year. That's as much also driven by the market conditions.
In relation to strategic initiatives, obviously, if we were to do anything that was to be looking at acquisitions, they'd be having to have a substantial discussion at the board around the financial impact and be able to demonstrate to shareholders that they added value, preferably in the very short term, but certainly over the longer term, significant value to shareholders. And so of getting a very sufficient return on capital of what we would invest in that, 'cause it's a high bar we would have to have before we'd make any of those investments, if we were to make them.
Thank you. We'll move to this side of the room and then come to the middle here.
Chairman, it's great to welcome you to Magellan. I think the fact that you bring global experience is something that's going to all be well for this company. What makes you think that we're not a target from other large players at a significant discount?
... Yes, thank you. And, we may well be a target. I do believe as a business, there's significant value and potential in what we can do, and that's our job as a board and as a business to unlock that. I can't run the business or worry about being a target. The best thing I can do is to deliver the value inherent in the business and its structure and focus on what we can control. If we were a target, if someone did wish to come and make an offer for the company, of course, as a board, we'd have to evaluate that, and we'd also have to put that to shareholders.
It's not our intention to look for those, but of course, we, as any public company, you're always at the whim of other shareholders wishing to acquire that business. The best thing we can do is focus on what we can do and really drive the value, the inherent value in the business, and to demonstrate that through an improved share price and improved business performance.
Thank you. Second question is, I've read recently about Sandon Capital, not that I have any affiliation with them at all. However, I'm just wondering what the view really is, or the hesitancy about potentially returning some funds to shareholders. How much capital do we really need to set aside?
Yeah. And I think Gabriel from Sandon is here in the audience, so maybe over a tea and coffee, you could make your acquaintance. In terms of the philosophical views of what Sandon have put out around Magellan, a lot of them are very much in line with what we've been doing. You know, we've reduced the cost base, we've sorted out the SPP loans, where we're looking to invest in our global equity strategy and utilize our distribution arrangements to really drive forward growth. So we're actually aligned on quite a large number of areas there, and I thank Gabriel for his very constructive comments he's given us. In terms of the return of capital, what I would say is, we do look at that, and obviously, we gave a special dividend.
We've reinstated the share buyback recently. So we are returning shareholder value. But we are balancing it against the needs of the business. While the business is still going through its sort of stabilization and return to growth, I think that capital has provided a significant support from our clients. They have made several comments to us about how they appreciate both the investment for making the fund, but just the soundness of the balance sheet to do that. There are a number of initiatives, depending on how they develop over the next year or so, that may or may not need capital support.
So I think over the next year or two, we will evaluate what needs us to keep the business from being a strong business and what are not required over and above our needs of business, and then we can look to return that. But I wouldn't. I'd be reluctant to move very quickly into that. I've seen many in our industry move to what I would call a capital light model, where they've returned nearly all the excess capital they had, and then what they've found themselves in a bit of a strategic conundrum where they'd like to make changes to their business and they don't have the ability to do so. So I think there is a balance in there, and we as a board are very committed to try and get that balance right.
So it is an ongoing board discussion, but in the very short term, I do think it provides comfort and support to our clients.
Thank you, Andrew. Let's move here to the center.
Thank you. Yeah, my question relates to the statement in the chairman's letter, where you talk about share buyback. And I noticed at the thirtieth of June, you'd bought back 4.3 million shares for AUD 47 million, average of AUD 10.90 or thereabouts. The shares are now tracking 40% below that. So what I'd like to know is, what have you done recently to lift that number? Because it seems to me a no-brainer to be buying shares back at this level.
Yeah. Thank you for your question. There's a number of reasons that do prohibit us at certain periods, buying back our shares. And we've been in periods, over the more recent past that have, restricted us. And actually, the announcement of two weeks ago was one that sort of had stopped us up to that. Having got through that announcement two weeks ago, we are... I can confirm we've actually been back buying shares at current levels, in the, in the very recent past.
So, but how many have you bought back? I'd like to have a report. Sorry, John Homewood is my name.
Hi, John. Yeah.
What I'd like to know is, how have you lifted that AUD 4.3 million?
Yeah.
What's the figure now?
Yeah. So we've only bought back 50,000 yesterday. You will see that we publish the amount we purchase every day on the ASX, and you'll see us ongoing announcing what those buybacks are. And we're actively in the market buying shares.
What's holding you back?
Before this period, there was periods where, given our corporate responsibilities, we're unable to have been buying back shares, and the corporate changes that we announced two weeks ago was one such period that held us back from being able to buy that, buy back shares. With that having been changed now, we're in a position to be able to do so, and we've therefore just started the program again this week.
Because you agree that this puts a... Sends out a positive message-
Yes
to the market
Agree.
for a company to be buying back its own stock.
Agree, John, and that's why this week we fully confirmed and are back at buying shares in the market.
Thank you for the question. We'll move to this gentleman in the middle. Thank you.
Good morning, and as always, thank you for your time today and throughout the year. My question goes to strategy and the new CEO. You've talked to the... You've give the sense with what you've talked about today, that the strategy going forward over the next 12 months, two years, or what have you, is clear, it's defined, it's known, it just needs to be executed. That's the sense, the sense I get. So that's the question is: How correct is that? In the context of the new CEO, that's a work in progress at the moment. So at some point, X, you're going to allocate the new person, and he's going to be in the job. What is his top three priorities initially when he starts?
It could be a her as well, I'll just say.
Oh, I'm sorry, yes, of course.
Um-
The person.
Yeah. In terms of... You're right. I think the direction of travel of our strategy is set, but the fine-tuning of that will fall to and be the remit of the new CEO. And that's why we're actively recruiting the CEO at the moment. We've had a number of-- I'd actually say I'm very pleased with the candidate list that we've had, and we're actively pursuing those as quickly as we can. And so hopefully, we can be in a position to announce that person as soon as we can. Obviously, we'll announce it to you as shareholders. One limitation of being executive chair while you're looking for a CEO is the fact that a lot of the remit of some of the strategic decisions we make, particularly around new investment teams, falls to the CEO.
There will be a period with the CEO we hire, most likely, that they will be out of the market because of their existing contractual arrangements at the firms they're working in. So there'll be a period where we can announce they're coming to join the firm, but they're not able to fully work for us. At least in those situations, we'll be able to engage on areas that, so we don't hold back our strategy until they physically join. So they would have some input, at least, in the direction we're going. But the clarity of the focus around the diversification and bringing in new investment teams is well, is well accepted by all of the candidates that we're talking to. They appreciate that strategy. They sign up to that.
So I don't believe that a new CEO is gonna do a very different strategic direction, but obviously, you'd expect them to bring their experience, and their sort of stamp on what we do, and that's what we're really looking for. In terms of the characteristics, obviously, someone who can have strong followership, very strong engagement with our, with our clients, because that's, you know, reestablishing that trust. I mentioned a lot of technology in my speech. Someone who's technologically curious. They don't need to have been in a technology business, but I think they need to appreciate how that is changing the way we engage with people and our investment processes, and just really a proven track record as a CEO, building and growing businesses.
Thank you.
We're gonna move to the back of-
Yes, thanks. Thank you.
Thank you. Is this on?
Yeah.
Yes.
Yeah. Okay. Gabriel Radzyminski from Sandon Capital. Congratulations, Chairman, on your appointment, and thank you for those kind words you made about us. Much of your presentation took the wind out of the questions I had, so I'm not coming up about that two-question limit on anything. But just on picking up on the capital management question from before, at today's share price, the market imputes a value for the funds management business at around AUD 250 million-AUD 260 million. As you know, from what we've published, we think that is both cheap. We do think it makes the situation of a potential acquirer seeing a very cheap opportunity to buy the shares.
The challenge we believe exists is that if someone were to make an acquisition approach, is that they're typically priced as a function of share price. And while the share price includes so much excess capital, because you're not a capital light business today, we think that distorts the upside opportunity for shareholders, given the funds management value. You've reinstituted the buyback, which is good to see, a token amount, perhaps, but at least you, you've indicated that it's clearing the decks. Will the board give further thought... You made the point, before that, you know, if there's acquisition opportunities, the board would need to get across them as well as shareholders. That latter part is not quite accurate in that shareholders will get to learn after the board's made a decision.
Whereas if you are truly capital light, you do need to come back to shareholders to raise capital for acquisitions. We certainly think that would be a far more disciplined approach for the board to take, but that's just one—I guess that's probably more of a statement than a question. In terms of the employee, the new Employee Accountability and Alignment Model, we wrote to all of you describing the flaws that we saw in the previous incentive plan, and particularly the fact that there had been no long-term incentive plan devised by the Remuneration Committee. One of the factors why we certainly voted against the Remuneration Report and Mr. Eales's election, and we encouraged others to do the same. You've said that the new Employee Accountability and Alignment Model will be put forward for approval at the next AGM.
We would ask that you seriously consider bringing that forward, to coincide with the appointment of a new CEO, so that shareholders actually know what we're playing with.
Yeah.
We certainly wouldn't object to, you know, an-
An EGM.
AGM, just to consider that matter. But I do think it's important, given that it is more than a year since Mr. Douglass left, and that the company really needs to up its game on that incentive thing. We would suggest that be brought forward as soon as possible.
Yeah. Gabriel, thank you for your comments. As you said, they're more a statement. The first one, and in regard to the long-term incentive plan, it is our intention that the new CEO will be coming under that proposal, and one of the consideration we'll give is whether, if it's developed enough, we take it to an EGM. So I appreciate your thoughts and views and support for that. And as we discuss that, that may well be the best outcome rather than delaying it to the next AGM, but we'll take that under consideration. Thank you.
Thank you. We'll just move here. Thank you.
Yeah, I may have missed this, but David George was CEO and CIO. Now that he's gone, who is the acting CIO, and is the new CEO gonna be the CIO as well? Why have you joined those two roles?
Yeah. It's a good question, and David actually, before several months ago, gave up the dual roles of CEO and CIO. At the full year results, he announced that he was going back to be just CEO, CEO, and Gerald Stack, who's a long-serving member of our investment team, stepped up as head of investments. CIO is a title. Sometimes people think of that as someone who has full control over the investment decision. Head of investment more reflects the fact that they represent the function of the department. The investment decisions, actually, the portfolio decisions, rest with the portfolio managers. So we have a head of investment, who is Gerald Stack, who's been with the group nearly 20 years. And to your question about would the new CEO share the title of CEO and CIO? I can confirm, no.
I don't believe in today's modern investment management firms, someone can perform both those functions. Certainly wouldn't be my intention, and the candidates we're approaching are not people who would be holding the CIO title. They would hold only the CEO title.
Just a supplementary question. The performance is pleasing over the last 12 months, but you still haven't stopped the bleeding. Is there any sign that you're really stabilizing funds under management?
I think in a number of areas, we have seen encouraging signs. So we mentioned that we'd seen, since John Sevior's departure, a decline in the Airlie business on his retirement. Interesting, I'd say there's quite a large pipeline of client engagement on the Airlie business, and numbers are very good, and so I'm very encouraged by the client activity in that area. Our infrastructure business has actually been pretty robust through all the challenges. So the biggest area of decline in assets under management have been in our global area, and it's been predominantly, not solely, but predominantly driven by our institutional clients. We still retain some institutional clients there, but they're a lot smaller than where they have been historically, and therefore, you can't lose an asset twice in that regard.
Those clients, there's very little in terms of future fall from there, and really, it's about being on the front foot and engaging with clients. As you pointed out, we've had one, one decent year in there. We're gonna need two, three years of that consistent performance before we can really get strong engagement, particularly in that strategy. And it's just an unfortunate situation where our business finds itself in, and typical businesses in this area.
Thank you, Andrew. Are there any shareholders who haven't yet asked a question, who would like the opportunity to ask the board a question? Okay, we'll take two more questions here, and then we'll move on to the, items of resolution as we have some.
Okay. Is there any other shareholders that would like to ask a question before I do? Oh, okay. My question is, on page four, it says here, "Meaningful transformation takes time." Now, David, our former CEO, David George, was in the role for 17 months. Basically, for meaningful change to take time, obviously, you would need at least three to five years for his vision or for Magellan's vision to come to fruition. Now, I'm just wondering why he wasn't given a chance to make his vision come true in regards to getting Magellan up to AUD 100 billion in funds under management. And what's gonna happen with the new CEO? Would they be given a chance to have that vision that you've explained to them, Mr.
Formica, to come true, but would they be given a time period, say, three to five years' time? Because that's probably an average of when they can see, that vision coming true, whatever you implemented today.
I think we might just keep it to one question here. We've got one question here-
Okay, sure.
One more there, and then we'll move on to the items of business.
Okay, sure. Not a problem there.
Yeah.
I can ask my other questions in the Remuneration Report.
Thank you. Yeah, to your, to your point that, I think one of the... In the conversations I had with David, one of the things was exactly around the time that David felt he could commit to the business on his own plans, which are both at a personal level and his career objectives. I agree with you. I think it needs to be someone who can commit to well over five years and possibly seven years to really not just implement the changes, but see them through and execute and then see the opportunities that come from those. And that wasn't within David's tenure of what he was expecting to do.
Then there were a number of other conversations about what were the skill sets and just frankly, how David was enjoying it relative to what he owned, his opportunities will be. And he felt that he'd done a very good job, and there's a number of pleasing things that he worked on, but the forward agenda was probably playing less to the skill set than someone else, and that's where we came to that decision. And once we've reached that decision, the question is: Do you act relatively quickly, or do you sit there and work and take time? I think it was important, and the board came to a very clear view that having reached that decision, it makes a more transparent process of getting the new CEO.
So one of the key characteristics of the new CEO is that he or she has the ability to see at least on five years, and I'd be really looking for someone who has the ability to look seven years to 10 years in their tenure, to not just make changes in the business, but therefore implement those and execute and see the benefits that come from that. So that tenure and ability to have that is actually a critical component of the characteristics we're looking in and judging the candidates across.
Thank you for that.
Thank you. We'll move to our last question.
Sorry, this one's a really simple one. You mentioned the Energy Transition Strategy. Where can we find any information about that? There's nothing on the website.
Uh, I'm-
It's been much talked about, and, as a shareholder and even just as an investor, it'd be interesting to see what's happening there and where we can find.
Can I take that on notice, and I'll come back to you.
Thank you.
Okay, thank you. Having given our shareholders a reasonable opportunity to ask their questions, we will now move on to the order of business.
Thank you, Primal. I'm advised by the company secretary that the holders of approximately 85 million of the company's ordinary shares have sent in proxies. In my capacity as Chairman of the company, I've been appointed as proxy by the holders of between 83.2 million and 84.1 million of the company's ordinary shares, depending on the relevant resolution being decided today. Where any of these proxies are open and subject to voting exclusions, votes will be cast in favor of the resolutions we put in the meeting. There will be opportunities for shareholders to ask questions concerning the resolutions before the motion is put to the vote. Unless there is a strong objection, I will announce the proxy voting results after the vote is taken for each resolution.
The proxy voting figures will be as at the closing time for receipts of proxies, which was at 10:30 A.M. on Monday, the 6th of November, 2023. These figures may change if a shareholder who submitted a proxy has attended the meeting today and revoked their proxy. I now propose to proceed with the items of business, which were set out in the notice of meeting. The first item of business on the agenda deals with the financial statements and reports for the year ended 30th of June, 2023, including the Directors' Report and the Auditor's Report, and they have been tabled. No resolution is required in relation to this agenda item, and no written questions solely of the company's auditors have been received from shareholders. I will now take questions from the floor in relation to this item.
If you wish to ask a question, please raise your blue or yellow card.
Sorry, Mr. Chairman, just on an order, matter of sort of the conduct of the meeting. I think it would be best practice for you to put up the proxy voting one just before the poll is taken, so shareholders can see what the numbers are. I think most companies would consider that best practice.
Do we have the... I'll look to those in the-- to do that?
There are no votes on the first item, so-
So we'll do that for the following ones, because there's no votes actually on that first item. We're moving on to. No, I'm sorry. We were, we're just starting on the financial statements. So now if we take the resolutions that require approval, the adoption of the Remuneration Report. Item two concerns the adoption of the company's Remuneration Report. This report forms part of the Directors' Report, which is contained in the company's annual report. The resolution now will be voting on, now appears on the screen. I'll take the resolution as read. I now move to consider item two, adoption of the Remuneration Report, as contained in the notice of meeting and as appears on the screen. I point out that the vote on this resolution is advisory only and is non-binding.
However, the board takes shareholder feedback on this matter seriously. While the poll on the Remuneration Report has not been completed, based on votes already received, more than 25% will be against this resolution, which means that we will incur a first strike on this item. Having spoken to many shareholders, we understand there are a number of reasons for this, including remuneration outcomes not aligned to business performance, the CEO fixed pay levels above peers, a lack of share-based short-term or long-term incentive, and material retention incentive awards. We accept and acknowledge that shareholders are disappointed with our remuneration framework and want to assure shareholders we have taken on your feedback and have already implemented steps to address many of these areas of concerns as we transition from a founder-led business towards a more traditional listed corporate.
As noted in my address, a major part of this is our Employee Accountability and Alignment Model, which we expect to be in place by June 2024. This will allow us for equity-based incentives, a revised remuneration structure for our KMP, and performance-based incentive aligned to shareholder outcomes. Whilst we retain and incentivize our key talent to deliver for our clients and generate future shareholder returns, we look forward to continuing to engage with our shareholders on their concerns and addressing each of these in full in our full year 2024 Remuneration Report. Before putting the motion to a vote, I would like to invite any questions or comments on the Remuneration Report. If you wish to ask a question, please raise your blue or yellow card.
Hi, Chair and Board. Thanks for letting me ask this question. Now, on page 35, you've got the CEO one-off signing bonus, and basically, the first signing bonus of AUD 600,000 was paid when Mr. David George entered the company for AUD 300,000, and also on the within five days of the six-month anniversary. Now, if the new CEO were to come in, would that still be in place, or would you wait until... You said that tenure is important. Would you say that the first cash signing bonus, say, for example, if it's AUD 500,000, that 250,000 would be paid, and if they stayed on board for the next 3-5 years, you'll pay them an additional 250,000 or bonus with that?
That's my first question. Second question is in relation to the share purchase plan and the loans that you're gonna cancel out for employees. Would that impair goodwill, or would that... And would that incur an increasing cost of goodwill? Because you said the group has goodwill of AUD 106.251 million. Now, with regards to that, I wanted to ask also, with that goodwill, what's the expected return? Do you expect the goodwill to make three or four times your money? That's my other question as well. Thanks.
In terms of your questions, we'll look at the ones that relate to the remuneration point. Firstly, the bonus sign-on is related to the individual account, yeah, that we go with. And those sign-ons are typically related to foregone bonuses that they had at their previous employer, and you try and match the time period that they were there. If the individual had bonuses that were payable in three years' time, any sign-on bonus that for those foregone, we would typically relate to the same period, so it would be in three years' time. But it's very specific to the candidate, whether they have any foregone remuneration at all. And so it can't be specific today of what it would be, but it will be related to the candidate. If it w...
It wouldn't likely be six months if they had a long-term sign-on, but it will reflect the payment of what they're foregoing to achieve the best candidate. In terms of the ESP, it's actually not foregoing the loan, so it doesn't have an impact on goodwill. What they're doing is giving retention payments, which will actually run through our P&L as an expense, and over the period those retention payments are made, they're expensed through the accounts. I said earlier that the majority of these will be paid in September 2025, so you should expect over the period from now to September 2025 through our financial accounts, and after that period, they won't be ongoing. So they don't impact the goodwill.
Thank you.
Are there other questions on the Remuneration Report?
No.
Thank you for that.
We'll now proceed to voting. As chairman, I exercise my power to direct that the vote on item 2 is to be taken by way of a poll. As set out in the notice of the meeting and subject to voting exclusions, I will vote all undirected proxies in favor of this resolution. Please submit your votes now in relation to item 2. The proxy voting results for this resolution are shown on the screen there. If we now turn to item 3A, this concerns the re-election of John Eales to the board. John was first appointed to the board on the first of July, 2017. He was re-elected at the company's AGM on the 22nd of October, 2020. He retires in accordance with the Company's constitution and ASX Listing Rule 14.4, and being eligible, offers himself for re-election.
The board, excluding John Eales, unanimously support his re-election. John brings invaluable leadership and governance oversight experience to the board, as well as important corporate knowledge and retention following the board renewal program that we've undertaken. The precise resolution shareholders will be voting on now appears on the screen. Unless I hear to the contrary, I will also take the resolution as read. I would now like to move to consider Item 3A, the re-election of John Eales, as contained in the notice of the meeting and as it appears on the screen. I understand we have received two pre-submitted questions relating to this item of business. So, Primal, can I ask you to read out those first, and then we'll go to the floor for any other questions?
Thank you, Andrew. The first question is: Please explain how John Eales adds financial benefits to the company.
Following the board renewal program, John is one of two remaining directors on the board with tenure over five years, which is important for the board's decision-making when it comes to retaining corporate knowledge and history. I have personally asked him to remain on the board to support the new directors. Through recent challenges, John has contributed a great deal to the business in his capacity as Chair of the Remuneration and Nominations Committee, including driving the changes to the non-exec director fee pool last year, which has allowed Magellan to attract the high-quality new non-exec directors that have been put up today. He's also driven the acceleration of the initial cash retention program for staff to allow them to remain focused on clients and the business during what has been a very stressful period.
He supports the development of the new Employee Accountability and Alignment Model, and more generally, the events at Magellan over the past 18 months have had an impact on staff, and John has provided support and leadership over this time. This includes running a session for the whole company on resilience, and he's also remained available to the staff at all times during this challenging time.
Thank you. The second pre-submitted question is: John is on a lot of boards. Does John have enough time to commit to Magellan?
John is wholly committed to the business, and I've never seen him be unavailable, even at short notice when required. I know John would not take on the role if he wasn't able to commit the requisite time and energy into the role, and John has demonstrated his commitment to the business over the last six years, but particularly so over the last two years. His proven leadership, expertise, and resilience training for all staff was very helpful, and he was instrumental in designing the transition of our remuneration framework away from the previous founder-led structure towards a more typical of an ASX-listed company. We're halfway through the process, having sold the SPP loan to staff, and that allows us now to move towards the equity-based incentive model that I discussed to be implemented for full year 2024.
I'd now like to open for any questions on this resolution from the floor. If you have a question on this resolution, please raise your blue or yellow card and wait for the microphone. As there's no further questions, we'll now proceed to voting. As chairman for this resolution, I exercise my power to direct that the vote on Item 3A is to be taken by way of a poll. As set out in the notice of the meeting, I will vote all undirected proxies in favor of this resolution. Please submit your vote in relation to Item 3A. The proxy and voting results for this resolution are shown on the screen. We'll now move to Item 3B, which concerns the election of Cathy Kovacs to the board.
Cathy was first appointed to the board with effect on the sixth of November, 2023. She retires in accordance with the Company's constitution and ASX Listing Rule 14.4, and being eligible, offers herself for election. The board, excluding Cathy Kovacs, unanimously supports her election. Cathy brings deep experience in the financial services industry, where she has successfully guided emerging and established businesses and has demonstrated a proven capacity for strategic thinking in rapidly changing environments. The precise resolution shareholders will be voting on now appears on the screen, and unless I hear to the contrary, I'll also take this resolution as read. I now move to consider Item 3B, the election of Cathy Kovacs, as contained in the notice of meeting and as it appears on the screen.
If you wish to ask a question of this resolution, please raise your blue or yellow card now. As there are no questions, we'll now proceed to voting. As chairman for this resolution, I exercise my power to direct that the vote on Item 3 B is to be taken by way of a poll, and as set out in the notice of meeting, I will vote all undirected proxies in favor of this resolution. Please submit your vote in relation to Item 3 B now. The proxy voting results for this resolution can be seen on the screen. We'll now move to Item 3 C, which concerns the election of David Dixon to the board. David was first appointed to the board on the 15th of December 2022.
He retires in accordance with the company's constitution and ASX Listing Rule 14.4, and being eligible, offers himself for election. The board, excluding David, unanimously supports his election. David has over 30 years' experience in leading and growing investment businesses within the funds management industry and has extensive experience as a senior investment leader, board trustee, and director of companies. The precise resolution shareholders will be voting on now appears on the screen, and unless I hear to the contrary, I'll take the resolution as read. I now move to consider Item 3C, the election of David Dixon, as contained in the notice of meeting and as it appears on the screen. If you wish to make a question on this resolution, please raise your blue or yellow card now. As there are no questions, we'll now proceed to voting.
As chairman for this resolution, I exercise my power to direct that the vote on Item 3C is to be taken by way of a poll. As set out in the notice of meeting, I will vote all undirected proxies in favor of this resolution. Please submit your vote in relation to Item 3C now. The proxy voting results for this resolution can be seen on the screen. Now, if we move to Item 3D, this concerns my election, and I will step aside as chair for this part of the meeting and hand the chair over to Hamish McLennan, who will address this item of business.
Thank you, Andrew. Item 3 D concerns the election of Andrew Formica to the board. Andrew was first appointed to the board with effect on the 26th of July, 2023. He was appointed Executive Chairman on the 25th of October, 2023. He retires in accordance with the company's constitution and ASX Listing Rule 14.4, and being eligible, offers himself for election. The board, excluding Andrew Formica, unanimously supports his election. Andrew brings over 30 years' experience as an executive and director in the funds management industry, 14 of which he was the CEO of a leading global funds management business. The precise resolution shareholders will be voting on now appears on the screen. Unless I hear to the contrary, I will also take the resolution as read.
I now move to consider that Item 3 D, the election of Andrew Formica, as contained in the notice of the meeting and as it appears on screen. If you wish to ask a question on this resolution, please raise your blue or yellow card. Judy?
There's no question, just a comment.
Yeah.
Okay. Thanks, Mr. McLennan, and, with Andrew Formica, thank you for answering our questions in a most honest and candid manner, and especially with representative Sandon in regards to takeover. I do thank you for your honest feedback, and we can be a, a takeover target and that Magellan will do its best to not be a takeover target. So thank you, and I hope, that honest and candid, feedback and announcement will come from Magellan for many years to come. So I look forward to hearing your communication further. And also to the rest of the board, I look forward to your honest and, forthcoming conversation, and very honest as well, and transparent. So thank you.
Thank you.
Thank you. We will now proceed to voting. As chairman for this resolution, I exercise my power to direct that the vote on Item 3 D is to be taken by way of a poll. As set out in the notice of the meeting, I will vote all undirected proxies in favor of this resolution. Please submit your vote in relation to Item 3 D. The proxy voting results for this resolution can be seen on the screen. I will now hand the chair back to Andrew.
Thank you, Hamish. Thank you, Hamish, and thank you, shareholders, for your vote of confidence. Item 3E concerns the election of Deborah Page to the board. Deborah was first appointed to the board with effect on the third of October, 2023. She retires in accordance with the company's constitution and ASX Listing Rule 14.4, and being eligible, offers herself for election. The board, excluding Debbie, unanimously supports her election. Debbie is a deeply experienced company director with broad experience spanning various ASX-listed, private, public sector, and regulated entities. The precise resolution you'll be voting on now appears on the screen. Unless I hear to the contrary, I'll take this resolution as read. I'd now like to move to consider Item 3E, the election of Debbie Page, as contained in the notice of meeting and as it appears on the screen.
I do understand that we've received a pre-submitted question relating to this item of business, so I'll go to Primal to read out this question.
Thank you, Andrew. The question is: Deborah is on a lot of boards. Does Deborah have enough time to commit to Magellan?
Thanks, Primal, and thanks for the question. As with John and all the other directors of the board, Debbie's are wholly committed to the business, and since joining the board, I've never seen her be unavailable, even at short notice when required. Debbie would not have taken on the role if she wasn't able to commit the requisite time and energy into the role. I'll now go to the floor if there's any questions on the floor. Just wait for the microphone, and thank you.
Thank you, Mr. Chairman. John Homewood, my, is my name, shareholder. Is it customary for the directors to talk to these questions rather than you speak on their behalf? I'm just curious. I would have thought that this is a golden opportunity for the directors, the incoming ones, to... and the ones looking for re-election, to sell themselves here today.
Some boards do it that way, some don't. You're welcome to ask them any questions you like. I think, as I said, their bios are in the, in there. If there's any particular questions you'd like, we can, we could do that. I've seen boards do it both ways, and so that the way we've chosen is their bios are there, you're available to ask any questions. Otherwise, it's very hard, I think, for people to stand up and talk about themselves, and some people get embarrassed doing it, as I would.
I'm happy to make a comment.
Brian Ellison, shareholder. You've mentioned the bios a couple of times being in the annual report. I can't find them. What page are they on, please?
They're also in the notice of meeting and on the website, but we'll make sure we get you a copy, if that's okay?
I'm happy to answer. I'm more than happy to introduce myself to shareholders today. I've spent more than 20 years working as a non-executive director, and prior to that, I was both a partner at one of the large accounting firms and subsequently held senior finance positions at companies like Commonwealth Bank and Lendlease. In relation to the funds management industry, I've been involved both as an auditor in my early career, but more recently, I've spent 9 years on the board of Pendal Group Limited, which was taken over by Perpetual last year, and I spent the last 12 months of that as the chair of Pendal Group.
I have significant experience in governance of an investment management business that operates at a global level, and I think that is particularly relevant for the role that I play here on this board.
Thank you. Thank you, Debbie. We'll now proceed to voting. As Chairman for this resolution, I exercise my power to direct the vote on Item 3 E to be taken by way of a poll. As set out in the notice of meeting, I will vote all undirected proxies in favor of this resolution. Please submit your vote in relation to Item 3 E now. The proxy voting results for this resolution can be seen on the screen. That concludes the items of business. I will now pause to allow you time to finalize your votes. Please ensure that you have cast your votes on all resolutions, as I will declare the polls closed after this pause. I think I see people's activity stopped, so I will now declare the polls closed. Please hand your voting card to the Returning Officer on your way out.
The result of today's vote will be released to the ASX later today and will also be available on our website. There being no further business, the meeting is closed. I'd like to thank you for your attendance today and for your interest in Magellan, and please do join us, myself and our fellow directors, for tea and coffee just outside the hall here.